Federal Fund “Trigger” Announcement Likely Friday10 min read

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With California’s budget situation growing worse as revenues continue to drop, State Treasurer Bill Lockyer, possibly with Mike Genest, the Governor’s Department of Finance director, will announce as early as Friday (March 27) – and no later than Monday (March 30), whether or not California will receive at least $10 billion in federal funds by June 30, 2010 that “may be used” to replace (off-set) the spending of State general fund money.

Details of the announcement, which is supposed to take place in the State Capitol, will likely be firmed up later on Thursday (March 26). The announcement will not be made in a formal hearing or meeting, but more likely in a press briefing in the State Capitol, accompanied by a press release.

The determination by the State Treasurer and Department of Finance Director is crucial on whether major permanent cuts happen or not to several critical programs that serve hundreds of thousands of people with disabilities, mental health needs, the blind, seniors and low income families. While there has been no official word on what the State Treasurer or the Finance Director will report, most observers feel that the likely news will not be good.

If that $10 billion goal is reached, then a “trigger” in the 2009-2010 State Budget would be pulled, and certain major permanent cuts including elimination of several Medi-Cal optional benefits, rollback of State funding for In-Home Supportive Services worker wages, cuts to SSI/SSP and CalWORKS grant levels would not happen. But if the threshold falls short of the $10 billion, then the “trigger” is not pulled, and all those cuts take effect beginning July 1, 2009. These are cuts in addition to others that are not impacted by this “trigger” including major cuts to regional centers that serve over 240,000 children and adults with developmental disabilities, cuts proposed to mental health services, additional cuts to SSI/SSP and CalWORKS and other programs.

California is expected to receive over $31 billion in federal money from the federal economic stimulus bill by December 2010, and billions more in federal competitive grants – but much of that money is restricted in how it is spent or does not replace spending of state general fund money.

The Department of Finance Director Genest did issue a tentative report in late February that projected that the State would bring in $8 billion of federal funds by June 30, 2010 that can be counted toward the $10 billion threshold – falling $2 billion.

There are differences of opinion on what is meant by “make available” and “may be used” in terms of what federal funds can be counted toward the $10 billion – and what happens if the Treasurer – who is a Democrat – and the Department of Finance director – who is a Republican working directly under the Governor – disagree.

What the Treasurer and Finance Director Must Decide

• The 2009-2010 State budget signed into law by the Governor on February 20, 2009 requires the State Treasurer and the Governor’s Director of Finance to determine by April 1, 2009 whether California will receive at least $10 billion from the $789 billion federal economic stimulus bill (signed into law by President Obama on February 17, 2009), called the American Recovery and Reinvestment Act (ARRA) and, possibly, other federal legislation.
• To qualify, the federal funds have to be “made available” to California by June 30, 2010, and must replace or offset spending that would otherwise be made from the State general fund.
• If State funds must be spent to access the federal funds, those State expenditures, at least in some cases, will be subtracted from the dollars counted toward the $10 billion benchmark.
• No one knows for sure what will happen if the State Treasurer and the Department of Finance director don’t agree on whether or not the $10 billion threshold is met – though it appears that for the cuts to be prevented, both officials would need to agree. It also appears that, barring a surprise, that the two officials are likely to agree.
• The State Treasurer at the March 17th public hearing indicated that while he will continue working with the Department of Finance, he will also make an independent assessment of whether the trigger threshold will be reached. To help make that determination, the Treasurer’s Office hired an expert and experienced independent consultants to analyze legislation and data. These consultants submitted a report to the Treasurer’s Office just before the March 17th hearing – which largely agreed that the $10 billion threshold would not be reached – though did provide some options, providing there was legislative approval – to achieve that threshold.

What Happens If The $10 Billion Threshold Is Not Met?

If the $10 billion threshold – as determined by the State Treasurer and Department of Finance director – is not reached, then several major permanent cuts will take place as scheduled and also one of the tax increases would also take effect in July 2009.

The following cuts – all similar to what the Governor previously proposed in nearly every budget year since 2003 include:

MEDI-CAL BENFIT CUTS

Would permanently eliminate, effective July 1, 2009 – unless the $10 billion threshold of federal funds is met as determined by the State Treasurer and Department of Finance Director – several important Medi-Cal “optional” benefits – called “optional” because the federal government does not require the states to provide them.

Another cut would be $54.1 million in funding for South Los Angeles Medical Services

The Medi-Cal benefits facing permanent elimination are (effective July 1, 2009):

• adult dental
• acupuncture services
• audiology and speech therapy services
• chiropractic services
• optometric and optician services including services provided by a fabricating optical laboratory
• podiatric services
• psychology services, and
• incontinence creams and washes.
• This reduction was originally proposed by the Governor and would mean a cut to the Medi-Cal program of over $258.8 million ($129.4 million of that in State general funds) during the 2009-2010 State Budget year that begins July 1, 2009.

Who Is Exempted By This Cut

• It does exempt medical and surgical services that may be provided by a doctor regardless of whether the service is actually provided by either a doctor or dentist, pregnancy-related services, and services for treating conditions that might complicate pregnancy.
• It also exempts persons in the Early and Periodic Screening, Diagnosis, and Treatment Program and long-term care in a skilled nursing facility or intermediate care facility.

IN-HOME SUPPORTIVE SERVICES (IHSS)

There are two cuts impacted by the federal “trigger”.

The first would permanently cut back what the State will provide toward IHSS worker wages (called “State participation”) back to the maximum amount of $9.50 per hour. While not specifically rolling back wages by itself – the counties who pay more than that amount in IHSS worker wages would have to make up the difference. Nearly every county in California is facing mounting budget deficits of their own and would not be able to replace the lost State funding – and that in turn would lead to a permanent rollback in IHSS worker wages.
The second cuts funding by limiting the IHSS share of cost buy-out.

State Funding of IHSS Worker Wages

• Effective July 1, 2009, would limit the state funding (participation) in IHSS worker wages to a total cost of wages up to $9.50 per hour and individual health benefits up to $0.60 per hour.
• Reduction – if it goes through – would mean a cut of $74.2 million in State general fund money.

IHSS Share of Cost Buy-Out

• Effective July 1, 2009, would limit the share-of-cost buy-out for IHSS recipients who receive Medi-Cal personal care services to those receiving this supplementary payment before July 1, 2009 (meaning no one else would be eligible for the share of cost buy-out after that date).
• Reduction – if it goes through – would mean a cut of $3.8 million in State general fund money during the 2009-2010 State budget year.

SSI/SSP GRANT LEVEL

The federal “trigger cuts” impact one – but not all of the cuts to SSI/SSP (Supplemental Security Income – funded by the federal government – and the State Supplemental Payment program, funded by the state).

SSI/SSP Grant Level

• Effective July 1, 2009, would reduces by 2.3% the SSI/SSP grants in effect on December 1, 2008 by 2.3%., reducing the monthly grant levels by $20 for individuals and $35 for couples.
• Either way, this would also continue the cut (withholding) of the federal cost of living increase that went into effect for SSI/SSP on January 1, 2009 – but is scheduled to be cut on May 1, 2009.
• Also continued either way is the cut (suspension) of the State cost of living money owed to SSI/SSP that will be due on June 1, 2010.
• This 2.3% grant reduction – if it takes effect – would mean a cut of over $267.8 million State general fund money during the 2009-2010 State budget year.

Exempts from this reduction are people receiving SSI/SSP living in SSP living arrangements for Non-Medical Out-of-Home Care and Title XIX medical facilities, as well as those receiving a Restaurant Meal Allowance.

CALWORKS GRANTS

The California Work Opportunity and Responsibility to Kids program – called “CalWORKS” is the state’s “welfare to work” program which includes thousands of low income children and their parents who have disabilities or other special needs, including mental health needs. Other cuts to CalWORKS are happening or will happen, regardless of the decision by the State Treasurer and Department of Finance Director on the $10 billion threshold.

CalWORKS Grant Reduction

• Effective July 1, 2009, would permanently reduce the CalWORKs maximum grant payments by 4%.
• This would mean a loss of $29 monthly for a family of three, reducing their monthly grants from $723 to $694.

Reduction – if it goes through – would mean a cut of $146.9 million in State general fund money during the 2009-2010 State Budget year..

OTHER PROGRAMS IMPACTED BY FEDERAL TRIGGER

• Cuts to Courts (new judges, trial court operations) of $171.3 million in State general funds.
• University of California cut of $50 million in State general funds.
• California State University cut of $50 in State general funds.
• The increase in personal income tax drops from 0.25% to 0.125%

LEGISLATIVE BUDGET LANGUAGE

The following is the legislative budget (trailer) bill language in ABx3 16 that was passed and signed by the Governor in February along with the main budget bill and other budget related bills, dealing with the federal “trigger cuts”:

SECTION 1. Section 99030 is added to the Government Code, to read:
99030. (a) On or before April 1, 2009, the Treasurer and the Director of Finance shall meet and confer in a public hearing for the purpose of determining whether federal legislation has been enacted that will make available, by June 30, 2010, additional federal funds that may be used to offset not less than ten billion dollars ($10,000,000,000) in General Fund expenditures.

(b) Notwithstanding any other provision of law, the Treasurer may send a designee and the Director of Finance may designate a deputy of his or her office to act in his or her place and stead for purposes of subdivision (a).

(c) If, on or before April 1, 2009, the Treasurer and the Director of Finance determine that sufficient federal funds have been made available as described in subdivision (a), the Director of Finance immediately shall notify, in writing, the Joint Legislative Budget Committee and the Controller of this determination.

(d) This section shall be operative only until July 1, 2010, and as of that date is repealed.

SEC. 2. This act addresses the fiscal emergency declared by the Governor by proclamation on December 19, 2008, pursuant to subdivision (f) of Section 10 of Article IV of the California Constitution.

SEC. 3. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to reduce General Fund expenditures at the earliest possible time, it is necessary that this act take effect immediately.

The California Disability Community Action Network, is a non-partisan link to thousands of Californians with developmental and other disabilities, people with traumatic brain injuries, the Blind, the Deaf, their families, community organizations and providers, direct care, homecare and other workers, and other advocates to provide information on state (and eventually federal), local public policy issues.

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