BILL ANALYSIS Ó
AB 122
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CONCURRENCE IN SENATE AMENDMENTS
AB 122 (Blumenfield)
As Amended June 8, 2011
Majority vote. Budget Bill Appropriation Takes Effect Immediately
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|ASSEMBLY: | |(February 22, |SENATE: |26-4 |(June 11, 2011) |
| | |2011) | | | |
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(vote not relevant)
SUMMARY : This supplemental appropriations bill (deficiency bill)
appropriates $1.2 billion from the General Fund (GF) to the State
Controller for allocation to the Department of Corrections and
Rehabilitation (CDCR) ($1.15 billion), the Department of Mental
Health (DMH) ($50 million), CAL FIRE ($12,600), the Department of
Finance (DOF) ($145,000), and $1.1 million for Mariposa, Modoc and
Shasta Counties for homicide trial reimbursement.
FISCAL EFFECT : Appropriates $1,215,451 (GF) to the State Controller
for allocation to specified departments for what are supposed to be
unanticipated expenses.
This appropriation is factored into current May Revision budget
figures. Any unencumbered funds as of June 30, 2011 revert to the
GF.
COMMENTS:
1)Rationale . This bill contains funding necessary to address
deficiencies in the 2009 and 2010 Budget Acts. These funds have
already been spent. The proposed funding in this measure has been
approved by DOF and the Joint Legislative Budget Committee.
2)Deficiency Descriptions .
a) CDCR .
i) $643,400,000 for the California Prison Health Care
Services Receiver for savings erosion scored in the 2010
Budget Act.
The 2010 Budget Act reduced the CDCR budget for the Receiver
by $820 million. The Receiver achieved only $94 million of
the $820 million target, and the proposed 2011 Budget Act
reduces the current year medical services budget by 5%, which
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results in a deficiency of $643,400,000.
What would have been an ongoing reduction of $820 million has
also been restored in the 2011 Budget Act, with a 10% percent
reduction to the base medical budget.
The Receivership cites its federal court mandate to provide
constitutionally adequate health care to all inmates as
rationale for its inability to significantly reduce costs.
As the level of health care increases within the institutions
as a result of the receivership, more health issues are
identified. To address these issues, the receivership has
increasingly relied on outside contractors, such as hospitals
for inpatient and outpatient care, specialty care physicians
and laboratories.
According to the receiver, ongoing reforms will help hold
medical costs in check. The receiver contends that
implementation of various reforms, including a utilization
management system, a third-party administrator to pay medical
invoices to reduce the number of incorrectly paid claims, as
well as penalties for delayed payments, will reduce referrals
to outside providers and reduce state costs.
ii) $414,900,000 for "unanticipated costs" from the 2009 and
2010 Budget Acts .
(1) $25,676,000 for "unanticipated costs" from the
2009 Budget Act . Running out of cash in June 2010 due to
unanticipated but structural deficiency costs, such as
legal costs, overtime, medical guarding, workers
compensation, lump sum retirement payments, and struggling
to make payroll, CDCR stopped paying some vendors and
ultimately used its Revolving Fund to pay vendors and
contracts.
(2) $389,224234 for "unanticipated costs" from the
2010 Budget Act , as CDCR's structural deficiency continued
to mount. Last year CDCR also opted to use the Victim
Compensation and Government Claims Board process for what
amounted to deficiency appropriations, which merely
delayed the deficiency settle-up.
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CDCR contends significant "budget trueing" augmentations
in the 2011 Budget Act, combined with decreased
expenditures, including hiring freezes, administration
cuts, program reductions, and contract savings, should
eliminate its structural deficiency.
According to DOF, "The Department has made every effort to
control expenses while following proper safety and
security measures, complying with court mandates and
working closely with programs and institutions. The
Department cannot avoid these costs given they are related
to mandatory security coverage and/or unforeseeable
expenses (such as overtime and worker's compensation).
The CDCR is unable to absorb these costs within its
existing appropriation."
iii) $93,259,000 for what CDCR calls unanticipated inmate
population-related costs , primarily related to a "reversal of
savings estimates." (This in addition to a $200 million
augmentation to the 2010 Budget Act for unachieved savings.)
The delineation of these costs is somewhat murky; it does not
appear the $30 million attributed to contract facility costs
or the $50 million attributed to changes in parole caseload
were either unanticipated or emergency costs. Nevertheless,
DOF contends CDCR cannot absorb a reduction of this
magnitude, and that delaying or denying this appropriation
will only further contribute to the CDCR structural
deficiency DOF is attempting to eliminate.
b) DMH - $50,000,000 for unanticipated population workload
costs , including rollover of a $24 million 2009-10 shortfall,
increased overtime to cover vacancies and furloughs and to
implement safety and security measures, and increases in state
hospital admissions.
According to DOF, DMH has taken significant steps to control
state hospital costs, including limiting training and travel to
essential activities, strictly monitoring overtime, limiting
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equipment and supply purchases, capping contract costs, and
limiting reimbursement rates to Medicare fee schedules.
c) CAL FIRE - $12,600,000 for increased Unemployment Insurance
(UI) payments . State departments are responsible for payment
of standard UI claims and a portion of the recent UI
extensions. CAL FIRE hires approximately 2,600 seasonal
firefighters to work during high risk months. Although CAL
FIRE's budget includes funding for standard UI claims, CAL FIRE
is experiencing increased UI payments because of the recent UI
extensions, the downturn in the state's economy, and the
inability of seasonal firefighters to find work during
off-months.
According to DOF, CAL FIRE's only alternative to this
deficiency would be to halt seasonal firefighter staffing for
the remainder of the fiscal year and/or release seasonal
firefighters until next fiscal year, which would create greater
pressure on local governments and private resources - at a
higher cost. In addition, releasing seasonal firefighters
would increase UI costs.
d) Reimbursement to counties for homicide trial costs -
$1,147,000 .
i) $1,090,000 to Shasta County for the trial of Curtis
Taylor and Beau Gray, and the trial of Scott Varner.
ii) $53,000 to Modoc County for the trials of Christopher
Bradbury and Robert Chad Haralson.
iii) $3,800 to Mariposa County for records storage fees
related to the Cary Stayner trial.
Government Code 15202 and 15202.1 stipulate a county may apply
for reimbursement of costs in excess of the amount of derived
by the county from a tax of 0.0125 of 1% of the full value of
property assessed for purposes of taxation within the county.
Eligible costs are defined as all costs, except normal salaries
and expenses, incurred in connection with bringing the
defendant(s) to trial, including the trial itself, including
extraordinary expenses such as witness fees, court reporter
fees, and costs in preparing transcripts. Trial costs include
pretrial, hearing, and postconviction proceedings.
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e) DOF - $145,000 to reimburse its EdFund transaction financial
advisor . In April 2009, DOF contracted with FBR Capital
Markets to serve as financial advisor to determine the value of
EdFund and to assist in the transition to a new federal
guarantor, pursuant to the Federal Family Education Loan
Program. The contract stipulated FBR would be paid an amount
determined by the amount of the final transaction, payable at
the close of the transaction, from the proceeds the state
received from the successor guarantor.
In August, 2010, however, the U.S. Department of Education
intervened, negating the transaction. As a result FBR was due
only direct expenses, capped at $250,000. The expense became
an unanticipated GF cost once the EdFund transaction was
cancelled.
3)Prior Legislation . SB 849 (Ducheny), Chapter 628, Statutes of
2010, appropriated $654 million ($517 million for CDCR medical
care, $131 million for Department of Developmental Services, $5.4
million for CAL FIRE, $5.9 million for homicide trial
reimbursement) to address 2009 Budget Act deficiencies.
Analysis Prepared by : Geoff Long / APPR. / (916) 319-2081FN:
0001284