BILL ANALYSIS
AB 421
Page 1
Date of Hearing: May 20, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 421 (Beall) - As Amended: May 4, 2009
Policy Committee: Human
ServicesVote:6 - 0
Education 9 - 0
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill authorizes payments for 24-hour care of a child
classified as seriously emotionally disturbed (SED) and placed
out-of-home in an out-of-state, for-profit residential facility.
Specifically, this bill:
1)Authorizes payments for SED children in for-profit,
out-of-state facilities if the county or local education
agency (LEA) has placed the child pursuant to a due process
hearing decision, mediation or settlement agreement; or if
after a thorough search, no other comparable private
non-profit or public residential facilities has been
identified that is willing to accept the placement or is
capable of meeting the child's needs.
2)Requires the Department of Mental Health (DMH) to provide
information to the Legislature each year on the number of
in-state and out-of-state placements of SED children, the
average lengths of stay for those children, and the number of
children who were dependents, wards or voluntarily placed in
foster care at the time of their placement.
3)Deems that allowable mental health treatment and out-of-home
care expenses for residential care of an SED child in an
out-of-state, for-profit facility are retroactively
reimbursable to the counties until January 1, 2011.
4)Removes the current rate cap for children placed in
out-of-state, for-profit facilities.
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FISCAL EFFECT
1)The State Controller's Office recently disallowed $1.8 million
in mandate claims from San Diego County based on the fact that
the claims were for payments to out-of-state, for-profit
residential placements for seriously emotionally disturbed
children. This legislation allows for retroactive payments,
thus the state would be required to pay that claim.
2)It is likely that other counties will also have disallowed
claims. If so, the cost for allowing retroactive payments for
these placements could exceed $10 million.
3)Under current law, the state will reimburse counties for
monthly grant payments up to the maximum group home rate in
foster care. This legislation removes that rate cap.
Therefore, if the rate increases by five percent for the
approximately 250 children placed in out of state facilities
it would cost in excess of $850,000 GF per year.
4)Costs to DMH in excess of $75,000 GF for the workload
associated with collecting data and providing the Legislature
with the required annual report.
COMMENTS
1)Rationale . The author notes that California law was never
changed to reflect the changes in federal law that allowed
federal funding of for-profit group home placements. The
author also states that "some out-of-state providers are owned
by 'for-profit' entities, usually hospital/behavioral health
corporations. Some 'non-profit' residential providers are
operated by the parent company through a subsidiary contract.
In a good faith effort to comply with the state law, counties
contract for services for some SED students with the
'non-profit' entities." According to the author, "Counties
placed students in these facilities believing that, so long as
the contracted company was 'not-for-profit' this was in
compliance with the letter and the intent of federal and state
law. Counties have historically been reimbursed by the state
for the costs of these placements, and therefore had no reason
to believe they did not comply with state law."
However, the author notes, in 2005, an unpublished
administrative law judge decision in a special education due
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process hearing found that these facilities do not meet the
definition of non-profit, because they are a subsidiary of a
for-profit company. "This decision prompted the State
Controller's Office to dispute counties' eligibility for
mandate reimbursement for these out-of-state placements."
The purpose of this bill is to expand state law to incorporate
allowances that are made in federal law for for-profit group
home placements for SED children. The author and supporters
contend that out-of-state, for-profit facilities are sometimes
the only available placements to meet a child's needs in
compliance with federal education law.
2)Background . The federal government's original exclusion of
for-profit companies from receiving foster care funds was in
part because Congress feared repetition of nursing home
scandals in the 1970s, when public funding triggered growth of
a badly monitored institutional care industry. California's
current policy of limiting payments to nonprofit group homes
continues to ensure that the goal of serving children's
interests is not mixed with the goal of private profit.
Nonprofits are also generally subject to more oversight,
including that of a financially disinterested board. For these
reasons, over the years, California has continuously rejected
opening up placements in for-profit group home facilities for
both foster children and SED children, except for one narrow
exception.
In 2006, AB 1462 (Adams; Chapter 65, Statutes of 2007), carved
out a narrow exception to allow California counties to match
federal funding of for-profit placements for a small number of
foster youth who are also eligible for disability-related
services and have extraordinary needs such that there are no
other placement options. Among other requirements, AB 1462
limited these placements to 12 months each and no more than 5
children per county at a time. Counties are not allowed to use
state General Fund for to pay for the placement of these
children in for-profit facilities.
3)Seriously Emotionally Disturbed Children . Children who have
been diagnosed with serious emotional disturbances generally
require special education and mental health treatment services
to meet their educational needs. Children who are identified
as seriously emotionally disturbed (SED) generally require
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out-of-home placement in order to benefit from an educational
program that meets their specific needs. These children are
generally placed by county mental health agencies. The board
and care costs for the children placed in non-profit
facilities are paid through the Department of Social Services
(DSS) budget. DSS estimates that the average monthly caseload
in 2008-09 will be 1,903 children. The average monthly grant
cost for those children is approximately $5,600.
DSS, in their budget document, contends that the cost for
children placed in for-profit facilities is entirely borne by
the California Department of Education (CDE). Data collected
by the Legislative Analyst's Office on this issue for this
committee suggests that there are likely close to 250 children
placed in out-of-state for-profit facilities (163 from Los
Angeles County alone.)
4)Special Education a State-Mandated Program . Chapter 1747,
Statutes of 1984 (AB 3632, W. Brown), and related statutes
established the Special Education Pupils Program, commonly
known as the AB 3632 program, and shifted the responsibility
for providing special education related mental health services
from local educational agencies (LEAs) to counties. County
mental health agencies are required to coordinate and/or
provide mental health services (either directly or through
contracts) for a child's educational benefit after an initial
assessment and referral from an LEA. In addition, the AB 3632
program is a reimbursable state-mandated program. This means
that costs to local government in excess of federal and state
funds provided for this program generally must be reimbursed
by the state through the mandate claims process.
The Commission on State Mandates adopts "parameters and
guidelines" for each mandate that set forth rules determining
what specific costs will be reimbursed by the state. The State
Controller's Office (SCO) regularly conducts audits to ensure
that claims paid by the state to reimburse local government
agencies are consistent with the commission's parameters and
guidelines for that mandate.
5)Unpaid County AB 3632 Mandate Claims . The latest data
available shows that there is close to $500 million in unpaid
AB 3632 mandate claims. Of that amount, almost $80 million is
for out-of-state mental health services. This legislation
addresses a small subsection of this population and the
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disallowed claims discussed in this bill are a small fraction,
less than one percent, of the total money owed to counties for
AB 3632 services.
6)Related Legislation . SB 292 (Wiggins) in 2008, a substantially
similar bill, authorized payments for 24-hour care of a child
classified as seriously emotionally disturbed (SED) and placed
out-of-home in an out-of-state, for-profit residential
facility. That bill was initially held on this committee's
suspense file. The bill was then withdrawn from this committee
and placed on the Assembly third reading file, where it was
never taken up.
Also in 2008, AB 1805 (Committee on Budget), a budget trailer
bill, contained identical language to SB 292. That bill was
vetoed by the governor. In his veto message he wrote, " I
cannot sign [AB 1805] in its current form because it will
allow the open-ended reimbursement of claims, including claims
submitted and denied prior to 2006-07. Given our state's
ongoing fiscal challenges, I cannot support any bill that
exposes the state General Fund to such a liability."
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081