LAO
The 2026-27 Budget: In-Home Supportive Services
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2026-27 BUDGET
The 2026-27 Budget:
In-Home Supportive Services
GABRIEL PETEK | LEGISLATIVE ANALYST | MARCH 2026
SUMMARY
Brief Covers Drivers of In-Home Supportive Services (IHSS) Cost Growth. Over the past couple of
decades, the IHSS program has experienced significant growth in total and General Fund costs. This brief
analyzes the primary drivers of cost growth in IHSS over time. Overall, IHSS has three core cost drivers:
caseload, cost per hour of care, and the average hours per case. We examine how these cost drivers have
changed alongside policy changes in the program and the state overall. Taken together, these cost drivers
account for much of the overall growth in the program.
Maintenance-of-Effort (MOE) Has Resulted in State Taking On an Increasing Share of Nonfederal
IHSS Costs. Historically, counties paid 35 percent of the nonfederal share of IHSS service costs and
30 percent of the nonfederal share of IHSS administrative costs. In the early 2010s, this share of cost model
was replaced with an IHSS MOE. Under the MOE, county costs are adjusted annually by a fixed growth factor
and a portion of locally negotiated wage increases. Part of the impetus to switch to a county MOE structure
was to provide counties with fiscal relief as IHSS costs, largely outside of the counties control, continued to
grow rapidly. Because nonfederal IHSS costs have grown faster than the MOE in recent years, the state has
taken on an increasing share of IHSS program costs.
Governor’s Budget Includes Three IHSS Budget Solutions. In response to a projected multiyear
structural deficit, the Governor’s 2026-27 budget proposal includes three solutions in IHSS. These include
(1) a proposal to eliminate the IHSS Permanent Back-Up Provider Program (estimated to save $3.5 million
in 2026-27 and on-going), (2) a proposal to align IHSS eligibility time lines with Medi-Cal (estimated to save
$86 million in 2026-27 and on-going), and (3) a proposal to remove the state’s share of cost associated with
any growth in IHSS hours per case starting next year (estimated to save $233.6 million in 2027-28, growing to
$805 million in 2029-30).
We Recommend the Legislature Ask Clarifying Questions and Weigh Trade-Offs of Each Proposal.
For each of the proposed solutions in the IHSS program, we suggest the Legislature ask the administration
key, clarifying questions as it weighs the trade-offs of each proposal. This is particularly important for
the IHSS hours shift proposal, as the mechanics of how this will work remains unclear to us at this time.
In particular, we note that the proposal to shift IHSS hours growth costs to counties does not assume savings
until 2027-28. This means that the Legislature has time to fully understand the proposal and its implications
before taking action.
INTRODUCTION
For the In-Home Supportive Services (IHSS) of $3 billion—10 percent—compared to revised
program, the Governor’s 2026-27 budget proposes estimates for 2025-26). The primary drivers of this
approximately $12.5 billion General Fund, an year-to-year General Fund cost increase include
increase of $1.1 billion (9.7 percent) from the continued estimated growth in the three primary
Governor’s revised 2025-26 budget estimate. IHSS cost drivers—caseload (8 percent), cost per
This increase would bring total program funding hour (2.3 percent), and hours per case (1.5 percent).
to $33.4 billion total funds in 2026-27 (an increase
www.lao.ca.gov 1
2026-27 BUDGET
In light of the state’s fiscal situation (as (estimated to save $233.6 million in 2027-28,
described in the LAO publication: The 2026-27 growing to $805 million in 2029-30).
Budget: Overview of the Governor’s Budget), the
This brief (1) examines IHSS cost growth and
Governor’s 2026-27 budget also proposes three
the main cost drivers over the years, (2) describes
budget reductions in IHSS:
the Governor’s January 2026 proposals for
• A proposal to eliminate the IHSS Permanent IHSS, and (3) provides issues and questions
Back-up Provider Program (estimated to save for the Legislature to consider as it evaluates
$3.5 million in 2026-27 and on-going) the IHSS budget proposals and the overall
• A proposal to align IHSS eligibility time lines structural budget problem. We note that we are
with Medi-Cal (estimated to save $86 million in still working with the administration to better
2026-27 and on-going) understand key aspects of the Governor’s budget
• A proposal to remove the state’s share proposals for IHSS. As such, this brief includes
of cost associated with any growth in our best understanding of the proposals as of
IHSS hours per case starting next year March 16, 2026. As more information becomes
available, we will provide updates if necessary.
BACKGROUND
Overview of the IHSS Program. The IHSS IHSS Costs Split Between Federal
program provides personal care and domestic Government, State, and Counties. IHSS costs
services to low-income individuals to help them are shared by the federal government, state, and
remain safely in their own homes and communities. counties. Since IHSS primarily is delivered as
In order to qualify for IHSS, a recipient must be a Medi-Cal benefit, the federal share of cost is
aged, blind, or disabled, and be low income. determined by the Medicaid reimbursement rate,
In most cases recipients have income below the which typically is 50 percent. The state receives
level necessary to qualify for the Supplemental an enhanced federal reimbursement rate for many
Security Income/State Supplementary Payment IHSS recipients who receive services as a result
cash assistance program (for example, about of the Patient Protection and Affordable Care Act
$1,234 a month for an aged and/or disabled expansion (90 percent federal reimbursement
individual living independently in 2025-26). IHSS rate) and the Community First Choice Option
effectively functions as an entitlement program as waiver (56 percent federal reimbursement rate).
all individuals who meet these requirements are Overall, the effective federal reimbursement rate
eligible to receive IHSS services. IHSS recipients for IHSS is about 54 percent. The remaining
generally are eligible to receive up to 283 hours per nonfederal share of IHSS costs is covered by the
month of assistance with tasks such as bathing, state and counties. Historically, counties paid
dressing, housework, and meal preparation. Social 35 percent of the nonfederal share of IHSS service
workers employed by county welfare departments costs and 30 percent of the nonfederal share of
conduct an in-home assessment of an individual’s IHSS administrative costs. Beginning in 2012-13,
needs in order to determine the amount and type however, the historical county share-of-cost
of service hours to be provided. In most cases, the model was replaced with an IHSS county
recipient is responsible for hiring and supervising maintenance-of-effort (MOE), meaning county
a paid IHSS provider—oftentimes a family member costs reflect a set amount of nonfederal IHSS costs
or relative. The average number of service hours (that may be adjusted annually by a growth factor
that will be provided to an estimated 875,344 IHSS and a portion of locally negotiated wage increases)
recipients is projected to be 127 hours per month in as opposed to a certain percent of nonfederal IHSS
2026-27 (up from 125.1 in 2025-26). costs. The state is responsible for covering the
remaining nonfederal share of costs not covered by
the IHSS county MOE.
2 LEGISLATIVE ANALYST’S OFFICE
2026-27 BUDGET
State-Only IHSS for Some Recipients. While expanded over time to include individuals who are
the vast majority of IHSS recipients are eligible for not eligible for Medi-Cal due to their immigration
Medi-Cal and receive IHSS as a Medi-Cal benefit, status (enrollment in this population of noncitizens
the state also operates the IHSS-Residual program, has since been frozen as a budget solution in
which provides services to individuals not eligible 2025-26). Because the Residual program does not
for federally funded Medi-Cal benefits, but who receive federal financial participation, the Residual
meet all other IHSS eligibility criteria. Beginning program is funded with state General Fund only.
in 2016, the IHSS-Residual program was also
IHSS COSTS HAVE INCREASED OVER TIME
Given the structural budget problem, it is Costs of the Program Have Increased
important to better understand the main drivers of Significantly Since Fiscal Year 2001-02…
cost increases in the state’s major programs. In this Looking back over the last couple of decades,
section we provide some historical information on as seen in Figure 1, the IHSS program has
the primary drivers of cost growth in IHSS. Overall, experienced significant growth in total and
IHSS has three core cost drivers: caseload, cost General Fund costs.
per hour of care, and the average hours per case.
Figure 1
IHSS Cost Growth
(In Billions)
$40
35
$33.4 Billion Total Fundsª
30
25
$18.5
20
Federal Funds
15
10
$12.5
$2.4 Billion Total Funds
5 State Funds
$1.0
$0.9
County Funds $2.4
a Footnote. $0.5
2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16 2017-18 2019-20 2021-22 2023-24 2025-26 2026-27
a Estimated at 2026-27 Governors Budget.
IHSS = In-Home Supportive Services.
www.lao.ca.gov 3
2026-27 BUDGET
…And the Program Has Gone Through Many institutional care (such as nursing homes) towards
Historical Changes in That Time. Over this home based care (such as IHSS). For additional
same time period, as seen in Figure 2, the IHSS information on the history of the IHSS program,
program has gone through many significant policy please refer to the Department of Social Services
changes (both state and federal). Notably, there Website (Local Assistance Estimates for the
has been longstanding state and federal policy 2026-27 Governor’s Budget, Program History).
that encourages a shift away from a reliance on
Figure 2
Major In-Home Supportive Services (IHSS) Program Historical Changes
Caseload Expansions“
Reinstatement of Partial Medi-Cal Asset Limiti
Caseload Contractions Medi-Cal Expansion Freezej
Program Expansions Medi-Cal Asset Limit Full Elimination
Provider Wage and Benefit Changes Medi-Cal Expansion to Adults Regardless of Immigration Statush
State-County Cost Sharing Elimination of Minor Recipient Provider Eligibility Rules
Partial Medi-Cal Asset Limit Repealg
Medi-Cal Expansion to Older Adults Regardless of Immigration Statusf
Medi-Cal Expansion to Young Adults Regardless of Immigration Statuse
Medi-Cal Expansion to Children Regardless of Immigration Statusb
ACA
IHSS-CFCO
IHSS-Residual IHSS-PCSP IHSS Plus Option
1973 1983 1993 2003 2013 2023
1991 Realignment
Collective Bargaininga
Quality Insurance Monitoring
Provider Background Checks
County MOE Established
FLSAc
Minimum Wage Increased
County MOE Rebased
Paid Sick Leave
County MOE Rebased
Electronic Visit Verification
BUPS
CFCO Penalty
a
Required counties to act as or establish an employer of record for IHSS providers, for purposes of collective bargaining.
b
Children aged 19 and under.
c
Required that IHSS providers be compensated for overtime, travel time and wait time.
d
Required statewide minimum wage to increase to $15.00 per hour by 2022 and receive annual cost of living adjustments there after.
e
Young adults aged 19 to 25.
f
Older adults aged 50 and over.
g
Medi-Cal asset limit raised from $2,000 to $130,000 for individuals and from $3,000 to $195,000 for couples.
h
Adults aged 26 to 49.
i
Required the Medi-Cal asset limit be partially re-instated at $130,000 for individuals and $195,000 for couples.
j
Full-Scope Medi-Cal expansion enrollment freeze for those with unsatisfactory immigration status.
PCSP = Personal Care Services Program; CFCO = Community First Choice Option; MOE = Maintenance of Effort; ACA = Affordable Care Act;
FLSA = Fair Labor and Standards Act; and BUPS = Back-up Provider System.
4 LEGISLATIVE ANALYST’S OFFICE
2026-27 BUDGET
Primary Cost Driver: Caseload The Governor’s 2026-27 budget assumes the
caseload will continue growing at this faster rate,
One of the primary cost drivers in the IHSS
estimating a growth rate of 10 percent in 2025-26
program is caseload. When the number of people
and 8 percent in 2026-27.
in the program increases due to underlying
demographic changes or policy expansions, State Demographic Shifts Have Also
the cost of the program also increases. Below, Contributed to Increased Caseloads. While
we provide some background on the IHSS caseload policy changes at the state and federal level have
over time. increased the number of individuals eligible to
receive IHSS services, another factor contributing
IHSS Caseload Growth Rates Have
to the growing IHSS caseload has been the shift
Historically Been Variable. Although the
in state demographics. Specifically, according to
IHSS caseload has grown at a positive rate for
the U.S. Census American Community Survey,
all but two years, since 1991-92 (our first year of
from 2015 to 2024, the number of individuals
readily available data), the rate of that growth has
in the state aged 65 and over has increased
been variable. In 1991-92, the caseload grew at a
by 29 percent, while the overall population has
rate of 8.1 percent. The following year (1992-93),
increased by a little over 2 percent. Further,
the caseload growth dropped to 1.4 percent.
the number of Californians with a disability has
Over the next eight years, growth rates fluctuated
increased by 14 percent. More specifically,
between 3 percent and 8 percent, until reaching a
those 65 and over with a disability impacting
peak growth rate of 10.2 percent and 10.4 percent
independent living has increased by 17 percent.
in 2001-02 and 2002-03, respectively. Caseload
The share of IHSS recipients over age 65,
growth then hovered between 4.5 percent and
however, has remained a relatively consistent
8 percent for the next six years. However, following
share of the overall IHSS population.
the passage of several service reductions,
eligibility changes, and anti-fraud initiatives, the
IHSS caseload actually
declined year over year
by 0.2 percent in 2009-10 Figure 3
and declined again by
Actual and Projected IHSS Caseload Trends
0.02 percent in 2011-12.
Average Monthly Paid Caseload
Recent Caseload
Growth Has Matched
1,000,000
Historic Highs. As
900,000
seen in Figure 3, IHSS 2026-27 Governor’s Budget Projections
800,000
caseload has grown
significantly since 2013. 700,000
Despite slower caseload 600,000
Actuals
growth between 2016-17 500,000
and 2020-21 (the
400,000
caseload continued to
300,000
grow during this period,
200,000
just at a slower than
100,000
usual rate). As seen in
Figure 4 on the next
2013-14 2015-16 2017-18 2019-20 2021-22 2023-24 2025-26 2026-27
page, the IHSS caseload
growth rate has since
IHSS = In-Home Supportive Services.
grown at historic rates—
reaching a growth rate of
10.3 percent in 2024-25.
a Footnote.
www.lao.ca.gov 5
2026-27 BUDGET
Figure 4
Caseload Growth Rate and Key Caseload Related Policy Changes Over Time
Full-Scope Medi-Cal
Expansion Enrollment Freezea
12%
Continuous Coverageb Continuous Coverage
Unwinding Periodc Reinstatement of a Partial
Medi-Cal Assett Limit
10
Full-Scope Medi-Cal Expansion
a
to Individuals Aged 26-49
8
Begining of Medi-Cal
Full-Scope Medi-Cal Expansion Asset Limit Repeal Full Elimination of
to Individuals Aged 18 and Undera Medi-Cal Asset Limit
6
Elimination of Minor Recipient
Provider Eligibility Requirements
4
Full-Scope Medi-Cal Expansion Full-Scope Medi-Cal Expansion
2 to Individuals Aged 19-25a to Individuals Aged 50 and Overa
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26d 2026-27d
COVID-19
a
Refers to full-scope Medi-Cal expansion to individuals regardless of immigration status.
b
Refers to county Medi-Cal eligibility redeterminations that were temporarily paused in response to the COVID-19 public health emergency.
c
Refers to when Medi-Cal eligibility redeterminations resumed.
d
Assumes caseload growth rate in Governors 2026-27 budget.
Primary Cost Driver: since 2014. This growth in IHSS hourly wages is in
Cost Per Hour of Care part due to increases to the state minimum wage—
from $8 per hour on January 1, 2014 to $16.90 per
Another component of cost growth in IHSS
hour on January 1, 2026. Pursuant to current law,
is growth in the cost per hour of care. When the
the state minimum wage will continue to increase
cost of providing care increases, for example, due
by inflation annually (or 3.5 percent, whichever is
to increases in the minimum wage or overtime
lower). Additionally, counties may establish IHSS
compensation, the cost of the program also
hourly wages above the state minimum wage
increases. Below, we take a look at how the
through local wage ordinances or, more commonly,
average cost per hour of IHSS has changed
collectively bargained agreements. The state,
over time.
federal government, and counties share the cost of
Cost Per Hour Has Increased Alongside
IHSS wages above the minimum wage.
Minimum Wage Increases. The Governor’s
budget estimates that the cost per hour of IHSS Primary Cost Driver:
services will continue to increase from $21.85 in
Average IHSS Hours Per Case
2025-26 to $22.36 in 2026-27. The IHSS cost per
The next main cost driver in IHSS is the average
hour primarily includes wages but also includes
number of hours provided per case. As the number
other costs, such as benefits. However, as seen
of hours of service provided to IHSS recipients
in Figure 5, when we consider IHSS hourly wages
increases, so does the overall cost of the program.
separately, we see that the average growth rate
Below, we provide some information on how the
of hourly wages has been 5.6 percent annually
average hours per case have changed over time.
6 LEGISLATIVE ANALYST’S OFFICE
2026-27 BUDGET
Average Hours Per Case Have Steadily negotiated wage and benefit increases
Increased Over Time. As shown in Figure 6, the above the minimum wage).
average monthly IHSS paid hours per case has • Roughly 10 percent of the growth is due to
increased by roughly 2 percent annually since 2014. hours per case growth.
The 2026-27 budget projects the average monthly
We note that these growth components are our
number of IHSS hours per case to increase from
best estimates based on the data we have available
125.1 hours in 2025-26 to 127 hours in 2026-27.
at this time. Moreover, costs to administer the
We will discuss the growth in IHSS hours per case
program also make up a small component of the
in a later section of this brief.
growth listed above.
Taken Together, These Cost Drivers
Account for Much of
Figure 5
the Growth
Overall, IHSS Cost Statewide Average IHSS Hourly Wage Growtha
Growth Can Be Attributed
to Three Main Factors.
$25
IHSS costs can be largely
19.51
attributed to three primary 20 17.95 18.66
16.64
factors: caseload, cost per Average IHSS County Wage 15.98
14.93
13.71
hour, and hours per case. 15 12.54
Between 2019-20 and the 10.17 10.32 10.64 11.21 11.51
Governors 2026-27 budget 10 State Minimum Wageb
estimate, IHSS General
5
Fund costs are estimated to
grow by about 170 percent.
From approximately
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
$4.7 billion General Fund
a Reflects weighted statewide average of IHSS hourly wage in the month of January in each year.
(absent one-time federal
b Relfects state minimum wage as of January in each year.
funds used to offset General
IHSS = In-Home Supportive Services.
Fund during COVID-19) to
$12.6 billion General Fund
(absent the Governor’s Figure 6
proposed 2026-27 IHSS
IHSS Paid Hours Per Case
reductions). Based on the
Average Monthly Paid Hours Per Case
available data, we believe
that the primary growth
factors can roughly be 140
apportioned as follows:
120 Actuals
2026-27 Governor’s Budget Projections
• Roughly 50 percent of 100
the growth is due to
80
caseload growth.
60
• Roughly 40 percent
40
of the growth is due
to cost per hour 20
growth (including
the minimum wage 2014-15 2016-17 2018-19 2020-21 2022-23 2024-25 2026-27
increasing from $13 to
$16.90, and locally IHSS = In-Home Supportive Services.
www.lao.ca.gov 7
a Footnote.
2026-27 BUDGET
Difficult to Account for Interaction Effects. It component. For example, it is possible that higher
is important to note that some of these components IHSS wages increase IHSS program awareness and
may be interactive, making it difficult to conclusively therefore contribute to higher caseloads.
attribute a portion of the growth to one specific
IHSS MOE STRUCTURE
The factors outlined above account for much factor of 3.5 percent was applied beginning in
of the growth in the overall costs of IHSS. When 2014-15. Added to the MOE were any county
looking specifically at the General Fund, however, costs associated with local IHSS wage increases.
there is another structural factor that has also The state General Fund assumed the remaining
made it so that the above described increases are nonfederal IHSS costs. Over the five years in
borne more by the General Fund than they were which the 2012 IHSS MOE was in effect (2012-13
historically. In this section we outline the IHSS MOE to 2016-17), growth in the county IHSS MOE
and how it has resulted in an increasing share of was less than the growth in total IHSS costs,
IHSS program costs for the state. resulting in counties paying for a smaller share of
Establishment of IHSS MOE. Historically, the nonfederal IHSS costs and the state General
as established by the 1991-92 State-Local Fund paying for a greater share of nonfederal IHSS
Realignment legislation, counties paid 35 percent costs relative to the original cost-sharing ratios
of the nonfederal share of IHSS service costs established under 1991 realignment. Specifically,
and 30 percent of the nonfederal share of IHSS under the 2012 IHSS MOE, the state share of
administrative costs. However, as part of the IHSS nonfederal costs increased from 65 percent
Coordinated Care Initiative (CCI), the county share in 2011-12 ($1.7 billion) to roughly 76 percent in
of cost model—which required counties to pay a 2016-17 ($3.5 billion).
certain percent of nonfederal IHSS costs—was 2017 IHSS MOE. In January 2017, CCI was
replaced with an IHSS MOE—which required ended, effectively eliminating the 2012 MOE. In
county costs to reflect a set amount of nonfederal response to this elimination, a new county IHSS
IHSS costs (which would be adjusted annually by MOE was established in July 2017—referred to as
a growth factor and a portion of locally negotiated the 2017 IHSS MOE. Under the new 2017 IHSS
wage increases). Part of the impetus to switch to MOE, the counties’ share of IHSS costs were reset
a county MOE structure was to provide counties to roughly reflect the counties’ share of estimated
with fiscal relief as IHSS costs, largely outside of 2017-18 IHSS costs based on historical county
the counties’ control, continued to grow rapidly. cost-sharing ratios (35 percent of the nonfederal
Additionally, because CCI as envisioned shifted share of IHSS service costs and 30 percent of the
some program control from counties to the state, nonfederal share of IHSS administrative costs).
it was thought that counties should have less As a result of the MOE base being reset, the 2017
of a share of program costs going forward. For IHSS MOE significantly increased IHSS county
more information on Realignment, please see the costs relative to what county costs would have
nearby box. For information on the Coordinated been under the 2012 IHSS MOE. Specifically,
Care Initiative, please refer to our previous report total IHSS county costs increased by about
titled: The 2013-14 Budget: Coordinated Care $630 million in 2017-18 relative to 2016-17. The
Initiative Update. 2017 IHSS MOE also increased annually by (1) the
MOE Structure Has Changed Over Time, counties’ share of costs from locally negotiated
Beginning With 2012 MOE. As part of the 2012 wage increases and (2) an annual adjustment factor
IHSS MOE, beginning in 2012-13, all counties were (of as high as 7 percent). We note that when the
required to maintain their 2011-12 expenditure 2017 IHSS MOE was initially implemented, there
levels for IHSS, to which an annual growth was concern that 1991 realignment—the revenue
8 LEGISLATIVE ANALYST’S OFFICE
2026-27 BUDGET
What Is Realignment?
Realignments Typically Shift Responsibility, and Funding, From the State to the
Counties. Realignment refers to changes in program responsibility, both administrative and fiscal,
between the state and counties. Typically, realignments have shifted administrative responsibility
and resources from the state to counties.
1991 Realignment Adjusted County Responsibility for Health and Human Services (HHS)
Program Administration and Benefits. In 1991, the state enacted a major realignment package
that, among other things, increased counties’ share of cost in some programs—including
In-Home Supportive Services, while also reducing counties’ share of cost for administering other
major HHS programs. Counties were also given an increased share of state revenues to cover the
net increase in costs.
1991 Realignment Provided Additional Revenue to Help Pay for Increased HHS Costs.
As part of 1991 Realignment, the state dedicated certain revenue sources (specifically, a new
portion of the sales tax and vehicle license fee revenue) to help pay for increased HHS costs.
Over time, realignment revenues were intended to cover actual program costs associated with
the increase to counties’ share of cost under realignment. Under realignment, funding is allocated
across different accounts that support different programs. Statute specifies which accounts (and
therefore programs) should be prioritized for growth in realignment revenues and in what order.
For Realignments to Work Well, Several Principles Need to Be Met. Realignments are
intended to have long-term benefits for counties by providing (1) greater local flexibility over
programs and services based on local needs and (2) incentives to encourage counties to innovate
to achieve better program outcomes. Better program outcomes also benefit the state fiscally
because counties’ service improvements have the potential to reduce overall costs. Moreover,
with a share of cost, counties have an incentive to control program costs in areas over which they
have more control (like administration). To achieve these benefits, we believe realignments need to
follow certain core principles.
• Counties’ Share of Costs Reflect Their Ability to Control Costs in the Program. That
is, counties’ share of cost should reflect the extent of the discretion they have over how to
deliver services in the program. Programs in which the state (or federal government) set
specific requirements are not good candidates for counties to have a high share of cost.
• Revenues Generally Cover Costs Over Time. While realignment revenues will not cover all
county responsibilities in each year, in general, revenues should grow sufficiently to cover
county costs over time.
• Flexibility to Respond to Changing Needs and Requirements. Funding allocations
should be sufficiently flexible to allow counties to use funding where it is needed most.
• Funding Is Transparent and Understandable. The funding provided to counties should be
easily understandable and information about the use of funding should be readily available.
Modifications to 1991 Realignment Have Been Made Over Time. Over time, as programs
contained in 1991 realignment have changed, modifications have been made to the funding
structure as well. For IHSS specifically, the county share of cost in the program was replaced by
a set maintenance-of-effort. This was done in recognition of the fact that the IHSS program had
changed over time and that counties no longer had the same level of control over the program.
The modifications made to the counties share of program costs were made in an effort to better
align the IHSS program with the principles of realignment. Specifically, they helped to better align
the cost of the programs with counties available revenue and better matched counties’ costs with
their level of programmatic control. For more information on 1991 realignment please see our
analysis titled: Rethinking the 1991 Realignment.
www.lao.ca.gov 9
2026-27 BUDGET
source used to cover IHSS county MOE costs— also set to increase annually by (1) the counties’
would no longer be able to fully cover IHSS county share of costs from locally negotiated wage
costs in the long term. Consequently, the 2017-18 increases and (2) an annual adjustment factor
budget agreement required the Department of 4 percent.
of Finance (DOF) to review and report on the Under 2019 MOE, General Fund Costs Have
funding structure of 1991 realignment as part Significantly Outpaced Growth in County
of its January 2019 budget proposal. For more Costs. Between 2019-20 and 2024-25, the annual
information on the 2017 IHSS MOE, please refer to IHSS MOE growth factor has been less than
our 2018 post titled: Recent Changes to State and the year-to-year growth in total IHSS nonfederal
County IHSS Wage and Benefit Costs. costs. As a result, a greater share of nonfederal
2019 IHSS MOE. In 2019, DOF found that IHSS costs have been shifted from counties to the
1991 Realignment could no longer support the state. Specifically, as seen in Figure 8, under the
county costs of IHSS. As a result, in 2019-20, 2019 IHSS MOE, the state share of IHSS nonfederal
the 2017 MOE was eliminated and replaced with costs increased from 73 percent in 2019-20
the current IHSS MOE structure—referred to as ($4.3 billion) to 82 percent in 2024-25 ($10.3 billion).
the 2019 IHSS MOE. As seen in
Figure 7, the 2019 IHSS MOE Figure 7
reduced the base county costs
MOE Adjustments Over Time
in 2019-20 to roughly $1.6 billion,
2011 2017 2019
decreasing IHSS county costs by
roughly $300 million relative to Base county cost (in billions) $0.9 $1.8 $1.6
Annual inflation factor 3.5% As high as 7% 4.0%
2018-19. The 2019 IHSS MOE was
Figure 8
Share of Nonfederal IHSS Costs
90%
2011 MOE 2017 2019 MOE
MOE
80
70
State Share
60
50
40
County Share
30
20
10
2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16 2017-18 2019-20 2021-22 2023-24 2025-26a 2026-27a
a
Assumes cost estimates in Governor's 2026-27 budget.
MOE = Maintenance-of-Effort and IHSS = In-Home Supportive Services.
10 LEGISLATIVE ANALYST’S OFFICE
2026-27 BUDGET
Overall, the MOE Results in the State Bearing the historical share of cost model. Specifically, if
a Larger Share of Overall Cost Increases the historic share of cost model had remained, the
Compared to Share of Cost Model. As seen in estimated 2026-27 General Fund costs would be
Figure 9, under the MOE structure, the General $2.8 billion less and estimated county costs would
Fund has also taken a larger share of nonfederal be $2.8 billion more.
IHSS costs than would have been the case under
Figure 9
IHSS Nonfederal Cost Growth Under MOE Compared to Historical Cost Sharing Ratio
(In Billions)
$14 Under the
2011 MOE 2017 2019 MOE historic cost
MOE sharing ratio:
12
State Share MOE
State Share Historical General Fund
10 costs would
County Share MOE
be $2.8 billion
County Share Historical less...
8
6 ...and county
costs would
be $2.8 billion
more
4
2
2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16 2017-18 2019-20 2021-22 2023-24 2025-26a2026-27a
a
Assumes cost estimates in Governor's 2026-27 budget.
MOE = Maintenance-of-Effort and IHSS = In-Home Supportive Services.
www.lao.ca.gov 11
2026-27 BUDGET
GOVERNOR’S IHSS BUDGET PROPOSALS
RECOGNIZES CONTINUED Utilization of Back-Up Provider System Has
Fallen Below Expectations Since Inception.
GROWTH IN PRIMARY PROGRAM
As seen in Figure 10, the 2023-24 Budget Act
COST DRIVERS
appropriated a total of approximately $18.4 million
Budget’s Estimates of Caseload, Cost Per General Fund ($15.7 million for services, $2.7 million
Hour, and Hours Per Case Appear Reasonable. for administration) for BUPS. From October
As noted in the “Introduction” section, the 2022 through June 2024 (the most recent month
Governor’s budget estimates IHSS General Fund of available expenditures), less than $900,000 total
expenditures to increase by $1.1 billion (9.7 percent) funds had been spent on Back-Up Provider
between 2025-26 and 2026-27. This increase in services. Because utilization in 2023-24 was
costs is primarily driven by increases in each of the lower than expected, the 2024-25 Budget Act
programs three primary cost drivers—caseload appropriation was reduced to approximately
(8 percent), cost per hour (2.3 percent), and hours $8.6 million General Fund ($5.6 million for
per case (1.5 percent). Overall, we find that the services, $3 million for administration). However,
Governor’s budget estimates for these primary the Governor’s 2026-27 budget includes updated
cost drivers appear reasonable. We will continue to estimates that BUPS will cost $4.5 million General
monitor actual caseload, cost per case, and hours Fund in fiscal year 2025-26. Most of the funding in
per case data and provide updates, as needed, at 2025-26 is estimated to go towards administering
the May Revision. Below, we present the Governor’s the program ($4.2 million) rather than the services
three reduction proposals for the IHSS program and themselves ($298,000). It is our understanding from
provide issues and questions for the Legislature to the administration that the decreasing service costs
consider as it evaluates these proposals. reflect updated utilization estimates; however, we
are continuing to explore the reasons estimated
ELIMINATION OF PERMANENT administrative costs for the program remain
BACK-UP PROVIDER SYSTEM elevated relative to estimated service costs.
Governor’s Budget Proposes to Eliminate
Permanent Back-Up Provider System
State Back-Up Provider System. The Governor’s
(BUPS) Established in 2022-23 Budget. The
budget proposes to eliminate the BUPS program,
2021-22 budget included $5 million General Fund
resulting in an estimated $3.5 million General Fund
to create a permanent IHSS back-up provider
savings in fiscal year 2026-27 and ongoing.
system on January 1, 2022, contingent on a policy
framework being adopted in statute. However, a
policy framework for the BUPS program was not
Figure 10
adopted within the 2021-22 budget period, resulting
Back-up Provider System Allocations
in the initial $5 million allocation going unspent.
Over Time
The 2022-23 budget codified a policy framework
for BUPS. Under BUPS, a recipient whose regular (In Millions)
provider is not available, but who has an urgent
Services Administration Total
need or whose health and safety will be at risk
without a back-up provider, can receive up to 2023-24a $15.7 $2.7 $18.4
2024-25b 5.6 3.0 8.6
80 hours (if the recipient is non-severely impaired)
2025-26c 0.3 4.2 4.5
or 160 hours (if the recipient is severely impaired)
a 2023-24 Budget Act appropriation.
of back-up provider services per fiscal year. b 2024-25 Budget Act appropriation.
Additionally, back-up providers are paid $2 above c Estimate at 2026-27 Governor’s Budget.
the local IHSS hourly wage rate.
12 LEGISLATIVE ANALYST’S OFFICE
2026-27 BUDGET
Some Counties Had Local Back-Up Provider CONFORM IHSS-RESIDUAL
Programs Prior to Establishment of State
PROGRAM WITH MEDI-CAL
System. It is our understanding from speaking
COVERAGE
with county Public Authorities, that prior to the
establishment of the statewide BUPS program, IHSS-Residual Serves Individuals Not Eligible
multiple counties had established their own for Medi-Cal… As noted in the “Background”
local back-up provider programs—some of section of this brief, the vast majority of IHSS
which continued to run alongside the statewide recipients are eligible for Medi-Cal and receive
system. For example, the Los Angeles County IHSS as a Medi-Cal benefit—allowing the state to
Public Authority has and continues to run the draw down federal funds to offset state IHSS costs.
Back-Up Attendant Program (BUAP) alongside the However, the state also operates the IHSS-Residual
statewide BUPS program. While similar to BUPS, program, which provides services to individuals not
BUAP requires a recipient to have a minimum of eligible for federally funded Medi-Cal benefits, but
25 hours per week (BUPS has no minimum hour who meet all other IHSS eligibility criteria. Costs
requirement), requires providers to have additional for the IHSS-Residual program are fully covered
experience or certification compared to BUPS, and by the state. Currently, the vast majority of those
pays $3 above the local wage (BUPS pays $2 above who enter the IHSS-Residual program are either
the local wage). (1) individuals who are not eligible for Medi-Cal
due to their immigration status or (2) recipients
Key Questions for Legislative Consideration.
who were terminated from Medi-Cal due to
Given the current budget challenges, and
noncompliance (for example, failing to submit
the notable low utilization of the program, the
Medi-Cal re-determination paperwork).
Legislature may wish to consider the trade-offs
associated with this proposal. In doing so, the …However, IHSS Recipients Who Do Not
Legislature could ask the administration the Comply With Medi-Cal Eligibility Rules May
following questions: Be Treated Differently. The consequences for
IHSS recipients terminated from Medi-Cal due to
• What have been the main challenges that
Medi-Cal noncompliance currently varies. In some
have led to the lower-than-initially-expected
counties, these recipients may also be terminated
utilization of the program?
from IHSS because IHSS is a benefit of Medi-Cal.
• Is lower-than-expected utilization due to
In other counties, these individuals may fall into
challenges in finding available providers?
the IHSS-Residual program as a sort of “safety
Does the administration have information on
net” until they get their Medi-Cal reestablished.
how often a back-up provider is requested but
Whether a recipient is manually terminated from
not provided?
IHSS or is enrolled in the IHSS-Residual program is
• Are there ways to reduce the administrative entirely dependent on the practices in the county
costs? Could a more centralized model they reside in.
be considered?
• Some Cases Get Transferred to the
• Are there opportunities for the state to better
IHSS-Residual Program. If a recipient
support local county back-up programs?
terminated from Medi-Cal is not manually
• Last year, the administration indicated it was
terminated from IHSS the recipient is
going to work to educate and inform more
automatically enrolled into the IHSS-Residual
recipients of the program. Did that effort
program until the county worker updates
ever occur?
the case. While this means that a recipient’s
provider continues to receive service
payments in real time, the state General
Fund is responsible for covering all costs
and cannot draw down federal funds until
the recipient is reenrolled into Medi-Cal.
www.lao.ca.gov 13
2026-27 BUDGET
Currently, as we understand it, there is no program—allowing them to continue to receive
statutory limit to how long an IHSS recipient IHSS services through this state funded program—
may remain in the IHSS-Residual program. would no longer receive IHSS services once
Additionally, it is our understanding that terminated from Medi-Cal. Additionally, unlike
the state cannot retroactively draw down current practice, this proposal would ensure that
federal funds for payments made through the all recipients who are terminated form Medi-Cal
IHSS-Residual program during the recipient’s due to noncompliance would be treated the same
gap in Medi-Cal eligibility. regardless of the county in which they reside.
• Some Cases Are Manually Terminated This proposal would not impact recipients who
From IHSS. If an IHSS recipient terminated utilize the IHSS-Residual program due to their
from Medi-Cal is manually terminated from immigration status.
IHSS, the recipient needs to reinstate their Implementing This Proposal at the Same
Medi-Cal eligibility in order to receive paid Time as Upcoming Federal Changes May
services through the IHSS program again. Present Additional Challenges. Currently,
As a result, if a recipient’s provider continues Medi-Cal generally renews eligibility for
to provide care, they will not receive payments beneficiaries every 12 months. However, beginning
for services until the recipient reinstates in January 2027, as a part of the new federal
their Medi-Cal eligibility. Once the recipient requirements of H.R. 1, the state will be required
reinstates their Medi-Cal eligibility, they to renew eligibility every six months for recipients
are eligible to return to IHSS. Additionally, within the Medicaid expansion population under
if Medi-Cal eligibility is re-instated within the Patient Protection and Affordable Care Act
90 days of termination, the state can (ACA)—generally childless adults. The increased
retroactively draw down federal funds and pay frequency of redeterminations will increase the
IHSS providers for services provided during risk these IHSS recipients lose Medi-Cal coverage.
the gap in IHSS and Medi-Cal eligibility. Under the Governor’s proposal, these individuals
would also be automatically terminated from IHSS.
Administration’s Interpretation of
The Governor’s budget estimates the IHSS ACA
IHSS-Residual Eligibility Rules. Under
population to consist of roughly 42,000 average
current statute, individuals eligible for federally
monthly cases in 2025-26.
funded Medi-Cal benefits are ineligible for the
Governor’s Budget Assumes All Terminated
IHSS-Residual program. Only individuals not eligible
Cases Would Reinstate Medi-Cal and IHSS
for federally funded Medi-Cal benefits are eligible
Eligibility. Under the administration’s proposal,
to receive services through the IHSS-Residual
it is our understanding that recipients would be
program. The administration’s interpretation of
automatically reenrolled into IHSS if they reinstate
statute is that individuals who were once eligible
their Medi-Cal eligibility within 90 days. (Recipients
for federally funded Medi-Cal benefits, but were
would be manually reinstated into IHSS if they
terminated from Medi-Cal due to noncompliance,
reinstate their Medi-Cal eligibility after 90 days.)
are ineligible for the IHSS-Residual program.
The Governor’s budget assumes all recipients
Governor Proposes to Automate Termination
would be reinstated into Medi-Cal and IHSS
of IHSS Concurrent With Medi-Cal. As part
within 90 days of termination and assumes all
of the proposed 2026-27 budget, the Governor
recipients would continue to receive services
proposes to automate the IHSS termination
during the gap in eligibility and providers would
process for individuals who are terminated from
be retroactively reimbursed once the recipient is
Medi-Cal. This would ensure that recipients who
reenrolled into Medi-Cal and IHSS. As such, rather
are terminated from Medi-Cal due to Medi-Cal
than the state paying for all service costs through
noncompliance will be automatically terminated
the IHSS-Residual program, the administration
from IHSS and not be enrolled in the IHSS-Residual
estimates the state would be able to draw
program. As a result, some recipients who
down federal funds to cover a portion of these
may have been enrolled into the IHSS-Residual
14 LEGISLATIVE ANALYST’S OFFICE
2026-27 BUDGET
service costs. As a result, the Governor’s budget the Legislature may also want to decide to
includes $86 million net General Fund savings in weigh the trade-offs of providing additional
2026-27 and ongoing. funds to counties to mitigate disenrollments
Alternatives to Governor’s Proposal. related to H.R. 1 implementation. (The key
This proposal has been before the Legislature trade-off being what alternative solutions to
(and rejected) a number of times over the years. adopt in order to free up resources to support
As such, the Legislature may wish to consider the additional funding for counties.)
alternatives to the Governor’s proposal as well • Exclude Certain Populations From
as options that could mitigate the impacts of the Automatic Termination. Certain IHSS
proposal, were it adopted. It should be noted, recipients—for example, those with a high
however, that most of these alternatives would not level of authorized hours—may have greater
save as much as the Governor’s proposed change difficulty completing the administrative
(and may, in some cases, result in up-front costs). tasks required to remain in compliance with
Medi-Cal. Excluding this population from the
• Better Communication to Recipients.
Governor’s proposal may avoid adding undue
Currently, it is our understanding that
hardship on those who require IHSS services
when IHSS recipients receive Medi-Cal
the most and who would also likely have the
re-determination materials or a notice of
greatest difficulty re-enrolling into Medi-Cal
Medi-Cal termination, it may not be fully
should they be terminated.
understood that losing Medi-Cal eligibility
would also mean potentially losing IHSS • Allow for a Standardized Grace Period.
services. As such, providing a clear written Currently, when an individual is terminated
warning that any loss of Medi-Cal eligibility from Medi-Cal for noncompliance, they
could result in a loss of IHSS services may may be manually terminated from IHSS
decrease the number of IHSS recipients losing immediately, enrolled in IHSS-Residual for
Medi-Cal eligibility due to noncompliance. a period of time before being terminated
(This alternative could be adopted alone from IHSS, or allowed to remain in the
or alongside the Governor’s proposal to IHSS-Residual program indefinitely.
mitigate disenrollments.) An alternative to automatically terminating
all IHSS recipients when they lose Medi-Cal
• Provide Administrative Funding to Prevent
eligibility (as proposed by the Governor) could
Medi-Cal Disenrollments. By providing
be to allow all recipients who are terminated
county administrative staff with additional
from Medi-Cal for noncompliance to enroll in
resources, counties may be better positioned
IHSS-residual for a certain period of time (for
to assist and provide outreach to IHSS
example six months) before being terminated
recipients at risk of losing Medi-Cal eligibility.
from IHSS. This would allow recipients extra
This could prevent IHSS recipients from losing
time to re-enroll into Medi-Cal before being
Medi-Cal eligibility due to noncompliance.
terminated from IHSS. We note, however, that
Or, if an IHSS recipient has been terminated
this alternative would result in less savings
from Medi-Cal, increased resources could
than the Governor’s proposal, and could
allow county administrators to better assist
possibly result in no savings or additional
recipients in re-enrolling into Medi-Cal on
costs compared to the status quo. This is
a timely basis—increasing the chances of
because some counties currently terminate
retroactive payment and federal funding
IHSS recipients immediately and requiring
participation. (This proposal could be adopted
those counties to allow recipients to remain
alone or alongside the Governor’s proposal to
in the IHSS-Residual program for longer
mitigate disenrollments.) As we discuss in our
than they otherwise would have would
recent report, The 2026-27 Budget: County
result in those cases costing more than
Administration and H.R. 1 Administration,
is the case today.
www.lao.ca.gov 15
2026-27 BUDGET
Current Statute Is Not Clear on Whether Additional Issues for Consideration if
Recipients Terminated From Medi-Cal Legislature Adopts Governor’s Proposal.
Are Ineligible for IHSS-Residual Program. While the administration assumes all recipients
As previously mentioned, the administration would continue to receive services during
interprets current statute as rendering the gap in Medi-Cal and IHSS eligibility (and
recipients terminated from Medi-Cal ineligible providers would be retroactively reimbursed),
for the IHSS-Residual program. Despite the some recipients may experience a disruption in
administration’s interpretation, we understand care and not return to Medi-Cal and IHSS. Thus,
that counties may have a different understanding should the Legislature adopt some version of the
of the statute—leading to varying usage of the administration’s proposal, it may want to consider
IHSS-Residual program throughout the state. asking the administration to monitor and report
Specifically, current statute mentions that back on (1) how long it takes recipients to reinstate
individuals ineligible for federally funded Medi-Cal their Medi-Cal and IHSS eligibility, (2) the extent to
benefits are eligible for the IHSS-Residual program. which recipients experience a disruption in care,
If an individual is terminated from Medi-Cal due to and (3) the number of recipients who ultimately do
noncompliance, it can be reasonably understood to not return to Medi-Cal or IHSS. With that data, the
mean the individual is ineligible for federally funded Legislature could consider tailoring the policy in
Medi-Cal benefits. Consequently, it is unclear to the future in order to maintain services for eligible
us whether that individual could be eligible for the IHSS recipients.
IHSS-Residual program.
Legislature Should Consider Clarifying REMOVE STATE’S SHARE OF
Purpose of IHSS-Residual Program. If the COST IN IHSS HOURS PER
Legislature does not adopt the Governor’s
CASE GROWTH
proposal, it is likely that the current variance in
As noted at the start of this brief, the average
the usage of the IHSS-Residual program would
hours per case for IHSS has been steadily
continue. That is, some counties would continue
increasing for many years. This has been a factor
providing services through the IHSS-Residual
in the overall growth in program costs over time.
program even after Medi-Cal coverage is
Below, we present how counties assess IHSS
terminated, while some counties would continue
hours, what we know of the Governor’s proposal
to terminate recipients from IHSS to align with
to date, and potential alternatives and outstanding
their Medi-Cal status (similar to the Governor’s
questions for the administration.
proposal). This raises equity issues, as recipients
would be treated differently only based on the
How Are IHSS Hours Assessed Today?
county in which they live. The Legislature may want
What Is an IHSS Functional Index Ranking?
to consider what the role of the IHSS-Residual
When an IHSS social worker conducts an
program should be. Regardless of whether the
assessment, they rank the recipient’s impairment
Legislature adopts the proposed change, we
to perform activities of daily living on a six-point
recommend amending statute to clarify whether
scale known as the functional index (FI) ranking.
individuals ineligible for federally funded Medi-Cal
An FI ranking of 1 is the lowest impairment level
benefits due to Medi-Cal noncompliance are or
and notes that a recipient is independent and
are not eligible for the IHSS-Residual program.
able to perform a task without another person’s
Such clarification will increase the likelihood that
assistance. An FI ranking of 5 notes that a recipient
the policy is implemented consistently throughout
cannot perform a task with or without another
the state. Additionally, the Legislature may want to
person’s assistance and an FI ranking of 6 signifies
consider how long recipients would be permitted to
a recipient requires paramedical services (meaning
remain in the IHSS-Residual program and whether
that, in order to provide the service, a provider
recipients would be manually or automatically
must be trained and overseen by a licensed health
terminated from the IHSS-Residual program if
care professional). The weighted average of the
the recipient does not reinstate their Medi-Cal
FI rankings for each assessed task are then used
eligibility within the specified time frame.
16 LEGISLATIVE ANALYST’S OFFICE
2026-27 BUDGET
to create an overall FI score. For minor recipients, premade meals. In this case, the person with the
there is a separate age appropriate guidelines FI ranking of 4 may receive very similar hours for
tool where FI ranks are adjusted to reflect the age meal preparation as the person with an FI rank of 2.
at which a minor may be expected to complete a Exceptions may also be made to allow a recipient
task. For example, when assessing a minor below to live safely and independently in their own home.
the age of 14 for laundry services, rather than An example of an exception that may require more
assessing the recipient’s level of need based on the time than what is prescribed by the HTG is if a
regular six point FI scale, social workers assess an recipient has a dietary restriction that requires
FI ranking of 1 unless there is extraordinary need longer preparation times or more frequent meals.
above what would be required for a minor who Alternatively, if a recipient eats relatively simple
does not require IHSS services. This is because meals (for example toast and coffee for breakfast)
the age appropriate guidelines tool regards laundry they could receive below the minimum amount of
services provided for a minor aged 14 and under to time prescribed by the HTG.
be within the expected responsibilities of a parent Protective Supervision Increases Hours,
or guardian. but Not FI Scores. Some IHSS recipients are
What Are the Hourly Task Guidelines (HTG)? determined to require “protective supervision”
County social workers then use the Hourly Task to remain safely in their own homes. Protective
Guidelines to determine the amount of hours to supervision allows certain recipients to receive
authorize for each IHSS task. The time required the maximum amount of hours allowed to them
is determined based on the recipient’s FI ranking, (195 hours if non-severely impaired, 283 hours
as well as other considerations including the if severely impaired). To receive protective
recipient’s living environment. For FI rankings supervision, an IHSS recipient must be deemed
2 through 5, there is a range of hours that can be non-self-directing, meaning that because of their
allocated depending on the nature of the assistance mental impairment or mental illness, the recipient
needed. For example, the hours assigned for the does not understand what is dangerous, and may
task of meal preparation not only depend on the be more likely to perform dangerous actions that
severity of the recipient’s assessed impairment could cause them to get hurt. They must also be
but also the type of food the recipient usually eats; assessed to need 24-hour-a-day supervision to
whether those meals are pre-packaged, cooked, remain in their home safely and these needs must
or can be re-heated; and the frequency with which be certified by a medical professional. It should be
the recipient eats. Because of this, a recipient with noted that recipients determined to need protective
an FI ranking of 3 for meal preparation, for example, supervision do not receive an FI ranking for
may be authorized hours ranging from 3.3 to protective supervision. As such, while a recipient’s
7 hours per week. For an FI ranking of 6, a licensed overall FI score does not change whether or not
health care professional will indicate the amount of they are provided protective supervision services,
time necessary to perform the specific task. their hours would be quite different.
The HTG Allows for Flexibilities in Authorized
Hours. Further, there are service categories Figure 11
where different FI ranks may have overlapping
Hourly Task Guideline for Meal
ranges of hours under the HTG. For example, as
Preparation
seen in Figure 11, a recipient with an FI rank of 2
may be assigned a greater number of hours than Range of Hours
a recipient with an FI rank of 4 for certain tasks. Functional Index Ranking Low High
In this case, a recipient with an FI rank of 2 may be Rank 2 3.01 7.00
physically able to prepare their own meals but may Rank 3 3.30 7.00
move slowly and require constant prompting and Rank 4 5.15 7.00
Rank 5 7.00 7.00
encouragement, while a recipient with an FI rank
of 4 may rely totally on their caregiver to cook but
may be able to use a microwave and consume
www.lao.ca.gov 17
2026-27 BUDGET
Department of Social Services (DSS) Mechanics of Governor’s Proposal Remain
Conducts Quality Assurance Monitoring. DSS Unclear. Although the administration is clear that
works with counties to conduct quality assurance the concept of this proposal, at a high level, is to
monitoring. These tasks include, but are not shift the cost of increases in the average hours per
limited to, conducting home visits, reviewing Case case from the state to the counties, the mechanics
Management Information and Payrolling Systems of how this would actually work remain unclear to
data, and case reviews—including reviewing us at this time. In order to fully analyze the proposal,
FI rankings and HTG exceptions. The administration it will be necessary to receive further details from
has also noted that they have recently conducted a the administration. Below, we describe two main
statewide refresh training for all county staff on the ways such a shift has been described to us to date:
use of these assessment tools. We are working with
• Only Counties Above the Statewide
the administration to better understand this recent
Average Pay for Hour Growth. As described
quality assurance effort and the outcomes of the
in the trailer bill language released in
statewide refresh training.
February 2026, the administration’s proposal
There Is Variance in the Average Hours Per would require the administration to calculate a
Case by County. Although there are standardized statewide annual baseline level of authorized
tools and quality assurance measures in place,
hours per case. The language would then
there is variance in the average hours authorized
require any county with average authorized
per case. Average hours per case vary widely
hours above the baseline to pay 100 percent
throughout the state, estimated to range from a
of the nonfederal cost of any growth in
high of 170.7 hours per case in Mono County to
their average authorized hours. This would
a low of 86.6 hours per case in Trinity County in
mean that any growth in hours per case that
2025-26. There are many reasons why this could
occurs in the counties below the statewide
potentially be the case. For example, it remains
average baseline would still receive General
unclear if counties with higher average hours per
Fund support.
case also tend to have recipients with greater needs
• All Counties Share in the Cost of Growth
and higher average FI scores. Additionally, as noted
in Average Hours Per Case. After speaking
previously, demographics within the state continue
with the administration, however, we
to change. Recipient needs may be growing as the
understood their vision of the proposal to
population ages, and these changes may not be
differ from that described in the trailer bill. At a
happening equally across the state. The reason for
high level, based on that conversation, it is our
this variance is something we are currently working
understanding that the Governor’s proposal
with the administration to better understand.
would similarly require the administration,
each year, to calculate a statewide average
Governor’s Proposal
authorized IHSS hours per case baseline.
Governor Proposes to Shift Costs Associated
However, the costs associated with any
With Growth in IHSS Hours Per Case to
growth in statewide average authorized hours
Counties Beginning in 2027-28. As noted earlier
per case above this baseline would then be
in this brief, current growth in the hours per case is
shifted to all counties to pay in proportion
something that is paid for by the state and federal
to their share of the overall IHSS caseload.
governments. Counties currently do not experience
This means that all counties would be
added costs (above the annual 4 percent growth
required to pay a portion of this growth in
in county costs built into the county MOE) when
statewide average authorized hours per case,
hours per case grow. Beginning July 1, 2027,
regardless of whether the county has average
the Governor proposes to shift nonfederal costs
hours per case growth above the baseline
associated with any increase in average hours per
average or not.
case to the counties. The administration estimates
that this proposal would save approximately The administration recently informed us that it
$233 million General Fund in 2027-28 and grow to continues to work through the mechanics of how
over $800 million General Fund savings in 2029-30. this proposal would function. We will continue to
18 LEGISLATIVE ANALYST’S OFFICE
2026-27 BUDGET
work with the administration to clarify this proposal Mechanics of Governor’s Proposal Are
and will provide updated information as necessary. Important to Understand County Ability to
No Changes to HTGs or How Assessments Control Costs. Depending on how this proposal is
Are Conducted… Although the actual mechanics operationalized, counties will have differing levels
of how this proposal would be implemented are of control over their costs. For example, if the costs
unclear at this time, the administration has been associated with any growth in authorized hours per
clear that this proposal would have no impact on case is applied to all counties in proportion to their
the current hourly task guidelines or FI ranking share of the overall IHSS caseload, then counties
process. Moreover, it would not prohibit increases will have little to no control over their own costs.
in hours assessed as necessary by social workers. This is because the amount a county will pay under
this version of the proposal depends on a county’s
…Or the Existing MOE. The administration has
share of the IHSS caseload and not whether the
also been clear that this proposal would have no
county increased authorized hours. Meaning, a
impact on the current MOE structure. All costs that
change in an individual county’s average hours per
are shifted from the General Fund to the counties
case will have little impact on the amount their costs
in relation to this proposal would lie outside of
will grow. For example, under this interpretation
the established MOE agreement that is currently
of the proposal, a disproportionate share of the
in place.
cost (35.5 percent in 2025-26) would fall onto
Administration’s Rationale for Shifting
Los Angeles County, despite Los Angeles County
Costs to Counties. The administration has
having one of the lowest average authorized hours
provided several rationales for this proposal.
per case in the state (118.8 hours per case) and an
However, primarily the administration has made
average hours per case well below the statewide
one key point—because counties control and
average (125 hours per case). Further, a majority of
perform IHSS assessments, giving them a direct
the state’s IHSS caseload is concentrated amongst
fiscal responsibility for the growth in hours per
a small number counties, but these counties do not
case will incentivize counties to ensure accurate
necessarily have the highest average authorized
assessments. As context for this proposal,
hours per case.
the administration has noted that, since the
Alternatively, if the costs associated with the
establishment of the 2019 MOE, the state has been
growth in authorized hours per case is applied only
taking on an increasing share of nonfederal IHSS
to those counties above the statewide average
costs. This proposal would shift the cost of some of
hours per case, the proposal may better align
this growth back onto the counties. Below, we lay
with a county’s ability to control their own costs.
out some of our concerns for consideration.
This is because, particularly for those counties
Administration Has Not Assessed the Root
close to the statewide average hours per case
Cause of Variance in Hour Authorizations
baseline, counties able to shift their average hours
Across the State. The administration has noted
per case below the statewide average will not
that over the past several years, the statewide
have increased costs. That said, we are uncertain
average authorized hours per case has increased
of the level of control counties have to change
while the statewide average FI score has remained
their average authorized hours per case since
relatively flat. While we are working with the
they rely on standardized tools and assessment
administration to better understand the data
processes. Depending on how statewide average
being utilized to substantiate this claim, it remains
hours per case change in relation to this proposal,
unclear if the statewide average authorized hours
General Fund savings may differ than what the
per case is the best metric for determining whether
administration currently estimates.
IHSS hours are being accurately assessed by
the counties. Additionally, the growth rate for
hours per case has remained relatively steady over
time. As such, whether any particular state policy
changes have impacted the growth rate is unclear.
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Shifting These Costs to Counties Would • Evidence Around Average Hour Per
Not Fundamentally Change the Share of Case Increase. What evidence does the
Costs Borne by the Counties Compared to administration have that the average hours per
the State, but Would Erode Purpose of the case is growing faster than would be expected
MOE. As described in the “IHSS MOE Structure” or needed? Are there certain populations, for
section of this brief, over time, the state has been example, certain ages or certain tasks, such
taking on a larger share of nonfederal IHSS costs as protective supervision, that seem to have
compared to the counties. As was noted, however, the most growth?
the establishment of an MOE structure in IHSS • Has the Administration Considered Other
was in recognition of the counties previously Options to Address Hour Increases?
having a share of cost in the program that was Since the FI rankings and the HTGs are tools
determined to be too high compared to their level provided to counties by the state, the counties
of programmatic control. The MOE was meant to have limited control over how to apply them.
better align counties’ share of cost in the program Has the administration considered whether
with their level of programmatic control—a key the tools themselves (or the state’s oversight
feature of a successful realignment. Although of the tools) should be reevaluated?
the cost shift associated with this proposal is
• Does It Make Sense to Incrementally
significant for counties, it would not fundamentally
Increase County Costs Outside of the
change the overall share of cost borne by the
MOE? Or would it make more sense to take
counties compared to the state. Specifically, the
a more holistic view of how county and state
administration’s estimated $233 million in costs
shares of costs in the program have changed
being shifted from General Fund to the counites
over time? It has been nearly ten years since
in 2027-28 as a result of this proposal equates to
the most recent MOE was established. Is it
only 2 percent of the nonfederal share of IHSS
working as intended? Should adjustments
costs. Finally, making incremental adjustments to
be considered?
counties’ costs in the program, without impacting
• Are Counties Able to Absorb
the MOE, does raise questions about the purpose
Increased Costs With Current Level of
and value of the MOE.
1991 Realignment Revenues? As noted
Legislature Has Time to Evaluate Proposal
earlier, realignment works best when
Before Proposed 2027-28 Implementation.
counties’ revenue generally cover costs
The Governor’s proposal would not begin until
over time. The MOE that is currently in place
fiscal year 2027-28—meaning the 2026-27 budget
was an attempt to better meet this principle.
does not assume any savings from the proposal.
Has the administration worked with the
This gives the Legislature additional time to ask
counties to determine the level of increased
questions and gain clarity on this proposal before
costs counties would be able to bear with
making a decision. With this additional time, and
1991 realignment revenue? How would
given the fundamental questions that remain, we
an increase in county IHSS costs impact
suggest the Legislature ask the administration the
counties’ ability to fund other social services
following questions:
programs with realignment revenue?
• Mechanics of the Proposal. How would this
proposal be implemented? Would it impact all
counties or only counties above the statewide
average hours?
20 LEGISLATIVE ANALYST’S OFFICE
2026-27 BUDGET
OTHER IHSS UPDATES
Community First Choice Option (CFCO) However, if counties comply with the CFCO
Penalty Update. CFCO is a federal program reassessment requirements, they will not incur a
within IHSS that is aimed at serving those with the penalty and will therefore not have additional costs.
highest needs for assistance in their homes. The Timely CFCO Reassessments May Come
IHSS cases eligible for the CFCO program receive at the Expense of Other County Workload
the regular base Federal Medical Assistance Priorities. Currently, it is our understanding from
Percentage (FMAP) of 50 percent, plus an additional speaking with counties that the number of CFCO
enhanced FMAP of 6 percent (for a total FMAP of cases in noncompliance has decreased since the
56 percent). However, if counties do not conduct enactment of this policy, and as such, the cost to
timely, federally required reassessments of CFCO the counties, as a result of this policy, may be lower
recipients, those particular cases are no longer than the Governor’s budget estimates. However,
eligible to receive the additional 6 percent FMAP. it is also our understanding from speaking with
The cost of this lost 6 percent FMAP must then be counties, that potentially as a result of counites
reimbursed to the federal government. Since 2017, shifting workload to prioritize the reassessment
the cost of this lost 6 percent FMAP (also referred of CFCO cases, the number of applications that
to as the CFCO late penalty) has been paid for with take over 90 days to be processed has grown from
the General Fund and has grown over time—totaling 1,600 to 4,600 in the first six months of the CFCO
$63.2 million in 2023-24. penalty policy being in effect.
The 2025-26 Budget Act shifted half of the
cost of the CFCO late penalty to counties in
2025-26 (estimated in Governor’s budget to save
$40.5 million General Fund) and the full cost of
the CFCO late penalty beginning in 2026-27 and
ongoing. The Governor’s budget estimates the
savings to be $92 million General Fund in 2026-27.
www.lao.ca.gov 21
2026-27 BUDGET
22 LEGISLATIVE ANALYST’S OFFICE
2026-27 BUDGET
www.lao.ca.gov 23
2026-27 BUDGET
LAO PUBLICATIONS
This report was prepared by Juwan Trotter, 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.
24 LEGISLATIVE ANALYST’S OFFICE