The 2015-16 Budget: California Spending Plan

The 2015-16 Budget: California Spending Plan MAC TAYLOR (cid:129) L E G I S L A T I V E A N A L Y S T (cid:129) OCTOBER 2015 2015-16 BUDGET TABLE OF CONTENTS Chapter 1: Key Features of the 2015-16 Budget Package Budget Overview .....................................................................................................................................1 Major Features of the 2015-16 Spending Plan ......................................................................................3 Evolution of the Budget ..........................................................................................................................4 Chapter 2: Spending by Program Area Proposition 98 .........................................................................................................................................7 Overview ..................................................................................................................................................................................7 K-12 Education .....................................................................................................................................................................11 Commission on Teacher Credentialing .......................................................................................................................16 Adult Education ...................................................................................................................................................................17 Community Colleges .........................................................................................................................................................19 Child Care and Preschool ......................................................................................................................23 Higher Education ...................................................................................................................................26 Health ....................................................................................................................................................33 Human Services .....................................................................................................................................39 Resources and Environmental Protection ...........................................................................................46 Crosscutting Issues .............................................................................................................................................................46 Resources ...............................................................................................................................................................................50 Environmental Protection ................................................................................................................................................53 Transportation .......................................................................................................................................55 Judiciary and Criminal Justice ..............................................................................................................57 Other Major Provisions .........................................................................................................................63 www.lao.ca.gov Legislative Analyst’s Offi ce i 2015-16 BUDGET Legislative Analyst’s Offi ce www.lao.ca.gov (916) 445-4656 Legislative Analyst Mac Taylor State and Local Finance Education Jason Sisney Jennifer Kuhn Marianne O’Malley Ryan Anderson Carolyn Chu Edgar Cabral Justin Garosi Natasha Collins Ann Hollingshead Jason Constantouros Seth Kerstein Virginia Early Ryan Millera Paul Golaszewski Nick Schroeder Judy Heiman Brian Uhler Dan Kaplan Brian Weatherford Kenneth Kapphahn Corrections, Transportation, and Environment Health and Human Services Anthony Simbol Mark C. Newton Brian Brown Ginni Bella Navarre Drew Soderborg Amber Didier Ashley Ames Callie Freitag Ross Brown Ben Johnson Aaron Edwards Lourdes Morales Rachel Ehlers Felix Su Paul Jacobs Ryan Woolsey Helen Kerstein Meredith Wurden Anita Lee Shawn Martin Jessica Peters Jonathan Peterson Administration and Information Services Support Larry Castro Tina McGee Sarah Kleinberg Izet Arriaga Karry Dennis Fowler Sarah Scanlon Michael Greer Jim Stahley Vu Chu Anthony Lucero Sandi Harvey Rima Seiilova-Olson a General Fund Condition analyst, Spending Plan publication coordinator. ii Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET Chapter 1: Key Features of the 2015-16 Budget Package Th is publication summarizes California’s additional actions taken later in the summer— 2015-16 spending plan. It primarily refl ects the for example, trailer bills ratifying new labor Legislature’s passage of the budget and related agreements—the fi gures generally refl ect estimated trailer bills in mid-June 2015. While the text refl ects budget totals as of June 2015. BUDGET OVERVIEW State Spending and mandate backlog claims, and the end of the “triple fl ip” mechanism used to fi nance the state’s Figure 1 displays total state and federal prior defi cit fi nancing bonds. spending in the 2015-16 budget package. As shown in the fi gure, the spending plan assumes total General Fund Revenues state spending of $161 billion (not including bond Figure 2 (see next page) displays the revenue funds), an increase of 1.3 percent over revised assumptions incorporated into the June 2015 totals for 2014-15. Th e budget package also includes budget package. Th e budget assumes $115 billion major increases in 2014-15 General Fund spending in revenues and transfers in 2015-16, a 3.3 percent (primarily for education), which helps explain the increase over 2014-15. Th e state’s “big three” large increase in expenditures between 2013-14 General Fund taxes—the personal income tax and 2014-15. General Fund spending grows (PIT), sales and use tax, and corporation tax—are little in 2015-16, increasing at only 0.8 percent. assumed to increase at a slightly higher rate Programmatic spending growth, however, is (4 percent). Th e PIT estimate for 2015-16 refl ects a masked by various one-time actions, including $380 million revenue loss associated with the new one-time spending in 2014-15 on debt payments state Earned Income Tax Credit (EITC). General Fund revenue growth was Figure 1 much higher in 2014-15, Total State and Federal Fund Expenditures increasing at a very (Dollars in Millions) healthy 7.7 percent rate. Revised Change From 2014-15 Enacted Proposition 2 Fund Type 2013-14 2014-15 2015-16 Amount Percent Figure 3 (see General Fund $100,005 $114,473 $115,370 $897 0.8% Special funds 38,311 44,523 45,717 1,194 2.7 next page) displays Budget Totals $138,317 $158,996 $161,087 $2,090 1.3% the calculations Selected bond funds $4,494 $6,089 $6,488 $398 6.5% of Proposition 2 Federal funds 72,583 93,554 97,957 4,404 4.7 requirements incorporated www.lao.ca.gov Legislative Analyst’s Offi ce 1 2015-16 BUDGET Figure 2 General Fund Revenue Assumptions (Dollars in Millions, Includes Education Protection Account) Change From 2014-15 2013-14 2014-15 2015-16 Amount Percent Personal income tax $67,025 $75,384 $77,700 $2,316 3.1% Sales and use tax 22,263 23,684 25,240 1,555 6.6 Corporation tax 9,093 9,809 10,342 533 5.4 Subtotals, “Big Three” Taxes ($98,381) ($108,877) ($113,281) ($4,404) (4.0%) Insurance tax $2,363 $2,486 $2,556 $70 2.8% Other revenues 2,254 1,994 2,094 100 5.0 BSA deposit — -1,606 -1,854 -248 — Other transfers and loans 376 -444 -1,045 -601 — Totals, Revenues and Transfers $103,375 $111,307 $115,033 $3,726 3.3% BSA = Budget Stabilization Account. spending assumptions Figure 3 of the 2015-16 spending Proposition 2 Calculations for 2015-16 plan, as estimated by the (In Millions) Department of Finance. As described above, the Proposition 2 Requirements Base amounta $1,753 budget package requires Excess capital gains taxes captured by Proposition 2 1,955 a $1.9 billion deposit in Totals, Proposition 2 Requirement $3,708 the BSA, bringing the Deposit into Budget Stabilization Account $1,854 Debt payments 1,854 total BSA balance to Calculation of Excess Capital Gains Taxes $3.5 billion. Combined Total taxes from capital gains $11,659 with the $1.1 billion Less amount equal to 8 percent of all General Fund taxes -9,330 balance in the Special Subtotals, Capital Gains Taxes Over 8 Percent Threshold ($2,329) Less Proposition 98 share -$374 Fund for Economic Totals, Excess Capital Gains Taxes Captured by Proposition 2 $1,955 Uncertainties (SFEU)— a Equal to 1.5 percent of General Fund revenues. the state’s traditional into the budget package. As shown in Figure 3, Proposition 2 requires a $1.9 billion deposit into Figure 4 Proposition 2 Debt Payments in 2015-16 the Budget Stabilization Account (BSA) and $1.9 billion of debt payments. Figure 4 displays the (In Millions) debt payments in the budget package that meet Amount Proposition 2’s requirements. Special fund loan repayments $1,371 Special fund loan interest 47 The Condition of the General Fund Proposition 42 loan repayment 84 Proposition 98 settle upa 256 2015-16 Assumed to End With $4.6 Billion UC pension program 96 in Total Reserves. Figure 5 displays the condition Total $1,854 a of the General Fund under the revenue and Related to 2006-07 and 2009-10 minimum guarantees. 2 Legislative Analyst’s Offi ce www.lao.ca.gov budget reserve—the Figure 5 budget ends 2015-16 General Fund Condition (In Millions, Includes Education Protection Account) estimated total reserves. 2014-15 2015-16 er from the Prior-year fund balance $5,590 $2,423 budget assumptions—for Revenues and transfers 111,307 115,033 example, if 2015-16 Expenditures 114,473 115,370 revenues end up higher Ending fund balance $2,423 $2,086 than the assumed level Encumbrances 971 971 SFEU balance 1,453 1,116 er from Reserves SFEU balance $1,453 $1,116 Pre-Proposition 2 BSA balance 1,606 1,606 Proposition 2 BSA balance — 1,854 Total Reserves $3,059 $4,576 SFEU = Special Fund for Economic Uncertainties and BSA = Budget Stabilization Account. Source: Department of Finance. MAJOR FEATURES OF e centerpiece of the 2015-16 spending plan e budget package also dedicates a portion for one-time purposes, with the largest schools and community colleges. Outside of K-14 one-time augmentations for paying down the K-14 education, the budget package makes notable augmentations for child care and preschool, higher education, and Health and Human Services (HHS) Notable Increase in Funding for Child Care e major features of the budget package and Preschool Programs. e budget increases are summarized below. We discuss these and other total funding for child care and preschool Large Increase in Proposition98 Funding. bulk of the increase coming from state General Due primarily to state General Fund revenues e additional funding exceeding June 2014 budget assumptions, the supports rate and slot increases for non-California Work Opportunity and Responsibility to Kids (CalWORKs) child care and preschool programs. It e 2015-16 minimum guarantee also supports caseload and cost of care increases for CalWORKs child care programs. e budget dedicates a Also Notable Funding Increases for portion of all this additional funding for ongoing Universities. e budget includes increases of purposes, with the largest ongoing augmentation for the Local Control Funding Formula (LCFF) www.lao.ca.gov Legislative Analyst’s Of(cid:31) ce 3 2015-16 BUDGET (CSU), refl ecting 8 percent year-over-year increases administration to reduce annual revenues by for each segment. Th e bulk of new funding is $380 million. Th e federal EITC is an income unallocated, with the universities allowed to use tax credit that increases the aft er-tax income the funds for any operational or facility purpose. of low-income workers. Th e state EITC will In exchange for the funding increases, the supplement the federal credit for lower-income universities continue to agree to keep most resident individuals and households. undergraduate and graduate tuition charges fl at. HHS Augmentations. In addition to spending Th e budget also includes provisions relating to augmentations due to increased caseloads, utilization increasing resident enrollment at UC and CSU by of services, and labor costs in the HHS area, the 5,000 students and 10,400 students, respectively, in spending plan refl ects a select number of HHS 2016-17 compared to 2014-15 levels. Part of UC’s policy-driven augmentations. Specifi cally, the budget increase is to accelerate payments on UC’s pension package includes $226 million from the General liabilities ($96 million). Th is funding (counted as Fund (one time) to restore the 7 percent reduction Proposition 2 debt repayment) is contingent on UC in In-Home Supportive Services service hours. limiting the amount of compensation that can be Beginning May 2016, the spending plan provides factored into pension benefi ts for future employees. Medi-Cal coverage to undocumented immigrants State EITC. Th e 2015-16 budget creates under the age of 19 who are otherwise eligible for a new state EITC, which is estimated by the those benefi ts but for their immigration status. EVOLUTION OF THE BUDGET Th e Governor signed the 2015-16 Budget Proposition 98 package included over $3 billion to Act and 18 budget-related bills on June 24, 2015. pay down K-14 obligations and $4 billion for LCFF Between that date and September 2015, the implementation. In addition, the administration Governor signed fi ve additional budget-related estimated Proposition 2 requirements to be trailer bills into law. Th ese bills are detailed in $2.4 billion—consisting of a $1.2 billion deposit Figure 6. in the BSA and a $1.2 billion debt payment January Budget Proposed $3.4 Billion Reserve. requirement. On January 9, 2015, the Governor presented May Revision: Higher Revenues, Increased his 2015-16 budget proposal to the Legislature. Proposition 98 and Proposition 2 Requirements. Th e budget proposal included $159 billion of In the May Revision, the administration revised its state spending, consisting of $113 billion from revenue estimates upward $6.7 billion compared the General Fund and $46 billion from special to the January budget proposal for 2013-14 funds. Th e administration’s revenue estimates for through 2015-16 combined. Th e higher revenues 2014-15 increased more than $2 billion compared were mostly off set by $5.5 billion in higher to its June 2014 estimates that were incorporated General Fund spending necessary to meet the in the 2014-15 budget package. Th ose revenue Proposition 98 minimum guarantee. In addition, estimates resulted in a multibillion-dollar the administration’s May 2015 calculations of infl ux of new funds for schools and community Proposition 2 requirements increased from colleges under Proposition 98. Th e Governor’s $2.4 billion to $3.7 billion—requiring a $1.9 billion 4 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET deposit in the BSA and $1.9 billion of debt payments. Similarly, the Proposition 2 BSA deposit payments. Hundreds of millions of dollars in net was also $760 million higher, contributing to a total General Fund savings in HHS programs, debt reserve of $5.7 billion under the initial legislative service, prisons, the Cal Grant program, and other budget plan. Key legislative priorities refl ected in programs provided the resources necessary to fund this initial budget plan were in the areas of HHS, the Governor’s May Revision proposals. Th ese child care and preschool, and higher education. proposals included (1) growing the SFEU reserve Final Budget Package Refl ects Governor’s balance by almost $600 million, (2) establishing Revenue Assumptions. Th e Legislature passed a state EITC ($380 million), and (3) providing the fi nal budget package on June 19, 2015. Th e over $100 million to the universities. (Th e May spending plan relies on the Governor’s lower Revision also included the fi nal estimate of the May 2015 General Fund revenue assumptions mandates “trigger” included in the 2014-15 budget and the resulting administration calculations package—$765 million.) of the Proposition 98 minimum guarantee and Initial Legislative Package Included More Proposition 2. While overall General Fund Spending and Budget Reserves. Our offi ce’s May spending in the fi nal budget package rose only 2015 estimates of the state’s big three revenues Figure 6 were $3.2 billion higher Budget-Related Legislationa than the administration’s Bill May 2015 estimates Number Chapter Subject for 2013-14 through AB 93 10 2015-16 Budget Act 2015-16 combined. Th e SB 97 11 Amendments to the 2015-16 Budget Act (“Budget Bill Junior”) Legislature adopted AB 95 12 Transportation AB 104 13 Education and child care our offi ce’s revenue AB 114 14 Public works: building construction estimates—including AB 116 15 Amendments to the 2014-15 Budget Act our estimates of local AB 117 16 Resources AB 119 17 Medi-Cal: nursing facilities property taxes—in the SB 75 18 Health fi rst budget package SB 78 19 Education fi nance: Local Control Funding Formula passed on June 15, SB 79 20 Human services SB 80 21 Earned Income Tax Credit 2015. Th e package also SB 81 22 Higher education refl ected our offi ce’s SB 82 23 Developmental services estimates of General SB 83 24 Resources SB 84 25 State government Fund spending in a few SB 85 26 Public safety areas where they diff ered SB 88 27 Water from the administration’s SB 98 28 Vacant positions and state health premiums estimates. Th is initial September Budget-Related Legislation budget package included SB 99 322 State employees: memoranda of understanding SB 101 321 Amendments to the 2015-16 Budget Act $2.1 billion in higher SB 102 323 State government General Fund spending, SB 103 324 Education including $760 million in SB 107 325 Redevelopment dissolution a higher Proposition 2 debt Includes budget bill and “trailer bills” identifi ed in section 39.00 of the 2015-16 Budget Act that were enacted into law. www.lao.ca.gov Legislative Analyst’s Offi ce 5 2015-16 BUDGET $61 million above May Revision levels, various Late Session Budget Legislation. In September choices were made to shift spending priorities 2015, the Governor signed several trailer bills. We compared to the Governor’s proposal. Specifi cally, display these under “September Budget-Related with savings resulting from (1) rejection of various Legislation” in Figure 6. Th ese bills included legislative administration proposals, (2) an error in the ratifi cation of certain labor union bargaining administration’s Medi-Cal estimates, (3) legislative agreements and the administration’s proposal related changes made to the Middle-Class Scholarship to the dissolution of redevelopment agencies. Program, and (4) other legislative actions, the Ongoing Special Sessions, Unallocated agreement made modest augmentations, generally Cap-and-Trade Revenues. On the day the in the areas of HHS, child care and preschool, and Governor signed the 2015-16 Budget Act, he called higher education. special sessions related to transportation funding Budget Package Signed by Governor. Th e and health care and developmental services Governor signed the 2015-16 Budget Act and fi nancing. As of the date of this publication, these related budget legislation on June 24, 2015. Similar special sessions are ongoing. In addition, at the to the 2014-15 budget, the Governor did not veto time of this publication, a signifi cant amount any General Fund appropriations, but vetoed of cap-and-trade auction revenue remains $1.3 million in appropriations from other funds. unallocated. 6 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET Chapter 2: Spending by Program Area PROPOSITION 98 State budgeting for school and community estimates. Th ese increases are due primarily to college districts is based primarily on state revenue being higher than assumed in last Proposition 98, approved by voters in 1988. year’s budget package. Th e estimate of the 2015-16 Below, we provide an overview of Proposition 98 minimum guarantee is $7.6 billion (12 percent) funding and spending changes under the enacted higher than the 2014-15 Budget Act level. Under budget package. We then highlight Proposition 98 the budget package, Proposition 98 spending spending changes specifi cally for K-12 education, is set at these latest estimates of the minimum adult education, and the California Community guarantees. Colleges (CCC). In this section of the report, we Increase in Estimated Property Tax Revenue also highlight notable non-Proposition 98 changes Covers Increase in 2015-16 Guarantee. Figure 2 for the California Department of Education (CDE) (see next page) shows approved Proposition 98 and the Commission on Teacher Credentialing funding levels for each of the three years by (CTC). In the subsequent section, we describe segment and fund source. As shown in the fi gure, preschool and child care changes. growth from the revised 2014-15 level to the enacted 2015-16 level is $2.1 billion (3 percent). Overview Th is relatively modest growth in the guarantee Substantial Upward Revisions to Estimates refl ects growth in per capita personal income of Proposition 98 Minimum Guarantee. (3.8 percent) off set by a reduction due to spike Proposition 98 establishes a minimum funding protection (discussed below). In 2015-16, total requirement commonly called the minimum Proposition 98 funding is $68.4 billion. Of guarantee. Figure 1 shows estimates of the minimum Figure 1 guarantee for 2013-14, Tracking Changes in Estimates of 2014-15, and 2015-16. As Proposition 98 Minimum Guarantee shown in the fi gure, the (Dollars in Millions) estimate of the 2013-14 Increase and 2014-15 minimum June 2014 June 2015 Amount Percent guarantees have increased 2013-14 $58,302 $58,914 $612 1.0% $612 million and 2014-15 60,859 66,303 5,444 8.9 $5.4 billion, respectively, 2015-16 — 68,409 7,550a 12.4 from the June 2014 a Refl ects increase from June 2014 estimate of 2014-15 minimum guarantee. www.lao.ca.gov Legislative Analyst’s Offi ce 7 2015-16 BUDGET this amount, $49.4 billion is General Fund and Th e signifi cant increase in the 2014-15 minimum $19 billion is local property tax revenue. Th e guarantee triggered the spike protection provision, estimated increase in local property tax revenue resulting in a corresponding $424 million from 2014-15 to 2015-16 ($2.3 billion, 14 percent) reduction in the 2015-16 minimum guarantee is due in large part to the end of the triple fl ip and (from what it would have been absent the spike the shift of associated local property tax revenue protection provision). Th is is the second time spike back from cities, counties, and special districts to protection has been triggered. (Th e fi rst time was in school and community college districts. Estimated 2013-14 based on a 2012-13 revenue surge.) growth in local property tax revenue ($2.3 billion) Outstanding Maintenance Factor Obligation is slightly greater than growth in the Proposition 98 Reduced Signifi cantly. Due to the increase in state minimum guarantee ($2.1 billion), resulting in a revenue, the estimated 2014-15 maintenance factor slight reduction in Proposition 98 General Fund payment increased by $2.8 billion compared to from 2014-15 to 2015-16. the June 2014 estimate—rising from $2.6 billion to 2015-16 Guarantee Aff ected by Spike $5.4 billion—resulting in the largest maintenance Protection Provision. In a year when the minimum factor payment made to date by the state. Th e state guarantee increases at a much faster rate than is expected to end 2014-15 with an outstanding per capita personal income, a constitutional maintenance factor of $743 million—the smallest spike protection provision excludes a portion of outstanding maintenance factor obligation the state Proposition 98 funding from the calculation of has owed since 2006-07. Th e maintenance factor the minimum guarantee the subsequent year. obligation is projected to grow modestly in 2015-16, Figure 2 Proposition 98 Funding by Segment and Source (Dollars in Millions) Change From 2014-15 2013-14 2014-15 2015-16 Revised Revised Enacted Amount Percent Preschool $507 $664 $885a $220a 33% K-12 Education General Fund $38,162 $43,888 $43,151 -$737 -2% Local property tax 13,736 14,432 16,380 1,947 13 Subtotals ($51,898) ($58,321) ($59,530) ($1,210) (2%) Adult Education Block Grant $25b — $500 $500 — California Community Colleges General Fund $4,223 $4,975 $4,801 -$175 -4% Local property tax 2,182 2,263 2,613 350 15 Subtotals ($6,406) ($7,238) ($7,414) ($176) (2%) Other Agencies $78 $80 $80 — — Totals $58,914 $66,303 $68,409 $2,106 3% General Fund $42,996 $49,608 $49,416 -$192 -0.4% Local property tax 15,918 16,695 18,993 2,298 14 a Includes $145 million for existing wraparound care, formerly funded with non-Proposition 98 General Fund. Excluding this accounting shift, growth is $75 million (11 percent). b For adult education consortium planning grants. Available for expenditure in 2013-14 and 2014-15. 8 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET increasing to $772 million. Th e increase is linked to Figure 4 (see next page), respectively. In addition the change in per capita personal income. Because to these changes, the budget package includes a growth in state General Fund is less than growth in $256 million settle-up payment related to meeting per capita personal income, no maintenance factor the Proposition 98 minimum guarantee for payment is required in 2015-16. 2006-07 and 2009-10 and $207 million in unspent Budget Package Contains Many Spending prior-year Proposition 98 funds that have been Changes. Given the increases in the minimum repurposed. Th e remainder of this section of the guarantees across the three-year period, the budget report discusses these spending changes in more package includes notable spending increases detail. each year of the period. For 2013-14, the budget Notably Reduces Backlog of K-14 Mandate accounts for higher LCFF costs and uses the Claims. Th e largest one-time spending increase remaining funding increase for paying down the in the budget package aff ects both school and K-14 mandate backlog. Th e many spending changes community college districts. Th e budget package for 2014-15 and 2015-16 are shown in Figure 3 and includes $3.8 billion to pay down the K-14 mandate Figure 3 2014-15 Proposition 98 Changesa (In Millions) Technical Adjustments Make Local Control Funding Formula growth adjustments $306 Otherb 149 Subtotal ($455) K-12 Education Pay down mandate backlog $2,748 Eliminate deferrals 897 Fund teacher training and support block grant 490 Fund career technical education (CTE) grants 150 Provide learning and behavioral supports for special educationc 10 Fund Internet technology management, training, and technical assistance 10 Finish developing evaluation rubricsd — Subtotal ($4,306) California Community Colleges Pay down mandate backlog $393 Eliminate deferrals 94 Create basic skills transformation program 60 Extend CTE Pathways Program 48 Fund maintenance and instructional equipment 48 Fund CCC Innovation Awards 23 Create basic skills partnership pilot program 10 Support implementation of baccalaureate degree pilot program 6 Subtotal ($683) Total, 2014-15 Changes $5,444 a All actions shown, except for technical adjustments, refl ect one-time spending. b Includes various property tax adjustments and adjustments to state agencies receiving Proposition 98 funding. c Part of special education package. d Provides $350,000 for the State Board of Education. www.lao.ca.gov Legislative Analyst’s Offi ce 9 2015-16 BUDGET backlog ($3.2 billion for the K-12 backlog and intent language that they prioritize the funds $632 million for the CCC backlog). Of the K-12 for supporting new responsibilities associated backlog funding, $40 million is earmarked with their review of districts’ Local Control and for county offi ces of education (COEs), with Accountability Plans (LCAPs). Aft er the state Figure 4 2015-16 Proposition 98 Changes (In Millions) Technical Adjustments Back out prior-year fundsa -$6,554 Otherb 335 Subtotal (-$6,219) K-12 Education Fund LCFF increase for school districts $5,994 Fund career technical education grants (one time) 250 Increase preschool funding 220c Fund various special education activities 50 Fund Internet infrastructure grants (one time) 50 Provide 1.02 percent COLA for select categorical programs 40 Pay down mandate backlog (one time) 31 Increase funding for the Charter School Facility Grant Program 20 Increase funding for Foster Youth Services 10 Other -3 Subtotal ($6,663) California Community Colleges Fund adult education consortia $500 Increase apportionment funding (above growth and COLA) 267 Fund 3 percent enrollment growth 157 Pay down mandate backlog (one time) 117 Augment Student Success and Support Program (SSSP) for matriculation services 100 Fund maintenance and instructional equipment (one time) 100 Augment SSSP for implementation of local student equity plans 85 Hire additional full-time faculty 62 Provide 1.02 percent COLA for apportionments 61 Fund CDCP noncredit courses at credit rate 50 Provide funds to restore enrollment earned back by districts 42 Supplement Cal Grant B awards for full-time CCC students 39 Augment Extended Opportunity Programs and Services 35 Fund new apprenticeships in high-demand occupations 15 Increase funding for established apprenticeships 14 Augment SSSP to fund dissemination of effective institutional practices 12 Augment SSSP for technical assistance to improve district operations and outcomes 3 Fund administration of higher Cal Grant B awards (one time) 3 Provide 1.02 percent COLA for select categorical programs 2 Subtotal ($1,663) Total, 2015-16 Changes $2,106 a Includes one-time funds for retiring deferrals, paying down the K-14 mandate backlog, and supporting various other one-time initiatives. b Includes LCFF growth adjustments, growth for K-12 categorical programs, and annualized funding for 4,000 preschool slots initiated in 2014-15. c Includes $145 million for existing wraparound care, formerly funded with non-Proposition 98 General Fund. LCFF = Local Control Funding Formula; COLA = cost-of-living adjustment; and CDCP = Career Development and College Preparation. 10 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET makes the $3.8 billion in payments, we estimate largest ongoing augmentation in the state budget the outstanding K-14 mandate backlog will be is $6 billion for implementing the LCFF for school $2 billion ($1.7 billion for schools and about districts and charter schools—bringing total LCFF $300 million for community colleges). funding to $52 billion. Th is refl ects a 13 percent Eliminates K-14 Payment Deferrals. As year-over-year increase in LCFF funding. Th e required by trailer legislation enacted last year, administration estimates this funding will close the budget package also provides $992 million to 52 percent of the gap to LCFF target rates. As eliminate all remaining K-14 payment deferrals. shown in Figure 5, the budget funds 90 percent of Th e budget year will be the fi rst fi scal year since the estimated statewide full LCFF implementation 2000-01 that the state is set to make all K-14 cost. School districts and charter schools may payments on time. use LCFF monies for any educational purpose, including implementation of their LCAPs. K-12 Education Categorical Programs $59.5 Billion Proposition 98 Funding for K-12 Education in 2015-16. Th is is $1.2 billion New Secondary School Career Technical (2 percent) more than revised 2014-15 funding Education (CTE) Competitive Grant Program. Th e and $6 billion (11.2 percent) more than the budget package includes $900 million in one-time 2014-15 Budget Act level. On a per-student basis, funding for a three-year competitive grant program funding increases from the 2014-15 Budget Act level to promote high-quality CTE. Of this amount, of $8,931 per student to the 2015-16 Budget Act $400 million is provided in 2015-16, $300 million level of $9,942 per student—an Figure 5 increase of $1,011 Implementation of the Local Control Funding Formula (11.3 percent). Th ese amounts (In Billions) exclude Adult $70 Education Block Target Grant funding 60 Growth and preschool Base funding. 50 52% of Gap Funded 30% of We discuss Gap Funded 40 12% of Gap Funded specifi c K-12 augmentations 30 below. 20 Local Control Funding 10 Formula 2012-13 2013-14 2014-15 2015-16 Large 72% 80% 90% Increase for Percent of Target Level Funded LCFF. Th e www.lao.ca.gov Legislative Analyst’s Offi ce 11 2015-16 BUDGET in 2016-17, and $200 million in 2017-18. School High-Speed Network (HSN) to provide LEAs with districts, COEs, charter schools, and Regional training and technical assistance to help them Occupational Centers and Programs operated by better manage their Internet connections. Th e HSN joint powers agencies (JPAs) may apply for grants, may partner with COEs and other LEAs to provide individually or in consortia. Th e program provides statewide access to training and resources. separate pools of funding for large-, medium-, and Pays Off Emergency Repair Program small-sized applicants, based on applicants’ average Obligation. Statute requires the state to provide daily attendance (ADA) in grades 7-12. Specifi cally, a total of $800 million to school districts for 88 percent of the funding is reserved for applicants emergency facility repairs. To date, the state with ADA greater than 550, 8 percent is reserved has provided $527 million for the program. Th e for applicants with ADA between 140 and 550, and budget includes $273 million (one time) for the 4 percent is reserved for applicants with less than fi nal Emergency Repair Program payment. Of the 140 ADA. Th e Superintendent of Public Instruction $273 million, $145 million comes from a settle-up (Superintendent), in collaboration with the payment and $128 million comes from unspent executive director of the State Board of Education prior-year Proposition 98 funds. (SBE), will determine the number of grants to be Package of Special Education Actions. Th e awarded and specifi c grant amounts. Applicants budget includes $67 million for a package of special that do not currently operate CTE programs; those education-related activities, as summarized in that serve low-income students, English learners, Figure 6. Of the $67 million, $52 million is ongoing foster youth, and students at high risk of dropping and $15 million is one time. Th e largest ongoing out; and those located in rural locations and areas augmentations in this package are for expanding with high unemployment will receive special services for infants, toddlers, and preschoolers consideration. In addition, the program prioritizes with disabilities as well as requiring preschool local applicants’ collaboration with postsecondary staff training and parent education relating to education, other local education agencies (LEAs), identifying and meeting preschoolers’ special and established CTE eff orts. Grantees are required needs. Th e largest one-time augmentation is for to match grant funds and commit in writing to one or two COEs to develop statewide resources funding CTE programs aft er their grants expire. and training opportunities for addressing students’ One-Time Educator Eff ectiveness Block Grant. diverse instructional and behavioral needs. Th e budget includes $500 million (one time) for Second Round of Broadband Internet training and support of certifi cated staff , including Infrastructure Grants. Th e budget includes teachers, administrators and counselors. Th e CDE $50 million in one-time funding for HSN to is to allocate a total of $490 million to school provide certain schools with grants to purchase districts, COEs, and charter schools based on the Internet infrastructure. Eligible schools are number of full-time equivalent certifi cated staff those that cannot administer online tests or can they employed in 2014-15. Funds may be used for administer the tests only by shutting down other a broad array of activities, including beginning essential online activities such as e-mail. Th e teacher support, assistance for struggling veteran Department of Finance (DOF) must approve teachers, training for implementation of new projects with costs exceeding $1,000 per test-taking state standards, and administrator training. Th e pupil and notify the Joint Legislative Budget remaining $10 million is allocated to the K-12 Committee (JLBC). If any funds remain aft er 12 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET meeting this core objective, HSN may provide budget appropriation of $8.3 million and instead grants to other school sites that do not have requires the agency to use up to that amount of Internet infrastructure that allows them to increase its reserve for 2015-16 operating costs. Th e budget their Internet speeds in a cost-eff ective manner. also increases state oversight of the program by Th ese latter allocations also are pursuant to a requiring HSN to submit to CDE, DOF, Legislative DOF-approved plan and JLBC notifi cation. Analyst’s Offi ce (LAO), and JLBC an annual Suspends HSN Budget Appropriation and fi nancial audit that accounts for all funding and use Adds Annual Program Audit. Th e Imperial COE of funds. receives an annual grant from CDE to assist LEAs Expands Eligibility for Charter School with network connectivity, Internet services, Facility Grant Program. Th e budget provides a and information sharing. In recent years, HSN $20 million augmentation for this program, raising has kept a large reserve. To help spend down this the total annual appropriation from $92 million to reserve, the budget package suspends HSN’s annual $112 million. Th e augmentation funds an increase Figure 6 Package of Special Education Actions 2015-16 (In Millions) Program Area Action Amount Proposition 98 Funds Infant and toddler services Increase funding for districts to serve children with disabilities ages birth to three $30.0 (brings total funding to $119 million). Preschool slots Fund 2,500 additional part-day State Preschool slots, with priority given to students 12.1 with disabilities. Learning and behavioral supports Provide funding for one or two county offi ces of education to develop statewide 10.0a resources, provide trainings, and allocate subgrants to improve how districts meet students’ learning and behavioral needs. Preschool training, parent Specify that State Preschool contractors must provide staff training and parent 6.0 information, and rate increase education on how to identify and meet students’ special needs. Increase part- day reimbursement rate by 1 percent to cover associated costs. State Special Schools Provide one-time increase for instructional activities at the state’s schools for deaf 3.0c and blind students.b Fund swap Redirect federal funds from local assistance to state-level activities, then backfi ll 2.0 with Proposition 98 funds. Subtotal ($63.1) Federal Fundsd Offi ce of Administrative Hearings Increase funding for state-level hearings regarding special education disputes $1.9a (brings total funding to $12.8 million). Alternative dispute resolution Increase funding for local grants to help districts and families resolve disputes 1.7 without a trial (brings total funding to $1.95 million). State-level improvement activities Fund CDE to develop resources and provide technical assistance to districts 0.5 implementing the new federally required statewide plan for improving services for students with disabilities. Subtotal ($4.0) Total $67.1 a One-time allocation scored to 2014-15 Proposition 98 guarantee. b The budget also requires that these schools spend at least $4.8 million from their non-Proposition 98 funds in 2015-16 to address critical facility maintenance needs. c Funded with one-time Proposition 98 Reversion Account monies . d New state-level activities funded in part by an increase in the state’s federal grant and in part by redirecting $2 million from local assistance. CDE = California Department of Education. www.lao.ca.gov Legislative Analyst’s Offi ce 13 2015-16 BUDGET in eligibility. Formerly, eligibility was limited to record-keeping and reporting activities. Enacted charter schools that (1) had at least 70 percent of through Chapter 434, Statutes of 2010 (AB 354, their students qualifying for free or reduced-price Arambula), the mandate took eff ect starting in the meals or (2) were located in the attendance area 2011-12 school year. Th e budget also adds to the of a surrounding elementary school that met this block grant a new mandate relating to Race to the criterion. Trailer legislation reduces this threshold Top activities. Th e budget provides no associated to 55 percent of students qualifying for free or increase in block grant funding for this mandate, as reduced-price meals. In an eff ort to provide more its estimated statewide cost is very small (less than certainty for charter schools regarding their $30,000). eligibility for the program, trailer legislation also Other Augmentations and Actions specifi es that eligibility will be based on prior-year (rather than current-year) data. CDE General Fund Augmentations. In Ongoing $10 Million Increase for Foster Youth addition to K-12 Proposition 98 funding, the Services. Th e 2015-16 budget increases funding budget includes $9.8 million in non-Proposition 98 for Foster Youth Services from $15 million to General Fund augmentations and 3.5 new positions $25 million. Th e increase in funding is intended to for CDE. Of this funding increase, $8.7 million is refl ect the new program requirements set forth in one time and $1.1 million is ongoing. Th e largest Chapter 781, Statutes of 2015 (AB 854, Weber). Th is augmentations are $3.7 million (one time) for legislation shift s the program’s focus from COEs CDE to continue to contract with a legal fi rm providing foster youth services directly to school to represent the state in the Cruz v. California districts providing those services and COEs helping case and $3.6 million (one time) to continue to coordinate services. Chapter 781 also expands the Standardized Account Code System (SACS) the defi nition of foster youth to include children upgrade project. Other notable augmentations placed with relatives. Th is change makes the include $350,000 for two three-year limited-term defi nition of foster youth the same as for LCFF. positions to administer the new CTE Incentive Funding for Some Former Quality Education Grant Program and $335,000 for three existing Investment Act (QEIA) Districts. Th e budget CDE positions to support the new adult education provides $4.6 million (one time) for school districts consortia. that previously received QEIA funding but are not SACS Upgrade Project. Th e budget includes eligible to receive LCFF concentration funding. Th e a total of $12.2 million ($5 million in federal funding is equivalent to half of the amount districts carryover funds, $3.6 million one-time General received from QEIA in 2014-15. Th e QEIA program Fund highlighted above, and $3.6 million sunsets at the end of 2014-15. General Fund carryover) to upgrade SACS. Th e Adds Two New Mandates to Block Grant. Th e California Department of Technology (CalTech) budget adds a new mandate related to pertussis initially approved the project in 2011 with a cost (whooping cough) immunizations to the schools of $5.9 million. In 2014, CDE revised the cost mandates block grant and provides an associated to $21.2 million, noting that it had signifi cantly $1.7 million augmentation to the block grant. Th is underestimated the project’s cost and complexity. mandate requires schools on an ongoing basis to Changes in data storage standards and soft ware verify pertussis immunizations for all students licensing and maintenance costs contributed to entering the seventh grade and to undertake related the cost increase. As of spring 2015, CDE had 14 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET selected a vendor (M Corp) and planned to award • Adds LCFF Reporting Requirements at a contract in the summer following fi nal approval Full Implementation. Trailer legislation and legislative notifi cation of the revised project also adds intent language imposing new scope and cost, as required by budget language. LEA reporting requirements once LCFF is Subsequently, M Corp informed CalTech it would fully implemented. At that time, LEAs will not extend the price quoted for the project, and, on be required to report annually the amount August 12, 2015, CalTech terminated the project of supplemental and concentration funding citing insuffi cient funding. they received on behalf of low-income Various Other Policy Changes. Th e budget students, English learners, and foster youth package also includes the following statutory as well as the amount they spent on behalf changes. of these students. • Expands Transitional Kindergarten (TK) • Adds Homeless Youth as a New Student Enrollment. Trailer legislation modifi es TK Subgroup. Trailer legislation requires LEAs rules to allow school districts and charter and schools with 15 or more homeless schools to enroll four-year-old children students to publish results of statewide in TK if their fi ft h birthday falls between assessments for homeless youth. In December 2 and the end of the school addition, it requires LEAs to include in year. Th ese children will begin generating their LCAPs specifi c goals for homeless attendance-based funding when they turn youth in the eight state priority areas and fi ve. Formerly, only children turning fi ve specifi c actions the district will take to years of age between September 1 and meet those goals. December 2 could enroll in TK. • Extends Deadline for SBE to Adopt • Clarifi es Requirements Related to Evaluation Rubrics. Trailer legislation Identifying Low-Income Students. Statute extends the deadline for SBE to adopt contains certain rules relating to how LEAs evaluation rubrics from October 2015 are to identify low-income students for the to October 2016. Th e evaluation rubrics purposes of generating LCFF supplemental are to measure and assess school district and concentration funding. Th e LEAs performance. identify most low-income students based on annual paperwork that these students • Extends Reduction in Routine submit to participate in the National Maintenance Set-Aside. Trailer legislation School Lunch Program. To identify some modifi es and extends provisions relating to other low-income students, LEAs use what the amount districts must annually deposit is known as the “alternative household in their routine maintenance accounts. income form.” Trailer legislation clarifi es Prior to 2008-09, school districts were the information that LEAs must include on required to set aside 3 percent of their total the alternative form and how the forms can expenditures for routine maintenance each be used and shared by LEAs. year for 20 years aft er receiving state bond funding. From 2008-09 through 2014-15, statute reduced the routine maintenance www.lao.ca.gov Legislative Analyst’s Offi ce 15 2015-16 BUDGET requirement to a 1 percent deposit. For system to accredit teacher preparation programs 2015-16 and 2016-17, trailer legislation in the state. Specifi cally, CTC plans to focus its requires districts to deposit no less than accreditation reviews on issues identifi ed by they deposited in 2014-15. For the next the data, as well as provide additional public three years (2017-18 through 2019-20), the information on program quality through a required deposit increases to 2 percent, data dashboard accessible from CTC’s website. rising to 3 percent beginning in 2020-21. Th e commission plans to implement some data collection and reporting in 2016-17, with full Commission on implementation of the new data system scheduled Teacher Credentialing for 2017-18. Updates to the Teacher and Administrator Budget Includes $33 Million for CTC. Th e Performance Assessments. For the past several budget provides $33 million for CTC—$26 million years, the state has required that individuals in special funds and $7 million non-Proposition 98 seeking to become teachers pass a performance General Fund. Th is is $7 million (37 percent) more assessment. Currently, CTC has approved four than the 2014-15 Budget Act level. Th e budget allowable teacher performance assessments, and contains four major CTC-related changes, as teacher preparation programs have discretion discussed below. to select which of the four assessments they will Credential Fee Raised to Help Address administer to their teacher candidates. In 2013, the Increased Teacher Disciplinary Workload. commission approved a similar requirement that Trailer legislation increases the maximum candidates in administrator preparation programs credential fee from $70 to $100. Th e budget scores a pass a performance assessment in order to receive corresponding increase of $4.5 million in credential an administrator credential. Th e budget package fee revenue. Th e bulk of this funding increase provides non-Proposition 98 General Fund of ($3.9 million) is for addressing higher workload $4 million in 2015-16 and $1 million in 2016-17 related to teacher disciplinary cases—specifi cally for various activities related to these assessments. covering the costs of the Attorney General’s offi ce, Of the $5 million provided across the two years, which represents CTC in discipline hearings $2 million is for updating the state-developed when teachers appeal an adverse ruling from the teacher performance assessment known as commission. (Over the past several years, CTC has CalTPA to refl ect the new state academic content had an increase in the number of disciplinary cases standards, $1 million is for conducting a study to appealed by teachers, resulting in a large backlog of determine equivalent scores across the four teacher unresolved cases that CTC expects will take several performance assessments approved by CTC, and years to eliminate.) Th e remaining $600,000 in new the remaining $2 million is for developing the credential fee revenue is split evenly between CTC’s administrator performance assessment. certifi cation and professional services divisions, Updates to Subject-Matter Exams in Science. supporting higher ongoing costs in those areas. Th e budget also includes $600,000 from the Test Streamlined Accreditation Data System. Development and Administration Account to Th e budget package includes non-Proposition 98 revise CTC’s teacher preparation science standards General Fund of $3.5 million in 2015-16 and and update science content on required teacher $1.5 million in 2016-17 for CTC to build a data exams to refl ect the new state science standards. system that it could use as part of a streamlined 16 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET Adult Education A consortium member, however, may pass through block grant funding to other adult education $500 Million for Adult Education Block providers, such as libraries and community-based Grant. Th is funding implements a restructuring organizations, serving students in the region. of adult education services begun in 2013. Th e restructuring is intended to improve coordination Funding among providers and better serve the needs of Guarantees Funding for Existing Adult adult learners. During the past two years, school Schools. In 2013-14 and 2014-15, school districts districts and community college districts formed and COEs operated under a maintenance-of-eff ort 70 consortia (largely coinciding with community (MOE) provision that required them to spend college district service areas). With input from the same amount annually on adult education as other regional groups (such as local workforce in 2012-13. During this period, school districts investment boards and libraries), the consortia and COEs funded adult education using LCFF developed joint plans to coordinate and deliver monies. Th e MOE provision expired July 2015. adult education in their regions. Each plan included Th e 2015-16 budget eff ectively extends the MOE (1) a needs assessment, (2) plans for coordinating for one additional year but begins funding adult and integrating existing adult education programs, education from the block grant rather than LCFF. and (3) strategies for improving student success. Specifi cally, the 2015-16 budget requires the CCC Th e block grant funding provides resources to Chancellor’s Offi ce to allocate up to $375 million begin implementing these plans. of the $500 million block grant for existing school district and COE adult education programs. (If Eligible Programs and Recipients CDE determines the aggregate MOE level exceeds Instruction Authorized in Seven Areas. $375 million, then school districts’ and COEs’ Consortia may use block grant funds for allotments will be prorated downward accordingly.) programs in seven adult education instructional To receive a part of the $375 million earmark, areas: (1) elementary and secondary basic school districts and COEs must be formal members skills, (2) citizenship and English as a second of adult education consortia. language, (3) workforce programs for older Remaining Funds Distributed to Consortia adults, (4) programs to help older adults assist Based on “Need for Adult Education.” Th e CCC children in school, (5) programs for adults with Chancellor and Superintendent will distribute the disabilities, (6) CTE, and (7) preapprenticeship remaining 2015-16 funds to the regional consortia programs. (Providers may off er instruction in based on each region’s need for adult education, as other adult education areas, such as parenting, determined by measures relating to general adult home economics, and recreation, using other fund population and immigrant population as well as sources, including LCFF.) low employment, educational attainment, and LEAs Eligible for Block Grant Funding. Formal adult literacy. Beginning in 2016-17, the Chancellor consortia membership is limited to school districts, and Superintendent will distribute the full block community college districts, COEs, and JPAs. Each grant amount based on (1) the amount allocated to formal member may be represented only by an each consortium in the prior year, (2) the region’s offi cial designated by its governing board, and only need for adult education, and (3) the consortium’s members may receive block grant funding directly. eff ectiveness in meeting those needs. Trailer www.lao.ca.gov Legislative Analyst’s Offi ce 17 2015-16 BUDGET legislation tasks the Chancellor and Superintendent college apportionments allocated for the seven with identifying associated measures of consortia authorized adult education instructional areas, eff ectiveness by January 1, 2016. Perkins funding, WIOA Title II funding, state Within Each Consortium, Locks in Funding adult education funds for CalWORKs participants, for All Members Going Forward. Trailer legislation Adults in Correctional Facilities program funding, requires each consortium to align its Adult and LCFF monies used for adult education. Education Block Grant allocation with its regional Other Features service plan. Th e trailer legislation, however, also specifi es that members of a consortium generally Includes Planning and Reporting are to receive at least as much as in the prior Requirements. Statute requires consortia to year. Th at is, if a consortium’s total block grant approve three-year adult education plans. Trailer funding in a given year is equal to or greater than legislation requires these plans to contain several its prior-year amount, then each of its consortium additional components, including a list of all members is to receive at least the same level of other entities that provide adult education in the block grant funding as in the prior year unless the region and a description of actions the consortia member no longer wishes to provide the service, is will take to integrate services. Consortia are unable to do so, or has been consistently ineff ective required to provide data annually to the Chancellor in meeting expectations despite interventions. and Superintendent about their services and Requires State to Coordinate Federal Adult outcomes. Based on these data, the Chancellor Education Funding. Trailer legislation requires and Superintendent must report annually to DOF, the state to coordinate funding of two federal adult SBE, and the Legislature on the status of consortia, education programs with state Adult Education including their funding allocations, types and Block Grant funding. Th e two federal programs levels of service, and eff ectiveness in meeting their are: (1) the Adult Education and Family Literacy region’s adult education needs. Act, also known as Workforce Innovation and Requires Transparent Decision-Making. Opportunity Act (WIOA) Title II, and (2) the Trailer legislation requires each consortium to Carl D. Perkins Career and Technical Education develop rules and procedures, to be approved by Act (Perkins). Statute requires the Chancellor and the Chancellor and Superintendent, regarding Superintendent to develop a plan to distribute participation, decision-making, and reporting. Th e funds from these two federal programs to regional language specifi es that all consortium decisions adult education consortia. Th e two agencies are (such as approval of a regional plan or funding required to submit the plan to DOF, SBE, and the allocations) must be considered in an open meeting Legislature by January 31, 2016. where members of the public have an opportunity Also Requires Local Coordination of to comment. Th e language also requires consortia Adult Education Funding. Trailer legislation to request and respond to feedback from other also requires school districts, COEs, JPAs, and entities providing workforce education and training community college districts that receive funding in the region. from various state and federal adult education Provides One-Time Funds to Develop programs to become members of their regional Consistent Data Policies and Collect Data. Th e consortia to better coordinate their programs. budget provides $25 million Proposition 98 General Th ese other funding sources are community Fund ($12.5 million to CCC and $12.5 million 18 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET to CDE) for data collection and reporting. Th e funding increases 12 percent from 2014-15 to CCC and CDE must provide 85 percent of the 2015-16. We discuss major apportionment increases $25 million to consortia to develop or update data below. systems and collect specifi ed data. Th e remaining Funds 3 Percent Enrollment Growth to Be 15 percent is for state-level activities to develop Distributed Under New Formula. Th e 2015-16 consistent data policies, measures, defi nitions, budget includes $157 million for 3 percent and collection procedures. In addition, CCC enrollment growth, supporting about 30,000 and CDE are to develop shared data agreements additional FTE students. Th e CCC Chancellor’s among state agencies, including the Employment Offi ce will distribute these funds using a new Development Department and the California allocation model it developed pursuant to 2014-15 Workforce Investment Board. Statute specifi es that budget legislation. Under the new model, CCC performance measures must include improved will determine a district’s “need for access” literacy; attainment of high school diplomas using three factors: (1) its share of the state’s or their equivalent; number of certifi cations, adult population without a college degree, (2) its postsecondary degrees, or completion of training share of unemployed adults, and (3) its share of programs; job placement; and improved wages. households with income below the federal poverty guideline. Th e Chancellor’s Offi ce will compare this Community Colleges measure of need with the district’s current share $7.4 Billion Proposition 98 Funding for CCC of community college enrollment, then allocate in 2015-16. Th is is $176 million (2.4 percent) more funds to reduce gaps between the two. In an eff ort than revised 2014-15 funding and $812 million to balance need, demand, capacity, and equity, (12 percent) more than the 2014-15 Budget Act the model also considers current enrollment and level. On a per-full-time equivalent (FTE) student recent enrollment growth patterns and gives each basis, funding increases from the 2014-15 Budget district the opportunity to grow at a minimum of Act level of $5,753 per student to the 2015-16 1 percent. Budget Act level of $6,379 per student—an increase Provides 1.02 Percent Cost-of-Living of $626 (10.9 percent). Th ese amounts do not Adjustment (COLA). Th e budget provides include the $500 million the budget provides for $61 million to fund the statutory 1.02 percent the Adult Education Block Grant. Th e budget also COLA for apportionments. Th e budget also appropriates bond monies for the construction includes $2 million to provide a 1.02 percent COLA phase of seven previously approved CCC for four categorical programs: (1) CalWORKs capital outlay projects. We discuss specifi c CCC Student Services, (2) Disabled Students Programs augmentations below. and Services, (3) Extended Opportunity Programs and Services (EOPS), and (4) Child Care Tax Apportionments Bailout (which supports campus child care centers Signifi cant Ongoing Increase in that serve as teaching labs for early childhood Apportionment Funding. Th e budget augments education students). apportionments for enrollment growth, cost of Provides Additional Unrestricted Funds living, unrestricted educational and operational Beyond Growth and COLA. Th e 2015-16 budget purposes, noncredit instruction, and full-time also provides a $267 million apportionment faculty. All combined, ongoing apportionment increase that districts may use for any educational www.lao.ca.gov Legislative Analyst’s Offi ce 19 2015-16 BUDGET or operational purpose, including retirement services, primarily for new students. costs, professional development, and facility Th is increase brings total funding for maintenance. In addition, the budget provides matriculation services to $285 million. $50 million to increase the rate for certain • $85 Million for Implementation of noncredit courses (Career Development and Student Equity Plans. Th ese funds are College Preparation courses) to the credit rate, to further improve access and outcomes consistent with 2014-15 trailer legislation. for disadvantaged groups through Funds Additional Full-Time Faculty. Th e implementation of student equity plans. budget includes $62 million for districts to hire Th is increase brings total associated additional full-time faculty. Th e CCC Chancellor’s funding to $155 million. Of this amount, Offi ce is to distribute the funds to districts based up to $15 million may be used to fund on their share of FTE students. Provisional budget agreements with up to ten districts to language sets forth rather complicated rules provide enhanced student support services for adjusting each district’s “faculty obligation for foster youth, consistent with the intent number” (FON), which, in turn, aff ects how many of Chapter 771, Statutes of 2014 (SB 1023, new full-time faculty members each district must Liu). Provisional budget language clarifi es hire. Districts with a relatively low existing FON that student equity plan funding may will see the greatest increase in their FON, and, to be used for existing campus-based and the extent they do not already meet their new FON, categorical programs that advance student will have to spend more of their funding allocations equity. to hire additional full-time faculty. Districts already in excess of their new FON will not be required • $12 Million for Workshops and Training. to hire new full-time faculty. Budget language Th ese funds are to help community college specifi es that districts must use any funds not personnel improve student achievement, needed to meet their FON for enhancing student college operations, and leadership of success through the support of faculty, including statewide initiatives. Th e CCC also may (but not limited to) support of part-time faculty use these funds to develop and disseminate offi ce hours. eff ective practices through the creation of an online information clearinghouse. Categorical Programs Provisional budget language specifi es Increases Student Success and Support that eff ective practices shall include Program. Th e budget augments the program by development of courses and educational $200 million. Since 2012-13, total funding for the programs for California Conservation program has increased signifi cantly—growing Corps members, adult inmates of prisons from $49 million in 2012-13 to $472 million in and jails, and former inmates. 2015-16. Th e augmentation for 2015-16 includes four components. • $3 Million for Local Technical Assistance. Th ese funds are to expand technical • $100 Million for Matriculation Services. assistance to community college districts Th ese funds are to enhance orientation, that demonstrate low performance in counseling and advising, educational any area of operations. Th e augmentation planning, assessment, and other student 20 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET brings total associated funding to Other Augmentations and Actions $5.5 million. Creates Basic Skills and Student Outcomes Expands EOPS. Th e budget provides Transformation Program. Th e budget provides $35 million to restore EOPS to its pre-recession $60 million for a one-time incentive grant program funding level. Th is program provides academic to improve community college remediation and support counseling, fi nancial aid, and other practices. Districts may apply for grants to help support services to help disadvantaged students them adopt or expand the use of evidence-based meet their educational goals. Total funding for the models for basic skills assessment, placement, program in 2015-16 is $123 million. instruction, and student support. Eligible activities New Financial Aid Program Supplements Cal under the grant program include curriculum Grant B Awards for Some Students. Th e budget redesign, professional development, release time for provides $39 million to supplement the Cal Grant B faculty and staff , and data collection and reporting. access award for CCC students who are enrolled in Th e number of awards and grant amounts will 12 or more units. In 2015-16, the Cal Grant B access depend on the number of successful applicants. award, which provides aid for books, supplies, Statutory language specifi es data collection and living expenses, is $1,656 without the CCC requirements for participating community colleges supplement. Th e size of the CCC supplement will and directs our offi ce to evaluate the program’s depend on the number of eligible CCC students eff ectiveness in interim and fi nal reports to be enrolled in 12 or more units. Th e Chancellor’s issued by December 1, 2019 and December 1, 2021, Offi ce estimates the new funding will provide respectively. additional support of about $800 per eligible Creates Basic Skills Partnership Pilot student. Th e budget provides campuses a total of Program. Complementing the larger basic skills $3 million (one time) for administration of the new grant program is a one-time $10 million grant program. program to promote more and better collaboration Augments Existing Apprenticeships and in delivery of basic skills instruction among high Funds New Apprenticeships in High-Demand schools, community colleges, and CSU campuses. Occupations. Th e budget increases funding for Th e CCC Chancellor’s Offi ce will award fi ve existing apprenticeship programs by $14 million, grants of $2 million each. To qualify for awards, bringing total annual funding to $37 million. community college districts must collaborate Provisional budget language raises the hourly with local school districts and CSU campuses to reimbursement rate for instruction from $5.04 better articulate English and math instruction to $5.46 to match the CCC noncredit rate. Th e across segments. Participating CSU campuses budget also provides $15 million to support must commit to directing their underprepared the development of new apprenticeships in students—either currently enrolled or planning to high-demand occupations. Th e Chancellor’s Offi ce enroll—to basic skills instruction at community indicates that new apprenticeships likely will be colleges. Statute requires the Chancellor’s Offi ce to started in healthcare, advanced manufacturing, report by April 1, 2017 on program eff ectiveness, information technology, and green jobs (for cost avoidance, and recommendations regarding example, jobs involving renewable energy) over the the expanded use of community colleges to deliver next two years. basic skills instruction to CSU students. www.lao.ca.gov Legislative Analyst’s Offi ce 21 2015-16 BUDGET Funds Start-up Costs for Baccalaureate Pilot educational programs for adult inmates and former Programs. Th e budget also includes $6 million inmates. Districts could use any unrestricted for start-up costs related to the implementation funding for this purpose. Th e language responds of Chapter 747, Statutes of 2014 (SB 850, Block), to the availability of private foundation funds to which authorizes CCC to establish up to improve inmate education requiring a match of 15 baccalaureate degree pilot programs. Th e pilot $1 in state funds for every $3 in private funds. Th e districts can use these funds for equipment, library Chancellor will allocate any private funds received materials, curriculum development, and faculty to participating districts in proportion to their use and staff professional development, among other of state funds for this purpose. costs. Professional development activities could Provides Physical Plant and Instructional include bringing in speakers from community Equipment Funding. Th e budget includes colleges that already have made the transition to $148 million (one time) for facilities and off ering baccalaureate programs, collaborating equipment. Th e Chancellor’s Offi ce is to allocate the with university and industry colleagues, and funds to community college districts based on their participating in academic conferences. FTE enrollment. Consistent with longstanding Extends CTE Pathways Initiative. Th e budget policy, districts may use the funds for scheduled provides $48 million to extend for one additional maintenance, special repairs, hazardous substances year an existing CTE initiative. Th e goal of the abatement, architectural barrier removal, and initiative is to help regions develop sustainable seismic retrofi t projects up to $400,000, as well policies and infrastructure to improve CTE as replacement of instructional equipment and pathways among schools, community colleges, library materials. Provisional budget language and regional business and labor organizations. further expands allowable uses to include certain Th e CCC and CDE award three-year grants under water conservation projects, including replacement the program. With the additional funding, the of water-intensive landscaping, drip or low-fl ow segments will allocate new awards (or renew irrigation systems, building improvements to existing ones) for 2015-16 through 2017-18. To reduce water usage, and installation of meters for qualify for funding, grantees must work toward wells to monitor water usage. eight specifi c objectives set forth in the program’s Increases Chancellor’s Offi ce Staffi ng. In authorizing legislation, Chapter 433, Statutes addition to CCC Proposition 98 funding, the of 2012, (SB 1070, Steinberg). Th ese objectives budget includes a $340,000 non-Proposition 98 include aligning secondary and postsecondary General Fund augmentation to begin supporting CTE programs to create seamless transitions for six new permanent positions in the Chancellor’s students, providing professional development to Offi ce. Th e 2015-16 budget assumes the facilitate CTE partnerships, and increasing the Chancellor’s Offi ce will need some time to make all number of students who engage in work experience the new hires and correspondingly includes only a programs. half year of funding, with the intent to annualize Enhances Education for Adult Inmates. costs the subsequent year. Th e additional staffi ng Provisional budget language directs the Chancellor is to help the system implement several statewide to identify one or more districts that are willing initiatives to improve student success and promote to use at least $5 million of their combined state eff ective administrative and educational practices funding on a one-time basis to develop eff ective at community colleges. 22 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET Capital Outlay (2) $20 million to make seismic and building code corrections to the L Tower at Rio Hondo Funds Construction Phase for Seven College; (3) $19 million to make seismic and code Previously Approved Projects. Th e budget provides corrections to a campus center building at Santa $100 million from previously authorized general Barbara City College; (4) $13 million to replace obligation bonds to support the construction phase an instructional building at El Camino College’s of these projects. Th e state funded earlier phases Compton Center; (5) $8.4 million to construct a of the projects in 2014-15. Th e projects include new academic facility at Los Rios District’s Davis (1) $33 million to replace fi re suppression, electrical Center; (6) $4 million to replace a fi re alarm system distribution, communication, storm water, sanitary at Mt. San Jacinto College; and (7) $1.7 million to sewer, wastewater, and natural gas systems at renovate Hayden Hall at Citrus College. the College of the Redwoods, Eureka campus; CHILD CARE AND PRESCHOOL Budget Act Provides $2.8 Billion for Child through direct contracts based on the SRR. Th e Care and Preschool Programs. As shown in 2015-16 budget provides $61 million for a 5 percent Figure 7 (see next page), the 2015-16 budget increase to the SRR starting July 1, 2015. For the includes $1.6 billion for non-CalWORKs programs, State Preschool program—both part-day and $1.1 billion for CalWORKs programs, and full-day—the 5 percent increase is in addition to $150 million for support programs. Combined, the a 1 percent increase to the part-day rate described 2015-16 Budget Act augments these programs by below. Due to the higher increase in the part-day $423 million (18 percent) from the 2014-15 Budget rate, the new State Preschool rates will be higher Act level. Th e bulk of the increase is covered by than the General Child Care rates—marking the higher Proposition 98 and non-Proposition 98 fi rst time diff erences have existed between rates for General Fund support. these two programs. Higher Spending Predominantly Due to Regional Market Rates (RMR) Increase Reimbursement Rate and Slot Increases. by 4.5 Percent. Th e state funds other child care New program enhancements and expansions centers, homes, and license-exempt providers using account for the vast majority of the year-over-year a voucher system based on the RMR. Th e 2014-15 increase. As shown in Figure 8 (see page 25), the Budget Act increased the RMR to the greater of largest augmentations are for reimbursement rates the 85th percentile of the 2005 RMR survey or the and additional slots, which receive an additional 85th percentile of the 2009 RMR survey defi cited $177 million and $138 million, respectively. by 10.11 percent. Th ese rate increases were eff ective We discuss these augmentations and caseload January 1, 2015. Th e 2015-16 budget provides adjustments in greater detail below. $34 million to annualize the cost of these rate increases. It also provides $44 million to increase Reimbursement Rates the RMR by an additional 4.5 percent starting Standard Reimbursement Rate (SRR) October 1, 2015. As of this date, the RMR will Increases by 5 Percent. Th e state historically has be set at the higher of 104.5 percent of the 85th funded General Child Care and State Preschool percentile of the 2005 RMR survey or 104.5 percent www.lao.ca.gov Legislative Analyst’s Offi ce 23 2015-16 BUDGET of the 85th percentile of the 2009 RMR survey activities for teachers and increase training for defi cited by 10.11 percent. parents. Th e full-day State Preschool rate—which is License-Exempt Rates Increase to 65 Percent funded through a combination of the part-day State of Family Child Care Home Rates. Th e budget Preschool rate and a “wrap” rate—also receives provides $18 million to increase license-exempt a 1 percent increase for the part-day preschool rates from 60 percent to 65 percent of the RMR portion of the rate. (In addition to the other for family child care home providers starting full-day and part-day SRR increases, the budget October 1, 2015. License-exempt providers are provides $14 million for a 1.02 percent infl ationary family, friends, and neighbors who provide child adjustment.) care to children in the CalWORKs and Alternative Slots Payment programs. Part-Day State Preschool Rate Increases Signifi cant Increase in Slots. Th e budget 1 Percent. Th e budget provides $6 million to provides $53 million to fund 6,800 additional increase the part-day State Preschool rate by Alternative Payment Program slots (that is, 1 percent to expand professional development non-CalWORKs voucher slots). For State Preschool, Figure 7 Child Care and Preschool Budget (Dollars in Millions) Change From 2014-15 2013-14 2014-15 2015-16 Actual Budget Act Budget Act Amount Percent Expenditures CalWORKs Child Care Stage 1 $337 $330a $411 $81 24% Stage 2b 367 355 414 60 17 Stage 3 202 220 278 58 27 Subtotals ($906) ($904) ($1,103) ($199) (22%) Non-CalWORKs Programs State Preschool $507 $614 $835 $220 36% General Child Care 464 544 450 -94 -17 Alternative Payment 177 182 251 68 37 Migrant 27 28 29 2 6 Handicapped 1 2 2 — — Subtotals ($1,177) ($1,370) ($1,567) ($197) (14%) Support and Quality Programs $74 $123 $150 $27 22% Totals $2,157 $2,397 $2,820 $423 18% Funding Non-Proposition 98 General $764 $809 $977 $169 14% Fund Proposition 98 General Fund 507 664 885 220 33 Federal CCDF 556 570 573 3 — Federal TANF 330 353 385 31 9 a Refl ects Department of Social Services’ revised Stage 1 estimates for cost of care and caseload. b Does not include $9.2 million provided to community colleges for Stage 2 child care. CCDF = Child Care and Development Fund and TANF = Temporary Assistance for Needy Families. 24 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET it provides $34 million to fund 7,030 additional Other Major Child Care Actions full-day slots beginning January 2016, $33 million Budget Shift s $145 Million in State Preschool to annualize the cost of 4,000 slots initiated late in Wrap Into Proposition 98. Another major child 2014-15, and $12 million to fund 2,500 additional care action involves a change in how the state part-day slots intended for children with disabilities accounts for preschool costs. Prior to 2015-16, beginning July 2015. For the CalWORKs programs, the state funded the part-day preschool program the budget funds a 4 percent increase in caseload using Proposition 98 General Fund whereas primarily due to more families projected to it funded the wraparound portion of the day participate in welfare-to-work activities and, as a using non-Proposition 98 General Fund. Th e result, use Stage 1 child care. budget package shift s the cost of wraparound care provided by LEAs into Proposition 98. Figure 8 2015-16 Child Care and Preschool Changes (In Millions) Change Proposition 98 Other Total Reimbursement Rates Increases the Standard Reimbursement Rate 5 percent starting July 1, 2015 $38 $23 $61 Increases Regional Market Rate 4.5 percent starting October 1, 2015 — 44 44 Annualizes Regional Market Rate increase initiated January 1, 2015 — 34 34 Increases license-exempt rate from 60 percent to 65 percent of family child — 18 18 care home rates starting October 1, 2015 Provides 1.02 percent COLA to Standard Reimbursement Rate 6 8 14 Increases part-day State Preschool rate 1 percent starting July 1, 2015 6 — 6 Subtotals ($50) ($127) ($177) Slots Provides 6,800 Alternative Payment Program slots starting July 1, 2015 — $53 $53 Provides 7,030 full-day State Preschool slots starting January 1, 2016a $31 3 34 Annualizes funding for 4,000 full-day State Preschool slots initiated 15 19 33 June 15, 2015 Provides 2,500 part-day State Preschool slots with priority for children with 12 — 12 disabilities starting July 1, 2015 Increases non-CalWORKs slots for statutory growthb 2 3 5 Subtotals ($60) ($78) ($138) Other Makes CalWORKs child care caseload and average cost of care adjustments — $116 $116 Provides one-time infant and toddler quality activity block grant — 24 24 Carries forward one-time funds for federally required quality activities — 3 3 Shifts LEA full-day State Preschool “wrap” into Proposition 98 $145 -145 — Removes one-time funding for State Preschool facilities and quality activities -35 — -35 Subtotals ($110) (-$2) ($108) Totals $220 $203 $423 a Of these slots, 5,830 are for local educational agency (LEA) providers, with the remainder for non-LEA providers. b Applies 1.39 percent growth to Alternative Payment Program slots and 0.37 percent growth to all other non-CalWORKs child care programs. COLA = cost-of-living adjustment. www.lao.ca.gov Legislative Analyst’s Offi ce 25 2015-16 BUDGET Th e Proposition 98 minimum guarantee is for the preschool QRIS starting in 2014-15. Th e not rebenched for this shift . Wraparound care CDE will allocate the one-time funds to existing provided by non-LEAs remains funded with regional consortia, which fi rst developed under non-Proposition 98 General Fund. the federal Race to the Top grant. Th e bulk of the One-Time Infant and Toddler Quality Rating funding is for these consortia to off er professional and Improvement System (QRIS) Block Grant. Th e development, training, technical assistance, and budget also includes $24 million in one-time funds other resources to child care providers. No more for a QRIS block grant to support improvements than 20 percent of the funding may be allocated in care for infants and toddlers. Th is funding directly to child care providers. builds upon the ongoing $50 million provided HIGHER EDUCATION $14.8 Billion in General Fund Support for we describe in more detail the budget for UC, CSU, Higher Education. As shown in Figure 9, this is Hastings, and CSAC. a $1.1 billion (8 percent) increase from 2014-15. Universities Th e University of California (UC) and California State University (CSU) each grow 8 percent, Budget Package Departs From Various whereas Hastings College of the Law (Hastings) Aspects of Governor’s Multiyear Higher Education grows 13 percent, and fi nancial aid programs Funding Plan. In 2013-14, the Governor proposed a administered by the California Student Aid four-year funding plan for UC, CSU, and Hastings Commission (CSAC) increase 10 percent. Below, that called for (1) base augmentations of 5 percent Figure 9 Higher Education General Fund Support (Dollars in Millions) Change From 2014-15 2013-14 2014-15 2015-16 Actual Revised Budget Act Amount Percent University of Californiaa $2,844 $2,991 $3,232b $241 8% California State Universitya,c 2,769 3,026 3,280 254 8 California Community Collegesa,d 4,636 5,408 5,742 334 6 Hastings College of Lawa 10 11 12 1 13 California Student Aid Commissione 1,699 1,937 2,135 198 10 California Institute for Regenerative 95 275 369 93 34 Medicinea Awards for Innovation in Higher Education — 50 — -50 -100 Totals $12,053 $13,698 $14,770 $1,072 8% a Includes general obligation debt service. b Does not include $25 million that UC will receive if it meets 2015-16 Budget Act enrollment expectations. c Includes health benefi t costs for retirees. d Includes state contributions to the California State Teachers’ Retirement System, Quality Education Investment Act funds, Adult Education Block Grant funds, and funding for CCC Chancellor’s Offi ce. e Includes Temporary Assistance for Needy Families, Student Loan Operating Fund, and Student Loan Authority Fund support that directly offsets General Fund costs. 26 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET in 2013-14 and 2014-15 and 4 percent in 2015-16 though it does not designate a set dollar amount for and 2016-17, (2) broad discretion for the segments this purpose. to determine how to spend their state funds, $3.3 Billion in General Fund Support for CSU. (3) no increases in tuition, and (4) no expectations Th is is a $254 million (8 percent) increase from regarding enrollment. Th e 2015-16 budget departs 2014-15. Of this amount, $229 million is ongoing. from this framework for UC and CSU by providing As with UC, the bulk of ongoing funding for CSU funding on top of each segment’s 4 percent base is unallocated, but the budget includes several new augmentation, earmarking some funding for earmarks. Specifi cally, of the new ongoing funding, specifi c purposes, and setting expectations for the budget earmarks at least $11 million for CSU to enrollment growth. Consistent with the Governor’s hire additional tenure-track faculty, $500,000 for multiyear plan, the 2015-16 budget assumes no the Center for California Studies to increase staff tuition increases for resident undergraduate and fellow stipends (replacing funding previously students at any of the three segments. Th e UC, provided from the Assembly’s budget), up to however, increased 2015-16 tuition for nonresident $500,000 to plan for an engineering program at undergraduate students as well as certain graduate the Channel Islands campus, $250,000 for the professional degree students (both residents and Mervyn M. Dymally African American Political nonresidents). Th e UC also increased its mandatory and Economic Institute, and $200,000 to increase Student Services Fee by 5 percent (or $48) in awareness of federal fi nancial aid programs for 2015-16. teachers. Th e ongoing increase also includes $3.2 Billion General Fund Support for UC. $7.6 million for lease-revenue debt service for Th is is an increase of $241 million (8 percent) from previously approved capital projects and $4 million 2014-15. Of this increase, $119 million is ongoing to fund benefi t rate changes for CSU retirees. As and $122 million is one time. Th e bulk of the with UC, the budget specifi es funding is available ongoing funding is unallocated, but the budget from CSU’s base budget for the California DREAM includes various earmarks for the remaining funds. Loan Program, though it does not designate a Specifi cally, the budget earmarks (1) $96 million specifi c amount for this purpose. As with UC, (one time) from Proposition 2 funds to supplement the budget also provides CSU with $25 million in payments made by UC toward its unfunded one-time funding for deferred maintenance. pension liability, (2) $25 million (one time) for $12 Million in General Fund Support for deferred maintenance (provided through a budget Hastings. Th is is a $1.4 million (13 percent) control section), (3) $6 million (ongoing) to support increase from 2014-15. Of this amount, $335,000 is two UC centers on labor research and education, for debt service on general obligation bonds issued (4) $1 million (one time) for the Wildlife Health in the past to pay for capital projects at Hastings. Center at the Davis campus to administer grants Unlike UC and CSU, Hastings has full discretion to local marine mammal stranding networks, in deciding how to use the remainder of its funding (5) up to $1 million for UC to continue planning increase. a medical school at the Merced campus, and Enrollment Expectations. Th e budget sets (6) $770,000 (ongoing) for an elections database enrollment expectations for UC and CSU. For housed at the Berkeley campus. In addition, the UC, the budget sets an expectation for the budget specifi es funding is available from UC’s base system to enroll at least 5,000 additional resident budget for the California DREAM Loan Program, undergraduate students by the 2016-17 academic www.lao.ca.gov Legislative Analyst’s Offi ce 27 2015-16 BUDGET year, as compared to the 2014-15 academic year. supporting state loan assumption and student Further, the budget authorizes the Director of outreach programs, and two augmentations Finance to augment UC’s budget by $25 million for CSAC’s state operations. It also includes should UC demonstrate prior to May 1, 2016 $1.9 million for Cal Grants from the College Access that it will meet the state’s expectation. For CSU, Tax Credit Fund. We highlight the main fi nancial the budget states a goal to increase enrollment aid components of the budget package below. by at least 10,400 resident FTE students over the $2.0 Billion in Cal Grant Funding. Of 2014-15 level. Th e budget establishes no enrollment this amount, $1.5 billion is state General Fund, expectations for Hastings. $521 million is federal TANF funding, and $1 Million for Freshman Eligibility Study. $1.9 million is from the College Access Tax Credit Th e budget provides the Offi ce of Planning and Fund. Cal Grant funding increases $164 million Research with $1 million for a study to determine (9 percent) from 2014-15 to 2015-16, consisting of the proportion of high school graduates eligible the following specifi c augmentations: for admission to UC and CSU as freshmen. Trailer • Fully Funds Cal Grant Participation legislation directs the offi ce to convene an advisory Growth. Th e budget includes an increase group that includes representatives from UC, of $145 million (9 percent) to account for CSU, CDE, DOF, and LAO to consider the overall increased Cal Grant participation. Th e approach to the study. Th e offi ce may contract out largest portion of this increase is due to to perform all or portions of the study. Th e offi ce growth in new awards in recent years, must submit the completed study to the Legislature which results in more renewal awards in and Governor by December 1, 2016. 2015-16. In addition, the second cohort Findings, Declarations, Required Actions, of Dream Act students accounts for some and Reporting Requirements. Th e budget package (about 15 percent) of the increase. includes a number of fi ndings, declarations, and required actions pertaining to UC, as well • Delays Scheduled Reduction in Cal Grant as reporting requirements for UC, CSU, and Award for Some Students. Th e budget Hastings. Figure 10 summarizes these provisions includes $9.1 million to delay a reduction for each segment. Figure 11 (see page 30) provides in the maximum award for students at additional detail on the required UC report relating private colleges accredited by the Western to performance and cost reduction measures. Association of Schools and Colleges. Th e 2012-13 budget scheduled a reduction in Financial Aid the maximum award for these students $2.1 Billion for Financial Aid. Of this from the 2013-14 level of $9,084 to $8,056 amount, $1.6 billion is from the General Fund in 2014-15, but subsequent budgets have and $521 million is federal Temporary Assistance postponed the reduction. Under the for Needy Families (TANF) funding. Financial current budget package, this reduction is aid spending from these sources increases further postponed until 2017-18. $198 million (10 percent) from 2014-15 to 2015-16. • Increases Number of New Cal Grant Th e budget includes several Cal Grant expansions, Competitive Awards. Th e budget includes eligibility changes for Middle Class Scholarships, $8 million to increase the number of new state funding to backfi ll expiring federal funds 28 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET Figure 10 Declarations, Reports, and Requirements for Universitiesa University of California Findings and (1) The UC Regents have endorsed a long-term funding framework that calls for fl at tuition in declarations 2015-16 and 2016-17 and actions to reduce the cost structure of the university. (2) The framework will create capacity for all campuses to serve more resident students. (3) Funding besides state funding (such as fi nancial aid currently provided to nonresident students) is available to serve more resident students. (4) The Legislature intends for funds from nonresident enrollment growth and nonresident tuition increases be used to increase resident enrollment. (5) The appropriation in the 2015-16 budget for unfunded liabilities of the University of California Retirement Plan (UCRP) does not constitute an obligation on behalf of the state to appropriate any additional funds in subsequent years for UCRP. Reporting (1) Report by November 30, 2015 a sustainability plan with enrollment projections, performance requirements targets, and changes needed to ensure expenditures do not exceed available resources, using General Fund and tuition revenue assumptions provided by the Department of Finance. (2) Report by December 1, 2015 on performance and cost reduction measures undertaken as a result of the Select Advisory Committee on the Cost Structure of the University. (3) Supplemental report by December 10, 2015 on university fund sources legally allowable to support educational costs, the factors used to determine which funds support educational activities, and the sources of funds used to calculate educational costs. (4) Report by April 1, 2016 on funds used for targeted support services to increase graduation rates of low-income and underrepresented students. (5) Upon receipt of funding appropriated for the UCRP unfunded liability, UC must submit a report demonstrating the funds have been used to supplement and not supplant funding otherwise available for UCRP. Required (1) The UC Regents are required to consider state employee compensation when considering actions compensation for employees in its “Senior Management Group.” At a minimum, the UC Regents are required to consider comparable positions designated as “state offi cers” (such as the Governor, Superintendent of Public Instruction, and a Member of the Legislature) and certain state agency directors (such as the Director of Finance and the Secretary of Transportation). (2) The UC Regents are required to post information online for each subcategory within its “Managers and Senior Professionals” personnel category as well as disaggregate all personnel categories by fund source. California State University Reporting (1) Report by November 30, 2015 a sustainability plan with enrollment projections, performance requirements targets, and changes needed to ensure expenditures do not exceed available resources, using General Fund and tuition revenue assumptions provided by the Department of Finance. (2) Report by April 1, 2016 on factors impacting graduation rates for all students and for low- income and underrepresented students separately. Legislative Analyst’s Offi ce Reporting Report by January 1, 2017 on the need for new CSU campuses within certain regions of the requirement state and by January 1, 2018 on the need for new UC campuses statewide (Chapter 22). Offi ce of Planning and Research Reporting Report by December 1, 2017 on the proportion of high school graduates eligible for admission requirement to UC and CSU as freshmen (Chapter 324). Hastings College of the Law Reporting Supplemental report by September 30, 2015 on a proposed formula to fund enrollment growth requirement and adjust for enrollment declines. a Authorized in the 2015-16 Budget Act, the Supplemental Report of the 2015-16 Budget Act, Chapter 22, Statutes of 2015 (SB 81, Committee on Budget and Fiscal Review), and Chapter 324, Statutes of 2015 (SB 103, Committee on Budget and Fiscal Review). www.lao.ca.gov Legislative Analyst’s Offi ce 29 2015-16 BUDGET Cal Grant competitive awards from 22,500 Grant B access award by $8 per student, to 25,750 per year. As more competitive on top of the base award amount of $1,648 awards, in turn, are renewed, the per student. Th ese funds come from the associated costs are expected to increase to College Access Tax Credit Fund. $14.4 million in 2016-17, $19.9 million in Adjusts Eligibility Rules for Middle Class 2017-18, and $23.4 million in 2018-19. Scholarships. Trailer legislation makes a few modifi cations to Middle Class Scholarships. • Provides Small Supplement to Cal Whereas the program previously had no asset Grant B Access Award. Th e budget ceiling, trailer legislation establishes a ceiling of includes $1.9 million to supplement the Cal Figure 11 UC Performance and Cost Reduction Measures Measure Description Implementation Time Line Streamline Transfer Pathways UC is to closely align its lower-division requirements for its During 2015-16 and 2016-17. 20 most popular majors with those used by CSU and CCC for associate degrees for transfer. It also will consider adopting the common course numbering system used by CSU and CCC. Increase Transfer Enrollment UC has committed to admitting one transfer student for every By 2017-18. two freshman students at all campuses (but Merced). Review Units Required for Majors UC has agreed to reduce the number of units required for Not specifi ed. a major to no more than 45 upper-division units “wherever possible” in 75 percent of majors at each campus (except the Los Angeles campus because it already has undertaken such a review). Review Exam Credit Policies The UC President is to strongly encourage UC faculty to Not specifi ed. review its policies on awarding credits to students successfully passing (1) Advancement Placement tests taken in high school and (2) exams administered by the College Board to measure mastery of college-level material. Create Alternative Pricing Models Three campuses are to create alternative pricing models for the Start by summer 2016. for Summer Session summer session to provide an incentive for more students to enroll during that term. Identify Three-Year Degree UC is to identify three-year degree pathways in 10 of its top 15 Develop degree pathways by Pathways majors, with a goal of having 5 percent of students enrolled in March 1, 2016. these accelerated degree pathways. Achieve enrollment goal by summer 2017. Increase Use of Data and UC is to report on how campuses are using data and technology Not specifi ed. Technology to help students succeed and close achievement gaps. It also will initiate a multicampus pilot program to use adaptive learning technologies to improve instruction and student persistence. Expand Online Course Offerings UC is to expand upon efforts begun in recent years to increase Convene industry group the number of online courses it offers. As part of this effort, during summer 2015. No UC will convene a group of industry leaders to identify which time line specifi ed for course online certifi cate and master’s degree programs could benefi t expansion. California’s workforce. Implement New Way of Calculating Three UC campuses are to pilot “activity-based costing” to Not specifi ed. Costs calculate educational costs in certain departments. 30 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET $150,000. (Th e asset ceiling excludes primary technology system to administer fi nancial aid residences and funds in retirement accounts.) programs. Th e budget also provides $95,000 and Starting in 2015-16, students with household one position for CSAC to implement program assets above the ceiling are ineligible to receive a changes to the Cal Grant C program, as required by Middle Class Scholarship. Starting in 2016-17, the Chapter 692, Statutes of 2014 (SB 1028, Jackson). legislation also prohibits recipients from receiving Capital Outlay a total amount of assistance under the program that exceeds the equivalent of four years (or, in Authorizes UC to Fund 15 Capital Outlay some cases, fi ve years) of full-time attendance. Projects From Support Appropriation. Pursuant to Additionally, the legislation requires both income Chapter 50, Statutes of 2013 (AB 94, Committee on and asset limitations for eligibility to be adjusted Budget), UC’s state-funded capital outlay projects for infl ation starting in 2016-17. To refl ect no longer are approved by the Legislature in the savings from these changes as well as lower-than- state budget but instead are approved by DOF. anticipated participation in the program, trailer On April 7, 2015, DOF authorized UC to fund legislation adjusts the statutory appropriations 15 projects totaling $297 million from its support for the program down from $152 million to appropriation, with no future state costs for $82 million in 2015-16, from $228 million to subsequent project phases expected. In addition to $116 million in 2016-17, and from $305 million to state funding, the university is expected to provide $159 million thereaft er. $136 million toward the projects from nonstate Modifi es College Access Tax Credit. Created sources. Th e 15 projects include: in 2014, the College Access Tax Credit is scheduled • New Buildings, Building Replacements, to sunset in 2016. In the near term, budget trailer and Building Additions. Th ese projects legislation continuously appropriates moneys include (1) a new biological and physical deposited into the fund to CSAC to supplement sciences building at San Diego, (2) a new the amount of the Cal Grant B access award. environmental health and safety facility (Previously, the Legislature had to appropriate the at Santa Cruz, (3) a new assembly hall funds in the annual budget.) Trailer legislation and demolition of an existing assembly modifi es and extends the tax credit through 2017. hall at Santa Barbara, (4) new research Backfi lls Expiring Federal Funds. Th e and meeting space at the Intermountain budget includes a $15 million state General Fund Research Extension Center (located in augmentation to replace expiring federal College northeastern Siskiyou County), and (5) an Access Challenge Grant funds formerly used to addition to a sciences building at Riverside. support three state programs—the Assumption Program of Loans for Education ($7.2 million), the • Existing Building System Renewals. Th ese California Student Opportunity Access Program projects are for (1) a sciences building at ($7.2 million), and the Cash for College program Riverside and (2) a classroom building at ($586,000). Berkeley. Increases CSAC State Operations by $935,000. • Seismic, Fire, and Life Safety Improvements. Th e budget provides CSAC with $840,000 and three Th ese projects are for (1) a chemistry positions to begin planning for a new information building at Davis, (2) a clinical sciences www.lao.ca.gov Legislative Analyst’s Offi ce 31 2015-16 BUDGET building at San Francisco, (3) a medical infrastructure upgrades and servicing required school building at Los Angeles, and to maintain buildings undertaken by the private (4) various buildings at Irvine. partner. Authorizes CSU to Fund 117 Capital Outlay • Campus Infrastructure Improvements. Projects From Support Appropriation. Similar to Th e one project in this area is to install the changes made for UC capital outlay approvals, new campus telecommunications and data Chapter 34, Statutes of 2014 (SB 860, Committee infrastructure at Santa Cruz. on Budget and Fiscal Review), delegated approval for state-funded CSU capital outlay projects to the • Equipment for Newly Constructed DOF. Because CSU missed statutory deadlines for Buildings. Th e equipment is for (1) a new submitting its 2014-15 projects, trailer legislation classroom and academic offi ce building at authorizes CSU to initiate both 2014-15 and Merced, (2) an expanded environmental 2015-16 projects over the coming year. In total, health and safety facility at Riverside, and DOF approved 117 projects and $310 million (3) a new coastal biology building at Santa in associated state funding. Of this amount, Cruz. $191 million is for improvements to campus Additionally, trailer legislation relating to the infrastructure, including upgrades to main campus classroom and academic offi ce building project utility plants, electrical systems, gas, sewage, and at Merced authorizes UC to use projected savings water piping. An additional $116 million is for from the preliminary plans and working drawings various facility projects, including improvements to phases for the construction phase. roofi ng and elevator systems, seismic corrections, Allows UC to Enter Public-Private demolitions, improvements to heating and air Partnerships. Trailer legislation expands upon conditioning systems, and new equipment for labs Chapter 50 to allow UC to use its state support and physical education facilities. Th e remaining appropriation to enter into public-private $3 million is for campus pathways and roadwork. partnerships. Under such a partnership, a private Four Relatively Large CSU Projects. Four of entity typically would fi nance, design, build, CSU’s authorized projects have estimated costs of operate, and maintain a capital project whereas $20 million or more per project. Th ese projects are UC, in turn, would make a series of payments to (1) a campuswide renewal of utility lines, chillers, the private entity so long as the facility remains boilers, telephone lines, and emergency power at available for its use. Th ough trailer legislation Los Angeles; (2) the replacement and expansion grants UC broad authority to engage in these types of water, gas, and sewer lines at Long Beach; of partnerships, it requires UC to receive DOF (3) a multiphase project to demolish abandoned approval for specifi c projects. Th e UC indicates that structures at Monterey Bay remaining from the it plans to seek approval from DOF in the future to original Fort Ord base; and (4) a multiphase project enter into a public-private partnership to expand to provide seismic and code compliance corrections the Merced campus to accommodate 10,000 to the physical sciences building at Los Angeles. students—up from the current campus enrollment Modifi es Timeline for CSU Capital Outlay level of 6,200. For this project only, the trailer Approvals. Chapter 34 requires CSU to submit legislation requires UC employees to perform all a list of proposed capital outlay projects for the routine maintenance work, with more complex coming fi scal year to DOF by September 1. Th e 32 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET CSU indicates it missed this deadline for 2014-15 postsecondary institutions to be subject to a state because its Board of Trustees did not adopt a capital complaint resolution process as a condition of outlay plan until November 2014. To accommodate participation in federal fi nancial aid programs. To the Trustees’ later timeline for capital outlay enable the state’s nonprofi t colleges and universities approvals moving forward, trailer legislation to comply with this law, trailer legislation permits requires CSU to submit only a preliminary list of these institutions to contract with the state’s Bureau capital outlay projects to DOF by September 1, with for Private Postsecondary Education to review the fi nal list due by December 1. and act on complaints concerning the institution. Authorizes $36.8 Million in State Lease- (Th ese institutions otherwise are exempt from Revenue Bonds to Build a New Academic bureau oversight.) Th e legislation permits the Facility at Hastings. Unlike for UC and CSU, the bureau to refer complaints to the institution, an Legislature continues to approve capital outlay accrediting agency, or another entity, though it projects for Hastings in the annual budget and requires the bureau to ensure all complaints are authorizes associated state bond funding. Th e resolved. budget authorizes $36.8 million in state lease- Requires Bureau to Report on Complaints revenue bonds to build a new academic facility on Against Nonprofi t Colleges and Universities. vacant land owned by Hastings using a design- Th e bureau is to report the following information build procurement method. Th e new facility is to the Legislature by February 1, 2017: (1) a list intended to replace an existing academic facility of institutions executing a complaints-related whose building systems are reaching the end contract with the bureau, (2) the total number of their useful lives. Demolition of the existing of complaints against each of these institutions, building is not included in the project scope. (3) the nature of the complaints, (4) the number of complaints referred to another entity, (5) the Bureau for Private Postsecondary Education number of complaints resolved, and (6) the number Gives Nonprofi t Colleges and Universities of complaints pending. Th e last three items are to Access to State Complaint Resolution Process. A be disaggregated by the type of entity handling the federal regulation eff ective July 1, 2015 requires complaint. HEALTH Overview of Spending. Th e spending plan Figure 13 (see next page) shows the major policy provides $20.2 billion General Fund for health changes adopted by the Legislature as part of the programs. Th is is an increase of $715 million, 2015-16 spending plan. Th ese changes are discussed or 3.7 percent, compared to the revised 2014-15 in more detail below. In addition to signing the spending level, as shown in Figure 12 (see next 2015-16 Budget Act, the Governor convened a page). Th is year-over-year increase in spending special session of the Legislature to address the refl ects increases in both caseload and utilization fi nancing of Medi-Cal (among other health and of services (including increased use of high-cost human services issues), as discussed below. drugs), as well as a Medi-Cal-related funding restoration and some new health care initiatives. www.lao.ca.gov Legislative Analyst’s Offi ce 33 2015-16 BUDGET Figure 12 Major Health Programs and Departments—Spending and Trends General Fund (Dollars in Millions) Change From 2014-15 to 2015-16 2013-14 2014-15 2015-16 Amount Percent Medi-Cal—local assistance $16,488 $17,521 $18,040 $519 3.0% Department of State Hospitals 1,463 1,547 1,604 57 3.7 Department of Public Health 115 120 132 12 10.0 Other Department of Health Care 46 133 254 121 91.0 Services programs Emergency Medical Services Authority 7 8 8 — — All other health programs (including 178 178 184 6 3.5 state support) Totals $18,297 $19,507 $20,222 $715 3.7% Department of Health Care part the result of underlying cost drivers in the Services (DHCS)—Medi-Cal program, such as changes to caseload and the cost of providing health care services. For example, the Th e spending plan provides $18 billion General spending plan assumes that overall caseload will Fund for Medi-Cal local assistance expenditures grow by 2.5 percent compared to 2014-15, and that administered by DHCS. Th is is an increase of managed care rates will increase by 1.6 percent. We $519 million, or 3 percent, compared to the revised discuss some of the major policies related to the 2014-15 spending level. Spending in 2014-15 was 2015-16 Medi-Cal budget below. $241 million greater than the 2014-15 budget Expands Full-Scope Benefi ts to appropriation. Major factors that contributed Undocumented Children. Th e 2015-16 Budget to this defi ciency include higher-than-expected enrollment among families and children Figure 13 during the state’s Major Policy Changes—State Health Programs implementation of the 2015-16 General Fund Effect (In Millions) Patient Protection and Program Amount Aff ordable Care Act Medi-Cal—Department of Health Care Services (ACA), and increases in Expands full-scope coverage to undocumented children $40.0 Medi-Cal payments for Restores rates previously reduced for dental providers 30.0 Medicare services used Department of Public Health by individuals who are Establishes ongoing state syringe exchange program 3.0 Demonstration projects for Hepatitis C virus prevention 2.2 dually eligible for both Outreach/education pilot programs to reduce HIV exposure 2.0 programs. Department of State Hospitals Diff erences in Increases capacity for incompetent-to-stand-trial patients 17.0 Medi-Cal spending Increases capacity for the Restoration of Competency program 10.1 Increases capacity for CDCR-committed patients 4.6 between 2014-15 and Increases secured capacity at Metropolitan state hospital 3.6 2015-16 are in large CDCR = California Department of Corrections and Rehabilitation. 34 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET Act expands full-scope Medi-Cal coverage to spending) relative to the amount of federal funds eligible children under the age of 19 regardless of the state would have received at the 65 percent cost immigration status. Previously, undocumented share. children who would otherwise have been eligible Expands Benefi ts Available Th rough Drug for Medi-Cal but for their immigration status were Medi-Cal (DMC) Delivery System. DHCS is eligible for restricted scope Medi-Cal coverage, currently seeking a DMC Organized Delivery which provides emergency and pregnancy services. System Waiver from the Centers for Medicare and Th e spending plan assumes implementation of Medicaid Services (CMS). Th is waiver seeks to this coverage expansion will begin May 1, 2016, demonstrate that organized substance use disorder resulting in $40 million in General Fund costs in services improve outcomes for DMC benefi ciaries. 2015-16. Th e estimated full-year General Fund cost Counties that opt into the waiver would provide a of this expansion is $160 million. continuum of care to DMC benefi ciaries and would Restores Provider Payment Rates for Dental provide additional benefi ts that are not currently Providers. Th e 2011-12 budget authorized a available, such as residential treatment services. reduction in Medi-Cal provider payments by up Implementation of the waiver would be done on to 10 percent. Following a period in which these a regional basis and would phase in over several reductions were temporarily enjoined by the years. Th e spending plan assumes the waiver will be courts, the state began implementing many of approved in early 2015-16 and 22 counties will opt the reductions in the fall of 2013. Eff ective July 1, into the waiver and begin providing the additional 2015, the 2015-16 budget eliminates the 10 percent services in 2015-16. payment reduction for dental providers, at an Changes to Services for Certain Pregnant annual General Fund cost of $30 million. Women. Based on recent guidance from CMS, the Includes Enhanced Federal Funding for administration now expects that pregnancy-only Children’s Health Insurance Program (CHIP). Medi-Cal coverage—available to pregnant CHIP is a joint federal-state program that provides women with incomes between 139 percent and health coverage to children in low-income 208 percent of the federal poverty level—will families, but with incomes too high to qualify for count as minimum essential coverage under Medicaid. In California, both CHIP coverage and ACA. Th is is because the scope of California’s Medicaid coverage are provided through Medi-Cal. pregnancy-only coverage is expansive enough to Currently, the federal government provides a qualify as minimum essential coverage. At the 65 percent federal cost share for CHIP coverage time of the 2014-15 spending plan, pregnancy-only (roughly a two-dollar match for every dollar the Medi-Cal coverage was not expected to count as state spends). Recently, the federal government minimum essential coverage. Accordingly, the enacted legislation to fund an increase in the 2014-15 spending plan assumed this population federal cost share for CHIP from 65 percent to would obtain the minimum essential coverage 88 percent as authorized by the ACA. Th e higher through Covered California and therefore the federal cost share will be in place from October 1, state planned to provide Medi-Cal coverage that 2015 through September 30, 2017. Consistent would only “wrap around” the Covered California with the recent federal action, the spending plan coverage. Because of timing issues and the updated assumes $381 million in additional federal funds in CMS guidance, the plan to provide for wraparound 2015-16 (and an equivalent off set in General Fund coverage was never implemented in 2014-15. Th e www.lao.ca.gov Legislative Analyst’s Offi ce 35 2015-16 BUDGET 2015-16 spending plan assumes that this group will year, no special session-related fi nancing legislation be enrolled in pregnancy-only Medi-Cal (that is, had been enacted as of the time of this publication. getting more than just wrap-around coverage), at a President’s Executive Actions on Immigration slightly higher overall cost to the state. 2015-16 Budget Enacted in June Did Not Th e President’s recent executive actions on Modify Existing Managed Care Organization immigration include those that allow certain (MCO) Tax. CMS recently issued guidance that undocumented immigrants to request deferred California’s current MCO tax structure is likely action status, which provides temporary relief from incompatible with federal Medicaid requirements. deportation, and employment authorization. Th e Th e Governor’s 2015-16 budget proposed a President’s executive actions expand the Deferred new MCO tax structure that would meet these Action for Childhood Arrivals (DACA) program requirements while funding two objectives: and create the Deferred Action for Parents of (1) restoring service hours previously reduced in Accountability (DAPA) program (also known as the In-Home Supportive Services (IHSS) program the Deferred Action for Parents of Americans and (at a cost of $226 million in state funds) and Lawful Permanent Residents program). For more (2) maintaining the General Fund off set in the details on these programs, please see our analysis Medi-Cal program that is achieved by the current of the President’s executive actions in our report, tax (roughly $1.1 billion). Th e Legislature did not Th e 2015-16 Budget: Analysis of the Health Budget. adopt the Governor’s MCO tax proposal as part Th e President’s executive actions have not yet been of the 2015-16 budget package enacted in June. implemented as a result of legal action challenging However, because the current MCO tax does not that they violate the United States Constitution as expire until the end of June 2016, and the federal an overreach of executive power. Th ere are several deadline to bring the tax into compliance is August layers to the legal challenge and currently it is not 2016, failure to modify the tax does not aff ect the clear if and when the actions may be implemented. Medi-Cal budget in 2015-16. (As discussed in Some undocumented immigrants aff ected by the the “Human Services” section of this report, the President’s executive actions—if such withstand spending plan includes one-time General Fund legal challenge—may newly qualify for full-scope resources to fund the IHSS restoration in 2015-16.) Medi-Cal, IHSS, and the Cash Assistance Program Special Session. In part to address the eventual for Immigrants (CAPI). Although individuals need for a replacement MCO tax and/or alternative granted deferred action under the President’s funding sources, the Governor convened a special executive actions are not eligible for CalFresh or legislative session on June 19 to address this CalWORKs, there may be an indirect eff ect on and other aspects of health and human services enrollment in these programs. Th is is because fi nancing. Other fi nancing issues to be covered some adults who are granted deferred action status in the special session include providing funding will have children who are currently eligible for to continue the restoration of IHSS service CalWORKs and CalFresh but are not enrolled, and hours beyond 2015-16 and for rate increases for some of these parents may now choose to enroll the providers of Medi-Cal and developmental services. eligible children as a result of the deferred action While the Legislature held several special session process. hearings and considered various pieces of proposed 2015-16 Budget Includes Funding for Potential legislation from July through September of this Caseload Increases Due to President’s Executive 36 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET Actions on Immigration. Th e spending plan Figure 14 includes $26.7 million General Fund to account for Funding for Potential Caseload Increases potential increased caseloads in health and human Due to President’s Executive Actions on services programs, including Medi-Cal, IHSS, Immigration CAPI, CalWORKS, and CalFresh, should the courts 2015-16 General Fund (In Millions) ultimately decide to allow the President’s executive Medi-Cal $16.8 actions on immigration to be implemented during IHSS 4.0 2015-16. Th e spending plan assumes that the CAPI 0.4 executive actions will be implemented beginning CalWORKs 5.4 CalFresh administration —a October 2015 and that implementation will ramp Total $26.7 up over a 24-month period. Specifi c amounts of a The spending plan includes $22,000 General Fund for potential increased General Fund provided for individual programs are CalFresh administrative costs. IHSS = In-Home Supportive Services; CAPI = Cash Assistance Program for displayed in Figure 14. Immigrants; and CalWORKs = California Work Opportunity and Responsibility to Kids. Department of State Hospitals (DSH) in county jails, by up to 78 beds in two counties. Under the budget plan, General Fund spending Th is includes (1) $6.1 million for 46 additional ROC for DSH will be approximately $1.6 billion in beds in San Bernardino County and (2) $4 million 2015-16, an increase of $58 million, or 4 percent, for up to 32 additional ROC beds in one additional from the revised 2014-15 level. Th e year-over-year county that has not yet been identifi ed. In addition, increase is largely due to various plans to increase DSH expects to activate 30 additional ROC beds capacity in the state hospitals and psychiatric during 2015-16 in San Bernardino County that programs. were funded, but not activated, in 2014-15. Activation of Additional Beds. Th e budget Secured Capacity at Metropolitan. Th e plan includes a $21.6 million General Fund increase budget package also includes $3.6 million from the for the activation of an additional 105 patient beds. General Fund for preliminary plans and working Th is total includes (1) $17 million for 105 beds drawings for a project to increase the amount of to treat incompetent to stand trial (IST) patients secure capacity at DSH-Metropolitan. Specifi cally, in DSH facilities and (2) $4.6 million for 30 beds the project would increase the security of 505 beds, at DSH-Vacaville to treat patients referred by including 273 beds that are currently activated and the California Department of Corrections and 232 beds that are not. According to the department, Rehabilitation. In addition, the budget package these 232 beds would be prioritized for IST patients includes $8.3 million in reimbursement authority once the project is completed in 2017-18. for the activation of 40 beds at DSH-Metropolitan for patients committed under the provisions of Department of Public Health (DPH) the Lanterman-Petris-Short (LPS) Act. Counties Th e spending plan provides $2.7 billion will contract with the state for these beds for LPS from all fund sources for DPH programs. Th is is patients. an increase of $173 million, or about 7 percent, Restoration of Competency (ROC) Expansion. compared to the revised prior-year spending Th e budget provides an additional $10.1 million levels. Of this total, the spending plan provides from the General Fund to expand the ROC $132 million General Fund for DPH, an increase program, which provides services to IST patients www.lao.ca.gov Legislative Analyst’s Offi ce 37 2015-16 BUDGET of $12 million or 10 percent. Th is year-over-year • L&C Timelines. Th e spending plan increase in General Fund largely refl ects a number includes budget-related legislation that of relatively small program augmentations initiated specifi es timelines for the completion of by the Legislature, as discussed further below. complaint investigations and reporting on Licensing and Certifi cation (L&C) Program. the department’s compliance with these Th e department’s L&C Program licenses and new timelines. certifi es over 7,500 health care facilities and Legislative General Fund Augmentations agencies that do business in the state. Th e for New Program Activities. Th e spending spending plan includes a number of special plan includes the following legislative General fund augmentations to address workload-related Fund augmentations that were approved by the requirements (including addressing workload Governor: backlogs) and improve program quality in the • $3 million ongoing to establish a state L&C Program. Th e quality improvement funding syringe exchange program in an eff ort to is in response to recent issues of inconsistent and prevent the spread of the Hepatitis C virus inadequate oversight, monitoring, and enforcement and HIV. of L&C standards. Th ese augmentations include: • L&C Workload and Quality Improvement. • $2.2 million for three years in grant Th e spending plan includes $19.8 million funding for demonstration projects aimed in 2015-16 for 237 permanent positions at preventing the Hepatitis C virus. (123 positions become eff ective July 1, 2015 • $2 million ongoing for Pre-Exposure and 114 positions become eff ective April 1, Prophylaxis outreach and education pilot 2016), and an increase of $30.4 million in programs in an eff ort to reduce new HIV 2016-17, to address L&C workload. Th e infections for uninsured and underinsured spending plan also includes $2 million in at-risk individuals. 2015-16 to implement quality improvement projects recommended by an outside AIDS Drug Assistance Program (ADAP). In consultant. addition to the $2.2 million mentioned above for demonstration projects aimed at preventing the • Los Angeles County L&C Workload and spread of the Hepatitis C virus, the spending plan Contract Monitoring. Th e spending plan refl ects the following program and funding changes includes $14.8 million to augment the to ADAP: Los Angeles County contract to perform • ADAP Modernization. Th e Legislature L&C activities in Los Angeles County. Th e updated and expanded fi nancial eligibility spending plan also includes $378,000 and for ADAP and the Offi ce of AIDS Health three positions to provide on-site oversight Insurance Premium Payment program, by and perform workload management, considering family size and increasing the training, and quality improvement income limit. activities to improve the effi ciency and eff ectiveness of Los Angeles County L&C activities. 38 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET • ADAP Enrollment Process. Th e spending $536,000 (special funds) and fi ve positions plan includes an increase of $3 million to manage the increase in client eligibility in federal funds and eight positions to verifi cation workload within ADAP. improve the enrollment process, develop Ebola Emergency Preparedness. Th e spending quality metrics, and provide funding to plan includes an increase of $15.5 million in local health jurisdictions to support ADAP federal expenditure authority in 2015-16 to enrollment activities. support accelerated state and local public health preparedness and operational readiness for • ADAP Client Eligibility Verifi cation responding to the Ebola virus. Workload. Th e spending plan includes HUMAN SERVICES Overview of Spending. Th e spending plan Figure 16 (see next page) shows the major policy provides nearly $11.6 billion from the General Fund changes adopted by the Legislature as part of the for human services programs. Th is is an increase 2015-16 spending plan. Th ese changes are discussed of $1.1 billion, or about 11 percent, compared to in more detail below. In addition to signing the the revised prior-year spending level, as shown 2015-16 Budget Act, the Governor convened a in Figure 15. Th is is largely the result of higher special session of the Legislature to address the spending in the Department of Developmental fi nancing of developmental services (among other Services (DDS) and the IHSS program, refl ecting health and human services issues), as discussed increased caseloads, costs per consumer, and labor below. costs, as well as a funding restoration in IHSS. Figure 15 Major Human Services Programs and Departments—Spending Trends General Fund (Dollars in Millions) Change From 2014-15 to 2015-16 2013-14 2014-15 2015-16 Amount Percent SSI/SSP $2,772.6 $2,789.5 $2,811.6 $22.1 0.8% Department of Developmental Services 2,801.0 3,140.2 3,520.7 380.4 12.1 CalWORKs 1,161.9 673.7a 738.4 64.7 9.6 In-Home Supportive Services 1,926.3 2,193.3 2,805.3 612.0 27.9 County Administration/Automation 674.5 841.7 825.1 -16.6 -2.0 Department of Child Support Services 304.6 313.6 313.6 -0.1 — Department of Rehabilitation 57.0 58.4 58.6 0.2 0.3 Department of Aging 31.5 32.3 31.5 -0.9 -2.7 All other social services (including state support) 252.6 403.2 466.2 63.0 15.6 Totals $9,982.0 $10,446.0 $11,571.0 $1,125.0 10.8% a Refl ects the impact of a $425 million shift of General Fund costs to counties related to the expansion of Medi-Cal under the federal Patient Protection and Affordable Care Act. www.lao.ca.gov Legislative Analyst’s Offi ce 39 2015-16 BUDGET Figure 16 Major Policy Changes—Human Services Programs 2015-16 General Fund Effect (In Millions) Program Amount CalWORKs Increase child care reimbursement rates $21.7 Augment funding for homeless and housing supports 15.0 Immigration Create immigration services program 15.0 Fund potential caseload increases resulting from executive actions on immigration 9.9 In-Home Supportive Services (IHSS)a Restore 7 percent service hoursb 225.9 Developmental Servicesa Develop community-based services for persons moving from Sonoma DC 46.9 Activate 41 additional beds in Secure Treatment Program at Porterville DC 18.8 Backfi ll lost federal funding at Sonoma DC 13.2 Child Welfare Services Funding for continuum of care reform efforts 21.5 Community Care Licensing Additional quality enhancements and program improvements 3.0 a We note that the 2015-16 budget includes a total of about $285 million in IHSS and the Department of Developmental Services (not included in this table) to fund compliance with new federal regulations for overtime for home care workers. The policy to comply with the new regulations was adopted as part of the 2014-15 budget, but was not implemented due to federal litigation. The policy will only be implemented in 2015-16 if there is a federal court decision directing states to do so. b The General Fund support for the restoration of service hours is limited to one year. The administration called a special session to identify a sustainable, alternative funding source to continue the restoration in future years. DC = Developmental Center. Department of Developmental Services refl ects legislative approval of the Governor’s plan to initiate and develop closure plans for the Under the budget plan, General Fund spending remaining DCs (with the exception of the secure for DDS will increase from about $3.1 billion in treatment portion of Porterville DC), with the 2014-15 to over $3.5 billion in 2015-16, or by about last closure completed in 2021. In this regard, 12 percent. To a large extent, this year-over-year the administration submitted a closure plan for increase refl ects increased regional center Sonoma DC to the Legislature in October 2015— (community-based) caseload and other workload- beginning the process to close Sonoma DC by the related adjustments. Below, we discuss the most end of 2018. Budget-related legislation sets criteria signifi cant other spending changes that were for the closure plan and makes implementation adopted in the DDS budget. of the plan contingent upon legislative approval Governor Announces Th at Developmental in the 2016-17 budget process. Related to this Center (DC) Closure Plans Will Be Submitted planned closure, the spending plan includes to the Legislature. Th e DCs are large, state-run $46.9 million General Fund for the development of institutional facilities that serve individuals with new community-based services and supports for developmental disabilities. Th ere are currently persons moving from Sonoma DC. Th e spending just over 1,000 residents in DCs out of a total plan includes the approval of new staff at DDS DDS caseload of over 290,000. Th e spending plan 40 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET headquarters and at the regional centers to ensure Reporting on Rate-Setting and Regional proper planning implementation and oversight, and Center Operations Core Staffi ng Methodologies. budget-related legislation provides for increased Budget-related legislation requires the department reporting to ensure the Legislature is informed as to report to the Legislature during the 2016-17 this process moves forward. budget process on its evaluation of (1) existing Expansion of Secured Treatment Program rate-setting methodologies for community-based at Porterville DC. Th e spending plan includes services and supports and (2) the regional centers’ an increase of $18.8 million General Fund and operations budget core staffi ng formula. 182 positions in 2015-16 to activate 41 additional Special Session Actions to Address beds in the Secure Treatment Program at Developmental Services Financing. As discussed Porterville DC. Th is refl ects the increasing number further above under the “Health” section of this of IST individuals who need to be restored to report, the Governor convened a special legislative competency so that they can stand trial. session in June to address various health and Backfi ll for Lost Federal Funding and human services issues. Th ese include the provision Implementation of DC Program Improvement of suffi cient funding for additional rate increases Plans. Th e spending plan includes an increase of for providers of developmental disability services. $13.2 million General Fund in 2015-16 to backfi ll In addition to this funding goal, the special session the continued loss of federal funding associated is to consider and act upon legislation to increase with four decertifi ed units at Sonoma DC. Th e oversight and the eff ective management of services spending plan also includes a total of $21.4 million provided to consumers of the regional center ($12.8 million General Fund) to implement system. While the Legislature held several special program improvement plans at all the DCs. session hearings and considered various pieces of Delayed Implementation of Federal Fair proposed legislation from July through September Labor Standards Act (FLSA) Overtime Rules. of this year, no special session-related fi nancing Th e spending plan includes a total of $37.5 million legislation had been enacted as of the time of this ($15.6 million General Fund) for a rate increase publication. to regional center vendors employing workers CalWORKs providing home care services. Vendors that employ workers providing services—including personal Th e spending plan provides a total of assistance, supported living services, and in-home $5.8 billion (all funds) to support the CalWORKs respite—to consumers in their homes are impacted program, an increase of $91 million (2 percent) by new federal labor regulations (originally to over the prior year. Th is year-over-year increase take eff ect on January 1, 2015) requiring overtime refl ects the net eff ect of (1) $37 million in costs for pay for home care workers. As these regulations new augmentations, (2) roughly $140 million in are currently being challenged in the courts, net costs to pay for a full year of implementation the spending plan assumes an eff ective date no of previously approved policy changes, and sooner than October 1, 2015. A recent appeal (3) off setting savings of roughly $85 million to the U.S. Supreme Court to continue to delay associated with various changes in estimated implementation of the new regulations beyond caseload levels. Within the total funding amount, mid-October was denied. the spending plan provides $738 million from the General Fund to support CalWORKs, an increase www.lao.ca.gov Legislative Analyst’s Offi ce 41 2015-16 BUDGET of $65 million (10 percent) over the prior year. to refl ect the full-year costs of providing higher Major changes in CalWORKs funding in the grants. Of this total funding, $122 million is 2015-16 spending plan are described in greater paid for from the Child Poverty and Family detail below. Supplemental Support Subaccount, a special fund Housing Support Funding Augmented. Th e dedicated to providing CalWORKs grant increases, CalWORKs Housing Support Program (HSP), with the remaining $65 million paid for from the created as part of the 2014-15 budget package, General Fund. Under current law, General Fund provides funding from a capped allocation to support for this grant increase will be reduced in select counties to provide housing assistance future years as funds in the subaccount continue to to CalWORKs families that are homeless or grow. experiencing housing instability. Th e Governor’s Savings From Declining Caseload. Th e January budget proposed to continue funding HSP spending plan refl ects roughly $85 million of at $20 million (all funds), the same level of funding General Fund savings in CalWORKs relative to the provided in the prior year. Th e 2015-16 spending prior year due to a smaller estimated caseload in plan provides a total of $35 million (all funds) for 2015-16. Th ese savings include both reduced cash HSP in 2015-16, an increase of $15 million (General assistance funding to refl ect fewer families enrolled Fund). in the program, partially off set by modest increases Child Care Reimbursement Rates Increased. in funding for employment services and child care Providers of child care for CalWORKs recipients to refl ect higher estimated need for these services. can be either licensed by the state or license- In-Home Supportive Services exempt. Licensed providers are generally reimbursed up to a specifi ed regional market rate Th e budget increases General Fund support (RMR). License-exempt providers—generally for IHSS by over $600 million (nearly 28 percent) family, friends, and neighbors—are reimbursed at a in 2015-16 when compared to the revised 2014-15 fraction of the RMR (60 percent under current law). level. Th e major budget-related changes for IHSS Eff ective October 2015, budget legislation increases involve (1) the one-time use of General Fund to the current RMR by 4.5 percent and also increases restore IHSS service hours previously reduced the fraction of the RMR received by license-exempt and (2) contingency funding for the possible providers to 65 percent. Th e spending plan includes implementation of new federal labor regulations for $22 million (General Fund) in the CalWORKs home care workers. budget to pay for the partial-year costs of these rate Restores IHSS Hours From Prior-Year increases. For more information on these changes 7 Percent Reduction. Th e 2015-16 budget includes and their broader eff ect on the state budget, see $226 million from the General Fund, on a one-time the “Child Care and Preschool” write-up in the basis, to restore IHSS service hours that had “Education” section of this report. been reduced by 7 percent in a prior-year budget Full-Year Funding Provided for April 2015 action. Th e Legislature and the Governor have Grant Increase. As part of the 2014-15 budget stated their intent to continue this restoration of package, CalWORKs grants were increased service hours beyond 2015-16 with the use of an by 5 percent, eff ective April 2015. Th e 2015-16 alternative funding source. On June 16, 2015, the spending plan includes $187 million (all funds), Governor called a special session to consider and an increase of $140 million over the prior year, act upon legislation to identify permanent and 42 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET sustainable funding from a restructured MCO funding ($270 million General Fund, plus federal tax and/or alternative fund sources to achieve funds) for IHSS to comply with these regulations— a number of goals, including maintaining the contingent on the legal validity of the regulations restoration of IHSS service hours beyond 2015-16. being upheld—and assumes a delayed eff ective While the Legislature held several special session implementation date of October 1, 2015. hearings and considered various pieces of proposed Community Care Licensing (CCL) legislation from July through September of this year, no special session-related fi nancing legislation Funds Additional CCL Quality had been enacted as of the time of this publication. Enhancements. Th e 2015-16 spending plan funds Provides Contingent Funding for Delayed the Governor’s proposal for a multiyear, multistage Implementation of New Federal Labor plan to further reform the CCL division within Regulations Aff ecting IHSS. As part of the 2014-15 the Department of Social Services (DSS). (See Th e budget, funding was provided and legislation was 2014-15 Budget: California Spending Plan for a enacted to respond to new federal labor regulations description of the initial quality enhancements.) issued by the Department of Labor (DOL) that Th e spending plan includes an increase of required states to (1) pay overtime to IHSS 28.5 positions (13 two-year limited-term positions) providers for all hours worked that exceed 40 in a and $3 million General Fund to (1) hire and begin week and (2) compensate IHSS providers for time training staff in preparation for an increase in spent waiting during medical appointments and the frequency of inspections for all facility types traveling between the homes of IHSS recipients. beginning in 2016-17 and (2) make various other Th ese are two work activities for which providers changes intended to strengthen enforcement are not currently paid. In a lawsuit brought by capacity and improve the quality of care delivered associations of home care companies, a federal at facilities under the regulatory purview of CCL. district court ruled in December 2014 that DOL Th e reforms will go into eff ect incrementally overreached its rulemaking authority when it through 2018-19. Th e plan includes additional promulgated the revised FLSA regulations for the funding and positions in budget years beyond home care industry. Eff ectively, the court ruling 2015-16 to fully implement the plan. When fully invalidated the DOL’s new regulations—causing implemented, the plan would add a total of 145 new the state to halt its implementation of the new rules. permanent positions within DSS, at a total cost Th e DOL appealed the decision, and in August of $37.3 million General Fund over the three-year 2015, the ruling was overturned. Th e plaintiff s period over which the positions are ramping up. appealed to the U.S. Supreme Court to further Th e annual cost of these reforms once they are fully delay implementation of the new regulations until implemented is expected to be $14.1 million. Below, the Supreme Court has time to fully consider we describe the main components of the plan. the case. On October 6, the Chief Justice denied • Multiyear, Multistage Plan to Increase the postponement request. At the time of this Inspection Frequency. Th e fi nal budget publication, the plaintiff s had not decided whether package incrementally increases the or not to pursue a full appeal to the Supreme Court. frequency of inspections from at least once Th e new FLSA regulations are expected to go into every fi ve years for most facilities to at least eff ect mid-October with a 30 day nonenforcement once every three years or more frequently period. Th e 2015-16 budget package provides for some facilities. Th e CCL division will www.lao.ca.gov Legislative Analyst’s Offi ce 43 2015-16 BUDGET continue to conduct random inspections New Immigration Assistance Program on at least 30 percent of all facilities for the Th e spending plan provides $15 million fi rst stage of the plan, but will subsequently (General Fund) to establish a new program in DSS scale down random inspections as routine that will (1) provide grants for qualifi ed nonprofi t inspection frequencies increase. Once legal services organizations to assist individuals fully implemented in 2018-19, child care with applications for DACA status, DAPA status, facilities will be inspected every three or naturalization; and (2) provide grants for other years with 30 percent random inspections, nonprofi t organizations (as more broadly defi ned) children’s residential care facilities will be to provide free education and outreach to increase inspected every two years with 20 percent community awareness of issues related to DACA, random inspections, and adult and senior DAPA, naturalization, and other immigration care facilities will be inspected annually. remedies. Of the $15 million total funding amount, $440,000 is dedicated to program administration at • Additional CCL Quality Enhancements. DSS, with the remainder available for grants. Th e Th e spending plan also provides implementation of this program is not completely (1) temporary resources to address the dependent on the implementation of the President’s current complaint backlog, (2) three nurse executive actions, because it targets a broader practitioners to monitor the medical needs population of immigrants—such as those eligible of residents at CCL-regulated facilities, for naturalization—than those who would be (3) resources to expand supportive services impacted by the executive actions. Th e new Federal to providers and clients, and (4) the Immigration Assistance program builds on the establishment of a new Southern California Unaccompanied Undocumented Minors Legal training unit for licensing analysts and Services Funding (UUM) program, approved as expanded refresher training off ered part of the 2014-15 budget package, which contracts statewide. with qualifi ed nonprofi t legal services organizations Interest in Further Increasing Inspection to provide similar legal services to unaccompanied, Frequency. Th e fi nal budget package also undocumented immigrant minors. Th e 2015-16 includes legislation that requires DSS to update spending plan continues funding for the UUM the Legislature frequently regarding the program at the prior-year amount of $3 million implementation status of the multiyear plan and (General Fund). an analysis of the policy and fi scal implications of implementing annual inspections for facility types Child Welfare Services not currently proposed to move towards annual Background on Continuum of Care Reform inspections. (CCR) Eff orts. In legislation connected with the 2012-13 Budget Act, DSS was required to establish President’s Executive Actions on Immigration a stakeholder workgroup to recommend revisions Please see the “President’s Executive Actions on to rates, services, and programs in the foster care Immigration” write-up under the “Health” section system, focusing attention, at a minimum, on of this report, for a discussion of this issue that services and programs provided by group homes aff ects both health and human services programs. and Foster Family Agencies (FFAs). Th e Legislature 44 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET specifi ed that the workgroup consider, among other child welfare system by performing comprehensive things, (1) how assessment processes could be assessments of children to ensure that their initial structured to match a foster child’s characteristics placement is in the most appropriate setting, to the appropriate placement setting, (2) how increasing the use of home-based family care, providing services more comprehensively could and reducing the use of group homes. Included improve foster child outcomes, (3) how these in Chapter 773’s numerous changes is the services could be better provided in family-like transformation of group homes to short-term settings, and (4) how quality evaluations and residential treatment centers (STRTCs) intended rate-setting systems could be used to improve the to provide short-term, specialized and intensive quality of placements. Th e Legislature required treatment for children only when their needs that DSS submit recommended revisions for the cannot be met initially in a family-based foster Legislature’s consideration by October 2014. care setting. Chapter 773 also makes changes to Th e DSS convened a stakeholder workgroup the services FFAs are required to provide for the pursuant to this legislative direction in 2012. families that they certify. In recognition of the Workgroup discussions continued through changing roles of the STRTCs and the FFAs in the the following three years. In January 2015, child welfare continuum of care, the legislation concurrent with the release of the Governor’s also requires DSS to develop new rate structures budget proposal, DSS released California’s Child for STRTCs and FFAs to become eff ective in 2017. Welfare Continuum of Care Reform, a report (We note that the 2015-16 spending plan includes that features 19 recommendations based on $4.3 million from the General Fund to support a workgroup discussions. Th e main objective of the 15 percent increase in FFA social worker rates.) recommendations is to improve the experience Because one of the primary goals of the CCR eff ort and outcomes of children and youth in foster is to reduce reliance on group care and increase care by (1) improving assessments of children reliance on home- based settings, the spending plan and families to make better initial placement also includes $17.2 million from the General Fund decisions, (2) emphasizing family-based placements to support foster parent recruitment, retention, and by providing appropriate services and supports, training eff orts. (3) changing the goals of group home placements, California Earned Income Tax Credit and (4) increasing transparency and accountability for child outcomes. Please see the “California Earned Income Tax Spending Plan Provides Funding for Credit” write-up in the “Other Major Provisions” Initial CCR Eff orts. As an initial step towards section of this report for a discussion of the new implementing the CCR eff orts, the 2015-16 budget Earned Income Tax Credit enacted as part of the and Chapter 773, Statutes of 2015 (AB 403, Stone), 2015-16 budget package. make changes to California’s child welfare system that, at a high level, aim to improve the state’s www.lao.ca.gov Legislative Analyst’s Offi ce 45 2015-16 BUDGET RESOURCES AND ENVIRONMENTAL PROTECTION Th e budget package provides a total of and low-carbon transit operations (5 percent). $9.8 billion from various fund sources—the Th e administration estimates that the state will General Fund, bond funds, and various other receive a total of $2 billion in auction revenue in special funds—for programs administered by the 2015-16, resulting in $1.2 billion to be continuously California Natural Resources and Environmental appropriated to the above programs in 2015-16. Protection Agencies (CNRA and CalEPA, Th e remaining $800 million, as well as about respectively). Th is is a decrease of about $1.9 billion $900 million in unspent revenue generated in (16 percent) compared to 2014-15 estimated prior years, are available for appropriation by the expenditures. Most of the reduction in spending Legislature, as discussed below. is related to estimated bond expenditures in the Th e budget appropriates $251 million from resources area. Some of this decrease, however, revenue that is not continuously appropriated. Most is related to how bond funds are accounted for in of the additional funding will be used to provide the budget, making year-over-year comparisons incentives for low-carbon vehicles, energy effi ciency diffi cult. In total, about two-fi ft hs of the budget and solar projects for low-income households, for resources and environmental protection and water effi ciency improvements. Th e budget departments is from special funds, while the also includes funding for state departments to General Fund and bond funds each support about administer cap-and-trade funds allocated as part of one-quarter of these budgets. Th e remainder is the 2014-15 and 2015-16 budgets, including ongoing supported with federal funds. oversight of previously funded projects. Th e remaining unspent revenue—estimated to be about Crosscutting Issues $1.5 billion by the end of 2015-16—is available to be allocated in future legislation. Cap-and-Trade Figure 17 Figure 17 summarizes 2015-16 Cap-and-Trade Expenditure Plan the 2015-16 cap-and- trade expenditure plan. (In Millions) Consistent with statute Continuously Appropriated Funds (60 Percent of Revenue)a that was adopted as part High-speed rail $500 Affordable housing and sustainable communities 400 of the 2014-15 budget, Transit and intercity rail capital 200 60 percent of cap-and- Low-carbon transit operations 100 trade revenue in 2015-16 Subtotal, Continuously Appropriated ($1,200) will be continuously Non-Continuously Appropriated Funds Incentives for low-carbon vehicles $90 appropriated to: Energy effi ciency and solar for low-income households 70 high-speed rail Agricultural water and energy effi ciency 40 (25 percent), aff ordable Urban water-energy effi ciency 20 Other administrative costs 31 housing and sustainable Subtotal, Non-Continuously Appropriated ($251) communities (20 percent), Totala $1,451 transit and intercity a Based on Governor’s May Revision $2 billion 2015-16 revenue estimate. Actual funding depends on actual 2015-16 revenue. rail capital (10 percent), 46 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET Drought among others. In addition, the budget includes funding for emergency drought-response activities, Budget Funds Various Drought-Related such as fi re protection and drinking water Projects. Th e 2015-16 budget includes $1.8 billion deliveries. Of the total $1.8 billion provided for for various drought-related activities to be drought-related activities, about 90 percent of it is administered by several state departments, from Proposition 1, the water bond measure passed particularly the State Water Resources Control by voters in November 2014. About $120 million is Board (SWRCB) and Department of Water supported by the General Fund. In addition to the Resources (DWR). As shown in Figure 18, the funding provided in the budget, in March 2015, the budget funds projects designed to improve water Legislature passed and Governor signed Chapter 1, conservation and develop local infrastructure Statutes of 2015 (AB 91, Committee on Budget), related to groundwater cleanup, safe drinking which appropriated $1.1 billion for drought and water, wastewater treatment, and water recycling fl ood protection activities. Figure 18 Drought Funding in the Budget Act 2015-16 (In Millions) Department Purpose Amount Fund Source Water Conservation DWR/CDFA Agricultural water conservation $82 Proposition 1/SF DWR Urban water conservation 76 Proposition 1/SF DGS Water conservation in state buildings 15 GF/SF DWR Save Our Water campaign 4 GF Subtotal, Water Conservation ($177) Infrastructure Programs SWRCB Groundwater cleanup $783 Proposition 1 SWRCB Safe drinking water 175 Proposition 1 SWRCB Water recycling 161 Proposition 1 SWRCB Wastewater treatment projects 158 Proposition 1 SWRCB Stormwater projects 101 Proposition 1 DWR Groundwater sustainability grants 60 Proposition 1 DWR Desalination grants 50 Proposition 1 Subtotal, Infrastructure Programs ($1,488) Emergency Drought Response CalFire Enhance fi re protection $67 GF/SF OES Drinking water delivery 22 GF DWR Removal of emergency rock barriers 15 GF/SFa CSD General assistance to migrant farm workers 8 GF HCD Move households without potable water 6 GF SWRCB Implement executive order 1 GF Subtotal, Emergency Drought Response ($119) Total $1,784 a Funds are “off-budget” so are not appropriated in 2015-16 Budget Act. DWR = Department of Water Resources; CDFA = California Department of Food and Agriculture; SF = Special Fund; DGS = Department of General Services; GF = General Fund; SWRCB = State Water Resources Control Board; CalFire = California Department of Forestry and Fire Protection; OES = Offi ce of Emergency Services; CSD = Department of Community Services and Development; and HCD = Department of Housing and Community Development. www.lao.ca.gov Legislative Analyst’s Offi ce 47 2015-16 BUDGET Statutory Changes to Address Eff ects of Proposition 1 Funding Drought. Th e budget plan also includes several Th e budget appropriates a total of $1.8 billion changes to state law in response to the drought. from Proposition 1, which authorized a total of In general, these changes are intended to improve $7.5 billion in water-related funding. In addition access to clean drinking water, accelerate completion to the amount provided for drought-related of certain projects, increase water conservation, activities discussed above, the spending plan increase monitoring of water diversions, and for 2015-16 also includes $200 million from improve accountability. Specifi c changes include: Proposition 1 for other, nondrought-related • Drought Water System Consolidation. activities. Most of this funding—$163 million—is Authorizes SWRCB to require water for watershed protection and restoration projects systems serving disadvantaged administered by state conservancies ($88 million), communities with unsafe or unreliable the Wildlife Conservation Board ($39 million), water supplies to merge with or receive and the Department of Fish and Wildlife (DFW) water from other public water systems. ($37 million). Th e total from Proposition 1 also includes $33 million for the Integrated Regional • California Environmental Quality Act Water Management program administered by (CEQA) Exemptions. Provides exemptions DWR, as well as $3 million for DWR staff to from CEQA for certain types of projects, support the California Water Commission, which is subject to certain conditions. Project types charged with evaluating and selecting water storage that could be exempted are recycled water projects to be funded by Proposition 1. Figure 19 pipelines, development of state building provides a summary of all funding provided from codes for dual plumbing, and local Proposition 1 in Chapter 1 and the 2015-16 budget groundwater protection ordinances. plan. • Local Enforcement. Allows local water Timber Regulation and Forest Restoration agencies to issue penalties for violations Th e budget provides a total of $10.7 million and of local and state water conservation 15 positions for the Secretary of Natural Resources regulations, with penalties up to $10,000 ($2.1 million), California Department of Forestry for fi rst violation (increasing for continuing and Fire Protection (CalFire) ($5.2 million), violations). Penalties for residential water SWRCB ($2.6 million), DFW ($285,000), and the users is generally limited to $1,000. Department of Conservation (DOC) ($597,000) • Monitoring and Reporting. Generally to expand the Timber Regulation and Forest requires water diversions of greater than ten Restoration Program. Specifi cally, this funding acre-feet per year to have a measuring device will support (1) data collection and analysis for to accurately identify amount diverted, and timber harvest regulatory activities and grant increases the frequency of water diversion programs, (2) information technology, (3) increased reporting to at least annually. monitoring and fi eld inspections, and (4) local assistance grants related to forest improvement and • Accountability. Implements additional water quality. reporting requirements on Proposition 1 project outcomes, costs, and time frames. 48 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET Figure 19 Proposition 1 Bond Funds (In Millions) Implementing Bond Purpose Departments Allocation 2014-15a 2015-16 Water Storage $2,700 $0 $3 Water storage projects CWCb 2,700 0 3 Watershed Protection and Restoration $1,496 $0 $163 Various state obligations and agreements CNRA 475 0 0 Watershed restoration benefi ting state and Delta DFW 373 0 37 Conservancy restoration projects Conservancies 328 0 88 Enhanced stream fl ows WCB 200 0 39 Los Angeles River Restoration Conservancies 100 0 0 Urban watersheds CNRA 20 0 <1 Groundwater Sustainability $900 $0 $843 Groundwater cleanup projects SWRCB 800 0 783 Groundwater sustainability plans and projects DWR 100 0 60 Regional Water Management $810 $0 $232 Integrated Regional Water Management DWR 510 0 33 Stormwater management SWRCB 200 0 101 Water use effi ciency DWR 100 0 98 Water Recycling and Desalination $725 $132 $211 Water recycling SWRCB 725 132 161 Desalination DWR 0 50 Drinking Water Quality $520 $136 $333 Drinking water for disadvantaged communities SWRCB 260 136 175 Wastewater treatment in small communities SWRCB 260 0 158 Flood Protection $395 $0 $0 Delta fl ood protection DWR and 295 0 0 CVFPB Statewide fl ood protection DWR and 100 0 0 CVFPB Administration and Oversight $0 $0 $1 Administrationc DWR and 0 0 1 CNRA Totals $7,546 $267 $1,786 a Appropriated in emergency drought legislation (Chapter 1, Statutes of 2015 [AB 91, Committee on Budget]). b With staff support from DWR. c Bond does not provide specifi c allocation for bond administration and oversight. It allows the use of other allocations for this purpose. CWC = California Water Commission; CNRA = California Natural Resources Agency; DFW = Department of Fish and Wildlife; WCB = Wildlife Conservation Board; SWRCB = State Water Resources Control Board; DWR = Department of Water Resources; and CVFPB = Central Valley Flood Protection Board. www.lao.ca.gov Legislative Analyst’s Offi ce 49 2015-16 BUDGET Resources Environmental License Plate Fund (ELPF). Th e CNRA administers the ELPF, which faced a As shown in Figure 20, the budget includes projected shortfall of $10.5 million in 2015-16. As $5.1 billion (including $2.5 billion from the shown in Figure 21, the budget package includes General Fund) for the support of various various changes to address this shortfall. Most resources programs in 2015-16. Th is is a decrease savings are due to shift ing activities previously of $2.5 billion, or 33 percent, from the revised funded by the ELPF to special funds administered 2014-15 spending level. Most of this reduction in by DFW ($7.5 million) and the Department year-over-year spending is attributable to lower of Parks and Recreation ($3.3 million). Other bond spending in 2015-16, particularly for DWR. departments receiving ELPF support are expected to meet 5 percent savings targets, resulting in California Natural Resources Agency savings of about $1 million. Additionally, funding Th e budget includes $54.9 million from for the fourth climate change assessment and various fund sources to support the CNRA, a net Climate Ready grants were delayed by one year reduction of about $3.2 million, or 6 percent, from to achieve one-time savings. Th e budget package the estimated 2014-15 level. Th is is primarily due also includes budget trailer legislation (1) allowing to a reduction in planned Proposition 84 bond ELPF monies to be used for deferred maintenance expenditures, which is partially off set by funding in state parks and (2) requiring the CNRA to increases related to Proposition 1. convene a working group to review and make Figure 20 Resources Budget Summary (Dollars in Millions) Change From 2014-15 2013-14 2014-15 2015-16 Amount Percent Expenditures Department of Forestry and Fire Protection $869 $1,268 $1,243 -$25 -2% General obligation bond debt service 1,009 958 965 7 1 Department of Water Resources 824 2,887 925 -1,962 -68 Department of Parks and Recreation 515 628 529 -99 -16 Energy Resources Conservation 244 778 422 -356 -46 Department of Fish and Wildlife 320 495 407 -88 -18 Wildlife Conservation Board 59 105 114 8 8 California Conservation Corps 76 88 98 10 11 Department of Conservation 90 92 89 -2 -3 Coastal Conservancy 5 149 63 -86 -58 Other resources programs 164 223 284 61 28 Totals $4,175 $7,671 $5,140 -$2,531 -33% Funding General Fund $2,177 $2,558 $2,481 -$76 -3% Special funds 928 1,806 1,324 -482 -27 Bond funds 953 3,053 1,111 -1,941 -64 Federal funds 117 255 223 -32 -13 50 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET recommendations Figure 21 regarding future priorities Addressing the Environmental License Plate Fund (ELPF) for ELPF expenditures. Shortfall in the Short Term Positive (+)/Negative (-) Impact on ELPF Reserve (In Thousands) Department of Forestry and Fire Protection Action 2014-15 2015-16 2016-17 Delay fi rst year of climate change assessment $2,500 -$2,500 — Th e budget includes Delay second year of climate change assessment — 2,500 -$2,500 $1.2 billion (mostly Delay Climate Ready grants 1,300 -1,300 — General Fund) to support Shift DPR expenditures to SPRF 200 3,300 — Shift DFW expenditures to FGPF 900 7,500 — CalFire, which is about Savings targets and other reductions — 1,100 — the same level as in Total Savings $4,900 $10,600 -$2,500 2014-15. Both the 2014-15 DPR = Department of Parks and Recreation; SPRF = State Parks and Recreation Fund; DFW = Department of Fish and Wildlife; and FGPF = Fish and Game Preservation Fund. and 2015-16 budgets include augmentations for Proposition 1E. Th e budget provides drought-related wildfi re protection. $463 million to DWR from Proposition 1E Illegal Fireworks Disposal. Th e budget (2006) to support fl ood protection activities. provides $5 million on a one-time basis (Toxic Th is total includes $300 million for systemwide Substances Control Account [TSCA]) for the capital projects (such as building bypasses) and disposal of seized illegal fi reworks. Th e budget $163 million for state operational activities (such package also includes budget trailer legislation that as planning, analysis, levee maintenance, and temporarily changes how the State Fire Marshal equipment purchases). Chapter 1—the emergency handles seized fi reworks. Specifi cally, the State drought legislation passed in March 2015— Fire Marshal is no longer required to dispose of included $660 million (primarily from all seized fi reworks, but instead is required to Proposition 1E) for fl ood protection projects in manage them. Specifi cally, under the legislation, if urban and rural areas, as well as for grants to local fi reworks are determined not to be hazardous by governments for local fl ood protection activities. certain explosives experts, the State Fire Marshal Proposition 1E requires all funds to be is required to store them. If they are determined to appropriated by July 1, 2016. Th e budget act and be hazardous, the State Fire Marshal must contract Chapter 1 fully appropriate the remaining funds with a federally permitted hazardous waste hauler available from Proposition 1E. Under these bills, to haul and dispose of them. Th is additional the department will have fi ve years to commit fl exibility could reduce state costs since all seized Proposition 1E funds and three additional years to illegal fi reworks currently must be shipped out of spend the funds, aft er which time the authorization state for disposal, which can be very expensive. to use the funds will expire. Department of Water Resources Department of Fish and Wildlife Th e budget includes $925 million from various Th e budget includes $407 million from various fund sources to support DWR, a net reduction of fund sources to support DFW, a net reduction of about $2 billion, or 68 percent, from the revised $88 million, or 18 percent, from the revised 2014-15 2014-15 level. Th is is primarily due to a reduction in level. Th is is primarily due to the expiration of planned bond expenditures. www.lao.ca.gov Legislative Analyst’s Offi ce 51 2015-16 BUDGET one-time funding provided in 2014-15, such as for requirements. Th is work includes reevaluating drought-mitigation activities. aquifers to determine which ones potentially Payment in Lieu of Taxes (PILT). Th e budget contain drinking water and ensuring well provides $644,000 to resume PILT payments to operators are not injecting harmful fl uids into such local governments. Th ese payments are provided aquifers. If an aquifer does not have water that to off set lost property tax revenues that local would potentially be used for drinking water, the governments otherwise would have collected if state may request an exemption from the federal wildlife management areas in those jurisdictions government. An exemption allows operators to had not been transferred to the state in the past. inject fl uid into the aquifer. Th ere are 36 counties identifi ed to receive PILT In addition, the Legislature passed budget- payments. Budget trailer legislation specifi es that trailer legislation that made the following changes: PILT payments (1) are made at the discretion of the • SWRCB Approval of Aquifer Exemptions. Legislature, and (2) can only be made to nonschool Th e DOC must consult with the SWRCB local governments (so as not to be duplicative and the appropriate regional water quality with General Fund Proposition 98 payments to control board prior to proposing an aquifer school districts that already take into account local exemption to the U.S. EPA. If the DOC property tax revenue collected by districts). and SWRCB concur that the exemption proposal merits consideration, the agencies Department of Conservation are required to provide a public comment Th e budget provides a total of $89 million period on the proposal and to jointly for the DOC from various funding sources, a conduct a hearing prior to submitting the net decrease of $2 million, or 3 percent, from the exemption request to the U.S. EPA. revised 2014-15 level. Underground Injection Control (UIC) • Reports on Compliance With U.S. EPA Program. Th e budget provides $3.5 million and Requirements. Beginning January 30, 23 positions from the Oil, Gas, and Geothermal 2016, the DOC and SWRCB must provide a Administrative Fund (OGGAF) for the DOC report to the Legislature every six months to conduct activities related to the state’s UIC regarding the status of the UIC Program Program, which regulates certain oil and gas and DOC’s progress in meeting U.S. EPA wells to ensure they comply with the federal Safe requirements to review aquifer exemptions. Drinking Water Act. (Th e budget also includes • Independent Review Panel to Improve $2.9 million for SWRCB to assist with UIC Program Eff ectiveness. Th e Secretaries of regulatory activities related to water quality, as CalEPA and CNRA are required to appoint discussed below.) Specifi cally, the funding and an independent review panel to evaluate the positions will be used to improve the oversight UIC Program and to make recommendations and regulation of the state’s UIC Program and on how to improve the eff ectiveness of the comply with U.S. Environmental Protection program by January 1, 2018. Agency (U.S. EPA) orders. Th e DOC is currently working with the U.S. EPA to address various Oil and Gas Data Management System. Th e program defi ciencies that have been identifi ed and budget includes $6 million from the OGGAF to bring the program into compliance with federal develop a new oil and gas data management system, 52 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET subject to approval by the California Department of State Water Resources Control Board Technology. Th e budget also gives the Department Th e budget includes $2.4 billion (mostly of Finance the authority to provide an additional Proposition 1 bond funds) to support SWRCB, $4 million aft er providing a report to the Joint a net increase of $1 billion, or 77 percent, from Legislative Budget Committee (JLBC) regarding the revised 2014-15 level. Th is is primarily due to the implementation of (1) an assessment of the the provision of Proposition 1 bond funding, as operations and business practices of the Division described above. of Oil, Gas, and Geothermal Resources and (2) the Underground Storage Tank Cleanup. Th e development of an oil and gas data management budget for the board includes a $164 million system. Th e total estimated cost for the system, increase in Underground Storage Tank Cleanup including planning, design, and development, is Funds, which primarily refl ects implementation of $20 million. recent policy changes adopted by the Legislature to (1) increase fees on petroleum stored in Environmental Protection underground tanks and (2) use the resulting As shown in Figure 22, the budget includes revenues for new and existing programs related $4.7 billion (mostly special funds and bond funds) to cleaning up contamination from underground for various environmental protection programs. storage tanks. Th is is an increase of $650 million, or 16 percent, Bay Delta Water Quality Control Plan. Th e from the revised 2014-15 spending level. Th is budget includes $7.8 million from the General increase largely refl ects Proposition 1 bond funding Fund to update and implement the Bay Delta Water provided to SWRCB. Quality Control Plan. Th is plan is designed to Figure 22 Environmental Protection Budget Summary (Dollars in Millions) Change From 2014-15 2013-14 2014-15 2015-16 Amount Percent Expenditures State Water Resources Control Board $568 $1,348 $2,387 $1,039 77% Department of Resources Recycling and 1,432 1,527 1,508 -20 -1 Recovery Air Resources Board 486 834 469 -365 -44 Department of Toxic Substances Control 167 209 204 -5 -2 Department of Pesticide Regulation 83 87 90 3 4 Other environmental programs 30 39 36 -3 -8 Totals $2,765 $4,044 $4,694 $650 16% Funding General Fund $45 $89 $72 -$17 -1% Special funds 2,397 2,798 2,814 15 1 Bond funds 156 789 1,442 653 21 Federal funds 167 368 367 -1 — www.lao.ca.gov Legislative Analyst’s Offi ce 53 2015-16 BUDGET provide the board with more current water quality process is complete, including onsite presentations information—such as fl ow requirements—to from location representatives in Riverside and inform ongoing Delta operations. Pomona to the ARB site evaluation team, and a Underground Injection Program. Th e budget summary of the site selection action taken by the provides $2.9 million (mostly from OGGAF) ARB is submitted to the JLBC for 30-day review. and 19 positions to enable the board to perform Th e total estimated project cost is $366 million, various oversight and regulatory activities related including site assessment and development of to the UIC Program in conjunction with DOC, performance criteria ($5.9 million), construction as discussed in more detail above. Activities to ($258 million), and equipment ($102 million). be performed by the board include inventory and Construction is scheduled to begin July 2017 and be enforcement activities for ponds that contain oil completed January 2020. and gas wastewater in the Central Valley, technical Department of Toxic Substances Control reviews of aquifer exemption submittals from DOC, and hydrological reviews of injection well Th e budget includes $204 million from proposals submitted by well operators. various funds to support the Department of Toxic Substances Control, which is about the same level Air Resources Board (ARB) as in 2014-15. Th e budget provides a total of $469 million Program Improvements. Th e budget provides for the ARB from various funding sources, a net several temporary funding augmentations intended decrease of $365 million, or 44 percent, from the to help the department implement its “Fixing revised 2014-15 level. Th is year-over-year reduction the Foundation” initiative, which is designed to is largely the result of a one-time $240 million improve its performance and reduce backlogs. appropriation of Proposition 1B bond funds for Specifi cally, the budget includes funding for: port modernization that was included in the • Enhanced Enforcement. Th e budget 2014-15 budget. provides $2.1 million ($222,000 Hazardous Southern California Mobile Emissions Waste Control Account [HWCA] and Testing Laboratory. Th e budget provides a total $1.9 million TSCA) for two years and of $5.9 million from the Motor Vehicle Account 11 positions to implement and evaluate (MVA) ($3.8 million), the Air Pollution Control approaches to address environmental Fund ($1.2 million), and the Vehicle Inspection violations in vulnerable communities. Repair Fund ($900,000) to begin the planning Th e department will focus inspection work necessary to move mobile emissions testing and enforcement resources on the metal operations—including light duty vehicle testing recycling industry and the hazardous waste operations at a state-owned facility in El Monte and transportation industry. heavy duty vehicle testing operations at a facility in Los Angeles—to a new consolidated facility in • Permitting Coordination and Backlog Southern California. Budget-year funding will Support. Th e budget provides $1.6 million be used to assess the suitability of two potential from the HWCA for two years and sites ($200,000) and develop performance criteria 16 positions to (1) reduce the department’s ($5.7 million). Of the $5.9 million, $2.9 million will backlog of continued hazardous be available only aft er the ARB’s site evaluation waste facility permit applications, 54 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET and (2) streamline and strengthen the workload, inspections, investigations, enforcement and permitting processes. policies, and statutory mandates. Th e budget package also includes trailer • Improving Enforcement Performance. legislation to establish an independent review panel Th e budget provides $1.4 million (TSCA) to oversee the department’s activities and report for two years and 11 positions to conduct a to the Legislature and Governor every 90 days review of the department’s hazardous waste on the department’s performance. Th e panel management enforcement program. Th is will also make recommendations for program funding is intended to address concerns improvements beginning in January 2016. Th e that the program has provided inadequate budget also establishes an Assistant Director for protection against environmental hazards Environmental Justice to provide outreach and in some communities. Specifi cally, the information to communities disproportionately department will assess its enforcement aff ected by hazardous waste facilities. program including evaluation of its TRANSPORTATION Th e spending plan provides $17.6 billion from Act, he called a special legislative session on various fund sources for transportation programs. transportation. Specifi cally, he called on the As shown in Figure 23, this is an increase of Legislature to adopt legislation to (1) provide a $2.1 billion, or 13 percent, when compared to permanent and sustainable increase in funding the revised level of spending in the prior year. for transportation, (2) establish clear performance Th e greater spending is due primarily to the objectives, and (3) improve project delivery. As of development of the high-speed rail project. the date of this publication, no legislation has been Special Session on Transportation. On the adopted as part of the ongoing special session. day the Governor signed the 2015-16 Budget Figure 23 Transportation Program Expenditures Various Funds (Dollars in Millions) Change From 2014-15 Program/Department 2013-14 2014-15 2015-16 Amount Percent Department of Transportation $10,863 $10,277 $10,490 $212 2% High-Speed Rail Authority 1,339 916 3,089 2,173 237 California Highway Patrol 1,917 2,128 2,283 156 7 Department of Motor Vehicles 1,009 1,082 1,093 10 1 Transit Capital (Proposition 1B) 278 649 150 -499 -77 State Transit Assistance 408 420 451 31 7 California Transportation Commission 7 28 28 — — Totals $15,822 $15,501 $17,584 $2,083 13% www.lao.ca.gov Legislative Analyst’s Offi ce 55 2015-16 BUDGET Department of Transportation (Caltrans) Fleet Greening. Th e budget includes an ongoing increase of $12 million (State Highway Th e budget plan includes total expenditures Account) to help the department comply with of $10.5 billion from various fund sources for two ARB regulations that limit emissions from Caltrans. Th is level of expenditures is more than certain diesel-powered equipment. Specifi cally, in 2014-15 by $212 million (or 2 percent). Th e the additional funds will help support the increase primarily refl ects the shift ing of some department’s plan to replace roughly 600 pieces of workload initially assumed to occur in 2014-15 into equipment by 2020-21. Caltrans also plans to defer 2015-16. Th e budget provides roughly $3.9 billion the replacement of other equipment in order to for transportation capital outlay, $2 billion for local ensure that suffi cient funds are available to replace assistance, $1.7 billion for capital outlay support, all of the particular equipment aff ected by the and $1.5 billion for highway maintenance. Th e regulations within the specifi ed time frame. budget plan also assumes that $560 million will Project Initiation Documents (PIDs). Th e be available for mass transportation programs, budget includes $53.8 million to support 362 including $300 million in cap-and-trade auction positions to develop PIDs—project planning revenues to increase transit and intercity rail documents that establish the initial project scope, ridership and encourage transit and rail operators cost, and schedule for highway projects. Th is is a to adopt clean technologies. (As discussed earlier net increase of $3.4 million and 25 positions above in this report, existing state law continuously the levels provided in 2014-15. Of this increase, appropriates 10 percent of all cap-and-trade $2 million and 14 positions is for Caltrans to auction revenue for intercity rail capital projects develop additional PIDs over the next two years for and 5 percent for low-carbon transit operations.) projects totaling $500 million. Th is would provide Th e balance of the funding supports program the department with a shelf of projects to the extent development, legal services, and other programs. that there are unexpected funding increases in the Road Usage Charge Pilot Program. future (such as unanticipated federal funds). Chapter 835, Statutes of 2014 (SB 1077, DeSaulnier) requires the California State Transportation Transit Programs Agency (CalSTA) to implement a road usage Proposition 1B Transit Capital. charge pilot program by January 2017, and report Proposition 1B, approved by voters in November on the outcomes of the pilot to the Legislature 2006, authorized the issuance of $20 billion by June 2018. Th e budget provides $10.7 million in general obligation bonds for state and local to Caltrans, working under the direction of transportation improvements, including CalSTA, for the design and implementation of the $3.6 billion for capital improvements to local pilot program. Specifi cally, the budget includes transit systems. Th e budget includes expenditures $618,000 for fi ve full-time positions, $7.7 million of $150 million in Proposition 1B bond funds for for an existing consultant contract, $1.1 million transit projects—a 77 percent decline from 2014-15. for future consultant contracts, and $1.3 million Th is decline refl ects the fact that many projects for overtime and other costs to accelerate the pilot funded by Proposition 1B are completed or nearing by one year. Th e budget also provides $162,000 completion. and one limited-term position to the California State Transit Assistance (STA) Program. Th e Transportation Commission to assist in the design budget plan includes about $450 million for the and implementation of the pilot. 56 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET STA program to support local transit operations California Highway Patrol (CHP) and capital projects, an increase of 7 percent from Th e budget provides $2.3 billion to fund CHP 2014-15. Th is amount includes about $350 million operations, about $155 million (or 7 percent) more from the public transportation account and an than 2014-15. Almost all of this amount is from estimated $100 million from cap-and-trade auction the MVA, which generates its revenues primarily revenues for “low-carbon transit” projects—transit from driver license and vehicle registration fees. operations that reduce greenhouse gas emissions, Th e budget includes $136 million for the design such as by expanding services to increase transit and construction of fi ve area fi eld offi ces—in ridership. Crescent City, Quincy, San Diego, Santa Barbara, and Truckee. In addition, the budget includes High-Speed Rail Authority (HSRA) $1 million for a pilot program to test the use of Th e budget plan includes total expenditures of body cameras—cameras worn on the uniform of an $3.1 billion for HSRA, an increase of $2.2 billion offi cer to fi lm events occurring while the offi cer is (or more than three times) above the level of on duty. expenditures in 2014-15. Th e increase is primarily due to an increase in construction activities and Department of Motor Vehicles (DMV) in grants for local transit projects that will support Th e budget provides $1.1 billion for DMV the operation of the high-speed rail. Th e total operations, $10 million, or 1 percent, more than in expenditures include $1.2 billion in federal funds 2014-15. Of this total amount, nearly all funding is and $1.4 billion from proceeds of bonds authorized from the MVA. Th e budget includes $4.7 million by Proposition 1A (2008). Th e budget plan also to fund the initial phase of the administration’s assumes that $500 million in cap-and-trade auction multiyear plan to replace eight DMV facilities revenues will be available for the project in 2015-16. over the next several years. In addition, the budget (As discussed earlier in this report, existing includes $2.5 million and ten positions to increase law continuously appropriates 25 percent of all information system security in order to safeguard cap-and-trade auction revenue for the planning and information stored by the department, including a capital costs of the fi rst phase of the high-speed rail new security operations center to provide 24-hour project.) monitoring of the DMV’s information systems. JUDICIARY AND CRIMINAL JUSTICE Th e 2015-16 budget provides $11.9 billion from Judicial Branch the General Fund for judicial and criminal justice Th e budget provides $3.5 billion for support of programs, including support for ongoing programs the judicial branch—an increase of $110 million, and capital outlay projects, as shown in Figure 24 or 3.3 percent, from the revised 2014-15 level. Th is (see next page). Th is is an increase of $221 million, amount includes $1.6 billion from the General or 2 percent, above the revised 2014-15 General Fund and $499 million from the counties, with Fund spending level. most of the remaining balance from fi ne, penalty, and court fee revenues. Th e General Fund amount is a net increase of $176 million, or 12 percent, www.lao.ca.gov Legislative Analyst’s Offi ce 57 2015-16 BUDGET Figure 24 Judicial and Criminal Justice Budget Summary General Fund (Dollars in Millions) Change From 2014-15 Program/Department 2013-14 2014-15 2015-16 Amount Percent Department of Corrections and Rehabilitation $9,188 $9,977 $10,031 $54 0.5% Judicial Branch 1,208 1,414 1,590 176 12.0 Department of Justice 172 201 201 — — Board of State and Community Corrections 44 69 68 -1 -1.4 Other criminal justice programsa 32 24 17 -8 -32.0 Totals $10,644 $11,685 $11,907 $221 1.9% a Includes debt service on general obligation bonds, Offi ce of the Inspector General, and State Public Defender. from the revised 2014-15 amount. Funding for trial $39 million for increased trial court health court operations is the single largest component of benefi t and retirement costs. the judicial branch budget, accounting for around • Proposition 47 Workload ($27 Million). four-fi ft hs of total spending. Th e budget provides $27 million in General General Fund Support for Trial Court Fund support in 2015-16 for trial courts Operations. Th e budget package includes to process resentencing petitions from an ongoing net $185 million General Fund off enders currently serving felony sentences augmentation to trial court operations in 2015-16. for crimes that Proposition 47 (2014) Th is amount includes the following increases: reduced to misdemeanors. • Five Percent Base Increase ($91 Million). Th e budget includes a $91 million • Dependency Counsel ($11 Million). Th e augmentation for trial court operations, budget provides a total of $115 million for which refl ects a second 5 percent General the support of court-appointed dependency Fund increase initially approved as part of counsel. Th is amount includes an ongoing the 2014-15 budget. $11 million General Fund augmentation to reduce dependency counsel caseloads. • Fine and Fee Backfi ll ($66 Million). Th e amount of fi ne and fee revenue collected • Telecommunications Network ($6 million). to support trial court operations continues Th e budget provides $6 million in General to be lower than expected. In recognition Fund support to expand the Local Area of this, the budget provides $66 million Network/Wide Area Network (LAN/ in additional General Fund support to WAN) telecommunications network backfi ll an expected decline in fi ne and fee infrastructure program to include the last revenue in 2015-16. Th is amount includes four trial courts not currently participating $31 million to make the one-time backfi ll in the program. provided in 2014-15 ongoing. Th e above augmentations are partially off set by a $24 million reduction in General Fund support for • Health Benefi ts and Retirement Costs trial court operations in 2015-16 in order to refl ect ($39 Million). Th e budget includes 58 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET the availability of property tax revenue in accordance Corrections and Rehabilitation with Control Section 15.45 and Section 2578 of the Th e budget act contains $10 billion from Education Code. Such funds are remitted to the state the General Fund for support of the California by counties that collect more property tax than state Department of Corrections and Rehabilitation law allows them to spend on education. (CDCR). Th is is a net increase of $54 million, Improvement and Modernization Fund or less than one percent, above the revised (IMF). In recent years, the judicial branch’s IMF 2014-15 level of spending. Th is increase primarily has experienced persistent operational shortfalls refl ects additional costs related to (1) employee that steadily depleted the IMF’s fund balance. (Th e compensation, (2) increased staffi ng for the IMF is a judicial branch special fund that supports California Health Care Facility (CHCF) in various projects and programs that broadly benefi t Stockton, (3) complying with a court order trial courts, such as information technology regarding the way the state handles inmates with projects.) To help address the immediate insolvency mental illnesses, and (4) the activation of new of the IMF, the budget package ends a $20 million infi ll bed facilities located at Mule Creek and R.J. annual transfer of funding from the IMF to the Donovan prisons. Th ese increases are largely off set Trial Court Trust Fund (TCTF)—which provides by savings primarily related to a projected decrease most of the funding to support trial court in the prison population and the use of out-of-state operations. Th is transfer was fi rst approved as part contract beds for inmates. of the 2011-12 budget package to help off set trial Adult Correctional Population. Figure 25 (see court budget reductions. Partially off setting this next page) shows the recent and projected changes benefi t to the IMF, the budget shift s $6.3 million in the inmate and parolee populations. As shown in costs for supporting the California Case in the fi gure, the prison population is projected to Management System Version 3 (CCMS V3) from decline from 129,000 inmates at the end of 2014-15 the TCTF to the IMF. (Th e CCMS V3 is a civil, to about 128,000 inmates by the end of 2015-16. small claims, probate, and mental health case Th is decline is primarily due to the implementation management system currently used by fi ve trial of Proposition 47 (2014), which reduces penalties courts.) Th ese costs will need to be addressed by the for certain off enders convicted of nonserious and resources freed by the terminated TCTF transfer— nonviolent property and drug crimes and allows resulting in a net $14 million augmentation in IMF for the resentencing of certain off enders previously resources. convicted of such crimes. Th e parole population Capital Outlay. Th e budget provides is projected to decline to about 43,000 parolees by $218 million for various court construction the end of 2015-16, primarily due to the eff ects of projects. Th is amount consists of (1) $131 million in the 2011 realignment, which shift ed from the state lease revenue bond authority for the construction to the counties the responsibility for supervising or renovation of three previously approved projects certain off enders following their release from (Lakeport, Yreka, and Willows) and (2) $87 million prison. from the Immediate and Critical Needs Account Infi ll Facility Activation. Th e budget includes (ICNA) for acquisition, design, and construction $36 million from the General Fund to activate three activities for 11 projects. (In accordance with state new infi ll bed facilities that are currently under law, ICNA receives revenue from certain court fee construction—two new facilities at Mule Creek and fi ne increases.) prison in Ione and one new facility at R.J. Donovan www.lao.ca.gov Legislative Analyst’s Offi ce 59 2015-16 BUDGET Recidivism Figure 25 Reduction Inmate and Parolee Populations Projected to Decrease Funding. Th e As of June 30 Each Year budget package allocates 180,000 Inmates $18.9 million from 160,000 Parolees the Recidivism 140,000 Reduction 120,000 Fund (RRF) for 100,000 various initiatives 80,000 intended to reduce recidivism. (Th e 60,000 RRF is supported 40,000 by savings 20,000 resulting from the underutilization of 2011 2012 2013 2014 2015 2016 funding provided in 2013-14 for prison in San Diego. Th ese facilities will add contract beds.) As almost 2,400 beds to the design capacity of CDCR’s shown in Figure 26, these funds are provided to 34 prisons and are scheduled to be activated in CDCR and other state agencies, such as the Board February 2016. of State and Community Corrections (BSCC). For Inmate Mental Health Care—Court example, the budget allocates $6.9 million from the Compliance. Th e budget also includes $42 million RRF to CDCR to expand in-prison substance use from the General Fund to comply with an order treatment programs. by the federal court in the Coleman v. Brown Correctional Health Care. Th e budget case pertaining to inmate mental health care. In package provides a total of $295 million for the August 2014, the court ordered CDCR to adopt operation of CHCF in Stockton. Th is includes new policies regarding how the department handles a $76 million General Fund augmentation to inmates with mental illnesses. For example, the provide 715 additional positions to help address department was ordered to end the practice of various defi ciencies in care (such as inadequate housing certain inmates with mental illnesses clinical staffi ng) that have been identifi ed since together with general population inmates when they the facility was opened in fall 2013. Th e budget are placed in segregated housing units. In response package provides an additional $61 million from to the court order, the department will designate a the General Fund to pay for new drugs used to special segregated housing unit for such mentally treat inmates with Hepatitis C. Th e budget also ill inmates where they will have access to increased includes $1.9 million from the General Fund for out of cell time and therapy. In addition, CDCR was the federal court-appointed Receiver to begin the ordered to increase its monitoring of inmates in process of transitioning inmate medical care back segregated housing units by hiring additional staff to to state control, as outlined by the federal court in periodically conduct cell inspections. 60 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET Figure 26 2015-16 Spending to Reduce Recidivism (In Millions) Department Amount In-prison substance abuse treatment expansion CDCR $6.9 Grants to CBOs to expand community based programs BSCC 4.0 Grants to CBOs to expand in-prison programs CDCR 3.0 Mentally Ill Offender Crime Reduction Grant program BSCC 1.7 Workforce investment boards EDD 1.5 Competitive grants for collaborative courts Judicial Council 1.3 Evaluation of CDCR’s career technical education programs CDCR 0.5 Total $18.9 CDCR = California Department of Corrections and Rehabilitation; CBO = community-based organization; BSCC = Board of State and Community Corrections; and EDD = Employment Development Department. March 2015. Specifi cally, the funding will support Department of Justice (DOJ) various transition-related responsibilities, including Th e budget provides $794 million for support revising state regulations and assessing whether the of DOJ in 2015-16, which is roughly the same responsibility for care at individual prisons can be as the revised 2014-15 level of spending. Th is returned to the state. amount includes $201 million from the General Community Corrections Grant Program. Fund. Th e budget includes 51 positions and nearly As part of the 2015-16 budget package, the $10 million ($720,000 from the General Fund and Legislature adopted statutory changes to the $9 million from other funds) for DOJ to implement community corrections grant program authorized legislation enacted in prior years. Th is includes by Chapter 608, Statutes of 2009 (SB 678, Leno), additional legal responsibilities from increased which is intended to improve outcomes for certain workload or enforcement activities of other state individuals supervised by probation departments departments ($6 million), increased enforcement by giving counties a fi scal incentive to reduce the of the charitable organizations in California number of such off enders who are incarcerated ($2 million), ongoing maintenance and operations for violating the terms of their supervision for the Controlled Substance Utilization Review or committing new crimes. For example, the and Evaluation System ($1 million), and increased Legislature approved the Governor’s proposal workload from new requirements related to the to (1) remove the number of off enders diverted state’s initiative process ($720,000). Additionally, from county jail as a factor in determining county the budget includes 12 positions and about payments and (2) incorporate the recidivism rate $4 million in funding over three years from the for certain populations of off enders supervised by Gambling Control Fund to address the current county probation departments as part of the 2011 cardroom licensing backlog. realignment as a factor in determining county payments. In total, counties are expected to receive Other Criminal Justice Programs about $125 million in SB 678 grant funds in Traffi c Amnesty Program. In adopting the 2015-16. 2015-16 budget package, the Legislature authorized an 18-month traffi c amnesty program—beginning www.lao.ca.gov Legislative Analyst’s Offi ce 61 2015-16 BUDGET October 1, 2015—for delinquent debt. Under the state law—except for the revenue deposited into program, the $300 civil assessment imposed by the State Penalty Fund (SPF). Th e Judicial Council collection programs for a failure to pay or a failure will receive the fi rst $250,000 deposited into the to appear without good cause will be waived. SPF in order to reimburse DMV for costs incurred Individuals will then receive a 50 percent reduction in advertising the amnesty program, such as in the total amount of remaining court-ordered by providing information about the program debt owed for traffi c infractions and certain traffi c with each motor vehicle registration notice. Th e misdemeanors (upon agreement of the court and remaining SPF amnesty revenue will be deposited the county) as long as the debt was assessed prior into only two of the nine funds supported by the to January 1, 2013 and other specifi ed criteria are SPF—82.2 percent to the Peace Offi cer’s Training met. Individuals who certify that they receive Fund (POTF) and 17.8 percent to the Corrections certain public benefi ts (such as Medi-Cal) or that Training Fund (CTF)—in order to address their their monthly income is up to 125 percent of the immediate insolvency. Th e budget assumes that the federal poverty level will receive an 80 percent SPF will receive $12 million in amnesty revenue reduction. Amnesty participants could either with $10 million going to the POTF and $2 million pay in full or set up a monthly payment plan. going to the CTF. Individuals who subsequently fail to comply with BSCC. Th e budget includes $180 million their payment plan will have 30 days to resume ($68 million from the General Fund and payment or request a change in their payment plan. $112 million from other funds) for BSCC, which is If individuals do not resume payments or request responsible for administering various public safety a change to their payment plan, the collection grants, overseeing local correctional standards, program could refer the debt to the Franchise providing technical assistance to local criminal Tax Board for collection. Finally, participants justice agencies, and collecting data. Th e budget of the amnesty program, as well as individuals includes General Fund increases for the following who are currently making payments to collection local law enforcement grant programs: programs for the same violations included in the • Post Release Community Supervision amnesty program, will be able to have their drivers’ (PRCS) Funding. Th e 2011 realignment licenses reinstated if their licenses were previously requires county probation departments suspended due to a failure to pay court-ordered to supervise nonviolent, nonserious debt or appear in court. Aft er such reinstatement, off enders released to PRCS following their collection programs will not be able to suspend prison terms. Due to the early release of the drivers’ licenses of amnesty participants who certain prison inmates as part of the state’s subsequently fail to comply with their payment plan to comply with the federal court plan. order to reduce prison overcrowding, Collection programs would be permitted to there will be a temporary increase in the charge a $50 amnesty program fee in addition PRCS population. Th e budget includes to recovering most of their operational costs for limited-term funding of $18.6 million administering the program. Revenues collected in 2015-16 and $15.5 million in 2016-17 in the amnesty program will be distributed to to assist counties with this increased various state and local funds in accordance with workload. 62 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET • Local Law Enforcement Grants. Th e the state, (2) $6 million to strengthen the budget includes $31 million on a one-time relationship between communities and law basis for local law enforcement grants, enforcement, and (3) $5 million for police including (1) $20 million for agencies station infrastructure in Kings County. that provide data on their use of force to OTHER MAJOR PROVISIONS California Earned Income Tax Credit (EITC) Builds on Federal EITC. Th e California EITC builds on the federal EITC, a similar provision Th e 2015-16 spending plan includes the in the federal income tax code. As shown in adoption of the California EITC, a personal income Figure 27, the federal EITC is structured such that tax (PIT) credit that is intended to reduce poverty the amount of credit a tax fi ler may claim increases among California’s poorest working families by with earnings over a phase-in range, meaning increasing their aft er-tax income. For those tax that greater earnings result in a larger credit. fi lers who qualify, the credit will reduce income (Individuals without earnings may not claim the tax liability and, in the common case where the credit.) For higher levels of earnings, the amount amount of the credit exceeds the fi ler’s liability, the of the federal EITC peaks and then gradually diff erence will be paid to the fi ler as a tax refund. phases out. Th e amount of federal EITC that may For tax year 2015, the fi rst year that the California be claimed also varies by the number of qualifying EITC will be available, an estimated 2 million dependents, with signifi cantly greater credit individuals will qualify (825,000 tax returns) amounts available for fi lers with dependents than with an average credit amount of $460 per return. Because the California EITC will reduce taxpayers’ income Figure 27 tax liabilities and provide Basic Structure of the Federal EITC refunds, the spending plan Credit Amount, Single Filer With Two Dependent Children, 2015 Tax Year assumes that the credit will reduce PIT revenues available $6,000 to the General Fund by an 5,000 estimated $380 million in 2015-16. Th e spending plan 4,000 also includes $22 million (General Fund) for the 3,000 Franchise Tax Board to 2,000 implement and administer the Phase-In Flat Phase-Out Range Range Range credit in 2015-16. Th e major 1,000 features of the California EITC are described in greater 10,000 20,000 30,000 40,000 $50,000 detail below. Earned Income EITC = Earned Income Tax Credit. www.lao.ca.gov Legislative Analyst’s Offi ce 63 2015-16 BUDGET for fi lers without dependents. As of 2014, 25 states credit. For a fi ler with two dependents, earnings of and the District of Columbia had EITC provisions $6,935 (roughly equivalent to working 15 hours per in their own income tax laws that build on the week for a full year at the current minimum wage) federal credit, usually by matching a specifi ed would qualify for the maximum credit of $2,358. percentage of a fi ler’s federal EITC amount. As noted previously, the annual earnings level at Like other states, the California EITC matches a which the same fi ler will no longer qualify is $13,870 percentage of the federal EITC—up to 85 percent. (roughly equivalent to working 30 hours per week Unlike most other states, the California EITC for a full year at minimum wage). Filers that work matches the federal EITC only for earnings levels that Figure 28 correspond to the phase-in Basic Structure of the California EITC range of the federal credit. Filers with annual earnings State Credit Amount for Single Filers, 2015 Tax Year above this amount ($13,870 $2,500 for a fi ler with two qualifying Two Dependents 2,000 dependents in 2015) may not claim the California EITC. 1,500 Focuses on Working Families With the Lowest 1,000 Incomes. As shown in Figure 28, the California 500 No Dependents EITC matches 85 percent of fi lers’ federal EITC up to 10,000 20,000 30,000 40,000 $50,000 a maximum amount and Annual Earned Income then immediately starts to phase out for higher earnings Combined State and Federal Credit Amount, 2015 Tax Year levels. Th e maximum benefi t provided by the credit can be signifi cant, but the credit $6,000 Two Dependents is available over a relatively Combined State and Federal EITC 5,000 Federal EITC Only narrow range of earnings, focusing on fi lers with 4,000 the very lowest incomes. 3,000 Figure 29 displays, for various household sizes, the 2,000 maximum credit amount, 1,000 the earnings level at which No Dependents this maximum credit can be 10,000 20,000 30,000 40,000 $50,000 claimed, and the earnings Annual Earned Income level at which the fi ler will no EITC = Earned Income Tax Credit. longer be eligible to claim the 64 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET full time throughout the Figure 29 year at minimum wage Maximum California EITC Amounts will not qualify for the 2015 Tax Year California EITC. Annual Wages Annual Wages Excludes to Receive to No Longer Self-Employment Maximum Maximum Qualify for Credit Credit Credit Income. Th e federal EITC has historically No qualifying dependents $214 $3,290 $6,580 One qualifying dependent 1,428 4,940 9,880 had a high level of Two qualifying 2,358 6,935 13,870 improper payments to dependents Three or more qualifying 2,653 6,935 13,870 individuals who claimed dependents a larger credit than EITC = Earned Income Tax Credit. for which they were eligible. One common employees are scheduled to receive a 2.5 percent source of improper payments in the federal EITC pay increase in 2015-16. is the misreporting of self-employment income. Pension Costs Refl ect Higher Rates. Th e In order to limit improper payments resulting California Public Employees’ Retirement System from misreported self-employment income, the (CalPERS) determines what percentage of payroll California EITC defi nes earnings more narrowly the state must contribute to the system to fund than the federal EITC to only include wages subject employee pension benefi ts. Based on the higher to withholding, excluding self-employment income. contribution rates adopted by the CalPERS board, Amount of Credit to Be Set Th rough Annual the budget assumes that the state’s General Fund Budget Act. As noted above, for tax year 2015 the costs to pay these benefi ts in 2015-16 will increase California EITC matches up to 85 percent of the by about $200 million. Most of this increase federal EITC, over the federal EITC’s phase-in refl ects recently adopted actuarial assumptions and range. Budget legislation enacting the California methodologies being phased in by CalPERS. EITC provides that this matching percentage is to Higher Health Costs for Active and Retired be determined as part of the annual budget act. In Employees. Th e state provides health benefi ts this way, the amount of the California EITC may to eligible active and retired state employees. be adjusted in future years. In the event that the Th ese benefi ts are administered by CalPERS. In budget act does not specify a matching percentage, mid-June, the CalPERS board approved 2016 the matching percentage is set to zero. health premiums that are—on average—7.4 percent higher than 2015 health premiums. Th is premium State Employee Compensation growth is expected to increase state General Fund Pay Increases for Most Employees. Th e budget costs in 2015-16 to provide health benefi ts to active assumes that most state employees will receive pay employees by about $30 million ($43 million from increases in 2015-16, totaling about $200 million other funds). State costs for retired employee in added General Fund costs. Th ese pay increases health benefi ts are expected to increase by about are pursuant to current law established in existing $120 million due to 2016 health premiums and a labor agreements—referred to as memoranda of growing number of retirees. understanding (MOUs)—and other laws. Most state www.lao.ca.gov Legislative Analyst’s Offi ce 65 2015-16 BUDGET Prefunding Retiree Health Benefi ts. Pursuant Deferred Maintenance to existing labor contracts and administrative As shown in Figure 30, the budget includes actions, money is set aside to prefund retiree $120 million from the General Fund on a one-time health and dental benefi ts for rank-and-fi le basis to address backlogs of deferred maintenance and managerial employees affi liated with three at various state entities. Th e budget also provides of the state’s 21 bargaining units. Specifi cally, the California Community Colleges (CCC) with contributions are made annually to this trust $148 million in Proposition 98 funds, which fund by (1) the state to prefund these benefi ts can be used for deferred maintenance projects, for highway patrol offi cers (Bargaining Unit 5) instructional equipment, or drought resistance and (2) employees to prefund these benefi ts for projects. Th e CCC funding is described in more maintenance workers (Bargaining Unit 12) and detail in the “Higher Education” section of this doctors (Bargaining Unit 16). In September 2015, report. the Legislature ratifi ed proposed MOUs with professional engineers (Bargaining Unit 9) and Debt Service scientists (Bargaining Unit 10) that require both Th e budget provides $7.6 billion from the the state and employees to make contributions General Fund and other funds for debt-service to prefund these benefi ts beginning in 2017-18. payments in 2015-16. Th is represents an increase In order for each new prefunding plan to go into of 4 percent from 2014-15, and refl ects additional eff ect, the MOU must also be ratifi ed by members debt-service costs related to transportation, of the respective bargaining units. Prior to the date resources, housing, corrections, and other projects. of this publication, the scientists’ unit rejected their Th is includes $6.6 billion for general obligation proposed MOU. Th e budget plan contains no state dollars to prefund retiree health benefi ts for state employees Figure 30 other than highway patrol offi cers in 2015-16. General Fund Deferred Maintenance However, Control Section 3.61 allows the Governor Funding in 2015-16 Budgeta to begin prefunding these benefi ts for executive (In Millions) branch employees excluded from the collective State Entity Amount bargaining process. In the case of rank-and-fi le California State University $25 employees subject to collective bargaining, the University of California 25 Parks and Recreation 20 Governor may not order prefunding of these Corrections and Rehabilitation 15 benefi ts except upon legislative approval of Developmental Services 7 future labor agreements or other legislation. Th e State Hospitals 7 California Fairs 7 administration proposes implementing prefunding General Services 5 arrangements with all rank-and-fi le state employees Emergency Services 3 through the collective bargaining process. Labor Military 2 Veterans Affairs 2 agreements with most state employees expire at the Food and Agriculture 2 end of 2015-16. Total $120 a Does not include $2 million in one-time General Fund for Department of Forestry and Fire Protection deferred maintenance projects that was included in Chapter 1, Statutes of 2015 (AB 91, Committee on Budget). 66 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET bonds ($4.8 billion from the General Fund). trailer bill appropriates $23.8 million to off set fi re Th e budget also includes $986 million for lease protection costs for four newly incorporated cities revenue bonds ($591 million from the General in Riverside County. Fund). Debt-service payments for the University State Mandate s (Noneducation) of California and California State University are made directly from their main state support Th e budget plan provides $44.4 million appropriations and are refl ected in the above total. from the General Fund for 19 mandates on local governments primarily related to criminal justice, Redevelopment health, and tax administration. Th e budget package Trailer Bill Makes Many Changes to suspends 56 noneducation mandates, including Dissolution of Redevelopment Agencies (RDAs). ones related to elections, animal shelters, and Chapter 325, Statutes of 2015 (SB 107, Committee interagency child abuse reporting. When a mandate on Budget), makes several changes to the RDA is suspended, local government compliance with dissolution process and allocation of revenue the mandate’s provisions is optional during the among local governments. Chapter 325 consolidates budget year. Similar to state budget actions in the biannual review of RDA debt payments by the recent years, the budget deferred payment for, but Department of Finance into an annual process did not suspend, two labor relations mandates: and establishes a process for successor agencies to Peace Offi cer Procedural Bill of Rights and Local obtain “last and fi nal” approval of debt payment Government Employment Relations. schedules. In addition, the trailer bill makes a Unclaimed Property number of other changes, including modifying successor agency administrative cost limits and Provides Resources to the State Controller’s allowable expenditures, permitting the expenditure Offi ce (SCO) to Increase Property Reunited With of certain proceeds of RDA bonds issued January Owners. Th e budget package includes $581,000 through June of 2011, and ensuring property tax in 2015-16 and $857,000 annually beginning in levies intended to fund local agency pension costs 2016-17 to increase the amount of unclaimed are used for those purposes. property reunited with owners. Th e proposal Th e trailer bill also addresses disputes that had implements some of the options detailed in arisen out of RDA-related litigation. First, the bill our February 2015 report, Unclaimed Property: restricts the defi nition of a loan agreement between Rethinking the State’s Lost & Found Program. a former RDA and the city or county that founded Specifi cally, the SCO will (1) make more properties the RDA to loans of money, real property, and eligible for SCO’s streamlined online claims process infrastructure development payments. Second, the by increasing the eligibility ceiling from $1,000 to bill requires any remaining interest on these loans $3,000 and (2) perform a manual review of online to be recalculated at 3 percent (or 4 percent under claims that meet eligibility requirements but were certain circumstances) simple interest. Finally, the not initially approved through SCO’s automatic bill specifi es that total repayments by a former RDA process. In addition, SCO indicates that three to a city or county cannot exceed $5 million. actions will be implemented administratively Chapter 325 also includes several changes without the need for additional resources. intended to address some long-standing local Specifi cally, SCO will (1) reduce documentation government fi nance issues. Most notably, the requirements for paper claims, (2) improve www.lao.ca.gov Legislative Analyst’s Offi ce 67 2015-16 BUDGET the online database of unclaimed properties which is scheduled to occur by mid-2016. Th e by allowing users to search more fi elds, and administration has indicated that it anticipates (3) enhance outreach eff orts by collaborating with developing a plan—including cost-benefi t legislators. SCO intends to review more options analyses—for the remaining boards and bureaus in for reuniting unclaimed property with owners and 2016. request additional resources in a future budget Bureau of Private Postsecondary Education proposal. (BPPE). Th e budget provides BPPE with an additional $3.9 million in special funds to fund Budgetary Processes 25 additional staff in 2015-16. Th is represents Control Section 4.11 of the budget act an increase of 29 percent over BPPE’s 2014-15 authorizes the Department of Finance to change budget. Th e additional resources are intended to state budgetary processes for tracking personnel improve protections for students by increasing and operating costs in every executive branch BPPE’s oversight capacity over most of the state’s department. Th e administration indicates that private postsecondary schools, including nationally any changes to the state’s budgetary processes will accredited schools, unaccredited schools, and be for display purposes only and will not aff ect various specialized schools. state spending or staffi ng levels. Departmental Offi ce of Emergency Services (OES) personnel and operating expenses are expected to be displayed diff erently in the 2016-17 budget. A Response to Hazardous Materials Rail budget trailer bill, in a related change, repealed the Accidents. Th e budget provides a $10 million existing state law that required elimination of some loan in 2015-16 from the High-Cost Fund-B state positions that are vacant for six consecutive Administrative Committee Fund to the Regional months. Railroad Accident Prevention and Immediate Response Fund. Th is loan, which is in addition to Department of Consumer Aff airs (DCA) a similar $10 million authorized for 2014-15, will Th e budget provides DCA with $612 million allow OES to purchase hazardous material response from various special funds that are supported vehicles and training for six local hazardous mainly by licensing and other fees. Th is is a net material response teams. Th ese teams will be increase of $4 million, or 1 percent, compared to required to respond to rail hazardous material the estimated spending level for 2014-15. accidents at the direction of OES. Th e budget BreEZe Project. Th e budget provides package also includes trailer bill legislation that $25 million in 2015-16 from various special funds (1) specifi es how the state responds to accidents for the continuation of the BreEZe information involving hazardous materials travelling by rail and technology (IT) project. While the BreEZe project (2) establishes a fee on the top 25 most hazardous was originally proposed to replace various IT materials travelling by rail in California (as defi ned systems at 37 boards and bureaus within DCA, cost by OES). Th e fee will be administratively set by OES overruns and project delays led the administration with input from an industry advisory committee to propose terminating the development contract and will be collected by the railroads from the with the vendor early. Th e funding in the budget owner of the hazardous materials, which could be will allow DCA to complete the roll out of the seller of the hazardous material, the receiver, BreEZe to about half the boards and bureaus, or a third party. Th e legislation also requires OES 68 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET to periodically reassess rail hazardous response Specifi cally, the funding in 2015-16 will needs across the state, the appropriateness of the fee be used to develop a new project management amount, and the eff ectiveness and effi ciency of the framework and manage three IT projects on a pilot state’s new activities. basis. A report is due to the Legislature within six months of completing the pilots that identifi es California Military Department (CMD) (1) challenges that the PMO encountered relative Consolidated Headquarters Complex. Th e to the services provided to the pilot projects, budget provides $8.8 million from the General (2) lessons learned from the pilots, (3) how the Fund to purchase 30 acres of land at Mather Field project management framework will be revised in Sacramento County to build a new 285,600 based on the lessons learned from the pilots, and square foot consolidated headquarters complex (4) next steps for the PMO. In the interim, CalTech for the CMD. (Currently, CMD headquarters staff is required to update the Legislature regarding are divided between several leased buildings in the eff orts to develop the PMO within the department. Sacramento area.) Th e estimated cost of the entire It is anticipated that additional resources will be project is expected to be $113 million, which would needed in the future in order to expand CalTech’s be fully paid for by the state with lease revenue capacity to manage additional state IT projects. bonds (reimbursed by the General Fund). Labor Programs California Department of Technology (CalTech) Interest Payment for Federal Unemployment CalTech is the state’s central IT organization. Insurance (UI) Loan. California’s UI fund has been It has lead responsibility for approval and oversight insolvent since 2009, which has required the state of state IT projects, providing data center and to borrow from the federal government to continue telecommunications services, managing IT payment of UI benefi ts. California’s outstanding procurement, and establishing and enforcing IT federal loan is estimated to be $7 billion at the end policies and standards. of 2015 and $5 billion at the end of 2016. Th e state is Project Management Offi ce (PMO). Th e required to make annual interest payments on this 2014-15 Budget Act provided funding for CalTech federal loan. Th e 2015-16 spending plan includes to plan for the establishment of a statewide PMO, $175 million (General Fund) to make the interest which would create a centralized team of skilled payment due in the fall of 2015. project management professionals who would UI Administrative Funding and Customer manage state IT projects throughout the state. As Service Issues. Th e Employment Development required by the Legislature, the administration Department (EDD) has had signifi cant challenges submitted a plan for the establishment of the with UI program administration in recent years. statewide PMO within CalTech as part of the Claims activity rose during the most recent Governor’s January budget proposal. Th e 2015-16 recession and EDD struggled to process benefi t spending plan provides $1.5 million—about claims in a timely manner and respond to claimant $1 million in the form of a loan from the General inquiries. At the same time, the federal grant Fund to the Technology Services Revolving Fund— that has traditionally supported UI program and 11 permanent positions to begin implementing administration has been identifi ed as insuffi cient the administration’s plan. to adequately administer the program. Th e 2014-15 budget package included several measures to www.lao.ca.gov Legislative Analyst’s Offi ce 69 2015-16 BUDGET address administrative challenges, including enforcement, including failure to comply with (1) additional state funding to support program certain state law requirements and expectations administration (including $47 million from the of federal agencies responsible for Cal/OSHA General Fund), and (2) a commitment from EDD oversight. Additionally, budget legislation clarifi es to identify potential administrative effi ciencies and that Cal/OSHA is to prioritize serious accidents meet specifi c goals related to customer service. Th e and complaints over nonserious complaints when customer service goals include: conducting on-site investigations. Among other things, the approved positions are intended to • Answer 50,000 customer calls weekly. achieve the following results: • Schedule 95 percent of eligibility interviews • Increase total annual Cal/OSHA on a timely basis. enforcement inspections by roughly 1,400 (on top of the roughly 8,700 inspections • Process 100 percent of initial UI claims that would have been conducted within three days of receipt. otherwise). • Process 100 percent of online inquiries • Increase annual planned enforcement within fi ve days of receipt. inspections of worksites in high-hazard As of March 2015, EDD reports that it is industries—those with a relatively high meeting these customer service goals. Based on rate of serious injury and illness—by 630 EDD estimates of the resources needed to maintain (on top of the roughly 400 that would have improved customer service levels, the 2015-16 been conducted otherwise). spending plan does not include any General Fund support for UI program administration. Th is • Increase inspections of worksites with a year-over-year reduction in General Fund support permit to engage in specifi ed high-risk is possible primarily because of (1) an estimated activities. reduction in claims workload relative to the prior • Increase the number of follow-up year, which reduces total administrative costs, and inspections at worksites with an unresolved (2) unanticipated collections of certain UI benefi t serious violation. overpayments from federal income tax refunds through the federal Treasury Off set Program that • Reduce the time to initiate inspections can be used to support UI administration in place following formal complaints. of General Fund resources. Increased Funding and Positions for • Reduce the time to conclude open Cal/OSHA Enforcement. Th e spending plan inspections. includes an increase of $4.6 million (special funds) in 2015-16 ($7.1 million ongoing) to support 44 new California State Library positions, phased in over two years, in the Division $31 Million (General Fund) for State and of Occupational Safety and Health (also known as Local Libraries. Of this amount, $17 million is Cal/OSHA) within the Department of Industrial for direct operations and facilities of the State Relations. Th ese resources are intended to address Library and $14 million is for assistance to local several concerns raised with current Cal/OSHA libraries. Th e budget includes $8 million in new 70 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET spending—$840,000 for state operations and debt obtain certain Internet services from the service and $7.2 million for local library assistance. Corporation for Educational Network Th is spending increase is off set by $5 million in Initiatives in California. expiring prior-year one-time funds. • $4 million (one time) for the State Library Assistance to Local Libraries. Of the to administer grants to local libraries for $7.2 million increase, $2.2 million is ongoing and Internet equipment purchases (such as $5 million is for one-time purposes. Specifi cally, routers). Th e State Library has discretion the budget includes: in determining how these grants will be • $2 million (ongoing) for local libraries to allocated, and, in the past, has required expand basic literacy training services to some local libraries to provide matching adults. Th e State Library has discretion funds. in allocating funding and may expand services at existing programs or develop • $1 million (one time) for several libraries new literacy programs at libraries that to administer a pilot program intended currently are not participating. to enable 1,000 adult students to take online high school courses. Students who • $225,000 (ongoing) for the State library complete the coursework of this program to contract with a local library network can earn an accredited high school to work on behalf of local libraries to diploma. www.lao.ca.gov Legislative Analyst’s Offi ce 71 2015-16 BUDGET 72 Legislative Analyst’s Offi ce www.lao.ca.gov 2015-16 BUDGET www.lao.ca.gov Legislative Analyst’s Offi ce 73 2015-16 BUDGET 74 Legislative Analyst’s Offi ce www.lao.ca.gov LAO Publications The Legislative Analyst’s Offi ce (LAO) is a nonpartisan offi ce that provides fi scal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814.