The 2020-21 Budget: Analysis of the Department of Developmental Services Budget

The 2020-21 Budget: Analysis of the Department of Developmental Services Budget GABRIEL PETEK LEGISLATIVE ANALYST FEBRUARY 7, 2020 analysis full gutter 2020-21 BUDGET LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Executive Summary The Governor’s proposed 2020-21 budget for the Department of Developmental Services (DDS) includes $9.2 billion from all fund sources, up $1 billion relative to revised 2019-20 estimates. The General Fund accounts for $5.7 billion of proposed 2020-21 spending, an increase of $622 million (12.3 percent) from revised 2019-20 General Fund spending. Year-Over-Year Spending Increase Is Due Largely to Caseload Growth, State Minimum Wage Impacts. DDS is estimated to serve 368,622 individuals with qualifying developmental disabilities (called “consumers” in statute) in 2020-21, up 5.3 percent from 2019-20. The cost to serve new consumers, as well as growth in the cost per case, accounts for $420.3 million ($263.4 million General Fund) of the total year-over-year increase. Spending for service providers’ costs associated with state minimum wage increases accounts for another $224.1 million ($114.6 million General Fund). Major New Policy Proposal This Year Is for a Performance-Incentive Program. The proposed budget includes $78 million ($60 million General Fund) to implement a performance-incentive program for developmental services administered through Regional Centers (RCs). The program is subject to potential suspension on July 1, 2023. Its four broad goals are to improve quality, deliver “person-centered” services, promote settings that integrate consumers in the community, and increase consumer employment. It would base incentive payments on whether RCs meet certain performance metrics, to be developed in consultation with the stakeholder community. Current Conditions of the Developmental Services System Are Not Conducive to a Successful Performance-Incentive Program. While the goals of the proposed program reflect legislative priorities for DDS, we find the system’s current conditions, particularly funding challenges, would significantly constrain the ability of RCs and service providers to respond to incentives in a way that would lead to the intended goals. In addition, we find that the proposed program’s structure lacks several criteria identified by researchers as optimal to result in a successful government performance-incentive program. We also note that this proposal appears to move the system away from implementing rate reform—a key legislative interest over the last several years. This interest is reflected in the statutory requirement for a three-year rate study (since completed) to modernize the DDS rate structure in an effort to address the sustainability and quality of developmental services provided in the community. Recommend Legislature Reject Performance-Incentive Proposal and Consider Its Preferred Way Forward for the DDS System. Given the above concerns, we recommend the Legislature reject the proposal for a performance-incentive program, and instead consider the direction it would like to take the DDS system in the future. On the one hand, pursuing full implementation of the rate study’s recommendations over time would align the system with the guiding vision of the Lanterman Act, but it would increase costs significantly. If the Legislature pursued this path, we offer some suggestions for how to repurpose funding proposed in the Governor’s budget for the performance-incentive program to begin to address some of the system’s chronic challenges. This path also could lay the foundation for pursuing a performance-based incentive program in the future. On the other hand, the Legislature may choose a different path forward. If so, we suggest the Legislature begin to consider ways to change the system based on the Legislature’s priorities and available resources. www.lao.ca.gov 1 analysis full gutter 2020-21 BUDGET Governor Proposes Supplemental Rate Increases for Three Additional Services— Recommend Approval. The 2019-20 budget included funding for supplemental rate increases of up to 8.2 percent in numerous service categories, effective January 1, 2020, at an annualized cost of $413 million ($250 million General Fund). Although these increases do not reflect implementation of the rate study’s recommended rate models, the selection of service categories to target was based on findings from the then-draft rate study. The Governor’s budget proposes $18 million ($10.8 million General Fund) in 2020-21 for supplemental rate increases for three additional services—infant development, Early Start therapeutic services, and independent living services—effective January 1, 2021. The addition of these three services to those services receiving supplemental rate increases reflects a correction made in the final version of the rate study, and thus is consistent with legislative intent in enacting the 2019-20 increases. We therefore recommend approval of the proposed supplemental rate increases for the additional three service categories. Governor Proposes Enhanced Service Coordinator Caseload Ratios for Children Ages 3, 4, and 5—Withhold Recommendation as Basis for Proposal Unclear. The proposed budget includes $16.5 million ($11.2 million General Fund) to reduce the RC service coordinator-to-consumer ratios to 1:45 for children ages 3, 4, and 5. Currently, federal funding agreements and state statute require average caseload ratios of 1:62 to 1:66 at each RC. The Governor’s proposal is based on the administration’s preferred caseload ratios of 1:45 in the Early Start program, which serves infants and toddlers under age 3 (statute limits average Early Start caseload ratios to 1:62). While the Governor’s proposal might have merit given developmental milestones at the targeted age range, it does not address other known problems with caseload ratios for service coordinators serving other age groups. In addition, whether all RCs have the same service coordination needs is unknown. Without prejudice to its merits, the Governor’s proposal lacks an analytic basis to determine where or for whom caseload relief is warranted. We therefore withhold recommendation on this proposal and suggest the Legislature ask for more information about the basis for this proposal at budget hearings this spring. Governor Proposes Expanding Crisis and Safety Net Services for Consumers in Crisis—Recommend Approval and That Legislature Seek Information on Department’s Prioritization of Safety Net Spending. The Governor’s budget includes $20.9 million ($19 million General Fund) in 2020-21 to expand the safety net as follows: (1) a temporarily increase in capacity (until 2024) at DDS’ secure treatment program at Porterville Developmental Center (PDC) for consumers currently in jail, (2) simultaneous development of five specialized homes that would ultimately replace the temporary increased capacity at PDC, and (3) an increase in crisis prevention training at four RCs (currently this model is being piloted at two RCs). We find that each of these three proposals has merit. The first two fill a current gap in the system that results in consumers inappropriately being placed in county jails and the third could increase the ability of RCs, service providers, and families to prevent crises from happening or from escalating. While we recommend that the Legislature approve the three proposals, we also recommend that the Legislature request more information from DDS to better understand how the department prioritizes its safety net spending in its long-term planning efforts. 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET INTRODUCTION The following report assesses the Governor’s performance-incentive program, which appears proposed 2020-21 budget for the Department of to represent a new direction for the DDS system. Developmental Services (DDS), which currently Second, we assess the Governor’s proposal to serves about 350,000 individuals with qualifying provide supplemental rate increases in additional developmental disabilities in California. We first service categories in 2020-21. Third, we review provide an overview of the budget proposal, a proposal to reduce the caseloads of service including caseload projections and changes in coordinators who work with children ages 3, 4, year-over-year spending. We then consider four key and 5. Finally, we examine the Governor’s proposed new policy proposals. First, and most significantly, additions to DDS’ crisis and safety net services. we consider the Governor’s proposal for a BACKGROUND Lanterman Act Lays Foundation for “Statutory of consumers into the community and consumer Entitlement”. . . California’s Lanterman Act was choice have grown in importance, institutional originally passed in 1969 and substantially revised settings are less common. Most former DC in 1977. It amounts to a statutory entitlement residents transitioned to community-based homes to services and supports for individuals with (a small share live in intermediate care facilities or qualifying developmental disabilities. By passing skilled nursing facilities). the Lanterman Act and subsequent legislation, . . . And Aside From Two State-Operated the state committed to providing the services and Facilities, DDS Now Administers a Fully supports that all qualifying “consumers” (the term Community-Based System. DDS continues to used in statute) need and choose to live in the least operate a secure treatment program at PDC for restrictive environments possible. There are no consumers placed there by court order. PDC income-related eligibility criteria. includes competency training for consumers . . . Although Spending on Services Is Limited deemed incompetent to stand trial (IST). Statute to Funding Provided. Although the Lanterman Act limits the number of PDC residents to 211. DDS entitles consumers to the services and supports also operates a leased community facility—Canyon they need, it also states that DDS cannot require Springs in Cathedral City (Riverside County)—which Regional Centers (RCs)—the agencies that serves up to 56 consumers, many of whom are coordinate services for consumers—to spend more transitioning from PDC. Otherwise, DDS’ consumer on services than what has been appropriated. population now is served in community settings. DDS Is Closing Its Last General Treatment DDS Contracts With 21 RCs, Which Developmental Center (DC) . . . Pursuant to the Coordinate and Pay for Consumer Services. plan proposed by the Governor and approved by Community services are coordinated by the Legislature in 2015, DDS is closing its last 21 nonprofit RCs, which contract with DDS. general treatment DC—Fairview DC in Costa Mesa RCs pay for consumers’ direct services, which (Orange County). DDS plans to move the final are delivered by a large network of private and resident this month. In December, DDS closed the nonprofit service providers. Most consumers also General Treatment Area of Porterville DC (PDC) receive services through other state programs, in Porterville (Tulare County). DCs were large such as Medi-Cal (California’s Medicaid program), state-operated institutions for individuals with public schools, or In-Home Supportive Services. developmental disabilities. At one time the state If a service can be accessed through one of these operated as many as seven DCs, but as integration other programs, RCs cannot pay for that service. www.lao.ca.gov 3 analysis full gutter 2020-21 BUDGET OVERVIEW OF THE GOVERNOR’S BUDGET PROPOSAL Governor’s Budget Proposes More Than has grown by 5 percent on average in recent years. $9 Billion to Fund Developmental Services. The DDS caseload is projected to add 18,575 new The Governor proposes $9.2 billion (total funds) consumers in 2020-21, growing by 5.3 percent in spending for DDS in 2020-21, up more than relative to revised 2019-20 estimates. DDS’ Early $1 billion (12.4 percent) relative to revised 2019-20 Start Program—which serves children under age 3 spending of $8.2 billion. The General Fund accounts who have a developmental delay—is growing for $5.7 billion—or about 62 percent—of proposed particularly fast—twice as fast as the consumer 2020-21 spending, an increase of $622 million population age 3 and older. Figure 2 shows growth (12.3 percent) from revised 2019-20 General Fund in the DDS system over the past ten years. spending of $5 billion. Figure 1 shows growth in the Governor’s Caseload Assumptions Reflect DDS budget over the last decade. Recent Trends and Appear Reasonable. Although the reasons for the growth in DDS caseload are Caseload Projections not entirely clear (a large part of the explanation Caseload Continues to Grow Rapidly. may be better diagnoses than in the past), the The number of consumers served in the DDS Governor’s assumptions about the population in system—projected by the administration to be 2020-21 reflect trends in recent years and are very 368,622 in 2020-21—continues to grow rapidly. close to our own estimates. While California’s overall population has grown Current-Year Adjustments by less than 1 percent on average in recent years (and the number of births in the state was down The Governor’s budget estimates a net decrease between 2017-18 and 2018-19), DDS caseload in spending of $63 million ($14.3 million General Fund) in the current year for community services and a net Figure 1 increase of $5 million ($4.1 million Department of Developmental Services Spending General Fund) for state-operated Has Doubled in Ten Years facilities. (In Billions) Purchase-of-Service (POS) Expenditures Revised Downward. $10 Federal Funds and Reimbursements Most of the current-year change 9 General Fund in community services is due 8 to reduced POS spending, which is estimated to decline 7 by $63.9 million ($41.7 million 6 General Fund). The decline is driven 5 primarily by reduced spending on state minimum wage increases, 4 which is based on actual requests 3 to date from service providers for 2 related adjustments. The decrease 1 in General Fund spending is offset to some degree by the correction of 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21 an accounting error that results in increased General Fund spending Note: 2019-20 amounts are estimated and 2020-21 amounts are proposed. on RC operations in the current year. 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Budget-Year Adjustments and increases also was extended 18 months from Policy Proposals December 31, 2021 to July 1, 2023. Three Primary Factors Drive Spending Key New Policy Proposals Account for Most Increase. A $1 billion increase ($627.2 million of the Remaining Increase. The increase in General Fund) in proposed 2020-21 spending year-over-year spending also reflects several key on community services relative to revised new policy proposals, which we assess in later 2019-20 estimates primarily is due to the three sections of this report. factors discussed below that reflect workload • Performance-Based Incentives. The budget adjustments (as opposed to new policy Governor’s budget proposes $78 million proposals). Increased spending on community ($60 million General Fund) for a new services is partially offset by decreased spending performance-based incentive program, of $26.2 million ($16.7 million General Fund) on the goal of which is to encourage quality state-operated facilities. improvements in services and consumer • Caseload and Use of Services. The outcomes. Funding is subject to the same increase in the number of consumers served possible suspension on July 1, 2023 noted and changes in the mix and amount of above. services used by each consumer account for • Supplemental Provider Rate Increases for $420.3 million ($263.4 million General Fund) of Three Additional Services. The Governor the increase. proposes $18 million ($10.8 million General • State Minimum Wage. Funding to help Fund) for the half-year cost of supplemental service providers pay for the rising cost of rate increases for three additional services— state minimum wage increases accounts infant development, Early Start therapies, and for another $224.1 million ($114.6 million independent living services. Rate increases General Fund) of this increase. This includes would take effect January 1, 2021 and are the full-year costs of the increase from $12 to subject to potential suspension on July 1, 2023. $13 that began January 1, 2020 and half-year costs Figure 2 of the increase from Caseload Served by Department of Developmental $13 to $14 that is scheduled Services Continues to Grow Rapidly to begin on January 1, 2021. • Full-Year Implementation of Supplemental Rate 400,000 Birth Through Age 2 Increases. The 2019-20 Age 3 and Older 350,000 Budget Act included half-year costs for supplemental 300,000 rate increases of up to 250,000 8.2 percent in numerous service categories. The 200,000 increases took effect 150,000 January 1, 2020. The proposed 2020-21 budget 100,000 includes an additional 50,000 $206.2 million ($124.5 million General Fund) to account for 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21 the full-year cost of these increases. The potential Note: Population from January of each fiscal year. Populations for 2019-20 and 2020-21 are estimated. suspension of these rate www.lao.ca.gov 5 analysis full gutter 2020-21 BUDGET • Enhanced Caseload Ratios for Children The Governor’s budget includes the following Ages 3, 4, and 5. The Governor proposes proposals as part of the updated plan: $16.5 million ($11.2 million General Fund) to » Additional Temporary Capacity at reduce caseloads for RC service coordinators PDC. The Governor’s budget proposes who work with children ages 3 through 5 $8.9 million General Fund to add temporary and their families. The Governor proposes 20-bed capacity (one intermediate care a 1:45 caseload ratio (or one service facility unit) at PDC for DDS consumers coordinator for every 45 children). Currently, who are currently in county jails awaiting required caseload ratios for this age group a PDC placement and who have been are 1:62 for children enrolled in the Medicaid deemed IST. These beds would be available waiver or 1:66 for children not enrolled in the through June 30, 2024. Medicaid waiver. (The Medicaid Home- and » Additional Community-Based Specialized Community-Based Services waiver provides Homes for Former PDC Residents. The federal matching funds for services at a level budget proposal includes $7.5 million required to help a Medicaid- [called Medi-Cal General Fund for the development of five in California] eligible consumer live in the new enhanced behavioral supports homes community and who, if not for this funding, (EBSHs) that include delayed egress would require care in a more institutional (meaning there is a short delay and alarm setting. This waiver accounts for more than if a consumer tries open an exit door) 25 percent of funding in the DDS budget.) and secured perimeter (which is a locked • Safety Net Expansion. Chapter 28 of 2019 fence surrounding the property). These (SB 81, Committee on Budget and Fiscal homes would serve consumers who were Review) required DDS to submit an updated at PDC because they were a safety risk to safety net plan in conjunction with the release themselves or others. of the Governor’s proposed 2020-21 budget. » Crisis Prevention Training. In 2019-20, DDS submitted this plan on January 10. The DDS began pilot testing a crisis prevention “safety net” provides services for consumers training program at two RCs. The at risk of or experiencing a crisis and for those Governor’s budget proposes adding who may be at risk of losing, or who have training at four additional RCs in 2020-21, lost, their residential placement due to a crisis. at a cost of $4.5 million ($2.6 million General Fund). RATE REFORM AND PERFORMANCE-BASED INCENTIVES BACKGROUND supported living, and personal assistance. RCs pay providers a rate for each service provided based on a set of service codes. This system, which is How Community Services Are Funded akin to a “fee-for-service” model, includes more RCs Pay Providers for Each Service Based than 150 service codes. Traditionally, the specific on a Rate; Current Rate Structure Outdated. rates paid for each service were set in a number Service providers around the state deliver a of different ways, including by DDS, statute, wide variety of services and supports to DDS negotiation between providers and RCs, or other consumers, including residential services, day departments. Budgetary conditions over the past programs, employment support, independent and couple of decades led to numerous incremental 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET changes to both the rates and the rate-setting Figure 3 (see next page) lists some of these methods. These piecemeal changes made the allocations. rates overly complex, inequitable across similar The purpose of these alternative payments is to providers, and hard to understand. In addition, address some of the particular service requirements there generally is common agreement that the that were not being met under the rate-setting current rate structure does not result in funding process. levels that align with the funding requirements of the DDS system, which are based on current laws DDS Oversight of the System and demand for services. DDS Oversees RCs Through Performance Recent Rate Study Examined Rate-Setting Contracts. One way DDS conducts oversight of Process and Associated Funding Gaps . . . To RCs is through contracting. Statute requires the address the problems associated with service state to enter into five-year contracts with RCs. provider rates (both the structure and level of These contracts include annual performance rates), the Legislature approved $3 million General objectives—such as how many consumers live in Fund in 2016 for DDS to conduct a rate study homelike settings or how many consumers have over a three-year period. DDS contracted with competitive job placements—as well as annual health policy consultants, Burns and Associates, performance reporting requirements. Currently, to conduct the study, the results of which were RCs’ funding levels are not contingent on their delivered in draft form on March 15, 2019 and in performance under these contracts. final form on January 10, 2020. The rate models DDS’ Current Data Systems Provide Limited recommended by the study provide similar rates Ability to Understand Unmet Needs. The current for similar services, include assumptions and data available about DDS consumers and services inputs that can be modified or updated, allow for are not comprehensive and are not collected in a adjustments based on regional and other cost systematic manner. This makes understanding the differences, and reflect rate levels necessary to extent to which service needs go unmet across the meet service needs. Not factoring in the increased state difficult. In particular, DDS does not collect funding associated with 2019-20 supplemental enough data to quantify whether service providers rate increases, Burns and Associates estimated have sufficient capacity to meet consumers’ diverse that if the rate models were fully implemented, needs or whether consumers have sufficient choice DDS spending would increase $1.8 billion in total among providers. funds (about $1.1 billion General Fund) relative to 2019-20 spending. PROPOSED . . . But Recommendations Have Not Been PERFORMANCE-INCENTIVE Implemented. The Governor has not proposed implementing the rate models developed by PROGRAM Burns and Associates. Last year’s budget actions increased funding for supplemental rate payments Overview of Proposed Program to certain providers, rather than implement the rate The Governor’s 2020-21 budget proposes models. DDS has committed to discussing “system $78 million ($60 million General Fund) annually and fiscal reform” through a new workgroup (of to establish a performance-incentive program the same name) comprised of family members, for developmental services that are administered advocates, service providers, RC representatives, through the RC system. The program would be and others. subject to potential suspension on July 1, 2023. Some Funding Allocations Take Place Outside Program Goals Prioritize Quality, the Traditional Rate-Setting Process. In addition Person-Centeredness, Integration, and to paying for services through the rate-setting Consumer Employment. The proposed process, DDS has several separate funding program has four stated goals: (1) having a allocations, some with set annual funding amounts. www.lao.ca.gov 7 analysis full gutter 2020-21 BUDGET quality system that values consumer outcomes, System and Fiscal Reform Workgroup of the (2) developing services that meet consumer Developmental Services Task Force to determine needs in a person-centered way, (3) promoting which outcomes align with the stated goals and settings that better integrate consumers into the how to measure them. These measures—or wider community, and (4) increasing the number metrics—would form the basis of RC contracts of consumers that have competitive (minimum moving forward. wage or higher) job placements in the mainstream RCs Would Be Eligible for Performance community. Payments for Certain Metrics. DDS would RC Contracts Would Be Based on New revise RC performance contracts to reflect the Program Goals. DDS intends to work with the systemwide agreed-upon metrics. RCs would be Figure 3 DDS Allocations That Operate Outside of Traditional Rate-Setting Process Amount Year Authorizing Allocation Purpose (General Fund) Legislation Approved Employment-Related • Tiered incentives for service providers $20 million annually. 2016-17 Incentives that successfully place a consumer in competitive integrated employment: $1,000 for a consumer who is employed for 30 consecutive days, $1,250 for 6 consecutive months, and $1,500 for 12 consecutive months. • Up to $10,400 per consumer per year for paid internships. Reducing Disparities Grants to RCs and community- $11 million annually. 2016-17 based organizations to implement recommendations and plans to reduce disparities in RC services. Compliance With HCBS Rule Funding to help providers achieve $15 million annually. 2016-17 compliance with federal HCBS rules by March 17, 2022. Awards based on demonstrated need. Specialized Home Service Negotiated rates for service providers at At least $83.6 million spent in 2005-06 (ARFPSHN), Rates specialized homes (ARFPSHN, CCH, and total in 2018-19.a 2014-15 (CCH/EBSH) EBSH). Average per-person spending is more than three times what it is at the most intensive community care facilities. CPP/CRDP • CPP: Funding allocated to RCs to About $60 million to 2002-03; CRDP added in enhance community-based service $68 million annually. 2017-18 capacity to reduce reliance on restrictive settings. • CRDP: Excess CPP funds that can be used to develop other needed community resources. a This amount does not include the service provider billing for vacancies (which is allowed via the contracts with Regional Centers), nor does it include the amount of contract purchase-of- service dollars for ARFPSHN homes. DDS = Department of Developmental Services; RC = Regional Center; HCBS = Home- and Community-Based Services; ARFPSHN = Adult Residential Facility for Persons with Special Health Care Needs; CCH = Community Crisis Home; EBSH = enhanced behavioral supports home; CPP = Community Placement Plan; and CRDP = Community Resource Development Plan. 8 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET eligible for additional payments by meeting certain service providers are not in a position to respond metrics—called “advanced tier” metrics. These to the incentives in such a way that would lead metrics would be weighted (some would be more to the program’s intended goals. Below, we important than others), and RCs could receive a discuss an evaluation framework for thinking varying amount of incentive funding, depending on about performance incentives and describe the which metrics they meet. challenges currently facing the DDS system that In the First Year, DDS Proposes to Improve make implementation of a performance-incentive Data Quality and RC Infrastructure. DDS program premature. indicates that in the first year of the proposed Optimal Conditions for Successful incentive program, the funding would allow RCs Government Performance-Incentive to improve the quality and consistency of data collected and to ensure adequate infrastructure Programs (such as contracting processes or payment In 2010, the RAND Corporation released a study practices) is in place to carry out the program. examining nine “performance-based accountability DDS Is Modeling This Idea on Programs in systems” (systems that provide incentives based Other States. DDS developed this proposal based on measured outcomes to improve public services) on communications with the National Association in five public sectors: child care, education, health of State Directors of Developmental Disabilities care, public health emergency preparedness, and Services and by examining similar programs in transportation. The study found that the conditions other states, such as Louisiana. listed in Figure 4 are optimal for success. We will use these conditions as an evaluation framework LAO ASSESSMENT for considering the Governor’s proposed performance-incentive program. RAND notes Improving service quality, delivering that while fully realizing all six of these conditions person-focused services, increasing accountability is rare, decision makers should assess whether of RCs and service providers, and thinking sufficient conditions are present to make a innovatively aligns with the Legislature’s priorities performance-based accountability system the most for DDS. As discussed below, however, the DDS appropriate and cost-effective policy intervention. system’s current conditions are not suited for In addition, RAND found that successful implementing the proposal. Specifically, RCs and implementation of a performance-based Figure 4 Excerpted From RAND Studya on Performance-Based Accountability Systems for Public Services Optimum circumstances include having the following: 9 A goal that is widely shared. 9 Measures that are unambiguous and easy to observe. 9 Incentives that apply to individuals or organizations that have control over the relevant inputs and processes. 9 Incentives that are meaningful to those being incentivized. 9 Few competing interests or requirements. 9 Adequate resources to design, implement, and operate the performance-based accountability system. a RAND Corporation (2010). “Toward a Culture of Consequence: Performance-Based Accountability Systems for Public Services.” www.lao.ca.gov 9 analysis full gutter 2020-21 BUDGET accountability system requires getting past certain will be used. DDS is engaging stakeholders pitfalls, such as lack of experience managing such to develop the measures (which is a good systems or lack of infrastructure to support it, step given the importance of stakeholder unrealistic time lines, overly complex design, lack of buy-in), however, whether the ultimate communication, and resistance from stakeholders. choice of measures will be appropriate The study notes that assessing “upfront whether is unknown. For example, among other providers have sufficient resources to do what is measures, DDS mentioned the possibility required of them” is important. of using quality-of-life measures, which are RAND found examples of strategies that can subjective measures whose accuracy depends aid public agencies in avoiding these pitfalls. For heavily on how the responses are obtained, example, public agencies can pilot-test the system particularly in the context of individuals with to identify problems or challenges. Exploiting developmental disabilities. In light of this existing infrastructure (such as building on top of concern, pairing such measures with more existing structures) and implementing the system objective ones will be important. in stages can reduce implementation time and • Properly Aligned Incentives. The proposal minimize the effect of mistakes in the system. is vague about how the incentives would be The report recommends regular and effective aligned. Although the program would provide communication with stakeholders, as well as the incentive payments to RCs, many of regular monitoring of the system to identify and the goals depend on the quality of services correct problems on an ongoing basis. delivered by the large network of service providers. Without aligning incentives with the Proposal Meets Few of RAND’s right actors—those whose behavior affects Conditions outcomes—success may be difficult. • Meaningful Incentives. Whether the Lacks Some of RAND’s Optimal Conditions incentives—monetary or otherwise—would for a Successful Performance-Based System. be meaningful enough to change behavior is Figure 5 summarizes our assessment of the extent unknown given the current lack of detail on to which the Governor’s proposal meets the six the structure of the incentives. RAND notes major conditions the RAND study says are optimal that the “size of an incentive should reflect for a successful performance-based system. We the value to the government of changing discuss these further below. • Widely Shared Goal. The Figure 5 proposal appears to have DDS’ Proposed Performance-Incentive Program one condition in place—a widely shared goal. The Lacks Important Conditions for Success broad goals of the program Does the Proposed Program (quality, person-centeredness, Currently Have This Element? integration, and consumer Conditions Yes No Unclear employment) reflect previously Widely shared goal  established legislative Clear, observable measures X priorities and most likely Properly aligned incentives ? are shared by RCs, service providers, and consumers Meaningful incentives ? and their families. Few competing interests X • Clear, Observable Sufficient resources ? Measures. Currently, the DDS = Department of Developmental Services. program proposal does not Note: Conditions for a successful performance-based accountability system are taken from Rand Corporation’s 2010 report, “Toward a Culture of Consequences: Performance-Based specify which measures Accountability Systems for Public Services.” 10 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET the targeted behavior” and recommends an Proposed Program Does Not Address incentive large enough to offset the costs of Existing Problems in the DDS System effecting that change in behavior. DDS System Has Fundamental Challenges. • Few Competing Interests or Requirements. The DDS consumer population continues to grow The DDS system has numerous federal, in number and change in composition. Numerous statutory, regulatory, and practical challenges currently strain the system as it tries to requirements that create competing demands adapt to the evolving needs of the population, the for the attention of RCs and service providers. most fundamental of which are funding-related in Such demands include ensuring compliance nature. We summarize these issues below. with federal rules to receive federal funding; completing reports and other tasks related • Outdated Rates and Rate Structure. to consumer health and safety; responding As noted previously, the current DDS to various administrative, accounting, and rate structure is not aligned with current reporting requirements; and training new service needs, treats similar service staff. The combination of these various providers differently, and—according to requirements means that RC staff and service the rate study—has a sizeable funding gap provider staff may not have sufficient time ($1.8 billion [$1.1 million General Fund] not and resources to effectively respond to the accounting for last year’s supplemental proposed incentives. While some of the goals rate increases). Moreover, minimum wage of the proposal would align with existing increases exacerbate funding challenges in requirements, the administration has not several ways. First, the rising state minimum provided sufficient detail to determine the wage creates upward pressure on the wages extent to which this would be the case. of service provider employees who make • Sufficient Resources to Run the Program. just above the minimum wage, but the rate Whether the amount proposed for the adjustments provided for state minimum program—$78 million ($60 million General wage increases do not account for these Fund) annually—is sufficient to design, compaction pressures. Second, the state implement, administer, and monitor the has not adjusted provider rates to account program is unclear. How the Governor chose for costs associated with local minimum this amount also is unclear. wage ordinances. Third, the rate adjustments provided to cover costs associated with The Governor’s Proposal Does Not Describe state minimum wage increases have not Oversight or Evaluation Mechanisms. As been available to providers in areas with currently described, the proposal lacks well-defined local minimum wages that exceed the state oversight and evaluation mechanisms to ensure minimum wage. Figure 6 (see next page) program fidelity. Incentive programs have the shows the local areas in which providers were potential to yield unintended consequences, unable to access funding associated with the such as achieving the performance measure, January 1, 2020 state minimum wage increase but not achieving the program goal. Given the from $12 to $13 per hour. funding challenges in the current system, incentive • Caseload Growth. The rapidly growing payments could be especially problematic. number of consumers and their changing Oversight of the performance-incentive program demographics strain the service provider would be necessary to ensure that potential network as well as RC service coordinator recipients do not circumvent important rules or caseloads. While state law and federal compromise quality to meet a particular metric. agreements stipulate the average service Including evaluation components to assess the coordinator-to-consumer ratio that an RC program’s ongoing success at achieving the stated may have, Figure 7 (see page 13) shows goals also would be critical. that more than 90 percent of consumers are www.lao.ca.gov 11 analysis full gutter 2020-21 BUDGET served by RCs whose caseload ratios exceed While some elements of the proposal—like requirements. updating data systems—would lay the foundation • Lack of Data. Because the DDS system for performance-based incentive contracts with does not collect data in a systematic way, RCs, the proposal otherwise does not set up many understanding service gaps—which could of the optimal conditions for success. inform policy and spending decisions by the Legislature—is difficult. LAO RECOMMENDATIONS Proposed Performance-Incentive Program Reject Proposal Does Not Address Most of These Challenges. Without addressing the existing challenges, Proposed Incentive Program Addresses providers are not positioned to respond to an System Challenges at the Edges Only . . . The incentive-based system, such as the one proposed. proposed performance-incentive program does not address the Figure 6 fundamental financial challenges Local Areas in Which Providers Cannot Request DDS Funding facing the DDS system. Instead, Associated With January 2020 State Minimum Wage Increase the proposal appears to take From $12 to $13 Per Hour the system in a new direction by changing RC performance Employer Size Local Hourly Wage contracts and basing new funding City or County (if Applicable) Before 1/1/2020 on yet-to-be determined metrics. Belmont $13.50 . . . And Will Likely Not Work Berkeley 15.59 Well Under Current Conditions. Cupertino 15.00 El Cerrito 15.00 If designed well under the Emeryville 16.30 right conditions, the proposed Fremont 26+ employees 13.50 performance-incentive program Los Altos 15.00 could have the potential to improve Los Angeles City 26+ employees 14.25 service quality and consumer Los Angeles City Under 26 employees 13.25 outcomes. However, under current Los Angeles County—unincorporated areas 26+ employees 14.25 conditions in which numerous Los Angeles County—unincorporated areas Under 26 employees 13.25 challenges strain the system, Malibu 26+ employees 14.25 Malibu Under 26 employees 13.25 the program would not have a Milpitas 15.00 foundation conducive to success. Mountain View 15.65 Consequently we recommend the Oakland 13.80 Legislature reject the proposal to Palo Alto 15.00 provide incentive-based payments. Pasadena 26+ employees 14.25 The administration’s proposal Pasadena Under 26 employees 13.25 to update RC contracts, however, Redwood City 13.50 Richmond 15.00 has merit. We recommend these San Francisco 15.59 contracts be revised to reflect more San Jose 15.00 meaningful and relevant measures San Leandro 14.00 (developed in conjunction with San Mateo For-profits 15.00 stakeholders). San Mateo Nonprofits 13.50 Recommend the Legislature Santa Clara 15.00 Request Additional Information Santa Monica 26+ employees 14.25 Santa Monica Under 26 employees 13.25 About the Administration’s Sunnyvale 15.65 Long-Term Vision for the DDS DDS = Department of Developmental Services. System. The Governor’s proposed 12 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET DDS budget appears to move Figure 7 away from implementation of the Most of the DDS Population Is Served by RCs That rate study, given that neither the Are Out of Compliance With Required Caseload Ratios revised 2019-20 budget proposal nor the current budget proposal DDS Population (in Thousands), March 2019 includes steps to implement it. The Legislature might wish to ask the Served by an RC that is in compliance department at budget hearings to Served by an RC that is out of compliance Moved provide more information about its From DC future vision for the system. Under Recommend the Legislature Age 3 Consider Its Preferred Way Medicaid Forward. Without prejudice to the Waivera administration’s long-term plans, All we recommend the Legislature Others consider the direction it would 40 20 0 20 40 60 80 100 120 140 160 like to take the DDS system. Implementing rate reform— a Refers to the group of consumers whose services are eligible for federal matching funds which has been an interest of through the Medicaid Home- and Community-Based Services Waiver Program. the Legislature for the past few DDS = Department of Developmental Services; RCs = Regional Centers; and DC = Developmental Center. years—significantly exceeds the resources provided to DDS in the Governor’s budget. Doing options for 2020-21 to begin that process. (If the so, however, would bring the DDS system into Legislature chooses this direction, we recommend alignment with the vision of the Lanterman Act. requiring DDS to develop a multiyear rate reform If that were the chosen direction, the Legislature implementation plan, which could include later could consider repurposing the resources included implementation of a performance-incentive in the Governor’s proposal for performance program.) Alternatively, the Legislature may incentives to begin addressing some of the most choose a different path forward. In that case, we problematic elements of the current system and recommend the Legislature begin to consider ways develop a path forward to fully implement rate to change the system based on the Legislature’s reform over time. The box on page 15 offers priorities and available resources. NEW SUPPLEMENTAL PROVIDER RATES Background The Legislature and the administration used the draft rate study (released in March 2019) to Draft Rate Study Results Informed determine which service categories to increase Supplemental Rate Increases in 2019-20. The within the budgeted amount of $206 million 2019-20 enacted budget included $206 million ($125 million General Fund). The 2019-20 budget ($125 million General Fund) for supplemental included the suspension of these services in rate increases of up to 8.2 percent to the service December 2021 unless the anticipated amount of categories shown in Figure 8 (see next page). General Fund revenues met a certain threshold. The rate increases apply to services that make Several Services Were Not Given Rate up the majority of POS spending. (The full-year Increases in 2019-20. Among the services that cost of these increases in 2020-21 is $413 million were not given a supplemental rate increase [$250 million General Fund].) www.lao.ca.gov 13 analysis full gutter 2020-21 BUDGET were independent living services, Figure 8 infant development services, and Department of Developmental Services Early Start therapeutic services. Supplemental Rate Increases, Effective January 1, 2020 The draft rate study models had Service Code and Service Rate Increase indicated that the existing rates for these services were sufficient in 017 - Crisis Team—Evaluation and Behavior Modification 8.20% the near term. As described below, 025 - Tutor Services—Group 8.20 however, updated rate models 028 - Socialization Training Program 8.20 048 - Client/Parent Support Behavior Intervention Training 8.20 indicated they were not. 055 - Community Integration Training Program 8.20 Under Federal Reimbursement 062 - Personal Assistance 8.20 Rules, DDS Must Seek Federal 063 - Community Activities Support Services 8.20 Approval of Rate Increases. To 091 - In-Home/Mobile Day Program 8.20 receive federal Medicaid matching 093 - Parent-Coordinated Personal Assist Service 8.20 funds, DDS must seek federal 094 - Creative Arts Program 8.20 approval of the supplemental 108 - Parenting Support Services 8.20 109 - Program Support Group—Residential 8.20 rate increases. This approval 110 - Program Support Group—Day Service 8.20 process takes about six months 111 - Program Support Group—Other Services 8.20 for program changes like a rate 113 - DSS Licensed-Specialized Residential Facility 8.20 increase. Because of this delay, 420 - Voucher Respite 8.20 the 2019-20 budget provided 465 - Participant-Directed Respite Services 8.20 half-year funding in anticipation of 475 - Participant Directed Community-Based Training Services/Adults 8.20 the increases beginning January 1, 510 - Adult Development Center 8.20 2020 (which they did). 515 - Behavior Management Program 8.20 612 - Behavior Analyst 8.20 Budget Proposal 613 - Associate Behavior Analyst 8.20 615 - Behavior Management Assistant 8.20 Three Additional Services 616 - Behavior Technician—Paraprofessional 8.20 Would Be Included in 645 - Mobility Training Services Agency 8.20 Supplemental Rate Increases 650 - Mobility Training Service Specialist 8.20 Approved by Legislature. The 860 - Homemaker Services 8.20 862 - In-Home Respite Services Agency 8.20 Governor’s budget proposes 864 - In-Home Respite Worker 8.20 $18 million ($10.8 million General 875 - Transportation Company 8.20 Fund) to add the three additional 880 - Transportation-Additional Component 8.20 services noted above to the 882 - Transportation-Assistant 8.20 supplemental rate increases in 896 - Supported Living Services 8.20 2020-21. The funding represents 904 - Family Home Agency 8.20 half-year costs. In 2021-22, 905 - Residential Facility Serving Adults—Owner Operated 8.20 the estimated annual cost of 910 - Residential Facility Serving Children—Owner Operated 8.20 915 - Residential Facility Serving Adults—Staff Operated 8.20 these increases is $36 million 920 - Residential Facility Serving Children—Staff Operated 8.20 ($21.6 million General Fund). 950 - Supported Employment—Group 8.20 Figure 9 notes each service and 952 - Supported Employment—Individual 7.60 the percentage rate increase for 073 - Parent Coordinator Supported Living Program 6.30 each. 605 - Adaptive Skills Trainer 3.90 Rate Increases Would Take 635 - Independent Living Specialist 2.40 Effect January 1, 2021. For the DSS = Department of Social Services. added services, supplemental rate increases would not take effect until January 1, 2021, which would again provide the state six months 14 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET to seek federal approval of these Figure 9 increases. Proposal for Supplemental Rate Increases for Three Rate Increases Would Additional Services, Effective January 1, 2021 Potentially Be Suspended July 1, 2023. The supplemental rate Service Code and Service Rate Increase increases approved in 2019-20 520 - Independent Living Program 8.20% and proposed in 2020-21 would 805 - Infant Development Program 8.20 be suspended on July 1, 2023 116 - Early Start Specialized Therapeutic Services 5.00 unless General Fund revenues are anticipated to reach a certain 2020-21 as ones that had potential issues with their threshold. This extends the original suspension draft rate models. The results from the draft rate date for the 2019-20 increases by 18 months. models had led to the omission of these services (Currently, the administration assumes these from the rate increase in 2019-20. The Governor’s suspensions take effect.) budget proposes to correct that omission based on revised rate model information. Again, the proposal LAO Assessment does not implement rate models; rather the rate Proposal Corrects Omission From 2019-20 models—if they were fully implemented—indicate Supplemental Rate Increases. We had identified which services are most in need of a rate increase. the three services targeted for rate increases in Options for Repurposed Funding The Legislature could choose to repurpose the $60 million General Fund proposed for performance incentives (or another funding amount) for one or more of the following uses. Begin to Implement Rate Study Recommendations. Last spring, we offered some ways to incrementally roll out rate models. The Legislature could opt for one of these options—or another option—to phase in rate models, beginning in 2020-21. Increase Supplemental Service Provider Rates. Alternatively, or in combination with the first example, the Legislature could increase supplemental provider rates or provide supplemental rate increases in additional service categories. Increase RC Operations Funding to Improve Caseload Ratios. The Legislature could provide Regional Centers (RCs) with additional funding to improve caseload ratios. This not only would increase compliance with the state’s federal Medicaid waiver agreement and protect against the loss of federal funding, but also it would give service coordinators more time to deliver services to consumers in a person-centered way. Have the Administration Lead an Effort to Improve Data Systems and Data Integrity. This idea may be somewhat similar to what the Governor intended for the first year’s use of performance-incentive funding, but we also would recommend redesigning RCs’ case management information technology systems to facilitate reporting and analysis on service gaps, consumer preferences, and consumer outcomes. Consider Other Ways to Improve Quality. The Legislature could consider ways to use existing allocations for employment incentives, paid internships, reducing disparities, complying with federal rules, and developing community-based resources (noted earlier) to test performance-incentive strategies. We suggest the Legislature ask the Department of Developmental Services for ways it could redesign the structure of these allocations to build in accountability and quality measures and use some of the funding to test the use of performance incentives. www.lao.ca.gov 15 analysis full gutter 2020-21 BUDGET Built-In Suspension of Rate Increases in 2023 LAO Recommendation Creates Uncertainty About Sustainability. As Recommend Approving New Supplemental we noted in our analysis last year, the Governor’s Rate Increases, Consistent With Legislative proposed suspension of services that are Action in 2019-20. We recommend the Legislature arguably ongoing in nature creates uncertainty for approve the proposed supplemental rate increases consumers and service providers. for infant development, Early Start therapies, and independent living, consistent with the Legislature’s action approving supplemental rate increases in 2019-20. ENHANCED CASELOAD RATIOS FOR CHILDREN AGES 3, 4, AND 5 Background LAO ASSESSMENT Age 3 is an important milestone in the DDS Proposal Does Not Target system. Infants and toddlers who were part of the Early Start program are reassessed at age 3 to Existing Caseload Problems determine whether they have a substantial lifelong While the Governor’s proposal to add extra developmental disability. It also is the age at which support for the families of children ages 3 through young children may become eligible for services 5 might have merit, it does not address some of through the school system. Currently, required the known problems with caseload ratios described average caseload ratios at each RC for consumers below. ages 3 and older are 1:62 if they are enrolled in the Early Start Caseload Ratios Well Over 1:45. Medicaid waiver or 1:66 if they are not enrolled in The Governor’s budget bases its proposal for the Medicaid waiver. caseload ratios of 1:45 for children ages 3, 4, and Governor’s Proposal 5 on the purported 1:45 caseload ratios in Early Start. Although statute sets Early Start caseload Budget Proposes to Reduce Caseloads for ratios at 1:62, DDS funds RCs for a preferred Service Coordinators Working With Children caseload ratio of 1:45. The salary assumptions Ages 3 Through 5. The Governor’s budget in the funding formula DDS uses to determine proposes $16.5 million ($11.2 million General how much to pay RCs to implement the preferred Fund) to pay for additional service coordinators caseload ratios is very outdated, however. at RCs to lower the caseload ratio for young Consequently, an RC typically hires fewer service consumers ages 3 through 5 to one service coordinators than it is “funded for” because it has coordinator for every 45 consumers (1:45). DDS to pay a higher salary than that provided in the cites the complexity parents face navigating the formula. As a result, as of March 2019, all RCs had various systems at this point in their child’s life as average Early Start caseload ratios exceeding 1:45 justification for lowering the service coordinator as shown in Figure 10. The average caseload ratio caseload ratios. DDS also cites 1:45 caseload statewide was 1:65 and six RCs had average Early ratios in Early Start as the basis for selecting that Start ratios in excess of 1:70. particular ratio. Current Federal Waiver Caseload Ratios Risk Loss of Federal Funding. In addition to problems with the Early Start caseload ratios, RC service coordinators also carry large caseloads for 16 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET consumers age 3 and older enrolled in the Medicaid service coordination to families of children waiver. While statute and federal agreements ages 3 through 5. While we agree those ages require average caseload ratios of 1:62 at each RC, include important milestones and could benefit as of March 2019, only one RC was in compliance from extra support, why this is necessarily the case as shown in Figure 11 (see next page). The at all RCs is unclear, given some RCs might need average caseload statewide was 73 and nine RCs extra support elsewhere. For example, age 22 is had average caseload ratios of 1:75 or higher. another important milestone in the system—it is Medicaid waiver caseload ratios have been out when consumers age out of the school system of compliance for multiple years. Although the and begin to access adult services from RCs. federal government has not taken any action against California as Figure 10 of yet, these out-of-compliance None of the Regional Centers Meet the ratios nonetheless put federal Preferred Early Start Caseload Ratiosa funding at risk, particularly given the state’s experience in the Average Number of Consumers Served by a Single Service Coordinator, March 2019 1990s. Specifically, in 1997, the federal government found Preferred Ratio Required Ratio 1:45 1:62 that RCs had numerous quality problems. In response, the federal government froze enrollment in Valley Mountain 81 the Medicaid waiver program until San Andreas 81 RCs implemented agreed-upon San Diego 77 changes, which meant that the Westside 73 state could not access federal South Central LA 73 matching funds for services Inland 72 provided to consumers who would have otherwise been new waiver Kern 69 enrollees. When the freeze was Harbor 65 finally fully lifted several years North Bay 64 later, DDS estimated the state Eastern LA 64 had foregone nearly $1 billion East Bay 63 in federal funding. At that time, the federal government and San Gabriel/Pomona 62 California agreed to limit the size Central Valley 62 of caseloads as one way to avoid Tri-Counties 61 compromising the quality of RC Orange County 60 services. Golden Gate 58 Service Coordination Alta California 58 Needs May Differ Far Northern 55 Across RCs Frank D. Lanterman 54 North LA County 52 Without prejudice to its Redwood Coast 49 merits, the Governor’s proposal lacks sufficient analytic basis to determine where or for whom a Statute requires that a single service coordinator serve no more than 62 infants and toddlers (1:62) enrolled in Early Start, but the preferred ratio as determined by the administration is 1:45. caseload relief is warranted. Instead, it assumes that all RCs LA = Los Angeles. need to provide more intensive www.lao.ca.gov 17 analysis full gutter 2020-21 BUDGET Transition planning at schools begins at age 16. LAO RECOMMENDATIONS Arguably, consumers in this transitional age range We withhold recommendation on the proposal and their families also could use added attention for enhanced caseload ratios for children ages 3, from their service coordinators. Given that more 4, and 5. In light of the fact that most consumers than 90 percent of DDS consumers are served are assigned to service coordinators who have very by RCs that are out of compliance with caseload large caseload ratios (and that all RCs are out of ratios, we to question why the proposal is limited to compliance in at least one service category), we ages 3 through 5. would need more information to justify approval of this request Figure 11 to enhance caseload ratios for All but One RC Is Out of Compliance With such a limited age group. In Required Federal Medicaid Waiver Caseload Ratiosa addition, the program—Early Average Number of Consumers Served by a Single Service Start—that serves as the model Coordinator, March 2019 for this caseload ratio of 1:45 does not have a single RC with Required Ratio 1:62 average caseloads that small. Consequently, the rationale for San Andreas 82 targeting caseloads for this age North LA County 82 group before targeting Early Start Golden Gate 80 caseloads is unclear. San Diego 78 Recommend the Legislature Ask DDS to Report on the Orange County 78 Following Issues at Budget Frank D. Lanterman 77 Hearings. We recommend the Alta California 77 Legislature request additional Kern 76 information from DDS at budget Westside 75 subcommittee hearings this spring North Bay 74 to inform its deliberations on this component of the Governor’s Inland 72 proposal: Harbor 72 East Bay 72 • What is the department’s plan to address other caseload ratios Valley Mountain 71 that are out of compliance? South Central LA 69 • Is the department concerned Redwood Coast 69 about the possibility of losing Eastern LA 68 federal funding because of Central Valley 67 out-of-compliance caseload ratios Tri-Counties 65 for consumers enrolled in the Far Northern 65 Medicaid waiver program? • For each RC, are children San Gabriel/Pomona 61 ages 3, 4, and 5 the group for which service coordination needs a California’s Medicaid Home- and Community-Based Services Waiver requires an average are the greatest? service coordinator-to-consumer ratio at each RC of 1:62 for waiver-enrolled consumers. • What is the department’s plan RC = Regional Center and LA = Los Angeles. to improve Early Start caseload ratios? 18 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Recommend Requiring DDS to Provide in a timely way. We recommend the Legislature Updated Caseload Ratio Information in March. direct DDS to provide this information to the budget Each year, statute requires RCs to report caseload subcommittees and the LAO in March to better information to DDS. The final reporting is complete inform budget decisions that will be made this year. in March, but is not always made available publicly SAFETY NET PLAN BACKGROUND how it will increase the capacity of the system to prevent crises from happening, and whether Closure of DCs Led to Need for consumers need greater access to ongoing mental Community-Based Safety Net. As DDS closed health and behavioral health services. Although its last general treatment DCs, it simultaneously our recommendation was not taken up in all developed community-based services for aspects, DDS was directed by the Legislature to individuals in crisis. (Previously, DCs served as a submit a revised plan along with the Governor’s backstop and safety net for individuals needing 2020-21 budget proposal. crisis services.) Such safety net services—which provide temporary residential, medical, and DDS BUDGET PROPOSALS TO behavioral intervention—range from mobile crisis EXPAND THE SAFETY NET teams to acute crisis homes to “step-down” homes and services for individuals moving from more restrictive settings, such as institutions for mental Revised Safety Net Plan disease or PDC’s Secure Treatment Program. DDS released its revised safety net plan on DDS Submitted a Safety Net Plan in May January 10. It includes an update on previous 2017. The previous Governor’s plan to close initiatives, describes how it engaged stakeholders DCs was approved by the Legislature in 2015. to develop the plan, discusses recent initiatives, Subsequent legislation required DDS to submit and describes the new proposals in the Governor’s a safety net and crisis plan with the Governor’s budget (summarized below). revised budget in May 2017. Many, but not all, of DDS’ recent and current activities related to safety Additional PDC Capacity, EBSH net services were described in that plan. Homes, and Crisis Prevention Training Legislation Associated With the 2019-20 Temporary Additional Capacity of 20 Beds Budget Required DDS to Submit a Revised Plan at PDC . . . The Governor’s budget proposes in January 2020. Last year, we recommended the $8.9 million General Fund to temporarily add one Legislature require DDS to submit a revised plan intermediate care facility (ICF) unit of 20 beds at in part because each budget proposal since the PDC (for a total of 231 beds at PDC). The 20 beds May 2017 plan was released has included new would not be available after June 30, 2024. The proposals (that were not identified in the original Governor’s budget indicated the purpose of the plan) to expand the safety net. Assessing whether additional beds, which would increase the statutory these new additions were necessary or sufficient cap of 211 beds at PDC to 231, is to provide became difficult because there was little insight into temporary additional capacity for individuals with how the department decided to request additional developmental disabilities who have been deemed funds. We recommended that DDS submit a new IST and are currently in county jails awaiting plan that would include information about how admission to PDC. the department is planning for the future, how it makes its decisions to add new resources, www.lao.ca.gov 19 analysis full gutter 2020-21 BUDGET . . . In Combination With Development of Five The Safety Net Plan Provides Less Detail Additional Community-Based Homes to Serve About Longer-Term Plans. Although the plan Individuals Previously at PDC. The Governor’s provides important information about current and budget proposes $7.5 million General Fund for past efforts and describes the new proposals for DDS to develop five additional EBSHs with delayed 2020-21, it provides little information about efforts egress and secured perimeter. These homes would beyond 2020-21. Because the plan is more like a serve individuals at PDC who are deemed a danger status update, assessing whether the department to themselves or others, which would make more is conducting the right amount of preparation for room at PDC for those accused of committing the future is difficult. For example, the plan provides a crime and deemed IST. DDS estimates all five good data about the growth in the number of homes would be up and running by July 2024 when consumers diagnosed with autism or intellectual the temporary ICF unit at PDC would cease being disabilities, but it does not address what the available. department anticipates having to do to in terms Additional Crisis Training at Four RCs. of safety net planning to adequately serve these The Governor’s budget includes $4.5 million consumers in the future. ($2.6 million General Fund) to expand crisis The Plan Does Not Provide Much Detail About prevention training and education at four additional How DDS Prioritizes Safety Net Spending. DDS RCs (training and education currently are being compiles certain data and information about the pilot-tested at two RCs). The particular program safety net, such as how many consumers were is called Systemic, Therapeutic, Assessment, placed in restrictive settings like jails and for Resources, and Treatment (START). It was how long, the characteristics of consumers with developed in 1988 at the University of New complex needs, and ongoing housing development. Hampshire to serve the unique needs of individuals What is less clear is how DDS uses that information with developmental disabilities and co-occurring to determine which projects to prioritize in a given mental or behavioral health challenges. Among year, anticipate future need, and project caseloads other things, it provides training to local START and spending associated with meeting those teams (which are selected and contracted by the needs. RC) on whole person assessment, community Focus on Prevention Is a Good Approach. education, and data collection and management. The focus on training of local teams to prevent These teams facilitate 24-hour care coordination and respond to crises by educating and coaching and provide coaching and education to families, family, staff, and providers could potentially reduce staff, and service providers. the number of full-blown crises. This would be better for the consumer and the consumer’s family LAO ASSESSMENT and service providers. Moreover, crises can be costly events. Crises often result in consumers having to move from their current residence to a Revised Safety Net Plan temporary crisis home or a restrictive setting like The Safety Net Plan Provides Important an institution for mental disease, the latter of which Information About Efforts Thus Far. DDS’ revised is ineligible for federal funding. Consequently, safety net plan provides important status updates reducing the frequency of consumer crises could about past and current safety net development and reduce state costs. operation and it describes the 2020-21 proposals to expand the safety net. It also describes the Additional PDC Capacity, changing demographics and composition of EBSH Homes, and Crises Prevention the DDS consumer population, which provides Training important context (particularly about the increasing share of individuals with autism) about the need for DDS Provided Information to Demonstrate safety net services. Need for Additional Capacity. DDS used 20 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET information about the number of consumers in . . . Crisis Training, as Proposed, Is Justified. county jails awaiting admission to PDC (which is Typically, government agencies wait for the results currently at capacity) as the basis for proposing to of pilot programs before deciding whether the pilots add 20 temporary beds at PDC and develop five were successful enough to scale the programs up EBSHs in the community (which could each serve and replicate them in other areas. In this case, DDS up to four people). The PDC resources would be may be justified in moving forward before the pilot available for individuals who have been found IST testing is complete. As we noted in our analysis last and need competency training. PDC is likely a year, moving the system more toward prevention of more appropriate placement for an individual with crises and away from having to respond to crises developmental disabilities than county jails. The is important. The START program—which has been EBSH homes would serve individuals at PDC who used and evaluated in other states and requires are deemed a danger to themselves or others. data collection as a requisite activity—trains Moving those individuals into EBSH would make families and providers on ways to prevent and room at PDC for the IST population needs. respond to potential crises and link them to local Restrictive Nature of Proposed resources, such as first responders. Which RCs will Community-Based Homes Means the Governor’s be selected for START services is still unknown. Proposal Should Be Considered With Caution. Although it appears the additional EBSH capacity LAO RECOMMENDATIONS is warranted, it is worth noting that increasing the number of EBSHs that include delayed egress Revised Safety Net Plan and a secured perimeter deviates from current statute. Currently, EBSHs with delayed egress Consider Requesting More Information and secured perimeter are written into statute as About Future Planning and Decision-Making a pilot program that ends January 1, 2021. The Process. Although the safety net plan submitted pilot only allowed six of these homes to be built by DDS includes important status updates and and for only one to be developed in a given year. descriptions of programs and changing consumer The current proposal would increase the cap to 11 demographics, it still lacks information about homes and remove language about only developing future-looking strategies and the methodology one of these homes per year. The reason for the DDS uses to determine imminent and future needs. original limitations is that EBSHs with delayed We recommend the Legislature continue to press egress and secured perimeter are considered more DDS at hearings, if not in another formal update, restrictive settings and are not eligible for federal to provide additional information about its strategic matching funds. Since approving the planned planning process to inform the Legislature’s closure of DCs, the Legislature has approached assessment of the Governor’s safety net spending proposals to expand the use of restrictive settings priorities in the current and future budget in the community with caution given the potential proposals. implications for the individual. Although the Additional Capacity and Homes Legislature may determine this particular expansion is warranted, making these decisions deliberately Recommend Approving Additional PDC and conducting ongoing oversight of DDS to ensure Capacity and Homes. The proposed temporary these settings are not being overused is important. additional capacity at PDC coupled with the While START Pilot Is Not Complete . . . development of new EBSH homes with delayed Pilot-testing of START services at San Andreas and egress and secured perimeter makes sense for San Diego RCs is not yet complete and no reports serving consumers in jail awaiting admission to are available yet about the implementation and PDC. We recommend the Legislature approve this progress. component of the safety net proposal and request www.lao.ca.gov 21 analysis full gutter 2020-21 BUDGET regular updates about the use of and demand for which RCs would be selected for START services these kinds of services. and why, we recommend approval of funding Recommend Approving Increase for START to increase START training on crisis prevention Training. While we recommend the Legislature and intervention in concept. We recommend the ask DDS at budget subcommittee hearings about Legislature request regular updates on these training efforts, including reports of available data. CONCLUSION The most significant new proposal meanwhile, should consider the way forward given in the Governor’s DDS budget is the these challenges. Does it want to use the rate performance-incentive program. It represents a study to design a path forward that could lead new direction for developmental services without to the right conditions for a performance-based addressing existing challenges in the current accountability system in the future? Or, does it want system. Without addressing these challenges, to consider an alternative path that changes the the proposal is unlikely to succeed. We therefore system to address future service demands given recommend rejecting this proposal. The Legislature, budget constraints? LAO PUBLICATIONS This report was prepared by Sonja Petek, and reviewed by Mark C. Newton and Carolyn Chu. 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. 22 LEGISLATIVE ANALYST’S OFFICE