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The 2016-17 Budget: Analysis of the Human Services Budget
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The 2016-17 Budget:
Analysis of the
Human Services Budget
MAC TAYLOR • L E G I S L A T I V E A N A L Y S T • FEBRUARY 2016
2016-17 BUDGET
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2016-17 BUDGET
EXECUTIVE SUMMARY
Overview of the Human Services Budget. The Governor’s budget proposes $12.2 billion from
the General Fund for human services programs—a 3.9 percent increase over 2015-16 estimated
expenditures. The year-over-year changes mainly reflect the combination of (1) continued
implementation of previously enacted policy changes; (2) changes in caseload, utilization of services,
and cost per unit of service; and (3) new policy proposals in the Department of Developmental
Services (DDS) and, to a lesser degree, the Supplemental Security Income/State Supplementary
Payment (SSI/SSP) program. (We will be providing more information of the Governor’s major
proposals in DDS in our upcoming publication, The 2016-17 Budget: Analysis of the Developmental
Services Budget.)
Legislature Will Want to Evaluate Administration’s SSI/SSP Proposal in Light of Its Own
Goals. The Governor’s 2016-17 budget proposal includes six months of funding to provide a
one-time cost-of-living adjustment (COLA) to the state-funded SSP portion of the SSI/SSP grant. If
the Legislature has an interest in increasing SSI/SSP grants, we find that the Governor’s proposal to
provide a one-time COLA to be one way to do so. However, we think that the Legislature will first
want to set its own goals for where it would like SSI/SSP grants to be, and over what time period
it would expect to take to get there. Once these goals are established, the Legislature would be in
a better position to consider the specific grant proposal made by the Governor. By establishing
its goals for the program, the Legislature can ensure that any funding provided for SSI/SSP grant
increases is used in a way that furthers those goals.
Governor’s Proposals for In-Home Supportive Services (IHSS) and California Work
Opportunity and Responsibility to Kids (CalWORKs) Appear Reasonable. We have reviewed the
administration’s 2016-17 budget proposals for IHSS and CalWORKs. While we raise some areas of
uncertainty—mainly related to caseload estimates in CalWORKs and the recent implementation of
federal labor regulations in IHSS—overall we find the administration’s proposals to be reasonable
at this time. We will continue to monitor these areas of uncertainty and update the Legislature if we
think any updates to the caseload and budgeted funding levels should be made.
Governor’s Continuum of Care Reform (CCR) Proposal Is Logical Next Step, but Some
Uncertainty Remains. The Governor’s budget proposes funding in 2016-17 to continue to
implement CCR in the state’s foster care system. At a high level, CCR aims to reduce reliance on
long-term group home placements and increase the utilization and capacity of home-based family
placements for children in the foster care system. We provide background on CCR, describe the
Governor’s funding proposal, and highlight key areas of remaining uncertainty surrounding
CCR implementation. While we think that the Governor’s budget is a logical next step in the
implementation of CCR, we suggest some key issues and questions for legislative consideration with
the goal of gaining some clarity around these remaining areas of uncertainty.
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2016-17 BUDGET
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OVERVIEW
Background on Human Services child welfare and adult protective services General
Fund costs.
California’s major human services programs
Legislation enacted in 2013 shifted additional
provide a variety of benefits to its citizens. These
General Fund costs in the CalWORKs program
include income maintenance for the aged, blind, or
to local realignment revenues that previously have
disabled; cash assistance and employment services
been used to provide health services to indigent
for low-income families with children; protecting
individuals. These realignment revenues have been
children from abuse and neglect; providing home
freed up given that many indigent individuals
care workers who assist the aged and disabled in
are newly eligible for coverage in the state-
remaining in their own homes; collection of child
funded Medi-Cal program. The 2013 legislation
support from noncustodial parents; and subsidized
additionally provided that the costs of specified
child care for low-income families.
ongoing increases to the CalWORKs assistance
Human services are administered at the state
payments will be shifted to revenues from the
level by the Department of Social Services (DSS),
growth of existing local realignment revenues that
Department of Developmental Services (DDS),
otherwise would have supported other human
Department of Child Support Services, and other
services programs. We discuss the statutorily
California Health and Human Services Agency
driven CalWORKs grant increases in greater detail
departments. The actual delivery of many services
later in the “CalWORKs” section in this report.
takes place at the local level and is typically carried
out by 58 separate county welfare departments.
Expenditure Proposal by Major Programs
A major exception is the Supplemental Security
Overview of the Human Services Budget
Income/State Supplemental Payment (SSI/SSP),
Proposal. The Governor’s budget proposes
which is administered mainly by the U.S. Social
expenditures of $12.2 billion from the General
Security Administration. In the case of DDS,
Fund for human services programs in 2016-17. As
community-based services (the type of services
shown in Figure 1 (see next page), this reflects a net
received by the vast majority of DDS consumers)
increase of $453 million—or 3.9 percent—above
are coordinated through 21 nonprofit organizations
estimated General Fund expenditures in 2015-16.
known as regional centers.
Summary of the Major Budget Proposals and
Recent Major Changes in Funding for Human
Changes. As shown in Figure 1, the budget reflects
Services. As a result of realignment-related
generally stable General Fund expenditures across
legislation in 2011 and 2013, the budget reflects
a majority of the human services programs, with
shifts to counties of a significant amount of
relatively higher growth in DDS. Major new policy-
General Fund costs in human services programs.
driven spending proposals are concentrated in DDS
Specifically, as a result of 2011 legislation, the
and, to a lesser extent, SSI/SSP. While in some cases
budget (beginning in 2011-12) reflects shifts to
the year-over-year funding growth appears modest
local realignment revenues of about $1.1 billion
or flat, this is actually masking both cost increases
of General Fund costs in the California Work
and decreases within the program. We highlight
Opportunity and Responsibility to Kids
the major budget changes below.
(CalWORKs) program and about $1.6 billion in
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2016-17 BUDGET
DDS. The 7.5 percent growth ($265 million) is almost completely offset by proposed increased
in DDS General Fund expenditures is driven in funding for the continuation of the implementation
part by several new spending proposals primarily of the Continuum of Care Reform (CCR). At a high
aimed at supporting community services as level, the funding provides for additional resources
well as their development in preparation of the to improve the state’s child welfare system by
continued closure of developmental centers. (We performing comprehensive assessments of children
will provide more information on the Governor’s to ensure that their initial placement is the most
major proposals in DDS in our upcoming DDS appropriate setting, increasing the use of home-based
publication, The 2016-17 Budget: Analysis of the family care, and reducing the use of group homes.
Developmental Services Budget.) Some funding was provided for CCR in 2015-16,
CalWORKs. The 6 percent growth ($43 million) and the Governor’s budget continues this, and some
in General Fund expenditures in CalWORKs additional funding, in support of this effort.
largely reflects funding shifts and masks a decline In-Home Supportive Services (IHSS). It is
(3 percent) in total funding for the program from important to note that the modest (1.1 percent)
all sources. The decline in total funding is primarily year-over-year net growth in the IHSS General
the result of lower estimated caseloads. Fund expenditures masks a number of both cost
DSS Nonrealigned Children’s Programs. increases and savings. On the cost front, the
The slight decrease in General Fund support for budget reflects increased costs for a full year of
the nonrealigned children’s programs under the implementation of compliance with new federal
DSS budget is primarily the result of the cost of a labor regulations, caseload growth, and higher costs
one-time set-aside to pay for a $50 million federal per service-hour as a result of wage increases. On
penalty in 2015-16. Although this $50 million is the savings front, the Governor’s January budget
not included in 2016-17, the year-over-year savings proposes to continue to restore IHSS service hours
Figure 1
Major Human Services Programs and Departments—Budget Summary
General Fund (Dollars in Millions)
Change From
2015-16 to 2016-17
2015-16 2016-17
Estimated Proposed Amount Percent
SSI/SSP $2,795.9 $2,872.8 $76.8 2.8%
Department of Developmental Services 3,508.8 3,773.5 264.8 7.5
CalWORKs 697.7 740.5 42.8 6.1
In-Home Supportive Services 2,934.4 2,966.0 31.6 1.1
County Administration and Automation 824.3 855.1 30.8 3.7
Nonrealigned Children’s Programsa,b 259.5 255.6 -3.9 -1.5
Department of Child Support Services 314.3 314.2 -0.1 —
Department of Rehabilitation 59.8 59.9 0.1 0.2
Department of Aging 33.4 33.8 0.3 1.0
All other human services (including state support) 334.7 345.0 10.3 3.1
Totals $11,762.9 $12,216.3 $453.4 3.9%
a
This includes, among other programs, the Kinship Guardianship Assistance Payment Program, Approved Relative Caregiver Program, and
funding for the Continuum of Care Reform efforts.
b
The 2015-16 General Fund includes a $50 million set-aside for a potential federal penalty. This penalty is currently being appealed. If the state
does not ultimately have to pay the penalty, or pay a lesser amount, General Fund costs in this area would be less.
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that were eliminated as a result of a previously SSI/SSP. Finally, although the year-over-year
enacted 7 percent reduction in service hours, but growth in SSI/SSP would not be considered
do so through a restructured tax on managed significant (2.7 percent), we note that unlike in
care organizations (MCOs) rather than from the recent years, it includes funding increases for
General Fund as was done in 2015-16. We note that more than just growth in the caseload. The budget
on February 8, 2016, the administration released includes about $40 million to fund a one-time
an updated MCO tax proposal. The administration cost-of-living adjustment (COLA) (estimated to be
has indicated that funding to continue the IHSS 2.96 percent) to the state-funded, SSP portion of the
service-hour restoration could come from either grant.
MCO tax revenues or the General Fund.
SSI/SSP
The SSI/SSP program provides cash grants to statutorily required to provide an annual COLA
low-income aged, blind, and disabled individuals. each January. This COLA increases the SSI portion
The state’s General Fund provides the SSP portion of grant by the Consumer Price Index for Urban
of the grant while federal funds pay for the SSI Wage Earners and Clerical Workers (CPI-W).
portion of the grant. For 2016-17, the budget In years that the CPI-W is zero or negative (as
proposes nearly $3 billion from the General Fund was the case in 2010, 2011, and 2016), the federal
for the state’s share of SSI/SSP—an increase of government does not increase SSI grants, but
$77 million (2.8 percent) over estimated 2015-16 instead holds them flat. The federal government
expenditures. This increase would bring total gives the state full discretion over whether and how
program funding to $10.3 billion ($2.9 billion from to provide increases to the SSP portion of the grant.
the General Fund and $7.4 billion federal funds) Until 2011, the state also had a statutory COLA.
in 2016-17. The primary drivers of this increase Although this statutory COLA existed, there were
are modest caseload growth (less than 1 percent) many years that, due to budget constraints, the
and the Governor’s proposal to provide a one-time COLA was not provided. The last state-funded
COLA to the SSP portion of the grant. COLA was provided in April 2005.
Caseload Growing Modestly. The SSI/SSP During Constrained Budget Environment, SSP
caseload has continued to grow at a rate of less Grants for Individuals and Couples Reduced to
than 1 percent each year since 2011-12. The budget Federally Required Minimum. The state is required
estimates that about 1.3 million individuals and to maintain SSP grant levels at or above the levels
couples will receive SSI/SSP grants in 2016-17, an in place in March 1983 in order to receive federal
increase of 0.8 percent over 2015-16. Medicaid funding. As a result of difficult budget
times during the most recent recession, the state
Background on SSI/SSP Grants
decreased SSP grants for individuals and couples to
Both the State and Federal Government these minimum levels. As shown in Figure 2 (see
Contribute to SSI/SSP Grants. Grant levels next page), for couples, the state reduced the SSP
for SSI/SSP are determined by both the federal grant to the federally required minimum ($396 per
government and the state. The federal government, month) in 2009-10. For individuals, SSP grants
which funds the SSI portion of the grant, is
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2016-17 BUDGET
were first reduced by 2.9 percent to $171 per month required minimum levels, the state could no longer
in 2009-10, and then subsequently to the federally do this. Despite the gradual increases in the grants
required minimum of $156 per month in 2011-12. shown in the figure, current maximum SSI/SSP
Because no state COLA has been provided since grant levels remain below the 2008-09 levels.
these reductions, SSP grants for individuals and
Governor’s Proposed One-Time COLA
couples have remained at these minimum levels.
Grants Have Been Gradually Increasing Budget Proposes One-Time COLA to SSP
Due to Federal COLAs, but Remain Below Portion of Grant. The budget includes six months
Pre-Recession Levels. As shown in Figure 2, the of funding ($41 million) from the General Fund to
total SSI/SSP monthly grant amount for individuals increase SSP grants by the California Necessities
and couples has been increasing since 2010-11— Index (CNI) beginning January 1, 2017. The
solely due to the provision and pass-through of Governor’s budget estimates that the CNI will be
federal COLAs. We note that during some difficult 2.96 percent. The annualized cost of this COLA
budget times prior to 2010-11, the state negated is estimated to be approximately $80 million to
the impact of COLAs by reducing the SSP portion $90 million from the General Fund. In addition,
of the grant by the amount of the federal increase, the budget estimates that the federal government
thereby holding total SSI/SSP grant levels flat. will provide a 1.7 percent COLA to the SSI portion
After the state reduced SSP grants to the federally of the grant, also beginning January 1, 2017. Based
Figure 2
Maximum SSI/SSP Grants for
Individuals and Couplesa Compared to Federal Poverty Levelb
Individuals Couples
$1,700
1,600 SSP
1,500 SSI
1,400 Federal Poverty Levelb
1,300
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16
a The maximum monthly grants displayed refer to those for aged and disabled individuals and couples living in their own households, effective
as of January 1 of respective budget year.
b Federal Poverty Level as established by U.S. Department of Health and Human Services, effective as of January 1 of respective budget year.
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2016-17 BUDGET
upon the Governor’s estimate of the CNI and CPI, Grant Increases Should Reflect the
the administration estimates that total monthly Legislature’s Goals for SSI/SSP Grant Levels
maximum grants for individuals will increase by
Setting Goals for SSI/SSP Grant Levels. The
$17.09 and grants for couples will increase by $30.43.
Governor’s proposal is one way to increase the
With Revised CNI and CPI, Grant Increases
SSI/SSP grant. It raises grant levels to all recipients
Less Than Estimated by Governor. The CNI is
and would essentially maintain grants at roughly
an estimate of how the cost of living in California
the same level relative to the federal poverty
has changed from year to year. The Governor’s
guideline as they are today. We think, however, that
budget estimates that the CNI will be 2.96 percent,
the Legislature will want to first set its own goals
using partial data. Our review of the actual
for where it would like SSI/SSP grant levels to be,
data—published after the release of the Governor’s
and over what time period it would expect to take
budget—indicates that the January 2017 CNI is
to get there. Once these goals were established,
2.76 percent (we expect this to be the final CNI).
the Legislature would also be better positioned to
Using the updated CNI, we estimate the proposed
consider the specific grant increase proposal made
January 1, 2017 SSP COLA would cost the
by the Governor. Below, we provide examples of
General Fund $38 million in 2016-17, a decrease of
ways the Legislature may approach increases to the
$3 million below the Governor’s January estimate.
SSP grant—depending on its specific goals.
The Governor’s budget estimates that the CPI-W
Target Available Resources to Most Effectively
that the federal government will use to adjust the
Achieve Legislature’s Goals. As we described
SSI portion of the grant will be 1.7 percent, but
above, the Governor’s budget provides the same
our estimate of the CPI-W is slightly lower, at
1.39 percent. (The actual
Figure 3
CPI-W will not be known
SSI/SSP Monthly Maximum Grant Levelsa
until the fall.) As a result of
Governor’s Proposal
these downward estimates
Governor’s 2016-17 Budget Proposal
of the CNI and CPI-W, we
LAO Estimates
estimate that monthly SSI/
Governor’s Change From
SSP grants would increase
2015-16 Estimatesb Amountc 2015-16d
by $14.51 for individuals
Maximum Grant—Individuals
and $26.23 for couples
SSI $733.00 $745.46 $743.19 $10.19
under the Governor’s SSP 156.40 161.03 160.72 4.32
proposal. Figure 3 shows Totals $889.40 $906.49 $903.91 $14.51
Percent of Federal Poverty Leveld 90% 92% 91%
current maximum grant
Maximum Grant—Couples
levels for individuals
SSI $1,100.00 $1,118.70 $1,115.29 $15.29
and couples compared SSP 396.20 407.93 407.14 10.94
to the Governor’s budget Totals $1,496.20 $1,526.63 $1,522.43 $26.23
Percent of Federal Poverty Leveld 112% 114% 114%
proposal (as estimated by
a
The maximum monthly grants displayed refer to those for aged and disabled individuals and couples living in their own
both the administration households, effective as of January 1 of the respective budget year.
b
Reflects Governor’s budget estimate of the (1) January 2017 federal cost-of-living adjustment (COLA) for the SSI portion of the
and our office).
grant, and (2) the Governor’s one-time January 2017 state-funded COLA for the SSP portion of the grant.
c
Reflects LAO estimate of the (1) January 2017 federal COLA for the SSI portion of the grant, and (2) the Governor’s one-time
January 2017 state-funded COLA for the SSP portion of the grant.
d
Compares grant level to federal poverty guideline from the U.S. Department of Health and Human Services for 2016.
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2016-17 BUDGET
percentage grant increase for all recipients through In past years when state COLAs were provided,
a one-time COLA. However, the Legislature may the state used a different methodology—a statutory
have other goals for grant increases that could formula to adjust the total SSI/SSP grant by
suggest targeting the increases among recipients. the CNI. It worked by applying the CNI to the
As an example, if the Legislature established a combined SSI/SSP grant. First, the federal COLA
goal to ultimately bring the maximum SSI/SSP was applied to the SSI portion of the grant, and
grant for all recipients to 100 percent of the federal then the cost to increase the total, combined grant
poverty level, it may not make sense to provide the by the CNI (after accounting for the federal COLA)
same grant increase to all SSI/SSP individuals and was covered with state funding. This type of COLA
couples (as proposed by the Governor), but instead effectively raises the total SSI/SSP grant by the CNI
focus the available funding on individuals. This and may be referred to as a “whole-grant” COLA.
is because grants for individuals are currently at This approach takes the view that the overall grant
about 90 percent of the federal poverty guideline level is what should be maintained (rather than just
while grants for couples are at about 112 percent. the SSP portion directly controlled by the state).
Alternatively, the Legislature could set its goals For this option, the state cost is determined, in
relative to another measure of poverty (such as the part, by the difference between the CPI and CNI.
Supplemental Poverty Measure, which accounts for The higher (lower) the CNI is relative to the CPI,
cost-of-living differentials). The cost to the General the greater (less) the state cost in applying this
Fund for these types of targeted grant increases COLA methodology. We estimate that the cost of
would vary by the grant level chosen, the size of providing this type of COLA in 2016-17 would be
the population targeted, and the time period over about $115 million for six months of an increase
which the grant increases would be provided. (approximately $230 million for a full year) and
Providing COLAs to Maintain Desired Grant would result in the changes to the maximum grant
Levels. Once SSI/SSP grants are at desired levels, reflected in Figure 4.
the Legislature may also want to consider providing
ongoing COLAs to
Figure 4
maintain the purchasing
SSI/SSP Monthly Maximum Grant Levelsa
power of those grants.
If Whole-Grant COLA Provided
The Governor’s proposed
2016-17 Estimated
COLA to the SSP portion
2015-16 Whole-Grant COLA Change
of the grant—if provided
Maximum Grant—Individuals
annually—would be one
SSI $733.00 $743.19 $10.19
way to achieve this goal. SSP 156.40 170.76 14.36
This approach takes the Totals $889.40 $913.95 $24.55
Percent of Federal Poverty Levelb 90% 92%
view that it is the state-
Maximum Grant—Couples
funded SSP portion of
SSI $1,100.00 $1,115.29 $15.29
the grant that should be SSP 396.20 422.21 26.01
maintained, while federal Totals $1,496.20 $1,537.50 $41.30
Percent of Federal Poverty Levelb 112% 115%
COLAs would continue to
a
The maximum monthly grants displayed refer to those for aged and disabled individuals and couples living in their own
adjust the SSI portion of households, effective as of January 1 of respective budget year.
b
Compares grant level to federal poverty guideline from the U.S. Department of Health and Human Services for 2016.
the grant.
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2016-17 BUDGET
Whatever the Funding Level, SSI/SSP sets its goals for the program, it can ensure that
Grant Increases Could Be Structured to Further whatever the funding level provided for SSI/SSP
Legislature’s Goals. As we have discussed above, grant increases—be it the $41 million proposed by
there are various goals the Legislature may wish the Governor or some other amount—the funding
to establish when considering SSI/SSP grant would be used in a way that furthers those goals.
increases, all at various costs. Once the Legislature
IN-HOME SUPPORTIVE SERVICES
Background meet the state’s nursing facility clinical eligibility
standards, the federal government provides an
Overview of IHSS. The IHSS program provides
enhanced reimbursement rate of 56 percent
personal care and domestic services to low-income
referred to as Community First Choice Option. The
individuals to help them remain safely in their own
nonfederal costs of the IHSS program are paid for
homes and communities. In order to qualify for
by the state and counties, with the state assuming
IHSS, a recipient must be aged, blind, or disabled
the majority of the nonfederal costs.
and in most cases have income below the level
Counties’ Share of IHSS Costs Is Set in
necessary to qualify for SSI/SSP cash assistance.
Statute. Budget-related legislation adopted in
The recipients are eligible to receive up to 283 hours
2012-13 created a county maintenance-of-effort
per month of assistance with tasks such as bathing,
(MOE) for IHSS. The county MOE generally sets
dressing, housework, and meal preparation. Social
counties’ contributions to IHSS at their 2011-12
workers employed by county welfare departments
levels, and increases the contributions annually by
conduct an in-home IHSS assessment of an
3.5 percent (for inflation) plus a share of any wages
individual’s needs in order to determine the
and benefits subsequently negotiated at the county
amount and type of service hours to be provided.
level. Under the county MOE financing structure,
The average number of service hours that will
the state General Fund assumes all nonfederal
be provided to IHSS recipients is projected to be
IHSS costs above counties’ MOE expenditure
approximately 102 hours per month in 2016-17. In
levels. In 2016-17, the Governor’s budget estimates
most cases, the recipient is responsible for hiring
the total county MOE to be about $1.1 billion, an
and supervising a paid IHSS provider—oftentimes
increase of $37 million above the estimated county
a family member or relative.
MOE for 2015-16.
The IHSS Program Receives Federal Funds as
a Medi-Cal Benefit. For nearly all IHSS recipients,
The Governor’s Budget Proposal
the IHSS program is delivered as a benefit of the
and LAO Assessment
state-federal Medicaid health services program
The budget proposes $9.2 billion (all funds)
(known as Medi-Cal in California) for low-income
for IHSS expenditures in 2016-17, which is an
populations. The IHSS program is subject to federal
approximately $700 million (8.3 percent) net
Medicaid rules, including the federal medical
increase over estimated expenditures in 2015-16.
assistance percentage reimbursement rate for
General Fund expenditures for 2016-17 are
California of 50 percent of costs for most Medi-Cal
proposed at nearly $3 billion, a net increase of
recipients. For IHSS recipients who generally
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2016-17 BUDGET
$32 million, or 1.1 percent, above the estimated full-year impact of the state’s minimum wage
expenditures in 2015-16. It is important to note increase from $9 to $10 per hour that began on
that the modest year-over-year net growth in IHSS January 1, 2016. In addition, the budget reflects
General Fund expenditures masks a number of wage increases negotiated at the county level
both cost increases and savings. On the cost front, for IHSS providers. We note, however, that the
the budget reflects caseload growth, higher costs Governor’s budget does not take into account
per service-hour as a result of wage increases, and wages negotiated after September 2015, including
increased costs for a full year of compliance with a county-negotiated wage increase from $10 to $11
new federal labor regulations. On the savings for Los Angeles County IHSS providers effective
front, the Governor’s January budget proposes to February 1, 2016. We estimate the Los Angeles
continue to restore IHSS service hours that were County wage increase will cost the General Fund
eliminated as a result of a previously enacted approximately $70 million in 2016-17. We expect
7 percent reduction in service hours, but to do so that the Governor’s revised estimates released in
through a restructured tax on MCOs rather than May will account for this and other negotiated
through the General Fund, as was done in 2015-16 wage increases that occurred after the development
(at a General Fund cost of $233 million). We note of the Governor’s budget, but are set to take effect
that on February 8, 2016, the administration in 2016-17.
released an updated MCO tax proposal. The Implementation of Federal Labor Regulations
administration has indicated that funding to Affecting Home Care Workers. As shown in
continue the IHSS service-hour restoration could Figure 5, the 2016-17 budget includes full-year
come from either MCO tax revenues or the General funding ($850 million total funds, $395 million
Fund. While we generally do not take issue with General Fund) to comply with federal labor
the Governor’s budget proposal, overall, we note regulations that became effective in 2015-16. The
that the budget includes several areas of fiscal new regulations require states to (1) pay overtime
uncertainty. Below, we describe some of the main compensation—at one-and-a-half times the regular
components of the Governor’s IHSS proposal and rate of pay—to IHSS providers for all hours worked
note any issues with them. that exceed 40 in a week, and (2) compensate
Increases in IHSS Basic Services Costs. IHSS providers for time spent waiting during
Caseload growth and wage increases for IHSS medical appointments and traveling between
providers continue to be two primary drivers of the homes of IHSS recipients. We note that 2014
increasing IHSS service costs. The Governor’s budget-related legislation generally restricts IHSS
budget assumes the average monthly caseload for providers to work no more than 66 hours per week.
IHSS in 2016-17 will be about 490,000, an increase Although these federal regulations were issued in
of 5.7 percent compared to the estimated 2015-16 2013, legal challenges in the federal courts halted
average monthly caseload. We have reviewed the implementation. In anticipation of a federal court
caseload projections in light of actual caseload decision requiring implementation sometime in
data available to date and do not recommend any 2015, the 2015-16 budget included partial-year
adjustments at this time. Provider wage increases funding to implement the regulations (contingent
also contribute to increasing IHSS service costs. on the courts’ validation), but did not specify an
The Governor’s budget includes $70 million implementation date. Following a federal court
General Fund ($150 million total funds) for a decision in August 2015 that affirmed the validity
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2016-17 BUDGET
Figure 5
In-Home Supportive Services: Costs to Comply With New Federal Labor Regulations
(In Millions)
2015-16 Estimates 2016-17 Governor’s Proposal
(February 1, 2016 Implementation) (Full-Year Cost of Compliance)
General Fund Total Funds General Fund Total Funds
Overtime premium pay $164 $356 $218 $475
Newly compensable work activities 117 247 172 366
Administration 25 50 2 5
Changes to time sheet and payrolling system (CMIPS II) 6 11 2 4
Totals $312 $664 $395 $850
CMIPS II = Case Management, Information and Payrolling System.
of the rules, the state set an implementation date • Limitations Placed on Overtime and
of February 1, 2016 for the new regulations to take Newly Compensable Work Activities.
effect in IHSS. Below, we discuss several elements The 2016-17 budget includes a full year of
of the state’s implementation plan and highlight funding for IHSS provider overtime and
any issues with them: newly compensable work activities. This
• Current Year May Be Overbudgeted estimate reflects the statutory caps adopted
in 2014—before federal courts placed a
Due to Delayed Implementation. The
temporary hold on implementation—
2015-16 budget assumed that the new
generally limiting the number of hours
federal labor regulations would be
an IHSS provider can work to 66 hours
implemented on October 1, 2015. Since
per week. When multiplied by roughly
then, the administration has established
four weeks per month, this weekly
an implementation date of February 1,
limit is about equal to the maximum
2016. Rather than reduce the 2015-16
number of service hours that may be
IHSS budget by an estimated $120 million
allotted to IHSS recipients per month.
General Fund to account for the
The Governor’s budget estimates that
implementation delay, the administration
28 percent of providers typically work
has indicated that it made the decision to
more than 40 hours per week, and that
keep this funding in the budget to provide
most of these providers generally work less
for any unforeseen costs associated with
than the new 66 hour per week cap. The
the new regulations. We note that the
legislation establishing the caps also limits
methodology it used to estimate 2015-16
the amount of time an IHSS provider who
expenditures related to implementation of
works for multiple recipients can spend
the new rules already provides contingency
traveling between the homes of recipients
funding to account for some level of
to seven hours per week. We note that
uncertainty. As a result, IHSS may be
DSS estimates that of the approximately
overbudgeted by around $120 million
18 percent of IHSS providers who serve
General Fund in 2015-16.
more than one recipient, most spend
www.lao.ca.gov Legislative Analyst’s Office 13
2016-17 BUDGET
under seven hours per week traveling 2015-16, we estimate that this exemption
between recipients. These limitations will could result in General Fund costs in the
be enforced by a tiered penalty system low millions of dollars annually. Until
developed by DSS. Providers can be more guidance is issued about how the
terminated if they violate these limitations extraordinary circumstances exemption
on multiple occasions. may be applied, it is difficult to estimate its
potential costs.
• Exceptions to Overtime Limit for Certain
Providers. After the 2016-17 Governor’s • Three-Month Grace Period for All
budget was released, DSS issued guidance Providers. The legislation that enacted
to counties establishing two exemptions the overtime and travel time limits for
to the overtime cap: (1) an exemption for IHSS providers also established a grace
live-in family care providers, and (2) a period for the first three months of
temporary exemption for extraordinary implementation (now spanning February 1
circumstances. We note that current law through May 1, 2016). During this grace
does not provide specific authority for period, providers will not accrue penalties
these exemptions. It is our understanding if they violate the overtime and travel time
that the administration will be seeking limits. County social workers, however,
statutory authority for these exemptions may work with IHSS providers found
through the budget process. The first violating the limits and inform them of the
exemption is for IHSS providers who are violation without penalty during this time.
related to, live with, and work for two or
Proposed Continued Restoration of Service
more IHSS recipients. For these providers,
Hours From 7 Percent Reduction. Offsetting the
the overtime cap is extended to 90 hours
above increases in IHSS General Fund costs, the
per workweek (not to exceed 360 hours
Governor’s January budget proposes to use revenue
per month). In 2015-16, it is estimated that
from a restructured MCO tax, rather than General
approximately 760 IHSS providers met
Fund, in the amount of $236 million to provide the
this criteria. For the second exemption
nonfederal share of funding needed to continue to
related to extraordinary circumstances,
restore service hours from the 7 percent reduction
DSS (in consultation with the Department
enacted in 2013-14. In 2015-16, the service hours
of Health Care Services), is in the process
were restored through the use of the General
of establishing criteria for temporarily
Fund on a one-time basis, with the intent that
exempting IHSS providers from the
an alternative funding source would be used in
66-hour workweek limit in situations
future years. The 7 percent restoration relates to
where the limit would place IHSS recipients
terms of an IHSS settlement agreement—adopted
at risk of out-of-home institutionalized
by the Legislature—that resolves two class-action
care. At this time, the Governor’s budget
lawsuits stemming from previously enacted budget
does not include funding to account for
reductions. The terms of the settlement agreement
either of the two exemptions. Based on the
require the state to pursue a revenue source other
number of providers estimated to meet the
than the General Fund for the purpose of restoring
live-in family care provider exemption in
service hours from the 7 percent reduction. On
14 Legislative Analyst’s Office www.lao.ca.gov
2016-17 BUDGET
February 8, 2016, the administration released an funding source for the service-hour restoration could
updated MCO tax proposal. As noted earlier, the be either MCO tax revenues or the General Fund.
CALWORKS
Background WTW 24-Month Time Clock Determines
Allowable Activities. As of 2013, state law
The CalWORKs program was created in
defines two sets of rules for which allowable
1997 in response to 1996 federal welfare reform
WTW activities may be used to meet the work
legislation that created the federal Temporary
requirement. The first set of rules, referred to as
Assistance for Needy Families (TANF) program.
“federal” rules because they closely mirror federal
CalWORKs provides cash grants and employment
TANF law, place greater emphasis on employment
services to families whose income is inadequate to
over some other activities including education,
meet their basic needs.
training, and mental health and/or substance
Cash Assistance. Grant amounts vary across
abuse treatment. The second set of rules, referred
the state and are adjusted for family size, income,
to as “CalWORKs” rules, allow relatively greater
and other factors. For example, a family of three
flexibility to choose activities that may help adult
that has no other income and lives in a high-cost
recipients address barriers to employment. Adult
county currently receives a cash grant of $704 per
recipients may meet the work requirement under
month (equivalent to 42 percent of the federal
federal rules at any time, but may meet the work
poverty level). A family in these circumstances
requirement under CalWORKs rules only for up
would generally also be eligible for food assistance
to a cumulative, but not necessarily consecutive,
through the CalFresh program in the amount
24 months. Once 24 months of participation under
of $497 per month and health coverage through
CalWORKs rules have been exhausted, recipients
Medi-Cal.
must participate under federal rules. This policy is
Work Requirement and Employment Services.
referred to as the “WTW 24-month time clock.”
As a condition of receiving aid, able-bodied adults
Federal Work Participation Rate (WPR)
are generally subject to a work requirement,
Requirement. As noted above, federal law lays out
meaning that they must be employed or participate
rules governing how recipients may meet the work
in specified activities—known as “welfare-
requirement. Federal law requires the state to track
to-work (WTW) activities”—intended to lead to
the percentage of assisted families that meet the
employment. CalWORKs cases that include an
work requirement under federal rules, also known
adult who is subject to the work requirement are
as the WPR. Federal law further requires the state
entitled to receive subsidized child care and other
to maintain a WPR of at least 50 percent or face
employment services to help meet the requirement.
financial penalties.
Individuals who fail to meet the work requirement
Adult Time Limit on Aid. In California, adult
without good cause are subject to a sanction
recipients are also generally limited to a cumulative
by being removed from the calculation of their
lifetime maximum of 48 months of assistance in
family’s monthly grant, resulting in reduction in
CalWORKs. Adults who exhaust 48 months of cash
cash assistance (of roughly $140 dollars).
assistance are removed from the calculation of their
www.lao.ca.gov Legislative Analyst’s Office 15
2016-17 BUDGET
family’s monthly grant, resulting in decreased cash (specifically, an increase in state support for
assistance. (The family would continue to receive a Tribal TANF programs). Within the total funding
reduced grant for children who remain eligible.) amount, the budget proposes $741 million
Funding. CalWORKs is funded through a in General Fund support for CalWORKs, an
combination of California’s federal TANF block increase of $43 million (6 percent) over estimated
grant allocation, the state General Fund, and current-year levels. This increase in General Fund
county funds, including significant amounts spent support primarily reflects a net decrease in the
by counties as a result of state-local realignment. amount of funding budgeted from non-General
In order to receive its annual TANF allocation, Fund sources, thereby increasing the requirement
the state is required to spend an MOE amount for General Fund. The following sections highlight
from state and local funds to provide services to some major features of the 2016-17 CalWORKs
families eligible for CalWORKs. In recent years, budget.
this MOE amount has been $2.9 billion. While the
Budget Estimates Reduction in
CalWORKs program makes up the majority of
Current-Law Funding Requirement
TANF and MOE spending, it is important to note
that the TANF block grant is used to fund a variety The budget estimates that the total funding
of programs in addition to CalWORKs, and some required to operate CalWORKs consistent with
state and local expenditures outside CalWORKs are current law and policy will decrease in 2016-17
counted toward the MOE requirement. relative to the prior year. Below, we describe two
factors that contribute to the decreased funding
Budget Overview
requirement.
As shown in Figure 6, the Governor’s budget Savings From Declining Caseload. The
proposes $5.3 billion in total funding for the number of families receiving CalWORKs assistance
CalWORKs program in 2016-17, a net decrease each month has generally declined since 2011-12,
of $187 million (3 percent) relative to estimated primarily due to an improving labor market. The
current-year funding. This decrease primarily budget estimates that the average monthly number
reflects savings from a declining caseload, slightly of CalWORKs cases in 2015-16 will be 507,615—a
offset by a small increase in other spending 5 percent decrease from the prior year. The average
monthly number of cases
Figure 6
is projected to further
CalWORKs Budget Summary
decline by 2 percent
All Funds (Dollars in Millions) in 2016-17 to 496,558.
Change From 2015-16 Consistent with these
2015-16 2016-17
Estimated Proposed Amount Percent caseload declines, the
Cash grants $3,051 $2,963 -$88 -3% budget reflects savings
Employment services 1,468 1,390 -78 -5
from a declining caseload
Stage 1 child care 410 394 -16 -4
of about $165 million (all
Administration 494 482 -12 -2
Othera 95 102 7 7 funds) in 2016-17 relative
Totals $5,518 $5,331 -$187 -3% to the prior year.
a
Excludes transfer of federal Temporary Assistance for Needy Families block grant funds to the Cal Grant
program and funding for the Kinship Guardianship Assistance Payment Program.
16 Legislative Analyst’s Office www.lao.ca.gov
2016-17 BUDGET
Savings From Ongoing Implementation CalWORKs costs among the program’s major
of the WTW 24-Month Time Clock. Adult funding sources, displayed in Figure 7. Below, we
recipients who exhaust 24 months of participation describe some of the factors that contribute to these
under CalWORKs rules may continue to receive shifts.
assistance by meeting the work requirement Reduced Realignment Funding From Local
under federal rules. However, some recipients who Indigent Health Savings. Current law directs
exhaust the 24 months are anticipated to fail (for a certain realignment funds previously dedicated
variety of reasons) to meet the work requirement to local indigent health programs to instead be
under federal rules, resulting in reduced cash used each year to pay for an increased county
assistance. The first individuals to exhaust the share of CalWORKs grant costs, in an amount
24 months, fail to meet the work requirement equal to the estimated savings that counties will
under federal rules, and have their assistance realize in their indigent health programs due to
reduced, are beginning to do so during 2015-16, the expansion of Medi-Cal. This redirection of
with the number expected to grow over the next funds reduces the amount of state and federal
several years before leveling off. Specifically, funds needed to support the CalWORKs program.
the administration estimates that 1,790 cases (For more information on this redirection, see the
(0.4 percent of the total caseload) will have reduced “CalWORKs” write-up in our previous report, The
cash assistance by the end of 2015-16 with an 2014-15 Budget: Analysis of the Human Services
estimated savings of $1 million (all funds), growing Budget.) Current law also provides that the state
to 11,650 cases (2.4 percent of the total caseload) “true up” the amount of redirected savings three
and savings of roughly $11 million (all funds) by years after the fact to reflect actual county savings
the end of 2016-17. amounts. For 2016-17, the budget estimates that
the amount of CalWORKs grant costs paid with
Shifts in Program Funding Sources
realignment funds from local health savings will
Within the estimated total funding be $413 million, which is $329 million (44 percent)
requirement of the program in 2016-17, the less than estimated for 2015-16. The main reasons
Governor’s budget reflects some shifting of total for the significant reduction in estimated savings
Figure 7
CalWORKs Funding Sources
(Dollars in Millions)
Change From 2015-16
2015-16 2016-17
Estimated Proposed Amount Percent
Federal TANF block grant fundsa $2,574 $2,684 $110 4%
General Fundb 698 741 43 6
Realignment funds from local indigent health savings 742 413 -329 -44
Realignment funds dedicated to grant increases 311 302 -9 -3
Other county/realignment funds 1,193 1,191 -2 —c
Totals $5,518 $5,331 -$187 -3%
a
Excludes transfer of federal Temporary Assistance for Needy Families (TANF) block grant funds to the Cal Grant program.
b
Excludes funding for the Kindship Guardianship Assistance Payment Program.
c
Rounds to zero.
www.lao.ca.gov Legislative Analyst’s Office 17
2016-17 BUDGET
are (1) data from counties show that the state’s the difference and no additional grant increase is
estimated savings in 2013-14 were likely overstated, provided. The amount of General Fund support
requiring the state to return an estimated needed to make up for insufficient dedicated funds
$151 million to counties through the true-up in 2016-17 is $17 million.
process during 2016-17, and (2) the administration Increased General Fund Needed to Backfill
now has lower expectations for the amount of Reduced Realignment Funding and Meet MOE
annual ongoing savings. Decreased realignment Requirement. As noted above, the state must
funding from local health savings increases the pay a minimum MOE amount from state and
need for funding from other sources. We note that local funds (including realignment) to receive the
estimated local indigent health savings for 2016-17 annual TANF block grant. The reduction in the
are uncertain and may be updated at the May estimated current-law funding requirement and the
Revision. estimated decrease in available realignment funds
Realignment Funds Dedicated to Grant from local health savings mean that General Fund
Increases Insufficient for New Increase. Current spending in CalWORKs must increase for the state
law dedicates certain other realignment funds to to meet the required MOE in 2016-17. Specifically,
pay the costs of new CalWORKs grant increases General Fund support for CalWORKs increases by
and outlines an annual process through which $43 million (6 percent) in 2016-17 over the prior
these grant increases are provided. Unlike year.
realignment funds from local health savings, Increased Federal TANF Support From
discussed above, these dedicated funds are not Carry-In. The budget estimates that the amount of
intended to offset the funding needed from unused TANF funding available for use in 2016-17
other sources. Rather, dedicated funds are increased by roughly $400 million over the prior
intended to cover increases to total program costs year, largely from funds allocated to counties in
resulting from new grant increases. Specifically, prior years that were not spent. After accounting for
each year the Department of Finance (DOF) the increased General Fund support needed to meet
estimates the combined cost of all past increases the state’s MOE requirement, only $110 million of
provided from the dedicated funds (two separate these additional TANF funds are needed to meet
5 percent increases have been provided to date, in the estimated current-law funding requirement of
March 2014 and April 2015, at a total annual cost of the program. The budget increases TANF support
$319 million during 2016-17) and the total amount for CalWORKs by this amount and increases the
of available dedicated funds ($302 million in amount of TANF funds used to support financial
2016-17). When the estimated amount of dedicated aid for low-income college students through the Cal
funds exceeds the estimated cost of previously Grant program by $304 million, directly offsetting
provided increases, DOF further determines what otherwise would be General Fund Cal Grant
the percentage increase in CalWORKs grants costs of the same amount.
that could be sustained by the excess dedicated
State Has Likely Reached WPR Compliance
funds. A grant increase of this amount would
then be provided during the budget year. When California Has Failed to Meet WPR
the estimated cost of previous grant increases Requirement Since 2007. California has failed to
exceeds the estimated amount of dedicated funds, meet the WPR requirement every year since federal
as is the case for 2016-17, the General Fund covers fiscal year (FFY) 2006-07 and has been assessed
18 Legislative Analyst’s Office www.lao.ca.gov
2016-17 BUDGET
cumulative penalties of about $1.3 billion, as shown
Figure 8
in Figure 8, that would ultimately take the form
Work Participation Rate Penalties
of a one-time reduction to the state’s TANF block
(In Millions)
grant allocation. To date, the state has not faced
FFY Penalty
any reductions to the TANF block grant as the state
2007-08 $48
pursues various administrative avenues to reduce
2008-09 113
or eliminate the penalties.
2009-10 180
Federal Law Allows WPR Penalties to Be 2010-11 246
2011-12 312
Reduced or Eliminated Through Corrective
2012-13 378
Compliance Plans. Federal law provides that
Total $1,277
penalties may be eliminated if a state enters
Note: The state failed to meet the work participation rate
requirement in federal fiscal year (FFY) 2013-14 but has not yet
into a “corrective compliance plan” that results
been assessed any additional penalties.
in the state meeting the WPR requirement in a
later year. To date, the state has submitted two Analyst’s Budget Assessment
corrective compliance plans. Under the first,
Governor’s Proposal Consistent With Current
$342 million in penalties for 2007-08, 2008-09,
Law and Policy. In our view, the Governor’s
and 2009-10, would be eliminated if the state
2016-17 CalWORKs budget proposal is consistent
meets the WPR requirement during FFY 2014-15
with current law and policy and makes adjustments
(which ended in October 2015). Under the second,
to total funding only to reflect costs and savings
$558 million in penalties for 2010-11 and 2011-12
associated with changes in caseload and ongoing
may be eliminated if the state meets the WPR
implementation of previously enacted policy
requirement during FFY 2015-16. The state has not
changes.
yet submitted a corrective compliance plan for the
Caseload Estimates Generally Appear
2012-13 penalties.
Reasonable, but Should Be Revisited at May
California Likely Reached Compliance in FFY
Revision. The CalWORKs budget is largely driven
2014-15. With the release of the Governor’s budget,
by assumptions made by the administration
the administration announced that it appears to
about the number of families that will receive
have achieved a WPR of 55 percent—sufficient for
assistance and what services they will need. In
compliance—during FFY 2014-15. If compliance
examining the Governor’s proposal, we reviewed
is verified by the federal government, $342 million
the administration’s caseload estimates against the
of the state’s penalties will be eliminated. If
most recent actuals available and our expectations
compliance is maintained in 2015-16, most of the
for how caseloads may change in the future. In our
penalties assessed for 2010-11 and 2011-12 will be
view, the administration’s estimate of the number
eliminated. (A small portion of 2011-12 penalties
of families that will receive cash assistance and
relate to an additional WPR requirement for cases
the families that will utilize child care subsidies
with two parents that the state continues not to
appear reasonable. We note that the estimated need
meet. These penalties will need to be addressed
for other employment services may be overstated
through other means.) We note that the state failed
(implying that savings on services may be greater
to meet the WPR requirement in 2013-14, but
than assumed in the Governor’s budget). However,
penalties for that year have not yet been assessed.
we recommend leaving caseload-related funding
www.lao.ca.gov Legislative Analyst’s Office 19
2016-17 BUDGET
decisions until after the May Revision. Our office estimates and associated budgeted funding levels
will follow actual caseload levels between now and should be made.
May to assess whether any updates to the caseload
CONTINUUM OF CARE REFORM
California’s child welfare system serves to Overview of the Child
protect the state’s children from abuse and neglect, Welfare System
often by providing temporary out-of-home
California’s child welfare system provides
placements for children who cannot safely remain
a continuum of services for children who have
in their home and services to safely reunify
experienced or are at risk of experiencing abuse or
children with their families. As part of a years-long
neglect. These child welfare services (CWS) include
effort to identify and effect improvements to the
responding to and investigating allegations of
state’s child welfare system, the Legislature passed
abuse and neglect, providing family preservation
legislation in 2015 implementing the Continuum
services to help families remain intact, removing
of Care Reform, or CCR. The law, Chapter 773 of
children who cannot safely remain in their home,
2015 (AB 403, Stone), makes fundamental changes
and providing temporary out-of-home placements
to the way the state cares for children who have
until (1) the family can be successfully reunified
been removed from their home. Predicated on
or (2) an alternative permanent placement can be
widespread concern surrounding poor outcomes
found. Adoption and guardianship are the two
for children placed in non-family-like settings,
most common permanent placement options after
CCR aims to increase the foster care system’s
family reunification.
reliance on more family-like settings rather
Child Welfare Programs Are State Supervised,
than institutional settings like group homes.
County-Administered. The DSS oversees CWS,
Additionally, CCR makes changes to ensure that
while county welfare departments carry out
the state’s foster children receive needed mental
day-to-day operations and services. DSS is
health treatment and supportive services regardless
responsible for statewide policy development,
of their placement setting.
enforcing state and federal regulations, and
To accomplish these goals, the Governor’s
ensuring that the state achieves the federal
budget proposes about $60 million in General
performance standards tied to federal funding.
Fund for support of CCR implementation efforts.
Counties have some flexibility around the design
While the long-term fiscal implications of CCR are
of their operations and the range of services they
unknown, the Governor’s 2016-17 budget recognizes
provide. All counties investigate allegations of
that CCR implementation requires up-front funding
abuse, engage with families to help them remain
from the state. This analysis begins by providing
intact, and provide maintenance payments to
an overview of the existing foster care system;
foster caregivers and providers. Other services vary
highlights the major policy changes included in
county by county, with some counties, for example,
AB 403; and evaluates the Governor’s proposed
offering supplemental payments for children with
CCR implementation spending in light of continued
high needs and others offering child care for a
uncertainties around the ultimate costs, savings, and
subset of children in care. Assisting the counties
programmatic impacts of the reform package.
20 Legislative Analyst’s Office www.lao.ca.gov
2016-17 BUDGET
are several hundred private Foster Family Agencies the nonfederal costs of administering CWS. In
(FFAs) and group home operators who themselves 2011, the state enacted legislation known as 2011
provide a continuum of services ranging from realignment, which dedicated a portion of the
foster parent recruitment and certification to state’s sales tax to counties to administer CWS.
mental and behavioral health counseling. The 2016-17 budget assumes that over $2 billion
The Role of County Probation Departments will be available from realignment revenues for the
in the Child Welfare System. County probation support of CWS programs. The 2011 realignment
departments carry out many of the same services transferred fiscal risk to counties at the same time
provided by county welfare departments in the as it gave them a guaranteed source of revenues.
case of children who have been declared wards Prospectively, counties are not responsible for
of the court through a delinquency hearing. future cost increases resulting from state, federal,
After obtaining jurisdiction over a child, county and judicial policy changes, but are responsible for
probation departments will assess the parents’ all other increases—for example, those associated
ability to adequately supervise the child, provide with rising caseloads. Conversely, if overall child
family preservations services if there is a risk of welfare costs fall, counties get to retain those
removal, and secure a foster care placement— savings. Proposition 30, approved by voters in
typically in a group home—if removal is deemed 2012, protects the state from having to reimburse
necessary. Unlike the majority of children counties for child welfare policies that were in place
who enter the child welfare system, children in prior to 2011 realignment. Proposition 30 also
out-of-home care due to a probation decision protects counties by establishing that counties only
have not necessarily been subject to abuse or need to implement new state policies that increase
neglect. Instead, probation departments typically overall program costs to the extent that the state
utilize foster care placements with the aim of provides funding.
rehabilitating the child. Commonly considered a Federal Funding for CWS. Federal funding for
less restrictive setting for a population that might CWS stems from several sources and is estimated
otherwise be placed in a locked facility, group to be over $2.5 billion in 2016-17.
homes are the most utilized foster care placement State General Fund Supports Nonrealigned
setting for county probation departments. In Components of Child Welfare and State Oversight
contrast, child welfare departments utilize group Functions. The 2016-17 budget proposes over
home placement relatively infrequently. Relative $250 million General Fund to county welfare and
to children overseen by the child welfare system, probation departments to implement components
probation youth tend to be older and require of the child welfare program that were not part
heightened supervision. of 2011 realignment. This includes funding
for such things as a program to combat the
CWS Funding
commercial sexual exploitation of children and
Total funding for CWS is estimated to be foster care payments for certain relative caregivers.
roughly $5 billion for 2016-17. Below we describe Additionally, the General Fund continues to
the major sources of this funding. support the state’s CWS oversight function at DSS.
2011 Realignment Revenues Are a Major
Source of CWS Funding in the State. Until 2011-12
the state General Fund and counties shared
www.lao.ca.gov Legislative Analyst’s Office 21
2016-17 BUDGET
Child Welfare Workers Rely on an Array supervision payment rates from the state—which
of Out-of-Home Placement Options we refer to as foster care payment rates.
Kinship Care. Established child welfare policy
When finding a placement for foster children,
and practice in the state prioritizes placement
counties rely on four primary placement options—
with a noncustodial parent or relative. Among
kinship care, foster family homes (FFHs), FFAs,
child welfare workers’ first responsibilities
and group homes. As of October 2015, there were
following a child’s removal is locating a potential
over 65,000 children in foster care in California.
relative caregiver. Kinship care comprises care
For this report we refer to kinship care, FFHs,
from relatives and nonrelative extended family
and FFAs as home-based family care. Federal and
members and is the state’s most utilized placement
state law mandate that children be placed in the
option at 38 percent of foster placements as of
least restrictive placement setting, which state
October 2015. Unlike other placement types,
law describes as that which promotes normal
kin-caregivers are not necessarily eligible for
childhood experiences and the day-to-day needs of
foster care payments at the same level as other
the child. Figure 9 shows the proportions of foster
foster caregivers. Specifically, relatives caring for
children in each of these placement settings. The
children who are ineligible for federal financial
four selected placement types vary in their level
participation (primarily due to income eligibility
of restrictiveness, serve children with different
rules) have historically received a lower foster
though overlapping needs, provide distinct sets of
care payment rate—the CalWORKs child-only
specialized services, and receive varying care and
payment of $369 per child per month in 2015-16.
However, with the passage of
Figure 9 the state-funded Approved
Distribution of Foster Children by Selected Placement Typea Relative Caregiver (ARC)
funding option program in
2014, relative caregivers of
federally ineligible children
FFA
Kinship Care
can potentially receive the
foster care payment rate
(referred to as the basic rate),
which varies in 2015-16 from
$688 to $859 per month based
on the age of the child. The
Otherb ARC program is optional at
the county level and several
counties have chosen not to
Group Home
FFH participate; as a result, some
relative caregivers continue to
a
Data Source: University of California, Berkeley California Child Welfare Indicators Project.
b “Other” includes foster children living in placements other than the four selected placements, receive the lower CalWORKs
for example, children placed in Supervised Independent Living Placements and Transitional
Housing. The category excludes children placed with guardians who nevertheless have an rate. Currently 47 counties
open child welfare case.
have opted to participate in
FFH = foster family home and FFA = foster family agency.
the ARC program.
22 Legislative Analyst’s Office www.lao.ca.gov
2016-17 BUDGET
FFHs. County-licensed foster homes, known supervision, and services to foster children with
as FFHs, are often the preferred placement option the highest levels of need, often children with
when a suitable relative caregiver cannot be found significant emotional or behavioral challenges who
and the child does not have needs requiring a have difficulty achieving stability in a home-based
higher level of services. Counties recruit FFH family setting. Professional staff provide the
caregivers and provide basic social work services care and supervision as well as therapeutic and
to the approximately 10 percent of foster children supportive services to children in group homes.
statewide who resided in an FFH as of October Due in part to the absence of a parental caregiver,
2015. In 2015-16, FFH caregivers receive the group homes are considered the most restrictive
foster care payment basic rate of $688 to $859 per (except in the case of foster children supervised
month (varying by the child’s age) for the care and by probation agencies), least family-like foster
supervision of each foster child in their home. care setting, and are generally the least preferred
FFAs. The FFAs are the only primary placement option. Because of their reliance on
placement type that does not directly house the professional staff and provision of often intensive
children under their care. Instead, FFAs are private supportive services, group homes are compensated
nonprofit agencies that recruit and certify foster at higher rates than the other placement types.
caregivers, place children into FFA-certified homes, The Rate Classification Level System (RCL), which
and provide supportive services to the children in features 14 rate levels, determines group home
their care, typically children with elevated needs provider payments. For 2015-16, providers receive
compared to those placed in FFHs. Considered between $2,391 (RCL 1) to $10,130 (RCL 14)
a less restrictive alternative to group home care, per month per child, depending primarily on
placement in an FFA is often the preferred option the qualifications of their staff and the number
for children whose placement stability depends on of staff hours they provide to children in their
greater social worker involvement and direct access care. Services and treatments vary across group
to supportive services. Because they offer a wider homes, but often include, particularly among
array of services and typically serve children with higher level group homes, counseling and mental
higher needs, counties reimburse FFAs at a higher health treatment services. As of October 2015,
rate than either relative caregivers or FFHs. The approximately 10 percent of California’s foster
FFA-certified caregivers receive the basic rate plus children were living in group homes.
a $189 monthly supplemental payment known as Other Placement Types. In addition to the four
the Child Increment. On top of this, FFAs are paid primary placement types described above, a suite
a monthly rate between $912 and $1,012 per child of alternative options exist to serve children with
for the social work and administrative services they distinct needs and circumstances. For example, these
provide. Adding together the direct caregiver and include supervised independent living arrangements
FFA portions, the payment per child placed at an for older, relatively more self-sufficient youth.
FFA in 2015-16 ranges from $1,789 to $2,060 per Summary of Monthly Foster Care Provider
month (referred to as the FFA rate). As of October Rates. Figure 10 (see next page) summarizes the
2015, 27 percent of the state’s foster children were foster care payment rate structure for the four
placed through an FFA. primary placements types. Each carries different
Group Homes. Group homes—operated as costs for the state and its federal and county funding
private, nonprofit agencies—provide 24-hour care, partners.
www.lao.ca.gov Legislative Analyst’s Office 23
2016-17 BUDGET
Figure 10
Selected Monthly Foster Care Payment Rates by Placement Type
2015-16
Kin Caregivers
Relative Non-Relative Foster Family Foster Family
Caregivers Caregivers Homes Agencies Group Homes
Foster care payment rate $369 or $688-$859a $688 - $859 $688 - $859 $688 - $859 $2,391 - $10,130b
Supplemental caregiver Specialized Care Specialized Care Specialized $189 —
payments Incrementc Incrementc Care Incrementc
Supplemental provider — — — $912 - $1,012 —
payments
a
Relative caregivers caring for a child who is ineligible for federal financial participation and who live in a county that has chosen not to participate in the Approved Relative
Caregiver Program receive the $369, CalWORKs child-only rate. All other relative caregivers receive the basic rate.
b
Unlike home-based care providers who primarily receive a rate based on the age of the child, group home rates are determined by the level of services they provide. Rate Classification
Level (RCL) 14 is the highest level and most costly group home; RCL 1 is the least costly. Children are assigned to group homes based on the level of their service needs.
c
The specialized care increment is a monthly supplemental payment available to kin and foster family homes caregivers at the county option for the care of children with elevated
needs.
Impetus for CCR family, others leave the foster care system with no
life-long family relationships. We note that given
Longstanding concerns about the outcomes
the potentially higher needs of children placed in
and costs of group home care led the Legislature
group homes, it is difficult to determine whether
to enact CCR legislation to reform the foster care
group home placements themselves directly lead to
system. CCR aims to reduce reliance on group
these poor outcomes.
homes and increase the capacity of home-based
Group Homes Are More Costly Than
family placements.
Home-Based Family Placements. As previously
Children in Group Homes Experience Poor
noted, group home placements can cost up to
Outcomes. The foster care system provides services
$10,130 per child per month depending on the level
for children from a variety of circumstances, each
of care provided. In contrast, foster care payments
with varied strengths and needs. Those placed
for home-based family settings generally range
in group homes tend to be children with higher
from $688 per child per month for relative and FFH
needs than the foster care population as a whole.
placements to $2,060 for FFA placements. We note,
Research suggests that group home placements are
however, that there are certain home-based family
occasionally warranted, but long-term group home
placements, such as Intensive Treatment Foster
stays are associated with elevated rates of reentry
Care (ITFC), that have significantly higher payment
into foster care, lower educational achievement,
rates due to the level of services they provide.
and higher rates of involvement in the juvenile
Placing children in group homes when they could
justice system. Children placed in group homes
be successfully served in home-based family
remain in foster care longer and often have a
settings may not only be less effective, but also a
more limited array of permanency options than
less efficient use of child welfare resources.
their home-based family placed peers. Those
Concerns About the Adequacy of Home-Based
who do not reunify with their families typically
Family Placements. Reducing reliance on group
emancipate by aging out of foster care. Although
home placements has been a priority for the
a portion of children who age out of group homes
state for some time. One major challenge to
may reconnect with their parents and extended
24 Legislative Analyst’s Office www.lao.ca.gov
2016-17 BUDGET
reducing reliance on group home placements is Major Changes
having an adequate supply of home-based family Resulting From CCR
placements, particularly those capable of caring
for children whose elevated needs make them CCR Creates a New Placement Type
at risk for group home placement. Additionally,
Short-Term Residential Treatment Centers
services and supports to enable home-based family
(STRTCs) Replace Group Homes. Assembly
caregivers to care for children at risk of group
Bill 403 seeks to end group homes generally as
home placement are not available to all home-based
a placement option beginning January 1, 2017.
family placement types, in some cases requiring
(With certain exceptions on a case-by-case basis,
children to move to more restrictive settings in
some group homes may be allowed to continue
order to receive necessary mental health and other
to operate as group homes past January 2017.)
supportive services. Ensuring the adequacy and
STRTCs will replace group homes as the placement
availability of home-based family placements is
setting for children who cannot safely be placed in
a key consideration if reliance on group home
home-based family settings, providing a similar
placements is to be further reduced.
level of supervision as group homes, but with
Years of Legislative Interest Leads to
expanded services and supports. In contrast to
Reforming the State’s Foster Care System.
group homes serving as long-term placements for
Longstanding concerns surrounding poor
children for whom home-based family placements
outcomes for children growing up in group
cannot be found, STRTCs are intended to provide
homes led the Legislature in 2012-13 to call for the
short-term, intensive treatment to allow children
creation of a stakeholder workgroup to recommend
to successfully transition to a family setting as
changes to the foster care system—known as
quickly and successfully as possible. Assembly
CCR. Chapter 35 of 2012 (SB 1013, Committee
Bill 403 restricts STRTC placements to children
on Budget and Fiscal Review) instructed the
who have been assessed as requiring the level of
workgroup to develop revisions to the services
behavioral and therapeutic services that STRTCs
available to children in out-of-home care as well as
will be required to provide. Children whose level
the rate systems that govern foster care payments.
of need qualifies them for STRTC placement
In 2015, DSS published its legislative report with
include, among others, those assessed as seriously
19 recommendations based on the workgroup’s
emotionally disturbed and victims of commercial
findings. The 19 recommendations aim to improve
sexual exploitation. To ensure the ongoing
the experience and outcomes of children in
appropriateness of all STRTC placements, resident
foster care and have largely been incorporated
children’s case plans will be subject to review every
into AB 403. The CCR centers around several
six months by the director or deputy director of
complementary goals—(1) ending long-term
the supervising county child welfare or probation
group home placements, (2) increasing access to
department. The case plans will specify the reasons
supportive services regardless of whether a child
for the child’s placement, the expected duration of
is in a group home or home-based family setting,
stay, and the transition plan for moving the child to
(3) utilizing universal child and family assessments
a less restrictive environment.
to improve placement and service decisions, and
(4) increasing transparency and accountability for
child outcomes.
www.lao.ca.gov Legislative Analyst’s Office 25
2016-17 BUDGET
CCR Efforts to Increase Access to Quality Improvement and
Necessary Services and Supports Oversight Under CCR
CCR Expands the Set of Core Services FFAs STRTCs and FFAs Required to Obtain
and STRTCs Are Required to Provide. Among National Accreditation. CCR seeks to improve
other activities, FFAs currently engage in foster the quality of residential services by requiring
parent recruitment, retention, and certification, all STRTCs and FFAs to maintain accreditation
and employ social workers to support the children from a nationally recognized accreditation body.
in their care through more frequent interactions Accreditation typically involves an in-depth review
than county social workers have historically been of an organization in order to confirm it meets
funded to provide. (We note AB 403 also authorizes recognized service standards. Reaccreditation will
counties to operate their own FFA.) Group homes, reoccur every three years as a means of ensuring
particularly high-level ones, administer a range of continuous quality improvement and maintenance
therapeutic and supportive services in addition to of high operating standards into the future.
providing direct care and supervision. Under CCR, FFA and STRTC Performance Measure
STRTCs and FFAs will be required to ensure access Dashboard for County Placement Agencies and
to specialty mental health services and strengthen the Public. CCR calls for the development and
their permanency placement services by approving promulgation of publicly available FFA and STRTC
families for adoption, providing services to help performance measures. DSS intends for these
families reunify, and giving follow-up support indicators—for example, on rates of successful
to families after a child has transitioned to a less family reunifications, placement stability, client
restrictive placement. Assembly Bill 403 requires satisfaction, educational achievement, and health
several other core services to be made available, and safety standards—to inform placement
including, but not limited to, educational, health, decisions. Assembly Bill 403 specifies January
and social supports. The specifics around the new 2017 as the launch date for the public dashboard.
core services that FFAs and STRTCs will have to Initially, the indicator dashboard will likely feature
directly or indirectly provide is currently under only a subset of the measures that will ultimately
development. be included, and then be gradually expanded as
CCR Calls for Additional Integration Between the system undergoes continued development and
Child Welfare and Mental Health Services. Prior additional FFA and STRTC performance data
to CCR, the state was working to ensure that become available.
CWS-involved children obtain medically necessary
CCR Changes to the Caregiver Approval
mental health services. CCR builds on these
and Placement Processes
efforts by requiring all FFAs and STRTCs to either
(1) maintain certification from the Department of Resource Family Approval (RFA) Replaces
Health Care Services (DHCS) or county Mental the Existing Multiple Approval, Licensing, and
Health Plans (MHPs) to provide mental health Certification Processes for Home-Based Family
services directly or (2) contract with mental health Caregivers. Before foster caregivers may receive
providers to serve children in their care. foster care payments, they must be approved,
certified, or licensed to provide care. Currently, the
approval process differs by placement type—for
26 Legislative Analyst’s Office www.lao.ca.gov
2016-17 BUDGET
example, FFHs are licensed according to one set will be administered by a child welfare worker, the
of criteria while relative caregivers are approved results of which will inform decisions made by the
under a different set. The CCR replaces the multiple child and family team.
approval standards currently in place with a
CCR’s New Requirements Lead to the
unified assessment that incorporates a psychosocial
Development of New Rate Structures
evaluation, risk assessment, and permanency
assessment for all prospective home-based New STRTC and FFA Payments Rates
family caregivers. Unlike the previous multiple, Are Currently Under Development. Generally,
overlapping approval processes, the RFA process pursuant to AB 403, the RCL system featuring
will automatically qualify a foster family for 14 separate group home reimbursement rates
guardianship and adoption. Once the transition to and the current FFA rate structure will sunset
RFA is complete, all home-based family placements and be replaced by a new set of rates that will
will be approved as “resource families.” Currently take effect beginning January 2017. These new
underway in five early-implementer counties, the rates are expected to reflect the expanded set of
rest of the state will convert to the resource family responsibilities CCR places on STRTCs and FFAs.
approval process for all new home-based family Under consideration by DSS and a stakeholder
caregivers on or before January 1, 2017. workgroup is a system whereby a child’s needs
More Collaborative, Child-Centered Decisions assessment determines, at least in part, the rate
Through the Use of Child and Family Teaming. To that the child’s caregiver and supportive service
increase child and family involvement in decisions provider(s) are entitled to. This could potentially
relating to foster children’s care, CCR mandates allow, for example, a county to contract or provide
the use of child and family “teaming” through supportive services for children in home-based
every stage of the case planning and service family placements other than FFA-certified
delivery process. The child and family team may homes. This would be in contrast to the current
include, as deemed appropriate, the affected child, foster care payment rate system whereby a child’s
her or his custodial and noncustodial parents, placement generally determines the foster care
extended family members, the county caseworker, payment rate and services that the child receives.
representatives from the child’s out-of-home Rate development remains a fluid process, however,
placement, the child’s mental health clinician, and it is unknown at this time how rates will
and other persons with a connection to the child. be structured in a way that increases access to
Members of the team will meet as needed to discuss services for all children in home-based family
and agree on the child’s service plan whenever an settings. Stakeholder workgroups focused on rate
important foster care decision is being made. development are currently meeting, and it is our
Needs Assessment to Inform Placement understanding that a new rate system will be ready
and Services Decisions. CCR calls for children in March 2016.
to receive a comprehensive strengths and needs
Overview of the
assessment upon entering the child welfare system
Governor’s Budget for CCR
to improve placement decisions and ensure
prompt access to supportive services when they The Governor proposes $61 million from the
are determined to be necessary. The assessment is General Fund ($95 million total funds) to continue
expected to utilize a structured assessment tool that to implement CCR in 2016-17. The proposed
www.lao.ca.gov Legislative Analyst’s Office 27
2016-17 BUDGET
General Fund spending represents an increase of of children out of group homes into home-based
$39 million over the $22 million General Fund family placements. The total funding proposed
($34 million total funds) provided for CCR in from the General Fund for CCR implementation
2015-16. We note that the 2015-16 funding for for counties in 2016-17 is less than it would be
CCR is allocated primarily toward foster parent if these county savings were not assumed by the
recruitment and retention and a rate increase for budget. It is important to note that the offsetting
FFAs. As with 2015-16, most of the Governor’s county savings associated with CCR are accounted
proposed spending for 2016-17 is dedicated to the for in this way due to 2011 realignment, which, as
county child welfare and probation departments we previously discussed, established that the state
that directly administer CWS, with a small must provide funding to counties equivalent to
portion of the proposed funding for additional the net cost of new state policy requirements. We
positions at DSS and DHCS to provide regulatory, describe the Governor’s estimated CCR costs and
implementation, and administrative support to savings in more detail below.
their county partners. Figure 11 summarizes how Over Half of the Governor’s Proposed Spending
the proposed state CCR implementation spending is Is for Foster Parent Recruitment and Support.
allocated among the various state and local entities. Reducing the state’s reliance on group home and
STRTC placements depends on FFA and child
Proposed CCR Spending Includes New
welfare and probation departments’ ability to
Assumed Costs and Savings for
recruit and retain home-based family caregivers for
County Implementation
the children expected to leave group homes over
The Governor’s proposed budget provides the next several years. The 2015-16 budget provided
funding for the next round of CCR implementation. $17.2 million General Fund ($25.8 million total
Most major components of AB 403 become funds) to support county efforts to increase the
effective on January 1, 2017, requiring significant supply of home-based family caregivers. To receive
implementation efforts by the state, counties, and recruitment and retention funds, county child
foster care providers in advance of that date. The welfare and probation departments had to submit
Governor’s 2016-17 proposed budget recognizes county plans to DSS identifying how they would
new state General Fund costs associated with CCR use the funds to train, recruit, retain, and support
implementation and accounts for offsetting county home-based family caregivers. In 2015-16 allowable
savings from the elimination of duplicative foster uses of the funding provided to these county
caregiver approval processes and the transition departments included: (1) staffing to provide direct
Figure 11
2016-17 Proposed Continuum of Care Reform State Spending
(In Millions)
2015-16 2016-17
General Fund Estimated Proposed Change
Local assistance to county welfare and probation departments $21.5 $57.5 $36.0
Department of Social Services—state support 0.5 3.0 2.5
Department of Health Care Services and local assistance to — 0.4 0.4
county mental health plans
Totals $22.0 $60.8 $38.8
28 Legislative Analyst’s Office www.lao.ca.gov
2016-17 BUDGET
services and supports to foster caregivers, (2) foster however, all home-based family placements will
care payment supplements to support caregivers of have to convert to RFA, which will require the
children with exceptional needs, and (3) intensive reassessment of existing foster and kin caregivers.
relative finding and engagement. Budget-related Funding for Proposed Child and Family
legislation in 2015-16 requires DSS to report to Teaming (CFT) Activities. The CCR requires the
the Legislature during 2016-17 budget hearings on use of a multidisciplinary, team-based approach to
counties’ uses of these funds as well as the outcomes placement and other decisions that affect a child
achieved. For 2016-17, the Governor builds on receiving CWS. The Governor’s budget recognizes
the 2015-16 appropriation, proposing a total of that this new approach increases workload at the
$32 million General Fund ($47 million total funds) county level since it requires the coordination
to help counties increase the supply of high-quality, of team-based decision-making among multiple
home-based family placements. About half of parties. After accounting for the components of
2016-17’s proposed spending is intended for county CFT that were in place before 2011 realignment and
probation departments, which in 2015-16 received therefore already incorporated into county funding,
a small fraction of the recruitment and retention the Governor’s budget includes $10 million General
funding. At this time it is unclear whether the Fund ($14.4 million total funds) for a half year of
proposed 2016-17 funds will be allocated to counties implementation for this component of CCR.
using the same methodology used in 2015-16. Remaining Proposed Funding for a Variety of
RFA Implementation Results in Net Costs. CCR-Related Activities. The remaining $11 million
The Governor proposes $11 million General Fund General Fund ($18 million total funds) proposed
($16 million total funds) to assist counties as they for CCR implementation at the county level in
transition to the unified RFA process. This funding 2016-17 is intended to (1) maintain the FFA rate
represents the estimated net cost to counties of increase enacted in 2015-16 given caseload growth,
implementing RFA after accounting for assumed (2) implement needs assessments and STRTC case
total county savings of roughly $19 million in reviews, (3) help cover a portion of initial FFA and
2016-17. On the cost side, RFA imposes additional STRTC accreditation costs, (4) update child welfare
training requirements on home-based family workers’ case management system, and (5) develop
caregivers and expands the set of assessment the provider performance indicator dashboard.
criteria that child welfare workers have to apply Also included in the Governor’s proposal is
before approving a caregiver as a qualified approximately $200,000 General Fund ($400,000
placement. On the savings side—and among other total funds) for county MHPs to ensure children in
expected efficiencies—the switch to RFA eliminates STRTCs are appropriately placed.
the need to carry out adoption assessments Savings Due to Lower Foster Care Payments
for caregivers already approved as resource Expected to Materialize in 2016-17. While the
families and is expected to encourage placement Governor’s proposal does not provide a long-term
stability, thereby reducing the total number of outlook for CCR-related General Fund costs,
caregiver approvals by incorporating permanency the 2016-17 CCR proposal assumes that county
considerations into the initial placement decision. savings related to lower foster care payments,
The transition to RFA will be a multiyear effort which offset the above estimated costs, begin to
as counties initially need only apply RFA to accrue in 2016-17. These savings are due to an
new home-based family placements. By 2019, assumed steady transition of about 2,500 children
www.lao.ca.gov Legislative Analyst’s Office 29
2016-17 BUDGET
out of group homes into less costly home-based proposal that will be implemented by counties (that
family placements over the first three years after is, apart from state operations expenditures).
CCR becomes effective. For 2016-17, the Governor
State Operations Spending
projects $6.4 million in county savings as a result
of shifting children to less costly placements, The Governor Proposes New Positions at DSS
which offset the General Fund contribution that and DHCS for CCR Implementation. In 2015-16,
would otherwise be necessary to implement CCR’s DSS received $500,000 for two new positions to
other mandated activities. We note that although administer the foster parent recruitment, retention,
CCR requires a new rate structure for STRTCs and support funding. The 2016-17 proposed
and FFAs, these new rates were still under budget requests temporary funding (three years)
development at the time of the Governor’s budget. of $2.5 million in General Fund ($5 million total
In the absence of new rates for STRTCs and FFAs, funds) to add 34.5 new positions at DSS to form
the Governor’s budget uses the rates currently a CCR implementation team to, among other
paid to RCL 14 group homes and ITFC providers responsibilities, oversee policy development as well
as placeholder figures for the new provider rates as a robust stakeholder workgroup process.
under CCR. For 2016-17, DHCS requests $175,000 General
Summary of Governor’s Estimated Costs and Fund ($350,000 total funds) to help STRTCs
Savings for 2016-17 CCR County Implementation. obtain mental health certification. Across the
Figure 12 shows the Governor’s estimated costs and state there are over 700 group homes, a subset of
assumed county foster care payment savings for which will likely seek mental health certification as
the major components of the 2016-17 CCR budget they convert to STRTCs. If an STRTC chooses to
Figure 12
Proposed CCR State Spending for County Child Welfare and
Probation Department Implementation
(In Millions)
2015-16 2016-17 Change From 2015-16
General Total General Total General Total
Activity Fund Funds Fund Funds Fund Funds
Foster parent training, recruitment, retention, and $17.2 $25.8 $32.2 $47.4 $15.0 $21.6
support
Resource Family Approvala — — 11.2 16.2 11.2 16.2
Child and family teaming — — 9.7 14.4 9.7 14.4
2015-16 FFA rate increase 4.3 7.3 4.5 7.6 0.2 0.3
Case planning assessment, reviews, and training — — 4.4 6.6 4.4 6.6
Accreditation — — 1.4 2.8 1.4 2.8
Automation and performance measure development — — 0.5 0.8 0.5 0.8
Assumed foster care payment savings at the — — -6.4 -7.3 -6.4 -7.3
county levelb
Totalsc $21.5 $33.1 $57.5 $88.6 $36.0 $55.5
a
Estimated total spending for Resource Family Approval is net of estimated county savings, which are estimated at approximately $19 million in total funds.
b
Assumed foster care payment savings offset the costs of the other proposed CCR activities, reducing the total estimated state funding for CCR implementation.
c
This figure does not include the approximately $3.4 million General Fund ($6.4 million total funds) in the Governor’s proposed budget to support DSS state operations, DHCS
state operations, and county Mental Health Plans’ CCR implementation efforts.
CCR = Continuum of Care Reform; FFA = Foster Family Agency; DSS = Department of Social Services; and DHCS = Department of Health Care Services.
30 Legislative Analyst’s Office www.lao.ca.gov
2016-17 BUDGET
provide the services directly, CCR requires that it uncertainties surrounding the total fiscal impact
obtain certification from DHCS or a county MHP. and programmatic challenges of the reform
DHCS requests additional resources to support one package remain. The Governor’s budget recognizes
permanent position and temporary funding for that implementation will result in up-front costs
two positions to directly certify the new STRTCs for the counties. Offsetting those costs are assumed
and assist county MHPs that choose to carry out county savings that are projected to materialize
STRTC certification themselves. beginning in 2016-17. These offsetting savings are
uncertain because they are based upon particular
LAO Assessment
assumptions about rates (which have not been
finalized) and other assumptions about the number
Governor’s Proposal Is a Logical Next
and speed at which children will exit group
Step for CCR Implementation
homes (which will depend upon the availability
Full implementation of AB 403 is expected of home-based family caregivers). Ultimately, the
to be a multiyear effort. Funding for CCR future costs or savings from CCR are contingent
implementation began in 2015-16 with an on a host of interconnected factors, including the
augmentation for counties to increase outreach, new STRTC and FFA foster care payment rates
recruitment, and support for foster parents that DSS develops, the rate at which children
and to provide an increase to the FFA rate. exit group homes to home-based family care,
The Governor’s 2016-17 proposal builds upon and which home-based family settings are most
the 2015-16 efforts, and continues to primarily heavily utilized following the closure of group
focus early implementation efforts on building homes. Programmatically, the ability of counties to
capacity in home-based family settings while recruit and support additional home-based family
beginning to phase in other components of CCR caregivers will be critical to CCR’s success.
implementation. We have reviewed the Governor’s Availability of New Home-Based Family
proposal for new positions at DSS and DHCS. Placements Key to CCR’s Success. Currently, over
Given the magnitude of the CCR implementation 5,500 children reside in group homes. DSS projects
efforts, we find them to be reasonable. We note that around 2,500 of these children will gradually
that the request for DSS positions includes limited transition to home-based family placements
term funding, which will allow the Legislature over the three years following implementation.
to reevaluate the ongoing CCR workload when Child welfare and probation departments are
implementation is further along. Overall, we find developing strategies to better identify and
that the Governor’s proposal is a logical next step support home-based family settings for children
in the implementation of CCR, but recognize that transitioning from group homes.
many uncertainties continue to surround CCR Recognizing the necessity of finding new
implementation. We highlight several of these key home-based family caregivers under AB 403,
uncertainties in this section. the Governor dedicates nearly half of new CCR
spending to counties for foster parent recruitment
Considerable Fiscal and Programmatic
and retention. County welfare and probation
Uncertainties Surround CCR Implementation
departments’ ability to translate these funds
Because CCR results in a fundamental shift into additional home-based family caregivers is
in the way CWS are delivered in California, large unknown at this time. As we have noted, AB 403
www.lao.ca.gov Legislative Analyst’s Office 31
2016-17 BUDGET
requires DSS to report at upcoming legislative CCR’s Net Costs Will Ultimately Depend on
hearings on the recruitment and retention efforts Speed of Transition and Finalization of Rates.
currently underway. Without a considerable increase The level at which the state sets rates will help
in the number of home-based family placements, determine CCR’s fiscal impact. Higher rates for
CCR’s goal of reducing the state’s reliance on children in STRTCs and FFAs than what the
long-term group home placements cannot be met. Governor’s budget assumes will erode potential
The Speed at Which Children Will Leave savings accruing from transitioning children out
Group Homes Is Unknown. In estimating 2016-17 of group homes, even more so if that transition is
savings for counties, DSS assumes a steady slower or less complete than anticipated.
transition of children out of group homes and As we have noted, the administration’s
into STRTCs or home-based family placements. estimates of foster care payment savings assumes
What the exit rate will ultimately be is subject that the rates paid to FFAs and STRTCs will be
to significant uncertainty, such as the extent to roughly similar to those in place today. While
which group homes successfully petition for we recognize that this approach is prudent in
license extensions past CCR’s January 1, 2017 the absence of new, finalized rates, using current
implementation date. By January 2019, all child rates could underestimate the future costs of
welfare group home placements must cease, but STRTC and FFA provider payments, potentially
probation group home placements may potentially underestimating total General Fund costs for
continue indefinitely. In both the short and long CCR implementation. The administration will be
run, children remaining in group homes will add releasing the rate structure in March, at which time
cost pressures to CCR that may affect its net fiscal it should have a better estimate of potential costs
impact. and savings.
New Rate Structures for FFAs and STRTCs Realignment May Complicate Budgeting
Are Still Under Development. The new rate for CCR Implementation. As we have noted,
structures currently under development will take under 2011 realignment, if the state places new
into account the new requirements of CCR— requirements on counties, it must provide state
accreditation, mental health certification, CFT, resources to reimburse counties for the new
and the augmented slate of core services that FFAs costs. Counties are not required to implement
and STRTCs must provide. The near finalization any changes in state policy that increase overall
of regulations surrounding new core service program costs unless the state provides funding to
requirements is a precondition to the final adoption cover those increased costs. The Governor’s budget
of a rate system since the payments providers attempts to compensate counties for the increased
receive must take into account the services they net costs associated with CCR, but as we have
will be required to provide. Moreover, as previously noted, current estimates are based on a number of
noted, alternative rate models may be considered assumptions. We think it is reasonable to assume
that would tie, at least in part, the rate a child’s counties could realize some level of savings as
caregiver and service provider receive to the child’s children transition out of group homes and that
needs assessment rather than the child’s placement these savings could be used to offset the state’s cost
type. Which model is ultimately adopted will likely for CCR. However, the net impact on counties will
have important programmatic and fiscal effects, ultimately depend upon the finalization of rates
which are unknown at this time. and the speed at which children transition from
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2016-17 BUDGET
more costly care. Adding to the uncertainties, there These suggestions are primarily focused on
may be wide variation in the speed and level of gaining additional clarity around the key issues of
savings achieved across the various counties. uncertainty we raise in this analysis.
Uncertainties Surrounding Mental Health CCR Implementation Costs and Savings
Services and Certification. Assembly Bill 403 Subject to Change Once New Rates Are Finalized.
requires that all STRTCs and FFAs either obtain The long-term cost of CCR largely depends on
mental health certification from DHCS or county the savings achieved from children exiting group
MHPs or contract with a certified mental health home care. Due to the absence of finalized rates
provider. For FFAs and STRTCs, there is some in the Governor’s January budget, the likelihood
uncertainty around what certification will require and extent of county savings from lower foster care
and who will be the certifying entity or entities. It payments is uncertain. The Legislature will want to
is our understanding that counties have concerns revisit the proposed CCR implementation funding
that insufficient resources are being provided for once new provider rates are developed in March, at
MHPs to prepare for the influx of new applicants which time more accurate savings and costs can be
and potential service recipients should the plans estimated.
have a direct role in certifying providers and Use Budget Deliberations to Gain Clarity on
administering services to these additional children. Key Aspects of the Proposal. As we have noted,
The Governor proposes funding for DHCS and there are several other components of CCR that
MHPs to carry out CCR-related workload, but the create some uncertainty. The Legislature may wish
augmentation is limited to what is needed to serve to use the upcoming budget process to ask the
STRTCs. FFAs facing the same rules as STRTCs do administration some clarifying questions around
not appear to be accounted for in the Governor’s these areas of uncertainty. The following are some
mental health-related budget augmentations. It is key issues for the Legislature’s consideration:
unclear whether there may be additional General
• Addressing Realignment Challenges.
Fund cost pressures associated with the mental
Given the uncertainty surrounding
health certification of FFAs. DSS is convening a
CCR’s net costs or savings, how will the
workgroup with DHCS and representatives from
administration ensure that it is accurately
the county MHPs to focus on the role of mental
funding counties for the newly required
health in CCR. Additionally, the administration
activities under CCR? How will the
is considering legislation that will provide more
administration track county savings
clarity on the mental health component of CCR.
attributable to CCR on an ongoing basis?
Key Issues for Legislative Consideration • How Core Services Will Be Made
Overall, we find the Governor’s proposal Available to All Children. Once the rates
to continue the implementation of CCR to be a are developed, the Legislature may want
reasonable next step. We also find the Governor’s to ask the administration to provide
request for additional positions at DSS and greater detail to demonstrate if and how
DHCS to oversee and implement CCR to be the new rate structure increases access to
reasonable and raise no concerns at this time. core services for all children regardless of
We do, however, make some suggestions for the placement setting.
Legislature to consider as it evaluates the proposal.
www.lao.ca.gov Legislative Analyst’s Office 33
2016-17 BUDGET
• Recruitment and Retention Funding. The upcoming budget process, such as the
ability to recruit and retain home-based number of home-based families recruited
family placements is important to the and key recruitment and retention
success of CCR. Under current law, the challenges counties are experiencing.
administration is required to report in
• Role of Mental Health. Based on progress
budget hearings on counties’ uses of these
from the mental health workgroup process,
funds, providing an opportunity for
and deliberations on potential legislation
the Legislature to oversee the strategies,
to clarify the role of mental health in CCR,
allocation amounts, and progress of the
what is the most up-to-date vision of how
funding. Given the increased funding for
mental health will be further integrated
this effort, the Legislature may consider
with CWS under CCR?
requiring the department to include other
oversight measures in this report in the
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2016-17 BUDGET
www.lao.ca.gov Legislative Analyst’s Office 35
2016-17 BUDGET
Contact Information
Ginni Bella Navarre Managing Principal Analyst, 319-8342 Ginni.Bella@lao.ca.gov
Health and Human Services
Callie Freitag SSI/SSP 319-8331 Callie.Freitag@lao.ca.gov
In-Home Supportive Services
Ben Johnson Child Welfare Services 319-8336 Ben.Johnson@lao.ca.gov
Continuum of Care Reform
Ryan Woolsey CalWORKs 319-8356 Ryan.Woolsey@lao.ca.gov
LAO Publications
The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal 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.
36 Legislative Analyst’s Office www.lao.ca.gov