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• STATE SENATE DEMOCRATS UNVEIL “RESTRUCTURING” PROPOSAL  AS MAJOR PIECE TO RESOLVE ON-GOING STATE BUDGET CRISIS
• Would Shift Some Public Safety and Human Services Functions and Funding to Counties – Calls for Elimination of Department of Aging and Department of Alcohol and Drug Programs – Would Shift Functions Either to Counties or To Other State Agencies – Shift CalWORKS Childcare To Counties

SACRAMENTO, CALIF (CDCAN) [Updated 06/21/2010  04:05 PM  (Pacific Time)] -  With California facing a $20 billion budget gap and the prospect of enormous on-going budget shortfalls in the coming years, Senate Democratic leaders today unveiled a summary of a four part plan that would propose shifting $3 to 4 billion worth of responsibility of certain public safety, human services including some parts of the CalWORKS “welfare to work” program, adult protective services, and alcohol and drug programs and other health related programs to the counties, along with a dedicated stream of funding that they say will increase government efficiency, and reduce the size of the state’s structural (on-going) deficit.  The proposal would require 2/3rds approval in both houses as part of the 2010-2011 State budget and also approval of the Governor.

Calls for Elimination of Aging and Alcohol and Drugs Program Departments

The proposal by the State Senate Democrats would call for the elimination of the Department of Aging and the Department of Alcohol and Drug Programs, shifting many of their responsibilities to the counties or to other state agencies including adult protective services, Drug Medi-Cal and other programs and, they claim, would not increase the existing tax burden on “regular Californians” while improving “government accountability by clarifying areas of responsibility for state and local governments as well as bringing services closer to the people in a manner that promotes efficiency and encourages innovation”.

The proposal also would shift CalWORKS childcare to the counties.

[Copy of the 6 page pdf file – not scanned – of the State Senate Democratic restructuring proposal is attached to this report – titled “20100621-StateSenateDemocrats-RestructuringOverviewHandout.pdf” and can also be viewed or downloaded – along with other supporting documents – from the CDCAN website at www.cdcan.us]

Proposal Does Not Directly Impact Other Health or Human Services Such As IHSS, Regional Centers, Medi-Cal

The proposal does not touch on or impact directly In-Home Supportive Services, regional center funded community based services, Medi-Cal – though various parts of the plan, dealing with adult protective services and services transferred or shifted from the Department of Aging  and proposed elimination of the Departments of Aging and Alcohol and Drug Programs would impact people in all of those other programs in various degrees. 

Steinberg Says Restructuring “Key Piece” In Solving State Budget Crisis

Senate President pro Tem Darrell Steinberg (D-Sacramento) and Senator Denise Moreno Ducheny (D-San Diego), Chair of the Senate Budget and Fiscal Review Committee, said the restructuring plan is a key piece in solving the short term and long term state budget crisis, saying it is an alternative to elements of the Governor’s budget that “would harm our economic recovery, result in more than 450,000 lost jobs, and dramatically reduce the quality of life for all Californians”.

“Our challenge now is to find a way to save essential investments in education, health, public safety and infrastructure – investments necessary to create jobs and expand the state’s economy,” Steinberg said.  “While these investments are critical to California’s economic future, we cannot credibly use them to prop up the existing government structure that has failed too many for too long.  Through a multi-year restructuring of government, we can save billions of general fund dollars by moving programs off our books while still giving counties secure and adequate funding to maintain the core services that protect communities and the most vulnerable in society.”

Both State Senate Democratic leaders said that finding an alternative to the Governor’s proposed budget plan is “critical”  because even if all the proposed cuts were enacted – including total elimination of several health and human service programs “…it would still leave California with more than a $6 billion budget deficit next year”.

“The Governor's budget proposal would further setback our economic recovery by taking billions of federal money out of our economy and putting hundreds of thousands of families out of work,” Sen. Ducheny said.  “We have an obligation to develop alternatives that will improve public safety and make our safety net programs sustainable by delivering them in the most cost effective and accountable way possible.”

The incoming Senate Republican Leader, and the current vice chair of the Senate Budget and Fiscal Review Committee, Sen. Bob Dutton praised Senate President Pro Tem Steinberg and other Democratic leaders for “thinking ‘outside the box’ with their proposal today” but was not supportive of the plan itself saying “it does little to deal with state inefficiencies and relies heavily on questionable revenue sources that I believe will result in greater job losses in the private sector.”  He felt that policymakers needed instead to use “that ‘outside the box’ thinking to revitalize private sector jobs in California. In the end the only way we are going to truly solve this ongoing budget crisis is through a strong private sector that puts hard-working California citizens back to work.”

Dutton said that “While I haven‘t had the opportunity to look at all the details of this plan, the Legislative Analyst Office indicated this proposal will likely raise taxes 500% in state income taxes for a family of four earning $50,000…My Republican colleagues and I will only support a proposal that will bring California’s spending in line with revenues and doesn’t raise taxes. It appears this proposal falls far short of doing that.”

Other Reaction To The State Senate Democratic Proposal

No official reaction yet from Governor Arnold Schwarzenegger, however both Assembly Speaker John Perez (Democrat – Los Angeles, 46^th Assembly District) and Assembly Republican Leader Martin Garrick (Republican – Carlsbad, 74^th Assembly District) issued statements today in response to the State Senate Democratic proposal:

Assembly Speaker Perez:  “This has been the most open and deliberative budget process in recent memory, and the two plans put forward by the Assembly and Senate reflect the values and priorities of Californians by closing our deficit without ruining the recovery. I am looking forward to working with the Senate to produce a final budget proposal that saves and creates 465,000 jobs and addresses our long-term structural problems.”

Assembly Republican Leader Garrick: "Senate Democrats' so-called reforms are just another ploy to continue to raise taxes on hard-working Californians and grow the size of government.  Their latest scheme would shift program responsibilities to counties and make it easier to raise taxes at the local level.  They want to raise state taxes on cars and oil, and further delay job creation incentives.  This plan proves that there is no such thing as a temporary tax increase, and that Democrats have no problems with breaking commitments made during previous budget negotiations whenever convenient.  The Democrats continue to reject nearly all of the Governor's program reductions that would lead to actual savings in this budget year.  Simply paving the way for higher taxes and higher spending is not the way to close our $19.1 billion budget deficit.  The Governor's budget blueprint sets priorities, reduces spending, does not raise taxes, and is the appropriate approach.  It doesn't bode well for a timely budget resolution that the Assembly and Senate Democrats remain miles apart in their competing plans to raise taxes, and increase borrowing."

SUMMARY OF STATE SENATE DEMOCRATIC PLAN

This is the summary of State Senate Democratic plan for restructuring issued today.  A copy of the plan can be viewed and downloaded on the CDCAN website at www.cdcan.us  along with supporting documents.

Background

California has been mired in budget shortfalls for years.  Currently, that shortfall stands at $18 billion.  Worse, multi-billion dollar shortfalls are forecast in the 2011-12 fiscal year and beyond.  Even if the Legislature adopted the Governor’s austere 2010-11 budget plan, which completely eliminates the safety net for children and their families, eliminates mental health services, and makes other untenable cuts, the state would still begin the next budget year over $6 billion in the red.  The only alternative in this difficult fiscal environment is to rethink the roles of government at both the state and local levels and shift programs, along with the dollars to run them, closer to the people served.

The concept of devolving services and funds to counties is not new. Counties already operate many state-created and state-funded programs, particularly health and human services programs, on behalf of the state.  And, in some cases, counties provide substantially similar services for substantially similar populations as the state (for example, state-funded parole services and county-funded probation services both supervise offenders in the community). 

Governor Schwarzenegger in January and May as part of his 2010-2011 State Budget, proposed that certain state functions and responsibilities be moved to the counties or “realigned” including changing existing criminal sentencing laws in a way that would require more convicted felons to serve their sentences in county custody, not state prison.  This proposal also includes sharing state funds with counties to help offset the additional costs the counties would bear. 

However, this proposal is an anomaly.  Most of the Governor’s other budget proposals call for major cuts or eliminations of state-funded programs—particularly health and human services safety net programs—that will shift costs to counties with no way to pay for the services.  CSAC estimates that, if enacted, the Governor’s proposals would move as much as $4 billion in costs to the counties and result in the loss of even more in federal funds coming to California. 

The 1991 Realignment:

In 1991, California faced a budget deficit of over $14 billion and the Governor and Legislature enacted a state/local realignment program to shift $2 billion in program expenditures from the state to local government with a dedicated funding source. 

The state shifted responsibility to counties for planning, managing and delivering a number of programs in health, social services and mental health.  The risk for program growth was shifted to local government, but so was the program flexibility to manage this risk, especially in mental health programs. 

Other, smaller “realignments” occurred in subsequent years, including the 1997 shift of funding for trial courts from counties to the state, and the 2007 shift of major portions of the juvenile justice system from the state to counties. 

Nearly 20 years after the original 1991 realignment, assessments of the shift are a bit clearer.  On one hand, some of the original flexibilities provided to counties under the 1991 realignment have been whittled away and services have been reduced as inflation and other cost increases have cut into the real cost of delivering those services.  On the other hand, the shift probably preserved the programs from total elimination had they continued to rely solely on state revenues for support, given the state’s chronic fiscal difficulties.

Benefits of Restructuring

• Eases the state’s revenue shortfall and enables smaller increases in state taxes and fewer devastating cuts in programs that serve the state’s most vulnerable populations.
• Provides a more stable funding source for programs, opportunities for effective long-range planning, and spending flexibility that will help counties better tailor programs to fit their local needs.
• Places program design and planning decisions at the local level allowing consumers of government services more access to local decision makers.

Principles to Restructuring

Not all programs are good candidates for restructuring because of federal restrictions and other policy reasons.  The following restructuring principles are recommended:

1. Federal Funds:  Restructuring should assure continued receipt of federal funds and should allow the State to obtain additional federal funds where possible.
2. Fiscal Incentives:  Counties should have appropriate fiscal incentives to serve clients in a programmatically appropriate manner.
3. Transfer of Costs to Other State Programs:  Restructuring should assure that the state does not assume financial responsibility for clients transferred by counties to other state programs.
4. Local Flexibility:  State administrative responsibilities should be limited to the development and oversight of guidelines regarding program performance outcomes.  This should include uniform, simplified, and consolidated data reporting requirements.
5. Funding:  Funds provided for restructuring should benefit the programs to be realigned from the state to local government.
6. Future State Costs:  Realignment should minimize the state’s exposure to future mandate claims.
7. Fiscal capacity:  Counties should have sufficient fiscal capacity, through new revenues and/or new revenue-raising authority, to assume program responsibilities from the state.
8. Multi-year Endeavor:  The restructuring of programs should take place over a number of years, in order to allow the state and counties time to prepare for changes and develop service delivery channels and fiscal capacity.
   

2010 “Restructuring” Proposal

[CDCAN Note: The State Senate Democratic proposal is divided into four parts, the first three dealing with specific services and programs to be shifted – and the fourth part dealing with how those functions will be paid for.]

Part I – Improving Public Safety (Account #1)

Goal:  Restore the ability of local communities to provide safe streets and improve outcomes for families impacted by drug and alcohol abuse.

 Transfer Community-Based Public Safety Programs from State to Counties (up to $1.6  billion over 4 years):

Public Safety Sub-Account #1:

A.         Shift state juvenile parole services to counties (modified version of Governor’s May Revision proposal).

B.         Shift certain low-level criminal offenders (primarily drug and property crime offenders) to counties for both incarceration and community supervision (modified version of Governor’s May Revision proposal).

C.        Maintain existing funding for COPS/Juvenile Justice program (set to expire in 2011-12).

Public Safety Sub-Account #2:

D.        Shift Drug Medi-Cal programs to counties.

E.         Shift Offender Treatment Program to counties.

F.         Restore Substance Abuse and Crime Prevention Act Funding to counties.

G.        Shift Drug Court Program to counties.

Also, eliminate the Department of Alcohol and Drug Programs (ADP); transfer any necessary remaining functions to other state agencies (such as Department of Health Care Services), and add one ADP [Alcohol and Drug Programs] oversight position to HHS [California Health and Human Services] Agency.

Part II – Improving the Welfare-to-Work Program (Account #2)

Goal:  Provide counties with flexibility and incentives to tailor CalWORKs program to address local needs and gain efficiencies.

Increase County Share of CalWORKs and Transfer CalWORKs Child Care to Counties (up to $2.6 billion over 4 years):

A.         Increase county share of CalWORKs grants from 2.5 percent to 25 percent.

B.         Increase county share of CalWORKs services and administration to 25 percent.

C.        Increase county share of county welfare automation to 25 percent.

D.        Shift CalWORKs child care to counties.

Part III – Improving Protective and Aging Services for Adults (Account #3)

Goal:  Give counties additional fiscal incentives to manage protective and aging services for vulnerable adults and elderly.  

Shift Adult Protective Services and Various State-Supported Aging Services to Counties (up to $85 million over 4 years):

A.         Realign Adult Protective Services to counties

B.         Realign Aging programs to counties

Also, eliminate the Department of Aging; transfer any necessary remaining functions to other state agencies (such as Department of Social Services), and add one Aging oversight position to HHS [California Health and Human Services] Agency.

Part IV — Financing the Plan

Goal:  Give counties additional revenues to pay for the restructured services.  This should take the form of both new revenue streams and authority for counties to raise additional revenues on their own to deliver the services and meet the needs of the community.  

Total New Local Revenues Needed:  About $3.2 billion in 2010-11, and increasing to about $4.3 billion by 2013-14.

A.  Oil severance tax (ongoing, beginning in 2010-11).

B.  Transfer VLF [vehicle license fee] funds from DMV [Department of Motor Vehicles] to counties (ongoing, beginning in 2010-11)

C.  Continue existing VLF rate that is set to expire in 2011, dedicated to public safety programs (ongoing, beginning in 2011-12).

D.  Dedicate county savings from federal healthcare reform to restructuring services (ongoing, beginning in 2013-14).

E.   Provide “bridge” funding from delay of corporate tax breaks (in 2010-11 and 2011-12 only).

F.  Provide a portion of state’s sale tax rate (less than ¼ cent) to counties for realigned services as secondary “bridge” (in 2012-13 only).