BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 272 (Monning)
Hearing Date: 01/19/2012 Amended: 01/13/2012
Consultant: Mark McKenzie Policy Vote: Health (5-0)
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BILL SUMMARY: AB 272, an urgency measure, would transfer up to
$6.5 million from the California Health Facilities Financing
Authority (CHFFA) Fund to the California Health Access Model
Program (CHAMP) Account, a continuously appropriated fund
created by the bill. These funds would be used by CHFFA to fund
an initial $1.5 million competitive grant program for one or
more projects to demonstrate new or enhanced methods of
delivering health care services to improve access and health
outcomes for vulnerable populations or communities, as
specified. As early as the second year following the
implementation of the demonstration program, and after providing
a report to the Legislature and Governor on the program's
outcomes, the bill authorizes CHFFA to implement a second grant
program that awards up to $5 million to replicate the model
developed by a demonstration project. Any funds remaining in
the CHAMP Account on January 1, 2020 would revert to the CHFFA
Fund.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Fund transfer $6,500 Special*
CHFFA grant administration absorbable costs for
demonstration program, Special*
and likely minor to moderate costs to
administer
___________ replication grants (see staff comments)
* CHFFA Fund
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STAFF COMMENTS: SUSPENSE FILE.
CHFFA was established in 1979 to be the state's vehicle for
providing financial assistance to public and nonprofit health
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care providers through loans funded by the issuance of
tax-exempt bonds. CHFFA also administers the Healthcare
Expansion Loan Program II (HELP II), which provides direct loans
to small and rural health facilities, and several grant programs
that have provided funding for community clinics and 13 of the
state's children's hospitals.
By borrowing through CHFFA, health facilities can likely obtain
lower interest rates than they would through conventional bonds.
Generally, nonprofit, licensed health facilities in California,
including adult day health centers, community clinics, skilled
nursing facilities, developmentally disabled centers, hospitals,
and drug and alcohol rehabilitation centers are eligible for
CHFFA financing. Proceeds from CHFFA bond sales may be used for
project-related costs, including: construction; remodeling and
renovation; land acquisition (as part of the proposed project);
acquisition of existing health facilities; purchase or lease of
equipment; refinancing or refunding of prior debt; working
capital for start-up facilities; costs of bond issuance;
feasibility studies; and reimbursement of prior expenses. Under
statute, savings resulting from issuance of tax-exempt bonds for
borrowers must be transferred to the consuming public through
lower or contained costs for delivery of health services. In
2010, $712,845,000 in bonds were issued by CHFFA.
The continuously appropriated CHFFA Fund currently has a fund
balance of approximately $14 million which has accumulated over
the past 30 years and is largely derived from initial and annual
administrative fees paid by CHFFA borrowers. Fees deposited
into the CHFFA Fund have averaged approximately $2.4 million
annually in recent years. In the past, the CHFFA Fund balance
has been used to fund Medi-Cal Bridge Loan Program loans to
hospitals, clinics and other health institutions when the
state's budget impasses temporarily suspend Medi-Cal
reimbursements to these health facilities. Surplus funds have
also been used to enhance funding available for the HELP II
Financing Program which benefits small or rural health care
facilities. By transferring up to $6.5 million to the CHAMP
Account for purposes of funding the new grant program, this bill
would preclude the use of CHFFA funds for these other purposes.
CHFFA anticipates minimal workload related to the administration
of the demonstration grant program. After an initial review of
proposals, a limited number of project sponsors would be invited
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to submit full applications, and monitoring and administration
of one or two grantees is not anticipated to be onerous.
Overall costs to establish and administer the demonstration
project would be absorbable. Since the replication grant
program would be based upon achievements related to the
demonstration program, administrative costs are difficult to
estimate at this time, and would depend upon the number, size,
and types of projects to be replicated. Staff estimates that
any ongoing administrative costs would likely be minor to
moderate, perhaps a maximum of $200,000 over several years, and
would be borne by CHFFA's continuously appropriated funds, if
necessary.
Staff notes that the bill does not provide specific direction
for the types of projects that may be funded through the
demonstration and replication grant programs. Rather, the bill
authorizes grants to be used for projects that would demonstrate
"new or enhanced cost-effective methods of delivering health
care services to improve access to quality health care for
vulnerable populations or communities, or both, that are
effective at enhancing health outcomes and improving access to
quality health care." CHFFA indicates that the language was
left intentionally vague so that applicants could present a
broad range of possible projects to encourage innovative
approaches to demonstrate outcomes. The grants provided through
this new program are intended to be used in conjunction with
other sources of funding available to project sponsors. CHFFA
intends to initially fund innovative demonstration projects that
could easily be replicated for broader application statewide
with the second round of grants after providing a report to the
Legislature on the outcomes of the demonstration program.