BILL ANALYSIS
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THIRD READING
Bill No: AB 10XXX
Author: Evans (D)
Amended: 6/29/09 in Senate
Vote: 21
WITHOUT REFERENCE TO COMMITTEE
ASSEMBLY FLOOR : Not relevant
SUBJECT : Budget Act of 2009: Revision
SOURCE : Author
DIGEST : Senate Floor Amendments of 6/29/09 delete the
prior version of the bill amending the Mental Health
Services Act, an initiative measure enacted by the voters
as Proposition 63 in 2004 and which requires a vote of the
people. This bill now makes the necessary modifications to
the 2009 Budget Act [SB 1 (Ducheny), Chapter 1, Statutes of
2009-10, Third Extraordinary Session]. This bill amends
the Budget Act in order to address the budget gap for the
2009-10 fiscal year.
ANALYSIS : Some of the significant reductions that are
reflected in these amendments are listed below by major
subject matter area. Statutory changes needed to activate
some of these reductions are typically in one of the
several Budget trailer bills.
I. K-12 Education . This bill and ensuing trailer bills
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make the following adjustments to K-12 education
funding:
A. Revenue Limit Reductions . Cuts revenue limit
apportionments for local educational agencies (LEAs)
by approximately $1.9 billion, including commensurate
categorical reductions for basic aid school
districts.
B. Revenue Limit Deferral Savings . Achieves savings
by shifting $1.7 billion in revenue limit payments to
LEAs from 2009-10 to 2010-11.
C. Transportation Restorations . Eliminates special
funds for student transportation programs, but
provides the following restorations:
1. Approximately $496 million in Proposition 98
funding for the Home-to-School Transportation
program - an augmentation of $281 million. This
leaves a reduction of approximately 20 percent,
which is in line with reductions for other
categorical programs.
2. $3.9 million in federal special education
funds to fully restore transportation services at
the State Special Schools.
D. Federal Funds . Authorizes a significant increase
in federal funds in 2009-10 - primarily new,
one-time, funds authorized under the American
Recovery and Reinvestment Act (ARRA), including:
1. Approximately $548 million in anticipated
ARRA Stabilization Funds to backfill K-12 revenue
limit reductions and related categorical
reductions for Basic Aid Districts.
2. $634 million in anticipated ARRA Individuals
with Disabilities Education Act (IDEA) funds for
students with disabilities.
3. $540 million in anticipated ARRA Title I
Basic Grants for low-income students.
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4. $165 million in available Title I Set-Aside
funds - including new ARRA funds - to be allocated
to LEAs using Title I student counts.
5. $403 million in anticipated ARRA School
Improvement Grant funds that are set aside
pursuant to legislation.
E. Child Care
1. Fully funds Stage 2 and Stage 3 child care
services.
2. Adds $15.5 million from Federal ARRA funds
for additional child care slots for low-income
families.
3. Eliminates the Extended Day Care Program,
which is redundant of the Prop 49 After-School
Education & Safety program, effective September 1,
2009.
4. Denies Governor's proposal to increase
family fees and decrease reimbursement rates for
child care providers.
II. Higher Education
A. Community Colleges
1. Reduces funding by approximately $700
million for community colleges consistent with the
Proposition 98 minimum funding guarantee and the
funding levels proposed by the Governor in the May
Revise.
2. Provides smaller reductions to priority
categorical programs, and places many (but not
all) categorical programs into a flexible pot.
Provides community colleges with some flexibility
to achieve savings.
3. Increases student fees by $6 per unit (to
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$26 per unit), consistent with pre-2007 levels.
The additional fee revenue provides community
colleges with $80 million in funds to offset
necessary reductions. However, no reduction is
made in the area of financial aid administration,
ensuring that there are resources for students to
find financial assistance.
4. Provides community colleges with $130
million in federal economic stimulus funds to
offset cuts.
B. University of California (UC)/California State
University (CSU)
1. Total reductions of $266 million to each
segment (total of $532 million) in 2009-10 are
equal to the Governor's May Revise proposal, but
unlike the Governor's proposal, cuts are equalized
between UC and CSU. Of these total reductions -
$1.97 billion over two years - approximately $1.7
billion will be offset by federal economic
stimulus funds.
2. Does not eliminate funding for academic
preparation as proposed by the Governor, but
rather achieves savings through unallocated
reductions.
C. Hasting College of the Law . Rather than eliminate
all funding for Hastings, the conference committee
adopted a 10 percent reduction.
D. Student Financial Aid
1. Does not eliminate the Cal Grant Financial
Aid Program.
2. Achieves substantial savings by transferring
$32 million in excess funds in the Student Loan
Operating Fund to the General Fund to offset Cal
Grant costs.
3. Makes reductions to the Cal Grant Program,
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but makes cuts effective for 2010-11. Reductions
include freezing the income eligibility level at
the current thresholds for Cal Grant A recipients
for one year and reducing the maximum awards for
students attending private colleges.
III. Health
A. Healthy Families . Rejects elimination of the
program, but achieves substantial savings of
approximately $70 million, by establishing a waiting
list for enrollment unless third-party philanthropic
organizations, donations, or other sources, become
available to continue enrollment of children
throughout the year.
B. Medi-Cal . Does not adopt the Governor's proposals
to eliminate Adult Day Health Care, state-only
programs, clinic programs, services for legal
immigrants, or recent family planning rate increases.
1. Reduces by about $2.8 billion General Fund
(GF) to reflect receipt of enhanced federal funds
as provided under ARRA.
2. Assumes receipt of $1 billion in federal
funds for repayment to California for expenditures
made within the Medi-Cal Program which should have
been funded by the federal government, including
expenditures which should be have provided under
the federal Medicare Program.
3. Adopts the Governor's unallocated reduction
of $323.3 million GF.
4. Reduces by $22.5 million GF by requiring
pharmacies to bill Medi-Cal at a rate that is
comparable to private third-party payers, as
specified in trailer bill language.
5. Reduces by $37 million GF by making changes
in the Medi-Cal reimbursement made to pharmacies
as it pertains to the estimated acquisition cost
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of drugs.
6. Reduces payments to hospitals by sweeping
the Distressed Hospital Fund for a savings of $23
million GF.
7. Reduces Adult Day Health Care coverage to
three days per week and related changes, for a
savings of $26.8 million GF.
8. Suspends cost-of-living increases effective
August 1, 2009, for skilled nursing facilities and
other long-term care for a General Fund savings of
$75.8 million in 2009-10.
9. Reduces by $14 million GF to reflect the
elimination of the state-only payment for
ancillary health services provided in Institutions
for Mental Disease.
C. Other Health Programs
1. Maternal and Child Health . Rather than
total elimination of the various programs and
services offered, a reduction of $11.5 million was
adopted.
2. Community-Based Clinics . Rather than total
elimination as proposed by the administration, the
conference committee (a) reduced Rural Health
Services by $2.2 million, (b) reduced Seasonal
Migratory Worker services by $1.9 million, and (c)
reduced Expanded Access to Primary Care Clinics by
$8.4 million (total funds).
3. HIV/AIDS . Rather than total elimination of
these programs, a reduction of $33.5 million was
adopted without jeopardizing federal Ryan White
funding and utilizing AIDS Drug Rebate Funds to
offset a portion of the General Fund reduction.
4. Domestic Violence Shelters . Reduced overall
funding by 20 percent, rather than a complete
elimination as proposed by the Governor.
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D. Emergency Medical Services Authority . Reduces
funding for the California Poison Control System,
which provides immediate free treatment advice and
assistance over the phone, for a savings of $3
million.
E. Department of Mental Health . Proposes to reduce
the Mental Health Managed Care Services and Early and
Periodic Screening, Diagnosis, and Treatment Program
for a combined General Fund savings of $92 million.
F. Developmental Services . Reduces by $334 million,
as proposed by the Governor, through a methodical and
inclusive approach with substantial input from the
communities that access these services.
IV. Human Services
A. CalWORKs . Does not eliminate the program, but
achieves $270.5 million in budget year savings by
reducing funding to counties, temporarily exempting
certain families (e.g., those with very young
children) from work requirements, reverting funds,
and adjusting caseload estimates.
B. In-Home Supportive Services (IHSS) . Does not make
the devastating cuts proposed by the Governor, but
achieves $111 million in budget year savings by
increasing the share of costs for some recipients and
reducing or eliminating services for clients with the
lowest levels of need.
In the February 2009 Special Session, the IHSS
share-of-cost buy-out was eliminated effective July
1, 2009, for prospective cases only. This proposal,
which would become effective October 1, 2009, reduces
by 50 percent the state's share of the buy-out for
clients who were previously grandfathered in to
continue receiving a full buy-out.
Does not reduce worker wages; however, adopts
Governor's proposed savings of $40 million from
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improved fraud detection.
C. Supplemental Security Income/State Supplementary
Program (SSI/SSP) . Adopts modified version of
Governor's proposal. Reduces grants for couples who
are aged, blind or disabled to federal minimum level
(as proposed), but reduces grants for individuals by
a lesser amount. Ensures that grants for individuals
are close to the poverty line (unlike Governor's
proposal, which would have dropped substantially
below). These changes result in General Fund savings
of $115.9 million in the budget year.
In the February 2009 Special Session, SSI/SSP grants
were reduced by 2.3 percent, or $20 for individuals
and $35 for couples per month, effective July 1,
2009, under the assumption that federal funds would
not be received at a $10 billion level. This
proposal further reduces the maximum grants for
individuals from $850 to $845 per month and for
couples from $1,489 to $1,407 per month.
D. Foster Care . Proposes a General Fund reduction of
$36.7 million to foster care programs, including
savings of $26.6 million from a 10 percent reduction
to rates for Group Homes, Foster Family Agencies, and
placements for Seriously Emotionally Disturbed
children.
E. Safety Net and Food Programs for Poor Immigrants .
Does not eliminate Cash Assistance Program for
Immigrants (CAPI) or California Food Assistance
Program (CFAP), as proposed by the Governor.
However, CAPI recipients (approximately 12,000 aged,
blind, and disabled legal immigrants who would be
eligible for the SSI/SSP program but for their
immigration status) will see a decrease in their
grants consistent with the reductions adopted in the
SSI/SSP program. CFAP would continue to provide food
assistance to more than 22,000 low-income legal
non-citizens between the ages of 18 and 65, who meet
all the eligibility requirements for the federal Food
Stamp program but have resided in the United States
for less than five years.
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F. Alcohol and Drug Programs . Reduces funding by $90
million for Proposition 36 programs that provide
treatment to substance abuse offenders, but continues
to fund treatment under the Offender Treatment
Program (OTP). Provides federal Byrne funds of
approximately $60 million to supplement OTP services.
G. Reduces, by 10 percent, the rates paid to Drug
Medi-Cal providers for a General Fund savings of $8.8
million.
V. Corrections and Judiciary
A. Overall in Corrections . Achieves $1.2 billion in
savings (somewhat less than the Governor's amount).
Includes prison and parole reforms (including
eliminating parole for low-risk offenders, increasing
supervision for higher-risk parolees, bolstering
probation supervision, implementing re-entry courts);
modification to sentencing laws for "wobblers" (fewer
changes than proposed by the Governor); and
alternative custody options.
Reduces funds for less effective rehabilitation
programs (but not elimination, as proposed by the
Governor), and includes unallocated reductions to the
Department of Corrections and Rehabilitation,
including to headquarters administration (using more
realistic assumptions than the Governor's).
B. Department of Corrections and Rehabilitation
1. Reduces $402.5 million related to targeted
reductions in the state prison population by (a)
commuting sentences of undocumented immigrants in
our prison system and having them immediately
deported by Federal Immigration and Customs
Enforcement, (b ) changing sentencing options for
low-level offenders by eliminating the current
sentencing options for specified crimes that may
be treated either as felonies or misdemeanors,
making them punishable by a jail term rather than
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state prison, and (c) placing certain lower-rise
inmates under GPS monitoring. These proposals
will prioritize the incarceration of the most
serious offenders.
2. Reduces Department of Corrections and
Rehabilitation (CDCR) programs by $175 million.
The CDCR will also have a $100 million unallocated
reduction, at least $20 million of which will come
from headquarters. In addition, funding for
building maintenance is being eliminated on a
one-time basis in 2009-10. In total, 2009-10
expenditures will be reduced by $322.6 million.
C. Judicial Branch
1. Reduces funding, by $168.6 million, by
reducing general fund support to the courts by 10
percent. This reduction will be achieved through
various measures, including one-day per month
court closures, use of reserves, and an increase
in fees.
VI. Natural Resources and the Environment
A. Department of Conservation . Suspends "Williamson
Act" payments of $34.7 million to counties for
Agricultural and Open Space Land Preserves.
B. CalFire . Shifts $37.8 million from GF to a new
State Responsibility Area fire protection fee.
C. Office of Environmental Health Hazard Assessment .
Shifts $5.7 million from GF to special funds. This
created $4.1 million in GF savings over the
Governor's proposal.
VII. State Government
A. Consolidations and reorganizations . Adopts
Governor's proposed savings from consolidations and
reorganizations.
B. Information Technology Savings . Reduces funding
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for state information technology services, consistent
with recent IT consolidation, and provides the Office
of the Chief Information Officer additional authority
to achieve another $100 million in savings.
C. Employee Compensation . Rejects Governor's
proposal to reduce salaries by five percent - thereby
maintaining a two-day furlough for all employees.
Assumes some savings that will be achieved if
proposed labor agreements are not ratified by the
Legislature. General Fund savings are estimated at
$60 million in 2008-09 and $150 million in 2009-10.
D. Paycheck Deferral . Defers June 30, 2010 state
employee paychecks to July 1, 2010, to achieve budget
savings of approximately $1.2 billion.
E. Rural Health Care Equity Program (RHCEP) .
Proposes to eliminate funding for the RHCEP (except
for Bargaining Unit 5, until its existing contract
expires) which provides reimbursements for certain
health care expenses for State employees who do not
have access to a health maintenance organization.
Estimates annual savings of $15.7 million. The
2008-09 approved budget eliminated payments through
the RHCEP for retired annuitants.
F. Public Employees' Retirement System (PERS) .
Rejects the Governor's proposal to save an estimated
$132.2 million, beginning in January 2010, by
contracting for lower cost health care coverage
either through PERS or directly from an insurer.
This change could conflict with existing collective
bargaining contracts. Instead assumes PERS' 2010
final adopted health and dental premium rate increase
will be less than the nine percent increase assumed
in the February enacted budget and scores $50 million
in savings. Additionally, recognizes the plan
adopted by the PERS Board to rebate, via a two-month
payment holiday in 2009-10, $100 million in excess
Preferred Provider Organization premiums paid by the
state.
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G. State Compensation Insurance Fund . Adopts the
Governor's proposal to sell a portion of the State
Compensation Insurance Fund (SCIF) to a private
entity for an estimated $1 billion. The SCIF remains
the "insurer of last resort".
H. Department of Industrial Relations . Shifts the
majority of the remaining General Fund support in the
Department of Industrial Relations (DIR) budget to
fee-support.
1. Employer fees will be increased to fund the
Occupational Safety and Health Program and the
Labor Standards Enforcement Program. Similar fees
on employers were increased in the 2008-09 budget
to address funding shortfalls. Ongoing cost
reductions beginning in 2010-11 will produce over
$60 million in GF savings.
I. Department of General Services . Delays repairs to
the State Capitol building and park, for one year,
providing $5.4 million in savings.
J. ARRA Oversight . Provides GF loans of $4.1 million
to the Department of Finance (DOF) (including the
Inspector General, the ARRA coordinating task force,
and the Office of State Audits and Evaluations) and
$1.6 million to the Bureau of State Audits to fund
ARRA oversight. It is anticipated that the loans
will be repaid within the 2009-10 fiscal year once
the federal government clarifies the method by which
states may obtain federal reimbursement for ARRA
oversight costs. The DOF funding includes $2.5
million for a new statewide ARRA database in order to
better meet federal reporting, transparency, and
accountability requirements.
VIII. Local Government and Transportation
A. Does not suspend Proposition 1A in 2009-10.
B. Does not suspend Proposition 42 in 2009-10.
C. Adopts the Governor's proposals on public transit
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funds. This includes new General Fund relief of $336
million by directing new transit "spillover" revenues
to transportation-related debt service.
Additionally, directs $315 million in transit revenue
formerly directed to home-to-school transportation,
to transportation-related debt service. Due to
gasoline prices above forecast, scores $300 million
in General Fund relief beyond the Administration's
numbers.
D. Adopts the Governor's proposal to redirect the
local gas tax for General Fund relief, but limits the
shift to two years instead of permanent. In 2009-10,
the amount of the shift would be $986 million, and in
2010-11, the shift would be about $750 million.
These amounts are consistent with the limit on bond
debt payment of 25 percent of fuel and weight fee
revenues outlined in Article XIX, Section 5 of the
California Constitution. Future legislation can
provide local governments with new opportunities to
raise funds for public transit and local
transportation services.
E. "Realigns" $300 million Vehicle License Fee funds
from the Department of Motor Vehicles to counties.
Counties would use funds to support CalWORKs grants.
F. Extends the shift of redevelopment funds for
education by two years - the shift of $350 million
enacted for 2008-09 would be continued in 2009-10 and
2010-11.
G. Suspends state subventions to local governments
(primarily counties) under the Williamson Act Program
for a General Fund savings of $34.7 million.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
DLW:mw 6/29/09 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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