The 2018-19 Budget: California Spending Plan (Final Version)

The 2018-19 Budget: California Spending Plan MAC TAYLOR LEGISLATIVE ANALYST OCTOBER 2, 2018 analysis full gutter 2018-19 BUDGET LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Table of Contents KEY FEATURES OF THE 2018-19 BUDGET PACKAGE Budget Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Major Features of the 2018-19 Spending Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Evolution of the Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SPENDING BY PROGRAM AREA Proposition 98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 K-12 Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Adult Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 California Community Colleges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Early Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Higher Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Human Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Homelessness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Natural Resources and Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Judiciary and Criminal Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 www.lao.ca.gov analysis full gutter 2018-19 BUDGET LEGISLATIVE ANALYST’S OFFICE www .lao .ca .gov (916) 445-4656 Legislative Analyst Mac Taylor State and Local Finance Corrections, Transportation, and Environment Carolyn Chu Anthony Simbol Brian Brown Justin Garosi Drew Soderborg Ann Hollingsheada Seth Kerstein Ross Brown Ryan Miller Rachel Ehlers Lourdes Morales Paul Golaszewski Nick Schroeder Helen Kerstein Brian Uhler Luke Koushmaro Brian Weatherford Anita Lee Shawn Martin Education Caitlin O’Neil Jennifer Kuhn Tom Van Heeke Ryan Anderson Health and Human Services Edgar Cabral Mark C . Newton Jason Constantouros Ginni Bella Navarre Sara Cortez Kenneth Kapphahn Chas Alamo Amy Li Jackie Barocio Lisa Qing Ben Johnson Paul Steenhausen Brian Metzker Ryan Millendez Sonja Petek Ryan Woolsey Administration, Information Services, and Support Sarah Kleinberg Tina McGee Sarah Barkman Izet Arriaga Patt Kregelo Sarah Scanlon Michael Greer Jim Stahley Vu Chu Anthony Lucero Mohammed Mohammed Saeed Rima Seiilova-Olson a General Fund Condition analyst, Spending Plan “Chapter 1” coordinator . LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Chapter 1: Key Features of the 2018-19 Budget Package Each year, our office publishes the California in 2018 . In general, it reflects budgetary legislation Spending Plan to summarize the annual state that the Governor has signed through June 30, 2018 . budget . This publication discusses the 2018-19 In some cases, as noted, we discuss budget actions Budget Act and other major budget actions approved approved by the Legislature after June 2018 . BUDGET OVERVIEW Spending Discretionary General Fund Spending. In constructing the budget, the Legislature Overall Spending. Figure 1 displays the was faced with decisions over how to allocate administration’s June 2018 estimates of total $10 billion in discretionary General Fund resources . state and federal spending in the 2018-19 budget (“Discretionary” in this context excludes billions package . As the figure shows, the budget assumes of dollars controlled by constitutional funding total state spending of $197 .2 billion (excluding requirements, such as Proposition 98 [1988] and federal and bond funds), an increase of 7 percent Proposition 2 [2014], and added costs to maintain over the revised 2017-18 level . General Fund existing policies and programs .) Figure 2 (see spending in the budget package is $138 .7 billion— next page) shows how the June 2018 budget an increase of $11 .6 billion, or 9 percent, over package allocated these discretionary resources the revised 2017-18 level . Special fund spending among reserves, one-time spending, and ongoing increased $1 .3 billion, or 2 percent, over the spending . As the figure shows, the budget allocates revised 2017-18 level . the vast majority of discretionary resources to reserves and one-time Figure 1 spending . This allocation includes Total State and Federal Expenditures proposals made by the Governor (Dollars in Millions) in January and May, which were later approved by the Legislature, Revised Change From 2017‑18 Enacted as well as legislative choices made 2016‑17 2017‑18 2018‑19 Amount Percent in putting together the final budget General Fund $119,291 $127,045 $138,688 $11,643 9% package . As discussed later in this Special funds 44,249 57,169 58,512 1,343 2 publication, the largest one-time Budget Totals $163,540 $184,214 $197,199 $12,986 7% spending actions in the budget Bond funds 2,340 6,309 4,173 -2,135 -34 include: nearly $700 million in Federal funds 95,337 98,107 107,455 9,347 10 additional discretionary funding Note: Reflects administration estimates of budgetary actions through June 2018. for the universities, $630 million to 1 analysis full gutter 2018-19 BUDGET the state will collect $133 billion Figure 2 in General Fund revenues How the Budget Allocates Nearly and transfers in 2018-19, a $10 Billion in Discretionary General Fund Resources 3 percent increase over revised 2017-18 estimates . The state’s largest three General Fund taxes— the personal income tax, sales and One-Time Spending use tax, and corporation tax—are projected to increase 4 percent . Reserves Figure 4 summarizes the Reserves condition of the General Fund under the revenue and spending assumptions in the budget package, as estimated by the Department of Finance (DOF) . This shows that estimated state General Fund available resources ($141 .8 billion) exceed total Ongoing Spending General Fund expenditures ($138 .7 billion) . Note: Reflects administration estimates of budget actions taken through June 2018. Budget Package Assumes 2018-19 Ends With Nearly $16 Billion in Reserves. Figure 4 shows the budget package replace the State Capitol Annex, $500 million for assumes that 2018-19 will end with $15 .9 billion emergency homeless aid block grants, and nearly in total reserves . Under current revenue estimates, $300 million to repay local government mandates the budget package deposits enough money into related to children’s mental health . the Budget Stabilization Account (BSA), the state’s Budget Commits About $1.5 Billion in constitutional rainy day fund, so that it reaches Ongoing Spending. While the budget package its maximum level of $13 .8 billion (10 percent of emphasizes building more reserves and one-time General Fund tax revenues) . To reach this maximum spending, it does make some ongoing spending level, the budget includes a $2 .6 billion optional commitments . These ongoing commitments carry deposit in addition to the deposit required under a cost of about $1 .2 billion in 2018-19, growing to the Constitution . $1 .5 billion annually thereafter . The largest out-year Budget Creates Two New Reserve Accounts. increase is for CalWORKs cash grants . The budget The budget package also creates two new reserves: dedicates $90 million in 2018-19 to increase these grants beginning in April 2019, but the full-year • Safety Net Reserve. The budget creates cost of these increases is $360 million . The budget the Safety Net Reserve, which aims to save also dedicates about $348 million to the universities money specifically for the future expenditures on an ongoing basis and $139 million to increase of two programs: CalWORKs and Medi-Cal . salaries for correctional officers . (During a recession, these programs typically have increased expenditures as caseload Revenues increases .) To that end, the Safety Net Figure 3 displays the administration’s revenue Reserve has two subaccounts, one for each projections as incorporated into the June of these programs . The 2018-19 budget 2018 budget package . The administration projects plan deposits $200 million in the CalWORKs 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Figure 3 General Fund Revenue Estimates (Dollars in Millions) Revised Change From 2017‑18 Enacted 2016‑17 2017‑18 2018‑19 Amount Percent Personal income tax $83,264 $91,971 $95,011 $3,040 3% Sales and use tax 24,874 25,384 26,674 1,289 5 Corporation tax 11,020 11,246 12,259 1,013 9 Subtotals ($119,158) ($128,601) ($133,944) ($5,343) (4%) Insurance tax $2,422 $2,514 $2,576 $62 2% Other revenues 1,842 1,711 1,810 99 6 Transfer to BSAa -3,014 -2,697 -4,358 -1,661 — Other transfers and loans -427 -305 -640 -335 — Totals, Revenues and Transfers $119,982 $129,825 $133,332 $3,507 3% a In 2018-19, includes the temporary transfer to the Budget Deficit Savings Account. Note: Reflects administration estimates of budgetary actions through June 2018. BSA = Budget Stabilization Account. subaccount . It also directs DOF to develop a Figure 4 methodology to calculate General Fund Summary caseload savings in these (In Millions) programs (that materialize 2017‑18 2018‑19 from year-over-year caseload Revised Enacted declines) for determining deposits in future years . Prior-year fund balance $5,702 $8,483 Revenues and transfers 129,825 133,332 • Budget Deficit Savings Expenditures 127,045 138,688 Account (BDSA). The budget Ending fund balance $8,483 $3,127 also creates the BDSA, which Encumbrances $1,165 $1,165 for 2018-19 will temporarily SFEU balance 7,318 1,962 hold the estimated $2 .6 billion Reserves optional BSA deposit until BSA balancea $9,410 $13,768 May of 2019 . In May, DOF will SFEU balance 7,318 1,962 adjust this optional deposit, Safety Net Reserve — 200 as needed, to reflect updated Total Reserves $16,728 $15,930 estimates of revenues . For a Includes the $2.6 billion supplemental deposit which will be held in the BDSA until May 31, 2019. example, if General Fund BSA = Budget Stabilization Account; SFEU = Special Fund for Economic Uncertainties; and BDSA = Budget Deficit Savings Account. tax revenues are lower than current projections, DOF will transfer a lower optional deposit to the BSA . MAJOR FEATURES OF THE 2018-19 SPENDING PLAN The major General Fund and special fund described below . We discuss these and other spending actions in the 2018-19 budget package actions in more detail in “Chapter 2 .” are shown in Figure 5 (see next page) and briefly 3 analysis full gutter 2018-19 BUDGET Considerable New Spending on Education. overhaul of the apportionment formula—moving The budget package contains significant increases from an entirely enrollment-based formula to one for every education segment . For elementary that has a performance component . Receiving and secondary schools, the state surpasses the the most discussion of any education proposal Local Control Funding Formula target rates set in this year, the budget package also establishes a 2013-14 . For both the California State University statewide online college intended to help working and the University of California, the budget adults improve their career technical skills . supports higher ongoing spending (intended largely Healthcare and Mental Health. The budget for employee compensation and some enrollment package provides funding for some healthcare growth) as well as considerable one-time spending . and mental health programs . Most notably, the For early education, the budget contains higher budget allocates $1 .3 billion in Proposition 56 taxes spending for more slots, rate increases, staff on tobacco products to three major purposes: training, and facilities . For community colleges, the (1) to increase payments to Medi-Cal providers budget provides an augmentation to support an ($821 million), (2) to establish a student loan Figure 5 Major General Fund and Special Fund Spending Actions Education Provides $3.7 billion ongoing augmentation for the Local Control Funding Formula, surpassing the funding targets. Provides $1.1 billion for one-time K-12 discretionary grants. Increases funding for public universities ($348 million ongoing, $412 million one time). Increases ongoing support for early education programs by $474 million.a Provides $408 million in additional ongoing apportionment funding for community colleges. Provides a total of $314 million ongoing for two main high school career technical education programs. Provides $300 million for one-time grants to improve the academic performance of certain low-performing students. Creates an online community college ($20 million ongoing, $100 million one time). Healthcare and Mental Health Allocates $1.3 billion in Proposition 56 revenues to Medi-Cal, largely for provider payment increases. Reduces the state’s mandate backlog, related to county mental health services for children ($281 million one time). Provides $131 million for Hepatitis C treatment across various departments. Provides $100 million (one time) for an incompetent to stand trial diversion program. Homelessnessb Provides $500 million (one time) for emergency homelessness aid block grants. Provides $50 million (one time) to counties to aid homeless individuals with mental illnesses. Augments housing assistance and support programs for CalWORKs families by $32 million (ongoing cost of $63 million). Provides other homelessness assistance funding for seniors, youth, and victims of domestic violence (total $26 million one time). Poverty Increases cash assistance grants beginning in April 2019 ($90 million in 2018-19, $360 million ongoing). Provides $220 million (one time) to reverse the CalFresh cash out policy for SSI/SSP. Infrastructure and Equipment Sets aside $630 million (one time) to replace the Capitol Annex. Sets aside $333 million (one time) for deferred maintenance projects across various departments. Provides $195 million ($25 million ongoing) for flood control infrastructure. Allocates $134 million to counties to purchase new voting systems. Provides $130 million for infrastructure and equipment at correctional facilities. Sets aside $100 million (one time) to construct a new California Indian Heritage Center. Provides $98 million (limited term) to purchase four CalFire helicopters. Other Approves a new labor agreement with the California Correctional Peace Officers Association ($192 million all funds, ongoing). Provides $90 million (one time) for 2020 Census outreach. a The budget package also includes $185 million in additional federal funds for early education programs. b Bond-related housing programs are shown in Figure 6. 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET repayment program for Medi-Cal physicians and includes $90 million General Fund in 2018-19 to dentists, and (3) to offset General Fund spending support a 10 percent across-the-board increase in Medi-Cal . The budget plan also uses General to CalWORKs maximum grant levels, beginning Fund resources to (1) reduce the state’s mandate April 1, 2019 . (As a result, the 2018-19 cost of backlog related to county mental health services for this change is $90 million, but the administration children and (2) increase the availability of Hepatitis anticipates the full-year, ongoing cost will be C treatment for those receiving care through $360 million .) Second, the budget includes Medi-Cal and at the state’s correctional and state legislation that would eliminate the Supplemental hospital facilities . Security Income (SSI) cash-out policy, which made Homelessness. The budget provides about SSI/State Supplementary Payment (SSP) recipients $600 million in General Fund increases for ineligible for CalFresh food benefits, and provides homelessness initiatives in 2018-19 . There is a $220 million to implement the change . one-time allocation of $500 million for block grants Infrastructure and Equipment. The to local governments, which will fund services 2018-19 budget package sets aside over such as shelters, rental assistance, outreach, and $1 .5 billion to fund various infrastructure projects construction of affordable housing . The spending and to purchase equipment . This includes plan provides $50 million in one-time General Fund $630 million to replace the Capitol Annex grants to counties to fund outreach, treatment, and $333 million for deferred maintenance and related services for homeless persons with projects across various departments, which the mental illness . The budget also provides funding administration will have the authority to allocate for CalWORKs families who are homeless or at in future years . The budget also provides funds risk of becoming homeless to find and move for flood control, including levee maintenance and into permanent housing, and increases the daily various urban flood control projects; counties to maximum voucher amount for the Homeless purchase new voting systems; and infrastructure Assistance Program . The budget package also and equipment at correctional facilities, including places on the November ballot a program—No replacing the roofs at three facilities . Place Like Home—to construct and rehabilitate Other Major Features. In addition to General permanent supportive housing for those with Fund and special fund spending, the 2018 budget mental illness and are homeless . package allocated bond funding, took actions with Poverty. The budget package takes two major respect to authorizing new bonds, and made some actions to increase cash assistance, both with other notable policy choices . Figure 6 summarizes the aim of reducing poverty . First, the budget plan some of these actions . Figure 6 Other Major Features Bonds and Bond Funding Allocates $1.3 billion in bond funds to begin implementing projects authorized under Proposition 68 (2018). Puts the No Place Like Home program on the ballot for approval by voters. Authorizes $1.3 billion in lease revenue bond authority to construct ten trial court courthouses. Other Major Changes Creates two new reserve accounts: the Budget Deficit Savings Account and the Safety Net Reserve. Allocates future required Proposition 2 infrastructure spending (beginning in 2019-20). Creates a new certification and true-up process for Proposition 98. Establishes statutory cost-of-living adjustment for the Local Control Funding Formula (the costliest existing K-12 program). Establishes a new community college apportionment formula that links funding to enrollment, low-income student counts, and student outcomes. Shifts power for taking over fiscally distressed school districts from the State Superintendent of Public Instruction to the applicable county Superintendent of Schools. 5 analysis full gutter 2018-19 BUDGET EVOLUTION OF THE BUDGET January Budget Proposed Nearly $16 Billion in Figure 7 . The Governor did not veto any in Total Reserves. The Governor’s 2018-19 appropriations in the 2018-19 Budget Act . January budget proposed a total reserve level of $15 .7 billion . In particular, the Governor proposed Figure 7 an optional deposit into the state’s rainy day fund Budget‑Related Legislation to fill it to its constitutional maximum level . After Bill fulfilling constitutional obligations for spending on Number Chapter Subject schools and debt, the Governor also allocated about $1 billion in discretionary resources to other Signed in June 2018 spending proposals, mostly one time in nature . SB 840 29 2018-19 Budget Act AB 1808 32 Education May Revision: Higher Revenues, More AB 1809 33 Higher education One-Time Spending. Relative to January, the AB 1810 34 Health administration had about $4 billion more in AB 1811 35 Human services AB 1812 36 Public safety discretionary resources to allocate in the budget AB 1817 37 State government (largely reflecting higher revenues, which were AB 1824 38 State government partially offset by higher constitutional and AB 1825 39 Proposition 98 Certification caseload-driven spending) . The Governor’s May AB 1826 40 State Capitol Building Annex Revision proposals dedicated most of these AB 1827 41 No Place Like Home Act of 2018 AB 1830 42 Reserve accounts resources to new spending, virtually all for one-time AB 1831 43 State government purposes . These spending proposals focused AB 1834 44 Corrections on the areas of infrastructure, mental health, AB 1838 61 Local government taxation and homelessness . The Governor also proposed SB 841 31 2017-18 Budget Act: Augmentation SB 847 45 Courts increasing reserves by more than $1 billion, SB 848 46 Transportation resulting in a total proposed reserve level of SB 849 47 Medi-Cal $17 billion . SB 850 48 Housing Final Budget Package Includes $15.9 Billion SB 852 49 State Bargaining Unit 6 MOU SB 853 50 Developmental services in Total Reserves. The Legislature passed the final SB 854 51 Public resources budget package on June 14, 2018 . Total reserves SB 855 52 Taxation in the final budget package are lower than the SB 856 30 Amendments to the 2017-18 Budget Act proposed level in the May Revision, but roughly SB 866 53 Employment SB 871 54 Motion picture tax credits the same as the level proposed by the Governor in Signed After June 2018 January . The budget package also reflects various AB 1840 426 Education choices that shifted spending priorities compared SB 846 142 Employment to the Governor’s proposal . In particular, the final SB 857 87 In-Home Supportive Services budget package reduces payments for deferred SB 861 331 National Mortgage Settlement Fund: allocations maintenance by $700 million—relative to the SB 862 449 Amendments to the 2018-19 Budget Act Governor’s proposal—freeing up a like amount of SB 867 450 Legislative Counsel: Workplace conduct funding . Correspondingly, the final budget package services reflects higher General Fund spending for homeless SB 869 451 Local elections grants and the universities, among others . SB 873 452 State Bargaining Units 9 and 10 MOU SB 875 453 Public resources Budget Package Signed by Governor. The SB 876 454 Human services Governor signed the 2018-19 Budget Act and SB 877 455 State government 26 other budget related bills between June SB 878 456 Motion picture tax credits SB 879 457 Public safety and September 2018 . These bills are detailed MOU = Memorandum of Understanding. 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Chapter 2: Spending by Program Area PROPOSITION 98 Annual school and community college spending guarantee or any level above it . If the minimum levels are based primarily on Proposition 98 guarantee increases after budget enactment due (1988), which established certain constitutional to updated inputs, the state owes a “settle-up” minimum requirements . In this section, we provide obligation . In some years, the state also creates or an overview of Proposition 98 spending under pays “maintenance factor .” Maintenance factor is the enacted budget package and describe the created when General Fund revenue growth is weak new process the state adopted for finalizing the relative to changes in per capita personal income . Proposition 98 calculations . We then highlight Maintenance factor is paid when General Fund Proposition 98 spending changes specifically for revenue growth is stronger . K-12 education, adult education, and community Higher Proposition 98 Spending in colleges . On the “EdBudget” portion of our website, 2016-17 and 2017-18. Figure 1 shows how we post many tables containing additional detail Proposition 98 spending has changed in 2016-17 about the Proposition 98 budget (as well as the and 2017-18 compared to the 2017-18 Budget child care and higher education budgets) . Act . From the June 2017 budget plan to the June 2018 budget plan, spending increased Overview $252 million in 2016-17 and $1 .1 billion in 2017-18 . Proposition 98 Establishes Minimum These upward revisions are attributable mainly Spending Level. This minimum spending to higher General Fund revenue . As part of the requirement is commonly called the minimum 2017-18 increase, the state is making an additional guarantee . The minimum guarantee is determined maintenance factor payment of $789 million (on top by three main formulas (known as tests) and of a previous $536 million payment) . After making various inputs, including General Fund revenue, the $1 .3 billion total payment, the state will have per capita personal income, and K-12 student eliminated all remaining maintenance factor for attendance . The state can spend at the minimum the first time since 2005-06 . In both 2016-17 and Figure 1 Proposition 98 Spending Revised Upward in 2016‑17 and 2017‑18 (In Millions) 2016‑17 2017‑18 June 2017 June 2018 Change June 2017 June 2018 Change Proposition 98 Spending $71,390 $71,642 $252 $74,523 $75,618 $1,094 State General Fund 50,488 50,234 -254 52,631 53,381 750 Local property tax 20,902 21,407 506 21,892 22,236 344 7 analysis full gutter 2018-19 BUDGET 2017-18, the state is spending at the calculated is state General Fund and $23 .5 billion is local minimum guarantee . property tax revenue . From 2017-18 to 2018-19, 2018-19 Spending Up Notably Over Revised General Fund spending increases $1 .5 billion 2017-18 Level. For 2018-19, total Proposition 98 (accounting for about 60 percent of the $2 .8 billion spending across all segments is $78 .4 billion, increase in spending) and property tax revenue an increase of $2 .8 billion (3 .7 percent) from the increases $1 .3 billion (accounting for the remaining revised 2017-18 level (see Figure 2) . Test 2 is 40 percent) . The primary factor accounting for the operative test in 2018-19, with the increase the growth in property tax revenue is an assumed in the guarantee attributable to a 3 .67 percent 6 .4 percent growth in assessed property values . increase in per capita personal income . Though Spending Package Includes Settle-Up the administration projects a 0 .29 percent decline Funding. In addition to the increases associated in student attendance for 2018-19, the budget with 2016-17 through 2018-19, the budget makes no downward adjustment to the minimum plan provides a $100 million payment related to guarantee . This is because the budget assumes meeting the 2009-10 minimum guarantee . Of that attendance increases the previous year (in this amount, $89 million is for K-12 discretionary 2017-18), thereby triggering a hold harmless grants and $11 million is for community college provision in the State Constitution that negates deferred maintenance . This payment reduces any attendance declines over the subsequent the state’s outstanding settle-up obligation from two years . The budget sets total Proposition 98 $440 million to $340 million . The budget scores all spending in 2018-19 equal to the administration’s of the settle-up payment as a Proposition 2 debt May Revision estimate of the minimum guarantee . payment . About 40 Percent of Increase Covered Budget Package Enacts New Proposition 98 With Higher Property Tax Revenue. Of total Certification Process. Certification is the process Proposition 98 spending in 2018-19, $54 .9 billion of finalizing the calculation of the minimum Figure 2 Proposition 98 Spending by Segment and Source (Dollars in Millions) Change From 2017‑18 2016‑17 2017‑18 2018‑19 Revised Revised Enacted Amount Percent Preschoola $975 $1,290b $1,215 -$74 -5.8% K‑12 Education General Fund $43,701 $46,240 $47,507 $1,267 2.7% Local property tax 18,582 19,295 20,414 1,118 5.8 Subtotals ($62,283) ($65,535) ($67,920) ($2,385) (3.6%) California Community Colleges General Fund $5,473 $5,757 $6,063c $306 5.3% Local property tax 2,825 2,941 3,110 168 5.7 Subtotals ($8,299) ($8,698) ($9,173)c ($474) (5.5%) Other Agenciesa $85 $95 $85 -$10 -10.7% Totals $71,642 $75,618 $78,393 $2,775 3.7% General Fund $50,234 $53,381 $54,870 $1,488 2.8% Local property tax 21,407 22,236 23,523 1,287 5.8 a Consists entirely of General Fund. b Includes $167 million for one-time grants to fund the expansion of early education programs, including preschool. Excluding this amount, the preschool increase from 2017-18 to 2018-19 is $93 million (8.3 percent). c Includes $164 million for the new K-12 component of the Strong Workforce Program. Excluding this amount, the increase from 2017-18 to 2018-19 is $142 million (2.5 percent) for General Fund spending and $310 million (3.6 percent) for total community college spending. 8 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET guarantee after the fiscal year is over . State described above but runs on a modified timeline . law previously required the Director of Finance, The modified process is set to begin with the State Superintendent of Public Instruction, and Director of Finance publishing a preliminary Chancellor of the California Community Colleges calculation for all uncertified years by July 11, to agree upon a final calculation nine months after 2018 . Upon this publication, a review and public the end of the fiscal year . Though intended to be an comment period follows, with final certification for annual process, disputes among these three often those years completed by September 15, 2018 . delayed certification for many years . Chapter 39 of Final certification is followed by a 90-day legal 2018 (AB 1825, Committee on Budget) revamps challenge period (the same time frame as used for the certification process . Most notably, it assigns future fiscal years) . a lead role to the Director of Finance in making the Proposition 98 calculations; creates review periods K-12 EDUCATION for the Legislature, state agencies, and public to examine the Department of Finance’s (DOF) $67.9 Billion Proposition 98 Spending on K-12 calculations; and creates a defined period for legal Education in 2018-19. The enacted 2018-19 level challenges . The new process is set to begin with is $2 .4 billion (3 .6 percent) more than the revised certification of the 2017-18 minimum guarantee in 2017-18 level and $3 .2 billion (4 .9 percent) May 2019 . more than the 2017-18 Budget Act level . The budget increases spending per student by $579 Package Also Includes a New Process (5 .2 percent) over the 2017-18 Budget Act level, to True-Up Proposition 98 Spending. In bringing Proposition 98 spending per student up to addition to the new process for certifying the $11,645 . guarantee, Chapter 39 creates a companion process for adjusting school spending when the Package Includes Mix of Ongoing and guarantee increases or decreases as a result of One-Time Spending. As Figure 3 shows (see final calculations . For those years in which the next page), the budget includes $5 .8 billion in guarantee ends up lower than previously estimated, Proposition 98 augmentations for K-12 education the state is to credit spending above the minimum across the three-year budget period . Of the guarantee toward a new true-up account called $5 .8 billion, $4 billion (70 percent) is ongoing the “Proposition 98 Cost Allocation Schedule .” and $1 .8 billion (30 percent) is one time . From For years in which the guarantee ends up higher an accounting perspective, the increase is than previously estimated, the state is to apply any scored across multiple fiscal years and includes credits in the account toward the spending required settle-up and some unspent funds from prior to meet higher minimum guarantee . If the credits years that have been repurposed . In addition to are insufficient to meet the higher guarantee, the the Proposition 98 increase, the budget includes state is required to make a settle-up payment to $594 million in Proposition 51 bond authority schools and community colleges for the remaining for school facility projects and $100 million in difference . The State Controller is to distribute this non-Proposition 98 funding for kindergarten school payment automatically on a per-pupil basis using facilities . We describe major K-12 changes below . a DOF-developed schedule unless the Legislature Core Program adopts an alternative payment plan as part of the regular state budget process . Fully Implements the Local Control Funding Parallel Process Established to Close the Formula (LCFF) for Schools, Then Further Books on 2009-10 Through 2016-17. Due to Increases Rates. In the January budget, the delays in past certifications, the state has not Governor proposed fully implementing LCFF and certified the minimum guarantee for any fiscal reaching the target funding rates . The final budget year since 2008-09 . To close the books on reaches and then goes beyond full implementation . 2009-10 through 2016-17, the budget package Specifically, the budget closes the gap to the establishes a process that parallels the one target rates and funds the statutory 2 .71 percent 9 analysis full gutter 2018-19 BUDGET cost-of-living adjustment (COLA) to those rates . effectively funding a 3 .7 percent COLA in 2018-19 . In addition, the budget provides nearly an extra The administration estimates that the combined 1 percentage point increase in the LCFF rates— ongoing cost of both full implementation and the augmented COLA is $3 .7 billion . This augmentation brings total Figure 3 LCFF spending for school $5.8 Billion New Proposition 98 Spending for districts and charter schools K‑12 Education to $61 .1 billion, a 6 .4 percent increase over the revised 2016-17 Through 2018-19 (In Millions) 2017-18 level . School districts Ongoing and charter schools may use Local Control Funding Formula $3,666 LCFF monies for any educational Career Technical Education Incentive Grants 150 purpose . Cost-of-living adjustment for select categorical programsa 114 Makes Two Related Changes County and regional support for low-performing districts 68 Charter School Facility Grant Program 25 to School Planning. In addition California Collaborative for Educational Excellence 12 to the LCFF augmentation, Online educational resources 1 Chapter 426 of 2018 (AB 1840, Additional support for districts in fiscal distress 1 Committee on Budget) District reimbursements related to teacher dismissalsb — appropriates $200,000 one time Subtotal ($4,036) to the California Department One Time of Education (CDE) for Discretionary grants $1,091 redesigning the Local Control Supplemental grants to support certain low-performing studentsc 300 and Accountability Plan (LCAP) Teacher residency programs 75 template to make its content Grants for addressing certain teacher shortages 50 more accessible to parents and Matching support for classified employees during summer 50 Professional development for classified employees 45 other community members . Computer-based ELPAC 21 Chapter 32 of 2018 (AB 1808, Charter School Facility Grant Program backfill 21 Committee on Budget) provides After-School instruction in computer coding 15 $200,000 one time to CDE for School climate initiative 15 developing a budget overview Grants to support community engagement 13 template—also specially designed California School Information Services 7 for parents . The department is Alternative ELPAC for students with disabilities 6 to pass through these funds to California Collaborative for Educational Excellence 6 Southern California Regional Occupational Center 3 the San Joaquin County Office of Suicide-prevention training 2 Education (COE), which in turn Backfill for fire-related property tax decline in basic aid districts 1 is required to complete the two California-Grown School Meals Program 1 template-related tasks . Additional materials for genocide awareness education 1 Funds One-Time Discretionary Otherd 1 Grants. The largest one-time Subtotal ($1,723) spending initiative for Total $5,760 a K-12 education is $1 .1 billion that Applies to special education, child nutrition, mandates block grant, services for foster youth, adults in correctional facilities, and American Indian education. Rate is 2.71 percent. local education agencies (LEAs) b Budget provides $60,000 ongoing for this purpose. may use for any educational c Based on count of students who did not meet statewide standards on assessments of reading and math and are not foster youth, low-income students, English learners, or students with purpose . Funding is distributed disabilities. based on student attendance d Consists of $339,000 for paying down a backlog of district claims relating to teacher dismissals, $250,000 for homeless student services in San Diego Unified School District, $200,000 for (an estimated $183 per average improving the Local Control and Accountability Plan template, and $200,000 for developing a daily attendance) . If an LEA parent-friendly district budget summary. ELPAC = English Language Proficiency Assessments for California. owes any funding to the federal 10 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET government according to a 2014 settlement over address those weakness . Alternatively, technical Medi-Cal billing practices, the State Controller is to assistance may include helping a district to connect deduct this obligation from the LEA’s discretionary with another academic, fiscal, or programmatic grant . The budget assumes that these Medi-Cal expert, who, in turn, performs those functions . obligations total $145 million statewide (though COEs also may request that a regional lead agency the administration believes actual payments likely (described below) or the California Collaborative for will come in lower) . The remainder of each LEA’s Educational Excellence (the Collaborative) assist the discretionary grant will be scored against any school district directly . Though COEs must ensure outstanding mandate claims . As less than one-third that districts obtain support, COEs do not need to of LEAs have any such claims, we estimate that provide that support themselves . only $202 million of the funding provided will count Creates New Regional Support Network. toward the K-12 mandates backlog . We estimate The budget includes $14 million ongoing primarily that the total remaining mandate backlog at the end to support COEs as they go about assisting of 2018-19 will be $668 million . low-performing districts . Of the $14 million, Provides COLA for COE Funding Formula. $10 million is for up to ten Special Education Local The budget provides $6 .4 million to cover a Plan Areas (SELPAs) to serve as special education 2 .71 percent COLA for the 24 (out of 58) COEs that resource leads to assist COEs . The remaining have LCFF allocations equal to their LCFF targets . $4 million is for six to ten COEs to serve as Those COEs funded above their LCFF targets do geographic lead agencies to assist other COEs . not receive this COLA . In total, the 2018-19 budget Starts Giving the Collaborative Ongoing provides COEs with $1 billion in LCFF funding . Of Funding. The budget also includes $12 million this amount, $466 million is intended for district ongoing for the Collaborative to assist primarily support (excluding the new district support add-ons the regional lead agencies and COEs . To this described below), $258 million is for alternative end, the Collaborative is to provide various education, and $315 million is for existing add-ons statewide trainings . In prior years, the Collaborative (effectively four LCFF hold harmless provisions) . was funded with one-time Proposition 98 appropriations . The budget reappropriates Support for District and $5 .6 million from these prior-year allocations . The School Improvement Collaborative is to use these reappropriated funds for additional statewide trainings and technical Increases COE Funding for Supporting assistance . Low-Performing Districts. The budget includes $54 million ongoing for COEs (on top of the district Provides One-Time Funding to Districts support funding mentioned above) to provide Serving Certain Low-Performing Students. low-performing districts with technical assistance . The budget includes $300 million one time for Each COE will receive a $200,000 base amount, districts to help certain low-performing students . with remaining funding distributed based on Specifically, the funds are allocated to districts the number and size of low-performing districts based on the count of students who (1) did not identified within the county . For each identified meet achievement standards based on the latest district within the county, a COE will receive results of statewide assessments of reading and $100,000 for districts with less than 2,500 math and (2) are not foster youth, low-income students, $200,000 for districts serving between students, English learners, or students with 2,500 and 10,000 students, and $300,000 disabilities . Prior to receiving these funds, districts for districts with more than 10,000 students . must develop a plan for how these funds will be Chapter 32 requires that COE technical assistance used to improve the performance of qualifying be focused on building district capacity to develop students . By November 1, 2021, districts are and implement improvement strategies . COE required to report to CDE how funds were spent technical assistance may include helping a district and the extent to which they impacted student to identify its weaknesses and select strategies to outcomes . By February 1, 2022, CDE is to submit 11 analysis full gutter 2018-19 BUDGET an aggregated report to the Legislature on the is the first increase in ongoing funding for FCMAT outcomes of the initiative . since 2014-15 . Supports Low-Performing Schools Identified Career Technical Education Under Federal Accountability System. The federal Every Student Succeeds Act (ESSA) Makes Career Technical Education (CTE) requires states beginning in 2018-19 to set aside Incentive Grants Ongoing. The budget provides 7 percent of Title I funds to assist low-performing $150 million ongoing to extend the CTE Incentive schools in improving student performance . Grant program indefinitely . This program was California has decided to identify low-performing first established as part of the 2015-16 budget schools using the performance measures package to provide a three-year bridge until the included in the California School Dashboard . In LCFF funding targets were reached . Moving 2018-19, the 7 percent requirement equates to forward, school districts, COEs, charter schools, $135 million . Of this amount, the budget allocates and Regional Occupational Centers and Programs $125 million to low-performing schools and may apply for the Incentive Grants . The program $10 million to COEs . CDE is to develop formulas reserves separate pools of grant funding for large-, for distributing these funds . For the COE formula, medium-, and small-sized applicants . Recipients CDE is to consider the number of low-performing must provide a local match of $2 for every $1 of schools identified within the county . The funding CTE Incentive Grant funding provided to COEs essentially replaces $10 million Begins Funding High School CTE Also Title I funding provided in previous years for the Through California Community Colleges’ (CCC) Regional System of District and School Support . Strong Workforce Program. In addition to funding These funds supported 11 COE leads—one the CTE Incentive Grant program, the budget in each of the regions set by the California provides $150 million ongoing to support high County Superintendents Educational Services school CTE through the CCC Strong Workforce Association—to assist districts and schools in their Program . These funds are to be allocated to improvement efforts . eight regional consortia based on a formula that Funds Pilot Project to Address School considers both regional employment conditions as Climate Issues. The budget gives a total of well as grades 7-12 average daily attendance . Each $15 million to the Orange COE and Butte COE to consortium is to distribute funds to schools within evaluate new support strategies for addressing its region on a competitive basis . As with the CTE issues such as bullying and student trauma . Incentive Grant program, recipients must provide Chapter 32 requires these two COEs—in two local dollars for every one Strong Workforce partnership with a California institution of higher dollar . The budget also provides $14 million learning—to submit to the Legislature a plan how ongoing to support administrative costs associated they will use these funds by December 1, 2018 . In with the Strong Workforce program . Of this recent years, these two COEs received a total of amount, a total of $12 million is for 72 high school $30 million (one-time Proposition 98) to develop a Workforce Pathway coordinators—one for each set of multi-tiered support strategies aligned with community college district . Each coordinator would students’ academic and behavioral challenges work with high schools in the area to coordinate and provide subgrants to schools interested in their CTE programs with the region’s Strong implementing those strategies . Workforce plan . The remaining $2 million would Expands Role of the Fiscal Crisis and support the community colleges’ costs in managing Management Assistance Team (FCMAT). The these high school coordinators . budget provides an ongoing augmentation of Continues Direct Funding for Southern $972,000 for FCMAT to (1) provide additional California Regional Occupational Center assistance for fiscally distressed school districts (SCROC). The budget provides SCROC $3 million and (2) provide additional training for COEs for the second of four installments totaling regarding fiscal oversight of school districts . This $10 million over four years ($4 million in 2017-18, 12 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET $3 million in 2018-19, $2 million in 2019-20, and Information Technology $1 million in 2020-21) . The state funds are intended The 2018-19 budget package makes three to support SCROC’s general operations . information technology-related appropriations, Teacher Workforce described below . Continues to Rely on Mix of Fund Sources Provides One-Time Grants for Teacher to Support K-12 High Speed Network Residency Slots. The budget includes $75 million (HSN) . The budget authorizes HSN to spend to start new or expand existing teacher residency $21 million, an increase of $1 .1 million over the programs . Of the $75 million, $50 million is prior year . Of that amount, $11 .2 million comes earmarked for special education teachers, with from federal E-Rate and state Teleconnect the remaining $25 million for bilingual education subsidies (down $700,000 over the prior year) teachers and science, technology, engineering, and and $9 .8 million comes from the Proposition 98 math (STEM) teachers . CTC is to award competitive Broadband Infrastructure Improvement Grant grants to schools over several years . Schools can Program (up $1 .8 million over the prior year) . The qualify for up to $20,000 per teacher candidate, administration’s expectation is that HSN operate with a dollar-for-dollar local match required . The without a deficit in 2018-19 and not fund additional funds can be used in a variety of ways, including network upgrade projects beyond those DOF providing stipends for teacher candidates and informally approved in May . teacher mentors . Provides More Ongoing Funding for Student Provides One-Time Local Solutions Grants. Friendly Services. The budget provides an This $50 million initiative is intended to fund new ongoing augmentation of $1 million (bringing total or existing local efforts to recruit and retain special Proposition 98 funding to $3 .5 million), primarily to education teachers . As with the teacher residency support additional workload generated by greater grants, CTC is to award competitive grants to usage of the college planning website . The website schools . Successful schools can receive up to is operated by the California College Guidance $20,000 per teacher, with a dollar-for-dollar local Initiative, a non-profit entity housed within the match required . Chapter 32 gives districts broad Foundation for California Community Colleges, discretion in how schools may use the grant funds . which is located in Sacramento . Funds Two One-Time Initiatives for Classified Funds Higher First-Year Costs to Upgrade Employees. The budget includes a total of School District Financial Reporting System . The $95 million for these initiatives . Of this amount, budget provides a one-time allocation of $716,000 $50 million is for a new Classified School Employee from the Educational Telecommunication Fund (on Summer Assistance Program . This program allows top of $3 million in one-time Proposition 98 funds classified employees to deposit a portion of their previously approved in the 2016-17 budget plan) income earned during the 2019-20 school year to fund the first-year costs of the Standardized into a fund that would be supplemented by state Account Code Structure (SACS) replacement dollars and paid out in one or two installments project . The entire project is estimated to take three during the summer months . The state matching years and cost $11 .5 million . dollars would be spread proportionally among participating employees . The remaining $45 million Student Assessments is for employee training . CDE is to distribute this Provides $21.4 Million to Develop funding among LEAs based on the number of Computer-Based Version of the English classified school employees they employ . LEAs may Language Proficiency Assessments for use the funds for a wide range of possible training California (ELPAC). The ELPAC assesses whether activities but must give highest priority to training students from non-English speaking households activities relating to the implementation of school require special support to learn English . The safety plans . pencil-and-paper version of the ELPAC was 13 analysis full gutter 2018-19 BUDGET rolled out in spring 2018 . The ELPAC replaces • Community Engagement Professional the California English Language Development Learning Network. The budget includes Test (CELDT), which is no longer aligned with $13 million one time for the Collaborative and state academic content standards . With the a lead COE to jointly administer professional $21 .4 million, CDE is to contract with a vendor, learning networks focused on community who in turn is to convert the assessment from engagement . Funding would be used to pencil and paper to computer based . operate the professional learning networks Provides $5.9 Million to Develop Alternative over the next six years . ELPAC for Students With Disabilities. Some • Fresh School Meals. The budget includes students with severe cognitive disabilities cannot be $1 million one time to the California-Grown accurately assessed using the recently developed Fresh School Meals Grant Program . The ELPAC . Under existing state law, these students’ program will provide grants to at least eight Individualized Education Program (IEP) teams are LEAs . Chapter 32 requires CDE to give tasked with identifying appropriate alternative grant priority to LEAs with high shares of assessments on a case-by-case basis . With the low-income students and English learners . $5 .9 million, CDE is to contract with a vendor to • California School Dashboard. The budget develop a single, statewide alternative assessment includes $300,000 one-time Proposition 98 that would replace the case-by-case method of funding to the San Joaquin COE to improve selecting alternatives . the California School Dashboard website, which provides information on school and Other Changes district performance . Provides One-Time Federal Funds for Academic Enrichment. The budget includes State Operations $165 million one-time federal ESSA Title IV funding Supports New CDE Workload. The budget for academic enrichment . Specifically, LEAs includes a $7 .3 million augmentation for new may use the funding to improve (1) educational CDE workload ($4 .2 million non-Proposition 98 opportunities outside of core instructional General Fund and $3 .1 million federal funds) . areas, (2) school conditions for student learning, Of the $7 .3 million, 56 percent is ongoing and and (3) use of technology in schools . Of the 44 percent is one time . Of the changes, three relate $165 million, $121 million is to be distributed to legislation enacted in 2017, whereas most of the to LEAs based on their share of existing others relate to new initiatives . Among the most Title I funding, with the remainder distributed notable changes to CDE ongoing workload are competitively . CDE will prioritize the competitive additional monitoring of adult education programs awards to LEAs that plan to use funds for visual receiving federal adult literacy grants, establishing a and performing arts education or expanding access new unit to respond to special education litigation, to physical and mental health care . and providing more technical assistance to LEAs for Makes Various Other Adjustments. The budget their sexual health education courses . Additionally, also funds the following: CDE received ongoing augmentations to help • After School Coding Grant. The budget administer the new statewide system of support includes $15 million one time to create the for low-performing districts, to respond to recent After School Kids Code Grant Pilot Program . expansion of the State Preschool program, and to The funding will be distributed competitively address internal data security and privacy issues . to LEAs participating in the After School Among the most notable changes to one-time Education and Safety Program . Grant workload are supporting curriculum revisions for recipients are to include computer coding in several academic subjects, paying certain legal their after school curriculum . fees, and administering new federal grants for schools affected by recent wildfires . 14 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Directs CDE to Standardize Process for Funds Shortfall in Charter School Facility Reclassifying English Learners. Another Grant Program. This program helps certain charter notable one-time increase in CDE workload is schools occupying privately leased facilities cover developing a standard reclassification process . Of their rent and other facilities costs . The budget the $7 .3 million workload-related augmentation, includes $21 million one-time Proposition 98 $437,000 is federal funding provided for this funding to fully cover an estimated shortfall purpose . Currently, state law gives districts broad in 2017-18 . (Beginning in 2017-18, the state discretion to determine when students initially increased the maximum per-student facility grant identified as English learners no longer require amount from $750 to $1,117 . The per-student language-specific instructional support . Chapter 32 grant had not been increased since the program seeks to standardize this process by requiring was created in 2001 .) In addition, retroactively CDE to develop a uniform protocol for reclassifying beginning in 2017-18, Chapter 32 limits the lease English learners by June 30, 2020 . costs applicants can claim to their 2016-17 lease costs plus the statewide K-12 COLA rate . Absent School Facilities the backfill and lease cap, the administration Provides Second Installment of estimated the California School Finance Authority Proposition 51 (2016) Bond Funding for School (which administers the program) would pro-rate Facilities. Proposition 51 authorizes the state to 2017-18 awards downward by about 20 percent . sell $7 billion in general obligation bonds for school Increases Ongoing Funding for Charter facilities . The state plans to issue $594 million of School Facility Grant Program . In addition to these bonds in 2018-19 . This is about the same funding the 2017-18 shortfall, the budget includes amount of Proposition 51 school bonds issued in a $25 million ongoing augmentation for the 2017-18 ($592 million) . As of May 31, 2018, the program in 2018-19 . Chapter 32 also makes the Office of Public School Construction had received following three programmatic changes effective school facility requests totaling $3 .8 billion in state with the 2018-19 grant year: (1) it eliminates an bond funding . The state generally funds school automatic backfill for prorated awards, (2) requires facility requests on a first-come, first-serve basis . new applicants to receive an independent appraisal Kindergarten Facilities. The budget includes affirming their lease is either at or below market $100 million one-time non-Proposition 98 General rates, and (3) requires the California School Finance Fund to help school districts cover facility Authority to first cover applicants’ lease costs costs associated with converting their part-day before funding their other facilities costs in years kindergarten programs into full-day programs . when awards are prorated . About one-third of school districts currently offer Provides $4 Million for Deferred Maintenance part-day programs . Funds can be used to construct at the State Special Schools (SSS). This additional classrooms or renovate existing space . appropriation is in addition to a total of $7 million in Funding is to be distributed by the State Allocation one-time funding provided for deferred maintenance Board, with local matching requirements similar to at SSS in the 2015-16 and 2016-17 budgets . those of the School Facilities Program (SFP) . Under In addition, provisional language included in the SFP, the state typically covers 50 percent of new annual state budget acts the past three years has construction costs and 60 percent of renovation required SSS to spend a total of $5 .4 million from costs, with districts required to cover remaining its operating budget on deferred maintenance costs . For both types of projects, the state can projects . (Despite a total of $12 .4 million in contribute up to 100 percent of project costs if associated expenditures over the past three years, a district faces exceptional challenges in raising the administration reports the maintenance backlog its local share . Priority for grants will be given at SSS decreased from $25 .6 million in 2015-16 to to districts with high proportions of low-income $21 .3 million as of June 2018 .) students and districts that face challenges in raising their local shares . 15 analysis full gutter 2018-19 BUDGET Districts in Fiscal Distress allows these four districts to use proceeds from the sale or lease of their surplus property for Gives Counties Greater Role in Taking helping to make their emergency loan repayments . Control of Fiscally Distressed Districts. In 1991, Chapter 426 also specifies that using proceeds in the state created a system to oversee district this way does not affect the four districts’ eligibility budgets and promote fiscal health . In the final few for state facility funding . By comparison, state law weeks of the 2018 legislative session, the state generally requires districts to reinvest facility-related significantly changed the system by shifting primary proceeds into facility projects and counts such responsibility for district takeovers from the SPI to proceeds against eligibility to receive state facility the county superintendent of schools . Under the funding . former system, COEs and county superintendents of schools were tasked with reviewing district ADULT EDUCATION budgets quarterly, disapproving unsound budgets, and supporting districts as they built fiscal recovery $527 Million Proposition 98 Spending on plans . If these efforts failed and a district needed Adult Education. The budget package increases an emergency state loan, then the state intervened, funding for the Adult Education Block Grant with the SPI appointing an administrator who (AEBG) from $500 million to $527 million . Most assumed responsibility for the district . Chapter 426 of the increase ($22 million) is attributable to the gives control of the district instead to the county program receiving a 4 .3 percent COLA . The higher superintendent of schools, with concurrence from rate is in recognition that the program did not the SPI and the president of the State Board of receive a COLA the past few years . Specifically, Education . the 4 .3 percent equates to a 2 .7 percent COLA Authorizes Special Appropriations associated with 2018-19 and a 1 .6 percent COLA for Two Fiscally Distressed Districts. associated with 2017-18 . Chapter 426 contains several provisions that Additional Support for Tracking Student depart from the regular emergency loan process Outcomes. The budget also provides $5 million and apply only to the Oakland Unified School ongoing for the CCC Chancellor’s Office to District and the Inglewood Unified School District . undertake several data-related projects . Most For both districts, Chapter 426 specifies that the notably, the Chancellor’s Office is to enhance a state is to provide budget appropriations covering data sharing platform intended to track student up to 75 percent of their operating deficits in outcomes across providers and into the workforce . 2019-20, 50 percent of their deficits in 2020-21, Provisional language requires the Chancellor’s and 25 percent of their deficits in 2021-22 . The Office to use up to $500,000 of the appropriation size of the two districts’ operating deficits are to on a one-time basis to contract with an outside be determined by FCMAT, with the concurrence of entity to survey adult schools about their budgets . DOF . Though the specific planning requirements Other Changes. In addition, the budget package vary, both districts are to update their operational (1) renames AEBG the “Adult Education Program,” and facility plans in 2018-19 . By March 1 of each (2) moves the deadline for regional consortia to year through 2021, FCMAT, with concurrence from adopt three-year plans from 2018-19 to 2019-20, the applicable county superintendent of schools, is (3) requires all providers receiving state or federal to report to the Legislature and DOF on progress adult education funding (including libraries and the districts have made to improve their budget community-based organizations) to participate in conditions . their regional consortium’s planning activities, and Creates Special Facility Rules for All Four (4) places a cap on the amount school districts and Fiscally Distressed Districts. In addition to community college districts may charge their adult Oakland and Inglewood, two other districts— education consortium for administrative costs . Vallejo City Unified School District and a high school district in Monterey County—currently are paying off emergency state loans . Chapter 426 16 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET CALIFORNIA COMMUNITY COLLEGES Figure 4 $9 Billion Proposition 98 $1.2 Billion in New Proposition 98 Spending for Funding for CCC in 2018-19. California Community Colleges The enacted 2018-19 level is 2016-17 Through 2018-19 (In Millions) $479 million (5 .5 percent) more than the revised 2017-18 level and Ongoing $612 million (7 .1 percent) more New apportionments funding formula $175 New high school CTE through Strong Workforce Program 164 than the 2017-18 Budget Act level . COLA for apportionments 173 The budget increases funding per 1 percent enrollment growth 60 full-time equivalent (FTE) student Full-time faculty 50 by $635 (8 .6 percent) over the AB 19 fee waivers for first-time full-time students 46 2017-18 Budget Act level, bringing Consolidated financial aid program for full-time students 41 Proposition 98 funding per FTE COLA for Adult Education Block Grant 22 student up to $8,051 . New online college 20 Apprenticeships 19 Package Includes Mix COLA for select student support programs 13 of Ongoing and One-Time Adult education data system 5 Spending. As Figure 4 shows, NextUp program for foster youth 5 the budget includes $1 .2 billion Financial aid management system upgrades 5 in Proposition 98 augmentations Common course numbering system 1 for community colleges across Academic Senate —a the three-year period . Of Subtotal ($797) the $1 .2 billion, $797 million One Time (67 percent) is ongoing and New online college $100 $398 million (33 percent) is Part-time faculty office hours 50 Apprenticeship prior-year shortfalls 36 one time . From an accounting Minimum 2.71 percent increase to each college’s apportionment 35 perspective, the increase is scored Competitive grants to increase online course offerings 35 across multiple fiscal years and Deferred maintenance and instructional equipment 28 includes some unspent funds Financial aid management system upgrades 14 from prior years that have been Reappropriations 10 repurposed . In addition to the New public safety training center at El Camino College 10 Proposition 98 increase, the Legal services for undocumented students 10 budget includes $64 million in Student mental health services 10 bond authority for community California STEM Pathways Program 10 Hunger-free campus grants 10 college facility projects . We Veteran resource centers 8 describe major CCC changes Open educational resources 6 below . Professional development for classified employees 5 Re-entry programs for formerly incarcerated students 5 Apportionments CTE programs for refugee students 5 Creates New Credit New Early Childhood Education Center at Norco College 5 Certified nursing assistant program 2 Apportionment Funding Formula. Fire-related property tax backfill 2 The 2018-19 budget package Los Angeles Valley College Family Resource Center capital improvements 1 includes $175 million ongoing and Subtotal ($398) $35 million one time to transition Total $1,195 to the new formula . The formula a Budget provides $232,000 for this purpose. includes three main components, CTE = career technical education; COLA = cost-of-living adjustment; and STEM = science, technology, engineering, and mathematics. described below . In future years, 17 analysis full gutter 2018-19 BUDGET a COLA is to be applied to the funding rates Student Success Allocation Linked to underlying each of the three components . Colleges’ Performance. This component of the Base Allocation Is Largest Component of New formula provides colleges with funding based on Formula. In 2018-19, the new formula provides specified student outcomes—obtaining various $3,727 per credit FTE student . A district’s FTE degrees and certificates, completing transfer-level student count is calculated using its three-year math and English within a student’s first year, rolling average . The base allocation also includes and having students obtain a regional living wage an amount linked to the number of colleges and within a year of completing community college (see state-approved centers in the district . In 2018-19, Figure 5) . Districts receive additional funding for roughly 70 percent of the formula appropriation the outcomes of students who receive a Pell Grant is distributed through the base allocation . or need-based fee waiver, with somewhat greater Chapter 33 of 2018 (AB 1809, Committee on amounts for the outcomes of Pell Grant recipients . Budget) reduces base rates over the subsequent In 2018-19, roughly 10 percent of the formula two years, such that roughly 60 percent of formula appropriation is distributed based on the student funding will be distributed through the base success allocation . Chapter 33 increases award allocation in 2020-21 . amounts over the subsequent two years, such that roughly 20 percent of the formula will be distributed Supplemental Allocation Designed Primarily based on performance in 2020-21 . to Benefit Low-Income Students. The formula provides an additional $919 for every student who Includes Several Provisions Easing Transition receives a Pell Grant, a need-based fee waiver, or to New Formula. Chapter 33 includes hold is undocumented and qualifies for resident tuition . harmless provisions for community college districts Student counts are “duplicated,” such that districts that would have received more funding under receive twice as much supplemental funding the former apportionment formula than the new ($1,838) for a student who is included in two of formula . For 2018-19, 2019-20, and 2020-21, these categories (for example, receiving both a Pell these community college districts are to receive Grant and a need-based fee waiver) . The allocation their total apportionment amount in 2017-18, is based on student counts from the prior year . adjusted for COLA each year of the period . Roughly 20 percent of the formula appropriation is Beginning in 2020-21, districts are to receive no distributed through the supplemental allocation . less than the per-student rate they generated in Figure 5 Student Success Allocation: Amounts by Student Outcome Measure and Student Type 2018-19 Additional Funding for Each: All Pell Grant Need‑Based Fee Outcome Measure Students Recipient Waiver Recipient Associate degree for transfer $1,760 $666 $444 Associate degree 1,320 500 333 Credit certificate requiring 18 or more units 880 333 222 Transfer-level math and English courses completed within the 880 333 222 student’s first academic year of enrollment Transfer to a four-year university 660 250 167 9 or more career technical education units completed 440 167 111 Regional living wage obtained within one year of community 440 167 111 college completion Note: Chapter 33 of 2018 (AB 1809, Committee on Budget) increases the award amounts in future years. In 2019-20, funding amounts are to increase by 50 percent. In 2020-21, funding amounts are to be double the 2018-19 levels. 18 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET 2017-18 under the former apportionment formula allocation) . In addition to funding systemwide multiplied by their current FTE student count . (In growth, the budget adjusts for enrollment adopting the new funding formula, the state also declines that districts experienced in 2017-18 and retained its longstanding one-year hold harmless anticipated enrollment restoration in 2018-19 . After provision that allows districts to receive the greater adjusting for declining enrollment (-3 .2 percent) of their calculated current- or prior-year allotments . and restoration (2 .3 percent), the 2018-19 budget This provision is designed to help districts with supports net enrollment growth of 0 .1 percent, declining enrollment .) representing about 1,000 FTE students . Assigns Certain Monitoring and Oversight Funds 2.71 Percent COLA. The budget Responsibilities to Chancellor’s Office. also provides colleges a total of $173 million Chapter 33 requires the Chancellor’s Office to to provide the statutory 2 .71 percent COLA for develop processes for monitoring implementation of apportionments . Additionally, the budget includes the funding formula . Most notably, the Chancellor’s a total of $12 million to provide COLA for four Office is required to develop minimum standards categorical programs: (1) Extended Opportunity for the types of certificates and awards that count Programs and Services, (2) Disabled Students towards the student success allocation . The Programs and Services, (3) CalWORKs Student primary objective is to monitor if any erosion in the Services, and (4) the Child Care Tax Bailout (which quality of awards occurs because of the new fiscal supports campus child care centers that serve as incentives . teaching labs for college students interested in Creates Formula Oversight early education) . Committee. Chapter 426 creates a 12-member Online College oversight committee, with the Assembly, Senate, and Governor each responsible for choosing Creates New Online Community College. four members . The committee is tasked with Chapter 33 creates a new online community reviewing and evaluating initial implementation college to be administered by the CCC Board of of the new funding formula . It also is tasked with Governors . The Board of Governors is to choose examining possible changes to the formula over the chief executive of the college . The chief the next few years . Specifically, by January 1, executive is required to establish an advisory 2020, the committee is to make recommendations council consisting of local trustees from other to the Legislature and Governor for including community colleges as well as employees of the first-generation college student data and incoming online college . academic proficiency data into the supplemental Provides $100 Million for Startup and allocation component of the formula . Then, $20 Million for Ongoing Operations. The startup by June 30, 2021, the committee is to make funding may be spread over a seven-year period recommendations relating to including noncredit and used for technology, building space, and instruction into the base and supplement allocation business plan development, among other things . components of the formula . The committee The funding for ongoing operations is intended is scheduled to sunset on January 1, 2022 . for the salaries and benefits of staff, staff training, Chapter 426 requires the Chancellor’s Office to and technology licensing and maintenance . When contract with a third party to staff the committee the college begins enrolling students, it is to for its duration . The Chancellor’s Office is expected receive apportionment funding similar to all other to absorb these contract costs within its existing community college districts, with the apportionment budget . funding coming on top of the college’s base Funds 1 Percent Enrollment Growth. $20 million ongoing allocation . The budget provides $60 million for 1 percent College Intended to Focus on Short-Term systemwide enrollment growth . This funding Pathways. Initially, the online college is intended to amount is based upon 2017-18 apportionment focus on short-term programs for working adults rates (rather than upon the new formula’s base who have no postsecondary credentials . Over the 19 analysis full gutter 2018-19 BUDGET next three years, the college is required to develop Requires Chancellor’s Office to Make at least three short-term program pathways Recommendations for Providing Existing linked with industry needs . These pathways Colleges More Flexibility. Chapter 33 requires may not be duplicative of programs offered at the Chancellor’s Office, by January 1, 2019, existing community colleges . In addition, for every to recommend to the Board of Governors 10 pathways offered by the online college, at least ways of making online and competency-based one pathway must be developed in collaboration programs easier and more attractive for colleges with an existing community college . The online to develop and operate . The Chancellor’s college also is to use existing industry certifications, Office recommendations must include ways to competency-based learning, and prior learning streamline the processes for (1) funding noncredit assessments to reduce the amount of additional competency-based programs and (2) offering online courses students need to complete their pathway . courses under a flexible calendar . Several Milestones and Reporting Faculty Requirements for College. Chapter 33 requires the new college to meet certain program, Funds More Full-Time Faculty. The budget administrative, and accreditation milestones within provides $50 million ongoing for colleges to hire the first seven years . Most notably, the online more full-time faculty . As a condition of receiving community college must begin enrolling students by funding, districts must increase the percentage of the last quarter of calendar year 2019; design and their instruction taught by full-time faculty . validate at least 13 program pathways by July 1, Funds More Part-Time Faculty Office 2023; and obtain full accreditation by April 1, 2025 . Hours. The budget provides $50 million one time College Exempt From a Few Requirements for part-time faculty office hours . The program Applying to Other Colleges. Most notably, the reimburses districts that compensate part-time new online college has flexibility with regard to faculty members for office hours related to their setting its academic calendar and establishing its teaching assignments . Districts must provide a student fee structure . The new college, however, one-to-one match for state funds . is subject to most other rules and regulations Apprenticeships that apply to existing community colleges . The college, for example, is required to spend at least Provides $37 Million One Time to Make Up 50 percent of its general operating budget on for Pro-Rata Reductions in Prior Years. These salaries and benefits of faculty and instructional funds are intended to backfill apprenticeship aides engaged in direct instruction . As with other sponsors (such as labor unions and businesses) colleges, it also is required to have its programs for pro-rata funding reductions that occurred from and courses reviewed and approved by the 2013-14 through 2017-18 . Though Apprenticeship Chancellor’s Office . funding increased from $23 million in 2013-14 to Provides Competitive Grants for Existing $40 million in 2017-18 and the underlying statutory Colleges to Develop New Online Programs. The hourly reimbursement rate increased from $5 .04 to budget provides $35 million one time for existing $5 .90, the number of apprenticeship instructional community college districts to develop online hours provided each year of the period notably programs and courses that (1) lead to short-term exceeded budget assumptions . As a result, the industry-valued credentials or (2) enable a student state applied pro-rata reductions to the program’s who completed a program at the new online reimbursement rates throughout the period . Of the community college to continue his or her education $37 million being provided to backfill these pro-rata at an existing community college . The Online reductions, $27 million goes to programs affiliated Education Initiative, administered by Foothill-De with school districts and $10 million goes to Anza Community College District, is to award these programs affiliated with community college districts . grants . Historically, programs for firefighting and the 20 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET construction trades have been among the largest the Full-Time Student Success Grant and the apprenticeship programs . Community College Completion Grant with a Provides $23 Million Ongoing Augmentation new program that has slightly different underlying for Apprenticeships in 2018-19. Of this amount, rules . The new program—the Community Colleges $19 million is associated with the number of Student Success Completion Grant—provides instructional hours funded . Specifically, the budget a $649 per semester grant for financially needy funds the same level of instructional hours in students enrolled in 12, 13, or 14 units and $2,000 2018-19 as the estimated level in 2017-18 (nearly for students enrolled in 15 or more units . The 10 million instructional hours)—about 3 million more budget provides $132 million for the new program, hours than originally budgeted for 2017-18 . The an increase of $41 million over the combined cost remaining $4 million is associated with increasing of the two prior programs in 2017-18 . As with the the hourly instructional reimbursement rate from prior programs, the new program is intended to $5 .90 to $6 .26 . help financially needy community college students with their living costs . Authorizes Community Colleges to Earn Credit Funding Rate Under Certain Provides Funding to Upgrade Financial Aid Circumstances. Chapter 33 authorizes community Management Systems. The budget provides colleges to generate the credit funding rate rather $14 million one time and $5 million ongoing for than the apprenticeship rate for instruction that colleges to upgrade these systems . The core (1) is offered on a credit basis and (2) is taught associated objective is to process state and by a community college instructor (as opposed federal financial aid grants more efficiently, thereby to an instructor employed by a sponsor, which reducing the staff time required to process aid currently is the most common staffing practice) . applications and increasing the staff time available The 2018-19 credit rate equates to an hourly rate for student outreach and guidance . of $7 .10 per student—13 percent higher than Other Ongoing the hourly apprenticeship rate . Moving forward, Programmatic Increases apprenticeship programs will need to begin reporting how much instruction is funded through Consolidates Large Student Support each of the two rate options . Programs Into Block Grant. Chapter 33 combines the Student Success and Support Program, Financial Aid including funding for student equity plans, and Funds Expanded Eligibility for Fee Waivers. the Student Success for Basic Skills program The budget provides $46 million for the expansion into a block grant named the Student Equity and of the California College Promise Grant program . Achievement Program . As a condition of receiving Chapter 735 of 2017 (AB 19, Santiago) expanded funds, districts are required to develop student the fee waiver program to students who do equity plans, deliver student matriculation services not demonstrate financial need . Specifically, it (such as orientation, counseling, and advising), authorizes fee waivers for all resident first-time, and adopt assessment and placement policies, full-time students during their first year of college . as specified under current law . Funding for the (Though the cost of the expanded program is new program ($475 million statewide) is based on calculated assuming all these students obtain fee districts’ 2017-18 allocations for the consolidated waivers, the authorizing legislation allows colleges categorical programs . Chapter 426 additionally to use their program allotments for other purposes, requires districts and the Chancellor’s Office to such as providing more student support services .) report annually on how block grant funds were To receive funding, colleges must meet various spent and their effectiveness in advancing student requirements, such as participating in the Guided outcomes . Pathways initiative . Augments NextUp Program for Foster Youth Restructures Some Financial Aid for by $5 Million. This program provides support Students’ Living Costs. Chapter 33 replaces services for current and former foster youth enrolled 21 analysis full gutter 2018-19 BUDGET in the community colleges . The program—also science degree in a high-tech field or an associate known as the Cooperating Agencies Foster Youth degree for transfer in science, technology, Educational Support Program—initially received engineering, or mathematics (STEM) . Participating $15 million in 2015-16 and was authorized to businesses must provide students with on-the-job operate at up to ten community college districts . experience and agree to give students who Chapter 722 of 2017 (SB 12, Beall) authorized up complete the program first priority for available to 20 districts to participate in the program, but it full-time jobs . The grants are to be spent over a did not provide additional funding to support the six-year period . expansion . The additional $5 million provided in Other Augmentations. The budget also 2018-19 is intended to support some expansion . provides: Provides Ongoing Funding for Course • $6 million one time for the CCC Academic Identification (C-ID) Numbering System. The Senate to develop and expand the use of budget provides $685,000 to the CCC Academic open educational resources . Senate in support of the C-ID system . This system, • $5 million one time to expand or create new which was created in 2007, is intended to promote veteran resource centers on community common numbering of comparable courses offered college campuses . by college campuses . The Academic Senate had previously received one-time funding for the C-ID • $5 million one time for a competitive grant system . program intended to help colleges improve their support services for currently and Increase for CCC Academic Senate. The formerly incarcerated students . Participating budget increases ongoing funding for the CCC colleges must provide at least $50,000 in Academic Senate by $232,000, bringing total matching funds and develop a long-term plan ongoing funding to $1 million . that describes how the college will ensure the Other One-Time Initiatives services funded by the grant are sustainable in the long run . Funds Various Student Services. The budget • $5 million one time to support career includes several one-time allocations for colleges pathways for refugees through the Strong to help students with various issues outside Workforce Program . Grant recipients are to of core academic instruction . Specifically, the partner with nonprofit organizations to provide budget includes $10 million to provide mental related social services . health services to students, $10 million to address student hunger at community college campuses, • $5 million one time for training classified and $10 million to provide legal services to community college employees . Districts are undocumented students on community college required to consult with classified union staff campuses . in determining what type of training to provide . Funds Three College-Specific Projects. • $2 million one time through the Strong Specifically, the budget provides $10 million for Workforce Program to expand enrollment in a new public safety training center at El Camino CNA training programs . College, $5 million for a new early childhood • $1 .9 million one time to backfill community education center at Norco College, and $800,000 college districts for losses in property tax for capital improvements at the Los Angeles Valley revenue in 2017-18 due to wildfires . College Family Resource Center . Creates New STEM Pathways Program. The State Operations budget includes $10 million for competitive grants Increases Chancellor’s Office Staffing. The to encourage schools and community colleges to budget provides a $2 million non-Proposition 98 work together with industry to develop workforce General Fund augmentation for the Chancellor’s training programs spanning grades 9 through 14 . Office, bringing total non-Proposition 98 support The programs are to culminate in an associate in 22 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET up to $17 million . The budget package does not projects . The budget funds preliminary plans specify the number of new associated positions for all six projects and working drawings for five or the specific workload to be supported with the of the six projects . Three of the projects entail additional funds . Based upon information provided constructing new facilities whereas the other three by DOF and the Chancellor’s Office, the funds are projects involve renovating or replacing existing intended to cover workload associated with various buildings . A list of all these projects is on our recent initiatives—such as the Guided Pathways EdBudget website . The six projects were among initiative and changes to student remediation and the 15 projects approved by the Chancellor’s Office placement—as well as new initiatives adopted as in fall 2017 and recommended for inclusion in the part of the 2018-19 budget package—such as the 2018-19 budget . The state did not approve the new funding formula and online community college . remaining nine projects this year . Funds Second Phase of Projects Approved Facilities Last Year. The budget also allocates $40 million in Provides Maintenance and Equipment Proposition 51 bond funds for subsequent phases Funding. The budget provides $28 million of 15 projects approved last year . For 14 projects, one-time Proposition 98 funding that districts may the budget includes funding for working drawings . use for scheduled maintenance, special repairs, For one project using a design-build process, hazardous substances abatement, architectural the budget includes funding for both design and barrier removal, certain seismic retrofit projects, construction . A list of all these projects also is on water conservation projects, and replacement of our EdBudget website . instructional equipment and library materials . The Funds Construction Phase of One Previously funds are allocated to districts based on their FTE Approved Project. The budget provides enrollment (counting both credit and noncredit $14 million in Proposition 1D (2006) funds to instruction) . replace an instructional building at Compton Funds Six New Capital Outlay Projects. The College . The state originally provided funding budget authorizes $10 million Proposition 51 2015-16, but funding was not spent due to project (2016) bond funding for six new capital outlay delays . EARLY EDUCATION $4.7 Billion Total Spending on Early Education increase, with various other adjustments comprising Programs. Of this amount, $2 .3 billion is for the remainder of the increase . We describe these preschool programs, $2 .3 billion is for other child augmentations below . development programs, and $144 million is for Slots support programs . As Figure 6 shows (see next page), the 2018-19 Budget Act augments these Funds Additional Alternative Payment Slots. programs by a total of $655 million (16 percent) The budget provides $205 million federal funds from the revised 2017-18 level . Non-Proposition 98 for 11,307 new Alternative Payment slots starting General Fund covers about half of this increase July 1, 2018 . This funding is tied to an increase in ($324 million), with Proposition 98 General Fund the amount of available federal funds . To address ($148 million) and federal funds ($183 million) some uncertainty regarding whether the increase in comprising the rest of the increase . the federal grant will be ongoing, the funds are to Higher Spending Due to Slot and Rate be spent over a two-year period (through June 30, Increases. As Figure 7 shows (see page 25), more 2020) . Despite some uncertainty, the state expects slots and higher reimbursement rates account to receive the same increase in federal funds in for the vast majority of the year-over-year funding 2019-20 . If California receives this additional federal 23 analysis full gutter 2018-19 BUDGET funding, the Legislature and Governor intend to use the Legislature and Governor agreed to add as part it to sustain the 11,307 slots for another two years of a 2016-17 multiyear budget agreement . (2020-21 and 2021-22) . The budget also provides Reimbursement Rates $16 million ongoing non-Proposition 98 General Fund for 2,100 new Alternative Payment slots Increases Standard Reimbursement Rates starting September 1, 2018 . (SRR). The state funds State Preschool, General Funds Additional State Preschool Slots. The Child Care, a portion of Migrant Child Care, and budget provides $19 million to annualize the cost Care for Children with Severe Disabilities based on of 2,959 preschool slots added April 1, 2018 . The the SRR . The 2018-19 budget provides $48 million budget also provides $8 million for 2,959 new General Fund ($32 million Proposition 98 and full-day State Preschool slots at LEAs starting $16 million non-Proposition 98) to increase April 1, 2019 . This increase represents the third of the SRR by 2 .8 percent . The new rate for a three equal batches of State Preschool slots that full-day, center-based State Preschool slot is Figure 6 Early Education Budget (Dollars in Millions) Change From 2017‑18 2016‑17 2017‑18 2018‑19 Actual Revised Enacteda Amount Percent Expenditures CalWORKs Child Care Stage 1 $418 $323 $331 $7 2.3% Stage 2 445 508 560 52 10.2 Stage 3 284 348 399 51 14.7 Subtotals ($1,147) ($1,179) ($1,289) ($110) (9.4%) Non‑CalWORKs Child Care Alternative Payment Program $283 $292 $530 $237 81.2% General Child Care 308 340 412 72 21.0 Bridge program for foster children — 20 41 21 103.3 Migrant Child Care 31 35 40 6 15.9 Care for Children With Severe Disabilities 2 2 2 —b 5.3 Subtotals ($623) ($689) ($1,024) ($335) (48.6%) Preschool Programs Transitional Kindergarten $789 $811 $865 $55 6.8% State Preschool—full day 627 738 804 66 9.0 State Preschool—part day 447 503 538 35 7.0 Preschool QRIS Grant 50 50 50 — — Subtotals ($1,913) ($2,101) ($2,257) ($156) (7.4%) Support Programs $89 $91 $144 $53 58.3% Totals $3,772 $4,060 $4,715 $655 16.1% Funding Proposition 98 General Fund $1,764 $1,933 $2,081 $148 7.6% Non-Proposition 98 General Fund 984 1,099 1,423 324 29.5 Federal CCDF 639 635 857 222 35.0 Federal TANF 385 388 344 -44 -11.3 Federal Title IV-E — 5 10 5 104.0 a The 2018-19 budget plan also funds Inclusive Early Education Expansion Program ($167 million) using 2017-18 Proposition 98 General Fund. Funding for this proposal is not included in this table. b Less than $500,000. QRIS = Quality Rating and Improvement System; CCDF = Child Care and Development Fund; and TANF = Temporary Assistance for Needy Families. 24 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET $12,070 per year, whereas the new rate for a • Infants: from 1 .7 to 2 .44 . full-day, center-based General Child Care slot for • Toddlers: from 1 .4 to 1 .8 . a preschool-aged child is $11,995 per year . The • Children with exceptional needs: from 1 .2 to 2 .8 percent increase applies to rates for centers, 1 .54 . family child care homes, and all age groups . • Children with severe disabilities: from 1 .5 to Increases Certain Adjustment Factors. The 1 .93 . state adjusts the SRR for certain higher-cost groups of children, including infants, toddlers, (An adjustment factor of 1 .5 reimburses providers children with exceptional needs, and children with at 1 .5 times the rate for other children . The infant severe disabilities . The state also adjusts regional and toddler adjustments are relative to the base market rates (RMR) for these latter two groups SRR used for General Child Care programs .) of children . The budget provides $40 million Permanently Extends Regional Market Rate non-Proposition 98 General Fund to increase the (RMR) Hold Harmless Provision. The budget adjustment factors listed below in the following provides $14 million ($13 million non-Proposition 98 ways, beginning January 1, 2019: General Fund and $1 million federal funds) to permanently extend the RMR hold harmless Figure 7 2018‑19 Early Education Changes (In Millions) General Fund Federal Change Prop. 98a Non‑Prop. 98 Funds Total Slots Provides 11,307 Alternative Payment slots available until June 30, 2020 — — $205 $205 Annualizes cost of State Preschool slots initiated April 1, 2018 $19 — — 19 Provides 2,100 Alternative Payment slots starting September 1, 2018 — $16 — 16 Provides 2,959 full-day State Preschool slots at LEAs starting April 1, 2019 8 — — 8 Subtotals ($28) ($16) ($205) ($248) Reimbursement Rates Provides 2.71 percent COLA to certain child care and preschool programs $30 $24 — $54 Increases Standard Reimbursement Rates 2.8 percent starting July 1, 2018 32 16 — 48 Provides increase to certain adjustment factors starting January 1, 2019 — 40 — 40 Annualizes Regional Market Rate (RMR) increase initiated January 1, 2018 — 20 $4 24 Permanently extends RMR hold harmless provisionb — 13 1 14 Subtotals ($62) ($113) ($5) ($180) Other Makes CalWORKs caseload and average cost of care adjustments — $108 -$7 $101 Adjusts Transitional Kindergarten for increases in attendance and LCFF funding rate $55 — — 55 Provides one-time increase to quality support programs — — 26 26 Provides funds to annually inspect licensed child care providers — — 26 26 Annualizes funding for bridge program for foster children initiated January 1, 2018 — 16 5 21 Reduces non-CalWORKs slots by 0.48 percentc -5 -4 — -9 Makes other technical adjustments 9 -2 — 7 Replaces federal funds with state funds (accounting adjustment) — 77 -77 — Subtotals ($59) ($195) (-$27) ($227) Totals $148 $324 $183 $655 a Enacted budget also funds Inclusive Early Education Expansion Program ($167 million one time) using 2017-18 Proposition 98 General Fund. b The RMR hold harmless provision was set to expire December 31, 2018. c Reflects statutory adjustment based on the projected decrease in the birth-through-four population. COLA = cost-of-living-adjustment; LEA = local education agency; and LCFF = Local Control Funding Formula. 25 analysis full gutter 2018-19 BUDGET provision so that no provider moving forward license-exempt providers to help them receives less than it received on January 1, 2018 . become licensed providers . (The hold harmless provision was set to expire • $5 million for professional development for December 30, 2018 .) The budget also includes licensed child care teachers . $24 million to annualize the RMR rate increase initiated January 1, 2018 . Other Changes Quality Support Programs Makes Adjustments to CalWORKs Child Care. The budget adjusts CalWORKs child care spending Funds Inclusive Early Education Expansion up by $101 million compared to the revised Grants. The budget provides $167 million 2017-18 level . The bulk of the year-over-year Proposition 98 General Fund for one-time increase is due to major policy changes enacted competitive grants to school districts and other last year costing much more than anticipated . child care and preschool providers for the purpose Specifically, the 2017-18 budget substantially of increasing access to inclusive early education increased the exit income threshold and allowed programs . Grants could be used for a variety of families to demonstrate eligibility only once a year one-time expenses, including training, facility (rather than having to maintain eligibility throughout renovations, and equipment . Grant recipients must the year) . These eligibility changes allow families to provide $1 in local funds for every $2 received remain in the program longer and reduce the rates through the grant . Grant recipients also must of fluctuation in and out of the program . The budget commit to provide program data and participate in also accounts for changes in average cost of care an evaluation . based on families using different types of providers, Funds Annual Inspections of Licensed Child serving children of different ages, or providing more Care Providers. The budget provides $26 million average hours of care per day . federal funds to inspect licensed child care Makes Statutory Adjustments to providers more frequently . Currently, Community Non-CalWORKs Child Care and Preschool Care Licensing (CCL), a division of the Department Programs. The budget provides $54 million to of Social Services, typically inspects licensed child fund a 2 .71 percent COLA for non-CalWORKs child care providers once every three years . Federal care programs and the State Preschool program . law requires states to inspect licensed child care For the programs that receive the SRR, the COLA providers annually . California currently has a waiver augments the rate that providers receive . In the from this requirement that is set to expire October Alternative Payment program, the COLA effectively 2018 . creates extra child care slots . The budget also Funds Other Quality Improvement Activities. makes a $9 million downward adjustment to these The budget provides $26 million one-time federal programs reflecting an estimated 0 .48 percent funds for various quality improvement initiatives: decrease in the birth-through-four population in • $10 million for a three-year pilot program California . focused on including children with exceptional Augments Transitional Kindergarten (TK). needs in mainstream early education settings . The budget adds $55 million for TK . This increase • $6 million to be spent at the discretion is due to a 6 .1 percent increase in LCFF funding, of CDE, with first call for ensuring state offset by a slight expected decrease in TK average compliance with federal consumer education daily attendance . requirements, including making basic Clarifies Licensing Standards for LEA-Run information on child care providers available to State Preschool Programs. The 2017-18 budget parents . plan exempts State Preschool programs run by • $5 million for the Child Care Initiative LEAs from certain health and safety standards, Project, which recruits and trains existing known as Title 22 standards, beginning July 1, 2019 . The 2018-19 budget includes several 26 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET provisions to clarify rules for these programs Clarifies That an LEA Can Serve Both once the exemption takes effect . Specifically, State Preschool and TK Students in a Single Chapter 32 clarifies that the exemption from Title Classroom. In addition, Chapter 32 specifies the 22 standards applies to any classroom serving at requirements that apply when State Preschool least one State Preschool student . The legislation and TK students are served in a single classroom also requires CDE to add certain health and and program requirements conflict . Most notably, safety requirements to Title 5 regulations, which Chapter 32 requires mixed classrooms be taught govern all State Preschool programs . In addition, by a teacher with a multiple subject teaching Chapter 32 requires LEA-run State Preschool credential (the current TK requirement) and have programs to use CDE’s uniform complaint a staffing ratio of one adult per 8 children (the procedures for addressing health and safety current State Preschool requirement) . In addition, complaints and to use expedited response timelines Chapter 32 requires all students in a mixed that currently apply to school facility health and classroom be evaluated with the Desired Results safety issues . Developmental Profile (typically only required for State Preschool students) . HIGHER EDUCATION In this section, we discuss notable budget were CSU to increase tuition levels . The amount changes for the California State University, of any such reduction would equal the amount of University of California, Hastings College of the estimated state cost increases to the Cal Grant and Law, California Student Aid Commission, and the the Middle Class Scholarship programs resulting California State Library . from a tuition increase . The provisional language requires the Director of Finance to notify the Joint California State University Legislative Budget Committee at least 30 days $7.4 Billion Total Spending on CSU’s Core before making any such reduction . Program in 2018-19. As Figure 8 shows, $4 .1 billion (56 percent) Figure 8 is state General Fund, $3 .2 billion California State University Core Funding by Source (43 percent) is student tuition and fee revenue, and $53 million (Dollars in Millions) (0 .7 percent) is other state funding Change From 2017‑18 2016‑17 2017‑18 2018‑19 (primarily lottery revenue) . Core Actual Revised Enacted Amount Percent spending increases by $377 million Core Funds (5 .4 percent) over 2017-18 . The General Fund increase consists mostly of higher Ongoinga $3,454 $3,719 $3,959 $240 6.5% General Fund support, with a small One time 110 47 163b 117 250.7 increase in tuition revenue due to Subtotals ($3,564) ($3,765) ($4,122) ($357) (9.5%) enrollment growth . Tuition levels Tuition and feesc $3,077 $3,168 $3,188 $20 0.6% are intended to remain flat from Other state fundsd 50 53 53 — — 2017-18 to 2018-19 . Totals $6,691 $6,986 $7,362b $377 5.4% Reduces General Fund a Includes funding for pensions and retiree health benefits. b Support if CSU Raises Tuition In addition, the budget appropriates $7 million one-time General Fund to the Department of Social Services for provision of legal services to undocumented students and immigrants at CSU campuses. in 2018-19. The budget includes c Includes funds that CSU uses to provide tuition discounts and waivers to certain students. In 2018-19, CSU plans to provisional language that allows provide $702 million in such aid. d Includes lottery funds and, beginning in 2017-18, $2 million ongoing from the State Transportation Fund for the Director of Finance to reduce transportation research. CSU’s General Fund appropriation 27 analysis full gutter 2018-19 BUDGET Provides $240 Million (6.5 Percent) Ongoing Designates $163 Million General Fund for General Fund Increase. As Figure 9 shows, Various One-Time Purposes. The largest increase $122 million is an unrestricted augmentation, which is $120 million for enrollment growth of 3,641 CSU intends to use primarily for implementing full-time equivalent (FTE) undergraduate students collective bargaining agreements ratified by (1 percent over the 2017-18 level) . Provisional the Board of Trustees in 2018-19 and covering language permits CSU to spend these funds over other employee-related cost increases, including a four-year period to support the student cohort . higher health premiums for active employees . The Prior to spending these funds, CSU must notify remaining $118 million in ongoing funding is for the Legislature and DOF on how it will distribute various other costs, including providing additional these enrollment growth slots among its campuses instruction and support services as part of the and how much of the total it expects to spend Graduation Initiative and covering higher pension each year . The remaining $43 million in one-time costs and retiree health care costs . The budget funding is associated with six initiatives . The largest includes provisional language requiring CSU to of these is $35 million for deferred maintenance . earmark at least $25 million of its base funding to This deferred maintenance spending is part of increase the number of tenure-track faculty above a larger package of spending across numerous the 2017-18 level . agencies discussed later in this report . Outside of CSU’s main appropriation item, the budget appropriates $7 million Figure 9 one-time General Fund to the California State University General Fund Changes Department of Social Services for contracting with an external (In Millions) group to provide legal services 2017‑18 Revised Spending $3,765.4 to undocumented and immigrant Ongoing students, faculty, and staff at CSU Unrestricted increase $122.1 campuses . Graduation Initiative 75.0 Authorizes CSU to Fund Five Pension adjustment 22.5 Facility Projects. The 2018-19 Retiree health benefits adjustment 20.3 Center for California Studiesa 0.2 state cost of these projects totals Subtotal ($240.1) $109 million . The associated annual debt service is estimated to One Time be about $7 million . CSU indicates Enrollment growthb $120.0 it will support debt service using Deferred maintenance 35.0 Shark research at the Long Beach campus 3.8 existing funds . The projects range Open educational resourcesc 1.7 from a new academic building at Student hunger and basic needs 1.5 the San Luis Obispo campus to Mervyn M. Dymally Institute at the Dominguez Hills campus 1.0 equipment at the Pomona campus . Science and Technology Policy Fellows Program 0.4 A list of all authorized projects is Remove one-time funding provided in prior years -46.6 on our EdBudget website . Though Subtotal ($116.7)d CSU and DOF originally proposed Total $356.8 funding 27 projects, serious 2018‑19 Enacted Spending $4,122.3d concerns over the quality of the a Reflects $100,000 for the Education Policy Fellowship Program, $86,000 for a cost-of-living proposals led to the Legislature adjustment for the Capital Fellows Program, and $24,000 for the Sacramento Semester Program. b and administration scaling back Intended to fund a cohort of 3,641 full-time equivalent students over a four-year period. c Funding authorized pursuant to Chapter 633 of 2015 (AB 798, Bonilla). project approvals this year . d In addition, the budget appropriates $7 million one-time General Fund to the Department of Social Services for provision of legal services to undocumented students and immigrants at CSU campuses. 28 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET University of California Figure 10 $9.1 Billion Total Spending on University of California Core Funding by Source UC’s Core Program in 2018-19. (Dollars in Millions) As Figure 10 shows, $3 .8 billion Change From 2017‑18 (41 percent) is state General 2016‑17 2017‑18 2018‑19 Fund, $4 .9 billion (54 percent) Actual Revised Enacted Amount Percent is student tuition and fees, and General Fund $437 million (5 percent) is from Ongoing $3,279 $3,367 $3,475 $108 3.2% other revenue sources (including One time 262 177 249 72 40.9 overhead on state and federal Carryovera -45 5 39 34 639.0 research grants and lottery funds) Subtotals ($3,496) ($3,549) ($3,764) ($214) (6.0%) that UC allocates for its education Tuition and feesb $4,507 $4,816 $4,928 $112 2.3% programs . Core funding increases Lottery 38 42 42 —c -0.1 $316 million (3 .6 percent) over Other core fundsd 353 405 395 -10 -2.5 2017-18 . The increase consists Totals $8,394 $8,813 $9,129 $316 3.6% a of higher General Fund support, Of the $262 million one time provided in 2016-17, $45 million was unspent. UC plans to spend $5 million of the carryover in 2017-18 and the remainder in 2018-19. additional support from nonresident b Includes funds that UC uses to provide tuition discounts and waivers to certain students. In 2018-19, UC plans to tuition increases, and a small provide $1 billion in such aid. c Less than $500,000. increase in tuition revenue due to d Includes a portion of overhead funding on federal and state grants, a portion of patent royalty income, and Proposition enrollment growth . As with CSU, 56 funding designated for graduate medical education. systemwide tuition and fee levels are intended to remain flat from Fund and redirects $15 million from within UC’s 2017-18 to 2018-19, and the budget package budget . The redirections implement a 2017-18 contains provisional language reducing General Budget Act provision requiring the university to Fund support were UC to raise tuition . As with CSU, identify existing programs from which funds could be the specific reduction is connected to the associated redirected . Our EdBudget website includes a table increase in Cal Grant and Middle Class Scholarship listing all the identified programs, along with the costs for UC students . (The language does not apply amount redirected from each program for enrollment to increases in the Student Services Fee .) growth . If UC enrolls fewer than the expected Provides 3 Percent Ongoing General Fund 2,000 students, the 2018-19 Budget Act contains a Increase. As Figure 11 shows (see next page), provision reducing General Fund support by $10,000 the budget provides UC with a $92 million increase for each student below the enrollment target . in unrestricted ongoing General Fund support . Provides $105 Million One-Time Unrestricted The university likely will use this amount to cover Increase. This funding is designated for “general salary increases, employee benefit cost increases, university needs .” Though the budget does not pension cost increases, and other operating cost specify the exact use of the funds, provisional increases over the coming year . The budget also language states legislative intent that the funds includes $10 million ongoing General Fund support be used to enroll more resident undergraduate to backfill one-time Proposition 56 monies provided students and augment services and programs that to UC in 2017-18 . improve student outcomes . Supports 1.1 Percent Enrollment Growth. Provides $56 Million One Time for Three The budget provides $20 million to support 2,000 Physician Training Programs. These funds are additional resident undergraduate students in allocated as follows: 2018-19 compared to 2017-18, with the goal of admitting at least one transfer student for every two • Primary and Emergency Care Residency freshman students . The enrollment is supported Slots ($40 Million). Budget documents with a mix of General Fund and redirected funds . indicate these General Fund monies Specifically, the budget provides $5 million General are intended to be used to supplement 29 analysis full gutter 2018-19 BUDGET Proposition 56 (2016) funds for physician • UC Davis and UC Irvine Psychiatry residency slots primarily in the areas of Scholarships ($1 Million). Provisional primary care and emergency care . UC has language specifies that these Mental Health discretion in how it distributes these funds Services Act monies (passed through the amongst hospitals . Office of Statewide Health Planning and • UC Riverside School of Medicine Development) are for scholarships for Residency Slots ($15 Million). Provisional physicians enrolling in these two programs . language specifies that these General Fund The programs are one year in duration and monies are for accredited psychiatry programs provide advanced training on primary care that use telemedicine . The budget directs psychiatry . UC to report to the Legislature annually on Provides $16 Million One Time for Three the use of the funds . UC has until June 30, Research Initiatives Involving UC. Specifically, 2023 to spend the funds . the budget provides $12 million to the UC Davis Institute for Regenerative Cures to research “Jordan’s Syndrome”—a rare Figure 11 disorder resulting from a genetic University of California General Fund Changes mutation that is thought to cause autism and other neurological (In Millions) disorders . The budget also 2017‑18 Revised Spending $3,549.4 provides $3 million directly to UC Ongoing for research on Valley Fever—an Unrestricted increase (3 percent) $92.1 infectious disease caused by a Replace one-time Proposition 56 funds with General Fund 10.0 fungus that lives in the soil and is Resident undergraduate enrollment growth (2,000 students)a 5.0 acquired by inhaling contaminated Center for Global Conflict and Cooperation 1.0 dust . (In addition, the budget Subtotal ($108.1) passes $3 million through the One time California Department of Public General university needsb $105.0 Health for similar research at Primary and emergency care residency slots 40.0 Kern Medical Center, a nonprofit Carryover reappropriated for original purposes 39.5 teaching hospital located in Deferred maintenance 35.0 UC Berkeley operating deficit 25.0 Bakersfield .) The budget also Psychiatry residency slots 15.0 provides $500,000 for the California Jordan’s Syndrome research 12.0 Vector-Borne Disease Surveillance Legal services for undocumented and immigrant students and employees 4.0 Gateway (CalSurv), located at UC Valley fever research 3.0 Davis, which compiles data on UC Davis Aggie Square project planning 2.8 mosquitos and mosquito-borne Equal employment opportunity activitiesc 2.0 health threats . Ralphe J. Bunche Center for African American Studies 1.8 Student hunger and basic needsd 1.5 Provides $74 Million One Anti-bias training 1.2 Time for Other Priorities. These Mosquito surveillance 0.5 priorities include $35 million for Remove prior-year one-time funding -181.9 deferred maintenance, also part Subtotal ($106.3) of the state’s larger deferred Total $214.4 maintenance package . It includes 2018‑19 Enacted Spending $3,763.8 $25 million to help UC Berkeley a Another $15 million is redirected from within UC’s budget, for total support of $20 million. address its budget deficit . The b The budget states legislative intent that the funds be used for enrollment growth and services and programs that budget conditions these funds on improve student outcomes. c Reflects third consecutive year of one-time funding. the campus submitting a plan by d Reflects second consecutive year of one-time funding. December 1, 2018 to eliminate its 30 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET deficit . The remaining $14 million is spread across $8 .6 million, $6 million comes from UCOP’s six other initiatives involving certain staff training administrative budget, $2 million comes activities and certain student services . In addition from various initiatives established by the UC to these initiatives, the budget provides $150,000 President, and $551,000 comes from three General Fund one time to the Underground other small programs eliminated from UCOP’s Scholars Initiative at UC Berkeley, with the funds budget . passed through the Board of State and Community • Specifies Amount Used for Agriculture and Corrections . Natural Resources (ANR) Division. The ANR Authorizes UC to Undertake Nine Capital Division oversees several agricultural research Outlay Projects. The 2018-19 state cost of these and outreach programs in partnership projects totals $301 million . Four of the projects with federal and local agencies . Within the (totaling $153 million in state funding) involve $288 million provided for UCOP’s operations, constructing new academic space and one entails the budget designates $73 million for this constructing an addition to the Northern Regional division . The earmarked amount reflects the Library Facility, located in Richmond . The other same level of support as provided to the projects focus on correcting various seismic and ANR Division in 2017-18 . The earmarking life-safety deficiencies . All of projects UC originally is intended to lend greater transparency to proposed this year ended up being authorized UCOP’s budget . by the state . A list of all these projects is on our • Augments Funding for UCPath With EdBudget website . To finance the projects, UC will Campus Charges. The budget continues sell university bonds and pay the associated debt to designate $52 million General Fund for service using its state General Fund appropriation . the UCPath project but authorizes UC to UC estimates the annual debt service for these assess up to $15 million in campus charges projects to be $22 million . to support the project . UC indicates that the Adjusts Budgeting of UCOP. Prior to 2017-18, augmentation from the campus charges would UC allocated all General Fund support directly to fund the first year of a two-year plan to deploy the campuses . To fund UCOP’s core operations the UCPath center at all campuses . and programs, the central office assessed each campus a charge . In an effort to improve Office of Planning and Research transparency and oversight over UCOP’s budget, Provides $10 Million Ongoing General Fund the state in 2017-18 changed this arrangement . for New Online Learning Lab. The purpose of Specifically, the state budget itemized $349 million the new California Education Learning Laboratory of UC’s General Fund appropriation for UCOP and is to expand lower-division online and hybrid directed UC to eliminate the campus charges . courses at the state’s three public higher education Of this amount, $296 million was designated for segments . (This is a separate program from the UCOP’s operations and $52 million for the UCPath online initiatives the state already funds at the three project . UCPath is a payroll and human resource segments .) At least for the first three years, the service center ultimately intended to be used by program will focus exclusively on STEM courses . all UC campuses . The 2018-19 budget makes the After three years, the program is permitted to add following three adjustments to these line items: online and hybrid courses in other disciplines . The • Reduces UCOP Budget. The budget program is to be administered by the Office of designates $288 million for UCOP operations, Planning and Research (OPR), which is charged an $8 .6 million (2 .9 percent) reduction from with awarding competitive grants to intersegmental the 2017-18 level . The budget redirects this teams of faculty . Trailer language allows OPR, $8 .6 million to support enrollment growth in however, to contract with another entity, such as a 2018-19, as part of the $20 million funding nonprofit organization, to administer the program . arrangement described earlier . Of the 31 analysis full gutter 2018-19 BUDGET Provides $30 Million One Time General Fund 2018-19—reflecting a $2 million operating deficit . for Precision Medicine. The amount represents The school intends to cover the deficit by drawing the fourth year of funding for research on precision down its reserves . The school projects it will medicine, which aims to improve health care end 2018-19 with general purpose reserves of through better use of advanced computing, $11 million—significantly lower than its reserve of technology, and data . Funds in previous years $26 million at the end of 2015-16 . The 2018-19 generally have supported projects researching academic year represents the start of an internal, new technologies and data tools to monitor and multiyear plan to eliminate Hastings operating diagnose certain health issues . In addition, a deficit . The plan relies primarily on decreases in portion of past funding has been used to develop a financial aid awards (beginning in 2018-19) and database of precision medicine research activities increases in tuition revenue (beginning in 2019-20) . in the state and available government and private Under the budget plan, Hastings’ operating deficit fund sources to support research projects . The would be eliminated by 2021-22 . administration indicates that funds in 2018-19 Student Financial Aid would support similar projects . $2.4 Billion Total Spending on Student Aid Hastings College of the Law Commission-Run Financial Aid Programs $65 Million Total Funding for Hastings in in 2018-19. As Figure 12 shows, $1 .3 billion 2018-19. Of this amount, $43 million (66 percent) (54 percent) is state General Fund, $1 .1 billion is tuition and fee revenue, $20 million (31 percent) (45 percent) is federal Temporary Assistance is state General Fund, and $1 .7 million (3 percent) for Needy Families (TANF) funding, and is other funding, such as investment income, that $27 million (1 percent) is state special funds and the college allocates for its education programs . reimbursements . Financial aid spending from these (The General Fund amount does not include general sources increases a net of $72 million (3 .1 percent) obligation bond debt service on Hastings projects, from the revised 2017-18 level . Ongoing spending which is estimated to be $795,000 in 2018-19 .) increases $70 million and one-time spending After accounting for all changes, core funding increases $5 .5 million . These increases are offset increases $7 .9 million (13 .8 percent) over 2017-18 . by $3 .5 million in reductions to state operations due General Fund Increases by $7.6 Million. to backing out prior-year one-time funding . Year Of this amount, $1 .1 million is ongoing and over year, General Fund increases by $46 million, $6 .5 million is for three one-time initiatives . Virtually TANF funds increases by $23 million, and special all of the school’s ongoing increase is unrestricted, funds and reimbursements increase by $4 .2 million . with Hastings indicating it likely will use this funding Covers Higher Cal Grant Costs. The budget primarily for employee compensation increases . Of increases Cal Grant funding by $66 million in the one-time funds: 2018-19 . Of this increase, $57 million is for changes in Cal Grant participation . Another • $4 .5 million is for a new diversity pipeline $5 .2 million is for expanded Cal Grant B eligibility initiative . for foster youth, as described below . The budget • $1 .5 million is for consultants and various also assumes UC increases the Student Services activities intended to assist the school in Fee by 4 .8 percent and provides $4 .2 million to aligning its administrative processes with the cover the higher associated Cal Grant costs . new UCPath system by 2019-20 . (Following budget enactment, the UC Board of • $500,000 is for deferred maintenance projects Regents decided not to raise the fee for 2018-19 .) at the law school, also part of the state’s Expands Cal Grant B Eligibility for Foster larger package of projects . Youth. The Cal Grant B provides $1,672 per recipient in aid for living expenses . It also provides School Has $2 Million Operating Deficit in tuition coverage at most institutions after the 2018-19. Though Hastings is receiving $65 million first year of study . Chapter 33 of 2018 (AB 1809, in core revenue, it plans to spend $67 million in 32 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Committee on Budget) makes three Cal Grant B cost . Although the Chafee program is not an changes for foster youth students . It (1) entitles entitlement program, staff at CSAC indicate that foster youth to receive a Cal Grant B until they are the intent of the augmentation is to cover all eligible 26 years of age regardless of when they graduated foster youth . from high school, (2) increases the amount of time Maintains Cal Grant Award Amount for foster youth recipients can renew their grants from Nonprofit Schools, With Conditions. The four years to eight years of full-time study, and 2012-13 budget amended state law to lower (3) extends the deadline to apply for a Cal Grant the Cal Grant from $9,084 to $8,056 starting B from March 2 to September 2 for foster youth in 2014-15 for students attending nonprofit attending CCC . schools, as well as for students attending for-profit Also Expands Chafee Eligibility for Foster institutions accredited by the Western Association Youth. The Chafee program provides foster youth of Schools and Colleges (WASC) . Subsequent up to $5,000 in aid generally for living expenses . budget actions have postponed the scheduled The program is funded from a mix of state and reduction . Chapter 33 repeals the scheduled federal funds . Both state and federal funds reduction for the nonprofit sector but ties the flow from the Department of Social Services to $1,028 award differential to the sector admitting the California Student Aid Commission (CSAC) a specified number of students with an associate through an interagency agreement . Chapter 33 degree for transfer each year . If the sector fails also expands the eligible age a foster youth to admit the specified number of students each can receive a Chafee grant to 26 years old . The year, the Cal Grant is to be reduced to $8,056 budget provides the Department of Social Services for students attending that sector . In contrast $4 million General Fund for covering the associated to awards at the nonprofit sector, the budget Figure 12 California Student Aid Commission (Dollars in Millions) Change From 2017‑18 2016‑17 2017‑18 2018‑19 Actual Revised Enacted Amount Percent Spending Local assistance Cal Grants $1,947 $2,172 $2,238 $66 3.1% Middle Class Scholarships 71 100 101 2 1.6 Chafee Foster Youth Program 13 14 19 4 29.9 Student Opportunity and Access Program 8 8 8 —a 2.3 Assumption Program of Loans for Education 10 7 5 -2 -27.0 National Guard Education Assistance Awards 2 2 2 — — Other programsb 1 4 1 -3 -80.1 Subtotals ($2,053) ($2,307) ($2,374) ($67) (2.9%) State operations $16 $16 $21 $5 31.2% Totals $2,069 $2,323 $2,395 $72 3.1% Funding General Fund $1,122 $1,256 $1,302 $46 3.6% Federal TANF 926 1,043 1,066 23 2.2 Other federal funds and reimbursements 17 18 22 4 23.3 College Access Tax Credit Fund 4 6 6 —a 1.5 a Less than $500,000. b Includes Cash for College, Child Development Teacher/Supervisor Grants, Graduate Assumption Program of Loans for Education, John R. Justice Program, Law Enforcement Personnel Dependents Scholarships, and State Nursing Assumption Program of Loans for Education For Nursing Faculty. TANF = Temporary Assistance for Needy Families. 33 analysis full gutter 2018-19 BUDGET implements the scheduled reduction for students CSAC to continue working on replacing its online attending WASC-accredited for-profit schools, grant delivery system . CSAC uses this system to thereby lowering the award for these students to process financial aid applications, make offers, $8,056 . and process payments . The project is in the fourth Covers Slightly Higher Costs for Middle of the four review stages of the state’s Project Class Scholarships. The state first funded the Approval Lifecycle . CSAC plans to select a vendor Middle Class Scholarship program in 2014-15 . in 2018-19 to accomplish the first of two phases The program covers a portion of systemwide entailed in building the new system . tuition and fees for students who do not qualify California State Library for Cal Grants but have household incomes and assets each under $171,000 . State law specifies Provides $63 Million in Total Funding the amount of funding for the program each for State Library. Of this amount, $42 million year, eventually capping total funding for the (66 percent) is state General Fund, $18 million program at $117 million in 2019-20 . Chapter 33 (29 percent) is federal funds, and $3 million adjusts the statutory spending levels to reflect (4 percent) is special funds . Of state General Fund, updated participation and cost data . Specifically, $27 million is for assistance to local libraries and Chapter 33 authorizes $71 .2 million for the $15 million is for state operations and facilities . program in 2016-17, $99 .8 million in 2017-18, and The budget includes $16 million in new General $101 .4 million in 2018-19 . The slight increase in Fund spending—$14 million for local library 2018-19 spending is due primarily to an increase assistance and $2 million for state operations . Of in projected number of awards and the assumed the $16 million, about one-quarter is for ongoing increase to the UC Student Services Fee . purposes, with three-quarters for one-time Increases CSAC State Operations Funding. purposes . Our EdBudget website has a summary of The budget includes $5 .5 million one time for all these augmentations . HEALTH Overview of Spending Department of Health Care Services (DHCS)—Medi-Cal The spending plan provides $25 .4 billion General Fund for health programs . This is an increase of Overview. The spending plan provides about $2 .9 billion, or 13 percent, compared to $23 billion from the General Fund for Medi-Cal the revised 2017-18 spending level, as shown local assistance expenditures through DHCS . in Figure 13 . This year-over-year net increase is This is an increase of $2 .6 billion (13 percent) primarily due to significant growth in projected compared to the revised estimates of 2017-18 General Fund spending in Medi-Cal . To a significant spending levels . Revised 2017-18 spending is degree, increased projected General Fund spending $830 million (4 percent) above the 2017-18 Budget in Medi-Cal in 2018-19 reflects a shift in costs to Act appropriation, reflecting various technical the General Fund from other state and federal fund adjustments that both increase and decrease sources, rather than an overall increase in program spending . Of note, spending in 2017-18 is higher costs . In addition, and as shown in Figure 14 (see by $680 million General Fund to backfill claims page 36), year-over-year growth in health program for federal Medi-Cal funding that the federal spending reflects a number of policy actions government now disputes . We provide more adopted by the Legislature as part of the 2018-19 information on General Fund costs associated with spending plan . We discuss these policy actions in these disputed claims below . Growth in Medi-Cal greater detail below . funding in 2018-19 over revised 2017-18 levels 34 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Figure 13 Major Health Programs and Departments—Spending Trends General Fund (Dollars in Millions) Change From 2017‑18 to 2018‑19 2017‑18 2018‑19 Amount Percent Medi-Cal—local assistance $20,344 $22,965 $2,620 13% Department of State Hospitals 1,541 1,733 192 12 DHCS—state administration 219 236 17 8 Other DHCS programs 217 207 -11 -5 Department of Public Health 149 174 25 17 Office of Statewide Health Planning and Development 33 93 60 180 Emergency Medical Services Authority 8 9 — 3 Health and Human Services Agency 4 10 6 157 Totals $22,519 $25,430 $2,910 13% DHCS = Department of Health Care Services. primarily reflects (1) reductions in the amount of from providers) . Figure 15 (see page other state funds available to offset General Fund 37) summarizes the Proposition 56-funded spending, including funding provided through provider payment increases included in the Proposition 56 (2016); (2) various technical spending plan . adjustments—largely one time in nature—as a • $220 Million to Establish the Proposition 56 result of reduced federal funding, requiring a Medi-Cal Physicians and Dentists Loan General Fund backfill; and (3) regular growth in Repayment Program. On a one-time basis, program costs . We discuss some of the major the spending plan allocates $220 million in Medi-Cal components of the 2018-19 budget unspent 2017-18 Proposition 56 funding package below . for Medi-Cal to establish a loan repayment Proposition 56 Spending Package. program for physicians and dentists who Proposition 56, approved by voters in 2016, raised participate in Medi-Cal . We provide additional state taxes on tobacco products and dedicates the detail on this program in the “Health Care majority of its associated revenues to Medi-Cal . Workforce” section of this report . The spending plan allocates up to $1 .26 billion in • $218 Million to Offset General Fund Proposition 56 revenues to be spent in Medi-Cal in Spending on Medi-Cal Cost Growth. The 2018-19 on the following purposes: spending plan dedicates $218 million in Proposition 56 revenue to offset General • Up to $821 Million for Provider Payment Fund spending in Medi-Cal . This represents Increases. On a one-time basis, the spending a decrease from the $711 million in plan extends the 2017-18 provider payment Proposition 56 revenue that offset General increases into 2018-19 and provides for Fund spending in Medi-Cal in 2017-18 . additional provider payment increases . The reduced Proposition 56 General Fund Budget language directs DHCS to develop offset accounts for nearly $500 million of the the structure for the new 2018-19 provider year-over-year $2 .6 billion increase in General payment increases before October 2018 and Fund Medi-Cal spending between 2017-18 authorizes DHCS to make 2018-19 payments and 2018-19 . available while federal approval of federal funding for the payments is pending Repayment of Federal Funds Received for (provided that any payments not approved Potentially Disallowed Claims. The spending plan by the federal government can be recouped 35 analysis full gutter 2018-19 BUDGET includes $754 million General Fund in 2017-18 will likely be able to eventually recover a significant and $675 million General Fund in 2018-19—a portion of this funding (resulting in General Fund total of $1 .4 billion over the two years—to replace savings) by submitting required supporting a projected loss in federal funds related to an documentation for the disputed claims, but the increased amount of claims the federal government amount and timing for recovering funds is unknown . now disputes . Until such disputes are resolved, Federal Reauthorization of Funding for the the federal government requires the state to Children’s Health Insurance Program (CHIP). The return previously claimed federal funds . To ensure spending plan reflects $600 million less General Medi-Cal is fully funded, the state must backfill the Fund support for Medi-Cal in 2018-19 relative lost federal funds with General Fund . The state to the Governor’s January budget as a result of Figure 14 Major Actions—State Health Programs 2018-19 General Fund Effect (In Millions) Program Amount Department of Health Care Services Uses Proposition 56 funding to offset General Fund spending on cost growth in Medi-Cal -$217.7 Establishes homeless mentally ill outreach and treatment grant program (one time) 50.0 Provides COLA for county Medi-Cal administrative funding 28.3 Expands availability of Hepatitis C prescription drug treatments in Medi-Cal 21.8 Removes treatment limits in Breast and Cervical Cancer Treatment Program 8.4 Provides funding for Health Information Exchanges (one time) 5.0 Provide funding for additional data collection on children and LTSS in the CHIS (one time) 3.8 Creates Whole Genome Sequencing Pilot Project (one time) 2.0 Extends pediatric mobile optometry services pilot program funding for a half year (one time) 1.0 Office of Statewide Health Planning and Development Provides funding to establish all-payer health care cost and utilization database (one time) $60.0 Department of Public Health Provides one-time funding for ALS wrap-around services $9.0 Expands Black Infant Health Program 8.0 Provides one-time augmentations for HIV and STD prevention 7.0 Provides one-time funding for valley fever research, outreach, and awareness 5.0 Provides one time capital outlay for Richmond Laboratory upgrade 4.9 Increases funding for Alzheimer’s Disease Program research grants 3.1 Provides one-time funding for diabetes prevention awareness 2.5 Provides funding to develop contaminant testing guidelines at public beaches (one time, 0.4 decreasing amounts each year through 2022-23) Backfills loss of federal funding for border health efforts 0.3 Department of State Hospitals Provides one-time funding to counties to establish IST diversion programs $99.5 Expands IST patient treatment capacity 51.2 Activates additional beds at Coaling State Hospital 11.5 Provides funding to upgrade the Patton State Hospital’s fire alarm system (one time) 9.4 Expands availability of Hepatitis C prescription drug treatments 3.3 Health and Human Services Agency Creates Council on Health Care Delivery Systems to develop reform options (one time) $5.0 State Controller’s Office Repays counties for outstanding state mandates related to children’s mental health (one time) $280.5 COLA = Cost-of-Living Adjustment; LTSS = Long-Term Services and Supports; CHIS = Children’s Health Interview Survey; ALS = amyotrophic lateral sclerosis; and IST = Incompetent to Stand Trial. 36 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET the federal reauthorization of Figure 15 funding for CHIP . In January, Use of Proposition 56 Funding in Medi‑Cal the Governor’s budget assumed federal funding for CHIP would (In Millions) be reauthorized at a 65 percent 2017‑18 2018‑19 federal share of cost—a lower Provider Payment Increases: share of cost than the 88 percent Physician services $111 $500a federal share of cost the state had Dental services 86 210a previously been receiving . (A lower Women’s healthb 43 49 federal share of cost corresponds Intermediate Care Facilities for the Developmentally 10 12 to higher General Fund costs for Disabledb CHIP .) The February 2018 federal AIDS Medi-Cal Waiver Programb 3 3 reauthorization of CHIP funding Home health servicesb, c — 28 Pediatric day health care facilitiesb, c — 7 temporarily maintains the federal Freestanding pediatric subacute care facilities — 4 share of cost at 88 percent Program for All-Inclusive Care for the Elderlyd — 6a through state fiscal year 2018-19, Community-Based Adult Services programsd — 2a reducing projected state spending Subtotals ($253) ($821) compared to the Governor’s Medi‑Cal Physicians and Dentists Loan — $220e proposed January budget . For Repayment Program more information on the impact Offset to General Fund Spending in Medi‑Cal $711 $218 of the federal reauthorization of Totals $964 $1,259 CHIP on state Medi-Cal spending, a The spending plan provides up to the listed dollar amounts. please see our Budget and Policy b Payment increases are intended to be ongoing, though the funding source may differ in future Post: Recent Congressional Action years. All other funding items are intended to be reevaluated after 2018-19. c on the Children’s Health Insurance Payment increases take the form of a rate increase as opposed to a supplemental payment or a direct allocation to qualifying providers. Program (CHIP). d Payment increases take the form of a direct allocation to qualifying providers. e $190 million is dedicated to physician loan repayment and $30 million is dedicated to dentist loan Provides for a Cost-of-Living repayment. Adjustment (COLA) for County Administrative Funding. The thousands of dollars, though the cost of the drug budget includes $28 million treatments has declined in recent years . As a General Fund ($56 million total funds) to provide part of the May budget proposal, the Governor a COLA to county funding for Medi-Cal eligibility proposed, and the Legislature approved, expanding determination activities . The budget also assumes the availability of these drug treatments across the continuation of county administrative funding multiple state-funded health care programs, augmentations that began in 2013-14 and grew including Medi-Cal, Correctional Health Care in subsequent years to reflect increased Medi-Cal Services, and the Department of State Hospitals . caseloads following the implementation of the With the augmentation, DHCS will update its Patient Protection and Affordable Care Act . clinical guidelines for Medi-Cal to make the drug Expands Availability of Hepatitis C Treatment. treatments available to all patients age 13 and The spending plan provides $22 million in General above with Hepatitis C, except for those with life Fund to expand the availability of potentially expectancy of less than 12 months . curative Hepatitis C prescription drugs to almost all Establishes San Mateo Dental Integration Medi-Cal enrollees with the disease . Until 2018-19, Pilot Program. Budget-related legislation only Medi-Cal enrollees with a relatively advanced grants DHCS the authority to establish a dental stage of Hepatitis C, as well as enrollees with integration pilot program in San Mateo County no certain related conditions, generally qualified to sooner than July 2019, provided the Legislature receive the curative prescription drug treatments . appropriates funding at a future time . Currently, A full course of these treatments costs tens of 37 analysis full gutter 2018-19 BUDGET Denti-Cal—Medi-Cal’s dental program—is provided Provides Funding for Additional Data on a fee-for-service basis in San Mateo as well Collection Through California Health Interview as throughout most of the state . Under the pilot Survey (CHIS). The budget includes $3 .8 million program, the Health Plan of San Mateo would General Fund ($7 .5 million total funds) on a become responsible for the delivery and financing one-time basis to collect additional information of Denti-Cal services . This pilot program would through CHIS, a statewide health survey represent the first time a Medi-Cal managed care administered by the University of California (UC) plan that oversees the broader physical health Los Angeles . Specifically, the budget includes of Medi-Cal enrollees is made responsible for its $3 million General Fund ($6 million total funds) to members’ dental care . add questions to CHIS related to the demand for Removes Limits on Treatment Length in the long-term services and supports among seniors Breast and Cervical Cancer Treatment Program and persons with disabilities in the state . The (BCCTP). The BCCTP provides breast and cervical remaining $750,000 General Fund ($1 .5 million cancer treatment for individuals with incomes below total funds) augmentation is to test new ways of 200 percent of the federal poverty line who do not collecting health information from children and have alternative low-cost treatment coverage . For youth . certain individuals in BCCTP that do not qualify Extends Pediatric Mobile Optometry Services for full-scope no-cost Medi-Cal coverage, prior Funding for a Half Year. The spending plan law limited treatment to between 18 months (for provides up to $1 million General Fund to extend breast cancer) and 24 months (for cervical cancer) . state funding for a pilot program that provides mobile Legislation adopted as part of the budget package optometry services to school children in Los Angeles eliminates these limits on treatment length . The County . Under this program, optometry services, budget provides $8 .4 million from the General Fund including vision examinations and the providing of in 2018-19 for this change . eyeglasses, are provided onsite at schools . This Provides Funding for the Development of funding will extend payments for these services for Health Information Exchanges (HIEs). The the period from July 1, 2018 to December 31, 2018, 2018-19 budget includes $5 million General Fund after which the program will sunset . (one time) to expand the use of HIEs among safety Health Care Workforce net health care providers . HIEs serve as platforms for providers and health care plans to access and The spending plan provides significant one-time share their patients’ and members’ electronic funding to expand the state’s health care workforce health records . This state funding is expected to and improve its geographic distribution across the leverage $45 million in federal American Recovery state . Below, we describe the health care workforce and Reinvestment Act funds . The spending plan augmentations in the 2018-19 spending plan . gives DHCS broad flexibility to determine how to Establishes the Proposition 56 Medi-Cal administer this funding . Physicians and Dentists Loan Repayment Establishes Whole Genome Sequencing Program. As previously noted, the spending plan Pilot Project. The 2018-19 spending plan dedicates $220 million in one-time Proposition 56 provides $2 million General Fund to establish Medi-Cal funding to establish a medical and dental a Medi-Cal Whole Genome Sequencing Pilot school student loan repayment program for recent Project . The funding will be allocated through graduate physicians and dentists that participate a grant to a nonprofit organization in the state, in Medi-Cal . This funding, with $190 million to yet to be determined, which will use the funding physicians and $30 million to dentists, will be to investigate the potential value of using whole available for expenditure through 2024-25 . Budget genome sequencing to help in the diagnosis and legislation establishing the program directs DHCS treatment of Medi-Cal patients, especially children to develop the criteria governing who can receive with complex medical needs . funding through the loan repayment program as well as the award amounts . The legislation directs 38 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET DHCS to prioritize ensuring timely access, limiting 2018-19 budget package includes the following geographic shortages of services, and ensuring actions related to these issues: quality care in Medi-Cal in the design of the program . • Establishes an All-Payer Health Care Augments UC Graduate Medical Education Cost and Utilization Database. The budget (GME) Programs. The spending plan dedicates provides $60 million General Fund on a $55 million General Fund (one time) to UC for GME one-time basis to OSHPD to establish a programs . Of this funding, $40 million will support database that would collect information residency programs for primary care, emergency, on public and private health care costs and potentially specialist physicians . The remaining and utilization in the state . The database $15 million is for the UC Riverside School of is intended to be used to increase the Medicine for psychiatric residency programs transparency of health care pricing and inform which currently incorporate telemedicine into state policy decisions . Budget legislation their practice or plan do to so in the future . This directs the creation of a stakeholder $15 million in funding is available for expenditure committee to advise on the establishment and until June 30, 2023 . ongoing maintenance of the database, and Dedicates State Mental Health Services Act outlines the intent of the Legislature that the Funding to Mental Health Workforce Programs. database be completed by July 2023 . The spending plan includes $11 million (one time) • Creates a Council on Health Care Delivery from the Mental Health Service Fund (MHSF) to Systems. The spending plan provides expand the state’s mental health workforce . Of $5 million in General Fund for the Health and this funding, $10 million will provide additional Human Services Agency to establish a task funding to the Office of Statewide Health Planning force whose goal is to develop options for and Development (OSHPD) for the mental accomplishing universal health care coverage health Workforce Education and Training (WET) and reducing health care costs . The council program . State funding for WET had largely will be composed of appointees of the been set to expire at the end of 2017-18 . The Governor, Senate, and Assembly, and will remaining $1 million, also through OSHPD, will submit a report to the Legislature on available fund scholarships for primary care and emergency options by October 1, 2021 . physicians participating in psychiatry fellowships at • Directs California Health Benefit Exchange either the UC Davis Medical School or the UC Irvine to Produce a Report on Improving Medical School . Individual Market Affordability. Budget Provides Funding to Increase the Number legislation directs the state’s health of Certified Nursing Assistants (CNAs). The benefits exchange, known as Covered spending plan provides $2 million from the General California, to develop options for providing Fund (about $5 million in total funds) in response to additional financial assistance to low- and new staffing requirements at skilled nursing facilities middle-income residents to promote access (SNFs) . Absent any action to increase the number to health insurance coverage . The legislation of CNAs in the state, the administration estimated requires Covered California to report to the a shortfall of about 1,400 CNAs by July 1, 2018, Legislature, Governor, and Council on Health when the new rules take effect . Care Delivery Systems, regarding these Health Care Coverage and options no later than February 2019 . Affordability Behavioral Health Through the development of the 2018-19 budget Repays Counties for Outstanding State package, the Legislature considered a variety Mandates Related to Children’s Mental Health of proposals to expand health care coverage Services. The spending plan includes $281 million and improve the affordability of coverage . The from the General Fund to repay counties, with 39 analysis full gutter 2018-19 BUDGET interest, for costs incurred for state mandates Reduces Ongoing Funding for Mental related to services for children with mental illness . Health Crisis Response Personnel Grants. Counties incurred these costs to implement In 2013-14, the Legislature established a grant AB 3632 mandates, which assigned responsibility program administered by the Mental Health for mental health services for special education Services Oversight and Accountability Commission students to county mental health agencies . (MHSOAC) that provides counties with funding to The county mandates were repealed when hire “triage” personnel to assist with mental health Chapter 43 of 2011 (AB 114, Committee on Budget crisis response, stabilization, and treatment . The and Finance) transferred this responsibility to Legislature has appropriated $32 million in MHSF schools . annually for the program since its inception . After Establishes One-Time Homeless Mentally Ill several consecutive years in which funding for the Outreach and Treatment Grant Program. The program was not fully expended, the spending spending plan provides $50 million on a one-time plan reduces ongoing funding for this program to basis from the General Fund for DHCS to distribute $20 million annually . To provide funding in 2018-19, grants to counties to fund multidisciplinary the spending plan reappropriates $20 million in teams providing outreach, treatment, and related unspent funding for triage grants from 2017-18 . services for homeless persons with mental illness . Expands Consumer Advocacy Contracts to Grant determinations will be made by DHCS in Include Immigrant and Refugee Populations. consultation with the Department of Finance (DOF) The spending plan includes $670,000 ongoing and the California State Association of Counties MHSF funding for the MHSOAC to develop based on a county’s number of homeless persons consumer advocacy contracts with non-profit with mental illness and its overall population . organizations that do outreach, education and Counties receiving grants are required to report the training, and advocacy related to mental health use of funds, services provided, and the number outcomes among immigrants and refugees . This of individuals served to DHCS . The funds will be augmentation doubles funding for MHSOAC available through 2019-20 and are intended to advocacy, which currently has programs supporting provide bridge funding prior to the implementation organizations that work with various other targeted of other programs targeted at homeless persons populations, including: children; veterans; and with mental illness, such as the No Place Like lesbian, gay, bisexual, transgender, and queer Home program . communities, among others . The augmentation Funds All Children Thrive Pilot Program. is designed to address concerns about access The spending plan provides $10 million one time, to mental health care services by immigrant and available over three years, for DPH from the refugee communities . MHSF for a three-year pilot program to study and Department of Public Health (DPH) report on childhood trauma and associated local interventions, with particular attention to racial The spending plan provides $3 .21 billion from equity and community involvement and resilience all fund sources for DPH programs, up 2 percent within high need cities and counties . from $3 .16 billion in 2017-18 . Of the total, Provides Ongoing Funding for Suicide General Fund spending accounts for $175 million, Hotlines. The spending plan includes $4 .3 million in an increase of 17 percent from $150 million in ongoing MHSF funding to allow the state’s 11 crisis 2017-18 . Most of the year-over-year increase in call centers that answer calls through the National General Fund spending results from augmentations Suicide Prevention Lifeline to maintain services that by the Legislature . As detailed below, some of the were originally funded with discretionary county increases fund programs and services, while others MHSF funds . The ongoing funding resolves a support research and outreach . (In the “Other recurring suicide hotline funding shortfall that in Provisions” section of this report, we describe previous years was addressed with one-time MHSF augmentations related to cannabis regulation, state administrative funding . including an increase of $10 .6 million from the 40 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Cannabis Control Fund for DPH’s role in licensing funds for health-related efforts in border and regulating cannabis manufacturers .) communities near Mexico . Public Health Programs and Services. The Public Health Research and Outreach. The spending plan provides about $25 million from the spending plan provides $10 .6 million General Fund General Fund for the following programs: for public health-related research and outreach . (It • Amyotrophic Lateral Sclerosis (ALS) also provides $10 million one time from the Mental System of Care. $9 million one-time General Health Services Fund for the “All Children Thrive” Fund, available over three years, to support pilot program to study local interventions to prevent wrap-around services for individuals with ALS . and treat childhood trauma, as noted in the “Health” section of this report .) The funds will support: • Black Infant Health Program. $8 million ongoing General Fund to expand the Black • Valley Fever Research and Outreach . Infant Health Program, which seeks to reduce $2 million one-time General Fund, available black-white disparities in infant and maternal over two years, for education and outreach health, by providing funding to 15 counties on valley fever and $3 million General Fund to establish local grant programs . These one time for valley fever research at Kern programs will promote the development Medical Center in Bakersfield . (In addition, the of Community Centers of Excellence in spending plan includes $3 million one-time perinatal health and promote evidence-based General Fund for valley fever research at the or evidence-informed prenatal care, family University of California .) planning, and fatherhood initiatives . • Alzheimer’s Disease Program Grant • HIV/AIDS and Sexually Transmitted Disease Awards. $3 .1 million ongoing General Fund (STD) Services and Prevention. $5 million (and $104,000 one time from the California one-time General Fund augmentation for Alzheimer’s Disease and Related Disorders comprehensive HIV prevention services Research Fund) to provide grants for including pre-exposure prophylaxis (PrEP) Alzheimer’s research . and post-exposure prophylaxis (PEP), • Diabetes Outreach Awareness Campaign. and a $2 million one-time General Fund $2 .5 million one-time General Fund, available augmentation for STD prevention . (The over two years, to implement a diabetes spending plan also provides $2 .7 million prevention and treatment awareness campaign . ongoing from the AIDS Drug Assistance Program [ADAP] Rebate Fund to expand Capital Outlay at Richmond Lab. The spending DPH’s Office of AIDS eligibility and enrollment plan provides $4 .9 million from the General Fund activities and $2 million ongoing from the for the Richmond Viral and Rickettsial Diseases ADAP Rebate Fund to expand eligibility for Laboratory Bio-Safety Level 3 upgrade . Funding PrEP and PEP .) will allow DPH to complete working drawings and • Contaminant Testing Guidelines at Public construction costs of the upgrade . Beaches. $354,000 in 2018-19 from the Proposition 56 Revenues . The General Fund to finalize implementation of spending plan provides $165 .5 million from contaminant testing guidelines at public Proposition 56 tobacco tax revenues for three beaches . (The General Fund will also provide DPH programs, as specified by the language of decreasing amounts for this purpose through Proposition 56: 2022-23 .) Funding will allow DPH to complete • $129 .5 million for the Tobacco Control Branch development of rapid testing protocols and for its tobacco prevention efforts . finalize guidelines pursuant to Chapter 928 of 2014 (SB 1395, Block) . • $30 million for the state dental program . • Border Health Efforts. $300,000 ongoing • $6 million for tobacco law enforcement efforts, General Fund to backfill the loss of federal specifically DPH’s Stop Tobacco Access to Kids Enforcement Program . 41 analysis full gutter 2018-19 BUDGET Special Fund Augmentations. In addition to complete these programs, judges could drop or the General Fund augmentations described above, reduce the charges against the individuals . In the spending plan also provides $35 .4 million in order to receive funding, counties must submit increased expenditure authority from special funds program plans to DSH and the Council on Criminal for DPH . Major augmentations include one-time Justice and Behavioral Health for review and funding for the licensing and regulation of cannabis approval . Large counties are required to contribute manufacturers ($10 .6 million) and a pilot project 20 percent towards the cost of operating a related to childhood trauma ($10 million) . diversion program, while small counties are required to contribute 10 percent . Department of State Hospitals (DSH) Additional IST Treatment Capacity. The Under the budget plan, General Fund spending budget provides an $51 .2 million General Fund for DSH will be about $1 .7 billion in 2018-19, an augmentation to expand IST patient treatment increase of $192 million, or 12 percent, from the capacity . This includes (1) $28 .5 million (increasing revised 2017-18 level . The year-over-year net to $72 .6 million annually by 2021‑22) to activate increase is largely due to the establishment of and staff 236 beds at DSH-Metropolitan, Incompetent to Stand Trial (IST) diversion programs (2) $13 .1 million to establish a community-based and activation of additional treatment capacity, as IST treatment program in Los Angeles County, discussed below . and (3) $9 .6 million to establish additional county IST Diversion Programs. The budget provides a jail-based competency treatment program beds . one-time $99 .5 million General Fund augmentation Other Adjustments. The budget also provides for DSH to contract with counties to establish IST $11 .5 million (General Fund) for the activation diversion programs . The budget package includes of 80 beds for mentally disordered offenders at legislation to authorize trial court judges to refer DSH-Coalinga . In addition, the budget includes certain individuals who are likely to be found IST $9 .4 million for the construction phase of a project or have been found IST into treatment programs to upgrade the DSH-Patton Fire alarm system supported by these funds rather than referring them and $3 .3 million to treat additional patients with to a state hospital . If such individuals successfully Hepatitis C . HUMAN SERVICES Overview of Spending part of the 2018-19 spending plan . These changes are discussed in more detail below . The 2018-19 spending plan provides nearly $14 billion from the General Fund for human CalWORKs services programs . This is an increase of The spending plan provides a total of $5 billion $858 million, or 6 .6 percent, compared to the (all funds) to support the California Work revised prior-year spending level, as shown in Opportunity and Responsibility to Kids (CalWORKs) Figure 16 . This is primarily the result of higher program in 2018-19, an increase of $30 million spending in the Department of Developmental (less than 1 percent) relative to estimated spending Services (DDS) and the In-Home Supportive in 2017-18 . The year-over-year increase primarily Services (IHSS) program, largely reflecting new reflects the net effect of roughly $280 million in program augmentations in DDS and increasing new programs (and augmentations to existing caseloads, costs per consumer, and labor costs for programs), which is offset by roughly $250 million both programs . Figure 17 (see page 44) shows the in savings that result from declining caseloads . major policy changes adopted by the Legislature as Within the total funding amount, the spending plan provides $373 million from the state General 42 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Fund for CalWORKs in 2018-19, a decrease an adult member who is not eligible to receive of $65 million (15 percent) relative to 2017-18 . assistance) . The decrease in General Fund support for the Future Cost-Of-Living Adjustments May Be CalWORKs program results largely from the Provided. The budget includes language that availability of additional county realignment funds would adjust the CalWORKs grant based on annual that are dedicated to paying a portion of the cost changes to the cost of living, as measured by the of CalWORKs grants . Major changes in CalWORKs California Necessities Index, beginning July 1, funding and policy included in the 2018-19 2022 . These adjustments would be subject to spending package are described below . appropriation in future budget acts . Monthly CalWORKs Grants Increased New Home Visiting Program. The spending 10 Percent. The budget plan includes $90 million plan includes $27 million federal Temporary General Fund in 2018-19 to support a 10 percent Assistance for Needy Families (TANF) funds in across-the-board increase to CalWORKs maximum 2018-19 to begin a new home visitation program grant levels, beginning April 1, 2019 . (The budgeted within the CalWORKs program . The spending amount corresponds to one quarter of the full-year plan also sets aside an additional $131 million in cost of the grant increase .) As displayed in TANF funding to support annual costs of the home Figure 18 (see page 45), the proposal will increase visiting program in future years . Under the new the maximum grant amount for a family of three program, CalWORKs families with a child under with no other income by $71 per month, from two years old will be eligible to receive regular visits $714 to $785 . The administration anticipates that from a nurse, parent educator, or early childhood the full-year costs of this proposal will be about specialist who works with the family to improve $360 million General Fund annually beginning maternal health, parenting skills, and child cognitive in 2019-20 . In addition to the 10 percent grant development . Counties will prioritize limited home increase, the 2018-19 spending plan includes visiting funding to provide home visits for first-time budget-related legislation with intent language to parents under the age of 25 . (Counties could also increase grant levels to achieve at least 50 percent serve other families, but only insofar as funds are of the federal poverty level for all CalWORKs available .) Families could receive home visits for up families by 2021-22 (including those families with to two years . As a condition of receiving program funding, county human services agencies that elect Figure 16 Major Human Services Programs and Departments—Spending Trends General Fund (Dollars in Millions) Change From 2017‑18 to 2018‑19 2017‑18 2018‑19 Amount Percent Department of Developmental Services $4,152.7 $4,502.4 $349.7 8.4% In-Home Supportive Services 3,443.7 3,812.6 369.0 10.7 SSI/SSP 2,840.0 2,792.8 -47.2 -1.7 County Administration/Automation 773.5 823.2 49.7 6.4 Child welfare services 500.1 512.9 12.8 2.6 CalWORKs 437.5 372.6 -64.9 -14.8 Department of Child Support Services 315.6 318.6 3.1 1.0 Department of Rehabilitation 64.6 64.6 — 0.1 Department of Aging 34.0 36.3 2.3 6.8 All other social services (including state support) 525.6 709.6 184.0 35.0 Totals $13,087.2 $13,945.6 $858.4 6.6% 43 analysis full gutter 2018-19 BUDGET to participate in the program will be required to county home visiting program . Participating families submit plans to the Department of Social Services would be eligible to receive a one-time stipend to (DSS) that detail how they intend to operate the purchase household items related to child safety . Figure 17 Major Actions—Human Services Programs 2018-19 General Fund Effect (In Millions) Program Amount CalWORKs Creates new Safety Net Reserve and makes initial deposit for the CalWORKs program $200.0a Increases monthly cash grants by 10 percent, beginning April 1, 2019 90.0 Provides three-year funding for new CalWORKs Home Visiting Initiative 158.0 Augments existing housing and homelessness programs within CalWORKs 31.6 Provides one-time funding for county “single allocation” funding for employment services 23.5 In‑Home Supportive Services (IHSS) Augments funding on a one-time basis for IHSS administrative costs 15.4 Provides temporary funding to support planning for the federally mandated electronic visit verification system 0.6b SSI/SSP Provides one-time funding to eliminate the SSI cash-out policy and establish a hold harmless program 220.0 Child Welfare Services Provides additional resources for Continuum of Care Reform-related county administrative activities 11.1 Expands eligibility for Chafee higher education grants for former foster youth up to age 26 4.0 Funds one-time training and services to reduce foster youth interaction with law enforcement 4.0 Immigration Augments existing immigration services funding 10.0 Funds immigration legal aid services at California State University campuses 7.0c Food Assistance Funds CalFresh fruits and vegetables pilot program 9.0 Provides one-time grant funds for food bank infrastructure 5.5 Funds one-time grants to food banks to operate diaper banks 10.0 Other Department of Social Services Provides one-time grant funds for services for Holocaust survivors 3.6 Provides one-time grant funds for youth citizenship and engagement programming 2.0 Provides one-time funding for Senior Home Safe program 15.0 Department of Child Support Augments existing funds for local child support agencies 3.0 Department of Aging Augments existing long-term care ombudsman funding 2.3 Developmental Services Delays enforcement of “Uniform Holiday Schedule” by one year 29.3 Augments funding on a one-time basis for consumer transitions from DCs to the community 26.0 Provides one-time “bridge funding” for service providers’ direct services staff 25.0 Increases rates for certain health-related service providers to match Medi-Cal rates 17.7 Funds deferred maintenance projects at Porterville DC 10.0d Provides augmentations for various DDS headquarters activities 3.7 Provides one-time funding for Best Buddies Program 1.5 a This funding is in a reserve and is therefore not reflected in the 2018-19 budget for CalWORKs. b Reflects total General Fund support provided to the Department of Social Services, Department of Developmental Services, Office of Systems Integration, and Department of Health Care Services to support planning for the federally mandated electronic visit verification system. c Additional campus legal aid services funding provided as part of the University of California and the community colleges budgets. d Funding for deferred maintenance is budgeted through Control Section 6.10. DC = Developmental Center and SSI/SSP= Supplemental Security Income/State Supplementary Payment. 44 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET New Safety Net Reserve With Figure 18 $200 Million Initial Deposit. The Maximum Monthly CalWORKs Grant budget creates the Safety Net Reserve, which aims to set aside Family of Three in a High-Cost County With No Other Income funds for the future expenditures Without Grant With Grant of two programs: CalWORKs and Increase Increasea Amount Percent Medi-Cal . (These are programs Grant $714 $785 $71 10% that, during a recession, typically Grant as a percent of FPLb 40% 44% have increased expenditures a Budget legislation provides a 10 percent grant increase effective April 1, 2019. as caseload increases .) The b Anticipated 2019 federal poverty level (FPL) based on LAO estimate. 2018-19 budget plan deposits an initial $200 million in the if the caseload increases or decreases by more CalWORKs subaccount and directs the Department than 5 percent . Caseload funding will not change of Finance to develop a methodology to calculate in years when the caseload is steady and does caseload savings in these programs and deposit a not increase or decrease by more than 5 percent . portion of these savings into the reserve in future This new methodology is intended to have the years . effect of reducing year-over-year fluctuations in this Updated Budget Methodology Results in component of the single allocation . Additional Funding for County Operations. The spending plan also includes a one-time Recent caseload-driven reductions to county $23 .5 million augmentation to the employment funding for CalWORKs administration and services component of the single allocation . services—referred to as the “single allocation”— This has the effect of maintaining funding for this raised concerns that additional reductions for component at the amount provided in 2017-18 . administration and services might lead counties Expanded Funding to Support Programs for to eliminate staff positions, reassign staff, or Homeless CalWORKs Families. The spending reduce some services . In light of these concerns, plan includes two actions related to assistance for the 2017-18 budget package required the homeless CalWORKs families . First, the spending administration to revisit the single allocation budget plan augments existing funding for the Housing methodology . The spending plan is based on Support Program (HSP) by $24 million in 2018-19 this new methodology to calculate the eligibility and by an additional $24 million General Fund and administration component of the single in 2019-20 . Under the plan, overall funding for allocation . (The administration plans to update the HSP will be $95 million General Fund in 2019-20 employment services component in the coming and thereafter . Through HSP, participating county year .) The updated eligibility and administration human services agencies help CalWORKs families component, which was proposed as part of the who are homeless or at-risk of becoming homeless May Revision, is $593 million—$55 .6 million above find and move in to permanent housing . Currently, what was proposed in the Governor’s January 49 counties participate in the program . budget . Second, the spending plan provides $7 .6 million The new methodology allocates to counties a General Fund to increase the daily maximum base funding amount that does not change each voucher amount for the Homeless Assistance year and a caseload funding amount that increases Program (HAP) payments from $65 to $85 . The or decreases in years when the caseload increases HAP provides daily housing payments to homeless or decreases by more than 5 percent . The base (or at-risk of becoming homeless) CalWORKs funding amount is set at 40 percent of average families that are used to purchase nightly housing historical funding for the single allocation and will accommodations (for example, in a hotel) . not change from one year to the next . Additionally, Temporary housing assistance is available for up caseload funding cannot increase or decrease to 16 consecutive days each year . Payments are by a step of more than 5 percent each year, even intended to serve as temporary assistance for 45 analysis full gutter 2018-19 BUDGET families as they search for permanent housing . The $15 .4 million General Fund on a one-time basis daily rate was last increased in 2006 (from $40 per for IHSS administrative costs, totaling $268 million day to $65 per day) . General Fund ($733 million total funds) for IHSS Fingerprinting Requirement Discontinued. administration in 2018-19 . We note that the As part of legislation associated with the 2017-18 administration will reexamine the revised budgeting Budget Act, the administration discontinued the use methodology for IHSS administrative cost as a part of the Statewide Fingerprint Imaging System (SFIS) of the 2020-21 budget process . as a requirement for issuing CalWORKs benefits, Electronic Visit Verification (EVV). Federal law effective July 1, 2018 . Prior to the discontinuance enacted in 2016 initially required states to use an of SFIS, in addition to the standard use of a photo EVV system for Medicaid-funded personal care ID to verify identity, adults applying for CalWORKs services by January 1, 2019 and home health care were required to have their fingerprints taken services by January 1, 2023 . In July 2018, the and matched against other applicants in order federal government extended the implementation to prevent individuals from receiving duplicate date for Medicaid-funded personal care services cash aid . Going forward, the state will continue to January 1, 2020 . Required functions of the the existing process for verification, except EVV system include electronically collecting and without the use of fingerprint imaging . This means verifying date of service, start and end time, and that adult applicants will continue the standard type of services provided—functions that the practice of providing a photo ID to initiate the current systems in California are not fully equipped application and eligibility determination process . to do . Failure to comply with EVV will result The 2018-19 spending plan provides $2 .4 million to in an escalating reduction of Medicaid federal decommission SFIS . funds for those services affected by EVV . While the administration is working with the federal In-Home Supportive Services (IHSS) government to request a “good faith effort” time The 2018-19 spending plan includes $3 .8 billion extension (until January 1, 2021) to implement EVV General Fund for IHSS, a net increase of in order to avoid the out-year penalties for failure about $370 million (10 .7 percent) over revised to comply with the set deadlines, the 2018-19 estimates of 2017-18 costs . The year-over-year spending plan provides resources for the planning net increase in estimated IHSS General Fund and subsequent implementation of EVV across costs is primarily due to caseload growth and various departments . increased state minimum wage costs, which Specifically, the 2018-19 spending plan provides are partially offset by the scheduled decrease in $949,000 ($559,000 General Fund) to support General Fund assistance provided to counties . The planning for the EVV system across the Department major changes to the IHSS program include (1) a of Social Services, Department of Health one-time funding increase for IHSS administrative Care Services, Department of Developmental costs and (2) funding to support the planning and Services, and Office of Systems Integration . The implementation of an electronic verification system spending plan also includes budget bill language in IHSS and other Medicaid-funded programs . that (1) authorizes the Department of Finance IHSS Administrative Costs. The to increase DSS’s state operations and local 2017-18 budget included language that required assistance resources by up to $1 million General the administration, in consultation with counties, Fund in 2018-19 to develop and implement an EVV to update the budgeting assumptions used to solution, (2) temporarily exempts the administration estimate IHSS administrative costs . Although from creating regulations for the implementation of the administration proposed a new budgeting EVV—allowing it to instead implement EVV through methodology as part of the January budget all-county letters in 2018-19, and (3) proposes proposal, counties raised concerns that IHSS general principles to which the administration shall county staffing costs may not have been fully adhere to when implementing EVV . captured . The spending plan provides an additional 46 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Supplemental Security Income/State to end the SSI cash-out will be used on an annual Supplementary Payment (SSI/SSP) basis to increase Cash Assistance Program for Immigrants (CAPI) grant levels to SSI/SSP grants The 2018-19 budget includes $2 .8 billion levels—an increase of $10 for individual CAPI General Fund for SSI/SSP, which is slightly—about grants and $20 dollars for couple CAPI grants— 2 percent—lower than the revised estimates for upon the elimination of the SSI cash-out (expected 2017-18 . The decrease is primarily due to the to be June 1, 2019) . expiration of one-time funding for augmentations Future COLAs May Be Provided. The provided in prior years . We note that the 2018-19 2018-19 budget includes language that would SSI/SSP General Fund budget does not include adjust the SSP portion of the grant based on $220 million in one-time General Fund provided to annual changes to the cost of living, as measured eliminate the SSI cash-out and create a hold by the California Necessities Index, beginning harmless program for households negatively July 1, 2022 . These COLAs to SSP grant levels affected by the policy change . (These funds are would be subject to appropriation in future budget mainly displayed in the state budget for food acts . assistance programs and county administration and automation, and are available to be used Department of Aging over multiple years .) The 2018-19 spending plan The budget provides $36 million General includes budget-related legislation potentially Fund for the Department of Aging in 2018-19, providing future cost-of-living adjustments (COLAs) an increase of $2 .3 million (6 .8 percent) above to SSP grant levels . 2017-18 . This increase represents an ongoing Ending The SSI Cash-Out Policy. The augmentation for the Long-Term Care Ombudsman budget includes legislation that eliminates the program—from $1 million General Fund in SSI cash-out policy—effectively making SSI/SSP 2017-18 to $3 .7 million General Fund in 2018-19 . recipients eligible for CalFresh food benefits . The These additional funds would increase the base implementation date is scheduled to be June 1, funding levels for all local ombudsman programs 2019 . We note that trailer bill legislation allows from at least $35,000 to at least $100,000 per for a delayed implementation date (no later than fiscal year . August 1, 2019) if the necessary automation changes are not completed by June 1, 2019 . The Adult Protective Services administration expects that the majority of affected Housing Program households would benefit from ending the SSI cash-out . However, some households currently State law requires that each county have receiving federal food benefits are expected to an adult protective services (APS) program to experience a reduction in those benefits . As a investigate reports of abuse and neglect of elders result, the budget includes language that would and dependent adults who live in private settings . establish a hold harmless program in the form County APS offices typically coordinate services of a state-funded food benefit program for these such as counseling, money management, and households . out-of-home placement for the abused or neglected adult . The state is responsible for program As previously mentioned, the spending plan oversight for APS, including statewide training of provides $220 million one-time General Fund (to APS workers to ensure consistency . In 2011, the be used over multiple years) for the necessary main programmatic and fiscal responsibility for programmatic and automation changes to end the APS was realigned to counties . APS is funded SSI cash-out and implement the hold harmless through a combination of state, county, federal, and policy . The budget includes intent language 2011 realignment funds . focused on the continuation of the hold harmless policy once the initial funds are fully used . We note Establishes Limited-Term State Matching that roughly $3 million of the $220 million allocated Funds for County Senior Home Safe Program. www.lao.ca.gov 47 analysis full gutter 2018-19 BUDGET The spending plan provides $15 million General new foster caregiver approval process, Fund in 2018-19 on a one-time basis—available Resource Family Approval (RFA), has taken to be spent over three years—to establish the longer than expected and delayed when Senior Home Safe Program . Under this pilot emergency caregivers begin to receive foster program, state funding will be awarded to counties care assistance payments . In response, or tribes to provide housing-related supports in March, the Legislature passed and the to seniors experiencing homelessness or at Governor signed Chapter 8 of 2018 (AB 110, risk of homelessness primarily due to elder or Committee on Budget), which authorized dependent abuse, neglect, self-neglect, or financial funding for foster care assistance payments exploitation . Participating counties and tribes are at the time of placement on a temporary basis required to provide a dollar-for-dollar match to in 2017-18 . The spending plan includes a receive state funds . Budget-related legislation also long-term solution that provides funding for requires an independent evaluation of the impacts foster care payments at the time of placement of the program . on an ongoing basis starting in 2018-19 . The state will primarily utilize federal Emergency Child Welfare Services Assistance (EA) funding available through Continues Funding for the Continuum of the Temporary Aid for Needy Families block Care Reform (CCR). The 2018-19 spending grant to pay for these temporary payments . plan provides $205 million in General Fund to EA funding for these payments will generally continue the state’s CCR efforts . Although this expire after whichever comes first: (1) the reflects a decrease of $44 million compared to foster caregiver completes the RFA process revised spending in 2017-18, it is higher than prior and begins receiving standard foster care projections of 2018-19 CCR spending . This higher assistance payments or (2) after six months funding level relative to previous projections, largely in 2018-19 and three months in 2019-20 and reflects lower projected CCR-related saving rather beyond . In general, for emergency caregivers than policy changes that result in higher CCR whose RFA remains pending after the costs . For example, the spending plan assumes specified time periods have lapsed, counties slower movement of foster children out of group will be able, but not required, to use county homes and into lower cost, home-based family funding for temporary foster care assistance settings than had previously been projected, payments until RFA is completed . The shorter which has the effect of increasing projected CCR time period in which funding is available after spending . 2018-19 reflects the state’s expectation that counties eventually will be able to reduce the New Policy Changes in CCR. The spending time it takes to complete the RFA process . plan includes several major CCR-related policy changes, which we describe below: • Provides Additional Funding for County Administration. For 2018-19, the spending • Ensures Funding at the Time of Placement plan provides $123 million in General Fund for Emergency Foster Caregivers. for county administrative activities related Foster children can be placed with relative to CCR . Of the total, $11 million reflects caregivers on an emergency basis before an augmentation over the Governor’s May full foster caregiver approval is granted . (We budget proposal, which will assist counties note that children may also be placed on in (1) clearing an accumulated backlog of an emergency basis with unrelated adults RFA applications that remain unapproved with a close connection to the child .) When and (2) carrying out the new level-of-care a child is placed on an emergency basis, assessment tool that will be used under CCR the caregiver generally does not receive to determine foster care payment levels . foster care assistance payments while the The funding for the assessment tool will caregiver approval process is pending . CCR’s 48 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET be ongoing, while the funding for the RFA incidents that may not have resulted in such an backlog is expected to be one time . intervention for youth who were not in congregate • Extends Group Homes as an Allowable care . The involvement of law enforcement in Placement Option Beyond 2018. Under these situations exposes foster children to the existing state law, group homes would no criminal justice system, which can lead to adverse longer be an allowable foster care placement outcomes for the youth involved . The spending option after December 31, 2018 for most plan requires congregate care facilities to develop foster children . Instead, foster children could protocols specifying the circumstances under either be placed in a short-term residential which law enforcement may be contacted in treatment program (the new congregate response to behavior exhibited by resident children . care placement option under CCR) or in a These protocols must state that contacting law home-based family setting . The spending enforcement can only be done as a last resort and plan temporarily extends group homes as an only upon approval of a staff supervisor . In addition, allowable placement option for foster children the spending plan includes $4 million one time beyond December 31, 2018 for up to one from the General Fund for DSS to provide training year . for congregate care staff, law enforcement, and county personnel in order to reduce the frequency Expands Eligibility for Chafee Higher of foster youth involvement with law enforcement . Education Grants. The Chafee Education and The funding will also support community-based Training Vouchers Program provides grants of up services for foster youth in congregate care, to $5,000 a year for individuals who (1) were in including mentoring, educational enrichment, and foster care at some point between the ages of 16 self-awareness and health programming among and 18, (2) are less than 22 years old as of July 1st others . of the award year, (3) have a financial need, and (4) are attending qualifying career and technical Immigration Assistance training or college . This federal- and state-funded As shown in Figure 19 (see next page), the program was established by federal law in 1999 budget plan includes a total of $31 million General and is administered in California by the Student Fund for new one-time grant programs that provide Aid Commission through an interagency agreement legal services for immigrants . These programs with DSS . The program is intended to address are in addition to ongoing funding of $48 million the large disparity between foster youth higher for existing immigration services, administered by education attainment rates compared with that DSS . This total amount—$79 million—is $11 million of the general population . However, many former greater than the one-time and ongoing funding foster youth are unable to take full advantage of the provided in 2017-18 . Below, we describe the new program due to delayed college enrollment after one-time funding provided for immigration services high school or delayed training or degree program as part of the 2018-19 spending plan . completion beyond the age cap . The spending plan Immigration Services Augmented on provides the program with an ongoing $4 million One-Time Basis. The Immigration Services augmentation from the General Fund to increase Funding program within DSS provides grants the maximum eligible age to receive Chafee Foster to nonprofit legal aid organizations to provide Youth Grants to 26 years old beginning in the various legal services . These services include 2018-19 award year . (1) assisting individuals applying for naturalization, Establishes Programs to Reduce Foster Youth deferred action, and other immigration remedies; Interaction With Law Enforcement. Currently, (2) conducting outreach and education in immigrant law enforcement officers are called in response to communities; and (3) providing legal defense for behavioral incidents involving foster youth residing individuals subject to deportation proceedings . A in many congregate care settings . A concern is total of $65 million General Fund was provided for that some of these calls are for relatively minor these services ($45 million ongoing) as part of the 49 analysis full gutter 2018-19 BUDGET Figure 19 New One‑Time Funding for Immigration Assistance and Legal Servicesa 2018-19 Budget Act, General Fund (In Millions) Program Description Amount Legal services for TPS Grants to nonprofit legal aid organizations to advise and represent current or $10 recipients former TPS holders. Legal services at CCCb Administered by DSS, legal aid services for undocumented community 10 college students and employees. Legal services at CSU Administered by DSS, legal aid services for undocumented community 7 college students and employees. Legal services at UC Potentially administered by the UC law schools. Legal services for 4 undocumented students and employees. Total $31 a New one-time funding is in addition to $48 million ongoing for immigration legal services at DSS. b Counts towards state’s Proposition 98 minimum education funding requirement. TPS = Temporary Protected Status and DSS = Department of Social Services. 2017-18 budget . (An additional $3 million has been determined whether they would provide legal aid provided in recent years for legal representation services through their law schools or if they would of unaccompanied undocumented minors .) The also provide these services via DSS’ existing grant spending plan includes a one-time augmentation program . of $10 million for immigration services specifically Food Assistance to be used to provide services to unaccompanied undocumented minors and for recipients of CalFresh Fruits and Vegetables Pilot Temporary Protected Status (TPS) . Under TPS, the Program. The spending plan provides $9 million federal government provides temporary refugee General Fund to conduct a three-year pilot project status to immigrants of certain countries that have in which CalFresh food assistance recipients experienced armed conflict, a natural disaster, or will be eligible to receive one dollar in additional other extraordinary circumstances . food benefits (that could be used for any Immigration Services for College and CalFresh-eligible food item) for each one dollar University Students. The spending plan purchase of California-grown fruits and vegetables . designates new, one-time funding of $21 million The pilot will be tested in at least three locations General Fund to provide immigration services for statewide . Additional food benefits generated from students, staff, and faculty at the state’s higher the purchase of fruits and vegetables would be education segments—the community colleges automatically added to the individual’s electronic ($10 million), California State University (CSU) benefit transfer card . ($7 million), and the University of California (UC) Food Bank Infrastructure Grants. The ($4 million) . The community colleges and CSU are spending plan includes $5 .5 million General Fund to provide these services to students, staff, and on a one-time basis for grants for community food faculty via an existing immigration services grant banks to make infrastructure improvements, such program at DSS . Specifically, DSS would use these as the purchase of refrigerated storage, vehicles monies to contract with several dozen nonprofit used for food distribution, warehouse equipment, organizations that provide legal aid services under and technology systems used for inventory the state’s existing Immigration Services Funding management . program . As discussed above, grant funds would Providing Diapers to Low-Income Families. be used to provide legal consultations and legal The spending plan includes $10 million General representation . Regarding the UC portion, at the Fund to provide one-time grants to four large food time of budget enactment, the UC had not yet 50 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET banks to operate a temporary program to supply not provide services on those days or absorb low-income parents with diapers . the cost of doing so—resulting in General Fund savings . The 14-day policy has not been enforced Department of Child Support Services since 2015 due to litigation brought by service Funding for Child Support Services. The provider associations . Because a 2016 court ruling 2018-19 spending plan provides the Department ultimately upheld the state’s policy, the Governor of Child Support Services (DCSS) with $319 million proposed to start enforcing it again as of July 1, General Fund, an increase of $3 million (1 percent) 2018 . A legislative compromise was reached with relative to revised estimates for 2017-18 . This the Governor, however, to delay enforcement for increase is due to a $3 million ongoing General one year, meaning that for 2018-19, the state will Fund augmentation to local child support agencies . not prescribe a set holiday schedule . Budget language requires that DCSS work with the Augments Funding for Consumer Transitions Child Support Directors Association of California From Developmental Centers (DCs) to the (CSDA) to determine an allocation schedule for Community. DDS is in the process of completing the augmentation . Counties that receive these the final phase of a decades-long transition from additional funds are required to report annually an institution-based system of service delivery to on child-to-staff ratios, total collections, cost a more integrated community-based system . In avoidance benefits, and number of families served . December 2018, it will close Sonoma DC, which In addition, the 2018-19 spending plan includes opened more than 125 years ago . The department budget-related legislation requiring DCSS, in will also close Fairview DC and the general collaboration with CSDA, to submit a report to treatment area of Porterville DC by December the Legislature by July 1, 2019 on programwide 2021, at the latest . The secure treatment program operational efficiencies and proposed refinements at Porterville DC will remain open indefinitely . to the current budgeting methodology for the child Although the state is expected ultimately to save support program . money by closing DCs and serving individuals in the community, it has incurred significant costs during Department of the transition . These costs include (1) developing Developmental Services (DDS) resources in the community to serve former DC residents, (2) creating a community-based safety The spending plan provides $4 .5 billion from net to replace DC-based safety net services, the General Fund ($7 .4 billion total funds) to (3) covering the transition costs of moving residents support DDS in 2018-19, an increase of 8 percent into the community, (4) facilitating closure of DC from $4 .2 billion General Fund ($6 .9 billion total facilities, (5) providing bonus incentives to retain funds) in 2017-18 . The year-over-year increase is DC staff who care for the remaining DC residents, largely the result of caseload increases, changes and (6) offsetting the loss of federal funding at in service utilization, and costs associated with the DCs . The spending plan provides $26 million scheduled increases to the state minimum wage . one-time General Fund ($30 .6 million total funds) to The spending plan also provides several policy support the transition costs of consumers expected augmentations that together comprise around to move from Sonoma, Fairview, and Porterville $100 million in new General Fund spending . DCs in 2018-19 . This is in addition to $43 .9 million Delays Enforcement of 14-Day Uniform General Fund ($67 .9 million total funds) in “base” Holiday Schedule. The spending plan provides community placement plan funding that has $29 .3 million from the General Fund ($48 .3 million historically been provided each year . total funds) to delay enforcement of the 14-day Provides “Bridge Funding” for Service “uniform holiday schedule” by one year . This Providers. The spending plan provides $25 million policy—first enacted in 2009 as a recessionary from the General Fund ($40 .2 million total funds), budget solution—prohibits service providers from available over two years and conditional on billing for services on 14 predetermined days receiving federal approval for matching funds, for each year . This means that providers either do 51 analysis full gutter 2018-19 BUDGET the wages and benefits of service provider staff that Adds Language Related to Self-Determination provide direct services to consumers . The bridge Program (SDP). One of the more significant policy funding is one-time as DDS and the Legislature changes in DDS that will occur in 2018-19 is await findings and recommendations from a implementation of SDP . Chapter 683 of 2013 three-year rate study scheduled to be completed (SB 468, Emmerson) authorized SDP, with an by March 2019 . It is meant to increase funding for initial three-year phase-in period, but made service providers until any recommendations from implementation contingent on approval of federal the rate study can be implemented . Budget bill matching funds . The state just received federal language gives DDS and the Department of Finance approval on June 6 and the spending plan flexibility in how to implement and allocate funding . contains both budget and trailer bill language Increases Rates for Certain Health-Related related to the rollout of SDP . Budget bill language Service Providers. The spending plan provides allows DDS to shift up to $2 .8 million General $17 .7 million from the General Fund ($30 .1 million Fund from the Regional Center (RC) budget to total funds) in 2018-19 to increase certain DDS state operations for the administration of service provider rates to match rate increases SDP . Trailer bill language specifies how some of in the Medi-Cal system . Of the total General the federal matching funds generated by SDP Fund increase, $17 .1 million is for home health should be prioritized for participant training and providers, while $351,000 is for pediatric day person-centered planning . health care providers and $202,000 is for providers SDP represents a fundamental shift in how at intermediate care facilities-developmentally consumers receive services and supports through disabled (ICF-DDs) . Within the DDS system, certain the DDS system . It allows consumers and their rates are determined by the “schedule of maximum families to decide which services and supports allowances,” which are Medi-Cal-set rates . they need and prefer by allowing them to direct Because the rates for these three services were the process by which such decisions are made . increased in the Medi-Cal system, the spending Statute stipulates that SDP must cost the same plan provides funding to increase the rates DDS or less for each participating consumer than what pays for these services . is currently spent through the traditional services/ Provides Funding for Deferred Maintenance supports delivery system . RCs will still be involved at Porterville DC. The spending plan includes in determining the total amount of money available one-time funding of $10 million from the General to each consumer, ensuring that consumers work Fund, available over three years, for deferred with an approved financial management service to maintenance projects at Porterville DC . Although manage their money, and ensuring that consumers the final selection of projects is yet to be made, are only authorized to purchase allowable services DDS will focus on the areas of Porterville DC that and supports (for example, services and supports serve the secure treatment program, since it will that are eligible for federal matching funds) . SDP remain open indefinitely . (The $10 million for DDS will ultimately be offered to anyone in the DDS is part of a one-time General Fund allocation of system, but it will first be phased in over three $305 million for deferred maintenance projects years with up to 2,500 consumers representing all at 20 state departments . For more details on 21 RCs . this allocation, please see the “Other Provisions” section of this report .) HOMELESSNESS Emergency Aid Block Grants for governments to fund a variety of homelessness Homelessness. The budget includes a one-time services—such as shelter services, rental allocation of $500 million for block grants to local assistance, outreach, and construction of 52 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET affordable housing . $150 million of the grants the Mental Health Services Act (Proposition 63 of is divided among the state’s 11 most populous 2004) . Before these bonds can be issued, the cities based on their homeless populations . The state must complete a validation process whereby remainder is divided among Continuums of Care— the courts determine whether issuance of the local entities that administer housing assistance bonds is legal . The validation action is pending . If programs with a particular area, often covering a NPLH is approved by voters, the state would be county or group of counties—roughly based on able to issue the bonds without going through the their homeless populations . validation process . No Place Like Home. The budget package Other Funding for Homelessness. The budget places the No Place Like Home (NPLH) program also includes a collection of homelessness-related before the voters for their approval at the funding augmentations for outreach, mental health November 2018 election . In 2016, the Legislature services, and assistance targeted to CalWORKs created the NPLH program to construct and families, seniors, youth, and victims of domestic rehabilitate permanent supportive housing for violence . These augmentations total $109 million those with mental illness who are homeless . The in 2018-19 . More detail on these augmentations program authorizes the issuance of bonds backed can be found in the “Health and Human Services” by personal income tax revenues raised under sections of this report . NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION The budget package provides a total of (1) $1 .5 billion in continuous appropriations, $11 .7 billion from various fund sources—the (2) $166 million in other existing spending General Fund, bond funds, and various special commitments, and (3) $1 .4 billion in discretionary funds—for programs administered by the spending . The plan assumes at least $2 .6 billion in California Natural Resources and Environmental auction revenue in 2018-19, more than $400 million Protection Agencies . This is a net decrease of carried over from the end of 2017-18, and about $3 .5 billion (23 percent) compared to $50 million in interest income accrued to the fund . 2017-18 estimated expenditures . This reduction We discuss the major parts of this expenditure plan primarily is related to a $2 .6 billion decrease in in more detail below . the amount of bond funds budgeted . (We note Continuous Appropriations ($1.5 Billion). that estimated bond expenditures for 2017-18 Under legislation passed in 2014, about 60 percent are somewhat inflated because of how prior-year of annual auction revenue (less certain other bond appropriations are reflected in budget existing spending commitments) is continuously documents, making year-over-year comparisons of appropriated to high-speed rail (25 percent), bond spending difficult .) Figures 20 and 21 (see affordable housing and sustainable communities next page) display total funding provided for major (20 percent), transit and intercity rail capital departments overseen by the natural resources and (10 percent), and low carbon transit operations environmental protection agencies, respectively . (5 percent) . Other Existing Spending Commitments Cap-and-Trade Expenditures ($166 Million). The spending plan includes State cap-and-trade auction revenue is $166 million for spending commitments made deposited in the Greenhouse Gas Reduction Fund in prior years . Similar to the current year, some (GGRF) . As shown in Figure 22 (see page 55), of these allocations—specifically backfilling the the spending plan allocates $3 .1 billion from the State Responsibility Area (SRA) fee suspension GGRF for various programs . This plan includes: ($28 million) and the expanded manufacturing sales 53 analysis full gutter 2018-19 BUDGET Figure 20 Natural Resources Budget Summary (Dollars in Millions) Change From 2017‑18 2016‑17 2017‑18 2018‑19 Expenditures Actual Estimated Budgeted Amount Percent Totals $5,039 $8,767 $7,212 ‑$1,554 ‑18% By Department Forestry and Fire Protection $1,305 $2,179 $1,844 -$335 -15% Parks and Recreation 480 806 1,304 497 62 General obligation bond debt service 1,025 951 1,026 76 8 Water Resources 548 2,003 716 -1,287 -64 Energy Commission 396 683 533 -150 -22 Fish and Wildlife 431 520 524 4 1 Natural Resources Agency 312 333 293 -40 -12 Wildlife Conservation Board 94 496 196 -300 -60 Conservation Corps 94 109 157 48 44 Conservation 124 171 131 -40 -23 State Lands Commission 32 45 99 54 119 Other resources programsa 199 470 389 -81 -17 By Fund Source General Fund $2,726 $3,512 $3,622 $110 3% Special funds 1,271 2,145 1,777 -368 -17 Bond funds 885 2,740 1,521 -1,219 -44 Federal funds 157 369 293 -76 -21 By Purpose State operations $4,174 $5,661 $4,913 -$747 -13% Local assistance 556 2,146 1,734 -412 -19 Capital outlay 309 960 566 -394 -41 a Includes state conservancies, Coastal Commission, and other departments. Figure 21 Environmental Protection Budget Summary (Dollars in Millions) Change From 2017‑18 2016‑17 2017‑18 2018‑19 Expenditures Actual Estimated Budgeted Amount Percent Totals $3,714 $6,436 $4,544 ‑$1,893 ‑29% By Department Resources Recycling and Recovery $1,500 $1,743 $1,568 -$175 -10% Air Resources Board 700 1,705 1,386 -319 -19 Water Resources Control Board 1,137 2,578 1,137 -1,441 -56 Toxic Substances Control 247 263 303 40 15 Pesticide Regulation 94 104 105 1 1 Other departmentsa 37 44 44 1 2 By Fund Source General Fund $96 $217 $130 -$88 -40% Special funds 2,905 4,286 3,842 -443 -10 Bond funds 427 1,564 202 -1,362 -87 Federal funds 286 370 370 — — By Purpose State operations $1,247 $1,753 $1,638 -$115 -7% Local assistance 2,467 4,530 2,906 -1,624 -36 Capital outlay — 154 — -154 a Includes the Environmental Protection Agency, Office of Environmental Health Hazard Assessment, and general obligation bond debt service. 54 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Figure 22 2018‑19 Cap‑and‑Trade Expenditure Plan (In Millions) Program Department Amount Continuous Appropriationsa $1,490 High-speed rail High-Speed Rail Authority $621 Affordable housing and sustainable communities Strategic Growth Council 497 Transit and intercity rail capital Transportation Agency 248 Transit operations Caltrans 124 Other Existing Spending Commitments $166 Manufacturing sales tax exemption backfill N/A $89 State administrative costs Various 49 SRA fee backfill CalFire/Conservation Corps 28 Discretionary Spending $1,401 Mobile Source Emissions Heavy duty vehicle and off-road equipment programs Air Resources Board $180 Clean Vehicle Rebate Project Air Resources Board 175 Low-income light duty vehicles and school buses Air Resources Board 100 Low-carbon fuel production Energy Commission 13 Local Air Pollution Reduction Local air district programs to reduce air pollution Air Resources Board 245 Local air district administrative costs Air Resources Board 20 Technical assistance to community groups Air Resources Board 10 Agriculture Agricultural diesel engine replacements Air Resources Board 112 Methane reductions from dairies Food and Agriculture 99 Incentives for food processors Energy Commission 64 Healthy Soils Food and Agriculture 5 Agricultural renewable energy Energy Commission 4 Forestry Forest health and fire prevention CalFire 160 Prescribed fire and fuel reduction CalFire 30 Local fire response Office of Emergency Services 25 Regional forest restoration projects Natural Resources Agency 20 Urban forestry CalFire 5 Other programs Transformative Climate Communities Strategic Growth Council 40 Waste diversion CalRecycle 25 Urban greening Natural Resources Agency 20 Climate and energy research Strategic Growth Council 18 Low-income weatherization Community Services and Development 10 Energy Corps Conservation Corps 6 Wetland restoration Fish and Wildlife 5 Coastal adaptation Various 5 Woodstove replacements Air Resources Board 3 Technical assistance for disadvantaged communities Strategic Growth Council 2 Total $3,056 a Continuous appropriations based on revenue assumption of $2.6 billion in 2018-19. CalTrans = California Department of Transportation; SRA = State Responsibility Area; CalFire = California Department of Forestry and Fire Protection; and CalRecyle = California Department of Resources Recycling and Recovery. 55 analysis full gutter 2018-19 BUDGET tax exemption ($89 million)—are “taken off the top” (ZEV) fueling infrastructure in 2018-19 . (We before determining continuous appropriations . discuss this change in the ZEV section below .) Discretionary Spending ($1.4 Billion). Revenue Multiyear Commitments for Certain Programs. that is not continuously appropriated—sometimes Most of the new spending is one time, but some referred to as discretionary revenue—is available programs would receive multiyear funding . These to be allocated through the annual budget act or multiyear programs are: (1) $200 million annually other legislation . The budget includes $1 .4 billion in over eight years to continue light-duty ZEV rebates, discretionary GGRF spending for various programs . including $175 million for the Clean Vehicle Most of the programs received GGRF in prior Rebate Project and $25 million for incentives for years as well . Some of the notable changes to the light-duty vehicles for low-income consumers; allocations in 2018-19 include: (2) $30 million ongoing for prescribed fire and fuel • Prescribed Fire and Regional Forestry. reduction; (3) the two-year $20 million allocation for The spending plan provides $30 million for AB 617 implementation; and (4) $6 million ongoing prescribed burning and fuel reduction in to the California Conservation Corps for energy forests and $20 million for regional forest efficiency activities in the Energy Corps program . restoration projects . This funding is part of In addition, Chapter 626 of 2018 (SB 901, Dodd) the administration’s proposal to implement directs $200 million annually from 2019-20 through the Forest Carbon Plan . Up to $7 million of 2023-24 to forest health, prescribed fire, and fuel this funding may be allocated to the California reduction projects . Air Resources Board (CARB) for monitoring Strategy to Ensure Fund Solvency. The budget air pollutant emissions related to prescribed prohibits most departments and agencies from burning . (In addition, the spending plan spending more than 75 percent of their GGRF continues cap-and-trade funding for forest allocations before the final quarterly auction of the health and fire prevention activities, funded at fiscal year (scheduled for May 2019) . Once the $160 million in 2018-19 .) final auction is complete and the total amount of • Local Air Districts. The spending plan 2018-19 revenue is determined, the Department includes $20 million for two years to pay of Finance (DOF) will determine how much of for local air district costs of implementing the revenue is available to fund the discretionary Chapter 136 of 2017 (AB 617, C . Garcia) . programs specified in the expenditure plan . DOF Local air district costs include purchasing must then notify the Joint Legislative Budget and maintaining air monitoring equipment and Committee of its determination within 30 days . developing community air protection plans . This strategy is meant to ensure fund solvency if The budget also includes $30 million over two actual revenue is lower than $2 .6 billion . Certain years from the Air Pollution Control Fund for programs—most notably $200 million to CARB for these activities, providing a total of $50 million light-duty ZEV rebates—are not be subject to the for these purposes . 75 percent restriction . • Low-Carbon Fuel Production. The spending Proposition 68 Resources Bond plan provides $12 .5 million to the California Energy Commission (CEC) for grants to California voters approved Proposition 68 in low-carbon fuel production facilities . This June 2018 . This measure authorizes the state allocation backfills a portion of the $23 million to sell a total of $4 .1 billion in general obligation that was provided for this purpose in 2017-18 bonds for resources-related purposes, including from the Alternative and Renewable Fuel parks, habitat restoration, and water projects . The Vehicle Technology Fund (ARFVTF) . The 2018-19 Budget Act appropriates over one-quarter budget plan redirects these ARFVTF dollars to of the bond . Specifically, this includes $1 .3 billion pay for an expansion of zero-emission vehicles for 20 departments . Figure 23 shows expenditures 56 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET for each department and program proposed for Department of Fish and Wildlife (DFW) Proposition 68 funding in 2018-19 . The budget includes $524 million from various Environmental License Plate Fund sources for DFW . This is roughly equivalent to the amount provided in 2017-18 . The Environmental License Plate Fund (ELPF) Funding Augmentations. The budget provides supports various resources and environmental $39 .1 million ($34 .1 million General Fund and protection programs . The fund is primarily $5 million Tire Recycling Management Fund) supported from the sale and renewal of in augmentations for DFW . Of this amount, personalized motor vehicle license plates, as well $29 .6 million is authorized for three years and as a portion of fees on the sale and renewal of $9 .5 million is provided on a one-time basis . The certain specialty license plates . The Department new funding is provided for the following purposes: of Motor Vehicles recently began offering “legacy license plates,” which has increased revenues • Address Operating Shortfall—$19 .6 million in recent years . The fund is estimated to receive for three years to address an operating $55 million in revenues in 2018-19 . As displayed shortfall in the Fish and Game Preservation in Figure 24 (see next page), the budget includes Fund and allow DFW to continue its existing several new ELPF expenditures . Most of this activities . funding is provided on a one-time or limited-term • Expand Activities—$10 million for three years basis . (including $5 million from the Tire Recycling Management Fund) to expand DFW’s current Figure 23 2018‑19 Funding From Proposition 68 Resources Bond (In Millions) Department Primary Uses Amount Parks and Recreation Local and state parks $482.6 Water Resources Control Board Groundwater cleanup and management, safe drinking water 177.3 Water Resources Flood protection, groundwater recharge 160.8 Natural Resources Agency Salton Sea, river and parkway recreation, green infrastructure 126.2 Wildlife Conservation Board Habitat conservation 71.9 Coastal Conservancy San Francisco Bay restoration, coastal forests 53.7 Sierra Nevada Conservancy Watershed Improvement Program, habitat restoration 36.3 Santa Monica Mountains Conservancy Habitat restoration, LA River restoration 34.0 Food and Agriculture Water efficiency, healthy soils 31.0 Fish and Wildlife River and wetland restoration 23.6 Ocean Protection Council Marine wildlife, assisting coastal communities 20.3 Forestry and Fire Protection Urban forestry 14.6 Conservation Corps Parkway restoration, grants to local corps 9.8 San Gabriel Mountains and LA River Conservancy LA River restoration 8.7 Tahoe Conservancy Upper Truckee River and Marsh restoration 3.2 Conservation Agricultural conservation 2.2 Baldwin Hills Conservancy Habitat restoration 1.2 Sacramento‑San Joaquin Delta Conservancy Economic development 1.1 Coachella Valley Mountains Conservancy Habitat restoration 0.2 San Diego River Conservancy San Diego River restoration 0.1 Various Statewide bond administration 1.4 Total $1,260.0 LA = Los Angeles. 57 analysis full gutter 2018-19 BUDGET Figure 24 Major New ELPF Expenditures in the 2018‑19 Budget (In Millions) Department Purpose Amount CNRA Ocean Resiliency Program to address threats of climate change on coastal $15.0 and marine ecosystems TRPA/SWRCB Backfill General Fund monies redirected to DFW 6.6 CalFire Fireworks stewardship program for seized illegal fireworks 3.6 SLC Boca Chica Lowlands Restoration Project 2.0 Delta Stewardship Council Delta Science Program 2.0 General Services Backfill Energy Resources Programs Account funding 1.9 Conservation Watershed coordinator grants 1.8 Coastal Conservancy Backfill bond funds for ongoing operations 1.0 CNRA Establish project monitoring unit 0.7 ELPF = Environmental License Plate Fund; CNRA = California Natural Resources Agency; TRPA = Tahoe Regional Planning Agency; SWRCB = State Water Resources Control Board; DFW = Department of Fish and Wildlife; CalFire = California Department of Forestry and Fire Protection; SLC = State Lands Commission; and DWR = Department of Water Resources. service levels and authority for 30 new expenditures . The net decrease largely reflects a positions . technical issue related to unspent 2016-17 funds • Expand California Waterfowl Habitat that were carried over into 2017-18 . This decrease Program—$5 million one time to expand is partially offset by an increase in spending for ZEV this program—which provides grants to fueling infrastructure, discussed below . landowners for improving waterfowl habitat ZEV Fueling Infrastructure. The budget conditions on their private lands—to working includes $134 .5 million ARFVTF for ZEV fueling agricultural rice fields . infrastructure, including $114 .5 million for electric • Launch California Biodiversity vehicle charging stations and $20 million for Initiative—$2 .5 million one time for a new hydrogen fueling stations . These funds will be effort to improve understanding of and administered through the existing Alternative and preserve the state’s biodiversity . Renewable Fuel and Vehicle Technology Program (ARFVTP) . The $114 .5 million for electric vehicle • Conduct Budget Review and Develop charging stations is $99 million more than the Tracking System—$2 million one time for 2017-18 funding level . This increase reflects (1) a DFW to contract with an independent entity $43 million one-time allocation from the ARFVTF to conduct a service-based budget review fund balance, (2) a $15 million one-time transfer and develop a new budget tracking system from the Air Quality Improvement Fund, and by January 2021 . DFW can also use a portion (3) redirecting $41 million from other ARFVTP of these funds to support associated staff activities, such as grants for low-carbon fuel work . The budget package includes budget production facilities . (As discussed earlier in the trailer legislation (1) specifying the scope cap-and-trade section of this report, $12 .5 million and interim deadlines for these activities and GGRF is being used to backfill a portion of funding (2) authorizing DFW to accept private funds to for low-carbon fuel production .) The administration help support the review and system . intends to allocate all ARFVTP funding (about $95 million annually) to ZEV fueling infrastructure California Energy Commission over the next several years . The budget provides $533 million for CEC in 2018-19, a net decrease of $150 million (22 percent) compared to estimated prior-year 58 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Department of Water Resources Central Valley (described in the “Other Provisions” section of this report) . The budget includes $716 million for DWR, which represents a $1 .3 billion decrease compared CalFire to the prior year . (These totals do not include The budget includes $1 .8 billion from various the roughly $1 .7 billion in annual payments from fund sources to support the California Department water contractors for DWR’s work on the State of Forestry and Fire Protection (CalFire), a net Water Project, as those funds are not appropriated decrease of $335 million, or 15 percent, from the through the annual budget act .) This year-to-year estimated 2017-18 level . This decrease is primarily decrease is primarily due to the way bond funds are due additional one-time fire-fighting costs provided accounted for in the annual budget . Specifically, in 2017-18, particularly for the large fires that DWR had $1 .7 billion in 2017-18 spending authority occurred in Sonoma and Napa Counties in October from bond funds appropriated over the past several 2017 and in Ventura County in December 2017 . years, compared to the roughly $350 million appropriated in the 2018-19 Budget Act . Helicopter Fleet Replacement. The budget includes $101 million from the General Fund Flood Management. The budget provides in 2018-19 for the procurement of four new $195 million from the General Fund for helicopters as part of CalFire’s helicopter fleet flood management projects—primarily levee replacement plan . Funding for procurement of the improvements—in the Central Valley . This funding first helicopter was provided in the 2017-18 budget . falls into two categories: Under the plan, all 12 of CalFire’s helicopters would • First, the budget includes $170 million one be replaced by 2020-21 . The one-time cost of fleet time for six specific urban levee improvement replacement, including ancillary costs and capital projects—identified in the budget act—that outlay, is currently estimated at $315 million . The have already been authorized by the U .S . administration estimates ongoing support costs will Army Corps of Engineers and funded by grow to about $14 million annually for increased Congress . These monies would meet federal staffing and maintenance needs . requirements for the state’s share of funding Fire Protection. The budget provides an those projects and be used in combination increase of about $50 million from the General with local and federal funds . Fund to support CalFire’s firefighting capabilities . • Second, the budget provides $25 million on an This includes $11 million for increased staffing and ongoing basis to perform regular maintenance vehicle maintenance, $9 .4 million for additional and repairs on the levees for which the state dispatchers at Emergency Command Centers, holds special responsibility and liability . DWR $7 .3 million for additional California Conservation will perform some of these activities and Corps (CCC) fire crews, and $4 million to lengthen allocate some funding to local agencies that the season that McClellan Reload Air Base is have contracted with DWR to maintain the staffed . (The budget also provides funding for a state’s levees . Additionally, from this ongoing new firefighter training program for parolees at amount, the budget sets aside $1 .3 million the Ventura Training Center, which is discussed in in 2018-19 to study the feasibility of levying the “Judiciary and Criminal Justice” section of this an assessment to support flood management report .) activities within the Sacramento-San Joaquin California Conservation Corps Drainage District . The budget includes a total of about $157 million In addition to these funds, the budget includes ($90 million General Fund) for CCC, a net $96 .5 million for various flood management increase of about $48 million, or 44 percent, activities from Proposition 68 (as mentioned earlier) above estimated 2017-18 expenditures . This and $100 million from the General Fund to address year-over-year change primarily reflects an deferred maintenance and repairs on levees in the increase of almost $36 million in General Fund 59 analysis full gutter 2018-19 BUDGET spending for capital outlay projects . These projects throughout the state park system . The department mainly consist of $24 million for the planning and utilized its newly implemented accounting system— construction costs of a kitchen, multipurpose room, known as Service-Based Budgeting or SBB— and dorm replacement at the Auburn residential to inform its proposed allocation of additional center, as well as funding for the acquisition and resources and positions across the state parks . planning phase to build new residential centers (as The largest funding increases are for facilities and discussed below) . maintenance, natural resource management, and Expansion and Replacement of Residential local engagement . Center Facilities. The budget includes $9 million California Indian Heritage Center. The budget from the General Fund for the acquisition and authorizes $200 million—$100 million from the planning phases of new residential centers in General Fund and up to $100 million in donations— Auberry ($4 .3 million), Los Pinos ($1 .4 million), for the planning and construction of a California and Greenwood ($3 .2 million), as well as the Indian Heritage Center in West Sacramento . The study phase in Yountville ($200,000) . This funding center is intended to replace the State Indian begins the implementation of a major expansion of Museum at Sutter’s Fort State Historic Park in residential centers over the next five years . The first Sacramento . The new center would be managed two of these facilities will provide services in new by the department in collaboration with tribal locations . The center at Greenwood will replace representatives . The final project is expected to an existing residential center that is no longer include up to 120,000 square feet of building serviceable, and the new center at Yountville will space, outdoor plazas and venues, and educational replace an existing nonresidential center in Napa . trails to the Sacramento River . It is expected to be The projects are estimated to cost a combined total completed by the end of 2022 . of $163 million (General Fund and lease revenue State Lands Commission (SLC) bonds) to complete . The budget provides $99 million for SLC, which Department of Parks and Recreation is more than double the current-year level of (DPR) $45 million . The significant funding increase is to The budget includes $1 .3 billion from various plug offshore oil and gas wells, as described below . fund sources to support DPR, a net increase of Abandoned Oil and Gas Wells. The budget $497 million, or 62 percent, from the estimated provides $58 million in 2018-19 for SLC to plug 2017-18 level . This is primarily due to $483 in and secure two offshore oil and gas sites near one-time Proposition 68 funding (discussed above) . Santa Barbara . Specifically, the budget provides Parks Funding Augmentation. The budget $38 million for Platform Holly and $20 million for assumes that $79 million of fuel tax revenue will be Rincon Island as proposed by the administration . transferred to the State Parks and Recreation Fund Under the administration’s plan, $20 million (SPRF) in 2018-19 as a result of Chapter 5 of 2017 would be provided for each site in 2019-20, and (SB 1, Beall) . This is an increase of $25 million from an additional $10 .5 million for Rincon Island in the amount transferred in 2017-18, which primarily 2020-21 . SLC assumed control and responsibility reflects the full implementation of the fuel tax for the facilities at these sites after the lessees increases established in SB 1 . Of the transferred declared fiscal insolvency and relinquished the amount, the budget provides (1) $26 .6 million leases they had held with the state . These wells to address a historical budget shortfall in SPRF and facilities are on state lands and will continue and $7 .7 million to build up the fund’s year-end to pose risks to the environment and public health reserve; (2) $3 million to continue support that was until they are fully plugged and secured . The initiated in 2017‑18 for recruitment and training, ultimate cost to the state is likely to be less than off-highway vehicle grants, and abandoned the $109 million that the Legislature approved, watercraft abatement grants; and (3) $41 .9 million however, as the state is in active negotiations for ongoing and 361 positions to expand service levels a prior lessee to pay some of the costs . Any funds 60 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET that the state ultimately receives will reimburse the Safe Drinking Water. As part of the January General Fund for these upfront appropriations . The 10 budget package, the administration proposed Legislature also approved supplemental reporting budget trailer legislation to impose new charges on language requiring SLC to submit a status update water system customers and certain agricultural regarding funding, work, costs, and the terms of entities . The revenues, in turn, would have been other offshore leases by January 10, 2019 . used to implement a financial assistance program to address unsafe drinking water . The Legislature State Water Resources Control Board did not adopt the Governor’s proposal . However, (SWRCB) the Legislature approved $20 million from the General Fund on a one-time basis for SWRCB, The budget includes a total of about $1 .1 billion mainly to ensure safe drinking water in schools and ($72 million General Fund) for SWRCB in 2018-19 . provide emergency relief grants to households . (The This is a net reduction of $1 .4 billion, or 56 percent, budget also includes $3 .5 million from the General below 2017-18 expenditures . The decrease is due Fund for the Office of Emergency Services to mainly to an almost $1 .5 billion reduction in bond provide emergency water tanks .) funding from Proposition 1 (2014) . TRANSPORTATION The spending plan provides $23 .2 billion from Senate Bill 1 Funding all fund sources for transportation programs . Senate Bill 1 increased fuel taxes and vehicle As shown in Figure 25, this is a net increase of charges to support existing and new transportation $4 .7 billion, or 25 percent, when compared to the programs . It also repays monies loaned in the past revised level of spending in 2017-18 . This largely to the General Fund from various transportation reflects increased spending resulting from the accounts . In total, the spending plan assumes recent transportation funding package contained SB 1 provides $4 .6 billion in 2018-19—a in Chapter 5 of 2017 (SB 1, Beall) . The spending $1 .8 billion (62 percent) increase from the revised plan also includes other augmentations for the level of spending in 2017-18 . (The main reason for California Department of Transportation (Caltrans), the year-to-year increase is that the increased taxes the California Highway Patrol (CHP), and the and charges authorized by SB 1 were in effect for Department of Motor Vehicles (DMV) . Figure 25 Transportation Program Expendituresa (Dollars in Millions) Change From 2017‑18 Program/Department 2016‑17 2017‑18 2018‑19 Amount Percent Department of Transportation $9,151 $11,417 $14,218 $2,802 25% California Highway Patrol 2,344 2,416 2,601 185 8 Shared revenues (local streets/roads) 1,277 1,882 2,587 705 37 Department of Motor Vehicles 1,059 1,124 1,184 60 5 High-Speed Rail Authority 733 305 1,177 872 286 State transit assistance 339 726 983 257 35 Other transportation programsb 334 649 428 -221 -34 Totals $15,238 $18,518 $23,179 $4,661 25% a Includes state General Fund, state special funds, state bond funds, federal funds, and reimbursements. b Includes California State Transportation Agency, California Transportation Commission, and Board of Pilot Commissioners. 61 analysis full gutter 2018-19 BUDGET only part of 2017-18 .) The $4 .6 billion in spending Capital Outlay Support. The budget increases includes: spending from various funds on Caltrans’ capital outlay support program to deliver new projects • $1 .6 billion for state highways . through the SHOPP and other programs from • $1 .2 billion for local streets and roads . $1 .9 billion to $2 billion—a $168 million increase . • $778 million for transit . The increase consists of (1) $137 million for 785 • $758 million for programs supporting multiple state staff and overtime equivalent positions, types of transportation . (2) $22 million for 87 external consultant equivalent • $170 million for other transportation programs positions, (3) $3 .3 million for project permits, (such as for active transportation) . (4) $2 million (one time) for construction arbitration costs, (5) $1 .2 million (one time) for a Caltrans’ • $105 million for state parks and agricultural facility needs study to be conducted by the programs (from the fuel tax revenues Department of General Services, and (6) $1 million associated with off-highway vehicles) . for training . Further, provisional language allows the The budget package also amends SB 1 to allow Department of Finance (DOF) (after notification to local governments to fund projects upfront and the Joint Legislative Budget Committee [JLBC]) to later reimburse themselves with funds they receive increase or decrease spending for additional state in future years through SB 1 . staff or external consultants to meet project delivery needs . Under the language, DOF can increase Caltrans spending by up to $36 million at any point in the The budget plan for Caltrans includes total fiscal year and can increase or decrease spending expenditures of $14 .2 billion from all fund sources, by up to $13 .3 million on or after January 1, 2019 . an increase of $2 .8 billion (or 25 percent) from Compensation Cost Adjustment. The budget the revised 2017-18 level of expenditures . The provides a $58 million increase from the State increase from 2017-18 to 2018-19 primarily reflects Highway Account (SHA) to address what Caltrans new funding provided from SB 1 for highway characterizes as insufficient funding for its existing maintenance and rehabilitation . As discussed below, positions . The augmentation is spread across the budget also augments Caltrans’ capital outlay Caltrans’ programs based on their historical support program, provides increases for Caltrans’ compensation expenditures and position history, compensation costs and various other purposes, with most of the increase going to highway and places a limit on Caltrans’ indirect cost recovery maintenance ($20 .5 million) and administration charges for certain local governments . ($16 .1 million) . Caltrans indicates that this Highway Maintenance and Rehabilitation. The augmentation will alleviate the need for new budget increases highway maintenance spending position requests for most of its programs over the from the Road Maintenance and Rehabilitation next few years . Account (RMRA) established by SB 1 from Indirect Cost Recovery Rate Limit for $421 million to $576 million—a $154 million Self-Help Counties. When Caltrans performs increase . The increase consists of (1) $100 million work for a local government, it charges the local for major maintenance contracts (specifically for government for associated indirect costs, such bridges and culverts) and (2) $53 .6 million to as for accounting . The budget package includes support 400 new positions . Of the new positions, trailer bill language to limit Caltrans to charging no 300 are to perform routine maintenance, while more than 10 percent for administrative indirect the remaining 100 are to oversee construction cost recovery to self-help counties (counties with contracts for major maintenance . Additionally, sales tax measures dedicated to transportation the budget increases spending from the RMRA improvements) until July 1, 2021 . The budget on highway rehabilitation projects included in the provides Caltrans with $10 million (SHA) to fully State Highway Operations and Protection Program make up for the resulting decrease in its indirect (SHOPP) from $424 million to $994 million—a cost recovery revenues . $570 million increase . 62 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET California Highway Patrol that comply with federal standards—commonly referred to as “REAL IDs .” The budget authorizes The budget provides $2 .6 billion to fund CHP the Director of Finance to further augment the level operations . This is an increase of $185 million, or of funding for driver license and ID card processing 7 .8 percent—mainly due to increases in funding for by $16 .6 million to alleviate customer wait times at capital outlay projects—compared to the revised DMV field offices, following a 30-day notification to level of spending in 2017-18 . Nearly all of this the JLBC . The Director of Finance is authorized to funding is from the Motor Vehicle Account (MVA), approve additional resources above $16 .6 million to which derives the majority of its revenue from the extent DMV is able to justify the resources and vehicle registration fees and driver license fees . provide an update on how the $16 .6 million is to Field Office Replacement Projects. The be used and its impact on wait times . (The Director budget includes a total of $169 million from the of Finance has already authorized a total increase MVA to fund replacement CHP offices . This total of $16 .6 million and the Legislature has concurred includes (1) $3 .7 million for the performance criteria with the request .) phase in Santa Fe Springs and Baldwin Park; and Front-End Sustainability (FES) Project. (2) $165 million for the design-build phase in Quincy In 2013, the DMV initiated the FES project to ($37 million), El Centro ($40 million), Hayward, complete the upgrade of its vehicle registration ($48 million), and San Bernardino ($40 million) . This and fee collection system, which currently depend funding is part of the administration’s ongoing plan on 45-year old technology . The budget package to replace deficient CHP area offices . provides an increase of $15 million in 2018-19 to Radio Console Replacement Project. The support the implementation of the FES project . budget provides $3 .9 million from the MVA in The budget package also includes trailer legislation 2018-19 to begin the replacement of the remaining to increase by $1 per-transaction fee (from antiquated dispatch consoles in all communication $3 to $4) charged to private entities (such as car centers statewide over the next four years . The dealerships) that utilize the system to collect vehicle CHP estimates future expenditures from the MVA registration fees on the department’s behalf, in of $4 .5 million in 2019-20, $4 .9 million in 2020-21, order to help offset the project’s implementation and $509,000 in 2021-22 in order to complete the costs . The FES project is expected to be replacement project . completed in 2022-23 at a total cost of $89 million, Vehicle Fleet Replacement. The budget with the above fee increase expiring in 2023 . includes an ongoing augmentation of $4 .5 million Field Office Replacement and Renovation from the MVA for the replacement of CHP vehicles Projects. The budget includes $7 .9 million that exceed the Department of General Services’ in 2018-19 to continue the replacement and recommended vehicle replacement mileage renovation of the Oxnard and Reedley DMV field threshold of 100,000 miles . The CHP expects to offices, as well as to construct perimeter fencing at replace a total of 1,105 vehicles in 2018-19 . 13 existing field offices . The budget also includes $200,000 to begin advanced planning for two Department of Motor Vehicles future renovation projects proposed for 2021-22 . The budget provides $1 .2 billion for DMV Other Budget Augmentations. The budget operations, an increase of $60 million (or 5 percent) also includes (1) $3 .1 million for the replacement from the revised level of 2017-18 expenditures . of IT equipment that has reached the end of its Nearly all of this funding is from the MVA . useful life and (2) $1 .4 million to extend the state’s Driver License and Identification (ID) Card clean air vehicle decal program as authorized Processing. The 2018-19 budget includes by Chapter 630 of 2017 (AB 544, Bloom) . This $351 million for DMV to process driver licenses program permits certain low- and zero-emission and ID cards . This is an increase of $21 million vehicles to operate in the state’s carpool lanes from the 2017-18 level due to workload related to regardless of the vehicle’s occupancy level . the issuance of new driver licenses and ID cards 63 analysis full gutter 2018-19 BUDGET JUDICIARY AND CRIMINAL JUSTICE The 2018-19 budget provides $14 .3 billion from priorities . The remaining $47 .8 million is to be the General Fund for judicial and criminal justice allocated to trial courts with below average programs, including support for program operations funding levels . and capital outlay projects, as shown in Figure 26 . • Self-Help Services ($35.6 Million). The This is an increase of $616 million, or 4 .5 percent, budget provides $19 .1 million in limited-term above the revised 2017-18 General Fund spending funding for self-help centers and $16 .5 million level . on a one-time basis to support county law libraries . The budget package also requires Judicial Branch the Judicial Council to conduct a cost-benefit The budget provides $3 .8 billion for support of analysis of self-help services by November the judicial branch—an increase of $247 million 2020 . (We note that the budget package also (or 7 percent) from the revised 2017-18 level . This makes ongoing a $10 million augmentation to amount includes $1 .9 billion from the General Fund the Equal Access Fund Program to provide and $499 million from the counties, with most of legal services and assistance to indigent the remaining balance from fine, penalty, and court individuals in civil cases that was set to end fee revenues . The General Fund amount is a net after 2018-19 .) increase of $161 million, or 9 percent, from the • Health Benefits and Retirement Costs revised 2017-18 amount . Funding for trial court ($24.9 Million). The budget provides operations is the single largest component of the $24 .9 million for increased trial court health judicial branch budget, accounting for around benefit and retirement costs . four-fifths of total spending . • Fine and Fee Backfill ($9.3 Million). The Trial Court Operations. The budget includes budget provides $9 .3 million to backfill various General Fund augmentations for trial court a further decline in 2018-19 fine and fee operations, including the following: revenue collected to support trial court operations, for a total General Fund backfill of • General Purpose Funding ($122.8 Million). $64 .3 million in 2018-19 . The budget includes $122 .8 million in general • Language Access ($8 Million). The purpose trial court operations funding . Of budget package provides $4 million to this amount, $75 million will be allocated by Judicial Council for trial court signage, Judicial Council to trial courts based on its Figure 26 Judicial and Criminal Justice Budget Summary General Fund (Dollars in Millions) Change From 2017‑18 2016‑17 2017‑18 2018‑19 Amount Percent Department of Corrections and Rehabilitation $10,675 $11,603 $11,874 $271 2.3% Judicial branch 1,702 1,748 1,909 161 9.2 Department of Justice 219 238 282 44 18.6 Board of State and Community Corrections 108 67 181 114 169.1 Other departmentsa 78 71 98 27 37.6 Totals, All Departments $12,782 $13,727 $14,344 $616 4.5% a Includes Office of the Inspector General, Commission on Judicial Performance, Victim Compensation Board, Commission on Peace Officer Standards and Training, State Public Defender, funds provided for trial court security, and debt service on general obligation bonds. Detail may not total due to rounding. 64 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET court interpreter equipment, and other Corrections and Rehabilitation language-access-related activities at trial The budget act provides $11 .9 billion from courts, as well as $4 million (one-time) to the General Fund for support of the California support trial court interpreter services . Department of Corrections and Rehabilitation • Online Traffic Pilot ($3.4 Million). The (CDCR) . This is a net increase of $271 million, budget provides $3 .4 million to Judicial or 2 percent, above the revised 2017-18 level of Council to develop and test different activities spending . This increase primarily reflects additional related to the online adjudication of certain costs related to (1) Hepatitis C treatment for traffic infractions at a minimum of eight trial inmates, (2) the replacement of radio equipment courts . in CDCR facilities and vehicles, and (3) prison roof In addition, the budget includes a $48 .2 million replacements and mold remediation . This additional reduction in General Fund support for trial court spending is partially offset by various spending operations in 2018-19 in order to reflect the reductions, including reduced spending for contract availability of property tax revenue in accordance beds due to a decline in the inmate population . with Control Section 15 .45 and Section 2578 of Adult Correctional Population. Figure 28 (see the Education Code . Such funds are remitted to next page) shows the recent and projected changes the state by counties that collect more property tax in the inmate and parolee populations . As shown than state law allows them to spend on education . in the figure, the prison population is projected to The budget also appropriates $15 million from decline slightly from about 128,500 inmates at the the Trial Court Trust Fund on a one-time basis end of 2017-18 to about 126,300 inmates by the to support start-up costs associated with the end of 2018-19 . The parole population is projected implementation of the state’s new pretrial process to increase slightly from about 47,500 to about as required by Chapter 244 of 2018 (SB 10, 49,200 parolees by the end of 2018-19 . These Hertzberg) . The budget specifies that the funds will trends are primarily due to the estimated impact of be reimbursed by the General Fund in 2019-20 . Proposition 57 (2016), which made all nonviolent offenders eligible for release consideration, Capital Outlay. The budget provides $1 .3 billion expanded CDCR’s authority to award sentencing for various trial court construction projects . This credits to inmates, and requires that judges decide amount includes $32 .2 million from the Immediate and Critical Needs Account (ICNA) for the pre-construction design Figure 27 activities for three projects . The budget also provides $1 .3 billion Lease Revenue Bonds Backed by General Fund in lease revenue bond authority for Authorized for Court Construction the construction of ten projects, (In Millions) as shown in Figure 27 . The annual Construction debt service on these bonds will County/Courthouse Project Cost be paid from the General Fund Glenn—renovation and addition to Willows Courthouse $38.3 instead of ICNA . (ICNA receives Imperial—New El Centro Courthouse 41.9 revenue from certain court fee Riverside—New Indio Juvenile and Family Courthouse 45.3 and fine increases to fund trial Riverside—New Mid-County Civil Courthouse 75.8 court facility projects .) The budget Sacramento—New Sacramento County Courthouse 459.8 package also requires Judicial Shasta—New Redding Courthouse 138.8 Council to reassess its trial court Siskiyou—New Yreka Courthouse 59.2 facility needs by December 31, Sonoma—New Santa Rosa Criminal Courthouse 160.7 2019 . Stanislaus—New Modesto Courthouse 237.2 Tuolumne—New Sonora Courthouse 57.7 Totals $1,314.8 65 analysis full gutter 2018-19 BUDGET includes $17 .5 million to purchase Figure 28 vehicles that are primarily used Adult Inmate and Parolee to transport inmates to receive Populations Projected to Change Slightly health care . As of June 30 Each Year Rehabilitation Programs. The 140,000 budget provides $16 .8 million in additional support for 120,000 rehabilitation programs . This Inmates includes (1) $8 .3 million (General 100,000 Parolees Fund) to increase the availability 80,000 of career technical education programs and (2) $4 million 60,000 (Inmate Welfare Fund) to support innovative programming grants 40,000 on an ongoing basis . The budget 20,000 also provides $2 .1 million from the General Fund for CDCR to establish the Ventura Training 2015 2016 2017 2018 2019 Projected Projected Facility, which will provide firefighter training and certification for about 80 parolees . The budget also provides $2 million to the in all cases whether juveniles should be tried in Department of Forestry and adult court . Fire Protection and $3 .5 million to the California Inmate Health Care. The budget includes Conservation Corps to support the training center . $3 .2 billion from the General Fund for inmate health Division of Juvenile Justice (DJJ). Legislation care . This includes the following augmentations: approved as part of the budget package allows (1) $105 .8 million on a limited-term basis to DJJ to house more juvenile and adult court youth increase the number of inmates with Hepatitis in order to reduce the number of such youth C that receive treatment, (2) $20 .1 million to housed in adult prison . For example, the legislation implement various strategies intended to improve authorizes DJJ to operate a seven-year pilot how the department manages mental health program to house certain adult court youth who beds, (3) $18 .1 million on a limited-term basis to can serve their entire sentences in DJJ if they are increase payments to contract psychiatrists who able to complete them before turning age 25 . The provide services when civil servants are unavailable, budget includes $2 .1 million from the General Fund (4) $10 .8 million to provide health care services in to support this new workload . reentry facilities, and (5) $8 .3 million for additional Other Budget Adjustments. The budget costs to implement the Electronic Health Record includes various other augmentations from the System . General Fund to support CDCR operations . Equipment and Roof Repairs. The budget These include (1) $16 .5 million to pay for overtime includes various General Fund augmentations worked by custody staff, (2) $13 .5 million to to purchase equipment and repair roofs . This reduce the inmate caseload for Correctional includes $72 .3 million to replace roofs as well as Counselors, (3) $12 .9 million to expand training for to address mold damage at various institutions . employees, (4) $10 .3 million to increase custody The budget also includes $32 .9 million for CDCR staffing primarily related to medical guarding and to replace public safety radio system infrastructure transportation, (5) $9 .1 million to implement a used at several institutions and by the statewide two-year contraband interdiction pilot program, inmate transportation unit . In addition, the budget and (6) $8 .2 million for additional costs to provide 66 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET janitorial services at the Correctional Health Care backlog of unprocessed sexual assault evidence Facility in Stockton . and $1 million to inventory the total amount of Capital Outlay. The budget provides an unprocessed evidence in the state . additional $39 .1 million from the General Fund Other Budget Adjustments. The budget to support various capital outlay projects in state includes (1) $11 .1 million (Ammunition and Safety prisons . Some of the most significant projects Enforcement Special Fund) for the regulation of are to: (1) construct a kitchen at the California ammunition and firearms and (2) $10 million one Correctional Center in Susanville ($19 .7 million), time (General Fund) to implement a tier-based sex (2) develop working drawings to construct mental offender registry as required by Chapter 541 of health crisis bed facilities at two state prisons 2017 (SB 384, Wiener and Anderson) . ($7 .1 million), and (3) develop preliminary plans to Other Criminal Justice Programs construct additional medication distribution rooms at various state prisons ($3 .3 million) . The budget Board of State and Community Corrections also provides $43 million in increased lease revenue (BSCC). The budget includes various one-time bond authority to improve prison health care General Fund augmentations for new grant facilities . programs to be administered by BSCC . This includes (1) $50 million for community-based Department of Justice (DOJ) organizations that provide housing services to The budget provides $683 million for support formerly incarcerated individuals, (2) $37 .3 million of DOJ in 2018-19—an increase of $36 million, to provide services to youth in lieu of punishment or 5 .5 percent, from the revised 2017-18 level of such as jail (commonly referred to as “diversion spending . This amount includes $282 million from programs”), and (3) $28 .2 million to assist counties the General Fund—a net increase of $44 million, with a temporary increase in the population or 19 percent, from the revised 2017-18 level of supervised by county probation departments due spending . (This increase does not include employee to the release of prison inmates as a result of compensation increases .) Proposition 57 . Forensics Workload. The budget includes a Commission on Peace Officer Standards and total of $18 .9 million in one-time General Fund Training (POST). The budget includes a one-time support for various forensics-related workload . $25 million General Fund augmentation to POST for First, the budget provides $6 million to backfill an law enforcement training activities: (1) $15 million additional decline in criminal fine and fee revenue for use of force and de-escalation training, available to support DOJ’s Bureau of Forensics (2) $5 million for crisis mental health training, Services (BFS) and $5 .4 million to replace BFS and (3) $5 million to provide competitive grants laboratory equipment . Second, the budget provides for innovative trainings or procedures that could $6 .5 million to help counties and cities address the reduce officer-involved shootings . OTHER PROVISIONS Proposition 2 Infrastructure the BSA—until it reaches its maximum level of 10 percent of General Fund tax revenue . (The state Proposition 2 Requires Infrastructure can suspend or withdraw these deposits when Spending After BSA Reaches Maximum Level. facing a budget emergency .) Once the BSA reaches Under Proposition 2, the state is required each year this maximum, required deposits that would bring to set aside funds for reserves, debt payments, the fund above 10 percent of General Fund taxes and—potentially—infrastructure . In particular, the instead must be spent on infrastructure . Under the state must deposit funds into the rainy day fund— budget plan’s revenue assumptions, the maximum 67 analysis full gutter 2018-19 BUDGET BSA level is $13 .8 billion . With both a required to fund state capital outlay, lease payments and optional deposit, the budget package sets related to state capital outlay, and deferred aside enough funds so that the BSA reaches its maintenance . The Legislature will appropriate maximum level at the end of 2018-19 . these funds for these dedicated purposes in Proposition 2 Infrastructure Spending future annual budget bills . to Begin in 2019-20 if Economy Continues • Rail Infrastructure Account. After dedicating to Grow. Each year that General Fund tax $415 million to state infrastructure, revenues increase, the maximum level of the Chapter 43 continuously appropriates half BSA also increases (typically by several hundred of the remaining funds to the Transportation millions of dollars) . Beginning in 2019-20, any Agency for the newly established Rail Proposition 2 requirement in excess of the amount Modernization Improvement Program . The needed to max out the reserve must be dedicated Secretary of Transportation will allocate the to infrastructure . For example, if the 2019-20 funds to high-priority rail projects, including Proposition 2 requirement is $1 .5 billion, around those that benefit shared use corridors and $1 billion would be allocated to infrastructure station areas . projects . • Housing Rehabilitation Loan Fund. Trailer Bill Appropriates These Funds to Chapter 43 continuously appropriates Three Uses. Chapter 43 (AB 1831) appropriates the other half of the remaining future available Proposition 2 infrastructure funds Proposition 2 infrastructure funds to the to the Infrastructure Stabilization Fund (from Multifamily Housing Program, administered 2019-20 through 2021-22) . As shown in Figure 29, by the California Department of Housing the legislation distributes these funds to the and Community Development . This program following three uses: funds the construction and rehabilitation of affordable rental housing for lower-income • State Infrastructure and Maintenance Fund. households . The first $415 million available is dedicated Deferred Maintenance Figure 29 and Other Infrastructure Trailer Bill Legislation Appropriates Deferred Maintenance. As Proposition 2 Infrastructure Funds Beginning in 2019-20 summarized in Figure 30, the budget includes $305 million on a Proposition 2 Infrastructure Funds one-time basis from the General Fund (non-Proposition 98) for deferred maintenance projects at Infrastructure Stabilization Fund 20 state departments in 2018-19 . The departments have up to three years to expend these funds . (The $415 Milliona budget also includes $28 million State Infrastructure in Proposition 98 General Fund and Maintenance Fund for community college projects .) 50% 50% The budget includes a provision that allows departments to Rail Housing Infrastructure Rehabilitation use up to 10 percent of their Account Loan Fund allocations—up to $5 million— a If amount in the Infrastructure Stabilization Fund is less than $415 billion, the entire amount is deposited into to conduct assessments of the State Infrastructure and Maintenance Fund. department infrastructure . 68 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET Because the administration has not identified legislation also authorizes lease revenue bonds of all of the specific projects that departments will $423 million to construct a new office building near undertake with the funding, the budget requires the State Capitol to be used as “swing space” for DOF to provide a list of projects to the Joint legislators and staff during the renovation of the Legislative Budget Committee (JLBC) 30 days prior Annex . to allocating funds to a department . Subsequent to Sacramento Area State Office Buildings. The the allocation of funds, departments may change budget includes $29 .6 million from the General their list of projects subject to approval by DOF . Fund for the initial planning phase—known as the DOF must notify the JLBC of any projects added performance criteria phase—for three state office with estimated costs of greater than $1 million, as building projects in the Sacramento area . These well as provide a quarterly report of all changes to capital outlay projects are: the list of projects . The budget also requires DOF • Construction of Richards Boulevard to provide the JLBC with an annual report on the Building ($18.1 Million). The budget provides status of funded projects . funding for the performance criteria phase Capitol Annex. The budget sets aside of a project to construct a complex of four $630 million from the General Fund into the State buildings with a total of 1 million net usable Project Infrastructure Fund (SPIF) for the renovation square feet at the former site of the state of the State Capitol Annex, originally constructed in printing plant . The total estimated cost of 1952 . Budget trailer legislation authorizes the use this project is about $1 billion . The facility is of lease revenue bonds of up to $756 million for the expected to house the California Department renovation in the event that total funding in SPIF of Tax and Fee Administration; the Board of (including $128 million of previously available fund Equalization; and various departments within balance) is not sufficient to cover project costs . The the Business, Consumer Services, and Housing Agency . Figure 30 • Renovation of the Bateson Deferred Maintenance Building ($5.2 Million). This 2018, Non-Proposition 98 General Fund (In Millions) project will involve the renovation Department Amount of the 215,000 net usable square foot building constructed in 1981 . Water Resources $100 The total cost of the project is Judicial Branch 50 estimated at $161 million . The California State University 35 University of California 35 building is expected to house California Exposition and State Fair 15 various departments currently Developmental Services 10 in leased space, such as the General Services 10 Department of Parks and State Hospitals 10 Recreation, Department of Water Corrections and Rehabilitation 9 Resources, and Department of Science Center and African American Museum 7 Forestry and Fire Protection . Military 4 Office of Emergency Services 4 • Renovation of the Unruh State Special Schools 4 Building ($6.3 Million). This Veterans Affairs 4 building was constructed in 1929 California Fairs 3 and has 125,000 net usable square Forestry and Fire Protection 2 feet . The total cost of the project is Employment Development 1 estimated at $90 million . The State Food and Agriculture 1 Treasurer’s Office—the building’s Conservation Corps 0.5 major tenant—is expected to Hastings College of Law 0.5 Total $305 69 analysis full gutter 2018-19 BUDGET relocate back to the Unruh Building after Financial Information System for completion of the renovation . California (FI$Cal) Debt Service. The budget provides $7 .6 billion An Integrated Financial Management System. from various funds for debt service payments in For the last several years, the administration 2018-19 . This represents an increase of 6 percent has been engaged in the design, development, from 2017-18 . This total includes $6 .5 billion and implementation of the FI$Cal project . This for general obligation bonds ($5 billion from the information technology (IT) project will replace the General Fund), and $1 billion for lease revenue state’s aging and decentralized IT financial systems bonds ($623 million from the General Fund) . with a new system integrating state government processes in the areas of budgeting, accounting, Employee Compensation cash management, and procurement . Since the Labor Agreements Increase State Annual project began, it has changed considerably in Costs. Assuming union members ratify agreements scope, schedule, and cost from what was initially with Bargaining Units 9 and 10, the state has active anticipated . These changes have been documented memoranda of understanding (MOU) with 20 of in special project reports (SPRs) . In February 2018, the 21 state rank-and-file employee bargaining the California Department of Technology approved units . (The MOU with Bargaining Unit 5 [Highway the seventh SPR for FI$Cal . Patrol] expired in July 2018 .) In 2018-19, the New Project Plan. The new project plan— budget assumes that state costs to pay for salary SPR 7—changes the scope of the FI$Cal project and benefits (excluding retirement benefits) for in two significant ways . First, it ends the project rank-and-file employees and their managers will before the State Controller’s Office’s (SCO’s) increase by $1 .4 billion ($725 million from the accounting functions fully transition onto FI$Cal . General Fund) . In addition, various provisions in Second, it changes the “onboarding” approach MOUs will significantly increase state annual costs so that not all departments that were previously for years to come . These include scheduled salary anticipated to transition to FI$Cal will actually increases, funding state contributions to prefund transition . Although SPR 7 makes significant retiree health benefits, increases in health care changes to the scope of the FI$Cal project, it only costs, and increases in other benefit costs . reflects very minor changes in overall project costs . Retirement Costs Continue to Grow. The Based on SPR 7, the total estimated cost for the state’s costs to pay for pension and retiree health project is $918 million ($493 million General Fund) benefits continue to grow . The budget assumes and is estimated to be completed in July 2019 . that the state’s costs to pay for active and retired The 2018-19 spending plan provides $53 .5 million state employees’ pension benefits will increase ($52 .2 million General Fund) to continue with the by $340 .5 million ($189 million General Fund) FI$Cal project and maintain and operate the FI$Cal in 2018-19 to a total contribution of $6 .2 billion system . ($3 .6 billion from the General Fund) . State pension SCO’s Integrated Solution. In light of persistent costs are expected to grow for the foreseeable challenges, SPR 7 establishes a new approach for future due to CalPERS phasing in the effects of deploying the accounting functions related to SCO . actuarial assumption changes and salary growth . In Rather than transitioning fully to FI$Cal, as prior addition, the budget assumes that the state’s costs SPRs planned, SPR 7 introduced the Integrated to pay for health benefits received by retired state Solution . Under the Integrated Solution, SCO employees will increase by about $170 million to will run the FI$Cal system and its existing legacy a total of $2 .2 billion in 2018-19 . These costs also accounting systems in tandem . The Integrated are expected to grow for the foreseeable future due Solution develops interfaces between both FI$Cal to increases in health premiums and the number and SCO’s legacy systems so that data is entered of retired state employees and eligible dependents only once (in either system) but then both systems receiving the benefit . share the data . This way each system can perform 70 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET the accounting and cash management functions a list of enacted budget proposals related to the for the state . The administration proposed this Integrated Solution by January 1, 2020 . approach because of SCO’s continued concern Cannabis Regulation and Enforcement regarding the performance and accuracy of the FI$Cal system . The Integrated Solution allows As summarized in Figure 31, the budget additional time for testing and validating the FI$Cal includes an increase of $129 million (primarily system using reports produced by SCO’s legacy from the Cannabis Control Fund and Cannabis systems before SCO fully transitions . Tax Fund) for several departments to regulate The cost of the Integrated Solution is not cannabis businesses . This amount roughly doubles reflected as a project cost in SPR 7 . Instead the the amount provided in 2017-18 . The funding 2018-19 spending plan provides SCO $5 .4 million is provided on a two-year limited-term basis . A ($3 .1 million General Fund) to support the majority of the funding supports the departments Integrated Solution . In total, SCO anticipates it will responsible for licensing and compliance oversight cost $25 .6 million (all funds) through 2021-22 to of cannabis businesses, including retailers, (1) develop and test the new accounting and cultivators, and manufacturers . Other activities cash management functions in FI$Cal, (2) develop supported by the funding include administrative the Integrated Solution, and (3) support the hearings of appeals filed by licensees, tax maintenance and operations of the FI$Cal project collection, and implementation of an information once the legacy systems are decommissioned . technology system (IT) to track cannabis products None of these costs are reflected in the total FI$Cal from cultivation through retail . The budget act project cost . However, as a means of tracking allows the amounts provided from the Cannabis project costs, the Legislature adopted supplemental Control Fund for the Bureau of Cannabis Control, reporting language as part of the 2018-19 budget Department of Public Health, and Department that requires the Department of Finance to provide of Food and Agriculture to be augmented by Figure 31 Summary of Funding Increases for Cannabis Regulation and Enforcement 2018-19 (In Millions) Department Primary Purposes Amount Bureau of Cannabis Control Licensing and enforcement of retailers, distributors, and other $54.3 licensees; grants to equity applicants Food and Agriculture Licensing and enforcement of cultivators 28.3 General Services Administrative hearings on behalf of licensing departments 13.0 Public Health Licensing and enforcement of manufacturers 10.6 GO‑Biz Grants for substance abuse treatment and other services 10.0 Employment Development Administration of employment tax program 3.7 Highway Patrol Develop protocols for determining when drivers are under the 3.0 influence of cannabis Tax and Fee Administration Administration of cultivation and retail excise taxes 2.3 University of California Research on effects of cannabis 2.0 Cannabis Control Appeals Panel Hearing appeals of decisions made by cannabis licensing 1.4 departments Secretary of State Business filings and trademark registration 0.4 Finance Audit of Bureau of Cannabis Control 0.4 Total $129.4 GO-Biz = Governor’s Office of Business and Economic Development. 71 analysis full gutter 2018-19 BUDGET the Department of Finance (DOF) for additional violence shelters (discussed in the “Homelessness” resources needed to implement IT, licensing, and section of this report) . enforcement activities . The budget also authorizes California Disaster Assistance Act (CDAA). a $59 million loan from the General Fund to the The budget includes an increase of $88 .1 million Cannabis Control Fund in case licensing revenues in 2018-19 and $23 .5 million ongoing from the are not sufficient to cover costs . General Fund for CDAA (for a total of $127 .2 million in 2018-19 and $62 .6 million ongoing for CDAA) . Voting Equipment Most of the increase in 2018-19 is expected Reimbursement to Counties for Voting to be used to provide reimbursements to Equipment. The budget includes up to local governments related to damage to local $134 .4 million General Fund for the state to infrastructure caused by storms in early 2017 and reimburse counties for costs counties incur to fires in late 2017 . The ongoing funding represents replace voting systems . Counties may seek the average of spending on CDAA in recent years . reimbursement for costs to replace voting systems California Earthquake Early Warning (CEEW) incurred after April 29, 2015 . The Secretary of System. The budget includes $15 .8 million from State will determine the maximum amount of state the General Fund in 2018-19 and $750,000 from funding available to each county based on the size the General Fund annually thereafter to support the of the county, the number of voters registered in CEEW system . Of the total in 2018-19, $15 million the county, and the Secretary of State’s estimate of is to complete the build-out of 283 remaining need for county voting equipment . planned sensor stations required for the system . Census Military Department Over $90 Million for Census Outreach. The The budget provides $231 million for the budget provides $90 million to the Government California Military Department (CMD), including Operations Agency for outreach activities related to $104 million from the General Fund and the decennial census through 2020-21 . Outreach $125 million from federal funds . This total is will be led by the Complete Count Census (a an increase of $16 million, or 7 percent, from committee established for the purpose of ensuring 2017-18 estimated expenditures . California has a complete and accurate census California Cadet Corps. The budget provides count) . The budget package requires the Complete an additional $7 .2 million in General Fund support Count Census to report on various elements of in 2018-19 (increasing to over $8 million annually census preparation—including the media campaign in future years) to more than triple the size of and funding allocations for local, targeted the cadet corps program from its current level outreach—over the next three years . These reports of 51 schools and 6,000 cadets to 175 schools are due to the Joint Legislative Budget Committee, and 21,875 cadets by 2022-23 . This increase in the Assembly Select Committee on the Census, support will fund a greater share of program costs and the Senate Select Committee on the 2020 that are currently paid for by schools in areas such United States Census various progress . as commandant training, supplies, and activities . It will also fund uniforms and state-level activities Office of Emergency Services (OES) for these additional participating schools . Finally, The budget provides OES with $1 .5 billion (more it will fund curriculum updates, improved facilities than two-thirds from federal funds) in 2018-19 . for CMD staff, and a larger state-level staff (12 This is a net increase of $38 million, or about additional positions in 2018-19 and 11 thereafter) . 3 percent, compared to the estimated spending Military Academies. The budget includes level in 2017-18 . In addition to the augmentations $3 .6 million from the General Fund in 2018-19 described below, the budget includes $10 million ($3 .3 million ongoing) to enable CMD to support from the General Fund to support local domestic activities at both the California Military Institute (CMI) and Porterville Military Institute (PMI) . Most of 72 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET this funding is to support 21 military personnel to General Fund to provide workforce training support run the military program component of the schools, grants pursuant to Chapter 824 of 2017 (AB 1111, similar to the support currently provided at the E . Garcia), known as the Breaking Barriers to Oakland Military Institute (OMI) . Employment grant program . Grant funds will supplement workforce development services for Labor Programs individuals with barriers to employment in order New Statewide Prison to Employment for them to successfully enter, participate in, Initiative. The spending plan includes $36 million and complete existing training programs . Eligible General Fund over two years ($16 million in individuals include, among others, out-of-school 2018-19 and $20 million in 2019-20) for the youth, the long-term unemployed, English language California Workforce Development Board (State learners, the California Work Opportunity and Board) to distribute grants to local workforce Responsibility to Kids (CalWORKs) participants, boards to fund employment training opportunities seasonal farmworkers, and persons with for at least 1,000 ex-offenders and to integrate disabilities . local employment training with programs offered Expanded Funding for Apprenticeship by parole and probation departments . Funds Consultants. The 2018-19 spending plan includes could be used for a variety of services, including $3 .5 million special funds to support 22 new English language learning, basic skills and adult apprenticeship consultant staff positions at the education, training stipends, industry-approved Division of Apprenticeship Standards within the certification programs, pre-apprenticeship, and Department of Industrial Relations . These staff will on-the-job training, among others . In addition to support new apprenticeship training programs in direct employment services, the spending plan nontraditional industries, including certain state funds supportive services for ex-offenders who civil service classifications, information technology, participate in job training . Supportive services and healthcare services . The budget plan includes are services that an ex-offender may require ongoing funding of $5 .6 million special funds to in order to attend job training and commonly support a total of 42 apprenticeship consultants include bus passes, childcare vouchers, and by 2021-22 . These positions will be funded out of housing assistance . Ex-offenders who participate the Employment Training Fund, which consists of in employment services would be eligible for up revenue from an existing payroll tax on employers . to $5,000 each in supportive services . Funding Typically, these funds are used by the Employment would also be provided to support the creation Training Panel to distribute workforce training of regional partnerships between the local grants to businesses . boards, California Department of Corrections and Department of Veterans Affairs Rehabilitation, parole centers and county probation departments, and community-based reentry service The spending plan for California Department providers . These funds would be used to facilitate of Veterans Affairs (CalVet) includes $414 million collaboration among the partner organizations General Fund in 2018-19, an increase of in order to customize job placement based on $9 .2 million (2 .3 percent) over revised estimates each ex-offender’s training history, education for 2017-18 . This amount is expected to be offset needs, and work experience . The State Board by $76 million from federal reimbursements for will perform a study of the initiative in 2021-22, Veterans Homes . evaluating the degree to which individuals who Additional Reporting Requirements receive services under the initiative are able to for Veterans Homes Master Plan. The successfully complete workforce training programs 2017-18 budget included language that requires and successfully transition into the labor market CalVet to develop a systemwide master plan for the and broader workforce education system . veterans homes by July 1, 2019 . Key components Funds the Breaking Barriers to Employment of the master plan include (1) an assessment of Initiative. The spending plan includes $15 million current demand for services, (2) projecting future 73 analysis full gutter 2018-19 BUDGET long-term care needs among California’s veterans, EITC . (For more information on the federal EITC and (3) determining how to align the veterans and the prior state EITC, see our 2015-16 State homes system to meet current and future demand Spending Plan .) The budget package modifies the across all levels of care . existing EITC in two ways . The 2018-19 budget extends the deadline Closes Age Gaps. By building on the federal for the master plan to December 31, 2019 and EITC, the state EITC inherited certain eligibility requires that the master plan be updated every five restrictions . Specifically, under the federal EITC, years . Additionally, CalVet is required to include eligible filers without a qualified dependent child additional information in the master plan about must be at least age 25 and younger than age 65 . (1) potential location of future veterans homes, The 2018-19 budget plan expands the state EITC (2) the possible provision of services through a to working individuals without children who are community-based model, and (3) the local cost of between the ages of 18 and 25, as well as to those living for employees . The 2018-19 spending plan over age 65 . The administration estimates this provides $241,000 General Fund for two permanent change will allow up to 500,000 previously ineligible positions beginning 2019-20 (once the limited-term filers to claim the state EITC . resources provided in 2017-18 expire) to support Expanded to Higher Income Families. The the future development of the master plan . 2018-19 budget plan expands income eligibility Capital Outlay. The 2018-19 budget includes to $16,800 for filers with no children and $24,960 funding for two capital outlay projects: for filers with one or more qualifying children . The higher income thresholds account for the rising • Veterans Home of California, Yountville minimum wage . For instance, $24,960 reflects the Skilled Nursing Facility. The plan provides annual earnings of one person working fulltime at about $7 million General Fund for the the 2019 minimum wage of $12 per hour . These beginning phase to construct a new skilled changes will allow about 220,000 additional nursing and memory care facility at the households to claim the credit . In addition, Veterans Homes of California in Yountville . because of the higher income thresholds, the The new facility, which is estimated to cost a credit phases out more slowly for those eligible tax total of $293 million, would largely replace the filers with higher incomes . As a result, the amount existing skilled nursing facility and memory of the credit will be somewhat higher—by tens care unit at Yountville . of dollars—for a filer near the high end of current • California Central Coast Veterans Cemetery qualifying range . (CCCVC). The plan includes $571,000 from Increased Spending on EITC Education, private donations to complete the working Outreach, and Tax Preparation. The drawings for the expansion of the CCCVC . 2018-19 budget provides $10 million for grants to The expansion is estimated to result in about various organizations to expand awareness of the 3,700 in-ground burial sites . The total cost of EITC . the project is estimated to be $9 .2 million and will be covered by a combination of federal, Business Tax Credits state, and private funds . Extends Film Tax Credit by Five Years. The budget package extends the motion picture Earned Income Tax Credit (EITC) tax credit through the 2024-25 fiscal year . The State EITC Adopted in 2015. The EITC is a California Film Commission competitively awards personal income tax credit that is intended to up to $330 million per year in tax credits to motion reduce poverty among California’s poorest working picture production companies . The credit amount is families by increasing their after-tax income . 20 percent of certain production expenses, such as California adopted the state EITC in 2015 . The crew wages and post-production costs . (The credit state EITC builds on the similarly structured federal 74 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2018-19 BUDGET is higher—25 percent—for independent films and Extends New Employment Credit . The budget relocating television productions .) package extends the New Employment Credit Extends California Competes and Provides by five years . This credit is intended to provide $20 Million for Small Business Assistance. The an incentive for businesses to hire individuals budget package extends the California Competes who, because of their personal history, may have program by five years . This program allows the difficulty entering the workforce or developing administration to negotiate tax credit agreements employment skills . Businesses operating in under which selected businesses may qualify specified areas of the state may claim a credit for tax credits by meeting hiring and investment if they hire an eligible individual, pay the new targets . The budget package reduces the annual employee at least 150 percent of the state limit on available credits from $200 million to minimum wage ($16 .50 per hour in 2018), and $180 million . The budget also provides $20 million comply with certain reporting requirements . The per year for five years for grants to organizations annual amount of credits allowed varies and is that offer technical assistance services to small unrestricted . Eligible businesses claimed about businesses and entrepreneurs . $1 .4 million in credits for 2016 . 75 analysis full gutter 2018-19 BUDGET 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. 76 LEGISLATIVE ANALYST’S OFFICE