BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 564 (Portantino) Hearing Date: 8/27/2009 Amended: 7/23/2009 Consultant: Katie Johnson Policy Vote: Health 7-2 _________________________________________________________________ ____ BILL SUMMARY: AB 564 would limit the maximum amount of public funds in the Substance Abuse Treatment Trust Fund that may be used for compensation of a director, officer or employee of a non-profit entity that provides substance abuse treatment in California to the salary limitations established by the federal government. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2009-10 2010-11 2011-12 Fund Counties' administrative minor and absorbable General costs _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED. Existing law provides for the licensure of substance abuse treatment programs by the Department of Alcohol and Drug Programs (DADP). Existing law, Proposition 36, establishes the Substance Abuse and Crime Prevention Act of 2000. It requires that non-violent drug possession offenders and parolees receive drug treatment in lieu of incarceration. It also establishes the Substance Abuse Treatment Trust Fund, which requires the transfer of money from the General Fund commencing in FY 2000-2001 and ending in 2005-2006 for allocation to counties through a specified distribution formula. The program received General Fund transfers of $60 million in start-up funding in FY 2000-2001, and $120 million annually from FY 2001-2002 through FY 2005-2006. In the following years, the Legislature appropriated $120 million in FY 2006-2007, $100 million in FY 2007-2008, and $90 million in 2008-2009. There is not an appropriation for this program in the FY 2009-2010 budget. Funds are used by counties to provide drug treatment programs, vocational training, and family counseling, among other programs. This bill would limit the maximum amount of public funds in the Substance Abuse Treatment Trust Fund that may be used for compensation of a director, officer or employee of a non-profit entity that provides substance abuse treatment in California to the salary limitations established by the federal government on grant awards from the federal Substance Abuse and Mental Health Services Administration (SAMHSA). The federal salary cap limitations are imposed for FFY 2009 by the Omnibus Appropriations Act, 2009 Public Law 111-8. Executive salary is limited to an amount that is no greater than Executive Level I of the Federal Executive Pay Scale. Effective January 1, 2009, Page 2 AB 564 (Portantino) that annual salary is $196,700. If a California-based substance abuse treatment program receives SAMHSA grants, it would already be subject to similar provisions under federal law. This bill would prohibit the use of public funds for compensation for any director, officer, or employee who collects rent from a substance abuse treatment facility unless that person certifices that he or she is in compliance with the federal Office of Management and Budget Circular A-122, which relates to cost principles for non-profit organizations. Since DADP performs audits of substance abuse treatment programs only upon request, it does not regularly audit all facilities. DADP would need an office technician to initially contact each substance abuse treatment program to obtain salary information. Since DADP does not track the non-profit status of substance abuse treatment programs, it would need to contact all programs licensed in the state. Additionally, the department would likely need half an analyst position permanently to evaluate data and produce reports. There are 900 substance abuse treatment programs licensed by the department. Costs to DADP would be approximately $100,000 in FY 2009-2010, $220,000 in FY 2010-2011, and $50,000 ongoing from the Substance Abuse Treatment and Prevention Fund, which receives its monies from the General Fund, federal SAMHSA grants, and federal funds. Additionally, there would be unknown database start-up and maintenance costs. The author's proposed amendments would require that the restriction on executive payment of any corporation, both for-profit and not-for-profit, providing substance abuse treatment in the state, as provided by this bill, be included as a term of all contracts entered into in the state to provide drug treatment services when using public funds to provide treatment. This amendment would eliminate the need for DADP to survey all substance abuse treatment programs in the state and would reduce costs accordingly. The effect of this bill would be minor and absorbable for counties since most of them currently include this type of provision in their substance abuse treatment program contracts.