BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 85
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          (  Without Reference to File  )

          AB 85 (Budget Committee)
          As Amended  June 13, 2013
          Majority vote.  Budget Bill Appropriation Take Effect  
          |ASSEMBLY:  |     |(May 13, 2013)  |SENATE: |24-11|(June 15,      |
          |           |     |                |        |     |2013)          |
                    (vote not relevant)                
           Original Committee Reference:    BUDGET  

           SUMMARY  :  This is the 1991 Realignment/CalWORKs trailer bill,  
          containing statutory and technical changes necessary to  
          implement the Budget Act of 2013.  This bill also implements a  
          mechanism for counties to share savings, which result from  
          implementation of the federal Affordable Care Act (ACA), with  
          the state.  

           The Senate amendments  delete the Assembly version of this bill,  
          and instead:

          1)Create "option 1" for determining county savings as follows:   
            A formula that measures actual county health care costs and  
            revenues.  Revenues will include patient care revenues,  
            federal funds, health realignment dollars, and net county  
            contributions to health care services, which will be adjusted  
            to reflect historic growth rates.  The difference between  
            total revenues and total costs will determine the savings.   
            Because this mechanism is cost-based, it includes incentives  
            for cost containment and maximizing enrollment in coverage,  
            and also accounts for the remaining uninsured being served by  
            the county, consistent with today's level of service.  The  
            formula includes a cap on the amount of savings that will be  
            redirected based on the proportion of health realignment funds  
            historically used for indigent care, thereby allowing the  
            county to retain the full amount of realignment historically  
            spent on public health.  Under this option, the costs counties  
            incur for serving the remaining uninsured will have first  
            priority before any savings are collected.  To the degree that  
            federal reimbursement they receive for providing services to  


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            the uninsured or Medi-Cal beneficiaries declines, those costs  
            will be funded prior to any savings being redirected.  The  
            counties also will retain 20% of the savings.  Funding for  
            public health is preserved, as the state's share of savings is  
            limited to the funding spent on indigent health.

          2)Create "option 2" for determining county savings as follows:   
            60% of a county's health realignment allocation plus  
            maintenance-of-effort (MOE) will be captured as savings and  
            the county retains 40% of its realignment funding for public  
            health and to provide care to the remaining uninsured.

          3)Provide that the 12 counties operating designated public  
            hospitals (DPH) and the 12 non-DPH/non-CMSP (County Medical  
            Services Program) counties have the option to select either  
            option 1 or 2, described above and created through this bill,  
            to determine county savings.

          4)Provide for certain variations to option 1 specifically for  
            Los Angeles County (LA).  Authorize LA to calculate costs  
            based on actual total costs instead of actual Medi-Cal and  
            uninsured costs.  Specify that the maximum state redirection  
            for LA would be 82% of health realignment funds, rather than  
            based on a formula.  Calculate revenue based on all payors,  
            rather than Medi-Cal and uninsured revenue.  Include  
            additional variations specifically for LA.

          5)Provide that the 34 CMSP counties shall be subject to option  
            2, above, to determine county savings.

          6)Require that the $89 million that CMSP counties collectively  
            contribute annually to the CMSP Governing Board will be  
            redirected as savings, and the Governing Board will be  
            responsible for covering the remainder of the amount equal to  
            60% of the program's total realignment and MOE funding.

          7)Require that, beginning, January 1, 2014, and through June 30,  
            2014, counties, in the aggregate will redirect a pro rata  
            portion of their realignment funds up to $300 million.  Actual  
            savings will depend on the level of realignment revenues for  
            those counties operating under the 60/40 formula and on the  
            various factors used to determine costs and revenues for those  
            counties utilizing the mechanism described in option 1. 
          8)Authorize any county, if circumstances arise that affect a  


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            county's health care finances and are out of a county's  
            control, to request to change the mechanism by which savings  
            are determined.  

          9)Create the County Health Care Funding Resolution Committee to  
            hear requests to change mechanisms, as described above.   
            Stipulate that the Committee's members would be the Director  
            of Finance, the Director of Health Care Services, and a  
            representative from the California State Association of  

          10)Authorize the state, for counties that choose option 1, to  
            revise the 2013-14 estimates in May and, if at that point in  
            time, the savings are estimated to be lower than $300 million,  
            the money will be provided to the county for health care  

          11)Provide that future year savings for all counties will be  
            estimated in January and May, prior to the start of the year  
            based on the most recently available data.  Stipulate that for  
            all option 1 counties, a reconciliation will occur within two  
            years of the close of each fiscal year.  To the extent actual  
            savings differ from the initial estimates, funding will be  
            retroactively adjusted.  Require a true-up process for all  
            other counties to ensure that the percentages transferred to a  
            county's Health Subaccount has been sufficient.

          12)State that if the non-CMSP counties do not adopt a resolution  
            that confirms their approach, they will default to a 62.5/38.5  
            state-county sharing ratio.

          13)Provide a "true-up mechanism" for the counties that choose  
            the mechanism option rather than the 60/40. 

          14)Create, for 2013-14, a special holding account in the Family  
            Support Subaccount for the public hospital counties, which  
            essentially creates a short-term true up mechanism for them.  

          15)Provide a true-up for the counties that chose the 60/40  
            option rather than the mechanism.

          16)Require the Director of Finance, Department of Health Care  
            Services (DHCS), and the State Controller's Office to work  
            together to ensure legislation is implemented as the  
            Legislature intended.


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          17)Include intent language to review the funding formulas  
            established in Section 7 in the event that the federal  
            government enacts reforms to federal immigration laws that  
            create a pathway to citizenship for otherwise undocumented  
            persons, and that pathway does not provide for enhanced  
            federal funding.  Require the DHCS to analyze the potential  
            impacts of such a change on county health care expenditures,  
            and report this information to the applicable fiscal and  
            policy committees.

          18)Provide for the CalWORKs 5% grant increase in 2013-14,  
            effective March 1, 2014, and describes the process for  
            providing future grant increases.  The estimated cost for this  
            increase is approximately $50 million, with annualized cost of  
            approximately $150 million, depending on caseload changes.

          19)Specify that the grant increases will be funded through the  
            new Child Poverty and Family Supplemental Support Subaccount,  
            which consists of redirected 1991 Realignment general growth  

          20)Require the Director of Finance to annually, as part of the  
            January 10 and May 14 Budget process, determine both the cost  
            of continuing to provide the previously implemented grant  
            increases pursuant to this process and comparing that to the  
            amount of revenue projected to be in the Child Poverty and  
            Family Supplemental Support Subaccount for the current and  
            budget year.  

          21)Prescribe that if the Child Poverty and Family Supplemental  
            Support Subaccount is projected to have more funds than are  
            needed to cover the previously implemented grant increase  
            costs, adjusted for caseload, then a calculation will be done  
            to determine the additional grant increase percentage that can  
            be afforded for the following fiscal year. 

          22)Specify that to the extent it is determined that a new grant  
            increase can be afforded, that grant increase would be  
            effective the upcoming October 1, starting October 1, 2014.   
            The final projections depend on the level of revenues adopted  
            in the Budget Act.  Upon enactment of the Budget, the Director  
            of Finance will provide legislative notification regarding the  
            grant increase level.


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          23)Specify that previously implemented grant increases will not  
            be adjusted downward if it is projected that revenues in the  
            Child Poverty and Family Supplemental Support Subaccount are  
            not sufficient to cover the entire cost of the grant  
            increases.  In these situations, current General Fund  
            provisional authority will be used to ensure grants are  
            funded.  Additional grant increases pursuant to this mechanism  
            will not be provided until and unless the ongoing cumulative  
            costs of all prior grant increases provided by this process  
            are fully supported by the Child Poverty and Family  
            Supplemental Support Subaccount.  

          24)Sunset, as part of the changes to 1991 Realignment, current  
            accounts within the Local Revenue Fund and establishes new  
            accounts within the Local Revenue Fund effective July 1, 2013.  

          25)Establish the Family Support Subaccount and the Child Poverty  
            and Family Supplemental Support Subaccount at the state level  
            and establish the family support account at the local level.

          26)Move, for 2013-14, $1 billion in sales tax from the Social  
            Services Subaccount to the Health Subaccount. 

          27)Establish the ongoing structure, which adds the Child Poverty  
            and Family Supplemental Support Subaccount as an account that  
            receives base funding from the sales tax account, and  
            otherwise the structure is the same as current.  

          28)Apply language that exists for the CalWORKs Maintenance of  
            Effort (MOE) Subaccount that prevents locals from reallocating  
            up to 10% of the fund among other accounts to the family  
            support account, and places both pieces of law into the same  

          29)Allocate, pursuant to a schedule developed by the Director of  
            Finance, moneys from the Child Poverty and Family Supplemental  
            Support Subaccount (state level), to the family support  
            account (local level).  All funds that are allocated shall be  
            used for grant increases.  Any funds not allocated will remain  
            at the state level, and will be available for allocation in  
            the following year.

          30)Direct the Controller to move money monthly to the family  
            support account to be used by counties to pay an increased  


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            county contribution towards CalWORKs costs.

          31)Establish short term and ongoing methods for transferring  
            funding from the Health Subaccount to the Family Support  

          32)Require the Controller to account for the Sales Tax swap when  
            distributing Vehicle License Fee revenue.

          33)Establish how the general growth in the sales tax account is  
            allocated among a) mental health (same as current law), b)  
            health (18.4545%), and c) the new Family Supplemental Support  
            Subaccount (the remainder).  There is no General Growth for  
            social services.

          34)Require that funds deposited in the family support account  
            may only be used to pay an increased contribution towards  
            CalWORKs as the funds were allocated by the Director of  

          35)Require that funds deposited in the family support account  
            may only be used to pay an increased contribution towards  
            CalWORKs as the funds were allocated by the Director of  
          36)Contain an appropriation allowing this bill to take effect  
            immediately upon enactment. 

           COMMENT  :  This bill is a budget trailer bill within the overall  
          2013-14 budget package to implement actions taken affecting the  
          Department of Health Care Services, and related to the  
          implementation of federal health care reform.

          For background, the Local Revenue Fund under 1991 realignment  
          provides a dedicated funding source to 1) help pay county  
          contributions toward various social service and health programs  
          (Foster care, Adoptions Assistance, Child Welfare Services,  
          In-Home Supportive Services (IHSS), CalWORKs, and California  
          Children's Services), termed the Social Services subaccount  
          programs, and 2) support county indigent health, public health,  
          and mental health programs.  The Local Revenue Fund receives  
          both sales tax and vehicle license fee revenue.  Current law  
          establishes a process by which annual growth in these revenues  
          are allocated amongst the various programs supported by 1991  
          Realignment.  First call on revenue growth is to fund the  


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          increases in program costs experienced in the prior year for the  
          Social Services subaccount programs.  These allocations are  
          known as Caseload Subaccount allocations.  Remaining funds,  
          termed "General Growth" are then allocated to all of the 1991  
          Realignment programs based on historical formulas, with indigent  
          and public health (collectively) and mental health receiving  
          roughly equal shares and the Social Service subaccount programs  
          receiving a significantly smaller amount.   

           Analysis prepared by  :    Andrea Margolis and Nicole Vazquez /  
          BUDGET / (916) 319-2099

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