BILL ANALYSIS Ó AB 85 Page 1 ( Without Reference to File ) CONCURRENCE IN SENATE AMENDMENTS AB 85 (Budget Committee) As Amended June 13, 2013 Majority vote. Budget Bill Appropriation Take Effect Immediately ----------------------------------------------------------------- |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 AB 85 Page 2 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 AB 85 Page 3 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 Counties. 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 costs. 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. AB 85 Page 4 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 funds. 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. AB 85 Page 5 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 section. 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 AB 85 Page 6 county contribution towards CalWORKs costs. 31)Establish short term and ongoing methods for transferring funding from the Health Subaccount to the Family Support Subaccount. 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 Finance. 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 Finance. 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 AB 85 Page 7 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 FN: 0001205