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Both Medi-Cal Institutional and Non-Institutional Providers Will Continue to Be Paid Even If No Budget In Place & If Special Fund Is Exhausted – Payments Will Continue for SSI/SSP, IHSS

Controller Issues Statement On Governor’s Order To Temporarily Reduce State Employee Wages to Federal Minimum – Refuses to Implement

SACRAMENTO, CALIF (CDCAN) [Updated 07/01/2010  08:05 PM  (Pacific Time)] –  With a long budget stand-off expected to last possibly through the summer, the State Controller released information indicating what things the State can continue to pay – and what things cannot be paid, without a spending plan in place.

A copy of his 3 page letter (pdf file) to the Governor and four legislative leaders, dated June 15, 2010,  outlined what the State is required to continue paying and what payments he cannot make unless a State budget is in enacted, is attached to this CDCAN Report and can also be downloaded from the CDCAN website at www.cdcan.us.

Both Medi-Cal Institutional And Non-Institutional Providers Will Be Paid Even if Special Fund Is Exhausted

The State Controller in that letter to the Governor and legislative leaders wrote that the list of what the State can and cannot pay is basically “unchanged” from previous years with one significant exception, dealing with continuing payments to both institutional and non-institutional Medi-Cal providers.

Chiang wrote:

…payments will be made to both institutional and non-institutional Medi-Cal providers. In prior years, once a stop-gap appropriation of approximately $2 billion in state and federal funds was exhausted, payments to institutional providers such as nursing homes and hospitals were prohibited until a budget was enacted,” but this year those providers – and non-institutional Medi-Cal providers will continue to be paid even if that fund is exhausted, writing that “…this change was required as a condition for receiving additional Medicaid [Medi-Call] funds pursuant to the American Recovery and Reinvestment Act.

LIST OF WHAT STATE WILL CONTINUE TO PAY:

The State Controller earlier indicated the State could be once again at the edge of a cliff leading to financial disaster as early as late August or early September if the State cash flow situation grows critical – as it did in February and July 2009.

If that situation happens, payments for several of these programs – even those required by federal law or the State Constitution - might not continue in late August or early September if the budget stand-off continues and the State runs out of cash and with no ability to borrow short term funds, and as a result, is unable to pay some or all of its bills.  That doomsday scenario – which could have world wide economic impact – is more likely to be the ultimate reason why and when a state budget deal is finally reached.

Until then however, the following are the programs and services that the State must continue to pay even if there is no State Budget in place, as required by federal or state laws or by the State Constitution:

Federal Required Payments

Even without a State budget in place, federal law requires California to continue making payments to certain federally funded programs:

• Medi-Cal (both institutional and non-institutional providers – regardless if special fund is exhausted) – includes most regional center funded services, and all of the  developmental centers. 
• SSI/SSP (Supplemental Security Income/State Supplemental Payment) grants to the lowest income people with disabilities, seniors
• In-Home Supportive Services (IHSS) workers (providers) pay
• State employees – though the Governor today (July 1) ordered the State Controller to temporarily reduce the employee wages to the federal minimum wage until a state budget is enacted. Some state employees who are part of unions who have reached a tentative agreement on a new contract with the Governor, are exempted from this order.  The State Controller however, as of today (July 1 – see letter below) said he would refuse to implement this order unless a court ordered him to do so.
  

State Constitutional Requirements

These are payments that the State Constitution requires the State to continue to make regardless whether a State budget is enacted or not such as:

• Debt service (bond or loan payments)
• Revenue limit education payments

Prior State Budget Year Payments

These are payments for spending that was occurred – but not yet paid out – in the previous State budget year that ended June 30, 2010, as authorized in the 2009-2010 State Budget that include payment to vendors for services provided on or before June 30, 2010.

Continuous Legislative Appropriations

These are payments required by State law to continue regardless if a State budget is in place such as:

• CalWORKS payments (California’s “welfare to work” program) that includes thousands of children and parents with special needs and disabilities
• Income tax refunds
• Unclaimed property claims

LIST OF WHAT STATE CANNOT PAY UNTIL BUDGET IS ENACTED:

• Payments to community colleges, categorical school programs (including adult education, special education), local governments, some non-profit organizations and other programs or entities not included in the list of what the State can pay
• Payments to vendors for services provided on or after July 1, 2010
• Salaries and per diem of state elected officials, including legislators, and their appointed staff.

GOVERNOR ORDERS MININUM WAGE PAY FOR STATE EMPLOYEES UNTIL BUDGET IS ENACTED - STATE CONTROLLER REFUSES ORDER

As reported earlier, Governor Arnold Schwarzenegger today (July 1^st) ordered federal minimum wage pay for most state employees until a spending plan is enacted.  The federal minimum wage is $7.25 per hour.

State employees will be paid their full pay retroactively once a State budget is passed by the Legislature and signed into law by the Governor – something at this point in time many do not expect to happen anytime soon.

A spokesman for the Governor expected the temporary pay reduction to take effect in the next State employee paychecks.  Or maybe not.

The director of the Department of Personnel Administration sent a letter with the Governor’s order to State Controller John Chiang Thursday afternoon, but Chiang, who is the statewide elected official in charge of paying the state’s bills, including issuing paychecks to state employees, said today he would refuse to implement the order unless a court ordered him to do so.  [see below for official statement from Chiang issued today – July 1^st]

Some State Employees Exempt From Governor’s Order

About 37,000 state employees who are members of six bargaining units (unions) are exempt from the Governor’s order because they have reached agreement on new union contracts with the Governor in recent days.

However members of the largest of the State worker unions – SEIU (Service Employee International Union) Local 1000, has not yet reached an agreement with the Governor on a new contract – and are not exempt from the temporary wage reduction order.

State employees who are managers or supervisors would receive $455 per week instead of their normal pay.  Other State employees who are doctors and attorneys would receive no minimum pay because federal law exempts those professionals from any minimum wage requirement.

In-Home Supportive Services (IHSS) workers or providers are not state employees and are not impacted by this order.

Statement by State Controller Chiang on Governor’s Order:

The following statement was released by State Controller John Chiang late on Thursday in response to the Governor’s order to temporarily reduce state employee wages to the federal minimum wage, with the exception of 6 state bargaining units (unions) that have reached tentative agreement with the Governor on new contracts:

“I am not surprised that the Governor would issue yet another demand that we cut pay for more 250,000 state employees even while the issue of whether it is feasible to do so has not yet been resolved by the courts. I have made it clear that once the courts hand down a final resolution, I will abide by that ruling.

“In the absence of the leadership needed to bring the Legislature to an agreement on his budget, the governor again resorts to political tricks. Because of the limits of the state’s current payroll system, there is no way that his order can be accomplished without violating the State Constitution and the federal Fair Labor Standards Act. In short, his demands will do nothing to solve the budget deficit, but will hurt taxpayers by exposing the state to billions of dollars in penalties for those violations.

“Unfortunately, the DPA [Department of Personnel Administration] also is mistaken about the position of the previous State Controller about the ability of the state payroll system to make reductions to more than 250,000 paychecks. In a letter  written in July 2004, my predecessor notified legislators that his office ‘had conducted a study and concluded it is not feasible to pay some employees full salary and others minimum wage under the state’s current payroll system.’

“Notwithstanding necessary changes to the State’s labor laws, we continue to work with the Governor on building a system capable of legally reducing wages in the manner sought by his Administration. This system modernization is slated for roll-out in 2012. If the DPA [Department of Personnel Administration] has a problem with that schedule, they should consult the steering committee, of which four of the six members are the governor’s appointees, including DPA Director Debbie Endsley.

“Again, absent a final court ruling, I will continue to protect the State’s finances and pay full wages earned by state employees.”