The 2022-23 Budget: The Governor’s Homelessness Plan

2022-23 BUDGET The 2022-23 Budget: The Governor’s Homelessness Plan Summary Homelessness in California. While homelessness is a complex problem with many causes, the high costs of housing is a significant factor in the state’s homelessness crisis. Rising housing costs that have exceeded growth in wages, particularly for low-income households, put Californians at risk of housing instability and homelessness. In California, around 2.5 million low-income households are cost burdened. More people experience homelessness in California than any other state. As of January 2020—the most recent year federal data is available—California had about 161,500 individuals experiencing homelessness. Shifting State-Local Relationship. Historically, local entities have provided most of the homelessness assistance in their jurisdiction, relying in part on federal and state funding. As the homelessness crisis has become more acute, the state has taken a larger role in funding and supporting local governments’ efforts to address homelessness. The state has increased its role in addressing homelessness by providing significant, albeit one-time and temporary, funding towards infrastructure and flexible aid to local governments in recent years. Update on Key Recent Homelessness State Spending. Recent budget actions reflect the increased role of the state in addressing homelessness. The state budget provided a total of $7.2 billion ($3.3 billion General Fund) in 2021-22 to about 30 homelessness-related programs across various state departments. We provide implementation updates for several of the major, recent homelessness augmentations. Homelessness Package Proposes to Focuses on Near-Team Needs. The Governor’s 2022-23 budget proposes $2 billion one-time General Fund over two years that is intended to address near-term homelessness needs while previously authorized funds for long-term housing solutions are implemented: $1.5 billion for behavioral health “bridge” housing and $500 million for the Encampment Resolution Grants Program. Devote Attention to Overseeing Recent Augmentations. We suggest the Legislature dedicate the early part of the budget process to overseeing the implementation of last year’s significant homelessness augmentations. Prior to authorizing increased funding for the activities proposed in the 2022-23 budget, ensuring that the homelessness efforts authorized in prior budgets are operating effectively, adequately supported, and can be maintained over time will be important. Consider Long-Term Plan for Ongoing Homelessness Efforts. Addressing this crisis requires a complex combination of services and infrastructure. As more information about recent state efforts becomes available, we suggest the Legislature assess which types of interventions appear most effective. This information could help guide the state’s long-term fiscal and policy role in addressing homelessness. For Any Authorized Funds, Set Clear Expectations and Establish Metrics to Assess Performance. Setting clear expectations through statute and establishing reporting requirements to facilitate oversight over the state’s progress towards addressing homelessness will be critical. GABRIEL PETEK | LEGISLATIVE ANALYST FEBRUARY 2022 www.lao.ca.gov 1 2022-23 BUDGET BACKGROUND Housing Affordability Affects Homelessness. youth. Finally, Figure 2 depicts how the state’s The state is facing a severe affordable housing sheltered and unsheltered homeless populations crisis. Not surprisingly, those living in poverty are have changed between 2010 and 2020. Recently, the most significantly affected. Rising housing costs HUD released 2021 PIT count data for sheltered that have exceeded growth in wages, particularly people experiencing homelessness. Challenges for low-income households, put Californians at associated with the COVID-19 pandemic means risk of housing instability and homelessness. national data on unsheltered people experiencing In California, around 2.5 million low-income homelessness will not be available for 2021. households are cost burdened (spend more than California had 51,400 sheltered people experiencing 30 percent of their incomes on housing). Over homelessness in 2021, a 5 percent increase in the 1.5 million low-income households face even more population of sheltered people relative to 2020. The dire cost pressures—spending more than half of box on page 4 describes the challenges collecting their income on housing. For this population, job accurate and timely homelessness data. loss or an unexpected expense could result in homelessness. Figure 1 Homelessness in California. People Experiencing Homelessness in California While homelessness is a complex problem with many causes, the high costs of housing is a significant factor in the state’s homelessness crisis. More people experienced homelessness in California than any 161,500 people experiencing homelessness in the state. other state. As of January 2020— the most recent year complete 28% of people experiencing 7% homelessness in the U.S. from federal data is available—California are in California. 2019 has about 161,500 individuals 5% experiencing homelessness, which Unsheltered 70% from represents about 28 percent of 2019 Male 65% the total homeless population in the nation. (California’s overall 32% Chronically homeless population, however, is about 12 percent of the nation.) Figure 1 23% Severe mental illness provides additional details about 22% Chronic substance abuse people experiencing homelessness in California in 2020. Additionally, 16% Families with children the state’s Homeless Data 8%Unaccompanied youth under 24 Integration System (HDIS)—which tracks people served in the state— 41% In Los Angeles 13% from identified that 246,100 unique 2019 people accessed some form of homelessness service in the state in 2020—159,400 individuals and 83,500 families with children. Figure based on the U.S. Department of Housing and Urban Development’s (HUD’s) January 2020 point-in-time homelessness count, before the onset of the coronavirus disease 2019. Included in the individual and family Recently, HUD released incomplete point-in-time data for 2021. The data reflected a count of totals are 24,300 unaccompanied sheltered people experiencing homelessness. Challenges associated with the COVID-19 pandemic means national data on unsheltered people experiencing homelessness will not be available for 2021. 2 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Shifting State-Local Relationship. experiencing homelessness, the state invested Historically, local entities have provided most significant resources in infrastructure—such as of the homelessness assistance in their the purchase, renovation, and modification of jurisdiction, relying in part on federal and state former hotels—to house people experiencing or funding. As the homelessness crisis has become at risk of homelessness. This new homelessness more acute, the state has taken a larger role infrastructure, which is still coming online, is to in funding and supporting local governments’ be owned and operated locally. Concurrently, the efforts to address homelessness. Initially, the state continued to provide local entities flexible state provided flexible funding directly to local homelessness assistance on a one-time basis year entities to address homelessness in their own after year. Overall, the state has increased its role in communities. However, the state expanded its addressing homelessness by providing significant, support and approach following the emergence of albeit one-time and temporary, funding towards the COVID-19 pandemic. In response to concerns infrastructure and flexible aid to local governments that the pandemic would place more people at in recent years. risk of homelessness and further harm people Figure 2 Recent Trends in People Experiencing Homelessness 180,000 Unsheltered Sheltered 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Figure based on the U.S. Department of Housing and Urban Development's point-in-time homelessness counts. www.lao.ca.gov 3 2022-23 BUDGET Recent Homelessness State Spending. particular entity. Although these are challenging Recent budget actions reflect the increased role issues that are not solved quickly, California has of the state in addressing homelessness. Figure 3 made some notable progress in creating a state summarizes major recent homelessness state infrastructure and portfolio of programs to address spending actions. homelessness since 2018-19 when the state Progress in State’s Response... In the past, began taking a more active role in addressing our office has noted the challenges associated homelessness. In particular, the recent statutory with providing funding for homelessness that is changes to the responsibilities and composition (1)one-time or temporary in nature; (2) provided of the Homelessness Coordinating and Financing across multiple agencies, departments, and Council (HCFC)—now known as the California levels of government; (3) not tied to specific Interagency Council on Homelessness (Cal ICH)— outcome measures, goals, or a particular strategy; encourages greater coordination among the various and (4) not overseen and coordinated by one state entities involved in addressing homelessness. Challenges Collecting Accurate and Timely Homelessness Data Federal Government and States Rely on Point-in-Time Counts. The U.S. Department of Housing and Urban Development (HUD) requires Continuums of Care (CoCs) to conduct point-in-time (PIT) counts of people experiencing homelessness, generally on a single night in January. CoCs are required to conduct a PIT count of homeless individuals who are “sheltered” annually and a PIT count of individuals who are “unsheltered” at least once every two years, though CoCs may choose to conduct an unsheltered count annually. HUD requires CoCs to conduct PIT counts as a condition of receiving federal funding and uses the data to determine allocations of federal funds. States and local entities also rely on PIT data to inform their response to homelessness. Homeless Population Likely Larger Than Available Data Reveals. Various factors, including difficulty reaching all unsheltered individuals, limitations on counting all forms of homelessness, and capacity constraints of CoCs complicate efforts to produce an accurate count. The expert consensus is that the HUD PIT count underrepresents the homeless population. COVID-19 Further Complicates Data Availability and Accuracy. Federal reporting from the January 2020 PIT count (before the onset of COVID-19) is available. Recently, HUD released 2021 PIT count data for people experiencing sheltered homelessness. Due to public health concerns associated with the pandemic, a federal waiver for the January 2021 PIT count means data will not be available for unsheltered homelessness that year. HUD is requiring the full January 2022 PIT count to move forward—sheltered and unsheltered. However, many jurisdictions are delaying their count to the end of February 2022 to allow time for the current surge in COVID-19 cases to subside. This means that the first federal PIT count data reflecting the impact of COVID-19 on homelessness will likely not be available until early 2023. State’s New Homelessness Data Integration System Offers More Information. The Homeless Data Integration System (HDIS) administered by the California Interagency Council on Homelessness (Cal ICH), which became operational in 2021, allows the state to access and compile standardized data collected by CoCs about the people they serve. Cal ICH anticipates updating the system to focus more on the outcomes of people accessing services to help the state and local entities better assess their progress toward preventing, reducing, and ending homelessness. While this data would not replace the PIT count data, it can complement PIT count data by providing more information about the delivery of homelessness services in the state and captures a broader population of people experiencing housing instability. 4 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET The box on the next page explains Cal ICH’s original creation and recent changes to the council’s composition. Figure 3 Additionally, the recent roll out of Major Recent State Homelessness Spending HDIS is a step forward in the state’s (In Millions) access to centralized information about the delivery of homelessness Funding State services across the state. Over time, Program Amounta Type Administrator as the system compiles more detailed 2018-19 information about the homelessness No Place Like Home $2,000 One time HCD services delivered locally, this system HEAP 500 One time HCFCb Total $2,500 may help inform state policy and 2019-20 budget decisions. Finally, more HHAPP Round 1 $650 One time HCFC recent rounds of flexible funding for COVID-19 Emergency Homelessness 100 One time HCFC local governments have included Funding requirements, such as local action Project Roomkey 50 One time DSS plans and outcome goals, that will Total $800 facilitate oversight, accountability, 2020-21 and the ability to track local Homekey Program $800 One time HCD HHAPP Round 2 300 One time HCFC governments’ progress. Project Roomkey 62 One time DSS …But Long-Term Planning and Total $1,162 Funding Remains Necessary. 2021-22 Despite this progress in the state’s Homekey Program $1,450 Temporaryc HCD engagement and response, the HHAPP Round 3 1,000 Temporaryd HCFC scale of the homelessness crisis Community Care Expansion Program 805 One time DSS in California is significant and Behavioral Health Continuum 756 Temporarye DHCS Infrastructure Program continued work and resources will CalWORKs Housing Support Program 190 Temporaryf DSS be necessary to address the state’s Expansion homelessness challenges. Past Project Roomkey 150 One time DSS Housing and Disability Advocacy 150 Temporaryg DSS budget actions and the Governor’s Program Expansion 2022-23 budget continue to rely on Bringing Families Home Program 93 Temporaryh DSS one-time and temporary funding. Expansion In order to meaningfully address Home Safe Program Expansion 93 Temporaryi DSS Encampment Resolution 50 One time HCFC homelessness, the state likely will Total $4,737 need to have a continued fiscal role a All fund sources. and set a clear, long-term strategy. b HCFC is now the California Interagency Council on Homelessness. To this end, determining the balance c The budget also authorized $1.3 billion in 2022-23 for the Homekey Program. of the state-local relationship—both d The budget also authorized $1 billion in 2022-23 for HHAPP Round 4. e The budget also authorized $1.4 billion in 2022-23 and $2.1 million in 2023-24 for the Behavioral programmatically and fiscally—over Health Continuum Infrastructure Program. the long-term will be important. f The budget also authorized $190 million in 2022-23 for the CalWORKs Housing Support Program Expansion. Programmatically, local entities g The budget also authorized $150 million in 2022-23 for the Housing and Disability Advocacy are most knowledgeable about Program Expansion. h The budget also authorized $93 million in 2022-23 for the Bringing Families Home Program the specific homelessness-related Expansion. challenges facing their communities i The budget also authorized $93 million in 2022-23 for the Homekey Program. and are better positioned than HCD = Housing and Community Development; HEAP = Homeless Emergency Aid Program; HCFC = Homeless Coordinating and Financing Council; HHAPP = Homeless Housing, Assistance the state to deliver services. In and Prevention Program; DSS = Department of Social Services; and DHCS = Department of Health recognition of this, local entities Care Service. traditionally have been given www.lao.ca.gov 5 2022-23 BUDGET significant discretion over how state funds are over what time horizon, making it more likely that spent to address homelessness. However, the the state’s investments would have a meaningful, state can help to coordinate and guide local action ongoing impact on homelessness. based on best practices and statewide interests. Summary of Major 2022-23 Homelessness Fiscally, striking a balance between state and local Proposals. The Governor’s 2022-23 budget responsibility may be more complex. Most recently, proposes $2 billion General Fund over two years the state has focused on providing infrastructure for two major homelessness proposals. Figure 4 funding, which otherwise could be challenging for provides an overview of the homelessness local governments to raise. Having a clear balance budget proposals. of the state-local relationship would help inform what types of activities the state should fund and The California Interagency Council on Homelessness Established to Oversee Housing First Policy. In 2017, the Housing First model was adopted in the state by Chapter 847 of 2016 (SB 1380, Mitchell). It required state housing programs to adopt the model. Housing First is an approach intended to quickly and successfully connect individuals and families experiencing homelessness to permanent housing without preconditions and barriers to entry, such as sobriety, treatment, or service participation requirements. Supportive services are offered to enhance the prospect of achieving housing stability and prevent returns to homelessness as opposed to addressing predetermined treatment goals prior to providing permanent housing. Housing First emerged as an alternative to a housing philosophy that required individuals experiencing homelessness to first complete short-term residential and treatment programs before securing permanent housing. Under this prior model, permanent housing was offered only after an individual experiencing homelessness could demonstrate that they were “ready” for housing. The California Interagency Council on Homelessness (Cal ICH) is responsible for monitoring state programs’ compliance with Housing First. While confirmation was pending as of November 2021 for some programs administered by the California Governor’s Office of Emergency Services (Cal OES), many other programs—including those administered by the Housing and Community Development Department and Department of Social Services—were found to be complying by Cal ICH. Recent Statutory Changes to Cal ICH. In addition to overseeing compliance with the state’s Housing First policy, Cal ICH now directly administers the $3.45 billion in previously authorized flexible state funding provided to local entities. Legislation recently updated the council’s structure and membership in ways that facilitate better coordination across state entities that administer other homelessness-related programs. Specifically, (1) requiring the Secretary of the California Health and Human Services Agency to serve as a co-chair with the Secretary of the Business, Consumer Services, and Housing Agency; (2) requiring existing member agencies and departments to be represented by the Director or Secretary rather than by a representative, except for the California Department of Education; and (3) adding the Director of the Departments of Aging, Director of the Departments of Rehabilitation, Director of the Departments of State Hospitals, Director of the Departments of Cal OES the State Public Health Officer, and the executive director of the California Workforce Development Board. How these changes to Cal ICH that are intended to break down silos will work in practice is as yet unknown. 6 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Figure 4 Major 2022-23 Homelessness Budget Proposals (In Millions) Fund State Proposal 2022-23 2023-24 Source Administrator Behavioral Health Bridge $1,000 $500 General Fund DHCS Housinga Encampment Resolution 500 — General Fund Cal ICH Grants Program a This funding is proposed to be provided through the existing Behavioral Health Continuum Infrastructure Program. DHCS = Department of Health Care Services and Cal ICH = California Interagency Council on Homelessness. UPDATE ON MAJOR RECENT STATE ACTIONS ADDRESSING HOMELESSNESS In this section, we provide implementation updates supportive housing units, street outreach, service for several of the major, recent homelessness coordination, and permanent housing. Allocations to augmentations. While Figure 3 shows that the major local entities generally are based on the local entity’s recent augmentations span four departments and share of the homeless population. an even larger number of programs, the 2021-22 Budget-related legislation has modified some budget actually provided even more funding—a total HHAPP program features over time. Most of $7.2 billion ($3.3 billion General Fund)—to about significantly, the program has evolved to encourage 30 homelessness-related programs in additional coordination among local entities to address state departments that are not all shown in the figure. homelessness in their region and require local Beyond the various state housing departments, action plans that will facilitate assessing program the 2021-22 budget also funds homelessness performance and conducting oversight. Figure 5 on programs in the human services, health, veterans, the next page provides an overview of each round of transportation, higher education, and emergency authorized HHAPP funding. (The state also provided services areas of the budget. We are only highlighting $500 million in flexible homelessness aid to large the implementation status of the major augmentations cities [populations over 330,000] and CoCs on a in this section. one-time basis in 2018-19 through the Homeless Emergency Aid Program [HEAP].) Homeless Housing, Assistance and Initial Findings From 2020 Annual Progress Prevention Program (HHAPP) Report: HHAPP Round 1. The 2020 annual progress Flexible Aid to Local Entities. Since 2019-20, the report for HHAPP Round 1 was published by HCFC budget has authorized $2.95 billion General Fund in in February 2021. flexible aid to large cities (populations over 300,000), • Actual Awards. Eligible local entities had counties, Continuums of Care (CoCs)—local entities the option to apply jointly and redirect their that administer housing assistance programs within a HHAPP allocation to another eligible entity particular area, often a county or group of counties— in their region. In total, $618 million was and more recently to tribal governments through allocated to 102 local entities—14 large cities, HHAPP to fund a variety of programs and services 49 counties, and 39 CoCs. The remaining that address homelessness. Eligible uses include $32 million supports program administration rapid rehousing, operating subsidies for existing and a technical assistance program to support www.lao.ca.gov 7 2022-23 BUDGET grantees. Of the $618 million, cities received approximately 4,600 people—64 percent by $271 million, counties received $179 million, and CoCs, 17 percent by counties, and 19 percent CoCs received $168 million. by cities. Additionally, 41 percent of people • Obligated and Expended Funds. As of served were chronically homeless. Services the February 2021 report, HHAPP grantees provided could range from offering information obligated 54 percent ($334 million) of awarded to a person experiencing homelessness to funds and expended 10 percent ($61 million) transitioning a person into permanent housing. of their funding. Of the funds that have already • Initial Outcomes. The main outcome in the been obligated, the funding mostly was report is related to the destination of people dedicated towards implementing new navigation after they exited HHAPP-funded projects. centers, emergency shelters, and permanent There were 2,000 recorded exits from housing. Of the funds that have already been HHAPP-funded projects. Exits to unsheltered expended, the funding has mostly been directed homelessness accounted for 26 percent towards providing new navigation centers with (530 people) of all exits types reported. Exits wraparound services and emergency shelters. to permanent housing destinations accounted • Service Delivery. From spring 2020, for 22 percent (457 people) of all exits. People when funds were disbursed, through also exited to temporary living situations September 2020, HHAPP funds served (18 percent, or 375 people). A large portion of Figure 5 Overview of The Homeless Housing, Assistance and Prevention Program (HHAPP) (In Millions) 2019-20 HHAPP 2020-21 HHAPP 2021-22 HHAPP 2022-23a HHAPP Round 1 Round 2 Round 3 Round 4 Grant Funding Citiesb $285 $130 $336 $336 Counties 175 80 224 224 CoCs 190 90 240 240 Tribal Governments — — 20 20 Bonusc — — 180 180 Totals $650 $300 $1,000 $1,000 Youth Set Aside 8 percent of allocation. 8 percent of allocation. 10 percent of allocation. 10 percent of allocation. Fund Disbursement Disbursed spring 2020. Disbursed fall 2021. Anticipated initial Anticipated initial disbursement spring disbursement spring 2022. 2023. Status Recipients managing Recipients managing Applicants engaging Application anticipated to allocated funds per allocated funds per with Cal ICH on their be released September program requirements program requirements local action plan and 30, 2022. and developing annual and developing annual outcome goals before reports, as needed. reports, as needed. submitting a complete application, which is due June 30, 2022. Expenditure Deadline June 30, 2025 June 30, 2026 June 30, 2026 June 30, 2027 Reporting Annual progress report Annual progress report Annual progress report Annual progress report Requirements due December 31. due December 31. due December 31. due December 31. Final report due Final report due Final report due Final report due December 31, 2025. December 31, 2026. October 1, 2026. October 1, 2027. a The 2021-22 budget authorized an additional $1 billion allocation in 2023-24. The prior rounds of HHAPP allocated funding on a one-time basis. b Generally, funding is available for cities with populations over 300,000. However, HHAAP Round 1 also includes a $10 million allocation to Palm Springs. c Potential “bonus” disbursement available dependent on meeting performance conditions. Amount will vary depending on number of eligible recipients. CoCs = Continuums of Care and Cal ICH = California Interagency Council on Homelessness. 8 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET individuals served in HHAPP-funded projects $62 million in one-time funding from its Disaster exited to unknown destinations (18 percent, Response-Emergency Operations Account to or 359 people). Finally, institutional settings continue operating the program while transitioning (4 percent or 88 people) and other destinations people to permanent housing. Project Roomkey was (12 percent, or 246 people) accounted for the intended to provide temporary, emergency shelter remaining reported exists. options while also serving as a pathway to permanent housing. Accordingly, the 2021-22 budget provided The 2021 annual progress report, which would $150 million one-time General Fund to support provide updates on HHAPP Round 1 and Round 2, transitioning Project Roomkey participants into is not yet available. As shown in Figure 5, while the permanent housing. allocation methodology was the same for HHAPP Preliminary Outcomes and Current Status. Round 1 and Round 2, the total allocation amount At the height of the program in August 2020, for Round 2 was less than half the amount available 16,400 rooms were secured statewide by Project in Round 1. Roomkey and 12,000 were occupied. Overall, Project Roomkey the program has provided short-term housing for Emergence of COVID-19 Significantly over 50,000 people in 55 counties and five tribal Altered State’s Response to Homelessness. entities. As the program is winding down there are In March 2020, the state had authorized $1.15 billion about 10,500 rooms secured statewide, and about in flexible aid to local entities (through HEAP and 62 percent are occupied. Of the 37 counties that HHAPP Round 1). However, the state modified its continue to have rooms secured through Roomkey, approach as part of an amendment to the 2019-20 12 counties have occupancy rates between 90 and budget following the emergence of COVID-19 100 percent, 8 counties have occupancy rates given the immediate need to prevent the spread of between 70 and 80 percent, and Los Angeles COVID-19 among people experiencing homelessness has an occupancy rate of 40 percent. Figure 6 and at risk of homelessness. shows preliminary data from a June 2021 report Emergency Action Established Project Roomkey to Address Figure 6 Immediate Housing Needs During Pandemic. At the outset of the Project Roomkey Exitsa COVID-19 public health emergency, the state provided $50 million General Fund (later offset by federal funds) for the newly established Project Roomkey administered by Permanent Unknown or the Department of Social Services Housing Other Settings 20% (DSS). The program helped local 25% governments lease hotels and motels to provide immediate housing to Temporary Housing vulnerable individuals experiencing 10% homelessness that were at risk Unsheltered of contracting COVID-19. The Settings 16% goal of this effort was to provide Institutional non-congregate shelter options for Setting people experiencing homelessness, Congregate Shelter 24% 5% to protect public health, and to minimize strain on the state’s health care system. In November 2020, the state authorized an additional a Data based on Department of Social Services report from June 2021. www.lao.ca.gov 9 2022-23 BUDGET on the experience of Roomkey participants upon risk of COVID-19 or other communicable diseases. exiting the program. Today DSS is currently in Most of the funding is federal, however the state the process of working with all Project Roomkey also provided General Fund—$250 million in grantees to develop and execute local rehousing 2021-22 and $300 million in 2022-23—to support plans. The administration indicates that the time initial operating subsidies. Recipients have until line for completing these transition plans varies June 30, 2026 to expend the General Fund portion. by community. Within the total allocation, there is an 8 percent set-aside for programs serving youth. Applications Homekey Program for funds are accepted from local governmental 2020-21 Budget Established Homekey entities and tribal governments on a continuous Program. Building off of Project Roomkey, the basis. HCD began accepting applications in 2020-21 budget and subsequent action allocated September 2021. Between September 2021 and $800 million in one-time funding for the newly January 2022, the program maintained the eight established Homekey Program. The program geographic region structure for initial prioritization provides for the acquisition of hotels, motels, of funding. Beginning in February 2022, residential care facilities, and other facilities that applications will be considered on a case-by-case can be converted and rehabilitated to provide basis without regard to the regions. Additionally, permanent housing for persons experiencing the Homekey Program requires full occupancy— homelessness or at risk of homelessness, and who defined as no more than a 10 percent vacancy also are impacted by COVID-19. Homekey provides rate—within 90 days of completing construction grants to local entities to acquire these properties, and/or rehabilitation. For interim housing projects, which are owned and operated at the local level. the program requires an affordability restriction on To promote equitable access to Homekey funding, the units for 15 years, while a 55 years affordability the program divided the state into eight regions restriction is required for permanent housing and reserved funding for applicants in each projects. The administration estimates this funding region during the initial priority application period. will support the creation of 14,000 housing units. Each region’s share of the Homekey funding Figure 7 provides an overview of Homekey Program was based on its statewide share of (1) persons funding. Figure 8 provides a full breakdown of the experiencing homelessness and (2) low-income set-asides in the 2021-22 funding. renter households that are rent burdened. The Preliminary Outcomes and Current Status. program also provides some exemptions to the The 2020-21 funding has been fully disbursed California Environmental Quality Act and local through 94 awards to 51 local entities and zoning restrictions to expedite the acquisition supported the creation of nearly 6,000 units. of Homekey sites. Unlike Project Roomkey, this Figure 9 provides information about the distribution program is administered by the Department of funding across the state and units created. of Housing and Community Development (HCD). Figure 7 2021-22 Budget Provided Significant Additional Funding Homekey Program Overview for Homekey Program. (Dollars in Millions) The 2021-22 budget provided HCD $2.75 billion ($1.45 billion in Amounta Awarded Projects Units Created 2021-22 and $1.3 billion in 2022-23) 2020-21 $800 94 5,900 to fund additional Homekey 2021-22b 1,450 14 1,200 projects that can be converted and 2022-23c 1,300 — — Totals $3,550 108 7,100 rehabilitated to provide permanent a All fund sources. housing for persons experiencing b Applications are still being accepted, so far $323 million has been awarded. homelessness and who are also at c The 2021-22 budget authorized an additional $1.3 billion allocation in 2022-23. 10 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Additionally, 91 percent of funds were spent on Behavioral Health Continuum rehabilitation and acquisition of motels and hotels; Infrastructure Program 7 percent of funds were spent on acquisition 2021-22 Budget Established Behavioral of other types of sites; and 2 percent of funds Health Continuum Infrastructure Program were spent on other eligible categories, including (BH-CIP). The 2021-22 budget package included master leasing, conversion from nonresidential $755.7 million in 2021-22, $1.4 billion in 2022-23, to residential purposes, purchase of affordable and $2.1 million in 2023-24 to establish BH-CIP. covenants, and relocation costs. For the 2021-22 Under this program, the Department of Health funds, HCD continues to accept applications and Care Services (DHCS) provides competitive grants make awards. So far, over 40 applications have to local entities to increase behavioral health requested about $1 billion in Homekey funding and infrastructure, predominantly by constructing, 14 projects have been awarded funding. acquiring, or renovating facilities for community Encampment Resolution Program behavioral health services (contingent on these local entities providing matching funds and Encampment Resolution Efforts. The 2021-22 committing to providing funding for ongoing budget provided Cal ICH $50 million one-time services). Grants provided under this program fund General Fund to establish a competitive grant a variety of community behavioral health facility program for cities, counties, and CoCs to support types to treat individuals with varying levels of encampment resolution. Specifically, the program is intended to fund local demonstration projects that (1) address the immediate crisis of experiencing Figure 8 unsheltered homelessness in encampments, Homekey Program Funding Categoriesa (2) position people living in encampments onto (In Millions) paths to safe and stable housing, and (3) result in sustainable restoration of public spaces to Category 2021-22b their intended uses. This program is established in recognition of a need to develop effective, Geographic Allocation $952 Discretionary Reserve (20 Percent) 238 scalable, and replicable strategies that meet State Administrative (5 percent) 72 the specific, complex needs of individuals Tribal Set-Aside (5 percent) 72 living in encampments. The program received Homeless Youth Set-Aside (8 percent) 116 nearly 40 applications requesting $120 million Total 2022-23 Allocation $1,450 in resources. As Cal ICH reviews applications, a All fund sources. their scoring system prioritizes funding for b Funding categories for the 2022-23 appropriation are not available. However, state law requires an 8 percent homeless youth set-aside. applications that (1) demonstrate a commitment to collaborate with local and state partners to resolve encampment issues; (2) address encampments Figure 9 with 50 or more occupants; and (3) reflect a diverse Homekey Program 2020-21 Awards range of communities across the state, including (In Millions) rural, urban, and suburban communities. Cal ICH is expected to provide award notifications in Regions Funding Units Created February 2022. Los Angeles County $268 1,814 Bay Area 275 1,627 San Joaquin Valley 63 765 Southern California 66 592 San Diego County 38 332 Sacramento Area 39 331 Balance of State 26 233 Central Coast 23 217 Totals $798 5,911 www.lao.ca.gov 11 2022-23 BUDGET behavioral health needs. For example, funds could funding than anticipated will be distributed be used on (1) short-term crisis treatment beds, in 2021-22 and more than anticipated will be (2) residential treatment facilities in which treatment distributed in 2022-23. In addition, DHCS typically lasts for a few months, or (3) longer-term intends to apply a cap to most BH-CIP funding rehabilitative facilities. Certain portions of the total for different regions of the state. (These caps amounts discussed above for this program are set would be determined by these regions’ share aside for more specific purposes or targeted at of 2011 realignment funds for behavioral more specific populations. Specifically, funding is health.) However, DHCS will reserve a small reserved for the establishment of mobile behavioral amount (not subject this cap) to distribute at health crisis teams and for community behavioral its discretion depending on what statewide health facilities targeted at children and youth. demand ultimately is. Although the administration indicates that BH-CIP • Local Application Requirements. could support people experiencing homelessness In order to obtain BH-CIP funding, local with behavioral health conditions, the funding entities will be required to participate in is not limited to this population, nor is there an a pre-application consultation on project established set-aside or strategy to target people readiness requirements. Following this, when experiencing homelessness. applying for funds, local entities will be required Since Approval, DHCS Has Developed Funding to submit documentation of (1) control over Plan and Key Program Details. When BH-CIP the property to be acquired or rehabilitated, was approved, several key implementation details (2) approval for any necessary local permits, were not fully developed yet. These outstanding (3) adherence to behavioral health facility details concerned (1) the funding plan, (2) what licensing requirements, (4) preliminary requirements local entities would need to meet to construction plans and time lines, (4) capacity apply for and obtain funds, and (3) what the ultimate to meet the local match requirement (further match requirement from local entities would be. discussed below), and (5) engagement with Below, we discuss recent developments related to the local community (including any necessary these key program details. contracts to ensure that Medi-Cal services are provided in facilities proposed for acquisition • Funding Plan. DHCS intends to make BH-CIP or construction). Local entities also will be grant funds available through six rounds. required to share results from local behavioral Under this schedule, funding through rounds health needs assessments (which inform which one and two were made available in 2021 facility types they will prioritize) and how they and some awards were made. Round one intend for projects to advance racial equity. ($150 million) is focused on mobile crisis infrastructure and round two ($16 million) is • Local Match Requirement. The amounts focused on local planning activities. DHCS has that local entities will be required to provide awarded $138.8 million through round one and as the match for BH-CIP funding vary by $1.5 million through round two so far. For the applicant type. Specifically, (1) tribal entities will later rounds, round three ($518.5 million) be required to provide 5 percent in matching would be focused on launch ready projects, funds; (2) counties, cities, and nonprofits will round four ($480.5 million) would be focused be required to provide 10 percent in matching on children and youth facilities, and rounds funds; and (3) for-profit or private organizations five and six ($960 million combined) would be will be required to provide 25 percent in focused on priorities identified in a recently matching funds. In addition, under BH-CIP, released DHCS analysis that examined the the local match can be provided in the form current capacity and statewide need for of cash or in-kind contributions (such as land behavioral health services. Notably, this or existing structures) subject to approval funding plan results in shifts in the estimated from the state. payment timing for BH-CIP, such that less 12 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Community Care Expansion Program care facilities, homelessness counts, and development costs. DSS also determined a few Community Care Expansion (CCE) Program funding set-asides, such as 5 percent for tribes Implementation Update. DSS received and 8 percent for small counties. $805 million—$450 million federal American Rescue Plan Act (ARPA) of 2021 funds, $53 million • Matching Funds. Applicants will be required Home- and Community-Based Services ARPA Fund, to provide matching funds, with the match rate and $302 General Fund—in 2021-22 to administer varying by the type of applicant (for example, a the CCE program. The program aims to expand 10 percent match will be required for counties and preserve residential facilities serving vulnerable and cities, and a 5 percent match for tribes). adults and seniors—such as DSS-licensed adult • Intersection With Behavioral Health residential facilities and residential care facilities Infrastructure Program. DSS has been for the elderly. Facilities prioritized for funding will collaborating with DHCS to coordinate the be those serving adults and seniors receiving departments’ work across CCE and BH-CIP. Supplemental Security Income/State Supplementary The departments have contracted with an Payment (SSI/SSP) or Cash Assistance Program external consulting and research firm to serve for Immigrants (CAPI) benefits, and/or at risk of or as the administration entity for CCE and BH-CIP. experiencing homelessness. CCE funding has not yet This contractor will provide pre-application been allocated. DSS indicated that a joint request for technical assistance and consultations to all applications (RFA) portal for CCE capital expansion program applicants beginning in January 2022, projects and BH-CIP shovel-ready projects will be and will provide ongoing training and assistance launched February 15 for counties, cities, tribes, throughout the duration of both projects. Where non-profits, and for-profit organizations. Applications possible, applicants will be encouraged to will be assessed along a number of criteria, leverage funding from both CCE and BH-CIP— including: efforts to advance racial equity, financial as well as other sources—to deliver more viability, long-term operational sustainability, and comprehensive residential and behavioral health comprehensive use of resources to serve the target services to eligible populations. population. Applications will be reviewed on a rolling basis, with funding disbursed on a per-project Homelessness Landscape Assessment basis as applications are approved until funds Homelessness Assessment and Data are exhausted. System. The 2021-22 budget provided $5.6 million Leading up to the release of the RFA, the one-time General Fund for Cal ICH to contract with administration has made a number of implementation a vendor to conduct an analysis of homelessness decisions for the program: service providers and programs at the local and state level. A statutorily mandated interim report is due to • Funding Division. Of the total funds, 75 percent the Legislature July 1, 2022 and a final assessment is will be available for capital expansion projects due by December 31, 2022. In addition, the budget to acquire, construct, and rehabilitate facilities. provided $4 million one-time General Fund to support The remaining 25 percent will be available further development of HDIS, which would allow the (through a noncompetitive allocation to counties state to access and compile more standardized data and tribes, separate from the RFA) to preserve collected by CoCs. While the HDIS system is now facilities that serve the prioritized populations. operational, Cal ICH indicates they will spend the The preservation funding will include $55 million first half of 2022 working to establish systemwide for a capitalized operating subsidy reserve—for performance measures that will help the state and facilities running operating deficits—for use up local jurisdictions better assess their progress toward to five years. preventing, reducing, and ending homelessness. • Regional Approach With Set-Asides. DSS Once these performances measures are finalized, defined seven CCE funding regions, with Cal ICH anticipates updating the HDIS system to regional allocations to be determined by focus more on the outcomes of people accessing factors such as distribution of adult and senior services throughout California. www.lao.ca.gov 13 2022-23 BUDGET GOVERNOR’S 2022-23 HOMELESSNESS PROPOSALS Homelessness Package Proposes to intended to serve as a “bridge” resource until the Focuses on Near-Team Needs. The Governor long-term housing and treatment solutions for proposes $2 billion one-time General Fund over people with serious behavioral health conditions two years that is intended to address near-term authorized as part of the 2021-22 budget homelessness needs while previously authorized come online. funds for long-term housing solutions are Encampment Resolution implemented. Below, we describe the two major homelessness proposals. Grants Program Significantly Augments Funding for Behavioral Health Bridge Housing Encampment Resolution Program. The Governor Proposes Bridge Funding for Behavioral proposes $500 million one-time General Fund in Health Housing. The budget proposes $1 billion 2022-23 for the Encampment Resolution Grants General Fund in 2022-23 and $500 million General Program administered by Cal ICH. This is a ten-fold Fund in 2023-24 to address the immediate housing expansion of the current Encampment Resolution and treatment needs of people with complex Grant Program. The program would require behavioral health conditions. The funding would quarterly fiscal reports and annual programmatic be administered by DHCS through the Behavioral outcomes reports from all funding recipients. Health Continuum Infrastructure Program Cal ICH anticipates collecting information established in the 2021-22 budget. While key emerging from the grantees across the state to details are forthcoming, the administration indicates identify, disseminate, and coordinate resources funds could be used differently than the existing and services to prevent and end unsheltered program structure. For instance, funds could be homelessness in collaboration with other state used to purchase and install tiny homes and to agencies. Recently released budget-related provide time-limited operational supports in these legislation provides additional details about how the tiny homes or in other housing settings, including proposal would be implemented. We are reviewing existing assisted living settings. This funding is the proposed legislation. LAO COMMENTS Devote Attention to Overseeing Recent and successes in standing up these programs; are Augmentations. We suggest the Legislature there local capacity constraints that are limiting dedicate the early part of the budget process the effectiveness of these programs; and are to overseeing the implementation of last year’s state, local, and regional entities coordinating significant homelessness augmentations. In our effectively? Prior to authorizing increased funding examination of recent investments, described for the activities proposed in the 2022-23 budget, above, we have learned about the status of ensuring that the homelessness efforts authorized funding disbursements, when unawarded funds in prior budgets are operating effectively, are anticipated to be released, and have an initial adequately supported, and can be maintained understanding about where resources are being over time will be important. For instance, we have allocated and for what purposes. However, there is raised whether local governments need additional more to learn as the Legislature conducts oversight support to establish services and supports for of these programs, assesses their performance, Homekey properties, especially over the long term. and identifies opportunities to improve their Additionally, is the state actively disseminating operation. For instance, what were the challenges best practices related to homelessness response 14 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET and providing robust technical assistance to best For Any Authorized Funds, Set Clear position local entities for success? Is Cal ICH Expectations and Establish Metrics to Assess positioned and supported to effectively oversee Performance. We recommend the Legislature the homelessness-related programs administered consider how the state would coordinate work across the many state entities administering related to these new proposals across programs them? In parallel with overseeing recent efforts, and departments. Setting clear expectations we suggest the Legislature consider the role of the through statute and establishing reporting state—in partnership with locals—in addressing requirements to facilitate oversight over the state’s homelessness going forward. Ultimately, assessing progress towards addressing homelessness will the performance of current programs and be critical. Forthcoming information from the determining the nature of the state-local relationship Homelessness Landscape Assessments and going forward could inform the Legislature’s budget improvements to HDIS could help the Legislature decisions in 2022-23. make better-informed budget decisions in future Consider Long-Term Approach for Ongoing fiscal years and exercise stronger oversight Homelessness Efforts. The scale of the over budget actions. homelessness crisis in California is significant. Specific Considerations for Addressing this crisis requires a complex 2022-23 Budget Proposals combination of services and infrastructure. As more information about recent state efforts becomes How Has the Administration Assessed the available, we suggest the Legislature assess which Level of Need for Encampment Resolutions? types of interventions appear most effective. This While requests for encampment resolution funding information could help guide the state’s long-term in 2021-22 exceeded availability by $70 million, fiscal and policy role in addressing homelessness. the Governor’s proposal goes far beyond funding For instance, if Homekey were determined to be these original requests. The state’s ability to spend an effective state-level intervention, the Legislature the major proposed augmentation is unclear. could consider establishing an infrastructure fund Understanding how recently introduced legislation to support the purchase and rehabilitation of may expand the scope of allowable usages of the facilities over many years. funds will be important. Additionally, the 2021-22 State Appropriations Limit (SAL) funding was intended to fund demonstration Considerations. The SAL constrains how the projects which would inform best practices for Legislature can spend revenues that exceed a addressing the needs of people living in unsheltered specific threshold. Given recent revenue growth, encampments, while simultaneously addressing the the SAL has become an important consideration health and safety needs of the entire community. in the state budget process and will continue The administration is proposing an augmentation to constrain the Legislature’s choices in this on many orders of magnitude above what has been year’s budget process. However, certain types of previously authorized for the program before the spending, like some funding for capital outlay, are initial funding is released and the performance of excluded from this limit. Some prior homelessness the program can be assessed. As a result, how funding—such as General Fund spending on the successful interventions will be identified for this Homekey Program—has met the SAL definition round of funding is unclear. of capital outlay and has been excluded from the Bridge Funding May Make Sense limit. As the Legislature crafts its homelessness but Forthcoming Details Will Be package, allocating funding to homelessness Important. The Governor indicates the programs excluded from the SAL could allow the homelessness funding proposed in the 2022-23 state to allocate more funds to those programs than budget is intended to address near-term needs it otherwise could. while previously funded long-term housing solutions come online. We suggest the Legislature consider the trade-offs between pursuing the www.lao.ca.gov 15 2022-23 BUDGET bridge proposal, given the time and resources questions to consider about the current proposal required to implement a new program of this scale include: (1) what would happen to resources once and supporting existing services and programs. permanent housing comes online, (2) how quickly Specifically, the Legislature could consider can the bridge-funded units be up and running, where existing programs could be leveraged to (3) how does the timing align with the anticipated provide immediate housing support for people schedule for more permanent options, (4) does the with behavioral health needs experiencing proposed bridge housing solution make sense for homelessness. While some bridge resources may individuals with behavioral health conditions, and be necessary, whether the short-term options (5) how would the funding support transitioning proposed by the administration are most effective, individuals into permanent housing? Finally, the especially in the context of what the state already focus of the proposal—whether for behavioral has invested towards housing and homelessness health or broader homelessness-related services— infrastructure, is unclear. For example, could an should determine which state entity should oversee expanded Project Roomkey address the immediate the program. Currently, many state entities are need identified by the Governor? Alternatively, tasked with different homelessness responsibilities, would additional funding for CCE provide both so ensuring programs are properly suited to a immediate and longer-term solutions? Some key department’s mission is important. CONCLUSION California has made notable progress in its the early part of the budget process to overseeing engagement and development of partnerships the implementation of last year’s significant with local governments since 2018-19 when the homelessness augmentations. Additionally, the state began taking a more active role in addressing state authorized significant funding last year for homelessness. Overall, the state has increased programs the Governor now proposes for additional its role in addressing homelessness by providing augmentation. In both cases, it is too early to significant, albeit one-time and temporary, funding know how these programs have performed. As the towards infrastructure and flexible aid to local Legislature moves forward in its efforts to address governments in recent years. Despite this progress, homelessness, we suggest considering how to the scale of the homelessness crisis in California is balance the state-local relationship and identify a significant and continued work and resources will predictable funding strategy that aligns with the be necessary to address the state’s homelessness balance of responsibilities between the state and challenges. We suggest the Legislature dedicate local governments. LAO PUBLICATIONS This report was prepared by Lourdes Morales, and reviewed by Ginni Bella Navarre 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, California 95814. 16 LEGISLATIVE ANALYST’S OFFICE