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pdf 1969-1970 AFDC Budget LAO Analysis

Published on 06 May 2017 By Anonymous 5970 downloads

1969-1970 AFDC Budget Analysis.pdf

” Rehabilitation Item 165 Department of Rehabilitation-Continued mination cases will be processed and 14,000 persons will be referred for vocational rehabilitation. Departmental Administration Program The purpose of this activity is to provide executive direction, plan- ning, policy determination and office services for operation of all de- partment programs. Organizational units include the Executive Office, Management Services, Research and Statistics; Program Planning, Program Analysis and Consultation, and Staff Development. The budget proposes an expenditure of $2,6-88,342, most of which is distributed to other programs, for the 1969-70 fiscal year. This is $185,903 above the amount estimated to be expended during the current fiscal year. SOCIAL WELFARE GENERAL SUMMARY Social welfare has as its objectives the providing of money for food, clothing, and housing; certification for medical care and food stamps; and rendering social services to dependent persons so that they may become more self-sufficient and independent. Proposed 1969-70 social welfare expenditures in California, from all funds, total $1,588,198,785. This is an increase of $156,495,420, or 10.9 percent over the estimated expenditures for 1968-69. This $1,588,198,785 is broken down by source of funds in Table 1. Table 1 Total 1969-70 Social Welfare Expenditures Including Administrative Cost By Source of Funds Sou1’ce of funds State General Fund ___ _ Federal funds ________ _ County funds ________ _ Total $578,826,242 731,586,706 277,785,837 A.s.~istance $545,362,597 706,431,729 277,785,837 Unallocated support and specialized social service programs $33,463,645 25,154,977 Total ______________ $1,588,198,785 $1,529,580,163 $58,618,622 The total of $1,529,580,163 for assistance is distributed by program as follows: Aid to the Blind, including self-supporting _______________ _ Aid to Needy Disabled ________________________________ _ Aid to Families With Dependent Children _______________ _ Old Age Security _____________________________________ _ U nmet Shelter Needs _________________________________ _ Work Incentive Program _____________________________ _ Federal aid programs __________________________________ _ $25,790,512 265,869,439 790,375,772 435,068,019 3,814,482 4,395,000 4,266,939 Total program expenditures ___________________________ $1,529,580,163 618 Social Welfare Item 165 General Summary-Continued Table 3 California Population and Number of Welfare and Medi-Cal Recipients Monthly Percentage Percentage Recipients A.verane increase Monthly increase as percent Fiscal civilian from Average fro’m of civilian year population 1 p1’ior year Recipients prior year population 1960-6L________ 15,865,000 601,952 3.80\/0 1961-62 _________ 16,450,000 3.70\/0 638,626 0.60\/0 3.9 1962-63 _________ 17,043.000 3.6 743,168 16.4 4.4 1963-64 _________ 17,625,000 3.4 831,626 11.9 4.7 1964-65_________ 18,159,000 3.0 944,524 13.6 5.2 1965-66 _________ 18,604,000 2.5 1,141,863 20.9 6.1 1966-67 _________ 18,988,500 2.1 1,298,194 13.7 6.8 1967-68 _________ 19,423,500 2.3 1,475,662 13.7 7.6 1968-69 _________ 19,908,000 2.5 1,647,400 ‘ 11.6 8.3 1969-70 _________ 20,404,000 2.5 1,809,200 1 9.8 8.9 1 Estimated. There has continued to be a nationwide increase in welfare caseloads. California appears to have a larger overall welfare burden than most other states including some of the more highly populated and industrial states. The following factors contribute to this higher caseload in California. (1) California has lower eligibility requirements for categorical aid programs than most other states. (2) In a society where technology changes and advances occur at a rapid rate, such as the recent development of sophisticated farm machinery, there are persons who :find it difficult to :find other employment or to be retrained. (3) Continued-high in-migration when compared to other industrial states. Tables 4 and 5 compare California with New York, Michigan, Illinois and the nation as a whole as of July 1968. Michigan and Illinois have state administration of welfare and New York and California have a joint state-county system of administration. Table 4 Comparative Population Recipient Data July 1968 Program U.s. New YO\/’k Oalifomia Illinois Michigan Adult recipients: Old age security per 1,000 population aged 65 and over 105.0 40.0 175.0 33.0 48.0 Aid to the blind per 100,000 population age.d 18 and over 63.0 27.0 104.0 25.0 26.0 Aid to the disabled per 1,000 population aged 18-64 ____ 6.2 4.1 12.0 5.6 4.2 Aid to families with dependent children receipients: Dependent children per 1,000 population under age 18 .. __ 58.0 105.0 88.0 60.0 45.0 Dependent children per 1,000 popnlation under age 2L __ 51.0 92.0 78.0 53.0 40.0 General assistance per 1,000 population under age 65 ___ 4.6 12.2 2.8 5.3 8.7 620 Item 165 General Summary-Continued Table 5 Average Monthly Payments Per Recipient July 1968 Program U.S. New York Old age s~urity _____________ $68.40 $94.55 Aid to the blind_____________ 91.45 i21.90 Aid to the disabled__________ 81.80 109.40 Aid to families with dependent children ______________ ~__ 42.15 General assistance___________ 45.55 71.00 69.05 Oalifornia $101.60 138.85 118.70 46.60 42.45 Social Welfare Illinois $61.00 80.50 81.95 43.85 44.15 Michigan $67.65 88.50 87.15 45.10 34.85 Table 6 compares welfare administrative cost in California, New York, Michigan and Illinois and the nation as a whole for the 1967-68 fiscal year. Table 6 Administrative Cost Per Recipient 1967-68 Fiscal Year Program U.S. N ew York Average all programs _______ $94.20 $130.66 Old Age Security ___________ 86.28 251.97 Aid to the Blind ___________ 145.02 468.51 Aid to the Needy Disabled ___ 176.39 314.73 Aid\u00b7to Families with Dependent Children _________________ 86.54 108.89 Oalifornia $156.70 92.35 187.04 345.77 151.50 Illinois Michigan $98.18 $85.68 162.37 93.28 162.85 74.45 161.78 106.92 81.02 82.08 Public assistance program characteristics for California, New York, Illinois and Michigan are comparable in that they provide the same basic programs to recipients. That is, these states provide assistance in the form of money payments, medical care .and social services to aged, blind, disabled persons and families with dependent children, including unemployed parents. Some states do not include unemployed fathers in their families with dependent children program and provide a differ- ent type of medical assistance than the states identified in the tables above. There are differences between eligibility factors and standards of assistance provided by the various states including those identified above. In general, of the states identified, California permits the great- est property reserve but requires the longest residency. The exception to this is the AFDC reserve property allowance in New York, which permits families to exempt a $1,000 trust fund for each child. California allows the family to have $600 in cash or other personal property. Because of the differences between program and services provided by the various states, as well as the methods of allocating administrative cost, caution should be used when comparing California to other states or the U.S. as a whole. However, with these differences in mind, the information in Tables 4, 5, and 6 may be used in a limited way for comparative purposes. – State Administration We recommend that the state adopt a system of direct state admin- istration of all categorical aid welfare programs as well as county gBn- eral relief programs. 621 Social Welfare Item 165 General Summary-Continued California has a higher administrative cost than most other states in the country per recipient serveil. Some of this is due to higher salaries and operating expenses as well as the level of service given. However, we think that much of this high administrative cost is due to the general welfare organization in California. California has traditionally administered the welfare function through a state-county system. The State Department of Social Welfare is responsible for supervising the administration of the categorical aid programs and social services programs. The counties are directly re- sponsible for determining eligibility, paying assistance, providing serv- ices and reporting to the state. We believe that this system has developed into a huge, complex or- ganism which devotes excessive amounts of its resources to relatively unproductive functions through which the state and county each at- tempts to preserve its own identity and to overcome almost unsolvable administrative problems among and between its semiautonomous parts. The net result of this dual system and the continuing problems that it produces is that welfare laws are not uniformly applied throughout the state, that it is impossible to locate and assess responsibility for program failure, and that the cost of program administration is sub- stantially more than it needs to be. The most expensive single function performed by the state depart- ment is its relatively fruitless effort to write and interpret rules, reg- ulations and explanatory materials for 58 semiautonomous county wel- fare departments. The county welfare departments in turn expend much time and effort attempting to comply and at the same time pre- serve their local autonomy and to respond to local demands which are frequently incompatible with state requirements. In the end we do not have uniform application of the welfare laws in all jurisdictions. The efforts of social workers are diverted to endless problems of communication and interpretation, and no real progress is made toward the basic objectives of the system which is the elimina- tion of dependency on welfare to the greatest practical extent. Under state administration the state would assume the responsibility for the functions of determining eligibility, paying assistance, and pro- viding services, together with the related administrative activities which are currently performed by the counties. Flexibility to take advantage of diverse organizational concepts would be one of the numerous bene- fits of state administration, providing efficiency in relation to the pri- ority needs of the programs. Other benefits of centralized state administration would be (1) the uniform administration of the welfare laws as they affect all dependent persons, (2) the opportunity for the Legislature to study the admin- istration of welfare more directly by having one organizational head responsible for all welfare activities, and (3) the ability to direct pro- gram changes against the massive problem of dependency without the dilution of purpose which presently occurs through communication and interpretation and the necessity to secure cooperation among separate entities with divergent and frequently conflicting ideas, interests, loyal- 622 Item 165 Social Welfare General Summary-Continued ties, and motivations. Systems and procedural simplification should also result in a substantial reduction in the excessive cost of administer- ing the present system. The argument most commonly advanced for the retention of the present system at the local administrative level is that local authorities, being closer to the people, can judge need more accurately and therefore prevent the undue enlargement of caseloads. This argument may have been valid when California was rural in character and when relief was a direct financial responsibility of local resources. However, these con- ditions no longer prevail in California and the growth of caseloads and cost which are evident in recent years, contradict the argument. Today eligibility and grant levels are prescribed by statewide standards and any significant deviation or difference resulting from local attitudes violates the intention of the law. It is far more likely that realistic welfare programs can develop under a system of state administration more amenable to direct legislative control on a statewide basis than from the present unwieldly, chaotic structure which is engrossed in the problems of self preservation and autonomy at the expense of making progress towards welfare’s basic objectives. Planning the actual transition to state administration will require considerable study and a minimum of two years of preparation prior to efficient implementation. Decisions will need to be made concerning the organization, delivery and financing of welfare services . .An inven- tory of equipment, facilities and personnel will be necessary . .All agen- cies involved in the present welfare system will need to help in the planning and implementation of programs during this transitional period. Many of the changes. particularly in relation to personnel mat- ters and fiscal operations, will involve several state and county agencies . .Adequate staff time must be made available and supplemented during the transition period to make possible the careful planning which is required. If the state could approach the administrative cost per recipient that prevails in Michigan and Illinois, California taxpayers could save ap- proximately $95 million per year. Due to various factors, including higher costs, we do not anticipate a savings of this magnitude. How- ever, we do believe a savings on the order of $50 million could reason- ably be expected after implementation of state administration. Closed – End Appropriation We recommend that the Legislature adopt a method of closed-end appropriations for social welfare expenditures. Public assistance grants to recipients are provided for by open-end appropriations. This means there is no limit to state expenditures for welfare purposes for any fiscal year except in the aid to needy disabled category, which is limited to a maximum based on a statewide average per month per fiscal year. Social welfare expenditures may exceed the proposed subvention estimates by an amount limited only by the solvency of the State Treasury. Under the present open-end appropria- tion the Legislature has no direct control over expenditures. 623 Social Welfare Items 166-167 General Summary-Continued A closed-end appropriation, which is the method used in many other states, would require state funds to be appropriated annually after legislative review of the estimates submitted by the State Department of Social Welfare. The ability to identify the various factors comprising the state costs gives further credence to the desirability of closed-end appropriations for welfare programs. Because state support of the Medi-Cal program is a closed-end appropriation, we have been able to better identify the factors which increased cost in the state support of Medi-Cal, and therefore to provide better cost controls. DEPARTMENT OF SOCIAL WELFARE Items 166 and 167 from the General Fund Requested 1969-70 ___________________________________ $16,866,593 Estimated 1968-69 __________________________________ 15,898,841 Actual 1967-68 _____________________________________ 13,502,647 Requested increase $967,752 (6.1 percent) Increase to improve level of service $31,711 Total recommended reduction ________________________ _ SUMMARY OF RECOMMENDED REDUCTIONS Amount General Fund Medical certification ________________ $52,990 Work incentive program ____________ 16,278 Research and statistics _____________ 19,650 Management analysis _______________ 7,278 Totals ________________________ $96,196 Federal jU1td $52,990 48,834 19,650 7,278 $128,752 Total $105,980 65,112 39,300 14,556 $224,948 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS $96,196 Analysis page 626 627 629 629 We withhold recommendation regarding a request for 11 clerical positions pending a review of departmental needs after a move of central operations from three locations to one location. GENERAL PROGRAM STATEMENT The Department of Social Welfare is responsible for ‘supervising administration of the categorical aid programs and social service pro- grams discussed under Item 348 of this analysis. In general, the depart- ment coordinates and integrates a statewide social welfare program. The department also is required to provide fair hearings to welfare applicants and specific reports to the federal government. The depart- ment pursues its objectives through a series of programs and functions. These include Public Assistance Categorical Aid and Special Social 624 Items 166-167 Social Welfare Department of Social Welfare-Continued Service programs which are grouped into five broad categories as follows: (1) Support and Maintenance Programs. (2) Human Resources Conservation Programs. (3) Public Protection Programs. . . (4) Community and Local Agency Resources Improvement and Sup- port Programs. (5) Systemwide Planning, Management and Supporting Functions. In terms of man-years, total positions for the department for the past, current and budget years are shown in Table I. Table I Total Man-Years, Department of Social Welfare I norease from Fisoal year Total prior year 1967-68 (actual) ___________________________ 1474.3 1968-69 (estimated ) __ ~ _____________________ 1701.5 227.2 1969-70 (proposed) _________________________ 1736.8 35.3 The department also has 61 authorized positions which do not appear in this item. These positions are discussed under Items 347 and 348 of this analysis (Special Social Services Programs). The executive agency of state government administering the welfare programs is the State Department of Social Welfare, headed by a director and chief deputy director, appointed by the Governor. The director is responsible for setting policy, adopting standards that define the purposes and responsibilities of state welfare operations, administer- ing welfare programs, and rendering decisions on public assistance appeals cases. A seven-member State Social Welfare Board, appointed by and serv- ing at the pleasure of the Governor, functions as an advisory body to the department and is also responsible for broad study in the welfare field. Support and Maintenance Programs The Support and Maintenance programs are designed to enable people to subsist at a level compatible with an established minimum standard of health and decency. Aid payments are provided through public assistance programs for adults and for children and their families and by certifying eligibility for Medi-Cal benefits and for federal food stamps. The\u00b7 detailed expenditure schedules for these programs will be found in the traditional budget under Subventions for Health and Wel- fare-Public Assistance Programs, page 746. The total state operational cost of the supporting elements of the program are carried in this item of the budget. Aid payments are made through Aid to Families with Dependent Children, Aid to the Needy Disabled, Old Age Security,\u00b7 and Aid to the Blind programs. These categorical aid programs may be supplemented by county general relief programs which are separate and in addition to\u00b7 the programs men~ tioned above. 625 Social Welfare Department of Social Welfare-Continued Medical Certification Items 166-167 We recommend the deletion of: seven hospital social worker II posi- tions and four hospital social worker I positions for a total salary savings of approximately $105,980 ($52,990 General Fund) plus re- lated operating expenses. At the present there are 28 permanent State Department of Social Welfare hospital social workers and 12 permanent clerks assigned to 13 state mental hospitals throughout the state. These workers process wel- fare and Medi-Cal applications for patients over 65 years of age and mentally retarded persons 18 through 64 years of age. This activity in- cludes: helping the patients complete the application forms; assembling informational material on applicants, which is available in the institu- tions; interviewing the patients when possible; and forwarding all of this information to the counties involved. In addition the workers main- tain working relationships with hospital and county welfare depart- ment staff and supervise the preparation of statistical reports. Clerical staff is provided for recordkeeping, correspondence, and other required duties. The department is reimbursed for the cost of these positions through the Health Care Deposit Fund. Department of Mental Hygiene psychiatric social workers located in the hospitals are required to provide all social services to welfare recipients in the hospitals. They do the main workup on the case, gather information about the patient and the patient’s family and work with the patient and his family. Mental Hygiene trust officers receive the public assistance payments for the patients and handle the fiscal aspects for patients who are certified for Medi-Cal. Hospital social workers have fewer and less time-consuming tasks and more clerical support than county eligibility workers who not only perform typical tasks similar to hospital workers but in addition must complete the investigation and grant, or deny aid. In addition to having a more difficult job, county eligibility workers are not required to have the education and experience of the hospital social workers. The hos- pital social worker I must have graduated from college and have one year of experience as a social worker or eligibility worker in a public or private welfare agency. A county eligibility worker requires two years of college and one year of experience of a clerical nature in a public or private welfare agency. Upon the recommendation of the Department of Social \\\u00a5 elfare the suggested caseload for county eligibility workers with clerical support is 350 active continuing cases plus any new cases that might come in during the month. Because the job in the hospital is less difficult, the qualifications of the workers are higher, and because there is addi- tional clerical support we believe a workload of 450 cases per worker is more realistic. Based on 450 cases per worker, the State Department of Social Welfare will need 17 hospital social workers to serve the 7,570 caseload anticipated for 1969-70. We have recommended the deletion of 11 positions based upon our suggested yardstick. 626 Items 166-167 Social Welfare Department of Social Welfare-Continued Human Resources Conservation Programs The Human Resources Conservation programs are designed to strengthen and preserve family life, improve the capabilities of indi- viduals to realize their full potentials for productive, independent liv- ing, increase their earning capacity and protect those who cannot effec- tively protect themselves. The following six programs are included as human resources con- servation programs: (1) The Self-Support program which is concerned with planning, motivating and preparing the recipient for job training and placement and includes sheltered employment for disabled persons and day-care services. (2) The Child Protection program. (3) The Adoption program which provides development and support of relin- quishment and adoption services, safeguards children in independent adoptions, intercounty adoptions and provides adoption information and control. (4) The Adult Protection and Self-Care program. It should be noted that an increase of $126,842 is proposed in this pro- gram to improve the level of service by providing prerelease screening of mental patients. (5) The Protective Services for the Mentally Hand- capped. (6) The Family and Child Development program which in- cludes family services, preschool educational services and foster care services. Self- Help Program-Recipient Training We recommend the deletion of five positions requested for the Work Incentive program and the transfer of one Social Service Administrator III to the Employment and Training program, for a total net savings of $65,112 ($16,278 General Fund). Work Incen\u00b7tive Program TheWork Incentive program (WIN) is designed to restore appropri- ate AFDC recipients to regular employment through counseling, train- ing and job placement, or to provide employment on special work proj- ects to improve the communities in which they live. Currently the program is operated in the 26 counties having the larger AFDC case- loads and will be extended to other counties as federal funds become available. County welfare department responsibilities are: (1) refer all AFDC recipients who are trainable or employable to the State Department of Employment; (2) provide social services to the families of those enrolled in the program as needed; (3) provide for child care when needed and provide training or work-related expenses in addition to the normal public assistance grant. The State Department of Em- ployment staff is responsible for the assigning of accepted recipients to counseling, tutoring, orientation training, work experience training, or special work projects and for the eventual placement of the recipients in employment. Six positions including one social service administrator III, one social service administrator I, one welfare fiscal representative, one associate social research analyst and two social service administrator II positions have been requested to augment the present department staff working in the WIN program. 627 SociliJ Welfare Items 166-167 Department of Social Welfare-Continued The old recipient work and training programs previously operated by the department are to be succeeded, by July 1, 1969, by the WIN pro- gram. The Department of Employment has already taken over the ad- ministration of recipient training programs previously supervised by the State Department of Social Welfare through Title V projects and work experience and training programs. The State Department of Social ,Velfare staff supervised the various county welfare work ex- perience and training programs. Now under the current WIN program the staff coordinates activities with the Department of Employment rather than supervising programs. We feel that recipient training pro- grams should receive the highest of priority’ and we did not take issue with the department retaining its present recipient training staff even though the Department of Employment has taken over the major responsibility for the training of recipients. However, we do not think that the department can justify additional staff in this area when such a large part of the departmf’nt’s previous responsibility has been removed. Educational Training Program (ETP) The Educational Training Program (ETP) is designed to supplement and complement the WIN program by providing self-support services in areas of the state not covered by WIN or where WIN cannot serve all appropriate recipients. It is administered by county welfare depart- ments that elect to do so in accordance with a county plan of services which assnres no duplication of effort. Upon completion of training under ETP, participants are referred to the Department of Employ- ment for job placement . .As the capacity of WIN increases, the activ- ities carried under this program will decrease proportionately. How- ever, there will remain between 10,000 and 20,000 .AFDC recipients who will not be eligible for WIN because they are non-federal .AFDC recipients. The department must emphasize those activities which help reduce the rolls or increase the earned income available to these families not eligi- ble for the WIN programs. To provide additional emphasis, coordina- tion and supervision for this program as well as the other training pro- grams, we recommend that the social service administrator III position requested for the WIN program be assigned to the Educational Train- ing program. Public Protection Program We recommend approval as b~tdgeted. The objective of this program is to maintain standards for children’s agencies and facilities, facilities for aged persons and life-care contracts. These objectives are met through licensing and inspection programs under the provision of Sections 16000-16318, Welfare and Institutions (Jode. The department reviews, counsels and licenses facilities for the reception and care of the aged and for the reception and care of chil- dren\” both directly and through delegation to local agencies. The de- partment also issues certificates of authorization for certain institutions for the aged to enter into life-care contracts with aged persons. 628 Items 166-167 Social Welfare Department of Social Welfare-Continued Community and Local Resources Improvement and Support Programs We recommend approval as budgeted. Community and Local Agency Resources Improvement and Support programs are designed to help local agencies and communities develop the resources required to meet the needs of disadvantaged people and to help coordinate community efforts to deal with the problems faced by these people. These specific programs include: Community, Planning and Development ; Public Welfare Manpower program and Demonstra- tion Projects program. Systemwide Planning, Management and Supporting Functions This program includes centralized activities and services regarding planning, direction, administration and audit control which are in- cluded in the Support Budget-General Activities. In addition, this program includes general administrative staff, the Research and Sta- tistics Bureau, the Electronic Data Processing Bureau and other de- partmental support staff. Research and Statistics Bureau We recommend a reduction of three associate social research analyst and one clerk II positions for a total savings of $39,300 ($19,650 Gen- eral Fund). The primary goal of the Research and Statistics Bureau (R. & S.) is the development and maintenance of a statistical reporting system which will provide facts upon which managerial and administrative decisions regarding welfare can be made and federal reports compiled. Three associate social research analysts and one clerk II are proposed to develop reports regarding protective services for children, act as field staff to supervise county research activities, and analyze statistics de- veloped on manpower and personneL We feel the four positions re- quested are not justified because reports previously processed manually by R. & S. staff have been or will be automated soon and the staff which has been developing the automated reporting procedures will be avail- able early in the 1969-70 fiscal year. The R. & S. Bureau requested and received authorization in the 1968-69 budget to establish seven positions to meet deadlines for ~ederal reports and complete ADP sampling techniques. In connection with these positions, two programmer II positions were authorized in the Data Processing Bureau to program the procedures developed by the R. & S. Bureau. Much of the work of this staff should be accomplished prior to July 1969, and should then be available for other responsibil- ities such as those proposed above. Management Analysis We recommend the deletion of one senior management analyst posi- tion for a savings of $14,556 ($7,278 General Fund). The Department of Social Welfare has been reorganized as of Octo- ber 1, 196-8. As part of that reorganization the Management Analyst Bureau was abolished and the personnel and functions assigned to it . were dispersed to several bureaus in the department .. The sep.ior mau- ‘,629 Social Welfare Items 168-169 Department of Social Welfare-Continued agement analyst position which functioned as the head of the bureau has been vacant since August 30, 1968. We recommend its deletion. Business Management and Offices Services We withhold recommendation regarding 11 new clerical support posi- tions pending a review of department needs after it has moved into new quarters. This function of the department is to provide the space, equipment, supplies and centralized office services required to support the depart- ment’s operation. These positions are based and adopted on a work measurement standard which established a ratio of clerks to profes- sional positions. Page 576 of the Program Budget states: \”Units of the headquarters office are in three widely separated locations, and this has a heavy impact on the centralized office service operation.\” The department should be prepared to discuss the number of personnel man-months presently required because of the three separate office locations in Sac- ramento, such as extra messengers, typing pool supervisors and dupli- cating staff. By the start of the 1969-70 fiscal year the department will move its personnel from the three locations to one central location in Sacramento. On the basis of this move it would appear that some reduction in staff could be made. We are, therefore, withholding our recommendation on the proposed 11 clerical positions pending a review of department needs. DEPARTMENT OF INDUSTRIAL RELATIONS Items 168 and 169 from the General Fund Requested 1969-70 ————–____________________ $22,715,150 Estimated 1968-69 __________________________________ 22,148,130 Actual 1967-68 ——————–_________________ 20,417,380 Requested increase $567,020 (2.6 percent) Total recommended reduction ——–________________ $30,000 SUMMARY OF RECOMMENDED REDUCTIONS Analysis Amount page Reduce operating expenses in the Division of Administration__ $30,000 632 GENERAL PROGRAM STATEMENT The Department of Industrial Relations was created by the Legisla- ture in 1927 to \”foster, promote, and develop the welfare of the wage earners of California, improve their working conditions, and advance their opportunities for profitable employment. \” To meet these broad objectives, the department provides services in the following nine program areas: (1) Conciliation Service, (2) Indus- trial Accidents, (3) Industrial Safety, (4) Industrial Weliare, (5) Labor Law Enforcement, (6) Apprenticeship Standards, (7) Labor Statistics and Research, (8) Fair Employment Practices, and (9) State 630 ”

pdf 1972-1973 AFDC Budget LAO Analysis

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1972-1973 AFDC Budget Analysis.pdf

” Social Welfare Summary SOCIAL WELFARE 155,000. disability determination applications will be processed. This represents an increase of 12,000 above the current year and 24,030 -above the 1970-71 fiscal year. DEPARTMENTAL ADMINISTRATION PROGRAM We recommend approval. This program includes the office of the director, management serv- ices, and field support services. These activities provide executive direction, planning, policy determination and staff support for opera- tion of all departmental programs. The budget proposes the expenditure of $2,744,264 to support this program in 1972-73, an increase of $113,961 above the amount estimat- ed to be expended in the current year. Under program budgeting concepts, the entire amount for support of this program is charged to other programs. No major changes are proposed for this program during 1972-73. Shifts in staffing were made during the current year to reflect the changes in workload associated with the increase in the programs mentioned above. A total of 17.6 new positions are proposed for the budget year, 15.6 of which were administratively added during the current year. SOCIAL WELFARE SUMMARY Proposed total program expenditures 1972-73 (all funds) ……………………………………………………………… $2,783,873,402 Estimated total program expenditures 1971-72 (all funds) ……………………………………………………………… $2,665,225,134 Increase (4.6 percent) ……………………………………………. + $118,648,268 RECOMMENDATIONS (1) We recommend that the Legislature require the State Department of Social Welfare to submit all proposed new regulations to the Executive Committee of the County Welfare Directors Association for its advice. (2) We recommend that the Legislature require the State Department of Social Welfare to submit the proposed regulations to the Executive Committee no later then 30 days prior to the date of filing with the Secretary of State, unless a regulation is to be adopted on an emergency basis in which case it shall be submitted to the Executive Committee no later then fifteen days prior to the date of , filing. (3) We recommend that the County Welfare Directors Association and the Director of the State Department of Social Welfare be required to jointly develop specific criteria establishing the basis for the issuance of emergency regulations. The association and the 25-82626 719 167124.505 SOCIAL WELFARE Social Welfare Summary SOCIAL WELFARE-Continued director should be further required to submit no later than the 30th day of the 1973 legislative session a listing of such criteria to the Legislature. (4) We recommend that in all cases in which the director does not abide by the advice of the association, he be required to submit to it within 15 days a report specifying in detail the reasons for his refusal. (5) We recommend that the Department of Social Welfare be required to develop specific, measurable goals as well as potential outputs for its Bureau of County Training and that these goals and outputs be included in the department’s program budget statement for fiscal year 1973-74. The goals developed by the department should (a) assure a uniform application of welfare regulations throughout the state, (b) reflect a much heavier emphasis upon the training of eligibility technicians rather than social workers, and (c) stress the use of on-the-job training in preference to classroom instruction. A listing of the goals developed by the department should be provided to the Joint Legislative Budget Committee no later then June 30, 1972. (6) We recommend that the Chief of the Bureau of County Training, State Department of Social Welfare, not be required to possess a master’s degree in social work. (7) We recommend that the Legislature require the State Department of Social Welfare to establish in Sacramento County a pilot project designed to test (a) the administrative feasibility, (b) the fiscal effect, and (c) the impact upon recipient work patterns associated with the implementation of the following AFDC restrictions: (1) The termination of all recipients whose total gross income, exclusive of grant payment and prior to any deductions, exceeds 150 percent of the need standard for such recipient; (2) the requirement that exemptions relating to expenses incurred by employed recipients shall be limited to no more than $125 per month; and (3) provision for the deduction of all nonexempt income from the AFD E flat grant schedule defined by Section 11450 of the Welfare and Institutions Code. GENERAL PROGRAM STATEMENT For the 1972-73 fiscal year, proposed program expenditures (all funds) for support of public welfare activities total $2,783,873,402, to be financed from General Fund appropriations, county funds, federal grants and reimbursements. The budget indicates that total expenditures for support of public welfare activities will increase $118,648,268 above that estimated to be expended during the current fiscal year. Table 1 summarizes the department’s proposed expenditures by program and source of funds. 170124.520 720 Social Welfare Summary SOCIAL WELFARE Table 1 Total Proposed 1972-73 Welfare Expenditure Including Administrative Cost by Category and Source of Funds Governor’s Budget Program ‘1’otal ]i’ederal General Pund County ::!tate operations __________ $22,657,362 $8.429,992 $14,227,370 Categorical aid ___________ 1,781,485,250 854,423,450 647,676,900 $279,384,900 Attendant and out-of-home care ______ 151,286,100 75,411,600 1)9,91’\\6,900 15,83’7,600 Special needs ____________ 59,318,700 29,596,800 27,306,200 2,415,700 Local administration of public assistance, including social services ________ 459,847,000 * 294,705,000 49,39H,600 11.5,743,400 Special social services _____ 135,217,190 112,824,536 19,657,090 2,735,564 Bonus value of food stamps 174,111,800 174,111,800 Total _______________ $2,788,873,402 $1,549,503,178 $818,253,060 $416,117,164 The state does not participate in the funding of social services administrative costs. Departmental Responsibilities The Department of Social Welfare is charged with the following responsibilities: (1) To provide, within the limits of public resources, resonable cash grant assistance to financially needy persons; (2) To furnish social services designed to assist financially needy persons to develop a capacity for self-support; (3) To provide pretective social services to (a) financially needy persons who are disabled, and (b) persons who are subject to exploitative practices which threaten their health, opportunity for development or capacity for independence. Major Legislation Major legislation affecting the administration of welfare in Calfornia was enacted during the 1971-72 fiscal year. Chapter 578, Statutes of 1971 (Senate Bill 796), requires the implementation of very significant program modifications relating to eligibility and grant determinations, the administrative and funding relationship between the counties and the state, OAS responsible relative liability, confidentiality, family planning services, day care services, and employability programs. Among the more significant changes required to be effected by the statute are the following: (1) 150 percent of gross income limitation-Section 25.2 of the chaptered bill renders ineligible for aid, to the extent per~itted by federal law, any AFDC recipient whose total gross income, exclusive of grant payment and prior to any deductions, exceeds 150 percent of the need standard for such recipient. (Section 11267 of the Welfare and Institutions [W. and I.] Code.) (2) Work Related Expenses-Section 28.1 provides that exemptions related to expenses incurred by employed AFDC recipients shall be limited to $50 plus reasonable and necessary costs associated with child care. (Section 11451.6 of the W. and I. Code.) 721 172124530 SOCIAL WELFARE Social Welfare Summary SOCIAL WELFARE-Continued (3) AFDC Flat Grant Schedule-Sections 28, 28.5, and 29.1 (a) eliminate the maximum participating base (MPB) and (b) provide for the establishment of a flat grant schedule adjusted to reflect only the differing dollar requirements related to various family sizes. Grants paid to AFDC recipients are required to equal the amount specified by the schedule when added to all other income available to the family after deduction from the gross income of the family of the exemptions required by federal and state law. The schedule is required to be adjusted annually, commencing during the 1973-74 fiscal year, to reflect changes in the cost of living. (Sections 11450, 11452, and 11453 of the W. and I. Code.) (4) Special Needs-Section 28 eliminates state participation in the funding of allowances in the AFDC program for special needs which are not common to the majority of needy persons. Recurring special needs not common to the majority of needy persons and nonrecurring special needs caused by sudden and unusual circumstances beyond the control of the needy family are to be funded by the counties. The state continues to participate in the funding of recurring special needs which are common to the majority of recipients. (Section 11450 of the W. and I. Code.) (5) Verification of Eligibility-Sections 23.2 and 25.1 provide that verification of applications of recipients requiring immediate assistance must occur within five working days. If eligibility is not verified within five working days, the county must bear the entire cost of the cash payment made to the applicant. (Sections 11056 and 11266 of the W. and I. Code.) (6) Exempt Property-Sections 24.1, 24.2, 24.12 and 24.13 repeal those sections of the Welfare and Institutions Code which provide for the exemption of certain personal property in determining eligibility for assistance under the provisions of the various aid programs. These sections establish maximum value limits relating to such personal property. (Sections 11155, 11258, and 11261 of the W. and I. Code.) (7) Changed Sharing Ratios: Administrative Costs-Section 23 requires that the State Department of Social Welfare, rather than the counties, assume all responsibility relating to the control of the eligibility and grant level determinations which underlie the various aid programs. It further requires that the state fund 50 percent of the administrative costs related thereto. The State Department of Social Welfare is permitted, however, to contract with the counties for the discharge of its responsibilities relating to the determination of eligibility and grant amounts. This section of the chaptered bill is not to be 181124575 722 Social Welfare Summary SOCIAL WELFARE implemented until July 1, 1972. (Section 11050 of the W. and I. Code.) (8) Changed Sharing Ratios: Grant Costs-Sections 39.1 through 39.4 provide (a) that the state and the counties shall share equally the nortfederal costs for support of A TD cash grant payments and (b) that the state shall assume the full funding of the nonfederal costs for support of cash grant payments made to recipients of the three other adult aid programs, AB, APSB and OAS. This section of the chaptered bill is not to be implemented until July 1, 1972. (Sections 15201, 15202,’ 15203, and 15204 of the W. and I. Code.) (9) Lump Sum Income and Casual and Inconsequential Income-Sections 22, 24.3, 24.4, 24.14 and 32.9 of the bill very significantly reduce the exemptions which can be claimed on the basis of the lump-sum income and casual and inconsequential income provisions of the Welfare and Institutions Code. (Sections 11018, 11157, 11262, and 12052 of the W. and.1. Code.) . (10) Absent Parents and Stepfather Restrictions-Various sections provide for the implementation of administrative machinery needed to facilitate the collection of absent parent payments. In addition, Section 8.6 requires that a wife’s community property interest in a stepfather’s income be used for support of her children by a previous marriage. The section further provides, however, that in determining the wife’s interest in her husband’s community property, all prior support liability of her husband as well as $300 of his gross monthly income shall first be excluded. (Section 512.75 of the Civil Code.) (11) OAS Responsible Relative Liability-Section 33 authorizes a very significant increase in the relatives’ contribution scale. In addition, the bill requires that relatives’ contributions be paid directly to county welfare departments rather than the recipient. (Section 12101 of the W. and I. Code. (12) Confidentiality-Sections 11.5, 12, 13 and 14 permit the release of information by the State Franchise Tax Board and the Department of Human Resources Development to the Director of the State Department of Social Welfare for the purpose of determining entitlement to public social services. In addition, Section 19 permits county welfare departments to release lists of applicants for, or recipients of, public social services to any other county welfare department, the State Department of Social ,Welfare, or any other public agency to the extent required to verify eligibility. (Section 19286.5 of the Revenue and Taxation Code, and Sections 1094, 10915 and 2714 of the Unemployment Insurance Code.) (13) Work Programs-The statute appropriated $7 million to the 723 184 124590 SOCIAL WELFARE Social Welfare Summary SOCIAL WELFARE-Continued State Personnel Board for support of special work projects and career opportunities development programs and $2 million to HRD and SDSW for the work incentive program (Sections 11300-11308 of the Welfare and Institutions Code, Sections 5000-5403 and 12000 of the Unemployment Insurance Code.) (14) Day Care Services-The statute appropriated $3 million for support of an expansion of day care services throughout the state. Specifically, it requires each county to establish a day care program in cooperation with the Departments of Human Resources Development and Education. (Sections 10811 and 10811-5 of the Welfare and Institutions Code.) (15) Family Planning Services-Sections 16 and 17 provide that family planning services shall be offered to all former, current, or potential recipients of child-bearing age. These services are to be provided on the basis of contracts between county welfare departments and the State Department of Public Health, subject to the approval of the State Department of Social Welfare. Section 39.7 (a) appropriated $1 million to the Department of Public Health, to be used in conjunction with $3 million in federal matching funds, for provision of the family planning services. (Sections 10053.2 and 10053.3 of the W. and I. Code.) Chapter 578: Full\u00b7Year Savings Estimate The Department of Social Welfare estimated that passage of the act would generate, on a full fiscal year basis, a General Fund savings of approximately $59.5 million during 1971-72. Table 2 depicts the estimated full-year savings associated with the various provisions incorporated into Chapter 578. Table 2 SDSW Estimated Savings Associated with Implementation of Chapter 578 Provi8ion 1. 150 percent of gross income>limitation ______________________ _ 2. Work-related expense exemption limitation _____ – _ – – _____ – – – — 3. AFDC flat grant schedule ________________________________ _ 4. Stricter eligibility> standards including reform of (a) special needs, (b) verification of eligibility, (c) exempt personal property __ – 5. Standardized eligibility operations including (a) changed shar- ing ratios relating to grant and administrative costs and (b) contracting with counties to achieve enhanced administrative efficiency (not to be fully implemented until July 1, 1972) ___ _ 6. Lump sum income and casual and inconsequential income re- strictions ________________________________ – – — – – – – – _ – – – — 7. Absent parents and stepfather restrictions ___________________ _ 8. OAS responsible relative liability scale ______________________ _ 9. Confidentiality ________ – – — – – —— – – — – — — – —- — — —- 10. Work programs including day care services __________________ _ 11. Family planning _________________ – – – _______ – – – – – – – – – – – – – — 12. Others ____ —– – – ______ – — – – —— – – — —– — — — — ->– Total savings _________ – _ – – – _ – __ – – – – – – – – – – – – – – – – – – – – – – – — 1&5 124 S9S 724 Savinga $4. 6 million 12.0 0.0 15.0 5.0 0.5 6.8 17.6 11.3 (cost) 12.0 (cost) 1. 0 (cost) 0.3 $59.5 million Social Welfare Summary SOCIAL WELFARE Delayed Implementation of Chapter 578 With the exception of the provisions relating to (1) state assumption of the responsibilities underlying eligibility and grant determinations and (2) changed administrative and grant cost sharing ratios, which are to become effective July 1, 1972, implementation of Chapter 578 was scheduled for October 1, 1971. Since the implementation date was three months subsequent to the start of the fiscal year, the savings es.timates associated with passage of the act had to be adjusted to reflect a maximum potential savings accrual period of only three-quarters of 1971-72 fiscal year. The adjustment reduced the maximum savings estimate for 1971-72 from $59.5 million to $44.6 million. Survey of Implementation of Chapter 578 In early November, one month after the chaptered bill was scheduled to be implemented, we undertook a county survey in order to determine the extent to which the bill had been implemented and, in addition, the effectiveness of the administrative procedures developed by the department to effectuate the implementation. The survey was designed to serve as a monitoring device which could be used to determine the impact of the act throughout the course of the entire fiscal year. The survey will be updated in February and May of 1972. Sixteen counties, representing approximately 85 percent of the AFDC caseload and approximately 80 percent of the adult caseload, have been selected to participate in the survey. Survey Findings for October 1971 The November survey indicated that the October implementation of Chapter 578 was undertaken amidst considerable administrative confusion. Of the 13 major provisions of Chapter 578 which we reviewed in our survey, only three-the work-related expense limitation, the casual and inconsequential income restriction, and the stepfather restriction-were fully implemented in all 16 of the survey counties. However, of these three provisions, only two were securing savings of any significance, the work-related expense limitation and the stepfather restriction. Five of the provisions, the 150 percent of gross income limitation, the AFDC flat grant schedule, the family planning provision, the confidentiality provision, and the employability program including day care services, had not been implemented in any of the 16 survey counties. The remaining four provisions, the five-day verification of eligibility restriction, the special needs’ restriction, the lump-sum income restriction, and the OAS responsible relatives’ liability scale, had been partially implemented in several but not all of the survey counties. 725 ISS 124610 SOCIAL WELFARE Soc\”ial Welfare Summary SOCIAL WELFARE-Continued However, the counties which reported having implemented these four provisions indicated that significant savings related thereto had not yet materialized. Table 3 summarizes the extent of implementation achieved during October. 190 124620 726 ~ is ~ Prec. Item 255 Folio 1359 Table 3 Implementation of Major Provisions of Chapter 578-November 1971 FuUy implemented $50 work-related expense limitation casual and inconsequential income restriction (but no savings accruing) stepfather restriction Not implemmted 150 percent gross income limitation’ AFDC flat grant schedule’ family planning’ confidentiality’ employability programs including day care services’ , Counties instructed not to implement by the Department of Social Welfare. 2 Invalidated by the California Supreme Court Counties had received no implementing regulations from the State Department of Social Welfare. Partially implemmted 5-day verification of eligibility (no saving accruing) special needs restrictions (no savings accruing} lump sum income restrictions (no savings accruing) OAS responsible relatives liability scale (no savings have materialized) g [ ~ ;> @ I en o o ~ ~ = trI SOCIAL WELFARE Social Welfare Summary SOCIAL WELFARE-Continued Survey Findings for October 1971: Savings Reestimate The extent of implementation revealed by our November survey caused us to further recalculate our estimate of savings associated with passage of the act. The reestimate was not intended to reflect the maximum potential savings which we expected to accrue as a result of passage of the act. Rather, it was intended only to indicate the amount of savings which would accrue unless the act were more effectively and extensively implemented during the ensuing months. Table 4 summarizes the calculations underlying our November reestimate. 192 12 4 630 728 ~ ~ ,; Table 4 Chapter 578 Savings Estimates Adjusted to Reflect November Survey Findings of October Implementation Provision 1. 150 percent of gross income limitation ________________________________ _ 2. Work-related expense limitation _____________________________________ _ 3. AFDC flat grant schedule __________________________ \” ________________ _ 4. Stricter eligibility standards including reform of (a) special needs, (b) veri- fication of eligibility, and (c) exempt personal property _________________ _ 5. Standardized eligibility operations including (a) changed sharing ratios relating to grant and administrative costs, and (b) contracting with counties to achieve enhanced administrative efficiency _________________________ _ 6. Lump sum income and casual and inconsequential income restrictions ____ _ 7. Absent parent and stepfather restrictions _____________________________ _ 8. OAS responsible relative scale _______________________________________ _ 9. Confidentiality ____________________________________________________ _ 10. Work programs including day care services ___________________________ _ 11. Family planning services ___________________________________________ _ 12. Others ___________________________________________________________ _ Estimated full year 1971-72 savings depicted in Table 0 $4.6 million 12.0 15.0 5.0 0.5 6.8 17.6 11.3 12.0 (cost) 1.0 (cost) 0.3 (cost) Total savings_ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ __ ___ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ $59.5 million Further adjusted to reflect actual Adjusted to reflect October implementation delayed implementation per on 10-1-71 county survey $3.4 million 9.0 11.1 3.7 0.4 5.1 13.2 8.6 9.0 (cost) 0.8 (cost) 0.1 (cost) $44.6 million $9.0 million 0.4 0.8 * 0.1 (cost) $10.1 million Survey indicated that counties, because of court challenge, are placing contributions collected from relatives in trust rather than using them as abatements to offset grant costs. Therefore no savings have yet materialized. . en o ~ ~ ~ … (1) r ~ en o o ~ ~ ~ i:I:I tz:l SOCIAL WELFARE Soci~ Welfare Summary SOCIAL WELFARE-Continued County-State Problems Contributing to Confusion Underlying Implementation of Chapter 578 In addition to revealing the confusion which characterized implementation of Chapter 578 during October, the November survey also highlighted many of the specific factors which gave rise to the confusion. (A) Department Reorganization-Throughout the course of the current fiscal year, the Department of Social Welfare has been undergoing a major reorganization. The reorganization reflects a reordering of priorities on the part of departmental management. Specifically, the fiscal responsibilities of the department are being emphasized much more than iri the past, and, correspondingly, the service responsibilities of the department are being less emphasized. We do not find fault with some shift of emphasis based upon a more realistic assessment on the part of departmental management of the relative importance of its service and fiscal functions. Nevertheless, we do question the wisdom of attempting to undertake a major departmental reorganization while at the same time attempting to implement the most complex, massive, and significant welfare act in the state’s history. The effective implementation of any major program change requires an administrative apparatus which is stable. Firmly established relationships between organizational units and management personnel within a department and between the department and other governmental agencies are indispensable preconditions for undertaking an efficient program implementation effort. Consequently, it would appear that a departmental reorganization, which disturbs such relationships, should not have been attempted while the department was engaged in an effort to implement major program modifications. The Department of Social Welfare, we believe, by attempting to undertake reorganization while at the same time implementing Chapter 578, made administrative confusion almost inevitable. (B) Elimination of the Field Representatives.and the Erosion of the State-County Relationship-A serious administrative failing arising from the department’s reorganization efforts was, we believe, the elimination of the department’s field representatives and the resultant weakening of the state-county relationship. The SDSW field representatives have in the past helped to coordinate and supervise on a day-to-day basis the activities of the 58 county welfare departments-the specific governmental units charged with the responsibility of directly administering the state’s welfare programs. SDSW departmental management was not unaware of the communication and supervisorial difficulties which were generated because of the elimination of the filed representatives. It did attempt 19612 S 10 730 Social Welfare Summary SOCIAL WELFARE to establish new points of liaison with the counties. Nevertheless, almost without exception, the various counties included in our November survey indicated that the terminatjon of the field representative function resulted in a critical communications and supervisorial breakdown between the counties and SDSW at a time when such a breakdown could have been least afforded. In short, rather than exerting every effort to reinforce the relationship between the state and the counties in order to expedite implementation of Chapter 578, the SDSW management chose to delete from the department’s organizational structure a key administrative link with the counties-a link which county welfare officials have relied upon heavily in the past. The ad hoc, interim points of contact which the state department established as substitutes for the field representative positions proved to be incapable of providing the level of communications and supervisorial efficiency necessary to assure a smooth implementation of Chapter 578. (C) Circumvention of County Welfare Directors’\u00b7 Association (CWDA) by SDSW-The elimination of the field representative function is, while important in itself, also symmptomatic, we believe, of a deeper, more general deterioration of the relationship between the State Department of Social Welfare and the various county welfare departments throughout the state. Testifying to this deeper, more general deterioration is the manner in which state welfare officials largely-circumvented the County Welfare Directors’ Association (CWDA), the primary organizational entity representing and reflecting the interests and concerns of county welfare officials, during the initial drafting stages of the implementing welfare reform regulations. Recourse to CWDA by the State Department of Social Welfare is not required by statute. However, in the past CWDA has provided important input to the department relating to (a) how properly to draft regulations, (b~ the clarity and completeness of proposed regulations, (c) the administrative workability of proposed regulations, (d) potential legal problems associated with proposed regulations, (e) the consistency of proposed regulations with those already implemented and (f) the need for new regulations. CWDA has, in addition, played an important role in identifying problem areas associated with the state’s welfare programs and has suggested workable solutions. Its publication of Time for Change constituted the basis for many of the reform provisions incorporated into Chapter 578. Finally, the organizational structure of CWDA provides for a quick assignment of important program and fiscal matters to appropriate informed personnel, permitting it thereby to function as a ready information resource. Valuable information relating to the program and fiscal impact of the department’s proposed regulations implementing Chapter 578 could have been provided to SDSW by CWDA had the relationship between the two organizational entities 731 19912525 SOCIAL WELFARE Social Welfare Summary SOCIAL WELFARE-Continued been more firmly established and more rigorously exploited. Instead, an inadequate level of county input characterized implementation of Chapter 578 resulting, we believe, in a considerable loss of administrative efficiency as well as additional costs to the taxpayer. Further discussion of the frayed relationship between state and county welfare officials is discussed in Item 255 of the Analysis. The following recommendations have been made in order to (a) reinforce the state-county relationship by grounding it in formalized, institutional procedures; (b) provide for a routine county check of the clarity, completeness, workability and consistency of proposed departmental regulations; and (c) afford counties adequate lead time to prepare for implementation. (1) We recommend that the Legislature require the State Department of Social Welfare to submit all new proposed regulations to the executive committee of the County Welfare Directors Association for its advice. (2) We recommend that the Legislature require the State Department of Social Welfare to submit the proposed regulations to the executive committee no later than 30 days prior to the date of filing with the Secretary of State unless a regulation is to be adopted on an emergency basis in which case it shall be submitted to the executive committee no later than 15 days prior to the date of filing. (3) We recommend that the County Welfare Directors Association and the Director of the State Department of Social Welfare be required to jointly develop specific criteria establishing the basis for the issuance of emergency regulations. The association and the director should be further required to submit no later than the 30th day of the 1973 legislative session a listing of such criteria .to the Legislature. (4) We recommend that in all cases in which the Director does not abide by the advice of the association, he be required to submit to it within 15 days a report specifying in detail the reasons for his refusal. (D) Internal Departmental Weaknesses-In addition to eliminating critical points of contact with the counties and, in general, damaging the relationship between state and county welfare officials, the department’s reorganization efforts tended, we believe, to seriously weaken the relationship between the services and program staff of the department on the one hand and the fiscal, regulations, and executive staff of the department on the other. The counties which we surveyed indicated that many of the difficulties associated with the regulations developed and promulgated by the department to implement Chapter 578 could have been avoided or at least alleviated if departmental management had vigorously required an adequate level of input on the part of its own program and services experts. (E) Inadequate Lead Time-without exception, the counties 211125& 732 Social Welfare Summary SOCIAL WELFARE included in our November survey reported that the administrative difficulties associated with the lack of adequate lead time were, in many cases, insurmountable. Senate Bill 796, Chapter 578, was signed by the Governor on August 13, 1971, The bill was scheduled to become effective on October 1, 1971, The amount of lead time, therefore, afforded to the State Department of Social Welfare and the 58 county welfare departments throughout the state amounted to only 33 working days. In comparison to the amount of lead time provided by other major reform bills enacted by the California Legislature during recent years, a lead time of only 33 working days is indeed very short. The Lanterman-Petris-Short Act, which revamped the provision of mental health services, was passed by the Legislature during 1967 with an effective date of July 1, 1969, a lead time of approximately two years. The Lanterman Mental Retardation Services Act, which established wholly new procedures for the care and treatment of mentally retarded persons, was enacted during the 1969 Legislative Session with an effective date of July 1, 1971, a lead time of again approximately two years. The State Aid for Probation Services Act, which reorganized the probation system in California, was passed during 1965 with an operative date of July 1, 1966, a lead time of approximately one year. Furthermore, although Chapter 578 was signed by the Governor on August 13, 1971, the initial guidelines for implementation were not provided to the counties until September 2, 1971, The guidelines, however, were not regulatory in effect, nor could it have been reasonably expected that the guidelines would be effectively used by the counties as a basis for planning implementation. At the most, the guidelines issued on September 2 amounted to little more than a summary description of the act itself. On September 14, supplementary guidelines were issued to the counties via telegram. These guidelines, like those issued on September 2, amounted to little more than a summary description of Chapter 578 and did not, therefore, furnish an adequate planning basis for implementation of the act. Further guidelines, similar to those issued on September 2 and 14, were provided to the counties on September 16 and 20. Finally, on September 23 through 29, advance and filed copies of the regulations began to arrive at county welfare departments. The actual amount of lead time, therefore, provided to county welfare departments to gear-up for implementation of Chapter 578 totaled little more than six working days. The lack of adequate lead time cannot be attributed to the State Department of Social Welfare nor to the 58 county welfare departments throughout the state. It was inherent in the act itself. However, county welfare officials have indicated that the absence of lead time has been an endemic problem during recent years. There can be no doubt that unless it is satisfactorily remedied an efficient 733 214125100 SOCIAL WELFARE Social Welfare Summary SOCIAL WELFARE-Continued implementation of departmental regulations will not be possible. We believ~ that the adoption of recommendations No.2 and No.3 (page 719 of the analysis) should help not only to reinforce the relationship between state and county welfare officials but, in addition, produce the lead time required by the counties. (F) Inadequate Training-Many of the difficulties associated with the department’s implementation of Chapter 578 during Octoberl971 can be attributed to an inadequate training effort on the part of the department. One of the most effective means of assuring an efficient implementation of any major program change is to furnish adequate training to the administrative personnel responsible for effecting the change. Regardless of the amount of lead time provided and the adequacy of the implementing regulations, it is not reasonable to expect an effective implementation of a major program change in the absence of an intelligently devised and efficiently executed training effort. The organizational structure of the Department of Social Welfare appears to reflect an understanding of this administrative principle. Specifically, a county training bureau is included in the administrative branch of the department. Ostensibly, it is charged with the responsibility of developing and implementing for county use training programs related to eligibility and grant determinations as well as the provision of social services. However, notwithstanding the department’s establishment of a county training bureau, county welfare officials indicated during our November survey that departmental training related to the implementation of Chapter 578 was totally inadequate. The department did provide for one statewide training conference to which key county personnel were invited. However, the county welfare officials interviewed indicated that the training provided at the conference was not very useful. They further noted that because the conference was not held until September 29, 1971, only two days prior to the scheduled implementation of the act, the training, even if it had been adequate, could not have been brought back to the counties and put into effect in time to have lessened the administrative difficulties which developed during the first two weeks of October 1971. Again, the absence of adequate training cannot be fully attributed to the State Department of Social Welfare. The department was not provided sufficient lead time to permit the development of an effective training program. Nevertheless, the counties which we surveyed reported that the county training bureau of the State Department of Social Welfare has not furnished adequate training services to county welfare personnel even when sufficient lead time w~s available. County welfare officials further complained that in the past the bureau (a) did not sufficiently stress training for eligibility 217125115 734 Social Welfare Summary SOCIAL WELFARE workers and (b) employed classroom instruction techniques rather than on-the-job training. The department’s failure to provide effective training to county welfare departments reflects, we believe, an inadequate estimation of the crucial administrative role of the training function. Effective training of county personnel by a centralized state training agency could, more than any other single undertaking, help to accomplish a uniform, efficient implementation of welfare regulations. Furthermore, the department’s past stress upon the training of social workers rather than eligibility technicians is difficult to understand. The eligibility and grant administration of county welfare departments is far larger, more costly, more complex, and much more vulnerable to administrative weaknesses than the administration of the social service function. The vast organizational networkof county welfare departments relates almost entirely to the determination of eligibility and the payment of grants. In comparison, the social services program is merely an adjunctive function. The adoption of the following recommendations will, we believe, help to establish an appropriate role for the department’s bureau of county training: (1) We recommend that the Department of Social Welfare be required to develop specific, measurable goals as well as potential outputs for its bureau of county training and that these goals and outputs be included in the deplJrtments program budget statement for fiscal year 1973-74. The goals developed by the department should (a) assure a uniform application of welfare regulations throughout the state, (b) reflect a much heavier emphasis upon the training eligibility technicians than social workers, and (c) stress the use of on-the-job training in preference to classroom instruction. A listing of the goals developed by the department should be provided to the Joint Legislative Budget Committee no later than June 30, 1972. (2) We recommend that because of the altered training needs of county welfare departments, the Chief of the Bureau of County Training, State Department of Social Welfare, not be required to possess a masters degree in social work, which is the case under current departmental regulations. Court Challenges: Chapter 578 Compounding the administrative difficulties generated by departmental reorganization, inadequate lead time and poor training was a series of court challenges directed at various provisions of Chapter 578 during the last three months of 1971. Specifically, suits were initiated against (a) the $50 work-related expense limitation, (b) the AFDC flat grant schedule, (c) the stepfather restrictions, (d) the OAS liability scale, and\u00b7 (e) the alleged inadequacy of notices of terminations and grant reductions sent by county welfare departments to affected recipients. (1) The $50 Work-Related Expense Limitation-On September 735 220 12 5 130 SOCIAL WELFARE Social Welfare Summary SOCIAL WELFARE-Continued 22, before the counties had received even the first packet of implementing regulations, the Sacramento Superior Court issued a temporary restraining order enjoining implementation of the $50 work-related expense limitation. On September 28, however, the Court of Appeal, Third Appellate District, stayed\u00b7 execution of the restraining order. Ten days later, on October 8, .the Sacramento Superior Court issued a\u00b7 preliminary injunction. enjoining any further implementation of the provision. The State Department of Social Welfare appealed the injunction to the Court .of Appeal, Third Appellate District. Five days later, the State Attorney General advised the department that its appeal of the preliminary injunction had resulted in a stay of its\u00b7 execution. Consequently, the department directed the counties, pursuant to the advice of the Attorney General, to continue to implement the provision. However, on October 27,. the Sacramento. Superior Court issued another order stating that its October 8 preliminary injunction had not been stayed by the appeal and that full compliance should be immediately effected. On . November 1,\u00b7 the department filed an appeal from the October 27 superior court order. On the same day, the Attorney General advised the department that (1) the Sacramento Superior Court had no jurisdiction to issue its October 27 order and (2) the order was, in any case, stayed by the November 1 appeal. However, on November 4, the Court of Appeals, Third Appellate District, declined to stay execution of the October 27 Sacramento Superior Court order. Approximately one month later, on December 8, the California Supreme Court refused to transfer the case from the Third AppellJlte District and declined to halt further proceedings in the superior court. The following day, the department notified the counties to ce!lse implementing the provision. Administrative costs: The counties included in our November survey reported that a significant portion of the excessive administrative costs incurred during October was attributable to the confusion generated by this court challenge. They expressed the further concern-a concern which proved later to. be well-founded-that eventually the court challenge would result in a stay of implementation which would entail additional administrative costs to the counties by requiring expensive retroactive grant adjustments. (2) The AFDC Flat Grant Schedule-On September 29, the California Supreme Court issued an order staying operation of Section 28, the section of the act relating to the AFDC flat grant schedule, pending a final determination of the proceedings. 222 12.5 140 736 Social Welfare Summary SOCIAL WELFARE Enforcement of the entire section was stayed. The State Department of Social Welfare, claiming that the September 29 order precluded issuance of the October 1 AFDC grant payments, sought a clarification from the court on September 30. As a result, the California Supreme Court modified its September 29 order staying operation of Section 28 only as it affected subsection A of Section 11450 of the Welfare and Institutions Code. Procedurally, this required (1) reversion to the old MPB, including the 21.4 percent increase required by departmental regulations issued in April, and (2) the use of the new miriimum standard of adequate care, Section 11452, instead of the old coded cost schedules. Nonexempt income was to be deducted from the minimum standard of adequate care rather than the flat grant schedule as required by the invalidated portion of Section 28. This procedural change required county welfare departments to recompute all of the October 1 AFDC grant payments. Such a recomputation was, of course, administratively impossible given a lead time of only one day. Consequently, the State Department of Social Welfare filed an emergency regulation with the Secretary of State to permit AFDC monthly grants to be paid in two unequal installments. This revision allowed counties to release the miscalculated October 1 AFDC checks, which had been computed on the basis of subsection A, and correct for overpayments or underpayments in the balance of the monthly grants included in the midmonth October 15 payments. Nevertheless, several counties, notwithstanding the emergency regulations issued by the department, failed to mail the October 1 AFDC checks. Apparently, the confusion generated by a failure to anticipate the September 29 and 30 California Supreme Court orders in conjunction with the breakdown of the communication and supervisorial relationship between state and county welfare officials proved simply too overwhelming to permit an orderly release\u00b7 of the first October grant payments as scheduled. On December 6, the California Supreme Court invalidated subsection A of Section 11450 of the Welfare and Institutions Code. The court ruled that nonexempt income must be deducted from the minimum standard of adequate care (Section 11452) not from the grant schedule. In addition, the court decision implied a return to the computation of AFDC payments on the basis of the flat grant schedule. (The September 30 California Supreme Court order had required that the computation of AFDC grant payments be made on the basis of the old MPB plus the 21.4 percent increase required by departmental regulations issued in April.) The effect of the December 8 California Supreme Court order was to generate increased costs to the state. As originally designed, Section 28 would have entailed no additionaI costs~ Specifica1ly, the 737 230 125180 .SOCIAL WELFARE Social Welfare Summary SOCIAL WELFARE-Continued savings resulting from grant decreases to families with nonexempt outside income would have approximately balanced out the costs resulting from grant increases to families with no nonexempt outside income. However, as a result of having invalidated the deduction of nonexempt income from the AFDC flat grant schedule and requiring instead that the deduction ,be made from the need standard, the court decision has, in effect, eliminated the savings aspect of the provision while at the same time approving the cost aspect. We estimate that additional state funds of approximately $12 million will be required as a result. I Administrative Costs: Between October 1 and October 15, the date the second payment of the October grant was scheduled to be mailed to recipients, all of the counties included in our November survey were able to secure sufficient clarification from the State Department of Social Welfare to permit a recalculation of the October grant and to adjust the Octpber 15 payment accordingly. Thus, by the end of October, county welfare officials had largely overcome the initial confusion resulting from not planning for the two California Supreme Court orders. However, the administrative costs generated by that confusion were excessive. Many county welfare departments, especially those which have not developed automated procedures for determining grant amounts, were compelled to spend large amounts of county funds for support of overtime payments to staff. (3) The Stepfather Restrictions-On October 6, the Sacramento Superior Court issued a temporary restraining order enjoining implementation of the stepfather restrictions. The case was, however, limited to three named recipients. On October 19, the court broadened the case to a class action and issued a preliminary injunction. The department immediately appealed the injunction to the Appellate Court, Third Appellate District, and eight days later, pursuant to advice provided by the Attorney General, notified the counties that its appeal ofthe October 19 injunction had resulted in a stay of its execution. Accordingly, the department directed the counties to continue to implement the provision. On November 19, the Court of Appeal, Third Appellate District, declined to halt further proceedings in the Sacramento Superior Court. Accordingly, three days later the State Department of Social Welfare directed the counties to cease implementing the provision. On December 2, the departmeQt issued new regulations which required evidence that a stepfather’s income is actually available, rather than merely assumed to be available, to the wife for support of her children by a previous marriage. Administrative Costs: The November survey did indicat\u20acHhat implementation of the stepfather restrictions had been inefficient 23J 1215 19.5 738 Social Welfare Summary SOCIAL WELFARE and excessively costly. However, the survey produced evidence revealing that the confusion which resulted was more attributable to inadequately developed regulations than to the October 6 court challenge. (4) The OAS Liability Scale-On October 20, the Sacramento Superior Court issued a temporary restraining order enjoining enforcement of the OAS liability scale. However, nine days later the Court of Appeal, third Appellate District, vacated the temporary restraining order and halted all further action of the Sacramento Superior Court, pending final determination of the proceedings scheduled for January 19, 1972. Many of the counties, because of the uncertainty generated by the court challenge, are placing the contributions secured from relatives into trust funds rather than using the contributions as abatements to offset the cost of the OAS program. (5) The Inadequacy of the 15-Day Notices of Termination and Grant Reduction-On September 28, the United States District Court for the Northern District of California issued a temporary restraining order enjoining implementation of the scheduled October 1 AFDC grant terminations, suspensions and reductions. The issuance of the temporary restraining order was based upon the alleged inadequacy of the SDSW designed 15-day notice of grant changes sent by county welfare departments to affected recipients. The court order further required that prior to October 8 supplemental payments be sent to recipients whose October 1 checks could not be corrected due to insufficient lead time. Administrative Costs-Because the court order required supplemental checks to be issued prior to October 8, county welfare departments were precluded from\u00b7 correcting for October 1 paym:ent errors through a simple adjustment of the midmonth check. The counties reported that this resulted in very significant increased administrative costs in addition to further delaying implementation of Chapter 578. Court Challenges: Savings Reestimate The court action which occurred during October, November and December required us to again recalculate our estimate of savings associated with implementation of Chapter 578. Table 5 depicts the amount of savings (cost) which can be anticipated if the current (December 1971) state of implementation is not improved during ensuing months. It is to be noted that should the current state of implementation continue to prevail during the remainder of 1971-72, a cost to the state of approximately $11.6 million may result. In short, rather than more extensively implementing the provisions of Chapter 578 during the two months following October, state and county welfare officials have actually lost considerable ground because of successful court challenges. 739 24112523.5 !! \” ~ Table 5 en o (\”) \u00bb r- Chapter 578 Cost-Savings Estimates Adjusted to Reflect Belayed Implementation and Court Actions .::; Provision 1. 150 percent of gross income limitation ________________________________ _ 2. Work-related expenses limitation ____________________________________ _ 3. AFDC flat grant schedule __________________________________________ _ 4. Stricter eligibility standards including reform of (a) special needs, (b) veri- fication of eligibility, and (c) exempt personal property _________________ _ 5. Standardized -eligibility operations including (a) changed sharing ratios E8ti’\/TUll,ed fuU year 1971-728avings depicted in Table 0 $4.6 million 12.0 15.0 m Further adjusted to r;; reflect both the resuU8 ~ Adjusted to reflect of the county survey m delayed implementation for Oct. and the Nov. I on 10-1-71 and Dec. court action ~ $3.4 million 9.0 11.1 -12.0 (cost) :::s .. :i’ c CD a. -:( relating to grant and administrative costs, and (b) contracting with counties ~ to achieve enhanced administrative efficiency _________________________ _ 6. Lump sum income and casual and inconsequential income restrictions ____ _ 7. Absent pa~ent and stepfather restrictions _____________________________ _ 8. OAS responsible relative scale _______________________________________ _ 9. Confidentiality ____________________________________________________ _ 10. Work programs including day care services __ 11. Family planning services ___________________________________________ _ 12. Others ________________ ~ __________________________________________ _ 5.0 0.5 6.8 17.6 11.3 12.0 (cost) 1.0 (cost) 0.3 Total savings_ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ $59.5 million 3.7 0.4 5.1 13.2 8.6 9.0 (cost) 0.8 (cost) 0.1 $44.6 million 1 Not implemented by order of State Department of Social Welfare. unknown’ +0.4 0.1 11. 6 (cost) County survey conducted during November indicates no savings are accruing. Currently, staff of our office is planning to undertake an additional survey during February. That survey should provide further information as to savings potential of this provision. 3 County survey conducted during November indicsted that counties, because of the court challenge, are placing contributions collected from relatives in trust funds rather than using them as abatements to offset cost of OAS program; Effect of this provision must remain unknown pending final determination of court proceedings. , County survey conducted during November indicated than no implementing regulations had been issued. Currently, staff of our office is planning to undertake an additional survey during Feb- . ruary. VJ o ~ t’\” I ~ [ ~ ;> … (1) r ~ Social Welfare Summary SOCIAL WELFARE \/ Court Challenges: Administrative Regulations Implementation of Chapter 578 did not constitute the sole basis underlying the department’s attempt to reform California’s welfare system. The department proposed additionally to achieve reform and savings by recourse to unilateral administrative action. Specifically, the department developed and promulgated the following four major regulations for which no change in state or federal statute was thought to be necessary: (a) the elimination of AFDC-U families receiving Unemployment Insurance Benefits (UIB); (b) the redefinition of unemployment to require that eligibility for payments under the provisions of the AFDC-U program not become effective until after 30 days of unemployment have expired; (c) the redefinition of unem- ployment.to require the elimination of AFDC-U families with heads of households employed for more than 25 hours per week (100 hours per month); and (d) the redetermination of eligibility every four months. , (1) Unemployment Insurance Benefits-The regulation requiring the elimination of AFDC-U families receiving unemployment insur- ance benefits was.to become effective January 1, 1972. The regulation had been filed with the Secretary of State and issued to the various county welfare departments. However, the Department of Social Wel- fare notified the counties by telegram on December 27 and 28 and by letter on December 29 not to implement the regulation. Fiscal Effect: The department estimates that approximately 15 per- cent of AFDC-U families are securing unemployment insurance bene- fits and, in addition, are entitled to an average grant of approximately $154 per month. Therefore, based upon the department’s own case- load estimates, the failure to implement the UIB regulation will result ill a loss of savings to the state of approximately $4.9 million during the current fiscal year. (2) 30-Day Waiting Period-The regulation rendering ineligible families with heads of households unemployed for less than 30 days became effective July 1, 1971. However, in December, the Sacramento Superior Court invalidated the regulation. Fiscal Effect: It is estimated by the department that approximately three percent of the AFDC-U cases were affected by implementation of this regulation. The average grant is estimated to be approximately $200 per month. Therefore, based upon the department’s own case- load estimates, the invalidation of the regulation will result in a loss of savings to the state of approximately $2.6 million during the current fiscal year. (3) 25-Hour Per Week Redefinition of Unemployment-On March 17, 1971, the department adopted regulations which required the ter- mination of AFDC-U families with heads of households employed in excess of 25 hours per week (100 hours per month). The regulation became effective July 1, 1971. Currently, the regulation remains in . effect. Fiscal Effect: The department estimates that approximately seven percent of the AFDC-U cases were affected by implementation of this regulation. The average grant of the families affected is estimated to . be $180 per month. Consequently, based upon the department’s es- 741 24412.5250 SOCIAL WELFARE Social Welfare Summary SOCIAL WELFARE-Continued timated caseload, savings to the state of approximately $2.0 million should result during the current fiscal year. (4) The Four-Month Rule-In April 1971, the department adopted regulations requiring a redetermination of eligibility every four months. The regulation became effective on June 1, 1971. It was de- signed to eliminate AFDC families with outside earned income which cannot be exempted on any basis other than the work-related expense exclusions. On May 25, the Sacramento Superior Court issued a temporary restraining order enjoining implementation of the regulation. Howev- er, the Department of Social Welfare, claiming that it was bound by an earlier Alameda Superior Court decision, continued to implement the regulation. Finally, on September 22, the California Supreme Court invalidated the regulation and, in addition, ordered retroactive grants to be paid to all of the. families eliminated as a result of its implementation. The court further directed all county welfare depart- ments to submit to the Director of the Department of Social Welfare a report identifying the administrative procedures and actions adopt- ed to assure compliance with the order. Fiscal Effect: We estimate that the loss of state savings associated with the invalidation of the regulation totals approximately $9.0 mil- lion for the current fiscal year. Table 6 indicates the amount of savings which can be anticipated as a result of unilateral departmental action if the current (December 1971). state of implementation is not improved during the ensuing months. Table 6 Estimated Savings from Unilateral Departmental Reforms Adjusted to Reflect Court ,Actions Estimated Adjusted to Full Year Savings Reflect Effect of 1971-72 Court Action Regulation (in millions) 1971-72 1. VIB regulation _______________________ _ $4.9 0 2. 30 day regulation _____________________ _ . 2.6 0 3. 25 hr.\/week regulation ________________ _ 2.0 2.0 4. 4 month rule _________________________ _ 9.0 0 .Total __________ ——————- $18.5 2.0 Summary’of Current State of Implementation of Welfare Reform Measures Table 7 depicts the current state of implmentation of each of the major welfare reform measures undertaken by the State Department of Social Welfare during the current fiscal year. In addition, the table compares the estimated full-year savings related to each of the meas- ures with the adjusted savings estimates which are based upon (1) our county survey for October and (2) court actions which occurred dur- ing October, November and December. It should be noted that if the current state of implementation prevails throughout the remainder of the 1971-72 fiscal year, the department’s reform efforts, both Chapter 578 and its unilateral administrative changes, may cost the state ap- . proximately $9.6 million. 742 _., !l \/iO–\”\u00b7—–\u00b7~ \/~ \/ ~ W Reform measure Chapter 578 1. 150 percent of gross income limitatibn ___ _ 2. Work~related expense exemption limitation_ 3. AFDC flat grant schedule __ 4. Stricter eligibility standards including re- form of (a) special needs. (b) verification of eligibility. (c) exempt personal property. 5. Standardized eligibility operations includ- ing (a) changed sharing ratios relative to grant administrative costs, and (b) con- tracting with counties to achieve enhanced administrative efficiency. 6. Lump sum income and causal and incon- sequential income restrictions. 7. Absent parent and stepfather restrictions __ 8. OAS responsible relative scale ___________ _ Table 7 Status of Welfare Reform Measures January 1972 Estimated full-year savings (in millions) $4.6 12.0 15.0 5.0 ‘0.5 6.8 1’7.6 State of implementation Not implemented by order of the department prior to 10-1-71. Implementation enjoined by preliminary in- junction.Retroactive grant adjustments re- quired. (Superior court.) Implementation of. subsection A, requiring deduction\u00b7 of nonexempt income from flat grant scbed1.lle enjoined. (California Supreme Court.) Review of counties indicated a partial imple- mentation but little savings accrual. Not to be fully implemented until July 1, 1972. Review of counties indicates negligible savings. Review of counties indicated a partial imple- mentation but negligible savings accrual. Stepfather restrictions enjoined from being implemented by preliminary injunction. Retroactive grant adjustments. (Superior court.) Absent parent provisions not imple- mented due to administrative difficulties. Not fully implemented. SaVings accrual po- tentialunknown. Currently, counties not using collected \u00b7contributions as abatements against the cost of the program. Adjusted savings estimate (in millions) $12.0 (cost) negligible (October) unknown (October) 0.5 (October) unknown (October.) Difference between estimated full-year savings and adjusted savings estimate (in millions) $-4.6 -12.0 -12.0 -15.0 unknown -6.8 unknown f\/) 0 0 ); r =E m r ’11 > 😀 m I 0 0 :::I … :i’ c CD Q. en 0 [ ~ ct> &F …. ct> en C 8 8 I\u00bb …. ‘< en o ~ t\"\" ~ ~ 51 ~ ,j>.. !> ;; Reform m6a8ure Chapter 578 9. Confidentiality ________________________ _ 10. Work programs inoluding day-oare services_ 11. Family Planning Servioes _______________ _ 12. Others _______________________________ _ E8timated full-year savings (in miUion8) 11.3 12.0 (cost) 1.0 (oost) 0.3 . Totals for Chapter 578______________ $59.5 Unilateral admini8trative reform 13. UIB regulation ________________________ _ 14. 30-day regulation ______________________ _ 15. 25-week regulation _____ _ 16. 4-month rule __________________________ _ Totals for unilateral administrative re- $4.9 2.6 2.0 9.0 form____________________________ $18.5 GRAND TOTALS_____________________ $78.0 ~ Chapter 578-Continued Table 7 Con~inued State of implementation Adjusted saving8 estimate (in miUions) Review of oounties indioated no implementa- __ (Ootober) tion. No regulations adopted by SDSW. Survey for Ootober indioated no implementa- __ (Ootober) tion. No regulations adopted by SDSW. Survey for Ootober indioated no implementa- __ (Ootober) tion. No regulations adopted by SDSW. Implementation enjoined. __ Implementation enjoined. Retroaotive grant adjustments required. $Q.1 (oost) $11. 6 (oost) Currently in effeot________________________ $2.0 Invalidated by California Supreme Court. Retroaotive grant adjustments required. $2.0 $9.6 (cost) Difference between estimated fuU-‘lIear saving8 and adjusted 8aving8 e8timate (in millions) -11.3 +12.0 +1.0 +0.2 $-48.5 $-4.9 -2.6 -9.0 $-16.5 $-65.0 en o ~ ~ ~ en 0 [ ~ CD g; … CD en c I\u00bb … ‘< Social Welfare Summary SOCIAL WELFARE Pilot Project We recommend that the Legislature require the State Department of Social Welfare to establish in Sacramento County a pilot project designed to test (a) the administrative feasibility, (b) the fiscal effect, and (c) the impact upon recipient work patterns associated with im- plementation of the following AFDC restrictions: (1) the termination of allrecipients whose total gross income, exclusive of grant payment and prior to any deductions, exceeds 150 percent of the need standard for such recipient; (2) the requirement that exemptions relating to expenses incurred by employed recipients shall be limited to no more than $125 per month; and (3) provision for the deduction of all nonex- empt income from the AFDC flat grant schedule defined by Section 11450 of the Welfare and Institutions Code. We further recommend that the department, in order to begin the project by July 1, 1972, be directed to immediately request a federEil waiver of the social security amendment which otherwise would pre- clude implementation. We continue to believe that there should be a ceiling limiting the amount of exemptions which can be deducted from the earnings used to compute the cash grant to which a recipient is entitled. The failure to establish such a ceiling has produced a group of public assistance recipients whose total income (public assistant grant supplemented by earned income) significantly exceeds the need standard defined by Section 11452 of the Welfare and Institutions Code. Additionally, it encourages the development of gross income differentials between recipients of equal needs. The earned income exemption provisions of the federal Social Secu- rity Act were designed to provide an incentive to welfare recipients .to eventually achieve total self-support, thereby eliminating their need for recourse to public assistance. However, a survey undertaken by our office during November of 1970 has led us to seriously doubt that the exemptions actually achieve this objective. The results of our survey appear to indicate that while earned income exemptions do induce recipients to secure employment, they do not induce total self-support. The restrictions which we have recommended be estab- lished by the department as the test elements of a pilot project are designed, we believe, to restructure the objectives of the earned in- come exemptions in light of this fact. Specifically, the objective is to encourage recipients to secure employment. Hopefully, the employ- ment experience gained by the recipients will accomplish two addi- tional objectives: (1) It will afford recipients an opportunity to develop or regain a sense of confidence in their ability to acquire and maintain employment; and (2) it will provide recipients with a limited opportunity to increase their standard of living above the need sched- ule defined by Section 11452 without, at the same time, permitting the establishment of grossly inequitable income differentials between recipients of equal needs. \/145 250 12 52BO SOCIAL WELFARE Item 255 SOCIAL WELFARE-Continued In summary, we believe that implementation of our recommenda- tion will provide welfare officials with an opportunity to test the valid- ity of both the assumptions underlying the exemption provisions of the Social Security Act and those underlying the restrictions which we have proposed. Furthermore, it will permit welfare officials for the first time to empirically measure the actual fiscal impact and adminis- trative feasibility of such restrictions. The results of such a pilot project could well bear significant impact upon future legislation affecting welfare programs. Should the results of the project demonstrate the invalidity of the assumptions underlying the current income exemp~ tion allowances, the way may be cleared for a successful challenge of the Social Security Act itself. And certainly, in view of the legal attacks which have challenged the major reform provisions of Chapter 578, it would be fruitless, we believe, to attempt any further welfare reform without first changing the Social Security Act. A pilot project such as we have recommended may well help to achieve that goal. DEPARTMENT OF SOCIAL WELFARE Item 255 from the General Fund Budget p. 170 Program p. 961 Requested 1972-73 ...................................................................... $14,227,370 Estimated 1971-72 ...................................................................... 9,801,474 Actual 1970-71 ............................................................................ 18,130,131 Requested increase $4,425,896 (45.3 percent) Total recommended reduction .............................................. Withhold SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Withhold recommendation pending receipt of sufficient information to evaluate the significant increase in the propsed appropriation for the department. 2. Recommend 1972-73 funds for support of the expanded data reporting system (EDRS) project be withheld until the State Department of Social Welfare, together with the Department of Finance, Division of Electronic Data Processing Control and Development, present the en- tire EDRS proposal to the legislative fiscal committees during deliberations on the. 1972-73 Budget Bill. The presentation should include a full disclosure of data, analysis and comments with regard to the issues raised in this analysis and should, in addition, include any alter- native approaches which are now being considered. 3. Recommend the State Department of Social Welfare 2.53 12.5 295 746 Analysis page 748 .749 749 Item 255 SOCIAL WELFARE establish eligibility determination as its first priority item and grant determination as its second priority item for purposes of implementing EDRS. 4. Recommend that in the future, any request to private 749 computer vendors for bids on the EDRS system design be separated from requests for EDP equipment. Fur- ther recommend that the State Department of Social Welfare undertake a thorough analysis and prepare the appropriate conceptual and detailed design before it requests bids from computer vendors since this is re- quired for a meaningful response. 5. Recommend the State Department of Social Welfare 749 reevaluate its mandatory requirement that EDRS meet the Medi-Cal management system (MMS) pilot county deadline for sharing eligibility data. This recommenda- tion is made for the purpose of providing the depart- ments sufficient time to design the most appropriate interface. It is our understanding that the Department of Health Care Services has contingency plans which will suffice until such time as a coordinated system can be developed. 6. Recommend the Department of Finance, through Sec- 749 tion 4 of the Budget Act of 1971, propose alternative computer configurations to those proposed under the EDRS bids in order to more appropriately implement the state's policies regarding consolidated EDP re- sources. We suggest that the new IBM 370\/165 com- puter currently being installed at the Department of Human Resources Development can serve as a central agency computer center for the State Department of Social Welfare. This will permit transfer of work now being performed on an IBM 360\/30 to the Department of Human Resources Development, leaving one other computer in the State Department of Social Welfare for purposes of implementing EDRS (phase I and II) should the project be approved. GENERAL PROGRAM STATEMENT The State Department of Social Welfare is charged with the respon- sibility of coordinating and integrating public welfare activities throughout the state. In addition, the department is also required to provide fair hearings to welfare applicants on request and furnish specified reports to the federal government periodically. Departmental Reorganization' During the 1971-72 fiscal year, the department has been reorgan- ized into three major administrative branches: (1) the operations 747 SOCIAL WELFARE Item 255 DEPARTMENT OF SOCIAL WELFARE-Continued branch, which is charged with the responsibility of administering the department's income maintenance systems and direct services pro- gram; (2) the legal affairs branch, which is charged with the responsi- bility of reconciling the department's programs with state and federal law and, in addition, properly representing the department's legal interests before the Legislature, the courts, and local, state and federal agencies; (3) the administrative branch, which is charged with the responsibility of providing necessary in-house support to departmen- tal staff. The department's reorganization reflects a reordering of priorities; specifically, the reorganization stresses the department's fiscal respon- sibilities and, correspondingly, deemphasizes its service responsibili- ties. The fiscal reorientation of the department' is partly reflected in the fact that whereas four of the five branch chiefs under the old departmental organization were social service administrators, none of the three major administrative branches into which the department has been reorganized is headed by a social service administrator. ANALYSIS AND RECOMMENDATIONS We withhold recommendation pending receipt of sufficient infor- mation to evaluate the significant increase in the proposed appropria- tion for the department. The budget proposes a total expenditure of $14,227,370, which is $4,436,096, or 45.3 percent, more than is estimated to be expended during the current fiscal year. This increase is due primarily to the following factors:' (1) The de- partment is again requesting $600,000 and 60 positions, as appropriat- ed by Chapter 578, Statutes of 1971, to meet the increased demand for fair hearings. (2) The budget proposes $1,084,744 in contract consult- ant funds to purchase assistance from the Attorney General's office and to purchase services from General Services and other sources to meet the increased demand for fair hearings and A TD hearing re- quests. (3) Fifteen positions and approximately $1,400,000 are also requested for development and implementation of the expanded data reporting system. (4) A total of 74.5 positions and approximately $300,- 000 previously included in the local assistance expenditure, are being transferred to this item in the budget year. (5) And, 27 new positions are proposed at a total cost of approximately $350,000 to develop and implement contracts with the counties as provided by Chapter 578, Statutes of 1971. We have not received sufficient workload information to recom- mend to the Legislature the level of funding proposed by this item. We have requested data relative to how the specific number of proposed positions was determined but have never .received such data. We have requested information relative to the whole matter of departmental reorganization and have received organizational charts 2M12S320 748 Item 255 SOCIAL WELFARE and a listing of position reclassifications as required by Chapter 426, Statutes of 1971. However, we have not been supplied any functional description of what the various branches and units accomplish within the department. Therefore, we are withholding a recommendation pending receipt of such information and workload data. Position Changes (1) Reduction in Authorized Positions-The b~dget indicates a sig- nificant reduction of positions for support of state operations. It pro- poses to transfer 915.5 positions, which are in the ~ommunity services branch to the Department of Mental Hygiene and add 104 new posi- tions for a net decrease of 811.5 positions. The 915.5 positions are being transferred to the. Department of Mental Hygiene in order to facilitate the consolidation of services to \\he mentally ill and the mentally retarded. A discussion of this transfer is found in our analysi~ of Item 241. (2) Proposed New Positions-Twenty-seven of the proposed new positions are required to implement Sections 23 and 42.5 of Chapter 578, the Welfare Reform Bill of 1971. Six of the positions are to be allocated to the contract administration\u00b7 bureau for the purpose of . developing contracts with county welfare departments. The contracts will permit counties to discharge the state responsibility relating to the control of eligibility and grant level determinations for all aid pro- grams. Two of the positions are to be allocated to the department's payment systems program for the purpose of coordinating implemen- tation of county contracts with the State Department of Social Wel- fare. The remaining 19 positions are requested to audit the state's share, $49,398,600, of the cost to county welfare departments of eligi- bility and grant determinations. Fifteen of the proposed new positions are related to the expanded data reporting system. An analysis of the justification underlying these positions is provided under the heading \"Expanded Data Reporting - System,\" which follows this discussion. A total of 60 positions are for support of the department's efforts to eliminate a fair hearing backlog. Thirty of the 60 positions are steno- graphic positions and the remaining 30 are for attorney positions. EXPANDED DATA REPORTING SYSTEM The State Department of Social Welfare (SDSW) is currently deve- loping a program designed to organize a \"total welfare management information system\". It plans to expend $1.3 million ($491,940 General Fund and $791,940 federal funds) during the current fiscal year for the purpose of implementing the first phase of the system which. has been designated, the expanded data reporting system (EDRS). The depart- ment is requesting an additional $1.4 million for fiscal year 1972-73 to continue the EDRS development. According to the SDSW, the total implementation cost of the system when fully implemented by June 749 261125335 SOCIAL WELFARE Item 255 DEPARTMENT OF SOCIAL WELFARE-Continued 30, 1975, is expected to approximate $4 million. Annual operating costs of the system are expected to be $28.5 million. Cost of operations as projected by the department will be shared by the federal govern- ment, the state and the counties and will include the complete cost for personnel, equipment and material for operations. The state will also assume $242,000 annually for maintenance of the system. The State Department of Social Welfare has estimated that $101 million in administrative costs and overpayments to recipients will accrue as a result of implementing the EDRS. These savings are at- tributed to a 50-percent reduction in eligibility workers ($26.7 million savings), 90 percent in budget and account clerks ($5.3 million sav- ings) , 21-percent reduction in operating expenses ($6.72 million sav- ings) and an $800,000 reduction in county and state reporting costs. In ~' addition, the department expects the EDRSto achieve a $57-million savings in recipient overpayments which have been identified in a recent audit by the Department of finance. Early Attempts to Automate Welfare Administration During the past several years, the State Department of Social Wel- fare, the counties, the California Supervisors Association and the fed- eral government have proposed various means by which the administration of welfare in California could be simplified and auto- mated. These proposals were unsuccessful primarily because of the complexities inherent in the decentralized administration of welfare in California and complex regulations which made analysis of the problems and'implementation of solutions more difficult. Preceding EDRS, the most significant attempt to automate welfare processes in California was the result of a 1969 study performed by the Assembly Office of Research and the staff of the Assembly Social Welfare Committee entitled \"California Welfare: A Legislative Pro- gram for Reform.\" This study resulted in a bill (AB 1351) which was subsequently signed into law as the Interg~vernmental Welfare Man- agement and Information Systems Act of 1969 (W. & I. Code, Article 1.5, Statutes of 1969). The 1969 act appropriated from the General Fund $108,000 ( to be matched by federal funds if possible) to begin a welfare information system study. Federal funds were secured and California became a participating state in the Nationwide Demonstra- tion Project (NDP) which was sponsored by the Federal Department of Health, Education and Welfare (HEW). The 1970 Legislature, be- cause of it shortage of funds and vague project objectives deleted requested state funds for this project from the 1970-71 Governor's Budget request. As a result, the State Department of Social Welfare was forced to secure full federal funding for a considerably reduced program. The current attempt to implement the expanded data reporting system is a direct outgrowth of the Nationwide Demonstration 269 12:S 37.5 750 Item 255 SOCIAL WELFARE Project, although the scope of the project has been considerably modi- fied. Nonetheless the EDRS has its genesis in the 1969 Intergovern- mental Welfare Management and Information Systems Act and the design of the system is subject to the provisions of that law. Also, the department has described the EDRS development as its method of implementing the Welfare Reform Act of 1971. Feasibility Study Inadequate During the spring and summer of 1971, the SDSW, utilizing much of the wprk accomplished by the NDP staff, prepared a feasibility study for submission to the Department of Finance in accordance with Section 4 of the Budget Act of 1971 and the State Administrative Manual. Concurrently, a request for proposal (HFP) was prepared for submission to private computer vendors at the appropriate time. Both the feasibility study and the RFP with some modification, were ap- proved by the Department of Finance and the RFP was submitted to the computer industry in early October 1971. We cannot understand how a project. of this magnitude could be justified or a request for proposal authorized for release to vendors on the basis of the information contained in the feasibility study submit- ted for approval to the Department of Finance. In this feasibility study it is indicated that the basic goal of the system is to develop a total welfare information system in compliance with the Intergovernmen- tal Welfare Management and Information Systems Act of 1969. However, the RFP states that \"No comprehensive analysis ofinforma- tion needs has been accomplished,\" even though such an analysis would be logically necessary and is specifically\u00b7 required by the 1969 act. Without a thorough and detailed analysis of welfare information flow and welfare information requirements by SDSW and the Cali- fornia counties, it is virtually impossible to describe accurately to pri- vate vendors in a request for proposal what the State of California desires in an automated welfare management information system. Certainly, one would not normally engage a computer vendor to pro- vide detailed analysis regarding precise requirements of a system which only a user (or a system consultant acting under direction of the user) can determine, nor would one expect such a computer vendor to be able to respond accurately to an RFP that does not detail these requirements. To illustrate this point, the Department of Health Care Services retained the services of a private system consultant for a firm price of $200,000 just to study existing Medi-Cal eligibility processes and make recommendations for an improved and integrated claims processing control system. The end result of this contract was a conceptual system design which was then used as a basis for solicitation of bids from potential contractors for the development and implementation of a Medi-Cal management system on a prototype basis. 26-82626 751 Z7312339S SOCIAL WELFARE Item 255 DEPARTMENT OF SOCIAL WELFARE-Continued Specific Questions Unanswered Because the feasibility study and the RFP do not adequately address the important and relevant components of the intended system, we are raising the following questions: 1. What action has the Department of Social Welfare taken to (a) simplify the basic welfare delivery system and (b) simplify, clarify and make uniform the current mass of welfare regulations and administra- tive processes upon which the EDRS is based? 2. A system objective is stated to \"provide the data necessary to automate the fiscal and control processes and improve supervision over county operations.\" What are the fiscal and control processes which are to be automated in the counties and why is improved super- vision beneficial? Further, how does automating these processes in fact make them more effective? 3. Why is it desirable to have a single centralized data base at the State Department of Social Welfare rather than to have local files or regional files? Why is it mandatory that the system be on-line? 4. Apparently, the only justification for a 24-hour update of recipi- ent eligibility information is to meet the Department of Health Care Services requirement for that information. Since the Department of Health Care Services requires approximately 250 characters of infor- mation for each recipient to determine eligibility, why will the Social Welfare file contain from 5,000 to 8,000 characters of information on each recipient on-line? 5. What use is the Department of Social Welfare going to make of this mass of recipient information once collected and placed in a data base in Sacramento? The answer to these questions and many others should be included in any cost\/benefit analysis presented to the Department of Finance or the Legislature before an expenditure of funds is authorized. Inadequate Cost and Savings Estimates The feasibility study indicates that the system, once implemented, will result in federal, state and local administrative savings of $101 million. The annual operating cost, on the other hand, is estimated to be $28.5 million excluding a one-time cost for implementation of $4 million. The costs and savings presented in the study are not substan- tiated with a discussion or display of the facts used to build the esti- mates. Indeed, the study does not even identify the period of time within which the savings will accrue. The $800,OOO-reduction in re- ports, 50-percent reduction in eligibility workers, gO-percent reduc- tion in budget and account clerks and 21-percent reduction in operating expenses are stated categorically with no reference to cor- roborating evidence. Included in the savings estimate is the recovery of $57 million in overpayments made to recipients which the Depart- 27512540:5 752 Item 255 SOCIAL WELFARE ment of Finance has identified in a recent audit. On this point we note that the 1969 report referenced above entitled, California Welfare: A Legislative Program for Reform\" concluded that the present welfare system errs in favor of the state, not the welfare recipient. This conclu- sion, the report stipulates, is based on data supplied to the Legislature by the SDSW division of quality control. Further, the study does not identify whether the $57 million will be saved annually or whether this is a one-time recovery of funds. We note 'also that, although full implementation of the EDRS is expected to extend through June 30, 1975, at a total one-time cost of $4 million, the study indicates that a total of $4 million will be expend- ed during the current and 1972-73 fiscal years. This leaves the im- plementation costs for two years (phase III of the system) unaccounted for. Poor Selection and Analysis of Alternatives A major requirement of any feasibility study is that a reasonable number of alternatives to the solution of a problem be considered, and analyzed. The presumption of this requirement is, of course, that a rational analysis of appropriate alternatives will be made, and the most cost effective alternative selected for implementation. Further, it is presumed that once selected, the best alternative can be fully justified with documented evidence of its merit and cost, even if certain of the conclusions were arrived at using professional judgment in the ab- sence of purely objective data. The SDSW chose three alternative approaches for analysis and con- sideration: (1) the present method of doing business, (2) a slightly modified version of present methods which would provide automated report generation and eligibility and grant determination, and (3) the fully automated, on-line, data base management concept proposed as EDRS. In our judgment, the department in effect considered only one alternative since the first two listed above are obviously deficient in terms of achieving the stated objectives. The department should have thoroughly analyzed only those alternatives available within the basic concept of utilizing sophisticated electronic data processing tech- niques because it is generally agreed, by virtue of past efforts, that existing methods cannot adequately cope with the volumes of data which must be processed. The feasibility study does not provide any alternatives to the approach selected in this category. . . Request for Proposal (RFP) The RFP was approved (with some modifications) by the Depart- ment of Finance and distributed to the computer industry in early October 1971. The RFP as released posed at least five significant prob- lems: (1) There is considerable opposition to the development of EDRS among the pilot counties, (2) the implementation time sched- ule is unrealistic, (3) it does not take into account state policies for the 753 283125445 SOCIAL WELFARE Item 255 DEPARTMENT OF SOCIAL WELFARE-Continued consolidation and integration of the state's EDP resources, (4) subsys- tem priorities appear to be in a sequence of implementation which will not be conducive to the greatest savings and system effectiveness in the shortest time, and (5) it lacks, in our judgment, the conceptual and technical detail necessary for a vendor to understand his role in the project, make appropriate cost estimates, or provide operational alternatives. , Basically, the RFP asks computer vendors to bid on phases I and II of a three-phase implementation plan for a fixed price of $800,000 (current-year funds). However, this price is to cover only phase I of the project, phase II going out to competitive bid near the completion of phase I. Work on phase I was originally scheduled to begin around December 8, 1971, with a completion date of September 1972. Phase I consisted of the development and implementation of the EDRS in seven pilot counties and was to be installed in two stages: stage I-the installation of hardware necessary to operate the system at the state level and the installation of the system and related hardware in Santa Clara and San Diego Counties; and stage II-the additional implemen- tation of EDRS in Contra Costa, Humboldt, Monterey, Napa and San Joaquin Counties. Thus, the December 8, 1971, date has slipped be- cause no vendor has been selected as of this writing. Phase II of the EDRS consists of the implementation of the system in the remaining 51 counties, and phase III is described as the exten- sion of the ED RS to a \"total management and operational information system\" which will be completed by June 30,1975. County Opposition to EDRS Our discussions and correspondence with county welfare and ad- ministration officials revealed a considerable amount of opposition to the EDRS system at the county level. This opposition stems in our judgment, primarily from a lack of communications between state and county officials, and an apparent arbitrary attitude on the part of the SDSW in preparing and promoting the EDRS proposal. . To illustrate, we understand that until the EDRS RFP was made public, the seven pilot counties were unaware of their designation as pilot counties. Indeed, it is our understanding that some of the proposed pilot counties were not even given a copy of the RFP at the time it was issued to the vendors. Some counties reacted to this treat- ment by informing the director of SDSW thatthey were not interested in participating as a pilot and others sought to clarify and understand the full fiscal and operational impact their participation would have'. We further understand that as of November 30, 1971, only Napa County had committed itself to being a pilot county and that San Diego, San Joaquin, Humboldt, and Contra Costa Counties had made their participation as pilot counties conditional on (1) state identifica- tion of all state and county costs of the proposal and (2) state agree- 286 12 5 460 754 Item 255 SOCIAL WELFARE ment to pay most, if not all, of the county costs. We also understand that both Santa Clara and Monterey Counties have declined to be pilot counties under any circumstances. This of course has serious implica- tions for the successful conclusion of the project because Santa Clara County is one of the two Medi-Cal management system (MMS) pilot counties and it is deemed important by SDSW that the interface be- tween the Medi-Cal management system and the expanded data re- porting system be tested in both Medi-Cal management system pilot counties. Otherwise, these counties will implement MMS by seeking eligibility data directly from the Department of Health Care Services. We do not concur that this interface should be of prime importance under the present circumstances since EDRS has much more signifi- cant deficiencies. Statutory Requirements for State\/County Planning County opposition to the EDRS proposal is significant in at least one important operational sense. If the SDSW is required to design and install a statewide welfare computer system over county opposition, the system has little chance of success because of the direct relation- ship between counties and the welfare population. The Legislature recognized this problem when it enacted the Inter- governmental Welfare Management and Information System Act of 1969. That act, among other things, directs the State Department of Social Welfare to \"undertake a program to improve the management and to simplify and reduce the cost of welfare administration by developing efficient highly automated processes for determining eli- gibility and making aid paxments .... \" In addition, the act directs that \"in carrying out the provisions of this article, the department shall: \"(a) In conjunction with county welfare departments and other concerned county agencies and officials, conduct comprehen- sive surveys of the information needs for welfare management as a precondition to actual design and programming of the model electronic data processing systems. The department shall request that the federal Department of Health, Educa- tion, and Welfare conduct a survey of its own welfare informa\" tion needs and provide the re.sults of that survey to the state. \" (b) With the participation of county government officials, de- velop a plan for implementing the provisions of this article.\" In our judgment, the intent of the above section is that the determi- nation of welfare information needs shall be a cooperative, analytical process utilizing the resources of the counties as well as the State Department of Social Welfare and that no system may be implement- ed until these conditions have been met. We have little evidence which would indicate that the department proceeded in accordance with the above intent. 755 289121547.5 SOCIAL WELFARE Item 255 DEPARTMENT OF SOCIAL WELFARE-Continued Existing County Data Processing Systems According to the SDSW feasibility study, 43 county welfare depart- ments are currently utilizing automatic data processing to some de- gree, ranging from simple warrant printing to rather sophisticated grant calculation, reporting system, and on-line inquiry systems. The very number of county EDP systems now in operation gives rise to some concern as to whether a \"total welfare information system\" is feasible or possible in the current decentralized environment. Also of importance is the fact that the SDSW does not indicate in either the feasibility study or the RFP whether any of the local systems have been examined for applicability to statewide processes. There is also no visible plan for integrating the state system with these county systems or any specified plan for replacing the local welfare systems. Unrealistic Time Schedule and Cost Estimates for Phases I and II Assuming that the questions in this analysis are answered satisfacto- rily, a new and better cost benefit study approved, and a contract signed with a vendor at an early date, we still do not believe that phase I can be implemented within the time designated in the RFP. In addition to the fact that the pilot counties have not yet been deter- mined, we feel it is extremely unrealistic to assume that a contractor can design a data base and a system which has not been clearly defined in the RFP or feasibility study, install hardware in the counties and in the State Department of Social Welfare and program, test and imple- ment the system in seven counties in seven months' time. Previous state experience indicates that systems of this size and nature require a substantial amount of planning and time to design and implement. For example, the Department ofJustice in 1967 began the design and installation of a criminal justice information system only half the size proposed by SDSW. Today, this system is less than 10 percent operational even though a total of $7 million has been invested in the project to date. The Medi-Cal management system (MMS) at the Department of Health Care Services is another example of the cost and complexity involved when implementing a large sys- tem. The system design for the MMS was contracted to cost $5.7 million over a two-year period and the project is now expected to cost at least $1 million more after experiencing delays due to design changes. In view of these experiences, we feel the schedule indicated in the feasibility study and RFP is totally unrealistic. This is further verified by the fact that during prospective vendor presentations (which we attended) every firm acknowledged the severe time constraints ap- parent in the project, particularly in phase I, and at least three vendors indicated the time schedule could not be met and recommended more t~me be allowed to complete phases I and II. Based on the 292 12 5 490 756 Item 255 SOCIAL WELFARE information provided in the RFP, we doubt that any vendor could realistically meet the time requirements specified unless he misinter- prets the intent of the SDSW. On the other hand, we fully understand why contractors have bid on this project since the requirements stated in the RFP are so vague as to virtually assure the winning contractor a great deal of flexibility in defining the basic system and computer configuration. This will permit the vendor an opportunity to secure a long-range systems and hardware commitment based on a de~ign favorable to that end. It should also be noted that the SDSW only gave vendors 30 days in which to bid on an RFP of several hundred pages. Lack of a Statewide EDP Perspective 'Section 4 of the 1971 Budget Act requires that appropriations over $10,000 for expansion, improvement or addition to electronic data processing activities, personnel, equipment, facilities or supplies to be expended during fiscal year 1971-72 or budgeted for fiscal year 1972- 73 must be certified by the Director of Finance as being in compliance with the criteria and procedures outlined in the SupplementaryRe- port of the Committee on Conference (Budget Act of 1970). As we understand the purpose of Section 4 it: is to guarantee that the Director of Finance has reviewed the proposal and finds the project to be consistent with statewide plans for EDP. The criteria which he must use in assessing the merits of a project are stated to be as follows: \"A. Consolidation and optimum utilization of electronic data proc- - essing equipment. - B. Maximum practical integration of electronic data processing sys- tems. C. The establishment of service centers, as required, to provide data processing services to units of state government not includ- ed in consolidation plans. D. Adherence to standards insuring appropriate compatabilityof systems and interchange of data and information. K Proper management controls to insure the most efficient, effec- tive and economical use of the state's resources. F. That a goal of any consolidation be to create functional informa- tion systems which are designed to process and provide informa- tion related to particular broad areas of subject matter. G. That the ultimate goal of this state is information systems that provide the most effective means of data storage, retrieval and exchange between units and agencies of state and local govern- ments. R That such goals as one-time collection of data, minimum duplica- tion of records, and maximum availability of information at low- est overall cost will not jeopardize or compromise the confidentiality of information as provided by statute or the pro- tection of the right of individual privacy as established by law.\" 757 2S712551l5 SOCIAL WELFARE Item 255 DEPARTMENT OF SOCIAL WELFARE-.Continued In our judgment, the SDSW feasibility study and RFP do not reflect the above statewide perspective or the standards of quality implied in the criteria and procedures set forth in the Budget Act and the Com- mittee on Conference report. It appears that the SDSW has not considered state or agency plans in developing its own EDP plans. For example, the Department of Human Resources Development has just received legislative authori- zation to purchase an IBM 370\/165 model computer. This modern and expandable machine (discussed in some detail under statewide EDP -Item 61) is comparable to approximately % of the computing capa- bility now existent in the entire executive branch of state government. This acquisition plus the Department of Health Care Services' plans, which could result in the acquisition of two more 370\/ 165's to operate MMS, would result in a tremendous resident capacity within the Hu- man Relations Agency. This capacity and the potential for duplication of both hardware and communication lines in the state would appear to make an agency approach to this problem mandatory. In our discus- sion of statewide EDP issues, we recommend that HRD become an agency data processing service center and that the work currently run on -a 360\/30 at SDSW be transferred to the HRD machine; thereby releasing another installed. state computer. Our review of the feasibility study and the RFP also leads us to question the validity of the decision by the Department of Finance in approving the feasibility study and the release of the request for pro- posal under these circumstances. Absence of Legislative Review and Approval The feasibility study and RFP states that this project is being imple- mented as part of the federal Nationwide Demonstration Project (NDP), a project involving a number of other demonstration .states which are implementing automated welfare administrative systems. The 1970 Legislature deleted from the 1970 Budget Ac~ all General Fund support for NDP because of the vague plans and objectives of the original proposal. The project staff was substantially reduced as a result of this action and the direction and supervision of the project was transferred from the Human Relations Agency to the State De- partment of Social Welfare. Additional federal funds were then secured by the department to continue California's participation. The department did not specifically identify any General Fund support for the NDP in its 1971-72 budget request to the Legislature. We note, however, that $491,940 of General Fund money is identified in the feasibility study for expenditure on phase I of the EDRS during this fiscal year. Further additional $1,358,660 General Fund money is required for the project during the 1972-73 fiscal year .. This makes a total of. $1,850,000 in General Fund money required for the two fiscal years. 300 125530 758 Item 255 SOCIAL WELFARE Because the Legislature has not had an opportunity to specifically review the proposed expenditures for the current or budget year and has expressed itself once by deleting state funds from the Budget Act for this project, it would appear to us that the department should seek legislative approval before making any fiscal commitment to a project of this magnitude. We also note in the feasibility study that only tentative approval has been granted by the federal government for $150,000 of the funds required for phases I and II of the project. Although it is indicated that this $150,000, once appropriated by the federal government, can then be matched equally by another federal grant, the department in fact has no federal commitment for $300,000 of the $1,283,880 required during the current fiscal year. Because state contribution for fiscal year 1971-72 is only $491,940 of the $800,000 required for contract services, we assume that anything less than a definite commitment from the federal government may preclude the state from entering ~nto a firm contractual agreement with a private contractor. Reports to the Legislature Required The Intergovernmental Welfare Management and Information Sys- tems Act of 1969 requires that the SDSW \"Submit an annual report of activities and recommendations concerning implementation of the act ... to the Governor and Legislature at each regular session of the Legislature.\" To our knowledge only the 1970 report has been submit- ted. Had a report been submitted by the department during the 1971 session, legislative staff may have been able to fully review the pro- posal before an RFP was issued, thereby averting many of the prob- lems described above. In fact, we only learned of the EDRS proposal after the RFPwas issued in October 1971. It was after attendance by our staff at the County Welfare Directors Conference in Santa Cruz on November 5, 1971, that we were asked to participate on the Vendor Proposal Evaluation and Review Com- mittees. Correspondence With SDSW After reviewing the SDSW feasibility study and request for proposal (RFP) , as well as participating as an observer on the evaluation and review committees and discussing the expanded data reporting sys- tem with local officials, SDSW personnel, the Department of Finance and firms representing the computer and systems design industry, we concluded that there was sufficient evidence available to recommend that the EDRS be halted until certain issues were resolved. We there- fore prepared a letter to the Director ofSDSW on November 30,1971, recommending that he cease all activities relating to implementation of EDRS until such time as the Legislature has had an opportunity to review the scope, objectives and cost of the entire project. We further recommended that the SDSW and the administration reevaluate its 759 303125545 SOCIAL WELFARE Item 255 DEPARTMENT OF SOCIAL WELFARE-Continued approach to the EDRS in light of the issues we raised and be prepared for a full discussion of the matter before the fiscal committees of the Legislature during deliberations on the 1972-73 budget request. We concluded that, if the SDSW acted expeditiously, and assuming the Legislature gave its approval, work could still begin within the current fiscal year. Present Status of EDRS The Director of SDSW responded on December 1, 1971 and indicat- ed that his department would review the contents of our letter and consult with experts in order to give us an answer as soon as possible. As of this writing, we have received no further response from the department. The Department of Finance, in an EDP status report provided to our office each month, indicates that as of December 30, 1971, the SDSW had submitted to the Department of FinaIice a systems pack- age in which a specific vendor was recommended to design the EDRS and supply the hardware to operate the system. The Department of Finance has raised a number of questions and has suggested an assess- ment of certain alternatives not previously considered. The Depart- ment of Finance reports, however, that the questions and issues have not been resolved as yet, and notification to the vendors has been withheld pending the outcome. Summary of Issues In view of the above analysis, it should be stated that our office is not opposed to the concept of a centralized system approach to wel- fare administration. We have in previous analyses recommended state administration of welfare and we also believe that administrative and procedural reforms should be an integral part of any welfare reform proposal. The most significant questions and issues raised in this analysis re- garding the expanded data reporting system (EDRS) are summarized below. These concerns are by no means a complete list of all the deficiencies apparent in the EDRS concept design, vendor selection procedures, project staffing and organization structure, or the inter- governmental relationships. The summary does represent,however, the key issues which, if resolved, will leave the department in a better position to resolve the less significant issues: (1) Inadequate feasibility study RFP and systems planning; (2) Inadequate substantiation of cost and savings estimates; (3) Apparent lack of county participation in planning the system; (4) Apparent reluctance of the pilot counties to participate in the project; (5) Deficiencies in the proposal with regard to planning, intergov-\u00b7 ernmental relations and reporting as outlined by the Intergov- 306 125560 760 Item 256 SOCIAL WELFARE ernmental Welfare Management and Information Systems Act of 1969; and (6) Ambiguity as to how the EDRS proposal is meeting the re- quirements of the Welfare Reform Act of 1971; (7) The unrealistic time schedule for implementation of the sys- tem; (8) Apparent lack of consideration for the present state policy to consolidate EDP resources where feasible and appropriate (application of Section 4 of the Budget Act of 1971); (9) Apparent ambiguities in the source of present and future funds; and (10) The lack of legislative approval of the scope, objectives and costs, source of funds and system design of ED RS. Department of Social Welfare PAYMENT SYSTEM CASH GRANTS Item 256 from the General Fund Budget p. ~6 Program p. 961 Requested 1972-73 ...................................................................... $647,676,900 Estimated 1971-72 ...................................................................... 647,563,500 Actual 1970-71 ............................................................................ 641,391,891 Requested increase $113,400 (0.02 percent) Total recommended reduction .............................................. Withhold SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. We are withholding our recommendation relating to expenditure levels pending a review of the spring case- load reestimates. 2. We recommend that the Department of Social Welfare be required to submit to the Legislature a quarterly report of the department's own caseload' and expendi- ture estimates. The report submitted by the department should include a projection of both the current and budget years of average monthly caseloads for each of the categorical aid programs, the average grant for each of the aid programs and the total estimated expendi- tures for each of the aid programs. The assumptions underlying each of the projections should be made ex- plicit. In addition, the assumptions should be supported by a detailed analysis. 761 Analysis page 767 768 30912105 SOCIAL WELFARE Item 256 PAYMENT SYSTEM CASH GRANTS-Continued GENERAL PROGRAM STATEMENT The Welfare and Institutions Code requires the provision of prompt, . humane, nondiscriminatory services and cash grant assistance to quali- fied applicants for public welfare. Public assistance programs in Cali- fornia furnish: , (1) Cash grant assistance to supplement the resources of needy persons thereby enabling them to secure the necessities of life; and (2) Those social and medical services required to promote their physical and social well being, thereby enabling them, to the fullest extent possible, to remain active members of the com- munity. Income Maintenance Programs (1) The Aid to Families with Dependent Children (AFDC) pro- gram is designed for needy children up to 21 years of age. Children between 18 and 21 years of age are eligible for aid only if in financial need and attending school or a training program regularly, or are employed and contributing to the family. The AFDC program consists of three basic elements: (a) the AFDC-FG (family group) element is designed to provide aid to dependent children who are in need of cash grant assistance and who are deprived of parental support and care because of death, continued absence from the home, or incapacity of one or both parents; (b) the AFDC-U (unemployed) element is de- signed to provide aid to children who are in need of cash grant assist- ance and who are deprived of parental support and care because of unemployment of one or both parents; and (c) the AFDC-BHI (boarding home and institution) element is designed to provide aid to needy children living outside of their own homes. These are chil- dren living in 24-hour foster care homes. In general, the eligibility requirements relating to the AFDC pro- gram are: (1) the family's income or resources are insufficient to fund basic needs; and (2) the family does not own real property in excess of $20,000 or personal property valued in excess of $1,600 of which only $600 can be in the form of liquid assets. (2) Old Age Security (OAS) program is designed to furnish aid to needy persons 65 years of age or older. Eligibility standards preclude the ownership of real property, other than a home, in excess of $5,000 of assessed value. In addition liquid assets must not exceed $1,200 ($2,000 for married couples). Eligible persons are entitled to a mini- mum income (public assistance grant plus outside income) of $141 and a maximum income of $206. (3) Aid to the Needy Disabled (ATD) program is designed to fur- nish social services and cash grant assistance to permanently and total- 312121020 762 Item 256 SOCIAL WELFARE ly disabled persons between 18 and 64 years of age. Eligibility require- ments relating to real and liquid assets coincide with those established for the Old Age Security program. In addition, however, persons ap- plying for assistance under the provisions governing the Aid to the Needy Disabled program must be examined by a team of physicians. Eligible persons are entitled to a minimum income (public assistance grant plus outside income) of $109. The current maximum grant, $133 per month, is based upon a statewide grant average for the 1971-72 fiscal year.' . . ' (4) Aid to the Blind (AB) program is designed to provide assistance to needy persons who are either without sight or who are suffering from severely impaired sight. The eligibility requirements permit as- sistance only to persons who are over 16 years of age. In addition, the degree of sight impairment must be verified by an eye examination. Eligibility requirements relating to real and personal property coin- cide with those of the two other adult aid programs. Eligible persons are entitled to a minimum income (public assistance grant plus out- side income) of $165 per month. Maximum total income is not pemit- ted to exceed $209 per month. ANALYSIS AND RECOMMENDATIONS The budget proposes an appropriation of $647,676,900 for support of categorical aid payments during 1972-73. This is $113,400, or 0.02 per- cent, in excess of the amount estimated to be expended during the current fiscal year. Table 1 depicts the department's estimated 1971- 72 and 1972-73 caseload and expenditure estimates for each of the categorical aid programs. 763 314121030 \"tI en Table 1 \u00bb 0 -< (j State Department of Social Welfare Estimates of 3: ;;: m t\"\" Average Monthly Caseload and Expenditures for 1971-72 and 1972-73 Z :E -I Estimated expenditures (I) t\"l t\"\" Estimated average monthly caseload -< ~ (I) (per8ons) State County -I !:Xl m t\"l Program Caseload Difference Expenditures Difference Expenditure8 Difference 3: n (1) AFDC-FG \u00bb (I) 1971-72 ____________________ 1,323,700 $328,013,800 $140,723,900 ::t 1972-73 ____________________ 1,445,200 +121,500 352,033,200 +$24,019,400 140,898,800 +$174,900 c;) (+7.3%) ::II (2) AFDC-U \u00bb 1971-72 ____________________ 244,500 54,082,600 26,381,000 Z -I 1972-73 ____________________ 208,400 -36,100 44,445,300 -9,637,300 21,693,500 -4,687,500 f ....:t (-17.8%) ~ .(3) AFDC-BHI n 0 1971-72 ____________________ 36,200 20,474,000 40,874,100 ~ 1972-73 ____________________ 38,250 +2,050 21,441,000 +967,000 48,189,300 +7,315,200 S\u00b7 (+4.7%) c (4) OAS CD a. 1971-72 ____________________ 318,200 127,325,900 21,221,600 1972-73 ____________________ 320,275 +2,075 149,495,400 +22,169,500 - 21,221,600 (+17.4%) (5) AB, APSB 1971-72 ____________________ 14,175 8,269,200 2,701,200 1972-73 ____________________ 14,490 +315 11,658,700 +3,389,500 -2,701,200 (+41.0%) (6) ATD 1971-72 ____________________ 202,900 109,398,000 18,231,300 1972-73 ____________________ 211,150 +8,250 68,603,300 -40,794,700 68,603,300 +50,372,000 -(-37.3%) ..... CD Total difference between 1971-72 and S 1972-73, state and county _______ +98,090 +113,400 +29,251,800 1'0 (+0.02%) 01 0) \\ Item 256 SOCIAL WELFARE Changed Sharing Ratios Table 1 indicates that the cost to the counties for support of categori- cal aid payments will increase $29,251,800 during the budget year. However, $24,731,196 of that amount reflects a shift in funding from the state to the counties. Specifically, Sections 39.1-39.4 of Chapter 578, Statutes of 1971, alter the cash grant sharing ratios to provide (a) that the state and the counties share equally the nonfederal costs for support of A TD payments, and (b) that the state assume full funding of the nonfederal costs for support of AB, APSB, and OAS payments. The changes are scheduled to become operative on July 1, 1972. Table 2 compares the estimated cash grant expenditures and funding shifts related to the changed sharing ratios which are to become operative during the budget year. In addition, the table depicts the fiscal effect generated by the changed administrative sharing ratio which is also to become operative July 1, 1972. Table 2 indicates that the net effect during 1972-73 of the changes in the various cost sharing ratios is to save the counties $24,667,404 in 1972-73', and cost the state the same amount. Had the changes not occurred, the counties would have been required to spend that much more for support of welfare programs. 765 317121045 Table 2 Comparison of Estimated Administrative and Cash Grant Expenditures and Funding Shifts Related to the Changes in the State-County Sharing Ratios, 1972-73 Fiscal Year Prooram Total nonfederal expenditure for 1972-73 ~ OAS _______ _________ _ $149,495,400 AB________ _____ ______ 11,658,700 ATD _________________ 137,206,600 Net fiscal effect of new cash grant sharing ratio_ Administration_ _ _ _ _ _ _ _ 98,797,200 Total net effect of changed grant and ad- ministrative cost sharing ratios ________________ _ State-county sharino ratios 1972-73 costs under provisions of Old sharino ratio (prior to July I, 1972) 1972-73 costs under provisions of New sharino ratio (subsequent to July I, 1972) State County State County Ratio Expenditure Ratio Expenditure Ratio Expenditure Ratio Expenditure 6\/7 $128,138,914 1\/7 $21,356,486 100%$149,495,400 3\/4 8,744,025 1\/4 2,914,675 100% 11,658,700 6\/7 117,605,657 1\/7 19,600,943 1\/2 68,603,300 1\/2 $68,603,300 100% 98,797,200 1\/2 49,398,600 1\/2 49,398,600 Cost-savinos resultino from chanoed sharino ratios State County $21,356,486 $21,356,486 cost saving 2,914,675 2,914,675 cost saving 49,002,357 49,002,357 saving cost 24,731,196 24,731,196 saving cost 49,398,600 49,398,600 cost saving $24,667,404 $24,667,404 cost saving .\" \u00bb -< s:: m Z -I o -< o -I m s:: (') \u00bb o ::c C) :II \u00bb Z -I ~ o ::::I .. :i' c CD Q. en o ~ t'\"' ~ ~ ~ - m ~ Item 256 SOCIAL WELFARE I.nformation Needs of the Legislature\u00b7 \" (a) Budget Document-In the past, the Department of Social Wel- fare has included in the budg~t document a detailed analysis of the caseload and expenditure trends underlying its estimates. The analy- sis, in addition to establishing basic trend patterns, has specified the impact of major court decisions. However, the department has chosen to omit from the 1972-73 budget document any such analysis. In its place, the department substituted vague generalities which do not provide a reliable basis for evaluating the accuracy of its estimates. The budget document merely alludes to the passage of Chapter 578 and asserts that as a result of its implementation a sharp decline in caseload growth is anticipated. (b) Spring and Autumn Reestimates-Normally, we have been fur- nished copies of caseload and expenditure estimates developed by the department during the spring and autumn. The estimate packets pre- pared by the department are usually sufficiently detailed to permit an evaluation of the categorical aid expenditure estimates included in the Governor's Budget. Specifically, the spring estimates are used as a check against the public assistance item appropriation just prior to passage of the Budget Bill; and, correspondingly, the autumn esti- mates are used as a check three to four months followirig passage of the Budget Bill. During the current fiscal year, however, we have been unable to secure a copy of the department's autumn estimates, . nor have we been furnished the detailed assumptions underlying the revised 1971-72 and projected 1972-73 caseload and cost estimates which the department included in the budget document. (c) Legislative Action-The Legislature has during the current fis- cal year attempted to establish by statute a basic welfare data base to serve its informational needs. Chapter 1091, Statutes of 1971 (AB 1598), requires each county board of supervisors by May 15 of each year to submit to the Senate Finance Committee, the Assembly Ways and Means Committee and the Joint Legislative Budget Committee an expenditure and caseload report for. the current and budget years. The report is to include estimates of (1) average monthly caseloads, (2) average monthly costs, and (3) the total appropriation and ex- penditure \"for each of the categorical aid programs. The estimates are to be developed on the basis of assumptions furnished by the Depart- ment of Social\u00b7 Welfare. In addition, Chapter 1, Statutes of 1971, F~rst Extraordinary Session (AB 1), requires all county welfare departments to furnish each month to the Department of Finance a copy of the monthly caseload and expenditure report routinely submitted to the State Department of Social Welfare. The report is to be submitted to the Department of Finance at the same time that it is submitted to the State Department of Social Welfare. The Department of Finance, upon receipt of the respective county reports, is required to make the data contained therein immediately available to the Joint Legislative Budget Com- 767 326 121090 SOCIAL WELFARE PAYMENT SYSTEM CASH GRANTS-Continued mittee. Item 256 i (d) Quarterly Report-We recommend that the data base estab- lished by AB 1 and AB 1598 be supplemented by a quarterly report to the Legislature of the departments own caseload and expenditure estimates. The report submitted by the department should include a projection for both the current and budget years of (1) average monthly caseloads for each of the categorical aid programs, (2) the average grant for each of the aid programS; and (3) the total estimated expenditures for each of the aid programs. The assumptions underly- ing each of the projections should be made explicit. In addition, the assumptions should be supported by a detailed analysis. Caseload and Expenditure Trends (1) AFDC Program-The Governor's Budget indicates a General Fund expenditure of $352,033,200 for support of AFDC-FG cash grant payments during 1972-73. This is $24,019,400 (7.3 percent) in excess of the amount estimated to be expended during the current fiscal year. The additional funds for 1972-73 are required to support an estimated increase of approximately 121,500 persons. The $24.0 million funding increase for support of the AFDC-FG program is partially offset by an estimated decrease in General Fund support for the AFDC-U program. Specifically, the budget document indicates an expenditure of only $44,445,300 during the budget year, a decrease of $9,637,300 (17.8 percent) below the amount estimated to be expended during the current fiscal year. The expenditure reduc- tion is based upon an estimated caseload decrease of approximately 36,100 persons. . Basis of SDSW Estimate-The AFDC-FG and U caseload and ex- penditure estimates cited in the budget document are apparently based upon full implementation of the Governor's Welfare Reform Program. Specifically, the budget narrative states that a \"sharp de- cline\" in the growth rate underlying AFDC expenditure increases is anticipated for the budget year \"as a result of reforms initiated in 1971 ... \" The narrative identifies the reform measures as: (1) absent parent and stepfather restrictions, (2) work programs, (3) child care, (4) community work experience, (5) separation of eligibility determina- tion processes from aid payment processes (ostensibly including the 150 percent of gross income limitation), (6) elimination of loopholes in the eligibility requirements, and (7) restriction of deductions from earned income of employed recipients (ostensibly including the $50 work-related expense exemption limitation). Assuming (1) that the caseload and expenditure estimates projected by the department reflect full implementation of the Welfare Reform Program and (2) that the basic caseload trends underlying the esti- mates are accurate, the required General Fund support indicated in the budget document may be considerably understated. Administra- 329 12 10 105 768 Item 256 SOCIAL WELFARE tive difficulties compounded by court action initiated during the last three months of the 1971 calendar year have virtually eliminated the savings potential associated with the reform program. Legislative Analyst's Estimate-Our independent analysis of basic AFDC caseload trends indicate that the average monthly AFDC-FG and AFDC-U caseloads will be respectively 1,500,000 and 278,000 per- sons per month. Based upon these estimates, the AFDC program may be underfunded by approximately $28 million General Fund dollars. The following assumptions underlie our AFDC expenditure estimates: (A) End of the Recession-The California economy is steadily re- gaining the ground it lost during the one-year recession from November of 1969 through December of 1970. Unemployment has dropped from 7.4 in April of 1971 to 6.1 in December of 1971. Business activity, employment, nonresidential construc- tion, consumer spending and personal and farm income are expected to improve substantially. The aerospace-electronics industry, which had been contracting since the middle of 1968, has stabilized. There can be little doubt that the gradual decline in the rate of caseload growth which has characterized the AFDC-FG and U programs since the spring of 1971 is very much related to the improved state of the California economy. Consequently, it is our judgment that the basic AFDC-FG and U caseload growth patterns will revert to the trends which prevailed immediately prior to the onset of the recession; specifically, the period from July of 1968 through October of 1969. . (B) Reform Failings and Retroactive Adjustments-Our estimates have not been adjusted to reflect any significat impact result- ing from implementation of the Welfare Reform Program, in- cluding both Chapter 578 and the administrative reform measures undertaken unilaterally by the department. Our esti- mates reflect the effect of retroactive eligibility and grant ad- . justments made for the months of October through December as a result of court challenges. (2) The Adult Aid Programs--The Governor's Budget indicates a General Fund expenditure of $229,757,400 for support of adult aid cash grant payments. This is $15,235,700 (6.2 percent) below the amount estimated to be expended during the current fiscal year. The decrease is largely attributable to the altered state-county cost sharing ratios previously discussed. In addition, however, the budget narrative appears to assume im- plementation of the OAS Responsible Relatives Liability Scale, Section 33 of Chapter 578. The State Department of Social Welfare had es- timated a $17.6 million General Fund savings associated with im- plementation of the scale. Currently Ganuary 1972), enforcement of Section 33 is being challenged in the Sacramento Superior Court. 769 332 12 10 120 SOCIAL WELFARE Item 257 PAYMENT SYSTEM CASH GRANTS-Continued County welfare departments, as a result of the court challenge, are placing the contributions collected from relatives into trust funds. Should the courts invalidate Section 33, OAS General Fund support may be understated by approximately the amount of the section's estimated fiscal impact, $17.6 million. Our estimates of the 1971-72 public assistance caseloads must re- main somewhat. tentative until at least April or May of the current fiscal year. At that time, sufficient data should be available to either conform or adjust our estimates .. Department of Social Welfare OTHER PAYMENTS (Attendant, Out\u00b7of\u00b7Home, and Intermediate Care and Special Needs) Item 257 from the General Fund Budget p. L-46 Program p. 962 Requested 1972-73 ...................................................................... $87,293,100 Estimated 1971-72 ...................................................................... 80,490,200 Actual 1970-71 ............................................................................ 51,049,100* Requested increase $6,802,900 (8.5 percent) Total recommended reduction .............................................. None General Fund support for special needs was included in grant costs and not in a separate appropriation until FY 11171-72. GENERAL PROGRAM STATEMENT The funds proposed in this item are for support of the following four program elements of the adult assistance program: (1) Attendant and Homemaker Services: Attendant and homemak- er services are designed to assist infirm recipients to remain in their own homes, thereby avoiding institutionalization. The services consist primarily of housekeeping and personal care. State law requires grad- ual conversion from the existing attendant care program to homemak- er services. This conversion will permit utilization of a more favorable federal funding ratio. Current state regulations require all counties to convert to homemaker services by December 31, 1972. (2) Out-of-Home Care: Out-of-home care consists of a protective, nonmedical living arrangement apart from the recipient's own home. The services provided include board, room, personal care, and desig- nated supplementary services related to the recipient's individual needs. . (3) Intermediate Care: intermediate care consists of a protective living arrangement which, in addition to providing board, room and personal care, includes supervision of health related services designed to prevent physical deterioration and to restore, to th~ greatest extent possible, full health. The level of nursing care furnished by intermedi- 334 12 10 155 770 Item. 257 SOCIAL WELFARE ate care facilities is less than that provided by skilled nursip.g homes. The intermediate care program was established during fiscal year .1970-71 in cooperation with the State Departments of Health Care Services and Public Health. The vendor payments for board, room and personal care and supervision are categorical aid payments funded by the department. However, by contract, the actual payments are fur- nished by the Department of Health Care Services. (4) Special Needs: Special needs consist of those ite,ms which are not commonly required by all recipients. The need for such items are most often related to physical infirmities or other conditions peculiar to individual or family circumstances. Funds for support of such spe- cial need items are not included in the basic grants of adult aid recipi- ents. Therefore, departmental regulations permit the issuance of special grants to fund the cost of such needs, and these costs are paid from this item. . In the past, General Fund support was provided through a separate item for the recurring and nonrecurring special needs of recipients in the Aid to Families with Dependent Children (AFDC) program. However, Chapter 578, Statutes of 1971, provided that recurring spe- cial needs were to be incorporated in the grants of AFDC recipients and that funds for nonrecurring special needs of AFDC recipients were to be provided by the counties. ANALYSIS AND RECOMMENDATIONS We recommend approval. The budget proposes a total General Fund appropriation of $87,293,- 100 for support of attendant and homemaker services, out-of-home care, intermediate care and special needs. This is an increase of $6,802,900, or 8.5 percent, over the amount estimated to be expended for the same elements during the current fiscal year. A breakdown of the individual element decreases and increases included in this\u00b7overall appropriation increase is indicated in Table 1. (1) Attendant and Homemaker Services-The proposed 1972-73 General Fund appropriation for attendant and homemaker services reflects a decrease of $547,500, or 2.6 percent, from the General Fund amount estimated to be expended in the current year. However, the budget proposes an increase of $538,300 in the total nonfederal funds available for attendant and homemaker services. Chapter 578, Statutes of 1971, provided after July 1, 1972, (1) that the counties assume 50 percent of the nonfederal costs for the Aid to the Totally Disabled program, and (2) that the state fund all of the nonfederal costs for support of the OAS, AB, and APSB programs. The net result of these changes with regard to attendant and homemaker services was that county cost increased by $1,085,800 while General Fund costs were reduced by $547,500 in the budget year. 771 3371210170 Table 1 Attendant and Homemaker Services, Out-of-Home Care, hltermediate Care, and Special Needs Costs to the General Fund by Fiscal Year Change\/rom 1971-72 to 1972-73 --.1 Type 0\/8ervice --.1 1970-71 1971-72 1972-73 Amount Percent to Attendant and homemaker services _________ $23,473,181 $21,458,400 $20,910,900 -$547,500 -2.6 Out-of-home care ________________________ 24,970,919 28,872,200 26,579,700 -2,292,500 -7.9 Intermediate care ________________________ 55,000 5,067,100 12,496,300 +7,429,200 +146.6 Speoial needs ____________________________ 2,550,000* 25,092,500 27,306,200 +2,213,700 .+8.8 1rotal _______________________________ $48,499,100 $80,490,200 $87,293,100 +$6,802,900 0 -t ::z: m :2J \"V ,. 0( s:: m Z ~ Until fiscal year 1971-72, funds for special needs were included in grant costs. The amount shown here reh\ es to special shelter payments and funds authorized by Chapter 1426, Statutes of 1970. en 0 0 :> 1:’\” ~ 1:’\” ~ t\”l -~ ~ Item 257 SOCIAL WELFARE (2) Out-of-Home Care-For the budget year, the department pro- poses a General Fund decrease of $2,292,500, or 7.9 percent, from the amount estimated to be expended in the budget year for support of this item. In this program also, however, the change in state I county sharing ratios has made it possible for the department to actually propose total increased expenditures for out-of-home care while at the same time decreasing General Fund expenditures. The counties will be paying $5,214,300 more for out-of-home care in the budget year than they paid in the current year. Thus, the net nonfederal expendi- ture increase proposed for the bqdget year is $2,921,800. (3) Intermediate Care-The proposed 1972-73 General Fund ex- penditure for support of intermediate care is $12,496,300 which is $7,429,200, or 146.6 percent, above the amount estimated to be ex- pended during, the current fiscal year. In the absence of supporting data from either the program budget narrative or backup information, we have assumed that this increase is due primarily to the fact that the intermediate care program, which was established and developed dqring 1970-71 and 1971-72, will be in full operation during the budget year. The effect of recent federallegisl!ltion transferring the funding of this program to the Department of Health Care Services will be presented at the budget hearings. (4) Special Needs-For the current year, $18,788,600 was appro- priated from the General Fund for support of special needs. In order to meet a greater than anticipated demand for special needs, the department transferred $2,662,300 from Item 256 of the Budget Act to Item 257, the Special Needs Item, during the current fiscal year. In addition, the budget indicates that the department will request a deficiency appropriation of $3,641,600 during the cur.rent session of the Legislature. Thus, the department anticipates a total expenditure of $25,092,500 in the current year for support of special needs. The proposed special needs expenditure from the General Fund for the budget year is $27,306,200, which is $2,213,700, or 8.8 percent, above the amount estimated to be expended in the current year. We assume that this increase is related to the fact that the department anticipates an overall increase in the adult caseload during the budget year. 773 3411210190 SOCIAL WELFARE Department of Social Welfare SPECIAL SOCIAL SERVICES Item 258 Item 258 from the General Fund Budget p. L-46 Program p.965 Requested 1972-73 …………………………………………………………… . Estimated 1971-72 …………………………………………………………… . Actual 1970-71 ………………………………………………………………… . Requested decrease $520,990 (5.7 percent) Total recommended reduction ……………………………………… . GENERAL PROGRAM STATEMENT $8,667,390 9,188,385 9,354,088 None The programs funded under this item are highly specialized social services, staff development, public assistance and experimental and improvement programs. They include: (1) the Self-Support program, (2) the Family and Child Development program, (3) the Child Pro- tection program, (4) the Adoption program, (5) the Public Protection program, (6) the Public Welfare Manpower program, (7) the Demon- stration program, and (8) the nationwide social information system. ANALYSIS AND RECOMMENDATIONS We recommend approval. The budget proposes an appropriation of $8,667,390 for support of the department’s specialized social services programs. Included in this appropriation is a reappropriation of $3,000,000 from Chapter 578, Statutes of 1971, for the WIN program and child care services. This is a decrease of $520,990, or 5.7 percent, below the amount estimated to be expended for comparable programs during the current fiscal year. The budget indicates, however, that an additional $10,989,700 General Fund dollars will be made available through a transfer to the depart- ment from the appropriation item for education in the 1972 Budget Act. Thus, a total of $19,657,090 General Fund is proposed for support of the department’s special social services programs during 1972-73. 3431210230 774 Item 259 SOCIAL WELFARE Department of Social Welfare LOCAL ADMINISTRATION OF PUBLIC ASSISTANCE Item 259 from the General Fund Budget p. L-46 Program p. 962 Requested 1972-73 ……………………………………………………………. $49,398,600 Estimated 1971-72 …………………………………………………………… . Actual 1970-71 ………………………………………………………………… . Requested increase $49,398,600 (- percent) Total recommended reduction ………………………………………. $350,000 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Recommend the state not participate in the funding of any additional salary costs for social workers performing eligibility’ technician functions. (Estimated savings $350,000.) GENERAL PROGRAM STATEMENT Analysis page 775 In the past, state law and regulations required that county govern- ments, acting through county welfare departments, (a) determine eligibility, (b) determine grant amounts, (c) provide grants to recipi- ents, and (d) furnish social services designed to reduce dependency. The cost for providing these administrative services was shared by the counti,es and the federal government. The federal government fund- ed 50 percent of the administrative cost related to eligibility and grant detenllination and 75 percent of the cost related to the provision of social services. Section 23 of Chapter 578, Statutes of 1971, provides, however, that the State Department of Social Welfare, rather than county welfare departments, be charged with the responsibility relating to the control of eligibility and grant level determinations for all aid programs. The chaptered bill also provides that the department may contract with the counties for the discharge of these responsibilities. Section 42.5 of the bill further provides that the state shall pay 50 percent of all nonfederal administrative costs relating to eligibility and grant deter- minations in all categorical rud programs. The section relating to ad- ministrative costs is to become effective on July 1, 1972. ANALYSIS AND RECOMMENDATIONS The budget proposes $49,398,600 from the General Fund for pay~ ment of 50 percent of the county administrative costs related to eligi- bility and grant determination, as required by Section 42.5 of Chapter 578, Statutes of 1971. It is hoped that in the future those proposals included in the Governor’s Welfare Reform Program to simplify ad- ministrative procedures will also reduce administrative costs. We recommend that the funds included in this appropriation not be 775 345 12 10240 SOCIAL WELFARE Item 259 LOCAL ADMINISTRATION OF PUBLIC ASSISTANCE-Continued used in support of those additional salary costs for social workers per- forming eligibility technician functions. Separation of social work and eligibility functions was mandated by the 1967 amendments to the Social Security Act. In California, the counties were directed by the state to develop separate staffs to per- form eligibility functions and social work functions by January 1, 1970, in the adult programs and by July 1, 1970, in the children’s program. Because the educational and experience requirements for eligibility technicians were less than those for social workers, the salary ranges for eligibility workers were also lower. However, because the counties were not immediately able to recruit and train persons to perform eligibility functions and because the number of actual social work positions needed was drastically reduced by separation, the counties simply assigned many of their social workers. to the eligibility work positions. With regard to the determination of salaries for these social workers now performing eligibility worker functions, the counties generally used the following three methods: (1) . Social workers performing eligibility functions were allowed to maintain their social worker classification and salary and were allowed to proceed upward on the social worker pay scale. (2) In other counties, social workers who were assigned to eligibili- ty functions had their salaries frozen at the level they had attained when they were transferred from the social worker to the eligibility worker classification. Their salaries could only increase if their eligibil- ity worker salary level exceeded their last social worker salary level. (3) And, in a few counties, persons who had previously performed social worker functions and were now performing eligibility worker , functions were simply reclassified as eligibility workers and paid on the basis of the eligibility worker pay scale; It is our opinion that a sufficient time has passed and enough attri- tion has occurred in county welfare department staffs for those per- sons whose social work ,positions were eliminated because of separation to either have found other positions at that level or, if they wished to continue to perform eligibility worker functions, to be re- classified formally as eligibility workers and paid on that basis. Regard- less of whether or not the counties accept this recommendation, we do not feel that state money should be used in support of salaries for county personnel working out of classification. We therefore recommend that state regulations specifically pre- clude the payment by the state of county administrative costs which are additional costs for salaries of social workers performing eligibility worker functions. We estimate that implementation of this recommendation will re- sult in state savings of approximately’ $350,000. 348 12 10 2S5 776 ”

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” 580 .\/ SOCIAL WELFARE General Summary SOCIAL WELFARE SUMMARY Proposed total program expenditures 1973-74 (all funds) .. ……………………………. …………….. ………………… $2,534,008,561 Estimated total program expenditures 1972-73 (all funds) ……………………………………………………………….. $2,744,047,534 Actual total program expenditures 1971-72 , (all funds) ……………………………………………………………….. $2,645,002,202 Requested decrease $210,038,973(7.6 percent) RECOMMENDATIONS (1) State Administration of Public Assistance. Recommend state as- sumption of all county responsibilities relative to the provision of public assistance, including cO’unty general relief programs and certification for – food stamps and Medi-Cal. (2) Employable AFDC Recipients. Recommend transfer of all re- sponsibilities related to eligibility determination and income maintenance for employable Aid to Families with Dependent Children (AFDC) recipi- ents from the Department of Social Welfare and the county welfare de- partments to the reconstituted Department of Human Resources Development and R~habilitation. (3) Social Services Funds. Recommend Legislature review proposed division of funds between the state and the counties. Further recommend Legislature require the Department of Social Welfare to allocate the coun- ties’ share. of federal funds appropriated for social services on the following basis: a. Forfiscal year 1972-73, allocations should be proportionate to county 1972-73 services budgets which were reviewed by the State Depart- ment of Social Welfare. b. 1973-74 allocations should be on the basis of county welfare caseload, limited by county ability to utilize funds, with any excess made avail- able to counties requesting more than their caseload share. (4) Public Law 92-603 (HR 1). Recommend the following in order to . provide for federal assumption of all administrative responsibilities rela- tive to the adult aid programs on January 1, 1974: a. Development of single, flat, supplemental grant for all eligible adult aid recipients; b. Elimination of special needs; c. Elimination of cost-of-living provision in current state law; d. Elimination of relatives’ responsibility program; and e. Elimination of counties’ share in the Aid to the Totally Disabled (ATD) program at a state cost of approximately $88 million. (5) Evaluation of Social Services. Recommend the ,Health and Wel- fare Agency be directed by the Legislature to develop an effective means for evaluating the need for social services on a continuing basis, not only as a mechanism for allocating federal funds but al.so in order to provide the state with necessary information with which to determine its support 582 \/ SOCIAL WELFARE General Summary , eluding welfare recipients. Responsibilities of CounW Welfare Departments In all of the 58 counties, financial aid and social services are actually provided and administered by local county welfare departments which operate under the joint control of the county boards of supervisors and any and ~ll of the aforementoned state agencies. Total Program Expenditures For fiscal year 1973-74, the department’s budget shows a proposed total program expenditure (all funds) for support of public welfare activities of $2,534,008,561. Of this amount, $818,758,084 is from General Fund appro- priations, $365,142,926 is from county funds, and $1,351,696,226 is from federal grants and reimbursements. Table 1 summarizes the department’s proposed expenditures by program and source of funds. Table 1 Total Proposed 1973-74 Social Welfare Expenditures Including Administrative Cost by Category and Source of Funds\u00b7 , Governor’s Budget Program’ State operations (Item 275) ……… . Categorical aid (No item) …………. . Other payments (Item 276) Attendant care ………………………. .. Out-of-home care …………………. .. Special needs ………………………… .. Urunet shelter needs (Item 277) .. Homemaker services (Item 278) Local administration of aid pay- ments (Item 280) ………………. . Departmental demonstration projects (Item 279) …………… . Bonus value of food stamps ……… . Cuban refugee program ………….. .. Total ………………………………… . Total Federal $19,122,941 $7,487,487 1,889,615,000 907,888,000 4,006,500 2,001,525 63,828,200 31,883,300 80,702,800 40,299,200 1,876,770 937,044 67,452,500 50,589,375 193,262,000 96,631,000 541,850 379,295 189,600,000 189,600,000 24,000,000 24,000,000 $2,534,008,561 $1,351,696,226 General Fund $11,635,454 680,332,600 1,588,675 22,008,100 35,513,400 750,000 16,863,125 48,315,500 162,555 $818,758,084 County $301,394,400 416,300 9,936,800 4,890,200 189,726 48,315,500 $365,142,926 The proposed expenditures do not reflect the impact of either’ Public Law 92-603 (HR 1) or Public Law 92-512 (Revenue Sharing). The expenditures proposed by the Governor’s Budget do not, however, reflect the impact of either Public Law 92-603 (HR 1) or Public Law 92-512 (Revenue Sharing), both of which may have a substantial effect on state expenditures. The budget states that material related to these new laws will be presented as a supplement to the Governor’s Budget. We have included summaries of Public Laws 92-512 and 92-603 on pages 587 and 589 of our Analysis. Final recommendations on all items affected by the new federal laws will have to be withheld until the supplemental presentation is made and the necessary backup information received from the department. State Administration We recommend that legislation be enacted to provide for state adminis- tration of public assistance, including county general relief programs and, certification for foodstamps and Medi-Cal benefits. \\ I General Summary SOCIAL WELFARE \/ 583 Since 1968, this office has urged the elimination of the present dual system of welfare administration and recommended a single state ad- ministration. We believe the duplication of effort and lack of administra- tive clarity produced by the current system far outweighs any advantages purportedly gained through local administrative control. Recent state and federal legislation removing more and more authority from the county level and placing it within state control has only served to buttress our contention that state administration is the most effective and economical method of administering and controlling the welfare system. Current Administrative Structure Presently, the administration of welfare in California is executed within a complicated organization structure consisting of three levels of govern- ment: (1) the federal government-which establishes a framework of laws and regulations defining basic program policies; (2) state govern- ment-which is charged with the responsibility of supervising andcoor- dinating . the implementation of categorical aid and social services programs enacted by the federal government; and (3) county govern- ments:…….whicll,~through contracts with the state,actually determine eligi- bility, provide assistance grants, and furnish social services to needy persons. The county welfare departments established by each of the 58 county governments constitute the basic administrative arm of the state’s welfare system. While these county departments are headed by directors appointed by county boards of supervisors, the departments are actually responsible to the state and federal governments as well as the local county boards of supervisors. Recent Statutory Changes At one time, county administration of welfare served the purpose of helping to reconcile basic long-range program policies designed at the federal and state levels with the demand of a local citizenry. However, during the last 20 years, the passage of federal and state laws and regula- tions which more specifically defined welfare functions has greatly dimin- ished the degree of administrative discretion afforded county welfare departments. Recent examples of statutory changes which have removed control from the local level are the Welfare Reform Act of 1971 and Public Law 92-603, HR 1. In 1971, the Welfare Reform Act transferred responsibil- ity for eligibility and grant determination from the counties to the state. The state is now simply cont:t:acting with county governments for the performance of such functions. Also included in the Welfare Reform Act was a provision eliminating county sharing in the funding of three of the four adult aid programs. The effect of these provisions was a reduction in county incentive to administer efficiently and, hence, control welfar\u20ac~ administrative and grant costs. The recent passage of Public Law 92-603~~ C commonly known as HR 1, will, as. of January 1, 1974, permit federa:~.F= ~ administration of the adult aid programs and the total elimination oio. …… county administrative participation in such programs. Thus, county wel-‘ J );:0 fare departments are rapidly being phased out of their administrative role. Currently, eligibility requirements, levels of assistance, work proce- dures, and a host of other standards governing welfare administration in 584 \/ SOCIAL WELFARE General Summary California are determined not by the county, but rather by the state and federal governments. County administration of welfare has been reduced to a point at which it functions largely in the capacity of paymaster and bookkeeper for the federal and state governments. Very little administra- tive discretion remains at the disposal of either county welfare directors or county boards of supervisors. ‘ Administrative Improvements through Implementation of State Administration We believe the following improvements would occur as a consequence of state administration of welfare: (1) Increased Ability to Assess Responsibility;\u00b7 The effectiveness of a large administrative organization is very much dependent upon the ease of assessing responsibility. Administrators must be able to locate the causes of program success or failure. The present structure of welfare administra- tion in California fails in this regard. Inefficient welfare officials find it relatively easy to escape notice within a confusing maze of existing welfare bureaucracy. On the other hand, effective welfare officials are very often frustrated in their efforts to improve procedures. (2) Equity and Uniformity, The present system of welfare administra- tion in California has very clearly resulted in a lack of statewide uniformity with regard to the application of laws and regulations governing public assistance programs. This has resulted’ in unequal treatment of welfare recipients. For example, the current welfare system provides for the es- tablishment . of 58 semi-independent county welfare administrations throughout the state. Recipients who find it necessary to move from one county to another invariably encounter subtle but sometimes significant changes involving program implementation. Such changes can and very often do involve the amount of the cash grant issued to the recipient. The implementation of state administration would remedy this’ and other inequities arising as a consequence of a lack of statewide uniformity. (3) Greater Administrative Efficiency. Implementation \u00b7of state ad- ministration of welfare would result in a considerable enhancement of administrative efficiency. Auditing activities, payment and bookkeeping functions,management analysis, statistical reporting, and most important- ly eligibility and grant determination procedures would be greatly simpli- fied. A state-administered system would allow such activities to be expedited by recourse to central computer operations and consolidated administrative support. It would, of course, be necessary to maintain in local offices on-the-spot funds to support emergency needs; however, all other disbursements could be made and recorded centrally. Under the current system, all expenditures, including well over one million checks issued to recipients, are made by the various administrative units and departments within the 58 counties, each of which employs different procedures at various stages of automation. I In addit,io,n., state administra. tion of welfare could substantially r.educe he amount of paperwork by consolidating the number of forms and ac-ounting documents required. County welfare departments often develop . dditional forms which require slightly different information than is in state forms. Indeed, some counties have developed in excess of 100 county General Summary SOCIAL WELFARE \/ 585 forms which are used in addition to the required state forms. Finally, recipients who move from one county to another generate considerable administrative cost. The welfare staff of the county into which the recipient moves is required to develop new control documents and records. For instance, in the absence of a standardized form for collt~c\u00ad tion of responsible relatives’ contributions, the entire procedure for deter- mining such contributions must be duplicated in each county into which a recipient may move. Implementation of state administration would end this wasteful duplication of effort. Inequity in Use of Property Tax for Support of Welfare Costs As we have noted before, there is wide disparity between counties in the property tax effort put forth to fund the county’s share of the welfare program. In fiscal year 1970-71, only 30.2 cents of the property tax rate in Orange County was needed to fund its share of the welfare program, but 94.5 cents was needed in Los Angeles and $1.06 in Kings County. Im- plementation of state administration would eliminate this inequitable as- sessment of welfare costs upon the county. State Assumed Cost and Related Savings On the basis of the Depar~ent of Social Welfare’s estimate of the fiscal impact of Senate Bill 540, 1972 Session, which would have provided for state administration, we believe that our proposal would entail a transfer of approximately $472 million in county costs to the state. However, on the basis of a study our office undertook in 1969 on the state-administered welfare systems of Michigan and Illinois, we have estimated that the effici- encies and reductions in duplication to,be derived from stateadministra- tion would result in a net savings of up to $50 million, all funds. MAJOR LEGISLATION During ‘an ll-month period, December 1971 through October 1972, three major pieces of federal legislation, with substantial and far-reaching impact on the welfare program, were passed by Congress and signed into law by the President. A summary of these laws and a discussion of their impact on California is included in the following pages: Talmadge Amendments Public Law 92-223, commonly known as the Talmadge Amendments, provides, with certain specified exceptions, that all employable persons over the age of 16 who are applicants for assistance under the Aid to Families with DependentChildren (AFDC) program must, as a condition of application for aid, register for manpower services with the Depart- ment of Human Resources Development. Public Law 92-223 also requires the establishment of, and provides 90 percent federal funding for, \”sepa- rate administrative units\” (SAUs) which are to be responsible for provid- ing health, vocational, rehabilitative, counseling,\u00b7 child care, and other social and supportive services as are neces’sary to enable registered recipi- ents to accept employment or receive manpower training. The SAUs are to be staffed by county employed social workers who are to be supervised and directed by Human Resources Development personnel. Thus, the 586 \/ SOCIAL WELFARE General Summary only contact which employable recipients will have with the welfare de- partment will be in the obtaining of their welfare grants. The purpose of the Talmadge Amendments is to focus the primary attention of the welfare system, particularly in regard to the AFDC pro- gram, on the employability of the welfare recipient. The Talmadge Amendments not only require the applicant to register for employment services before he may obtain public assistance but also provide for re- moval of the recipient from the multipurpose social services delivery system of the welfare department. Employable recipients are to receive’ socialservices from workers in special teams, the separate administrative units (SAUs). The SAUs are oriented toward one major goal, enhancing the employability of the recipient. All services provided by these units must, to the greatest extent possible, be supportive of this goal. In our analysis of the Department of Human Resources Development, on page 562, we have discussed implementation of the Talmadge Amend- ments in greater detail. Employable Welfare Recipients We recommend that all welfare-related responsibilities for employable recipients be transferred from county welfare departments to the recon- stituted Department of Human Resources Development and Rehabilita- tion. . While the initial referral of welfare applicants to an employment agency and the establishment of separate administrative units (SAUs) is a major step toward reorienting the emphasis of the welfare program, the fact that employable recipients must still obtain financial aid through the welfare department represents a significant shortcoming of a plan for total separa- tion of services to employables. Welfare departments should, to the greatest extent possible, serve only . dependent persons who are not, by the very reasons for their dependency, able to support themselves. There is no logical reason for referring em- ployable recipients who are receiving all of their job-related and social services needs from the DepartIIlent of Human Resources Development (DHRD) back to the welfare department for their public assistance grants. The curn:mt system which actually forces employable persons, who are without sufficient unemployment insurance of some kind, out of the main- stream of the employment world and into the welfare system, tends to perpetuate rather than eliminate the forces which initially made self- support for the individual unachievable. We believe a separate system should be developed, through a reconstituted Department of Human Resources Development and Rehabilitation, which focuses all forces on the individual’s capacity for self-support and on the temporariness of his current condition. ‘ The proposed transfer is only outlined here, but is discussed in greater detail under our analysis of the Department of Human Resources Devel- , opment on page 567. Genetal Summary SOCIAL WELFARE \/ 587 State and Local F.iscal Assistance Act (\”Revenue Sharing\”)-Limitation on Federal Social Service Funds Public Law 92-512, c.omm.only kn.own as the \”Revenue Sharing Act,\” was signed int.o law by the President .on Oct.ober 20, 1972. In additi.on t.o pr.oviding direct fiscal assistance t.o state and l.ocal g.overnments, Title III .of the act placed a maximum limitati.on .of $2.5 billi.on .on grants pr.ovided t.o states f.or s.ocial services and further pr.ovided that appr.opriated s.ocial services funds are t.o be all.otted t.o the states .on the, basis .of p.opulation, regardless .of welfare casel.oad. The act further specifies the f.oll.owing additi.onallimitati.ons.on the manner in which the available funds may be expended: . Funds all.otted t.o each state may be expended in the f.oll.owing ‘six cate- g.ories f.or past, present, and p.otential welfare recipients .on an unliniited basis: 1. Child care 2. Family planning 3. Aid t.o the mentally retarded 4. Drug addicti.on 5. Alc.oh.olic rehabilitati.on 6. F.oster h.omes F.or all .other services, at least 90 percent .of the remaining funds must be spent .only f.or present welfare recipients. Mter all welfare pr.ograms serving present recipients are funded and after all .of the ab.ove unlimited categ.ories are funded, any remaining funds may be used t.o pr.ovide serv- ices, .other than th.ose stated ab.ove, t.o past and p.otential welfare recipi- ents. Purpose of Social Service Funding The purp.ose .of s.ocial service funding is t.o pr.ovide assistance, primarily in the f.orm.of c.ounseling, t.o f.ormer, current and p.otential welfare recipi- ents in .order t.o eliminate .or reduce dependency .or .other pers.onal pr.ob- ‘ lems such pers.ons have which may result in .or are already a cause .of a recipient’s need f.or public assistance. M.ost s.ocial service funds are ex- pended at the l.ocallevel f.or salaries .of s.ocial w.orkers, psych.ol.ogists,psy- chiatrists, c.ounsel.ors, and .other pers.ons in the \”helping\” pr.ofessi.ons and .occupati.ons. These pers.ons assist clients in c.oping with any .of a multitude ‘ .of pr.oblems, including psych.os.ocial pr.oblems .of interpers.onal relati.on- ships, mental health pr.oblems, empl.oyment pr.oblems, pr.oblems .of .ob- taining material necessities such as adequate shelter .or cl.othing, m.oney management pr.oblems, and pr.oblems with vari.ous .other c.ommunity insti- tuti.ons such as sch.o.ols, p.olice, etc. S.ocial service funds are als.o used t.o’ supp.ort pr.ograms such as seni.or citizens\” centers which help such in- dividuals maintain their independence. The federal s.ocial service funds are a main s.ource f.or supp.ort .of c.ommu- nity pr.ograms designed t.o pr.ovide necessary assistance and supp.ort t.o perS.ons wh.o are unable t.o functi.on in a t.otally self-sufficient manner. With.out such c.ommunity funds and activities, it is believed that a much heavier burden w.ould have to be b.orne by .other s.ocietal instituti.ons, such as mental h.ospitals, penal instituti.ons, etc. S.ocialservice funds expended annually at the state level support such 588 \/ SOCIAL WELFARE General Summary programs as protective and supportive services to the mentally ill and mentally retarded, the family planning program of the Department of Health, and the child care program of the Department of Education. Limitation Versus Appropriation Public Law 92-512 merely places a ceiling on the total amount which may be appropriated for social services. An appropriations bill specifying the exact amount to be made available must be passed before the actual amount available to California can be determined. The Department of Health, Education and Welfare appropriation bill for fiscal year 1972-73 which included an appropriation of only $1.7 billion for social services was vetoed by the President. As a result, HEW is purrently operating under a \”continuing resolution\” which gives it the power to continue activities authorized in the last budget until Congress appropriates funds for this fiscal year. Thus, at this time, the level of the actual appropriation for the current year is unknown. Another appropriation bill must be introduced which may contain any amount up to $2.5 billion for social services. Supplemental Budget Presentation Because the actual federal appropriations for 1972-73 as well as 1973-74 are at this time unknown, the Governor’s Budget does not reflect the impact of Public Law 92-512 on social services programs. The budget states that material relative to the limitation’s impact will be presented as a supplement to the Governor’s Budget. Impact on California For fiscal year 1971-72, it is estimated that the state and counties in California expended a total of $221 million in federal funds for social services. In August 1972, the Department of Social Welfare estimated that the state and counties would expend a total of $273 million in federal funds for social services during the fiscal year 1972-73. We have estimated that if the entire $2.5 billion is appropriated, California’s share will be approxi- mately $245.3 million. Thus, at the minimum, California’s allocation will be $27.7 million less than was budgeted by the state and the counties for the current year. County Impact Regardless of the amount appropriated, the state must develop an allo- cation formula for determining the basis upon which the state and the counties will share in the available funds. The counties are staffing pro- grams on the basis that California will be receiving the full $273 million. As the revenue-sharing bill was not signed until four months into the budget year, most of the counties had already hired personnel and signed contracts utilizing federal funds which they anticipated would be avail- able as needed. Necessary State Action In order to provide the counties with guidance in the current year and in order to provide them with sufficient information with which to pre- pare their budgets for the next fiscal year, we recommend the Legislature review, the Health and Welfare Agency’s proposed plan for division of the General Summary SOCIAL WELFARE \/ 589 available federal funds between the state and the counties, and that appro- priated social services funds be allocated to the counties in the following manner: (1) We recommend for fiscal year 1972-73 that the total federal funds allocated by the state to the counties be divided on a proportionate basis relative to the 1972-73 social services budgets submitted by the counties and reviewed by the state. (2) For fiscal year 1973-74, we further recommend that federal funds be allocated to the counties on the basis of caseload population. However, we further recommend that any funds allocated to a county and not utilized by such county be made available for reallo- cation to any county which has a plan approved by the Department of Social Welfare for use of such additional funds. As the initial purpose of social services funds was to reduce dependency and, hence, the need for public assistance, we feel that it is necessary to make some correlation between need, a county’s welfare caseload, and available funds. However, we also realize that, historically, there has not been a direct relationship between caseload and social services expendi- tures. Therefore, we have tried to recommend formulas which take both of these factors into consideration. Additional State Support for Social Services Although social service funding has been utilized for many years, none of the states, including California, has ever devised a system for effectively evaluating the usage of such funds. Because of this lack of specific informa- tion, we are unable, at this time, to make any recommendations as to . whether or not the state should make additional funds available to main- tain the current level of social services. We also recommend, however, that the Health and Welfare Agency be directed by the Legislature to develop an effective means for evaluating the need for social services on a continuing basis, not only as a mechanism for allocating federal funds but also in order to provide the state with necessary information with which to determine its support for such activi- ties. HR 1-Federalization of the Adult Aid Programs Possibly the most far~reaching welfare legislation enacted by the 92nd Congress was Public Law 92-603, commonly known as HR 1, which pro- vides for federal takeover of the adult categorical assistance programs through a merger with the social s~curity system. The new program will be known as the Supplemental Security Income (SSI) program. HR 1 abolishes the current adult categorical aid programs and establishes a flat federal payment of $130 for a single person and $195 for a couple to an persons who qualify under federal definitions of agedness, disability, or blindness. States may supplement the federal payments if they deter~ine additional support is needed. Payments are calculated in combination with social security benefits and any other income of the recipient and may, at the option of the state, be administered by local social security offices. The bill contains a \”grandfather clause,\” which provides for inclu- sion in the federal program of all current state adult aid recipients, and 590 \/ SOCIAL WELFARE General. Summary also includes a \”hold harmless\” provision that provides, under certain specific conditions, that any supplemental payments which a state wishes to grant in order to maintain a welfare recipient’s total level of assistance as of January 1972 shall not require the expenditure of state funds above that expended for stich purposes during 1972. A more detailed summary of the major provisions of the SSI program established by HR 1 will be made available by this office at the time of the budget hearings. Many of the cost or savings factors of HR 1 will not be known until the Department of Health, Education and Welfare (HEW) issues regulations implement- ing HR 1. Recommendations Because HR 1 eliminates the current adult aid programs and establishes a new adult aid program, California will also have to review and rewrite – ‘- many of its laws and regulations relative to the adult aid programs. Final recommendations regarding these revisions cannot be made until the supplemental material alluded to in the budget is provided by the ad- ministration. However, in order for California to benefit to the. fullest extent from the provisions of HR 1, we believe that the following recom- mendations can be ma~e at this time in order to provide a framework for discussion: 1. We recommend that the statebegin preparation for federal assump- tion of all administrative responsibilities with regard to the Supplemental Security Income (551) program, including state supplementation, on January 1,1974. HR 1 provides for the administrative merger of the social security sys- tem and the adult aid programs on January 1, 1974 .. HR 1 requires the\u00b7 federal SSI program to be administered by the Social Security Admiriistra- tion and permits the states to have their optional supplemental programs administered by the federal \u00b7government. Because Social Security will administer both the federal and state portions at no state cost, state and county\u00b7 savings to be derived from federal takeover are estimated to be from $30 to $35 million annually. Because HR 1 requires eligibility require- ments for state supplementation to be as liberal as the federal require- ments, and because of the savings to be derived, we believe the state should opt for federal administration of all segments of the SSI program. If the state does not opt for federal takeover and continues to administer . its own supplemental program, the current state and county cost will probably double. This is because the federal government now pays 50 percent of state administration but, after implementation of HR 1, will not participate in such optional costs. . 2. We recommend that legislation be enacted to provide for a single, flat state supplemental grant for all persons qualified for.assistance under the SSI program. . Development of a flat grant is a necessary prerequisite to federal ad- ministrative takeover. The federal SSI payment will be the same for all recipients, regardless of classification. California currently has an extremely complicated system for calculat~ ing need and grant payments for each of the adult categories. Because the General Summary SOCIAL WELFARE \/ 591 basic needs of food, clothing, shelter, and special needs related to depend-\u00b7 encyare so similar for all the aid programs, we do not believe that there is justification for continuing this complex system. Continuation of the current programs would require state administration at a state and county cost of approximately $60 to $70 million. 3. We recommend elimination of the special needs program provided under current state law. The current special needs program is a relatively inequitable system which provides additional funds for specified special needs to specified groups of recipients. While special needs are intended to be relative to the recipient’s particular disability, there is no truly meaningful correlation between needs of a group of recipients and the special needs they are actually allowed. For example, aged and blind recipients are entitled to additional funds for a telephone and for laundry while disabled recipients are not entitled to such benefits. The current system merely serves to increase the inequities of the adult aid systems rather than reduce them. A more equitable plan would be to average out the current state cost for the special needs which are provided and to increase all recipient’s grants by that average amount. Recipients could then determine which were their highest priority special needs and expend their money accordingly, without individually having to seek the approval of the welfare depart- ment for each particular special need. 4. We recommend elimination of the cost-oE-living provisions in the state supplementary grants. Current state law provides for grant increases relative to increases in the cost of living. Prior to the enactment ofHR 1, the federal government paid for 50 percent of such increases. As ofJanuary 1, 1974, the state will have to assume the total cost of such increases. Because state participation in the SSI program is to be supplementary and because federal SSI payments are to be tied to social security payments, which already incl:ude provision for cost-of-living increases, we believe that the primary responsibility for granting cost-of-living increases in the SSI program should rest with the federal government. We therefore recommend that the state eliminate its cost-of-living provision and memorialize the Congress to include a cost-of- living provision in the SSI program. 5. We recommend elimination of the Responsible Relatives’ Contribu- tion program. . . It is our understanding that the only way in. which the state could continue its Responsible Relatives’ Contribution program would be if the state were to administer its own supplemental program. Disregarding administrative costs of collecting from responsible relatives, the state, under the current scale, could collect a potential of only $20 million a year from responsible relatives. The state cost for administering the SSI supple- mental program would be approximately $70 million. Thus, the net cost to the state for maintaining the program would be $50 million, less the savings which result from the deterrent effect of the requirement. We do not believe that the benefit derived from continuance of the responsible relatives program, on balance, is sufficient to justify its continuation. 6. We recommend elimination of the counties’ share in the Aid to the 592 \/ SOCIAL WELFARE General Summary Totally Disabled (ATD) program . . As a result of the Welfare Reform Act of 1971, counties no longer partici- pate in grant costs of the Old Age Security (OAS) program and the Aid tothe Blind (AB) program: The counties do, however, pay 50 percent of the nonfederal share of Aid to the Totally Disabled (ATD) grant costs. We do not believe that the counties should participate financially in the grant costs ofa program whose payment levels and eligibility requirements are determined by the federal and state governments and in which the coun- ties have no administrative or policy input, especially where this cost is so unevenly distributed in relation to local tax capacity, thus contributing to property tax inequities. The initial cost to the state for assumption of the county costs for the ATD program is estimated to be approximately $88 million. We have not made any specific recommendations with regard to grant levels because we are awaiting information from the administration in regard to interpretation by the Department of Health, Education and Welfare and the state of the impact on CaliforIiia of certain provisions included in HR 1. CATEGORICAL AID PROGRAMS The following is a discussion including recommendations which relate to the funds included in the Governor’s Budget for provision of categorical assistancce in the form of direct cash grants. Estimated General Fund Support Needed for Categorical Aid Programs Requested 1973-74 ……………………………………………………………. $680,332,600 Estimated 1972-73……………………………………………………………… 625,336,950 Actual 1971-72 …………………………………………………………….. :…… 657,369,835 Requested increase $54,995,650 (8.8 percent) Recommendations 1. AFDC Program. We are withholding our recommendation on ex- penditure levels in the Aid to Families with Dependent Children (AFDC) program pending a review of the department’s spring case- load reestimates. 2. Adult Aid Programs. We are also withholding our recommendation regarding expenditure levels in the adult categorical aid programs pending a review of the Legislature’s decisions with regard to im- plementation of Public Law 92-603 (HR 1). The Welfare and Institutions Code requires the provision of prompt, humane nondiscriminatory services and cash grant assistance to qualified applicants for public welfare. The funds discussed here are exclusively to provide direct cash assistance to persons who qualify not only on the basis of financial need but also on the basis of dependency. Financial need for purposes of the categorical assistance programs may be defined, with certain qualifications; as having insufficient resources to secure the neces- sities of life. A dependent person is one who is aged, blind, disabled or a minor child and who meets various other criteria related to his condition of dependency as defined by federal and state law and regulations. General Summary SOCIAL WELFARE \/ 593 Budget Item In the 1971 Budget Act, funds for categorical assistance were included in a separate item~ In the 1972 Budget Act, the Legislature deleted the item. While no item was included in the 1972 Budget Act, funds were included, on an unlimited basis, in the state budget for provision of cash grant assistance. In the budget year, no item is proposed for categorical aid. However, with certain specified exceptions, Section 32.5 of the Budget Bill limits the expenditure of funds to the amount included in the state budget for such purposes. The following is a discussion of the estimate included in the Governor’s Budget of funds needed by the department for categorical aid. The budget proposes $680,332,600 from the General Fund in support of categorical aid payments during 1973-74. This is $54,995,650, or 8.8 per- cent, in excess of the amount estimated to be expended during the current year. Table 2 compares the department’s 1972-73 and 1973-74 caseload and e~penditure estimates for each of the categorical assistance programs. AFDC Program The AFDC-FG (Family Group) and AFDC-U (Unemployed) caseloads are the most unstable categorical aid programs. For this reason, we are recommending, as we have in the past, that final budget decisions in this area be delayed until further and more complete information is available through the department’s spring caseload reestimates. Adult Aid Programs As previously stated, the recent enactment of Public Law 92-603, com- monly known as HR 1, provides for the abolishment of the adult aid programs of Aid to the Blind (AB), Old Age Security (OAS), and Aid to the Totally Disabled (ATD) and further provides for the establishment of the Supplemental Security Income\u00b7 (SSI) program for the aged, blind and disabled, which will become effective January 1, 1974. The creation of the SSI program will require complete review and revision of the state’s cur- rent adult aid programs. Material related to such revisions will be present- ed in a supplement to this Analysis. Table 2 State Department of Social Welfare Estimates of Average Monthly Caseload and Expenditures for 1972-73 and 1973-74′ Estimated average monthly case\/oad (persons2 Case\/oad Difference -(1) AFDC-FG 1972-73……………………………….. 1,287,294 1973-74 ……………………………….. 1,346,575 +59,281 (+4.6%) (2) AFDC-U 1972-73 ……………………………….. 185,918 1973-74 ……………………………….. 180,755 -5,163 (-2.8%) (3) AFDC-BHI 1972-73 ……………………………….. 31,192 1973-74 ……………………………….. 30,800 -392 (-1.3%) (4) OAS 1972-73 ……………………………….. 304,716 1973-74 …………………. ; …………… \u00b7 303,335 -1,381 (-0.5%) (5) AB, APSB 1972-73 ……………………………….. 14,175 1973-74 ……………………………….. 14,304 +129 (+0.9%) (6) ATD 1972-73 ……………………………….. 214,949 1973-74 ……………………………….. 230,840 +15,891 (+7.4%) Senate Bill 90 ……………………………. Total difference between 1972-73 and 1973-74, state and county ………… +68,365 ~Estimates do not reflect impact of Public Law 92-603 (HR 1). Reflects impact of Chapter 1371, Statutes of 1972 (AB 2089). Estimated e~nditures State Expenditures Difference Expenditures $326,307,400 $150,059,700 353,561,800 +27,254,400 162,808,100 (+8.4%) 51,038,800 24,287,100 51,597,700 +558,900 24,546,600 (+1.1%) 21,117,600 37,061,000 24,108,600 . +2,991,000 36,306,300 (+14.2%) 142,231,100 144,328,000 +2,096,900 (+1.5%) 11,056,200 11,771,200 +715,000 (+6.5%) c 72,662,700 69,065,100 83,488,500 + 10,825,800 77,733,400 (+14.9%) 923,150 11,476,800 + 10,553,650 (Not Applicable) +54,995,650 (+8.8%) en I …….. en 0 () Coun!x. …… :> Difference t\”‘ ~ tr:I t\”‘ +$12,748,400 ~ (+8.5%) = tr:I +259,500 !(+1.1%) -754,700′ (-2.0%) +8,668,300 (+12.6%) -….. (I) S tQ +20,921,500 ~ (+7.5%) Item 275 SOCIAL WELFARE \/ 595 Health and Welfare Agency DEPARTMENT OF SOCIAL WELFARE-SUPPORT Item 275 from the General Fund Budget p. 177 Program p. 11-314 Amount requested in Item 275 ……………………………………………….. $10,985,454 Carryover from Section 10.2, Ch. 156, Statutes of 1972 … :…….. 650,000 Total available funds 1973-74 …………………………………………………… $11,635,454 Estimated 1972-73 ……………………………………… -…………………………….. 10,622,827 Actual 1971-72 ………………………………………………………………………….. 8,524,196 Requested increase $1,012,627 (9.5 percent) Total recommended reduction ……………………………………………….. $1,163,570 Withhold recommendation………………………………………………………. $1,336,818 ——–SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Section 31 of the Budget Act of 1972. Recommend the provisions included under Section 31 of the Budget Act of 1972 be continued in the budget year with respect to the Department of Social Welfare. 2. Impact of HR 1. Withhold final recommendation on this item pending review of decisions made by the Legislature with regard to Public Law 92-603 (HR 1). 3. Contract Approval. Recommend all contracts and con- tract amendments proposed by the department be ap-_ proved by the Department of Finance and copies of approved contracts submitted to the Joint Legislative Budget Committee prior to their inception. 4. Contractual Services-Funds. – Withhold recommendation on the $1,166,947 (allfunds), which includes approxiniately $582,099 from the General Fund, requested for contractual services pending receipt of further explanatory material Jr9m the department. 5. Controller Contract. Reduce $292,699. We recommend $292,699 from the General Fund included in the depart- ment’s support budget for purchase of audit services from the Controller be contained in a separate item as shown in last year’s budget. 6. Fair Hearings. Withhold recommendations on $754,719 requested by the department from the General Fund for expansion of its fair hearings function. 7. Attorney General Contract. Reduce $164,882. Recom- mend a General Fund reduction to reflect elimination of the department’s contract with the Attorney General for purchase of legal services. 8. House Counsel. Reduce $21,152. Recommend elimina- tion of two positions requested by the department for ex- Analysis page 598 599 599 601 605 605 606 608 \u00b7 596 \/ SOCIAL WELFARE DEPARTMENT OF SOCIAL WELFARE-Continued pansion of its House Counsel unit. Item 275 9. Operations Security aRlee. Reduce $72,564. Recommend 609 reduction of six positions requested by the department for expansion of its Operations Security Office. 10. Bureau of Research and Evaluation. Reduce $11\”,938. Rec- 610 ommend elimination of the department’s Bureau of Re- search and Evaluation and the 14 positions contained therein for a General Fund savings in salaries and wages ($117,938) plus operating expenses. 11. Planning Unit. Reduce $36,282. Recommend elimination 610 of the department’s Planning Unit, Administration, and the four positions contained therein at a General Fund savings in salaries and wages ($36,282) plus operating ex- penses. 12. Project Coordination. Reduce $1\”,819. Recommend 611 elimination of the department’s Project Coordination Bu- reau and the two positions contained therein for a General Fund savings in salaries and wages ($17,819) plus operating expenses. 13. County Cost Plans Unit. Reduce $3\”,501. Recommend 612 elimination of the County Cost Plans Unit and the five positions contained therein for a General Fund savings in salaries and wages ($37,501) plus operating expenses. Fur- ther recommend transfer of the unit’s responsibilities to the Controller. 14. County Training Bureau. Reduce $45,432. Recommend 613 elimination of six positions and approximately $45,432 from the General Fund authorized in support of the depart- ment’s County Training Bureau. 15. Expanded Data Reporting System. Reduce $650,000. Rec- 617 – ommend the requested General Fund amount be re- duced to reflect the elimination from the SDSW budget of all funds requested for the support of Expanded Data Re- porting System (EDRS) activities. Recommend also the SDSW report to the fiscal committees at the budget hear- ings, giving a detailed accounting for the 1971-72 and 1972- 73 fiscal years of all expenditures (actual or planned) by the SDSW associated both directly and indirectly with the efforts to develop EDRS. Further recommend the report include the individual position classifications and costs as- sociated with the EDRS effort. GENERAL PROGRAM STATEMENT The Department of Social Welfare is responsible for coordinating and supervising the provision of cash grant assistance by county welfare de- partments. Direct departmental activities include providing fair hearings to welfare recipients, performing audits for federal and state fiscal control, and compiling and developing reports periodically required by thefederal Item 275 SOCIAL WELFARE \/597 government. Transfer of Social Service Responsibilites. to Department of Health During the last two budget sessions, the department’s budgets reflected the fact that the department was in the process ofreorganizing internally. In the budget year, the entire Health and Welfare Agency is being reor- ganized and restructured through creation of the Department of Health. The new Health Department will assume all of Social Welfare’s respon- sibilities related to the provision of social services. Thus, the Social Welfare budget reflects a partial restructuring and a reassessment of departmental priorities relative to its reduced responsibilities: ANALYSIS AND RECOMMENDATIONS Total Proposed Expenditures for Support of Departmental Operations For fiscal year 1973-74, the department is proposing to expend a total of$19,122,941 for support of departmental activities. 9f this a:mount, $7,- 487,487 is to be derived from the federal government and $11,635,454 is requested from the General Fund. Increase in General Fund Support The amount requested from the General Fund is $1,012,627, or 9.5 per- cent, above the amount estimated to be expended in the current year. This increase is the net result of the following factors: (1) Departmental responsibility for providing social services, including direct responsibility for adoption and licensure services, will be trans- ferredto the Department of Health in the budget year. In order to per- form the necessary activities related to these responsibilities, 244 positions and related support costs were eliminated from the Social Welfare budget and transferred to the Department of Health. , (2) In the budget year, the department is requesting 122 new positions plus related expenses and additional contract funds in’ order to provide increased support for the fair hearings function, the quality control func- tion, the legal function, and the. Children and Family Systems Manage- ment Bureau. ‘ Thus, the proposed increase shown in the Social Welfare budget only partially reflects the magnitude of the depeartmental request Jor in- creased support related to the provision of cash grant\u00b7 assistance because it also reflects a substantial reduction in necessary support associated with the transfer of social services responsibilities to the Department of Health: Change in Federal-State Sharing Ratio for Departmental Support As shown in Table 1, in the current year the federal government has provided approximately 46 percent of the funds needed for s4pport of departmental activities. In the budget year, federal funds will be reduced and will constitute only 39 percent of needed support. The reason for these changes in federal funds is the transfer of social service responsibilities to the newly created Department of Health. The federal government will pay 75 percent of costs related to social services but only 50 percent of costs related to cash grant assistance. Thus, as the department will no longer. have social service responsibilities, its total federal dollars as well as its 598 \/ SOCIAL WELFARE DEPARTMENT OF SOCIAL WELFARE-Continued federal percentage claiming rate will be reduced. Table 1 Item 275 Comparison of State\/Federal Sharing Ratios for Support of Departmental Activities in 1972-73 and 1973-74 . Total ………………………………………………………………………………………………. . General Fund ………………………………………………………………………………… . Federal funds ………………………………………………………………………………… . State\/federal sharing ratio ……………………………………………………………. . Reclassification of Authorized Positions 197~73 1973-74 $19,629,033 10,622,827 9,006,206 54\/46 $19,122,941 11,635,454 7,487,487 61\/39 We recommend continuation of Section 31 of the Budget Act of 1972 relative to the Department of Social Welfare in the budget year. Section 31 of the Budget Act of 1972 requires the Department of Fi- nance to evaluate and approve, on the basis of work program and organi- zation, all new positions established by departments during the current year. Within 10 days of authorizing any new position, the Director of the Department of Finance is further required to notify the Chairman of the Joint Legislative Budget Committee and the chairman of the committee in each house which considers appropriations of such new positions. Item 255 of the Budget Act of 1972 reflects the fact that the Legislature deleted all of the eight positions associated with the department’s legal task force, three of the six positions requested for the house counsel unit, 30 legal positions associated with the department’s fair hearings function, and nine positions associated with the development of the department’s Expanded Data Reporting System, including the staff administrative III position occupied by the Chief of the Management Information Systems Branch, in order to establish what the Legislature believed to be the appropriate level of departmental support. in what appears.to be a direct contradiction of legislative intent and a circumvention of Sectipn 31, in June 1972 the Department of Social Welfare processed documents provid- ing for the reclassification on July 1, 1972, of 31 positions authorized for various units to 24 legal counsels to serve as fair hearing officers, one associate counsel and one senior legal steno to serve in the legal task force, three legal counsels to serve in the house counsel unit, and one staff administrator III and one senior steno to staff the office of Chief, Manage- ment Information Systems and to supervise the development of the Ex- panded Data Reporting System (EDRS). Because these documents were processed before July 1, 1972, the effective date of the Budget Act of 1972, they did not require approval by the Department of Finance or submis- sion to the Chairman of the Joint Legislative Budget Committee and the , fiscal committees as required by Section 31. In an attempt to conform to the intent of the Budget Act, the Depart- ment of Finance on October 6,1972, informed the Chairmen of the Joint Legislative Budget Committee, the Senate Finance Committee,and the Assembly Ways and Means Committee of the departmental reclassifica- tions and the manner in which they were accomplished. The Department of Finance also directed the Department of Social Welfare to reassign the Item 275 SOCIAL WELFARE \/ 599 , three hous~ counsel and two legal task force positions to their original assignments. The 24 legal positions were, however, permanently reas- signed to the fair hearings unit, and the staff administrative III and senior steno positions were continued through December 31, 1972. Because of these actions, we believe that, hi order to insur~ that legisla~ tive intent is complied with, Section 31 should be continued in the budget year with respect to the Department of Social Welfare . .. Impact of HR 1 (Public Law 92-603) We are withholding any recommendation in regard to departmental positions related to supervision and support of the adult categorical aid systems pending review oflegislative decisions with regard to implemen- tation of HR 1. Public Law 92-603 repeals all federal laws and regulations related to the current adult categorical aid programs and establishes a new Supplemen- tal Security Income (SSI) program. These substantial changes in federal law will necessitate significant revision of state laws and regulations relat- ed to the adult aid programs. Material related to changes required by Public Law 92-603 will be pre- sented as a supplement to this Analysis. Departmental Utilization of Contracts We recommend that all contracts and contract amendments proposed by the department be approved by the Department of Finance and copies of approved contracts submitted to the Chairman of the JointLegislative Budget Committee,pri9P tt3 Mud\” cpti9lJ. The Department of Social Welfare is utilizing the contract procedure in a manner which circumvents not only legislative intent and budgetary control but also the administrative control procedures. The department has utiliied contracts to borrow positions from other state agencies, to hire individuals outside of the civil service system, to transfer funds between budget items, and to purchase the services of consulting firms without adhering to the control procedures outlined in not only the Budget Act but also in the State Administrative Manual and the Government Code. The following are examples of the manner in which the Department of Social Welfare has utilized contracts: individuals Borrowed from Other State Agencies The Department of Social\u00b7 Welfare has literally \”bought\” high level positions from other state agencies, such as the Board of Alcoholic Bever- . age Control, the Department of Rehabilitation, and the Department of Mental Hygiene, through use of the contract mechanism. While this\u00b7isan acceptable procedure when the contract position serves some function relative to the agency from which the position is contracted, in at least two instances the Department of Social Welfare has borrowed positions which have no relationship whatsoever to the agency from which they were borrowed. . . The normal procedure for establishment of a new position is, of course, to present the new position to the Legislature and have it approved by the Legislature and the appropriate administrative control agencies. When a position is established through this contract mechanism, it is not evaluated 21-8398S I 600 \/ SOCIAL WELFARE Item 275 . DEPARTMENT OF SOCIAL WELFARE-Continued by the Personnel Board in terms of the suitability of its classification level, it is not evaluated by the Department of Finance in terms of the additional need for such manpower, and it is not approved by the Legislature. Transfer of Funds Between Items As stated on pages 606-607 of the Analysis in the discussion of the ‘department’s contract with the Attorney General, the department util- ized the contract,mechanism to increase Item 255.2,1972 Budget Act, from $67,022 to $92,022 by using $25,000 that was included in Item 255, the basic departmental support item: By utilizing the contract procedure, Section 28 of the Budget Act, which requires the Department of Finance to ap- prove item augmentations and requires the Joint Budget Committee to be notified of such augmentations, was not complied with in any way. In this instance, legislative intent as specified by the Budget Act was completely circumvented as was the administrative control vested in the DepartmeIlt of Finance. Purchase of Services from Private Consulting Firms The Department of Social Welfare signed two separate contracts with . the same consulting firm at a total value of over $140,000, without conform- ing to’ those provisions of the State Administration Manual governing contracts for consultant services. According to documents contained in the Department of General Services fIles, the contracts were (1) not subject to competitive bidding, and (2) were lacking in detail as to how the amounts of the contracts were arrived at. In addition, the Department of General Services notes that the payment for contractor services is subject to the condition that it meets clearly identifiable stages of progress based upon progress reports, with the retention of not less than 25 percent of the total contract price until satisfactory completion. The Department of Social Welfare had no such payment schedule. The Department of General Services also notes with reference to one contraCt that no indica- tion is given as to what rate was used in the contract for computing travel and living expenses. And, General Services noted, in reference to another contract, that payments for such services were in excess of the rates pay- able to officers and employees of the state under Board of Control rules. It should be noted that neither of these consulting contracts were ap- proved by the Department of General Services before agreements were entered into between the Department of Social Welfare and the private consulting firm. In one instance,there was a six-month delay between the signing of the contract and approval by General Services. With such delays, it is difficult to see how the Department of General Services exerts any control over the contractual activities of the department. Individual Contracts The department has also utilized contracts to hire individuals outside of civil service. In one such instance, an attorney was hired at the rate of $125 , per day plus travel expenses, to serve as \”a consultant and advisor to the Director of Social Welfare on state legislation and regulations in the Social -Welfare area, particularly in’ the area of absent parent support.\” Again, Item 275 SOCIAL WELFARE \/ 601 competitive bidding procedures were not observed and the utilization of civil service personnel was avoided. The only justifications for these ac- tions were the following; \”The individual was a member of the Governor’s Task Force on Welfare Reform and is intimately familiar with federal and state regulations in the partjcular area of absent parent support.\” We find it very difficult to believe that there are not individuals in state service who are intimately familiar with federal and state regulations jn the area of absent parent support. These are just a few examples of the problems which exist under the current contract procedure which is, apparently, free from both legisla- tive and administrative control. Because of the manner in which contracts are maintained physically by the Department of General Services, we are unable to determine the actual extent of these uses of the contract mech- anism. For each contract submitted to General Services there exits a filing card which contains only the name of the department, the name of the contractor, and the amount of such contract. The originals of the actual contracts are, however, in files open to review except that not all of the actual contracts are in these files because the original copies may be removed by staff members of the Department of General Services and the Department of Social Welfare or apparently by numerous other individu’: also For example, a me.mber of our staff was allowed to remove the original copies of several contracts from the premises of General Services. While a form stating that a contract was removed from the files is to be inserted by General Services staff in place of a borrowed contract, our staff mem- ber revisited General Services a week after the contracts were removed and found that no forms had been filed. Thus, there is no method of insuring that public inspection of contracts is guaranteed. Approval by the Department of Finance In order to avoid departmental usage of contracts in a manner not consonant with leg,islative intent and in a manner which circumvents normal administrative control mechanisms, the Department of Finance should be required to review and approve all contracts prior to signing and commencement of services. Contractual Services Funds We withhold recommendation on the $1,166,947 requested for contrac- tual services pending receipt of further explanatory material from the department. In addition to the $3,998,558 requested for specified contractual services, such as. audits by the Controller and legal services from the Attorney General, the budget includes $1,166,947 for additional unspecified contrac- tual services. The backup material supplied this office by the department states that of this latter amount, $525,000 is required for the Medical Assistance program contract with the Department of Health Care Serv-‘ ices, $605,147 is needed for the Merit Systems contract with the State Personnel Board and $36,800 is needed for the Earnings Clearance System. With respect to the $36,800 requested for the Earnings Clearance System, the backup material does not explain why contractual funds are needed or with what agency or individual the department is going to contract. The 602 \/ SOCIAL WELFARE Item 275 ;frV DEPARTMENT OF SOCIAL WELFARE-Continued JI J7 I vJr'{ backup ma.terial further states that additional positions are to be obtained ,\/-P ‘ from another state agency and a county through the use of contract funds. The department has not supplied us with sufficient information with which to evaluate these contract position requests. Because of the manner in which the department has utilized contract funds in the budget year and because of the lack of information provided with respect to contract proposals in the budget year, we cannot, at this time, approve the department’s request for contractual services funds. Payment Systems As originally conceived, the adult systems management bureau and the children and family systems management bureau were to be the \”nerve centers\” of the department. All departmental activities related to pay- ment systems were to be supervised and coordinated by the payment systems bureaus. While this concept is still upheld by departmental man- agement, it has never really functioned at the department’s working lev- els. Part of the reason for this failure appears to lie in the very organizational and functional relationships of departmental units. The adult and children’s units are at the lowest working level of departmental organization-the bureau level. While such units as contracts administra- tion, field fiscal planning and county training should be serving the adult systems and children’s systems bureaus, they are both organizationally and functionally equal to those payment systems bureaus. The regulations unit, potentially one of the payment systems bureaus’ major tools for effectively’ \”managing\” categorical aid operations at the local level, is in a totally separate division, at least four: bureaucratic layers away from the payment systems bureaus, and operates almost autonomously. The regula- tions unit is responsible to the legal affairs branch and has very little contact with payment systems bureaus. The current lack of central coordination, or a \”nerve center,\” results in continued duplication, overlap, and even contradiction in activities per~ formed by the various departmental units. An actual example of these problems is the following: On September 12, 1972, the department’s regulations unit adopted, on an emergency basis, regulations for implementation of Chapter 1064, Stat- utes of 1972. This chapter provides for the pass-on to Old Age Security (OAS) recipients of $7.50 from contributions collected from their respon- sible relatives on a monthly basis. The regulation states that \”in each month when a responsible relative makes his full contribution on a current basis, the county shall pay to the OAS recipient, against whose grant the contribution is made, an amount not to exceed $7.50 as provided in Section 44-111.11\” of the state’s regulation manual. The regulation was insuffi- ciently clear for county eligibility workers and county fiscal personnel to agree on when the $7.50 pass-on should be granted. The chief of the department’s bureau of field fiscal planning directed the counties, through the County Welfare Directors’ Association (CWDA) fiscal com- mittee to pass on the $7.50 only if relatives had paid all previously owed amounts. The chief of the department’s adult systems managementbu- Item 275 SOCIAL WELFARE \/ 603 reau, however, informed the counties through the CWDA adult eligibility and grant committee that the $7.50 was to be passed on for any month in which any single relative paid his entire monthly contribution, if this amount exceeded $7.50. As of this writing, the regulations unit has not issued any clarifying regulations or instructions and the counties have received no definitive answer with regard to this problem from the state. — Had the adult systems management bureau truly been the \”nerve center\” of the department, this situation probably never would have occurred, and, had’ it occurred, the problem could certainly have been resolved much more rapidly than under the current system. While we are not prop()sing any specific changes in departmental orga- nization, we do believe that, if the department is to effectively manage the categorical aid programs, at least the functional relationships between the payment systems bureaus and other departmental units involved in pay- ment systems-related activities should be reflective of the basic \”nerve center\” concept. The current system, or lack thereof, is counterproduc- tive in that it merely perpetuates state and local confusion in regard to priorities and responsibilities. Children and Family Systems Management Bureau We recommend approval. For the budget year, the department has requested an increase of 17 positions, including 12 professional positions, in order to provide increased support for its child and family systems management bureau. The bureau is currently supported by~professional and three clerical positions. The department states that the increased level of support is needed to more effectively evaluate county operations in regard to the Aidto Fami- lies with Dependent Children program. The bureau is to be organized into teams’ which will not only evaluate but will also be responsible for provid- ing consultation to the groups of counties to which they will be assigned. These teams will also be responsible for coordinating and directing all other departinental services in order to assist them in more adequately meeting the need, of the counties. In order to provide needed assistance to the counties and in order to effectively implement the \”nerve center concept\” for which this payment system bureau was originally created, we recommend approval. of the requested positions. ‘. \\ Program Assessment-Quality Control Revi’ew We recommend approval of the 31 positions requested in augmentation of the departments quality control function. ‘ (1) Required.Federal Review The federal government requires state quality control units to review federally assigned samples. With its current staff, the department is only able to review approximately 76 percent of its required AFDC samples. An augmentation of five professional imd one clerical position would, according to the department, enable them to complete the required sam- ples. Incomplete reviews not only reduce the accuracy of information produced but also,according to recent newspaper accounts and according to regulations proposed by the Department of Health, Education and 604 \/ SOCIAL WELFARE Item 275 DEPARTMENT OF $OCIAL WELFARE-Continued Welfare, may result in losses offederal funds. The Department of Health, Education and Welfare has threatened to reduce by 8.3 percent federal payments to states which have failed to meet sampling requirements. (2) Monitoring of Earnings Clearance System The department is requesting six professional and one clerical position to\u00b7 provide state staff to review county utilization of the Earnings Clear- ance System. The Earnings Clearance System is a computerized method of comparing earnings reported by recipients to the welfare department and earnings reported by their employers to the Department of Human Resources Development for purposes related to unemployment insurance benefits. Even more important than the Earnings Clearance System’s ability to aid infraud investigations is the potential value of the system as a manage- ment tool with which to detect eligibility worker errors and areas in which more effective management control may be needed. Initial reports pro- duced by this system clearly revealed a lack of understanding on the part of the counties as to the manner in which the information was to be reported and utilized. The requested positions can, if properly utilized, provide meaningful guidance to county personnel in the use of the Earn- ings Clearance System as both a fraud investigation and a management tool. (3) Expanded Quality Control for State and County Purposes The department is requesting the addition of 15 professional and three clerical positions in order to expand the audit required by the federal government so that statistically accurate performance data can be gene- rated for the individual counties. The required federal sample is relatively small, 250 cases, and is selected randomly on a statewide basis with special emphasis given only to the County of Los Angeles. The number of cases selected in a particular county has no relationship to the size of such county. For instance, in one month a relatively large county like Alameda may have only one or two cases reviewed while a small county such as Lake may have as many as 8 or 10 reviewed. The federal audit mainly produces data with regard to statewide errors and gives very little mean- ingful data with regard to a particular county’s operation. Both the coun- ties and the state believe that a sample, weighted by county according to caseload population, will produce meaningful management information which can be used to reduce error rates and improve the effectiveness of the entire welfare system. Relationship with Payment Systems Bureau As previously stated, no departmental element with responsibilities related to the categorical assistance programs should operate autonomous- ly. The quality control reviews performed by the program assessment branch are worthless if they are not infegrated with the activities of the payment systems bureaus. The payment systems bureau chiefs should be the primary \”program managers\” who determine what programs are to be assessed and who are also responsible for effectively utilizing results produc~d by such assessments. A quality control program which merely Item 275 SOCIAL WELFARE I 605 detects and tabulates errors which are not reviewed and are not used to make program changes needed to eliminate such errors serves no pur- pose. The federal government has threatened to impose fisc~l sanctions not only in regard to incomplete sampling but also with respect to \”unac- ceptable error rates.\” Payment systems must guide the entire. department in utilization of data produced by the quality control reviews if the state’s error rate is to be reduced and federal penalties avoided. Audit Contract with Controller We recommend that the Legislature establish a separate item contain- ing the $292,699 from the General Fund budgeted by the department for purchase of audit services on a contract basis from the Controller. The Budget Act of 1972 reflected the Legislature’s decision to transfer the audit function from the department to the office of the Controller. The sum allocated by the department for audits was appropriated in a separate contract item to insure its expenditure for that purpose. When the Controller took over the audit function, audits were back- logged for approximately two years. At this time, the Controller is success- fully reducing this backlog. In order to insure that this effective arrangement is maintained and to insure SDSW does not use the funds for other purposes, we believe that the Legislature should continue to appro- priate these contract funds through a separate item. Legal Affair~Fair Hearings We withhold recommendation on $754,719 requested in augmentation of funds currently allocated for the performance of the department’s fair hearings function. \/ The department’s monthly fair hearings statistical report reveals that using current available staff and funds the department was able to dispose of 30,039 fair hearings requests during the first five months of fiscal year 1972-73, for a mOIJ.thly average of 6,008 cases. Thus, for the year it is anticipated that the department will be able to dispose of approximately 72,096 fair hearings requests. For the budget year, the department states that 42,000 normal hearing requests are anticipated plus 18,000 \”random filings,\” including a backlog of 10,000 cases, for a total of 60,000 cases. As the department is able to handle over 72,000 cases using current staff, there appears to be no justification for an augmentation in order to handle only 60,000 cases. In addition, utilization of recommendations made by a private consulting firm contracted by the department at a cost of over $100,000 should make greater efficiencies in the fair hearings procedures possible in both the current and the budget years. Although it appears that the department should be able to carry out its fair hearings without the requested increase, we are withholding our recommendation in this area pending the receipt of further information from the department. The backup information and date supplied is inadequate. Approximately 50 percent of the fair hearing requests are related to the adult aid categories. On January 1, 1974, fair hearing requests in the adult programs will, as a result of HR 1, probably become the responsibility of the federal government. Thus, the department’s estimate of anticipated fair hearings, which does not take into consideration the passage of HR 1, 606 \/ SOCIAL WELFARE DEPARTMENT ‘OF SOCIAL WELFARE-Continued . could be reduced by 25 percent to 45,000 cases. – Attorney General Contract Item 275 -W~ recommend elimination of the departments contract with tHe oF- fice of the Attorney General for a reduction of $164,882 in General Fund costs. We further recommend that the Attorney Generals public welfare section be augmented by three legal positions at a General Fund cost of approximately $1mOOO (net savings $64,882). The Budget Act of 1972 provided $67,022 in contract funds for purchase by the department of legal services from the Attorney General. The de- partment stated that such support was needed to perform legal research, prepare points and authorities, provide consultation and legal advice, marshal evidence and locate expert witnesses. While these activities are normally performed by the Attorney General, the department contended that it was receiving insufficient service from the Attorney General. At that time, the Attorney General had 19 lawyers available for service through his public welfare section. However, during the current year, lO legal positions were added to this unit and four more legal positions are proposed for addition in the budget year. Departmental Augmentation of Attorney General Contract Through removal of all funds requested under Item 255 by the depart- ment for legal services normally provided by the Attorney General and through creation of Item 255.2 in the Budget Act of 1972, the Legislature specified its intent that (1) legal services related to matters under the jurisdiction of the Attorney General were to be provided to the depart- ment through a contract with the Attorney General and (2) General Fund support provided for such contract was to be $67,022. The department was also authorized three legal positions and a Deputy Director, Legal Affairs, to meet its needs for house counsel services. However, through an amendment to the contract with the Attorney General, the department also expended $25,000 of the General Fund amount appropriated through Item 255 in augmentation of the original $67,022 appropriation included in Item 255.2. While the department justi- fied this augmentation on the basis that additional support was needed from the Attorney General, the fact remains that the Legislature expressly specified the amount of funding to be provided, not the level of services to be purchased. . . Also, the manner in which the’department augmented the contract appears to circumvent the normal control procedures. The effect of the contract amendment was to transfer funds from one budget item to aug- ment another. Section 28 of the Budget Act requires the Department of Finance to approve such augmentations and to notify the chairmen of the legislative appropriations committees and the Chairman of the Joint Leg- islative Budget Committee 30 days prior to such augmentations of the necessity of such actions. In regard to this contract augmentation, none of the requirements of Section 28 were complied with. Item 275 SOCIAL WELFARE \/ 607 Utilization of Total Contract Funds The contract funds provided in Item 255.2 and supplemented by the department with funds from Item 255 were used to establish a lO-man counsel unit within the physical plant of the department who are em- ployees of the Attorney General. Support costs for the uriit were also paid through Item 255 and not Item 255.2. While the unit is supervised by a deputy from the office of the Attorney General, work is delegated to this unit directly by departmental staff. Activities of the unit are outlined below. Litigation Support The counsel unit was originally authorized primarily to provide litiga- tion support to the Attorney General. However, it actually spends approxi- mately 20 percent of its time performing such functions. This unit may only provide such support at the request of a deputy handling a social welfare case for the Attorney General, and most deputies apparently prefer to do their own backup work. One of the reasons for this may be that if the deputy avoids using the contract unit, he may work directly with program personnel who are intimately familiar with the actual back~ ground of a case and who, if involved in the backup research for a case, make excellent witnesses when the case goes to court. The contract unit attorney is an unrelated third party who has had no involvement in the initial situation which brought about the litigation and who has no respon- sibility for its outcome. Thus, he is frequently excluded from rather than included in litigation support. Legal Consultation and -Advice The t\ it spends a great deal of time in providing legal advice and consultation to the department. While the unit has probably been helpful in this regard, the department also has a house counsel unit charged with this responsibility as well as management personnel who should them- selves have at least a modicum of knowledge relative to the legal frame- work within which they function. Also, in the budget year, responsibility for licensing and adoptions, for which the unit currently allocates approxi- mately three man-years, will be transferred to the new Department of Health. A house counsel unit has been established in the Department of Health to provide legal service to the elements contained therein. Fur- thermore, passage of HR 1, providing for federal assumption of all respon- sibilities related to adult aid programs, should substantially reduce departmental demands for legal support in the budget year. Thus,consultation and advice now provided by this unit should be adequately provided by the department’s house counsel unit, the Depart- ment of Hea,lth’s legal unit, and the Attorney General in the budget year. Model Points and Authorities One of the most useful tasks which this unit could have perform~d, but has to date not accomplished, is the compilation of model points and authorities for welfare-related litigation. Various publishing companies sell legal tools commonly known as \”form books.\” These form books contain standard materials used in various legal 608 \/ SOCIAL WELFARE Item 275 . DEPARTMENT OF SOCIAL WELFARE-Continued specialties. For instance, a form book may contain examples of model pleadings for a particular type of case or examples of the way iIi which certain types of legal documents should be composed. Form books may also be corripilations of all of the cases and decisions related to a particular area of the law. These compilations are called \”model points and authori- ties\” and are a great time saver for attorneys who must, as a portion of case preparation, compile points and authorities pertinent to the case they are presenting. If the lawyer has a basic reference document, a set of model points and authorities for a particular area, he merely has to select and ‘possibly update the appropriate references rather than having to research the entire matter hjmself. Unfortunately, adequate model points and authoritieii do not exist for welfare-related litigation. The department stated during the 197~73 budget deliberations that it needed staff to develop these points and authorities. Because the department has placed only minor emphasis on this function, very little has been accomplished toward meeting this goal. While compilation of points and authorities is still a vital function, we believe that, on the basis of the department’s performance in this area, the responsibility should be transferred to the Attorney General, who will ultimately be the primary beneficiary of such reference documents. Attorney General Augmentation In order to insure that the department receives adequate legal support and in order to insure the compilation of points and authorities for welfare litigation, we recommend that the Attorney General’s public welfare sec- tion be augmented by three positions, at a General Fund cost of approxi- mately $100,000. Because federal funds may be claimed for Attorney , General services provided Social Welfare, we recommend that the $100,- 000 be included in the Social Welfare budget as a separate item \”for reimbursement of Attorney General services only.\” Thus, the net savings through elimination of the contract and establishment of three Attorney General positions will be approximately $64,882. Augmentation of House Counsel Unit We recommend elimination of two positions and $21,152 requested by the department to augment its house counsel staff. The department currently has a deputy director for legal affairs as well as four legal positions in its house counsel unit. An administrative trainee also serves as a coordinator for legal affairs. The department is, however, requesting two additional positions to provide legal services in connection with institutional licensing, adoptions, probate claims, and intercounty disputes. In addition, the positions are requested to provide the depart- inEmt with legal representation and to provide the. director with legal advisors to interpret advice from the Attorney General. As of July 1, 1973, the Governor’s Reorganization Plan No.1 of 1970 transfers all responsibility for institutional licensing and adoptions to the Department of Health. 1:0. that department, a legal staff is proposed to provide services to all departmental units. In addition,on January 1, ~974, HR 1 provides for the federalization of the adult aid programs. At such Item 275 SOCIAr;WELFARE \/ 609 time, it is anticipated that probate claims will be the responsibility of the federal government. Such fUnctions as mediating intercounty disputes and interpreting opinions of the Attorney General should be performed ‘by the Attorney General and departmental management who are in- volved in the areas of dispute or who are responsible for implementing legal opinions or decisions at the program level. Department of Health Care Services The three-man legal staff of the Department of Health Care Services manages a large volume of legal work by delegating responsibility to departmental managers to the greatest extent possible and then serving mainly as a \”policing\” or supervisorial body for legal activity. This system not only reduces the need for legal st~ff but also has the added benefit of educating departmental managers, in at least a minimal way, in the area of the law upon which their program activity is grounded. Managers with such expertise are more capable because they have the knowledge with which to act more independently. Thus, we recommend disapproval of the requested attorney positions oil the basis that the functions these positions would perform may be adequately performed by existing legal and management staff. Operations Security Office \”‘\” We recommend elimination of six positions and $12,514 requested by i. the department to augment the staff of the operations security office. 6\/u-1\” The operations security office is responsible for the supervision of inves- Ill, tigation and prosecution of welfare applicants or recipients who obtain or \”\”~l\”c’l’ attempt to obtain aid fraudulently. During the current year, the office was ~I c:>\/ authorized four professional and one clerical position. In addition, through <.., use of \"blanket funds\" the department is also purchasing the services of. a special investigator who is in charge of a welfare fraud task force and provides additional support to the office. We were further informed by the chief of the operations security office that, in the budget year, an addition- al contract position currently assigned to the director's office will be assist- ing in operations security activities. Utilization of Authorized Positions For the following reasons, we have found it very difficult to assess the current activities and accomplishments of the office in relationship to its budgeted staff: As of this writing, none of the three special investigator positions author- ized for the office have been filled. Effective July 1, 1972, the department reclassified these three positions to three legal counsels in the house coun- sel unit. However, in order to comply with legislative intent, the Depart- ment of Finance directed the department in October 1972 to return the positions to their original classification. Nevertheless, at this time, six months into the budget year, these investigator positions have still not been filled. We were informed by the department that the delay was due to problems relative to approval of the requested level of positions by the department's own personnel bureau and the Personnel Board. If the de- partment had truly needed these positions it is unlikely that they would 610 \/ SOCIAL WELFARE Item 275 DEPARTMENT OF SOCIAL WELFARE-Continued (1) reclassify the positions immediately upon establishment and (2) spend six months in a classification dispute with their own personnel bureau and the Personnel Board. Without these positions being filled, it is impossible to assess the depart- ment's current capabilities in terms of its resources and, hence, impossible to calculate its need for expanded resources. . .! ,\/ft\"Research and Evaluation J t:,it . We recommend elimination of the departments bureau of research and '~l! 1Plf,valuation and the 14 positions contained therein for a General Fund f'[fi salary savings of $117,938 plus operating expenses. ;i The bureau of research and evaluation is assigned departmental respon- sibility for the performance of what may be termed basic research. During the past two years the bureau has undertaken such research projects as . evaluation of patterns in aging, studies of housing patterns of recipients, and studies of the manner in which welfare recipients expend their wel- fare funds. Responsibility for the performance of studies designed to pro- duce information with which to solve particular program. problems is assigned to the other departmental units which have the actual program responsibility for implementing solutions to problems. Thus, a study on the types of board and care purchased by recipients was recently assigned to the adult systems management bureau rather than the bureau of re- search and evaluation. Departmental emphasis has, during the past two years, shifted away from such basic research as is performed by the bureau of research and evaluation. In fact, only a few selected projects, begun at least a year ago, are still being carried out by the bureau. We were informed that since September 1, 1972, no assignments have been given to the research and evaluation bureau. Of 17 currently authorized positions, only six profes- sional positions are actually filled, and these individuals are primarily involved in completion of the aforementioned long-term projects. ' Departmental management apparently can find no Ulie for basic re- search. While the results of such research can be valuable to a program such as welfare which is ideally attempting to meet the ever-changing needs of an ever-changing clientele, we can see no justification for con- tinued authorization of positions which are not effectively utilized. Thus, until such time as the Department of Social Welfare demonstrates that it can use a program of research and evaluation, we recommend the elimina- tion of the bureau of research and evaluation and the 14 positions to be contained therein in fiscal year 1973-74. Planning Unit, Administration We recommend elimination of the planning unit for a General Fund salary savings of $36,282 plus operating expenses. The planning unit is a four-man unit consisting of two professional and two clerical positions within the department's administrative branch. Ac- cording to the last written statement of departmental activities which was submitted to our office, these two professional positions are responsible Item 275 SOCIAL WELFARE \/ 611 for: . (a) Advising, assisting, and serving as consultants to directorate level management on administrative, regulatory, and varied other prob-' lems involving welfare program planning, payments and public social service delivery systems; (b) Establishing and maintaining effective liaisons in communications between the department and counties; ( c ) Providing coordination, assistance and direction for (1) task force and study groups involved in definition and identification of long- range program needs, goals, objectives and directions, (2) formulat- ing plans for development of welfare payment and social service delivery systems and (3) maintaining a wide variety of inputs on potential and future advances in welfare payment and social.service delivery systems; (d) Preparation and presentation ofinformation concerning payment and social service delivery systems to government officials at the federal, state and local level; to interested lay and profession\"al groups; and to the public as assigned by directorate level manage- ment; as well as,- (e) Dictation of reports, preparation of correspondence, and perform- ance of other work as required. During the initial period of welfare reform, the single professional posi- tion contained in the unit was occupied by an individual with wide-range and long-term involvement in the activities of the Department of Social Welfare who served as a \"trouble shooter,\" counselor, ombudsman, and facilitator for the state and the counties. As is clearly shown by the duty roster, many ofthe functions which he performed were activities which .should have been performed by other departmental entities to whom such responsibilities were officially assigned; however, in the~onfusion which surrounded welfare reform, both at the state and county level, this individ- . ual served a very useful purpose in that he was able to cut through red tape and achieve workable solutions to'problenis on a timely basis. The major confusion surrounding welfare reform has now passed and the individual who filled this position during welfare reform has retired. It is now time for those units assigned responsibility for welfare program planning, pay- ment systems, and\" public social service delivery to themselves establish and maintain effective liaisons and communications between the state and the counties, formulate plans for the development of future welfare pro- grams, and provide the necessary information to the federal government and the interested public. Projects Coordination \\ We recommend eHminahon of the projects coordination bureau and the two positions contained therein at a General Fund salary savings of$17,819 plus operating expenses. The projects.coordination bureau is another unit, like the planning unit, whose functions have more properly been absorbed elsewhere: In keeping with the objectives of program management the department has estab- lished functional units, such as the adults systems management bureau, 612 \/ SOCIAL WELFARE Item 275 \\ DEPARTMENT OF SOCIAL WELFARE-Continued which are responsible for managing all elements related to their pro- grams, i.e., the adult categorical aid programs. Traditionally, the projects coordination bureau was responsible for supervision of all demonstration projects and other special research projects, regardless of subject, which involved welfare programs and\/ or funding. As these projects are now the responsibility of the various func- tional program managers, we recommend the elimination of the single professional and single clerical position currently authorized for the de- partment's projects coordination bureau. Elimination ()f County Cost Plans Unit We recommend elimination of the departments county cost plans unit :. J ,I) and the four professional and one clerical position contained therein for L ... ~ a General Fund savings of $3\",501 in salaries and wages plus additional 'v operating expenses. We further recommend transfer of the units respon- Y\/L sibilitiesto the Division of Local Government Fiscal Affairs in the office ~' of the Controller. Through Budget Bureau Circular A-87, the federal government man- dated that after January 1, 1970, no federal grantor agency could reim- burse local entities for administrative and overhead costs incurred, in relationship to a federally funded project, but outside of the grantee de- partment unless the grantee had a federally approved countywide cost allocation plan which included departmental indirect cost rates. The fed- eral government delegated the responsibility for approval of county cost allocation plans to the state. Because welfare programs were the largest recipients of federal funds and, as such, would lose the most reimburse- ment if the county cost plans were not developed, the Department of Social Welfare agreed to approve the county plans for the federal govern- ment. Division of Local Government Fiscal Affairs, Office of the Controller While the Department of Social Welfare's county cost plans unit has been effective in assisting counties in the development of satisfactory cost allocation plans for federal accounting purposes; the information they have developed has not been used to the benefit of the state accounting operations. The Division of Local Government Fiscal Affairs in the office of the Controller is responsible for prescribing uniform accounting and report- ing procedures for county governments. While the Controller's primary interest is in regard to state funds and the cost plans unit is oriented toward federal funds, the primaI:Y information relating to indirect costs and county accounting procedures which both must obtain is identical. Thus, many of their activities are necessarily duplicative. It would be much more efficient to\u00b7 have one unit, rather than two, developing cost allocation formulas for use by both the state and\u00b7 federal governments. Item 275 SOCIAL WELFARE \/ 613 Chapter 1406, Statutes of ',!t72 (SB 90) The possibility of overlap and contradiction also exists between these' two state agencies which are performing such similar functions. The De- partment of Social Welfare is utilizing the cost allocation plans not only for federal purposes but also for its own state purposes. For example, county welfare administrative cost claims against the state m~y include indirect costs determined on the basis of a county's federal cost allocation plan. Chapter 1406, Statutes of 1972, requires the state to fund any additional costs incurred by the counties as a result of state and\/or federal action which occurs after January 1,1973. The chapter further requires the Con- troller to review county cost plans for funding. Indirect cost allocation plans will naturally be involved. If the state or federally imposed added county cost is welfare related, who is to approve the appropriate cost allocation plan-the Controller, who has the statutory, responsibility for such functions, or Social Welfare, which already requires and uses such plans for state funding? In order to provide for interdepartmental uniformity itt the state level and to simplify the Controller's responsibilities related to Cha:pter 1406, the county cost plans unit should be abolished and its responsibilities transferred to the Controller where the needs of federal and state agencies could be combined. County Training Bureau We recommend abolishment of the county training bureau andelimina- tion of six of the 12 positions contained therein. We further recommend that the remaining six positions be' transferred to the payment systems management branch. This reduction should result in a General Fund salary savings of approximately $45,432 plus operating expenses. As we have stated previously in our Analysis, effective supervision and direction of county training activities is perhaps the most important tool the Department of Social Welfare has for insuring that its regulations, policies and program goals are uniformly and correctly carried out throughout the 58 counties. As we have also previously noted, the depart- ' ment is not effectively utilizing its cou,nty training resources. Relationship With Payment Systems Bureaus In r(,')gard to control of the welfare system, probably the most important county training responsibilities are related to eligibility and grant determi- nation in the categorical assistance programs. While the training bureau recognizes this as a primary area of importance, the manner in which it is attempting to meet this need is not conducive to success. Because the adult and the children and family systems management bureaus are designed to be the \"nerve centers\" of the department, they should be responsible for coordinating and supervising any activity related to eligibility and grant determination, possibly the most vital segment of payment systems. Nevertheless, these bureaus have only a limited rela- tionship with the activities related to eligibility and grant determination performed by the county training bureau. As is shown in Table 2, the county training bureau is in a completely separate organizational branch than the payment systems bureaus. Organizationally, communication be- 614 \/ SOCIAL WELFARE Item 275 DEPARTMENT OF SOCIAL WELFARE-Continued tween the two must pass through at least six layers of bureaucracy. Func- tionally, a review of the training bureau's activities reveals that it operates not as a dependent staff service, with the main responsibility of respond- ing to program staff needs, but rather as an independent program, design-, ing its own priorities and objectives. The result is a lack of consistency and uniformity in the goals of the training bureau and the bureaus it purports to serve. Table 2 Organizational Relationship of County Training Bureau . to Adult and Children Systems Bureaus .~~~ Chief Deputy 'Director ~ I I I Deputy Director Deputy Director Operations Administration I I Fiscal Staff Services Division Branch I I I Payment County Systems Training Branch Bureau I , I Adult Systems Children and Management Family Systems Bureau Management Bureau For exam:ple, during the current year approximately half of the training staff was extensively involved, with the County Welfare Directors' As- sociation (CWDA) staff development committee, in defining county in- formation needs and attempting to meet those needs through plans for training. At the same time, the children and family systems management \\ Item 275 SOCIAL WELFARE \/ 615 bureau was also assessing county problem areas and attempting to develop plans to meenhose needs. Without consulting the county training bureau and without any apparent knowledge of the work that had been done by the CWDA committee and the training bureau, the children and family bureau planned and scheduled workshops for the counties. to provide them with information (or training) in those areas in which that bureau had determined such assistance was needed. The county training bureau was completely bypassed. It appears to be worthless for a training bureau to be assessing training needs when major county training programs provided by the department are conducted by other departmental units and are not even developed pursuant to the training bureau's findings. Compliance Review Audit ,Besides assessing county training needs and attempting to serve such needs, the county training bureau is also involved in evaluation of county training programs. The bureau has abolished most of the specific require- ments previously contained in state training manuals and is now requiring the counties to promulgate their own training goals. The county training bureau is then going to evaluate not only county training goals but also the degree to which such training goals are accomplished. While this is a valid and useful activity, it is only a portion of what needs to be done with county training programs. The county training bureau, in conjunction with the payment systems bureaus, should be insuring not only that coun- ties are meeting their own training goals but also that such goals are commensurate with and supportive of state goals. Transfer to Payment Systems Branch Because approximately half of the county training bureau staff is util- ized in assessing county training needs and in developing solutions to such problems and because such functions are apparently being provided more effectively by the payment systems bureaus, we have recommended that the county training bureau be reduced by six pOSitions. We have further recommended that the remaining six positions be transferred to the pay- ments systems branch in order that such personnel and the activities they perform may be more responsive to the department's program goals. Field Fiscal Operations Bureau-Administrative Claims Audit We recommend approval. The budget proposes the addition of three clerical positions on a work- load basis for its county claims responsibility. We have reviewed the data arid recommend approval of the positions. Legislative Coordinator We recommend approval. The department is requesting one professional and one clerical position in augmentation of the two professional and one clerical positions now authorized in support of the department's office of legislative coordina- tion. The current staff is unable to handle the present amount of workload. 616 \/ SOCIAL WELFARE Item 275 DEPARTMENT OF SOCIAL WELFARE-Continued With the additional requested positions the office would be able to more effectively. direct departmental staff in the ptoduction of pertinent infor- I mation relative to legislation and could provide more complete and more timely information for legislators and their staffs, Expanded Data Reporting System (EDRS) The budget for the current fiscal year contains $1.3 million for the development of a welfare management information system. This reflects a reappropriation of the unexpended balance of funds requested in the 1971-72 fiscal year for the first phase of the system, which has been desig- nated by the Department of Social Welfare (SDSW) the expanded data reporting system (EDRS). The department is requesting spending au- thority of $1.3 million ($650,000 General Fund) for the 1973-74 fiscal year to continue development of EDRS. According to the feasibility study prepared by the SDSW, the total cost of the system when fully implement- ed is expected to approximate $4 million. The annual costs of operation and system maintenance have been estimated to be respectively $28.5 million and $242,000. The feasibility study indicates also that a $101 million savings resulting from a reduction in administrative costs and elimination of overpayments to recipients would accrue from full implementation of EDRS. Major Problems in ED,RS In our Analysis last year we discussed extensively the numerous major problems associated with the efforts of the department to implement this system. Many hours of testimony were given also during the budget hear- ings detailfng specific problems including: (1) the lack of a meaningful system definition, (2) a poor selection and analysis of alternatives,and (3) cost and savings estimates which appeared to have little credibility. It became apparent during the testimony that problems associated with the effort reflected ineffectiveness of the management and staff responsi- ble for the EDRSproject. Recognizing this, the fiscal committees recom- mended eliminating all positions associated with EDRS and further deleted all proposed funding for the system, including new positions. Funding for EDRS was subsequently restored (under certain specified conditions) by the Committee on Conference at the request of the ad- ministration. However, the positions which had been deleted were not restored. In addition to the $1.3 million reappropriation, the Budget Act of 1972 provided $100,000 for, according to Budget Act language, \" ... contract\" ing for consulting services for an initial feasibility study and conceptual systems design .... \" Language in the Budget Act provided also that no augmentation be made until the feasibility study and conceptual systems design (for which the $100,000 was provided) had been reported to the chairman of the Joint Legislative Budget Committee and the chairman of the fiscal committees in each house. Item 275 SOCIAL WELFARE I 617 EDRS at an. Impasse Although the Legislature provided $100,000 to the department to obtain an adequate feasibility study and conceptual system design, and the Health and Welfare Agency attempted to assure that legislative intent was followed, the result during the current year has instead been an impasse. Of the $100,000 available for the retention of consulting assistance, the SDSW contracted for $9,700 with a consulting firm. When we were in- formed of the department's intention (prior to signing of the contract) we communicated our concern to the Secretary for Health and Welfare that in our judgment an adequate feasibility study and conceptual system de- sign could not be obtained for $10,000. We noted also at'that time that personnel who had filled the positions deleted by the Legislature were still associated actively with the project. We were informed that the agency was confident that the contract would produce meaningful results and that we would have an opportunity to review the findings of the evalua- tion. We were also informed that individuals were not an issue and that the agency would take necessary ~teps to rectify any shortcomings in the evaluation. - The consultant's review and evaluation of EDRS was made available to us by the agency in September 1972. We have reviewed that report and consider it to be totally inadequate, an opinion which we believe is shared by most of the technical and management personnel in local, state, and federal government who have reviewed this report. The most glaring inconsistency in the report is the suggestion that the state adopt a welfare system being designed for Los Angeles County. To follow such a recommendation before the state has determined exactly -what a central state system for welfare information should produce is in _ our view incomprehensible. We note that an evaluation of EDRS by the Health and Welfare Agency released on October 16, 1972, confirms many of the findings of our office and those of county representatives who have examined the system proposed by the department. In recent months we have not been aware of any substantive progress made by either the SDSW or the Health and Welfare Agency in the development of a welfare information system. Department Demonstrates Inability to Comply With Legislative Intent We recommend that the requested budget be reduced by $1.3 mJ1lion to reflect the elimination from the SDSW budget of all funds requested for the support of EDRS actiVities. We recommend also that the SDSW report to the fiscal committees at the budget hearings, giving a detailed accounting for the 1971-72 and 1972-73 fiscal years of all expenditures (actual or planned) by the SDSW associated both directly and indirectly with the efforts to develop EDRS. We further recommend that the report include the individual position classifications and costs associated with the EDRSeffort The SDSW has now expended considerable time and funds to define and develop EDRS with no success. This is best illustrated by the fact that after all the time spent on this issue, none of the agencies involved under- 618 \/ SOCIAL WELFARE Item 276 DEPARTMENT OF SOCIAL WELFARE-Continued stands fully what results EDRS is intended to produce. We do not believe a continued expenditure by the department of funds available in the current year can produce meaningful results. We therefore recommend that the department terminate the expenditure of funds on this project. The responsibility for the definition and implementation of an automated welfare information system should be transferred to the Health arid Wel- fare Agency Consolidated Data Center. The data center director reports directly to the agency, secretary and this position offers the managerial and technical skills required (something that the SDSW has failed to demon- strate) which are necessary to successfully define and implement the system. Any requests for funding of this project should come from the agency and be supported by the usual documentation required for any system before approval is granted. Department of Social Welfare OTHER ADULT AID PAYMENTS (Attendant Care, Out-of-Home Care, and Special Needs) Item 276 from the General Fund Budget p. L-50 Program p. 11-316 Requested 1973-74 ............................................................................. ;$59,110,175 Estimated 1972-73 ............................................... ~ ................................ 75,610,700 Actual 1971-72 ...................................................................................... 64,995,261 Requested decrease $16,500,525 (21.8 percent) Total recommended reduction ........................................................ Pending SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Special Review. Withhold recommendation on this item pending legislative decisions relative to implementation of Public Law 92-603 (HR 1). GENERAL PROGRAM STATEMENT Analysis page 619 The funds proposed in this item are for support of the following three program elements of the adult assistance program: (1) Attendant Care. Attendant care is designed to assist infirm recipi- ents to remain in their own homes, thereby avoiding institutionalization. Services provided by an attendant consist primarily of housekeeping and personal care. Funds for attendant care are provided directly to recipients who must hire their own attendants. State law requires gradual conversion from the existing attendant care program to the homemaker services program by April 1, 1974. This conversion will permit utilization of a more favorable federal funding ratio. Homemaker services are discussed in Item 278. (2) Out-oE-Home Care. Out-of-home care consists of a protective, nonmedical living arrangement apart from the recipient's own home. The Item 276 SOCIAL WELFARE \/ 619 services provided include board, room, personal care, and designated supplementary services related to the recipient's individual needs. (3) Special Needs. Special needs consist of those items which are not commonly required by all recipients. The need for such items is most often related to physical infirmities or other conditions peculiar to individual circumstances. Funds for support of such special neeq items are not in- cluded in the basic grants of adult aid recipients. Therefore, departmental regulations permit the issuance of special grants to fund the cost of such needs, and these costs are paid from this item. ANALYSIS AND RECOMMENDATIONS We withhold recommendation on this item pending a reVIew oflegisla- tive decisions relative to implementation of Public Law 9\u00a3-603 (HR 1). Because the services funded by this item are directly related to the current adult aid programs, abolished by P .L. 92-603, this item must be considered in conjunction with discussions of proposals for implementa- tion of the new adult aid program created by P.L. 92-603. A discussion of Public Law 92-603 may be found on page 589 of the Analysis. Supplemental material containing specific recommendations with regard to implemen- tation of Public Law 92-603 will be presented to the Legislature at a later date. , Table 1 compares the proposed budgeted amounts for 1973-74 with the estimated expenditures for 1972-73 for each of the elements included in this item. Table 1 Comparison of Attendant Care, Out-of-Home Care and Special Needs Costs to the General Fund in 1972-73 and 1973-74 Type of Service Attendant care ..................................... . Out-of-home care ............................... . Special needs ... ; .................................. .. Total ........................... , ...................... .. 197~73 $14,235,700 26,528,700 . 34,846,300 $75,610,700 1973-74 $1,588,675 22,008,100 35,513,400 $59,110,175 Change from 197~73 to 1973-74 Amount Percent -$12,647,025 -88.8% -4,520,600 -17.0% +667,100 +1.9% -$16,5OIi,525 -21.8% 620 \/ SOCIAL WELFARE Department of Social Welfare UNMET SHELTER NEEDS Item 277 Item 277 from the General Fund Budget p. L-50 Program p. 11-328 Requested 1973-74 ............... ~ ............................................................. . Estimated 1972-73 ............................................................................... . Actual 1971-72 ..................................................................................... . Requested decrease $750,000 (50 percent) Total recommended reduction ....................................................... . SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Special Review. Withhold recommendation on this item pending review of legislative decisions relative to Public Law 92-603 (HR 1). GENERAL PROGRAM STATEMENT $750,000 1,500,000 N\/A Pending Analysis page 620 ' Fllnds for unmet shelter needs of adult aid recipients were provided by the Legislature through addition of Item 257.1 to the Budget Act of 1972. Unmet shelter needs include such items as expenses incident to moving into better housing, rent, gas and electricity deposits, expenses relative to upgrading of recipient-owned housing, and downpayments toward pur- . chases of homes. ANALYSIS AND RECOMMENDATIONS . We withhold recommendation on this item pending review of legisla- tive decisions relative to Public Law 92-603 (HR 1). Because implementation or-Public Law 92-603 will require complete review of all segments of the adult aid programs, including the unmet shelter needs program, we are unable to make recommendations relative to this item until the Legislature has determined the manner in which the state will implement Public Law 92-603. Supplemental material relative to Public Law 92-603 will be presented at the budget hearings. Item 278 SOCIAL WELFARE \/ 621 Department of Social Welfare HOMEMAKER SERVICES Item 278 from the General Fund Budget p. L-50 Program p. II-316 Requested 1973-74 .............................................................................. $16,863,125 Estimated 1972-73................................................................................ 7,618,000 Actual 1971-72 ................................................................................... :.. 2,213,378 Requested increase $9,245,125 (121.4 percent) Total recommended reduction ........................................................ Pending SUMMARY OF MAJOR ISSUES ~\\ND RECOMMENDATIONS 1. Special Review. Withhold recommendation on this item pending legislative review of Public Law 92-603 (HR 1) and Public Law 92-512 (Revenue Sharing). GENERAL PROGRAM STATEMENT Analysis page 621 Through the homemaker program, services are provided which are designed to assist infirm recipients to remain in their own homes, thereby avoiding institutionalization. Services consist primarily of housekeeping and personal care. Homemakers serve basically the same clientele and provide the same kinds of services as attendants, which are funded through Item 276. Conversion from Attendant Care to Homemaker Services While the services provided by attendants and homemakers are almost identical, the two programs are administered and funded intwo entirely different ways. In the attendant care program, the recipient simply re- ceives funds from the welfare department with which to purchase the services of an attendant. There are no training or experience require- ments for persons employed as attendants. The federal government will pay 50 percent of .attendant care costs. In the homemaker program, the county welfare agency purchases or provides. the skilled services of a trained homemaker to the recipient as needed. The federal government pays 75 percent of homemaker costs. In order to obtain increased federal funding current state law requires all counties to totally convert to home~ maker services by April!, 1974. However, in order to capture the in- creased federal funds as soon as possible, the department has proposed the following phase-in schedule for conversion to the homemaker program: 35 percent conversion by January 1, 1973, . 70 percent conversion by July 1, 1973, and 100 percent conversion by January 1, 1974. ANALYSIS AND RECOMMENDATIONS We withhold recommendation on this item pending legislative review of Public Law 92-603 (HR 1) and Public Law 92~512 (Revenue'Sharing). The funds proposed in this item do not reflect the impact of either Public ~aw 92-603 (HR 1) or Public Law 92-512 (Revenue Sharing). The 622 I SOCIAL WELFARE HOMEMAKER SERVICES-Continued Items 279-280 budget states, however, that information regarding the impact of these new laws will be presented as a supplement to the budget. Because of the . substantial impact such legislation will have on these funds, we are unable to analyze this item until the supplementary information is provided. Department of Social Welfare STATE DEMONSTRATION PROGRAM Item 279 from the General Fund Budget p. L-50 Program p.II-323 Requested 1973-74 ............................................................................. . Estimated 1972-73 ............................................................................... . Actual 1971-72 ..................................................................................... . Requested increase None Total recommended reduction ....................................................... . SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Inadequate Data. We are unable to evaluate this item with the backup information provided by the department. Therefore, we withhold recommendation pending receipt of meaningful information. Department of Social Welfare $162,555 162,555 NA Pending Analysis page 622 LOCAL ADMINISTRATION OF PUBLIC ASSISTANCE Item 280 from the General Fund Budget p. L-50 Program p. II-315 Requested 1973-74 .............................................................................. $48,315,500 Estjmated \u00b71972-73 ...................... ,......................................................... 49,398,600 . Actual 1971-72 ...................................................................................... NA Requested decrease $1,083,100 (2.2 percent) Total recommended reduction ..... :.................................................. Pending SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Special Review. Withhold recommendation on this item pending legislative decisions in regard to Public Law 92-603 (HR 1) and pending review of 1973-74 county budget proposals. Analysis page 623 Item 280 SOCIAL WELFARE \/ 623 GENERAL PROGRAM STATEMENT Section 23 of Chapter 578, Statutes of 1971, states that the Department of Social Welfare, rather\u00b7 than the counties as previously provided, are responsible for the control of eligibility and grant level determinations in all of the categorical aid programs. This chapter further states, however, that the department may contract with the counties for the discharge of these responsibilities; and, Section 42.5 of Chapter 578 provides that effec- tive July 1, 1972, the state shall pay 50 percent of all coUnty administrative costs related to eligibility and grant determination which are not paid for by the federal government. The funds provided in this item are for pay- ment of the state's share of these county administrative costs. ANALYSIS AND RECOMMENDATIONS We withhold recommendation on this item pending review of legisla- tive decisions relative to Public Law 92-603 (HR 1) and pending review of county welfare budget proposals for 1973-74. The budget propo~es $48,315,500 from the General Fund in support of the state share of county administrative costs related to eligibility and grant determination. This amount is $1,083,100, or 2.2 percent, below the amoun~ estimated to be expended in the current year. This 2.2 percent decrease is the net result of an anticipated decrease in administrative costs in the AFDC program ahd an anticipated increase in the costs of the adult aid programs. Adult Aid Programs Effective January 1, 1974, Public Law 92-603 (HR 1) grants the states the option of having the federal government perform all administrative func- tions relative to the provision of cash grant assistance to adults. If the Legislature chooses this alternative, after January 1, 1974, all state and .county administrative costs related to the adult aids will be eliminated. 'Thus, the level of administrative costs cannot be determined until deci- sions relative to HR 1 have been made. Aid to Families with Dependent Children The proposed allocation for administrative costs related to the AFDC program is $4,419,000, or 12.6 percent, less than the amount, estimated to be expended in the budget year. However, in the budget year, the total AFDC caseload is expected to grow. As administrative costs for el!gibility and grant determinations are directly related to caseload, administrative costs generally do not fall while caseload is rising. The Department of Finance states that backup information explaining this proposed reduc- tion in AFDC administrative costs is not available at this time.. . Chapter 1091, Statutes of 1971, provides that by May 15 of each year county boards of supervisors must submit to the Joint Legislative l3udget Committee cost estimates relative to the categorical aid programs for the present and forthcoming fiscal years. Included in these estimates packets are county administrative cost estimates for the current and forthcoming years. While these estimates are preliminary, they should be useful in evaluating potential county administrative costs for the budget year. In the absence of any definitive information as to why this decrease in 624 \/ DEPARTMENT OF CORRECTIONS Items 281-284 LOCAL ADMINISTRATION OF PUBLIC ASSISTANCE-Continued administrative cost is expected, we are withholding our recommendation pending review of the county budget proposals. Health and Welfare Agency DEPARTMENT OF CORRECTIONS Items 281 to 284 from the Gen- eral Fund Budget p. 179 Program p. II-347 Requested 1973-74 ............................................................................ $128,708,931 Estimated 1972-73 ................................................................................ 125,757,803 Actual 1971-72 ........................................................... : ....................... ; .. 110,571,750 Requested increase $2,951,128 (2.3 percent) . Increase to improve level of service $1,037,447 Total recommended reduction ...................................... .................. $3,564,309 Analysis SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS page 1. Reception-Guidance Centers. Reduce $2,554,148. Delete 629 $3,210,752 to open new center and substitute $656,604 to provide increased reception processing in existing facilities for a net reduction of $2,554,148. 2. Correctional Program Supervisors. Recommend limiting ex- 632 pansion of this position series and an evaluation of effective- . ness. 3. Boiler Plant Supervision. Reduce $187,164. Delete 19 station- 634 ary engineers and firemen. 4. Additional Camp Officers. Reduce $134, 798. Delete 15 cor- 639 rectional officers and correctional program supervisors. 5. Conventional Parole Caseload Formula Adjustment. 644 Reduce $688,199. Delete 58 proposed new parole positions. GENERAL PROGRAM STATEMENT The Department of Corrections was established in 1944 under the provi- sions of Chapter 1, Title 7, commencing with Section 5000 of the Penal ,Code. The department succeeded to the powers and duties of the former Department of Penalogy, the State Board of Prison Directors and related departments and agencies. The objectives of the department are to operate a system of correctional institutions for adult felons and nonfelon narcotic addicts providing secure detention, humane support and corrective treatment; to provide supervi- sion and treatment of parolees released to the community to finish serving their prescribed terms; and to advise, assist and consult with other govern- mental and private agencies and citizens' groups in programs of crime prevention, criminal justice and rehabilitation. To carry out these objectives, the department operates 12 major institu- tions, 15 conservation camps, four community correctional centers and 60 Items 281-284 DEPARTMENT OF CORRECfIONS \/ 625 parole offices. By the department's estimates these facilities and services will be used by approximately 19,300 adult felons and nonfelon drug ad- dicts and 20,300 parolees in 1973-74. The department's central administrative staff is headquartered in Sacra- mento, The Director of Corrections is aided by the advice and consulta- tion of the Adult Authority, the Women's Board of Terms and Paroles and the Narcotic Addict Evaluation Authority. All adults convicted in the superior courts for criminal offenses and committed to the custody of the Director of Corrections are sentenced for an indeterminate period under the law. The commitment to .the state system constitutes a felony conviction and incarceration is for the term prescribed by law with limited discretion in the term-fixing body (Adult Authority for adult males, Women's Board for adult females) to fix and c refix the extent of the sentence to be served within an institution and in the community on parole. The minimum term of sentence, including institutional confinement and parole, and the minimum time\u00b7which must be served in an institution prior to parole, are fixed by law for each offense category. This sentencing method was established to reduce the substan- . tial discrepancies between sentences for similar offenses which existed when the term of the sentence was set by the judges and to provide the sentencing authority discretion within specific bounds to set terms based on judgmental factors relating to the nature of the offense, the offender's background and his degree of rehabilitation. Inmates are usually released from the institutions to parole to continue serving their sentence in the community under supervision of the parole organization. Some prisoners serve their full term in an institution and are discharged without parole conditions. ANALYSIS AND RECOMMENDATIONS The total operations of this department and related governmental units and functions consist of General Fund appropriations shown in Table 1. Table 1 General Fund Appropriations Item 1. Support, Item 281 ................................................ : ................................................................... . 2. Transportation of prisoners, Item 282 .... , .......................................................................... . 3. Returning fugitives from out-of-state, Item 283 ............................................................. . 4. Court costs, Item 284 ........................................................................................................... ... Total ....................................................................................................................................... . Amount $126,922,620 171,211 563,448 1,051,652 $128,708,931 In addition, the correctional industries operations will utilize $10,423,133 and inmate welfare programs will expend $3,388,059 of special revolving funds established for and supported respectively by these separate opera- tions. The total operation of this department is distributed into six programs t in the 1973-74 program budget as reflected in Table 2. The proposed total departmental expenditure program of $145,082,257 is $1,793,103 or 1.3 Program I. Reception and diagnosis program ............. . II. Institution program ....................................... . III. Releasing authorities ..................................... . IV. Community correctional program ........... . V. Special items of expense ............................. . VI. Administration-undistributed ................... . TOTALS, PROGRAMS ......................................... . Reimbursements ................................................. . NET TOTALS, PROGRAMS ............................... . General FUnd ..................................................... . Correctional Industries Revolving FUnd ..... . Inmate Welfare FUnd ....................................... . Personnel man-years .......................................... . Table 2 Summary of Program Requirements 1971-72 (Actual) $1,400,419 104,085,344 1,037,753 . 15,854,535 1,367,991 3,672,057 $127,418,099 -4,188,358 $123,229,741 110,571,750 9,243,174 3,414,817 7,045.3 Fiscal year 1972-73 (Estimated) $1,474,948 117,882,834 1,113,220 17,170,992 1,786,311 3,860,849 $143,289,154 -3,286,478 $140,002,676 125, 757,803 10,783,174 3,461,699 7,135.6 1973-74 (Proposed) $1,791,605 117,966,309 1,285,344 18,496,582 1,786,311 3,756,106 $145,082,257 -2,562,134 $142,520,123 128, 708,931 10,423,133 3,388,059 7,224.6 Increase 1973-74 over 1972-73 Amount Percent $316,657 21.5 83,475 0.1 172,124 15.5 1,325,590 7.7 -104,743 -2.7 $1,793,103 1.3 -724,344 -22.0 $2,517,447 1.8 2,951,128 2.3 -360,041 -3.3 -73,640 -2.1 89.0 1.3 c m \"II \/ ~ :1:1 -f ~ m Z -f 0 \"II n 0 :1:1 :1:1 m n -f 0 z (I) I n 0 ~ ... :i\" c CD a. ~ en \" t:;) tzl '\"C > ~ tzl Z ~ 0 \”‘l () 0 !:O !:O tzl B 0 Z m – m til sg i-‘ ~ ~ Items 281-284 DEPARTMENT OF CORRECTIONS \/ 627 percent above current-year estimated expenditures of $143,289,154. De- duction of an e~timated $2,562,134 in reimbursments leaves a net program cost of $142,520,123 for 1973-74. The General Fund portion of this net amount is $128,708,931, which represents an increase of $2,951,128 or 2.3 percent above the current-year expenditures. The proposed General Fund expenditure is $18,137,181 or 16.4 percent. ,higher than the 1971-72 actual General Fund expenditure level even though the average daily institution population is expected to be 1,198 or 5.9 percent below the 1971-72 average. Major factors contributing to the increases in the 1973-74 budget request are shown in Table 3. Table 3 Major Adjustments-Support Budget (Exludes Special Items of Expense) Item 1972 Budget Act appropriation …………………………………………………………………………………….. .. Salary increase (general) ………………………………………………………………………………………………. . Salary increase (special custody classes) ………………………………………………………………………… ‘ Increased health benefits costs …………………………………………………………………………………….. .. Increased workmen’s compensation ………………………………………………………………………………. . Increased inmate pay positions (Budget Act, 1972) …………………………………………………… .. Increased inmate pay (Budget Act, 1972) ………………………………………………… ; ……………….. .. Uniform Allowances (Chapter 881\/72) …………………. ~ ……………………………………………………. .. Increased security devices (Chapter 1020\/72) ……………………………………………………………. .. Increased training and reclassifications (Chapter 1026\/72) …………………………………………. . Unexpended balance–estimated savings ……………………………………………………………………… . ADJUSTED BUDGET 1972-73 ……….. \” ………………………………………………………………….. .. Amount $112,003,781 6,526,696 3,722,500 119,152 500,958 156,000 212,000 325,000 374,775 150,000 -119,370 $123,971,492 Staffing increase–Morrissey decision ……………………………………………………………………………. 326,055 Reduce conventional parole caseload to 50\/1 ……………………………………………………………….. 981,353 Relocate Community Correctional Center…………………………………………………………………….. 142,117 Close Conservation Center ……………………………………………………………………………………………… -3,195,554 Open Older Boys’ Reception Center ……………………………………………………………………………… 3,210,752 Close Patton Branch, CRC program …………………………………………………………….. ‘………………. -648,934 Security improvements Correctional Training Facility…………………………………………………. 154,430 Increased boiler room positions………………………………………………………………………………………. 209,631 Additional vocational programs ………………………………………………………………………………………. 126,883 Overtime for self-help groups ………………………………………………………………………………………… 31,365 6.5 miscellaneous increased workload positions ……………………………………………………………. 111,641 Miscellaneous adjustments for price, population, reimbursements, staff benefits, etc. 1,501,389 TOTAL SUPPORT 1973-74, Item 281 …………………………………………………………………….. $126,922,620 Table 3 outlines the major adjustments made to Item 220 of the 1972-73 budget which resulted from the 1972 legislative session. These adjustments form the basis for increasing the 1973-74 budget request over the original- ly requested amount for the current year. Table 3 also reflects the major program increases requested for the 1973-74 fiscal year which are partially offset by savings due to population reductions and closure of institutional facilities. I. RECEPTION AND DIAGNOSIS PROGRAM The Reception and Diagnosis Program processes two classes ofpersdns, those committed to the department for diagnostic study prior to sentenc- ing by the superior courts and those sentenced to the department for incarceration for a term Of years; 628 \/ DEPARTMENT OF.CORRECTIONS Items 281:-284 DEPARTMENT OF CORRECTIONS-Continued The superior courts often desire’ a comprehensive diagnostic evaluation of a convicted offender in order to determine the most appropriate sen- tence. Many counties do not provide this service to its. courts as the work- load is not sufficient to warrant program implementation. Therefore, the objectives of this departmental program are to provide the courts a com- prehensive diagnostic evaluation of and recommended sentence for the convicted offenders temporarily committed to the department for diagno~ sis. Budget Request The department is requesting $1,791,605 for this program in 1973-74 consisting of $1,723,705 from the General Fund and $67,900 in reimburse- ments from the Department of Vocational Rehabilitation. The depart- ment is requesting 31 proposed new positions consisting of eight positions at existing reception centers for workload increase and reestablishment of positions previously abolished under the provisions of Section 20, Budget Act of 1972. An additional 23 positions are requested to provide diagnostic staffing for a new 400-bed reception center. The persons newly committed to the department from the courts as felons or nonfelon addicts are a largely unknown factor and a need exists to evaluate the individual for rehabilitation program determinations and proper institutional assignment~ Institutional assignments are based on a combination of factors such as the degree of custody security required (minimum to maximum) and individual and institutional program re- quirements. The new felon commitments are received at reception cen- ters located adjacent to and operated as part of regular penal institutions for males at Vacaville, Tracy, and Chino, for females at Frontera, and for nonfelon addicts at Corona and Tehachapi. The evaluations become a part of the inmate record and are utilized throughout the institutional stay for rehabilitation program as well as parole planning purposes. Table 4 shows the reception and diagnostic workload by number and types of commitments. There have been only slight increases in the cur- rent and budget years in the number of felon cases and nonfelon addicts, offset by a significant reduction in the number of parole violators proc- essed. The overall decline in workload for these categories has been more than offset by a 1,040 increase in county diagnostic cases, which is the primary reason for the need for additional processing capacity. Table 4 Reception and Diagnosis Program. Workload Data Persons processed 1971-72 Felons …. , .. , …………… , …… ;……………………………………………………… 3,200 Nonfelon addicts …………… , ……………….. ,………………………………… 4,226 Parole violators …………………………………………………………………… 2,800 County diagnostic cases …………………………………………………….. 3,360 Fiscal Year 197~7J 3,210 4,250 2,550 4,260 1973-74 3,285 4,400 1,980 4,400 The workload for this program consists of the cases referred to it by the participating counties, which totaled 3,360 in 1971-72 and are estimated to total 4,260 in the current and 4,400 in the budget year. Of the 3,360 cases Items 281-284\u00b7 DEPARTMENT OF CORRECTIONS \/ 629 diagnosed in 1971-72, only 1,590 were subsequently sentenced to the de- partment, and of the 4,400 to be diagnosed in 1973-74 it is expected that \u00b71,700 will be returned as felon commitments. Deletion of the Proposed New Reception Center We recommend deletion of the request to open the Older Boys’ Recep- tion-Center-at\u00b7an-estimatedcost-of-$3,21 0, 752andaltemativelyto process the projected workload at existing facilities at an approXimate cost of $656,604 for a net reduction of $2,554,148. . The increasing number of cases to be processed, especially county diag- nostic cases, has resulted in operating the three existing reception centers in excess of their rated capacity plus processing a part of the overflow at the California Conservation Center at Susanville. The department plans to close the Susanville Center by April 1, 1973, which would result in a gross savings of $3,195,554 in the budget year. Closure of this facility re- quires the establishment of additional reception processing capacity to handle the returning parole violators now processed at Susanville. The department plans to continue operating the existing reception centers in excess of capacity and to provide additional reception processing at San Quentin State Prison until the proposed activation of the Older Boys’ Reception Center as the new Chino Reception Center. This new facility was built for the Youth Authority but never activated due to population decline. To open this new facility would require 23 proposed new positions in this program plus a total of 173.6 proposed new positions contained in other programs of this budget. The total cost ofthis new facility for the first year is $3,210,652, which includes one-time expen- ditures for employee moving expense, initial equipment, structure modifi- cations and fencing totaling $929,160. This leaves a net cost of $2,281,592, which is substantially less than the operating cost of the Susanville institu- tion. The average length of time for most processing cases is eight weeks. Exceptions are felon parolees returned to finish their term for parole violation (six weeks) and county diagnostic cases returned under commit- ment (three weeks). The Corrections Systems Study (Keldgord Report) completed for the Board of Corrections in July 1971, recommended that the reception process be shortened to approximately 30 days. The report pointed out that in the federal prisons an intake screening officer recom- mends a full program for a new inmate within a few days of reception. Further processing under the federal system is completed in the institu- tion of assignment. Processing time of reception centers for the Youth Authority averages 30 days. While these three systems may not be exactly comparable, a question is raised as to the necessity for the eight-week average stay in processing centers of this department. A significant reduc- tion in the average length of stay in the reception centers could alleviate the necessity to provide additional processing capacity. Therefore, we suggest that the proposed new reception center not be established, that the proposed temporary use of San Quentin for excess processing cases be continued for the full budget year and that a thorough review of process- ing procedures be made by the department and the control agencies to 630 \/ DEPARTMENT OF CORRECTIONS Items 281-284 DEPARTMENT OF CORRECTIONS-Continued determine the feasibility of reducing the average length of stay in these facilities and thereby alleviate or eliminate the need for additional facili- ties: Reception Center Evaluation 1:1’1 our 1971-72 Analysis of the Budget Bill, we recommended that the department evaluate this program on the basis of the extent to which the institutions were accepting and implementing the inmate program rec- ommendations of the reception-guidance centers and the reasons for non- compliance. In response the department issued a report dated March 22, 1972, of a study sample of 980 inmates scheduled for release in March and April 1972. . In summary,the report established that the program recommendations were followed in the greater percentage of the cases. The lack of compli- ance generally resulted from inmate rejection of the programs recom- mended or a subsequent finding of unsuitability. An initial evaluation of the courts’ reaction to reception center recom- mendations on county diagnostic cases reveals a generally high degree of acceptance. It was determined that the Southern Reception Guidance Center was recommending a higher percentage of its county diagnostic . cases be committed to the department than were the reception centers in the north. This’discrepancy was explained on the basis that the southern California counties, on the average, commit more severe criminal cases for diagnosis than are received from the northern counties. The most recent study of this activity has not been received by this office but we under- stand one new finding is to the effect that the courts are to a greater degree than heretofore not following the recommendations to commit these diagnostic cases to the state prisons for incarceration. Therefore, either the. courts are being more liberal in. the use of probation or the reception centers are becoming more restrictive in their recommenda- tions. We expect that the published report will clarify this point. II. INSTITUTION PROGRAM Under the state Penal Code, persons convicted of certain designated crimes must be and for other convictions may be committed to the De- partment of Corrections for the period of time denoted for the offense in the Penal Code or criminal provisions of other state codes. The first objec- tive of this program is to protect society by providing facilities for the incarceration and care of felons and nonfelon addicts committed to state care. The second objective is to provide programs of corrective treatment best suited to the rehabilitation of the various types of commitments to the extent that present knowledge and resources permit. The department operates 12 institutions, ranging from minimum to maximum security, and including a medical-psychiatric institution and a treatment center for narcotic addicts under civil commitment. While the department seeks to assign and reassign inmates to institutions on the basis of individual program needs, other factors such as institutional and fiscal necessities also influence the determination of institutional assignment. Major treatment programs common to most all institutions include in- Items 281-284 DEPARTMENT OF CORRECTIONS \/ 631 dustrial m~nufacturing operations to reduce idleness and teach work hab- its and job skills, vocational training iI1 various trades and occupations, academic instruction ranging from literacy classes to college correspond- ence courses, and group and individual counseling by professional and nonprofessional counselors. In addition to the major institutions, the de- partment will also operate 15 camps housing 1,294\u00b7\u00b7 inmates du.ring the budget year. These camp inmates perform various forest conservation, fire prevention and suppression functions in cooperation with the Division of Forestry. This institutional program represents the major effort of the depart- ment in manpower and monetary expenditures. The reasons for the significant variations in man-years and monetary expenditures will be discussed in the following analysis of each program element. Proposed Closure of Institutional Facilities During the budget year, the department will need to provide institu- tional housing for an average daily population of 19,260. This represents a decline of 9,400 in average daily institutional population since 1969. In addition to facilities previously deactivated, the department plans to close five forestry camps, the nonfelon addict unit fot females at Patton State Hospital, three living units at the Institution for Men, one-half a living unit at the Institution for Women and the remainder of the California Conser- vation Center at Susanville during the current fiscal year. The decline in population has resulted in a shortage of inmates deemed by the depart- ment to be suitable for housing in the minimum security camps ana conservation centers. The decline in female prisoners makes space avail- able at the women’s institution sufficient to absorb the female nonfelon addict population now housed at Patton State Hospital at an overall sav\” ings in operating costs. Closure of these facilities, exclusive of the Susanville institution, plus program modifications at the California Rehabilitation Center and the Correctional Training Facility during the current year eliminated 117.6 positions with an annual salary saving of $1,436,399 and operating expense of $130,200 for a total savings of $1,566,599. At the same time, ,the depart- ment determined a need for 145.2 new positions at a cost of $1,679,222. These new positions will be more fully discussed under the analysis of the components of the institutional program specifically affected . . Closing the Susanville institution results in an annual savings of $3,195,- 554. This is largely offset by additional reception center beds at a first-year cost of $3,210,752. Included in the first-year costs are one-tlme expendi~ tures for employee moving expenses, intitial equipment, and capital out- lay totaling $929,160. After excluding these one-time expenditures, the operation of the new reception center will result in a net annual savings of $913,962 compared with the .annual cost of the Susanville operation. 1. Security Element The security element goals are to (1) protect the public by secure inGarceration of the felons committed, (2) maintain a relatively safe and stable environment for employee and inmate protection and (3) provide 22-83988 632 \/ DEPARTMENT OF CORRECTIONS Items 281-284 DEPARTMENT OF CORRECTIONS-Continued a stable setting wherein programs of rehabilitation are offered. The department has set the program objective of reducing the number of escapes, attempted escapes and incidents by 20 percent, but no time period for accomplishment is specified. Security must be provided full- time at 12 institutions and 15 conservation camps housing approximately 19,260 persons. Program resources devoted to this function in the budget year are 3,379.3 personnel man-years and $48,555,860. This represents an increase of 14.5 man-years but a decrease of $787,277 under the current year. Additional Security Positions Because of the changing nature of the inmate population which the department claims results in a more aggressive hard-core criminal ele- ment evidenced by the continuing disciplinary problems including homi- cides and other attacks on staff and inmates and in order to reduce these problems and curtail the number of escapes, the department resurveyed the security needs of all of its institutions and determined a need for 121.7\u00b7\u00b7 additional security positions for existing facilities unrelated to staffing for new facilities. These positions are being established during the current year and are in addition to the 319~6 additional security positions author- ized by the Legislature in 1972-73 to overcome deficiencies in security coverage resulting from changes in the inmate population profile. We have reviewed the justifications for these 121.7 additional positions and find them to be adequately justified except for the 15 additional camp positions at an annual salary cost of $134,798 recommended for deletion under the work projects-cooperating agencies component discussed subsequently in this analysis. Correctional Program Supervi~ors We recommend that the utilization of correctional program supervisors asreplacements for correctional officers be evaluated as to rehabilitative effect based on a strictly controlled research project. The department proposes to convert 300 correctional classification posi- tionsincluding 42 lieutenants, 69 sergeants and 189 correctional officers to a like number of correctional program supervisors III, II, and I respective- \u00b7ly as mandated by Chapter 1026, Statutes of1972. The correctional pro- gram supervisor (CPS) . position series was originally authorized as part of ~nd restricted to the conservation camp program. The concept represent- ed a merger of the custody and treatment concepts that were separate and distinct functions at that time and to a lesser degree this separation still prevails in institutions not utilizing the CPS series. The CPS series adds casework duties for a limited inmate caseload (16 inmates per CPS) to the regular custody functions of the correctional officer. For these added duties, the CPS position is paid on a scale 10 percent higher than the correctional officer. Evaluation of the rehabilitative results of the new position series reflected somewhat better parole results for inmates super- vised by the CPS series. This should have been a predictable result as the comparison was made between the minimum custody camp inmates and the\u00b7 more criminally involved inmates in the regular penal institutions. Items 281-284 DEPARTMENT OF CORRECTIONS \/ 633 Many of the latter were unsuitable for camp placement due to the more severe nature of their criminal backgrounds. No utilization (and therefore no evaluation) has been made as to the effectiveness of the CPS series in improving the rehabilitative results of the more severe criminal violators housed in the regular penal institutions. The departmElnt proposes to evaluate the effect,ivenessof this new posi- tion series in relation to regular institutions and has directed the institu- tions to which they will be assigned to prepare specific research projects with the assistance of the research unit of the department. A primary effort in this regard should be established at the Correctional Training Facility-North Facility (Soledad). This 1,200 capacity institution was built in two 600 capacity units. The department proposes to staff one half of this facility with CPS positions and the other half with correctional officers. This will afford an opportunity to evaluate the relative effective- ness of the two position series in improving the rehabilitation of inmates by randomly assigning comparable inmates to both 6OO-man units and following them on parole to determine any signifcant differences rh parole . success. The department alternately proposes to assign problem cases from other institutions to the 6OO-man unit staffed with CPS positions. This could result in a lack of comparability between the two 6OO-man units, thereby possibly negating proper evaluation of the program. Since treat- ment units are provided for problem cases, we question the use of the North Facility {or that purpose. We recognize that if the CPS series can improve the parole performance of these problem cases to a greater de- gree than is achieved by correctional officers with the less troublesome cases, it may erroneously indicate greater success for the CPS series. We recommend that the department place compatible inmates in both units at the North Facility and that research evaluations be made of the results of this and other programs utilizing CPS positions in the regular institutions. We further recommend that there not be further expansion of this position series until the recommended research evaluations indicate in- creased effectiveness sufficient tojustify the increased cost of the position series. 2. Inmate Support The objectives of this program are to provide food, clothing, medical and dental care, housekeeping services, and institution maintenance and operation for the felons, nonfelon addicts and others committed to the department. Total expenditures of $26,355,438 and 828.9 man-years were devoted to this program element for an average daily population of 20,485 inm\u00b7ates in 1971-72. To provide an improved program level in 1973-74 for an estimat- ed average daily inmate poprtlation of 19,260, the department is request- ing 906.6 man-years and $30,005,738. The budget-year request represents an increase of 13.8 man-years and $1,083,2lO over the current-year expen- ditures. A total of 76.3 proposed new positions are requested for this institution program element for 1973-74. Of these proposed new positions, 16.3 were 634 \/ DEPARTMENT OF CORRECTIONS DEPARTMENT OF CORRECTIONS-Continued Items 281-284 established ~dministratively during the current year as a reinstatement of previously authorized workload positions abolished under the provisions of Section 20, of the Budget Act of 1972, which prohibited the expenditure of funds for positions continuously vacapt between October 1, 1971, and July 1, 1972. Many of the positions were partial positions which were purposely held vacant so that the funds appropriated could be used to pay existing employees overtime to perform the. required functions. Other positions were vacant due to recruitment difficulties and the salary funds were transferred to operating expenses and the services, generally profes- sional, were supplied on a contractual basis by private practitioners. These positions should be approved as budgeted. Another 28.5 of the proposed positions are re~ated to\u00b7 the opening of the Chino Reception Guidance Center and should be deleted in line with our’ prior recommendation relating to the reception and diagnosis program. The remaining 31.5 proposed positions consist of 12.5 positions of various classifications that were justified on a workload basis and 19 stationary firemen and engineers requested as boiler operators to replace inmate boiler attendants. Proposed Boiler Attendants We recommend the deletion of the proposed new positions consisting of 10 stationary firemen and 9 stationary engineers for a salary reduction of $187,164. The department proposes to replace inmate boiler plant atte~dants with 19 civil service positions at an annual state cost of $187,164. The department states the need for the new positions is due to the difficulty of finding qualified, minimum custody inmates to fully staff the boiler operations. Minimum custody inmates are required because the boiler plants are located outside the security areas. As of October 3, 1912, the department housed in excess of 5,300 light custody inmafes. While obtain- ing minimum custody inmates with the proper skills may be difficult, it is not impossible to find suitable inmates who could be trained for these operations. Because these boiler plant jobs may be used to give valuable training and employable skills to inmates, we believe the substitution of civil service employees in this capacity is unwise unless the department can show that it is not possible to obtain and train suitable inmates. 3. Treatment While all inmate-employee relationships, including professional and nonprofessional staff, have potential rehabilitative effects, the treatment element ofthe institutional program relates to those structured activities specifically established for’ rehabilitative purposes. These functions in- clude psychotherapy and counseling, academic and vocational training, recreation, self-help activities and religious counseling, training and serv- ices. The need for these activities is based on evaluation of inmate deficiencies and requirements and enerally accepted correctional con- cepts. The treatment element proposes a budget-year staff of 819.3 man-years and expenditures of $14,546,002. This represents a net decrease of 23.5 Items 281-284 DEPARTMENT OF CORRECTIONS \/ 635 man-years below the current year but an increase of $9,113 in expendi- tures. The reduction in man-years is the net result of position deletions resulting from population decline partially offset by new positions estab- lished administratively in the current year and proposed as new positions in the budget year to provide for expanded psychiatric services due to workload increase. Significant changes in the treatment program are dis- cussed in relation to the analysis of each program element. The department’s request for 48.1 proposed new positions for this pro- gram element, which are discussed under the specific program compo- nent, less position deletions due to closure of institutional facilities results in a net decrease in man-years utilized. The total request includes 21.5 new positions over the 26.6 Section 20 positions requested for reestablishment. a. psychiatric Services. Many inmates committed to the Department of Corrections suffer from serious emotional and mental problems which contribute to varying degrees of social disability. To aid in the correction of such problems, institutions maintain professional staff and programs, including a large number of psychiatric hospital beds, designed to provide psychotherapy and other clinical services to those with mental disorders. Major psychiatric hospitals are located at the California Medical Facility, Vacaville and the California Men’s Colony, San Luis Obispo and are staffed with clinical employees to treat varying kinds and levels of mental disor- ders. In addition, each institution is staffed with psychiatrists and psycholo- gists to provide ongoing diagnostic and emergency psychiatric treatment. Many such services are limited to part-time consultant availability due to inability to recruit staff on a full-time basis. Group psychotherapy, which J strives for personality change and utilizes clinical staff, is another feature of this service. ‘ This program component is budgeted at $3,089,229 and 164.9 man-years for the budget year which is relatively the same as the current year adjusted for merit salary and price increases. The budget-year program represents an increase of $1,117,092 and 61.2 man-years over the’ 1971-72 actual expenditures. This increase is due to expansion in this program component by conveJ,’sion of the California Men’s Colony to a psychiatric treatment facility as authorized in the Budget Act of 1972. The department is requesting 20 proposed new positions for this compo- nent, of which 18.5 represents reestablishment of workload positions abol- ished under the provision of Section 20, Budget Act of 1972. These positions were abolished as unfilled but actually had been disencumbered to provide services on a contractual basis due to difficulty in recruiting psychiatrists. The requested new positions include one psychologist at Folsom Prison arid a half-time psychiatrist at the Correctional Training Facility on the basis of workload increase. , h. Counseling Services. This element of the treatment program pro- vides assistance to inmates to overcome problems related to their criminal backgrounds, institutional and personal adjustment and family and prop- erty difficulties. Counseling services are provided by professionally trained correctional counselors as well as group counseling by across section of staff disciplines. The correctional counselors respond to inmate 636 \/ DEPARTMENT OF CORRECTIONS DEPARTMENT OF CORRECTIONS…,….Continued Items 281\u00b7,,284 problems relating to family and others outside the penal institution as well as institutional adjustment and help inmates develop insight into their own behavior. These ~ounselors also help prepare the inmate for parole and submit reports to the paroling authorities relative to the inmate’s adjustment and progress during his period of incarceration. This counsel- ing service is provided to the entire inmate population as required. Group counseling, which is provided at all institutions, attempts to use the constructive influence of all staff members in effecting corrective changes in the inmates behavior. Approximately 7,648 inmates will be involved in group counseling in the budget year compared to 7,922 in- mates in 1971-72 and 7,772 in the current year. The reduced level reflects the reduction in inmate population. These counseling services have been justified on the basis of inmate need and the administrators contention that this counseling results in a more stable institutional atmosphere. The group counseling program is a relatively low-cost operation requiring only minor overtime funds and training effort for the lay counselors. ‘ The budget request for this program component totals $5,049,356 for 1973-74, which is a decrease of $85,429 or 1.7 percent below current-year expenditures and is equivalent to the 1.6-percent decline in inmate par- ticipation. The department is requesting 20.9 proposed new positions which in- cludes 5.9 abolished under the provisions of Section 20, Budget Act of 1972. These 5.9 positions consist of counselors, and other positions that were not filled due to recruitment difficulties but the services were provided by contractual arrangements. In order to continue the previously authorized level of service and to provide needed counseling services, reestablish- ment of these positions should be approved. Of the remaining 15 proposed new positions, 11 represent positions inadvertently deleted from the San Quentin budget in the 1972-73 Governor’s Budget. Because this request is to rectify that error, it does not increase the previously authorized level of counseling services at that institution. The remaining four are new positions and include one counselor II and three counselor I on a workload basis. We recommend approval of these proposed new positions. c. Academic. The objective of the academic program is to raise the educational achievement of inmates capable of and willing to accept such treatment. The needs are based on the fact that the average inmate tests at the 7.8 grade level. This academic retardation limits the inmates em- ployability in many areas of endeavor and probably contributes to the inability of some inmates to adjust to noncriminal pursuits. No definitive evah~ation has ever been presented the Legislature to demonstrate the impact and rehabilitative effect of academic training exclusive of other treatment factors. Efforts are being made by the department to evaluate the effectiveness of the academic program by comparing the increase in academic achievement of the inmates during incarceration. The first annual evaluation report on this program component was received in January, 1972 and reflected that of the inmates released during a two-month period in 1971 a total of 59.2 percent were involved in aca- Items 281-284 ‘DEPARTMENT OF CORRECTIONS \/ 637 demic and\/ or vocational training programs. Of those released, 30.4 per- cent were enrolled in primary grades. Average overall educational gain was 2.5 months for each month enrolled, while students enrolled in the, \\ primary grades gained 4.1 months per month enrolled. A more extensive report on the 1971-72 fiscal year is in preparation and we may have additional comments after its receipt and review. The department expended 70.9 man-years and $3,181,258 in the aca- demic program in 1971-72. This expenditure is projected to decline to 64.6 man-years and $2,770,914 in the budget year due to population decline and closure of facilities. This expenditure is necessary to provide the same academic program as previously authorized by the Legislature. Academic funds are provided on a formula basis determined by a total inmate popu- lation. As this program component also includes library services, individ- ual study and correspondence courses and physical education services, the decrease in expenditures is not directly proportional to pupulation de- crease, as are the academic funds. All institutions provide academic classes as needed through the 12th grade and higher academic level correspondence courses. The depart- ment estimates that academic enrollment will total 4,900 in the budget year and will result in the awarding of 950 elementary and 1,525 high school diplomas, 25 associate in arts degrees, and completion of 1,200 college-level courses. The academic enrollment of 4,900inmates reflects a decrease of only 200 inmates below the 1972-73 program level. The department is requesting two new positions including one arts and crafts instructor abolished under Section 20, Budget Act of 1972, and one elementary high school teacher for workload increase at the new Chiho Reception Guidance Center. Our recommended deletion of all positions for the new reception center would eliminate this position. d. Vocational Training. The goal of the vocational training function is to provide trade training and work skills which may reduce the parole failure rate of the inmate trainees. The budget year objective is to provide training in ,43 trade areas to approximately 2,800 inmates. To provide the proposed level of training will require 135.3 man-years and $2,649,071 in the budget year. The budget request for this program component includes four new instructor positions of which 2.5 instructors in diver training are to pro~ vide state support for a successful training program originally funded through the federal Manpower Development and Training Act. This in- structional program at the Institution for Men trains inmates as deep sea divers which is reportedly a successful employment area. One other posi- tion is to establish a small engine repair training program at the California Correctional Institution and a half-time instructor position to supplement the welding training program at the Sierra Conservation Center. We recommend approval ‘of these positions. The first annual vocational evaluation report which was prepared at the direction of the Legislature was issued in January, 1972. The report encom- passes a sample of 545 felons released during the last six months of 1970. The sample included 377 who had received vocational training and 168 who received on-the-job training during incarceration. 638 \/ DEPARTMENT OF CORRECTIONS Items 281-284 DEPARTMENT OF CORRECTIONS-Continued Immediately after release, 420 or 77.9 percent were active in the labor market while 125 or 22.1 percent were inactive by either being uneIll- ployed, in an academic situation, under incarceration in local jails or at large. Of those employed, 41.9 percent were employed in occupations identical to or directly related to the training received while incarcerated. During the period covered by the study, the national unemployment level was 7.7 percent which indicates that even during a period of high unem- ployment,. the majority of the trained parolees were able to obtain em- ployment. e. Leisure-Time Activities. This program element provides meaning- ful activities during periods when inmates are not engaged in other treat- ment activities. Included are various recreational, hobby craft, and group functions for the development of constructive use of leisure time and the reduction of idleness. Included are various athletic programs in which the inmates may be participants or spectators and various organized groups such as Alcoholics Anonymous. This program component is budgeted at 24.2 man-years and $440,116 in the current year as compared to the budget-year request for $417,411 and 23.2 man-years. Included in the current and budget year is one recreation- al therapist which, while proposed as a new position, was previously au- thorized on a workload basis but abolished under the provisions of Section 20. The position should be restored to provide needed services at the California Medical Facility. f. Religion. ReligiOUS counseling and services are provided to the ex- tent feasible to all major religious groups. Chaplains are provided at state expense at each institution for the faiths representing the preferences of the major portion of the inmate population i.e., Protestant, Catholic, and Jewish. In addition, volunteer chaplaincy services are obtained when available for Mormons, Christian Scientists, Muslims, Buddhists and oth- ers. The department is requesting 29.2 man-years and $570,021 to continue the previously approved level of service for this program element. The budget reqq.est represents a reduction of $24,819 and 2.1 man-years below the current-year expenditure levels due to population decline and closure of conservation camps. 4. Inmate Employment The goals of this program element are to provide for the operation and maintenance of the institutions, .. provide forest fire prevention and sup- pression services, and to further rehabilitate the inmate by providing work training and skills and instill proper work habits. The inmate work pro- gram is roughly divided into three areas including correctional industries, forest fire prevention and suppression and institutional operation and maintenance. Correctional Industries will provide employment to an estimated 1,885 inmates or 9.8 percent of the 1973-74 inmate population. This constitutes a reduction of315 inmates employed below the 1971-72 level of employ- nient. On-the-job training plus limited apprenticeship and classroom Items 281-284 DEPARTMENT OF CORRECTIONS \/639 training are provided in different trade and agricultural enterprises. Products are sold only to tax-supported California state and local govern- mental agencies. The total production of each product is limited by state law and approval of products ‘to be manufactured and the volume of production within the legal maximum are established by the Correctional Industries Commission. The Correctional Industries Commission consists of representatives of organized labor, industry, agriculture and the general public. The com- mission holds public hearings prior to authorizing new products or in- creasing existing production limitations. The entire correctional industries program is supported by the Correc- tional Industries’ Revolving Fund and product sales. Total expenditures from the industries revolving fund are estimated at $10,423,133. The industrial program will utilize 248.2 man-years of civil service employees who will train and supervIse the inmates. Work projects with cooperating agencies which include a variety of public services with state and federal agencies is another source of inmate employment. Included are 14 forestry and one road camp plus four camp programs operated from institutions with an average population of 1,294 inmates assigned to tasks related to forestry conservation, fire prevention and suppression. The proposed 1973-74 camp program represents it sub- shmtialreduction from the 1970-71 level which consisted of34 camps with 1,690 inmates assigned. The reduction results from an inmate population decline in the classifications the department considers suitable for camp placements. The department has also reduced camp population from 80 to 60 in- mates per camp without staff reductions. This results in an increased level – of staff services per inmate. The camp program is budgeted for approxi- mately tht:: same staffing level as now estimated for the current fiscal year which includes 15 additional positions administratively established during the current year. Total expenditures of $3,228,254 represents a reductiop. of $139,203 or 4.1 percent under the current year due largely to camp closures. Additional Camp Officers We recommend deletion of 13 correctional officers and two correctional program supervisors I for a reduction in salaries and wages totaling $134,- 798. . The department administratively. added these 15 positions effective September 1, 1972, under the provisions of Section 28, Budget Act of 1972. The positions were added to provide an additional officer or program supervisor in each of the 15 conservation camps. The department did so to increase security because of the reportedly worsening characteristics of inmate camp placements and to provide shift coverage’ previously sup- plied by the camp sergeant. The camps have operated since the inception of the camp program, staffed with one lieutenant, one sergeant and four officers plus Division of Forestry personnel. The four officers and the sergeant provided, one custody position per shift, 24 hours per day, seven day a week. The lieuten- 640 \/ DEPART~ENT OF CORRECTIONS DEPARTMENT OF CORRECTIONS-Continued Items 281~284 ant has overall. supervision of the camp. This staffing was provided each forestry camp which housed 80 inmates but in the 1971-72 fiscal year the department reduced inmate camp populations to 60 in order to operate the maximum number of camps for the benefit of the Division of Forestry. During the current and budget year, the department will reduce the number of camps from 25 to 15, still operating with 60 minimum security inmates. Due to the reduction of individual camp capacity and the demonstrated ability of the department to operate the camps without the fifth officer and without evidence of specific deficiencies, we believe the request for 15 new positions should be denied in the interest of economy. Work Assignments . Work assignments by inmates relate to those various functions which are necessary to the operation and maintenance of the institutions. A total of 11,803 inmates will be employed in these functions in 1973-74 as com- pared to 11,898 in 1972-73. The reduction is due to population decline. Work assignments provide job training in functions such as food service, laundry, housekeeping, plant maintenance, fire suppression, grounds care and similar tasks. Of the 11,803 work assignments, 5,704 are positions for which a small wage is paid as an incentive for the inmate employee. Total expenditures of $638,502 for 1973-74 are identical with the current-year expenditures, but represents an increase of $343,691 or 116.6 percent above the 1972-72 expenditure total. The substantial increase reflects two separate augmentations by the Legislature to the 1972-73 Governor’s Budget to provide a general salary increase for all inmate pay-work posi- tionS’ and to increase by 2,000 the number of pay positions from 3,704 to 5,704. Inmate Welfare Fund This fund was created in 1945 under the authority of Section 5006 of the Penal Code to provide a special trust fund for the benefit, education and welfare of inmates. Revenue to the fund consists of canteen profits from sales to inmates, retention of 10 percent of gross sales of inmate handicraft ,sold to the public, interest on deposits of inmates personal funds and forfeiture of inmates’ earnings as authorized by the Penal Code, interest on the fund, and donations received. The fund is expected to receive $3,419,329 and expend $3,388,059. The fund is used to operate the inmate canteens as self-supporting enterprises and to purchase recreation and leisure articles for the inmates’ benefit. Such purchases include movies, recreational games and equip-. ment, television sets and fiction library books and will total $264,513 in 1973-74. 6. Work Furlough The work and training furlough project permits the release of inmates during the normal workday for employment or training in the community and return to the institution during the night hours. The selected inmates are assigned to this program during the latter portion of their institutional Items 281-284 DEPARTMENT OF CORRECTIONS \/ 641 stay and are charged for room and board as well as staff supervision. The inmate is also required to provide his personal clothing, transportation; and other expenses including taxes, and a portion of his salary goes to his dependents. Cash repayments to the state are sufficient to reimburse 50 percent of the program costs for administration, supervision, and operat- ing expenses. The average work furloughee spends 60 days in the program prior to release. The department advises that the program indirectly produces additional savings as these inmat~s require less release money when paroled and institutional costs are reduced as the furloughee spends less’ time in prison. The department is requesting $273,428 for this activity in 1973-74, which represents an increase of $46,815 or 21 percent over the 1972-73 expendi- tures of $226,613. The utilization of 12.8 man-years of personnel in this function in the budget year reflects an expansion over the 1972-73 level of 9.9 personnel man-years. The department is requesting 4.~ new positions in the budget year of which 1.2 custody positions were abolished under Section 20 provisions and should be restored on a workload basis. During the current year, the department administratively reduced the program level on a temporary basis, and’ the request for three proposed new parole agents will restore the program to the previously authorized level. We recommend approval of the 4.2 proposed new positions. 7. Short-Term Treatment This activity provides needed additional short-term institutional treat- ment for parolees exhibiting difficulty on parole. Parolees in difficulty can be returned to these units within the penal institutions for an average of 4’12 months, of additional treatment instead of requiring parole revocation which carries an institutional stay of 15 to 18 months before subsequent parole. . An average daily population of 260 parolees will be cared for in this program activity at a total cost of $139,618 in 1973-74. This requested amount provides for continuation of the existing level of program. ferso~\u00ad nel utilization totaling 8.7 man-years is a continuation for the existing staffing level. \” While average daily population is relatively small, an estimated 1,300 parolees will be received into the program during the budget year and 1,250 will be released. Return of this number of parolees’ to the regular institution programs for 15 to 18 months would increase institution costs substantially above the cost of this short-term return program. S. Institution Operations-Administration Administrative services are required at each institution. This program element will utilize 297.5 man-years of personnel and $6,767,715 iIi the 1973-74 fiscal year as requested in the Governor’s Budget. This represents a decrease of 7.8 man-years but an increase of $304,332 in expenditures in 1973-74 over the 1972-73 fiscal year. The department is requesting 12.4 proposed new positions for this pro- gram element including one bookkeeping machine operator I for the 642 \/ DEPARTMENT OF CORRECTIONS Items 281-284 DEPARTMENT OF CORRECTIONS-Contin.ued Institution forMen which was abolished by Section 20, Budget Act of 1972 and is to be reinstated on a workload basis. We recommend approval of that position at a salary cost of $’0368. Community Betterment Program We recommend legislative approval of the requested $27,286 for this program. The department is requesting the equivalent of three positions in tem- porary help funds totaling $27,286. The request is to provide payment of overtime to employees who have previously volunteered their services for this function. The purpose of the activity is to permit the inmates of the California Correctional Institution at Tehachapi to participate in various public group meetings under custodial supervision in communities in central and southern California. The inmate participants provide insight as to problems relating to their criminal activities. The funds would also provide overtime pay for employees supervising self-help group meetings such as Alcoholics Anonymous, service clubs, etc., at the institutions, which groups may include noninmates. We believe these activities should be supported as a means of providing community enlightenment on problems of the prisons and prisQners, to encourage community involvement in the institution and parole pro- grams, and to provide opportunities for inmates to have meaningful con- tacts with public groups .. Included under this program component are seven proposed new posi- tions at a total salary cost of $64,080 which are requested as part of the staffing for the new reception center. These positions would be deleted under our recommended limitation of this new center under the recep- tion and diagnosis program. JII. RELEASING AUTHORITIES . This program includes the activities of the Adult Authority and the Women’s. Board of Terms and Parole relating to adult felons and the Narcotic Addict Evaluation Authority which relates to civilly committed narcotic addicts. The function of these boards is to fix and reset as required the terms to be served within the institutions and on parole. They may grant parole and may order suspension or revocation of parole as author- ized by law. The Adult Authority is assisted in Case hearings by hearing representatives who serve on panels with the board members. The budget for this program for 1973-74 totals $1,285,344 and 54.8 man- years as compared to $1,113,220 and 48 man-years in the current year. The increase of $172,124 in the budget year is due primarily to the request for 8 new positions at a salary cost of $115,248. One parole agent III position was deleted under the provisions of Section 20, Budget Act of 1972. We concur in the need for this position as well as the remaining seven dis- cussed later herein. Table 5 shows decreases in workload of the Adult Authority and Women’s Board of Terms and Parole as related to previously existing workload criteria. For instance, reductions are shown in Adult Authority hearings relative to both institution and parole cases heard which results Items 281-284 DEPARTMENT OF CORRECTIONS \/ 643 Table 5 Releasing Authorities Workload 1971-72 197~73 1973-74 Adult Authority: Institution cases heard ……………………………………………………………………….. 29,441 Releases granted …………………………….. ~……………………………………………. 10,265 . Parole and community services cases heard …………………………………… 15,664 Paroles suspended………………………………………………………………………….. 4,425 Reinstatements ………………………………………………… ;……………………………. 1,516 Prerevocation and revocation hearings ………………………………………. .. Other (mandatory review cases, reaffirmed actions, Ncru re- leases or placements ordered, parole continuations oi: advances 9,724 Women s Board of Terms and Parole: Institution cases heard ………………………………………………………………………. 1,808 Releases granted ……………………………………………………………………………. 510 Parole and community services cases heard …………………………………… 1,792 Paroles suspended………………………………………………………………………….. 360 Prerevocation and revocation hearings ………………………………………. .. Reinstatements ……………………………………….. :…………………………………….. 187 Other (routine, diScipline, general case discussion, progress reports, transfers) ………………………………………………………… 1,131 Narcotic Addict Evaluation Authority: 27,900 9,700 14,550 4,100 1,410 1,550 9,025 1,772 510 1,756 365 170 175 1,109 27,400 9,550 13,600 3,850 1,325 , 1,462 8,500 1,754 495 1,738 355 161 165 1,097 Institution cases heard ………………………………………………………………………. 4,961 4,947 5,037 Outpatient revocation cases heard …………………………………………………… 7,723 7,867 8,243 Final discharge hearings …. …… ………. ………. ………………………… …… ………… 334 340 356 from population decline. Significant new caseload increase is reflected in the category of prerevocation and revocation cases which will total an estimated 1,550 for the Adult Authority in the current and 1,462 in the budget year. This represents entirely new workload mandated by the U.S. Supreme Court in the case of Morrisseyvs. BrewerofJuly 29,1972, which provided that paroling authorities must follow specified minimum due process and procedural requirements when ordering parole revocations. Induded in these minimum requirements are the prerevocation and revo- cation hearings. The prerevocation hearing must be held in the parolee’s community and afford him an opportunity to present evidence in his own behalf. The prerevocation hearings have been and will be conducted by hearing representatives or other designees of the parole boards. If there is a finding of probable cause to revoke parole, the parolee is incarcerated at a departmental reception center pending a final hearing on revocation conducted by a panel consisting of an Adult Authority board member and a hearing representative. The parolee must be provided another opportu- nity to be heard and present his case at the revocation hearing. Workload increase resulting from these new procedures necessitates the following positions: Position Salary cost Adult Authority Three adult authority representatives ……………………………………. . Two parole agent II ………………………………………………………………… .. Two stenographer II ……………………………………………………………… .. Women’s Board of Terms and Parole Temporary help-case processing ……………………………………………. .. We recommend approval of these proposed new positions. $57,132 25,152 12,408 6,000 $100,692 644 \/ DEPARTMENT OF CORRECTIONS Items 281-284 DEPARTMENT OF CORRECTIONS-Continued IV. COMMUNITY CORRECTIONAL PROGRAM This community-based program includes regular and specialized parole supervision, operation of community correctional centers, outpatient psy- chiatric services, antinarcotic testing and community resource develop- ment. The program goal is to provide community supervision, support and services to achieve parolee rehabilitation. The total program is budgeted for 959.5 man-years and $18,496,582 for 1973-74 including $17,753,591 from the General Fund and $742,991 in reimbursements from federal funds to be expended in the program. This program is under the direction of the parole division which is subdivided into six regions and 61 parole unit offices, two psychiatric outpatient clinics and branches, four community correctional centers and an antinarcotic testing center in Los Angeles. A normal parole unit consists of a supervis- ing agent, another half-time supervisor who carries one-half of a caseload, six case-carrying agents and clerical assistance. Differences from the norm may be required due to workload requirements. Conventional Parole Supervision The objectives of conventional parole supervision are to further parolee rehabilitation through casework services and related support and to pro- vide public protection through surveillance of the parolees’ activities and recommending parolee revocation and return to custody when deemed necessary. The average daily parole caseload under conventional supervision is projected by the department to total 6,950 in 1973-74, a decrease of 755 parolees under the current-year average. The proposed budget contains a request for $15,356,375 and 838.8 man- years for this program lelement which is an increase of $782,298 and 5.4 percent above current-year expenditures. This increase results even though there is a decline of 755 cases or. 9.8 p,ercent in conventional parole caseload under the current year due to the request to reduce the conven- tional caseload of the average agent from 68\/1 to 50\/1. Proposed Enrichment of Conventional Parole Workload Formula We recommend deletion of 2 parole administrators I, $20,181; 6 parole agents Ill, $80,199; 14 parole agents II, $194,040; 33 parole agents I, $376,- 776,’ temporary help-clerical, $4,235; 1 accounting technician, $7,008 and I clerk-typist II, $5,760 for a total salary savings of $688,199. The department’s request is based on the following: \”Parole supervision at the level of 68\/1 permits only minimal case con- tacts with much of the parole agent’s time and efforts directed towards case emergencies that arise. Parole supervision aimed at crisispreven- tion and goal completion is extremely difficult under this workload factor. Today’s correctional system supervises a more antisocial, vio- lence prone, and emotionally disturbed offender than ever before. Items 281-284 DEPARTMENT OF CORRECTIONS \/ 645 Complicating this factor further,. recent legislative and parole board policy changes have resulted in earlier discharge of the more successful parolees. Consequently, today’sparole caseload contains a much more difficult type parolee to supervise.\” . Historically, parole agents for conventional parole supervision were budgeted on the basis of one’ agent for each 55 parolees and included supervisory positions. Subsequently this formula was modified to exclude supervisory positions froin the caseload computation which results in the presently approved formula of one case carrying agent for each 68 pa- rolees. The department’s statement that it is handling a more antisocial and violence prone offender on parole would relate only to a portion of the caseload. The department is handling in the same manner as it has previ- ously the more severe criminal cases in the institutions and on parole. The primary change is that court sentencing practices due to the probation subsidy program, the increase in plea bargaining, and other undetermined sentencing factors plus legislative and parole board policy changes have reduced the number of less severe criminals and left a smaller institution population consisting of more serious offenders. . The department should support the generalized statement with data reflecting that the increase in violence is due to the inmates who have been committed for crimes of violence rather than by other inmates convicted for nonviolent property crimes. Some of the violent acts com- mitted within the institutions are the result of racial and other social pressures existing in the outside community as well as within the prisons. The department contends that the violence within the prisons is partially due to the removal of the stabilizing effect on the institution population of the large number of lesser offenders who are no longer committed to the departmentbut are handled in the communities on probation. The department further contends that the removal of the less severe cases from the state correctional system plus the discharge from parole of many of those parolees completing one year of trouble-free parole results in a , more difficult caseload for supervision. While the removal of the reportedly stabilizing influence of the less severely criminal cases could logically have an adverse impact on the closed institutional society, the same logic does not follow if you remove the less severe criminal cases from the parole caseload. The remaining parolees are supervised in the open society which contains all of the stabilizing influences of family, associates and other noncriminal elements plus activities and diversions not available as stabilizing influences within the institutions. Therefore, while the change in institution population requires additional security staffing, it does not follow that a change in the characteristics of the parole caseload necessarily requires additional pa- role staffing . . This department has been experimenting with low caseload programs since 1954 when the now defunct special intensive parole unit, utilizing a 15-to-one parolee-to-agent caseload was established. This program prove’d that reduction in caseload per agent alone did not provide greater 646\/ PEPARTMENT OF CORRECTIONS DEPARTMENT OF CORRECTIONS-Continued Items 281-284 . parole success and was abandoned. Early reports on the work unit pro- gram, which provides one agent for each 33.3 parolees, also claimed im- proved parole results. These early claims of success were clouded by the lack of comparability of the experimental and control groups. For in- stance, fhe control group contained all of the check passers, many prop- erty crime offenders and felon narcotic cases which traditionally have high recidivism rates, while the work unit had all the violence-prone cases, including murderers and others who have a low rate of recidivism. There- fore, it could be expected that the work unit would show some improve- ment in recidivism. The 1971 report on the work unit program showed that some parolee categories did better and others did worse than compa- rable control cases. Overall, the degree of improvement does not warrant reductions in the conventional parole caseload and leads to doubt of the economic justification for continuation of the work unit concept-The 1972 work unit report has not been received for analysis. The legislative change previously mentioned refers to the enactment of Penal Code Section 2943 in 1965 which provided for the discharge from parole of parolees who had been on parole for two years and had been suitably rehabilitated in the judgment of the parole boards. The adminis- trativechange relates to the adoption of Adult Authority Resolution No. 284, permitting the discharge of persons completing one year of successful parole. During the first nine months of 1971, a total of 1,513 parolees were discharged under Penal Code Section 2943 and 1,020 under Adult Author- ity Resolution 284. During the same period in 1972, there were 800 dis- charges under Adult Authority Resolution 284. The discharges under these two provisions during the 1972 period represent a 14.3 percent reduction below what the parole population would have been at the end of that period if these parolees had not been discharged from parole during that nine-month period. The reduction of caseload from 68\/1 to 50\/1 repre- sents a 26.5 percent decrease in workload per agent below the existing standard. Therefore, the substitution of reportedly more difficult cases for the 14.3 percent of total caseload discharged under Penal Code Section 2943 and AA Resolution 284 would not support a 26.5 percent reduction in caseload per agent. Work Unit Parole Work unit parole supervision is an experimental low caseload parole management project. The project was initiated in 1964 to increase the time and attention parole agents could devote to parolees with histories of violent and aggressive acts and certain felon addicts. These cases were classified as special and assigned to a parole agent with an average case- load of 35 parolees. These and other work unit parolees were assigned on a weighted unit basis which rated the special cases at 4.8 work units, a regular parolee not representing a particular hazard but requiring regular supervision at three work units and all others as conditional at one work unit. An agent could have any combination of case types totaling 120 work units. The caseload per agent ranges from 24 to 45 parolees averaging 33.3 cases per agent. Items 281-284 DEPARTMENT OF’CORRECTIONS \/647 Total work unit caseload will average 6,460 parolees in the current and budget years. Total cost of this program element in 1973-74 is estimated to be $3,352,308, an increase of $38,573 over the current year due to price and staff benefit . increases. The amount requested will continue the cur- . rently approved level of service. The General Fund provides for 5,200 of these cases and the remaining 1,260 cases are budgeted by the General Fund on the basis of the conventional caseloads (68 cases per agent) plus federal funds sufficientto provide additional agents to reduce the caseload to 33.3 cases per agent. As mentioned in toe discussion of the conventional parole supervision element, the department’s claims of success for this program prior to 1968 were unfounded due to the lack of comparability of the control and experi- mental groups. In 1968, these groups were made more comparable by assigning aggressive history cases to the conventional caseloads. The 1971 work unit report reflects that of the 3,844 work unit cases placed on parole from January 1968 through June, 1969, there were 1,012 or 26.3 percent returned for parole violation during the first two yeats after r,elease to . parole. Fora like period, there were 3,848 paroled to a control group under conventional caseloads, of which, 1,043 or 27.1 percent had been returned for violations within two years following release to parole. The 0.8 percent difference may not be of significance and may have been caused by chance. Even if the difference was not a chance occurrence, it would not’ justify the additional expenditures required to reduce an average caseload of 68 to 1 to 33.3 to 1. Even after more experience was gained, the percent- age of overall returns for those on parole for one year after release be- tween July; 1969 through June 1970, was identical at 10.4 percent of caseload in both the experimental and control groups. . The 1972 report for this program element has not been released to this office for evaluation. Our recommendation relating to continuation of this ‘experimental project must await the opportunity, to review that report. Nonfelon Addict Parole A third distinct type of parole supervision is provided. the nonfelon addict released to outpatient status from the nonfelon addict rehabilita- tion program. After an initial period of institutional treatment stressing physical conditioning and group and individual counseling, the nonfelon addict is released to outpatient status. The parole supervision consists of casework services, surveillance and antinarcotic testing to determine use of narcotics. A determination of subsequent illegal drug usage results in a return to the rehabilitation center for additional treatment. Caseloads per parole agent average 32 parolees. Program expenditures in 1973-74 include 202 man-years and $4,119,391 to continue the currently authorized level of service. The average daily parole population for this program element is estimated to total 6,558 cases in the budget year, an increase of 285 cases over the current-year total. Total personnel effort is projected to increase 5.7 man-years in 1973-74 over 1972-73. _ The man-year increase results from the request for 3 parole agent II and 14 parole agent I positions based on approved workload formulas due to Table 6 Disposition of Persons Placed in Outpatient Status 1966-1971 Male Civil Narcotic Addicts Status as of June 30, 1972 by Cohort Year of Release Year of release to outpatient status 1966 1fKJ7 1f)(j8 1969 \/ 1970 1971 Status Number Percent Number Percent Number Percent Number Percent Number Percent Number Percent Number released to outpatient status …… 1,247 100.0 2,119 100.0 2,508 100.0 2,768 100.0 3,506 100.0 4,089 100.0 Status as of June 30, 1972: Active outpatient status………………………. 3 0.2 24 1.1 ~ 2.7 235 8.5 962 27.4 2,198 . 53.8 Inactive outpatient status 1…………………. 5 0.4 3 0.1 27 1.1 84 3.0 258 7.4 499 12.2 Returned to California Rehabilitation Center……………………………………………… 919 73.7 1,580 74.6 1,830 72.9 1,746 63.1 1,663 47.4 1,161 28.4 Died …………………………………………………….. 15 1.2 38 1.8 45 1.8 57 2.1 69 2.0 41 1.0 Discharged from civil commitment…… 305 24.5 474 22.4 539 21.5 646 23.3 554 15.8 190 4.6 Returned to court for. discharge …….. 150 12.0 172 8.1 165 6.6 181 6.5 55 1.6 Discharged by Department of Cor- rections ……………………………………………. 31 2.5 32 1.5 51 2.0 114 4.1 153 4.3 74 1.8 Writ (Habeas Corpus) …………………….. 7 0.6 14 0.7 7 0.3 6 0.2 2 0.1 Committed to prison with new felony commitment …………………………………… 39 3.1 69 3.3 84 3.3 104 3.8 137 3.9 78 1.9 Other court order discharge ………….. 78 6.3 187 8.8 232 9.3 241 8.7 207 5.9 38 0.9 1 Cases in suspended status, in detention, or whereabouts unknown. Source: Research Division, Department of Corrections. C m ~ ……. ::D 0 -I trl ~ \”‘e ~ ~ i -I o-l o ~ .\” trl ‘n\u00b7 z o o-l ::D 0 ::D \”‘J ~ (‘) -I 0 – I:C o I:C Z trl en Q J, -o 0 :::I Z … en :i’ c !. -~ ‘\” ~ ~ Table 7 Disposition of Persons Placed in Outpatient Status 1966-1971 Female Civil Narcotic Addicts Status as of June 30,1972 by Cohort Year of Release Year of release to outpatient status 1968 1967 1968 1969 1970 1971 Status Number Percent Number Percent Number Percent Number Percent Number Percent Number Percent Number released to outpatient status …… 250 100.0 372 100.0 374 100.0 471 100.0 438 100.0 471 100.0 Status as of June 30, 1972: Active outpatient status ……………….. ; ……. 4 1.1 17 4.5 45 9.6 146 33.3 281 59.7 Inactive outpatient status 1 0.4 2 0.5 4 1.1 10 2.1 29 6.6 64 13.6 Returned to California Rehabilitation Center ………………. , ……………………………. 179 71.6 233 62.6 224 59.9 261 55.4 185 42.3 104 22.1 Died …………………………………………………….. 4 1.6 4 1.1 9 2.4 6 1.3 6 1.4 3 0.6 Discharged from civil commitment …… 66 26.4 129 34.7 120 32.1 149 31.6 72 16.4 19 4.0 Returned to court for discharge …….. 41 16.4 60 16.2 47 12.6 45 9.5 8 1.8 Discharged by Department of Cor- rections ………………………………………… 2 0.8 10 2.7 11 2.9 10 2.1 20 4.6 13 2.8 Writ (Habeas Corpus) …………………….. 1 0.4 8 2.1 3 0.8 9 1.9 1 0.2 Committed to prison with new felony commitment.. …….. : ……………………….. 6 2.4 3 0.8 5 1.3 14 3.0 3 0.7 3 0.6 Other court order discharge …………… 16 6.4 48 12.9 54 14.5 71 15.1 40 9.1 3 0.6 1 Cases in suspended status, in detention, or whereabouts unknown. Source: Research Division, Department of Corrections. I-< ..... S' CI> I,:) 00 ~ ~ 0 t’l ‘\”t:I > ~ >-3 :: t’l Z >-3 0 \”%j (j 0 ~ ~ t’l (j >-3 -0 Z en …….. ~\” Ut 650 \/ DEPARTMENT OF CORRECTIONS DEPARTMENT OF CORRECTIONS-Continued Items 281-284 projected caseload increase less estimated vacancies due to turnover and recruitment delays. , Tables 6 and 7 present data relative to male and female nonfelon addicts placed in outpatient status in 1966 througp 1971. A nonfelon -aoaict is by law deemed sufficiently rehabilitated to be discharged from the program if he has remained drug-free for three years. The number discharged under this criteria is reflected in the data entitled, \”returned to court for discharge\” ih Tables 6 and 7. Tables 6 and 7 show declines in: the returned-to-court-for-discharge cat- egory for both male and female addicts. These data are subject to change especially for the latter year as subsequent discharges are made. There- fore, the latter year data in these tables is expected to be significantly larger in next year’s report and does not represent necessarily a decline in rehabilitative effect. The number discharged after having been drug-free is a minor part of the total nonfelon addict population. The institution and parole programs for nonfelon addicts have been justified in the past on the need to provide , treatment to the individuals committed. While the success rate is not high, it is somewhat better than results reported for other treatment programs for this type parolee. Interstate Unit Supervision This unit performs functions necessitated by the Interstate Probation and Parole Compact including: 1. Review and approval of California parole supervision of parolees from other compact states and referral of California parolees to other compact states for parole supervision. 2. Administrative control of California parolees in other states and func- tional control of cooperative cases in California. 3. Administrative control of deportation cases and preparation of extra- dition requests. This unit will utilize 7.8 man-years of personnel and $99,124 in expendi- tures during the budget year. Field Operations-Administration\/Unit Supervision Administrative guidance, supervision, and imcilliary support is neces- sary for case carrying parole agents and other treatment staff. Administra\” tive leadership from the director’s office is provided through six regional administrators, 18 district administrators and 61 field unit supervisors. This program unit also contains all the technical records staff and other clerical support. The department proposes utilization of 307.4 personnel man-years and $4,308,956 in this function which is an increase of 3.9 man-years and $95,476 above the current-year estimated expenditures. Items 28t-2B4 DEPARTMENT OF CORRECTIONS \/; 651 Community Correctional Centers The department operates four community correctional centers for a total average daily population of 175 nonaddicted felons and nonfelon addicts. The centers provide residential care and rehabilitation services to parolees lacking adequate financial or family resources or who are in need of assistance in the transition from an institutional setting to free society. There is substantial turnover in the resident population as reflected in total intake of 1,565 and departure of 1,563 residents during the year. Partile agents are located at the center and provide supervision and assistance to the parolee during and subsequent to his residence in the center; The center programs include all available community resources to , assist in the parolees’ adjustment. The centers are also used to house felons released on the wQrk-furlough program. The department advises that the availability of the centers results in earlier release from prisQn of some parolees .. The Hi73-74 budget will authorize total expenditures of $938,961 and 36.9 man-years for these four centers to continue the existing program level. The cost increase of $171,500 over the current-year estimated expen- ditures iS’due primarily to the need to relocate the Rupert Crittenden Center at an estimated cost of $142,117. This center is currently located in a state owned facility at rio cost to the department. This building is to be demolished due to highway construction requirements. The remaining increase is due to merit salary adjustments and price increases. Parolee Psychiatric Outpatient Services Psychiatric outpatient clinics are operated in Los Angeles and San Fran- cisco. They provide professional psychotherapy on a followup basis to parolees with aggravated assaultive and sexual offense convictions as well as to parolees with emotional problems. They make emergency psychiat- ric evaluations of parolees, consult with parole agents on crucial case decisions, and participate in the training of new. agents. Over 90 percent of the parolees attending these clinics are paroled by the Adult Authority with the mandatory order for psychiatric attention during their parole. The department proposes total expenditures of 30.6 man-years and $664,806 in the budget year, an increase of $13,070 due to the merit salary and price increases. . Table 8 Psychiatric Outpatient Clinic Workload 1971-72 197~73 Number of patients beginning of fiscal year ……… . 1,284 1,340 NUIhber of parolees admitted’to clinics ……………. .. 1,037 1,090 Number of parolees terminated from program .. .. 981 1,030 Number of patients end of fiscal year ……………….. .. 1,340 1,400 1973-74 1,400 1,144 1,084 1,460 Table 8 shows a relativeiy stable workload with a slight increase of 60 patients in the budget year over the current year. 652 I DEPARTMENT OF CORRECTIONS Items 281-284 DEPARTMENT OF CORRECTIONS-Continued Special Narcotic Services This program element includes the nalline and urinalysis testing of opiate users to detect reuse and also the methadone treatment activity. Routine tests will be made of the estimated 8,914 addicts under parole supervision in 1973-74 consisting of 8,050 nalline tests and 110,000 urinalyses. Based on prior experience, the department estimates positive test results reflecting reuse of opiate drugs in 195 of the nalline tests and 16,500 of the urinalyses. Under present procedures reuse of narcotics results in a return to the California Rehabilitation Center for further treahp.ent. The department is requesting 11.1 man-years of effort and $486,359 in the budget year which represents an increase of $39,322 over the current year. The budget increase for this program element is due primarily to the $20,000 requested to establish a narcotic detoxification service in the Los Angeles area. as a means of handling those nonfelon addicts who are de- tected reusing drugs but express a desire to abstain. This would provide a less costly alternative to the present program which requires the return of the parolee to institutional care at greater overall cost. We recommend approval of this requested mcrease. The department recently began a research program providing metha- done treatment to approximately 200 parolees in the Los Angeles area and is of too recent origin to provide definitive information at this time. Ap- proximately 600. additional parolees are involved in other methadone maintenance programs conducted outside of this departinental budget. Administration-Community Correctional Program This element comprises the-administrative staffing of the entire com- munity correctional program. The department proposes to expend 42.2 man-years and $907,964 for this program element in 1973-74. This repre- sents an increase of 1.9 man-years and $177,283 over the current year but a decrease of 23.7 man-years and $26,754 under the 1971\”:’72 expenditure levels. Of the $177,283 increase over current-year expenditures, new charges required for services performed by the Department of General Services, such as processing purchase orders, negotiating contracts, etc., total $149,- 637 in new expenditures in this program element. Also included in the overall increase is $12,768 salary cost for one accounting technician and one clerk-typist II which we recommended for deletion in our recommen- dation relative to reducing the conventional parole caseload formula to 50 parolees per agent. V. SPECIAL ITEMS OF EXPENSE These special items provide reimbursements to the counties for ex- penses relating to transportation of prisoners and parole violators, return- illg fugitives from justice from without the state, and court cost and other charges related to trials of inmates and related matters. These reimburse- ments are made by the State Controller on the basis of claims filed in Items 281-284 DEPARTMENT OF CORRECTIONS \/ 653 accordance with law. Actual and estimated expenditures for these special items are reflected in Table 9. . Table 9 Special Items of Expense 1971-72 197~73 Transportation of prisoners and parole violators, Item 282 …………………………………………………… .. Returning fugitives, Item 283 …………………………. . Court costs, Item 284 ………………………………………. .. Totals ……………………………………………………………. .. $134,461 449,620 784,510 $1,367,991 VI. ADMINISTRATION $171,211 563,448 1,051,652 $1,786,311 1973-74 171,211 563,448 1,051,652 $1,786,311 The. administration program includes centralized administration at the departmental level and administration of each institution and parole re- gion. The administrative head of the department is the director who consults with and secures the advice of the three paroling bodies. The departmental administration provides program coordination and support services to the institutional and parole operations. Each institution is head- ed by a warden or superintendent and its own administrative staff as necessary. Institutional operations are divided into custody and treatment functions each headed by a deputy warden or deputy superintendent. The parole operation is administratively headed by a deputy director assisted by centralized headquarters staff. The state is divided into six parole regions, each directed by a parole administrator. The parole func- tion is subdivided into districts and parole units which consist of a supervis- ing agent, a one-half time assistant supervisor who carries one-half a caseload and six case carrying parole agents. Total expenditures for administration not prorated to other programs are estimated at 197.2 man-years and $3,756,106 for the budget year. Thedepartmefit is requesting 21.5 proposed new positions, 10 of which would restore positions previously approved on a workload basis that were abolished under the provisions of Section 20, Budget Act of 1972. Included in the 10 are one law enforcement coordinator and one field representa- tive required for law enforcement liaison, investigative activities relating to inmate groups and other matters and jail inspections. Also included are a personnel analyst and five clerical positions needed for existing workload and two custody postions, one related to bus operations and the other to the personnel training program. We recommend approval of these 10 proposed positions. Of the remaining 11.5 proposed new positions, 9.5 are requested for workload increases due to legislation requiring annual jail inspections, court decisions relative to procedural rights of prisoners and parolees, and the need to maintain closer liaison and obtain greater intelligence on inmate groups and organizations. The two remaining proposed new posi\” tions are for the Agency Administration, but budgeted to this department. Included is one special assistant to the secretary ($23,148) and one com- munications assistant ($16,452). We withhold our recommendation on these two positions pending receipt and review of workload data from the office of the Secretar~ Health and Welfare Agency. 654 \/ DEPARTMENT OF THE YOUTH AUTHORITY Items 285–292 Health and Welfare Agency DEPARTMENT OF THE YOUTH AUTHORITY Items 285–292 from the General Fund Budget p. 184 Program p. II-445 Requested 1973-74 …………………………………………………………………… $82,443,354 Estimated 1972-73 …………………………………………………………………….. 81,655,517 Actual 1971-72 ………………………. ; ………………………………………………… 71,594,413 Requested increase $787,837 (1.0 percent) Total recommended reduction ……………………………………………….. None Analysis SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS page 1. Departmental Objectives. Recommend the program ef- 65’7 fectiveness measurement task force of the Department of Finance assist the Department of the Youth Authority in developing quantifiable program objectives and structures. , 2. Population Projections. Recommend department perform 669 a midyear revision of its population projection each January and, based thereon, submit a revised budget request. 3. Federal Wards. Recommend department close an institu-669 tion during the budget year for a net savings of $1,150,000 unless it receives a contract to house federal wards. 4. Drug Programs. Recommend department establish a pro- 671 gram objective for the rehabilitation of wards with histories of drug involvement including a related cost accounting system. 5. Employment of Ex-OffeI}ders. Recommend the law’ be 671 amended to permit certain classes of former Youth Author- ity wards to be considered for employment by the Youth Authority in positions holding limited peace officer status. GENERAL PROGRAM STATEMENT The Department of the Youth Authority and the Youth Authority Board were created by the Youth Authority Act adopted in 1941, and codified in Chapter 2.5 commencing with Section 1700 of the Welfare and Institutions Code. The purpose of these two units is \”. . . to protect society more effectively by substituting for retributive punishment, methods of training and treatment directed toward the correction and rehabilitation of young persons- found guilty of public offenses.\” The department and the board have attempted to carry out thelegisla- tive mandate in institutional programing by eliminating corporal punish- ment and by providing prevocational and vocational training programs, academic instruction, increased counseling and casework services, and specialized treatment programs for problem cases. Community-based programs include regular and low-caseload parole programs, for state wards and subsidies to local government to encourage substitution of locally operated programs for commitment to state institutions. Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY. \/ 655 The subsidy program is based on the assumption that more effective rehabilitation can be provided in the community or at least it is generally more desirable to treat the offender in the community than to incarcerate him in a state institution removed from his family and other potentially favorable influences. While there are cases in which removal from the community is clearly the preferred treatment, the state encourages local treatment by subsidizing construction and operation of county junvenile homes, ranches, and camps, enriched probation services, and delinquency prevention activities. Local treatment programs include incarceration in juvenile halls for short periods, longer-term commitment to county camps, day care centers, and community supervision with foster home or in-home placement and probation supervision. State subsidies to these local pro- grams total $27,943;888 in the proposed budget for 1973-74. The state-operated program consists of eight institutions (one less than in previous years as discussed later in the analysis), three reception cen- ters, and five forestry camps (one more than in previous years) that will house an estimated average daily population of 4,414 wards, plus a commu- nity parole program for a projected daily average population of 10,781 wards in fiscal year 1973-74. The department estimates it will handle 165 additional institutional wards but 1,060 fewer parolees in 1973-74 than in the current year. ‘ , The wards committed to the Youth Authority represent a relatively small portion of the\u00b7 total delinquency problem. Those committed are the product of a filtering system that commences with the initial arrest. Law enforcement makes the primary determination as to referral to probation or direct release without charge. Probation then determines whether those referred will be (1) released, (2) referred to another agency such as the Department of Mental Hygiene, (3) referred to another jurisdic- tion, (4) placed on informal probation, or (5) referred to the juvenile court. Informal probation is limit~d to no more than six months and is given only with the consent of the parent or guardian. The juvenile court may dispose of the petition by transferring jurisdiction to another county, by dismissal, granting probation, remanding the case to the adult court, or by committing the ward to the Youth Authority. Ward Characteristics Juveniles committed to the Youth Authority often are below average in economic status (35 percent welfare, 65 percent self-supporting families) , from broken homes (57 percent) and from homes of low educational attainment (neither parent had completed high school in 63 percent of the cases). However, fathers or father substitutes for 79 percent of the wards had no criminal records. The wards generally have a\u00b7 negative’ or indifferent attitude toward school (67 percent), are at the senior high school level (73 percent), of low-normal IQ,have no serious psychological disorders (76 percent), and generally had delinquently oriented associates (81 percent). The typical ward has had three or more delinquent contacts with authorities prior to Youth Authority commitment (87 percent) and had a prior institutional commitment at some level (59 percent). The Youth Authority program for these wards includes initial diagnosis 656 \/ DEPARTMENT OFTHE YOUTH AUTHORITY Items 285-292 DEPARTMENT OF THE YOUTH ,AUTHORITY-Continued and classification at three reception centers; institutional treatment con- sisting of academic, prevocational and vocational training; counseling and social casework; and work programs followed by aftercare counseling and parole supervision. In addition, there are specialized programs for direct release from reception centers, thus -bypassing the normal institutional stay, as well as other experimental programs. The department’s programs are supported by the following Budget Bill items’ in the amounts and for the purposes indicated. State Operations Item 285-Department support ………………………………………… $54,455,926 Item 286-Transportation of persons committed ……………. 43,540 Local Assistance Item 287-Maintenance and operation of county juvenile homes and camps ……….. :…………………………………. 3,224,280 Item 2~Construction of county juvenile bomes and camps ……………………………………………………………….. 600,000 Item 289-State’s share–control of juveniles at the inter- national border …………………………………………………. 144,308 Item 290–County delinquency prevention commissions- administrative expenses …………………………………… 33,300 Item 291-County delinquency prevention commissions- research and training grants ……………………………. 200,000 Item 292–Assistance to county special probation supervi- sion programs …………. ;……………………………………….. 23,742,000- $82,443,354 ANALYSIS AND RECOMMENDATIONS The departmental programs, as proposed in the Governor’s Budget, represent a net General Fund cost of $82,443,354 and 3,499:5 man-years of effort. However, the department anticipates budget-year reimbursements totaling $8,390,868 from fees charged to counties for ward care and diagno- sis and federal grants totaling $528,678 for a total expenditure program of $91,362,900. Table 1 shows that while the total number of employees will decrease by 124 man~years, the General Fund cost will increase by a net amount of $787,837 or 1.0 percent over estimated current-year expenditures. The staffing decline primarily reflects the closure of an institution (Los Guilu- cos), the transfer of two closed institutions to the Department of General Services for security and maintenance until final disposition and the re- duction of parole staff. The General Fund increase, which is due primarily to cost increases in the Community Services Program, has been minimized substantially by a cost reduction in the Rehabilitation Program (resulting from the declining ward population) and an anticipated net increase of $757,166 in federal reimbursements resulting from a proposed contract to provide care for 200 young federal offenders in Youth Authority facilities. The major General Fund increases consist of $394,641 for merit salary adjustments, $499,673 for price increases, $541,745 for the lO-month cost of Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY \/ 657 funding 70 security and control positions which have been partially fund- ed under the Public Employment program of the Federal Emergency Act of 1971, $118,160 for’ 11.2 man-years of new security personnel and $45,890 for workmen’s compensation benefits. Various fiscal and staffing adjust- ments in the 1973-74 budget will be discussed more fully in the analysis of each separate program. Table 1 Youth Authority Staffing and Expenditures Increase 1973-74 Actual Estimated Proposed over 1972-73 Program 1971-72 1972-73 1973-74 Amount Percent I, Conununity Services Man-years \”.\”\”,,\”\”,,. 41.3 49.3 48.9 -0.4 -0.8 Expenditures \”\”,,,,,. $22,081,521 $26,185,408 $28,971,864 $2,786,456 10.6 II. Rehabilitation Man-years \”\”\”\”\”\”\”\” 3,299.2 3,334.9 3,225.6 -109.3 -3.3 Expenditures \”\”\”\”\” 52,105,945 60,131,345 57,923,308 -2,208,037 -3.7 III, Research Man-years \”\”\”\”\”\”.\”. 51.7 79.8 70.7 -9.1 -11.4 Expenditures \”\”\”\”\” 854,635 1,337,610 1,117,282 220,328 -1.7 IV. Youth Authority Board Man-years \”\”\”\”\”\”\”\” 16.1 16.9 16.9 Expenditures \”\”\”\”\” 374,025 465,841 468,653 2,812 0.6 V. Administration Consolidated Data Center \”\”.;\”\”\”\” 37,500 81,605 93,930 12,325 15.1 Undistributed to other programs Man-years \”\”\”\”\”.~\”,,’ 119.1 142.6 137.4 -5.2 -3.6 Expenditures \”\”\”\”\” 2,629,810 2,743,815 2,787,863 44,048 1.6 Program Totals Man-years \”\”\”\”\”\”\”\”\”\”\”\”\” 3,527.4 3,623.5 3,499.5 -124 -3.4 Expenditures \”\”\”\”\”\”,,\”\”\” 78,083,445 90,945,624 91,362,900 417,276 0.5 Less Reimbursements \”\”\”\” $3,898,170 $8,637,502 $8,390,868 -$246,634 -2.9 Net program totals\”\”\”\”\”\”\” $74,185,275 $82,308,122 $82,972,032 $663,910 0.8 General Fund \”\”\”\”\”\”\”\”\” 71,594,413 81,655,517 82,#3,354 787,837 1.0 Federal Funds\”\”\”\”\”\”\”\”\” 2,590,882 tJ52,(j{)\/J 528,678 -123,927 -19.0 Need to Refine Departmental Objectivas and Organization o-We recommend that the program effectiveness measurement task force of the Department of Finance assist the Department of the Youth Author- ity in developing objectives and program structures which are specific, quantifiable, and conducive to reliable evaluation for inclusion in the ‘ Governors 1974-75 Budget. ‘ The Youth Authority’s programs are difficult to evaluate because their objectives are stated in nebulous terms and no standards exist for measur-‘ ing performance or effectiveness. This problem reflects, in part, the fact that program objectives are stated in terms of existing organizational structure rather than being based on the well-thought-out needs of the juvenile corrections system. For example, the objectives of the depart- ment’s Community Services program are: 658 \/ DEPARTMENT OF THE YOUTH AUTHORITY Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY-Continued 1. To assist local government and private organizations and citizens in developing and improving delinquency reduction programs. 2. To assist local government in developing and improving juvenile law enforcement and correctional systems. Other than some raw workload data, the departm~nt provides no quan- tified information on the success of the program in meeting these broadly stated objectives. Therefore, it is difficult to evaulate program achieve- ment or consider alternative courses of action. Most of the other depart- mental objectives are equally hard to evaluate. The program structure of the department needs reassessment and re- grouping to facilitate comparisons of the cost and effectiveness of alterna- tive approaches to agency objectives. An example of a departmental activity which appears to be misclassified as a program is the Youth Au- thority Board. Although the board serves an important function, it is questionable that it warrants full-program status. Perhaps it would be better classified as a supportive activity of some other departmental pro- gram such as Rehabilitation Services. ‘ Since October 1971, the program effectiveness measurement task force, composed of two members of the Department of Finance’s budget divi- sion and three members of the department’s audit division, has been assisting seven pilot state agencies in developing output measures which will provide information to decisionmakers concerning progress toward accomplishing identifiable objectives. Several measurements of effective- ness for the pilot agencies are included in the Governor’s 1973-74 Budget, and the Department of Finance plans to incorporate similar improve- ments. in the budget materials of all state agencies by 1978. Considering the importance of the goals of Department of the Youth Authority and the magnitude of its funding, the agency should be given higher priority with respect to implementation of the goals-oriented . budget system. Therefore, we recommend that the task force and the department begin in the 1973 9alendar year to review program structures and formulate specific, quantifiable program objectives which are condu- cive to evaluation and based on the needs of the juvenile correction’s system. Hopefully, the initial revision should be accomplished in time for inclusion in the Governor’s 1974-75 Budget, thus providing a better basis for program evaluation in future years. I. COMMUNITY SERVICES The community services program provides direct services by staff to local public and private agencies and grants of state funds to subsidize certain local programs relating to delinquency and rehabilitation. Direct staff services include standard setting, inspections, training, consultation, and technical assistance for local entities. State subsidies administered under this program provide for state-local sharing, by prescribed formulas, of the cost of construction and maintenance of juvenile homes, ranches, and camps, of enriched probl;ltion services and delinquency prevention programs. The reduction of delinquency to the greatest extent possible is the ultimate goal of this program, but there are lesser goals and objectives Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY \/ 659 . related to each element of the program discussed herein. . During calendar year 1972, the department coordinated the efforts of a federally funded four-man advisory team established to assist local law enforcement agencies in combating juvenile delinquency. Due to the success of this program, the department plans to aSSume its full support in the budget year. During the current year, the department assumed the increased cost of four professional positions (and related clerical support) which were necessary to meet workload increases related to monitoring the rapidly expanding probation subsidy program. The department pro- poses to maintain these positions in the budget year. As shown in Table 2, the community servicesprqgram will be reduced by 0.4 man-years and increased by a net total of $2,786,456 in the budget year. The staff reduction is attributable to a net reduction in federally funded positions due to the completion of one federally funded program, the National Survey of Youth Service Bureaus, partially offset by the im- plementation of another federally funded program, the model volunteers . program. The General Fund increase of $3,098,133 for the community services program reflects proposed increases in probation subsidy ($2,660,700), merit salary adjustments and price increases of $114,301, the cost of the law enforcement consultation team mentioned above ($92,140), increased cost of probation subsidy monitoring ($117,150), and other increases to offset a $113,842 reduction in federal reimbursements for projects which are being terminated. Category Personnel man-years …….. Expenditures …………………. General Fund ……………. Federal funds ……………… Reimbursements ….. , …… Table 2 Community Services Program Fiscal y\”ear 1971-72 . 1972-73 1973-74 41.3 49.3 48.9 $22,081,521 $26,185,408 $28,971,864 ($21,717,802) ($25,713,240) ($28,811,373) ($39,428) ($363,719) ($432,740) ($160,491) Services to Public and Private Agencies Increase 1973-74 over 1972-73 Amount Percent -0.4 -0.8 $2,786,456 10.6 $3,098,133 12 -$39,428 1()() -$272,249 -62.9 Probation services are provided to approximately 194,000 individuals by local agencies in the 58 counties, two of which have separate juvenile and adult probation departments. The counties also operate juvenile halls, ranches, camps, and homes and, in some cases, incarcerate juveniles in jails. Presently, 47 counties provide special probation services under the probation subsidy program. The department is required by law to estab- lish minimum standards of operation and make compliance inspections of these local facilities and programs except for regular nonsubsidized proba- tion services, in which instance the state standards are not mandatory. The department is also authorized bylaw to assist in improvement of local juvenile enforcement, rehabilitation, and delinquency prevention programs by providing training and consultation services to local agencies. The department proposes to expend 27.8 man-years and $525,870 for these services in the budget year compared to 26.2 man-years and $568,394 660 \/ DEPARTMENT OF THE ),’OUTH AVTHORITY DEPARTMENT OF ‘THE YOUTH AUTHORITY-Continued Items 285-,.292 in the current year: The 1.6 man-year increase reflects the addition of clerical support for the law enforcement consultation team noted earlier. The\” $42,524 expenditure decrease is primarily attributable to a drop in federally funded programs partially offset by increases in General Fund expenditures due to price increases and merit salary adjustments. Financial Assistance The state, under the administration of this department, provides subsi- dies to local government for construction and operation of ranches, camps, and homes for delinquents, special probation programs, delinquency pre- vention programs, and a border check station at San Diego. State support, which is intended to encourage the development of these local programs, is based on the belief that local treatment of delinquents is more desirable, if not more effective, than incarceration in state facilities. Treatment in the community or in locally operated institutions retains the ward in his normal home and community environment or at least closer to such influ- ences than may be the case with incarceration in state facilities. The validity of this theory and the extent of its application have not been scientifically established, but the concept is generally accepted among those working in juvenile rehabilitation. There has been extensive criti- cism of the adverse impact of this type of probation on the orderly conduct of public high schools. It is also generally recognized that removal from the community or at least from the natural home situation as it exists is necessary. in some cases. The department expects to devote 17.3 man-years to these subsidy pro- grams during 1.973-74, which is 1.5 man-years higher than the current level and to expend $28,322,340 or $2,866,401 more than in the current year. The increased staffing is for the law enforcement consultant team discussed earlier in this analysis. The net increase of $2,866,401 is due primarily to projected population increases in the various local subsidy programs. Ta- ble 3 identifies the individual subvention expenditures. The fiscal adjust- ments for each subvention are discussed in sections that follow. Construction and Maintenance Subsidies Table 3. shows that the construction subsidy is budgeted at the same level as the current year. The amount requested is based on the counties’ expressed intentions to construct additional facilities, adjusted by estimat- ed savings based on recent experience of counties not being able to fund construction programs as planned. The amount requested, therefore, ap- pears reasonable. This subsidy program, authorized in 1957 to encourage counties to pro- vide more local facilities for juvenile rehabilitation, reimburses counties for one-half the construction costs, not to exceed $3,000 per bed unit. To participate, counties must conform to standards prescribed by the Youth Authority. The counties had 27 facilities for approximately 1,503 wards when the program was commenced, compared to an anticipated 69 facili- ties with capacity for 3,945 juveniles in 1973-74. The state benefits from the Table 3 State Financial Assistance to Locally Operated Programs Activity Subsidized 1. Construction of juvenile homes, etc …………………………. .. 2. Maintenance of juvenile homes, etc …………………………. .. 3. Special probation supervision …………………………………….. .. 4. Border check station …………………………………………………… .. 5. Delinquency prevention ……………………………………………. .. 6. Construction at Natividad Ranch ……………………………… .. Total.subsidies ……………………………………………………………… .. General Fund ………………………………………………………. .. Special deposit fund ……………………………………………. .. Departmental staff and operating cost allocations …….. .. Total financial assistance ………………………………………… .. 1972-72 $292,000 2,773,437 17,718,723 142,324 227,200 ‘. (22,195) $21,153,684 $21,153,684 ($22,195) 343,389 $21,497,073 1972-73 $600,000 2,997,250 21,081,300 143,646 233,300 $25,055,496 $25;055,496 400,443 $25,455,939 1973-74 $600,000 3,224,280 23,742,000 144,308 233,300 $27,943,888 $27,943,888 378,452 $28,322,340 -~ CD S ‘\” t.o ~ ~ t.o Increase 1973-74 over 1972-73 Amount Percent 0 $227,030 7.6% t:r:I 2,660,700 12.6 \”tl > 662 0.5 = ‘\”‘l ~ t:r:I Z $2,888,392 11.5 ‘\”‘l $2,888,392 11.5 0 \”‘l -21,991 -5.5 ~ $2,866,401 11.3 t:r:I …..: 0 ~ ~ 0 = .~ ……… I – 662 \/ DEPARTMENT OF THE YOUTH AUTHORITY Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY-Continued fact that many of these juveniles would have been committed to state facilities with resultant state costs excepffor the $25 per month’per com- mitmentcontributed by the county of commitment. The maintenance subsidy (item 2 in Table 3) was established to encour- age development of local treatment programs in preference to state insti- tutional incarceration. It is limited to reimbursement of one-half the ward’s cost of care, not to exceed $95 per ward per month. The scheduled increase of $227,030 or 7.6 percent for the maintenance subsidy reflects increased population projections, on which subsidy pay- ments are based, by participating counties. Probation Subsidy The probation subsidy program was established in 1965 to encourage greater use of probation by sharing with the counties savings resulting to the state from a reduction in commitments of juveniles and adults to state institutions. Participating counties must make \”earnings\” based on a pre- scribed formula set forth in the Welfare arid Institutions Code. The county achieves earnings by reducing its combined level of adult and juvenile commitments below a base commitment rate previously established. For each reduction in its base commitment level, the county is reimbursed (up’ to a maximum of $4,000) its actual cost of providing an enriched probation program meeting minimum standards prescribed by the Youth Authority. As shown in Table 3, probation subsidies are expected to total $23,742,- 000 in the budget year, an increase of $2,660,700 or 12.6 percent over the $21,081,300 estimated for expenditure in 197~73. The increase consists of $2,500,700 to finance growth in probation workload at the local level and $160,000 to fund Chapter 830, Statutes of 1971, which, effective July 1,1972, increases the SUbsidy cost by approximately $160,000 annually to fund a revised formula which allows low commitment counties to use an assumed base commitment rate of 40 per 100,000 population instead of their actual rate if it is less than 40 per 100,000. Chapter 1004, Statutes of 1972 (AB 368), increased subsidy costs by $2,- 150,000 in the current year by (1) appropriating $2 million to assist county probation departments in meeting rising costs of the special subsidy pro- grams and to help local law enforcement agencies in the diagnosis, control \u00b7 or treatment of offenders or alleged offenders and (2) appropriating $150,- \u00b7 000 for counties to conduct probation subsidy evaluations. Chapter 1004 \u00b7 also permits the Director of the Youth Authority, with the approval of the Director of Finance, to adjust annually the probation subsidy payments to counties, beginning with the 1973-74 fiscal year, by an amount equal to the percentage of increase in the consumer price index. ‘ The $23,742,000 appropriation requested for the probation subsidy pro- gram is the estimated amount needed. to pay county claims for the last quarter of 197~73 and the first three quarters of 1973-74. It is based on departmental projections that there will be 5,500 fewer persons (3,400 juveniles and 2,100 adults) committed to state-operated adult and juvenile institutions in 1973-74 than would have been received under the counties’ . base commitment rates prior to the subsidy program. The department Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY \/ 663 states that since the inception of this program, there has been a total reduction of 20,576 juvenile and adult commitments to state institutions . below county base commitment rates. Currently, 194,000 persons are on probation, 18,400 or 9.5 percent of whom receive the special supervision provided by the state subsidy. San Diego Border Check Station The City of San Diego operates a check station at the M~xico-United States border near the Tijuana point of entry to deny passage into Mexico . to juveniles not escorted by adults or without proper parental consent. An estimated 19,000 juveniles will be interviewed at the border in the current year, and some 11,700 will be refused crossing privileges. The cost of the check station is prorated between the state and the City of San Diego on the proportion of city and noncity residents turned away from the border. The $144,308 requested for 1973-74 is $662 or 5percent over current-year expenditures and will maintain the station at its current workload level. Delinquency Prevention Subsidy The fifth subsidy shown in Table 3 covers two related functions. One provides for state sharing of operating costs \u00b7of local delinquency preven- tion commissions and the other provides funds to establish delinquency prevention programs. Delinquency prevention commissions of not less than seven members may be established in each county by ordinance to coordinate the work of the public and private agencies engaged in d~linquency prevention activities. The commissions are authorized by Section 1752.5, Welfare and Institutions Code, to receive funds from governmental and nongovern~ mentabources and to hire an executive secretary and necessary staff. The subsidy provision, which was enacted in 1965 to encourage creation of the commissions, provides that a payment of not more than $1,000 per annum may be made to each commission to help defray operating expenses. The delinquency prevention subsidy is projected to remain at the cur- rent level ($233,300) in the budget year. Delinquency Prevention Assistance The department provides staff services to disseminate information on delinquency and its possible causes; to encourage support of citizens, local governments, and private agencies to implement and maintain delin- quency prevention and rehabilitation programs; and to conduct studies of local probation departments. The department proposes to expend $123,654 and 3.8 man-years for this activity in 1973-74, which is $37,421 and 3.5 man-years under current-year levels. The reductions reflect the completion of a federally funded project, the National Survey of Youth Service Bureaus, during the 1972-73 fiscal year. 23-83988 664 \/ DEPARTMENT OF THE YOUTH AUTHOR.ITY Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY-Continued II. REHABILITATION SERVICES The rehabilitation services program includes those functions that direct- ly affect the projected 4,414 wards in state~operated institutions for delin- quent juveniles and 10,781 parolees under supervision in the community. The program goals include immediate public protection by incarceration and future public protection and benefit to the offender by his rehabilita- tion. The program workload results from the commitment of approximately 3,050 juvenile offenders to the state who have been adjudged by the courts as too severely delinquent for, treatment in the local community. The majority of these commitments have had a number of previous contacts with local juvenile rehabilitation programs such as juvenile hall, camp and home placement, informal and formal probation supervision. the 15,195 juveniles estimated to be in state juvenile correctional institutions and on parole in 1973-74 are a small portion of the state’s youth population. Organization The department is headed by a director who is assisted in overall opera- tion by a central administrative staff located in Sacramento. The Rehabili- tation Services program is administered by a deputy director and supporting staff, also in Sacramento. The program is geographically di- vid,ed on a north-south regional basis. Each region in turn is directed by a regional administrator who is administratively responsible for all institu- tional and parole functions within his region. This is a new organizational structure established as a means of providing a coordinated continuum of treatment and to remove artificial barriers created by separate and dis- tinct institution and parole functions. Each institution is headed by a superintendent and is divided into func- tional- units devoted to administration, treatment, and support services. Parole services are organized on a regional and unit basis extending from the basic unit, i.e., one supervisory agent to four agents, four to nine units per region, and six regions divided on a north-south geographic basis. The number of units varies because of the geographic extent of the region and other administrative factors. Highlights of Rehabilitation Services Program and Workload Changes During the current year, several significant changes occurred in the Rehabilitation Services program as summarized below. ‘ 1. Institution Closures. Due to overall population decline, the depart- ment plans to close Los Guilucos School, located near Santa Rosa, during the spring of 1973. Los Guilucos, which has a capacity of 260, serves asa training school for both boys and girls. To accommodate the remaining population at Los Guilucos, living units will be open at the Ventura School (a coeducatonal institution), O. H. Close, and Preston. Paso Robles School was closed on October 1, 1972 due, in part, to the success of the \”Increased Parole Effectiveness Program\” in meeting its objective of reducing parole returns to institutions. Los Guilucos, Paso Robles and Fricot Ranch School (closed on June 30, 1971 due to overall Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY \/ 665 population decline) will be declared surplus to the department’s needs and turned over to the Department of General Services for security arid maintenance until final disposition (Paso Robles School and the Fricot Ranch School on Nne 30, 1973, and Los Guilucos on October 1, 1973). 2. Drug Treatment. In August 1972, the department began a three- year federally funded project to develop a community-centered drug treatment system designed to make use of locally based drug treatment resources. During the project, the department plans to: (1) develop a treatment system for identifying and classifying drug-abusing wards, (2) identify and classify treatment resources, (3) utilize available local re- sources to provide services to drug-abusing wards, and (4) stimulate the development of needed but lacking local drug treatment activities. To accomplish these goals the department will implement (1) specialized diagnostic and planning units at two Youth Authority reception centers, (2) an intensive prerelease reentry program for drug abusers, and (3) specialized drug staff in each parole region to coordinate drug program efforts within the department and to facilitate utilization of community treatment resources. Federal funds for a:nother drug program which the Youth Authority is conducting at Preston School of Industry will expire in the 1973-74 fiscal year. The department plans to assume the full support cost of this pro- gram, which involves a 40-ward living unit utilizing the family therapy concept developed at Napa and Mendocino State Hospitals. As we discuss later under the heading \”Need to Evaluate Drug Programs\”, we believe that before the department develops additional drug programs, it should establish a quantifiable objective for the rehabilitation of wards with histo- ries of drug involvement, and also develop drug rehabilitation plans and a cost accounting system relating to such programs for presentation to the Legislature and the Department of Finance. 3. Youth ServiCes. Over the next three to five years the department, with federal funds and the assistance of various federal, state and local agencies, will embark on a project of developing three prototypes for the comprehensive delivery of youth services at the community level. The first of these model programs, Tolliver Community Parole Center in Oak- land, commenced July 1, 1972. The second prototype is planned for devel- opment in southern California early in 1973. ‘ 4. Added Due Process Requirements. In a recent decision, Morrissey vs. Brewer, the United States Supreme Court has required that new due ‘ process procedures be established for parolees faCing revocation of parole. The standards set down by the court will increase the number of hearings required to be held in local detention facilities and state institutions. The Youth Authority advises that investigating, documenting, and presenting alleged violations in these hearings will result in aworkload increase for the Youth Authority Board and parole and institution staff which could necessitate increased staffing. However, the department plans to hire any increases in such staffing within existing budgetary resources; 5. Federal Housing Contract. The Youth Authority states that it has established an agreement with the Federal Bureau of Prisons in which the bureau will reimburse the state for housing and caring for 200 young adult’ 666 \/ DEPARTMENT OF THE YOUTH AUTHORITY Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY-Continued federal offenders in Youth Authority facilities starting on February 1, 1973. The department states that the number of such wards could increase in future years. ‘ We understand that this agreement may not be finalized and, as dis- cussed later in this analysis, if it does not materialize we believe the department should close an additional institution during the budget year for a net savings of $1,150,000. 6. Ward Pay. The Youth Authority plans to expand institutional work programs for wards in the budget year by initiating a system of paying wards that are on various work assignments such as plant maintenance, food service, janitorial work, and certain educational aid positions. The proposal will cost $95,040. It has merit and we recommend approval. The jobs for which pay is proposed are those involving the maintenance and convenience of the facility and in which the training component is only a minor function of the work performed. The pay jobs, covering 17 differ- ent job classifications, will have a sliding pay scale of 5 cents to 19 cents per hour, with an average rate of 9 cents per hour. The Department of Corrections has paid inmates on work assignments for several years. Prior. to the budget year, the paid jobs in the Youth Authority have been in the four youth conservation camps where payment is received by wards at the rate of 75 cents per eight-hour day, or 9.4 cents per hour for forestry work. The rehabilitation services program is divided into three major ele- ments: diagnosis, care and control, and treatment. Manpower and mone- tary expenditures by program elements are set forth in Table 4. Table 4 Rehabilitation Services Program Increase 1973-74 over 1972-73 Program element 1971-72 1972-73 1973-74 Amount Percent DiagnQsis Personnel ………….. 274 272.9 271 -1.9 0.7% Expenditures …….. $6,918,571 $4,390,900 $4,385,301 -$5,599 -0.1 Care and Control Personnel ………….. 2,093.7 2,150.2 2,073.4 76.8 -3.6 Expenditures …….. $33,596,253 $39,240,730 $37,843,348 -$1,397,382 -3.6 Treatment Personnel ………….. 931.5 911.8 881.2 -30.6 -3.4 Expenditures …….. $11,591,130 $16,499,715 $15,694,659 -$805,061 -4.9 Totals Personnel ………….. 3,299.2 3,334.9 3,225.6 -109.3 3.3 Expenditures …….. $52,105,954 $60,131,345 $57,923,308 – $2,208,037 -3.7 Funding Sources General Fund …… $46,748,913 $52,436,251 $50,079,989 – $2,356,262 -4.5 Federal funds …… $2,258,030 $398,856 $341,138 -$57,718 -14.5 Reimbursements .. $3,099,011 $7,296,238 $7,502,181 $205,943 2.8 Table 4 shows that the General Fund cost of the rehabilitation program is projected to decrease by $2,356,262 or 4.5 percent in the budget year, and that program staffing is estimated\/to decrease by 109.3 positions or 3.3 percent. The major portions of the expenditure decrease are attributable to (1) a $2,400,203 reduction reflecting the net savings from the closure Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY \/667 of Los Guilucos, (2) a $656,164 reduction inthe cost of the parole eh~ment due to population decline, (3) a $253,980 reduction in maintenance and security costs arising from the transfer of three institutions (Paso Robles, Fricot and Los Guilucos) to the Department of General Services, and (4) an anticipated $757,166 net increase in federal reimbursements to pay for the cost of housing and caring for 200 young adult males in Youth Author- ity facilities. As mentioned previously, however, it is uncertain at this time whether the federal contract will be executed. Partially offsetting the above reductions are (1) salaries and staff benefit increases of approximately $407,900, (2) price increases of approximately $537,012, (3) $541,745 for the 1O-month cost of funding 70 security and control positions which have been partially funded under the public em- ployment program of the federal Emergency Employment Act of 1971, (4) $109,~19 to fund the full cost of the Preston drug program, (5) $118,160 for 11.2 additional security positions at various institutions, and (6) $95,040 to pay wards on work programs. The major portion of the $57,718 decrease in federal funds shown in Table 4 is attributable to the department’s anticipated loss (in September 1973) of a National Institute on Mental Health grant. The $205,493 increase in reimbursements for 1973-:74 shown in Table 4 is mainly attributable to the community-centered drug program discussed earlier in this analysis under \”Highlights of Rehabilitation Services Program and Workload Changes.\” The net staff reduction of 109.3 man-years shown in Table 4 reflects the declining ward population and results from the elimination of (1) 56.5 parole agents and related clerical positions, (2) 5.2 maintenance staff positions from Paso Robles School, (3) 11.0 maintenance staff positions fromFricot School, and (4) 47.8 institutional staff (youth counselors and group supervisors) from Los Guilucos, partially offset by the addition of 11.2 man-years of security positions for various institutions. The fiscal and staffing adjustments shown in Table 4 will be discussed in the analysis of each separate element of the rehabilitation progra~. Diagnosis The department operates three reception centers and provides diagnos- tic and case evaluation services within institutions and for wards on parole. Diagnostic services within institutions are provided by a combination of professional and lay counselors and other staff working on a team basis and holding regularly scheduled conferences and unscheduled meetings as required. . The department estimates that it will expend $4,385,301 and 271 man- years on the diagnosis element in the budget year. These are decreases \u00b7of $5,599 and 1.9 man-years from the current-year level and are attributable to ward population decline. . Care and Control The care and control element includes residential care in camps and institutions providing the basic human needs for housing, feeding, cloth- ing, medical and dental services and also surveillance and control in the community through parole supervision. 668 \/ DEPARTMENT OF THE YOUTH AUTHORITY DEPARTMENT OF THE YOUTH AUTHORITY-Continued Items 285-292 The wards are housed in facilities ranging in capacity from 80-ward camps to the Youth Training School with a capacity of 1,272. The usual institutions range from 250 to 560 capacity. Housing units for girls have a capacity of 40 to 50 in individual rooms. Male housing units are generally 50-boy capacity open dormitories, but individual rooms are provided at the Youth Training School and at Preston. Feeding facilities are either centralized mess halls at the older facilities or decentralized dining rooms attached to the living units with centralized food preparation at the newer institutions. Custody and control during the nonsleeping portion of the day is provided by youth counselors who also double as treatment personnel in relation to ward counseling, classifica- tion and other treatment team activities. Control during the sleeping hours and for the institution perimeter is provided by group supervisors who are not assigned treatment functions because of their limited contact with the wards. Community surveillance and control is provided by parole agents who also have treatment responsibilities. Specialized employees are provided for food preparation and distribu- tion, clothing and housing care and maintenance, and medical and dental needs. The department estimates that it will spend $37,843,348 on this element in 1973-74, a decrease of $1,397,382 or 3.6 percent from the 1972-73 level, and that the man-year level will decrease by 76.8, from 2,150.2 in 1972-73 to 2,073.4 in 197~74. These reductions are primarily attributable to reduc- tions in institution and parole average daily populations. Staff Increases-Loss of Federal Funds The department states that it is receiving more hostile, aggressive and dangerous wards with more delinquent histories than in previous years. As a means of providing proper care, control and security for this type of ward, the department requested, and the Legislature approved, an addi- tional 62.1 security and control positions, consisting of 28.3 man-years of youth counselor positions and 33.8 man-years of group supervisor ‘posi- tions, for the 1972-73 fiscal year. The state funded a portion of the cost of these positions and the balance was financed under the federal Emer- gency Employment Act of 1971. The federal funds for these positions will terminate at the end of August 1973, and the department plans to pick up the total cost of these positions at that time. The total cost of these positions for the 1973-74 budget year will be approximately $650,000. The additional cost to the General Fund, that portion which normally would have been paid by federal funds, will be $541,745. Due to increased internal security and escape problems, the depart- ment is also proposing the addition of 11.2 new security positions, at a cost of $118,160, for the budget year. The department states that these positions are necessary to combat increasing numbers of escapes and thereby help reduce the number of incidents involving property loss or personal harm to residents of communities near Youth Authority institutions. To add credence to the need for these positions, the Youth Authority points out that, in the period from 1965-66 to 1971-72, escapes have increased by 453 Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY I 669 percent. In this same period, Youth Authority commitments have de- creased by 44 percent. Population Projections Need Refining We recommend that the department perform a midyear revision of its .~ population projection in January of each year and that it submit a revised total for its departmental support budget, based on the revision, to the Department of Finance and the Legislature for incorporation into the following fiscal year budget. . The support budget of the Department of the Youth Authority is predi- cated on the number of wards for which it provides services. An historical pattern of over projecting population has resulted in budgeting at higher levels that necessary. In prior analyses we have. stated that the department has overestimated its population Projection and recommended corresponding budget reduc- tions. A review of the department’s population figures substantiates our. position concerning population projections .. For example, last year we stated that the department had overestimated the average daily ward population for the 1972-73 fiscal year at 4,809. Now, the department’s own population estimates in the 1973-74 budget document show a revised estimated average daily ward population of 4,249 for the 1972-73 fiscal year-a reduction of 560 wards from the departm~nt’s original estimate upon which the support budget was predicated for the 1972-73 fiscal year. Based on the latest available data, the average ,daily population may not even reach the revised figure during the 1972-73 fiscal year (the average daily population for the 1972-73 fiscal year was 4,006 as ofJanuary 1, 1973). The tendency for the. Youth Authority to over project its population is \u00b7partly due to the fact that its budget is developed on a population estimate \”‘ which is made more than six months prior to the presentation of the budget. The necessity for projecting the average daily ward population this far in advance is partly due to the time-consuming mechanics in~ volved in putting together the department’s support budget. Unfortunate- ly, this procedure does not lend itself to an accurate forecast of the budgetary requirements of the dep;lrtment. Therefore, we believe the department should perform a mid-year revision of its population projec- tion in January of each year. This would give the department six more months of ‘ experience on which to base its average daily ward population projection and would provide more accurate information for budget fore- casting purposes. Also the department should submit a revised total for its department support budget, based on the population projection revision, to the Legislature and the Department of Finance so that the. revised support figure may be incorporated; during the budget hearing process, into the fiscal year budget. Federal Wards We recommend that if the department does not receive a contract to housefederal wards, it close an institution during the budget year for a net savings of $i,i5O,(J()(). . As discussed in the section in the analysis entitled \”Highlights of Rehabilitation Services Program and Workload Changes\”, the Youth Au- 670 \/ DEPARTMENT OF THE YOUTH AUTHORITY Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY-Continued thority states that it has established an agreement with the Federal Bureau . of Prisons in which the bureau will reimburse the state for housing and caring for 200 young adult federal offenders in Youth Authority facilities starting in February 1, 1973. The department advises that the number of such wards could increase in future years to possibly as high as 400. From discussions with officials of the department, we understand that this agree- ment may not be finalized. The Governor’s Budget states that the department would have closed an additional 200 beds in the budget year if it were not for the agreement with the Federal Bureau of Prisons. Therefore, if the contract does not materialize, we recommend that the department dose one of its smaller (300 beds) institutions in the budget year. This action probably would require the opening of living units in another institution (at which there is already space available) , but it would produce a net savings of $1,150,000 for the department. Treatment The treatment element of the rehabilitation services program includes counseling, religious services, recreation, psychiatric services, education and aftercare treatment in the community. These services are designed \u00b7to meet the needs of the wards committed as an aid to\u00b7 their future rehabilitation. The wards generally come from broken homes, below average econom- ic status and substandard residential areas. They are usually academically retarded, lack educational motivation, have poor work and study habits, and have few employable skills. Over half are four to six grade levels below age level on standardized tests, especially in reading comprehension, vo- cabulary, arithmetic and spelling. An increasing number of wards are being paroled to out-of-home place- ments due to unsuitability of their home environment for treatment pur- poses. The goal of the treatment element is the rehabilitation of the wards committed. The immediate objectives are to provide those services which are deemed by modern correctional practice to be conducive to such rehabilitation. Academic instruction is a major ingredient of the treatment element as most of the wards are of school age and lack academic achieve- ment. Vocational training is also provided at the\u00b7 institutions housing older wards. The wards are generally afflicted with psychiatric, psychological, or at least character disorders requiring varying levels of counseling. For these reasons, psychiatric and psychological evaluations, testings, treatment, and counseling are provided. Counseling by teachers, living unit staff, and other personnel is also provided. Guidance and assistance in community adjustment plus surveillance and control is provided by the parole agent. This element will require 881.2 man-years of effort and $15,694,659 in 1973-74 as compared to 911.8 man-years and $16,499,715 in 1972-73. This is a decrease of 30.6 man-years or 3.4 percent and a decrease of $805,061 or 4.9 percent in costs between current and budget years. These reduc- Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY \/ 671 tions an~ due to declining ward populattons in institutions and on parole. Need to Evaluate Drug Programs We recommend that before the Youth Authority develops additional drug programs beyond those now existing and proposed in the budget year, it establish an objective, susceptible to quantifiable measurement, for the rehabilitation of wards with histories of drug envolvement and also develop drug rehabilitation plans and a cost accounting system relating to such programs for presentation to the Legislature and the Department of Finance no later than January 1, 1974. As discussed in the program budget, and summarized under the head- ing in our analysis entitled \”Highlights of Rehabilitation Services Program and Workload Changes\”, the department plans to develop a federally funded community-centered drug treatment system and assume full sup- port costs of a 40-ward living-unit drug program at Preston School. of Industry during the budget year. Not mentioned in the program budget, however, are several existing drug programs which the department main- tains at other institutions (Fred C. Nelles, Youth Training School, and Ventura School) which are described in the department’s August 1972, Guide to Treatment Programs. According to the department, the number of wards committed to it with a history of drug involvement has risen sharply during the past several years .. For example, commitments to the department for narcotic abuse convictions have increased from 5.7 percent in 1965 to 18.8 percent in 1971. During 1971, 85 percent of all male commitments (not just those for drug convictions) and 90 percent of all female commitments had histories of known narcotic involvement. Therefore, there appears to be an urgent need for drug programs in the Youth Authority. However, we believe that the drug programs that now exist within the department have beendevel- oped in a rather haphazard fashion, depending on such factors as the availability of buildings, the desire of local parole or institution personnel to establish drug programs, the availability of ex-drug users for use as\u00b7 counselors, the availability of \”trade-off’ money from other programs and the availability of federal funds. Drug programs should be established on the basis of need of particular wards in institutions or parole units and they should be based on an order- ly, statewide plan for the rehabilitation of wards with histories of drug involvement. We believe that the department should be able to develop a plan for such a statewide drug treatment system based on experience derived from existing drug programs. Accordingly, we recommend that the Youth Authority develop such a plan for presentation to the Legisla- ture and the. Department of Finance no later than January 1, 1974. Employment of Ex-offenders We recommend that the law be amended to allow certain classes of former Youth Authority wards to be considered for employment by the Youth Authority in positions that hold limited peace officer status. For approximately four years the Youth Authority has been employing certain ex-criminal ()ffenders in \”paraprofessional\” positions (such as pa- role aides and correctional program assistants) who work under the super- 672 I DEPARTMENT OF THE YOUTH AUTHORITY Items 285-:292 DEPARTMENT OF THE YOUTH AUTHORITY-Continued vision of treatment team supervisors or parole agents and become directly involved with the rehabilitation of Youth Authority wards. The para- professional offenders have proven to be quite competent in these posi- tions and have exhibited emotional maturity, stability, sympathetic and objective understanding of the problems of youth in custody, and capabili- ty of advancement in the correctional field. However, due to legal restric- tions (Government Code Section lO29) , the Youth Authority is not permitted to hire certain classes (ex-felons) of its former wards for such positions as group supervisors, youth counselors, and parole officers which are defined by Penal Code Section 830.5 as having limited peace officer status. Most Youth Authority wards are not considered felons and may be granted relief from all penalties and disabilities resulting from the offense or crime for which they were committed. However, approximately lO percent of the department’s wards are considered felons due to the nature of the crime for which they were committed and may not be granted such relief. If the law were amended, the Youth Authority advises it would consider hiring approximately three of its ex-felon wards in positions that hold limited peace officer status. The present hiring restriction appears to be unduly restrictive and dys- functional to both the Youth Authority and the ex-felon for a variety of reasons. First, it denies the department the services of individuals of prov- en ability with unique perspectives in the correctional field. Second, it hinders the department in developing career ladders for disadvantaged persons. Third, it reflects a lack of confidence in a correctional system that stresses rehabilitation and \”return to a useful role in society\” over punish- ment. Fourth, it suggests a lack of consistency in state policy to encourage private employers to employ persons who are disqualified from state em- ployment on the basis of their past records. In our judgment, the law should be amended to permit the Youth Authority to employ former Youth Authority felons in positions holding limited peace officer status, provided that such former offenders (1) were honorably discharged by the Youth Authority (2) were employed in a \”paraprofessional\” position by the department and (3) satisfy the Youth Authority that they possess the necessary personal characteristics and educational qualifications established for the job. This proposal is not without some degree of risk, but there are also occasional risks in employing in sensitive jobs persons who have not had prior criminal records. Moreover, the proposal should be evaluated in the positive context of being able to demonstrate to juvenile and other offend- ers that \”rehabilitation\” can become a reality and that society offers mean- ingful opportunities for those who make a full commitment to constructive changes in their attitude and value system. III. RESEARCH The research program was initially authorized in the 1957-58 budget to develop a continuing evaluation of the effectiveness of the Youth Author- ity programs. Currently, the program has three major areas of responsibili- ty including (a) the creation and implementation of a coordinated system Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY \/ 673 for long-range program planning and development, (b) the operation of the departmental information system, and (c) providing research’ and _ evaluation Ilervices to ongoing programs and special demonstration projects. The program planning and development’ responsibilities were . formally added to the division by transfer from the director’s office in early 1971. Manpower and monetary expenditures by program elements are set forth in Table 5. Table 5 shows that the research program will be reduced by 9.1 man- years and $220,328 in the budget year. The department advises that 2.5 of the man-year reduction and $26,532 of the cost reduction reflects an effort by it to reduce administrative costs. The remainder of the ,staff and cost reductions reflect the deletion of 6.6 positions which were administrative- ly added and supported by reimbursements in the current year. The $26,781 or 12.5-percent decrease in federal funds shown in Table 5 is a result of the expiration of a research project funded by the Law Enforce- ment Assistance Act. Table 5 Research Personnel Man-Years and Expenditure Data Increase Fiscal J’..ear in 1Q7~74 over 197Z-7J Program requirements 1971-72 197Z-7J 197~74 Amount Percent Infonnation Systems Personnel ………………………………………. 14.4 16.4 16.4 Expenditures …………………………………. $313,087 $376,655 $325,941 -$50,714 -13.5% Research and Evaluation ,Personnel …………… ; ………………………… 37.3 63.4 54.3 -9.1 -14.4 Expenditures ……. ; …………………………… $541,548 $960,955 $791,341 -$169,611 -17.7 Totals Personnel ………………………………………. 51.7 79.8 70.7 -9.1 -11.4 Expenditures …………………………………. $854,635 $1,337,610 $1,117,282 -$220,328 -16.5 Funding Sources General Fund …………………………………. $379,579 . $676,875 $650,343 -$26,532 -3.9 Federal funds …………………………………. $332,832 $214,321 $187,540 -$26,781 -12.5 Reimbursements ……………………………. $142,224 $446,414 $279,399 -$167,015 -37.4 IV. YOUTH AUTHORITY BOARD The Youth Authority Board, consisting of eight members, is the term- setting and paroling authority for wards committed to the department. It is charged with personally interviewing, evaluating and recommending a treatment program for each offender committed to the department. In 1973-74, the board will conduct approximately 37,000 case hearings in Youth Authority reception centers, institutions and parole offices. The board, which formerly was identified as an element of the administrative program, was designated as a separate program in the 1972-73 budget. The department advises that the board was given this change in status due to its separate and distinct decisionmaking r~sponsibilitiys within the Youth Authority organization. Table 6 shows staffing and expenditure data for the Youth Authority Board program. The requested increase of $2,812 is primarily due to price increases. As discussed earlier in the analysis, the Morrissey vs. Brewer decision 674\/ DEPARTMENT OF THE YOUTH AUTHORITY Items 285-292 DEPARTMENT OF THE YOUTH AUTHORITY-Continued will result in workload increases for the board which could necessitate additional staffing. However, the department believes it can adjust to new workload requirements within existing resources. Table 6 Youth Authority Board Support Data Fiscal year Program requirements 1971-72 1972-73 1973-74 Personnel man\”years ………………………… 16.1 16.9 16.9 Cost…………………………………………………….. $374,025 $465,841 $468,653 Funding Sources General Fund …………………………………. $374,025 465,841 468,653 V. ADMINISTRATION Increase in 1973-74 over 1972-73 Amount Percent $2,812 0.6% $2,812 0.6 The administration program, consisting of an executive and support services element, provides overall executive leadership, administrative direction, and other services necessary for the operation of the depart- ment’s programs as detailed in Table 7. The department advises that the 5.2 man-year reduction reflects an effort to reduce administrative costs, but the resulting savings are more than offset by increases in prices, staff benefits, workmen’s compensation costs, merit salary adjustments, and the proposed addition of an attorney and legal stenographer which were add- ed administratively in the current year to review Youth Authority Board case hearings, to review case-processing procedures with regard to due process, and to provide the department with the capacity to respond’ promptly and accurately to legal problems ~nd request for analysis of proposed legislation. Previously, the only source of legal advice concern- ing criminal and juvenile law for the department was the Attorney Gen- Table 7 Administration, Department of the Youth Authority Increase in 1973-74 over 1972-73 Program requirements 1971-72 1972-73 1973-74 Amount Percent Executive Personnel …………………………………… 14.8 11.4 11.4 Cost …………………………………………….. $185,226 $270,050 $275,887 $5,837 2.2% Support Services Personnel …………………………………… 104.3 131.2 126 -5.2. 4 Cost ……………………………………………. $2,482,084 $2,555,370 . $2,605,906 Total PersonneL …………………………………. 119.1 142.6 137.4 -5.2 -3.6 Cost ……………………………………………. $2,667,310 $2,825,420 $2,881,793 $56,373 0.2 Reimbursements ………………………….. $293,216 $462,110 $448,797 -$13,313 -2.9 Amounts charged to other programs for the consolidated data center ……………………………. $37,500 $81,605 $93,930 $12,325 15.1 General Fund …………….. ………………. $2,374,094 $2,363,310 $2,432,996 $69,686 2.9 Net Program Total ………………………. $2,629,810 $2,743,815 $2,787,863 $44,048 1.6 Items 293-294 CALIFORNIA HOSPITAL COMMISSION \/ 675 eral’s office, with some assistance on contractural matters being provided by the legal counsel of the Department of General Services. However, due to delays in receiving legal advice, nonlegal staff in the Youth Authority were required to make interpretations of various laws and rules affecting the department and its conduct. This is the first full-time legal position assigned to the Department of the Youth Authority. The budget-year cost of the attorney and the legal stenographer will be $32,510. CALIFORNIA HOSPITAL COMMISSION Items 293-294 from the Cali- fornia Hospital Commission Fund and the General Fund Budget p. 189 Program p. 1I-507 California Hospital Commission Fund…………………………………….. $886,000 General .. Fund………. ………………. ……………… ………. ……………………… …. 25,000 Requested 1973-74 ………………………………………………………………….. . Estimated 1972-73 ……………………………………………………………………. . Actual 1971-72 …………………………………………………………………………. . Requested increase $116,670 (14.7 percent) Total recommended reduction ………………………………………………. . Recommendation pending ………………………………………………………. . SUMMARY OF MAJOR ISSUES AND RECOMMENDATION 1. Uniform Accounting. Withhold recommendation of the $832,155 requested for the Uniform Hospital Accounting and Reporting program pending receipt of additional infor- mation. 2. Review of Exceptions. Delete $25\/XJO. Recommend dele- tion of request for -review of exception requests to federal price limitations. GENERAL PROGRAM STATEMENT $911,000 194,330 16,669 $25,000 $832,155 Analysis page 676 677 The California Hospital Commission was created by the California Hos- pital Disclosure Act, Chapter 1242, Statutes of 1971. The commission is responsible for the preparation of a uniform hospital accounting system and for the provision of other accounting services to improve the effi- ciency and effectiveness of hospital services. The act provides that the commission is to be supported through fees levied against all hospitals, except federal hospitals, and deposited in the California Hospital Commis- sion Fund. Under Phase lIof the President’s Economic Stablization Program com- mencing November 15, 1971, wage-price stabilization guidelines were es- tablished for the health services industry. Governors of each state were requested to appoint an agency to review and make recommendations on health care institutional requests for exceptions to federal price increase limitations. In January of 1972, the California Hospital Commission was designated as the state advisory board by the Governor. \\ 676 \/ CALIFORNIA HOSPITAL COMMISSION Items 293-294 CALIFORNIA HOSPITAL COMMISSION-Continued Therefore, the. California Hospital Commission is responsible for two programs: (1) uniform hospital accounting and reporting; and (2) review of exception requests to federal price increase limitations. ANALYSIS AND RECOMMENDATIONS The budget proposes appropriations of $886,000 from the California Hospital Commission Fund and $25,000 from the General Fund for the support of the California Hospital Commission during the 1973-74 fiscal year. The total amount of $911,000 budgeted is 14.7 percent or $116,670 above that which is estimated to be expended during the current fiscal year. Of the two programs administered by the commission, the Uniform Hospital Accounting and Reporting program is by far the largest, and was the basic purpose for establishing the commission in 1971. The second program, the review of exception requests to federal price increase limita- tions resulted from the federal government request to provide a service to the government at state cost. Table 1 shows the amount of support for each progra~ by source of funds. Table 1 Programs Administered by California Hospital Commission Program Source of funds 197~73 1. Uniform hospital accounting and reporting ……………………………….. Hospital Commission Fund 2. Review of exception requests to federal price limitations ………… Hospital Commission Fund General Fund Totals …………………………………………………………………………………………… . Uniform Hospital Accounting and Reporting Program $712,484 71,846 ~ 10,000 $794,330 1973-74 $832,155 53,845 25,000 $911,000 We withhold recommendation of the $832,155 requested for the Uni- form Hospital Accounting and Reporting program pending receipt of additional information. The basic objective of the California Hospital Commission is to develop and administer the implementation of regulations requiring a uniform system of accounting and financial and statistical reporting for all of the hospitals in California. The budget states that the commission has solicited proposed accounting systems from interested agencies which it will re- view. It will then adopt a system, establish rules and regulations which will require all hospitals to install the adopted system within 15 months after the promulgation of these rules and regulations. The commission members were appointed late in the 1971-72 fiscal year. The executive director was hired in August 1972 and a total of 14 positions were administratively established during the current year. The commission will also explore possible cost effective methods or changes which the hospitals can adopt to allow for lower operating costs and sav- ings during the budget year. If these occur, the commission will also assist in monitoring the pass-on of these to the general public. The revenue which supports the Uniform Accounting and Reporting Items 293-294 CALIFORNIA HOSPITAL COMMISSION \/ 677 program ofthe commission comes from a fee charged each hospital in the state, equal to 0.02 of 1 percent of the hospital’s gross operating cost for the provision of health care services for its last fiscal year. Thus, the activities of this program are supposed to be self-supporting, which they are for the 1973-74 fiscal year. However, a review of the \”fund condition\” of the California Hospital Commission Fund on page 509 of the program budget shows that the commission has been expending funds during the current and proposed year at a rate in excess of the revenues received. The fund and revenue source were just established in 1971. It maybe that the commission has initial one-time expenses that will not recur after 1973-74 but it is not possible to determine if that is the case since the program budget gives no indication. We cannot recommend approval of the budget of a\u00b7 relatively new special fund agency which appears to be operating in a deficit condition until additional information is supplied. Review of Exception Requests to Federal Price Limitations We recommend the disapproval of Item 294 which proposes .an appro- priation of $25,000 from the General Fund and Item 295 which proposes a deficiency appropriation of $10,000 from the General Fund for the cur- rent fiscal year. Since being designated by the Governor as the state advisory board to the FederalPrice Commission, the state commission is required to make recommendations to the federal commission on all requests from hospitals and nursing homes for exceptions to federal price limitations. The com- mission estimates that 350 requests will be reviewed during the current year and that 500 requests will be reviewed during the budget year. Exception requests from nursing homes will be approximately 12.5 per- cent and 32 percent respectively of the total requests received for each year. Hospital-assessed funds are being used to review exception requests of hospitals. However, the commission and the Department of Finance do nQtbelieve that the hospital-assessed funds should be llsed in the review of exception requests from nursing homes because\u00b7 nursing homes do not support those funds. Therefore, they have requested General Fund sup- port for those costs related to requests coming from nursing homes. A summary of the budget requests for this program is shown in Table 2. Table 2 Review of Exception Requests Source of funds 1972-73 1973-74 General Fund ………………………………………………………………………………………. $10,000 $25,000 California Hospital Commission Fund……………………………………………….. 71,846 53,845 Total …………………………………………………………………………………………………. $81,846 $78,845 The $lO,ooo included in the current year estimate represents a deficien- cy and therefore the total General Fund request of $35,000 would have to be appropriated for the budget year. We agree that the hospital funds should not be used to support excep- tion requests of nursing homes but we also do not feel the State General 678 \/ EDUCATION Item 295 CALIFORNIA HOSPITAL COMMISSION-Continued Fund should support the req1,lests. It is solely in the interest of the individ- ual nursing homes to be granted an exception to the Federal Price Com- mission ceilings. If they have a\u00b7 case they should provide a system of self-assessment to fund the research necessary to prove their case to the federal government. The request from the Federal Price Commission asked the Governor of each state to volunteer to appoint a state advisory board stating that, unfortunately, no federal supporting funds were pres- ently available. We question the state interest at a General Fund cost of $35,000. CALIFORNIA HOSPITAL COMMISSION Item 295 from the General Fund Budget p. 189 Program p. II-507 Estimated 1972-73 (proposed deficiency appropriation) …….. .. Total recommended reduction ………………………………………………. . SUMMARY OF MAJOR ISSUES AND RECOMMENDATION 1. Deficiency Appropriation. Delete $10,000. Recommend deletion of proposed deficiency appropriation for review of exception requests to federal price limitations. See discussion tinder Items 293 and 294. EDUCATION $10,000 $10,000 Analysis page 677 Page Summary of state expenditures for education ………….. …………………….. 678 State and local support to public schools ………….. …….. …….. ………….. …… 679 Summary of fed,eral aid to California schools …………………………………… 683 Department of Education…………………………………………………………………… 684 Budget Act items ……………………………………………………………………………. 684 Summary of major issues and recommendations ………… ……………….. 686 General program statement… ………. ………………….. …….. ………….. ………… 687 Program No. I-Instruction ……………………………………………………………. 694 Program No. II-Instructional Support.. ………………………………………… 723 Program No. III-School Administration Support ………………………… 729 Program No. IV-School Finance and State Aid ………………………….. 732 Program No. V-Library Services …………………………………………………. 737 Program No. VI-Departmental Management and Special Services 741 SUMMARY OF STATE EXPENDITURES FOR EDUCATION California’s system of public education is composed of elementary, secondary and unified school districts; the community colleges; the California State University and Colleges; the University of California; the California Maritime Academy; and . the state-operated schools for handicapped children. Support for education is derived from a variety of sources, including the State School Fund, local property taxes, State General Fund appropriations, and programs of federal aid. ”

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1975-1976 AFDC Budget Analysis.pdf

” 536 \/ HEALTH AND WELFARE General Summary DEPARTMENT OF BENEFIT PAYMENTS GENERAL SUMMARY. Funds for the Department of Benefit Payments are contained in five iterris and one control section of the 1975-76 Budget Bill. In the budget year the department is requesting a total of $1,153,104,105 from the Gen- eral Fund,\u00b7 an increase of $185 million over the amount anticipated to be expended in 1974-75. Table l.compares the current year and the budget year by budget item, indicating where the increases are occurring. Table 1 Department of Benefit Payments’ General Fund Requests for 1975-76 1974-75 \\ Budget estimated 1975-76 Per- BiD General Fund ~ General Dollar centage Item Purpose of Expenditure expenditures Fund’request increase increase 2JJ7 Departmental operations …. $13,909,149 $13,848,688 -$60,481 -.4% 288 Aged, blind and disabled cash grants ……………. , ……… 474,088,500 568,861,100 94,772,600 20.0 Section 32.5 AFDC cash grants \” ………… 429,234,950 513,857,400 84,622,450 19.7 289 Sped~ ,benefits to adult reCIpients ………………………. 2,346,000 4,441,500 2,095,500 89.3 290 Demonstration projects and training.\” ………………… 191,937 191,937 None None 291 County welfare depart- ment operations ……………. 48,4&5,700 51,903,500 3,417,600 7.0 $968,256,236 $1,153,104,105 $184,847,869 +19.1% In terms of all federal, state and county funds the Department of Benefit Payments will be directly and indirectly involved in the expenditure of an anticipated $3,118,309,186 in fiscal year 1975-76. This represents an in- crease of $389 million over the current year estimates. Table 2 compares the expenditure estimates for the current year and 1975-76. Table 2 Department of Benefit Payments- Total Welfare Expenditures, All Funds Budget Estimated 1975-76 Per- Bill Total 1974-75 estimated Do\/Jar cell\/age Item Purpose of Expenditure expenditures expenditures increase increase 2JJ7 Departmental operations $47,690,096 $47,499,652 -$190,444 .4% 2iJ8 Aged, blind and disabled cash grants ……………….. \” 1,200,798,700 1,352,115,000 151,319,300 12.6 Section 32.5 AFDC cash grants ………… 1,249,213,607 1,469,025,300 219,811,693 17.6 2JJ9, Special benefits to adult recipients ………….. 2,346,000 4,441,500 2,095,500 89.3 290 Demonstratioo,projects, training, Cuban refugees ……………………… , 11,077,443 11,246,534 169,091 1.5 291 County welfare depart- ment operations ………… 218,505,900 233,981,200 15,475,300 7.1 $2,729,631.746 $3,118,309,186 $388,677,440 14.2% Item 287 HEALTH AND WELFARE \/ 537 Health and Welfare Agency DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET Item 287 from the General Fund Budget p. 764 Requested 1975-76 ………………………………………………………………. . Estimated 1974-75 ………………………………………………………………… . Actual 1973-74 ……………………………………………………………………… . $13,848,668 13,909,149 9,701,906 . Requested decrease $60,481 (0.4 percent) Total recommended reduction …………………………………………… . SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Employment Tax Program. Withhold recommendation on 173.5 requested new positions for the -Employment Tax Collection Program until the Departments of Benefit Pay- ments and Finance indicate how and where the positions are to be utilized. 2. Fund Transfer. Recommend (1) schedule for Item 287 identify $1,649,539 for transfer to Health Care Deposit Fund and $3,112,339 as payable from Health Care Deposit Fund for the cost of services rendered the Medi-Cal Pro- gram by the Department of Benefit Payments; and (2) language’ be added specifying that $1,649,539 be trans- ferred to Health Care Deposit Fund to match federal funds. 3. Proposed Health Operations Positions. Withhold recom- mendation on proposed 28 new positions for Health Audits Bureau because no funds are budgeted. 4. Control Section 32.5. Withhold recommendation on Gen- eral Fund amount for control Section 32.5 pending review of department’s May estimates of caseload and cost. 5. Unemployment. Recommend department initiate project to determine interrelationship between unemployment and AFDC-U caseload. 6. Error Rate. Recommend department prepare estimates of effect the federal government’s quality control program will have on cash flow. 7. Details of Operating Expense and Equipment. Recom- mend Legislature withhold approval of the department’s Operating Expenses and Equipment Budget, Item 287 (b). 8. Responsible ReJatives. Rei\/uce $34,700. Recommend ap- provalof 33 Office Services Bureau positions requested and reduction of two of the proposed six Responsible Relative Bureau positions. 9. Responsible Relatives. Reduce $132,770. Recommend 19-87059 $167,470 AnaJysis page 541 542 542 543 545 546 547 548 548 538 \/ HEALTH AND WELFARE Item 287 DEPARTMI’NT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued $45,770 reduction in contract funds for investigations; a $70,000 reduction in funds for contract services from the Attorney General; and elimination of a vacant assistant operations security officer position at $17,000. 10. County EDP System. Recommend Legislature withhold 550 approval of $500,000 for development of the Model Modu- lar County EDP System pending a report by the depart- ment to the fiscal committees during budget hearings regarding more precise determination of plans and costs for developing the system. GENERAL PROGRAM STATEMENT The Department of Benefit Payments was created pursuant to Chapter 1212, Statutes of 1973, (AB 1950) and is the successor to the State Depart- ment of Social Welfare. The department’s three major areas ofresponsibil- ity are the administration of welfare, collection of payroll taxes, and auditing of certain. health care programs. ANALYSIS AND RECOMMENDATIONS The budget proposes an appropriation of $13,848,668 for the Depart- ment of Benefit Payments which is $60,481, or 0.4 percent, less than es- timated expenditures for the current fiscal year. In addition $6,079,004 in General Fund money is available to the department from Item 153, the support item for the Franchise Tax Board. These funds will be transferred to the Department of Benefit Payments for administration of the Employ- ment (withholding) Tax Operations. Table 1 shows total General Fund support by program function. Table 1 General Fund Expenditures for Operation of Department of Benefit Payments, (Including Reimbursements from Franchise Tax Board) Operations Employment Tax Operations (reim– bursement) ……………………………………. . Health Operations ………………… \”\” ………….. . Welrare Operations ………………………………. . Total …….. \”, ……….. : .. \”\”\”.,, ……………….. .. 1974-75 $6,079,004 2,817,827 11,091,322 $19,988,153 1975-76 $6,079,004 2,713,510 11,135,158 $19,927,672 Dol Jar change None $-104,317 43,836 $-60,481 Percent change None -3.7% 0.4 0.3% The Governor’s Budget anticipates that it will cost $47.5 million (all- funds) to operate the Department of Benefit Payments in fiscal year 1975-76. Table 2 shows the spread of operating costs among the three major programs of the department. It also shows the percentage of Gen- eral Fund money required of each of the three major programs. Table 3 shows that the cost per man-year of administrative staff varies substantially among the three major programs from a high of $24,724 in Welfare Operations to a low of $16,720 in Employment Tax Operations. The Governor’s Budget anticipates a two percent decline in the cost per Item 287 HEALTH AND WELFARE \/ 539 Table 2 Total Administrative Expenses-:….Oepartment of Benefit Payments with General Fund Sharing Ratios 1975-76 Operations Employment Tax …………………………. . Health \”\”\”‘\”,,”””””””””””””””’,””””’ Welfare ………………………………………… .. All funds $23,705,917 4,292,114 19,501,621 All Programs \”\”\”\”\”,,’,,\”\”\”\”\”\”\”\”\”\”\”‘\” $47,499,652 a Federal Funds Federal Funds and’ Dedicated Funds $17,626,913b 1,578,604′ 8,366,109′ $27,571,626 b Unemployment Insurance Fund and Disability Insurance Fund General Fund $6,079,004 2,713,510 11,135,512 $19,928,026 General Fund as percent of aJI funds 25,6% 63,2 57.! 41.9% man-year for Welfare Operations, a 3,7 percent increase for Employment Tax Operations and a 1.3 percent increase in Health Operations. Table 3 Department of Benefit Payments Cost per Administration Man\u00b7Year by Major Program 1974-75 1975-76 Operating Man\u00b7 Cost per Operahilg Man- Cos! per OpemtiollS costs years man-year 11 costs vears mlln:,’e’lr Employment Tax …. $23,105,917 1,381.9 $16,720 $23,705,917 i,364.8 $17,369 Health … \” …. \” ….. \” …… 4,402,294 238.0 18,497 4,292,114 228,0 18,742 Welfare …………… : …… 19,581,865 792.0 24,724 19,501,621 507,5 24,150 All Programs ………… $47,090,096 2,411,9 $19,524 $47,499,652 2,401.3 $19,780 a Cost per man-year includes salaries, benefits, rent, supplies. travel, equipment, communications, etc. Position Changes The Governor’s Budget requests the position changes summarized in Table 4. Table 4 1975-76 Governors Budget Position Change Reques~s Program J{;w-Yellrs Employment Tax Collection Operations ……………………………………………………………………………. + 173.5 Health operations … -;-……………………………………………………………………………………………………………. +28.0 Welfare operations a. Responsible Relative Program ……………………………………………………………. : …………………….. . h. Social Service estimates ……………………………………………………………………………………………. .. c. Civil Rights Program ………………………………………………………………………………………………… .. Positions Transferred Out Data Processing Positions to Department of Employment Development ……… .. Accounting positions to Department of Health ……………………………………………………………….. .. AUDITS AND COLLECTIONS Employment Tax Operations +39.0 +0.5 +2 +243.0 -19.0 -9.0 -28,0 Most employers in California must withhold payroll taxes for unemploy- ment insurance, disability insurance and personal income taxes. When these payroll taxes are withheld, they are sent to the Department of Benefit Payments Audits and Collections Division. The Audits and Collec- tions Division has two branches, the Central Operations Branch and the 540 \/ HEALTH AND WELFARE Item 287 DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued Field Operations Branch, which handle payroll tax collection, auditing and accounting functions. Central Operation Branch. This branch now collects payroll taxes from more than 482,000 employers. Tax collections in fiscal year 1975-76 are expected to total approximately $3.3 billion. Table 5 indicates the number of employers and anticipated collections by program in 1975-76. At the start of the current fiscal year the Central Operations Branch had 657.6 authorized positions. Table 5 Estimated Number of Subject Employers and Tax Collections 1975-76 Employers Unemployment insurance ……………………………. \”……………………………… 404,200 Disability insurance ……………………………………….. \”…………………………….. 498,350 Personal income tax …………….. ,,,…………………………………………………….. 429,700′ Tax revenues $877,000,000 444,770,000 2,022,000,000 $3,343,770,000 Within the Central Operations Branch there are four bureaus. The largest is the Tax and Insurance Accounting Bureau which has 546.6 of the branch’s 657.6 positions. This bureau has the following major responsibili- ties; the banking of tax revenues, the control of employer wage reports, the verification of tax submittals to assure accuracy, the maintenance of the employer registration files, the allocation of tax revenues to proper funds, the reconciliation of bank accounts, the maintenance of employee accounts and the computation of employee benefit entitlements in con- tested cases. The other large bureau in the Central Operations Branch is the Tax Audits and Collections Bureau which has 70 positions. The major respon- sibilities of this bureau are: the approval of refunds, the preparaton of bankruptcy claims, the processing of tax appeals and preparation for ap- peals hearings, handling air out of state employers’ accounts. The remaining two bureaus are’ the Technical Services Bureau (26 posi- tions) which provides policy interpretation, program expertise and pro- gram evaluation for the payroll tax program and the Classified School Employees Trust Fund Bureau (13 positions) which handles the collection of taxes from school districts in order to cover the cost of unemployment insurance benefits paid out to school district employees. Field Operations Branch. The Field Operations Branch is the second of the two branches in the Audits and Collections Division which handles payroll tax matters. It has 37 field offices with 520 positions, an average of 14 positions per field office. The major functions of a field office are to register new employers, audit employers’ books, collect delinquent taxes, determine the amount of wages actually paid to an employee in cases where the unemployment insurance benefit is contested and obtain wage reports from employers who have not submitted them. . ———————— Item 287 _ HEALTH AND WELFARE \/ 541 Employment Tax Program We withhold recommendation on 173.5 requested new positions for t\/le employment tax collection program until the Department of Benefit Pay- ments and the Department of Finance indicate how and where the posi- tions are to be utilized. i In a letter dated December 4, 1974, the Department of Finance ap- proved funds for 173.5 additional positions for the employment tax pro\u00b7 gram for fiscal year 1974-75. The budget proposes the continuation of the P9sitions which are fully federally funded, at the same level of funding, $3,388,699. The funds are to come from the Employment Development Department. Many of the position classifications and bureaus which appear on pages’ 770 and 771 of the Governor’s Budget will not actually be used. The department simply classified and allocated the positions as shown when it learned it would have extra federal funds available for this fiscal year. The department is now in the process of deciding the proper classification and location for these positions for the current and budget years. Ultimate General Fund Impact. In addition to federally funded tax collections and audits, the Audits and Collections Division collects and audits employers’ payroll withholding of state personal income taxes. Ap- proximately 25 percent of the division’s activities are -General Fund sup- ported. Any major addition of personnel in this. division has an ultimate impact upon General Fund costs. We have not been able to analyze the need for the additional 173.5 positions because the Departments of Benefit Payments and Finance have not\u00b7indicated where the positions will be established. Until we know this, we cannot determine what work is to be done by these positions or whether it is of sufficient priority to justify additional positions. Secondly, we do not know how the department plans to divide the additional staff between permanent and intermittent positions. Health Operations The Department of Benefit Payments operates a program to audit cer- tain providers of health care, handle health audit appeals and recover funds from insurance companies and other third parties who have an obligation to pay all or part of Medi-Cal recipients’ bills. Staff for this program has been located in the Department of Benefit Payments’ Audits and Collections Division since July 1, 1974, the effective date of Chapter 1212, Statutes of 1973 (AB 1950). The Health Operations Program has 238 positions in fiscal year 1974-75. Table 6 indicates the spread of positions among the various bureaus. Table 6 Health Operations Program Currently Authorized Positions L Chief of Health Operations ………………. ,,, ….. , …………………………… ,, …………………………………. ,………. 2 2. Health Audits Bureau …. \”………………………………………………………………………………………………………. 97 3. Health Recovery Bureau …………………………………… \”……………………………………………………………….. 72 4. Health Appeals Bureau………………………………………………………………………………………………………….. 10 5. Support Staff located in other bureaus…………………………………………………………………………………. 57 238 542 \/ HEALTH AND WELFARE Item 287 DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued The Governor’s Budget shows a drop in man-years for this program from 238 in 1974-75 to 229 in 1975-76. This decline is due to the transfer back to the Department of Health of nine accounting bureau support positions. The 229 positions for 1975-76 do not include the 28 proposed new positions. . To stay within the Governor’s Budget, the program’s 1975-76 vacancy rate will be higher than the assumed vacancy rate for 1974-75. The Gover- nor’s Budget indicates that the number of audits performed by the Health Audits Bureau will increase from 656 in 1974-75 to 837 in 1975-76. This is without consideration of proposed new\u00b7 positions. The Governor’s Budget also indicates that recoveries from third parties liable for certain medical expenses which were provided to Medi-Cal recipients will increase from $6 million to $15 million (250 percent). This increase is due to computeri- zation of some portionS-of the recovery program. Proposed Health Operations Positions We withhold recommendation on the 28 proposed positions for the Health Audits Bureau because there are no funds budgeted for them. The Governor’s Budget proposes to add 28 new positions to the Health Audits Bureau in fiscal year 1975–76. According to the department, the 28 proposed new positions are to be used to perform the kinds of audits indicated in Table 7. Table 7 Spread of Proposed New Health Audits Bureau Positions by Kind of Audit and with Cost\/Benefit Ratios Numherof Kind of :wdit Community and county hospital audits …………………… . new positions 16 Medically indigent care at county hospitals ………………. \” ………….. . 1 Prepaid health plan audits a ……………………………………………………… . 10 Waiver audits ……… \” ………………………………………………… : ………………. .. 1 28 a These audits are to be done for purposes of monitoring PHP’s. Cost\/Benefit Ratio Cost of Recovery $6.40 5.00′ Unknown Unknown recovery $1.00 1.00 The department indicates that the 1975-76 cost of the 28 new positions would be $655,046, of which $308,046 is General Fund money. We withhold recommendation on the 28 proposed positions because we hilve been informed by the Department of Finance that although the positions are proposed, the funds for the positions have not been included in the budget. We have not been able to determine how the positions are to be funded. We will present additional comments dnd recommendations at the budget hearings. Fund Transfer We recommend (j) the schedule for Item 287 identify $1,649,539 for transfer to the Health Care Deposit Fund and $3,112,339 as the amount payable from the Health Care Deposit Fund for the cost of services ren- dereo the Medi-Cal Program by the Department of Benefit Payments; Item 287 HEALTH AND WELFARE \/ 543 and (2) language be added to Item 287 specifying that the $1,649,539 be transferred by the Controller to the Health Care Deposit Fund to match federal funds for support of the Department of Benefit Payments. The Governor’s Budget estimates that the Health Operations program will cost $4,402,294 in 1974:-75 and $4,292,114 in 1975-76. The Health Oper- ations program consists of audit and recovery functions related to the Medi-Cal program and various other programs in which the state sub- venes funds to the counties. Such programs are the Crippled Children’s Services, family planning and Short-Doyle. Of the above amounts, approx- imately $3,162,946 in the current year and $3,112,339 in the budget year represent the cost of administrative services rendered the Medi-Cal pro- gram by the Department of Benefit Payments. The General Fund share of these amounts is $1,676,361 and $1,649,539 for the current and budget years. The General Fund share is supposed to be sent to’ the Health Care Deposit Fund where it is matched with federal funds and returned to the department as the $3.1 million figure. As of mid-January, none of the $1,676,361 General Fund money budget- ed for the current year had been transferred to the Health Care Deposit Fund to be matched with federal money and returned to the department. The department advises us that some of the $1.6 million allocated for transfer has been expended. The department is attempting to determine if matching funds can still be obtained through some other method. WELFARE PROGRAM OPERATIONS Cash Grant Programs The budget does not have an appropriation item for the Aid to Families with Dependent Children (AFDC) and Aid to Potential Self-Supporting Blind (APSB) programs. The Welfare and Institutions Code provides that state funds necessary for these programs shall be continuously appropriat- ed. Control Section 32.5 of the Budget Bill provides for a limit on the funds available. However, the section provides that the Director of Finance may approve expenditures for increased caseload or cost in addition to the amount stated in the section. Because there is no specific budget item for the AFDC and APSB programs we will discuss them in this portion of the departmental budget. Control Se~tion 32.5 We withhold recommendation on the appropriate General Fund amount for Control Section 32.5 pending receipt and review of the depart- ment’s May estimates of caseload and cost. . Table 8 presents the funds requested by program for Section 32.5. It also shows the dollar and percentage increase in the budget year. The amounts requested as shown in Table 8 are based on estimates prepared by the Department of Benefit Payments in November. In April and May the department will prepare updated estimates based on more caseload and cost experience. Upon completion of these updated esti- mates the Department of Finance will submit a budget letter changing 544 \/ HEALTH AND WELFARE Item 287 DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued Table 8 Comparison of General Fund Support for Aid to Families With Dependent Children (AFDC) and Aid to Potential Self-supporting Blind (APSD) in Current and Budget Year Current Budget Dollar Percent Ye.1I Year increase increase Aid to Families With Dependent Children (AFDC) Family Group (FG) …………………… $352,601,300 $402,765,500 $50,164,200 14.2% Unemployed (U) ………………………… 46,876,000 76,624,800 29,748,800 63.5 Foster Care (BHI) .. \”, ……………….. , 29,311,950 33,990,900 4,678,950 16.0 Aid to Potential Self-supporting Blind ……. ; …………………………………. 445,700 476,200 30,500 6.8 Total………………………………………… $429,234,950 $513,857,400 $84,622,450 19.7% the General Fund request for Control Section 32.5. It should be noted that in effect Control Section 32.5 is an open-ended appropriation. Regardless of the amount of money placed in Control Section 32.5, the state is re- quired by law to pay its share of AFDC grants. The Governor’s Budget indicates that the $84,622,450 requested Gen- eral Fund increase results’from two factors: changes in caseload and a 14.5 percent cost-of-living adjustment. Table 9 shows these changes by pro- gram according to information contained in the Governor’s Budget. We discuss these two factors under the headings A. Caseload Changes, and B. Grant Increases. Table 9 Factors Accounting for 1975-76 General Fund Increase Program Cause of Increase or Decrease General Fund Cost AFDC-Family Group ……………… :…………… a) caseload decrease $-4,800,000 b) cost-of-living adjustment 54,900,000 AFDC-Unemployed ……. ,., … \” …………. , …… ,.. a) caseload increase 22,700,000 b) cost-of-living adjushnent 7,100,000 AFDC-Foster Care …………. \” ….. \” ….. \” …. \”\”… a) caseload increase 4,700,000 b) cost-of-living adjustment $84,800,000 A. Caseload Changes Table 10 presents the caseload data used to arrive at the dollar amounts shown in the Governor’s Budget. Table 10 1975-76 Governor’s Budget Ch,ange in Average Monthly Caseload Estimllted EstimMed 1974-75 1975-76 llt’erage monthly 1lt’erage month~v persons count persons count AFDC-Family Group …………………. 1,177,212 1,175,193 AFDC-Unemployed …………………… 149,863 209,759 AFDC-Foster Care …………………….. 31,094 32,152 APSB ……………… ,…………………………….. 175 175 Change from current yel1r -2,019 50,896 1,058 None Percentage change from current yellr -0,2% 40% 3.3% None Item 287 HEALTH AND WELFARE \/ 545 Projected Cost Increase in AFDC-U Programs. The major AFDC case- load change projected in the Governor’s Budget is in the AFDC’Unem- ployed program. In December, the Department of Benefit Payments Estimates, as released to the Department of Finance, projected that the AFDC-U caseload would increase by only 7,200 persons in 1975-76 over the average monthly caseload of the current year. However’, the Gover- nor’s Budget as submitted in January increased this caseload estimate by over 50,000 persons in the belief that the 1975-76 unemployment rate in California would be sufficiently high to cause a sharp increase in the number of families needing public assistance. The AFDC-U caseload increases shown in the Governor’s Budget may prove to be somewhat conservative based on the experience of the AFDC- U caseload in the 1970-71 recession. However, the effect of adxerse eco- nomic conditions on AFDC-U caseload in 1975-76 should be easier to forecast near the end of the current fiscal year when the department’s revised estimates are due. At present the various estimates of 1975-76 AFDC-U caseload are highly speculative and should be’ so regarded. Unemployment We recommend that the Department of Benefit Payments initiate a study to determine the interrelationship between general economic con- . ditions, unemployment and the growth and decline in the AF!)C-U case- load. During the 1970-71 recession the Department of Benefit Payments did not gather data about the characteristics of the AFDC-U caseload which would allow it to forecast what would happen to this caseload in the event another recession took place. California, along with the rest of the nation, is in a recessionary period, and little data are available with which to project its influence on the AFDC-U caseload. We believe that it is appro- priate for the department to devote the reSOurces necessary, in the re- mainder of this fiscal year and in 1975-76, to examine the relationships between the AFDC-U caseload and unemployment rates and general economic conditions. Projected AFDC-FG Decrease. The budget projects a small increase in the number of families receiving family group benefits. However, this growth is more than offset by a reduction in the number of children per family. The budget anticipates that this \”person\” reduction will result in budget year caseload expenditures being $4.8 million less than current year expenditures. AFDC-FG (Family Group) grants will be’ adjusted on July 1, 1975 for a cost-of-living increase, at a General Fund cost of $54.9 million. The net expenditure increase in 1975-76 from the General Fund is projected to be $50.1 million. Although the effect of unemployment is not as great on the AFDC- Family Group program as it is on AFDC-U, there is some impact On the FG caseload when economic conditions are ‘on a downturn. Therefore, while we agree with the budget assumption that families will continue to be slightly smaller during the coming fiscal year, it appears doubtful that there will be a reduction in the number of persons receiving assistance. Wishful Thinking. The budget projects an average FG caseload of 546 \/ HEALTH AND WELFARE Item 287 DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued 1,175,193 persons in the 1975-76 fiscal year. In November 1974, the numb~r 6f persons on the caseload was 1,189,346. We share the administration’s hope that the number of persons on the FG caseload will decrease, but it is difficult to view this as other than wishful thinking, considering the economic condition of both the nation and California. B. Grant Increases AFDC-Family Group and Unemployed grant entitlements are au- tomatically adjusted each year by the state to take into account changes in the cost-of-living which occurred in the prior year. Increases in grant entitlements resulting from cost-of-living adjustments are payable to the recipient on July 1 of each year. Foster care grants are adjusted by county boards of supervisors without regard to the Consumer Price Index. The dollar totals shown in the Governor’s Budget for the AFDC-FG and U . Programs assume that the Consumer Price Index will rise by 14.5 percent in the 12-month base period used for calculating such adjustments. Table 11 shows the average monthly grants and dollar increases used to arrive at the cost-of-living amounts requested in the Governor’s Budget. Table 11 1975-76 Governor’s Budget Average Monthly Grant 1975-76 81’erage monthly grant ‘per Progmm person AFDC-Family Group.. …………………………………………… $82.33 AFDe-Unemployed ………………………………………………………….. 75.65 AFDC-Foster Care ……………………. , ……………………… \”…………. 303.54 APSB…………………………………………………………………………………….. 226.76 Effect of the Error Rate Program on the General Fund EstiJl1<1ted Percentage increase increase over from current current year year $10.58 14.7% 10.88 16.8 29.89 lO.9 14.62 6.9 We recommend that the Department of Benefit Payments prepare estimates of the eFFect the Federal government's quality control program will have on the state's cash-flow situation and upon Federal, state and county cost sharing ratios in 1974-75 and 1975-76. The federal Department of Health, Education, and Welfare (HEW) has initiated a major quality control program whiCh is intended to reduce state and county errors in the administration of welfare. Under the program, by June 30,1975, not more than five percent of the children's (AFDC) cases can be given welfare checks in excess of the amount they are legally entitled to receive and not more than three percent of the cases can be mistakenly classified as eligible and thus paid welfare grants to which they are not entitled. Neither the departmerit's December estimates nor the Governor's Budget have attempted to estimate the effect the federal quality control program will have on the state General Fund in 1974-75 or 1975-76 ... Federal reductions in AFDC fund advancements because of the quality control program, have caused California to experience cash-flow prob- Item 287 HEALTH AND WELFARE \/ 547 lems. The state is likely to experience even greater problems in' the re- mainder of the current fiscal year. The combined effect of federal reduc- tions in fund advancements and potential federal claim cuts for grants paid could result in an overall reduction of the federal share and an increase in the state and county share of AFDC grant costs. The department should inform the Legislature how it has handled past cash flow problems, how it intends to handle any future problems and how the management of such problems will affect the counties. In addition, the fiscal committees of the Legislature should be told how much additional General Fund money will be required in 1974-75 and 1975-76 in the event the state does not fully meet its error control goals. Civil Rights Coordinator A civil rights coordinator and one clerical position were administrative- ly established during the current fiscal year and are proposed as new positions for the budget year. We believe they are justified. The coordina- J tor is the technical staff person responsible for knowing what the 58 county welfare departments are doing to comply with Title VI and VII of the U. S. Civil Rights Act both in terms of fair employment practices and equal access to services. He collects and evaluates ethnic data, works with coun- ties to develop better bilingual service delivery capabilities, evaluates county welfare department affirmative action plans and performs other tasks related to the civil rights program. ADMINISTRATION DIVISION We are in agreement with the return of 19 data processing positions to the Department oFEmployment Development and 9 accounting positions to .the Department of Health. These positions were transferred from the Departments of Health and Employment Development when the Department of Benefit Payments was created. However, \"they have remained vacant and the Department of Benefit Payments has contracted for these services from the other departments during this fiscal year.' The department wishes to I continue to obtain data processing services for the Employment Tax Program through contract with the Department of Employment Development in 1975-76. Thus, the funds for this purpose will stay in the Department of Benefit Payments although the positions will transfer back. In the case of the health accounting functions, the funds and the positions will return to the Department of Health because the entire responsibility for this phase of the health program is to be returned. . Details of Operating Expenses and Equipment We recommend the Legislature withhold approval of the Department of Benefit Payments Operating Expenses and Equipment Budget, Item 287 (b) of the Budget Bill. , We have asked the department to answer a -detailed list of questions about what is included in the Operating Expenses and Equipment (OE&E) budget and how these figures were derived. We do' not believe that the OE&E budget for the Employment Tax Operations was built on enough actual experience, partially because of a number of delays in 548 \/ HEALTH AND WELFARE Item 287 DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued receiving cost accounting reports from the Employment Development Department's computers. We cannot recommend this item until the de- partment responds to our request for additional data. Responsible Relative Program We recommend approval of the 33 Office Services Bureau positions requested and reduction of two of the proposed SLY Responsible Relative Bureau positions for a General Fund reduction of $34,700. We recommend a $45,770 reduction in contract funds for investigations; a $70,000 reduction in funds for contract services from the Attorney Gen- eral; and the elimination of a vacant assistant operations security officer position at $17,000 for a total savings of $132,770. Chapter 1216, Statutes of 1973, (AB 134) made the state directly respon- sible for the administration of the Responsible Relative Program effective July 1, 1974. Prior to that time, the 58 county welfare departments adminis- tered this program which required children of aged welfare recipients to contribute money to help offset the cost of supporting their parents. In a letter dated December 3, 1974, the Department of Finance ap- proved funds which provided for the establishment of 39 positions for this program in the current fiscal year. Thirty-three of these positions will go to the Office Services Bureau and six to the Responsible Relatives Bureau. The Governor's Budget proposes to continue these positions in fiscal year 1975-76. Office ServIces Bureau. The Office Services Bureau handles all the banking functions associated with the program, responds to problems raised in letters regarding amount of liability owed and prepares the necessary forms so that required information can be entered into the computer system. We have reviewed the operation of the Office Services Bureau and conclude that the 33 positions added in the current year should be con- tinued in the budget year. The original program design placed too much emphasis on data processing and did not anticipate the manual functions which would have to be performed. As a result, the following workload is not being processed: l. Approximately one-half of the computerized billings for the 15,000 'relatives who now pay are for the wrong amount and need to be corrected. Correction is very slow due to inadequate staffing and the lack of an adequate filing system. 2. Approximately 12,000 responsible relatives who are billed each month do not pay. Nothing is being done about this. If extra staff is added these persons will receive warning letters from the Attorney General's office notifying them to comply. 3. Approximately 30,000 forms with names of relatives who may owe something are piled up in large stacks on the floor of the Business Services Bureau. These names need to be entered into the computer system so questionnaires can be sent out for liability determinations. 4. Approximately 36,000 relatives need to be asked to again submit information to determined if they are now liable for a payment.. I Item 287 HEALTH AND WELFARE \/ 549 5. Approximately 40,000 new recipients need to be asked for their chil- dren's names and addresses. Tlie Department of Benefit Payments estimates the additional staff would be able to resolve serious problems with existing caseload of 15,000 paying relatives, as well as get to various backlogs which would allow approximately 12,500 more payors to be added to the system. This would, it is estimated, increase revenues from the current $300,000 a month to $550,000 a month in 1975-76. If revenues develop as projected in 1975-76, then it would cost approximately $1 to collect $6 and the General Fund would realize approximately $4,920,000 in revenue. The Governor's Budget proposes that 33 clerical positions added to this bureau be continued in fiscal year 1975-76. Eighteen of the positions are to be permanent and the remaining 15 are to be intermitten~ and used as required to handle fluctuations in workload. Responsible Relatives Bureau. The Responsible Relatives Bureau processes complex liability determination problems, answers most Corre- spondence and is responsible for program reporting and continuing im- provement of the system. The December augmentation letter authorized up to six additional analyst positions for this bureau. We recommend the reduction of two of these pOSitions unless additional correspondence work- load materializes. We believe that the correspondence functions and ana- lytical functions ofthe bureau can be adequately handled by the addition of four analysts. Additional Fund Reductions We recommend the reduction pf $132,770 in additional funds from the Responsible Relative Program for the following reasons. First, the original plan to investigate certain nonpaying responsible relatives through con- tracted investigations, coordinated by the Operations Security Bureau, has not materialized. Thus, one assistant operations security officer position at a cost of $17,000 has remained vacant and $45,770 in investigative funds has not been used. Second, the program does not need the magnitude of service from the Attorney General's office that was originally budgeted. Therefore, we recommend the amount budgeted for these services be reduced from $120,000 to $50,000. The remaining $50,000 would be used in the event the Attorney General's services are required in 1975-76. The McGeorge Fair Hearings Contract The budget proposes $311,652 to contract with McGeorge Law School for part-time fair hearings officers. The department conducts administrative hearings to judge the fairness of decisions made by county welfare department personnel in handling welfare cases. Recipients of aid and applicants for aid. have the right to appeal decisions made involving their cases when they feel an errOr has been made which adversely affects their entitlements to assistance. When a request for a fair hearing is made, the department proceeds to schedule a hearing. Under the current operating procedure, the department both hires and contracts for attorneys to perform the hearings. Budgeting for fair hearings is on .the basis of hearing officer units. For each hearing officer, the following support staff is added: 550 I HEALTH AND WELFARE Item 287 DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued Hearing Officer Budget Unit Man-years Classification per unit Hearing officer ......................................... \" ............ : ................................. , ........................... , ......... ~............ 1.0 Review officer ..................... \" .................................................................... , ............................... \"................. 0.2 Social services consultant ........................................................................... ,,, ................................ ,,.......... 0.1 Senior clerk .......................... , .................. \"................................................................................................... 0.2 Steno II .......................................................................................................................................................... 0.2 Clerk II .......................................................................................................................................................... 1.4 3.1 In a letter dated November 15, 1974, the Department of Finance ap- proved funds to augment the McGeorge Fair Hearing contract for the current fiscal year and the budget proposes $311,652 for the continuation of the contract. The augmentation added the equivalent of six referee man-years to the four referee man-year equivalents originally in the McGeorge contract. The McGeorge workload fluctuates according to need. If McGeorge's services are not needed' then cases are not referred and consequently contract funds are not expended. There has been heavy use of the McGeorge contract this fiscal year because the King v. Martin decision required the department to dispose of fair he\u00b7arings cases within 90 days rather than the 124 days it previously took. This reduction in average process time requires heavier use of McGeorge staff and departmental support staff. Model .Modular County EDP System We recommend that the Legislature withhold approval of $500,000 con- tained in the Governor's Budget for the development of the Model Modu- lar County EDP System pending a report by the department to the fiscal committees during budget hearings regarding a more precise determina- tion of plans and costs for developing this system in the 1975-76 fiscal year. At present, California counties must report voluminous amounts of data to the state and the federal government. This reporting requirement has resulted in the independent development by the counties of a number, of individualized electronic data processing (EDP) systems. Although some \"counties have joined to share the cost\" and benefits of developing and maintaining certain common systems, there are no systems which are used \" statewide in such basic areas as eligibility determination, grant calculation or warrant writing . . The department states that county expenditures for welfare EDP have increased from $6 million in the 1970-71 fiscal year to $12.5\u00b7 million in 1973-74. It believes that this trend may be controlled if the counties would use a model system based in part on existing county systems. The depart- ment proposes to develop such a system and the $500,000 included in the Governor's Budget for the 1975-76 fiscal year is intended to permit initial development of the model system, including pilot implementation in three counties. An undetermined amount of funds is being expended in the current year on the model system effort, primarily through the County Item 287 HEALTH AND WELFARE \/ 551 EDP Systems Bureau of the department. County Participation Unlike the department's last attempt with regard to county \/ state EDP systems which was called the Expanded Data Reporting System (EDRS), the present effort apparently includes a high degree of county participa- tion. We were critical of the EDRS effort because it lacked such participa- tion, and believe that tne department's policy of local government\u00b7 inclusion is not only necessary but is a more logical approach. Fundamenta' Questions We are in basic agreement with the department that welfare informa- tion processing needs improvement and we support the department's goal to achieve a more effective and less costly information-processing pro- gram. However, we did raise in a December 10, 1974 letter to the Director of Benefit Payments certain fundamental issues regarding the model sys- tem program we felt should be addressed. These were (1) an approxima- tion of multi-year state costs, including maintenance operation once the system is implemented, (2) a cost\/benefit analysis, (3) the control over maintenance and modification of completed modules, (4) whether Or not counties will be required to use the system, and when and by what means, (5) the policy regarding tailoring standard modules to satisfy an individual county's request for modification, (6) provision to reassess the entire . project feasibility depending on how much original system design and computer programming must be done in order to develop the system and (7) a reassessment of the priority of resolving certain identified project tasks such as the question of central maintenance and controL The essence of the department's December 24, 1974 response to our letter is that a cost\/benefit analysis, and therefore multi-year costs, Can be developed only after a more precise definition of the proposed system is obtained. This will occur once a state\/county evaluation team has defined system modules and how they will be developed. It is estimated that this definition will be completed by May 1, 1975. Another Jactor affecting potential state cost is that of federal participa- tion. We understand that the department has been unsuccessful in obtain- ing maximum federal partiCipation and will therefore seek funding which could provide 50-50 sharing of the development cost. . Further, although the department addressed each of the considerations\u00b7 raised in our letter, we continue to be concerned that the state not invest funds in the development of a system which not all counties will actually use. Despite assurances from department staff that this will not occur, we believe that a strong indication of commitment is req'lired, such as a tentative timetable for county cutover to the model system which the counties can agree. 552 \/ HEALTH AND WELFARE Item 288 Health and Welfare Agency DEPARTMENT OF BENEFIT PAYMENTS-STATE SUPPLEMENTAL PROGRAM FOR AGED, BLIND AND DISABLED Item 288 from the General Fund Budget p. 271 Requested 1975-76 .......................................................................... $568,861,100 Estimated 1974-75............................................................................ 474,088,500 Actual 1973-7 4 ....................... .......................................................... 369,862,960 Requested increase $94,772,600 (20 percent) Total recommended reduction .................................................... Pending SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. May Caseload ,Estimates. Withhold recommendation on ap- propriate amount for Item 288 pending review of depart- ment's May caseload estimates. GENERAL PROGRAM STATEMENT \"Analysis page 552 On January 1, 1974, the federal Social Security Administration began the direct administration of cash grant assistance programs for California's aged, blind and disabled recipients. Prior to that time the 58 county wel- fare departments in the State of California were responsible for the pro'li- sion of cash grants to these recipients. The new program, commonly known as the Adult Program or the SSI\/SSP program, resulted primarily from the enactment of Public Law 92-603 (HR 1) and Chapter 1216, Statutes of 1973 (AB 134). As provided in the enabling legislation, the state forwards the funds appropriated in this'item to the federal government. ANALYSIS AND RECOMMENDATIONS We withhold recommendation olJ appropriate amount for Item 288 pending receipt and review of departments May caseload estimates. The budget proposes an appropriation of $568,861,100 as the state share of the cost of the adult aid program. This amount is $94,770,400, or 20 percent, more than is estimated to be expended during the current fiscal year. In April and May the department will prepare updated estimates based on recent caseload and cost experience. Upon completion of these updated estimates the Department of Finance will submit a budget letter changing the General Fund request for Item 288. Our offiCe- will review these updated estimates and recommend changes in dollar amounts where appropriate. It should be noted that Item 288 is an open-ended appropriation. Regardless of the amount of money placed in Item 288, the state is required to pay for its share of aged, blind and disabled grants. Table 1 shows the General Fund support being requested for 1975-76. I Item 288 HEALTH AND WELFARE \/ 553 Table 1 1975-76 Governor's Budget-General Fund Request for Cash Grant Assistance to Aged. Blind and Disabled 1975-76 Program Governor's Budget Aged (OAS) .................................................................................................................................. $274,97B,020 Blind (AB) .................................................................................................................................... 16,377,760 Disabled (ATD) .......................................................................................................................... 277,505,300 Total............................................................................................................................................ $568,661,100 The overall requested 20 percent increase in General Fund support for Item 288 is spread among the three programs shown in Table 2. Table 2 1975-76 Governor's Budget General Fund ,Grant Cost Increases by Program Program OAS .......................................................................................................... .. AB .............................................................................................................. .. ATD .......................................................................................................... .. Estiinated 1975-76 increase over 1974-75 $42,863,520 . 1,348,060 50,561,000 $94,772,600 Percentage increase over 1974-75 IB.47% B.99% 22.28% 20.0% . Table 3 indicates the average monthly grant.per person anticipated by the Governor's Budget. Table 3 1975-76 Governor's Budget Average Monthly Grant Per Persona 1974-75 Average monthly grant Program per person OAS ............................................................ $135.68 AB .............................................................. 203.14 ATD............................................................ 205.79 1975-76 Average monthly grant perperson $130.88 219.67 199.79 Change from 1974-75 average grant $-4.60 16.53 $-6.00 ' Percentage change -3.5% B.l % -2.9% a Excludes special circumstance and special benefits (average monthly grant equals total cash grants divided by caseload divided by 12 months) Table 4 shows the factors involved.in the requested $94,772,600 General Fund increase. Table 4 1975-76 Governor's Budget Growth Factors and Offset Savings Growth factors and offset savings A. Caseload growth ......... ; ............................................. \" ....................................................... \" .. B. Cost-of-living adjustment .................................................................................................... . Gross cost increases ... \" ............................................................................. \" .... ,\" ................... .. C. Anticipated offset savings .................................................................................................. .. 1975-76 Requested Increase .................................................................... \".,\", ........... \".,\"', .. 1975-76 General Fund $37,600,000 100,400,000 $138,000,000 (43~7,000) $94,772,600 554 \/ HEALTH AND WELFARE Item 288 DEPARTMENT OF BENEFIT PAYMENTS-STATE SUPPLEMENTAL PROGRAM FOR AGED. BLIND AND DISABLED-Continued The caseload estimates upon which the General Fund request is based are shown in Table 5. Table 5 197~76 Governor's Budget Average Monthly Adult Caseload 1975-76 average Estimated 1974-75 average monthly persons monthly increase from Program ...... count persons current count year Aged (OAS) .............................................. 315.736 350,203 '34,467 Blind (AB) .................................................. 12.850 12,850 None Disabled (ATD) ........................................ 265.398 320,424 55,026 593~84 683,477 89,493 Percentage increase over current year 10.9% None 20.7% 15.1 % The Governor's Budget'projects significant caseload growth in both the aged and disabled programs. These large caseload increases were not expected because the department's September estimates projected an average monthly 1974-75 caseload of only 576,614 persons. The caseload changes which came about between the department's September and December estimates added over 50,000 persons to the estimated adult caseload for 1975-76. This resulted primarily from the department's attempt to reconcile the various conflicting reports on case- load which it receives from the federal Social Security Administration. The Department of Finance subsequently added another 34,943 persons fol- lowing its review of caseload primarily because the latest information available indicates that the federal government is not going to be able to annually redetermine the eligibility of all adult recipients. This could mean that the caseload discontinuance rate will be' low and that conse- quently the growth rate of the caseload may not level off as quickly as anticipated by the department's December estimates. The Governor's Budget indicates that the caseload growth in the adult program will generate a General Fund cost of $37,600,000 in 1975-76. This includes approximately $13.9 million for the cost-of-living adjustment pay- able in 1975-76. The Size of the State Cost-ot-Living Adjustment The Governor's Budget states that $100,400,000 additional General Fund money will be required in 1975-76 in order to pay the cost-of-living adjust- ment due to aged, blind and disabled recipients. Under current law, the state must grant an automatic cost-of-living adjustment to recipients only on the state portion of the grant. The first state cost-of-living adjustment will be larger than subsequent years because it will be based upon changes in the Consumer Price Index which have taken place since July 1973. The department has chosen the month of December 1974 as the comparison month. This means that the first cost-of-living adjustment will cover 18 months of inflation, from July 1973 to December 1974. The estimated . change in the Consumer Price Index during this period is 17.5 percent. Item 289 HEALTH AND WELFARE \/ 555 Current law does not specify what month the department is to use in applying this first cost-of-living adjustment. Tnus, if any month after De- cember 1974 but prior to July 1975 is used, the amount of the cost-of-living adjustment would be higher than the amount budgeted. Federal Cost-of-Living Adjustment The federal cost-of-living adjustment is payable July 1, 1975 and is .es- timated to result in a 9.1 percent increase in the federal portion of the grant, increasing it from $146 a month to $159 a month for most recipients. However, state law does not allow this increase to be passed on to the recipient. For example, if an individual receives a grant of $235 a month composed of a federal portion of $146 and a state portion of $89 and the federal portion increases by $13, the gross entitlement of $235 is not in- creased. Only the interrelationship between federal and state share changes so that the federal portion becomes $159 and the state'portion $76. Under current law, the state cost-of-living increase is applied only to the state portion of the grant and not to the federal portion. The 17.5 percent increase in the Consumer Price Index for, the period of July 1973 to De- cember 1974 applies only to the state portion of the grant. In this case, the 17.5 percent increase on the $76 (after the federal cost-of-living increase) translates into a $13 cost-of-living adjustment and increases the $235 enti- tlement to $248. Health and Welfare Agency DEPARTMENT OF BENEFIT PAYMENTS-COST OF SPECIAL CIRCUMSTANCES AND SPECIAL BENEFITS Item 289 from the General Fund Budget p. 761 Requested 1975-76 ......................................................................... . Estimated 1974-75 ........................................................................... . Requested increase $2,095,500 (89.3 percent) Total recommended reduction .................................................. .. 1975-76 FUNDING BY ITEM AND SOURCE Item 289 (a) 289(b) Description Special Circumstances Special BeneRts Total Fund General General SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS Amount $2,682,200 1,759,300 $4,441,500 $4,441,500 2,346,000 . Pending Analysis page 556 556 ,Analysis page 1. May Caseload Estimates. Withhold recommendation pend- ing receipt and review of the department's May caseload estimates. 556 556 \/ HEALTH AND WELFARE DEPARTMENT OF BENEFIT PAYMENTS-COST OF SPECIAL CIRCUMSTANCES AND SPECIAL BENEFITS-Continued GENERAL PROGRAM STATEMENT Item 289 f Chapter 1216, Statutes ,Of 1973 (AB 134) established a special \"needs pre gram fer aged, blind and disabled welfare recipients: Under the pre- gram relatively few special need items are provided because mest have been averaged inte the basic grant, censistent with the federal flat-grant appreach. These centinuing special needs allewances which are available are paid entirely frem the state General Fund and administered by the\" ceunty welfare departments, net by the federal Secial Security Adminis- tratien. ANALYSIS AND RECOMMENDATIONS We withhold recommendation pending receipt and review of the May caseload estimates. The 1975-76 Budget Bill divides Item 289 inte twe parts: (a) Special circumstances ......................................................... . (b) Special benefits ............. : ....................................................... . o Special Circumstances:: Item 289{a) $2,682,200 $1,759,300 Sectien 12550 ,Of the Welfare and Institutiens Cede prevides fer a special circumstances pregram te be administered by the ceun ty welare depart- ments. This pre gram is te previde payments te aged, blind and disabled recipients te meet nenrecurring special needs which include: replace- ment ,Of essential heuseheld furniture and equipment ,Or clething when lest, damaged ,Or destreyed by a catastrephe; necessary meving expenses; required heusing repairs; and unmet shelter needs. The Department ,Of Benefit Payments has estimated that these special circumstance allew- ances, payable entirely with state General Fund meney, will cest $2,682,- 200 in fiscal year 1975-76, an increase ,Of $1,178,000 ever the current year. , It sheuld be neted that the 1974-75 budget centained $7,708,700 te cever the anticipated expenses ,Of Item 289(a). The ameunts budgeted fer this subitem in the 1974-75 budget were based en actual claims experience under the fermer pregram fer aged, blind and disabled. We believe twe facters acceunt fer the lew level ,Of expenditures. First, the regulatiens issued by the department are extremely restrictive, making it impessible fer many prospective recipients te qualify fer benefits. Secendly, the Se- cial Security Administratien has net referred all qualified persens te the ceunty welfare departments te file their claims. Special Benefits: Item 289(b) . Sectien 12152 ,Of the Welfare and Institutiens Cede provides that if an aged, blind ,Or disabled persen is ineligible fer a cash grant selely because he ,Owns a heme in excess ,Of $25,000, he shall be entitled te the relevant tetal benefit. It provides, further, that the state will bear the full cests ,Of payments and administratien ,Of this pregram. The Department ,Of Benefit Payments has estimated that this will cest the General Fund $1,279,300 in fiscal year 1975-76, an increase ,Of $437,500 ever the current year. Sectien 12352 ,Of the Welfare and Institutiens Cede prevides that aged, blind and disabled recipients whe have ne exempt inceme ,Of thier ,Own -------------------------- Item 290 HEALTH AND WELFARE \/ 557 to declare shall be able to declare up to $20 from the contributions made by their sons or daughters under the Responsible Relative Program as exempt income. This has the effect of increasing their spendable income by up to $20 a month. The Department of Benefit Payments estimates that\u00b7 they will receive $6.7 million in responsible relative conributions in 1975- 76 of which $480,000 will be used to pay the benefits provided by Section 12352. Health and Welfare Agency DEPARTMENT OF BENEFIT PAYMENTS SPECIAL PROGRAMS Item 290 from the General Fund Budget p. 763 Requested 1975-,-76 ........................................................................ .. Estimated 1974-75 .......................................................................... .. Actual 1973-7 4 ................................................................................. . Requested increase None T()tal recommended reduction ................................................... . 1975-76 FUNDING BY ITEM AND SOURCE Item 290 (a) 290 (b) 290 (c) Description County training Demonstration programs Cuban Refugees and repatriated Americans Fund General General Federal $191,937 191,937 95,073 Pending Amount $22,880 169,057 191,937 10,234,900 Analysis SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS page 1. Modular EDP System. Recommend Legislature withhold 558 approval of the requested $191,937 pending receipt of re- port on Model Modular EDP System. GENERAL PROGRAM STATEMENT Item 290 contains the appropriation for the 25 percent state matching share for state training of county welfare department personnel and 50 percent state matching share for demonstration projects operated at the county welfare department level. The item shows the amount of federal funds anticipated to be expended on the Cuban Refugee and Repatriated Americans program. Table 1 indicates the division of the requested G~\u00ad eral Fund money between training activities and demonstration projects. Item 290a 290b Table 1 County Training and Demonstration Projects, 1975-76 County training ................................................................................................. , ............... .. Demonstration projects .. , ................................................................................................ . TotaL .......................................................................................................................... . $22,880 169,057 $191,937 , 558 \/ HEALTH AND WELFARE DEPARTMENT OF BENEFIT PAYMENTS SPECIAL PROGRAMS-Continued ANALYSIS AND RECOMMENDATIONS Item 291 We recommend the Legislature withhold approval oFthe requested $191,937 pending receipt of the report on the Model Modular EDP Sys- tem:S developmental plans and costs for 1975-76. The Department of Benefit Payments is in the process of trying to develop a better electronic data processing (EDP) system for use by county welfare departments. (See page 550 of this Analysis.) There may or may not be a relationship between the use of demonstration project money and the development of the Model Modular EDP System. This will not be clear until April or May 1975 whe':l the department will be able to cost out the developmental phase of the Model EDP project. Health and Welfare Agency DEPARTMENT OF BENEFIT PAYMENTS- ADMINISTRATION OF COUNTY WELFARE DEPARTMENTS Item 291 from the General Fund Budget p. 763 Requested 1975-76 ......................................................................... . Estimated 1974-75 ........................................................................... . Actual 1973-74 ................................................................................. . $51,903,500 48,485,700 49,889,744 Requested increase $3,417,800 (7 percent) Total recommended reduction ................................................... . 1975-76 FUNDING BY ITEM AND SOURCE Item 291(0) 291 (b) 291(c) 291 (d) Description AFDC Administration APSB Administration SSP Adritinistration Food Stamp Administration Fund General General General General SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. May Caseload Estimates. Withhold recommendation on ap- propriate Gen,eral Fund dollar amount for Item 291 pending review of the department's May caseload estimates. Pending Amount $46,128,700 41,800 2,133,000 3.600,CMXl $51,903,500 Analysis page 559 2. Quarterly Report. Recommend Department of Benefit Pay- ments, Department of Finance and Legislative Analyst jOintly agree on format for a report containing statistical ' data and narrative analysis on operation of county welfare departments. 562 3. Control of County Expenditures. Recommend department outline its position on methods of controlling state expendi- 563 -- ----~-~~~~~~~- Item 291 HEALTH AND WELFARE \/ 559 tures for operation of county welfare departments. 4. Total Welfare Picture. Recommend all funds subvened to 564 counties for operation of county welfare department pro- grams be shown in one item of the Budget Bill and discussed under one section in the Governor's Budget. GENERAL PROGRAM STATEMENT Item 291 of the 1975-76 Budget Bill contains the General Fund appro- priation for the state's share of the costs which the 58 county welfare departments incur in administering the AFDCeligibility and grant deter- mination program, the food stamp eligibility and benefit determination program and the remainder of the aged, blind and disabled programs administered at the county level. Table 1 inaicates the funds requested by program for fiscal year 1975-76. Table 1 1975-76 Governor's Budget General Fund Request by Program 1975-76 AFDC administration ........................................................................................................ . APSB administration ................................................................................................................... .. General Fund Request $46,128,700 41,800 3,800,000 2,133,000 $51,903,500 Food stamp administration ......................................................................................................... . Adult program administration ........ , .......... , ..................................................................... : ......... . Total ........................................................................ : ............................................................... .. Table 2 indicates the state, federal and county sharing ratios anticipated by the Governor's Budget for the administration of these programs by the county welfare departments. Tabl.2 1975-76 Governor's Budget Administrative Cost Sharing Ratios and Total Cost Percentage Distribution Federal State County AFDC administration ...................................... .. 49.2% 25.4% 25.4% Food stamp aaministration ............................... . 50. % 7.2% 42.8% Adult program administration ......................... . 98.1 % 1.9% Total All Funds Item 291 ......................... . All Funds $181,764,700 50,000,000 2,216,500 $2:)3,981,200 The amount requested in Item 291 is based on estimates prepared by the Department of Benefit Payments in November and released in De- cember. In April and May the department will prepare updated estimates based On more cost experience. Upon completion of these updated esti- mates the Department of Finance will submit a budget letter changing the General Fund request for Item 291. At that time our office will review these updated estimates and recommend changes in dollar amounts where appropriate. ANALYSIS AND RECOMMENDATIONS We withhold recommendation on the appropriate General Fund amount for Item 291 pending receipt and review of the departments May caseload estimates. 560 \/ HEALTH AND WELFARE Item 291 DEPARTMENT OF BENEFIT PAYMENTS- ADMINISTRATION OF COUNTY WELFARE DEPARTMENTS-Continued The budget proposes an appropriation of $51,903,500 for the state's share of county administrative costs. This amount is $3,417,800, or 7 percent more than is estimated to be expended during the current fiscal year. We have been given very little data to support the request for funds for the operation of county welfare departments. We believe this is because the Department of Benefit Payments has very little budget justification information at this time. In recent years, growth of the county welfare departments in terms of the total number of employees and total costs has been substantial for the programs funded through Item 291. Table 3 shows that in the last eight fiscal years the number of county welfare department employees has increased 74 percent even though county welfare departments no longer administer the cash grant assist- ance programs for the aged, blind and disabled. Many county welfare department positions once associated with the adult cash grant program have been transferred to the following programs operated by the county welfare departments: Medically indigent and medically needy only eligibility determina- tions. Nonpublic assistance food stamp program eligibility determinations Homemaker program. AFDC Program (quality control and eligibility processing) . Table 3 Growth in Number of County Welfare Department Employees Public Welfare Personnel in Year Ending County Welfare June 30 ' Departments 1967 ... ,........................................................................................................................................ 19,981 1988............................................................................................................................................ 21,963 1969 .............. ; .............................................................................................. :.............................. 24,243 1970............................................................................................................................................ 28,521 1971.. .............................................................................................................................. :........... 31,268 1972 ........................................................................... :................................................................ 35,462 1973............................................................................................................................................ 36,582 1974 ................................................................................................. ,.......................................... 34,802 Table 4 shows that the. costs of administering AFDC and Food Stamp Table 4 Growth in AFDC and Food Stamp Cost AFDC Eligibility and Grant Fiscal Year 1971-72 .............................................................................................. .. 1972-73 .............................................................................................. .. 1973-74 .............................................................................................. .. 1974-75 estimated ................. , ..... \" ........................................ , ..... \" .. . 1975-76 estimated ........................................................................... . Detennination Program (aU funds) $108,382,908 121,241,084 147,087,374 170,032,500 181,764,700 Nonassistance Food St8(11P Eligibility and Food Stamp De- termination Program (all funds) $10,398,864 24,784,731 29,643,696 46,400,000 50,000,000 Item 291 HEALTH AND WELFARE \/ 561 Programs have been growing continually in recent years at the county welfare department level. Between fiscal years 1971-72 and 1975-76, it is estimated that AFDC administrative costs will have increased by 68 percent and food stamp administrative costs by 481 percent. In addition, the cost of the county welfare department's AFDC eligibility and grant determination program is growing rapidly. The department's September estimates projected a 1974-75 cost of $156,667,700. Three months later, the department's De- cember estimates projected a 1974-75 cost of $170,032,500. The depart- ment knows that costs are going up but it does not know why this is happening and whether or not it is justified. Table 5 illustrates that even though the AFDC caseload has been declin- ing, )\\FDC administrative costs have been increasing. Table 5 AFDC Administrative Cost Per Case AFDCyearly AFDC administrative AFDC average administrative cost monthly case . cost per Fiscal Year (in millions) count case 1971-72...................................................................... $108.4 476,157 $228 1972-73...................................................................... 121.2 460,357 263 1973-74...................................................................... 147.1 436,458 337 1974-75 estimated.................................................. 170.0 441,808 385 1975-76 estimated.................................................. 181.8 445,175 408 Administrative costs per case could be expected to increase from year to year to keep pace with inflation, unless some program improvement had been. introduced to reduce per case costs. Table 6 compares the growth rate of the Consumer Price Index with the growth rate of AFDC administrative costs per case. AFDC administrative costs per case have grown faster than inflation. However, in 1975-76 the increase in cost per case may be less than inflation if the departmental estimates are correct. TableS Growth in Consumer Price Index Compared to Growth in AFDC Administrative Cost Per Case Percentage increase in California CPI Fiscal Year 1972-73 ...... 0 0 .......................................................................................... .. 1973-74 ............................................................................................................. . 1974-75 ............................................................................................................. . 1975-76 ............................................................................................................. . from prior yearS 5.6% 10.4% ILl % 7.0% . a Compares the month of June in one year to month of June in following year. Percentage increase in AFCD cost per case from prior year 15.3% 28.1% 14.2% 5.9% The administrative costs for the Food Stamp Program relate only to services provided to nonpublic assistance families. Food stamp administra- tive costs for households receiving public assistance aTe charged principal- ly to AFDC. Table 7 contains the annual administrative cost per nonassisted households. This year, as last, we cami.ot account for the high per case cost of han- dling food stamp eligibility determinations and benefit entitlements. Nor can we account for the anticipated increased costs between 1973-74 and 1974-75. 562 \/ HEALTH AND WELFARE Item 291 DEPARTMENT OF BENEFIT PAYMENTS- ADMINISTRATION OF COUNTY WELFARE DEPARTMENTS-Continued Table 7 Food Stamp Administrative C9sts Per Case Nonpublic Annual administnllive assistance Nonpublic cost per non- food stamp assistance assistance Fiscal Year costs households household 1972-73 ........................................................................... $24,784,731 88,537 $280 1973-74 ....................................... :.................................. 29,643,696 108,913 $272 1974-75 .......................................................................... 46,400,000 138,700 $335 estimated 1975-76 .......................................................................... 50,000,000 139,400 $359 estimated Chapter 1216, Statutes of 1973, (AB 134) made the state responsible for all nonfederal food stamp administrative costs above the amount ($22,900,- 000) the counties were paying in calendar year 1973. The 1974-75 budget, as a result, contained a $12 million General Fund appropriation to cover anticipated state food stamp administrative cost. This was the first state fiscal involvement in the Food Stamp Program. Subsequent to the passage of the state budget, the federal government passed PL 93-347 which in- creased the federal share of food stamp administrative costs from approxi- mately 23 percent to 50 percent. The effect of the increased federal sharing in 1974-75 was to reduce anticipated state expenditures by $8.8 million to $3.3 million. The department anticipates that in fiscal year 1975-76, county costs will be $21,400,000 which is still $1.5 million short of the county expenditure limit of $22.9 million. Once the counties reach an expenditure level of $22.9 million limit any additional program growth will be paid for entirely by the state and federal governments. At that time, there will be little if any financial incentive for the counties to keep tight control over the growth of food stamp administration costs. Several coun- ties already have reached their 1973 expenditure limit. Quarterly Report We recommend that the Department of Benefit Payments, the Depart- ment of Finance and the Legislative Analysts Office jointly agree on the format for a report containing statistical data and narrative analysis re- garding the operation of county welfare departments. The report would be prepared by the Department of Benefit Payments on a quarterly basis. Due to the absence of basic data about the operation of county welfare departments and in light of escalating administrative cost, it is important that the state gather and analyze information which will allow the admin- istration and Legislature to make fiscal decisions and formulate policy regarding the operation of county welfare department administered pro- grams. The recommended report should contain the following kinds of infor- mation: (a) The total number of employees by program by county; (b) Caseloads and workload processed by program by county; (c) Workload output per position by program by county; (d) Cost per case by program by county; (e) Ratio of support staff to line staff by program by county; (f) Comparison of administrative overhead costs to line operating costs by program by county; (g) Ratios of first line supervisors to eligibility workers and social work- ers by program by county; and -------- Item 291 HEALTH AND WELFARE \/ 563 (h) Comparison of salary ranges for commonly used classifications by county. . Most of this information is currently available from quarterly adminis, trative claims submitted by counties. Control of County Expenditures . .. We recommend that the Department of Benefit Payments outline its posiUon during the budget hearings on methods of controlling state ex- penditures for the operation of county welfare departments. The Department of Benefit Payments should outline'to the Legislature what mechanisms it is interested in pursuing in fiscal year 1975-76 to control the growth of the administrative costs of programs operated by county welfare departments and what additional statutory authority it may need. Some alternatives that should be considered for controlling administrative costs are as follows: 1 Introduce state mandat~d maximum staffing ratios. a. Relating eligibility workers and social workers to caseload andlor workload b. Relating administrative and clerical positions to the numper of eligibility workers and social workers c. Relating first-line supervisorial staff to the number of eligibility workers and social workers 2. Change the various program's sharing ratios so that the counties will bear nearly the same percentage of administrative cost in each pro- gram, thus avoiding the incentive to add staff on the basis of which- ever program has the best sharing ratio. The new sharing ratio might be set to keep the county tot\"l dollar participation at about current levels provided the overall county fiscal involvement was sufficient to encourage good management. 3. Limit state expenditures to a maximum dollar amount per case served. 4. Require county welfare departments to submit to the state budget requests for administrative expenses. Such budget submittals could follow a format prescribed by the department and contain standard- ized support data. (The department's analysts would review these budgets in detail to justify expenditure of state funds.) 5. Begin comprehensive review of the various forms required by the state for the processing of eligibility, calculation of benefit entitle- ment, cost claiming and data reporting. County welfare departments spend a large amount of staff time processing long and complex client forms and filling out forms for the state. To the extent these forms can be simplified to reduce the amount of staff time required to process them; administrative savings are possible. 6. Develop data processing programs for use by county welfare depart- ments which would make it possible for the counties to more rapidly process the large volume of eligibility information. \" 564 \/ HEALTH AND WELFARE Item 291 DEPARTMENT OF BENEFIT PAYMENTS- ADMINISTRATION OF COUNTY WELFARE DEPARTMENTS-Continued Total Welfare Picture We recommend that all funds which are subvened to the counties for the operation of county welfare department programs be shown in one item in the Budget Bill and discussed under one unified section in the Governor's Budget. For several years, the Legislature has not had a total picture of what it is costing to operate county welfare departments. In part, this is because the appropriations for the operation of various programs are spread be- tween the Department of Health budget and the Department of Benefit Payment's budget and are included in several different budget bill items. County welfare departments essentially have two kinds of programs: programs to determine eligibility and calculate benefit entitlement and programs to provide some kind of direct or indirect service to the recipi- ents. If all of these county welfare department administrative funds were placed in one budget item, the total of all federal, state and county funds would be approximately as shown in Table 8. Table 8 Estimated Costs of Operating County Welfare Departments A. Eligibility and benefit determination programs 1. AFDC ..................................................................................... : ....... . 2. Aged, blind and d~abled ........................................................... . 3. Food stamps .. \" ............................................................................. . 4. Medically needy only and medically indigent determina- tions ................... , ......................... \" ..... \" ........ \" ........... \" ............ . B. Service Program 5. Homemaker services ................................................................... . 6. Other social services ................................................................... . 7. Adoptions ....................................................................................... . 8. Child protective services ........................................................... . 9. WIN ................................................................................................. . 10. Boarding home licensing .......................................................... .. Total ............................................................................................... . 1975-78 All Funds General Fund $181,764,700 2,216,500 50,000,000 76,305,000 65,000,000 164,772,100 12,698,750 3,000,000 7,222,000 1.770,000 $564,749,050 $46,128,700 2,133,000 - 3,600,000 53,413,920 16.250.000 o 12,698,750 o o 1,644,000 $135,868,370 Items 292-296 HEALTH AND WELFARE \/ 565 DEPARTMENT OF CORRECTIONS Items 292-296 from the General Fund Budget p. 772 ,Requested 1975-76 .......................................................................... $180,638,314 Estimated 1974-75............................................................................ 175,378,277 Actual 1973-74 .................................................................................. '150,509,779 Requested increase $5,260,037 (3.0 percent) Total recommended reduction .................................................... $102,605 1975-76 FUNDING BY ITEM AND SOURCE .Item Description Fund 292 Departmental Operations General 293 Transportation of Prisoners General 294 Returning Fugitives General 295 Court costs and county charges General 296 Local detention of parolees General SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Population Projection. Recommend department review population projection and make necessary adjustments. 2. Double Ceiling. Recommend department prepare alter- natives for elimination of double ceiling. 3. Reorganization. Recommend legislative consideration of Adult Authority r<,organization. 4. Community Correctional Centers. Reduce $102,605. Recommend deletion of 8.5 positions related to closure of Parkway Center. GENERAL PROGRAM STATEMENT Amount $177,839,380 200,000 700,000 1,598,934 300,000 $180,838,314 Analysis page 568, 568 571 573 The Department of Corrections, established in 1944 under the provi- sions of Chapter 1, Title 7 (commencing with Section 5000) of the Penal Code, operates a system of correctional institutions for adult felons and nonfelon narcotic addicts. It,also provides supervision and treatment of parolees released to the community to finish serving their prescribed terms, advises and assists other governmental agencies and citizens' groups in programs of crime prevention, criminal justice and rehabilita- tion. To carry out these functions, the department operates 12 maj'or institu- tions, 19 camps, four community correctional centers and 60 parole units. The department estimates these facilities and services will be used by approximately 25,015 adult felons and nonfelon drug addicts and 18,905 parolees in 1975-76. 566 \/ HEALTH AND WELFARE DEPARTMENT OF CORRECTIONS-Conti.nued ANALYSIS AND RECOMMENDATIONS Items 292-296 The total operations of this department and special items of expense from all funding sources for the budget year are summarized in Table t. Table 1 Budget Summary Funding General Fund ..................................... , ... . Correctional Industries Revolving Fund ................................................. . Inmate Welfare Fund ........................ .. Federal Funds ....................................... . Reimbursements ... '. ............................... . Total ..................................................... . Program I. Reception and Diagnosis ..................... . Man-years .......... \" .......... \" .......... \" ..... . II. Institution ............................................... . Man-years ......................................... . III. Releasing Authorities ............................ , Man-years ......................................... . IV. Community Correctional .................. .. Man-years ......................................... . V. Administration (undistributed) ........ .. Man-years ......................................... . VI. Special Items of Expense .................. :. Total expenditure ...... ~ ...................... . Total Man-years ................................. . Proposed 5180,638,314 15,669,01l 4,682,501 41,063 2,537,367 $203,568,256 $2,168,201 124 5169,558,559 6,801.9 $2,413,828 73 520,914,142 891.3 $5,714,592 231.4 52,798,934 $203,568,256 8,121.6 Change From Current Year Amount Percent $5,260,037 3.0 639,208 4.3 -36,928 -0.8 $5,862,317 3.0 $-157,889 -6.8 -9 -6.8 $5,260,125 3.2 -71.9 -1.1 $159,449 7.1 $252,669 1.2 -36.7 -4.0 $47,963 0.9 -8.6 -3.6 5300,000 12.0 - $5,862,317 3.0 -126.2 -1.5 The proposed General Fund increase of $5,260,037 is attributable largely to population and price increases, the cost of operating three additional conservation camps and workload increases totaling $781,543 related to recent court decisions on inmate and parolee rights. Also reflected is (1) a reduction in positions which were administratively established during the current year for workload arising from the California Supreme Court decision In re Olson, (2) elimination of the work unit parole project, and (3) a reduction in research staff. These budgetary changes will be dis- cussed under the appropriate program analyses herein. Olson Decision workload\" The Olson decision compels the disclosure, upon the request of an inmate and\/ or his attorney, of all documents in his file, except those which would endanger an informant or institution security. The department was administratively authorized ll5 positions at an estimated salary cost of $1,041,730 during the current year to remove the confidential information from the files and tb review the remaining contents with the inmates and \/ or their attorneys. The department has found that the workload is not as large as originally anticipated and employee reductions below the author- ized level are planned for the current year. None of the ll5 positons is I continued in the budget year because the file purging will be completed T---------------, Items 292-296 HEALTH AND WELFARE \/ 567 and future files will be constructed to permit separation of the excluded information without requiring increased staff. There are four other recent court decisions having a fiscal impact on this budget. They are discussed in the \"Releasing Authorities\" section of this Analysis. The 4.3 percent increase in the Correctional Industries Fund reflects an expansion of textile products manufacturing and price increases. The $2,- 537,367 in reimbursements for the budget year is identical to the amount shown in the Governor's Budget for the current year. The amount i~ substantially below the $8,215,572 in such reimbursements received in the 1973-74 fiscal year. The difference reflects the budgetary policy of show- ing federal reimbursements for special projects only after they are re- ceived. The budget document identifies special projects which are anticipated to be reimbursed by federal funds totaling $5,436,177 in the budget year. The $2,537,367 in reimbursements which is shown as part of the department's expenditure program reflects services provided to other state agencies, housing of federal and out-of-state prisoners, and services to employees and inmates. I. RECEPTION AND DIAGNOSIS PROGRAM Through four reception centers, the department processes four classes of persons: those committed to the department for diagnostic study prior to sentencing by the superior courts, those sentenced to a term of years, those returned because of parole viola ton and non-felon addicts. The department provides the courts a comprehensive diagnostic evaluation of and recommended sentence for convicted offenders await- ing sentencing. Newly committed felons or nonfelon addicts are a largely unknown factor and there is a need to evaluate the individual for suitable program determinations and proper institutional assignment. The new felon commitments are received at reception centers located adjacent to and operated as part of regular penal institutions for males at Vacaville and Chino, for females at Frontera, and for nonfelon addicts at Corona. Program Reductions The program reduction of $157,889 shown in Table 1 reflects a net reduction of nine positions partially offset by merit salary adjustments and price increases. The staff reduction reflects the transfer of reception cen- ter staff to the main institution budget at Deuel Vocational Institution becaus~ of the conversion of the reception center facility at that institution to regular inmate housing. II. INSTITUTION PROGRAM The department operates 12 institutions, ranging from minimum.to maximum security, including two medical-psychiatric institutions and a treatment center for narcotic addicts under civil commitment. Major treatment programs include 23 industrial manufacturing opera- tions and seven agricultural enterprises which seek to reduce idleness and teach work habits and job skills, vocational training in various occupations, academic instruction ranging from literacy classes to college correspond- ence courses, and group and individual counseling. The department will also operate 19 camps which will house an estimated 1,0BO inmates during 568 \/ HEALTH AND WELFARE Items 292-296 DEPARTMENT OF CORRECTIONS-Continued the budget year. These camp inmates perform various torest conservation, fire prevention and suppression functions in cooperation with the Division of Forestry. '. The institution program will provide for a projected average daily popu- lation of 25,015 inmates in the budget year, an increase of 535 inmates or 2.19 percent over the current year. This is a relatively minor increase when compared with increases of 1,715 inmates (7.5 percent) and 2,720 (13.6 percent) in the current and past fiscal years, respectively. This pro- jection is based on a number of factors, including continuation of econom- ic conditions existing in the early summer of 1974. The worsening economic and employment conditions could result in further increases in crime, which should result in additional commitments to the state. Population Projection Appears Low We recommend that the department review it population projection for the budget year and make necessary budgetary adjustments. The projected increase of 535 or 2.19 percent in average daily popula- tion (ADP) appears too low based on the first six months experience of the current year, during which the ADP has increased by 491, averaging 81.8 inmates per month. In order to end the. current year with the ADP originally projected, the monthly increase would have to be reduced to an average of 33.3 inmates. This does not appear reasonable in view of cur- rent experience which attributes population build-up to both court and Adult 'Authority actions. . . Continuation of court commitment and adult Authority paroling and parole revocation practices as reflected in institution population increases in the first half of the current year would produce an ADP for the budget year approximaely 500 inmates above the budgeted proj~ction and result' in serious underfunding of the department. The funding deficiency would approximate $500,000 if the population increase is spread among existing institutions (compounding existing overcrowding problems) or $3,250,000 if additional facilities are opened. Double Ceiling We recommend that the department prepare, for consideration by the Legislature, alternatives lor eliminating double-ceIling of inmates. Historically, the housing of two inmates to a cell was standard penal practice despite strong professonal opposition to it. With the decline in institution population in the late 1960s and early 1970s, it was possible to eliminate double celling. The populaton decHne resulted from the com- bined factors of lower court commitments brought about by the probation subsidy program, increased plea bargaining, increased legal representa- tion of indigent defendants and other undetermined factors plus the somewhat mqre liberal term-setting and paroling policies of the Adult Authority. At that time, the Legislature had the opportunity to continue the same level of double ceiling and close institutional facilities or eliminate double- ceiling. The Legislature chose the latter alternative. Double-ceiling was, however, reinstituted because of an increase in the percentage of felony Items 292-:296 HEALTH AND WELFARE \/ 569 defendants who were committed by the superior courts, a reduction in the number of releases granted by the Adult Authority and a significant in- crease in parole revocations for parole violations not resulting from a new conviction. These factors, which reflected an express administration pol- icy, have resulted in double-ceiling of approximately 3,500 inmates as of the end of 1974. An increase of 500 to 1,000 in inmate population will compound the existing situation. This amount of overcrowding in the already volatile prison environment is extremely hazardous, especially because it would have to be concentrated in the older penal facilities, San Quentin and Folsom. In this situation the department is subject to opposing points of view. One does not want additional facilities on the basis that their existence would result in additional incarcerations; the other supports the previous executive policy and demands a greater use of incarceration for public protection and as a deterrent to larger increases in criminal activity. Re- gardless of the policy of the neW administration, we believe that additional facilities should be constructed in recognition of current population pro- jections and the fact that it takes apprOximately five years from initial budgeting to opening of the facility. If methods are developed or policies adopted to reduce overall penal population, the new facilities can replace . existing archaic institutions. . As new construction would not be available for approximately five years and if inmate population continues to increase as in the first six months of the current fiscal year, the population will exceed existing capacity to an intolerable extent. Current projections indicate a male felon popula- tion of 25,475 in 1980. Compared to existing institutional capacity of 20,217 on a one-inmate-per-cell basiS, this will result in a shortage of 5,258 cells. The proposed budget makes no provisions for additional capacity. Table 1 shows proposed institution program expenditures of $169,558,- 559 in the budget year. The net increase of $5,260,125 or 3.2 percent over the current year results from merit salary adjustments, workload and price increases partially offset by a net decrease of71.9 authorized positions. The staffreduction reflects the deletion of91\"positions administratively added for implementing the Olson decision and other reductions totaling 1.9 positions partially offset by 64.8 new positions, 43.8 of which were adminis- tratively established during the current year. The 64.8 new positions for this program include ten for workload in- crease at the California Conservation Center, Susanville; 21.6 for the open- ing of three conservation camps; 17.7 previously authorized positions deleted under Section 20 of the Budget Act of 1974 (related to termination of unfilled positions); eight for workload increase because of the Bye decision; 0.5 underthe Inmate Welfare Fund and seven under the Correc- tional Industries Revolving Fund. The Bye decision requires additional due process procedures in hearings involving the out-patient status of nonfelon addicts. The Section 20 positions are those generally not filled on a permanent basis due to recruitment problems or to afford greater ad- ministrative flexibility, and all have been previously justified on a work- load basis. These position authorizations are used to contract for services for which permanent employees cannot be recruited (usually psychia- 20-87059 570 \/ HEALTH AND WELFARE \\ Items 292-296 DEPARTMENT OF CORRECTIONS-Continued trists) or to pay current employees for providing needed services on an overtime basis. New Camps The budget provides $206,462 for 21.6 new positions to operate three camps which will house 220 inmates in the budget year with a potential of 240 inmates at maximum capacity. These inmate-operated camps are currently functioning with Ecology Corps personnel under the Division of Forestry. The replacing of ecology corps staff with inmates should produce savings for the Division of Forestry, but such savings are not reflected in the Governor's Budget. We note that the camp budget data on page 777 of the Governor's Budget reflect only a $23,282 increase in overall expenditures and no change in the number of inmates assigned or in personnel years, whereas the salary cost of the 21.6 new positions without staff benefits will total $206,462. While the overall budget totals in regards to these new camps appear to be in order, the data on budget page 777 relating to \"work projects-cooperating agencies\" appears to be incorrect. The department should clarify this matter. Inmate Pay Increase The budget contains $100,000 to provide a 13.8 percent overall pay increase (averaging $16 per year or $1.33 per month) to the 6,241 paid positions for inmates who work in the institutions. In addition, there are 2,759 nonpaid inmate positions. Because of inflationary increases in the prices of products purchased in the inmate canteens compared to the average inmate pay of $9.67 per month, the increase is warranted. III. RELEASING AUTHORITIES This program includes the activities of the Adult Authority and the Women's Board of Terms and Parole relating to adult felons and the Narcotic Addict Evaluation Authority which relates to civilly committed narcotic addicts. The function of these boards is to fix and reset as required the terms to be served within the institutions and on parole. They may grant parole and order suspension or revocation of parole as authorized by law. The Adult Authority is assisted in case hearings by hearing repre- sentatives who serve on two-man panels with board members or separate- ly. The U.S. Supreme Court in the case of Morrissey v. Brewer of July 29, 1972, provided that paroling authorities must follow speCified minimum due process and procedural requirements when ordering parole revoca- tions. Included in these minimum requirements are prerevocation and revocation hearings. The prerevocation hearing must be held in the pa- rolee's community and afford him an opportunity to present evidence in his own behalf. The hearing is conducted by hearing representatives or other designees of the parole boards. If there is a finding of probable cause to revoke parole, the parolee is incarcerated at a departmental reception center pending a final hearing on revocation at which the parolee must be provided another opportunity to present his case. On May 14, 1973, the , .. '7,-,---.-.-,--, .. -----. - Items 292-296 HEALTH AND WELFARE \/ 571 U.S. Supreme Court in Gagnon v. Scarpelli also mandated that paroling authorities returning technical parole violators must provide counsel for indigent parolees upon request. This ruling has increased the length and complexity of parole revocation hearings. , In addition, recent California Supreme Court decisions including In re Sturm, In re Prewitt,1n re LaCroix, and In re Valrie have required the parole boards to prepare written reasons for denying parole and to hold special additional hearings prior to placing parolees in custody after their arrest for additional crimes to determine if parole is to be revoked. Adult Authority Reorganization We recommend legislative consideration of organizational changes in the Adult Authority. Prior to the 1959-60 fiscal year, the Adult Authority consisted of seven members who met in two-member panels to hear cases in the various institutions and to determine parole revocations. In order to handle the increasing caseload, reduce travel requirements and avoid increasing the . size of the board, board representatives were authorized in 1959-60. The board representatives were teamed initially (1 to 1) wfth board members for case hearing purposes, but the decisions of these \"mixed\" panels had to be ratified by another board member. Subsequently, panels composed only of representatives were authorized, but the requirement for board ratification of their actions was retained. Institution and parole population increases plus the additional workload resulting from recent court decisions have had a significant impact on the board's workload requirements. The workload growth over the years has resulted in enlargement of the Adult Authority until it now consists of nine members and 15 hearing representatives plus six new representatives requested in this, budget. Additionally, the department was budgeted for four new board members during the current year, but the necessary legislative authorization for the member increase was not enacted. Three of these four board-member positions were reclassified to hearing representatives. In our judgment, the combined total of nine board members and 24 representatives (assum-' ing approval of the six proposed) produces an ov~r-size and unwieldy organization. The indeterminate sentence law under which the Adult Authority acts has been the subject of much recent discussion. If this law is repealed or substantially altered it may eliminate the need for or-significantly reduce the staff needs of the Adult Authority. If the board is to continue opera- tions under the existing law, the Legislature should consider the following organizational changes:. . 1. Permit term-fixing, paroling and parole revocation hearings by a single hearing representative. 2. Reduce the size of the board to five (a reduction of 4 members) and change the functions of the members from hearing cases to setting policy and hearing appeals from the decisions of hearing representa- tives. Such action would reduce salary costs for board members by $124,032 annually. Implementation would require amendments to 572 \/ HEALTH AND WELFARE Items 292--296 DEPARTMENT OF CORRECTIONS-Continued Section 5075 of the Penal Code to reduce the board membership and to Section 5076.1 to permit hearing representatives to make final decisions subject to appellate review and to permit hearings by indi- vidual board representatives. . The addition of six new boa~d representatives would appear to result in an excessively large hearing body. If hearings were conducted by one person, only 16 positions would be needed to handle the projected hearing workload. However, time must be provided for review of the upcoming case, which is now done during each hearing by the second panel member while the first member conducts the immediate hearing. We make no recommendation for position reductions at this time, pending further review of workload needs required by the suggested change in hearing procedures and recent court deCisions. IV. COMMUNITY CORRECTIONAL PROGRAM This community based program includes conventional and specialized parole supervision, operation of community correctional centers, outpa- tient psychiatric services, anti-narcotic testing and community reSOurce development. The program goal is to provide community supervision support and services to achieve successful parolee performance. Table 1 shows a proposed budget of $20,914,142 for the 1975-76 fiscal year, an increase of $252,669\u00b7or 1.2 percent. The increase is a result of parole population and price increases along with merit salary adjustments, a reduction in the conventional caseload formula (from 59 parolees per agent to 50 to 1) partially offset by elimination of the work unit supervision (33 to 1 ratio) program reflecting an overall decrease of 36.7 man-years. Termination of the work unit program ends the latest in low caseload experimental projects that commenced in fiscal year 1953-54. While these programs sometimes r-eflected minor improvement in caseload results, it was not sufficient to justify the additional costs and may in fact have been at least partially caused by factors other than the case supervision level. The 50 to one supervision level complies with the legislative mandate contained in Item 313.3, Budget Act of 1974, which provided an appropria- tion of $400,000 to accomplish the reduction in caseload size from 59 to 1 to 50 to 1. The appropriation was deleted by the Governor on the basis that the overall caseload reduction could be accomplished administratively. This budget provides for a 50 to 1 parolee\/parole agent ratio for all except work furlough (35 to 1) and nonfelon addict (32 to 1) supervision. Community Correctional Centers The department has been budgeted for four state-supported and one federally-funded community centers (half-way houses). These centers house work furloughees, newly released parolees requiring a structured living situation and parolees who are unstable on parole and for whom the additional community sup.ervision may forestall a parole revocation. Items 292-296 HEALTH AND WELFARE \/ 573 Sacramento Center The Sacramento Community Correctional Center was established and has been operating with federal funds provided through the Office of Criminal Justice Planning and the California Council on Criminal Justice (Ccq). The department requested state funding for the fourth year of operation of this Center because the ccq limits federal funds to the initial . three years of operation. The requested amount was not included in the budget on the basis that fourth-year funding will be sought from \u00b7the federal government. If federal funding is not available, this budget will be underfunded by $287,751 for the operation of this center or the center will have to be closed. Closure of Parkway Center We recommend the deletion of 85 positions related to closure of Park- way Center: one parole agent III, one correctional lieutenant, one COrrec- tional sergeant, three correctional officers, one senior stenographer, one supervising cook II and 0.5. cook II for a salary savings of $102,605 During the current year, the department is closing the Parkway Com- munity Correctional Center and transferring its staff of 8.5 positions to other centers (Central City, Vinewood and Crittenden) as shown in Table 2. Table 2 Community Center Staffing A verage Daily Community Center Population Crittenden ....... :.............................................................................. 50 Central .................... ,,, ............................................... :..................... 50. Vinewood ........................................................................................ 27 Parkway .\" ......... ,............................................................................. 50 Total Staffing Authorized Proposed 11.1 14.1 11.0 14.5 8.4 10.4 _ 8.5 0 The purpose of the redeployment is to provide additional staff dee.med necessary at the other centers because of the loss of federally supported positions. These centers were originally budgeted and staffed without federal assistance. Federally funded positions were subsequently added to augment the existing staffing level. The department advises that loss of the federally-funded staff creates staffing deficiencies which results in an in- creasing number of disciplinary incidents and potential incidents. Incidents within the center and in the surrounding community resulted in the closing of a community correctional center formerly operated on the grounds of the Institution for Men at Chino. It is also partly the increase in incidents and the threat thereof that has resulted in the closure of the Parkway Center and staff augmentations at other centers. These centers are expensive operations, costing $824,926 for an average popula- tion of 140 parolees and work furloughees for a per capita cost of $3,666 per year. This number of inmates could be handled in the institutions for approximately $140,000 per year ($1,000 each). The early release of inmates to the work furlough program and the provision of community centers for parolees is for their benefit and the state should not be burdened with an unreasonable expenditure level for such operations because'of the undisciplined actions of the program par- 574 \/ HEALTH AND WELFARE Items 292--296 DEPARTMENT OF CORRECTIONS-Continued ticipants. If the department is unable to provide suitable inmates and. parolees for this program as originally proposed, the program should be abandoned. If the program has to be staffed to the level proposed in this' budget, then it is not the lightly structured program initially contemplat- ed. V. ADMINISTRATION The admihistration program includes centralized administration at the departmental level headed by the director. It provides program coordina- tion and support services to the institutional and parole operations. Each institution is headed by a warden or superintendent and its own adminis- trative staff. Institutional operations are divided into custody and treat- ment functions, each headed by a deputy warden or 'deputy superintendent. The parole operation is administratively headed by a chief parole agent assisted by centralized headquarters staff. The state is divided into 5 parole regions, each directed by a parole administrator. The parole function is subdivided into districts and parole units. As shown in Table 1 total support requirements for administration (not prorated to other programs) are estimated at 231.4 man-years and $5,714,- 592 for the budget year, which represents an increase of $47,963 or 0.9 percent over the current level. The net increase represents merit salary adjustments and price increases' partially offset by a reduction of 8 re- search positions (totaling $105,156 in salary savings) and 0.6 in other minor position adjustments. VI. SPECIAL ITEMS OF EXPENSE Items 293-296 provide reimbursements to the counties for expenses relating to transportation of prisoners and parole violators, returning fugi- tives from justice from outside the state, court costs and other charges related to trials of inmates and local detention costs of state parolees held on state orders. These reimbursements are made by the State Controller on the basis of claims filed by the counties in accordance with law. This program proposes an increase of $300,000 or 12 percent to provide for the reimbursement' of local detention costs for parolees incarcerated on orders of the paroling authorities. This new program element was authorized by Chapter 1237, Statutes of 1974. Crime Increase Opinions differ significantly on the reasons for crime and on the most effective methods of preventing it. This section contains information on the rapid growth in crime rates since 1960, the shift in policy regarding the use of probation and local treatment of offenders, and data on the percentages of felony arrests that ultimately result in convictions and state prison sentences. While there are many suggestions on what changes should be made in the criminal justice system, seldom is there a discussion of the fiscal impediments and time lags necessary to implement a policy change. The end of this section contains such comments. For example,if the state decided to reduce the number of felony offenders treated locally under the probation program, and as a substitute to increase state prison -. ---.....,..,....,.---~-.-.~-. ----------------- Items 292--296 HEALTH AND WELFARE \/ 575 commitments, it would require five years of lead time to build one new prison at a cost of $65 million, which would add only ten percent to our total prison capacity. As shown in Table 3, the total\u00b7 federal, state and local crime fighting effort in California has failed to reduce the incidence (as measured by the number and rate per 100,000 of total population) of the seven major offenses reported to California law enforcement agencies. Year 1960 .................................. 1961 .................................. 1962 .................................. 1970 .................................. 1971 .................................. 1972 .................................. 1973 ..................... Increase 1973 over 1960 ................ Table 3 Total and Rate of Crimes Reported Seven Major Offenses 1960-1973 Increase Over Prior Year ,crimes Reported Number Rate Number Bole b Amount Percent Amount 251,495 1,585 259,231 1,576 7,736 3.1 -9 276,658 1,623 17,427 6.7 47 652,389 3,261 47,813 7.9 216 714,665 3,527 62,296 9.6 266 723,936 3,527 9,251 1.3 0 740,157 3,569 16,221 5.3 42 488,662 1,984 194.3% 125.2% Percent -0.6 3.0 7.1 8.2 0 1.2 a Includes willful homicide. robbery, aggravated assault, forcible rape, burglary, grand theft, and auto theft. b Rate per 100,000 population. Specifically, the table shows that the reported incidence of the seven major offenses increased from 251,495 (1,585 per 100,000 population) in 1960 to 740,157 (3,569 per 100,000 population) in 1973. This represents an increase of 194.3 percent in these crimes reported and a 125.2 percent increase in the rate of such reported crimes per 100,000 population. These data do not include drug and other felony offenses, although many of the crimes are committed by drug addicts to obtain the funds necessary to support their habits. A recent federally supported study showed that the incidence of crime is significantly greater (in the communities studied) than the level reported to law enforcement agencies. The increase in reported crime in California has continued unabated each year since 1960, although there was no increase in the rate per 100,000 population in 1972. Crime Clearances While the crime rate continues to soar, the clearance rate (reflecting crimes cleared by arrest) averages only 21 percent of six of the seven major offenses reported. If the clearance rate could be substantially im- proved, there would be a greater deterrent effect to the criminal sanc- tions. It may reasonably be assumed that persons usually engaged in unlawful activities are aware of the general extent to which such activity is successfully conducted, and therefore they do not appear to be greatly deterred by legal sanctions. 576 \/ HEALTH AND WELFARE DEPARTMENT DF CDRRECTIONS-Contin'ued Table 4 Adult Felony Arrests and Dispositions 1960. 1966. 1970-72 Items 292--296 1968 1968 1970 1971 1972 Total Adult Felony Arrests a ............. . Dispositions by Type 1. As Percent of Arrests a. Release by Police .. \" ............. . h .. Complaint Filed ................... . c. Lower Court ......................... . d. Superior Court ............ ,,, ...... . I. Not convicted .................. .. 2. Convicted ......................... . e. Superior Court Sentences 1. Prison ... : ............................. . 2. Youth Authority .............. .. 3. Probation only ................. . 4. Probation and Jail ........... . 5. Jail only ............................ .. 6. Fine .................................... .. 7. Civil Commitment ......... . 2. As Number'Totals a. Released by Police ............... . b. Complaint Filed ................... . c. Lower Court ......................... . d. Superior Court ......... ; .......... .. 1. Not convicted .................. .. 2. Convicted ........................ .. e. Superior Court Sentences 1. Prison ................................. . 2. Youth Authority .............. .. 3. Probation only ................ .. 4. Probation and Jail .......... .. 5. Jail only ...................... : ...... . 6. Fine .................................... .. 7. Civil Commitment .. \" .... \" 98,821 28.7 3.6 25.1 7.1 1.7 ILl 4.8 0.2 0.3 28,400 3,584 24,816 6,971 1,665 lO,983 4.712 177 308 107,344 204,935 25.7 22.6 74.3 77.4 12.6 18.5 35.0 28.9 5.2 4.5 29.8 24,4 6.3 2.5 1.7 0.9 9.2 9,4 6.4. 7.1 4.5 3.0 0.6 0.5 1.2 1.0 27,599 46,245 79,745 158,690 13,494 37,954 37,584 59,257 5,584 9,307 32,000 49,950 6,731 5,025 1.831 1,873 9,883 19,249 6.871 14,564 4.777 6,118 596 988 1,311 2,133 a Excludes persons arrested and turned over to other jurisdictions. Uncertainty of Apprehension or Incarceration 219,231 231,863 21.6 19.9 78,4 80.1 22.0 21.8 29.8 24.4 4.2 3.3 25.6 2Ll 2.5 2,4 0.9 0.7 9.9 7.6 8.1 7.5 2.6 1.8 0.3 0.2 1.2 Ll 47,238 46.121 171,993 185,742 48,324 50,438 65,236 56.586 9,218 .. 7,562 56,018 49.024 5,408 5,584 1,973 1,515 21,738 17,606 17,703 17,318 5.771 4,062 704 436 2,721 2,423 Table4 shows that in 1972, for example, there were 231,863 adult felony arrests. In that year there were 1,383,969 felony crimes reported, some of which were unfounded, committed by juveniles, etc. While disposition data may not represent the identical persons reflected in total arrests, there are sufficiently comparable for discussion purposes. The 231,836 adult felony arrests in 1972 were disposed of as follows (shown as percent of arrests) : . 1. Law enforcement released 19.9 percent. 2. Criminal complaints were filed against the remaining 80.1 percent. 3. However, the trial courts processed only 46.2 percent as felony charges because the remainder were released by the district attor- neys, or the charge 'fas reduced to a misdemeanor complaint. 4. Another 21.8 percent was disposed of as misdemeanors by the lower courts. - I 5. As a result, only 24.4 percent of the total felony arrests were finally handled as felony complaints by the Superior Courts (21.1 percent , . -.--- --.----~~--- Items 292-296 HEALTH AND WELFARE \/ 577 were convicted and 3.3 percent were not). 6. Superior court sentences were: a. State prison-2.4 percent b. Youth AutllOrity-O.7 percent c. Probation only-7.6 percent 'd. Probation and jail.'.--7.5 percent e. Jail only-l.8 percent f. Fine only-O.2 percent g. Civil commitment-l.1 percent The probability of incarceration has been reduced significantly in re- cent years, especially since the advent of the probation subsidy program, which rewards the counties for not committing adult felons and juvenile delinquents to state institutions. Out of the total adult felony convictions disposed of by the superior courts in 1960 (totaling 24,816), 8,944 or 36 percent were committed to the state and the remainder 15,872 or 64 percent were handled locally. By 1972, total state commitments were reduced to 9,602 or 19.6 percent of all convictions and 80.4 percent were handled locally. Thus, the chance of receiving a state commitment has declined substantially. Crime Rates by Persons on Probation and Parole The change in sentencing patterns has resulted in an increase in the number of probationers. Probation sentences totaled 44.3 percent of su- perior court convictions in 1960, which increased to 7l.2 percent in 1972. If the 1960 rate was applied to 1972 total superior court convictions, there would have been 21,718 probation grants in 1972 or 13,206 less than the 34,924 actually granted. The increased number of convicted felons in the community has an impact on local crime rates because of those convicted in the superior courts in 1972, a total of 3,130 or 23.7 percent were on probation when they committed a new offense for which they were subse- quently prosecuted. An additional 13.6 percent of the 1972 felony prosecu- tions related to crimes committed by persons who were under state parole supervision. Therefore, it is apparent that any increase in the number of persons released to probation and parole will increase the amount of crime. A review of these crime, prosecution and court disposition data leads to the conclusion that the deterrent impact of criminal sanctions is substan- tially diluted by the lack of certainty of apprehension, prosecution and incarceration. On the other hand, while increasing the certainty of apprehension' and prosecution (by improving law enforcement and district attorney opera- tions) and the certainty of substantial punishment (by a change in sen- tencing practices) may enhance the deterrent effect of criminal laws, the state is not prepared t6 handle an increase in prison population. Existing state penal facilities are overcrowded. A return to the rate of prison sen- tencing effective in 1960 based on the \u00b7total number of arrests in 1972 would have added about 10,800 more prisoners that were received in 1972. This does not include any increase in the rate of dispositions because of improved law enforcement and prosecution. A significant increase in the , 578\/ HEALTH AND WELFARE Items 297-304 DEPARTMENT OF CORRECTIONS-Continued number of state commitments cannot be handled without substantial cost increases to provide additional prison facilities. Fiscal Implications _ The growth in California's prison facilities has not kept pace with the growth in crime rates. This factor influenced the change in our criminal justice policy whereby a larger proportion of offenders are handled locally through the probation program, which is partially subsidized by the state. Many law enforcement officials and private citizens are dissatisfied with local treatment and want a greater portion of the offenders sent to prison in order to protect the public and hopefully reduce the crime rate. However, a substantial change in this policy is not viable at this time because the state lacks the prison facilities. Our existing facilities house about 25,000 adult felons and non-felon addicts, and Table 4 shows that 5,664 new felons were added during 1972. If we returned to the 1960 commitment rate, then 16,500 felons, or about three times as many, would have been added to our prison population in 1972. This one year change would have required the building of four new prisons, at a cost of $65 million each, for a total capital outlay expenditure of $260 million. In subsequent years there would have been additional pressures for new prisons, unless the state kept the total population static by accelerating paroles. In addition to the capital outlay costs, the state would have in- creased annual custodial costs by about $70 million for these 10,000 new prisoners, but part of the cost would have been offset by reductions in probation subsidies. . Another important consideration is the lead time necessary to plan and construct a new prison-about five years. Under these conditions, 1980 would be the earliest that a substantial change in prison sentencing could be implemented even if the decision were made in 1975. DEPARTMENT OF YOUTH AUTHORITY Items 297-304 from the General Fund Budget p. 785 Requested 1975--16 ......................................................................... . Estimated 1974-75 ........................................................................... . Actual 1973-74 ................................................................................. . Requested decrease $2,030,996 (2.0 percent) Total recommended reduction ............. , ..................................... . 1975-76 FUNDING BY ITEM AND SOURCE Item Description 297 Deparhnent support ,298 Transportation of persons committed 299 Maintenance and operation of county juvenile homes and camps 300 Construction of county juvenile homes and camps Fund General General General General $97,315,835 99,346,831 86,021,790 None Amount $70,872,367 43,540 3,825,840 400,000 - --------------~~~~~~~~~~~__c~~_c Items 297-304 HEALTH AND WELFARE \/ 579 301 State's share-control of General juveniles at the international border 302 County delinquency prevention General commissions-administrative expenses 303 County delinquency prevention General commissions-research and training grants 304 Assistance to county special General probation supervision programs SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 253,788 33,3!JO 200,000 21,687,000 $97,315,835 1. Border Check Station. Recommend Youth Authority and Depart- ment of Finance conduct cost-benefit analysis of Border Check Sta- tion and report to Joint Legislative Budget Committee by December 1, 197:;. (Analysis page 112.) - . 2. Paso Robles. Recommend Youth Authority evaluate alternatives to continued use of Paso Robles School and report to Joint Legislative Budget Committee by December 1, 1975. (Analysis page 113.) GENERAL PROGRAM STATEMENT The responsibility of the Youth Authority Board and the Department of Youth Authority as stated in the Welfare and Institutions Code, is ..... to protect soci,ety more effectively by substituting for retributive punish- ment, methods of training and treatment directed toward the correction and rehabilitation of young persons found guilty of public offenses.\" The board and the department have attempted to carry out this legislative mandate through the program areas discussed below. Youth Authority Board The Youth Authority Board, consisting of eight members, is charged with personally interviewing, evaluating and recommending a treatment program for each offender committed to the department. It also sets terms of incarceration and is the paroling authority for all such wards. , Administration ~ The administration program consists of (1) the department director and his.immediate staff, who provide overall leadership, policy determination and program management; and (2) a support services element, which provides staff services for fiscal management, management analysis, data processing, and facility construction, maintenance and safety. Community Services The community services program provides direct staff services to local public and private agencies and state grants to subsidize certain local programs relating to delinquency and rehahilitation. Services to Public and Private Agencies The department is required by law to establish minimum standards of operation and make compliance inspections of special probation services which receive state subsidies and county-operated juvenile halls, ranches, camps and homes and, in some cases, jails in which juveniles are incar- cerated. The department is also authorized by law to assist in the improve- I ' I ! 580 \/ HEALTH AND WELFARE Items 297-304 DEPARTMENT OF YOUTH AUTHORITY-Continued ment of local juvenile enforcement, rehabilitation, and delinquency pre- vention programs by providing training and consultation services to local agencies . . Financial Assistance The state, under this department's administration, provides subsidies to local government for construction, maintenance and operation of ranches, camps, and homes for delinquents, special probation programs, delin- quency prevention programs, and a border check station at San Diego. State support, which is intended to encourage the development of these local programs, is based on the belief that local treatment of delinquents is more desirable, if not more effective, than incarceration in state facili- ties. Treatment in' the community or in locally operated institutions re- tains the ward in his normal home and community environment or at least closer to such influences than may be the case with incarceration in state facilities. Delinquency Prevention Assistance The department provides staff services to disseminate information on delinquency and its possible causes; to encourage support of citizens, local governments, and private agencies in implementing and maintaining de- linquency prevention and rehabilitation programs; and to conduct studies of local probation departments. Rehabilitation Services The rehabilitation services program, which is administered by a deputy director and supporting staff in Sacramento, is geographically divided on a north-south regional basis. Each region is directed by an administrator who is responsible for all institutional and parole functions within his region. This organizational structure is established as a means of providing. a continuum of treatment and reducing artificial barriers created by sepa-' rate and distinct institution and parole functions. The program consists of eight institutions, three reception centers, and five forestry camps that will house an estimated average daily population of 4,846 wards, plus a community parole caseload program involving 7,361 wards for a projected total daily average population of 12,207 wards in fiscal year 1975-76 (Table 1). The department estimates it will handle a daily average of 121 additional institutional wards but 761 fewer parolees in 1975-76 than in the current year. (There is an error in the Governor's budget, page 799, in that the 685 average daily population for the recep- tion centers and clinics is not included within the total average daily population for all institutions. The total shown as 4,161, is actually 4,846.) The wards generally come from broken homes, below average econom- ic status and substandard residential areas. They are usually academically retarded, lack educational motivation, have poor work and study habits, and have few employable skills. Over half are four to six grade levels below age level on standardized tests, especially in reading comprehension, vo- --~-~-------.--~~-~----~------------------ Items 297-304 HEALTH AND WELFARE \/ 581 cabulary, arithmetic and spelling. Many also have psychological disorders or anti-social behavior patterns. Table 1 Youth Authority Wards Average Daily Population Reception Centers ............................................... , ................................. . Facilities for Males ...................................... , ...... , ................................ .. Facilities for Females .......................................................................... .. Subtotal ~nstitutions) ...................................................................... . Change from prior year ................................................................... . Parole Caseload .................................................................................... .. Change from prior year .................................................................. .. Total Wards .................................................................................... .. Diagnosis, 1973-74 1974-75 627 685 3,499 3,800 219 240 4,345 4,725 9,546 13,891 +301 8,122 -1,424 12,847 1975-76 685 3,921 240 4,846 +121 7,361 -761 12,207 Diagnostic and case evaluation services are provided within institutions and for wards on parole. Diagnostic services within ipstitutions are pro- vided by a combination of professional and lay counselors and other staff working on a team basis and holding regularly scheduled conferences and unscheduled meetings as required. Care and Control Residential care in camps and institutions provides housing, feeding, clothing, medical and dental services, while parole supervision in the community provides required surveillance and control to assist in rehabili- tating the ward and protecting the community. Treatment Treatment includes counseling, religious services, recreation, psychiat- ric services, academic and vocational training in the institutions and post- release treatment in the community. These services are designed to meet the needs of the wards committed as an aid to their rehabilitation. Research The research program was initially authorized in the 1957-58 budget to develop a continuing evaluation of the effectiveness of the Youth Author- ity programs. It provides the evaluation and feedback to management necessary to determine those programs which are effective and should be continued, those that show promise and should be reinforced and those that should be discontinued. It also provides estimate.s of future institu- tional and parole caseloads for budgeting and capital outlay purposes, and collects information on the principal decision points in the movement of wards through the department's rehabilitation program from the time of initial referral to final discharge. ANALYSIS AND RECOMMENDATIONS The departmental programs, as proposed in the Governor's Budget, represent a net General Fund cost of $97,315,835 and 3,773.2 man-years of effort. However, the department anticipates budget-year reimbursements totaling $9,781,805 and federal grants totaling $389,370 for a total expendi- ture program of $107,487,010. Table 2 summarizes the budget request, showing sources of funding by category, expenditure levels by program area, and proposed dollar and 582 \/ HEALTH AND WELFARE Items 297--304 DEPARTMENT OF YOUTH AUTHORITY-Conti~ued position changes. As indicated, the staffing level is reduced by a net total of 146.5 man-years and General Fund expenditures decrease by a net amount of $2,030,996 or 2.0 percent under current-year expenditures. There are also reductions totaling $3,780,135 in federally funded research projects and in other reimbursements. Funding Table 2 Budget Summary Proposed General Fund ..................................................................... $97,315,&35 Reimbursements ........... , .............. ; .......... \".......................... 9,781,805 Federal Funds ........................................ ,........................... 389,370 Totals ..................... : ............................................................. $107,487,010 Programs Youth Authority Board ..... ;................................................ 81,076,184 Man\u00b7years ............... \" ...................... : ... , .... .. ~ ................ ,...... 32.4 Administration ............................... , .... , ...... : ............... ,........ $3,753,495 Man\u00b7years ...... , ....... , ...... , .......................... , .............. \" ....... \" 152.9 Community Services .................. , ................... , ........ ,',........ $28,086,543 Man\u00b7years ..... , ....... , ............. , ......................... ,,, ..... ,,........... 59.8 Rehabilitation , .............. : ....... ,,, ................ , ...... , ....... ,,........... $73,052,264 Man\u00b7years ............................... , .. , ............ , ...... ,...... 3,460,2. Research .......... , ...... , ................................................ ,,, ....... ,... $1,518,524 Man\u00b7years ... \" .... , .......... , ...... , ......................... , ................ ,.... 01,9 Total ................................................................... \"............... $107,487,010 Man-years\", ................................................................ ,..... 3,773,2 Program Adjustments Change From Cur- rent Year Amount Percent $-2,030,996 -2.0 -3,223,666 -24.8 -556,469 -58.8 $-5,811,131 -5.1 $-1,403 0.1 -1.0 $274,015 7.9 -9.0 &-4,601,630 -14.1 -29.1 $-993,794 -1.3 -83.8 $-488,319 -24.3 -23.6 $-5,811,131 -5.1 -146.5 The reduction in the Youth Authority Board's budget request reflects the elimination of one temporary help position added administratively in , the current year. The decrease of nine positions in the administration program reflects administrative adjustments, completion of the \"Correctional Decision- making Information System\" project (a two and one-half year federally- funded study to design a computer system to maintain ward histories from initial commitment to final release from Youth Authority custody), and completion of the \"Manager Assessment Selection and Training Program\" study (a two-year federally funded grant to assess the managerial potential of Youth Authority employees). The $4,061,630 reduction in the community services program reflects lower costs for probation subsidy (discussed below under \"Local Assist- ance\"), elimination of 4.1 positions administratively and termination of25 grant-funded positions working on the \"Youth Development and Delitl- quency Prevention Project,\" which was established to develop and 'test . various community based youth diversion projects. (Elements of projects found successful in diverting youth from the criminal justice system will be incorporated into the regular Youth Authority program.) The depart- ment is requesting an increase of $179,554 in General Fund support for the Items 297-304 HEALTH AND WELFARE \/ 583 \"Model Volunteer Program,\" which has the objective of identifying ways and means by which volunteer groups can contribute more effectively to the development and implementation of programs designed to reduce juvenile delinquency and rehabilitate young offenders. This project is supported by California Council on Criminal Justice funds through April 1975 and is proposed to continue until a successful volunteer program can be developed and implemented. . Adjustments to the rehabilitation program include the addition of 4.2 positions at the Northern California Youth Center for security, 0.5 clerical position at Karl Holton School for workload, and two maintenance posi- tions at the Youth Training School at no additional cost by transfer of contractual services monies to personal services. Offsetting these in- creases are the reduction of (1) 15 regular parole positions because of reduced caseload (see Table 1), (2) 14 positions administratively, and (3) 61.5 positions due to termination of several grant-funded projects includ- ing the \"Community Centered Drug Program,\" which was instituted in an attempt to reduce the revodtion of parole of Youth Authority wards due to drug violations. A complete evaluation of this project will be made by the Youth Authority after its termination and appropriate modifica- tions to the rehabilitation program will be included in the 1976-77 budget proposal. The department proposes to continue 199 positions added administra- tively in the current year for reactivating Paso Robles. Costs for the reacti- vation of Paso Robles for up to 245 state wards are being assumed by Los Angeles County as reimbursement for displacement of 245 Youth Author- ity wards from Youth Training School. (Los Angeles County is maintaining 245 of its minors at Youth Training School because of inadequate facilities within the county.) The department also proposes to continue 25 positions added administratively in the current year for the Youth Authority's TEST (Training, Employment and Self-Discipline for Today) project, which was started at Paso Robles with the goal of aiding wards in the transition from institutional to community life. Reductions in the research program are attributable to elimination of (1) 4 positions in the regular research program, (2) 9 grant-funded posi- tions in the \"Community Centered Drug Program,\" (3) 2 grant-funded positions for the \"Man-to-Man Job Therapy\" project, 7 grant-funded posi- ~tions for the \"Cooperative Behavorial Demonstration Project,\" and (5) 1.6 positions deleted through administrative adjustments. General Support The proposed budget contains $815,531 for merit salary adjustments, $223,015 for increased food costs (up 12 percent) and $97,857 for higher utility expenses (up 13 percent). The minor capital outlay budget is in- creased from $108,000 to $200,000 to improve security at various facilities because older, more sophisticated and assaultive youth are now being committed to the Youth Authority. These additional support costs are offset by personnel reductions throughout the department (previously discussed) and by decreases in the local assistance program. 584 \/ H~ALTH AND WELFARE Items 297-304 DEPARTMENT OF YOUTH AUTHORITY-Continued Local Assistance No change is proposed in the level of local assistance for transportation of persons committed (Item 298), construction of county juvenile homes and camps (Item 300), or support of county delinquency prevention com- missions (Items 302-303). However, an increase of $10,211 or 4.2 percent over the current year is proposed for the state's share of operating ex- penses for the City of San Diego Border Check Station (Item 301), which is discussed later in the analysis. . The maintenance and operation of juvenile homes and camps subsidy (Item 299), which by law is limited to reimbursement of one-half of a ward's cost of care, not to exceed $95 per month, is proposed to increase by $340,860 or 9.5 percent over current-year estimated expenditures. As shown in Table 3, this increase approximates the anticipated increase in average daily population on which the subsidy payments are based. Table 3, Number and Population of Juvenile Homes. Camps and Ranches 197J...74 1974-75 1975-76 Number of facilities: .................................. :.................................................. 71 Average daily population............................................................................ 2,964 Percent increase over prior year ........................................................ \" 76 3,494 17.~ 79 3,835 9.B The $21,687,000 budgeted for probation subsidy (Item 304) is $4,079,000 less than the amount estimated to be expended in the current year. Of this decrease, $1,905,000 reflects a decline in the number of youths and adults being diverted from state institutional commitment, The remaining re- duction of $2,174,000 results from statutory termination' on June 30, 1975, of the provisions of Chapter 411, Statutes of 1974, which provided the above amount to supplement probation subsidy grants or be used by local law enforcement for youth diversion programs. Need to Evaluate Continued State Funding of Border Check Station We recommend that the Youth Authority and the Department 01'1'1- nance conduct a cost-benefit analysis of the City of San Diego Border Check Station and report with recommendations regarding continued funding to the Joint Legislative Budget Committee by December 1, 1975. The City of San Diego operates a check station at the Mexico-United States border near the Tijuana point of entry to deny passage of juveniles- into Mexico who are not escorted by responsible adults or lack proper parental consent. The cost of the station is prorated between the state and the city on the proportion of city and noncity residents turned away. Table 4 shows the state funding requirements, the number of juveniles contact- ed and the number denied entry into Mexico. Table 4 San Diego Border Check Station 1970-71 1971-72 1972-73 197J...74 1974-75 1975-76 State Support................. $219,635' $142,324 $143,646 $144,308 $243,577 $253,788 Juveniles Contacted...... 18,261 18,199 25,284 20,953 29,850 32,500 Juveniles Denied Entry 9,778 Il,622 10,985 7,746 14,450 15,730 a Includes $90,000 for construction of uew border check station as a result of relocating and expanding the freeway. Items 297--304 HEALTH AND WELFARE \/ 585 The station was opened by the city in the mid-1950's and the state began its financial participation in 1961-62 because of problems in Tijuana relat- ing to the availability of pornographic materials, lewd entertainment, prostitution, alcohol and other intoxicants, as well as numerous assaults and robberies of American citizens, to which it did not wish California youth to be exposed. . As shown in Table 4, state support for the station increased by $99,269 Or 68.8 percent between 1973-74 and 'the current year. This increase re- flects the state's portion of the cost; under an established contractual formula, for increasing the number of police officers manning the station from 14 to 25 to screen the increased vehicular traffic that resulted from the opening of a new eight-lane freeway into Tijuana. An additional $10,- 211 or 4.2 percent is requested for the budget year as the state's prorated share of increased operating expenses. In view of the improved conditions in Tijuana and the generalliberali- zation of social attitudes and entertainment opportunities on this side of the border in recent years, we believe it is appropriate to reassess the state's need to continue funding this program. At a minimum, such review should consider the feasibility of operating the border station on a spot- check basis a.nd utiliZing personnel other than the highly trained,highly paid uniformed police officers whom the City of San Diego now assigns to this program. Alternatives to Utilizing Paso Robles We recommend that the Youth Authority evaluate alternatives to the long-term use of Paso Robles School and report to the Joint Legislative Budget Committee with recommendations by December 1, 1975. As discussed earlier in the analysis, the Youth Authority has reactivated accommodations for the 245 wards at Paso Robles with contractual funds ($2.5 million in the current year) provided by Los Angeles County. It should also be noted that $1.3 million was recently administratively trans- ferred from probation subSidy savings to reopen an additional 200 beds at Paso Robles to alleviate overcrowding at other institutions, bringing it to maximum capacity of 445. However, funds for the 200 additional ward population have been included in the proposed budget. Paso Robles was one of three geographically isolated institutions (Fricot Ranch and Los Guilucos School were the other two) closed between June, 1971 and June 30, 1973, due to an overall population decline. These particu- lar institutions were closed because of their rural locations, which made it di.fficult to recruit and maintain adequate qualified staff, and their high per capita cost of operations. The Fricot and Los Guilucos facilities have been disposed of as surplus properties. If the reversal of the previous institutional population trend continues. as the Youth Authorityfigures in Table 1 indicate, construction of a new facility should be considered as an alternative to long-term use of Paso Robles. All major new institutional complexes constructed for the Youth 586 \/ HEALTH AND WELFARE Item 305 DEPARTMENT OF YOUTH AUTHORITY-Continued Authority in recent years have been designed with central power, supply, maintenance and food service facilities sufficient to accommodate the addition of new satellite institutions. Such facilities are in the long run more economical to operate and maintain than the older, isolated facilities such as Paso Robles. CALIFORNIA HEALTH FACILITIES COMMISSION Item 305 from the California Health Facilities Commission Fund Budget p. 814 Requested 1975-76 ......................................................................... . Estimated 1974-75 ........................................................................... . Actual 1973-74 ................................................................................. . Requested increase $230,279 (34.1 percent) Total recommended reduction ................................................... . GENERAL PROGRAM STATEMENT $905,728 675,449 380,459 None The California Health Facilities Commission was created by Chapter 1171, Statutes of 1974, which renamed the California Hospital Disclosure Act the California Health Facilities Disclosure Act. This act also includes proviSions related to skilled nursing and intermediate care facilities in addition to those for the hospitals. The commission is responsible for: the preparation of a uniform accounting system for hospitals, and skilled nurs- ing and intermediate care facilities; and, the provision of other accounting services to improve the efficiency and effectiveness of services provided by these facilities. The act provides that the commission is to be supported through fees levied against all facilities, except federal facilities, and deposited in the California Health Facilities Commission Fund. In addition, as a secondary objective to the uniform accounting and reporting program, Chapter 1072, Statutes of 1973, requires the commis- sion to prepare and submit a proposal for a state health facility economic stabilization_program to the Legislature before July 1, 1975. ANALYSIS AND RECOMMENDATIONS We recommend approval. The Budget Act proposes an appropriation of $905,728 from the Califor- nia Health Facilities Commission Fund for support of the commission during the 1975-76 fiscal year. This represents an increase of $230,279, or 34.1 percent, over the current year estimate. However, an appropriation of $100,000 for 1975-76 was contained in Chapter lln to cover start-up costs related to the inclusion of skilled nursing and intermediate care facilities during the 1975-76 fiscal year. When added to the Budget Act appropriation, this represents total estimated expenditures of $1,005,728, an increase of $330,279, or 48.9 percent, over the current year estimate as shown in Table 1. Item 305 HEALTH AND WELFARE \/ 587 Table 1 California Health Facilities Commission Actual Estimated Estimated Expenditures Uniform accounting and reporting: Hospitals ...................... , .................................................. . Skilled nursing and intermediate care facilities ... . Economic stabilization program ............ \", .... , ............... . Total expenditures ............... : ................................... . Source of Funds California Health Facilities Commission Fund ......... . Federal funds .......... l ......................................................... .. 1973-74 $335,802 44,657 $380,459 $380,459 1974-75 $865,539 31,342 $896,881 $675,449. 221,432 Proposed 1975-76 $704,688 301,040 $1,005,726 $1,005,728 The federal funds shown for the current year are from a contract with the Department of Health, Education, and Welfare, requiring the devel- opment of hospital care statistics. These funds are being used to accelerate and augment this activity which was already required by state law. Uniform Accounting and Reporting Program The basic objective of the California Health Facilities Commission is to develop and administer the implementation of regulations requiring a\u00b7 uniform system of accounting and financial and statistical reporting for all hospitals and skilled nursing and intermediate care facilities in California. The commission contracted with a private accounting firm for develop- ment of an accounting and reporting manual for hospitals during the 1973-74 fiscal year and the manual was officially adopted November 14, 1973. Copies were distributed to all hospitals and upon completion of fiscal years on or after June 30, 1975, all hospitals are required to submit pre- scribed reports to the commission. The same type of system for skilled nursing and intermediate care facilities will be developed during the budget year for use on or after July 1, 1976. Therefore, funds appropriated for the budget year will be used to process the first annual hospital fi.nan- cial reports, and to develop regulations and the accounting and reporting manual for skilled nursing and intermediate care facilities. The increase in estimated expenditures for 1975-76 is justified because significant workload increases were necessary to expand the program to include skilled nursing and intermediate care facilities. Economic Stabilization Program As shown in Table 1, there are no funds requested in the budget year for the development of the economic stabilization program proposal for health facilities. This proposal is required to be developed prior to July 1, 1975. The latest estimate for the release of the proposal is sometime in March. Position Changes The commission proposes to add nine positions and delete one position for a net increase in authorized positions of eight for the budget year as follows. For processing hospital reports, 2 programmers, 2 accounting technicians, 1 statistical clerk and 1 clerk-typist are requested. For devel- opment of the uniform accounting and reporting manual for skilled nurs- 588 \/ HEALTH AND WELFARE Item 305 CALIFORNIA HEALTH FACILITIES COMMISSION-Continued ing and intermediate care facilities, 2 associate analysts and 1 clerk-typist are requested. Increased workload appears to justify the need for these additional positions. The position being deleted is that of a general auditor whose services are no longer required. Fund Condition The summary of the fund condition contained on page 817 of the Gover- nor's Budget shows accumulated surpluses of $523,675, $296,351 and $436,- 123 for 1973-74, 1974-75 and 1975-76 respectively, in the California Health Facilities Commission Fund. Surpluses were reduced in the current year by delaying the collection of, and reducing the amount of, fees contributed by hospitals. However, a significant increase in the surplus is shown for the budget year. This estimate is based on the collection of maximum fees from the hospitals and skilled nursing and intermediate care facilities for the budget year .. This situation indicates that excessive fees are being charged. However, because this is a relatively new fund and the program was recently ex- panded, more experience is needed before more adequate fee levels can be determined. Surpluses should be adjusted to cover cash-flow needs. "

pdf 1976-1977 AFDC Budget LAO Analysis

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1976-1977 AFDC Budget Analysis.pdf

” 600’1 HEALTH AND WELFARE . DEPARTMENT OF REHABILITATION\”\”‘;Continued Item ‘300 to the’ administrative s~rvices divlsion leaving a net reduction. in. th~ de- partmental.administration of 11 positions. . DEPARTMENT OF BENEFIT PAYMENTS General Summary Funds for the Department of Benefit Payments are contained in seven items and one control section of the 1976-77 Budget Bill. For fiscal year 1976-77 the department is requesting a total of $1,338,065,845 from the General Fund, a $99.5 million, or 8 percent increase over estimated 1975- 76 expenditures. . Table 1 compares the current year and budget year by item indicating areas of increase. . Table 1 Department of Benefit Payments General Fund Request for 1976-77 Budget Bill Purpose of Estimated Proposed Percentage Item Expenditure 197~76 1976-77 Increase IncFease Departmental operations 300 (a) ……………………………….. .$14,834,411 $15,367,162 $1,212,934 8.2% 301 (b) ………………………….. : … 0 680,183 302 Adult cash grants ………….. 637,117,300 679,581,400 42,464,100 6.7 Control AFDC cash grants ………… 516,740,800 561,091,200 44,350,400 8.6 section 32.5\u00b7 303 Foster care legislatiOli .; …. 0 2,700,000 2,700,000 NIA .304 Special Programs for adults ………………………. 3,431,650 3,845,400 431,750 12.6 . 305 County welfare depart: ment operations …….. 66,474,100 74,500,500 8,026,400 ‘ 12.1 306 Legislative Mandate ………. 203,164 300,000 96,836 4U . , $1,238,801,425 $1,338,065,845 $99,264,420 8.0% Health and Welfare Agency DEPARTMENT OF BENEFIT PAYMENTS OPERATING’ BUDGET Item 300 from the General Fund Budget p. 770 Request~d 1976-77 … ; …………………………………….. ; ………. ~ ………….. . Estimated 1975-76 …………………………………………………………………. . Actual 1974-75 …………………. ~ ………………………………………………….. . $15,367,162 14,834,411 \u00b712,206,92.9 Requested increase $532,751 (3.6 percent) Total recommended reduction ………………………………………….. .. SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Employment Tax Division. Withhold recommendation on the r\u00ab;lquested 472.1 positions pending development of a workload budgeting model similar to ‘that used to justify fair hearings staff increases or . decreases. 2. Child Support Collections Program. Withhold recommen~ dation of43.5 requested new positions. 3. Food Stamp Program. Withhold recommendation on 36 of \u00b783.5’req\\.Jested new positions. $676,984 Analysis ‘. page 603 606 607 Item 300 HEALTH AND WELFARE \/ ~~ 4. Blanket Funds. Recommendfundi:ng for tempo!aryhelp:608. and other purposes be appropriated to the Department of Finance fqr allocation. Further recommend that Legislature be notified of changes in purpose for which blanketftinds are used. 5. General Fund Surplus. Reduce Item 300 by $676,984. 609 Recommend reduction in anticipation of salary’ savings. 6. ‘AFDCCash Grants and Control Section 32.5. Withhold 610 recommendation on amount for AFDC aid payments pend- ing receipt and review of May 1976 subvention estimates. GENERAL PROGRAM STATEMENT The Department of Benefit Payments was created by Chapter 1212, Statutes of1973, (AB 1950) and is the successor to the State Department of Social Welfare. The department’s three major areas of responsibility are the administration of welfare programs, the collection, auditing and ac- counting of payroll taxes from California’s employers, and the auditing of certain health care programs. The payroll tax collection program of the Department of Employment Development and the health auditing pro- gram of the Department of Health were transferred to the Department of Benefit Payments on July 1, 1974. ANALYSIS AND RECOMMENDATIONS This item of the Budget Bill proposes a General Fund appropriation of $15,367,162, for the operation of the Department ‘of Benefit Payments which is $532,751 or 3.6 percent, more than is anticipated to be expend- ed during the current year. Additional General Fund money is available to the department in the form of reimbursements from the Franchise Tax Board for the collection of state withholding taxes. The Governor’s Budget proposes a total of $68,027,777 (all funds) to operate the department in fiscal year 1976-77. .. Fifty-nine percent of the department’s operating funds, or $40,092,109, come from other state departments as reimbursement for services per- formed. The balance of the department’s operating funds, $27,935,668, is composed of two parts. The first part, is the requested General Fund appropriation contained in Items 300 and 301. The balance, $11,888,323, is anticipated federal matching funds, primarily for the department’s wel- fare, operations. \” For fiscal year 1976-77 the budget proposes the addition of 765.7 new positions. Table 1 shows, by major program, where the 765.7 requested new positions are to be located in the department. Most of these were established administratively during the current year and are shown as proposed new positions for the budget year. Due to the magnitude of the number of positions proposed we defer recommendation so that we can respond specifically to each proposal at the time of the budget hearings. Employment Tax Division In December 1975, a reorganization implemented by the Department of Benefit Payments separated the EIilploymentTax program from the Health Operations program. The Employment Tax Operation was made 602 I HEALTH AND WELFARE Item 300 DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued Table 1 Requested New Positions for the Department of Benefit Payments 1976-77 A. Employment Tax Operations 1. Increased Unemployment Insurance Workload ………………………………………………………… .. 2. Extended Program: Unemployment Insurance for Agricultural Workers ……………….. .. 3. Increased federal funding of U.1. Program ……………………………………………………………….. .. Subtotal …………………………………………. ; ……………………………………………………………………………… .. B. Health Operations , 1. More audits ……………………………………………………………….. ; …………………………………………………. . 2. Increase Recovery from Insurance Companies ………………………………………………………….. .. Subtotal ………………………………………………………………………………………………………………………….. .. C. Welfare Operations 1. Frur Hearing-Transfer 33 positions, add 7 more ……………………………………………………. , .. .. 2. Data ProcessiD.g-Add 47 positions (see Item 301) ………………….. , ……………………………… .. 3. Child Support Collection Program-add 43.5 positions ……….. ~ …………………………………. .. 4. Food Stamps-federal regulations-add 83.5 positions ……………………………………………… .. 5. Administrative cost control-add 15 positions ……………………………………………………………. .. 6. Conversion of temporary clerical help to permanent positions ……………………………….. .. 7. Other new positions ……………………………………………………………………………………………………… . Subtotal …………………………………………………………………………………………………………………………… . Requested new Positions 258 106 lOB.1 472.1 13 13.5 26.5 40 47 43.5 83.5 15 +21.6 -21.6 38;1 267.1 Departmental Total ……… ;……………………………………………………………………………………………. 765.7 a division within the department and the Audits and Collections Division was abolished. The Governor’s Budget requests $35,872,829 to operate the division in 1976-77 which is an increase of $4,860,998, cor 15.7 p.ercent, over anticipated expenses for the current year. The division is supported by reimbursements from the Employment Development Department and the Franchise Tax Board. Table 2 shows the areas of increased expenditure for this division. c Table 2 Employment Tax Division Increases in Administrative Costs by Program 1976-77 Tax CoUection, Cost of Administration Reimbursing Auditing and Department Accounting Program 1975-76 1976-77 Employment Develop\u00b7 Unemployment In\u00b7 $20,401,204 $24,895,548 ment surance Employment Develop\u00b7 Disability Insurance 3,696,936 3,797,782 ment Franchise Tax Board Withholding of state 6,662,404 6,910,995 Income Tax Employment Develop\u00b7 Classified School Ern\u00b7 251,287 268,504 ment ployees $31,011,831 $35,872,829 Percent Change +22.0% +2.7 +3.7 +6.8 The Employment Tax Division collects, audits and accounts for payroll taxes whiGh California’s employers withhold for unemployment insur- ance, disability insurance and state personal income taxes. It is anticipated that over $4.8 billion in payroll withholding taxes will be collected from approximately 495,000 employers in fiscal year 1976-77. Table 3 shows the estimated tax collections and number of contributing employers by pro- gram. Item 300 HEALTH AND WELFARE \/ 603 Table 3 Employment Tax Division Estimated Tax Collections and Contr.ibuting Employers 1976-71 Employers UnemploYment Insurance …………………………………………………. 445,000 Disability Insurance ……………………………………………………………. 495,000 Personal Income Tax ………………………………………………………….. 428,360 Tax Revenues $1,443,500,000 521,945,288 2,867,000,000 $4,832,445,288 In order to carry out its tax related responsibilities the Department of Benefit Payments has organized the Employment Tax Division into three branches: Field Operations, Technical Services and Central Operations. The Field Operations Branch has 37 field offices which register new em- ployers, audit employer’s books, collect delinquent taxes and wage reports as well as determine the amount of wages actually paid in cases where the amount of unemployment insurance benefit is in question. The relatively small Technical Services Branch provides the rest of the division with administrative and policy direction. Specifically, this branch develops program and workload data needed for managing and budget- ing. It also develops and interprets regulations, develops operating proce- dures, analyzes legislation, works with the Employment Development Department to improve data processing services and assists in the plan- ning of organizational changes. The Central Operations Branch is a large organization with a number of specialized units processing various portions of the branch’s total work- load. This branch is organized into four bureaus: Tax Accounting, Insur- ance Accounting, Tax Audits and Collections, and Classified School Employees Trust Fund. These bureaus process tax revenues, review tax forms for accuracy, maintain employer registration files, process contested unemployment insurance payments, charge benefits paid to the proper accounts, process tax refunds, handle tax appeals and collect unemploy- ment insurance related taxes from school districts. Table 4 shows the currently authorized positions and the 472.1 request- ed new positions for the Employment Tax Division. Table 4 Employment Tax Division Currently Authorized and Requested New Positions 1976-77 Currently Authorized A. Tax Division Adrninistration…………………………………………………………………… 7 B. Field Operations Branch (37 Field Offices) ………………………………………… 551.2 C. Technical Services Branch …………………………………………………………………….. 30 D. Central Operations Branch …………………………………………………………………… 2 1. Insurance Accounting Bureau ………………………………………………………….. } 586.1 2. Tax Accounting Bureau ………………………………………………………………… . 3. Audits and Collections Bureau ……………………………………………………… . 4. Classified School Employees Bureau …………………………………………. … 5~ Temporary Help …………………………………………………………………………… . E. Unallocated requested new positions ……………………………………………………. . 78 13.5 79.6 o Employment Tax Division …………………………………………………………………… 1,347.4 Workload Budgeting 1976-77 Requested New Positions o 85 11.4 o 173 73 12 o o 108.1 472.1 We recommend that prior to budget hearings the Department of Bene- 604 I HEALTH AND WELFARE Item 300 DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued fit Paymentsdevelop, in consultation with the Department of Finance and the Legislative Analysts office,a workload budgeting model to jushry staff increases.or decreases in the Employment Tax Division similar to that used for departmental fair hearings. . Further; we withhold recommendation on the requested 472.1 positions until the new budgeting model is presented to the fiscal subcommittees which hear the departments budget. Last year the Employment Tax Division requested and received 178.5 new positions. This year the division is requesting 472.1 new positions. All the proposed positions will be funded with federal unemployment insur- ance money. There are three major reasons which account for the availa- bility of additional fede~al funds. First, the U. S. Department of Labor increases funds for staffing as workload increases, and increased unem- ployment has significantly increased this division’s workload. Secondly, recent federal and state law extended unemployment insurance coverage to agricultural workers which increased workload in the tax collection area and in the area of benefit payments to unemployed agricultural workers. Finally, in this period of high unemployment the federal govern- ment has liberalized its formula for making funds available to states so that backlogs and other factors causing delays in the timely payment of unem- ployment benefits can be minimized. We have recommended the developmentand use of a budgeting proce- dure similar to that used in the department’s fair hearings activity because we are not satisfied that the documentation submitted to date adequately identifies workload elements, existing standards of productivity or project- ed workload trends. The positions proposed for the Employment Tax Division should be based on best estimates of anticipated workload rather than on a combination of anticipated federal funding and anticipated workload. We believe that data developed for the federal cost model can be utilized to produce an objective and comprehensible budgeting proce- dure which is suitable for state budgeting purposes. For this reason, we recommend that the Legislature withhold approval of the division’s 472.1 proposed positions until a more suitable budgeting model is developed. Health Operations The Department of Benefit Payments is responsible for fiscal audits of organizations which provide health care services through the Medi-Cal, Crippled Children, Short-Doyle and other state and federally funded health care programs. In addition to the recovery of overpayments made to health care providers, this program also attempts to recover funds from any insurance companies which have an obligation to pay all or part of a Medi-Cal recipient’s bills for medical services received. The Governor’s Budget requests $4,903,011 (state and federal funds) to operate the Health Operations program in fiscal year 1976-77 which is $803,743, or 19.6 per- cent, more than is anticipated to be expended during the current year. For fiscal year 1976-77 the Governor’s Budget requests 26.5 new posi- tions: Table 5 shows the location of the authorized and proposed positions for the 1976-77 fiscal year. HEALTH AND WELFARE \/ 605 Budge’tRequest-HealthOperations We recommend approval of the 26.5 requested new positions for the Health Operations Branch. The Health Recovery Bureau has requested authority to expend an additional $194,563 in order to recover an estimated $2,557,000 essentially from insurance companies which have an obligation to pay all or part of a’ medical bill which was paid fOf by the state through the Medi-Cal program. Ten of the 13.5 ‘positions for the Health Recovery Bureau are Table 5 Health Operations Program Existing and Proposed New Positions 1976-77 Currently Location of Budgeted Positions Positions Chief of Health Operations ……………………………………………………………………………… 2 Health Audits Bureau ……………………………………………………………………………….. ;……. 121 Health\u00b7. Recovery Bureau …………… ,…………………………………………………………………… 72 Health Appeals Bureau …………………………………………………………….. ,…………………….. 13 Support staff in other bureaus ………………………………………………………………………… 10.4 Proposed new Positions o 12 13.5 1 o 2IiI.4 26.5 proposed to improve the speed with which insurance companies are billed for their portion of medical bills. This is accomplished by more rapid coding of documents for the automated billing system. Two addiqonal positiolls are to be used to secure approximately $135,000 in reimburse- ments from health providers for overpayment resulting from improper provider billings. The remaining position is to be devoted to collecting approximately $250,000 in accounts receivable from medically indigent persons. The. Health Audits Bureau has requested 12 new positions to improve the,timeliness of audits in the Short-Doyle program and to audit new programs. Five of the positions are to reduce the backlog of unaudited . local Short-Doyle programs. Four positions are proposed for audits ofthe alcoholism program, one for drug. abuse programs and two for the social. rehabilitation services programs. On the basis ofthe anticipated reyenue and improved program administration resulting from increased recovery and audit activity we recommend the approval of the reques~ed26.5 positions. . WELFARE OPERATIONS The Welfare Operations portion of the Department of Benefit Pay- ments includes all functions in the department except those in the Em- ployment Tax Division and the Health Operation program discussed earlier. Theprincipal reason for the existence ‘of Welfare Operations is to service the fiscal and program needs of county welfare departments either directly or indirectly. Table 6 shows the number of positions ~:p. each unit within the Welfare Operations portion of the department. . Budget R~quest-Administrative Hearings. We recommend the ifansfer of33 fairhearingspositions from the 001ce of Administrative Hearings and approval of seven new fair hearings posi- tions. . The budget proposes the transfer of the 33 Office of Administrative 606 I HEALTH AND WELFARE Item 300 DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Cpntinued Table 6 Welfare Operations-Number of’ Positions by Function Currently Auth()rized Positions A. Welfare Program Administration 1. AFDC\/Food Stamp\/Adult\/Support Enforcement Branches …………………………………….. .. 2. Legal\/Planning\/Legislative\/Regulations\/Public Inquiry ………………………………………….. .. 3. Casework Review-Error Detection\/Management Consulting …………………………………… .. B. Fair Hearings ……………………………………………………………………………………………………………………. . C. Claiming and Accounting Functions ………………………………….. ~ …………………………………………. . D. Program Statistics and Cost Estimating ……………….. : …………….. , ……………………………………….. .. E. Support Functions …………………………………………………………………………………………… : ……………… .. F. Director’s office plus non-welfare units in welfare operations …………………………………….. .. C. Responsible Relative Program (phasing out) ……………………………………………………………….. .. 82 ffl llO 112 112.4 63 333 15 55 969.4 Hearings (OAH) positions to the Department of Benefit Payments. By budgeting the positions in the department rather than in OAH, the de- partment has estimated that savings of $230,000 will be achieved. A study of 498 randomly selected c’asesindicates that the quality and impartiality of fair hearing decisions should not suffer if transferred to the Departm~nt of Benefit Payments. Recent legislation required the department to review fair hearings re- ferees’ proposed decisions within 30 days or else the proposed decision becomes operative without review. To meet the 30-day review deadline, the department has administratively established five positions funded through a contract with McGeorge Law SchooL In the budget year, the administration proposes to directly fund the central review unit through the operating budget rather than through contract. The department grants or denies requests for rehearing of fair hearing decisions. Currently, the workload involved in deciding whether or not a case shall be reheard is processed by McGeorge Law School students working under contract. For the budget year, the department proposes to establish two hearing assistant positions within the Chief Counsel’s office to process this workload. Budget Request-Child Support Collections, We withhold recommendation on 43.5 requested new positions for the Child Support Collections program. PL 93-647 (Title IV-D of the Social Security Act) and state implementa- tion legislation, Chapter 924, Statutes of 1975, (AB 2326) reformed Califor- nia’s system for collecting child support payments from absent fathers whose children are on welfare. Part of the federal reform imposed signifi- cant new accounting and reporting requirements on counties and on the state. Inorder to fulfill its additional responsibilities, the department h~ requested 43.5 new positions. Table 7 shows the bureaus schedul~,d to receive the positions. Prior to making recommendations on these positions, we plan to review more completely the justification for the scope of activities performed, the overall system designed to handle the flow of reports from counties, and the workload actually experienced in this program to date. Item.300 HEALTH AND WELFARE \/ 607 Table 7 Distribution of Child Support Program New Positions by Bureau Accounting Bureau ………………………………………………………………………………………………. :…………………. 13.5 Claims Audit and Control Bureau……………………………………………………………………………………………. 15.0 Financial Planning Bureau ………………………………………………………………………………………………………. ‘ 8.0 Estimates Bureau ……………………………………………………………………………………………………………………… , 1.0 Information Development Bureau ………………………………………………………………………………………….. 1:0 Child Support Office … ………………………………………………………. …… …….. ……………………………. …… ……. 1.0 Computing Facilities Bureau …………………………………………………………………………………………………… 4.0 43.5 Budget Request-Food Stamp Program We withhold recommendation on 36 of the 83.5 new positions requested for the Food Stamp program. The department is requesting continuation of the 83.5 new positions administratively established in the current year to review the quality of casework in county operated food stamp programs. These positions were established in response to recently issued federal efficiency and effective- ness regulations. The regulations aim to determine why and to what ex- tent food stamp recipients either pay the wrong amount for food stamps, or why and to what extent ineligible persons are provided food stamps. These determinations are made by the random selection and in-depth review of at least 1,260 case files each six months. When the results of the review are available, the state must work with counties to correct the pattern of casework errors discovered . . We recommend that the 27 positions for the Quality Control Bureau be approved for the federally mandated review of 1,260 cases each six months. The department’s request for these positions is based’ on experi- ence in the AFDC program. InAFDC, production averaged 12.15 com- pleted case reviews per month per worker which is considerably better than the eight cases per month workload shindard suggested by federal regulations. The department’s food stamp request is based on the assump- tion that 12.5 cases will be reviewed per worker per month. The 27 posi- tions include three supervisors and three clerical positions plus four analysts to review the required sample of 800 denied cases. We further recommend the approval of the 14 positions ,requested for the food stamp branch to work with the counties to correct the problems discovered by the reviews. We withhold recommendation on the 36 positions for the Program Review Bureau pending further review of options available to the state in responding to the federal mandate to ,review food stamp operations in 37 counties each year. The requested 36 new positions for the Program Re- view Bureau are in essence to be used to perform case reviews to deter- mine what the quality of food stamp casework is in a particular county rather than in the state as a whole. Weare not convinced that the use of 36 positions on the Food Stamp program alone is of the highest priority. We are more concerned about the quality of casework performed by county welfare departments in. the Medi-Cal program because the state has a much larger fiscal involvement in the payment of medical bills and the payment of adminiStrative expenses. The state has no fiscal involve- ment in the food stamp program except in administrative costs. 608 \/ HE;ALTH AND WELFARE Item 300 , \” . t. ~. DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued . The Department of\u00b7 Benefit Payments is responsible for determining the quality of casework in the Medi-Cal program as well as in the AFDC and Food Stamp programs. Stich Medi-Cal. case review work is funded through a contract with the Department of Health. From the state’s pet:~ spective, it would be preferable to improve the quality of casework in Medi~Cal areas before focusing resources on the Food Stamp program. Currently, there are no plans to conduct in-depth individual county cas~\u00ad work reviews for the Medi-Cal program in 1976-77. Budget. Request.:….County Administration We recommend the approval of 15 positions related to the countyad- ministrative cost control The department proposes the .continuation of 12 positions administra- tively established. this year to make the county adnlinistrativecostcontrol effort operational and the addition of three new positions in’ the AFDC branch whiCh would also work in the administrative cost control area. The three additional positions would be used to improve liaison with the coun- ties in the area of administrative cost controL Budget Request-SpecializeCi Services We recommei?d approval of the conversion of 21.6 temporary clerical . positions to full-time permanent positions. . Over a period of time, the clerical workload in the Specialized Office Services Bureau and the Program Information Bureau has increased. As workload increased, the department has hired temporary help fromblan- ket funds available to it. From the department’s perspective, the problem with the long-term use of temporary help is that too many temporary employees leave soon after they are trained either to accept permanent employment or because of expiration of their appointment. Thus, a good deal of time is lost in the recruitment and training of temporary personnel. Blanket Funds We T(!cormilend that blanket flinds for temporary help and other pur- poses be adequately budgeted but be appropriated to theDepartment of Finance for allocation. We .further recommend that such blanket funds not be used to fund permanent newdepartment8J activities and that the Legislature be noti- fied of changes in the purposes for which such funds are expended. The State Administrative Manual (SAM) defines the term \”blanket\” or \”blanket funds\” as follows: \”A temporary or seasonal position orblanket is an authorization in the approved budget in terms of the amou~t of salaries and wages that may be spent for a specified purpose rather than in terms of the number of cla~sifications of individuals to perform the activity. – – – The approved Governor’s Budget contains authorization for various types of blankets. A blanket authorization specifies the amounts of dollars that may be expended for the budgeted purpose such as tem- porary help, seasonal help, and indefinite military leave.\” The Department of Benefit Payments welfare operations uses blanket lteni300 HEALTH AND WELFARE I 60s funds to hire clerical and other personnel on a liniitedterni basis (l)’to process peaks of workload, (2) to pay overtime salary costs, (3) to pay lump sum vacation obligations when an employee is leaving, (4) to recruit and hire minority employees, and (5) to overlap positions so that a new employee can learn the assignment of an existing employee who is leav- ing. During the past fiscal year, expenditures for the above purposes totaled $840,000. For the current year, such expenditure levels appear to be continuing at the same level. The 1976-77 budget as introduced con- tains only $147,000 for these purposes. It is possible for the department to redirect positions from one bureau to another bureau for a new or expanded activity and then fill in behind the transferred positions using temporary help from the blanket. Later the temporary help can be converted to permanent positions with the justifi- cation that continuing workload necessitates permanent positions. We .understand that the Department of Finance has, in the past, in- creased the amount of funds available for blanket expenditures during the course of a fiscal year by approving budget revision letters which transfer money from salary savings to the appropriate blanket. This procedure provides the Department of Finance with a control mechanism over funds which could otherwise be used for almost any purpose the department wishes. However, the existing procedure is defective in that it does not provide for adequate legislative review. We recommend that the following procedure be established for the use of blanket funds. First, that blanket funds be adequately budgeted by blanket number but appropriated to the Department of Finance to be allocated as needed to the Department of Benefit Payments. This proce- dure allows continued oversight by the Department of Finance but it also provides the Legislature the opportunity to review departmental activi- ties conducted through blanket appropriations. Under ctirrentprocedure funding for blanket activities is contained within salary savings and is hot easily subject to review. We also recommend that blanket funds not. be used either directly or indirectly to fund new activities within the depart- ment. Unexpended General Fund Money We recommend reduction of $676,f\/84 in Item 3(){) from the departmen- tal appropriation in anticipation of salary savings and lower than the pro- jected employee benefit costs. . For the past several years the Department of Benefit Payments has experienced large unexpended General Fund balances at the end of the fiscal yearas is shown on Table 8. Large unexpended General Fund balances can accrue for a variety of reasons including the following: improper estimates of salary savings, overestimates of General Fund sharing ratios, overestimates of employee benefit costs and overestimates of operating equipment and expenses. Last year, when the Legislature considered the department’s operating budget, it was thought that at the end of the 1975-76 fiscal year the unexpended General Fund balance would again be large. In recognition of this probability, the Legislature transferred $800,000 from the main 610 \/ HEALTH AND WELFARE Item 30-i Dr:PARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued Table 8 Unexpended General Funds Department of Benefit Payments Fiscal Year Estimated Savings in \”current year\” Budget $654,620 362,254 197~73 ………………………………………………………………………………………. .. 1973-74 ………………………………………. ; ……………………………………………… . 1974-75 ………………. ; …………………………………………………………………….. .. 197s.:.76 ……………………………………………………………………………………….. . a Estimated in 1976-77 Governor’s Budget. 380,221 283,284 a Actual Unexpended General Fund Money $3,755,688 1,751,501 2,355,022 appropriation for the department into a separate item rather than remove the entire amount from the department’s budget. The Department of Finance was then provided authority to allocate the $800,000 to the de- partment if the need should arise. Later the amount available for alloca- tion to the department was reduced to $492,000 by the Governor .. During the current fiscal year the Department of Finance has approved the establishment of many new positions which has reduced the amount of anticipated General Fund savings. The major staff additions which affect the General Fund are shown in T~ble 9. Table 9 Cost of 1975-76 Mid-year Staff Changes Department of Benefit Payments As Contained in 1976-77 Governor’s Budget 1975-76 General Fund Cost 1. Model Modular EDP Project …………………………………………………………………………………… $522,710 2. Food Stamp Efficiency and Effectiveness Regulations ……. ,…………………………………… 503,816 3. Child Support Collections: PL 93-647………………………………………………………………………. 130,287 4. Other Staff Increases ……………………………………………………………………………………………….. 200,743 5. Augmentations to Blanket Funds ……………………………………………………………………………. 300,000 6. Phase-out of Responsible Relative Program and Elimination of Prepaid Health Plan Audits …………………………………………………………………………………………………………………. -340,000 $1,337,556 Our estimate of unexpended General Fund balances for 1976-77 is $676,- 984 which is based on the assumption of a 54 percent state share for the support of the health operations program and an increase in salary savings which we believe more accurately reflects the department expenditures based on prior year’s experience of unexpended balances. AFDC Cash Grants and Control Section 32.5 We withhold recommendation on the appropriate amount for Control Section 32.5 pending receipt and review of the May 1976, subvention estimates. The budget bill does not contain an item which appropriates funds for the Aid to Families with J)ependentChildren (AFDC) program because the Welfare and Institutions Code provides a continuous appropriation for AFDC. aid payments. However, Control Section 32.5 of the Budget Bill limits funds available to a specified dollar amount and provides thatthe Item.; 300 I:IEALTH\”AND WELFARE \/ 611 Direct’or ‘of Finance :dl:ayihcrease\u00b7 the expi:mditurEf limit\u00b7 in order to pt6~ vide for unexpected caseload growth or other changes which increase aid payment expenditures. The budget proposes an appropriation of $561,091,200 for AFDC aid payments which is $44,350,400 or 8.6 percent more than estimated to be expended in the current year. However, the requested amount will be changed when the Department of Finance submits the May Revenue and Expenditure Budget Revision to the Legislature. The budget revision will be based on the department’s May 1976, subvention estimates which take into account the latest available caseload and expenditure data. We will review these estimates’ and make our recommendations at that time. AFDC Caseload and Cost Trends The Governor’s Budget anticipates very little change in AFDC caseload in the budget year. The AFDC Family. Group caseload is projected to decline by two-tenths of one percent while the AFDC-Unemployed case- load is projected to decline by 5.4 percent. The Foster Care caseload is expected to increase by eight-tenths of one percent. Table \u00b710 shows the anticipated AFDC caseload changes. Table 10 1976-77 Governor’s Budget Projected AFDC Average Monthly Caseload Changes (Persons Count) Estimated Estimated . Change Actual 1974-75 197~7(j 1976-77 CaseJoad Percent AFDC-Family Group ……… . AFDC-Unemployed …………. . AFDC-Foster Children …… .. 1,205,321 140,655 30,385 1,376,361 1,233,000 1,230,4QO 174,lfJO 164,725 29,300 29,540 1,436,500 1,424,755 -2,510 -0.2% -9,375 -5.4% +240 +0.8% -11,745 -0.8% The AFDC caseload projections reflect an anticipated improvement in the economy. If the economy does not improve or if there is no drop in caseload in spite of a modest economic upturn, the budget .year caseload in May 1976 subvention estimates should show increased caseload. The Governor’s Budget requests an increase of $44,350,400 over the amount anticipated to be expended this fiscal year. Table 11 shows the areas of requested increase. Table 11 AFDC Program-General Fund Expenditures Actual Estimated Estimated AFDC Program 1974-75 197~7(j 1976-77 $375,134,562 $427,352,300 $469,828,500 47,035,508 65,723,000 67,496,900 Family Group (FG) ……………….. .. Unemployed (U) …………………… .. Foster Care (BHI) …………………. .. 25,889,159 23,665,500 23,765,800 $448,059;229 $516,740,800 $561,091,200 Amount Percent $42,476,200 9.9% 1,773,900 . 2.7% 100,300 .04% $44,350,400 8.6% The Governor’s Budget indicates that $37 million of the increase in AFDC-FG program results from the annual cost-of-living increase. The Department of Finance informs us that the remaining portion of the AFDC-FG increase, $5,476,200 is related to increased average grant costs ‘612 ‘\/ ‘HEALTH AND WELFARE Item 301 ,DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued , resulting from less full and part-time employment among AFDGtecipi- ents. In the AFDC-U program the Governor’s Budget indicates the cost-of- living increase of $4.5 million will almost be offset by a caseload decrease estimated to save $4.1 million. The remainder of the AFDC-U increase, $1,373,900, is related to expected decreases in recipient income which increases grant’ cost. ‘ AFDC Cost-of-Living Increase – C- AFDC recipients receive cost-of-living inc.reases in July of each year. The increases are based on changes in the consumer price index. The increase payable in July 1976 anticipates an 8.7 percent change in the consumer price index, based on 12 months of inflation, measured from December 1974 to December 1975. Department of Benefit Payments MODEL MODULAR DATA PROCESSING PROPOSAL Item 301 from the General Fund Budget p. 773 Requested 1976-77 ………………………………………………………………. . Estimated 1975-76 ………………………………………………………………… . Total recommended reduction …………………………………………… . SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. County EDP Systems Review Function. Reduce Item 301 by $581,082. Recommend staff reduction of 43 of 47 positions requested. 2. EDP Guidelines. Recommend establishment of guidelines to preclude review of minor county EDP projects. 3. Los Angeles County Welfare System. Recommend in- -creased monitoring of the management information system development and steps to limit state support to an appropri- ate level. – 4. Need for Adequate County Data. Recommend Budget Act language to enable improved county reporting of costs and recovery of state funds when county savings do not materi- alize. ‘ Model Modular County EDP System $680,183 N\/A $581,082 Analysis page 613 614 614 615 In 1974 the Department of Benefit Payments initiated a joint state- . county effort to explore the feasibility of developing what it termed a model modular county EDP system. This effort has been continued in the current year and represents the latest in a series of departmental attempts to achieve economies relative to the development and operation of auto- Item 301 HEALTIIAND WELFARE \/ 613 mated county welfare information systems. For the most part, such system development .and operation has been conducted on an independent county basis. It has been the department’s contention that substantial sa~ngs can be realized if model systems are developed from selected components of existing.county automated systems .and used by the coun- ties (in lieu of independent county systems). Impetus for the depart- ment’s model system effort was prompted by an increase in the cost of automated county welfare processes (a cost shared by the state) from $6 . million in 1970-71 to an estimated $14 million in 1975-76 and a projected $25 million annuallyin the near future, and by the desire to avoid duplica- tion of effort in many counties. .. Funds totaling $1,045,420 ($522,710 fed~ral) are provided; in Item 287.2 of the current budget for initial implementation of the model system. Language in Item 287.2 precludes the expenditure of these funds until the department has prepared a detailed estimate of resources required and schedule of events and has received Department of Finance approval of a feasibility stUdy. Feasibility Study Completed The joint state-county effort to explore feasibility of the model system effort was completed in October 1975 .. The study explores a number of alternatives which range from development of a totally centralized and state-operated system to the alternative of maintaining the status quo (whereby the department’s County EDP Bureau monitors county systems and has approval authority for proposed changes and additions to each system). The study conclusion rejects direct implementation now of a central or regional standardized data-processing operation and favors ihstead a grad- ual approach to increased sharing of systems. The department proposes to . accomplish this by substantially increasing staff assigIled to the depart- ment’s County EDP Bureau, and upgrading the bureau to branch level. According to the study, the increased staff will be .used primarily to (1) develop a standard set of data elements for eventual use in all county systems, (2) develop a central program library, (3) effect ,greater staff involvement in evaluating proposed and current county welfare EDP development, and (4) develop other packages for use by the counties such as a manual of guidelines for system development and a catalog of input and output forms. Staff Augmentation Excessive We recommend deJetion of43 posihons from the expanded coUnty EDP systems monitoring function fora savings of $1,162,164 ($581,082.General Fund\/. . The alternative recommended by the department includes augmenting the present County EDP Systems Bureau staff of eight by administratively adding 47 positions in the current year using funds available in Item 287.2. The proposed budget includes $1,360,325 to continue operation of the expanded function at the 55-position level. Assuming that county welfare EDP costs will increase to $25 million annually in the near future as estimated by the department, the state’s 614 \/H~ALTH AND WELFARE Item 301 MODEL MODULAR DATA PROCESSING PROPOSAL….,..Continued , annual share under current sharing ratios will be approximately $6 million. The department could not provide a reasonable estimate of how much of this $6 million is systems development. If we assume an annual systems development cost of $3 million (undoubtedly a high estimate) , the depart- ment would under its current plan expend $1.3 million each year to moni~ , tor and evaluate a $3 million development effort. The funds would not be used to develop a new system. The additional employees would only facilitate exchange of knowledge among counties. . . Further, although many of the department’s objectives in augmenting County EDP Bureau staff may be desirable, the potential for attaining a successful cost-benefit result is doubtful. In this instance, we believe a reasonable alternative is to provide a small state staff’ to work with the . counties. Such a state effort would serve as a catalyst in assisting counties to reach agreement on practical systems goals which thEm can be imple- mented through a copperative effort. Our conclusion after a thorough evaluation of the model system feasibil- ity study and discussions with the department regarding the. alternative chosen is that (1) the staffing level proposed is not justified, (2) . .the end product would not necessarily cause substantial improvements in county data processing systems, and (3) 47 new positions could more profitably be used elsewhere. We, recommend the elImination of 43 positions for a’ savings of $581,082 in state funds. We recommend approval of four new positions including one governmental program analyst, two associate data processing analysts and one clerk-typist II. These positions when added to the eight currently authorized in the County EDP System Bureau can provide increased benefits to the state which are more in line with practi- cal responsibilities of the department and the fiscal magnitude of pending systems projects. We recommend the department defer the administra- tive establishment of the 47 positions during the current year pending the hearing of the budget by legislative committees. \”, Of’ Guidelines Needed We recotnmend that guidelines be developed which Will focus county EDP bureau staff resources on’ significant county welfare EDP projects. At present, County EDP Bureau staff review proposed changes to county welfare ‘EDP systems without regard to the significance of the change. This practice does not allow an optimum use of staff. The depart- ment should develop guidelines which will elimina~e the review of rela- tively insignificant documents and focus staff activity on selected major county proposals which we believe demand closer monitoring, especially, in the early stages of implementation while it is still possible to influence the course of events. Welfare Case Management Information System (WCMIS) We recommend that the department increase and maintilln close moni- toring of the Los Angeles County Welfare Case Management’Information System. We recommend further that the department take steps to ensure that the state does not pay for unused computer capacity and associated com- , 1 I Item 3’01\u00b7 HEALTH AND WELFARE I 615 puter operations which the department determines to be excessive. In 1971, Los. Angeles County initiated a major welfare EDP system development effort intended’ to replace existing welfare information- handling processes, many of which were not automated, with a new and comprehensive automated system known as the Welfare Case Manage- ment Information System (WCMIS). According to the department, the t ‘the development effort as ofJune 30, 1975 was approximately .2 milli e 1971)..;.76 cost is estimated at $6 million. Although the department was not able to identify the state’s share of these costs, we assume that the state cost as of June 30, 1975 will approximate $1 million and there is a potential $L5 million additional state cost for 1971)..;.76. The project is intended to result in substantial net saVings. However, information obtained from the department based on its monitoring of WCMIS indicates the project has been redefined, the scope has now changed and anticipated savipgs have been postponed. Also, substantial computing capacity may have been acquired prematurely. Further, de- spite the expenditure of considerable amounts of funds to date, no phase of the system is operational. However, the current revised schedule indi- cates that a central recipient index will be operational this spring. The department’s monitoring ofWCMIS has resulted in some reapprais- al of the level of state financial support of this project. The department recognizes that it needs to increase the level of monitoring and intends to assign one of the proposed new positions to assist in monitoring WCMIS. We concur and recommend that the department assign\u00b7 an additional position to WCMIS to continue close surveillance of this effort. This activ- ity can be accomplished within the staff which we have recommended for such purposes. We believe also that the department should determine whether or not Los Angeles County has acquired computing capacity and associated equipmeptprematurely. If this is the case, the state should not pay for such unused resources. We raise this question because Los Angeles in- stalled a large UNIVAC 1100 computer and is acquiring 330 remote termi- nals in th~ current year, many of which are, according to the department, apparently assigned at least temporarily to warehouse facilities. Although the department has not succeeded in obtaining information from Los Angeles County regarding-current computer usage, we expect that usage may be low because WCMIS is not operational. The department must take steps now to determine if significant costs will be incurred with little productivity. If there is a cost to the state ~ssociated with any prema- ture delivery of equipment, the department should develop a means of limiting state support of WCMIS to a level which is commensurate with the goals of state funding. Need for Adequate County Data We recommend that Budget Act language be added to authorize the department to (1) withhold state financial support of county welfare EDP operations where a county does not provide a breakdown of welfare EDP costs ,as requested by the department, and (2) enter into agreement with 616 \/ lIEALTH AND WELFARE MODEL MODULAR DATA PROCESSING PROPOSAL-Continued. the co~ties wherein state support is tied to savings projected by the counties and state funds are recovered to the extent that savings do not materialize. We understand that the county ED P Systems Bureau has been unable to obtain from the counties sufficient breakdowns of county welfare EDP . costs. This imposes a severe limitation on the bureau’s ability to perforJJl its functions, and results in the bureau being unable to determine \” the actual cost of county projects approved by the department. The counties can provide this information because the data are a necessary element of proper project management. , …’ The WCMIS experience to date suggests the need for the state to ,pro- tect its investment in system development efforts which are \”sold\” to the state on the basis of anticipated savings. In such cases it would beappropri- ate for the state to guarantee its support of a county project to the extent that the county will guarantee savings to the state. In order to provide the department with the ability to enter into agreements which will provide this guarantee; we recommend adoption of appropriate Budget Act lan- guage~ Lack of Compliance with Budget Act Language Item 291 of the Budget Act of 1975 states in part that \”. . . the depa:tt~ ment may authorize not more. than $1 million (all funds) for expenditur~ . by county welfare departments for the development of data processing systems in 1975-7.6, and all such approvals shall relate specifically to the development\u00b7ofthe Model Modular EDP system and shall notconti’ibllte, to the improvement of independent county EDP systems.\” . ,.’ We believe that the department has failed to comply with this stipula- tion by approving the first phase of WCMIS which alone exceeds the $1 million limitation. Although we pointed out to the department the Item 291 restriction at thetiine approval ofWCMIS was under consjdenition, the department obtained from its counsel a legal opinion which supported the approval. Our analysis of this opinion suggests that it is constructed simply to supply an interpretation of Item 291 which supports thedepart- mental position. . ‘ Item 302 -HEALTH AND WELFARE I 617 Department of Benefit Payments STATE SUPPLEMENTAL PROGRAM FOR AGED, BLIND AND DISABLED Item 302 from the General Fund Budget p. 115 Requested 191~71 ……………………………………………………………….. $679,581,400 Estimated 1975-16…………………………………………………………………. 631,111,300 Actual 1914-15 ……………………………………………………………………….. 488,264,414 Requested increase $42,464,100 (6.1 percent) Total recommended reducti<;>n ………….. :………………………………. Pending SUMMARY OF I’)IIAJOR ISSUES AND RECOMMENDATIONS 1. May Caseload Estimates. Withhold recommendation on appropriate amount for Item 302 pending review of May 1976, subvention estimates. 2. Cost~of-Living Adjustment. Recommend Legislature re- vie~ optional methods for calculating cost-of-living grant increases. GENERAL PROGRAM STATEMENT AnalySis page 611 618 On January 1, 1914, the federal Social Security-Administration assumed responsibility for direct administration of cash grant welfare assistance to California’s approximately 655,000 aged, blind and disabled recipients with the establishment of the Supplemental Security Income program (SSi). Prior to that time California’s 58 county welfare departments had administered cash grant programs for these recipients. Under provisions of state and federal law, California supplements the basic federal grant payment with an additional state payment, referred to as the State Supple- mentary Program (SSP). Each year the state supplemental payment is automatically increased to provide recipients with a cost-of-living adjust- ment. The adjustment is calculated based on changes in the Consumer Price Index. . ANALYSIS AND RECOMMENDATIONS We withhold final recommendation on the appropriate amount for Item .102 pending receipt and review of the May 1976, subvention estimates. The budget proposes an appropriation of $679,581,400 for the state share of the cost of aid payments to .aged, blind and disabled recipients. However, in April the Department of Benefit Payments will prepare updated estimates based on the most recent caseload and cost experience which will be included in the May Revenue and Expenditure Budget Revision submitted to the Legislature by the Department of Finance. We will review the May 1976, subvention estimates and make our recommen- dations at that \u00b7time. 618 I HEALTH AND WELFARE Department of Benefit Payments STATE SUPPLEMI;NTAL PROGRAM . ‘ FOR AGED. BLIND AND DISABLED-Continued The Size of the CostoOf-Living Adjustment We recommend that the Legislature review the optional methods for calculating adult cost-oE-living grant increases prior to approving Item 302 and that the Legislature specify a comparison month for purposes of cal- culating a cost-oE-living adjustment. . For fiscal year 1976-77, the methodology used to calculate the cost-of- living adjustment for aged, blind and disabled recipients is especially important because it will determine whether most recipients will receive a fl or a $14 monthly increase. The Governor’s Budget proposes the use of it methodology which would result in a $7 monthly increase at a General Fund cost of $61.1 million. A $14 monthly increase would result in an additional General Fund cost of approximately $61 million or $122 million total cost. Historical Perspective; In order to understand why the law which governs the calculation of the cost-of-living increase is susceptible to inter- pretation, it is necessary to reView qhanges in procedure over the last several years. Prior to the implementation of the federal HR 1 legislation, which established the SSI\/ SSP program, cost-of-living increases were based on year-to-year percentage changes in the Consumer Price Index (CPI) , just as they are now. However, the dates used to calculate the peJ,\”centage change were different. At that time, the change was measured from Juneof one year to June of the following year. Six monthslater,in December, the cost-of-living increase was implemented. However, Chapter 1216, Statutes of 1973 (AB 134), provided that the annual cost-of-living adjustment be paid in July, or six months later than it had been. The initial effect was a one-time six-month delay in the payment of the cost-of-living adjustment. The first cost-of-liVing adjust- ment under the new law was to take place in July, 1975. . The Governor’s Budget for 1975-76, as introduced, proposed a cost-of- living adjustment for the current year which would have compensated recipients for 12 months of inflation at an estimated General Fund cost of $114 million. The increase proposed in the Governor;s Budget was baseq on changes in the CPI between June 1973 and June 1974, the increase to be paid July 1, 1975 one year later. However, the Legislature augmented the 1975-76 Budget Act by $65.2 million which took the one-time six- month delay into account, and gave recipients an IS-month cost-of,living increase, rather than the 12-month increase proposed by the Governor’s Budget. The increase covered the period from June 1973 to December 1974, and was paid in July 1975, six months later. This year the Governor’s Budget proposes a $7 cost-of-living increase which is based on six months of additional inflation as measured by changes in the CPI from December 1974 to June 1975. The lag period, the time between the final month used to measure inflation and the’payment month, is again 12 months. The logic used to support this increase is that the 1975-76 increase was composed of two elements. The first element was Itein~302 HEALTH AND WELFARE \/ 619 the normal 12-month cost-of-living increase which was based on chariges in the CPI between June 1973 and June 1974. Thiswas a $16 increase. The second element was a special $8 monthly advanced payment which was based on changes in the CPI between June and December 1974 . . The 1976-77 Governor’s Budget assumes that the six month’s special increase has already been provided and is currently part of the grant amount. This is the special $8 advanced payment referred to above. There- fore, from that perspective, it is only necessary to compensate recipients for the six additional months of inflation which occurred between Decem- ber1974 and June 1975. ‘Prior to the release of the Governor’s Budget, we assumed that recipi- entswould receive compensation for 12 months of inflation. Except for the JUly 1975 increase, recipients have routinely received an annual cost-of- living increase based on 12 months of inflation. The lag period (the period between the last inflation month and the payment month) has always been six months. We had assumed that legislative intent, in providing the special augmentation last year, was to grant recipients permanent com- pensation for the six-months delay related to transition to the new pro- gram. If that were legislative intent, then December would be established as the comparison month for calculating cost-of-living increases, rather than the preceding June as is proposed by the Governor’s Budget. In implementing the 1975-76 cost-of-living adjustment, the Department of Benefit Payments did in fact use December as the comparison month. However, the department was not mandated by Budget Act language to use any particular comparison month in calculating the 1975-76 cost-of- living increase. The Budget Act language provided only that the cost-of- living adjustment could not be more than $24 a. month for an aged or disabled recipient, or $27 a month for a blind recipient. In other words, the Legislature gave the administration the latitude of increasing grants beyond that proposed in the Governor’s Budget up to the amounts sug- gested by the Legislature. The Governor chose to give the full cost-of- living increase which recognized a six-month lag period. If the Legislature believes recipients should receive a cost-of-living ad- justment in July 1976, which reflects a six-month lag rather than a 12~ month lag, then Budget Act language should be added to Item 302 which would specify that the cost-of-living adjustment for 1976-77 will be based on changes in the Consumer Price Index as measured from December 1974 to December 1975. This change would require the item to be aug- mented by approximately $61 million. If the Legislature desires a 12- . month lag in the cost-of-living adjustment as proposed in the Governor’s Budget, then no augmentation is required. The present budget proposal would provide $7 more a month to the average aged or disabled recipient living alone. . . This is approximately a 2.7 percent increase in spendable income. A return to the six-month lag period would result\” in a$14 monthly increase. This increase represents approximately a 5.8 percent increase in spenda- ble income. 620 \/ HEALTH AND WELFARE Department of Benefit Payments STATE SUPPLEMENTAL PROGRAM FOR AGED. BLIND AND DISABLED-Continued Caseload and Cost Trends Item 302 The Governor’s Budget anticipates a 4~ percent increase in the aged caseload and 16.8 percent increase in the disabled caseload in 1976-77. The blind caselo_ad is projected to remain essentially stable. The reasons for the projected growth in adult caseloads are: first, the changes in the definition of disability, from permanently disabled to temporarily disabled, makes a larger percentage of the population eligible. Second, the federal Social Security Administration has had difficulty in annually redeterminingeligi- bility for all cases. Therefore, the discontinuance rate is low which keeps caseload larger than it otherwise would be. Third, the higher grant levels -of the new program allow more people to qualify for assistance. Finally, high cost of medical care and drugs causes many persons who only qualify for small grants to join the program so that they will have a Medi-Cal card . and free medical care. Table 1 compares current year and budget year caseloads. Table 1 1976-77 Governor’s Budget: Average Monthly Adult Caseload Comparison Aged …………………………………………… . Blind ………………………………………….. .. Disabled …………………………………….. .. Total ……………………………………….. . 1974-75 312,970 12,&’38 267,169 592,977 1975-76 335,100 12,800 318,000 665,900 1976-77 350,300 12,900 371,300 734,500 Increase Amount Percent 15,200 4.5% 100 .7% 53,300 16.8% 68,600 10.3% The Governor’s Budget projects that aid\” payment expenditures for adult recipients will increase by $42.5 million in 1976-:77. The major factors contributing to this are caseload growth and the cost-of-living adjustment increases, offset by a number of anticipated savings. Table 2 shows the increases and anticipated savings. Table 2 Factors in the Net $40 Million Increase for Adult Program Aid Payments 1976-77 General Fund Cost or $a,vings Increased Costs in Millions ~: g~!i6~!~:t~~.~~~~~ .. :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: $!~:~ Offset Savings 3. Increased county contributions ………………………………………………………………………………… . -U.B 4. Hold harmless\/baseline savings ………………………………………………………………………………… . -29.4 5. Declining mandatory supplement payments ………………………………. ; …………………………. . -4.7 6.\u00b7 More countable recipient income …………………………………………………………………………… . -7.4 Net General Fund increase ………………………………………….. ,…………………………………………….. $+42.5 Item 3()3 HEALTH AND WELFARE. \/ 621 County Contributions County contributions toward this program grow from year to year and are related to the percentage growth in the assessed value of property in a county. County contributions are estimated to be $131.4 million this year and $143.2 million in 1976-77, a 9 percent increase. Hold Harmless Savings The Governor’s Budget anticipates that the state’s so-called hold harm- less or baseline payment will decline from $381.4 million in the current year to $352 million in the budget year. This savings results because federal cost-of-living adjustments partially offset state costs. Mandatory Supplements When the new adult program started, certain cases had to. be given special supplementary payments so their grants would not be lower under the new program than underlhe old. With the passage of time there are fewer such cases. More Recipient Income The state is entirely responsible for adult grant costs above $217 a month. If a recipient has a monthly income above $217, the excess income reduces the amount of the grant the state furnishes. The Governor’s Budget anticipates approximately $7.4 million will be available to recipi- ents with monthly incomes of $217 or more. This increase in income results primarily from Social Security increases .. Department of Benefit Payments FOSTER CARE PROGRAM Item 303 from the General Fund Budget p: 774 Requested 1976-77 ………………………………………………………………. . Estimated 1975-76 ……………………………………………………………….. .. Total recommended reduction ………………………………………….. .. SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS $2,700,000 None $2,700,000 Analysis page 1. Eliminate Item 303. DeJete $2, 700,000. Recommend the 622 . amount required for the foster care program accompany’ . proposed legislatiop.. GENERAL PROGRAM STATEMENT Under current law the state will pay up to $40.50 a month toward the care of a foster child, if the case is eligible for federal matching funds. If the case is not eligible for federal funds, the state will pay up to $81.00 a month. In November 1975, the average foster care case cost $318 a month. Because the state share is a fixed amount which does not increase from year to year, counties have, in recent years, absorbed a larger percentage 622 \/ HEALTH AND WELFARE FOSTER CARE PROGRAM-Continued of total foster care and payment costs. ANALYSIS AND RECOMMENDATIONS We recommend the deletion of $2, 700,000. Item 304 The administration requests the appropriation of $2,700,000 inanticipa- tion of legislation which would increase state obligations in the funding of the foster care program. We recommend deletion of this request because the Governor’s Budget does not explain or justify changes to be made in the foster care program. In addition, we do not know the cost of the final version of a foster care bill. We recommend also that the necessary funds be amended into the implementing legislation. Department of Benefit Payments SPECIAL ADULT PROGRAMS Item 304 from the General Fund Budget p. 776 Requested 1976-77 ………………………………………………………………. . Estimated 1975-76 ………………………… : …………………………………….. . Actual 1974-75 ……………………………………………………………………… . Requested increase $413,750 (12.1 percent) Total recommended reduction ….. ………………………………………. 197~77 FUNDING BY ITEM AND SOURCE Item 304 (a) 304 (b) 304 (c) Description Special Circumstances Special Benefits\/Excess Value Homes Aid to Potential Self-Supporting Blind 304 (d) Emergency Payments, Loan Losses GENERAL PROGRAM STATEMENT Fund General General General General $3,845,400 3,431,650 1,908,529 Pending Amount $911,000 1,086,500 473,300 1,374,600 $3,845,400 Chapter 1216, Statutes of 1973, (AB 134) established a program to pro- vide for the emergency and special needs of adult recipients. The pro- gram’s special allowances, paid entirely from the state General Fund, are administered by the county welfare departments, rather than the federal Social Security Administration. ANALYSIS AND RECOMMENDATION We withhold final recommendation on the appropriate amount for Item 304 pending receipt and review of the May 1976 subvention estimates. The budget proposes an appropriation of $3,845,400 for special adult programs which is $413,750, or 12.1 percent, more than is estimated to be Item 304 HEALTH AND WELFARE \/ 623 expended during the current year. In May the Department of Benefit Payments will finalize updated estimat~s based on the most recent case- load and cost information which will be included in the May Revenue and Expenditure Budget Revision submitted to the Legislature by the Depart- ment of Finance. We will review the May 1976 subvention estimates and make recommendations at that time. Special Circumstances (Item 304(a)) The Special Circumstances program is intended to provide adult recipi- ents with special assistance in times of emergency. Payments can be made for replacement of furniture, equipment or clothing which is damaged or destroyed by a catastrophe. Payments are also made for moving expenses, housing repairs and emergency rent. The Budget Act of 1975 appropriated $2,222,700 for special circumstances. However, if current expenditure trends continue only $885;OOOwill be expended. It appears that two faGtors account for the low levels of expenditure. First, current regulations re- quire recipients to use up all liquid assets before they are eligible for the benefits of this program. Secondly, it appears that many recipients are not aware of the existence of this special program. SP!Cial Benefits\/Excess Value Homes (Item 304(b)) The Excess Value Home program provides aid payments to aged, blind or disabled persons who would qualify for the regular SSI\/SSP program except that they own homes valued at $25,000 or more. The Budget Act of 1975′ appropriated $1,279,000 for this program. However, if current expenditure trends continue only $653,800 will be expended. Aid to ~otimtiaISelf-Supporting Blind Program (Item 304(c)) The Aid to Potential Self-Supporting Blind program allows blind recipi- ents to retain’ more earned income than the basic program for blind recipients as an incentive for recipients to become economically self- supporting. Expenditures for this program have been very close to the amounts budgeted. Uncollectabfe Loans (Item 304 (d) ) Chapter 1216, Statutes of 1973, (AB 134) mandated that counties pro- vide emergency loans to aged, blind or disabled recipients whose regular monthly check from the federal Social Security Administration has been lost, stolen or delayed. In the event a county cannot obtain repayment of the emergency loan, the state must reimburse the county for the loss. If current trends continue, it appears that approximately $900,000 of the $2,281,600 appropriated for reimbursement of uncollectable loan.s will not be expended in the current year. In part, this is because a procedure has been worked out with the federal government whereby the counties can . deduct the loan amount from the federal check before it is forwarded to the recipient. Also the Social Security Administration is doing a better job of delivering checks to recipients. Because three of the four programs funded through Item 304 are rela- tively new and have not yet settled into predictable expenditure patterns, experiditures for the remainder of this fiscal year will be important in 624 \/ HEALTH AND WELFARE ltem305 SPECIAL ADULT PROGRAMS-Continued determining how much should be budgeted for 1976-77. Department of Benefit Payments ADMINISTRATION OF COUNTY WELFARE DEPARTMENTS Item 305 from the General Fund Budget p. 777 Requested 1976-77 ……………………………………. ; ………………………. .. Estimated 1915-76 ……………………………………………………………….. .. Actual’ 1974–75 ………………………………………………………………………. . Requested increase $8,026,400(12.1 percent) Total recommended reduction …………………………………………… . 1976-77 FUNDING BY ITEM AND SOURCE Item Description Fund 305 A. AFDe Administration General B. Administration of Special Adult . Programs General C. Food Stamp Administration General D. Emergency Payments Administration General SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS $74,500,500 66,474,100 Q6,949,223 Pending Amount $52,296,100 1,351,400 20;253,000 600,000 Analysis page 1. May Caseload Estimates. Withhold recommendation on appropriate dollar amount for Item 305 pending receipt and review of May 1976 subvention estimates~ 624 GENERAL PROGRAM STATEMENT Item 305 of the 1976-77 Budget Bill contains the General Fund appro- priation for the state’s share of the costs which the 58 county welfare departments incur in making eligibility determinations and benefit .pay- ments in the AFDC and Food Stamp programs. State funds for the admin- istration of the small special benefit program for aged, blind and disabled recipients still operated by county welfare departments are also included in this item. Funds for county welfare department social service programs and for Medi-Cal eligibility determination programs are not included within this item. However, funds to cover the administrative expenditures of district attorneys’ offices related to the AFDC child support collections program are included. Table 1 shows anticipated total administrative ex- .penditures.\u00b7and shar~ngratios for Item 305. ANALYSIS AND RECOMMENDATIONS We withhold recommendation on the appropriate dollar amount for Item 305 pending receipt and review of the May 1976 subvention esti- mates. Item 305 HEALTH AND WELFARE \/ 625 Table 1 1976-77 Governor’s Budget-Item 305 County Administrative Costs and Sharing Ratios Total administrative expenditure:; Percentage of cost Programs (all funds) Federal State County 1. AFDC a. County welfare departments …………………… .. b. District Attorneys-Child support ………….. .. 2. Food Stamps (nonwelfare cases only) ………….. .. 3. Adult Programs Administration of special benefits ……………… .. . Administration of emergency loans ………….. .. Total (All Funds) Item 305 ………………………… .. $204,887,500 31,533,600 83,906,100 1,351,000 600,000 $322,278,200 50% 75 50 25% 25 100 100 25% 25 25 In April and May 1976, the Department of Benefit Payments will pre- pare updated county administrative cost estimates for 1976-77 based on the most recent administrative expenditure claims and workload data submitted by the counties. Upon completion of these updated estimates, the Department of Finance will submit a budget letter changing the amount of the request for Item 305. We will work closely with the depart- ment to review data and estimating methods. If this item is again to be a closed-ended appropriation used in conjunction with a cost control plan, it is important that the item be carefully budgeted and that the data and assumptions used to develop the appropriation be available for detailed review. The budget proposes an appropriation of $74,500,500 for Item 305 which is 12.1 percent, or $8,026,400 more than the amount the Governor’s Budget estimates will be expended in the current year. The amount requested was derived based on the following assumptions. AFDC Program. First, 1976-77 estimates assume no growth in AFDC county welfare department workload because caseload is projected to remain essentially constant. Secondly, increases in salaries, benefits and operating expenses are ex- pected to average only 6.7 percent in 1976-77 on a statewide basis. Food Stamp PrograiJl. It is assumed that food stamp administrative costs will increase rapidly in the current year and in 1976-77 because of cost-of-living increases, and workload increases. Administrative cost per case, the basic unit used for estimating purposes, received a 9.98 percent cost-of-living increase for the current year to reflect actual increases in county salary and benefit costs. For 1976-77 the unit cost per case was increased an additional 6.7 percent to reflect anticipated county cost-of- living increases for employees. The Governor’s Budget also anticipates significant workload increases in the current year and in 1976-77 resulting from the food stamp outreach program and normal program growth. The outreach effort is intended to make potential food stamp users aware of the program, thus increasing the applications workload and the workload for maintaining ongoing cases. Workload increases related to outreach are expected to increase administrative costs by $6.9 million this year and 626 \/ HEALTH AND WELFARE lteffi’300 ADMINISTRATION OF COUNTY WELFARE DEPARTMENTS-Continued $10.4 million in 1976-77, all funds. New federal mandates will require counties to have additional staff to concentrate on the improved manage- ment of the Food Stamp Program. In preparing the budget for the 1976-77 fiscal year, the Department bf Finance reduced the 1975-76 expenditure estimate by $2.4 million based on the assumption that the department’s administrative cost control effort will reduce expenditures. For 1976-77 the Department of Finance as- sumed savings related to the administrative cost control effort would increase by an additional $500,000. Table 2 summarizes the major areas of anticipated growth in county administrative costs. Table 2 1976-77 Governor’s Budget-Item 305 Estimated Changes in County Welfare Department Administrative Costs General Fund (millions) . 1. 1975-76 Base ………………………………………………………………………………………………………………………… $66.4 2. AFDC workload increases …………………………………………… ~…………………………………………………… ~ 3. AFDG-Salary\/Benefit\/Operating Expenses\/Equipment increases ……………………………….. 3.3 4. Transfer to Item 304(d): Uncollectable loans …………………………………………………. ,………………. -1.3 5. Food Stamp Salary\/Benefit\/Operating Expenses\/Equipment increases ………………………… 2.4 6. Food Stamp Workload-{)utreach and’normal growth ……….. ;………………………………………….. 4.1 7. Federal mandate: improved management …. ;……………………………………………………………………. .3 8. Other minor increases and offsets …………………………………………………………………………………….. -.2 9. Additional cost-control-plan savings…………………………………………………………………………………… -.5 1976-77 General Fund Request ………. :…………………………………………………………………………….. f14.5 A full discussion of problems related to the administration of the AFDC and food stamp programs at the county level and the issues related to administrative cost control are discussed as part of Item 290, Medi-Cal administration. Department of Benefit Payments LOCAL MANDATED COSTS Item 306 from the General Fund Budget p. 782 Requested 1976-77 ………………………………………………………………. . Estimated 1975-76 ………………………………………………………………… . Actual 1974-75 ……………………………………………………………………… . Requested increase $96,836 (47.7 percent) Total recommended reduction …………………………………………… . $300,000 203,164 97,742 None Items, 307-311 HEALTH AND WELFARE \/ 627 GENERAL PROGRAM STATEMENT In January 1972, classified employees of locaJ school districts were cov- ered by unemployment insurance. School districts reimburse the Unem- ployment Insurance Fund for the actual cost of insurance benefits paid to classified staff when they become unemployed. Chapter 1012, Statutes of 1973, and Chapter 1256, Statutes of 1975, (AB 91) increased weekly unem~ ployment insurance benefits from $75 to $104. ANALYSIS AND RECOMMENDATIONS We recommend approval. The increased benefits levels would increase local reimbursement costs except that Section 2231 (a) of the Revenue and Taxation Code requires the state to reimburse local school districts for additional costs resulting from state requirements imposed after January 1, 1973. DEPARTMENT OF CORRECTIONS Items 307- 311 from the General ,Fund Budget p. 786 Requested 197&-77 ……………………………………………………………….. $205,011,,442 Estimated 1975-76…………………………………………………………………. 199,057,249 Actual 1974-75 …………………………. \\ ………. :………………………………… 178,919,131 Requested increase $5,954,193 (3.0 percent) Increase to improve level of service $300,000 Total recommended reduction ……………………………………………. None 1976-77 FUNDING BY ITEM AND SOURCE \”Item 307 308 309 310 311 Description Departmental Operations Transportation of Prisoners Returning Fugitives from Justice Court Costs and County Charges Local Detention of Parolees Fund General General General General General SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS Amount $202,212,508 200,000 700,000 1,598,934 300,000 $205,011,442 AJialysis- page 1. ~an Quentin Replacement or Reconstruction. Recom- mend population at San Quentin State Prision be reduced to 1,000 inmates, subject to adoption of recommendations 631 in capital outlay portion of this analysis. ‘ ‘2. Unallocated Redirection: Recommend identification of program reductions to effect savings equal to proposed transfer of $683,000 to the Department of Rehabilitation. 637 628 I HEALTH AND WELFARE DEPARTMENT OF CORRECTIONS-Continued GENERAL PROGRAM STATEMENT Items 307…,311 The Department of Corrections, established in 1944 under theprovi- sions of Chapter 1, Title 7 (commencing with Section 5000) of the Penal Code, operates a system of correctional institutions for adult felons. and nonfelon narcotic addicts. It also provides supervision and treatment. of parolees released to the community to finish serving their prescribed terms, advises and assists other governmental agencies and citizens’ groups in programs of crime prevention, criminal justice and rehabilita- tion. To carry out these functions, the department operates 12 major institu- tions, 18 camps, three community correctional centers and 60 parole units. The department estimates these\u00b7 facilities and services will be used by approximately 20,870 adult felons and nonfelon drug addicts and 20,955 parolees in 1976-77. ANALYSIS AND RECOMMENDATIONS . The total operations of this department, the term-setting boards and special items of expense from all funding sources are summarized in Table 1. Fimding General Fund ………………………………. . Correctional Industries . Revolving Fund ……………………….. . Inmate Welfare Fund ………………….. . Federal Funds …………………………. … : Reimbursements …………………………. . Table 1 Budget Summary Estimated 1975-76 $199,057,249 16,109,950 5,069,990 42,063 3,129,241 Proposed 1976-77 $205,Oll,442 16,793,068 4,470,137 42,063 1,878,975 Total ………………………………………….. $223,408,493 $228,465,685 Program I. Reception and Diagnosis ………… $2,400,242 $2,444,977 Man-years …………………………………. 126 . 126 II. Institution …………………………………. $183,740,959 $188,443,243 Man-years …………………………………. 6,825.8 6,766.6 III. Releasing Authorities……………….. $2,839,556 $2,707,100 Man-years …………………………………. 84 76 IV. Community Correctional ………… $24,684,987 $25,042,806 Man-years …………………………………. . 984.9 952.9\u00b7 V. Administration (Undistributed) $6,943,815 $7,711,625 Man-years ……………………………… ;… 242 239 VI. Unallocated Redirection a.;………. $-683,000 VII. Special Items of Expense …………$2,798,934 $2,798,934 Change from Current Year Amount Percent $5,954,193 3.0% 683,1l8 -329,853 -1,250;266 $5,057,192 $44,735 $4,702,284 -59.2 $-132,456 -8 $357,819 -32 $767,810 -3 $-683,000 4.2 -6.5 -40.0 2.3% 1.9% 2.6% -0.9 -4.7% -9.5 1.4% -3.2 11.1% -1.2 Total expenditure …………………….. $223,408,493 $228,465,685 $5,057,192 2.3% Total man-years ………………………… 8;262.7 8,Hio.5 -102.2 -L2 Reflects the retention of federal funds by the Department of Rehabilitation as discussed in this ~alysis. Although departmental expenditures from all funding sources listed in Table 1 are projected to increase by $5,057,192 (or 2.3 percent over the eurrent year), the proposed General Fund portion would increase by HEALTH AND WELFARE \/ 629 $5,954,193 or 3.0 percent. This difference reflects a net\” red1.lction of $897,001 or 3.7 percent in the other funding sources shown in Table 1. The increase of $683,118 or 4.2 percent in expenditures from the Correc- tional Industries Fund (also shown inTable 1) reflects merit salary adjust\” meIlts and price increases. The reductibn in Inmate Welfare Fund . (IWF) exPenditures results primarily from population decline and the transfer of $160,000 of expenditures for inmate benefits to the General Fund pursuant to Chaptei382, Statutes of 1975. This enactment prohibits the use of IWF moities to finance ( 1) staff overtime for special entertainment events for inmates, (2) the purchase and repair of television sets and (3) the pur- chase of athletic and recreation uniforms and supplies. Chapter 382 appro- priated$l60,ooo for current year expenditures for such purposes and this leyelis proposed for 1976-77. . I. RECEPTION AND DIAGNOSIS PROGRAM Through four !eception centers, the department processes’ four classes of persons: those committed to the department for diagnostic study prior to sentencing by the superior courts, those sentenced to a term of years, those returned because of parole violation and nonfelon addicts. . The department provides the courts a comprehensive diagnostic evaluation of and recommended sentence for convicted offenders await- ing sentencing. Newly committed felons or nonfelon addicts are a largely .unknown factor and there is a need to evaluate the individual for suitable program determinations and proper institutional assignment. The new felon commitments are received at reception centers located adjacent to and operated as part of regular penal institutions for males at Vacaville and Chino, for females at Frontera, and for nonfelon addicts at Corona. The proposed expenditure of $2,444,977 for this program is $44,735 or 1.9 percent above estimated current-year. expenditures. The increase repre- sents nierit salary adjustments and price increases tb continue the existing program level. . ‘ II. INSTITUTION PROGRAM This program operates the department’s 12 institutions, which range from minimum to m~imum security, including two medical-psychiatric institutions and a treatment center for narcotic’ addicts under civil com- mitment. Major programs include 23 industrial manufacturing operations and seven agricultural enterprises which seek to reduce idleness and teach work habits and job skills, vocational training in various occupations, aca- de~c instruction,ranging,frbm literacy classes to college correspondence courses, imd group and individual counseling. The department will also operate 18 camps which will house an estimated 950 inmates during the budget year. These camp inmates perform various forest conservation, fire prevention and suppression functions in cooperation with the Division of Forestry. The institution program will provide for a projected average daily population of 20,870 inmates in the budget year, an increase of 45 inmates over the current year. This program proposes an expenditure of $188,443,243, which is an in- crease of $4,702,284 or 2.6 percent over estimated current-year expendi- 630 \/ HEALTI;I AND WELFARE Items 307–311 DEPARTMENT OF CORRECTIONs….:..Continued tures of$183,740,959. The budget year and current-year expenditures s~b\u00ad stantially exce.ed the 1974-75 fiscal year actual expenditures of $170,576,308 even though the institution population is projected to decline from an average daily population of 24,636 in 1974-75 to 20,870 in the budget-year. This is’due to the factt-hat population reduction savings of approximately $2.8 million in 1975-76 and $3.2 millio~ in the budget year will be more than offset by price increases over .the two-year period for food, utilities and other operating costs, plus salary and staff benefit increases and other adjustments discussed separately in this analysis. ‘ Inmate Benefits As noted earlier, Chapter 382 provided for a shift of $160,000 ‘in Inmate Welfare Fund expenditures to the General Fund. This is one of the pro- gram changes resulting in increased General Fund costs even though there has been a significant reduction in institution population . . Training Academy The department proposes a General Fund expenditure of $333,999 for support of the regional training\u00b7 academy which has been financ~d by a combination of state and federal funds through the Office of Criminal Justice Planning (OCJP). The academy provides initial and inservice training to employees of this department and the Department of the Youth Authority. Because OCJP funding is limited (generally to three fiscal years) , all future costs of this training center will be a’ General Fund responsibility. The Department of the Youth Authority also will contrib- ute $324,118 for this purpose in the budget year. Retirement Costs The dep~tment anticipates costs of ~pproximately $800,000 in both the current and budget-years to cover the employer’s contribution for indus- trial retirement benefits granted to designated employees by 19751egisla- tion. Recent actuarial data reveal that the existing employer contribution rate for these employees is too high, and Assembly Bill 2325 has been introduced to adjust it. The amounts proposed for the current and budget years are based on the enactment of AB 2325 or similar legislation. If such legislation is not enacted, this budget item would be underfunded by approximately $1 million. Inmate Pay Increases Another factor contributing to increased costs is, a proposed $100,000 augmentation for inmate pay. Of the 8,500 inmates employed within the , institution (other than for Correctional Industries and the Inmate Welfare Fund) , 6,241 are paid an average of $152 per annum or $12.67 per month. The additional $100,000 would provide an average increase of 10.5 percent or $16 per year. This increase appears to be justified because of the price increases which affect the cost of items purchased by inmates froIn the prison canteens. Items 307-311 HEALTH AND WELFARE \/ 63t General Fund Support for Family Visiting Facilities The family visiting program, which, entails ,24-hour visiting of inmates with family members in private facilities, was initiated’ in 1968 at the California Correctional Institution at Tehachapi. To implement the pro- gram, inmate labor and Inmate Welfare Fund (IWF) ~onies were used ,to convert unused employee housing to suitable visiting’ quarters. This program was subsequently expanded to all institutions through acquisition of.used house trailers and remodeling of unneeded offices arid other ac- qommodations using IWF resources and inmateJabor. The department proposes an expenditure of $300,000 from the General Fund to provide an additional 38 family visiting units. This proposed increase in the level, of service provided in this function represents the initial General Fund sup- port of the program. The money would provide an averge of approximate- ly three new units at each of the ’12 institutions. The (}epartmEmt believes this program contributes to inmate welfare by reducing tensions within the institutions and by strengthening and retain- ing family ties which assist in the inmates’ rehabilitation upon release. Tq.ere has been some evidence presented iIi the past which shows that iiunat~s having close visiting ties with family members perform better on parole. It is not certain whether this is due to the visiting program or whether the type of inmate who has t:egular and frequent use of visiting privileges would do well on parole regardless of such visits. ‘Because of the wide acceptance of this program and the need to,provide additional facilities to meet increased demand, we support this proposed increase in the level of service from the General fund. ‘ \” Population Reduction Savings’ The institution population projections for the current and budget years reflect substantial reductions (3,811 and 3,766, respectively, in the average daily institution population below the 1974-75 population total); In the proposed budget, the approximately $2.8 million in savings resulting from population reduction in the current year partially offsets pric\u00ab;l and other increases in the total expenditures. Item 292 of the Budget Act of 1975 provides, \”. . . that subject to approval by the Department ()f Finance, any reallocation of savings due to reduction in population, other than those resulting from decreased court commitments, shall be used to give primary emphasis to the development of transition programs in the com- munity for persons being released from prison.\” If theon-going parole program qualifies as atransilion to the commu- nity program within the meaning of this language, increase,d expenditures of approximately $3.5 million for paroles in the current year would appear to’ comply with the requirements’ of Item 292. H()wever,’ if the Legis- lature’s objective was to secure enriched community services over those provided routinely by parole supervision on a workload increase basis, the intent of the bridget language has not been implemented. Male Felon Institution Requirements We recommend that the population at San Quentin State Prison be reduced to 1,000 inmates in line with our recommendations to limit utiliza- tion of this prison andto provide replacement facilities as discussed in the 22-8882.5 632 \/ HEALTH AND WELFARE DEPARTMENT OF CORRECTIONS-Continued capital outlay portion of this analysis. lt~ms’307~n .’ The average daily population for male felon institutions is projected at 17,965 for the budget year. The, present rated capacity of male felon ihsti- hltions ~exclusive of the California Men’s Colony, West Facility, which is presently closed) is 20,914. This represents a gross excess capacity of 2,949 over the anticipated average daily populatiOIl (ADP). After providing a: 5 percent operating vacancy factor to allow for inmates temporarily out to court and to provide for peaks in population fluctuation, there is a net capacity of 19,868 or an excess of 1,903 over projected ADP for the budget year. The department estimates that felon institution population will increase to 18,845 on June 30,1977, and to 19,370 on June 30,1978. On this basis, the net capacity available during the budget year would be sufficieIit toper- mit the closure of a major institution, but the projected increase byJune 30,1978, would require a reopening of the facility during the 1977..,.78 fiscal year if the legislative policy agairist dOUble ceIling is to be followed: The department’s projected increase in ADPis based primarily onthe estimated impact of Chapters 1004 arid 1087, Statutes of 1975, which pro- hibit the granting of probation under specified circumstances. ‘If the com- mitnientsrelating to these recefttenactments do not reachthe anticipated level, the net excess capacity will be significantly greater than currently projected.’ ‘ , ‘ ‘In order to avoid closing an institution, which would have to ‘be reopened within a year, resulting in added expense of transferring’ employees and inmates to other facilities and possible loss of experienced personnel, the department plans to close living units within all male felon institutions during the current and budget years. These units would then be reopened as the population increases. \” Oui-recommendation provides for reducing the inmate populatiOJ,lat San Quentin to 1,000 and transferring the remaining 1,191 inmates budget- edfor,this institution to other iQ.stitutions. This would permit substantially the same housing flex~bility as the department’s proposal, possibly provide some savings in the support budget, and also provide for the eventual replacement or reconstruction of San Quentin State Prison. New Positions A total of 62.5 new positions with a salary cost of $902,493 are proposed for the institution program. These positions, listed on pages 798 and 7~ of the Governor’s Budget, can be grouped into six categories as follows: a.6 teachers to replace, a like, number of positions currently emploYeq. under contract with local school districts. ‘ b. 4.5 positions for the regional training center previously provided:by con,tractual serviCes and reimbursed by federal funds. This request merely authorizes the establishment of the positions and does riot increase the program level. c. L6clerical positions previously provided under operating expenses which have been reduced to reflect this change. d.’ ~~t8 positions for the opening of additional housing units at theiCali- ltems.307.:…311 HEALTH AND WELFARE I 633 fornia Rehabilitation Center. This instittinon provides housing and treatment for nonfelon narcotic adqicts. The positions are requested under previously approved workload formulas to staff two additional male and one additional female living units which are needed on the .’ basis of projected increases in the nonfelon addict population. Nar- cotic addicts who have committed felonies may be committed to this program by the courts after being convicted but not sentenced on the felony charge when it is determined that the felony was related to the narcotic habit. Narcotic addicts may also be committed volun- tarily for treatment without being convicted of a felony. e. 7 technical and clerical positions for workload increases attributable to the California Supreme Court decision in Gee vs. Brown, which is discussed in the Releasing Authorities program section of this analy- sis. f. 28.6 temporary help positions for variOus functions which were abol- ished under the provisions of Section 20, Budget Act of 1975. Section 20 requires abolition of positions continuously vacant from October ,,1,1974 to July 1, 1975. A number of the positions classified as tempo- rary help were never filled because the department used the funds to provide the services required on an overtime or extra shift basis. The other positions were not filled because of recruitment problems and the funds were used to provide required services on a contractual basis. On the total 62.5 new positions, only the 26.3 positions (representing $401,122 of the total cost) requested (1) for the training center, (2) for openiq.g:additional housing units for nonfelort addicts and (3) for the Gee vs\” prown decision workload, represent additional staff over the current level. III. RELEASING Al!THORITIES This program includes the activities of the Adult Authority and the Women’s Board of Terms and Parole relating to adult felons and the Narcotic Addict Evaluation Authority which relates to civilly committed narcotic addicts. The function of these boards is to fix and reset as required the terms to be served within the institutions and on parole. They may grant parole and order suspension or revocation of parole as authorized by law. The Adult Authority is assisted in case hearings by hearing repre- sentatives who serv~ on two-man panels with board members or separate- ly. In 1972, the U.S. Supreme Court in the case of Morrissey vs; Brewer prOvided that paroling authorities must follow speCified minimum due pr()cess and procedural requirements when ordering parole revocations. Included in these minimu.m requirements are prerevocation and revoca- tionhearings. The prerevocation hearing must be held in the parolee’s community and afford him an opportunity to present evidence in his own behalf. The hearing is ‘conducted by hearing representatives or other designees of the parole boards. If there is a finding of probable cause to revoke parole, the parolee is incarcerated at a. departmental reception center pending a final hearing on revocation at whIch the parolee’ must 634 \/ HEALTH AND WELFARE . Items. 307:-311 DEPARTMENT OF CORRECTIONS-Continued be provided another opportunity to. present his case. In 1973 the U.S. Supreme Court in Gagnon\u00b7 vs. Scarpelli also mandated that paroling au- thorities returning teohnical parole violators must provide cOllnsel for indigent parolees upon request. This r\”uling has increased the length and complexity of parole revocation hearings. In addition, California Supreme Court decisions including In re Sturm, In re Prewitt,ln re LaCroix, and In re Valn’e have required the parole boards to prepare written reasons for denying parole and to hold special additional hearings prior to placing parolees in custody after their arrest for additional crimes to determine if parole is to be revoked. New Court Decisions Increase Costs In the case of Gee vs. Brown, the California Supreme Court granted state prison inmates a limited right to legal representation at parole board hearings at which a previously set parole date maybe rescinded. Seven additional positions at a cost of $277,754 are requested in the institution program and 2 new hearing represeIltatives and 1 seIlior stenographer for this program at a salary cost of $59,812 to: 1. Review all inmate disciplinary cases to be heard inthe institutions to determine which would require the presence of an attorney, 2. Ascertain whether the inmate wishes to waive his right to have an attorney present, and 3. Schedule and participate in parole board hearings at which attorneys will be present. . Additionally, the California Supreme Court in the matter of In re Rodriguezheld that a primary sentence must be set for all inmates propor- tionate to the inmate’s culpability for his crime. Consequently, all inmates who have served more than the usual length of time. in prison for an offense must be given a hearing to set a primary term. These decisions will increase costs by $134,310 in the budget year for eight temporary hearing representatives. Fluctuation in Parole Releases In recent years there have been two dramatic shifts in Adult Authority policies relative to the release of inmates to parole supervision in the community. The first change occurred in 1972 when the release policy became more restrictive and contributed to a substaIltial increase in insti- tution population. . From 1965 to 1972, the number of male felon inmates released to parole averaged 7,424 per year, ranging from a low of 6,02lin 1968 to a high of 9,489 in 1971. From mid-1972 through 1974, the Adult Authority’s more restrictive policies relating to the setting of parole dates and parole. re- leases resulted in a decline in male felon releases to 4,899 in 1973 and to 4,717 in 1974. In 1975, this trend reversed, largely as a consequence of three factors: 1. Adoption of more liberal parole release policies of the Adult Author- . ity. 2 .. A larger institution population from which paroles could be granted -a result of population build-up during the period mid-1972 through \u00b7\u00b7ltems \u00b7307-311 HEALTH AND WELFARE\u00b7 \/ 635 1974 when the r.elease policy was more restrictive. 3. The impact of recent court decisions which placed limits on the term of incarceration (Rodriquez decision) and granted inmates a limited right to legal counsel at- hearings to rescind previously set parole dates for disciplinary reasons (Gee decision). As a result, 10,578 male felons were released to parole during 1975, of which 7,949 were paroled during the last six months. It is anticipated that the release rate will normalize as the backlog of inmates held in prison by the more restrictive policies of the 1972 through 1974 period have been released. The new yearly release rate may exceed the rate prior to 1972 due to the impact of the Gee and Rodriquez deci- sions. The Rodriquez decision may shorten the average period of incarcer- ation of certain inmates, and the Gee decision may reduce the number of previously granted parole dates which are rescinded. Impact of Increased Releases on Crime The substantial increase in the number of inmates released to parole probably will result in an increase in the crime rate. From 1965 through 1972, the rate of parolees returned with new felony commitments aver- aged 10 percent by the end of the second year of parole. On this basis, the 4,717 male felons released to parole during 1974 would result in a return of ‘472 for new felony convictions during the specified period, compared to the approximately 1,058 which can be expected to be returned for that reason from the 10,578 releases in 1975. .. Parole Returns Along with the substantial fluctuation in the number of male felons released to parole, there also has been considerable variation in the num- ber of parolees returned to prison for parole violations, particularly in those returns not involving new court commitments. This group declined from a return rate of approximately 575 parolees per quarter at the begin- ning of 1968 to a low of less than 300 in the last quarter of 1971. In 1972 and the first half of 1973, the nuniber.returned.per quarter steadily in- creased to 620 in the second quarter of 1973. These returns declined to 200 in the first quarter, 280 in the second, and 175 in the third quarter of 1975. The dramatic increase in these parole returns in 1912 and the first half of 1973 is due partly to an increase in the total parole population which was caused by the larger than average number of paroles granted from 1969 through 1971. However, a more significant factor was the change in parole recision policies of. the Adult Authority in 1972. The substantial quarterly decline in parole returns without new commitments commenc- ing in 1973 and continuing through 1975 reflects: 1. More lenient parole return decisions by the Adult Authority. 2. The impact of court decisions guaranteeing the parolees’ rights to counsel, to confront adverse witnesses and to present evidence in their own behalf. 636 I HEALTH AND WELFARE Items 307-311 DEPARTMENT OF CORRECTIONS-Continued IV. COMMUNITY CORRECTIONAL PROGRAM The community correctional program includes conventional and spe- cialized parole supervision, operation of community correctional centers, outpatient psychiatric services, anti-p.arcotic testing and cominunity re- source development. The program goal is to provide community supervi- sion, support and services to parolees to assist them in achieving successful parole adjustment. Total expenditures of $25,042,806 are requested for this program in the budget year, consisting of $24,814,638 in state General Funds and $228,168 in reimbursements. The proposed General Fund expenditure represents an increase of $1,167,436 or 4.9 percent over the current year resulting from parole population and price increases, merit salary adjustments and a reduction in federal reimbursements related to the Sacramento Com- munity Correctional Center. Proposed Workload Positions A total.of 47 parole pOSitions at a salary cost of $809,325 are requested on the basis of approved workload formulas to handle parole population increases. An additional 1.2 positions at a salary cost of $18,043 are pr~posed to restore previously approved workload positions deleted un- der the provisions of Section 20, Budget Act of 1975. Closure of Vinewood Community Correctional Center The department plans to close the Vinewood Center for female nonfel- on addicts as an uneconomical operation and transfer the population (ap- proximately 25 persons) to another community center along with a portion of the staff. The resulting savings will be utilized to support the female parolees at their new location and expand other community pro- grams for parolees. V. ADMINISTRATION The administration program includes’ centralized administration at the departmental level headed by the director. It provides program coordina- tion and support services to the institutional and parole operations. Each institutipn is headed by a warden or superintendent and its own admin- strative staff. Institutional operations are divided into custody and treat- ment functions, each headed by a deputy warden or deputy superintendent. The parole operation is administratively headed by a chief parole agent assisted by centralized headquarters staff. The state is divided into 5 parole regions, each directed by a parole administrator. The parole function is subdivided into districts and parole units. The support requirements for administration (not prorated to other programs) are estimated at 239 man-years and $7,711,625, which includes. a General Fund appropriation of $7,331,227 and reimbursements of $380,- 398. The increase of $767,810 or 11.1 percent over the current year repre- sents merit salary adjustments, price increases, full-year operating costs of the regional training academy (formerly funded with federal funds) and other minor adjustments. HEALTH AND WELFARE \/ 637 VI. UNALLOCATED REDIRECTION We recommend that the Department o[Corrections identify thepro~ grarp reductions which must be made to accomplish the proposed transfer of $683,000 from this agency to the Department of Rehab11itatioIi. In 1971 federal funds became available through the Department of Rehai>ilitation for support of public offender programs. The prior admin- stration choose to apply a portion of such funds to offset partially previous- ly established General Fund supported programs in the Department of Corrections and thereby reduce General Fund expenditUres. \”The Gover- nor’s Budget proposes to return these funds, totaling $683,000, to the Department of Rehabilitation to expand programs for physically disabled persons. We are not opposed to the transfer, but since the Governor’s Budget does not replace these furids with General Fund monies to fully finance the Department of Corrections’ programs we believe the $683,000 reduction must be identified. \” VII. SPECIAL ITEMS OF EXPENSE Items 308-:-311 provide reimbursements to the cpunties for expenses relating to transportation of prisoners and parole violators, returning fugi- tives from justice from outside the state, court costs and other charges relat:edto trials of inmates and local detention costs of state parolees held on state orders. Thesereimburseinents are made by the State Controller on the basis of claims filed by th~ counties in accordance with law. The Governor’s Budget proposes continuation of the current year’s estimated expenditure level. DEPARTMENT OF THE YOUTH AUTHORITY Items 312–318 from the General Fund – Budget p. IS06 Requested 1916-77 ………………………… ………………………………….. .’. $112,026,378 Estimated 1975-76 …………………………….. ;…………………………………. 110;139,336 Actual 1974-,75 ……………………… ; …………. ;, …….. :………………………… 98,986,817 Requested increase $1,887,042 (1.7 percent) Total-recomm~nded reduction -……………………………………….. ….. $55,060 197&-77 FUNDING BY ITEM AND SOURCE Item DeSCription Fund Amount 312 Department support General $87,836,698 _ 313 Transportation of persons committed General -43,540 314 Maintenance and operation of county ju- General 3,825,840 veIlile homes and camps 315 Construction of county juvenile homes General 400,000 and camps – 316 County delinquency prevention com- General 33,300 missions-administrative expenses 317 County delinquency prevention com- General 200,000 missions-research and training grants 318 Assistance to _ county special probation General 19,687,000 supervision programs $112,026,378 638 \/ HEALTH AND WELFARE Items31~18 DEPARTMENT OF THE YOUTH AUTHORITY-Continued SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Transfer of Funds. Recommend identification of program . reductions to effect. savings equal to proposed transfer of $623,770 to the Department of Rehabilitation. 2. Funding Level. Recommendation withheld pending May revision of population estimate. 3. Staff Benefits. Reduce $21\/X){) (Item 312). Recommend reduction to reflect more accurate estimate of benefit costs for new positions. 4. Psychiatric Services. Reduce $34,060 (Item 312). Recom- mend elimination of contract psychiatric services. GENERAL PROGRAM STATEMENT Analysis page 643 643 644 644 The responsibility of the Youth Authority Board and the Department of the Youth Authority as stated in the Welfare and Institutions Code, is \”. . . to protect society more effectively by substituting for retributive punishment, methods of training and treatment directed toward the cor- rec~on and rehabilitation of young persons found guilty of public of- fenses.\” The board arid the department have attempted to carry out this mandate through the program areas discussed below. Youth Authority Board The Youth Authority Board, consisting of eight members, is charged with personally interviewing, evaluating and recommending a treatment. program for each offender committed to the department. It also sets terms of incarceration and is the paroling authority for all such wards. Administration The administration program consists of (1) the department director and his immediate staff, who provide overall leadership, policy determination and program management; and (2)- a support services element, which provides staff services for fiscal management, management analysis, data processing, and facility construction, maintenance and’ safety. CommunitY Services The community services program provides direct staff services to local public and private agencies and administers state grants to subsidize cer- tain local programs relating to delinquency and rehabilitation. Program elements are as follows. SerVices to Public and Private Agencies . The department is required by law to establish minimum standards of operation and make compliance inspections of special probation services which receive state subsidies and county-operated juvenile halls, ranches, camps and homes and, in some cases, jails in which juveniles are incar- cerated. The department is also authorized to assist in the improvement Items 312–318 HEALTH AND WELFARE \/ 639 of local juvenile enforcement, rehabilitation, and delinquency preventiori programs by providing training and consultation services to local agencies. Financial Assistance The department administers state subsidies to local government (Qr construction, maintenance and operation of ranches, camps, and\u00b7 homes for delinquents, special probation programs, and delinquency prevention programs. State support, which is intended to encourage the development of these local programs, is based on the belief that local treatment of delinquents is more desirable, if not more effective, than incarceration in state facilities. Treatment in the community or in locally operated institu- tions retains the ward in his normal home and community environment or at least closer to such influences than may be the case with incarcera- tion in state facilities. Delinquency Prevention Assistance The department provides staff services to disseminate information on delinquency and its possible causes; to encourage support of citizens, local governments, and private agencies in implementing and maintaining de- linquency prevention and rehabilitation programs; and to conduct studies of local probation departments. Rehabilitation Services The rehabilitation services program, which is administered by a deputy director and supporting staff in Sacramento, is geographically divided on a north~south regional basis. Each region is directed by an administrator who is responsible for all institutional and parole functions within his region. This organizational structure was established as a means of provid- ing a continuum of treatment and reducing artificial barriers created by separate and distinct institutj.on and parole functions. . ‘ The program consists of eight institutions, three reception centers, and five forestry camps that will house an estinlated average daily population of 5,041 wards, plus a community parole caseload program involving 7,431 wards for a projected total daily average population of 12,472 wards in fiscal year 1976-77 (Tablel). The department estimates it will handle a daily average of 214 additional institutional wards but 322 fewer parolees in 1976-77 than in the current year. . The wards generally come from broken homes, below average econom- ic status and substandard residential areas. They are usually academically retarded, lack educational motivation, have poor work and study habits, and have few employable skills. Sixty-three percent have reading compre- hension levels three or more years below their age-grade expectancy and 85 percent are Similarly deficient in math achievement levels. Many also have-psychological disorders or anti-social behavior patterns. Diagnosis All wards received by the Department of the Youth AuthOrity undergo a diagnosis procedure at one of three departmental reception c;enters, which includes interviews, psychological and educational testing, and medical and dental examinations. Based on this information, staff develops 640 \/ HEALTH AND WELFARE DEPARTMENT OF TliE YOUTH AUTHORITY-Continued Table 1 Items. 312-3.1~ Average Daily Population of Youth Authority Wards 1974-75 Reception centers ……………………………………………………………. \u00ab15 Facilities for males ………………. ………………………………………….. 3,660 Facilities\u00b7 for females ………………………………………………………… 179 Subtotal (Institutions) …………………………………………………… 4,514 Change from prior year ……………………………………………….. . Parole caseload …………………………………………. ……………………… \u00b78,327 Change from prior year ……………………………………………… .. Total Wards ……………………………………………………………….. 12,841 1975-76 660 3,977 190 4,827 +313 7,753 -574 12,580 1976-77 660 4,191 190 5,041. +214 7,431 -322 12,472 recommendations to assist the Youth Authority Board in determining institutional assignments and treatment programs for the individual wards. . Care and Control Residential care in camps and. institutions provides housing, feeding, clothing, medical and dental services, while parole supervision in the commuhity provides required surveillance and control to assist in rehahili- tating the ward and protecting the community. Treatment Treatment includes counseling;religious services, recreation, psychiat- ric services, academic and vocational training in the institutions and pO\/lt- release treatment in the community~ These services are designed to meet the needs of the wards committed as an aid to their rehabilitation. Research The research program provides the evaluation and feedback to manage- ment necessary to\u00b7 determine those programs which are effective\u00b7 and should be continued, those that show promise and should .be reinforced and those that should be discontinued. It also provides estimates of future institutional and parole caseloads for budgeting and capital outlay pur- poses, and collects information on the principal decision points in ‘the movement of wards through the department’s rehabilitation program from the time of initial referral to final discharge. ANALYSIS AND RECOMMENDATIONS The departmental programs, as proposed in the Governor’s Budget, represent a net General Fund cost of $112,026,378 and 3,884.3 man-years of effort. Additionally, the department anticipates budget-year reimburse- ments amounting to $5,860,803 and federal grants totaling $259,140 for a total expenditure program of $118,146,32I. Table 2 summarizes the budget request, showing sources of funding by category, expenditure levels by program area, and proposed dollar and position changes. It .should be noted that the comparisons between the current and budget years do not realistically portray support needs in that costs associated with projected population increases which have been acknowledged in the’ current year are not funded in the budget year. As discussed later, this budgeting technique materially understates 1976-77 Items 312-318 HEALTH AND WELFARE \/ 641 support costs of the department. Table 2 Budget Summary Change from Current Year Current Year Proposed $112,026,378 5,860,803 259,140 Amount Percent Funding General Fund ………………. . Reirtlbursements …………… . Federal Funds ……………… .. Totals: ……………………………….. . Programs $110,139,336 10,170,951 491,578 $120,801,865 $118,146,321 +1,887,042 -4,310,148 -232,438 $-2,655,544 Youth Authority Board…. $1,207,053 $1,328,767 $+121,714 Man~years ………….. :……… 32.5 37 +4.5 Administration ……………… $4,749,897 $4,873,058 $+ 123,161 Man-years…………………… 177.2 172.2 -5.0 Community Services…….. $27,591,160 $26,129,533 $-1,461,627 Man-years…………………… 59.8 58.8 -1.0 Rehabilitation Services …. $85,043,860 $84,886,503 $ -157,357 Man-years…………………… 3,589.1 3,548 -41.1 Research ………………………… $2,209,895 $1,552,230 $-657,665 Man-years…………………… 84.5 68.3 -16.2 Unallocated Redirection a .. $-623,770 $-623,770 +1.7% -42.4 -47.3 -2.2% +10.1% +13.8 +2.6 …,2.8 -5.3 -1.7 -0.2 -1.1 -29.8 ..;..19.2 Totals…………………………………. $120,801,865 $118,146,321 $-2,655,544 -2.2% Man-years…………………… 3,943.1 3,884.3 -58.8 ~1.5 a Reflects the retention of federal funds by the Department of Rehabilitation as discussed in this analysis. Budget Anticipates Reduced Retirement CQsts The current employer contribution rate for members of the \”industrial\” category of the Public Employees’ Retirement System (i.e., noncustody employees) is 16.90 percent. This rate has been actuarially determined to be too high, and legislation (AB 2325) is currently pending to reduce it by 2.86 percent. The department’s budget is based on the assumption that the lower rate will become law. If AB 2325 or a similar bill is not enacted, departmental costs will increase by about $342,000 in the budget year. Court Decisions Increase Costs The department proposes to add $866,335 and 48 positions to comply with court decisions affecting due process procedures for wards and pa- rolees. These decisions and the costs of compliance are discussed below. In Wolff vs. McDonnell, the U.S. Supreme Court specified procedural due process standards for residents of correctional institutions who are subject to disciplinary actions. The decision established the following re- quirements for determining misconduct. 1. Advance written notice of charges must b~ given to the accused. 2. The accused shall be allowed to call witnesses and present evidence. 3. Substitute counsel should be provided in some cases. 4. The fact finder must be impartial. 5. The fact finder must make a written statement as to the\u00b7 evidence relied on and reasons for the disciplinary actions. The budget contains $480,400 and 31 man-years (22 parole agents and 642 ‘HEALTH AND WELFARE DEPARTMENT OF THE YOUTH AUTHORITY-Continued rune clerical positions) to implement these provisions. Items 31W18\u00b7\u00b7\u00b7 Court decisions in re Olson and re Dennis Love authorized inmates and parolees to review their files maintained by the department. The budget contains $5,000 for temporary help to comply with this decision. In Gee vs. Brown, the California Supreme Court required higher \”due process\” standards for institutional residents who, having been referred to parole, are subsequently accused of a rule or law violation which may result in the rescinding of referral to parole. The budget contains $61,038 and three positions for determining whether wards should be represented by counsel during the factfinding and disposition hearings in these cases. In re LaCroix and re Valrie, the California Supreme Court found that pending criminal proceedings do not constitute probable cause for a parol- ing authority (the Youth Authority Board) to detain a parolee without conducting a timely pre-revocation proceeding. The budget contains $319,897 and 13 positions to conduct the hearings required by these two decisions. Other Program Changes . Dental Care. The department requests $51,731 to add one dentist and one dental assistant at DeWitt Nelson Training Center. This center, which provides pre-camp training for all wards scheduled to be transferred to the five Youth Conservation camps, is currently staffed with a half-time dentist and half-time dental assistant who are unable to perform all re- quired dental work on the pre-camp and other wards. The additional dental staffing should improve the dental care level of wards released directly to parole and insure that ward~ transferred to the camps are in good dental health, thereby reducing the need for transporting them from camp to a Youth Authority institution for dental work. Camp Teachers. The budget contains $104,133 to continue support for a teacher at each of the five camps. Until September 1974, the camp teacher positions were funded by Title 1 of the Elementary and Secondary Education Act (ESEA). However, this was determined to be inappropri- ate because Title 1 ESEA funds are intended to supplement, rather than fully support, state programs. From September 1974 until August 1976, the positions will be funded from the Governor’s 4 percent discretionary funds under the Comprehensive Employment Act (CETA). However, the Em- ployment Development Department, which administers CET A, has in- dicated that these funds will not be available after August 31, 1976. The $104,133 will support these positions f()r the remainder of fiscal year 1976- 77. Camp Supervisors. The budget also contains $63,025 to provide a sec~ ond group supervisor during the 11 p.m. to 7 a.m. shift at each of the four camps which now have only one\u00b7 group supervisor on duty during that time. The fifth camp, Oak Glen, is presently staffed at the level requested for the other camps. Ward Pay. The department requests $14,500 to increase ward pay by an average of 6.7 percent. Under this program, older and more sophisti- cated wards are paid 4 cents to 12 cents per hour for work relating. to Items 312:.:-318\u00b7 HEALTH AND WELFARE \/ 643 institutional operations. More Staff for Youth Training School .. \u00b7 Funds are included to provide increased parole agents and an in-house psychiatric capability at the Youth Training School (YTS). Presently, YTS has one parole agent for each one hundred general population wards. The budget proposes sixteen and one- half man-years at a cost of $201,562 to provide a 50 to 1 ward\/parole agent ratio. The proposed ratio is the same as that used at other Youth Authority institutions; Seven additional positions costing $156,601 are proposed for psychiatric services at YTS. The YTS psychiatric program is discussed later in this analysis. Transfer of Federal Funds Requires Unspecified Program Cuts We recommend that the Department of the Youth Authority identify the program reductions which must be made to accomplish the proposed transfer of $623,770 from this agency to the Department of Rehabilitation. In 1971 federal funds became available through\u00b7 the Department’ of Rehabilitation for support of programs for treating disabled offenders. The’ previous administration chose t,o transfer a portion of those funds to the Youth Authority to offset some of the costs of previously established Gen- eral Fund programs and thereby reduced General Fund expenditures. The last item in Table 2, \”Unallocated Redirection,\” ideritifies these fed- er31 funds (totaling $623,770) which, in the budget year, will be retained by the Department of Rehabilitation to expand its programs for severely handicapped persons. No provision is made to replace these funds with General Fund monies. Thus, unspecified Y olith Authority programs will have to be reduced to compensate for this funding loss. Institutional Population Underbudgeted We withhold recommendation on the Youth Authority support budget pending the May revision of the population estimate. As reflected in the Governor’s Budget, the department has increased its estimate of current-year program requirements by $1,040,888 and 64.8 man-years over the originally budgeted level as a result \u00b7of population increases. However, corresponding adjustments have not been extended to the budget year, even though the 197&-77 institutional population esti- mate\u00b7reflected in the budget narrative shows a further increase. The administration recognizes that present and projected population levels will necessitate higher budgetary support if present policies remain unchanged. However, the budget states that the department will examine’ institutional length of stay with the view of reducing commitment time as an alternative to providing additional General Fund support. We find this pOSition a possible change in policy which is inconsistent with the department’s experience with wards presently committed as described on page 808 of the Governor’s Budget: \”The prior offense records of youth currently being committed . . . are more extensive than previously …. There has been a marked in- crease in violent behavior by Youth Authority wards in institutions. . . . As a result of the screening process resulting from improved probation resources, the Youth Authority is receiving older, more criminallyex- perienced, difficult youths requiring longer periods of institutional and 644 . \/ HEALTH AND WELFARE Items 312:.;.318 DEPARTMENT OF .THE YOUTH AUTHORITY-Continued parole treatment and supervision. The Youth Authority Board has in- creased length of stay from an average of8.6 months in 1961 tol2.3 months in 1974.\” (Italics added). In view of these statements, we believe it wouldbe unwise for budget- ary pressure to influence the Youth Authority Board to shorten lengths of stay. The board must consider many factors, including the need to protect the public from further criminal acts, when establishing periods of incarc- eration. For these reasons, we withhold recommendation on the depart- ment’s institutional support needs pending the May revision. Support is underbudgeted by approximately $2.5 million on the basis of population estimates contained in the Governor’s Budget. Staff Benefits Overbudgeted We recommend a reduction of$21,000 to reflect more accurate estimate of benefit costs for new positions (Item 312). The department’s budget request for new positions includes $220,174 for staff benefits. This amount, which is based on a percentage of payroll, provides funds for the state’s share of the costs of retirement benefits, social security, unemployment and workers’ compensation benefits and health benefits. The health benefits component was budgeted at 6.23 percent of payroll. In conjunction with the department, we have reviewed this component and find that it approximates 3.6 percent rather than 6.23 percent of payroll. The difference, when applied to payroll costs for the new positions, amounts to approximately $21,000. Psychiatric Services-Youth Training School We recommend a reduction of $34\/)60 to eliminate contract psychiatn’c services for wards at the Youth Training School (YTS) (Item 312). Presently, ITS does not have an in-house psychiatric staff. A minimal level of psychiatric service is provided by one consulting psychiatrist and one consulting psychologist on a part-time basis. Costs of these .services were $47,276 in 1974-75 and are estimated at $32;750 for 1975-76. The sum of $34,060 is requested to continue these services in the budget year. In addition to these part-time consultants, the budget also proposes to add one psychiatrist, two staff psychologists, two psychiatric social workers and two stenographers to the ITS staff ata General Fund cost of $156,601. While we believe that the in-house psychiatric program would provide a desirable improvement in the level of such services, it should offset the need to continue the consulting psychiatric services. We therefore recom- mend elimination of the consulting contracts for a General Fund savings of $34,060. ;lteIil319 HEALTH AND WELFARE \/ 645 CAlIFORNIAcHEALTH FACILITIES COMMISSION, Item 319 from the California Health FacilitiesC()mmission Fund Budget p. 824 Requested 197&-77 ………………………………………………………………. . Estimated 1975-76 ………………………………………………………………… . Actual 1974-75 ……………. ~ ………………………………………………. ;; ……. . llequested increase $107,211 (11.2 percent) Total recommended\u00b7 reduction …………………………………………… . GENERAL PROGRAM STATEMENT $1,062,939 9q5;728 507;083 None The California Health Facilities Commission was created by Chapter 1171, Statutes of 1974, which renamed the California Hospital Disclosure Act, the California Health Facilities Disclosure Act. This act includes provisions related to skilled nursing and intermediate care facilities in addition to those for the hospitals. The commission is responsible for (1) the preparation of a uniform accounting and reporting system forhospi- tals, and skilled nursing and intermediate care facilities; and (2) the provi- sion. of other accoun):ing services to\u00b7 improve the efficiency and effectiveness of services provided by these facilities. The act provides that the commission is to be supported through fees levied against all facilities which are deposited in the California Health Facilities Commission Fund . . In addition, as a secondary objective to the uniform accounting and reporting program, Chapter 1072, Statutes of 1973, required the commis- siqn Jo prepare\u00b7 and submit a proposal for a state health facility economic stabilization program to the Legislature before July 1, 1975. This proposal was submitted to the Legislature on March 29, 1975. . ANALYSIS AND RECOMMENDATIONS We recommend approval. The budget proposes anappropriatibn of$I,062,939 from the California Health Facilities Commission Fund for support of the commission during the 1976-77 fiscal year which is an increase of $107,211, or 11.2 percent, overestimated current year expenditures. Total expenditures, all funds, are estimated to increase by $52,211, or 5.2 percent, in 1976-77, as shown inTable 1. . . The federal funds shown for the 1974-75 and 1975-76 fiscal years are \u00a3rom a contract with the’ Department of Health, Education and Welfare (:DHEW) requiring the development of specified hospital care statistics. These funds enabled acceleration and augmentation of this activity. al- ready required by state Jaw~ This project will be completed during the current year thereby eliminating the source of federal funds for the budget year. The commission is currently seeking to obtain another con- tract with DHEW for a pilot project involving rate setting for hospitals and\/ or skilled nursing and intermediate care facilities. 6461\” \u00b7HEALTH ANO WE;LFARE CALIFORNIA\u00b7 HEALTH FACILITIES COMMISSION-Continued Table 1 California Health Facilities Commission Estimated Expenditures and Source of Funds 1974-75 through 1976-77 E~timated Expenditures Uniform accounting and reporting: Actual 1974-75 Hospitals …………………………………………………….. $588,446 Skilled nursing and intermediate care facilities ……….. ; ……….. ; ……………………………. .. Economic stabilization program ……. \” ….. ,…33,805 Total Expenditures ……………………………….. $622,266 Source of Funds California Health Facilities Commission Fund ………… ; ……. : …………. ;; …………. ,………….. $507,083 Federal funds ……………………………………………. $115,183 Uniform Accounting and Reporting Program Estimated 197~76 $709,688 301,040 $1,010,728 $955,728 $55,000 Item 319 . . Proposed. 1976-77 $690,910 372,029 . $1,062,939 $1,062,939 The basic . .objectIve .of the Calif.ornia Health Facilities C.ommissi.on is. t.o devel.oP and administer the implementati.on .of regulati.ons reqlliring a unif.orm system .of acc.ounting and financial and statistical rep.ortingf.orall h.ospitals and skilled nursing and intermediate care facilities in California. The c.ommissi.on’c.ontracted with a private acc.ounting fiim f.or devel.oP- ment .of an accounting and rep.orting manual f.or h.ospitals during the 1973-74 fis’cal year which was .officially ad.opted N.ovember 14, 1973. C.opies were distributed t.o all h.ospitals and, UP.on c.ompleti.on .offiscal years .on .or after June 30,1975, all h.ospitals are required t()submit prescribed reports t.o the c.ommissi.on. The same type .of system f.or skilled nursing an<;l inter- mediate care facilities is being devel.oped during the current year f.or use .on .or after July 1, 1976. Theref.ore, funds appr.opriated in the budget year will be used t.o (1) pr.ocess the first annual financial rep.orts fr.om all h.ospitals which sh.ould be receiyed byN.ovember 1976, (2) .c.omplete the devel.opment phase f.or regulati.ons and the acc.ounting and rep.orting manual f.or skilled nursing and intermediate care facilities, and (3) begin pr.ocessing .of the first annual rep.orts received fr.om the skilled nursing and intermediate care facilities. The increase in estimated expenditures f.or 1976-77 is mainly due t.o the' pr.oP.osed additi.on .of three P.ositi.ons. This W.ould increase the t.otal auth.or- ized P.ositi.ons fr.om 23.5 t.o 26.5 with the additi.on .of .one legal c.ounsel, .one pr.ogrammer and .one clerk. These increases.aresuPP.orted byc.omparable estimated increases in w.orkl.oad. In additi.on, the aPP.ointment.of an att.or- ney t.o the staff is .auth.orized by sta.te law. Theref.ore, we are recOJ:,nmend- ing appr.oval .ofthe am,ount requested. "

pdf 1977-1978 AFDC Budget LAO Analysis

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1977-1978 AFDC Budget Analysis.pdf

” 564 \/ HEALTH AND WELFARE Items 257-259 EMPLOYMENT DEVELOPMENT DEPARTMENT-Continued Nearly 21 percent of the total effort statewide goes into the application process. Only 35 percent of the total resources of the program are used for the primary function, job placement. An almost equal amount of resources is used for indirect services such as developing labor market information, establishing employer and union services, promoting community relations and providing technical assistance. The staff development function is also a part of the indirect service. We question a distribution of resources which only directs 35 percent of the funding into the major thrust of the program. In fact, we were informed, the registration process in some instances actually consumes up to 45 or 50 percent of the field resources. Costs Per Action Increasing. Filially, the report should deal with the problem of rising costs per action in the employment services program. Table 3 compares the cost per individual placed and the cost per place- ment transaction for fiscal years 1974-75 through 1977-78. Table 3 Cost of Placement Activities 1974-75 through 1977-78 FS Total Program Fisc\/Ii .’ ‘ellr Expenditures 1974-75 actual) ……………………………. $49,971,565 1975-76 (actual) ………………………….. 52,272,732 1976-77 (est.) ……………………………… 59,178,868 1977-78 (est.) ……………………………… 61,472,507 Pilicement Cost per TTllI1S<1ch'ons Transllction 436,007 $114.61 412,575 126.70 465,000 127.27 465,465 132.07 lndil iduals Placed 293,941 280,007 323,107 323,444 Cost per lndilidual Piliced $170,Ol 186.68 183.16 190.06 \"Placement Transactions\" refer to the total number of placements achieved. Several transactions may involve the same individual placed in successive short-term jobs. \"Individuals placed,\" on the other hand, re- , ports only the total number of individuals placed during a fiscal year. The figures for 1976-77 and 1977-78 are based on estimates of the department. If the pattern of previous years is repeated, costs will actually be higher for both transactions and individuals placed than the initial estimates indicate. The report should include a discussion of this pattern of rising costs per benefits. FOOD STAMP PROGRAM All potentially employable applicants for food stamps are required to register for employment with EDD. As a condition for continuing eligibili- ty for food stamps, registrants must accept referral to appropriate job . openings. This program is fully funded by the federal government. The 1977-78 budget of $2,739,400 is an increase of $99,967, or 3.8 percent. This will provide for 145 position equivalents. The impression of most EDD management and staff that we have talked to is that this registration process is an expensive program which has very little value or effect. Items 257-259 HEALTH AND WELFARE \/ 565 WORK INCENTIVE (WIN) The Work Incentive (WIN) program is designed to provide e~ploy\u00ad ment and training services to the employable recipients of the Aid to Families with Dependent Children. (AFDC) program. With specified ex- ceptions, employable members of AFDC families must register with EDD for the WIN program as a condition of eligibility to aid. . The WIN program is funded by 90 percent federal funds matched with 10 percent state General Fund. A total of $45,027,396 has been budgeted for the program in fiscal year 1977-78. The General Fund portion is budg- eted at $4,438,406 which is an increase of $323,313, or 7.9 percent, above the amount estimated to be expended during the current year. One change that will occur in the budget year is the transfer of state matching funds for the federal WIN child care allocation from EDD to the Department of Benefit Payments. Through this year, the federal WIN child care allocations have been budgeted by the Department of Benefit Payments but the matching funds were carried in the EDD budget. . Recent Program Results The eighth annual report to the Legislature regarding the effectiveness of the California Work Incentive program indicates that the WIN program during the 15 months encompassing fiscal year 1975-76 plus a three-month transitional quarter ending September 30, 1976, exceeded the federally established goals in terms of the numbers of WIN participants who en- tered employment. The Department of Labor had set goals of 37,000 job-placements to be accomplished by the department during the 15 months. DuriIig that time, 46,133 WIN registrants entered employment. According to the data collected by the Department of Benefit Payments, welfare savings for the 15 months amounted to $37,000,000. California ranked well among the other. more populous states both in terms of the number ofregistrantswho entered employment and in terms of the total welfare savings. One area in which the department has made some improvement is the relationship between the EDD WIN unit and the staff relating to WIN in the Department of Benefit Payments (DBP). Staff from the two depart- ments have worked out problem areas and have begun to coordinate in seeking to establish better working relationships in the field between staff of the county welfare departments and EDD field offices. There is some discussion now of co-locating DBP and EDD WIN central office staffs in order to further enhance working relationships. Another change in the program which appears to improve significantly the potential for assisting welfare recipients to enter employment is the Intensive Manpower Services (IMS) component. This component, adopt- edMarch 16, 1976, consists primarily of group job-finding workshop ses- sions in which the participants are helped in developing techniques for job seeking, application completion and job interviewing. Job-fjnding work- shops have iIi other settings proven to be successful and it is likely that this will prove to be a strengthening feature for the WIN program. '. 566 \/ HEALTH AND WELFARE Items 257-259 EMPLOYMENT DEVELOPMENT DEPARTMENT-Continued Problem Areas Although the department does seem to be making progress in correct- ing some of the past problems with the WIN program, there are a number of major problems which hamper the effectiveness of the program. Registration. A year ago, reports from the department indicated that over 30 percent of the WIN staff time is used simply for the mandatory registration process. The eighth annual WIN report states that 16 percent of the time is still used for registration of clients who will never be assisted by the program. This problem results from the federal requirement that all nonexempt AFDC employable recipients must register with the WIN program as a condition of eligibility to receive aid. Table 4 compares the number of registrants with the number of persons who entered employ- ment during fiscal year 1975-76 and the transitional quarter ending Sep- tember 30, 1976. Table 4 Comparison of WIN Registrants with Job Entrants Q Fiscal Year 1975-76 and Transition Quarter Registmtiol1s Periods COI\u00b7ered (Cumulatil\"e) FY July 1975 through June 30, 1976 .............................................. 355,214 Transitional Quarter ending September 30, 1976...................... 387,633 a Source: J..\";ghth AllIIIIII\/ Report to the Legis\/llture all WI.\\\" . Registral1ts At El1d of Reportil1g Period 137,789 230,392 RegistTJl11ts Obtail1il1g Full-Time Emplo.lwe\/lt (Cumulatil'e) 33,821 41,436 . There were 387,633 cumulative registrants in the WIN program during the I5-month period. Only 41,436 of these registrants entered employ- ment during that same time. Even this comparison does not give an accurate reflection of the relative ineffectiveness of the WIN program. Many of those who entered employment were never participants in the WIN program. A participant is a WIN registrant who is entered into a WIN service component. Of those who entered employment, it is estimated that almost two-thirds found jobs on their own rather than being referred by EDD. The eighth annual report states that only about 5 percent of the registrants on-hand at the end of each reporting period were actually participating in one of the WIN components; This indicates that there are many clients who are registered in the WIN program who are never provided a service. . Recognizing this problem, the department has applied to the Depart- ment of Labor requesting waivers in the WIN registration process. The department is asking to test the effectiveness of establishing WIN asa voluntary program in a few select counties. If the waivers are granted, the project will determine what savings may be realized by registering and serving only those AFDC clients who wish to volunteer for the WIN program. Disincentives to Employment. One of the major problems facing AFDC employable recipients is the issue of disincentives to employment. Items 257-259 HEALTH AND WELFARE \/ 567 As social benefits through welfare and \u00b7medical insurance programs \u00b7are increasing, the disincentives for employment are also incre~sing. Higher costs of employment. and related expenses also work against the AFDC family head entering employment. Because of these disincentives,. the department is seeking waivers to test the benefit of using public funds to contract with private employers to provide jobs for volunteer AFDC recipients. WIN Program Evaluation We recommend that the department, in its ninth annual report to the Legislature on WIN present a fully documented evaluation of the WIN program components. During the past several years we have brought to the attention of the Legislature the lack of good evaluation systems that is characteristic of . most of the manpower programs and is particularly evident in the WIN program. The WIN program was inaugurated in 1968. Through'the years, there have been massive collections of data and unending reports gener- ated about it. Nevertheless, it is still virtually impossible to identify which components of the WIN program are the most effective. The seven basic WIN components as identified in the annual report are: 1. WIN Institutional Training. This component provides for vocation- al training through public or private facilities\u00b7 when it is determined that a WIN participant is not job-ready without some basic educational assist- ance. 2. Work Experience. A WIN participant may be placed in an un- salaried job training position for exposure to work experience and some skill training. 3. WIN On-the-job Training. The WIN participant may be placed in a regular employment situation in which the employer is reimbursed for portions of the costs of training the employee (up to 50 percent of the wages). . 4. WIN-COD (Career Opportunity Development). This is a special California Public Service Employment (CPSE) project administered by the State Personnel Board and the Employment Development Depart- ment. WIN-COD places participants in state and local government civil service positions. Salary costs are reimbursed to the hiring agencies for periods of up to one year. 5.WIN-PSE (Public Service Employment). In addition to the public service employment under WIN-COD, the Employment Development Department also administers a separate WIN-PSE program. 6. Intensive Manpower Services. This is a new component designed to provide WIN participants with ,specific help in terms of job development and job-seeking techniques. It is administered primarily through the use of group job-finding workshops. 7. Participation in Other Programs. A WIN participant may be re- ferred to another employment or training program such as programs under the Comprehensive Employment and Training Act (CET A). There are no data available to demonstrate which of the above pro- grams are effective for the various types of clients. The costs identified 568 \/. HEALTH AND WELFARE Items 257-259 EMPLOYMENT DEVELOPMENT DEPARTMENT .....,Continued with each of the program components are unreliable. We recognize that the department has made efforts to improve the program through innova- tive new projects. However, the real effectiveness of the existing program has not been thoroughly evaluated. Therefore, we recommend that dur- ing the calendar year 1977, the department thoroughly review andevalu- ate the program and present the results of that evaluation with recommendations for changes in the ninth annual report to the Legisla- ture on WIN. SERVICE CENTER PROGRAM There are eight\u00b7 service centers located in San Francisco, Richmond, Venice, South Central Los Angeles, East Los Angeles, San Diego,\u00b7 East Fresno and West Fresno. The Service Center program, administered through these eight centers, seeks to facilitate the more effective coordi- nation; development and improvement of employment-related services to residents in the poverty areas in which the centers are located. The goal of the program is to assist the clients of the centers to reach their highest potential of economic self-sufficiency. The program budget request for 1977-78 is $4,169,137 which is an in- crease of $117,771, or 2.9 percent, over the amount estimated to be expend- ed during the current year. The program is totally supported from the State General Fund. Program Redesign During-the past year, the department has redesigned the Service Cen- ter program in an effort to (1) make it more effective in meeting the needs of the clients it serves and (2) demonstrate clearly to the Legisla- ture that the program is complementary rather than duplicative of the federally-funded employment services program. The Service Center program was first implemented in 1966. The con- cept at that time was to establish a \"supermarket\" of services where the disadvantaged would be given all needed service assistance under one roof. Several state and local government agencies were located in the centers and a single administrator was the \"functional\" supervisor over all the programs in each center. Because of the conflicting purposes of the different agencies, the concept quickly deteriorated. Legislation in 1968 moved the program into the newly formed Department of Human Re- sources Development (HRD). By 1972, the original program had virtually disappeared. HRD was be- ing funded for a program which only existed in name. The service centers could hardly be distinguished from HRD centers which werefully funded by the federal government. There was no distinct use of the state service center funds and no separate reporting system to identify program out- puts. The department has now established a clearly defined separate pro- gram with 169 positions operating out of the eight service centers. Approx- imately 79 of these positions provide direct employment-related services to a specific caseload of clients. Service center clients are certified as being disadvantaged and hard-to-place persons in need of services beyond the Item 261 HEALTH AND WELFARE \/ 603 tion and an analyst, as his assistant in the director's office. The department also has a personnel section and an affirmative action section in the ad- ministrative services division. We believe that these units can supply the necessary assistance to the civil rights officer in the director's office. Therefore, we recommend elimination of the analyst position in the direc- tor's office. The total savings including salaries, benefits and operating expenses and equipment from eliminating these six positions is $170,880, of which 20 percent, or $34,176, is General Fund. Table 7 shows the savings resulting from each proposed position reduction. Table 7 Savings Resulting from Proposed Position Reductions Position classification Chief Deputy Director ............... , ........................... . Vocational Rehabilitation Counselor .................. .. Clerk Typist II .......................................................... .. Legal Advisor ............................................................. . Legal Counsel ........................................................... . Analyst.. ...................................................................... .. Proposed salary 1977-78 $33,216 . 16,904 9,384 30,684 20,460 18,180 Estimated staff benefits $6,201 3,156 1,752 5,729 3,820 3,394 Estimated operating expenses and equipmeJlt allocation $3,000 3,000 3,000 3,000 3,000 .3,000 Total.............................................................................. $128,828 $24,052 $18,000 General Fund (20 percent)\u00b7 ........................................................................................................ .. Federal Funds (80 percent) ........................................................................................................ .. DEPARTMENT OF BENEFIT PAYMENTS General Summary Total salings $42,417 23,060 14,136 39,413 27,280 24,574 $170,880 $34,176 $136,704 Funds for the Department of Benefit Payments are contained in six budget items and one control section of the 1977:....78 Budget BilL As shown in Table 1, the department requests a total of $1,551,453,593 from the General Fund, a $131,869,105, or 9.3 percent increase over estimated cur- rent year \"expenditures. Budget Bill Item 261 262 263 Control Section 32.5 264 265 266 Table 1 Department of Benefit Payments General Fund Request for 1977-78 Purpose Departmental Operations ................................. . Cash Grants: Aged, Blind and Disabled ...... .. Special Adult Benefits Program ..................... . Cash Grants: AFDC .......................................... .. WI;'; Child Support ........................................... . County Welfare Department Operations .... .. Legislative ~landates ........................................ .. EstiJn;lted 1975-76 $16,550,188 742,278,300 6,116,300 576,666,500 68,772,000 9,201,200 81,419,584,488 Proposed 1976-77 $16,855,890 824,341,300 5,609,300 616,972,400 327,803 70,124,800 17,222,100 81,551,453,593 Percellf ~ > Z o :e t%l ~ !XI t:’l -…. CD 3 ~ …… Item 261 HEALTH AND WELFARE \/623 The 1977-78 budget shows a total request for blanket funds of $2,416,837 from all funds. This request compares to actual expenditures of $4,537,286 in 1975-76. Because of the significant reduction we asked the department to indicate the amount of money to’ be allocated for each of the existing blankets. Table 5 shows how the department proposes to use the blanket funds it has requested. It appears that the affirmative action blanket No. 950 and blanket funds for employment tax operations may not be adequately funded for 1977:…78. In the past, it has been possible to shift funds, such a~ salary savings, to cover the cost of blanket activities not budget~d. We recommend that this practice be discontinued in 1977-78 and that blanket activities be openly budgeted but limited to the amounts appropriated by the Legislature only for the purposes indicated. If the Legislature accepts this recommenda- tion, blanket funds would be scheduled in Item 261 of the Budget Bill by purpose, blanket numqer and amounts and language would be added to limit available funds to the amounts appropriated for the purpose speci- . fied. The number of positions funded through blankets is significant (in 1975- 76, 505 full-time equivalent positions were used). Yet, nowhere in the budget process is there a meaningful way to report how the positions have been used in the past or how they are to be used in the future. It is important that some form of reporting take place because (1) the number of positions funded through blankets is substantial, and (2) the depart- ment has almost unlimited authority to expend these funds. In’ contrast to blanket funded positions, when regularly budgeted positions are request- ed, the Legislature is informed of the position classification, the salary, and where in the\\organization the position has been used in the past and will be used in the future. We are withholdipg comment on funding for blanket fund numbers 910, ~ll and 912 because the Department of Finance has required the Depart- ment of Benefit Payments to prepare written justification in support of the 67 position equivalents and the $861,497 requested. This material is being. prepared too late to be included in this anlaysis and we plan to review it for the budget hearings. We recommend that the department prepare similar material for the Legislature by April 1, 1977 on affirmative action and employment tax operation blanket positions. This report should include details on what classifications have been used in which bureaus for what purposes and at what salary cost. The report should make an informed estimate of how the positions are to be used in 1977-78. We recommend that future depart- mental budgets provide the same amount of detail on blanket positions as on regularly budgeted positions and when changes are made that they be justified. . Legislative Approval of Regulations We recommend that state initiated welfare regulations, which have a General Fund cost impact in excess of $500,000 annually and are not required by federal law, regulation or court order, be subject to approval 624 \/ HEALTH AND WELFARE Item 261 DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued by the Joint Legislative Budget Committee prior to becoming effective. Currently the Department of Finance must’ approve the issuance of new welfare regulations which have a cost impact. In the past, most new regulations have been issued in response to a court ruling or a change in federal law and regulation. However, a number of welfare regulations are now under consideration which have significant costs but are not mandat- ed by court rulings or changes in federal law. If the administration does not request funding for these regulations during the departmental budget hearings, the regulations could be issued later without legislative review or approval. We are aware of several major regulations\/changes that could, if adopt- ed, add to the cost of the welfare program. One regulation, which has had a public hearing, would exempt most income tax refunds from considera- tion when welfare entitlements are calculated. If adopted, this regulation would cost $5.3 million, approximately half of which would be paid for from the General Fund and the balance from federal funds. Another regulation under consideration would liberalize the welfare status of aliens who are in the country without proper documentation. It is estimat- ed that regulation changes regarding undocumented aliens would have a $14 million General Fund cost and a $7 million county cost. Regulation changes’ which would liberalize the amounts of property an AFDC appli- cant could have and still qualify for welfare are also under consideration. If adopted, in its current form, this regulation package is estimated to cost $4,059,000 of which $1,433,000 would be paid by the state, $660,000 by the counties and $1,966,000 by the federal government. If the Legislature believes prior legislative review and approval of state’ initiated welfare regulations with cost implications is appropriate, then some budget language modification is needed. We recommend that the following be added to section 32.5 and Item 263: \”Provided further that no changes in welfare rules and regulations may add to pr:ogram or administrative annual General Fund costs in excess of $500;000, unless such changes are specifically required by court order or change in federal or state law, or specifically included in the appropria- tions of the Budget Act of 1977 or approved by the Joint Legislative Budget Committee. \” Monthly Reporting by Counties We recommend that repeal of Section 10809.5 of the Welfare and Insti- tutions Code which requires certain reporting by counties. Section 10809.5 of the Welfare and Institutions Code requires county welfare departments to submit a copy of the monthly Caseload Movement and Expenditure report to the Department of -Finance at the same time the information is forwarded to the Department of Benefit Payments. The Department of Finance is required to make the information immediately available to the Joint Legislative Budget Committee. When this reporting requirement was enacted in 1971, the Legislature was not receiving timely and complete data about caseloads and costs from the department. Since 1971, relations between the department and the Item 261 HEALTH AND WELFARE \/ 625 Legislature have improved to the point where legislative staff is provided data and estimates shortly after they are requested. Therefore, there is no longer a need to receive each county’s individual report. Because there is a cost associated with providing these now unneeded reports, we recom- mend repeal of Section 10809.5 of the Welfare and Institutions Code. AFDC Cash Grants and Control Section 32.5 We withhold recommendation on the appropriate amount for Section 32.5 of the Budget Bill pending receipt and review of the May 1977 subven- tion estimates. The Budget Bill does not contain an item which appropriates funds for the Aid to Families with Dependent Children (AFDC) program because the Welfare and Institutions Code provides a continuous appropriation . . However, Section 32.5 of the Budget Bill limits funds available to a speci- fied amount and provides that the Director of Finance may increase the expenditure limit in order to provide for unexpected caseload growth or other changes which increase aid payment expenditures. The budget proposes $616,972,400 in Section 32.5, which is $40,305,900, or 7.0 percent, more than is estimated to be expended during the current fiscal year. In addition to these funds, there are state costs of $8,500,000 for the current year and $16,322,100 in the budget year for local mandated costs resulting from Chapter 348, Statutes of 1976, (AB 2601). Thus, the total General Fund cost for AFDC grants in 1977-78 is estimated to be $633,294,500, which is an increase of $48,128,000, or 8.3 percent, over the amount estimated to be expended during the current fiscal year. The amount requested will be adjusted when the Department of Finance submits the May revenue and expenditure budget revision to the Legisla- ture. The budget revisiop for AFDC grants will be based on the depart- ment’s may 1977 subvention estimates which take into account the latest available caseload and expenditure data. We will review these estimates and make our recommendations at the time. In recent years, we have not been able to review the May subvention estimates adequately in the short period of time between their release by the administration and their approval as part of the budget by the Legisla- ture. The lack of review has not resulted in subsequent difficulties because the estimates produced by the department are of high quality and normal- ly have not been adjusted outside of the Estimates Bureau of the Depart- ment of Benefit Payments. When the estimates have been adjusted we have been informed, so that the policy issue involved could be considered by the Legislature. However, the department has agreed to provide ear- lier access to the estimates to make a more complete outside review possible. AFDC Caseloads and Cost Trends The Governor’s Budget projects AFDC caseload to decline by 1.4 per- cent in 1977-78 as shown in Table 6. 626 \/ HEALTH AND WELFARE Item 261 DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued Table 6 1977-78 Governor’s Budget AFDC Caseload (Persons Count) AFDC Family Group ………………………………………………………………….. . AFDC Unemployed ……………………………………………… ~ …………………….. . AFDC-Foster Children …………………………………………………………….. . 1977-78 1,240,900 164,100 31,020 1,436,020 Change from Percentage 1976-77 change -16,500 -1.3% -4,900 -2.9 .+970 +3.2 -20,430 -1.4% The net AFDC General Fund cost increase of $48.1 million proposed in the budget is a combination of $64.9 million in increases and $16.8 million in offset savings. The major increases are the annual automatic AFDC cost-of-living adjustment ($32.3 million) and the recent 6 percent AFDC grant increase provided by the Legislature ($27.3 million). Also contribut- ing to increased costs are new welfare regulations ($2.5 million), the end of extended unemployment insurance benefits in California ($1.6 mil- lion), and increased foster care grants and child support incentive pay- ments ($1.2 million). ‘ The major offset savings are attributed to caseload decline ($11.9 million savings), increased federal sharing in the AFDC-U program\/($4.3 million savings) and ,increased social security, minimum wage and unemploy~ ment insurance benefit payments which act to reduce welfare. costs. Improved AFDC Benefits Chapter 348,Statutes of 1976, (AB 2601) provided a 6 percent increase in the. AFDC payment standards effective January 1, 1977. Table 7 shows maXimum grants, for AFDC families in the current year and in 1977-78. The increases result from a combination of the annual cost-of-l\”ing adjust~ ment, which is tied to the inflation rate, and the 6 percent benefit increase granted by the Legislature. ‘ Table 7 Monthly Maximum Aid AFDC-FG and U Programs Governor’s Budget Projections Ju~’\u00b7-Dec. 1976 (Before FilJ1li~r 6 percent size illcrellSe) 1………………………………………………………….. $157 2 …………………………………………… :……………. 258 .3………………………………………………………….. 319\u00b7 4………………………………………………………….. 379 5………………………………………………………….. 433 6………………………………………………………….. 487 7………………………………………………………….. 534 8………………………………………………………….. 581 9………………………………………………………….. 628 10 ………………………………………….. :…………….. fiT5 Jiln.-June 1977 (After 6 percellt increilse) $166 273 338 402 459 516 566 616 666 716 JU~\”I, 1977 (After cost-of- filing ilJ(}rease) $175 288 356 424 484 544 597 650 702 755 Tot;1l lilcrellSe From Dec. 1976 to Ju~1′ 1, 1977 $18 30 37 45 51 57 63 69 74 80 Item 261 HEALTH AND WELFARE \/ 627 MONITORING COUNTY AUTOMATED WELFARE INFORMATION SYSTEMS In the 1976-77 Analysis we discussed the department’s plans to develop a model data processing system for use by the county welfare department. As we noted, last year, departmental justification for this and similar ear- lier projects was the increasing cost in which the state shared, of county kutomated welfare processes. These costs were approximately $6 million in 1970-71 and could approximate $20 million in the current year if the trend continues. During last year’s budget hearings we were only in partial agreement with the department’s objectives regarding model systems and standards. We believed the most beneficial course of action to be an increase in the monitoring of system development efforts, particularly the Los Angeles County Welfare Case Management Information System. It was our judg- ment -that the potential benefit from some of the other activities was minor at best. Several budget hearings and discussions between our office and the department last year resulted in a reduction of the budget request and approval of22 new positions. These positions were to be used for increased system review and monitoring and other activities, including the develop- ment of a data dictionary and a computer program library. Monitoring Data Processing We withhold recommendation on continued funding of 12 positions pending review of budget change proposal due February 1, 1977. Since approval of the 1976-77 Budget Act, the department hasreeva- luated its intended use of the added resources regarding county automat- ed welfare operations. The department’s current position, with which we concur, is that the most effective use of these resources is in expanded system review and monitoring . . As a result, the department has kept only 12 of the 22 positions author- ized, assigning six to the County EDP Systems Bureau and three to other county-related program areas. The other three positions are to be pro- vided by the Department of Health on a contractual basis. Ten positions have been deleted, and they are not reflected in the proposed budget. The department has been requested to provide the Department of Finance a budget change proposal to justify continued funding of the remaining authorized positions. We will review this document and make our recom- mendations during the budget hearings. Welfare Case Management Information System (WCMISI Los Angeles County’s Welfare Case Management Information System (WCMIS) is ultimately intended to replace existing welfare information processes with a new and comprehensive computer-based system. The state is funding approximately one-fourth ofWCMIS developmental costs, estimated at $2.3 million by the end of the current year. In the 1976-77 Analysis we noted that despite the state’s significant investment in WCMIS , no phase of the system was operational. However, it was anticipated that an automated centralized recipient index would be operational by spring of 1976. In fact, the index which would allow county welfare offices to access a recipient data base via remote terminals, is now J 628 \/ HEALTH AND WELFARE Item 261’ DEPARTMENT OF BENEFIT PAYMENTS OPERATING BUDGET-Continued scheduled to be operational countywide the spring of 1977. Los Angeles County began development of the WCMIS system in 1971. Although substantial savings to offset the developmental cost Of WCMIS have been projected by Los Angeles County, the increase in the state’s investment in the face of continued project delay supported our conten- tion that the department needed to improve its review and monitoring of such county efforts. As a result of our concern about this particular project, we have met with the county’s welfare and data processing management to assess actual WCMIS progress. Based on this review, which included a demonstration of the centralized recipient index and data base, we be- lieve the county is trying to achieve county-wide implementation of this phase of WCMIS in accordance with the revised schedule. If this is accom- plished, significant reductions in personnel associated with manual records handling should occur. However, if county-wide implementation does not occur as scheduled, the justification for continued state support of this costly effort needs to be examined, as discussed below. Los Angeles County DB.tB Processing We recommend that the Legislature withhold approval for state fund- ing of the Los Angeles County Welfare Case Management Information System for the 1977-78 fiscal year pending review of the department’s in-depth evaluation of this project. Because of its increasing concern regarding WCMIS costs and progress, the department has formed, a study team to perform an on-site project evaluation. The team, managed by the Chief of the Program Support Branch and supervised on-site in Los Angeles by the Assistant Chief of the County EDP Systems Bureau, is composed of seven persons who will examine the project from fiscal, program and technical perspectives. We have reviewed the study plan: and believe that if it is completed as proposed, the state will for the first time have an appropriate understand- ing of the project, including (a) its present and probable cost, (b) its relevance in terms of program benefits, (c) its likelihood of achieving projected savings, and (d) the validity of the billing mechanism with respect to welfare data processing costs shared by the state .. The study team reportis anticipated by February 15, 1977. However, we would support an extension of this deadline if additional time is required. We believe that withholding approval of state support for 1977-78 is war- ranted pending legislative review of the department’s WCMIS report. Item 262 HEALTH AND WELFARE \/ 629 Department of Benefit Payments STATE SUPPLEMENTAL PROGRAM FOR AGED. BLIND. , DISABLED Item 262 from the General Fund Budget p. 682 Requested 1977-78 ……………………………………………………………….. $824,341,300 Estimated 197~77…………………………………………………………………. 742,278,300 Actual 1975-76 ………………………………………………………………………. 641,739,955 Requested increase $82,063,000 (11.0 percent) Total recommended reduction ……………………………………………. Pending SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. May Caseload Estimates. Withhold recommendation pend- ing receipt and review of the May 1977 subvention esti- mates. GENERAL PROGRAM STATEMENT Analysis page 629 On January 1, 1974, the federal Social Security Administration assumed responsibility for direct administration of cash grant welfare assistance for California’s aged, blind and disabled recipients. Prior to that time, Califor- nia’s 58 county welfare departments provided cash assistance to these recipients. Under provisions of state and federal law, California supplements the basic federal Supplemental Security Income (SSI) payment with an addi- tional State Supplementary Program (SSP) payment. Each year state sup- plemental payments are increased to provide recipients a cost-of-living adjustment pursuant to the Welfare and Institutions Code. ANALYSIS AND RECOMMENDATIONS We withhold recommendation on the appropriate amount for Item 262 pending receipt and review of the May 1977 subvention estimates. ‘ The budget proposes an appropriation of $824,341,300 for the state share of the cost of aid payments to aged, blind and disabled recipients for the 1977-78 fiscal year. This is $82,063,000, or 11.0 percent, more than the amount estimated for the current year. However, the requested amount will be adjusted when the Department of Finance submits the Revenue and Expenditure Budget Revision to the Legislature in May 1977. We will review the revised estimates and make our recommendations at that time. Benefit Entitlements Payment standards for the SSP program are estimated to increase on July 1, 1977, from $276 a month to $296 a month in 1977-78 for aged and disabled recipients. Blind recipients’ entitlements are estimated to in- crease from $313 to $334. The increases will be based on the change in cost-of-living from December 1975, to December 1976. Benefit entitlements can be increased or decreased according to living arrangement. For example, if a recipient lives in another family’s house, 630 \/ HEALTH AND WELFARE Item 262 S.TATE SUPPLEMENTAL PROGRAM FOR AGEO, BLIND, DISABLED-Continued the grant is reduced by\u00b7 approximately $69 a month. If a ~ecipient lives alone but has no cooking facilities, he receives an additional $33 a month for meal allowances. A couple receives approximately $35 less a month than two individual recipients living alone. Estimating Problems Tile appropriation for the State Supplemental Program (SSP) is based on case load and cost data supplied to the state by the federal government. Since the inception of this program in 1974 the Department of Benefit Payments has had a continuing problem obtaining detailed and reliable data fgr estimating purposes and program monitoring. Data currently being received is particularly questionable due to a number of factors. The Department of Finance believes the data used to prepare the estimate of $824,341,300 in September 1976, is more reliable than that used for the December estimate of $785,802,200. Thus, the Governor’s Budget proposes the earlier of the two estimates which is $38.5 million more than the one prepared later. It is possible that the data used for the May 1977, estimates will be no better than that used for the December 1976, estimate. If the Legislature does not appropriate enough money for the SSP program, the language of Item 262 makes it possible for the Department of Finance to add funds without the need for a deficiency appropriation. If the May estimate verifies the December rather than the September estimate, this item is over budgeted by $38.5 million. Cost Trends: SSP Program The major reason for the $82.0 million increase in the cost of the SSP pregramis the increase in benefit levels mandated by Chapter 348, Stat- utes of 1976 (AB 2601). Chapter 348 provided that the state would pass through to recipients the annual cost-of-living increase given on the fed- eral SSI portion of the grant, and would also increase grants by $3 a month. These benefit increases will cost approximately $107 million in 1977-78. However, because of certain offset savings for the state, total state costs increase only by $82 million. Caseload growth is not a major cause of the budgeted increase. The caseload is estimated at 772,700 for 1977-78, only four-tenths of one percent higher than the 197~77 caseload. Item 263 HEALTH AND WELFARE \/ 631 Department of Benefit Payments. SPECIAL ADULT PROG.RAMS I Item 263 from the General Fund Budget p. 682 Requested 1977-78 ………………………………………………………………. . Estimated 1976-77 …………………….. r . .. … . . Actual 1975-76 ……………………………………………………………………… . Requested decrease $507,000 (8.3 percent) Total recommended reduction …………………………………………… . 1977-78 FUNDING BY ITEM AND SOURCE Item 263 (a) 263 (b) 263 (c) 263 (d) Description Special Circumstances Special Benefits Aid to Potential Self\u00b7Supporting Blind Emergency Payments Fund General General General General $5,609,300 6,116,300 2,460,024 $2,000,000 Amount $3,148,400 70,400 609,400 1,7S1,100 $5,609,300 ., j ~ Analysis SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS page 1. May Olseload Estimates. Withhold reeommendatiQnpend- 031 ing receipt and review of May 1977 subvention estimates. 2. Special Circumstances. Reduce by $2,(}(){},()()(). Recommend i32 deletion pending release and review of new regulations. 3. Emergency Payments (Uncollectable Loans). Recommend 032 report to Legislature by April 1, 1977 as to reasons for high percentage of uncollectable emergency loans. GENERAL PROGRAM STATEMENT Chapter 1216, Statliltes of 1973, (AB 134) established a program to pro- vide for the emergency and special needs of adult recipients. The pro- gram’s special allowances, paid entirely from the state General Fl.ln

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” 596 \/ HEALTH AND WELFARE Item 270 DEPARTMENT OF REHABILITATION-Continued $36,000 for increased medical consulting fees, $29,000 for increased dental consulting fees and approximately $106,000 for miscellaneous smaller items. The Governor’s Budget (line 56, page 679) states that \”5.7 medical positions are proposed new in the budget year to replace services previ- ously obtained under contractual services.\” However, the budget pro- poses an increase of $36,000 in medical consulting fees. We believe that the proposed increased medical and dental consulting fees, together with smaller miscellaneous increases, constitutes overbudgeting for consultant and professional services. , We recommend that the total budgeted for professional and consultant services consist of the (a) base amount of $856,000, (b) the $251,000 for Section 504 implementation, (c) $30,000 for job development projects, and (d) $30,000 for training of occupational specialists, for a total of$I,167,000. This would result in a reduction of $171,092, of which $34,206 is from the General Fund. DEPARTMENT OF SOCIAL SERVICES General Summary Funds for the new Department of Social Services are contained in nine budget iteIns and one control section of the 1978-:79 Budget Bill as identi- fied in Table 1. The department requests a total of $1,771,416,847 from the General Fund for fiscal year 1978-:79. Table 1 Department of Social Services General Fund Requests for 1978-79 Budget Estimated Proposed Bill Purpose 270 Deparbnentai support ……………………………….. .. Control Section 32.5 Cash grants: AFDC ……………………. , ………………. . 271 Cash grants: aged, blind and disabled ……….. . 272 Special adult programs ………………………………… . 273 WIN child care ………. ~ …………………………………… . 274 Special social services programs ……………….. … 275 Indo-Chinese refugee assistance program ….. . 276 County administration ………………………………… . 277 Executive mandates ……………………………………. . 278 Legislative mandates ………………………………….. . 1977-78 197~79 N\/A $622,737,000 733,659,900 5,642,100 327,803 94,024,998 o 69,746,100 o 17,768,000 $28,930,400 673,149,800 831,575,800 6,214,500 347,471 130,512,576 3,019,900 77,904,900 2,022,800 17,738,700 Percent increase N\/A +8.1% +13.3 +10.2 +6.0 +38.8 +100.0 +11.7 +100.0 -0.2 Item 270 HEALTH AND WELFARE \/ 597 Department of Social Services DEPARTMENTAL SUPPORT Item 270 from the General Fund Budget p. 687 Requested 1978-79 ……………………….. ,……………………………………… $28,930,400 Estimated 1977-78 ………………. ,………………………………………………… N \/ A Total recommended reduction …………. ~……………………………….. $197,182 1978-79 FUNDING BY ITEM AND SOURCE Item Description Department of Social Services Support Item 270 Chapter 892, Statutes. of 1977 Fund General General SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Departmental Reorganization. Recommend Department of Benefit Payments submit a report to the Joint Legislative Budget Committee and the fiscal subcommittees and policy conimittees by April 1, 1978, which identifies proposed in- ternal organization of the Department of Social Services. 2. Organization of Social Services Division. Recommend pro- gam support functions of the Social Services Division be integrated with the support functions of the Department of Social\u00b7 Services. 3. Community Care Licensing. Recommend that the De- partment of Health report to the Joint Legislative Budget Committee and the fiscal subcommittees and policy com- mittees by April 1, 1978, on community care caseload stand- ards, and the return of licensing responsibilities by counties to the state. 4 .. Control Section 32.5-AFDC Cash Grants. Reduce by $1,- ‘. 280,200. Recommend Control Section 32.5 be reduced by $1,280,200 for the cost of proposed new regulations which have not yet been adopted or reviewed. 5. Federal Welfare Legislation. Recommend Department of Benefit Payments report to fiscal subcommittees during budget hearings on estimated impact on PL 95-216 and proposed expenditure of new federal funds. 6. Special Social Services Program (discussed in our analysis of Item 274). Reduce by $197,182. Recommend that Item 270 be reduced by $197,182 by deleting seven proposed new positions. 7. Evaluation Model. Withhold recommendation of four new AmoUnt $28,912,400 18,000 $28,930,400 Analysis page 598 599 602 602 604 604 604 598 \/ HEALTH AND WELFARE DEPARTMENTAL SUPPORT-Continued positions pending receipt of Assembly Office of Research report. GENERAL PROGRAM STATEMENT Item 270 Chapter 1252, Statutes of 1977, creates a new Department of Social Services effective July 1, 1978. This department will replace the Depart- ment of Benefit Payments as the single state agency responsible for super- vising the administration of public social services supported by state funds . and federal grants-in-aid. Specifically, the new department will retain the welfare operations function of the current Department of Benefit Pay- ments and the disabity evaluation, community care licensing and social services functions currently administered by the Department of Health. ANALYSIS AND RECOMMENDATIONS The Governor’s Budget proposes $28,930,400 from the General Fund for support of the new Department of Social Services. Included in this total General Fund expenditure are amounts of $28,912,400 from this item and $18,000 from Chapter 892, Statutes of 1977 whichlprovides funds for imple- menting pilot centers for victims of domestic violence. Total program expenditures, including federal funds and reimbursements, are projected at $86,920,219 for fiscal year 1978-79. Because of the creation of a new department and the transfer of various functions to it, we are unable to compare this amount to prior year expenditures. Departmental Reorganization We recommend that the Department of Benefit Payments submit a report to t:he Joint Legislative Budget Committee and the fiscal subcom- mittees and policy committees by April 1, 1978, which identifies the proposed Jnternal organization of the new Department of Social Services. The Department of Benefit Payments has undertaken a comprehensive study of alternative ways to organize the new Department of Social Serv- ices. In September 1977, a committee, was established to prepare state- ments of the new department’s mission and organizational philosophy. This committee was comprised of members of the Department of Benefit Payments’ own planning committee as well as representatives from each of the programs which would be transferred to the new department. The Department of Benefit Payments has also contacted various con- .~tituent, advocate and professional groups to obtain their input regarding the new departmental organization. The department is currently devel- oping a timetable for receipt of these additional comme~ts and sugges- tions. When this information is received, the Department of Benefit Payments will make a final decision regarding the internal organization of the new Department of Social Services. As of late January, the plan had not been prepared. We therefore recommend that the Department of Benefit Payments submit a report to the Joint Legislative BudgetCommit- tee and the fiscal and policy committees by April 1, 1978, which identifies the proposed internal organization of the new Department of Social Serv- ices. Item 270 HEALTH AND WELFARE \/ 599 Organization of the Social Services Division We recoznmend that the program support functions of the Social Serv- ices DiVision be integrated with the support functions of the new Depart- . ment of Social Services. . The Social Services Division as it is currently organized in the Depart- ment of Health has experienced serious difficulties in . developing and implementing useful procedures for on-going planning, data collection, caseload estimates, program monitoring and program impact evaluation. As a result, we do not believe that the Social Services Division should be transferred to the new Department of Social Services without undergoing several organizational changes. The experience .and capability demonstrated by staff in the Department of Benefit Payments’ Administration Division, Auditand Evaluation Divi- sion and Program Development Division could make significant contribu- tionsto improving these program activities. We therefore recommend that the program support functions of theSocial Services Division includ- ing on-going planning, data collection, caseload estimates, resource alloca- tions, and on-going program moriitoring and program impact evaluation be integrated with the support functions of the new Department of Social Services. Federal Welfare Reform The U.S. Congress is currently considering two bills, HR 9030, and S 2084, entitled, \”The Better Jobs and Income Act\”, which contain President Carter’s plan for reforming the national welfare system. The U.S. House of Representatives has formed a special Subcommittee on Welfare Reform to review and revise HR 9030.\u00b7 After the subcommittee completes action on the bill it will be submitted to three main committees (Ways and Means, Agriculture. and Education and Labor) for further review. It is anticipated that .these committees will make substantial revisions in the . President’s original proposal. As a result, we are unable to say how federal welfare reform will affect California or to make any recommendations for chaIlges in California law at this time. A summary of the two major pro- grari.:lccomponents of the President’s welfare reform proposal as it was origlnally submitted to the U.S. Congress. follows: ‘ Consolidated Cash Assistance Program. HR 9030 would replace the present federal AFDC, SSI\/SSP and Food Stamp programs with a new’ Consolidated Cash Assistance program, The new program would cover existing categories of recipients as well as intact families, childless couples and. single individuals. The. proposed program would provide a national basicf benefit and would encourage states such as California to continue current state supplements to the federal basic benefit level. The proposal would establish one benefit level for persons who are not expected to work and a lower benefit level for persons who are expected to work as ap incentive to find a job. In addition, a portion of income earned by persons expected to work would be disregarded up to a certain level in order to encourage employment. Also included is an earned income tax credit mechanism designed to stre:p.gthen the work incentive arid to provide tax relief to families with children. 600 \/ HEALTH AND WELFARE Item 270 DEPARTMENTAL SUPPORT-Continued The federal government would have responsibility for administering the new cash assistance program and would fund 90 percent of the cost of the basic federal grants. The federal government would also administer and share in the cost of state supplements which meet federal eligibility requirements. Each state would be required to pay 10 percent of federal grant costs and would be responsible for the entire cost of administering and providing supplements which do not meet federal eligibility require- ments. An example of the latter is the cost of pJ;’oviding.supplements to those current recipients of AFCD and SSI who may have higher earnings than those allowed under the new program, but who would be protected against loss of present benefits by grandfathering provisions. An Emergency Assistance program would be established under Title :xx (Social Services) of the Social Security Act to provide payments for emergency subsistence needs of individuals not served by the new Cash, Assistance program. California’s emergency assistance allocation is es- timated to be $111′ million . . EmpJoyznent Opportunibes Program. An integral part of the Carter welfare reform proposal is the employment opportunities program which is designed to move people from public subsidy programs into private sector jobs. The employment opportunities program has two major parts, Job Search Assistance and Public Service Employment and Training. The Job Search Assistance program would provide beneficiaries with job development and placement services such as these currently offered by the state employment service agencies (in California, the Employment Development Department). The subsidized Public\u00b7 Service\u00b7 Employment and Training program would provide opportunities for beneficiaries to be placed in subsidized employment such as the Comprehensive Employment and Training Act (CETA) Titles II and VI now provide. Beneficiaries who are designated as \”required to work\” would beobli- gated to participate in the employment opportunties program. First, in order to receive the full cash assistance to which they are entitled a mandatory participant would be required to seek employment ini the private sector and to accept any available employment at the minimum wage or higher. If no unsubsidized employment were found, the partici- pant would then be required to accept a public service job at minimum wage; Major Concerns. The President’s welfare proposal has been reviewed by a number of state and national welfare program providers and organi- zations. Below is a summary of some of the problem areas which have been identified. 1. State responsibilities would be limited to intake and direct client contact furictions in the cash assistance program. As a result, the state would have to deal directly with recipients without having any control over the program or ability to respond to recipients’ problems. . 2. The proposal does not identify how the cash assistance program is to be integrated with the Medi-Caland social services programs. It is an- ticipated that HR 9030 could create significant additional demands on Item 270 HEALTH AND WELFARE \/ 601 these services without providing additional money for their support. 3. The federal allocation for emergency ne~ds is probably inadequate to cover request~ for emergency funds and will be reduced in subsequent years. 4. The proposal fails to include a federalcost-of-living adjustment in benefit levels. 5. The proposal would create a complex federal\/ state. funding relation- ship and would result ina fragmented administrative structure. The fed- eralgovernment would administer the basic cash assistance program, while the state would retain responsibility for administering special sup- plemental payments for non-federally eligible welfare recipients, emer- gency assistance, social services and Medi-Cal. 6. The measure does not address the problem of economic develop- ment. Unless private jobs are available, no employment training and placement system can succeed. 7. The requirement that participants accept jobs at minimum wage raises problems with labor unions, and is in conflict with\u00b7 other federal employment programs, such as the Youth Employment and Development program, which mandate that prevailing wages be paid to public service workers. 8. The~ proposal leaves in question the relationship between the state employment services agencies and CET A prime sponsors. By indicating that the prime sponsors would be eligible to provide what are now em- ployment services responsibilities, the state’s role is brought into question. 9. The incentives designed to encourage a beneficiary to obtain and maintain a job in the private sector need to be reworked. As it now stands, a participant might actually lose net income by taking a private sectorjob. Also; no financial assistance is provided that would enable the participant to seek work dUring his mandatory job search effort. This may severely hamper his search. 10. There is much emphasis on employment but almost no emphasis on training without which many of the beneficiaries may not be able to compete for employment. 11. The level of fiscal relief projected by the proposal is not likely to materialize. A staff analysis of the proposal has been prepared by the Department of Benefit Payments and the Employment Development Department dated October 31, 1977, and contains a cost estimate of the . proposal;s impact on California. This estilnate is based on a comparison of current state welfare programs and an approximation of current programs under HR 9030 and projects an increased cost to the state and counties of $348 million per year. According to the department anruysis, .this cost increase is due to the addition of 1.5 million working poor to the cash assistance program, in- creased emergency assistance payments, Public Service Employment minimUm wage ~upplements,increased Medi-Cal administrative costs and the grandfathering of those AFDC and SSI\/SSP recipients who would.no longer be eligible for the federal program; Not ~cluded are the increased Medi-Cal program costs and increased administrative and program costs for the Social Services program which could be substantial. Theseesti- 602 \/ HEALTH AND WELFARE Item 270 DEPARTMENTAL SUPPORT-Continued mates are likely to change depending on action taken by the congressional committees. ‘ Community Care Licensing Program We recommend that the Department of Health report to the Joint Legislative Budget Committee and appropriate policy and fiscal subcom- , mittees cornmittees by April 1, 1978 on community care evaluation case- load standards, and the return of licensing responsibilities by counties to the state. The budget proposes $8,658,292 from the General Fund for the Commu- nity Care Licensing Program, and $1,500,000 in Federal Title XX Funds. Of the General Fund amount, $8,158,292 is in this item (support) and $500,000 is in Item 274 (Special Social Services Programs) to match the Federal Title XX monies of that item. This program with a proposed 224.7 positions is currently within the Department of Health’s Licensing and Certification Division. The Community Care Licensing Program is responsible for regulating approximately 50,000 day care centers, 24-hout residential facilities,pre- schools, and similar types of community care facilities. These facilities are evaluated by state personnel in regional offices, and.by county,programs operating under contract with the state. The counties handle about 80 percent of the workload. The Community Care Licensing Program has had difficulty fulfilling its mandate over the past year. Most of the program’s district offices failed to meet state mandated annual evaluation requirements. This problem stemmed from an abnormally high staff vacancy rate, inappropriate case- load standards for facility evaluators, and county programs returning li- censing responsibility to the state. The program ha,s now filled most of its positions and is working on caseload standards. We recommend that par- ticular attention be directed to the problem of maintaining full staffing and that the Department of Health report on the progress in developing new caseload standards and on the current status and probable trend oyer the next year on the return of licensing responsibilities to the state. ; AFDC Cash Grants We recoznmend a, General Fund reduction of $1~2{)(} from Control Section 32.5pending the issuance and review of new regulations. Control Section’32.5. The Budget Bill does not contain an item which appropriates funds for the Aid to Families with, Dependent Children (AFDC) program because the Welfare and Institutions Code provides a continuous appropriation. However, Section 32.5 of the Budget Bill limits available .funds to a specified amount and permits the Director of Finance to increase the expenditure limit in order to provide for unexpected caseload growth or other changes which increase aid payment expendi- tures. , ‘ The budget proposes $673,149,800 in Section 32.5, which is $50,412,800 or 8.1 percent more than is estimated to be expended-in the current year. In addition to these funds, there are state costs for AFDC grants of Item 270 HEALTH AND WELFARE \/ 603 $17,768,000 in the current year and $17,924,600 in the budget year for legislative and executive mandated costs budgeted in Items 277 and 278. Thus the total General Fund cost for AFDC grants in fiscal year 1978-79 is estimated to be $691,074,400 which is an increase of $50,569,400 or 7.9 percent over the amount estimated to be expended in the current year. AFDC Caseloads and Cost Trends. The Governor’s Budget projects that the AFDC case load will decline by 0.2 percent ill 1977-78 as shown in Table 1. . Table 1 1978-79 Governor’s Budget AFDC Average Monthly Caseload (Person Count) AFDC Family Group ………………….. , ……… . AFDC Unemployed …………………………….. . AFDC-Foster Children ………. : ……………… . 1977-78 1,271,200 172,908 26,558 1,470,666 197~79 1,272,747 168,717 26,558 1,468,022 Change from 1977-78 +1,547 -4,191 o -2,644 Percentage chQIlge +0.1% .,-2.4 o ….:0.2% The net AFDC General Fund cost increase of $50.4 million reflected in Section 32.5 includes $56.8 million in increased costs and $6.4 million in offset savings_ The major cost increases include: a) an annual AFDC cost- of,living adjustment ($45.8 million), b) an increase in payment standards resulting from Chapter 348, Statutes of 1976 ($3.7 million), c) phase-out of the federal special unemploymerit assistance program and the federal extended unemployment insurance program ($0.8 million) , d) increase in child support payments ($2.8 millioIl), e ) the cost of new regulations implemented as.a result of federal maIldates, within the authority of exist~ ing state law, or as a result of an out-of-court settlement which the Legisla- ture has previously reviewed ($2.6 million). and f) the result of a recent court case which ruled that the department’s prior-month budgeting,sys- tern fGr calculating AFDC payments is inadequate ($1.1 million).. . These costs Will be offset by savings resulting from: a) a reduction in AFDCcaseload ($4.3 million savings), b) an increase in OASDlbenefits ($0.8 million savings) and c) increases in the minimum wage ($l.~millioll savin~s).. .. Proposed Regulations. The budget contains a total General.Fund ex- penditure of $1,280,200 for proposed regulations resulting from the Garcia vs. Swoap case. Under existing regulations the department requires a recipient to report income received in the prior month as a basis for determining the grant level to be received in the next month. However, the cdurt has ruled that the department’s prior-month budgeting system is m.adequate and has required the department to submit revised regula- tions for its approval. The modified regulations would require that should a change in income occur to create a hardship, a supplemental payment would be issued upon the request of the reCipient. The department esti- mates these revised regulations will be submitted to the court by February 1, 1978, but it is also pursuing an appeal to the U.S. Supreme Court. Because these regulations have not yet been issued, and because the 604 \/ HEALTH AND WELFARE Item 270 DEPARTMENTAL SUPPORT-Continued Legislature lias not yet had an opportunity to review the issues raised by the court’s decision, we recommend, that funds appropriated through Section 32.5 be reduced by $1,280,200. New Federal Welfare Legislation We recommend that the Department of Benefit Payments report to the fiscal subcommittees during budget hearings on estimated impact of PL 95-216 and proposed expenditures of new federal funds. On December 15, 1977, Congress enacted PL 95-216 (HR 1346) which allocates $187 million to states and counties for fiscal relief of state and local welfare costs. State allocations are to be based on a two-part estimate: 1) 50 percent based on each state’s share of total AFDC expenditures for December 1976, and 2) 50 percent based on the general revenue sharing formula. The law requires the states to pass-on a portion of these funds to political subdivisions. Based on a preliminary determination, it is estimat- ed that California will receive approximately $25.4 million in additional federal funds. Federal funds will be payable to the states for the period October 1, 1977 to March 31, 1978. In adclj.tion, the law changes fiscal incentives for the AFDC quality control program, changes procedures for obtaining information from fed- eral wage records, expands the authority for state demonstration pro- grams, and changes procedures for reimbursing erroneous state supplementary payments.’ Because these funds were only recently approved by Congress, they are ,not reflected in the Governor’s Budget. We therefore recommend that the Department of Benefit Payments report to the fiscal committees dur- ing budget hearings on the estimated impact of the new federal legislation and proposed expenditure of new funds. Recommendations Discussed in Item 274. We have recommended that Item 270 be reduced by $i97,182 bydelet- ing seven proposed new positions for social services program monitoring. We have a1~o withheld recommendation on four propos’ed position~ for development of a social services evaluation model pending rec~iptJand review of a report by the Assembly Office of Research: These recommendations are d(scussed in Item 274, Special Social Serv- ices program, because the majority of funds for the program are contained in that item. However, these reductions should be made in this depart- mental support item. Item 271 HEALTH AND WELFARE \/ 605 Department of Social Services STATE SUPPLEMENTARY PROGRAM FOR AGED, BLIND AND DISABLED Item 271 from the General Fund Budget p. 690 Requested 1978-79 ……………………… :………………………………………. $831,575,800 Estimated 1977-78 ……….. … ……………………… \u00b7………………………… .. 733,659,900 Actual 1976-77 ………………………………………………………………………. 676,632,394 Requested increase $97,915,900 (13.3 percent) Total recommended reduction ……………………………………………. None GENERAL PROGRAM STATEMENT On January 1, 1974, the Federal Social Security Administration assumed responsibility for direct administration of cash grant welfare assistance for California’s aged, blind and disabled recipients. Prior to that time; Califor- nia’s 58 county welfare departments provided cash assistance to these recipients. Under provisions of state and federal law, California supplements the basic Federal Supplemental Security Income (SSI) payment with an addi- tional State Supplementary Program (SSP) payment. Each year state sup- plemental payments are increased to provide recipients acost-of-living adjustment pursuant to the Welfare and Institutions Code. ANALYSIS AND RECOMMENDATIONS\u00b7 We recoll1mend approval. The budget proposes a General Fund appropriation of $831,575,800 for _ the state cost of aid payments to aged, blind, and disabled recipients for fiscal, year 1978-79. This is an increase of $97,915,900, or 13.3 percent, over the amount estimated for the current year. The major reasons for the $97.9 million increase in the cost of the SSP program are as follows: (a) an automatic annual cost-of-living adjustment on tne State Supplementary Payment provided to recipients (net state cost of $67.5 million) (b) a pass-on of federal cost-of-living increases iIi the federal SSI benefit pursuantto Chapter 348, Statutes of 1976 (net state cost of $23.9 million), and (c) an increase incaseload ($6.4million). The case- load is estimated at 714,641 for fiscal year 1978-79, which is an increase of 21,857, or 3.2 percent, over the current year. Payment standards for the SSP program are estimated to increase on July 1, 1978, as follows: (a) from $296 per month to $320 per month for aged and disabled individuals, and (b) from $334 per month to $361 per month for blind individuals. . We recommend approval of this amount with the understanding that the appropriation is subject to adjustment when the Department of Fi- nance submits the May revision of expenditures to the Legislature. 606 \/ HEALTH AND WELFARE Item 272 STATE SUPPLEMENTARY PROGRAM FOR AGED, BLIND, DISABLED-Continued Fed(ilral Revenu.Sharing Funds Budget Bill language in Item 409 specifies that $275 million shall be , appropriated from the Federal Revenue-Sharing Fund to the General Fund and transferred to Item 271 to partially fund the SSP program. Language in .Item 271 specifies that the revenue-sharing money is to be . expendeci prior to the expenditure-of the remaining $556,575,800. For the four fiscal years prior to the 1978-79 fiscal year, federal revenue-sharing funds were appropriated to the State School Fund for public school appor- tionments. In fiscal year 1973-74, a portion ofthe federal revenue-sharing funds were appropriated for welfare costs of the SSP program. Department of Social Services SPECIAL ADULT PROGRAMS Item 272 from\u00b7 the General Fund Budget p. 691 Requested 1978-79 ……………………………………………………………… .. Estimated 1977:….78 ………………………………………………………………… . Actual 1976-77 ……………………………………………………………………… . Requested increase $572,400 (10.1 percent) Total recommended reduction …………………………………………… . 1978-79 FUNDING BY ITEM AND. SOURCE Item 272(a) 272 (b) 272 (c) 272 (d) Description Special Circwnstances Special Benefits . Aid to Potentially Self, Supporting Blind Emergency Payments GENERAL PROGRAM STATEMENT Fund General General General General $6,214,500 5,642,100 4,837,452 None Amount $3,222,300 108,100 1,001,700 1,852,400 $6,214,500 Chapter 1216, Statutes of 1973, (AB 134) established a program to pro- vide for the emergency and special needs of SSIISSP recipients. The program’s special allowances, paid\u00b7entirely from the General Fund, are administered by the county welfare departments. ANALYSUfAND RECOMMENDATIONS We recormnend approval. The budget proposes a General Fund appropriation of $6,214,500 which is an increase of $572,400 or 10.1 percent over the current year. We recom- . mend approval of this amount with the understanding that the appropria- tion is subje<:!t to adjustment when the Department of Finance submits the May revision of expenditures. . Item 272 HEALTH AND WELFARE \/ 607 Special Circumstances (Item 272(a)) The speCial circumstances program provides adult recipients with spe- cial assistance in times of emergency; Payments can be made for replace- ment of furniture, equipment or clothing which is damaged or destroyed by a catastrophe. Payments are also made for moving expenses, housing repairs and emergency rent. The budget proposes $3,222,300 for fiscal year 1978-79 which is an in- crease of $300,800 or 10.3 percent over the current year. The primary reasons for this.increase is a cost-of-living adjustment as well as the cost of new regulations implemented by the Department of Benefit Payments on June 21, 1977 in response to a court case. The new regulations remove the requirement that recipients liquidate all available income before qualifying for a payment, increase the maximum allowance for certain categories of special circumstances, and create additional categories of allowances. . Special Benefits (Item 272(b) ) The special benefits program is for blind SSP recipients who have guide dogs. This program provides a special monthly allowance to cover the cost of dog food. The budget proposes $108,100 for fiscal year 1978-79 which is an increase of $21,900 or 25.4 percent over the current year. The primary reason for this increase is Chapter 1206, Statutes of 1977, which increased the monthly allowance from $18 to $30 effective January 1, 1978. Aid to\u00b7Potentially Self\u00b7Supporting Blind (Item 272(c)) The Aid to Potentially Self-Supporting Blind (APSB) program provides payments to blind recipients who earn more income than is allowed under . the basic SSII SSP program. The purpose of the program is to provide an incentive to these individuals to enable them to become economically self-supporting. The budget proposes $1,031,700 for fiscal year 1978-79 which is an increase of $218,500 or 26.9 percent over the current year. The reason for this increase is an expanded caseload as well as a cost of living adjustment for payment standards. The program is estimated to have an average monthly caseload of 252 recipients in fiscal year 1978-79. Emergency Payments (Uncollectible Loans) (Item 272 (d) ) Chapter 1216, Statutes of 1973, mandates that counties provide emer- gency loans to aged, blind, or disabled recipients whose regular monthly check from the federal Social Security Administration has been lost, stolen or delayed. The budget proposes $1,852,400 for fiscal year 1978-79 which is an increase of $31,200 or 1.7 percent over the current year. 22-76188 608 \/ HEALTH AND WELFARE Item 273 Department of Social Services WORK INCENTIVE PROGRAM-CHILD CARE Item 273 from the General Fund Budget p. 693 Requested 1978-79 .................................................. ....................... Estimated 1977-78 ........................................................................... . Actual 1976-77 ............................................................................ : .... . Requested increase $19,668(6.0 percent) Total recommended reduction ............................................. , ..... . GENERAL PROGRAM STATEMENT $347,471 327,803 312,193 None The new Department of Social Services will have responsibility for providing nonemployment-related social services to welfare recipients registered in the Work Incentive (WIN) program. This responsibility was transferred from the Employment Development Department to the De- partment of Social Services' predecessor agency, the Department of Bene- fit Payments, in February 1976. The primary purchased service in the WIN program is child day care. ANALYSIS AND RECOMMENDATIONS We recommend approval. The Governor's Budget proposes a General Fund expenditure of $347;- 471 for WIN child care for fiscal year 1978-79, which is an increase of $19,668. or 6.0 percent more than is estimated to be expended during the current fiscal year. This amount is to be matched with $4,632,949 in federal funds and $167,301 in county funds for a total program expenditure in fiscal year 1978-79 of $5,147,721. This is a total program increase of $288,- 380, or 5.9 percent, over the amount estimated to be expended in the current year. Under existing federal and state law, it is possible to reimburse child care expenses for WIN enrollees through AFDC funds, WIN funds, or social services funds. The Department of Benefit Payments' current policy is to encourage county welfare departments to charge the WIN program for child care whenever possible because of the higher federal sharing ratio for WIN child care costs. Child Care Report It is estimated that subsidized child care is provided annually to between 60,000 and 80,000 children in California directly as a work-related welfare expense through the Aid to Famililes with Dependent Children (AFDC) program and to approximately 5,100 children through the Work Incentive (WIN) program. However, there is presently little statistical or evaluative data for these child care programs. The 1977-78 Budget Act includes supplemental language requiring the Department of Benefit Payments and the Department of Education to develop procedures for annually reporting comparable statistical information. This information is aimed at supplying the Legislature with a better understanding of the Item 274 HEALTH AND WELFARE \/ 609 nature of welfare-related child care and a partial comparison of such child care with subsidized child care provided through the educational system. The information required by the Legislature includes: (a) characteristics of individuals served, (b) types of child care used, (c) child care costs, and (d) total annual child care expenditures. . The Department of Benefit Payments has indicated that its report will be submitted to the Legislature by March 1, 1978. We will review the data in the report and compare it with information contained in the Depart- ment of Education's report which has already been submitted to the Legislature. Department of Social Services SPECIAL SOCIAL SERVICES PROGRAMS Item 274 from the General Fund Budget p. 694 Requested 1978-79 .......................................................................... $130,512,576 Estimated 1977-78............................................................................. 94,024,998a Actual 1976-77 ................................................... ,.............................. 45,382,710 Requested increase $36,487,578 (38.8 percent) Total recommended reduction .................................................... $38,240,472 a Excludes $1,200,000 appropriated by Welfare and Institutions Code Section 16151 for the maternity care program. 1978-79 FUNDING BY ITEM AND SOURCE Item Description 274 Special Social SeMces Program Chapter 892, Statutes of 1977 Fund General General Amount $130,387,576 125,000 $130,512,576 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. N~w Federal Legislation. Recommend Department of Fi- nance report to the fiscal\u00b7 subcommittees during budget hearings regarding the proposed use of $19.88 million in federal funds appropriated by\u00b7 PL 95-171. 2. Other County Social Services Program. . (a) Reduce by $22,132,591. Recommend reduction of $22,- 132,591 for state funding of program. (b) Recolllmend the Department of Social Services report to the joint Legislative Budget Committee and the ap- propriate fiscal subcommittees and. policy committees by July 1, 1978 on procedures to assure Budget Act lan- guage requirements for county matching funds are im- plemented in the event the Legislature approves a General Fund appropriation. Analysis page 614 615 616 610 \/ HEALTH AND WELFARE Item 274 SPECIAL SOCIAL SERVICES PROGRAMS-Continued 3. Homemaker\/Chore Program. (a) Reduce by $15,907,881. Recommend reduction of $15,- 617 907,881 for General Fund program augmentation. (b) Recommend the Social Services Division report to the 619 Joint Legislative Budget Committee and the appropri- ate fiscal subcommittees and policy committees by April 1, 1978 on procedures to reduce staff turnover in the In-Home Supportive ServiCes Branch. (c) Recommend the Department of Social Services report 620 to the Joint Legislative Budget Committee and the ap- propriate fiscal subcommittees and policy committees on a biannual basis beginning July 1, 1978 on the state management of the Homemaker \/ Chore program. 4. Demonstration Programs. Reduce by $200,000. Recom- 621 mend reduction of $200,000 for demonstration programs. 5. Maternity Care Program. Recommend the Department of 621 Health submit a plan for implementation of the maternity care program to the Joint Legislative Budget Committee and the appropriate fiscal subconimittees and policy com- mittees by April 1, 1978 which identifies procedures for as- suring that estimated expenditures do not exceed funds appropriated. 6. Management Information System. Recommend the De- 622 partment of Social Services report to the Joint Legislative Budget Committee and the appropriate fiscal subcommit- tees and policy conimittees by December 1, 1978, on its progress in (a) implementing a comprehensive data system for the Homemaker \/ Chore program, and (b) studying the feasibility of a statewide data system for all social services. 7. Program Monitoring and Review. (a) Recommend Item 270 be reduced by $197,182. Rec- 623 ommend deletion of seven proposed positions. (b) Recommend the Department of Social Services exam- 623 ine the current program review and monitoring opera- tions for the Social Services program and: submit a report of its findings and recommendations to theJoint Legislative Budget Committee and the appropriate fis- cal subconimittees and policy conimittees by Decem- ber 1, 1978. 8. Evaluation Model. Withhold recommendation of funds 624 budgeted in Item 270 pending receipt and review of Assem- bly Office of Research report. 9. Programs for the Elderly. Recommend the Social Services 625 Division designate two professional staff to participate in a special planning group in the Department of Aging no later than June 1, 1978. . '.' Item 274 HEALTH AND WELFARE \/ 611 GENERAL PROGRAM STATEMENT Beginning July 1, 1978 the Social Services program will be administered by the new Department of Social Services. This department is designated as the single state agency for purposes of receiving federal social services funds from Title XX of the Social Security Act. The goals of the Title XX social services program as defined by federal law include self-support, self-sufficiency, protection bf children and adults, deinstitutionalization and institutionalization where necessary. . Title XX Services. Federal regulations require that at least threeserv- ices be provided for SSI\/ SSP recipients and that at least one service be directed at each of the five federal program goals. The only specific serv- ice mandated by federal law is family planning for AFDC recipients. However, state law mandates that counties provide the following services: (1) information and referral, (2) protective services for children, (3) protective services for adults, (4) out-of-home care for children, (5) out- of-home care for adults, (6) child day care services, (7) health-related services, (8) family planning, (9) in-home supportive (homemaker I chore) services, and (10) employment-related services. In addition, state law permits counties to provide any of 14 additional special services. Of the 10 mandated services, four are required to be available to all persons: information and referral, protective services for children, protec- tive services for adults, and court-ordered child foster care. Other services are provided to individuals based on their participation in various income maintenance programs including SSI\/SSP, AFDC, and the Medically Needy Only portion of the Medi-Cal program. Federal regulations require that 50 percent of Title XX funds be used for such cash grant recipients. In addition, the state requires that some of the services be provided to individuals whose annual gross income does not exceed 80 percent of California's adjusted median income for a family of four. Title XX social services are administered or provided by the 58 county welfare departments, the state Department of Social Services, the Depart- ment of Health Services (family planning), the Department of Mental Health (community rehabilitation), the Department of Developmental Services (regional centers), the Department of Rehabilitation (blind counselors), and the Department of Education (child development). Title XX Program Funding. In 1972, Congress enacted legislation es- tablishing a cap of $2.5 billion for federal Title XX funds to be distributed to the states on the basis of population. California's share for fiscal year 1978-79 is $248,500,000. In addition, $5 million in unallocated Title XX funds are available from fiscal year 1977 -78~ As a result, a total of $253,500,- 000 in federal Title XX funds are available for the budget year. Federal law requires that funds be matched on the basis of 75 percent federal funds and 25 percent state and county funds. As a result of the federal funding cap, California is now providing General Fund support for social services which is far in excess of the 25 percent required match. For fiscal year 1978-79, General Fund expenditures for social services pro- grams will be more than $67 million above the amount required by the 25 percent match. . .. In addition, Chapter 1216, Statutes of 1973, requires that at least 66 612 \/ HEALTH AND WELFARE Item 274 SPECIAL S\u00b7OCIAL. SERVICES PROGRAMS-Continued percent of federal Title XX funds be allocated to the counties. The 1978-79 budget proposes that $193,705,711 or 76.4 percent of Title XX funds be allocated to counties. The remaining federal funds are allocated to state programs, primarily child care and programs for the mentally and developmentally disabled. Of the $193,705,711 allocated to the counties, $124,454,128 is allocated for the Other County Social Services program and $69,251,583 is allocated for the Homemaker \/ Chore program. Prior to fiscal year 1976-77, the counties provided the 25 percent match for federal funds in the Other County Table 1 Proposed General Fund Budget Increases for Social Services Program 1978-79 Cost A. Budget Base ............................................................................................ .. R Budget Adjushnents 1. Other County Social Services a .. Replacement of one\u00b7time fifth-quarter federal funds avail- able in fiscal year 1977-78 ......................................................... . $11,247,779 b. Six percent cost-of-living for total program support ........ .. 8,297,362 2. Homemaker\/Chore a. Replacement of one-time federal funds available from PL 94-401 (HR 12455) .in fiscal year 1977-78 .............................. .. 4,544,256 b. Caseload increase ......................................................................... . 9,820,119 c. Increase in average hours per case ............ ,' ........................... .. 4,446,331 d. Increase in minimum wage standard and six percent cost- of-living for county employees ................................................. . 8,183,432 e. Federal fund adjustment ........................................................... . 163,743 f. Federal Title XX funds available from fiscal year 1977-.78 -5,000,000 g. Federal Title XX funds unallocated in 1977-78 base ......... . -5,000,000 h. Increase in federal Title XX yearly allocation to reflect population adjustment .............................................................. .. -1,250,000 3. Adoptions a. Reduction in funds previously appropriated from Chapter 363, Statutes of 1975 ................................................................... . -64,000 b. Six percent cost of living ........................................................... . 923,556 4. Community Care Facilities Evaluation a. General Fund match for federal Title XX funds previously budgeted in Department of Health support item ............ .. 500,000 5. Demonstration Programs a. Continuation of pilot program previously funded by Chap- ter 977, Statutes of 1976 ............................................................ .. 1,600,000 b. Appropriation from Chapter 892, Statutes of 1977 ............ .. 125,000 c. Reduction in funds appropriated from other legislation .. .. -2,050,000 Total, Budget Increases ....................................................................... . Proposed Total General Fond, Item 27.4 and Chapter 892, Stat- utes of 1977 .................................................................................... .. Total $94,024,998 $19,545,141 $15,907 ,881 $859,556 $500,000 $-325,000 $36,487\/578 $130,512,576 Item 274 HEALTH AND WELFARE \/ 613 Social Services program. However, beginning in 1976-77, the state has contributed an increasing amount of funds for program support. Chapter 1216, Statutes of 1973, requires that the state provide the 25 percent match for federal funds allocated to county homemaker \/ chore programs. Other Social Services Programs. The Social Services program also in- cludes $3.4 million in federal Title IVB funds for child protective services for which the counties provide a 25 percent match, and the $16.3 million adoptions program which is 100 percent state funded. ANALYSIS AND RECOMMENDATIONS The Governor's Budget proposes $130,512,576 from the General Fund for special social services programs. Included in the total General Fund expenditure are amounts of $130,387,576 from this item and $125,000 from Chapter 892, Statutes of 1977 for centers for victims of domestic violence. These funds are allocated to the following five program areas: the Other County Social Services program, the Homemaker I Chore program, the Adoptions program, community care facilities evaluation, and demonstra- tion programs. The proposed General Fund appropriation is $36,487,578, or 38.8 percent, more tha{l is estimated to be expended in the current year. Table 1 identifies the major components of this cost increase and offset savings. Table 2 Total Proposed Expenditures for Social Services Programs Other County Social Servo ices ................................. . Homemaker I Chore ........... . Adoptions ............................. . Facilities Evaluation ......... . Demonstration Programs .. Child Development (De\u00b7 partment of Educa\u00b7 tion) ............................ .. Regional Centers (Depart\u00b7. ment of Developmen\u00b7 tal Services) ............... . Community Rehabilitation (Department of Men\u00b7 tal Health) ................... . Blind. Counselors (Depart\u00b7 ment of Rehabilita\u00b7 tion) ............................. . Family Planning (Depart\u00b7 ment of Health Servo ices) ............................... . Child Protective Services Totals ................................. . Fiscal Year 1978-79 General Federal Fund in General Fund in funds in Item 274 other items Item 274 County funds Total $22,132,591 89,588,835 16,316,150 500,000 1,975,000\" $10,671,314 1,753,334 4,295,179 35,000 444,444 $130,512,576 $17,199,271 $124,454,128 $48,862,239 $195,448,958 69,251,583 158,840,418 16,316,150 1;500,000 2,000,000 1,975,000 32,013,942 42,685,256 5,260,002 7,013,336 12,885,537 17,180,716 105,000 140,000 4,000,000 4,444,444 3,400,OOOb 1,133,333 4,533,333 $252,870,192 $49,995,572' $450,577,611 Includes $125,000 appropriated from Chapter 892, Statutes of 1977. b Federal Title IV\u00b7B funds for child protective services. 614 \/ HEALTH AND WELFARE Item 274 SPECIAL SOCIAL SERVICES PROGRAM~Continued Table 2 identifies total proposed expenditures for social services pro- . grams for fiscal year 1978-79. These include five programs which are entirely funded in Item 274 and five programs for which federal funds are budgeted in Item 274 and matching state funds are budgeted in other items. Item 274 also contains an appropriation of $3,400,000 in federal Title IVB funds for protective services for children. These funds are matched on the basis of 75 percent federal and 25 percent county with no state participation. County funds are estimated to be $1,133,333 for a total pro- gram expenditure of $4,533,333 in fiscal year 1978-79. Total expenditures for programs supported in Item 274 including state, federal and county funds are estimated to be $433,378,340 for fiscal year 1978-79. This is an increase of $36,220,556 or 9.1 percent over estimated current year expenditures. New Federal Legislation We recommend that the Department of Finance report to the fiscal subcommittees during budget hearings regarding the proposed use of $19.88 million in federal funds appropriated by PL 95-171. In calendar year 1976, $23.7 million in federal funds appropriated by PL 94-401 (HR 12455) was available to California for child care services for the 15-month period, July 197~eptember 1977. These funds were appro- priated to help states meet the federal Interagency Day Care Require- ments for child care services. Because California already met federal day care staffing requirements, a portion of these funds were used to replace existing federal Title XX funds allocated to child care. These Title XX funds were in turn redirected to other social service programs including homemaker \/ chore. On November 12, 1977, Congress enacted PL 95-171 (HR 3387) which extends the provisions of PL 94-401 and allocates an additional $19.88 million in federal funds to California for the period October 1, 1977 to September 30, 1978. The Governor's Budget does not indicate how these funds are to be expended. It is necessary that the Legislature be informed of the administration's proposal because the proposed use of these funds will affect decisions relating to the funding of other social service pro- grams. It should be noted that Budget Act language for fiscal year 1977-78 and proposed Budget Bill language for fiscal year 1978-79 state that any additional Title XX funds which become available to the state shall be used in lieu of the General Fund appropriation for other county social services. We therefore recommend that the Department of Finance report to the fiscal subcommittees during budget hearings regarding the proposed use of $19.88 million in federal funds appropriated by PL 95-171. OTHER COUNTY SOCIAL SERVICES PROGRAM Prior Year Funding The Other County Social Services program includes Title XX services other than homemaker \/ chore services provided by county welfare de- Item 274 HEALTH AND WELFARE \/ 615 partments. These services include protective services for children and adults, out-of-home services for children and adults, health-related serv- ices, employment services, information and referral, and others. Prior to fiscal year 1976-77, other county social services were funded on the basis of 75 percent federal Title XX funds and 25 percent county funds with no state participation. Beginning in fiscal year 1974-75, the Depart- ment of Health began a four-year phase-in of a method of allocating federal funds to counties based on the number of public assistance recipi- ents in the counties. The old method based on prior year expenditures was to be phased out over a four-year period. The Budget Act of 1976 appro- priated, for the first time, $6.8 million from the General Fund to support other county social services. These funds were allocated so that each county received an amount equal to its highest allocation during the first three years of phase-in of the new allocation formula. During fiscal year 1976-77, the state received an additional $5 million in one-time federal Title XX funds available from the fifth quarter of the federal fiscal year. These funds were allocated to the Other County Social Services program, and thus $5 million of the appropriated $6.8 million reverted to the Gen- eral Fund. _ The Budget Act of 1977 appropriated $13,835,229 from the General Fund to provide a six percent cost of living for the federal and General Fund share of program support. The new allocation system based on number of public assistance recipients was discontinued, and funds were distributed to each county in an amount sufficient to proVide a cost of living increase for prior year expenditures. During the current fiscal year, an additional $11.2 million in fifth-quarter federal funds again became available. Because Budget Act language required the state to use any new federal Title XX funds in lieu of General Fund support for other county social services, the $11.2 million in federal funds were allocated to the program, and an identical amount is proposed to revert to the General Fund. Governor's Budget Proposal We recomznend a General Fund reduction of $22,132,591 for the Other County Social Services program. . The budget proposes an appropriation of $22,132,591 for the Other County Social Services program which is an increase of $19,545,141 or 855.4 percent above current year expenditures. The General Fund increase includes the following cost components: (a) $11,247,779 in lieu of the one-time federal funds available during fiscal year 1977-78, and (b) $8,297,362 to provide a s~ercent cost-of-living for both the state and federal portion of program support. Total program support is estimated at $195,448,958 which includes $124,454,128 from federal Title XX funds and $48,862,239 from county matching funds. If the federal Title XX funds remain,capped, and if the state continues to provide a cost-of-living for both th,e federal and state share of program 616 \/ HEALTH AND WELFARE Item 274 SPECIAL SOCIAL SERVICES PROGRAMS-Continued support, the annual level of state expenditures can be expected to rise to over $70 million by 1983-84. We have a number of concerns about appropriating state funds for this program. First, there is no mechanism\u00b7 to assure that funds are allocated to those counties with the greatest need, for example, those with the highest number of public assistance recipients. As a result, there is signifi- cant variation in the funds allocated to the counties. Second, the Depart- ment of Health has not established adequate guidelines to assure that counties are providing a minimum standard of services. Instead, these determinations are left to the individual counties. Third, the department is unable to identify how the proposed funds will actually be spent for the various mandated and optional social services because an adequate plan- ning and allocation procedure has not been implemented. Finally, there are no data available to measure the effectiveness of the program. As a result, we recommend a General Fund reduction of $22,132,591 for the Other County Social Services program. County Funds In the event that the Legislature approves a General Fund appropria- tion for other county social services, we recommend that the Department of Social Services report to the Joint Legislative Budget Committee and the appropriate fiscal subcommittees and policy committees by July 1, 1978 on procedures toassure that Budget Act language requirements for county matching funds are implemented The Legislature added language to the Budget Act of 1977 which re- quired that any allocation of funds appropriated for Other County Social Services be available when matched by 25 percent in increased county program funds above the level in existence during fiscal year 1976-77. The intent of such language was to insure that counties would provide a match for additional General Fund support from new county monies. In a letter dated July 25, 1977, the Department of Health instructed counties to match federal and state monies for other county social services with 25 percent county funds. The department did not indicate that the match must be provided from new county funds. As a result, counties could opt to provide the 25 percent match from existing county over- match, without having to increase the level of county support. We believe this action was contrary to the intent of the Legislature. The 1978-79 Budget Bill again contains language that would require increased allocations for other county social services to be matched by 25 perc~nt in increased county program funds above the level in existence during the 1977-78 fiscal year. In the event that the Legislature approves a General Fund appropriation for other county social services, we recom- mend that the Department of Social Services report to the Joint Legisla- tive Budget Committee and the appropriate fiscal subcommittees and policy committees on procedures f01> assuring that the intent of this lan- guage is met in fiscal year 1978-79. Item 274 HEALTH AND WELFARE \/ 617 HOMEMAKER\/CHORE PROGRAM P_rogram Description The Homemaker I Chore program provides domestic and personal care services to approximately 73,000 aged, blind, and disabled low-income individuals. County welfare departments administer the program, and services may be provided either directly by county employees, by agen- cies under contract with the counties, or by providers hired directly by the recipient. Section 12304 of the Welfare and Institutions Code defines a severely impaired recipien~ as one who requires 20 or more hours of service per week to carry out specified functions of daily living. The program defines a nonseverely impaired recipient as one who receives less than 20 hours of service per week. As of July 1,1977, the maximum monthly allowance for severely impaired clients was $577 and the maximum allowance for nonseverely impaired clients was $400. Section 12306 of the Welfare and Institutions Code requires the state to match available federal Title XX funds for the cost of the program. The federal matching basis’is 75 percent federal funds and 25 percent state funds. However, beginning in fiscal year 1974-75, the state has provided increased state funds while federal funds have remained the same. County administrative costs for the Homemaker I Chore program are included in the cost of the Other County Social Services program which is supported from federal, state and county funds~ Beginning in fiscal year 1977-78, homemaker \/ chore funds are allocated to counties on the basis of individ- ual county caseload growth, average hours\u00b7per case, and average cost per case. to? Table 4 shows the growth in the Homemaker I Chore program from fiscalyeir 1974-75 to 1975-:-79. Table 4 Total Expenditures in Homemaker\/Chore Program Fiscal Year 1974-75 to 197a.,..79 Fiscal Year 1974-75 …………………… : ………………………………. .. 1975-76 ……………………………………………………… . 1976-77 ……………………………………….. , ………….. .. 1977-78 (Estimated) ………………………………… . 1978-79 (Budgeted) ……………………………….. .. Governor’s Budget Proposal General Fund $2.5,927,000 44,953,000 28,908,943 73,680,954 89,588,835 Federal Funds . $52,750,002 51,415,152 86,726,828 62,709,582 69,251,583 Total $78,677,002 96,368,152 115,635,771 136,390,536 158,840,418 Annual Percent Increase 22.6% 20.1 18.0 16.5 We recommend a General Fund reduction of $15,907,881 for the Home- maker\/Chore program since projected benefits resulting from this aug- mentation cannot be identiRed The Governor’s Budget proposes a General Fund appropriation of $89,- \u00b7588,835 which is an increase of $15,907,881, or 21.6 percent above the current year estimated expenditure. Total program expenditures includ- ing federal funds are projected at $158,840,418 which is an increase of ‘ $22,449,882, or 16.5 percent over the total current year expenditure. The 618 \/ HEALTH AND WELFARE Item 274 SPECIAL SOCIAL SERVICES PROGRAMS-Continued primary reason!? for this $22.5 million increase are: (a) a projected 7.2 percent increase in caseload ($9.8 million), (b) an increase in average hours of service per client ($4.5 million), and (c) an increase in minimum wage standards and a six percent cost-of-living for county employees ( $8.2 million). A general goal of the program is to permit aged, blind and disabled low-income persons to remain in their own homes in lieu of institutionali- zation. Home care is often both more socially humane as well as more cost-efficient than placing such persons in an institution. It is evident that if no homemaker \/ chore services\u00b7 were provided, a certain number of persons would need to be institutionalized in out-of-home care facilities such as nursing homes or board and care facilities. However, it is not . possible to identify the level of funding necessary to hold institutionaliza- tion to the minimum level feasible. Nor is it possible to identify what specific impact, if any, increased or decreased funding for homemaker \/ chore services has on admissions to such facilities. It is likely that some of those now receiving services would not be institutionalized even if the services were not provided. Moreover, in some cases the cost of providing homemaker \/ chore services, when added to an individual’s SSI\/ SSP bene- fit payment, may exceed the cost to the state of providing services through an out-of-home care facility. In addition, the program lacks uniform procedures for determining client eligibility and service needs, and lacks standards for monitoring program quality and costs. We cannot recommend continuous General Fund augmentations to the Homemaker \/ Chore program until such time as the projected target popu- lations or program benefits resulting from such augmentations are identi- fied by the department. We therefore recommend a General Fund reduction of $15,907,881. Homemaker\/Chore Regulations During fiscal committee hearings last year, the Department of Health projected that proposed new regulations for the Homemaker \/ Chore pro- gram would result in an annual General Fund savings of $16 to $23 million. The proposed homemaker \/ chore appropriation in the Governor’s Budget for fiscal year 1977-78 was based on the assumption that such a savings would be realized. However, because the regulations had not yet been implemented, the Legislature added an additional $20 million to the budget. During the current year, a portion of these funds have reverted. The Legislature also added language to the Budget Act of 1977 which prohibited homemaker\/chore regulations\u00b7 with a fiscal impact greater than $500,000 from going into effect until the Chairman of the J oint Legis- lative Budget Committee, or his designee, has had at least 30 days to review them. On December 28,1977, the chairman received a letter from the Director of Finance notifying him that the Department of Health planned to implement the new regulations after 30 days. The Director of Finance estimated that the revised regulations would result in an annual General Fund cost of $1,940,000 to $9,442,306, but indicated that it was not Item 274 HEALTH AND WELFARE \/ 619 possible to confirm an exact cost estimate because of the lack of adequate program data. It appears that these regulations, if promulgated, would have a major fiscal impact and would tend to obligate the state to a higher General Fund expenditure in the future. The Governor’s Budget does not include funds to cover the cost of these proposed regulations.\u00b7 The Vice-Chairman of the Joint Legislative Budget Committee has recommended that the Director of Finance ask the Department of Health to withhold implementation of these regulations at the end of the 30-day period to allow the fiscal committees of the Legislature an opportunity to review this Illatter. We did not receive the proposed regulations early enough for us to review them in this Analysis. We will prepare a supple- mental analysis of the regulations for the budget hearings. Program Activities We recommend that the Social Services Division report to the JOint Legislative Budget Committee and the appropriate fiscal subcommittees and policy committees by April 1, 1978 on procedures to reduce staff turnover in the In~H6me Supportive Services Branch. Last year the Legislature approved continuation of 26.5 positions for the In-Home Supportive Services (IHSS) branch which had been established during fiscal year 197~77 pursuant to Section 28 of the Budget Act of 1976. This brought total staffing for the IHSS branch to 35.5 positions as of July 1, 1977. Subsequent to that time, six positions whose primary functions were related to program support-specifically, homemaker! chore evalua- tion and data collection-were informally transferred,to the appropriate program support branches within the Social Services Division. This trans- fer was in accordance with legislative intent expressed at the time the positions were approved. From February to May 1977, staff in the IHSS branch conducted a review of programs in the 58 counties. This review identified a number of problems among the various counties including (a) inconsistencies in assessing level of client needs, (b) variations in county determinations of client eligibility, (c) lack of compliance with existing regulations, (d) lack of program data, (e) variations in the level and quality of services pro- vided, (f) variations in the cost of providing services, and (g) inappropri- ate implementation of standards relating to minimum wage and the Federal Insurance Contribution Act. The Department of Health indicates that as a result of these county reviews, corrective action plans have been initiated with each county to assure conformance with existing regulations. However, in order for many of these problems to be resolved at the local level, the department needs to identify clear and consistent policies at the state level, particularly in areas not addressed by existing regulations. The department has made little progress in the identification of formal policies. Part of this delay is a result of high staff turnover within the IHSS branch. During the 11 month period from February 1977 to January 1978, there have been three chiefs\u00b7 of the IHSS branch. In addition, according to information supplied by the Social Services Division, 10 of thebr,anch’s 620 \/ HEALTH AND WELFARE Item 274 SPECIAL SOCIAL SERVICES PROGRAMS-Continued 23.5 professional positions have left the branch during the 5-month period from July 1, to December 1, 1978. After some delay, all but 2.5 positions have been refilled as of January 15, 1978. However, the head of the Policy Development Section remains unfilled. These staffing problems are reflective of and contribute to problems of poor employee morale and lack of effective management leadership. Un- less this situation is corrected, it will be impossible for the branch to resolve many of the problems identified in the county program reviews. We therefore recommend that the Social Services Division report to the Joint Legislative Budget Committee and the appropriate fiscal subcom- mittees and policy committees by April 1, 1978 on procedures to reduce staff turnover in the In-Home Supportive Services Branch. Reports to the Legislature We recommend that the Department of Social Services implement procedures to assure that supplemental reports on social services pro- grams are completed and submitted to the Legislature in a timely fashion. We further recommend that the Department of Social Services report to the Joint Legis\/ative Budget Committee and the fiscal subcommittees and appropriate policy committees on a biannual basis beginning July 1, 1978 on state management of the Homemaker\/Chore program. Such a report should identify major program issues, describe scheduled and com- pleted staff activities, and identify policies established by the department to resolve these issues. The Legislature added supplemental language to the Budget Act of 1977 requesting that the Department of Health report to the Legislature on a quarterly basis beginning July 1, 1977 on progress in the study of policy issues relating to the homemaker \/ chore program. Even though staff work for the first report has been completed for some time, no formal reports were submitted to the Legislature as of January 15, 1978. Because the Legislature needs to be kept informed of the progress and activities of the IHSS branch, we- recommend that the Department of Social Services implement procedures to assure that supplemental reports on social services programs be completed and transmitted to the Legisla- ture in a timely fashion. We further recommend that the department submit a report to the Legislature on a biannual basis beginning July 1, 1978 on state management of the homemaker program which includes (a) identification of major program issues, (b) description of scheduled and completed staff activities, and (c) identification of policies established by the department to resolve these issues. OTHER STATE ADMINISTERED SOCIAL SERVICES PROGRAMS Adoptions We recommend approval of the proposed $16,316,150 General Fund subvention for public adoption agencies. This is an increase of $859,556 or 5.6 percent over estimated expenditures in the current year. The increase is due to a cost-of-living adjustment for the program. Item 274 HEALTH AND WELFARE \/ 621 Item 270, Department of Social Services Support, proposes $157,596 from the General Fund to establish nine positions for the Adoptions Pro- gram. The new staff will be used to (a) reduce backlogs in case processing and review relinquishments and other actions which free children for adoption, (b) develop a monitoring system for the Aid for the Adoption of Children program which provides financial assistance to limited-in- come parents who adopt hard to place children, (c) provide ad~itional support for placement of children across state lines, and (d) investigate illegal or improper adoptions and placements. Demonstration Programs We recommend a General Fund reduction of $200,000 for unspecified demonstration programs. The budget proposes $1,975,000 for social services demonstration pro- grams. Of this amount, $1,850,000 is in Item 274 and $125,000 is from Chapter 892, Statutes of 1977. This is a decrease of $325,000 or 14.1 percent- from current year expenditures and reflects a decrease in funds appro- priated from other legislation. Included in the $1,975,000 are the following amounts: (a) $1,650.000 for continuation of the family protection pilot program previously funded by Chapter 977, Statutes of 1976, (b) $125,000 for local assistance costs to implement pilot centers for victims of domestic violence under the provi- sions of Chapter 892, Statutes of 1977, and (c) $200,000 for unspecified demonstration programs. Victims of Domestic Violence. Chapter 892, Statutes of 1977, which became effective January 1, 1978, requires the Department of Health to contract with between fo~r and six public or private nonprofi~ agencies to develop centers for victims -of domestic violence. The Department of Health is required to select projects for funding no later than April 1, 1978. The department has placed responsibility for this program with the Social Services Division. The division indicates it currently plans to send out requests for proposal to prospective bidders by the end of January 1978 and to have individual centers funded by the April 1, 1978 deadline. Unspecified Projects. The Budget Act of 1977 contained $200,000 ‘from the General Fund for departmental demonstration programs. However, the Department -of Health did not begin soliciting proposals for these projects until December 29,1977. The Governor’s Budget again proposes $200,000 for unspecified demonstration programs. We recommend a GeneralFund reduction of $200,000 for demonstra- tion programs for the following reasons: (a) we are unable to identify how funds available in the current year will be expended or what benefits will be derived from these projects, and (b) the department is unable to identify how these funds will be spent in the budget year. Maternity Care Program We recommend that the Department of Health submit a plan for im- plementation of the maternity care program to the Joint Legislative Budget Committee and the fiscal subcommittees and appropriate policy committees by Apn1 1, 1978. This plan should include procedures for 622 \/ HEALTH AND WELFARE Item 274 SPECIAL SOCIAL SERVICES PROGRAMS-Continued assuring that estimated expenditures do not exceed funds appropriated . and a schedule for implementation of regulations. Chapter 1190, Statutes of 1970, (The Pregnancy Freedom of Choice Act) which went into effect January 1, 1978, requires the state to reimburse nonprofit licensed maternity homes for the cost of care and services pro- vided to unmarried pregnant women under the age of 21. These reim- bursements are not to exceed $965 per month per person as adjusted annually. The Department of Health is required to adopt regulations, to specify procedures for filing claims for reimbursement, and to conduct audits. The Department of Health placed responsibility fo)\” administration of the program with the Social Services Division. Section 16151 of the Welfare and Institutions Code appropriates funds from the General Fund to the Department of Health to reimburse li- censed maternity homes as follows: (a) $1.2 million for fiscal year 1977-78, and (b) $2.4 million for fiscal year 1978-79. Although these funds are not appropriated through Item 274, they are reflected in the Governor’s Budget under the special social services program. As of late January, the Department of Health was in the process of developing a model contract for reimbursements, but had not yet imple- mented the program. Because of the possibility that requests for reim- bursement may exceed appropriated funds, careful program plruming and early implementation of regulations are essential to assure that funds are properly allocated. We therefore recommend that the Department of Health submit a plan for implementation of the maternity care program to the Joint Legislative’ Budget Committee and the fiscal subcommittees and appropriate policy committees by April 1, 1978. This plan should include but not be limited to procedures for assuring that estimated expenditures do not exceed funds appropriated and a schedule for implementation of regulations. SOCIAL SERVICES PROGRAM ADMINISTRATION Management Information System We recommend that the Department of Social Services report to the Joint Legislative Budget Committee and the appropriate fiscal subcom- mittees and policy committees by December 1, 1978 on its progress in (a) implementing a comprehensive data system for the Homemaker\/Chore program, and (b) studying the feasibility of a statewide data system for all social services. One of the continuing problems of the social services program is lack of a comprehensive management information system. In the past the department has relied on several information sources. First, the depart- ment receives some client and service information reported by counties in accordance with federal statistical reporting requirements. However, this information does not provide sufficient detail on a timely basis to m~et the program’s data needs. In addition, the department has relied on one- time surveys of selected counties to provide information in the Homemak- er\/Chore program area. However, these one-time surveys have often been poorly designed and fail to provide on-going information to identify Item 274 HEALTH AND WELFARE \/ 623 program trends over time. Recent studies of the Homemaker I Chore pro- gram completed by the Office of the Auditor General and the State Bene- fits and Services Advisory Board point out the need for a comprehensive homemaker I chore management information system. Recently, the Information Development Section of the Social Services Division developed a series of management objectives for collection of program data. These objectives include development and implementation of a monthly interim data system for the Homemaker \/ Chore program by January 1978, to provide information on number of clients served, hours’ of service provided and program expenditures by county. In addition, the section plans to develop and implement a more comprehensive informa- tion system for the Homemaker \/ Chore program by October 1979 and to conduct a study of the feasibility of implementing a statewide manage~ ment information system for all social services by June 1979. Because of the need for adequate program data to provide a basis for effective program planning, monitoring, and evaluation, the new Depart- ment of Social Services should establish a comprehensive social services information system as _one of its major priorities. We therefore recom- \” mend that the Department of Social services report to the Joint Legisla- tive Budget Committee and the appropriate fiscal subcommittees and policy committees by December 1, 1978 on its progress in implementing a comprehensive data system for the Homemaker I Chore program and in studying the feasibility of implementing a statewide system for all social services. Program Monitoring and Review We recommend deletion of seven new positions for a General Fund reduction of $197,182 in Item 270, support for the Department of Social Services. We further recommend that the Depar:tment of Social Services examine the current program review and monitoring operations for the Social Services program and submit a report of its findings and recommenda- tions to the Joint Legislative Budget Committee and appropriate policy and fiscal subcommittees by December 1,1978. – Last year, the 1977-78 budget proposed the continuation of six positions in the Social Services Evaluation Branch which had been established pur- suant to Section 28 of the Budget Act of 1976. Because the justification for these positions was not adequate, we withheld recommendation pending receipt of the department’s plan for conducting reviews of county pro- grams and special program studies. Although the information which was, submitted to the Legislature during budget hearings did not adequately identify the department’s planned activities, we recommended approval of the six positions because of the program’s need for stronger program monitoring and review capabilities. There are currently 26 positions as- signed to the Social Services Evaluation Branch. , The budget proposes $197,182 in Item 270 (support for the Department of Social Services) for an additional seven positions to review county. programs and conduct special studies. The documentation submitted to our office for justification 6f the new positions was outdated. We therefore 624 \/ HEALTH AND WELFARE Item 274 SPECIAL SOCIAL SERVICES PROGRAMS-Continued requested and received additional information which indicated that the new positions would be used as follows: 1. County Monitoring. Five of the new positions are proposed to be assigned to the Field Operations Section to conduct county reviews. There are currently 14 positions assigned to this section. The purpose of these reviews is to assure that county p:rograms are in compliance with existing social services regulations. The new positions would enable the section to review cOllIlty programs every 18 months with the first cycle scheduled for completion December 1979. 2. Special Studies. Two positions would be assigned to the Program Review Section which currently consists of eight positions. These positions would be used to complete two to four studies in as yet undesignated topic areas. We have several concerns about the current monitoring and review activities conducted by the Social Services Evaluation Branch. First, there is a lack of coordination between staff of the Evaluation Branch and other program branches who conduct county reviews such as the In-Home Supportive Services Branch. As a result, a county may have several differ- ent teams of state staff reviewing selected elements of county programs at different points in time. Second, there is no procedure for assuring that the findings identified in county reviews or special reports are reviewed and resolved by other branch managers responsible for on-going program administration. Third, existing regulations are so vague that they do not provide an adequate standard for state level review of county programs. Since these problems have not yet been resolved, we do not believe additional positions can be used effectively at this time. As a result, we recommend deletion of seven new positions for a General Fund reduction of $197,182 in Item 270. We further recommend that the Department of Social Services examine the current program review and monitoring oper- ations for the Social Services program and submit a report of its findings and recommendations to the Joint Legislative Budget Committee and the appropriate fiscal and policy committees by December 1, 1978. Development of an Evaluation Model We withhold recommendation of four proposed positions pending re- ceipt and review of the Assembly Office of Research preliminary report on social services evaluation. The budget proposes $126,082 in Item 270 for four positions to be estab- lished for the period July 1, 1978 to June 30, 1980. These positions will be used to establish and implement an evaluation model focusing on program effectiveness of child protective services in seven selected counties. The department has not yet developed a work plan for development and implementation of this model. House Resolution No. 21 directs the Assembly Office of Research to review the evaluation and monitoring systems of the social services pro- grams funded by Title XX, design and select one or more models of social services evaluation, and make recommendations for program evaluations. The Assembly Office of Research indicates it will submit a preliminary Item 275 HEALTH AND WELFARE \/ 625 report of its findings to the Assembly Rules Committee by February 1978. We withhold recommendation of the four proposed positions pending receipt of this report. Coordination of Programs for the Elderly We recomlDend that the Social Services Division designate two ex- perienced professional staff to participate in a special planning group in the Department of Aging beginning no later than June 1, 1978. In Item 238, Department of Aging, we discuss the lack of an integrated system of services to the elderly, particularly in the area of health and social services. As a result, we recommend that a special planning group be established in the Department of Aging which has responsiblity for coordinating services to the elderly. This planning group would be com- posed of staff from each of the existing state departments and offices which have responsibility for planning and providing health and social services to the elderly. The Social Services Division in the Department of Health is a logical contributor to this effort since it is responsible for planning and providing protective’ and. out-of-home care services for adults, as well as homemaker\/chore services. In the Homemaker\/Chore program, it is estimated that 64 percent of the recipients are over 65 years of age. We recommend that the Social Services Division identify two ex- perienced professional staff to participate in this special planning group no later than June 1, 1978. Because the Social Services Divison already has responsibility for services planning and coordination and because a signifi- cant number of new positions were added to the budget last year for this purpose, the designation of two positions to the special planning group is an appropriate use of existing staff. Department of Social Services INDO-CHINESE REFUGEE ASSISTANCE PROGRAM Item 275 from the General Fund Budget p. 693 Requested 1978-79 ………………………………………………………………. . Estimated 1977-78 ………………………………………………………………… . $3,019,900 None Requested increase $3,019,900 Total recommended reduction …………………………………………… . $1,630,000 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS L Federal Funding Changes. Reduce by $l,63O,()(}{).Recom- . mend reduction of support for payments to individuals not meeting eligibility requirements of existing welfare pro- grams. Analysis page 626 626 \/ HEALTH AND WELFARE Item 275 INDO-CHINESE REFUGEE ASSISTANCE PROGRAM-Continued GENERAL PROGRAM STATEMENT The Indo-Chinese Refugee Assistance program (!RAP) was established by federal law and policy directives to provide benefits to eligible Indo- Chinese refugees. Until recently, the !RAP was 100 percent federally: funded. However, the enactment of recent federal legislation (PL 95-145) will phase-out federal participation in this program. This phase-out is to be implemented over a four-year period as follows: 75 percent federal participation beginning October 1, 1978; 50 percent on October 1, 1979; 25 percent on October 1, 1980; and zero on October 1, 1981. ANALYSIS AND RECOMMENDATIONS The Governor’s Budget pr9poses a General Fund appropriation of $3,- 019,900 for the local assistance cost of continuing the Indo-Chinese Refu- gee Assistance program in fiscal year 1978-79. Total local assistance costs including federal, state and county support are projected to be $29,644,800 which is an increase of $2,619,600, or 9.7 percent, over the current year. The primary reason for this increase is a projected increase in caseload. Table 1 presents total local assistance costs as identified in the Governor’s Budget. Table 1 Local Assistance Costs for Indo-Chinese Refugee Assistance Program for Fiscal Year 1978-79 Federal State County Total 1. AFDC a. Federally eligible ………. ; ………………….. $14,272,500 $1,376,300 $662,600 $16,311,400 b .. Nonfederally eligible ………………………. 2,339,100 526,300 253,400 3,118,BOO 2. General assistance ……………………………….. 1,067,600 513,200 1,580,BOO 3. Residuals ……………………………………………….. 7,244,400 1,630,000 784,BOO 9,659,200 4. Nonassistance food stamp savings ………. (512,700) (512,700) (1,025,400) Total ………………………………………………………. $24,410,900 $3,019,900 $2,214,000 $29,644,BOO Federal Funding Changes We recommend a General Fund reduction of $1,630,000 for the state cost of providing benefits to Indo-Chinese refugees who do not meet eligibility requirements for existing welfare programs. As of October 1, 1977, IRAP individuals who were qualified to receive AFDC payments were enrolled in the AFDC program. Payments to these individuals were 100 percent federally supported, with !RAP reimbursing the state and counties for their share of AFDC costs. !RAP individuals who were not eligible for AFDC nevertheless received payments from county welfare departments equal to the AFDC payment. These costs were also 100 percent federally funded, with !RAP providing the entire amount. These non-AFDC eligible indiv.iduals are referred to as IRAP \”residuals.\” Beginning October 1, 1978, federal IRAPreimbursements will be re- duced by 25 percent. The $3,019,900 proposed from the General Fund is the net state cost of replacing declining federal reimbursements and con- tains the following cost components: (a) an increase of $1,902,600 for the. portion of the state’s share of AFDC costs which will no longer be reim- Item 276 HEALTH AND WELFARE \/627 bursed by federal IRAP funds, (b) an increase of $1,630,000 for the state cost of continuing payments to residual individuals at the current year level despite a reduction in federal reimbursements, and (c) a savings of $512;700 that will no longer be charged to the nonassishince food stamp program. In the past, IRAP recipients were enrolled in the nonassistance food stamp program for which the state pays 50 percent of the administra- tive cost. However, as !RAP individuals are transferred to the AFDC program, food stamp administrative costs will be absorbed by the AFDC program. The Department of Benefit Payments has estimated that a portion of the residual IRAP individuals will be eligible for county general assistance. These costs will be supported from federal IRAP reimbursements and county funds with no state participation. If the state should choose to continue to replace declining federal funds with state General Fund support for the IRAP residuals, this cost will continue to grow as projected federal phase-out of the program is com- pleted. We believe that neither the state nor the counties have the respopsibili- ty or authority to pay Jor the administrative and grant costs of individuals who do not qualify for existing .welfare programs. The administration is proposing a significant policy change through the budget procedure in lieu of the normal legislative. procedure. Adoption of this policy would result in the granting of public assistance to a group of persons who have assets or income which exceed the present AFDC standards or who do not meet other eligibility requirements such as having minor children. We can find no justification for this and therefore recommend a General Fund reduction of $1,630,000 for the state cost of providing payments to IRAP residuals. Department of Social Services COUNTY ADMINISTRATION Item 276 from the General Fund Budget p. 692 Requested 1978-79 ……………………………………………………………….. . Estimated 1977-78 ………………………………………………………………… . Actual 1976-77 ……………………………………………………………………… . Requested increase $8,158,800 (11.7 percent) . Total recommended reduction …………………. ~ ………………………. . 1978-79 FUNDING BY ITEM AND SOURCE Item 276 (a) 276 (b) 276 (c) 276 (d) 276 (e) Descrirtion AFDC Special Adult Programs Food Stamps Emergency Payments Nonmedical Out\u00b7of\u00b7Home Care Certification Fund General General General General General $77,904,900 69,746,100 . 65,677,564 Pending Amount $64,638,700 1,950,800 10,446,600 548,900 319,900 $77,904,900 628 \/ HEALTH AND WELFARE COUNTY ADMIN.ISTRATION-Continued SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Expenditure Revisions. Withhold recommendation pend- ing receipt and review of May Revision of Expenditures. GENERAL PROGRAM STATEMENT Item 276 Analysis page 629 This item contains the General Fund appropriation for the state’s share of administrative costs incurred by counties for the following program activities: a) AFDC eligibility determination, b) administration of the Food Stamp program, c) administration of the special benefit and emer- gencypayments programs for aged, blind and disabled recipients, and d) identification of licensed out-of-home care facilities and certification of nonlicensed facilities which provide services to aged, blind and disabled recipients. ANALYSIS AND RECOMMENDATIONS The Governor’s Budget proposes a General Fund appropriation of $77,- 904,900 for the state share of county welfare department administrative costs. This is an increase of $8,158,800 or 11.7 percent over the current year .. As shown in Table 1, the Governor’s Budget projects that total county welfare department administrative costs including federal, state, and county funds Will be $395,845,700 in fiscal year 1978-79 which is an increase of $28,043,800 or 7.6 percent over the current year. Table 1 TOTAL COUNTY WELFARE DEPARTMENT ADMINISTRATIVE COSTS FOR AfDC. SPECIAL ADULT PROGRAM. fOOD STAMPS. EMERGENCY PAYMENTS AND NONMEDICAL OUT-Of-HOME; CARE CERTifiCATION\u00b7 Estimated Projected Percent 1977-78 1978-79 Increase Change 1. AFDC a. Eligibility Casework ……………… $233,404,200 $253,614,300 . +$20,210,100 +8.7 b. Child Support Collections …….. 70,818,000 75,067,100 +4,249,100 +6.0 2. Special Adult Programs ……….. : ………. 1,573,300 2,002,100 42,8,BOO +27.3 3. Food Stamps …………………………………… 61,196,100 64,293,400 +3,097,300 +5.1 4. Emergency Payments …………………….. 508,500 548,900 +40,400 +7.9 5. Nonmedical Out-of-Home Care Cer- tification ………………………………………….. 301,BOO 319,900 +18,100 +6.0 Totals ……………………………………………. $367,801,900 $395,845,700 +$28,043,800 +7.6 a Excludes costs for Medi-Cal eligibility detennination, county general assistance programs and county social services programs. Item 277 . HEALTH AND ‘WELFARE \/ 629 Expenditure Revisions We withhold recommendation pending receipt and review of the May revision of expenditures. In May 1978, the Department of Finance will submit its Revision of Expenditures to the Legislature. The revision will contain the administra- tion’s most recent expenditure claims and workload data. We have identi- fied two areas where revisions are likely. The first is the state’s,share of the cost of implementing proposed regulations. The budget proposes an appropriation of $1,836,900 for proposed regulations which will change procedures for contacting AFDC recipients who fail to return monthly reporting fonns. The Department of Benefit Payments indicates it is cur- rently revising its proposed regulations and this may affect the estimated cost of implementation. A second ~rea is the cost of implementing new federal food stamp regulations. Recently enacted federal law (PL 95-113) contains major revisions to the food stamp program. These revisions will eliminate the purchase requirement, revise income and eligibility requirements, and change certain administrative procedures. However, federal regulations have not been issued to implement this new law. If these new regulations are received by the. department in time to be included in the May Revision of Expenditures, they may result in changes in the General Fund appro- priation. Because, of the need to continue this item as a closed-ended appropriation in conjunction with a cost-control plan, it is important that the budget estimates be as accurate as possible. Department of Social Services EXECUTIVE MANDATES Hem 277 from the General Fund Budget p. 694 Requested 1978-79 ………………………………………………… , ………….. .. Estimated 1977-78 ………………………………………………………… : ……… . Actual 1967-77 ……………………………………………………………………….. . Requested increase $2,022,800 Total recommended reduction …………………………………………… . SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS $2,022,800 None None Pending Analysis page 1. Expenditure Revisions. Withhold recommendation pending receipt and review of May revision of expenditures. 629 ANALYSIS AND RECOMMENDATIONS We withhold recommendation pending receipt and review of the May revision of expenditures. The Governor’s Budget proposes a General Fund appropriation of $2,- 022,800 to reimburse .counties for the cost of implementing state regula- tions for the Aid to Families with Dependent Children (AFDC) program 630 \/ HEALTH AND WELFARE Item 277 EXECUTIVE\u00b7 MANDATES-Continued in accordance with Section 2231 of the Revenue and Taxation Code. The state’s share of these increased costs is reflected in Control Section 32.5, AFDC Maintenance Payments, and in Item 276, County Administration. This is a new budget item and reflects costs for the following changes iri regulations: 1. Work-Related Equipment. The department proposes to implement regulations which would exempt from consideration as property the en- tire value of an AFDC recipient’s work-related equipment. Current regu- lations provide a maximum exemption of $200. This limit has forced some recipients to dispose of work-related equipment in order to meet AFDC eligibility requirements. The new regulations are scheduled for im- plementation February 1, 1978. The budget proposes $27,500 to reimburse counties for their share of increased grant costs resulting from a minor increase in caseload. 2. Minor Parent. The department proposes to implement regulations which would change AFDC eligibility standards for minor parents and their children. The proposed regulation would exclude a minor parent residing with his or her nonneedy parents from eligibility for AFDC but would continue AFDC payments for the minor parent’s child. Under current regulations, the value of housing, utilities, food and clothing con- tributed to the minor parent by his or her nonneedy parents is deducted from the AFDC payment for minor parent and child. This often results in the child receiving less than would be paid if eligibility were based on the needs of the child alone. Under the new regulations, if the grandparent is capable of supporting the minor parent, only the minor parent’s child would be eligible for AFDC. This would make the payment level for that child comparable to the payment level of children residing with other nonneedy relatives. The budget proposes $158,400 to reimburse counties for their share of increased grant costs. 3. Monthly Reporting Forms. The department proposes to develop regulations which will change procedures for contacting AFDC recipients who fail to return monthly reporting forms. If such forms are not received, county welfare departments may discontinue a recipient’s aid payment. The budget proposes $1,836,900 to reimburse counties for their share of administrative costs resulting from such regulations. However, the De- partment of Benefit Payments indicates that the. proposed regulations may be substantially revised. As a result, the department’s current cost estimate of $1,836,900 may be adjusted when the Department of Finance submits the May revision of expenditures. We therefore withhold recom- mendation. Item 278 HEALTH AND WELFARE \/ 631 Department of Social Services LEGISLATIVE MANDATES Item 278 from the General Fund Budget p. 701 Requested 197~79 ………………………………………………………………. . Estimated 1977-78 ………………………………………………………………… . Actual 1976-77 ……………………………………………………………………… . Requested decrease $29,300 (0.2 percent)\u00b7 Total recommended reduction ………………………………………….. .. GENERAL PROGRAM STATEMENT $17,738,700 17,768,000 8,354,372 None Chapter 348, Statutes of 1976, increased the AFDC welfare payment standard by 6 percent, effective January 1,1977, in order to support a higher standard of living. Normally, counties pay a portion of AFDC grant costs. However, because the state mandated the increase, it has an obliga- tion to reimburse counties for the local share of the 6 percent increase. Chapter 348 disclaims any obligation on the state’s part to reimburse counties for cost-of-living increases in payment standards. As a result, cost-of-living increases do not affect the state’s level of reimbursement on a cost-per-case basis. ANALYSIS AND RECOMMENDATIONS We recommend approval. . The budget requests $17,738,700 for fiscal year 197~79 to reimburse counties for their portion of the cost of AFDC grant increases which became effective January 1, 1977. The proposed $17,738,700 is a decrease of $29,300, or 0.2 percent, below the current year. The reason for this decrease is the 0.2 percent decrease in AFDC caseload projected for fiscal year 1978-79. We recommend approval of this amount with the understanding that the appropriation is subject to adjustment when the Department of Fi- nance prepares the May revision of expenditures. 632 \/ HEALTH AND WELFARE Items 279-285 Health and Welfare Agency DEPARTMENT OF CORRECTIONS Items 279-285 from the General Fund Budget p. 714 Requested 1978-79 …………………….. ; ………………………………… :~ …… $266,116,975 Estimated 1977-78…………………………………………………………………. 261,041,103 Actual 1976-77 ……………………………………………………………………….. 223,239,827 Requested increase $5,075,875 (1.9 percent) Total recommended reduction ……………………………………………. $781,270 1978-79 FUNDING BY ITEM AND SOliRCE Item 279 280 281 282 283 284 2&5 Description Departmental operations Community Release Board Workers compensation-inmates Transportation of prisoners Returning fugitives from justice Court costs and county charges Local detention of parolees Fund General General General General General General General SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. New Positions for Inmate Visiting. Reduce Item 279 by $347,670. Recommend deletion of 20 positions requested for surveilling inmate visiting areas. 2. New Positions for Prison Gang Intelligence. Reduce Item 279 by $110,000. Recommend deletion of six positions re- quested for obtaining information on prison gangs. 3. New Maintenance Positions at Deuel Vocational Institu- tion. Reduce Item 279 by $74,100. Recommend deletion of five new positions. 4. Position Transfer. Recommend Structural Drafting Tech- nician be transferred to headquarters staff. 5. Staffing Standards. Recommend department establish staffing standards for psychiatric treatment and submit re- port. 6. Limited Term Positions. Recommend nine new clerical positions for Community Release Board be authorized for one year only. 7. Parole Region Consolidation. Reduce Item 279 by $25,000. Recommend deletion of one parole agent III po- sition redirected to update and maintain manuals. 8. Limited Term Approval. Recommend CEA II position funds being allocated to the Special Alcohol and Narcotics\u00b7 program be approved for two years only. Amount $257,459,656 3,982,809 1,247,600 233,200 816,200 1,724,550 652,960 $266,116,975 Analysis page 635 636 637 637 638 639 640 640 Items 279-285 HEALTH AND WELFARE \/ 633 9. New Positions for High Control Supervision Unit. Reduce 641 Item 279 by $16O,()()(). Recommend deletion of 10 posi- tions requested for parolee investigation. 10. Investigative\/Intelligence Staff. Reduce Item 279 by $64,- 642 500. Recommend deletion of three special agent positions to eliminate duplication .. GENERAL PROGRAM STATEMENT The Department of Corrections, established in 1944 under the provi- sions of Chapter I, Title 7 (commencing with Section 5(00) of the Penal Code, operates a system of correctional institutions for adult felons and nonfelon narcotic addicts. It also provides supervision and treatment of parolees released to the community as part of their prescribed terms, and advises and assists other governmental agencies and citizens’ groups in programs of crime prevention, criminal justice, and rehabilitation. ANALYSIS AND RECOMMENDATIONS To carry out its functions, the department operates 12 major institutions, 19 camps, two community correctional centers and 58 parole units. The department estimates these facilities and services will provide for an aver- age daily population of 22,205 in institUtions and 20,092 on parole (includ- ing\u00b7 felons and nonfelon drug addicts). Impact of Determinate Sentencing Act of 1976, Chapter 1139, Statutes of 1976 (SB 42) and Chapter 165, Statutes of 1977 (AB 476) On July 1, 1977, California’s Determinate Sentence Law took effect, replacing the indeterminate sentencing structure. The purpose of impris- onment is no longer rehabilitation of the offender. The new law declares that \”the purpose of imprisonment for crime is punishment.\” The Determinate Sentence Law establishes a scale of three. basic sent- ences for most crimes, with some crimes carrying a penalty of death or life imprisonment with or. without the possibility of parole. In sentencing an individual to prison, judges must initially select one of the three basic terms set for each offense-for example 16 months, 2 or 3 years and 5, 6, or 7 years. The upper and lower ranges are for special mitigating or aggravating circumstances. In addition, judges can \”enhance\”, or in- crease, sentences for the following reasons: use of weapons, prior felony convictions, excessive p~operty damage, and consecutive sentences. Judges are not required to sentence all felons to prison; they retain the discretion to impose a fine, a county jail term, probation or suspending sentence as’ provided by law. Good behavior and work participation credits can reduce the amount of time served by one-third. Credits are vested every eight months on the basis of three months for good behavior and one month for prescribed work participation. The new law stipulates one year on parole for persons not sentenced to life imprisonment and three years for those with a life sentence. The maximum time for any single reincarceration resulting from a technical violation of parole is six months and one year, respective- ly. Any such period of reincarceration is not credited to an individual’s parole period. Thus, persons not sentenced to life imprisonment cannot 634 \/ HEALTH AND WELFARE DEPARTMENT OF CORRECTIONS-Continued Items 279-285 be retained under parole or custody (without a new conviction) for longer than 18 months; for persons with a life sentence, the limit is four years. The full impact of the Determinate Sentence Law on the institutional and parole programs can be assessed only after further experience with it. The department’s proposed budget provides for program and personnel increases in the institutional program. Other departmental programs gen- erally would be continued at their previously authorized level. The total operations of this department, the Community Release and Narcotic Ad- dict Evaluation boards, and special items of expense from all funding sources (General Fund, special and federal funds, and reimbursements) are summarized in Table 1. Table 1 Department of Corrections Budget Summary Funding General Fund …………………………….. . Correctional Industries Revolving Fund ………………………………………. .. Inmate Welfare Fund ……………….. .. Federal funds …………………………….. . Reimbursements ………………………. .. Estimated 1977-78 $261,041,103 18,851,279 6,015,610 42,063 3,925,619 Totai ………………………………………… $289,875,674 Program I. Reception and diagnosis ………. $2,887,052 Personnel-years …………………….. 127 II. Institution ……………………………… 236,615,443 Personnel-years …………………….. 6,987.7 III. Releasing authorities ……………. 6,501,925 Personnel-years ……. : ……………… 17.8 IV. Community correctional pro\” gram ……………………………… 28,941,187 Personnel-years …………………….. 877.7 V. Administration (undistribut- ed) …………………………………. 11,697,133 Personnel-years …………………….. 354.3 VI. Special items. of expense …….. 3,232,934 Totals ………………………………………. $289,875,674 . Personnel-years …………………….. 8,424.5 Proposed 1978-79 $266,116,975 19,943,530 6,169,861 42,063 1,797,289 $294,069,718 $2,932,846 126.1 241,901,178 6,981.2 4,140,881 90.8 29,222,737 897.4 12,445~66 368.5 3,426,910 $294,069,718 8,464.0 Change from Current Year Amount Percent $5,075,872 1.9% 1,092,251 154,251 -2,128,330 $4,194,044 $45,794 .9 5,285,735 -6.5 -2,361,044 13 281,550 19.7 748,033 14.2 193,976 $4,194,044 39.5 5.8 2.6 -54.2 1.4% 1.6% -.7 2.2 -.1 -36.3 16.7 1.0 2.2 6.4 4.0 6.0 1.4% .4 I. RECEPTION AND DIAGNOSIS PROGRAM Through four reception centers, the department processes four classes of persons: those committed to the department for diagnostic study prior to sentencing by the superior courts, those sentenced to a term of years, those returned because of parole violation, and nonfelon addicts. The department provides the courts,’on request, a comprehensive diag- nostic evaluation and recommended sentence for convicted felon offend- ers awaiting sentencing. For individuals committed to prison, an extensive Items 279-285 HEALTH AND WELFARE \/ 635 personal history is compiled for determining suitable custody and pro- gram needs. The new felon commitments are received at reception cen- ters located adjacent to and operated as part of regular penal institutions for males at Vacaville and Chino, for females at Frontera, and for nonfelon addicts at Corona. . .. The proposed expenditure of $2,932,846 for this program is $45,794 or 1.6 percent above estimated current-year expenditures. The increase repre- sents merit salary adjustments and price inflation to continue the existing program level. . II. INSTITUTION PROGRAM This program includes the department’s 12 institutions, which range from minimum to maximum security, including two medical-psychiatric institutions and a treatment center for narcotic addicts undercivil com- mitment. Major programs include 24 correctional industry operations and seven. agricultural enterprises which seek to reduce idleness and teach good work habits and job skills, vocational training in various occupations, aca- de~ic instruction ranging from literacy classes to college correspondence courses, and group and individual\u00b7 counseling. The department will also operate 19 camps which will house an estimated 1,070 inmates during the budget year. These’ camp inmates perform various forest conservation, fire prevention and suppression functions in cooperation with the Division of Forestry. The institution program will provide for a projected average daily population of 22,205 inmates in the budget year, an increase of 820 . inmates over the current year.. . For this program, the department proposes an expenditure of $241,901,- .178 in the budget year, which is an increase of $5,285,735 or 2.2 percent ‘a.bove estimated current-year expenditures. Gang related violence among inmates has,become a major problem in prison operations. The primary causes of this turmoil are intra and inter ethnic rivalries, and the distribution of narcotics, both inside and outside of prison. Thus, most of the department’s proposals in this program area attempt to control gang violence and reduce drug traffic into prison. Excessive Staff Requested for Surveilling Inmate Visitors We recommend deJetion of20 newpositions proposed to increase secu- rity surveillance withinprison visiting areas, for a savings of$347,670 (Item 279). The number of institutional arrests for inmate possession of narcotics and dangerous drugs has increased approximately 91 percent from 1975 to 1977, rising from 430 in 1975 to 820 in 1977. To combat this problem, the department is proposing a five-part, $680,- 652 program consisting of: (a) 18.6 additional guards for~creeniI;lg and searching visitors before they enter the visiting areas at a coSt of $323,333; , (b) certain physical modifications costing $58,900 to increase the security of visiting faCilities at six institutions-e.g., telephone visiting booths; (c) urinalysis machines and equipment for ten institutions to identify narcot- ics users at a cost of $190,870 (San Quentin and the California Rehabilita- tion Center already have such machines); (d) the use of specially trained 636 \/ HEALTH AND WELFARE Items 279-285 DEPARTMENT OF CORRECTIONS-Continued dogs and their handlers to detect drugs and other contraband items inside the institutions at a cost of $62,800; and (e) 20 guard’ positions at a cost of $347,670 for surveillance inside the prison visiting rooms. The department already has 97.5 surveillance guards assigned inside the visiting areas of the 12 institutions, but only one guard is assigned to the visitors entrance gate at each institution. With the addition of 18.6 posi- tions and more thorough inspection procedures, the entrance guards should intercept a substantial amopnt of illegal materials currently being smuggled into the institutions. The urinalysis machines will provide a means to detect inmates using narcotics, and those so identified will be restricted to using telephone booths for visiting purposes, thereby elimi- nating direct transmission of articles. The dogs will provide another means of drug detection within the institutions. These four new proposals, combined with the existing 97.5 visiting area security guards, should have a significant deterrent impact and eliminate a substantial amount of the narcotic\/contraband traffic into the prisons. Visiting room surveillance is probably the least cost-effective method of drug control because of the crowded conditions in these areas, the pres- ence of children and close physical contact between inmates and visitors. We believe that, given the size of staff already available and the potential benefits to be gained from implementing the first four proposals, the department should assess the impact of these programs before augment- ing visiting room staff. Reduce New Positions for Prison Gang Intelligence We recommend deletion of six new positions proposed to obtain infor- mation on prison gang activity, for a savings of $110,000 (Item 279). The department is requesting one full-time lieutenant position for each ,of the 12 institutions to collect, analyze and disseminate information on prison gangs to other institutions and parole officers, as well as to federal, state and local law enforcement agencies. Table 2, shows reported gang incidents by institution for 1977. Given the number of reported gang incidents and the need to avoid placing inmates in institutions with rival gangs, we believe there is justification for the requested positions at four institutions: (1) Deuel Vocational Institution, (2) California Correctional Center, (3) California Training Facility, and (4) San Quentin. . Although the California Institution for Men and the California Medical Facility have had fewer incidents, we are recommending that both re- ceive the requested positions as well. As reception centers for the entire system, they constitute important sources of information on gang activity. The number of gang-related incidents at the remaining institutions is very small (ranging from 15 to 0) and does not warrant such positions on a full-time basis. Therefore, only six of the requested positions should be authorized. Items 279-285 ‘ HEALTH AND WELFARE \/ 637 Table 2 Department of Corrections Number of Reported Gang Related Incidents by Institution in 1977 Institution Number Incidents Deuel Vocational Institution ………………………………………………………………………………………………………. 84 California Correctional Center ………………………………………………………………….. , … ;………………………….. 65 California Training Facility ………………………………………………………………………………………………………… 56 San Quentin State Prison ……………………………………………………………………………………………….. ;.; …. ;…… 44 California Institution for Men …………………………………………………………………………………………………….. 24 California Medical ,Facility ………………………………………………………………………………………………………….. 17 Folsom State Prison …………………………………………………………………………………………………… : …………….. ,. 15 California Mens Colony ……………………………… , ……………………………………………………………………………. :… 9 California Correctional Institution ………….. ;………………………………………………………………………………… 4 California Rehabilitation Center …………………………………………………………………………………………………. 2 California Institution for Women ……………………………………………………………………………………………….. 0 Sierra Conservation Center …………… , …….. ;…………………………………………………………………………………… 0 New Maintenance Personnel for Deuel Vocational Institution Not Justified We recommend deletion of five new maintenance positions (4 painters and one glazier) for a savings of $74,JOO (Item 279). The department is requesting 16 new maintenance positions (plus_ a secretary) for Deuel Vocational Institution (DVI). The department states that the institution does not have a sufficient number of skilled employees for a preventive maintenance program, and that the existing staffis able only to handle breakdowns and those repairs deemed absolutely neces- sary. The personnel problem is compounded by the lack of inmates with trade skills to augment the civilian staff. Eleven of the requested positions, which we recommend for approval, are in job classifications which require special expertise (e.g., machinist, electrician, and fusion welder) which would be difficult to secure from the inmate population. The remaining five, however, consist of four painter I positions and one glazier (glass installer). We believe that inmates can be trained to perform necessary painting within the institution, and there- fore recommend deletion of the four painter positions. With respect to the glazier, we note that none of the 12 institutions has a position specified to install glass, and we have no information indicating why such a position is needed. DVI is not uniquely different from the other 11 institutions, and it has operated adequately in the past without a glazier. In the absence of justification for the glazier position, it should be deleted. Position Transfer We recommend a proposed structural drafting technician II position for Deuel Vocational Institution be transferred to headquarters. The department has requested a structural drafting technician II posi- tion for DVI to make design and construction drawings for remodeling existing and, building new structures. None of the 12 institutions or the facilities planning section of the head- quarters office has a drafting position and the department has not shown 638 I HEALTH AND WELFARE DEPARTMENT .oF C.oRRECTI.oNS-Continued Items 279-285 why only DVI should have one. We believe that all of the institutions could benefit from the services of this position for minor projects which would not warrant use of the State Architect’s office. Therefore, it should be placed in the department’s central facilities planning section. Need Psychiatric Staffing Standards We recommend the department formulate staffing standards for psychi- atric treatment at the California Medical Facility and California Mens Colony and report to the JointLegislative Budget Committee by Novem- ber 1,1978. The department provides psychiatric treatment for mentally ill inmates requiring hospitalization at the California Medical Facility and theCalifor- nia Mens Colony. Over the past years, psychiatric staffing allocations for these institutions have been piecemeal rather than according to a compre- hensive treatment plan. Recent federal court decisions in other states have mandated improved treatment standards in the corrections and mental health areas. We believe the department should develop staffing standards of its own to reduce the possibility of judicial intervention. California has recently instituted significant changes in standards for psy- chiatric treatment, in terms of both physical structure and staffing ratios for the mental hospitals. Chapter 1202, Statutes of 1973 (SB 413), requires state hospitals under the jurisdiction of the Department of Health to be licensed as health facilities which requires compliance with certain stand- ards. Although the law does not make these standards applicable to the Department of Corrections, the department should develop standards to conform with contemporary practices and report thereon to the Joint Legislative Budget Committee by November 1, 1978. \/ .other New Positions and Major Program Adjustments The department is requesting other new positions and program in- creases for the institution program which we recommend be approved as follows: Program Detail Total Cost 1. Relocate protective housing unit. Provide 20 additional positions to relocate the protective housing unit at Deuel Vocational Institution to the California Institution for Men (elM) and to correct other related security deH~ ciencies at CIM. (The Legislature was notified of this change through Section 28 letter.) ……………………………….. $335,037 2. Augment the security staff in San Quentin north and east blocks by 15.2 positions for control and safety of staff and inmates. (Approval was given by the Legislature to add these positions in the current year.) ……………………………. $277,220 3. Provide 22.4 security positions for Deuel Vocational In- stitution to provide a second officer in each of the seven general population housing units to allow consistency of supervision and mobile surveillance. ……………………………. $398,656 Items 279-285 HEALTH AND WELFARE \/ 639 4. Provide 20 boiler room tender positions to replace in- mate help at the Correctional Training Facility, Califor- nia Institution for Men, San Quentin State Prison and California Rehabilitation Center. This will reduce repair costs and eliminate a primary source of weapons ………. . 5. Replace deteriorated and unsafe laundry equipment not covered by the normal equipment replacement allot- ment ……………………………………………………………………………….. . 6. Establish four office services supervisor I positions, one each at the California Medical Facility, Folsom, Deuel Vocational Institution; and the California Mens Colony. This position will assume the duties of chief clerk and provide professional skills capable of handling the in- creasinglycomplex procurement document workload. (All other institutions have this position.) ………………….. . III. RELEASING AUTHORITIES $228,882 $330,000 $49,853 The Determinate Sentencing Law created a Community Release – Board, replacing both the Adult Authority for male felons, and the Women’s Board of Terms and Paroles for female felons. The board has nine members, all appointed by the Governor with the advice and consent of the Senate. The Community Release Board reviews, within one year of commit- ment, the sentences of all persons committed to the department in order to ascertain whether specific sentences are in conformity with sentences received by other inmates for similar offenses. The board has the authority to return cases to the trial courts for resentencing when it determines sentences are disparate. The board will set the terms of incarceration for persons sentenced to life imprisonment with possibility of parole. The up – to one-third reduction in time served for good behavior and program participation will be initially determined by the department subject to review by the Community Release Board on appeal of an inmate. The board must also decide whether, and for how long, to reincarcerate pa- rolees for technical violations. – Temporary Backlog of Indeterminate Sentence Cases We recommend that nine new clerical positions for the Community Release Board be authorized for one year only. This year the board has been setting determinate terms for all inmates sentenced before July 1, 1977. To accomplish this task, the Legislature authorized a one-time augmentation of 24 positions for 1977-78. It was originally contemplated that with this enlarged staff the board could es- tablish release dates for all inmates sentenced under the indeterminate sentence law. By the end of the current year, the board will have set determinate sentence dates for all regular and ‘~serious offender\” cases..:…. persons convicted of crimes involving violence or bodily injury. However, in the budget year the board will need to conduct hearings for approxi- _ mately 2,000 inmates sentenced to life imprisonment with the possibility of parole. To handle this workload, the bO,ard is requesting five, one-year hearing officer positions and nine-permanent clerical office assistant II positions. 640 \/ HEALTH AND WELFARE DEPARTMENT OF CORRECTIONS~Continued Items 279-285 Pursuant to the determinate sentence law, the board is required to record hearings involving serious offender and life-term prisoners. These recordings must be transcribed within 30 days of the for-life term hearings and in every serious offender hearing which is subject to court review. Additionally, in order to provide the ~bility to assure consistent decisions rendered by the board in these, and all other cases, as mandated by law, the de6isions need to be centrally reviewed. These requirements necessi- tate a transcription procedure not presently available to the board. However, by the end of the budget year the board should have com- pleted the backlog of hearings for life-termers and have an empirical estimate of how many serious offender hearings need to be transcribed. At that time, we will be in a better position to evaluate the board’s regular workload and the required number of permanent clerical positions. Pend- ing that review, the new clerical positions should be approved for one year only. Narcotic Addict Evaluation Authority This board, consisting of four part-time members, makes release deci- sions on narcotic addicts who have committed crimes but who are com- mitted as nonfelons for treatment of their drug problem. This board has not been directly affected by the Indeterminate Sentence Law, and the budget provides for a continuation of the currently approved program level. IV. COMMUNITY CORRECTIONAL PROGRAM The community correctional program includes conventional and spe- cialized parole supervision, operation of community correctional centers, outpatient psychiatric servi~es, anti-narcotic testing and community re- source development. The program goal is to provide public protection as well as support and services to parolees to assist them in achieving success- ful parole adjustment. Parole Region. Consolidation Warrants Position Cuts We recommend deletion oE one parole agent III position proposed to update and maintain the three basic operating manuals on parole supervi- sion, Eor a savings oE $25,()()() (Item 279). We recommend that Eunding derived From converting one CEA II posi- tion to operating expenses Eor Eundingthe Special Alcohol and Narcotics program be limited to June 30, 1981, pending the departments evaluation oE this project. . The Parole and Community Services Division currently operates through five parole regions, four of which are responsible for both felons and nonfelon drug addicts, while the fifth is responsible only for nonfelons in Los Angelt;ls County. The nonfelon population in Region V has dropped significantly during the last three\u00b7 years because the county has been committing a decreasing number of civil addicts to the department, preferring instead to use local facilities and programs for treating such persons. Thus, there has been a decrease in the number of nonfelons released to state parole supervision in that region. Items.279-285 HEALTH AND WELFARE \/641 As a result of this population decrease, the department proposes to\u00b7 eliminate region V and reallocate its staff of seven positions. As discussed’ below, we recommend deletion of one position and limited-term approval of another. The department proposes t.o reassign permanently one parole agent III position t.o revising and maintaining the three .operating manuals .on pa- role supervision: Felon Supervision Manual, N.onfelon Supervisi.on Man- ual, and W.ork Furlough Supervisi.on Manual. In 1977-78 the Parole and C.ommunity Services Divisi.on established a task force (costing $38,450) to rewrite the Felon Supervision Manual. This was necessitated by changes in parole procedure resulting from the determinate sentence law. We d.o n.ot believe that the task.of updating manuals is of such magni- tude or need take place s.o frequently as to warrant a full-time p.ositi.on. Such w.ork should be absorbed by existing staff. Accordingly, we recom- mend deletion of the position. The Nati.onal Institute of Alcohol and Alcoh.ol Abuse funded the Special . Alcohol and Narcotics program from July 1971, through June 30,1977. This pr.ogram, .operated by Calif.ornia State P.olytechnic University, Pomona, provided pre-release and community re-entry services to inmates and parolees with a history of alc.ohol and\/ or drug abuse. The f.ocus of these . services was.on academic and vocati.onal educati.on. According t.o the department, preliminary results of this project indicate a high rate of successful program completi.on, together with a high rate .of j.ob place-\u00b7 ment. The department proposes t.o eliminate one CEA II p.osition (regional parole administrator) and transfer the savings, appr.oximating $45,000, to operating expense-subsistence and pers.onal care. These funds w.ould be used t.o continue the pr.ogram. This program; should be empirically evaluated bef.ore state funds are c.ommitted for its continuati.on. Reduction of High Control Supervision Unit We recommend deletion of 10 new parole positions proposed for a High Control Supervision program, for a savings of $160,000 (Item 279). The department is requesting 30 positions (24 special agents and 6 clerical) to establish for a two-year peri.od, six \”high contr.ol\” par.ole super- vision units t.o pr.ovide special investigati.on and surveillance of parolees suspected .of engaging in organized and\/or serious criminal behavior. These. agents would not carry ordinary caseloads. Because this would be an experimental program and the size of the relevant parole population is unknown, there is no basis for determining the number of such units that might be utilized or evaluating their impact on parolee behavior. Accordingly, we believe that the program should be limited to four units (16 agents and four clerical) with expansion in future years dependent on\u00b7 an assessment of program results. V. ADMINISTRATION The administration,program, including centralized administration at the departmental level headed by the director, provides program coordic nation and support services to the institutional and parole operations. Each institution is headed by a warden or superintendent and its own 642 \/ HEALTH AND WELFARE Items 279-285 DEPARTMENT OF CORRECTIONS-Continued administrative staff. Institutional operations are divided into custody and treatment functions, each headed 1;>y a deputy warden or deputy superin- tendent. The parole operationis administratively headed by a chief parole agent assisted by centralized headquarters staff. Each of the 5 parole regions is directed by a parole administrator, arid the parole function is subdivided into districts and parole units. Duplication of Investigative\/Intelligence Staff We recommend deletion of three special agent positions for a savings of $64,500 (Item 279) to eliminate duplication. The department’s central office is requesting three special agent posi- tions, one for the Bay Area Special Services unit and two for assignment to the Prison Gang Task Force. The Bay Area Special Services unit provides a number of administrative and investigative functions, such as liaison with local law enforcement agencies and investigation of prison gang-related activities. Approximate- ly 50 percent of the agents’ time will be assigned to a special Bay Area Task Force on prison gang activity (whose functions are very similar to those described below). The Prison Gang Task Force collects and analyzes information on prison gang activity-both inside and outside of prison-and dessiminates it to other operational units of the department as well as federal, state, and local law enforcement agencies. The department has also requested 36 other new positions, costing $1,- 567,000, whose stated tasks are duplicative of the above functions as fol- lows: A. Four parole agent II positions (one for each region) to investigate, coordinate, and disseminate information concerning prison gangs within their respective regions. These agents will not carry any caseload. Their total efforts will be directed toward the suppression of prison gang-con- nected activity both inside and\u00b7 outside of the institutions. B. A senior special agent and secretary for headquarters staff to coordi- nate the above four parole agents and the 12 lieutenant positions for each of the institutions discussed earlier. C. Thirty positions (discussed earlier) for six high control supervision units to provide investigation and surveillance of parolees suspected of engaging in organized and\/or other serious criminal behavior. These 36 special investigative, intelligence, and surveillance positions would be performing the same basic duties proposed for the three special agents. One or more of the 36 positions could also provide liaison to the Bay Area Task Force and the Prison Gang Task Force. VI. SPECIAL ITEMS OF EXPENSE Item 282 to 285 provide reimbursements to the counties for expenses relating to transportation of prisoners and parole violators to state prisons, returning fugitives from justice to the state, court costs and all other charges relating to trials of inmates for crimes committed in prison and local detention costs of state parolees held on state orders. These reim- bursements are made by the State Controller on the basis of claims filed Items 286-293 HEALTH AND WELFARE \/ 643 by the counties. As shown in Table 3 each of the four items reflects a continuation of the currently approved program level adjusted for infla- tion. Table 3 Change From Actual Estimated Proposed Prior Year 197~77 1977-78 1978-79 Amount Percent Function Transportation of Prisoners (Item 282) ………………………….. $200,000 $220,000 $233,200 $13,200 6% Returning Fugitives from Jus- tice (Item 283) …………………… 700,000 770,000 816,200 46,200 6 Court costs and County Charges (Item 284) ………………………….. 1,598,934 1,626,934 1,724,550 97,616 6 County Charges for Detention of Parolees (Item 285) ………. 560,000 616,000 652,960 36,960 6 Health and Welfare Agency DEPARTMENT OF THE YOUTH AUTHORITY Items 286-293 from the General Fund Budget p. 736 Requested 1978-79 ………………… : ……………………………………………. \u00b7$147,988,086 Estimated 1977-78 ……………… : ………………….. :…………………………… 142,516,655 Actual 1976-7r …………………………. , ……………. ,…………………………… 117,960,892 Requested increase $5,471,431 (3.8 percent) Total recommended reduction ………… :………………………………… $860,680 1978-79 FUNDING BY ITEM AND SOURCE Item Description Fund Amount 286 Deparbnent Support General $110,173,246 ‘lET Transportation of persons committed General 43,540 288 Maintenance and operation of county ju; General 3,648,000 venile homes and camps 289 Construction of county juvenile homes General 400,000 and camps 290 County delinquency. prevention com- General 33,300 missions 291 Delinquency prevention projects, re- General 200,000 search and training grants 292 Assistance to county special probation General 15,430,000 supervision programs 293 Legislative mandates (Chapter 1071, General 18,000,000 Statutes of 1976) Prior year balance available (Chapter General 60,000 647, Statutes of 1977) $147,988,086 644 \/ HEALTH AND WELFARE Items 286-293 DEPARTMENT OF THE YOUTH AUTHORITY-Continued SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Feeding Cost. Reduce Item 286 by $65,450. Recom- mend offset of reimbursements from National School Lunch Program. Analysis page 650 2. Offsetting Grant Overhead Funds. Reduce Item 286 by 650 $214,5()(). Recommend overhead portion of monies re- ‘ ceived to offset costs of administering grant programs be used for that purpose for a General Fund savings. 3. Camp Programs Under-utilized Reduce Item 286 by 651 $148,480. Recommend deletion of 6.8 positions for the camp at Ventura School. 4. Ward\/Staff Ratio. Reduce Item 286 by $220,190. Recom- 652 mend deletion of 11.1 positions for pilot program to evalu- ate ward and staff safety. Recommend evaluation\u00b7 be conducted of Fred C. Nelles School where reduced popula- tion levels already exist. 5. Ward Grievance Staffing. Recommend departmentiden- 653 tify all positions diverted to ward grievance duties. 6. Medical-Psychiatric Program. Reduce Item 286 by 653 $78, 000. Recommend deletion of funds for staff at the Preston School until new modular building is completed. 7. Modesto Training Academy. Recommend department 654 utilize academy by sending new employees to first avail- able class following employment. I 8. Modesto Training Academy. Recommend Simplification 655 of contract with Department of Corrections. 9. Parole Reorganization. Recommend department contin- 656 ue to operate and evaluate special parole programs proposed for termination. 10. Volunteer Coordinators. Reduce Item 286 by $104,900. Recommend deletion of four positions requested for pilot volunteer projects in parole program. 657 11. County Reimbursements for Detaining Parolees. Reduce 658 Item 286 by $104,660 and establish Item 286.1 in the amount of $75,5()(). Recommend transfer of funds to local assist- ance and reduction of amount requested by $29,160. 12. Probation Subsidy. Withhold recommendation pending 658 additional cost information. GENERAL PROGRAM STATEMENT The responsibility of the Youth Authority Board and the Department of the Youth Authority, as stated in the Welfare and Institutions Code, is \”. . . to protect s()ciety more effectively by substituting for retributive punishment, methods of training and treatment directed toward the cor- rection and rehabilitation of young persons found guilty of public of- fenses.\” The board and the department have attempted to carry out this mandate through the program areas discussed below. Items 28&–293 HEALTH AND WELFARE \/ 645 Youth Authority Board , The. Youth Authority Board, consisting of eight members, is charged with personally interviewing, evaluating and recommending a treatment program for each offender committed to the department. It also sets terms of incarceration and is the paroling authority for all such wards. Administration The administration program consists of (1) the department director and immediate staff, who provide overall leadership, policy determination and program management; and (2) a support services element, which pro- vides staff services for fiscal management, management analysis, data processing, personnel, training, and facility construction, maintenance and safety. Community Services The community services program provides direct staff services to local public and private agencies and administers state grants to subsidize cer- tain local programs relating to delinquency and rehabilitation. Program elements are as follows. Services to Public and Private Agencies This element establishes minimum standards of operation and makes compliance inspections of special probation services which receive state subsidies and county-operated juvenile ,halls, ranches, camps and homes and, in some cases, jails in which juveniles are incarcerated. It also assists in the improvement of local juvenile enforcement, rehabilitation, and delinquency prevention programs by providing training and consultation services to local agencies. Financial Assistance This element administers state subsidies to local government for con- struction, maintenance and operation of ranches, camps, and homes for delinquents, special probation programs, and delinquency prevention programs. State support, which is intended to encourage the development of these local programs, is based on the belief that local treatment of delinquents is more desirable, if not more. effective, than incarceration in state facilities. Treatment in the community or in locally operated institu- tionsretains the ward in his normal home and community environment or at least closer to such influences than may be\u00b7 the case with incarcera- tion in state facilities. Delinquency Prevention Assistance This element disseminates information on delinquency and its possible causes; encourages support of citizens, local governments, and private agencies in implementing and maintaining delinquency prevention ,and rehabilitation programs; and conducts studies of local probation depart- ments. Rehabilitation Servibes The rehabilitation services program includes a community parole ele- ment and an institutions element, each of which is administered by a deputy director and supporting staff in Sacramento. The parole branch is divided into four regions. The institutions and camps branch is organized 646 \/ HEALTH AND WELFARE Items 286-293 DEPARTMENT OF THE YOUTH AUTHORITY-Continued on a north-south regional basis. It operates four reception centers, eight institutions and five forestry camps as follows: &~o\/ W~liM Reception Centers: Northern Reception Center\/Clinic …………………………………………………………………….. Sacramento Southern Reception Center\/Clinic………………………………………………………………………. Norwalk Youth Training School Clinic a……………………………………………………………………………… Chino Ventura Reception Center\/Clinic a …………………………………………………………………….. Camarillo Institutions: . . Northern California Youth Center ………………………………………………………………………. Stockton O. iI. Close School Karl Holton School DeWitt Nelson Youth Training Center Preston School of Industry …………………………………………………………………………………… lone Fred C. Nelles School……………………………………………………………………………………………. Whittier El Paso de Robles School …………………………………………………………………………………….. Paso Robles . Southern California Youth Center .. ,……………………………………………………………………. Chino Youth Training School Ventura School………………………………………………………………………………………………………. Camarillo . Camps: Ben Lomond Youth Conservation Camp ……………………………………………………………. Santa Cruz Pine Grove Youth Conservation Camp …………………………………. ,……………………………. Pine Grove Mt. Bullion Youth Conservation Camp ……………………………………………………………….. Mariposa Washington Ridge Youth Conservation Camp …………………………………………………… Nevada City Oak Glen Youth Conservation Camp …………………………………………………………………. Yucaipa a Colocated with institution. With an estimated average daily population of 4,332 wards, plus a com- munity parole program involving 7,258 wards, the department will super- vise a projected total daily average population of 11,590 wards in fiscal year 1978-79 (Table 1) . The department estimates it will handle a daily average of 192 more institutional wards and 138 fewer parolees in 1978-79 than in the current year. The wards generally come from broken homes, below average econom- ic status and substandard residential areas. They are u,sually academically retarded, lack educational motivation, have poor work and study habits, and have few employable skills. Sixty-three percent have reading compre- hension levels three or more years below their age-grade expectancy and 85 percent are similarly deficient in math achievement levels. Many also have psychological disorders or anti-social behavior patterns. Table 1 Average Daily Population of Youth Authority Wards Reception centers ………………………………………………………………… . Facilities for males ……………………………………………………………….. .. Facilities for females ……………………………………………………………. .. Subtotal (institutions) ………………………………………………………. .. Change from prior year …………………………………………………… .. 1976-77 645 3,305 119. 4,069 . Parole caseload ………………………………………………………………………. 7,486 Change from prior year …………………………………………………… .. Total Wards …………………… ~……………………………………………………… 11,555 1977-78 1978-79 650 665 3,365 3,542 125 125 4,140 4,332 71 192 7,396 .7,258 -90 -138 11,536 11,590 Items 286-293 HEALTH AND WELFARE \/ 647 Diagnosis All wards received by the Department of the Youth Authority undergo a diagnosis procedure at one of the four reception centers, which includes interviews, psychological and educational testing, and medical and dental examinations. Based on this information, staff develops recommendations to assist the Youth Authority Board in determining institutional assign- mentsand treatment programs for the individual wards. Care and Control Residential care in camps and institutions provides housing, feeding, clothing, Illedical and dental services, while parole supervision in the community provides required surveillance and control to assist in rehabili- tating the ward and protecting the community. Treatment Treatment includes counseling, religious services, recreation, psychiat- ric services, academic and vocational training in the institutions and post- release treatment in the community. These services are designed to meet the needs of the wards committed as an aid to their rehabilitation. Research. The research program provides the evaluation and feedback to manage- ment considered necessary to determine those programs that are effective and should be continued, those that show promise and should be rein- forced and those that should be discontinued. It also provides estimates of future institutional and parole caseloads for budgeting and capital outlay purposes, and collects information on the principal decision points as the wards move through the department’s rehabilitation program from the time of referral to final discharge. ANALYSIS AND RECOMMENDATIONS The department’s programs, as proposed in the Governor’s Budget, represent a net General Fund cost of $147,988,086 and 4,145.1 personnel- yeats of effort. Additionally, the department anticipates budget-year reim- bursements amounting to $11,472,680 and federal grants totaling $448,455 for a total expenditure program of $159,909,221. Table 2 summarizes the budget request, showing sources of funding by category, expenditure levels by program area, and proposed dollar and position changes. Table 2 Budget Summary Department of the Youth Authority Estimated Proposed Funding 1977-78 1978-79 General Fund ………………………………………. .. $142,516,655 $147,988,086 Reimbursements …………………………………. .. 13,451,725 11,472,680 Federal Funds …………………………………….. .. 559,496 448,455 Totals\u00b7 …………………………………………. : ………….. .. $156,527,876 $159,909,221 Programs Youth Authority Board ………………… ; …….. .. $1,632,721 $1,676,904 Change Amount Percent $5,471,431 . 3.8% -1,979,045 -14.7 -111,041 -19.8 $3,381,345 2.2% $44,183 2.7% . 648 \/ HEALTH AND WELFARE DEPARTMENT OF THE YOUTH AUTHORITY-Continued Personnel-years …………………………………. 41.1 40.7 Administration ………………………………………. 6,405,149 6,345,632 Personnel-years …………………………………. 219.4 203.5 Community Services……………………………… 23;718,715 23,487,381 _ Personnel-years …………………………………. 61.0 64.0 Rehabilitation Services………………………….. 104,542,629 108,343,247 Personnel-years ………………….. :……………. 3,721.9 3,763.8 Research…….. ………………………….. ……………… 2,228,662 2,056,057 Personnel-years …………………………………. 85.5 73.1 Legislative Mandates a………………………….. 18,000,000 18,000,000 Totals ………………………………………………………… $156,527,876 $159,909,221 Personnel-years …………………………………. 4,128.9 4,145.1 Items 286-293 -.4 -59,517 -15.9 -231,334 3.0 – 3,800,618 41.9 -172,605 -12.4 $3,381,345 16.2 -1.0 -1.0 -7.2 -1.0 4.9 3.6 1.1 -7.7 -14.5 2.2% a Chapter 1071, Statutes ofl976, relating to the juvenile justice system, amended by Chapter 1241, Statutes of 1977 (AB 84). Major Shift in Distribution of Parole Resources The budget reflects the closure of several special parole programs and the reallocation of staff to provide an equal IE:vel of service to parolees throughout the state. The programs to be closed are: 1. Five community parole centers, which provide an intensified level of service and surveillance to about 615 parolees in Los Angeles (four centers) and Stockton (one center). 2. TheJ.O.B.S. program, which assists parolees in securing and retaining employment in Oakland, Berkeley and Richmond. 3. The San Francisco Project, which provides more intensive services to approximately 400 parolees in San Francisco The parole reorganization proposal also includes 15 additional clerical positions and $195,810 on a workload basis. It is discussed later in this Analysis. – Additional Funds for Out-of-Home Placements The department requests an additional $125,304 to cover increased costs in acquiring adequate out-of-home placements for parolees not living independently or returning to their natural homes. Chapter 1071’, Statutes of 1976, prohibits the placement of \”status offenders\” (run-aways, for example) in secure detention facilities. This has resulted in an increased demand for nonsecure facilities such as foster and group homes. Since the supply of such facilities has not increased with the demand resulting from Chapter 1071, and because counties and private agencies also utilize foster home placements, costs for such facilities have risen significantly. -The additional $125,304 should permit the department to compete more ade- quately for desirable homes, thereby reducing the difficulty the depart- ment has experienced in placing wards in foster homes. Medical-Psychiatric Programs Expanded The budget includes $1,01l,923 (including $250,000 for minor capital outlay) to expand the department’s medical-psychiatric program to ac- commodate 115 wards. Funds will be used to upgrade existing intensive counseling programs at the Preston School and the Northern Reception Center Clinic to medical-psychiatric programs, and to slightly inCrease funding for the existing medical-psychiatric program located at the South- I terns 286-‘293 HEALTH AND WELFARE \/ 649 ern Reception Center \/ Clinic. This is discussed later in the Analysis. Institutional Population Projected to Increase The budget includes $968,980 to accommodate an additional 192 wards in the institutions. Current-year average daily institutional population is projected to be 4,140 (16 less than budgeteq.), and an average daily popula- tion of 4,332 wards is projected for the budget year. Based on current institutional population trends, we believe that the projected budget-year increase is reasonable. However, a technical budgeting probleJIl concern- ing funds required for the increased population is discussed later in this Analysis. ‘ … Funds Provided to Reimburse Counties for Costs Arising from Major Revision of Juvenile Justice Procedures (Chapter 1071, Statutes of 1976) Chapter 1071 made major changes in the way juveniles are processed by the criminal justice system at the local level. These changes were outlined on page 666 of the 1977-78 Analysis. As originally approved, Chapter 1071 contained an \”offsetting savings\” local cost reimbursement disClaimer. Chapter 1241, Statutes of 1977, (AB 84) deleted the disclaimer and appropriated $18 million to pay county claims resulting from Chapter 1071 during the period Janu~y 1, 1977, to June 30, 1978. The Governor’s Budget request~ $18 million to continue such reimbursements in 1978-79. Technical problems in Chapter 1241 have precluded payment of any claims. However, a bill (AB 2091) has been introduced to resolve these problems. While claims have been submitted by some counties, they have not been reviewed or validated. However, based on the\u00b7limited informa- tion that is available, the funding request appears to be a reasonable approximation of reimbursement requirements on a full-year basis. We will monitor this program carefully and be in a better position next year to evaluate cost projections. Other Program Changes Maintenance Positions for Northern Conservation Camps and Parole. The budget includes five maintenance mechanics for the four northern conservation Camps and the commUnity residential parole center in Los Angeles. They will be. funded primarily from savings in overtime and travel costs otherwise incurred in sending institutional maintenance staff to these locations. Fiscal MoiJitoring and Internal Auditing. The department requests $83,063 and three positions to assist management in insuring the fiscal integrity of department operations, which entails separate budgets for each of the ten institutions, five Camps and over 40 parole andadministra~ tive offices. The managers of these programs have independent authority to purchase goods and services for their operations. Accounting functions are performed at seven locations. Youth Authority Board Staff. The budget includes $16,520 and one position to augment the board staff. The position will review board policies for compliance with statutory law and court decisions, write proposals for board policy consideration and prepare board policy manual revisions. Implementation of Statewide Logistics and Material Management Sys- 650 \/ HEALTH AND WELFARE Items 286-293 DEPARTMENT OF THE YOUTH AUTHORITY-Continued tem (SLAMM). The department requests $35,965 and 3.2 positions to implement SLAMM. This computerized system, developed by the De- partment of General Services, is designed to improve the procurement and management of materials, thereby reducing overall state costs. The 3.2 positions will provide five hours a week of additional staff time at each of the institutions and camps and three hours a week at each of the four parole regions. Savings from the implementaiton of SLAMM should occur in future years. Perimeter Security Youth Training School The budget includes 1.7 positions costing $37,459 to provide increased perimeter security daily from midnight to 8 AM. The positions will be used to deter escapes and prevent intrusions of contraband and unauthorized persons. Feeding Cost for Increased Institutional Population Overbudgeted We recommend a reduction of $65,450 (Item 286) to offset reimburse- ments resulting from the departments participation in the National School Lunch program. The budget includes $968,980 to provide institutional staffing and oper- ating monies to accommodate an additional 176 wards over the level currently budgeted. This sum includes approximately $800 per ward for feeding. However, $372 of this amount wil be reimbursed by the federal government because of the department’s participation in the National School Lunch Program. Consequently, General Fund requirements for the additional ward population can be reduced by $372 per ward or a total of $65,450. . Offsetting Grant Overhead Funds We recommend that the overhead portion of monies received to offset costs of achninistering grant prograins be used for that purpose for a General Fund savings of $214,500 (Item 286). . The department is budgeted to receive grant awards totaling $6,746,326 in 1978-79. Of that amount, $369,503 (a percentage of each grant) is avail- able to offset departmental costs for administering the grant program. For example, the $222,222 grant entitled \”Citizens’ Initiative Project\” (which involves,the assignment of volunteers to work with parolees in Sacra- mento and Hayward) includes $33,202 of indirect cost funds. Each grant received by the department requires accounting services. Most grants are not large enough to require (and therefore budget for) a full-time accounting position. In such cases, indirect c;o,st monies would usually be included in the grant to offset its accounting costs: Of the $369,503 to be received as unrestricted indirect cost reimbursements, only $118,260 is allocated to specific positions as shown in Table 3. . Items 286-293 HEALTH AND WELFARE, \/ 651 Table 3 1978-79 Indirect Cost Funds Department of the Youth Authority Available for Allocation ……………………………………………………………………… . Allocated: Fiscal monitoring team ………………………………………………………………… . Budget analyst ………………………………………………………….. , …………………… . Stenographer, facilities planning …………………………………………………… . Total Allocated ………………………………………………………………………………….. . Not presently allocated ……………… ., ……………………………………………………. . $82,590 23,340 12,330 $369,503 118,260 $251,243 The $251,243 not allocated represents resources available to the depart- ment for which no expenditure is currently planned. We believe that there are several, other positions, currently funded from the General Fund, which should be supported from grant overhead cost funds. This would be consistent with the state policy to recover such costs from the grant fund source. These positions, shown in Table 4, are essential to the grant process and would not be required if the grant program did not exist., Table 4 Grant Related Positions Department of the Youth Authority Organizational Element Personnel\u00b7years Division of Program and Resources Development …………………….. 5.0 Personnel Division …………………………………………… ,………………………….. . 1.0 Accounting Division ……………………………………………………………. ;……….. ~ Total … , ……………………………. ; …… \u00b7……………………………………………………….. 10.0 1978-79 Cost $138,950, 15,100 60,450 $214,500 The Division of Program and Resource Development is the departmen- tal unit which seeks and administers grants. The equivalent unit in the Department of Corrections is funded from indirect cost monies. The per- sonnel and accounting divisions positions identified in Table 4 represent the department’s estimate of the minimum staff required in those divi- sions to administer the grant program. Consistent with the purpose for which the federal government includes indirect cost funds in grants, we believe that the above positions should be financed with federal funds for Cl General Fund savings of $214,500 (Item 286). The remaining indirect cost funds of $36,743 should be expended only for administrative services to grant-funded activities. Expenditures from this amount, as well as from any additional indirect cost funds received by the department,. should allow savings to the General Fund unless the department can substantiate the need for additional positions or operating expenses to administer grants. Such expenditures should be considered an increase in the level o(service and reported to the Legislature in accord- ance with Section 28 of the Budget Act. 652 \/ HEALTH AND WELFARE DEPARTMENT OF THE YOUTH AUTHORITY-Continued Camp Programs Under-utilized Items 286-293 We recommend that 6.8 positions added last year to permit the depart- ment to open an institution based camp at the Ventura School be deleted for a savings of $148,480 (Item 286). Prior to 1977-78, the department operated five separate conservation camps, one camp-type program at the EI Paso de Robles School, and a centralized pre-camp forestry training program at the DeWitt Nelson Training Center. Last year, the Govenor’s Budget reflected termination of the centralized training program and the opening of two additional institution based camps: one at DeWitt Nelson and one at the Ventura School. The one at Ventura was to be co-educational to give female wards an opportunity to participate in a camp program. Because the population levels of the five camps were significantly below the budgeted level in early 1977, we recommended (subsequent to publi- cation of the 1977-78 Analysis) that one of the five conservation camps be closed and the facility turned over to the California Conservation Corps. The department responded that it needed to retain the camp because it anticipated that camp population levels would be at budgeted capacities by June 30,1977. While the camp population did increase, the five camps were 39 wards, or more than 10 percent, below the budgeted level on June 30. Since that time, camp populations have been declining and by the end of 1977 stood at 292 or 88 under the budgeted level. This occurred despite a significant increase in ward camp pay which was implemented adminis- tratively on July 1, 1977. Because the camp programs represent significant capacity and all as~ sociated staffing costs are incurred even though the ward population is less than budgeted, we believe that the department should develop proce- . dures to insure that all qualified wards are assigned to the camp program. Should the type of wards committed to the department preclude such action, the department should close at least one of the camps. . We understand that the department has delayed opening the camp program at the Ventura School until at least March 1978 in order to study the camp population problem. Because of this, we recommend that the Ventura School camp not be opened until the department has demon- strated the\u00b7 capacity to sustain ward populations in the existing camp programs at the budgeted level. The staff added last year to permit the Ventura School camp to be opened should be deleted for a savings of $1:48,480 (Item 286). If, despite inadequate camp population levels, the department desires to open a co-educational camp at the Ventura School, it should transfer either the DeWitt Nelson camp or one of the four Northern Conservation Camps to Ventura. Additional Funds Not Needed to Evaluate Benefits of a Reduction in the Ward\/Staff Ratio . We recom.mend deletion of 11.1 positions requested to test whether lower open-dormitory population levels reduce danger to wards and staff for a savings of $220,190 (Item 286). We further recommend that an evaluation be conducted at the Fred C Nelles School where reduced population levels already exist. Items 286-293 HEALTH AND WELFARE \/ 653 The Governor’s Budget includes $220,190 to allow the departlnent to open an additional living unit at DeWitt Nelson to reduce population density in three units which now house a total of 150 wards. The depart- ment’s plan is to assign these wards to four units (about 37 wards per unit) and to evaluate the effect of that reduction on ward and staff safety. We believe that additional pilot or demonstration projects are not re- quired for this purpose. The department is currently evaluating a federal- ly funded project at the Preston School in which the population level has been reduced to 40 wards in one living unit and the staffing of another unit has been increased. Additionally, the department’s research section is planning to study the relationship between population density and vio-. lence at the Youth Training School (YTS). Even though YTS is not an open dormitory facility, the results ofthat study should be useful in evaluating the advantages oflowering the population levels in living units throughout the department. We believe that the proposed evaluation could be conducted at the Fred C. Nelles School which, for several years, has had reduced popula- tions in its living units. About half of the units at the Nelles School have 30 wards with the balance at 40 wards. Because the evaluation of the impact of reduced ward\/staff ratios could be conducted at the Nelles School without additional staffing costs, we recommend that funds includ- ed for additional staffing at Dewitt Nelson be deleted for a savings of $220,190 (Item 286). Ward Grievance St!iffing We recommend that the department, during budget hearings, identify all security parole and treatment positions diverted to ward grievance duties. . The Governor’s Budget requests 3.4 positions costing $64,130 to provide perimeter security for the Southern Reception Center \/ Clinic from 3 PM to 7 AM daily. In the current year, the department diverted an existing security position to perform wards’ rights functions. We believe that this action may be indicative of other staff diversions implemented throughout the department to comply with Chapter 710, Statutes of 1976. Chapter 710 established a procedure for responding to warci complaints. At the time the bill was under consideration, the department assured both the Department of Finance and the Legislature that no additional costs would be incurred in implementing it because the department already had administratively established a system conforming to the bill’s provi- sions. While workload requirements may have changed since that assurance was\u00b7 given; We have not been so advised and the department has not requested additional staff to implement Chapter 710. Therefore, we rec- ommend that, during budget hearings, the department report on the numbers of security, parole and treatment personnel who are performing ward grievance duties\u00b7to indicate the costs of Chapter 710 and the degree to which other activities have been reduced. Medical-Psychiatric Staff Not Needed Until Capital Improvements Completed We recommend that funds for the Preston staff component of the medi- cal-psychiatric program be phased in to coincide with completion of the. 654 \/ HEALTH AND WELFARE Items 28~293 DEPARTMENT OF THE YOUTH AUTHORITY-Continued new building and other required facilities modifications for a savings of $78,(}()() (Itell1 286). The budget includes $1,011,923 to upgrade three existing programs to provide medical-psychiatric facilities for 115 wards. Two of these pro- grams are located at the major reception centers (Sacramento and Nor- walk) and one is at the Preston School (lone). Because the department currently operates a medical-psychiatric program at Norwalk, only minor staff and facility adjustments will be required there. While each of the three sites requires some physical improvements, only the Preston site requires significant new construction (a 40′ by 60′ modular building, as well as extensive modification to an existing dormitory). As- suming timely processfug of required contracts by the Department of GeneralServices, the department estimates that the building can be ready for occupancy by November 1, 1978. Despite this delay, the budget in- cludes funds to fill the 16.9 new positions Preston requires for the program, onJuly 1. At that time any new employees would have to be housed in temporary facilities, and wards probably would not be housed in the pro- gram unit because of construction activity. Even existing employee offices will be severely disrupted by required construction. Generally staff\u00b7 for new programs are authorized 30 days before the program is actually opened to permit them to develop working relation- ships, receive some training and exposure to an institutional setting, and take care of personnel, pay and other requirements. Consistent with that policy, we believe that most of the new staff for this program should not be hired before October 1, 1978. However, because of the significant program changes at Preston, we believe that it is not unreasonable to hire a few key people such as the program administrator and staff psychiatrist somewhat earlier than that date. Hiring staff in acc{)rdance with our rec- ommendation would result in General Fllild savings of $78,000 (including $13,500 which reflects double-budgeting of training needs). . Should construction of the building be delayed, the department should also delay hiring most of the staff until 30 days before the projected availa- bility of the building. The Department of Finance should revert to the General Fund any monies saved by such a hiring delay. Modesto Training Academy Not Fully Utilized We recormnend that the department fully utilize the Modesto Training Academy by sending new employees to the first available class following their employment. . The Department of Corrections and the Youth Authority jointly utilize the Correctional Training Academy at Modesto for training most newly hired personnel. The program is designed to equip new group supervisors and youth counselors (Department of the Youth Authority) and correc- tionalofficers (Department of Corrections) and ancillary personnel with the basic skills necessary to work in an institutional setting. The cur- riculum includes, for example, the training mandated by Penal Code Sec- tion 832 (powers of arrest, etc.), and training in room and body search techniques, report writing, self-defense, and disciplinary procedures. _ According to training academy staff, such training is. most -effective Items 286-293 HEALTH AND WELFARE \/ 655 when a new employee is sent to the academy shortly after his\/her employ- . ment begins. A few,days of institutional exposure, under the supervision , of experienced personnel, is probably all that is desirable for new em- ployees prior to academy attendance. Failure to receive training reason- ably soon after job placement may result in employees’ acquiring poor work habits, and being unable to respond properly to hazardous situations. We believe that new staff should be scheduled for academy attendance in the first month following employment. Based on limited data collected by academy staff, it appears that less than one-third of the Youth Authority employees (11 of 38 in late 1977) are attending within their first three months of employment. Moreover, the department is not using all ‘of its authorized slots at the academy. We recommend that the department, to the maximum extent possible, send new employees to the first available class after their employment. Simplify Cost Accounting for Modesto Training Academy We recommend that the contract arrangements with the Department of Corrections for operation of the Modesto TrainingAcademy besimpli- &d ‘ The Governor’s Budget includes $372,050 as the’ Department of the Youth Authority’s share of the cost of operating the Correctional Training Academy. This amount, which is transferred to the Department ofCorrec- tions by contract, includes ‘funds for instructional costs, ‘travel and per diem of students. It also includes the money necessary to hire back-up personnel to cover the student’s work shift in the institution. Consequent- ly, a considerable portion of the funds originally transferred to the Depart- ment of Corrections are returned to the Department of the Y Quth Authority. We recommend that the department transfer only its portion of the instructional costs to the Department of Corrections, and retain those funds which would ultimately be returned. This would simplify account~ ing procedures and produce minor cost savmgs to both departments. Parole, Reorganization The Governor’s Budget reflects a reorganization of the department’s parole program with the goal of providing more services to, and surveil- lance of, parolees during the period immediately after institutional re- lease. The reorganization includes a revision of the clerical staffing formula and the closure of several special parole programs whose staff would be redistributed to regular parole offices throughout the state. Clerical Staffing Formula. The number of clerical positions authorized for each regular parole office is based on a formula adopted over 20 years ago. It provides one clerical position for each 220 cases plus one-half posi- \” tion for each supervisor. Given the significant increase in paperwork re~ sulting from court decisions regarding due process for wards whose parole is in jeopardy, this level of clerical assistance is inadequate and has neces- sitated the use of parole agents to perform clerical tasks. The department proposes to modify this formula to provide one clerical position for three parole agents, and retain the one-half position for each supervisor. The 656 \/ HEALTH AND WELFARE Items 286-293 . DEPARTMENT OF THE YOUTH AUTHORnY-Continued budget contains 15 additional clerical positions at a cost of $195,810 to implement the new formula, . Parole Agent Utilization, Each regular parole office is assigned one non-case-carrying agent (violations specialist) to handle parolees whose behavior may result in termination of parole or other disciplinary action. These positions were authorized as a result of recent court decisions, re LaCroix and re Valrie. Because of variations in the number of cases requir- ing special handling, the specialists in some offices are under-utilized. In order to equalize workload, the department proposes to assign all special- ists to the pool of regular case-carrying agents. Parole Reorganization We recommend that the department continue to operate and evaluate the special parole programs which are proposed for termination. During the past several years, the department has established a number of parole programs designed to provide special, more intensified services for parolees, generally in high crime, high ‘unemployment areas of the state .. These projects offer such diverse services as lodging, job training, academic studies, and group counseling. Despite substantial allocation of resources to these projects, the department has failed to provide adequate evaluation of their accomplishments. It is proposing to terminate a num- ber of them in the budget year and reallocate their resources to the regular parole program. Only the SPACE program in Los Angeles and the Park Centre in San Diego are proposed for continuation. Programs to be terminated are: 1. The San Francisco project, which serves 400 parolees in the San Francisco area. \u00b7It was officially formed in July 1975 by combining two special projects and one regular parole office. The program is staffed at a level significantly higher than regular parole offices and employs other professional staff. Parolees are phased through the program and receive services prescribed on an individual basis. For example, some wards re- ceive schooling at the project while others are placed in smaller caseloads where their behavior can be more closely observed. 2. The J.O.B.S. program; which was established in July 1975 to assist’ parolees in Oakland, Berkeley and Richmond in obtaining employment. J.O.B.S. staff work in conjunction with regular parole agents to place parolees in jobs or training leading to employment. 3. Five community parole centers (CPC’s) which serve a total of 615 parolees, four of which’ are located in the Los Angeles area and one in Stockton. Six CPC’s were\u00b7 established in 1966-67, but the one in San Fran- cisco was integrated into the San Francisco Project described above. The centers are staffed at a level higher than regular parole offices. They also employ a teacher and a group supervisor who. generally assists wards in obtaining employment. The Department of Finance in its October 1976 review of the depart- ment’s parole program concluded that CPC’s should be discontinued in 1978-79 unless the Youth Authority can demonstrate that they outperform regular parole units in urban target areas. With respect to the other special programs, including the San Francisco Project, the department stated that Items 286-293 HEALTH AND WELFARE I 657 they should be continued because they are new and experimental. However, the department recommended that termination dates-be estab- lished and followed unless the Youth Authority documented the pro- grams’ effectiveness. After reviewing the Department of Finance report and the Youth Au- thority’s response to it, we generally concur with the findings. We believe that the San Francisco Project, as well as theJ.O.B.S. program, should be continued until thoroughly evaluated. We see little justification, in light of the Department of Finance study, for transferring the resources of these projects to enrich the regular parole program. Because the Department of the Youth Authority has not\u00b7 documented the effectiveness of the CPC’s, these programs, according to the Depart- ment of Finance report, should be terminated in 1978-79. The budget reflects this action but proposes to transfer the resources to the regular parole program. We believe the CPC’s should be evaluated. They repre- sent a considerable state investment in an innovative attempt to deal with parolee needs and problems. We therefore recommend that the CPGs be retained and evaluated. Pending completion of evaluation repotts we further recommend that the San Francisco Project and the J;O.B.S. program be given. termination dates of June 30, 1982,and the CPC’s termination dates of June 30, 1980. Use of Parole Volunteer .. Coordinators Not Defined We recommend deletion oE Eour proposed volunteer coordinators in the parole regions Eor a savings oE $104,900 (Item 286). The budget contains $211,900 for 8.5 new positions to formalize and staff existing and proposed volunteer programs. Four and. one-half positions will supplement 5.5 existing full time and part-time positions in the institu- ‘ .. tions to provide one full-time volunteer ,coordinator at each of the ten institutions. We believe that these positions are useful because they can provide centralized control, training and supervision to numerousvolun-. teersserving a.significant number of wards at each location. The remaining four new positions are requested to provide one volun- teer coordinator for each parole region. They will conduct pilot programs for which no detail or work plans are currently available. Even the loca- tions of the programs are unknown. .’ .’ Over the years, the department has partiCipated ina number of grant- funded projects which made use of volunteers. It is currently operating, in Sacramento and Hayward, a grant-funded program entitled \”Citizens Initiative Project\” wl1ich utilizes volunteers to improve the integration of parolees into society. It began receiving parolees in early 1977. The project is staffed with 8.5 positions and will expend $222,222 in the budget year. We believe that additional pilot projects should not be approvec:luntil performance data are available from the \”Citizens’ Initiative Project\”. Moreover, in view of the staff needed to operate that project, we do not believe that one-person pilot projects are viable. Therefore, we recom- mend that the four parole positions be deleted for a savings of $104,900 – (Item 286). . 658 \/ HEALTH AND WELFARE DEPARTMENT OF THE YOUTH AUTHORITY-Continued County Reimburseme,nts,for Detaining Certain Youth Authority Parolees Overbudgeted Items 286-293 We recoInmend that funds included in the departments support budget to reimburse county costs incurred in detaining certain Youth Authority parolees be reduced to $75,500 and transferred to a new local ‘assistance item,for a net savings of $29,160. ‘ Chapter 1157, Statutes of 1977 (AB 166) requires the department to reimburse counties for ,detaining Youth Authority parolees, when the de- tention is related solely to the violations of the conditions of parole and not to a new criminal charge. The act, an urgency measure, appropriated $73,000 based on the department’s estimate of its annual cost. The depart- ment’ssupport budget (Item 286) includes $104,660 to provide such reim- bursements for 1975-79. Chapter 1157 was patterned after Chapter 1237, Statutes of 1974, which requires the Department of Corrections to reimburse counties for detain- ing adult parolees under similar conditions. Fundsfor payments required by Chapter 1237 are classified as local assistance in the Governor’s Budget and appropriated by a separate item in the Budget Bill (Item 285):. Monies required for transportation of persons committed to the Depart- ment of the Youth Authority and state support for construction, operation and maintenance of county juvenile homes and camps; county juvenile delinquency prevention commissions; delinquency prevention projects and research and training grants; and the probation subsidy program are classified as local assistance in the Governor’s Budget and appropriated by separate iteIIls in the Budget Bill (Items 287 to 292). We believe that costs attributable to Chapter 1157 should be similarly classified. , We further recommend that the $104,660 requested be reduced to $75,- 500 for a net savings of $29,160. When Chapter 1157 was under considera- tion the department estimated its costs to be $72,900 based on 2,916 confinement days in county jails at $20 per day ($58,320) plus 324 confine- ment days in juvenile halls at $45 per day ($14,580). The budget request is based on the same number ofcoJ:lfinement days but higher daily costs ($30 for jails and, $53 for juvenile halls). According to the Department of Corrections, the 1976-77 unweighted average amount paid per day for county jail costs under Chapter 1237 was $18.36. We understand that when the Department of the Youth Authority begins to make payments under Chapter 1157 it will use the rates ap~ proved by the Department of Corrections. We believe that the $30′,rate used in developing the budget is excessive and that the $20 rate used by the department in estimating the cost of Chapter 1157 is more accurate and j’ustified by the Department of Corrections’ actual experience. We therefore recommend that the department’s request be reduced to $75,- 500 and placed in a separate local assistance item. The net savings would ‘be $29,160. Items 286-293 HEALTH AND WELFARE \/ 659 Probation Subsidy Program Historically Overbudgeted We withhold recommendation on the probation subsidy program (Item 292) because it has been overbudgeted for five consecutive years. Addi- tional expenditure data will be available before the May revision to the budget. The probation subsidy program was established in 1965 to encourage greater use of probation by sharing with the counties savings resulting to the state from a reduction in commitments of juveniles and adults to state ip,stitutions. Participating counties must make \”earnings\” based on a pre- scribed formula set forth in the Welfare and Institutions Code. The county achieves earnings by reduCing its combined level of adult and juvenile commitments below a bas~ commitment rate previously established. For each reduction in its base commitment level, the county is reimbursed (up to a maximum of $4,(00) its actual cost of providing an enriched probation program meeting minimum standards prescribed by the Youth Authority. As shown in Table 9, this program has been consistently overbudgeted for the last five fiscal years. Additionally, the number of counties par- ticipating in the program and county \”earnings\” which determine proba- tion subsidy expenditures have been decllning over the past several years. Budgeted …………………. Expended\u00b7 ……………….. Savings …………………….. Table 5 Probation Subsidy Savings 1973-74 1974-75 197~76 $23;742,000 $24,100,665 \” $21,687,000 20,410,354 22,248,284 20,759,555 $3,331,646 $1,852,381 . $927,445 b 1976-77 1977-78 (Est.) $19,687,000 $18,387,000 16,966,440 15,430,000 $2,720;560 $2,957,000 \”Includes $2,174,000 appropriated by Chapter 411, Statutes of 1974, primarily for treatment of offenders ‘;: or alleged offenders by local law enforcement agencies. ~ Jricludes $914,258 transferred to departmental support. Last year the Legislature, on our recommendation, reduced the 1977-78 appropriation for the probation subsidy program to $18,387,000, which was the 1976-71 expenditure estimate shown in the 1977-78 Governor’s Budget. As shown in Table 5, actuai 1976-77 expenditures were less than $17 million. . ‘ . Estimated expenditures for 1977-78 are $15,430,000 or almost $3 million less than appropriated .. Much of this savings reflects further decline in . county participation in the program. The 1978-79 budget request is the same as the current-year expenditure estimate. We believe that probation subsidy funding requirements will continue to decline. Additional cur- rent-year expenditure data will be available prior to the May revision to the Budget. On the basis of .that data, a more reliable estimate of budget- year requirements for the probation subsidy program can be developed. 660 \/ HEALTH AND WELFARE Item 294 Health and Welfare Ag4;tncy CALIFORNIA HEALTH FACILITIES COMMISSION Item 294 from the California Health Facilities Commission Fund . Budget p. 758 Requested 1978-79 ……………………………. ; ……………………………….. . Estimated 1977-78 ………………………………………………………………… . Actual 1976-77 …………………………………………. : …………………………. . Requested increase $187,042 (15.5 percent) . Total recommended. reduction ………………………………………….. .. SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS $1,394,294 1,207,252 996,652 $82,109 Analysis page 1. New Positions for Health Facility Reports and Related Ac- tivities. Reduce Item 294 by $82,109. Recommend deletion of 6.5 positions. 660 GENERAL PROGRAM STATEMENT The California Health Facilities Commission was\u00b7 created by Chapter 1242, Statutes of 1971, and charged with the responsibility of developing a uniform system of accounting and reporting for all hospitals in Califor- nia. Chapter 1171, Statutes of 1974, further required the commission to develop and implement an accounting arid uniform reporting system for long-term care facilites in California, in addition to the hospitals. The purposes of developing these systems of reporting requirements were to: (1) encourage economy and efficiency in providing health care services, (2) enable public agencies to make informed decisions in purchasing and administering publicly financed health care, (3) encourage organizations which provide health care insurance to take into account financial infor- mation provided to the state in establishing reimbursement rates, (.4) provide a uniform health data system for use by all state agencies, (5) provide accurate information to improve budgetary planning, (6) identify and disseminate information regarding areas’of economy in the provision of health care consistent with quality of care, and (7) create a body of reliable information which will facilitate commission studies that relate to the implementation of cost effectiveness programs. ANALYSIS AND RECOMMENDATIONS The budget prQposes an appropriation of $1,394,294 from the California Health Facilities Commission Fund for support of the commission during the 1978-79 fiscal year, an increase of $187,042, or 15.5 percent, above the current year. This increase provides for the continuation of three staff service analyst positions which were established during the current year, the creation of six new positions, and 0.5 personnel years in temporary help. Item 294 HEALTH AND WELFARE I 661 Positions for Research We recommend approval of a research manager III, a staff services analyst and related expenses at a cost of $73,836, The present reseach staff consists of three professional and Qne clerical. position. An additional staff services analyst position has been established’ during the current year and the budget proposes to continue this postion and add a research manager III. The research unit in the commission has conducted studies on the various cost components and other elements of health facility care. In view of the increasing need tohave this type of information available to the Legislature as it considers the issue of rising costs in the delivery of health care services, we believe the requested positions are justified. . Positions for Processing Health Facility Reports . W~ recommend deletion of 6.5 positions for the processing of health facility reports and related activities at a savings of $82,109. The budget proposes establishing two clerk I, one clerk-typist I, one senior clerk-typist position, and a 0.5 temporary help position to assist in the processing of health facility reports in the budget year. One staff services analyst position, established in the current year, is proposed for continuation in the budget year for work on changes in the accounting manual and to respond to requests for extensions in filing the reports. The . accounting technician will assist in the budget and personnel functions of the commission.. Pursuant to Chapter l17l, Statutes of 1974, the commission developed a uniform accounting and reporting system for the approximately 1,200 long-term care facilities in California. Approximately 600 of the 1,200 facili- ties have a fiscal year ofJanuary I-December 31. Effective January 1, 1977; compliance with the system was required of the facilities with fiscal years’ beginning on that date. The remainder complied when their fiscal year started. The law requires that the facility accounting reports be submitted with- in four months of the end of the fiscal year and the commission estimates that it will be receiving these reports beginning in April 1978. Consequent- ly, last year the Legislature approved the request by the commission for six new positions, effective March 1, 1978, to process the anticipated initial 600 long-term care facility reports. We have received no information.in- dieating that the positions established March 1 cannot process the initial 600 reports and the balance of the reports on a continuing basis.\u00b7 In the absence of any new statutory authority extending the responsibilities of the commission, we do not believe any additional positions are justified .. ”

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” 742 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES General Summary Table 1 identifies expenditures .and revenues from all funds for pro- grams administered by the Department of Social Services for fiscal years 1978-79 and 1979-80. Funds for the Department of Social Services are contained in nine items and one control section of the 1979-80 Budget Bill, as identified in Table 2. The department requests a total of $1,684,952,084 from the General Fund for fiscal year 1979-80. This is an increase of $85,243,554, or 5.3 percent, over estimated current year General Fund expenditures. I. II. III. IV. V. VI. VII. VIII. IX. X. Table 1 Department of Social Services Expenditures and Revenues by Program All Funds 1978-79 and 1979-80 Estimated Proposed Program 1978-79 1979-80 State Operations …………………….. $88,350,676 $89,114,809 AFDC ………………………………………. 1,857,736,900 2,024,242,200 SSItSSP …………………………………… 1,551,817,400 1,661,131,200 Attorneys’ Fees for Judicial Review of Fair Hearings ………… 15,000 Special Adult Programs ………….. 5,472,596 6,003,700 Harrington vs. Obledo Court Case ………………………………………… 5,798,600 Special Social Services Programs …………………………………. 501,551,326 567,075,289 County Welfare Department . Administration …………… : ………….. 370,033,891 409,698,271 In.do\u00b7Chinese Refugee Program Residuals …………………………………. 17,210;500 15,662,400 State Council on Developmen\u00b7 tal Disabilities and Area Boards’ …………………………………… 1,922,010 Total ………………………………………… $4,394,095,299 $4,778,741,469 General Fund ………………………….. $1,599,708,530 $1,664,952,084 Federal Funds ………………………… 2,117,478,760 2,355,770,246 County Funds ………………………… 647,292,819 715,512,948 Reimbursements …………………….. 29,615,190 22,506,191 Change over 1978-79 Amount Percent $764,133 0.9% 166,505,300 9.0 109,313,800 7.0 15,000 nta 531,104 9.7 5,798,600 nta 65,523,963 13.1 39,664,380 10.7 -1,548,100 -9.0 -1,922,010 -100.0 $384,646,170 8.8% $85,243,554 5.3 238,291,486 11.3 68,220,129 10.5 -7,108,999 -24.0 Funding and administrative support responsibilities for these organizations were transferred to the Department of Social Services from the Department of Developmental Services for the period October 1. 1978 through June 30, 1979. In fiscal year 1979-80. these entities have separate budgets. TTT:\”\u00b7′ T,……. …. .. Item 282 HEALTH AND WELFARE \/ 743 Table Z Department of Social Services General Fund Requests 1978-79 and 1979-80 Estimated Budget Item 1978-79 282 Departmental Support …………………… $26,626,086 Control Section 32.5 Cash Grants-AFDC …………………….. 612,364,000 283 Attorneys’ Fees ……………………………… 284 Cash Grants-SSI\/SSP …………………… 734,844,300 a 285 Special Adult Programs …………………. 5,437,596 286 Harrington vs. Obledo Court Case .. 287 Special Social Service Programs …… 132,392,220 288 County Administration …………………… 71,420,291 289 Executive Mandates ………………………. 42,100 290 Legislative Mandates …………………….. 16,581,937 Proposed 1979-80 $34,444,087 661,967,800 15,000 706,156,442 5,968,700 5,798,600 177,143,755 79,008,300 42,100 14,407,300 Total ……………………………………………….. $1,599,708,530 $1,684,952,084 Percent Chailge 29.4% 8.1 N\/A -3.9 9.8 N\/A 33.8 10.6 0 -13.1 5.3% a Includes $14,061,100 of increased cost to the counties for the SSI I SSP program resulting from unanticipat- ed increases in assessed valuations in 1978-79 of approximately 10 percent. This cost was defrayed from the General Fund. Department of Social Services DEPARTMENTAL SUPPORT Item 282 from the General Fund Budget p. 768 Requested 1979–80 ………………………………………………….. , …………. . Estimated 1978-79 ………………………………………………………………… . Actual 1977:\”’78 ……………………………………………………………………… . $34,444,087 26,626,086 N\/A Requested increase $7,818,001 (29.4 percent) Total recommended reduction ………………………………………….. .. $1,457,067 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Indo-Chinese Refugee Assistance Program. Recommend the Department of Social Services report to the fiscal com- mittees during budget hearings on the likelihood that the federal government will provide 100 percent funding for the Indo~Chinese Refugee Assistance program during 1979-80. 2. Special Consultants. Reduce by $45.000. Recommend reduction of $45,000 from the General Fund and $45,000 from federal funds by eliminating temporary help funding for special consultants. 3. Title XX Training Contracts. Recommend reduction of $341,250 in federal funds by eliminating Title XX training contracts. Analysis page 746 748 749 744 \/ HEALTH AND WELFARE Item 282 DEPARTMENTAL SUPPORT-Continued 4. Attorney General Services. Reduce by $73,892. Recom- 749 mend a reduction to eliminate overbudgeting for Attorney General services. 5. Reorganization Report. Recommend the Department of 749 Social Services submit a reorganization report to the Legis- lature prior to budget hearings in order to comply with language in the Budget Act of 1978. 6. Disability Evaluation Accountants. . Recommend reduc- 750 tion of $93,301 in federal funds by deleting six proposed . positions for disability evaluation accounting. 7. Program Development Division. Reduce by $219,244. 750 Recommend elimination of a CEA II and a Staff Services Manager II in the deputy director’s office of the Program Development Division for a savings of $50,187 in General Funds and $32,087 in federal funds. Recommend transfer of function and remaining positions in the Program Devel- opment Division to the Administration Division. Recom- mend elimination of funding for public assistance demonstration projects for a reduction of $169,057 from the General Fund and $169,057 from federal funds. 8. Fair\u00b7 Hearing Positions. Reduce by $323,586. Recom- 753 mend deletion of 18 proposed fair hearing positions for a reduction of $323,586 from the General Fund and $226,730 from federal funds. 9. Food Stamp Outreach. Reduce by $37,408. Recommend 755 deletion of 3 positions for food stamp outreach for a reduc- tion of $37,408 from the General Fund and $37,408 from federal funds. Withhold recommendation on funds proposed for food stamp outreach contracts. 10. Social Service Positions. Reduce by $757,937. Recom- 755 mend deletion of 29.5 proposed social service positions. n. Rural Youth Employment Project. Recommend con- 757 tinuation of.eight positions for a limited term ending Sep- tember 30, 1979. 12. Federally Funded Positions. Recommend supplemental 757 language be added to instruct the Department of Social Services to immediately terminate positions for the Indo- Chinese Refugee Assistance program and the Office of Child Abuse Prevention in the event federal funds for these programs are discontinued. 13. Caseload Movement and Expenditure Report. Recom- 760 mend current law be amended deleting requirement that monthly Caseload Movement and Expenditure Report be submitted to the Joint Legislative Budget Committee . 14. Control Section 32.5-Proposed AFDC Regulah\u00b7ons. 769 Reduce by $1,698,500. Recommend control section limit be reduced by $1,698,500 for the cost of proposed regula- tions which have not been issued. Item 282 HEALTH AND WELFARE \/ 745 15. Control Section 32.5-AFDC Cost-oE-Living. Increase by 770 $6,478,800. Recommend that current law for calculating AFDC cost-of-living adjustment be changed and that con- trol section limit be increased by $6,478,800 to provide a 6.91 percent cost-of-living increase. GENERAL PROGRAM STATEMENT Chapter 1252, Statutes of 1977, created a new Department of Social Services effective July 1, 1978. This department has been designated the single state agency for purposes of administering welfare and social serv- ices programs supported by state and federal funds. This department retained the welfare operations function of the former Department of Benefit Payments, and assumed responsibility for the disability evaluation, community care licensing and social services functions of the former De- partment of Health. ANALYSIS AND RECOMMENDATIONS The Governor’s Budget proposes $34,444,087 from the General Fund for support of the Department of Social Services in 1979–80. This is $7,818,001, or 29.4 percent, more than estimated General Fund expenditures for the current year. Table 1 identifies the major components of this General Fund cost increase. Total program expenditures, including federal funds and reimbursements, are projected at $89,114,809 which is $764,133, or 0.9 percent, more than total estimated expenditures in the current year. Of this amount, $61,686,332 is for personal services and $27,428,477 is for operating expenses and equipment. Table 1 Proposed General Fund Adjustments for the Department of Social Services’ State Operations Budget A. Budget Base ………………………………………………………………………………….. . B. Budget Adjustments 1. Employee benefits ………………………………………………………………….. . 2. Merit salary adjustment …………………………………………………………… . 3. 5 percent price increase ………………………………………………………… .. 4. Transfer from social services item to consolidate Title XX funds 5. Current year one-time costs …………………………………………………. .. 6. Budget change proposals ………………………………………………………. .. 7. Reduction for funds separately identified in Item 283 ………… .. Total, Budget Increases ……………………………………………………….. . Proposed Total General Fund, Item 282 ………………………….. .. Ar\/justment $489,548 143,921 395,728 5,529,808 -1,689,783 2,963,779 -15,000 Total $26,626,086 7,818,001 $34,444,087 The requested departmental support expenditures for 1979–80 include the transfer of $5,529,808 to consolidate Title XX funds.WhEm the General Fund budget totals are adjusted for this change and the $1.7 million in current year one-time costs, proposed expenditures for state operations increase $4.0 million, or 14.9 percent, over the current year. \/ 746 I HEALTH AND WELFARE Item 282 DEPARTMENTAL SUPPORT-Continued DEPARTMENTAL BUDGET ISSUES Reorganization Funding Transfer Item 255 of the Budget Act of 1978 appropriated $3 million from the General Fund to the Department of Finance to augment the budgets of the Departments of Health Services and Social Services. These funds were to be used to offset any adjustments in federal financial participation resulting from the reorganization of the Health and Welfare Agency. During the current year, the Department of Finance approved a budget revision submitted by the Department of Social Services requesting that $1.5 million be transferred from Item 255 to its departmental support item. These funds were used to offset an anticipated deficit resulting from a shortfall in federal funds of $1.5 million. This resulted in no net change in the department’s support budget, but it increased the General Fund sup- port by $1.5 and decreased federal support by the same amount. The Governor’s Budget proposes to continue the $1.5 million General Fund augmentation in fiscal year 1979-80. Control Sections 27.1 and 27.2 Control Sections 27.1 and 27.2 of the Budget Act of 1978 require that the Department of Finance restrict expenditures for personal services and operating expenses and equipment in order to achieve a specified funding reduction in the current year. The proposed budget for the department indicates that the following savings will be achieved pursuant to these provisions: a. $1.2 million savings in operating expenses and equipment, of which half is federal funds and half is state funds. b. $2.2 million savings in personal services, of which half is federal funds and half is state funds. These reductions are to be made in the current year and to be continued as permanent reductions in the budget year. The budget indicates that reductions in operating expenses and equipment will be achieved in the areas of printing, electronic data processing, general expense, contractual services, and communications. The budget also indicates that reductions in personal services will be achieved by the elimination of 114.6 personnel- years. However, the department has not yet identified which positions will be eliminated. We will review the proposed position reductions when that information becomes available. Indo-Chinese Refugee Assistance Program We repommend that the Department of Social Services report during the budget hearings on the likelihood that the federal government will provide 100 percent funding for the Indo-Chinese Refugee Assistance Program during 1979-8(}; The Indo~Chinese Refugee Assistance Program (IRAP) was established by federal law and policy directives to provide benefits to eligible Indo- Chinese refugees. In 1978-79, IRAP expenditures are estimated to total $68.8 million. These expenditures are 100 percent federally funded. As a result of recent federal legislation (PL 95-549), federal funds for this pro- Item 282 HEALTH AND WELFARE \/ 747 gram will terminate on October 1, 1979, and Indo-Chinese refugees who are eligible will be transferred to other assistance programs. The Governor’s Budget assumes that current federal law will be amended to continue 100 percent federal funding of the IRAP program through the remaining three quarters of 197~. If federal law is not changed, however, state expenditures to replace federal IRAPfunds could increase above the budget level by anywhere from $29.3 million to $36.9 million. Table 2 Local Assistance and Administrative Costs for Indo-Chinese Refugees 1979-80 (In Millions) Federal 1st Quarter Normal IRAP Program Total Share Funding State County Local Assistance AFDC ………………………………………. $24.1 $ILl $2.6 $7.0 $3.4 SSI\/SSP …………………………………….. 7.6 3.9 0.9 2.B Residual…………………………………….. 5.7 5.7 General Relief ……………………. ;…… 6.4 6.4 Medi-Cal …………………………………… 27.0 4.1 5.7 17.2 Social Services ………………….. ;…….. 7.2 2.3 3.B Ll – – – Subtotal ……. ;………………………….. $7B.O $19.1 $17.2 $3O.B $10.9 AdminislTl!tion AFDC ………………………………………. 2.1 1.0 0.3 0.4 0.4 Residual…………………………………….. 0.5 0.5 General Relief ……………………… :…. 3.1 3.1 Medi-Cal…………………………………… 2.7 1.0 0.4 1.3 0.2 – 0.6 -State Support …….. , ………… ,…………. O.B Subtotal…………………………………. $9.2 $2.0 $1.4 $2.3 $3.5 Total………………………………………….. $87.2 $2Ll $1B.6 $33.1 $14.4 The state would be required to provide $29.3 million in accordance with existing state funding requirements’ for welfare and Medi-Cal programs. The state would not be obligated to replace the remaining $3.8 million for lRAP social services in the event federal funds were not forthcoming but the Legislature might choose to make these funds available as well. Final- ly, if the Legislature adopted a policy of fully reimbursing counties for the cost of AFDC grants and administration, as it did for the current year, state exp~nditures would have to rise by another $3.8 million. . It is ourunderstimdirig at this time that no federallegisl~tionh~sbeen introduced to continue full federal funding for IRAP through the last three quarters of 197~. Therefore, we recommend that the department re- port during the budget hearings on the likeHhood that federal funds will be available for IRAP during 197~. 748 \/ HEALTH AND WELFARE Item 282 DEPARTMENTAL SUPPORT-Continued Use af Special Consultants We recommend that Item 282 be reduced by $90,000 consisting of $45,- 000 from federal funds and $45,000 from the General Fund.. by eliminating temporary help funding for special consultants. The Governor’s Budget contains $1,262,358, all funds, for 73.5 temporary help positions. This is a decrease of $7,047, or 0.6 percent, below current- year expenditures. These funds are used for staff costs relating to: (a) overtime and seasonal temporary help salaries, (b) vacation earnings of employees who leave the department, (c) recruitment and hiring of mi- nority employees, (d) overlapping of positions to provide training for new employees and (e) special consultants. We requested the Department of Social Services to identify how special consultants had been used during fiscal year 1977-78 and the first six months of fiscal y~ar 1978-79. We received information on seven consult- ants. Based on our review of this information, we have identified the following problems with the department’s policy regarding special con- sultants: 1. The salaries and hiring periods for some of the consultants have been excessive. For example, the department hired one consultant for $200 per day for a period of 5.5 months for a total expenditure of $24,200. On an annualized basis, this amounts to $52,800 per year. 2. The products produced by some of the consultants have been of questionable value. For example, the department hired two consultants to prepare reports on welfare training and disability evaluation, one for $79 per day for a total of 217 days and one for $177 per day for a total of 132 days. Although draft reports were prepared, they were never put into final form. In addition, the department was unable to identify what action it had taken relative to the product prepared by each consultant. 3. In some cases, special consultant positions have been used inappro- priately. For example, in two instances the department hired individuals as consultap.ts for a period of nine months each, prior to their appoint- ments to exempt positions within the department. The State Administra- tive Manual states that temporary help positions are to be used for temporary, seasonal or intermittent uses as contrasted to longer-term, more permanent staffing needs. The level of funding proposed for temporary help positions in the proposed budget is based on prior year expenditures rather than on an identification\u00b7 of specific budget year needs. Based on information pro- vided by the department, we estimate that the department expended $91,289 for special consultants during fiscal year 1977-78. Current year expenditures appear to be about the same. Because of the problems we have identified regarding how these positions have been used in the past, and because the department is unable to justify the use of special consult- ants in the budget year, we recommend that Item 282 be reduced by $90,000, all funds. Item 282 HEALTH AND WELFARE \/749 Title XX Training Contracts We recommend that Item 282 be reduced by $341,250 in federal funds for Title XX training contracts. The Governor’s Budget proposes a total of $341,250 in federal funds for Title XX training contracts. Of this amount, $210,000 is for departmental staff to coordinate Title XX training activities and $131,250 is for commu- nity rehabilitation training. This is an increase of $16,250, or five percent, over estimated current year contract expenditures. However, the depart~ ment indicates that no contracts have been negotiated to date for expendi- ture of funds in the current year. In Item 287, Special Social Service Programs, we have identified a num- ber of problems with the department’s current management and utiliza- tion of Title XX training funds. Based on the problems discussed in that item and based on the fact that the department is unable to identify what specific positions or contracts will be funded in the current or budget year, we recommend Item 282 be reduced by $341,250 in federal funds. Attorney General Services We recommend a reduction of $73,892 from the General Fund because of overbudgeting for Attorney General services. The budget proposes $73,892 to reimburse the Attorney General. for legal services related to adoptions. We recommend that this amount be deleted because the Attorney General has no staff to perform this function and Item 47, Department ofjustice, does not contain reimbursements for these services. In addition, the budget proposes to continue 1.5 positions established administratively in the current year to provide legal services’ for the adoptions program. Reorganization Report We recommend that the Department of Social Services submit an up-to- date reorganization report to the Legislature prior to budget hearings in order to comply with language in the Budget Act of 1978. Section 28.01 of the Budget Act of 1978 required that the department submit a preliminary reorganization report to the Legislature by August 1,1978. This report was to identify the department’s internal organization, utilization of staff and resources, positions to be added or reclassified, significant budget or organizational changes, and proposed expansion or reduction of departmental programs. In addition, the department was required to submit a final reorganization report to the Legislature by January 1, 1979. . The Department of Social Services has not submitted at this .time an approved preliminary or final report to the Legislature. As a. result, the . Legislature does not have an approved departmental organization chart to use as a basis for analyzing proposed budget changes. The department indicates that it will soon submit a report consistent with the departmental organization reflected in the budget, but that it is now planning a second major departmental reorganization which will be presented to the Legis- lature at a later time. In order to comply with Budget Actlanguage, we recommend that the department submit an up-to-date reorganization report to the Legislature prior to budget hearings. \u00b7750 \/ HEALTH AND WELFARE Item 282 DEPARTMENTAL SUPPORT-Continued PROPOSED STAFFING CHANGES Table 3 identifies proposed departmental position changes, by division, for fiscal year 1979-80. These changes are discussed below. Disability Evaluation Accounting We recommend that Item 282 be reduced by $93,301 in federal funds by deleting six proposed positions for disabIlity evaluation accounting. The budget proposes $93,301 in federal funds to establish six positions to process invoices for the Disability Evaluation program. According to the department’s proposal, 13 accoUnting positions were required for disa- bility evaluation when that program was a part of the former Department of Health. However, when the Department of Social Services assumed responsibility for the program, only seven accounting positions were iden- tified and transferred. It is our understanding that the Health and Welfare Agency made an intensive effort during the reorganization process to properly identify and transfer. functions among the appropriate departments. If the positions which had been used to provide accounting support for disability evalua- tion were improperly reduced by six positions; those positions and funds should be identified and transferred from the Department of Health Serv- ices to the Department of Social Services. We therefore recommend that Item 282 be reduced by $93,301 in federal funds by deleting six proposed positions. If the Department of Health Services believes that it can justify an increase in positions, it should request that new positions be estab- lished, as provided for\u00b7 in the State Administrative Manual. Program Development Division We recommend elimination of a CEA II and a Staff Services Manager II in the deputy director’s office of the Program Development Division for a savings of $50,187 in General Funds and $32,087 in federal funds. We also recommend that the remaining positions in the Program Development Division be transferred to the Administrahon Division. We recommend that the budget be reduced by $169,057 in General Funds and $169,057 in federal funds for demonstration projects. Program Development Division. The Program Development Division within the department is responsible for identifying, developing, testing and evaluating alternative plans and programs. These activities are car- ried out through two branches: (1) the Office of Planning and (2) the Management Analysis Branch. The Office of Planning includes the Dem- onstration Projects Bureau and the Research Bureau. The Demonstration Projects Bureau is responsible for monitoring and evaluating demonstra- tion projects which.\u00b7 are funded by the state and carried out by the coun- ties, colleges and wllversities, and recipient organizations. The purpose of the demonstration projects is to improve the administration of public assistance programs. The Research Bureau is responsible for performing short and long term analytical studies. Existing Division Positions 1. Director’s Office …………………. \u00b7\u00b7 16.5 2. Government and Community Relations ……………………………….. 54 3, Welfare Program Operations 124.2 4. Legal Affairs ………………………… 135.5 5. Adult and Family Services …. 209.5 6. Administration …………………….. 640.3 7. Licensing and Assessment.. …. 357.6 .8. Program Development ………… 29 9. Disability Evaluation ……………. 1,270 10. Temporary Help …………………. 73.5 TOTAL ……………………………….. 2,910.1 Table 3 Department of Social Services Proposed Position Changes for Fiscal Year 1979-80 Proposed Position Total Changes Positions 16.5 -2 52 14.3 138.5 22.5 158 48 257.5 13 653.3 46.5 404.1 -10 19 21 1,291 0 73.5 153.3 3,063.4 General Fund $-52,969 366,378 545,028 690,309 43,039 1,185,968 ~136,305 322,331 $2,963,779 Fiscal Effect of Proposed Changes Federal Funds $423,117 196,573 496,613 123,458 -87,145 $1,152,616 Reimburse- ments $34,346 57,332 269,101 $360,779 Total $-52,969 789,495 741,601 1,186,922 200,843 1,243,300 -223,450 591,432 $4,477,174 …… …… (!) S ~ ::r: ~ :> z t::I ::6 M ~ :::0 M ‘- – …… UI …a 752 \/ HEALTH AND WELFARE Item 282 DEPARTMENTAL SUPPORT-Continued Table 4 shows the number and classification of positions in the Program Development Division for 1978-79 and 1979-80 as identified by the De- partment of Social Services. In the current year, the division consists of 29 positions. The Governor’s Budget proposes to eliminate 1(\\ positions from the division as of July 1, 1979. Of the 10 positions, one is a secretary within the deputy director’s office and nine are within the Office of Planning. These include two Associate Governmental Program Analysts, four Staff Services Analysts, one Office Technician and two Office Assistant II posi- tions. As a result of these reductions, 19 positions remain in the division, including two in the deputy director’s office, five in the Office of Planning and 12 in the Management Analysis Branch. Table 4 Program Development Division Authorized Positions Program Development Division: Deputy Director CEA II ………………………………………………………………………………………………………………….. . Staff Services Manager II ……………………………………………………………………………………. . . Secretary ………………………………………………………………………………………………………………. . Subtotlll …………………………………………………………………………………………………………….. . Office of Planning Staff Services Manager III ………………………………………………………………………………….. . Staff Services Manager II ……………………………………………………………………………………. . Staff Services Manager I ……………………………………………………………………………………… . Associate Governmental Program Analyst ……………………………………………………….. . Staff Services Analyst …………………………………………………………………………………………. . Office Technician ………………………………………………………………………………………………… . Office Assistant II ………………………………………………………………………………………………. -0. Subtotal …………………………………………………………………………………………………………….. . Management Analysis Branch Staff Services Manager II ………….. ; ……………………………………………………………………… .. Staff Services Manager 1.. ……………………………………………………………………………………. . Associate Management Analyst …………………………………………………………………………. . Associate Governmental Program Analyst ……………………………………………………….. . Staff Services Analyst ………………………………………………………………………………………… .. Secretary ………………………………………………………………………………………………………………. . Subtotal ……………………………………………………………………………………………………………. .. Total ………………………………………………………………………………………………………………….. .. Authorized Positions 1978-79 1979-80 1 1 1 1 1 0 – 3 2 1 1 2 2 1 1 2 0 5 1 1 0 2 0 14 5 1 1 2 2 4 4 1 1 3 3 1 1 12 12 – 29 19 We have two concerns with the Program Development Division as proposed for 1979-80. First, we do not believe that this unit of nineteen positions justifies division status. The Program Development Division has the fewest number of authorized positions with the exception of the Ex- ecutive Division. Most divisions within the department consist of more than 150 authorized positions. Second, the division as proposed would have a CEA II and a Staff Services Manager II supervising a staff of only seventeen positions. We therefore recommend that seventeen positions and the functions of the Program Development Division be transferred Item 282 HEALTH AND WELFARE \/ 753 to the Administration Division, and that the CEA II and Staff Services Manager II in the deputy director’s office be eliminated. Office of Planning. The number of authorized positions for this unit has been reduced from 14 in the current year to five in the budget year. As a result of this action, we have several concerns with the proposed structure of the Office of Planning. First, we cannot determine how the functions of this office will be distributed among the remaining five posi- tions. Second, it is unclear how the remaining positions will be able to achieve the goals of the office. For example, the department indicates that there will be two positions instead of six in the demonstration unit responsible for overseeing a proposed budget of $338,114 for demonstration projects. In addition, there will be two positions assigned to the Research Unit which was assigned seven positions during the current year. Third, the office will consist of an unusually large number of high level professional positions including one Staff Services Manager III, two Staff Services Manager II, one Staff Services Manager I and a Staff Services Analyst. Prior to budget hearings, we will seek clarification of the functions of the remaining five positions in the Office of Planning. Demonstration Projects. The Governor’s Budget proposes $338,114 for public assistance demonstration projects. This is the same amount which is estimated to be expended during 1978-79. The purpose of the projects is to improve the administration of public assistance programs. We have several concerns with the Governor’s proposal. First, the de- partment is unable to identify the projects to be funded in 1979-80 because its screening and selection process does not start until after the Governor’s Budget is proposed. Second, although most of the $338,114 appropriated for demonstration projects for 1978-79 has been committed in the current year, only two of the proposed five projects have been started as of January 1979. Because the department is unable to identify how the proposed funds for demonstration projects will be spent in the budget year, and because it is likely that projects started in the current year will carryover into the budget year, we recommend that the $338,114 for demonstration projects in the proposed budget be eliminated. Fair Hearing Positions We recommend the deletion of18 proposed fair hearing positions result- ing in a reduction of $323,586 in General Funds and $226, 730 in federal funds. Recipients of aid and applicants for aid have the right to appeal deci- sions by county welfare departments which they believe adversely affect their entitlements to assistance. The Office of Chief Referee conducts administrative hearings to judge the fairness of decisions made by county welfare department personnel in handling welfare cases. When a request for a fair hearing is made, the department schedules a hearing, notifies both the county and the claimant and assigns a hearing officer. After the hearing is concluded, the hearing officer writes a proposed opinion for Z7-78fjl3 754 \/ HEALTH AND WELFARE DEPARTMENTAL SUPPORT-Continued adoption by the director. Item 282 The department proposes to add 13 hearing officers (Staff Counsel I) and 5 support staff (four Office Assistant lIs and one Office Services Supervisor I) due to projected workload increases in the fair hearing process. The department estimates there will be approximately 31,395 hearing requests filed in 1979-80. Of this amount, approximately 18,810 will be withdrawn and 12,585 will be heard and will require a written decision. We have reviewed actual caseload data for the first five months of 1977-78 and 1978-79. Table 5 shows that the number of intake requests and decisions rendered for the first five months of 1978-79 is below that of the comparable period in 1977-78. If this trend continues in the current year, the department will receive somewhat fewer hearing requests and will issue fewer decisions in 1978-79 than in 1977-78. Intakes ……………………………………. . Decisions ………………………………… . Table 5 Fair Hearing Request Intakes and Decisions Rendered 1977-78 and 1978-79 1977-78 1978-79 Year (actual) 30,391 9,559 July- November (actual) 12,752 4,367 Year (estimate) 26,659 9,009 July- November (actual) 12,358 3,754 The department states that new proposed Food Stamp Regulations, which will go into effect in January 1979, will result in a significant increase in hearings during the remainder of the current year and in the budget year. However, because there is no actual data available concerning the impact of these regulations, and because available data indicates that the current year workload will be slightly less than that in 1977-78, we are unable to recommend approval of the requested positions. During 1977-78 and 1978-79 the department was authorized 50 hearing officer positions. It estimates that the workload productivity for both inex- perienced and experienced hearing officers is approximately 215 cases heard and written per year. Based on 215 cases per hearing officer and assuming 9,559 decisions disposed of in 1977-78, the department’s staffing level should have been 45 hearing officers (9,559 -T 215 = 45) rather than 50. Using the same methodology, the department’s appropriate staffing level in 1978-79 would be 42 positions (9,009 -T 215 = 42) not 50 as currently authorized. We are not recommending a reduction in the department’s current budget, despite a possible lower fair hearings workload in 1978-79. We believe it is appropriate that the fair hearings unit be adequately funded to process appeals in the event a sudden unexpected\u00b7 surge in appeals occurs, as might happen when regulations change or the courts overrule existing procedures. However, we are recommending that the 18 positions proposed for fair hearings in 1979-80 be deleted. Item 282 HEALTH AND WELFARE \/ 755 Food Stamp Outreach Program We recommend the elimination of two Associate Governmental Pro- gram Analyst positions and one Office Technician position for a reduction of $37,408 in General Funds and $37,408 in federal funds. We withhold recommendation on the funds proposed for contracts with local community agencies to provide food stamp outreach services. The budget requests $400,000 for the Food Stamp Outreach program. This amount consists of $200,000 in federal funds and $200,000 in General Funds. The General Fund money would replace Title II funds which were used in the current year. The budget also proposes to convert an Associate Governmental Program Analyst position from three-quarter to full-time. At present, the Food Stamp Outreach Unit is authorized one Staff Services Manager I, 3.7 Associate Governmental Program Analysts and one Office Technician. The budget proposes to reduce funding for the Food Stamp Outreach Program from $767,611 in the current year to $400,000 in the budget year. This is a reduction of $367,611, or 47.9 percent, from the current year. Almost all of this reduction is for contracts with community agencies to provide outreach services. We have several concerns with the proposed expenditures for the Food Stamp Outreach program. First, the budget proposes to reduce expendi- tures for contracts by $362,183, or 66 percent, but makes no corresponding reduction in the number of staff positions responsible for monitoring and evaluating these contracts. Therefore, we recommend that the Food Stamp Outreach Unit be reduced by two Associate Governmental Pro- gram Analyst positions (including the proposed .3 position) and one Office Technician. If adopted, this recommendation would leave one Staff Serv- ices Manager I and two Associate Governmental Program Analyst posi- tions to monitor the remaining contract funds. Second, the department is unable to specify how $191,137 of the $400,000 will be allocated among contractors for outreach activities during 1979-80. Because food stamp outreach activities are mandated by the federal gov- ernment and because the department has not made a final decision as to the allocation of the funds for outreach activities, we withhold recommen- dation on the funds for contracts pending receipt of further information from the department. Social Service Positions We recommend that Item 282 be reduced by $757,937, by eliminating 29.5 proposed positions for social services. Reorganization Transfer. The 1978-79 budget proposed that 251.7 so- cial service positions be transferred from the Department of Health to the. new Department of Social Services to implement the agency reorganiza- tion. These positions are reflected in Table 6. An additional number of administrative positions were also transferred. These transfers were subse- quently approved by the Legislature. The proposed budget now indicates that only 209.5 positions are currently assigned to the Social Services Divi- sion, now called the Adult and Family Services Division, a reduction of 42.2 positions. In addition, there has been a significant redirection of posi- 756 \/ HEALTH AND WELFARE Item 282 DEPARTMENTAL SUPPORT-Continued tions within the division. Because the department has not submitted a reorganization report in conformance with Section 28.01 of the 1978 Budget Act, it is impossible to identify how it has reassigned positions transferred from the Department of Health for social service functions. Table 6 Comparison of Social Service Program Positions for Fiscal Year 1978-79 As Identified in Governor’s Budget for 1978-79 and Governor’s Budget for 1979-80 Social Services Program Component Current Year Positions Governor’s Governor’s Budget Budget 1978-79 1979-80 Division Office ………………………………………………………………………… 9.1 2.0 Resources Control …………………………………………………………………… 15.0 Planning and Evaluation ………………………………………………………… 43.0 23.0 Adult Services a; In\u00b7 Home Supportive Services ………………………………………… 34.5 16.5 h. Other ……………………………………………………………………………….. 22.0 30.0 Family and Children’s Services ……………………………………………… 128.1 138.0 Total…………………………………………………………………………………… 251.7 209.5 Change -7.1 -15.0 -20.0 -18.0 +8.0 +9.9 -42.2 Budget Proposal. The budget proposes a total General Fund appro- priation of $757,937 for 29.5 new positions to administer social service programs. These positions are to be assigned as follows: (a) five positions in the Adult Services Branch to monitor county adult social service pro- grams, (b) 5.5 positions to implement a quality control system for in-home supportive services in the Licensing and Assessment Division, (c) three positions to assist in policy development in the Family and Children’s Services Branch, and (d) 16 positions to assist in the implementation of a $5 million improved 24-hour child protective services response system. This program proposal is discussed separately in Item 287, Special Social Service Program. Because the department has not yet identified to the Legislature how positions transferred from the Department of Health have been reas- signed, we have no basis for evaluating the department’s request for an additional 29.5 positions for social services. For example, positions specifi- cally assigned for in-home supportive services have dropped from 34.5 to 16.5 positions, a reduction of 18 positions. We asked the department to identify how those 18 positions have been redirected and to provide justifi- cation for each redirection. The department indicated that 16 of these positions have been reassigned within the division and two positions have been reassigned outside the division but did not provide justification for the redirections. As a result, we are not able to verify that positions which were approved by the Legislature originally for in-home supportive serv- ices are continuing to be used in that manner. In addition, we have also identified some functions which are currently being performed within the Adult and Family Services Division even Item 282 HEALTH AND WELFARE \/ 757 though the Legislature has never approved any positions to perform those functions. Most of these are in the area of demonstration projects. For these reasons, we recommend that Item 282 be reduced by $757,937, by eliminating 29.5 proposed positions for social services. Rural Youth Employment We recommend continuation of eight positions for the Rural Youth Employment Project for a limited term ending September 30, 1979. The budget reflects the transfer of eight positions for the Rural Youth Employment (RYE) Project from the Lieutenant Governor’s Office to the Department of Social Services. This transfer was made pursuant to Execu- tive Order D-3-78 effective January 3, 1979. These positions are to be funded from $94,982 in federal funds mad~ available for the project in the budget year from the U.S. Department of Labor. The RYE Project was established during the current year under author- ity of Section 28 for the period from September 1, 1978 through September 30, 1979. The Department of Social Services states that it has no plans to continue the project past that date. We recommend approval of the con- tinuation of these positions in the Department of Social Services, but . further recommend that they be approved for a limited term ending September 30, 1979 to coincide with the termination of the project. Federally Funded Positions We recommend that supplemental language be added to instruct the Department of Social Services to immediately terminate positions for the Indo-Chinese Refugee Assistance program and the Office of Ch11d Abuse Prevention in the event federal funds for these programs are discon- tinued. The budget proposes to continue 15 federally funded positions as fol- lows: (a) 10 positions in the Office of Child Abuse Prevention to be funded from $285,089 in federal child abuse prevention funds, and (b) five posi- tions to provide assistance for the Indo-Chinese Refugee Assistance pro- gram (IRAP) to be funded from $147,215 in federal IRAP funds. . During the current year, the IRAP positions were established adminis- tratively using federal funds. The child abuse positions have been estab- lished on a one-year limited term basis each year for a number of years. Since all of these positions are required for administration of federally funded programs, we re(‘ommend approval. However, we further recom- mend that supplemental language be added to the Budget Act to instruct the department to immediately terminate all of these positions in the event federal funds for these programs are discontinued. As previously stated, while the budget reflects full federal financing of IRAP during the budget year, existing law would terminate federal funding as of October 1, 1979. Other Proposed Changes Adoptions Legal Support. The budget proposes to continue 1.5 posi- tions which were administratively established in the current year to pro- vide legal support to the adoptions program. These positions were funded in the current year by $42,365 from the General Fund which was redirect- 758 \/ HEALTH AND WELFARE Item 282 DEPARTMENTAL SUPPORT-Continued ed from departmental operating expenses. This redirection was continued in the budget year. As a result, the budget proposes no additional funds for these positions. Adoptions Investigations. The budget proposes $53,202 from the Gen- eral Fund to continue two adoption positions which were administratively established in the current year. These positions will be used to investigate irregular adoptive activities. .. Transfers to the Health and Welfare Agency. The budget proposes to transfer a CEA I position and clerical position froin the Government and Community Relations Division to the Health and Welfare Agency to assist the Rural and Migrant Affairs Coordinator. The proposed use of these positions is discussed in Item 35, Support for the Secretary of Health and Welfare. Community Care Licensing. The budget proposes to continue 46 posi~ tionsand to establish one new position for the Community Care Licensing program, for a total of 47 positions. The 46 continuing positions\u00b7 were established under the authority of Section 28 of the 1977 Budget Act during fiscal year 1977-78, and continued in\u00b7 fiscal year 197s.:-79 using federal funding from Title II of the Public Works Employment Act. The original proposal indicated that these positions were to become on-going state-funded positions beginning July 1, 1979. Of the 46 continuing posi- . tions, 31 will be used to provide investigative support for licenSing en\” forcement, eight will be used to provide legal support, five will be used to evaluate current state licensing procedures, and two will be used to update a facilities information system. The one new position will be used to assist in the functions of the client’s rights office. The budget proposes a total of $1,329,619 from the General Fund for the continuing and proposed positions. Included in this amount is $40,000 to provide medical and professional consultants to assist in facilities review. Life Care Contracts. The budget proposes two positions to conduct management audits of life care facilities and to assist in the implementa- tion of Chapter 1240, Statutes of 1978, regarding the supervision oflife care contracts. These positions are to be funded from $57 ,332 in federal Title II funds. The department indicates that these positions will be ongoing and will need to be supported from the General Fund beginning July 1, 1980. Disability Evaluation Determinations. The budget proposes $591,432, all funds, to establish 21 positions for the Disability Evaluation program. Of this amount, $322,331 is from the General Fund and $269,101 is from reimbursements from the Health Care Deposit Fund made available through the Department of Health Services: Nine of the positions will be used to process disability evaluations for the increasing caseload in the medically needy portion of the Medi-Cal program. The remaining 11 positions are to be used to process the increased number of medically indigent applicants referred to the medically needy program. The in- crease is due to a revision in the referral application procedures. The department estimates that 10 percent of medically indigent cases, which are funded 100 percent from the General Fund, are potentially eligible for Item 282 HEALTH AND WELFARE I 759 the medically needy program which is funded by 50 percent federal funds and 50 percent state funds. This assumption is being tested in a demonstra- tion project, and conclusive results are expected in March 1979. We will be reviewing the evaluation of the project when it is available. State Council and Area Boards on Developmental Disabilities. The budget proposes to establish two accounting technician positions to pro- vide staff support for the State Council and Area Boards on Developmen- tal Disabilities. Chapter 432, Statutes of 1978, transferred responsibility for providing administrative support for the council and boards from the Department of Developmental Services to the Health and Welfare Agency. The agency has designated the Department of Social Services to provide such services. The two positions are to be funded from $34,346 in reimbursements from federal funds made available to the state council for administrative support. A further discussion of these programs is con- tained in Item 271, Department of Developmental Services. Positions for the Federal Program Operations Bureau. The depart- ment proposes to permanently establish three Associate Governmental Program Analyst positions to assist in monitoring the state’s participation in the SSP program. These positions are proposed to cost $96,088 in 1979- 80, of which $74,949 will be from the General Fund and $21,139 will be federal funds. . Program Review and Fraud Prevention Branch. The department is proposing to permanently establish three Associate Governmental Pro- gram Analyst positions in the Program Review and Fraud. Prevention Branch, and to replace Title II funds with General Funds. One position would be responsible for maintaining and developing various fraud detec- tion systems. The remaining two positions would assist in monitoring county fraud prevention programs. The three positions were funded through Title IJ funds in the current year. General Fund costs in 1979-80 for these positions would be $47,542 and federal fund costs would be $43,885. Minimum Income Level Maintenance Unit. The budget includes $83,- 534 and four positions for a minimum income level maintenance unit within the Federal Program Operations Bureau. The positions include one Associate Governmental Program Analyst and three Management Serv- ices Technicians. These positions are proposed to be limited term and federally funded. The purpose of the positions is to comply with federal requirements to recalculate mandatory state supplemental payments for specified SSI \/ SSP recipients. AFDC-Boarding Homes and Institutions Positions. The budget pro- poses three positions for the AFDC Program Management Branch to expand and improve the department’s monitoring and control of the AFDCBoarding Homes and Institutions program. The positions will cost $87,773, of which $43,887 will be from the General Fund and $43,886 will be federal funds. 760 \/ HEALTH AND WELFARE Item 282 DEPARTMENTAL SUPPORT-Continued Monthly Reporting By Counties We recommend that Section 10809.5 of the Welfare and InsUtuUons Code, which establishes certain reporting requirements by the counhes, .be amended. Section 10809.5 of the Welfare and Institutions Code requires county welfare departments to submit each month a copy of the Caseload Move- ment and Expenditure Report to the Department of Finance and the Department of Social Services. The Department of Finance is required to provide this information immediately to the Joint Legislative BlJ.dget Committee. Each month the Joint Legislative Budget Committee receives a copy of each county’s monthly report. . When this reporting requirement was enacted in 1971, the Legislature was not receiving timely and complete data on caseloads and costs from the department. Since 1971, relations between the department anp the Legislature have improved to the point where legislative staff receive data and estimates shortly after they are requested. Therefore, there is no longer any need for the Joint Legislative Budget Committee to receive each county’s individual report. Because there is a cost associated with providing these unneeded reports, we recommend that Section 10809.5 of the Welfare and Institutions Code be amended to delete the requirement that a copy of the Caseload Movement and Expenditures Report be sub- mitted to the Joint Legislative Budget Committee. STATE ADMINISTRATION AND FUNDING OF MEDI\u00b7CAL AND PUBLIC ASSISTANCE PROGRAMS Impact of Proposition 13 Passage of Proposition 13 significantly reduced the amount of revenues from property taxes available for local governments. Tahle 7 presents the estimated effect of Proposition 13 on county property tax revenues. County property tax revenues totaled $10.5 billion in 1976-77. In 1977-78, this revenue source totaled $11.4 billion, an increase of $939 million, or 8.9 percent. As a result of passage of Proposition 13, county property tax revenues for 1978-79 are estimated to total $5.6 billion, a decrease of $5.9 billion, or 51.5 percent. Table 7 County Property Tax Revenues 197~77 Through 1979-80 (In Millions) 1976-77 1977-78 1978-79 Amount County Property Tax Revenues.. $10,509 Enactment of Chapter 292 Percent Change Amount $11,448 Percent Change Amount 8.9% $5,552 Percent Change -51.5% In response to the passage of Proposition 13, the state assumed most of the county share of welfare program costs in 1978-79 through enactment of Chapter 292, Statutes of 1978 (SB 154). This act requires the state to pay: Item 282 HEALTH AND WELFARE \/ 761 (a) the county share of the State Supplementary Payment (SSP) program, (b) the county share of the unemployed and family group components of the Aid to Families with Dependent Children (AFDC) program, and (c) 95 percent of the county nonfederal share of the boarding homes and institutions component of the AFDC Program. The state is also required to pay the county cost for administration of (a) the AFDC program, (b) the Child Support\u00b7 Enforcement program, and (c) the Food Stamp pro- gram. The state also assumed the county share of Medi-Cal costs in 1978- 79. The Governor proposes to continue a program of fiscal relief for coun- ties on a one-year basis in 1979-80. It is our understanding that the funds for this relief will be contained in a separate bill as yet unidentified. This relief will once again be based on the counties’ Medi-Cal and welfare costs. The Governor, however, proposes to change the sharing ratio for the AFDC-BHI component from 95 percent state \/ 5 percent county in 1978-79 to 50 percent state\/50 percent county in 1979-80. The administration proposes to compensate for the additional costs by increasing the amount available to counties in block grants from $436.0 million in the current year to $498.4 million in the budget ye~r. Table 8 shows the county cost for the Medi-Cal and welfare programs assumed by the state in 1978-79. Table 8 also shows the amount of county welfare and Medi-Cal fiscal relief proposed by the Governor for 1979-80. Table 8 Estimated Fiscal Relief for the County Share of Medi\u00b7Cal and Welfare Program and Administrative Costs 1978-79 and 1979-80 (In Millions) Program Medi\u00b7Cal ……………………………………………………………………………………….. , …….. .. SSI\/SSP …………………………………………………………………………………………………. .. AFDC Grants: Family Group and Unemployed Parents ………………………………………… .. Boarding Homes and Institutions …………………………………………………… .. AFDC Administration ………………………………………………………………………….. .. Child Support Enforcement Administration …………………………………………………………………………………. .. Nonassistance Food Stamp Administration ………………………………………………………………………………….. . Total ………………………………………………………………………………………………… . Based on December 1978 estimates. 1978-7fl $440.0 181.6 250.3 88.0 59.2 21.5 $1,065.8 1979-80 $484.0 200.4 271.8 42.4 63.8 29.3 21.5 1,113.2 b The Department of Social Services states that this amount will be offset by $7.2 million from the federal government for the costs incurred in providing child support enforcement services to non-AFDC recipients. As a result of Chapter 292, in 1978-79 the state is funding the county share of the Medi-Cal Program and the majority of the county welfare grant and administrative costs while the counties continue to administer several of the programs. The Governor proposes to continue this arrange- ment on a one-year basis in 1979-80. The Governor’s proposal provides a temporary answer to the question of who should fund and administer welfare programs in California. . – 762 \/ HEALTH AND WELFARE Item 282 DEPARTMENTAL SUPPORT-Continued Chapter 1241, Statutes of 1978, requires the Department of Social Serv- ices to prepare a report on state administration of welfare and social services programs that are now administered by county governments. It requires the department to submit a final\u00b7 report with its recommenda- tions on state administration to the Legislature by March 15, 1979. The act states that the report is to determine whether state administration is in the best interest of recipients, taxpayers arid efficient administration. In addi- tion, the department is required to make recommendations on and pre- pare an estimated schedule for implementation of state administration. It is also required to consider a number of issues in its report including: payment systems and data management, county contracts,status of county employees, functions of programs, feasibility of contracting with counties to perform administrative functions, and the cost of a transfer to . state administration. In accordance with the requirements of Chapter 1241, the department submitted a preliminary report to the Legislature on October 13, 1978. We reviewed the department’s interim report and reported to the Legislature on our findings and recommendations in December 1978. When the de- partment’s final report is submitted, we will review the findings and recommendations of the report. In the meantime, we offer a number of recommendations and observations regarding state administration of wel- fare. 1. SSI\/SSP and Medi\u00b7CalPrograms The SSI\/SSP program provides cash grants to eligible aged, blind and disabled individuals. The Medi-Cal program provides health services to welfare recipients, the medically needy and the medically indigent. The costs for both programs are shared by the federal, state and county governments to varying degrees. The federal government funds the SSI portion of the SSI\/SSP grant while the state and counties finance the cost of the SSP component. The federal government funds apprpximately 50 percent of the Medi-Cal program with the exception of the medically indigent category which is funded 100 percent by the state. County costs for both the SSP and Medi-Cal programs are based on a formula which ties . the county share to changes in assessed valuation of property. We recommend that the state permanently assume the county costs of the SSI\/SSP and Medi-Cal programs for the following reasons: First, the counties do not administer these programs and have no direct control over program costs or content. Second, the equivalent tax rates which support county contributions toward these programs vary significantly among counties, thereby placing an unequal burden upon taxpayers in different counties. Table 9 shows the tax rate equivalents which counties would have to set if they were to levy a separate property tax to cover their Medi-Cal and SSI\/SSP obligations. Table 9 shows, for example, that a homeowner in San Oiegocounty con- tributed 20 cents per $100 of assessed value to the Medi-Cal program in 1977-78, while a homeowner in San Francisco county contributed 60 cents per $100. The homeowner in San Diego county paid 11 cents per $100 of Item 282 HEALTH AND WELFARE \/ 763 assessed value to the SSIISSP program in 1977-78 whHe a homeowner in San Francisco county paid 35 cents per $100. . Table 9 County Property Tax Equivalents\u00b7 For the County Share of Medi-Cal and SSt\/SSP Programs 1977-78 Tax Rate Equivalents COUIlty MedJ~Cal’ SSI\/SSP Alameda …………………………………………………………………………….. $0.37 $0.18 Alpine ……………………………………………………………………………….. 0.05 0.03 Amador ……………………………………………………………………………….. 0.25 0.05 Butte ………………………. ;……………………………………………………….. 0.34 0.18 Calaveras .. , ……………………………………………. ,…………………………. 0.25 ‘0.08 Colusa .. :…………………………………………………………………………….. 0.17 0.05 Contra Costa ….. ,:………………………………………………………………. 0.31 0.14 Del Norte ………………………………………………………………………….. 0.36 0.18 El Dorado …………………………………….. ; .. , ……….. ,……………………… 0.16 0.09 Fresno ……………………………………………………………………………….. 0.63 0.20 Glen,n …….. : ……………………………………………. :…………………………… 0.22 0.07 Humboldt ………………………………………………………………………….. 0.42 0.20 Imperial ….. : ……………………………… ;……………………………………… 0.20 0.17 Inyo .. ; …… ; …. ; ………………………. : …………………………. ;……………….. 0.27 0.07 Kern…………………………………………………………………………………… 0.48 0.14 ~~~:::::::::::::::~:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: ~:t~ ~:~ Lassen ……………………………………………………………………………….. 0.27 0.11 Los Angeles ………………………………………………………………………. 0.49 0.20 Madera ……………………………………………….. :…………………………… 0.41 0.24 Marin ….. :……………………………………………………………………………. 0;15 0.06 Mariposa .; ……………………………… ,…………………………………………… 0.11 0.06 Mendocino …………………………………………… ,………………………….. 0.34 0.16 Merced ……………………………………………………………………………… 0.52 0.20. ‘Modoc ……………………………………………………………………………….. 0.32 0.09 Mono …………………………………… ,…………………………………………… 0.06 0.02 Monterey ………………………………………………………………………….. 0.37 0.10 Napa …… , …………. ,……………………………………………………………………. 0.23 0.14 Nevada ……………………………………………………………………………… 0.39 0.11 Orange ……………………………………………………………………………… 0.22 0.05 Placer …………………………………………………………………………………. 0.32 0.10 Plumas ……………………. : ……………………. ~-::;……………………………… 0.21 0.06 Riverside ………………. ;………………………………………………………….. 0.35 0.16 Sacramento ……………………………………………………………………….. 0.59 0.28 San Benito ………………………………………………………………………… 0.24 0.08 San Bernardino …………………………………………………………………. 0.33 0.13 San Diego ………………………………………………………………………….. 0.20 0.11 San Francisco …………………………………………………………………… 0.60 0.35 San Joaquin’ ………………………………………………………………………. 0.60 0.26 San Luis Obispo . . ,……………………………………………………………. 0.46 0.12 San Mateo………………………………………………………………………….. 0.28 0.09 Santa Barbara …………………………………………………………………… 0.33 0.12 Santa Clara …………………… : …………. ;……………………………………… 0.27 . 0.10 Santa Cruz … :…………………………………………………………………….. 0.35 0.14 Shasta………………………………………………………………………………….. 0.25 0.17 Sierra ……. :………………………………………………………………………….. 0.11 0.06 Siskiyou ……………………………………………………………………………… 0.38 0.11 Solano .::.: ………. :.: ………… : ……………. :…………………………………….. 0.19 0.14 Sonoma ………………………………………. ; ……………………….. :…………. 0.38 0.13 764 \/ HEALTH AND WELFARE DEPARTMENTAL SUPPORT-Continued Stanislaus ………………………………………………………………………….. 0.56 Sutter …………………………………………………………………………………. 0.45 Tehama ……………………………………………………………………………… 0.26 Trinity ………………………………………………………………………….. ;….. 0.58 Tulare ……………………………………………………………………………….. 0.56 Tuolumne ………………………………………………………………………….. 0.32 Ventura……………………………………………………………………………… 0.20 Yolo …………………… :…………………………………………………………….. 0.39 yuba ……………………………………………….. ;………………………………… 0.60 \”Tax rate equivalent expressed per $100 of state and local assessed value. Item 282 0.23 0.11 0.13 0.09 0.25 0.11 0.07 0.13 0.32 2. AFDC-Family Group and Unemployed Parents (Costs for Grants and Administra- tion) and Food Stamp Administration The AFDC program provides cash grants for children and their parents or guardians whose income is insufficient to meet their basic needs. Eligi- bility is limited to families with children who are needy due to the death, incapacity, continued absence or unemployment of the parents or guard- ians. The Food Stamp program permits eligible low income families to purchase food stamps in order to increase their food buying power. Because both the AFDC and Food Stamp programs are supervised by the state and administered by the 58 county welfare departments, the issues surrounding the financing and administration of these programs are more complex than those surrounding the SSI\/SSP and Medi-Cal pro- grams. Many have argued that the counties have little or no control over pro- gram and administrative costs and therefore should be relieved of any financial participation. We do not believe this argument is completely accurate. Although grant levels and eligibility criteria for the AFDC pro- . gram are set by the federal and state governments, the counties can Table 10 AFDC Intake Actions Per Eligibility Worker and Costs Per Intake Action 1977-78 Intake Actions Per Counties Eligibility Worker\” Alameda………………………………………………………………………………………….. 26.08 Contra Costa…………………………………………………………………………………… 27.07 Fresno ……………………………………………………………………………………………. 23.23 Los Angeles…………………………………………………………………………………….. 22.81 Orange ……………………………………………………………………………………………. 25.06 Riverside ……………………………………………………………………… ;……………….. 42.30 Sacramento …………………………………………………………………………………….. 31.37 San Bernardino ……………………………………………………………………………… 30.68 San Diego ………………………………………………………………………………………. 24.48 San Francisco …………………………………………………………………………………. 24.05 Santa Clara …………………………………………………………………………………….. 29.26 Average ………………………………………………………………………………………. 27.85 \” Excludes supervisors. b Costs include eligibility workers’ salaries and benefits. Excludes support costs. Costs Per Intake Action b $57.65 58.73 66.68 72.51 54.53 30.18 52.01 41.11 61.41 64.00 51.37 $55.47 Item 282 HEALTH AND WELFARE \/ 765 significantly affect the cost and operation of the welfare system. The fact that eligibility worker productivity and costs vary significantly among counties suggests that there is considerable local control over the adminis- tration of welfare programs in California, Table 10, for example, shows the number of intake actions per eligibility worker and the costs per intake action for the 11 largest counties during 1977-78. During this period, the average number of intake actions per eligibility worker in these counties was 27.85. This ranged from a high of 42.30 intake actions in Riverside to a low of 22.81 in Los Angeles. Table 10 also shows that the cost per intake action varies significantly among coun- ties. The average cost per intake action for the 11 largest counties was $55.47. This cost varied from a high of $72.51 per intake action in Los Angeles to a low of $30.18 in Riverside. Under a system of full state financing and county administration, there would be less incentive for the counties to control program and adminis- trative costs. This is because a county which has a financial stake in the grant and administrative costs of the welfare program would be more inclined to keep payment errors low and administrative productivity high than a county with no financial investment in the program. Any proposed legislation which would relieve the counties of their grant and administra- tive costs for these programs should contain sanctions for high error rates and provisions to insure that counties improve their productivity. 3. AFDC-Boarding Homes and Institutions Program The AFDC-BHI program provides cash grants for eligible children re- siding in foster care homes and institutions. Children are placed in foster homes or institutions because they have been abused, abandoned or neg- lected by their parents, or because they cannot be managed by their . parents. Children are eligible to receive financial assistance under the AFDC-BHI program based primarily upon the limited income and re- sources of the parents. Among the AFDC program components, BHI is. unique for a number of reasons. First, altq.ough the state supervises the BHI program, counties have been given a great deal of discretion in administering it. For exam- ple, counti~s set their own rates of reimbursement for foster home care and establish the criteria for plaCing children in foster homes. (As a result of Chapter 292, in 1978-79 the department is required to approve requests by foster care providers for rate increases.) Second, because counties set their own BHI rates, considerable varia- tion exists among counties. For example, in 1976-77 the average monthly payment per recipient in the 11 largest counties was $357. This average payment ranged from a high of $454 in Contra Costa County to a low of $197 in Fresno County. Third, Table 11 shows that while the level of state expenditures for the BHI program remained essentially unchanged during the last five years, the county share of this program more than doubled. During this period, county expenditures for this program grew at an average annual rate of 18.4 percent while totaLexpenditure increases for this program averaged 13.5 percent. 766 \/ HEALTH AND WELFARE DEPARTMENTAL SUPPORT-Continued Table 11 Fiscal Year 1975-79 …. 1977-78 …. 197&-77 …. 197~76 …. 1974-75 …. 1973-74 …. Average Annual Change Expenditures for the AFDC-Boarding Homes and Institutions Program 1973-74 Through 1978-79 (In Millions) Total Federal State Percent Percent Percent Amount Change Amount Change Amount Change $151.2 14.5% $33.9 23.7% $23.4 -2.9% 132.l 8.4 27.4 -6.2 24.l 2.i 121.9 10.2 29.2 22.2 23.6 0.9 110.6 11.2 23.9 14.4 23.4 -3.7 99.5 23.4 20.9 26.7 24.3 4.3 BO.6 16.5 23.3 – 13.5% 16.2% 0.1% \”Shows the state and county share as if Chapter 292 had not been enacted. Item 282 County Percent Amount Change $93.9\” 16.5% BO.6 16.6 69.l 9.2 63.3 16.6 54.3 33.l 40.8 18.4% An increase in the state share of the BHI program should be accom- panied by increased state control over the setting of reimbursement rates. 4. Child Support Enforcement Program . Federal and state law recognizes the obligation of parents to support their children. In order to ensure\u00b7 that parents meet this responsibility, the state has created a Child Support Enforcement program which is state supervised and locally operated. The district attorney’s office in each county is responsible for the day-to-day activities related to determining paternity, locating absent parents and. enforcing child support of both welfare and non welfare recipients. . Child support payments collected from absent parents whose children are receiving aid through the AFDC program are used to offset county, state and federal expenditures for this program. These collections are shared by federal, state and county governments based on their \u00b7share of AFDC program costs. In addition, incentive payments are made to counties and other states for collecting child support payments. The incentive payments paid to counties and other states total 27.75 percent of collections and consist of two components: (a) a federal incentive of 15 percent of collections and (b) a state incentive of 12.75 percent of collections. The costs for administering the Child Support Enforcement program are shared by the federal and county governments, with the federal gov- ernment paying 75 percent and the counties paying 25 percent. As a result of Chapter 292, the state assumed the county’s share of the program for 1978-79. Table 12 shows the amount of child support collections made in 1976-77 and 1977-78, the local assistance administrative costs related to these col- leCtions. and the ratio of costs to collections. Because the federal and county governments share the local assistance costs for administering this Item 282 HEALTH AND WELFARE \/ 767 program, the state has had no local assistance costs but has received sub- stantial benefits. For example, the state had no local assistance costs in 1976-77 but received $19.0 million in child support payments collected by the counties from absent parents of welfare recipients. These payments were used to offset the state’s AFDC expenditures. If the state assumes the counties’ administrative costs, the state’s ratio of collections to administra- tive costs will probably more closely approximate those of the counties shown in Table 12. Table 12 Child Support Enforcement Collections and Local Assistance Administrative Costs (Dollar Amounts In millions) Distribution of AFIJC Cbffd Support Fiscal Collections AFDC Administrative Costs Year Total Federal\” State\” Countl Total Federal State County 1976-77 ……………………………. $65.9 $19.9 $19.0 $27.0 $49.9 $37.4 – $12.5 1977-78 ……………………………. 74.6 22.3 20.5 31.8 57.7 43.3 – 14.4 \” Net collections after incentive payments to counties. b Includes federal and state incentive payments to the counties. Ratio of CoUections to Administrative Cosis Total Federal State County 1.32:1.00 0.53:1.00 NA 2.16:1.00 1.29:1.00 0.51:1.00 NA 2.20:1.00 The state has not imposed adminstrative cost controls on the Child Support Enforcement program because the costs are shared by the federal and county governments. If the state assumes the county share of the administrative costs for the Child Support Enforcement program, the tate should develop a plan to control those costs. 5. General Relief Needy California residents who are not eligible for either SSI\/SSP or AFDC benefits may receive aid through the county’s general relief pro- gram. Section 17000 of the Welfare and Institutions Code requires counties to provide assistance to indigent individuals who lack adequate means of support. Each coun ty is permi tted to design its own general relief program including eligibility criteria and payment levels. The program and ad- ministrative costs for general relief are borne by the counties. This ar- rangement was unaffected by Chapter 292. County costs for the general relief program are estimated at $112.9 million in 1978-79. Of this amount, $31.5 million (27.9 percent) is for administration and $81.4 million (72.1 percent) is for grants. There is wide program variation in costs from county to county because counties are permitted to determine eligibility and grant levels. For exam- ple, the average grant for a one~person case in the 11 largest counties in June 1978 was $106. However, the average grant level for one person varied significantly among these counties ranging from $70 in Sacramento County to $141 in Santa Clara and $172 in Los Angeles. A state financed general relief program would probably eliminate such disparities by estab- lishing a uniform grant level. However, this would probably result in increased costs for general relief statewide, and thus the increased state costs would probably exceed $112.9 million by a considerable amount. 768 \/ HEALTH AND WELFARE Item 282 DEPARTMENTAL SUPPORT-Continued 6. Social Services Programs Counties are responsible for administering 10 mandated and 14 optional social services including in-home supportive services, child and adult pro- tective services, information and referral and others. These services are supported by federal funds from Title IV-B and Title XX of the Social Security Act, by state funds and by county funds. In addition, counties are responsible for providing WIN-related social services. Total proposed county funding for Title IV-B and Title XX social services for fiscal year 1979-80 is $44,858,133. Total proposed county funding for WIN social serv- ices is $1,372,539. These costs were not taken over by the state as part of the state buy-out of county welfare costs during the current year which occurred as a result of Chapter 292, Statutes of 1978. Social service programs currently administered by counties are charac- terized by a lack of program definition or minimum performance stand- ard, lack of uniform needs assessment or allocation procedures, lack of quality or cost control mechanisms, and inadequate management informa- tion. If the state should assume responsibility for these programs, it would be faced with the task of attempting to define and standardize them, and to balance current funding and service inequities among the counties. Because federal Title IV-B and Title XX funds are capped, any additional support for program expansion would have to come from the General Fund. AFDC CASH GRANTS-CONTROL SECTION 32.5 The Budget Bill does not contain an item which appropriates funds for the Aid to Families with Dependent Children (AFDC) program because the Welfare and Institutions Code provides a continuous appropriation to fund the program. However, Section 32.5 of the proposed Budget Bill limits available funds to a specified amount and permits the Director of Finance to increase the expenditure limit in order to provide for unex- pected caseload ‘growth or other changes which increase aid payment expenditures. The budget proposes a limit of $661,967,800 in Section 32.5, which is $49,603,800, or 8.1 percent, more than is estimated to be expended in the current year. In addition to these funds, there are state costs of $16,624,037 for AFDC grants in the current year and $14,449,400 in the budget year in Items 289 and 290 for executive and legislative mandated costs. Thus, the total General Fund cost for AFDC grants in fiscal year 1979-80 is estimated to be $676,417,200, which is an increase of $47,429,163, or 7.5 percent, over the amount estimated to be expended in the current year. Table 13 shows the amount proposed in Control Section 32.5 for AFDC cash grants and the major cost increases and offsetting savings. AFDC Caseload The Governor’s Budget projects that the AFDC caseload will increase by 1.5 percent in 1979-80, as shown in Table 14. Item 282 HEALTH AND WELFARE \/ 769 Table 13 Proposed General Fund Budget Increases for AFDC GRANTS A. B. 1979-80 Base Budget …………………………………… : …………………………………. . Budget Adjustment 1. 6 Percent Cost-of-Living adjustment …………………………… . 2. Increased Caseload due to Reduced Abortion Funding 3. Increased Costs due to Court Cases …………………………….. . 4. Reduced Costs due to Minimum Wage Increases ……… . 5. Basic Caseload and Grant Increases …………………………….. . 6. Effect of Increased Child Support Collections …………… . 7. Increased Costs for Child Support Incentive Payments 8. Other Adjustments ……………………………………………………….. . Total Budget Increase ……………………………………………………….. . Proposed General Fund, Section 32.5 …………………………………………. . Table 14 Cost $42,717,600 5,368,600 1,033,400 -2,016,800 5,632,700 -5,209,300 1,903,500 174,100 AFDC Average Monthly Caseload (Person Count) 1979-80 Governor’s Budget AFDC Family Group ……….. , ………………………………… . AFDC Unemployed …………………………………………….. . AFDC Foster Children ……………………………………….. . AFDC Aid for Adoption of Children ………………….. . Total ………………………………………………………………….. . Proposed Regulations-Garcia vs. Swoap 1978-79 1,254,400 164,111 27,895 1,960 1,448,366 1979-80 1,271,692 167,833 28,742 ~ 1,470,284 Total $612,364,000 49,603,800 $661,967,800 Change from 1978-79 Amount Percent. 17,292 1.4% 3,722 2.3 847 3.0 57 2.9 21,918 1.5% We recommend that the limit in Control Section 32.5 be reduced by $1,698,500 pending the issuance and review of new regulations. The budget proposes a General Fund appropriation of $2,204,500 fot proposed regulations resulting from the Garcia vs. Swoap case. Of thi1l amount, $1,698,500 for grant supplemental payments is included within Control Section 32.5 and $506,000 for county implementation costs is in- cluded in Item 288. Under existing regulations, a recipient is required to report income received in the prior month as a basis for determining the grant level to be received in the next month. However, a Superior Court has concluded that the department’s prior-month budgeting system is inadequate and has required the department to submit revised regulations for its ap- proval. The proposed regulations would require that should a change in income occur to create a hardship, a supplemental payment would be issued upon the request of the recipient. However, the regulations have not been issued because the department has appealed the case to the State Court of Appeal. We recommend that the funds subject to Control Section 32.5 be re- duced by $1,698,500 because: (a) the proposed regulations related to Gar- cia vs. Swoap have not yet been issued and (b) the case is presently pending in the court of appeal. 770 I HEALTH AND WELFARE DEPARTMENTAL SUPPORT-Continued Cost-of~Livinglncreases for AFDC Recipients We recommend that: Item 282 1. Current law be amended to establish December 1977 as the base month and year for cEJlculating changes in the consumer price index (CP!) when determining the cost-of-liviIlg increase for AFDC recipients. The comparison month to be used annually thereafter would be December. 2. Current law be changed so that .the percentage change in. the con- sumer price index from December 1977 to the comparison month of De- cember be applied against the AFDC grant levels in effect in June 1979. 3. The limit in Control Section 32.5 be increased by $6,478,800 to pro- vide a 6. 91 percent cost-of-living increase for AFDC recipients effective July 1, 1979, in order to reflect the change in the consumer price index between December 1977 and December 1978. Background Assistance payments made under the Aid to Families with Dependent Children (AFDC) program consist of two components: (1) the basic grant and (2) the cost-of-living factor. The basic grant repre- sents the cost of obtaining necessary living needs such as food, clothing, shelter and utilities. The basic grantis adjusted annually based on changes in the average of the separate consumer price indices for Los Angeles and San Francisco. As passed by the Legislature, the Budget Act of 1978 contained funds for a 2.5 percent cost-of-living increase for AFDC recipients and state em- ployees. In passingSB 154, the Legislature provided that the annual cost- of-living increase for AFDC recipients in \u00b71978-79 would not exceed the cost-of-Uving adjustment provided state employees. The Governor elimi- nated from the Budget Act of 1978 all appropriations for state employee sillary increases and funds for cost-of-living increases for AFDC recipients. As aresult, AFDC recipients were not provided ~ cost-of-living increase in fiscal year 1978-79. Because of this action, we requested an opinion from the Legislative Counsel concerning the requirements of existing law rela- tive .to . the cost-of-living increase in 1979-80. Specifically, we asked whether the actions taken for the current year permanently eliminated the. requirement that a cost-of-living increase be provided to cover the increase in prices between Deeember 1976 and December 1977 . . The Legislative Counsel has concluded that: (1) the actions of the Legis- lature and administration merely suspended the cost-of-livingadjustment for AFDC recipients for the 1978-79 fiscal year and (2) in the absence of intervening legislation, the cost-of-living adjustment provided on July 1, 1979, willhave to include the cost-of-living adjustment which would have been provided on Julyl, 1978. The Counsel’s opinion states in part: \”The suspension of the July 1, 1978, cost-of-living adjustments for the 1978-79 fiscal year with respect to AFDC .,. will result in increases on July 1, 1979, which would include the percentage increases which would otherwise have been included in the respective inoperative adjustments of 1978.\” Section 11453 of the Welfare and Institutions Code specifies the proce- dures for cakulating the cost-of-living adjustment. The section establishes December 1975 as the base month and year from which changes in the , Item 282 HEALTH AND WELFARE \/ 771 consumer price index are measured. It also provides that the Department of Social Services shall select a comparison month for computation of the percentage change in the cost-of-living.The department has selected December as the comparison month and is required to use the same comparison month annually. In computing the cost-of-living increase, the department is required to determine the percentage chan.ge in the aver- age of the separate consumer price indices for Los Angeles and San Fran- cisco between December 1975 and the comparison month. Because of this procedure, any cost-of-living adjustment not provided in one year is au- tomatically contained in the subsequent. year calculations. Under current law, the cost-of-living increase forl979-80 would include two components: (1) the adjustment which would have been provided in 1918-79and (b) the increase that normally would become effective July 1, 1979. Under current law, the combined cost-of-living increase would be 15.16 percent. General Fund costs for providing a 6 percent cost-of-living adjustment as proposed by the administration would total $42.7 million. The General Fund cost of a 15.16 percent cost\”of~living increase, as required by current law, would be $107.9 million. How Much Of An I1J,.creas(‘J Should Be Granted? We have several con- cerns with the Governor’s proposed 6 percent cost-of-livingadjustment. First, the purpose ofa cost-of-living increase is to help the purchasing power of grants to welfare r~cipients keep pace wi~h the rising costs. of food, shelter, transpo:rtatiol1, and other necessities of life. However as fat as we can determine, the administration’s proposed cost-of-living increase is an arbitrary per<;!entageadjustment which does not reflect a direct relationship betweenc'urien:t grant levels and changes in economic condi- tions. . Second, it is our understanding that the administration's proposal is pledicated upon a challge i.n current law. However, it is unclear whether the Governor proposes to change permanently the statutory requirement for a cost-of-living adjustment based on the consumer price index, or whether he intends simply to suspend the requirements for a second year (as SB 154 waived these requirements for 1978-79). If he is proposing merely to suspend current statutory autho:i\"ity for another year, then exist- ing law would require AFDC recipients to be given cost-of-living adjust- ments covering a three-year period, with a resulting heavy impact on the 1980-81 budget. We also have some problems reconciling the provisions of current law with the actions taken by the Governor and Legislature in enacting the Budget Act of 1978 and SB 154. On the one hand, their intent may have been to defer the cost-of-living adjustment on the AFDC grant until 1979- 80. This action would produce a one-time savings, l;lUt would not perma- nently reduce the level of state expenditures under this program. On the other hand, the purpose of the Governor and Legislature in denying the cost-of-living adjustment may have been to permanently reduce program costs, thereby providing increased state funds for use in assisting local governments on a permanent basis. This would suggest that the cost-of- living increase not be restored in 1979-80. 772 I HEALTH AND WELFARE Item 283 DEPARTMENTAL SUPPORT-Continued We have no basis for determining the intent of the Governor and Legis- lature in denying the 1978-79 cost-of-living adjustment called for under existing law. We believe, however, that AFDC recipients should not suffer a further reduction in the purchasing power of their benefit checks in 1979-80, and therefore we recommend that these recipients be given a 6.91 percent cost-of-living adjustment effective July 1, 1979 (rather than the 6 percent increase proposed in the budget). Any increase above this 6.91 percent level fbr 1979--80 would result in an increase in the real income of program beneficiaries when compared to the grant levels ap- proveciby the Governor and Legislature for 1978-79 and we have no basis for recommending such an increase. We further recommend that current law be amended to establish De- cember 1977 as the new base month and year for computing changes in the consumer price index when calculating annual cost-of-living increases for AFDC recipients. The comparison month to be used annually thereaf- ter should also be December. We further recommend that current lawbe amended so that the percentage change in the index from December 1977 to the comparison month of December of each subsequent year be applied annually against the AFDC grant levels in effect in June 1979. If legislation is adopted which incorporates these recommendations, AFDC recipients would receive a 6.91 percent cost-of-living increase ef- fective July 1, 1979. This would mean that a family of three who received $356.00 per month in the current year would be entitled to $381.00 per month in the budget year. The same family would receive $377.00 under the administration's proposal and $410.00 under current law. The General Fund cost for a 6.91 percent cost-of-living increase in 1979- 80 would be $49,196,400. Because the Governor's Budget contains $42,717,- 600 fora 6 percent cost-of-living increase, we recommend that the limit in Control Section 32.5 be increased by $6;478,800. Department of Social Services ATTORNEYS' FEES AND COSTS AWARDED TO WELFARE APPLICANTS OR RECIPIENTS Item 283 from the General Fund Budget p. 785 Requested 1979-80 ................ ; ......................................................... . Estimated 1978-79 ....................... ; ..... .............................................. Total recommended reduction ................................................... . GENERAL PROGRAM STATEMENT $15,000 N\/A None . Current law provides that welfare applicants or recipients can file a petition with the Superior Court requesting a review of a fair hearing decision issued by the director of the department. Current law also pro- vides that \"the applicant or recipient shall be entitled to reasonable attor- ney's fees and costs, if he obtains a decision in his favor.\" Item 284 HEALTH AND WELFARE \/ 773 This item provides funds pursuant to Section 10962 oftheWelfare and Institutions Code for the payment of attorney fees to welfare recipients or applicants who successfully litigate complaints against the Director of the Department of Social Services. This item is identified separately for the first time in the budget year. ANALYSIS AND RECOMMENDATIONS We recommend approval. The budget proposes $15,000 from the General Fund to pay the attor- neys' fees and\u00b7 costs of welfare recipients and applicants who have re- ceived a favorable court decision. Expenditures for the first six months of 1978-79 totaled approximately $7,000 for four claims. Information provided by the department indicates that the fees for 1978-79 were paid to both private practice attorneys and public interest law firms. Department of Social Services STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED Item 284 from the General Fund Budget p. 772 Requested 1979-80 ........................... ; .............................................. $706,156,442 Estimated 1978-79............................................................................. 734,844,300 Actual 1977-78 .................................................................................. 721,202,706 Requested decrease $28,687,858 (3.9 percent) Total recommended increase ...................................................... $21,639,400 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. SSI\/SSP Cost-oFLiving Increase. Augment Item 284 in the amount of $21,639,400. Eecommend that current law for calculating_. SSI\/SSP cost-of-living adjustment\u00b7\u00b7 be amended to provide a 6.91 percent cost-of-living increase. GENERAL PROGRAM STATEMENT Analysis page 776 The SSI\/SSP program is a federally-administered program under which needy and eligible aged; blind; and disabled persons receive financial assistance. The program began on January 1, 1974, when the Federal Social Security Administration assumed responsibility for direct administration of cash grant welfare assistance for California's aged, blind and disabled recipients. Prior to that time, California's 58 county welfare departments administered a joint federal-state-county program which provided cash assistance to these recipients. Under provisions of state and federal law, California supplements the basic Federal Supplemental Security Income (SSI) payment with an addi- tional State Supplementary Payment (SSP). 774 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED. BLIND. AND DISABLED-Continued ANALYSIS AND RECOMMENDATIONS Combined State and County Costs Item 284 The budget proposes $706,156,442 from the General Fund as the state share of the SSII SSP program in 1979-80. This is a decrease of $28,687,858, or 3.9 percent, from estimated expenditures in the. current year. Although the Governor's Budget provides for a 6 percent cost-of-living increase for SSIISSP recipients, the total cost of this program to the state and counties will increase only slightly in .1979-80. Combined state. and county expenditures for the SSP Program are estimated at $906,572,000 in 1979-:-80. As shown in Table 1, this. is an increase of $4,152,300, or 0.5 percent, above the current year. Table 1 State and County Expenditures For the SSP Program 1978-79 and 1979-80 Change 1978-79 $734,844,300 167,575,400 1979-80 Amount Percent State ..................................................................... . $706,156,442 $~28,687,858 -3.9% County\u00b7 ............................................................... . 200,415,558. ---'-+.::.:32~,840~,1~58 _+_._19_.6 Total ......... , ........ : .................................................. . $902,419,700 $906,572,000 $+4,152,300 +0.5% \"SB 154 provided that the state would pay the county share in 1978-79. The Governor's Budget proposes the county share for 1919-80 also be paid by the state. Under the Governor's proposal, the federal government would pay for most of the 6 percent cost-of~living increase in the SSIISSP grant. This is why the proposed 6 percent increase results in only a small increase in combined state and county expenditures for this program. Table 2 shows how the grant for an aged or disabled individual would be determined in 1979-80. This individual is receiving a monthly SSIISSP check of $307.60 in 1978-79. The GQvernor proposes to increase the total grant by 6 percent, or $18.46, in 1979-80. Because the federal government will provide a cost-of-living increase on its SSI grant of 8.4 percent, or $16.00, the state only has to contribute an additional $2.46 to reach the total grant adjustment of $18.46. Table 2 SSI\/SSP Grant Level for an Aged or Disabled Individual 1978-79 and 1979-80 Cost-of-Lil'ing IncreaSe Program SSI Grant .............................................................. .. SSP Grant .............................................................. .. Total ..... ; .. : ........................................ ; .................... .. 1978-79 $189.40 11820 $307.60 X X Percent AlliQUIlI 8.4%\" $16.00 N\/A 2.46 -- 6.0% $18.46 1979-80 $205.40 120.66 $326.06 \" Does not equal $16 exaCtly due to the manner in which the federal government calculates the cost-of- living adjustmen~. Item 284 HEALTH AND WELFARE \/ 175 General Fund Costs Two factors account for the $28.7 million (3.9 percent) decrease in the cost to the General Fund of the SSP program in 1979-80. First, current year state expenditures of $734.8 million include $14.1 million for the SSP program which would have been paid by the counties if legislation (SB 154) had not been enacted to shift the counties' share of program costs to the state. This $14.1 million expenditure resulted from a greater-than- anticipated increase in assessed property valuations in 197&-79. During the hearings on SB 154, it was assumed that assessed valuations in the counties would increase by only 1.5 percent under Proposition 13. In fact, reassess- ments increased assessed valuations by approximately 10 percent. Because the county share of the SSP program is based on increases in assessed valuation,the county obligation rose by 10 percent to $181.6 million. SB 154 appropriated only $167.6 million of this amount, leaving $14.1 million to be funded from Item 271 of the Budget Act of 1978. Second, General Fund costs for the SSP program in 1979-80 will de- crease because of the present funding formula. As noted above, the county share of the SSP program is not tied to changes in program costs, but rather to changes in assessed valuations. If assessed valuations increase by more than program costs (as they are expected to in 1979-80), the county share of the program grows accordingly, thereby reducing the state share. Components of Change Table 3 shows the components of change in the proposed General Fund expenditures for the SSP program. Table 3 Proposed General Fund Budget Adjustments in the SSP Program 1979-80 Cost A. Budget Base ......................................................................................... . B. Budget Adjustments 1. Six percent Cost\u00b7of\u00b7Living Adjustment for 1979-80 .............. $21,060,(j()() 2. Cost to the State of Passing on the Federal SSI Cost\u00b7of.Living Increase in 1979-80 ............................................................ :........... 45,325,800 3. Reduced Grant Costs due to Increases in Recipient Unearned Income .......................................................................... -60,182,700 4. Increased County Share of the SSP Program for 1978-79 Resulting from Reassessments .................................................... -14,061,100 5. Two\u00b7month Cost\u00b7of\u00b7Living Increase for 1978-79.................... -18,817,800 \u00b76. Decrease in Estimated Costs for the 1978-79 SSI Cost\u00b7of- Living Adjustment.......................................................................... -1,127,800 7. Other Adjustments ........................................................................ -884,858 Total, Budget Decrease ................................................................... . Proposed Total General Fund, Item 284 ..................................... . Federal Revenue Sharing Funds Total $734,844,300 $-28,687,858 $706,156,442 Budget Bill language in Item 432 specifies that $276.2 million shall be appropriated from the Federal Revenue Sharing Fund to the General Fund and transferred to Item 284 to partially fund the SSP program. Language in Item 284 specifies that the revenue sharing money is to be 776 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued Item 284 expended prior to the expenditure of the remaining $429,956,442. Cost-Of-Living Increase for SSI\/SSP Recipients We recommend that: 1. Current law be changed to establish December 1977 as the base month and year for calculating changes in the consumer price index when detennining the cost-oE-living increase for SSI\/SSP recipients. The com- parison month to be used annually thereafter would be December. 2. Current law be changed so that the percentage change in the con~ sumer price index from December 1977 to the comparison month of De- cember be applied against the total SSI\/SSP grant levels in effect in June 1979. 3. The Budget Bill be augmented by $21,639,400 to provide a 6.91 per- cent cost-oE-living increase for SSI\/SSP recipients effective July 1, 1979, in order to reflect the change in the consumer price index between Decem~ ber 1977 and December 1978. Background. Each month, recipients receive from the federal govern- ment a single monthly check comprised of the federal grant payment for SSI and the state grant payment for SSP. Both the SSI and the SSP. grants consist of a basic grant amount and a statutorily set cost-of-living factor which increases the basic grant annually. The cost-of-living increase on the federal SSI grant is based on the percentage change in the u.s. Consumer Price Index. The cost-of~living increase on the state SSP grant is based on the percentage change in the separate consumer price indices for Los Angeles and San Francisco. As a result of the actions taken by the Legislature and the Governor in enacting the Budget Act of 1978 and Chapter 292, Statutes of 1978 (SB 154), the cost-of-living increase on the SSP grant was provided for only two months (July and August) during 197&-79. The federal cost-of-living in- crease on the SSI grant is being provided for the entire fiscal year. These two measures had the effect of overriding existing law that required a 7.71 percent increase in SSI\/SSP grants-at least during 197&-79. We requested an opinion from the Legislative Coupsel concerning the status of thecost-of-living increase on the SSP grant provided for in exist- ing law, after the end of fiscal year 197&-79. Specifically, we asked whether the actions of the Governor and the Legislature had permanently elimi- nated the cost-of~living increase on the SSP grant for the ten-month period September 1978 through June 1979. The Legislative Counsel has concluded that: (1) the actions of the Gov- ernor and the Legislature merely suspended the cost-of-living adjustment on the SSP grant for 10 months in 197&-79 and (2) in the absence of intervening contrary legislation, the cost-of-living adjustment provided on July 1, 1979, would have to include the cost-of-living factor which would have been provided on July 1, 1978 (in addition to the factor required on July 1, 1979). The opinion of the Legislative Counsel states in part: \"Thus, in the absen,ce of intervening contrary legislation in 1979 which would take effect on or before July 1, 1979, under Sections 11453 and 12201 Item 284 HEALTH AND WELFARE I 777 (Welfare and Institutions Code), the amount of the respeptiveJuly 1, 1979, AFDC and SSIISSP state cost-of-living adjustments would include the percentage increases which would otherwise have been included in the respective inoperative adjustment of 1978.\" Under current law, the cost-of-living increase required on July 1, 1979, is based on the change in the consumer price index from December \u00b71976 to December 1978, and is estimated to be 15.16 percent. Table 4 shows the cost of providing (a) a 6 percent cost\"of-living adjust- ment as proposed by the Governor and (b) a 15.16 percent cost-of-living increase as required by existing law. Total costs for a 6 percent cost-of- living increase would be $148.5 million, of which $66.4 million would be from the General Fund. This consists of $21.1 million for theSSP cost-of- living and $45.3 million for passing on the federal cost-of-living increase .on the SSI grant. (Current law requires the state to pass-on federal in- creases on the SSI grant to SSIISSP recipients. Because theJederal govern- ment provides only enough funds to cover the cost-of-living increase for SSI recipients, there is a cost to the state for providing the SSI increase to the remaining SSP recipients who do not qualify for SSI because their income is too high.) Table 4 also shows that the cost of providing a 15.16 percent cost-of- living adjustment would be $365.3 million. Of this amount, the state' wo~ld contribute $283.2 million and the federal government wouldproVide $82.1 million. Table 4 Cost-of-Living Increases for SSI\/SSP Recipients in 197~ Under Various Assumptions (in millions) Adrilinistration s Current law proposed Program SSI\/SSP 15.16 percent 6 percent General Fund .................. ~ ........................................................................................ . SSP Cost\u00b7of-Living ............................................................................................... . Cost for passing on the federal cost-of-living increase on the SSl grant Federal Funds: Cost to the federal government for prOviding SSl cost-of-living increase Total, SSl\/SSP ............................................................... : ....... , ............................... . increase increase $283.2 (237.9). (45.3) 82.1 $365.3 $66.4 (21.1) (45.3) 82.1 $148.5 Problems With the Cost-oE-Living Formula Used Under Existing Law. We have some concerns with the provisions of current law regarding cost-of-living adjustments for SSIISSP recipients. First, because of the formula in the Welfare and Institutions Code, the total SSIISSP grant and the SSP portion increase annually at a rate greater than the rate of in- crease in the consumer price index. This is illustrated iIi Table 5, which compares the change in the SSIISSP grant for an aged or disabled person with the change in the consumer price index for Los Angeles and San Francisco. As the table indicates, if the full cost-of-living increase had been provided in 1978-79, the total SSIISSP grant would have grown 8.8 percent l;lnd the SSP grant would have risen 12.2 percent, even though the con- sumer price index rose only 7.7 percent between December 1976 and 118 \/ HEALTH AND WELFARE Item 284 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED. BLIND. AND DISABLED-Continued December 1977 (the period used to determine the cost-of-living adjust- ment for 1978-79). Table 5 also shows that in 1977-78, the SSIISSP grant increased 7.2 percent, the SSP grant grew 9.2 percent, but the consumer price index rose 5.3 percent between December 1975 and December 1976. Fiscal Year Table 5 SSI\/SSP Grant for an Aged or Disabled Individual and Change in the Consumer Price Index 1977-78 and 1978-79 (Dollar amounts shown for 1978-79 are based on the assumption that the cost-of\u00b7living increase was granted) Total' SSI\/SSP Grant SSI Grant SSP Grant Percent Percent AmoUI1t Change Amount Change Amount Percent Change Change in Consumer Price Index Percent Period Change 197~79 ................................. . $322.00 8.8% $189.40 6.5% $132.60 12.2% 12\u00b7771 7.7% 1977-78 ................................. . 296.00 7.2 177.80 6.0 118.20 9.2 12-76 12-761 12-75 5.3 Second, the distortion between the change in the consumer price index and the increase in the SSI\/SSP grant results in an inequity between the cost-of-living adjustment provided for AFDC and SSI\/SSP recipients. Ta- ble 6 compares the change in the grant level for a one-person AFDC recipient with that for an aged or disabled SSI\/SSP recipient. It shows that if the full cost-of-living increase had been provided in 1978-79, the total SSI\/SSP grant would have increased 8.8 percent, while the grant level for an AFDC recipient would have risen 7.4 percent, or an increase approxi- mately equal to the percentage change in the consumer price index. For 1977-78, the SSIISSP grant rose 7.2 percent, the AFDC grant increased 5.4 percent and the consumer price index change was 5.3 percent. Fiscal Year Table 6 Gr.ant Levels for an Aged or Disabled Individual on SSI\/SSP and One Person on AFDC 1977-78 and 1978-79 (Dollar amounts shown for 1978-79 are based on the assumption that the cost-of\u00b7living increase was granted) Aged or DisabJed One Person SSI\/SSP Recipient AFDC Recipient Change in Consumer Pnee Index Percent Grant Change Grant Percent Change Percent Change 197~79 .................................... $322.00 8.8% $188.00 7.4% Period 12-77\/ 12-76 12-761 12-75 7.7% 1977-78 .................................... 296.00 7.2 175.00 5.4 5.3 In view of the above, we recommend that current law be changed to establish December 1977 as the new base month and year for computing Item 284 HEALTH AND WELFARE \/ 779 changes in the consumer price index when calculating the cost-of-living increase for SSI\/SSP recipients_ The comparison month to beused annual- ly thereafter should be December. We further recommend that current law\u00b7\u00b7be amended so that\u00b7 the percentage change in the consumer price ind~x be applied against the total SSI\/ SSP grant in order that the grant increase will more closely reflect the amount required to offset changes in the cost-of-living. How Much oEan Increase,Should be Granted? We have several con- cerns with the Governor's proposed 6. percent cost-of-living increase. First, the intent of a cost-of-living adjustment is to. help maintain the purchasing power of grants to welfare recipients as the costs of food, shelter, transportation and other necessities of life rise. As far as we can determine, the Governor's proposed cost-of-living increase is an arbitrary percentage adjustment, and does not reflect a direct relationship between current grant levels\u00b7 and a change in any economic index that we can identify. Second, itis our understanding that the Governor's proposal is predicat- ed upon a change in current law. Specifically, it is unclear whether the Governor proposes to change permanently the statutory requirement for a cost-of-living increased based on the consumer price index, or whether he proposes to simply suspend the requirements of current law for a second year (as SB154 suspended these requireme:q.ts for 1978-:-79) . .If he is proposing merely to suspend current statutory authority for another year, then ~xisting law would require SSI\/SSP recipients to be given cost- of-living adjustments covering a three-year period, with a resulting heavy impact on the 1980-81 budget. . We also have some problems reconciling the provisions of current law with the actions taken by the Governor and Legislature in enaCting the Budget Act of 1978andSB 154. On the one hand, their intent may have been to defer the cost-of-living increase on the SS:p grant until 1979-80. This would produce a one-time savings but would not permanently reduce the level of government expenditures under the program. On the other hand, the Governor's and Legislature's purpose in denying the cost-of- living adjustment may have been to permanently reduce program costs, thereby providing increased monies for use in assisting local government on a permanent basis. This would suggest that the cost-of-living increase not be restored in 1979-80. We have no basis for determining the intent 6f the Governor and Legis- lature in denying the 1978-:-79 cost-of-living adjustment called for under existing laW. We believe, however, that SSI\/SSP recipients should not suffer a further reduction in the purchasing power of their benefit checks in 1979-80,llnd therefore we recommend that these recipients be given a 6.91 percent cost-of-living adjustment effective July 1, 1979 (rather than 6 percent increase called for in the budget). Any increase above the 6.91 percent cost-of-living would result in an increase in the real income of program beneficiaries when compared to the grant levels approved by the Governor and Legislature for 1978-:-79. We have no basis for recommend- ing suchan increa~e. In conclusion thEm, we recommend that the total SSI \/ SSP grant levels 780 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED. BLIND. AND DISABLED-Continued Item 284 in effect in June 1979 be established in law as the grant levels against which changes in the consumer price index are annually applied. If legislation is adopted which incorporates our recommendations, an aged or disabled individual who received .$307.60 inthe current year would be entitled to $328.86 in 1979-80. This same person would receive $326.06 under the governor's proposal and $353.00 under current law. Table 7 shows that the General Fund cost for a 6.91 percent cost-of- living increase in 1979-80 would be $88.0 million. Because the Governor's Budget contains only $66.4 million for a 6 percent cost-of-living increase, we recommend that the budget be augmented by $21.6 million. Table 7 Cost-of-Living Increases for SSI\/SSP Recipients in 1979-80 Under Various Assumptions Program SSI\/SSP General Fund .................................................................. .. SSP Cost-of-Living ....................................................... . Cost for Passing On the Federal Cost-of-Living In- crease on the SSI Grant ........................................ .. Federal Funds: Cost to the Federal Goverrunent for Providing SSI Cost-of-Living Increase ........................................... . Total, SSI\/SSP .................................... : ...................... . Related Programs 6.91 Percent Increase $88,025,800 (42,700,000) (45,325,800) $82,114,400 $170,140,200 Administration's Proposed 6 Percent Increase $66,386,400 (21,060,600) ( 45,325,800) $82,114,400 $148,500,800 Difference +$21,639,400 ( +21,639,4(0) +$21,639,400 Current law requires that adjustments be made to maximum aid pay- ments for severely impaired and nonseverely impaired recipients of in- home supportive services who are at the existing maximum and who have additional unmet needs. This adjustment is based on the formula for cal- culating cost-of-living for SSIISSP recipients. IHSS recipients, however, received an increase in maximum aid payments for fiscal year 1978-79, even though SSIISSP recipients did not receive the full cost-of-living ad- justmeIlt called for under existing law. As a result, failure to provide a catch-upcost-of-living increase to SSIISSP recipients for 1978-79 would not affect in-home supportive services recipients. Because the cost-of-living adjustment for a recipient under the Aid to the Potentially Self-Supporting Blind program is determined using the same formula used for SSIISSP recipients, a revision of the current cost-of- livingformula will affect the APSB recipients. This issue is discussed under Item 285. Item 285 HEALTH AND WELFARE \/ 781 Department of Social Services SPECIAL ADULT PROGRAMS Item 285 from the General Fund Budget p .. 772 Requested 1979-80 ......................................................................... . Estimated 1978-79 ........................................................................... . Actual 1977-78 .................................................................................. . Requested increase $531,104 (9.8 percent) Total recommended increase ..................................................... . 1979-80 FUNDING BY ITEM AND SOURCE Item 285 (a) 285 (b) 285 (c) 285 (d) 285 (e) 285(f) Description Special Circumstances Special Benefits . Aid to the Potentially Self-Supporting Blind Emergency Payments Repatriated Americans Repatriated Americans Total Fund General General General General General Federal SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS $5,968,700 5,437,596 5,305,2'04 $13,600 Amount $2,710,200 115,900 1,582,600 1,560,000 35,000 -35,000 $5,968,700 Analysis page ,1. Aid to the Blind Cost-oi-Living. Increase Item 285(c) by $13,600. Recommend augmentation to provide a 6.91 per- cent cost-of-living increase in order to conform to the rec- ommendation in Item 284. 782 GENERAL PROGRAM STATEMENT Chapter 1216, Statutes of 1973 (AB 134), established a program to pro- vide for the emergency and special needs of SSI\/SSP recipients. The program's special allowances, paid entirely from the General Fund, are administered by county welfare departments. ANALYSIS AND RECOMMENDATIONS The budget proposes a General Fund appropriation of $5,968,700 for Special Adult Programs administered by the Department of Social Serv- ices. This is an increase of $531,104, or 9.8 percent, over estimated current year expenditures. Special Circumstances (Item 285(a)) The special circumstances program provides adult recipients with spe- cial assistance in times of emergency. Payments can be made for replace- ment of furniture, equipment or clothing which is damaged or destroyed by a catastrophe. Payments are also made for moving expenses, housing repairs and emergency rent. The budget proposes $2,710,200 for fiscal year 1979--80 which is an in- crease of $590,800, or 27.9 percent, over the estimated current year ex- 782 I HEALTH AND WELFARE Item 285 ,SPECIAL ADULT PROGRAMS-Continued penditure. The primary reason for this increase is caseload growth. Special Benefits (Item 285(b)) The special benefits program is for blind SSP recipients who have guide dogs. This program provides a special monthly allowance to cover the cost of dog food. The budget proposes $115,900 for fiscal year 1979-80 which is an increase of $5,504, or 5.0 percent, over the current year. The primary reason for this increase is an increase in caseload. Aid to Potentially Self-Supporting Blind (Item 285 (c) ) We recommend an augmentation of $13,600 to provide a 6.91 percent cost-oE-living increase in order to conform to the recommendation in Item 284.' ' The Aid to Potentially Self-Supporting Blind (APSB) program provides payments to blind recipients who earn more income than is allowed under the basic SSI\/ SSP program. The purpose of the program is to provide an incentive to these individuals to become economically self-supporting. The budget proposes $1,582,600 for fiscal year 1979-80, which is an increase of $347,700, or 28.2 percent, over the estimated current year expenditure. The reasons for this increase are a proposed 6 percent cost-of-living adjust- ment and increased caseload. , Section 13100 (a) of the Welfare and Institutions Code requires that the' grant for a recipient under the Aid to the Potentially Self-Supporting Blind Program be adjusted annually. This adjustment is based on the formula for calculating the cost-of-living increase for SSI\/SSP recipients. The Governor's Budget contains a 6 percent cost-of-liviIig adjustment for APSB recipients. We recommended in 'our analysis of Item 284 that the current formula for calculating the SSI \/ SSP cost of living be revised to provide a 6.91 percent increase (instead of a 15.16 percent increase, as existing law requires) in 1979-80. If that recommendation is adopted, it will affect the cost~of-living adjustment for APSB recipients. We therefore recommerid an augmentation of $13,600 to provide a 6.91 percent cost-of-living adjustment for the APSB program, in order to be consistent with the recommendation in Item 284. Emergency Payments (Uncollectible Loans) (Item 285(d) ) Chapter 1216, Statutes of 1973, mandates that counties provide emer- gency loans to aged, blind and disabled recipients whose regular monthly check from the federalSocial Security Administration has been lost, stolen or delayed. The budget proposes $1,560,000 for fiscal year 1979-80 which is $412,900, or 20.9 percent, below the estimated current year expendi- tures. This ,estimated decrease is due to Chapter 724, Statutes of 1978 (SB 1631), which allows the department to adopt regulations basing eligibility for re~eipt of a loan on the repayment of previous loans. Item 286 HEALTH AND WELFARE \/ 783 Temporary Assistance for Repatriated Americans (Item 285(eH The federal repatriate program is designed to provide temporary help to needy U.S. citizens returning to the United States from foreign coun- tries because of destitution, physical or mental illness or war. Recipients can be provided temporary assistance to meet their immediate needs and continuing assistance for 12 months or less. County welfare departments administer the program based on federal and state guidelines. The pro- gram is 100 percent federally funded. Expenditures in the current year are estimated at $35,000 and the same amount is proposed for 1979-80. Department of Social Services HARRINGTON VS. OBLEDO COURT CASE Item 286 from the General Fund\u00b7 Budget p. 773 Requested 1979-80 ......................................................................... . Estimated 1978-79 ....... \u00b7 ................................................. ; .................. . Total recommended reduction ................................................... . SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS $5,798,600 N\/A $5,798,600 Analysis page 1. Harrington vs. Obledo. Reduce Item 286 by $5,798,600. 784 Recommend deletion because final court decree has not been issued. GENERAL PROGRAM STATEMENT This item provides\u00b7 $5,798,600 from the General Fund to pay the pro- spective costs of the California Court of Appeals decision in the Harring- ton vs. Obledo court case. ANALYSI!) AND RECOMMEN,DATIONS Prior to January 1974, adult welfare recipients in California were pro- vided aid through the following programs: Old-Age Assistance, Aid to the Blind, and Aid to the Totally Disabled. The federal government helped finance these adult welfare programs through grantS-in-aid to California, and the programs were administered by the county welfare departnients. Beginning January 1,1974, these programs were replaced by the SSI\/SSP program through enactment of PL 92-603 (HR 1) and Chapter 1216, Stat- utes of 1973 (AB 134). The Harrington vs. Obledo case concerns two welfare reCipients who received aid under the adult welfare program in effect in California prior to January 1, 1974, but who were not eligible to receive aid under the SSI\/SSP program. At the time the SSI\/SSP program was implemented, Ms. Harrington was a recipient under the Aid to the Totally Disabled program. However, she was dropped from the SSI\/SSP program because she did not meet the new federal definition of \"disabled.\" Similarly, Ms. Cruz was a recipient under the Old Age Assistance Program but did not meet the new federal eligibility requirement for aliens established for the SSI\/ SSP pro- gram. 784 \/. HEALTH AND WELFARE Item 286 HARRINGTON VS. OBLEDO COURT CASE-Continued . Both former welfare recipients brought suit against the state after being dropped from the federal SSI program, claiming that they were entitled to receive SSP benefits at state expense. At issue was whether the Legisla- ture had intended to establish a separate state-administered and state- financed adult welfare program for former recipients who were ineligible for SSI. The state argued that the Legislature had not intended to provide for such persons under SSP. The Los Angeles Superior Court ruled in favor of the state. This decision was reversed by the Court of Appeals. The Court of Appeals concluded that recipients who are ineligible for SSI benefits under the Social Security Act are eligible for SSP benefits as a result oflanguage contained in Section 12151 of the Welfare and Institutions Code. Section 12151 identifies eligi- bility requirements for SSP recipients and makes reference to PL 93-66. The crux of the issue, according to the court, is whether the state intend- ed to fix eligibility based on standards in effect when PL 93-66 was enact- ed, rather than based on the standards established by later federal amendments contained in PL 93-233. Under standards in effect when PL 93~66 was enacted, a recipient was eligible for the new SSI\/ SSP program if he had received aid in December 1973. Use of this standard would allow Harrington to qualify for the federal program. However, PL 93-233 amended PL 93-66 to require that a recipient must have received aid in December 1973 and for at least one month prior to July 1973 in order to be eligible. Use of this standard would exclude Harrington from federal eligibility because she did not start to receive aid until October 1973. The court concluded that originally the Legislature had enacted a state law with eligibility requirements that were consistent with the federal law. However, the court found that, when the federal law was amended by PL 93-233, the Legislature failed to change state law to fully conform to federal law, thus leaving a class of persons, including Ms. Harrington, eligible to receive state benefits. In the case of Ms. Cruz, the court ruled that she was entitled to con- tinued state welfare payments, even though she no longer met the federal requirements, and that her alien status should be determined by require- ments in state, rather than federal, law. Section 11104 of the Welfare and Institutions Code, which defines eligible alien status for AFDC recipients, requires that an alien's certification of legal status be verified by the U.S. Immigration and Naturalization Service and that aid continue pending such verification. Because such verification was never sought by the state, the court has ruled that Ms. Cruz is entitled to the payment of benefits. The Court of Appeals has remanded the case to the Los Angeles Superi- or Court to prepare a final judgment. Although the state appealed the case to the California Supreme Court, it has been denied a petition for hearing. Governor's Proposal We recommend deletion of$5, 798,600 in Item 286 for costs related to the Harrington vs. Obledo case. The Budget Bill proposes to appropriate $5,798,600 from the General Item 286 HEALTH AND WELFARE \/ 785 Fund to pay the prospective costs of the Court of Appeals' decision. This includes funds for the following pmposes: (a) $5,410,100 for retroactive grant costs, (b) $360,000 for prospective grant costs and (c) $28,500 for implementation costs. In addition, Item 286 contains language which permits funds to be transferred to Item 282, Department of Social Services support, or Item 288, County Administratiori, since it is not clear whether the court will require the state or the counties to administer a separate new program for SSP recipients. Unresolved Issues\u00b7 During hearings on the 1978-79 budget, the Department of Finance submitted a budget amendment letter proposing funds to pay the partial year costs related to the Harrington court case. At that time we pointed out several unresolved issues in connection with this case which suggested that approval of the request was premature. The Legislature did not include funds in the Budget Act for these costs. Many of the unresolved issues which we identified last year have not yet been resolved. Specifically: (1) we do not know what specific action the Superior Court will require of the department in its final decree, (2) we do not know whether the state will be required to make retroactive pay- ments as well as prospective payments to recipients, (3). we do not know the extent to which the state and\/ or counties will be required by the court to undertake extensive search activities to find and notify eligible recipi- ents, (4) we do not know whether the state or counties will be required to administer a separate program for this class of recipients, and (5) the Legislature has not had an opportunity to fully review the court's decision or final judgment, or to consider the policy question of establishing a separate SSP program for recipients who are eligible under old federal state welfare programs but who are not eligible for the SSI program. Since the court's decision is based on its interpretation of legislative 'intent, it is appropriate for the Legislature to review thatinterpretation. AB 3464, which would have amended Section 12151 of the Welfare and Institutions Code to conform state eligibility standards with existing fed- eral eligibility requirements for SSI, was introduced in March 1978 and was referred to the Assembly Human Resources Committee. This bill would have eliminated the necessity for prospective payments to recipients such as Ms. Harrington and Ms. Cruz. However, the bill was not acted on by the committee. Because there has been no final court decree in this case and because the Legislature has not had an opportunity to fully review the policy question involved, we recommend deletion of the proposed $5,798,600. 28-78673 ----------------.~----.-------~-.. ---.---- 786 \/ HEALTH AND WELFARE Department of Social Services SOCIAL SERVICE PROGRAMS Item 287 from the General Fund Item 287 Budget p. 777 Requested 1979-80 ............................... , .......................................... $177,143,755 Estimated 197~79............................................................................ 132,113,865 Actual 1977-78 ................ ;................................................................. N fA Requested increase $45,029,890 (34.1 percent) Total recommended reduction .................................................... $67,467,029 1979-80 FUNDIIIIG BY.ITEM AND SOURCE Item Description W Social SerVices Program Chapter 892, Statutes of 1977 Budget Act of 1978, Item 274 Welfare and Institutions Code, Section 16151 Total Fund \\ General General General General SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. In-Home Supportiv.e Services Program. Amount $173,118,755 125,000 1,500,000 2,400,000 $177,143,755 Analysis page (a) Reduce by $33,927,057. Recommend General Fund 795 reduction of $33,927,057 for increased program costs. (b) Recommend that Budget Act language be added to 797 make counties liable for the expenditure offunds which \u00b7exceed the budgeted amount, and to require the De- partment of Social Services to implement a plan for controlling program costs. (c) Reduce by $14 million. Recommend General Fund re- 747 duction of $14 million by eliminating funds for proposed regulations. 2. Other County Social Services Program. (a) Recommend that legislation be enacted to identify and 799 define county-administered social services more clearly and to limit the number of services which counties are required to provide. (b) Reduce by $14,339,972. Recommend reduction by 801 transferring $14,339,972 in federal funds from other county social services to in-home supportive services and reducing General Fund support for in-home sup- portive services by an equal amount. (c) Reduce by $5 million. Recommend a General Fund 801 reduction of $5 million for an augmentation for child protective services in accordance with legislative in- tent. Item 287 HEALTH AND WELFARE \/ 787 3. Title XX Training. Recommend a reduction of $16,863,300 805 in federal and county funds and reimqursements by elimi- nating funds for Title XX training programs. 4 .. Demonstration Projects. Reduce by $200,000. Recom- 805 mend a General Fund reduction of $200,000 by eliminating funds for unspecified demonstration projects. 5. Title XX Funding Transfer. Recommend that Budget 807 Items 271, 275, and 287 be revised so that the proposed\u00b7 allocation of federal Title XX funds to the Department of Developmental Services and the Department of Mental Health will be replaced by General Fund support. GENERAL PROGRAM STATEMENT The Department of Social Services is responsible for administering a number of social service programs. These programs differ in terms of services provided, clients served, source of funding, and organizational . point of delivery. The Governor's Budget has grouped these programs into Adult Services and Family and Children's Services. We have identified the major components of these programs below. Title XX Social Services The department is designated the single state agency for purposes ~f receiving federal social service funds from Title XX of the Social Se~\\lrity Act. Federal regulations require that at least three services be provided for SSI\/SSP recipients and that at least one service be directed to achiev- ing each of five federal program goals including self-support; self-suffi- ciency, protection of children and adults, deinstitutionalization and institutionalization where necessary. The only specific service mandated by federal law is family planning for AFDC recipients. . County Administered Services. The majority of Title XX social serv- ices are administered by county welfare departments. State law and regu- lations require cOllnties to provide ten specific services and permit counties to provide any of 14 additional services. One of the mandated services is provided through the In-Home Supportive Services (IHSS) program. The remaining services are provided through the Other County Social Service (OCSS) program. ... Of the ten mandated services, fou~ are requited to be available to all persons: information and referral, protective services for children, protec- tive services for adults, and court-ordered foster care.\u00b7 Other services are provided to individuals who receive SSI\/ SSP or AFDC, or who are eligible by virtue of theit low income. Federal regulations require that 50 percent of Title XX funds be used to provide services to cash grant recipients. In addition, the state requires that specific services be provided to individu- als whose annual gross income does not exceed 80 percent of California's adjusted median income (or $15,145 in 1978). State Administered Services. The Governor's Budget proposes that Title XX social services also be provided by the Department of Health . Services (family planning) , the Department of Mental Health (continuing care services), the Department of Developmental Services (continuing care services and regional centers), and the Department of Education 788 \/ HEALTH AND WELFARE SOCIAL SERVICE PROGRAMS-Continued (child development). Item 287 Title XX Program Funding. In 1972, Congress enacted legislation es- tablishing a cap of $2.5 billion on federal Title XX funds, with the amount to be distributed to the states on the basis of population. California's share for fiscal year 1979-80 is $250,629,981, which includes a $2.1 million in- crease over last year's allocation to reflect a change in California's popula- tion. An additional $33,154,900 is available in the budget year as a result of PL 95-600 (HR 13511) for a total federal Title XX allocation of $283,784,- 881. Federal law requires that $263,784,881 of available Title XX funds be matched on the basis of 75 percent federal funds and 25 percent state and county funds. As a result of the federal funding cap, California is now providing support for social services which far exceeds the 25 percent required match. For fiscal year 1979-80, state and county expenditures for social services will be $119.5 million above the amount required. . In addition, Section 15151.5 of the Welfare and Institutions Code re- quires that at least 66 percent of federal Title XX funds be allocated to the counties. The budget proposes that $209,625,400, or 73.9 percent of avail- able funds be allocated to counties in 1979-80. The remaining federal funds are allocated to state programs. Of the $209,625,400 allocated to the counties, $77,215,300 is for in-home supportive services and $132,410,100 is for other county social services. Section 12306 of the Welfare and Institu- tions Code requires the state to provide the 25 percent match for federal funds used for in-home supportive services. Counties are required to pro- vide the 25 percent match for other county social services although the state has provided an additional amount of General Fund support for these services in prior fiscal years. Other Social Service Activities The department is also responsible for administering the following so- cial service programs: 1. Child welfare services which are funded under Title IV-B of the Social Security Act. The state receives an annual allocation of $3.4 million in federal Title IV-B funds for which the counties are required to provide a 25 percent match. These funds are used to supplement protective serv- ices for children. 2. Maternity care services which are funded from a continuing annual General Fund appropriation of $2.4 million made by.section 16151 of the Welfare and Institutions Code. These funds are used to reimburse non- profit licensed maternity homes for the cost of care and services provided to unmarried pregnant women. 3. WIN social services which are funded through a combination of fed- eral, state and county funds. 4. Services to Indo-Chinese refugees which are 100 percent federally funded through September 30,1979. 5. Adoption services which are 100 percent state funded. 6. Community care licensing services provided by counties which are 100 percent state funded. Item 287 HEALTH AND WELFARE \/ 789 Impact of Proposition 13 At this time, it is unclear what impact Proposition 13 has had on social services. One problem is that it is difficult to separate the effect of Proposi- tion 13 reductions on local revenues from the effect of legislative reduc- tions on social service funding for fiscal year 1978-79. The action taken by the Legislature was further compounded by a related change in the alloca- tion of remaining funds to counties. A second problem is that Proposition 13 not only had an impact on available local revenues but also may have changed local administrator's perceptions about how they should spend those revenues. For example, it appears that some county boards of supervisors reduced their social service spending primarily because they interpreted Proposition 13 as a voter demand to reduce welfare services and not because of an actual reduction in available funds. For these reasons, any reduction in county social service expenditures may be explained by several factors other than Proposition 13 revenue reductions. There have been a number of surveys made by various organizations to identify the current situation in county social service programs. According to a 49-county survey conducted by the County Welfare Directors Associa- tion during October 1978, counties reported a total reduction of 560 social services positions during fiscal year 1978-79 below the prior year level. These reductions were made primarily by eliminating vacant positions and to a lesser extent through layoffs and demotions. It\u00b7 is difficult to identify the extent to which these positions were vacant as a result of a hiring freeze or for other reasons. In addition, it is difficult to identify the impact of the elimination of positions on the level and quality of services provided. The department also conducted a survey during November 1978 of 11 large county welfare departments serving areas containing 85 percent of the total population. All 11 counties indicated they would continue to provide a county match for available federal funds at the rate of 25 percent or more. In addition, all 11 counties reported that they would be willing to provide a county match for any additional federal or General Fund support for other county social services should it be made available. However, the survey was not designed to identify if counties had reduced any existing overmatch. ANALYSIS AND RECOMMENDATIONS The budget proposes $177,143,755 from the General Fund for social service programs in 1979-80. The total includes $173,118,755 from this item, $2,400,000 for maternity care services appropriated by Section 16151 of the Welfare and Institutions Code, $125,000 for centers for victims of domestic violence appropriated by Chapter 892, Statutes of 1977, and $1,500,000 for multipurpose senior service centers carried over from the Budget Act o\u00a31978. The proposed General Fund amount is $45,029,890, or 34.1 percent, above estimated current year expenditures. Table 1 identi- fies the major components of this cost increase. 79C)\/ HEALTH AND WELFARE SOCIAL SERVICE PROGRAMS-Continued Table '1 Proposed General Fund Budget Adjustments for Social Service Programs Fiscal Year 1979-80 A. Budget Base ....................................................................................... . B. Budget Adjustments 1. In-Horne Supportive Services 'a. ,Caseload groWth ..................................................................... . b. ,Provider benefits ................................................................... . c. Minimum wage increase .......... : ............................................ . d; Impact of Chapter 1362, Statutes of 1978 ......................... . e.Statutory cost-of-Iiving adjustment for grants at max- imum level ....................................................................... . f. Proposed regulations ............................................................... . g. Title XX funding consolidation ......................................... ... h. Transfer from demonstration projects ............................. . ; i.Replacement of one:tirne federal funds for community care licensing ................................................................... . 2. Other County Social Services a. Augmentation for child protective services ..................... . 3. Demonstration Projects a. Carry over from Budget Act of 1978 ................................. . b. Termination of HR 3387 projects and transfer to IHSS c. Continuation of Family Protection Act Project ............. . d. Termination of other project funding ............................... . 4. Adoptions a. Decrease in placements ....................................................... . b. Six percent cost of living ..................................................... . 5. Community Care Licensing a. Six percent cost of living ..................................................... . b. 'Technical adjustment ........................................................... . 6. WIN,Child Care a. Transfer of funds previously budgeted in separate item Total General Fund Increases ....................................................... . Proposed Total General Fund from Item 2frt, Section 16151 of the W &1 Code, Chapter 892, Statutes of 1977, and carry over from Budget Act of 1978 ......................................................................... . Aq;usbnent $17,801,757 -2,086,500 13,478,200 182,000 2,647,100 9,056,400 -5,634,808 3,573,551 1,527,000 5,000,000 1,500,000 -2,073,551 -317,000 -284,814 -1,322,800 868,800 845,100 -'8,900 278,355 Item 287 Total $132,113,865 $40;544,700 $5,000,000 -:-$1,175,365 -$454,000 $836,200 $278,355 $45,029,890 $177,143,755 Total expenditures for programs supported in Item 287 by state, federal and county funds as well as by reimbursements are projected to be $567.- 075,289 for 1979~0. This is an increase of $65,523,963, or 13.1 percen.t, twer totalestima.ted current year expenditures. Table 2 identifies total proposed expenditures for social service programs for the budget year. .' Item 287 HEALTH AND WELFARE \/ 791 Table z Total Proposed Expenditures for Social Service Programs Fiscal Year 1979-80 Program A. Title XX S~ial Services 1. In-Home Supportive Services ...................... .. 2. Other County Social Services ...................... .. a. Adult Services ...... .. b. Family and Chil- dren's Services ...... 3. Child Development (Department of Education) .......... 4. Family Planning (De- Partment . of Health Services) 5. Regional Centers and Continuing Care Services (De- partment of De- velopmental Ser' vIces) ........ ; .......... . 6. Continuing Care Services (De- partment of Mental Health) .. B. Title XX Training 1. State Administered .... 2. County Administered C. Other Social Services 1. Demonstration Proj- ects ...................... .. 2. Adoptions .................. .. 3. Community Care Li- General Fund, Ceneral Fimd in Otber. in Item 287 Items $141,524,900 5,000,000 (5,000,000) 3,158,000 12,389,900 $10,671,314 444,444 3,212,200 2,836,313 censing.................. 12,392,600 4. Services to Indo- Federal FundS in Item 287 $77,215,300 132,410,100 (23,568,900) (108,841,200) 52,013,942 4,000,000 9,636,600 8,508,939 9,997,500 2,650,000 430,075 chinese Refugees 7,182,400 5. WIN Child Care ........ 278,355 3,711,405 6. WIN Separate Ad- ministrative Unit 11,146,643 7. Child Welfare Serv- ices (Title IV-B) 3,400,000 8. Maternity Care ..........2,400,000 Total.......................... $177,143;755 $17,164;271 $322,302,904 Availability of Additional Federal Funds Beimbur.se- County funds menls $43,724,800 (7,444,400) (36,280,400) 883,300 134,023 1,238,516 $3,332,500 17,f!RT Total $218,740,200 181,134,900 (31,013,300) (150,121,600) 62,685,256 4,444,444 12,848,800 11,345,252 13,330,000 3;533,300 3,605,962 12,389,900 12,392,600 7;182,400 4,1~,783 12,385,159 .1,133,333 4,533,333 2,400,~ $47,iI3,972 $3,350,387 $5&1,075~ PL 95-600 (HR 13511) increased the $2_5 billion ceiling on federal Title XXfund~ available to the states for federal fiscal year 1979 by $400 million_ The federal ceiling will reverUo the $2.5 billion levelbeginning in fed~tal fiscal year 1980 unless additional fedetallegisliltionis enacted. Galifornia's share of this increase is $40 million. Of this amount, $20 million is a con- tinuation of federal funds made available during fiscal years 1977-78 and 792 \/ HEALTH AND WELFARE Item 287 SOCIAL SERVICE PROGRAMS-Continued 1978-79 for federal interagency day care requirements as a result of PL 95-171 (HR 3387) and PL 94-401 (HR 12455). A discussion of the proposed use of these funds is found in Item 328, Child Development Programs. An additional $20 million is available for Title XX social services. Table 3 identifies how the budget proposes to allocate the $40 million in the current and budget years. We anticipate that the Department of Finance will submit a letter under Section 28 of the 1978 Budget Act notifying the Legislature of its intent to approve the expenditure of those funds identified for the current year. A discussion of the proposed use of these funds is included in our analysis of the individual programs. Program Table 3 Proposed Use of One-Time Federal Funds Made Available by PL 95-600 (HR 13511) for Social. Service Programs I. Fiscal Year 1978-79 Other County Social Services-to replace General Fimd support pursuant to Budget Act language ................................... : ................................................................ .. II. Fiscal Year 1979-80 A. Other County Social Services 1. To continue 1978-79 funding .................................................................................. .. 2. To provide portion of cost of living ...................................................................... .. B. Child Development ......................................................................................................... . Total .............................................................................................................................. .. Amount $6,845,100 6,845,100 6,309,800 20,000,000 $40,000,000 In addition, California's allocation of federal funds received under Title XX of the Social Security Act has been increased as a result of an adjust- ment for California's population growth. This represents an on-going in- crease of $2,130,000 in California's annual allocation. The budget indicates that these funds will be used for in-home supportive services in the cur- rent year and for in-home supportive services and other county social services in the budget year. We anticipate receiving a Section 28 letter from the Department of Finance for the proposed current year expendi- ture of these funds. Departmental Progress in Addressing Social Service Issues Last Years Budget Issues. Last year during budget hearings, there was substantial legislative discussion regarding the lack of adequate program information to use as a basis for assessing appropriate funding levels for county-administered Title XX social services. As a result, our office recom- mended that $750,000 in one~time federal funds be allocated to the depart- ment for the purpose of establishing a planning group and developing a data base for other county social services. The Department of Finance opposed our recommendation, claiming that it was unnecessary. The de- . partment stated that the Department of Social Services already had ade- quate resources and staff to perform these functions, and in fact had established a\u00b7 number of departmental subcommittees to address these issues. Subsequent to that time, these subcommittees were discontinued. Item 287 HEALTH AND WELFARE \/ 793 Administration s Lack of Response. Because of the statements made by the Department of Finance during budget hearings, the Legislature added supplemental language requesting that the Department of Finance identify those existing positions and resources to be utilized by the Depart- ment of Social Services in defining and standardizing social services and developing a data base. Supplemental language also requested that the Department of Social Services report to the Legislature by December 1, 1978 on its progress in developing program goals and objectives, service standards, procedures for assessing service needs and priorities, and meas- ures of service impact. To date, neither of these reports has been submit- ted to the Legislature. On September 26, 1978, the Governor approved Chapter 1235, Statutes of 1978, the Social Services Planning Act. This act is intended to establish a comprehensive planning and allocation process for social services during a three-year period. The first cycle is to begin July 1, 1979. In the depart- ment's assessment of issues relating to the implementation of Chapter 1235, it reaffirmed that there existed (a) no uniform approach or structure for social service programs, (b) no uniform criteria for determining needs, assessing performance, or allocating resources, (c) ineffective public in- volvement in the planning process, (d) inadequate management informa- tion, (e) fragmented management control, (f) lack of departmental leadership, and (g) unclear priorities. Because we had failed to receive departmental responses to the supple- mental language requests, we sent a letter to the Director of Social Serv- ices on December 14, 1978. In that letter, we requested that the department identify what progress it had made in these problem areas during the first six months of fiscal year 1975-79 and what plans it had in the months ahead. To date, we have not received a written response from the department. Based 'on our discussions with departmental staff, we have identified that the department intends to (a) establish an eight-member departmen- tal task force to identify program goals and objectives, (b) develop a claims form which would require counties to report service costs by pro- gram, (c) develop a cost comparison report for in-home supportive serv- ices, and (d) develop a characteristics survey ofrecipients of other county, social services. In addition, the department has previously indicated that it will develop a master plan for a three-year phase-in of the Social Services Planning Act during January 1979. In response to a supplemental language request, the department also has stated that it will implement new report- ing forms for the in-home supportive services program by August 15, 1979, and that it established a departmental social services information system task force as of December 1978. This task force is to analyze data needs, assess current reporting systems, and present its recommendations to the department by July 1979. Conhnuing Budget Problems. We anticipate that significant program accomplishments may be achieved by these activities if sustained. At the same time, it is clear that the department's approach in dealing with the major administrative and program issues in social services during the first 794 \/ HEALTH AND WELFARE' Item 287 SOCIAL SERVICE PROGRAMS-Continued six months of fiscal year 1978-79 has been unnecessarily delayed and frag- mented. Part of this problem is due to the fact. that the departmental diviSion\u00b7 responsible for administering the social service program was un- der the management of an acting director for most of that time. A perma- nent deputy director was named during December 1978. Nonetheless, the Legislature is faced with the same lack of adequate information which was evident durmg last year's budget hearings. ' ' .. IN-HOME SUPPORTIVE SERVICES PROGRAM Program Description The In-Home Supportive Services (iHSS) program provides domestic and personal care services to approximately 85,000 aged, blind and dis- abled low~income individuals. County welfare departments administer the program. However, services may be provided either directly by county employees, by agencies under contract with the counties, or by providers hired directly by the recipient. Section 12304 of the Welfare and Institutions Code defines a severely impaired recipient as one who requires 20 or more hours of service a week . to carry dut specified' functions of daily living. The program defines a nonseverely impaired recipient as one who receives less than 20 hours of specified services per week. As of July 1, 1978, the maximum Illonthly alloWaIlce was $621 per month for severely impaired clients and $431 per month for nonseverelyimpaired clients. Section 12306 of the Welfare and Institutions Code requires the state to Ill1,l.tch available fede~alTitle XX funds for the cost of the' program from the G~Jleral Fund. The federal matching basis is 75 percent federal funds and 25 percent state funds. However, in fiscal year 197 ~75, the state began providing irlCreased state funds while federal funds remained the same. Of the fundsproposed in the budget, 65 percent are state alld 35 percent are federal. County administrative costs for in-home supportive services are inchided iIi the cost of the Other COUIlty Social Services' program which is supported from federal, stale and county funds. Table 4 shows the growthirithe IHSS program from fillcal year 1974-75 to 1979-80. Table 4 Total Expenditures for the In~Home Supportive Services Program Fiscal Years 1974-75 to 1979-80 Fiscal Year 1974-75 .................................................. . 1975-76 ................................................. . 1976-77 ...... ; ....... , ....... : .......................... .. 1977-78 ................................................. . 1978-'79 (Budgeted) ........................ .. 1978-79 (Estimated) ........................ .. 1979-80 (Proposed) .......................... .. General Fund $25,927,000 44,953,000 28,908,943 53,647,157 90,766,284 100,980,200 141,524,900 Federal Funds $52,750,002 51,415,152 86,726,828 82,743,379 80,736,134 82,866,134 77,215;300 Total $78,677,002 96,368,152 115,635,771 136,390,536 171,502,418 183,846,334 218,740,200 Annual Percent Increase 22.6% 20.1 18.0 25.7 34.8 19.0 Item 287 HEALTH AND WELFARE \/:795 Current Year Deficiency Funds appropriated for the IHSSprogram for fiscal year 197&-79 totaled $171,502,418. This included $159,288,618 in state and federal funds made available by the Budget Act of 1978 and $12,213,800 made available ,by Chapter 463,Statutes of 1978 for provider benefits. However, the budget indicates that estimated expenditures for in~home supportive services will total $183,846,334, an increase of $12,343,916,. or 7 percent over budgeted funds. The budget indicates that this deficiency will be funded, as follows: (a) $6,845,100 from the General Fund redirected from Other County Social Services as a result of one-time federal funds made available by HR 13511, (b) $2,573,105 from the General Fund made available as a result of a current year savings in the Adoptions program, (c) $761,287. from the General Fund made available as a result of a current year savings in -the county community care licensing program, (d) $2,130,000 from federal funds made available as a result of a population adjustment forCalifomia's Title XX allocation, and (e) $34,424 from a proposed deficiency appropria- tion. According to an opinion from the Legislative Counsel, the Legislature is not required to make available additional funds for ii1\"home:~upportive services.during the current year for counties which exceed thejr, alloca- tion. Budget Proposal The budget proposes a General Fund appropriation of.$141,524,900 for in-home supportive services, which is an increase of $40,544,700, ()r 40.2 percent, above the current year estimated expenditure. The primary rea- sons for the $40.5 million increase are: (a) $17.8 million for a 12 percent increase in caselqad, (b) $13.5 million for minimum wage increases, (c) $2.6 million for statutory cost-of-livlng adjustments for grants which are cu'rrently a1 the maximum level, (d) $9 million forthe additional cost of proposedregulations, (e) $5.1 million to replace federal funds m,ade avail- able during the current year as a result of HR 3387, and (f) $0.2 million for the cost of providing services to, disabled employed individuals pursu- ant to Chapter ~362, Statutes of 1978.T}.lese costs are offset by the follow- ing General Fund reductions:+a) $5.6 million used to replace federal Title XX funds, and (b) $2.1 million resulting from a decrease in the cost of provider benefits. ,;, Total program expenditures including federal funds are estimated at $218,740,200 for the budget year, which isan increase of $34,893,866, or 19 percent, over estimated current year expenditures, and an increase of $47,237,782, or 27.5 percent, over the current year appropriation. Continuing Program Problems We recommend that Item 287 be reduced by $33,927,057 from the Gen- ,eral Fund byreducing funds for the In-Home Supportive Services Pro- gram. , . A number of long-standing problems plaguing the IHSS program con- tinue to limit our ability to assess the appropriateness of the proposed funding level. 796 \/ HEALTH AND WELFARE Item 287 SOCIAL SERVICE PROGRAMS-Continued Unknown Program Results. One problem is lack of measurable pro- gram goals or data to assess whether the program is effective in meeting those goals. Some groups contend that the program's purpose is to provide an alternative to immediate institutionalization of eligible recipients. Other advocate groups have argued that the purpose of the program is to provide for the comfort and safety of eligible recipients in their own homes. In two letters to the department, we asked the department to identify: (a) its interpretation of the program goal, (b) its efforts to meas- ure the effectiveness of the program in meeting that goal, and (c) the effect of the proposed level of funding on the department's ability to meet that goal. The department has not responded to our request. One of the contributing problems is lack of clear program intent as identified in the enabling legislation. Nevertheless, the department has not indicated whether it intends to propose amendments to existing law to more clearly define the program. Nor has it adopted a narrow construc- tion of the purpose of the program in order to ensure that program costs will stay within the available funds, an action the Legislative Counsel believes is permissible. Unjustified Program Variations. A second problem is that among county programs, there continue to be unexplained variations in funds received, funds expended and services provided. 1. Funds Received. There is a close relationship between a county's SSI\/SSP caseload and its IHSS caseload. This is probably explained by the fact that most IHSS recipients are SSI!SSP recipients. As a result, we would expect that a county's allocation of IHSS funds would bear some relationship to its SSI!SSP caseload. However, based on our review of data for 1978-79, we determined that the annual amount of IHSS funds re- ceived by some counties relative to their SSI!SSP caseload is more than four times greater than that received by other counties. 2. Funds Expended. The average monthly payment per client made by counties ranges from a high of $295 per month in some counties to a low of $57 per month in other counties. In addition, costs for services provided by contract providers range from a high of $9 an hour to a low of $4 an hour. 3. Services Provided The average monthly hours of service per client provided by counties range from a high of 140 hours per month in some counties to a low of 10 hours per month in other counties. These variations suggest that the state may be providing more General Fund support than is necessary to maintain a quality program. Recommendation. According to an opinion from the Legislative Counsel, the Legislature is not required to increase the level of state funding for in-home supportive services, for the budget year above the level of funds appropriated for services in the current fiscal year. Because the department is unable to identify what program results it expects to achieve with the proposed funding for in-home supportive services, or to justify why such a broad range of variations is permitted among the county programs, we recommend that Item 287 be reduced by $33,927,057. This Item 287 HEALTH AND WELFARE \/ 797 would be achieved by deleting funds for caseload growth, minimum wage increases and adjustments for grants at the maximum level. Any increased expenditures for these components should be absorbed within the existing funding level. . Uncontrolled Program Growth We recommend that Budget Act language be added to Item 287 to: (a) make the counties liable for the expenditure of funds for in-home support- ive services which exceeds the amount of funds contained in the budget- and (b) require the Department of Social Services to implement a plan for controlling the costs of the In-Home Supportive Services program. An additional problem of the IHSS program is the continued spiraling of program costs. Of particular concern is the $12.3 million deficiency in the current year and the inability of the department to avert this deficien- cy. As indicated in Table 4, total program costs have almost tripled in a five-year period. If the rate of program growth continues at the same rate as it has in the past, the program will cost an estimated $2 billion dollars by fiscal year 1989-90. There has been much confusion regarding the department's authority to control or limit county expenditures for services and whether funding for in-home supportive services should be considered open-ended or close-ended. We asked the department to define its role in administering the program and to identify what it had done during the current year to assure that program expenditures did not exceed funds appropriated. We also asked the department to identify what plans it had to develop regula- tions which would require counties to keep program expenditures within the level of appropriated funds. The department has not responded to our request. In order to assure that unjustified program costs do not continue to . exceed the amount of funds appropriated by the Legislature, we recom- mend that Budget Act language be added to: (a) make the counties liable for the expenditure of funds 'for in-home supportive services which ex- ceeds the amount of funds contained in the budget, and (b) require the Department of Social Services to implement a plan for controlling the costs of the IHSS program. The Legislative Counsel has advised.us that both of these provisions are valid conditions on the expenditure of funds appropriated in the Budget Act. Program Regulations We recommend that Item 287 be reduced by $14 million from the General Fund by eliminating funds for proposed in-home supportive serv- ices regulations. Last year the Legislature added Budget Act language which required the department to issue emergency administrative regulations for in- home supportive services by July 15, 1978 and to develop additional pro- gram regulations to establish a uniform range of services. These program regulations were to be presented to the Legislature for review by Novem- ber 15, 1978 and to be adopted by April 1, 1979. In addition, the budget appropriated $1 million for the emergency administrative regulations and $3 million for the three-month cost of the additional program regulations for fiscal year 1978--79. ,798 I HEALTH AND WELFARE Item 287 SOCIAL SERVICE PROGRAMS-Continued The department has implemented the emergency regulations in con- formance with the July 15 deadline and has submitted draft program regulations in' conformance with the November 15 deadline. The emergency administrative regulations alter a number of proce- dures in the areas of eligibility determination and service authorization. The proposed program regulations contain the following changes: 1. A restatement of the purpose and content of the program. 2. The establishment of a range. of services to be provided in each county. This range excludes medically-related personal services, protec- tive supervision, and teaching and demonstration services, and limits the provision of transportation services to those which are medically related. 3. Further amendments to the application and needs assessment proc- esses. The department estimates that the proposed program regulations will result in an annual General Fund cost to social service programs of $19,774,400. This amount is composed of the following: (a) a cost of $27,891,500 to the Other County Social Services program for the transfer of protective supervision services and other staff requirements, (b) a \" savillgs of $8,117,100 resulting from the elimination or restriction of certain services. In addition, the proposed regulations. will result in a cost of $1,694,000 to the Medi-Cal program for the provision of medically-related personal care and a savings of $409,000 to the SSP program resulting from the placement of a small number of individuals in out-of~home care facili- . ties asa result of changes in protective supervision services. The total General Fund cost of the regulations is estimated at $21,059,400. Item 287 contains a total of $14 million for the proposed regulations even though the department estimates they will cost $19,774,400 for social serv- ices programs. The department indicates that the regulations will be fur- ther amended to reflect the $5 million reduction and to reflect the concerns expressed as a result of public hearings held on January 15 and 16, 1979. TheprogI.'am regulations attempt to establish a uniform range of serv- ices in conformance with legislative intent. However, we believe the Legislature should have a-number of concerns with the regulations as submitted on November 15, 1978: . 1. The regulations restate the program's definition but not in such a way as to permit measurement of accomplishments. The proposed regulations state that in-home supportive services are those activities and resources provided to eligible individuals. who could not remain in their own homes without them and that the program is an alternative to out-of-home care. They also state that clients who are found to be able to live at home in comfort and safety without such services are not to be granted services. This definition does not provide a clear statement for eligibility determi- nation or program evaluation, As a result, the department is unable to identify what actual program. outcome can be anticipated as a result of providing a specified range of services in each county. 2. The proposed regulations do not contain provisions which would Item 287 HEALTH AND WELFARE \/ 799 assist the state or counties in limiting. the cost of the program to the amount offunds appropriated through the budget process. In addition, the department is unable to identify at this time how the regulations will be further amended to reflect the amount of funds cur- rently contained in the Governor's Budget. As a result, we cannot recom- mend approval of funds for the proposed regulations. We therefore recommend that Item 287 be reduced by $14 million from the General Fund. . OTHER COUNTY SOCIAL SERVICE PROGRAM Program Description The Other County Social Services (OCSS) program consists of nine mandated and 14 optional services administered by counties under the provisions of Title XX of the Social Security Act. The mandated services include protective services for children, protective services for adults, out-of-home services for children, out-of-home services for adults, health- related services, employment services, information and referral, family planning services, and child care services. Under this program, counties are required to provide the 25 percent match for any federal Title XX funds received, unlike in-home supportive services where the state pro- vides the match. However, in fiscal year 1976-77 the state began to provide an increasing amount of state support because of the cap on federal funds. This year, Item 287 includes funds for the OCSS program in two sub- items, Adult Services and Family and Children Services. These subitems also contain funds for in-home supportive services, Indo-Chinese services, WIN social services, and social services administered by other state agen- cies. These program components are discussed separately in other parts of our analysis. Unclear Statutory Basis We recommend that legislation be enacted to identify and define' . county administered social services more clearly and to limit the number of services which counties are required to provide. A Department of Finance report dated June 1978 states that there is no legislatively established social services program. Rather, the law \"specifies a collection of diverse programs, each with its own purpose, scope of benefits, and eligibility criteria ... \" It further points out that the statutes are particularly unclear in identifying whether all counties are required to provide those services mandated by state regulation. We asked the Legislative Counsel to identify those services which are required to be . provided by state statute. The Counsel indicated that eight services are required in statute but that protective services for adults and out-of-home services for adults are not mandated by law. Because of the confusion regarding the legal basis for provision of specif- ic social services, we recommend that legislation be enacted to more clearly define county-administered social services. The Legislature may wish to consider requiring only those services which are most critically needed and where program effectiveness can be identified most clearly, thus reducing the number of services which counties are required to provide. . ---- -~-- ~---------- 800 \/ HEALTH AND WELFARE SOCIAL SERVICE PROGRAMS-Continued Current Year Budget Item 287 The budget as approved by the Legislature and the Governor provided $166,553,669 for the OCSS program of which $118,070,128 is federal funds, $6,845,100 is state funds, and $41,638,441 is county funds. In addition, Budget Act language required that in the event additional federal Title XX funds became available, such funds shall be used in lieu of General Fund dollars for support of that program. The Governor's Budget indi- cates that $6,845,100 in federal funds made ;lvailable as a result ofHR 13511 will be used to replace the General Fund appropriation for OCSS in the current year and that the released General Fund dollars.will be used to fund part of the current year deficiency in the In-Home Supportive Serv- ices program. Proposed Budget The Governor's Budget for fiscal year 1979-80 proposes a total amount of$181,134,900, including $132,410,100 in federal funds, $5 million in state funds, and $43,724,800 in county funds. This is a total program increase of $15,058,872, or 9.1 percent, over estimated current year expenditures. Included in the $15.1 million increase is a $5 million General Fund increase for child protective services and a $7,494,872 increase in federal funds for a 6 percent cost-of-living adjustment. Table 5 presents a break-out or\" funding by source for the OCSS program for fiscal year 1979-80. Source A. Federal Funds Table 5 Breakout of Funding by Source for Other County Social Services Program for Fiscal Year 1979-80 a. Continuing Title XX allocation ....................................................................................... . h. HR 13511 funds to replace General Fund support... .................................................. . c. HR 13511 funds to provide portion of cost-of-living ................................................... . d. Title XX population adjustment to provide portion of cost-of-living ................... . B. General Fund .... : ........................................................................................................................ . C. County Funds ............................................................................................................................ . Total ........................................................................................................................................... . Amount $118,070,128 6,845,100 6,309,800 1,185,072 5,000,000 43,724,800 $181,134,900 The budget indicates that the $181,134,900 will be distributed as follows: (a) $155,535,700 for the nine mandated services, and (b) $25,599,200 for optional services, although the budget does not identify these by individ- ual services. The department indicates that the distribution of funds by services is not based on actual expenditure data because the department does not yet receive this information from the counties. Instead it is based on how counties planned to spend their 1978-79 planning allocation in their Title XX plans last year. For this reason, the budget estimates are probably not highly accurate since the Title XX plan is not regarded as being particular- ly valid. Item 287 HEALTH AND WELFARE \/ 801 legislative Concerns We recommend that Item 287 be reduced by $14,339,972 by transferring $14,339,972 in federal funds from other county social services to in-home supportive services and reducing the General Fund appropriabon for in-home supportive services by an equal amount. In our analysis last year, we identified a number of problems with the OCSS program, including the fact that the program lacked standard pro- gram definitions or minimum service requirements and was unable to demonstrate the extent to which it was successful in meeting program goals. As a result, the Legislature reduced state funding to the 1976-77 level. Budget Act language was added which stated it was the intent of the Legislature that state funds appropriated for support of the program for fiscal year 197~79 be made on a one-time basis only and that any future General Fund appropriations be based on the department's ability to identify the effectiveness of such services in meeting program goals. In a letter to the department dated December 14, 1978, we asked what effort it had made in this regard, and what program outcomes it antici- pates will be achieved as a result of the funding level proposed in the Governor's Budget. The department has not responded to our request. The budget proposes to use $14,339,972 in new federal funds for support of the OCSS program. These funds will be used in lieu of General Fund support. Because these federal funds alternatively could be used to offset Gerieral Fund costs in other so'cial service programs the effect of the budget's proposal is the same as it would have been had the $14,339,972 been requested from the General Fund directly. We believe this is con- trary to the Legislature's intent not to provide support for other county social services above the level for fiscal year 1975-76 unless the effective- ness of those services could be conclusively demonstrated. The depart- ment has not been able to provide that demonstration. We therefore, recommend that Item 287 be reduced by $14,339,927. This would be ac- complished by transferring $14,339,972 in new federal funds to the In- Home Supportive Services program and reducing the General Fund ap- propriation for in-home supportive services by an equal amount. Child Protective Services Proposal We recommend that Item 287 be reduced by $5 million by eliminating a General Fund augmentation for child protective services in accordance with stated legislative intent. Current Program. The budget proposes $79,269,333 in federal and ~ounty funds for child protective services funded under Title XX and Title IV-B of the Social Security Act. In addition, the budget contains an addi- tional $47,138,000 in federal and county funds for related out-of-home and child care services and an unspecified amount of funds for optional chil- dren's services. Under current procedures, each county is permitted to determine how much of its appropriation for other county social services will be used for child protective services. The basis for determining how the state allocates funds to counties and how counties allocate funds to individual services is not based on a rational needs assessment process. Moreover, the depart- 802 \/ HEALTH AND WELFARE Item 287 SOCIAL SERVICE PROGRAMS-Continued ment was unable to provide a break-out of ~stimated child protective service expenditures by counties. Regulations implemented in 1969require that child protective service intervention be available 24 hours a day. According to a Department of Health report dated October 1977,42 of the 58 counties report that their welfare departments provide 24-hour child protective services. However, the characteristics of the existing systems vary from county to county. Proposal. The budget proposes a $5\u00b7 million augmentation for child protective services. According to the department's proposal, these funds are to be used to develop and implement improved 24-hour child protec- tive service response systems in all 58 counties. The proposal identifies 14 requirements which counties must meet in providing such a system. The department indicates that these requirements will later be formalized as regulations, although it has provided no schedule for doing so. Counties which already. meet these requirements willbe permitted to use augmen- tation funds for other child protective services. The department indicates that the funds will be allocated to each county based on the number of children aged 17 and under, with a mini- mum base for small counties. The allocation formula will not take into account how much money counties are\u00b7 currently spending for child pro- tective services. The department states that counties are expected to provide a 25 percent match for any funds received, although these funds are not identified in the budget. In addition, the department proposes to establish 16 new positions to oversee implementation of the new response system at a General Fund cost of $417,190. These positions are discussed separately in Item 282, Departmental Support. . Program Concerns. We have a number of concerns with the depart- ment's augmentation proposal: 1. Budget Act language for fiscal year 1978-79 specifically stated it was the Legislature's intent not to provide additional General Fund support for other county social services, of which child protective services is a part, in the event the department is unable to demonstrate the effectiveness of the programs. The\u00b7department has not done this. 2. Counties are currently spending $25,599,200 for optional services. We believe that counties should be required to use these funds to satisfy existing requirements of mandated services before using funds for option- al services. 3. At this time, the department is unable to identify how budgeted funds are currently spent for child protective services or how the proposed $5 million augmentation will be spent for services by the coun- ties. 4. There is a need to revise and update existing child protective services and child welfare services regulations prior to providing additional fund- ing. For example, current regulations permit counties to spend their Title IV -B funds for child welfare services for specialized needs such as camp or tutoring. We believe that if an improved 24-hour response system is identified as an important need, counties should be required to use avail- able funds for that service first. For these reasons, we recommend that Item 287 be reduced by $5 million. Item 287 HEALTH AND WELFARE \/ 803 TITLE XX TRAINING Section 28 Letter On November 3,1978, the Director of Finance submitted a letter to the Joint Legislative Budget Committee under the provisions of Section 28 of the Budget Act of 1978, regarding the proposed use of federal Title XX training funds. These funds are in addition to the state's allocation of Title XX funds for services. Federal training funds are currently uncapped but must be matched by 25 percent in state or local funds. The letter stated that the Director of Finance: (a) had approved $2.4 million to continue three state university training programs begun in fiscal year 1971-78, (b) intended to approve an expenditure of $1.8 million to permit the Depart- ment of Social Services to contract with the Southwest Regional Labora- tory (SWRL) for Educational Research and Development for Title XX planning and training activities after 30 days, and (c) intended to approve an expenditure of $0.9 million to contract with three additional education- al institutions to conduct new training programs. On December 5, 1978, the Chairman of the Joint Legislative Budget Committee requested that the Director of Finance allow the Department of Social Services to contract with the three educational institutions only until February 1,1979, in order to provide the committee an opportunity to review the appropriateness of these contracts. The chairman did not make specific recommendations on the remaining proposals. However, the chairman identified a number of problems with the proposed con- tracts including the fact that some of the institutions had proceeded with their training programs in spite of the fact that their contracts had not been reviewed by the Legislature or given final approval by the Depart- ment of Finance. On February 6, 1979, the Chairman of the Joint Legislative Budget Committee responded to a subsequent request by the Director of Finance to continue the contracts through June 30, 1979. The chairman approved that request on the grounds that to do otherwise would unnecessarily penalize students and faculty. However, the chairman conditioned his approval on the department's willingness to discontinue immediately the practice of beginning training programs prior to executive or legislative approval. He informed the director that the issue of social service training would be reviewed fully by the fiscal subcommittees of the Legislature during budget hearings. Current Year Expenditures The Governor's Budget indicates that the state and counties will spend a total of $16,440,700 during the current year for social services training, to be funded from federal funds, county funds and reimbursements. However, the department has stated that, because of the concerns ex- pressed by the Joint Legislative Budget Committee, it does not intend to expend the amount reflected in the budget and will instead spend only the $7,898,852 approved in the Budget Act of 1978 and the Section 28 letter. Identification of Problems As we indicated to the Chairman of the Joint Legislative Budget Com- mittee, there are a number of problems with the way the administration has administered Title XX training funds during the current year: 804 \/ HEALTH AND WELFARE Item 287 SOCIAL SERVICE PROGRAMS-Continued 1. The Department of Finance approved contracts to continue several training programs even though funds were not included in the Budget Act and the Legislature had not been given prior notification. . 2. Several of the educational institutions either continued to provide training services after their 1977-78 contracts had expired or began new programs before contracts had been approved. In order to reimburse the institutions for expenses already incurred, the Department of Social Serv- ices then backdated these contracts. 3. The Department of Social Services did not adhere to procedures for the selection of contract providers as identified in the State Administrative Manual (SAM). According to an opinion by the Legislative Counsel, SAM does not\u00b7 contain any provision which would have exempted the SWRL contract from the request-for-proposal procedures. As a result, the SWRL contract probably would have been subject to the requirement that three qualifying proposals be secured. The department did not seek any propos- als but instead contacted SWRL and worked directly with it in preparing a proposal. The Counsel does point out, however, that there are no statu- tory provisions which require that a request~for-proposal process be fol- lowed for professional consultant services. 4. Continuing training programs at the state universities have been criticized by the department and were nof adequately evaluated prior to the selection of new programs. 5. The department does not have any formal procedures for identifying training needs or reviewing program proposals based on their ability to meet those needs. 6. Several of the programs will provide training and stipends to students seeking a Master's of Social Work degree in spite of the fact that counties are terminating a substantial number of social service positions as a result of the passage of Proposition 13. In addition, the state has not developed regulations for the selection of students or the awarding of stipends. These decisions are left to the individual institutions. 7. The department has not made an effort to coordinate state-adminis- tered university training programs with county administered training pro- grams. Instead, this responsibility has been delegated tci\"i:he educational providers. As a result, services may be duplicative in some areas and inadequate in others. In at least one case, the state approved a contract to provide training services to social service providers in a specific county. However, the county welfare department had not been given an opportu- nity to review that contract and indicated it already had plans to enter into similar training contracts on its own. Budget Proposal We recommend that Item 287 be reduced by $16,863,300 in federal and county funds and reimbursements by eliminating funds for Title XX train- ing programs. The budget proposes a total of $16,863,300 in federal and county funds and reimbursements for state a.nd county administered Title XX training programs. In addition, the budget proposes $341,250 in federal funds in Item 282, Departmental Support, for departmental training contracts. The department indicates it is attempting to improve its management Item 287 HEALTH AND WELFARE \/ 805 of Title XX training programs. For example, it states that it intends to 'do a statewide training needs assessment through its contract with SWRL and that it is attempting to develop a model request for proposal, and evalua- tive criteria for reviewing such\u00b7 proposals. Its contract with SWRL also indicates that SWRL is responsible for evaluating existing training con- tracts by June 1979. In addition, the department states it is drafting regula- tions to require counties to develop needs assessment and evaluation procedures for individual county Title XX training plans. However, these regulations will not be implemented in time for the 1979-80 planning process. At this time, the department is unable to identify what training programs counties have conducted in prior years or what impact these have had. Because we are unable to identify how funds budgeted for social serv- ices training will be spent in fiscal year 1979-80, and because we are unable to identify how adequately the department will resolve current manage- ment problems, we recommend that Item 287 be reduced by $16,863,300 in federal and county funds and reimbursements by eliminating funds for Title XX training. . OTHER SOCIAL SERVICE ACTIVITIES Demonstration Projects We recommend that Item 287 be reduced by $200,000 by eliminating funds for unspecified demonstration projects. The budget proposes $3,158,000 from the General Fund for demonstra- tion projects, which is a decrease of $1,175,365, or 27.1 percent, below current year expenditures. Total funds budgeted for projects including federal funds and reimbursements are estimated at $3,605,962, which is a decrease of $1,222,735, or 25.3 percent, below total current year expendi- tures. The major reason for this decrease is an elimination of funds for one-time projects. The budget indicates that funds for demonstration projects will be. ex- pended as follows: $125,000 for domestic violence projects to be funded from Chapter 892, Statutes of 1977, $1,333,000 for a family protection pilot project, $178,869 fora federally funded project for families at risk, $269,093 for federally funded child abuse projects, $200,000 from the General Fund for unspecified projects, and $1.5 million to be carried forward from the Budget Act of 1978 for multipurpose senior serviCe centers. The proposed use of the $1.5 million is discussed in Item 35, Secretary of Health and Welfare, and Control Section 10.08. Last year, we recommended deletion of $200,000 for unspecifieddem- onstration projects because the department waS unable to identify how these funds were to be spent. Subsequent to that time, the department identified several proposals to be funded from the $200,000 and we recom- mended approval. .Since budget hearings, the department has changed a number of those proposals. At the time this analysis was prepared, the department has not actually executed the contracts for funds available in the current year, nor is it able to identify how the $200,000 contained in the proposed budget will be spent. The department is already committing a substantial amount of time and resources to social service demonstration projects. For example, during the current year, the department is responsible for administering 17 social 806 I HEALTH AND WELFARE \u00b7Item 287 SOCIAL SERVICE PROGRAMS-Continued service demonstration projects. Many of these were established as a result of special legislation. Ten of these projects are expected to continue into the budget year. Several of these involve as many as three individual sites. In addition, the department is faced with major problems in defining and restructuring social service systems. We believe that the department would achieve better program results by committing its staff and re- soureesto these efforts rather than additional demonstration projects. We therefore recommend that Item 287 be reduced by $200,000 from the General Fund by' eliminating funds for unspecified demonstration projects. Adoptions The budget proposes $12,389,900 from the General Fund for support of county administered adoption programs in 28 counties. This is a decrease of $454,000, or 3.4 percent, below estimated current year expenditures. This reflects an increase of$868,800 to provide a 6 percent cost-of-living adjustment, which is more than offset by a reduction of $1,322,800 to. reflect a decline in caseload. The state is also responsible for the provision , of state-administered adoption services in a number of additional counties. This program component is funded in Item 282, Departmental Support. Commu.,ity Care Licensing The .budget prQposes $12,392,600 from the Gene.ral Fund to support county~a,dminister~d community care licensing activities. This is an in- crease of $836,200, or 7.2 percent, over estimated current year expendi- tures, This increase reflects $845,100 for a 6 percentcost-of-living adjustment which is partially. offset by a $8,900 technical adjustment. Forty-seven counties contract with the state to license 71 perGent ()f the state's 40;000 community care facilities. These activities are reimbursed from the General Fund. Remaining licensing activities are conducted by state personnel funded in Item 282, Departmental Support. ' Social 'SerVices for Indo-Chinese Refugees The Budget ActJ:>f 1978 did not contain funds’ for social services to Indo~Chinese refugees. However, the Governor’s Budget indicates that $7,182,~OO in federal funds will be expended in the current year forthis purpqsb. In’addition, the budget proposes a total of $7,182,400 in federal funds for Indo-Chinese social services in 197~0. These funds will be used to so’#ti,riue contracts With private agencies, to provide education, employ- menf and training’ services, to reimburse counties. for, the’ provision of social services, and to provide English language training. As We d.iscussed in Item 282, Departmental Support, federal funding for the Indo-‘Chinese Refugee Assistance Program (IRAP) is expected to ter- minate September 30, 1979. If no additional federal legislation is enacted, feder~ fu:p.ding for IRAP social services could be .overstated in the budget by. $4,~26,J{j(). At that time, the state and counties would have to decide if th~y wished to continue thes~ services using. the same sharing ratios as for existing programs. If this is the case, it would resultma state cost of $3.8 ffiillionand a county cost of $1.1 million. ,.’ . ‘ , Item 287 HEALTH AND WELFARE \/ 807 WIN Social Services The budget contains $12,385,159 in federal and county funds for the cost of administering\u00b7\u00b7 WIN Separative Administrative Units (WIN-SAUs). WIN-SAUs are administered by county welfare departments to provide social services to WIN registrants. These funds have not been reflected in the budget in previous years. The budgetalso contains $4;123,783 for WIN child care services includ~ ing$278,355 from the General Fund, $3,711,405 from federal funlils. and $134,023 from county funds. These services are funded on the basis of 90 percent federal funds and 10 percent state and county funds. This is the same amount which is estimated to be expended in the current year. Title XX Funding Transfer We recommend that Budget Items 271, 275, and 287 be revised so that the proposed allocation of federal Title XX funds to the Department of Developmental Services and the Department o[ Mental Health be re- placed by General Fund support. The Department of Social Services has been designated the single state agency for purposes of administering Title XX funds. llowever, the de- partmententers into a number of interagency agreements in order for other state departments to provide services supported in part by federal Title XX funds. The budget proposes that these include the Department of Education (child care), the Department of Health Services (family planning), the Department of Mental Health (continuing care services) , arid the Department of Developmental Services (continuing care sen’ices and regiorialcenter workshops) iIi 1979-80. The federal funds for these services are contained in Item 287. However, the General Fund match is appropriated in other departmental budget items. Because federal Title XX funds have been capped since 1972, the amount of federal funds traditionally allocated to these agencies has remained fairly constant, ex- cept for child care which has received augmentations as a result of the availability of one-time federal funds. Last year, the department redirected federal Title XX funds from the commul1ity care licensing program by replacing them with General Fund overmatch from the in-home supportive services program. This resulted in no net change in support for either program but resulted in the elimina- tionof federal funds in community care licensing and an increase in federal funds for inchome supportive services. The budget proposes to redirect federal Title XX funds from the Department of Rehabilitation for blind counselors and from the Department of Social Services for a.dminis- trative support through the same transfer mechanism. . There area number of administrative efficiencies which can be achieved by reducing the number of state programs which currently re- ceive Title XX funds: 1. Reduced Planning and Reporting Actii’ities. Federal regulations re- quire that each program which receives federal Title XX funds satisfy complicated planning and reporting requirements. These requirements may not synchronize with state planning and reporting requirements. In addition, they place an unnecessary burden on state staff which results in 808 \/ HEALTH AND WELFARE SOCIAL SERVICE PROGRAMS-Continued no identifiable program benefit. Item 287 2. Reduced Confusion Regarding Program Monitoring. The current arrangement of funneling federal funds through the Department of Social Services to other departments has resulted in confusion regarding depart- mental responsibility for program monitoring. Because the department has been designated the single state agency by the federal government, it is responsible for ensuring that federal requirements are met.\u00b7 However, the Department of Social Services does not have the staff or authority to perform on-going review and enforcement functions for other depart- ments. In addition, the current funding arrangement requires that each department devote a considerable amount of staff time to’ ensure the proper budgeting of funds and negotiation of interagency agreements. Currently the Department of Mental Health uses Title XX funds for continuing care services to individuals who no longer require hospitaliza- tion. The Department of Developmental Services uses Title XX funds for continuing care services as well as regional center workshops. Table 6 identifies how much Title XX funds are currently budgeted for these departments. Table 6 Allocation of Title XX Funds to the Department of Mental Health and the Department of Developmental Services 1. Federal Title XX Funds (75 percent) Department of Developmental Services a. Item 2137 ……………………………………………………………………………….. $9,636,600 2. General Fund (25 percent) a. Item 271 ……………………………………………………………………………….. 3,212,200 h. Item 275 ………………………………………………………………………………. . Total\u00b7 …………………………………………………….. : ……………. ,………… $12,848,800 Department of Mental Health . $8,508,939 2,836,313 $11,345,252 The proposed continuation of Title XX funds in these programs will not result in any significant program or administrative benefit. As a result, we recommend that Budget Items 271, 275, and 287 be revised so that the proposed allocationoffederal Title XX funds to the Department of Devel- opmental Services and the Department of Mental Health be replaced by General Fund support. This can be accomplished by transferring federal funds currently allocated to these programs to the In-Home Supportive Services program and transferring an equal amount of General Fund dollars from in-home supportive services to programs for the mentally and developmentally disabled. This redirection will not have any impact on total funds available to each of these programs. However, it will result in greater administrative effi- ciency and an indeterminate General Fund savings by eliminating un- necessary planning, reporting, budgeting and monitoring activities. Because state law in effect July 1, 1979 will require that any General Fund dollars allocated to county mental health programs be matched by 10 percent in county funds, we further recommend that Budget Act lan- Item 288 HEALTH AND WELFARE \/ 809 guage be added to Item 275 to exempt counties from providing it match for the redirected funds. In this way, counties will not be penalized for a funding transfer at the state level by having to provide additional funds. However, we continue to recommend that counties be required to pro- vide a lO percent match for all other General Fund support received for local mental health programs, as ~iscussed in Item 275. Department of Social Services COUNTY ADMINISTRATION Item 288 from the General Fund Budget p. 774 Requested 1979–80 ………………………………………………………………. . Estimated 1978–79 ………………………………………………………………… . Actual 1977-78 ……………………………………………………………………… . Requested increase $7,588,009 (lO.6 percent) Total recommended reduction …………………………………………… . 1979-80 FUNDING BY ITEM AND SOURCE Item 288 (a) 288 (b) 288(c) 288 (d) . 288(e) 288(f) 288 (g) Description AFDC Special Adult Programs Food Stamp Admin!stration Emergency Payments Nonmedical Out\u00b7of-Home Care Certifi- cation County Staff Development County Staff Development Total Fund . General General General General General General Federal SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS $79,008,300 71,420,291 70,344,248 $506,000 Amount $63,830,100 973,600 12,978,800 465,600 760,200 7,301,153 -7,301,153 $79,OOS,300 Analysis page 1. Proposed Regulations. Reduce Item 288 by $506,000 . . Rec- ommend reduction for the cost of proposed regulations relating to the Garcia vs. Swoap case which is still pending. 811 2. Administrative Cost Control. Recommend modifications to the Administrative Cost Control Plan. COUNTY ADMINISTRATION GENERAL PROGRAM STATEMENT 811 This item contains the General Fund appropriation for the state’s share of administrative costs incurred by counties for the following program activities: (a) AFDC eligibility determination, (b) administration of the Food Stamp program, and (c) administration of the special benefit and emergency payment programs which provide services to aged, blind and disabled recipients. County staff development training, which is reim- bursed by federal funds, is also shown in this item’s schedule. 810 \/ HEALTH AND WELFARE Item 288 COUNTY ADMINISTRATION-Continued ANALYSIS AND RECOMMENDATIONS The budget proposes a General Fund appropriation of $79,008,300 for the state share of county welfare department administrative costs. This is an increase of $7,588,009, or 10.6 percent, over theestirilated current year expenditures. Table 1 shows the major components of this incr.eas.e. The largest component is $4,238,300 to provide a 6 percent cost-of-living in- crease for county welfare departments’ salaries and nonpersonal services. Expenditures for food stamp administration are anticipated to increase by $3,339,300. Of this amount, almost $2.0 million reflects the net increase in administrative costs due to the Food Stamp Reforin Act of 1978. Table 1 Proposed General Fund Budget Adjustments for County Welfare Department Administration 1.979-80 A. Budget Base …………………………………………………………………………………. .. B. Budget Adjustments 1. Administration of AFDC Programs a. Growth iIi caseloadand cost per case …………………….. , ………… . b. Six percent cost-of-IiVing increase for salaries and nonperson- aI services …………………………… ; ……… , …………………………………….. .. c. Other adjustments ……………………………………………………………….. .. 2. AdmiIlistration of Special Adult Programs a. Termination of minimum income level retrieval project- Cost $2,711,800 2,688,800 -733,600 one year (1978-79) ………………………………………………………………. -231,100 h. Caseload growth in special circuinstances and APSB pro- grams …………………………………………………………………………………….. 76,800 c. Six percent cost-of-living increase for salaries and nonperson- al services ……………….. ……………………………………………………………. 39,000 —- 3. Food Stamp .Administration a. Net increase in administrative costs due to Food Stamp Re- form Act ……………………………………………………………………………….. .. 1,969,200 b. Six percent cost-of-living increase for salaries and nonperson- aI services …………………………………………………… , ………………………. . 1,461,500 c. Increased costs due to court cases ……………………………………… . 518,500 d. Other adjustments ……………………………………………………………… .. -609,900 4. Emergency Payments a .. Six percent cost-o(living increase for salaries and nonperson- aI services ……… ; ……………………………………………………………………. . 18,400 b. Other adjustments …………………….. : ……………………….. ; ……………. . 19,700 5. Nonmedical Out-of-Home Care Certification a. Six percent cost-of-Iiving increase for salaries and nonperson- aI services … : ……. : …………………………………………………………………. .. 30,600 h. Deficiency appropria.tion fot 1976-77 : …… ; ……… : ………………… . c. \u00b7Other Adjustments ………….. : ………………………………………………….. . -300,000 -71,691 Total Budget Increases ……………………………………………………………….. .. Proposed Total from General Fund, Item 288 …………………………… . Total $71,420,291 $4,667,000 $-115,300 $3,339,300 $38,100 $\u00b7-341,091 $7,588,009 $79,088,300 Item 288 HEALTH AND WELFARE \/811 Proposed Regulations-Garcia Vs. Swoap . We recommend a General Fund reduction of$506.000 pending the issuance and review of new regulations. . The budget proposes a total General Fund appropriation of $2,204,500 for proposed regulations resulting from the Garcia vs. Swoap case. Ofthis amount, $1,698;500 for grant supplemental payments are included within the funds specified in Control Section 32.5, and $506,000 for county im- plementation costsareiriItem 288; In our discussion of Control Section 32.5, we recommended that the funds proposed for supplemental pay- ments be eliminated because: (a) the proposed regulations related to Garcia vi;. Swoap have not yet been issuedap.d (b) the case is presently pending in the court of appeals. We recommend that the $506,000 proposed for county implementation costs contained in this Item be elimi- nated for the same reasons. COUNTY ADMINISTRATIVE COST CONTROL . Implementation of Plan Prior t’o 1975-76,’ administrative costs of county welfare departm~nts were growing more rapidly than the growth in workload and prices com- bined. As a result, the Budget Act of 1975 required the Department of Benefit Paymeritsto establish a plan to control county administrative costs. During fiscal year 1975-76, the Department designed and imple- mented a cost control plan based on input from counties and other inter- estedparties. The basic concept behind the existing administrative cost control plan is that each county receives an allocation of funds within which it must operate. County allocations are based on productivity expectations; Coun- ties in which productivity per worker is low compared to other counties r:eceive smaller allocations than required to continue operating at current stafflevels. Such counties can either improve worker productivity or pro- . vide additional funds of their own to cover the resulting deficit. Several elements are especially important to the success of an adminis- trative cost contr:ol plan of this kind. First, the state must notbe too lenient when it establishes productivity expectations. If it is, the resulting county allocations are too large, and counties have no fiscal incentive to make major improvements in their operations. Second, the state must not increase allocations except for’ acceptable cost-of-living increases, unanticipated workload increases or other excep- tional circumstances beyond the counties’ control. This meanslha~if the state has excess funds in its appropriation, it should not \”bail-oue; a county which has failed to meet its productivity requirements or the discipline imposed by a cost control plan will be eroded and the benefits of such a plan will be lost. Need for Revised Plan We recommend that the county administrative cost control plan be revised to include more stringent productivity standards by chariging the base year to 1977-78. AFDC workload within a county welfare department can be’ divided \u00b7;t\u00b7 ; —–~~~————– 812 \/ HEALTH AND WELFARE Item 288 COUNTY ADMINISTRATION-Continued into two functions. There is intake workload which is related to processing applications (approval and denials), intercounty transfers, and changes from one aid category to another. There is also continued case workload associated with maintaining, reviewing and updating. existing cases. The County Administrative Cost Control program has resulted in im- provements in welfare department productivity. For example, welfare worker productivity has increased statewide since 1974-75. In addition, while administrative costs for the AFDC program have continued to in- crease during the last few years, the rate of growth has slowed. Despite recent improvements in productivity, significant variations in eligibility worker productivity still exist among counties. Table 2 shows the number of intake actions and continuing cases per eligibility worker for the 11 counties with the largest caseloads. Table 2 AFDC Intake Actions and Continuing Cases Per Eligibility Worker 1977-78 Intake Counties Action Per Eligibility Worker\” Alameda …………………………………………………………………………………………………………… . Contra Costs ………………………………………………………….. ; …………….. : ………………………. . Fresno ………………………………………………………………………………………………………………. . Los Angeles …………………………………………………………………………………………….. : ……… . Orange …………………………………………………………………………………………………………….. . Riverside …………………………………………………………………………………………………………… . Sacramento ……………………………………………………………………………………………………… . San Bernardino ………………………………………………………………………………………………… . San Diego …………………………………………………………………………………………………………. . San Francisco …………….. ~ …………………….. ‘ …………………………………………………………… . Santa Clara ……………………………………………………………………………………………………….. . 26.08 27JJ7 23.23 22.81 25.06 42.30 31.37 30.68 24.48 24.05 29.26 Average………………………………………………………………………………………………………….. 27.85 \”Excludes supervisors. Continuing Cases Per Eligibility Worker\” 113.72 108.79 141.18 135.59 135.30 143JJ7 127.10 129.73 112.21 118.04 124.62 126.30 Similar variations in productivity exist among the medium and small counties. The productivity of the 11 largest counties has improved over the last four years from an average of 23.06 intake actions per eligibility worker in 1974-75 to 27.85 intakes in 1977-78. Although productivity has im- proved, the cost control plan continues to rely upon productivity expecta- tions which were established in 1974-75. While these productivity expectations were reasonable as a beginning point, we believe that they should be adjusted upward periodically to reflect the progress made in productivity as well as to encourage further improvements in productiv- ity. In order to encourage further improvements in welfare department performance, we recommend that the county Administrative Cost Con- trol Plan be revised to include more stringent productivity standards by changing the base year to 1977-78. For example, the department should Item 288 HEALTH AND WELFARE \/ 813 determine the average number of intake actions per eligibility worker for the large, medium and small counties using the 1977-78 base year. A county whose performance is below its respective group’s mean level would be required to increase its activity to equal the average level of its group. If a county is unable to improve worker productivity to operate within its allocation, the county would have to provide additional funds to cover the deficit. If this recommendation is adopted, it will result in savings to the state for the cost of welfare administration by encouraging greater productivity by county welfare departments. For example, Orange County, which averaged 25.06 intake actions per eligibility worker in 1977-78, would be allocated only enough funds in 1979-80\u00b7 for 27.85 intake actions thereby requiring an improvement in worker productivity. (The 27.85 intake ac- tions is the average number of intake actions in 1977-78 for the 11 largest counties.) Provisions for Overhead Costs We recommend that county allocations be calculated on the assumption that no county will spend more than $1 on overhead support for each $1 spent on eligibility worker salaries and benefits. On a statewide basis, counties spend approximately $1 on overhead for each $1 spent on eligibility worker costs. Eligibility workers are the em- ployees who deal with the public and make the eligibility determinations. Overhead costs consist of expenditures for administrative staff, clerical backup staff, rent, travel, data processing, charges made by the other county agencies, and other operating costs. Table 3 shows the wide varia- tions between counties in the amounts spent on overhead support. Table 3 AFDC Program County Welfare Department Overhead Cost Ratios 1977-78 Overhead per $1.00 of eJigibilitv worker cost Fresno……………………………………………………………………………………………………………………………………………. $.57 Sacramento …………………………………………………………………………………………………………………………………… .63 San Diego …………………………………………………………………………………………………………………………………….. .65 San Bernardino……………………………………………………………………………………………………………………………… .74 Orange ……………………………………………………………………………………….. , ……………… ………….. ; ……………….. ;.. .88 Santa Clara …………………………………………………………………………………………………………………………………… .88 Alameda………………………………………………………………………………………………………………………………………… .97 San Francisco ……………………………………………………………………………………………………….. : ……….. :………….. .96 Contra Costa …………………………………………………………………………………………………………………………………. 1.05 Riverside ………………………………………………………………………………………………………………………………………. 1.01 Los Angeles…………………………………………………………………………………………………………………………………… 1.24 We do not believe that these wide variations between the .ll largest counties are justified. In order to reduce county variations .in overhead costs, we recommend that county allocations be calculated on the assump- 814 \/ HEALTH AND WELFARE Item 288 COUNTY ADMINISTRATION-,-Continued tion that no county will spend more than $1 on overhead for every $1 spent on eligibility worker salaries and benefits. If this recommendation is adopted, it will result in savings to the state because it would require that comities reduce their overhead cost ratios to no more than $1 for every $1 spent on eligibility worker salaries and benefits. For example, Contra Costa County would be required to reduce its overhead costs from $1.05 to $1. Phase-in of Revised Allocations We recommend that the department develop a plan for phasing-in revised productivity standards to avoid immediate sizable reductions for individual counties. Such phase-in recommendations should be presented to the Legislature by April 1, 1979. Some counties might not be able to reach the recommended productiv- ity standards in a single year without having to either layoff existing staff or commit substantial additional county funds to the system. Therefore, we recommend that the department develop a system of phased alloca- tion reductions and be prepared to present the proposal to the Legislature. by April 1, 1979. We further recommend that the departmen.t not allocate phase-in funds to a county until the state and county have signed a memo- randum of understanding outlining the steps the county will take to im- prove its productivity. Avoidance of Cost Overruns We recommend language be included in the Budget Bill to clarify the department’s authority to refuse funding for county cost overruns. Current Budget Act language states that funds for county welfare de- partmentadministration will be controlled within the amount appropriat- ed. Some counties have argued that if there is a year-end surplus in the county administrative item, the state is obliged to fund county cost over- runs, including overruns caused by a county’s failure to meet its productiv- ity goals. If the state were to use remaining funds to cover these cost overruns, the incentives to improve productivity and efficiency would be weakened significantly. For this reason, we recommend that surplus funds not be used for county cost. . . Because the current Budget Bill language is general, we recommend the following language be added specifying that the department shall not fund county cost overruns caused by a county’s failure to meet its produc- tivity goals. \”Provided further that during the 1979-80 fiscal year the department in administering the plan to control county administrative costs shall not allocate funds\u00b7 to cover county cost overruns which result from county failure to meet minimum productivity expectations.\” Items 289-290 HEALTH AND WELFARE \/ 815 Department of Social Services EXECUTIVE MANDATES Item 289 from the General Fund Budget p. 777 Requested 1979-80 ……………. ; ……………………………………………….. . Estimated 1978-79 ………………………………………………………………… . Actual 1977-78 ……………………………………………………………………… . Requested increase-None Total recommended reduction …………………………………………… . ANALYSIS AND RECOMMENDATIONS We recommend approval. $42,100 42,100 N\/A None The Governor’s budget proposes a General Fund appropriation of $42,- 100 to reimburse counties for the cost of implementing state regulations for the Aid to Families with Dependent Children (AFDC) program and the Aid to the Potentially Self-Supporting Blind program, in accordance with Section 2231 of the Revenue and Taxation Code. 1. Work Related Equipment. The department has implemented regu- lations which exclude the entire value of an AFDC recipient’s work-relat- ed equipment from property value in determining eligibility for benefits. Previous regulations provided a maximum exemption of $200. 2. Treatment of Loans. The department proposes to implement regu- lations which would change the method of treating loans when calculating a recipient’s grant level under the AFDC and APSB programs. Under current regulations, outside loans made to recipients are counted as in- come when determining a recipient’s grant. The proposed regulations would exclude loans which the recipient is required to repay from income. Department of Social Services LEGISLATIVE MANDATES Item 290 from the General Fund Budget p. 783 Requested 1979-80 ………………………………………………………………. . Estimated 1978-79 ………………………………………………………………… . Actual 1977-78 ……………………………………………………………………… . Requested decrease $2,174,637 (13.1 percent) , Total recommended reduction ………………………………………….. .. GENERAL PROGRAM STATEMENT $14,407,300 16,581,937 20,792,310 None Chapter 348, Statutes of 1976, increased the AFDC welfare payment standard by 6 percent, effective January 1, 1977, in order to support a higher standard of living for AFDC recipients. Normally, counties pay a portion of AFDC grant costs. However, because the state mandated the 816 \/ HEALTH AND WELFARE Item 291 LEGISLATIVE MANDATES -Continued increase, it has an obligation to reimburse counties for the local share of the 6 percent increase. Chapter 348 disclaims any obligation on the state’spart to reimburse counties for cost-of-living increases in payment standards. As a result cost- of-living increases do not affect the state’s level of reimbursement on a cost-per-case basis. ANALYSIS AND RECOMMENDATIONS We recommend approval. The budget requests $14,407,300 for fiscal year 1979-80 to reimburse counties for their portion of the cost of AFDC grant increases which became effective January 1, 1977. The proposed $14,407,300 is a decrease of $2,174,637, or 13.1 percent, below the current year. Expenditures in the current year are estimated at $16,581,937. This includes $1.5 million of a prior year balance to cover claims filed against fiscal year 1976-77. We recommend approval of this amount with the understanding that the appropriation is subject to adjustment when the Department of Fi- nance submits the May revision of expenditures to the Legislature. Health and Welfare Agency CALlFOR.NIA HEALTH FACILITIES COMMISSION Item 291 from the California Health Facilities Commission Fund Budget p. 793 Requested 1979-80 ………………………………………………………………. . Estimated 1978-79 ………… : …………………………………………………….. . Actual 1977-78 ………………………… , ………………………………………….. . $1,941,679 1,830,658 1,096,747 Requested increase $111,021 (6.1 percent) Total recommended reduction …………………………………………… . SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Cost Containment Study. Augment Item 291 by $65,000. Recommend the commission conduct study of state cost containment programs. 2. Research Support. Reduce Item 291 by $73,150. Recom- mend reduction of funds budgeted for increased research staff. 3. Patient Billing Data. Recommend legislation requiring hospitals to provide the commission with pa~ient discharge and billing data. $8,150 Analysis page 818 819 820 Item 291 HEALTH AND WELFARE \/ 817 General Program Statement The California Health Facilities Commission collects financial data from health facilities and discloses financial information on the facilities to the public. The commission was created by Chapter 1242, Statutes of 1971, which also required that a uniform accounting and reporting system be devel- oped for hospitals. Chapter U71, Statutes of 1974, applied this reporting requirment to long term care facilities. The purposes of the reporting requirement are to: (1) encourage economy and efficiency in providing health care services, (2) enable public agencies to make informed deci- sions in purchasing and administering publicly financed health care, (3) encourage organizations which provide health care insurance to take into account financial information provided to the state in establishing reim- bursement rates, (4) provide a uniform health data system for use by all state agencies, (5) provide accurate information to improve budgetary planning, (6) identify and disseminate information regarding areas of economy in the provision of health care consistent with quality of care, and (7) create a body of reliable information which will facilitate commis- sion studies that relate to the implementation of cost effectiveness pro- grams. Chapter 1337, Statutes of 1978 (SB 1903), expanded commission respon- sibilities by requiring the commission to: (1) establish standards of effec- tiveness for health facilities, and (2) forecast hospital operating and capital expenditures for each of the state’s Health Systems Areas and for the state as a whole. Health Systems Agencies must then consider these standards and forecasts in developing their area health plan. ANALYSIS AND RECOMMENDATIONS The commission proposes expenditures in the budget year of $1,941,679 which is an increase of $Ul,021 (6.1 percent) over the $1,830,658 shown in th~ budget for the current year. The primary reason for the increase is the addition of funds to establish five new positions. Cost Containment Study We recommend that the commission prepare a report for the Legisla- ture, to be submitted on or before January 1, 1980, which (1) describes existing state cost containment systems, (2) reviews any evaluations of these systems which have been performed, (3) discusses the applicability of these systems to California, (4) presents a range of options for California specifying the costs and the benefits of each and (5) recommends a specif- ic system. We further recommend that Item 291 be increased by $65,000 to support the costs of the study. Inflation Rate Excessive. Health care costs in the nation as well as in California have increased at an alarming rate. Data presented in the com- mission’s 1978 Annual Report demonstrate that: 1. Increases in hospital expenditures in California have averaged over 18 percent per year from 1972 to 1977. 2. During 1977 alone, hospital costs in California rose from $4.5 billion to $5.3 billion even though the service level did not change. 3. Between 1972 and 1976, Californians experienced a 93 percent in- 29-78013 818 \/ HEALTH AND WELFARE Item 291 CALIFORNIA HEALTH FACILITIES COMMISSION-Continued crease in hospital costs while the Consumer Price Index rose by only 36 percent. 4. If the inflation rate continues at 18 percent per year, California hospi- tal costs will rise from the present $5.3 billion to $21.6 billion by 1985. The commission estimates that government pays for approximately 60 percent of hospital costs in California. Specifically, it estimates that 7.2 percent of hospital revenues comes from county governments, 14.7 per- cent comes from Medi-Cal, 33.3 percent comes from Medicare, and ap- proximately 5 percent comes from government paid employee health benefits and income tax deductions for health care. Influence of Payment Systems. One factor which may be contributing significantly to the rapid rise in hospital cost is the payment system. In California, Medicare, Medi-Cal and Blue Cross pay hospitals retroactively for almost all expenditures they incur. Thus, government is providing what amounts to an open-ended appropriation for reimbursement of hos- pital operating costs in these program areas. This type of reimbursement system does not provide hospitals with any incentive to control costs because they receive total reimbursement for their charges. Twelve states have implemented cost containment programs which rely on prospective reimbursement systems. Under this method, hospital budgets and rates are set in advance and reimbursement is made only for the amount established at the beginning of the fiscal year. Nine of these states have mandatory programs, while three are voluntary. The systems being utilized vary considerably, from rate setting by formula (New York) to budget review (Indiana) to a combined system in Washington state. Even though the first prospective rate setting system was implemented over 10 years ago, only a few attempts have been made to analyze the effect of the systems on hospital costs. The Health Care Financing Admin- istration (HCFA) in the U.S. Department of Health, Education and Wel- fare (HEW) has received evaluations on four state systems (New Jersey, Rhode Island, Indiana and New York) and a program in western Pennsyl- vania, which show that prospective reimbursements lessened the pace of inflation in hospital costs from 1 to 3 percent per year. These evaluations are the first in the nation to carefully document the effect of prospective reimbursement. (A 2 percent reduction in California in 1977 would have resulted in a savings of almost $900 million.) Additionally, the Secretary of HEW recently released data which demonstrated that in 1977, states with mandatory cost containment programs had an average inflation rate for hospital costs of 12 percent, while states with voluntary programs experienced an average rate of 15.6 percent and states with no programs experienced a 15.8 percent average rate. Study Needed. The state’s considerable financial interest in control- ling health care costs requires that California consider the adoption of a prospective budgeting system for hospitals. We believe that before a spe- cific system is adopted, however, a review of existing systems should be conducted. We recommend, therefore, that the commission prepare by January 1, 1980, a report for the Joint Legislative Budget Committee and Item 291 HEALTH AND WELFARE \/ 819 the fiscal subcommittees which (1) describes eXisting cost containment programs implemented by other states (both mandatory and voluntary), (2) reviews any evaluations of these systems which have been performed, (3) discusses the applicability of each system to California, (4) presents a range of options for California including an analysis of the costs and bene- fits of each option and (5) recommends a specific system. The commission estimates the cost of preparing a report of this nature at $65,000. We believe that this is a reasonable estimate and recommend an augmentation of $65,000 to Item 291 from the California Health Facili- ties Commission\u00b7 Fund. Research Support We recommend deletion of the four positions requested to support the commissions research functions, for a savings of $73,150. Last year, the Legislature authorized 25 new positions to augment the commission’s research activities. Specifically, the additional positions were intended to undertake the following projects: (1) establish a soundly based peer grouping system for hospitals, (2) develop a detailed analysis of hospitals’ present and future capital costs and their impact on patient cost, (3) analyze hospital cost per capita by county, (4) study the.reimburse- ment practices of private health insurance companies, (5) examine the effect of increased staffing on hospital costs (for each health systems area) , (6) produce information’on the efficiency of hospitals, (7) study the com- pensation of hospital based physicians, (8) report on tl}e costs of excess bed capacity in hospitals, (9) develop a uniform budget and rate system for hospitals, and (10) develop a system for the collection of patient and discharge data. . Because it was estimated that the revenue in the California Health Facilities Commission Fund would not be adequate to fund them, the Legislature appropriated $195,000 from. the General Fund to support the positions. The Governor vetoed the $195,000 General Fund appropriation and the Department of Finance subsequently deleted five of the positions. The commission proposes to add four positions in the current year. These positions would assist the 20 which were established in the current year in carrying out the research activities listed above. Data provided to the Legislature during last year’s hearings indicate that the first phase of seven of these projects will be completed by January 1980, and that staff will then perform \”ongoing activities.\” There are no data available which specifically detail the ongoing functions resulting from these research projects. We do not believe that four requested positions should be approved unless workload data demonstrate that the ongoing functions of these projects require a staffing level higher than the existing 20 positions. Consequently, we recommend deletion of the four proposed positions. Accounting Position We recommend approval of the requested account clerk II position. Last year the commission’s staff doubled in size from 32 to 64 positions. The commission is requesting an additional position for its business serv- ices section to assist with the additional workload generated by the staff 820 \/ HEALTH AND WELFARE CALIFORNIA HEALTH FACILITIES COMMISSION–Continued increase. We believe the position is justified. Patient Billing Data Needed Items 292-299 We recommend that legislation be introduced requiring hospitals to provide the commission with patient discharge and billing data. The commission is charged with identifying and disseminating informa- tion on ways of promoting economy in the provision of health care, consist- ent with high quality care. One of the tools critical to the analysis of hospital costs is the capacity to review patient discharge and billing data. Having access to this information would permit the commission to (1) assess the complexity of an individual hospital’s patient load, (2) group and compare hospitals by difficulty of patient load, and (3) compare the charge structures of hospitals for delivery of similar services. Patient dis- charge and billing data are collected in abstracts, without patient or physi- cian name. Thus, supplying the data to the commission would not violate confidentiality requirements. Further, a format for data collection has already been established (the Uniform Hospital Discharge Data Set for California). This formaUs being used by many California hospitals and is endorsed by the California Hospital Association. In our analysis of Items 257 and 346, we have recommended that county and university hospitals be required to provide these data to the cominis- sion. While some hospitals are providing the data on a voluntary basis, we believe that the state’s substantial investment in controlling health care costs warrants mandatory compliance with this vital information require- ment. We therefore recommend that all hospitals be required to submit patient and discharge data to the commission. Health and Welfare Agency DEPARTMENT OF CORRECTIONS Items 292-293 and 29~299 from the General Fund, Item 294 from the Inmate Welfare Trust Fund, and Item 295 from the Correctional Indus- tries Revolvirig Fund Budget p. 796 Requested 1979-80 ……………………………………………………………….. $268,339,741 Estimated 1978-79…………………………………………………………………. 257,873,733 Actual 1977-78 ………………………………………………………………………. 253,824,967 Requested increase $10,466,008 (4.0 percent) Total recommended reduction ……………………………………………. $1,491,754 Items 292-299 1979-80 FUNDING BY ITEM AND SOURCE Item 292 293 294 295 296 m 298 299 Description Departmental Operations Workers’ Compensation-Inmates Inmate Welfare Fund Correctional Industries Transportation of Prisoners Returning Fugitives from Justice Court Costs and County Charges Local Detention of Parolees Total HEALTH AND WELFARE \/ 821 Fund General General Trust Revolving General General General General Amount $263,198,273 1,247,600 (6,339,900) (20,812,841 ) 233,200 816,200 924,550 1,919,918 $268,339,741 Analysis SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS page 1. Canteen Manager. Reduce Item 292 by $16,338. Recom- 826 mend that prison canteen manager position be funded by the Inmate Welfare Fund. 2; New Positions. Reduce Item 292 by $35,498. Recom- 827 mend deletion of two security positions requested for spe- cial housing units at Deuel Vocational Institution. 3. Headquarters Car Pool. Recommend that three cars per- 828 manently assigned to executive\/administrative staff be placed in the departmental car pool for the benefit of all headquarters staff. 4. County Reimbursement for Detaining Parolees. Reduce 829 Item 299 by $1,439,918. Recommend elimination of over- budgeting. GENERAL PROGRAM STATEMENT The Department of Corrections, established in 1944 under the provi- sions of Chapter I, Title 7 (commericing with Section 5000) of the Penal Code, operates a system of correctional institutions for adult felons and nonfelon narcotic addicts. It also provides supervision and treatment of parolees released to the community as part of their prescribed terms, and advises and assists other governmental agencies and citizens’ groups in programs of crime prevention, criminal justice, and rehabilitation. To carry out its functions, the department operates 12 major institutions, 19 camps, two community correctional centers and 58 parole units. The department estimates these facilities and services will provide for an aver- age dllily population of 22,980 in institutions and 14,677 on parole (includ- ing felons and nonfelon drug addicts) . ANALYSIS AND RECOMMENDATIONS The budget proposes $268,339,741 from the General Fund for support of the Department of Corrections in 1979-80. This is $10,466,008, or 4 percent more than estimated expenditures in the current year. The department’s proposed budget provides for program and personnel increases in the institutional program and decreases in the community correctional program. Other departmental programs generally would be continued at their previously authorized level. Total expenditures of the department, the Narcotic Addict Evaluation Board, and special items of 822 \/ HEALTH AND WELFARE Items 292-299 DEPARTMENT OF CORRECTIONS-Continued expense, from all funding sources (General Fund, special and federal funds, and reimbursements), are summarized in Table 1. Control Sections 27.1 and 27.2 Control Sections 27.1 and 27.2 of the Budget Act bf 1978 require that the Department of Finance restrict expenditures for personal services and operating expenses and equipment in order to achieve a specified funding reduction in the current year. The proposed budget for the department indicates that the following savings will be achieved pursuant to these provisions: a. $1.5 million savings in operating expenses and equipment and; b. $363,000 savings in personal services fro:Ql the reduction of 16.5 posi- tions. The budget proposes the continued deletion of the positions. Table 1 Department of Corrections Expenditures Summary General Fund ………………………………….. . Correctional Industries Revolving Fund ………………………………………… .. Inmate Welfare Fund …………………….. .. Federal funds …………………………………. .. Reimbursements ……………………………. .. Total …………………………………………….. . Program I. Reception and diagnosis …….. .. Personnel\u00b7years …………………… .. II. Institution ……………………………. .. Personnel\u00b7years …………….. ; ……. . III. Community correctional pro- gram ……………………………… .. Personnel-years .. , ………………… .. IV. Administration (undistribut- ed) ……………………………….. .. Personnel-years … ~ ……………….. .. V. Special items of expense …….. .. Totals ………………………………………… .. Personnel-years …………………… .. Estimated 1978-79 $257,873,733 20,197,764 5,919,240 108,777 10,758,295 $294,857,809 . $2,939,876 126.9 244,296,471 6,955.6 27,329,020 817.2 16,398,574 322.5 3,893,868 $294,857,809 8,222.2 a Proposed 1979-80 $268,339,741 20,812,841 6,339,900 91,777 8,008,880 $303,593,139 $3,039,477 128.1 252,095,773 7,021.1 26,283,643 ‘725.1 18,280,378 311.3 3,893,868 $303,593,139 8,185.6 b Change From Current Year Amount Percent $10,466,008 4.0% ‘615,077 420,660 ~17,()()() -2,749,415 $8,735,330 $99,601 1.2 7,799,302 .65.5 -1,045,377 -92.1 1,881,804 -11.2 $8,735,330 -36.6 3.0 7.1 -15.6 -25.6 3.0% 3.4% .9 3.2 .9 -3.8 -11.3 11.5 -3.5 3.0% -.5 a Reflects a reduction of 16.5 positions as required by Section 27.2, Budget Act of 1978. b Reflects an additional reduction of 50 poSitions. Impact of Determinate Sentencing On July 1, 1977, California’s Determinate Sentencing Law took effect, replacing the indeterminate sentencing structure and replacing both the Adult Authority (for male felons) and the Women’s Board of Terms and Paroles (for female felons) with a Community Release Board. The stated purpose of imprisonment is no longer rehabilitation of the offender. The law declares that \”the purpose of imprisonment for crime is punishment.\” Items 292-299 HEALTH AND WELFARE \/ 823 The Determinate Sentencing Law, as modified by Chapter 165, Statutes of 1977 (AB 476), and Chapters 579 and 582, Statutes of 1978 (SB 709 and SB 1057, respectively), establishes a scale of three sentences for most felonies, with some crimes carrying a penalty of death or life imprison- ment with or without the possibility of parole. There are ten such sentenc- ing scales, with the minimum being 16 months. In sentencing an individual to prison, judges must initially select one of the three basic terms set for each offense. The law establishes a presumption in favor of the middle term, with the upper and lower terms allowed for special aggravating or mitigating circumstances, respectively. In addition, judges can \”enhance,\” or increase, sentences for the following reasons: use of weapons, prior felony convictions, excessive property damage, and con- secutive sentences. Judges are not required to sentence all felons toprison; they retain the discretion to impose a fine, a county jail term, or probation, or to suspend sentence, as provided by law. Good behavior and work participation credits can reduce the amount of time served by one-third. Credits are vested every eight months on the basis of three months for good behavior and one month for prescribed work participation. The law stipulates a maximum of three years on parole for prisoners with determinate sentences and five years for those without determinate sentences (lifers). When an individual with a determinate sentence has been continuously on parole for one year after release from confinement, the Community Release Board must discharge him, unless the board de- termines, that there is \”good cause\” to retain him on parole. For felons without a determinate sentence, it is presumed that the parolee will be discharged after three continuous years unless the board determines there is \”good cause\” to retain the felon on parole. The maximum time for any single reincarceration resulting from a tech- nical violation of parole is one year (two years for paroled lifers) . Any such period of reincarceration is not credited to an individual’s parole period. Thus, the maximum amount of time persons with determinate sentences can be retained under’ parole and custody fora parole violation is four years; for persons with a life sentence the maximum period is seven years. Persons convicted of crimes committed through June 30, 1977, were sentenced under the Indeterminate Sentencing Law and individuals con- victed of crimes committed after that date are sentenced under the Deter- minate Sentencing Law. Table 2 shows the proportion of male felons convicted under the two laws. In cases where a person is convicted of a series of crimes, some of which predate the Determinate Sentencing Law, he may be sentenced under both laws. In these situations the Community Release Board (discussed in Item 300) is responsible for setting a determi- nate sentence. After the Determinate Sentencing Law became effective, it was nine months before 50 percent of the felony convictions in a month were sentenced under the new law. As of December 1978 this figure had increased to 75 percent. 824 \/ HEALTH AND WELFARE Items 292-299 DEPARTMENT OF CORRECTIONS-Continued Table 2 Type of Commitment Total Number of Male Felons Newly Received From Court July 1977-December 1978 Number Percent Date Total DSL\” ISL b Both DSL ISL Both 1977 July ………………………………………. 582 579 3 99.5 0.5 August …………………………………. 593 8 581 4 1.3 98.0 0.7 September ……………………………. 506 32 459 15 6.3 90.7 3.0 October ……………………………….. 509 53 433 23 10.4 85.1 4.5 November ……………………………. 557 125 410 22 22.4 73.6 4.0 December ……………………………. 674 223 405 46 33.1 60.1 6.8 1978 January …………………………………. 652 258 330 64 39.6 50.6 9.8 February ……………………………… 589 276 258 55 46.9 43;8 9.3 March …………………………………… 808 410 323 75 50.7 40.0 9.3 April …………………………………….. 732 416 241 75 56.8 32.9 10.3 May …………….. ………………………. 761 456 223 82 59.9 29.3 10.8 June …………………………………….. 895 585 240 70 65.4 26.8 7.8 July ………………………………………. 666 439 184 43 65.9 27.6 6.5 August …………………………………. 795 540 195 60 67.9 \\ 24.5 7.6 September ……………………………. 690 483 163 44 70.0 23.6 6.4 October ……………………………….. 722 502 170 50 69.5 23.6 6.9 November ……………………………. 751 570 140 41 75.9 18.6 5.5 December\” ………………………….. 690 517 126 47 74,9\u00b7 18.3 6.8 \”Determinate Sentence Law. b Indeterminate Sentence Law. \” Tentative. I. RECEPTION AND DIAGNOSIS PROGRAM Through four reception centers, the department processes four classes of persons: those committed to the department for diagnostic study prior to sentencing by the superior courts, those sentenced to a term of years, those returned because of parole violation, and nonfelon addicts. The department provides the courts, on request, a comprehensive diag- nostic evaluation and recommended sentence for convicted felon offend- ers awaiting sentencing. For individuals committed to prison, an extensive personal history is compiled for determining suitable custody and pro- gram needs. The new felon commitments are received at reception cen- ters located adjacent to and operated as part of regular penal institutions for males at Vacaville and Chino, for females at Frontera, and for nonfelon addicts at Corona. The proposed expenditure of $3,039,477 for this program is $99,601, or 3.4 percent, above estimated current-year expenditures. The increase is for merit salary adjustments and price inflation in order to continue the existing program level. Items 292-299 HEALTH AND WELFARE \/ 825 II. INSTITUTION PROGRAM This program includes the department’s 12 institutions, which range from minimum to maximum security, including two medical-psychiatric institutions and a treatment center for narcotic addicts under civil com- mitment. Major programs include 25 correctional industry operations and seven agricultural enterprises which seek to reduce idleness and teach good work habits and job skills, vocational training in various occupations, aca- deinic instruction ranging from literacy classes to college correspondence courses, and group and individual counseling. The department will also operate 19 camps which will house an estimated 1,280 inmates during the budget year. These camp inmates perform various forest conservation, fire prevention and suppression functions in cooperation with the Depart- ment of Forestry. The institution program will provide for a projected average daily population of 22,980 inmates in the budget year, an increase of 1,555 inmates over the current year. Need for Increased Special Housing Units The department maintains special housing units for three types of in- mates to keep them isolated from the general, \”mainline,\” population: (1) Security Housing Units. These are the most secure \”lock-up\” facilities within an institution. They are used for inmates who pose difficult management problems and endanger the safety of other inmates. (2) Management Control Units. These are secure units used to segre- gate from the mainline population inmates who are identified as affiliated gang members. Segregation of gang members is intended to reduce fights between the gangs and reduce pressure on other inmates to become gang members. (3) Protective Housing Units. These units are used for inmates who are vulnerable to pressure (for any number of reasons) or are threatened and require protection from other inmates. . The department is filled to capacity in all three types of units. Further- more, there is a waiting list of approximately 75 for bedspace within these special housing units. The increased need for\u00b7 security housing units pri- marily results from four factors: (1) the department estimates that the prison population will increase by 1,555 during the budget year; (2) the proportion of the prison population that is violence prone or predatory is increasing; (3) the size of prison gangs appears to be increasing both inside and outside the prisons; and (4) the intensity of warfare between gangs is increasing. To increase capacity within these facilities the department is proposing modifications in four institutions: 1. Folsom State Prison. Convert, on a temporary basis, 31 cells to a security housing unit; 2. San Quentin State Prison. Convert 229 cells from a protective hous- ing unit to a security housing unit, and convert 244 cells from an honor- block to a protective housing unit; 3. Deuel Vocational Institution (DVI). Convert 299 cells to a protec- tive housing unit and 50 cells to a security housing unit. 826 \/ HEALTH AND WELFARE Items 292-299 DEPARTMENT OF CORRECTIONS-Continued 4. California Institution For Men. Convert 50 cells to a protective housing unit and 50 cells to a security housing unit. These modifications will provide the department with an additional 360 cells for security housing and 364 cells for protective custody. The depart- ment estimates that these conversions will solve only its short-term needs. To implement the conversions listed above, the department is request- ing 133.9 new positions at a total aimual cost of $2,559,891. The increased staffing is primarily necessitated by the increased security requirements of special housing units. We believe all but two of these new positions are justified by workload, and recommend that they be approved. However, among the new positions requested for DVI is one that should be funded by the Inmate Welfare Fund and two which should be deleted. New Prison Facilities New prison facilities are being proposed by the department and are discussed under Item 475a. This office is also recommending that up to three base centers operated jointly by the Department of Forestry and the California Conservation Corps be returned to their original use as inmate conservation camps operated by the Departments of Forestry and Correc- tions, as discussed in Item 188 .. Improper Funding We recommend that a prison canteen manager proposed for the special housing units at Deuel Vocational Institution be funded by the Inmate Welfare Fund for a savings to the General Fund of $16,338 (Item 292). A Prison Canteen Manager I position is proposed to receive, fill and deliver canteen orders of inmates in the special housing units at DVI. (Inmates confined in these units are not allowed normal access to the prison canteen.) An additional task would be to inspect canteen orders to insure that contraband items, such as glass, are not given to the inmates. The Inmate Welfare Fund, which receives revenues from the sale of canteen products and inmate handicraft items, supports canteen activities throughout the department. Because this position is totally related to providing canteen service to the special housing units, it should be sup- ported from the Inmate Welfare Fund, rather than from the General Fund. This would conform to existing policy. Excess Recreational Time We recommend deletion of two security positions proposed for the protective housing unit at Deuel Vocational Institute for a savings of $35,498 (Item 292). Two new correctional officer positions are proposed for the protective housing unit at DVI to supervise the recreation yard-one from the yard itself and the other from a gun tower. This augmented staffing (two existing correctional officers positions used to supervise the yard will be continued) would allow 16 hours a day for outside recreational activity. Also programmed for this protective custody unit is an existing crafts program, a new vocational wood-working program, as well as academic instruction. Items 292-299 HEALTH AND WELFARE \/ 827 Given these other activities, we believe that eight hours of outside recreation per day is sufficient for this group of inmates. The protective custody units at other institutions have a maximum of eight hours per day for such activity and the department has provided no justification for providing a higher level of recreation for this unit. Therefore, we recom- mend deletion of the two new correctional officer positions. III. COMMUNITY CORRECTIONAL PROGRAM The community correctional program includes conventional ‘~nd spe~ cialized parole supervision, operation of community correctional centers, outpatient psychiatric services, anti-narcotic testing and community re- source development. The program goal is to provide public protection as well as support and services to parolees to assist them in achieving success- ful parole adjustment For the Community Correctional program, the department proposes an expenditure of $26,283,643 in the budget year, which is a decrease of $1,045,377 or 3.8 percent below estimated current-year expenditures. This decrease reflects a decline in the parole population and the closing of the Sacramento Valley Community Center. The felon parole population has decreased. primarily as a result of the Determinate Sentencing Law, which limited parole to one. year for all parolees except those who had been sentenced to life terms. Also contrib- uting to the decline in parole has been a decrease in the non-felon, civil narcotic addict parole population. These narcotic addicts are criminal offenders whose drug addiction is recognized by the court as having con- tributed to the offense. For this reason, their felony convictions are sus- pended and they are committed to the department for treatment of their addiction under Section 3152 of the Welfare and Institutions Code. In- creasing numbers of these defendants prefer sentencing on a felony con- viction with a set term and one year on parole, rather than risk the possibility of serving a total period of seven years (including incarceration and parole) under Section 3152. This appears to be a direct result of the Determinate Sentencing Law. We concur with the closing of the Sacramento Valley Community Cen- ter, a half-way house which serves as a temporary residence for parolees. Since the facility was opened; there have been problems maintaining the population at staffed bed capacity. The facility was previously used as a work furlough center, but insufficient numbers of inmates with the re- quired security classification wanted to participate in the program in the Sacramento area. More recently, following\u00b7 conversion of the center to a half-way house, there has been a sh()rtage of parolees using its facilities. The department will attempt to find a community vendor to operate the center on a contractual basis. Because payment to such vendors would be on a per capita basis, costs of operation should decline from present levels. IV. ADMINISTRATION The administration program, including centralized administration at the departmental level headed by the director, provides program coordi- nation and support services to the institutional and parole operations. Each institution is headed by a warden or superintendent and has its own 828 \/ HEALTH AND WELFARE Items 292-299 DEPARTMENT OF CORRECTIONS-Continued admiIlistrative staff. Institutional operations are divided into custody and treatment functions, each headed by a deputy warden or deputy superin- tendent. The parole operation is headed by a chief parole agent, assisted by centralized headquarters staff. Each of the 4 parole regions is directed by a parole administrator, and the parole function is subdivided into dis- tricts and parole units. Headquarters Car Pool We recommend that three cars permanently assigned to executive\/ administrative staff be placed in the departmental car pool for the benefit of all headquarters staff. The department has five vehicles permanently assigned to executive\/ administrative staff: (1) Director, (2) Chief Deputy Director, (3) Deputy Dir~ctor, Institutions, (4) Assistant Director, Law Enforcement Liaison, and (5) Senior Special Agent, Law Enforcement Liaison. Three of these automobiles should be placed in the departmental car pool-those as- signed to: (1) Chief Deputy Director, (2) Deputy Director, Institutions, and (3) Assistant Deputy Director, Law Enforcement Liaison. Travel logs for these three vehicles have not be filled in on a daily basis during the past year as required by Sections 4143.1 and 4143.2 of the State Administrative Manual. This has made it impossible to determine to what extent and for what purposes these cars are needed on an individual basis. Furthermore, Fleet Administration of the Department of General Serv- ices specifically disapproved the Home Storage Request permits for all three of these cars, in August 1978, on the basis that .using these cars for commute purposes was not necessary for these individuals to meet their administrative responsibilities. Therefore, we recommend that these three cars be permanently as- signed to the departmental car pool for the benefit of all headquarters staff. This will reduce the departments’ need to obtain other automobiles from Fleet Administration, and thereby provide more efficient use of state vehicles. V. SPECIAL ITEMS OF EXPENSE Items 296 to 299 provide reimbursements to the counties for expenses relating to transportation of prisoners and parole violators to state prisons, returning fugitives from justice to the state, court costs and all other charges relating to trials of inmates for crimes committed in prison and local detention costs of state parolees held on state orders, These reim- bursements are made by the State Controller on the basis of claims filed by the counties. As shown in Table 3, costs in three categories are expected to remain the same as in the current year, while court costs and county charges are expected to decrease by $800,000 or 46.4 percent. Item 300 HEALTH AND WELFARE \/ 829 Table 3 Change From Actual Estimated Proposed Prior Year Function 1977-78 1978-79 1979-80 Amount Percent Transportation of Prisoners (Item 296) ……………………………………………. $220,000 $233,200 $233,200 Returning Fugitives from Justice (Item 297) ……………………………….. 770,000 816,200 816,200 Court Costs and County Charges (Item 298) ……………………………….. 1,626,934 1,724,550 924,550 $-800,000 -46.4% County Charges for Detention of Pa- rolees (Item 299) …………………….. 616,000 1,919,918 . 1,919,918 County Reimbursements for Detaining Departmental Parolees Overbudgeted We recommend that the amount proposed to reimburse county costs incurred in detaining certain department parolees be reduced by $1,439,- 918 (Item 299). Chapter 1237, Statutes of 1974, requires the department to reimburse counties for detaining its parolees when the detention is related solely to a violation of the conditions of parole. and not to a new criminal charge. The $1,919,918 budgeted for this purpose is based on the anticipated num- ber of confinement days multiplied by the estimated average per capita daily cost of operating county jails. However; the Attorney General has ruled that under Chapter 1237 the department can reimburse counties only for the added (that is, the incremental) costs of detaining state pa- rolees. The department estimates that conforming to the Attorney Gen- eral’s opinion would reduce payments to counties by approximately 75 . percent of the budgeted amount. Based on the Attorney General’s opinion, this item is overbudgeted. Therefore, we recommend that Item 299 be reduced from $1,919,918 to $480,000. Health and Welfare Agency COMMUNITY RELEASE BOARD Item 300 from the General Fund Budget p. 821 Requested 1979-80 ………………………………………………………………. . Estimated 197~79 ………………………………………………………………… . Actual 1977-78 ……………………………………………………………………… . Requested decrease $466,772 (9.0 percent) Total recommended reduction …………………………………………… . The Governor’s Budget reports these expenditures in the Department of Corrections. GENERAL PROGRAM STATEMENT $4,742,085 5,208,857 4,868,127 a None The Determinate Sentencing Law (Chapter 1139, Statutes of 1976) created a Community Release Board, replacing both the Adult Authority for male felons and the Women’s Board of Terms and Paroles for female felons. The board has nine members, all appointed by the Governor with the advice and consent of the Senate. In past years, program and budget data for this board and its predecessor agencies have been shown in the 830 \/ HEALTH AND WELFARE Item 300 COMMUNITY RELEASE BOARD-Continued Governor’s Budgetunder the Department of Corrections. Beginning with the budget year, the board’s budget is being shown separately, reflecting its independent status. . As discussed more fully in our analysis of the Department of Correc- tions’ budget request, the Community Release Board sets a determinate prison sentence and establishes the length and conditions of parole for male and female felons originally sentenced under the old Indeterminate Sentence Law. It also considers parole release for persons sentenced to life imprisonment with the possibility of parole. The one-third reduction in time served for good behavior and program participation, which the new law allows, is initially determined by the Department of Corrections, subject to review by the board on appeal from an inmate. The board decides whether and for how long to reincarcerate parolees for technical violations of parole. It is required to review the sentences of all felons committed to the Department of Corrections within one year of commitment to ascertain whether specific sentences are in conformity with sentences received by other inmates for similar offenses. The board also advises the Governor on applications for clemency. ANALYSIS AND RECOMMENDATIONS The budget proposes a General Fund expenditure of $4,742,085 for support of the Community Release Board in 1979-80. This is a decrease of $466,772, or 9 percent, from estimated current-year expenditures. As shown in Table 1, staff requirements are expected to decline by 10 personnel-years from 104.2 in 1978-79 to 94.2 during the budget year. This reflects the deletion of \u00b718 limited-term positions and 2.5 miscellaneous positions, which are partially offset by the addition of 10.5 new positions as discussed below. The board was not required to reduce staff under Section 27.2 of the Budget Act of 1978. Table 1 Community Release Board Budget Summary Personnel\u00b7 Years 1978-79 Expenditures …………………………………………………………………………………. 104.2 Positions Limited to June 30, 1979…………………………………………………………… -18.0 In re CarroU Decision ……………………………………………………………………………… 3.5 Disparate Sentence Review …………………………………………………………………….. 7.0 Other Adjustments ………… ,……………………………………………………………………….. -2.5\” 1979-80 Request ………………………………………………………………………………………….. 94.2 Amount $5,208,857 -664,903 365,570 82,865 -250,304 $4,742,085 \”Includes 1.7 positions transferred to the\u00b7 Department of Corrections and an increase of 0.8 position of \u00b7salary savings. Decline in Workload Resulting From Sentencin.g Law Change As discussed earlier, the Determinate Sentence Law replaced the In- determinate Sentence Law on July 1, 1977. It required the board to set a determinate sentence for all inmates sentenced before that date. To ac- complish this, the board was authorized 18 limited-term positions which will terminate on June 30, 1979. Workload changes are summarized in Table 2. Item 300 HEALTH AND WELFARE \/ 831 Table 2 Community Release Board Workload Indicators Number of Cases Workload 197~79 1979-80 1. Parole Consideration Hearings a. Life Term Prisoners …………………………………………… . 1,949 1,543 b. Non-Life Indeterminate Sentence Law …………… . 8,048 3,298 2. Extended Term Hearings ……………………………………… . 2,416 232 3. Parole Revocation Hearings ………………………………….. . 3,838 3,327 4. Rescission Hearings ………………………………………………… . 640 480 5. Denial of Good Time Credit ………………………………….. . 525 788 6. Review Length and Conditi(ln of Parole ………………. . 675 675 7. Discharge Review ………………………………………………….. . 9,215 7,954 8. Decision Review ……………………………………………………… . 10,414 5,204 Change from current rear Number Percent -406 -21% -4,750 -59% -2,184 -90% -511 -13% -160 -25% 263 50% -1,261 -14% -5,210 -50% The three most significant workload decreases are for: (1) Inmates sentenced for nonviolent crimes under the Indeterminate Sentence Law (Category 1 (b) in Table 2) for which the board must set a parole release date_ This element is expected to decrease by 4,750 cases or 59 percent; (2) Inmates convicted of violent crimes under the Indeterminate Sen- tence Law for which the board must conduct extended term hearings. This category will decrease by 2,184 cases or 90 percent;and (3) Head- quarters review of every decision rendered by a board panel for legality and consistency, which decreases by 5,210 cases or 50 percent. Court Decision Increases Costs In re Carroll, a California appellate court decision, held that the board must issue subpoenas for witnesses upon request of parolees, inmates or counsel at parole revocation hearings. The board is requesting 3.5 positions and $365,570 (including subpoena service costs and witness fees) to imple- ment this decision. Permanent Staff for Disparate Sentence Review The Determinate Sentence Law requires that the board review the sentence of each inmate to insure consistency with sentences received by other inmates sentenced for similar crimes and under similar circum- . tances. In the current-year, the board is using university workstudy stu- dents for this purpose. Because of rapid turnover of this type of employee and the resultant lack of consistency in review decisions, the board is requesting seven permanent positions and $82,865 for 1979-80. Due to the increasing workload (from 8,000 cases in 1978–79 to 17,000 in 1979-80) and the importance of consistency, we concur with the board’s request. 832 \/ HEALTH AND WELFARE Items 301-306 Health and Welfare Agency DEPARTMENT OF THE YOUTH AUTHORITY Items 301-306 from the General Fund Budget p. 823 Requested 1979-80 ……………………………………….. ……………………… $176,929,571 Estimated 1978-79…………………………………………………………………. 193,621,122 Actual 1977-78 ………………………………………………………………………. 124,009,031 Requested decrease $16,691,551 (8.6 percent) Total recommended reduction …………………………………… , … …… $654,459 1979-80 FUNDING BY ITEM AND SOURCE Item Description Fund Amount 301 Department Support General $118,439,941 302 Transportation of Persons Committed General 43,540 303 County Delinquency Prevention Com- General 33,300 missions 304 Delinquency Prevention Projects, Re- General 200,000 search and Training Grants 305 Detention Costs of Parolees General 75,500 306 County Justice System Subvention Pro- General 58,137,290 gram Total $176,929,571 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Camp Program Underutilized. Recommend department identify steps taken to insure that camp program is fully utilized. 2. Reception Center Capacity Misallocated Reduce Item 301 by $136,000. Recommend coeducational program be terminated and additional reception capacity made avail- able. 3. Additional Institutional Capacity Needed. Augment Item 301 by $278,048. Recommend staff and operating ex- penses be provided to house 40 additional wards. 4. Grant Overhead Funds. Reduce Item 301 by $134,406. Recommend workload adjustments because of reduced grant activity. 5. Teacher Costs. Reduce Item 301 by $17,(}()(). Recom- mend savings from reduced work-year option be recog- nized. 6. Disciplinary Decision-Making System. Reduce Item 301 by $156,940. Recommend positions added administrative- ly be deleted. 7. Cadet Corps Program. Reduce Item 301 by $42,310. Recommend equal pay for all camp programs. 8. Out-oE-State Travel. Reduce Item 301 by $14,310. Rec- ommend out-of-state travel funds be reduced to level of Analysis page 839 840 841 842 842 842 844 844 Items 301-306 HEALTH AND WELFARE -\/ 833 recent experience. 9. Local Justice Training. Reduce Item 301 by $7fi041. 845 Recommend local training program be reimbursable. 10. Chapter 461 Evaluation. Recommend evaluation address 845 potential state savings. 11. Chapter 461 Repayment Possibilities. Recommend defi- 846 nition of potential penalties. 12. County Reimbursement for Detaining Parolees. Reduce 846 Item 305 by $55,500. Recommend overbudgeting be eliminated. 13. Crime and Delinquency Prevention. Reduce Item 301 by 846 $100,000 and eliminate Item 304 ($200,000). Recommend the Office of Criminal Justice Planning become single state agency for crime and delinquency prevention. GENERAL PROGRAM STATEMENT The responsibility of the Youth Authority Board and the Department of the Youth Authority, as stated in the Welfare and Institutions Code, is \” . . . to protect society more effectively by substituting for retributive punishment, methods of training and treatment directed toward the cor- rection and rehabilitation of young persons found guilty of public of- fenses.\” The board and the department have attempted to carry out this mandate through the program areas discussed below. Youth Authority Board The Youth Authority Board, consisting of eight members, is charged with personally interviewing, evaluating and recommending atreatment program for each offender committed to the department. It also sets terms of incarceration and is the paroling authority for all such wards. Administration The administration program consists of (1) the department director and immediate staff, who provide overall leadership, policy determination and program management; and (2) a support services element, which pro- vides staff services for fiscal management, data processing, management analysis, personnel, training, and facility construction, maintenance and safety. Prevention and Community Corrections The prevention and community corrections program provides services to local public and private agencies and administers the County Justice System Subvention Program (Chapter 461, Statutes of 1978) and other local programs relating to delinquency prevention. The program consists of three elements: Financial aid, information, and juvenile detention facili- ties regulation. Institutions and Camps The institutions and camps branch is organized on a north-south re- gional basis. h operates four reception centers, eight institutions and five forestry camps as follows: —– — ——- 834 \/ HEALTH AND WELFARE Items 301-306 DEPARTMENT OF THE YOUTH AUTHORITY-Continued Facility Location Reception Centers: Northern Reception Center\/Clinic ……………………………………………………………………………. Sacramento Southern Reception Center\/Clinic …………………………. ;…………………………………………………. Norwalk Youth Training School Clinic a . . ….. . …. ….. . … .. … . … .. .. ……. ….. Chino Ventura Reception Center \/ Clinic a . …. .. . …. .. . …. …. …. . …… ….. … Camarillo Institutions: . Northern California Youth Center ……………………………………………………………………………… Stockton O. H. Close School KarlHolton School DeWitt Nelson Youth Training Center Preston School of Industry ………………………………………………………………………………………….. lone Fred C. Nelles School…………………………………………………………………………………………………… Whittier El Paso de Robles School ……………………………………………………………………………………………. Paso Robles Southern California Youth Center ……………………………………………………………………………… Chino Youth Training School Ventura School………………………………………………………………………………………………………………. Camarillo Camps: Ben Lomond Youth Conservation Camp ………………………………………… ;……………………….. Santa Cruz Pine Grove Youth Conservation Camp………………………………………………………………………. Pine Grove Mt. Bullion Youth Conservation Camp ………………………….. ,…………………………………………. Mariposa Washington Ridge Youth Conservation Camp ………………………………………………………….. Nevada City Oak Glen Youth Conservation Camp ………………………………………………………………………… Yucaipa a Colocated with institution. According to the Governor’s Budget, the department will house a pro- jected average daily population of 4,909 wards in the budget year (Table 1), which is 344 above the current-year estimate. Population projections are discussed later in this Analysis. Table. 1 Average Daily Population of Youth Authority Institutions 1977-78 Reception Centers (Male and Female Wards) …………………………………. 678 Facilities for Male Wards …………………………………………………………………… 3,332 Facilities for Female Wards ……………………………………………………………….. 114 Total ………………………………………………………………………………………………. 4,124 Change from Prior-Year ………………………………………………………………. , ….. . a Estimated. Parole Services 197~79a 1979-80\” 695 700 3,735 4,064 135 145 4,565 4,909 +441 +344 The primary role of the parole branch is to provide supervision of, and services to, wards after their release on parole. For management purposes, the branch is divided into four regions which supervise a total of approxi- mately 40 parole offices and two residential programs. Average parole caseload for 1979–80 is estimated at 6,931 or 37 (0.5 percent) less than anticipated in the current year. Items 301-306 HEALTH AND WELFARE \/ 835 Planning. Research. Evaluation and Development This program, through its planning and program assessment element, is responsible for the departmental planning process, reviewing problem issues and conducting short-term program reviews. The program and resources development element obtains grant funding and monitors grant-funded projects. The research element provides to management the evaluation and feedback considered necessary to determine those pro- grams that are effective and should be continued, those that show promise and should be reinforced and those that should be discontinued .. It also provides estimates of future institutional and parole caseloads for budget- ing and capital outlay purposes, and colleCts information on the principal decision points as the wards move through the department’s rehabilitation program from the time of referral to final discharge. ANALYSIS AND RECOMMENDATIONS . The budget proposes $176,929,571 from the General Fund for support of the Department of the Youth Authority in 1978-80. This is a decrease of $16,691,551, or 8.6 percent from estimated expenditures during the current year. Additionally, the department anticipates budget-year reiIn- bursements amounting to $9,126,663 and federal funds. totaling $532,809, for a total expenditure program of $186,589,043. Table 2 Budget Summary Department of the Youth Authority Estimated Proposed Change 1978-79 1979-80 Amount Funding General Fund ……………………………. $193,621,122 $176,929,571 $-16,691,551 Reimbursements ………………………… 14,035,442 9,126,663 -4,908,779 Federal funds ……………………………. 546,932 532,809 -14,123 Totals …………………………………… $208,203,496 $186,589,043 $-21,614,453 Programs Prevention and Community Cor- rections ……………………………….. $85,881,087 $60,946,629 $-24,934,458 Personnel-years ………………………. 67.6 65.5 -2.1 Institutions and Camps ……………… 94,465,843 97,958,329 3,492,486 Personnel-years ………………… , …… 3,540.9 3,500.9 -40.0 Parole Services ………………………….. 16,694,758 16;431,792 -262,966 Personnel-years ………………………. 440.9 428.1 -12.8 Planning, Research, Evaluation and Development ……………… 2,206,541 2,095,129 -1ll,412 Personnel-years ……… :.: ……………. 76.4 62.7 -13.7 Youth Authority Board ……………… 1;719,791 1,735,964 16,173 Personnel-years ………………………. 42.0 41.3 -0.7 Administration ………………………….. 7,035,476 7,421,200 385,724 Personnel-years ………………………. 221.5 214.4 -7.1 Title II Match a …. .. . . ….. . 200,000 -200,000 Reductions per Sections 27.1 and 27.2, Budget Act of 1978 …….. ( -1,265,000) (-700,000) (565,000) Personnel-years ………………………. -31.8 -31,8 Totals …………………………………… $208,203,496 $186,589,043 $-‘-21,614,453 Personnel-years ………………………. 4,357.5 4,281.1 -76.4 Percent -8.6% -35.0 -2.6 -10.4% -‘-29.0% -3.1 3.7 -1.1 -1.6 ~2.9 -5.0 17.9 0.9 -1.7 5.5 ~3.2 -100.0 (44.7) -10.4% ..,.1.8 a Provides for supplies and materials to match a federal Public Works Employment Act grant. 836 \/ HEALTH AND WELFARE Items 301-306 DEPARTMENT OF THE YOUTH AUTHORITY-Continued Expenditure Comparisons Misleading. Table 2 summarizes the budget request, showing sources of funding by category, expenditure levels by program, and proposed dollar and position changes. Comparisons between fiscal years in the General Fund and budget totals are misleading because onetime costs of $27.2 million are included in 1978-79 as a result of legislative changes\u00b7in the local assistance program. After adjusting for these onetime costs, the department’s General Fundrequest for 1979-80 increases by about $10.5 million (6.3 percent) over current-year costs, rather than decreasing by $16.7 million as indicated in the budget. These changes and the fiscal consequences thereof are discussed later in this Analysis. Subsidy Programs Revised 1. County Justice System Subvention Program. Chapter 461, Statutes of 1978 (AB 90), as modified by Chapter 464, replaced the local Probation Subsidy program and the subsidy programs authorized for the construc- tion and operation of juvenile homes, ranches and camps with the County Justice System Subvention Program (CJSSP). Under the new program, counties will receive in 1978-79 either a per capita grant of up to $2.55, or an amount equal to the sum of the amount received in 1977-78 from the repealed subsidy programs and as reimbursement for costs imposed by Chapter 1071, Statutes of 1976 (AB 3121), whichever is greater. For pur- poses of calculating the new subsidy, all counties are considered to have a population of at least 20,000. In order to receive state funds under the CJSSP, counties are required to maintain their juvenile and criminal commitment rates at or below their \”base\” commitment rate, which is calculated as the average number of new commitments to the Departments of the Youth Authority and Corrections per 100,000 population for fiscal years 1973-74 through 1976- 77. Commitments for specified violent offenses (murder in the first or second degree, or certain arsons, robberies, rapes and assaults, for exam- ple) and of certain repeat felons would be excluded from \”funding year\” commitment rates but not from the base rate calculation. Chapter 461, appropriated $55 million for the C]SSP in 1978-79. Of this amount, the Governor’s Budget indicates that $54,846,500 will be subvent- ed and the remaining $153,500 will be spent on an independent evaluation of the program’s effectiveness as mandated by Chapter 461. For 1979-80 the subsidy is budgeted at $58,137,290 or 6 percent more than the current- year amount. Language included in the 1979 Budget Bill would limit increases in county grants to 6 percent even though Chapter 461 requires that the 1979-80 increase be based on the change in the cost-of-living between December 1977 and December 1978 (about 8 percent). Chapter 464, which made minor changes in the County Justice System Subvention Program, also permitted $18 million appropriated by Chapter 1241, Statutes of 1977, to be expended. The purpose of this appropriation was to reimburse counties for Chapter 1071 costs incurred from January 1, 1977 to June 30, 1978. However, technical problems in Chapter 1241 (failure to specify disbursement procedures) precluded such payments. Items 301-306 HEALTH AND WELFARE \/ 837 The budget indicates that these payments will be made in the current year. 2. Detention of Status Offenders. Chapter 1061, Statutes of 1978, pro- vided limited circumstances in which minors taken into custody solely on the basis of a\”status offense\” (run-aways, for example) may be detained in a secure facility. Previously, such minors could be detained only in shelter care facilities, crisis resolution homes or other nonsecure facilities. Status offenders securely detained pursuant to Chapter 1061 must be kept separate from minors detained for law violations. The act provided $1.5 million to assist counties with capital outlay costs incurred in meeting this separation requirement. Current-Year Subsidy Costs Include Significant Onetime Expenses As a result of the enactment of the new subsidy programs and the expenditure of amounts appropriated by Chapter 1241, current-year local assistance expenditures include onetime costs of $27.2 million. This tends to inflate expenditures in the current year and accounts for the reduction in budget-year funding requirements. Funding for the department’s local assistance program is shown in Table 3. Table 3 Local Assistance Programs Department of the Youth Authority Program Probation SubSidy a ………………………………………………….. . Delinquency Prevention Commissions …………………. .. Delinquency Prevention Grants ……………………………. .. Chapter 1071, Statutes of 1976, Reimbursements a .. .. Tr2nsportation of Wards ………………………………………… .. Detention of Parolees ……………………………………………… .. CC’unty Justice System Subventions ………………………. .. Status Offender Detention Grants a ………………………. .. Total, Local Assistance …………………………………….. .. Estimated 1978-79 $7,700,000 b 33,300 698,976 18,000,000 43,540 75,500 54,846,500 1,500,000 $82,897,816 Proposed 1979-80 $33,300 200,000 43,540 75;500 58,137,290 $58,489,630 Change from Current-Year $-7,700,000 -498,976 -18,000,000 3,290,790 -1,500,000 $-24,408,186 a Onetime costs in. the current year. b ReqUired to liquidate county earnings through June 1978. which were paid.in arrears. Current-Year Deficiency Identified-Institutional Population Still Underbudgeted The Governor’s Budget reflects a deficiency of $1.1 million in current- year funding requirements because institution population levels have ex- ceeded original estimates. The department now anticipates an average daily population of 4,565 wards in the current year (compared to an earlier estimate of 4,412) and 4,909 in the budget year. By June 30,1980, the ward population is expected to total 5,005, which will result in all capacity, under present program formulas, being utilized. However, there are an addition- al 336 beds not in use because of special programs which utilize low caseload formulas. Institutional population data are shown in Table 4. 838 \/ HEALTH AND WELFARE DEPARTMENT OF THE YOUTH AUTHORITY-Continued Table 4 Items 301-306 Institutional Population-Department of the Youth Authority Change from Budgeted 1978-79 1979-80 CUrrent.year Beginning of Year …………………………………………………………………… .. End of Year ………………………………………………………………………………. . Average Daily Population ………………………………………………………. .. December 31, 1978 4,324 4,742 4,565 Projected Assuming Straight Line Increase ……………………………. 4,533 Actual………………………………………………………………………………………… 4,708 4,742 5,005 4,909 418 263 344 By comparing the actual December 31, 1978, population (4,708) to ei- ther the straight-line projection (4,533) or the average daily population for 1978-79 (4,565), as shown in Table 4, it is clear that the department had a greater number of wards in its institutions at the end of 1978 than is reflected in the Governor’s Budget. This indicates that the current-year deficiency of $1.1 million included in the Governor’s Budget is understat- ed. Additionally, it indicates that budget-year population projections are also understated, based on the current policy of the Youth Authority Board governing length-of-stay. Effective June 1, 1978, this policy increased the initial terms for some offenders, thus resulting in a longer average length- of-stay. While the length of stay has averaged 11.5 months for wards paroled in December 1978, that average may rise considerably as the percentage of wards whose terms were set under the new policy increases. Projections included in the Governor’s Budget were based on an average length of stay of 11.5 months in 1978-79, and 12 months in 1979-80. Initial terms. set by the board under the new policy have averaged 12.5 months. Three issues regarding the population problem are discussed later in this Analysis~ Expansion of Treatment Programs for Emotionally Disturbed Wards The department proposes to expand its capability to deal with emotion- ally disturbed wards by upgrading three regular program living units to . intensive treatment units, each of which will accommodate 35 wards. The additional 25 positions required to operate these prQgrams have been redirected from other activities. The intensive treatment units will be an intermediate level of care between the regular program and the existing medical\/psychiatric program, which has a capacity of 115 wards. Departments ~o be Removed from the Health and Welfare Agency Chapter 1252, Statutes of 1977 (SB 363), requires the Governor to sub- mit, by January 31, 1979, a reorganization plan removing the Departments of Cqrrections and the Youth Authority from the Health and Welfare Agency by July 1, 1979. The budget does not indicate the new organiza- tional placement of either department, or make any allowance for the costs that ~ight result from a reorganization plan. Position Reductions Unidentified The Governor’s Budget indicates that 31.8 unidentified positions and $700,000 have been deleted from the department’s budget pursuant to Section 27.2, Budget Act of 1978. According to the budget, these positions will be identified during legislative hearings. The effect of this reduction Items 301-306 HEALTH AND WELFARE \/ 839 on departmental operations cannot be precisely determined until the positions are identified. As a percentage of total staff, this reduction amounts to approximately 0.7 percent and should not significantly affect program performance. Camp Programs Still Underutilized We recommend that the department report during budget hearings on steps taken to insure that camp programs are fully utilized . The department currently operates five separate conservation camps and one camp-type program each at the EI Paso de Robles School and the DeWitt Nelson Training Center. Since early 1977 population levels of the five camps have been significantly below the budgeted level except for very brief periods. Last year, in addition to recommending that a budgeted, but unopened, institutional based camp at the Ventura School not be opened, we recom- mended that the department develop procedures to insure that all quali- fied wards were assigned to a camp. According to a January 1978 departmental report, there were more than an adequate number of camp- qualified wards in the department’s institutions at that time. Language was included in the Supplemental Report of the Conference Committee on the 1978 Budget Bill specifying that living units budgeted to be opened during 1978-79 remain closed unless existing capacity, especially in camps, is utilized substantially at the budgeted level. Despite this expression of legislative intent and the ward population pressures, which the department has experienced in 1978-79 (as evi- denced by the proposed $1.1 million deficiency), camp programs have continued to be underutilized throughout the current fiscal year. Month- end camps populations for July to December 1978 have ranged from 332 to 366, compared with a budgeted capacity of 380 and a physical capacity of 400. This underutilization has placed increased population pressure on the institutions. We therefore recommend that the department take necessary action to maximize utilization of the camps and advise the fiscal committees of its plan to achieve this objective. Reception Center\/Clinic Capacity Misallocated We recommend that the coeducational program located at the North- ern Reception Center\/Clinic be discontinued, and that reception capacity be increased by 21 beds for a net savings of $136,000 (Item 301). The department operates two reception center \/ clinics, one in Sacra- mento (the Northern Reception Center\/Clinic, generally referred to as NRCC) and one in Norwalk (the Southern Reception Center\/Clinic). The reception program serves as an entry and processing point for persons committed to the department. Wards usually spend three to four weeks at the reception points for evaluation prior to being assigned to a regular institution program or camp. In the current year, the reception centers have been constantly overcrowded, with wards sleeping in the medical facilities, on mattresses on day room floors, or at other institutions while waiting for processing space at the reception centers. To alleviate this problem, the department proposes to open on a full- ——.——-~ … ——— 84\u00b70 \/ HEALTH AND WELFARE Items 301–306 DEPARTMENT OF THE YOUTH AUTHORITY-Continued time basis, a small20-bed living unit at NRCC which is presently used only when overcrowding occurs. Because of its small size, this unit is not cost efficient. It requires nearly the full clinic staffing complement of about 12 staff members even though only 20 wards (compared to 50 in most recep- tion units) are served. We believe that the 20-bed unit should only be used for overflow capaci- ty. It is more appropriate, we think, to obtain the additional space required at NRCC by discontinuing a coeducational program (24 female\/11 male wards) at NRCC and using the 41 beds in that unit for reception purposes. With only minor staffing and cost adjustments, the female wards could be transferred to the Ventura School, which is the department’s primary institution for females. The Ventura School will be staffed in 1979\”-80 to provide a full range of programs for 215 female wards, although the budget anticipates that only 195 female wards will be housed there. Physical capacity of the staffed units is 245. The 11 male bed spaces currently located in the NRCC coeducational unit can be shited to one of the 50-bed living units currently budgeted for 30 wards at the Fred C. Nelles School. The fiscal consequences of this recommendation are shown in Table 5. Table 5 Budget Summary of Recommendation to Terminate Coeducational program 1 Savings from changing coeducational unit to reception unit.. …………………………………… . 2. Savings from not opening 2O-bed reception unit. ……………………………………………………… . 3, Cost of adding 24 female wards to Ventura School.. ………………………………………………….. . 4. Cost of adding 11 male wards to F.e. Nelles School.. ………………………………………………… . Net Savings …………………………………………………………………………………………………………………….. . $44,215 252,800 -106,056 -54,959 $136,000 In addition to increasing reception center capacity by 21 beds at a $136,000 savings, this recommended realignment would allow NRCC to continue using the 20-bed unit for reception overflow, thus reducing the need for wards to sleep on day room floors. If the department desires to maintain some capacity for female wards in northern California, it should transfer a full living unit from the Ventura School to one of the three institutions in Stockton. The displaced unit could then be transferred to the Ventura School. Provide for Additional Institutional Population We recommend that staff and operating expenses be provided to permit 40 additional wards to be housed at the FredG. Nelles School at a cost of $278,048 (Item 301). In 1972 the department implemented an experimental program at the Fred C. Nelles School in which the individual living unit populations were reduced from 50 to either 30 or 40 wards. It was assumed that by providing more intensive services, the average length-of-stay would decline enough to permit the institution to accept the same number of admissions as in the previous year. A 1974 departmental review of the program indicated Items 301-306 HEALTH AND WELFARE \/ 841 that this objective was not being met for various reasons, including a change in Youth Authority Board term-setting policies. Similarly, as shown in Table 6, wards assigned to 30 ward dormitories do not earn term reduc- tions sufficient to offset the difference in capacity between those units and the 40 ward units. Table 6 Wards Paroled from the F.e. Nelles School in 1977-78 Paroled with time additions ………………………………… . Paroled with time reductions …………………………….. . Totaled paroled …………………………………………………… .. Average change from initial term (in months) .. .. 30 Ward Units 32 (17%) 104 (56%) 184 -1.0 40 Ward Units 32 (22%) 101 (69%) 145 -1.8 Total 64 (19%) 205 (62%) 329 -1.3 The data in Table 6 are based on the unit from which each individual was paroled. Therefore, it does not necessarily represent time extensions or reductions for wards assigned to 30- or 40-bed units. However, to the extent that a bias is reflected, it probably would be in favor of the 30 ward units. This is because wards with short initiallengths-of-stay are assigned to the 30 ward units. If a ward so assigned recieves an increase in his confinement period because of misconduct, he is likely to be transferred to a longer-term, 40-ward unit. As discussed earlier, we believe that the institutional population level will exceed that presently forecast in the Governor’s Budget. To accom- modate a portion of the unbudgeted population, we believe that all living units at F.e. Nelles School should be raised to 40 wards. Therefore, we recommend that the department’s budget be increased by $278,048 for staff and operating expenses. If the department, in its May revision to the budget, anticipates a need to house more wards throughout the system than this proposal would accommodate, it should consider raising all living units above the 40-ward level. Grant Activity Declines-Administrative Support Not Needed We recommend that seven positions which support the departments grant program be deleted for a savings of $134,406 (Item 301). In our Analysis of the 1978 Budget Bill, we reported that the department anticipated receiving unrestricted grant overhead funds totaling $369,503. These funds are included in each grant to offset departmental costs for administering the grant program. Fifteen positions were identified as support staff for this function. However, the Governor’s Budget reflected that only five of these positions were supported by grant funds (at a cost of $118,260); the remaining ten positions were financed from the General Fund. Therefore, we recommended adoption of a policy requiring that all positions which provide administrative support to the department’s grant program be funded with grant overhead funds, and that General Fund support for this purpose be deleted. The administration concurred with this recommendation. The 1979-80 Governor’s Budget includes restricted grant overhead mo- nies totaling $140,294. However, all 15 positions supported by overhead funds in 1978-79 are still shown in the budget. Because of the reduction 842 \/ HEALTH AND WELFARE Items 301-306 DEPARTMENT OF THE YOUTH AUTHORITY-Continued in anticipated receipts, nine positions and $184,706 have been transferred to General Fund support for 1979-80. We have reviewed workload for these positions and believe that the work associated with seven of them are still grant-related. Due to the projected decline in gnmt support and workload, they should be deleted. If and when the department receives additional grants, any administrative positions needed at that time can be established on a workload basis. Therefore, we recommend that the de- partment’s budget be reduced by seven positions and $134,406 (Item 301). Ten-Month Work Year for Teachers Permit Savings We recommend a reduction of $17,()()() (Item 301) to reflect the savings resulting when teachers elect to work only 10 months per year. Because of the year-round nature of the department’s educational pro- gram, a teaching staffis retained on a full year basis. However, individual teachers may elect to be employed under a so-called \”10 \/12\” plan in which they work for 10 months but have their pay spread over the entire calen- dar year. The department usually accrues savings under the 10\/12 plan because the intermittent employees hired for the two-month period gen- erally are paid at a lower rate. Although the department estimates these savings at $17,000 in the cur- rent year, they are not reported as an offset to the 1979-80 funding re- quest. Therefore, we recommend that the department’s support budget (Item 301) be reduced by $17,000 to reflect these savings in the education- al program. . Additional Staff for Disciplinary Decision Making System Not Needed We r.ecommend that six positions added administratively in the current- year to funch’on as fact finders in the departments disciplinary system be deleted for a savings of $156,940. Background The Disciplinary Decision Making System (DDMS) was established as a result of a U.S. Supreme Court decision, Wolffvs. McDon- nell, which specified due process standards for residents of correctional institutions who. are subject to disciplinary actions. The decision estab- lished the following requirements for determining misconduct. 1. Advance written notice of charges must be given to the accused. 2. The accused shall be allowed to call witnesses and present evidence. 3. Substitute counsel shall be provided in some cases. 4. The fact finder must be impartial. 5. The fact finder must make a written statement as to the evidence relied on and reasons for\u00b7 the disciplinary action. Thirty-one positions, including nine clerical, were added to the depart- ment’s budget in 197fr77 for DDMS proceedings. The 10 institutions (in- cluding the two reception centers) chose to implement the fact finder requirements in different ways. In four institutions, including the Youth Training School which has the greatest disciplinary workload, middle management duties were realigned to permit one position to do almost all of the fact finding. In the other six institutions, this responsibility was shared among two or more middle managers, such as living unit supervi- Items 301-306 HEALTH AND WELFARE \/ 843 sors. Problem. The department found that the practice of allocating the fact-finding workload among several staff members created problems of uniformity and fairness in the fact-finding process. Therefore, the depart- ment administratively established six positions on July 1, 1978, to serve as DDMS fact finders in the six institutions where this function previously had been shared by middle management personnel, principally living unit supervisors. While we concur with the need to remove this function from the living unit supervisors and centralize it under a single employee, we do not, for the reasons discussed below, believe that full-time positions are justified for this program. . .. Although the budget change proposal which was prepared to justify full-time positions indicates that four hours of fact-finder time is required per case, the fact finder at the Youth Training School, who devotes about two-thirds of his time to this program, handled 841 cases in 1976,859 in 1977 and 317 in the first six months of 1978. This would indicate that the processing of an average case requires approximately 1.5 hours. For the two-and-one-half year period January 1976 through June 1978,\u00b7 none of the six institutions at which the positions were added had even one-half of the disciplinary workload at the Youth Training School. It is evident, therefore, that the task of fact finder at these institutions does not justify full-time positions. . Assigh Responsibility on Part-Time Basis. We believe a more cost ef- fective solution to handling the fact-finding function is for each of the six institutions to assign one position which does not involve supervising liv- ing units to serve as the primary fact finder. To reduce the amount of time diverted from their other management duties, individuals assigned this role should receive training from the Youth Training School fact finder. For these reasons we recommend that the six positions added adminis- tratively in the current year be deleted for a savings of $156,940. Significant Pay Increase for Ward Cadets We recommendthat wards assigned to the California Cadet Corps pro- gram at the Ben Lomond Youth Conservation Camp receive pay equal to that received by wards assighed to the department’s other camps for a savings of $42,310 (Item 301). During the current year, the department administrativelyeshiblished a California Cadet Corps company at the Ben Lomond Youth Conserva- tion Camp. This was done without notifying the Legislature pursuant to Section 28, and increased departmental costs by $53,270. The purpose of the program is to provide structured activity (marching, exercise drills, etc.) for what is ward leisure time in the department’s other camps. It is anticipated that this structure will avert some of the disciplinary problems that might otherwise occur. Under the program, wards participate in conservation work from 8AM to 4PM on weekdays and in cadet corps activities from 6:30 AM to 7:30AM and 6:30PM to 8:30PM on weekdays and 8AM to Noon on Saturdays. The department’s 1979-80 budget includes $202,690 for ward pay for the conservation camps. Wards assigned to the institution-based camps at 844 \/ HEALTH AND WELFARE Items 301-306 DEPARTMENT OF THE YOUTH AUTHORITY-Continued DeWitt Nelson and EI Paso de Robles and the four conservation camps which do not have the cadet corps program receive an average of $1.15 per day. When the cadet company was activated, the department in- creased ward pay rates at the Ben Lomond camp to an average of $3 per day. No justification for this increase has been provided. All camp wards receive premium pay while engaged in fire-fighting activities. While it is possible that the cadet program will avert some of the discipli- nary problems which might otherwise occur in the camp, we believe that it is inappropriate to provide a higher rate of pay for wards participating in this program than for wards assigned to the other camps. The primary purpose of the camps, in addition to instilling work habits as an element of ward rehabilitation, is to provide conservation work and maintain an emergency fire-fighting capability. Ward pay rates should be based on this activity rather than on the availability of a cadet program. Therefore, we recommend that the pay rate at this camp be reduced to the level paid at the other camps for a savings of $42,310 (Item 301). Out-of-State Travel Overbudgeted We recommend that funding for out-oE-state travel be reduced to the level of recent experience for a savings of $14,310 (Item 301). The Governor’s Budget includes $42,770 for out-of-state travel for the department. As shown in Table 7, such travel has been consistently over- budgeted since 1975-76. Table 7 Out-of-State Travel Expenditures Department of the Youth Authority Fiscal Year Budgeted 1975-76 .:……………………………………………………………………………. $41,160 1976-77 ……………………………………………………………………………… 35,BOO 1977-78 ……………………………………………………………………………… 39,380 1975-79 ……………………………………………………………………………… 40,100 Expended $17,096 24,421 23,867 Percent of Budget Spent 41.5% 68.2 60.6 Most of this expenditure is for transportation of staff accompanying wards being extradited from other states. The department has not yet identified other trips planned for 1979-80. Lacking detailed justification, we believe that the department’s out-of-state travel request should be reduced to the level expended in 1977-78, adjusted for an inflation rate of 20 percent (equal to that allowed for intrastate air transportation by the Department of Finance in its budget preparation instructions) . Therefore, we recommend an out-of-state travel allocation of $28,640 or 14,130 less than the amount included in the Governor’s Budget. Local Justice System Training Program Should .be Self-Sufficient We recommend that the departments localjustice training program be made fully reimbursable for a General Fund savings of$76,041 (Item 301). The department offers various training courses, such as advanced family counseling and juvenile law enforcement officer training, to local justice system employees. The total 1979-80 cost of this program will be $114,916, Items 301-306 HEALTH AND WELFARE \/ 845 of which $38,875 will be recovered through tuition fees. According to the department, tuition rates are based on what various outside consultants charge and include an amount to cover the program’s operating expenses. However, personnel costs are not considered in setting tuition. We believe that programs of this type should be funded on a \”user fee\” basis. That is, total costs should be recovered from program beneficiaries. This approach forces state programs to be competitive, in terms of cost and quality, with programs available elsewhere. Therefore, we recom- mend that this program be put on a fully reimbursable basis for a savings of $76,041 (Item 301). Chapter 461 Evaluation Should Address Potential Savings to State Correctional Agencies We recommend that the independent evaluation mandated by Chapter 461, Statutes of 1978 (AB 90), address the relationship between local pro- grams funded with Chapter 461 funds and the degree to which such programs reduce the need for state incarceration. Chapter 461, which established the County Justice System Subvention program (discussed earlier in this Analysis) , specified that an independent agency must conduct an evaluation of the program by June 30, 1982. The first six-months cost of the evaluation ($153,500) was allocated from the Chapter 461 appropriation, and the budget includes $307,700 to continue the evaluation in 1979-80. The department anticipates that the total cost of the evaluation will be approximately $1.1 million. The initial contract has been awarded to A. D. Little, Inc. Counties are permitted to spend their Chapter 461 allocations on local correctional services. These expenditures should help counties stay within the commitment limits (described earlier) by providing suitable local programs for certain offenders who would otherwise be committed to state correctional institutions. Because of the high cost of state incarcera- tion and the availability of Chapter 461 funds, we believe that the evalua- tion should address the degree to which these funds reduce the number of persons committed to state institutions, the services provided to them and the effect of the alternative dispositions on recidivism. Chapter 461 Repayment Possibilities Should be Defined We recommend that the department specify, in its regulations, those conditions under which it may require counties to repay sub ven ted funds. Under the County Justice System Subvention program, the director of the department is required to determine, at least annually, whether each county is complying with its commitment limit. If this review reveals that a county has exceeded its limit, or is likely to do so, it is given 60 days to submit a plan for correcting or avoiding the violation. If the director determines that the plan fails to resolve the problem in a satisfactory manner, the department may withhold all or a portion of the county’s future subventions or may require repayment of funds previously dis- bursed. Because of the wide discretion given to the director, we believe the department should specify, in its regulations, the criteria to be used in setting the penalty. 846 \/ HEALTH AND WELFARE Items 301-306 DEPARTMENT OF THE YOUTH AUTHORITY-Continued County Reiinbursements for Detaining Youth Authority Parolees Overbudgeted We recommend that amounts included to reimburse county costs in- curred in detaining certain YouthAuthority parolees be reduced to $20,- ()(}() for a savings of $55,500 (Item (05). Chapter 1157, Statutes of 1977 (AB 166), requires the department to reimburse courities for detaining Youth Authority parolees when the de- tention is related solely to the violation of the conditions of parole and not to a n.ew\u00b7 criminal charge. The act was patterned after Chapter 1237, Statutes of 1974, which requires the Department of Corrections to reim- burse counties for detaining adult parolees under similar conditions. The amount included in the budget is based on the anticipated number of confinement days times estimated average per capita costs for county jails ($20) and juvenile halls ($45). However, the Attorney General has ruled that under Chapter 1237 the Department of Corrections should reimburse counties only for their added (that is, incremental) costs of detaining state parolees. The language contained in Chapter 1157 govern- ing Youth Authority payments is identical to that in Chapter 1237. While the Department of the Youth Authority is making payments in accordance with the Attorney General opinion (generally between $2 and $8per day), it has budgeted on the higher, average per capita cost basis. Based on the Attorney General’s opinion, this item is overbudgeted. Therefore, we recommend that Item 305 be reduced from $75,500 to $20,000, for a savings of $55,500. Consolidate State Crime and Delinquency Prevention Activities We recommend that the Office of Criminal Justice Planning be desig- nated the lead agency for state crime and delinquency prevention activi- ties and that funding for overlapping activities of the Department of the Youth Authority be deleted, for savings totaling $300,000, consisting of $100,()(}() for administration (Item (01) and $200,()(}() in grants (Item (04). Presently, three state agencies interact with local public and private a,gencies seeking financial support for various crime and delinquency pre- vention projects. The Department of the Youth Authority awards General Fund grants totaling $200;000 per year and expends about $100,000 of staff time in this area. The Department of Justice has a $482,421 crime preven- tion program, and the Office of Criminal Justice Planning (OCJP) ex- pends approximately $40 million for projects designed to improve the criminal justice system. To eliminate duplication and overlap, total pro- gram responsibility should be placed in one state agency. We believe that OCJP is the proper agency to assume this role and have outlined\u00b7 the supporting reasons for this conclusion\u00b7 as part of our analysis of the OCJP budget (Items 407-412 of this Analysis). The department’s grant program is duplicative of the much larger OCJP grant program but, unlike the OCJP program. which is about 90 percent federally funded, the department’s program is entirely state sup- ported. Moreover, the types of projects typically supported by the depart- ment can be financed at the county level under the new subvention program (Chapter 461, discussed earlier) which is budgeted at about $58 Items 301-306 HEALTH AND WELFARE \/ 847 million. Thus, based on the ability of local governments to determine their own funding priorities under Chapter 461, and the availability of grants from oqP, we believe that the department’s program should be deleted for a General Fund savings of $200,000 (Item 304). Additionally, the $100,000 in staff support should be deleted. The Office of Criminal Justice Planning is required by state and federal law to provide technical assistance to local agencies. Giving one state agency responsibili- ty for technical assistance and advice in this area should provide for a more consistent and accountable program. Therefore, we recommend that Item 301 (department support) be reduced by $100,000, representing the cost of three positions and related expenses. Should OCJP develop a coordinated, functional crime and delinquency prevention program, we believe that the Legislature should consider transferring the County Justice System Subvention program from the department to OCJP. Such consolidation would focus all available re- sources for criminal justice programs in one state agency, thereby improv- ing accountability and simplifying coordination among all concerned levels of government. If that transfer is made, the Legislature should also transfer the $33,300 program (Item 303) which provides administrative funds to county delinquency prevention commissions. ”

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” Item 309 HEALTH AND WELFARE \/ 833 DEPARTMENT OF SOCIAL SERVICES SUMMARY The Department of Social Services is the single state agency responsible for supervising the delivery of cash grants and social services to needy persons in California. Monthly grant payments are made to eligible recipi- ents through two programs-Aid to Families with Dependent Children (AFDC) and the Supplemental Security Income\/State Supplementary Payment (SSI\/SSP) program. In addition, welfare recipients, low-income individuals, and persons in need of protection may receive a number of social services such as information and referral, domestic and personal care assistance, and child and adult protective services. Table 1 identifies total expenditures from all funds for programs admin- istered by the Department of Social Services for fiscal years 1979-80 and 1980-81. Total expenditures for 1980-81 are proposed at $5,970,576,604, which is an increase of $970,317,486, or 19.4 percent, over estimated cur- rent year expenditures. Table 1 Department of Social Services Expenditures and Revenues by Program All Funds 1979-80 and 1980-81 Budget Estimated Proposed Item Program 1979-80 1980-81 309 Department support ……………….. $106,331,313 $114,252,730 Control Section 32.5 AFDC cash grants …………………… 2,106,081,700 2,585,469,700 310 SSI I SSP cash grants …………………. 1,789,952,500 2,103,276,700 311 Special adult programs ……………. 39,535,300 73,771,000 312 Special social services programs 551,103,962 658,490,874 In-home supportive services .. (212,944,100) (249,475,500) 313 County welfare department administration ………………………. 407,254,343 435,315,600 314 Local mandates ………………………… (7,261,900) (7,930,200) Change Amount $7,921,417 479,388,000 313,324,200 34,235,700 107,386,912 (36,531,400) 28,061,257 (668,300) Totals …………………………………….. $5,000,259,118 $5,970,576,604 $970,317,486 General Fund ………………………. 2,378,688,388 2,858,299, 789 479,631,401 Federal funds ………………………… 2,377,233,561 2,838,235,305 461,001,744 County funds’ ………………………. 230,018,862 255,032, 436 25,013,574 Reimbursements …………………… 14,338,307 19,009,074 4,670,767 Percent 7.4% 22.8 17.5 86.6 19.5 (17.2) 6.9 (9.2) 19.4% 20.2 19.4 10.9 32.6 Net county expenditures after adjusting for local fiscal relief provided by Chapter 282, Statutes of 1979 (AB8). Table 2 shows the General Fund expenditures for cash grant and social services programs administered by the Department of Social Services. The department requests a total of $2,858,299,789 from the General Fund for 1980-81. This is an increase of $479,631,401 or 20.2 percent, over es- timated current year expenditures. 834 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-Continued Table 2 Department of Social Services General Fund Expenditure 1979-80 and 1980-81 Item 309 Budget Estimated Proposed Change Item Program 1979-80 1980-81 Amount 309 Department support ……………… $40,545,191 $43,938,948 $3,393,757 Control Section 32.5 310 3ll 312 313 314 AFDC cash grants …………………. 986,941,900 1,195,372,200 208,430,300 SSI\/SSP cash grants ……………….. 1,087,876,000 1,310,291,600 222,415,600 Spe<;ial adult programs .............. 3,708,700 4,196,000 487,300 Special social service programs 156,936,886 195,424,741 38,487,855 In-home supportive services (117,077,943) (149,424,493) (32,346,550) County welfare department administration .......................... 95,397,8ll 101,146,100 5,748,289 Local mandates ............................ 7,261,900 7,930,200 668,300 Totals .......................................... $2,378,668,388 $2,858,299,789 $479,631,401 Health and Welfare Agency DEPARTMENT OF SOCIAL SERVICES Percent 8.4% 21.1 20.4 13.1 24.5 (27.6) 6.0 9.2 20.2% Item 309 from the General Fund Budget p. HW 145 Requested 1980-81 ............ , ............................................................ . Estimated 1979-80 ........................................................................... . Actual 1978-79 ................................................................................. . $43,938,948 40,545,191 25,658,951 Requested increase (excluding amount for salary increases) $3,393,757 (+8.4 percent) Total recommended reduction ................................................... . SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. County Training Funds. Reduce by $18,018. Recommend reduction of $18,018 from the General Fund and $54,054 from federal funds to reflect actual expenditure pattern for county training. 2. Facilities Operations. Reduce by $27,250. Recommend reduction ($24,978 General Fund, $31,314 federal funds and $2,272 reimbursements) to eliminate overbudgeting for price increases for facilities operations. 3. Data Processing Services. Reduce by $38,109. Recom- mend deletion of funds ($37,206 General Fund, $26,891 federal funds and $903 reimbursements) l;mdgeted for rate increases of Health and Welfare Agency Consolidated Data Center. 4. Fair Hearing Officers. Reduce by $139,175. Recommend $924,809 AnaJysis page 853 854 854 855 Item 309 HEALTH AND WELFARE \/ 835 reduction of $139,175 from the General Fund and $97,518 from federal funds by deleting six fair hearing officer posi- tions. Further recommend workload standard evaluation by the Department of Finance. 5. Affirmative Action-Temporary Help Positions. Reduce 857 by $135,529. Recommend reduction of $135,529 from the General Fund and $135,528 from federal funds by eliminat- ing temporary help funding for affirmative action recruit- ing. 6. Special Consultants. Reduce by $51,036. Recommend re- 861 duction of $50,869 General Fund, $25,322 federal funds and $167 reimbursements by eliminating temporary help fund- ing for special consultants. Further recommend control language requiring Department of Finance approval of special consultants. 7. Centralized Delivery System. Reduce by $398,207. 863 Recommend: a. Control language requiring that department's feasi- 866 bility study identify the total state and local resources required and schedule of events necessary to com- plete the system. b. Control language requiring funds for undefined posi- 866 tions not be expended until specified approvals have been obtained and that any funds not. expended for approved budgeted positions revert. c. Reduction of $398,207 from the General Fund and 867 $398,206 from federal funds by eliminating funds for data processing. d. Funds budgeted for the system be scheduled in a 867 separate item. 8. ChJ1d Support Enforcement Program. Augment by 868 $13,008. Recommend augmentation of $13,008 from the General Fund and $19,513 from federal funds by adding 1.5 positions to the 4.5 positions requested for county child support collection activities. Further recommend these six positions be limited to June 30, 1982. 9. Public Inquiry and Response Positions. Reduce by $38,402. 869 Recommend deletion of two proposed positions, for a Gen- eral Fund savings of $30,247 and a reduction of $9,600 in federal funds and $8,155 in reimbursements. 10. Title XX Training Positions. Recommend two manage- 870 ment positions requested for Title XX training be limited to June 30, 1982. Further recommend report on progress toward achievement of management goals by December 15, 1981. 11. Family and Children s Services Positions. Reduce by $92,- 871 091. Recommend reduction of $92,091 from the General Fund by deleting three positions proposed to develop regulations for family and children's services programs. 836 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued 12. Indochinese Refugee Assistance Program Positions. Rec- 873 ommend department submit plan for centralized program coordination prior to budget hearings. 13. Community Care Licensing Positions. Withhold recom- 874 mendation on the establishment of 55 new positions pend- ing receipt of department's workload standard meth- odology. 14. Control Section 32.5-AFDC Cost of Living. Recom- 880 mend enactment of legislation providing cost-of-living ad- justment to AFDC grants through the annual budget process rather than automatically through statute. GENERAL PROGRAM STATEMENT Chapter 1252, Statutes of 1977 (SB 363), created a new Department of Social Services, effective July 1, 1978. The new department retained the welfare operations function of the former Department of Benefit Pay-\u00b7 ments, and assumed responsibility for the disability evaluation, commu- nity care licensing and social services functions of the former Department of Health. Departmental functions are carried out through eight divisions. Chart 1 shows the current organization of the department by division. Each division is divided into various branches and bureaus. Legal Affairs Division The Legal Affairs Division consists of the Office of the Chief Counsel and the Office of the Chief Referee. The Office of the Chief Counsel provides legal advice to departmental managers and support to the Attor- ney General in litigating cases affecting the department. The Office of Chief Referee is responsible for conducting administrative hearings to determine the fairness of decisions made by county welfare department personnel in handling welfare cases. Administration Division The Administration Division has responsibility for providing all support functions for the Department of Social Services. The functions include (1) processing personnel transactions, (2) providing space and centralized typing services, (3) managing the accounting and budgeting systems of the department, (4) collecting and analyzing data regarding the programs administered by the department, and (5) developing estimates of the projected costs and caseloads of the cash assistance and social services programs. Centralized Delivery System This division is responsible for definition, design, development and im- plementation of an automated system for delivering financial assistance and services to welfare recipients in California. The division was estab- lished in response to Chapter 282, Statutes of 1979 (AB 8), which requires the department to implement a centralized delivery system for welfare benefits in California by July 1, 1984. Item 309 State Advisory Committee on Child Abuse Services Advisory Board Special Assistant to the Director, Legislature Affirmative Action Office HEALTH AND WELFARE \/ 837 Chart 1 Department of Social Services Organization Chart Legal Affairs Division Administration Division Centralized Delivery System Division Adult and Family Services Division Director Chief Deputy Welfare Program Operations Division Community Care Licensing Division Planning and Review Division Disability Evaluation Division Special Assistant to the Director Administrative Assistant Office of Government and Commu nity Relations Office of Pu blic Information 838 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued Adult and Family Services Division The Adult and Family Services Division is responsible for managing and administering social services programs including in-home supportive serv- ices, other county social services, child welfare services and the state adoptions program. The division consists of five branches: (1) Family and Children's Services, (2) Adult Services, (3) Adoptions, (4) Systems and Policy and (5) AB 1642 Implementation. It plans, organizes and directs the operation of statewide social services programs delivered through county welfare departments, private agencies under contract, and other state departments. In addition, the division performs direct adoptions casework through three district offices. Welfare Program Operations The Welfare Program Operations Division has overall responsibility for the management of payment programs which provide financial assistance to needy individuals. The division consists of four branches. The AFDC Program Management Branch provides policy direction and interpreta- tion to county welfare departments in administering the payment of grants under the AFDC program. The Adult Program Management Branch provides liaison with the Social Security Administration which administers the State Supplementary Payment (SSP) program. This branch also provides policy direction to the counties in the administration of various special adult programs including Emergency Loan and Special Circumstances, Aid to the Potentially Self-Supporting Blind, and the Guide Dog Special Allowance. The Food Stamp Program Management Branch supervises the county administration of the federal Food Stamp program. The Child Support Program branch develops statewide policies and procedures for collecting child support from absent welfare and non- welfare parents. Community Care Licensing Division The Community Care Licensing Division (1) supports the facilities evaluation activities of county licensing agencies through the develop- ment of regulations, the collection of statewide data and the investigation of complaints and (2) directly licenses community care facilities in coun- ties where the county welfare department has chosen not to contract with the state for this purpose. The division is organized into three branches to carry out these responsibilities: (1) Field Operations, (2) Client Protec- tion Services, and (3) Policy and Administrative Support. The Field Oper- ations Branch and Client Protective Services Branch maintain district offices throughout the state. Planning and Review Division The Planning and Review Division (1) monitors the progress of demon- stration projects under the authority of the Department of Social Services, (2) responds to public inquiries regarding cash assistance and social serv- ices programs, (3) conducts studies of the personnel and financial manage- ment practices of the department, (4) evaluates the efficiency, equity and Item 309 HEALTH AND WELFARE \/ 839 effectiveness of programs carried out by the 58 county welfare depart- ments, and (5) develops error rate estimates in the determination of eligibility and level of payment to clients of the cash assistance and In- Home Supportive Services programs. Disability Evaluation Division The Disability Evaluation Division is responsible for determining the medical eligibility of California residents for benefits under the disability insurance, supplemental security income, and medically needy programs of the Social Security Act. There are six regional offices throughout the state responsible for processing disability claims. ANALYSIS AND RECOMMENDATIONS The budget proposes a General Fund appropriation of $43,938,948 for support of the Department of Social Services in 1980-81, which is an increase of $3,393,757, or 8.4 percent, over estimated current year expendi- tures. This amount will increase by the amount of any salary or staff benefit increase approved for the budget year. The budget for the department proposes total expenditures from all funds of $114,252,730, which is an increase of $7,921,417, or 7.5 percent, over the estimated 1979-80 expenditures. Table 1 shows total expendi- tures, by division. Proposed General Fund Budget Changes Table 2 details the changes in the department's proposed General Fund expenditures for 1980-81. This table shows that expenditures in the budget year will increase by $3,393,757 over the current year. Included in the increased costs for existing programs is $1,482,630 for additional employee . benefits (exclusive of salary increases) and $555,306 for a 7 percent in- crease in operating expenses and equipment. These costs are partially offset by reductions totaling $4,800,943. These reductions reflect the fact that certain one-time expenditures in the current year will not occur in the budget year. Table 2 also shows that budget change proposals to expand existing programs or to add new programs in 1980-81 will increase departmental expenditures by $5,870,746. Proposed New Positions The department is proposing a total of 340.2 new positions for 1980-81, as shown in Table 3. Three budget requests account for almost two-thirds of the proposed new positions. The single largest request is for 132 posi- tions for a centralized welfare delivery system required by Chapter 282, Statutes of 1979 (AB 8). The department also is requesting 64.1 positions for the disability evaluation division due to projected increases in work- load. In addition, the department is proposing 48 new positions to inspect and license community care facilities. The remaining 96.1 positions re- quested by the department are proposed for functions in the divisions for administration, adult and family services, welfare program operations and pl~nning and review. 840 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued Table 1 Summary of .the Department of Social Services Support Budget 1979-80 and 1980-81 Estimated Proposed Change Funding 1979-80 1980-81 Amount General Fund .................................................. $40,545,191 $43,938,948 $3,393,757 Federal funds .................................................. 63,080,240 66,231,866 3,151,626 Reimbursements .............................................. 2,705,882 4,081,916 1,376,034 Totals .......................................................... 106,331,313 114,252,730 7,921,417 Division Administration ................................................ 18,403,260 19,580,305 1,177,045 Personnel-years .......................................... 506.1 521.2 15.1 Legal affairs ...................................................... 5,591,035 5,751,597 160,562 Personnel-years ............................................ 142.1 145.3 3.2 Adult and family services .............................. 8,423,038 8,853,543 430,505 Personnel-years ............................................ 236.1 254.0 17.9 Welfare program operations ........................ 7,182,466 8,448,055 1,265,589 Personnel-years ............................................ 150.4 156.7 6.3 Community care licensing ............................ 7,229,806 8,580,166 1,350,360 Personnel-years ............................................ 243.9 283.1 39.2 Planning and review ...................................... 7,601,797 8,366,582 764,785 Personnel-years ............................................ 235.1 253.6 18.5 Disability evaluation ...................................... 43,421,422 44,995,787 1,574,365 Personnel-years ............................................ 1,239.6 1,297.8 58.2 Data processing bureau ................................ 2,874,531 2,965,346 90,815 Personnel-years ............................................. 64.5 66.2 1.7 Centralized delivery system b . .. ........ .... 1,469,356 4,546,638 3,077,~ Personnel-years ............................................ 61.3 104.4 43.1 Executive .......................................................... 4,134,602 2,164,711 -1,969,891 Personnel-years ............................................ 67.4 62.3 -5.1 Office of Government and Community Relations c . .. .... . . ..... ..... ... . ..... (2,599,844) (712,190) ( -1,887,654) Personnel-years ........................................ (23.2) (17.0) (-6.2) Affirmative Action Office .......................... (681,086) (736,002) (54,916) Personnel-years ........................................ (28.0) (28;6) (0.6) Office of Public Information .................... (105,216) (97,412) (-7,804) Personnel-years ........................................ (2.8) (2.9) (0.1) Services Advisory Board ............................ (76,323) (86,588) (10,265) Personnel-years ........................................ (1.9) (2.0) (0.1) Special assistant Legislature ................................................ (76,202) (86,701) (10,499) Personnel years ........................................ (1.9) (2.0) (0.1) Special assistant to the director, south- ern region .................................................. (67,994) (75,765) (7,771) Personnel-years ........................................ (1.9) (2.0) (0.1) Administrative assistant ............................ (35,781) (43,294) (7,513) Personnel-years ....... , ................................ (0.9) (1.0) (0.1) Director and chief deputy d . ... ... .. .. ... (492,156) (362,759) (-165,397) Personnel-years ........................................ (6.8) (6.8) (0) Totals .............................................................. $106,331,313 $114,252,730 $7,921,417 Personnel-years ........................................ 2,946.5 3,144.6 198.1 Percent 8.4% 5.0 50.9 7.5% 6.4% 3.0 2.9 2.3 5.1 7.6 17.6 4.2 18.7 16.1 10.1 7.9 3.6 4.7 3.2 2.6 209.4 70.3 -47.6 -7.6 -72.6 -26.7 8.1 2.1 -7.4 3.6 13.4 5.3 13.8 5.3 11.4 5.3 21.0 ILl -33.6 0 7.5% 6.7% Personnel-years do not equate with authorized positions due to vacancies. b The personnel-years shown here reflect only project staff for the Centralized Delivery System. Program staff for CDS are disbursed among the other divisions of the department. C Expenditures for the Office of Government and Community Relations in 1979-80 include $1,926,000 for . disaster relief pursuant to Chapter 848, statutes \u00b7of 1979. d 1979-80 expenditures for the directorate include $143,000 for direct contracts, including the Kepner- Tregoe training project. . Item 309 HEALTH AND WELFARE \/ 841 Table 2 Proposed General Fund Adjustments for the Department of Social Services Support Budget Cost 1. 1979-80 Current Year Revised Expenditures ..................................... . 2. Baseline Adjustments for Existing Programs A. Increase in Existing Personnel Costs 1. Merit salary adjustments ............................................................. . $463,844 2. OASDI ............................................................................................... . 146,549 3. Retirement ....................................................................................... . 89,574 4. Workers' compensation ................................................................. . 1,206 5. Restore 27.2 reduction ................................................................... . 781,457 Total ............................................................................................... . B. Onetime Expenditures 1. 1978-79 disaster relief ....................................................... : ........... . $ -1,926,000 2. Disaster relief--ongoing ............................................................... . -703,050 3. Reduction of operating expenses and equipment by amount transferred from IHSS provider benefits ................................. . -786,200 4. Chapter 282, Statutes of 1979 (AB 8) ...................................... .. -1,356,221 5. Limited term position related to Youakim v. Miller ............. . -16,628 6. Onetime salary bonus increase ................................................... . -4,344 7. Chapter 1069, Statutes of 1979 (AB 1368) transfer ............... . -8,500 Total ............................................................................................... . C. Program Funding Shifts 1. Increased General Fund costs due to expiration of federal funds for child support administrative activities ................... . $416,170 2. Child support-transfer of Attorney General reimburse- ments ............................................................................................... . 102,130 3. Systems review funding transfer ............................................... . -33,332 4. Attorney's fees transfer from Item 283 ................................... . 1,050 5. Rape victim counseling centers transfer to Item 312 ........... . -200,000 Total ............................................................................................... . D. Seven Percent Price Increase on Operating Expenses and Equipment ........................................................................................... . 'l'otal, Baseline Adjustments ................................................................... . 3. Program Change Proposals for 1980-81 A. Centralized delivery system ............................................................. . $2,576,028 B. Simplified referral system ................................................................. . 913,727 C. Community care licensing-field operations ............................... . 1,210,685 D. Other ..................................................................................................... . 1,170,306 Total Program Change Proposals ......................................................... . 4. Total General Fund change proposed for 1980-81... ........................ . 5. Total General Fund, Item 309 ............................................................... . Workload and Administrative Adjustments Total $40,545,191 $1,482,630 $-4,800,943 $286,018 $555,306 ($-2,476,989) $5,870,746 ($3,393,757) $43,938,948 The department has transferred the computer services branch consist- ing of 68.5 positions from the administrative division to the centralized delivery system project, as shown in Table 3. These positions will not work directly on the centralized delivery system project, but will perform the ongoing EDP functions of the department. In addition, the department proposes to eliminate two auditor positions in the Office of Life Care Contracts. These positions were supported by federal funds from Title II of the Public Works Employment Act, which will not be available after 1979-80. Division Director's office ............................................... . Government and community relations ..... . Welfare program operations ......................... . Legal affairs ................. : ..................................... . Adult and family services ............................. . Administration ................................................. . Community care licensing ............................. . Planning and review ..................................... ... Disability evaluation ....................................... . Centralized delivery system ......................... . Project staff ................................................... . Program staff ................................................. . Data Processing ........................................... . Temporary Help ............................................... . Totals ............................................................... . Existing Positions 23.0 19.5 125.3 144.0 249.0 585.0 242.6 230.0 1,276.0 73.4 2,967.8 Table 3 Department of Social Services Proposed Position Changes for 1980-81 Workload and Administrative Requested Total General Adjustments Positions Positions Fund 23.0 19.5 15.5 140.8 $136,693 144.0 17.0 266.0 340,724 -68.5 21.2 537.7 87,918 55.0 297.6 1,399,108 -2 34.5 262.5 405,643 64.1 1,340.1 913,727 +68.5 132.9 201.4 2,586,933 (105.0) (105.0) (2,068,282) (27.0) (27.0) (507,746) (+68.5) (0.9) (69.4) (10,905) 73.4 -- -2 340.2 3,306.0 $5,870,746 Fiscal Effect of Req.uested Positions Federal Reimburse- Funds ments Totals $211-,669 $348,362 138,886 479,610 366,296 454,214 1,399,108 454,425 $13,125 873,197 -540,650 1,435,186 1,808,263 2,389,571 4,976,504 (2,068,280) (4,136,562) (310,386) (818,132) (10,905) (21,810) $3,020,201 $1,448,311 $10,339,258 c m \"tI l> ~ -I ~ m 2 -I 0 TI en 0 (\”) \u00bb r- en m ~ < n m en I (\") 0 :I ... :;' c CD Q, CO ~ N ....... :I: tIl > t; :I: :> z 0 ::;; t’l t\”\” ‘\”%j :> l:C t’l -….. . (1) 9 g Item 309 HEALTH AND WELFARE \/ 843 Control Section 27.2, 1979 Budget Act Reductions Control Section 27.2 of the 1979 Budget Act requires the Department of Finance to limit expenditures for personal services in order to achieve a specified funding reduction. Chapter 1035, Statutes of 1979 (SB 186), modified Control Section 27.2 by requiring that the reduction in costs for personal services be made on a one-time basis through increased salary savings. Pursuant to these provisions, the department’s salary savings were increased by $781,457 from the General Fund in the 1979-80 budget. The department indicates that the increased salary savings will be achieved by delaying departmental hiring in unspecified areas. The budget includes funds to restore support for these positions in the budget year. IMPACT OF RECENT LEGISLATION Financing of Specified County Welfare Costs Chapter 282, Statutes of 1979 (AB 8), provides for a long-term program of fiscal relief to local governments to mitigate the loss of property tax revenues resulting from the passage of Proposition 13. The act provides for annual state funding of county costs for specified welfare programs effec- tive with the 1979-80 fiscal year. Table 4 shows that the state costs of the welfare provisions of AB 8 are estimated at $517.3 million for 1979-80 and $606.7 million for 1980-81. The budget year amount is $89.4 million, or 17.3 percent, above the current year costs. Table 4 State Costs for the Welfare Provisions of Chapter 282 Statutes of 1979 (AB 8) (in millions) Program SSI, SSP grants …………………………………………………………………………………………… . AFDC Family group and unemployed parent grants ……………………………………… . Foster care grants ………………………………………………………………………………….. . Aid to adoption of children ……………………………………………………………………. . Special needs …………………………………………………………………………………………… . Administration ……………………………………………………………………………………….. . Staff training …………………………………………………………………………………………… . Food stamp administration ……………………………………………………………………….. . Child support enforcement program Administration ……………………………………………………………………………………….. . Incentive payments to counties …………………………………………………………….. . Work incentive program …………………………………………………………………………… . Aid to the potentially self\u00b7supporting blind program- Administration ……………………………………………………………………………………….. . Family protection pilot projects …. ; ……………………………………………………………. . Totals ……………………………………………………………………………………………………….. . Estimated 1979-80 $206.9 209.7 83.7 0.9 0.5 N\/A a 1.0 11.8 2.1 0.1 0.04 0.6 $517.34 Proposed 1980-81 $234.2 254.4 100.8 1.0 0.5 N\/A a 0.9 12.9 1.1 0.2 0.05 0.6 $606.65 a Chapter 282 did not provide for state assumption of county costs for administering the AFDC Program. 844 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued The following discussion compares the provisions of AB 8 with Chapter 292, Statutes of 1978 (SB154), which provided fiscal relief during 1978-79. 1. Supplemental Security Income\/State Supplementary Payment (SSI\/ SSP) Program. This program provides cash grants to eligible aged, blind and disabled individuals. Historically, the federal government has paid the cost of the SSI grant, and the state and counties have shared the cost of the SSP grant. The county share was set by statute at $1l8 million for fiscal year 1974-75, and was increased annually thereafter by the percentage increases in the assessed valuation of property. Chart 2 shows the expenditure of funds by level of government for the SSI\/SSP program from 1977-78 through 1980-81. In 1977-78, the federal government paid $587.1 million (39.9 percent), the state contributed $721.1 million (48.9 percent), and the counties contributed $165.4 million (11.2 percent). In response to the passage of Proposition 13, the state assumed the county share of costs-estimated at $181.8 million-for 1978- 79 through enactment of SB 154, bringing the state share to 58.1 percent. AB 8 requires the state to continue to finance the county share of costs for this program beyond 1978-79. This provision will increase state costs by $206.9 million in 1979-80 and $234.2 million in 1980-81 as shown in Chart 2. 2. Aid to Families with Dependent Children program-Grants for Fam- ily Group and Unemployed (AFDC-FG and U). The AFDC program provides cash grants to children and their parents or guardians whose income is insufficient to meet their basic needs. Prior to 1978-79, the federal government paid 50 percent of the grant costs, the state paid 33.75 percent and the counties paid 16.25 percent. In 1977-78, the federal gov- ernment paid $853.7 million, the state paid $623.2 million, and the counties paid $226.3 million, as shown in Chart 3. After passage of Proposition 13, the state assumed the entire county share of costs for this program for 1978-79, as a result of the enactment of SB 154. This change increased state costs by $260.4 million. Beginning with the current year, the federal government will pay 50 percent of costs, the state will pay 44.6 percent and the counties will pay 5.4 percent, as a result of the enactment of AB 8. This act will result in additional state costs of $209.7 million in 1979-80, and $254.4 million in 1980-81, as shown in Chart 3. 3. Aid to Families with Dependent Children-Grants for Foster Care. The AFDC Foster Care program provides cash grants to eligible children residing in foster care homes and institutions. Prior to 1978-79, the coun- ties paid the major share-approximately 77 percent-of the nonfederal costs for this program. During 1978-79, the state assumed 95 percent of the nonfederal costs due to the enactment of SB 154. As a result, state costs for this program increased by $78.6 million, as shown in Chart 4. AB 8 requires the state to continue to pay 95 percent of the nonfederal share of program costs until January 1, 1984. Chart 4 shows that the addi- tional state costs resulting from this provision are $83.7 million in 1979-80 and $100.8 million in 1980-81. Millions Chart 2 of Expenditures for the SSI\/SSP Program -Dollars ….. CD $1,400 _ 1977…,78 to 1980-81 S (in millions) Ij.j $1,310 0 1,300 j _Fiscal ‘\” 1,200 Relief (AB 8) V\/\/\/\/\/\/J 1,100 -I $1,088 1,000 ~] $891 Ii ,&., ~ ~ Prior Law 800 -Relief (SB 154) . .. . . . . :.!. – State Share $721 $702 700 -I m $641 m 600…J $587 ::::::::’:’:’:.:.:ofV>VVVVI t:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:1’\\?VV’..XJ Prior law Share 500…J ~:::::::::::::::::::IXXXXXI E:’:’:’:~:~:~:~:::::rxvxYXI ~:::::::::::::::::::[)()(X’)(>.I liiiil;l;lil;l;l;l;~ ::Ii J::Ej :> 400…J t;:;:;:;:;:;:;:;:;:~ ~::::::::::::::::::1,X,?<,?VV 300…J’ ~:::::~::::::::::::~ t\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:::::t z tJ ~ ~ S !:C ~ >-< ..... CD :3 W 0 (.0 Millions of Dollars 5150 125 100 Chart 5 Expenditures for Administration of the AFDC Program 1977-78 to 1980-81 (in millions) $126 $107 $104 $141 -,.,. S g 7S ;.t ~.:.:.:.:.:.:.:.:.:.~ t:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:o\/'\/' \/'\/' \/' \/' \/' \/.I t::::::::::;:;:;:;:;2 1;:;:;:;:;:;:;:;:;:;~$69 $69 $63 $63 ::::::::::::::::1:1~r!!\"\"\"l!'\"'X\"\"';>T–…………….. ::c [:2 ………. ‘. , , …….. …………. .-.-.-.-.-.-.-.-n ~ 50 \”‘l ~.:.:.:.:.:.:.:.:.:.!f<#~ 1:.:.:.:.:.:.:\u00b7:.:\u00b7:=KXXXXl'-\"Prior law t\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b7:\u00b71>Q<)QQ')I E\u00b7:\u00b7\u00b7\u00b7\u00b7\u00b7\u00b7\u00b7\u00b7\u00b7\u00b7\u00b7\u00b7\u00b7\u00b7\u00b7:\u00b7{><)(>(><) Z t:I ~ 25 ~ E:::::::::::::::::::~ I:::::::::::::::::::~ E:;:;:::~:~:~:~:~:~:~ 1:;:;:;:;:;:;:;:;:::fx\”x\”x\”x’XI ~ ~ t\”l -0- E;:;:;:::::::::;:;::~ E;:;:;:;:;:;:;:; ;~ ~ …… federal Stale County Federal State ~ Federal State ~ Federal State ~ ! .l~77~7ij 1978-79 1979-80 1980-81 ,,,’. . (Estimated) (proposed) 850 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued administrative costs of the APSB program, a special state program de- signed to encourage blind recipients to become self-supporting. As a result of AB 8, the state share of costs for this program increased from 50 to 83.3 percent, and county costs were reduced from 50 to 16.7 percent. Because of this provision, state costs will increase by $41,900 in 1979-80 and $45,700 in 1980-81. 9. Food Stamp Administration. The Food Stamp program permits eli- gible low-income families to obtain food stamps in order to increase their food buying power. Historically, the federal, state and county govern- ments have shared the costs of administering the Food Stamp program. The federal government paid 50 percent of costs, county costs were capped at $21.5 million annually and the state paid the balance. For 1978- 79, the state assumed the county share of administrative costs pursuant to SB 154. For 1979-80 and beyond, AB 8 eliminates the cap on county ex- penditures and requires the counties to pay 50 percent of the nonfederal share of costs. This provision will not result in additional costs to the state in 1979-80 or 1980-81. 10. Child Support Enforcement Program-Administration. The pur- pose of this program is to locate and obtain child support payments from absent welfare and nonwelfare parents. Prior to 1978-79, the federal gov- ernment financed 75 percent of the administrative costs and the counties paid the remaining 25 percent. In 1978-79, the state paid the county share of administrative costs for this program as a result of SB 154. Beginning with 1979-80the state will pay 75 percent of the costs of collecting child support from non welfare parents, if federal funds are not available for such purposes. This provision will increase state costs by $11.8 million in 1979-80 and $12.9 million in 1980-81. The counties will continue to pay 25 percent of administrative costs for collecting child support from welfare parents. 11. Child Support Enforcement Program-Incentive Payments. The Child Support Enforcement program provides incentive payments to counties for collecting child support from absent parents. Prior to 1979-80, the payments totaled 27.75 percent of collections, with the federal govern- ment paying 15 percent and the state providing 12.75 percent. AB 8 in- creased the state incentive payment to 15 percent until December 31, 1980 at which time it will revert to 12.75 percent. This provision results in increased state expenditures of $2.1 million in 1979-80 and $1.1 million in 1980-81. 12. Work Incentive Program (WIN). Prior to 1979-80, the fetleral, state and county governments shared the costs of reimbursing welfare recipients enrolled in the WIN program for (a) work and training-related expenses and (b) child care costs. The federal government paid 90 per- cent of costs, the state paid 6.75 percent and the counties paid 3.25 percent. AB 8 provides that the state will assume the county share of service costs for this program, which results in increased state expenditures of $133,023 in 1979-80 and $206,500 in 1980-8l. 13. Chapter 977, Statutes of 1976 (SB 30), Family Protection Pilot Projects. AB 8 provides that the state’s share of costs for family protec- tion pilot projects, established in two counties under the provisions of Chapter 977, Statutes of 1976, and Chapter 21, Statutes of 1978, shall be the same as the state’s share of AFDC Foster Care costs for fiscal years 1979-80 I\u00b7 I Item 309 HEALTH AND WELFARE \/ 851 and 198(hg1. AB 8 requires projects to be funded on the basis of95 percent state and 5 percent county funds for the two fiscal years. Because of this change, state costs will increase by $566,525 in 1979-80 and $566,700 in 198(hg1. 14. Centralized Delivery System. AB 8 requires the Department of Social Services to implement a case management, eligibility verification and benefit disbursement system in the counties by July 1, 1984. The system will verify eligibility and make payments for the following pro- grams: (a) AFDC, (b) Food Stamps, (c) Medi-Cal, (d) Special Adult Programs, and, to the extent feasible, (e) Social Services and (f) Child Support Enforcement. The department is permitted to pilot test the sys- tem in several counties prior to actual statewide implementation. The department is required to report annually to the Legislature on its progress in implementing the system. The first report is due March 1, 1982. The department has submitted a budget proposal, discussed in detail later in the Analysis, to establish positions for this project. Low Income Energy Assistance Program (PL 96-126) On November 27, 1979, President Carter signed Public Law 96-126, which provides $1.35 billion in financial assistance for low-income persons to offset increased energy costs during federal fiscal year 1980 (October 1979-September 1980). Of this amount, $150 million was provided to the federal Community Services Administration for allocation to states for the ongoing Energy Crisis Assistance Program. The remaining $1.2 billion was provided to the Department of Health, Education and Welfare for two purposes. Approximately $400 million was designated for cash grants to recipients of assistance under the Supplemental Security Income \/ State Supplementary Payment (SSI\/SSP) program. The remaining $800 million was earmarked for other low-income populations. California s Share of Funds. As a result of the enactment of PL 96-126, California received $50,557,205 for one-time grant payments to needy individuals in the current year. Of this amount, a total of $29,720,000 was distributed to SSI\/SSP recipients in California. The federal government mailed the checks directly to SSI\/SSP recipients on January 7, 1980. The grant for an SSI \/ SSP recipient in California was $44. California also received $20,837,205 to provide cash grants to other low- income households. In a letter dated January 8,1980, submitted under the provisions of Section 28 of the 1979 Budget Act, the DireCtor of Finance requested that the Joint Legislative Budget Committee waive the 30-day waiting provision in order to provide energy assistance funds to food stamp households certified for benefits in December 1979. The request to waive the 30-day waiting period was approved. Payments were issued by county welfare departments during February 1980 to an estimated 531,841 households. The amount of the energy assist- ance payments varied among counties based on a formula which took into consideration the climate and cost of energy in each county. The grant payments ranged from $25 for a food stamp household in Orange County to $103 in Mono County. Grant and Administrative Costs. Of the $20,837,205 administered by 852 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued the department, $18,753,485 (90 percent) was distributed as cash grants to food stamp households and $2,083,720 (10 percent) was set aside for county and state administrative costs. Reporting Requirements of Chapter 1241. Statutes of 1978 Chapter 1241, Statutes of 1978 (SB 768), required the Department of Social Services to prepare preliminary and final reports on state adminis- tration of welfare and social services programs currently administered by county government. The act also required the Legislative Analyst to moni- tor and evaluate the development of these reports. The department submitted its preliminary report to the Legislature on October 13, 1978. Our analysis of the preliminary report was provided to the Legislature in December 1978 (Report Number 78-15). We received a copy of the department’s final report on April 9, 1979. It identified four forms of state administration, including (1) the current county administrative system, (2) state\/county contracts for local admin- istration, (~) a Centralized Delivery System (CDS), and (4) full state administration of welfare programs. The department recommended that the state implement a Centralized Delivery System (CDS) which would consist of a statewide automated system to store and index the case records of welfare recipients, verify eligibility, compute grant amounts and issue warrants. Subsequent to the department’s final report, enactment of A.B 8, re- quired the department to implement a Centralized Delivery System in all counties by July 1, 1984. The functions of CDS as outlined by AB 8 are similar to those identified in the department’s final report on state admin- istration. The act contained funds for the department to establish positions in the current year. The department is requesting additional positions in the budget which we discuss later in this analysis. Our analysis of the department’s proposal for developing and implementing a Centralized Delivery System is intended to meet the reporting requirements of Chap- ter 1241. Disability Evaluation Determinations The 1979-80 budget proposed 12 positions to process the increased num- ber of medically indigent applicants referred to the medically needy pro- gram. The increase was due to an administrative revision in the referral application procedures. The referral procedures were revised to better identify applicants who could qualify for assistance under the medically needy component of Medi-Cal instead of the medically indigent component. Medically indi- gent cases are funded 100 percent from the General Fund while medically needy cases are funded 50 percent from federal funds and 50 percent from state funds. The change in procedures ensures that the state will receive federal financial participation for the cost of care for those persons who are eligible under the federal program. Subsequently Chapter 451, Stat- utes of 1979 (AB 1251) required that persons applying for medical assist- ance first apply as medically needy rather than medically indigent. The department estimates General Fund savings to the Medi-Cal program of Item 309 HEALTH AND WELFARE \/ 853 approximately $5.0 million in 1980-81 resulting from the shift of medically indigent cases to the medically needy classification. Based on findings from a demonstration project in San Diego County, the department estimates that approximately 16 percent of the medically indigent cases statewide will be referred for evaluation as medically needy. In order to meet the projected increase in workload, the depart- ment has requested 89.1 positions for the budget year. Of these, 25 are redirected positions and 64.1 are new positions. The department antici- pates full implementation of the new referral system for medically indi- gent applicants by March 1, 1981. Expenditures for the new positions are proposed at $1,808,263, of which the state’s share is $913,727. In view of the projected savings to the General Fund from the’ new referral system, we recommend approval of the requested positions. We will monitor the development of the caseload and savings projections of this project as they become available. County Training Overbudgeted We recommend a reduction of $72,072 all funds ($18,018 General Fund and $54,054 federal funds) to reflect the actual expenditure pattern for county training. The department’s schedule of operating expenses and equipment con- tains proposed expenditures of $96,096 for county training. The funds are used to assist county welfare departments to develop staff training pro- grams. Counties use these funds to meet training needs which are not funded in their own budgets and to experiment with new training ideas and techniques. County welfare departments which wish to utilize the training funds submit proposals to the Department of Social Services. The department selects training projects for funding based on a specified crite- ria. \” Historically, the department has budgeted approximately $92,000 for county training. Table 5 shows the amount of funds budgeted for county training and the amount of funds expended since 1976-77. During this period, actual expenditures have been lower than the amounts budgeted by margins of 71 percent to 89 percent. As of January 1980, the department had approved two training proposals totaling $10,232, during the current year. This amounts to 10.6 percent of the funds budgeted for 1979-80. Several other proposals for county train- ing projects are in various stages of review. It seems unlikely, however, that the other county training projects will be funded during the current year because departmental policy requires the projects to be completed during the fiscal year in which the proposal is approved. Table 5 Expenditures for County Training 1976-n to 1979-80 1976-77 Budgeted ………………. \” …. \” …. \” ….. \” .. \”.\” ….. \” …. \” .. \” … \”……… $91,520 Expended …. \”\”\”\”\” … \”.\”\”\”\”\”\”\”.\”\”.\”.\”\”\”.,, …. ,,\”\”,,.,,.,,\”\”\”\” 24,044 Amounts not expended \”\”\”\”\”.\”.\”\”\”.\”.\”\”\”\”\”\”\”\”\”\”\”,,.,,. $61,476 Percent\”\”\”.\” .. \”\”.\”\” … \”.\”.\”.\”\”\”\”\” .. \”\”\”\”\”\”\”\”\”.\”\”\” … \”\”\”\”\” 73.7% 1977-78 $91,520 12,641 $78,f)19 86.2% , a Estimated expenditures based on two contracts approved as of January 1980. 30-80045 1978-79 $91,520 26717 $65,243 71.3% Estimated 1979-80 $96,096 10,232 a $85,864 89.4% 854 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-\u00b7Continued Based on the historical data in Table 5 and anticipated expenditures in 1979-80, our analysis indicates\u00b7 that. the department is overbudgeted for county training by 75 percent. Therefore, we recommend that proposed expenditures for county training be reduced by $72,072 all funds ($18,018 General Fund and $54,054 federal funds) . Facilities Operations Overbudgeted We recommend that funds overbudgeted for facilities operations be deleted, for a savings of $58,564 ($24,978 General Fund, $31,314 federal funds, and $2,272 reimbursements). The budget proposes $4,309,934 for facilities operations, an increase of $487,804, or\u00b711 percent, over estimated current year expenditures. This increase includes (1) a 7 percent price increase ($258,929) and (2) an increase of $228,875 in budget adjustments related to position changes. The Department of Finance’s Budget Letter Number 4, issued July 27, 1979, instructed departments on allowable cost increases for operating expenses and equipment for the budget year. The departments were -allowed to use either (1) a 7 percent general price increase or (2) specific cost factors for individual items and a 5 percent increase where specific factors were unavailable. The Department of Social Services did not comply with these instruc- tions in two instances when preparing the proposed budget for facilities operations. First, the department applied an inflation adjustment to long- term building leases which will not increase in the budget year. Second, the department applied a specific cost factor (35 percent in the budget year) to the heat, lights, and water component of facilities operations, while applying the 7 percent allowable rate to all other subcategories. Department of Finance budget instructions allow the applicatioQ. of a specific price increase only if a 5 percentincrease is applied where specific_ factors are unavailable. Thus, the department’s methodology results in overbudgeting of this operating expense component. Accordingly, we recommend a reduction of $48,305 from the facilities operations category. We further recommend an additional reduction of $10,259 which has been included in the 1980-81 base budget as the result of using a similar methodology when adjusting current year expenditures. Elimination of the overbudgeted funds would result in a total savings of $58,564, consisting of $24,978 from the General Fund, $31,314 from federal funds, and $2,272 from reimbursements. Data Processing Services Overbudgeted We recommend deletion of funds overbudgeted for data processing services for a savings of $65,000 ($37,206 General Fund, $26,891 federal funds and $903 reimbursements). The Department of Social Services contracts with the Health and Wel- fare Agency Consolidated Data Center for a number of data processing services. The budget proposes $900,000 in reimbursements from the De- Item 309 HEALTH AND WELFARE \/ 855 partment of Social Services to the Consolidated Data Center for 1980-8l. This is an increase of $65,000, or 7 percent, over revised 1979-80 expendi- tures of $835,000. The Consolidated Data Center advises that it is not planning a rate increase in 1980-81. Moreover, the department’s revised current year expenditure estimates may be reduced as a result of downward rate ad- justments in January 1980. For these reasons, we recommend deletion of the $65,000 (all funds) budgeted for data center rate increases~ Fair Hearing Officers We recommend deleHon of six fair hearing ofi1cers, for a total savings of $236,693 ($139,175 General Fund and $97,518 federal funds). We further recommend that the Program EvaluaHon Unit in the Department of Fi- nance evaluate the workload standard for hearing ofi1cers in the Depart- ment of Social Services and report its findings to the Legislature by December 15, 1980. Background. The Office of Chief Referee within the Department of Social Services is responsible for conducting administrative hearings to determine the fairness of decisions made by county welfare departments in handling welfare cases. Recipients of aid have the right to appeal deci- sions by county welfare departments which they believe adversely aff~ct their entitlements to assistance. Typically, a fair hearing is requested when a county action results in the denial, reduction or termination of assistance or services. When a request for a fair hearing is made, the department schedules a hearing, notifies both the county and the claimant and assigns a hearing officer. After the hearing is concluded, the hearing officer writes a proposed opinion for adoption by the Director of the Department of Social Services. Positions Requested for 1979-80. During hearings on the budget last year, the Legislature approved a request for 10 additional fair hearing positions. The department requested the positions based on (a) projected increases in workload and (b) the need to meet federal requirements to issue fair hearing decisions for food stamp cases within 60 days of a request for a hearing. Of the 10 pOSitions approved, six were hearing officers required to hear cases and write decisions and four were clerical support staff. Three of the hearing officers were provided to meet the projected increase in normal caseload and three were provided to meet the food stamp requirement. Projected Caseload Growth. Table 6 shows the department’s projec- tions of the fair hearing caseload for 1978-79 and 1979-80. The projections were made in March 1979 in preparation for the hearings on the 1979-80 budget and were the basis for requesting additional positions. In addition, Table 6 indicates the actual fair hearing caseload for 1978-79 and our estimate of the caseload for 1979-80. Table 6 shows that the number of hearings requested in 1978-79 totaled 25,562. This was about 3,000 less than projected by the department. During this period, 8,761 fair hearing decisions were rendered, or 3,600 less than originally estimated by the department. 856 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued The department’s estimate of hearings for the current year is 28,033, slightly less than our estimate. The number of decisions estimated to be rendered in the current year is 11,373, or about 2,519 more than our estimate. The reason for this difference is that the department has as- sumed that approximately 60 percent of the requests will be withdrawn or dismissed and therefore will not require a hearing. However, actual experience in 1978-79 indicates that approximately 70 percent of the re- quests are withdrawn or dismissed prior to hearing. Using this withdrawal or dismissal rate, we estimate that the department will render approxi- mately 8,850 decisions during the current year, in contrast to the depart- ment’s 11,373 estimate. Table 6 Fair Hearing Caseload 1978-79 and 1979-80 Actual 1978-79 Department Projection Actual -Requests for hearings ……. …………………………………………. 28,527 25,562 Decisions rendered…………………………………………………… 12,391 8,761 Estimated 1979-80 Department Analyst Projection Estimate 28,033 29,514 a 11,373 8,854 b Based on actual experience for the first four months of 1979-80. b Assumes withdrawal or dismissal of 70 percent of requests based on actual department experience in 1978-79. Workload Standard The estimated number of decisions rendered in a year is significant because this is the workload standard used for deter- mining the number of hearing officers needed. For 1979–80, the depart- ment is authorized 54 hearing officer positions. Last year, the department identified an annual workload standard for both experienced and inex- perienced hearing officers of 215 cases heard and written. Based on this workload standard and assuming 8,854 decisions disposed of in 1979–80, the department’s staffing level should be 41 heariIig officers (8,854 -;- 215 = 41), rather than 54. The department recently advised us that the workload standard of 215 decisions per hearing officer was no longer appropriate for two reasons. First, the types of cases handled by hearing officers are now more complex than they were in the past. As a result, thes~ cases require additional writing time. Second, the federal requirement to issue food stamp deci- sions within 60 days of appeal (instead of 90 days for AFDC cases) requires additional staff. While fair hearing cases may have increased in complexity during the last few years, there is nothing to indicate that the increase is so great as to require 13 positions, or 32 percent more staff than justified by the workload standard (54 authorized positions -41justified = 13 posi- tions) . Reduce Hearing Officer Positions. We recommend that the six hear- ing officer positions authorized by the Legislature last year be eliminated for the following reasons. First, the number of fair hearing decisions in 1978-79 was lower than projected. Based on experience in the first four months of 1979–80 we estimate that the number of decisions will remain stable in the current year. Second, the department has redirected three Item 309 HEALTH AND WELFARE \/ 857 of the six hearing officer positions authorized by the Legislature to per- form other functions in the current year. One position was assigned as a supervisor in the San Francisco office. The remaining two positions were assigned to a unit which reviews fair hearing decisions for consistency with regulations and prior decisions. This would suggest that additional posi- tions to hear cases and write decisions were not required in the current year. If this recommendation is adopted, the department will have 48 hearing officers, or seven more than justified by the department’s workload stand- ard. We are not recommending that the other seven hearing officer posi- tions be deleted because of the continued debate over the appropriate workload standard for these positions. To resolve this issue, we recom- mend that the following supplemental report language be adopted: \”The Program Evaluation Unit in the Department of Finance shall evaluate the workload standard for hearing officers in the Department of Social Serv- ices and report its findings to the Legislature by December 15, 1980.\” Affirmative Action-Temporary Help Positions We recommend that Item 309 be reduced by $271,057, consisting of $135,528 from federal funds and $135,529 General Fund, by eliminating temporary help funding for affirmative action recruiting. The budget proposes expenditures of $1,192,001 from all funds for 73.4 temporary help positions. This is a decrease of $97,965, or 7.6 percent, from expenditures in the current year. The funds are used for staff costs related to: (a) overtime and seasonal temporary help salaries, (b) vacation earn- ings of employees who leave the department, (c) overlapping of positions to ,provide training for new employees, (d) special consultants, and (e) recruitment and hiring of minority employees. the budget proposes 21.5 temporary help positions for affirmative ac- tion hiring purposes in 1980-81. The total cost of the positions is estimated to be $271,057, which is the same amount as budgeted in the current year. The purpose of these funds is to assist the department in meeting its affirmative action goals through recruiting minority employees, upward mobility candidates, and students. Under this policy, the department places an individual in a temporary help position pending a vacancy in a permanent position. When a permanent position becomes available, the individual is transferred to it. Background. In January 1977, the Department of Social Services (then the Department of Benefit Payments) submitted a budget request to establish 57.8 ongoing temporary help positions. Of that number 21.5 posi- tions were to be used to assist the department achieve its affirmative action goals. We recommended approval of the 57.8 positions. In the preparation of this analysis, we requested the Department of Social Services to identify how the temporary help positions for affirma- tive action had been used to achieve the department’s goals. Our analysis of information provided by the department indicates that the continued use of temporary help positions for affirmative action recruiting purposes is no longer justified. Goals Achieved The department indicates that it has two affirmative 858 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued action goals: (1) labor force parity-the department’s demographic com- position should reflect the ethnic and racial composition of the California civilian labor force and (2) population parity-the department’s work- force should reflect the make-up of the California population. If labor force parity is the objective, the department has achieved or exceeded its affirmative action goals for ethnic and racial composition in total and for most categories, as shown in Table 7. For example, using the labor force parity goal, 23.7 percent of the department’s workforce should be from minority groups. The department’s actual minority composition is 35.1 percent. In addition, the department has achieved its goals for specific ethnic categories with the exception of hispanics. If population parity is the measure, the department has achieved its goals both in total and for specific ethnic categories except hispanics and \”other\” minorities as shown in Table 7. Table 7 Department of Social Services Comparison of Affirmative Action Goals with Actual Experience for All Personnel Categories October 1979 Goal Labor force parity ………. .. Population parity …………. . Actual representation ….. . Blacks 6.3% 7.0 14.8 Hispanics 13.7% 15.5 9.1 Ethnic and Racial Composition Native Asians Americans FiUpino 2.3% 0.4% 0.7% 2.8 0.5 0.8 6.5 1.1 3.1 Other 0.3% 0.9 0.5 Total 23.7% 27.5 35.1 Table 8 compares the department’s affirmative action goals for the placement of minority employees in professional positions with actual experience. With the exception of hispanics and \”other\” minorities, the department has achieved or exceeded its minority recruiting goals. Table 8 Department of Social Services Comparison of Affirmative Action Goals with Actual Experience for Professional Categories October 1979 Goal Labor force parity ……….. . Population parity …………. . Actual representation ….. . Blacks 6.3% 7.0 8.5 Ethnic and Racial Composition Hispanics 13.7% 15.5 ) 11.1 Native Asians Americans FiUpino 2.3% 0.4% 0.7% 2.8 0.5 0.8 6.9 0.7 2.6 Other 0.3% 0.9 0.3 Total 23.7% 27.5 30.1 Table 9 compares the department’s affirmative action goals for minority representation in managerial positions with actual experience. With the exception of hispanics and \”others\”, the department has achieved or ex- ceeded its goals. Item 309 HEALTH AND WELFARE \/ 859 Goal Table 9 Department of Social Services Comparison of Affirmative Action Goals With Actual Experience for Managerial Categories October 1979 Ethnic and Racial Composition Native Blacks Asians Amencans Filipino Labor force parity …………….. . 6.3% 7.0 11.5 Hispamcs 13.7% 15.5 5.4 2.3% 0.4% 0.7% Other 0.3% 0.9 0.6 Population parity ………………. . 2.8 0.5 0.8 Actual representation ……….. . 5.4 1.7 0.9 Total 23.7% 27.5 25.5 These data suggest that the department has made significant progress in achieving its affirmative action goals and that there is no longer a need for the department to rely upon this recruiting mechanism to achieve its objectives. Procedure Not A vailable to Other Departments. During the current hiring freeze, the use of the temporary help blanket for recruiting pur- poses provides the Department of Social Services with a hiring procedure which is generally unavailable to other departments. It is our understand- ing that other departments of comparable size have not been provided funds through temporary help positions to meet their affirmative action goals. Instead, the other departments achieve their goals by waiting for a vacancy to occur and then filling it with an available applicant. The De- partment of Social Services could also rely upon this method for meeting its affirmative action goals . . Transitiomng Into Permanent Positions. While use of temporary help positions has assisted the department to achieve its affirmative action goals, the department has had some problems in moving certain groups ofindividuals from the affirmative action blanket into permanent posi- tions. During 1978-79, 60 persons were placed in the affirmative action positions, as shown in Table 10. Of this number, 25 were from the minority recruitment program, 26 were from the student recruitment program and nine were in the upward mobility category. Although student recruitment constituted 43 percent of the affirmative action blanket usage, it account- ed for only 12 percent of the persons transitioned to permanent positions during 1978-79. Because of the relatively few permanent graduate student positions in the department, it is unlikely that significant numbers of students would be transitionedinto permanent positions. For these reasons, we recommend that funds for affirmative action temporary help positions be deleted, for a savings of $271,057 ($135,529 General Fund and $135,528 federal funds). Table 10 Department of Social Services Affirmative Action-Temporary Help Positions Actual 1978-79 Actual 1979-80 (through December 1979) Transitioned In Transitioned In Total AlRrmative Action Program Persons Minority recruitment ………………………….. 25 Upward mobility\u00b7 ……………………………….. 9 Student recruitment b………………………….. 26 to Permanent Blanket to Permanent Blanket Position As of Total Position As of Nurnber Percent 6-31).79 Separated Persons Number Percent 1-4-80 18 72% 1 6 13 5 38% 6 6 67 2 15 1 20 4 3 12 5 18 10 0 0 7 Totals…………………………………………………. 60 ~ ~% 8 25 ~ 6 ID% TI Upward mobility program provides opportunities for advancement for state employees in iow-paying occupations. b Recruitment of students for full-time work during the summer and part-time work throughout the year. Separated 2 o 3 5 o m ~ \u00bb ::v -i s: m Z -i o .\” en o n \u00bb r- en m ::v < n m b o ~ :t. ~ c CD Q. I ........ ; ~ ~ ~ ~ ~ g Item 309 HEALTH AND WELFARE \/ 861 Inappropriate Use of Special Consultants We recommend elimination of temporary help funding for special con- sultants, for a savings of $76,358 ($50,869 General Fund, $25,322 federal funds and $167 reimbursements). We further recommend Budget BIll language requiring Department of Finance approval of any special con- sultant positions to be established with temporary help funds. The budget proposes expenditures of $1,192,001 from all funds for 73.4 temporary help positions in the Department of Social Services. This is a decrease of $97,965, or 7.4 percent, from expenditures in the current year. These funds are used for staff costs related to: (a) overtime and seasonal temporary help salaries, (b) vacation earnings of employees who leave the department, (c) recruitment and hiring of minority employees, (d) over- lapping of positions to provide trainip.g for new employees and (e) special consultants. Legislative Action. In the Analysis of the 1979 Budget Bi1l, we identi- fied several problems with the department's use of special consultants. On the basis of our review, we recommended that temporary help funding for special consultants be eliminated for 1979-80. The Legislature adopted this recommendation and reduced funds for temporary help by $71,699 ($53,774 federal funds and $17,925 General Fund). In the preparation of this analysis, we requested the department to identify any special consultants established during 1979-80. The depart- ment provided information on seven consultants. Our analysis of the infor- mation provided\u00b7 by the department indicates that the department is continuing to use special consultants financed with temporary help fund- ing. This is inappropriate for two reasons. First, using funds to establish special consultant positions for which the Legislature denied funds clearly violates both legislative intent and Con- trol Section 15 of the 1979 Budget Act. That section provides that \"no appropriation made by this act or any other provision of law may be combined or used ... to achieve any purpose which has been denied by any formal action of the Legislature.\" Second, consultants were hired to perform functions which duplicate duties of existing authorized positions; This is evident in the following examples. Indochinese Refugee Consultants. For example, during the budget hearings last year, the department requested that the Legislature contin- ue funding for four positions in the Adult and Family Services Division to assist in the administration of the Indochinese Refugee Assistance Pro- gram (!RAP). The positions were in addition to 2.5 permanent positions previously assigned to the division for IRAP administration. The Legisla- ture was advised that the four positions would monitor the performance of departmental contractors who were providing social services, English as a second language, vocational training and employment services to Indochinese refugees. The Legislature approved funds for the four posi- tions, as requested. Subsequently, however, the department hired three special consultants to review and evaluate the various services provided to the Indochinese refugees by departmental contractors. The services include social services, English as a second language (ESL) and vocational training. In requesting 862 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued the State Personnel Board to approve these contracts, the department stated that the consultants would: 1. \"Examine the linkages between these provider agencies (contrac- tors) and other agencies and community groups which also provide assistance to the newly arriving refugees from Indochina; 2. \"Determine if the specific services\u00b7 available through the contract agencies are relevant and appropriate to refugees' needs; 3. \"Determine if the agencies use a broadly coordinated approach to avoid service gaps and service duplication; 4. \"File a report of findings with specific recommendations concerning needs for improved coordination of efforts among agencies to over- come those factors most tending to prolong the refugees' depend- ency upon public assistance programs in their assimilation into the culture and economy of California.\" The department indicates that the consultants' report will be available in February 1980. The Legislature recognized the need for such monitoring and evalua- tion activities when it approved permanent funding of the four positions requested by the department. Consequently, these consultants duplicate the functions performed by positions previously authorized by the Legisla- ture. Moreover, our analysis indicates thatthe efforts of the special consult- ants also duplicate an evaluation conducted by a private research firm under contractto the department in 1979-80. The firm was hired to evalu- ate the social services provided by 14 private agencies to refugees between July 1978 and June 1979. Specifically, the objectives of the study were to: 1. Identify the number of refugees receiving services from private agencies; 2. Identify the service needs of the refugees in terms of the statutory goal of self-sufficiency; 3. Evaluate the effectiveness _ of the services provided in making re- fugees self-sufficient; 4. Determine if certain groups of refugees are receiving a dispropor- tionate amount of services; 5. Recommend resources required to fill the gap between\u00b7 identified service needs and service d~livery; 6. Identify the various systems by which private agencies deliver social services and evaluate their effectiveness. The firm has completed its report and submitted its findings to the department. Minority Affairs Consultant. In addition, the department has hired a special consultant to develop communications with various minority orga- nizations concerning departmental programs. This position is under the general supervision of the Assistant to the Director of Community Affairs. Our analysis indicates that the special consultant duplicates the duties of the assistant director position. One of the duties of this position is to develop communications with the various groups served by the depart- ment. Item 309 HEALTH AND WELFARE \/ 863 Additional Controls Needed. The amount of funds proposed for tem- porary help positions for \u00b71980--81 is based on prior-year expenditures rather than on an identification of specific budget-year needs. Our analysis of information provided by the department, indicates that the department will spend approximately $76,358 (all funds) in the current year for special consultants. Given the problems with the department's use of special consultants in the past, and the continuation of these problems during the current year, we recommend that temporary help funds in Item 309 be reduced by $76,358. Currently, requests to fund special consultants are reviewed by the State Personnel Board, but not by the Department of Finance. The State Personnal Board reviews such requests to determine the appropriateness of the salary range and the availability of civil service employees to per- form the work. Clearly this review has been inadequate, as the depart- ment has hired special consultants to perform tasks for which it already has been authorized positions. Therefore, we recommend adoption of the following Budget Bill lan- guage to require the Department of Finance to review and approve the establishment of special consultants by the Department of Social Services. \"Provided further, that the department shall not establish special con- sultant positions funded through temporary help funds prior to review and approval by the Department of Finance.\" Centralized Delivery System (CDS) We recommend: 1. Budget Billianguage be added requiring that the departments feasi- bility study include an identification of the total state and local resources required and schedule of events necessary to complete the development of CDS; 2. Budget Bill language be added providing that positions for phases 2 and 3 of the CDS project not be established until specified approval proc- esses have been completed and that funds not expended for approved budgeted positions revert. 3. $796,413 budgeted for electronic data processing be deleted ($398,207 General Fund and $398,206 federal funds). 4. Funds budgeted for the CDS project be scheduled in a separate budget item. Provisions of AB 8. AB 8 requires the Department of Social Services to implement a Centralized Welfare Delivery System (CDS) in all coun- ties by July 1, 1984. The act states that the system will assist in the delivery of benefits to eligible recipients for the following programs: Aid to Fami- lies with Dependent Children (AFDC); Food Stamps; Medi-Cal eligibility; Aid for Adoption of Children; Special Adult programs; and to the extent feasible, Social Services and Child Support Enforcement. The act identifies the following system goals: (1) prompt and accurate verification of eligibility, (2) accurate computation and timely disbursal of benefits, (3) uniform treatment of recipients, (4) reduction of administra- tive complexity, (5) enforcement of management and fiscal controls, and (6) collection of management information. 864 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued CDS Division. During the current year, the department established a separate division which is charged with the responsibility to define, de- sign, develop and implement CDS. The department is currently working on the definition phase of CDS which will produce a feasibility study detailing the proposed system design. Positions Requested for CDS. The department proposes to administra- tively establish 89 positions for CDS in the current year as shown in Table 11. The budget proposes to continue these 89 positions and establish 43 new positions, for a total of 132 positions in 1980-81. The Department of Finance has approved the establishment of 65 of the 89 positions in the current year to work on Phase I-Definition of the CDS project. The budget states that approval of the remaining 67 positions (24 in the current year for Phase 2-Design and 43 in the budget year for Phase 3-Development) is subject to the Department of Social Services identifying how the positions will be used to design and implement CDS. Departmental Accomplishments. The department has accomplished several important tasks related to the CDS project in a relatively short period\u00b7 of time. It has recruited personnel, assembled an organizational structure and started the project's definition phase (Phase 1). The depart- ment advises that an advisory council has been established to provide advice and recommendations to the department for consideration when developing and implementing CDS. We have several concerns with certain aspects of the department's approach to the development of CDS. 1. Amount of Time Required to Implement CDS. AB 8 allows the de- partment approximately five years (July 1979 to July 1984) in which to define, design, develop and implement CDS. Discussions with departmen- tal staff suggest that the department is reluctant to seek a revision in the date specified for full implementation of the system. Our analysis indicates that the statutory time frames are very demanding, and that several fac- tors may affect the department's ability to achieve the \"time frames\". First, the department has interpreted the act as requiring that a highly complex automated system be in operation within five years. Historically, estimates of the time required to implement systems of this magnitude have been too optimistic. For example, Los Angeles County's Welfare Case Management Information System (WCMIS) has experienced several delays and the scope of the system has had to be redefined more than once. Although the WCMIS project was initiated in 1971, the central index was not operational until 1977. The system is not scheduled to start issuing checks to AFDC recipients and authorizations to participate in the Food Stamp program until October 1980, nine years after the project's initiation date. Second, there is currently a shortage of qualified EDP professional staff in state government. As of December 1979, there was approximately a 9.4 percent vacancy rate in state agencies for EDP staff including computer programmers, analysts and computer operators. Third, the department has not had enough time to define all of the requirements of the system, and therefore does not know how much time Project Staff Approved ................................................................ .. Pending approval by Department of Finance Program Staff Approved ................................................................ .. Pending approval by Department of Finance Totals ............................................................................ .. Approved ................................................................. . Pending approval by Department of Finance Table 11 Centralized Delivery System Project Positions Requested Number of Positions 1979-80 198fJ...81 40 40 24 65 25 25 2 89 132 1979-80 and 1980-81 1979-80 General Total Fund\" $1,POO,854 $530,427 402,746 201,373 553,900 327,058 $2,017,500 $1,058,858 ($1,614,754) ($857,485) Federal Funds $530,427 201,373 226,842 $958,642 ($757,269) Costs Total $2,202,003 1,934,559 756,738 61,394 $4,954,694 ($2,958,741) (65) (65) (24) (67) ($402,746) ($201,373) ($201,373) ($1,995,953) a Funds provided in Chapter 282, Statutes of 1979 (AB 8). -@' s 8 1980-81 General Federal FUnd Funds $1,101,002 $1,101,001 967,280 967,279 446,352 310,386 61,394 ::t: tXl $2,576,028 $2,378,666 :> ($1,547,354) ($1,411,387) ti ($1,028,674) ($967,279) ::t: :> Z ti ~ tXl t\”\” >! ::c tXl …….. CO G) UI 866 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued is required to implement CDS. The department is currently revising its interim time frames leading to implementation in July 1984. As a result of this revision process, the department has moved back the date for pilot testing CDS from July 1981 to October 1981. While the department should make every attempt to meet the im- plementation date established by AB 8, the department should make a realistic assessment of the reasonableness of that implementation date. 2. Feasibility Study. The State Administrative Manual and Control Section 4 of the Budget Act require that a feasibility study report (FSR) be prepared prior to the expenditure of funds for EDP projects of this magnitude. The department has indicated that it plans to issue a feasibility study approximately July 15, 1980. The study will identify (a) the welfare programs to be included in CDS, (b) the functions which the system will perform and (c) the method for implementing CDS. This is a critical document which also should identify the impact of implementing CDS on the state and county governments. In addition to addressing electronic data processing methods, the feasibility study report should identify (1) the total state and local resources required, and a schedule of events or tasks necessary to complete CDS, (2) the cost and staffing impact of this system on county EDP operations, and (3) the department’s plan to integrate CDS with the Welfare Case Management Information System in Los Angeles County and the Welfare Case Data Management System located in 11 other counties. In order to identify these system impacts for the Legislature, we recom- mend the following Budget Bill language: \”Provided further that the department’s feasibility study report include an identification of (1) the total state and local resources required and schedule of events necessary to implement CDS, (2) an identification of the impact of CDS on current county EDP operations and (3) an identifi- cation of how the existing WCMIS and Case Data Management Systems will be incorporated into CDS.\” I 3. Undefined Positions. The budget indicates that 67 of the 132 posi- tions proposed for 1980-81 have not yet been approved by the Depart- ment of Finance. The positions not yet approved would work on the design and development phases (Phases 2 and 3) of the CDS project. The budget proposes to reserve $1,995,953 ($1,028,674 General Fund and $967,- 279 federal funds) for the 67 positions pending clarification of how they will be used to design and develop CDS. Because the administration is unable to identify how the 67 positions will be used in the budget year, we have no basis upon which to recommend that they be approved. In addition, we believe that until the feasibility study report is completed, the department itself will not know what pro- grams will be included in CDS and the personnel resources required for this system in 1980-81. On the other hand, we recognize that the depart- ment will require positions in 1980-81 for design and development actiyi- ties even though it is unable to identify their functions at this time. We recommend approval of the funds for the 67 positions contingent upon the adoption of Budget Bill language that prohibits the expenditure Item 309 HEALTH AND WELFARE \/ 867 of funds for these positions until (a) the Department of Finarice approves the department’s feasibility study, (b) the federal government approves federal financial participation for development of the CDS project and (c) after 30 days notification of such approvals and submission of the approved feasibility study report to the Joint Legislative Budget Committee. We further recommend that Budget Bill language specify that any funds not expended for approved budgeted positions revert to the General Fund. The follOwing language is consistent with these recommendations: \”Provided that the $1,995,953 ($1,028,674 General Fund and $967,279 federal funds) appropriated by this item for Phases 2 (design) and 3 (development) of the CDS project may not be expended until (a) the Department of Finance approves the Department of Social Services, feasi- bility study, (b) the federal government has approved federalfmancial participation for development of the CDS project, and (c) after 30-days notification of such approvals and submission of the approved feasibility study report to the Joint Legislative Budget Committee.\” \”Provided further, that any amount of the $1,995,953 not expended for approved, budgeted positions for CDS revert.\” Adoption of these recommendations will allow (a) the department ade- quate personnel to complete the definition phase of CDS and (b) the Legislature the opportunity to review the feasibility study report and the department’s personnel requirements before the department proceeds with subsequent phases of CDS. 4. Funds Budgeted for Electronic Data Processing (EDP). The de- par.tment has budgeted $796,413 in 1980-81 for EDP related to CDS. The department maintains that the funds are needed to carry out the pilot phase of the project. AB 8 allows the department to test CDS in several cOUIlties prior to statewide implementation. Our analysis indicates that these funds are not justified for 1980-81. First, given delays in the CDS schedule, the funds will not be required until fiscal year 1981-82. The department originally projected that it would start pilot testing in July 1981, thus requiring that the funds be budgeted for 1980-81. However, the department now projects that pilot testing will not start until October 1981. Our review indicates that this date may be re- vised further depending upon the results of the feasibility study. Second, based on conversations with departmental staff, it is unclear whether the requested funds will be used to purchase equipment or to pay for services from the Health and Welfare Data Center. Third, the department is unable to identify the number of counties which will participate in the pilot test. Because the pilot project phase of CDS will not start until October 1981 (fiscal year 1981-82) at the earliest, we recommend that these funds be eliminated from the 1980-81 budget, and requested for the budget year in which they will be expended. This will result in savings in the budget year of $796,413 ($398,207 General Fund and $398,206 federal funds). . 5. Budget CDS Appropriations in Separate Item. Because of the po- tential costs of this project and the time required to implement it, we recommend that the funds for CDS be scheduled in a separate budget item. Separate scheduling of the costs will allow the Legislature to track the development, maintenance and operational costs of the CDS project. 868 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued Child Support Enforcement Program-Positions to Increase Collections We recommend that the 4.5 positions requested for the Child Support Operations Bureau be augmented by 1.5 positions, for increased costs of $32,521 ($13,008 General Fund and $19,513 federal funds). We further recommend that the six positions be limited until June 30, 1982, subject to the achievement of specified goals. The purpose of the Child Support Enforcement program is to locate and obtain child support payments from absent welfare and non welfare par\” ents. Support payments collected from absent parents whose children are receiving public assistance under the Aid to Families with Dependent Children (AFDC) program are used to offset county, state and federal expenditures for this\u00b7 program. The budget requests an additional 4.5 positions for the Child Support Enforcement Branch at a cost of $100,835 all funds ($40,344 General Fund and $60,491 federal funds). The positions will be assigned to the Child Support Operations Bureau and will be used to: (1) monitor county opera- tions of the program, and (2) recommend and implement corrective action plans for improving county performance. The department originally requested six positions to perform these functions. In its proposal, the department identified the following goals it expected to achieve if the positions were approved: (1) based on federal standards collections from absent parents whose children are receiving welfare payments would increase from 4 percent to 10 percent of AFDC expenditures by the end of 1981-82 and (2) child support collections from absent AFDC parents in Los Angeles County, which has the lowest collec- tion rate of any county, would double by the end of 1980-81. It is estimated that the state will collect about $94.9 million in 1979-80 from absent AFDC parents. This amount is equal to 4.5 percent of total estimated AFDC expenditures ($2,106.1 million) in the current year. Of the $94.9 million collected, $31.6 million will be returned to the state to offset its expenditures for the AFDC program. If the state collected 10 percent of AFDC expenditures as proposed by the department, the amount returned to the state in the current year would be about $69 million. We support the department’s efforts to increase child support collec- tions and its willingness to identify measureable goals to be achieved by the requested positions. Because the department’s anticipated results were based on six positions, we recommend an augmentation of 1.5 posi- tions to the 4.5 new positions included in the Governor’s Budget. We further recommend that the six positions be limited to June 30, 1982, subject to the department achieving the following goals identified in its budget request by that date: (1) increase collections from absent AFDC parents to 10 percent of AFDC expenditures and (2) double the collec- tions from absent welfare parents in Los Angeles County. If the depart- ment achieves these goals, we would recommend that the positions be made permanent. Item 309 HEALTH AND WELFARE \/ 869 Public Inquiry and Response We recommend that two proposed positions for the Public Inquiry and Response Branch be deleted, for a savings of $48\/){)2 ($30,247 Generai Fund, $9,600 in federal funds and $8,155 in reimbursements). The budget proposes $71,755 ($45,385 from the General Fund, $14,387 in federal funds and $11,983 in reimbursements) to establish 3.5 positions in the Public Inquiry and Response Branch of the Planning and\u00b7 Review Division. This division consists of four branches including Planning and Development and Public Inquiry and Response. The Public Inquiry and Response Branch (1) responds to inquiries from welfare applicants, county welfare departments, attorneys and other individuals, regarding the public assistance and social services programs administered by the department, (2) translates departmental forms and publications into Spanish and responds to non-English requestsfor information, (3) moni- tors child protective service referrals to California county welfare depart- ments from other states, and (4) provides support to the chief referee in fair hearing matters. This branch currently is authorized 27 positions. An additional staff services manager, staff services analyst and 1.5 clerical positions are proposed for the budget year. The department advises that there are insufficient\u00b7 manager positions in this branch to supervise existing staff effectively, and therefore it is requesting a new staff services manager position. Recommended Staffing Ratios. The State Personnel Board (SPB), in a recent audit of personnel functions delegated to the Department of Social Services, stated that the minimum allowable ratio of managers to analysts is one to three. Staff of the State Personnel Board advise that the maximum recommended ratio is one manager to eight analysts. Tlle current manager to analyst ratio in the Public Inquiry and Response Branch is two to sixteen. On this basis, an additional manager appears to be justified for the Branch. At the same time, however, there are units in the division with more managers per analyst than the maximum estab- lished by the State Personnel Board. In the Long Range Planning Bureau, for example, the manager to analyst ratio is two to three. Consequently, our review indicates that the department has sufficient supervisory staff within the division to transfer a manager position to the branch without additional staff. Positions Redirected. The department is requesting a staff services analyst position for the complaint and case review unit of the branch to help overcome existing backlogs in this unit’s work. During 1979–80, three analyst positions in the complaint and case review unit of the branch were redirected to other functions: (1) one governmental program analyst was ona Kepner-Tregoe training assignment from July to December 1979, (2) another moved to the Welfare Program Operations Division to assist in the establishment of a food stamp complaint processing system, and (3) the third analyst was loaned to the Governor’s Office to perform census outreach. Because departmental priorities have redirected these positions from the Public Inquiry and Response Branch during the current year, we have no basis for recommending that approval be given for an additional analyst position in this unit to overcome \”existing backlogs.\” 870 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES–Continued . Our reVfew\u00b7ofeXistlng-departmentaI resources-indicates iliai: the needs of the Public Inquiry and Response Branch can be met without the estab- lishment of additional analyst and manager positions. We recommend the deletion of the.proposed staff services manager and staff services analyst, for a savings, all funds, of $48,002 ($30,247 from ‘General Fund, $9,600 in federal funds and $8,155 in reimbursements). Title XX Training The Title XX training program consists of (1) county administered staff development, (2) services training conducted by universities for county welfare department staff, and (3) training for direct service providers, such as foster parents, child day care workers and providers of in-home supportive services. Federal grants to the states for Title XX training were unlimited prior to the passage. of PL 96-86, effective in the 1980 federal fiscal year. The act established a national spending limit of $75 million for Title XX training programs. As a result of this limitation on funds, Califor- nia’s 1980 Title XX training allocation was reduced to $3.8 million by the Department of Health, Education and Welfare. This reduced the amount of federal TitleXX training funds available to California during state fiscal year 1979–80 from $12.9 million to $3.8 million, a difference of, $9.1 million. Pending federallegislation–.HR 3434, which amends the Social Security Act regarding adoptions assistance, foster care and child welfare services -would establish a permanent ceiling on Title XX training funds equal to 4 percent of each state’s Title XX services allocations. The budget, which assumes enactment of HR 3434, proposes $13 million for Title XX training in 1980-81. If HR 3434 is not enacted, the level of federal funding for Title XX training is not known. Thus, if HR 3434 is not enacted, funding for California’s Title XX train- ing\u00b7 program may be limited to an amount less than proposed in the budget. The midyear reduction in federal funds during 1979–80 forced the department to (1) discontinue the review of proposals for foster care and child care. training, (2) terminate negotiations for the development of a cost accounting sys~em, and (3) cancel contracts with universities con- ductingservices training. If Title XX training funds are less than the amount budgeted in anticipation of the passage of HR 3434, the level of Title XX program activity will have to be adjusted accordingly. Title XX funding is discussed further in our analysis of Item 312. Title XX Training Management We recommend (1) two new positions be limited to June 30, 1982, and (2) supplementaIlimguage be adopted requiring the Department of So- cial Services to report to the Legislature by December 15, 1981, r{!garding (a) progress toward estabh\”shing standard procedures for the manage- ment and evaluation .ofTit1e XX training programs and (b) the effective- ness and accomplishments of the programs. The budget proposes $61,876 (consisting of $46,407 in federal funds and $15,469 from the General Fund) to establish two positions to manage and evaluate Title XX training programs conducted by universities for county welfare department staff and direct service providers. Item 309 HEALTH AND WELFARE \/ 871 In our Analysis of the 1979-80 Budget Bill, we recommended that funds for Title XX training be deleted from the budget bec;ause (1) we were unable to identify how funds budgeted for social services training were to be spent in 1979-80 and (2) Title XX training programs were being managed in violation of the State Administrative Manual. During the current year, the Department of Social Services has attempted to address the problems we had identified by (1) contracting with a former county staff development officer to advise county welfare departments on the availability of Title XX training programs and (2) establishing statewide priorities for Title XX training. The addition of these two new positions should enable the department to implement an effective management and evaluation system for the Title XX training program. However, given the uncertainty over the funding level for this program and the Legislature’s need to review the management and effectiveness of Title XX training, we recommend (1) the two new positions be limited to June 30, 1982, and (2) the following supplemental report language be adopted: \”The department shall submit a report to the Legislature by December 15, 1981 (a) identifying the department’s progress toward establishing standard procedures for the management and evaluation of Title XX training programs, and (b) reporting on the effectiveness and accomplish- ments of these programs.\” Family and Chiidren’sServices Position We recommend deletion of three positions proposedin the Family and Children So Services Policy Bureau, for a General Fund reduction of $92,,- 09l. The budget proposes $92,091 from the General Fund to establish three social services consultant positions in the Family and Children’s Services Policy Bureau. These positions would be limited to two years, ending June 30, 1982. The consultants are requested to: (1) implement pending federal legislation (HR 3434) affecting adoptions, child welfare services and foster care (discussed in Item 312), and (2) develop regulations for implementac tion of the Indian Child Welfare Act. Our analysis indicates that the requested positions are not justified for the following reasons: . 1. Draft Regulations Already Prepared The department already has incorporated many of the provisions of HR 3434 in draft regulations devel- oped by its Social Services Policy Task Force (discussed in Item 312). The extent to which these regulations must be modified to comply with HR 3434 is uncertain. In addition, the department has also prepared draft regulations for implementation of the Indian Child Welfare Act. The need for additional resources to develop regulations therefore has not been demonstrated. 2. Reporting Activities Currently Underway. Current state law al- ready mandates many of the statistical reporting requirements included in HR 3434. For example, the department is already required to develop a comprehensive management information system for foster care place- ment and theAFDC Boarding Homes and Institutions (BHI) program, prepare an annual report on foster care, and report on family protection service activities. Our review indicates that these ongoing activities will 872 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued respond to a major portion of the HR 3434 reporting requirements. 3. Positions Already Provided. Last year the Legislature approved the department’s request to establish three positions in the Family and Chil- dren’s Services Branch for a two-year limited term in order to (a) develop child protection and foster care policies, (b) draft necessary regulations, and (c) implement these policies and assess their effect on county pro- grams. During the first six months of 1979-80, the Family and Children’s Services Policy Bureau allocated 2.6 existing personnel-years to the de- partment’s task force effort to develop new regulations. The bureau used its three new positions to replace those staff temporarily assigned to the task force. With the completion of the draft regulations, task force staff are being returned to their original assignments. By the beginning of 1980-81 the three positions added by the Budget Act of 1979 will be available for activities such as implementation of HR 3434. 4. Positions Vacant in Bureau. Our analysis indicates this bureau will have a 14 percent vacancy rate during 1979-80. While this high vacancy rate is largely attributable to the difficulty in filling newly authorized positions, the Family and Children’s Services Policy Bureau will be able to meet the workload demands for at least 2.5 positions (14 percent of 1979-80 authorized positions) simply by filling its vacancies. Because the department already has adequate resources for the im- plementation of HR 3434 and the Indian Child Welfare Act, we recom- mend that the three positions proposed for the Family and Children’s Services Policy Bureau be deleted, for a General Fund savings of $92,091. Indochinese Refugee Assistance Program The passage of PL 96-110, the Cambodian Relief Act, assures 100 percent federal funding for the Indochinese Refugee Assistance Program (IRAP) until September 30,1981. This program includes (1) nationwide resettle- ment activities conducted by private, charitable organizations, (2) cash assistance, medical assistance, educational programs and social services delivered by state and county agencies, and (3) social services, job place- ment and language training provided by private contractors. Pending Federal Legislation. Two versions of a comprehensive fed- eral refugee assistance bill continuing IRAP beyond 1981 will be consid- ered by a conference committee in 1980. Both bills before the conferees establish limits on the period of time, after arrival in the United States, that individual refugees may receive 100 percent federally funded cash assist- ance payments. Unknown Number of Indochinese Refugees in California. The num- ber of refugees currently residing in California is not known. Estimates vary from 87,325 to 138,800, a difference of 59 percent. An accurate esti- mate\u00b7 is not available because (1) voluntary agencies responsible for the resettlement of Indochinese refugees\u00b7 have not maintained accurate counts of refugees coming into California and (2) many refugees migrate to California after being resettled in other states. Assistance to Indochinese Refugees in California. In California, pro- grams for assisting Indochinese refugees are conducted primarily by the Departments of Social Services, Health Services and Education under the overall direction of the Secretary of Health and Welfare. The Department Item 309 HEALTH AND WELFARE \/ 873 of Social Services administers cash assistance payments to Indochinese refugees not eligible for AFDC or SSI\/SSP. County welfare departments deliver in-home supportive services and other county social services to these clients. In addition, contracts for special social services and for train- ing in English as a second language (ESL) are administered by the De- partment of Social Services. In July 1979, the most recent month for which actual caseload informa- tion is available, 35,819 Indochinese refugees received cash assistance pay- ments in California. This was an increase of 9,186, or 34 percent, over the caseload in October 1978, the first month such information was collected. The number of public assistance cases is expected to increase at a greater rate during 1980-81, as a result of higher national immigration quotas. The budget estimates that 81,500 refugees will receive cash assistance in July 1980, and that the average monthly caseload in 1980-81 will be 97,800. Table 12 shows the Governor’s proposed 1980-81 federal expenditure of $228.43 million for IRAP. The table distinguishes between the normal federal share of program expenditures and additional funding designated specifically for IRAP. This estimate will be revised during the budget process to reflect updated caseload projections. Table 12 Indochinese Refugee Assistance Program (IRAP) Estimated Federal Expenditures in California (in millions) Estiinated 1979-80 Proeosed 1980-81 Normal Normal Federal 1RAP Federal Program Category Total Share Funding Total Share Local Assistance \u00b7AFDC …………………… $42.27 $21.13 $21.13 $81.77 $40.88 ‘SSI\/SSP ………………. 12.57 7.00 5.57 26.85 14.48 Residual ……………….. 31.48 31.48 62.00 Medical assistance .. 45.91 13.54 32.37 85.79 25.16 Administration AFDC …………………… 3.57 1.79 1.79 6.62 3.31 Residual ……………….. 3.49 3.49 6.64 Medical Assistance 6.76 2.00 4.76 12.62 3.70 Social Services County Welfare Departments …….. 4.37 4.37 8.46 Contracts ……………… 13.19 13.19 23.24 State support ………. 1.08 1.08 1.96 — Totals a … . ………. $164.69 $45.46 $119.23 $316.95 $87.53 a Some columns and rows do not total due to rounding. Positions Requested for Administration of the IRAP Program IRAP Funding $40.89 12.37 62.00 60.63 3.31 6.64 8.92 8.46 23.24 1.97 — $228.43 We recommend that the Department of Social Services submit a plan to the Legislature prior to budget hearings, for coordinating the activities of the proposed IRAP positions. The budget proposes 16.5 positions, limited to September 30, 1981 to administer an expanded federally funded IRAP program, at a cost of $515,276 in federal funds. Currently, the department has 7.5 authorized 874 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued positions for administration of the IRAPprogram. In aletter dated January 18, 1980, submitted under the provisions of Section 28 of the 1979 Budget Act, the Director of Finance notified the Joint Legislative Budget Com- mittee of her intention to establish the 16.5 new IRAP positions adminis\” tratively during the current year in various bureaus within the Department of Social Services. Of the 16.5 positions proposed in the budget and administratively estab- lished in the current year, 13.5 will manage contracts between the Depart- ment of Social Services and private agencies. The remaining three positions will augment existing staff for the administration of cash assist- ance programs delivered by county welfare departments. Table 13 details the assignments of the department’s 24 IRAP positions. Table 13 Proposed Organizational Location of Positions to Administer IRAP New Cash Assistance Staff Adult and family services division …………………………. . Administration division Statistical Services Bureau …………………………………. .. Contracts bureau ……………………………………………….. .. County fiscal administration bureau …………………. .. Planning and review division Operations assessments and audits bureau ………. .. Welfare program operations division County adult program operations …………………….. .. Totals ……………………………………………………………….. .. o 1.5 o o o 1.5 3 New Contracts Management Staff 3 1.5 1 5 3 0 13.5 Total Existing Existing and Proposed IRAP Positions for Staff IRAP 6.5 9.5 0 3 0 1 0 5 0 3 1 2.5 – – 7.5 24 Positions for Budget Year. The increase in IRAP funding will place new demands on the department in the budget year. For this reason, we recommend approval of the 16.5 limited-term positions. Our review indi- cates, however, that the department should identify more clearly how the activities of the new and existing positions will be centrally coordinated. It is our understanding that three deputy directors will have authority for various aspects of the assistance program, and three separate units will assign field representatives to the social services contractors. For these reasons, we recommend that the department submit a plan to the Legisla- ture, prior to budget hearings, that (a) identifies the organizational unit within the department which will have overall responsibility for the pro- gram and (b) describes how IRAP activities will be coordinated. Community Care Licensing We withhold recommendation on the establishment of 55 new positions in the Community Care Licensing Division. The budget proposes to establish 55 positions in the Community Care Licensing Division, at a General Fund cost of $1,399;108. Of these posi- tions, 48 are requested for the Field Operations Branch and seven are requested for the Policy and Administrative Support and Client Protec- tive Services Branches. Item 309 HEALTH AND WELFARE’ \/ 875 Request for Positions in the Field Operations Branch. The depart- ment’s request for positions in the Field Operations Branch is based on (1) an increased number of facilities licensed by state staff and (2) implemen- tation of procedures which increase the amount of time necessary to process licenses and maintain case files. The request for these positions, as submitted to the Department of Finance by the Department of Social Services, was based\u00b7 on an unpub- lished workload study performed by the Department of Social Services. The workload standards established in this study subsequently were modi- fied by the Department of Finance during its budget preparation process. Staff of the Departments of Finance and Social Services have been unable to clarify the analytical basis for the revised workload standard which was used as the basis for requesting 48 new positions. Table 14 compares the annual number of facilities currently licensed per evaluator with the workload standards proposed by the Departments of Social Services and Finance. Table 14 Alternative Annual Workload Standards for facilities Evaluation and the. Associated Need for New Staff 198G-81 Day Care Facilities Current standard ………….. \” ……… \”.\” .. \”.\” ….. \” .. \” … \” ….. \” .. \” .. \” … \” ….. \”…. 180 Department of Social Services.\”\”\”\”\”\”\”\”\”\”\”\”\”\”\”\”\”\”\”\”\”\”\”.\”\”\”\”\”.. 117 Department of Finance …… \” ………….. \” .. \” …. \”\” .. \” .. \” .. \”.\” .. \” …. \” …….. \”. 150 Residential Care . Facilities 90 68 75 New Positions Required 8 109 48 Current year proposal. The Department of Social Services advises that it has submitted a request to the Department of Finance to establish a portion of the positions in the Field Operations Branch during the current year. The Department of Social Services further advises that it intends to increase its request for field positions for this branch when its workload study is released. We are unable to make a recommendation on the proposed 55 new positions for the Community Care Licensing Division because (1) we have no basis on which to evaluate the workload standard proposed by the Department of Finance, (2) the workload study conducted by the Depart- ment of Social Services has not yet been released, and (3) additional positions for the Client Protective Services and Policy and Administrative Support Branches cannot be evaluated separately from the staffing level authorized for the Field Operations Branch. Pending documentation of the workload standards forming the basis of this staffing request, we with- hold recommendation on the 55 new positions. AfDC CASH GRANTS-CONTROL SECTION 32.5 The Budget Bill does not contain an appropriation for the Aid to Fami- lies with Dependent Children (AFDC) program. This is because the Wel- fare and Institutions Code provides a continuous appropriation to finance cash grants to eligible children and their parents or .guardians under the program. Control Section 32.5 of the Budget Bill, however, limits available 876\/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued funds to a specified amount and permits the Director of Finance to in- crease the expenditure limit in order to provide for unanticipated case~ load growth or other changes which increase expenditures for aid payments. Proposed Expenditures Control Section 32.5 of the 1980-81 budget proposes to limit General Fund expenditures to $1,195,372,200. In addition to these funds, Item 314 provides $5,455,400 from the General Fund for local costs mandated by the State’s Legislative and Executive branches. Thus, the total General Fund cost for the AFDC grants in fiscal year 1980-81 is proposed at $1,200,827,600. This is an increase of $208,736,000, or 21.0 percent, over estimated 1979-80 expenditures. Total expenditures from all funds for cash grants paid through Control Section 32.5 are proposed at $2,585,469,700, which is an increase of $479,- 388,000, or 22.8 percent, over estimated current-year expenditures. In addition to these funds, the budget includes federal funds of $62,005,900 ‘in Item 311 for cash grants to Indochinese refugees who do not meet the eligibility requirements for existing welfare programs, but who will re- ceive a grant amount equal to the AFDC payment level as the result of federal requirements. Total expenditures from Control Section 32.5 and Items 311 and 314 are proposed at $2,647,475,600 in 1980-81, which is an increase of $509,910,900, or 23.9 percent, above the estimated current-year expenditures. Table 15 shows the total estimated expenditures for AFDC grants\u00b7 in 1979-80 and 1980-81. Table 15 Total Expenditures for AFDC Grants Estimated Funding 1979-80 Control Section 32.5 Federal ………………………. ; ……………………………………………. . $1,035,120,200 State …………………………………………………………………………. . 986,941,900 Prior law share ……………………………………………………… . (690,121,300) Fiscal relief. ………………………………………………………….. . (296,820,600) County …….. ………………………………………………………………. 84,019,600 Subtotals ……………………… …………………………………… $2,106,081,700 Item 314, Local Mandates Federal ……………………………………………………………………… . State …………………………………………………………………………. . $5,149,700 . County ……………………………………………………………………… . .,…5,149,700 Subtotals …………………………………………………………… . Item 311, Indochinese Refugees Federal …. ………………………………………………………………….. State …………………………………………………………………………. . $31,483;000 County ……………………………………………………………………… . Subtotals ……………………………………………………………. $31,483,000 Totals ……………………………………………………………………………. $2,137,564,700 PrOf}OSed 1!J80..81 Amount $1,289,749,100 1,195,372,200 (837,511,100) (357,861,100) 100,348,400 $2,585,469,700 $5,455,400 -5,455,400 $62,005,900 $62,005,900 $2,647,475,600 Percent Increase 24.6% 21.1 (21.4) (20.6) 19.4 22.8 5.9 97.0 97.0% 23.9% Item 309 HEALTH AND WELFARE \/ 877 Expenditures By Category of Recipient Grant payments limited by Control Section 32.5 are provided to five categories of recipients, as shown in Table 16. Total payments for the family group component-typically a mother with one or more children- are proposed at $2,250.0 million for 1980-81, an increase of 22.5 percent over the current year. In addition, the budget proposes an expenditure of $264.2 million from all funds for cash grants to unemployed parents with dependent children. This is an increase of 27.6 percent over the current year. Finally, the budget proposes an expenditure of $188.2 million in 1980-81 for grants to children receiving foster care in boarding homes and institutions, which is an increase of 22.3 percent over the current year. Proposed General Fund Budget Increases Table 17 shows the changes in General Fund expenditures for the AFDC program proposed in the 1980-81 Governor’s. Budget. General Fund expenditures in the budget year will increase by $208,430,300 over estimated expenditures in the current year. This amount consists of$2~5,- 048,400 in increased expenditures and $16,618,100 in offsetting savings. Most of the proposed increase-83 percent, or $172,146,200-is to pro- vide a 14.65 percent cost-of-living increase for AFDC grants as required by statutes. Other significant increases include $36,418,400 due to a pro- jected increase in basic caseload resulting from an economic recession; $1,860,100 due to a change in the method by which the costs for AFDC Foster Care program are claimed; and $2,646,300 due to several court cases. -AFDC Caseload ——– —– The. budget projects that the AFDC caseload will increase by 80,584 persons, or 5.8 percent, in 1980-81 as shown in Table 18. This increase is significantly larger than increases in previous years, which have ranged between 1 percent and 2 percent. The increase is expected to result from the economic recession projected for 1980. Such a recession would in- crease unemployment and therefore expand the number of individuals\u00b7 receiving assistance under this program. The department indicates that these estimates are subject to change during the May revision, based on additional caseload data for the current fiscal year. Cost-of Living Increases State law requires that recipients of assistance under the AFDC-Family Group and Unemployed programs receive an annual cost-of-living in- crease on their grants effecti’::.e l1!i..x .L~f eac:h year: The cost-of-livin~ adjustment is based on the change in the consumer price indices for Los Angeles and San Francisco during the preceding calendar year. (The increase is measured from December to December.) During the current year (1979-80), cash grant amounts paid to these individuals were in- creased by 15.16 percent. This increase compensated for the increase in the consumer price indices during a two-year period (December 1976- December 1978) because no cost-of-living adjustment was provided in 1978-79. The Governor’s Budget proposes a 14.65 percent cost-of-living increase for AFDC grants for 1980-81. Because actual Consumer Price Index (CPI) data are not currently available for the entire calendar year 1979, this estimate is subject to change as part of the May revision of expenditures. Recipient Family group ……………………… . Unemployed parent. ………….. . Foster care …………………………. . Aid for adoption 6f children Child support incentive pay- ments to counties ……….. . Child support collections from absent parents ……. . Totals ………………………………. . Total $1,837.3 207.0 153.9 2.7 -94.9 $2,106.0 Table 16 Control Section 32.5 Expenditures for AFDC Grants by Category of ReCipient (in millions) Prol2!!!.ed 1!J80…81 Estimated 1979-80 Amount Percent Change Federal State County Total Federal State County Total Federal State County $926.6 $812.1 $98.6 $2,250.0 $1,141.9 $988.1 $120.0 22.5% 23.2% 21.7% 21.7% 101.5 94.1 11.4 264.2 137.8 112.7 13.6 27.6 35.8 19.8 19.3 38.6 109.6 5.8 188.2 49.0 132.2 7.0 22.3 26.9 20.6 20.7 2.7 2.9 2.9 7.4 7.4 14.0 14,0 -28.1 17.7 16.2 -33.9 26.4 15.7 20.6 -45.6 -45.6 -3.7 -119.8 -56.7 -56.8 -6.4 26.2 24.3 24.6 73.0 –$1,035.1 $986.9 $84.0 $2,585.5 $1,289.7 $1,195.3 $100.3 22.8% 24.6% 21.1 % 19.4% C m ~ :II -I 3: m Z -I o .\” en o n \u00bb r- en m :II < C; m b ::l .. 5' c !. ~ -....;, I ~ t:I ~ -@ ~ Item 309 HEALTH AND WELFARE \/ 879 Table 17 Control Section 32.5 Proposed General Fund Budget Increases for AFDCGrants 1980-81 1979-80 Current Year Revised .................................................................. .. A. Baseline Adjustments 1. Basic caseload increase ................................ , .......................................... . -2. Cost-of-living increase a. 1979-80 cost-of-living increase adjusted for caseload growth .. b. 1980-81 cost-of-living increase .................... , .................................... . Subtotals ......................................................................................................... . 3. Court cases a. Garcia v.\u00b7 Swoap ................................................................................... . b. Youakim v; Miller ............................................................................... . c. Crosby v. Califano ...................... : ........................................................ . d. Castro v. Ventura ............................................................................... . Subtotals ......................................................................................................... . 4. Regulations a. Overpayment\/underpayment ......................................................... . b. Federal budgeting ............................................................................. . c. Elimination of passing grade ........................................................... . d. Special needs ....................................................................................... . e. AFDC-BHI supplement to SSI\/SSP child ..................................... . . f. Good Cause Regulations .................................................................. .. Subtotals ................................................................................................ .. 5. AFDC-BHI direct cost claiming method ....................................... . 6. Legislation a. Chapter 55, Statutes of 1978-AFDC-BHI 18-20 ...................... .. b. Chapter 1170 Statutes of 1979-0verpayment recoupment... .. . Subtotal ............................................................................................... . 7. Reduced grant costs due to minimum wage increases ............ : .... . 8. Effect of increased child support collections .................................. ;. 9. Increased costs for child support incentive payments .................. .. B. Total Budget Increase .................................................... ; ...................... . C. Proposed 1980-81 expenditures ........................................................... .. Table 18 Cost $7,957,800 172,146,200 2,349,000 166,700 22,600 108,000 -27,700 845,900 993,600 24,600 6,900 9,800 -9,600 -441,300 AFDC Average Monthly Persons Receiving Assistance Program AFDC family group ...................................................... .. AFDC unemployed ...................................................... .. AFUC foster care .......................................................... .. AFDC aid for adoption of children .......................... .. Totals ............................................................................ .. Estimated 1979-80 1,202,933 165,942 'ZT,717 1,798 1,398,390 Estimated 1980-81 1,265,350 181,658 30,132 1,834 1,478,974 Total $986,941,900 $36,418,400 $180,104,000 $2,646,300 $1,853,100 $1,880,100 $-450,900 $-4,876,500 $-11,290,700 $2,166,500 ($208,430,300) $1,195,372,200 Percent Change 5.2% 9.5 8.7 2.0 5.8% 880 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued Table 19 shows the proposed AFDC payment standards for selected family sizes for 1980-81. For example, if a 14.65 percent cost-of-living adjustment is provided, the grant for a family of two will increase by $48 from $331 in 1979-80 to $379 in 1980-81. The grant for a family of three will increase by $60, from $410 to $470. . Table 19 Maximum AFDC Grant Amounts for 1980-81 Assumes a Cost-of-Living Increase of 14.65 Percent Estimated Proposed Change Family Size 1979-80 1980-81 Amount Percent\u00b7 1 .............................................................................................. .. $201 $231 $30 14.92% 2 ............................................................................................... . 331 379 48 14.50 3 ............................................................................................... . 410 470 60 14.63 4 .............................................................................................. .. 487 559 72 14.78 Percentage changes does not equal 14.65 percent because the Welfare and Institutions Code requires that dollar amounts be rounded. Historically, AFDC grant levels for children residing in foster care have been established by county boards of supervisors. On occasion, the coun- ties adjusted the grant amounts without taking changes in the Consumer Price Index into consideration. As a resultof AB 8, AFDC foster care grants will be increased annually by the same percentage increase applied to grants for the AFDC-Family Group and Unemployed Programs. Counties may increase the foster care grants by more than this percentage, but they will have to fund the full cost of the larger increase. Table 20 shows the total costs from all funds to provide a 14.65 percent cost-of-living increase for AFDC grants. In 1980-81 these costs are estimat- ed at $368,583,500, of which the federal government pays $176,704,900, the state pays $172,146,200, and the counties pay $19,732,400. Table 20 Cost-of-Living Expenditures for AFDC Grants 1980-81 Cost-oE-Living Increases Family group and unemployed .......... .. Foster care ................................................ .. Totals ....................................................... . Total $345,021,100 23,562,400 $368,583,500 Cost-of-Living Increases for AFDC Recipients Federal $170,226,900 6,478,000 $176,704,900 State $155,916,000 16,230,200 $172,146,200 County $18,878,200 854,200 $19,732,400 We recommend enactment of legislation which would provide for the cost-oE-living adjustment to AFDC grants through the annual budget proc- ess rather than automatically through statute. Background. Each month recipients of assistance under the Aid to Families with Dependent Children (AFDC) program receive a payment consisting of two components: (1) the basic grant and (2). the cost-of-living adjustment. The basic grant represents the cost of obtaining necessary living needs such as food, clothing, shelter and utilities. State law requires that the basic grant amount be adjusted annually to reflect changes in the cost-of-living. The purpose of the cost-of-living adjustment is to help the Item 309 HEALTH AND WELFARE \/ 881 purchasing power of welfare recipient grants keep pace with the rising costs of food, shelter, transportation and other necessities of life. Table 21 shows the increase in the AFDC grant f0r a family. of three from 1972-73 through 1980-81. During this nine-year period, the grant amount has increased at an average annual rate of 8.1 percent. Table 21 AFDC Grant Increases for a Family of Three 1972-73 to 1980-81 Grant Amount 1972-73.......................................................................................................... $237 1973-74.......................................................................................................... 243 1974-75.......................................................................................................... 262 1975-76.......................................................................................................... 293 197~77 July-December 1976.............................................................................. 319 January-June 1977 .................................................................................. 338 1977-78.......................................................................................................... 356 1978-79.......................................................................................................... 356 1979-80 .............................. ;........................................................................... 410 1980-81 (Estimated) ................................................................... ,............ 470 Percent Increase 0.9% 2.5 7.8 11.8 8.9 6.0' 5.3 b 15.2 14.6% Grant amounts increased by 6 percent effective January 1, 1977, as a result of Chapter 348, Statutes of 1976 (AB 2601). b Cost-of-living increase suspended for one year . . Our analysis indicates that the current statutory requirement to provide an automatic cost-of-living increase to AFDC recipients should be modi- fied. ;Lack of Legislative Flexibility in Setting Spending Priorities. Because tijere is a statutory requirement to provide an annual cost-of-living adjust- ment to various cash assistance payments, the Legislature's flexibility is liihited in setting spending priorities for the state as a whole. Specifically, increased expenditures of approximately $511 million from the General Fund in 1980-81 ($172.1 million for the AFDC program and $338.9 million for the SSI\/SSP program) will not be subject to the Legislature's control through the budget process because these increases are required by stat- ute. 882 \/HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued Table 22 shows that much of the growth in the AFDC and SSI\/ SSP programs is currently outside the control of the Legislature. The table shows that state expenditures for the AFDC program for 1980-81 are proposed\u00b7 to increase by $208.5 million over estimated expenditures for 1979-80. Of this amount, $172.1 million, or 83 percent,is due to the cost-of- living increase and the remaining 17 percent is due to caseload and other adjustments. In the SSI\/SSP program, state expenditures are estimated to increase by $222.4 million over estimated 1979-80 expenditures. Cost-of- livlng adjustments,however, will total $338.9 million. (The cost-of-living increase of $338.9 million is offset by (a) increases in recipient unearned income-for example, Social Security benefits-which reduces grant ex- penditures and (b) other adjustments totaling $116.5 million.) Table 22 State Expenditures for AFDC and SSI\/SSP Grants (in millions) Program AFDC ................................................................... . SSI\/SSP ................................................................ .. Estimated 1979-80 $986.9 1,087.9 Expenditures for Proposed Cost-ol-Living Proposed Amount of Increase 1980-81 Increase Amount Percent $1,195.4 $208.5 ($172.1) 82.5% 1,310.3 222.4 (338.9) 152.4 While the Legislature can limit expenditures under Control Section 32.5 to less than the amount required to provide for the statutory cost-of-living increase (as it did in the 1979 Budget Act) this does not change the state's obligation to provide these increases. Consequently, such action serves to increase the likelihood that a deficiency will arise requiring further execu- tive or legislative action. Effect on County Appropriations Under Article XI lIB of the Constitu- tion. It is possible that in the future an automatic cost-of-living increase in the AFDC program could require counties to curtail appropriations in other areas due to the provisions of Article XIIIB of the state constitution (added by Proposition 4 on the November 1979 ballot). Article XIIIB limits the amount of funds that the state and local govern- ments may appropriate from the proceeds of taxes. The Legislative Coun- sel has issued an opinion holding that appropriations for the AFDC program probably would be treated as \"proceeds of taxes\" at the local level and thus would count against the counties' appropriation limits. Item 309 HEALTH AND WELFARE \/ 883 If, in the future, costs for this program grow at rates which are higher than the rates used to adjust the appropriations limit for local govern- ments, counties might be forced to curtail the growth of other types of appropriations. (More information on the effects of Article XIIIB may be found in our report entitled\" An Analysis of Proposition 4, the Gann 'Spirit of 13' Initia- tive,\" (December 1979).) For illustration purposes, Table 23 compares the percentage increase in appropriations allowed under Article XIIIB for 1980-81 with the proposed percentage increase in the nonfederal share of costs for the AFDC pro- gram. Ass1.iming that the population of a county increases by 1.7 percent and per capita income increases by 10.5 percent, county appropriations could increase by 12.4 percent in 1980-81 over its 1979-80 appropriation limit. However, the county would have to increase its appropriation for the AFDC program by 21 percent, assuming a 14,65 percent cost~of-living adjustment and a 5.8 percent caseload increase. As a result, the county would have to hold the growth in other expenditures below 12.4 percent if it were already at its appropriation limit, in order to comply with the limits imposed by Article XIIIR Table 23 Comparison of the Appropriation Adjustments Under Article XIIIB and Growth in AFDC Appropriations Article XIllB a Percent Change for 191JO...81 Cost of living: U.S:CPI ........................................................................................................................................... . State per capita personal income ............................................................................................... . Population ........................................................................................................................................... . Percentage Limit for Appropriations b . .. .. . . . . . . . . Growth in AIDe Appropriation .................................................................................................... . 12.8% 10.5 1.7 12.4%C 21.0% a Contained in our report \"An Analysis of Proposition 4\", issued in December 1979. b Combination of the percentage change iIi state per capita personal income and population. State per capita personal income was applied instead of the U.s. CPI because Article XHm requires that the lesser of these two factors be used when calculating the appropriation limit. . C Percentage increase in State per capita personal income (10.5 percent) and population (1.7 percent) do not add to appropriation limit (12.4 percent) due to compounding. Problems in Measuring Inflation The most popular way of measuring inflation is to use the Consumer Price Index (CPI). The CPI is a statistical device which records changes over time in the cost of a defined \"market basket\" of goods and services. The market basket includes food, housing, clothing, transportation, medical care, entertainment and other catego- ries. 884 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued -The Bureau of Labor Statistics has constructed two CPI \"market bas- kets.\" One market basket is based on the consumption behavior of all urban area residents and represents about 80 percent of the nation's households. The other is based on the purchasing habits of only wage and clerical workers in urban areas and represents only 40 to 50 percent of all households. Our analysis suggests that there are several problems with using these indices for determining the impact of inflation on welfare recipients. First, there is currently no specific index which measures the impact of inflation on the goods and services typically purchased by welfare recipients. As a substitute, existing law uses the average change in the \"market basket\" of goods and services purchased by urban wage and clerical workers in the San Francisco and Los Angeles areas. However, welfare recipients do not have the same purchasing patterns or face the same\u00b7 price pressures as wage earners and clerical consumers. For example, the index includes the impact of increased costs for items which many AFDC recipients do not purchase. Specifically, almost one-quarter of the total expenditures meas- ured by the index is for homeownership, although most AFDC recipients are renters and do not purchase homes. Second, the CPI can overstate the rate of inflation faced by the average consumer because it does not measure changes in consumption patterns which occur during periods of high inflation. This is a particularly serious problem during periods of rapid inflation when consumers tend to shift away from purchasing goods exhibiting the largest price increases to goods that are not going up in price to the same extent. For example, when gasoline prices increase and consumers cut back on their use of automo- biles, the index does not adjust for this change. There are several alternatives to using a Consumer Price Index to meas- ure \"inflation.\" One alternative is the Gross National Product (GNP) Consumption Deflator published by the U.S. Department of Commerce. This index more nearly reflects the actual increases in prices paid by the average consumer because it allows for changes in consumption patterns, and treats housing costs in a way which avoids the bias of only counting new home purchases. In addition to the GNP consumption deflator, it is possible to adjust one of the existing indices to exclude an item (such as housing) which does not measure increases borne by the consumer. Third, Chart 6 shows that the rate of \"inflation\" varies substantially depending o~ which index is used to measure the change in prices. This chart compares the quarterly percentage change in prices between 1978 and 1979 and shows that as of October 1979: ~ 13% P 12 E R C E 11 N T I 10 N C R E 9 A S E 8 Chart 6 AltemativeMethods of Measuring the Rate of Inflation (Percentage Change from 1978 to 1979) California CPl- .. ' Urban Consumers a USCPI --~?:.:..-- ........................... >\/\/\”~ ….. ,\/’ , Current Law b , \/ ,\/ California CPI- \/\/ _– Urban Consumers, .——- , .–_–~– Less Homeownershipa …. – , .. — \” .. ‘ — ……. , .. — , .;.:.– ——- ,,,,, .. –_ .. – ,~’ …… -_ …. — ………… -…………. — —– \”\” …. -_ .. -\” ——- …. , ………… .. -.. -,’ —–…….. ..—- ,\/’\/ I II III February April June a Average los Angeles. San Francisco, and San Diego 1979 b California CPl-Wage Earners and Clerical Workers, Average los Angeles and San Francisco IV August GNP Consumption Deflator V October ….. ct S Vj f6 ::t: ~ ~ t:i ~ ~ …….. ! 886 \/ HEALTH AND WELFARE Item 309 DEPARTMENT OF SOCIAL SERVICES-Continued 1. The index with the highest rate of increase was the California CPI for urban consumers which increased by 12.5 percent. 2. If homeownership is excluded from the California CPI for urban consumers, prices rose 10.8 percent, instead of 12.5 percent. 3. The GNP consumption deflator had the lowest rate of increase at 9.1 percent. 4. The California CPI for wage earners and clerical workers for Los Angeles and San Francisco (current law) increased by 11.3 percent. Table 24 shows the General Fund costs which would result from using various measures of inflation to adjust cash grant levels. In constructing the table, we have measured the change in prices from October 1978 to October 1979, the most recent period for which comparable data are available. Consequently, the rates of inflation and General Fund costs are different from those shown in the Governor’s Budget which it uses esti- mates of change from December 1978 to December 1979. Table 24 General Fund Expenditures for AFDC Cost\u00b7of\u00b7Living Increases Using Various Consumer Price Indices and the GNP Consumption Deflator Change from October 1978 to October 1979 Percent Alternative Measures of InDation Increase California CPI-Urban Consumers\u00b7 ………………………………………………………….. 12.5% U.S. CPI………………………………………………………………………………………………………… 12.2 Current Law b ……………………………………………………………………………………………… 11.3 California CPI-Urban consumers (less homeownership) …………………….. 10.8 GNP Consumption Deflator ………………………………………………………………………. 9.1 General Fund (in miUions) $147.8 144.3 133.3 127.2 107.8 Average Los Angeles, San FranCisco, San Diego b California CPI wage earners and clerical workers. Average for Los Angeles and San Francisco Alternative Approach to Providing Cost-oi-Living Increases. Our anal- ysis suggests that the statutory requirements to provide an annual cost-of- living adjustment limits the Legislature’s ability to set spending priorities. Moreover, if funds for the AFDC program are subject to limitations at the county level, rapid growth in this program could automatically require counties to curtail the growth in spending in other priority areas. Because of these factors, we recommend that legislation be enacted to allow the Legislature to grant cost-of-living increases through the annual budget process rather than automatically through statute. We are not recommending that welfare recipients be denied cost-oi-living increases. Rather, we are recommending that the Legislature give itself more flexi- bility in setting spending priorities for the state by considering cost-of- Item 310 HEALTH AND WELFARE \/887 living adjustments in the budget process. .. . The Legislature may wish to use one of severalcost-of-living indices when deciding how much to adjust cash grant levels. We recommend that the Legislature use an index which excludes the impact ofincreased costs for items which AFDC reCipients generally do not purchase (for example, homeownership).Alternatively, the Legislature may wish to use oneo( thecost-of-liviIlg factors provided for llnderArticle XIIIB (the U.S. CPI or state per capita personal income). While\u00b7 these measures may not di- rectly reflect the impact of increased costs of goods and services on wel- fare recipients in California, they would allow for program growth within the limits set by Article XIIIB. Department of $ocialServices STATE SUPPLEMENTARY PAYMENT PROGRAM . FOR THE AGED, BLIND AND DISABLED . Item 310 from the General Fund Budget p. HW 149 Requested 19Ba-81 .. , ……………………………………………….. , …………. $1,310,291,600 Estimated 1979-80 ……………………….. , ………………………………………… 1,087,876,000 Actual 197~79 ………………………………………………………………………. 891,020,326 Requested increase $222,415,600 (+20.4 percent) Total recommended reduction ……………………………………………. None SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. SSI\/SSP Cost-of-Living. Recommend enactment oflegisla- tion which would provide for the cost-of-living adjustment to SSI\/ SSP grants through the annual budget process rather than automatically through statute. GENERAL PROGRAM STATEMENT Analysis page 892 The Supplemental Security Income\/State Supplementary Payment (SSI\/SSP) program is a federally-administered program under which eli- gible aged, blind and disabled persons receive financial assistance. It be- 888 \/ HEALTH AND WELFARE Item 3lO STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND AND DISABLED-Continued gan on January 1, 1974, when the federal Social Security Administration assumed responsibility for administration of the cash grant program which provides assistance to California’s eligible aged, blind and disabled. Prior to that, California’s 58 county welfare departments administered a joint federal-state-county program which provided cash assistance to these recipients. The federal and state governments share the grant costs of the SSI\/SSP program. The federal government pays the cost of the SSI grant and the state pays the cost of the SSP grant. ANALYSIS AND RECOMMENDATIONS The budget proposes an appropriation of $1,3lO,291,600 from the Gen- eral Fund for the state share of .the SSI\/ SSP program in 1980-81. This is an increase of $222,415,600, or 20.4 percent, over estimated current year expenditures. The appropriation includes $234,207,300 for the coun.ty share of costs which the state assumed pursuant to Chapter 282, Statutes of 1979 (AB 8). Federal expenditures of $792,985,100 are proposed for 1980-81, an increase of $90,908,600, or 12.9 percent, over estimated current . year expenditures. Total expenditures of $2,103,276,7oo are proposed for the SSI\/SSP pro- gram for 1980-81, as shown in Table 1. This is an increase of $313,324,200, or 17.5 percent, over estimated current year expenditures. Table 1 Total Expenditures for the SSI\/SSP Program 1979-80 and 1980-81 ChangeJi’rom 1979-80 Estimated Proposed 1979-80 1980-81 Federal …………………………………………… . $702,076,500 $792,985,100 State ……………………………………………… .. 1,087,876,000 1,310,291,600 Prior law share ………………………….. .. (880,979,100) (1,076,084,300) Fiscal relief ……………………………….. .. (206,896,900) (234,207,300) County ………………………………………….. .. Totals ……………………………………….. .. $1,789,952,500 $2,103,276,700 Expenditures by Category of Recipients Amount $90,908,600 222,415,600 (195,105,200) (27,310,400) $313,324,200 Percent 12.9% 20.4 22.1 13.2 17.5% Grant payments in the SSI\/SSP program are made to three general categories of recipients as shown in Table 2. Total grant expenditures to aged recipients are proposed at $760,977,200, an increase of 17.6 percent above estimated current year expenditures. In addition, the budget pro- poses to spend $1,279,728,500 from all funds for cash grants for disabled recipients. This is an increase of $190,8lO,3oo, or 17.5 percent, over the current year. The budget also proposes to spend $62,571,000 for cash grants for blind recipients, an increase of 16.6 percent over the current year. Proposed General Fund Budget Increases Table 3 shows the proposed changes in the General Fund expenditures for the SSP program. The General Fund increase of $222,415,600 in 1980-81 consists of $356,505,300 in increased costs and $134,089,700 in offsetting Recipient Aged …………………………………. Blind …………………………………. Disabled ……………………………. Totals ……………………………. Table 2 Expenditures for SSI\/SSP Grants by Category of Recipient 1979-80 and 1980-81 Estimated 1979-80 Prol2Qsed 1980-81 Total Federal State Total Federal $647,352,200 $191,118,400 $456,233,800 $700,977,200 $212,744,200 53,682,100 19,279,600 34,402,500 62,571,000 21,542,300 1,088,918,200 491,678,500 597,239,700 1,279,728,500 558,698,600 $1,789,952,500 $702,076,500 $1,087,876,000 $2,103,276,700 $792,985,100 State $548,233,000 41,028,700 721,029,900 $1,310,291,600 Percent Change From 1979-80 Total Federal State 17.6% 11.3% 20.2% 16.6 11.7 19.3 17.5 13.6 20.7 17.5% 12.9% 20.4% -~ 3 c.J ….. o ::r: ~ ~ >- Z t:I ~ liJ \” I 890 \/ HEALTH AND\u00b7 WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED. BLIND AND DISABLED-Continued Item 310 savings. The major cost increases include (a) $262,690,500 to provide a cost-of-living increase for the SSP grant based on a 14.65 percent change in the Consumer Price Index and (b) $76,200,100 to pass on the federal cost-of-living increase for the SSI grant. These costs are offset by an in- crease of $133,680,700 in the unearned income of SSI! SSP recipients which reduces the total amount for grant payments by the same amount. Table 3 Proposed General Fund Budget Changes 1980-81 Cost 1979-80 Current Year Revised ……….. , …………………………………………. . A. Baselineadjusbnents 1. Basic caseload increase ……………………………………………………… . 2. Cost-of-living increase ……………………………………………………….. . . a. 1979-80 increase adjusted for caseload growth ……………. $5,123,100 h. 1980-81 increase on the SSP grant……………………………….. $262,690,500 c. 1980-81 cost to the state of passing on the federal SSI cost-of-living increase…………………………………………………….. $76,200,100 3 .. Nonrecurring cost …………………………………………………………….. . 4. Reduced grant costs due to increased recipient unearned income ………………………………………………………………………………. . a. 1979-80 increase adjusted for caseload ………………………… $-1,359,700 h. 1980-81.increase ……………………………………………………………. $-132,321,000 B. Total Budget Increase ………………………………………………………….. .. C. Proposed General Fund Expenditures ……………………………….. .. Caseload Total $1,087,876,000 $12,491,600 $344,013,700 $-409,000 $-133,680,700 ($222,415,600) $1,310;291,600 The Budget projects that the caseload for the SSI\/SSP program will increase by 13,776 persons, or 2.0 percent, as shown in Table 4. These projections are subject to change during the May revision of expenditures. Table 4 SSI\/SSP Average Monthly Persons Receiving Assistance 1979-80 and 1980-81 Program Aged ……………………………………………………………………….. . Blind ………………………………………………………………………. .. Disahled …………………………………………………………………. .. Estimated 1979-80 317,771 17,229 366,924 Proposed 1980-81 322,500 17,358 375,842 Totals …………………………………………………………………… 701,924 715,700 Cost-of-Living Increase Change From 1979-80 Persons Percent 4,729 1.5% 129 0.7% 8,918 2.4% 13,776 2.0% Current law requires cash grants for SSI\/SSP recipients to be increased annually to compensate for increases in the cost-of-living. The federal government provides a cost-of-living increase for the SSI grant based on the changein the U.S. Consumer Price Index (CPI). In addition, the state provides a cost-of-living adjustment for the SSP grant, based on the change in the consumer price indices for Los Angeles and San Francisco. The federal government is proposing to increase the SSI grant by 13.3 percent for 1980-81. The SSP grant increase will be based on a 14.65 Item 310 HEALTH AND WELFARE \/ 891 percent change in the Consumer Price Index. The SSP grant will actually increase more than 14.65 percent over the current-year level because of the method prescribed by state law for calculating cost-of-living increases. Table 5 shows the maximum SSI\/SSP grant payments for selected recip- ient categories for 1979-80 and 1980-81. It is estimated that the grant for an aged or disabled individual will increase by $60 from $356 in the current year to $416 in the budget year. During the same period, the grant for an aged or disabled couple will increase by $106 from $660 to $766. Table 5 Maximum SSI\/SSP Grant Levels 1979-80 and 1980-81 Change From 1979-80 Aged\/Disabled Individual Estimated 1979-80 $356.00 (208.20) (147.80) Proposed 198fJ.c81 Amount Percent Totals ……………………………………………………………………….. . SSI. ……………………………………………………………………………. . SSP …………………………………………………………………………… . Aged\/Disabled Couple Totals ……………………………………………………………………….. . SSI. ……………………………………………………………………………. . SSP\” …………………………………………………………………………… . Blind Individual Totals ……………………………………………………………………….. . SSI. ……………………….. ; …………………………………………………. . SSP …………………………………………………………………………… . Blind Couple Totals ……………………………………………………………………….. . SS( ……………………………………………………………………………. . SSp.; ………………………………………………………………………….. . 660.00 (312.30) (347.70) 399.00 (208.20) (190.80) 776.00 (312.30) (463.70) $416.00 (235.90) (180.10) 766.00 (353.90) (412.iO) 465.00 (235.90) (229.10) 894.00 (353.90) (540.10) $60.00 16.9% (27.70) 13.3 (32.30) 21.9 106.00 16.1 (41.60) 13.3 (64.40) 18.5 66.00 16.5 (27.70) 13.3 (38.30) 20.1 118.00 15.2 (41.60) 13.3 (76.40) 16.5% !;Cable 6 shows the total expenditures from all funds for the SSI! SSP co~t-of-living adjustment for 1980-81. Total expenditures are estimated at $486,419,400, of which the federal government will pay $147,528,800 and the state will pay $338,890,600. The state costs consist of two components: (1) the increased cost for the SSP grant ($262,690,500) and (2) the cost of passing on the federal cost-of-living increase on the SSI grant ($76,200,- 1(0). (Current law requires the state to pass on federal cost-of-living increases on the SSI grant to all SSI! SSP recipients. Under federal require- ments, recipient countable income-for example, social security benefits -is applied first to reduce the SSI portion of the grant. As a result,’ the state pays the full cost of providing the SSI increase to the remaining SSP recipients who have income above the SSI grant level and therefore do not qualify for SSI benefits.) SSI\/SSP Program Federal Funds: Table 6 Cost-of-Living Expenditures for SSI\/SSP Grants 1980-81 SSI Cost-of-Living ……………………………………………………………………………………………………….. . General Fund: ………………………………………………………………………………………………………………… . SSP cost-of-living increase …………………………………………………………………………………………. . Cost for passing on the federal cost-of-living increase ………… , ………………………………… … Total, SSI\/SSP …………………………………………………………………………………………………………. . Cost $147,528,800 $338,890,600 (262,690,500) (76,200,100) $486,419,400 892 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED. BLIND AND DISABLED-Continued Federal Revenue Sharing Funds Item 310 Budget Bill language in Item 485 specifies that $276,200,000 shall be appropriated from the Federal Revenue Sharing Fund to the General Fund to finance part of the state’s cost of the SSP program. Language in Item 310 (the SSP appropriation) specifies that the revenue sharing funds will be expended prior to the expenditure of the remaining $1,034,091,600 from the General Fund, appropriated in that item. Cost-of-Living Increases for SSI\/SSP Recipients We recommend enactment of legislation which would provide for the cost-oE-living adjustment to SSI\/SSPgrants through the annual budget process rather than automatically through statute: Background. Each month, recipients .of assistance receive from the federal government a single monthly check covering the federal grant payment for SSI and the state grant payment for SSP. Both the SSI and SSP grants consist of a basic grant amount and a statutorily set cost-of- -living factor which increases the basic grant annually. The basic grant represents the cost of obtaining necessary living needs, such as food, cloth- ing, shelter and utilities. The purpose of the cost-of-living adjustment is to help the purchasing power of grants to SSI\/SSP recipients keep pace with the rising costs of food, shelter, transportation and other necessities of life. The cost-of-living increase on the federal SSI grant is based on the percentage change in the U.S. Consumer Price Index. The cost-of-living increase on the state SSP grant is based on the average percentage change in the separate consumer price indices for Los Angeles and San Francisco. Table 7 shows the increase in SSI\/SSP grants for an aged or disabled individual from the beginning of this program in January 1974 through 1980-81. During this seven-year period, the SSI\/SSP grant increased annu- ally at a rate of 8.6 percent. . Table 7 SSI\/SSP .Grant Increases for an Aged Individual January 1974 to 1980-81 Total SSI\/SSP Grant JallUary-June 1974 ………………………………………………………………………………………….. $235.00 1974-75……………………………………………………………………………………………………………… 235.00 1975-76 ……….. ;…………………………………………………………………………………………………… 259.00 1976-77 ………………………………………………………………… ;………………………………………….. 276.00 1977-78;…………………………………………………………………………………………………………….. 296.00 1978-79……………………………………………………………………………………………………………… 307.60 1979-80……………….. ……………………………………………………………………………………………. 356.00 1980-81……………………………………………………………………………………………………………… 416.00 Percent Increase , 10.2% 6.6 7.2 3.9\” 15.7 16.& \”Reflects the effect of the SSI cost-of-living increase for 1978-79. The SSP cost-of-living increase was suspended except for July and August 1978 when the total grant payment for an aged individual was $322. The budget estimates that under current law, the SSP grant will be increased on the basis of a 14.65 percent change in the consumer price indices for Los Angeles and San Francisco and the SSI grant will be in- . Item 3lO HEALTH AND WELFARE \/ 893 creased by 13.3 percent. These estimates are subject to change during the May revision of expenditures when actual Consumer Price Index data will be available. Our analysis indicates that the current statutory requirement to provide an automatic cost-of-living increase to SSI\/SSP recipients should be modi- fied. Lack of Legislative Flexibility in Setting Spending Priorities. Because there is a statutory requirement to provide an annual cost-of-living adjust- ment to various cash assistance payments, the Legislature’s flexibility is limited in setting spending priorities for the state as a whole. Specifically, increased expenditures of approximately $511 million from the General Fund in 1980-81 ($172.1 million for the AFDC program and $338.9 million for the SSI\/SSP program) will not be subject to the Legislature’s control through the budget process because these increases are required by stat- ute. Table 8 shows that much of the growth in the AFDC and SSI\/SSP programs is currently outside the control of the Legislature. The table shows that state expenditures for the AFDC program for 1980-81 are proposed to increase by $208.5 million over estimated expenditures for 1979–80. Of this amount, $172.1 million, or 83 percent, is due to the cost~of\u00ad living increase and the remaining 17 percent is due to caseload and other adjustments. In the SSI\/SSP program, state expenditures are estimated to increase by $222.4 million over estimated 1979–80 expenditures. Cost-of- living adjustments, however, will total $338.9 million. (The cost-of~living increase of $338.9 million is offset by (a) increases in recipient unearned income-for example, Social Security benefits-which reduces grant ex- penditures and (b) other adjustments totaling $116.5 million.) Table 8 State Expenditures for AFDC and SSI\/SSP Grants (in millions) Program AFDe ………………………………….. . SSI\/SSP ………………………………… . Estimated 1979-80 $986.9 1,087.9 Proposed IfJ8();.8I $1,195.4 1,310.3 Proposed Amount of Increase $208.5 222.4 Expenditures for Cost-of-Living Increase Amount Percent ($172.1) 82.5% (338.9) 152.4 Effect on State Appropriations Under Article X\/IIB of the Constitu- tion. It is possible that in the future an automatic cost-of-living increase in the SSP program could require the state to curtail appropriations in other areas due to the provisions of Article XIIIB of the state constitution (added by Proposition 4 on the November 1979 ballot). Article XIIIB limits the amount of funds that the state and local govern- ments may appropriate from the proceeds of taxes. The Legislative Coun- selhas issued an opinion holding that appropriations for the SSP program count toward the state’s appropriation limit. If, in the future, costs for this program grow at rates which are higher than the rates used to adjust the appropriations limit, the state might be forced to curtail the growth of other types of appropriations. 894 \/ HEALTH AND WELFARE Item 310 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND AND DISABLED-Continued (More information on the effects of Article XIIIB may be found in our report entitled \”An Analysis of Proposition 4, the Gann ‘Spirit of 13′ Initia- tive,\” (December 1979).) For illustration purposes, Table 9 compares the percentage increase in appropriations allowed under Article XIIIB for 1980-81, with the proposed percentage increase in the state share of costs for the SSP program. Assum- ing that the population of the state increases by 1.7 percent and per capita income increases by 10.5 percent, state appropriations could grow by 12.4 percent in 1980-81 over the 1979-80 appropriation level. However, be- cause of the statutory cost-of-living increase, the funds appropriated by the state for the SSP program must increase by 20.4 percent. As a result, the state would have to hold the growth in other expenditures below 12.4 percent if it were already at its appropriation limit, in order to comply with the limits imposed by Article XIIIB. Table 9 Comparison of the Appropriation Adjustment Under Article XIIIB and Growth in SSP Appropriations 1980-81 Article XII\/O B Percent Change Cost of living: for 1980-81 U.S. CPI …………………………………………………… ……………………………………………………………………….. 12.8% or State per capita personal income………………………………………………………………………………………. 10.5 Population ……………………………………………………………………………………………………………………………… 1.7 Percentage limit for appropriation b . … . .. … . . . . . . 12.4 e Growth in SSP appropriation …………………………………………………………………………………………………… 20.4% Estimates contained in our report \”Analysis of Proposition 4\”, issued December 1979. b Combination of the percentage change in state per capita personal income and population. State per capita personal income was applied instead of U.S. CPI because Article XIIIB requires that the lesser of these two factors be used when calculating tb. appropriation limit. e Percentage increase in state per capita personal income (10.5 percent) and population (1.7 percent) do not add to the appropriation limit (12.4 percent) due to compounding. Problems with the Current Formula Used to Calculate Cost-oE-Living Grant Increases. There are several problems with the current method used to calculate cost-of-living adjustments for SSI\/SSP recipients. 1. SSI\/SSP Cost-oE-Living Adjustment Does not Reflect the Change in the Consumer Price Index. Under current law, the cost-of-living in- crease for the SSP grant is obtained by applying the change in the Con- sumer Price Index against inflated base amounts which are set in statute. As a result, the total SSI\/SSP payment and the SSP portion of the grant increase annually at a rate greater than the rate of inflation as measured by the Consumer Price Index. This is illustrated in Table 10, which com- pares the change in the SSI \/ SSP grant for an aged person for 1980-81 with the changes in the consumer price indices for Los Angeles and San Fran- cisco. The table shows that the total SSI\/SSP grant will increase 16.9 per- cent and the SSP grant will increase 21.9 percent, even though the combined consumer price indices rose only 14.7 percent between Decem- ber 1978 and December 1979 (the period used to determine the cost-of- living adjustment). Item 310 HEALTH AND WELFARE \/ 895 Table 10 SSI\/SSP Grant for An Aged Individual Total SSI\/SSP Grant Percent Amount Change 1979-80 ………. $356.00 1980-81 ………. 416.00 16.9% 19~ and 1980-81 SSIGrant SSP Grant Amount $208.20 235.90 Percent Change Amount $147.80 13.3%b 180.10 Percent Change 21.9% Change in Consumer Price Index\u00b7\u00b7 Percent Change Period 14.7% 12-79\/ 12-78 Reflects the change in the average of the indices for Los Angeles and San Francisco. b Reflects the federal cost-of-living adjustment for the SSI grant. The federal cost-of-living adjustment is based on the change in the U.S. CPI from the January-March 1979 quarter to the January-March 1980 quarter, which is estimated to increase by 13.3 percent. Thus, under the current method used to calculate the cost-of-living increase, the SSP grant will increase 49 percent more than the change in the consumer price indices used to determine the cost-of-living adjust- ment (21.9 percent SSP cost-of-living increase ..;- 14.7 percent change in CPI = 49 percent difference). 2. Disparity in the Cost-ot:LivingAdjustment Provided AFDC Recipi- ents. The cost-of-living formula used for calculating the SSIISSP grant results ina difference between the inflation adjustment provided AFDC recipients and that provided SSIISSP recipients. Table 11 compares the. change in the grant level of one AFDC recipient with that. of an aged SSIISSP recipient for 1980-81. It shows that the total SSIISSP grant will increase by 16.9 percent while the grant level for an AFDC recipient will increase by 14.9 percent or an increase approximately equal to the change in the Consumer Price Index. Table 11 Grant Levels for an Aged Individual Receiving SSI\/SSP and One Person Receiving AFDC 1979-80 …………………………………………. . 1980-81 …………………. ; …………………….. . 1979-80 and 1980-81 Aged SSI\/SSP Recipient Grant $356.00 416.00 Percent Change One Person AFDC Recipient Grant $201.00 231.00 Percent Change 14.9% Change in Consumer Price Index Percent Change Period 14.7% 12-79\/ 12-78 If the current method of calculating the cost-of-living increase was modified so that the change in the Consumer Price Index was applied against the total grant (as is done in adjusting AFDC grants), the grant for an aged individual in 1980-81 would be $408 per month, as shown in Table 12. This method would provide a 14.6 percent cost-of-living increase instead of a 16.9 percent increase, and therefore would more accurately reflect the increase in the Consumer Price Index. Because the grant amount would be $8 less\u00b7 than the amount provided under current me- 896 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND AND DISABLED-Continued Item 310 thodology, it would result in asavings of $54.2 million to the General Fund in 1980-81. The revised methodology would result in a General Fund savings of $701,828,7QO over a five year period. 1979-80 .. ; ………… . 1980-81 …………… . Table 12 Grant Levels for an Aged Individual Receiving SSI\/SSP 1979-80 and 1980-81 Current Law Method Alternative Method Grant $356 416 Percent Change 16.9% Grant $356 408 Percent Change 14.6% Change in Consumer Price Index Percent Change 14.7% Period 12\u00b779\/ 12\u00b778 Problems in Measuring Inflation. The most popular way of measuring inflation is to use the Consumer Price Index (CPI). The CPI is a statistical device which records changes over time in the cost of a defined \”market basket\” of goods and services. The market basket includes food, housing, clothing, transportation, medical care, entertainment and other catego- ries. The Bureau of Labor Statistics has constructed two CPI \”market bas- kets.\” One market basket is based on the consumption behavior of all urban area residents and represents about 80 percent of the nation’s households. The other is based on the purchasing habits of only wage and clerical workers in urban areas and repr~sents only 40 to 50 percent of all households. Our analysis suggests that there are several problems with using these indices for determining the impact of inflation on welfare recipients. First, there is currently no specific index which measures the impact of inflation on the goods and services typically purchased by welfare recipients. As a substitute, existing law uses the average change in the \”market basket\” of goods and services purchased by urban wage and clerical workers in the San Francisco and Los Angeles areas. However, welfare recipients do not have the same purchasing patterns or face the same price pressures as wage earners and clerical consumers. For example, the index includes the impact of increased costs for items which many SSI\/SSPrecipientsdo not purchase. Specifically, almost one-quarter of the total expenditures meas- ured by the index is for homeownership, although most SSI\/SSP recipients are renters and do not purchase homes. Second, the CPI can overstate the rate of inflation faced by the average consumer because it does not measure changes in consumption patterns which occur during periods of high inflation. This is a particularly serious problem during periods of rapid inflation when consumers tend to shift away from purchasing goods exhibiting the largest price increases to goods that are increasing at a slower rate. For example, when gasoline prices increase and consumers cut back on their use of automobiles, the index Item 310 HEALTH AND WELFARE \/ 897 does not adjust for this change. There are several alternatives to using a Consumer Price Index to meas- ure \”inflation.\” One alternative is the Gross National Product (GNP) Consumption Deflator published by the U.s. Department of Commerce. This index more nearly reflects the actual increases in prices paid by the average consumer because it allows for changes in consumption patterns, and treats housing costs in a way which avoids the bias of only counting new home purchases. In addition to the GNP Consumption Deflator it is possible to adjust one of the existing indices to exclude an item (such as housing) which does not measure increases borne by the consumer. Third, Chart 1 shows that the rate of \”inflation\” varies substantially depending on which index is used to measure the change in prices. This chart compares the quarterly percentage change in prices between 1978 and 1979 and shows that as of October 1979: 1. The index with the highest rate of increase was the California CPI for urban consumers which increased by 12.5 percent. 2. If homeownership is excluded from the California CPI for urban consumers, prices rose 10.8 percent, instead of 12.5 percent. 3. The GNP consumption deflator had the lowest rate of increase at 9.1 percent. 4. The California CPI for wage earners and clerical workers for Los Angeles and San Francisco (current law) increased by 11.3 percent. Table 13 shows the General Fund costs which would result from using various measures of inflation to adjust cash grant levels. In constructing the table, we have measured the change in prices from October 1978 to October 1979, the most recent period for which comparable data are available. In addition, we have assumed that the current method of cal- cu:lating cost-of-living increases has been modified so that the change in the CPI is applied against the total SSI\/SSP grant. Consequently, the rates of inflation and General Fund costs are different from those shown in the Governor’s Budget which uses estimates of change from December 1978 to December 1979. Table 13 General Fund Expenditures for SSP Cost-of-Living Increases Using Various Consumer Price Indices and the GNP Consumption Deflator Change from October 1978 to October 1979 Percent Alternative Measures of Inflation Increase California CPI-Urban Consumers b ………………………………………………………….. 12.5% U.S. CPI.. ……………………………………………………………………. ;……………………………….. 12.2 Current Law C ……………………………………………………………………………………………… 11.3 California CPI-Urban Consumers (less homeownership) a…………………….. 10.8 GNP Consumption Deflator ………………………………………………………………………. 9.1 % a Assumes change In current method for calculating cost-of-living increases. b Average Los Angeles, San Francisco, San Diego. General Funda (in millions) $221.1 213.1 185.2 170.3 $119.3 C California CPI for wage earners and clerical workers. Average for Los Angeles and San Francisco. 13’)(, P 12 E R C E 11 N T 10 N C R E 9 A S E 8 Chart 1 Altemative Methods of Measuring the Rate of Inflation (Percentage Change from 1978 to 1979) . California CPl- .. ‘ .’ UrbanC ……. onsumers a .. \/..\/,.-~_- USCI’I ………………… : .. ;;:;\/\/’ ….. . , Current Law b \/ \/ -_\/ ,\/ California CPI-\/\/ _– Urban Consumers, .’ —— ,. … –_—-;~– Less Homeownership a .. — .\” .. — , .;.::.-‘— …. – .\” .. -.. —-.. ~ ;,,; … —– …. -‘ -;r…——- …. -…. ———-;,.,. ———– –_ …. -…. —.. —- ,,\” ———-_…. \/\/\/ GNP Consumption _——- Deflator I \” III February April June a Average losAngeles,San Frandsco, and San Diego 1979. b California CPl-Wage Earners and Clerical Workers, Average los Angeles and San Francisco IV August V October \”11 en 0-1 ~:J> -1-1 ::z:m men :J>c Ci):g mr em s::: Ul m Cz Z-l e:J> :J>~ z-< e-V e:J> —< enS::: :J>m UlZ r-l m-v e~ 10 nCi) g~ ~.:J> ~s::: It I ……. ::t ~ ~ I I-< ct 3 CoJ ...... o \\ \\ \\. Item 310 HEALTH AND WELFARE \/ 899 '\\ Alternative Approach to Providing Cost-oE-Living Increases. Our anal- ysis suggests that the statutory requirement to provide an annual cost-of- living adjustment limits the Legislature's ability to set spending priorities. Moreover, if funds for the SSI\/SSP program are subject to limitations at the state level, rapid growth in this program could automatically require the state to curtail the growth in spending in other priority areas if it already was appropriating at its limit. In addition, the current method for calculating cost-of-living adjustments for SSI\/SSP recipients results in grant increases which are larger than the change in the Consumer Price Index. Because of these factors, we recommend that legislation be enacted to allow the Legislature to grant cost-of-living increases through the annual budget process rather than automatically through statute. We are not recommending that welfare recipients be denied cost-oE-living increases. Rather, we are recommending that the Legislature give itself more flexi- bility in setting spending priorities for the state by considering cost-of- living adjustments in the budget process. The Legislature may wish to use one of several cost-of-living indices when deciding how much to adjust cash grant levels. We recommend that the Legislature use an index which excludes the impact of increased costs for items which SSI\/SSP recipients generally do not purchase (for exam- ple, homeownership). Alternatively, the Legislature may wish to use one of the cost-of-living factors provided for under Article XIIIB (the U.S. CPI or state per capita personal income). While these measures may not di- rectly reflect the impact of increased costs of goods and services on wel- faretecipients in California, they would allow for program growth within the limits set by Article XIIIB. Consequences of Modifying The Cost-oE-Living Adjustment For SSI\/ SSP Recipients. If no cost-of-living increase was provided on the SSP grant for 1980-81, General Fund savings would total approximately $263.0 million. This amount would increase by almost $224.0 million, for total savings of $487.0 million, if the state did not pass on the federal cost~of\u00ad living adjustment on the SSI grant. Failure to provide either one of the cost-of-living adjustments would have the following consequences. a. Loss of Food Stamp \"Cash-Out\" Status. If California failed to pro- vide either of the two cost-of-living increases, it would be required to provide food stamps to eligible SSI\/SSP recipients. Under current federal law, California is allowed to provide cash in lieu of food stamps to eligible SSI\/SSP recipients so long as the state: (1) passes on the federal cost-of- living increase for the SSI grant and (2) provides a cost-of-living increase for the SSP grant pursuant to current state law. This provision of federal law allows the state to avoid the administrative costs which would occur if county welfare departments were required to distribute food stamps to SSI\/SSP Recipients. It is assumed that in the absence of a change in federal law, the state would lose its \"cash-out\" status if it failed to provide a cost-of-living in- crease to SSI\/ SSP recipients. As a result, the state and counties would incur administrative costs of $35.4 million to provide food stamps to eligible SSI\/SSP recipients. Under current sharing ratios, the state and counties each would pay $17.7 million. The federal government would contribute 900 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND AND DISABLED-Continued Item 311 $35.4 million. I b. Failure to Meet the Federal Governments Maintenance of Effort' Requirement (PL 94~585). In order to receive federal Title XIX Medi~ caid funds (Medi-Cal), the state is required to either (1) maintain its gross expenditures for the SSP program at the current year levels or (2) main- tain the state payment levels provided in December 1976. The state has been complying with this law by meeting the gross expenditure test be- cause the state has not maintained the payment level for a category of recipients referred to as mandatory supplementation cases. If the SSP cost-of-living increase is not provided, it is unlikely that the state's expenditures for the SSP program would be sufficient to meet the gross expenditure test. If the state failed to meet the gross expenditure test, it could still avoid the loss of Medicaid funds by insuring that SSP grants for all categories of recipients did not drop below the grant levels paid in December 1976. In order to meet this requirement, the state would be required to provide the cumulative amount of all SSI cost-of-living increases since December 1976 to mandatory supplementation cases. The General Fund cost to provide the cost~of-living increases to the mandatory supplementation cases would be approximately $3.0 million in 1980-81. Department of Social Services SPECIAL ADULT PROGRAMS Item 311 from the General Fund Budget p. HW 150 Requested 1980-81 ......................................................................... . Estimated 1979-80 ........................................................................... . Actual 1978-79 ................................................................................. . $4,196,000 3,708,700 5,269,496 Requested increase $487,300 (+ 13.1 percent) Total recommended reduction ................................................... . SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Special Circumstances. Reduce by $100,508. Recom- mend cost-of-living increase be reduced from 14.65 percent to 9 percent, for a General Fund savings of $100,508. 2. Administrative Costs for Cash Assistance Programs. Rec- ommend that federal funds for administrative costs for In- dochinese and Cuban refugees scheduled iIi Item 311 be reduced by $6,900,700 and that federal funds in Item 313 (county welfare department administration) be increased by a similar amount. $100,508 Analysis page 901 . 904 \\ \\~tem311 HEALTH AND WELFARE \/ 901 GEN.ERAL PROGRAM STATEMENT \\ This item contains the General Fund appropriation to provide grants for tJ;1e emergency and special needs of SSI I SSP recipients. The special allow- al;1ce programs for SSI\/SSP recipients are paid entirely from the General Fund and are administered by county welfare departments. In addition, this item contains the grant and administrative costs of three programs which are 100 percent federally funded: (a) Indochinese refugees who do not meet the eligibility criteria for other cash assistance programs, (b) Cuban refugees on general relief and (c) repatriated Americans. ANALYSIS AND RECOMMENDATIONS The budget proposes an appropriation of $4,196,000 from the General Food for special adult programs administered by the Department of So- cial Services in 1980-81. This is an increase of $487,300, or 13.1 percent, over estimated current year expenditures. Total expenditures for this item are proposed at $73,771,000, an increase of $34,235,700, or 86.6 percent, over estimated current year expenditures. The federal government will pay $69,575,000, or 94.3 percent, of this amount. Most of these expenditures ($62,005,900) are for cash grants to Indochinese refugees who normally would not be eligible for assistance under the AFDC program, but who, due to federal law, will receive a grant equal to the AFDC payment standard. When the federal legislation for the Indochinese\u00b7 Refugee Assistance program expires, these refugees will either receive county general relief or no assistance. Table 1 shows the proposed expenditures for special adult programs in 1980-81. Special Circumstances (Item 311 (a)) We recommend that the cost-oE-living increase be reduced from 14.65 percent to 9 percent, for a General Fund savings of $100,508. The special circumstances program provides adult recipients with spe- cid assistance in times of emergency. Payments can be made for replace- ment of furniture, equipment or clothing which is damaged or destroyed by a catastrophe. Payments also are made for moving expenses, housing repairs and emergency rent. The budget proposes $1,930,900 for grants under the special circum- stances program for 1980-81. This is an increase of $240,900, or 14.3 per- cent, over the estimated current year expenditures. The Department of Social Services indicates that the proposed expenditures include funds for a 14.65 percent cost-of-living increase. Our analysis indicates that a 9 per- cent cost-of-living adjustment should be provided for special circum- stances programs instead of a 14.65 percent adjustment. First, the amounts provided under the special circumstances program generally are one-time allowances to cover emergency expenditures and are not considered grants designed to maintain the recipients' standard of living. Second, there is no statutory requirement to provide a 14.65 percent cost-of-living increase for the special circumstances program. Program Special circumstances ...................................................................... .. Special benefits ................................................................................... . Aid to the potentially self-supporting blind ............................. ... Emergency payments ............................ , .......................................... . Repatriated Americans ..................................................................... . Indochinese Refugees: . Grants .............................................................................................. .. Administration ............................................................................... . Cuban Refugees: Grants ............................................................................................... . Administration ............................................................................... . Totals ............................................................................................. . Table 1 Special Adult Programs 1979-80 and 1980-81 Estimated J!J7f)...8{} State $1,690,000 147,400\" 1,310,000 561,300 $3,708,700 Federal $40,000 Total $1,690,000 147,400 1,310,000 561,300 40,000 31,483,000 31,483,000 3,487,400 3,487,400 568,700 247,500 $35,826,600 568,700 247,500 $39,535,300 State $1,930,000 116,900 1,632,100 516,100 $4,196,000 a Includes $40,100 in benefit payments related to the Harrington v. Obledo court case. ProlJ()S(!(\/ JfJ(J)..8J Federal Total $1,930,900 116,900 1,632,100 516,100 $40,000 40,000 62,005,900 62,005,900 6,642,800 6,642,800 628,400 628,400 257,900 257,900 $69,575,000 $73,771,000 en \"0 m n ;; r l> C C ~ \”0 :a 0 Ci) :a Percent Change \u00bb 3: State Federal Total en 14.3% J, 14.3% -20.7 -20.7 g 24.6 24.6 :=. -8.1 -8.1 ::I c CD Q. 97.0% 97.0 90.5 90.5 i 10.5 10.5 I 4.2 4.2 13.1% 94.2% 86.6%1 CD 2 \” =: t:r:I > ~ > Z tJ ~ t:r:I t\”‘ ~ l:J:I t:r:I ~ ~ ‘\” ~ ~ \\ \\ I. Item 311 HEALTH AND WELFARE \/ 903 Third, the administration has proposed a 9 percent cost-of-living adjust- ment for similar programs where the cost-of-living increase is discretion- ary . . Therefore, we recommend that a 9 percent cost-of~living increase be provided this program instead of a 14.65 percent.adjustment. Special Benefits (Item 311 (b)) This item contains funds for (a) SSP recipients who have guide dogs and (b) recipients of assistance resulting from the Harrington v. Obledo court case. The guide dog program provides a special monthly allowance to cover the cost of dog food. The budget proposes $111,900 for fiscal 1980-81, which is an increase of $4,600, or 4.3 percent, over the current year. The Harrington v. Obledo court case concerns two welfare recipients who received aid under California’s adult welfare program, but who were not eligible to receive aid under the SSI\/SSP program when it replaced the categorical aid programs on January 1, 1974. The California Court of Appeals ruled that the two plaintiffs were entitled to assistance at state expense. State expenditures for this assistance are proposed at\u00b7 $5,000 in the budget year. . Aid to Potentially Self-Supporting Blind (Item 311 (c)) The Aid to Potentially Self-Supporting Blind (APSB) program provid\u00a2s payments to blind recipients who earn more income than is allowed tinder\u00b7 the basic SSI\/SSP program. The program seeks to ‘encourage these in- dividuals to become economically self-supporting. The budget proposes $1,632,100 for 1980-81, which is an increase of $322,100, or 24.6 percent, over estimated current year expenditures. The increase is due to a proposed 14.65 percent cost-of-living adjustment and an increase in case- load. Emergency Payments (Uncollectible Loans (Item 311 (d)) Chapter 1216, Statutes of 1973, mandates that counties provide emer- gency loans to aged, blind and disabled recipients whose regular monthly checks from the federal Social Security Administration have been lost, stolen or delayed. The budget proposes $516,100 for 1980-81, which is $45,200, or 8.1 percent, below estimated current year expenditures. This estimated decrease is due to Chapter 724, Statutes of 1978 (SB 1631), which allows the department to adopt regulations that require individuals to repay previous loans before they can be eligible to receive a new loan. Temporary Assistance for Repatriated Americans (ltem.311(e)) The’ federal repatriate program is designed to provide temporary help to needy U.S. citizens returning to the United States from foreign coun- tries because of destitution, physical or mental illness or war. Recipients can be provided temporary assistance to meet their immediate needs and continuing assistance for a period. of up to 12 months. County welfare departments administer the program based on federal and state guide- lines. The program is 100 percent federally funded. Expenditures for the budget year are proposed at $40,000, the same amount estimated for the current year. 904 \/ HEALTH AND WELFARE SPECIAL ADULT PROGRAMS-Continued Indochinese Refugees (Item 311 (f)) Item 311 The Indochinese Refugee Assistance program was established by fed- erallaw to provide benefits to eligible Indochinese refugees. Historically, the federal government has paid the entire cost of cash grants, social services and medical assistance provided to Indochinese refugees. On November 13, 1979, President Carter signed the Cambodian Relief Act (PL 96-110) which extends 100 percent federal funding for Indochinese refugees through September 30, 1981. The federal funds for cash grant payments to Indochinese refugees who qualify for the Aid to Families with Dependent Children (AFDC) pro- gram are limited by Control Section 32.5 of the 1980 Budget Bill. Assist- ance for Indochinese refugees who qualify under the Supplemental Security Income\/State Supplementary Payment program are included in Item 310. Item 311 (f) contains federal funds for cash grants and administrative costs related to Indochinese refugees who do not meet the eligibility requirements for the AFDC and SSI\/SSP programs. The budget proposes expenditures of $68,648,700 from federal funds for these costs. This in- cludes $62,005,900 for grants and $6,642,800 for administrative costs; Total expenditures are estimated to increase by $33,678,300, or 96.3 percent, over current year expenditures. The significant increase in expenditures is due to projected caseload growth. The department estimates that the number of Indochinese refugees receiving assistance under this special program will increase from approximately 22,950 in the current year to 39,433 in the budget year. Cuban Refugees (Item 311 (g)) This item contains federal funds for cash grants and administrative costs related to Cuban refugees who do not meet the eligibility requirements for the AFDC and SSIISSP programs but who are receiving general relief grants from counties. The budget proposes federal expenditures of $886,- 300 for the budget year. This includes $628,400 for grants and $257,900 for administrative costs. Expenditures are estimated to increase $70,100, or 8.6 percent, over the current year. Scheduling of Federal Funds for County Welfare Department Administrative Costs We recommend that federal funds for county welfare department ad- ministrative costs for Indochinese and Cuban refugees scheduled in Item 311 be reduced by $6,900,700 and that federal funds in Item 313 (county administration) be increased bY$6,9OO, 700. As we mentioned earlier, Item 311 contains both the grant and adminis- trative costs related to two refugee programs which are 100 percent feder- ally funded in 1980-81: (1) Indochinese refugees and (2) Cuban refugees. The administrative costs for these programs total $6,900,700. All funds for county welfare administration should be budgeted in the same item in order to facilitate legislative review of these expenditures. Accordingly, we recommend that these administrative costs be scheduled Item 312 HEALTH AND WELFARE \/ 905 in Item 313 which is the item where county welfare administrative costs are normally scheduled. Department of Social Services SOCIAL SERVICES PROGRAMS Item 312 from the General Fund Budget p. HW 154 Requested 1980-81 ……………………………………………………………….. $195,424,741 Estimated 1979-80…………………………………………………………………. 156,936,886 Actual 1978-79 ………………………………………………………………………. 126,668,613 Requested increase (excluding amount for salary increases) $38,487,855 (+24.5 percent) Total recommended reduction ……………………………………………. $10,547,864 19~1 FUNDING BY ITEM AND SOURCE Item Description 312 Social Services Programs Welfare and Institutions Code, Section 16151 Fund General General Amount $191,737,701 2,193,400 Budget Act of 1978, Item 274 Total General 1,493,640 $195,424,741 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Reserve for Federal Requirements. Reduce federal funds by $25,101,772. Recommend deletion of proposed federal funds reserve, until such time that (a) augmentation to federal funds is assured and (b) a specific expenditure proposal is reviewed by the Legislature. 2. Population Adjustment to Title XX Allocation. Reduce by $1,448,840. Recommend federal funds available in state fiscal year 1980-81 replace General Fund support for In- Home Supportive Services. 3. The Social Services Planning Act, AB 1642. Recommend the department submit an overall plan for three-year phase-in, to the Legislature prior to budget hearings. 4. Social Services Policy Task Force Draft Regulations. Rec- ommend Department of Finance review a single regula- tions package for proposed social services redesign. Further recommend Budget Act language requiring that Legislature be notified prior to expansions or alterations in social services programs. 5. In-Home Supportive Services. Recommend Budget Act language requiring cost control plan by December 15, 1980 6. In-Home Supportive Services Minimum Wage Increase. Analysis page 913 914 916 917 921 924 906 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued Reduce by $2,899,986. Recommend General Fund reduc- tion in amount overbudgeted for minimum wage increases to individual providers. 7. In-Home Supportive Services Cost-of-Living Adjustments. 925 Recommend enactment of legislation providing cost-of- living adjustments for in-home supportive services pay- ments through the annual budget process rather than au- tomatically through statute. 8. Twenty-Four Hour Emergency Response System. 927 Reduce by $5 million. Recommend replacement of Gen- eral Fund support in order to fund the system as a compo- nent of the other county social services program. 9. Community Care Licensing Revised Allocation Method. 930 Withhold recommendation on proposed licensing increase of $523,200 pending receipt of specified information. 10. Adoptions Caseload Increase; Reduce by $982,588. Rec- 932 ommend funds budgeted for 5.4 percent increase in adop- tive placements be deleted due to inappropriate caseload projection. 11. Rape Victim Counseling Centers. Reduce by $135,050. Rec- 934 ommend deletion of funds overbudgeted for 1980.;.81. 12. Licensed Maternity Care Home Program. Reduce by $81,- 934 400. Recommend Budget Act language to appropriate amount other than statutory appropriation. Further rec- ommend reduction of $81,400 overbudgeted for 1980-81. GENERAL PROGRAM STATEMENT The Department of Social Services (DSS) administers various social services programs which provide services to eligible clients or to individu- als and facilities serving clients, rather than cash as the AFDC and SSI\/SSP programs provide. The programs differ from each other in the nature of the services provided, the characteristics of clients served, the source of funding, and the agency that delivers the service. Social services programs are administered by the Adult and Family Services and Community Care Licensing Divisions of the department. The budget includes seven programs: (1) other county social services, (2) specialized adult services, (3) specialized family and children’s services, (4) adoptions, (5) county staff development and services training, (6) demonstration projects, and (7) community care licensing~ The major components of these programs are identified below. Title XX Social Services The department is the single state agency designated to receive federal social services funds from Title XX of the Social Security Act. Federal regulations require that at least three services be provided for SSI\/SSP recipients, and that at least one service be directed to achieving each of the five federal Title XX program goals of (1) self-support, (2) self-suffi- ciency, (3) protection of children and adults and reunificationoffamilies, (4) prevention or reduction of inappropriate institutional placements, and Item 312 HEALTH AND WELFARE \/ 901 (5) institutionalization only when necessary. The only specific service mandated by federal law is family planning for AFDG recipients. Federal financial participation in state Title XX programs is contingent on preparation of a statewide Comprehensive Annual Services Program (CASP) Plan. The annual CASP must identify and describe (a) the serv- ices to be provided within the Title XX program, (b) the specific target groups for each service, and (c) the structure of the social services deliv- ery system. Federal regulations allow each state to establish a delivery system that is most appropriate to the state’s Title XX needs. County-Administered Services. County welfare departments adminis- ter the majority of California’s Title XX social services. State law and regulations (1) require counties to provide 10 specific services and (2) permit counties to offer any of 14 additional services. One of the 10 man- dated activities is In-Home Supportive Services (IHSS). The 23 remaining services comprise the Other County Social Services (OCSS) program. Of the 10 mandated activities, four are required to be available to all persons: information and referral, protective services for adults, protec- tive services for children, and court ordered foster care. Other services are provided to individuals who receive SSI\/SSP or AFDC, or who are eligible because of their low income. State-Administered Services. The budget proposes that specific Title XX social services be provided by the Department of Health Services (family planning) and the Department of Education\u00b7 (child development programs). Federal funds received by the Department of Social Services as the single state agency responsible for Title XX are transferred to those departments under the terms of separate interagency agreements. Federal Title.xx Allocations. Based on its share of the nation’s total popi;Ilation, California receives approximately 10 percent of the federal funds available each fiscal year from Title XX of the Social Security Act. In 1972, Congress enacted legislation establishing a cap of $2.5 billion on federal Title XX funds. However, since 1976, Congress has enacted tempo- rary annual increases to this limit. Title XX Matching Requirements. Federal law requires that federal Title XX funds expended on most social services be matched on a 75:25 federal\/non-federal sharing basis. Family planning services, however, re- quire only a 10 percent non-federal match. Child development program augmentations are 100 percent federally funded. Because federal Title XX funds are capped, any expenditures that exceed the federal allocation, plus th~ non-federal match, must be supported with state and local funds. California is now providing support for social services which far exceeds the 25 percent non-federal required match. Other Social Services In addition to Title XX social services, the department is responsible for administering the following social services programs: 1. Child welfare services which are funded under Title IV-B of the Social Security Act. In fiscal 1979-80, California was allocated $4.1 million in federal Title IV-B funds which was matched by counties at a 75 percent federal\/25 percent county ratio. Title IV-B funds are used to supplement 908 \/. HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued protective services for children. 2. Maternity care services which are funded from a continuing annual General Fund appropriation of $2.4 million pursuant to Section 16151 of the Welfare and Institutions Code. These funds are used to reimburse nonprofit\u00b7 licensed maternity homes for the cost of care and services pro- vided to unmarried pregnant women. 3. Work Incentive Program (WIN) social services, which are funded 90 percent by federal funds and 10 percent by the General Fund. Federal law requires that all nonexempt AFDC applicants register with . local WIN sponsors to receive employment and job training services. Through local separate administrative units (SAUs), the Department of Social Services administers supportive social services, including child care, for WIN par- ticipants. 4. Services to Indochinese refugees, which are 100 percent federally- funded through October 1981. These social services, job training and Eng~ !ish language instruction programs are provided by county welfare depart- ments and private contractors. 5. Adoption services which are 100 percent state-funded. 6. Community care licensing services provided by counties, under con- tract with the state, which are 100 percent state-funded. (Facilities evalua- tion and licensing conducted directly by state personnel are included in Item 309, Departmental Support.) 7. Demonstration programs whch are funded individually by the state or federal government. These programs address a variety of programmat- iC and procedural alternatives to existing social services delivery systems. 8. County staff development and training programs which are support- ~d by federal Title :xx funds and matched with state, county and univer- sityfunds.\u00b7 these programs are directed at both long-term skill needs and immediate. nedds for short-term training of\u00b7 service workers providing Title XX services. 9. Rape victim counseling centers which are 100 percent state-funded. These centers were funded through the budget for the first time in the 1979 Budget Act. ANALYSIS AND RECOMMENDATIONS The budget proposes expenditures of $195,424,741 from the General Fund for social services programs in 1980-81, which is an increase of $38,487,855, or 24.5 percent, over estimated current year expenditures. This amount will increase. by the amount\u00b7 of any salary or staff benefit increase approved for the budget year . . Total expenditures include $191,737,701 in this item, $2,193,400 appro- priated by Section 16151 of the Welfare and Institutions Code for materni- ty care services, and $1,493,640 carried forward from the 1979 Budget Act for the Multipurpose Senior Services Project. Increases in caseload and other costs for the In-Home Supportive Services program account for $32,346,550 or 84 percent, of the proposed increase in the General Fund appropriation for social services. Table 1 identifies the major components of this increase, Item 312 HEALTH AND WELFARE \/ 909 Table 1 Proposed 1980-81 General Fund Budget. Adjustments for Social Services Program Adjustment A. 1979-80 Current Year Revised ……………………………………………………….. . B. Budget Adjustments 1. In-Home Supportive Services a. Caseload growth (7:9 percent) ……………… , …………………………………… . $11,081,950 b. 1979-80 cost-of-living ……………………………… : …………………………………… . 114,500 c. 1980-81 statutory increase ………………………………….. , ………………….. …. 4,113,700 d. Minimum wage increases …………………………………………………………… . 15,440,300 e. Provider benefits (Chapter 463, Statutes of 1978) ……………………. . 460,200 f. Services for clients earning income (Chapter 1362, Statutes of 1978) ………………………………………………………….. ; …………………………………. . 13,200 g. Paramedical services (Chapter 1071, Statutes of 1979) …….. , ……… . h. Parent providers (Chapter 1059, Statutes of 1979) ……………………. . 616,900 25,900 i. I HSS regulations ………………………………………………………………………….. . 479,900 Subtotal …………………………………………………………………………………………….. . 2 .. Rape Crisis Centers a. Transfer from Item 288.1 …………………………………………………………….. . 200,000 b. Cost -of-living increase ………………………………………………………………….. . 18,000 3. Maternity Care a. Cost -of-living ………………………………………………………………………………… . 4. WIN a. Long Beach Project ……………………………………………………………………… . 70,154 b. Caseload increase .. ……………………… ………………………………………………. 156,046 5. Adoptions a. Caseload growth (5.4 percent) ……………………………………………………. . 773,100 b. 1979-80 cost-of-living ……………………………………………………………………. . 64,900 c.\u00b7 1980-81 cost-of-living\u00b7 ………………………………… , ………………………………… . 1,469,043 d. Increase in fees …………………………………………………………………………… . -2,700 e. Hard to place children ………………………………………………………………… . 8,000 Subtotal …………………………………………………………………………………………….. . 6. Demonstration Programs a. Termination of Projects ………………………………………………………………. . -1,630,391 b. Multipurpose senior project carry forward ………………………………… . 1,487,280 c. IHSS needs assessment project cost-of-living …………………………….. . 9,765 d. Adjustment to Family Protection Act (Chapter 21, Statutes of 1977) …………………………………………………………………………………….. .-…….. . 500 Subtotal …………………………………………………………………………………………….. . 7. Co~~ty ~are Licensing a. Facilities mcrease …………………………………………………………………………. . 770,500 b. Revised allocation method …………………………………………………………. . 480,000 c. 1979-80 cost -of-living ……………………………………………………………………. . 149,100 d. 1980-81 cost-of-living …………………………………………………. ………………… 1,388;500 e. Regulations implemented in 1980-81 …………………………………………. . -118,292 f. Regulations to be implemented in 1980-81 ………………………………… . 489,500 g. RegiStration pilot project (Chapter 1063, Statutes of 1979) ……… . 143,600 Subtotal ……………………………………………… , ……………………………………………. . Total Proposed\u00b7 General Fund Increases …………………………………………. . C. Proposed Total General Fund ……………………………………………………….. . D. Other General Fund Appropriations 1. . Multiplirpose Senior Services Projects …………………………………………….. . -1,493,640 2 Licensed Maternity. Care Home ……………………………………………………….. . ….,2,193,400 Subtotal ………………………………………………………………………………………………. . E. General Fund in Item 312 ……………………. ; ……………………. …………………. Total $156,936,886 32,346,550 218,000 214,700 226,200 2,312,343 -132,846 3,302,908 38,487,855 195,424,741 -3,687,04a $191,737,701 910 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued Total expenditures, all funds, for social services programs are projected to total $656,016,074 in 1980-81. This is an increase of $107,024,312, or 19.5 percent, over total estimated current year expenditures. Table 2 identifies total proposed expenditures for social services programs for the budget year. A. Title XX Social Services 1. In-Home Supportive Serv- Table 2 Total 1980-81 Proposed Expenditures for Social Services Programs General Fund OtDer Federal Funds Reimb~ in Rem 31J General Fund in Item 31J County Funds menls Total ices …………………………………. $149,424,493 – $99,092,607 – $248,517,HlO 2. Other County Social Serv- ices a. Adult and family and children services ………. b. 24-hour emergency re- sponse system ………….. .. 3. Child development (De- partment of Education) .. 4. Family plaiming (Depart- ment. of Health Services) 5. Reserve for new federal requirements ……………….. .. Subtotals ………………………. .. B. Title XX Training 1. County staff development 2. Services training ………….. .. Subtotals ……………………….. . C. Indochinese Refugee Assist- ance Program 1. County social services a. In-Home Supportive Services ……………………. . b. Other County Social Services …………………… .. 2. Social services contracts .. Subtotals ……………………….. . D. Other Social Services 1. Adoptions …………………….. .. 2. Community care licens- ing ………………………………… . 3. Demonstration projects .. 4. Child welfare services (TitleN\”B) ………………….. . 5. Work incentive program (TitleN-C) a. WIN child care ………. .. b. WIN administrative unit …………………………… . 6. Rape victim counseling centers ………………………… .. 7. Maternity care ……………. .. Subtotals ………………………. .. Totals; ……………………………………… .. 5,000,000 $10,671,314 444,444 $154,424,493 $11,115,758 $17,584,043 16,857,400 2,018,265 $1,493,640 635,500 218,000 2,193,400 $37,313,208 $3,687,040 $191,737,701 $14,802,798 144,327,010 $47,611,630 191,938,640 2,929,319 2,643,107 10,572,426 52,013,942 62,685,256 4,000,000 4,444,444 25,101,772 25,101,772 $327,464,650 $50,254,737 $543,259,638 $1,889,550 $629,850 $2,519,400 11,434,200 $3,811,400 15,245,600 $13,323,750 $629,850 $3,811,400 $17,765,000 $958,400 $958,400 7,505,700 7,505,700 20,575,500 20,575,500 $29,039,600 $29,039,600 $17,584,043 16,857,400 $269,093 $100,000 3,880,998 4,119,446 1,373,149 5,492,595 5,719,300 6,354,800 12,033,500 1,337,100 13,370,600 218,000 2,193,400 — $22,141,339 $2,810,249 $65,951,836 = $391,969,339 $53,694,836 $3,811,400 $656,016,074 – —–_._— Item 312 HEALTH AND WELFARE \/ 911 Title XX-State and County Overmatch Section 15151.5 of the Welfare and Institutions Code requires that at \u00b7least 66 percent of federal Title XX funds be allocated to the counties. The budget proposes that $246,348,936, or 75.2 percent, of the available Title XX funds be allocated to the counties in 1980-81. The remaining federal funds, $81,115,714 (24.8 percent of the total), are allocated to state pro- grams. Of the $246,348,936 allocated to the counties by the budget, $99,092,607 is for IHSSand $147,256,329 is for the OCSS program. (In addition, $8,464,- 100 in federal funds for social services provided by county welfare depart- ments to Indochinese refugees is included in the budget subitems for IHSS and OCSS.) Section 12306 of the Welfare and Institutions Code requires the state to provide the 25 percent match for federal funds used for IHSS. Because federal funds are capped, every additional dollar spent on IHSS must come from the General Fund. In order to receive federal Title XX funds, counties traditionally have provided the 25 percent match for OCSS. In addition, the state has pro- videdGeneral Fund support for OCSS, although it is not required by state law to do so. For fiscal year 1980-81, total state and county Title XX expenditures will be $114,195,661 above the amount needed to provide a 25 percent match for federal funds. Table 3 displays the relationship between state, county and federal Title XX expenditures from 1977-78 through 1980-81. Table 3 Title XX Program Funding Sources 1977-78 to 1980-81 1977-78 ………………………………… . 1975-79 ………………………………… . 1979-S0 (Estimated) ………….. .. 1980-81 (Proposed) …………… . Federal $276,585,768 274,237,842 290,733,000 $327,464,650 Source: Department of Social Services Potential Increase in Federal Funds State General Fund $71,275,945 115,959,405 133,193,701 $165,540,251 County $46,335,905 41,160,800 47,559,546 $50,254,737 Percent Totals General Fund $394,197,618 18.1 % 431,358,047 26.9 471,486,247 28.2 $543,259,638 30.5% In federal fiscal year 1979, PL 95-600 (HR 13511) increased the national Title XX limit on a one-time basis to $2.9 billion. As a result of this increase, California’s Title XX allocation in 1979-80 was $290 million, rather than $250 million as it would have been otherwise. For federal fiscal year 1980, California’s allocation has been reduced to approximately $250 million because under existing federal law, the national cap on Title XX funds reverts to $2.5 billion. The U.S. Congress is currently considering legislation (HR 3434) which 912 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued would permanently increase the cap on available federal Title XX funds. The Senate and House versions of this bill, which are scheduled to be considered in conference committee in spring 1980, propose new spend- ing limits of $2.7 billion and $3.1 billion, respectively, for federal fiscal year 1980. Table 4 summarizes the proposed spending limits included in the two versions. Table 4 Federal Title XX Spending Limits Proposed by the Two Versions of HR 3434 Federal Fiscal Years 1980-1985 (in billions) Senate House 1980…………………………………………………………………………………………………………………… $2.7 $3:1′ 1981.. ………………………………………………………………………….. ;……………………………………. 2.9 3.1 1982….. …………. …… …………. …. ……….. ………… ……………… ……. ……………………………………. 3.0 3.1 1983…………………………………………………………………………………………………………………… 3.1 3.1 1984 ……………… ;………………………………………………………………………………………………….. 3.2 3.1 1985…………………………………………………………………………………………………………………… 3.3 3.1 Proposed Use of Additional Federal Funds PL 95-600 (HR 13511) increased the state’s federal Title XX allocation on a one~time basis by $40,lO3,000 for federal fiscal year 1979. As Table 5 indicates, the department allocated $6,845,100 of this amount for other county social services in 1978-79 (utilizing the authority provided by Sec- tion 28 of the Budget Act), the remainder-$33,251,900-was allocated for other county social services and child development programs in 1979-80 by the Legislature in the 1979 Budget Act. The Department of Social Services anticipates that a version of HR 3434 will be approved by the U.S. Congress and will make available to Califor- nia an additional $40 million in federal fiscal year 1980 and $40 million in federal fiscal year 1981. Because the federal fiscal years overlap state fiscal years, the state will be able to use funds from two federal fiscal years at once. This will result in a one-time increase in federal Title XX funds of $40 million and an ongoing increase to the federal Title XX allocation of $40 million. The budget proposes to expend the $80 million anticipated from HR 3434 as follows: 1) $6,845,100 for other county social services in 1979-80, in accordance with the provisions of the 1979 Budget Act. 2) $73,145,900 for other county social services, child development, and a reserve for new federal requirements, in 1980-81. Table 5 identifies how the budget proposes to allocate the projected $80 million increase. Implications for Future Funding of Social Services Programs. Increas- ing the federal Title XX expenditures to approximately $330 million in 1980-81, as the budget proposes, would create a higher base expenditure level for future years. This higher base could not be sustained if federal funds in 1981-82 and later years remain at the $290 million level. Hence, over time, the state would be required to make up the difference between the level of expenditures for the budget year and the amount of Title XX money coming into the state. Item 312 HEALTH AND WELFARE \/ 913 Table 5 Federal Title XX Funds Source and Expenditure 1979-80 and 1980-81 Change Estimated 1979-80 Proposed 1980-81 Amount Percent 1. Basic allocation under $2.5 billion national spending limit ……………………………………… . 2. Adjustment for population increase ……… . 3. Increase due to HR 13511 ……………………… . a. Other county social services-replacing General Fund …………………………………… .. b. Other county social services-cost of living ………………………………………………….. . c. Child development… ………………………….. . 4. Increase expected with passage of HR 3434 a. Other county social services-continue HR 13511 funding leveL …………………… . b. Other county social services-cost of living ………………………………………………….. . c. Other county social services-24-hour emergency response system …………….. . d. Child development …………………………… . e. Reserve for new federal requirements Totals ……………………………………………………………. . $248,500,000 2,130,000 33,257,900 (6,845,100) (6,361,800) (20,051,000) 6,845,100 b $290,733,000 $253,037,000 $4,537,000 1,272,750 . b 73,154,900 ( 13,206,900) (11,916,909) (2,929,319) (20,000,000) (25,101,772) $327,464,650 $36,731,650 1.8% 12.6% a The total amount available from the passage of HR 13511 was $40,103,000. Of this amount, $6;845,100 was allocated for expenditure for other county social services in 197~79. b The .total amount expected from HR 3434 is $80 million. The budget proposes to allocate $6,845,100 for 1979-80 and the remainder for expenditures in 1980-81. Funds Reserved for Federal Requirements We recommend that $25,101,772 proposed as a reserve for federal re- quirements be deleted from the budget until such time that (1) the aug- mentation to federal funds is assured by the passage of HR 3434 and (2) a specific proposal for the expenditure of these funds is reviewed by the Legislature. Budget Proposal. The budget proposes that $25,101,772 in new federal funds resulting from HR 3434 be budgeted as a \”reserve for federal re- quirements.\” According to the department, this amount will be used to accomplish unspecified program objectives of HR 3434 related to child welfare services, foster care and adoption assistance programs. However, the department does not have a plan for expenditure of the funds and has been unable to identify the level of expenditure necessary to meet poten- tial federal requirements. Legislative Review Necessary. Because the department has been una- ble to identify the specific ways in which reserve funds would be used, w~ conclude that the administration is, in effect, proposing to establish a $25 million contingency fund. If approved, this would significantly increase the department’s spending authority and deny the Legislature the oppor- tunity to review specific proposals for social services programs. A contin- gency fund of this type is both undesirable and unnecessary. It is 914 \/ HEALTH AND WELFARE SOCIALSERVICESPROGRAMS-,Continued Item 312 undesirable because it would prevent the Legislature from having a voice in how these funds are used. Moreover, the funds could be used in such a manner as to increase General Fund requirements in future years. It is unnecessary because the administration has procedures at its disposal which allow unbudgeted funds to be spent-specifically Department of Finance budget amendment letters and the Section 28 process-:while providing fotlegislative notification and review. . Therefore, we recommend that $25,lOl,772 budgeted for \”reserve for federal requirements\” be deleted. We further recommend that when HR 3434is enacted and its program requirements are established, the Depart- ment of Social Services be direCted to submit to the Legislature a specific estimate of costs associated with accomplishing the program objectives of the act and a specific plan for expending all funds for this purpose. Population Adjustment to Annual’ Title XX Allocation We recommend that increased federal Title.XX\” funds in the amount of $1,448,040, which are allocated to California lor federal fiscal year198Ion the basis of the states increase in population, be included in the 1980,-81 budget WeEurthei recommend that these funds be used to replace Gen- eralFundsupport for In-Home Supportive Services, fora GeneralFund savings of $1,448,840. Poplilation Adjustmentto Title.XX\” Allocation. At the beginning of each federal fiscal year, adjustments are made to each state’s allocation of federal Title XX funds to reflect changes in the state’s proportion.ofthe national population. The budget contains $1,272,750 for the state’s popula- tionadjustment for federal fiscal year 1980. However, the budget does not contain an additional population adjustment for federal fiscal year 1981, as announced in the November 30, 1979 Federal Register. If the total\u00b7 amount of federal Title XX. ftmds available to the states is increased by the passage\u00b7of HR 3434, California’s 1981 population adjust- mentwill also increase above the level shown in the Federal Register. As Table 7 indicates,\u00b7 California’s adjustment will be $1,279,179 if there is no change in the base allocation, and $1,448,840 if HR 3434 is enacted in the form anticipated by the budget. Table 7 Effect of the November 30, 1979 Population Adjustment on California’s Title XX Allocation Assuming HR 3434 Is Not Enacted 1981 federal allocation …………………………………………………….. $255,588,929 1980 federal allocation…………………………………………………….. 254,309,750 Increase due to population adjustment ……………….. :……… $1,279,179 Assuming HR 3434 Enacted with $2.9 DiDion Ceiling $296,448,440 294,999,600 $1,448,840 Budgeting Population Adjustmentlncreases. In the past, the depart- ment has not budgeted these funds in the state fiscal year in which they become available. Instead, the funds have been kept as a reserve. Thus, the department did not budget population adjustment funds for federal Item 312 HEALTH AND WELFARE \/ 915 fiscal year 1979 in the state’s 1978-79 budget. Instead, the funds were held in reserve and used to fund an unanticipated deficit in the IHSS program. The department advises that the 1980-81 budget does not contain the 1981 population adjustment because the department proposes to hold the money in reserve for state fiscal year 1981-82. Such a reserve, however, is unnecessary because during three-quarters of 1981-82, the state will be able to draw doWn any new federal funds for the population adjustment made available in federal fiscal year 1982. The failure to include the federal fiscal year 1981 population adjustment funds in the budget has three consequences: 1. It gives the Legislature a less-than-complete picture of available funds, 2. It reduces the Legislature’s options regarding the use of the funds, 3. It requires General Fund support to be higher than necessary. Therefore, we recommend that federal funds allocated to California in the form of a population increase for federal fiscal year 1981 be included in the budget so as to provide the Legislature with a complete budget of availabl~federal funds. Specifically, we recommend these funds be budg- eted for In-Home Supportive Services, thereby permitting a correspond- ing reduction in General Fund support. Assuming that HR 3434 will pass with a national ceiling of $2.9 billion (as the Governor’s Budget assumes), this will result in a General Fund savings of $1,448,800. The Social Services Planning Act The Social Services Planning Act, Chapter 1235, Statutes of 1978 (AB 1642), requires the Department of Social Services to: (a) develop a com- prehensive needs assessment, planning and allocation process for all social services programs Junded by Title. XX of the Social Security Act and (b) coordinate Title XX services with other social services programs. The act identifies the department as the state agency responsible for developing the planning and allocation process, and requires the department to base its budget proposals for social services programs on this planning process. The act requires a prediction of program utilization (PPU) to be used to apply needs assessment information to resource allocation decisions dur- ing the budget process. AB 1642 requires the PPU to be provided to the Legislature at the time the proposed state budget is submitted, and re- quires the Legislative Analyst to review the PPU in his Analysis of the Budget Bill. AB 1642 mandates that planning requirements be implemented during a three-year period beginning July 1, 1979. The first complete planning cycle, including development of the PPU, is not required to be completed until submission of the 1982-83 Governor’s Budget. The law requires that the Director of the Department of Social Services (1) specify the se- quence of steps which the counties must carry out in order to achieve full implementation of the planning act by the end of the three-year phase-in period, and (2) appoint an interim planning task force to advise the de- partment on the review of county plans and steps necessary for the phase- in of the provisions of AB 1642. 916 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued Departmental Progress in Implementing the Social Services Planning Act We recommend that the Department of Social Services present an overall plan to the Legislature for the three-year phase-in of AB 1642 prior to 1980-81 budget hearings. We further recommend that this plan specify the sequence of steps necessary for counties to comply with the act. The department advises that no official schedule for the phase-in of AB 1642 has been developed or circulated among the counties to assist them in the transition to a new planning process. The lack of an overall im- plementation schedule (1) results in inadequate planning instructions for counties, (2) renders assessment of progress toward implementation of AB 1642 exceedingly difficult, and (3) jeopardizes eventual implementa- tion of the act. During 1979-80, the department has (1) pilot tested a claims form which includes service expenditures and staff costs by program, (2) placed great- er emphasis on resource coordination and resource allocation in the 1980- 81 county planning guidelines, and (3) appointed an interim planning task force that met for the first time on January 30, 1980. The results from the new reporting format had not been completely tabulated at the time this analysis was prepared. These activities, however, are steps toward the compilation of a uniform data base necessary for preparation of the 1982- 83 budget and a prediction of program utilization. Because it is not clear how diverse activities occurring in the depart- ment will be combined in the implementation ofAB 1642, we recommend that the Department of Social Services present an overall plan to the Legislature for the three-year phase-in at the time of budget hearings. We further recommend that the plan submitted to the Legislature specify the sequence of steps necessary for counties to comply with the act. Social Services Policy Task Force In our Analysis of the 1979 Budget Bill, we indicated that the depart- ment intended to establish a task force to identify program goals and objectives during 1979-80. This policy task force, composed of eight social services and systems development specialists from the Adult and Family Services Division, produced a draft set of regulations. The draft regula- tions were released in August 1979 and published for comment October 9, 1979. The proposed draft regulations are designed to address the following problems in social services programs: (1) lack of established goals and clear program objectives, (2) uncertain priorities, (3) failure to combine planning with program delivery and resource allocation and (4) lack of a cohesive program role in relation to services provided by other programs. The department advises that it views the draft regulations as an essential first step in resolving these problems and moving toward implementation of AB 1642. Although substantial portions of the draft regulations may be altered during the review process, the proposed package includes several provisions which will improve the management and delivery of the social services programs addressed. Specifically, the proposal (1) places time limits on the duration of service, (2) eliminates health-related and em- Item 312 HEALTH AND WELFARE \/ 917 ployment-related services from the list of mandated services, and (3) requires that service plans be developed for each client. Legislative Review of Proposed Changes We recommend that the Department of Social Services submit its proposed redesign of social services programs and a specific expenditure plan for its implementation as a single regulations package for the ap- proval of the Department of Finance. We further recommend that Budget Act language be adopted requiring notification of the Legislature regard- ing the costs expected to result from redesign, expansion or alteration of existing social services programs. Our analysis indicates that there are a number of problems with the department’s regulations designed to alter social services programs. Unspecified General Fund Costs. State and local cost estimates to im- plement the proposed regulations will be available for the first time in mid-February 1980. The regulations may reduce the demand for expendi- tures by eliminating funding of some current programs and by establish- ing plans and time limits for services. However, we have identified potential increases in county costs that may result from requirements to (1) provide additional management information, (2) increase case man- agement and documentation activities, (3) augment staff for new service activities, and (4) achieve higher than currently required ratios of social workers to total staff. It is possible that the additional county costs will have to be reimbursed by the state under Article XIII B of the State Constitution (Proposition 4) . . Reserve for Federal Requirements. No specific cost estimate or ex- penditure plan has been prepared for the proposed regulations. However, the budget proposes $25 million as a \”reserve for federal requirements\” to be used for objectives included in the proposed regulations. Sound budgeting practices require that these funds not be appropriated for un- specified purposes,\u00b7 as discussed earlier in this analysis. Implementation Schedule Not Tied to Budget Process. The develop- ment of the draft regulations has been hampered by the necessity to work within three different time cycles: (1) the state budget process, (2) the federal cycle for preparation of the comprehensive annual services pro- gram plan and (3) the schedule for phase-in of AB 1642. The department advises that it intends to implement the regulations by October 1, 1980. This deadline requires regulations to be filed for public hearing by June 1980. . The department indicates that it will amend California’s 1980 Compre- hensive Annual Services Program plan in order to assure continued fed- eral financial participation if the redesign is implemented prior to the beginning of federal fiscal year 1981. It also indicates that counties will receive training and orientation to help them implement the regulations, between June 1 and October 1, 1980. This schedule does not permit legisla- tive consideration of the potential expenditures for implementation of the regulations during hearings on the 1980-81 Budget. Changes in Statute Required. Our review of the draft regulations indi- cates that their implementation would require changes in existing stat- 32-80045, 918 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued utes. For example, legislation may be required to change procedures for dealing with children who are dependents of the court and to remove health related services from the list of mandated programs. Because the program changes proposed by the regulations will signifi- cantly alter social services programs in the state, we recommend that the Department of Finance review and approve the department’s entire so- cial services proposal prior to any program or funding changes. Because of the potential fiscal and policy impact of the proposal, we further recom- mend that the Legislature add the following Budget Act language in order to ensure it receives notification of any change in expected expenditures due to the redesign, expansion or alteration of existing social services programs: \”. . . provided further that no funds appropriated in this item may be spent for the expansion or alteration of existing social services programs unless (1) the Legislature has been notified at least 30 days prior to the effective date of such expansion or alteration and (2) such notification includes a specific expenditure plan and detailed description of the proposed expansion or alteration.\” IN\u00b7HOME SUPPORTIVE SERVICES Program Description The In-Home Supportive Services (IHSS) program provides personal care, domestic and paramedical services to approximately 90,000 aged, blind and disabled individuals. County welfare departments administer this program, which is funded by the state and federal governments. Services are delivered in three ways: (1) directly by county employees, (2) by agencies under contract with the counties or (3) by providers hired directly by the recipient. Individual providers, hired directly by recipi\u00b7 ents, deliver 95 percent of all IHSS service hours. Los Angeles County accounts for 45 percent of all IHSS expenditures and service hours in California. The state is statutorily required to provide a 25 percent match for federal Title XX funds available for IHSS. However, since fiscal year 1978- 79, the state General Fund has provided a larger portion of total IHSS support than federal funds. Of the funds proposed for the budget year, 59.9 percent are state and 40.1 percent are federal. Chart 1 shows the relation- ship between state and federal funds spent on IHSS from 1974-75 to 1980-81. Current Year Increase A total of $213,915,549 was appropriated for the IHSS program in fiscal year 1979-80. This includes: (a) $209,913,276 in the 1979 Budget Act, (b) $2,290,000 appropriated by Chapter 1071, Statutes of 1979, for the im- plementation of paramedical services, (c) $216,000 appropriated by Chap- ter 1059, Statutes of 1979, for payments to parents as providers ofIHSS, (d) $286,523 in additional federal funds to provide IHSS to Indochinese refugees, and (e) $1,209,750 appropriated by Chapter 463, Statutes of 1978, for provider benefits thatwer~ not used during 1978-79. Item 312 $250 225 200 175 150 125 100\u00b7 75 HEALTH AND WELFARE \/ 919 Chart 1 Expenditures for In-Home Supportive Services General Fund, Federal Funds and Totals 1974-75 to 1980-81 . (in millions) \” General Fund … ,. \”, \” ,. \”, …… ,\” .— \”\” ,.\”,…—- . \”.. ,.,…. —- -,’ \”… \/ -7- \/ \/\” Federal Funds \/ ,I’ \/ ,,,,~ 50 – – – – . \”\” .,…—- \” 25\u00b7; o 1974-75 .,.. —– ……. ‘ 1975..,76 1976-77 1977-78 1978-79 1979-80 1980-81 (Estimated) (Proposed) The budget estimates that current year expenditures will total $212,944,- 100. This includes (1) $209,913,276 from the 1979 Budget Act, (b) $286,523 in federal funds to provide IHSS to additional Indochinese refugees, (c) $2,655,200 to implement paramedical services authorized by Chapter 1071, Statutes of 1979, (d) $146,100 to pay parents as providers ofIHSS pursuant to Chapter 1059, Statutes of 1979, and (e) an offsetting net savings in current year expenditures of $56,999. Thus, a surplus of $971,449 is anticipated in the currenf year for this program, including $635,650 in unspent funds for IHSS provider benefits. The department has not yet advised the Legislature of its plans for ex- pending these funds. Budget Year Proposal The budget proposes a General Fund appropriation of $149,424,493 for IHSS, which is an increase of $32,346,550, or 27.6 percent, above estimated 1979-80 expenditures. This proposed increase consists of (a) $11.1 million for the General Fund share of an anticipated 7.9 percent growth in case- load, (b) $4.2 million for statutory cost-of-living adjustments for grants 920 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued which are currently at the maximum level and for other provider in- creases, (c) $15.4 million for minimum wage increases, and (d) $1.6 mil- lion for existing legislative and regulatory requirements. Total program expenditures are proposed at $249,475,500 for 1980-81. This is an increase of $36,531,400, or 17.2 percent, over estimated current year expenditures and an increase of $71,878,232, or 40.5 percent, over actual 1978-79 expenditures. Departmental Progress in Addressing Program Problems Last year we identified three major problems in the In-Home Support- ive Services program: unknown program results, unjustified program variations and uncontrolled program growth. During 1979-80 the depart- ment attempted to resolve these problems by (1) continuing the im- plementation of uniform, statewide program regulations adopted April 1, 1979, (2) continuing to refine a reporting format for the IHSS program which identifies costs by mode of service provision, by county, by average hours and by average cost, (3) establishing a range of allowable costs for IHSS delivered by contract providers, (4) developing regulations to im- plement the parent provider and paramedical services provisions of Chap- ter 1059, Statutes of 1979 (AB 1134) and Chapter 1071, Statutes of 1979 (AB 1940), and (5) conducting a quality control pilot study of the five counties with the largest IHSS caseloads. These efforts are positive steps toward defining and restricting variation and uncontrolled growth in IHSS expenditures and determining the actu- al results of this program. However, the impact of most of them cannot be assessed at this time because they have not been in effect long enough. For example: (1) The first quarter of participation by all counties in the cost compari- son report ended September 1979, but the department will not be able to provide a report on the first period until spring 1980. (2) The regulations implementing Chapters 1059 and 1071 were issued in January 1980 and had not been fully implemented at the time this analysis was prepared. (3) The department has postponed, beyond the April 15, 1980 deadline, submission of the report on implementation of the April 1, 1979 regula- tions requested in the Supplemental Language Report of the 1979 Budget Act because data are insufficient to assess the effectiveness and impact of the regulations. Inadequate data regarding these efforts hampers our analysis of the budget. In addition, it severely restricts the ability of the department to manage the program effectively. Our analysis indicates that management information which is available to the department is not being applied consistently to resource decisions. For example, available data regarding the number of IHSS service hours actually delivered to clients were not used by the department in its projection of the number of hours subject to minimum wage increases. Instead, a projection of hours was made which is unrelated to actual experience. Item 312 HEALTH AND WELFARE \/ 921 IHSS Payrolling System Chapter 463, Statutes of 1978 (AB 3028), requires the Department of Social Services to ensure that payments for unemployment insurance, disability insurance and workers’ compensation are made on behalf of individual providers. Services provided by individual providers account for 83.9 percent of annual IHSS expenditures and 68.3 percent of total annual case months; All but four counties use this mode of service provi- sion for a portion of their caseload. This act. went into effect January 1978 .. The department originally planned to have the system implemented by November 1978. However, because of problems in the selection of a contractor, the department did not enter into a contract with a private vendor until September 5, 1979. The first checks were mailed by the contractor to individual providers in January 1980. Initiation of the statewide payrolling system may lead to prompt pay- ment of providers and more accurate expenditure and service data. However, it is too early to assess the effect of this system. Sacramento County Versus the State of California In the Sacramento County v. the State of California court case, 26 coun- ties are challenging. the state practice of reimbursing counties only for actual IHSS service costs and not for costs associated with assessment and administration. In an Interlocutory Judgment issued October 15, 1979, by the Sacramento Superior Court, county claims were upheld and an injunc- tion was issued to prevent the reversion to the General Fund of unspent funds for IHSS from the 1976 Budget Act and subsequent budget acts. Because the case is being considered in two parts-damages anclliability- and the damages portion has not been decided, the total amount necessary to reimburse counties for their assessment and administrative costs has not beeD. determined. Continued Growth in Expenditures We recommend that Budget Act language be added to Item 312 to require the Department of Social Services to (1) develop and implement a plan for controlling the costs of the In-Home Supportive Services pro- gram and (2) submit the plan to the Legislature by December 15, 1980. The proposed budget requests a 27.6 percent General Fund increase for IHSS and a 17.2 percent increase in total funds. Since 1974-75, expendi- tures for IHSS have grown by over 300 percent. The average annual increase in expenditures since 1974-75 has been 21.3 percent. Table 8 shows the increases in total funds for IHSS since 1974-75. The average annual increase for the 1978-79 through 1980-81 period will be $35.9 mil- lion if the proposed budget increase is approved by the Legislature. 922 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued Table 8 Total Expenditures for the In-Home Supportive Services Program 1974-75 to 1980-81 r Percent Percent General .of Federal of Percent Amount Fund Total Funds Total Totals Increase Increase 1974-75 ……………. $25,927,000 32.9% $52,750,002 67.1% $78,677,002 1975-76 ……………. 44,953,000 46.6 51,415,152 53.4 96,368,152 22.5% $17,691,150 1976-77 ……………. 28,908,943 25.0 86,726,828 75.0 115,635,771 20.0 19,267,619 1977-78 ……………. 53,647,157 39.3 82,743,379 61.7 136,390,536 18.0 . 20,754,765 1978-79 ……………. 94,731,134 53.3 82,866,134 46.7 177,597,268 30.2 41,206,732 Estimated 1979- SO ……………… 117,057,943 54.9 95,865,157 46.1 212,944,100 19.9 35,346,832 Proposed 1980- 81 ……………… $149,424,493 59.9% $100,051,007 40.1% $249,475,500 17.2% $36,531,400 Quality Control Pilot Study. During the past year, a departmental project has demonstrated that IHSS expenditures can be reduced through greater control over allowable costs. Specifically, a quality control pilot study of the five counties with the largest IHSS caseloads was conducted by the department in September 1978. The sample counties included 55 percent of statewide IHSS caseload and 65 percent of all statewide expend- . itures. The primary objective of the pilot study was to test the feasibility of applying quality\u00b7 control techniques used in the AFDC, Food Stamp and SSI\/ SSP programs to IHSS. The purpose of quality control reviews is to determine, through review of case documentation and contact with a sample of recipients, the percentage of total caseload and expenditures that are subject to specific errors. In the IHSS review, as in AFDC, the error rates tested were (1) payments to persons ineligible for service, (2) overpayments and (3) underpayments. Findings of the Quality Control Pilot Study. The report on the pilot study states that the error rate attributable to payments to ineligibles far exceeded the comparable rate for the AFDC program during the same period. Table 9 compares the three types of errors as percentages of total caseload and total expenditures. Because the AFDC error rates are taken from a standard six-month review period, the two sets of data are not directly comparable. Nevertheless, this table illustrates the magnitude of the error rates discovered by the IHSS pilot study. Table 9 Error Rates IHSS Quality Control Pilot and AFDC October 1978 to March 1979 Payments to IneUgibles Percent of cases AFDC ………………………………………….. 3.1 IHSS Pilot Study Sample ……………. 10.6 Percent of payments 2.5 15.8 Overpayments Underpayments Percent Percent Percent Percent of cases of payments of cases of paymimts 10.4 3.0 3.5 0.5 10.6 3.2 3.4 0.6 If the percentage of error in payments identified by the quality control pilot study is an indication of program-wide error, the cost to the General Item 312 HEALTH AND WELFARE \/ 923 Fund for payments to ineligibles and overpayments may have been as high as $17.97 million in 1978-79. Table 10 shows the results of applying these error rates to total program expenditures for the past, current, and budget years. Underpayments are not included in the table because the pilot study’s findings did not include a significant amount of this type of error. Table 10 Possible General Fund Cost of Error Rates Found by the IHSS Quality Control Pilot 1978-79 to 1980-81 (in millions) Payments Inellgibles Actual 1978-79……………………………………………….. …………………….. $14.96 Estimated 1979-80 ……………………………………………………………….. 18.49 Proposed 1980-81 …………………………………………………………………. 23.59 Totals ……………………………………………………………………………… $57.04 Overpayments $3.01 3.72 4.75 $11.48 Totals $17.97 22.21 28.34 $68.52 Applying the sample error rate from the pilot study in 1978-79 to overall program expenditures is not conclusive evidence that over $68 million from the General Fund will have been spent in error in the three years ending with 1980-81. However, the potential for significant inappropriate expenditures warrants close attention by the Legislature. This is under- scored by the fact that, while the Governor’s Budget proposes an increase of $32.35 million for IHSS, expenditures made in error may be as high as $28.34 million in 1980-81. Cost Control Plan Needed. Since the Quality Control Pilot Study was conducted, the department has issued uniform program regulations that mayireduce the error rates in IHSS. However, the impact of these regula- tions remained uncertain at the time this analysis was prepared. The Governor vetoed 1979 Budget Act language requiring the depart- ment to conduct a cost containment project for all social services programs and to report the results during the 1980-81 budget hearings. He main- tained that the Social Services Policy Task Force and the implementation of Chapter 1235, Statutes of 1978 (AB 1642), would accomplish the objec- tives of the vetoed Budget Act language. However, during 1979-80, these two efforts have not examined the IHSS program. Consequently, it is clear that the project called for by the Legis- lature in the 1979 Budget Act is still needed. If program growth continues as it has in the past, total expenditures for IHSS will exceed $300 million in 1982-83. The Department of Social Services is in the best position to identify the steps necessary to contain costs for this program. For this reason, we recommend that the following Budget Act language be added to Item 312 requiring the Department of Social Services to develop and implement a plan for containing the costs of the In-Home Supportive Services program: \”Provided further that the Department of Social Services prepare and submit to the Legislature by December 15, 1980, a plan for controlling the costs of the In-Home Supportive Services program, including (a) criteria for termination of service, (b) appropriate levels of compensation for providers ofin-home supportive services, (c) a schedule for quality con- 924 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued trol reviews and plans for reducing the amount of General Fund money spent in error, and (d) identification of steps leading to control of county wage setting procedures for IHSS providers.\” Minimum Wage Increases We recommend funds overbudgeted for minimum wage increases to individual providers ofin-home supportive services be deleted, for a Gen- eral Fund savings of $2,899,986. Background Minimum wage increases, effective January 1, 1980, and January 1, 1981, will increase costs for the delivery of in-home supportive services by individuals hired directly by recipients and through purchase of service agreements with contract providers. Budget Proposal. The budget proposes $20,848,300 from the General Fund to provide minimum wage increases to individual and contract providers. This includes $12,829,700 for full-year costs of the January 1, 1980 increase from $2.90 per hour to $3.10 per hour and $8,018,600 for six-month costs of the January 1, 1981, increase to $3.25 per hour. The amount budgeted for the two minimum wage increases in 1980-81 exceeds the actual amount required for this purpose because the depart- ment inappropriately estimated the number of service hours affected by the minimum wage. The department’s estimate was derived by dividing total estimated 1980-81 expenditures by $2.90, the minimum wage prior to January 1, 1980. This method overstates the total number of service hours because (1) it includes service hours paid at flat monthly rates rather than by the hour and (2) it includes hours paid at rates higher than the minimum wage. Using information from the IHSS cost comparison report regarding service hours delivered by individual providers in 1978-79, we have es- timated an alternative number of service hours. Table 11 displays the two estimates of service hours which will be affected by the increases in the minimum wage in the 1980-81 budget year. Table 11 IHSS Service Hours Affected by Minimum Wage Increases Individual Providers 19SO-a1 Based on Projected from Projected Actual 1978-79 Expenditures Service Hours Paid at Divided by $2.90 an Hourly Rate Difference Individual Provider Severely Impaired Clients……………………………. 20,834,163 Nonseverely Impaired Clients …………………….. 37,518,550 17,752,983 31,676,673 3,081,180 5,841,877 A more accurate calculation of the amount which should be included in the budget for minimum wage increases is derived by applying the amounts of the minimum wage increases to the number of service hours projected from the 1978-79 cost comparison report. Based on this methodology, a total of $17,948,314 is needed to pay the minimum wage to individual and contract providers during 1980-81. The difference Item 312 HEALTH AND WELFARE \/ 925 between this amount and the amount proposed in the budget is $2,899,986. We therefore recommend a reduction of $2,899,986 to delete funds over- budgeted for minimum wage increases. Payments at the Statutory Maximum We recommend that legislation be enacted aJJowing the Legislature to adjust maximum monthly payments to IHSS recipients by a cost-oE-living factor determined through the annual budget process, rather than au- tomatically through statute. . Background. Maximum monthly dollar grants awarded to IHSS recipi- ents are limited by Sections 12304 and 12201 of the Welfare and Institu- tions Code. Two categories of recipients are identified for purposes of determining the maximum monthly grant level: (a) IHSS recipients who are authorized to receive at least 20 hours per month of personal care, ambulation, paramedical, and other specified services, and (b) recipients who receive less than 20 hours of the specified services. Existing law requires that the maximum amount of monthly payments to IHSS recipients be adjusted annually to provide cost-of-living increases identical to those statutorily authorized for SSI\/SSP recipients. The cost- of-living adjustment is calculated as an average of the percentage changes in the separate consumer price indices for all items for Los Angeles and San Francisco. Based on this formula the 1980-81 estimated percentage increase is 14.65 percent. Table 12 shows the maximum monthly grant rates for 1979-80 and 1980-81 using this estimated rate of increase. Table 12 Maximum Monthly IHSS Grants 1919-80 and 1980-81 EShmated Proposed 197fH’j{) 1980-81 Recipients receiving 20 or more hours of specified services per month ………………. …………………………… $664 Other recipients………………………………………………………………………… 460 $761 1 527 1 1 These amounts are rounded to the nearest dollar and are estimates as of January 25, 1980. Percent Change 14.65% 14.65 Application of the Increased Monthly Grant. The maximum allowable monthly grant is adjusted on July 1 of each year based on the statutory formula. Section 12304 of the Welfare and Institutions Code stipulates that this increase should not be construed to be a guaranteed increase in an individual recipient’s grant amount. However, the budget assumes that all case months being paid at the statutory maximum in the current year will be paid at the higher statutory maximum in 1980-81. Increasing the maximum allowable monthly grant level affects both the service hours provided to recipients and the amount paid to providers. Recipients of IHSS may receive hourly or flat monthly payments which they use to reimburse their providers. If a recipient’s provider is paid on an hourly basis, an increase in the statutory maximum monthly grant will increase the number of hours a recipient may receive during each month. For cases paid at the maximum allowable flat monthly rate, instead of by the hour, an increase in the statutory maximum payment results in an increase in the amount paid the provider. ——— ————— 926 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued Lack of Flexibility in Setting Spending Priorities The Legislative Counsel has advised us that \”the Legislature is not required to make available a certain amount of funds to carry out county plans for in-home supportive services even thoug~ county awards may escalate with increases in the cost-of-living pursuant to statutory for- mulas\”. In practice, however, there is tremendous pressure for counties to provide monthly payments at the maximum level permitted by law. The budget proposes $4.4 million from the General Fund to provide a 14.65 percent cost-of-living adjustment for IHSS payments to individuals who are already at the maximum. Because this increase partially accounts for the continued growth in expenditures of this program, amending current statute to bring the level of cost-of-living adjustments within the legislative budget process will give the Legislature more flexibility in (1) responding to high priorities when resources are scarce and (2) complying with the provisions of Article XIn B (Proposition 4) limiting state appropriations. We discuss several alter- nate methods for calculating cost-of-living increases in our analysis of the AFDC and SSI\/SSP programs (Items 309 and 310). We therefore recommend that legislation be enacted allowing the Legislature to adjust maximum monthly payments to In-Home Supportive Services recipients by a cost-of-living factor determined through the annu- al budget process rather than automatically through statute. OTHER COUNTY SOCIAL SERVICES Proposed Budget The budget proposes a total amount of $199,444,340 for Other County Social Services in 1980-81. This is an increase of $10,383,060, or 5.2 percent, over 1979-80. This increase consists of $1,718,751 in county funds and $8,664,309 in additional federal funds. Program Definition In our Analysis of the 1979 Budget Bill we recommended the Legislature consider enacting legislation to more clearly define county-administered social services funded through Title XX. During the current year, the Department of Social Services is proposing regulations to redesign the Other County Social Services (OCSS) program to replace the nine man- dated and fourteen optional services with three programs, consisting of eight services. The proposed program alignment includes (1) information and referral, (2) adult social services programs and (3) famlly and chil- dren’s services programs. The department has not yet determined what effect this program redesign will have on the delivery of existing social services. The Department of Finance and the Legislature should consider the program changes and related costs of this program redesign as a single package, as discussed earlier in this analysis. Item 312 HEALTH AND WELFARE \/ 927 24-Hour Emergency Response System We recommend that Item 312 be reduced by $5 million from the Gen- eral Fund returning the 24-hour emergency response system to a funding pattern comparable to other components of the Other County Social Serv- ices program. Budget Proposal. The budget proposes $10,572,426 for the provision of a statewide 24-hour emergency response system for prevention of child abuse and neglect, of which $5 million is from the General Fund, $2,929,- 319 is from federal funds, and $2,643,107 is from county funds. This repre- sents an increase of $3,905,759 ($2,929,319 in federal funds and $976,440 in county funds), or 58 percent, over estimated 1979-80 expenditures. Background. State funds for the 24-hour emergency response system were first made available in the current year. The 1979 Budget Act includ- ed a $5 million General Fund appropriation to augment existing local child protective services supported by state, county and federal funds from Title XX and Title IV-B of the Social Security Act. The funds were to be matched by $1,666,667 in county funds. The primary objectives of the new appropriation were to provide and publicize toll-free emergency tele- phone lines and enable prompt social worker response to reports of child abuse and neglect. The Supplemental Report of the 1979 Budget Act requested the Depart- ment of Social Services to submit (1) a plan for the implementation of the 24-hour emergency response system by September 15, 1979, and (2) a report of the preliminary program impact resulting from this augmenta- tion by April 1, 1980. . System Implementation. In order to participate in this program, coun- ties were required to provide a 25 percent match for available General Fund dollars. Each participating county was also required to submit a plan detailing its existing child protection program and its proposed use of 24-hour response system funds for providing (1) the basic response system and (2) backup services, which may include emergency caretakers and homemakers, followup treatment and emergency shelter. According to a December 30, 1979, update of information provided in the department’s September 15, 1979 plan, 43 county plans had been approved, 4 counties had been granted conditional approval, and 11 coun- ties had either not submitted their plans, declined.the offer\u00b7 of additional state funding or had their plans rejected by the department. Table 13 displays the planned use of 1979-80 emergency response funds in the six counties receiving the largest allocations, and in other counties with approved and conditionally approved plans. The table shows that $3,856,425, or 77 percent, of the original $5 million General Fund appro- priation is planned to be used by counties for the basic response system. The remainder is either planned to be used for back-up services ($926,- 343), or is unallocated ($217,232). 928 \/ HEALTH AND WELFARE SOCIAL SERVICES PROGRAMS-Continued Table 13 Alameda …. Contra Costa …….. Los Angeles Orange …….. San Diego .. Santa Clara Other counties Totals …… Selected Counties Projected Expenditures for the 24-Hour Emergency Response System by Expected Use 1979-80\u00b0 Basic SJ!!tem Back-Ue. Services State County Total State County Total $225,023 $75,001 $300,004 105,618 35,201 140,819 $32,250 $10,750 $43,000 844,056 281,352 1,125,408 685,586 228,528 914,114 344,872 114,957 459,829 74,250 24,750 99,000 377,817 125,938 503,755 291,072 97,024 388,096 1,667,967 558,391 2,226,378 134,257 44,753 179,010 $3,856,425 b $1,287,864 $5,144,289 $926,343 b $308,781 $1,235,124 Item 312 Totals $300,004 183,819 2,039,522 558,829 503,755 388,096 2,405,388 .. $6,379,413 a Source: Department of Social Services, December 1979 b Because some counties did not submit plans and therefore did not receive allocations, projected expendi- tures of General Fund 24-hour emergency response system funds for the basic system and for back-up services do not total to $5 million. Unallocated funds total $217,232. Our analysis indicates that continued General Fund support of this program is inappropriate. . . .. .. First, there is no specific statutory authority for this program. Theregu- lations developed by the department for implementing this response sys- tem cite Sections 10553 and 16502 oftheWelfare and Institutions Code.as the department’s statutory authority. These sections, however, do not address a 24-hour response system, or an expanded state role in the other county social services program. Instead, they establish the Diiector of the Department of Social Services’ authority to promulgate regulations for the administration of social services programs and establish the overall child protective services program in California. Second, the departments reporting system cannot yet produce infor- mation on the number of referrals, dispensation of casesractual prevention of family separations, or actual expenditures. Therefore, no analytical basis currently exists to determine the effectiveness of funds spent on the 24- hour response system in 1979-80. Third, the allocation method is deficient. According to the department, the allocation method used in 1979-80 probably will be used in 1980-81. This allocation method does not take into account funds available from other sources in considering the counties’ need for 24-houremergency funds. For example, in 1979-80, there was approximately $120 million available to the counties for program~ addressing child abuse, neglect and protection, such as the 24-hour response system ($4.1 million through Title IV-B and $116 million through Title XX) .If an improved response system is identified by counties as an important need, counties should be required to use available resources for that service, as they are for other aspects of the Other County Social Services program. Fourth, new federal funds should be used to replacfutate funds for this\u00b7 activity. Both versions of HR 3434 propose to amend Title XX and Title IV-B of the Social Security Act and increase funds available to the states for children’s protective and welfare services. If this billisenacted, the department anticipates an $80 million increase ih federal funds for other Item 312 HEALTH AND WELFARE \/ 929 county social services, of which children’s protective services are a major part. Of the $80 million increase, the budget proposes t9 use $2,929,319 for the 24-hour response system. The 24-hour emergency response system should appropriately be (a) included in the expanded children’s services proposed to meet the objectives of HR 3434 and (b) supported entirely on the basis of 75 percent federal\/25 percent county funds as are other components of the Other County Social Services program. For these reasons, we recommend that General Fund support for the 24-hour emergency response system be deleted. Adoption of this recom- mendation would return the response system to a funding pattern com- parable to other social services programs and result in a General Fund savings of $5 million. This recommendation would leave $5,572,426 budg- eted for the 24-hour emergency response system. This amount would be sufficient to continue the basic system. If counties choose to provide back- up services, it is appropriate that funds included in the budget for other county social services and child welfare services be used in lieu of con- tinued General Fund support. As noted earlier, over $120 million is avail- able to the counties for programs addressing child abuse, neglect and protection, allowing counties ample flexibility to fund back-up services. OTHER SOCIAL SERVICE ACTIVITIES Community Care Licensing Community care facilities provide nonmedical residential care, day care, or homefinding services for children and adults. The Community Care Facilities Act of 1973 (Health and Safety Code, Section 1500 et. seq.) established minimum standards of care and services in community care facilities and for the licensing and evaluation of the facilities. The Depart- ment of Social Services develops regulations, conducts facilities evalua- tion, and contracts with counties to license and evaluate community care facilities. In 1979-80,48 counties contracted with the state to license approximate- ly 70 percent of all community care facilities in California. About 90 per- cent of the county-licensed facilities are family day care or foster homes for children. The Department of Social Services is responsible for assuring the performance of county licensing agencies, and it also directly licenses about 26 percent of the state’s community care facilities. Expenditures for direct state facilities evaluation are included in Item 309, Departmental Support. Current Year Deficit The department estimates that current year expenditures for community care licensing will exceed appropriations by $275,224. Current year expenditures for county-administered community care licensing will exceed the amount budgeted in the 1979 Budget Act by $378,724, or 2.8 percent. This is the result of (1) increased expenditures of $196,032 to cover higher-than-anticipated cost-of-living salary increases for county staff, (2) $68,292 for the implementation of several regulations during 1979-80, and (3) a net increase of $114,400 to implement family day care registration pilot projects authorized by Chapter 1063, Statutes of 1978 (AB 1368). Chapter 1063 appropriated $112,000 from the General Fund and transferred $8,500 originally budgeted for county licensing in the local assistance budget item to the departmental support budget item. 930 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued The net effect of these adjustments is a current deficit of $275,224. The department has not yet advised the Legislature how it intends to fund the community care licensing deficit in the current year. Budget Year Increase. The budget proposes $16,857,400 from the Gen- eral Fund to support facilities evaluation and licensing by counties under contract with the Department of Social Services. This is an increase of $3,302,908, or 24.4 percent, over estimated 1979-80 expenditures. This proposed $3.3 million increase is composed of (a) $1,537,600 for cost-of-living increases to county licensing staff, (b) $514,808for the im- plementation of new regulations, including the family day care registra- tion pilot project, (c) $770,500 for an anticipated 6.4 percent increase in the\u00b7 number of licensed facilities and (d) $480,000 for increased grants to counties based on the implementation of a revised cost allocation formula. Revised Allocation Procedure We withhold recommendation on a proposed community car,e licensing increase of $523,200 pending receipt of (a) the Management Analysis Bureau s workload study and (b) an explanation of how the study was used to determine the proposed county allocations. Current Allocation Method The existing procedure for allocating funds to counties which perform facilities evaluation is based on an esti- mate of each county’s annual costs for fiscal year 1978-79, adjusted for (a) estimated increases in the number of facilities licensed, (b) costs of special requirements and (c) a 6.7 percent cost~of-living increase. This procedure perpetuates existing variations in licensing costs among counties. For ex- ample, 1979-80 allocations to the 48 contracting counties allowed a varia- tion in average cost per license from $49 to $1,037, and a variation in hours spent per license from 3 to 42. Table 14 displays the variation permitted under the current allocation procedure. The counties selected are the five largest and five smallest counties in the state. Table 14 Facilities Evaluation Estimated Costs per License Selected Counties Based on 1979-80 Allocation Average Monthly Number of Facilities Licensed July-Dec. 1978 Alameda…………………………………………………… 1,931 Almador…………………………………………………… 35 Contra Costa……………………………………………. 424 Del Norte ……………………………………………….. 76 Los Angeles……………………………………………… 7,361 Mariposa …………………………………………………. 12 Modoc………………………………………………………. 18 San Diego ……………………………………………….. 3,129 Santa Clara ……………………………………………… 2,676 Tuolumne ……………………………………………….. 42 1979.;.,go Allocation $969,187 5,749 352,487 6,934 3,158,174 6,393 1,339 1,103,886 1,498,886 $7,840 Estimated 1979.;.,go A verage Cost per License a $428.77 116.38 1,036.80 88.82 433.88 494.16 48.90 309.34 502.64 249.20 Estimated Number of Hours Spentper License 14.5 7.8 42.8 5.1 19;1 29.0 3.0 12.1 23.6 15.1 a This column was derived by multiplying the estimated number of hours spent per liceilse in 1979-80 by the estimated cost per hour in 1979-80. Item 312 HEALTH AND WELFARE \/ 931 Proposed Allocation Method. The proposed allocation method will use workload standards developed by the department’s Management Analysis Bureau in a study of state licensing staff. The department advises that the revised allocation formula, which it intends to use on a temporary basis, is based on annual workload standards of 150 licensed day care facilities or 75 licensed residential care facilities per evaluator. We have been una- ble to verify the appropriateness of the 150 and 75 caseload assignments because the Management Analysis Bureau study has not been released. Without reviewing this workload study, we have no analytical basis on which to evaluate the revised allocation method and the increased costs associated with it. Pending receipt of (a) the Management Analysis Bureau’s study and (b) an explanation of how the study was used to determine the proposed allocations, we withhold recommendation on the proposed increase of $523,200 ($480,000 for additional evaluation costs and $43,200 for a related 9 percent cost-of-living adjustment). Adoptions The Department of Social Services administers a statewide program of services to parents who wish to place children for adoption and to persons who wish to adopt. Adoptive services are provided through three state district offices, 28 county adoption agencies and a variety of private agen- cies. There are three major adoption programs: (1) relinquishment adop- tions, the freeing of a child from parental custody and placement in an adoptive home; (2) independent adoptions, cases in which the natural parents and the adoptive parents agree on placement without extensive assistance from an adoption agency; and (3) intercountry adoptions in- volving children from countries other than the United States. t;The adoptions program is primarily supported from the General Fund with the exception of a maximum fee of $500 collected from adoptive parents. The General Fund supports case work provided by the state and by county agencies, and reimburses private adoption agencies for place- ment of hard-to-place children. Current-Year Deficiency. The total expected adoptions deficit in 1979 -80 is $1,701,870, consisting of $1,443,500 for increased caseload, $272,070 for the higher cost-of-living adjustment, $8,000 for increased reimburse- ments to private adoption agencies as a result of the enactment of Chapter 489, Statutes of 1979 (AB 296), and an offsetting increase in fees of $21,700. Estimated expenditures for the adoptions program exceed the amount budgeted in the 1979-80 Budget Act for two major reasons. First, projec- tions of current year caseload estimates have been revised to show growth in adoptive placements. Second, counties were allowed to increase the salaries of their employees by a 7.4 percent, which is higher than the 6.0 percent increase originally budgeted. This resulted from a court ruling on county employee collective bargaining. The department has not yet advised the Legislature how it intends to 932 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued fund the proposed adoptions deficit in the current year. 1 Budget Proposal The budget proposes $17,584,043 to support the state adoptions programs in 1980-81, which is an increase of $2,312,343, or 15.1 . percent, over estimated current year expenditures. This increase consists of (a) $773,110 for a 5.4 percent increase in the number of placements, (b) $64,900 for continuation of 1979-80 cost-of-living increases for the addition- al caseload, (c) $1,469,043 for 1980-81cost-of-living increases for county staff, (d) an offsetting increase in fees of $2,700, and (e) $8,000 for reim- bursements to private adoption agencies for placing \”hard to place\” chil- dren. No Caseload Increase Expected We recommend funds budgeted for a 5.4 percent growth in the number of adoptive placements be deleted, for a General Fund savings of $982,588. Background. The number of adoptive placements is controlled by the availability of resources, the time limits placed on various phases of the adoption process, and the number of available adoptive children. For example, the final outcome of federal court rulings on Medi-Cal funded abortions may ultimately affect the number of children available for adop- tion. The state is required by statute to reimburse counties for delivering adoption services. The state, however, may specify allowable county costs. The Legislature is not required to increase funding for the adoptions program when caseload increases as it must under entitlement programs. No Increase in Adoptive Placements. The budget estimates adoptive placements will increase during 1980-81 by 5.4 percent over 1979-80, based on the assumption that the number of placements will grow at a steady rate throughout 1979-80 and 1980-81. Our analysis of the number of adoptive placements since 1974-75 indicates that there have been er- ratic increases and declines in the number of adoptive placements. Chart 2 displays the trend in adoptive placements since 1974-75. The 1979-80 and 1980-81 projections of the Department of Social Services and the Legislative Analyst are also shown. This chart illustrates the cyclical nature of adoptive placements. In all five fiscal years shown, the fourth quarter exhibited a dramatic increase in placements. However, the fourth quarter increases have not reversed an overall decline in the number of adoptive placements since 1974-75. The data shown on Chart 2 do not support the conclusion that the number of adoptive placements will in- crease in a straight line growth trend in 1980-81 as proposed by the depart- ment. Based on the data for the 1974-75 through 1978-79 period, we conclude that the number of adoptive placements will remain the same or decrease during 1980-81. Table 15 shows the anhual placement totals for the same period. . Because data provided by the department do not support an expected increase in the number of adoptive placements, we recommend funds budgeted for a 5.4 percent caseload increase be deleted, and instead rec- ommend that funds be budgeted at the caseload level justified by our analysis. This will result in a General Fund savings of $982,588. This Item 312 900 N U M800 B E R o F P 700 L A C E M E N 600 T S HEALTH AND WELFARE \/ 933 Chart 2 Total Adoption Placements By Quarter 1974-75 to 1980-81 Proposed in Budget \” ….. \”j .\/ , 1’\/ , \” \/’~ , ‘\\ .\/ II I ‘\” \/’ ‘\\ , \\ \\,.\” , \\ , \\ ,\\ , \\ ,\\ ….. , I \\ ,’\” \\ I \\ ,,, I’ I \\ \/ \\ I \\ , v \\1 V v Analyst’s Projection \/ ‘soo -‘—–~—————-~—-~– 1975-76 1976-77 1977-78 1978-79 1979-80. 1980-81 (projected) (projected) 1974-75 Table 15 Number of Annual Adoption Placements 1974-75 to 1980-81 Totaf Almuaf Adoption Placements \” 1974-75 ………………………………………………………………………………………………………………………………………. 3,’}Jj7 1975-76 ………………………………………………………………………………………………………………………………………. 3,071 1976-77 ………………………………………………………………………………………………………………………….. ,…………. 2,709 1977-78 ………………………………………………………………………………………………………………………………………. 2,396 1978-79 ………………………………………………………………………………………………………………………………………. 2,545 1979-80 (Department of Social Services) ……………………………………………………………………………….. 2,715 (Legislative Analyst) …………………………………………………………………………………………………. 2,550 1980-’81 (Department of Social Services) ……………………………………………………………………………….. 2,862 (Legislative Analyst) …………………………………………………………………………………………………. 2,703 amount consists of two parts: (a) a reduction of $836,148 in basic program costs arrived at by applying our estimate of the number of placements to the department’s unit cost of $5,263 per phi-cement, and (b) a reduction 934 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued of $146,440 in funds budgeted for 1979-80 and 1980-81 cost-of-living in- creases for the unsubstantiated caseload growth. Rape Victim Counseling Centers-Additional Funds Not Needed We recommend that the department implement a uniform contract period for rape victim counseling centers that corresponds with the state fiscal year, for a General Fund savings in the budget year of $135,050. Background Chapter 1312, Statutes of 1978, appropriated $100,000 for the 1978-79 fiscal year to support local rape victim counseling centers and to encourage the establishment of new centers. The Legislature appro- priated an additional $200,000 in Item 288.1 of the Budget Act to continue the program in 1979-80. Delayed Implementation of Item 288.1. The department advises that it will use the $200,000 Budget Act appropriation to provide grants to 36 centers in the current year. Of the 36 centers, 20 are centers which did not receive grants in 1978-79. Because of a delay in processing proposals and negotiating grant agree- ments with the centers, the department advises that the 20 new centers will not begin operation until February 1, 1980. The 16 continuing centers will begin their second year of funding in late March 1980. As a result of this delay, the department anticipates that only $76,092 of the $200,000 appropriation will actually be spent durfug 1979-80. The remaining $123,- 908 will be encumbered in 1979-80 but will actually be tlsed to continue the centers through a portion of the 1980-81 fiscal year. Budget Proposal. The budget proposes $218,000 from the General Fund to continue funding for the centers for an additional 12 months. Because the current year contract cycle for this program will not.oend until January 31, 1981 for the 20 new centers and March 31, 1981 for the 16 continuing centers, the budget needs to appropriate funds for only five and three months respectively in order to continue all centers through the end of fiscal year 1980-81. The amount required to fund the existing 36 centers through the end of fiscal year 1980-81 with a 9 percent cost of living adjustment is $82,950. We therefore recommend a General Fund reduction of $135,050. In order to prevent this problem from recurring in the future, we further recommend that the department implement a uniform contract period which corresponds with the state fiscal year. Licensed Maternity Care Homes-Budget Inclusion Needed We recommend that (1) legislation be enacted to appropriate funds for this program in the annual budget process and (2) Budget Act language be added to appropriate $2,112,000 in lieu of Section 16151 of the Welfare and Institutions Code, for a General Fund savings of $81,400. Legislative History. Chapter 1190, Statutes of 1977, the Pregnancy Freedom of Choice Act, established the Licensed Maternity Care Homes program. This act is designed to provide pregnant unmarried women, under the age of 21, the choice between interrupted pregnancy and full- term pregnancy by providing counseling and residential treatment serv- ices through licensed, nonprofit maternity homes. The act appropriated Item 312 HEALTH AND WELFARE \/ 935 $1.2 million for anticipated half-year costs in 1977-78. The statute further provided for a $2.4 million annual continuing appropriation to carry out the provisions of this program. Program Administration. The department executed its first set of con- tracts with nine licensed maternity care homes in September 1978. The contracts stipulate the number of individuals the homes expect to serve and the monthly rate the state will pay for each individual residing in the homes. Monthly Rates. The enabling legislation established a monthly rate of $965 and provided that the department could increase the rate by as much as 10 percent each July 1. The 1979–80 rate increase allowed a maximum monthly payment of $1,062 and the 1980–81 rate increase will allow a maximum monthly payment of $1,168. In 1980–81, three of the nine con- tractors, serving approximately 23 percent of the caseload, will not charge the maximum rate. BudgetProposai. The budget indicates that the department wiUspend _$2,193,400 in funds continuously appropriated by the Welfare and Institu- tions Code for the licensed materntiy care home program in 1980–81. This is an increase of $214,700 or 10.85 percent over current year contracted expenditures. This increase is due to a 10.85 percent cost-of-living adjust- ment. Our analysis indicates that th() Legislature would have (1) a greater degree of program review and fiscal control and (2) more budgetary flexibility if legislation was enacted to fund this prograIIl in the annual bud.get process, rather than through a continuous statutory appropriation. Expenditures will Surpass Appropriation. Each year, the amount spent on maternity care programs increases as a result of the .10 percent rate increase authorized by the statute. Table 16 displays alternative ex- penditure trends for 1979–80 through 1982–83 based on four different assumptions: 1) increasing each contractor’s rate by 10 percent per year, (2) increasing the proposed 1980–81 total funding level by 10 percent annually, (3) increasing the 1979–80 contract amount by 10 percent annu~ ally, and (4) increasing estimated expenditures by 10 percent annually. Regardless of the methodology employed, Table 16 indicates resource requirements for this program will exceed the statutory appropriation by 1982–83. Table 16 Licensed Maternity Care Homes Alternative Expenditure Trends 197940 to 1982-83 Assumptions’ Estimated Proposed 1979-80 1980-81 1. Contractor’s rates and caseloads .. $1,978,719 $2,070,499 2. Governor’s 1980-81 Budget ………… 1,978,719 2,193,400 3. 1979-80 Contract amounts ………….. 1,978,719 2,176,590 4. 1979-80 Estimated expenditures .. 1,850,000 2,112,000 Each of the assumpti.ons are increased by 10 percent annually. Projected Projected 1981-82 1982-83 $2,277,548 $2,505,303 2,412,740 2,394,249 2,633,674 2,323,200 2,555,520 Because (1) it is likely that this program will reach its funding limit in 936 \/ HEALTH AND WELFARE Item 312 SOCIAL SERVICES PROGRAMS-Continued the next year or two, and (2) the budget process allows the Legislature the greatest degree of flexibility for assessing need and determining spending priorities, we recommend that legislation be enacted to include funding for this program in the annual budget process. Budget Act Language Needed The budget indicates that the depart- mentwill spend $2,193,400 for this program. Because this amount is less than that appropriated in Section 16151 of the Welfare and Institutions Code (Chapter 1190, Statutes of 1977), Legislative Counsel advises that the Budget Act should include language making an appropriation in the Budget Act \”in lieu of statutory appropriations.\” Overbudgeting for 1980-81. The total expenditure proposed for this program in the 1980-81 budget, $2,193,400, was derived by applying a 10.85 percent price increase directly to the total 1979-80 contract amount. This methodology overlooks (1) the statutory requirement that price increases be applied to monthly rates per client and not to the total expenditure level, (2) homes serving 23 percent of th~ caseload will increase their rates by less than 10 percent in 1980-81, (3) total expenditures in 1978-79 were less than the total contract amount, and (4) total expenditures in 1979-80 are estimated to be less than the total contracted amount for the current year. Based on the current, stable caseloads of contractors, we estimate pro- gram requirements of $2,070,499 in the budget year. Alternatively, the highest reasonable estimate of program expenditure:> in 1980-81 is $2,112,000, based on estimated current year expenditures. We recommend that language be added to Item 312 to appropriate $2,112,000 for the Licensed Maternity Care Home program in lieu of funds appropriated by Section 16151 of the Welfare and Institutions Code. The adoption of the following language will result in a General Fund savings in 1980-81 of $81,400: \”Provided further that $2,112,000 appropriated for the Licensed Mater- nity Care Home program is made in lieu of Section 16151 of the Welfare and Institutions Code;\” Social Services for Indochinese Refugees The Governor’s Budget proposes $29,039,600 in federal funds for social services to Indochinese refugees. This is an ~ncrease of $10,380,300 or 66.3 percent over estimated current year expenditures. The funds will be used to continue contracts with private agencies providing social services, job placement, and training in English as a second language ($20,575,500) and to support social services provided to refugees by county welfare depart- ments ($8,464,100). Continued Federal Funding. The Indochinese Refugee Assistance Program (IRAP) provides federal funds to states and directly to providers for cash assistance, medical assistance and social services to refugees. The Cambodian Relief Act (PL 96-110) assured 100 percent federal funding for IRAP until September 30, 1981. Program Growth. In 1978-79, the Department of Social Services had contractual agreements with approximately 20 private agencies for IRAP. Item 312 HEALTH AND WELFARE \/ 937 During 1979-80 the number increased to over 40. In order to administer the contracts and perform other functions related to lRAP, the depart- ment has requested 16.5 new positions which are discussed in Item 309 of our analysis. WIN Social Services The budget proposes $635,500 from the General Fund to provide child care costs for participants in the Work Incentive (WIN) program. This is an increase of $226,200, or 55.2 percent, over 1979-80 expenditures for this program. The increase includes: (1) $70,154 to provide a 10 percent state match for a special welfare reform pilot in Long Beach and (2) $156,046 for caseload growth and cost-of-living increases. Total proposed funds for WIN ($19,725,400) include (1) $635,500 from the General Fund for child care, (2) $5,719,300 in federal funds for child care and (3) $12,033,500 in federal funds and $1,337,100 in county funds for t4e cost of administering WIN separate administrative units (SAUs). WIN SAUs are a(,iministered by.county welfare departments to provide social services to AFDC recipients who register and participate in employment or training through the WIN program. Demonstration Programs .The plldget proposes $3,511,905 from the General Fund for demonstra- tionprograrns,which is a decrease of $132,846, or 3.6 percent, from 1979-80 estimated expenditures. The net decrease consists of a decrease of $1,630,391 resulting from project terminations offset by an increase of $1,497,545 for three remaining projects. The total amount proposed for. demo.nstration programs is $3,880,998,including $100,000 in county funds and $;269,093 in federal funds .. Four projects will be funded through three demonstration programs. First;~tan IHSS project will receh’e $118,265 for a third year to develop a model for making \”equitable\” needs assessments. Second, Multipurpose Senior Services Project funds not spent during 1979-80 ($1,493,640) will be carried forward for a third year. This project is discussed in our analysis of Item 35. Third, projects in San Mateo. and Shasta counties authorized by the Family Protection Act (Chapter 21, Statutes of 1977) will be funded at $1.9 million including $125,000 for state administration costs. These projects will be completed on June 30, 1981. 938 \/ HEALTH AND WELFARE Item 313 Department of Social Services COUNTY ADMINISTRATION OF WELFARE PROGRAMS Item 313 from the General Fund Budget p. HW 152 Requested 1980-81 ……………………………………………………………….. $101,146,100 Estimated 1979-80…………………………………………………………………. 95,397,811 Actual 1978-79 ………………………………………………………………………. 187,714,891 Requested increase $5,748,289 (+6.0 percent) Total recommended reduction ……………………………………………. $20,909,371 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS L Administrative Costs for Cash Assistance Programs. Rec- ommend that federal funds in item 313 be increased by $6,900,700 and that federal funds in Item 311 (special adult programs) be reduced by a similar amount. 2. Fiscal Sanctions for High Error Rates. Reduce by $2~909,37J. Recommend: a. Reduction of $20,909,371 from the General Fund to recover state funds misspent by counties with error rates above 4 percent for the quality control period October 1978-March 1979. b. The reduction of $20,909,371 be scheduled in Item 313 under AFDC Administration. c. Control language requiring thatthe General Fund alloca- tion to each county be reduced by the amount of state funds the county misspent for October 1978-March 1979. d. Legislation be enacted requiring that fiscal sanctions be applied against counties with high error rates in order to recover state funds misspent by counties. e. Department develop a plan, prior to budget hearings, for improving the reliability of its quality control error rate data. 3. Child Support Enforcement Program. Recommend that (Legislation be enacted which allows the state and counties to recover their administrative costs for child support en- forcement services provided to non welfare recipients. GENERAL PROGRAM STATEMENT Analysis page 940 941 947 This item contains the General Fund appropriation for the state’s share of costs incurred by the counties for administering: (a) the AFDC pro- gram, (b) the Child Support Enforcement program, (c) the Food Stamp program, and (d) special benefits and emergency payment programs for aged, blind and disabled recipients. The costs for training county eligibility and nonservice staff also are shown in this item. Table 1 Expenditures for County Welfare Department Administration 1979-80 and 1980-81 Estimated J!J79..8() Prooosed J980-8J Program Federal State County Total Federal State County ToM AFDe administration ……… ; …… $125,997,200 $62,713,900 $62,713,800 $251,424,900 $140,553,1XMl $68,616,200 $68,616;500 $UT,785,700 Food stamp administration …… 35,155,600 17,577,400 17,577,500 70,310,500 32,484,400 16,199,500 16,199,500 64,883,400 Child support enforcement ad- ministration: Welfare ……………………………….. 45,130,500 15,043,500 6O,174,1XMl 49,192;300 16,397,400 65,589,700 Nonwelfare ………………………… 11,813,900 3,938,1XMl 15,751,900 12,877,200 4,292,400 . 17,169,600 Administration of special adult programs ………………………… 23,900 2,327,800 21,1XMl 2,372,700 2,537,400 22,900 2,560,300 Staff training ………………………….. 5,415,232 964,811 840,300 7,220,343 5,495,200 915,800 915,900 7,326,900 Totals ……………………………… $211,722,432 $95,397,811 $100,134,100 $407,254,343 $227,724,900 $101,146,100 $106,444,600 $435,315,600 Percent CiJange Federal State County Total 11.6% 9.4% 9.4% 10.5% -7.6 -7.8 -7.8 -7.7 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 7.9 1.5 -5.1 9.0 1.5 7.6% 6.0% 6.3% 6.9% I-< ,..,. (t) 8 c.J ..- c.J 0:: ~ E:; .0:: ~ i ....... a 940 \/ HEALTH AND WELFARE Item 313 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued ANALYSIS AND RECOMMENDATIONS The budget proposes an appropriation of $101,146,100 from the General Fund as the state share of county administration of welfare programs in 1980-81. This is an incr:ease of $5,748,289, or 6.0 percent, over estimated current year expenditures. Totalexpenditures of $435,315,600 are proposed for county administra- tion of welfare programs in 1980-81. This is an increase of $28,061,257, or 6.9 percent, over estimated current year expenditures. Table 1 shows the total expenditures for county welfare administrative costs. Table 2 shows the proposed changes in General Fund expenditures for county administration of welfare programs. The largest General Fund increase is $8,267,800 to provide a 9 percent cost-of-living increase for county welfare departments. This is offset by estimated savings of $2,905,- 200 in the administration of the Food Stamp program due to a projected decrease in Food Stamp caseload. Table 2 Proposed 1980-81 General Fund Changes For County Welfare Department Administration Cost 1979-80 Current Year Revised ...................................................................................................... .. Baseline Adjustments: A. -AFDC Administration 1. 9 percent cost-of\u00b7living for 1980-81 .............................................................................. .. $5,582,800 2. Adjust 1979-80 cost -of-living for caseload .................................................................. .. 206,200 3. Other adjustments ............................................................................................................ .. 113,300 Total .............................................................................................................................. ; .... . B. Food stamp administration 1. 9 percent cost-of-Iiving for 1980-81 .............................................................................. .. 1,336,500 2. Adjust 1979-80 cost-of-living for caseload .................................................................. .. -57,300 3. Projected caseload decrease ........................................................................................... . -2,905,200 4. Indochinese refugee administrative costs .................................................................. .. 276,800 5. Other adjustments ............................................................................................................. . -28,700 Total .................................................................................................................................. .. C. Child support enforcement-Nonwelfare recipients 1. 9 percent cost-of-Iiving for 1980-81 .............................................................................. .. D. Administration of special adult programs 1. 9 percent cost -of-living for 1980-81 .............................................................................. .. E. Staff training 1. 9 percent cost-of-Iiving .................................................................................................... .. $75,600 2. Nonrecurring expense-training of county fair hearing representatives .......... .. -124,611 Total .................................................................................................................................. .. F. Total budget increase ............................................................................................................ .. G. General Fund Expenditures ................................................................................................ .. Total $95,397,811 $5,902,300 $-1,377,900 $1,063,300 $209,600 $-49,011 ($5,748,289) $101,146,100 Scheduling of Federal Funds for County Welfare Department Administrative Costs We recommend that federal funds for county welfare administrative costs scheduled in Item 313 be increased by $6,900,700 and that federal funds for county administrative costs in Item 311 (special adult programs) be reduced by $6,900,700. \" Item 313 HEALTH AND WELFARE \/ 941 Item 311 contains $6,900,700 in federal funds for county administrative costs related to two refugee programs: (1) Indochinese refugees and (2) Cuban refugees. In our analysis of Item 311, we recommend that the funds be budgeted in Item 313 because this item contains the funds for county welfare administrative costs. Thus, in order to facilitate legislative review, we recommend that federal funds in Item 313 be increased by $6,900,700 to reflect the reduction in federal funds in Item 311. Fiscal Sanctions for High Error Rates We recommend: a. Reduction of $2{),909,371 from the General Fund to recover state funds misspent by counties with error rates above 4 percent for the quality control period October 1978-March 1979. b. The reducti.on of $2{),909,371 be scheduled in Item 313 under AFDC Administration. c. Control language requiring that the General Fund allocation to each county be reduced by the amount of state funds the county misspent for October 1978-March 1979. d. Legislation be enacted requiring that fiscal sanctions be applied against counties with high error rates in order to recover state funds misspent by counties. e. Department develop a plan, prior to budget hearings, for improv- ing the reliability of its quality control error rate data. Historically, California's error rates for the administration ofthe AFDC program have been among the lowest of all states. In addition, California has had one of the lowest error rates among states that have large case- loads. For example, for the period of January through June 1978, Califor- nia's payment error rate was 4.3 percent; New York's was 13.0 percent; Pennsylvania's was 16.1 percent; and Illinois' was 19.5 percent. California's low error rates were achieved at a time when the counties were paying approximately 16 percent of the costs for AFDC grants. Fiscal Sanction Provisions of SB 154. As a result of passage of SB 154, the state assumed the county costs for AFDC grants during 1978-79 while the counties continued to administer the program. The act also contained language allowing the Director of the Department of Social Services to hold counties financially liable for excessive error rates in the administra- tion of the AFDC program. In addition, the director was given the author- ity to establish the error rate standard for which counties would be held fiscally liable. The department issued regulations establishing a 4 percent payment error rate for 1978-79. For fiscal sanction purposes, payment error rate was defined as payments to ineligible recipients and overpayments to eligible recipients. In order to determine the county error rates, the department augment- ed its federally-required quality control sample of 1,200 cases by 3,800 cases for a total of 5,000 cases reviewed during each six-month reporting period. This provided a minimum sample of 120 cases for each of the 34 largest counties. These counties represent approximately 85 percent of the state- wide caseload. P 10\";, E 9 R C 8 E 7 N T 6 I 5 N 4 E 3 R R 2 0 R Chart 1 Statewide AFDC Payment Error Rates ,a January 1974 to March 1979 - - - 9.8'X. Jan.- June 74 9.2'X. July- Dec. 74 8.4% Jan.- june 75 6.4'>\” July- Dec. 75 5.2cY\” Jan.- June 76 4.7f}{, July- Dec. 76 3.5CX) Jan.- June 77 3.9% July- Dec. 77 4.3% Jan.- June 76 5.5% 3.7% Apr.- b Oct. 78- Sept. 76 Mar. 79 a’Combined payment error rates for overpayments and payments to ineligibles. b’Effective July 1,1978, federal quality control review periods were changed from January through June and July through December to Aprilthrough September and October. through March. (‘) ! 0 c: z ……. ~ ::t: r:J J> > \” ~ i: i ::t: 0; ~ -I 0 :311 ~ J> -I r:J is r;;’ z > 0 = \”ft r:J ~ m r- \”ft J> :311 m ‘\”0 :311 0 (i) :311 J> 3: ~ 0 :s tt. :s c Z. ~ ….. CD 3 c.:l ~ c.:l Item 313 HEALTH AND WELFARE \/ 943 The first complete quality control period for 1978-79 was October 1978 through March 1979. The statewide. payment error rate for this period was 5.5 percent, as shown in Chart 1. This was an increase of 49 percent over the error rate for the previous reporting period. It was also I the highest error rate for the state during the last three years. This error rate represents misspent funds for a six\”month period of $47,737,700, of which the federal government paid $23,590,500 and the state paid $24,147,200. Table 3 shows that among the 34 largest counties, the error rate ranged from a low of 0.8 percent in Kern County to a high of 10.7 percent in San Francisco County. Ten counties exceeded the statewide error rate of 5.5 percent and 15 counties had error rates above the 4 percent standard set by the department. Of the 11 counties with the largest caseloads, six had error rates above the statewide average. Table 3 Thirty-four Largest Counties AFDC Payment Error Rates October 1978 through March 1979 Payment County Error Rate \u00b7San Francisco…………………………………………………………………………………………………………………………………………………….. 10.7% \u00b7San \u00b7Diego ………………………………………………………………………………………………………………………………………………………….. 9.5 San Mateo ………………………………………………………………………………………………………………………………………………………….. 8.5 \u00b7Los Angeles ………………………………………………………………………………………………………………………………………………………. 7.4 \u00b7Contra Costa …………………………………………………………………………………………………………………………………………………….. 7.3 \u00b7San Bernardino …………………………………………………………………………………………………………………………………………………. 7.3 Sonoma ……………………………………………………………………………………………………………………………………………………………… 7.2 San Luis Obispo ……………………………………………………………………………………………………………………………………………….. 6.6 Alameda ……………………………………………………………………………………………………………………………………………………………. 5.9 Marin…………………………………………………………………………………………………………………………………………………………………. 5.7 Statewide ………………………………………………………………………………………………………………………………………………………….. 5.5 Ventura ……………………………………………………………………………………………………………………………………………………………… 5.1 \u00b7Orange……………………………………………………………………………………………………………………………………………………………….. 4.8 Mendocino ………………………………………………………………………………………………………………………………………………………… 4.5 Santa Barbara …………………………………………………………………………………………………………………………………………………… 4.4 Merced ……………………………………………………………………………………………………………………………………………………………… 4.1 Imperial……………………………………………………………………………………………………………………………………………………………… 4.0 Monterey ………………………………………………………………………………………………………………………………………………………….. 4.0 \u00b7Fresno …………………………………………………… ………………………………………………………………………………………………………….. 3.9 Kings …………………………………………………………………………………………………………………………………………………………………. 3.7 Madera ……………………………………………………………………………………………………………………………………………………………… 3.7 \u00b7Santa\u00b7 Clara ………………………………………………………………………………………………………………………………………………………… 3.6 Shasta…………………………………………………………………………………………………………………………………………………………………. 3.5 Yolo …………………………………………………………………………………………………………………………………………………………………… 3.4 San Joaquin………………………………………………………………………………………………………………………………………………………… 3.3 Santa Cruz ………………………………………………………………………………………………………………………………………………………… 3.3 \u00b7Riverside …………………………………………………………………………………………………………………….. ………………………………….. 3.2 Solano ……………………………………………………………………………………………………………………………………………………………….. 2.9 \u00b7Sacramento…………………………………………………………………………………………………………………………………………………………. 2.4 Tulare ……………………………………………………………………………………………………………………………………………………………….. 1.9 Butte …………………………………………………………………………………………………………………………………………………………………. 1.7 Humboldt ………………………………………………………………………………………………………………………………………………………….. 1.4 Stanislaus……………………………………………………………………………………………………………………………………………………………. 1.4 yuba…………………………………………………………………………………………………………………………………………………………………… 0.9 Kern…………………………………………………………………………………………………………………………………………………………………… 0.8 * Eleven largest counties. Source: Department of Social Services. 944 \/ HEALTH AND WELFARE \u00b7Item 313 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued Fiscal Sanction Provisions of AB 8. AB 8 contains language allowing the director to apply fiscal sanctions against counties for high error rates in 1979-80 and subsequent years. In addition, Chapter 1133, Statutes of 1979 (AB 339), requires the director to notify the Joint Legislative Budget Committee by January 30, 1980, of the error rate standard to be\u00b7 in effect during 1979-80. The act requires that beginning with fiscal year 1980-81, the error rate standard shall be established in the budget. Will Fiscal Sanctions Be Applied? We asked the department inJanuary 1980 if it planned to apply fiscal sanctions against counties with high error rates. The department responded that it would not sanction counties for the first two quality control periods (October 1978-March 1979 and April 1979-September 1979). The department indicated that sanctions might be. applied during the third quality control period of October 1979-March 1980. The departmeIit cited the following reasons for not exercising its sanc- tion authority. First, the increased error rates during 1978-79 could be partially due to low morale among county welfare employees, who at the time thought they would not receive cost-of-living increases during 1978- 79 due to the passage of Proposition 13. Second, county welfare depart- ments were implementing major changes required by the federal govern- ment in the administration of the Food Stamp program during this period. Third, the counties had expressed concern about the size of the quality control sample and therefore the reliability of the error rate. data. We have no basis for determining why the statewide error rate in- creased significantly for the period October 1978 through March 1979. Furthermore, we do not know whether this is a temporary or permanent deterioration in the quality of AFDC program administration. Error rate data for the second quality control period (April 1979-September 1979) are not available as of this writing. Th~ department indicates that this information will be available in early 1980. . Misspent Funds Can Be Recovered We asked the Legislative Counsel if the Legislature could recover misspent state funds from counties with error rates in excess of the error rate standard for the period October 1978-March 1979. The Legislative Counsel has informed us that the Legis- lature can recoup misspent funds from counties With error rates in excess of the error .rate standard for any period after October 1978 by reducing the General Fund appropriation for county welfare department adminis- trative costs (Item 313). If the department had applied fiscal sanctions against counties with error rates above 4 percent, the state would have recovered $20,909,371 in misspent funds for the period of October 1978-March 1979. Table 4 shows the amount of funds which would have been recouped from the 15 counties with error rates above 4 percent. Item 313 HEALTH AND WELFARE \/ 945 Table 4 Misspent Funds Which Could Be Recovered October 197&-March 1979 ~unlf &M&re San Francisco……………………………………………………………………………………………………………………………… 10.7% San Diego …………………………………………………………………………………………………………………………………… 9.5 San Mateo …………………………………………………………………………………………………………………………………… 8.5 Los Angeles ……………………………………………………………………………………………………………………………….. 7.4 Contra Costa ……………………………………………………………………………………………………………………………… 7.3 San Bernardino ………….. ….. …………………………………………………………………………………………………………. 7.3 Sonoma …………………………………………………………………………………………………………………. 7.2 San Luis Obispo ……………………………………………………………………………………………………………… ,……….. 6.6 Alameda …………………………………………………………………………………………………………………………………….. 5.9 Marin ………………………………………………………………………………………………………………………………………….. 5.7 Ventura………………………………………………………………………………………………………………………………………. 5.1 Orange………………………………………………………………………………………………………………………………………… 4.8 Mendocino …………………………………………………………………………………………………………………………………. 4.5 Santa Barbara ……………………………………………………………………………………………… :…………………………… 4.4 . Merced ……………………………………. ;……………………………………………………………………………………………….. 4.1 Total ………………………………………………………………………………………………………………………………………. .. Amount $1,801,789 2,970,881 449,425 12,099,465 706,iil5 1,153,308 294,255 72,997 901,528 43,163 142,984 226,356 14,425 25,914 6,266 $20,909,371 The amount of funds which would have been recovered from each county is based on the department’s regulations for applying fiscal sanc- tions for the period October 1978-March 1979. The regulations provide that a county’s fiscal liability is equal to the percent of payment error rate above 4 percent multiplied by the total aid payment dollars expended by the county during the review period. For example, Marin County had a 5.7 percent error rate and expended $2,538,994 during the review period, resulting in a fiscaFliability of $43,163 (5.7 percent -4 percent = 1.7 per- cent X $2,538,994 ~ $43,163). Sanctions Needed. Our analysis indicates that fiscal sanctions should be applied againstcounties with high error rates for the following reasons: First, the department’s perception oflow morale among county welfare department personnel is an inappropriate basis for determining when to apply sanctions against counties. (Moreover, the Department of Social Services indicates that most county welfare departments eventually re- ceived cost-of-living increases in 1978-79. The state General Fund cost for the increases totaled $3,993,331 in 1978-79.) Second, fiscal sanctions are needed to encourage counties to control program costs. If fiscal sanctions are not applied, the federal and state governments will fund almost 95 percent of the payment errors, while the counties, which administer the program, will fund only 5 percent of the erroneous payments. It is important that other fiscal incentives be estab- lished to encourage a high level of administrative performance and keep payment errors low. Third, sound administrative policy requires that the level of govern- ment responsible for determining eligibility and making payments also should be responsible for excessive overpayments and payments to ineligi- ble recipients. Fourth, by authorizing the department to establish a sanction process, it would appear that the Legislature intended that such a mechanism be used when counties have excessive error rates. Fifth, the federal government has proposed regulations which would require all states to reduce their payment error rates to 4 percent by 946 \/ HEALTH AND WELFARE Item 313 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued September 30, 1982. During the next three years, states would be required to reduce their error rates by one-third each year until they rea~hed 4 percent in September 1982. In addition, the. federal government issued regulations effective November 26, 1979, which provide for increased federal financial participation for states that have error\u00b7 rates below 4 percent. The state will receive 10 percent of the federal share of money saved for each one-half percentage point that the state’s rate is below the 4 percent level. Sixth, if fiscal sanctions are applied against counties with high error rates, the state will be able to recover some of the state funds paid by the counties in error. Because the Department of Social Services has stated that it will not attempt to recover state funds misspent by the counties in the administra- tion of the AFDC program for the period October 1978-March 1979, we recommend that: (a) The Legislature reduce the General Fund appropriation in Item 313 (County Welfare Department Administration) by $20,909,371 in order that the state can recover the funds misspent by the counties with error rates in excess of the 4 percent error rate standard for October 1978- March 1979. (b) The Legislature schedule in Item 313 the General Fund amounts to be reduced from AFDC administration as follows: (a) AFDG Administration …………………………………………………. $47,706,829 (1) Total program ………………………………………………………. 209,169,200 (2) Federal funds ……………………………………………………….. ~ 140,553,000 (3) Amount withheld for purposes of holding counties liable pursuant to Section 37, Chapter 292, Statutes of 1978 and Section 83, Chapter 282, Statutes of 1979 ………………………………………………………………………… -20,909,371 (c) Budget Act language be added which requires that General Fund support allocated to each county for welfare department administration for 1980-81 be reduced by the amount of the county’s fiscal liability pursu- ant to Section 37, Chapter 292, Statutes of 1978 and Section 83, Chapter 282, Statutes of 1979. Thus, counties with error rates of 4 percent\u00b7 or below would not have their General Fund allocations reduced, while counties with error rates above 4 percent would receive reduced General Fund support. We recommend the following language for Item 313: \”Provided further, that General Funds allocated to each county for administration of the Aid to Families with Dependent Children program for 1980-81 be reduced by the amount of the county’s fiscal liability pursu- ant to Section 37, Chapter 292, Statutes of 1978 and Section 83, Chapter 282, Statutes of 1979.\” (d) Legislation be enacted to require the application of fiscal sanctions because current law allows, but does not require, the department to apply such sanctions. . (e) The department submit a written plan, prior to budget hearings, for improving the reliability of the quality control error rate data for counties. Item 313 HEALTH AND WELFARE \/ 947 Child Support Enforcement Services Provided Nonwelfare Recipients We recommend that legislation be enacted which allows the state and counties to recover their administrative costs for child support enforce- ment services provided to non welfare recipients. Background. Federal and state law recognize the obligation of parents to support their children. In order to ensure that parents meet this respon- sibility, the state has created a Child Support Enforcement Program which is state supervised and locally administered. The district attorney’s office in each county, in cooperation with the county welfare department, is responsible for the day-to-day activities related to determining pater- nity, locating absent parents and obtaining child support payments. These services are available to welfare and nonwelfare parents. Historically, the administrative costs for this program have been shared by the federal and county governments, with the federal government paying 75 percent and the counties contributing 25 percent. In 1978-79, the state assumed the county share of administrative costs for the welfare and nonwelfare components of this program as a result of the enactment of Chapter 292, Statutes of 1978 (SB 154). Beginning in 1979-80, counties again contribute 25 percent of the costs for child support enforcement services provided welfare recipients. However, Chapter 282, Statutes of 1979 (AB 8), requires the state to pay 75 percent of the administrative costs for child support enforcement services provided non welfare recipi- ents, if federal funds are not available for such purposes. Federal Funding for Nonwelfare Recipients. Federal funding for the nonwelfare portion ,of the child support enforcement program ended on October 1, 1978. OriJanuary 2,1980, President Carter signed HR 3091 (PL 96-178), which retroactively provides 75 percent federal funding for the nonwelfare program from October 1978 through March 31, 1980. At this time, it is unclear whether federal funding will be available after March 1980. Pending legislation (HR 4904) would provide permanent federal matching funds for this program. If federal funds are not available in 1980-81, then the state will be required to pay 75 percent of the adminis- trative costs and the counties will pay 25 percent pursuant to the provi- sions of AB 8. Recoupment of Non welfare Administrative Costs. Federal regulations allow states and counties to recoup administrative costs incurred in pro- viding child support enforcement services to non welfare parents, These costs include locating the absent nonwelfare parent, establishing paternity of the nonwelfare child, obtaining support obligations, and colIt:’;cting and distributing support payments. Federal regulations allow administrative costs to be recovered by de- ducting the costs for such services from the amount of the support pay- ment prior to the district attorney’s office sending the payment to the recipient. In addition, federal regulations provide that large initial ad- ministrative costs may be prorated over a period of months. We have been advised by staff of the federal Child Support Enforcement Program that federal regulations do not prohibit a state from charging the absent parent for the administrative costs of this program, instead of deducting the costs from the support payment. ‘ 948 \/ HEALTH AND WELFARE Item 313 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued California s Child Support Enforcement Plan. Although federal law allows states to recoup their administrative costs for providing child sup- port services to nonwelfare recipients, California has not taken advantage of this provision in the past. Specifically, the state’s child support enforce- ment pla:n does not provide for recoupment of administrative costs. In addition, the department reports that only 13 counties charged a fee to nonwelfare recipients for the child support services provided during the quarter ending March 1979. Moreover, discussions with department staff indicate that the fees charged were inadequate to cover the administra- tive costs in most of these counties. We asked the Department of Social Services in December 1979 why California did not take advantage of the federal provision to recover the administrative costs related to this program. We were advised that the department opposed recoupment because the administrative costs would be . deducted from the child support payment, thereby reducing the amount of money provided to the dependent child. In addition, the de- partment stated that a service fee would deter individuals from requesting child support services. Non welfare Collections and Administrative Costs for 1980-81. The De- partment of Social Services estimates that child support collections for nonwelfare recipients will total $112,000,000 in 1980-81, as shown in Table 5. Administrative costs for this program are proposed at $17,169,600 for the budget year. Of this amount, the st~te will pay $12,877,200 (if federal funds are not available) and the counties will pay $4,292,400. Table 5 Nonwelfare Child Support Enforcement Program Support Collections and Administrative Costs 1980-81 CoUecb’ons ……………………………………………………………………………………………………………………………………………….. .. Administrative Costs ………………………………………………………………………………………………………………………………. . Federal ………………. : ………………………………………………………………………………………………………………………………… . Amount $112,000,000 17,169,600 State ………………………………………………………………………………………………………………………………………………………. (12,877,200) County …………………………………………………………………………………………………………………………………………………… (4,292,400) Administrative Costs Should Be Recouped AB 8 requires the state to pay 75 percent of the administrative costs for child support services pro- vided to nonwelfare recipients. We asked Legislative Counsel if the state and counties could recoup these administrative costs and, if collectible, the method by which they could be recovered under AB 8. Legislative Coun- sel has issued an opinion that the state and counties do not have the authority under current state law to recover their administrative costs for this program. Our analysis suggests that legislation should be enacted allowing the state and counties to recoup their administrative costs for child support enforcement services provided to nonwelfare recipients by charging the absent parent for the services. First, federal funding of these administra- tive costs in the future is uncertain. Second, federal law and regulations permit the state to recover these administrative costs. Item 314 HEALTH AND WELFARE \/ 949 Department of Social Services LOCAL MANDATES Item 314 from the General Fund Budget p. HW 162 Requested 1980-81 ………………………………………………………………. . Estimated 1979-80 ………………………………………………………………… . Actual 1978-79 ……………………………………………………………………… . Requested increase $668,300 (+9.2 percent) Total recommended reduction …………………………………………… . ANALYSIS AND RECOMMENDATIONS We recommend approval $7,930,200 7,261,900 15,521,623 None This item contains the General Fund appropriation to reimburse local governments for executive and legislative mandates. The budget proposes a General Fund appropriation of $7,930,200 for local mandates. Of this amount, $2,488,800 is to reimburse counties for the cost of implementing various executive regulations. The remaining $5,441,400 is to reimburse counties for a state mandated increase in payment levels for recipients of assistance under the Aid to Families with Dependent Children (AFDC) program. Executive Mandates The Governor’s Budget proposes to reimburse counties for implement- ing three executive regulations relating to the following programs: Aid to Families with Dependent Children (AFDC), Aid to the Potentially Self- Supporting Blind (APSB), and In-Home Supportive Services (IHSS) . The reimbursements are proposed in accordance with Section 2231 of the Revenue and Taxation Code. 1. Work-Related Equipment-AFDC Program. The department has implemented regulations which exclude the entire value of an AFDC recipient’s work-related equipment from property value in determining eligibility for benefits. Previous regulations provided a maximum exemp- tion of $200. General Fund costs are estimated to be $9,500 in 1980-81. 2. Treatment of Loans-AFDC and APSE Programs. The department has implemented regulations which change the method of treating loans when calculating a recipient’s grant level under the AFDC and APSB programs. Under previous regulations, loans made to recipients were counted as income when determining a recipient’s grant. The new regula- tions exc1ude loan repayments as countable income. The budget estimates expenditures of $4,500 for these regulations in 1980-81. 3. Regulations for the In-Home Supportive Services Program. The budget proposes $2,474,800 to reimburse counties for social worker time spent implementing the April 1, 1979 regulations for the In-Home Sup- portive Services (IHSS) program. Increased levels of service are required by the regulations to (1) assess the need for in-home supportive services for clients residing in shared living situations, (2) teach and demonstrate homemaking skills, and (3) provide protective supervision to IHSS recipi- 33-80045 950 \/ HEALTH AND WELFARE Item 315 LOCAL MANDATES-Continued ents. The amount budgeted for this mandate is an increase of $326,600, or 17 percent, over estimated expenditures for the current year, based on a 7.9 percent projected caseload increase and a 9 percent cost-of-living adjustment. Legislative Mandates Six-Percent Increase in AFDC Grants. Chapter 348, Statutes of 1976, increased the AFDC welfare payment standard by 6 percent effective January 1, 1977, in order to provide a higher standard ofliving for AFDC recipients. Normally, counties pay a portion of AFDC grant costs. Howev- er, because the state mandated the increase, it has an obligation to reim- burse counties for their share of the 6 percent increase. The budget proposes General Fund expenditures of $5,441,400 in 1980-81 to reimburse counties for their costs. Chapter 348 disclaims any obligation on the state’s part to reimburse counties for cost-of-living increases in payment standards. As a result, cost-of-living increases do not affect the state’s level of reimbursement on a cost-per-case basis. Health and Welfare Agency CALIFORNIA HEALTH FACILITIES COMMISSION Item 3i5 from the California Health Facilities Commission Fund Budget p. HW 173 Requested 1980-81 ………………………………………………………………. . Estimated 1979-80 ………………………………… ……………………………… Actual 1918-79 ……………………………………………………………………… . Requested increase (excluding amount for salary increases) $14,459 (+0.7 percent) Total recommended reduction …………………………………………… . SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS $2,100,217 2,085,758 1,616,016 None Analysis page 1. Patient Discharge Data. Recommend legislation requiring hospitals to report patient discharge abstract data to the commission. 951 GENERAL PROGRAM STATEMENT The California Health Facilities Commission collects financial data from health facilities and discloses financial information on the facilities to the public. The commission was created by Chapter 1242, Statutes of 1971, which also required that a uniform accounting and reporting system be devel- oped for hospitals. Chapter 1171, Statutes of 1974, extended this reporting requirement to long-term care facilities. The purpose of the reporting Item 315 HEALTH AND WELFARE \/ 951 requirements are to: (1) encourage economy and efficiency in providing health care services, (2) enable public agencies to make informed deci- sions in purchasing and administering publicly financed health care, (3) encourage organizations which provide health care insurance to take into account financial information provided to the state in establishing reim- bursement rates, (4) provide a uniform health data system for use by all state agencies, (5) provide accurate information to improve budgetary planning, (6) identify and disseminate information regarding areas of economy in the provision of health care consistent with quality of care, and (7) create a body of reliable information which will facilitate commis- sion studies that relate to the implementation of cost effectiveness pro- grams. Chapter 1337, Statutes of 1978, expanded commission responsibilities by requiring the commission to: (1) establish standards of effectiveness for health facilities, and (2) forecast hospital operating and capital expendi- tures for each of the state’s Health Systems Areas and for the state as a whole. Health Systems Agencies must then consider these standards and forecasts in developing their area health plan. ANALYSIS AND RECOMMENDATIONS The budget proposes an appropriation of $2,100,217 from the Health Facilities Commission Fund for support of the commission in 1980-81, which is an increase of $14,459, or 0.7 percent, over estimated current year . expenditures. This amount will increase by the amount of any salary and sblffbenefit increases approved in the budget. The primary components of the change are: (1) discontinuation of long-term care (LTC) facility disclosure reports, for a savings of $136,500, (2) establishment of three new positions for a Disclosure and Intera- gency Relations Unit, at a cost of $70,433, (3) a $55,051 reduction to eliminate three positions not required to continue existing functions, and (4) $135,577 increase for merit salary and price adjustments. Discharge Data Needed We recommend enactment of legislation requiring hospitals to report patient discharge abstract data to the commission. Patient discharge data includes medical diagnosis\u00b7 and patient statu\u00b7s upon discharge from the hospital. The data are collected in abstracts, without patient or physician name. A format for data collection has been established (the Uniform Hospital Discharge Data Set for California) , and is used by many hospitals for administrative purposes. The format is en- dorsed by the California Hospital Association. Currently, university hospitals are required by Item 346, Budget Act of 1979 to provide the commission with discharge data, and some private hospitals disclose the information voluntarily. The commission staff is cur- rently developing a data processing system for discharge data, which should be completed in 1980-81. The effectiveness of the commission’s hospital disclosure program would be greatly enhanced if hospitals were required to provide the 952 \/ HEALTH AND WELFARE Item 315 CALIFORNIA HEALTH FACILITIES COMMISSION-Continued commission with patient discharge abstracts. With this information, the commission would be able to (1) assess the complexity of an individual hospital’s patient load, (2) group and compare hospitals by patient load complexity, (3) compare mortality rates for various diagnoses among dif- ferent hospitals, and (4) compare gross operating costs among hospitals of similar patient load complexity. Such information will particularly aid HSAs and other agencies in their health planning activities. Given the state’s substantial financial interest in promoting efficiency in the provision of health care services, we recommend that legislation be introduced amending the Health Facilities Disclosure Act to require all hospitals to disclose patient discharge abstract data. Because the data is in abstract form, supplying it to the commission would not violate confiden- tiality requirements. Disclosure and Interagency Relations Unit We recommend approval. The budget proposes three new positions to establish a Disclosure and Interagency Relations Unit, at a cost of $70,433 in 1980-81. The unit will conduct activities which will: 1. improve communication between the commission and users of the commission’s data-primarily the HSAs, the Office of Statewide Health Planning and Development (OSHPD), and the Department of Health Services (DHS); 2. improve the effectiveness of the commission’s disclosure programs; 3. increase the number of research papers produced by the commission staff in support of their hospital disclosure program; 4. increase data accessibility and reduce duplicative reporting require- ments; and 5. improve the structure of auditing and investigating activities among the commission, DRS, and OSHPD. The commission’s current disclosure programs do not provide sufficient technical assistance to the users of the information. This is particularly true in the case of the Health Systems Agencies, whose members generally lack the technical expertise required to interpret the data provided in the hospital disclosure reports. Our analysis indicates that the proposed unit is necessary if the commission is to increase the effectiveness of its disclo- sure programs. We recommend approval of the proposal. Discontinuation of LTC Facility Reports Processing We recommend approval. The commission proposes to discontinue its collection of financial disclo- sure reports from LTC facilities, and instead to utilize the Medi-Cal cost report for the commission’s disclosure activities, for a savings of $136,500. The commission’s LTC facility accounting, reporting, and disclosure program is currently staffed by 10 positions at a cost of $431,409. The program consists of five elements: (1) reports processing, (2) disclosure, (3) accounting systems, (4) data processing support, and (5) data process- ing operations. The commission proposes specifically to: 1. eliminate the reports processing element. The commission will in- Item 315 HEALTH AND WELFARE \/ 953 stead utilize the Medi-Cal cost reports and will reimburse the De- partment of Health Services (DHS) in the amount of $55,386 for the commission’s share of the departments reports processing costs. The commission will realize a cost savings of $78,386 through the elimina- tion of three accounting and one clerical position and printing ex- penses. 2. share expenses with the department for the commission’s data proc- essing system support and operations. The commission will automate the Medi-Cal cost report on LTC facilities and will use the data to continue its existing disclosure function. The department will reim- burse the commission in the amount of $113,500. ‘ Implementing this arrangement will allow the commission to continue its LTC facility disclosure function and to reduce program costs to $294,909 for a savings of $136,500. We have reviewed the proposed procedure revi- sions and recommend their approval. Review of Commission Functions The Supplemental Report of the Budget Act of 1979, requires the Legis- lative Analyst to review the functions of the commission to determine which, if any, of its functions should continue, and to report his findings to the Legislature in the analysis of the Budget Bill of 1980. The commission has three primary functions: (1) hospital accounting, reporting, and disclosure, (2) long-term care facility accounting, report- ing, and disclosure, and (3) research. Hospital Accounting~ Reporting, and Disclosure California hospitals file an annual report with the commission contain- ing: 1. a balance sheet detailing the hospital’s assets, liabilities, and net worth at the end,Qf the hospital’s last fiscal year; 2. a statement of the hospital’s income, expenses, and operating surplus or deficit for the past fiscal year; 3. a statement detailing the source and application of funds expended during the past fiscal year; 4. data which allocates the costs of non-revenue-producing depart- ments of the hospital to the other non-revenue and revenue-producing centers Which they serve; and 5. data which identifies costs related to categories, types, or units of health care services. The reports filed by the hospitals are based on a uniform accounting and reporting system required by commission regulations. The commission has collected the disclosure reports for four years. The commission’s hospital disclosure program consists of two activities; (1) disclosure of hospital financial data to specific public and private organizations, both on an ongoing basis and in response to special requests, and (2) disclosure to the general public. The information is disclosed in a variety of different formats, including individual hospital reports, the Inventory of Financial and Statistical Information, Hospital Data for Health Systems Agencies, Economic Standards for Health Planning in California, special research reports, and, for some users, the commission’s 954 \/ HEALTH AND WELFARE CALIFORNIA HEALTH FACILITIES COMMISSION-Continued comprehensive data base itself on computer tape. Item 315 The commission discloses hospital cost data to a large number of organi- zations. Foremost among these are the state’s 14 Health Systems Agencies (HSAs), which receive all of the commission’s regular publications on an ongoing basis. The HSAs rely primarily on the Hospital Data for Health Systems Agencies, the Economic Standards for Health Planning in Califor- nia, and the individual hospital reports. These documents are the HSAs’ primary source of quantitative information used for their ongoing health planning activities. Several units in the Department of Health Services make use of the commission hospital data. The Audits and Investigations Division makes use of the individual hospital reports and the comprehensive data base to supplement the Medi-Cal cost report. The division uses the commission data because (1) the Medi-Cal cost report is not automated, (2) cost center identified in the Medi-Cal cost reports are not uniform, and (3) the commission’s data reports more cost centers than the Medi-Cal report. The Medical Care Standards Division and the Office of Planning and Evaluation also make use of the commission’s hospital data. Other administrative agencies that use the commission’s hospital data include the Division of Health Planning in the Office of Statewide Health Planning and Development, the Health and Welfare Agency Secretary’s Office, the Attorney General’s Office, the State Controller, and county governments. Several legislative bodies also make use of the commission’s data. Nongovernmental users of the commission have included individual hospitals, the California Hospital Association, the Schools of Public Health at the University of California, health insurers, and certain health profes- sionallabor organizations. The commission disseminates data on hospital costs to consumers of health care services as well as to specific organiza- tions. These activities consist primarily of press releases which disclose data from selected research projects conducted by the commission staff. Our recommendations to the Legislature concerning this function will be made in a supplemental analysis to be released prior to budget hear- ings. Our recommendations will be based on the following criteria: 1. The effectiveness of the commission’s hospital data disclosure activi- ties in promoting economy and efficiency in the provision of hospital services; 2. The cost of the disclosure program; and 3. The availability of alternative data sources and the potential to elimi- nate duplication of reporting and disclosure activities. LTC Facility Accounting. Reporting. and Disclosure Chapter 1171, extended hospital accounting, reporting, and disclosure requirements to long-term care (LTC) facilities. The commission has completed the collection and coding of one year’s LTC facility disclosure reports. Our recommendations to the Legislature concerning this function will be based on the following criteria: Item 315 HEALTH AND WELFARE \/ 955 1. The potential of disclosure to promote efficiency and economy in the provision of LTC facility services; 2. The costs of these disclosure activities; and 3. The availability of alternative data sources and the potential to elimi- nate duplication of reporting and disclosure activities. Research The commission’s research activities consist of: 1. Developing the Economic Standards for Health Planning in Califor- nia; and 2. Producing special reports, or \”white papers\”, on selected topics con- cerning the hospital industry. Both of these activities support the two reporting and disclosure programs. ”

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1981-1982 AFDC Budget LAO Analysis

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” Item 518 HEALTH AND WELFARE \/ 933 Emergency Exiting System We recommend a reduction of$4,(J()() in Item 516-301-036 and a reduction of$l6,(J()() in Item 516-301-890 to delete funds for an emergency egress system because the system has not yet been approved by the State Fire Marshal. The budget proposes the expenditure of $20,000 ($4,000 General Fund, SAFCO, and $16,000 Federal Trust Fund) for an emergency egress (exiting) system at a Department of Rehabilitation office building. The department indicates that in- stallation of this system would allow disabled individuals to evacuate the building in their wheelchairs. The proposed system is battery powered. This egress system is experimental and still in development at the University of California, Davis campus. The budget amount is based on the department’s best estimate at this time. However,\u00b7 the cost of the system will not be fully known until development has been completed. Accordingly, the request for funding is prema- ture. This prototype emergency egress system was proposed for the central headquar- ters building in the budget for 1980-81. Its cost was then estimated at $50,000. The Legislature appropriated this amount, and included budget language restricting expenditures until the State Fire Marshal approved the system. The department has not yet obtained the approval of the Fire Marshal for the prototype project. We therefore recommend deletion of this project because adequate support for the budget amount is not available, and because the State Fire Marshal has not yet approved a prior prototype project. DEPARTMENT OF SOCIAL SERVICES SUMMARY The Department of Social Services is\u00b7 the single state agency ~esponsible for supervising the delivery of cash grants and social services to needy persons in California. Monthly grant payments are made to eligible recipients through two programs-Aid to Families with Dependent Children (AFDC) and the Supple- mental Security Income\/State Supplementary Payment (SSI\/SSP) program. In addition, welfare recipients, low-income individuals, and persons in need of pro- tection may receive a number of social services such as information and referral domestic and personal care assistance, and child and adult protective services. ‘ Table 1 identifies total expenditures from all funds for programs administered by the Department of Social Services for 1980-81 and 1981-82. Total expenditures for 1981-82 are proposed at $5,980,087,931, which is an increase of $51,728,507, or 0.9 percent, over estimated current year expenditures. Table 2 shows the General Fund expenditures for cash grant and social services programs administered by the Department of Social Services. The department requests a total of $2,588,806,202 from the General Fund for 1981-82. This is a decrease of $214,502,462, or 7.7 percent, from estimated current-year expenditures. SpecilJI Adjustments. The budget anticipates changes in state law or regulation which would reduce General Fund expenditures for welfare programs by $47,081,- 962 and increase revenues by $1,028,400. These proposals are discussed in more detail elsewhere in this analysis. Table 3 identifies the specific sources of the $48,110,362 in savings anticipated by the budget. 934 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES SUMMARY-Continued Program Table 1 Department of Social Services Expenditures and Revenues by Program All Funds 1980-81 and 1981-32 Estimated 1980-81 Department support. ………………… .. AFDC cash grants ……………………… . Item 518 Change Amount Percent $3,487,649 2.7% 108,285,100 4.2 SSI\/SSP cash grants ……………… n …. $127,849,805 2,553,851,600 2,038,020,400 Proposed 1981-82 $131,337,454 2,662,136,700 1,937,990,400 -100,030,000 -4.9 Special adult programs ………………. . 25,9fJl,284 31.6 Special social services programs .. 82,222,016 622,996$17 (243,486,011) (15,756,100) 108,189,300 596,189,063 (270,884,325) -26,807,814 -4.3 In-home supportive services ….. . (27,398,314) (11.3) Community care licensing ……. . (6,463,700) (-9,292,400) (-59.0) County welfare department ad- ministration …. ; …………………….. . 503,418,726 (8,350,320) 544,245,014 (8,458,000) 40,826,288 8.1 Local mandates ……………………….. … (107,680) 1.3 Special Adjustments: Reduced expenditures …………… . ( -61,223,662) (1,028,400) ( -61,223,662) Increased revenues .. ; ……………… . Totals ………………………………………… .. General Fund …………………………….. . Federal funds …………………………….. . County funds …………………………….. . Reimbursements ……………………….. . Emergency Revolving Fund ……. . $5,928,359,424 2,803,308,664 2,829,483,551 276,576,170 18,888,039 123,()(}() $5,980,087,931 2,588,806,202 3,094,625,186 287,287,557 9,368,986 Table 2 Department of Social Services\u00b7 General Fund Expenditures 1980-81 and 1981-32 Budget Estimated Proposed Item Program 1980-81 1981-82 518-001-001 Department support …. $51,325,252 $49,320,058 518-101-001 (a) AFDC cash grants …….. 1,195,856,900\” 1,215,955,900 518-101-001 (b) SSI\/SSP cash grants …… 1,251,981,900\” 1,051,005,000 (1,028,400) $51,728,507 -214,502,462 265,141,635 10,711,387 -9,499,053 -123,()(}() Change Amount – $2,005,194 20,099,000 -200,976,900 518-101-001 (c) Special adult programs 5,596,016\” 3,728,800 -1,867,216 518-101-001 (d) County welfare depart- ment administration …… 102,249,654\” 110,092,643 7,842,989 518-101-001 (e) Special social services programs …………………….. 172,192,522 143,782,101 -28,410,421 In-home supportive 0.9% -7.7 9.4 3.9 -50.3 .,…100.0 Percent -3.9% 1.7 -16.1 -33.4 7.7 -16.5 services ……………………… (142,944,564) (117,727,145) (-25,217,419) (-17.6) 518-101-001 (f) Community care licens- ing ……………………………….. 15,756,100 6,463,700 -9,292,400 -59.0 518-101-001 (g) Local mandate ……………. 8,350,320 8,458,000 107,680 1.3 Special Adjustments: Reduced expendi- tures ………………………… ( -47,081,962) ( -47,081,962) Increased revenues .. ( -1,028,400) ( -1,028,400) Totals …………………… $2,803,308,664 $2,588,806,202 -$214,502,462 -7.7% \” Includes funds for anticipated deficiency. Item 518 HEALTH AND WELFARE \/ 935 Table 3 Department of Social Services Special Adjustments\u00b7 General Fund 1981-82 Special Program Adjustments Department Support 1. Deletion of family day care licensing requirement ……………….. .. -$886,200 2. Charge licensing fees for specified community care facilities … . 323,200 Subtotal ……………………………………………………………………………………….. . AFDC Cash Grants 1. Limit eligibility for state AFDC-U program …………….. : …………….. . -$28,780,200 2. Eliminate 80 percent grant supplementation … , …………… ~ …………. . -6,423,000 Subtotal ……………………………………………………………………………………….. . Special Adult Programs 1. Eliminate emergency loan program for SSIJ SSP recipients ….. . Special Social Services 1. Deletion of family day care licensing requirement ………………… . County Welfare Department Administration 1. Limit eligibility for state AFDC-U program …………………………….. . . -$1,233,700 2. Eliminate 80 percent grant supplementation …………………………… , -436,900 Subtotal ……………………………………………………………………………………….. . Total, Reduced Expenditures ……………………………………………………….. . Total, Increased Revenues-Community Care Licensing Fees ….. . Total Savings ………………………………………………………………………………….. . a Source: Governor’s Budget Page A-25 Health and Welfare Agency DEPARTMENT OF SOCIAL SERVICES Total -$563,000 – $35,203,200 -$1,765,862 -$7,879,300 -$1,670,600 -$47,081,962 -$1,028,400 -$48,110,362 Item 518-001 from the General Fund Budget p. HW 162 Requested 1981-82 ………………………………………………………………. . Estimated 1980-81 ………………………………………………………………… . Actual 1979-80 ……………………………………………………………………… . $49,320,058 51,325,252 40,165,050 Requested decrease (excluding amount for salary increases) $2,005,194 (-3.9 percent) Total recommended reduction …………………………………………… . Total recommendation pending …………………………………………. . $2,680,147 $2,102,086 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Contracts With the Health and Welfare Agency. Reduce by $25,- .956. Recommend reduction of $51,912 ($25,956 General Fund and $25,956 federal funds) to correct overbudgeting. 2. Out-of-State Travel. Reduce by $14,667. Recommend reduction of $27,675 ($14,667 General Fund and $13,008 federal funds) to reflect actual expenditure pattern. Analysis page 948 948 936 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued 3. Equipment. Reduce by $101,344. Recommend deletion of $220,- 949 312 ($101,344 General Fund, $107,953 federal funds, and $11,015 reimbursements) proposed for unnecessary equipment. 4. Attorney General Legal Services. Withhold recommendation on 950 $2,542,973 for legal services ($1,169,768 General Fund, $1,246,057 federal funds and $127,148 reimbursements) pending Department of Finance reconciliation of conflicting estimates for such services. 5. Salary Savings. Reduce by $855,038. Recommend amount bud- 951 geted for salary savings be increased to reflect recent trends for a savings of $2;035,805 ($855,038 General Fund, $1,099,334 federal funds, and $81,433 reimbursements). 6. Unscheduled reimbursements. Recommend adoption of control 952 language requiring that General Fund costs be reduced by the amount of unscheduled reimbursements received by\u00b7 tlie depart- ment. 7. Health and Welfare Agency Consolidated Data Center. Reduce 952 by $itJ8,623. Recommend reduction of $342,950 ($188,623 General Fund, $150,898 federal funds, and $3,429 reimbursements) to reflect past expenditures and prevent overbudgeting. 8. Data Processing. Reduce by $128,526. Recommend reduction of 955 $233,683 ($128;526 General Fund, $102,820 federal funds, and $2,337 reimbursements) to delete funds for expiring contracts and to re- flect actual expenditures. 9. Data Processing Positions. Recommend adoption of Budget Bill 955 language requiring the Department of Finance to notify the Legis- lature of the savings resulting from implementing new electronic data processing systems, prior to continuing nine EDP positions beyond December 31, 1981. 10. Training for Computer Programmers. Reduce by $65,578. Rec- 956 ommend reduction of $119,232 ($65,578 General Fund and $53,654 federal funds) budgeted in temporary help to train computer programmers. because proposal represents a piecemealllPproach to a statewide problem. 11. Foster Care Management Information System. Withhold recom\” 956 mendation on $500,000 in federal funds proposed for the develop- ment and implementation of a foster care management infor- mation system; pending review of a feasibility study report. 12. SPAN Project-Consultant and Professional SerVices Contracts. 958 Reduce by $74,800. Recommend reduction of $220,000 ($74,800 General Fund and $145,200 federal funds) budgeted for consultant and professional services contracts in the statewide Public Assist~ ante Network (SPAN) Project because state staff are available to perform these activities. 13. SPAN Project-In-State Travel. Reduce by $33,660. Recom- 959 mend reduction of $99,000 ($33,660 General Fund and $65,340 federal funds) overbudgeted for\u00b7 in-state travel. 14. SPAN Project-Training Funds. Reduce by $13,637. Recom- 959 mend reduction of$40,10B ($13;637 General Fund and. $26,471 federal fUnds) overbudgeted for training. , . .. ‘ .. 15. SPAN Project-External AUairs Manager. Reduce by $33;559. 960 Recommend deletion of $98,702 ($33,559 General Fund and $65,- 143 federal funds) budgeted for the external affairs manager be- cause county advice and recommendations are already available Item 518 HEALTH AND WELFARE \/ 937 to the department. 16. SPAN Project-Feasibility Study Report. Recommend the de- 960 partment submit a report to the Legislature containing county recommendations on the feasibility study report. 17. SPAN Project-‘-Pilot Project. Withhold recommendation on $1,- 961 676,617 ($561,645 General Fund, $899,730 federal funds and $215,- 242 reimbursements) budgeted for the pilot project pending receipt of the department’s feasibility study report and a docu- ment describing proposed operation of the pilot project. 18. Refugee Resettlement Program. Recommend deletion of 19 po- 964 sitions because of excessive workload projections and duplication of functions performed by existing staff, for a reduction of $657,042 in federal fundS. 19. Fair Hearing Officers. Reduce by $220,554. Recommend dele- 966 tion of nine faii’ hearing officers, due to overbudgeting, for a sav- ings of $416,138 ($220,554 General Fund, $158,132 federal funds, and $37,452 reimbursements). 20. Food Stamp Positions. Reduce by $41,721. Recommend dele- 968 tion of three positions because workload has not been document- ed, for a savings of $83,442 ($41,721 General Fund and $41,721 federal fund. 21. Community Care Licensing-Workload Standards. Reduce by 969 $454,332. Recommend deletion of 19 new facilities evaluator and support positions to reflect adjusted workload standards, for a General Fund savings of $454,332. 22. Community Care Licensing-Legal Services. Recommend five 971 proposed new legal services positions be limited to June 30,1982 because of probable workload savings. 23. Social Services-Evaluation: . Reduce by $183,097. Recommend 972 deletion of six new positions proposed to evaluate children’s serv- ices programs because sufficient staff exist to accomplish this func- tion, fora General Fund savings of $183,097. 24. Interstate Compact for the Placement of Children. Reduce by 973 $58,142. Recommend (1) transfer of responsibility for coordinat- ing the placement of children in foster care with other states from the Planning and Review Division to the Adult and Family Serv- ices Division, and (2) deletion of two proposed new positions for this activity to cOhsolidatethe responsibility under one deputy direction and utilize existing staff, for a General Fund savings of $58,142~ 25. Systems and Policy Branch Reorganization-Workload Data Re- 975 quested. Withhold recorrimendation on $438,148 ($370,673 Gen- eral Fund and $67,475 in federal funds) and 11 positions, pending receipt of detailed workload data. 26. Office of Government and Community Relations. Reduce by 976 $186,913. Recommend: a. Deletion of two professional positions, 2.5 clerical positions, and contract funds because the positions duplicate functions of au- thorized positions, for a savings of $212,342 ($116,788 General Fund and $95,554 federal funds). b. Deletion of a staff services manager II in the welfare program operations division and a staff services manager II in the Adult\u00b7 and Family Services Division because the positions duplicate functions of authorized positions, for a savings of $92,926 ($70,- 125 General Fund and $22,801 federal funds). 938 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued GENERAL PROGRAM STATEMENT Chapter 1252, Statutes of 1977 (AB 363), created a new Department of Social Services, effective July 1, 1978. The new department retained the welfare opera- tions function of the former Department of Benefit Payments, and assumed re- sponsibility . for the disability evaluation, community care licensing and social services functions of the former Department of Health. Departmental functions are carried out through nine divisions. Legal Affairs Division The Legal Affairs Division consists of the Office of the Chief Counsel and the Office of the Chief Referee. The Office of the Chief Counsel provides legal advice to departmental managers and supports the Attorney General in litigating cases affecting the department. The Office of the Chief Referee is responsible for con- ducting administrative hearings to determine the fairness of decisions made by county welfare department personnel in handling welfare cases. Administration Division The Administration Division has responsibility for providing all support func- tions for the Department of Social Services. The functions include (1) processing personnel transactions, (2) providing space and centralized typing services, (3) managing the accounting and budgeting systems of the department, (4) collecting and analyzing data regarding the programs administered by the department, and (5) developing estimates of the projected costs and caseloads of the cash assistance and social services programs. Centralized Delivery System This division is responsible. for the definition, design, development and im- plementation of an automated system for delivering financial assistance and serv- ices to welfare recipients in California. The division was established in r.esponse to Chapter 282, Statutes of 1979 (AB 8), which requires the department to imple- ment a statewide centralized delivery system for welfare benefits by July 1, 1984. Adult and Family Services Division The Adult and Family Services Division is responsible for managing and admin- istering social services programs including in-home supportive services, other county social services, child welfare services and the state adoptions program. The division consists of five branches: (1) Family and Children’s Services, (2) Adult Services, (3) Adoptions, (4) Systems and Policy and (5) AB 1642 Implementation. It plans, organizes and directs the operation of statewide social services programs delivered through county welfare departments, private agencies under contract, and other state departments. In addition, the division performs direct adoptions casework through three district offices. Welfare Program Operations The Welfare Program Operations Division has overall responsibility for the management of payment programs which provide financial assistance to needy individuals. The division consists of five branches. The AFDC Program Manage- ment Branch provides policy direction and interpretation to county welfare de- partments in administering the payment of grants under the AFDC program. The Adult Program Management Branch provides liaison with the Social Security Administration which administers the State Supplementary Payment (SSP) pro- Item 518 HEALTH AND WELFARE \/ 939 gram. This branch also provides direction to the counties in the administration of various special adult programs including Emergency Loan, Special Circumstances, and the Guide Dog Special Allowance. The Boarding Homes and Institutions (BHI) rate-setting branch is responsible for making recommendations to the Legislature for setting AFDC Foster Care rates. The Food Stamp Program Man- agement Branch supervises the county administration of the federal Food Stamp program. The Child Support Program Branch develops statewide policies and procedures for collecting child support from absent welfare and nonwelfare par- ents. Community Care Licensing The Community Care Licensing Division (1) supports the facilities evaluation activities of county licensing agencies through the development of regulations, the collection of statewide data and the investigation of complaints and (2) directly licenses community care facilities. The division is organized into three branches to carry out these responsibilities: (1) Field Operations, (2) Client Protection Services, and (3) Policy and Administrative Support. The Field Operations and Client Protective Services Branches maintain district offices throughout the state. Planning and Review Division The Planning and Review Division (1) responds to public inquiries regarding cash assistance and social services programs, (2) conducts studies of the personnel and financial management practices of the department, (3) evaluates the effi- ciency, equity and effectiveness of programs carried out by the 58 county welfare departments, and (4) develops error rate estimates for the determination of eligi- bility and level of payment to clients of the cash assistance and in-home supportive services programs. Disability Evaluation Division The Disability Evaluation Division is responsible for determining the medical eligibility of California residents for benefits under the disability insurance, supple- mental security income, and medically needy programs of the Social Security Act. There are six regional offices throughout the state responsible for processing disability claims. Executive Division The Executive Division consists of the director’s immediate staff and six special offices: (1) Affirmative Action, (2) Public Information, (3) Government and Com- munity Relations, (4) Refugee Services, (5) Deaf Access and (6) Services to the Blind. In addition, five advisory committees report to the director on issues con- cerning child abuse, social services, life care contracts, community care facilities, and services planning. ANALYSIS AND RECOMMENDATIONS The budget proposes an appropriation of$49,320,058 from the General Fund for support of the Department of Social Services in 1981-82. This is a decrease of $2,005,194, or 3.9 percent below estimated current year expenditures. This amount will increase by the amount of any salary or staffbenefit increase approved for the budget year. The budget proposes total expenditures of $131,337,454 from all funds for the support of the department in 1981-82. This is an increase of $3,487,649, or 2.7 percent, over estimated 1980-81 expenditures. Table 1 shows total expenditures, by division. 940 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued Table 1 Summary of the Department of Social Services Support Budget 1980-81 and 1981-82 Estimated Proposed Change Funding 1980-81\” 1981-82\” Amount General Fund ………………………………………. $51,325,252 $49,320,058 -$2,005,194 Federal funds ………………………………………. 72,026,956 76,123,854 4,096,898 Reimbursements …………………………………. 4,497,597 5,893,542 1,395,945 Totals ……………………………………………….. $127,849,805 $131,337,454 $3,487,649 Division Administration …………………………………….. $18,267,597 $17,839,788 -$427,809 Personnel-years ……………………………….. 537.4 541.4 4.0 Legal affairs ………………………………………… 6,113,515 7,001,248 887,733 Personnel-years ……………………………….. 147.2 152.2 5.0 Adult and family services …………………… 9,139,054 9,763,557 624,503 Personnel-years ……………………………….. 263.0 262.0 -1.0 Welfare program operations ……………… 9,215,194 8,313,169 -902,025 Personnel-years ……………………………….. 174.0 166.0 -RO Community care licensing …………………. 10,010,789 11,486,076 1,475,287 Personnel-years ……………………………….. 310.6 362.5 51.9 Planning and review ………………………….. 10,551,207 10,422,219 -128,988 Personnel-years ……………………………….. 308.5 314.3 5.8 Disability evaluation ……………………………. 50,333,051 52,617,003 2,283,952 Personnel-years ……………………………….. 1,361.0 1,361.0 Centralized delivery system ……………….. 6,621,937 10,286,876 3,664,939 Personnel-years ……………………………….. 193.7 208.7 15.0 Executive ……………………………………………… 7,597,461 4,170,518 -3,426,943 Personnel-years ……………………………….. 183.8 106.5 -77.3 Special adjustment ……………………………… .,..563,000 -563,000- Personnel-years ……………………………….. -18.5 -18.5 Totals …………………………………………………… $127,849,805 $131,337,454 $3,487,649 Personnel-years ……………………………….. 3,479.2 3,456.1 -23.1 a Personnel-years do not equate with authorized positions due to vacancies. Proposed General Fund Budget Changes Percent -3.9% 5.7 31.0 2.7% -2.3% 0.7 14.5 3.4 6.8 -0.4 -9.8 -4.6 14.7 16.7 -1.2 1.9 4.5 55.3 7.7 -45.1 -42.1 2.7% -0.7% Table 2 details the changes in the department’s proposed General Fund expend- itures for 1981-82. This table shows that expenditures in the\u00b7 budget year will decrease by $2,005,194, or 3.9 percent, from the current year. The net General Fund decrease of $2,005,194 consists of reduced costs totaling $7,930,180 and in- creased expenditures of $5,924,986. The major cost increases include (a) $798,442 for merit salary adjustments and staff benefits (exclusive of cost of living salary increases), (b) $715,919 for a 7 percent increase in operating expenses and equip- ment, and (c) $3,979,399 to establish new or continue existing programs and positions. The increased costs are offset by reduced expenditures of (a) $4,794,702 in one-time expenditures during the current year, (b) $1,957,703 for limited-term and administratively-established positions, (c) $563,000 in special adjustment re- ductions proposed by the administration, and (d) $614,775 in other proposed changes. Item 518 HEALTH AND WELFARE \/ 941 Table 2 Proposed General Fund Adjustments For the Department of Social Services Support Budget Cost 1. 1980-81 Current Year Revised Expenditures …………………………….. . 2. Baseline adjustments for existing programs. A. Increase in existing personnel costs 1. Merit salary adjustment ……………………………………………………… . 2. OASDI ………………………………………………………………………………… . 3. Retirement. ………………………………………………………………………… . 4. Workers’ compensation ………………………………………………………. . Subtotal ……………………. , ……………………………………………………….. . B. Decreases in existing personnel costs 1. Limited-term positions a. SPAN.project. …………………………………………………………………. . b. AFDC-BHI rate setting project ……………………………………. . c .. Administrative support-accounting …………………………….. . d. California Fiscal Information System …………………………… . e. AFDC-foster care ……………………………………………………….. . f. Adult services ………………………………………………………………. … g. Child protective services ……………………………………………… .. Subtotal ………………….. , …………………………………………………….. .. 2. Administratively established positions a. SSI\/SSP quality control review project ………………………. .. b. Office of Deaf Services ……………………………………………….. .. c. IHSS payrolling ……………………………………………………………….. . d. Community care licensing of group homes ……………….. .. Subtotal ………………………………………………………………………….. .. C. One-time expenditures 1. 1980-81 disaster relief ………………………………………………………. .. 2. Equipment expenditures …………………………………………………. .. Subtotal ……………………………………………………………………………… .. D. Seven percent price increase for operating expenses and equipment ……………………………………………………………………………… .. Total, Baseline Adjustments …………………………………………………. .. 3. Program change proposals A. Department of Social Services 1. Proposed position changes a. Community care licensing ……………………………………………. .. b. SPAN project ………………………………………………………………… . c. Other ……………………………………………………………………………… .. Subtotal ………………………………………………………… ; ……………….. . 2. Other proposed changes a. Salary savings and overhead. adjustments …………………… .. h. Department of Finance reductions ……………………………… .. Subtotal ………………………………………………………………………….. .. B. Reimburse Office of Administrative Law ……………………………. .. C. Reimburse Department of Justice ………………………………………… . Total, Program Change Proposals …………………………………… .. 4. Special adjustments A. Deletion of family day care licensing requirement ……………. .. B. Charge licensing fees for specified community care facilites Total, Special Adjustments …………………………………………………….. .. 5. Total General Fund Change Proposed for 1981-82 …………………. .. 6. 1981-82 Proposed General Fund Expenditures ………………………… .. Total $51,325,252 Funds to continue some of these activities in the budget year are contained in the program change proposals for the department. 942 \/IIEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL\u00b7 SERVICE.S-Continued Special Adjustments The budget for state support of the Department of Social Services includes net reductions of $563,000 from the General. Fund due to anticipated changes in current state law regarding the community care licensing program. Currently, the Department of Social Services (1) licenses and evaluates community care facilities to ensure the health and safety of residents and clients, (2) develops regulations for the operation of these facilities under the provisions of the Health and Safety Code, and (3) investigates complaints against community care facilities. In addi- tion, 48 counties contract with the state to license certain community care facilities within their jurisdiction. The legislative changes anticipated by the budget are (1)\u00b7 deletion of the statu- tory requirement that the department license small family day care homes, for an anticipated state savings of $886,200 and (2) reestablishment of fees for licensure, at an estimated state support cost of $323,200. . Deletion of Licensing Requirement for Small Family Day Care Homes The 1981 Budget Bill, as introduced, anticipates passage of legislation to delete the existing statutory licensure requirement pertaining to small family day care homes for children. This change is estimated to result in savings of $886,200 in state support costs, as shown in Table 2, and $7,879,300 in local assistance payments to counties which currently contract with the state to license family day care homes. The county-operated portion of the community care . licensing program is dis- cussed in our analysis of Item 518-101-001 (e) and (f). A family day care home, as defined by state law and referred to by the proposed change, provides care, protection and supervision to up to 12 children, in the care-giver’s own home, for periods ofless than 24 hours per day, while the parents or guardians are away. If one adult care provider is present in the home, up to six children II).ay be cared for under existing state law. With an assistant present, a maximum of twelve children may be cared for in a family day care home. If more than twelve children are cared for in a facility, the facility must be licensed as a day care center. State Support Savings Underbudgeted The savings estimate of $886,200 in state siIpport is based on a reduction of 32.5 positions from the Community Care Licensing Division, 22 of which we understand would be facility evaluators. The remaining 10 positions would consist of various support staff in the division. Our analysis indicates that the assumptions underlying this estimate are conservative and additional savings could be realized if the proposed change in state law is approved. The basis for this conclusion is as follows: First, the 32.5 positions do not include state staff in the Policy and Administrative Support or Client Protection Services branches of the Community Care Licensing Division. Our analysis indicates that policy development and audit investigation workload would also diminish in these branches if licensure of family day care homes was eliminated. Second, the estimate of state support savings is based on a projection of 2,928 facilities being affected in 1981-82. An August 1980 work volume count of state- licensed facilities identified 3,030 of these facilities. Because the number of li- censed small family day care homes is expected to continue to increase during 1980-81, the projection of 2,928 facilities appears to underestimate potential state savings. Tothe extent that (1) workload related to policy development and audit investi- gation is reduced due to the deletion of family day care licensing, and (2) more facilities are licensed than the number included in the estimate, the budget un- Item 518 HEALTH AND WELFARE \/ 943 derestimates state staff savings which should accrue if this change in law is ap- proved. Licensing Family Day Care Homes. We are unable to advise the Legislature of the specific impact of this proposal on the operation of small family day care homes. In our review of the licensure of these facilities, we have identified, howev- er, several factors which the Legislature may wish to consider in its debate on this statutory change. First, these facilities do not generally provide highly technical or specialized services and can, therefore, be evaluated by the parents or guardians of children who may use the facilities. In addition, because children stay in the facilities less than 24 hours each day, the parent or guardian generally has daily contact with the facility and its operators. On-site licensing visits to the facilities are currently required only once every two years. Second, many small family day care homes are not currently licensed. The Department of Social Services has estimated that up to 50 percent of all such facilities currently operate without a licellse. Third, state licensing staff receive fewer complaints per facility for small family day care homes than for community care facilities in total. For example, in August 1980, the latest data available, small family day care homes accounted for 22 percent of all licensed community care facilities but only 11 percent of complaints involved these facilities. Our analysis iridicates that a large share of the complaints involving small family day care homes concern operation of a facility without a license. Finally, the Legislature already has recognized the relative safety of small family day care homes in establishing less restrictive procedures for the licensure of these facilities and by creating a three-county demonstration project to certify small family day care homes rather than require licenses for their operation (Chapter 1063, Statutes of 1979). . Fees For Licensure The 1981-82 Governor’s Budget also assumes that legislation will be enacted to intiate the imposition of fees for licensing certain community care facilities. We are unable to advise the Legislature of the specific impact of this proposal on the operation of such facilities. Such legislation would require the Legislature, howev- er, to reverse the policy it established in enacting Chapter 91, Statutes of 1980, which prohibits fees for the licensure of community care facililies. The budget anticipates that such fees would generate revenues of $1,028,400 but would require the establishment of 14 clerical positions for fee collection at a cost of $323,200. Therefore, net anticipated revenue is estimated to be $705,200. We understand that the estimated revenue of $1,028,400 is based on a flat fee of $100 being received from 10,284 facilities. Actual revenue generated from charging fees for licensure will vary to the extent that (1) the number of facilities licensed varies from the projected number and (2) the fee schedule, which is not specified in the budget, generates revenue greater or less than $100 per facility per year. Potential County Costs. The estimate of anticipated revenue does not reflect the potential cost of county staff, which may be required to collect fees for licen- sure. It is our understanding that the proposed imposition of fees for licensure would exempt foster family homes, family day care homes, and certain other facilities, from the fee requirement. During 1980-81, the Department of Social Services has assumed full responsibility for licensing the majority of community care facility categories, but counties have generally retained the responsibility to license foster family homes and family day care homes. Some counties have also retained responsibility for licensing and evaluating some facilities which would be subject to fee payments. To the extent that counties continue to license facilities which are required to pay fees, counties will incur additional administrative costs which will offset the current estimate of increased revenue. Division Executive …………………………………………………. Welfare program operations ……….. : ………… Legal affairs ……………………………………………… Adult and family services ………………………. Administration ………………………………………… Community care licensing …………………….. Planning and review ……………………………….. Disability evaluation ……………………………….. Centralized delivery system …………………… Temporary help ………………………………………. Totals …………………………………………………….. Table 3 Department of Social Services Proposed Position Changes for 1981-.82 Workload and Requested Existing Administrative New Total Fiscal EfFect of Requested New Positions General Federal Reimburse- Positions Adjustments Positions Positions Fund Funds ments Totals 42.7 41.5 84.2 $112,635 $1,362,490 $1,475,125 136.0 30.0 166.0 292,958 674,838 967,796 141.0 5.0 146.0 143,456 143,456 253.0 -1.0 10.0 262.0 342,639 342,639 522.4 19.0 541.4 189,971 133,995 $39,011 362,977 293.6 68.9 362.5 1,589,374 1,589,374 296.3 -3.0 21.0 314.3 286,296 -51,950 234,346 1,337.1 -0.5 1,336.6 161.7 39.0 200.7 1,096,457 1,826,752 217,013 3,140,222 74.4 -21.5 8.0 60.9 -74,387 -74,387 -148,774 — 3,258.2 -26.0 242.4 3,474.6 $3,979,399 $3,871,738 $256,024\u00b7 $8,107,161 CI m .\” :I11I::II … ~ m Z … 0 \”‘II en 0 n ;; … en m :I11I::II < n m en I n 0 :::II ... :i\" c It Q., CD oIiIo oIiIo \" ::z:: ~ ti ::z:: > Z 0 ~ I:’l I:\”‘ ~ I:’l – m en i-‘ 00 Item 518 HEALTH AND WELFARE \/ 945 Proposed New Positions The department is proposing a total of 242.4 new positions for 1981-82, as shown in Table 3. Three. budget requests account for 60 percent of the proposed new positions. The single largest request is for 56 positions for various divisions to work on the Statewide Public Assistance Network (SPAN) project pursuant to Chapter 282, Statutes of 1979 (AB 8). Of this number, 43.5 positions were authorized for a limited term and are scheduJed to terminate on June 30, 1981. The budget proposes to continue these positions on a limited term basis during 1981-82. The department is also requesting (a) 51.9 positions to evaluate and license community care facili- ties and (b) 38.5. positions to administer the refugee assistance\u00b7 program. The remaining 96 positions are proposed for functions throughout the\u00b7 department. IMPACT OF RECENT LEGISLATION Cost.;.of:-Living Increases for Welfare Recipients Chapter 511, Statutes of 1980, provides that, effective January 1, 1981, annual cost-of-living increases on grants for various public assistance programs will. be based on the change in the California Necessities Index rather than the Consumer Price Index. The impact of this bill on specific welfare programs during 1980-81 and 1981-82 is as follows: 1. AidtoFamilies With DependentChiJdren (AFDC). For the first six months of fiscal year 1980-81 (July 1, 1980-Dec. 31, 1980), AFDC grants were increased by 15.48 percent over the amounts paid in 1979-80. This adjustment represents the percentage change in the Consumer Price Index for Los Angeles-Long Beach- Anaheim and San Francisco-Oakland between December 1978 and December 1979. Effective January 1, 1981, AFDC grants were reduced to levels that are 13 percent higher than grant amounts paid in 1979-80. The 13 percent adjustment represents the change in the California Necessities Index (CNI), as defined by Chapter 511, between December 1978 and December 1979. The act provides, however, that the maximum state reimbursement for cost-of-living increases for AFDC-Foster Care remains at 15.48 percent during all of 1980-81. Table 4 shows the effect of Chapter 511 on the maximum grant level paid, for various family sizes, during 1980-81. Table 4 Maximum Monthly AFDC Grant Levels 1979-80 and 1980-81 FamilySize 1.. ………………………………………………………………………… .. 2 …………………………………………………………………………… . 3 …………………………………………………………………………… . 4 …………………………………………………………………………… . 1979-80 $201 331 410 487 1!J80…81 July-December January-June 1980 1981 $232 $227 382 374 473 463 563 550 Beginning with the 1981-82 fiscal year, the statute requires that AFDC grants be adjusted annually based on the percentage change in the CNI during the 12-month period ending in the preceding December. Thus, the statute requires the cost-of-living adjustment for fiscal year 198f-82 to be based on the percentage 946 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued change in the CNI between December 1979 and December 1980. 2. Supplemental Security Income\/State Supplementary Payment (SSI\/SSP) Program. During the first six months of 1980-81, SSI\/SSP recipients received a cost~of-living increase based on the percentage change in the Consumer Price Index for Los Angeles-Long Beach-Anaheim and San Francisco-Oakland between December 1978 and December 1979. Although the percentage increase in the Consumer Price Index for this period was 15.48 percent, recipients actually re- ceived an 18 percent increase to their total SSI\/SSP grant due tothe methodology established in law in 1973 for calculating the SSI\/SSP cost-of-living increase. Effective January 1, 1981, Chapter 511 provided a cost-of-living adjustment based on the percentage change in the California Necessities Index. It also re- pealed the method of calculating SSI\/SSP cost-of-livingincreases which resulted in grant adjustments that were larger than the change in the Consumer Price Index. As a result, SSI\/SSP grants for the last six months of 1980-81 were reduced to levels that are 13 percent higher than grant amounts paid in 1979-80.’ Table 5 shows the effect of Chapter 511 on the maximum SSI\/SSP grant levels, for various categories of SSI\/SSP recipients during 1980-81. Table 5 Maximum Monthly SSI\/SSP Grant Levels 1979-80 and 1980-81 Aged\/Disabled individual …………………………………………….. . Aged\/Disabled couple ………………………………………………….. . 1979-80 $356 660 Blind individual ……………………………………………………………… 399 Blind couple …………………………………………………………………… 776 1981J…81 July-December January-June 1980 1981 $420 $402 773 746 471 905 451 Em Beginning with fiscal year 1981-82, Chapter 511 requires that cost-of-living ad- justments be based on the December-to-December change in the California Necessities Index. In addition, the cost-of-living adjustments will be applied against the total SSI \/ SSP grant rather than just the SSP portion of the grant. The new methodology is similar to that used for calculating the AFDC cost-of-living adjustment, and will result in a grant increase which reflects the percentage change in the new California Necessities Index. 3. Aid to the PotentiaJlySelf-Supporting Blind (APSB) Program. Under Chap- ter 511, payment levels for the APSB program remain tied to those for the SSIISSP program. As a result, APSB grants for the first six months of 1980-81 were based on a 15.48 percent change in the Consumer Price Index. For the last six months of 1980-81, APSB grants were reduced to levels that are 13 percent higher than grant amounts paid in 1979-80, to reflect the change in the California Necessities Index during 1979. The grants for an APSB recipient are those shown in Table 5 for a blind individual. 4. In-Home Supportive Services (IHSS) Program. . Under Chapter 511, cost-of- living increases in the maximum allowable payments which individuals may re- ceive for in-home supportive services are 15.48 percent in 1980-81, as determined . by the percentage change in the Consumer Price Index. As a result, IHSS max- imum grants increased from $664 in 1979-80 to $767 in 1980-81 for a severely impaired recipient, and from $460 to $532 for a nonseverely impaired IHSS recipi- ent. Effective July 1, 1981, the cost-of-living adjustment will be based on the change in the California Necessities Index. Item 518 HEALTH AND WELFARE \/ 947 5. Fiscal Impact. Table 6 shows the fiscal impact of Chapter 5Il. Compared to\u00b7 the cost-of-living increases required under prior law, the act resulted in savings of $89.8 million to the General Fund and $14.4 million in federal funds in 198().,.81. Under current federal law, California is allowed to provide cash in lieu of food stamps to eligible SSI\/SSP recipients so long as the state: (1) passes on the federal cost-of-living increase for the SSI grant and (2) provides a cost-of-living increase for the SSP grant pursuant to current state law. This provision of federal law allows the state to avoid the administrative costs which would occur\u00b7 if county welfare departments were required to distribute food stamps to SSI\/ SSP recipients. Although the state changed its formula for calculating cost-of-living increases for SSI I SSP recipients, the federal government did not require the state and counties to administer a program to provide food stamps to eligible SSI\/SSP recipients in the current year. Medi-Cal costs decreased in the current year as a result of changing the AFDC cost-of-living adjustment from .15.48 to 13 percent. This is commonly referred to as the Medi-Cal Spin-off. As the AFDC standard increases, Medi-Cal recipients are allowed to retain niore money for living expenses and consequently are required to spend less money on medical expenses. Conversely, as AFDC cost-of-living adjustments are reduced, recipients are required to spend more money on medical expenses under the Medi-Cal program, thus reducing the, net costto the state and federal government. Table 6 Cost-of-Living Expenditures Comparison of Prior Law Requirement with Chapter 511 1980-81 (in millions) Prior Law Require- ment Chapter 511 (15.5% July 1980- (15.5% July-Dec ’80) Program June 1981) (13% Jan-Jun ’81) AFDC ……………………………………………………………….. $186.4 $173,0 SSI I SSP ……………………………………………………………… 342.6 ‘lff1.6 APSB …………………………………………………………………. 0.2 0.2 IHSS;………………………………………………………………….. 3.4 3.4 Medi\u00b7Cal Spin\u00b7off ……………………………………………… 24.7 23.3 Totals……………………………………………………………… $557.3 $467.5 a Chapter 511 resulted in a savings of $40,000 in the APSB program. AFDC-Foster Care Difference ~$13.4 -75.0 a -1.4 -$89.8 Chapter 1166, Statutes of 1980, specifies the various conditions under which a child is eligible to receive financial assistance under the Aid to Families with Dependent Children-Foster Care (AFDC-FC) program. The act also requires the Department of Social Services to submit specified reports to the Legislature con- cerning foster care payments. The major feature of the act is that it limits payments to children voluntarily placed in foster care. Beginning January 1, 1982, payments to children who are voluntarily placed in foster care on or after January 1, 1981, will be limited to six months. Under existing hiw, foster care payments for voluntary placements are not limited to a specified period of time. This act will result in savings to the department and local governments as a result of: 1. Limiting grant payments to six months for children voluntarily placed in 948 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-Continued foster care after January 1, 1981, and Item 518 2. Clarifying existing law concerning eligibility for foster care payments. The Department of Social Services estimates that this act will result in General Fund savings of $957,500-in 1981-82. While this act results in General -Fund savings to the Department of Social Services, there will be increased state costs to the Departments of Developmental Services and Mental Health~ Under the act’s provisions, voluntary placements who are developmentally disabled or emotionally disturbed and unable to obtain a court-ordered placement after six months, would be shifted to regional centers and community mental health programs. Costs to these programs are undeter- mined, but potentially major, depending upon the number of children transferred to the Departments of Developmental Services and Mental Health. TECHNICAL BUDGETING ISSUES Contracts with the Health and Welfare Agency Overbudgeted We recommend a reduction-of $51,912 ($25,956 General Fund and $25,956 federal funds) overbudgeted for contracts with the Health and Welfare Agency. The budget proposes $65,700 for two contracts with the Health and Welfare Agency. The contracts would reimburse the agency for the following: (1) $26,967 for part of the salary for one position located in the Governor’s Office in Washing- ton, D.C., and (2) $38,733 for the systems review unit in the- Health and Welfare Agency. The systems review unit studies the efficiency and effectiveness of depart- mental programs overseen by the agency, and tries to identify overlaps in service delivery, funding sources and clients. Our review of the Health and Welfare Agency’s schedule of reimbursements found that the agency anticipates receiving $13,788, not $65,700, from the Depart- ment of Social Services during 1981-82. The $13,788 is for partial support of the one position in the Governor’s Office in Washington. The agency is not scheduled to receive reimbursements from the department for support of the systems review unit because the Governor’s Budget requests a direct appropriation of funds to the agency for this purpose. For this reason, we recommend a reduction of $51,912 overbudgeted for DSS contracts with the Health and Welfare Agency. Out-of-State Travel Overbudgeted We recommend that funding for out-DE-state travel be reduced to reflect the departments most recent actual experience, for a savings of $27,675 ($14,667 General Fund and $13,{)()8 federalfunds). The budget requests $116,367 for out-of-state travel by Department of Social Services (DSS) employees. As Table 7 shows, such travel has been consistently overbudgetedsince 1977-78. Table 7 Department -of Social Services Out-of-State Travel Expenditures 1977-78 to 1979-80 Budgeted 1977-78………………………………………………………………………… $65,236 1978-79………………………………………………………………………… 119,066 1979-80………………………………………………………………………… 123,666 Expended $52,429 59,245 -69,953 Percent of Budget Spent 80.4% 49.8 56.6 Item 518 HEALTH AND WELFARE \/ 949 Expenditures for out-of-state travel are intended to enable the department to communicate with other states and the federal government regarding income maintenance and social services programs. The department has not yet identified specific trips planned for 1981-82. As a result, DSS has estimated its budget,year travel needs by increasing its 1980-81 budgeted amount ($100,714) by 7 percent and adding the anticipated cost of travel for new positions. Given historical trends, our analysis indicates that a more reasonable methodolo- gy to estimate budget year needs is to (1)\u00b7 utilize the department’s 1979-80 expend- iture level, increased by 7 percent annually; as allowed by the Department of Finance’s budget instructions and (2) add the cost of travel for new positions. This results in a 1981-82 out-of-state travel requirement of $88,692. To reflect actual experience, we therefore recommend a reduction of $27,675 ($14,667 General Fund and $13,008 federal funds). Equipment Request Unjustified We recommend a reduction in the funds proposed for unjustified new an. ( replacement equipment, for a reduction of$22O,312 consistingof$101,344 from the General Fund, $107,953 in federal funds, and $11,015 in reimbursements. The budget requests $803,486 for purchase of major equipment, such as type- writers, tape recorders, and automobiles in 1981-82 .. Of this amount, $160,681 is proposed to replace equipment that is no longer functional due to age or excessive wear. An additional $582,599 is proposed for purchase of new major equipment. Table 8 summarizes the department’s request. Table 8 Department of Social Services Request for Major Equipment 1981-82 New equipment ………………………. , ………………………………………………………………… ; ……………………… .. Replacement equipment ………………………………………………………………………………….. ; ………………… . Seven percent price increase ……………………………………… , ……………………………………………………… . Equipment for proposed new positions ………………………………………………………………………………. . Total request …………………………………………………………………………………………………… , ………….. , ….. . $582,599 160,681 52,030 8,176 $803,486 Unjustified Items. Our analysis indicates that the need for several items in- cluded in the 1981-82 equipment request has riot been established. Table 9 summa- rizes these items and the dollar amounts associated with each. A discussion of each component follows. Category Table 9 Department of Social Services Equipment Reductions Recommended by Legislative Analyst Typewriters (276) ………………………………………………………………………………… ; …………. , ………………… . Replacement calculators (63) ………………………………………………………………………………………………. . Pickup truck with camper shell (1) ……………………………………………………………………………….. , …. .. Other items ………………………………………………………………………………………………………………………….. .. Total …………………………………………………………………………………………………………………………………. .. Amount $167,530 16,632 10,000 26,150 $220,312 Typewriters. The department’s request includes 209 replacement typewriters and 67 new ones, for a total request of 276 machines. The State Administrative Manual allows typewriters to be replaced after 10 years of use or when excessive wear is exhibited. Our review of the department’s property inventory (exclusive of the Disability Evaluation Division) indicates that, as of December 1980, the 950 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF. SOCIAL SERVICES-Continued department has 522 typewriters which were acquired after June 30, 1972. Of this total, the department has 72 typewriters which are not assigned to particular units. During 1980-81, the Department of Social Services has 434.2 authorized full-time clerical positions (exclusive of the Disability Evaluation Division) . For the budget year, the department is proposing an additional 36.5 clerical positions for a total of 470.7 positions. Based on these data, we conclude that the department currently possesses 51 more typewriters less than 10 years old than it has full-time clerical staff to operate them. Our analysis also indicates the department may purchase additional typewriters for special needs with $21,445 appropriated in the 1980 Budget Act for typewriter purchases. Therefore, we cannot establish the need for additional typewriters and recon.’Unend that no funds for this purpose be appro- priated in 1981-82 for a reduction of $167,530. Replacement Calculators. The Department of Social Services’ criteria for re- placement of calculators is 10 years’ use. The department’s property inventory indicates that 73 calculators were acquired prior to June 30, 1972. Using the depart- ment’s own standard, its request for 136 replacement calculators should be re- duced by 63. The average cost of the replacement calculators requested is $264. Therefore, we recommend a reduction of $16,632 for calculator replacement. Pickup Truck. Information provided by the department has not included spe- cific . justification for pUrchase of a new pickup truck listed in the equipment request. The department currently possesses three pickup trucks and two vans; In addition, the 1980 Budget Act provided $14,000 for two new pickup trucks. As of December 1980, neither of these trucks was in the department’s property inven- tory. Without specific detailed justification of the need for an additional vehicle and assurance that funds budgeted for vehicles in 198Q.,.81 will be expended for this purpose, we recomnlend that additional funds be deleted for the proposed pickup truck. Other Items. Our review also has identified the following items in the depart- ment’s 1981-82 request which duplicate equipment either requested in the cur- rent year or already available to the department: (1) a $1,300 calculator for the Affirmative Action Office, and (2) several items of microfilm equipment for the Community Care Licensing Division ($24,850). In view of this duplication, we recommend a reduction of $26,150. .. Recommendation. Based on our review of the department’s equipment sched- ule, we recommend a reduction of $220,312, consistiIlgof $101,344 from the Gen- eral Fund, $107,953 in federal funds, and $11,015 in reimbursements. The recommended reduction will leave the department with a budget for major equip- ment totaling $583,174, or 33.4 percent more than actual 1979-80 expenditures. Attorney Gen.eral Legal Services We withhold recommendation on $2,542,973 proposed to reimburse the Attomey General for legal services, pending reconciliation by the Department of Finance of conflicting esti- mates of the anticipated cost for such services in 1981-82. Our analysis has identified a discrepancy between the amount of legal services which the department is budgeted to obtain from the Attorney General and the amount oflegal services which the Attorney General is budgeted to provide. While DSS proposes $2,542,973 for this purpose, we can identify only $2,286,146 in services in the Department of Justice’s budget for DSS. For example, DSS proposes to expend $683,709 of the total $2,542,973 proposed to reimburse the Attorney Gen~ eral, for services related to (1) categorical aid, (2) cases related to the legal separation of children from their parents’ custody so that adoption may occur, and (3) litigation involving residential care facilities. The Department of Justice indi- cates that 8,688 hours, or approximately $427,884 worth of attorney services, will Item 518 HEALTH AND WELFARE \/ 951, be provided to the Department of Social Services for these three activities. To the extent that this discrepancy cannot be explained by anticipated workload, the department may be overbudgeting for Attorney General services. We have identified similar inconsistencies in other departments’ budgets and have requested that the Department of Finance reconcile these discrepancies by April 1, 1981. This request is discussed is our analysis of the Department of Justice’s budget (Item 082-001-(01). We therefore withhold recommendation on $2,542,973 ($1,169,768 General Fund, $1,246,057 in federal funds and $127,148 in reimburse- ments) proposed for Attorney General services until we can evaluate the depart- ment’s proposed expenditures in light of the reconciled data from the Department of Finance. Salary Savings Underestimated We recommend salary savings be increased to reflect recent experience, for a reduction of $2,035,805($855,038 General Fund, $1,09!J,334 federal funds, and $81,433reimbursements). When budgeting for salaries and wages, agencies are required to recognize that salary levels will fluctuate and that not all authorized positions will be filled throughout the budget year. Savings in the cost of salaries and wages occur due to vacant positions, leaves of absences, delays in the filling or establishment of positions, turnover, and refilling positions at a lower salary than initially budgeted. To prevent overbudgeting, the State Administrative Manual requires each agency to include an estimate of salary savings as a percentage reduction to the gross salaries and wages request. The State Administrative Manual further requires that \”the amount of savings should be estimated on the basis of the past year experience in administering the departmental hiring plan.\” The Department of Social Services has budgeted $4,409,805, or 6.0 percent of salaries and wages, as salary savings in 1981-82. The department advises that this estimate is based on (1) 5 percent of 1981-82 base salaries and wages, (2) 10 percent of salaries and wages for some proposed new positions, and (3) adjust- ment~ to specific position requests to reflect anticipated vacancies. This estimate, however, does not reflect the actual experience of the department, as shown in Table 10. 1977-78 ………… .. 1978-79 …………. . 1979-80 ………… .. Table 10 Department of Social Services Salary Savings 1977.;..78 to 1979-80 Total Salaries and Wages Estimated at Midyear $50,623,218 50,327,527 58,930,392 Estimated Salary Savings Amount Percent $2,125,682 4.2% 1,270,982 2.5 2,998,047 5.2 Actual Total Salaries and Wages $46,704,976 46,369,028 53,733,434 Actual Salary Savings\” Amount Percent $3,918,242 . 7.7% 3,958,499 7.9 5,196,958 8.8 \” Difference between total salaries and wages estimated at midyear and actual salaries and wages expend- ed. Table 10 shows that the actual salary savings rate has exceeded the estimated rate in each of the last three years. Moreover, the actual salary savings rates shown in Table 10 may understate the true amount of salary savings realized because they do not reflect salary savings that may have been used by the department to (1) establish unbudgeted positions administratively, or (2) allocate more funds to temporary help blankets than budgeted. The average actual unspent salary savings percentage experienced by the De- partment of Social Services during the period 1977-78 to 197!Wro was 8.14 percent. Applying this average to the proposed salary and wages for 1981-82 results in an 952 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued estimate of salary savings for 1981-82 of $6,089,585. This amount is $1,591,526 higher than the $4,498;059 proposed by the department. Because staff benefits are budgeted on the basis of authorized expenditures for salaries and wages the cost of these benefits will be overbudgeted to the extent salary savings are underbudgeted. To correct for this, we. recommend a corre- sponding reduction in staff benefits, for an additional reduction of $444,279. In order to reflect salary savings that are more in line with the department’s actual experience,. we recommend a total reduction of $2,035,805. This amount consists of $855,038 from the General Fund, $1,099,334 in federal funds, and $81,433 in reimbursements. Use Unscheduled Reimbursements to Reduce General Fund Costs We recomlnend adoption of Budget Bill language requiring that General Fund ~upport for this item be reduced by.the amount of unscheduled reimbursements received by the department. The budget shows that the department will receive reimbursements totaling $5,893,542 in 1981-82~ Most of the estimated reimbursements are. from other state departments and agencies for services provided during the year. For example, the department .estimates that it will receive $3,316,113 from the Department of Health Services for performing disability evaluations. . Our analysis indicates that reimbursements for the department may be undere- stimated for 1981-82. Our review of the department’s budget documents found that\u00b7 histOrically the department has received reimbursements from various sources which were not schedUled in the budget. These reimbursements totaled $138,135 in 197~79 and $151,413 in 1979-80. During the first five months of 1980-81, the department had received unschedUled reimbursements totaliiJ.g $44,038. If this trend continues throughout theremaixlder of the year, the amount: of unschedUled reimbursements in 1980-81 woUld total $105,691. . In developing the 1981-82 budget, the department did not build in an estimate for unschedUled reimbursements. The department maintains it cannot accurately estimate the amount of these reimbursements because the source of the reim- . bursements varies annually. To the extent unschedUled reimbursements are received in the budget year, the department will be overbudgeted. Therefore, we recommend that Budget Bill language be adopted to require that the department’s General Fu,nd appropria- tion be reduced by the amount of unschedUled reimbursements received in 1981- $2. We recommend adoption of the follOwing language: i\”Provided further, that funds appropriated by this item shall be reduced by the : Department of Finance by the amount of unschedUled\u00b7 reimbursements made .. available for the purpose of this item.\” DATA PROCESSING Health and Welfare Agency Consolidated Data Center ‘i We recommend Mat funds budgeted for the reimbursement of the Health . and Welfare IJgency Data Center be reduced to\u00b7 a. level consistent with\u00b7 past expimditures to prevent fverbudgeting,for .a. savings of $342,950, consisting of $188,623 from the General Fund, $150,898 in federal funds, and $3,429 in reimbursements. i The Governor’s Budget includes $2,606,035 for reimbursements to consolidated ;data centers from the Department of Social Services for various data processing : services. Of this amount, $1,053,950 is proposed to reimburse the Health and . Welfare Data Center (HWDC) for data processing services related to the ongoing activities of the department. Item 518 HEALTH AND WELFARE \/ 953 Reimbursement of HWDC for Ongoing Activities. The proposed $1,053,950 for ongoing departmental activities is $218,950, or 26.2 percent, above the $835,000 included in the 1980 Budget Act for reimbursements to HWDC. The Department of Social Services anticipates that current year costs will total $909,000, or $74,000 above the amount budgeted for this activity. The Supplemental Report ofthe1980 Budget Act requires us to review the use of the HWDC by the Department of Social Services. In reviewing the information provided to us by the department, we encountered two’ problems. First, the backup information is not consistent with the budget. For example, in response to arequestforthe costs of computer services activities planned to he conducted by HWDC for DSS during1981-82, the department provided uswith a list of activities with costs exceeding the $1,053,950 proposed for these activities. As a result, we . are not able to reconcile these anticipated costs with the proposed budget or with actual 1979-80 costs for these activities. Second, the inforII\\ation provided by the departmentis not complete. At the time this analysis was written, the department was unable to provide us with a comprehensive data processing plan, as reqUired by the State Administrative Manual, for the budget year or subsequent years. The department advises, however, that such a plan will be developed by February 1981. . For these reasons; our review of the information provided to us by the depart- ment does not enable us to. determine the department’s need for fwids to reim~ burse HWDC during the budget year. Instead, we have had to\u00b7 rely on past expenditure patterns in order to determine DSS’s need forfwids to reimburse HWDC for data processmg services. Table 11 shows that (1) actual expenditures reported by the State Controller and HWDC from 1977 …. 78to 1979-80 are less than the past year actual expenditures reported by the Department of Social Services in the budget and .(2) actual expenditures during the three-year period averaged 86 percent of budgeted fwids. 954 I HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-Continued Table 11 Department ot Social Services Expenditures for Ongoing Services Item 518 From the Health and Welfare Agency Conso~idated Data Center 1977-78 to 1980-81 1977-78 ………………………………………………. . 1978-79 ………………………………………………. . 1979-80 ………………………………………………. . 1980-81. ……………………………………………… . Budgeted Funds $251,993 728,222 BOO,OOO 831’i,OOO Expttnditures Reported by DSS $251,993 724,000 BOO,OOO 909,000\” Percent of Actual Budgeted Funds Expenditures Actually Spent $202,994 80.5% 107,281 97.1 651,723 81.5 a Estimate by Department of SoCial Services. Budgeted funds have been increased to this amount through ‘a midyear adjustment of $74,000. Price Increase Inappropriate. The department proposes expenditures of $1,053,950 in 1981–82 consisting of $985,000, identified as a base amount, plus $68,- 950′ for a 7 percent price increase. The department has not provided information identifying the need for a $76,000 increase in its base amount over estimated 1980-81 expenditures of $909,000. In addition, the Director of HWDC advises that a general price increase is not planned for the budget year. Therefore, we have no basis to recommend the proposed increases of $144,950 for reimbursements to HWDC. Current Year Reimbursements Overestimated The department has consistent- ly overestimated anticipated expenditures for HWDC services. The DSS’ projec- tion of $909,000 for 1980-81 appears excessive because (1) actual expenditures for the first five months of 1980-81 were $20,000, or 7 percent below the DSS projected total for this period and (2) the DSS projection of reimbursements in the last six months of 1980-81 includes two months with estimated reimbursements exceeding $100,000. Reimbursements to HWDC exceeded $100,000 in only one out of 24 months during 1978-79 and 1979–80. The average monthly reimbursement over the period July 1978 to November 1980 was $56,771. Our analysis of monthly reimbursements to HWDC from DSS indicates that reimbursements are higher in the last two months than in the first 10 months of the year. In order to project anticipated reimbursements for the last seven months of 1980-81, we projected each month separately based on actual expenditures during that month in 1978-79 and 1979–80. Based on this methodology, we project actual 1980-81 expenditures will be $711,000 rather than $909,000 anticipated by the department. Recommendation. Based on (1) a consistent pattern of overbudgeting, (2) a lack of detailed information regarding budget year expenditure plans, and (3) our estimate that actual expenditures in the current year are likely to be less than the amount budgeted, we conclude that the department has overbudgeted its need for funds to reimburse HWDC. Because we have no analytical basis for projecting an increase in data processing costs during the budget year, we recommend that the amount budgeted for these costs be maintained at what we estimate to be the current year level ($711,000), for a reduction of $342,950 ($188,623 General Fund, $150,898 federal funds, and $3,429 reimbursements). Item 518 HEALTH AND WELFARE \/955 , Data, Processing Overbudgeted We recommend deletion of funds budgeted for expiring contracts, fora reduction. of $233,683 consisting of $128,526 from the General Fund, $102,820 in federal funds, and $2,337 reimbursements because existing departmental resources are adequate to meet workload In addition to the $2,606,035 requested for data processing services, to be pro- vided by the consolidated data centers, the budget proposes $283,446, all funds, for other data processing services to be supplied to the department in 1981-82. Ac- cording to the State Administrative Manual, expenditures funded through the data processing category of operating expenses and equipment may include data proc- essing personnel, equipment, supplies, and reimbursements to state agencies other than the consolidated data centers. Historically, the Department of Social Services has used this funding category primarily to support interagency agreemen~s and contracts With private data processing firms. During the three~year period 1978-79 to 1980-81, contracts With two ,private firms, account for 56 percent of total data processing expen,ditures. Both of these firms provided the department With programming assistance for specific time-limited projects. Both contracts Will expire during 1980-81. Our analysis indicates that’ the budget requests an excessive amount for data processing, for the folloWing reasons: First, two expiring contracts for program- mingservices are built into the request. Given the proposed addition of 10 pro- grammer staff in 1981-82 to the 15 existing positions in the department, existing departmental resources appear to be adequate and appropriate to handle the programming needs of the department. Second, information supplied by the de- partment indicates that the data processing reqtie’st for supplies and equipment ($124,491) exceeds 1979-80 actual expenditures ($5,576) for this purpose by more than 2,000 percent. Accordingly, we recommend that the amount budgeted for data procssing in 1981-82 be based on actual 1979-80 expenditures; less the cost of the two expiring contracts ($145,009 – $103,125= $41,884). This amount should be increased by ‘1 percent for both 1980-81 and 1981-82 to include allowable price increaes ($41,- 884 X 1.07 X 1.07 = $49,762). On this basis, werecommend a reduction of$233,683 in data processingfunds consisting of $128,526 from the General Fund, $102,820 in federal funds, and\/$2,337 in reimbursements. Additional Data Processing Positions We recommend adoption of Budget Bill language which requires that, before nineposi- tions in’ the Data Processing Bureau, are continued beyond December 31, 1981, the Depart- ment of Finance notify the Legislature and document the savings resulting from implementing new electronic data processing systems. ‘ , The budget proposes $177,076 for 10 additional positions in the Data Processing Bureau. Nine of the positions will’develop and implement new electronic data processing (EDP) systems to support departmental programs, and Will be limited to June ,30, 1982. The budget includes only six months funding for the nine positions. Any funding for the positions beyond December 31, 1981, Will have to ,come from savings resulting from the implementation of new EDP systems by the department. We believe the Legislature should be notified of the savings Used to continue the p()sitionsbeyond December 31, 1981. Therefore, we recommend the adoption of the following Budget Billianguage requiring that, prior to continuing the nine EDP positions the Director of Finance document the savings resulting from new EDP systems: \”Provided that authorization for expenditures to continue, nine new data’proc- essing positions beyond December 31, 1981 shall become effective no sooner than 30 days after notification in writing by the Director of Finance to the Joint 956 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued Legislative Budget Committee documenting (1) the amount of savings achieved by the department, (2) the new data processing systems which gener- ated the saVings, and (3) how the new data processing systems produced the savings.\” Temporary Help Funds to Train Computer Programmers We recommend a reduction of$119,232 ($65,578 General Fund and $53,654 federal funds) budgeted in temporilry help funds to provide training to computer programmers because the proposal represents a piecemeal and fragmented approach to a statewide problem. The budget proposes $119,232 in temporary help funds\u00b7 to provide training to entry level computer progranimers during 1981-82. The department plans to establish twosix-month training periods because it is experiencing difficulties in recruiting and retaining skilled electronic data processing (EDP) personnel. Eight programniers would be trained during each six\”month training session. The de- partment proposes t() fund the training program from anticipated salary saVings resulting from vacancies in the Data Processing Bureau during the budget year. We have the f()llowing concerns with the department’s proposal: FirSt, the department’s proposal attempts to address what is a statewide problem on a piecemeal basis. Most stale agencies are currently experiencing difficulties in recruiting and retaining qualified EDP personnel. In order to address this and other statewide EDP issues, the Director of Finance created the California Infor- mationTechnology Advisory Board (CITAB) in May 1980. As a result of CITAB’s review,thefo1l6wingactions are being taken to deal with the problem ofrecruit- ing EDP\u00b7personnel for state government: (a) testing to fill programmer positions will be done on an open and continuous basis, (b) modifications are .being made in the recruitment process to minimize delays in hiring personnel, (c) a survey is being taken to determine the comparability of state and private sector salaries for EDP personnel and (d) the appropriate ratio of EDP supervisors to staff is being reviewed. The approach to the shortage of EDP personnel proposed by the department also warrants consideration by CITAB. SeCond, it would provide the Depiutinent of Social Services with a recruiting procedure unavailable to other departments. It is our understanding that other departments of comparable size have ri()t been provided funds through temporary help to meet their EDP training needs, Third, if a training program For entry level programmers is needed, it should be operated oli a statewide,1ather than departmenta\/, basis. Departmerits should use the state EDP education program in the Department of General Services to meet their training needs in this area. Otherwise, each department will develop duplicative training programs which will result in additional General Fund costs. Fourth, the proposal does not reflect sound budgeting policy. Departments sh()uld not fund training programs by increasing temporary help !unds in anticipa- tion that excess salary savings will occur. For these reasons, we recommend deletion of the $119,232 budgeted in tempo- raryhelp to train computer programmers. Foster Care Management Information System We Withhold recommendation on $500,()()() in federal funds proposed fora contract with a privstevendor to develop and implement an automated foster care management informa- tion system until information required by the State Administrative Manual has been submit- ted to the Legislature . The budget proposes the expenditure of $500,000 in federal funds for the devel- opment and implementation of an automated foster care information system dur- ing 1981-82.\u00b7 This system. will comply with the requirements of the Federal Item 518 HEALTH AND WELFARE \/ 957 Adoption Assistance and Child Welfare Act of 1980. (We discuss the act in more detail later in this analysis.) Supporting material also states that $250,000 in federal funds will be spent for this purpose during the current year. At the time this analysis was prepared, the Legislature had not received notification that the de- partment had been authorized to expend these unbudgeted federal funds. Our analysis of this proposal notes the following deficiencies: Required Feasibility Study Report Not Prepared The State Administrative Manual requires departments to prepare a feasibility study report (FSR) on major data processing activities. Without such a report, the Legislature is unable to determine what alternatives were considered for the development of the proposed system and why a private contractor is preferable to state data process- ing resources. In addition, the Legislature has no basis upon which to assess the progress of such a system without the time schedule routinely included in a feasi- bility study report. The department advises that a feasibility study report on this system will be developed and approved by the state Office of Information Tech- nology by February 9, 1981. (This appears to be an unusually short turn-around time for an FSR.) Proposal Not Coordinated with Other Requirements\u00b7 of Federal Law. The Adoption Assistance and Child Welfare Act of 1980 (PL96-272) allows the state to obtain additional federal funds if specific management information system components are implemented in conjunction with a series of other requirements. The\u00b7 proposed management information system, . by itself, will not fulfill federal requirements for additional funding. For example, the inventory of children in foster care required by Chapter 1229, Statutes of 1980, must be conducted in close coordination with the development of the federally mandated managementinfor- mation system if additional federal funds are to be obtained. Because a feasibility study report has not been prepared and because there is no specific estimate of the costs of this system, we withhold recommendation on this proposal. We recommend that the Department of Soc.ial Services\u00b7 submit to the Legislature, prior to budget hearings, a feasibility study report as required by Section 4920 et. seq., of the State Administrative Manual, which includes (1) an analysis of the information requirements necessary to meet state and federal objectives, (2) a description of the problems that must be overcome to meet these .requirements, (3) an analysis of each of the alternatives available, including (a) utilization of existing reporting formats and systems and (b) development of a new information system using state-owned resources, (4) a detailed cost estimate for each of the alternatives (!onsidered, (5) a discussion of why the chosen alternative was selected, (6) a detailed implementationplan,and (7) an analysis of how the proposed system will interface with (a) the Statewide Public Assistance Network and (b) other requirements of PL 96-272. STATEWIDE PUBLIC ASSISTANCE NETWORK PROJECT AB 8 requires the Department\u00b7 of Social Services to implement a\u00b7centralized delivery system (CDS) in all counties by July 1, 1984. The system, which is known as the Statewide Public Assistance Network (SPAN) project, will assist in the delivery of benefits to participants in the following programs: Aid to Families with Dependent Children (AFDC); Food Stamps; Medi-Cal; Aid for the Adoption of Children; Special Adult Programs,. and to the extent feasible, Social Services and Child Support Enforcement. Table 12 shows the number of positions and expenditures committed to the SPAN project during the past, current, and budget years. The budget proposes 140 positions and total expenditures of $6,333,820 for the SPAN project in 1981-82. Of this amount, General Fund expenditures are proposed at $2,420,442,. an increase of $425,478, or 2l.3 percent; over estimated current year expenditures .. 958 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-Continued Table 12 SPAN Project Positions and Expenditures 1979-80 to 1981-32 Positions-Location by Division ……………………………….. . Centralized Delivery System …………………………….. . Welfare Program Operations …………………………… … Adult and Family Services ………………………………… . AdminiStration …………………………………………………….. . Medi-Cal ………………………………………………………………. . Total Expenditures ………………………………… : …………….. . General Fund …………………………………….. ………………. Federal\/unds …………………………………………………. 0 …. . Actual 1979-80 41.8 (36.2) (3.9) (1.7) $1,454,275 758,201 696,074 Estimated 1980-81 136.5 (107.0) (24.0) (3:0) (2.5) $4,158,281 1,994,964 2,163,317 Item 518 Proposed 1981-82 140 (113.0) (21.5) (2.0) (3.5) $6,333,820 2,420,442 3,913,378 Of the 140 positions proposed for 1981-82, 128.5 were authorized previously by the Legislature. The department proposes to continue these positions in the budget year and to add 11.5 new positions. Of the 140 positions proposed for the SPAN project in 1981-82,47 are permanent and 93 are litnited term. E:ffective October 1980, the federal share of costs for developing the food stamp portion of the project increased from 50 percent to 75 percent. The department lmticipates that the federal share of costs for developing the AFDC component will increase from 50 percent to 90 percent, beginning July 1, 1981, pursuant to PL 96-265. That act provides for. 90 . percent federal financial\u00b7 participation for the planning, design, development and installation .of a statewide EDP system for the AFDC\u00b7 program. . Consultant and Professional Services Contracts We recommend a reduction of$22O,(J()() ($74,800 General Fund and $145,200 federal funds) forconsu\/tant and professional services contracts because state staFF are available to perform these activities. The budget proposes $320,000 for consultant and professional services contracts for the SPAN project in 1981-82. (This amount excludes $60,902 proposed for an external\u00b7 affairs manager which is discussed elsewhere.) The department is re- questing funds for (a) the design and implementation of a computer data base; (b) the design of a computer facilities, general systems, and a data communications network; and (c) assistance in adopting county or private vendor-developed soft- ware to SPAN usage. Based on our analysis, we recommend the following reductions: Double Budgeting. Our review found that the department had budgeted $40,- 000 for the same consultant and professional services in two separate budget proposals. Therefore, we recommend a reduction of $40,000 to correct double budgeting. State Staff AreA vailable. Our analysis indicates that the department has ade- quate personnel resources available to perform several of the functions for which contract funds are requested. For example, the department requested, and the Legislature authorized, the establishment of 107 SPAN staff for the current year. Of this number, 34 are computer programmers, 29 are data processing analysts and \u00b716 are data processing managers. Some of these positions are organized into several development specialty areas, such as network, data base and general systems design, in which the proposed consulting services would be provided. Because the department already has been authorized staff to perform the activities, we recom- Item 518 HEALTH AND WELFARE \/ 959 mend a reduction of $180,000 in funds budgeted for consultant and professional services. SPAN In-State Travel Overbudgeted We recommend a reduction of $99,(){)() ($33,660 General Fund and $65,340 federal funds) overbudgeted for in-state travel related to the Statewide Public Assistance Network (SPAN) project. The budget proposes an additional $198,000 for in-state travel for the SPAN project during 1981-82. (This amount excludes travel funds for the external affairs manager which is discussed elsewhere.) The components of this amount and our recommendations are as follows: 1. The department is requesting $138,000 for travel related to the pilot project and utilization of county staff in Sacramento. Of this amount; $69,000′ is for travel and per diem costs for state personnel to travel to pilot county sites to train county staff. It also includes funds for pilot county staff to travel to Sacramento. The remaining $69,000 is for travel costs and per diem for various county staff to travel to Sacramento to provide assistance to state personnel in Writing specifications, programming and testing the SPAN system. We recommend deletion of $69,000 budgeted for travel of state and county staff related to the SPAN project because this amount has been built into the depart- ment’s budget base for1981-82. The Legislature approved approximately $99,414 for the travel expenses of permanent SPAN staff in 1980-81. The 1981-82 budget includes these funds plus a 7 percent price increase, so that $106,373 -will be available to the department for this traveL In addition, our review of departmental budget documents found that the estimated cost for in-state travel was based on conversion activities in 10 counties during 1981-82. Discussions with departmental staff, however, have suggested that no more than three counties will participate in the pilot project. , 2. The department is requesting $60,000 for the per diem and travel costs of various advisory committees which provide advice and recommendations to the department on the SPAN project. Actual expenditures to date for these commit- tees total $5,758. The department states that the amount of claims paid to date is small because a number of claims have not yet been submitted to or processed by the department. Based on the actual expenditure data, however, we have no basis upon which to recommend approval of the full $60,000. We therefore recommend a reduction of $30,000 budgeted for in-state travel for the various advisory commit- tees. SPAN Training Funds Overbudgeted We recommend a reduction of $40,108 ($13,637 General Fund and $26,471 federal funds) overbudgeted for training of various SPAN staff. – The budget proposes an additional $54,387 for training various state staff work- ing on the SPAN project during 1981-82. The training is designed for data process- ing programmers and managers. Our analysis indicates that funds budgeted for training should be reduced for the following reasons: First, the amount of resources requested for training is overbudgeted to the extent that it does not take into account funds previously authorized by the Legis\” lature. During hearings on the 1980 Budget Bill, the Legislature approved $37,484 for trainingSPAN positions in 1980-81. The 1981-82 budget includes these funds, plus a 7 percent price increase, for a total-of $40,108. Second, our review of the department’s justification for the additional funds found that several of the -proposed training programs were identical or similar to training programs for which the department has been provided funds in the 960 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICE5-Continued current year. Item 518 Third, the department has indicated that not all staff will receive training. Rather, training will be provided on an as-needed basis, depending on the individ- ual requirements of each staff member; Fourth, the department has indicated that it will make every effort to recruit experienced staff in order to minimize training. For the above reasons, we recommend a reduction of $40,108 budgeted for training. External Affairs Manager-SPAN Project We recommend: 1.’ Deietion of $60,902 ($20,707 General Fund and $40,195 federal funds) in Contractual services budgeted for an external sHain manager because county advice and recommenda- tions are available to the department. 2. Deletion of $37,800 ($12,852 General Fund and $24,948 federal filnds) budgeted for travel by an external affairs manager. The 1980 Budget Act included funds fora staffservices manager III position for the External’ Affairs Branch of the Centralized Delivery System Division. The External Affairs Branch is responsible for ensuring county input in the design and implementation of the SPAN project. The estimated cost of the position in 1980-81 was $42,800; The department deleted the position, however. and contracted With San Diego County Department of Public Welfare for the services of one ofits employees. The cost of the contract in the current year is $55;365~ The department proposes 1981-82 expenditures totaling $98,702 ($60,902 in contractual services and $31,800 for travel and per diem costs) to continue the external affairs manager. Our analysis’ suggests that the proposed expenditures for the external affairs manager should be deleted for the following reasons: 1. County Input A vailable Through Advisory Committees. During the current fiscal year, the department has established five advisory committees representing the courities which provide’ advice and recommendations to the department’ on the SPAN project. The committees include\u00b7the’ (1) California Welfare Directors Association, Management Policy Review Committee, (2) District AttorneyTech- nical Advisory Committee, (3) Data’ Processors Technical Advisory Committee, (4) Centralized Delivery System (CDS) Advisory Council, and (5) SPAN Fiscal Impact Task Force. 2. County Personnel Are Directly Involved in SPAN Development. From May through mid-July 1980, 15 county welfare department staff from 10 counties worked With state staff in Sacramento on the system\/program reqUirements re- port for SPAN. During November and December 1980, two county staff personnel worked With the state SPAN Design Team. Finally, the department has indicated that atleast six county staff will be located in Sacramento and will work With state staff during 1981-82 on various aspects of SPAN development. Because the department will have access to extensive county advice and recom- mendations on the SPAN project through advisory committees and county staff located in Sacramento, we do not find a need for an external affairs manager and recommend that funds budgeted for this position be deleted. SPAN Feasibility Study Report (FSR) We recommend that the department submit a report to the Legislature by May 1, 1981 which identifies county recommendations concerning the feasibility study report and the departments response to, the recommendations. ‘ The department.has scheduled release of the feasibility study report (FSR) on Item 518 HEALTH AND WELFARE \/ 961 the SPAN project for January 31,1981, In addition, the department is scheduled to issue a supplemental report on May 1, 1981, which identifies the fiscal impact of SPAN on a county-by-cotinty basis. . The department states that it Will hold three one-day workshops throughout the state duriri.g February 1981 in order to obtain comments and recommendations on the feasibility study. In order that the Legislature may monitor the development of the system, we recommend that the department submit a report to the Legisla- ture by May 1, 1981 listing the recommendations of counties concerning \u00b7the feasi- bility study and the department’s response. SPAN PiiotProjed We withhold recommendation on $1,676,617 ($561,645 General Fund, $899,730 federal ‘. funds and $215,242 reimbursements) budgeted for the SPAN pilot project and other develop- mental activities, pending receipt of the feasibility study and a report describing the proposed operation of the pDot project. The budget proposes $1,676,617 for personal services and equipment for opera- tion of the pilot project and other SPAN-related development activities. Of this amount, $196,000 is for computer equipment, $429,977 is for personnel, and $310,- 000 is for an interagency agreement with the Health and Welfare Agency Con- solidated Data Center. The personnel costs are for 19 computer operators and 6 data processing staff. The department has scheduled field testing of the SPAN system, in selected pilot counties, starting in October 1981, The pilot test will last 15 months, until January 1, 1983. During this period, state and county staff will test the functions to be performed by SPAN, and train county eligibility and social worker staff in SPAN procedures. To date, 16 counties have volunteered to participate in the pilot project. The department indicates that the pilot counties will\u00b7 be selected by mid-February 1981, We withhold recommendation on funds budgeted for the pilot project and SPAN development activities pending receipt of the feasibility study report and a document describing the pilot project. 1, The Feasibility Study Report (FSR) Has Not Been Issued. The State Ad- ministrative Manual (SAM) and Control Section 4 of the Budget Act require that a feasibility study report be prepared prior to the expenditure of funds for EDP projects of this magnitude. SAM requires the report to (1) define the requirements of the system being examined, (2) identify\u00b7 alternative ways of meeting those requirements, including acost\/benefit analysis, and (3) identify an implementa- tion schedule for the proposed solution. The department had not issued the feasibility study for the SPAN project at the time this analysis was written. The FSR is scheduled to be released on January 31, 1981, Until we have reviewed the proposed alternatives and implementation schedule contained in the FSR, we are unable to determine the number of person- nel and computer equipment necessary for developmental activities related to SPAN, including the pilot project. 2 .. The Legislature Needs a Document Describing the Pilot Project. The de- partment has not\u00b7 yet issued a document describing the operation of the pilot project. So that the Legislature can evaluate the department’s request, we recom- mend that the department submit a report to the Legislature by April 1, 1981, describing the proposed pilot project. The report should contain the following: (1) . an identification of the pilot counties; (2) an implementation schedule, (3) a description of the sequence in which functions will be assumed by the pUot coun- ties, (for example, will the system be completely installed in one county before it is implemented in a second pilot county, or will one function be implementedin the. m:st county and then put: in place in a second county?), (4) quantifiable 34-81685 962 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued performance criteria for evaluating the pilot, (5) a statement as to whether the pilot counties will be held harmless for AFDC error rates and if so, how such a hold harmless provision will be administered and (6) a statement as to whether the pilot counties will be held harmless for administrative costs under the depart- ment’s cost control plan and if so, how such a hold harmless provision will be administered. REFUGEE PROGRAMS The Federal Comprehensive Refugee Act of 1980 (PL 96-212) was enacted in March 1980. This law (1) establishes annual quotas for refugee resettlement in the nation, (2) imposes, effective April 1981, a three-year limit on 100 percent federal funding for the cost of providing special refugee cash assistance to individual refugees, (3) requires the states to submit plans for the provision of cash assistance and services to refugees, (4) expands the scope of the refugee program to include services to individuals from all nations, provided they meet specified criteria, and (5) authorizes a specific dollar limitation on federal support for social services to refugees. The Department\u00b7 of Social Services is the state agency designated to receive federal funds for the administration of social services and cash assistance to refugees. Refugees in Colifornio The federal government has. established national quotas on the number of re- fugees entering the United States. The quota for federal fiscal year 1981 is 217,000; Estimating the refugee population in California is extremely difficult because (1) it is difficult to track refugees who move from one state to another, and (2) there is a general lack of information at the federal level regarding the number of refugees assigned to specific states. If present trends continue, however, a large number of these new refugees will settle in California. According to the Population Research Unit of the Department of Finance, apprOximately 153,000 Indochinese refugees residedin California in October 1980, an increase of 55,000 over the estimated 98,000 in the state in December 1979. Based on the Department of Finance estimate and the total number of Indo- chinese refugees in the nation, it would appear that apprOximately 35 percent of all Indochinese refugees in the country reside in California. In addition to Indochinese refugees, California has experienced influxes of re- fugees from Cuba and other nations. The state has also begun to experience an immigration of Cuban\/Haitian entrants who have not been granted legal refugee status under the Comprehensive Refugee Act of 1980. Because these individuals have not been declared refugees, they are not entitled to the benefits outlined by the act for other new arrivals. Cuban\/Haitian entrants may, however, receive similar assistance under the provisions of the federal Refugee Education Assistance Act of 1980. The federal Department of Health and Human Services reports that 4,700 Cuban refugees have been settled in California during 1980. Reliable esti- mates of the numbers of other refugees and Cuban\/Haitian entrants in the state have not been developed. Refugee Assistonce Programs Administered by DSS Pursuant to. PL 96-212, California provides cash assistance, medical assistance, and social services to refugees. The Department of Social Services supervises the provision of cash assistance. DSS also administers the delivery of social services programs for refugees through (1) interagency and purchase-of-service agree- ments and (2) allocations to county welfare departments. The Department of Social Services estimates 109,580 and 152,297 refugees will Item 518 HEALTH AND WELFARE \/ 963 receive cash assistance during 1980-81 and 1981-82, respectively. The estimated 1980-81 caseload is an increase of 55,013 persons, or 100.8 percent, over the actual 1979-80 caseload. This anticipated increase is due to (1) expansion of the refugee assistance program to include refugees of other nationalities, and (2) continued influx of Indochinese refugees at the rate of 14,000 per month nationwide. Table 13 displays the estimated caseloads from 1979-80 to 1981-82 for each cash assistance program. Table 13 California Refugee Resettlement Program Estimated Average Monthly Cash Assistance Caseload 1979-80 to 1980-81\u00b7 Actual Estimated 197!J…8()b 1980-81 AFDC ………………………………………………………………………………………. 29,564 61,164 SSI I SSP …………………………………………………………………………………… 2,395 4,566 Nonfederal AFDC C 370 Refugee cash assistance ………………………………………………………….. 22,608 41,614 General relief ……………………………………………………….. ; ………………. . Off aid d ………………………………………………………………………………….. . 1,866 (1,706) Total Cash Assistance ………………………………………………………….. 54,567 109,580 Estimated 1981-82 85,540 6,452 388 57,772 2,145 (2,259) 152,297 Source: Department of Social Services. No caseload estimates are available for the number of refugees receiving social services from private contractors and county welfare departments. b 1979-80 data include Indochinese refugees only. C These individuals do not meet federal eligibility requirements for the AFDC program but are eligible for the state-only program. In 1979-80 all refugees were eligible for federal refugee cash assistance, and thus none received state-only AFDC. d This category includes individuals who, after three years in the country, are not eligible for cash assistance on the basis of income and are therefore terminated from aid. This provision of federal law was not effective in 1979-80. Fiscal Impact As a result of PL96-212, a greater number of individuals are eligible for refugee services and cash assistance. In addition, because of the three-year limitation on individual eligibility for refugee cash assistance, a steadly increasing portion of these refugees will no longer be eligibile for income maintenance aid which has been 100 percent federally funded. Some of these individuals will become eligible for and receive aid through state and local cash assistance programs, while others will no longer receive any cash assistance. Table 14 shows the estimated expendi- tures required for cash assistance and social services to refugees in 1980-81 and 1981-82. Refugee Assistance Staffing We recommend deletion of 19 positions proposed to adminster refugee programs because workload is overestimated and the new positions would duplicate functions performed by existing staff, for a savings of $657,041 in federal funds. The budget proposes $1,355,790 in federal funds to add 38.5 new positions to supervise the delivery of social services and cash assistance to refugees. This pro- posal includes\u00b7 $161,319 to reimburse the Hea!th and W~1fare Agen~y fo~ four . positions in the agency’s Office of Refugee Affarrs. The posltions established m the agency are discussed in our analysis of Item 053. Table 14 California Refugee Resettlement Program’ Estimated Expenditures-All Funds 1980-81 and 1981-82 (in millions) 1980-81 1981-82 Difference Program Category Federal State County Total Federal State County Total Federal State County Local Assistance AFDC ………………………………………………………………………. $90.8 $4.1 $0.5 $95.4 $136.8 $9.5 $1.1 $147.4 $46.0 $5.4 $0.6 SSI\/SSP …………………. ; ………………………………………………. 21.7 0.7 22.4 27.7 3.3 31.0 6.0 2.6 Refugee cash assistance ………………………………………….. 74.9 74.9 103.0 103.0 28.1 General relief.. …………………………………………………………. (1.9) ~). ~) (4.7) (5.0) (0.2) (2.8) – — — Subtotals ……………………………………………………………… $187.4 $4.8 $0.5 $192.7 State Administration $267.5 . $12.8 $1.1 $281.4 $80.1 $8.0 $0.6 AFDC ………………………………………………………………………. $8.4 $0.1 $0.1 $8.6 $11.8 $0.4 $0.4 $12.6 $3.4 $0.3 $0.3 Refugee cash assistance ………………………………………….. 8.6 8.6 10.9 10.9 2.3 Social Services Contracts _ ……………………………………………………………….. 24.3 24.3 40.5 40.5 16.2 County welfare departments ………. : ……………………….. 6.6 6.6 9.4 9.4 2.8 State support ……………………………………………………………… 2.8 2.8 3.6 3.6 0.8 General relief.. …….. \u00b7 …………………………………………………….. (0.1) ~) ~) (0.2) ~) ~) (0.1) Subtotals ……………………………………………………………… $50.7 $0.1 $0.1 $50.9 $76.2 $0.4 $0.4 $77.0 $25.5 $0.3 $0.3 Totals ………………………………………………………………………….. $238.1 $4.9 $0.6 $243.6 $343.7 $13.2 $1.5 $358.4 $105.6 $8.3 $0.9 Source: Department of Social Services. Does not include the costs of medical assistance provided by the Department of Health Services. Total $52.0 8.6 28.1 ~) $88.7 $4.0 2.3 16.2 2.8 0.8 ~) $26.1 $114.8 c m -a \u00bb :l1li’ …. ~ m z …. 0 \”‘1’1 CIt 0 n ;; r- CIt m :l1li’ < n m r n 0 :::I -:r c ID a. CoD ! ...... ::t: t\"l :> ~ ::t: :> Z t:I :is t\”l t:\”‘ ~ l:I:I t\”l I-< ~ CiI ~ 00 Item 518 HEALTH AND WELFARE \/ 965 Of the total DSS request, 37.5 positions would be located in the Office of Refugee Services, created July 1, 1980, and the remaining position is proposed for the Accounting and Systems Bureau. The Office of Refugee Services (ORS) consists of three units: management, program monitoring and fiscal monitoring. The Legislature authorized 26 positions in the 1980 Budget Act for refugee programs. ORSabsorbed 16 of the positions when it was created. The remaining 10 positions are assigned to other units of the department. Section 28 Letter. In a letter dated December 30, 1980, submitted pursuant to Section 28 of the 1980 Budget Act, the Director of Finance requested a waiver of the 30-day waiting period so that the Department of Social Services could expend $470,199 to establish 32 of the proposed 38.5 additional positions during the current \\ year. In response to the December 30 letter, the Chairman of the Joint Legislative Budget Committee requested that the Director of Finance approve 11 of the 32 proposed positions ($224,437). He recommended that the remaining 21 positions not be authorized at this time because of (1) inappropriate workload projections and (2) a concern that the Legislature should have the opportunity to review potential duplication between the requested positions and existing staff. Federal Funds Uncertain. Our analysis indicates that federal officials have not formally approved the specific funding level proposed for the administration of California's refugee resettlement program, and future federal appropriations may restrict the use of refugee program funds for administrative costs. In addition, the federal 1982 appropriation level for social services to refugees is lower than that anticipated by the budget. Because of this uncertainty over the amount of federal funds to support\u00b7 the administration of this program and to fund contracts, the General Fund may be faced with potentially significant funding demands in future years. Additional Workload Has Not Been Justified. The budget proposes to utilize 33 of the 64.5 new and existing positions primarily for on-site monitoring of public and private agencies which contract with DSS to provide social services to re- fugees. The department is proposing to continue and expand a service delivery network for refugees which is separate from the established network serving nonrefugee clients. The staffing request is based on estimates of 80 and 90 contracts with private agencies in 1980-81 and 1981-82, respectively. In the October 1979 to September 1980 contract year, approximately 40 private agencies contracted with DSS for this purpose. In the current contract cycle, there are 65 such agencies, rather than the 80 on which the budget proposal is based. The department advises that 99 percent of all refugees served by the resettle- ment programs reside in 15 major concentrations in the state. These refugees may receive services from county welfare departments, local school districts, and com- munitycolleges, in addition to the private provider agencies. Consequently, it is not clear that any new contracts are rieeded to provide services to refugees beyond the 65 provider agencies now under contract in 1980-81. Without documentation that 25 additional contracts (an increase of 38 percent) are needed, we must conclude that the staffing request is excessive. Excessive On-Site Visits. In addition, the proposal includes sufficient program monitoring staff to conduct on-site visits to each contractor every six weeks. Fed- eral guidelines for administration of refugee programs require \"close monitoring of all aspects\" of the refugee services program, but are silent on the frequency of visits. The state plan, which DSS submitted to the federal government in compli- ance with PL 96-212, calls for on-site program and fiscal monitoring visits at least quarterly. No information has been presented to justify visits on a more frequent basis than that identified in the state plan. Hence, we have no analytical basis to recommend approval of program monitoring staff in excess of the number re- quired to do the quarterly visits. 966 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued Monitoring of Other State Agencies. As the single state agency designated to receive federal funds, the Department of Social Services is ultimately responsible for the administration of all refugee programs. In order to carry out this responsi- bility, the Governor's proposal contains staff in DSS to monitor the activities of subcontractors of the Departments of Education and Mental Health. Our analysis indicates that. this activity is not specifically required by federal law and would result in duplication of effort between DSS and the respective departments. Duplicative Manager Positions Proposed The staffing proposal includes three staff services manager (SSM) II and four SSM I positions for 1981-82. More than 30 percent of the total workload proposed for the SSM II positions involves con- ducting visits to contractors and other local organizations. Workload for the SSM I positions includes time to perform visits to these same organizations. Our analysis has identified additional duplication of effort between these positions because both manager classifications would review the same reports and respond to inqui- ries from contractors. Duplication of Existing Departmental Functions. DSS proposes that program management and fiscal staff would each conduct separate reviews of county wel- fare department refugee programs. Our analysis indicates, however, that staff in the department's Welfare Program Operations and Adult and Family Services Divisions will continue to review the program activities of county welfare depart- ments, including those activities involving refugees. In addition, other functions proposed for the new staff appear to duplicate activities currently assigned to the translation unit of the Planning. and Review Division. Existing Staff Not Utilized for Refugee Programs. In our review of existing staff initially authorized by the 1979 Budget Act to administer refugee programs, we were unable to identify the functions of one position located in the Systems and Policy Branch of the Adult and Family Services Division. This position should be utilized for refugee resettlement programs, consistent with legislative action, before any additional positions are authorized for this purpose. SPAN Positions Limited to June 30, 1982. Our review of the positions request- ed for refugee resettlement indicates that one Associate Governmental Program Analyst and one-half clerical position are proposed to provide program input to the SPAN project. Therefore, it is our understanding that these positions\u00b7 are limited to June 30, 1982. Recommendation. We recommend deletion of (1) 18 proposed new positions ($629,911) to eliminate inappropriate workload and duplication and (2) funding for one new position ($27,131) to allow for the redirection of staff authorized for refugee programs but involved in unidentified functions, for a total reduction\u00b7 of $657,041 in federal funds. We recommend approv31 of 20.5 proposed new staff and $537,430 in federal funds. Table 15 summarizes the existing and proposed refugee program staff in the department and identifies the positions which our analysis indicates are justified. Our recommended staffing level of 45.5 total positions is based on (1) the time required for individual tasks, as identified in the department's proposal, and (2) adjustments to workload projections based on the problems identified in our re- view. STAFFING LEVELS Fair. Hearing Officers Overbudgeted We recommend a deletion of nine fair hearing officers due to overbudgeting (five staff counsel I and four review officer II positions), for a total savings of $416,138 ($220,554 General Fund, $158,132 federal funds and $37,452 reimbursements). . Background Welfare recipients have the right to appeal decisions by county welfare departments which they believe adversely affect their entitlements to Item 518 HEALTH AND WELFARE \/ 967 Table 15 Summary of Position Request Department of Social Services Refugee Resettlement Program 1981-82 Total Existing Existing LAO Recom- Legislatively- New and mended Authorized Positions Proposed Total Organization Positions Requested Positions Staff OlHce of Refugee Services Chief .................................................... 1 1 2 2 Fiscal monitoring of contracts ........ 5 12 17 12 Program monitoring of contracts and public agencies .................. 5 12 17 13 .Management ...................................... 5 12.5 -- 17.5 8.5 Subtotals .......................................... 16 37.5 53.5 35.5 Other DSS Units Operations, assessments, and au- dits ................................................ 3 3 3 Statistical services .............................. 3 3 3 Contracts .............................................. 1 1 1 Public inquiry and response ....... ~ .. 1 1 1 . Accountiilg and systems .................. 1 1 Adult and family services ................ 2 2 1 -- Subtotals .......................................... 10 1 11 10 Totals ........................................................ 26 38.5 64.5 45.5 LAO Total Recom- Recom- mended mended New Reduction Staff 1 -5 7 -4 8 -9 3.5 -18 19.5 1 -1 -1 -1 -19 19.5 assistance. Typically, a fair hearing is requested when a county action results in the denial, reduction or termination of assistance or services. The Department of Social Services' Office of Chief Referee is responsible for conducting administra- tive hearings to determine the fairness of decisions made by county welfare de- partments. The appropriate workload standard for fair hearing officers was an issue during legislative hearings on the department's budget for 1980-81. As a result, the Legis- lature deleted three hearing officer positions. The Legislature also adopted lane guage in the Supplemental Report of the 1980 Budget Act requiring the Department of Finance to evaluate the workload standard for fair hearing officers. Department of Finance Report. The Department of Finance report, submit- ted to the Legislature in December 1980, concluded that the appropriate workload standard for fair hearing officers was 194 cases per year. In other words, hearing officers should be able to hear and write an average of 194 cases annually. This productivity standard takes into consideration the number of hearing days, travel days and writing days required to produce a finished opinion, and is lower than the standard used in the past. The department's deputy director for legal affairs and the chief referee have endorsed the new workload standard. Staffing Requirements\u00b7 in the Budget Year. The department estimates that 7,932fair hearing cases will be heard and written in 1981-82. This is an increase of 153 cases above the estimated total of 7,779 for 1980-81. The number of hearing officers required to complete the estimated workload in 1981-82 is derived by dividing the estimated number of cases (7,932) by the workload standard (194). As a result of this calculation, the department requires 41 line hearing officers to meet estimated budget year workload (7,932 cases written + 194 cases per officer = 41 hearing officers). Current Staffing Level. The department states that it currently has 46 line hearing officer positions. Our records show, however, that the Legislature has authorized 50 hearing officers. The other four positions authorized by the Legisla- 968 \/ HEALTH AND WELFARE', Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued ture to perform line hearing functions have been redirected by the department to perform other activities. Of the four positions, two are currently supervisors. The remaining two positions are assigned to the central review unit which is responsible for reviewing proposed decisions for consistency with regulations and prior decisions. ' Consistent with the workload standard identified by the Department of Finance and the Department of Social Services' estimate of caseload for 1981-82, we recom- mend a staffing level of 41 hearing officers for 1981-82. This will provide the Department of Social Services with adequate staff to meet anticipated caseload. In the event that workload exceeds the department's estimate, the department will have ll\u00b7supervisors and 5 positions in the central review unit who occasionally hear cases, and can be used on a temporary basis to handle the excess . Our recommendation would result in the deletion of nine hearing officer positions that have not been justified on a workload basis. Food Stamp Positions We recommend deletion of three positions proposed in the Food Stamp Policy Coordina- tion Bureau because workload has not been documented, for a savings of $83,442 ($41,721 General Fund and $41,721 federal funds). The budget proposes $83,442 from all funds to establish' three positions in the Food Stamp Policy Coorcliriation Bureau. The bureau analyzes and interprets federal law and regulations concerning the Food Stamp program. Currently, the bureau consists of 12 professional positions and 1 clerical position. The three proposed positions are requested in order to handle increased workload due to anticipated passage of federal legislation. Our analysis indicates the following: . 1. Amount and Complexity of Workload Is Unknown. The department points out that during 1980, the federal government enacted 38 amendments to the Food Stamp Act. This resulted in increased workload for the Policy Bureau during 1980-81. Discussions with departmental staff indicate that state regulations to implement the 38 amendments will be developed and promulgated during the current year. For planning purposes, the department has assumed that an additional 38 amendments will be adopted by the federal government during 1981-82. We have no basis upon which to project the number of amendments which may be enacted by Congress in future years. The number of amendments adopted in past years, however, has been substantially less than 38. For example, in 1979, seven amend- ments were enacted, and in 1978 only one amendment was adopted. Furthermore, the complexity of the regulations, and in turn the amount of time required to write and implement state regulations\"cannot be determined in advance of the passage of specific federal legislation. 2. Food Stamp Policy Bureau Larger Than AFDC Policy Bureau. Within the department, the Fo()d Stamp and AFDC Policy Bureaus perform similar activities. Both are responsible for analyzing,interpreting and implementing federal and state policy for th~ir respective programs. Currently, the AFDC Policy Bureau has eight permanent professional positi()ns and the Food Stamp Bureau has ten perma- nent professiorial staff. Approval of the department's request for three additional Food Stamp Policy Bureau positions would provide that unit with a total of thir- teen permanent positions, or 63 percent more permanent staff than authorized for the AFDC Policy Bureau even though they perf orin similar activities. We have no data to indicate that the Food Stamp Policy Bureau needs 63 percent more staff to handle its workload than its counterpart bureau in the AFDC program . . For these reasons, we are unable to document the need for additional staff, and Item 518 HEALTH AND WELFARE \/ 969 recommend deletion of the proposed positions. We also note that it is not sound budgeting practice to establish positions in anticipation that federal legislation might be passed. Contingency staffing is generally. not provided to other state agencies that administer federally supported programs. Community Care Licensing Workload Standards Contain Unjustified Tasks We recommend a reduction of 19 positions proposed for the Community Care licensing Division to reflect (a) the deletion of unjustified tasks and (b) actual experience in filling new positions, for a General Fund savings of $454,332. . The budget proposes to add 52 new positions to the Field Operations Branch of the Community Care Licensing Division, ata General Fund cost of $1,136,745. The Field Operations Branch directly licenses community care facilities through nine offices located throughout the state. The request for additional positions is based on (1) application of a January 1980 vvorkload study of the tasks involved in licensing and evaluating community care facilities and (2) a projected increase in the number of community care facilities licensed by state staff from 12,793 in March 1980 to 15,498 in June 1982, a projected annual increase of approximately 12 percent. Workload Study. A workload study completed by the Department of Social Services indicates that the historically accepted staffing standards of 150 licensed day care or 75 licensed residential care facilities per evaluator do not accurately reflect the actual workload required to license and evaluate community care facilities. Based on a review of actual time spent and tasks performed, the workload study establishes alternative staffing standards for seven distinct categories of facilities, rather than the two broad categories utilized currently. Our review of this study has identified two components which should not be included In the workload standards: (1) evaluations of community care facilities within 90 days after intitialapproval of a license to operate (referred to as post- licensing evaluations) and (2) caseload management activities. Post-Licensing Evaluations.\u00b7 The proposed staffing standard includes time for evaluators to visit each facility within 90 days after approval of a license to operate. The department advises that these visits may reduce (1) the amount of time required for annual visits and (2) the number of complaints received regarding violations of licensing regulations. Because no data are available to document the . effects of these visits, we have no analytical basis to recommend provision for these visits in the proposed workload standard. In addition, because these post-licensing visits have not been conducted on a uniform basis in the past, we cannot assess the amount of time built into the licensing standard for this activity. Casel08d Management. The workload study also includes a factor referred to as \"caseload management.\" This activity is built into the total workload standard as a 20 percent increase to the time required for all other activities. This compo- nent includes several tasks, such as case file review and drop-in visits, which are performed as part of other tasks included in the workload study. Our analysis indicates that the department has implemented new procedures to increase staff efficiency since the time of the workload study. These changes are not reflected in the staffing standard. We recommend the portion of the staffing standards based on this caseload function be reduced by 50 percent to reflect these new procedures. This would reduce the 20 percent factor for caseload manage- ment activities to 10 percent. For the reasons given above, we cannot recommend that provision be made for the post-licensing evaluation and caseload management workload components in the workload standards for licensing evaluations. Table 16 compares the workload standards proposed by the Department of Social Services with the adjusted stand- ards we recommend, based on the deletion of the two identified components. 970 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-Continued Table 16 Department of Social Services Alternative Staffing Standards for Facilities Evaluators (Facilities per Evaluator) Facility Category Day Care ................................................................................. . Family day care ................................................................. . Other day care ................................................................... . Residential Care ..................................................................... . Foster family homes ......................................................... , Other family homes ........................................................... . Group homes for children .............................................. .. Other group homes .......................................................... .. Homefinding agencies ..................................................... . Existing Standard 150 75 Proposed Standard 129 104 115 113 fiT 51 84 . Item 518 Analyst's Proposed AdjllSted Standard 143 114 126 124 73 56 84 Projection of Licensed Facilities. Our analysis indicates that the budget's pro- jection of the number of licensed facilities in 1981-82 is based on a continuation of actual experience and appears to be valid. Actual experience throughout 1981- 82, however, may vary to the extent that some counties return the licensing function to the state, or other program changes occur. In addition, the use of a staffing standard based on the more specific facility categories will require closer tracking of facility growth than in the past. To the extent that the rate of growth in facility types with high staffing standards, such as group homes for children, is less than the overall projected growth rate, the use of prorated overall growth rates employed in the proposal will overstate the actual need for staff. The Depart- ment of Social Services advises that systems improvements to its Facilities Infor- mation System. will allow detailed tracking of' facility increases for the department's 1982--83 budget proposal. . Recommend Staffing Level for 1981-82. Based on an application of the adjust- ed staffing standards shown in Table 16 to the projected number of licenses in force as of June 30,1982, wehave developed an estimate of the staff required to license community care facilities during 1981-82. Table 17 compares the Governor's pro- posal with our recommended staff level. Table 17 Department of Social Services Field Operations Branch Comparison of Proposed Staffing and Analyst's Recommended Staffing Level 1981-82 Evaluator ........................................... . Supervisor .......................................... .. Clerical ....................................... : ....... . Manager ...... ; ...................................... . Totals ............................................... . Existing SfIlIT 149.5 24.0 SO.5 14.0 238.0\" Proposed NewSfIlIT 33.0 6.4 12.5 51.9 Proposed Total Stall 182.5 30.4 63.0 14.0 289.9 Analyst's Proposea New SfIlIT Total SfIlIT 18.5 168.0 2.4 26.4 b 12.5 63.0 14.0 33.4 271.4 This column includes 20 positions added to the Field Operations Branch during 1~1 to perform workload transferred to the state from counties. b Based on one supervisor to every 6.35 evaluators as included in the 1980 Budget Act. Item 518 HEALTH AND WELFARE \/ 971 Effective Dates of Positions. The budget proposes to establish 30 of the 51.9 positions on July 1, 1981. The remaining 21.9 positions would be established effec- tive January 1, 1982 to provide adequate staff to handle anticipated-increases in the number of licensed facilities during the year. Our analysis of the department's projection of facilities licensed indicates that a total of 14,750 facilities are expected to be licensed by December 1981. Based on our recommended staffing standard, - this workload will require the addition of 11.5 evaluators, 1.2 supervisors and 8 clericals on July 1,1981 and the remaining 12.7 positions on January t, 1982. SaJary Savings. The proposal for 51.9 new positions includes an estimate of $258,565 for salary . savings anticipated as a result of reducing gross salaries and wages required for these positions by an amount equal to (1) 50 percent of the annual salaries for those positions proposed to be established at midyear, plus (2) an additional reduction of 5 percent to allow for normal turnover and unpredicta- ble absences. The Department of Finance's budget instructions for new positions requires that (1) adjustments must be made to salary savings for dollars and personnel-year fractions to compensate for the actual number of months the posi~ tion is expected to be vacant during the year, and (2) a minimum of 5 percent salary savings be budgeted for new positions in addition to this vacancy adjust- ment; A review of Field Operations Branch experience in filling 41 new positions authorized in the 1980 Budget Act and 20 positions administratively established during 1980-81 indicates that, on average, these positions were vacant 127 working hours prior to being filled; a period equal to 7 percent of annual work time. According to the Department of Finance instructions, 7 percent, rather than 5 percent, of gross salaries and wages for the positions approved should be deducted from the. proposal to reflect the actual experience of this unit in filling newly authorized positions. Using the department's methodology for estimating salary savings, plus an additional 2 percent to reflect actual experience, we estimate salary savings of $147,732 for our recommended staffing level. Recommendation. Based on the adjusted staffing standards shown in Table 16, we recommend that the number of staff authorized for 1981-82 be increased by 33.4-19 positions (15 evaluators and 4 supervisors) less than the number request- ed in the budget. Of these 33.4 positions, we recommend that 11.5 evaluators, 1.2 supervisors, and 8 clerical positions be established effective July 1, 1981, and the remaining positions be established January 1, 1982. Based on these adjustments to the proposed position request and taking into account the salary savings needed to comply with Department of Finance budget instructions, we recommend a total reduction of $454,332 from the General Fund, consisting of $377,052 from personal services and $77,280 from operating expenses and equipment. Legal Assistance for Community Care Licensing Division We recommend that five new positions proposed to provide additional legal assistance for the community care licensing program be limited to June 30, 1982 because of probable workload savings in the future. The budget proposes $143,456 from the General Fund to establish 1.5 attorneys, 2.5 legal. assistants, and 1 clerical position in the Office of the Chief Counsel to provide legal support to the community care licensing program. The Office of the Chief Counsel (1) prepares licensure cases for litigation by the Attorney General and (2) represents the Community Care l.icensing Division in administrative hearings on license revocations and denials. The department advises that addition- allegal support is needed for these activities due to (1) increased emphasis on enforcement of licensing laws and regulations by state and county evaluator staff, (2) continued growth in the number of licensed facilities, and (3) increased num- 972 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued bers of trained licensing evaluators employed by the state. Efficient Procedures Reduce Staff Need. A major portion of the workload antiCipated for the proposed legal assistants involves the preparation of cases for attorney work. Our analysis indicates that the licensing evaluation staff\u00b7 of the department has\u00b7 recently implemented case preparation procedures which are expected to reduce the workload of these legal assistants. This workload reduction factor has not been taken into account in the proposal for ,additional legal assist- ants. Staff Need Based on Number of Evaluators. The proposal for legal staff is built on a projection of the percentage increase in state licensing staff in 1981-82. Consequently, to the extent that legislative action on the 1981 Budget Bill reduces the licensing staff, the legal staff proposal may also be subject to reduction. Existing Backlog. The department advises that the Office of the Chief Counsel processed 70 of the 134 referrals from the Community Care Licensing Division during 1979-80, leaving a backlog of 64\u00b7 cases. Our analysis indicates that (1) the number of referrals far exceeded the legal staffs output during the period June 1979 to November 1979, (2) the number of referrals per month is expected to remain constant during 1981-82, and (3) the number of cases processed by the Office of the Chief Counsel increased after November 1979 but has not kept pace with the number of new referrals. Our analysis has not identified, however,\u00b7 an acceptable backlog for this program activity. We recognize the current and budget year workload facing the Office of the Chief Counsel. Our analysis indicates that the elimination of existing backlogs by limited-term staff and increased staff efficiency may reduce the need for these positions in future years. Therefore, we recommend that approval of these five proposed positions be limited to June 30, 1982. Request for Additional Social Services Evaluation Positions We recommend the deletion of six new positions proposed to evaluate childrens services programs because existing staff can absorb this workload, fora General Fund savings of $183,097, consisting of $136,687 in personal services and $46,410 in operating expenses and equipment. . The budget proposes to add six new positions in the Operations Assessment Unit of the Planning and Review Division, at a cost of $183,097. The new positions are proposed to review over a two-year period, the (a) delivery of children's protec- tive services, (b) 24-hour emergency response system, and (c) foster care pro- grams in 10 counties. The objectives of these reviews are to: (1) Evaluate the effectiveness, efficiency and equitable local administration of services systems, procedures, regulations and\/ or operations. (2) Provide evaluation of proposed program modifications through detailed field studies and operations reviews. (3) Develop program and services information necessary for program\/policy decisions, planning and reviews by outside agencies. ( 4) Conduct an evaluation of the effect of specific children's services programs on the recipients. Our analysis indicates that additional staffing to conduct the reviews proposed for these six positions is not required for several reasons. Current Staff Not Utilized for Social Services Reviews. The Operations Assess- ments Unit currently is authorized eight positions to conduct social services re- views similar to those proposed in the budget. During the first six months of 1980-81, the eight positions were involved in assessing county delivery of food stamps and had not initiated a single review of social services activities. Although Item 518 HEALTH AND WELFARE \/ 973 24 positions were approved specifically for food stamp review in the 1980 Budget Act, only six of the positions were filled as of January 1981. Program Operations Bureau. The Family and Children's Services Program Operations Bureau (15 positions) monitors children's services programs delivered by the counties to ensure effective, equitable and efficient service delivery. This bureau also conducts special studies of high priority program issues. An example of such a special study is a detailed review scheduled to. be conducted during January and February 1981 of the children's protective services (CPS) program. In a letter dated November 24, 1980, county welfare directors were notified by the department that the CPS review would include (1) an administrative question- naire, (2) a compliance-oriented case review, (3) a review of services characteris- tics, and (4) an intake decision making survey. The Family and Children's Services Program Operations Bureau has announced that a review of foster care Will also be conducted during 1981. Because existing staff is already assigned to review those programs, additional staff is not required. Integrated Review and Improvement Studies Have Already Documented Deliv- ery Systems. A series of Integrated Review and Improvement Studies of the children's services programs was conducted in 17 counties by the Operations and Ass~ssments Unit during 1978-79. The studies identified problem areas and docu- mented the characteristics of each county's service delivery system. The depart- ment's proposal for additional staff in the Operations Assessments Unit anticipates workload in excess of two personnel-years in order to redocument the service systems previously identified. Evaluation of Family Protection Act and 24-Hour Response Systems. Pursuant to legi~lative direction, the department has committed staff in the current year to conduct evaluations of the Family Protection Act (Chapter 21, Statutes of 1977) pilot counties and the 24-Hour Response System. The evaluation designs for both studies included a client outcome component. Our preliminary review of the 24-Hour Response System report, submitted January 20, 1981, indicates that this report includes an assessment of the effects of these services on clients. Although the Family Protection Act report has not yet been submitted to the Legislature, preliminary results indicate that this effort may preclude the need for the client outcome portion of the proposed workload. Positions Authorized For the 24-Hour Response System. The 1979 Budget Act established 16 permanent positions specifically for the implementation and con- tinued monitoring of the 24-hour response system. This is one of the two programs for which the department is requesting six new positions. Our analysis indicates that current staff resources are sufficient to monitor this program adequately. Existing departmental staff are currently monitoring and evaluating the pro- grams identified in the request for six additional positions. In addition, the depart- ment has not utilized existing staff iIi the Operations Assessments Unit for social services reviews. The existing eight positions in that unit could be directed to conduct special audits and outcome evaluations of county delivered children's services programs without the addition of six new staff. We therefore recommend deletion of the six proposed new positions, for a General Fund reduction of $183,- 097, consisting of $136,687 in personal services and $46,410 in operating expenses and equipment. Interstate Compact for the Placement of Children We recommend (1) transfer of responsibility for the administration of the foster care component of the Interstate Compact for the Placement of Children from the Planning and Review Division to the Adult and Family Services Division, and (2) deletion of two proposed new positions for this activity, for a General Fund savings of $58,142. The Interstate Compact for the Placement of Children (ICPC) (Civil Code 974 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued Sections 264-274) obligates the 46 member states to coordinate the interstate placement of children in foster care and adoptive homes. Prior to a major reorgani- zation of the Department of Health in 1978, the adoptions and foster care compo- nents of California's ICPC activities were administered by a single organization in the Department of Health. After the transfer of social services programs to the Department of Social Services, however, this function was split. Currently within DSS, the Adult and Family Services Division coordinates the placement of chil- dren for adoption, and\u00b7 the Planning and Review Division is responsible for the assignment of foster care cases to appropriate county welfare departments and agencies in other states. Need for Closer Coordination. The current California ICPC designated com- pact administrator is the deputy director for Adult and Family Services. The Adult and Family SerVices Division has the responsibility for overall supervision of the state's foster care program and contains field staff and program policy staff to carry out this responsibility. Currently, four positions in the Planning and Review Divi- sionare responsible Jor (1) reviewing ICPC requests from other states and from California county welfare departments for home evaluations and (2) monitoring the supervision of foster care placements in California from\u00b7 other states. Because (1) the Adult and Family Services Division contains a field monitoring capacity and (2) major policy decisions in the foster care program are coordinated within the Adult and Family Services Division and should incorporate problems identi- fied with the interstate flow of children, California could more effectively carry out its obligations under the ICPC if the administration of the entire compact was consolidated under the direct supervision of the designated compact administra- tor. Adclitionill Staff NotRequired Existing resources within the Family and Chil- drens Services Branch of the Adult and Family Services Division can meet the anticipated workload identified in connection with the request for two additional positions to administer the foster care component of ICPC. The organization responsible for foster care program policy is the Family and Children's Services Policy Unit. The budget proposes to continue three positions in the Family and Children's Services Policy Unit, which were initially authorized in the 1979 Budget Act. This unit, consisting of 20 authorized positions, experienced a 17 percent vacancy rate in 1979-80, for an average of 3.4 vacant positions. During the first six months of 1980-81, the vacancy rate for this unit was 21 percent. . The department advises that, as of November 1980, all positions authorized in this unit have been filled. In order to justify the need for continuation of the three limited-term positions, the department has identified several tasks that have been delayed due to past vacancies. One of these tasks is a response to program prob- lems related to ICPC foster care cases. Our analysis indicates that the continuation of the three limited-term positions, combined with the recent filling of positions which were previously vacant, will enable the Family and Children's Services Policy Unit to assume the responsibilities identified in the department's proposal for two ICPC positions. Therefore, we recommend (1) a transfer of the function of ICPC foster care and related positions from the Planning and Review Division to the Adult and Family Services Division and (2) deletion of two positions proposed for the Planning and Review Division, for a General Fund savings of $58,142 consisting of $45,566 in personal services and $12,576 in operating expenses and equipment. Item 518 HEALTH AND WELFARE \/ 975 Systems and Policy Branch Reorganization We withhold recommendation on $438,148 ($370,673 General Fund and $67,475 in federal funds) budgeted for 11 positions in the Systems and Policy Branch of the Adult and Family Services Division, pending receipt of detailed workload data for these positions. The budget proposes continuation of 13 of the 14 existing positions for the Systems and Policy Branch of the Adult and Family Services Division. The respon- sibilities of this branch include forms and systems development for all the social services programs administered by the Adult and Family Services Division. Dur- ing our review of the staff requests for this division, however, we learned that the Systems and Policy Branch will be dissolved prior to the beginning of 1981-82, and that 13 positions will be assigned to other branches within the division. The re- maining position, authorized to provide program input to the Statewide Public Assistance Network (SPAN) project, expires June 30, 1981. Two of the 13 continu- ing positions are proposed for a limited term, expiring June 30, 1982, to provide input to SPAN. The Department of Social Services advises that this branch will be dismantled in order to eliminate duplication and inefficient management practices. Table 18 shows the department's organizational plan for positions currently assigned to the Systems and Policy Branch. Table 18 Department of Social Services Reorganization of Systems and Policy Branch Proposed Organizational Location of Redirected Positions Branch Family and Children's Services Systems Bureau (New) Social Services Planning Branch Adult Services Branch Total Positions 1 Staff Services Manager II 1 Staff Services Manager I 2 Associate Governmental Program Analyst (AGPA) AGPA (SPAN) Social Services Consultant (SSC) III (1) AGPA-Expires June 30, 1981 (SPAN) 1 AGPA 1 SSC II 1 Staff Services Analyst 1 Management Services Technician 1 Office Technician AGPA SSA (SPAN) 13 We have identified three problems with this proposed reorganization: (1) the budget does not identify workload which justifies additional staff in the units currently anticipated to receive the redirected positions, (2} administrative effi- ciency anticipated as a result of the proposed redirection is not reflected in reduc- tions of requested 1981-82 staff, and (3) the absence of workload data regarding the reorganization makes it difficult for the Legislature to review the staffing needs of the Adult and Family Services Division. Because of these problems, we withhold recommendation on $438,148, ($370,673 from the General Fund and $67,475 in federal funds) -the funding necessary to continue the 11 non-SPAN positions. We recommend that the Department of Social Services prepare and submit detailed workload justification for the con- tinuation of these 11 positions prior to legislative hearings on its budget. 976 I HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-Continued Office of ~overnment and Community Relations We recommend: Item 518 1. The deletion of 3 govemment liaison positions and 2.5 clerical positions because they duplicate functions of other authorized personnel, for a savings of$212,342 ($116, 788 General Fund and $95,554 federal funds). 2. The deletion of a staff services manager H in the Welfare Program Operations Division and a staff services.manager II in the Adult and Family Services Division, because the positions duplicate functions of authorized positions, for a savings of$92,926 ($'10,125 General Fund lllid $22,801 federal funds). Background .The Office of Government and Community Relations assists in the formulation of deparhnental policy and represents the deparhnent before the Legislature, local governmental agencies and community groups. The office con- sists of six units, as shown in Chart 1. The office reports to the director of the deparhnent and is separate from the deparhnental divisions responsible for super- vising the administration of welfare and social services programs in California. Our analysis suggests that several of the units in the office duplicate the activities of various line bureaus of the deparhnent. Local and Small County liaison Positions. The Local Government Liaison Unit consists of one professional position who participates in the development of deparhnental policies and provides policy ~terpretation between the deparhnent and county welfare directors, boards of supervisors and local government officials. This unit is also responsible for conveying local government positions on welfare issues to the deparhnent. The Office of Government and Community Relations also contains one person on contract as the Small County Liaison. This position is responsible for providing advice and recommendations from small counties to the deparhnent. Chart 1 Office of Government and Community Relations . , OFFICE OF GOVERNMENT AND COMMUNITY RELATIONS I I I I I ASSISTANT TO THE DIRECTOR, LEGISLATIVE FEDERAL LOCAL SOUTHERN REGION COORDINATOR LIAISON GOVERNMENT LIAISON I I DISASTER ASSISTANT DIRECTOR, RESPONSE COMMUNITY AFFAIRS UNIT -i 01 t-oo ~ ~ ~ ~ \"\"l' ~ ........ ~ 978 I HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued Our analysis suggests that the duties of the local government and the small county liaisons duplicate the responsibilities of other positions within the depart- ment. For example: The department has 10 deputy directors who assist in the formulation of departmental policies and who are responsible for representing the depart- ment before local government officials. Of the 10 deputies, one is responsible for providing policy interpretation and direction to county welfare depart- ment directors and local government officials in the administration of income maintenance programs. Another deputy performs the same functions in the delivery of social services throughout the state . There are also various program operation bureaus within the department which are responsible on a daily basis for interpreting federal and state regula- tions and providing management consultation to county welfare departments. In addition, the program staff are responsible for \"providing effective feed- back to top DSS administration on local concerns and problems from both welfare administrative officials and outside organizations.\" In the Welfare Program Division alone there are currently 49.5 professional positions author- ized to provide policy interpretation and consultation to local officials on cash assistance programs. Because the local and small county liaisons duplicate the functions of other authorized positions in the department, we recommend that they be deleted, for a savings of $101,575. Federal Liaison. The Federal Liaison Unit is responsible for reviewing state plans for cash grant and social services programs prior to their submission to the federal government. In addition, the unit is responsible for tracking federal bills and reviewing proposed federal regulations. . Our review of departmental operations, however, found that day-to-day con- tacts with the federal government are carried out by the deputy directors and their program staffs. For instance, program staffs review and propose changes in the various state plans. In addition, there are separate policy bureaus in the depart- ment responsible for analyzing proposed federal legislation and regulations. As an example, the Welfare Program Operations Division is authorized 36.5 professional positions to review proposed federal laws and regulations for the AFDC, SSI\/SSP, Food Stamp and Child Support Enforcement programs. Because the federal liaison duplicates the activities of other authorized positions, we recommend that funding for the unit be deleted, for a savings of $56,069. We also recommend a corresponding reduction of 2.5 clerical positions. This would leave the Office of Government and Community Relations with four cleri- cal positions for the ten remaining professional positions. Assistant to the Director, Southem Region. It is our understanding that the duties of this position are similar to those of the local government liaison, but limited to southern California. The position participates in the development of departmental policies and provides policy interpretation between the department and local government officials, including county welfare departments, in southern California. Our analysis suggests that these duties duplicate the functions of the deputy directors and various operation bureaus within the department. Currently, this position is exempt from civil service hiring requirements. Because this position is performing some of the workload of authorized positions within the program operations bureaus of the department, however, we recommend the deletion of ~ a staff services manager II position within the Welfare Program Operations Divi- sion, for a savings of $45,602. Item 518 HEALTH AND WELFARE \/ 979 Assistant Director, Community Affairs. The department's organization hand- book states that in order to improve. the administration of welfare programs, this position is responsible for a \"variety of special projects involving liaison between the department, the. Legislature, the private business sector, and numerous com- munity groups .... \" In addition, the position \"manages the American Indian Fos- ter and Day Care Home Recruitment Project and serves as the American Indian Coordinator for all aspects of departmental operations affecting that population group.\" Our analysis suggests that this position duplicates activities of other staff in the department. First, one of the responsibilities of this position is to improve welfare administration. As noted previously, the department has various deputy directors and program staff responsible for providing policy interpretation and direction to local governments in the administration of welfare programs. Second, to. the extent that this position works on American Indian Welfare programs, it duplicates activities of positions currently authorized in the Adult and Family Services Division. For example, the 1980 Budget Act authorized one posi- tion for the adoptions branch to work specifically on Indian adoptions. The depart. mentalso requested one position to implement the federal Indian Child Welfare Act. The Legislature, however, denied the requested position, based on its deter- mination that adequate personnel were available in the Adult and Family Services Division. The Assistant Director, Community Affairs position is exempt from civil service hiring requirements. However, because the position in the Office\u00b7 of Government and Community Affairs appears to perform some of the workload of other posi\u00b7 tions, we recommend the deletion of a staff services manager II within the Adult and Family Services Division, for a savings of $47,324. Health and Welfare Agency DEPARTMENT OF SOCIAL SERVICES Items 518\u00b7101 from the General Fund Requested 1981-82 ......................................................................... $2,539,486,144 Estimated 1980-81 ............................................................................ 2,751,983,412 Actual 1979-80 .................................................................................. 2,309,996,836 Requested decrease $212,497,268 (-7.7 percent) Total recommended reduction .................................................. $20,682,362 Total recommendation pending\u00b7 ................................................ $32,398,314 a General Fund totals for all local assistance elements. 1981-82 FUNDING BY ITEM AND SOURCE Item Description 518-101-OO1-Local Assistance -(a) AFDC cash grants ............................................. . -(b) SSI\/SSP cash grants ........................................... . -(c) Special adult programs .... ................................ -(d) County welfare department administration -(e) Special social services programs ..... , ............... . -(f) Community care licensing ............................... . -(g) Local mandate ................................................... . Fund General Amount $2,539,486,144 (1,215,955,900) (1,051,005,000) (3,728,800) (1l0,092,643) (143,782,101) (6,463,700) (8,458,000) 980 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued Item 518-101-001 appropriates all of the General Fund support for the state share of the local assistance programs administered by the Department of Social Ser- vices. We discuss the programs separately in the following six sections. We have identified the Budget Bill reference by the appropriate letter, such as 518-101 (a) for the AFDC cash grant program. Department of Social Services AID TO FAMILIES WITH DEPENDENT CHILDREN Item 518-101 (a) from the Gen- eral Fund Budget p.HW 163 Requested 1981--82 ........... ; ...... ...................................................... $1,215,955,900 Estimated 1980-81 ........... ................................................................. 1,195,856,900 Actual 1979-80 .................................................................................. 964,760,500 Requested increase $20,099,000 (+1.7 percent) Total recommended reduction.................................................... $4,393,213 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Performance Standards for Administering the AFDC Program. Reduce by $4,393,213. Recommend General Fund reduction of $4,393,213 from Item 518-101-001(a), AFDC cash grants, because funds are overbudgeted give the application of fiscal sanctions. GENERAL PROGRAM STATEMENT Analysis page 992 The Aid to Families with Dependent Children (AFDC) program provides cash grants to children and their parents or guardians whose income is insufficient to meet their basic needs. Eligibility is limited to families with children who are needy due to the death, incapacity, continued absence or unemployment of their parents or guardians. The Budget Bill contains an in-lieu appropriation for the Aid to Families with Dependent Children (AFDC) program. This does not limit program expenditures because the Welfare and Institutions Code provides a continuous appropriation to finance cash grants to eligible children, and their parents or guardians, under the program. In addition, language in the Budget Bill provides that the Director of Finance can increase AFDC expenditures due to (1) changes in caseload or pay- ment standards, (2) enactment of a federal or state law or (3) a final court decision on the merits of a case. ANALYSIS AND RECOMMENDATIONS Current Year Deficiency The budget estimates that there will be a General Fund defiCiency of $41,924,650 in the current year for the AFDC program. The deficiency is due to caseload increases in the AFDC-unemployed parent program resulting from: (a) regula- tions issued by the department following the United States Supreme Court deci- sion in Westcott v. Califano and (b) a greater than anticipated number of unemployed\u00b7 parents due to the. recession. The 1980 Budget Act assumed a caseload of 201,070 recipients in the AFDC- unemployed parent program during 19~1. Based on caseload data through August 1980, the department has revised its current year estimate upward by . 51,350 recipients, to 252,420. Of this increaSed caseload, the department estimates that approximately 37,486 additional recipients, or 73 percent, are due to the Westcott regulations and the remaining 13,864 are related to the recession. The cost for the new recipients added as a result of the Westcott regulations is estimat- ed at $35,410,100 for 19~1. Of this amount, the state share is $26,320,300, the Item 518 HEALTH AND WELFARE \/ 981 county costs are $3,186,900, and the federal government's share is .$5,902,900. (This issue is discussed later in this analysis.) . It is possible that the General Fund deficiency in the current year could be greater than estimated due to recent increases in the AFDC-family group case- load. Current year estimates of expenditures for the AFDC-family group program are based on two months of actual caseload experienceijuly and August 1980). Actual caseload data, which is now available for September and October 1980, show that the family group caseload is above the estimate shown in the 1981-82 budget document. To the extent that the family group caseload exceeds current year projections, additional General Fund costs will be incurred. Because the Welfare and Institutions Code provides a continuous appropriation to finance cash grants to eligible children and their parents, a deficiency bill is not required to increase the amount of funds for this program. Control Section 32.5 of the 1980 Budget Act authorizes the Director of Finance, after notifying the Legislature, to approve increases in expenditures for the AFDC program\u00b7 which are in excess of the amounts appropriated for the 1980-81 fiscal year. Budget Year Proposal The budget proposes program expenditures of $1,215,955,900 from the General Fund in 1981-82. In addition to these funds, the budget provides $5,762,000 from the General Fund for costs related to the AFDC program mandated by the state's legislative and executive branches. Thus, the state's General Fund cost for AFDC grants and local mandates in fiscal year 1981-82 is proposed at $1,221,717,900. This is an increase of $20,263,500, or 1.7 percent, over estimated 1980-81 expenditures. Total expenditures from all funds for AFDC cash grants are proposed at $2,662,- 136,700, which is an increase of $108,285,100, or 4.2 percent, over estimated current year expenditures. In addition to these funds, the budget includes federal funds of $103,007,300 for cash grants to refugees (Indochinese, Cubans and others) who do not meet the eligibility requirements for existing welfare programs, but who will receive a grant amount equal to the AFDC payment level as a result of federal requirements. . Total expenditures, including AFDC grants, local mandates, and payments to refugees, are proposed at $2,765,144,000, which is an increase of $136,359,800, or 5.2 percent, above estimated current year expenditures. Table 1 shows the total es- timated expenditures for AFDC grants in 198Q..:.81 and 1981-82. Table 1 Total Expenditures for AFDC Grants Proposed 1981-82 Ertimated Percent Funding 1981)..81 Amount Increase AFDC Federal ........................................................................... . $1,252,372,000 $1,338,361,800 6.9% State ............................................................................... . 1,195,856,900 1,215,955,900 1.7 County ........................................................................... . 105,622,700 107,819,000 2.1 Subtotals ..................................................................... . $2,553,851,600 $2,662,136,700 4.2% Local Mandates Federal ........................................................................... . State ............................................................................... . $5,597,500 $5,762,000 2.9 County ......................................................................... ... -':5,597,500 -5,762,000 2.9 Subtotals ..................................................................... . Refugees Federal ........................................................................... . $74,932,600 $103,007 ,300 37.5% State ........................................................................... . County ........................................................................... . Subtotals ..................................................................... . $74,532,600 $103,007,300 37.5% Special adjustments ....... , ............................................. . (-) (46,000,800) -(-) Totals ................... .......................................................... $2,628,784,200 $2,765,144,000 5.2% ,. CD 6 ts ... ...... Table 2\u00b7 Expenditures forAFDC Grantsby Category of Recipient (in millions) 0 ::I: \"II t\"l ,. > ~ ~ ;:: ::I: iii > lit Z Recipient Family group …………………………………………… . Unemployed parent ….. ~ ………………………. : .. … Foster care ………………………………………………. . Aid for adoption of children ………………….. . Child support incentive payments to coun- ties ……………………………………………………. . Child support collections from absent par- ents ……………………………………………………. . Prooared 1!J81-82 Estiniated 1!NJ…81 Amount Percent Chao~ Total Federal State County Total Federal State County Total Federal State County $2,121.1 $1,080.6 $928.1 $112.4 $2,212.1 $1,135.6 $960.3 $116.2 4.3% 5.1% 3.5% 3.4% 345.4 161.8 163.8 19.8 356.5 191.0 147.6 17.9 3.2 18.0 -9.9 -9.6 183.7 43.9 132.9 6.9 192.8 46.9 138.6 7.3 5.0 6.8 4.3 5.8 3.0 3.0 3.2 3.2 6.7 6.7 14.7 13.5 -28.2 15.1 12.9 -28.0 2.7 -4.4 -0.7 -99.5 -48.6 -45.5 -5.4 -102.5 -50.3 -46.6 \”‘:5.6 3.0 3.5 2.4 3.7 =e 0 ::; ~ :::I: t\”l t’\” 0 ~. m .\” !:I:I m t\”l Z 0 m Z … n :::I: ;:: Totals ……………………………………………………. . — — — — — $2,553.7 $1,252.4 $1,195.8 $105.5 $2,662.1 $1,338.3 $1,216.0 $107.8 4.2% 6.9% 1.7% 2.2% 0 lIIII m Z J, 0 :::I -so c CD a. -r-1\” (l) 3 en -00 Item 518 HEALTH AND WELFARE \/ 983 Table 3 Proposed General Fund Budget Increases for AFDC Grants 1981~ 1980-81 Current Year Revised ………………………………………………………. .. A. Baseline. Adjustments 1. Basic Caseload ………………………. , ……………………………………………….. . 2. Cost-of-living increase a. 1980-81: Reduced.costs as a result of providing a 13 percent increase instead of 15.48 percent increase ……………………….. . b. 1981-82: \u00b74.75 percent increase ………………….. ………………………. Subtotal ………………………………………………………………………………. . 3. Refugees-terminate 100 percent federal funding for time lim- ited refugees a. Indochinese …………………………………………………………………………. . b. Cubans …………………………………………… : .. ………………………… ; ……. . Subtotal ………………………………………………………………………………. . 4. Court cases a. Northcoast Coalition-vs-Woods …………………………………………. . b .. Vaessen-vs-Woods ……………………………………………………………….. . c. Youakim-vs-Miller ………………………………………………………………. . d. Westcott-vs-Califano …………………………………………………………… . e. Garcia-vs-Swoap (80 percent supplementation) ………………. . Subtotal ………………………………………………………………………………. . 5. Regulations a. Overpayment\/recoupment. ………………………………………………. .. b. Stepparent responsibility ………………………………………………….. . c. Foster care eligibility ………………………………. , ……………………….. . d. Federal budgeting regulations …………………………………………. . e. Eliminate passing grade requirement ………………………………. . Subtotal ………………………………………………………………………………. . 6. Reduced grant costs due to: a. Increases in minimum wage …………………………………………… … b. Increases in Retirement, Survivors, Disability and Health Insurance …………………………………………………………………………….. . c. Extension of unemploymeritbenefits …………………………….. … Subtotal ………………………………………………………………………………. . 7. Special adjustments a. Limit eligibility for state AFDC-U program ……………………. . b. Eliminate 80 percent supplementation …………………………….. . Subtotal ………………………………………………………………………………. . 8. Reduced costs due to increased child support collections ……. . 9. Reduced costs for child support incentive payments …………… . B. Total Budget Increase ………………………………………………………………… . C. Proposed 1981-82 Expenditures ……………………………………………….. .. Cost -$9,905,900 65,813,000 $5,118,300 321,000 1,859,400 -1,241,600 6,600 2,060,500 8,000 -66,800 -71,600 -957,500 1,277,4QO 890,200 -$2,512,600 -2,228,800 -1,730,900 -28,780,200 -6,423,000 Total $1,195,856,900 -5,561,900 $55,907,100 ~,439,300 $2,692,900 $1,071,700 -$6,472,300 – $35,203,200 -$1,078,300 -696,300 ($20,099,000) $1,215,955,900 984 I HEALTH AND WELFARE . Item 518 AID TO’ FAMILIES WITH DEPENDENT CHILDREN-Continued Expenditures by Category of Recipient AFDC grant payments are provided to four categories of recipients, as shown in Table 2. Total payments from all funds for the family group component- typically a mother with one or more children-are proposed at. $2,212.1 million for 1980-81, an increase of 4.3 percent over the current year. In addition, the 1981-82 budget proposes an expenditure of $356.5 million, from all funds, for cash grants to unemployed parents with dependent children. This is an increase of 3.2 percent over the current year. Finally, the budget proposes an expenditure of $192.8 million in 1981-82 for grants to children receiving foster care in boarding homes and institutions, which is an increase of 5 percent over the current year. Proposed General Fund Budget Increases Table 3 shows the changes in General Fund expenditures for the AFDC pro- gram proposed in the 1981-82 budget. General Fund expenditures in the budget year will increase by $20,099,000 over estimated current year expenditures. This amount consists of $65,111,000 in increased expenditures and $45,012,000 in offset- ting savings. Most of the proposed increase-85.9 percent, or $55,907,I~is related to cost- of-living increases for- AFDC grants. AFDC Caseload The budget projects that the AFDC caseload will increase by 12,210 persons, or 0.8 percent, in 1981-82 as shown in Table 4. Table 4 AFDC Average Monthly Persons Receiving Assistance 1980-81 and 1981-82 Pro8f8Ill AJi’DC-Fl!IIlily Group ……………………………………………… , ……… .. AFDC-Unemployed .. , ……………………………………………………… .. AFDC-Foster Care …………. , ………………………………………………. . AFDC-Aid for Adoption of Children ……………………………… .. Totals …………………………………………………………………………….. . Estimated JfJ(I)..8J $1,214,410 252,420 26,320 1,840 $1,494,990 Proposed J!J8J-82 $1,227,310 251,770 26,280 1,840 $1,507,200 Percent Change 1.1% -0.3 -0.2 0.8% Item 518 HEALTH AND. WELFARE \/ 985 SPECIAL ADJUSTMENTS PROPOSED BY THE ADMINISTRATION Fiscal Impad ~f Special Adjustments and Cost-of-Living Increases Table 5 shows the \”special adjustments\” and cost-of-living reductions from what current law requires proposed by the budget for the AFDC program in 1981-82. The table reflects savings due to both reduced grant and administrative costs. The General Fund reductions total $124,047,BOO. Of this amount, savings resulting from cost-of-living adjustments that are less than what existing law requires total $87,- 174,000. In addition, the administration proposes to limit eligibility for the state AFDC-U program which will result in reduced costs of $30,013,900. The budget also proposes to modify the AFDC budgeting system which will reduce costs by $6,~9,900. 1. Special Adjustments Table 5 Proposed Budget Reductions General Fund 1981-82 a. Limit eligibility for the state AFDC-U program Cost (1) Assistance payments,……………………………………………………. -$28,780,200 (2) Administration ……………………… ,…………………………………… -1,233,700 Subtotal ………………….. ‘ …………………. ;~ ……………………………. . b. Eliminate 80 percent supplementation of AFDC grants (1) Assistance payments ………………………………………. ;…………. -6,423,000 (2) Administration ………………………………………………………….. ;. -436,900 Subtotal ……………………………………………………………………… . 2. Cost-of-living increase-Reduce cost-of-living from 11.2 per- cent to 4.75 percent …………………………………………………………….. . Totals …………………………………………………………………………………………. . Grant Payments ………………………………………………………………………. . Administrative Costs ……………………………………………………………… . Total -$30,013,900 -,.$6,859,900 -$87,174,000 -:$124,047,800 (-$122,377,200) ( -$1,670,600) Chart 1 shows the fiscal effect oftha proposed\u00b7 reductions on AFDC grant expenditures for 1981-82. Under clirrent law, General Fund costs forAFDCgrants (including local mandates)’ would total $1,344.2 million in 1981-82. H theadminis- tration’s proposed reductions are adopted, General Fund expenditures for AFDC grants (including local mandate costs) . in 1981-82 would be $1,22L8 million, a difference of $122.4 million. Limit Eligibility for the State AFDC-U Program. The AFDC-unemployed parent program provides cash assistance toneedychil- dren and their’ parents who are unemployed. State participation in the AFDC program is optional. Currently 26 states, including California, participate with the federal government in providing cash grants to children and their parentswho are unemployed. In addition, California provides cash assistance to children and their unemployed parents who do not meet the federal eligibility requirements for the AFDC-U program. The state AFDC-U program is funded solely by state and county funds. At the time this Analysis was written, it was our understanding that the administration proposed to limit eligibility for the state-oilly program to fami- lies where neither parent is employed full time. As a result, families with a full time employed parent and an unemployed parent, who did not meet feideralrequire- , ments, would not be eligible for the state AFDC-U program. 986 \/ HEALTH AND WELFARE Item 518 AID TO FAMILlES\u00b7WITH DEPENDENT CHILDREN-Continued Chart 1 AFDC Expenditures 198o-B1and1981-82 Dollars (in millions) $1,475 1,450 1,425 1,400 1,375 1,350 1,325 1,300 1,275 1,250 1,225 1,200 1,175 1,150 1,125 1,100 100 ImiK@ul !~juC~f~ents all Governor’s Budget Federal State 198G-81 (Estimated) County .. -. ~~~~7:~e~~a~~on 11.2 % cost-at-living +- Additional Funds ] Eliminate80% ~ Supplementation ~ Limit AFDC-U Eligibility ~ 11.2% cost-ot- living 1 Additional Funds Federal State 1981-82 (Proposed) County Eliminate 80 Percent Supplementation of AFDC Grant$. Current federal regulations allow states to adopt one of three methods for calculating a- recipient’s monthly grant payment. These options are: (a) prior- month budgeting with supplementation of grant payments, (b) prior-month budgeting with no supplementation, provided the assistance payment is issued within a specified time frame, and (c) concurrent (prospective) budgeting. Currently, California calculates a recipient’s grant payment using prior-month budgeting with supplementation of the grant: Under this method; the recipient’s grant in the current month is based on actual income received in a prior. month. If, as a result of this calculation, the recipient’s combined grant and income is less than 80 percent of the maximum aid payment standard, the recipient is entitled to. a supplemental grant. The value of the supplemental grant is that amount which, when combined with the grant and income, equals 80 percent of the maximum graIlt. At the time this Analysis was written, it was our understanding that the adminis- tration proposes to change its regulations so that the recipient’s grant is calculated using prior-month budgeting with no supplementation. Under this proposal, the state is required. to provide the assistance\u00b7 payment .within 25 days of the prior month used for calculation of the grant. Currently, counties do not meet the 25 day requirement. Under the current system, income received between the first and last day of month one (budget month)\u00b7 is reported to the county welfare department in month two. This informa- tion is used to calculate the grant prOvided in month three (payment month). As a result, there is a 30-day lag between the budget month (month one-used to calculate the grant) and the payment month in which the grant is received. The administration proposes to change the budget month from the first through the Item 518 HEALTH AND WELFARE \/ 987 last day of the month, to the seventh day of one month through the sixth day of the next month. This change would allow the checks provided on the first and fifteenth of the month to fall within the necessary 25-day period. Cost-of-Living Increase Current Law and the Administration s Proposal State law requires that recipi- ents of assistance under the AFDC family group and unemployed parent programs receive an annual cost-of-living increase on their grants effective July 1 of each year. The cost-of-living adjustment required on July 1,1981 is based on the change in the California Necessities Index from December 1979 to December 1980. It is currently estimated that the required cost-of-livingadjustment is 11.2 percent. The budget proposes to suspend, during 1981-82, the automatic cost-of-living increase required by . current law and. to provide instead a 4:75\u00b7 percent increase in AFDC grants. . Maximum Payment Levels. Table 6 shows the maximum AFDC grant levels for selected family sizes assuming: (a) a 4.75 percent cost-of-living adjustment, as proposed by the administration and (b) an .11.2 percent increase, as reqUired by current law. If a 4.75 percent increase is provided, the grant for a family of three will increase by $22 to $485. Under current law, the grant would increase by $52 to $515. . . Historically, AFDC grant levels for children residing in foster care have been established by county boards of supervisors. On occasion, the counties adjusted the grant amounts without taking changes in the Consumer Price Index into consider- ation. AB 8 limited state reimbursement for increases in AFDC foster care grants to the same percentage increase applied to grants for the AFDC family group and unemployed parent program. Chapter 511, Statutes of 1980 (AB 2982), suspended this provision by providing for a 15.48 percent increase in foster care grants during the entire 19BQ..:.81 fiscal year. Counties may increase the foster care grants by more than 15.48 percent during the current year, but they will have to fund\u00b7 the full cost of the larger grant .amount. In 1981-82, under cUrrent law, state reimbursement for cost-of-livingincreases for foster care will be the same as that provided for the family group and unemployed parent grants. Table 6 Maximum AFDC Grant Levels 1980-81 and 1981-82 J!J8J-82 J!J80.8J Family EYtimated Size Ian-Iun ‘8J 1 ………………………………………………………………………… $227 2 ………………………………………………………………………… 374 3 ………………………………………………………………………… 463 4 ……………… :……………………………………………………….. 550 5 ………………………………………………………………………… 628 Governor’s Proposal ~75Percent Amount Chlll!ge $238 $11 392 18 485 22 576 26 658 30 Current Law 11.2 Percent Amount Change $252 $25 416 42 515 52 612 62 698 70 Ji’iscal Effect of Various Cost-oE-Living Increases. Table 7 shows the fiscal ef- fect on the General Fund of providing a 4.75. percent cost-of-livingincrease and . a 11.2 percent adjustment. The administration’s proposal to provide a 4.75 percent increase will cost $65,813,000 from the General Fund. An 11.2 percent cost-of-living adjustment would require an additional $87,174,000 from the General Fund. 988 \/ HEALTH AND WELFARE AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Table 7 Cost-of\u00b7Living Expenditures for AFDC Grants Assuming Various Cost-of\u00b7Living Increases General Fund 1981-82 CunentLaw (11:2 Percent) General Fund ……………………………………………. :… $152,987,000 Administration s Proposal (4.75Percent) $65,813,000 Item 518 Difference $87,174,000 Previous Increases in AFDC Grants. Each month, recipients of assistance un\u00b7 der the AFDC program receive a payment consisting of two components: (1) the basic grant and . (2) the cost-of-living adjustment. The basic grant represents the cost of obtaining necessary living needs such as food, clothing, shelter and utilities. State law requires that the basic grant amount be adjusted annually to reflect changesin the cost of living. The purpose of the cost\u00b7of.living adjustment is to help the purchasing power of welfare recipient grants keep pace with the rising costs of food, shelter, transportation and other necessities of life. Prior to July 1973, AFDC grants were not regularly increased to reflect the impact of inflation. For example, between October 1951 and June 1973, the grant for a family of three was increased six times. Table 8 shows the increases in the AFDC grant for a family of three since July 1973. This table shows that: Starting in July 1973, cost\u00b7of\u00b7living ~djustments have been provided in each year except 1975-79. Cost.of\u00b7living increases were suspended during 1975-79 after the pas~age of Proposition 13. (The Welfare ReformAct of 1971 (Chapter 578, Statutes of 1971) required, effective July 1, 1973, that AFDC grants be increased annually based on the change in the Consumer Price Index.) Effective January 1977, AFDC grants were increased by six percent. This increase was in addition to the annual cost\u00b7of\u00b7living adjustment required by the Welfare and Institutions Code. For the first six months of 1980-81 aune-December 1980), grants were in\u00b7 creased 15.48 percent above the grant amounts provided in 1979-80. During the last six months of 1980-81 aanuary -June 1981), grants were reduced to a level which was 13 percent above the amounts provided in 1979-80. Grant Table 8 AFDC Grant Increase for a Family of Three 1973-74 to 1981-82 Period Covered. Amount 1973-74 ……………………………………………………………………………………………. $243 1974-75 ……….. ,…………………………………………………………………………………. 262 1975-76 ……………………………………… ,…………………………………………………… 293 1976-77 July’:’December 1976 …………………………………………………………………… 319 January-June 1977 …………………………………………. , …………. ;……………… \u00b7338 1977-78 ……………………………………………………………………………………………. 356 1978-79 ……………………………………………….. ;.; ………… ,……………………………. 356 1979-80 …. :………………………………………………………………………………………… 410 1980-81 July-December 1980 ……….. ,………………………………………………………… 473 Jan)lary-June 1981 ………………………………………………………………………. 463 1981-82 (Proposed) ………………………………………………………………………… 485 Does not equal 15.48 percent due to rounding. Change Amount Percent $19.00 7.8% 31.00 11.8 26.00 8.9 19.00 6.0 18.00 5.3 54.00 15.2 63.00 15.4\u00b7 -10.00 -2.1 22.00 4.75 Item 518 HEALTH AND WELFARE \/989 California’s AFDC Grants Compared to Other States. Table 9 compares the maximum grant levels for the 10 most populous states for family sizes three, four, and five, as of January 1, 1981. Sf1ltes Table 9 State Comparison\u00b7 Maximum AFDC Grant Levels January 1. 1981 California ……………………………………………………………………………………………………….. . New york ………………………………………………………………………………………………………. .. Texas …………………………………………………………………………… : ……………………………….. .. Pennsylvania …………………………………………………………………………………………………. .. Illinois ……………………………………………………………………………………………………………. .. Ohio ……………………………………………………………………………………………………………… .. Michigan ………………………………………………………………………………………………………. .. Borida ……………………………………………………………………………………………………………. . New Jersey ……………………………………………………………………………………………………. . Massachusetts ……………………………………………………………………………………………….. .. In descending order by state population. Three $463 394 116 332 302 263 432 195 360 379 Family Size Four $550 476 140 395 368 327 508 230 414 445 Five $628 544 164 451 432 381 591 265 468 510 Maximum AFDC Levels Compared to Poverty Levels. One of the objectives of the AFDC program is to provide eligible children and their parents with a minimum standard of living. One method of assessing whether this objective has been achieved is to compare the maximum AFDC grant payments with the pov- erty levels for various family sizes. Although it is difficult to define the true poverty level, the Bureau of the Census publishes annually an estimate of \”poverty thre- sholds.\” The thresholds, which are intended to reflect the costs for minimum nutrition and other items for various family sizes, are updated annually to reflect changes in the Consumer Price Index (CPI). For a family below the poverty level, the difference between a family’s income and the threshold represents the amount of additional money needed to reach the poverty. line. The use of the overall CPI to increase the poverty thresholds can overstate the true poverty level. This is because the index includes the impact of increased costs for items which many grant recipients do not purchase. For example, amajor cause of rapid CPI inflation in 1979 (11.3 percent), involved escalating housing costs and rising mortgage interest rates. Although most grant recipients are rent- ers and do riot purchase homes, the impact of housing costs is included in the index for increasing the poverty level. On the other hand, to the extent that the original market basket used to define the poverty threshold excludes goods which welfare recipients purchase, this measure could understate the true poverty level. Keeping in mind these limitations of the poverty definition, Table 10 compares, for illustrative purposes, the maximum AFDC grant levels in California with the poverty thresholds published by the Bureau of the Census for family sizes of three and four. The grant amounts do not include the value of other benefits, such as food stamps and Medi-Cal, which the family also may receive. The table shows that families which received the maximum AFDC grant levels, had an income which placed them below the poverty levels for 1977, 1978, and 1979. In 1979, the poverty level for a nonfarm family of three was $5,784. During the same period, the maximum grant for an: AFDC family of three was $4,596, or 20.5 percent ($1,188) below the poverty level. The poverty level for a family of four in 1979 was $7,412. The maximum AFDC grant for the same family size during 1979 was $5,460, or 26.3 percent ($1,952) below the poverty level. 990 \/ HEALTH AND WELFARE . AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Table 10 Poverty Levels and Maximum AFDC Payment Levels 1971 to 1979 Item 518 Family of Three . Family of Four Year 1979 ………………………………………………………… .. 1978 ………………………………………………………… .. 1977 ……….. : ………………………………………………. . Preliminary Westcott v. Califano Poverty Level $5,784 5,201 4,833 AFDCCrant Percent Below Poverty Level Poverty Level Amount $4,596 4,272 4,164 20.5% $7,412 17.9 6,662 13.8 6,191 AFDCCrant Percent Below Poverty Level Amount $5,460 5,f!16 4,950 26.3% 23.8\u00b7 20.0 Background In June 1979, the United States Supreme Court ruled that Section 407 of the Social Security Act was unconstitutional because it discriminated on the basis of sex by providing AFDC benefits to families only when the father was the unemployed parent. Unlike the federal government, California did not discrimi- nate on the basis of sex at the time of the ruling because it provided AFDC benefits . to families with either unemployed fathers or mothers. The cost of the benefits provided to families where the mother is\u00b7 the unemployed parent has been paid by the state and counties. . Following the Westcott\u00b7 decision, the Department of Social Services repealed that part of its regulations which specified the eligibility requirements to be met for the AFDC-U program when both parents lived iIi the home, but the unemploy- ment of only one parent was the basis for eligibility. Specifically, it deleted the requirement that the unemployed parent have been in the labor. market for a period of 30 days prior to eligibility. In the May 1980 revision of expenditures, the department identified the court case bot did not provide an estimate of cost due to the lack of caseload data. In concurring with the department’s proposed regulations, the\u00b7 Department of Fi- nance indicated that while the regulations might increase the AFDC-unemployed caseload, the impact was expected to be insignificant. November 1980 Expenditures. The Department of Social Services’ revised esti- mate of expenditures for 19~1 identifies a total cost of $35,410,100 in 19~1 related to its Westcott vs Califano regulations. Of this amount, the state share is $26,320,300, the county costs are $3,186,900, and the federal costs total $5,902,900. The department estimates that General Fund costs in 1981-82 will be $28,380,800. . Because California has historically provided AFDC benefits to families where either the father or mother was the unemployed parent, we requested that the department explain why it had significantly modified its regulations following the Westcott decision. The department cited the folloWing considerations: 1. . Unwarranted Distinction Between Unemployed Parents. The department stated that its regulations created a: distinction, without basis in federal or state law, between cases in which both parents were unemployed and those in which only one parent was unemployed. Specifically, previous regulations required that in a family where only one parent was unemployed, that parent had to have been \”in the labor market forfull time employment\” at least 30 days prior to receiving aid. No such requirement was placed on a family where both parents were unem- Item 518 HEALTH AND WELFARE \/ 991 ployed. The Legislati ve Counsel has provided our office with an opinion which supports the department’s conclusion on this point. However, it is not clear that the Westcott decision specifically required this change in state regulations. 2. Labor Force Connection. The department’s regulations required the unem- ployed AFDC parent to \”have been in the labor market for full time employment at least the 30-day period immediately prior to the beginning date of aid.\” The department stated that the 30-day requirement was not in conformity with state statute because the Welfare and Institutions Code makes no reference to a30-day labor market connection. The Legislative Counsel concluded that \”the labor mar- ket requirement would not, however, appear to violate the state statutory defini- tion of. employment, since that statute does require that a person be seeking employment.\” Legislative Counsel points out that \”applying the rule of statutory interpretation that statutes must be given a reasonable construction (Great West- ern Distiller Products, Inc., v. J. A. Wather & Co., 10 Cal2d 442, 446), the labor market requirement can be viewed as a reasonable means of determining whether the person has been seeking employment.\” . 3. County Application of Labor Force Connection. The department stated that it had received indications that the 30-day labor force connection, while gender neutral, was applied by the counties in a way that discriminated against women. The regulations required that the unemployed parent have been in the labor market for full time employment for at least 30 days prior to the beginning date of aid. Although this meant that the unemployed parent need only have been looking for a job, the department asserted that some counties interpreted thisto require the parent to have been employed full time prior to the beginning of aid. We are unable to determine how the counties applied the labor force connec- tion. However, if the department determined that counties were incorrectly ap- plying the regulations, the department could have prOvided instructions clarifying the intent and application of the rules; rather than repealing the requirement. Based on the information provided by the department and the opinion of the Legislative Counsel, it appears that parts of the regulations concerning eligibility of unemployed parents for AFDC benefits were inconsistent with state law, and other parts (30-day work requirement) were consistent. Nevertheless, it is not clear to us that the Westcott decision required the department to modify its regulations. The administration’s proposal in the budget to limit eligibility for the state AFDC-U program, however, appears to be addressing the fiscal impact of the Westcott regulations. Funds for Preliminary Court Injunctions Department of Finance request. Section 32.5 of the 1980 Budget Act authorizes the Director of Finance to increase expenditures in the AFDC program for pur- poses which were not anticipated in the budget. The section requires the director to notify the Legislature, through the Joint Legislative Budget Committee, of increased costs in excess of $500,000 when such increases are not the result of enactment of a federal or state law. During 1980, the Director of Finance notified the Legislature on three occasions of increased costs in the AFDC program due to pending court cases. In May and June 1980, the director requested a waiver of the 30-day waiting period in order to allow the Department of Social Services to issue instructions directing counties to comply with preliminary court injunctions in the cases of Vaessen v. Woods and North Coast Coalition v. Woods. In. addition, the director proposed in October 1980 to allow the department to issue emergency regulations to comply with a preliminary court injunction in the case of Angus v. Woods. 992 \/ HEALTH AND WELFARE Item 518 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Legislative Response. The Joint Legislative Budget Committee de~edthe re- quest for a: waiver of the 30-day waiting period in the Vaessen and North Coast Coalition cases because the department was appealing the court’s decision. Be- cause final decisions had not been issued in the cases, there was no basis for determining what, if any, changes the state would be required to make in its program. In addition, compliance with the preliminary injunctions would have resulted in sigriificant General Fund costs (in 1980-81 approximately $2.8 million in theVaessen case and $2.6 million in the North Coast Coalition case) which the department. would. not be able to recoup ifit ultimately prevailed in court. In conclusion, the committee denied the request for a waiver of the 30-day waiting period and urged that the Directors of the Departments of Finance and Social Services use all legal means to maintain the status quo, pending a final decision invalidating the\u00b7 existing regulations. . Funds made available for court decisions. On October 28, 1980, the Director of Finance notified the Joint Legislative Budget Committee that she had ex- hausted all reasonable legal means available to the state to resolve the cases. Accordingly, s~e stated that she had approved the issuance of all-county letters in the Vaessenand North Coast Coalition cases and emergency regulations in the Angus case. The director n()ted that the North Coast Coalition case had been decided on its merits by the First District Court of Appeal on October 1, 1980. In additiOll, she pointed out that the federal government had concluded that state regulations which were at issue in the Angus case were out of compliance with federal requirements. . . The director concluded that by approving funds for the North Coast Coalition and Angps cases, she had no choice but to approve funding for the Vaessen case even though the department was continuing t() appeal the decision. The director stated that under the language in Section 32.5 of the 1980 Budget Act,she did not have the discretion to pick and choose the cases for which funds were made available. Proposed control language. In order\u00b7 to restrict the availability of funds for court orders,the 1981 Budget Bill contains control language which provides that no funds are appi;opriated or available for court orders until a final court decision on the merits is issued. The intent of this language is to prohibit the administration from modifying its regulations in order to comply with. court orders until a final decision invalidating the regulations is issued. Our analysis indicates that the prop()l!ed language responds to the issues previously identified by the Joint Legisla- tive Budget Committee. We\u00b7recommend approval. Performance Standards for Administering the AFDC Program We recommend \”Genera\/Fund reduction of$4,3!J3,213 from Item 518-101-001 (a), AFDC cash grants, because funds are overbudgeted given the. application of fiscal sanctions. This issue is discussed()n page 1011 of the Analysis under Item 518-101-001 (d), . County Administration of Welfare Program. Item 518 HEALTH AND WELFARE \/ 993 Department()f S()cialServices STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND AND DISABLED Item 518-101 (b) from the Gen- eral Fund Budget p. HW 166 Requested 1981-82 ….. ‘ ………………………………………………………….. $1,051,005,000 Estimated 1980-81 …………………………………………………………………. 1,251,981,900 Actual 1979-80 ……………………………………………………………………….. 1,087,536,118 Requested decrease $200,976,900 ( -16.Lp~rcent) Total recommended reduction …. :……………………………………….. None SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Optional Supplementation of Federal SSI Benefits. Recommend . enactment of legislation which requires legislative approval of pro- , gram changes in those cases where state supplementation of federal SSI benefits is optional. GENERAL PROGRAM STATEMENT Analysis page 1002 The supplemental Security Income\/State Supplementary Payment (SSI\/SSP) program is a federally-administered program under which eligible aged, blind and disabled persons receive financial assistance. It began on January 1,1974 when the federal Social Security Administration assumed responsibility for administration of the cash grant program which provides assistance to California’s eligible aged, blind and disabled. Prior to that, California’s. 58 county welfare departments ad- ministered a joint federal-state-county program which provided cash assistance to these recipients. The federal and state governments share the grant costs of the SSI\/SSP program. The federal government pays the cost of the SSI grant and the state pays the cost of the SSP program. ANALYSIS AND RECOMMENDATIONS Current Year Deficiency The budget estimates that there will be a defiCiency of $11,267,168 in the SSI\/ SSP program for 1980-81, primarily due to increased caseload. The 1980 Budget Act assumed a total SSI\/SSP (!aseload of704,742 persons. The departnient’smost recent estimate projectS a caseload of707,528, or 2,786 more recipients than anticipated for 1980-81. All of the caseload increase is in the disabled. category. Budget Year Proposal The budget proposes an appropriation of $1,051,005,000 from the GeneralFund for the state share of the SSI\/SSP program in 1981-82. This isa decrease of $200,976,900, or 16~1 percent, below .estiinated current year expenditures. Federal expenditures of $886,985,400 are proposed for 1981-82, an increase of $100,946,900, or 12.8 percent, over estimated current year expenditures. . . Total expenditures of $1,937,~,400 are proposed for the SSI\/SSP program for 1981-82, as shown m Table L This is a decrease of $100,030,000, or 4.9 percent, below estimated current year expenditures. ~1685 994 \/ HEALTH AND WELFARE Item 518 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND AND DISABLED-Continued Table 1 Total Expenditures for the SSI\/SSP Program 1980-81 and 1981-82 Ertimated Proposed J9tJO…IjJ J98J-82 Federal ………………………………………………. . $786,038,500 $886,985,400 State …………………………………………………. .. 1,251,981,900 1,051,OOS,OOO County ………………………………………………. . Change Amount $100,946,900 .:…200,976,900 Percent 12.8% -16.1 Totals …………………………………………… ;.. $2,038,020,400 $1,937,990,400 -$100,030,000 -4.9% Federal Revenue Sharing Funds Budget Bill language in Item 954 specifies that $180.3 million, plus any interest earnings, shall be appropriated from the Federal Revenue Sharing Fund to the General Fund to finance part of the state’s cost of the SSP program. Language in Item 518 (the SSP appropriation) specifies that the revenue sharing funds will be expended prior to the expenditure of the remaining General Fund amount appro- priated in the item. Expenditures by Category of Recipients Grant payments in the SSI\/SSP program are made to three general categories of recipients, as shown in Table 2. Total grant expenditures to aged recipients are proposed at $657,183,900, a decrease of 9.2 percent below estimated current year expenditures. In addition, the budget proposes $1,221,139,200, from all funds, for cash grants for disabled recipients~ This is a decrease of$30,737,900, or 2.5 percent, below the estiinated current year expenditures. The budget also proposes to spend $59,667,300 for cash grants for blind recipients, a decrease of 4.2 percent below estimated current year expenditures. Proposed General Fund Budget Decreases Table 3 shows the proposed changes in General Fund expenditures for the SSP programs. General Fund expenditures are proposed to decrease by $200,976,900 in 1981-82. This consists of $14,954,200 in increased costs and $215,931,100 in re- duced expenditures. The major cost increase is $11,849,300, due to anticipated caseloadgrowth. The budget also contains General Fund costs of $2,551,900 for Indochinese refugees who, because they have been in the United States more than three years, are not eligible for 100 percent federal funding. The $2,551,900 repre- sents the state’s share of costs for these individuals, which will be matched by federal funds. In addition, the budget contaiils$200,OOO to provide cost-of-living increases to a category of recipients known as \”mandatory supplementation cases.\” Three factors account for the decrease of $215,931,000 in General Fund expendi- tures for the SSI\/SSP program. First, recipient unearned income (for example, Retirement, Survivors, Disability and Health Insurance) is estimated to increase by 12.3 percent on July I, 1981. This will result in increased unearned income of $136.3 million which will reduce total SSP grant costs. Second there is a savings of $64.1 million as a result of annualizing a 13 percent cost-of-living adjustment, rather than a 15.48 percent increase in 1981-82. Third, due to the method of calculating the SSI\/SSP cost-of-living increase, federal funds, rather than General Fund support, will be used to provide the proposed 4.75 percent cost-of-living adjustment. (This issue is discussed elsewhere in the Analysis.) Recipient Aged ………………… . Blind ………………… . Disabled, ………….. . Totals …………… . Total $723,870,600 62,272,700 1,251,877,100 $2,038,020,400 Table 2 Expenditures for SSI\/SSP Grants by Category of Recipient 1980-81 and 1981-82 Estimated 1!J80..81 Federal $207,478,800 21,783,600 556,776,100 $786,038,500 State $516,391,800 40,489;100 695,101,000 $1,251,981,900 Total $657,183,900 59,667,300 1,221,139,200 $1,937,990,400 Proposed 1981-82 Federal $231,737,100 24,668,800 630,579,500 $886,985,400 State $425,446,800 34,998,500 590,559,700 $1,051,005,000 Percent Change From 1!J80..81. . Total Federal State -9.2% 11.7% -17.6% -4.2 13.2 -13.6 -2.5 13.3 -15.0 -4.9% 12.8% -16.1% ~ CIt ~ 00 ::t: ~ tl ::t: > Z 0 ~ ~ t\”l ‘\” CD CD en 996 \/ HEALTH AND WELFARE Item 518 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND AND DISABLED-Continued Table 3 Proposed General Fund Budget Changes 1981-82 1980-81 Current Year Revised …………………………………………….. . A. Baseline Adjustments 1. Basic caseload increase …………………………………………….. … 2. Cost -of-living increase a. 1980-81: Reduced costs as a result of providing a 13 percent increase instead of 15.48 percent adjustment b. 1981-82: Reduced costs because federal cost-of-living funds are used to offset state grant costs ………………. . Subtotal ……………………………………………………………………….. . 3. Reduced grant costs due to increased recipient unearned income a. 1980-81 increase adjusted for caseload ………………….. . b. 1981-82 increase ……………………….. ; …………………………… . Subtotal ……………………………………………………………………….. . 4. Federal legislation a. Substantial gainful employment (PL 96-265) ……….. . b. Indochinese refugees-PL 96-212 …………………………. . Subtotal ……………………………………………………………………….. . 5. Mandatory supplementation cases …………………………….. . Total Budget Decrease …………………………………………………………. . Proposed General Fund Expenditures ………………………………… . Caseload Amount -$64,149,800 -12,708,100 -$2,741,500 -136,331,700 $353,000 2,551,900 Total $1,251,981,900 11,849,300 -$76,857,900 -$139,073,200 $2,904,900 200,000 ( -$200,976,900) $1,051,OOS,OOO The budget projects that the caseload for the SSI\/SSP program will increase by 8,855 persons, or 1.3 percent, as shown in Table 4. These projections are subject to change during the May revision of expenditures. Table 4 SSI\/SSP Average Monthly Persons Receiving Assistance 1980-81 and 1981-82 Program Aged ………………………………………………………………………………….. . Blind ………………………………………………………………………………….. . Disabled …………………………………………………………………………….. . Totals …………………………………………………………………………….. . Cost-of-Living Increase Ertimated 1fJ80..81 315,060 17,603 374,865 707,528 Proposed 1981-82 317,500 17,850 381,033 716,383 Change Persons Percent 2,440 0.8% 247 1.4 6,168 1.6 8,855 1.3% Current Law. Current law requires cash grants for SSI\/SSP recipients to be increased annually to compensate for increases in the cost-of-living. The cost-of- living adjustment required on July 1, 1981 is based on the change in the California Necessities Index between December 1979 and December 1980. It is currently estimated that the cost-of-living adjustment required under existing law is 11.2 percent. Administration ~ Proposal The administration proposes to suspend, during 1981-82, the automatic cost-of-living adjustment required by current law and to provide instead a 4.75 percent increase on the SSI\/SSP grant. Under the budget Item 518 HEALTH AND WELFARE \/ 997 proposal, federal funds made available for a cost-of-living increase on the SSI grant would be used to finance the 4.75 percent cost-of-living adjustment on the total SSI\/SSP grant.. . . The federal government will provide $154.4 million for a 12.3 percent cost-of~ living increase on the SSI grant in 1981–82. The administration is proposing to use $141.9 million of the federal funds to provide a 4.75 percent cost-of-living adjust- ment to the total combined SSI\/SSP grant. The remaining $12.5 million in federal funds will be used to reduce the state’s SSP grant costs. Under current law, the state can use the federal funds to offset General Fund costs so long as the SSP grant levels do not drop below the December 1976 payment standards. Table 5 illustrates how the federal funds will be used to (a) finance the 4.75 \\ percent cost-of-living increase and (b) reduce the state’s SSP grant costs. Under the administration’s proposal, the totalSSI\/SSP grant for an aged individual will increase by $19, or 4.75 percent, to $421 in 1981–82. Because the federal govern- ment will provide a cost-of-living increase on the SSI grant of 12.3 percent, or $29.30, the state’s share of costs on the SSP grant will decrease by $10.30. Table 5 . SSI\/SSP Maximum Grant Aged Individual 1!JtIM1 Jan-June 1981 Total Grant ………………………………………………………….. $402.00 SSI ………………………………………………………………………… 238.00 SSP ………………………………………………………………………. 164.00 1981-82 $421.00 267.30 153.70 ChIll1f{e Amount Percent $19.00 4.73% a 29.30 12.3 -10.30 -6.3 a Does not equal 4.75 percent because the amount of money for the increase is rounded tothe nearest dollar. Maximum Payment Levels. Table 6 compares the maximum SSI\/SSP grant payments, for selected categories of recipients, assuming: (a) a 4.75 percent cost- of-living adjustment as proposed by the administration and (b) an 11.2 percent increase required by current law. Under existing law, the maximum grant for an aged individual would increase by $45, to $447 in 1981–82. Under the administra- tion’s proposal, the grant for an aged individual will increase by $19, to $421 in the budget year. Table 6 Maximum SSI\/SSP Grant Levels 1980-81 and 1981-82 Category of Recipient Aged\/Disabled Individual Total grant ……………………………………. . SSI ………………………………………………… . SSP ………………………………………………… . Aged\/Disabled Couple Total grant ……………………………………. . SSI ………………………………………………… . SSP ………………………………………………… .. Blind In~vidual Total grant ……………………………………. . SSI ……………………………… , ….. ; ………….. . 1!JtIM1 Ertimated JIlI1-\/une’81 $402.00 238.00 164.00 746.00 357.00 389.00 SSP ………………………………………………….. . 45i.00 238.00 213.00 Blind Couple Total grant …………………………………… .. SSI ………………………………………………… . SSP ………………………………………………… . m.oo 357.00 520.00 1981-82 Govemor’s Proposal 4.75 Percent Amount Chlll1ge $421.00 $19.00 267.30 29.30 153.70 -10.30 781.00 35.00 401.00 44.00 380.00 -9.00 472.00 21.00 267.30 29.30 204.70 -8.30 919.00 42.00 401.00 44.00 518.00 -2.00 Canent Law 11.2 Percent Amount Change $447.00 $45.00 267.30 29.30 179.70 15.70 830.00 84.00 401.00 44.00 429.00 40.00 502.00 51.00 267.30 29.30 234.70 21.70 975.00 98.00 401.00 44.00 574.00 54.00 998 I HEALTH\u00b7\u00b7AND WELFARE Item 518 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED,. BLIND AND DISABLED-Continued Fisca\/Effect of Various Cost-oE-Living Increases. If the statutory cost\”of-liviIig adjustment of 11.2 percent is provided to SSI\/SSP reCipients instead of the proposed 4.75 percent increase, the additional General Fund cost would be $207.1 million as shown in Chart 1. This would increase General Fund costs for this program to $1,258.1 million in the budget year, or $6.1 million fibre than estimated current year expenditures. Chart 1 SSI\/S$P Expenditures 1980-81 and 1981-82 (in millions) Dollars ~_–‘—_____________________ –, $1 1 .; Special Adjustments J <- 11.2% Cost-of-living Additional Funds Federal State County Federal State. County . ~~~--~--~~ 1980 - 81 (Estimated) 1981-82 (Proposed) Table 7 compares the fiscal effect of providing a 4.75 percent, rather than an 11.2 percent, cost-of-liviIig adjustment. The administration's proposal to provide a 4.75 percent cost of liviIig will cost $141.9 million. Federal funds will be used to fund the entire amount. Ail 11.2 percent cost-of-liviIig adjustment would require ex- penditures totaling $349.0 million. The cost to the state for providing an 11.2 percent adjustment, instead of a 4.75 percent increase, would be $207.1 million in 1981-82. Table 7 Cost of Living Expenditures for $SI\/SSP Grants Assuming Various Cost-of-Living Increases 1981-82 CunentLaw . (11.2 Percent) General Fund ...................................................................... $194,591,900 Federal funds .... ~................................................................. 154,418,100 Totals .................................................................................. $349,010,000 Administration s ltoposal (4.75 Percent) -$12,508,100 154,418,100 $141,910,000 lJiIference $207,100;000 $207,100,000 Item 518 HEALTH AND WELFARE \/ 999 Consequences of ModiFying the Cost-of-Living Adjustment For SSIISSP Recipi- ents. Failure to provide the full cost-of-living adjustment required by current statute would have the following consequences. a. Loss oFFood Stamp \"Cash-Out\" Status. If California does not provide the full cost-of-living increase, it could be required to provide food stamps to eligible SSI\/SSP recipients. Under current federal law, California is allowed to provide cash in lieu of food stamps to eligible SSI\/SSP recipients so long as the state: (1) passes on the federal cost-of-living increase for the SSI grant and (2) provides a cost-of-living increase for the SSP grant pursuant to current state law. This provi- sion offederallaw allows the state to avoid the administrative costs which would occur if county welfare departments were required to distribute food stamps to \\ SSI\/SSP recipients. It is uncertain whetl;1er the federal government would require the state to provide food stamps to eligible SSI\/SSP recipients if the full cost-of-living was not provided in 1981-82. For example, although the state changed its cost-of-living formula for 198Q-81, the federal government did not require it to provide food stamps to SSI\/SSP recipients. The issue in 1981-82 may be different, however. While the state changed its method for calculating cost-of-living increases in 1980-81, it provided the max- imum increase required by the new formula. In 1981-82, the administration is proposing to provide an adjustment which is less than that required by the current cost-of-living formula. If the state loses its \"cash-out\" status, the state and counties would incur adminis- trative costs of approximately $40 million to provide food stamps to eligible SSI\/ SSP recipients. Under current sharing ratios, the state and counties each would pay $20. million. The federal government would contribute $40 million. b. Failure to Meet the Federal Government's Maintenlfllce of EFFort Require- ment (PL 94-585). In order to receive federal Title XIX Medicaid funds (Medi- Cal), the state is required to either (1) maintain its gross expenditures for the SSP program at the current year levels or (2) maintain the state payment levels provided in December 1976. The state has been complying with this law by meet~ ing the gross expenditure test. If a 4.75 percent cost-of-living increase is provided, the state's expenditures for the SSP program would be insufficient to meet the gross expenditure test. If the state fails to meet the gross expenditure test, it could still avoid the loss of Medicaid funds by insuring that SSP grants for\u00b7 all categories of recipients did not drop below the grant levels paid in December 1976. In order to meet this requirement, the state would be required to provide the cumulative amount of all SSI cost-of-living increases since December 1976 to mandatory sup- plementation cases. The Governor's Budget contains $200,000 to provide the cost- of-living increases to the mandatory supplementation cases during 1981-82. Historical Cost-of-Living Increases For SSIISSP Recipients. Each month, SSI\/ SSP recipients receive a single monthly check from the federal government. The amount of the check covers the federal grant payment for SSI and the state grant payment for SSP. Both the SSI and SSP grants consist of a basic grant amount and a statutorily set cost-of-living factor. The basic grant represents the cost of obtain- ing necessary living needs, such as food, clothing, shelter and utilities. The purpose of the cost-of-living adjustment is to help the purchasing power of grants to SSIl SSP recipients keep pace with the rising costs of food, shelter, transportation and other necessities of life. 1000 \/. HEALTH AND WELFARE Item 518 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND AND DISABLED-Continued . Table 8 shows the increase in SSI\/SSP grants for an aged or disabled individual from the beginning of the program in January 1974 through 1981-82. During this seven-year period, the SSI\/SSP grant increased aimually at a rate of 8.0 percent. Table 8 SSI\/SSP Grant Increases for an Aged Individual January 1974 to 1981-82 ]anuary-JWle 1974 ................................................................................................................. . 1974-75 ..................................................................................................................................... . 1975-76 ..................................................................................................................................... . 197~77 ........................................................................................................................... ; ........ .. 1977\"':78 ..................................................................................................................................... . 1978-79 ............................................................................................... ;.: ................................... . 1979-80 ..................................................................................................................................... . 198()..;81 July-December\u00b7 1980 .............................................. ; ......................... : ......... ~ ..................... . 1~~~~~~~ .. ~~~.:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: SSI\/SSP Grant $235.00 235.00 259.00 276.00 296.00 307.60 356.00 420.00 402.00 $421.00 Percent Increase 10.2% 6.6 7.2 3,9\" 15.7 18.0 12.9 4.7% aReflects the effect of the SSI cost-of-Iiving increase for 1978-79. The SSP cost-of-Iiving increase was suspended except for July and August 1978 when the total grant payment for an aged indiVidual was $322. b Proposed by the administration. California's SS\/ISSP Grants Compared to Other States. The federal govern- ment allows states, attheir option, to supplement the federal SSI benefits. Califor- nia supplements the SSI benefits through the State Supplementary Payment (S~P) program. Table 9 shows the SSI\/ SSP benefits for an aged individual for the 10 most populous states as of January 1, 1981. Of the 10 states, six supplemented the basic grant, with California prOviding the largest supplementation of $164, followed by New York witha monthly supplement of $63. California's supplementation was 160 percent more\u00b7 than that prOvided by New \u00b7York. . Table 9 State Comparison\u00b7 Maximum Monthly SSI\/SSP Grant Levels . ForAn Aged Individual, Ten Largest States . . January 1, 1981 State Total Grant FederiJl SSI California ............... ;...................................................................................... $402 New York b .......................................... ;....................................................... \u00b7.301 Texas.............................................................................................................. 238 =~~v~~:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::. Ohio ........................... ; ............ ;.................................................................... 238 Mic1Ugan b . . . . . . . . . ,................................ 262 .. Florida ... , ................. ; ...... : ............... ; .............................. , ....................... ,..... 238 New Jersey\u00b7 ............................ ;..................................................................... 261 Massachusetts ....................................... ....... :.............................................. 357 a In descending order by state population. b Grant levels vary by region within the state. $238 238 238 238 238 238 ,238 238 238 238 State SSP $164 63 o 32 o o 24 o 23 19 Item 518 HEALTH AND WELFARE \/ 1001 .. Table 10 shows the maxinium SSI\/SSP grantlevels for aged couples.as ofJanuary 1, 1981. Of the 10 most populous states, California's grant level was the highest at $746 per month. Six of the 10 states supplemented the federal grant. Four of the six states provided supplemental payments of less than $101), California provided the largest supplemental grant of $389, followed by Massachusetts with a: supple- ment of $215 per month. California's supplement is $174, or 81 percent, more than that provided by Massachusetts. Table 10 State Comparison Maximum Monthly SSI\/SSP Grant Levels For An Aged Couple. Ten Largest States January 1. 1981 State Total Crant California...................................................................................................... $746 New York .................................................................................................... 436 Texas.............................................................................................................. 357' Pennsylvania................................................................................................ 406 Illinois ............................................................................................................ 357 Ohio .............................................................................................................. 357 Michigan ............................................... , .... ,................................................. 393 Florida .......................................................................................................... 357 New Jersey .................................................................... ~............................. 369 Massachusetts .............................................................................................. 572 Fedei'al SSf $357 357 357 357 357 357 357 357 357 357 State SSP $389 79 o 49 o o 36 o 12 215 Maximum SSIISSP Levels Compared to Poverty Levels. One of the objectives of the SSI\/SSP program is to provide aged, blind arid disa!:>ledrecipients with a minimum standard of living. One way of assessing whether this objective has been achieved is to compare the maximum SSI\/SSP grant amounts with the poverty . levels for various family sizes. Although iUs difficult to define the true poverty level, the Bureau of the Census publishes annually an estimate of \”poverty thresh- olds.\” The thresholds, which are intended to reflect the costs for minimum l’lutri- tion and other items for various. family sizes; are updated\u00b7 a.rulually to reflect changes in the Consumer Price Index (CPI). For a family below the poverty level, the difference between a family’s income and the threshold represents the amount of additional money needed to reach the poverty level. The use of the overall CPI to increase the poverty thresholds can overstate the true poverty level. This is because the index includes the impact of increased costs for items which many grant. recipients do not purchase. For example, a major cause of rapid CPI inflation in 1979 (11.3 percent) involved escalating housing costs and rising mortgage interest rates. Although most grant recipients are rent- ers and do not purchase homes,. the impact of rising housing costs is included in the index for increasing the poverty level. On the other hand, to the extent that the original market basket used to define the poverty threshold excludes goods which welfare recipients purchase, this measure could understate the true poverty level. Keeping in mind these limitations of the poverty definition, Table 11 compares the SSI I SSP grant levels in California with the poverty levels for an aged individual and a two-person family (head of household over age 65). The grant amounts do not include the value of other benefits, such as Medi-Cal, which the family may\u00b7 receive. The table shows that recipients who received the maxinium SSI\/SSP grant had an income which placed them above the poverty levels for 1977, 1978 and 1979. For example, in 1979 the poverty level for an individual 65 years of age or older was $3,479. During the same period, the maxinium annual SSIISSP grant was $3,982, or 14.5 percent ($503), above the poverty level. The poverty level for a 1002 \/ HEALTH AND WELFARE Item 518 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND AND DISABLED-Continued two-person household (with the head of household over age 65) was $4,390. At the same time, the maximum SSI\/SSP grant was $7,406, or 68.7 percent ($3,016), above the poverty threshold. 1979\u00b7 ………….. .. 1978 ………….. .. 1977 ………….. .. \” Preliminary. Table 11 Poverty Levels and Maximum SSI\/SSP Grant Levels 1977 to 1979 Poverty Level $3,479 \” 3,127 2,906 Aged Individual SSf\/SSP Grant Level Amount $3,982 3,650 3,432 Percent Above Poverty Level 14.5% 16.7 18.1 Poverty Level $4,390\” 3,944 3,666 Aged Couple SSf\/SSP Grant Level Amount $7,406 6,844 6,474 Percent Above Poverty Level 68.7% 73.5 76.6 Eligibility for State Supplementary Payment Program We recommend enactment of legislation which requires legislative approval of program changes in those cases where state supplementation of federal SSI benefits is optional. General eligibility criteria for the state supplementary payment (SSP) program are contained in the Welfare and Institutions Code. Section 12150 of the Welfare and Institutions Code provides that individuals who are eligible for the federal Supplemental Security Income (SSI) program are\u00b7 also entitled to receive SSP benefits. Historically; there have been few changes to the federal SSI eligibility requirements which have had significant fiscal impact on the state’s supplementa- tion program. However, enactment of recent federal legislation (PL 96-265) sug- gests that by conditioning eligibility for state supplementation on federal eligibility, the\u00b7 Legislature has delegated substantial authority over adoption of optional SSP changes to the administration. PL 96-265 Substantial GainFul Activity, Prior to enactment of PL 96-265, a disabled individual who was employed and earning more than $300 a month was considered to be engaged in substantial gainful activity tSGA), and therefore not eligible for SSI benefits. As a result of the enactment of PL 96-265, an individual who loses his eligibility for regular SSI benefits because of performance of substan- tial gainful activity becomes eligible for a special benefit status which entitles him to cash benefits equivalent to those he would be entitled to receive under the regular SSI program. In addition, a person who receives the special benefits is eligible for Medicaid and social services on the same basis as a regular SSI reCipient. PL 96-265 provides that state supplementation of the federal benefits for SGA cases is optional. The Department of Social Services has notified the Social Security Administration, which administers the SSI\/ SSP program, that California will sup- plement the federal grant for SGA cases starting in 1980-81. It is the department’s position that the state is required to supplement the Federal benefits provided to SGA cases. This is because Section 12150 of the Welfare and Institutions Code provides that an individual who receives SSI bene- fits is eligible for the state supplementary payment program. The department estimates the cost of the supplementation at $300,900 in 1980-81 and $670,000 in 1981~2. Of the $670,000, the state will pay $640,800 and the federal government will pay $29,200. Item 518 HEALTH AND WELFARE I 1003 We have no programmatic basis for recommending against the administration’s decision to supplement federal SSI grants to individuals who demonstrate substan- tialgainful activity. To the extent that PL 96-265 encourages disabled recipients to work, it would have a beneficial effect. It appears that the administration’s decision to supplement the federal SSI benefits provided to SGA individuals is consistent with state law concerning eligi- bility for the SSP program. (We have requested an opinion from Legislative Counsel as to whether receipt of SSI benefits triggers eligibility for SSP benefits.) Our analysis indicates, however, that this program change raises a larger issue oflegislative control. Specifically, it appears that state statute does not provide for legislative review and control over optional changes in the SSP program. In order to provide an opportunity for such review, we recommend legislation be enacted which requires legislative approval of program changes in those cases where state supplementation of federal SSI benefits is optional. Department of Social Services SPECIAL ADULT PROGRAMS Item 518-101 (c) from the Gen- eral Fund Budget p. HW 167 Requested 1981-82 ……………………………………………………………… .. Estimated 1980-81 …………………………………………………… ; …………. .. Actual 1979-80 ……………………………………………. : ………………………. . Requested decrease $1,990,216 (-34.8 percent) Total recommended reduction …………………………………………… . a. Includes $123,000 from Emergency Revolving Fund. GENERAL PROGRAM STATEMENT $3,728,800 5,719,016 a 5,236,700 None This item contains the General Fund appropriation to provide grants for the emergency and special needs of SSI\/SSP recipients. The special allowance pro- grams for SSI\/SSP recipients are paid entirely from the General Fund, and are administered by courity welfare departments. In addition, this item contains the cash grant costs for three special groups of recipients: (a) refugees (Indochinese, Cubans and others) who do not meet the eligibility criteria for other cash assist- ance programs, (b) Cuban refugees on general relief, and (c) repatriated Ameri- cans. ANALYSIS AND RECOMMENDATIONS We recommend approval. Current Year Deficiency The budget estimates a 1980-81 deficiency of $357,600 for special adult pro- grams. The deficiency is attributable to an increase in the number of uncollected emergency loans provided to SSI\/ SSP recipients. Budget Year Proposal The budget proposes an appropriation of $3,728,800 from the General Fund for special adult programs administered by the Department of Social Services in 1981-82. This is a decrease of $1,990,216, or 34.8 percent, below estimated current year expenditures. en … .\” m n ;; ……. ,… ::t Table 1 ~ t’l Special Adult Programs C :> C ~ 1980-81 and 1981~ ,… … Estimated 1!J11()..81 Prooosed 1981-82 Percent Chan{le .\” :> Program County State Federal Total County State Federal Total County State Federal Total ‘\” Z 0 0 Special circum- Ci) ~ stances ………….. $1,981,200 $1,981,200 $2,052,700 $2,052,700 3.6% 3.6% ~ t’l Special benefits …… 113,500 113,500 114,300 114,300 0.7 0.7 ~ ~ Aid to the potential- r Iyself-support – l:D ing blind ………. 1,424,400 1,424,400\u00b7 1,561,800 1,561,800 9.6 9.6 n t’l Emergency loan 0 ~ program ………… 1,409,800\” 1,409,800 -100.0 -100 :r. ~ Repatriated Ameri- c cans ……………….. $53,000 53,000 $53,000 53,000 CD t:I. Indochinese re- fugees cash as- sistance ………….. 70,480,800 70,480,800 94,893,200 94,893,200 34.6% 34.6 Cuban refugees cash assistance 781,300 781,300 1,658,800 1,658,800 112,3 112.3 Other refugees cash assistance ………. 3,670,500 3,670,500 6,455,300 6,455,300 75.9- 75.9 Cuban refugees general relief .. $1,161,500 Low income energy 355,900 1,517,400 $1,167,300 232,900 1,400,200 0.5% -34.6 -7.7 assistance ad- ministration …… 790,116 790,116 -1 -100 -100 Totals ……………….. $1,161,500 $5,719,016\” $75,341,500 $82,222,016 $1,167,300 $3,728,800 $103,293,200 $108,189,300 0.5% -34.8% 37.1% 31.6% -rT a Includes $123,000 from the Emergency Revolving Fund. (l) S Ot \”\”\”‘ 00 Item 518 HEALTH AND WELFARE \/ .1005 Total expenditures for this item are proposed at $108,189,300, an increase of $25,967,284, or 31.6 percent, over estimated current year expenditures. The federal government will pay $103,293,200, or 95.5 percent; of this amount. Total federal expenditures in this program, except $285,900, are for cash grants to refugees who normally would not be eligibl~ for assistance under the AFDC program. Due to a federal law, however, these refugees will receive a grant equal to the AFDC payment standard. This cash assistance is time-limited to three years from the date that the refugee enters the country. At the end of the three-year period,. the refugee will either receive county-funded general relief or no assistance. Table 1 shows the proposed expenditures for special adult programs in 1981-82. Special Circumstances The special circumstances program provides adult recipients with special assist- ance in times of emergency. Payments can be made for replacement of furniture, equipment, or clothing which is damaged or destroyed by a catastrophe. Payments also are made for moving expenses, housing repairs and emergency rent. The budget proposes $2,052,700 for grants under the special circumstances pro- gram for 1981-82. This is an increase of $71,500, or 3.6 percent, over estimated current year expenditures. Special Benefits This program contains funds for (a) SSP recipients who have guide dogs and (b) recipients who receive assistance as a result of the Harrington -vs- ObJedo court case. The guide dog program provides a special monthly allowance to, cover the cost of dog food. The budget proposes General Fund expenditures of $108,900 for these allowances in 1981-82. The Harrington -vs- ObJedo court case concerns two welfare recipients who received aid under California’s adult welfare program, but who were not eligible to receive aid under the SSIISSP program when it replaced the categorical aid programs on January 1, 1974. The California Court of Appeals ruled that the two plaintiffs were entitled to assistance at state expense. State expenditures for\u00b7 this assistance are proposed at $5,400 in the budget year. Aid to the Potentially Self.Supporting Blind The Aid to the Potentially Self-Supporting Blind (APSB) program provides payments to blind recipients who earn more income than is allowed under the basic SSII SSP program. The program encourages these individuals to become economically self-supporting. The budget proposes $1,561,800 for 1981-82, which is an increase of $137,400, or 9.6 percent, over estimated current year expenditures. The increase is due to: (a) a proposed 4.75 percent cost-of-living adjustment and (b) an increase in caseload. Emergency Loan Program Chapter 1216, Statutes of 1973, mandates that counties provide emergency loans to aged, blind and disabled recipients whose regular monthly checks from the federal Social Security Administration have been lost, stolen or delayed. The budget assumes enactment of legislation which would eliminate this program effective July 1, 1981. There are two types of costs related to this program: (1) uncollected loans and (2) administrative costs. Counties are required to initiate collection efforts before determining that a loan is uncollectable. If the county is unable to collect the loan 1006 \/ HEALTH AND WELFARE Item 518 SPECIAL ADULT PROGRAMS-Continued from the SSIISSP recipient, the county may submit a claim for state reimburse- ment. The department estimates that the counties will be unable to collect repay- ments in 491 cases in !:he current year. As a result, state costs to reimburse counties for uncollected loans in 19~1 are estimated at $1.4 million. Countyadministra- tive costs, which are funded 100 percent by the state, are estimated at $0.5 million in 19~1. Temporary Assistance for Repatriated Americans The federal repatriate program is designed to provide temporary help to needy u.s. citizens returning to the United States from foreign countries because of destitution, physical or mental illness or war. Recipients can be prOvided tempo- rary assistance to meet their immediate needs and continuing assistance for a period of up to 12 months. County welfare departments administer the program based on federal and state guidelines. The program is 100 percent federally fund- ed. Expenditure.s for the budget year are proposed at $53,000, the same amount estimated to be expended in the current year. Refugees-Cash Assistance In March 1980, President Carter signed the Comprehensive Refugee Act of 1980 (PL 96-212), which extended 100 percent federal funding for refugee assistance through March 30, 1981. Effective April 1, 1981, 100 percent federal funding of cash assistance is limited to three years from the date the refugee entered the country. Federal funds for cash grants to refugees who do not meet the eligibility require- ments for the AFDC program, but who, due to federal law, are receiving a grant equal to the AFDC payment standard are contained in Item 518-101-866 (d), Refu- gee Programs. The budget proposes expenditures of $103,007,300 from federal funds for these costs. This is an increase of $28,074,700, or 37.5 percent, over estimated current year expenditures. The significant increase in expenditures is due to projected caseload growth. The department estimates that the number of refugees receiving assistance under this special program will. increase from ap- proximately 41,614 in the current year to 57,772 in the budget year,an increase of 16,158 recipients, or 38.8 percent. Department of Social Services COUNTY ADMINISTRATION OF WELFARE PROGRAMS Item 518-101 (d) from the Gen- eral Fund Budget p. HW 169 Requested 1981-82 …………………………………. ; …………………………… $110,092,643 Estimated 1980-81…………………………………………………………………. 102,249,654 Actual 1979-80 …………………. ;………………………………………………….. 87,406,111 Requested increase $7,842,989 (+7.7 percent) Total recommended reduction ……………………………………………. None SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Cost-of-Living Increases for County Welfare Departments. Recom- mend adoption of control language to limit funds appropriated by the Budget Bill for county cost-of-living increases for personal, and Analysis page 1009 Item 518 HEALTH AND WELFARE \/ 1007 nonpersonal, services to the amount consistent with the percentage increase authorized by the Legislature. Further recommend adop- tion of supplemental language directing the department to admin- ister the 1981-cost control plan accordingly. 2. Performanc~. Standards for Administering the AFDC Program. Recommend: a. General Fund Reduction of $4,393,213 from Item 518-101-001 (a), 1016 AFDC cash grants, because funds are overbudgeted given the application or fiscal sanctions. b. Department advise the Legislature during budget hearings on: 1. Criterion to be used to eliminate or reduce amount of county 1016 fiscal liability for October 1979\”:March 1980. 2. Whether counties will be held fiscally liable for high error rates 1017 for April-September 1980 review period. 3. Whether counties can be held fiscally liable using regulations not 1017 in effect throughout the October 1980-March 1981 review peri- od. c. Department submit a plan to the Legislature for reducing error 1018 rates in specified counties. GENERAL PROGRAM STATEMENT This item contains the General Fund appropriation for the state’s share of costs incurred by the counties for administering: (a) the AFDG program, (b) the Food Stamp program, and (c) special benefits and emergency payment programs for aged, blind, and disabled recipients. In addition, it identifies the federal and county costs of administering cash assistance programs for refugees. The costs for training county eligibility and nonservice staff also are included in this item. ANALYSIS AND RECOMMENDATIONS Current. Year Deficiency .. The budget estimates that there will be a deficiency of $4,632,254 in county administration for 1980-81. Of this amount, $1,510,900 is due to regulations issued by the department following the Westcott vs. Califano court case. The remaining $2,369,500 results from an unanticipated caseload increase in the food stamp pro- gram. Budget Year Proposal The budget proposes an appropriation of $110,092,643 from the General Fund as the state share of county administration of welfare programs in 1981-82. This is an increase of $7,842,989, or 7.7 percent, over estimated current year expendi- tures. Total expenditures of $544,245,014 are proposed for county administration of welfare programs in 1981-82. This is an increase of $40,826,288; or 8.1 percent, over estimated current year expenditures. Table 1 shows the total expenditures for county welfare department administrative costs. Table 2 shows the proposed changes in General Fund expenditures for county administration for 1981-82. The largest General Fund increase is $6,416,900 due to projected caseload increases in the nonassistance food stamp program. Three program changes proposed by the administration will reduce General Fund costs for county welfare department administration by $2,149,662. The proposed changes are (1) limit eligibility for the state AFDC-U program (-$1,233,700) (2) eliminate 80 percent supplementation of AFDC grants (-$436,900), and (3) elimi- nate emergency loans to SSIISSP recipients (-$479,062). Table 1 Expenditures for County Welfare Department Administration 1980-81 and 1981-82 (in thousands) EstimiJted 1!J80..81 ProPOSed 1981-82 Percent chan.ee Program AFDC administration ……………………………………………………… . Federal State County Total Federal State County . Total Federal State County ToW $148,761 $73,326 $73,327 Nonassistance food stamp administration ……………….. ; ……. ;. Child support enforcement $295,414 $155,133 $74,012 $74,012 $303,157 4.3% 0.9% 0.9% 2.6% 51,018 25,509 25,509 102,035 66,299 33,150 33,150 132,599 30.0 30.0 30.0 30.0 Welfare …………………………………………………………………………. . Nonwelfare ……………………………………………………………………. . Special adult programs ……………………………………………………. . Refugee cash assistance …………………………………………………… .. Staff training …. , ……………………………………………………………….. . Totals …………………………………………………………………………….. . 52,257 17,419 69,677 52,264 17,421 69,685 13,321 4,440 17,761 13,321 4,440 17,761 2,384 18 2,402 1,907 18 1,925 -20.0 -19.9 7,840 48 7,888 10,877 49 10,926 38.7 2.1 38.5 6,182 1,030 1,030 8,242 6,144 1,024 1,024 8,192 -0.6 -0.6 -0.6 -0.6 $279,379 $102,249 $121,791 $503,419 $304,038 $110,093 $130,114 $544,245 8.8% 7.7% 6.8% 8.1% n … o 8 C 00 Z … \”- –< ::t: ~ t\"l CJ > ~ t\”‘ _ :;:l Z ….. – > = Z ~ 0 !: ~ – t\”l ~. ~ o ~ \”‘1’1 t\”l ::e In r- .\”‘1’1 ~ ~ In ‘V 3 G’) ~ ~ ~ :s .. 5\u00b0 c CD G. -~ en ….. 00 Item 518 HEALTH AND WELFARE \/ 1009 . Table 2 County Welfare Department Administration Proposed \u00b71981-82 General Fund Changes 1980-81 Current-Year Revised ……………………………………………………….. . Baseline Adjustments A. AFDC Administration 1. Basic caseload ……………………………………………………………………… . 2. Cost-of-living a. 1980-81 cost-of-living adjusted for caseload ………………….. . b. 1981-82 …………………………………………………………………………… . 3. Refugees ……………………… : ……………… , …………………………………….. . 4. Court cases a. Westcott ………………………………………………………………………… .. b. Others .: …………………………………………………………….. ……………. 5. Special adjustments a. Limit AFDC\/U-state eligibility …………. …… …… ………………. b. Eliminate 80 percent supplementation ……………………….. . 6. Other adjustments …………………………………………………………… ; … . Subtotal …………………………………………………………………………….. . B. Nonassistance Food Stamps 1. Basic caseload ……………………………………………………………………… . 2. Cost-of-living a. 198().:81 cost.of-living adjusted for caseload ………………….. . b. 1981-82 …. ………………………………………………………………. ……… 3. Refugees ………………………………………….. ; …………………………………. . 4. Other ………………………………………………………. …………………………… Subtotal …………………………………………………………………………….. . C. Special Adults 1. Special adjustments a. Eliminate emergency loans to SSI\/SSP recipients , …….. . 2. Other ………………………………………………………………………………….. . Subtotal …………………………………………………………………………… . D. Staff Development ………………………………………………………………….. . E. Total Budget Increase …………………………………………………………….. . F. General Fund Expenditures ………………………………………………… … Cost $1,368,600 148,500 265,500 328,100 9,100 -1,233,700 -436,900 236,711 $6,416,900 777,800 504,500 -58,304 -$479,062 1,544 Total $102,249,654 $685,911 $7,640,896 -$477,518 -$6,300 ($7,842,989) $110,092,643 Cost-of-Living Increases\u00b7 for County \u00b7Welfare Department Employees We recommend adoption of control language which would limit funds appropriated by the Budget Bill for county cost-of-living adjustments for personal, and non personal seniices, to an amount consistant with the percentage increase authorized by the Legislature. We further recommendadoption of supplemental language directing the department to adminis- ter the 1981-:82 cost control plan accordingly. . Item 518(d) appropriates $110,092,643 as the state’s share of costs fOTcoUnty administration of welfare programs. This amount does not contain the state’s share of funds to provide a cost-of-living increase to county employees during 1981~2. Under current law, costs for county administration of the AFDC and food stamp programs are shared by the federal government (50 percent), state government (25 percent), and county government (25 percent}. Unless control language is added to the Budget Bill, the state is obligated to reimburse the counties for its share of cost-of-living increases provided by local governments to their employees. In the current fiscal year, the Legislature appropriated funds to provide a 9 1010 \/ HEALTH AND WELFARE Item 518 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued percent cost-of-living adjustment for county welfare department employees. The funds were intended to cover increases in personal services (salaries, and em- ployee benefits) and nonpersonal services (operating expenses and equipment) . Although the Legislature appropriated funds for a 9 percent cost-of-living adjust- ment, counties have granted cost-of-living increases which average 10.09 percent. Table 3 shows the cost-of-living increases for personal services (salaries, and staff benefits) prOvided in 1980-81 by counties with large and medium size welfare caseloads. Table 3 Cost-of-Living Increases For Personal Services County Welfare Department Employees 1980-81 Eleven Largest Counties Alameda …………………………………. : …………………………………………………………………………………….. . Contra Costa ………………………………………………………………………………………………………………….. . Fresno …………………………………………………………………………………………………………………………….. . Los Angeles ……………………………………………………………………………………………………………………. . Orange …………………………………………………………………………………………………………………………….. . Riverside …………………………………………………………………………………………………………………………. . Sacramento ……………………………………………………………………………………………………………………… . San Bernardino ……………………………………………………….. ; ……………………………………………………. . San Diego ……………………………………………………………………………………………………………………….. . San Francisco ………………………………………………………………………………………………………………….. . Santa Clara ……………………………………………………………………………………………………………………… . Fourteen Medium Size Counties Butte ………………………………………………………………………………………………………………………………… . Humboldt ……………………………………………………………………………………………………………………….. . Kern ………………………………………………………………………………………………………………………………… . Merced …………………………………………………………………………………………………………………………. …. Monterey …………………………………………………………………………………………………………………………. . San Joaquin ……………………………………………………………………………………………………………………… . San Mateo ……………………………………………………………………………………………………………………….. . Santa Barbara …………………………………………………………………………………………………………………. ;. Santa Cruz ……………………………………………………………………………………………………………………… . Solano ………………………………………………………………………………………………………………………………. . Sonoma …………………………………………………………………………………………………………………………… . Stanislaus …………………………………………………………………………………………………………………………. . Tulare ………………………………………………………………………………………………………………………………. . Ventura …………………………………………………………………………………………………………………………… . Cost-ol-Living Increase Not Reported 10.78% 7.38 10.73 Not Reported 12.73 13.20 927 7.49. 8.52 Not Reported Not Reported 7.19 11.58 10.73 Not Reported 9.12 H.91 11.07 10.04 9.55 H.04 9.15 8.74 6.81% The issue of cost-of-living increases is likely to become an even more important fiscal issue in 1981–82 if the Budget Act contains no funds or only limited funds for county employee salary and benefit increases. For example, if the Legislature appropriated funds for a 4 percent increase but the counties granted a 9 percent adjustment, the additional cost would be approximately $5.2 million from the General Fund and $10.1 million in federal funds. Moreover, in subsequent fiscal years, the 9 percent cost-of-living adjustment would be built into the base expendi- tures against which next year’s increase is applied. The issue facing the Legislature is: should the state pay for the cost of salary and benefit increases granted by the counties that exceed the percentage increase provided for by the Legislature? There is no explicit legislative policy on this matter at the present time. Item 518 HEALTH AND WELFARE \/ 1011 We believe that the state should establish the policy that it is not obligated to pay for the cost of salary increases in excess ofthe percentage increase provided for by the Legislature. We recommend the Legislature establish this policy (a) to avoid possible cost overruns in the county administration item and (b) to avoid different percentage increases for state and county emloyees. Accordingly, we recommend that Budget Bill language be added which (a) makes clear that the state will not pay the cost-of-living increases above the percentage increase pro- vided in the Budget Act, regardless of whether funds are available in this item to fund such increases, and (b) instructs the department to administer the 1981-82 cost control plan accordingly. The following Budget Bill language is consistent with this recommendation: \”Provided further, that notwithstanding any provision of law to the contrary, none of the funds appropriated by this act for Program 10.20, county administra- tion, shall be used by counties to provide a cost-of-livingincrease to county welfare.departments for personal,and nonpersonal services, which exceeds the percentage increase authorized by the Legislature in this act for 1981-82. \”Provided further, that the .1981-82 county administrative cost control plan for program 10.20, county administration, shall contain a provision which specifies that the share of any county cost-of-living increase for personal, and nonpersonal services, which exceeds the percentage increase authorized by the Legislature shall be the sole fiscal responsibility of the county.\” Even if the Legislature chooses to limit state funds for county cost-of-living increases in the budget year, any cost-of-living adjustments granted and paid for by the counties which exceed the percentage increase for which state funds are available in 1981-82 would automaticallY be built into the following year’s budget for county administration. To prevent this from happening, we recommend that the Legislature instruct the. department to operate the cost control plan in such a manner that any cost-of-living increase provided by counties for 1981-82 above the amount of state reimbursement shall be a permanent county fiscal obligatiori. The following supplemental report language is consistent with this recommenda- tion: \”The department’s 1982-83 request for funds for county administration shall not include the cost of any 1981-82 cost-of-living lncreasesfor personal, and nonper- sonnel services which exceeds the percentage increase authorized by the Budget Act of 1981. The department shall notify the counties that the state will not pay for excess cost-of-living increases and that the increases granted in excess of the percentage approved by the Legislature shall be a permanent county fiscal obliga- tion. The department shall maintain documentation which indicates that county cost-of-living increases granted by counties which exceed the amount of state reimbursement shall be excluded from the 1982-83 funding requests made in January and May 1982. Finally, the 1981-82 and 1982-83 county administrative cost control plans shall contain a provision which explicitly provides that any county authorized increases for personal and nonpersonal services provided in 1981-82 which exceed the percentage increase authorized in the Budget Act of 1981 shall be the permanent fiscal obligation of the county.\” Performance Standards for the Administration of the AFDC Program We recommend: 1. A General Fund reduction of $4,393,213 from Item 518-101-()()1 (a), AFDC cash grants, because funds are overbudgeted given the application of fiscal sanctions. 2. The Director of the Department of Social Services advise the Legislature during budget hearings 011: 1012\/ HEALTH AND WELFARE Item 518 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued \u00b7(a) The criterion he will use to eliminate or reduce the amount of the fiscal . liability assessed on 13 counties for the review period of October 197~ March 1980. (b) Whether counties wiD beheld fiscally liable for errors which exceed the statewide error rate during the April-September 1980 review period (c) Whether counties can beheld fiscally liable using regulations which were not in eRect throughout the October 1980-March 1981 quality control period. 3. The department submit a plan to the Legislature prior to the budget hearings for reducing the error rates in specified counties. Background As a result of SB 154 in 1978, the state assumed the county share of grant costs for the AFDC program for 197B-79, while the counties continued to administer the program. In addition, the act gave the Director of the Department of Social Services the authority to establish a statewide error rate standard against which the performance of counties in their administration of the AFDC program could be measured. Furthermore, the act authorized the director to hold counties financially liable for errors above the statewide error rate standard. Under this proVision of SB 154; the director can recoup funds misspent by counties in excess of the statewide performance standard. ‘ The department issued regulations establishing a4 percent payment error rate standard for 1978-,.79. The payment error rate consists of payments to ineligible recipients and overpaymerits. to eligible recipients. AB 8 incorporated the provision of SB 154 concerning county liability for high error rates. In addition,AB 8 required that the Joint Legislative Budget Commit-, tee be notified of the performance standard for 1979-80, and that beginning with fiscal year 1980-81, the standard be established annually in the Budget Act. The 1980 Budget Act established a 4.0 percent error rate standard for the review period of October 1980-March 1981\u00b7 and a 3.75 percent standard for April-September. 1981. The\u00b7 1981 . Budget Bill proposes. a 4.0 percent standard for October 1981- September 1982. The federal government has issued regulations which provide that federal matching funds will not be available for erroneous expenditures by states in excess of a specified error rate standard. Federal regulations require that states achieve a payment error rate of 4.0 percent for the quality control periods of October 1, 1982-September 30, 1983. In addition; the regulations require the states to reduce their error rates by one-third decrements starting with the October 1980-Sepb:im~ bel’ 1981 review period.F~ure of states to achieve the interim reductions .or the ultimate 4.0 percent level will result ill a reduction in. federal financial participa- tion. The departmerit indicates that because California’s error rate in the base period (April-September 1978) was below 4.0 percent, the state must achieve the 4.0 percent standard for the review period of October 1980-September 1981 and subsequent review periods. . . California’s Error Rate. Historically, California’s error rates for the administra- tion of the AFDC program have been among the lowest of all states. Similarly, among the states with the largest caseloads, California has had one of the lowest error rates. Table 4 compares California’s error rate with those of six .other states for the three quality control review periods between April 1978 and September 1979. The table shows that during this period: California’s payment error rate was below the national average in each of the review periods. During April-September 1978, California’s error rate was 3.7 percent while the national average was 9.4 percent. New York, with an 8.8 percent error rate, came closest to California’s performance, During the Octo- Item 518 HEALTH AND WELFARE \/ 1013 ber 1978-March 1979 review cycle, when California’s error rate increased to 7.2 percent, the national average was 10.4 percent. In the last review period for which national data are available, California’s error rate was7.8 percent and the U.S. average was 9.5 percent. – California’s error rate ahnost doubled-it increased by 95 percent~between the review periods of April-September 1978 and October 1978-March 1979. During the same period, the error rate nationwide increased 10.6 percent . California’s error rate increased again during the April..,.September 1979 peri- od from 7.2 percent to 7.8 percent. During the same period, the error rate for the six states as well as the nation decreased. In sum, California’s error rate which was significantly below the -national average on September 30, 1978, more than doubled during the following 12-month period. Table 4 AFDC Payment Error Rates\u00b7 April 1978-September 1979 April- State September 1978 California;……………………………………………………………………. 3.7% lllinois ………………………………………………………………………….. 17.1 Massachusetts ……………………………………………………………… 15.9 Michigan …………………………………………………………………….. 9.2 New york…………………………………………………………………….. 8.8 Ohio ……………………………………………………………………………. 9.5 Pennsylvania……………………………………………………………….. 16.3 U.S. Average ……………………………………………………………….. 9.4 Includes technical errors. Chart 1 -October 1978- Match 1979 7.2% 13.8 24.8 10.3 10.3 11.9 11.9 10.4 -Statewide AFDC Payment- Error Rates\u00b7 January 1974 to September 1979 10% ~9 a: ffi 8 ~ 7 en I-z 6 w ~ 5 \u00ab a.. 4 LL o 3 I- Z ~ 2 a: w a.. a Federal Findings. Combined payment error rates for oVeipaymenls and p~ymenls to ineligibles. April- September ,979 7.8% 11.9 22.4 9.6 8.8 9.1 9.7 9.5 1014 I HEALTH AND WELFARE Item 518 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued Chart 1 shows the trend in California’s paYment error ratebetweenJwlUary1974 and September 1979. During that period, the errOr rate decreased from a high of 9.8 percent in January-June 1974 to a lowof3.5 percent inJanuary-June 1977. Since June 1977, California’s error rate has more than doubled from 3.5 percent to 7.8 percent, as of September 1979. California’s mo~t recent error rate of 7.8 percent represents misspent funds totaling $70,336,000. Of this amount, the state share is $33,794,600, the county share is $1,963,000, arid the federal amount is $34,623,400. The Department of Social Services has pointed out that the error rate of 7.8 percent includes errors related to the treatment of social security numbers over which the federal government Table 5 Thirty-Five Largest Counties AFDC Payment Error Rates C October 1978-March 1980 October 1978- April- County March 1979 September 1979 Alameda a …………………………………………………………………. 5.9% Butte………………………………………………………………………….. 1.7 Contra Costa b . . . . . . .. . . . ~………. 7.3 Fresno ………………………………………………………………………. 3.9 Humboldt ………………………… :……………………………………… 1.4 Imperial…………………………………………………………………….. 4.0 ~1s:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: ~:~ Los Angeles……………………………………………………………….. 7.4 Madera………………………………………………………………………. 3.7 Marin a …………………………………………………………… ~………… 5.7 Mendocino ……………………………………………………………….. 4.5 Merced b …………………………………………. ~ …………………… ;… 4.1 Monterey b ………………………………………………………………… 4.0 ~k~~.~:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: 4.8 d Riverside …………………………………………………………………… 3.2 Sacramento ……………………………………………………………….. 2.4 San Bernardino b ………………………………………………………. 7.3 San Diego ……………………………………………………………….. 9.5 San Francisco\u00b7………………………………………………………….. 10.7 San Joaquin ……………………………………………………………….. 3.3 San\u00b7 LuiS Obispo………………………………………………………… 6.6 San . Mateo ……………………………………………………………….. 8.5 Santi Barbara b ………………………………………………………… 4.4 Santa.Clara … ::……………………………………………………………. 3.6 Santa\u00b7 Cruz …. ;…………………………………………………………… 3.3 Shasta\u00b7…………………………………………………………………………. 3.5 Solano b ……………………………………………… :~…………………… 2.9 Sonoma a …. ; …………………………… ,: ………. ;………………………. 7.2 Stanislaus ……………… ;.; …………… : .. , …………. ;;…………………… 1.4 Tulare ………………………….. :……………………………………………. 1.9 Ventura ……………………………….. ;………………………………….. 5.1 b\u00b7 Yolo ………………………………………………………………………. ;. 3.4 Y~ba ………………………………………. ;………………………………… 0.9 Error rates above 4 percen~ for each of the three review periods. b Error rates above 4’percent for two out of\u00b7three review periods. 8.8% 1.0 8.4 3.0 1.9 3.7 0.6 5.3 2.2 2.8 4.9 1.5 3.4 5.6 5.5 3.0 2.7 3.6 3.7 5.2 9.6 1.0 2.5 5.1 4.2 6.3 1.6 3.4 4.7 6.8 2.9 6.0 3.1 6.6 2.4 October 1979- March 1980 lLO% 1.3 3.9 3.0 2.7 2.0 3.9 2.9 2.5 5.9 1.5 6.6 9.2 6.4 3.9 4.0 4.3 13.4 7.1 10.6 2.6 1.3 5.1 3.3\u00b7.\u00b7\u00b7 3.6 2.9 4.5 5.6 7.5 3.2 1.3 3.9 10.5 0.5 < Excludes social security enumeration errors, includes WIN registration errors. d Reliable error rate data not available due to insufficient number of cases being completely reviewed. e Reliable error rate data not available due to disruption caused by the October 1979 earthquake. Item 518 HEALTH AND WELFARE \/ 1015 and California currently have a policy difference. If social security enumeration errors are excluded, the state's error rate is 5.6 percent. The adjusted error rate represents misspent funds totaling $50,497,600, of which the state share is $24,230,- 500. In 1979-80, each 1 percent of error cost the General Fund an estimated $9.6 million. County Error Rates. Prior to October 1978, the department collected county specific error rate data for the 15 counties with the largest caseloads. After enact- ment of SB 154 and the state buy-out of county costs for the AFDC program, the state expanded its quality control sample to the 35 largest caseload counties. Table 5 shows the error rates for the 35 largest counties for the three periods between October 1978 and March 1980. The department established a 4 percent performance standard for the three quality control periods shown in Table 5. During this time, 14 counties exceeded the error rate standard for two or more review periods. Seven counties had error rates above the 4 percent standard for each of the three review cycles. An additional seven counties had error rates above 4 percent for two out of three review periods. Legislative Action. Under current law, the Director of the Department of Social Services has the authority to hold counties financially liable for high error rates. The Supplemental Report of the 1980 Budget Act required the department to submit a report concerning the future use of fiscal sanctions. The report was to identify (a) the review period for which counties would be financially liable for high error rates, (b) the circumstances under which counties would not be held liable even though they exceeded the error rate standard, and (c) features to be included in calculating the error rate. Department to Hold Counties FiscaJJy Liable for Excessive Errors Using Cur- rent Regulations. In his report to the Legislature dated January 1981, the Direc- tor of the Department of Social Services stated that fiscal santions would be applied against counties with error rates above 4 percent for the October 1979- March 1980 review period. The director assessed such sanctions on January 8,1981. Table 6 shows the counties which were sanctioned, their error rates, the amount of misspent state funds, and the amount of the fiscal sanction. It should be noted that of the 13 counties which were sanctioned, five had exceeded the statewide enor rate (4 percent) for three consecutive review periods. An additional three counties had error rates above 4 percent for two out of three review periods. General Funds Overbudgeted Based on Departments Plan to Hold Counties FiscaJJy Liable for High Error Rates. The director of the department has indicat- ed that no funds will be withheld from counties while they are appealing the fiscal sanctions for the October 1979-March 1980 review period. Upon completion of the administrative appeal process, however, the state will reduce its share of funds which are advanced to the counties for AFDC assistance payments by the amount of the fiscal sanction. Because of the time required for the adplinistrative appeal process, the department will probably not be able to recoup the misspent funds during the current year. . Our analysis indicates that the department will be able to withhold the amount of the fiscal sanction from county advances in 1981-82. The proposed General Fund appropriation for AFDC cash grants for 1981-82 has not been reduced by the amount of the fiscal sanctions proposed by the department. As a result, General Fund support for Item 518-101-001 (a); AFDC cash grants, is overbudgeted. We therefore recommend a General Fund reduction of $4,393,213 from Item 518-101- 001 (a) because the state will be able to recover these funds during the budget year from the counties. .. 1016 \/ HEALTH AND WELFARE Item 518 COUNTY\u00b7 ADMINISTRATION OF WELFARE PROGRAMS-Continued Table 6 Fiscal Sanctions for High Error Rates\u00b7 October 1979-March 1980 County Alameda b .................................................. ; ..................................... .. Marin b .............................................................................................. . Merced ............................................................................................. . Monterey c ..... ~ ................................................................................. . ?a:::e~t~\u00b7\u00b7:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: San Bernardino c .. . ; ................................................ . San Francisco b . . . . . . . . .. . . . . . . .. . .. San Mateo b . . . . . . . . . .. . .. . . . . . .. . . Shasta ................................................................................................. . Solano ....... ; ........................................................................................ . Sonoma b .................. : ....................................................................... .. Yoloc .................................................................................................. . Totals .................................................................................................. . Error Rate 5.74% 4.36 6.47 8.01 4.16 4.37 6.91 6.48 4.10 4.48 4.70 6.92 8.32 Amount of Misspent State Funds $1,390,429 57,112 219,747 349,967 605,086 981,143 1,366,738 840,853 192,190 123,601 200,655 326,973 164,641 $6,819,135 Amount of Sanction $944,597 10;568 188,008 392,645 52,156\u00b7 186,172 1,289,914 721,203 10,505 29,679 66,975 309,207 191,584 $4,393,213 a Error rates are lower than those shown in Table 5 because the rate used by the director: (1) excluded \"technical errors\" such as social security enumeration and WIN registration, and (2) were prior to inclusion of quality control findings by State staff. bError rate had been above 4 percent for the last three review periods, including October 1979-March 1980. c Error rate had been above 4 percent for two out of the last three review periods, including October 1979-March 1980. Criterion for Appealing Sanctions is Unclear. The department's report to the Legislature states that counties may appeal the sanction based upon extenuating circumstances which may have affected their performance. If \"good cause\" is foUnd, the director may elimihate or reduce the amount of fiscal liability. The report does not specify the criterion to be used to determine if\" good calise\" exists to reduce or ~llininate the amount of the sanction. In order that the Legislature may be informed of circumstances under which an appeal will be approved, we recommend that the department report during the budget hearings on the crite- rion it will use to eliminate or reduce the amount of the fiscal sanction. Department Proposes to Revise CUlTent Sanction Regulations. In the January 1981 report, the director stated that it was his intent to revise the current state sanction regulations and to make the revised regulations effective retroactively to October 1980. A comparison of the major features of the department's proposed regulations with the current regulations that the federal government would utilize to sanction the states for excessive errors, follows: 1. Error Rate Must be Above the State Performance Standard for Two Consecu- tive Review Periods. The department's proposal provides that fiscal sanctions will be applied when the county's error rate is above the state's performance standard for two consecutive review periods (a total of 12 months). In addition, the plan provides that county performance below the statewide error rate stand- ard in one 12-month period can reduce or eliminate the sanction amounts in the next 12-month period. This \"banking\" feature is not contained in existing federal regulations. 2. \"Client Caused\" ElTors Will Be Included The department proposes to include \"client caused\" errors when determining a county's error rate. This fea- ture is consistent with current federal regulations. Item 518 HEALTH AND WELFARE \/ 1017 3. Technical Errors Will Be Excluded. Technical errors include the county's failure to have a recipient's social security number on file or the failure of a recipient to register for the Work Incentive (WIN) program. The department proposes to exClude these errors when determining a county's error rate because it maintains that such errors do not result in mlsspent funds. Current federal regulations include technical errors for purposes of applying future fiscal sanctiohs against the states. . . 4. Use of the Lower Limit of the Point Estimate as the Error Rate. Quality\u00b7 control reviews produce a point estimate of a county's error Tate. The reviews also produce a range above and below the point estimate in which the \"true\" error rate would fall if every case in a county, rather than a statistical sample, were reviewed .. For example, survey findings may show that a county's error rate is 5.0 percent plus or minus 1.0 percent. This means that there is a certain probability that the error rate for the county could be as low as 4.0 percent or as high as 6.0 percent. The department has elected to use the lower liririt of the error rate (4.0 percent in the example above) when applying sanctions. Under current regulations, the federal government would use the point estimate, not the lower liririt if it were to apply sanctions against California. 5.\u00b7 County Appeals. Counties could appeal a fiscal sanction based on. circwn- stances outside of the county welfare department's controL Circumstances outside of county control could include, for example: (a) disasters, (b) strikes or work actions,and (c) incorrectly written state policy. The federal government allows waiver of the sanction based on a finding of a \"good faith effort\" by the, state to reduce its error rate. Departments Plans to Apply Sanctions During April-September 1980 is Un- clear. In\" his January report to the Legislature, the director stated that he will apply sanctions for\u00b7the review period October 1979-March.198O. In addition, the director indicated his intent to apply sanctions using revised regulations starting with the October 1980-March 1981 review period. The department's report is silent, however, on its plans to apply sanctions for the intervening review period of April-September 1980. In\u00b7 order that the Legislature is.awareof the\u00b7 depart- ment's plans, we recommend that the department advise the LegislahIte during budget hearings as to whether or not it will hold counties fiscally liable for high error rates during th~ April-September 1980 review period. DepartnJent's Authority to Apply Sanctions lJased on Retroactive Regulations Is Uncertain. In his report to the Legislature, the director stated his intention to revise the current sanction regulations and to apply the revised regulations start- ing with the review period of October 1980-March 1981. At the time this Analysis was written, the department had not issued revised regulations. We are unable to advise the Legislature when the revised regulations will be issued and to what extent the final regulations will reflect the department's current \"proposal. More- over, it is uncertain whether the department can apply fiscal sanctions based\u00b7 on regulations which are to take effect retroactively. . . We recommend that the department be prepared to inform the Legislature -during the budget hearings if itean hold counties fiscally liable using regulations which were not in effect throughout the October 1980-March 1981 quality control period. If.the department determines that the revised regulations cannot be ap- plied during this period, it should be prepared to advise the committee of its alternative plans. Corrective Action. The AFDC program management branch within the de- partment is responsible for supervising county administration of the AFDC pro- gram in California. Within the branch, the program operations bureau provides assistance to county welfare departments in the administration of the AFDC 1018 \/ HEALTH AND WELFARE Item 518 COUNTY ADMINISTRATION OF WELFARE PROGRAMs.;....Continued program, including assistance in county specific corrective action efforts. This bureau is currently authorized 15 permanent professional positions. In addition to this bureau, the program systems bureau is authorized 10.5 permanent profes- sional positions responsible for implementing statewide changes in welfare ad- ministrative systems for corrective action purposes. On January 22, 1981, the department provided our office with a document identifying the statewide corrective actions undertaken by state staff since 1979, as well as those currently underway. In addition, the report summarized the corrective actions underway by state and county staff in 15 counties with error rates above 4 percent. . . As Table 5 on page 1014 shows, seven counties have had error rates above the statewide standard (4 percent) for the last three review periods. An additional seven counties have had error rates above 4 percent in two out of three review periods. Because of the contfuued high error rate in the 14 counties, we recom- mend that the department, in cooperation with the counties, submit a report to the Legislature prior to the budget hearing stating how it plans to reduce the error rates in the 14 counties. The report should identify for each of the 14 counties: (a) the specific type of assistance which state staff will provide, (b) the type of errors which will be reduced, (c) the specific corrective actions, in order of priority, which will be implemented by the county to reduce identified errors, (d) a time table for implementing the corrective actions, and (e) the method for evaluating the effectiveness of the planned corrective action. SPECIAL SOC.lAL SERVICES AND COMMUNITY CARE LICENSING PROGRAMS Item 518-101 (e) and (f), from the General Fund Budget p. HW 172 Requested 1981~2 .......................................................................... $150,678,638 a Estimated 1980-81 ............................................................................ 187,948,622 Actual\u00b7 1979-80 .................................................................................. 157,982,830 Requested decrease $37,269,984 a (-19.8 percent) Total recommended reduction .................................................... $7,848,749 Total recommendation pending .................................................. $32,398,314 a Reflects replacement of $52,013,942 from the General Fund with equivalent federal funds. Special social services program General Fund expenditures are proposed to increase by $14,743,958, or 7.8 percent over estimated 1980-81 expenditures. 1981-82 FUNDING BY ITEM AND SOURCE Item Description 51S-101-OO1 (e)--Social serVices program 51S-101-OO1(f}-,Community care licensing Budget Act of 1978, Item 274 Total Fund General General General Amount $143,782,101 6,463,700 432,837 $150,678,638 Item 518 HEALTH AND WELFARE \/1019 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS Analysis page 1. Unbudgeted Federal Title IV\"B Funds. Reduce by$7,31fM23. Recommend anticipated federal funds be scheduled in the Budget' Bill for a savings in overbudgeted General Fund support of $7,310,- 123. ' , 2. Transfer of Foster Care Costs to Title IV-A. RecoIruhend Depart- ment of Finance advise Legislature of anticipated General FUnd saVings prior to budget hearings. Further reconlmendBudget Bill langUage requiring reduction of General Fund support by the amoUnt of federal fund increase to prevent overbudgeting and ensure legislative review of appropriations. 3.' Control of Program'\" Appropriations; 'Recommend detailed Budget Bill schedule of social services progranis~ Further recom- ' mend language requiring advance notification to the Legislature when funds are to be transferred among these programs, to ensure legislative review of program expenditures. , 4. Social Services Planning Act. Recommend Department of Fi- nance include in its 198().:..81 , progress report a description 'of a process for weighting state and county priorities. Further recom~ mend supplemental report language requiring that a design for , prediction of program utilization be submitted to the Legislature by September 1, '1981. 5. Cost-of-Living Increase for County Employees. Recommend adoption of Budget Bill and supplemental report language lipUt- ing state liability for countycost-of-livingadjustmentstothe cost\" of-living percentage 'increase authorized, by ,the Legislature. 6. In-Home Supportive SerVices. Withhold recommendation on $27,398,314 from the General Fund pending receipt of (a) report required by the 1979 Budget Act and (b) report and plans for corrective action for the April to October, 1980 quality control review period., 7. In-Home Supportive Services Payrolling System. Recommend adoption of Budget Billianguage requiring (a) a feasibility study report be submitted to the Joint Legislative Budget Committee by September 1, .19~1 and (b) a competitive bid prbcess be imple- mented upon expiration of current contract to select most cost- .' effective vendor., ' 8. Twenty-Four-Hour Emergency Response System. Withhold rec- ommendation on $7,929,319 ($5,000,000 General Fund and $2,929,- 319 federal funds), pending review of (a) a report submitted\u00b7 , January 20,1981 and (b) actual expenditures during 1979-80. ,9. Community Care Licensing. Reduce by $371,134. Recommend , deletion of unjustified tasks from workload standard, for a General Fund reduction of $371,134. 10. Adoptions Cost Per Placement. Reduce by $167,492. Recom- mend cost per placement be based on full year rather than single quarter experience, !oraGeneral Fundreduction pf $167,492. U. Federal Funds for Refugees. Recommend Department of Fi- nance advise the Legishlture during 1981 budget hearings regard- irig the administration's plans in the event ,the state dpes>not, receive federal funds anticipated in the budget. . ‘,’ 12. Title XX Training. Recommend Department of Finance advise the Legislature regarding the administration’s plans in the event the state does not receive federal funds anticipated in the budget. –._— —- —– 1031 1032 1033 1034 1035 1040 1042 1045 ,1046 1048 1049 1050 1020 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued GENERAL PROGRAM STATEMENT The DepartIilentof Social Services (DSS) administers various social services programs which provide services to eligible clients rather than cash as in the AFDC and SSI\/SSP programs. The programs differ from each other in the nature of the services provided, the characteristics of clients served, the source of funding, and\u00b7 the agency that delivers the service. . Social services programs are administered by the Adult and Family Services and Community\u00b7 Care Licensing Divisions of the department. The budget includes seven programs: (1) other county social services, (2) specialized adult services, (3) specialized family and children’s services, (4) adoptions, (5) county staff develop- ment and services training, (6) demonstration projects, and (7) community care licensing. The major components of these programs. are identified below. Title XX Social Services The largest group of programs funded through this item are those operated pursuant to Title XX of the federal Social Security Act. The Department of Social Services is the single state agency designated. to receive federal social services funds under this title. Federal Title XX regulations require that at least three services be provided for SSI\/SSP recipients, and that at least one service be direct- ed to achieving each of the five federal Title XX program goals of (1) self-support, (2) self-sufficiency, (3) protection of children and adults and reunification of families, (4) prevention or reduction of inappropriate institutional placements, and (5) institutionalization orily when necessary. Federal financial participation in state Title XX programs is contingent on preparation of a statewide.Comprehensive Annual Services Program (CASP) plan; Under the provisions of Public Law 96-272, enacted in May 1980, the states may choose to prepare the CASP annually or.on a multi-year basis. The CASP must identify and describe (a) the services to be provided within the Title XX program, (b) the specific target groups for each service, and (c) the structure of the social services delivery system. Federal regulations allow each state to establish a deliv\” ery system that is _ most appropriate -to the state’s Title XX needs. County-Administered\u00b7 Services. County welfare departments administer the majority of California’s Title XX social services. State law and regulations (1) require counties to provide 10 specific services and (2) permit counties to offer any of 13 additional services. One of the 10 mandated activities is In-Home Sup- portive Services (IHSS). The 22 remaining services comprise the Other County Social Services.(OCSS) program. Of \u00b7the 10 mandated activities, four ate required to be available to all persons: information\u00b7 and referral,protectiveserYices for adults, protective . services for children, andcoutt ordered foster care~ Other services are provided to individuals who receive SSl\/SSPor AFDC, or who are eligible because oftheirlow income. Federal regulations require that 50 percent of all clierttsreceiving services sup- ported by-federal Title XX funds must receive or be eligible for (a) \u00b7AFDC, (b) SSIlSSP, or (c) Medi.:.Cal. . State-Administered Services. The budget proposes the expenditure of federal Title XX funds for family planning services administered by the Department of Health Services. Federal regulations do not reqUire family planning services to be offered as part of the .state’s Title XX program. TIle fed~ral government, however, may withholdfinaneial participation in the state’s AFDC program if family plan- ning services are not made available to AFDC recipients. Federal funds received Item 518 HEALTH AND WELFARE \/ 1021 by the Department of Social Services as the single state agency responsible\u00b7 for Title XX are transferred to the Department of Health Services under the terms of an interagency agreement. Federal Title.xx Allocations. Based on its share of the nation’s total popula- tion, California receives slightly more than 10 percent of the federal funds avail- able each year from Title XX of the Social Security Act. Prior to passage of PL 96-272, there was a nationwide authorization ceiling of $2.5\u00b7 billion .. Public Law 96-272 contains provisions which increase this national ceiling each fiscal year until 1985. The federal ceiling on nationwide Title XX\u00b7 reimbursements is set at $2.9 billion in federal fiscal year 1981 and $3.0 billion in federal fiscal year 1982. Title .xx Matching Requirments.Federallaw requires that federal Title XX funds expended on most social services be matched on a 75:25 federal\/nonfederal sharmgbasis. Family planning services, however, require only a 10 percent nonfederal match. Special federal fund augmentations for child development pro- grams made in past years have not required state or local matching funds. Because federal Title XX funds are capped, state and local funds must be used not only for the nonfederal match but for any expenditures that exceed the federal allocation. California is now providing support for social services which far exceeds the re- quired 25 percent nonfederal match. Other Social Services In addition to Title XX social services, the department is responsible for adminis- tering the following social services programs: 1. Child welfare services which are funded under Title IV-B of the Social Secu- rity Act. These funds are used to supplement the Title XX protective services for children. 2. Maternity care services, which are funded from a continuing annual General Fund appropriation of $2.4 million pursuant to Section 16151 of the Welfare and Institutions Code. These funds are used to reimburse nonprofit licensed maternity homes for the cost of care and services provided to unmarried pregnant women. 3. Work Incentive Program (WIN) social services, which are funded 90 percent by federal funds and 10 percent by the General Fund. Federal law requires that all nonexempt AFDC applicants register with local WIN sponsors to receive em- ployment and job training services. Through local separate administrative units (SAUs), the Department of Social Services administers the delivery of supportive social services, including child care, for WIN participants. These SAUs are general~ ly operated by county welfare departments. 4. Services to Indochinese refugees, which are 100 percent federally-funded: These social services, job training, and English language instruction programs are delivered by county welfare departments and private contractors. 5. Adoption services delivered by counties which are 100 percent federally- funded. (The cost of adoption case work conducted directly by the state is budget- ed in Item 51B-Departmental Support.) 6. Community care licensing services provided by counties, under contract with the state, which are 100 percent state-funded. (Facilities evaluation and licensing conducted directly by state personnel are included in Item 51B-Departmental Support.) 7. Demonstration programs which are funded individually by the state or fed- eral government. These are intended to test alternative programs and procedures to existing social services delivery systems. . 8. County staff development and training programs which are supported by federal Title XX funds and matched with state, county, and university funds. These programs are directed at both long-term skill needs and short-term training needs of Title XX service workers. 1022 I HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued ANAL YSIS.AND RECOMMENDATIONS The budget proposes expenditures of $150,678,638 from the General Fund for social services programs in 1981-82. This is a decrease of $37,269,984, or 19.8 per- cent, below ~.t;imated current year expenditures. The General Fund reduction of $37.3 millio ‘f!S not represent an overall reduction in services. The major compo- nent of the. .’ .;posed.reduction is a replacement of $52.0 million in General Fund support for~ciCial services programs with equivalent federal funds budgeted in past years for child development programs. The General Fund commitment\u00b7 for social services programs is actually proposed to increase by $14.7 million rather than decrease by $37.3 million. This funding shift is described in more detail below. . Table 1 Proposed 1981.,.82 General Fund Budget Adjustments For Special Social Services and Community Cara Licensing Programs A. 1980-81 Current Ye~ Revised …………………………………………. . B. Budget Adjusbnents 1. In-home supportive services a.Title XX funding shift …………………………………………….. . .. ‘ b. Additional Title XX allocation ………………………………… . c. Caseload growth (6.49 percent) …………………………….. . d.1981-82statutory cost-of-living (4.75 percent) ……… . e. Minimum wage increase Ganuary 1981) …………………. . f. Provider benefits (Chapter 463, Statutes of 1978) ….. . g. Restaurant meal allowance …………. …………………………. Subtotal ………………………………………………………………………………. . 2. Adoptions a. Caseload growth (2.5 percent) ……………………………….. . b. 1980-81 cost-of-living ………………………………………………. . c. Indian Child Welfare Act (PL 95-608) ……………………. . d. Adoption fees …………………………………………………………… . Subtotal …………………………. ; …………………………………………………… . 3. Community Care Licensing a. Revised workload standards ……………………………………. . b. Implementation of regulations …………………………… , ….. . c. Deletion of fainily day care facility licensing …………. . Subtotal ………………………………………………………………………………. . 4. DemonStration’ Programs\u00b7 a .. Termination \u00b7of projects …………. ; …………. …………………… b. Multipurpose senior services project …… \” ………………. . Subtotal …………………………… ;: ……………………………………. ;.; .. ;; …… . 5. Other Programs a. Work incentive program-child care ……………………… . b. Transfer ofaccess assistance for deaf to state support c; Transfer of domestic violence programs to counties Subtotal ………………………………………………………………………………. . Total Proposed General Fund Adjilsbnents ……………………. . C. Proposed Total General Fund ……………………………… , ………… . D. Other GeneralFundAppropriations 1. Multipurpose senior servicesproject. .. : ……………………….. . E. GeneralFuild in Item 518-101-OOHe) and (f) ………………… . Adjustment -$52,013,942 -601,791 16,233,408 1,368,820 7,633,525 2,163,346 ~785 378,136 34,200 1,860 -9,148 -$1,521,800 108,700 -7,879,300 -2,399,765 -627,966 59,319 -44,801 -152,000 Total $187,948,622 -$25,217,419 $405,048 -$9,292,400 -$3,027,731 -$137,482 -$37,269,984 150,678,638 -432,837 $150,245,801 Item 518, HEALTH AND WELFARE \/ 1023 Total proposed General Fund expenditures include $150,245,801 appropriated in this item and $432,837 carried forward from the 1980 Budget Act for the multipur- pose senior services project. Of the total proposed for the budget year, $6,463,700 is identified in the Budget Bill for community care licensing and $143,782,101 is proposed for special social services programs. Included in the $143,782,101 is $2,079,670 appropriated in lieu of a $2.4 million statutory appropriation (Welfare and Institutions Code Section 16151) for licensed maternity care homes. As shown in Table 1, the major components of the anticipated decrease are (1) a replacement of $52,013,942 in General Fund support budgeted for in-home supportive services with federal funds formerly budgeted for child development programs administered by the Department of Education and (2) a reduction of $7,879,300 due to the anticipated deletion of statutory requirements to license family day care homes. Total expenditures, all funds, for social services programs are projected to total $593,925,900 in 1981~82. This is a decrease of $26,568,157, or 4.3 percent, below total estimated expenditures in the current year. Table 2 identifies total proposed ex- penditures for social services programs for the budget year. As shown by Table 2, federal funds comprise $385.8 million, or 65.0 percent of total proposed expenditures for social services programs. The availability of these funds depends on congressional action on the 1981 and 1982 federal fiscal year budgets. Congress may appropriate less for the programs identified in Table 2 than antiCipated by the Governor’s Budget. If this occurs, a larger amount of General Fund support may be required in 1981-82 than included in the budget. In addition, because of the overlap of state and federal fiscal years, lower federal appropria- tions than anticipated by the budget for the Title XX program, in particular, would result in an increased demand for General Fund support in 1982-83 in order to maintain the same level of service proposed for 1981-82. FEDERAL FUNDING FOR SOCIAL SERVICES PROGRAMS Title XX-State and County Overmatch Section 15151.5 of the Welfare and Institutions Code requires that at least 66 percent of federal Title XX funds be allocated to the counties. The budget pro- poses that $300,413,509, or 98.7 percent, of the available Title XX funds be allocated to the counties in 1981-82. The remaining federal funds, $4,000,000 (1.3 percent of the total), are allocated to the family planning program adminstered by the De- partment of Health Services. Of the $300,413,509 allocated to the counties by the budget, $153,157,180 is for IHSS, $144,327,010 is for the OCSS program and $2,929,319 is for the 24 hour emergency response system. (In addition, $9,411,631 in federal funds for social services provided by county welfare departments to Indochinese refugees is in- cluded in the budget subitems for IHSS and OCSS.) Section 12306 of the Welfare and Institutions Code requires the state to provide the 25 percent match for federal funds used for IHSS.ln order to receive federal Title XX funds, counties traditionally have been required by the annual Budget Act ‘to provide the 25 percent match for OCSS. In addition, the state has provided General Fund support for OCSS, although it is not required by state law to do so. 1024 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-Continued Table 2 Total 1981-82 Proposed Expenditures For Social Services and Community Care Licensing Programs A. Title XX Social services 1. IiI-home supportive ser- General Pundin Item 518(e,\/) . vices (IHSS) ;………………. $117,727,145 2. Other colinty social ser- .. ‘ vices (OCSS) ……………… . 3. 24-hoUr emergency re- sponse ……. ;…………………… 5,000,000 4. Family Planning (DHS) Subtotals………………………. $122,727,145 B. Title XX Training I. County \u00b7staff develop- ment ………………. ; ………… .. 2. University training …… .. Subtotals.\u00b7 …………………….. . C. Refugee Assistance 1. . County social services a IHSS:, ……. : ……………… … b.OCSS …………………….. … 2. Contracted services …… .. Subtotals …………………….. .. D. Other’Social services 1. Adoptions …………………… $16,946,994 2.’ Cominunitycare licens- ing a. Total cost ……………….. (14,343,000) b. Deletion . of family day care licensing …. ( -7,819,300) c. Net total cost ………… 6,463,700 3 .. Demonstration pro- . grams ………….. \” …………… . 4. CbHd welfare. services (Title IV-B) ……………… .. 5. Work incentive pro- gram (Title 1V-C) a.WIN cbHdcare………. 430,946 b. WIN administrative unit ……….. ;; ……………. . 6. Matelnity care ……………. 2,!J19;~0 7. Deaf Access ……………….. 1,597,346 Other General Fund $432,837 Suhtotals.; ……………… :……….. $27,518,656 $432,837 \u00b7Totals ……………………………………… $150,245,801 $432,837 Federal Funds in Item 518(e) $153,157;180 144,327,010 ‘2,929,319 .4,000,000 $304,413,509 2,5!J1,000 9,093,000 $11,600,000 306,813 9,104,818 40,482,334 $49,893,965 269,093 4,119,446 3,878,512 11,648,624 $19,915,~5 $385,823,149 County Reimburse- Funds ments $47,802,455 2,643,1!J1 $444,444 $50,445,562 $444,444 835,~ 3,031,000 $835,~ $3,031,000 $1,373,149 1,294,291 $2,~,440 $53,948,669 $3,475,444 Item 518 Total $270,884,325 192,129,465 10,572,426 4,444,444 $478,030,660 3,342,~ 12,124,000 $15,466,~ 306,813 9,104,818 40,482,334 $49,893,~ $16,946,994 (14,343,000) ( -7,879,300) 6,463,700 701,930 5,492,595 4,309,458 12,942,915 2,!J19,~0 1,597;346 $50,534,608 $593,925,900 \u00b7’This amount includes a reduction of $62,685,256, total funds ($52,013,942 federal Title XX funds and $10,671,314 reimbursements) from the i980 Budget Act appropriation for Special Social Services programs’dlle to’ a tranSfer of funds budgeted for child development programs to the Department ‘. of Education~ This’$62,685,256 is included in Item 610 of the 1981 Budget Bill for child development programs. For fiscal year 1981-82, total state and county Title XX expenditures are . proposed to exceed the required match by $73,034,871. Because of this General Fundovefmatch; any savingss, deficits, reductions, or augmentations in any of the TitleXXsocial services programs wiD have a corresponding doUar-for-doUar im- pact on the states. Table 3 displays the relationship between state, county, and federal TitI~XX expenditures fr(j)ln 1977-78 thrli)1agh 1921-22. Item 518 HEALTH AND WELFARE \/ 1025 Table 3 Title xx Program Funding Sources 1977’-78 to 1981.;.a2 1977-78 …………………………………….. .. 1978-79 …………………………………….. .. 1979-80 ……………………………………… . 1980-81 (estimated) ……………….. .. 1981.,82 (proposed) ……………….. .. Title XX Funding Transfer Federal $276,585,768 274,237,842 283,887,900 303,811,718 304,413,509 State General . Fund $71,275,945 115,959,405 135,267,127 159,060,322 123,171,589 County $46,335,905 41,160,800 45,493,155 50,445,562 50,445,562 Totals $394,197,618 431,358,047 464,648,182 513,317,602 478,030,660 Percent General Fund 18..1% 26.9 29.1 31.0 25.8 The budget proposes to (1) redirect $52 million in federal Title XX funds from the child development program administered by the Department of Education to the In-Home Supportive Services program and (2) replace these funds with an equal amount of General Fund support which has been budgeted in past years for the .In-Home Supportive Services program. This transfer will result in no\u00b7 net change in the level of funding for. either program or in the total General Fund amount required for the support of the two programs. The effect of the funding shift will be to (1) increase federal funds budgeted for In-Home Supportive Serv- ices, (2) \”buyout\” federal funds for child development programs with General Fund support, and (3). transfer appropriations for child development programs from the budget item for special social services programs (Item 518) to Item 610. Similar funding transfers were contained in the 1978 and 1979 Budget Acts, when General Fund support replaced federal Title XX funds in the Community Care Licensing program and programs administered by the Departments of Rehabilita- tion, Developmental Services, and Mental Health. Potential Administrative Savings, As the single state agency designated to re- ceive federal Title XX funds, the Department of Social Services (DSS) historically has entered into an interagency agreement with the Department of Education (DOE) to transfer federal funds to DOE for child development programs. Federal regulations concerning state Title XX programs require the designated single state agency to (1) compile an annual plan for all services supported by federal Title XX funds and (2) ensure that the state’s Title XX program meets all federal requirements. In past years, the interagency agreement between DSS and DOE prOvided DSS with approximately $270,000 for\u00b7 the administrative costs of monitor- ingDOE child development programs and complying with other federal require- ments. Because the proposed funding transfer will eliminate federal Title XX funds in the child development program, there is no longer a need for the $270,000 allowance for DSS administrative costs. We discuss the proposed use of these funds in the budget year in our analysis of child development programs (Item 610). Change in Federal Law. For federal fiscal years 1977, 1978 and 1979, $200 million in federal child day care appropriations were made available nationwide without state or local match requirements. The allocation each state received from this amount was ill addition to the state’s normal share of federal funds for Title XX social services. The increased amount, however, could be spent only for child development~ The Adoption Assistance and Child Welfare Act of 1980 (PL 96-272), enacted in May 1980, deletes the requirement that a portion of the state’s Title XX . allocation must be spent on child development programs. Instead this law exempts up to 8 percent ofa state’s total annual Title XX allocation (an amount equal to 36-81685 1026 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued approximately $24.7 million in California in federal fiscal year 1982) from existing state match requirements if the funds are used for child development. Becailse the budget already contains more General Fund support for special social services programs than is required by federal law, California would not have to provide any additional match even if it fails to use 8 percent of its Title XX allocation for child development. As a result, California will not gain or lose federal funds as a result of the proposed General Fund buyout of child day care. Proposed Allocation of Federal Title XX Funds by State Fiscal Year. Because the federal and state fiscal years are not the same, the state must decide how federal funds provided during a given federal fiscal year are to be split between two state fiscal years. For example, the state must decide how to split funds received during federal fiscal year 1982 (October 1, 1981-September 30, 1982), between the state’s fiscal year 1981-82 (which encompasses 75 percent of fiscal year 1982) and 1982-83 (which encompasses 25 percent of fiscal year 1982). Table 4 shows the proposed allocation of federal Title XX funds by state fiscal year. The budget proposes to allocate $304.4 million in federal Title XX funds for use during state fiscal year 1981-82. This includes $261.7 million, or 84~6 percent, ofthe amount expected to be available to the state during federal fiscal year 1982. The remaining funds from federal fiscal year 1982 are reserved for use during state fiscal year 1982-83. By allocating more than 75 percent of the federal funds available in a federal fiscal year for use during the initial state fiscal year for which they are available, the state (1) increases the base budget for social services programs and (2) de- creases federal funds available for the subsequent year. Therefore, this practice creates a need for futUre year increases in state or federal support. Table 4 Federal Title XX Funds Allocated by State Fiscal Year 1980-81 and 1981-82 (in millions) Federal Fiscal Year 1980 1981 1982 State fiscal year 1980-81 …………………………….. : …………. . $62.0 $241.8 State fiscal year 1981-82 …………………………………………. . Unbudgeted …………………………………………………………….. .. 42.7 $261.7 11.9\u00b7 47.6 b Totals …………………………………………………………………. $273.3 $296.4 $309.3 Total $303.8 304.4 The 1980 Budget Act reserved this amount to fund legislation enacted prior to June 30, 1981. b These funds are reserved for use during the first quarter of state fiscal year 1982-83. Major Federal Legislation-PL 96-272 The Adoption Assistance and Child Welfare Act of 1980 (Public Law 96-272) was enacted. by Congress on June 17, 1980. Thislaw made several major amendments to the federal Social Security Act related to the following programs: (1) Title XX social services, (2) Title IV-B child welfare services, (3) Aid for the Adoption of Children, and (4) Title IV-A foster care payments. The intent of the federal law isto (1) reduce the numbers of children in out-of-home placements nationwide -by providing states with financial incentives to prevent the initial separation of families and (2) encourage permanent planning for children who are separated from their families. The actual fiscal impact on California of many of the provisions Table 5 Adoption Assistance and Child Welfare Act of 1980 Summary of Major Provisions Program EfFective October 1, 1980 EfFective October 1, 1981 EfFective October 1, 1982 EfFective October 1, 1983 EfFective October 1, 1984 Foster Care Pay- ments …………….. . Child Welfare Serv- 1. Cap on federal par- ticipation if $163.55 m. Title IV-B appropriat- ed. 2. Optional shift to new Title IV-E program- potential additional funding if specific re- quirements met. 3. Revised definition of allowable foster care costs under Title IV -E. ices…………………. 1. Title IV-B funds pro- vided on advance ba- sis. 2. Optional compliance with new protections -potential increase in federal funds. Adoption Assistance 1. Optional program- federal funding avail- able if certain IV-B re- quirements met. Social Services ………. L Indexed ceiling re- places cap. 1. Cap if $22Om. Title IV-B appropriated. 1. Cap if $266 m. Title IV-B appropriated. 2. Same as October 1980. 2. Mandatory shift to new Title IV-E. Case plan and six-month review required. Other requirements to obtain voluntary placements funding. 3. Same as October 1980. 3. Same as October 1980. 1. Same as October 1980. 1. Same as October 1980. 2. Saine as October 1980. 2. Same as October 1980 1. Same as October 1980. 1. Required program. 1. Same as October 1980. 1. Same as October 1980. 1. Same as October 1982. 2. Preplacement pre- ventive and reunifica- tion services required. Termination of fund- ing for voluntary placements. 3. Same as October 1980. 1. Same as October 1980. 1. Requires payments for cases where par- ents reside outside state. 1. Same as October 1980. 1. Same as October 1982. L Federal funding level may revert to FFY 1979 level for any state that fails to meet requirements. i s 0\”1 ~ 00 ::I: ~ ~ ~ o ~ …….. … ~ 1028 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued of this federal law will remain uncertain until federal regulations clarifying con~ gressional intent are finalized. Table 5 summarizes the major provisions of PL 96-272. Increase to Federal Title XX Ceiling. Public Law 96-272 increases the nation- wide cap on federal funds available under Title :xx of the Social Security Act. In federal fiscal year 1981, the total federal Title XX authorization is $2.9 billion. This amount will increase to $3.0 billion for federal fiscal year 1982. California’s share of these federal authorizations, as published in the Federal Register, is $296,483,159 in federal fiscal year 1981 and $309,325,846 in federal fiscal year 1982. Table 6 shows the annual national Title :xx authorization levels as speCified in PL 96-272. The amounts for federal fiscal years 1981-1985 represent the maximum funding levels authorized for the Title :xx program under exisiting law. There is no guarantee, however, that these maximum amounts will be appropriatedby the Congress. Thus, the amounts of Title XX funding available to California may be less than the amounts implied by Table 6. Table 6 National Title XX Authorization Levels Specified in PL 96-272 Federal Fiscal Years 1980-1985 (in billions) Funding Level 1980………………………………………………………………………………………………………………………… $2.7 1981………………………………………………………………………………………………………………………… 2.9 1982………………………………………………………………………………………………………………………… 3.0 1983………………………………………………………………………………………………………………………… 3.1 1984………………………………………………………………………………………………………………………… 3.2 1985………………………………………………………………………………………………………………………… 3.3 Revised Definition of Allowable Foster Care Payments. Historically, California has received federal reimbursement through Aid to Families with Dependent Children, Boarding Homes and Institutions (AFDC-BHI) for a portion of the cost of educational programs, non-Medi-Cal medical services, and some transportation services provided to children in foster care. PL 96-272 redefines the foster care maintenance program and creates a new Title IV-E program which excludes these activities from the definition of foster care payments. If provision for these activi- ties is not included in final federal regulations, the Legislature will need to consid- er whether to continue these activities using state funds. The cost of these activities in California is estimated at $4.7 million in 1981-82. Cap on Federal Financial Participation in Foster Care Payments. Under previ- ous federal law, federal financial partiCipation in the state’s foster care payment program (Title IV-A AFDC-BHI) was not limited toa specific amount. Under the provisions of PL96-272, beginning in federal fiscal year 1981, an annual ceiling will be set for federal finanCial partiCipation in the state’s foster care payment program (Title IV-A\/IV-E) if the federal appropriation level for Title IV-B child welfare services is at least as high as speCified in PL 96-272. Table 7 shows the federal appropriation levels which are required by the act in order to impose a ceiling on federal partiCipation in foster care payment costs. Because the current continuing resolution on the federal budget (House Joint Resolution 644) contains up to $163.5 million for Title IV-B, federal financial par- tiCipation in foster care payments will be capped for each state, in federal fiscal year 1981. Proposed federal regulations indicate each state will be allowed to select one of three formulas to determine the state’s ceiling. Item 518 HEALTH AND WELFARE I 1029 Table 7 Federal Title IV-B Appropriation\u00b7 Levels Required to Cap Federal Participation in Foster Care Payment Costs Federal Fiscal Years 1981-1984 (in millions) Federal Fiscal Year Appropriabon Level 1981. ………………………………………………………………………………………………………………….. .. 1982 …………………………………………………………………………………………………………………… .. 1983 …………………………………………………………………………………………………………………… .. 1984 …………………………………………………………………………………………………………………… .. $163.5 220.0 266.0 266.0 In a program instruction to state administrators, dated January 2, 1981, the federal Administration for Children, Youth and Families announced that the most favorable of these three methods for California would allow the state $42 million for foster care maintenance payments during federal fiscal year 1981. This is less than the amount assumed in the budget. The budget asumes that the federal share of foster care grants and administra- tive costs during 1980-81 will be $48.0 million. These costs are estimated at $54.3 million in 1981-82. Three quarters of federal fiscal year 1981 fall in state fiscal year 1980-81 and one quarter falls .in state fiscal year 1981-82. Thus, if the state is unsuccessful in its attempts to increase the announced cap, there may be a shortfall in federal funds in one or both of these two state fiscal years. To the extent the final cap on federal foster care funding is less than the federal share of costs under prior law, apd total costs are not reduced, other funds would have to be utilized in this program in order to avoid a reduction in services provided. If the federal 1982 Title IV-B appropriation also imposes a cap on foster care payments,the state may experience further reductions in the amount of federal funds available in state fiscal year 1981-82. New Foster Care Payment Program Requirements. PL 96-272 mandates that the state’s foster care payment program (Title IV-E) include a case plan for each child in foster care and a six-month administrative or court review of each foster care placement. These two requirements must be met by October 1982 in order for the state to continue to receive federal financial participation in the foster care payment program. Federal financial participation beyond October 1983 is contingent upon the state having implemented permanency planning services and preplacement serv- ices designed to maintain children in their own homes whenever possible. The specific federal definition of these preplacement and permanency planning re- quirements will remain uncertain until federal regulations are finalized. New Child Welfare Services Program Requirements. In order for the state to exercise certain options regarding the child welfare services program, federal law requires (a) state implementation of all new foster care payment program re- quirements, (b) an inventory of all children in foster care, (c) a statewide foster care information system, and (d) an 18-month court-dispositional hearing for all children in foster care. If these requirements are met, the state could (a) transfer surplus foster care payment funds, within the federal ceiling, to child welfare services, (b) obtain federal reimbursement for the cost of foster care payments for children placed in out-of-home .care on a voluntary basis, and (c) receive a share of federal child welfare services appropriations exceeding $141 million. In addi- tion, states which comply with child welfare services requirements prior to Octo- ber 1984 will be eligible to receive an additional share of the annual Title IV-B appropriation which remains unallocated because of the failure of other states to 1030 \/ HEA~THAND WELFARE Item 518, DEPARTMENT OF SOCIAL SERVICES-Continued comply with these new requirements. If California is not iI;l compliance with the new child welfare service requirements by, October 1984, its allocation of federal child welfare services funds will be reduced to its 1979 allocation ($4.5 million). Chart 1 shows California’s share of federal Title IV-B appropriations with and without compliance with the child welfare services requirements. The total cost of compliance with these federal requirements is not known at this time. The federal Title IV-B appropriation for federal fiscal year 1981, as contained in House Joint Resolution 644, enacted December 15, 1980, is $163.5 million. As shown by Chart 1, California will receive $11.4 million of this amount if the state has not fully implemented the provisions of federal regulations or $13.3 million if the state is in compliance with the federal regulations, a difference of $1.9 million. Chart 1 California’s Share of Federal Title IV-B Funds Trigger Appropriation Levels Federal Fiscal Years 1979 to 1985 ‘(in millions) Dol\/ars Federal appropriation level $266.0 220.0 163.5 141.0 66.2 56.5 Approximate state allocation $21.6 -===——-c-:–,—,—-,–.–,—,’ 17.9 13.3 11.4 ,5.2 4.5 a Based on p~st year allocation percentages. Federal Adoption Assistance Program. Mter the state has submitted a plan to the federal government for the implementation of the new foster care payment program, PL 96-272 allows the state tO’obtain federal reimbursement for approxi- mately 50 percent of the cost of cash payments to parents who adopt certain hard-to-place children. Eligibility for participation in the federal adoption assist- anceprogram would continue from the time of a: child’s adoption until he or she has reached the age of18. California’s current Aid for the Adoption of Children program, supported entirely by the state General Fund,all6ws cash payments, in lieu of foster care maintenance payments, to continue only five years after the child has been adopted. Consequently, as a result of the absence of a time limita- tion in the new federal program, the total caseload of subsidized adoptive children in California is likely to increase over time. Moreover, because of specific income- maintenance related eligibility requirements ill the federal program, hot all chil- dren currently eligible for the state program willbe eligible for the federal pro- gram. Item 518 HEALTH AND WELFARE \/ 1031 Increased Federal Title IV-B Funds Not Included in Budget We recommend that $7,310,123 in unbudgeted federal Title IV-B funds replace overbudg- eted General Fund support for special social services programs, for a General Fund savings of $7,310,123. Under Title IV-B of the federal Social Security Act, grants are made to the states to provide and improve child welfare services, such as adoptions, day care, foster care and protective services for abused and neglected children. In California, Title IV-B child welfare services are administered by the Department of Social Services and delivered by county welfare departments. Federal Title IV-B funds require a 25 percent state or local match, which, in accordance with the annual state Budget Act, is provided by the counties. Our analysis indicates that $7,310,123 in federal Title IV-B funds available to the state in 1980-81 and 1981-82 are not included in the Governor’s Budget. Because these funds are not included in the budget, a greater amount of General Fund support is proposed for these programs than is required to provide proposed services. Federal Appropriation. The Social Security Act authorizes $266 million annual- ly for child welfare services. In the annual federal budget, however, Congress has traditionally appropriated $56 million, rather than the entire authorized amount. California’s 1980-81 and 1981-82 budgets assume a federal appropriation level of $56 million. Federal Fiscal Year 1980 Allocation. In federal fiscal year 1980, however, the final federal appropriation level was increased to $66.2 million. The U. S. Depart- ment of Health and Human Services notified California on August 21,1980 that the state could receive up to $5,238,037 in 1980 rather than the $4,437,530 initially allocated. The federal agency further informed the state that the additional $800,- 507 was available for expenditure until September 30, 1981. On August 25, 1980 the Department of Social Services modified the state’s annual federal budget for child welfare services to include this additional allocation. Of the additional $800,507 allocated to the state, the budget proposes $500,000 to develop and implement a foster care management information system in 1981- 82. We discuss this proposal in our analysis of the department’s support budget. The administration has not submitted a proposal’to the Legislature for expenditure of the remaining $300,507. Federal Fiscal Year 1981 Allocation. As discussed earlier, House Joint Resolu- tion 644, the concurrent resolution on the federal 1981 budget, contains $163.5 million for Title IV-B child welfare services. Based on the allocation methodology established in PL 96-272, the Adoption Assistance and Child Welfare Act of 1980, the state will receive up to $11,447,146 during federal fiscal year 1981 without having to satisfy any additional federal requirements. If the state implements certain federal program requirements prior to the close of federal fiscal year 1981, the state’s allocation could be as high as $13.3 million. On October 20, 1980, the Department of Social Services submitted to the federal government the state’s budget request of $11,447,146 for federal fiscal year 1981. The Governor’s Budget, however, includes only $4,437,530 in federal Title IV-B funds, $7,009,616 less than the amount anticipated from the federal government. General Fund Savings Possible. Based on budget planning documents submit- ted to the federal government, we conclude that the administration intends to expend $7,310,123 in unbudgeted federal IV:B funds during 1981-82. Our analysis indicates these funds could be used to (1) replace proposed General Fund support for child welfare services or adoptions or (2) replace federal Title XX funds proposed for children’s protective services. If federal Title XX funds are freed~up through the use of Title IV-B funds, the amount of General Fund commitment required for the In-Home Supportive Services program could be reduced. Because 1032 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued the proposed expenditure of these federal funds is not included in the Governor’s Budget, the Legislature (1) does not have an opportunity to evaluate the total e\”enditure plan for child welfare services in the budget year, (2) is not able to specify how these additional federal funds should be used, and (3) is compelled to draw on the General Fund for support ofthe special social services programs while federal funds are held in reserve. If these additional federal funds are used to replace General Fund support proposed in this item, the $7,310,123 from the General Fund would be available for use by the Legislature in meeting its financial priorities in this program or for other parts of the state’s expenditure plan. Therefore, we recommend that $7,310,- 123 in unbudgeted federal Title IV-B funds replace General Fund support budget- ed for special social services programs, for a General Fund savings of $7,310,123. Foster Care Cost Shift We recommend the DepartmentofFinanceadvise the Legislature prior to budget hearings on the level of General Fund savings anticipated as a result of a shift in the cost of foster care services from Title XX to Title IV-A funding. We further recommend adoption of Budget Bill language requiring a reduction of General Flind supPOrt budgeted in thisitem by the amount of increased federal funds received as a result of this cost shift. The federal Social Security Act contains a variety of public assistance programs and funding mechanisms .. Title IV -A of that act establishes the Aid to Families with Dependent Children (AFDC) program discussed inour analysis ofItem 518-101- 001 (a). One component of the AFDC program is the provision of cash assistance payments on behalf of children in foster care. For federally eligible children, the federal government contributes 50 percent of the cost of these payments. and program administration. The remaining 50 percent of the cost of this program is shared by the state and counties. Until the placement of a cap on foster care costs under the provisions of P.L. 96-272, discussed earlier, federal Title IV-A funds for foster care were open~ended. . Another part of the Social Security Act, Title XX, provides federal support to meet five broad goals, including the prevention of abuse, neglect, and exploitation of children who are unable to protect. themselves. One of the programs offered by California to meet this objective is social services for children who are in foster care or are being considered for foster care. Federal Title XX funds are available for this program, up to an established allocation limit, on a matching basis of 75 percent federal, 25 percent nonfederal. Shift in Cost of Foster Care Intake. In a July 31,1980 letter to the U. S. Depart- ment of Health and Human Services, the Department of Social Services requested that certain foster care intake activities supported with federal Title XX funds be reimbursed instead through the AFDC foster care payment program. Our analysis indicates that the department instructed the counties to claim the cost of these activities as part of their Title IV-A programs beginning July 1, 1980 and enacted regulations on an emergency basis, effective January 24, 1981, implementing this procedure. The state TitleIV-A claim submitted to the federal government for the quarter ending September 30, 1980, included a claim for $699,025 in federal funds for these activities. Estimated Annual Savings. In a March 7, 1980 estimate, the Department of Social Services estimated that the total annual cost of these foster care intake activities was $17.7 million in 1979.,..8(). In accordance with TitleXX requirements, these costs were shared 75 percent federal ($13.3 million) and 25 percent county ($4.4 million). The department’s March 1980 estimate indicates that the $13.3 million in federal Title XX funds currently supporting foster care activities could be used to reduce the General Fund commitment for Title XX programs. This Item 518 HEALTH AND WELFARE \/ 1033 savings would be offset, however, by the required General Fund share ($4.4 million) of the nonfederal match for the administration of Title IV-A. Thus, in the March 1980 estimate, the Department of Social Services anticipated a net General Fund savings of $8.9 million asa result of this funding shift from Title :xx to Title IV-A. Foster Care Funding Uncertain. A crucial aspect of this funding shift is the assumption that federal Title IV-A funds are unlimited. If this funding source is capped, additional federal funds may not be available. As our analysis of PL 96-272 indicates, the federal government has established a ceiling on total Title IV-A foster care costs effective during federal fiscal year 1981. It is our understanding that the Department. of Social Services futends to appeal the federal fiscal year 1981 ceiling on the basis that not all applicable administrative costs were included in the federal calculation of base year expenditures. Congress must appropriate a specific funding level for child welfare services for federal fiscal year 1982 in order for the foster care cap to remain effective. Therefore, the level of federal financial participation in the state’s foster care payment program during federal fiscal years 1981 and 1982 is uncertain. Increased federal funds not budgeted Our analysis indicates that the departc ment has completed the necessary steps to transfer the funding of foster care intake activities from Title :xx to Title IV-A. At the time this analysis was written, we were unable to determine what, if any, General Fund savings would accrue to the state during 1981-82 as a result of the potential increase in federal funds. To th~ extent that additional federal funds become available as a result of this shift, the General Fund proposed for these programs is overbudgeted. As a result, the Legislature is unable to assess the actual need for General Fund sqpport for these programs and is restricted in its ability to allocate resources to meet its priorities. Therefore, we recommend the Department of Finance identify the level of an- ticipated 1981-82 General Fund savings resulting from this funding shift. Because any additional federal funds derived as a result of this funding shift will reduce the need for General Fund support for social services programs, we further recommend the adoption of the following Budget Bill language: \”Provided further that funds appropriated by this item shall be reduced by the Director of Finance by the amount of federal Title IV-A funds made available for the purposes of this item in excess of the federal funds scheduled in Item 518-101-866.\” STATE ADMINISTRATION ISSUES Legislative Control of Program Appropriations We recommend the 1981 Budget Bill be amended to schedule social services programs in the same detail as in prior years in order to facilitate legislative review of each program element. We further recommend adoption of Budget Bill language requiring that the Legis- lature be notified in advance of any transfers of funds among program elements. Item 518-101-001 (e) of the 1981 Budget Bill proposes $143,782,101 from the General Fund for social services programs. The programs proposed to be funded through this item include in-home supportive services, adoptions, a 24-hour emer- gency response system, and other programs, as detailed on page HW 174 of the budget document. In past years, the annual Budget Act separated these social services programs into several categories within the appropriation item. This practice restricted the transfer of funds between these programs under the provisions of Control Sections 27.5 and 28. For example, during 1978-79, the administration identified a deficit in funds appropriated for the In-Home Supportive Services program, and proposed to fund it using the anticipated savings in the Adoptions and Community 1034 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued Care Licensing programs. Prior to making the transfer, however, the Department of Finance notified the Legislature ofits intention. Our analysis indicates that such notification of a pending change in the approved budget program would not be required in 1981-82 if the Budget Bill (1) schedules all social services programs in one category and (2) does not contain language requiring such notification. The Legislature has traditionally authorized a total appropriation for social serv- ices programs based on its revi~w of the individual amounts required to support specific programs. Scheduling of the proposed funds in the 1981 Budget Bill, as introduced, would provide for legislative control over only the total appropriation and would thus limit the Legislature’s ability to review and influence expenditures for individual programs. In order to ensure that appropriated funds are expended in the manner approved by the Legislature, we recommend that the Budget Bill schedule for Item 518-lO1-001 (e) be modified to identify the individual appropria- tions for social services programs shown on pages HW 174 and 175 of the 1981 Governor’s Budget. In order to ensure continued legislative review of the expendi- tures for these programs, we further recommend adoption of the following Budget Bill language: \”Provided further that, notwithstanding the provisions of Sections 27.5 and 28 of the Budget Act, the Director of Fi~ance may transfer funds appropriated for program 20, social services, among these elements not sooner than 30 days after notification in writing of the necessity therefor to the chairman of the commit- tee in each house which considers appropriations and the chairperson of the Joint Legislative Budget Committee,or not sooner than such lesser time as the chairperson of the committee, or his designee, may in each instance determine;\” The Social Services Planning Act We recommend (1) the Department of Finance include in its 1!J80.-81 progress report on the implementation of Chapter 1235, Statutes of 1978, a description of the process for incor- porating county defined needs and priorities into the state social services plan required by that act, and (2) the adoption of supplemental report language requiring the Department of Social Services to submit a design for the prediction of program utilization which will be submitted with the proposed 1!J82.-8j budget. The Social Services Planning Act, Chapter 1235 , Statutes of 1978 (AB 1642), requires that the annual statewide social services planning process, required by federal law, be linked to the state’s. budget process. Currently, the state social services planning process is based on the federal fiscal year and does not provide usable data for resource allocation through the state’s budget process. To accom- plish this link, the act requires the Governor to submit to the Legislature with his proposed annual budget, a prediction of program utilization (PPU) based on a comprehensive state and county planning process. The Department of Social Services is required by the act to implement this comprehensive planning process during a three-year period beginning July 1, 1979. The first full planning cycle, including development of the PPU, is not required to be completed until submis- sion of the 1982-83 Governor’s Budget. Prediction of Program Utilization. The PPU is intended to furnish the Legisla- ture with (1) a description of proposed programs and services and (2) a basis for allocating funds among these programs. Specifically, the act requires the depart- ment to (1) predict the number of persons or families in need of each program, (2) recommend priorities among the various programs, (3) recommend an alloca- tion of funds based on (a) base year allocations, and (b) specified needs and priorities, (4) identify proposed funding sources and the need for additional re- sources, and (5) summarize social services coordination and integration accom- plishments and public involvement in the planning process. Item 518 HEALTH AND WELFARE \/ 1035 The Social Services Planning Act requires the Legislative Analyst to analyze the PPU in conjunction with his analysis of the annual Budget Bill. Because the first PPU willbe submitted as part of the. 1982–83 budget process, we have reviewed the department’s progress in implementing Chapter 1235; Statutes of 1978. In addition, the Department of Finance advises that it will submit to the Legislature a 1980-81 progress report, as required by Chapter 1235, after June 30, 1981. Departmental Progress in Implementing the Act. The department of Social Services appears to be close to its implementation schedule, as set forth in the plan submitted to the Legislature by the department during hearings on the 1980 Budget Bill. During 1980-81, DSS continued to convene the Interim Planning Task Force as required by the act, and developed planning guidelines for the 1982–83 planning cycle. These guidelines are scheduled to be released to the counties in mid-February, approximately two weeks behind schedule. The February guide- lines are intended to notify coUnties of the steps necessary for implementation of the act. An additional notification is anticipated in June, which will include de- tailed instructions, projected caseloads, and projected 1981 base allocations neces- sary fpr the counties tQ complete the required plan by October 1981. Design of PPU Unspecified We have identified two problems regarding the implementation of this act. First, the department has not developed a framework for incorporating county needs and priorities into the state plan. The 1982–83 draft planning guidelines allow the counties to identify high priority local service re- quirements. It is unclear, however, how these local priorities will be weighted in relation to each other and to the state’s established priorities. Second, the PPU.is scheduled to be\u00b7submitted to the Joint Legislative Budget Committee in late November 1981 along. with the department’s . estimate of pro\” gram expenditures for 1982–83. This time frame will allow legislative review of the prediction of program utilization only after it is completed rather than to its design. The required components of the PPU,however, may be addressed in a number of ways, and the Legislature may wish to \u00b7review these alternatives before the design is completed. . In order to allow the Legislature an\u00b7 opportunity to .assess the basis of the proposed 1982–83 budget for social services programs, we recommend the Depart- ment of Finance include in its 1980-81 progress report a description of the process for translating county needs and priorities into the state plan. We further recom- mend adoption of the following supplemental report language: \”The Department of Social Services shall submit a detailed design for the predic- tion of program utilization which will be submitted with the proposed 1982–83 budget, to the fiscal committees and the Joint Legislative Budget Committee by September 1, 1981.\” Cost-of-Living Increases for County Welfare Department Employees We recommend adoption of Budget Bill language limiting state fiscal liability for county cost-oE-living adjustments to the cost of the percentage increase authorized by the Legisla- ture. We further recommend adoption of supplemental report language directing the depart- ment to prevent overbudgetingof such increases in 1982-83. Item 518-101-001 (e) and (f) appropriate funds for county administration of the adoptions ($16,741,144) and community care licensing ($6,463,700) programs, as well as for a portion of the in-home supportive services program ($5,226,478). In addition, the budget contains $144.3 million in federal funds proposed for \”other county social services.\” These amounts do not include funds to provide cost-of~ living increases to county employees during 1981-82. In addition, the budget contains language stating that \”the Depa):\”tment of Social Services shall not allocate state funds to counties for county administration for the purpose of fiscal year 1981-82 cost-of-living adjustments.\” It is our understanding, 1036 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL. SERVICES-Continued however, that unless additional action is taken, the state may be forced to share in the funding of cost-of-living increases for county employees that exceed what- ever increases are specifically provided by the Legislature. 1980 Budget Act Limits Salary Increases. The 1980 Budget Act provides for discretionary cost-of-living adjustments of 9 percent for these social services pro- grams. It also contains language specifically prohibiting funds appropriated for these programs to be used for county employee salary increases in excess of 9 percent. Counties, however, were not prohibited by this language from providing salary increases in excess of 9 percent. The language merely specified that state and federal funds appropriated by the 1980 Budget Act could not be used for this purpose. As of November 1980, the average 1980-81 salary increase granted or expected to be granted by counties to their social services employees was 8.1 percent. Of the 58 counties, however, 24 have granted salary increases exceeding 9 percent. It is not known how many counties will grant further increases before the end of 1980-81. The Department of Social Services advises that counties will be notified in early February 1981 of the procedures which will be followed to disallowreim- bursements for salary increases in excess of 9 percent. In addition to salary increases, counties may incur cost increases for staff bene- fits, minimum wage requirements, administrative overhead, and operating ex- penses and equipment. Increases in these expenditure categories were not covered by the 1980 Budget Act language limiting county salary increases. Total county cost-of-living increases during 1980-81, however, will exceed county salary increases as a result of these increases in staff benefits and other expenses. Effect on General Fund. The 1980. B.udget Act language regar<:ling county employee salaries is not continued in the 1981 Budget Bill, as introduced. Conse- quently, county governments could provide salary and benefit increases and claim- price increases for nonpersonal services which exceed any cost-of-living adjust- ment provided these programs through the state's budget process. For example, if the Legislature appropriated funds for a 4 percent price increase for the three identified programs, and the counties granted price increases totaling 9 percent, , the state could be liable for additiona1, unbudgeted costs of approximately $1.3 million. .. The cost of individual county cost-of-living increases in excess of the percentage provided for by General-Fund appropriation for these programs may potentially be shifted to the state as a result of (1) reallocations of funds among the counties at the close of the fiscal year, (2) transfers of funds among state social services programs, and (3) requests for deficit appropriations from the General Fund. All three of these funding mechanisms have been employed in past years to fund county deficits. Therefore, without specific language precluding the use of funds appropriated by the Budget Bill for county cost-of-living increases in excess of the increase provided for by the Legislature, additional General Fund dollars may be required to support these increased expenditures. Moreover, in subsequent fiscal years, the higher cost-of-living adjustment would be built into the base expendi- tures, thus requiring increased state funding. Reimbursing counties for higher cost-of-living increases than specifically authorized in the Budget Act (1) reduces the Legislature's ability to control General Fund expenditures, (2) allows reduc- tions in service levels to support increased salary costs and (3) encourages inequi- table compensation levels among workers performing similar duties in the 58 counties. For these reasons, we recommend that controllanguage be added to the Budget Bill which limits the state's fiscal liability for county cost-of-living increases in both personal and nonpersonal services to the cost of the percentage increase approved Item 518 HEALTH AND WELFARE \/ 1037 by the Legislature. \"Provided further that notwithstanding any provision of the Welfare and Insti- tutions Code to the contrary, none of the funds appropriated by this item for programs 20 and 30 shall be used to provide cost-of-living increases to personal and nonpersonal services in excess of the amount specifically authorized for such purposes by the Legislature.\" Even if the Legislature chooses not to fund cost-of-living increases in excess of the amount specifically appropriated in the budget year, cost-of-living increases granted and paid for by the counties in 1981~2 could be built into the following year's budget. To prevent overbudgeting, we further recomm'end adoption ofthe following supplemental report language: \"The department's 198~ request for funds for special social services programs shall not include the cost of any 1981~2 salary, benefit, or nonpersonal services increase which exceeds the percentage increase authorized by the Budget Act of 1981. The department shall notify the counties that the state will not pay for cost-of-living increases in excess of the amount authorized by the Legislature and that the non-federal share of increases granted in excess of the percentage approved by the Legislature shall be a permanent county fiscal obligation.\" IN-HOME SUPPORTIVE SERVICES Program Description During 1981~2, the In-Home Supportive Services (IHSS) program will provide personal care, domestic and paramedical services to approximately 99,000 aged, blind and disabled individuals. This program is funded by the state and federal governments, and administered by county welfare departments. Each county may choose to deliver services in one of three ways: (1) directly by county employees, (2) by agencies under contract with the counties, or (3) by providers hired direct- ly by the recipient. Individual providers hired directly by recipients deliver 96.5 percent of all IHSS case months. Los Angeles County accounts for 43 percent of estimated 19~1 IHSS expenditures. Current Year Savings The Department of Social Services estimates that 198~1 General Fund ex- penditures for IHSS will be $273,428 less than the amount appropriated for the program by the 1980 Budget Act .. This amount, less than 0.1 percent of the $243.8 million appropriation, is due to savings of $2,046,327 in funds budgeted for mini- mum wage and cost-of-living increases which were partially offset by an increase of $1,772,899 in basic program costs, Budget Year Proposal The budget proposes a General Fund appropriation of $117,727,145 for IHSS, which is a decrease of $25,217,419, or 17.6 percent, below estimated 198~1 ex- penditures. . This proposed decrease in General Fund support does not reflect a reduction in services provided under the program. Instead, it is largely the result of a proposed shift of $52,013,942 in federal Title XX funds from the Department of Education's child care programs to IHSS, and a corresponding sh~ft of General Fund dollars from IHSS to the Department of Education. In addition, the alloca- tion of $601,791 in additional federal Title XX funds is being used to reduce the amoUnt of General Fund support provided to the program. When allowance is made for these funding shifts, the amount requested from the General Fund for support of the program actually increases by $27,398,314. This increase is due to an anticipated 6.49 percent growth in caseload ($16,233,408), statutory cost-of- 1038 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued living adjustments for grants which are currently at the maximum level ($1,368,- 820), mininium wage increases effective January 1981 ($7,633,525), the cost of employee benefits for individual providers ($2,163,346) and a net decrease in the cost of restaurant meals ($ - 785) . ' Total program expenditures are proposed at $270,884,325 for 1981-82. This is an increase of $27,398,314, or 11.3 percent, over estimated current year expenditures. The budget also includes $306,813 in federal funds to provide IHSS to refugees. Program Funding Sources The state is statutorily required to provide a 25 percent match for federal Title XX funds available for IHSS. Since fiscal year 1978-79, the state's General Fund share of the IHSS budget has been larger than the federal share~ Of the funds proposed for the budget year, however, 43.5 percent are state and 56.5 percent are federal. Chart 2 shows the relationship between state and federal funds spent on IHSS during the period 1974-75 to 1981-82. Dollars $300 275 250 225 200 175 150 125 100 75 50 25 Chart 2 Expenditures for In-Home Supportive Services General Fund, Federal and Totals 1974-75 to 1981-82 (in millions) o 74-75 \"75-'76 76-- 77 77-78 78- 79 79-80 80-- 81 Automatic Adjustment to Maximum Allowable Monthly Payment 81-82 The budget requests $1,368,820 to provide a 4.75 percent increase in (1) max- imum allowable monthly payments and (2) restaurant meal allowance levels for in-home supportive services (IHSS). This percentage increase is proposed in lieu of the statutorycost-of-living adjustment based on the California Necessities Index. Background Existing law requires that maximum monthly allowable payment levels for IHSS recipients be adjusted annually to provide percentage cost-of-living increases identical to those statutorily authorized for SSIISSP grant levels. Under current law, the cost-of-living adjustment is based on the annual percentage change in the California Necessities Index (eNI). This index measures the weight- Item 518 HEALTH AND WELFARE \/ 1039 ed average change in the prices of food, clothing, fuel, utilities, rent and transpor- tation for low-income consumers. The index is based on California's largest metro- politan areas and is measured from December to December of the year preceding the effective date of the adjustment. The adjustment in 1981--82 payment levels called for by existing law is estimated at 11.2 percent. For the IHSS program each 1 percent adjustment to the statutory maximum payment levels and restaurant meal allowances would cost approximately $290,000. Two categories ofIHSS recipients are identified for purposes of determining the maximum monthly payment levels: (a) IHSS recipients who are authorized to receive at lest 20 hours per month of personal care, ambulation, paramedical, and other specified services, arid (b) recipients who receive less than 20 hours of these specified services. Table 8 shows (1) the maximum allowable monthly payment levels for these two categories of recipients during 1979--80 and 1980--81 and (2) the 1981--82 maximum levels for these recipients based on the proposed budget and on the estimated increase in the CNI of 11.2 percent. Table 8 Maximum Monthly IHSS Grants 1979-80 to 1981-82 1979-8f} Recipients receiving 20 or more hours of specified services per month .................... $664 Other recipients .................................................. 460 1980-81 $767 532 Statutory (eN\/) $853 592 1981-82 Budget Proposal Di\/lerence $803 557 $50 35 Impact of Proposed Monthly Payment Levels. In-home supportive services are authorized for eligible recipients based on needs assessments conducted by county welfare department staff. Service is awarded on an hourly basis. A small number of severely disabled recipients receive a flat monthly award. The dollar amount of an individual recipient's IHSS award is generally deter- mined by multiplying the number of authorized service hours by the hourly wage paid to IHSS providers. Although counties have the authority to establish the wage level for IHSS providers, the hourly wage is generally equivalent to the federal and state minimum wage ($3.35 per hour effective January 1981). Thus, in 1980--81, IHSS recipients would receive the maximum monthly payment of $767 if they required 20 or more hours of specified service per month and were authorized 229 or more total hours of service per month. Other recipients could receive the maximum $532 monthly award if they were authorized 159 or more hours of paid service per month of which less than 20 hours were for specified services. A large majority of cases are paid on an hourly basis. For these cases, an increase in the statutory maximum monthly grant may increase the number of hours of service they receive each month. State law stipulates that an increase in the maximum allowable payment level should not be construed as a guaranteed in- crease in the number of hours of service or total dollar award a recipient may receive each month. Therefore, only those recipients who are determined to have an unmet need for service. which exceeds the current maximum payment level would receive increased service hour authorizations as a result of an increase in the statutory maximum. In practice, the majority of cases now at the statutory maximum would probably receive increased monthly service authorizations if the statutory maximum is increased. If the maximum payment level for 1981--82 is increased by 4.75 percent, as proposed by the budget, IHSS recipients paid on an hourly basis and receiving 20 or more hours of specified services could receive up to 239 hours of paid service 1040 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued per month (an increase of lO hours per month), provided no change is made to the minimum wage of $3.35 per hour. These recipients could receive up to 255 hours of paid service per month if the maximum payment level called for by existing law (eNI increase estimated at 11.2 percent) was approved (26 hours per month). Recipients not authorized to receive 20 hours or more\u00b7 of specified serv- ices could receive up to 166 and 177 hours of paid services per month, if the service cost level is increased by 4.75 percent and 11.2 percent, respectively. Recipients Paid on . a Monthly Basis. Approximately 1 percent of all IHSS recipients (less than 1,000 persons) receive flat monthly payments rather than hourly payments. These recipients' require a large amount of persollal services. Therefore, most flat grant recipients receive 20 or mOre hours of the specified services which qualify them for the highest maximum monthly payment. The effect of an increase in the statutory dollar award on flat grant recipients would \\, be an increase\u00b7 to their providers' monthly compensation. Caseload Receiving Maximum Monthly Payments. The Department of Social Services estimates that 3.35 percent' of all IHSS recipients receive the maximum allowable monthly payments. Of those recipients who qualify for the higher of the two service levels, however, 15.9 percent receive the maximum allowable monthly payment. Table 9 shows the number of recipients projected to receive the max- imum monthly paymerit during 1981-82. Table 9 In-Home Supportive Services Estimated Case load Receiving Maximum\u00b7 Monthly Payment\u00b7 1981-82 A verage Monthly Cases Total 20 hours or more of specified services .............................. 12,541 Other .......................................................................................... 86,493 Totals ..................................................................... ;............ 99,034 a Source: Department of Social Services. At Maximum Payment Level 2,000 1,312 3,315 Percent 15.9% 1.5 3.35% Other EUects of Statutory Increase. Increases in maximum monthly service costs to IHSS recipients account for $1,258,943 of the total $1,368,820 proposed for the statutory cost-of-living adjustment. The remainder is allocated for (1) an in- crease in the maximum monthly allowance for restaurant meals from $43 to $44 ($10,855) and (2) an increase in the cost of employee benefits for providers due to an increase in the number of IHSS recipients whose quarterly payroll to provid- ers would become subject to various withholding rules if the payment levels are increased ($99,022) . Continued Growth in Expenditures We withhold recommendation on $27,398,314 from the General Fund proposed for in- creases in caseload, minimum wage, cost-of-living and provider benefits for the In-Home Supportive Services program, pending receipt from the Department of Social Services of (1) a report required by the 19'19 Blidget Act regarding the implementation of uniform IHSS program regulations and (2) a report on the April to October 1980 quality control review period and the departments plans for correcting errors identified in that report. The budget proposes $270 million, all funds, for the In-Home Supportive Serv- ices program in 1981-82. 'this is an increase of $27A million, or 11.3 percent, above estimated current year expenditures. Because a larger share of available federal Item 518 HEALTH AND WELFARE \/ 1041 Title XX funds are proposed for allocation to this program than has been allocated in past years, the net General Fund amount proposed for IHSS in 1981-82 is $25.2 million, or 17.6 percent, less than estimated General Fund expenditures in the current year. Our analysis indicates that based on past trends and the reduced availability of additional federal funds in future years, General Fund support for IHSS can be expected to resume the growth rate indicated by Chart 2. Since 1974-75, when this program was created, total expenditures for IHSShave grown by over 300 percent. The average annual increase in expenditures since 1974-75 has been 19.4 percent. While the increase in expenditures proposed for 1981-82 is only 11.3 percent, the budget does not provide for (1) discretionary cost-of-living increases to county welfare department staff or contract providers or (2) the full statutory cost-of-living adjustment fotmaximum allowable payment levels. Table 10 displays the increases in total expenditures for IHSS since 1974-75 and the proportions of General Fund and federal funds for each year. The table shows that the rate of growth in expenditures decreased from 1979-80 to 1981-82. The department .states this maybe due to implementation of uniform regulations enacted in April 1979. Table 10 Total Expenditures for the In-Home Supportive Services Program 1974-75 to 1981-82 Percent Percent General of Federal of Amount Percent Fund Total Funds Total Totals Increase Increase 1974-75 .............. $25,927,000 32.9% $52,750,002 67.1%. $78,677,002 1975-,76 .............. 44,953,000 46.6 51,415,152 53.4 96,368,152 $17,691,150 22;5% 1976-77 .............. 28,908,943 25.0 86,726,828 75.0 115,635,771 19,267,619 2O~0 1977-78 ...... ; ....... 53,647,157 39.3 82,743,379 .61.7 136,390,536 20,754,765 18.0 1978-79 .............. 94,731,134 53.3. 82,866,134 46.7 177;597 ;lJi8 41,206;732. 30.2 1979-80 .............. 119,396,738 55.5 95,579,634 44.5 214,976,372 37,379,104 21.0 1980-81 (est) .. 142,944,564 58.7 100,541,447 41.3 243,486,011 28,509,634 13.4 198i-82 (prop) $117;727,145 43.5% $153,157,180 56.5% $270,884,325 $27,398,314 11.3 Cost Containment Report Submitted January 20, 1981. Pursuant to language contained in the 1980 Budget Act, the Department of Social Services submitted to the Legislature a report which suggests a variety of approaches to contain the continued growth in expenditures for this program. The report was submitted January 20,1981, too late for a detailed analysis to be inCluded here. Ourprelimi- nary review, however, indicates that the report should assist legislative decisions on the funding of this program. We will be prepared to comment on the report . during budget hearings. Factors Goveming Expenditure Growth. In the January 20, 1981 report, the department identified four aspects of the IHSS program which affect program costs: (1) eligible population, (2) range of services provided, (3) the level of assessed need for those eligible, and (4) the cost of services . Eligible population. Under\u00b7 current law, all SSIISSP recipients and others who would be eligible for SSI\/SSP except for excess income are eligible for IHSS. Less than 100,000 of those eligible, however, receive services. Expansions or res- trictions in the criteria for determining the eligible population would affect pro- gram cost. Range of Services. The IHSS program currently provides doinestic services, personal care, teaching and demonstration, yard hazard abatement and paramedi- cal services. The availability of these services through IHSS affects the total hours of service authorized. 1042 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued Assessed need. Needs a.ssessments conducted by social workers determine (1) the amount of IHSS required by recipients and (2) the degree of impairment for purposes of determining the recipient's monthly payment level. Individuals who are assessed as having a need for 20 or more hours of personal care service per month are eligible for higher maximum monthly service payments than other IHSS recipients. Individual needs assessment decisions are a major factor in total program cost . Cost of service delivery. The costs of (1) provider salaries, (2) employee benefits for providers and (3) administrative overhead for county welfare depart- mentsand contract providers are another component of program growth. Quality Control Program Not Described The cost containment report submit- ted on January 20,1981 does not contain (1) a schedule for future quality control reviews, or (2) the department's plans for correcting the errors identified by the current review. Both were required by the Legislature in the 1980 Budget Act. In a 1978 pilot study of quality control for IHSS, the department found that (1) 15.8 percent of payments sampled were made to recipients whose eligibility was not documented and (2) 10.6 percent of sampled cases received higher payments than authorized. The department advises that during the last year it has initiated a full-scale quality control process to (1) monitor county compliance with state IHSS regulations and (2) diagnose weaknesses in state regulatory policy for corrective action. In addition, the department indicates that a quality control report for the first six-month cycle is expected shortly. Required Report Delayed. The Supplemental Report of the 1979 Budget Act required the Department of Social Services to submit to the Legislature by April 1, 1980, a report on caseload growth, hours of service, cost of service, and other information regarding the April 1979 implementation of IHSS program regula- tions. In order to include data from counties which did not implement these regulations until November 1979, the department has delayed the submittal of this report until February 1, 1981. . Our analysis indicates that, although the marginal growth rate appears to be leveling off, IHSS expenditures will continue to grow at a rate exceeding that of other social services programs. We have not had an opportunity to review informa- tion which will be contained in the forthcoming report on the April 1979 regula- tions. As a result, we are unable to (1) determine what effect, if any, these efforts have had on controlling costs or (2) recommend approval of increased program costs. Therefore, we withhold recommendation on $27,398,314 from the General Fund requested to fund estimated increases in caseload, minimum wage, cost-of-. living and provider benefits pending receipt of (1) the report required by the 1979 BudgetAct regarding caseload growth, hours of services, costs of service and other information regarding the implementation of IHSS program regulations, and (2) the IHSS quality control report for the period April to October 1980 and\u00b7 the department's plans for correcting any error rates identified by that report. IHSS Payrolling System We recommend (1) the Department of Social Services submit to the Legislature prior to budget hearings, a timetable for development and approval of a feasibility study report on the 1982-83 implementation of Chapter 463, Statutes oEl97a, and (2) adoption of Budget Bill language requiring, in the absence of an approved feasibility study report, a competitive bidding process to select the most cost-effective vendor. The budget proposes $20,339,765 to provide employee benefits to individual providers of in-home supportive services. This is an increase of $2,163,346, or 11.9 percent, over estimated expenditures for this purpOSe in 19ao-:Bl. Of the proposed Item 518 HEALTH AND WELFARE \/ 1043 $20.3 million for provider benefits, $17.8 million would be eXpended for employee benefits, and $2,525,139 is proposed to pay.a private vendor for the operation of an automated statewide payrolling system. Background Chapter 463, Statutes of 1978 (AB 3028), requires the Depart~ ment of Social Services to ensure that payments for federal Old-Age Survivors and Disability Insurance benefits, unemployment insurance, disability insurance, and workers'compensation are made on behalf ofIHSS recipients to individual provid- ers. Counties and IHSS contract providers are responsible for ensuring that their employees receive these benefits. Services provided by individual providers are estimated by the Department of Social Services to account for 96.5 percent of ann~al case mo:qths during 1980-81. All but four counties use this mode of service provision for a portion of their caseload. ' . Chapter 463 went into effect on January 1, 1978. To comply with the provisions of the act, the department elected to contract with a private vendor to establish and maintain a statewide computerized payrolling system. Because of a challenge to the initial contractor selection process, the department had to undertake a .. second proposal process. This delayed selection of a payrolling contractor until September 5, 1979. In January 1980 the first checks were mailed to individual providers by Electronic Data Systems Federal (EDSF), the successful bidder in the second proposal process. ContraCt Costs Exceed Proposal. The EDSFfirmwas selected from among four qualified bidders to establish and maintain .the automated IHSS payrolling system. Its selection was based largely on the firm's organization, experience and proposed methodology, as well as on the totalproposed cost. The ED SF proposal scored second in the. evaluation process, and offered the . lowest bid of. the\u00b7 four qualifying bidders ($4,338,136, for the period September 1979 to June 1982); Since the execution of the contract, however, various system enhancements and additions not identified.in the request for proposal have increased the anticipated cost of the 34-month contract to $6,669,139. Thus the estimated cost of the contract is $2.2 million, or 52~0 percent, higher than the initial proposal. Without further competition among bidders, we are unable to determine if this contract is the most co~t-effective alternative available to the state for the provision of employee bene- fits on behalf of IHSS recipients. . .. Contract Expires June 30, 1982. The agreement between EDSF and DSS ex- pires June 30, 1982. The State Administrative Manual suggests than an analysis of alternatives to an expiring data processing contract should be concluded no later than six months prior to the expiration date. (The department advises that a period of nine months is generally required to complete the request for proposal process.) Therefore it will be necessary for the department to decide whether to .continue or terminate the current contract prior to legislative hearings on the 1982-83 Budget bill. . . . ... Alternatives to the Existing Contract. Among the alternatives available to the state are (1) operation of a payrolling system using state-owned resources, (2) continuation of the existing contract and (3) selection of a different vendor based on a competitive bid process. The current contract includes a provisioIi allowing the state to purchase or lease the software of the payrolling system. Our analysis indicates that, during the initial contract selection process, the department failed to include in the feaSibility study report, submitted to'the State Office of Information Technology, a detailed cost-benefit analysis of the alterna\" tives, such as the use of state-owned resources, to implement Chapter 463, Statutes of 1978. The purchase of system components not identified in the initial request for\u00b7 proposal have resulted in UnanticipaJed increases in total contract costs. To some extent these unanticipated increases would have been identified in a more detailed feasibility study report. 1044 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL\u00b7 SERVICES-Continued Time Schedule for Decision Not Established Our analysis indicates that the department has not yet developed a framework or time schedule for determining the most effective alternative for assuring that IHSS recipients meet their legal obligations\u00b7 as employers. In addition, we have been unable to determine the relationship between the IHSS automated payrolling system and the Statewide Public Assistance Network (SPAN) currently being developed by the department in response to Chapter 282, Statutes of 1979. The department has been unable to identify the potential link between these two automated public assistance systems. In sum; we conclude that (1) the initial analysis of alternatives for the im- plementation of Chapter 463, Statutes of 1978, did not adequately assess the poten- tial use of state-owned resources, (2) the anticipated total contract costs . are 50 percent higher than the bid submitted by the contractor in open competition, and (3) little attention has been focused by the department to date on what shouldbe done when the current payrolling. contract expires. To the extent that state re- sources could be used to proVide the payrolling service at a lower cost or other potential vendors could compete more successfully given current system specifica- tions, the current contract may be unnecessarily costly. Therefore, we recommend (1) the Department of Social SerVices submit to the Legislature prior to hearings on the 1981 Budget Bill a timetable for development and approval of a feasibility study report on the implementation of Chapter 463, Statutes of 1978; beginning July 1, 1982, and (2) the following language be added to the 1981 Budget Bill: \"ProVided further that, the Department of Social Services shall submit to the Joint Legislative Budget Committee, a feasibility stUdy report approved by the Department of Finance llIld prepared in accordance with Section 4920 et seq. of the State Administrative Manual, for the continued implementation of Chap- ter 463, StatUtes of 1978, and that this report shall include an analysis of (1) the alternative of utilizing state-owned resources and (2) the relationship of this implementation with the development of the Statewide Public Assistance Net- work. ProVided further that, in the event such a feasibility study report is not Gompleted and approved b)i September 1, 1981, the departmellt shall develop a request for proposal and enter into a competitive bidding process to select the most cost-effective vendor to implement the requirements of Chapter 463, Stat- utes of 1978.\" OTHER COUNTY SOCIAL .sERVICEs Program Description The Other County Social SerVices (OCSS) program consists of nine mandated TitleXX programs (IHSS isthe tenth mandated-program) and thirteen programs which are prOVided at each county's option. A fourteenth serVice, family protec- tion, offered in Shasta and San Mateo Counties on a pilot basis, expires June 30, 1981. . Proposed Budget The budget proposes a total amount of $211,806,709 for Other County Social SerVices in 1981-82. This total consists of$192,129,465 in federal and county funds for the overall OCSS program, $10,572,426 (including $5,000,000 from the General Fund) for a 24-hour emergency response system and $9,104,818 in federal funds for serVices to refugees. Because the OCSS program is supported primarily by capped federal Title XX funds, anycost-of-living increase granted by the Legisla- ture would require an increased General Fund appropriation. Item 518 HEALTH AND WELFARE \/ 1045 Twenty-four-Hour Emergency Response System We withhold recommendation on $7,929,319 proposed Eorcontinued supportoE a statewide 24-hour emergency response system pending review oE (1) actual 197!i-80 and 1980-8i C(Jsts Eorthis system, and (2) a report submitted to the Legislature January 20, 1981. The budget proposes $10,572,426 to continue a 24-hour emergency response system for child abuse and neglect. This amount includes $2,929,319 in federalTitle XX funds, $5,000,000 from the General Fund, and $2,643,107 in county funds, Required Report Received January 20, 1981. The Supplemental Report of the 1980 Budget Act required the Department of Social Services to submit a reportto the Legislature by December 15, 1980, regarding the characteristics of services rendered by the 24-hour emergency response system. The department notified the Legislature by letter that this report would be delayed until January 31, 1981, to allow for the collection of necessary d.ata. Because of the late receipt of that report, we are unable to include a thorough analysis of its findings in this Analysis. General Fund. Support Not Required Our preliminary review of the report, however, indicates that only $1,905,900 or 38.1 percent of the $5,000,000 appropriat- ed from\u00b7.the General Fund for this program was expended in 1979-80. The report states that in addition to possible start-up delays, one reason so few funds were expended in 1979-80, is that surplus federal Title IV-B funds were used prior to using state funds. In addition, the department reports that, as ofJanuary 1981, (I) seven counties were not claiming reimbursement from the 24~hour emergency response system appropriation and (2) Los Angeles County has implemented the .. system in only one of it six. regions. This indicates that 1981-82 expenditures may be somewhat less than the amount requested. . Funds Used for Purposes Other Than That Intended by the Legislature. Fur- ther, our analysis indicates that, contrary to legislative intent, funds appropriated by the Legislature in the 1979 Budget\u00b7 Act for this system were reallocated. to counties at the end of the fiscal year to defray county deficits in other social services programs. For the reasons given above, we are unable to determine the appropriate level of support for the 24-hour emergency response system. Accordingly, we withhold - recommendation on $5,000,000 General fund and $2,929,319 federal Title XX funds proposed to continue support for the 24-hour emergency response. system until we have had an opportunity to review (I) the actual 1979-80 and 1980-81 costs for this program and (2) the report submitted by the department January 20, 1981. . OTHER SOCIAL SERVICES ACTIVITIES Community Care Licensing Community care facilities provide nonmedical residential care, day care; or homefinding services for children and adults. The Community Care Facilities Act of 1973 (Health and Safety Code, Section 1500 et. seq.) established minimum standards of care and services in community care facilities, and provided for the licensing and evaluation of these facilities. Pursuant to this act, the Department of Social Services develops regulation~, conducts facilities evaluations, and con- tracts with counties to license and evaluate community care facilities. In 1980-81, 48 counties contracted with the state to license approximately 70 percent of all community care facilities in California. About 90 percent of the county-licensed facilities are family day care or foster homes for children. The Department of Social Services is responsible for monitoring the performance of county licensing agencies. It also directly licenses about 26 percent of the state's community care facilities. Expenditures for direct state facilities evaluation are included in Item 518-001-001, Departmental Support. 1046 I HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued Budget Year Decrease. The budget proposes $6,463,700 from the General Fund to support facilities evaluation and licensing by counties under contract with the Department of Social Services. This is a decrease of $9,292,400, or 59 percent, from 1980-81 estimated expenditures . . This proposed decrease consists of (1) a net reduction of $1,413,100 in funds proposed for county licensing, based primarily on the application of proposed state workload standards to the anticipated number of county licensed facilities, and (2) an anticipated savings of $7;879,300 resulting\u00b7 from proposed legislation to elimi- nate the licensure of family day care homes. The proposed budget also. anticipates the enactment oflegislation to reinstate fees for licensure of community care facilities. To the extent that county facilities licensed by counties are not exempt from such fees, the collection of these fees may increase county administrative costs. Such costs are\u00b7 not included in the proposed budget. Elimination of Family Day Care Licensing. . Faniily day care homes, as defined by state law, provide care, protection and supervision for up to 12 children in the caregiver's own home, for less than 24 hours, while the children's parents or guardians are away. The Department of Social Services estimates that 22,030 fam- ily day care homes would be licensed by counties during 1981--82. The estimated\u00b7 savings 6f $7,879,300 as a result of the elimination of licensing was derived by (1) applying the proposed state workload standard of 129 family day care facilities per evaluator to the projected caseload, and (2) adding the estimated cost of nonevaluator support staff. To the extent that county costs per position are overes- timated and counties exceed the workload standard of 129 facilities per evaluator, this estimate may overstate actual savings. Workload Standards Contain Unjustified Tasks We recommend thedeJetion of unjustified tasks from the proposed allocation standard, for a General Fund reduction of $371,134. The budget proposes $6,463,700 from the General Fund to support facilities evaluation and licensing by counties under contract with the Department of Social Services. Of this total, $5,776,346 is proposed for the ongoing cost of licensing and evaluating commUItity care facilities. The remaining $687,354 is proposed to sup- port the costs of several regulatory and legislative initiatives. The $5,776,346 proposed for basic costs is based on (1) actual 1979-80 county costs of $23.10 per hour of licensing activity, (2) projection of a stable caseload of 14,974 facilities in 1981--82, and (3) application of a January 1980 workload study of the tasks per- formed by state-employed licensing staff. Workload Study. The workload study completed by the Department of Social Services indicates that the historically accepted staffing standard-150 licensed day care and 75 licensed residential care facilities per state evaluator-does not accurately reflecttheactualworkload required to evaluate community care facili- ties.\u00b7This standard also has been used to allocate funds to the countiesJor commu- nity care licensing. Based on a review of actual time spent and tasks performed, the workload study establishes alternative staffing standards for seven distinct categories of facilities, rather than the two broad categories currently used .. We have identified two components which we .do not recommend be included in the workload standards: (1) evaluations of community care facilities within 90 days after initial approval of a license to operate (post-licensing evaluations) and (2) caseload management. . . Post-Licensing Evaluation. The proposed staffing standard includes time for evaluators to visit each facility within 90 days after an operating license has been approved. The department advises that these visits may. reduce (1). the amount of time required for annual visits and (2) the number of complaints received Item 518 HEALTH AND WELFARE \/ 1047 regarding violations of licensing regulations. The department, however, is unable to document the extent to which the proposed visits are likely to achieve these results. In addition, because these post-licensing visits have not been conducted on a uniform basis in the past, we are unable to verify the amount of time included for this activity. As a result, we have no analytical basis to recommend that this activity be provided for in the proposed workload standard. CaseJoild Management. The proposed workload standard also includes a \"case- load management\" component, which increases by 20 percent the amount of time required for facilities evaluation. This component includes several tasks, such as case file review and drop-in visits, which are already performed as part of other tasks. We recommend that increases for the caseload management component of the staffing standard be reduced from 20 percent to 10 percent, in recognition of this duplication. Projection of Licensed Facilities. The proposed county licensing budget as- sumes that the number of county-licensed facilities will remain constant during 1981-82. Our analysis of past trends in county-licensed facilities, other than fainily day care homes, indicates this is an appropriate assumption. The department estimates that during 1981-82, counties will license 100 adult day care homes, 13,200 foster family homes and 1,674 other family homes. Existing statute contains specific policies and procedures for licensing cortlmu- nity care facilities. Based on\u00b7 available information, we cannot recommend the addition of the two identified components to the workload standards for this program. Therefore we recommend that post-licensing evalutions and a portion of caseload management activities be deleted frotn the workload standard, for a General Fund reduction of $371,134. Table 11 identifies how this recommendation would affect the department's proposed workload standards. Table 11 Department of Social Services Alternative Staffing Standards for Facilities Evaluators (Facilities per Evaluator) Existing Facility Category Standard Day Care .......................................................................................... 150 Family day care ......................................................................... . Other day care ........................................................................... . Residential Care.............................................................................. 75 Foster family homes ................................................................. . Other family homes ................................................................. . Group homes for children ....................................................... . Other group homes ................................................................... . Homefinding agencies ............................................................. . Adoptions Proposed LAO Proposed Standard Adjusted Standard 129 143 104 114 115 126 113 124 67 73 51 56 84 84 The Department of Social Services administers a statewide program of services to parents who wish to place children for adoption and to persons who wish to adopt children. Adoptive services are provided through three state district offices, 28 county adoptions agencies and eight private agencies. There are three major adoptions programs: (1) relinquishment adoptions, in which a child is released from parental custody and placed in an adoptive home; (2) independent adop- tions, in which the natural parents and adoptive parents agree on placement without extensive assistance from an adoptions agency; and (3) intercountryadop- tions which involve children from countries other than the United States. 1048 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF\u00b7 SOCIAL SERVICES-Continued The adoptions program is primarily supported from the General Fund, although\u00b7 a fee of up to $500 is collected from adoptive parents. The General Fund supports casework provided by the state and county agencies, and reimburses private adoptions agencies for placement of hard-to-place children. Current year savings. The Governor's Budget estimates current year savings of $309,889 in the adoptions program. The department advises that this estiinated savings is based on (1) receipt of more recent information regarding the number of adoptive placements and the cost per adoptive placement ($240,476), (2) a revised methodology for estiinating fee revenues collected from adoptive parents $46,838), and (3) reductions in anticipated costs for implementing the federal Indian Child Welfare Act (PL 95-608) and reimbursing private adoptions agencies for services provided to \"hard-to-place\" children ($22,575). This estimated current year savings\u00b7 will be revised during the May 1981 revision of expenditures. Budgetproposal. The budget proposes $16,946,994 to support the state adop- tions program,s in 1981-82, which is an increase of $405,048, or 2.4 percent, over revised estiinated current year expenditures. This increase is based on (1) an anticipated increase in the number of adoptive placements from 2,647 to 2,712 in 1980-81 and 1981-82, respectively, and (2) a corresponding increase in the reve- nue anticipated as a result of the collection of fees for adoptions services. Cost for Adoptive Placement Overestimated We recommend deletion of overbu,dgeted funds for county-operated adoptions programs, fora .General Fund reduction of $167,492. . The $16,946,994 proposed in this item for the state adoptions program includes $16,741,144 to reimburse county adoptions agencies, and.$205,850 to reimburse private adoptions agencies and implement the provisions of the Federal Indian Child Welfare Act. County adoptions agencies submit quarterly claims forreim- bursement for adoptions services delivered to birth parents, adoptive parents and children. The state is required by statute to reimburse these county claims after it deducts revenue generated through the collection of fees from total costs. The state, however, may specify allowable county costs and is not required by law to increase funding for the adoptions program to provide for anticipated caseload increases or cost-of-living and overhead increases for county employees. Estimate of Unit Cost Based on Single Quarter. The budget proposal of $16,741,144 to reimburse county adoptions agencies is based on a projection of 2,712 placements of children in adoptive homes during 1981-82. Of these placements, 2,652 are anticipated to be relinquishment and indeperident adoptions and 60 are intercountry adoptions~ These caseload projections were multiplied by the aver- age costs per adoptive placement-$4,973 for intercountry adoptions and $6,340 for other adoptions programs-to determine the proposed 1981-82 request. The Department of Social Services advises that these unit costs were derived using the reported caseload and county reimbursement claims for the fourth quarter of 1979-80. In past years, the unit cost used for estiinating expenditures for the adoptions program has been based' on actual cost per placement over an entire year. The department advises that only the last quarter of 1979-80 was used for this estiinate because costs during the first three quarters, were not representative of total program costs. According to the department, county adoptions agencies had experienced deficits in previous fiscal years and felt compelled to hold down costs arbitrarily during the first three quarters of 1979-80 in order to avoid a further deficiency. We have three problems with the use of fourth quarter, rather than full year, data. First, our analysis of expenditures for the state adoptions program in the two years prior to 1979-80 indicates that there was a surplus of funds budgeted for Item 518 HEALTH AND WELFARE 11049 adoptions in both 1977-78 and 1978-79. In fact, a portion of the General Fund amount budgeted for the adoptions program in 1978-79 was transferred, at the request of the Department of Social Services, to fund a portion of the 1978-79 deficit in the In-Home Supportive Services program. Second, our review of quar- terly costs per adoptive placement since 1974-75 indicates that uIiitcostswere higher than the fourth quarter of 1979-80 only once during that six-year period. Finally, our analysis indicates that fourth quarter claims have been higher than the previous three\u00b7 quarters in four of the last six years; . Projected Unit cost based on full-year data. . Using actual 1979-80 costs claimed as of January 20, 1980, ($14,529,960) and placements as reported in the depart~ ment's publication, Adoptions in California, we estimate 1981-82 expenditures of $16,573,652 for reimbursement of county adoptions agencies, rather than the $16,- 741,144 proposed in the budget, a difference of $167,492. Because fullyear costs more accurately reflect the actual experience of the adoptions program, we rec- ommend using these costs for budgeting purposes, for a General Fund savings of $167,492. Social Services for Refugees We recommend the Department of Finance advise the Legislature during budget hearings regarding the administrations plans in the event the state does not receive\u00b7$49.9 million in anticipated federal funds for social services to refugees. The Comprehensive Refugee Assistance Act authorizes 100\u00b7 percent federal support of social services provided to refugees, without a time limit on individual eligibility. The concurrent resolution on the federal fiscal year 1981 budget(HJR 644) , however, limits to $93.7 million the amount of federal funds available for social services to refugees. California's allocation ()f these funds in 1980-81 is $25,- 014,400. This is $6 million less than estimated expenditures for the current\u00b7 year. This allocation may be increased if additional federal funds are made available (special funding for Cuban I Haitian entrants, as an example) or if other states fail to spend\u00b7 their share of these funds. . Budget ProPQsal~Federal Funds Uncertain. The budget proposes $49,893,Q65 in federal funds for social services to refugees. This is an increase of $18,818,324, or 37.7 percent, over estimated current year expenditures. The funds would be used to deliver social service$ to refugees, pursuant to the Federal Comprehensive Refugee Act of 1980 (PL 96-212) .. Of the proposed total, $40;482,334 would be used to continue and expand a network of contracts with private agencies Which pro- vide social\u00b7 services, job placement and training in English as a second language. The remaining $9,411,631 would be allocated to county welfare departments for the provision of services to refugees. . The budget proposes to use federal fiscal year 1982 refugee funds during state fiscal year 1981-82. The proposed 1982 federal budget, however, contains only $70.0 million in federal funds for nationwide services to refugees. If this proposed federal appropriation level is not increased through executive or congressional action, iUs unlikely that California would receive the proposed $49.9 million in federal funds for social serVices to refugees. Because a shortfall infederal funds in the budget year may curtail the anticipated level of service and create a demand for General Food support of these serVices, we recommend that the Department of Finance advise the Legislature duringbudget hearings of the administration's plans in the event the amount of federal funds anticipated in the budget does not materialize. . 1050 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-Continued Title XX Training The Title XX training program consists of (1) county administered staff develop- ment, (2) services training conducted by universities for county welfare depart- ment staff, and (3) training for direct service providers, such as foster parents, child care workers and providers of in-home supportive services. The 1980 Budget Act authorized two positions in the Department of Social Services to administer and monitor the state's Title XX training program. These positions are limited to June 30, 1982. During the current year, the department has redirected two additional positions for this purpose. In a status report required by . the 1980 Budget Act, the department advises that in the current year, (1) proposals have been accepted and contractors selected to provide training to child day care workers and foster parents, and (2) a uniform budget format for private vendors, . a standard written agreement between students and their county welfare depart- ment employers and a quarterly reporting system were developed for Title XX training contractors. Federal Funds Reduced We recommend the Department of Finance advise the Legislature during bridget hearings of the administrations plans in the event that federal Title XX training funds available in 1981-82 are less than budgeted. . The budget proposes $15,666,667 for Title XX training programs in 1981.,..82, consisting of $11,600,000 in federal funds, $3,231,000 in matching funds from con- tractors and $835,667 in matching funds from counties. Prior to the passage of PL 96-86, which became effective in federal fiscal year 1980, federal grants for Title XX training were unlimited. This act established a nationwide spending cap of $75 million for Title XX training programs. Under this spending limit, California's final allocation for federal fiscal year 1980 was $6,147,747. Additional federal legislation enacted in 1980, the Adoption Assistance and Child Welfare Act of 1980 (PL 96-272), authorized the allocation of federal Title XX training funds in an amount up to 4 percent of the state's total federal Title XX social services allocation. This equals approximately $11.6 million for California in 1980-81. Beginning in\u00b7federal fiscal year 1982, however, PL 96-272 allows federal Title XX training funds to be allocated only on the basis of an approved state training plan. Despite the higher authorization level contained in PL 96-272, Con- gress again appropriated $75 million for this program in federal fiscal\u00b7year 1980. The concurrent resolution on the 1981 federal budget (HJR 644) also contains $75 million. A report submitted December 18, 1980 to the Joint Legislative Budget Commit- tee by the Department of Social Services advised the Legislature that. (1) 1980-81 allocations to the state's Title XX training programs were being reduced in propor- tion to the reduction in federal funds from $11.6 million to $6,147,747, and (2) the appropriate Title XX training budget level for 1981-82 is $6,147,747. The 1981-82 budget, however, proposes $11.6 million in federal\u00b7 Title XX training funds. Our analysis indicates that the budget contains more federal funds for Title XX training than the state can expect to receive, given past and current. federal funding levels. As a result, the administration probably will be unable to accom- plish the proposed Program objectives for Title XX training. Therefore, we recom- mend the Department of Finance advise the Legislature during budget hearings of the administration's plans for reducing the proposed level of service if federal funds are not received at the anticipated level. --------------- ---- --- ------ . Item 518 HEALTH AND WELFARE \/ 1051 Demonstration Programs The budget proposes to terminate funding for three projects: (1) the Family Protection Act (Chapter 21, Statutes of 1977) projects in San Mateo and Shasta Counties, (2) respite care projects for abused or neglected children and their families. in four counties funded by Chapter 1353, Statutes of 1979, and (3) an in-home supportive services project to develop a model for conducting equitable needs assessments. The budget also propQses to carry forward $432,837 in funds initiallyappropriat- ed in the 1979 Budget Act for the multipurpose senior services project. Thisptoject is discussed in our analysis of the Health and Welfare Agency Secretary, Item 053. In addition, .the budget anticipates continued federal support of $269,037 for child abuse demonstration projects. The budget also proposes $1,597,346 in General Fund support for a program of access services for the deaf and hearing-impaired as established by Chapter 1193, Statutes of 1980. Department of Social Services LOCAL MANDATES Item 518-101 (g) from the Gen- eral Fund Budget p. HW 181 Requested 1981-82 ....... ~ ........................... , ........... : ........................... . Estimated 1980-81 .................................................... ; ...................... . Actual 1979-80 ................. c : ; Requested increase $107,680 (+1.3 percent) Total recommended reduction ................................................... . $8;458,000 8,350,320 7,074,577 $8,440,400 , 'Analysis SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS page 1. IHSS Executive Mandate. Reduce by $2,696,0fHJ. Recomrilend 1053 deletion of funding for the IHSS executive mandate .. , 2. AFDCLegisJativeMandate. Reduceby$5,744,400. Recommend 1054 reduction of the amount budgeted to reimburse counties for the mandate resulting from enactment of Chapter 348, Statutes of 1976 (AB 2601). GENERAL PROGRAM STATEMENT This item contains the General Fund appropriation to reimburse local govern- ments for executive and legislative mandates .. Thebudget proposes to reimburse counties for implementing four executive regulations and three legislative man- dates involving programs' administered by the Department of Social Services. Executive Mandates 1. Regulations for the In-Home Supportive Services Program. The budgetpro- poses to reimburse coun.ties for social worker time spent implementing regulations for the In-Home Supportive Services (IHSS) program dated April 1, 1979. The department anticipated that these regulations would impose a higher level of service on counties as a result of the requirements that counties. (1) assess the need for in-home supportive services for clients in shared living situations, (2) report on teaching and demonstration of homemaking skills, and (3) review the need for protective supervision for IHSS recipierits. 1052 \/ HEALTHANDWELFARE LOCAL MANDATES-Continued Item 518 2. Treatment of Loans-AFDC and APSB Programs. The department has im- plemented ~egulations which change the method of treating loans when calculat- ing a recipient's grant level under the AFDC and APSBprograms. Under the . previous regulations, loans made' to recipients were counted as income when determining a recipient's grant. The new regulations exclude loans as countable income. 3, Work-Related Equipment-AFDC Program. The department has imple- mented regulations which exclude the entire value of an AFDC recipient's work- related equipment in determining eligibility for benefits;Previousreguilltions provided a maximum exemption for work-related equipment of $200. 4. Employment Services Registration-AFDC Program. AFDC recipients in 31 counties are required to register for the Work Incentive (WIN) program. Recipients in non-WIN registratioil counties are required to register with the Employment Services (ES) program in the Employment Development Depart- ment, As a result of executive regulations, a standard exemption criterion was adopted for both programs. Legislative Mandates In addition to these executive mandates, this item includes funding for three legislative mandates. 1. Six Percent Increase in AFDC Grants. Chapter 348, Statutes of 1976, in- creased the AFDC welfare payment standard by 6 percent effective January 1, 1977, in order to provide a higher standard of living for AFDC recipients. Normal- ly, counties pay a portion of AFDG grant costs. However, because the state man- dated the 6 percent increase, it is obligated to reimburse counties for their share of the cost. Chapter 348 disclaims any obligation on the state's part to reimburse counties forcost-of-living increases in payment standards. As a result, cost-of-living in- creases do not affect the state's level of reimbursement on a cost-per-case basis. 2. Peace OfficerStarus for Welfare Fraud or Child Support Investigators. Chapter 1340, Statqtes of 1980, designates welfare fraud or child support investiga- tors as peace officers if they are regularly employed and paid as such by the county. The department estimates that this will result in additional salary and training requirements for current investigators. 3. Inventory of Foster Care Caseload. Chapter 1229, Statutes of 1980, appro- priated $250,000 for reimbursement of counties for costs incurred for conducting an inventory of children in foster care beginning in January 1981. The Department of Social Services advises that the implementation of this legislation will be com- pleted by October 1981. ANALYSIS' AND RECOMMENDATIONS The budget proposes a General Fund appropriation of $8,458,000 to reimburse executive arid legislative mandates in 1981-82. Of this amount, $2,713,600 is to reimburse counties for the cost of implementing various executive regulations. The remaining $5,744,400 is to reimburse counties for local mandates contained in specific legislation. The budget states that legislative mandates are underfunded by $172,400 in the current year. Most of this is due to an unanticipated increase in caseload during 1980-81. The proposed 1981-,82 appropriation represents an increase of $107,680, or 1.3 percent, over estimated 1980-81 expenditures. Table 1 details the costs of each of the local mandates funded in this item. Item 518 HEALTH AND WELFARE \/ 1053 Table 1 Department of Social Services General Fund Expenditures for Local Mandates 1980-81 and 1981-32 Estimated Proposed Change Percent 1980-81 1981-82 Amount Change Executive Mandates IHSS uniform program regulations ................... . AFDC treatment of loans .................... , .............. . AFDC employment-related equipment ........... . AFDC employment services registration ......... . Legislative Mandates AFDC grant increase (th. 348\/1976) ............... . Investigator status (Ch. 1340\/1980) ................... . Foster care inventory (Ch.I229\/1980) ........... . Totals ............................................................................. . IHSSExecutive Mandate $2,502,820 4,500 9,500 3,600 5,573,700 6,200 250,000 $8,350,320 $2,696,000 4,500 9,500 3,600 5,744,400 $8,458,000 $193,180 170,700 -6,200 -250,000 $107,680 7.7% 3.1 -100 -100 1.3% We recommend that funding for the IHSS executive mandate be deleted, for a General Fund savings of $2,696,000. Our analysis indicates that the appropriation of funds for\u00b7 this mandate is\u00b7 not warranted because (1) the counties have not been able to document any actual costs incurred as a result of the IHSS regulations, (2) the formula used by the Department of Social Services (DSS) to allocate the local mandate funds is not tied to the actual costs resulting from the three new IHSS requirements, and (3) separate reimbursement for any costs incurred as a result of these regulations may not be necessary if the Superior Court's decision in the Sacramento County vs. State of California case is upheld. Actual Costs Not Documented. The $2.7 million requested in the budget is based on (1) a DSS estimate of anticipated 1979-80 costs resulting from the April 1979 regulations, and (2) caseload and cost-of-living adjustments for 1980-81 and 1981-82, Because counties have not been required to submit clirirns for reimburse- ment of costs resulting from this mandate, the Department of Social Services is unable to identify the actual costs of the regulations. In a survey conducted by our office in October 1980, we contacted 10 counties which, together, accounted for 79 percent of the state's 1979-80 IHSS expendi- tures. None of these counties could document increased local costs associated with the new regulations. Three of the 10 counties surveyed indicated that they had incurred undeterminable increased costs due to the provisions requiring specific actions for shared living assessments. Because there is no information available on the actual costs of this mandate, it is impossible to verify (1) the need to fund this mandate, or (2) the initial DSS estimate of anticipated local costs. Allocation Formula Not Tied to Mandated Costs. Our analysis has identified two major problems with the allocation formula used by the Department of Social Services to distribute these funds in 1979-80 and 1980-81: (1) actual costs are not included in the formula, and (2) the formula rewards counties which overspend their allocations for Other-County Social Services. As a result, the allocation for- mula in effect provides counties with state funds for a broad range of social services programs, rather than solely for the reimbursement of local mandated costs, as intended by the Legislature. Pending Litigation Includes Costs of Executive Mandate. In a case that is now before the Court of Appeal (Sacramento County vs. State of California), several counties contend that the state is responsible for funding the entire nonfederal 1054 \/ HEALTH AND WELFARE LOCAL MANDATES-Continued Item 518 share of all costs related to the operation of the IHSS program, including adminis- tration and assessment. The counties'contention is based on (a) Welfare and Institutions Code Section 12306 which states \"as regards IHSS, the state shall pay the matching funds required for federal social services from the state's General Fund,\" and (b) the requirement that the state shall reimburse each local agency for all costs mandated by the state by statute or executive order enacted after January 1, 1973 (Revenue and Taxation Code Section 2207). The Sacramento County Superior Court has decided in favor of the counties. The state has appealed the court's decision on the basis that counties were support- ing these activities prior to 1973. . . . If the Superior Court decision is upheld, it would increase costs to the General Fund by approximately $35 million, Under the decision, the costs aSsociated With the April 1979 regulations would be treated as part of the IHSS administrative costs and would not require separate reimbursement. . . In sum, Section 2207 of the Revenue and Taxation Code requires that, to receive reimbursement of state mandated local costs, UIiits of local governments must show that the mandate resulted in increased costs based on increased levels of service. The inability of the counties to document increased' costs as a result of this mandate suggests that any costs associated with this mandate probably have been minor and were absorbed within existing program budgets. If, in the\u00b7 future, counties are able to' document costs' ass.ociated with the April 1979 regulations, these costs should be funded (a) in the same manner as the other IHSSadministra- tive costs, if the Superior Court's decision in the Sacramento County suit is upheld or (b) through the normal claims review process in the State Controller'soffice, if the decision is overtumed.Wetherefore recommend . that funding for this mandate be d,eleted from the 1981 Budget Bill. To the extent that counties are able to document increased costs resulting from the regulations and submit valid claims to the State Controller, a portion of these funds may still be required. AFDCLegislative Mandate We recommendthatfuntls budgeted to \u00b7reimburSe counties for the legislati~emandate residting from enactment of Chapter 348, Statutes 011976 (AD 26(1) be deleted, for.a savings oflS, 144,400 to the GeneralFLind. . . BackgrouIid:Chapter' 348, Statutes of 1976, increased by 6 percent the grant amounts provided under the Aid to Families with Dependent Children (AFDC) program, effective January 1,1977 .. Table 2 shovys the increased payment stand- . ards, asa result of the .act, for families with one through four persons. The 6 percent increase was. in addition to the annual cost-of-liVing increase required by the Welfare and Institutions Code. Table 2 AFDC Maximum Aid PaymentStandards . ,Resultingfroli'l Chapter 348, Statutes of 1976 Payments As Of FamilySize Dec,emberl976 January 1977 1., .............................. , ................................................................................ ;.. $157 $166 2 ............ ;.: .................. :.; ......................... , ............ , .............................. ~ ...... :. 258 273 \"'t::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::'. ~~~ : Increase $9 15 19 23 Normally, increased grant costs in the AFDC program are shared by the federal, state and county governments. At the time that Chapter 348 became effective, the federal government paid 50 percent of grant costs; the state paid 33.7 percent, and the county paid 16.3 percent. ------ - -----~-. ------ Item 518 HEALTH AND WELFARE \/ 1055 Chapter 348 identified the county share of the cost for the 6 percent increase as a reimbursable state-mandated cost, and appropriated $8.5 million from the General Fund to reimburse counties for costs incurred during the last six months of 1976-77. In subsequent years, the Budget Act has provided funds to reimburse counties for their costs. The statute disclaimed state reimbursement for the county share of subsequent annual cost-of-living increases. Table 3 shows the amounts budgeted and expended for this mandate since 1976-77. Table 3 Local Mandate Expenditures for AFDC Six Percent Grant Increase 1976-77 to 1980-81 1976-77 1977-78 197~79 1979-80 1980-81 Budgeted ................................... . $8,500,000 $23,592,447 $19,442,437 15,521,623 $14,891,400 $5,407,500 5,109,700 b 5,573,700 c Expended ................................. . 2,821,953 20,781,043 Half-year costs for January-June 1977. b Because AB 8 increased the state share of AFDC grants from 33.7 percent to 44.6 percent, actual expenditures for the local mandate were less than the amounts appropriated in the 1979 Budget Act. C Based on Department of Social Services' November 1980 estimate of anticipated expenditures. Analysis. Chapter 348 clearly imposed an increased level of service and addi- tional costs on the counties by increasing AFDC grants 6 percent. It was therefore appropriate, when the statute was enacted, for the state to fund the mandated costs. The enactment of AB 8, however, has called into question the need to continue funding this mandate. As a result of the passage of AB 8, the counties were required to assume 5.4 percent of the AFDC grant costs and 25 percent of the administrative costs, starting in 1979-80. In order to provide counties with a revenue source to fund their share of the AFDC grant and administrative costs, AB 8 shifted $115.6 million in property tax revenue from school districts to the counties. Of the $115.6 million transfer, $96.2 million was for AFDC assistance payments arid $19.4 million was for AFDC admiriistration. Funding No Longer Justified. AB 8 is silent on the intent of the property tax revenue transfer of $115.6 million. Thus, it is unclear whether the transfer was intended to provide a dollar-for\"dollar offset for county AFDC costs or whether it was intended simply to give the counties another revenue source for financing some of their welfare costs. Nevertheless, we have determined that the method for calculating the $96.2 million transfer for assistance payments resulted in the shift of funds to the counties for their share of the 6 percent AFDC mandate. Because the property tax revenue shift included funds to cover the county's share of the 6 percent grant increase, our analysis indicates that continued funding for these costs in the local mandate item results in double\"funding. We therefore recommend a reduction of $5,744,400. 1P56 \/ HEALTH AND WELFARE Item 518 DEPARTMENT OF SOCIAL SERVICES-REAPPROPRIATION Item\u00b7518-490 from the. General Fund We recommend approval . . This item reappropriates funds from Item 274 (i), Budget Act of 1978, for use in the multipurpose senior services project (MSSP). The act appropriated $1,500,000 in 1978. The budget anticipates that an unencumbered balance of $432,837 will remain at the end of the current year. This item would make the balance available to MSSP in 1981--82. . Two reasons account for the delay in the expenditure of these funds. First, the Health and Welfare Agency, whose responsibility it is to implement MSSP, was not able to secure an the necessary waivers to obtain federal funding, untilMarch 1980. Secondly, th~ acquisition of full caseload for the project has ben delayed. Conse- quently, the sites will not reach full caseload capacity until April 1981. MSSP should be in full\u00b7 operation by the time the reappropriated funds are made available in the budget year. The Department of Social Services haS advised oUr office that the unencum- bered balance may fluctuate during the current year, depending on the availabili- ty of other funds which can be used for MSSP. If additional funds are made available to the project during 1980-81, our analysis indicates that the balance from Item 274 (i), Budget ActoH978, will exceed $432,837. DEPARTMENT OF SOCIAL SERVICES-REVERSIONS . Item 518-495 from the General Fund . .. ~erecommend approval. . This item reverts the unencumbered balances from Chapter 363, Statutes of 1975, and Chapter 1241, Statutes of 1978, to the General Fund. 1. Section ~ Chapter 363, Statutes oF1975, Reimbursement of Private Adoptions Agencies . Chapter 363, Statutes of 1976 (SB 252), appropriated $64,000, from the General Food, to the Department of Social Services for the reimbursement of private . adoptions\u00b7 agencies which assist in the placement of a child who is under\u00b7 the custody and control of a public adoptions agency. The funds were appropriated without regard to fiscal year. As part of the statute, private agencies were allowed to claim up to $1,000 per plac~ment, less fees received from adoptive parents. Chapter 489, Statutes of 1979, raised the maximum placement ~eimbursement to $1,500. The 1980 Budget Act appropriated $64,000 to the Department of Social Services to cover the costs of these reimbursements in 1980-81. . Because the Department of Social Services has budgeted funds in 1980-81 and in 1981~2 to reimburse private agencies for their costs, we recommend approval of this reversion. 2; Section 4, Chapter 1241, Statutes of 1978. Chapter \u00b71241, Statutes of 1978 (SB 768), required the Department of Social Services to stUdy and prepare a preliminary and final report on state administra- tion of welfare and social\u00b7 services programs currently administered by county governments. The statute appropriated $200,000 from the General Fund to the Item 519 HEALTH AND WELFARE \/ 1057 department for this study. The preliminary report was submitted to the Legislature on October 13, 1978. The department's final report was received by our office on April 9, 1979. It recommended the implementation of a Centralized Delivery System which would store and index case records, verify eligibility, compute grant amounts and issue warrants. Many of the final report's recommendations were incorporated into AB 8 (Chapter 242, Statutes of 1979). The Department of Social Services was able to complete the required study with existing staff and resources. The $200,000 provided for additional staff was hot encumbered, and therefore, we recommend approval of this reversion. Health and Wel.fare Agency CALIFORNIA HEALTH FACILITIES COMMISSION Item 519 from the California Health Facilities Commission Fund Budget p. HW 194 Requested 1981-82 .......................................................................... . Estimated 1980-81 ........................................................................... . Actual 1979-80 ................................................................................. . Requested increase (excluding amount for salary increases) $278,635 (+11.5 percent) Total recommended\u00b7 reduction ................................................... . Recommendation pending ........................................................... . SUMMARY OF RECOMMENDATIONS $2,700,530 2,421,896 2,051,787 None $272,405 Analysis page 1. Data Processing Improvements. Withhold recommendation on $272,405 requested for data processing positions and equipment, pending analysis of cost data. 1059 GENERAL PROGRAM STATEMENT The California Health Facilities Commission collects patient and financial data from hospitals and nursing homes and discloses those data to government agencies and the public. The commission was created by Chapter 1242, Statutes of 1971, which also required that a uniform financial accounting and reporting system be developed for hospitals. Chapter 1171, Statutes of 1974, extended these accounting and report- ing requirements to long-term care (LTC) facilities. The purposes of the financial disclosure requirements are to: (1) encourage economy and efficiency in provid- ing health care services, (2) enable public agencies to make. informed decisions in purchasing and administering publicly financed health care services, (3) dis- s~minate fmancial .data on health facilities to private third-pll.rty payors and the public, (4) assist local health planning agencies, and (5) create a body of reliable data for research. Chapter 1337, Statutes of 1978, expanded the commission's responsibilities to include: (1) establishing standards of effectiveness for health facilities, and (2) forecasting hospital operating and capital expenditures for each of the state's health service areas for use by Health Systems Agencies in developing area health plans. . .. 37-81685 1058 \/ HEALTH AND WELFARE Item 519 CALIFORNIA HEALTH FACILITIES COMMISSION-Continued ANALYSIS AND RECOMMENDATIONS The budget proposes an appropriation of.$2,700,530 from the California Health Facilities Commission Fund to support commission activities in 1981-82. Thisis.an increase of $278,634, or 11.5 percent, above estimated current year expenditures. This amount will increase by the amount of any salary and staff benefit increases approved by the Legislature for the budget year. The primary components of the proposed increase are: . (1) establishment of five new positions in the Accounting Branch, at a costof $103,451; (2) installation of computer equipment\"and establishment of six new positions for key data entry, at a cost of $272,405. These changes would allow the commission to terminate\" an existing contract for key data entry and data processing, for a net cost savings of $112,832; and (3) establishment of five new positions to implement Chapter 594, Statutes of 1980 (SB 1370), which\" requires the collection of quarterly financial and patient discharge data. The budget identifies a total of 78.1 positions, which is an increase of 17.0 above the number authorized in the current year. Table 1 identifies the proposed new positions and the resulting cost or cost savings to the California Health Facilities Commission Fund. Table 1 California Health Facilities Commission iJroposed New Positions. 1981-\"82 Description 1. Accounting Branch ........................................................ ; ............................................ . 2. Data Processing .......................................................................................................... .. 3. SB 1370 Implementation ........................................................................................... . 4. Clerical Workload ................................................ : ............................................. : ........ . Totals ....................................................................................................................... , ... . Accounting Branch Workload We recommend approval. Number 5.0 6.0 5.0 1.0 17.0 Cost $103,451 -'-112;832 233,7~1 $224,380 \" The budget proposes the establishment of five new positions in the accounting branch to increase the productivity of health facility\" reports processing anq to improve data quality. Currently, three of the ninestaff\"in\" this branch are student assistants. Because of a high rated turnover in these positions, productivity in processing health facility reports has declined markedly since early 1979, resulting in a large backlog of unprocessed long-term care reports. The commission has adininistratively es- tablished three part-time positions in the current year to eliminate this backlog. To elirriinate the ongoing problem of declining productivity, the commission is proposing' to elirriinate the student assistant positions and replace\" them with three accounting technicians on a permanent basis. The net cost\" of establishing these positions is $8,469. The commission further proposes establishment of two accounting officer posi- tions to\" operate an editing system designed to reduce error rates in the health facility financial disclosure statements. The cost of these positions arid associated key entry and data processing support is $94,982. \"\" Our analysis of these proposals indicates that they arejustffied.Werecommend approval. Item 519 YOUTH AND ADULT CORRECTIONAL \/ 1059 Data Processing Improvements We withhold recommendation pending analysis of cost data. Currently, the commission contracts with the Franchise Tax Board (FTB) for a major portion of its key data entry and data processing workload. Because of increased charges, processing times, and high error rates, the commission proposes to discontinue its contract with FTB and to assume all key data entry and data processing duties in-house. Accordingly, it proposes to establish six new positions and to purchase data processing equipment arid software packages. The cost of these new positions and data processing support in 1981-82 is $272,405. The es- timated cost of the equivalent FTBservices in 1981-82 is $385,237. Thus, the establishment of these new positions and the associated adaptations to the commis- sion's data processing capabilities is estimated to result in 1981-82 cost savings of $112,832.At the time this analysis was prepared, we had not analyzed all the data supplied by the commission to verify the estimate. We withhold our recoinmenda- tion at this time, pending completion of that analysis. Our analysis and recommendation concerning this proposal will be presented in a supplemental analysis submitted by March 1, 1981. Implementation of Chapter 594, Statutes of 1980 We recommend,approval. Chapter 594, Statutes of 1980 (SB 1370), expanded health facility financial disclo- sure requirements to include disclosure of: (1) summary financial data on a quarterly basis, and (2) patient discharge data, including data on patient characteristics, admission, diagnosis, primary procedure, and disposition upon discharge~ Collection of patient discharge data will improve the commission's data analysis capabilities significantly, because discharge data will allow the commission to compare costs of hospitals with sirnilarcaseload and procedural mixes. The com- mission's current data base dges not allow such comparisons. Without controlling Jor variation in caseload and procedural mixes among hospitals, it is difficult to determine whether various hospital cost containment policies, such as the Califor- . ,nia Voluntary Effort, are effective. '- The budget proposes to establish (1) one new accounting officer position to implement the quarterly reporting requirements and, (2) two new professional and two new clerical positions to implement the discharge data prograin and to begin processing and analysis of discharge data in the final quarter of 1981-82. The cost of these six positions and their associated data processing support is $233,76l. Our analysis of the commission's proposal indicates that these positions are required to implement the requirements of Chapter 594. We recommend that they be approved. The Legislature should be aware, however, that hospitals will only begin to disclose discharge data at the end of 1981-82. The commission, therefore, is likely to request additional staff in its budget for 1982-83, when substantial workload increases are anticipated in the discharge data program. "

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1982-1983 AFDC Budget LAO Analysis

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” Item 5180 HEALTH AND WELFARE \/ 1043 DEPARTMENT OF SOCIAL SERVICES SUMMARY The Department of Social Services is the single state agency responsible for supervising the delivery of cash grants and social services to needy persons in California. Monthly grant payments are made to eligible recipi- ents through two programs-Aid to Families with Dependent Children (AFDC) and the Supplemental Security Income\/State Supplementary Payment (SSI\/SSP) program. In addition, welfare recipients, low-income individuals, and persons in need of protection may receive a number of social services such as information and referral, domestic and personal care assistance, and child and adult protective services. Table 1 identifies total expenditures from allfunds for programs admin- istered by the Department of Social Services for 1981-82 and 1982-83. Total expenditures for 1982-83 are proposed at $7,116,439,000, which is an increase of $582,999,000, or 8.9 percent, over estimated current year ex- penditures. Table 2 shows the General Fund expenditures for cash grant and social services programs administered by the Department of Social Services. The department requests a total of $3,146,642,000 from the General Fund for 1982-83. This is an increase of $161,461,000 or 5.4 percent, over estimat- ed current-year expenditures. OVERVIEW OF ANALYST’S RECOMMENDATIONS The analysis of the proposed 1982-83 budget for the Department of Social Services is divided into nine sections, as follows: (1) state operations, Table 1 Department of Social Services Expenditures and Revenues. by Program All Funds\u00b7 1981-82 and 1982-83 Program Department Support …………………………….. . AFDC cash gran ts ………………………………… . SSI\/SSP cash grants ………………………………… . Special adult programs …………………………… . Social services programs ……………….. , …….. . In-home supportive services ……………… .. Other social services ………………………….. .. Community care licensing …………………… .. County welfare department administra- tion ………… _._ …………………………………….. . Local Mandates __ …………………………………… .. Refugee and entrant cash grants …………… . Totals ……. ___ ……………………………………. . General Fund …. __ ……………………………….. ; …. . Federal funds … ___ ……………………………………. . Coun~v funds …. \” …………………………………… .. Reimbursements ……………………………………. . (in thousands) 1981-82 Estimated $152,541 2,897,686 2,139,220 2,822 543,765 (272,196) (271,569) 8,756 589,211 (74) 199,439 $6,533,440 2,985,181 3,203,178 337,941 7,140 1982-83 Proposed $167,184 3,129,552 2,325,424 2,829 610,388 (281,809) (328,579) 8,823 625,012 (114) 247lf27 $7,116,439 3,146,642 3,621,452 340,264 8,081 Change Amount Percent $14,643 9.6% 231,866 8.0 186,204 8.7 7 0.2 66,623 12.3 (9,613) (3.5) (57,010) (21.0) 67 0.8 35,801 6.1 (40) (54.1) 47,788 24.0 $582,999 8.9% 161,461 5.4 418,274 13.1 2,32:3 0.7 941 13.2 a Amounts shown include $637,190,000 proposed in Items 5180-181-001 ($459,947,000) and 5180-181-866 ($177,243,000) for cost-of-living increases. 1044 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES SUMMARY-Continued Table 2 Department of Social Services General Fund Expenditures\u00b7 1981~ and 1982-83 Program Department support ………………………………. .. AFDC cash grants ………………….. ; ……………. .. SSI\/SSP cash grants ……………………………….. .. Special adult programs ………………………….. .. Courity welfare department administra- tion …………………………………………………. .. Social Services ………………………………………… .. In-home supportive services ……………… .. Other social services …………………………… . Community care licensing …….. ; ……………. . Local mandate ………………………………………. .. Cost-of-living increase ………………………….. .. Totals ……………………………………………….. .. (in thousands) Estimated 1981-82 $51,755 1,364,832 1,268,867 2,733 119,014 169,224 (142,874) (26,350) 8,756 (74) $2,985,181 Proposed 1982-83 $53,377 b 1,424,063 1,345,687 2,740 116,615 195,337 (159,241) (36,096) 8,823 (114) (459,947) $3,146,642 Item 5160 Change Amount Percent $1,622 b 3.1 % b 59,231 4.3 76,820 6.1 7 0.3 -2,399 -2.0 26,113 15.4 (16,367) (11.5) (9,746) (37.0) 67 0.8 (40) (54.1) $161,461 5.4% a $459,947,000 has been proposed in Item 51BO-181′()()1 for cost-of-living increases. This amount is distribut- ed throughout the proposed amounts for l~for local assistance programs only. b This will increase by the amount of any salary or staff benefit increase approved for state employees in the budget year. (2) aid to families with dependent children, (3) state supplementary payment program for the aged, blind, and disabled, (4) special adult programs, (5) county administration of welfare programs, (6) social serv- ices, (7) community care licensing, (8) local mandates, and (9) cost-of- living increases. . We are recommending reductions totaling $96,403;000 from proposed General Fund expenditures. Of this total, $31,091,000 reflects recommen- dations that unbudgeted federal funds be used in lieu of General Fund support, $62,503,000 reflects technical budgeting recommendations, and $2,809,000 reflects recommendations for programmatic changes. The ma- jor technical budgeting recommendation is to reduce the amount proposed for cost-of-living adjustments to reflect the most recent estimate of the amount necessary. Our estimate is based on the 8.2 percent increase in the California Necessities Index (CNI) projected by the Commission on State Finance in January 1982. The change in the CNI is used to calculate cost-of-living adjustments for the AFDG, SSI\/SSP, and IHSS programs. The budget assumes an 8.8 percent increase in the CNI based on estimates made by the Department of Finance in early December 1981. Adoption of this technical recommendation would result in General Fund savings of $43,459,000 in the budget year. We withhold recommendation on $208,008,000 proposed in the Gover- nor’s Budget, pending receipt of additional information. Table 3 summa- rizes our recommendations by program category. Item 5160 HEALTH AND WELFARE \/ 1045 Table 3 Department of Social Services Summary of Legislative Analyst’s Recommendations\u00b7 General Fund (in thousands) Recommen- Reductions dations Programmatic Increase Pending Issues Technical Federal Funds Total -$1,213 1. State operations …………………………………………….. . ($7,859) -$397 -$816 2. AFDC cash grants ………………………………………… .. -26,208 -:$3,049 -29,257 3. SSI\/SSP cash grants ……………………………………….. . (41,O13) -34,393 -25,649 -60,042 4. Special adult programs ………………………………….. . 5. County administration of welfare programs … . -2,412 -514 -2,926 6. Social services ………………………………………………… . (159,136) -lOS -2,393 -2,498 7. Community care licensing …………………………… . -467 -467 8. Local mandates …………………………………………….. . Totals …………………………………………………………… . ($208,OOS) -$2,809 -$62,503 -$31,091 -$96,403 a These recommendations include the fiscal impact of reducing cost-of-living increases in Item 5180-181. Health and Welfare Agency DEPARTMENT OF SOCIAL SERVICES DEPARTMENTAL SUPPORT Item 5180 from the General Fund and Federal Trust Fund Budget p. HW 209 Requested 1982-83 ……………………………………………………………….. . Estimated 1981-82 ………………………………………………………………… . Actual 1980-81 ……………………………………………………………………… . Requested increase (excluding amount for salary increases) $1,622,000 (+3.1 percent) Total recommended reduction …………………………………………… . Recommendation pending ………………………………………………….. . 1982-83 FUNDING BY ITEM AND SOURCE Item Description 51BO-OO1-OO1-Department of Social Services- Support 51BO-OOI-866-Department of Social Services- Support . Total Fund General Federal SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS $53,377,000 51,755,000 47,238,000 $1,213,000 $7,859,000 Amount $53,377,000 ( 105,726,(00) $53,377,000 Analysis page 1. Community Care Licensing. Reduce by $397,000. Rec- ommend deletion of 14 positions and $397,000 in General Fund support, to reflect reduced statutory requirements for day care center licensing. 2. In-State Travel. Reduce by $61,000. Recommend Gen- eral Fund reduction of $61,000 to correct overbudgeting. 1050 3. Postage. Reduce by $547 000. Recommend General Fund 1051 1051 1046 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-,-Continued reduction of $54,000 to correct overbudgeting. Item 5180 4. Facilities Operations. Withhold recommendation on 1052 $5,786,000 ($2,071,000 General Fund, $3,504,000 in federal funds, and $211,000 in reimbursements) requested for facili- ties operations, because budget detail shows rent costs alone will exceed that amount in 1982-83. 5. Statewide Public Assistance Network (SPAN) Project. 1053 Withhold recommendation on $19,230,000 ($5,788,000 Gen- eral Fund, $11,400,000 in federal funds, and $2,042,000 in reimbursements) requested for SPAN, pending receipt of amended feasibility study report. 6. SPAN-Unjustified Expenditures. Reduceby$701~OOO. Rec- 1058 ommend deletion of $2,083,000 ($701,000 General Fund and $1,382,000 in federal funds) for unjustified expenditures proposed for SPAN project. GENERAL PROGRAM STATEMENT The Department of Social Services administers income maintenance, food stamps, and social services programs. In addition, the department is responsible for licensing and evaluating nonmedical community care facilities, determining eligibility for supplemental security income and medically needy (Medi-Cal) programs through disability evaluations, and implementing a statewide automated public assistance delivery system. These responsibilities are divided among nine operating divisions within the department. ANAL YSISAND RECOMMENDATIONS The budget proposes an appropriation of $53,377,000 from the General Fund for support of the Department of Social Services in 1982-83. This is an increase of $1,622,000, or 3.1 percent, over estimated current-year ex- penditures. This amount will increase by the amount of any salary or staff\u00b7 benefit increase approved for the budget year. The budget proposes total expenditures of $167,184,000 from all funds for support of the department in 1982-83. This is an increase of $14,643,000, or 9.6 percent, over estimated 1981-82 expenditures. Table 1 shows total expenditures and personnel-years by major program category. As shown in Table 1, the major increase proposed in this item is $13,005,- 000 for the Statewide Public Assistance Network (SPAN) project. Our analysis indicates that, without the SPAN project, the General Fund re- quest for the Department of Social Services would actually be $2,909,000, or 5,6 percent, below estimated 1981-82 expenditures. Proposed General Fund Budget Changes Table 2 details the changes in the department’s proposed General Fund support expenditures for 1982-83. As shown in Table 2, General Fund expenditures are proposed to increase by $1,621,521, or 3.1 percent, over the current year. The net General Fund increase of $1,621,521 consists of reductions totaling $7,541,180 and proposed expenditure increases of $9,162,701. The major cost increases result from program change proposals ($6,991,276). The largest single program change proposal is for support of the SPAN project. In addition, the budget proposes $456,653 from the General Fund to restore a reduction to the department’s travel budget made for the current year and $706,000 to restore funds unallotted by the Item 5180 HEALTH AND WELFARE \/ 1047 Table 1 SUnlmary of the D~partment of Social Services Support Budget 1981-82 and 1982-83 (dollars in thousands) Funding General Fund ………………………………………………. . Federal funds … _ …………………………………………… . Reimbursements …………………………………………. . Totals ….. _ ………………………………………….. .. Program AFDC …………….. _ …………………………………………… . Personnel-years ……………………………………….. . Child Support Enforcement ……………………….. . Personnel-years ……………………………………….. . SSI\/SSP …………… _ …………………………………………… . Personnel-yea,li’s ……………………………………….. . Special Adult Programs ………………………………. . Personnel-years ……………………………………….. . Food Stamps ….. _ …………………………………………… . Personnel-years ……………………………………….. . In-Home Supportive Services ……………………. . Personnel-years ………………………………………. .. Other County Social Services ……………………… . Personnel-years ……………………………………….. . Adoptions ……………………………………………………… . Personnel-years ……………………………………….. . Other Social Services …………………………………. .. Personnel-years ………………………………………. .. Community Care Licensing ………………………. .. Personnel\u00b7 years ……………… , ………………………. . Refugee Prognuns ……………………………………….. . Personnel-years …………….. ,.; ……………………… . Disability Evaluation ……….. ; ……………………….. . P~rsonnel\u00b7year5 ………………………………………. .. Services to Other Agencies ………………………… .. Personnel-year~ ……………………………………….. . Statewide Public Assistance Network Project Personnel-years ………………………………………. .. Total ……………………………………………………………. .. Personnel-years ………………………………………. .. Estimated 1981-82 $51,755 95,090 5,696 $152,541 $20,070 444.7 $5,216 100.1 $1,282 31.8 $1,296 37.2 $11,114 303.6 $4,374 ..110.4 $3,899 114.9 $4,384 125.2 $2,145 57.5 $15,785 426.9 $4,038 84.4 $71,911 1,566.8 $7,027 95.3 (8,308) ~.O) $152,541 3,498.8 Proposed 1982-83 $53,377 105,726 8,081 $167,184 $24,694 440.1 $5,639 104.9 $1,313 31.0 $1,881 38.4 $13,057 302.7 $5,178 110.1 $4,498 115.4 $4,459 120.7 $2,185 54.2 $15,861 403.3 $5,043 95.6 $76,345 1,566.0 $7,031 99.7 (21,313) ~.5) $167,184 3,482.1 Change Amount Percent $1,622 3.1 % 10,636 11.2 2,385 41.9 $14,643 9.6% $4,624 -4.6 $423 4.8 $31 -0.8 $585 1.2 $1,943 :-0.9 $804 -0.3 $599 0.5 $75 -4.5 $40 -3.3 $76 -23.6 $1,005 11.2 $4,434 -0.8 $4 4.4 (13,005) ~.5) $14,643 -16.7 23.0% -1.0 8.1 4.8 2.4 -2.5 45.1 3.2 17.5 -0.3 18.4 -0.3 15.4 0.4 1.7 -3.6 1.9 -5.7 0.5 -5.5 24.9 13.3 6.2 -0.1 0.1 4.6 (156.5) (24.0) 9.6% -0.5% Department of Finance as part of the 2 percent across-the-board reduc- tion imposed during the current year. The major decreases in anticipated expenditures include $2,469,000 to achieve a 5 percent reduction, as required in the Department of Finance budget instructions, and $3,066,085 to reflect the expiration of limited term and administratively establ}shed positions. Proposed Ne\”\” Positions The department is proposing 549.1 new positions and a reduction of 88.5 positions for 1982-83, as shown in Table 3. These changes result in a proposed total of 3,808.6 authoI-izec;l positions. The largest single request is for 257.3 p()sitions to expand disability evaluation services throughout the state. Thesepositions, whiGP were established administratively during the current year following notification of the Legislature as required by 1048 \/ HEALTH AND WELFARE\u00b7 DEPARTMENT OF SOCIAL SERVICES-Contin\”ed Table 2 Department of Social Services-Support Budget Proposed General Fund Adjustments (in thousands) 1. 1981-82 Current Year Revised Expenditures ……………………………………. . 2. Restoration of Current Year Reductions A. Restoration of 2 percent reduction …………………………………………… … B. Restoration of travel reduction ……………………………………………………. . Subtotal …………………………………………………………………………………………. . 3. Baseline Adjustments A. Increase in existing personnel costs (1) Merit salary adjustments ……………………………………………………….. . (2) OASDI ……………………………………………………………………………………. . (3) Workers’ Compensation ………………………………………………………… . Subtotal …………………………………………………………………………………………. . B.Decrease in existing personnel costs (1) Limited-term positions (a) Title XX training …………………………………………………………….. . (b) Child protection … , …………………………………………………………. . (c) Adoptions ……………………………………………………………………….. . (d) Child support …………….. , ………………………………………………… … (e) Administrative accounting …………………………………………….. . (f) Increased maintenance workload ………………………………….. . (g) Legal support ………………………………………………………………….. . (h) SPAN …………. : ………………………………………………………………….. . (i) SSI\/SSP quality control …………………………………………………. … Subtotal ……………………… . : ……………………………………………………. . (2) Administratively established positions (a) AB 111I-Office of Administrative Law ……………………….. . (b) Community care licensing …………………………………………… … (c) Family protection act.. ……………………………………………………. . Subtotal …………………………………………………………………………….. , .. C. One-time expenditures (1) 1981-82 disaster relief.. …………………………………………………………… . (2) Equipment …………………………………………………………………………….. . Subtotal …………………………………………….. ; …………………………………………. . D. Operating expenses and equipment (1) 7 percent price increase ……………………………………………………….. . Total, Baseline’ Adjustments …………………………………………. , …………….. . 4. Program Change Proposals A. SPAN project ………………………………………………………………………………… . B. Cornrnunity care licensing …………………………………………………………… . C. Other …. , ………………………………………………………………………………………… . Total, Program Change Proposals ………………………………………………. . 5. 5 Percent Reduction A. Personal services …………………………………………………………………………… . B. Operating expenses and equipment …………………………………………… . Total, 5 Percent Reduction …………………………………………………………… . 6.Total General Fund Change Proposed for 1982-83 …………………………. . 7. 1982-83 Proposed General Fund Expenditures ………. , …………………….. . Total $706 457 $218 29 18 -$18 -100 -184 -47 -21 -114 -167 -320 -113 -$250 -1,617 -115 -$2,000 -6 $4,069 1,888 1,034 -$1,304 \”‘:1,165 Item 5180 Cost $51,755 1,163 265 -1,084 -1,982 -2,006 $744 (-2,900) 6,991 -2,469 ($1,622) $53,377 Item 5180 HEALTH AND WELFARE I 1049 Control Section 28 of the 1981 Budget Act, are supported entirely by federal funds. , , The department is also requesting (a) 152.5 positions to continue devel- opment of the Statewide Public As.sistance Network (SPAN) project, (b) 59 positions to assume increased community care licensing responsibilities atthe state level, due primarily to caseload transfers from county licensing agencies, and (c) 10 new positions for state administration of refugee programs. The remaining 70.3 proposed positions are for various functions throughout the department. ‘ Table 3 Department of Social Services Position Changes Proposed for 1982~ Welfare progranl operations … . Social services ………………………. .. Community care licensing … ; .. .. Disability evaluation ………….. , .. . Management and administra- tion ……………………… ; …………. . SPAN ……………………………………… . Totals ………. _ …………. ; ……….. .. Existing Positions 134.5 241.0 319.5, 1,354.9 1,184.1 114.0 3,348.0 Workload and Administrative Requested Adjusbnenls New Positions ~5.0 5.5 ‘ -12.0 5.0 .:..24.0 59.0 -47.5 -88.5 257.3 69.8 152.5 549.1 ToM Positions 135.0 234.0 354.5 1,612.2 1,206.4 266.5 3,BOB,6 Net Change Number Percent ‘ 0.5 0.4% -7.0 -2.9 35.0 10.9 257.3 19.0 22.3 1.9 152.5 133.8 460.6 13.8% Requested New’ Fiscal Effect of Requested New Positions (in thousands) General Federal Reim- Positions Fund Funds bursements Welfare program operations……………… 5.5 $34 $155 Social services … > …………………………………. 5.0 163 Community care licensing ……………….. 59.0 1,888 Disability evaluation ………………………….. 257.3 15,944 Management and administration …….. 69.8 629 I,OBI $380 SPAN …………………………………………………. 152.5 4,069 7,388 1,791 Totals ………. …………………………………. 549.1 $6,783 $24,568 $2,171 Percents ……………………………….. : …… . 20.2% 73.3% 6.5% REDUCTION IN STATE OPERATIONS Five .Percen.Redl.lction Totals $189 163 1,888 15,944 2,090 13,248 $33,522 100.0% The ‘budget proposes reductions of $2,469,000 to the General Fund de- partmental ~mpport Item in order to comply with the Governor’s directive to reduce the baseline budget for 1982-83 by5 percent. ‘Because many of the individual reductions are proposed in programs which are jointly fundedfrorn federal funds and the General Fund, the General Fund reduction of $2,469,000 results in an additional reduction of$I,204,000in the federally funded portion of the department’s support budget., The prop<>sed General Fund reduction consists of: (a) $1,304,000 from salaries and wages due to the eliminationQf73 positions and (b) $1,165,000 from operating expenses and equipment, of which $285,000 is a reduction iIi funding fvr contracts with the Health and Wdfare Agency,theDepart- ment of Justice, the State Personnel Board, and the State Controller. Our analysis indicates that most of the 5 percent reductions are proposed in low priority functions andwill not result in decreases in the 1050 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-Continued departm.ent’s ability to comply with state or federal law. Two of the reduc- tions, however, are proposed for the Title XX training and food stamp outreach programs, both of which were scheduled for elimination inde- pendent of the 5 percent reduction. This appears to be inconsistent with the Department of Finance instructions that \”programs already scheduled or marked for reduction or elimination must not be included as a (5 percent) reduction.\” IMPACT OF RECENT LEGISLATION Community Care Licensing We recommend approval. The budget proposes 59 new positions for the Community Care Licens- ing Division. Of these positions, 41 were administratively established dur- ing the current year becaiIse of caselCiad transfers from the counties to the department. The remaining 18 positions were administratively estab- lished for the Family Day Care Licensing program created by Chapter 102, Statutes of 1981 (AB 251). The budget also proposes eliminating 24 positions in the Community Care Licensing Division. Of this total, 11 positions are proposed for elimi- nation because the licensing fee program for which they were originally established was eliminated by AB 251. The remaining 13 positions are proposed for elimination as part of the department’s 5 percent reduction. Thus, the budget proposes a net increase of 35 positions for community care licensing. Table 4 displays the proposed changes in authorized posi- tions in the Community Care Licensing Division. We recommend ap- proval of these changes. . Table 4 Department of Social Services Community Care Licensing Division Changes in Authorized Positions Number of Positions 1981-82 authorized positions ……………………………………………………………………………. , ………………… ~. 319.5 Family day care licensing positions administratively established during 1981-82 to conduct the family day care licensing program created by AB 251.. ………………………………………. .. Family day care licensing positions administratively established in the current year because Los Angeles County returned the licensing of these homes to the state ……. ; ………….. .. Adult group and family home licensing positions administratively established in the current year because various counties returned the licensing of these homes to the state ……. License fee p6sitionsdeleted because positions are not needed due to the elimination of the license fee program ………………………………………………………………………………………………… .. Five percent reduction ………………………………………………………………………………………………………… .. Proposed total authorized positions …………………………………………………………………………………… .. Statutory Requirements Reduced 18.0 18.5 22.5 -11.0 -13.0 354.5 We recommend a reduction of 14 positions for the Community Care Licensing Division to reflect the reduced workload which will result from the department’s compliance with the day care provisions of Chapter 102, Statutes of 1981, for a General Fund savings of $396,686. Chapter 102, Statutes of 1981 (AB 251), made several changes in the day Item 5180 HEALTH AND WELFARE \/ 1051 care center licensing program. Specifically, it extended the day care cen- ter license renewal period from two years to three years, and required the Department of Social Services to make unannounced visits at one-third of licensed day care centers each year ona random basis. The department has failed to change its regulations and practices to comply with these provisions of AB 251. The department continues to issue licenses to day care centers, which must be renewed every two years, and to make regular unannounced visits to each day care center in its nonrenewal year. The budget proposes continuing these policies during 1982-83. The department estimates that implementation of the provisions of AB 251 would result in reduced workload for the Community Care Licensing Division and permit the elimination of 14 positions, for a General Fund savings of $396,686 in 1982-83. We recolllmend, therefore, that this amount be deleted from the budget for community care licensing to reflect the savings the department will incur as a result of complying with AB 251. TECHNI.CAL BUDGETING ISSUES In-State Travel WerecoDlmend deletion of $61~OOO in General Fund support to correct overbudgeling for in-state travel. Budget instructions from the Department of Finance authorized state departments to increase by 7 percent current year base expenditures for each category of operating expenses, in putting together their 1982-83 budget. TheDSS’scurrent year base budget for in-state travel is $2,951,- 000. Thus, a 7 percent increase should be $207,000. The total in-state travel budget proposed by the department for 1982-83 is $3,947,000. This is an increase of$996,000, or 33.8 percent, over estimated current year expenditures. Of the increase, $268,000 has been proposed to adjust base expenditures for inflation. This is $61,000 more than the in- crease authorized by the Department of Finance. We recommend that this amount be deleted. In order to maximize the use of federal funds for departmental support, the reduction in in-state travel should be made in the General Fund-supported portion of the travel budget, for General Fund savings of $61,000. Postage We recommend deletion of $54~OOO in General Fund support for postage price increases to correct for overbudgeting. The budget proposes a total of $128,000 for postage price increases in 1982-83. This amount consists of $74,000 budgeted specifically for a postage price increase, plus $54,000 for a 7 percent general increase over the 1981-82 base budget for postage. Our analysis indicates that this represents double budgeting for a postage price increase. Therefore, we recommend deletion of $54,000. In order to maximize the use of federal funds for departmental support, this reduction should be made in the General Fund-supported portion of the postage budget for General Fund savings of $54,000. i —-<-- 1052 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-Continued Underfunded Facilities Operations We withhold recommendation on ~78fiOOO ($2,071,000 General Fund, $~504~OOO in federal funds~ and $211~OOO in reimbursements) requested for facilities operations because the anticipated cost of rent alone exceeds the total amount requested for facilities operations. The budget proposes $5,786,000 ($2,071,000 General Fund, $3,504,000 in federal funds, and $211,000 in reimbursements) for facilities operations in 1982-83 .. The individual components of this amount are as follows: 1. Rent................................................... ........................................... $5,253,000 2. Security services ...................................................................... 165,000 3. Work orders and alterations .................................................. 132,000 4. Facilities planning .................................................................... 118,000 5. Relocation of offices ................................................................ 112,000 6. Janitor and maintenance services ........................................ 4,000 7. Miscellaneous storage ............ ......................... ................. ........ 2,000 Total ..................... :.................................................................... $5,786,000 DSS's schedule of rental costs indicates that the department anticipates that its total expenditure for rent in 198~ will be $6,899,000. This amount is $1,646,000 more than the amount included in the budget pro- posal for rent, and $1,113,000 more than the request for all components of facilities operations. Increased Costs for Disability Evaluation. The department advises that, due to federal security requirements, state-operated disability evaluation (DE) offices must be separated from federally operated DE offices. Consequently, increased facilities operations costs for moving and rent will be incurred for disability evaluation offices located in the Los Angeles area during 198~. The fiscal impact of this relocation will be supported \"mostly\" by federal funds, according to the department, but a final estimate of new costs was not available at the time this analysis was prepared. .. We withhold recommendation on $5,786,000 ($2,071,000 General Fund, $3,504,000 in federal funds, and $211,000 in reimbursements) requested by the Department of Social Services for facilities operations in 1982-83, pending the receipt of detailed information on funding sOUrces for, and estimates of increased costs anticipated. in, the budget year. STATEWIDE PUBLIC ASSISTANCE NETWORK PROJECT Chapter 282, Statutes of 1979 (AB 8) , requires the Department of Social Services to implement a Centralized Delivery System (CDS) in all coun- ties by July 1, 1984. The system, which is known as the Statewide Public Assistance Network (SPAN), is mandated to assist in the delivery of bene- fits to participants in the following programs: aid to families with depend- ent children (AFDC), food stamps, Medi-Cal, aid for the adoption of children, special adult programs and, to the extent feasible, social services and child support. In addition, AB 8 authorizes counties to contract with the state to determine benefits for other public assistance programs (for example, general relief). Proposed Expenditures for 1982-83. The budget proposes 266.5 posi- tions and a total of $21,312,739 (all funds) for the SPAN project in 1982-83. Of this amount, General Fund expenditures are proposed at $6,488,422, an Item 5180 HEALTH AND WELFARE \/1053 increase of $4,530,873; or 231.4 percent, over currertt-year expenditures. Total Expenditures of $36.5 Million Since 1979-80. Table 5 shows the number of positions and expertditurescommitted to the SPAN project during the past, current, and budget years. The department estimates that $15.1 million has been spent on the SPAN project during the last three years (1979-80 through 1981-82). Ofthis amount, the General Fund share is $5.7 million. By the end of 1982-83, total expenditures will reach $36.5 million, of which the state share will have been $12.2 million. These estimates of General Fund costs assume additional federal funds above the normal sharing.ratio of 50 percent. As we\u00b7discuss later.in the analysis, the state may not receive additional federal funds peyond the usual 50 percent level. To the extent that increased federal financial par- ticipation is not available, General Fund costs will increase. Positions .................................... SPAN project ...................... Other department units .... Total Expenditures ................ General Fund ...................... Federal funds ...................... Reimbursements ...................... Tabla 5 SPAN Project Positions and Expenditures 1979-80 through 1982-83 (dollars in thousands) 1979-1J() 1980-81 1981-82 1982-&1 Total 41.8 124.6 215.0 266.5\" N\/A (95.1) (186.0) (237.5) N\/A (29.5) (29:0) (29.0) N\/A $1,454 $5,382 $8,309 $21,312 $36,457 758 2,950 1,958 6,488 12,154 696 2,331 6,093 12,782 21,902 101 258 2,042 2,401 Proposed 1982-&1 . Increase .over 198j-82 Amount Percent 51.5 .24.0% (51.5) (27.7) $13,003 156.5 4,530 231:5 6,689 109.8 .1,784 691.5% a In addition to these positions in DSS, the 1982-83 budget proposes 107 positions in the Health and Welfare Data' Center, 10 positions in the State Controller's Office, and 4 pOSitions hi the Department of Health Services. Feasibility Study Report Raquired We withhold recommendation on $1~23~000 ($5,788;000 General Fund, $1l,400lJOO federal funds, and $2,042,000 in reiinbursements), pending re- view. of an amended feasibility study report for the SPAN project. The budget proposes $21.3 million (all funds) and 266.5 positions in 1982-83 for the SPAN project. This level of support assumes that the SPAN project will be modeled after the Case Data System (CDS) currently in place in 13 California counties. At the time this analysis was prepared, the Department of Social Services had not issued an amended feasibility study report (FSR) which substantiates this project approach~ . The Department of Social Services advises that an amended FSRwill be issue~ January 31,1982. S1:lch a repor. t should, at a ;minimum,pr~vide: (a) a rationale for the selectIOn of the CDS alternative, (b) a revIsed cost- benefit analysis, including estimates of conversion costs for counties,such as Los Angeles, with existing automated eligibility determination and data base systems, and (c) an assessment Of the costs and benefits of alterna- tives for computer equipment procurement. Until we have reviewed this report, we are unable to make a recommendation on the budget request for the revised SPAN project. 1054 \/HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-Continued Lack of Accomplishments . to Date-A Major Disappointment We believe the Legislature has little reason to be satisfied with the accomplishments of the SPAN project to date. Based on our analysis, we believe the following should be of particular concern to the Legislature. 1. Departl71ent Has Proposed Three Different Approaches to SPAN During Last i2 Months. During the last 12 months, the department has significantly modified its approach to the SPAN project. In January 1981, the department issued an FSR which identified the Welfare Case Manage- ment Information System\/Integrated Benefit Payment System (WCMIS\/ IBPS) as the preferred alternative for an automated welfare system in California. Five months later, in May 1981, the department informed the Legislature that dueto development problems, the WCMIS\/IBPS alterna- tive was being replaced by another alternative-Welfare Case Manage- ment Information System\/Case Data System (WCMIS\/CDS). In December 1981, the department abandoned theWCMIS\/ CDS alternative and proposed a third alternative, referred to as the Case Data System (CDS). The department has stated that CDS represents the most cost-effective alternative to achieve the mandates of AB 8. To date, however, the admin- istration has been unable to provide an analysis which\u00b7 documents this claim. This is the third time in the last 12 months that the department has identified the most cost-effective approach and each time a different alternative has been proposed. 2. Little Progress Has Been Made During 1981. As a result of the changes in direction cited above, little progress was made on the SPAN project during 1981. This has occurred despite the fact thatfor each year since 1979-80, the Legislature has appropriated the amount of funds and authorized the number of positions, with minor exceptions, that were requested by the department for the SPAN project. These appropriations have resulted in a current year staffing level of215 positions, or 5;6 percent of total DSS staff. The proposed expenditures for 1982-83 amount to 13.4 percent of the total DSS support budget. The major product generated by the project to date, however, has been the FSR issued in January 1981, and the major amendments to it that have been made on two subsequent occasions; In our Analysis of the 1981 Budget Bill, we withheld recommendation on. the SPAN project pending receipt of the January 1981FSR. A full year later, the Legislature is faced with the identical situation of waiting for a feasibility study to document the selection of the most recently proposed SPAN alternative. 3. Pilot Project Start-Up Has Been Delayed 14 Months. Our analysis indicates that completion of the tasks necessary for implementation of SPAN has been delayed significantly. For example, the January 31,1981; FSR indicates that a pilot project to test the welfare components of SPAN would occur from October 1981 to December 1982. The 1982-83 budget proposal, however, indicates that the welfare pilot project will not begin until January 1983, 14 months later than anticipated. Moreover, it appears that actual county operation may not commence until April 1983, after scheduled system development activities are completed. In the mean- time, the budget proposes a scaled~down demonstration project in two small counties. Item 5180 HEALTH AND WELFARE \/ 1055 In the original FSR, pilot projects to test the child support and social services components of the SPAN project were scheduled for completion by July 1983. The current budget proposal indicates that those two pilots will not begin operation until after 1982-83. These schedule slippages may hamper the achievement of statewide implementation by July 1, 1984, as required by AB 8, and thus delay the savings anticipated as a result of statewide implementation of the project. 4. Despite Limited Progress~ Expenditures Are Higher Than Planned and Positions Requested Exceed Earlier Estimates. Even though major planned activities have not been performed on schedule, estimated ex- penditures for the period 1979-80 through 1982-83 exceed those identified in the initial FSR, as shown in Table 6. The department estimates that a total of $36.5 million, or $949,000 more than projected in the FSR, will have been expended for this project by the end of 1982-83. Table 6 Statewide Public Assistance Network Project Comparison of Planned Expenditures With Estimated Expenditures 1979-80 through 1982..-83 (all funds) Planned Expenditures\u00b7 1979-80 ................................................................................ $1,454,000 1980-S1 ................................................................................ 3,936,000 1981~ (Estimated) ........................................................ 9,819,000 1982-83 (Proposed) .......................................................... 20,299,000 b Totals .......................................................................... $35,508,000 Estimated Expenditures $1,454,275 5,381,846 8;308,164 21,312,739 $36,457,024 Djfference $275 1,445,846 -1,510,836 1,013,739 $949,024 Source: FeasibilitY study report, January 31, 1981. b Initial estimate includes $17,174,000 for development and overhead and $3,125,000 for ongoing costs. Our analysis ind{Qates that actual programmer \/ analyst positions for the SPAN project excy,yd the department's original estimate by nearly 100 positions. The January 1, 1981 FSR charted the need for programmers and analysts throughout the six-year life of the project. According to the FSR, the project would require an average of 39.75 program~ers and analysts durmg 1982-83. The department, however, proposes to fIll 138.7 program- mer and data processing analyst positions in the budget year. Because the department has not submitted an amended FSR, we are unable to deter- mine if this discrepancy in staff size is reasonable or essential to meet the project's goals. . 5. Amount of Savings to Be Realized Is Uncertain. The original FSR submitted in JailUary 1981 estimates annual ongoing net savings of $96,547,000 (all funds), starting in 1985-86, as a result of implementing SPAN. This is the net result of $123,197,000 in savings and $26,650,000in system costs. We are unable to advise the Legislature as to the amount of savings which would result from the SPAN project for three reasons. First, al- though the department has revised its approach twice to the SPAN project, it has not updated its estimates of savings to reflect these changes. The department states that it will not revise its savings estimates until after the pilot project test. . Second, it is not clear that some of the expected savings will materialize. The department originally estimated that approximately 55 percent ($68.0 1056 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-Continued million) of the annual savings ($123.2 million) would result from reducing the amount of time required by county staff to perform specified adminis- trative functions. It is questionable, however, that reduced worker time will result in dollar reductions. The FSR acknowledges, for example, that staffing levels, and in turn staffing costs, may not be reduced when SPAN is implemented. Rather, county staff may simply be reallocated to perform other functions. To the extent this occurs, cost savings will be reduced. Third, the department maintains that the state and federal share of administrative savings will be recouped through a cost avoidance\/recoup- ment plan which has not been developed. The department has been unable to advise us when this plan will be completed. 6. Federal Funding for the Project Is Being Withheld. Effective Octo- ber 31, 1981, the federal goverm;:lent discontinued federal support for the SPAN project, pending adequate responses from the Department of Social Services regarding a number of outstanding issues. In a letter dated De- cember 18, 1981, the assistant secretary of HHS notified the secretary of the California Health and Welfare Agency that, \"I am withholding ap- proval of HHS's participation in the next phase of the SPAN project, pending resolution of several issues, only one of which is discussed in this letter.\" The major issue raised by HHS was the relationship between the SPAN project and the Medi-Cal Eligibility Data System (MEDS) in which the federal government had already invested $5.9 million. The assistant secre- tary stated that, \"from the start of the SPAN project, HHS has been unable to determine precisely what will be the relationship between SPAN and MEDS.\" The assistant secretary pointed out that, \"numerous requests to the DSS have not answered our concerns as to whether the state is asking to fund portions of the SPAN project which will duplicate existing MEDS functions or processes.\" The Department of Social Services advises it will respond to the questions raised by the HHS during the week of January 25, 1982. 7. Enhanced Federal Financial Participation Is Uncertain. As a result of Public Law 96-265, states which qualify may receive enhanced federal funding for the development of automated data processing systems. Table 7 shows the fiscal impact of normal and enhanced federal funding ratios. As shown in Table 7, the budget assumes that $14,824,000 in federal funds will be available for the SPAN project in 1982-83, based on enhanced federal sharing ratios. If these enhanced ratios are not approved by the federal government and total costs remain as proposed, the most that the state could receive in federal funds would be $8,950,000, or $5,874,000 less than proposed by the budget. The budget anticipates that federal financial participation above the normal 50 percent share will be available during both 1981--82 and 1982-83. The original FSR issued by the department in January 1981 stated that \"federal financial participation will be at the rate of 90 percent in AFDC, child support, and Medi-Cal, and 75 percent in food stamps.\" Given recent federal action to withhold funding for the SPAN project, it is unclear how realistic it is to assume enhanced federal funding for the SPAN project in 1982--83. < As of January 15, 1982, the federal government had not approved en~ hanced federal financial participation for the development costs of the SPAN project. Item 5180 HEALTH AND WELFARE \/ 1057 Table 7 Comparison of Enhanced Federal Funding with Normal Ratios 1982-83 (in thousands) Normal Ratios Percent Amount AFDC .................................................................... .. 50% $3,315 Food stamps-AFDC ......................................... . 50 1,438 Food stamps-nimassistance ........................... . 50 771 Medi-Cal .............................................................. .. 45 1,440 Refugees .............................................................. .. 100 580 Child support ....................................................... . 75 1,406 Totals ............................................................. . $8,950 a Assumed in Governor's Budget Enhanced Federal Share' Percent 90% 90 75 90 100 90 Amount $5,957 2,585 1,156 2,878 580 1,668 $14,824 Djfference $2,642 1,147 385 1,438 262 $5,874 8. Equipment Acquisition Has Been Erratic. In April 1981, DSS sub- mitted a report to the Legislature on equipment requirements for the SPAN project. The report indicated that a Request for Proposal (RFP) for computer equipment for the pilot project and statewide implementation would be issued and a contract awarded during 1981-82, In SPAN newslet- ters, DSS confirmed that the RFP was issued in October 1981 and that the department anticipated awarding a contract in May 1982. Our analysis indicates that DSS has abandoned its plan for equipment acquisition which included a competitive bidding process, and instead has pursued two separate unplanned noncompetitive acquisitions. In at least one instance, this has resulted in increased costs with no visible product. Cont-ract with Departmenf of Justice; The Department of Social Services entered into an agreement with the Department of Justice to lease equipment for a two-county demonstration project scheduled to begin March 1982. This agreement was executed August 1, 1981, at an annual cost of $1,580,894. The agreement was subsequently canceled, ef- fective January 4, 1982, before the equipment began production for SPAN. As ofJanuary 15, 1982, the DSS is unable to advise us what the actual cost of this short-lived agreement will be. Whatever the cost, the expenditure of these funds resulted in no progress toward implementation of the dem- onstration project. Budget Year Proposal Currently, the DSS proposes to utilize equip- ment at the Health and Welfare Data Center for the demonstration project and to use \"surplus\" state equipment for the pilot project and statewide implementation of SPAN. This surplus equipment is anticipated to becom.e available at the Teale Data Center and will be transferred to the Health and Welfare Data Center. Our analysis indicates that this surplus equipment may not be approved for release in time for use by SPAN in the budget year. Until the DSS prepares a revised FSR, we are unable to determine the cost effectiveness of the proposed\u00b7 use of surplus state equipment. Furthermore, if the state equipment at the Teale Data Center is not made available for SPAN, this project may suffer additional delays in implementation. 9. Inadequate Response to 1981 Budget Act Language. The 1981 Budget Act states that only 25 percent of the 1981-82 appropriation for the 39-75056 1058 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-Continued SPAN project may be expended prior to submission to the Chairperson of the Joint Legislative Budget Committee (JLBC) of an amended FSR by the Department of Finance. The language in the 1981 Budget Act specifies a number of items to be addressed in the submission. . The Director of the Department of Finance notified the Legislature on August 28, 1981 of her intent to release the remaining 75 percent of funds appropriated for the SPAN project. In a letter dated September 30, 1981, the Chairman of the JLBC identified several inadequacies in the Direc- tor's response and requested additional detail prior to expenditure of more than 50 percent of the total appropriation. The Department of Finance responded to the September 30 letter on December 1, 1981. The response, however, did not address the revised project approach. Due to the abandonment of the selected alternative discussed in hearings on the 1981 Budget f,\\ct and in the Director's two letters during 1981-82, the Chairman of the JLBC was unable to concur with the Director's intent to expend the remaining 50 percent of the 1981-82 SPAN appropriation. In a letter dated December 28, 1981, the Chairman requested a current plan for the SPAN project and a revised current year expenditure plan. As of January 25, 1982, no response to these requests had been received. Our analysis indicates that responses to the Legislature during the cur- rent year have not adequately addressed the concerns expressed through Budget Act language. . Unjustified Expenditures for SPAN We recommend deletion of unjustified expenditures proposed for the SPAN project~ for a reduction of $2,083,000 {$701,000 General Fund and $1,382,000 federal funds}. Although we will be unable to assess the total need for the SPAN project in 1982-83 until we have reviewed the revised FSR, we have identified a number of instances where proposed funds for the SPAN project appear to have no supporting justification. Table 8 summarizes these unjustified expenditure proposals. Table 8 Analyst's Recommended Reductions of Unjustified Proposed SPAN Expenditures 1982-413 Contractual Services County file conversion ................................................. . Network and communication ..................................... . Other contracts ............................................................... . Health and Welfare Data Center .................................. .. State Controller's Office .................................................. .. Reimbursements for Data Center ....................... : ......... . Totals ......................................................................... . General Fund $49,831 74,073 268,348 176,000 78,450 54,208 $700,910 Federal Funds $98,169 145,927 528,652 348,000 154,550 106,792 $1,382,090 Total Reduction $148,000 220,000 797,000 524,000 233,000 161,000 $2,083,000 ContractuaJ Services; The budget proposes $5,121;838, all funds, for contractual services for the SPAN project in 1982-83. This amounts to 24 percent of total proposed expenditures in the budget year. Of this total, DSS advises that (a) $2,979,800 will be expended for county file conver- sion, beginning January 1983, (b) $220,000 will be expended for consultant Item 5180 HEALTH AND WELFARE \/ 1059 services related to network and communication facilities, (c) $1,125,000 will be expended for a variety of design consultation contracts, and (d) $797,038 is for unspecified purposes. .. During the current year, the SPAN project has four fully executed contractual agreements in effect, at an annual cost of $53,690. Five addi- tional contracts totaling $439,929 are in the review process as of January 20, 1982. Not counting the proposed costs of $2,979,800 for county conver- sion, the budget proposal calls for an increase of $1,648,419, or 234 percent, above current year expenditures for existing and anticipated contracts. This significant increase in contractual services is proposed even though the department is requesting 266.5\u00b7 data processing positions in DSS and 107 positions in the Health and Welfare Data Center for the SPAN project. Given the uncertainty regarding actual project needs, we cannot assess the entire contractual services request at this time. Three portions of the contractual services request, however, appear to be unjustified. 1. County File Conversion. . The budget proposes $2,979,800 for con- version of county data files as part of the four-county pilot project sched- uled to commence January 1983. Detailed county specific estimates provided by DSS, however, total only $2,831,800. Therefore, we recom~ mend a reduction of $148,000. 2. Network and Communication. Within the amounts proposed for contractual services during 198~ is $220,000 for network and communi- cation facilities. Over $350,000 in additional funds for SPAN network and communication facilities is also proposed within the amounts budgeted for Health and Welfare Data Center services to SPAN. After requesting addi- tional information concerning these contracts, the DSS advised us that this $220,000 is double-budgeted. We, therefore, recommend these funds be deleted. 3. Other Contractual Services. The Department of Social Services has provided us with a listing of contracts with proposed expenditure require- ments totaling $1,125,000. The DSS has also provided us with information which indicates that the DSS base budget for support of SPAN includes this $1,125,000 for contractual services. The DSS has not been able to produce even a list of proposed contracts to suggest the need for an additional $797,038 in funds proposed to be added to the 198~ budget for SPAN contractual services. Therefore, we recommend a reduction of $797,000. Health and WelEareData Center. The budget proposes $7,965,000 and 107 positions for Health and Welfare Data Center services. to the SPAN project. Of this amount, $350,000is proposed for communications consult- ing. This funding is based on information provided by the Department of Social Services in support of its budget. The information reveals, however, that the technical specifications which are necessary before pilot county . operations can begin, will not be completed until April 30, 1983. Conse- quently, there will be insufficient actual communications experience available to the consultant in 1982-83. For these reasons, we recommend deletion of the $350,000 budgeted for communications consulting. In addition, the data center's budget to support SPAN includes $174,468 to provide for the acquisition of a computer which would be used to test computer system control programs. The amount which has been budget- ed is one-half the cost of the computer. No additional funds have been budgeted to pay for the other half. Further, no justification has been 1060 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-Continued provided which would support the need for the type of computer being proposed. For these reasons, we recommend a reduction of $174,468. The total recommended reduction to data center services, at this time, is $524,000. State Controllers Office (SCO). In our analysis of proposed 1982-83 funding for the office of the State Controller (SCQ) (Item 0840), we recommend a reduction of $233,000 in funds proposed for the SPAN Project. The DSS proposes $600,000 to reimburse the SCQ for develop- ment and liaison work in the budget year leading to eventual SeQ dis- bursement of public assistance warrants. (No funds are proposed for actual disbursement.) The staff of SCQ advise that $233,000 of this amount is proposed to develop foreign language software programs for mailings to recipients. The SCQ is unable to advise, however, what these funds would be expended for or how the amount was derived. Therefore, we recom- mend deletion of this $233,000. Over Budgeting for Data Center Reimbursements. The proposal for additional funds to reimburse the Health and Welfare and Teale Data Centers for SPAN equipment and services in the budget year identifies the total need for such expenditures at $7,975,122. The proposal states that this amount is an increase of $6,534,819 over funds currently in the DSS support base budget. Thus, we conclude that $1,440,303 is required from the DSS support budget to meet the data center needs of the project in 1982-83. In other budget detail information provided by the Department of Social Services, an amount of $1,600,803 is identified as available in the SPAN base budget for consolidated data center expenditures. Because the combined total of base budget funds and proposed increase funds ($8,135,622) exceeds the identified need, we recommend that $160,500 be deleted from the 1982-83 budget. Department of Social Services LOCAL ASSISTANCE SUMMARY Items 5180-101 through 5180-181 from the General Fund and Federal Trust Fund Budget p. HW 209 Requested 1982-83 ......................................................................... $3,093,265,000 Estimated 1981-82 ............................................................................ 2,933,426,000 Actual 1980-81 .................................................................................. 2,818,581,000 Requested increase $ 159,839,000 (+5.4 percent) Total recommended reduction .................................................... $95,190,000 Recommendation pending ............................................................ $200,149,000 1982-83 FUNDING BY ITEM AND SOURCE Item Description 5180-101'()()I~AFDC cash grants 5180-10l-866-AFDC cash grants 5180-111.()()I-SSI\/SSP cash grants Fund General Federal General Amount $1,293,750,000 ( 1,431,288,(00) 1,039,316,000 Item 5180 5180-121-001-Special adult program 5180-121-866-Special adult program 5180-131-866-Refugee programs 5180-141-OO1-County welfare department admin- istration 5180-141-866-County welfare department admin- istration HEALTH AND WELFARE \/ 1061 General Federal Federal General Federal 2,740,000 (89,000) (234,903,000) 110,973,000 (337,697;000) 5180-151-OO1-Social services programs General 178,022,000 5180-151-866-Social services programs Federal (354,769,000) 5180-161-OO1-Community care licensing General 8,403,000 5180-171-001-Local Mandates General 114,000 5180-181-001-Cost-of-living increase General 459,947,000 5180-181.:s66-Cost-of-living increase Federal (177,243,000) Total $3,093,265,000 Items 5180-101-001 through 5180-181-001 appropriate the General Fund share of the local assistance programs administered by the Department of Social Services. ~ . ) discuss the programs and the proposed cost-of-living increase for local assistance in the following sections. The budget proposes General Fund expenditures for local assistance, including COLA, of $3,093,265,000. This is an increase of $159,839,000, or 5.4 percent, over estimated current year expenditures. Total expenditures -including federal funds, county funds (not appropriated by the Budget Bill), and reimbursements-are proposed at $6,949,255,000. This is an in- crease of $568,356,000, or 8.9 percent, over estimated current year expend- itures. Department of Social Services AID TO FAMILIES WITH DEPENDENT CHILDREN Item 5180-101 from the General Fund Budget p. HW 210 Requested 198~3 ....................................................................... $1,424,046,000 a Estimated 1981-82 ........................................................................... 1,364,814,000 Actual 1980-81 ................................................................................. 1,214,878,000 Requested increase $59,232,000 (+4.3 percent) Total recommended reduction Item 5180-101.. ........................ $17,782,000 Total recommended reduction Item 5180-181-001 (a) ............ ($11,475,000) Includes $130,296,000 proposed in Item 5180-181-001 (a) to provide an 8.8 percent cost-of-living increase to maximum AFDC grants. 1982-83 FUNDING BY ITEM AND SOURCE Item Description 5180-10l-001-Payments for Children 5180-181-001 (a)-Cost-of-Living Increases 5180-10l.:s66-Payments for Children 5180-181-866 (a)-Cost-of-Living Increases Total Fund General General Federal Trust Federal Trust Amount $1,293,750,000 130,296,000 (1,431,288,000) (144,609,000) $1,424,046,000 1062 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued SUMMARY.OF MAJOR ISSUES AND RECOMMENDATIONS 1. CNI Estimated at 8.2 percent. Reduce Item 5180-181-001 (a) by $8,961,000. Recommend Commission on State Finance estimate of eNI be applied to AFDC grants for a savings of $19,065,000 ($8,961,000 General Fund and $10,104,000 fed- eral funds). 2. Child Support Incentive Payments. Recommend enact- ment of legislation which revises the current incentive pay- ment structure in order to encourage improved county performance in child support enforcement and collection. 3. Data Processing Savings. Reduce Item 5180-101-001 by $11,- 302,000 and Item 5180-181-001 (a) by $1,051,000. Recom- mend reductions of $29,466,000 ($12,353,000 General Fund and $17,113,000 federal funds) to reflect savings anticipated from four data processing projects. 4. Federal Foster Care Funding Ceiling. Reduce Item 5180- 101-001 by $2,002,000 and Item 5180-181-001 (a) by $1,04~- 000. Recommend reduction of $3,049,000 because federal government has not established a cap on foster care mainte~ nance payments for federal\u00b7 fiscal year 1982. 5. Supplemental Payments. Reduce Item 5180-10}-001 by $4,- 478,000 and Item 5180-181-001 (a). by $416,000. Recom- mend reduction of $11,431,000 ($4,894,000 General Fund, $5,941,000 federal funds, and $596,000 in county funds) to eliminate funds budgeted in basic costs for discontinued payments. GENERAL PROGRAM STATEMENT Analysis paf{e 1070 1087 1088 1090 1091 The Aid to Families with Dependent Children (AFDC) program pro- vides cash grants to children and their parents or guardians whose income is insufficient to meet their basic needs. Eligibilityis limited to families with children who are needy due to the death, incapacity, continued absence or unemployment of their parents or guardians. The Budget Bill contains an in-lieu appropriation for the Aid to Families with Dependent Children (AFDC) program. This does notlimit program expenditures because the Welfare and Institutions Code provides a con- tinuous appropriation to finance cash grants to eligible children, and their parents or guardians, under the program. In addition, language in the . Budget Bill provides that the Director of Finance can increase AFDC expenditures due to (1) changes in caseload or payment standards, (2) enactment of a federal or state law or (3) a final court decision on the merits of a case. ANALYSIS AND RECOMMENDATIONS Current Year Deficiency The budget estimates that the AFDC program will incur a General Fund deficiency of $5,508,000 in the current year. This deficiency reflects a number. of separate increases and decreases to the 1981 Budget Act Item 5180 HEALTH AND WELFARE \/ 1063 appropriation for this program. . Cost Increases. The major unanticipated cost increases result from (a) reduced estimates of the savings to be realized from Chapter 69, Statutes of 1981 (SB 633), ($4,910,000), (b) reduced\u00b7 federal funds caused by the state being out of compliance with the provisions of the Omnibus Recon- ciliation Act of 1981 ($36,540,000), (c) six court rulings ($12,598,000), and (d) higher caseload and average grant levels than provided for in the 1981 Budget Act ($6,604,000). Savings. The major offsetting savings identified in the budget result from state implementation of the program changes included in the Omni- bus Reconciliation Act of 1981 ($36,537,000) and are attributable to two measures considered by the Legislature during the special session: AB 2x (Lockyer), which had not been enacted at the time this analysis was prepared, and Chlx\/8l. The estimated deficiency will be subject to change as part of the May revision of expe' 'iture estimate. . Court Rulings Increase State Costs by Over $12 Million. Six court rulings, including four decisions handed down during the current year, result in significant increases in state costs during 1981-82. . Five of these rulings are expected to increase costs in the budget year as well. The cost of complying with these rulings in 1982-83 are included in the budget. Two of these rulings (Green v. Obledo and Lowry v. Woods) also call for retroactive payments to groups of affected recipients. The Department of Social Services (DSS) advises that the method for determining damages has not been decided by the courts. As a result, our analysis indicates that the cost of making these retroactive payments rna)' be deferred until 1982-83. Another court case, Westcott v. Califano, will result in increased grant costs of $760,000 in the current year above the amount included in the 1981 Budget Act. The sixth ruling causing state costs to exceed the amounts provided by the Legislature for 1981-82 dates back to 1979-80. In the Vaessen v. Woods court case, the court issued an injunction prohibiting the state from treat- ing incorrietax refunds as income for grant purposes. The budget assumes that this injunction will be lifted prior to the beginning of 1982-83. The DSS, however, has advised us that this injunction may remain in effect through 1982-83. Because of uncertainties regarding judicial action in three of these six cases, total General Fund expenditures in 1982-83 may be higher than the amount proposed in the Governor's Budget. Table 1 shows the estimated costs of the four court rulings issued during the current year, and the Vaessen v. Woods injunction and Westcott v. Califano ruling. Budget Year Proposal The budget proposes expenditures of $1,424,046,000 from the General Fund for Aid to Families with Dependent Children (AFDC) cash grants in 1982-83. This amount, which is shown in Table 2, includes $130,296,000 requested in Item 5180-181 to provide an 8.8 percent cost-of-living in- crease in the maximum AFDC payments. In addition to these funds, the budget requests $17,000 from the General Fund in Item 5180-171 to reim- burse local governments for costs related to the AFDC program which were mandated by executive regulations. Thus, the cost to the state's General Fund for AFDC grants and local mandates is budgeted at $1,424,- 063,000 in 1982-83. This is an increase of $59,231;000, or 4.3 percent, over estimated 1981-82 e~penditures. 1064 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Table 1 Impact of Recent Court Rulings on the General Fund\u00b7 1981-82 and 1982-83 (in thousands) 1981-82 Angus v. Woods, ............................................................................ . Lowry v. Woods ::~~:~~~: i;:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: Green v. Obledo Prospective ................................................................................. . Retroactive c .............................................................................. .. Davis v. Woods ............................................................................. . Vaessen v. Woods d ...................................................................... .. Westcott v. Califano ..................................................................... . Totals ...................................................................................... .. $535 746 2,134 5,599 3,708 2,244 19,580 $34,546 1982-83 $553 550 3,802 23,120 $28,025 Difference $18 -196 -2,134 -5,599 94 -2,244 3,540 -$6,521 a Includes both grant and administrative costs. . b Retroactive grant payments to families who have not been allowed to deduct the cost of child care provided by nonrecipient members of the household. Actual number of potential recipients and period of retroactivity has not yet been determined by the courts. C Retroactive payments to AFDC recipients who can document actual work-related transportation costs in excess of those deducted based on standard 15 cents-per-mile. Court has not determined documen- tation required or the final retroactive settlement. d Budget assumes an injunction placed in this case will be lifted during 1981-82. Total expenditures from all funds for .AFDC cash grants in 1982-83 are budgeted at $3,129,535,000. This is an increase of $231,867,000, or 8.0 per- cent, over estimated current year expenditures. Included in this amount is $181.2 million, all funds, for cash grants to refugees. Chart 1 Proposed AFDC Expenditures by Funding Source 1982-83 (in millions) Total Expenditures $3,129.5 Federal ____ $1,575.9 (50.0%) County $129.5 (4:0%) ____ General Fund $1,424.1 (46.0%) Table 2 Expenditures for A.FDC Grants by Category of Recipients (in millions) Estimated 1981-92 Prol!!!.sed 1982-&1 Recipient Total Federal State County Total Federal State Family group ............................................................................ $2,314.0 $1,140.1 $1,045.2 $128.7 $2,448.1 $1,256.5 $1,062.9 Unemployed parent .............................................................. 496.6 252.3 217.9 26.4 608.4 313.0 263.5 Foster care ................................................................................ 208.9 52.1 148.6 8.2 213.2 56.4 148.6 Aid for adoption of children ................................................ 4.3 4.3 4.9 4.9 Child support incentive payments to counties .............. 0.4 18.5 6.9 -25.0 0.5 21.3 10.6 Child support collections ...................................................... -126.5 -61.6 -58.1 -6.8 -145.6 -71.3 -66.5 -- -- -- -- -- -- Subtotals ................................................................................ $2,897.7 $1,401.4 $1,364.8 $131.5 $3,129.5 $1,575.9 $1,424.0 Local mandates ........................................................................ 0.02 -0.02 0.02 AFDC cash grants to refugees ............................................ (138.3) (130.3) (7.2) (0.9) (181.2) (169.8) (10.2) County $128.7 31.9 8.2 -31.4 -7.8 $129.6 -0.02 (L4) Totals...................................................................................... $2,897.7 $1,401.4 $1,364.8 $131.5 $3,129.5 $1,575.9 $1,424.1 $129.5 Percent ChanfI.e Total Federal State 5.8% 10.2% 1.7% 22.5 24.1 20.9 2.1 8.3 14.0 14.0 25.0 15.1 53.6 15.1 15.7 14.5 8.0% 12.5% 4.3% (31.0) (30.3) (41.- --.!..) 8.0% 12.5% 4.3% County 20.8% -25.6 14.7 -1.4% (56.2) -1.4% ..... ~ en S CJI ..... ~ ~ ~ o ~ ......... .... i U'I 1066 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Chart 1 shows the funding sources for proposed AFDC expenditures in 1982-83. The state's share of these costs is estimated at 46 percent, the federal share is 50 percent, and the county share is 4 percent. Expenditures by Category of Recipient AFDC grant payments are provided to four categories of recipients within the traditional AFDC program, as shown in Table 2. Total pay- ments from all funds for the family gro1,lP component-typically a mother with one or more children-are proposed at $2,448.1 million in 1982-83, an increase of 5.8 percent over the current year. In addition, the 1982-83 budget propOSeS an expenditure of $608.4 mil- lion, from all funds, for cash grants to unemployed parents and their dependent children. This is an increase of 22.5 percent over the current year. The budget also proposes an expenditure of $213.2 million in 1982-83 for grants to children receiving foster care in boarding homes and institu- tions, which is an increase of 2.1 percent over the current year. The fourth assistance category consists of grants to adoptive parents to help cover the cost of adopting children who have been determined \"hard to place\" using specified criteria. The budget contains $4.9 million for aid for adoption of children in 1982-83, which is 14.0 percent over estimated current-year expenditures. Chart 2 shows the relative distribution of expepditures by recipient category. The largest expenditure category is the family group (73.8 per- cent), followed by unemployed parent (19.3 percent), foster care (6.7 percent), and aid for adoption of children (0.2 percent). Chart 2 Propos~d AFDC Expenditures by Category qf Recipient All Funds .. 1982-83 (in millions) Family Group $2,309.6 (73.8%) \\ Total Expenditures $3,129.5 Aid for Adoption of Children ____ $4.9 (1.0%) Foster Care $208.4 (6.7%) Unemployed Parent - $606.1 (19.4%) Item 5180 HEALTH AND WELFARE \/ 1067 Proposed General Fund Budget Increases Table 3 shows the components of the $59.2 million General Fund in- crease in expenditures proposed for the AFDC program in 1982--83. This amount reflects $184,838,000 in proposed increases which are partially offset by $125,606,000 in anticipated reductions. Seventy percent of the proposed increase-$130,296,OOO-is requested to fund an 8.8 percent cost- of-living increase in 1982--83. The anticipated $125.6 million in reductions reflect \u00b7(a) implementation of program changes required by state and federal legislation and (b) deletion of amounts for non-recurring one-time costs provided in 1981-82 for the AFDC program. Increased savings are anticipated from program changes made by Ch 1166\/80 ($9.9 million) and Ch 69\/81 ($4.3 million). In addition, implementation of the provisions of the federal Omnibus Reconciliation Act of 1981 (PL 97-35) is expected to result in increased savings of $55,056,000 during 1982--83. These savings are in addition to the $38.9 million in savings expected to be realized in 1981-82 and reflected in the 1982-83 baseline budget. The non-recurring costs that the budget shows for 1981-82 include $36.5 million to replace funds withheld by the federal government due to delayed state implementation of provisions in PL 97-35 affecting the AFDC program, and $7.1 million to satisfy court settlements which require retroactive payments. Cost-of-Living Increase The budget requests $130,296,000 for the statutory cost-of-living increase to maximum AFDC grant payments. State law requires that recipients of assistance under the AFDC family group and unemployed parent pro- grams receive an annual cost-of-living increase to their grants, effective each July 1. Historically, AFDC grant levels for children residing in foster care have been established by county boards of supervisors. On occasion, the counties adjusted the grant amounts without taking inflation index changes into consideration. AB 8 limited state reimbursement for in- creases in AFDC foster care grants to the same percentage increase ap- plied to grants for the AFDC family group and unemployed parent program. In 1982-83, under current law, state reimbursement for cost-of- living increases for foster care are proposed to be the same (8,8 percent) as that provided for the family group and unemployed parent grants. Under existing law, the cost-of-living adjustment required on July 1, 1982, must be based on the change in the California Necessities Index (CNI) from December 1980 to December 1981. The Department of Fi- nance estimated in December 1981 that the required cost-of-living ad- justment would be 8.8 percent. The budget propose~ to increase maximum payments by the estimated 8.8 perc<~nt CNI increase. 1068 \/ HEALTH AND WELFARE AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Table 3 Proposed General Fund Budget Increases for AFDC Grants 1982-83 (in thousands) 1981-82 Current Year Revised; ........................................................................... .. A. Baseline Adjustments 1. Basic caseload ............................................................................................ .. 2. Cost-of-Iiving increase a. 1981-82 cost-of-Iiving adjustment applied to caseload increase b. 1982-83: 8.8 percent increase ............................................................ .. Subtotal ................................................................................................... . 3: Court cases a. Westcott v Califano ............................................................................. . b. Vaessen v Woods ................................................................................... . c. Angus v. Woods .................................................................................... .. d. Lowry v. Woods .................................................................................. .. e. Davis v. Woods .................................................................................... .. Subtotal .................................................................................................. .. 4. State legislation a. Ch 69\/81 (SB 633) ................................................................................ .. b. Ch 703\/81 (SB 620) ............................................................................ .. c. Ch 1166\/80 (AB 2749) ........................................................................ .. d. Ch 810\/81 (AB 344) ............................................................................ .. e. Ch 619\/81 (AB634) ............................................................................ .. Subtotal ................................................................................................... . 5. Federal program changes in Omnibus Reconciliation Act of 1981 (PL 97-35) a. Implemented in Ch 1\/81 (SB Ix) .................................................... .. b. Included in AB 2x ................................................................................ .. Subtotal ................................................................................................... . 6. One-time costs during 1981-82 a. Retroactive payments in court suits ~:: ~ ~:!.::::::::::::::::::::~::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: b. Lost federal aid due to delayed implementation of PL 97-35 .... Subtotal ................................................................................................... . 7. Reduced grant costs due to increases in retirement, survivors, disa- bility, and health insurance .................................................................... .. 8. 80 percent supplemental payments .................................................... .. 9. Elimination of county sanction .............................................................. .. 10. Reduced costs due to increased child support collections ............ .. 11. Increased child support incentive payments .................................... .. 12. Foster care audit recovery .................................................................... .. 13. Federal fund ceiling on foster care payments .................................. .. B. Total Budget Increase ..................................................................................... . C. Proposed 1982-83 Expenditures .................................................................. .. Cost $3,417 130,296 3,352 -2,244 10 550 294 -4,348 -902 -9,907 110 29 -41,460 -13,596 -2,101 -5,014 -36,540 Item 5180 Total $1,364,814 43,265 133,713 1,962 -15,018 -55,056 -43,655 -$1,421 191 2,000 -8,371 3,707 -102 -1,983 ($59,232) $1,424,046 Item 5180 HEALTH AND WELFARE \/ 1069 Maximum Payment Levels. Table 4 shows the maximum AFDC grant levels for the unemployed and family group caseloads, for selected family sizes, assuming the estimated 8.8 percent increase. As the table shows, the maximum aid payment for a family of three is proposed at $551, an in- crease of $45 over the 1981-82 payment level. Maximum AFDC foster care rates are determined in each county and vary by type of placement. Table 4 Maximum AFDC Grant Levels 1981-82 and 1982-83 Family Size 1981-82 1982-83 Difference 1................................................................................................................ $248 $270 $22 2................................................................................................................ 408 444 36 3................................................................................................................ 506 551 45 4................................................................................................................ 601 654 53 5 ................................................................................................................ 686 746 60 Previous Increases to AFDC Grants. Prior to July 1973, AFDC grants were not increased on a regular basis to reflect the impact of inflation. Thus, during the nearly 22-year period between October 1951 and June 1973, the grant for a family of three was increased six times. The Welfare Reform Act of 1971 (Ch 578\/71) required, effective July 1, 1973, that AFDC grants be increased annually based on the change in the Consumer Price Index. Table 5 shows the increases in the AFDC grant for a family of three since July 1973, as well as changes in the California Necessities Index (CNI) over this nine-year period. This table shows that: Since July 1973, cost -of-living adjustments have been provided in each year except 1978-79. Cost-of-living increases were suspended during 1978-79 after the passage of Proposition 13. Effective January 1977, AFDC grants were increased by 6 percent. This increase was in addition to the annual cost-of-living adjustment required by the Welfare and Institutions Code. For the first six months of 1980-81 (June-December 1980), grants were increased 15.48 percent above the grant amounts provided in 1979-80. During the last six months of 1980-81 (January-June 1981), grants were reduced to a level which was 13 percent above the amounts provided in 1979-80. The average annual increase in maximum AFDC payments to three- person families between 1973-74 and 1982-83 was 9.4 percent. During this same period, the current statutory index governing grant level adjustments, the eNI, increased at an average annual rate of 9.1 per- cent. 1070 \/ HEALTH AND WELFARE AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Table 5 AFDC Grant Increases for a Family of Three 1973-74 through 1982-83 Ch{!!!ge Grant Period Amount Amount Percent 1973-74 ...................................................................................... $243 1974-75 ...................................................................................... 262 $19.00 7.8% 1975-76 ...................................................................................... 293 31.00 11.8 197~77 July-December 1976 .......................................................... 319 26.00 8.9 January-June 1977 .............................................................. 338 19.00 6.0 1977-78 ...................................................................................... 356 18.00 5.3 1978-79 ...................................................................................... 356 1979-80 ...................................................................................... 410 54.00 15.2 1980-81 July-December 1980 .......................................................... 473 63.00 15.4 January-June 1981 .............................................................. 463 -10.00 -2.1 1981-82 ...................................................................................... 506 43.00 9.2 1982-83 (Proposed) ................................................................ 551 45.00 8.8 Item 5180 California Necessities Index 9.3% 6.5 4.8 7.9 8.7 13.0 12.0 11.1 8.8 California's AFDC Grants Compared to Other States. Table 6 com- pares the maximum grant levels provided by the 10 most populous states for family sizes two, three, and four as of July 1, 1981. Table 6 State Comparison-Maximum AFDC. Grant Levels\u00b7 October 1. 1981 State Two California ....... .... ............ .......... ..................... .......... .... ........... ...... ........... .... $408 New york.................................................................................................... 333 Texas............................................................................................................ 86 Pennsylvania.............................................................................................. 273 Illinois ............... .......................................................................................... 225 Ohio ............................................................................................................ 216 Michigan .................................................................................................... 361 Florida ........................................................................................................ 150 New Jersey ................................................................................................ 273 Massachusetts ............................................. :.............................................. 314 a In decending order by state population. Family Size Three $506 424 118 332 302 263 421 195 360 379 Four $601 476 140 395 331 327 513 230 414 445 Commission on State Finance Estimates California Necessities Index at 8.2 Percent We recommend a General Fund reduction of $8,961,000 from Item 5180- 181-001 (a) to reflect the most recent estimate by the Commission on State Finance of the change in the California Necessities Index (CNI). The Department of Finance estimated in December 1981 that the CNI increase from December 1980 to December 1981 would be 8.8 percent. Based on more recent information, however, the Commission on State Finance estimated in late January 1982 that the actual CNI increase would be 8.2 percent rather than 8.8 percent. In our analysis of Item 5180-181, we recommend that the Commission on State Finance's more recent estimate \"t. Item 5180 HEALTH AND WELFARE \/ 1071 be used for calculating cost-of-living increases for the AFDC, SSI\/SSP, and IHSS programs. This recommendation, discussed on pag~ 1172 of this Analysis, would result in a General Fund savings of $8,961,000 10 the AFDC program. Caselaad Likely to Exceed Budget Projections The budget projects a net increase in the AFDC caseload of 11,694, or 0.8 percent, over 1981-82. Included in this overall increase are 19,332 additional refugees projected to receive AFDC in 1982-83. Table 7 shows the projected AFDC caseload for each of the four major AFDC programs. Table 7 AFDC Average Monthly Persons Receiving Assistance 1981-82 and 1982-83 Estimated Proposed Program 1981-82 1982-83 Number AFDC-Family group .......................................... 1,213,420 1,177,200 ::-36,220 AFDC-Unemployed .......................................... 324,520 374,010 49,490 AFDC-Foster Care ............................................ 27,880 26,180 -1,700 Aid for Adoption of Children ............................ 2,263 2,387 124 Refugees' Time-eligible ...................................................... (67,914) (84,404) (16,490) Time-expired ...................................................... (7,870) (10,712) (2,842) Totals ................................................................ 1,568,083 1,579,777 11,694 Percent -3:0% 15.3 -6.1 5.5 (24.3%) (36.1) 0.8% Grants to refugees who have been in the United States less than 36 months (time-eligible) are supported entirely by federal funds. If eligible for AFDC after the 36 months have elapsed, individual refugees may receive grants supported at the normal AFDC sharing ratio of 50 percent federal, 44.6 percent state, and 5.4 percent county. AFDC Caseload Growth Reflects Trends in the Unemployment Rate. Caseload projections for family group and unemployed parent programs in 1982-83 are based largely on the anticipated performance of the econ- omy, as measured by changes in the unemployment rate. Based on past experience, fluctuations in the unemployment rate are expected to result in a direct increase in caseload in the unemployed parent component during the budget year. Experience shows that increases in the unemploy- ment rate are closely followed by increases in the number of unemployed parent cases added to the AFDC caseload. Declines in the unemployment rate, however, have not brought about immediate reductions in the AFDC unemployed parent caseload. In contrast, the family group caseload, the largest component of AFDC, does not show as close a relationship to the unemployment rate for individ- ual months. Over time, however, this caseload does appear to reflect changes in the unemployment rate. For this reason, the budget projects that the family group caseload will increase at a slower rate during 1982-83 than in 1981-82, in response to an economic recovery that is expected to begin during the first quarter of 1982. Continued Higher Unemployment Rates are Likely to Mean Increased AFDC Caseloads. The budget projections of AFDC caseload are based on unemployment rates which are lower than those now anticipated by the Employment Development Department (EDD). Based on projec- tions prepared in October 1981 by the EDD, the Department of Social Services assumed that the unemployment rate would peak at 7.3 percent in March 1982 and decline steadily thereafter. The assumption used by the department is not consistent with actual experience to date or with subsequent EDD projections. The most recent 1072 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued EDD projections (January 1982) show continued high rates of unemploy- ment throughout the remaining months of the current year and into 1982-83. Table 8 compares the quarterly unemployment rates used to project AFDC caseload in the budget with recent EDD projections. As Table 8 shows, the revised unemployment rates are higher for each quar- ter and the recovery, which the budget anticipates will begin in the sec- ond quarter, is now expected to begin during the third quarter of 1982. Table 8 Quarterly Unemployment Rates' in California AFDC Budget Projection Compared with January 1982 EDD Projection EDD AFDC Budget Projection Period Projection January 1982 October-December 1981.......................................................................... 7.2% 8.4%b January-March 1982 .................................................................................. 7.3 9.0 April-June 1982 .......................................................................................... 7.2 9.1 July-September 1982 ................................................................................ 7.0 8.8 October-December 1982.......................................................................... 6.8 8.6 January-March 1983 .................................................................................. 6.7 8.4 April-June 1983 .......................................................................................... 6.5 8.2 a Percentage of civilian labor force that is not working but is actively seeking a job. b Actual unemployment rate: October 1981 8.1 % November 1981 8.2% December 1981 8.9% Difference 1.2% 1.7 1.9 1.8 1.8 1.7 1.7 Both family group and unemployed parent caseloads are projected in the budget based on October 1981 unemployment rate projections. The EDD has revised this projection to show a less optimistic economic pic- ture. Increased AFDC caseloads based on the revised employment rate projections may result in expenditures significantly above those proposed by the budget. The May revision of expenditures will include considera- tion of more recent projections of the state's economic performance. IMPACT OF RECENT LEGISLATION Implementation of New Federal Requirements Chapter 1, Statutes of 1981, First Extraordinary Session, required the Department of Social Services to file emergency regulations to partially conform state AFDC regulations with the provisions of the federal Omni- bus Reconciliation Act of 1981 (Public Law 97-35). This act also amended state law to conform to a new federal limit on the amount of child care expenses which may be deducted from a recipient's monthly income when calculating the amount of the AFDC grant. Court Delays. The Superior Court of Los Angeles County and a fed- eral District Court in San Francisco have separately enjoined the Depart- ment of Social Services and county welfare departments from reducing or eliminating grants to AFDC recipients pursuant to the regulations imple- menting Chayter 1, because the notices of action given by the Depart- mentof Socia Services were deemed by the courts to be inadequate. The result of these court injunctions has been that the program savings an- ticipated from these regulations did not begin December 1, 1981 as the Legislature had expected. Item 5180 HEALTH AND WELFARE \/ 1073 The Los Angeles court ruling prohibited all counties from implement- , ing these changes. This ruling was lifted after revised notices of action were approved by the court. Subsequently, the federal court has reexam- ined notices of action sent to individual recipients and required counties to reissue those found. to be inadequate based on a model notice. As of January 15,1982, many counties had issued what the courts consider to be adequate notices, and had adjusted recipients' January grants and eligibili- ty requirements pursuant to the changes made by Chapter 1. Because the counties had not implemented the program changes in all affected cases, an undetermined portion of the savings that the Legislature expected to be realized in January will not materialize. Program changes made pursuant to this act will result in savings to the federal, state, and county governments during 1981-82 and 1982-83. These savings are attributable to the following provisions. Earned Income Disregards. Under prior state and federal regulations, the amount of earned income, less certain disregards, was deducted from the maximum aid payment to determine the monthly AFDC grant level for a family. Regulations promulgated pursuant to PL 97-35 limit the amount of these deductions to $75 for work-related expenses and $160 per child for child care expenses. The new federal law also limits to four months the period during which individual AFDC recipients may receive a standard deduction of $30 from gross income plus one-third of the re- mainder. Income: Limit Eligibility at 150 Percent of Need Standard Under pre- vious state law, there was no limit on the amount of gross income a family could have and still be eligible for AFDC, provided the net income, after allowable deductions were made, was below the state's need standard. New federal law provides that families with gross income in excess of 150 percent of the need standard are ineligible to receive AFDC. (Pursuant to Ch 69\/81, California's need standard is equivalent to the maximum aid payment for each family size.) Unemployed Pariint: Limit Eligibility to Principal Wage Earner. Un- dc>r previous AFDGprogram regulations, a family could receive aid due to either parent’s unemployment. The new federal law stipulates that, for purposes of federal aid, deprivation may be established only if the \”princi- pal wage earner\” of the family is unemployed. The principal wage earner of the family is defined as whichever parent earned the greater amount of money during the preceding 24-month period. Retrospective Budgeting: Elimination of Supplemental Payments. Regulations issued pursuant to Chapter 1 and PL 97-35 prohibit the issu- ance of supplemental payments. Due to the method by which AFDC grants are calculated, a family which had a significant amount of earned income in one month could receive a grant in the following month which was less than 80 percent of the maximum payment level. In such cases, the state issued a supplemental payment to the recipient to cover the differ- ence, up to a maximum of 80 percent of the maximum aid payment. Budgeting for these payments for the current year is discussed more fully below. . Caseload and Fiscal Impact of Changes. The budget estimates Gen- eral Fund savings of $28.1 million during 1981-82 resulting from im- plementation of Chapter 1. During 1981-82, the Department of Social Services (DSS) estimates that AFDC grants to 23,280 cases will be re- duced, and 25,550 cases will no longer be eligible for grants. The full year savings anticipated by the budget in 1982-83 is $61.0 mil- lion. According to DSS, 60,160 cases will experience grant reductions and an additional 32,660 will no longer be eligible for assistance during 1982-83. A portion of the ineligible cases and grant reductions shown in 1982-83 are 1074 \/ HEALTH AND WELFARE ( Item 5180 i AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued I simply the continuation of actions antidpated in 1981–82. The major in- crease in savings in 1982–83 is due to restrictions on the $30 plus one-third earned income disregard for individual AFDC recipients, which takes effect gradually. Tables 9 and 10 display the estimated caseload and fiscal impact of the provisions enacted pursuant to Ch 1x\/8l. Table 9 Number of Cases Affected AFDC Program Changes Contained in Chapter 1. Statutes of 1!!!l1. First Extraordinary Session 1981~2 and Ut82-83 1981-82\” 1982-83 Difference Grant Ineligible Grant Ineligible Grant Ineligible Provision Reductions Reductions Reductions Cases Cases Cases Cases Cases Cases Earned income disregards …………………. .. 17,300 3,160 54,220 9,790 36,920 6,630 Income: Limit eligibility to 150 percent of need standard …………………………. . 21,480 21,890 410 Unemployed parent: principal wage earner …………………………………………… . 910 980 70 Retrospective budgeting: eliminate sup- plemental payments …………………… .. 5,980 5,940 -40 Totals ………………………………………………… . 23,280 25,~1)() 60,160 32,660 36,880 7,110 \” Assumes January 1, 1982 effective date for all grant and eligibility adjustments. Therefore, cases shown in 1981-S2 are only affected for six months. Source: Department of Social Services. Table 10 General Fund Fiscal Impact of AfDC Program Changes\u00b7 Contained in Chapter 1. Statutes of 1981. First Extraordinary Session 1981~2 and 1982-83 As Estimated in the 1982-83 Budget (in millions) Provision Earned income disregard ………………………………………. .. Income: Limit eligibility to 150 percent of need standard …………………………………………………………….. . Unemployed parent: principal wage earner ………… .. Retrospective budgeting: elimination of supplemen- tal payments ……………………………………………………… . State Savings -$11.4 -13.3 -0.8 -2.7 1981-82 Additional State Cost Due to Last Federal Funds b $25.2 c 4.3 0.2 0.9 — Net General Fund Fiscal Impact $13.8 -9.0 -0.6 -1.8 — 1982-83 -$33.4 -21.9 -1.2 -4.5 Totals …………………………………………………………………… .. -$28.2 $30.6 $2.4 -$61.0 \” Budget assumes all counties fully implemented grant and eligibility changes so that savings began on January 1, 1982. All numbers include both grant and administrative costs. b Potential cost to replace federal funds based On assumption that federal government will not share in the cost ot these portions of the AFDC program. C Assumes that the federal government will discontinue all aid to all cases with earned income disregards whether or not the new limits are exceeded. Because a large proportion of those receiving earned income disregards are below the ceiling for deductions, this assumption may overstate the amount of federal aid lost. Item 5180 HEALTH AND WELFARE \/ 1075 . Lost Federal Aid. The budget assumes that federal financial participa- I tion in the cost of benefits that exceeded the levels authorized by PL 97~35 will be denied for the months of November and December 1981. This will require corresponding increases in General Fund grant and administra- tion expenditures, amounting to $30.6 million, and increases in county costs totaling $9.6 million during 1981-82. Federal officials advise that \”compliance proceedings\” may be initiated against states which failed to comply with the provisions of PL 97-35 by the beginning ofJanuary 1982. The Department of Social Services advises, however, that no formal notifi- cation of intent to withhold or withdraw federal funds has been received by the state. Until the federal government takes such action, we are not able to determine the extent to which additional General Fund costs will actually be incurred due to lost federal aid, nor are we able to identify the time period to be covered by any recoupment effort. Additional Changes Required by PL 97-35. The provisions of Ch 1x\/81 do not provide for several program changes needed to conform with PL 97-35, and which require amendments to state law. These additional changes would be made by AB 2x (Lockyer) which was in Conference Committee on January 15, 1982. The 1982-83 budget assumes passage of this or similar legislation in time to permit counties to fully implement the program changes by April 1, 1982. The budget reflects estimated 1982-83 General Fund savings of $22.6 million from the implementation of these additional provisions. During the current year, the budget anticipates savings from this legislation of $10.7 million, offset by anticipated General Fund costs of $13.5 million to replace lost federal aid from November 1981 through March 1982. Modified Cost-of-Living Increases to Public Assistance Programs Chapter 69, Statutes of 1981 (SB 633) temporarily suspended statutory cost-of-living increases for the AFDC, Supplemental Security Income\/ State Supplementary Payment (SSI\/SSP), and In-Home Supportive Serv- ices programs for 1981-82, and made a number of amendments to state law wnich were expected to result in General Fund savings of $174.3 million. Chapter 69 provided a 9.2 percent cost-of-living increase to public assist- ance programs for 1981-82, in lieu of the 11.1 percent increase called for by the formula in existing state law. Due primarily to implementation delays and subsequent actions taken by the federal government and the courts, some of the savings anticipated from this measure will not occur. Table 11 summarizes the major provisions of Ch 69\/81 related to AFDC cash grants and county administration. Amendments to other programs affected by .Chapter 69 are discussed in our analyses of the respective budget items. Cost-oE-Living Increase. The 1981-82 budget requested funds to pro- vide a 4.75 percent increase in maximum aid payments, in lieu of the 11.1 percent increase required by state law. Chapter 69 provided a 9.2 percent increase instead which resulted in additional General Fund costs of $63.6 million over the amount proposed by the Governor. Because the 9.2 per- cent increase was less than required under current law however, Ch 69 resulted in savings of $28.2 million in 1981-82. Limit AFDC-U. This measure limited eligibility for the state-only AFDC-U program to families where neither parent is employed full-time and neither parent qualifies for assistance under the federal program. The Department of Social Services estimates that 1,220 cases in 1981-82 and 1,440 cases in 1982-83 will be ineligible for AFDC as a result of this provi- sion. (Chapter 1, Statutes of 1981, First Extraordinary Session, further restricted eligibility for the AFDC-U program to those families where the \”primary wage-earner\” is unemployed.) 1076 I HEALTH AND WELFARE AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Table 11 General Fund Annual Fiscal Impact of Chapter 69, Statutes of 1981 a AFDC Program Changes 1981-82 and 1982-83 (in millions) 1981 Budget Act Appropriation Provide 9.2 percent COLA b in lieu of ILl per- cent required by state law…………………….. -$28.2 Limit state AFDC-U …………………………………….. -7.3 Mandate recipients to apply for unemploy- ment insurance ……………………………………… . -5.0 Reduce need standard ………………………………….. . -3.4 Limit aid to specified essential persons ……… . -0.5 Limit aid to 18-20 year olds …………………………. . -26.9 Monthly payment issuance …………………………… . -0.4 Reduce child support incentive payments … . -7.2 Establish emergency assistance payments ….. . -7.5 Totals ….. ; ……………………………………………………. . -$86.4 1981-& Governor’s 1982 Budget Esbmates -$29.8 -7.2 -3.6 -3.3 -0.3 -19.6 -7.4 _7.5 d — -$78.7 Difference -$1.6 0.1 1.4 0.1 0.2 7.3 0.4 -0.2 $7.7 Item 5180 1982–83 -$3Llc -8.6 -3.9 -3.3 -0.3 -22.7 -7.5 -7.5 d -$84.9 a Source: Governor’s Budget and enrolled bill analysis of Department of Finance. Includes both grant and administration costs. b 1981-82 budget proposed 4.75 percent COLA to AFDC maximum aid payments. Therefore, the 9.2 percent increase provided by this measure resulted in increased General Fund costs above the level proposed in the Governor’s Budget: c Estimated, based on the rate of increase in General Fund costs for AFDC between 1981-82 and 1982-83. d Although this savings is included in the Governor’s Budget estimates for 1981-82 and 1982-83, the federal government has not approved the transfer of these funds to the state. Unemployment Insurance. Chapter 69 required all eligible AFDC recipients to apply for and receive unemployment insurance benefits (UIB). Under existing state regulations, monthly AFDC grants are re- duced by the amount of any unemployment insurance benefits received, The 1981 Budget Act estimated that the sum of these individual grant adjustments would result in General Fund savings of $5.0 million during 1981-82. This estimate, however, assumed unemployment insurance bene- fits (UIB) would be received beginning July 1, 1981. In practice, AFDC recipients who applied for UIB in July received payments in August. Due to the prior month budgeting system, income received by AFDC recipi- ents in August was reported in September for purposes of calculating the October 1981 monthly grant. As a result of this three-month delay, DSS has reestimated 1981-82 General Fund savings to be $3.6 million, a reduction of $1.4 million from the earlier estimates. Limit Aid to Children Over 17. Chapter 69 allows AFDC benefits to minors aged 18, 19, and 20 only if the child is a full-time high school student. This provision was modified by the court’s ruling in the DaFis v. Woods case, which restored eligibility to 18, 19, and 20 year-olds if they were enrolled in vocational or technical schools. As a result of this ruling and the fact that fewer-than-anticipated 18, 19, and 20 year-olds are in foster care, the General Fund savings estimate has been reduced by $7.3 Item 5180 HEALTH AND WELFARE \/ 1077 million. Pending legislation, AB 2x would conform state law to the provi- sions of PL 97-35 by prohibiting aid to any minor aged 19 or over, and allowing aid to 18 year-olds only if they are enrolled in high school or equivalent training programs and are scheduled to complete the program before they reach the age of 19. Child Support Incentive Payments. Chapter 69 provided that the counties would receive incentive payments of 15 percent of child support collections. This was less than the 27.75 percent incentive payment pro- vided to the counties during 1980-81 by the state (12.75 percent) and federal (15 percent) governments. Chapter 69 further stipulated that the state would not provide General Fund support for the incentive payments unless the federal government required a state match. Deletion of the state incentive payment was estimated to save $13.3 million from the General Fund if no state match was required, and $7.2 million if a state match was required. The federal government did not require a state match during 1981-82. Subsequent state legislation (Ch 968\/81), however, reinstated the 7.5 percent state incentive payment to counties. Emergency Assistance Program. Chapter 69 provides that $10.0 million in federal funds from an anticipated federal emergency assistance block grant would be – Z 0 ~ I:\”\” ~ ~ t’l ……… … … … en 1116 I HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued offset the anticipated loss of federal aid for the AFDC program due to delays in the state’s compliance with Public Law 97-35 and (b) $2297000 needed to support an increased share of county overhead costs’ du~ to decreases in federal social services funds. These increases are partially offset by a number of current-year savings. These include the savings from din~c~ billing for fraud investigation time ($1,731,000) and the savings anticipated from the implementation of Public Law 97-35 ($1,530,000). Budget Year Proposal The budget proposes an appropriation of $116,518,000 from the General Fund as the state’s share of county costs incurred in administering welfare program.s during 198~3. This is a decrease of $2,440,000, or 2.1 percent, from estimated current year expenditures . . Total expenditures of $624,915,000 are proposed for county administra- tion of welfare programs in 198~3. This is an increase of $35 760 000 or 6.1 percent, over estimated current year expenditures. Table 1. sh~ws the total expenditures for county welfar:edepartment administrative costs. Budget Year Adjustments Table 2 shows the proposed General Fund adjustments to expenditures for county administration in 1982-83. The net reduction of $2,440,000 in proposed General Fund expenditures is due to net savings of $3,956,000 in county administrative costs for the AFDC program, partially offset by increases of $1,516,000 in the cost of administering other welfare programs. The savings in AFDC costs result from two factors: (1) full-year im- plementation of the program changes required by Public Law 97-35 ($4,259,000) and (2) the restoration of federal aid eXpected to be withheld during the current year because the state delayed implementation of P.L. 97-35 ($7,450,000). AFDC Program Changes The budget anticipates savings in the cost of county administration during 1982-83, due to the provisions of Ch. 69\/81 (SB 633), and the provisions of the federal Omnibus Reconciliation Act of 1981 (Public Law 97-35). The specific changes made by these measures, and the impact of these changes on AFDC grant and administrative costs, is discussed in our analysis of Item 5180-101, AFDC payments. 80 Percent Supplemental Payments We recommend funds budgeted for the administrative costs of provid- ing 80 percent supplemental payments be deleted because these payments have been discontinued, for a savings of $1,441,~ consisting of $366,000 trom the General Fund, $710,000 in federal funds, and $365,000 in county funds. Background Prior to the enactment of Ch. 1\/81, First Extraordinary Session, state regulations allowed supplemental payments to AFDC recipi- ents whose monthly grants and other income would otherwise have been less than 80 percent of the maximum payment level. Such supplemental payments were issued to recipients to bring the total monthly grant and other income up to a maximum of 80 percent of the maximum aid pay- ment. To conform with federal law (Omnibus Reconciliation Act of 1981), these payments were eliminated by Chapter 1. Item 5180 HEALTH AND WELFARE \/ 1117 Table 2 County Welfare Department Administration Proposed 1982-83 General Fund Changes (in thousands) 1. 1981-82 Current Year Revised ……………………………………………………… . 2. Budget Adjustments A. AFDC administration (1) Basic caseload ……………………………………………………………………. . (2) Cost of living (a) 1981-82 cost of living adjusted for caseload …………….. . (b) 1982-83 (5 percent) ………………………………………………….. . (3) Court cases ……………………………………………………………………….. . (4) State legislation ………………………………………………………………… . (5) Savings due to Public Law 97-35 ……………………………………… . (6) Restoration of lost federal aid ……………………………………….. … (7) Other changes ……….. ; ……………… ; ………………………………………. . Subtotal ……………………………………………………………………………………. . B. Nonassistance Food Stamps (1) Basic caseload ……………………………………………………………………. . (2) Cost of living (a) 1981-82 cost of living adjusted for caseload …………….. . (b) 1982-83 cost-of-living ; ……………………………………………….. . (3) Other changes …………………………………………………………………. .. Subtotal ……………………………………………………………………………………. . C. Special Adult Programs (1) 1982-83 cost of living ……………………………………………………… … (2) Other changes ………………………………………………………………….. . Subtotal ……………………………………………………………………………………. . D. Staff Training (1) 1982-83 cost of living ……………………………………………………….. . (2) Other changes ………………………………………………………………….. . Subtotal ……………………………………………………………………………………. . 3.\u00b7 Total Budget Decrease ………………………………………………………………… . 4. Proposed 1982-83 General Fund Expenditures …………………………… . Total $3,673 194 4,151 -386 -107 -4,259 -7,450 228 $279 6 1,132 -900 $100 57 $162. 680 Cost $118,958 -3,956 517 157 842 -$2,440 $116,518 Estimates Include Cost of Discontinued Payments. The Department of Social Services advises that no adjustment was made in the budget estimate for county administration to eliminate the cost of providing sup- plemental payments. To correct this overbudgeting, we recommend a reduction of $1,372,000 from this item ($676,000 federal funds, $348,000 from the General Fund, and $348,000 in county funds). Because these amounts were included in the total used to calculate a 5 percent cost-of- living adjustment proposed for county administration, funds for which are included in the cost-of-living item, the total reduction resulting from this recommendation will be $1,441,000 ($366,000 from the General Fund, $710,000 in federal funds, and $365,000 in county funds). Overhead Shift fram Social Services We recommend that funds proposed to support increased welfare pro- gram overhead because of reduced social worker staffing be deleted.. for a reduction of $9,467,000 ($~41~000 from the General Fund.. $4,643,000 federal funds~ and $~41~000 county funds). . . . The budget requests $9,467,000, all funds, to finance administrative 1118 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMs.:-Continued overhead costs that the budget anticipates will be shifted from social services programs to welfare program administration. Background. Under existing procedures, counties submit quarterly claims to the state for reimbursement of their administrative costs related to various public assistance programs. In order to prepare these claims, county eligibility and social worker staff are asked to declare which pro- gram they spent their time on during a specified \”time study\” period. Basic staff costs for eligibility workers and social workers are then calculat- ed, based on the results of the time studies. Other costs, such as those for clerical staff, management and administrative staff, and operating ex- penses and equipment, are allocated for claiming purposes among the public assistance programs, based on the percentage of line staff time assigned to each program. For example, if70 percent of line staff time was spe:r;tt on AFDC during a claiming period, then 70 percent of the adminis- trative overhead costs would be allocated to the AFDC program. Increase Expected in AFDC and Food Stamp Share of Overhead Costs. Based on a survey of 17 counties in early fall 1981, the Department of Social Services anticipates that during the current year reductions in federal funds for social services programs will result in fewer social serv- ices workers employed by counties. In tum, social services programs will claim a smaller proportion of total line staff costs. ,As a result, it is expected that the proportion of total overhead costs allocated to social services programs will be reduced and the proportion allocated to AFDC and food stamps will increase in both the current year and the budget year. We have several problems with the budget proposal to provide addi- tional funds to provide for this shift in overhead costs. Social Services Reductions May Not Shift Overhead Costs. The net total reductions in federal funds for social services during 198f … 82 is $44.1 million statewide. Not all of this reduction, however, will result in social worker layoffs. Of the total reduction, $26.3 million will result in reduced p~yments to providers of in-home supportive services and $3.6 million will result in reduced funding for social services staff training, according to the Depart- ment of Social Services. These activities are not included in the time study pool. . . The only potential reduction in time study staff would result from the reduction. of $14.2. million from other-county social services. Even this reduction, however, is mitigated to some extent by the relaxation of some claiming instructions and planning requirements. The survey of 17 coun- ties, used to estimate the overhead cost .shift, was conducted before the counties had experience under the revised social services allocations. Therefore, it is not clear that the shift in overhead costs will actually occur. Counties Choose the . Cuts. Any actual reductions to social services . staff in the current and budget years will result from conscious decisions made by county officials in adjusting to the funding reductions. In other words, county officials could choose to implement any number of cost- saving alterIlatives, including staff layoffs, elimination of purchase-of-serv- ice agreements, equipment delays, or reductions to travel expenditures, The only alternative that\u00b7 results in increased overhead costs for AFDC and food stamps, arid hence increased funding for county welfare depart- ments under the budget proposal, is reductions in line social worker staff. To the extent staff reductions reduce service levels, the budget proposal Item 5180 HEALTH AND WELFARE \/ 1119 encourages counties to select an alternative reduction which is likely to result in less services and increased General Fund support for administra- tive costs than likely under other alternatives. How Fixed Are Overhead Costs? The budget Froposal assumes no reduction will occur in total overhead costs to be allocated as a result of the social services funding reductions. While some costs incurred by county welfare departments may be relatively fixed, the overhead cost pool includes many items, such as clerical staff, operating expenses and equipment and administrative staff, that could be reduced to reflect re- ductions in service staff. We see no reason to trea.t overhead costs as fixed, as the budget does. Conclusion. Our analysis indicates that there is no clear evidence that there will be a shift in overhead costs from social services to the AFDC and food stamps programs. While counties may choose to layoff workers rather than reduce overhead costs, and thus transfer a part of the cost of social services\u00b7 to the AFDC and food stamp programs, the cost to the AFDC and food stamps programs is undeterminable at this time. Provid- ing a separate appropriation for this anticipated cost shift (a) encourages counties to reduce services staff rather than reduce costs in other areas, (b) assumes that overhead costs are fixed and (c) provides funds in antici- pation of costs that may not materialize. Therefore, we recommend that funds proposed to provide separate funding for this overhead shift be deleted, for a reduction of $9,016,000, consisting of $2,297,000 from the General Fund, $4,422,000 in federal funds, and $2,297,000 in county funds. Because these amounts were included in the base used for calculating the cost-of-living amounts required for county administration, a further reduction of $451,000 should be made ($115,000 from the General Fund, $221,000 in federal funds, and $115,000 in county funds). The total recom- mended reduction, then, is $9,467,000 ($2,412,000 from the General Fund, $4,643,000 in federal funds and $2,412,000 in county funds). Quality Control Reviews Background. As a result of SB 154, enacted following the passage of Proposition 13 in 1978, the state assumed the county share of grant costs for the AFDC program in 1978-79, while the counties continued to admin- ister the program. In addition, the act gave the Director of the Depart- ment of Social Services the authority to establish a statewide error rate standard against which the performance of counties in their administra- tion of the AFDC program could be measured. Furthermore, the act authorized the director to hold counties financially liable for errors above the statewide error rate standard. Under this provision of SB 154, the director can recoup funds misspent by counties in excess of the statewide performance standard. Chapter 282, Statutes of 1979 (AB 8), incorporated the provision of SB 154 regarding county liability for high error rates. In addition, AB 8re- quired that the Joint legislative Budget Committee be notified of the performance standard for 1979-80, and that beginning with fiscal year 1980-81, the standard be established annually in the Budget Act. In addition to state law, the federal government has issued regulations which provide that federal matching funds will not be available for erro- neous expenditures by states in excess of a specified error rate standard, beginning October 1980. Statewide Error Rate Declining. The statewide error rate\u00b7 against 1120 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued which the federal performance standard is applied is generated from a review of approximately 1,200 individual AFDC cases by state employees. Federal staff re-review a subsample of about 200 cases from the state sample. The state findings are adjusted by the federal findings through the use of a regression formula.. . . Chart I shows the error rates for California from January 1, 1974 to September 1980. Chart I also shows that California’s error rate has de- clined for the last two review periods for which data is available. P E R C E N T o F P A Y M E N T S I N E R R o R Chart 1 Statewide AFDC Payment Error Ratesa January 1974 through September 1980 a Federal findings, combined payment error rates for overpayments and payments to ineligibles. ()alJ1omia Error Rate Lower Than Rates of Other Large States. His- torically, California’s error rates for the administration of the AFDC pro- gram have been among the lowest in the nation. For example, of the 10 largest states, California has had one of the lowest error rates during the last three review periods. Table 3 compares California’s error rate with those of the other nine large states for the three quality control review periods between\u00b7 April 1979 and September 1980. Table 3 shows that dur- ing this period,. California’s payment. error rate was below the national average in each of the review periods. Only Florida (4.1 percent) and Texas (7.0 percent) had lower error rates in the April to September 1979 period. None of the 10 large states, however, had a lower error rate than California during the other two periods. Item 5180 HEALTH AND WELFARE \/ 1121 Table 3 AFDC Payment Error Rates Ten Largest States April 1979 to September 1980\” April- October 1979- September 1979 March 1980 California …………………………………………………… 7.8% 6.3% New york…………………………………………………… 8.8 7.0 Texas ………………………………………………………….. 7.0 7.4 Pennsylvania ……………………………………………… 9.7 11.6 Illinois ………………………………………………………… 11.9 9.4 Ohio……………………………………………………………. 9.1 8.7 Michigan…………………………………………………….. 9.6 8.2 Borida………………………………………………………… 4.1 6.5 New Jersey…………………………………………………. 11.8 11.6 MassachiJsetts ……………………………………………. 22.4 16.7 U. S. Average ……………………………………………. 9.5 8.3 April- September 1980 5.1% 9.7 7.8 8.0 6.9 8.7 7.3 5.8 9.3 8.2 7.3 Ranked in order of population. Error rates include technical errors and have been adjusted based on federal subsample review. . Federal ~’anctjons May Be Levied in Budget Year. Despite the recent decline in California’s error rates and the state’s good performance in relation to other states, California may be subject to fiscal sanctions if the state’s final federal error rate exceeds 4.0 percent for the period October 1980 to September 1981. Federal regulations require that states achieve a payment error rate of 4.0 percent for the quality control periods of Octo- ber 1, 1982-September 30, 1983. In addition, the regulations require the states to reduce their error rates by one-third decrements, starting with the October \u00b71980-September 1981 review period. Failure of states to achieve the interim reductions or the ultimate 4.0 percentlevel will result in a reduction in federal financial participation. Because California’s error rate in the base period (April-September 1978) was below 4.0 percent, the state must achieve the 4.0 percent standard for the review period of October 1980-September 1981, and for subsequent review periods. At the time this analysis was prepared, federal officials had not released the final results of the October 1980 to September 1981 reviews, nor had they notified the states that fiscal sanctions will be applied. County Error Rates. Prior to October 1978, DSS collected county spe- cific error rate data for the 15 counties with the largest AFDC caseloads. Mter enactment of SB 154 and the state buy-out of county costs for the AFDC program, the state expanded its quality control sample to the 35 largest caseload counties. Table 4 shows the error rates for these counties during the review periods October 1979 to March 1981. Budget Bill Proposes 4.0 Percent Performance Standard. Since the enactment of SB 154, a performance standard for county error rates has been established each year. For all but one period since 1978-79 ( April to September 1981) a 4.0 percent error rate standard has been in effect. The Legislature established a 3.75 percent error rate standard for the April to September 1981 period. The 1982 Budget Bill proposes to establish a 4.0 percent error rate standard for the October 1981 to March 1982 and April to September 1982 periods. Counties Appeal Fiscal Sanction. On January 8,1981, the Director of DSS assessed fiscal sanctions against 13 counties with error rates in excess of the 4 percent standard during October 1979 to March 1980. The sanc\” tions applied against these 13 counties totaled $4.4 million. The Legislature reduced the General Fund amounts identified in the 1981 Budget Act for AFDC grants by $2 million to account for the fiscal effect of these sanc- tions. 41-75056 ________ L 1122 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued Table 4 Thirty-Five Largest Counties AFDC Payment Error Rates October 1979 to March 1981 October 1979- Counties March 1980\” April- September 1980b Alameda ……………………………………………………………… 11.0 0 2.9 Butte …………………………………………………………………… 1.3 1.3 Contra Costa ………………………………………………………. 3.9 1.8 Fresno…………………………………………………………………. 3.0 5.5 Humboldt……………………………………………………………. 2.7 1.7 Imperial……………………………………………………………… d 4.6 Kern …………………………………………………………………… 2.0 1.4 Kings…………………………………………………………………… 3.9 1.4 Los Angeles ………………………………………………………… 2.9 2.6 Madera……………………………………………………………….. 2.5 4.4 Marin…………………………………………………………………… 5.9 0 6.9 Mendocino ………………………………………………………….. 1.5 1.5 Merced ……………………………………………………………….. 6.6 0 4.7 Monterey ………………………………………………………… ;… 9.20 9.7 Orange ……………………………………………………………….. 6.4 0 3.4 Placer ……………………………………………………………. 3.9 3.2 Riverside ……………………………………………………………. 4.0 4.7 Sacramento …………………………………………………………. 4.3 0 3.2 San Bernardino…………………………………………………… 13.4 0 3.3 San Diego ………………………………………………………….. 7.1 6.9 Sail. Francisco …………………………………………………….. 10.6 0 3.7 San Joaquin ………………………………………………………… 2.6 1.4 San Luis Obispo …………………………………………………. 1.3 1.6 San Mateo ………………………………………………………….. 5.1 0 9.5 Santa Barbara …………………………………………………….. 3.3 4.6 Santa Clara …………………………………………………………. 3.6 2.6 Santa Cruz ………………………………………………………….. 2.9 2.9 Shasta …………………………………………………………………. 4.5 0 2.0 Solano …………………………………………………………………. 5.6 0 2.7 Sonoma……………………………………………………………….. 7.5 0 5.3 Stanislaus ……………………………………………………………. 3.2 4.0 Tulare …………………………………………………………………. 1.3 3.3 Ventura ……………………………………………………………… 3.9 3.5 Yolo …………………………………………………………………….. 10.5 0 2.4 Yuba …………………………………………………………………… 0.5 0.6 October 1980- March 1981 b 4.6 0.7 4.1 2.2 5.3 4.9 0.6 3.1 2.8 2.1 5.1 0.0 0.4 6.5 2.1 4.4 6.8 2.1 4.6 4.0 6.3 2.2 2.3 3.1 5.4 4.2 2.1 1.8 3.2 3.5 4.3 2.2 1.0 4.2 2.0 Excludes social security enumeration errors; includes WIN registration. b Excludes both social security enumeration and WIN registration errors. C Sanction assessed for error rate in excess of 4 percent. d Reliable error rate data not available due to disruption caused by the October 1979 earthquake. The DSS advises, however, that all 13 counties have appealed the fiscal sanctions. The county appeals cite extraordinary circumstances and ques- tion the statistical reliability of the quality control program. Each of the counties has requested and received hearings with the Director. The DSS is unable to advise us as to when decisions will be reached on these appeals or what criteria will be used to grant or deny the appeal. Item 5180 HEALTH AND WELFARE \/ 1123 Sanctions Unlikely Under New Regulations We recommend the adoption of Budget Bill language which requires the Department of Social Services to modify its regulations so that fiscal sanctions are appHed using the mid-point estimate of the error rate, rather than the low point estimate; The DSS has issued revised sanction regulations, which are effective beginning in the October 1980 to March 1981 review period. In order for a sanction to be assessed under the new regulations, county error rates, not including so-called technical errors,. must be higher than the effective state performance standard for two consecutive review periods. In addi- tion, the error rate used to determine it a county is above the pertormance standard will be the low point of the statistically reliable range. For exam- ple, Table 5 shows that Alameda County had a 4.6 percent error rate (technical errors excluded) in the October 1980 to March 1981 review period. The 4.6 percent error rate is the mid-point of a range in which the \”true\” error rate would fall if every case in the county, rather than a statistical sample were reviewed. In the case of Alameda County, this range is plus or minus 3.3 percent. Therefore, the \”true\” error rate in Alameda County during October 1980 to March 1981 is likely to fall between 1.3 percent and 7.9 percent. Table 5 shows the mid-point and low point of these\” confidence intervals\” for each county with error rates over 4 percent. Because no county has a low point error rate in excess of the 4 percent performance standard during this period, no sanctions would be assessed against the counties. Because fiscal sanctions are now based on performance during two consecutive review periods, the first period for which sanctions could be applied against these counties would be the October 1981 to March 1982 review period. Table 5 Confidence Intervals for Counties With Payment Error Rates of 4 Percent or Higher October 1980 to March 1981 COUNTIES Payment Error Rate (Point &timate) Alameda ……………………………………………………………… 4.6 . Contra Costa………………………………………………………. 4.1 Humboldt……………………………………………………………. 5.3 Imperial ……………………………………………………………… 4.9 Marin…………………………………………………………………… 5.1 Monterey ……………………………………………………………. 6.6 Placer …………………………………………………………………. 4.4 Riverside ……. ;…………………………………………………….. 6.8 San Bernardino…………………………………………………… 4.6 San Diego ………………………………………………………….. 4.0 San Francisco …………………………………………………….. 6.3 Santa Barbara …………………. ,………………………………… 5.4 Santa Clara ………………………………………………………… 4.2 Stanislaus ……………………………………………………………. 4.3 Confidence Interval (Plus or Minus) 3.3 2.3 3.7 3.9 3.0 3.7 3.0 3.7 3.3 3.0 3.8 2.6 2.8 3.0 LowPoint of Confidence Interval 1.3 1.8 1.6 1.0 2.1 2.9 1.4 3.1 1.3 1.0 2.5 2.8 1.4 1.3 High Point of Estimate Just As Likely As Low Point. We believe the use of the low point of the confidence interval for determination offiscal sanctions inadequately portrays the potential loss of tax dollars paid in error. It is just as likely that the error rate for a given county would be the high point of the confidence interval. Table 6 shows the high point esti- 1124 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued mates of county error ratesauring the October 1980 through March 1981 review period. If the high point of each estimate is used, 25 counties exceeded the 4 percent error rate performance standard during this peri- od. The General Fund share of the cost of these payment errors may have been as high as $29.2 million. Table 6 State Funds Misspent High Point of Error Rate Estimate Counties Over 4 Percent October 1980 through March 1981 Midpoint of Error Rate Counties Estimate Alameda …………………………………………………. 4.63 Contra Costa ………………………………………….. 4.11 Fresno …………………………………………………….. 2.24 Humboldt ……………………………………………….. 5.29 Imperial…………………………………………………… 4.88 Kings …………………….. ;………………………………. 3.08 Los Angeles ……………………………………………. 2.76 Marin………………………………………………………. 5.10 Monterey ……………………………………………….. 6.54 Placer ………………………………………………………. 4.39 Riverside …………………………………………………. 6.77 San Bernardino ………………………………………. 4.6 San Diego ……………………………………………….. 4.02 San Francisco………………………………………….. 6.28 San Joaquin……………………………………………… 2.16 San Luis Obispo …………………………………….. 2.32 San Mateo ……………………………………………….. 3.09 Santa Barbara ………………………………………… 5.42 Santa Clara……………………………………………… 4.22 Santa Cruz ……………………………………………… 2.09 Solano …………………………………………………….. 3.23 Sonoma …………………………………………………… 3.49 \” Stanislaus …………………………………………………. 4.34 Tulare …………………………………………………….. 2.19 Yolo ………………………………………………………… 4.17 Total ………………… ,…………………………………….. NA HighPoint of Error Rate Estimate 7.88 6.42 4.11 9.01 8.77 5.76 4.0 8.09 10.25 7.42 10.46 7.9 7.01 10.11 4.1 4.55 5.32 8.00 7.05 4.0 5.69 6.38 7.31 4.42 6.73 NA State Funds Misspent at HighPoint of Estimate 9 $2,610,273 1,002,982 699,972 266,054 219,925 133,994 \”9,132,568 146,455 608,991 180,955 1,884,927 2,202,951 3,057,388 1,820,780 600,045 95,614 316,130 366,395 1,779,573 131,017 349,676 412,392 594,387 439,495 193,995 $29,246,934 a Estimated based on monthly reports. Actual misspent funds may vary based on final clairD.s. The DSS regulations provide that fiscal sanctions will not be assessed against any county unless the county’s error rate, as measured by the low point of the estimated confidence interval, exceeds 4 percent for two consecutive review periods. Our analysis indicates that this policy pre- cludes the assessment of fiscal sanctions to any county for payment errors made between October 1980 through March 1981, despite the fact that the General Fund cost of these errors may have been as high as $29.2 million. Further, we havt: been advised that the federal government employs a midpoint estimate for calculation of state error rates, which would Be used for any assessment of fiscal sanctions against the state. Because the use of the low point\” estimate inadequately portrays the amount of potential misspent state funds, we recommend Budget Bill language in Item 5180- Item 5180 HEALTH AND WELFARE \/ 1125 101-001, provision 5 which requires that the midpoint estimate of county error rates be used in measuring county performance. Following is proposed language consistent with this recommendation: \”This mid-point of the confidence interval estimated from the quality control sample for each period shall be used to determine if individual counties exceed the 4 percent performance standard.\” Department’s Plans to Apply Sanctions During April to September 1980 is Unclear We recommend that the Department of Social Services report to the Legislature prior to budget hearings on its plans to apply fiscal sanctions for the period April to September 1980. The new regulations governing fiscal sanctions do not apply to the April-to-September 1980 review period. During this period, 11 counties had error rates in excess of the 4.0 percent standard. Six of these 11 counties were sanctioned for high error rates during October 1979 to March 1980 and six had error rates higher than 4.0 percent in the October 1980 to March 1981 period. Staff of the Department of Social Services have not been willing to advise us whether sanctions will be applied against those counties with high error rates during the April-to-September 1980 period. Therefore, we recommend that DSS report to the Legislature, prior to budget hearings, its policy regarding the application of fiscal sanctions for the April to September 1980 review period. Food Stamp Fraud Investigations We recommend that recoupments resulting from food stamp fraud investigations be renected as reimbursements in the 1982-83 budget, for a reduction of $5~000 ($1~OOO from the General Fund, $29~OOO federal funds, and $147,000 in county funds). As part of the administration of the food stamp program, county staff investigate alleged food stamp fraud. Until recently, any funds collected as a result of these investigations were forwarded by the counties to the federal government. Public Law 96-58, however, revised this practice and established a state share (50 percent) of the amounts collected for food stamp fraud. In California, the state share is divided between the state and counties. According to monthly reports published by the Department of Social Services, approximately $590,000 was collected as a result of food stamp fraud investigations during the most recent 12-month period (September 1980 to August 1981). We recommend the anticipated recoveries be re- flected as reimbursements in the 1982-83 budget at a level at least as high as that actually collected in recent months. This recommendation will permit a reduction of $590,000 in the amount appropriated for county administration, consisting of $148,000 from the General Fund, $295,000 in federal funds, and $147,000 in county funds. Fraud Investigation Not Cost Effective We recommend the Department of Social Services report to the Legisla- ture prior to budget hearings regarding ways to improve the cost effective- ness of food stamp fraud investigation. The federal government has recently enacted two major changes in the funding of food stamp fraud investigations. Pursuant to these changes, (1) states may retain 50 percent of the amounts recouped and (2) the federal 1126 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued government will provide 75 percent of the cost of fraud investigations, rather than 50 percent. These changes are intended to encourage states to pursue food stamp fraud. Our analysis indicates that recoupment of funds obtained fraudulently by food stamp recipients during the most recent 12-month period totaled $590,000. The budget proposes $7.8 million, including $848,000 from the General Fund, to conduct investigations into allegations of food stamp fraud. Assuming that collections during the budget year are approximate- ly the same as during the 12-month period ending September, 1981, the state will pay $5.73 in administrative costs for every $1 returned to the General Fund. Given the apparent lack of cost effectiveness in food stamp fraud inves- tigations and the recent federal changes, we recommend the DSS report to the Legislature prior to budget hearings regardingits plans for improv- ing the cost effectiveness of food stamp fraud investigation. Department of Social Services SOCIAL SERVICES PROGRAMS Item 5180-151 from the General Fund Budget p. HW219 Requested 1982-,83 ……………………………………………………………….. $195,337,000 a Estimated 1981-82 …………………………………………………………………. 169,224,000 Actual 1980-81 ………………………………………………………………………. 197,720,000 b Requested increase (excluding amount for salary increases) $26,113,000 ( + 15.4 percent) Total recommended reduction Item 5180-151-001 ……………… $2.393.000 Total recommended reduction Item 5180-181-001 (d) ………… ($105,000) Recommendation pending …………………. ……………………………… $159,136,000 aThis amount includes $17,315,000 proposed in Item 5180-181 for cost-of-Iiving increases. b This amount includes $15,882,000 for community care licensing. 1982-83 FUNDING BY ITEM AND SOURCE Item Description 5180-151-OO1-Social Services Program-Local As- sistance 5180-181-OO1~cial Services Program-Local As- sistance: COLA 5180-151-866-Social Services Program-Local As- sistance 5180-181-866-Social Services Program-Local As- sistance: COLA Total Fund General General Federal Federal Amount $178,022,000 17,315,000 (354,769,000) (3,441,000) $195,337,000 Item 5180 HEALTH AND WELFARE \/ 1127 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Federal Title XX Funds. Reduce Item 5180-151-001 by $889,000. Recommend that unbudgeted federal funds be used to replace General Fund support for social services, in order to provide the Legislature with more fiscal flexibil- ity. 2. Federal Title IV-B Funds. Reduce Item 5180-151-001 by $1~02~000. Recommend that unbudgeted federal funds be used to replace General Fund support for social serv- ices, in order to provide the Legislature with more fiscal flexibility. 3. Control of Program Appropriations. Recommend adop- tion of detailed Budget Bill schedule for specialized adult services. Further recommend language requiring advance notification to Legislature when funds are to be trans- ferredamong these and\/or all other social service programs, to ensure legislative review of program expendi- tures. 4. In-Home Supportive Services. Recommend department report to fiscal committees prior to budget hearings re- garding fiscal and programmatic effects of eliminating or relaxing scheduled six-month reassessments of nons ever ely impaired IHSS recipients. 5. IHSS County Administration. Recommend county IHSS administrative expenditures be budgeted with IHSS pro- gram costs, rather than other county social services, to facilitate legislative review of total IHSS pro,gram costs. 6. CNI Estimated at 8.2 Percent. Reduce Item 5180-181- 001 (d) by $10~000. necommend Commis~ion on State Finance’s estimate of CNI be applied to in-home support- ive services statutory maximum payments, for savings of $117,000 ($105,000 General Fund and $12,000 in county funds) . 7. County Response to IHSS Changes Pursuant to Chapter 69, Statutes of 1981 (SB 633). Recommend department ad- vise fiscal committees prior to budget hearings regarding 1981-82 actual experience in achieving mandated savings as projected by counties. 8. In-Home Supportive Services. Withhold recommenda- tion on $159,136,000 General Fund request, due to uncer- tainty regarding actual 1980-81 total program costs and resulting appropriate county share of costs in 1982-83. 9. IHSS Budget Reports. Recommend adoption of supple- mental report language directing department to include analysis of effect of providing budget reports to IHSS supervisors and intake workers in Alameda County pilot project. 10. IHSS Program Structure and Funding.Alternatives. Rec- ommend Departments of Finance and Social Services ad- vise fiscal committees prior to budget hearings regarding potential fiscal impact of two current year proposals to alter IHSS program and funding structure. Further recom- mend adoption of Budget Bill language requiring Director Analysis page 1134 1135 1139 1144 1145 1147 1152 1154 1154 1157 1128 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued of Finance to notify Legislature in the event that alterna- tive funding for IHSS is approved by the federal govern- ment. 11. Refugee Social Services. Recommend Departments of Fi- 1161 nance and Social Services advise fiscal committees prior to budget hearings regarding fiscal and program impacts should federal funding turn out to be significantly less than amount proposed for expenditure. 12. Adoptions. Reduce by $484~OOO. Recommend unbudg- 1163 eted federal funds be used to replace General Fund sup- port for adoptions program, in order to provide the Legislature with more fiscal flexibility. GENERAL PROGRAM STATEMENT The Department of Social Services (DSS) administers various social services Rrograms which provide services, rather than cash, to eligible clients. The budget has grouped these programs into five categories: other-county social services (OCSS), specialized adult services, special- ized family and children’s services, adoptions, and refugee social services. Federal funding for social services is provided pursuant to Titles IV-B, IV -C, and XX of the Social Security Act and the Federal Refugee Act of 1980. Funding from these sources was reduced during the current year as a result of congressional action on the federal budget. We discuss the details of these reductions later in this analysis. Except for refugee social services, which are administered by the Office of Refugee Services in the Executive Division, social services programs are administered by the Adult and Family Services Division within the De- partment of Social Services. The 1981 Budget Act authorized 241 positions in the department for administration of social services. During the current year, the department eliminated 12 positions, reducing the total number of state positions used to administer social services programs to 229. The budget for 1982-83 proposes to establish 7 new positions. Thus, a total of 236 positions is proposed for the budget year. ANALYSIS AND RECOMMENDATIONS Table 1 shows that total expenditures from all funds for social services programs are proposed at $610.4 million in 1982-83. Of this amount, 32 percent would come from the General Fund, federal funds would com- prise 58.7 percent, and counties are expected to provide 9.3 percent. The budget proposes appropriations of state and federal funds for social services local assistance totaling $553.5 million. Of that amount, which includes a cost-of-living adjustment, $195.3 million, or 35.3 percent, is re- quested from the General Fund, and $358.2 million, or 64.7 percent, is anticipated from the federal government. The budget also anticipates county support for social services totaling $56.8 million. Of the total General Fund request, $17.3 million, or 9.7 percent, of the baseline General Fund costs of social services programs, is for the proposed cost-of-living adjustment. The total cost-of-living increase for these programs from all funds is $24,196,000, or 4.1 percent. Because fed- Item 5180 HEALTH AND WELFARE \/ 1129 Table 1 Department of Social Services Proposed Expenditures for Social Services Including Cost-of\u00b7Living Adjustment All Funds 1982-83 (in thousands) Program A. Other County Social Services ………………… . General Fund $10,167 163,468 (159,241) Federal Funds $150,889 County Funds $53,622 B. Specialized Adult Services ……………………. . 1. In\u00b7Home Supportive Services …………… . 2. Maternity Home Care ……………………….. . 3. Access Assistance for the Deaf …………. . C. Work Incentive (WIN) Program …………. . D. Adoptions …………………………………………….. … E. Demonstration Program ……………………….. . 1. Child Abuse Prevention ……………………. . 2. Family Protection Act (AB 35) ……….. . F. Refugee Social Services …………………………. . 1. County Welfare Department Services 2. Contracted Services …………………………… . 3. Cuban\/Haitian Services ……………………. . G. Totals: Amount ………………………………………………. . Percent ………………………………………………. . Basic Cost and COLA Baseline cost. ………………………………………. . Cost-of-living adjustment ………………….. . COLA as percent of baseline ………………… . Funds appropriated in the Budget Bill Amount ………………………………………………. . Percent ………………………………………………. . (2,313) (1,914) 355 19,666 1,681 (1,681) $195,337 32.0% $178,022 17,315 9.7% $195,337 35.3% 120,686 (120,686) 14,515 206 (206) 71,914 (24,503) (45,508) (1,903) $358,210 58.7% $354,769 3,441 1.0% $358,210 64.7% 1,882 (1,882) 1,249 88 (88) $56,841 9.3% $53,401 3,440 6.4% Total $214,678 286,036 (281,809) (2,313) (1,914) 16,119 19,666 1,975 (206) (1,769) 71,914 (24,503) (45,508) (1,903) $610,388 100% $586,192 24,196 4.1% $553,547 100% eral funding for these programs is capped, increased expenditures for cost-of-living adjustments in social services programs other than refugee programs are borne by state and county funds. Proposed General Fund Budget Changes Table 2 details the proposed changes in General Fund spending for social services programs. The table shows that General Fund expenditures will increase by $26,113,000, or 15.4 percent, over estimated current-year expenditures. The major increases include (a) $17,315,000 for cost-of-liv- ing adjustments, and (b) $13,245,000 for a projected caseload increase in the In-Home Supportive Services program. The budget also proposes a shift of $9,377,000 of General Fund support into the adoptions program. The department replaced an equal amount of General Fund originally budgeted for the adoptions program in 1981-82 with federal funds that became available in October 1981. Thus, this shift merely restores the funding relationship established by the Budget Act of 1981. The General Fund increases proposed for 1982-83 are partially offset by decreases in proposed General Fund expenditures of (a) $4,000,000, re- flectingthe transfer of funds for family planning from DSS to the Depart- ment of Health Services, and (b) $9,401,000, reflecting the net effect of various federal f!IDding shifts. In additio.n, f~deral fu~di~g fo!\” th~ F.:~mily 1130 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued Protection Act demonstration projects has been shifted to the In-Home Supportive Services program and an equal amount of General Fund sup- port for In-Home Supportive Services is proposed for the Family Protec- tion Act demonstration projects. Table 2 indicates that General Fund support tor the Muitipurpose Sen- ior Services Project (MSSP) through appropriations to the Department of Social Services will be discontinued after the current year. MSSP itself, however, will continue through 1982-83. Table 2 Department of Social Services Proposed 1982-413 General Fund Budget Adjustments For Social Services Programs (in thousands)\u00b7 Adjustments A. 1981-82 Current Year Revised …………………………………………………….. .. B. Budget Adjustments 1. Other-County Social Services a. 198~ cost of living (5%) …………………………………………………… f{l,6fJl b. Net effect of various federal funding shifts………………………….. -9,401 Subtotal …………………………………………………………………………………. .. 2. In-Home Supportive Services a. 198~ statutory cost of living (8.8%) ……………………………….. .. b. 198~ discretionary cost of living (5%) ………………………….. .. c. Title XX funding shift (family planning) ……………………………. .. d. Family Protection Act funding shift …………………………………… .. e. Other, including 8.5 percent caseload growth …………………… .. Subtotal …………………………………………………………………………………. .. 3. Maternity Home Care a. 19~ cost of living (5%) …………………………………………………. .. Subtotal …………………………………………………………………………………. .. 4. Access Assistance for the Deaf a. 1~ cost of living (5%) …………………………………………………. .. Subtotal …………………………………………………………………………………. .. 5. Work Incentive (WIN) Program a. State match for increased federal funds ……………………………… .. Subtotal ………………………………………………………………………………….. . 6. Adoptions a. 19~ cost of living (5%) …………………………………………………. .. b. Minority family recruitment project …………………………………… .. c. General Fund shift ……………………………………………………………….. .. Subtotal …………………………………………………………………………………. .. 7. Demonstration Projects a. Child abuse respite care project (discontinued) ……………….. .. b. Multipurpose Senior Services Project ………………………………….. . c. Family Protectiop. Act funding shift …………………………………… .. d. 19~ cost of living (5%) …………………………………………………. .. Subtotal ………………………………………………………………………………….. . Total Proposed General Fund Adjustments ……………………………….. .. C. Proposed Total General Fund for 198~ …………………………………. .. 1,538 6,875 -4,000 -1,291 13,245 110 91 10 954 610 9,377 -610 -433 1,291 80 Total $169,224 -1,734 16,367 110 91 10 10,941 328 ($26,113) $195,337 Item 5180 HEALTH AND WELFARE \/ 1131 SOCIAL SERVICES BLOCK GRANT The federal Omnibus Reconciliation Act of 1981 (Public Law 97-35) created a social services block grant by combining Title XX social services, Title XX training, and Title XX child day care funding into a single pro- gram. In accordance with Ch 1186\/81, Statutes of 1981 (AB 2185), the Department of Social Services assumed administrative responsibility for the social services block grant effective October 1, 1981. Federal Block Grant Requirements Selected federal provisions and requirements governing the use of the social services block grant funds are as follows: Allocation Formula. California’s annual allocations of social services block grant funds as a percent of total funding will be the same. as it was under the Title XX program in federal fiscal year (FFY) 81, adjusted for updated population data. For FFY 82, California’s share of the total federal funding authorized for the social services block grant is $249.4 million, or 10.4 percent of the $2.4 billion expected to be available nationwide. Match Requirements. PL 97-35 eliminated the requirement for a 25 percent state match for federal social services funds that had applied in the Title XX program. In fiscal year 1980-81, General Fund spending for social services programs funded with federal Title XX funds totaled $181.8 million. This exceeded the federally required 25 percent match by $80.6 million. The budget for 1982-83 proposes General Fund spending of $195.3 million (including COLA) for programs which will be partially funded with social services block grant funds. With the elimination of the match requirement, there is no federal requirement for the state to spend any of the proposed $195.3 million. Reporting. PL 97-35 reduced the requirements for reporting certain specified statistical information to the federal government on the use of federal social services funds. State Plan. The Reconciliation Act substituted for the requirement that states prepare Comprehensive Annual Service Plans (CASPs) the requirement that states report to the federal government on their intend- ed use of social services block. grant funds. The states are required to obtain public comment on such notification before transmitting them to the Department of Health and Human Services. Restrictions. The block grant rules prohibit use of social services block grant funds for capital outlay, most cash grants, and inpatient services. There is no restriction on spending for adininistration. Funding Transfers. Up to 10 percent of the social services block grant funds may be transferred to programs providing health services, health promotion and disease prevention activities, or low-income home energy assistance. Amount Available Nationwide Under the Social Services Block Grant The authorization ceilings shown in Table 3 represent the maximum social services funding levels authorized under current law. PL 97-35 re- duced the national authorization for social services appropriations by $600 million for FFY 82 and by $650 million for FFY 83. 1132 \/ HEALTH AND WELFARE SOCIAL SERVICES PROGRAMS-Continued Table 3 Department of Social Services Item 5180 National Title xx Authorization Levels As Specified in PL 97-35 (in millions) Federal Authorization Fiscal Prior to Year PL 97-35 1982…………………………………………………………………………………… $3,000 1983…………………………………………………………………………………… 3,100 1984…………………………………………………………………………………… 3,200 1985…………………………………………………………………………………… 3,300 1986 and Thereafter ………………………………………………………… 3,300 Block Grant Funds Available to California Authorization SpeciRed In PL 97-35 $2,400 2,450 2,500 2,600 2,700 Difference -$600 -650 -700 -700 -600 California’s share of the specified ceilings identified in Table 3 is $249.4 million in FFY 82 and $254.6 million in FFY 83. For fiscal year 1981-82, the 1981 Budget Act appropriated $322.8 million in federal Title XX funds for social services programs and training. While a final federal appropriation has not yet been made for FFY 82, Congress has provided, through a continuing resolution that expires March 31, 1982, for an obligation rate equal to the rate for FFY 81-$2.4 billion. If this funding level continues for the full year, the Department of Social Services estimates that Califor- nia will have available for expenditure during 1981-82 approximately $265.3 million in social services block grant funds. This amount is $57.5 million, or 17.8 percent, less than was anticipated in the 1981 Budget Act. On November 13, 1981, the Director of Finance notified the Chairman of the Joint Legislative Budget Committee, pursuant to the provisions of Section 28 of the 1981 Budget Act, that the $57.5 million reduction would be partially offset in the current year by an increase in Title IV~B federal Table 4 Department of Social Services Federal Funding Changes for Social Services 1981-82 (in thousands) 1981 Budget Act Title XX Funding LeveL …………………………………. .. Title XX reduction ……………………………………………………………………… . Title XX Funds Available for 1981-82 ………………………………………… .. Reduced Federal Funding 1. Amount of reduction ……………………………………………………………….. .. 2. Offsetting transfers A. Increase in Title IV-B funds ……………………………………………….. .. $5,257 B. Low-Income Home Energy Assistance Program (LIEAP) funds …………………………………………………………………………………….. .. 8,064 C. General Fund transfer ………………………………………………………… .. 24 Subtotal ………………………………………………………………………………… . 3. Net federal reduction ……………………………………………………………….. .. ADocation of Net Federal Reductions 1. In-home supportive services (IHSS) ……………………………………….. . -$26,276 2. Other-county social services (OCSS) ……………………………………….. . -14,248 3. Title XX training ………………………………………………………………………. .. -3,583 $322,754 -57,452 $265,302 -$57,452 $13,345 -$44,107 -$44,107 Item 5180 HEALTH AND WELFARE \/ 1133 funds used for social services programs ($5.3 million) and a transfer to social services of federal funds provided for low-income home energy assistance ($8.1 million). As a result of these offsets, the net total reduction is now estimated at $44.1 million. Table 4 shows how the department has accommodated this funding reduction during the current year. In fiscal year 1982-83, the budget proposes social services expenditures of $252.8 million, a decrease of $25.8 million, or 9.3 percent, below estimat- ed current year expenditures of $278.6 million for Title XX social services. MAJOR FEDERAL LEGISLATION-Public Law 96-272 The Adoption Assistance and Child Welfare Act of 1980 (PL 96-272) made several major amendments to the federal Social Security Act related to (1) Title IV-B child welfare services, (2) aid for the adoption of chil- dren, and (3) Title IV-A foster care payments. The intent of PL 96-272 is to (1) reduce the numbers of children in foster care placement nation- wide by providing states with financial incentives to prevent the initial separation of families, and (2) encourage permanent planning for chil- dren who are separated from their families. Since the enactment of PL 96-272, however, both the Congress and the administration have taken actions which raise questions about the federal government’s continued commitment to the policies set forth in PL 96- 272. The impact of this act on child welfare service requirements and foster care payments is discussed below. New Child Welfare Service Requirements PublicLaw 96-272 added anew title, Title IV-E, to the federal Social Security Act which authorizes foster care grants. By federal fiscal year (FFY) 1983 (beginning October 1, 1982), PL 96-272 requires states to implement specified program requirements as a condition of continued federal financial participation in the foster care maintenance rrogram under Title IV-E. Compliance with the requirements was optiona in FFYs 81 and 82. California has exercised its option to continue receiving foster care payment reimbursements subject to the less restrictive requirements of Title IV-A through FFY 82. In FFY 83, compliance with the Title IV-E requirements becomes mandatory. The act requires that: By October 1, 1982, states establish a specific goal for the number of children who will remain in foster care longer than two years, and adopt a plan to achieve that goal. By October 1, 1982, states institute a case plan and review system for each child in foster care to include six-month administrative and eighteen-month judicial review. By October 1, 1983, states provide preplacement preventative and family reunification services to all children entering foster care. The Department of Health and Human Services, however, has with- drawn the proposed regulations which would have implemented and clarified the types of services which a state must provide in order to receive federal reimbursements for foster care payments. In the absence of such implementing regulations, we cannot determine the exact nature or the cost of state programs necessary to meet the requirements of Title IV-E. 1134 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued Cap on Federal Funds for Foster Care Payments PL 96-272 imposed a cap on federal participation in any federal fiscal year in which the appropriation for Title IV-B child welfare services equaled or exceeded the amounts scheduled in the law. The intent of the cap on federal financial participation in foster care payments is to encour- age states to use their increased Title IV-B funds to provide services intended to reduce the number of children in foster care. Prior to enact- ment of PL 96-272, federal financial participation in the state’s foster care payment program was not limited to a specific amount. Table 5 compares the Title IV-B appropriation levels which are neces- sary to trigger the cap on foster payments with actual appropriations for Title IV-B in past years. In FFY 81, the title IV-B appropriation was $163.5 million, resulting in a cap on federal funds for foster care payments. Con- gress has not enacted a final IV-B appropriation for FFY 82. It has, howev- er, provided for a continuation of the 1981 funding level-$I63.5 million-through March 31, 1982, when the third continuing joint resolu- tion on the budget expires. PL 96-272 stipulates that, in order for the cap on Title IV-E funds to become effective, the Title IV-B appropriation must be enacted prior to the beginning of the federal fiscal year for which the appropriation is made. This means that in order to limit funds for foster care payments for FFY 82 (October 1981-September 1982), Congress would have had to appropriate $220.0 million for Title IV-B prior to October 1981. Because Congress has not yet enacted an appropriation for Title IV-B, there will be no cap on foster care funding for FFY 82 under existing law. Table 5 Federal IV-S Appropriation Levels Required to Cap Title IV-E and Past Actual Appropriations Federal Fiscal Year (in millions) 1979 ………………………………………………………………………………………………… . 1980 ………………………………………………………………………………………………… . 1981. ……………………………………………………………………………………………….. . 1982 ………………………………………………………………………………………………… . 1983 ………………………………………………………………………………………………… . 1984 ………………………………………………………………………………………………… . IV-B Appropriation LeveJ Required to Cap IV-E Payments Under PL 96-272 Not Applicable Not Applicable $163.5 220.0 266.0 266.0 Actual Appropriation $56.5 66.2 163.5 163.5 a N\/A N\/A a This is a temporary continuation of funding at the FFY 81 level, pending final congressional action on an appropriation. STATE ADMINISTRATION ISSUES Allocation of Federal Title XX Funds by State Fiscal Year We recommend that unbudgeted Title XX funds be used in lieu of General Fund support for the social services program in 1981-82 in order to increase the Legislature’s fiscal flexibility, for General Fund savings of $889,000. Item 5180 HEALTH AND WELFARE \/ 1135 The budget assumes that Congress will appropriate the entire $2.45 billion authorized for Title XX funding during FFY 83. This assumption is consistent with congressional action on the federal budget for FFY 82, inasmuch as Congress has temporarily approved funding at the authorized level of $2.4 billion for FFY 82. The Department of Social Services estimates that California’s share of the $2.4 billion for FFY 82 will be $249,440,000 and, for FFY 83, that its share will be $254,550,000. Table 6 shows how Title XX funds available during FFY s 82 and 83 are to be allocated between state fiscal years. Table 6 Federal Title XX Funds Alloc;:ated by State Fiscal Year 1981…Q and 1982-83 (in millions) Federal Fiscal Year 1981 1982 1983 State Fiscal Year 1981-82 ……………………………………… . $55.9 $209.4 State Fiscal Year 1982-83 ……………………………………… . Unbudgeted …………………………………………………………… . 39.1 $213.7 0.9\” 4O.9 b — — Totals ………………………………………………………………. . $296.5 $249.4 $254.6 Total $265.3 252.8 ,U.8 \”The Governor’s Budget proposes reserving these funds, due to uncertainty about the final level of FFY 82 Title XX funds. b These funds, representing 16 Percent of the FFY 83 total, have been reserved for use during the first quarter of fiscal year 1983-84. The budget proposes to reserve approximately $0.9 million ($889,000) in FFY 82 Title XX funds for expenditure during 1982-83, due touncer- tainty regarding the final federal appropriation for social services. We conclude that the $889,000 reserved by the department could be used to replace General Fund support for any of the programs which are eligible for reimbursement under Title XX. These programs include tQI;l In-Home Supportive Services program and the Other-County Social Services pro- gram administered by the department, as well as several programs admin- istered by other state departments. If these additional federal funds are used to replace General Fund support proposed for Title XX eligible programs, the Legislature will have an additional $889,000 in General Fund resources to draw on and thus more flexibility in funding its priorities in this or other program areas. Therefore, we recommend that the $889,000 in unbudgeted Title XX funds be added to Item 5180-151-866 and the same amount be deleted from Item 5180-151-001, for a General Fund savings of $889,000. Additional Funds Available for Child Welfare Services We recommend that unbudgeted Title IV-B funds be used in lieu of General Fund support for social services programs in order to increase the Legislatures fiscal flexibility, for General Fund savings of$1~02o,()(}(). We further recommend adoption of Budget Bill language requiring a reduc- tion in General Fund support for this item by the amount of any additional federal funds received over and above the $1~02o,{)()(}. Public Law 96-272 permits qualifying states to receive a share of the difference between $141 million and the actual nationwide appropriation for Title IV-B during federal fiscal years (FFY) 1981 through 1984. The Title IV-B appropriation for FFY 81 was $163.5 million. Thus, under the 1136 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued provisions of PL 96-272, qualifying states received a share of $22.5 million, the difference between $163.5 million and $141 million. Each state’s share of the $22.5 million was based on its share of the total number of children aged 0-17 years residing in qualifying states. In order to qualify for a share of the additional funds, the state must: Conduct an inventory of all children in foster care and impl~ment a foster care information system; Implement a case review system; Provide family reunification services or preplacement preventative services. Proposed federal regulations which would have clarified these require- ments, however, have been withdrawn by the Department of Health and Human Services (HHS). In the absence of final regulations, HHS has allowed states to self-certify their compliance. As of December 1, 1981, the department had accepted self-certification as proof of compliance for the 34 states which had applied for a share of the additional Title IV-B funds. Some of the states which have self-certified include Arkansas, Arizona, Connecticut, Kentucky, Michigan, New Jersey, New York, Ohio, Oregon, Utah, Virginia, Vermont, and Washington. States which have not certified their compliance include Alabama, California, Florida, and Texas. California currently meets the requirements of PL 96-272 as regards eligibility for additional Title IV-B funding. The Budget assumes Califor- nia will not qualify for this additional\u00b7 federal funding during fiscal year 1982-83. According to the Department of Social Services, this is because California does not meet the requirements of PL 96-272. Our analysis indicates, however, that California will be in compliance with these re- quirements by the beginning of FFY 83. Our specific findings are as fol- lows: 1. The requirement for an inventory of all children in foster care and a foster care information system will be satisifed by October 1~ 1982. Chapter 1229, Statutes of 1980, required county welfare and probation departments to report foster care information to the Department of Social Services in order to complete an inventory of all children in foster care and to establish an ongoing foster care information system. Ch 1229\/80 also appropriated $250,000 for reimbursement of county costs incurred for this purpose. The Department of Social Services prepared a foster care information system feasibility study report and submitted it to the Department of Finance and the Legislature in May 1981. That report proposes the im- plementation of the foster care information system in two phases. Phase one, the inventory of all children in foster care, is now complete. Phase two, the development and implementation of the foster care information system, is scheduled for completion October 1, 1982. The budget proposes expenditures of $586,500 from federal funds available under Title IV-B during fiscal year 1982-83 for the state administrative and county costs of phase two. 2. Current State Law and Regulations Satisfy the Requirement for a Case Review System. The case review system required by PL 96-272 consists of three compo- nents. First, there must be a written case plan for each child designed to Item 5180 HEALTH AND WELFARE \/ 1137 achieve placement in the most family-like environment available . Under current state law and regulations, every county is required to provide protective services for children and out-of-home care services for children as part of the overall social services program funded through Titles XX and IV-B of the federal Social Security Act. The Comprehensive Annual Service Plan (CASP) for fiscal year 1981–82 defines these mandated services as follows: \”Protective Services to Children. Those preventive and reme- dial activities and purchases by social services staff on behalf of children under 18 years of age who are either harmed or threatened with harm as the result of abuse, neglect, or exploitation. Protective services are provided to all children in need of them without regard to income. The basis for protective services must be documented initially. The continuing status of the child at risk must be docu- mented each six months while protective services are provided (Emphasis added.) \”Out-oE-Home Care Services for Children. Those activities, serv- ice funded resources, and designated community resources which are provided and\/ or arranged by social services staff to or on behalf of children who have been placed in out-of-home care or are being considered for such placement. The program is also designed to assist with the child’s early return to a permanent family setting or stabilized long-range care.\” (Emphasis added.) In addition, regulations\u00b7 contained in the Manual of Policy and Procedures (MPP) , Division 30, Sections 206 through 216, provide that out-of-home services for children shall \”be consistent with a written case plan relevant to the needs of a child and the noncon- flicting needs of the parents,\” and \”prevent unnecessary place- ment.\” Second, the status of each child must be reviewed administratively or judicially every six months to determine the appropriateness of the placement . According to the CASP, the out-of-home care services for children program is \”designed to assist with the child’s early return to a permanent family setting or stabilized long-range care.\” In addition, the MPP requires that \”an initial assessment must be made of each child\” and that \”reassessments shall be made as fre- quently as needed but in no event less than once every six months.\” Current regulations do not specify that six-month reviews must be \”administrative reviews\” as defined in PL 96-272. As defined by PL 96-272, these reviews must allow the participation of the child’s parents and include at least one person who is not directly responsi- ble for the child’s case management. Current regulations do not require that reassessments include the participation of the child’s parents, but do allow parents as well as other concerned parties to initiate grievance proceedings for a variety of reasons. Current regulations do not specify that six-month reassessments include at least one person who is not responsible for the child’s case manage- ment. Thus, it is unclear whether current law satisfies the require- ments of PL 96-272 as to the exact composition of an administrative review. Our analysis indicates, however, that the purpose of the six-month reassessments required by current law is identical to the purpose of the six-month reviews required by PL 96-272 . Third, there must be a dispositional hearing, conducted within 18 — –.–~-.—-.~~~.-~~~- 1138 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued months of the initial placement by a court, or by an administrative body approved by the court, to determine the future status of the child . Health and Welfare Code Sections 366 and 729 require that every hearing in which a minor is made a ward of the court be continued to a specific future date, not more than one year after the date of the initial hearing. Our analysis indicates that this provision of cur- rent law satisfies the requirement for a dispositional hearing for those children who are in foster care pursuant to a court order. PL 96-272 does not appear to require 18-month dispositional hearings for children placed in foster care voluntarily. 3. Current law and regulations satisfy the requirements for family reunification and preplacement preventative services. (The section of PL 96-272 which allows states to qualify for additional Title IV-B funds re- quires only that states satisfy one of these requirements.) According to state regulations, out-of-home care services for children are \”designed to assist with the child’s early return to a permanent family setting or stabilized long-term care.\” In addition, the emergency response system is expected, according to a report submitted to the Legislature by the department in January 1981, Uto reduce the number of unnecessary out-oE-home placements of children through earlier involvement of social workers in planning the services needed for maintenance of the family in the home.\” The emergency response program is now operational in 53 counties. California Expenditures for Child Welfare Services are Substantial. In addition to meeting the requirements of PL 96-272, California currently spends a substantial amount of funds on child welfare services. During 1982-83, the department estimates that counties will spend $99,593,175 in state and federal funds for the protective services for children, out-of- home care services for children, and emergency response programs and that counties will spend an additional $33,197,725 of their funds for these programs. Thus, total spending for. these programs during 1982-83 is es- timated at $132,790,900. Given the specific program requirements and the substantial funding available to implement them, we conclude that the requirements of PL 96-272 relative to eligibility for additional Title IV-B funds have been satisfied. Federal Funds A vailable. Our estimate of additional IV-B funding available to California in 1982-83 under the provisions of PL 96-272 as- sumes that IV-B funding for FFY 83 will continue at the FFY 82 level ($163.5 million). Under the continuing resolution, the Secretary of Health and Human Services may reduce Title IV-B funding during FFY 82 by up to 6 percent. As a result, there is a range of possible funding levels for FFY 83, as shown in Table 7. . Pending a final decision by the Secretary of HHS, our estimate assumes a 6 percent reduction below the $163.5 million level provided for in the continuing resolution. Based on this assumption, California will be eligible to receive a minimum of $1,020,000 in additional Title IV-B funds which have not been budgeted for 1982-83. We recommend these unbudgeted Title IV -B funds be used in lieu of General Fund support for social services programs, for General Fund savings of $1,020,000. This will increase the amount available in the General Fund by $1,020,000, and will thus give the Item 5180 HEALTH AND WELFARE \/ 1139 Table 7 Additional Federal Title IV-B Funding Available to California for FFY 83 Two Estimates No Reduction by Secretary of HHS (in millions) Nationwide TitleIV-B Funding Available FFY83 During FFY 82 ………………………………………………………….. $163.5 Six Percent Reduction by Secretary of HHS During FFY 82 …………………………………………………………. 153.7 Additional Funding Available Under PL 96-272\” $22.5 12.7 Additional Funding Available to California inFFY83b $1.80 1.02 \”Equals the difference between $141 million and estimated nationwide appropriation for Title IV-B. b Based on California’s 8 percent share of national population of children 0-17 years of age. California will receive 8 percent of the total if all 50 states have self-certified. Legislature more flexibility to fund its priorities in this or other program areas. As shown in Table 8, California may receive up to $1,800,000 of addition- al Title IV-B funds during FFY 83. Furthermore, to the extent that other states fail to self-certify, California’s share of the amount appropriated in excess of $141 million would increase. To provide the Legislature with additional discretion in allocating limited funds, we recommend adoption of the following Budget Bill language in Item 5180-151-001 which would require federal funds to be used in lieu of General Fund money, to the extent possible: . \”Provided that funds appropriated by this item shall be reduced by the Director of Finance by the amount of additional federal Title IV-B funds made available for the purposes of this item in excess of the sum of the amount scheduled for this item.\” Schedule of Appropriations in Budget Bill We recommend the 1982 Budget Bill be amended to schedule special- ized adult services by program, in order to facilitate legislative review of each program element. We further recommend adoption of Budget Bill language requiring that the Legislature be notified in advance of fund transfers among specialized adult services and\/or any other social services program elements. Item 5180-151-001 (b) of the 1982 Budget Bill proposes $154,854,000 (excluding COLA) for specialized adult services. The programs proposed to be funded from this item include in-home supportive services ($150,828,000), maternity care ($2,203,000), and access assistance for the deaf ($1,823,000), as detailed on pages HW 220-221 of the budget docu- ment. In past years, the annual Budget Act itemized these social services programs within the appropriations item. This practice restricted the transfer of funds between these programs under the provisions of Budget Act Control Sections 27.5 and 28. Given that the amount of state and federal funds made available for IHSS is to be limited to the appropriation contained in the annual Budget Act-a new policy established by Chapter 69, Statutes of 1981 (SB 633)- 1140 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued our analysis indicates that the appropriation for IHSS should be identified separately in the Budget Bill. Unlike the appropriation for other county social services, the specialized adult services appropriation is not proposed for distribution to counties as a block grant. Rather, as noted above, speci- fied funding levels for each of the three programs included in this category have been proposed. . Therefore, in order to ensure that appropriated funds are expended in the manner approved by the Legislature, we recommend that the 1982 Budget Bill Items 5180-151-001 (b) and 5180-151-866 (b) (federal funds for specialized adult services) be scheduled to itemize the program-specific appropriations within the specialized adult services category. In order to ensure continued legislative oversight of the expenditures for all social services programs, we further recommend adoption of the following Budget Bill language. \”Provided further that, notwithstanding the provisions of Sections 27.5 and 28 of the Budget Act, the Director of Finance may transfer funds appropriated for program 20, social services, among these elements not sooner than 30 days after notification in writing of the necessity therefor to the chairperson of the committee in each house which considers appropriations and the chairperson of the Joint Legislative Budget Committee, or not sooner than such lesser time as the chairperson of the Budget Committee, or a designee, may in each instance determine.\” OTHER-COUNTY SOCIAL SERVICES The Other-County Social Services (OCSS) program funds five of the six Title XX services that counties are required to provide (the 24-hour Emer- gency Response Hadley: \”System\” is a component of one of the mandated programs). In-Home Supportive Services (IHSS) is the sixth mandated program. Under the OCSS program counties may choose to provide one or more of the 13 services that are optional under state law. In addition to providing state support for the OCSS program, the appropriation for OCSS also contains funds to reimburse counties for their costs of adminis- tering the IHSS program. Table 8 Department of Social Services Administrative Restructuring of Other-County Social Services Programs Protective services to children (including 24\u00b7hour emer\u00b7 gency response) Out\u00b7of\u00b7home care services for children Protective services for adults Out\u00b7of-home care for adults Information and referral Child day care case management services Employment\u00b7related services Health-related services Family planning services 13 optional services (includes Family Protection Act demonstrations) Prior Status Mandated Mandated Mandated Optional Current Status Mandated Deleted specific service requirements Eliminated Optional Item 5180 HEALTH AND WELFARE \/ 1141 Restructuring of OCSS Programs. In October 1981, the department administratively (1) eliminated the mandate for four of the previously mandated services and (2) deleted from its regulations the specific pro- Table 9 Department of Social Services Consolidated OCSS Funding by Source 1978-79 to 1982-83 (in thousands) FY 1978-79 OCSS ………………………………………………………….. County services staff development.. ………… Emergency response ……………………………….. Child welfare services ……………………………… Totals …………………………………………………. FY 1979-80 OCSS ………………………………………………………….. County services staff development.. ………… Emergency response ……………………………….. Child welfare services ……………………………… Totals …………………………………………………. FY 1980-81 OCSS ………………………………………………………….. County services staff development.. ………… Emergency response ……………………………….. Child welfare services ……………………………… Totals ……………………… ; ………………………… FY 1981~2 (Estimated) I)CSS County services staff development\u00b7 ………. Emergency response Child welfare services Totals ……………………………………………….. .. FY 19~ (Proposed) OCSS c County services staff development\u00b7 ………. Emergency response Child welfare services Totals ………………………………………………… . Federal General Funds Fund $124,915 2,071 3,400 $130,386 $132,410 2,300 $5 4,750 ~ $138,829 $4,755 $144,327 1,933 3,295 $2,374 ~ $153,674 $2,374 Allocated together $141,296 $11,901 b Budgeted together $150,889 $10,167 d County $41,161 690 1,133 $42,984 $43,908 767 1,585 1,373 $47,633 $47,802 836 1,890 1,373 $51,901 $51,066 $53,622 Percent General Total Fund $166,076 2,761 4,533 $173,370 $176,318 3,067 6,340 75.0% 5,492 $191,217 2.5% $192,129 2,769 7,559 31.4% 5,492 $207,949 1.1% $204,263 5.8% $214,678 4.7% PL 97\u00b735 eliminated separate funding of the county services staff development program. DSS estimates no spending for this program in 1981-82 or 1982-83. – b $9,376,656 of the General Fund amount shown was transferred from the adoptions item. An equal amount of federal funding for Title IV\u00b7B, child welfare services, which became available after the enactment of the Budget Act of 1981, was used to offset General Fund support originally budgeted for adoptions. c Includes $192,500 for local costs of the foster care information system. d In past years, Title XX funds were transferred from the IHSS program for the OCSS cost\u00b7of\u00b7living adjustment and an equal amount of General Fund was budgeted for the IHSS program. The General Fund amount shown here represents $2,500,000 for emergency reponse, plus $7,667,000 for the OCSS COLA. The budget schedules the General Fund cost for all social services COLAs together. 1142 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued gram requirements for three of the preViously mandated serVices. The 13 optional serVices were left unchanged. Table 8 summarizes the depart- ment’s restructuring of the OCSS program. The department made these changes to allow counties the flexibility to respond to a decrease of $14,248,000 in federal funds available for OCSS below the level assumed in the Budget Act of 1981. We have reported this reduction in 1981-82 funding in our discussion of the social services block grant. As part of its response to the decrease in federal funding, the depart- ment also consolidated into a single amount the funds preViously appro- priated seI>arately for OCSS, 24-hour emergency response, Title XX county staff development, and the child welfare serVices program. The consolidated funds, referred to as the adult, family, and children serVices block grant, are now allocated in one amount to the counties. Counties continue to receive separate allocations for in-home supportive services. The county cost for administering the IHSS program, however, continues to be funded through the OCSS allocation. Proposed Funding for OCSs. The budget proposes total spending of $214,678,000 for OCSS in 1982-83. This total consists of $150,889,000 in federal Titles XX and IV-B funds, $53,622,000 in county funds, and $10,167,000 in General Fund support. These amounts include a cost-of- liVing adjustment, for which state and federal funding is proposed sepa- rately under Items 5180-181-001 and -866 (d) . Table 9 shows OCSS funding sources as proposed in the budget and compares the estimated 1981-82 and proposed 1982-83 levels of funding with prior years’ funding for those programs which have been combined to form the OCSS block program. Table 10 Department of Social Services Funding for oess 197~ to 1982-13 (in thousands) 1979-80 All Funds Total actual expenditures…………………………………………………………………… $191,217 Less spending for programs eliminated during 1981-82 …………………. -16,485 Total spending comparable with the OCSS program as restruc- tured in October 1981 ………………………………………………………….. . 1~1 Total actual expenditures …………………………………………………………………. .. Less spending for programs eliminated during 1981-82 ……………….. .. Total spending comparable with the OCSS program as restruc- tured in October 1981 ………………………………………………………… .. 1981-82 Consolidated OCSS Total estiInated expenditures …………………………………………………………… . 1982-83 Consolidated OCSS Total proposed expenditures …………………………………………………….. .. $174,732 $207,949 -15,183 $192,766 $204,263 $214,678 Percent Change N\/A 10.3% 6.0% 5.1% Item 5180 HEALTH AND WELFARE \/ 1143 Table 10 compares funding for just those OCSS programs that are being funded in 1981-82, for the four-year period ending June 30,1983. Expendi- tures for the spepified programs eliminated in 1981-82 have been deduct- ed from total expenditures in 1979-80 and 1980-81. Table 10 shows that expenditures for the continuing OCSS programs will increase by 6 percent (the cost-of-living increase authorized by the Legislature) in 1981-82 and are expected to increase in 1982-83 by 5.1 percent-slightly more than the proposed cost-of-living increase. Thus, while overall funding for OCSS and related programs has been reduced, the funding for the ongoing OCSS programs is comparable to the funding levels for those same programs in recent years. IHSS Administration Component of OCSS. The Department of Social Services estimates that expenditures for IHSS administration will account for $46,438,700, or 21.6 percent, of the total OCSS budget in 1982-83. Assuming counties are able to limit their spending for IHSS administration to the 25 percent county match required by state and federal law, the county costs will be $11,609,675 and the combined state and federal share will be $34,829,02\”5. The DepartInent of Social Services advises that IHSS administration costs consist entirely of the costs of various assessments made by social workers or other county employees. These assessments determine the number of hours of in-home supportive services needed by each IHSS client or potential client. Assessments also determine the client’s, or pro- spective client’s, eligibility to receive these services. Costs of administra- tive overhead items, such as supervisory costs and operating expenses, are refl~cted in the total assessment costs through cost accounting procedures set up by the department. The various IHSS assessments made by counties consist of: Intake Assessments. These are assessments of potential IHSS recipi- . ents who are not currently receiving these services. The department . estimates that 25 percent of IHSS administrative costs is for intake assessments. Six-Month Rt;assessments. Counties are required by current law and regulation to reassess the eligibility and the level of need for services of every IHSS recipient every six months. The department estimates that these scheduled reassessments account for 56 percent of IHSS administrative costs. Periodic Reassessments. Counties are required to reassess IHSS cli- ents whose level of need for these services is likely to change before their next scheduled reassessment at intervals deemed appropriate by the social worker. The department estimates that these periodic reas- sessments account for 13 percent of IHSS administrative costs. Recipient-Requested Reassessment. IHSS recipients who believe that their need for in-hom~supportive services has changed since their initial assessment or their last reassessment may request a reas- sessment. The department estimates that recipient-requestedreas- sessments account for 5 percent of IHSS administrative costs. Other Reassessments. The department estimates that all other reas- sessments account for 1 perc~nt of IHSS administrative costs. Table 11 shows the cost of e.ach kind of assessment and reassessment, based on the department’s estimate of total IHSS administrative costs for 1982-83. 1144 \/ HEALTH AND WELFARE SOCIAL SERVICES PROGRAMS-Continued Table 11 Components of IHSS County Administrative Costs Federal, State, and County Funds (in millions) Percent of Item 5180 Assessment Type Total Cost Cost Intake Assessment………………………………………………………………………………………… 25% $11.6 Six-Month Reassessment ……………………………………………………………………………… 56 26.0 Periodic Reassessment …………. ;…………………………………………………………………….. 13 6.0. Recipient-Requested Reassessment ……………………………………………………………. 5 2.3 Other Reassessments …………………………………………………………………………………… 1 .5 Totals …………………………………………………………………………………………………….. 100% $46.4 Elimination of Scheduled Six-Month IHSS Reassessments We recommend that the Department of Social Services report to the Fiscal Committees~ prior to budget hearings, on the fiscal and program- matic effects of eliminating or relaxing the requirement for six-month reassessments of nonseverely impaired IHSS recipients, including an esti- mate of the number of recipients who would request a reassessment if the scheduled reassessment were eliminated and a discussion of the likely effects of such a change on IHSS recipients. Section 12304 of the Welfare and Institutions Code requires counties to reassess the level of need of all severely impaired IHSS recipients at least once every six months. Severely impaired IHSS recipients are those as- sessed as needing at least 20 hours per week of in-home supportive serv- ices. The department estimates that approximately 12 percent of all six-month IHSS reassessments are of severely impaired recipients. There is no statutory requirement for counties to conduct six-month reassessments of nonseverely impaired IHSS recipients. Counties are re- quired by DSS regulation (Manual of Policy and Procedure, Section 30- 459.5), however, to conduct such reassessments. The department esti- mates that the elimination of six-month reassessments for nonseverely impaired IHSS recipients would reduce the cost of IHSS county adminis- tration by $1l.5 million during 1982-83. The primary purpose of the six-month IHSS reassessment is to deter- mine whether the recipient’s need for in-home supportive services has increased or decreased since the last assessment. To the extent that the six-month reassessments result in reducinf{ recipients’ assessed need or eligibility for in-home supportive services, the elimination or relaxation of the requirement that counties conduct six-month reassessments would increase the cost of the existing IHSS program. To the extent that these reassessments result in increasing recipients’ assessed needs, the elimina- tion or relaxation of the requirement would decrease the cost of the existing IHSS program. We are unable at this time to determine whether, on average, six-month reassessments result in increased or decreased IHSS program costs. If six-month reassessments of nonseverely impaired recipients were discontinued, it is likely that some of those recipients whose circumstances had changed sufficiently to warrant an increase in authorized service hours would request an unscheduled reassessment. To the extent that such recipients request reassessments in lieu of the currently required six~ month reassessments, the cost savings attributable to elimination of such reassessments would be less than the department estimates. We are una- Item 5180 HEALTH AND WELFARE \/ 1145 ble at this time to determine the extent to which nonseverely impaired IHSS recipients would request reassessments in lieu of six-month reassess- ments and are, thus, unable to estimate the likely cost savings of eliminat- ing or relaxing the requirement for these reassessments. We arlOl also unable to determine the likely effect on IHSS recipients of reducing reassessments. To the extent that some recipients are granted more service hours as the result of the current six-month reassessments, the elimination or reduction of the requirement for those reassessments could result in decreased service to those recipients. While some recipi~ ents might request unscheduled reassessments, and thereby be granted more service hours, other equally deserving recipients might not request reassessments and might, consequently, receive less service than they are qualified to receive. Therefore, the programmatic and fiscal effects of elimiIiating or relax- ing six-month reassessments of nonserverely impaired IHSS recipients are uncertain. Because the potential General Fund consequences from such a policy change are major, however, we recommend that the department report to the fiscal committees prior to budget hearings on the likely fiscal and programmatic effects of eliminating or relaxing the requirement for six~month reassessments under the IHSS program. The department’s re- port should address the questions of the fiscal effect of a possible increase in recipient requested reassessments and of the likely effects of the elimi- nation or relaxation of the requirement for six-month reassessments on IHSS recipients. . Transfer of Funding for IHSS Administration We recommend that federal. funds for county administration of the In-Home Supportive Services program be transferred from other-county social seTvices (Item 5180-151-866[aJ) to specialized adult services (Item 5180-151-866[b J), in order to budget program and administrative costs to- gether With the same program, thus facilitating legislative review of total program costs. . As already noted, county administrative costs for the In-Home Support- ive Services (IHSS) program currently are funded from county allocations of state and federal funds for other-county social services (OCSS). For 1982-83, the proposed appropriation for OCSS is $161,056,000 (including COLA). Of this amount, approximately $34,829,000 will support IHSS county administration. With the exception of IHSS administration, the OCSS category contains Title XX social services programs for which the county administrative costs associated with the provision of such services are also funded from the OCSS allocation. Our analysis indicates that transferring IHSS county administration from OCSS to specialized adult services would be consistent with the general practice in the social services program of budgeting administra- tive and program costs together. In addition, budgeting these two cost elements together would facilitate legislative review of the total cost of the IHSS program; This is especially desirable, given the consolidation of fund- ing for OCSS into a block grant to counties, since consolidation will reduce the availability of cost data for individual program components such as IHSS administration. Therefore, we recommend that $34,829,000 for county administration of in-home supportive services be transferred from subpart (a) ofItem 5180- 151, other-county social services, to subpart (b), specialized adult services. 1146 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued IN-HOME SUPPORTIVE SERVICES The fundamental concept of the In-Home Supportive Services (IHSS) program is that providing certain services to eligible aged, blind, and disabled persons will allow those persons to remain in their own homes when they would otherwise have to be institutionalized in boarding or nursing facilities. A secondary purpose of the IHSS program has been to enhance the quality of life of the recipients, as opposed to reducing the immediate prospects of their institutionalization. Currently, county welfare departments administer the IHSS program. Each county may choose to deliver services in one (or some combination) of three payment modes: (1) directly by county employees, (2) by private agencies under contract with the counties, or (3) by individual providers hired directly by the recipients. Individual providers delivered 75.7 per- cent of IHSS case months in 1980-81. Budget Year Proposal The budget proposes a General Fund appropriation of $159.2 million (including a cost-of-living adjustment (COLA) of $8.4 million) for IHSS in 1982-83. This is an increase of $16.3 million, or 11.4 percent, above estimated 1981-82 General Fund expenditures. The budget proposes a total appropriation of $279.9 million (including COLA, but excluding county funds of $1.9 million). The requested appro- priation is $8.6 million, or 3.2 percent, more than estimated current year expenditures. of appropriated funds. As Table 12 indicates, the budget assumes that counties will commit $1.9 million to the IHSS program in 1982-83. Of that amount, approximately one-half ($0.9 million) is expected as a share in the cost of the proposed $9.3 million COLA. Although supporting documents provide the detail regarding the county share of the COLA, the budget itself does not indi- cate a cost to the counties for providing this increase. The extent to which counties will in fact share in the 1982-83 cost of providing the level of service proposed in the budget depends on whether actual program costs exceed the amount of state and federal funds available for IHSS in the budget year. Table 12 In-Home Supportive Services Funding by Source 1981-412 and 1982-83 (in thousands) Total Program B General Fund …………………………………………………… .. Federal funds ……………………………………………………. . Courtty funds …………………………………………………… .. Estimated 1981-<12 $142,874 128,402 920 Totals .................................................................... $272,196 Program Cost Exclusive of County Funds General Fund.............................................................. $142,874 Federal funds .............................................................. 128,402 Totals .................................................................... $271,276 a Includes amounts. for COLA. Proposed 1982-83 $i59,241 120,686 1,882 $281,809 $159,241 120,686 $279,927 Change Amount Percent $16,367 11.5% -7,716 -6.0 962 104.6 $9,613 3.5% $16,367 11.5% -7,716 -6.0 $8;651 3.2% Item 5180 HEALTH AND WELFARE \/ 1147 Chart 1 shows the state and federal cost-sharing relationships for in- home supportive services over the period 1976-77 to 1982-83 (proposed). The county share of costs is not displayed in the table beyond 1980-81, although county funds are included in the estimates of total expenditures. 0 0 L L A R S $300 275 250 225 200 175 150 125 100 75 50 25 Chart 1 Department of Social Services Expenditures for In-Home Supportive Services General Fund, Federal Funds, and Total 1976-77 through 1982-83 (in millions) Total Funds 263.1 . a 272.2 General Fund 159.4 281.8 a 159.2 ,,.-- ................. 142.9 ___ ---- 119.4,\"\"''' ... ;.;- .\".' ~- ----- 86 7 94.7 ~~~- _--- 128.4 . 82.7 ~~~~ _---- 1037 120.7 ------.,..--- 95.6 . 53.L~\"'''' 82.9 . Federal Funds 28.9 ......... - ... --- oL-----------~--------------~--~------~---- 76-77 77-78 78-79 79-80 80-81 b 81-82 b 82-83 b (+ 18.0%) (+30.2%) (+21.1 %) (+22.4%) (est.) (prop.) (+3.5%) (+3.5%) [l Counfy match of $0.9 mIllion for 1981-82 and $1.9 million for 1982-83 not displayed tJ ~our(t-J Govtrnor's Budget for 1982-83 Commission on Stote Finonce Estimates California Necessities Index at 8.2 Percent We recommend a General Fund reduction of $1~OOO from Item 5180- 181-001 (d) to reflect the most recent estimate by the Commission on State Finance of the changein the Califomia Necessities Index (CNI). The Department of Finance estimated in December 1981 that the CNI increase from December 1980 to December 1981 would be 8.8 percent. Based on more recent information, however, the Commission on State Finance estimated in late January 1982 that the actual CNI increase would be 8.2 percent rather than 8.8 percent. In our analysis ofItem 5180-181, we recommend that the Commission on State Finance's more recent estimate be used for calculating cost-of-living increases for the AFDC, SSI\/SSP, and IHSS programs. This recommendation, discussed on page _ of this Analy- sis, would result in total savings of $117,000 ($105,000 General Fund and $12,000 in county funds). Impad of Current Year State and Federal Changes The In-Home Supportive Services Program was directly affected by two major developments during 1981-82: (1) the reduction of federal funds available to California for social services programs and (2) the enactment of Ch 69\/81 (SB 633). 1148 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued Federal Funds Reduction. As noted iIi our discussion of the federal social services block grant, California received approximately $57.5 million less in federal Title XX funds for social services than the 1981 Budget Act anticipated. This reduction in Title XX funding was partially offset on a one-time basis by using $13.4 million in federal funds for social services that had been allocated to California for related programs (Title IV-B of the Social Security Act and the Low-Income Home Energy Assistance program). Thus, the net reduction in federal funding for social services during the current year was $44.1 million. Of the $44.1 million reduction, $26.3 million occurred in the In-Home Supportive Services program, reducing the total state and federal pro- gr;un dollars available for 1981-82 from $297.6 million to $271.3 million. As shown in Table 13, this resulted in an overall IHSS program reduction of 9.7 percent, while the counties' share of total local program costs declined by 75 percent. On November 13, 1981, the Director of Finance advised the Legislature in a Section 28 notification that the necessary program reduc- tions in IHSS would be made pursuant to the provisions of Ch 69\/81. Table 13 Department of Social Services Funding Reductions in the In-Home Supportive Services Program 1981-82 (in thousands) Change Budget Act 011981 Section 28 Notification 11\/13\/81 $142,874 Amount Percent General Fund.................................................. $142,874 Federal funds .............................................. 154,678 Totals ........................................................ $297,552 Total allocation of state and federal funds County share ................................................ .. Totals, Local Program ......................... . $291,677 a 3,842 b $295,519 c 128,402 $271,276 $265,749 a 961 b $266,710 C -$26,276 -17.0% -$26,276 -8.8% -$25,928 -8.9% -2,881 -75.0% -$28,809 -9.7% a The Department of Social Services commits a portion of local assistance funding to support the contract for the IHSS payrolling system and workers' compensation. In the original allocation plan, these costs were estimated at $5,875,000; under the revised allocation plan, the department estimates costs of $5,527,000. b The Department of Social Services prOvided these estimates. C Source: DSS's All-County Letter No. 81-70 Guly 8,1981) and All-County Letter No. 81-109 (October 21, 1981), respectively. Chapter 69, Statutes of 1981. Five provisions of Ch 69\/81 will have the greatest impact on IHSS. These provisions: L Limit General Fund expenditures forIHSS to the amount appropriat- ed for this purpose in the annual Budget Act; 2. Require counties to share in the cost of the program; 3. Require counties to submit plans to the Department of Social Serv- ices indicating how each county intends to keep program costs within the county's allocation; 4. Require DSS to ensure, based upon the contents of county plans, that any program reductions necessary to accommodate a capped appropria- tion would be made evenly throughout the year and in a specified order of legislative priorities; and 5. Restrict the circumstances under which IHSS will be made available. Item 5180 HEALTH AND WELFARE \/ 1149 Statewideness Chapter 69 established legislative priorities on how \"optional\" program reductions needed to keep expenditures within the amounts appropriated in the annual Budget Act are to be implemented. If reductions should be necessary, counties and the department must reduce services in the fol- lowing order: 1. Reduction in the frequency with which nonessential services are provided; 2. Elimination of nonessential service categories; 3. Termination or denial of eligibility to persons requiring only domes- tic services; 4. Termination or denial of eligibility to persons who, in the absence of services, would not require placement in an out-of-home care facility; and 5. Per capita reduction in the cost of services authorized. The counties' IHSS plans submitted to DSS in September indicated that the program reductions mandated by Ch 69\/81 would be sufficient to keep current year IHSS expenditures within the initial 1981--82 appropriation. Several counties have advised us, however, that due to both the unan- ticipated federal fund reductions and delays in implementing the mandat- ed reductions, they would be making further reductions to stay within their current year allocations, in accordance with the legislative priorities specified in Ch 69\/81. To the extent that during the current year some counties, but not all, are forced to make one or more additional program reductions (that is, beyond those made statewide pursuant to DSS regulations), benefits avail- able under the IHSS program would not be uniform statewide. That is, \/I v E R \/I G E M 0 N T H L y c \/I S F L 0 \/I D Chart 2 Department of Social Services In-Home \u00b7Supportive Services Average Monthly Caseload (in thousands) Aver:age Cost per Case Month 1979-80 through 1982-83 0 Severely impaired 120 [ill Nonseverely impaired $230 _ Average Cost per 100 $206 80 60 40 20 0 82-83 (prop.) 240 200 D 160 0 L 120 L A 80 R S 40 0 1150 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued clients with similar-characteristics and in similar circumstances would be treated dissimilarly With respect to the in-home supportive services they receive. Many county IHSS administrators believe that this would be con- trary\u00b7 to existing law regarding uniform provision of services stateWide. In an opinibn issued on February 8, 1982, the Legislative Counsel ad- vised our office as follows: \"In general, existing law requires that in-home supportive services be supplied uniformly by counties, except that, after proper notification, counties may differentially implement program re- ductions in order to prevent costs\u00b7 for the in-home supportive services program from exceeding available funds. The priority provisions of Chap- ter 69 of the Statutes \u00b7of 1981 which authorize differential implementation of these reductions are not in conflict with existing law.\" Chart 3 Department of Social Services In-Home Supportive Services Funding Fourteen Largest Counties 1980-81 and 1981-82 (in millions) o Revised county allocations\u00b7for 1980-81 [\u00a3l Initial county allocations for 1981-82 iil Total costs prOjected by counties before Chapter 69 savings (1981-82) II Total costs projected by counties after Chapter 69 savings (1981-82) Revised actual county allocations, reflecting federal fund reductions (1981-82) o $280 . 252.4 268.0 240 221.5\" o 200 L 160 L A R S 120 80 40 O'--__ ..L...-_..I.-_.....L=~ __ Dec 81 July 81 Sept 81 Sept 81 198

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1983-1984 AFDC Budget LAO Analysis

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1983-1984 AFDC Budget Analysis.pdf

” Item 5180 HEALTH AND WELFARE \/ 1049 DEPARTMENT OF SOCIAL SERVICES SUMMARY The Department of Social Services (DSS) is the single state agency responsible for supervising the delivery of cash grants and social services to needy persons in California. Monthly grant payments are made to eligible recipients through two programs-Aid to Families with Depend- ent Children (AFDC) and the Supplemental Security Income\/State Sup- plementary Payment (SSI\/SSP) program. In addition, welfare recipients, low-income individuals, and persons in need of protection may receive a number of social services such as information and referral, domestic and personal care assistance, and child and adult protective services. . Table 1 identifies total expenditures from all funds for programs admin- istered by DSS, for 1982-83 and 1983-84. Total expenditures for 1983-84 are proposed at $6,164,391,000, which is a decrease of$198,592,000, or 3.1 per- cent, below estimated current-year expenditures. Table 1 Department of Social Services Expenditures and Revenues by Program All Funds 1982-33 and 1983-84 (in thousands) Program. Department support …………………………………… .. AFDC cash grants …………………… ; …………………. . SSI\/SSP cash grants ……………………………………… . Special adult programs ………………………………… . Refugee and entrant cash grants ……… ; ………. .. Low income home en~rgy assistance ………… .. County welfare department administration .. Emergency assistance employment pro- grams ………………………………………………….. . Social services programs …………………………….. . Community care licensing ………………………….. .. Totals …………………………………………………….. .. General Fund ………………………………………………. . Federal Funds ………………………………………………. . Interstate Collections Incentive Fund ……….. . County Funds ………………………………………………. . Reimbursements ………………………………………….. .. 1982-83 Estimated $147,196 2,946,983 2,012,124 1,748 117,399 583,977 (336) 545,240 8,316 $6,362,983 2,763,446 3,262,310 330,315 6,912 1983–84 Proposed $149,495 2,723,190 1,946,118 1,748 97,941 54,145 619,880 (1,344) 566,235 5,639 $6,164,391 2,525,586 3,235,397 600 394,115 8,693 ChanlI.e Amount Percent $2,299 1.6% -223,793 -7.6 -66,006 -3.3 -19,458 -16.6 54,145 35,903 6.2 (1,008) (300.0) 20,995 3.9 -2,677 -32.2 -$198,592 -3.1% -237,860 -8.6 -26,913 -0.8 600 63,BOO 19.3 1,781 25.8 Table 2 shows the General Fund expenditures for cash grant and social services programs administered by DSS. The department requests a total of $2,525,586,000 from the General Fund for these programs in 1983-84. This is a decrease of $237,860,000, or 8.6 percent, below estimated current- year expenditures. OVERVIEW OF ANALYST’S RECOMMENDATIONS The analysis of the proposed 1983-84 budget for DSS is divided into ten sections, as follows: (1) state operations, (2) aid to families with dependent children, (3) state supplementary payment program for the aged, blind, and disabled, (4) special adult programs, (5) refugee cash assistance pro- grams, (6) low-income home energy assistance program, (7) county ad- ministration of welfare programs, (8) social services, (9) community care licensing, and (lO) cost-of-living increases. 1050 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES SUMMARY-Continued Table 2 Department of Social Services General Fund Expenditures 1982-83 and 1983-84 (in thousands) 1982-83 1983-84 Program Estimated Proposed $44,344 $42,223 1,327,672 1,174,669 Department support ……………………………. .. AFDC cash grants ……………………………….. .. SSI\/SSP cash grants ……………………………. .. 1,104,161 1,021,772 Special adult programs ………………………… .. 1,708 1,708 County welfare department administra- tion ………………………………………………… ; 99,268 109,153 Emergency assistance employment programs ……………………………………. . (84) (336) Social Services programs …………………….. .. 177\/117 173,098 Community care licensing …………………. .. 8,316 2,963 Totals ……………………………………………. .. $2,763,446 $2,525,586 Item 5180 Change Amount Percent -$2,121 -4.8% -153,003 -11.5 -82,389 -7.5 9,885 10.0 (252) (300.0) -4,879 -2.7 -5,353 -64.4 -$237,860 -8.6% We are recommending reductions totaling $38,202,000 from proposed General Fund expenditures. Of this amount, $194,000 reflects recommen- dations for programmatic change, $9,862,000 reflects technical budgeting recommendations, and $28,146,000 reflects recommendations that un- budgeted federal funds be used in lieu of General Fund support. Table 3 Department of Social Services Summary of Legislative Analyst’s Recommendations General Fund (in thousands) Recommended Changes Program- Increase matic Technical Federal Recommendations Issues Issues Funds Total Pending State Operations ………………………. -$194 -$1,055 -$1,249 AFDC Cash Grants …………………. 72;1.67 -$940 -2,750 68,577 b SSI\/SSP Cash Grants ……………….. -72;267 -6,387 -5,800 -84,454 $937,318 Low-Income Home Energy As- sistance Program ……………….. 54,145 County Administration of Wel- fare Programs …. , ………………. -149 -2,349 2,498 Social Services ………………………….. -2;219 -14,185 ~16,404 17,170 Community Care Licensing …….. -167 -2,007 -2,174 — Totals …………………………………. -$194 -$9,862 -$28,146 -$38;202 $1,008,633 a In our analysis of the departmental support budget (Item 5180-001-(01), we withhold recommendation on a proposed General Fund reduction of $414,000 associated with the elimination of 14 legal positions. b In our analysis of the AFDC program (Item 5180-101-(01), we withhold recommendation on a proposed General Fund reduction of $18,309,000 related to the Welfare Fraud Early Detection Prevention Program. Item 5180 HEALTH AND WELFARE \/ 1051 In addition, we are recommending that $72,267,000 requested from the General Fund to provide for a cost-of-living adjustment under the SSI\/SSP program be used instead to provide a cost-of-living adjustment for AFDC recipients. This recommendation is based on the considerable disparity that exists between SSI \/ SSP and AFDC grants, and the fact that maximum grant levels under the AFDC program are not adequate to provide for a standard-of-living at the federally designated poverty level. We withhold recommendation on $1,008,633 proposed in the Budget, pending receipt of additional information. Table 3 summarizes our recom- mendations by program category. Health and Welfare Agency DEPARTMENT OF SOCIAL SERVICES-DEPARTMENTAL SUPPORT Item 5180 from the General Fund and Social Welfare Fed- eral Fund Budget p. HW 139 Requested 19~4 ………………………………………………………………. . Estimated 1982-83 ………………………………………………… : …………….. . Actual 1981-82 ……………………………………………………………………… . $42,223,000 44,344,000 51,540,000 Requested decrease (excluding amount for salary increases) $2,121,000 (-4.8 percent) Total recommended reduction …………………………………………… . 1,249,000 1983-84 FUNDING BY ITEM AND SOURCE Item Description 5180-001-OO1-Department of Social Services, Sup- Fund General Amount $42,223,000 port 5180-001-866-Department of Social Services, Sup- port Federal (98,579,000) Analysis SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS page 1. Placer and Nevada Counties’ Data Processing Systems. 1058 Reduce by $194~OOO. Recommend Placer and Nevada Counties pay for 25 percent of the costs of the data process- ing systems operated by the Department of Social Services because the costs of services are part of the routine adminis- trative costs in which all other counties are required to share, for an increase in reimbursements of $194,000 and a reduction in General Fund support of the same amount. 2. Legal Positions. Withhold recommendation on proposed 1058 elimination of 14 legal positions, pending identification of the positions to be eliminated and review of the depart- ment’s plan to absorb the workload currently assigned to those positions. 3. Family Protection Act. Recommend elimination of re- 1059 quirement for annual report on the Family Protection Act (FPA) Demonstration Project consistent with our recom- mendation for approval of the proposed elimination of the 1052 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-DEPARTMENTAL SUPPORT-Continued project. 4. Unbudgeted Federal Funds. Reduce by $l~O~OOO. Rec- ommend unbudgeted federal funds be used to replace Gen- eral Fund support for foster family home and group home for children licensing in order to provide the Legislature with more fiscal flexibility. 5. Community Care Licensing. Recommend implementa- tion of the facility rating system. Further recommend that the Department of Social Services report to the fiscal com- mittees prior to budget hearings on (a) the costs of using the Facility Information System (FIS) to generate management information reports based on the facility rating system and (b) a plan to develop performance standards for the com- munity care licensing system based on the rating system. 6. Community Care Licensing. Recommend adoption of Budget Bill language requiring the department to conduct a demonstration project to test the feasibility of eliminating or modifying the current requirement for annual visits to all community care facilities. Further recommend enactment of legislation in order to allow the department to conduct this project. . 7. Community Care Licensing. Recommend enactment of legislation to require that all community care facilities be charged a license fee based on (a) the cost of licensing each facility type and (b) the proportion of each facility’s clients which are private placements. GENERAL PROGRAM STATEMENT 1060 1062 1064 1065 The Department of Social Services (DSS) administers income mainte- nance, food stamps, and social services programs. In addition, the depart- ment is responsible for licensing and evaluating nonmedical community care facilities, and determining eligibility for the federal supplemental security income and Medicaid\/medically need}’ programs through disabil- ity evaluations. These responsibilities are divided among nine operating divisions within the department. . The department is authorized to have 3,502.6 positions in the current year. ANALYSIS AND RECOMMENDATIONS The budget proposes an appropriation of $42,223,000 from the General Fund for support of the DSS in 1983-84. This is a decrease of $2,121,000, or 4.8 percent below estimated current-year expenditures. The decrease, however, makes no allowance for the cost of any salary or staff benefit increases that may be approved for the budget year. The budget proposes total expenditures of $149,495,000, including ex- penditures from reimbursements, for support of the department in 1983- 84. This is an increase of 2,299,000, or 1.6 percent, over estimated 198~ expenditures. Table 1 shows total expenditures and personnel-years for the department, by major program category.\u00b7 .. Item 5180 HEALTH AND WELFARE \/ 1053 Table 1 Summary of the DSS Support Budget 1982-a3 and 1983-84 (dollars in thousands) Estimated\” Proposed Change Funding 1982-83 1983-84 Amount General Food ……………………………… $44,344 $42,223 -$2,121 Federal Funds ……………………………… 95,940 98,579 2,639 Reimbursements ……………………. : …… 6,912 8,693 1,781 Totals …………………………………….. $147,196 $149,495 $2,299 Program AFDC-FG\/U: ……………………………….. $15,085 $13,057 -$2,028 Personnel Years ………………………. 233.0 226.6 -6.4 AFDC-FC: …………………………………… 3,210 4,121 911 Personnel Years ………………………. 89.4 131.9 42.5 Child Support: ……………………………… 4,824 5,463 639 Personnel Years ………………………. 63.9 64.6 0.7 SSI\/SSP: ………………………………………. 1,096 1,103 7 Personnel Years ………………………. 24.0 24.1 0.1 Special Adult Programs: ……………… 393 326 -67 Personnel Years ………………………. 4.1 1.8 -2.3 Food Stamps: ……………………………….. 10,055 10,343 288 Personnel Years ………………………. 269 271.6 2.6 Refugee Programs: ………………………. 2,666 2,842 176 Personnel Years ………………………. 47.5 45.2 -2.3 Social Services Programs: ……………. 17,136 17,268 132 Personnel Years ………………………. 405.0 369.5 -35.5 In-Home Supportive Services: …… (3,048) (3,398) (350) Personnel Years ………………………. (78.8) (77.7) (-1.1) Other County Social Services: …… (3,610) (3,566) (-44) Personnel Years ………………………. (109.8) (93.0) (-16.8) Adoptions: …………………………………… (5,267) (5,557) (290) Personnel Years ………………………. (127.6) (127.9) (0.3) Other Social Services: …………………. (3,987) (3,855) (-132) Personnel Years ………………………. (66.7) (62.7) (-4.0) Child Abuse Prevention Programs: (1,224) (892) (-332) Personnel Years ………………………. (22.1) (8.2) (-13.9) Community Care Licensing: ………. 13,954 13,260 -694 Personnel Years ………………………. 379.0 311.2 -67.8 Disability Evaluation: …………………. 72,669 76,122 3,453 Personnel Years ………………………. 1,581.3 1,551.3 -30.0 Services to Other Agencies: ………. 4,811 5,014 203 Personnel Years ………………………. 93.8 85.8 -8.0 County Data Systems ……………… : … 1,297 576 -721 Personnel Years ………………………. 5.0 5.0 Totals ……………………………………………. $147,196 $149,495 $2,299 Personnel Years ………………………. 3,195.0 3,088.6 -106.4 Percent -4.8% 2.8 25.8 1.6% -13.4% -2.7 28.3 47.5 13.2 1.1 0.6 0.4 -17.0 -56.1 2.9 1.0 6.6 -4.8 0.8 -8.8 (11.5) (-1.4) (-1.2) (-15.3) (5.5) (0.2) (-3.3) (-6.0) ( -27.1) (-62.9) -5.0 -17.9 4.8 -1.9 4.2 -8.5 -55.6 1.6% -3.3 \”Estimated expenditures for 198Z-83 do not reflect the 2 percent unallotment directed by Executive Order D-l-83. Proposed General Fund Budget Changes Table 2 shows the changes in the department’s proposed General Fund support expenditures for 1983-84. As the table shows, General Fund ex- penditures are proposed to decrease by $2,121,000, or 4.8 percent. The decrease reflects proposed expenditure increases totaling $4,480,000 and reductions totaling $6,601,000. The major proposed increases consist of: (1) increased costs for existing personnel ($1,542,000), (2) the state share of 1054 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-DEPARTMENTAL SUPPORT-Continued Item 5180 grants for disaster relief-Anaheim fire and Northern California Floods- ($1,079,000), and (3) program change proposals for foster care group home auditing and rate setting ($515,000). The major decreases consist of: (1) the elimination of the family day care licensing program ($1,206,000), (2) an adjustment for the one-time only 1982-83 costs of the’ contract to revise the Statewide Public Assistance Network (SPAN) feasibility study report and other SPAN-related activities ($666,000), (3) savings to the General Fund anticipated from enactment of a provision in the compan- ion bill to the Budget Bill which would require counties to pay for disabili- ty evaluations of Medically Indigent Adults ($1,828,000), and (4) the availability of federal funds for the licensing of foster care homes and institutions ($1,407,000). Table 2 DSS-Support Budget Proposed General Fun\” Adjustments . (in thousands) Cost 1. 1982-83 Estimated Current Year Expenditures, revised ………………. . 2. Baseline Adjustments A. Increase in existing personnel costs (1) Merit salary adjustment ……………………………………………………… . (2) Retirement …………………… ; …………………………………………………… . (3) Other ……………………………………………………………………………………. . Subtotal ………………………………………………………………………………….. . B. Decrease in existing personnel costs (1) Limited-term positions (a) AFDC foster care position ………………………………………… .. (b) Child support program maintenance increase ………… .. (c) Information systems analysis bureau position ………….. .. (d) Adoptions policy and program consultation ………………. . (e) Continue limited-term adoptions caseworker position (f) IHSS payrolling system management unit ……………….. .. (g) Family Protection Act (AB 35) evaluation ……………….. .. Subtotal ………………………………………………………………………………….. . (2) Other Reductions (a) Long~term care ………………………………………………………….. .. (b) Family day care home licensing ……………………………….. .. (c) Attorneys ……………………………………………………………………… . (d) SPAN ………………………………………………………………………….. .. (e) Disaster Relief-Chapter 955\/82 ………………………………… . (f) Disaster Relief-Chapter 994\/80 ……………………………….. .. Subtotal ………………………………………………………………………………….. . C. One-Time Expenditures (1) Equipment …………………………………………………………………………. . (2) Disaster relief …………………………………………………………………….. .. Subtotal …………………………………………………………………………………. .. D. Operating Expenses and Equipment (1) Price increase …………………………………………………………………….. .. (2) Office of Administrative Law ………………………………………….. .. (3) Health & Welfare Data Center contract …………………………. . Subtotal ………………………………………………………………………………….. . E. AdjUstments to fund sources $330 1,207 5 -$34 -32 -77 -40 -64 -65 -106 -$36 -1,206 -233 -666 -238 -100 $538 -189 -29 Total $44,344 $1,542 -$418 -$2,479 $1,078 $320 Item 5180 HEALTH AND WELFARE \/ 1055 (1) Child support …………………………………….. : ……………………………… . $285 (2) Disability evaluation …………………………………………………………… . -1,828 (3) Federal funds for licensing of foster care homes and institu- tions ……………………………………………………………………………………… . -1,407 Subtotal ………………………………………………………………………………….. . F. Adjustments to full-year costs (1) Child support UI intercept-AB 2856 …………………………….. … $68 (2) Adoptions Attorney General costs-‘–AB 2695 ……………………. . 23 (3) Returned county workload ………………………………………………… . 31 Subtotal ………………………………………………………………………………….. . Total Baseline Adjustments ……………………………………………………….. . 3. Program Change. Proposals A. AFDC-foster care rate setting ………………………………………………… . $195 B. Child al;mse and neglect prevention and intervention-AB 1733 -250 C. AFDC-foster care audits and appeals ……………………………………. . 320 D. Adoptions casewor.kers …………………………………………………………….. . 69 E. Child support maintenance increase ……………………………………….. . 42 F. Placer\/Nevada case data system ………………………………………………. . 288 Total Program Change Proposals …………………………………………….. . 4. Total General Fund Change Proposed for 1983-84 ……………………… . 5. 1983-84 Proposed General Fund Expenditures …………………………….. . Table 3 Department of Social Services Position Changes Proposed for 1983-84 Workload and Requested -$2,950 $122 (-$2,785) $664 (-$2,121) $42,223,000 Existing Administrative New Total Net Change Positions Adjustments Positions Positions Number Percent AFDC-Foster Care ……………. 111.0 AFDC-Child Support En- forcement …………………….. 71.7 AFDC-Other …………………….. 253.3 SSI\/SSP ……………………………….. 26.7 Special Adult Programs ………. 7.5 Food Stamps ………………………… 301.0 Refugee Program ……………….. 50.1 Social Services Programs …….. 420.6 Community Care Licensing .. 383.9 Disability Evaluation ………….. 1,704.5 Services to Other Agencies .. 95.2 SPAN …………………………………… Totals ……………………………. 3,425.5 -8.1 -0.6 -7.6 -5.5 -12.0 -0.1 -22.5 -49.1 -13.7 -1.3 -120.5 Requested New Positions AFDC-Foster Care ……………………………… 40.5 AFDC-Child Support Enforcement …… 4.5 Social Services Programs ………………………. 2.0 Community Care Licensing…………………… 3.5 SPAN ………………………………………………………. 5.0 Totals ….. …………………………………………… 55.5 Percent …………………………………………… . 40.5 143.4 32.4 29.2% 4.5 75.6 3.9 5.4 245.7 -7.6 -3.0 26.7 2.0 -5.5 -73.3 289.0 -12.0 -4.0 50.0 -0.1 -0.2 2.0 400.1 -20.5 -4.9 3.5 338.3 -45.6 -11.9 1,690.8 -13.7 -0.8 93.9 -1.3 -1.4 5.0 5.0 5.0 — — 55.5 3,360.5 -65.0 -1.9% Fiscal Effect of Request for New Positions (in thousands) General Fund $749 42 69 98 288 $1,246 52.3% Federal Reim- Funds bursements $749 98 184 $1,031 43.3% $104 $104 4.4% Totals $1,498 140 69 98 576 $2,381 100.0% 1056 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-DEPARTMENTAL SUPPORT-Continued Proposed New Positions Item 5180 The department is proposing a net reduction of 65 positions for 1983-84, as shown in Table 3. This reflects 55.5 new positions and a reduction of 120.5 positions. As a result of these changes, the budget proposes funding for 3,360.5 authorized positions in 1983-84. The largest single request is for 40.5 positions for the Aid to Families with Dependent Children-Foster Care (AFDC-FC) program. These positions are requested to conduct audits of foster care group homes and to staff a new statewide rate-setting system for foster care group homes. Both the rate setting system and the requirement for group home audits were created by Ch 977\/82 (AB 2695). The largest single reduction in staffing is the proposed elimination of 49.1 positions from the community care licensing division in order to reflect the elimination of the Family Day Care Licensing Program. Current-Year Support Budget Augmentation On September 17, 1982, the Director of the Department of Finance notified the Chairman of the Joint Legislative Budget Committee, pursu- ant to control Section 28 of the 1982 Budget Act, of her intent to approve an augmentation of $1,951,835 to the Department of Social Services’ budget. The purpose of the augmentation was to fund a projected shortfall in the department’s support budget. The requested augmentation consist- ed of (1) a transfer of $1,753,835 in federal Title XX funds from social services programs to departmental support and (2) $198,000 in unbudget- ed federal Title IV-B (child welfare services) funds. The department proposed to use these additional federal funds to support activities which were budgeted for support from the General Fund, thereby making $1,- 951,835 in General Fund money available to offset the projected General Fund shortfall in the department’s support budget. The department stated that the General Fund shortfall was the result of four factors: 1. FiYe Percent Legislatiye Reduction. In acting on the 1982 Budget Bill, the Legislature reduced the department’s General Fund support appropriation by 5 percent, for a reduction of $2,296,000. The department took administrative actions to reduce total spending by $2,098,000, and proposed to fund the remaining $198,000 through the funding augmenta- tion proposed in the Section 28 letter. 2. Inab11ity to Meet Salary Sayings. The department estimated that it would fall short of its budgeted salary savings target by $1,200,000. The department took administrative actions to reduce total spending by $699,- 090, and proposed to fund the remaining $500,910 through the funding augmentation proposed in the Section 28 letter. 3. Unfunded Actiyities. The department identified a shortfall of $594,- 925 attributable to several mandated activities for which no funding was available in the budget. The department proposed to seek a $250,000 increase in reimbursements from other state departments for a portion of these activities, and to fund the remaining $344,925 through the funding augmentation proposed in the Section 28 letter. 4. Statewide Public Assistance Network (SPAN) Phase-Out Costs. The department estimated that it would incur $980,000 in unbudgeted costs associated with the phase-out of the SPAN project. The department Item 5180 HEALTH AND WELFARE \/ 1057 pro.po.sed to. fund this sho.rtfall thro.ugh the funding augmentatio.n pro.po.sed in the Sectio.n 28 letter. On Octo.ber 15, 1982, the Chairman o.f the Jo.int Legislative Budget Co.mmittee no.tified the Directo.r o.f the Department of Finance. that he had no. objectio.n to. an augmentatio.n o.f $1,192,925 fo.r the department’s suppo.rt budget. The chairman reco.mmended, ho.wever, that the directo.r not appro.ve: The department’s request to. use $198,000 in federal funds to. o.ffset a po.rtio.n o.f the Legislature’s 5 percent reductio.n in the department’s suppo.rt budget, because such an augmentatio.n wo.uld be co.ntrary to. the Legislature’s intent in making the 5 percent reductio.n; , The department’s request to. use $500,910 in federal funds to. o.ffset reduced salary savings because: (1) the department’s inability to. meet its salary savings target was largely due to. the department’s inappro.- priate use o.f anticipated savings fro.m its hiring freeze to. o.ffset the Legislature’s 5 percent reductio.n, rather than to. meet its salary sav- ings target, (2) the Legislature appro.ved the salary savings target pro.po.sed by the administratio.n, and the department never advised the fiscal co.mmittees during hearings o.n the 1982 Budget Bill o.f its pro.jected inability to. meet this target, and (3) the salary savings sho.rtfall resulted in part fro.m the department’s o.wn actio.ns; and The department’s request to. use $60,000 o.f federal funds fo.r \”unfund- ed activities\” ,because the activity fo.r which the $60,000 was request- ed was being perfo.rmed by perso.nnel previo.usly assigned to. the SPAN pro.ject fo.r who.m funds were alSo. being requested under the SPAN phase-o.ut co.mpo.nent o.f the Sectio.n 28 letter. On Octo.ber 15, 1982, the Department o.f Finance appro.ved anaugmen- tatio.n to. the department’s suppo.rt budget o.f $1,192,925. Statewide Public Assistance Network The 1982 Budget Act did no.t include requested funds fo.r the co.ntinued develo.pment o.f the Statewide Public Assistance Netwo.rk. Instead, the budget directed t:l,.e Audito.r General to. request bids fo.r a revised feasibil- ity study to. determine the appro.priate next step in the develo.pment o.f a statewide data pro.cessing system fo.r public assistance pro.grams. This study is under way and a repo.rt is expected by April 15, 1983. . The 1982 Budget Act alSo. included funds to. suppo.rt two. activities: (1) o.peratio.n o.f a data pro.cessing system fo.r the welfare departments in Placer and Nevada Co.unties (which had been started under the SPAN pro.ject) and (2) develo.pment o.f a central index o.fpublic assistance cases in Orange Co.unty using the Lo.s Angeles Co.unty Welfare Case Manage- ment Info.rmatio.n System. Bo.th o.f these activities are pro.ceeding as planned. Federal Funding. Fo.llo.wing the terminatio.n o.f the SPAN pro.ject, the federal go.vernment withdrew its appro.val o.f enhanced federal funding fo.r the pro.ject (90 percent o.f to.tal pro.ject Co.sts) fo.r bo.th 1981-82 and 1982-83, and requested DSS to. justify any federal participatio.n in the Co.st o.f the SPAN wo.rk co.mpleted to. date. At the time this Analysis was pre- pared, federal o.fficials advised us that DSS had failed to. pro.vide this justificatio.n fo.r 1981-82. Until DSS justifies no.rmal federal funding levels (50 percent o.f to.talpro.ject Co.sts), the state will no.t receive any o.f the appro.ximately $6 millio.n expected to. be received fo.r the SPAN pro.ject in . 1981-82. The DSS has info.rmed us that the 1982-83 SPAN-related activities have been appro.ved fo.r federal financial participatio.n at the usual rate o.f 1058 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-DEPARTMENTAL SUPPORT ‘:\”-Continued Item 5180 50 percent (instead of the 90 percent sharing ratio). SPAN Phase-Out Costs. The DSS estimates that the 1982-83 costs to phase out the staff formerly assigned to the Statewide Public Assistance Network will total $2,359,887 ($1,030,922 from the General Fund, $1,233,- 528 in federal funds, and $95,437 in reimbursements). As of January 17, 1983,44 of the original 146 employees were still employed by the depart- ment. It is expected that by the end of the fiscal year these employees will have taken permanent positions, either in DSS or in other departments, or will have left state service. The department does not anticipate the need for layoffs. Placer and Nevada Counties’ Data Processing Systems We recommend that Placer and Nevada Counties share in the costs of operating their welfare data processing systems because the costs of these services are part of the routine administrative costs in which all other counties are required to share, for a savings to the General Fund of $194,- 000. Since 1982, DSS has provided data processing to the welfare depart- ments of Placer and Nevada Counties as part of the SPANlroject. Al- though the Legislature halted the SPAN project, it approve continued state support for these counties’ data processing functions. The budget proposes to fund five limited term positions to support this operation and to pay the data processing and contract costs associated with the systems in these counties. The data processing systems in Placer and Nevada Counties are no lon.ger operating as demonstration projects, and the state has no plans to use these counties as test sites for a statewide data system. Our analysis indicates that these counties should be treated like all other counties and required to pay for 25 percent of the costs of these data processing services. The . costs of the systems amount to $777,000, which includes $576,000 in direct costs and another $201,000 in DSS overhead costs allocated to this activity. The budget proposes that these costs be shared 50 percent by the federal government and 50 percent by the state. We recommend that the General Fund costs be reduced by $194,000, and that reimbursements from Placer and Nevada Counties be increased by the same amount. Reduction in Departmental Legal Staff We withhold recommendation on the proposed elimination of 14 legal positions, pending receipt of further information from the department identifying the positions to be eliminated and the department’s plan for absorbing the workload now assigned to these positions. The Office of the Chief Counsel provides legal advice to departmental managers and support to the Attorney General in litigating cases affecting the department. The budget proposes a 30 percent reduction in the num- ber of personnel assigned to Office of the Chief Counsel, for a savings of $414,000. This reduction in staff consists of nine attorneys and five related support personnel. The reduction is consistent with the administration’s goal of centralizing state legal services within the Department of Justice. Such legal services include staff support to protect state fiscal interests in suits involving welfare programs, social services programs, and commu- nity care licensing. – ——– ——— Item 5180 HEALTH AND WELFARE \/ 1059 The office is divided into seven functional areas: (1) community care licensing, (2) government law, (3) social services, (4) fiscal, (5) legisla- tion, adults, and special projects, (6) welfare programs and (7) legal sup- port. The budget does not specify in which areas legal staff will be reduced. Thus, we have no means for determining the effect of such reductions on the completion of necessary legal work within the depart- ment. In addition, the budget proposes neither additional staff nor addi- tional funding to the Department ofJustice so that it can provide the legal services previously accomplished internally by the department. We believe that the manner in which the proposed staffing reductions are made could seriously affect the timely\u00b7 completion of necessary legal work within the department. Moreover, these reductions could have a significant General Fund impact if they result in the department’s inabili- ty to prepare adequately for cases in which increased state expenditures could result from unfavorable court decisions. We therefore withhold recommendation on the proposed reductions in legal staffing, pending . receipt of information concerning (1) the manner in which such reduc- tions will be made and (2) the effect of such reductions. Report on Legislatively Mandated Publications Chapter 1632, Statutes of 1982 (AB 2960), requires each state agency to identify in its 1983-84 budget request every state publication produced by the agency which is legislatively mandated and requires 100 or more employee hours to produce. The act also requires each agency to recom- mend which of these publications, if any, should be discontinued. The department has identified six reports falling in this category. Of these, the department recommends that the following three be continued: A quarterly report on child support collections for children.in foster care, required by Ch 1276\/82. An annual report on the Family Protection Act (FPA) demonstration project, required by Ch 104\/81 (AB 35). An annual report on the activities of the Office of Child Abuse Pre- vention (OC4\\,P), required by Ch 1334\/78. We concur with the department’s recommendation thatthe foster care child support collections and the OCAP reports be continued. FPA Report We recommend the elimination of the requirement for an annual report on the FPA demonstration project. The budget assumes the enactment of statutory changes to eliminate the FPAdemonstration project and deletes the funding for the prepara- tion of the annual report on the project. Thus, the department’s recom- mendation to continue the annual report on the FPA is inconsistent with the budget. In our analysis of the Social Services item; we recommend approval of the proposal to eliminate the FP A based on our conclusion that the provisions of Ch 978\/82 (SB 14) implement the FPA demonstration project on a statewide basis. We therefore recommend that the require- ment for an annual report on the project also be eliminated. The department recommends elimination of the following three legisla- tively mandated reports: An annual report on the funding and allocation of the Social Services Block Grant (Title XX), required by Ch 1343\/82(AB 2695). 1060 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-DEPARTMENTAL SUPPORT-Continued Item 5180 An annual calendar of rulemaking activity for the current year re- quired by Ch 1211\/82. . . An annual report on child support, required by Ch 924\/75. We concur with the department’s recommendation to discontinue the annual report on child support because it duplicates other reports. Regardfug the department’s recommendation to discontinue the annual report on the Social Services Block Grant (Title XX) required by Chapter 1343, our analysis indicates that much of the information is contained in other statutorily-required reports. In addition, Chapter 1343 specifically allows the department to use other required reports to substitute for the reports required by Chapter 1343. The department’s recommendation to eliminate the requirement that it provide the Legislature with a rulemaking calendar for current and prior years is based on the department’s contention that this requirement duplicates the requirements of Ch 827\/81. Our analysis indicates, howev- er, that the annual ‘Calendar of rulemaking required by Ch 1211\/82 does not dUflicate the requirements of Ch827\/81. This is because the provi- sions 0 Ch 1211\/82 require a broader circulation and a different format than those required by Ch 827\/81. We are, however, unaware of the considerations which led the Legislature to enact legislation during the last session to require this report .and are consequently unable to advise the Legislature whether the report’ is still needed. Unbudgeted Federal Funds We recommend that unbudgeted federal Title IV-E funds be used in lieu of General Fund support for the departmental support item in order to increase the Legislatures fiscal nexibilit~ for a General Fund savings of $1,055,(J()O .. Background. The Adoption Assistance and Child Welfare Act of 1980 (P.L. 96-272) provided that qualifying states could receive federal Title IV-E funds for administrative activities on behalf of federally eligible foster care children, including licensing of foster family homes and group homes. In order to qualify for these federal funds, states are required to have an accepted Title IV-E plan. With the enactment of Ch 977\/82 (AB 2695) and Ch 978\/82 (SB 14), California came into compliance with the requirements for an acceptable Title IV-E plan. The u.S. Department of Health and Human Services (DHHS) approved California’s Title IV-E plan effective October 1, 1982. Title IV-E Funds Not Budgeted for 1982-83. The departmental sup- port budget includes $1,407,000 in federal Title IV-E funds for foster family and group home licensing during 198~. The budget proposes to use these federal funds during 198~ to offset a portion of the General Fund costs of the Community Care Licensing program. Our analysis indicates that California is eligible to receive $1,055,000 of additional Title IV-E funds for 1982-83. These additional funds represent the federal share of the costs of licensing foster family and group homes during 1982-83. Although these funds will be available for use during 1982-83 or 198~, the administration’s budget does not include these funds for either fiscal year. If these funds are used to replace General Fund support for social services programs in 198~, the Legislature will have an additional $1,055,000 in General Fund resources to draw on and thus Item 5180 HEALTH AND WELFARE \/ 1061 more flexibility in funding its priorities in this or other program areas. We therefore recommend that the $1,055,000 in unbudgeted Title IV-E funds be used in 1983-84 to offset the General Fund cost of the Community Care Licensing program. COMMUNITY CARE LICENSiNG-PROGRAM REVIEW Community care facilities provide nonmedical residential care, day care, or home-finding services to children and adults. In general, clients of community care facilities require care ~d supervision be?atise they are unable to care for themselves due to theIr age and! or phYSICal or mental disabilities. The Department of Social Services licenses some community care facilities and contracts with the State Department of Education (SDE) and county governments to license other facilities. Table 4 displays the various types of facilities licensed by the Departments of Social Serv- ices and Education and the counties. Table 4 Community Care Facilities Projected Licensed Facilities . 1983-84 1. Adoption and home-finding agencies ………………. . 2. Small family homes for children and foster family homes ………………………………………………………………….. . 3. Other family homes (small and large family homes for adults and large family homes for chil- dren) ………………………………………………………………….. . 4. Group homes for children ………………………………… . 5. Group homes for adults ……………………………………… . 6. Adult day care homes ……………………………………….. . 7. Family day care homes for children a . 8. Day care centers for children …………………………… . Totals ………………………………………………………………. . Facilities Licensed Directly ByDSS 99 1,412 3,600 1,198 3,563 193 9,772 5,017 24,854 Facilities Licensed by Counties Under Contract WithDSS 12,400 21,440 33,840 Facilities Licensed by SDE Through an Interagency Agreement WithDSS 1,500 1,500 Total Facilities 99 13,812 3,600 1,198 3,563 193 31,212 6,517 60,194 a The budget assumes the enactment of a statutory change to eliminate the licensing of these facilities; We discuss the proposal to eliminate family day care licensing in our analysis of Item 5180-161, community care licensing, local assistance. The Department of Social Services estimates that the community care facilities shown in Table 4 provide residential (24-hour) care and day care to approximately 555,900 individuals. The department estimates that 404,- 700, or 75 percent, of the clients, are served by day care facilities and 151,200 clients are served by residential facilities. Chart 1 shows the types of clients cared for by 24-hour residential facilities. The chart shows that 40 percent of the clients are elderly, 34 percent are mentally disturbed or developmentally disabled adults and children, 20 percent are foster chil- dren, and 6 percent are substance abusers. 1062 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-DEPARTMENTAL SUPPORT-Continued Chart 1 Types of Clients Served by Residential Facilities Department of Social Services 1982-83 Elderly (40 % ) – Developmentally Disabled Children and Adults (14%) I Mentally Disturbed Children and \/ Adults (20%) Foster Care Children, ~~#~~~ _Status Offenders (1 %) …….Foster Care Children, Delinquents (3 % ) \” Foster Care Children, Voluntaries (3 %) \\ Foster Care Children, t Abused and Neglected (13%) Substance Abusers (6 %) Lack of Data to Measure Effectiveness of the Licensing Program We recommend that the department report to the fiscal committees prior to budget hearings on (J) the departments progress in implementing the facilities rating system, (2) the cost of using the Facilities Information System (FIS) to generate management information reports based on facil- ity ratings and (3) its pl(ln to develop performance standards based Or? the rating system. The purpose of the community care licensing program is to ensure that community care facilities provide a healthy and safe environment to their clients,\u00b7 It is difficult to assess the success of the program in achieving this goal because the department lacks data which measures the degree to which community care facilities are operating in compliance with licens- ing requirements. For example, the department does not collect data on the number and types of licensing violations by facilities. As a result, we are unable to advise the Legislature as to whether the program has been successful in achieving its\u00b7 goals. Current law and regulation require the department to maintain a facili- ties rating system which could readily be adapted to provide the data necessary to assess the extent to which facilities are in compliance with health and safety standards. The department, however, has never imple- mented the required rating system. We believe that implementation of the rating system would result in negligible costs to the current evaluation process because licensing evalua- tors currently record all violations of licensing standards. In order to im- plement the rating system the department would merely have to require Item 5180 HEALTH AND WELFARE \/ 1063 evaluators to assign a letter grade to each facility based on the number and seriousness of violations. The department currently operates the computer-based Facilities In- formation System (FIS). We believe that the FIS could be adapted to generate reports on facility ratings which could be used (1) to assess the effectiveness of the licensing program and (2) to set goals for the future performance of the program. In order to assist the Legislature in evaluating the effectiveness of the community care licensing program, we recommend that the department report to the fiscal committees, prior to the budget hearings, on (1) its progress in implementing the facility rating system, (2) the costs of using the FIS to generate management information reports based on the facility rating system, and (3) its plan to develop performance standards based on the rating system. The Effectiveness of the Annual Visit The primary tool of the department in ensuring compliance with licens- ing standards is the inspection visit. The department’s licensing evaluators conduct three types of inspection visits: 1. Annual or Renewal Visits. During this type of visit, the licensing evaluator inspects the facility to determine whether it is in compliance with all licensing standards. Evaluators spend more of their time conduct- ing annual visits than performing any other function. 2. Complaint Visits. During this type of visit, the evaluator investi- gates complaints and, in addition, may conduct a general inspection of the facility, at his discretion. 3. Plan-oE-Correction Visits. During this type of visit, the\u00b7 evaluator determines whether a deficiency cited during a prior visit has been cor- rected. If the evaluator determines that the correction has not been made, the evaluator may assess a civil penalty. The evaluator may also cite the facility for any other violation detected during the plan-of-correction visit. Inspection visits are the core of the licensing program because they are the only way for the department to determine whether a particular facil- ity is operating in compliance with minimum licensing standards. Our review of the licensing program indicates, however, that the current pol- icy of requiring annual inspections of all community care facilities may not result in the most effective use of an evaluator’s time because the annual visit seems to result in the identification of relatively few serious violations of licensing standards. Annual Visits Identify Relatively Few Serious Violations. We re- viewed all of the \”accusations\”, 23 in total, filed by the department against state-licensed facilities during the period July 1 through December 1,1982. An \”accusation\” is a legal document listing the reasons the department is initiating proceedings to revoke the license of a community care facility. The 23 accusations we reviewed contained 234 alleged violations of com- munity care licensing standards. Table 5 identifies the original source of the information which eventually led to these allegations by the depart- ment. Table 5 shows that 65 percent of the violations were first identified through complaints from sources other than a licensing visit. In addition, 6 percent of the alleged violations were identified during complaint visits. Only 20 percent of the alleged violations were identified as a result of annual visits. Furthermore, of the 23 accusations we reviewed, only one was based primarily on alleged violations which were first identified dur- ing an annual visit. 1064 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-DEPARTMENTAL SUPPORT-Continued Table 5 Source of Infor-mation Leading To an Allegation of a Violation Against a Community Care Facility July 1, 1982 through December 1, 1982 Original Source of Information Number of Violations 1. Complaints from: a. Placement agency …………………………………………………………………………………. . b. Local fire, health or police department …………………………………………….. . c. Friend\/relative of client or anonymous ………………………………………………. . d. Client or former client.. ……………………………………………………………………… … e. Employee of facility …………………………………………………………………………….. . Subtotal ………………………………………………………………………………………………. . 2. Various types of visits: a. Annual visit …………………………………………………………………………………………… . b. Plan-of-correction visit …………………………………………………………………………. . c. Complaint visit ……………………………………………………………………………………. … 60 15 57 17 4 153 47 21 a 13 a Subtotal……………………………………………………………………………………………….. 81 Total ………………………………………………………………. ;…………………………………. 234 Item 5180 Percent of Total 25.6% 6.4 24.4 7.3 1.7 65.4% 20.0% 9.0 5.6 34.6% 100% a Represents instances in which an alleged violation was first identified during the course of a plan-of- correction visit, or a complaint visit. On this basis, we conclude that complaints and complaint visits are far more important than annual visits as a source of information leading to the decision to seek a revocation of a facility’s license_ Yet, according to the department’s estimate, the average evaluator spends two and one-half times as much time conducting annual visits as he does. responding to complaints_ The elimination of the requirement for annual visits to all facilities could result in either (1) substantial General Fund savings, to the extent that a reduction in the number of inspection visits would result in a reduced need for licensing evaluators, (2) increased program effectiveness, to the extent that evaluator time now spent on annual visits could be redirected to more frequent visits to problem facilities, or (3) some combination of decreased program costs and increased program effectiveness_ Demonstration Project Recommended We recommend the adoption of Budget Bill language requiring the department to undertake a demonstration project to test the feasibility of eliminating or modifying the current requirement for annual visits to all facilities. We further recommend enactment of legislation to allow the department to conduct the recommencled demonstration project. Our analysis indicates that a demonstration project testing the feasibility of eliminating or modifying the current requirement for annual visits would provide the Legislature with information which could potentially result in substantial General Fund savings, greater program effectiveness, or both. Under the demonstration project, one group of facilities would continue Item 5180 HEALTH AND WELFARE \/ 1065 to receive the required annual visits, another would receive no annual visits but would continue to be visited in response to complaints, and a third group would be visited at a frequency to be. determined by each facility’s score as assigned by the facilities rating system. Thus, the lower- rated facilities in the third group would be visited several times a year rather than annually, while the higher-rated facilities in this group might not be visited at all except in response to complaints. This deIllonstration project would not require the department to assign additional evaluators to the facilities in these three groups, but rather to change the way in which existing evaluators are assigned to visit the facilities. Thus, the demonstration project could be accomplished within the existing re- sources of the department. In order to implement the demonstration project,we recommend adop- tion of the following Budget\u00b7 Bill language: \”Not sooner than 30 days after submission of a detailed plan to the fiscal committees and the Joint Legislative Budget Committee, the com- munity care licensing division of the department shall commence a demonstration project designed to determine whether the current stat- utory requirement for annual visits of community care licensing facili- ties should be (1) retained, (2) eliminated, or (3) replaced with a policy of more frequent visits to low-rated facilities and less’ frequent visits to high-rated facilities. This project shall consist of a control gro,,!p and two experimental groups of licensed facilities, each of which shall be rated according to the facilities rating system defined in Article 7, Chapter 1 of the California Administrative Code. These ratings shall be based on a review of the case files of each facility in each group. The facilities shall be rated both before and after the demonstration project. Facilities in the control group shall be evaluated according to the current practices of th~ department. Facilitie~ in one experimental ~oup shall be visited only mresponse to complamts and shall not recelve the currently re- quired annual visit. Facilities in the other experimental group shall be visited by licensing evaluators with a frequency determined by their rating-higher rated facilities will be visited only in response to com- plaints while lower rated facilities will be visited as frequently as possi- ble given the number of evaluators assigned to’ the experimental group.\” Because the current policy of annual visits of community care facilities is required by law, we recomIllend an amendment to the companion bill to suspend the current statutory requirement for annual visits with re- spect to those facilities chosen to be included in the experimental groups in the demonstration project. Licensing Fees We recommend enactment of legislation requiring that community care facilities be charged a fee based on (a) the cost of licensing each facility type and (b) the’ proportion of each facility’s clients which are private placements. The Legislature has determined that many licensing programs should be supported entirely by fees collected from licensees because (1) licens- ing is a service which should be paid for by the beneficiaries of the service and (2) licensees can either absorb the fee or pass it through to their clients. The community care licensing program, however, is unlike most other licensing programs in that community care facilities are not chMged for their licenses. ‘.\” 1066 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-DEPARTMENTAL SUPPORT-Continued Item 5180 Reasons that Community Care Facilities are Exempted from License Fees. Our analysis indicates that there are two reasons community care facilities are exempt from license fees: 1. Community care facilities often are unable to adjust the rates they charge their clients to reflect specific changes in their cost of doing business. This is because the rate of reimbursement is set by the government. 2. Part of any increase in the cost of care resulting from the imposition of a license fee would be borne by the General Fund. Across-the-Board Exemption from LicensingFee is Not Justified. An unknown number of community care clients are private placements. Pri~ vate placements are those community care clients whose care is paid from nongovernmental sources. For example, nearly all of the children who receive day care from day care centers licensed by DSS are private place- ments whose care is generally paid for by their parents. In addition, most children in family day care are private placements whose care is paid for by their parents. (The budget proposes to eliminate the licensing of family day care homes. We discuss this proposal in our analysis of the Community Care Licensing LocalAssistance item). Furthermore, many elderly clients . of group homes for adults pay for their own care; In fact, most community care facility types have some private . placements. Community care facilities are free to increase the rates they charge for private placements to the extent that the market will allow. Thus, the current. p. olicy of exempting co.mmunity care facilities from a lice.nsing fee results, in effect, in a subsidy of these private placements. We find no analytical basis for such a subsidy, since private placements, by definition, are those placements which do not qualify for any of the various programs which specifically subsidize community care. We conclude that there is some basis for excluding community licensing facilities from the normal requirement that the licensee pay for the costs of the program under which he is licensed. We also conclude, however, that such an exemption results in unjustified General Fund subsidies to privately placed clients of community care facilities. Therefore, we rec- ommend enactment of legislation requiring that community care facilities be charged a fee based on (a) the cost of licensing each facility type and (b) the proportion of each facility’s clients\u00b7which are private placements. Item 5180 HEALTH AND WELFARE \/ 1067 Department of Social Services AID TO FAMILIES WITH DEPENDENT CHILDREN Item 5180-101 from the General Fund and Social Welfare Fed- eral Fund Budget p. HW 141 Requested 1983-84 ………………………………………………………………. $1,174,669,000 Estimated 1982-83 …………………………………………………………………. 1,327,672,000 Actual 1981-82 ………………………………………………………………………. 1,349,088,000 Requested decrease $153,003,000 ( -11.5 percent) Total recommended reduction from Item 5180-101-001 …… .. Total recommended transfer from Item 5180-181-001 (a) …. .. Recommendation pending …………………………………………………. .. 3,690,000 (72,267,000) $18,309,000 1983-84 FUNDING BY ITEM AND SOURCE Item Description 5180-101-001-Payments for Children 5180-101-866-Payments for Children 5180-101-919-Incentives from other states General Federal Fund Interstate Incentive Collec- Amount $1,174,669,000 (1,379,107,000) (600,000) tions SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Welfare Fraud Early Detection\/Prevention Program. Withhold recommendation on budgeted savings of $18,309,- 000 to the General Fund, pending receipt of additional de- tails on how the program will be implemented. 2. Transfer of Cost-of-Living Funds. Recommend that $72,267,000 in Item 5180-181-001 (a) be transferred to Item 5180-101-001 and used to fund a cost-of-living increase for AFDC recipients, rather than for recipients of Supplemen- tary Security Income\/State Supplementary Payments (SSI\/ SSP) program who now receive larger grant amounts. 3. Improved Program Information. Recommend the Depart- ment of Social Services (DSS) submit a plan for collecting information on those portions of the AFDC assistance popu- lation that receive aid not required by federal law. 4. Administrative Increases to the AFDC Appropriation. Recommend adoption of Budget Bill language requiring the Director of the Department of Finance to notify the fiscal committees 30 days before increasing the amounts appro- priated for AFDC . 5. Unallowable Federal Costs. Reduce Item 5180-101-001 by $1710~OOO. Recommend General Fund reduction and cor- responding increase in federal funds because it is not clear that costs will be a state responsibility. 6. Group Home Foster Care Costs. Recommend DSS report to the fiscal committees prior to budget hearings regarding Analysis page 1073 1075 1086 1102 1102 1103 1068 I HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued the costs of group home foster care for federally eligible children. 7. Anticipated Federal Reimbursements. Reduce Item 5180- 1104 101-001 by $1~65~OOO. Recommend General Fund reduc- tion and corresponding increase in federal funds to reflect . anticipated federal reimbursements for specified foster care costs in 1982-83. 8. Audit Recoveries. Reduce Item 5180-101-001 by $94~OOO. 1104 Recommend General Fund reduction to reflect a more real- istic estimate of group home audit recoveries. GENERAL PROGRAM STATEMENT The Aid to Families with Dependent Children (AFDC) program pro- vides cash grants to children and their parents or guardians whose income is not sufficient to provide for their basic needs. Eligibility is limited to families with children who are needy due to the death, incapacity, con- tinued absence, or unemployment of a parent or guardian. In the past, the Welfare and Institutions Code provided a continuous appropriation to finance cash grants to AFDC families. Section 13340 of the Government Code (Ch 1284\/78) sunsets the continuous apI>ropriation for the AFDC program and requires that, starting in 1983-84, these funds be appropriated in the Budget Act. The Budget Bill, however, contains a provision that allows the Director of the Department of Finance to in- crease the. amount of funds available for the AFDC program if it is deter- mined that expenditures will exceed the amount appropriated for the budget year. During the current year, 553,680 families (1,592,000 persons) are expect- ed to receive AFDC grants: ANALYSIS AND RECOMMENDATIONS Current Year Deficiency The budget estimates that the AFDC program will incur a General Fund deficiency of $58,797,000 in the current year. This deficiency is the net result of several separate increases and decreases in funding require- ments, relative to what was anticipated in the 1982 Budget Act for this program. Cost Increases. The major unanticipated cost increases are due to: (1) increased caseload in the AFDC-Family Group and Foster Care programs, due in part to unemployment exceeding pr~dicted levels ($9,350,000), (2) lower estimated savings from the provisions of Chapter 3, First Extraordi- nary Session of 1981-82 ($3,703,000), (3) court rulings ($10,541,000), (4) smaller savings from the changes in the state Unemployed Parent pro- gram ($29,982,000), and (5) reduced savings under the Emergency Assist- ance program for unemployed parents ($9,263,000). Additional Savings. Partially offsetting savings during 1982-83 are an- ticipated by the budget in two areas: (1) lower estimates of court-ordered retroactive payments ($3,321,000) and (2) greater estimated savings due to Chapter 1, First Extraordinary Session of 1981-82 ($2,583,000). The estimated deficiency is subject to change\u00b7 in the May revision of expenditure estimates. Item 5180 HEALTH AND WELFARE \/ 1069 Court Rulings Increase State Costs On July 29,1982, the U.S. District Court ruled in the case of Turner v. Woods that California’s treatment of mandatory payroll deductions vio- lates federal law. Prior to the court ruling, the state considered the \”stand- ard work expense\” deduction to include mandatory deductions such as federal and state taxes, social security taxes, and state disability insurance. The federal court ordered the state to subtract both the standard work expense deduction (a flat $75 for work-related expenses, which is reduced to $50 for part-time work) and mandatory payroll deductions from gross income, whert calculating a recipient’s grant. The effect of this ruling is to reduce the amount of countable income earned by recipients, thereby increasing the number of families eligible for AFDC and the amount of grants paid to individual recipients with earned income. The budget esti~ mates that the General Fund cost of complying with the court’s order will be $10,936,000 in 1982-83 and $13,292,000 in 1983-84. The department is appealing the Turner v. Woods decision. Until a final judicial decision in this case is made, the state will continue to incur additional costs. The effects of the Turner v. Woods case and other recent court rulings are summarized in Table 1. Table 1 Impact of Recent Court Rulings on the General Fund a 1982-83 and 1983-84 (in thousands) Turner v. Woods ………………………………………………………………………………. . Lowry v. Woods ~:~~:~~~\u00b7b\u00b7:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: Seibert v. Woods ………………………………………………………………………………. . Greene v. Obledo b . . . . . Farias v. Woods ………………………………………………………………………………. … Totals …………………………………………………………………………………………… . Estimated 1982-83 $10,936 1,018 2,359 155 5,592 424 $20,484 a Includes both grants and administrative costs. b Assumes all recipients entitled to retroactive relief will receive payments in 1982-83. Budget Year Proposal Proposed 1983-84 $13,292 1,236 374 2,764 $17,666 The budget proposes expenditures of $1,174,669,000 from the General Fund for AFDC cash grants in 1983-84. This represents a decrease of $153,003,000, or 11.5 percent, from estimated 1982-83 expenditures. As shown in Table 2, total expenditures from all funds for AFDC cash grants are budgeted at $2,722,590,000 in 198:h’W, representing a $224,393,- 000, or 7.6 percent decrease from estimated expenditures in the current year. Included in this amount is $122,133,000 from all funds for cash grants to refugees. Chart 1 shows the sources of funding in 198:h’W for each of the three AFDC grant programs. The state and county contribute 44.6 percent and 5.4 percent, respectively, toward the cost of grants provided to those recipients who are eligible under federal Family Group and Unemployed 1070 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT \”CHILDREN-Continued Parerit programs. The federal government contributes 50 percent toward the cost ofthese grants. The federal share of total costs under the FG and U programs exceeds 50 percent bec::tuse the grant costs for refugee fami- lies are 100 percent federally funded during the first 36 months that they are in the United States. For those\”AFDC recipients who are not eligible under federal law, the state pays 89.2 percent of grant costs and the county pays 10.8 percent. These sharing ratios apply to the State Only AFDC-U program. Chart 1 also shows that the AFDC-Family Group program accounts for $2,006 million, or 74 percent, of all estimated grant costs in the three major AFDC programs. The Unemployed Parent program accounts for another 18 percent, and the Foster Care program accountsfor 8 percent. (Child support incentives and Adoptions Assistance are not included in this chart.) o o L L 1 A R S Chart 1 Total AFDC Grant Costsa By Program and Fond Source 1983-84 (in millions) 0′—- Family Group Unemployed Parent Federal Funds General Fund rtttt@Wikilnl County Funds 215 Foster Care Table 2 Expenditures for AFDC Grants by Category of Recipient’ (in millions) Estimated 1982-83 PrOl22.sed 1983-84 Recipient Category . Total Federal State County Total Federal State County Family group ………………………… $2,314.4 $1,174.6 $1,016.7 $123.1 $2,166.7 $1,094.8 $956.1 $115.8 Unemployed parent ……………… 541.1 317.8 199.1 24.1 498.0 292.7 183.2 22.2 Foster care ……………………………. 214.9 50.5 156.2 8.2 219.2 52.1 92.7 74.4 Aid for adoption of children .. 5.4 0.1 5.3 6.5 0.5 6.0 Child support incentive pay- ments to counties ………….. 1.7 22.6 10.9 -31.7 0.4 21.0 12.3 -32.9 Child support collections………. -148.0 – 72.1 -68.2 -7.8 -168.3 -82.0 ~75.7 -10.6 — — — Subtotals ………………………… $2,929.4 $1,493.6 $1,319.9 $115.9 $2,722.6 $1,379.1 $1,174.7 $168.8 Court-Ordered retroactive payments ………………………… $17.6 $8.9 $7.8 $0.9 AFDC cash grants to refugees (160.3)~) (75.4) ~) (122.2) _~!.:!) (54.5) ~) Totals ……………………………… $2,947:0 $1,502.5 $1,327.7 $116.9 $2,722.6 $1,379.1 $1,174.7 $168.8 Columns may not sum due to rounding. Percent Chanl!e Total Federal State County -6.4% -6.8% -6.0% -6.0% -8.0 -7.9 -8.0 -8.0 2.0 3.2 -40.6 805.1 20.7 .358.9 13.5 -76.8 13.7 -7.0 13.7 13.8 ILl . 3.8 36.5 -7;1% -7.7% -11.0% 45.6% -100.0% -100:0% -100.0% -100.0% (-23.8) (-19.4) (-27.7) (-27.5) -7.6% -8.2% -11.5% 44.5% -~ CJl ….. ~ = ~ S! o ~ ……. …. S … 1072 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Proposed General Fund Budget Changes Table 3 shows the factors resulting in the $153 million decrease in Gen- eral Fund support for the AFDC program in 1983-84. The change reflects $38,743,000 in increased costs which are more than offset by $191,746,000 in proposed reductions. Table 3 Proposed General Fund Budget Changes for AFDC Grants 198344 (in thousands) 1982-83 Current Year Revised ……………………………………………………….. . A. Baseline Adjustments 1. Basic caseload ……………………………………………………………………… . 2. Court cases a. Turner v. Woods …………………………………………………………….. . b. Lowry v. Woods …………………………………………………………….. . c. Seibert v. Woods …………………………………………………………….. . d. Farias v. Woods ………………………………………………………………. . Subtotal ……………………………………………………………………….. . 3. State legislation a. Ch 327\/82 (SB 1326) ……………………………………………………….. . b. Ch 703\/81 (SB 620) ……………………………………………………….. . c. Ch 325\/82 (AB 2315) ……………………………………………………. … d. Ch !J17\/82 (AB 2695) ……………………………………………………… . e. Ch 1166\/80 (AB 2749) ……………………………………………………. . Subtotal ……………………………………………………………………….. . 4. Adjusted estimates of federal program changes in Omnibus Budget Reconciliation Act of 1981 (P.L.97-35) a. Implemented in Ch 1\/81 (SB Ix) ………………………………….. . b. Included in AB 2x …………………………………………………………… . Subtotal ……………………………………………………………………….. . 5. One-time costs during 1982-83 a. Retroactive payments in court suits (1) Lowry v. Woods ……………………………………………………….. . (2) Green v. Ob\/edo ……………………………………………………… . (3) Farias v. Woods ……………………………………………………… … Subtotal ……………………………………………………………………….. . 6. Reduced grant costs due to increases in retirement, survi- vors, disability, and health insurance ………………………………… . 7. End to extended and supplemental federal unemployment insurance benefits ………………………………………………………………. . 8. Payment verification systems …………………………………………….. . 9. Fixed WIN sanction period ………………………………………………… . 10. Emergency Assistance Program …………………………………………. . 11. Adjustnients in. Child Support Collections and Incentives .. 12. Change in Foster Care sharing ratio a. Decreased grant cost share …………………………………………. … b. Decreased state share of child support collections ……… . Subtotal ……………… ; ………………………………………. : …………….. . 13. Foster Care Audit Recoveries …………………………………………….. . 14. Special Adjustments . a. Welfare fraud early detection …………………. ; …………………… . b. Prorated shelter costs …………….. ; ……………………………………. . c. Change beginning date of aid ……………………………………….. . d. Reduce State-Only AFDC-U program to 2 months ……… . Subtotal ……………………………………………………………………….. . B. Total Budget Increase ………………………………………………………………. . C .. Pf(i)[email protected]. 1~ ‘ElqJeildit1;lres ………………………………………………. . Cost $2,193 218 219 2,753 -$7,828 -4 -1,488 649 -447 -$740 160 -$2,331 -5,033 -423 -$66,487 1,774 -$18,309 -37,418 -35,629 -810 Total $1,327,672 $21,092 $5,383 -$9,118 -$580 -$7,787 -$880 $8,193 -$3,958 -$20 -$258 -$7,836 -$64,713 -$355 -$92,166 -$153,003 $1,174,669 Item 5180 HEALTH AND WELFARE I 1073 Program Changes Proposed by the Administration The budget proposes three significant program changes in the AFDC program during 1983-84 that are estimated to reduce General Fund costs by $90,276,000. This savings includes $91,356,000 in grant savings, partially offset by $1,080,000 in added administrative costs. Table 3 shows the es- timated grant savings associated with each of the proposals. The budget proposes to implement a Welfare Fraud Early Detection\/ Prevention Program that is expected to result in General Fund savings of $18,309,000 in 1983-84. The administration also proposes two changes af- fecting grants to AFDC recipients: (1) require a prorated reduction in the need standard and grant amount for families living with another individ- ual(s), which is estimated to reduce General Fund costs by $36,338,000 (grant savings of $37,418,000, partially offset by additional administrative costs of $1,080,000) and (2) require that aid begin on the first day of the month following the date of application, which would result in estimated General Fund savings of $35,629,000. Fraud Early Detection and Prevention Program The administration proposes to implement a program to increase the chances of detecting fraudulent applications before such applicants are approved for aid. The proposed program is patterned after a pilot pro-ro:m implemented in Orange County in March 1981. The program calls Improved training of eligibility staff to detect fraud. Establishment of a Welfare Fraud Early Detection Unit that: -Makes daily. visits to assigned welfare offices. -Receives case referrals through simple, streamlined procedures. -Provides eligibility workers with immediate feedback regarding the cases referred. Cases flagged with fraud histories to be automatically referred for investigation if reopened. Criminal prosecution for attempted fraud in cases where aid was denied. Savings From the Fraud Early Detection and Prevention Program are Difficult to Estimate . We withhold recommendation on the amount of savings that will result from the Welfare Fraud Early Detection\/Prevention Program~ pending receipt of additional detail on the program’s implementation. The pilot program in Orange County has contributed to increases in the number of fraud referrals and may have resulted in decreases in grant expenditures. A report prepared by Orange County on the pilot experi- ence states that fraud was detected in about 49 percent of the 1,596 fraud referrals during the first year of operation. Assuming that the detected cases which were kept off the rolls would have drawn benefits for the same period as the average AFDC case, the savings in Orange County could reach $6 million. The savings from this program, however, are likely to be lower. Some of these fraudulent cases, had they received aid, probably would have been detected through other ongoing fraud detection proce- dures, resulting in collection of the fraudulent overpayments. Reliable estimates of the actual savings attributable to the early detection program cannot be made. It is unclear whether the Fraud Early Detection and Prevention Pro- 1074 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued gram proposed in the budget can be counted upon to achieve a savings of $18.3 million, as the administration assumes, for the following reasons: 1. It is uncertain how the proposal differs from existing welfare detec- tion practices in several counties. Current state and federal regulations require that intake cases be given the highest priority in fraud investiga- tions. Several large counties (Los Angeles, Fresno, San Diego). give special attention to intake cases using either special staff that are allocated to intake precessing or more experienced eligibility workers. 2. There is no implementation plan for the statewide program. A schedule for implementing this program has not been prepared. The specific features of the plan and the timing of its implementation may lead to different savings estimates. 3. The budget estimate includes savings attributable to prevention of fraudulent issuance of food stamp coupons. The administration’s esti- mate of savings to the General Fund from this program includes $3,112,000 in savings due to reduced food stamp benefits. Because the federal govern- ment pays the full cost of food stamp benefits, reductions in the value of food stamps issued would not save any state or county funds. 4. The budget assumes that implementation of the program will not increase administrative costs. It is our understanding that the program calls for transferring existing personnel to the new fraud prevention activi- ties, and would not increase the total number of fraud investigative staff. This, however, may lead to reduced savings from current anti-fraud activi- ties. The District Attorney’s office in Orange County found it necessary to add six new investigators to handle continuing case investigations that previously were neglected on account of the early fraud detection\/pre- vention program. Other counties may experience similar needs for added personnel. Without knowing details of the plan for implementing this program, we cannot determine whether the savings attributed to the program are likely to occur, or whether additional administrtive costs need to be budgeted. Therefore, we withhold recommendation, pending receipt of additional detail on the program’s implementation. Proration of Shelter Costs The budget also includes savings due to the expected passage of legisla- tion which would require a prorated reduction in the need standard and grant amount for AFDC families living with another individual(s). Under this proposal, the need standard and grant amounts would be reduced to reflect the lower level of shelter and utility expenses incurred by an AFDC family residing in a shared living arrangement. This option is available to California as a result of recent changes made in federal law by the Tax Equity and Fiscal Responsibility Act of 1982. Currently, the only AFDC families whose grants are affected by sharing quarters with others are those for whom the whole amount of shelter is paid by the non-AFDC tenant. Current rules require that in the case of these AFDC families, the entire amoun:t of their shelter costs be counted as in-kind income, thereby reducing the size of the grant to which they are entitled. The budget estimates that, as a result of the proposed policy change, total costs for AFDC grants and administration will be reduced by nearly $81 million ($36 million General Fund, $41 million in federal funds, and ~.————-~—— Item 5180 HEALTH AND WELFARE \/ 1075 $3 million in county funds). This estimate assumes that the maximum grants would be reduced by 25 percent for families sharing living quarters, except those who share with SSI\/SSP recipients. The companion bills to the Budget Bill, however, do not specify the amount of the grant reduc- tion. Instead, the bills leave this determination to the Director of the Department of Social Services (DSS). Beginning Date of Aid The budget also proposes to change the date when an AFDC applicant’s aid payments begin. Under the proposal, aid would begin on the first day of the month following the month in which the application was filed. Currently, individuals whose applications are completed within a calendar month receive benefits from the day they applied. TheDSS estimates that about 70 percent of AFDC applicants (22,000 monthly) are now receiving grants prorated to the date of application. The budget proposes that these families not receive this first payment, which currently averages $321.52. To achieve the budgeted savings, a statutory change will have to be made. The budget companion bills, however, do not contain provisions effecting the required changes. Eligibility\u00b7 Criteria Table 4 lists the eligibility criteria for the AFDCand food stamp pro- grams (most AFDC recipients receive food stamps). Cost-of-Living Increase . State law requires that recipients of assistance under the AFDC pro- gram receive an annual cost-of-living increase to their grants, effective July 1 of each year. Under existing law, the cost-of-living adjustment (COLA) required on July 1, 1983 is oased on the change in the California Necessities Index (CNI) from December 1981 to December 1982. The Department of Finance estimated in December 1982 that the July 1,1983 COLA required by existing law is 6.8 percent, and would increase costs to the Fund. by $98,780,000. The budget, however, proposes to sus- pend the statutOry provision requiring COLAonJuly 1, and proposes that no COLA be given to AFDC recipients in 1983-:84. The budget companion bills would repeal the statutory requirement that a COLA be given in 1983-84 and subsequent years, and would make cost-of-living adjustments subject to determination in the annual budget act. Transfer of Cost-of-Living Funds from SSI\/SSP to AFDC Recipients We reco~mend that $72~67,OOO in General Fund support for cost-of- living increases budgeted in Item 5180-181-001 (a) for SSIISSP recipients instead be transferred to Item 5180-101-001 and used to fund a COLA for AFDC recipients~ since the standard of Jiving achieved by these recipients is considerably lower than that of SSIISSP recipients. While the budget proposes no COLA for AFDC recipients, it requests $72,267,000 from the General Fund for a 2.1 percent COLA for recipients of assistance under the Supplemental Security Income\/State Supplemen- tary Payment (SSI\/SSP) program. These funds are subject to the federal government granting a 1983 cost-of-living increase for SSI\/SSP recipients. Our analysis indicates that, on a need basis, these funds should be used instead to provide a COLA for AFDC recipients. As discussed below, the I. Categorical Requirements A. AFDC-Family Group ………… .. B. AFDC-Unemployed Parent.. .. C. AFDC-Foster Care ……………. .. D. Food Stamps ………………………… .. II. Income and Resource Require- ments Table 4 Basic Eligibility Requirements For the AFDC and Food Stamp Programs ~ a -I o ; Child with one parent absent, deceased, or physically or mentally incapacitated. , ~ \”Principal Wage Earner\” unemployed. Federal eligibility available if principal wage earner is unemployed for 30 days iii and has recent work experience. Otherwise, family is eligible for 4 months of Emergency Assistance and State-Only tit AFDC.\” ., :e Child placed in foster care. Federal eligibility is for a child removed by the court from an AFDC-eligible home; the ~ state supportS court-placed children not linked to AFDC, and, for 6 months, voluntarily placed children. :z: Any family or individual qualifies who meets federally determined income and resource requirements. 0 m .,. AFDe Food Stamps m Z ~ A. Real and Personal Property …. $1,000 limit; home exempt $1,500 limit ($3,000 for household with one member over 60) Z -I B. Household Goods\/Personal Effects …………………………………. .. C. Motor Vehicle …………………….. .. D. Gross Income Limit ……………. .. E. Allowable Income Deductions Exempt First $1,500 of net market value exempt 150 percent of AFDC maximum aid payment (see Table 5) 1. Standard work expenses ($75 full time; $50 part time) 2. Child care expenses (up to $160 per child) 3. If the family has received AFDC within past 4 months, $30 and Va of remaining income; not applied to families not previously on AFDC b F. Net Income Limit…………………. AFDC maximum aid payment (see Table 5) Exempt Limit of $4,500 on fair m!!I’ket value Limit $507 for an individual; each additional household member mcreaseslimit by $167 (family of 3 limit of $841) 1. 18% of earned income 2. Standard deduction ($85) 3. ‘ $115 limit on the sum of excess shelter costs and de- pendent care expenses 4. Excess medical expenses (actual amount less $35) for households with member over 60 or receiving Title II disability payments. Limit of $390 for individual; each additional household member adds about $129 (family of 3 limit is $647) \” The’budget proposes to reduce the combined Emergency Assistance and State-Only Program eligibility to a total of three months. b Once a family qualifies for aid, during the first four months, it is entitled to the $30 and one-third earned income exemption in calculating the AFDC grant n :z: ;:: o \”\” m Z J, o ::s -5\u00b0 c t … at ……. :I: ~ t3 :I: ~ \\:) ~ ~ ~ -~ CTI \”\”\” ~ Item 5180 HEALTH AND WELFARE \/ 1077 maximum grant paid AFDC recipients is not enough to raise their incomes above the poverty level. In contrast, SSIISSP maximum grants are already above the poverty level, even without the proposed 2.1 percent COLA. AFDC maximum grants have been below the federally designatedpov- erty level since the welfare reform measures were enacted in 1971. In 1982-83, AFDC maximum grants are equal to about 77 percent of the poverty level. Meanwhile, SSIISSP grants exceed the poverty level by 8 percent for aged or disabled individuals and by 53 percent for aged or disabled couples. The SSIISSP grants have received partial or full cost-of- living increases in every year since 1974, including a 2.8 percent increase for the current year. AFDC grant levels, however, have remained un- changed since July 1981. Given this disparity in grant amounts relative to the poverty level, we recommend that funds which the budget proposes to use for cost-of-living increases for SSIISSP recipients be used instead to increase AFDC grant levels. Approval of this recomendation would nar- row the gap between AFDC and SSIISSP grant levels. Approval of the budget proposal would cause this already wide gap to widen further. The basis for our recommendation is discussed in greater detail under Item 5180-181-001. To be consistent with this recommendation, we make related recom- mendations in our analyses of two other budgets. In the Department of Developmental Services (Item 4300), we recommend a General Fund augmentation of $1.5 million to replace lost SSIISSP reimbursements. In Medi-Cal (Item 4260), increased General Fund costs of $7.2 million would be offset partially or wholly by savings. Therefore, we recommend that the department submit estimates of the net effect of our AFDC and SSIISSP COLA recommendations on Medi-Cal costs. Maximum Payment Levels. Table 5 shows the maximum payment lev- els for the unemployed parent and family group caseloads, for selected family sizes, assuming (1) no COLA, as proposed by the administration and (2) a 6.8 percent increase, as required by current law. As the table shows, under current law, the maximum grant for a family of three in 1983-84 would increase by $34 to $531 per month. If no COLA is provided, the maximum aid payment will be the same in 1983-84 as it is 1982-83. Table 5 Maximum AFDC Grant Levels 1982-83 and 1983-a4 Family Size 1 ……………………………………………………………………….. … 2 …………………………………………………………………………. . 3 …………………………………………………………………………. . 4 …………………………………………………………………………. . 5 …………………………………………………………………………. . 1982-83 $248 408 506 601 686 Budget Proposal $248 408 506 601 686 1983-84 Current Law Amount Change $265 $17 436 28 540 34 642 41 733 47 Previous Increases to AFDC Grants. The Welfare Reform Act of 1971 (Ch 578\/71) requires that AFDC grants be increased annually, based on changes in the CN!. Chart2 shows the increases in the grant since July 1973, and the value of the today’s grant level in \”real\” 1973 dollars-that is, the actual amount, adjusted for inflation as measured by the CN!. The chart shows that, in 1982-83, the \”real\” value of the three-person grant ($241) fell below the 1973-74 value ($243) for the first time since 1974-75. 1078 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued The budget proposal to maintain grants at the current-year level would result in a \”real\” grant level of $225, 7.4 percent less than the \”real\” grant value in 1973-74. $500 D 400 0 L 300 L A 200 R S 100 Chart 2 AFDC Maximum Aid Payment for Family of Three Actual and Constant Dollar Value a Actual Dollars ..r:.—-~ .r–_r-‘L- …… —-1- 269 270 L___ 265 271 265 260-\” -242- 248 254 250 -241~225;- 1973-74 Constant Dollars 73-74 74-75 75–76 76-77 77-78 78–79 79-’80 8Q-81 81-82 82-83 83-84 Fiscal Year Impact of Recent Legislation Four recent legislative enactments have combined to make substantial changes in the eligibility requirements that apply to the AFDC unem- ployed parent and family group programs. The net result of the changes has been a 41,170 reduction in the number of cases receiving aid (41,455 cases terminated and 285 added); a reduction in grant amounts for 82,148 cases and an increase in grant amounts for 28,276 cases. The effects of these changes are summarized in Tables 6 and 7, which show the effects on caseload and costs, respectively. Table 6 AFDC Caseload Effects from Recent Legislation 1982-83 Cases\u00b7 with Changed Grant Legislation Increases Decreases Ch 69\/81 (SB 633) …………………………………………. 3,432 PL97-35 (OBRA) a . Ch lx\/81 (SB Ix) ……………………………………… ~ 6,715 Ch 3x\/82 (AB 2x) ………………………………………. 28,276 Ch 327\/82 (SB 1326) ……………………………….. .. Totals ……………………………………………………. 28,276 a Omnibus Budget Reconciliation Act of 1981. 43,956 34,574 186 82,148 Changes in Average Monthly CaseJoad Increases Decreases 7,356 28,775 285 3;509 1,815 285 41,455 Item 5180 HEALTH AND WELFARE \/ 1079 In total, these four :pleasures reduced General Fund costs for the AFDC prograIIl by $260 million in 1982-83. Budget savings in 1983-84 will be somewhat different due to proposed changes in the State-Only AFDC-U Program. Table 7 Fiscal Impact 1rom Recent Legislation AFDC\u00b7FG and U Grants and Administrative Costs 1982-a (in thousands) Legislation All Funds Federal Ch 69\/81 (SB 633) ………………………. .. -$104,122 -$61,076 Eligibility changes ., …………………. .. (-48,414) (-32,587) In\u00b7Lieu COLA ………………………….. .. (-55,708) (-28,489) PL 97\u00b735 (OBBA) ‘ ……………………….. . -$203,946 -$108,511 Ch 1x\/81 (SB Ix) …………………….. .. (-161,824) (-82,252) Ch 3x\/82 (AB 2x) …………………….. .. (-42,122) (-26,259) Ch 327\/82 (SB 1326) …………………… .. -$273,714 -$112,515 COLA suspension …………………….. .. (-259,658) (-132,790) Eligibility changes …………………… .. (-14,056) (-128) Transfers to Federal\u00b7U ……………. .. (0) (19,577) Emergency Assistance ……………… .. (0) (826) Other changes ………………………….. .. __ …:….(0) (0) Totals …………………………………….. .. -$581,782 -$282,102 Omnibus Budget Reconciliation Act of 1981. State -$34,481 ( -10,202) (-24,279) -$81,616 (-67,744) (-13,872) -$143,530 ( -113,166) (-12,092) (-16,690) (-737) (-845) -$259,627 County -$8,565 (-5,625) (-2,940) -$13,819 (-11,828) (-1,991) -$17,669 ( -13,702) (-1,836) ( -21387) (-89) (845) -$40,053 Chapter ~Statutes of 1981 (SB 633)-$34 million General Fund sav- ings in 1982-83. This law temporarily suspended cost-of-living adjust- ments in AFDC, SSI\/SSP, and In-Home Supportive Services (IHSS), and made several changes in eligibility rules. It provided for a cost-of-living adjustment of 9.2 percent in lieu of the 11.1 percent which the previous law required. Eligibility changes had the greatest effect on 18 to 20 year olds who could no longer receive aid unless they were full-time high school students. The courts later interpreted \”high school students\” to include students attending vocational or technical schools. Chapter 1~ Statutes of the 1981-82 First Extraordinary Session (SB 1x)- $68 million General Fund savings in 1982-83. The first in a pair of meas- ures implementing federal law changes enacted by P.L. 97-35, Chapter 1 made the following major changes in the AFDC program: Established a maximum gross income limit at 150 percent of the maximum aid payment; . Established a limit on the size of and eligibility for earned income disregards; Limited AFDC-U eligibility to families where the \”principal earner\”, rather than either parent, is unemployed; and . Eliminated supplemental payments. Chapter~\u00b7 Statutes of the 1981-82 First Extraordinary Session (AB 2x)- $14 million General Fund savings in 1982-83. This statute enacted most of the remaining changes required by P .L. 97-35, including the following: 35-76610 1080 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Changed benefits provided to pregnant women. An expectant mother with no other children receives aid for a family of one plus a $70 special need allowance, beginning when the pregnancy is veri- fied. Expecting mothers with other children receive the $70 allow- ance only in the last four months of pregnancy; Required inclusion of stepparent income in the family’s total income when calculating grants; Required that lump sum payments received by the family be counted as income in the month received and in following months; Reduced personal property limit, from $1,600 to $1,000; Exempted the home from consideration as property; Made those unemployed because of a strike ineligible for AFDC-U aid. Allowed children to be eligible under the program only until their 19th birthday, and limited aid to only those 18 year olds attending school; . Required that aliens prove permanent resident status before being approved for aid; and Increased to 10 percent the portion of the grant that can be withheld in order to collect past overpayments caused by client error. (5 per- cent if the overpayment was due to agency error). Chapter 32~ Statutes of 1982 (SB 1326)-$144 million General Fund savings in 1982-83. This statute implemented several changes in the AFDC program, the savings from which were incorporated in the 1982 Budget Act. It: Suspended cost-of-living increases for the AFDC program for one year (until July 1, 1983); Established 30 days of Emergency Assistance for nonfederally eligible unemployed parents; and Placed a three month limit on eligibility for the State-Only Unem- ployed Parent program following termination of eligibility for Emer- gency Assistance. The limit on State-Only AFDC-U eligibility has led to the reclassification of many State-Only AFDC-U families as eligible for the federal AFDC-U and AFDC-FG programs, resulting in a savings to the state and the coun- ties, and added costs to the federal government. The Emergency Assist- ance program accomplished a similar, though smaller, shift in funding. Actual Caseload Changes Chart 3 shows the caseloads under the AFDC program since 1978-79. Average monthly caseload in the AFDC-FG and AFDC-U programs has increased at an annual average rate of 3.7 percent during the past five fiscal years. The AFDC-FG and AFDC-U caseloads are expected to in- crease by 0.7 percent in the budget year. The budget estimates that the Foster Care caseload will remain stable at around 28,000 during 1983-84. Caseloads Continue to Rise. Despite the major changes in federal and state laws whjch have reduced the number of families qualifying for AFDC benefits, average monthly caseloads have risen every year since 1979-80. Two factors have caused these increases. First,unemployment has risen since the beginning of 1980, except during a six-month period in early 1981. Higher unemployment traditionally has meant higher case- loads in both the Family Group and Unemployed programs. Second, the 1979 Westcott v. Califano decision allowed unemployed mothers to qualify Item 5180 HEALTH AND WELFARE \/ 1081 C A S E S Chart 3 AFDC Caseload History Average Monthly Case load 1978-79 to 1983-84 (in thousands) Family Group 1000 ~ Unemployed 900 Parent 800 ~ Foster Care 700 600 500 400 300 200 100 0 78–79 7~0 8Q-81 81-82 Fiscal Year 82-83 (Est.) 83-84 (Prop.) for AFDC-U, causing as much as a 50 percent increase in the unemployed caseload. CaseJoad Likely to Exceed Budget Projections. The DSS estimates that the total number of AFDC recipients will increase by 0.6 percent between 1982–83 and 1983-84. Most of this increase is expected in the Family Croup l’rogram, where increases are expected to more than offset the projected decrease in unemployed parent cases. Table 8 shows the projected AFDC caseload in persons for each of the four major AFDC programs. Table 8 AFDC Average Monthly Persons Receiving Assistance 1982~ and 1983-84 Program AFDC\u00b7Family Group ………………………………. . AFDC\u00b7Unemployed ………………………………… . AFDC-Foster Care ………………………………….. . Aid for Adoption of Children ……………….. .. Refugees\u00b7 Time-eligible ………………………………………. .. Time-expired ……………………………………….. . Totals ………………………………………………… . Estimated 1982-83 1,204,430 359,360 28,234 2,519 (96,549) (32,375) 1,594,543 Proposed 1~ 1,218,600 354,020 28,269 2,775 (73,407) (68,592) 1,603,664 Change Number Percent 14,170 1.2% .:…5,340 -1.5 35 0.1 256 10.2 (-23,142) (36,217) 9,121 (-24.0) (lll.9) 0.6% Grants to refugees who have been in the United States less than 36 months (time-eligible) are supported entirely by federal funds. During that period, refugees who qualify are enrolled iii. AFDC or other welfare programs, and the state and counties receive reimbursement for nonfederal costs. Time- expired refugees, those in the United States longer than 36 months, may qualify for and receive AFDC grants supported by the usual share of federal (50 percent), state (44.6 percent), and county (5.4 percent) funds. 1082 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Our analysis suggests that the department’s caseload estimates for 1983- 84 may be low, for the following reasons: 1. The Employment Development Department (EDD) now projects that unemployment will peak somewhat later than the departments esti- mates assumed. The EDD’s most recent projections assume that unem- ployment will peak in the second quarter of 1983, after the April 1983 date that DSS assumed in constructing its caseload estimates. In the past, AFDC caseloads have risen with increasing unemployment, with the rate of in- crease slowing when the peak in unemployment is reached. This suggests that the growth in the AFDC caseload will begin to slow later in the year than DSS projects, causing higher average caseloads during the year. 2. The growth rate projected for AFDC-FG caseload growth was based on the actual rate of growth between July and December 1981, which may be abnormally low when compared to rates that usually occur during periods of rising unemployment. During the first four months of this base period, unemployment grew relatively little, only increasing in the last two months of the period at a .rate typical of the 1980 and 1982 reces- sions; 3. AFDC-U caseloads are based on actual case load growth rates between May 1981 and July 1982, without adjusting for the effect of P.L. 97-35. The department estimates that enactment of P.L. 97-35 reduced AFDC-Ucaseloads by 3,068 cases. By disregarding this reduction, the department may have underestimated AFDC-U caseload growth rates. STATE-ONLY AFDC UNEMPLOYED PARENT PROGRAM Most families whose principal wage earner is unemployed and meet income and resource requirements qualify for assistance under the federal AFDC Unemployed Parent program. Some needy families, however, are excluded by federal eligibility criteria. For example, to be federally eligi- ble, the unemployed parent must be out of work for at least 30 days, and have an established connection with the workforce. This connection is established by (1) earning at least $50 in each of 6 quarters over 13 quar- ters prior to seeking aid, (2) having participated in at least 5 days of job training during the quarter, or (3) receiving unemployment benefits in the past year. In the past, families who did not qualify for federal AFDC-U, either because they lack a sufficient connection to the workforce (91 percent of State-Only AFDC-U cases) or because they were not unemployed for more than 30 days (4 percent), were entitled to benefits financed entirely by state and county funds, without federal participation. (The remaining 5 percent were pregnant women with no other children.) Chart 4 shows AFDC-U nonfederal caseloads for the past nine years. Nonfederally-eligi- ble cases averaged 17 percent of the total AFDC-U caseload during this period. Under the provisions of Ch 327\/82 (SB 1326), these families now receive aid from two programs established by the measure’-the State- Only AFDC-U program and the Emergency Assistance program. \”.; (,:::..,. Item 5180 HEALTH AND WELFARE \/ 1083 P E R S o N S Chart 4 Average Monthly Caseloads for State Only AFDC-U and Emergency Assistance Programs 1973-74 to 1983-84 (estimated) (in thousands of persons) State Only Program thf\\}\\{\\f\\f\\:t{A Emergency Assistance 73-74 74-75 75-76 76-77 77-78 76-79 79-80 80-81 81-82 82-83 83-84 (est.) (est.) Emergency Assistance and State-Only AFDC-U Programs. The Emer- gency Assistance program, first authorized by Ch 1193\/80 (AB 2980), and approved by the U.S. Department of Health and Human Services in June 1982, began granting aid in July 1982 to unemployed families who do not meet federal eligibility requirements. Most counties, however, did not implement the, program until October 1982. The program provides fed- eral funds for 50 percent of the costs of supporting families during the first 30 days of the parent’s unemployment. Eligibility is limited to one 30-day period per year. After 30 days, some families will qualify for the federal AFDC-U program. Those with sufficient work experience who do not meet federal requirements can enroll in the State-Only AFDC-U program and receive aid for an additional three months each year. The intent of Chapter 327 was to provide a total of three months in aid (one month of Emergency Assistance and two months of State-Only AFDC-U) to unemployed parents. As enacted, however, Chapter 327 made these persons eligible for a total of four months of aid. As a result, the State-Only AFDC-U program now provides three months of aid after the first 30 days of emergency\u00b7 assistance. The 1983 Budget Bill assumes enactment of legislation which will provide aid for a total of three months (one month under Emergency Assistance and two months under the State-Only AFDC-U program). Savings Lower Than Anticipated. Table 9 shows the amount of savings reflected in the 1982-83 budget as a result of the changes made to the State-Only AFDC-Uprogram. As the table indicates, the savings originally expected have not materialized. This has happened for several reasons. First, the budget assumed a three-month program, instead of a four-month program as provided by Chapter 327. Second, the budget anticipated savings of $10 million in the Emergency Assistance program. Current estimates of savings are much lower because the number of families actu- 1084 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued ally enrolling in the program each month has been much lower. Third, the budget now estimates that a large number of recipients who in the past would have been found to be ineligible for federal benefits\u00b7 will now be found to be eligible for these benefits. This reduces the anticipated savings from $.89 to $.45 per State-Only AFDC-U dollar because persons assumed to be off aid at the end of the three month period are instead being aided under the federal program, with state support. While this still reduces General Fund costs, it does not reduce them by as much as it would have if these families received no aid at all. Table 9 Comparison of Budgeted and Estimated General Fund Savings from Three-Month State-Only Limit and The Emergency Assistance Program Grant and Administrative Savings 1982-83 (in thousands) Emergency Assistance …………………………………………………………… . Three-Month State-Only Limit …………………………………………….. . Federalization of State-Only AFDC-U Families a ……………….. .. Transfers to AFDC-FG b ………………………………………………………. .. Total Savings …………………………………………………………………… .. Budget Act $10,000 59,200 $69,200 November Estimate $737 11,362 16,690 703 $29,492 Difference -$9,263 -47,838 +16,690 +703 -$39,708 a Federalization due to (1) new information about connection with labor force and (2) expiration of 30 . day ub.employment requirement. b Transfers to FG due to (1) one parent leaving home, (2) pregnant women with no other children in the last 4 months of pregnancy, and (3) reclassification of family members in combined federal and nonfederal case. Table 10 Result of Implementation of Three-Month Limit for the. State-Only AFDC-U Program\u00b7 Selected Counties October 1!J82 Average Outcome for Cases OfT Aid Monthly CaseJoad Due to Three-Month limit Caseload October FederalizedTo General County fan.-\/une 1!J82 1!J82 Total FC&U ReUel Terminat!ld Alameda …………………… 338 17. 376 254 1 121 Contra Costa ……………. 220 54 151 60 12 79 Los Angeles ……………… 2,101 864 2,220 1,305 286 Sacramento ……. : ………. 753 44 699 623 12 64 San Bernardino ………… 706 79 689 359 330 San Joaquin ……………… 713 184 679 546 11 109 Shasta ………………………. 119 35 92 69 2 15 Stanislaus …………………. 285 65 211 125 4 82 Tulare ………………………. 173 31 134 70 4 60 Ventura …………………… 117 31 89 42 1 45 — Totals …………………. 5,525 1,404 5,340 3,453 47 1,191 (100%) (25%) (100%) (65%) (1%) (22%) a SOURCE: County Welfare Directors Association. Other Outcome 629 13 6 1 — 649 (12%) Item 5180 HEALTH AND WELFARE \/ 1085 Actual County Experiences Table 10 shows the results of a survey of the counties conducted by the County Welfare Directors’ Association to determine the effects of the SB 1326 changes in the State-Only AFDC-U program. In counties surveyed from which results are complete and which account for about 40 percent of statewide nonfederal cases, the number of nonfederal cases in October was 75 percent lower than the average number of cases reported during the period January to June 1982. The table also shows what happened to the cases no longer classed as nonfederall}’ eligible. About 65 percent of these cases were transferred to the federally supported Family Group or Unemployed Parent programs. Twenty-two percent of the cases were terminated, 1 percent were enrolled in General Assistance, and 12 percent were enrolled in employment and training programs or had other out- comes. Federalization of State-Only AFDC-U Families. Several reasons ex- plain the federalization of what previously were considered to be nonfed- erally eligible cases. Most importantly, a substantial portion of the refugee families enrolled in the State-Only program were reinterviewed and found to qualify for federal aid. Faced with the prospect of having to provide general relief payments to these families after their eligibility for state aid lapsed, counties chose to reevaluate their employment histories to determine whether federal eligibility could, after all, be established. In the process, counties uncovered evidence of a workforce connection. In part, this resulted from a clarification of federal regulations concerning the definition of in-kind income that allowed refugees to establish eligibili- ty for the federal AFDC-U and FG program, based on earnings from nonwage work. Most counties also deemed participation in English classes to qualify as job training experience. . Many nonrefugee families in the State-Only AFDC-Uprogramalso were transferred to federally eligible programs on the same basis. Again faced with the prospect of having to provide general relief payments to these families, the counties were able to establish the workforce connec- tion needed to qualify these families for the federal program. In addition, a small number of these families were federalized based on changes in the family’s status since first enrolling in the state-only program. Such changes reflected passage of the 30-day waiting period, or sufficient part- time work to meet the $50-in-13-quarters eligibility criterion. In some instances, counties report that cases were reclassified as family group cases because qne parent left home. General Assistance Impact. Based on data collected in November 1982, in no county have general assistance rolls been significantly affected by the three-month limit on the State-Only AFDC-U program. As of Novem- ber, 1982, a total of 90 families formerly on State-Only rolls in 47 counties have applied and received general assistance from the counties .. This num- ber may increase in the future as additional applications are processed or as the number of unemployed families needing aid increases. To date, however, the three-month limit on State-Only AFDC-U apparently has not caused large increases in county-supported welfare caseloads. It should be noted that Los Angeles County transferred over 600 State- Only AFDC-U recipients to job training activities under the CETA Pro- gram. Had this program not been available, more recipients might have applied for and been granted general assistance. 1086 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued The Size of the County Share Affects the Way Counties Administer State-Funded Programs. As noted above, a large proportion of the cases previously found to be ineligible for federal AFDC benefits and assigned to the State-Only AFDC-U program were later found by the counties to be federally eligible. Many of these cases were time-eligible refugee fami- lies whose assistance payments are fully supported by federal funds. Other cases, however, were either time-expired refugees or nonrefugee families who previously were incorrectly classified by the counties as nonfederally eligible cases. The counties’ failure to correctly classify these cases resulted in consid- erable costs to the state that could have been-and should have been- avoided. Because the state pays 89.2 percent of the cost of nonfederally eligible cases, but only 44.6 percent of the costs of federally eligible cases, misclassification caused state payments in these instances to be twice as high as they should have been. Misclassification also doubled the counties’ costs, but the additional costs per case were much smaller-only about 12 percent of the added costs to the state. The extra cost to the counties was $0.054 per grant dollar. Apparently, however, this extra nickel did not provide sufficient motivation for the counties to seek out the lowest cost classification for these cases. Counties were not motivated to reevaluate these cases and reclassify them into the federal AFDC-U program until they faced the prospect of these families being without assistance or en- rolling in the 100 percent county-funded general assistance program. The difference between a county paying an extra five cents on the dollar and paying an extra 95 cents on the dollar has made a substantial difference in the behavior of the\u00b7 counties. . Information on the Assistance Population We recommend that DSS submit a plan to the Legislature for collecting data concerning those portions of the population that receive aid not required by federal law. The consequences of limiting eligibility for the State-Only AFDC-U program, described above, reflect a more basic problem facing the Legis- laturein attempting to set policy under the AFDC program: inadequate information about those drawing benefits under the program. Until re- cently, little was known about the characteristics of those persons who receive State-Only AFDC-U benefits. Although DSS conducted a survey of the State-Only AFDC-U population in June, 1982, the results were not reported in time to assist the Legislature in accurately gauging the effects of program changes considered in the 1982 budget process. In the future, benefit changes may be considered for other segments of the welfare population. In the event that legislative proposals are made to either increase or reduce benefits or eligibility for sub-groups of this population, the Legislature will need accurate information about these groups in order to evaluate the merits of the proposals. We recommend that the DSS develop and present to the Legislature a plan for conducting characteristic surveys of these special recipient groups to provide the Legislature with accurate program information. . Item 5180 HEALTH AND WELFARE \/ 1087 BENEFITS AVAILABLE TO AFDC RECIPIENTS In addition to the monthly cash grant, AFDC recipients may qualify for and receive a variety of other benefits. Some of these additional benefits, such as Medi-Cal and child care services, are available to AFDC recipients because they are categorical public assistance recipients. Other benefits, such as public housing and social security benefits, are available to AFDC recipients to the extent that they meet specific eligibility criteria and, in the case of public housing, are accepted into the program. This section discusses the major benefits available to AFDC recipients, in addition to their monthly cash grants. The discussion focuses on the benefits as they were in 1981-82, the latest year for which data is available on actual utilization. For the most part, data presented here was collected as part of the April 1982 AFDC characteristics survey conducted by DSS. It reflects changes made by the Omnibus Budget Reconciliation Act of 1981 (P .L. 97-35). Generally, statistics collected on other benefits received by AFDC participants are collected on the basis of cases, not the number of individual recipients. To estimate benefits per individual, as opposed to benefits per case, requires that the value of benefits per case be divided by 3.0, the average number of individuals in each AFDC family. It should be noted. that, in addition to the benefits discussed below, AFDC recipients may: 1. Utilize a variety of social services, including family planning, pro- vided by local agencies; 2. Participate in the Work Incentive (WIN) program, which provided employment services for 35,415 recipients in 1981-82, or about 2.3 percent of the monthly AFDG caseload, and social services intended to improve employability to another 188,510 recipients; and 3. Participate in the Women, Infants, and Children Nutrition program if the parent is pregnant or if the family has children under five years of age. In addition, approximately 31,081 AFDC families shared their household with an SSI!SSP grant recipient during 1981-82. Medi-Cal. The Medi-Cal program, administered under Title XIX of the federal Social Security Act, provides funds to health care providers for the cost of care delivered to public assistance recipients, and other medi- cally-needy individuals whose medical costs exceed their ability to pay. All AFDC reCipients are eligible for Medi-Cal health care. During 1981-82, 575,500 persons, or 38 percent of all AFDC recipients, utilized Medi-Cal reimbursed fee-for-services care. An undetermined number of additional AFDC recipients utilized other Medi-Cal services provided through pre- paid health plans, dental plans, and other categories of service paid for on a per-capita basis. The average monthly cost of fee-for-service Medi-Cal services utilized by AFDC recipients during 1981-82 was $133.29. Unemployment Insurance. UnemFloyment Insurance (UI), support- ed by employer contributions, provides weekly cash payments to unem- ployed persons who are actively seeking work. Approximately 57,501 AFDC reCipients also received UI benefits in 1981-82. The amount of weekly UI benefits depends upon the amount of earn- ings received during a base period of employment. The average UI benefit received by AFDC cases in 1981-82 was $275.02 per month. Assuming the average case size of three, the average value per family member was $91.67. Food Stamps. The purpose of the food stamp program is to ensure low-income households are able to obtain an adequate level of nutrition 1088 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued by providing food stamps at no cost to eligible households. For most households eligibility for food stamps is based on gross income and re- sources available. For households with a member age 60 or over or receiv- ing Title II disability payments, eligibility is based on net income and resources available to the household after allowable deductions. The amount of food stamps awarded is based on net monthly income and household size. Because their income is low, most AFDC households quali- fy for food stamps. In 1981–82, 1,143,687 persons receiving AFDC grants also participated in the food stamp program. According to D~S, the aver- age cash value of food stamps used was $26.44 per individual AFDC recipi- ent. AFDC Special Needs. This program provided average allowances of $10.57 to 8,288 AFDC families, during 1981-82 for special needs such as prenatal nutrition. The average benefit value was $3.52 per individual. Social Security. The retirement, survivors, disability, and health insur- ance (RSDHI) program provides benefits to retired and disabled workers and their dependents and to survivors ofinsuredworkers. It also provides health insurance benefits for persons age 65 and over and for the disabled under age 65. According to statistics compiled by the Department of Social Services, 40,407 AFDC recipients also received RSDHI payments averag- ing $60.60 per month during 1981-82. RSDHI payments are counted as income for AFDC grant purposes. As a result, individual AFDC grants are reduced by the amount of the RSDHI payment, less specified deductions. Child Care Dun.ng Working Hours. Several d. ifferent child care pro- grams may be available to AFDG recipients, depending on where they live. The Office of Child Development (OCD) in the State Department of Education provides subsidies on behalf of children from AFDC families to a network of child care centers throughout the state. In 1981-82, an estimated 42,719 AFDC children received subsidized child care in OCD- supported centers, at an average cost of $128.50 per child per month. Another child care resource available to AFDC families in 1981-82 was the \”income disregard\” mechanism. Under this arrangement, individual AFDC families select and pay for child care, and are then allowed to deduct the cost of the care from net countable income for purposes of AFDC grant calculation. In 1981-82, approximately 11,235 families received child care through this indirect subsidy. These families reduced their countable income an average of $103 per month as a result. The federal Omnibus Reconciliation Act of 1981 limited these child care deductions to a maximum of $160 per child. Child Nutrition Programs. Low-income children, including those from AFDC families, are eligible for free meals provided through schools and child care agency meal programs. Public schools must provide at least one such meal per day for each needy pupil, at an estimated cost of $1.35 per meal. Approximately 35 percent of AFDC recipients are school age chil- dren. Housing Programs. Several housing assistance programs are available to low- and moderate-income households. These households may receive (1) subsidized shelter as tenants in public housing or (2) rental assistance to help them afford to live in new or rehabilitated units owned by public or private agencies. The availability of housing assistance, and the income thresholds for eligibility, vary among the counties. It is estimated that in 1981-82, approximately 25,077 AFDC recipients resided in public housing, Item 5180 HEALTH AND WELFARE \/ 1089 and an additional 143,970 received rental assistance. Low-Income Energy Assistance Program. During 1981-82, $76 million was made available in California to provide cash assistance to low-income households to help them pay the cost of the energy they used. Categorical public assistance recipients, such as AFDC households, are automatically eligible for this assistance, which is not considered in calculating the amount of a household’s cash grant. During 1981-82, approximately 621,- 636 AFDC recipients received a cash grant under this program. The aver- age annual benefit provided under the Home Energy Assistance Program in 1981-82 was $98.92 per household, or $32.97 per individual. These fed- eral funds also provided an undetermined number of AFDC recipients with (1) up to $300 in emergency help in paying energy bills and (2) grants of up to $1,000 to weatherproof their homes. Other Income. In addition to the benefits described above, 13 percent of AFDC recipients report other income in the form of child support payments, contributions from members of their households who do not receive AFDC, their own earnings, and in-kind income. This other income is available to the recipient in addition to the actual AFDC grant awarded each month, even though the actual cash grant may be reduced from the maximum aid payment by some portion of the other income received. Calculation of A verage Benefits. Table 11 shows the average value of benefits and other income received by individual in 1981-82, based on the average of three \\members per AFDC household. The averages are cal- culated in two ways. The \”Average Cash Value of Benefits Received\” shows the average benefit value per individual in those AFDC households that received the particular benefit. For example, among those AFDC households that received food stamps, the average value of the coupons per individual was $26.44. The \”Value of Benefits Averaged Over All AFDC Recipients\” gives the average benefit value for all individuals in the AFDC program, including both those who received the particular benefit and those who did not. As a result, this measure of benefits per ~FI?C ~n.dividualis less than the average 1;>enefit ~eceived per participat- mg mdlvldual. The average value of benefits provIded to a famIly of three was calculated by multiplying the individual average benefit value by three. Difficulties in Calculating Benefits Received by AFDC Families. The average benefit value provides the best available picture of the total bene- fits received by AFDC families. Like all averages, of course, it masks what can be large differences among recipient families. Some families may do much better than the average; others receive less than the average. The average, however, provides a meariingful measure of benefits provided to the hypothetical \”average\” AFDC household. Several points must be kept in mind when reviewing the information on average benefit values provided in Table 11. Not all recipients receive each of these benefits. Some programs are geographically limited; others have long waiting lists; still others have distinct eligibility criteria that some AFDC recipients do not meet. More than one-half of all AFDC families get less than the average benefit value. This is because relatively few individuals receive unem- ploymentcompensation, child care, or rental subsidies-each of which provides relatively large benefits to those qualifying for them. This sKews the distribution of benefits, causing the median family benefit to be less than the average benefit. The average number of persons receiving a benefit understates the 1090 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued number of persons who use the program over the year. Because some recipients enroll for only a few months at a time, the program pro- vides aid to more\u00b7 individuals in the state than the monthly average figure would imply . Finally, not all AFDC cases contain three members. Under some benefits programs, (Unemployment Insurance, Social Security, LI- HEAP), larger families get the same benefit as smaller families. Table 11 Monthly Benefits Available to AFDC Recipients a 1981-82 Average Value of Cash Value Benefit Recipients Percent of Averaged Over Using ofAFDC Benefits ADAFDC Benefit Benefits Recipientsb Received Recipients AFDC Cash Grant ……………………………. 1,532,818 100.0% 147.20 $147.20 Medi.Cal C ………………………………………… 575,500 37.6 133.29 50.04 Unemployment Insurance ……………….. 57,501 3.8 91.67 3.44 Food Stamps …………………………………….. 1,143,687 74.6 26.44 19.73 AFDC Special Needs ………………………. 24,864 1.6 3.52 0.06 Social Security …………………………………. 40,407 2.6 60.60 1.60 Child Care d …………………………………….. 42,719 2.8 128.50 3.58 Child Nutrition e ……………………………… 539,401 35.2 19.69 6.93 Public Housing f ……………………………….. 25,077 1.6 41.34 0.68 Rental Subsidies f.g ……………………………. 143,970 9.4 81.97 7.70 Other Income h ……………………………….. 208,116 13.4 93.87 12.75 Average Total Monthly Benefits …….. $253.71 Average Total Annual Benefits ………. $3,044.52 LIHEAP’ ………………………………………….. 621,636 40.6% $32.97 $13.37 Average Total Annual Benefits with LIHEAP …………………………………….. $3,057.89 Overall Average Times Three (Family of Three) $441.60 150.12 10.32 59.19 0.18 4.80 10.74 20.79 2.04 23.10 38.25 $761.13 $9,133.56 $40.11 $9,173.67 a SOURCES: Department of Social Services, Office of Economic Opportunity, Department of Health Services, federal Department of Housing and Urban Development, State Department of Housing and Community Development. b Percentage figures do not total 100 percent because some recipients utilized more than one benefit. C Fee-foNervice users only. Other Medi-Cal service. categories, such as prepaid health plan, are paid for on a per capita basis. Data on the utilization of these fee-for-service categories by public assistance recipients is not available at this time. d Includes only subsidized child care provided through the Office of Child Development in the State Department of Education. e Based on $1.35 average meal value, one meal per 175 school days per year. f Housing assistance caseloads are based on a two-bedroom household with three members with monthly income of $473. Housing authorities and state and federal departments do not maintain specific data on the number of public assistance recipients who reside in subsidized housing. g Includes assistance under Sec.tions 8 and 23 of the federal Housing and Urban Development Act and the Farmer’s Home Administration’s Rental Assistance program. h Includes contributions from absent parents and other persons in the households, earned income, and in-kind income. i This amount is received in a lump sum rather than on a monthly basis. The Importance of the AFDC Grant. Table 11 demonstrates the im- portance of the basic AFDC grant in maintaining the income of recipients. The majority of AFDC recipients rely solely on the grant plus food stamp coupons for their support. Although there is a wide variety of bther benefit programs available, only a relatively small number of AFDC recipients are Item 5180 HEALTH AND WELFARE \/ 1091 served by these programs. Changes in Treatment of Earned Income P.L. 97-35-the federal Omnibus Budget Reconciliation Act of 1981-as implemep.ted by Chapters Ix and 3x, First Extraordinary Session of 1981- 82, changed significantly the method used to calculate grant payments under the AFDC program. These changes increase the amount by which a recipient’s grant is decreased for families with earned income. Table 12 illustrates the effects of these federal changes. Table 12 Monthly Disposable Income for a Working and Nonworking Family of Three Before and After Changes Enacted in the Omnibus Budget Reconciliation Act of 1981 After Changes Before Changes After Four Nonworking Working Nonworking Working Months Income: Earnings …………………………………………….. . AFDC Grant a…………………………………….. $506 Food Stamp Value ……………………………. 60 Renter’s Credit …………………………………… 11 Gross Income …………………………………. $577 Expenses: Child Care b ………………………………………. .. Work Related Exenses C …………………… .. Taxes d ……………………………………………….. .. Total Expenses ………………………………. . Disposable Income…………………………………. $577 $600 410 11 $1,021 $200 70 14 $284 $737 $506 93 11 $610 $610 . SOURCE: Department of Social Services. b. Child care costs were assumed not to exceed one\u00b7 third of gross income. $600 $600 319 195 55 11 11 – – $930 $861 $200 $200 70 70 14 14 – – $284 $284 $646 $577 c. Includes transportation costs and other miscellaneous expenses. d. Federal income tax (including Earned Income Credit), state income tax, Social Security tax, and state disability insurance tax. The table shows the disposable income for a family of three with earned income of$O and $600per month. \”Disposable income\” includes the sum of all income (earned income, welfare payment, food stamp value, and tax credits) less expenses directly related to earning the income (child care, transportation, other work-related expenses, and taxes). (Table 12 as- sumes that the family has no income from sources such as in-kind income, contributions from the absent parent, or other benefit programs.) Before the federal changes in the treatment of earned income, the nonworking family used in this example would have received an AFDC grant of $506, food stamps amounting to $60, and the renter’s credit of $11, for a total gross income of $577, as shown in Table 12. Work-related ex- penses and taxes for this family would have been zero, resulting in a \”disposable income\” of $577. If the parent in this family took ajob paying $600 a month (shown in the second column of Table 12) the parent’s earning would have resulted in a lower AFDC grant ($410) and the loss of eligibility for food stamps. Expenses would have included $200 for child care (assumed not to exceed one-third of gross income), $70 in direct 1092 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued work-related expenses, and $14 per month in taxes (federal and state income taxes, social security, and state disability). The resulting disposable income would have been $737 per month. After the federal changes, the disposable income for the nonworking fam,ily increased because the value of the food stamps increased to $93 (as a result of the 1982 inflation adjustments), giving the family a disposable income of $610. The working family’s AFDC grant now starts at $319 for the first four months on aid. This is less than the grant before the federal changes took effect because the one-third earned income disregard is now calculated after other deductions are subtracted. Here again, the working family has too much income to qualify for food stamps, leaving it with disposable income of $646. Mter four months of aid, the family is no longer eligible for the $30 and one-third deduction, causing the AFDC grant to drop by another $124, to $195. As a result, the family now qualifies for food stamps and receives $55 in coupons. Its disposable income drops to $577. (The family will again qualify for an additional four months of the $30 and one-third deduction after twelve more months of aid.) We have made similar calculations to show how taking jobs paying $200, $400, $800, $1,000, arid $1,200 monthly affects a family of three’s disposable income. The results of these calculations are shown in Charts 5 and 6, Chart\u00b7 5 compares disposable income before the federal changes with disposable income under current law during the first four months of aid. Chart 6 compares disposable income under existing law both before and after the fourth month of aid. $1000 Dooo I S 800 P 0700 S A 600 B 500 L E 400 I 300 N 200 C 0 100 ChartS Monthly Disposable Income8 : Family of Three Before and After Federal Changes Before After Changes Changes First 4 Mos. I IIW\/@! 870 804 737 937 M O-W~~~~~~~–~~~~~~~~~–~~~~~~ E None $200 $400 $600 Monthly Earned Income a Disposable income IS earned income, AFDC grant. and Food Stamp value less taxes and work expenses. AFDC cash grant and Food Stamp values calculated by Depar~ment of Social Services. b Ineligible for AFDC because earnings exceed 150 percent of Maximum Aid Payment. Item 5180 HEALTH AND WELFARE \/ 1093 ChartS Monthly Disposable Income a : Family of Three Under Current Law; First Four Months and After Four Months of Aid o $ I Firs! 4 Mos. After 4 Mos. S P o S A B L E I N C o M E V!~ffll1 I::mf:~ff:jjjrl None Monthly Earned Income a DI::>posablt~ Income IS l!arnt!d Income, J\\F-OC gran!. and Food Stamp value less taxes and work expenses. AFDC cash H\u00a5 nlll and 1- ood Stalllp values calculated by Department of Social Services Comparing AFDC eligibility rules before the implementation of recent federal law changes to the rules that apply under current law disclose the following: . During the first four months of aid (Chart 5): -A family of three with earned income of $800 or more is no longer eligible for AFDC. -A family of three capable of earning between $800 and $1,000 a month would be better off not working and applying for AFDC and food stamps. This is because the family’s disposable income would range from $482 to $522 if the head of the family worked, compared to $610 if family head did not work. -A nonworking family of three could increase its disposable income slightly by getting ajob paying $600 or less per month . After the first four months of aid (Chart 6): -‘-The benefits\u00b7’ from employment disappear for all AFDC families over the next twelve months (until they again qualify for the $30 and one-third deduction.) -After the first four months of aid, these families have a larger dispos- able income if they do not work: $610 per month, compared with $577, assuming the job pays $600. . DSS’s Report on the Effects of the Recent Federal Law Changes. Chapter 3x directed DSS to report to the Legislature on the effects of P.L. 97-35. The department’s report, which was submitted on December 29, 1982 discusses the effects of P.L. 97-35 during its first four months of operation. The report states that, through June 1982,31,320 AFDC-FC and 3,068 AFDC-U cases had been discontinued, due to the federal changes. The report, however, does not identify how many terminations can be 1094 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued attributed to individual changes in the program. . The report. compared selected characteristics of the AFDC caseload before October 1981 and after implementation of P.L. 97-35. It found that a smaller share of the AFDC-FG population had earned income after the federal law changes than before. Specifically, the report points out that before implementation of P.L. 97-35, 15 percent of the AFDC-FG popula- tion had earned income, but only 9.3 percent had earned income after- wards. In addition, the average amount of the earned income had dropped from $536 prior to the law changes to $313 after. The share of AFDC-U families with earned income fell from 11 percent in October 1981 to 10 percent in April 1982. The average earned income for those AFDC-U families with earned income fell from $469 in October to $418 in April 1982. These results reflect the initial effects of the recent changes in federal law resulting from changes in the composition of the AFDC population due to the new eligibility criteria. It remains to be seen how individual families will adapt to the new eligibility rules. The department has initiat- ed a longitudinal study of AFDC families to provide data on the response of individual families to the law changes over time. The study calls for collecting data on recipients surveyed in the past at three additional points in time, with the last point being April 1983. 0 0 L L A R S Chart 7 Expenditures for AFDC-Foster Care By Funding Source 1977-78 to 1984-85 (in millions) $250 225 200 175 150 125 100 75 50 25 0 77-78 Federal Funds 78-79 79–80 General Fund I??!{I\/:::)?N 80-81 81-82 82-83 Fiscal Year County Funds 83-84 84-85 1\/1\/84 AB8 Sunset (current law) No AB 8 FUll-Year Sunset Effect olAB8 Sunset Item 5180 HEALTH AND WELFARE \/ 1095 AFDC FOSTER CARE PROGRAM The AFDC-Foster Care (AFDC-FC) program provides cash grants to eligible children residing in fo~ter family homes and institutions. Prior to 1978-79, the counties paid the major share of the nonfederal costs of this program-approximately 77 percent. During 1978-79, the state, through the enactment of Ch 297\/78 (SB 154) assumed 95 percent of the nonfeder- al costs. This change in the AFDC-FC sharing ratio was extended through December 31, 1983, by Ch 282\/79 (AB 8). Under the provisions of AB 8, the foster care sharing ratios will revert to their pre-1978-79 levels on January 1, 1984. Chart 7 displays the expenditures for the foster care program by funding source for fiscal years 1977-78 through 1982-83. In addition, Chart 7 shows expenditures for the Foster Care program for 1983-84 and 1984-85 under three different assumptions regarding the sharing ratios under this pro- gram. Specifically, Chart 7 shows Foster Care expenditures for 1983-84 assuming: The funding relationships proposed in the budget. The budget as- sumes that the AB 8 sharing ratio for the Foster Care program will sunset on December 31, 1983, as c~ed for by current law, and pro- poses General Fund expenditures of $89,988,000 under the program. This represents a reduction of $66,157,000, or 42 percent, from the level of General Fund expenditures in 1982-83. This reduction is due primarily to the change in the sharing ratio. The funding relationships which would exist in 1983-84 if the AB 8 sharing ratio were continued throughout 1983-84. Such an extension of the AB 8 sharing ratio would result in General Fund expenditures of $156,475,000, or 73 percent of total foster <;are costs. This is $66,487,- 000 more than the amount proposed in the budget. The funding relationships which will exist under current law in 1984- 85. This ref).ects the full~year effect of sunsetting the\u00b7 AB 8 sharing ratio on December 31, 1983, and approximates the funding relation- ships which will exist under current law in 1984-85. The amounts shown assume no caseload changes for 1984-85. The full year effect of sunsetting the AB 8 sharing ratio would be to decrease the General Fund share of Foster Care program costs by $133,075,000, or 85 per- cent, compared with General Fund expenditures for the program in 1982--83. Fiscal Relief The foster care sharing ratio established by AB 8 (and SB 154) provided counties with approximately $600 million in fiscal relief over a five and one-half year period. The scheduled sunset of the AB 8 sharing ratio raises the basic policy questions of whether the state should continue to provide this fiscal relief to counties, and if so, whether it should provide such relief in this, or sbme other, form. We recommend that the Legislature address the question of the appro- priate state\/county sharing ratio for the Foster Care program separately from the question of how much fiscal relief should be provided to the counties. The sharing ratio should be determined on a programmatic basis, and once determined, the effects can be compensated for in the amount of fiscal relief provided to the counties under other programs (such as the property tax traIl feror VehicleI::;icense Fees subverttidils). 1096 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Factors the Legislature Should Consider in Determining Foster Care Sharing Ratios As a general rule, we believe that the appropriate sharing ratio for any program is the one which gives the greatest share of program costs to that level of government which has the greatest control over the level of these costs. This is because to the extent a unit of government has a substantial share in the costs of the program it will work more diligently to control expenditures. Without a substantial share in program costs there is little if any incentive to achieve cost savings. Our analysis indicates that three factors determine the costs of the foster care program-the rates paid to foster care providers, the number of children in foster care (caseloads), and decisions affecting the kinds of placements in foster care. Currently, these three factors are influenced by decisions made at both the state and local levels. Foster Care Rates. Historically, each county determined the rate it paid to foster parents. With the enactment of Chapter 977, Statutes of 1982 (AB 2695), the state assumed complete control over foster care rates. Chapter 977 established a statewide basic rate for children residing in Foster Family homes. In addition, it transferred the authority for setting foster care rates for group homes from the counties to the Department of Social Services (DSS). Caseload. In general, the number of foster care cases is determined by (1) general demographic trends, such as increased child abuse and ne- glect, (2) the effectiveness of services provided to children and their families by county welfare departments, (3) decisions by juvenile courts in individual dependency proceedings, and (4) changes in eligibility crite- ria. Neither state nor county government exerts much control over the general demographic trends which affect the foster care caseload. As regards eligibility criteria, the Legislature has enacted various changes which have affected the number of children in foster care. For example, Ch1166\/80 (AB 2749) limited the availability of state General Fund sup- port for children placed m foster care voluntarily (that is, not pursuant to a court order) to six months. This resulted in significant reductions in foster care caseloads during 1981--82 and 1982--83. As regards services provided to children in Foster Care, the Legislature recently created several new service programs which may give the coun- ties an increased ability to control foster care. caseloads. Specifically, Chap- ter 978, Statutes of 1982 (SB 14), created the emergency response, family reunification, family maintenance, and permanent placement service pro- grams. These new service programs are intended, in part, to: Reduce the number of new placements in foster care by providing services to safely keep abused and neglected children in their homes (emergency response and family maintenance); Increase the number of discontinued cases by providing services to reunite children in foster care with their parents (family reunifica- tion); and Increase the number of discontinued cases by providing for the early development of a permanent plan for children who cannot be safely reunited with their families, with first consideration being given to adoption (permanent planning). Item 5180 HEALTH AND WELFARE \/ 1097 The extent to which these programs will reduce foster carecaseloads is unknown. Because services will be provided by county social workers, the success or failure of the program will be determined, to a large extent,. by county welfare departments. It is qllite possible, however, that even the best managed service programs will fail to reduce foster care caseloads due to factors beyond the control of the counties, such as demographic changes and court decisions. Placement Decisions. The type of home in which a child is placed can significantly affect the costs of the Foster Care program. For example, the average monthly cost of a child in a foster family home during 1982-83 is $376, whereas the cost of a child in a group home is $1,485. If a child is placed in a group home, the choice of the particular home can dramatical- ly affect the costs of placement because grouP home rates vary widely. In addition, other placement decisions, including whether to place the child outside a county or to provide specialized care, carry with them significant cost implications. . These kinds of decisions are made by county social workers and, to a lesser extent, by county probation officers. As a result, this determinant of costs is susceptible to the control of the counties. Because these decisions are often based on the social worker or probation officer's professional assessment of the placement needs ofa particular child, however, the county's ability to use its authority to make placement decisions to control foster care costs may be limited. . Relative Importance oE Rates, Caseload, and Placement Decision in Determining the Costs oEthe Foster Care Program. In 1977-78, the total cost of the foster care program was $131.2 million. At that time, there were 26,687 children in foster care, at an average yearly cost of $4,916. For 1983-84, the budget proposes total foster care spending of $214.4 million, based on a projected caseload of 28,269 children at an average annual cost of $7,584 per child. The $214.4 million proposed in the budget represents an increase of $83,2 million, or 63 percent, over the 1977-78 level. Our analysis indicates that this increase is attributable to three factors: J. Rates. Approximately 75 percent of the increase is due to cost-of- living increases in foster care rates. 2. Caseload. Ten percent of the increase is attributable to the in- creased caseload (from 26,689 children to 28,269 children). 3. Placement Decisions and Other Factors. Fifteen percent of the in- crease is due to a variety of factors, including placement decisions which result in more costly placements. ' Thus, we conclude that rate setting is by far the most important deter- minant of foster care costs. Caseload growth and placement decision, however, also have a significant effect on foster care costs. Conclusion. We conclude that under current law, the state exerts the preponderance of control over foster care costs by virtue of its rate setting authority. This does not necessarily imply, however, that the state should pay the bulk of the costs of the program because:' Changes in caseloads and in placements-both of which can be in- fluenced by county decisions-have the potential to actually reduce costs below current levels, whereas rate setting, as a practical matter, serves only to slow cost increases. To the extent that such reductions are feasible, they are more likely if the counties have a major share in the costs of foster care . It would be administratively difficult to transfer the responsibili~yfor 1098 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued providing services to foster care children and their parents from the counties to the state. Thus, the ability to control caseload and the ability to make placement decisions must remain with the counties. If the Legislature decides to return to the pre-AB 8 foster care sharing ratios, as proposed by the Governor, it may wish to consider tranferring the rate setting function back to the counties. Such a transfer would place most of the control over the costs of the Foster Care program in the hands of the counties, where primary responsibility for funding the program will rest. CHILD SUPPORT ENFORCEMENt: The Child Support Enforcement Program is a revenue-producing pro- gram adxninistered by the county district attorneys' offices. Through this program, the district attorneys locate absent parents, establish paternity, and obtain and enforce court-ordered child support payments. This serv- ice is available to welfare recipients and nonwelfare families. Child sup- port payments collected on behalf of AFDC recipients are used to reduce state, county, and federal welfare costs. Collections made on behalf of nonwelfare clients are distributed directly to the client. Chart 8 shows collections from variol,ls sources over an eight-year period ending with the budget year. o o L L A R S ChartS Total Child Support Collections 1976-77 to 1983-84 (Proposed) (In millions)\u00b7 $35 30 25 $199 $186 $170 $156 $277 $253 $216 oL~~a-~:~rr~~~*~~ __ ~t~t~~~~L-~f~~~lli~~~;~~~~:\u00b7.: .. ~\u00b7 ... ~:\u00b7 .. : ...... :.:; ... :.::: .. : .. ~.::: .... :&.:::.:.:.~ .. :::~:~ .... : .. : ... :::: ... ::.:.:::.:::.\u00b7.: .. :i:;:\u00b7'::':;'\u00b7'~'\u00b7MI:::\u00b7'.::.: .... ::~:.~:::: .. :: .. : ... ::.~ .... : .. ~:.:~:~ .. ::.:~.:}::::.: .. :i.\u00b7.\u00b7: .. \u00b7.~~.\u00b7.~:.:::.~.: ... ::.:\u00b7.;.:.;:::~~.::.: .. :: .. :~~~y \u00b7}!i~~l~~\\ ~rtlmftf ~1~*@ 76-77 77-78 76-79 79-80 80-81 81-82 82-83 83-84 (est.) (Prop.) Item 5180 HEALTH AND WELFARE \/ 1099 Recent Program Changes Several recent changes in state and federal law have affected all three fiscal components of the child support program: (1) welfare recoupments, (2) administrative costs, and (3) incentive payments to counties. UI\/DI intercept. Chapter 1072, Statutes of 1982 (AB 2856), imple- ments a federal mandate to intercept the unemployment or disability insurance payments going to absent parents with child support payments in arrears. This method of collecting overdue child support payments is similar to the ongoing system to intercept state and federal income tax returns. The DSS estimates that this UI\/DI intercept system will increase collections by $8,715,000. Of this amount, the net revenue to the state is $3,732,000 (the state's total share of collections is $4,035,000 less the 7.5 percent in incentive payments). . IRS Intercept. Collections from the Internal Revenue Service (IRS) refund intercepts have significantly exceeded estimates for the current year. Total collections are now estimated to reach $39,582,000 in 1982-83 (up from the $29,895,000 assumed in the 1982 Budget Act), and in 1983-84 are expected to reach $45,920,000. An additional $13.4 million is expected from the Franchise Tax Board (FTB) intercepts. Chart 8 shows that in- come tax intercepts are responsible for the major growth in child support collections during the current and budget years. Some of these added collections are offset by lower than expected base collections in 1982--83. The department's current-year estimate of base collections ($92 million) is 11 percent lower than the $103 million planned for in the 1982 Budget Act. The department explains that lower level collections can be expected because (1) administrative resources are being drawn away from base collection activities and redirected to the more productive intercept sys- tems and (2) some of the intercept collections would have otherwise been collected through base collection actions. Collections also decline as unemployment in the state increases. . Federal Changes. Recent federal legislation makes two significant ch:mges in federal funding of Child Support activities. Neither change, however, directly affects General Fund costs. Effective October 1, 1982, the federal share of administrative costs declined from 75 percent to 70 percent. As a result, the county share of administrative costs increased from 25 to 30 percent. Effective October 1, 1983, federal incentives paid to counties for AFDC-related collections will be reduced to 12 percent from the current 15 percent level. State Changes. Chapter 981, Statutes of 1982 (AB 3000) , fixes the state's incentive payments to the counties at 7.5 percent, regardless of the amount paid by the federal government. As a result, the state will not be required to maintain the 22.5 percent combined state-federal incentive, as was previously required. The total incentive rate will decrease to 19.5 percent when the federal decrease takes effect. Chapter 1276, Statutes of 1982 (SB 1337), provides for the payment of child support incentives equal to 7.5 percent of the amounts received for nonfederally funded foster care cases. Incentives are already paid on col- lections in cases with federal fund participation. These new incentives apply only to statewide collections that exceed the 1982-83 budget projects ($3,750,000). The budget anticipates that collections in 1983-84 will not exceed this amount. 1100 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Los Angeles County Performance For manYJears, Los Angeles County has lagged behind the rest of the state in Chil Support collections. From 1978 to 1980, Los Angeles ranked 58th out of 58 counties in terms of the share ur AFDC grants costs re- couped in child support collections. During this period Los Angeles re- couped only 3.5 percent of its grant costs through child support collections, compared with 5.1 percent for the 57th ranked county and a 5.8 percent average recoupment rate for all counties except Los Angeles. The poor and deteriorating performance by Los Angeles County stimu- lated a complete overhaul of its Child Support operation. In June 1981, new management in the Bureau of Child Support Operations retrained bureau personnel and extensively reorganized the bureau along lines found to be successful in other county child support operations. New teams were formed, consisting of lawyers, family support representatives, and clerical personnel, to undertake enforcement actions. All 18 enforce- ment teams were in place by June 1982. Other teams, 5 intake teams trained to open child support cases and 11 establishment teams trained to acquire child support orders, were in place by July 1982. The potential success of this reorganization is reflected in the monthly statistics reported to DSS. Los Angeles County has shown a dramatic increase in the nUIIiber of major enforcement actions, the kind of actions. that can be expected to increase child support collections. Chart 9 shows an increase of over 400 percent in major enforcement actions in Los Angeles since the first quarter of 1980. The total of all major actions increased from 1601 in the first quarter of1980 to 8,844 in the first quarter of 1982, in spite of a 26 position decrease in child support staff over the same period. E N F 0 R C E M E N T A C T I 0 N S Chart 9 Major Child Support Enforcement Actions a Per Quarter for Selected Counties Los Angeles Orange Sacramento San Diego 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 ..... 2,000 1,000 ._----- ............ ~ ............... . ----------==~~, .......... ~=-... --------~ ~-~--------------0 Jan.- Mar. Apr.-June July-Sept. Oct.-Dec. Jan.-Mar. Apr.-June July-Sept. Oct.-Dec. Jan.-Mar. 80 80 80 80 81 81 81. 81 82 .1 \/,tll'11 ;,,\"!,llll:.!lI' lu,I,' IIIJlI(; ull)L~70. waHl: asslYllIllenls. ~onlelTlpt iJChOIl::>, wnts 01 execution. and recording of liens. Item 5180 HEALTH AND WELFARE \/ 1101 The goal of this increased activity-increased collection-has not shown up in the data as yet. While total collections in Los Angeles have increased, the increase is due entirely to increases in the IRS and FfB intercept programs. Base collections are unchanged. To some extent the reorganiza- tion has contributed to increases in intercept collections because, before the reorganization, many cases were not up to date and had inaccurate information about the size of support arrears. the reorganization has in- creased the number of cases with arrears that could be submitted for IRS or FTB matching. It probably is too early to expect increases in the child support collections resulting from the county’s recent reorganization. State Child Support Enforcement Staff The budget proposes to continue 4.5 limited-term positions in the Bu- reau of Child Support Enforcement within the Department of Social Serv- ices. Over the past two years, these positions have conducted in-depth evaluations of six counties’ child support operations, including an evalua- tion of Los Angeles County’s child support activities and an Orange County cost study. The staff have also worked to develop performance measures that can help identify counties where collections can be in- creased. We recommend approval. These positions fulfill an important state function-to collect and share the experiences of individual counties in administering child support op- erations. Different counties will from time to time experience drops in perform- ance that must be corrected. For example, San Diego, Orange, and Sacra- mento Counties have recently shown marked decreases inactions to enforce child support orders (Chart 9). Uncorrected, decreases in these actions will lead to decreases in collections, and a resulting increase in net AFDC grant costs. Performance Measures The department has an ongoing effort to develop useful performance measures of child support collection activities. One measure compares the actual rate at which AFDC grant payments are recouped in each county with a predicted recoupment rate. The department’s model adjusts for differences among the counties in terms of social and economic character- istics, such as median income and AFDC caseload, and predicts the ex- pected child support recoupment percentage for individual counties. Some of the characteristics included in the model have a logical connec- tion with child support activities. For example, counties with a high rate of births out of wedlock have, on average, lower recoupment rates. Other characteristics used to estimate recoupments have no obvious, direct con- nection with child support recoupment. (For example, one of the factors used to predict the recoupment rate is the percent of all deaths between the age of 10 and 14.) The department intends to refine its predictive model for estimating child support recoupment rates, and to incorporate predictive variables that relate to the specific characteristics of each county’s AFDC popula- tion, in addition to variables that relate to the entire county population. 1102 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Refinement of the model could provide a means to enhance the child support incentive payments for counties that perform above their predict- ed level. Refinements must increase the reliability of the model and de- crease the statistical error in the estimates of the counties’ recoupment rates. BUDGET ISSUES Increases in the AFDC Appropriation We recommend that Budget Bill language be adopted requiring the Director of the Department of Finance to notify the fiscal committees at least 30 days before increasing the amount appropriated for AFDG. The Welfare and Institutions Code provides a continuous appropriation to finance cash grants to AFDC families. Chapter 1284, Statutes of 1978, sunsets the continuous appropriation for\u00b7 the AFDC program starting in 1983-84. In the past few years, this continuing appropriation has been supersed- ed by an in lieu appropriation established in the Budget Act. Nevertheless, other provisions of the act authorized the administration to increase the amount of this appropriation to meet expected program costs, provided the Director of the Department of Finance informed the Legislature of the increase. The 1983 Budget Bill contains a similar provision which, in effect, removes the limit on the AFDC appropriation established by Item 5180- 101-001. Under this provision, however, the expenditure limit could be increased without prior review by the Legislature of either the necessity for. the increase or the availability of funds to pay for the increase. To rectify this problem, we recommend the adoption of the following budget bill language which would provide for legislative review of proposed in- creases in the appropriation for the AFDC program: \”If the Director of the Department of Finance determines that the estimate of expenditures will exceed the expenditures authorized for program 10.04, Payments for Children, the Director shall so report to the chairperson of the committee in each house which considers appro- priations and the chairperson of the Joint Legislative budget committee. The Director shall not increase the amount of the limitation until 30 days\u00b7 after written notification to the same chairpersons of the necessity for the increase and the availability of funds.\” Unallowable Group Home Costs We recommend a General Fund reduction of $l~l~OOO. from the amount budgeted for \”unallowable\” federal costs in the foster care pro- gram because it has not been established that the General Fund’s share of program costs will actually increase. Background. The Adoption Assistance and Child Welfare Act of 1980 (P.L.96-272) created Title IV-E of the federal Social Security Act which provides federal funds for foster care beginning October 1, 1982. Title IV-E, however, limits federal funds for children in group homes to speci- fied \”allowable costs.\” Among the unallowable costs are expenditures for counseling, therapy, and psychological and educational testing provided by social workers employed by group homes. Chapter 977, Statutes of 1982 (AB 2695), provides that the state will continue to share in these unallowa- Item 5180 HEALTH AND WELFARE \/ 1103 ble costs to the extent that funds are available. The budget proposes a General Fund increase of $1,100,000 to cover these unallowable costs. Our . analysis indicates\u00b7 that the department has failed to demonstrate that the requested funds are needed. Specifically, we find that the depart- ment’s request fails to take into account two factors which would decrease or even eliminate the need for additional General Fund support for chil- dren in group homes. Estimate Is Based on Group Home Staff Hours. The department’s estimate. is based on a survey of group home operators which revealed that 10 percent of all group home staff time is devoted to counseling, therapy and psychological and educational testing. Based on the percentage of staff time devoted to unallowable cost activities, the department estimates that 10 percent of the rate paid to group homes for federally eligible children is unallowable. This method of estimating costs, however, over- looks the fact that a substantial portion of a group home’s rate is attributa- ble to non-stafF-related costs such as supplies, food, and rent which are allowable under Title IV-E. Thus, the department overestimates the per- cent of the rates paid to group homes which would not be allowable for federal funding under Title IV-E. . According to the California Association of Services for Children (CSS) , a private organization which represents approximately 60 group homes throughout the state, 30 to 40 percent ofitsmembers’ costs are non-staff- related. By applying the percent of staff time which is devoted to unallow- able cost activities to the entire group home rate rather than to the 60 to 70 percent of the rate which represents staff costs, the department over- estimates the amount of the rate which is attributable to unallowable costs. Estimate Does Not Account for Costs Not Included in the Rates Paid to Group Homes. The department’s estimate also overlooks the fact that the total costs of many group homes exceed the rate at which the homes have been reimbursed from government sources. The CSS estimates that 25 percent of their costs of care are funded from a variety of charitable sources and are not reflected in the rate paid by any governmental entity. To the extent that a group home subsidizes a substantial share of the costs of the care it provides, it maybe able to use a portion of the subsidized costs to offset the reduction to its rate attributable to unallowable social worker costs. The department’s estimate does not account for this possibil- ity. For these reasons, we conclude that the budget has failed to clearly establish that the unallowable cost rule will result in increased General Fund costs. We therefore recommend a General Fund reduction of $1,100,000 to eliminate the proposed increase. Reporting Requirements Inadequate to Capture All Available Federal Funds We recommend that the department issue an all-county letter requiring the counties to document the total costs of any group home providing foster care to federally eligible children. We further recommend that the department report to the fiscal committees during budget hearings on the counties’ progress in complying with this requirement. The department notified counties of the unallowable cost rule (dis- cussed above) through an all-county letter dated October 4, 1982. In that letter, the department informed counties that they would be required to collect information reflecting the components of the rates paid to each group hODle.The letter, however, does not require the counties to collect 1104 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued information on the total costs of care provided by group homes. As we noted in the preceding section the state may be able to avoid additional General Fund costs resulting from implementation of the fed- eral unallowable cost rule to the extent that sufficient privately subsidized costs (that are allowable for federal reimbursement) can be used as an offset to the unallowable costs now covered by the government reim- bursement rate. Such an offset, however, could only occur if the total costs of group bomes, including the portion of the costs which are not covered by the rate, are documented. Until this documentation is obtained, the General Fund will have to pay for any unallowable costs included in each facility’s rate, as determined by the counties’ response to the all-county letter. To obtain the information needed to minimize state costs, we recom- mend that the department issue an all-county letter requiring the counties to document the total costs of any group home providing foster care to federally eUgible children. We further recommend that the d~partment report to the fiscal committees during budget hearings on the counties’ progress in complying with this requirement. Current YeCir Estimate of Unallowable Costs Is Not Justified. We recommend a General Fund reduction of $1~650~OOO to reflect the anticipated increase in the amount of federal foster care funds available to the state. The department’s estimate of General Fund spending for unallowable costs during 1982-83 is based on the same method used to estimate these costs for 1983-84. The department estimates that the unallowable cost rule will result in General Fund costs of $1,650,000 in 1982-83. As we have shown above, the state may be able to avoid these costs to the extent that privately subsidized costs can be used to offset unallowable costs included in a group home’s rate. . For 1982-83, the department will submit claims to the federal govern- ment based on the information collected by counties pursuant to the all-county letter dated October 4,1982. Assuming that the new all-c0unty letter whichwe recommend be issued produces the documentation need- ed to claim higher federal reimbursements for 1982-83, as we expect that it will, the state should receive during the budget year an additional $1.65 million in federal reimbursement for General Fund costs incurred during 1982-83. We therefore recommend that these increased federal funds be budget- ed under the AFDC federal fund item, and that the General Fund budget for foster care for 1983-84 be reduced by $1,650,000 to reflect the anticipat- ed increase in federal foster care funds. Audit Recoveries Underbudgeted We recommend a General Fund reduction. of $94~OOO to reflect a more realistic estimate of group home audit recoveries. Chapter 977, Statutes of 1982 (AB 2695), requires the department to conduct audits of all foster care group homes at least once every three years. The budget anticipates that these audits will result in the recovery of overpayments to group homes totaling $598,000 in 1983-84. These recov- eries will be shared by the Federal’ ($117,000), State ($457,000) and . County ($24,000) governments. The total cost of conducting these audits Item 5180 HEALTH AND WELFARE \/ 1105 is estimated at $914,000 ($457,000 General Fund and $457,000 in federal funds). Budget Estimate of Recoveries is Arbitrary. The department’s method of estirrl.ating audit recoveries is arbitrary. It simply assumes that recover- ies will be equal to the General Fund cost of conducting these audits. Since the General Fund cost of the audits is $457,000, the department assumes that General Fund recoveries will be $457,000. Estin:zate of Recoveries Should Be Based on Actual Experience. The estimate of audit recoveries should be based on actual experience with similar audit programs, instead of being based simply on the General Fund cost of the audit program. The department currently audits payments to In-Hom.e Support Services (IHSS) providers and refugee social services providers. Table 13 displays the costs and recoveries experienced in these audit programs during 1981-82. The table shows that the recovery-to-cost ratio was $1.74 in recoveries for every $1.00 in costs for IHSS audits and $3.68 in recoveries for every $1.00 in audit costs for Refugee Social Serv- ices. Table 13 Audit Costs and Recoveries IHSS and Refugee Social Service Providers 1981~ Audit Program IHSS Providers ………………………………………………………………. . Refugee Social Services Providers ……………………………… .. Totals …………………………………………………………………….. .. Costs $70,108 169,456 $239,564 Recoveries $121,714 623,247 $744,961 Recovery to Cost Ratio 1.74:1 3.68:1 3.11:1 In the budget change proposal submitted as justification for the posi- tions requested to conduct the group home audit program, the depart- ment stated that it expected a recovery to cost ratio of two-to-one. Based on the department’s estimate of audit recoveries for group homes, and on the department’s experience in auditing IHSS and refugee contracts, we recommend that audit recoveries be budgeted based on a two-to-one recovery ratio. Because total costs are estimated at $914,000, a two-to-one recovery ratio would result in total recoveries of $1,828,000, of which $1,397,000; or 76 percent, would accrue to the General Fund. This is $940,000 more than the recoveries proposed in the bud~et. We therefore recommend a General Fund reduction of $940,000 to reflect a more realis- tic estimate of audit recoveries. 1106 \/ HEALTH AND WELFARE Item 5180 Department of Social Services STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED Items 5180-111 from the Gen- eral Fund and Social Welfare Federal Fund Budget p. HW 143 Requested 1983-84 …………………………………………………………….. $1,021,772,000 a Estimated 1982–83 ………………………………………………………………… 1,104,161,000 Actual 1981-82 ……………………………………………………………………… 1,220,333,000 Requested decrease $82,389,000 (-7.5 percent) Total recommended reduction ……………………………………………. 12,187,000 Recommendation pending ………………………………… , ……………….. $937,318,000 \”This amount includes $72,267,000 proposed in Item 5180\u00b7181.()()1(a) for cost\u00b7of\u00b7living increases. 1983-84 FUNDING BY ITEM AND SOURCE Item Description 518().111′()()I-Payments to Aged, Blind, and Dis- abled 518().111~Payments to Aged, Blind, and Dis- abled-Refugees 5180-181.()()l(a)-Payments to Aged, Blind, and Disabled COLA 518().181-866 (a)-Payment to Aged, Blind, and Dis- abled COLA-Refugees Fund General Federal General Federal Amount $949,505,000 (12,121,000) 72,267,000 (305,000) Total $1,021,772,000 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Transfer Cost-of-Living Funds. Recommend that $72,267,- 000 proposed for cost-of-living increases for SSI\/SSP recipi- ents, be used instead to provide cost-of-living adjustments for AFDC recipients, because AFDC grants are significantly below the poverty level as compared to SSIlSSP grants. 2. Caseload Projections. Withhold recommendation on $937,- 318,000 for projected caseload, pending receipt of the May revision of expenditures, because actual caseload data shows a continuing decline in the number of persons receiving SSIlSSP. 3. Elimination of Medi-Cal Special Income Deduction. Reduce by $~38~OOO. Recommend reduction of funds re- quested for additional caseload expected to result from Ch 328\/82 (AB 799) in order to reflect actual caseload, for a General Fund savings of $6,387,000. 4. Federal Fiscal Liability (FFL) and Uncashed State Checks. Reduce by $~8~OOO. Recommend General Fund reduc- tion to reflect funds anticipated from the federal govern- ment for uncashed SSIl SSP checks and FFL for a General Fund reduction of $5,800,000. 5. Linking FFL to State AFDC and Medi-Cal Error Rates. Rec- Analysis page 1114 1118 1120 1121 1123 Item 5180 HEALTH AND WELFARE \/ 1107 ommend adoption of Budget Bill language requiring the department to report to the fiscal. committees before amending the SSI\/SSP contract to limit FFL. 6. Refugees. Recommend adoption of Budget Bill language 1125 requiring that Refugee Resettlement Program (RRP) and Cuban\/Haitian Entrant Program (CHEP) funds be ad- vanced to the Social Security Administration only when suf- ficient federal furtds exist to cover advances. GENERAL PROGRAM STATEMENT The Supplemental Security Income\/State Supplementary Payment (SSI\/SSP) program provides cash assistance to eligible aged, blind, and disabled persons. Eligibility for the. SSI\/SSP program is determined on the basis of the income and resources available to each elderly, blind, or disabled applicant. The federal government pays the cost of the SSI grant. California has chosen to supplement the federal payment by providing an SSP grant. The SSP grant is funded entirely from the state’s General Fund monies. In California, the SSI\/SSP program is administered by the federal government through local Social Security Administration (SSA) offices. During the current year, an estimated 669,500 persons will receive assist- ance under this program. ANALYSIS AND RECOMMENDATIONS Current-Year Surpl\”,s The budget estimates that General Fund expenditures for the SSI\/ SSP program will be $68,380,000 less than the amount budgeted in the current year, due to (1) lower-than-anticipated caseloads and (2) lower average monthly grant costs. Lower Case\/oads. The 1982 Budget Act assumed a recipient caseload averaging 687,925 persons per month. The department’s most recent esti- mate of the 1982-83 monthly caseload is 669,500 persons, or 2.7 percent less than the caseload projected for the current year in the 1982 Budget Act. Lower A ver\/ige Grants. The 1982 Budget Act anticipated average monthly grant costs of $262 during 1982-83. The department’s most recent estimate, however, is that the average monthly grant will be $250, or 4.6 percent, lower than originally anticipated. This decrease is attributable to higher-than-expected unearned income, which reduces the amount of the cash grant dollar-for-dollar. In addition, a new federal requirement to prorate a recipient’s first month of benefits from the date of eligibility has resulted in lower monthly grant costs. The estimate of the current-year expenditure shortfall is subject to change during the May revision of expenditures. Budget Year Proposal The budget proposes an appropriation of $1,021,772,000 from the Gen- eral Fund for the state’s share of the SSI\/SSP program in 1983-84. This is a decrease of $82,389,000, or 7.5 percent, from estimated current-year expenditures. Federal expenditures of $924,041;000 are proposed for 1983- 84, an increase of $16,078,000, or 1.8 percent, over estimated current-year expenditures. . Table 1 shows 1982-83 and 1983-84 total expenditures, by funding source, for each of the three categories of recipients. While the SSI\/SSP program is often thought of as primarily supporting aged individuals, the disabled are\u00b7 in fact the largest category of recipients, accounting for 55 1108 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued Item 5180 percent of the estimated average monthly caseload in 1983-84 and 64 percent of total grant costs. Included within the amounts identified in Table 1 are SSI\/SSP payments to refugees totaling $55.8 million in 1982-83, and $62.4 million in 1983-84. Of the latter amount, $12.2 million repr0sents the state’s share of aid to refugees who will no longer be eligible for 100 percent federal assistance in 1983-84. Funding for this aid comes from the General Fund. The level of General Fund expenditures for SSI\/SSP payments to refugees in the budget year is $6.3 million, or 107 percent, above the 1982-83 level. Table 1 Total Expenditures for SSI\/SSP Program By Category of Recipient 1982~ and 1983-84 (in millions) Category of Estimated lfJ82..83 Proposed lfJ83-84a Recipient Total Federal State Total Federal State Aged ……………………………….. $651.5 $235.6 $415.9 $600.1 $230.5 $369.6 Blind ……………………………….. 65.4 26.7 38.7 64.9 27.4 37.5 Disabled………………………….. 1,295.2 645.6 649.6 1,281.1 666.4 \u00b7614.7 Refugees ………………………… ~) (49.9)~)~) (50.2) (12.2) Totals ………………………….. $2,012.1 $907.9 $1,104.2 $1,946.1 $924.3 $1,021.8 a Includes 2.1 percent CO.LA. Proposed General Fund Expenditures Percent Change Total Federal State -7.9% -2.2% -11.1% -0.8 2.6 -3.1 -1.1 3.2 -5.4 ~) ~) (106.8) -3.3% 1.8% -7.5% Table 2 identifies the components of the $82,389,000 net decrease in General Fund expenditures proposed for the SSP program in 1983-84. This amount reflects $154,656,000 in decreased expenditures, partially offset by $72,267,000 in increases. The increase of $72,267,000 is requested in order to provide a 2.1 percent COLA for SSI\/SSP. grants. The major decreases result from: an increase in federal funds available to support SSI\/SSP grants ($72,- 267,000) ; antiCipated increases in recipients’ unearned income ($52,043,000), due primarily to increases in social security payments; a modification made by the federal government in retrospective budgeting requirements ($11,361,000); and a projected decrease in caseload ($14,237,000). Eligibility The Department of Social Services (DSS) estimates that approximately 666,054 individuals will receive cash assistance under the SSI\/SSP program in 1983-84. These individuals fall into one of three categories: aged; blind, or disabled. In order to be eligible for the SSI\/ SSP program, individuals must meet certain income and resource criteria in addition to meeting the categorical requirements for eligibility. Table 3 summarizes the eligibility requirements Jor the SSI\/SSP program. Item 5180 HEALTH AND WELFARE \/ 1109 Table 2 Proposed General Fund Budget Changes 1983-84 (in thousands) 1982-83 Current Year Revised ………………………………………………………….. .. A. Baseline Adjustments 1. Basic caseload decrease ……………………………………………………………. .. 2. Cost-of-living increase (2.1 percent) a. Federal funds available for cost of living ………………………….. .. b. Total Ceneral Fund cost …………………………………………………….. .. 3. Reduced grant costs due to increased recipient unearned in- come a. 1981–82 increased adjusted for caseload ……………………………… .. b. 1982-83 increase …………………………………………………………………… .. Subtotai ………………………………………………………………………………….. . B. Prograrn Changes 1. Retrospective budgeting ………………………………………………………….. .. 2. Eliminate Medi-Cal income deduction …………………………………… .. 3. Proration of first month benefits ……………………………………………. .. 4. Other ………………………………………………………………………………………… .. Total Budget Changes ………………………………………………………………………. .. Proposed General Fund Expenditures ………………………………………………. . Table 3 Basic Eligibility Requirements For the SSI\/SSP Program Amount -$14,237 -72$1 72$1 1,057 -53,100 -$52,043 -$11,361 -3,014 -1,463 -271 I. Categorical Requirements Category 1. Aged …………………………………………………. .. Criteria a. 65 years of age or older. Total $1,104,161 -$82,389 $1,021,772 2. Blind …………………………………………………. .. a. Vision correctable to no better than 20\/200 in the better eye. 3. Disabled ……………………………………………. .. II. Income and Resource Limits b. Diagnosis by physician or optometrist. a. Mental or physical impairment which precludes \”substantial gainful employment.\” Type Limit 1. Real Property\/Home………………………….. Entire value exempt. 2. Personal Property ……………………………… $1,500 for individual, $2,250 for couple. 3. Household Goods\/Personal Effects …… $2,000 equity value. 4. Motor Vehicle …………………………………….. $4,500 market value. 5. Gross Income Limit……………………………. None. 6. General Income Exclusion…………………. $20\/month general exclusion. 7. Earned Income Exclusion a. All categories …………………………………… a. First $65\/month of earned income plus one-half of remaining earned income. b. Blind and Disabled………………………… b. Any income used towards gaining self-suffi- ciency. 8. Net Income Limit ……………………………… Maximum SSI\/SSP grant (see Table 4). Case load Trends The Department of Social Services projects that an average of 666,054 persons will receive assistance under the SSI\/SSP program each month in 198~4. This is 3,446 persons, or 0.5 percent, less than the monthly case- load estimated for 1982-83. This decline in caseload is indicative of a trend evidenced since 1980-81, when the average monthly caseload reached 709,574. In that year, both the aged and disabled caseloads began to de- 1110 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued Item 5180 cline. The blind caseload, which accounts for less than 3 percent of the total, peaked a year later in 1981-82. Chart 1 illustrates the caseload trend for the SSI\/ SSP program from 1978-79 to 1983-84. While the numbers of recipients in all categories cur- rently are declining, the disabled category is declining at the slowest rate. As a result, disabled persons as a proportion of the total caseload continues to grow. In 1978-79, individuals receiving SSI\/SSP grants due to disability accounted for 52 percent of the total caseload. The department estimates that in the current and budget years, disabled recipients Will account for approximately 55 percent of the SSI\/ SSP monthly caseload. In contrast, the aged caseload has declined from 46 percent of the total caseload in 1978-79 to 43 perc;ent in 1983-84. Chart 1 SSI\/SSPAverage Monthly Case load Aged, Blind, and Disabled 1978-79 to 1983-84 P E <,oU,UUU'-1 R S \u00abuU,UUU'-1 o N S 78-79 Cost-of-Living Increase 79-80 80-81 81-82 Fiscal Year 82-83 (est.) Caseload Blind Aged wm:::::==t:??:=??l Disabled I I 83-84 (proj.) State Law Requires 6.8 Percent COLA. Current state law requires that the total SSI\/SSP maximum payment levels be increased each July 1, based on the change in the California Necessities Index (CNI) during the 12- month period ending the previous December. The Department of Fi- nance (DOF) estimates that the CNI increased by 6.8 percent during this 12-month period. (This estimate is subject to change as part of the May revision of expenditures.) Federal law requires that theSSI payment provided to aged, blind, and . disabled recipients be adjusted annually by the percentage change in the Consumer Price Index (CPI) from the first quarter of the prior year to the Item 5180 HEALTH AND WELFARE \/ 1111 first quarter of the calendar year in which the cost-of-living adjustment (COLA) is provided. Thus,a portion of the total increase to the combined SSI!SSP\u00b7payment is supported by increased federal funds. The DOF esti- mates that the CPI will increase by 5.3 percent between the period Janu- ary-March 1982 to January-March 1983. (This estimate also is subject to ch~ge during the May revision of expenditures.) Budget Proposes a 2.1 Percent COLA. The budget assumes that legis- lation will be enacted which suspends the statutory requirement to pro- vide a cost-of-living increase based on the change in the CN!. Under provisions of -the budget companion bill, the amount of any COLAs for SSI! SSP recipients would be determined as part of the annual budget process, subject to the availability of funds. The budget proposes a 2.1 percent increase in the maximum payment levels for SSI\/SSP recipients in 19~ at a cost of $72.3 million to the Geheral Fund. The cost to the General Fund of the adjustments would be matched by an increase in federal funds totaling $72;1.67,000. The federal funds are estimated to be made available to provide a 5.3 percent COLA to the SSI portion of the grant. The .actual amount of federal funds to be provided will depend on the change in the CPI between January-March 1982 and January-March 1983. The federal government does not reguire that the additional funds which it provides to California be passed through to SSI!SSP recipients. The state could use the funds: 1. To provide a COLA on the total SSI!SSP grant, as proposed by the administration; . 2. To replace General Fund\u00b7 support for the SSP program; 'or 3. For any other purpose. Table 4 Maximum Monthly SSI\/SSP Grant Levels 1982-83 and 1983-84 Administration Proposal 2.1 Percent Category of Recipient 1982-83 Amount Change Aged\/Disabled Individual Total Grant u.u\"'u ..... u ... \"'u ........... $451.00 $460.00 $9.00 SSI uu ..... i uu .......... u.u .... u .. u .... 284.30 299.00 14.70 SSP ..... uu ....................... u .... u .... u ..... 166.70 161.00 -5.70 Aged\/Disabled Couple Total Grant .. u .............. uu .... uu ...... 838.00 856.00 18.00 SSI.u .... uu ...................... uu .... uu ........ 426.40 449.00 22.60 SSP ...... uu .... uu .............. uu .. u ........ u 411.60 407.00 -4.60 Blind Individual . Total Grant ............... u .... u .. u .... uu. 506.00 517.00 11.00 SSI .:u ... u .................. u ...... u ...... uu ..... 284.30 299.00 14.70 . SSP uuu ................... u ...... u ............... 221.70 218.00 -3.70 Blind Couple Total Grant .u ...... u ........ u .. UUuu ..... 985;00 1,006.00 21.00 5SI uu;uu ......... uuu ........ uu .. uuu ...... u 426.40 449.00 22.60 SSP .................................................. 558.60 557.00 -1.60 36-76610 Current Law 6,8Percent Amount Change $482.00 $31.00 299.00 14.70 183.00 16.30 895.00 57.00 449.00\u00b7 22.60 446.00 34.40 540.00 34.00 299.00 14.70 241.00 19.30 1,052.00 67.00 449.00 22.60 603.00 44.40 1112 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGE.\" BLIND, AND DISABLED--Continued Item 5180 Maximum Payment Levels. Table 4 compares the maximum SSI\/ SSP payment levels for selected categories of recipients in independent living ar:rangements assuniing that recipients are granted (1) a 2.1 percent COLA, as proposed by the administration and (2) a 6.8 percent increase, as required by current law. Under existing law, the maximum grant for an aged individual would increase by $31 to $482 in 1983-{84. Under the ad- ministration's proposal, the grant for an aged individual will increase by $9 to $460. Fiscal Effect of COLA. Table 5 shows the cost of providing either a 2.1 percent or a 6.8 percent COLA to SSI\/SSP maximum payment levels in 1983--84, assuming that the federal SSI increase will' be 5.3 percent. As shown by Table 5, the federal government is expected to provide a 5.3 percent increase to SSI payments. This increased federal assistance is equal to the General Fund cost of providing a 2.1 perc~t increase to the combined SSI\/SSP grant level. To fund the statUtory cost-of-living in- crease of 6.8 percent would cost the General Fund $231,529,000, or an additional $l59,262,000 over the amount proposed in the budget. Table 5 Fiscal Effect of Proposed Cost-of-Living Adjustments In SSI\/SSP Maximum Payment Levels Base ................................................................... . Cost-of-living adjustments Increased federal funds, to provide a 5.3 percent CPI increase ........................ .. Savings to the state .................................. .. Subtotals .................................................. .. Cos~ of 2.1 percent COLA ...................... .. Cost of 6.8 percent COLA ...................... .. Totals: 1983-84 . General Fund Federal Funds $1,021,772,00Q $851,774,009 -72,267,000 $949,505,000 $72,267,000 $231,529,000 72,267,000 $924,041,000 Totals $1,873,546,000 72,267,000 -72,267,000 $1,873,546,000 $72,267,000 $231,529,000 Assuming 2.1 percent COLA .......... $1,021,772,000 $924,041,000. $1,945,813,000 Assuming 6.8 percent COLA .......... $1;181,034,000 $924,041,0IYS $2,105,075,000 Consequences of Limiting COLAs. In order to receive federal 'Title XIX Medicaid funds (Medi-Cal)\" California must either (1) maintain pri- or-year spending levels for the SSP program or (2) maintain the Decem- ber 1976 SS:p payment standards for all categories of eligible individuals. Under the administration's proposal, the state will fail to meet the prior year spending test, because the budget proposes to spend $82.4 million less in 1983--84 than was spent for the SSP program in 1982-83. Thus, in order to avoid the loss of federal Title XIX funds, the state will have to provide cost-of-living increases to the Mandatory State Supplementation Payment (MSSP) cases in order to bring their grants up to the December 1976 levels. The cost of these increases is estimated at $350,000 in 1983-84, and the budget contains sufficient funds for this purpose. It is possible that other groqps would fall below the applicable 1976 payment standards. The pSS informs us that it does not have a reliable estimate of the number of individuals that would be in this category if the state does not pass through the additional federal funds. Costs for raising the payment standards for these individuals, however, would not be in- curred until 1984-85. Previous Increases to SSIISSP Grants. Chart 2 shows the increases in the SSI\/SSP grant since January 1974, and the value of the grant in \"real\" .-------~------------------ Item 5180 HEALTH AND WELFARE I 1113 1974 dollars-that is, the amount of the grant adjusted toreflect the impact of inflation on purchasing power, as measured by the CN!. The chart shows that, in 1982-83, the \"real\" value of the grant to an aged or disabled individual was $214 compared to a \"real\" grant value in 1973-74 of $235. If a 2.1 percent COLA is granted to SSI\/SSP recipients, as the budget proposes, tlle \"real\" grant . level will fall to $205 in 1983-84, 12.8 percent less than the actUal grant amount in 1973-74. Chari 2 SSI\/SSP Maximum Grant Level for an Aged or Disabled Individual Actual and Constant Dollar Value 8 $500 D 451 0 L 400 Actual Dollars L A R 300 S 259 276 296 200 217 -----::-:-:--,.J--:2:;;:2;;4....,~ 230 226 _I -:-:-:-'--__ 219 216 214 205 c 100 1974 Constant Dollars 74-75 75-76 76-77 77-78 78-79 79-80 81H11 81-82 82-83 83-84 Fiscal Year a Aid payments we,re adjus!ed tor inflation measured by the California Necessities Index in the preceding calendar year. This simulates the current statutory adjustm~nt. ~ 19~3-84 maximum grant level as proposed by the Governor's Budget. Adjustment tor inflation based on the estimated 6.8 percent eNI increase. Table 6 State Comparison\u00b7 . Maximum Monthly SSI\/SSP Grant Levels Ten Largest States July 1. 1982 Aged or Disabled Individual BUnd Individual State Total Grant\" State SSP Total GrantS State SSP California .............................................................. $451.00 $166.70 New York C ............................................................ 347.51 63.21 Texas ..................... ;;.,............................................. 284.30 Pennsylvania ........................................................ 316.70 Illinois cd ......................... :...................................... 284.30 Ohio d .............................. ~: ......................... :.......... 284.30 Michigan c .. ;:.......................................................... 308.60 Florida' ...................................... ; ..................... ;....... 335.00 New Jersey............................................................. 309.00 Massachusetts, .... : ............. : .......................... ,........ 421.52 a In descending order by state population. 32.40 24.30 50.70 24.70 137.22 $506.00 $221.70 347.51 63.21 284.30 316.70 284.30 284.30 308.60 335.00' 309.00 442.44 32.40 24.30 50.30 24.70 158.14 b Includes federal SSI grant of $284.30 for all states. C Grant levels vary by region within the state. d State supplementary programs do not provide grants to individuals living in their oWn homes. 1114 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued Item 5180 CaJifomiil5 SSIISSP Grants Compared to Other States. The federal government allows states, at their option, to supplement the federal SSI benefits. California supplements these benefits through the SSP program. Table 6 shows the SSI\/ SSP benefits provided tom aged or disabled indi- vidual and to a blind individual by the 10 most populous states, as of July 1, 1982. Of the 10 states, 7 chose to supplement the basic grant. California provided the largest gr~ts to both categories of individu~s: $451 to the aged and $506 to the blmd. Compared to the grants prOVIded by Massa- chusetts, the state with the next largest supplement, California's grants to the aged and blind are 7 percent and 14 percent higher, respectively. Table 7 shows the maximum SSI\/SSP grant levels for aged or disabled couples and blind couples as ofJuly 1, 1982. Of the 10 most populous states, California again provided the largest supplemental payments to all cou- ples. Florida provided the next highest payment to aged and disabled couples, while Massachusetts provided the next highest payments to blind couples. The grant provided to aged and disabled couples in California was $838, or 25 percent more than the grant provided by Florida. California's grant to blind couples exceeds the Massachusetts grant by 11 percent. The other seven states making supplemental payments provided less than$600 in total SSI\/ SSP funds per month for the aged and disabled couples .. Table 7 State Comparison Maximum Monthly SSI\/SSP Grant Levels Ten Largest States July 1. 1982 Aged or Disabled Couple State Total Granta State SSP California .............................................................. $838.00 $411.60 New York .............................................................. 505.88 79.48 Texas ...................................................................... 426.40 Pennsylvania ................... ;..................................... 475.10 lllinois .................................................................... 426.40 Ohio ........................................................................ 426.40 Michigan ............................................................ \\... 462.80. F1orida.................................................................... 670.00 New Jersey ............................................................ 446.00 Massachusetts ...................................................... 640.72 Includes federal SSI grant of $426.40 for all states: 48.70 36.40 243.60 19.60 214.32 Blind Couple Total Granta State SSP $9\/is.00 $558.60 505.88 79.48 426.40 475.10 426.40 426.40 462.80 670.00 446.00 884.88 48.70 36.40 243.60 19.60 458.48 Transfer Cost;.of-Living Funds from SSI\/SSP toAFDC Recipients We recommend that $72~~OOO in General Fund support for cost-oE- Jiving increases budgeted in Item 5180-181-001 {aj for SSIISSP recipients (Item 5180-111-(01) be transferredto Item 5180-101-00Tand used instead to provide increases for AFDC recipients~ because the latter have a signifi- cantly lower standard-oE-Jiving than the former. Item 5180 HEALTH AND WELFARE \/ 1115 The budget proposes no cost\"of-living adjustment for AFDC recipients, and a 2.1 percent COLA for SSI\/SSP recipients,at a General Fund cost of $72,267,000. Our analysis indicates that theLegislature's objective of allow- ing needy persons to achieve at least a minimum standard-of-living can be achieved more effectively if the $72.3 million is used instead to provide a COLA for AFDC recipients. This is because AFDC grants are significantly below the poverty level, while SSI\/SSP grants are above (insome cases, considerably above) the poverty level. AFDC maximum grants have been below the poverty level since the welfare reform measures of 1971 were enacted. In 1982-83, AFDC max- imum grants were equal to about 77 percent of the poverty level income. At the same time, SSI\/SSP grants exceeded the poverty level incomes by 8 percent for aged and disabled individuals and by 53 percent for aged and disabled couples. SSI\/SSP grantshave receI.\u00b7ved p.artial or f.ull cost-of-l.iving increases every year since 1974. In contrast, AFDC grants have remained unchanged since July 1981. We recommend that funds proposed for cost-of-living increases under the SSI \/ SSP program instead be transferred to the AFDC program, so as to prevent a further widening of the disparity between AFDC and SSI\/ SSP grant levels. This recommendation is discussed in greater detail under Item 5180-181-001. To be consistent with this recommendation, we make related recom- mendations in our analyses of two other budgets. In the Department of Developmental Services (Item 4300), we recommend a General Fund augmentation of $1.5 million to replace lost SSI\/SSP reimbursements. In Medi-Cal (Item 4260), increased General Fund costs of $7.2 million would be offset partially or wholly by savings. Therefore, we recommend that the department submit estimates of the net effect of our AFDC and SSI\/ SSP COLA recommendations on Medi-Cal costs. BENEFITS AVAILABLE TO SSI\/SSP RECIPIENTS In addition to the monthly cash grant, SSI\/SSP recipients may qualify for and receive a variety of other benefits from federal, state, and local governments. Some of these additional benefits, such as health care serv- ices under Medi-Cal, are available to SSI\/SSP recipients because they are categoricaljublic assistance recipients. Other benefits, such as public housing an . social security benefits, are available to SSI\/SSP recipients only to the extent that they meet specific eligibility criteria and, in the case of public housing, are accepted into the program. This section discusses six major benefits available to SSI\/SSP recipients in addition to their monthly cash grants. The discussion focuses on the benefits as they were in 1981-82, the latest yearJor which data is available on aCtual utilization. It should be noted that, in addition to the benefits discussed in this section: 1. SSI\/ SSP recipients are eligible for adult social services from county welfare departments; 2. Some SSHSSP recipients (more than 31,000 in 1981-82) reside in households which also receive cash assistance through AFDC; and 3. About 4,700 applicants eligible for SSI\/SSP received interim assist- ance grants averaging $1,279.26 while they awaited final eligibility determination for SSI\/SSP. Because the combined monthly income of SSI\/ SSP recipients exceeds the monthly income limits for the food stamp program, SSI\/SSP recipients 1116 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued . Item 5180 are not eligible for food stamps. SocialSecurity; The Retirement, Survivors, Disability, and Health In- surance (RSDHI) program provides benefits to retired and disabled work- ersand their dependents, and to the survivors of insured workers. It also provides health insurance benefits for persons age 65 and over and for the disabled under age 65. According to statistics compiled by the federal Social Security Administration, 397,112 SSI\/SSP recipients also received RSDHI payments averaging $283 per month during 1981-82. The RSDHI payments are counted as income for SSI\/SSP grantpurfoses. As a result, individual SSI\/SSP grants are reduced by the amount 0 the RSDHI pay- ment, less a $20 standard deduction. The RSDHI payments constitute 97 percent of all countable income received by SSI\/SSP recipients. Medi-Cal. The Medi-Cal program, administered under Title XIX of the federal Social Security Act, provides funds to health care providers for the cost of care delivered to public assistance recipients, and other in- dividuals whose medical costs exceed their ability to pay, All SSI\/SSP recipients are eligible for Medi-Cal health care. During 1981-82, 476,180 individuals, or 69 percent of all SSI\/ SSP recipients, utilized Medi-Cal reim- bursed fee-for-service care. An undetermined number of additional SSI\/ SSP recipients utilized other Medi-Cal services provided through prepaid health plans, dental\u00b7 plans, and other categories of service paid for on a per-capita basis. The average monthly cost of fee-for-service Medi-Cal services utilized by SSI \/ SSP recipients during .1981-82. was $188. In addi- tion to regular Medi-Cal benefits, some SSI\/SSP recipients received Long- Term Care (LTC) benefits. The -LTC payments are made to skilled nurs- ing facilities and intermediate care facilities to cover the cost of board and care of beneficiaries. Because Medi-Cal covers the cost of room and board, SSI\/SSP recipients receive only an SSI\/SSP personal and incidental needs allowance of $25. .. In-Home Supportive Services. The In-Home Supportive Services (IHSS) program, funded in California under Title XX of the Social Secu- rity Act, provides domestic and personal care services to aged, blind, and \u00b7disabled individuals with the goal of preventing institutionalization.\u00b7The SSI\/ SSP recipients are eligible for this service. Other individuals may be eligible for IHSS if they meet all SSI \/ SSP eligibility criteria but have excess income. Monthly payments are made to providers on behalf of IHSS recipients. The authorized payment level is based on need, as determined by county social workers. Recipients who receive 20 or more hours of specified IHSS service each month are eligible for. higher maximum monthly benefits ($838 in 1981-82) than other IHSS recipients ($581 in 1981-82). During 1981-82,93,459 SSI\/SSP recipients received IHSSserv- ices. . Low-Income Energy Assistance. During 1981-82, $76 million was made available in California to provide cash assistance to low-income households to help them pay the cost of the energy they used. Categorical public assistance recipients, such as SSI\/ SSP reCipients, are automatically eligible for this assistance, which is not considered in calculating the amount of the SSI\/SSP cash grant. During 1981-82, approximately 267,053 SSI\/SSP recipients received a cash grant under this program. The average annual benefit provided under the Home Energy Assistance Program in 1981-82 was $110. An undetermined number of SSI\/SSP recipients also . received (1) up to $300 in emergency help in paying energy bills and (2) Item 5180 HEALTH AND WELFARE \/ 1117 grants of up to $1,000 to weatherproof their homes. Housing Programs. Several housing assistance programs are available to low- and moderate-income households. These households may receive (1) subsidized shelter as tenants in public housing complexes owned and operated by local public housing authorities or (2) rental assistance in new or rehabilitated units owned by public or private agenCies. The availability of housing assistance and income eligibility thresholds vary among the counties. It is estimated that in 1981-82, approximately 9,834 SSI\/SSP recipients resided in public housing and an additional 144,784 SSI\/SSP individuals received rental assistance. Senior Nutrition Programs. The Department of Aging administers community-based programs providing meals to the elderly either at group sites or in the recipient's home. All individuals age 60 or older are eligible. All aged individuals receiving SSI\/SSP grants are therefore eligible to receive this service. Access to these nutrition programs is limited, howev- er, because (1) the programs are small, serving only a small portion ofthe potential clients and (2) there are regional variations in the availability of the services. Approximately 419,000 individuals, or 12.3 percent of the population aged 60 years or older received meals at 821 sites in California in 1981-82. Another 1.9 percent of the eligible population were served meals in their homes. Because of the open-door policy of these centers, which require no affiliation with other state programs, it is not possible to quantify the benefit to SSI\/SSP recipients. . Calculation of A verage Benefits. Table 8 shows the average value of benefits received by SSI\/SSP eligible individuals in 1981-82. The averages are calculated in two ways. The \" Average Cash Value of Benefits Re- ceived\" shows the average benefit value per individual receiving the particular benefit. For example, in the case of those SSIISSP participants who received social security payments, the average value of the payment per recipient was $283. The \"Value of Benefits Averaged Over All SSI \/ SSP Recipients\" gives the average benefit value for all individuals in the SSI\/ SSP program, including both those who did not receive the particular benefit as well. as those who did. As a result, this measure of benefits received per SSI\/SSP individual is less than the average benefit received per participating individual. Difficulties in Calculating Benefits Received by SSIISSP Eligibles. The average benefit value provides the best available picture of the total benefits received by SSI\/SSP individuals. Like all averages, however, it conceals differences among individual recipients. In using the information contained in Table 8, it should be kept in mind that: Not all SSI\/SSP recipients are eligible for all benefits. Some benefits are contingent upon health or degree of physical impairment. The availability of some benefits is limited. Some programs are geo- graphically limited. In other cases, the ability of SSI\/SSP recipients to travel to the site where services are provided is limited. In yet other cases, some individuals may not be aware that a particular benefit is available. Some SSI\/SSP recipients may choose not to receive some benefits. They may use alternative resources, such as family, friends, the church and other nonprofit service providers, or they may choose to fend for themselves in an effort to gain or maintain independence. 1118 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued Item 5180 The average number of persons receiving a benefit, as shown in the table understates the number of persons who use the program over the c'ourse of a year. Because some recipients are enrolled for only part of the year the program provides aid to more individuals in the state than the ~onthly average figure would imply. Table 8 Monthly Benefits Available to SSI\/SSP Recipients\u00b7 1981-82 Value of Value of Percent Average Benefit Benefit of Cash Averaged Averaged Recipients Total Value of OverAll Over aU Using SSIISSP Benefit SSIISSP SSIISSP Benefit Benefit Caseloadb Received Recipients Couples SSI\/SSP cash grant ............................ 692,700 100.0% $252.64 $252.64 $404.10 Social security payments (RSDHI) 397,112 57.3 283.13 162.23 415.92 Medi-Cal health care c .................... 476,180 68.7 188.18 129.28 258.56 Long-tenn care .............................. 67,360 9.7 757.51 73.48 g In-home supportive services, do- mestic and personal care as- sistance ........................................ 93,459 13.5 213.85 28.87 28.B7 h Public housing e ....... ......... . ........ 9,834 1.4 68.90 0.96 0.96 1 Rental subsidies ef . 144,784 20.9 57.24 11.96 11.96 1 Average Total Monthly Benefits .. $659.42 $1,120.37 Average Total Annual Benefits .... $7,913.04 $1,344.44 LIHEAPd ............................................ 267,053 38.6 $110.0 $42.46 $42.46' Average Total Annual Benefits wI LIHEAP ...................................... $7,955.50 $13,486.90 Source: Deparbnents of Health Services, Social Services, HoUsing and Community Development, and Employment Development, Office of Economic Opportunity, and federal Deparbnent of Housing and Urban Development and the Social Security Administration, b The percentage figures do not add to 100 percent because many recipients utilized more than one benefit. C Fee-for-seIvice users only. Other Medi-Cai service categories, such as dental and prepaid health plans, are delivered on a per capita basis. Data on the utilization of these nonfee-for-service categories by public assistance recipients is unavailable at this time. d Cash benefits shown are total payments rather than monthly benefit. e Housing assistance caseloads are based on a household size of two with a monthly income of $791 (aged couple). Housing authorities and state and federal deparbnents do not maintain specific data on public assistance. recipients who reside in subsidized housing. f Includes assistance under Sections 8 and 23 of the federal Housing and Urban Development Act and the Farmers' Home Administration's Rental Assistance program. . g Couples classified as two individuals for LTC. h No data available. Assumes same level of benefit as for individual living alone. , Benefit is calculated on basis of household, regardless of size. The Importance of the SSIISSP Grant. Table 8 shows the importance of the basic SSI\/SSP grant in maintaining the income of recipients. The grant accounts for 38 percent of the average cash subsidy to individuals. Social security benefits account for 25 percent of the benefits available to SSI\/SSP recipients. SSI\/SSP Caseload Projections We withhold recommendation on $937,31~fH)() requested to fund case- load levels in 1983-84, pending the May revision of caseload estimates. The budget projects that the average number of persons receiving as- sistance through the SSI\/SSP program each month during 1983-84 will Item 5180 HEALTH AND WELFARE \/ 11'19 decrease by 3,446 or 0.5 percent, from the 1982-83 level. This decrease is expected to reduce expenditures under the program by $22,187,000 in . 1983-84, of which $7,950,000 represents federal funds and $14,237,000 will be saved by the General Fund. Table 9 shows the caseload projections for 1983-84, by category of recipient. Table 9 SSI\/SSP Average Number of Persons Receiving Assistance Per Month 1982~ and 1983-84 Category of Recipient Estimated 1982-83 Projected 1983-84 . Change Persons Percent Aged ......................................................................... . 285,933 17,571 365,996 283,300 17,354 365,400 -2,633 -0.9% Blind ........................................................................ .. -217 -1.2 Disabled .................................................................. .. -596 -0.2% Totals ................................................................ .. 669,500 666,054 -3,446 -0.5% Budget \/gnoresCaseload Trend. The Department of Social Services (DSS) projects that the\u00b7 number of aged and disabled persons qualifying for assistance under the SSI\/ SSP program will continue to decline during the current year. Actual caseload data shows that the decline in the aged caseload started in January 1981, and the decline in the disabled caseload started in July 1981. The department estimates that the SSI\/SSP caseload will continue to decline through June 1983 at which time it will level off and remain relatively constant during 1983-84. The basis for the department's projec- tion of a relatively stable caseload after June 1983 is its assumption that downward trends in caseload cannot continue indefinitely. P E R S Chart 3 SSI\/SSP Caseload Comparison of Actual and Projected Caseloads July 1980 to July 1984 (in thousands) 400 350 Disabled - - - _-' .. \"\".~;~ Projected . ~ Trend o 300 Number of Cases by which Projection Exceeds Trend N S 250 Projected Trend ~ ~ ~ ~ ~ ~ ~ ~ ~ 1980 1981 1981 1982 1982 1983 1983 1984 1984 1120 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued Item 5180 Chart 3 indicates that the department's assumption may result in case- load being overestimated for the budget year. It compares the caseload projection included in the budget with what caseload would be if recent trends continue. As the chart indicates, the department's projection of the aged caseload exceeds the projection based on recent trends by an aver- age of 9,400 cases per month. The department's estimate of the disabled caseload is 3,725 monthly cases more than the trend-based population. If actual caseload trends observed between June and November 1982 contin- ue throughout 1983-84, the General Fund requirement for the SSI\/ SSP program will be considerably lower than the department has projected. Caseload Estimates Will Be Revised DSS advises that caseload esti- mates for all categories of eligibles will be revised as part of the May revision of expenditures. Accordingly, we withhold recommendation on $937,318,000 requested from the General Fund to support the SSI\/SSP caseload, pending the May revision of expenditures. We recommend that funds proposed to support the increased caseload anticipated as a result ofCh 328182 (AB 799) be reduced to reflect actual caseload experience to date, for a General Fund savings of $6,387,()(}(). Background. Chapter 328, Statutes of 1982 (AB 799), eliminates the special income deduction for aged, blind, and disabled persons receiving Medi-Cal services under the Medically Needy (MN) program. The special income deduction allowed aged, blind, and disabled persons who were eligible, but not receiving SSIISSP, to receive medical services under the Medi-Ca~ program at no cost or at a reduced share of cost. With the elimination of the special income deduction, some of these individuals will now be found to have excessive income, and will lose their \"no-share-of- cost\" status under the Medi-Cal program. Because these individuals are, by definition, eligible for the SSII SSP program, they could retain their \"no-share-of-cost\" status by applying for and receiving SSIISSP benefits. (SSIISSP recipients do not pay a share of costs for Medi-Cal benefits.) Estimates of Increased Caseload. DSS estimates that 26,000 individuals will apply for and receive SSI \/ SSP as a result of the elimination of the special income deduction by Chapter 328. The budget requests a total of $7,984,000 from the General Fund to finance grants to these individuals. The estimate assumes that: All individuals eligible for SSIISSP and who previously received the Medi-Cal special income deduction, will apply for the SSIISSP pro- gram on October 1, 1982; The General Fund will have to fund 100 percent of the grants to these individuals. This is based on the department's belief that most of the individuals who chose not to apply for SSIISSP grants in the past are eligible for relatively small grant payments because they have rela- tively large amounts of other income. Because other income is de- ducted first from the federal SSI grant, this would mean that the costs of the grants to these persons would be supported entirely by the General Fund. The average cost per case each month would be $47. Analysis. Based on actual caseload data for September through No- vember 1982, we believe DSS has significantly overestimated the impact of Ch 328\/82 on caseload growth. Table 10 suggests that significantly fewer individuals applied for SSII SSP after the special income deduction was Item 5180 HEALTH AND WELFARE \/ 1121 eliminated than the number originally estimated by the department. The department projected an aged caseload for October of 295,000, including 277,000 \"basic\" cases and 18,000 cases attributable to the elimination of the Medi-Cal special income deduction. The actual caseload for October was 279,400, suggesting that only 2,400 aged individuals (279,400 - 277,000 = 2,400) applied for the SSI\/SSP program during the month as a result of the change made by Ch 328\/82, Actual data for the disabled caseload lead to a similar conclusion. The department's Oct()ber caseload estimate of 370,000 included 362,000 \"basic\" cases and 8,000 cases attributed to Ch 328\/82. The actual disabled caseload for the month, however, was only 363,500, indicating an increase of approximately 1,500 disabled cases (363,- 500 - 362,000 = 1,500) due to elimination of the special income deduc- tion. Therefore, we estimate that the total caseload growth in October attributable to AB 799 was 3,900(2,400 aged and 1,500 disabled individu- als). November caseloads indicate that approximately 700 more individu- als may have applied for SSI\/SSP as a result of AB 799. At the time this Analysis was written, DSS had .not received actual caseload data for December. The Department of lIealth Services' esti- ' mate of actual Medi-Cal caseloads, however, suggests that by December, a total of 5,100 individuals were receiving SSI\/SSP as a result of AB 799. This is only 20 percent of the 26,000 aged and disabled individuals that DSS expected to apply for SSI\/SSP as ~ result of Chapter 328's elimination of the special income deduction. ' Table 10 Impact of A,B 799 on SSI\/SSP, Aged And Disabled Caseload (in thousand case months) Aged Projected Projected Projected Caseload Caseload Caseload Excluding Including Actual Excluding AB799 AB799 Caseload AB 799 September .................................. 278.5 278.5 280.2 362.6 October ...................................... 277.0 295.0\" 279.4 362.0 November .................................. 275.5 293.5 278.2 361.4 Disabled Projected Caseload Including AB799 362.6 370.0b 369.4 Actual Caseload 363.3 363.5 363.3 Includes 18,000 case months projected to result from elimination of Medi-Cal special mcome deduction. b Includes 8,000 case months projected to result from AB 799. Conclusion. ,Our analysis indicates that the impact of AB 799 on the SSI\/SSP caseload has been significantly less than what is reflected in the budget. Given that only about 20 percent, or 5,100 individuals, of the potentially eligible population has applied for SSI\/SSP in order to retain their \"no-share-of-costs\" status under Medi-Cal, we recommend that the $7,984,OOOrequested for this caseload be reduced accordingly. Specifically, we recommend a General Fund reduction of $6,387,000 to reflect actual caseload experience to date attributable to the Legislature's enactment of AB 799. Federal Fiscal Liability We recommend a General Fund reduction of$5,Soo,OOO to reflect addi- tional federal reimbursements anticipated as a result of (1) federal re- quirements regarding uncashed SS\/ISSP checks and (2) Federal Fiscal Liability (FFL) for the period January 1974 to March 1979. 1122 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued Item 5180 The Supplemental Report of the 1982 Budget Act required the Depart- ment of Social Services (DSS) to provide the Legislature with a report on the status of all unresolved federal and state funding disputes regarding the SSIISSP program. Based on our review of that report, we conclude that General Fund support for the SSIlSSP program in 1983-84 can be reduced by $5.8 million. This reduction is warranted by the additional federal funds that can be anticipated. These additional funds, which may be treated as a \"credit\" against the payment that the state is required to make to the Social Security Administration to cover the cost of SSP grants, are attributable to two factors: (1) Uncashed state checks and (2) Federal Fiscal Liability (FFL) for the period January 1974 to March 1979. Uncashed Checks. The Socia.l Security Administration (SSA) adminis- ters California's SSP program in conjunction with the SSI program. Each month, SSIISSP recipients receive from SSA a U.S. treasury check which includes the combined SSIISSP payment. Currently, there is no time limit placed on the cashing of the SSII SSP checks and each year a. certain number of SSI\/SSP checks are not cashed. Sufficient federal and state funds to cover both the SSI and SSP portions of the unnegotiated checks are retained by the federal government. Recent federal law requires that uncashed SSP funds will be returned to states. The SSA must now credit the state's SSP account for all un- negotiated checks 180 days after issuance. In addition, all funds for checks previously issued and remaining uncashed must be returned. The SSA estimates that $4.6 million in California SSP funds currently are being held by the U.S. Department of the Treasury to cover uncashed SSI\/SSP benefit checks dating back to January 1974. The SSA based its estimate on the state's share of caseload for all federally administered SSP programs and applied that percentage to the combined state share of funds being held for the checks. With one exception, all of the states have agreed to the methodology used by the SSA in determining how much is due each state. Michigan, however, contends that states with significant caseloads of federally fund- ed refugees-including California-are favored by the settlement because the total caseload figures used in determining each state's share include refugees even though no state funds are used for SSI\/SSP payments to refugees. The department does not anticipate that Michigan's objections concerning the formula will delay an initial settlement. At the time this analysis was written, however, the federal government had not credited California for its share of the uncashedSSI\/SSP checks. . Federal Fiscal Liability. The federal quality assurance program peri- odically samples SSII SSP caseload data to identify errors made by the SSA in granting eligibility or in making payments to eligible individuals. The state then reviews a portion of the federal sample to test the accuracy of the federal review. The dollar error rates identified by the federal review are adjusted by the findings from the state review. This results in a dollar error rate for each review period, and is referred to as the amount of FFL owed to the state for the period. The state Auditor General has determined that the amounts of FFL due California have been understated because the SSA failed on several occa- sions to properly reflect state quality control (QC) findings in the final error rate. The SSA has agreed that the state QC findings in 22 cases were not --- -------------------- Item 5180 HEALTH AND WELFARE \/ 1123 included in the final errOr rate,and has agreed to revise FFL calculations for the periods in which these cases occurred. The Auditor General esti- mates than an additional $1.2 million in FFL will result from these adjust- ments. The SSA, however, has delayed crediting the state with these funds. Conclilsion. State officials advise that the federal government may credit the state during 1982-83 for the amounts that it is due .as a result of unnegotiated checks and FFL. No adjustment, however, has been made to estimated .1982-83 General Fund expenditures to reflect the anticipated $5.8 million reduction in General Fund expenditures to support the SSI\/ SSP program. Because formal settlement of these issues may be delayed into the budget year, we recommend that the 1983-84 General Fund request be reduced by the amount of the anticipated settlement, for a General Fund savings of $5.8 million. Linking Federal Fiscal Liability to State AFDC and Medi-Cal Error. Rates We recommend that the Legislature adopt budget billlanguagerequir- ing the DSS to notify the Joint Legislative Budget Committee and the fiscal committees 30 days prior to amending those provisions of the SSII SSP contract with the federal government regarding limitations on the payment of Federal Fiscal Liability. .. On March 24, 1982, DSS and the federal Department of Health and Humari Services (DHHS) signed a new contract which provided for con- tinued federal administration of the SSI\/ SSP program in California. The contract contained numerous provisions governing the administration of the SSI\/SSP program. One of the provisions requires the state to renegoti- ate the contract once DHHS has issued new regulations regarding Federal Fiscal Liability (FFL) for administration of the SSI\/SSP programs. It is anticipated that the new regulations will limit California's ability to recov- er state funds which were misspent by the federal government in connec- tion with the SSI\/SSP program for any period after October 1, 1980 in which the state receives a waiver of quality control sanctions in the Aid to Families with Dependent Children (AFDC) or Medi-Cal programs. Background. A state which has an SSP program is given the option of administering the program itself or having the program administered by the federal government. California has elected to have the federal Social Security Administration (SSA) administer its SSP program. The federal gov~rnment pays the costs of a.dministe.ring the SSI\/SSP program in Cali- forma. Federal and state responsibilities under the SSI\/SSP program are gov- ernedby contracts negotiated between each state and the federal govern- ment. The current contract between California and the SSA has been operative since October 1, 1979. In the interim, it has undergone periodic renegotiation and revision. The most~recent major revisions to the con- tract were signed on March 24, 1982. Provisions of the Most-Recent Contract. The revised contract makes several major changes in administration of the program. Some of these changes are advantageous tothe state. One revision, however, is potential- ly damaging to the state's interests. This revision requires that the contract be renegotiated to include provisions limiting the payment of FFL to the state if it receives a waiver of federal fiscal sanctions for errors in the AFDC or Medicaid programs. (This provision is commonly referred to as \"linkage. \") The extent to which the state's financial interest will be affected by 1124 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued Item 5180 linking FFL with waivers of AFDC and Medi-Cal sanctions will depend upon the specific provisions of the regulations promulgated by DHHS. At the time that the \"linkage\" provision was included in the contract, Federal regulations specifying the nature of this \"linkage\" had not been drafted. Potential Impact of Linkage. Our analysis identified four potential problems with the linkage concept: . . 1. There is no conceptual basis for linking fiscal responsibility in the SSI\/SSPprogram with sanctions under either the AFDC or the Medi-Cal program. . . 2. The linkage provisions may prevent the state from recovering state funds misspent by the federal government. 3. Linkage could force the state to make uninformed choices between seeking FFL and requesting that sanctions in the AFDC and Medi-Cal programs be waived . . 4. The sanctionable error rates are not equal across the affected pro- grams. . . ' No Basis for Linkage. It makes little sense to link administrative errors in SSI\/SSP to those made under AFDC or Medi-Cal because the programs are different and therefore generate different and unrelated administra- tive errors. These programs serve different clienteles that must meet different eligibility criteria. They are administered at different levels of government, and have different requirements for federal and state par- ticipation. For example, the SSI\/SSP program is administered at the federal level. It consists of a fixed federal grant payment, to which the state chooses to add a supplemental benefit. The AFDC program is administered by the counties on behalf of the state, while Medi-Cal is administered by the state. In summary, \"linkage\" strives for direct administrative trade-offs where none logically exist. . Potential for Loss of Federal Funds. While it is difficult to assess the fiscal effect of linkage in the absence of regulations, past .FFL settlements demonstrate that linkage could be costly to the state. California has recov- ered a total of $86,663,000 in FFL for various QC review periods from 1974 to 1980. In fiscal year 1982--83 alone, the state recovered $26 million in FFL owed for past periods. This recovery helped balance that year's budget. Potential for Uninformed Choice. The possibility exists that, for a given AFDC review period, the state will have to decide whether to request a waiver of the AFDC sanctions without knowing what the FFL is for that period. For example, initial estimates of AFDC error rates for the period October 1980 to March 1981 were available in September 1982. The DHHS informs us that a letter of liability for sanctions will be sent to the state during the next several months. Once California receives the federal notification, it will have 65 days in which to request waivers. The final estimate of FFL under the SSI\/ SSP program for the same period, however, is not yet available and may not be known by the time the state must decide whether or not to request a waiver of the AFDC sanctions for the October 1980-March 1981 period. The federal government has indicated that for the October 1980 to March 1981 period, the state faces potential AFDGsanctions of $34.0 million and potential FFL recoveries of $13 million. While the choice to seek waivers seems clear in this instance, no guarantee exists that in subsequent periods, FFL and sanctionable errors in the AFDC or Medi-Cal programs may not be more-nearly equal. Item 5180 HEALTH AND WELFARE \/ 1125 Under such circumstances, the state could choose the higher cost option because it does not have the information it needs to make an informed choice. Error Rate Thresholds Are Unequal. The thresholds for triggering sanctions in the AFDC and SSI\/ SSP programs are significantly different. Under federal regulations, the state is subject to sanctions in the AFDC and Medi~Cal programs for errors in excess of 4.0 percent for the period October 1980 to September 1982. After October 1, 1982, errors above 3.0 percent are sanctionable. The rate above which the federal government is liable for errors in the SSI\/SSP program, however, is still 4.0 percent. In other words, while the federal government believes that state errors in administering the AFDC and Medi-Cal programs should decline over time, it does not provide for a comparable reduction in federal errors in administering the SSI\/SSP program. Thus, lower sanctionable error rates in state-administered programs increase the state's liability for errors, relative to the federal government's liability due to errors. Conclusion. While the department has agreed to the \"linkage\" provi- sion, it is .unable to assess. the impact of this provision on the state costs under the SSI\/SSP program. This is because regulations governing \"link- age\" have not yet been promulgated. In fact, not even draft regulations have been provided to the state. Thus, neither we nor the department are able to say to what degree \"linkage\" will limit the state's ability to recover state funds misspent by the federal government. On the one hand, the regulations could impose a dollar-for-dollar trade-off between FFL and AFDC or Medi-Cal errors. If this were done, the state could still recover any amount of FFL in excess of the waivers. On the other hand, regula- tions could impose a blanket prohibition on the recovery of any FFL for any period in which waivers are requested. This might mean that the state would have to forego FFL recoveries even when the amount exceeded AFDC or Medi\u00b7Cal sanctions. Because the lihkage provisions are potentially harmful to the state's financial interest; we believe the Legislature should have an opportunity to review any agr-eement between the state and the SSA regarding linkage before it becomes effective. We therefore recommend that the following Budget Bill language be adopted, requiring the DSS to notify the Joint Legislative Budget Committee and the fiscal committees 30 days prior to amending that provision of the SSI\/SSP contract with the federal govern- ment regarding limitations on the payment of FFL. \"Provided further, that the Director of the Department of Social Serv- ices shall not amend the SSIISSP contract with the federal government regarding limitations on the payment of Federal Fiscal Liability until after 3~ days no~ification i~ writing to the Joint Legislative Budget CommIttee and fiscal commIttees of the proposed amendments to the contract.\" Federal Fund Offset of SSP for Refugees We recommend that the Legislature adopt Budget Bill language prohib- iting funds budgeted for the Refugee Resettlement Program (RRP) and the Cuban\/Haitian Entrant Program (CHEP) under Item 5180-111-866 from being advanced to the Social Security Administration (SSA) unless sufficient federal funds remain after expenditures have been made for the Refugee Cash Assistance (RCA)7 AFDa and county administration pro- grams. In Item 5180-111-866, the budget requests $12,121,000 in federal Refugee 1126 \/ HEALTH AND WELFARE STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued Item 5180 Resettlement Program (RRP) and. Cuban\/Haitian Entrant Program (CHEP) funds to pay the cost of the SSP portion of SSI\/SSP grants pro- vided to time-eligible refugees and entrants residing in California. Time- eligible refugees and entrants are individuals who have not been in this country for more than 36 months. As a result, the federal government pays the entire cost of the grants provided to these individuals. . Possible Delays in Receiving Federal Funds. In our analysis of Item 5180-131, refugee cash assistance programs,we discuss in detail the delays in receiving RRP and CHEP funds California experienced during FFY 82. Our analysis indicates that these delays resulted in aloss of$I.9 million in potential General Fund interest earning, and that siririlar delays are possi- ble during FFY 83 and FFY 84~ In addition, we concluded thataEproxi- mately $0.6 million in lost interest earnings could have been avoidea if the administration had adopted a policy of using available RRP and CHEP funds to pay for refugee cash assistance, AFDC, and medical assistance costs before providing advances to the SSA for the SSP portion of SSI! SSP payments to time-eligible refugees. . In order to reduce the loss of General Fund interest earnings, we recom- mend that the Legislature require the department use RRP and CHEP funds first to pay for refugee cash assistance, AFDC, and medical assist- ance costs and then, to the extent that sufficient RRP and CHEP funds remain, for advances to the SSA for the SSP portion of SSI\/SSP payments to time-eligible refugees. The following proposed Budget Bill language would implement this recommendation: \"Provided that no funds appropriated under Item 5180-111-001 shall be used for advances, or other payments, to the Social Security Administra- tion for that portion of state supplemental payments which the Director of the Department of Finance estimates to be attributable to payments made to refugees and entrants who have been in this country for less than 36 months. Provided further that no funds appropriated under Item 5180-111-866 for the SSP portion of SSI\/SSP payments to refugees and entrants who have been in this country for less than 36 months shall be advanced to the SSA during any quarter of 1983-84 for which the Director of the Department of Finance has determined that sufficient federal\u00b7Refugee Resettlement Program (RRP) and Cuban\/Haitian Entrant Program (CHEP) funds have not been made available by the federal govern- ment to meet the needs for RRP andCHEP for the anticipated expendi- tures during that quarter under Items 5180-10l-866-:-AFDC and 5180-131-866-:-refugee cash assistance programs.\" .' Item 5180 HEALTH AND WELFARE \/ 1127 Department of Social Services SPECIAL ADULT PROGRAMS Item 5180-121 from the General Fund and Social Welfare Fed- eral Trust Fund Budget p. HW 144 Requested 1983-84 ......................................................................... . Estimated 1982-83 ............................. .............................................. Actual 1981-82 ................................................................................. . Total recommended reduction ................................................... . 1983-84 FUNDING BY ITEM SOURCE Item Description 5180-121-OO1-Special Adult Programs 5180-121-866-Special Adult Programs GENERAL\u00b7 PROGRAM STATEMENT Fund General Federal $1,708,000 1,708,000 2,046,000 None AInotint $1,708,000 (40,000) This item provides the General Fund appropriation to fund grants for the emergency and special needs of SSI\/SSP recipients. The special allow- ance programs for SSI\/SSP recipients are supported entirely from the General Fund, and are administered by county welfare departments. This item also appropriates federal funds to finance cash grants to repa- triated Americans returning from other nations. ANALYSIS AND RECOMMENDATIONS We recommend approval. The budget proposes a General Fund appropriation of $1,708,000 for special adult programs administered by the Department of Social Services. in 1983-84. The proposed funding level is the same as the 1982-83 estimat- ed expenditure level. This is $461,000 less than the amount. appropriated for special adult programs in the current year. The difference is due primarily to lower~than-anticipated expenditures under the special cir- cumstances program. Special Circumstances The Special Circumstances Program provides adult recipients with fi- nanCial assistance in times of emergency. Payments up to specified max- imumamounts can be made to replace furniture, equipment, or clothing which is damaged or destroyed by a catastrophe. Payments also are made for moving expenses, housing repairs, and emergency rent. In addition, the Special Circumstances Program reimburses foster parents for the cost of burying a foster child who was in their care at the time of death. The budget proposes funding the Special Circumstances Program at the current-year estimated expenditure level of $1,598,000, thus assuming nei- ther any caseload growth nor any increase in average benefits during 1983-84. The budget estimates that an average of 584 persons will receive assistance under the Special Circumstances Program each month during \u00b71983-84. Itfurther assumes that the average payment will remain con$tant at the level estimated for 1982--83-$225. 1128 \/ HEALTH AND WELFARE Item 5180 SPECIAL ADULT PROGRAMS-Continued Special Benefits The special benefits program provides funds toSSP recipients who have guide dogs. Under the program, approximately 300 persons receive a special monthly allowance to cover the cost of f00d for their guide dogs. The budget proposes General Fund expenditures of $110,000 for these allowances in 1983-84. Temporary Assistance for Repatriated Americans The federal repatriate program is designed to provide temporary help to needy U.S. citizens returning to the United States from foreign coun- tries because of destitution, physical or mental illness, or war. Recipients can be provided temporary assistance to meet their immediate needs and continuing assistance for a period of up to 12 months. County welfare departments administer the program, based on federal and state guide- lines. The program is 100 percent federally funded. Expenditures for the budget year are proposed at $40,000, the same amount estimated to be expended in the current year. Department of Social Services REFUGEE CASH ASSISTANCE PROGRAMS Item 5180-131 from the Social Welfare Federal Fund Budget p. HW 146 Requested 1983-84 .......................................................................... $97,941,000 Estimated 1982-83............................................................................ 117,399,000 Actual 1981-82 .................................................................................. 195,075,000 Requested decrease $19,458,000 (-16.6 percent) Total recommended reduction .................. ................................. None GENERAL PROGRAM STATEMENT The Department of Social Services (DSS) is the single state agency designated to receive federal funds to provide cash grants, medical assist- ance, and social services to refugees and Cuban\/Haitian entrants. These funds are made available through the federal Refugee Resettlement Pro- gram (RRP) and Cuban\/Haitian Entrant Program (CHEP). The state budget appropriates these federal funds in various budget items. This item appropriates the ERP andCHEP funds which pay for the cash and medical assistance provided to refugees and Cuban\/Haitian entrants who do not meet the eligibility requirements for the Aid to Families with Dependent Children (AFDC) and the Supplemental Security Income\/ State Supplementary Payment (SSI\/SSP) programs. S. pecifically, the RRP and CHEP funds budgeted under this item are for: The costs of the Refugee Cash Assistance (RCA) and Entrant Cash Assistance (ECA) programs which provide cash grants to refugees and entrants who (1) have been in this country less than 18 months and (2) are not eligible to receive payments under the AFDC and SSI \/ SSP programs; Reimbursements to counties for their costs of providing general assist- Item 5180 HEALTH AND WELFARE \/ 1129 ance cash grants to refugees and entrants who have been in this country for more than 18 months but less than 36 months. . ... Reimbursements to the Departments of Health Services (DHS) and Developmental Services (DDS) for a portion of the costs of medical assistance provided to refugees and entrants who have been in this category for less than 36 months. ANALYSIS AND RECOMMENDATIONS We recommend approval. The budget proposes expenditures of $97,941,000 in federal RRP and CHEP funds for the refugee programs supported by this item. This is a reduction of $19,458,000, or 17 percent, below estimated current-year ex- penditures. This reduction is due primarily to: The expiration of some refugees' and entrants' eligibility to receive medical assistance under the RRP and CHEP. Upon reaching their 36th month in this country, refugees and entrants are no longer eligi- ble to receive RRP and CHEP funds; These time-expired refugees and entrants may, however, continue to receive medical assistance if they qualify for Medi-Cal or for a county's medically needy program. Federal action limiting eligibility for the RCA and ECA programs to 18 months, instead of 36 months. Prior to May 1, 1982, refugees and entrants who were ineligible for AFDC or SSI\/SSP but who met most of the income and resources eligibility requirements of the AFDC program were eligible to receive cash assistance under the RCA or ECA programs until they had been in this country for 36 months. As of May 1, 1982, however, cash .assistance under the RCA and ECA programs is available only to refugees and entrants who have been in this country for less than 18 months. The federal government will, however, reimburse counties for. general assistance and medically indigent program expenditures on behalf of refugees and entrants during their second 18 months in this country. The DSS estimates that, on May 1, 1982, approximately 22,500 refugees became ineligible for RCA and ECA due to this change. The department estimates that of these, 6,525 qualified for comity general assistance and 15,975 re- ceived no further aid. . Table 1 displays the expenditures of RRP and CHEP funds budgeted under this item for cash and medical assistance for 1982-83 and 1983-84. Table 1 Refugee and Entrant Cash and. Medical Assistance Programs Budgeted under Department of Social Services Item 5180-131-866 Cash Assistance ................................ .. Medical Assistance .......................... .. Totals .............................................. .. (in thousands) 1982-83 $50,145 67,254 $117,399 1983-84 $37,571 60,370 $97,941 RRP and CHEP Funding for Other Programs Change -$12,574 -6,884 -$19,458 Percent Change -25.1% -10.2% \u00b7-16.6% In addition to the RRP and CHEP funds budgeted under this item, the budget proposes expenditures of RRP and CHEP funds under several other items. Specifically, these funds are budgeted under the fo1l9\u00bb>:(Q;g items: .. ,.\” 1130 \/ HEALTH AND WELFARE Item 5180 REFUGEE CASH ASSISTANCE PROGRAMS-Continued Departmental Support-Item 5180-001. RRP and CHEP funds budgeted under this item are used to fund the costs incurred by the departmel1t in administering cash assistance and social serv~ces pro- grams for refugees and entrants. AFDC-Item 5180-101. RRP and CHEP fuuds budgeted under this item are used to pay the state and county share of costs of AFDC payments made to refugees and entrants who have been in this coun- try for less than 36 months (Referred to as time-eligible). Thus, the cost of assistance provided time-eligible refugees and entrants is fund- ed 100 percent by the federal government. SSIISSP-Item 5180-111. RRP and CHEP funds budgeted under this item are used to pay the SSP portion of SSI\/SSP payments to time- eligible refugees and entrants. Federal funding for the SSP portion of SSI! SSP grants is only available for time-eligible refugees and en- trants. County Administration—Item5180-141. RRP and CHEP funds budgeted under this item are used to pay the state and county share of the .costs of administering the AFDC, RCA, ECA, and general assistance programs. These fun.ds are only available for county ad- min!strativ~ costs incurred on behalf of time-eligible refugees. SocIal ServIces Programs-Item 5180-151. RRP funds budgeted un- der this item pay for (1) supportive services, such as In-Home Sup- portive Services and child protective . services and (2) employment-related services, such as Vocational English-as-a-Second Language. Social Services funded through RRP funds are available to time-expired as well as time\”eligible refugees and entrants. Table 2 shows that the budget anticipates a reduction in RRP and CHEP expenditures of $49,821,000, or 20 percent, between 1982-83 and 1983-84. This reduction is primarily due to caseload decreases associated with the 36-month limit on eligibility for RRP and CHEP funding and the 18-month limit on eligibility for the RCA and ECA programs. Table Z Total Expenditures of RRP and CHEP Funds All Budget Items Department of Social Services (in thousands) Program\/Item Number 1982-83 1983-84 Change Deparbnent Support-518().()()1 …… $5,488 $5,326 -$162 Cash Grant~Refugees AFDC-5180-101 ………………………… 75,894 56,130 -19,764 SSI\/SSP-5180-111 …………………….. 17,981 12,121 -5,866 Refugee Cash Assistance Program -5180-131 ……………………………. 117,399 97,941 -19,458 County Administration-5180-141 .. 15,923 11,752 -4,171 Social Services Programs-SI80-151 17,700 17,300 -400 Totals ………………………………………. $250,391 $200,570 -$49,821 Percent Change -3.0% -26.0 -32.6 -16.6 -26.2 -2.3 -19.9% Item 5180 HEALTH AND WELFARE \/ 1131 Total Federal Expenditures for Time-Eligible Refugees and Entrants The expenditure estimates shown in Table 2 reflect only spending from RRP and CHEP funds. Total expenditures for cash assistance provided to time-eligible refugees and entrants also include spending from other fed- eral funds not budgeted under this item. Specifically, total expenditures for refugee and entrant cash includes: Federal Title IV-A (AFDC) funds budgeted under Item 5180-101, for the normal federal share of AFDC payments made to time-eligible refugees and entrants; and Federal Title IV-A funds budgeted under Item 5180-141, county ad- ministration, for the normal federal share of the costs of administering that portion of the AFDC program attributable to time-eligible re- fugees and entrants. In addition, the federal government makes direct payments under the SSI\/SSP program to eligible refugees and entrants who reside in Califor- nia. Table 3 displays total federal expenditures for cash assistance to time- eligible refugees and entrants who reside in California. .. Table 3 Total Expenditures for Cash Assistance to Time-Eligible Refugees and Entrants Residing in California By Program and Funding Source 1982-83 and 1983-M (in thousands) Program\/Funding Source 1982-83 1983-84 Change 1. AFDC-federal Title IV-A ………………………. $70,217 $54,913 -$15,304 AFDC-RRP and CHEP ………………………… 75,894 56,130 -19,764 \u00b7Subtotals, AFDC ……………………………….. $146,1ll $111,043 -$35,068 2. SSI\/SSP-SSI portion ……………………………….. $24,091 $19,041 -$5,050 SSI\/SSP-SSP portion (RRP and CHEP) 17,987 12,121 -5,866 Subtotals, SSI\/SSP ……………………………. $42,078 $31,162 -$10,916 3. Refugee and Entrant Cash Assistance …… $39,812 $30,621 -$9,191 4. County general assistance–RRP and CHEP ………………………………………………………. $10,333 $6,950 -$3,383 5. County Administration-Federal Title IV-A ………………………………………………………….. $7,155 $5,463 -$1,692 County Administration-RRP and CHEP 15,923 11,752 -4,171 Subtotals, County Administration …… $23,078 $17,215 -$5,863 Totals …………………………………………………….. $261,412 $196,991 -$64,421 Federal Fund Source: RRP and CHEP Funds ……………………………. $159,949 $117,574 -$42,375 All Other Federal Funds ………………………….. 101,463 79,417 -22,046 Costs of Time-Expired Refugees and Entrants Percent Change -21.8% -26.0 -24.0 -21.0 -32.6 -25.9 -23.1 -32.7 -23.6 -26.2 — -25.4 -24.6% -26.5% ~21.7 Federal RRP and CHEP funds are available only for refugees and en- trants who have been in this country less than 36 months. Refugees and entrants who have been in this country for 36 months or more may contin- ue to receive cash and medical assistance through the AFDC, SSI\/SSP, Medi-Cal, county general assistance, or county medically indigent pro- grams if they meet the eligibility criteria for these programs. The cost of these time-expired refugees. and entrants is shared between the state, 1132 \/ HEALTH AND WELFARE Item 5180 REFUGEE CASH ASSISTANCE PROGRAMS–;-Continued federal, and county governments according to the specific funding ar- rangements for each program. Table 4 displays the cost of providing cash assistance to time-expired refugees and entrants. Table 4 Costs of Cash Assistance For Time-Expired Refugees and Entrants All Funds 1982-83, and 1983-84 (in thousands) Program\/Funding Source 1982-83 1983-84 1. AFDC a. General Fund ……………………………………………… $22,602 $46,619 b. County funds ……………………………………………… 2,739 5,647 c. Federal funds ……………………………………………… 23,440 51,131 Subtotals, AFDC ………………………………………. $48,781 $103,397 2. SSI\/SSP a. General Fund ……………………………………………… $5,874 $U,903 b. Federal funds ……………………………………………… 7,856 18,758 Subtotals, SSI! SSP …………………………………… $13,730 $30,661 3. County Administration a. General Fund ……………………………………………… $1,U2 $2,353 b. County funds ……………………………………………… 3,496 7,927 c. Federal funds ……………………………………………… 2,389 5,084 Subtotals, County Administration ………….. $6,997 $15,364 4. General Assistance, County Funds ……………….. $5,437 $12,753 Totals ………………………………………………………… $74,945 $162,175 General Fund ………………………………………………………. $29,588 $60,875 County Funds ………………………………………………………. $U,672 $26,327 Federal Funds …………………………………………………….. $33,685 $74,973 Amount Percent Change Change $24,017 106.3% 2,908 106.2 27,691 U8.1 $54,616 U2.0% $6,029 102.6% 10,902 138.8 $16,931 123.3% $1,241 111.6% 4,431 126.7 2,695 112.8 $8,367 119.6% $7,316 134.6 $87,230 116.4% $31,287 105.7% $14,655 125.6% $41,288 122.6% Table 4 shows that the General Fund costs of cash assistance programs for time-expired refugees is expected to increase by $31~8~0fJ0, or 106 percent between 1982~ and 1983-94. During this same time period, county costs for cash assistance programs for time-expired refugees will increase by $14,655,000, or 126 percent. These increases are due to re- fugees and entrants continuing to receive assistance after they have become ineligible for RRP and CHEP funding. The increased state and county costs shown on Table 4 represent federal costs which are being shifted to state and county governments becailse of the 36-month limit on RRP and CHEP funding eligibility. RRP and CHEP Funds Not Paid to California in a Timely Fashion The Office of Refugee Resettlement (ORR) in the Department of Health and Human Services (DHHS) is the federal agency responsible for administering RRP and CHEP funds. The ORR advances RRP and CHEP funds quarterly to states, based on an estimate of each state’s eligible spending during the upcoming quarter. ORR’s first quarterly advance to California for federal fiscal year 1982 was received on November 10, 1981 -more than half way through the first quarter. of federal fiscal year 1982. Subsequent advances were made in a more timely fashion but were in amounts far less than the state’s actual expenditures. As of December 31, Item 5180 HEALTH AND WELFARE \/ 1133 1982, DSS had submitted bills to the ORR totaling $281,410,070 for RRP and CHEP-eligible expenditures for cash and medical assistance (luring fed- eral fiscal year 1982. Of this amount, the ORR had paid the department $240,500,000, or $40,917,070; less than the amount billed. California is the only state which has not yet received an allocation of RRP and CHEP funds sufficient to pay the entire cost of its expenditures for FFY 82. General Fund Interest Losses Whenever the federal government fails to advance RRP and CHEP funds to the State in a timely manner, the state must temporarily use General Fund monies to cover the costs of cash and medical assistance provided to time-eligible refugees. This temporarily reduces the General Fund balances available to meet the state’s other cash requirements (or for short-term investment) . We estimate that the federal (lelays in advanc- ing the RRP and CHEP funds resulted in a loss of $1.9 million in potential General Fund interest earnings during federal fiscal year 1982. This type of cost associated with the RRP and CHEP programs is not eligible for reimbursement from the federal government, and therefore represents a permanent General Fund loss. . When faced with a shortfall of federal refugee funds, the DSS has elect~ ed to spend available RRP and CHEP funds in the following order: (1) to advance funds to the federal government for the SSP program, (2) to pay expenditures incurredtmder the RCA\/ECA program, (3) to pay AFDO costs, and (4) reimburse the Departments of Health Services and Devel- opmental Services for medical assistance. Because RRP and CHEP funds were not available in sufficient amounts to pay the AFDC and medical assistance costs in federal fiscal year 1982, General Fund monies were spent for these purposes. We estimate that if the administration had estab- lished a policy of using the RRP and CHEP funds first for RCA\/ECA, AFDC, and medical assistance expenditures and last for advances to the Social Security Administration for SSP payments, the interest loss of $1.9 million would have been reduced by approximately $0.6 million. Future Delays Possible. In a letter dated November 2,1982, the Secre- tary of DHHS informed the Governor of California that no additional funds would be granted to California until the completion of an audit of the department’s claim for the remaining $40,910,070. Normally, such au- dits are conducted after payments are made and any portion of the claim disallowed is repaid by the state. The Secretar~’s decision, therefore; casts some doubt as to whether the state will be fully reimbursed for expendi- tures incurred in federal fiscal year 1982. It is possible that future delays, or even shortfalls, in RRP and CHEP funds are possible. In order to mini- mize the General Fund effect of any such delay, we have recommended in our analysis of the SSP item (Item 5180-111-866) that the Legislature adopt Budget Billiangpage providing that no RRP or CHEP fuqds be used for advances to the SSAat any time when the total amount of RRP and CHEP funds available is not adequate to pay the costs of the other pro- grams for which these funds are budgeted. . 1134 \/ HEALTH AND WELFARE Item 5180 Department of Social Services LOW-INCOME HOME ENERGY ASSIST4NCE BLOCK GRANT Item 5180-136 from the Social Welfare Federal Fund Budget p. HW 147 Requested 1983-84 ……………………………………………………………….. $54,145,000 Estimated 198~ ……………………………….. ; ……………………………… . Actual 1981-82 ……………………………………………………………………… . Recommendation pending …………………………………………………… $54,145,000 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Administration of the Low-Income Home Energy Assist- ance (UHEA) Block Grant. Withhold recommendation, pending receipt of information regarding the department’s plan to administer the UHEA Block\u00b7 Grant program. GENERAL PROGRAM STATEMENT Analysis page 1136 This item appropriates federal funds for the UHEA Block Grant pro- gram. This block grant provides direct assistance to low-income households in order to help them finance their heating, cooling, and light- ing bills. The program consists of three components. The Horne Energy Assistance Program (HEAP) provides cash grants to eligible households to help alleviate the burden imposed by their energy- related utility bills. Grants vary by household size, the type of fuel l.lsed, and the location of the recipient’s residence. In 1981-82, HEAP grants averaged $110 per household. . . .. The Energy Crisis Intervention Program (ECIP) provides emergency assistance to households in cases where fuel has been shut off or is about to be shut off, the household does not have suificient funds to pay a delinquent utility bill, or the household is unable to finance the purchase or repair of heating devices. The ECIP is 9perated by local Community Action Agencies (CAAs) and other community-based organizations. Pay- ments under ECIP averaged $163 in 1981-82. The Weatherization Program provides low-cost energy conservation services, including weatherstripping, insulation, and heater adjustment, to recipients through community organizations. The average cost of weath- erization ser:vices totaled $670 per home in 1981-82. ANALYSIS AND RECOMMENDATIONS Budget-Year Proposal The budget proposes the enactment of legislation transferring the UHEA Block Grant from the Office of Economic Opportunity (OEO) to the Department of Social Services (DSS), effective October 1983. Under existing law (Ch 228\/82), administrative responsibility for the program rests with the OEO. For 1983-84 as a whole, the budget proposes a total of $80,216,000 for the UHEA Block Grant. This is the same amount that the budget anticipates the state will receive during the current year. Of the total amount proposed for expenditure in the budget year, $18,049,000 is requested in . Item 0660-101-890 for expenditure by OEO during the first quarter of Item 5180 HEALTH AND WELFARE \/ 1135 1983-84, and $54,145,000 is requested in this item for expenditure by DSS during the balance of the year. The r~maining $8,022,000 in LIHEA funds is earmarked in the budget for social services programs. Federal law per- mits the transfer qf up to 10 percent of a state’s allocation under the LIHEA program to community and social service block grant programs. The budget assumes that the amount of money available to all states in federal fiscal year 1983 (FFY 83) and FFY 84 (1) will be the same as what was made available in FFY 82 and (2) California’s share of the total will not change. Under the current continuing resolution, however, the FFY 83 funding level will exceed the amount available in FFY 82 by $100_ million nationwide. This suggests that California will receive approximate- ly $4.6 million more under the LIHEA program in FFY 83 than the budget anticipates. Federal and State Block Grant Itequirements Federal law imposes a number of requirements on states receiving LIHEA funds. In addition, California law (Section 16367 of the Govern- ment Code, as amended by Ch 228\/82) specifies the use and allocation of these funds within the state. The provisions of federal and state law that apply to the LIHEA program can be summarized as follows: Administrative Expenditures. Federal law allows up to 10 percent of the grant to be used for administration. Any administrative costs in . excess of this amount must be paid entirely by the state. State law limits administrative expenditures to 5 percent of the allocation for a given year. However, state law permits administrative expenditures to exceed the 5 percent cap, up to a maximum of 7.5 percent, pro- vided the Department of Finance provides prior notification to the Legislature through the Section 28 procedure authorized in the 1982 Budget Act. During the current year, the Department of Finance authorized an increase, to 6.1 percent, in the cap on OEO’s adminis- trative expenses under the LIHEA program. Program Expenditures. Federal law requires that a \”reasonable\” . portion of the block grant funds be made available for ECIP, and that – no more than 15 percent of the funds be used for weatherization. State law limits expenditures under the ECIPto 7.5 percent, and expendi- tures under the weatherization program to 10 percent, of the total allocation. The state’s budget anticipates that $5,715,000 will be spent for ECIP in FFY 82, while $5,836,000 will be spent for weatherization. In addition, federal law allows a state to transfer up to -10 percent of the LIHEA grant to social services programs. State law requires that up to 10 percent of the block grant funds be used to support social services programs. – _ _ Benefit Requirements. Federal law requires that households which have the lowest income and the highest energy costs in relation: to income, (after adjustments are made for household size) receive higher benefits. In addition, the federal government requires the state to conduct (1) outreach activitiEls designed to inform eligible households about LIHEA and (2) administrative fair hearings for those persons whose requests for benefits are denied or delayed. Eligibility Requirements. Under federal law, LIHEA benefits are available to (1) households in which at least one mem~er is eligibl~ for AFDC or SSI benefits or (2) households with incomes below either 150 percent of the poverty level or 60 percent of state median income. The current state plan restricts HEAP benefits to households with an 1136 \/ HEALTH AND WELFARE Item 5180 LOW-INCOME HOME ENERGY ASSISTANCE BLOCK GRANT-Continued AFDC Or SSI\/SSP recipient, provided the household’s income is less than 130 percent of the poverty level. Table 1 summarizes the eligibil- ityrestrictions imposed by federal and state law. Table 1 Federal and State Requirements for LIHEA Eligibility Program Federal Law State Law State Plan Home Energy Assist- 1. AFDC or SSI eligible, AFDC or SSI\/SSP Income below 130% of ance or eligible. poverty. 2. Income less than 150% of poverty. Energy Crisis Inter- 1. AFDC or SSI eligibles AFDC, SSI\/SSP 1. AFDC, SSI recipients vention and Weatheri- or General Relief, or or Food Stamp eligi- zation Program 2. Income less than Food Stamp eligi- bles and 150% of poverty. bles. 2. Income below 130% of poverty. Transfer of LlHEA Block Grant We withhold recommendation on the administration s proposal to trans- fer the LIHEA Block Grant from the Office of Economic Opportunity (OEO) to the Department of Social Services (DSS)~ pending receipt of information regarding the departments plans to administer the block grtint . . The budget assumes that legislation will be enacted transferring respon- sibility for administering the LIREA block grant from OEQ to DSS, effec- tive October 1983. The budget proposes to appropriate 75 percent of the FFY 84 grant ($54,145,000) to DSS for expenditure under the program during the last nine months of 1983-84. We have the following concerns regarding the administration’s pro- posal: . 1. The administration has not provided a plan describing how DSS will administer the LIREA block grant. As a result, it is not clear whether the department will.administer the program directly or contract with the counties to administer it. Currently, OEO: administers the REAP component of the LIREA block grant itself by prOViding cash grants for energy costs directly to individuals. disburses ECIP and weatherization funds to needy households through community-based organizations. If the Legislature transfers the LIREAbiock grant from OEO to DSS, the department will have to decide how benefits will be distributed to eligible households. The departm~nt might choose to administer one or moreofthe programs at the state level, or it might choose to delegate the responsibility to the counties. 2.. It is unclear whether DSS administration of the LIREA block grant will result in administrative savings. The budget asserts that \”the Depart- ment of Social Services can administer this program (LIREA Block Grant) through the existing welfare payment system at approximately 25 percent less administrative cost . than through a separate disbursement process.\” The budget, however, does not identify the costs to DSS for administering LIREA. In addition, SB 124 (the companion bill to the Budget Bill) would allow DSS to spend 5 percent of the grant amount for Item 5180 HEALTH AND WELFARE \/ 1137 administration and to increase this amount by an additional 2.5 percent through the Section 28 process. This suggests that transferring the block grant to DSS may not result in any administrative savings. . Conclusion. Thus,the administration’s proposal fails to make clear (1) how the department’s current payment system will be used to distribute HEAP, ECIP and weatherization funds, (2) if community-based organiza- tions will continue to administer some LIHEA programs, and (3) the extent to which .additional administrative costs will be incurred by the department in managing LIHEA. Therefore, we do not have an adeguate basis for determining th.e impact of this proposal on state costs and pro- gram beneficiaries. Accordingly, we withhold recommendation on the proposal to.transfer the LIHEA Block Grant from OEO to DSS, pending receipt of information regarding the department’s plans for administering the program and its\u00b7 estimates of what it will cost to implement its plans. Department of Social Services COUNTY ADMINISTRATION OF WELFARE PROGRAMS Item 5180~141fr()m the General Fund and Social Welfare Fed- eral Fund Budget p. HW 145 Requested 19~4 …………………………………………………… ~ …………. $109,153,OOO a Estimated \u00b71982-83 …………………………………………………………………. 99,268,000 Actual 1981-82 ………………………………………………………………………. 103,785,000 Requested increase $9,885,000 (10.0 percent) . Total recommended reduction Item 5180-141…………………….. 2,494,000 Total recommended reduction Item 5180-181-001 (b) ………… 4,000 a Includes $3,470,000 proposed in Item 5180-181\”()()1 (b) for a 3 percent cost-of-living increase. 1983-84 FUNDING BY ITEM AND SOURCE Item Description 5180-141-OO1-County administration 5180-181-001 (b)-Cost-of-Iiving increase 5180-141~ounty administration 5180-181-866 (b) -Cost -of-living increase 9680-101-001 (bb-ff}-Mandated local costs Fund General General Federal Federal General Amount $105,683,000 3,470,000 (323,301,000) (18,050,000) (291,000) Total SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Administrative Costs for Proration of Shelter Costs. Reduce by $l,08~(J(}(). Recommend reduction of $3,600,000 ($1,080,000 from the General Fund and $2,520,000 in federal funds) proposed for AFDC administrative costs associated with the proration of shelter costs, because the addition of these costs represents a departure from standard budgeting procedures under the County Administrative Cost Control Plan. $109,153,000 Analysis page 1144 1138 \/ HEALTH AND WELFARE Item 5180 COUNTY -ADMINISTRATION OF WELFARE PROGRAMS-Continued 2. State Quality Control Sanctions. Recommend adoption of 1150 Budget Bill language requiring that the\” performance meas- ure used by DSS for the purpose of applying sanctions be the combined annual error rate over two quality control peri- ods. 3. State Quality Review Sample. Recommend that DSS 1150 present a plan for coordinating the state and federal quality control samples so that the results can be combined. 4. Asset Clearllnce Match. Reduce Item 5180-141-001 by $1l~- 1151 000 and Item 5180-181-001 (b) by $~OOO. Recommend re- duction in funds proposed for county administration to account for projectedcaseload decreases due to the Asset ‘Clearance Match demonstration, for a total savings of $476,- 000 ($114,000 from the General Fund, $244,000 in federal funds, and $118,000 in county funds). 5. Federal Food Stamp Quality Incentive Payment. Reduce by 1152 $1~072,000. Recommend that federal incentive payments for improved food stamp error rates be budgeted in 198~, for a savings of $2,143,000 ($1,072,000 to the General Fund and $1,071,000 in county funds). 6. Food Stamp Mail Loss Liability. Reduce by $35,000. Rec- 1152 ommend reduction in funds proposed for the cost of alterna- tive food stamp issuance methods, due to lower-than-anticipated caseload, for a reduction of $140,000 ($35,000 frOni the General Fund, $70,000 in federal funds, and $35,000 in county funds). 7. Enhanced Federal Funding for Development of On-Line 1153 Food Stamp Issuance System. Reduce by $197,000. Recom- mend that enhanced federal funding for the development of an on-line food stamp issuance system be reflected in the budget, resulting in a savings of $398,000 ($197,000 from the General Fund and $201,000 in county funds). 8. Development of On-Line Issuance Systems. Recommend 1153 that DSS identify (1) the counties where on-line issuance is expected to become operational, (2) the costs and savings expected in each county, and (3) the scheduled dates for implementation. GENERAL PROGRAM STATEMENT This item contains the General Fund appropriation for the state’s share of costs incurred by the counties for administering (1) the AFDC pro- gram, (2) the food stamp program, and (3) special benefit programs for aged, blind, and disabled recipients. In addition, it identifies the federal and county costs of administering child support enforcement and cash assistance programs for refugees. The costs for training county eligibility and nonservice staff also are funded by this item. ANALYSIS _ AND RECOMMENDATIONS Expenditure Shortfall in the Current Year The budget estimates that General Fund expenditures for the adminis- tration of county welfare programs will be $3,527,000 less than the amount appropriated for 1982-83. This shortfall is due largely to (1) overbudgeting ————— ————————- – –~– Table 1 Expenditures for County Welfare Department Administration 1982413 and 1983-84 (in thousands) Eftimated 1982-83 Prof}OSe{i 1fJ83…84 Total Federal o State CQunty Total Federal State County AFDC administration………………………………………….. $350,913 $178,380 $75,048 $97,485 $375,491 $189,955 $83,249 $102,287 Nonassistance food stamp , ………………………………….. 89,664 45,539 19,474 24,651 94,841 48,206 21,017 25,618 Child Support Enforcement Welfare ……………………………………………………………… 89,187 63,545 25,642 95,323 66,968 28,355 Nonassistance .. ; ………………………………………………… 30,226 21,537 8,669 31,844 22,371 9,473 .. Special Adult programs .: …. , ………………………………… 1,814 1,814 1,867 1,867 Refugee cash assistance ………………………………………. 9,247 9,247 6,890 6,890 Staff\u00b7development……………………………………………….. 12,926 6,604 2,932 3,390 13,624 6,961 3,020 3,643 Subtotals (Budget Bill) ……………………. ;……………. $583,977 $324,852 $99,268 $159,857 $619,880 $341,351 $109,153 Local Mandates …………………………………………………… (-) (-) (86) (-86) (-) (-) (291) $169,376 (-291) EA employment programs (Ch. 3~\/82) ………….. 336 168 84 84 1,344 ~2 336 — — — — 336 Totals ……………………………………………………………. $584;313 $325,020 $99,352 $159,941 $621,224 $342,023 $109,489 $169,712 Percent Ch8l1l!e Total Federal State. 7.0% 6.5 10.9 5.8 5.9 7.9 6.9 5.4 5.4 3.9 2.9 2.9 -25.~\u00b7 -25.5 5.4 5.4 3.0 6.1% 5.1% 10.0% (-) (-) (238.4) 300.0 300.0 300.0 — — 6.3% 5.2% 10.2% County 4.9% 3.9 10.6 9.0 7.5 .6.0% (238.4) . 300.0 — 6.1% -~ en I-‘ ~ :r: ~ ~ ~ …….. -. -. ~ .1140 I HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued for Food Stamp fraud investigators ($3,560,000) and (2) greater-than- estimated savings from the cap on county overhead costs ($2,388,000). These savings are partially offset by increased costs due to (1) greater- than-anticipated AFDC workload ($1,287,000) , (2) added costs due to court decisions ($561,000), and (3) lower-than-anticipated savings from Ch. 327\/82 ($491,000). Budget Year Proposal The budget proposes an appropriation of $109,153,000 from the General Fund as the state’s share of county costs incurred in administering welfare programs during 1983-84. This is an increase of $9,885,000, or 10 percent, over estimated current-year expenditures. The budget proposes total e}..\”penditures of $619,880,000 for county ad- ministration of welfare programs in 1983-84, as shown in table 1. This is an increase of $35,903,000, or 6.1 percent, over estimated current-year expenditures. These amounts do not include a total of $1,344,000 for Emer- gency Assistance employment programs, consisting of $336,000 from the General Fund, $672,000 in federal funds, and $336,000 in county funds. Nor does the total include $291,000 proposed in Item 9680-101-001 to reimburse counties for state-mandated administrative activities and added grant costs. Budget Year Adjustments Table 2 shows the proposed adjustments to General Fund expenditures for county administration in 1983-84. The net increase of $9,885,000 is due to: 1. A 3 percent cost-of-living increase for county administration ($3,470,- 000), . 2. A projected increase in the AFDC caseload ($1,632,000), 3. Deletion of the limit on county overhead costs ($4,793,000), and . 4. Increased administrative costs to be incurred by counties in prorating the AFDC needs standard in order to account for reduced shelter and utility costs of AFDC families i~ shared living arrangements ($1,080,000). These increases are in part offset by: . 1. The reduction in costs associated with administering certain court decisions ($414,000), 2. Savings due to recent state legislation ($945,000), 3. Decreased administrative costs due to P.L. 97-35 ($331,000), 4. Reduced food stamp caseloads ($303,000). State Mandated Local Costs The budget proposes $291,000 from :the General Fund to reimburse counties for their costs of complying with five state mandates. One of these mandates was imposed by the Legislature: Chapter 102, Statutes of 1981 (AB 251), requires counties to deter- mine whether AFDC recipients have alternate medical insurance coverage (increase in administrative costs of $79,000) . The other four mandates were. imposed administratively, through ac- tions taken by the department. These mandates: Require counties to verify the household size and shelter costs for food stamp recipients (increase in administrative costs of $194,000); Item 5180 HEALTH AND WELFARE \/ 1141 Table 2 County Welfare Department Administration Proposed 1983-84 General Fund Changes\u00b7 (in thousands) 1. 1982-83 Current Year Revised ………………………………………………………………. . 2. Budget Adjustments . a. AFDC Administration (1) Basic caseload increase ……………………… , ……………………………………… . (2) 1983-84 Cost-of-living increase (3 petcent) …………………………….. . (3) Court cases ……………………………………….. .’ . .’ ……………………………………. . (4) State legislation ………………………………….. , ………………………………. : ….. . (5) Savings due to P.L. 97-35 …………………. ……………….. …………………….. (6) County overhead limitation ………………………………………………………. . (7) Proration of shelter costs …………………………………………………………… . ,(8)\u00b7 Other’ changes …………… ,; …………………. : … :, …………….. ; ……………………. . Subtotal ………………………………………………… .’ ……………………………………. . b. Nonassistance Food Stamps . (1) Basic caseload decline ……. ; …………….. ; . … ~ ………………………………….. . (2) 1983-84 cost-of-living increase (3 percient) ………………………………. . (3) County overhead limitation …………… :.~ ……………………………………… . (4) Other changes …………………………………………………………………………… . Subtotal ……………………………………………. ; . …. , …………………………………… . c. Special Adult Programs (1) 1983-84 cost-of-living increase (3 percent) ………………………………. . d. Staff Development (1) 1982-83 cost-of-living increase (3 percent) ………………………………. . 3. Total Budget Increase ……………………………………. ; …………………………………….. . 4. Proposed 1983-84 General Fund Expenditures ………………………………….. . Cost $1,632 2,673 -414 -945 -331 3,992 1,080 514 -$303 656 SOl 389 Total $99,268 $8,201 $1,543 $53 $88 $9,885 $109,153 a Does not include amourits appropriated by Ch. 327\/82 for Emergency Assistance employment programs. The department plans General Fund expenditures of $84,000 in 1982-83′ and $336,000 in 1983-84, leaving $492,000 avaiHlble for expenditure in 1984-85. Make the criteria for an exemption from employment services regis- tration the same for\u00b7 counties’ with and without WIN programs (in- crease in county grant costs of $3,600); Remove the $200 maximum exemption for the cost of employment- related equipment (increase in county grant costs of$9,500); and Exclude loans as income in determining eligibility and calculating the grant (increase in county grant costs of $4,500). County Administrative Cost Control Plan The Department of Social Service (OSS) allocates funds to counties for the administration of welfare programs based on a formula that considers (1) caseload, (2) productivity targets for eligibility workers, (3) the exist- ing salary structure in each county, (4) allowable cost-of-living increase, and (5) allocated support costs. . The process begins in January when each, county submits to the state detailed information that identifies expected costs during the upcoming year. The county also proposes specific productivity targets for (1) the number of AFOC intake andeontinuingcases to be handled per eligibility worker, and (2) the supervisory ratios for each of these. activities. The department calculates the county’s allocation in the following way. First, it determines the productivity targets (the number of cases to be 1142 \/ HEALTH AND WELFARE Item.51BO COUNTY ADMINISTRATION\u00b7 OF WELFARE PROGRAMS-Continued handled by an eligibility worker) and supervisory ratios for the county. The cost control plan calls for counties to meet the average of the produc- tivity standards achieved by similar size counties during a specific base year, or their own performance during the base year, if it was above average. Second, the department determines the allowable salary costs per worker, considering the limits on state funding for cost-of-living in- creases in the last two years and actual county salaries. Third, the depart- ment calculates total administration costs by multiplying theDSS May estimates of caseloads in AFDC and food stamps, times the average cost per case, which is derived from the productivity target and average salary costs. Several other adjustments are made in order to fund overhead costs, fraud investigation activities, and other special items. The state’s share of cost is approximately 25 percent of the total. The counties are notified of their allocation early in the budget year. The amount actually paid to a county is determined by adjusting the allocation for the actual caseload during the year. . . . Under this system, there are two ways in which the state can reduce the costs to the General Fund of county administration: (1) raise productivity targets and (2) limit the allowance for cost-of-living increases to county employees. Productivity Targets. The cost control plan specifies productivity tar- gets that provide a basis for limiting allocations to counties. Table 3 lists the productivity targets for the AFDC and Food Stamp programs, and shows the extent to which these targets are being met by the 27 largest counties. The first column of the table shows how many counties are meeting each of the productivity targets specified by the cost control plan. The second column shows the number\u00b7 of counties for which the target allowed by DSS results in administrative costs that are higher than they would be if DSS had required the county to meet the cost control plan s targets. The last column shows the number of counties for which the targets allowed by DSS result in costs that are lower than the costs that would be incurred if DSS had used the cost control plan’s targets to determine the county’s allocation. . . . . Table 3 shows that in general, the majority of counties are meeting their AFDC productivity targets, except in the area of quality control workers. Fifteen of the 27 counties were allowed more quality control staff than the plan calls for. The department funds more staffing in this area so as to increase the amount of resources devoted to reducing AFDC error rates. Plan targets for nonassistance food stamps and the support ratio; on the other hand, are not being met. In 17 out of the 27 largest counties, the targets allowed for food stamp cases per worker result in higher costs than plan targets. In 20 of the 27 counties, the targets allowed for the support ratio resulted in higher costs for county administration than the costs that would have been allowed under the plan targets. Cap on Cost-of-Living Increases. The state’s share of the cost of Cost- of-Living Adjustments (COLAs) provided to co1.iIity welfare department employees was capped at 6 percent in 1981-82. No state funding was allowed for the cost of these COLAs. in 1982-83. Preliminary data indicate . that, in spite of the zero percent state cap on COLAs, 31 counties have providedcost-of-living increases to their employees, ranging from 0.13 to nearly 15 percent. The full cost of these increases must be funded by the counties themselves. The budget proposes a \”‘3’percent cap on the COLAs that the state will help fund for 1983-84. Item 5180 HEALTH AND WELFARE \/ 1143 Table 3 Differences Between Cost Control Plan Targets and Allowed Productivity Targets (27 Large and Medium Sized Counties) 1982-83\u00b0 AFDC Allowed Target Equals Plan Target Intake cases\/worker ……………………………………………… 25 ‘hitake workers\/supervisor …………………………………… 21 Continuing cases\/worker …………………………………….. 20 Continuing workers\/supervisor ……………………………. 17 Quality Control workers ………………………………………. 12 Quality Control workers\/ supervisor c…………………. 4 Nonassistance Food Stamps Cases\/worker ………………………………………………………… 10 Workers\/~u~ervisor ……………………………………………… 17 Support ratio ………………………………………. ;………………… 7 Allowed Target Results in Higher Cost Than Plan Target 17 8 20 Allowed Target Results in Lower Cost Than Plan Target 1 1 3 6 2 SOURCE: Department of Social Services. b In two counties, added costs of lower productivity per worker or more quality control staff are offset by lower costs in other categories. CThree counties have no targets for Quality Control workers\/supervisor. d S)1pport ratio equals the ratio of support costs to eligibility staff costs. Support Ratio Limit. Last year, the Legislature adopted a third means for controlling county costs. It did so by adding language to the Budget Act limiting the support ratio at one dollar of support costs to one dollar of staff costs. This reduced General Fund expenditures by $4,793,000. Most of the reductions in state aid was experienced by Los Angeles County, , which lost $4,369,000 due to its size and the fact that its support ratio was among the highest in the state. The budget proposes to delete the limit on the support ratio, thus increasing General Fund costs by the amount saved in 1982-83. ‘. We concur With the department’s deletion of this limit. A fixed dollar limit on the ratio of support costs to eligibility worker costs does not allow a county the latitude to decrease total costs by shifting resources to sup- port activities in order to achieve savings in eligibility worker costs. Budget Year Estimates for County Administration. Generally, the de- partment calculates the General Fund appropriation for county adminis- tration in the budget by adjusting the current-year allocation for changes incaseload that are expected to occur in the budget year. The depart- ment, however, does not adjust the proposed expenditures for any changes in,administrative procedures that may have been required by state or federal law changes or by court decisions. The total amount budg- eted for county administration therefore depends only on the established productivity targets, the allowed salaries, and the projected caseload in- crease. The buqget for 1983-84 proposes a significant departure from this ap- proach. Specifically, for 1983-84 the administration has increased the es- timated county allocations to reflect the costs of changes in administrative 37\”-76610 1144 I HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued procedures that would be required for 1983–84 if the Legislature approves its proposal to prorate the AFDC need standard for shelter costs in shared living arrangements. Proration of Shelter Costs We recommen\” deletion of ~G~OOO ($1~08~OOO from the General Fund l(nd $~52~0!J0 in federal funds) proposed for AFDC administrative costs associated with the impleme~tation of the shelter costs proration~ because the addition of these costs represents a departure from standard budgeting procedures under the County Administrative Cost Control Plan. The budget proposes to change the method by which the AFDC grant is calculated in 1983–84. Specifically, it proposes to prorate the AFDC need standard and grant amount for these AFDC families living with another individual(s). If approved by the Legislature, this change would require eligibility workers to obtain information about all members of the household where the AFDC applicant\/recipient lives. This information will be needed in order to determine whether a prorated reduction of the AFDC need standard and grant is required in order to reflect the lower costs of shared living arrangements. The DSS estimates that gathering this information w()uld require an additional five minutes of eligibility worker time for each of 165,000 cases per month. This would result in additional costs of $4,800,000, of which the state’s share would be $1,080,000, the counties’ cost would be $1,200,000, and the federal share would be $2,520,- 000. In budgeting for the estimated costs associated with this proposed new procedural requirement, DSS has failed to use the meth()d normally used to budget for the cost or savings from proposed changes in procedural requirements. Normally, DSS identifies costs associated with procedural changes, but does not change the total amount budgeted for county ad- ministration to reflect these costs. They are merely cited for illustrative purposes, to identify the part of the total budgeted for county administra- tion that could be attributed to the procedural changes. The costs associat- ed with these new procedures are subtracted from total costs, as estimated under the cost control plan, and the remainder is labeled \”Basic Costs.\” Rather than follow the normal. practice of budgeting for procedural changes, the administration has added the costs associated with proration for shelter to the total budget-year estimate, thereby increasing the total amount requested from the General Fund for county administration. Many procedural changes have been implemented by the department in recent years, resulting in more or less time to process workload at the county level. For example, various AFDC procedural changes identified in this year’s subvention estimates (other than the change associated with proration) would permit, USin.g. the same logic used to augment the bud. get for the cost of proration, a General Fund savings of $1,158,000. These savings, however, do not affect the size of the General Fund approprhi.tion in either the current or budget year. If these procedural changes were used to adjust the amount of state support budgeted for AFDC administra- tion, they would more than compensate for the $1,080,000 in additional costs due to shelter proration, and result in a net General Fund savings of $78,000. Because the proposed allowance for the costs associated with the prora- Item 5180 HEALTH AND WELFARE \/ 1145 tion of shelter costs is not consistent with past policy, we believe the proposal requires special justification by the department. Specifically, DSS should demonstrate that: 1. The costs of proration would impose an exceptionally large cost on the county compared to the typical procedural change, and that the added requirement will prevent counties from meeting productivity targets specified in the cost control plan. 2. Compared to other procedure changes, the costs associated with this procedural change are more readily identifiable and more easily meas- ured than the costs associated with the other procedure changes. 3. The estimate of five minutes added time per case is relatively accu- rate, compared to the estimated costs or savings for other procedural changes. We recommend deletion of the costs for proration for shelter costs, until DSS is able to justify treating this procedural cost item in a special manner. If the department provides. further information concernirig these costs, we would evaluate this recommendation in light of the criteria stated above. AFDC . Quality Control Reviews Federal regulations require states to review a sample of AFDC case files twice a year to determine whether those receiving benefits are eligible for such benefits, and whether the correct amounts have been paid. Every six months, California draws a random sample of cases from the counties’ files and reviews each case. Based on its review, the state calcu- lates the percent of payments made in error to AFDC families. This per- cent is the state’s error rate. The federal government then reviews a subsample of the original state sample for accuracy, and adjusts the state’s finding to reflect the results from the subsample review. This adjusted error rate is the final federally recognized error rate. State regulations further require 34 of the 35 largest counties to conduct similar quality reviews twice a year. The thirty-fifth county (Los Angeles) estimates its error rate on the basis of the federal sample results. County quality control staff review about 140 cases, and calculate the county’s error rate based on the results of these reviews. A subsample of these county-reviewed cases is reviewed by the state to check on the accuracy of the original county results. The state then adjusts the county findings to arrive at the final state finding for each of the counties. California s Error Rate Is Increasing. Chart 1 shows the AFDC error rates in California since 1976. It shows that, although the statewide error rate never exceeded 5 percent between January 1976 and 1978, since 1978 the error rate has consistently been above 5 percent. In the most recent period for which final federal results are available, October 1980 to March 1981, the state’s error rate jumped to 8.6 percent. . Chart 2 compares the state error rate findings for the last review period shown on Chart 1, April to September 1981, with the results from the next I:eview period, October 1981 to March 1982. Chart 2 separates errors ac- cording to the type of error, in order to show the kinds of errors that are occurring. Chart 2 shows that in the period October 1981 to March 1982, error rates increased compared to the rates for the previous review peri- od, and that the increase occurred in all of the major error categories except for one-earned income. The decrease in the earned income cate- gory occurred because fewer recipients have earned income.to report as a result of the 1981 changes in feaerallaw. 1146 \/ HEALTH AND WELFARE . Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued P E R C E N T 0 F P A Y M E N T S I N E R R 0 R P E R C E N T 10 9 8 7 6 5 4 3 2 1- 0 o Chart 1 Statewide AFDC Error Rates a January 1976 to September 1981 IIII Jan.- June 76 July- Dec. 76 Jan.- June 77 July- Dec. 77 Jan.- June 78 Apr.- Oct. 78- Apr.- Oct. 79-. Apr . …, Oct. 80- Apr._b Sept. March Sept. March Sept. March Sept. 78 79 . 79 80 80 81 81 a SOURCE: Department of Social Services; federal findings, combined payment error rates for overpayments and payments to ineligibles. b Estimated. Chart 2 Major Payment Errors by Source a,b Apr. to Sept. 1981 Oct. 1981 to March 1982 Deprivation S.S. # Pensions etc. Earned Inc. WIN Bank Deposits a Source\” Department of Social Services. based on state findings only. b Sources 01 efror are as\”follows. Deprivation-aU or some members of the case are not qualified \”for AFDC because they lail to meet the criterion of deprivation of parental support: most ~rrors occurred in the qualifications for the unerDployed parent program. S.S. # -S.ocial security number wrong or missing. Pensions. etC.-Amounts of income from R.S.D.I. (Social Security). veterans’ programs. unemployment compensa\u00b7 tlon, workman’s compensation, or other benefit programs are missing or wrong. Earned income–discrepancy exists between earned income recorded in case and ~ctual. WIN-reqUired parent not registered and appropriate action not\u00b7taken. Bank Deposits-family has bank accounts or cash in amounts that differ from case record. Item 5180 HEALTH AND WELFARE \/ 1147 Another way to categorize errors is to divide them into two general categories: (1) agency-caused errol’s (for example, the eligibility worker fails to act on a client report of change in employment status) and (2) client-caused errors (for example, a client fails to report a change in employment status). For the first time since April1973, the October 1981 to March 1982 results show that agency-caused errors account for the majority of all errors, while the rate of client-caused errors actually de- clined. Federal Sanctions. Federal regulations require states to reduce their error rates by one-third decrements, starting in October 1980. Federal regulations also require that for the October 1982 to September 1983 review periods, states achieve an error rate of 4.0 percent or lower. Begin- ning on October 1, 1983, states must achieve an error rate of 3 percent or lower. Failure of states to achieve either the interim reductions or the 4.0 percent level will result in a reduction in federal financial participation in the costs of the AFDC program. Because California’s error rate in the base period (April to September 1978) was below 4.0 percent, the state must achieve the 4.0 percent standard for all review periods between October 1980 and September 1983, and a 3 percent standard for all subsequent review periods. Federal sanctions can be imposed upon the state when the combined error rate over two six-month sampling periods exceeds these standards. It is likely that California exceeded the allowable error rate standard of 4.0 percent during the October 1980-through-September 1981 review peri- od. The final error rate for the period October 1980 to March 1981, is 8.6 percent. Although final figures are not available from the federal govern- ment, DDS estimates that California’s error rate for the April-to~Septem\u00ad ber 1981 period will be 5.5 percent. When these two error rates are combined, California can expect to be notified of sanctions totaling between $30 and $40 million. The state then will have 65 days in which to request a waiver of sanctions, based on the state’s good faith effort to improve error rates in the AFDC program. The Secretary of DHHS will then. determine whether all, part, or none of the sanctions will be waived. State Legislation. Chapter 327, Statutes of 1982 (SB 1326), requires that federal sanctions be passed on to the counties in an \”equitable\” way. Counties may have sanctions reduced or set aside if the Director of DSS finds \”that extenuating circumstances exist and that the imposition of the full sanction amount would unfairly penalize the county.\” The act provides that the costs of federal sanctions attributable to the 23 smallest counties will be borne by the state. The remaining sanctions will be distributed among the 35 largest counties based on the extent to which the individual county error rates exceed the federal standard. The county error rate findings are based on a sample of 5,000 cases drawn and reviewed independently from the federal quality review sam- ple in all counties except Los Angeles, where the federal sample cases are used. The county error rate findings could be quite different from the statewide findings of the federal sample because the two error rate esti- mates come from two different samples. If the county results have an overall error rate less than the federal rate, the state would have to bear a greater portion of the federal sanction. State-Imposed Sanctions Unlikely. Chapter 1025, Statutes of 1982 (AB 1456), requires that the error rate used to determine ira county’s error 1148 \/ .HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued rate is above the allowable standard will be the low point of the statistically reliable range. For example, a county with a 4.5 percent error rate and a reliability of plus or minus 1 percent, could have a \”true\” error rate as low as 3.5 percent (low point of the range) or as high as 5.5 percent (high point of the range). Under the provisions of Chapter 1025, the county’s true Table 3 Thirty\u00b7Five Largest Counties\u00b7 AFDC Payment Error Rates April to September 1981 Mid\u00b7Point Estimate of the Enor Rate With Without Technical Technical County Enors b Enors e Alameda…………………………………………………………………………………. 9.0 4.8 Butte ………………………………………………………………………………………. 5.8 5.8 Contra Costa………………………………………………………………………….. 4.2 3.2 Fresno…………………………………………………………………………………….. 5.3 2.8 Humboldt ……………………………………………………………………………… 2.9 2.6 Imperial…………………………………………………………………………………. 6.6 2.9 Kern ………………………………………………………………………………………. 1.8 1.7 Kings………………………………………………………………………………………. 1.1 0.5 Los Angeles……………………………………………………………………………. 3.7 3.2 Madera …………………………………………………………………………………… 3.1 2.1 Marin …………………………………………………………………………………. ;… 2.1 0.7 Mendocino ……………. ;………………………………………………………………. 1.9 1.9 Merced …………………………………………………………………………………… 5.6 2.8 Monterey ……………………………………………………………………………….. 6.7 5.5 Orange ……………………………………………… ,………………………………….. 4.7 2.6 Placer …………………………………………………………………………………….. 6.9 5.1 Riverside ……………………………………………………………………………….. 5.1 4.1 Sacramento ……………………………………………………………………………. 2.4 1.3 San Bernardino ……………………………………….. ;………………………….. 4.9 4.2 San Diego ……………………………………………………………………………… 9.0 7.2 San Francisco ………………………………………………………………………… 8.1 4.5 . San Joaquin …………………………………… ;……………………………………… 4.3 3.2 San Luis Obispo …………………………………………………………………….. 2.8 2.2 San Mateo ……………………………………………………………………………… 2.4 1.7 Santa Barbara ………………………………………………………………………… \u00b78.5 8.1 Santa Clara …………………………………………………… :……………………… 9.4 6.2 Santa Cruz……………………………………………………………………………… 4.2 2.0 Shasta …………………………………………………………………………………….. 7.2 3.5 Solano …………………………………………………………………………………….. 5.6 4.2 Sonoma …………… ;…………………………………………………………………….. 4.6 3.7 Stanislaus ……………………………………………………………………………….. 5.4 2.9 Tulare …………………………… :………………………………………………………. 2.2 2.0 Ventura …………………………………………………………………………………. 3.1 2.3 Yolo ………………………………………………………………………………………… 4.7 3.2 Yuba ……………………………………………………………………….. …………….. 0.1 0.1 Number .of Counties with Error Rates Above 4 percent:…… 22 11 Low-Point Estimate of the Enor Rated 1.6 1.2 0.9 1.0 0.3 0.3 -0.2 -0.1 1.9 0.3 0.1 -1.0 1.2 2.4 0.1 2.4 1.7 o 1.5 2.9 0.4 0.7 0.5 -o.s 3.8 2.6 0.4 0.8 1.7 -0.3 0.9 0.3 0.6 0.6 -0.1 o a SOURCE, Deparbnent of Social Services, State sample, original county findings. b This number is comparable to the error rate reported as the statewide rate based on the separate federal sample. e This is the midpoint estimate of the error rate-that is, the actual error rate in each county’s sample. d This is the lo~ point of the 95 percent confidence interval for the error rate without technical errors. Item 5180 HEALTH AND WELFARE \/ 1149 error rate is assumed to be 3.5 percent. In addition, the department has adopted regulations which provide that sanctions are to be imposed only if a county’s error rate exceeds the standard for two consecutive six-month periods. Also, error rates exclude so-called technical error, e.g\” social secu- rity number of WIN registration, that are included in federal error rates. As a result of these provisions, it is unlikely that counties will ever be deemed to have exceeded the 4 percent error rate standard. . Table 3 shows that when the provisions of Chapter 1025 and the depart- ment’s regulations are applied for the quality control review period of April to September 1981, no county is found to be liable for sanctions, despite the fact that 22 of the 35 counties had reported error rates (first column of Table 3) exceeding 4percent. Under the rules as applied by the department, two counties were notified that they were liable for sanctions for the April to September 1981 period, but upon appeal it was determip.ed that cases in the sample were incorrectly identified as errors. The recal- culated error rate for each county was below the error rate standard. (Table 3 includes the corrected rates for these counties) Sanctions OffSet by Previous Years Performance. Even if sanctions ever were to be imposed, the amount of the penalty would be reduced by taking into account the county’s performance in earlier periods. Under current rules, the amount of the sanction, which would be roughly equal to the state’s share of assistance payments in excess of 4 percent that .pad been made in error during the year, would be reduced by an estimate of the payments \”saved\” during the previous year if the county’s error rate was below the error rate standard during the previous year. Thus, it is likely that sanctions would only be imposed on a county that consistently had extraordinarily high error rates. The State Pays the Cost of Erroneous Payments Taken as a whole, current state law and regulations result in a policy where sanctions will not be imposed on counties, and consequently the state will contillUe to bear most of the nonfederal cost of these payment errors. For example, if the 5.5 percent error rate, for the April-to-Septem- ber 1981 period continued throughout 1981\”-82, we estimate that payments made in error to AFDC recipients would total $~60,852,000 ($82,118,000 in federal funds, $70,249,000 in state funds, and $8,485,000 in cOlmty funds) . Under the current no-sanction policy, the state ends up paying $70,249,000 to individuals that, under existing law and regulations, do not warrant this assistance. This is nearly five times the amount spent from the General Fund on other county social services in 1981–82. If, instead, counties had been required to pay sanctions under the pro- grams they administer for errors exceeding 4 percent, the counties would have reduced the state’s cost of erroneous payments by $19,159,000. We conclude that this no-sanction policy-\”Let the State Pay\”-qbes not serve the interests of the state as ~ whole for the following reasons. Counties Have Insufficient Incentive to Keep Error Rates Low. As long as the state bears the major share of the cost of the erroneous pay- ments, the counties have little incentive to reduce errors. This cap be seen in a comparison of error rates for different periods. Prior to 1978-79, when the counties paid 16 percent of the costs ofAFDC grants, error rates were generally below 4 percent. Now that the county’s share is only 5 percent, the statewide error rate is much J:pgher. By imposing sanctions on those counties with high error rates, counties are given an incentive to take 1150 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued those managerial steps needed to keep rates low. Taxpayers in Counties with Low Error Rates Subsidize Taxpayers in Counties with High Error Rates. As long as the state pays the cost of the erroneous payments made by counties with high error rates, each taxpay- er in the state shares in the costs of these errors. This means that taxpayers residing in counties able to administer AFDC program with error rates of 4 percent or less are paying through their state taxes for the errors made in counties with error rates higher than 4 percent. Effective state sanctions would transfer the costs of these errors to taxpayers in the counties where they are made. The State Pays Three Times for High Error Rates. In addition to the $70,249,000 the state has already paid for erroneous AFDC payments in 1981-82, the current no-sanction. policy may require the state to bear additional costs associated with the errors made by county welfare work- ers. First, if federal sanctions are imposed, the state will pay a portion of the cost to the federal government of these errors. Second, the state allows counties with high error rates to employ more quality control workers than the cost control plan calls for, in order to help those counties to reduce their error rates. If these additional personnel are not successful in lowering error rates, the state will pay for the extra workers, as well as the uncorrected errors. Thus, the state may have to pay for errors made at the county level in three different ways: (1) the stat~’s share of pay- ments (45 percent), (2) the cost of any federal sanctions that are not passed onto the counties, and (3) the extra costs of quality control workers assigned in counties with high error rates. Current policy places the responsibility for welfare administration in the counties, but the state bears the costs of the counties’ failure to effec- tively discharge that responsibility. Unless the counties bear a greater share of the cost of their mistakes, the state probably can expect error rates to remain high. The Reliability of Error Rate Data Can Be Improved We recommend adoption of Budget Bill language requiring DSS to amend its regulations to specify that the performance measure to be used for the purposes of applying state sanctions shall be the combined annual error rate over two quality control review periods. We also recommend that DSS provide the fiscal committees prior to the budget hearings, with a plan for coordinating the federal sample and the separate state sample so that the results can be combined. Auditor Generals Recommendations. The Auditor General issued a report in September 1982. that recommended several steps to lower error rates. He recommended that DSS (1) improve the assistance if provides to counties in identifying and analyzing the source of errors and (2) improve its quality control sampling procedures in order to increase the reliability of individual county error rate estimates. Improved estimates would increase the chances that sanctions might be imposed on counties with high error rates. In June 1982, DSS held the first meeting of a new statewide corrective action advisory committee established in response to the Auditor General’s first recommendation. The DSS has established a plan to address the remaining recommendations contained in the Auditor General’s report. Error Rate Estimates. We concur with the Auditor General’s conclu- Item 5180 HEALTH AND WELFARE \/ 1151 sion that the lack of reliable county error rate data reduces the likelihood that sanctions will be applied against counties with high error rates. The department could improve the reliability of its error rates by increasing the number of cases reviewed. The size of the sample, however, is limited by the cost of conducting the case reviews. Any increase in the state’s sample of 5,000 cases would result in increased costs to sample and review the additional cases. Our analysis indicates that the department could increase the effective size of the quality sample without incurring any additional quality control costs by (1) combining results from two consecutive quality review peri- ods and (2) combining the federal and state samples. Combining the results from two consecutive quality review periods will double the sample size for most counties, and improve the reliability of the county error rate estimates. The improved reliability will result in a nar- rowing of the 95 percent confidence interval around the combined mid- point estimate of the error rates for the two six-month periods. This means that the low point estimate of the error rate will be closer to the midpoint of the interval, and will improve the chances that a county with truly high error rate will face sanctions. Therefore, we recommend that the Legisla- ture adopt the following Budget Bill language requiring the department to combine the results from two consecutive review periods for the pur- pose of determining a county’s error rate: \”For the purposes of state sanctions pursuant to Section 15200.4 of the Welfare and Institutions Code, the error rate estimate that shall be used to measure the quality performance of each county shall be the low point estimate of the confidence interval estimated by combining the results from the two quality review samples conducted during the two subsequent quality review periods.\” The DSS could also improve the reliability of error rate estimates by combining the federal and state quality review samples. The state selects about 5,000 cases every six months in order to determine the error rates in the 35 largest counties. In the review period April to September 1981, an additional 796 cases were drawn in all counties except Los Angeles, for review by the state and the federal government to determine the official statewide error rate. If these samples were combined, it would increase the total sample statewide by apprbximately 23 percent. This increase would improve the reliability of county-specific error rates, narrow the confidence intervals, and increase the chances of sanctions being imposed on counties with excessive error rates. We therefore recommend that DSS develop and present to the fiscal committees prior to budget hearings a plan to combine the results from the federal and state samples in order to improve the accuracy of county error rate estimates. BUDGET ISSUES Asset Clearance Match We recommend a reduction in funds budgeted for county administra- tion in order to reflect caseload decreases anticipated from the Asset Clear- ance Match demonstration project, for a savings of$476,000 ($114,000 from the General Fund, $244,000 in federal funds, and $118,000 in county funds), Chapter 703, Statutes of 1981 (SB 620), authorized DSS to conduct a demonstration project (referred to as the Asset Clearance match) which 1152 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued matches AFDC files against interest and dividend information from the Franchise Tax Board. The purpose of this project is to identify AFDC recipients who have personal property which exceeds the allowable fed- eral and state limits. The department estimates that this system will result in a grant savings because some individuals will no longer be eligible for aid. Although the department acknowledges that the demonstration will reduce the AFDC caseload, it has not reduced the amount budgeted for county administration funds accordingly. (These administrative costs are budgeted according to the estimated caseloads for the budget year.) In order to account for impact of the program on county workload, we recommend a reduction of $451,000, c()nsisting of $110,000 from the Gen- eral Fund, $231,000 in federal funds, and $110,000 in county funds. Because these amounts were included in the base used for calculating the cost-of-living amounts requested for county administration, a further reduction of $25,000 should\u00b7 be made ($4,000 from the General Fund, $13,000 in federal funds, and $8,000 in county funds in the cost-of-living item (Item 5180-181-001). The total recommended reduction, is $476,000 ($114,000 from the General Fund, $244,000 in federal funds, and $118,000 in county funds). Federal Food Stamp Incentive Payments We recommend that federal Food Stamp Incentive Payments be budg- eted in 1983-84~ for a savings of$2~143~OOO ($1~072,OOO to the General Fund and $l~071~OOO to county funds). Federal law provides that states which reduce. their Food Stamp error rates by more than 25 percent in any year will receive an increase in federal funds for Food Stamp administration. Specifically, the federal gov- ernment will increase its share of administrative costs from 50 to 55 per- cent. During the period April 1981 to September 1981, Calif()rnia’s Food Stamp error rate was 8.2 percent, down 27 percent from the 11.3 percent rate for the period April 1980 to September 1980. According to DSS, this will result in.enhanced federal funding of $2,143,000, and a corresponding savings to the state and counties. These funds will be received during either the current year or the budget year. Current law provides that these funds be distributed according to the share of administrative costs borne by the state and counties during the 1981 period. No adjustment has been made to the estimated General Fund expendi- tures for 1982-83 or 1983-84 in recognition of these additional federal funds. Accordingly, we recommend that the anticipated increase in fed- eral funds be reflected in the 1983-84 budget, resulting in a General Fund savings of $1,072,000 (Item 5180-141-001), a savings to the counties of $1,071,000, and an increase in federal funds of $2,143,000 in Item 5180-141- 866; Food Stamp Mail Loss Liability We recommend that funds proposed for alternative food stamp issuance methods be reduced to reflect a lower-than-anticipated caseload, for a savings of $14~OOO ($3~OOO from the General Fund, $7~OOO in federal funds~ and $3~OOO in county funds). . The Food Stamp Amendments of 1981 (P.L. 97-98) provide that states will be held liable for food stamp coupon mail losses. Counties which issue — – —~– —~~—‘ Item 5180 HEALTH AND WELFARE \/ 1153 more than $300,000 in coupons per quarter will bear the cost of coupon losses exceeding 0.5 percent of total coupons issued. Smaller counties are liable for losses over $1,500. The DSS reports that 20 counties face sanctions totaling $330,684 per quarter, based on actual mail loss rates during July to September 1982. State regulations provide that the counties shall bear the full cost of the mail loss liability. The budget includes $630,000, all funds, to support alternative means of issuing coupons to decrease the mail losses and avoid the sanctions. Such alternatives include certified mail, over-the-counter issuance, or automat- ed computer-assisted issuance. The budget assumes that alternative issu- ance methods will cost an additional $0.25 for each of 2,518,400 coupons issued during the budget year. Our analysis indicates that the number of coupons issued will reach only 1,960,000, based on current department caseload estimates in counties threatened with mail loss liability. This caseload would result in a cost of $490,000 to alter the method of issuing the coupons. Therefore, we recom- mend a reduction of $140,000 to reflect the lower caseload estimate, result- ing in a General Fund savings of $35,000, a federal fund savings of $70,000, and a $35,000 decrease in estimated county costs. Enhanced Federal Funding for On-Line Food Stamp Issuance We recommend that enhanced federal funding for the development of on-line issuance of food stamp coupons be budgeted, for a savings of $398,000 ($197,000 to the General Fund and $201,000 in county funds). The Food and Nutrition Service of the U.S. Department of Agriculture offers enhanced federal funding–75 percent rather than the usual rate of 50 percent-for the planning, design, development, and installation of new automated data processing and information retrieval systems. The budget includes a total of $1,595,000 for the development of an on-line Food Stamp issuance system which could qualify for enhanced funding as an automated data processing system. Our analysis indicates that the state will receive enhanced federal funds for the development of an automated on-line issuance system, resulting in decreased state and county costs of $197,000 and $201,000 respectively. The budget, however, has not been adjusted to reflect these savings. There- fore, we recommend that increased federal funds of $398,000 be budgeted, for a savings of $197,000 to the General Fund and $201,000 in county funds. Development of On-Line Food Stamp Issuance Systems We recommend that DSS identify prior to budget hearings (1) the counties where on-line food stamp issuance is expected to become opera- tional, (2) the costs and savings expected from installation of on-line systems in each county, and (3) the scheduled dates for implementation. In its original 1982-83 budget, the DSS included funds for the develop- ment of on-line food stamp issuance systems in Los Angeles County. The department now proposes to develop in 1982-83 an on-line system for counties where Case Data Systems are operating, and to expand the sys- tem in 1983-84 to .othercounties where it would be cost beneficial. In order to evaluate the costs estimated for this program and to insure that expected savings are appropriately budgeted, the Legislature needs information on (1) the current plan for implementing this system, (2) the costs associated with the development and operation of the system, and (3) the savings expected to accrue in the cost of Food Stamp administra- tion. We recommend that the DSS provide this information to the fiscal committees prior to budget hearings. 1154 \/ HEALTH AND WELARE Item 5180 Department of Social Services SOCIAL SERVICES PROGRAMS Item 5180-151 from the General Fund and the Social Welfare Federal Fund Budget p. HW 147 Requested 19~ ……………………………………………………………….. $173,098,000 a Estimated 1982-83 …………………………………………………………… ~ …… 177,977,000 Actual 1981-82 ………………………………………………………………………. 175,132,000 Requested decrease $4,879,000 ( ~2.7 percent) Total recommended reduction Item 5180-151-001……………… 15,893,000 Total recommended reduction Item 5180-181-001 (c) ………… (511,000) Recommendation pending ………. , …………………………………………. $17;170,000 a This amount includes $13,149,000 proposed in Item 5180-181-001 (c) for eost-of-Iiving increases. 1983-84 FUNDING BY ITEM AND SOURCE Item Description 5180-151-001-Social ServiGes Program\/Local As- sistance 5180-181-001-Social Serivces Program\/Local As- sistance: COLA 5180-151-8~ocial Services Program\/Local As- sistance Total Fund General General Federal SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Federal Title IV-E Funds. Reduce by $14~l~OOO. Recom- mend unbudgeted federal funds be used to replace Gen- eral Fund support for. social services program, in order to provide the Legislature with more fiscal flexibility. 2. Other County Social Services (OCSS). Withhold recom- mendation on funds proposed for child welfare services in the OCSS program ($1l,208,000 from the General Fund and $96,143,000 in federal funds), pending review of (a) final regulations implementing the family reunification and permanent placement programs and (b) draft regula- tions implementing the emergency response and family maintenance programs. 3. In-Home Supportive Services (IHSS). Withholdrecom- mendation on $3,007,000 requested from the General Fund and $25,791,000 in federal funds proposed foradministra- tion of the IHSS program, pending receipt of data reflect~ ingactual administrative expenditures for this program for the quarter ending December 31, 1982. Amount $159,949,000 13,149,000 (337,212,000) $173,098,000 Analysis page 1159 1160 1161 Item 5180 HEALTH AND WELARE \/ 1155 4. In-Home Supportive Services (IHSS). Recom~end adoption. of supplemental report language requiring the Department of Social Services (DSS) to report quarterly on IHSS administrative expenditures. 5. Allocation of OCSS Funds to Counties. Recoinmend adoption of Budget Bill language requiring DSS to submit an allocation formula to the fiscal committees which is consistent with the department’s estimates of the costs of the OCSS program .and is based on appropriate caseload measurements. 6. OCSS Cost Control Plan. Recommend adoption of Budget Bill language requiring DSS to develop an OCSS cost control plan. 7. OCSSFunds for Shasta and San Mateo Counties. Reduce Item 5180-151-001 by $1,600,000 and Item 5180-181~ooi (c) by $48,000. Recommend reduction in\u00b7 General Fund sup~ port budgeted for the OCSS program to correct for double- budgeting. 8. OCSS Cost-of-Living Adjustment (COLA). Recommend a General Fund rec:iuction of $252,000 and a federal funds augmentation of $726,000 in the OCSS COLA items (Item 5180-181-001 (c) and Item 5180-181-866) to correct for tech- nical errors in calculating the effects of a 3 percent OCSS COLA. 9. IHSS COLA. Recommend a General Fund reduction of $211,000 from the amount proposed for the IHSS COLA (Item 5180-181-001(c)) to correct for overbudgeting. 10. Issuance of IHSS Payroll Checks. Reduce by $108,000. Recommend General Fund reduction of $108,000 to cor- rect for overbudgeting of reimbursements to the\u00b7 State Controller’s Office for checkwriting services for the IHSS program. 11. IHSS Payrolling Contract. Withhold recommendation on $2,955,000 requested from the General Fund to support a new IHSS payrolling system contract, pending receipt of the May revision of expenditures. 12. IHSS Time-for-Task Standards. Recommend DSSreport to the fiscal committees prior to budget hearings on poten- tial General Fund savings from statewide time-for-task standards .. 13. Licensed Maternity Homes. Recommend enactment of legislation requiring DSS to collect additional financial data regarding residents of maternity homes. GENERAL PROGRAM STATEMENT 1161 1162 1166 1168 1168 1172 1173 U74 1174 1178 The Department of Social Services (DSS) administers various social services programs which provide services,. rather than cash, to eligible clients. The budget has grouped these programs into six categories: (1) . Other County Social Services (OCSS), (2) specialized adult services, (3) specialized family and children’s services, (4) adoptions, (5) demonstra- tion programs, and (6) refugee social services. . . Federal funding for social services is provided pursuant toTitles IV-A, IV-B, IV-C, IV-E;and XX of the Social Security Act and the Federal Refugee Act of 1980. In addition, 10 percent of the funds available under 1156 \/ HEALTH AND WELARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued the federal Low Income Home Energy Assistance (LIHEA) block grant are transferred to Title XX social service programs each year. ANALYSIS AND RECOMMENDATIONS Table 1 shows that the budget proposes total expenditures of $566.2 million for social services programs in 1983-84. Of this amount, $173.1 million, or 31 percent, is requested from the General Fund, and $337.2 million, or 60 percent, is anticipated from the federal government. The budget also anticipates county support for social services totaling $55.9 million. Of the total General Fund request, $13.1 million is for a three percent cost-of-living adjustment for social services programs. The total cost-of- living increase proposed for social services programs is $14.7 million. Except for refugee social services which are administered by the Office of Refugee Services in the Executive Division, social services programs are administered by the Adult and Family Services Division within the DSS. The 1982 Budget Act authorized 420.6 positions in the department for administration of social services. During the current year, the department eliminated 22.5 positions. The budget proposes creating two new positions during 1983-84. Thus~ the budget proposes a total of 400.1 state positions to administer social services programs during 1983-84. Table 1 Department of Social Services Proposed Expenditures for Social Services Programs Including Cost-of-Living Adjustment All Funds 1983-84 (in thousands) Program A. Other County Social Services ……………… .. B. Special Adult Services ………………………….. .. 1. In-Home Supportive Services ………….. .. 2. Maternity Home Care ………………………. .. 3. Access Assistance for the Deaf ………… .. C. Work Incentive (WIN) Program ………… .. D. Adoptions ……………………………………………… .. E. Demonstration Program ………………………. .. 1. Child Abuse Prevention …………………… .. 2. Family Protection Act (AB 35) ………. .. F. Refugee Social Services ………………………… .. G. Totals: Amount ………………………………………………….. . Percent …………………………………………………… . General Federal Fund Funds $18,293 $156,916 134,310 . 148,070 (130,265) (148,070) (2,167) (1,878) 355 19,482 658 (610) (48) $173,098 30.6% 14,494 432 (432) 17,300 $337,212 59.5% Proposed General Fund Budget Changes County Funds $52,598 2,082 (2,082) 1,245 $55,925 9.9% Total $227,807 284,462 (280,417) (2,167) (1,878) 16,094 19,482 1,090 (1,042) (48) 17,300 $566,235 100.0% Table 2 details the proposed changes in General Fund spending for social services programs. The table shows a net decrease in General Fund expenditures of $4,879,000, or 2.7 percent, from estimated current-year outlays. This reflects both increases and reductions. The major increases are due to: (1) the increased costs of children’s services budgeted for the Other County Social Services (OCSS) program that are attributable to the Item 5180 HEALTH AND WELARE \/ 1157 provisions of Ch 978\/82 (SB 14) ($15,816,000), (2) increased In-Home Supportive Services (lHSS) caseload ($7,495,000), a.nd (3) cost-of-living adjustments ($13,149,000). These increases are offset by proposed de- creases due to: (1) anticipated increases in federal Title IV-A, IV-E, and XX funds ($24,144,000), (2) a reduction ill the number of service hours to clients in the IHSS program ($7,495,000), and (3) the elimination offund- ing for Ch 1398\/82, which appropriated $10,000,000 for child abuse preven- tion during 1982-83, of which $8,683,000 was for local assistance. Table 2 Department of Social Services Proposed 1983-84 General Fund Budget Adjustments For Social Services Programs (in thousands) A. 1982-83 Current Year Revised ………………………………………………………… .. B. Budget Adjustments 1. Other County Social Services a. Transfer funding for ch 104\/81 (AB 35) from demonstration projects …………………………………………………………………………………….. .. b. Costs of Ch 978\/82 (SB 14) …………………………………………………… .. c. General Fund reduction due to increased federal funds …….. .. d. Cost-of-living increase ……………………………………………………………. .. Subtotal ……………………………………………………………………………………. . 2. IHSS a. Caseload increase ……………………………………………………………………. . b. Reduction in service hours to clients ……………………………………… . c. General Fund reduction due to increased federal funds ……… . d. Cost-of-living increase …………………………………………………………….. . Subtotal …………………………………………………………………………………… .. 3. Adoptions a. Costs of AB 2695 ……………………………………………………………………… . b. Cost-of-living increase …………………………………………………………….. . Subtotal …………………………………………………………………………………… .. 4. Demonstration Programs a. Eliminate Funding for Ch 1398\/82 (AB 1733) ………………………. .. b. Transfer funding for Ch 104\/82 (AB 35) OCSS program …….. .. c. Ch 104\/81 (AB 35)\u00b7 cost-of-living increase …………………………….. . Subtotal …………………………………………………………………………………… .. 5. Licensed Maternity Home Care Services a. Cost-of-living increase …………………………………………………………….. . 6. Deaf Access a. Cost-of-living increase …………………………………………………………….. . Total Proposed General Fund Adjustments …………………………………………. . c. Proposed Total General Fund for 1983-84 …………………………………….. .. Adjustments 1,600 15,816 -7,948 4,596 $7,495 -7,495 -16,l96 7,812 $51 575 -$9,751 -1,600 48 OTHER-COUNTY SOCIAL SERVICES Totals $177,977 $14,064 -$8,384 $626 -$11,303 $63 $55 -$4,879 $173,098 The Other-County Social Services (OCSS) program funds eight of the nine Title XX services that counties are required by the state to provide. In-Home Supportive Services (IHSS) is the ninth mandated program. Under the OCSS program, counties may also provide one or more of the various services that are optional under state law. Proposed Funding for OCSs. The budget proposes total spending of $227,807,000 for OCSS in 1983-84. This amount consists of $156,916,000 in 1158 \/ HEALTH AND WELARE Item 5180′ SOCIAL SERVICES PROGRAMS-Continued federal funds (Titles IV-A, IV-B, IV-E, and XX), $52,598,000 in county funds, and $18,293,000 in General Fund support. The total includes a cost- of-living adjustment of $4,596,000 proposed separately under Item 5180- 181-001 (c). Impact of Major Legislation-Chapter 978, Statutes of 1982 (58 14) Chapter 978, Statutes of 1982 (SB 14), restructured the OCSS program by creating the family reunification and permanent placement programs\” effective October 1, 1982, and the emergency response and family mainte- nance programs, effective October 1, 1983. These programs replace the emergency response, child protective services, and out-of-home care serv- ices for children programs authorized under prior law. Table 3 summa- rizes these changes in child welfare services. . Table 3 Summary of S8 14 Changes in Child Welfare Services Prior Law Senate BillU Emergency Response Preplacement Preventive Services Protective Services for Children a. Redefined Emergency Response, ,effective October 1, 1983. b. Family Maintenance Services, effective October 1, 1983. Out-of-Home Care Services for Children Family Reunification Services, effective October 1, 1982. Permanent Placement Services, effective October 1, 1982. The purpose of each of the new child welfare services programs created by SB 14 is as follows: 1. The Emergency Response Program will be the initial intake and assessment component of a new preplacement preventive program to help abused and neglected children remain with their families. 2. The Family Maintenance Program will be the second component of the new preplacement preventive program, and will provide ongoing services to children and their families who have been identified through the emergency response program as being abused, neglected, or in danger of being abused or neglected. These services will be limited to six months with the possibility of two three-month extensions. The primary goal of the family maintenance program is to allow children to remain with, their families under safe conditions, thereby eliminating unnecessary place- ment in foster care. 3. The Family Reunification Program provides services to children in foster care who have been temporarily removed from their families be- cause of abuse or neglect. The program also provides services to the families of such children. The primary goal of the program is to safely reunite such children with their families. Services under the family reunification program are limited to 12 months, with the possibility, ofa six-month extension. 4. The Permanent Placement Program provides services to facilitate the permanent placement of children who cannot return safely to their fami- lies. The primary goal of the program is to ensure that these children are placed in the most family-like and stable setting available, with adoption being the placement of first choice, followed by legal guardianship and long-term foster care. Item 5180 HEALTH AND WELARE \/ 1159 In addition to these changes in child welfare services programs, SB 14 made several procedural changes affecting the juvenile courts. Specifi- cally, SB 14 required that the status of each child in foster care be reviewed at least once every six months, and that the court conduct a permanency . planning hearing within one year of the child’s initial placement. Senate Bill 14 also provides that counties may establish an administrative review process to take the place of six-month court reviews for children who have had a permanency planning hearing. Unbudgeted Fedel’al\u00b7 Funds We recommend that unbudgeted Title IV-E funds be used in lieu of General Fund support for the social services program, in order to increase the Legislatures fiscal flexibility, for a General Fund savings of $14,185,~ 000. Background. . The Adoption Assistance and Child Welfare Act of 1980 (P.L. 96-272) provided that qualifying states could receive federal Title IV-E funds for case management services provided to federally eligible foster care children. In order to qualify for these federal funds, states are required to have an approved Title IV-E plan. With the enactment of Ch 977\/82 (AB 2695) and Ch 978\/82 (SB 14), California came into compliance with the requirements for an acceptable Title IV-E plan. The U.S. Depart- ment of Health and Human Services (DHHS) approved California’s Title IV-E plan effective October 1, 1982. Title IV-E Funds Not Budgeted for 1982,-83. The OCSS budget in- cludes $13,694,000 in federal Title IV-E funds for the case management of federally eligible foster care children during 1983-84. This amount repre- seuts the federal share (50 percent) of the costs of providing case manage- ment services to foster children under the family reunification and permanent placement programs. The budget proposes to use these fed- eral funds during 1983-84 to offset a portion of the General Fund costs of the OCSS program. Our analysis indicates that California is eligible to receive additional Title IV-E funds for 1982-83 because its Title IV-E plan was effective October!, 1982. The department estimates that the family reunification and permanent placement programs, which also went into effect on Octo- ber 1, 1982, will cost $59,666,000 during 1982-83, of which $48,423,000 will be for case management services. Of this amount, the deyartment esti- mates that approximately. 59 percent,\u00b7 or $28,370,000, of al spending for case management services, will be for federally eligible children. Under the federal sharing rate of 50 percent, California is eligible to receive additional Title IV-E funds during 1982-83 totaling $14,185,000. Although these funds will be available for use during 1982-83 or 1983-84, the admin- istration’s budget does not include these funds for either fiscal year. If these funds are used to replace General Fund support for social services programs in 1983-84, the Legislature will have an additional $14,185,000 in General Fund resources to draw on, and thus more flexibility in funding its priorities in this or other program areas. We therefore recommend that the $14,185,000 in unbudgeted Title IV-E funds be used in 1983-84 to offset the General Fund costs of social services programs. 1160 \/ HEALTH AND WELARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued Final Regulations Implementing S8 14 Child Welfare Services Programs Not Available We withhold recommendation on $107,351~OOO proposed for child wel- fare services in the OCSS Program ($11~208,OOO from the General Fund and $96,14~100 in federal funds)~ pending review of (1) the final regula- tions implementing the family reunification and permanent planning pro- grams and (2) the draft regulations implementing the family maintenance and emergency response programs. Background. Under the provisions of SB 14, the family reunification and permanent placement programs went into effect on October 1, 1982, and the family maintenance and emergency response programs will go into effect on October 1, 1983. The department’s regulations implement- ing the family reunification and permanent placement programs went into effect on an emergency basis on October 1, 1982. The department expects to submit final regulations to the Office of Administrative Law (OAL) for its review by January 28,1983. The OAL will have 30 days from the date the regulations are submitted in which to accept or reject the regulations. Service Levels Required by the Regulations may Exceed those Estab- lished in Law. At the public hearing on the regulations implementing the family reunification and permanent planning programs, several coun- ties presented testimony which identified specific instances in which the requirements of the regulations exceed the requirements of SB 14. Specifically, counties noted that the regulations: Require monthly face-to-face contact between the social worker and the parents, foster parents, and child for all family reunification cases. This is not a requirement of SB 14. Set specific time limits on the development and documentation of case plans. This also is not a requirement of SB 14. Establish a six-month administrative review process which is far more costly than the one created by SB 14. In fact, every county we have contacted has decided not to establish an administrative review proc- ess, but rather to have six-month reviews of children in foster care conducted by the court because they estimate that the review process created by the regulations would be a more costly alternative than a court review. It should be noted that any regulations issued by the Department of Social Services which exceed the requirements of SB 14 could be considered an executive mandate and subject to reim- bursements under Article XIIIB of the’Constitution. Regulations May Be Revised. It is our understanding that the depart- ment is considering a revision of the family reunification and permanency planning regulations, in response to the concerns raised at the public hearing. We have not had the opportunity to review the version of the regulations which the department will submit to the OAL. Furthermore, the regulations implementing the emergency response and family main- tenance programs have yet to be published even in draft form. SB 14 Estimates are Based on the Departments Regulations. The budget proposes total expenditures of $139,578,000 for child welfare serv- ices in 1983-84. This funding level is based on the department’s estimate of SB 14 costs, which is, in turn, based on the department’s regulations. We estimate that, of the total OCSS spending for child welfare services, $11,- Item 5180 HEALTH AND WELARE \/ 1161 208,000 will be from the General Fund, $96,143,000 will be from federal funds, and $32,227,000 will be from county funds. Given (1) the possibility that the regulations implementing the family reunification and permanent placement programs may be changed in response to public testimony, and that they are subject ot OAL approval in any event, and (2) that the regulations implementing the family main- tenance and emergency response programs will not be made public until April 1983, we have no basis on whichto evaluate the department’s esti- mates of the costs of child welfare services programs established by SB 14. We therefore withhold recommendation on funds budgeted for the OCSS program ($11,208,000 from the General Fund and $96,142,700 in the fed- eral funds), pending our\u00b7review of (1) the final regulations for the family reunification and permanent placement programs and (2) the draft regu- lations for the emergency response and family maintenance programs. IHSS Administrative Savings We withhold recommendation on $~798,000 ($3,007;000 from the Gen- eral Fund and $25,791~000 in federal funds) budgeted for IHSS administra- tion~ pending receipt of data needed to estimate the savings attributable to the change from semi-annual to annwll reassessments of IHSS recipi- ents. Senate Bill 14 eliminated semi-annual reassessments of IHSS recipients’ eligiblity and need for services, and instead required annual reassess- ments. This change will result in a reduction in IHSS administrative costs to the extent that it results in fewer reassessments of IHSS recipients by county welfare departments. Senate Bill 14 also required the Legislative Analyst to (1) identify the savings attributable to this change for \u00b7198~ and (2) estimate the savings in 1983-84. The Supplemental Report of the 1982 Budget Act requires the depart- ment to provide the Legislature with quarterly reports on IHSS adniinis- trative expenditures. The department’s first report for the quarter ending September 30,1982 was submitted on December 13, 1982. Because SB 14 did not take effect until September 13, 1982, however, the full effect of the change in the frequency of IHSS reassessments is not reflected in the expenditures for this period. We believe that data reflecting IHSS adminis- trative expenditures during the quarter ending December 31, 1982, will provide the data necessary for making the required estimate of IHSS administrative savings. The budget proposes a total of $37,443,000 for the administration of the IHSS program during 1983-84. This amount consists of $3,007,000 from the General Fund, $25,791,000 from federal funds, and $8,645,000 from county funds. Until we have reviewed actual expenditure data for IHSS adminis- tration during the quarter ending December 31, 1982, we have no basis for evaluating the department’s estimate of 1983-84 IHSS administrative costs. Therefore we withhold recommendation on $28,798,000 ($3;007,000 from the General Fund and $25,791,000 in federal funds) requested for IHSS administrative costs. Report on IHSS Administrative Costs . We recommend adoption of supplemental report language requiring the department to make quarterly reports on the costs of IHSS administra- tion. The Supplemental Report of the 1982 Budget Act requires DSS to pro- vide the Legislature with quarterly reports on IHSS administrative ex- 1162 \/ HEALTH AND WELARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued penditures. In arder to. facilitate the Legislature’s continued review af the fiscal effects resulting fram the change in the frequency af IHSS\u00b7 reassess- ments, we recammend the adaptian af the fallawing supplemental repart language: ‘The department shall submit, within 90 days of the last day of each quarter af 1983-84, a repart on the amaunt spent by each caunty fram state, federal, and county funds, far the administration af the In-Home Suppartive Services program.\” OCSS Allocation Formula Will Result in \”Underfunding\” of Some Counties We recommend adoption of budget bill language requiring the depart- ment to submit to the fiscal committees and the Joint Legislative Budget Committee an allocation formula for the OCSS program which is consist- ent with the departments estimates of the costs and savings of SB 14. The budget prapases tatal spending fram all funds for the OCSS pra- gram af $227,807,000 in 1983-84. Of this amaunt, $226,681,000. is far the department’s estimate af the casts af the OCSS pragram resulting fram the pravisians afSB 14. Assuming the department’s estimate is correct, the amaunt prapased in the budget will be sufficient to. pravide each caunty with an amaunt adequate to. pay far the costs af the OCSS pragram, including the iIicreased casts attributable to. the provisians af SB 14. Our analysis indicates, hawever, thatthe current farmula used by the department to. allacate state and federal funds to the counties will result in significant under-funding of same caunties. HistoricalBasis for the Allocation Formula. . The department’s farmula far allacating OCSS funds is graunded in the histaryaf the OCSS pragram. During the early 1970~s, funding far the pragram was mare than suffi- cient. In fact, each year many caunties spent less than their tatalallaca- tions. Unexpended furidswere reallocated amang the remaining counties. During the mid-ta-Iate 1970’s, hawever, the amaunt af funding available far the OCSS pragram (primarily federal Title XX funds, at that time) did nat keep pace with escalating costs, with the result that thase caunties which traditianally had returned a partion of their OCSS allocatians to. the state began to. use all af the fundsallacated to. them. In response, the department develaped anallacatian .farmula incarparating measure- ments of each caunty’s need far funds, such as caunty populatian, welfare caselaad, and children in faster care. The exclusive use af these caseload indicators, hawever, wauld have resulted in a massive shifting af funds awayfram thase caunties which had ahighleyel af expenditure far OCSS to thase.caunties which. had traditionally returned much of their OCSS allacation. The department therefare decided that no. caunty wauld, re- ceive . mOre than 102 percent, ar less than 98 percent, af its priar-year allacatian, adjusted far any cast-af-living increas~ granted by the Legisla- ture. Allocation Formula Inconsistent with SB 14 Cost Estimates. The far- mula used by the department to. distribute OCSS funds may have been apprapriate priar to. enactment af SB 14. The passage of SB 14, hawever, represents a major change in the OCSS pragram, making the farmula absalete. The department, however, has nat acted to. change the allacatian farmula to. reflect these changes in the pragram. . Our analysis indicates that the department’s allacatian farmula is incan- sistent with the SB 14 cast estimates in the fallawing ways: Item 5180 HEALTH AND WELARE \/ 1163 The formula distributes the total funding available for: the OCSS program to the specific service programs in a manner which is incon- sistent with the costs of each service program~ as estimated by the department. Prior to SB 14, 63 percent of OCSS funds were spent for the children’s services programs. According to the department’s esti- mate, the changes enacted by SB 14 will require that 76 percent of OCSS funds be spent for child welfare services. The allocation f()rmula used by the department in 1982-83-the first year in which SB 14 was in effect-however, continues to allocate only 63 percent of the avail- able funding based on child welfare services caseloads. The formula aJJocates funds using inappropriate measures of case- load The portion of the funds intended for child welfare services is allocated to counties based on each county’s share of statewide AFDC-FC and U children, AFDC-Foster Care children; and children aged 0-17, with each of these factors weighted equally. More appro~ priate caseload indicators would be each county’s share of statewide AFDC-Foster Care children and child protective service referrals. This is implicitly recognized by the department, since its estimates of the costs of the child welfare service programs created by SB 14 are based entirely on these caseloads. . The formula aJJocates IHSS administration funds based on IHSS and SSIISSP caseloads rather than on IHSS caseloads alone. Further- more, it allocates $9.6 million more for IHSS administi’ation than would be consistent with the department’s estimates of the cost of IHSS administration. Table 4 compares our estimate of each county’s costs for the OCSS program with our estimate of how much state and federal OCSS money each county will receive as a result of the current allocation formula. Our estimate of the costs of the OCSS program in each county is based on the department’s method of estimating the statewide costs of the OCSS pro- gram. The department based its estimate on (1) the statewide caseloads in the child welfare services programs, (2) the statewide costs of the IHSS administration component of the OCSS program, including the estimate of savings from the change in the frequency of IHSS reassessments, and (3) the statewide costs of the OCSS programs not affected by SB 14 (that is, adult protective services, out-of-home care services for adults, informa- tion and referral, and the optional programs). .. In estimating these costs on a county-by-county basis, we used the same caseload data used by the department in arriving at its estimate of state- wide costs. In estimating the disti’ibution of state and federal funds that will result from the current allocation formula, we merely applied the department’s allocation formula to the funds proposed in the budget. The county share of the costs of the OCSS program are not shown. For both our estimate of costs and our estimate of how the funds will he distributed, we assumed that the county shares would be at the maximum levels established in SB 14. Table 4 shows that 26 counties will receive an amount of state and federal funds that will not be sufficient to pay for all of the costs of the counties’ OCSS programs. The combined shortfall for all of these counties will be $14.6 million. Conversel):\” 32 counties will receive $14.6 million more under the department’s allocation formula than what the depart- ment’s own estimates would imply they need. We emphasize that these conclusions are based on the department’s estimate of the costs of the OCSS programs. This estimate may change as the implementation ofSB 14 proceeds and actual data reflecting the law’s costs become available. 1164 \/ HEALTH AND WELARE SOCIAL SERVICES PROGRAMS-Continued Table 4 Item 5180 Comparison of OCSS Estimated Costs With Estimated Allocation of Proposed OCSS Funding 1983-84 (in thousands) COUNTIES Alameda ……………………………………………………… . Alpine …………………………………………………………. . Amador ……………………………………………………… . Butte …………………………………………………………… . Calaveras ……………………………………………………. . Colusa …………………………………………………………. . Contra Costa ………………………………………………. . Del Norte ………………………………………………….. . El Dorado ………………………………………………….. . Fresno ……………………………………………………….. . Glenn …………………………………………………………. . Humboldt ………………………………………………….. . .Imperial . …………………………………………………….. Inyo …………………………………………………………….. . Kern …………………………………………………………… . Kings …………………………………………………………… . Lake …………………………………………………………… . Lassen …………………………………………………………. . Los Angeles ………………………………………………… . Madera ……………………………………………………….. . Marin …………………………………………………………. . Mariposa ……………………………………………………. . Mendocino ………………………………………………… . Merced ……………………………………………………….. . Modoc …………………………………………………………. . Mono …………………………………………………………… . Monterey ……………………………………………………. . Napa …………………………………………………………… . Nevada ……………………………………………………….. . Orange ……………………………………………………….. . Placer …………………………………………………………. . Plumas ………………………………………………………. .. Riverside ……………. ~ …………………………………….. . Sacramento ………………………………………………… . San Benito ………………………………………………….. . San Bernardino …………………………………………. . San Diego …………………………………………………. .. San Francisco ……………………………………………. .. San J oaquin …………………………. ~ …………….. ; …… .. San Luis\u00b7Obispo ………………………………………… .. San Mateo …………………… ; ……………………………. . Santa Barbara ……………………………………………. .. Santa Clara ………………………………………………… .. Santa Cruz ………………………………………………… . Shasta …………………………………………………………. . ADocation of OCSS Costs’ State and Federal Based on Funds for OCS5- DSS estimate DSS ADocation of SB 14 Formula b $7,924.4 $8,429.1 -8.1 71.9 65.6 89.8 1,608.9 1,220.1 85.6 113.8 47.4 85.1 4,690.2 6,291.0 175.4 142.8 610.2 429.3 5,218.7 4,511.1 165.1 160.1 655.2 780.0 490.9 601.3 82.3 106.7 2,260.6 2,518.4 926.4 473.4 305.2 248.1 89.2 122.1 70,694.5 66,449.7 535:8 494.0 604.5 1,023.9 37.3 69.9 572.6 577.7 1,713.6 1,108.7 72.4 56.7 40.0 45.6 1,812.8 1,537.4 435.5 491.5 346.3 293.7 7,565.3 8,251.6 949.6 729.0 115.7 114.4 5,805.0 4,827.8 4,805.7 7,035.9 78.7 112.1 6,283.7 5,480.6 12,933.9 10,287.6 5,634.5 6,543.3 1,933.7 3,831.2 1,247.2 621.7 3,662.5 3,450.2 1,315.9 1,471.2 4,758.1 8,454.7 1,076.2 1,025.6 762.9 839.1 Difference Amount Percent $504.7 6 80.0 . N\/A C 24.2 37 -388.8-24 28.2 33 37.7 80 1,600.8 34 -32.6 -19 -180.9 ~30 -707.6 -14 -5.0 -3 124.8 19 110.4 22 24.4 30 257.8 11 -453.0 -49 -57.1 -19 32.9 37 -4,244.8 -6 -41.8 -8 419.4 69 32.6 87 5.1 1 -604.9 -35 -15.7 -22 5.6 14 -275.4 -15 56.0 13 -52.6 -15 686.3 9 -220.6 -23 -1.3 1 -977.2 -17 2,230.2 46 33.4 42 -803.1 -13 – 2,646.3-20 908.8 16 1,897.5 98 -625.5 -50 -212.3 -6 155.3 12 3,696.6 78 -50.6 -5 76.2 10 Item 5180. Sierra …………………………………………………………. . Siskiyou …………………………………………………….. .. Solano ………………………………………………………… .. Sonoma ………………………………………………………. .. Stanislaus …………………………………………………… .. Sutter …………………………………………………………. . Tehama ……………………………………………………… . Trinity ………………………………………………………. .. Tuolumne …………………………………………………. .. Tulare ………………………………………………………… .. Ventura ……………………………………………………… . yolo ……………………………………………………………. .. yuba ………………………………………………………….. .. Totals …………………………………………………. .. 18.3 196.2 1,199.3 2,592.9 2,373.2 289.3 218.0 86.0 225.9 3,332.2 1,264.3 526.7 573.6 $174,083.1 HEALTH AND WELARE \/ 116$ 39.8 220.6 1,538.8 1,812.2 2,306.2 361.2 269.3 69.1 186.5 2,352.6 2,147.8 681.6 478.4 $174,083.1 21.5 24.4 339.5 -780.7 -67.0 71.9 51.3 -16.9 -39.4 979.6 883.5 154.9 -95.2 117 12 28 -30 -3 25 24 -20 -17 -29 70 29 -17 a The estimate of total ocss cost is from DSS. The distribution of the costs on a county-by-county basis was prepared by the Legislative Analyst. b Legislative Analyst’s estimate of the county-by-county allocations of OCSS funds that would result from applying DSS’ allocation formula. e Caseloads for the OCSS program in Alpine County are so small that the required county share is actually more than sufficient to pay for the costs of the OCSS program. We have the following three concerns regarding what appears to be underfunding for 26 counties; Underfunding may cause counties to reduce service levels in the OCSS program. Senate Bill 14 provides that the service requirements estab- lished in the bill may be reduced under certain circumstances. Specifi- cally, Section 72 of Ch 978\/82 provides that: The department must reduce the bill’s mandates upon the counties whenever reductions in federal funding result in a reduction in the funds available for the OCSS program . Thecounties ‘fill not be required to meet any of the mandates creat- ed by the bill during any fiscal year in which funding for the OCSS program falls below the funding available during 1981-82. 1n addition,SB 14 limited the required county match for OCSS funds to a specific dollarrunountfor each county. These amounts total $51,065,596. The limit established by SB 14; for ~ach county is approximately equal to that county’s required 25 percent match during 1981-82 (Prior to S1314, counties were required to pay for 25 percent of the costs6f the OCSS program.) The bill provides that the limit on each county’s share of OCSS program costs shall be increased annually by any percentage cost-of-living increase provided to the OCSS program in the budget act. This limit on county spending raises the question of whether a cpunty would be exempt from the service requirements ofSB 14 in the event that it received OCSS funds which, if combined with the required county funding, would not be sufficient topayfor the costs of providing services at the reqUired levels. III that regard, Legislative Counsel has advised us that:. \”Since counties are only to expend out of county funds the share allotted pursuant to Sections lO200 and lO201, it is reasonable to assume that the Legislature meant for a courtty to have the authority to reduce child welfare service levels where insufficient funding has been provided to ensure that the county will expend no\u00b7 more than its allotted share pf costs for OCSS, even under circumstances where Section 72 of Chapter 978 is inapplicable.\” 1166 \/ HEALTH AND WELARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued Thus, SB 14 gives counties the authority to reduce child welfare services below the levels required in the bill if funding is not sufficient to pay for the provision of services at the required level. Federal Sanctions Possible. Our analysis indicates that the failure of underfunded counties to provide child welfare services at the levels estab- lished by SB 14 could result in federal sanctions. Federal law requires that: (1) the parents of a foster child be allowed to participate in the six-month review of the child’s’status and (2) one of the parties involved in the review not be directly responsible for the child’s case management. Fed- eral financial participation in the foster care program, expected to total $72.6 million during 1983-84, is conditioned upon the state meeting these as well as other provisions of federal law. Senate Bill 14 incorporated these requirements into state law. Thus, to the extent that any of the 26 under- funded counties choose to achieve savings in the OCSS program by ignor- ing the requirements for the six-month reviews of children in foster care, or any other provision of SB 14 which is also a requirement of federal law, the state would be out of compliance with federal law and therefore subject to federal sanctions. Allocation Formula Inequitable. In addition to the possibility of fed- eral sanctions, the underfunding of 26 counties which we estimate could result from the department’s allocation formula also raises a question of equity. Why should the citizens of 26 California counties receive a lower level of the services provided under the OCSS program than do the citi- zens of the remaining 32 counties? In enacting SB 14, the Legislature clearly intended for the provisions of the law to apply equally to all coun- ties. Yet, the department’s allocation formula could result in 26 counties reducing OCSS service levels by an unknown amount below the service levels established by SB 14, despite the fact that, ona statewide basis, adequate funds would be available for all counties to provide the required service levels. Conclusion. We conclude that the use of the department’s allocation formula will result in the underfunding of some counties, and that this underfunding could, in turn, result in (1) federal sanctions against the state and (2) reductions in the level of services available to residents of the underfunded counties. To avoid these problems, we recommend that the Legislature adopt the following Budget Bill language requiring the department to submit an allocation plan to the fiscal committees prior to the allocation of OCSS funds for 19~4 which is consistent with the department’s estimate of the costs of SB 14: \”Provided that the Department of Social. Services shall submit its plan for allocating OCSS funds to the counties to the Chairpersons of the fiscal committees of each house and the Chairperson of the Joint Legisla- tive Budget Committee no later than 30 days before such allocations are made. The allocation plan shall be consistent with the department’s estimates of the costs of the OCSS program under the provisions of Ch. 978\/82, and shall be based upon the same caseload measurements used in such estimate.\” The Department Has Failed to Develop an Adequate Cost Control Plan We recommend adoption of Budget Bill language requiring the depart- ment to develop an OCSS cost control plan which (1) assesses the effec- tiveness of the OCSS program in each county and in the state as a whole~ Item 5180 HEALTH AND WELARE \/ 1167 (2) compares the effectiveness of similar counties in providing required services~ and (3)deve\/ops case\/oad measurements and work\/oadstandards for each of the OCSS services. Senate Bill 14 requires the department to establish \”a plan whereby costs of county administered social services programs will be effectively controlled within the amount annually appropriated for these services.\” In response to our request for a copy of its OCSS cost control plan, the department forwarded a copy of its OCSS allocation plan. In a memoran- dum to our office dated January 4, 1982, the department stated that, \”It is the department’s position that an allocation plan in itself is a cost control plan whereby. costs of county administered social services are effectively controlled within the amount annually appropriated for these services. The department will reimburse the counties only up to the amount appro- priated by the budget act.\” We recognize that an allocation plan limits the amount of state and federal funds thateach county may spend, and is therefore a spending plan. A spending plan is not the same as a cost control plan,however, for the following reasons: An allocation plan only provides information on how much money each county will spend. It provides no information regarding what each county, ‘or the state as a whole, will accomplish with the money spent. The Legislature appropriates money for the OCSS program to enable the counties to provide a certain level of services to the pro- gram’s clients, not merely so that the counties can spend the money it appropriates. ~ allocation plan pro,?desno information regarding thecost-effec- bveness of each county s program. For example, the plan for 1982-83 shows that Sacramento and Orange County were allocated approxi- mately equal amounts of money. ($6.5 million and $6.2 million, respec- tively), but it provides no basis for comparing the effectiveness of the programs in the two counties. Finally, an allocation plan cannot serve as the basis for determining the appropriate costs of providing these services. Specifically, the allocation plan provides no basis for determining workload standards. Nor does the plan identify appropriate caseload measurements for the various OCSS services. Only when such workload standards and case- load measurements have been developed will it be possible to deter- mine the appropriate level of funding for the OCSS program for each county as well as for the state as a whole. For these reasons, we do not believe that the department’s allocation plan can serve as an adequate cost control plan. In fact, SB 14 requires the department to develop both a cost control plan and an allocation plan, clearly demonstrating the Legislature’s understanding that the two plans are not one and the same. We therefore recommend adoption of the following Budget Bill lan- guage requiring the department to develop an OCSS. cost control plan which (1) assesses the effectiveness of the OCSS program in each. county and in the state as a whole,\u00b7 (2) compares the effectiveness of similar counties in providing required services, and (3) develops caseload meas- urements and workload standards for each of the OCSS services: \”Provided that the Department of Social Services shall submit to the chairpersons of the Fiscal Committees and the chairperson of the Joint Legislative Budget Committee by December 1, 1983 a cost control plim 1168 \/ HEALTH AND WELARE Item 51BO SOCIAL SERVICES PROGRAM~Continued for the OCSS program which shall, at a minimum, identify the depart- went’s plans to (1) develop a method of assessing the effectiveness of the OCSS program in each county and in the state, as. a whole, (2) develop a method of comparing the effectiveness . of similar counties in providing services under the OCSS program, and (3) develop caseload measurements and workload standards for each of the OCSS services.\” Double-Budgeting of OCSS Funds We recommend a General Fund reduction of $1,64~000 ($1,600,000 frorn the OCSS item (Item 5180-151-(01) and $4~000 from the COLA. item (Item 5180-181-001 (c) )to correct for double-budgeting of the costs of SB 14 in Shasta and San Mateo Counties. The Family Protection Act (FPA) was enacted by the Legislature in 197B to test many of the programs and concepts which ultimately were incorporated into SB 14. The demonstration project is conducted in Shasta and San Mateo Counties. With the enactment ofSB 14, the FPA demon- stration has, in effect, been made into a statewide program. The budget proposes to eliminate the FP A demonstration program and to transfer the funding for the program from the demonstration programs item (Item 51BO-151-001 (e)) to the OCSS item (Item 51BO-151-001 (a)). Our analysis indicates that this results in double-budgeting because OCSS funding has already been increased by$15,B16,000 for the statewide costs (including the cost attributable to Shasta and San Mateo Counties) of the provisions of SB 14. We therefore recommend a GeneralFund reduction ()f $l,64B,ooo ($1,600,000 from the OCSS item and $4B,000 from the COLA item) to correct for the double-budgeting of the costs of SB 14 in Shasta and San Mateo Counties. General Fund Cost of Proposed 3 Percent OCSS COLA is Overbudgeted We recommend a General Fund reduction of $2$2,000 and a Federal Fund increase of $726,000 to the OCSS cost-oE-living increase item (Items 5180-181-001{c) and 5180-181-866) to con;ect for technical errors in cal- culating the cost of providing a 3 percent COLA to the OCSS program. The budget proposes a 3 percent COLA for the OCSS program and includes a General Fund appropriation of $4,596,000 to fund it. The budget proposes no increase in federal funds as a result of the COLA. Our analysis indicates that in estimating the cost of a 3 percent COLA for the OCSS program, the administnition made two errors which result in overbudgeting. Specifically, the administration: Neglected to include in the base upon which the 3 percent was cal- culated the increased costs to the OCSS program of SB 14, thereby understating General Fund costs. Neglected to account for the fact that the 3 percent OCSS COLA will result in a 3 percent increase in federal Title IV-A and IV-E funds, thereby overstating General Fund costs . . The net effect of these two errors is that the budget (1) overestimates the C()st to the General Fund of providing a 3 percent COLA by $252,000 and (2) underestimates federal funding by $726,000. Theref()re, in order to accurately reflect the costs of a 3 percent OCSS COLA, we recommend a General Fund reduction of $252,000 and a federal fund augmentation of $726,000 to the OCSS cost-of-living increases item (Items 5180-1B1-001 (c) and 51BO-1B1-B66). Item 5180 HEALTH AND WELARE \/ 1169 IN-HOME SUPPORTIVE SERVICES The In-Home Supportive Services (IHSS) program provides specified services to eligible aged, blind, and disabled persons for the purpose of enabling them to remain in their own homes when they might otherwise be institutiot;lalized in boarding or nursing facilities. Two broad categories of services are available within the IHSS program: (1) domestic and relat- ed services and (2) nonmedical personal services. Domestic and related services include routine cleaning, meal preparation, shopping, and other household chore services. Nonmedical personal services include feeding, bathing, bowel and bladder care, and other services. Currently, county -welfare departmet;lts administer the IHSS program. Each county may choose to deliver services in one or a combination of three ways: (1) directly by county employees, (2) by private agencies under contract with the counties, or (3) by individual providers hired directly by the recipients. The delivery method used most extensively is by individual providers. The department estimates that individual provid- ers will deliver 75 percent of IHSS case-months in 1982-83. Current-Year Expenditure Shortfall The budget estimates that expenditures under the IHSS program in the current year will be $7,592,000 less than the amount reflected in the 1982 Budget Act. Of this amount, $6,983,000 will appear as a shortfall in General Fund expenditures. The remaining $609,000 represents savings to the counties from decreased matching requirements~ The shortfall is due pri- marily to a lower-than-anticipated number of service hours. $300 250 D 200 o L L 150 A R Chart 1 Department of Social Services Expenditures for In-Home Supportive Services General Fund, Federal Funds, and Total Funds 1976-77 to 1983-84 (in millions) 275.8 a 271.7a 280.4 a 260.1 .\”\”.\”\” … ——___ —— Total Funds ……….. .177.6 \” 136.4 \”\”, 115.6 _,’ \” \” \”,. …… \”\”.\”. .. 215.0\” \” \” \” \” General Fund 145.9 156.6 148.1 138.6 —\”,.— 9 130.2 S 100 86.7 82.7 __ – 128.4 131. –_—– 103.5 95.6 Federal Funds 50 O~—-_r——r_—-~——~—-_,~—-.-~—-~ 76-77 77-78 78-79 79-80 8D-81 81-82 b 82-83 b 8 4b (+18.0%) (+30.2%) (+21.1%) (+21.0%) (+6.0%) (est.) (prop.) . (-1.5%) (+3.20\/0 ) ~ County match of $1.5 million for 1981-82. $1.2 million tor 1982-83 and $2.1 million for 1983-84 not displayed. Source: Governor’s Budget for 1983-84. 1170 \/ HEALTH AND WELARE Item 5180 SOCIAL SERViCES PROGRAMS-Continued Budget Year Proposal The budget proposes a General Fund appropriation of $130,265,000 for IHSS in 1983-84. This is a decrease of $8.4 million, or 6 percent, below estimated 1982-83 General Fund expenditures. The budget proposes a total expenditure for IHSS of $280,417,000 in 1983-84. , Chart 1 shows the state and federal cost-sharing relationships for IHSS, for the period 1976-77 to1983-84 (proposed). The county share of costs since 198Q…;.81 is not displayed in the chart, although county funds are included in the estimates of total expenditures. The department estimates that an average of approximately 97,538 in- dividuals will\u00b7 receive IHSS services each month in 1983-84. This is an increase of 2,198 over estimated monthly caseloads in the current year. The cost of funding projected budget year caseloads at current service levels would be $287,912,000, including the cost of a COLA. Because the budget is reques~ng $280,~17 ,000, the a~inistration will have t? reduce the level of serVIces proVIded to IHSS clients by $7,495,000. ThIS means reducing services to the average client by approximately two hours each month. Because counties utilize different modes of delivering services to clients, and because the average hourly cost of these modes varies consid- erably, the size of the service reductions in each county will vary. As Table 5 indicates, the budget assumes that counties will commit $2.1 million to the IHSS program in 1983-84. The extent to which counties will, in fact, share in the cost of providing the level of service proposed in the budget for 1983-84 depends on whether actual program costs exceed the amount of state and federal funds appropriated for IHSS in the budget year. Table 5 In-Home Supportive Services Proposed Funding by Source 1982-83 and 1983-84 (in thousands) Estimated Proposed Total Program a 1982-83 1983-84 General Fund ………………………………………. .. $138,649 $130,265 Federal funds ….. , …. ;, ………………………………. . 131,874 148,070 County funds ………………………………………… .. 1,214 2,082 Totals …………………………. ; …………………. .. $271,737 $280,417 a Includes proposed 3.0 percent COLA. Impac::t of Chapter 69, Statutes of 1981 Change Amount Percent -$8,384 -6.0% 16,196 12.3 868 71.5 $8,680 3.2% Chapter 69, Statutes of 1981 (SB 633) limited General Fund expendi- tures for the IHSS program to the amount appropriated in the Budget Act. In addition, it made the following changes to the program: ComFort Was Eliminated as a Criterion of Need. During 1981-82, counties were required to eliminate service hours granted to clients for their comfort, rather than their health and safety. In implement- ing this provision, the department specified that counties could pro- vide a maximum of six hours per client per month for domestic chore services. Subsequent legislation (Ch 309\/82) , however, provides that Item 5180 HEALTH AND WELARE \/ 1171 cuts in services that are being provided on the basis of client comfort may be made only after an assessment of the individual recipient’s . need. Counties Must Share in the Cost of the Program. . Counties must now pay 10 percent of the General Fund-supported costs in excess of General Fund expenditures for the, IHSSprogram in 1980-81. In 1981- 82, 19 counties-and ten of the 14 largest-were required to provide the 10 percent match. Annual Program Plans Must be Submitted to DSS. Counties must submit plans to the department indicating how they intend to remain within their allocation of state and federal funds for the year. These plans are utilized by DSS in determining the county IHSS allocation for the year. Plans generally are not submitted in time, however, to be\u00b7 considered in the budget process. Counties Are Authorized to Make Necessary Program cuts. Any county needing to cut program expenses in order to stay within its allocation must make the cuts in the following predetermined order: (1) reduce the frequency of nonessential services, (2) eliminate nonessential services,(3)’ terminate Or deny eligibility to individuals requiring only domestic serv~ces! (4) te.rmi~ate.or ~eny eligibility to persons who would not reqmremshtuhonalization m the absence of services, and (5) reduce, Dn a per capita basis, the costs of services authorized~ In 1981-82, only two counties had to resort to the priority cuts .. In hoth cases, they did not go further than reducing the fre- quency ofnonesse~tialser.vices; and th.ese re~uctions ~ere in ~ffect for only a short perIod of time. At the time thls AnalYSlswas wrItten, no county anticipated resorting to priority cuts in the current year in order to stay within its allocation. ‘ Chapter 69 appears\u00b7 to be effective in controlling the costs of the IHSS program. Before implementation of Ch 69\/81, the IHSS program fre- quently overspent the amount appropriated by the Legislature. This no longer occurs. In 1981-82, IHSS received a supplemental appropriation of $3 million under Chapter 3X. At the end of the year, however, the depart- ment returned $6.3 million in funds appropriated for IHSS tD the General Fund, or more than the amount made available by Chapter 3X. In the current year, the department estimates that counties again will not spend their entire allocations; In our conversations with county welfar.e officials and social workers in the field, we found that counties have adopted diverse strategies for con- trolling costs within the IHSS program.\u00b7 These strategies include: Enhancing the awareness of social workers of the costs of providing IHSS services; . Educating assessment workers to the choice existing between auster- ity in initial need assessments or the painful task of later on reducing services; Substituting technically trained assessment workers for social work- ers; and Tighteningtime-for-task standards, which are the basis\u00b7for awarding IHSS service hours. 1172\u00b7 \/ HEALTH AND WELARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued Eligibility and Need Determination Eligibility for the IHSS program is tied Closely to eligibility for the SSI \/ SSP program. An individual\u00b7 can qualify for IHSS services if he \/ she: 1. Is currently a recipient of SSI\/SSP; 2. Meets all SSI\/SSP criteria, but is not receiving SSI\/SSP grants; 3. Was once eligible for SSI\/SSP, is now peiforming substantial gainful activity, but still has the disability w. hich was once the basis for his\/her eligibility; or 4. Meets all other SSI\/SSP eligibility criteria, but has an income which, although higher than the SSI\/SSP payment standard, is not sufficient to pay the full cost of IHSS services. These individuals ~re required to pay a share of the cost of the services provided. Assessment of Need County. social workers determine the type and level of IHSS services an individual needs in order to remain safely in his\/her home. In addition to the initial determination of need made by the county, each recipient must be reassessed periodically. Until the current year, the state required counties to reassess eligibility for IHSS services at least once every six months. Chapter 978, Statutes of 1981 (SB 14), length- ened the period for mandatory reassessments to no less frequently than once each year. .. Severely and Nonseverely ImpairedRecipients. Individuals may quali- fy for IHSS services as either nonseverely impaired or severely impaired clients. Individuals who require 20 hours or more each week, of the follow- ing services are considered to be \”severely impaired:\” (1) Routine bodily functions, (2) dressing, (3) meal preparation and feeding, (4) moving into and out of bed, (5) ambulation, (6) bed baths, and (7) paramedical serv- ices. In the current year, severely impaired individuals are eligible for service awards of up to $838. each month. . . Individuals requiring less than 20 hours of the services identified above each week are considered nonseverely impaired. In 1982-:-83, the non- severely impaired client is eligible for a maximum service award of $581 per month. Cost-of-Living Increase The budget proposes $7,812,000 from the General Fund to provide a 3 percent increase in the maximum allowable monthly payments provided \u00b7under the IHSS program\u00b7 and salary increases to IHSS providers. If .ap- proved, the maximum grant for a nonseverely impaired recipient will increase from $581 in 1982-:-83 to $598 in 1983-84. The maximum grant for a severely impaired client will increase from $838 in the current year to $863 in the budget year. General Fund Cost of Proposed IHSS COLA is Overbudgeted We recommend a General Fund reduction of $211~OOO to the IHSS cost-oE-living increase item (Item 5180-181-001 (c)) to correct for technical errors. In calculating the IHSS COLA, the administration made an error that results in overbudgeting. . The COLA proposed in the budget assumes that program cost~ will be $279,232,000 in the budget year. The budget, however, proposes that pro- gram costs be limited to $271,737,000, or $7,495,000 less than the base Item 5180 HEALTH AND WELARE \/ 1173 amount used in calculating the COLA. Calculating the COLA on the correct base results in a General Fund Savings of $211,000. We therefore recommend that funds proposed under Item 5180-181- 001 (c) for transfer to this item to finance a 3.0 percent COLA be reduced by $211,000 to correct for the error and make the COLA amount consistent with the budget request. IHSS Payrolling System The IHSS program pays individual providers of service through a cen- tralized payrolling system. Currently, the payrolling function is per- formed by a private contractor-Electronic Data Systems-Federal (EDSF). Counties provide the private contractor with payroll data through terminals located in the counties. Payroll data is then aggregated by the contractor at a central location where checks are written and statewide reports are produced. The budget proposes $3,063,256 for the costs of contracting for the IHSS payrolling system in 1983-84. This\u00b7 consists of the current year funding level of $2,963,256 plus $100,000 for the amortization of one-time start-up costs. Issuance of IHSS Payroll Checks We recommend a General Fund reduction of $1~OOO requested to reimburse the State Controllers Office (SCO) for issuing IHSS payroll checks during 1983-84. The current contract for the payrolling system has been extended to June 30, 1983. DSS currently is soliciting bids for a new payrolling agent whose contract would begin in the budget year. The new contract will differ from the current contract in that the contractor (1) will not issue the IHSS payroll checks and (2) will be reguired to provide expanded data on payroll and case management. The department informs us that the SCO will begin performing the checkwriting function when the new contract takes effect. The budget proposes $648,000 to reimburse the SCO for the issuance of IHSS payroll checks in 1983-84. This assumes that 150,000 checks will be issued monthly, at a unit cost of 36 cents. ED SF, however, informs us that approximately 125,000 checks currently are issued each month. The budget thus assumes a 20 percent growth in the number of providers covered by the centralized payrolling system in 1983–84. Our analysis indicates that the number of providers is not likely to grow appreciably in the budget year, for the following reasons. First, the depart- ment projects an increase of less than 3 percent in the number of case- months of service provided through the Individual Provider (lP) mode in 1983–84. Secondly, the budget assumes that client services will be reduced by an average of two hours each month. Presumably, some IHSS recipients who now receive two hours of service each month will lose their eligibility as a result of this reduction, thus offsetting part of the projected caseload growth in the IP mode. Thus, we conclude that the budget’s estimate of 150,000 checks to be issued under the IHSS program is unrealistic, and that approximately 125,000 IHSS checks will continue to be issued each month. On this basis, we recommend a General Fund reduction of $108,000 in order to J:Ilore accurately reflect anticipated costs to the SCO of issuing the IHSS payroll checks. 1174 \/ HEALTH AND WELARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued IHSS Payrolling Contract We withhold recommendation on the remaining $2,955,000 proposed to fund the payrolling contract in 1983-84, pending receipt of the May revi- sion of expenditures. … The department’s projected contract costs of $3,063,256 for 1983-84 are based on (1) current-year cost of the contract and (2) the 1983–84 share ($100,000) of amortized start-up costs. Our analysis indicates thatthe cost of the new contract could be higher or lower than the estimate included in the budget, for the following reasons: . 1. The department has not selected a vendor, and thus has no basis for determining whether contract bids will be higher or lower than the cost in the current year. 2. Because the cost of issuing checks was not\u00b7 bid separately in the past, it is impossible to project cost savings in the 1983-84 contraCt resulting from the transfer of this service to the SCO. . 3. The invitation for bid for the 1983-84 contract makes significant changes to the current contract which could result inadditionaf costs in 1983-84. For example, the new contractor will be required to expanded case management reporting activities. . .. . 4. Start-up costs may be lower than anticipated if the current contractor is awarded the new contract, because much of the basic system is already operational. Given the uncertainty surrounding the costs of the IHSS payrolling contract in 1983-84, we withhold recommendation on $2,955,000, pending the May revision of expenditures. At that time, the department Will know the actual costs associated with the lowest bid. Statewide Time-for-Task Standards We recommend that prior to the budget hearings the department report to the fiscal committees on the potential for achieving General Fund savings by imposing statewide time-for-task standards in the IHSS pro- gram. Currently, state law mandates the types of services which are available to recipients under the IHSS program. Services to IHSS recipients include domestic and related services, heavy cleaning, nonmedical personal serv- ices, travel to medical facilities and other essential transportation, yard hazard abatement, protective supervision, teaching and demonstration, and paramedical services. Within broad guidelines set by the state, coun- ties (1) determine the manner\u00b7 in which the services are provided to clients and (2) develop the standards used by social.workers.to determine the number of hours which an individual will receive. As a result, the unit costs of IHSS services vary widely among counties. . Current Time-for-Task Standards. County social workers or eligibility workers determine the number of IHSS services for which clients are eligible, based on the client’s degree of impairment and individual circum- stances. Most counties have implemented some method of limiting the number of hours granted to clients. One of the most widespread methods employed by counties for limiting hours to clients has been the establish- ment of time-for-task standards. Under time-for-task standards, a county specifies the maximum amount of time a social worker can allow for a given task. Item 5180 HEALTH AND WELARE \/ 1175 Thirty-seven counties now utilize time-for-task standards for a portion of IHSS services. There are, however, wide variations among counties in the development and application of time-for-task standards. Some county standards, for example, are based on historical awards of hours under the IlI.SS program. Other county standards, however, are based on actual time-studies conducted by welfare staff. Some counties apply standards to a . small fraction of the total services .available under IHSS, while other counties have sought to apply standards to as many services as possible. In the face of funding limitations placed on IHSS by Ch 69\/81, many counties have tightened their time-for-task standards,. but wide variation.s still exist . . Variations in Time\”ior-Task Standards Among Counties. For some types of services, it may not make sense to require counties to provide the same maximum number of hours. Some tasks may vary by case, by degree of impairment of the client, or by distance from the source of services. It makes little sense, for instance, to establish uniform standards for transpor- tation to medical appointments since IHSS clients live at varying distances from medical personnel, and require varyiJ:lg frequencies of treatment. Other tasks, however, lend themselves to uniform time-for-task stand- ards among counties. Meal preparation should take no longer in one coimty than in another, yet county time-for-task standards vary widely. As shown in Chart 2, San Francisco County allows up to 10.5 hours per week for meal preparation while Orange County allows only 3.5 hours per week. If San Francisco were to use Orange County’s meal preparation standards, savings could accrue to the IHSS program. Given the Gurrent average hourly statewide cost of $3.84, San Francisco would save $27 per week for each client whose hours were reduced from the San Francisco maximum to the Orange County maximum for meal preparation. Chart 2 In-Home Supportive Services Time-for-Task Standards MSix Largest Countiesa 1982-a3 A .15- Meal Preparation X I M U 12 M H 9-o U R S 6 P E R 3 W E 0 E K Feeding Diego Clara . Bernardino Franeisc6 a l xduurnn \/\\Ialllt:da anti Sacr;:mit:nto co~ntles. Alameda uses computerized aSSessments indices. 01 the three time-lor’ !\”lsk standards lIru~lrillt:d ilb()vl~. Sacramento tJSt;lS only M~al Preparation standards I\\o!’ I\ cwll:~. Cuunty ha~; no flllltdor\u00b7lnsk stan(jard for 3mbulation. 38-76610 1176 \/ HEALTH AND WELARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued Precedent for Statewide Time-For-Task Standards. In implementing Ch 69\/81, DSS established a statewide standard for domestic services. Currently, no more than six hours per month can be granted for such services as sweeping, vacuuming, dusting, cleaning kitchen and bath, and storing supplies. The cap on hours for domestic services acts as a time-for- task standard within which all domestic tasks can be accomplished in a manner sufficient to. protect the health and safety of the client. Savings Potential of Time-For-Task Standards. Since implementation of Ch q9\/81, growth in IHSS program expenditures has been curbed sig- p.ificantly. In 1982-83, total expenditures for the IHSS program decreased by 1.5 percent from tpe previous year’s level. This is i~ contrast to years prior to 1981-82, when the average annual rate of growth exceeded 19 percent. One of the factors contributing to the decline in the rate of growth of the program has been the cap on hours of domestic services available to clients. . Our review of time-for-task standards employed by counties suggests that even greater savings could be realized under the IHSS program if (1) all counties utilized appropriate time-for-task standards for IHSS services and (2) time-for-tasl< standards were\u00b7 applied on a statewide basis for services which can be offered in a uniform malip.er across counties. For this reason, we recommend that DSS report to the fiscal committees prior to the budget hearings on (1) the feasibility of implementing statewide time-for-task standards and (2) the potential for cost-savings fromimple- menting such stanqards. LICENSED MATERNITY HOME CARE The Licensed Maternity Home Care program provides a range of serv- ices to unmarried pregnant women under the age of 21. The program was establish(:)d by the Pregnancy Freedom of Choice Act (Ch 1190\/77) to provide unmarried minors with an alternative to abortion. Eight homes (four in Southern. California arid four in Northern Califor- nia) currently are licensed to provide maternity care. Licensed maternity homes provide food, shelter, personal care, protection, supervision, and maternity-related services to residents. Postnatal care, limited to two weeks after delivery, is also allowed under the program. Homes are reim- bursed by the state for care provided to eligible minors. Reimbursement rates currep.tly range from $965 to $1,238. In the current year, the materni- ty homes are licensed to provide care to 314 residents at one time. The average monthly caseload through October of the current year was 295 residep.ts. Budget Yecir Proposal . The budget proposes a General Fund appropriation of $2,167,000 for support of the Licensed Maternity Home 9are program in 1983-84. This includes $63,000 for a 3.0 percent discretionary COLA. The f-,egislature is not required to provide a COLA to the Licensed Maternity Horne Care program. Under current law, however, the depart- m(:)nt may increase the reimbursement rat(:)s to homes by up to 10 percent each year in order to reflect changes in the cost of providing care. Maternity-Related Services OFFered to Residents. The Department of Social Services (DSS) has adopted regulations specifying the range of services to be provided residents of maternity homes. All homes must offer: Item 5180 HEALTH AND WELARE \/ 1177 Individual and group counseling; Pre- and postnatal care; Information regarding child health and welfare services; and Referral to education, psychiatric, child placement, family planning, and adop~ion services. . In addition, residents of licensed maternity care homes are categorically eligible for Medi-Cal. . , Reimbursements for the Cost of Care. Licensed maternity homes can be divided into three broad categories: (1) those which offer services exclusively to pregnant unmarried minors, (2) those which offer services to both pregnant unmarried minors and young unmarried women who have children, and (3) those who offer services to delinquent adolescents who are neither pregnant nor mothers. For those homes which provide services exclusively to pregnant unmarried minors, the cost of care may be reimbursed under the Licensed Maternity Care program or through the Aid to Families with Dependent Children-Foster Care (AFDC-FC) program. The source of reimbursement depends on the circumstances of the girl's placement in the home. If the girl is under the custody of the juvenile court, or is placed pursuant to a voluntary agreement between the county and the parents or guardians and comes to the maternity home as a foster care placement, the home receives reimbursement for care through AFDC-FC. If the girl has not been removed from her family, but rather comes to the home on her own volition, the home is reimbursed through the Licensed Maternity Care program. AFDC-FC reimburse- ment rates generally are higher than reimbursements made under the Licensed Maternity Home Care program. Adolescents who are not pregnant are supported in the homes by alter- native funding sources. These sources include AFDC, AFDC-FC, founda- tion and other private sources, and parental contribution. Table 6 shows that homes differ significantly in the degree to which they rely upon funds from the Licensed Maternity Care program. Table 6 Licensed. Maternity Home Care Program Comparison of Allocations to Licensed Capacity of Homes (1982-83) Residential Home Capacity Percentoi Total Capacity Booth Memorial (Los'Angeles) .................................................. 35 Booth Memorial (Oakland) .......................................................... 30 Door of Hope (San Diego) .......................................................... 20 Crittenton (Fullerton) .................................................................. 58 Crittenton (San Francisco) .......................................................... 42 Mt. St. Joseph-St. Elizabeth (San Francisco) ........................ 25 St. Anne's (Los Angeles) .............................................................. 90 Violet Rice (San Jose) .................................................................... ,14 Totals.............................................................................................. 314 11.1% 9.6 6.4 18.5 13.4 8.0 28.6 4.4 100.0% Percentoi Total AUocation 9.7% 7.7 8.6 1.0 1.4 11.9 52.3 7.4 100.0% The disparity between the homes' residential capacity and the propor- tion of total program funds allocated to them through the Licensed Mater- nity Care program implies that some homes have large numbers of 1178 \/ HEALTH AND WELARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued residents supported from other funds. The Florence Crittenton Home in Orange County, for instance, receives only 1.0 percent of total program allocations; even though it has more than 18 percent of the beds main- tained by all licensed maternity homes. The administrator of the home informs us that many residents are either nonpregnant troubled adoles- cents, mothers with children, o~ pregnant adolescents placed by the court. These residents are reimbursed through other sources such as AFDC and AFDC-FC. St. Anne's, on the other hand, has approximately 29 percent of the beds, but receives 52 percent of maternity care program funding. A high proportion of the young adolescents residing at St. Anne's are volun- tary placement~ which are reimbursed by the Licensed Maternity Home Care program. Characteristics of Residents. The DSS regularly collects characteristics data on the licensed maternity home residents. The data, however, is limited to age, ethnicity, primary language, and educational background of the applicants. The state does not collect data on family income because current law forbids parental. contributions for care. If data concerning family income were collected, the department could assess the extent to which parents could afford to (1) contribute toward the cost of care of their pregnant child or (2) purchase necessary medical,counseling, and maternity related services from other sources. Recent Legislation. Chapter 327, Statutes of 1982 (the companion bill to the 1982 Budget Act) , established a means for (1) collecting information concerning family income and alternative resources of residents and (2) assessing parental financial responsibility for the care of their pregnant child. Under Ch 327\/82, parentalcopayments would have been sought only in c. ases whe. re parents expres.sed wil.lingness to co.ntribute. to the cost of their child's care. Chapter 1460, Statutes of 1982, however, repealed the provisions for parental copayment. It also repealed all authority for DSS to collect additional information. about applicants for maternity home care. This authority was repealed because the Legislature feared that some adolescents might be discouraged from seeking care if, as a require- ment for acceptance into a home, the girl's parents must be contacted and a family financial assessment made. The Legislature Needs Better Information on Program Participants enactment of legislation We recommend enactment of legislation requiring the\u00b7 department to adopt regulations for the collection of additional financial data about residents after their acceptance into a maternity home. . Additional information concerning family income and resources of girls applying for maternity home care would be useful to the Legislature in assessing the extent to which limited General Fund resources are needed to support the Licensed Maternity Home Care program. Our analysis indicates that this information can be collected in a manner that does not dissuade some girls from.applying for care. Rather than requiring homes to secure financial data from parentsJrior to an adolescent's acceptance into the home, this information coul be collected after the application procedure is completed and the pregnant minor has become a resident of a licensed maternity home. We recommend, therefore, enactment of legislation requiring the department to collect income data on residents of maternity homes and their parents. Item 5180 HEALTH\u00b7 AND WELFARE \/ 1179 Unfunded Legislation-Child Abuse Prevention Chapter 1398, Statutes of 1982, appropriated $10 million to the Depart- ment of Social Services for child abuse prevention programs. Under the provisions of Ch 1398\/82, funds for child abuse prevention would be awarded to contractors on a competitive-bid basis. Up to $9 million of the funds available during 1982-83 would be awarded by participating. coun- ties, with the remaining funds awarded by the Office of Child Abuse Prevention. At the time this\u00b7 Analysis was written, none of these funds had been encumbered according to the department. Legislation has been intro- duced which woul.d revert to the General Fund any fund~ appropriated by Ch 1398\/82 whICh are not encumbered as of the effective date of the legislation. The 1983-84 budget contains no funds for the child abuse programs createdbyCh 1398\/82. Department \u00b7of Social Services COMMUNITY CARE LICENSING Item 5180-161 from the General Fund and Social Welfare Federal Fund Budget p. HW 152 Requested 1983-84 ......................................................................... . Estimated 1982-83 ........................................................................... . Actual 1981-82 ................................................................................. . $2,963,000 a 8,316,000 8,756,000 Requested decrease $5,353,000 (-64.4 percent) Total recommended reduction Item 5180-161-001 ................. . Total recommended reduction Item 5180-181-001 (d) ........... . 2,007,000 ($167,000) a Includes $248,000 proposed in Iterri 5180-181'()()1 (d) to provide a 3 percent cost\u00b7of\u00b7livirig increase. 1983-84 FUNDING BY ITEM AND SOURCE Item Description 5180-161-001-Community Care Licensing 5180-161-866-Community Care Licensing 5180-181-001 (d)-Community Care . Licensing-COLA Total Fund General Federal General SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Unbudgeted Federal Funds. Reduce by $2,007,000. Rec- ommend unbudgeted federal funds be used to replace Gen- eral Fund support for foster family home licensing in order to provide the Legislature with more fiscal flexibility. 2. Cost-of-Living Increase. Recommend General Fund Re- duction of $167,000 to correct for error in calculating the cost of a 3 percent Cost-of-Living adjustment. Amount $2;715,000 (2,676,000) $248,000 $2,963,000 Analysis page 1180 1182 1180 \/ HEALTH AND WELFARE COMMUNITY CARE LlCENSING ...... Continued GENERAL PROGRAM STATEMENT Item 5180 This item contains the General Fund appropriation needed to cover the state's cost of contracting with counties to license foster family homes. The Department of Social Services also directly licenses foster family homes, as well as other community care facilities. Funds for direct state licensing activities are requested in Item 5180-001-001, departmental support. ANALYSIS AND RECOMMENDATIONS The budget proposes an appropriation of $2,963,000 from the General Fund to reimburse counties for licensing activities in 19~. This isa reduction of $5,353,000, or 64 percent, from current-year expenditures. Table 1 shows that the proposed reduction is primarily due to three fac- tors: (1) the proposed elimination of family day care licensing ($2,894,- 000), (2) the transfer of funding for a portion of the Foster Family Home Licensing Program from the General Fund to federal Title IV-E funds ($2,676,000), and (3) the proposed 3 percent cost-of-living adjustment (COLA) for 1983-84 ($248,000). Table 1 Proposed General Fund Budget Adjustments For Community Care Licensing 1983-84 (in thousands) ArQustment Total 1. 1982-83 Estimated Expenditures................................................................................ $8,316 2. Budget Adjustments A. Family day care caseload transfer ...................................................................... -$18 B. Foster home caseload transfer .................................................. :........................... -13 C. Elimination of family day care licensing .......................................................... -2,894 D. Transfer funding for Foster Family Home licensing to federal Title IV-E funds............................................................................................................................ -2,676 E. \u00b71983-84 Cost-of-living adjustment ........................... ;.......................................... 248 F. Total Adjustments .................................................................................................... -5,353 3. Total Proposed General Fund .............................................................................. $2,963 Un budgeted Federal Funds We recommend that unbudgeted federal Title IV-E funds be used in lieu of General Fund support for Community Care Licensing in order to increase the Legislature's fiscal flexibility, for a General Fund savings of $2,007,000. Background. The Adoption Assistance and Child Welfare Act of 1980 (P.L. 96-272) provided that qualifying states could receive federal Title IV-E funds for administrative activities on behalf of federally eligible foster care children, including licensing of foster famil), homes. In order to qualify for these federal funds, states are required to have an accepted Title IV-E plan. With the enactment of Ch 977\/82 (AB 2695) and Ch 978\/82 (SB 14), California came into compliance with the requirements for an acceptable Title IV-E plan. The U.S. Department of Health and Human Services (DHHS) approved California's Title IV-E plan effective October 1, 1982. Title IV-E Funds Not Budgeted for 1982-83. The community care Item 5180 HEALTH AND WELFARE \/ 1181 licensing budget includes $2,676,000 in federal Title IV-E funds for foster family licensing during 1983-84. The budget proposes to use these federal funds during 1983-84 to offset a portion of the General Fund costs. of the Community Care Licensing program. . Our analysis indicates that California is eligible to receive an additional $2,007,000 in Title IV-E funds for 1982-83 because its Title IV-E plan was effective October 1, \u00b71982. These additional funds represent the federal share of the costs of county licensing of foster family hoines during 1982- 83. Although these funds will be available for use during 1982-83 or 1983- 84, the administration's budget does not include these fU:(l.(is for either fiscal year. If these funds are used to replace General Fund stipport for the Community Care Licensing program in 1983-84, the Legislature will have an additional $2,007,000 in General Fund resources to draw on and thus more flexibility in funding its priorities in this or other program areas. We therefore recommend that the $2,007,000 in unbudgeted Title IV-E funds be used in 1983-84 to offset the General Fund costs of the Commu- nity Care Licensing program. Elimination of Family Day Care Licensing Budget Proposal. The budget assumes enactment of legislation to eliminate the statutory requirement that the state license family day care facilities. This change would result in total General Fund savings of $4,100,- 000. Of this amount, $2,894,000 represents the costs of contracts withcoun- ties to license family day care homes, and $1,206,000 represents the cost of licensing family day care homes directly by the department A family day care home provides care, protection, and supervision to up to 12 children, in the care-giver's own home, while the children's parents or guardians are away, for periods of less than.24 hours per day. Under existing law, if one adult care provider is present in the home, up to six children may be cared for in the home. With an assistant present, a max- imum of 12 children may be cared for in a family day ~are home. If more than 12 children are cared for in a facility, the facility inust be licensed as a day care center. The budget provides no information in support oBhe proposal to elimi- nate family qay care licensing. Lacking such information, we are unable to advise the Legislature of the specific impact that this proposlll would have on the operation of family day care homes. Our review of the Family Day Care Licensing program, however, has identified several fa,ctors which the Legislature may wish to consider during its deliberation on the proposed statutory change. Specifically, our review found that: 1. These facilities aresma14 and are located in tlie home of the care providers. Thus, they can be readily inspected and evaluated by the parents. or guardians of the children being cared for in the home .. 2. The parents or guardians of each child in these homes visit the hQmes at least twice a day while licensing evaluators visit the homes niu(Jh less . frequently. Under current law,licensing evaluators inspect these homes once prior to issuing the initial license, and again after a reqllest for a renewal of a license has been received. The renewal visit is required, however, only if the home has been cited for a major violation of licensing standards during the three-year term of its previous license. Evaluators are also reqllired to visit on a random basis 10 percent of alllicepsed family day care homes each year. . 3. These homes make up slightly more than one-half of all community care facilities~ yet they account for only 15 percent of all complaints against such facilities. 1182 \/ HEALTH AND WELFARE COMMUNITY CARE LICENSING-Continued Item 5180 4. The licensing of these homes is generally ineffective. State law re- quires that all such homes be licensed, yet estimates of the percentage of all family day care homes which operate without licenses range from 50 percent to 66 percent. The Legislature Rejected a Proposal to Eliminate Family Day Care Licensing in 1981-82. The current proposal to eliminate family day care licensing is identical to the one made in the 1981-82 budget. The Legisla- ture rejected that proposal. Instead, the Legislature streamlined theli- censing program by replacing the statutory requirement that each facility be inspected every two years with the requirement for random inspec- tions. of one-in-ten licensed facilities each year. In taking this action, the Legislature clearly expressed its desire to continue the licensing of family day care homes, but to do so at a reduced General Fund cost. Options A vailable to the LegislatUl'e. If the Legislature continues the licensing of family day care homes at the current level, an augmentation to the budget of $4,100,000 will be required. However, we have identified an option which would allow the licensing program to be continued with- out an augmentation. In our review of the Community Care Licensing Program, which ap- pears as part of our analysis of the department's support item (Item 5180- 001-001), we recommend that all community care facilities pay a licensing fee based on (1) the cost of licensing each facility type and (2) the number of private placements in each facility. We believe such fees are warranted, and would eliminate what appears to be, from an analytical standpoint an unjustified subsidy of private placements in community care facilities. The overwhelming majority of placements in family day care homes are pri- vate placements-that is, the cost of the care provided is paid for by private parties, generally the parents, rather than by any governmental program, If the fee we recommend is applied to family day care homes, it will generate revenues apprOximately equal to the costs of licensing these homes. Therefore, if the Legislature accepts our recommendation that all community care facilities be required to pay a license fee based on the number of private placements in each facility, it could continue the Family Day Care Licensing program without having to augment the budget. Cost-of-Living Adjustments We recom~end a General Fund reduction of $l~OOO from the amount budgeted under Item 5180-181-001 (d) for cost-of-living increases for com- munity care licensing due to overbudgeting. The budget includes $248,000 in Item 5180-181-001 (d) to provide a 3 percent COLA for the Community Care Licensing program. The $248,000 does not, however, reflect the reductions in the basic costs of the licensing program associated with (1) the proposal to eliminate family day care licensing and (2) the transfer of funding for foster family home licensing to federal Title IV-E funds. If these adjustments are accounted for, the basic costs of the licensing program are reduced to $2,715,000. A 3 percent COLA on this amount would require an increase of $81,000 which is $167,000 less than the amount proposed. The question of what is the appropriate COLA for the Community Care Licensing program is a policy question which the Legislature must address Item 5180 HEALTH AND WELFARE \/ 1183 in determining its overall fiscal priorities for 1983-84. Here, we merely address the technical issue of the appropriate base to be used in determin- ing the cost-of-living increase associated with a three percent COLA. In order to accurately reflect the fiscal effect of a three percent COLA for Community Care Licensing, we recommend a reduction of $167,000 from the amount budgeted for cost-of-living increases under Item 5180-181-, 001 (d). Department of Social Services COST-Of-LIVING ADJUSTMENTS Item 5180-181 from the General Fund and Social Welfare Fed- eral Fund Budget p. HW 156 Requested 1983-84 .......................................................................... $89,134,000 Total recommended reduction .................................................... $682,000 1983-84 FUNDING BY ITEM AND SOURCE Item Description 51BO-181.()()1-Cost-of\u00b7Living Adjustments 51BO-181-866-Cost-of\u00b7Living Adjustments Fund General Federal SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Transfer Cost-of-Living Funds. Recommend that $72,~ 267,000 proposed for cost-of-living increases for SSI\/SSP recipients be used instead to provide Cost-of-Living Adjust- ments (COLAs) for AFDC recipients because the current standard of living achieved by these recipients is considera- bly lower than that of SSI\/ SSP recipients. 2. Asset Clearance Match Demonstration Project. Reduce by $4~OOO. Recommend that proposed cost-of-living increases for county administration be reduced to reflect decreases in workload, for a General Fund savings of $4,000. 3. Other County Social Services Program (OCSS)-Shasta and San Mateo Counties. Reduce by $4~OOO. Recommend that proposed OCSS cost-of-living increase for Shasta and San Mateo Counties be reduced by $48,000 to correct for double- budgeting. 4. OCSS COLA. Reduce by $25~OOO. Recommend General Fund reduction of $252,000 and an augmentation of $726,000 from federal funds to correct for technical errors in calculat- ing the effects of a 3 percent OCSS COLA.. . 5. In-Home Supportive Services (IHSS) COLA. Reduce by $211~OOO. Recommend that proposed IHSS cost-of-living increase be reduced to correct for overbudgeting, for a Gen- eral Fund savings of $211,000. 6. Community Care Licensing. Reduce by $16~OOO. Recom- mend that proposed Community Care Licensing cost-of- living increase be reduced to correct for overbudgeting, for a General Fund savings of $167,000. Amount $89,134,000 (18,355,000) Analysis page 1186 1189 1189 1190 1190 1190 1184 \/ HEALTH AND WELFARE Item 5180 COST -OF-LIVING ADJUSTMENTS-Continued GENERAL PROGRAM STATEMENT This item contains the General Fund appropriation to provide cost-of- living adjustrrients (COLA) to various welfare and social services pro- grams. ANALYSIS AND RECOMMENDATIONS The budget proposes a General Fund appropriation totaling $89,134,000 for cost-of-living increases for various local assistance programs adminis- tered by the Department of Social Services. Table 1 shows the fiscal effect of the cost-of-living increases proposed for each of these programs. Table 1 Department of Social Services Proposed Cost-of-Living Increases General Fund 1983-84 (in thousands) Program (Proposed Cost\u00b7of-Living Arljustment) AFDC cash grants (0 percent) ..................... . SSI\/SSP cash grants (2.1 percent) ............... . Special adult programs (0 percent) ............. . County administration (3 percent) ............. . Social Services ( 3 percent) ............................. . In\u00b7 Home Supportive Services ................... . Other social services ..................................... . Community care licensing (3 percent) ....... . Totals ........................................................... . Proposed Baseline Funding $1,174,669 949,505 1,708 105,683 159,949 (122,453) (37,496) 2,715 $2,394,229 Cost-of- Living Increase $72,267 3,470 13,149 (7,812) (5,337) 248 $89,134 Percent Increase in Total Expenditures Expenditures $1,174,669 7.6% 1,021,772 1,708 3.3 109,153 8.2 173,098 (6.4) (130,265) (14.2) (42,833) 9.1 2,963 3.7% $2,483,363 As Table 1 indicates, the p~oposed cost-of~living increase~ would in- crease General Fund expendItures for these programs durmg 1983-84 from $2.4 billion to $2.5 billiQll, an increase of 3.7 percent. The increase reflects proposed cost-of-living increases in public assistance programs . ranging from zero to 3.0 percent. Because of factors unique to indjvidual programs, however, the percentage increase in General Fund expendi- tures may exceed the proposed COLA (expressed in percentage terms). For example: . The percentage increase in SSI\/SSP expenditures (7.6 percent) is greater than the percentage increase in maximuni SSI\/ SSP grants (2.1 percent) because the federal cost-of-living adjustment is given both to recipients who are eligible only for state payments (SSP), as well as to those who are eligible for both SSI and SSP payments . The percentage increase in social services expenditures ($.2 percent) is greater than the 3 percent COLA proposed in the budget because the federal government does not provide funds for a COLA on feder- ally funded social services, putting the burden for doing so on the state and comities. Table 2 shows that the budget p~oposes total expenditur~s of $5,960,151,- 000 for welfare programs. Of thIS amount, $120,424,000 IS proposed for cost-of-living increases. Table 2 Department of Social Services Proposed Cost-of-Living Increases All Funds 1983-84 (in thousands) Cost-of-LivinlI. Increases Program AFDC cash grants ............... ; ................................................................. . SSI I SSP cash grants Proposed funding sources ............................................................... . Actual funding sources a ...................................................... ;, ........ .. SPecial adult program ........................................................................ .. County administration ........................................................................ .. Refugee cash assistance ...................................................................... .. Social Services ...................................................................................... .. In\"Home Supportive Services ...................................................... .. Other social services ............................................................................ .. Community care licensing ................................................................ .. Local Mandates .................................................................................... .. Totals .............................................................................................. .. Baseline Funding $2,722,590 1,873,546 (1,873,546) 1,748 587,825 97,941 550,686 (271,737) (278,949) 5,391 (291) $5,839,727 General Fund $72$1 3;470 13,149 (7,812) (5,;;':7) 248 $89,134 Total Cost- Federal County Of-Living Funds Funds, Increase $305 $72,572 (72,572) (72,572) 18,050 $10,535 32,055 2,400 15,549 (868) (8,680) (1,532) (6,869) 248 $18,355 $12,935 $120,424 Percent General Total Funds Funding $2,722,590 99.6% 1,946,118 ( 1,946,118) 1,748 10.8 619,880 97,941 84.6 566,235 90.0 (280,417) 77.7 (285,818) 100.0 5,639 (291) 74.0% $5,960,151 a Because federal funds for the SSI\/SSP program are not appropriated by this bill, the antiCipated increase in federal funds of $72,267,000 to support a cost-of-living increase is reflected as a reduction in the General Fund requirement for baseline funding. As a result, the total cost of providing a 2.1 percent COLA to SSI\/SSP grants ($72.3 million, refugees excluded) is included in Item 5180-181-001 (a) as a General Fund cost. -~ 01 ..... ~ :I: ~ ti :I: ~ o ~ ....... --m 1186 \/ HEALTH AND WELFARE Item 5180 COST -OF-LIVING ADJUSTMENTS-Continued Cost-of-Living Adjustments for Public Assistance Recipients State law requires that recipients of assistance under the SSI\/SSP and AFDC programs receive an annual cost-of-living increase in their grants, effective July 1 of each year. Under existing law, the COLA required on July 1, 1983 is equal to the percentage change in the California Necessities Index (CNI) from December 1981 to December 1982. The Department of Finance estimated in December 1982 that the July 1, 1983, COLA required by existing law is 6.8 percent, and would, if ap- proved, increase costs to the General Fund by $330,309,000: $231,529,000 for the SSI\/SSP program and $98,780,000 for the AFDC program. The budget, however, proposes to suspend the.statutory provision requiring a COLA on July 1, and proposes that in 1983-84 no COLA be provided to AFDC recipients and that a 2.1 percent COLA be given to SSI\/SSP recipi- ents. The budget companion bills repeal the statutory requirement that a COLA be given in 1983-84 and subsequent years, and instead make cost-of-living increases subject to determination in the budget act. On .the Basis of Need~ AFDC Recipients Should Receive a COLA Instead of SSI\/SSP Recipients We recommend that $72~67;OOO iIi General Fund support for cost-oF- living increases budgeted for SSIISSP recipients~ instead be used to fund a COLA for AFDC recipients~ because the current standard of living achieved by these recipients is considerably lower than that of SSIISSP recipients. The administration proposes to provide a 2.1 percent COLA to the maximum grants for SSI\/SSP recipients, at a cost of $72.3 million. The proposed COLA would be financed by the General Fund. The budget document indicates, however, that the source of funding actually would be the federal government, not the state. The cost to the General Fund of the adjustments would be matched by an increase in federal funds totaling $72,267,000 which are made available to provide a cost-of-living increase on the SS! grant. The actual amount of federal funds to be pro- vided will depend on the change iIi the CPI between January-March 1982 and January-March 1983. If the change in the CPI during this period is less than 3 percent, the federal government will not provide any funds for a COLA to SSI grants. Any changes in the estimate of federal funds will be reflected in the May revision of expenditures. The federal government does not require that the additional funds it provides to California will. be passed through to SSI\/ SSP recipients. This is because the state already pays for grants to SSI\/ SSP recipients that are considerably higher than the minimum required by the federal govern- ment. Consequently, the state could use the funds: 1. To provide a COLA on the total SSI\/SSP grant, as proposed by the administration; 2. To achieve a measure of fiscal relief by replacing General Fund support for the SSP program; or 3. For any other purpose, including COLAs for other groups that do not have as high a standard of living as SSI\/SSP recipients. Our analysis indicates that, on the basis of need, it would make more sense to use these funds to provide a cost-of-living increase for AFDC recipients than it would to provide such an increase to SSI\/SSP recipients. Item 5180 HEALTH AND WELFARE \/ 1187 As discussed below, the maximum. grant currently paid AFDGrecipierits is not adequate to raise their incomes above the poverty level. In contrast, SSI\/ SSP recipients receive grants which currently exceed the poverty level, and will continue to do so throughout 1983-84 even if they do not receive aCOLA. California s AFDC Maximum Grants pontinue to FalJ Short of the Poverty Level. One of the objectives of the AFDC and SSI\/SSP programs is to provide recipients with a minimum standard of living. One way of assessing whether this objective is being achieved is to compare the max- imum AFDC and SSI\/SSP grant amounts with the federally designated poverty income level. Historically, AFDC grants have been below the poverty level, as shown in Chart 1. In 1974-75, the AFDC grant level for a family of three was equal to 77 percent of the poverty level, or put another way, it was 23 percent below the poverty standard. The AFDC grants reached 87 percent of the poverty level in 1980--81, and dropped back to 77 percent of the poverty standard in the current year. Under the administration's proposal, the AFDC grant would drop back further, to 74 percent of the poverty level. Even when the value of food stamps is considered, the grant for an AFDC family of three is still below the poverty level. Meanwhile, the maximum SSI\/SSP grant for an aged and disabled indi- vidual has consistently been above the poverty level. Inthe current year, for example, the maximum SSI \/ SSP grant to an aged or disabled individual exceeds the poverty level by 8 percent, while the grant to couples is 56 percent above the poverty standard. . Chart 1 1< Welfare Maximum Aid Payments as a Percent of Annual Poverty Level 8 p AFDC b and SSI\/SSP Aged\/Disabled I'~ E Individuals and Couples 1974-75 to 1983-84 I R C200 Aged\/Disabled Couple E 174 N .163 165 164 162 158~ T 150 ~ 156 153 '- 151 0 120 Aged\/Disabled Individual F 108 111 112 109 Fl..12iI 111 .. 108 106 105 100 P Poverty Level 0 80 85 84 86 78 80 87~ 81 77 V 77 77 74 E 50 AFDC Family of Three R T Y 74-75 75-76 76-77 77-78 78-79 ?g.-80 80-81 81-82 82-83' 83-c-84 Fiscal Year .I ~'l)UIIl\u00b71 U ~ BWt',lu III lilt' C.1:nSll~ 1983-84 pOverty\u00b7'~vel estlmatt:!d t'l .llllih. \\)1 Itlr't:t\u00b7 Wltt1l1ufll1(1(j st,lfnps ;\\F .. pC '\"amtly 0\u00b7' thre~ IS at approxlmat~ly 91 percent 01 poverty level With food stamps 1I1191:L'-\u00b783 Chart 2 compares the maximum AFDC grant for a family ofthree t() the 1188 I HEALTH AND WELFARE Item 5180 COST -OF-LIVING ADJUSTMENTS-Continued maximum SSIISSP grants for blind individuals and blind couples. In the current year, the AFDC family of three is receiving a maximum grant which is 77 percent of the poverty level, while a blind individual is receiv- ing a grant which is 120 percent of the poverty standard, and a blind couple is receiving a maximum SSIISSP grant which is 184 percent of the poverty level. Chart 2 Welfare Maximum Aid Payments as a Percent of Poverty Level8 p AFDC b and SSI\/SSP Blind Individuals and E Couples 1974-75 to 1983-84 R 203 C 200- 195 197 Blind Couple 191 195 192 189 E 186 184 180 178 N - T 150- 135 Blind Individual 0 122 125 126 125 122 124 .120 F -~ 117 118 '--' P 100- - Poverty Level 0 - 85 84 86 87 .----.. V 77 80 78 80 77 81 77\u00b7 74 E 50- AFDC Family of Three R T - Y 74-75 75-76 76-77 77-78 78-79 79-80 8

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1984-1985 AFDC Budget LAO Analysis

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” 1176 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES SUMMARY Item 5180 The Department of Social Services (DSS) is the single state agency responsible for supervising the delivery of cash grants and social services to needy persons in California. Monthly grant payments are made to eligible recipients through two programs-Aid to Families with Depend- ent Children (AFDC) and the Supplemental Security Income\/State Sup- plementary Payment (SSI\/SSP) programs. In addition, welfare recipients, low-income individuals, and persons in need of protection may receive a number of social services such as information and referral, domestic and personal care assistance, and child and adult protective services. Table 1 identifies total expenditures from all funds for programs admin- istered by DSS, for 1982–83 through 1984-85. Total expenditures of $7,149,- 142,000 are proposed for 1984-85, which is an increase of $214,297,000, or 3.1 percent, above estimated current-year expenditures. Table 1 Department of Social Services Expenditures and Revenues by Program All Funds 1982~ through 1984-85 (in thousands) Program 1982-83 1983-84 1984-858 Department Support ………………………….. $145,947 $161,508 $160,736 Payments for Children ………………………. 3,013,155 3,282,665 3,405,916 SSI\/SSP ……………………………………………….. 2,084,680 2,138,776 2,179,402 Special Adult programs ………………………. 1,591 1,524 190 Refugee program ……………………………….. 117,901 77,459 63,721 County Welfare Department Adminis- tration ………………………………………….. 591,640 649,463 685,633 Social Services programs …………………… 532,420 613,228 643,118 Community Care Licensing ……………….. 8,316 10,222 10,426 Local Mandates b ……………………………….. (282) (407) Totals ……………………………………………. $6,495,650 $6,934,845 $7,149,142 Funds General Fund …………………………………….. $2,813,682 $2,931,738 $3,051,494 Federal funds ………………………………………. 3,339,174 3,625,918 3,704,701 Interstate Collection Incentive Fund .. 600 525 County funds ………………………………………. 335,250 369,185 382,904 Reimbursements …………………………………. 7,544 7,404 9,518 Percent Change 1983-84 to 1984-85 -0.5% 3.8 1.9 -87.5 -17.7 5.6 4.9 2.0 (44.3) 3.1% 4.1% 2.2 -12.5 3.7 28.6 8 Includes proposed cost-of-living adjustments. b Funding for local mandates for 1983-84 and 1984-85 is prOvided in the item for state mandated local programs (Item 9680). Table 2 shows the General Fund expenditures for cash grant and social services programs administered by DSS. The department requests a total of $3,051,494,000 from the General Fund for these programs in 1984-85. , ;.\” Item 5180 HEALTH AND WELFARE \/ 1177 This is an increase of $119,756,000, or 4.1 percent, above estimated current- year expenditures. Table 2 Department of Social Services General Fund Expenditures 1982-83 through 1984-85 (in thousands) Program Department Support ………………….. . Payments for Children ………………… . SSI\/SSP ………………………………………… .. Special Adult programs ……………… .. County Welfare Department Ad- ministration ………………………….. .. Social Services programs ……………. .. Community Care Licensing ………. .. Local Mandate ……………………………. .. Totals …………………………………….. .. Actual 1982-83 $41,456 1,367,301 1,140,480 1,539 102,475 154,122 6,309 $2,813,682 \”Includes proposed cost of living adjustments Estimated 1983–84 $47,809 1,491,641 1,097,386 1,472 116,686 169,229 7,515 (282) $2,931,738 OVERVIEW OF ANALYST’S RECOMMENTATIONS Percent Change Proposed 1983–84 to 1984-85\” 1984-85 $45,758 -4.3% 1,562,645 4.8 1,101,124 0.3 138 -90.6 129,114 10.7 205,050 21.2 7,665 2.0 (407) 44.3 $3,051,494 4.1 The analysis of the proposed 1984-85 budget for DSS is divided into 9 sections, as follows: (1) state operations, (2) AFDC, (3) SSP program for the aged, blind, and disabled, (4) Special Adult programs, (5) Refugee Cash Assistance programs, (6) County Administration of Welfare pro- grams, (7) Social Services, (8) Community Care Licensing, and (9) cost- of-living increases. We are recommending reductions totaling $6,669,000 from proposed General Fund expenditures. Of this amount, $250,000 reflects recommen- dations for programmatic change and $6,419,000 reflects technical budget- ing recommendations. Table 3 Department of Social Services Summary of Legislative Analyst’s Recommendations General Fund (in thousands) Recommended Changes Programmab’c Techm’cal Issues Issues . AFDC cash grants …………………… .. -$350 -$5,678 County administration of welfare programs ………………………….. .. 100 -166 Social services ………………………….. .. Community care licensing …….. .. -501 Cost-of-living adjustments ………. .. -74 Totals…………………………………… -$250 -$6,419 Total -$6,028 -66 -501 -74 -$6,669 Recommendations Pending $63,199 4,583 5,143 $72,925 In addition, we are recommending that $10.9 million requested from the 1178 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES SUMMARY-Continued General Fund to remove existing limits on state participation in county welfare department salaries be used, all or in part, to provide cost-of-living increases for county administration in 1984-85. We withhold recommendation on $72,925,000 proposed in the budget pending receipt of the May revision of expenditures. DEPARTMENT OF SOCIAL SERVICES Departmental Support Item 5180 from the General Fund and Social Welfare Fed- eral Fund Budget p. HW 169 Requested 1984-85 ……………………………… ; ……………………………… . Estimated 1983-84 ………………………………………………………………… . Actual 1982-83 ……………………………………………………………………… . $45,758,000 47,809,000 41,456,000 Requested decrease (excluding amount for salary increases) $2,051,000 (-4.3 percent) Total recommended reduction …………………………………………… . None 1984-85 FUNDING BY ITEM AND SOURCE Item Description 5180-001-OO1-Department of Social Services, sup- Fund General Amount $45,758,000 port 5180-001-866-Department of Social Services, sup- port Federal (105,460,000) SUMMARY OF MAJOR ISSUES\u00b7 AND RECOMMENDATIONS 1. Statewide Public Assistance Network. Recommend the Legislature direct the Department of Social Services (DSS) to prepare a long-range plan for development of computer systems that can achieve the Legislature’s goals for welfare administration. 2. Disability Evaluation-Reimbursement Mechanism. Rec- ommend that the DSS report to the fiscal committees, prior to the budget hearings, regarding the proposed reimburse- ment mechanism for disability evaluations of Medically In- digent Adults (MIA). 3. Fair Hearings Backlog. Recommend that, prior to the budget hearings, DSS submit a plan to the fiscal committees for processing the remaining backlog of MIA fair hearing appeals. 4. Community Care Licensing-Fees. Recommend enact- ment of legislation requiring that community care facilities be charged a license fee based on (a) the cost of licensing each facility type and (b) the proportion of each facility’s clients whose care is paid for from nongovernmental sources. (Potential General Fund savings: $9,248,000) Analysis page 1182 1184 1185 1190 Item 5180 HEALTH AND WELFARE \/ 1179 5. Comunity Care Licensing-Family Day Care Caseload In- 1195 crease. Recommend that, prior to the budget hearings, the DSS advise the fiscal committees on how it proposes to sat- isfy statutory licensing requirements for family day care, given the number of evaluator positions proposed in the . budget. 6. Adoptions. Recommend that, prior to the budget hearings, 1196 DSS provide the fiscal committees with (a) an estimate of the effect of SB 14 on state district adoption office caseloads and (b) a plan for providing adoption services to children served by state district offices. GENERAL PROGRAM STATEMENT The Department of Social Services (DSS) administers income mainte- nance, food stamps, and social services programs. In addition, the depart- ment is responsible for licensing and evaluating nonmedical community care facilities and determining eligibility for the federal supplemental security income and Medicaid\/medically needy programs through disabil- ity evaluations. These responsibilities are divided among nine operating divisions within the department. The department was authorized 3,448.4 positions in the current year. The department proposes to delete three positions and administratively establish 73 positions during the current year. As a result, the department will have 3,518.4 positions during 1983-84. Table 1 Summary of the DSS Support Budget 1982-83 through 1984-85 (in thousands) Program AFDC-FG\/U …………………………………………………………. . AFDC-FC ………………………………………………………………. . SSI\/SSP ……………………………………………………………. : …… . Special Adult Programs ……………………………………….. . Food Stamps …………………………………………………………. . In-Home Supportive Services ………………………………. . Other County Social Services ………………………………. . Adoptions ………………………………………………………………. . Child Abuse Prevention ……………………………………….. . Community Care Licensing ………………………………… . Refugee Programs ……………………………………………….. .. Disability Evaluation …………………………………………….. . Services to Other Agencies ………………………………….. . County Data Systems …………………………………………… . Child Support ……………………………………………………….. . Maternity Care ……………………………………………………… . Access Assistance for the Deaf ……………………………. .. WIN ……………………………………………………………………….. . Refugee Services ………………………………………………….. . Demonstration Programs ……………………………………… . Totals ………………………………………………………………. . Funding General Fund ……………………………………………………….. . Federal funds ……………………………………………………….. . Reimbursements ……………………………………………………. . Totals ………………………………………………………………. . Actual 1982-83 $12,601 3,217 951 206 14,233 2,625 3,427 4,851 653 14,051 1,864 71,800 6,372 1,167 4,579\u00b7 72 117 931 2,116 114 — $145,947 $41,456 96,947 7,544 $145,947 Estimated 1983-84 $14,413 3,965 1,098 195 14,822 3,266 3,799 5,693 922 15,804 2,685 78,543 5,647 1,116 5,444 229 136 1,036 2,695 $161,508 $47,809 106,295 7,404 $161,508 Proposed 1984-85 $14,311 4,105 1,121 80 15,183 3,302 3,792 5,807 1,156 17,028 2,645 78,124 3,851 895 5,651 233 138 1,084 2,230 $160,736 $45,758 105,4fj{) 9,518 $160,736 1180 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES-Continued OVERVIEW OF THE BUDGET REQUEST Item 5180 The budget proposes an appropriation of $45,758,000 from the General Fund for support of the DSS in 1984-85. This is a decrease of $2,051,000, or 4.3 percent, below estimated current-year expenditures. The decrease, however, makes no allowance for the cost of any salary or staff benefit increases that may be approved for the budget year. The budget proposes total expenditures of $160,736,000, including ex- penditures from reimbursements, for support of the department in 1984- 85. This is a decrease of $772,000, or 0.5 percent, below estimated 1983-84 expenditures. Table 1 shows total proposed expenditures for the depart- ment, by major program category. Table 2 Department of Social Services-Support Budget Proposed General Fund Adjustments (in thousands) Cost 1983-84 Expenditures (Revised) ………………………………. : ……………………….. . A. Baseline Adjustments 1. Increase in existing personnel costs a. Full-year cost of 1983-84salary increase ……………………………….. .. $809 b. OASDI benefits …………………………………………………………………….. .. 103 c. Foster care licensing …………………………………………………………….. . 133 d. Day care licensing caseload …………………………………………………. .. 426 e. Yolo County case data positions ……………………………………………. .. 6 Subtotal ……………………………………………………………………………….. .. 2. Decrease in existing personnel costs a. Limited-term positions (1) Placer-Nevada case data ………………………………………………… . -$289 (2) Medically Indigent Adult fair hearings (AB 799) ………… .. -1,147 b. Retirement benefits ……………………………………………………………… .. -195 Subtotal ………………………………………………………………………………… . 3. One-time expenditures a. Equipment. …………………………………………………………………………….. .. -$2 b. Disaster relief ………………………………………………………………………… .. -1,080 Subtotal …………………………………………………… , …………………………. .. 4. Operating expenses and equipment a. Inflation adjustment ……………………………………………………………… .. 5. Adjustment of prior year Board of Control Claim, Ch 1183\/83 .. 6 .. Total baseline adjustments ………………………………………………………… .. B. Program Change Proposals 1. Disability Evaluation Division (DED) funding change ………….. .. -$1,839 2. Elimination of internal audit function ……………………………………….. . -113 3. CCL investigator workload increase …………………………………………. . 113 4. CCL caseload growth ……………………………………………………………….. .. 322 5. Child abuse and neglect prevention and intervention (AB 1733) 238 6. Multi-county case data system …………………………………………………… .. -9 7. Reduction in operating expenses and equipment …………………… .. -007 8. DED position reduction ……………………………………………………………. .. -57 9. Total program change proposals ……………………………………………….. .. C. Total Changes for 1984-85 ………………………………………………………………. . D. Proposed Budget for 1984-85 ………………………………………………………… .. Total $47,809 $1,477 -$1,631 -$1,082 $726 $11 (-$499) -$1,552 ( -$2,051) $45,758 Item 5180 HEALTH AND WELFARE \/ 1181 Proposed General Fund Budget Changes Table 2 shows the proposed changes in the department’s General Fund support expenditures for 1984-85. As the table shows, General Fund ex- penditures are proposed to decrease by $2,051,000, or 4.3 percent. The decrease reflects proposed expenditure increases totaling $2,887,000 and reductions totaling $4,938,000. The major proposed increases consist of: (1) $1,477,000 for increased costs of existing personnel, (2) $726,000 for a 6 percent inflation adjustment to the department’s budget for operating expenses and equipment, (3) $435,000 for increased caseloads in the com- munity care licensing program, and (4) $238,000 for the continuation of six limited-term positions for child abuse prevention that expire at the end of the current year. The major decreases consist of: (1) $1,147,000 for the one-time-only costs of processing fair hearing appeals resulting from the transfer of Medically Indigent Adults (MIA) to county health programs, (2) $1,080,000 for the one-time costs of providing assistance for specified disasters during 1983-84, and (3) $1,839,000 due to the administration’s proposal to require counties to pay for disability evaluations of MIAs. Table 3 Department of Social Services Position Changes Proposed for 1984-85 AFDC\u00b7Foster Care …………… . Child Support Enforcement Other AFDC ……………………. . Food Stamps ……………………. . Other County Social Serv- ices …………………………… … In-Home Supportive Serv- ices ……………………….. : … … Adoptions …………………………. . Child Abuse Prevention ….. . Refugee Services ………………. . Community Care Licensing Disability Evaluation ……….. . Services to Other Agencies County Data Systems ……… . Other …………………………………. . Totals ……………………….. … Existing Administrative New Total Positions Adjustments Positions Positions 146.7 -1.0 145.7 ~6 -~ W3 242.0 -3.2 238.8 289.0 – 2.9 286.l 97.9 -.2 79.6 -1.8 138.8 9.l 48.8 -2.0 374.8 2.5 1,690.3 -94.0 90.0 -5.l 97.4 3,380.0\u00b7 -108.0 6.0 59.5 39.0 9.0 113.5 97.7 77.8 138.8 15.l 46.8 436.8 1,635.3 84.9 9.0 97.4 3,385.5 Net Change Number Percent -1.0 -.7% -.3 -.4 -3.2 -1.3 -2.9 -1.0 -.2 -.2 -1.8 -2.3 .0 6.0 65.9 -2.0 -4.1 62.0 16.5 -55.0 -3.3 -5.l -5.7 9.0 N\/A .0 5.5 .2% The department is authorized 3,448.4 positions during 1983-84. Of these, 68.4 are limited-term and will expire at the end of the current year. Requested New Positions Child Abuse Prevention …………………. 6.0 Community Care Licensing ……………. 59.5 Disability Evaluation ………………………. 39.0 County Data Systems………………………. 9.0 Totals ………………………………………… 113.5 Fiscal Effect of Proposed New Positions (in thousands) General Fund $238 1,735 -9 $1,964 Federal Reim- Funds bursements lO 1,614 . -8 $1,616 912 $912 Totals $238 1,745 1,614 895 $4,492 1182 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-Continued Proposed New Positions The department is proposing a net increase of 5.5 positions for 1984-85, as shown in Table 3. This reflects 113.5 new positions and a reduction of 108 positions. As a result of these changes, the budget proposes funding for 3,385.5 authorized positions in 1984-85. The largest single request is for 59.5 positions for the Community Care Licensing program. These positions are requested to (1) conduct on-site evaluations of facilities and provide ad- ministrative support to licensing evaluators (56.5 positions) and (2) inves- tigate allegations of unsafe conditions in community care facilities (3 positions) . The largest single reduction in staffing is the proposed elimination of 94 positions from the disability evaluation division. This reduction primarily reflects an anticipated reduction in the number of disability cases that will be referred by the federal government to the state for review (55 posi- tions) . ANALYSIS AND RECOMMENDATIONS Legal Services Positions The Supplemental Report to the 1983 Budget Act requires our office to report on the effect of reductions in legal positions (1) resulting from vetoes by the Governor in acting on the 1983 Budget Bill and (2) proposed in the 1984 Budget Bill. ‘ . The 1983 Budget Bill, as submitted by the Legislature to the Governor, authorized 43.5 legal positions for the DSS. The Governor vetoed 7.5 of these positions. The department advises that, at the time the Governor vetoed the 7.5 positions, the department believed it could accommodate the reduction through changes in workload priority within the legal affairs division. Subsequently, the department administratively established 4.5 positions in the current year to handle the increased legal services workload associat- ed with the Community Care Licensing program. The budget proposes to continue these positions in 1984-85. The department advises that the three legal positions which were not restored will reduce the number of positions assigned to various welfare and social services programs. It is unclear what impact these reductions will have on the department’s ability to handle its legal services workloads. This is because the workloads associated with these programs will depend primarily on the number of court cases and regulation changes that occur in 1984-85. Statewide Public Assistance Network We recommend that the Legislature direct the DSS to prepare a long- range plan for the development of computer systems that can achieve the Legislatures goals for welfare administration. The Supplemental Report to the 1983 Budget Act required the Legisla- tive Analyst to review the Revised Feasibility Report on the Statewide Public Assistance Network (SPAN) prepared by Arthur Andersen and Company. In addition, the report directed the Analyst to present the Legislature with options for the continued development of statewide com- Item 5180 HEALTH AND WELFARE \/ 1183 puter systems that can support the administration of public assistance programs in California. The DSS also was required to submit a report that reviews the revised FSR and analyzes legislative options for the develop- ment of welfare computer systems. We issued our report in December 1983. The findings of our report are summarized below. Problems with the Existing Welfare System. We have identified the following problems with the current system of welfare administration in California-problems that the SPAN project was intended to solve: Lack of uniform welfare policy application throughout the state; High error rates; and Missed opportunities for improved efficiency through automation. To some extent, these problems can be solved by the application of com- puter technology. Options Considered. We have identified five options that the Legis- lature has available to it in attempting to develop state computer systems that can help solve the problems associated with the current welfare system: Require state administration of welfare programs with a state-devel- oped, state-run, and state-maintained computer system; Require development of the central delivery system concept using one of theSP AN designs; Develop and maintain two systems, one based on the Case Data de- sign and the other based on Los Angeles County’s welfare computer system, and expand MEDS to function as a statewide welfare index (this approach was recommended in the Arthur Andersen report); Require the DSS to prepare and implement a long-range plan for computer systems development capable of achieving the Legislature’ goals for welfare administration; and Repeal the provision of existing law requiring the development of a central delivery system and continue computer system development under existing departmental policies. Recommended Action. Based on our review of these options, we recommend that the Legislature direct the DSS to prepare a long-range plan for the development of computer systems that can achieve the Legis- lature’s goals for welfare administration. The plan should identify the specific steps that must be taken in order to: Meet those information needs of the state that are currently unmet; Develop cost-effective computer systems that can improve program efficiency and reduce error rates; and Increase the uniformity with which welfare policies are applied throughout the state. In addition, the plan should include specific milestones by which the Legislature can gauge the DSS’ success in completing the steps specified in the plan. Justification for the Recommendation. Clearly, the objectives of this option are modest compared to the objectives of SPAN. Given the state’s experience in attempting to develop large systems of this type, however, modest objectives would seem to be appropriate. Too many times in the past, the Legislature has allowed the DSS to take on large projects with ambitious goals only to find that after significant funds had been commit- ted to the projects, the department had little to show for the effort. The virtue of a planned effort involving a series of steps toward welfare auto- 1184 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-Continued mation is that it would minimize the chances and consequences of failure, while still working toward the same goals that the central delivery system was supposed to achieve. Such an approach would not preclude the devel- opment of a single statewide system, operated either by the state or by counties. Rather, it sets a deliberate pace for computer systems develop- ment that could ultimately result in a statewide computer system. We recommend this approach to computer systems development for the following additional reasons: It requires that computer development efforts be directed toward identified problems. It requires that resources for computer systems development be tar- geted at those activities that offer the greatest amount of program savings and tests the viability of these activities through pilot testing before statewide implementation. It minimizes the risk of failure. Disability Evaluation Program The Disability Evaluation program determines medical eligibility of California residents for Disability Insurance, Supplemental Security In- come (SSI), and Medi-Cal. With the exception of disability evaluations of Medically Indigent Adults (MIA), the division’s activities are supported through federal funds and reimbursements. In the current year, the costs of disability evaluations of MIAs are borne by the General Fund and federal funds. The budget proposes no General Fund support for the division in 1984- 85. Instead, the budget proposes t~ require counties to pay for disability evaluations of MIAs, which are conducted in order to determine if they qualify for medical services as medically needy (MN) recipients. Persons may qualify for Medi-Cal assistance if the)’ receive cash grants or they are classified as medically indigent or medically needy. Individuals may be eligible for Medi-Cal as medically needy if they do not receive cash assistance grants but are aged, blind, or disabled or members of families with dependent children. Medically indigent adults may receive medical care if they are pregnant women or are in long-term care. The budget proposes total expenditures of $78,124,000 for this program 1984-85. Of this amount, $71,778,000 are federal funds and $6,346,000 are reimbursements, including $1,194,400 in county funds. Counties to Reimburse the State for Disability Evaluations We recommend tha~ prior to the budget hearings, the department re- port to the fiscal committees concerning the proposed county reimburse- ment mechanism for disability evaluations of MIAs. Chapter 328, Statutes of 1982 (AB 799), transferred responsibility to the counties for providing medical care to most MIAs. (Previously, these in- dividuals received state-only-funded Medi-Cal benefits.) Counties may refer MIAs to the State, however, for a disability evaluation in order to determine if they qualify for medical services as MNs. If they qualify for the MN program, the county no longer pays the cost of their medical care. This is because MNs receive medical services through Medi-Cal, which is funded by the state (50 percent) and federal (50 percent) governments. Currently, counties have an incentive to refer most-or ail-MIAs for disability evaluations. This is because they not only do not pay for the cost Item 5180 HEALTH AND WELFARE \/ 1185 of MIA disability evaluations, but they save county funds if the individual qualifies for the MN program. Given this funding mechanism, there are no incentives for counties to screen MIAs in order to determine the likeli- hood that the individuals will be found eligible for the MN program. The Budget proposes to require counties to pay for the disability evalua- tions of MIAs. Requiring counties to pay for these services may create incentives for the counties to evaluate the likelihood of a referral being found eligible for the MN program, instead of automatically referring most applicants for evaluation. The extent to which better incentives are established will depend on the specific reimbursement mechanism established by the department. For example, if the department charges counties on the basis of the proportion of state funds allocated to each county for support of medical care for MIAs, counties will not have an incentive to evaluate the likelihood that the individual will qualify for the MN program. This is because counties will pay the same level of reimbursements, regardless of the number of MIAs referred for disability evaluation. On the other hand, if the depart- ment charges counties on a per capita referral basis, counties may be more likely to limit the number of individuals referred for evaluations. Because the incentives faced by counties differ markedly, depending on the way the reimbursement mechanism is structured, we recommend that, prior to the budget hearings, th~ department report to the fiscal committees on the proposed county reimbursement mechanism to be used for disability evaluations of MIAs. Fair Hearings for Medically Indigent Adults . We recommend that, prior to the budget hearings, the department present to the fiscal committees a plan for processing the remaining back- log of MedicallyIndigent Adult (MIA) fair heanngs appeals in the current and budget years. Chapter 328, Statutes of 1982 (AB 799), transferred responsibility for the medical needs of MIAs to the counties. Previously, medical care for MIAs was provided through the state-funded Medi-Cal program. Of the MIAs transferred to the counties, 22,000 appealed their status. The 1983 Budget Act provided the DSS with $1,356,000 for staffing and support costs to conduct fair hearings and associated disability evaluations for the individu- als who appealed their transfer. The department anticipated that all work associated with the transfer of the MIAs would be completed by February 1984. The department now advises that (1) the fair hearings process has not been completed for 5,700 individuals and (2) the department will not complete the process by the February 1984 deadline. Revised Schedule for Processing Appeals. The department now es- timates that processing of the fair hearings and remaining disability evaluations will not be completed until September 1984. The budget, however, does not contain funds for the costs of processing these appeals during the first three months of 1984-85. In addition, the department has not been able to advise us how it will fund the costs of processing the remaining 5,700 cases between March 1984 and June 1984. In the original proposal, the 1983 Budget Act provided funding only through February 1984 for the processing of MIA fair hearings. Until the hearing process is completed, MIAs continue to receive medi- cal services at state and federal expense through the Medi-Cal program. Each month that the 5,700 individuals receive medical services results in additional General Fund Medi-Cal costs of $1.2 million. 1186 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERViCES-Continued We conclude that the budget does not propose funds to process the backlog of fair hearing cases. In addition, the department has not been able to advise us of its plan for processing these cases using existing re- sources. Therefore, we recommend that, prior to the budget hearings, the department present the fiscal committees with a plan for processing the remaining MIA fair hearing appeals during the current and budget years. Report on Transfer of Day Care Licensing The Supplemental Report to the 1983 Budget Act requires the Legisla- tive Analyst to report on the feasibility of transferring the responsibility for licensing child day care facilities from the Department of Social Serv- ices (DSS) to the Department of Consumer Affairs (DCA). Specifically, the report required us to discuss (1) the organizational structure of the two departments, (2) the costs of day care licensing, (3) fees for day care licensing, and (4) the ability of each department to perform specified functions. We discuss each of these issues below. Organizational Structure of the Two Departments. The DSS cur- rently administers the Child Day Care Licensing Program through 11 district offices. The program licenses child day care centers and family day care homes. In addition, the DSS contracts with several counties to license family day care homes. The licensing of child day care\u00b7 facilities is totally supported by the General Fund; the department charges no fees to sup- port the cost of licenSing these facilities. The DCA was established by the Consumer Affairs Act of 1970 (Ch 1394\/70). It has four major components: (1) the 42 licensing agencies, which include boards, bureaus, programs, and committees; (2) the Divi- sion of Administration; (3) the Division of Investigation; and (4) the Divi- sion of Consumer Services. All of the boards and bureaus within the department, except the State Board of Guide Dogs for the Blind, are statutorily required to support their programs from revenues generated by various license fees. Each of the DCA’s constituent licensing agencies is statutorily inde- pendent of the department’s control. Only the five bureaus (Automotive Repair, Collection and Investigation Services, Electronic and Appliance Repair, Employment Agencies, and Home Furnishings) are under the direct statutory control of the Director of DCA. However, the department does provide centralized administrative services to each of its constituent agencies. (For further information regarding the DCA, please refer to Item 1120.) Costs of Licensing Child Day Care Programs. Table 4 compares the DSS’ estimate of the costs it incurs to license child day care facilities with the DCA’s estimate of the costs it would incur in the event that this licensing responsibility is transferred to that department. It is important to note that the estimate provided by the DSS does not include the portion of the department’s overhead costs that is attributable to this program. These costs may be substantial. Moreover, the estimate provided by the DCA is subject to error since the DCA has no direct experience with licensing day care facilities. Nevertheless, the estimates displayed in Table 4 are the best estimates currently available. According to these estimates, transferring the responsibility for child day care licensing from the DSS to the DCA would result in a slight reduction in annual ongoing licensing costs. In the first year of such a transfer, however, these savings would be more than offset by one-time start-up costs to the DCA. Item 5180 HEALTH AND WELFARE \/ 1187 Table 4 Comparison of Estimated Costs of Child Day Care Licensing DCA and DSS (in thousands) One-time start-up costs …………………………………….. .. On-going annual licensing costs ………………………. .. Totals …………………………………………………………… .. DSS NJA $9,200.0 $9,200.0′ DCA $406.5 8,909.0 $9,315.5 b Does nO,t include departmental overhead costs. Source: Department of Social Services. b Source: Department of Consumer Affairs. Difference $406.5 -291.0 $115.5 Fees for Licensing Child Day Care Programs. The 1983 Budget Act required the DSS to submit a report to the Legislature on community care licensing fees. (We discuss this report below.) Based on our review of the department’s report, we recommend that the Legislature authorize li- censing fees for all community care facilities, including child day care facilities. We recommend that the fee be based on( 1) the cost of licensing each facility type and (2) the proportion of each facility’s clients whose care is paid for from nongovernmental sources. Such a fee system would result in an annual day care license fee ranging from zero to $300, depend- ing on the number of clients in the facility whose care is paid for from private sources. The DSS estimates that the fee would generate annual General Fund revenues of $8,350,000 from child day care facilities. We estimate that these revenues would be partially offset by annual collection costs of $576,000. If child day care licensing is transferred, the DCA recommends that a licensing fee system be established in order to support the operations of the program and to remain consistent with the current funding philoso- phy of the department. The DCA recommends the following fee structure in order to support the program and provide a prudent reserve for eco- nomic uncertainties. Table 5 Department of Consumer Affairs Proposed Fees and Revenues for Child Day Care Licensing Fee Number of Licensees AppUcation ………………………………….. :…………………………………… $75 License Family Day Care …………………….. : … ,………………………………. 300 Day Care Center ……………………. :.’………………………………….. 375 Renewal ‘ Family Day Care ………………………………………………………….. 300 Day Care Center ……………………. ,…………………………………… 375 Registered Assistant Providers .. ~:;::…………………………………. 50 Renewal ………………………………….. ;.,……………………………………. 40 ‘\” n 11,357 8,518 2,839 12,501 4,167 12,500 12,500 Revenue $851,775 2,555,400 1,064,625 3,750,300 1,562,625 625,000 500,000 $10,909,725 In addition, the DCA1>elieves that the current triennial renewal period should be changed to an annual renewal period in order to reduce the 1188 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-Continued activity of unlicensed providers and improve enforcement efforts. Howev- er, by changing the renewal period, higher fees would be required in the first two years with a downward adjustment in the final year of the transi- tion period. The revenue projections in Table 5 are based on the proposed higher first-year fees. Comparison of the Abilities of DSS and DCA to Perform Specified Functions. The Supplemental Report requires the Analyst to assess the ability of DSS and DCA to perform a variety of functions. In general, we conclude that neither department is significantly better able than the other to perform these functions. In most cases, the DCA currently per- forms functions that are similar, but not identical, to the functions per- formed by the DSS in licensing child day care facilities. The following is a description of the way the two. departments perform the various func- tions identified in the Supplemental Report: 1. Enforcement. Currently, both DCA and DSS are required to conduct various enforcement activities in order to ensure that (a) speci- fied individuals and facilities are licensed and (b) these individuals and facilities are operating in compliance with licensing laws. We reviewed the enforcement programs administered by each department, but could find no basis for concluding that either one of the departments is better able than the other to achieve the goals of licensing child day care facili- ties. Specifically: The DCA reports that the extent of unlicensed activity in the business and professions which it licenses varies widely. It maintains that the percentage of individuals and businesses practicing without a license is affected bya variety of factors including (1) the consumer’s willing- ness to accept services without first verifying that the provider is licensed, (2) the benefit of licensure of the licensee, and (3) the costs and affordability of licensure. The DSS is unable to estimate the percentage of unlicensed day care centers or family day care homes that are operating in the state. We have discussed the issue of unlicensed facilities with state and county licensing staff and with members of the Governor’s Advisory Commit- tee on Child Development programs. These individuals agree that unlicensed activity is a major problem with respect to family day care homes, but that it is not a significant problem with respect to day care centers. We believe that the factors cited above by the DCA explain, at least partially, the extent of unlicensed activity in the family day care industry . Under current law, the authority of the two departments to levy administrative fines is similar but not identical. Effective January 1, 1984, the DSS was granted the authority to administratively fine child care centers for code violations. Family day care homes, however, are not subject to such fines. At this time, the DSS is unable to determine if the authority to levy fines will improve compliance with the law and reduce health and safety violations. The department reports, howev- er, that the utilization of administrative fines on other categories of community care facilities does improve compliance with the law. On the other hand, only two regulatory agencies within the DCA have the statutory authority to levy administrative fines. If the Legis- Item 5180 HEALTH AND WELFARE \/ 1189 lature decides to transfer the Child Day Care Licensing program to the DCA, it should provide the department with the same (or a greater) degree of flexibility and authority to levy fines than currently is available to the DSS. 2. COIIlplaint Handling. Under current law, both the DSS and DCA are required to review a complaint made against a licensee within 10 days. The DSS review consists, at a minimum, of a face-to-face visit by a licens- ing evaluator with the licensee. The DCA is not required to conduct site visits in response to complaints against licensees. Instead, its constituent agencies are required to administratively review complaints and notify the complaintant that a review is in progress. In addition, according to the DCA, its constituent agencies are not legally required to resolve a com- plaint within a specified time period. The DSS reports that in 1982-83, 98 percent of all required complaint visits were investigated within 10 days. The DCA reports that a recent sample of the department’s licensing programs confirmed that 100 per- cent of the administrative reviews are completed within the required 1O-day period. We have no basis for determining whether the DCA could improve upon DSS’ 98 percent review rate in the event that child care licensing was transferred to the DCA. 3. Orientation of New Providers. The DCA and its constituent reg- ulatory agencies do not provide orientation programs for new licensees. However, some boards and bureaus provide new licensees with informa- tion concerning the law and its application. The DSS has provided orientation seminars on an ad-hoc basis for new community care providers for some time. Members of the Governor’s Advisory Committee on Child Development Programs advise us that these seIllinars have been very useful to new providers. The DSS is in the process of implementing a more extensive program of orientation for new family day care providers. The department reports that the program will begin operation during 1983-;84. 4. Consumer A wareness. The Consumer Affairs Act requires the DCA to provide\”educationalmaterials to the public relating to the various licensed businesses and professions. The various boards and bureaus de- – velop. and distribute a wide variety of publications for this purpose. In addition, the DCA sometimes provides consumer information through radio and television announcements. Chapter 323, Statutes of 1983, requires the DSS to provide a program of consumer awareness services as part of the Family Day Care Licensing program. At the time this analysis was prepared, the DSS had not yet implemented the required consumer awareness program. The depart- ment advises that the program will be implemented during 1983–84 and will consist primarily of the development and distribution of educational materials. 5. Regulations. The DCA and the DSS must adhere to the same statutory guidelines for issuing regulations. Specifically, each board and bureau within the DCA (1) develops regulations, (2) submits them to the Director of the department and the Office of Administrative Law for review, and (3) holds public hearings. The DSS follows a similar process. Our analysis indicates that there is no substantive difference in the rule- making procedures utilized by the two departments. 6. Regionalization. The DSS currently administers the Child Day Care Center and Family Day Care Licensing programs through 11 district offices. In addition, the DSS contracts with several counties to license 1190 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-Continued family day care homes. The DCA does not have a system of district offices throughout the state that it uses to administer its programs. The DCA advises, however, that most of its boards and bureaus have informal relationships with local governments, and that a few boards have more formal relationships with local governments. The Structural Pest Control Board, for example, contracts with the Los Angeles County Agri- cultural Commissioner to investigate pesticide-related complaints. The DCA advises that it would have to establish eight district offices in order to administer a day care licensing program. 7. Development of Civil Service Classifications for Staff. Both de- partments must adhere to state personnel guidelines in the development of staff classifications. Our analysis indicates that the civil service proce- dures utilized by the DCA and the DSS are essentially identical. Conclusion. We have not found any substantial difference in the abilities of the two departments to perform the functions specified in the Supplemental Report. Moreover, based on the cost estimates submitted by the departments, it does not appear that a transfer of responsibility for day care licensing to the DCA would result in major cost savings. We have no analytical basis for concluding that transferring day care licensing from the DSS to the DCA would result in a substantial improvement in the licensing program. Consequently, we recommend that the responsibility for day care licensing remain with the DSS. DSS Report on Fees for Community Care Licensure We recommend enactment of legislation requiring that community care facilities be cllarged a license fee based on (1) the cost of licensing each facility type and (2) the proportion of each facility’s clients whose care is paid for from nongovernmental sources. (Potential General Fund savings: $9,24~OOO) The 1983 Budget Act required the DSS to submit a report to the Legisla- ture on (1) \”the community care licensing fee system recommended by the Legislative Analyst in the Analysis of the 1983 Budget Bill, \”and (2) a flat fee system. The department’s report, submitted in December 1983, reviewed three possible fee systems for the program. In addition to the two fee systems specified in the Budget Act, the report identified a third system based on a sliding scale, with the amount of the fee for each facility determined by the type and capacity of the facility. The department recommends that this fee system be adopted. Each of the fee systems is described briefly below. Fee System Recommended by Legislative Analyst. In our Analysis of the 1983 Budget Bill, we recommend that community care facilities be charged a license fee based on (1) the total costs of licensing each facility type and (2) the proportion of each facilities’ clients whose care is paid for from nongovernmental sources. This recommendation was based on our finding that (1) licensing is a service that should be paid for by the beneficiaries of the service and (2) licensees can either absorb the fee or pass it through to their clients. However, because community care facili- ties are often unable to adjust the rates they charge publicly supported clients, we recommended that facilities pay a fee based on the percentage of their clients whose care is paid from nongovernmental sources. Sliding Scale Fee System. Under this proposal, the amount of the li- censing fee would depend on the capacity of the facility, and would cover Item 5180 HEALTH AND WELFARE \/ 1191 only specified costs of licensing each facility type. Specifically, the fee would be based on initial application and renewal processing costs, but would not reflect the costs of complaint handling, follow-up visits to facili- ties by licensing evaluators, staff training, and departmental overhead costs. The department maintains that application processing costs are readily identifiable, whereas other program costs are more difficult to apportion equitably to the various licensing categories. The department also states that the sliding scale system would avoid the costly process of determining the proportion of clients whose care is paid for from private sources. Flat Fee System. Under this system, all community care licensees would pay a fee of $100 regardless of their size or type. Table 6 displays the department’s estimate of the revenues, collection costs, and fee levels for each of the three systems. Table 6 Fiscal Effect of Three Alternative Community Care Licensing Fee Systems SUding Revenue Child Day Car.e Facilities Family homes …………………………………………… . Centers ……………………………………………………… . Residential facilities ……………………………………… . Totals …………………………………………………….. .. Cost of collection ………………………………………… .. Amount of Fee …………… ; ……………………………… .. Legislative Analyst’s Proposal $6,609,000 1,741,000 1,583,000 $9,933,000 $685,000′ $0 to $860 b Scale Fee- Department’s Proposal $2,179,000 826,000 1,383,000 $4,383,000 $685,000 $100 to $275 c Flat Fee $2,179,000 342,000 1,181,000 $3,702,000 $685,000 $100 The DSS estimates that the collection costs associated with the Analyst’s proposed fee system would be $1,740,000. We believe the costs of collecting the fees under our proposal would be no more than the costs the DSS estimates for its proposal, $685,000. We discuss this issue below. b Fee depends on facility type and percent of facility’s clientele that is privately supported. C Fee depends on facilitY type and capacity. Source: DSS. Assumes effective date of July 1, 1984 In its report, the department identified several reasons why it recom- mended a sliding scale fee system, rather than the system we proposed. The report also asserts that the flat fee system would be preferable to our proposal, for the same reasons. We discuss each of the department’s rea- sons below: 1. Costly Recordkeeping. The report states that the Analyst’s \”fee system based on the proportion of private pay clients would necessitate the establishment of a costly, complex system for operators in recordkeep- ing and reporting.\” Our analysis indicates that this is not so because opera- tors of co.rnmunity care facilities currently maintain records identifying which of their clients are supported by government programs. Without such records, the operators would be unable to charge the government for the costs of care provided to the clients. It is difficult to imagine how a facility operator could stay in business without also knowing which of his or her clients pay for their own care. 2. Private Pay Clients Would Subsidize Public Clients. The report states that under the Analyst’s proposal, \”private pay clients will in effect subsidize the cost of licensing for public pay clients.\” In fact, this would not occur under our fee proposal, but would occur under the system the 1192 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-Continued department proposes. This is because our proposal would result in a fee based only on licensing costs attributable to private pay clients, not public- ly supported clients. The deRartment’s proposal, however, would charge a fee to facilities regardless of the actual mix of private and public clients. 3. Costs to the Operator. The report states that the fee proposed by the Analyst \”puts an unacceptable financial burden on the (facility) oper- ator.\” This assertion appears to be based on the department’s estimate that (a) under our proposal the annual fee for child day care facilities would range from $200 to $300 (assuming 100 percent private pay clients), and (b) the annual fee for residential care facilities would range from $400 to $800 (assuming 100 percent private pay clients). The report provides no evidence that these fees represent an unacceptable financial burden on the operator. For example, assuming a capacity of 25 children and a monthly day care charge of $200 per month per child, the $300 licensing fee for a child day care center would represent one-half of 1 percent of the facility’s total revenue. 4. Incentives to Increase Capacity. The report states that the fee proposed by the Analyst would create an incentive for facilities to increase their capacity, thereby reducing the availability of small facilities that are more suited to the special needs of some community care clients. We recognize that the fee we propose may create a slight incentive to increase capacity since facilities in each licensing category would pay the same fee regardless of their capacity. We do not believe this .incentive would be significant, however, since (a) facility capacity is limited by the physical size of each facility and (b) operators face other more significant incen- tives to increase capacity such as the economies of scale, and the resulting potential for higher profits, which are inherent in larger facilities. 5. Children’s Day Care Facilities Would Pay Most of the Fees. The report states that under the Analyst’s proposal, \”the bulk of the fees as- sessed would be to children’s day care facilities\”and that \”this is counter to the movement of the last several years to provide low cost day care to the working parent.\” We believe these statements are misleading for three reasons: a. While it is true that under our proposal, children’s day care facilities would pay more in fees than any other facility type, the same is true under the department’s proposed sliding scale system. In fact, almost any imaginable community care licensing fee system would generate more revenue from children’s day care facilities than from any other type of facility. This is because children’s day care facilities represent more than one-half of all licensed community care facilities. b. Any increase in the cost of day care to working parents resulting from the imposition of a license fee would be small, even assuming facility operators pass the entire cost of the fee on to the parent. For exam- ple, the fee we propose would raise the average cost of family day care by less than $4 per month per child, assuming the owner of the home passed through 100 percent of the fee. c. The fee system we propose would not increase the costs of day care to subsidized parents. Instead it would only affect the costs incurred by nonsubsidized parents who, by definition, do not qualify for a subsidy based on income or need. 6. Costs of Collection. The report states that the fee proposed by the Analyst would require a costly and complex collection system. The Item 5180 HEALTH AND WELFARE \/ 1193 department estimates that annual collection costs would be $1,740,000 under our proposal, as compared with $685,000 for the sliding scale system it proposes. The department’s estimate of the collection costs associated with our fee system assumed that the department, and the counties under contract to the department, would be required to maintain records re- flecting the payment status (private versus public) of each client in each facility. Such a system would, indeed, be very costly. Fortunately, no such system would be needed. The department could simply allow facilities to report the percentage of their clients whose care was paid for from non- governmental sources, in the same way that many of these facilities now report their income and expenses for tax purposes. These reports could be audited, on a random basis, to assure a relatively high level of accurate self-reporting. We believe the cost of collection of the fees from our pro- posal would be no more than the cost the department estimates for its proposal, $685,000. Department’s Proposal Imposes a Fee for Publicly Subsidized Commu- nity Care. The sliding scale fee system proposed by the department would impose a fee on all community care facilities without regard to the percent of a facility’s clients whose care is paid for by the government. (This is also true of the flat-fee system identified by the department in its report.) It would, therefore, put facility operators in the position of choos- ing between one or more of the following three options: (1) absorb the cost of the fee, (2)’reduce services to clients, or (3) seek an increase in the rate at which the government reimburses them for the care they provide to subsidized clients. We do not believe that any of these options is desirable for the following reasons: It would be unfair to expectoperators to absorb the costs of a fee without a determination that they could afford to do so. The level of service provided to these clients is often specified in law. Therefore, the provider may not be able legally to reduce the level of service in order to offset the cost of the fee. Moreover, the policy of the Legislature has been to encourage a high quality of community care. Increasing the rates of reimbursement paid to community care opera- tors by the government in order to offset the cost of the licensing fee could result in increased General Fund costs. This is because the General Fund pays a substantial share of the costs of care for many community care clients. For these reasons, werecommend the enactment oflegislation requir- ing that community care facilities be charged a fee based on (1) the cost of licensing each facility type and (2) the proportion of each facility’s clients whose care is paid for from nongovernmental sources. Assuming such a fee becomes effective on July 1, 1984, the department estimates that it would generate increased annual General Fund revenues of $9,933,000. We estimate that these revenues would be partially offset by increased General Fund costs to collect the fees of $685,000. Thus, the net effect of the fee we propose would be to reduce the General Fund costs of the Community Care Licensing program by $9,248,000. This would not put this licensing program on a fully self-supporting basis. Under our proposal, fee revenues would pay for approximately 34 percent of the costs of the program, which is roughly the same percentage as the percentage of community care clients whose care is paid for from nongovernmental sources. The General Fund (and, to a lesser extent, federal funds) would 1194 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICE5-Continued continue to pay for the 66 percent share of the costs of the Community Care Licensing program which is attributable to publicly supported cli- ents. Changes in the Family Day Care Licensing Program Chapter 323, Statutes of 1983, the companion measure to the 1983 Budget Act, made major changes in the Family Day Care Licensing pro- gram. Specifically, the measure required that starting in 1983-84: The department, or counties under contract with the department, visit all family day care homes prior to approving a request for license renewal. Prior law required such visits only to those homes that had been cited for a major violation of licensing standards during the term of their license. The DSS estimates that this change will result in a 25 percent increase in the workload of the Family Day Care Licensing program. The department provide (1) ongoing training to licensing staff and law enforcement agencies, (2) consumer education for parents of children in family day care, and (3) an orientation program for pro- spective family day care providers. The department allocated $300,- 000 for these programs in 1983-84 and proposes spending the same amount in 1984-85. Funds for Family Day Care Licensing Were Reduced By the Governor. The Legislature appropriated $10,210,000 for family day care licensing for 1983-84. This amount included $7,210,000 for the county costs and $3,000,- 000 for the department’s costs of family day care licensing. The Governor reduced these amounts to $4.8 million and $2.2 million, respectively. The reductions were based on the department’s estimate in July 1983 of the costs of the Family Day Care Licensing program. The July estimate as- sumed: A workload standard of 228 family day care homes per county licens- ing evaluator. Based on our review, we conclude that this workload standard is appropriate, given the increased number of unannounced visits to family day care homes required by Chapter 323. An estimated caseload of 21,440 county-licensed and 9,770 state-li- censed family day care homes. Changes in Caseload Estimates for 1983–84. Based on more recent data, the department has revised its estimate of the number of family day care homes that will be licensed in 1983-84. Specifically, the department estimates that the counties will license 19,200 homes and state staff will license 12,380 homes in 1983-84. This represents a reduction of 2,240 homes, or approximately 10 percent, in county caseloads and an increase of 2,610, or 27 percent, in state caseloads. These changes are attributable to (1) transfer of licensing caseloads from the counties to the state (coun- ties can return the responsibility for family day care licensing to the state at any time), (2) an increase in the rate of growth in state caseloads, and (3) a leveling-off in the growth of county caseloads. The department estimates that county caseloads will be the same in 1984-85 as in 1983-84 (19,200 homes). The state caseloads, however, are expected to increase from 12,380 to 14,568 homes. This is an increase of 50 percent over the number of homes that the department assumed would be licensed by the state in its July 1983 estimate. Item 5180 HEALTH AND WELFARE \/ 1195 Budget Proposal Does Not Reflect Change in the Licensing Caseload Estimate We recommend that, prior to the budget hearings, the department re- port to the fiscal committees on how it proposes to satisfy the requirements of Ch 323\/83, given the number of family day care licensing positions proposed in the budget. The budget includes $2,200,000 for family day care licensing conducted by the state district offices. This is the same funding level as in the current year. Although the department estimates that the State caseloads will increase by 50 percent, as compared with the estimated caseloads upon which the current-year funding level is based, the budget does not pro- pose an increase in state licensing staff to handle the increased caseload. The department advises that it did not adjust the budget proposal to reflect the changes in its caseload estimate because this program has not been budgeted on the basis of caseload since the enactment of Ch 102\/8l. (Chapter 1’02, the companion measure to the 1981 Budget Act, made substantial reductions in the number of family day care home inspection visits required by state law.) We have several concerns with the department’s conclusion that the Family Day Care Home Licensing program is not a caseload-driven pro- gram: The provisions of Chapter 102 that affected this program have been repealed. Specifically, Ch 323\/83 restored the Family Day Care Li- censing program to pre-Chapter 102 levels. Prior to the enactment of Chapter 102, this program had been budgeted on a caseload basis for several years. The department’s conclusion is inconsistent with the Governor’s ra- tionale for vetoing funds appropriated for Family Day Care Licensing in the 1983 Budget Act. Specifically, the amount of funds vetoed was based on the department’s estimate of the 1983-84 licensing caseloads. By continuing to fund the state and county components of this pro- gram at 1983-84 levels, without regard to caseload changes, the budget provides (1) more money than is necessary to support county licensing activities and (2) less money than necessary to support state licensing activities~ In our analysis of Item 5180-161-001, Community Care Licensing-local assistance, we note that the budget proposes to fund counties at approxi- mately the same level in 1984-85 as they are funded in 1983-84, despite a 10 percent reduction in the department’s estimate of the number of homes that the counties will license. The department has been unable to explain this apparent inconsistency in the way the budget proposes to fund the county licensing program, as compared with the way it proposes to fund the state’s licensing program. Our review indicates that the department’s workload standard of 228 family day care homes per licensing evaluator is appropriate, given the changes enacted by Chapter 323. Thus, it does not appear that the funding levels proposed in the budget are adequate to provide the number of licensing staff that are implied by the department’s own workload stand- ards and caseload estimates. Therefore, we recommend that, prior to budget hearings, the department advise the fiscal committees how it pro- poses to satisfy the requirements of Chapter 323, given the number of family day care licensing positions proposed in the budget. 1196 \/ HEALTH AND WELFARE Item 5180 DEPARTMENT OF SOCIAL SERVICES-Continued Adoptions Program We recommend that prior to the budget hearings~ the department pro- vide the fiscal committees with (1) an estimate of the effect of Chapter 978, Statutes of 1982 (SB 14) on the adoption caseloads of the state district adoptions offices and (2) its plan for providing services to children served by the district offices. The DSS administers a statewide program of adoption services. The department provides services to parents who wish to place children for adoption and to persons who wish to adopt children. Adoption services are provided through three state district offices, 28 county adoption agencies, and a variety of private agencies. There are three components to the Adoptions program: (1) the Relin- quishment Adoption program, which provides adoption services to chil- dren in foster care, (2) the Independent Adoptions program, which prOvides adoption services to birth parents and adoptive parents when both agree on placement and do not need the extensive assistance of an adoption agency, and (3) the Intercountry Adoptions program, which places children from foreign countries for adoption in the United States. The Adoptions program is supported primarily from the General Fund. The General Fund pays for the cost of case work activities provided by the state and county agencies, and reimburses private adoption agencies for placing children who are hard to place due to their physical, mental, or emotional handicaps or other factors. Budget Proposal Does Not Account for Potential Caseload Increases in State District Adoption Offices. Chapter 978, Statutes of 1982 (SB 14), made various changes in child welfare services that will affect the Relin- quishment Adoption program. These changes were designed to ensure that as many children in long-term foster care placement as possible are placed in adoptive homes. We discuss these changes in detail in our analy- sis of Item 5180-151-001. The budget proposes total spending of $5,807,000 ($5,759,000 General Fund and $48,000 federal funds) for the department’s costs of (1) adminis- tering the statewide Adoptions program and (2) providing direct adop- tion services through the three state district offices. This is an increase of $113,000, or 2.0 percent, over estimated expenditures in 1983-84. The budget proposes to maintain staffing levels in 1984-85 at the 1983-84 levels -108 authorized positions. . Although the budget proposes a relatively small increase in the depart- ment’s costs of providing adoption services in 1984-85, the budget pro- poses a General Fund increase of $5.6 million, or 30 percent, for reimbursements to county adoption agencies. Most of the proposed in- crease for the county adoption agencies is due to anticipated caseload growth in the Relinguishment Adoptions program, which is expected to result from the changes in child welfare services made by SB 14. The department estimates that as a result of SB 14, the relinguishment adoptions caseloads in the 30 counties served by 28 county adoption agen- cies will increase by 30 percent, from an estimated 4,510 children receiv- ing services in 1983-84 to 5,850 children receiving services in 1984-85. The department has not provided an estimate of the effect of SB 14 on adop- tion caseloads in the 28 counties in which adoption services are provided by the department’s three district adoptions offices. Item 5180 HEALTH AND WELFARE \/ 1197 We believe that the caseloads of the district offices are likely to increase by a percentage similar to the percentage increase projected for county adoption agency caseloads. This is because the changes enacted by SB 14 apply to all counties, not just the counties served by county adoption agencies. Therefore we recommend th.itt, prior to the budget hearings, the department provide the fiscal committees with (1) its estimate of the effects of SB 14 on adoption caseloads in the three state district offices and (2) its plan for providing adoption services to children served by the district offices. . Department of Social Services AID TO FAMILIES WITH DEPENDENT CHILDREN Item 5180-101 from the General Fund and Social Welfare Fed- eral Fund Budget p. HW 170 Requested 1984-85 ………………………………………………………….. $1,562,645,000 a Estimated 1983-84 ……………………………………………………………. 1,491,641,000 Actual 1982-83 ……………………………………………………………………… 1,367,301,000 Requested increase $71,004,000 (4.8 percent) Total recommended reduction in Item 5180-101-001 ………. .. Total recom.mended reduction in Item 5180-181-001 (d) ….. . Recommendation pending ………………………………………………….. . 6,028,000 64,000 63,199,000 a Includes $32,723,000 in Item 5180-181′()()1(d) to provide a 2 percent cost-of-living increase to the max- imum AFDC grants. 1984-85 FUNDING,BY ITEM AND SOURCE Item Description 5180-101.()()1-Payments for Children 5180-10l-866-Paym:ents for Children 5180-101-919-Incentives from other states General Federal Fund Interstate Incentive Collections Amount $1,529,922,000 (1,662,496,000) (525,000) 5180-181′()()1 (d)-Cost-of-Living Adjustments 5180-181-866(d)-Cost-of-Living Adjustments General Federal 32,723,000 (36,806,000) Total $1,562,645,000 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Foster Care Group Home Rate Control Plan. Recom- mend that the Department of Social Services (DSS) report to the fiscal committees on (a) the details of its proposed group home rate control plan for 1984-85 and (b) its timeta- ble and specific plans for developing ajermanent plan. 2. Child Support Collections. Withhol recommendation on estimated net savings of $63,199,000 to the General Fund from child support collections, pending receipt of revised estimates in May; 3. Child Support Incentive Payments. Recommend that DSS report to the Legislature on its progress in reducing the Analysis page 1221 1222 1223 1198 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued backlog of county claims for child support incentive pr.y- ments. 4. Extension of Federal Compensation Benefits. Reduce Item 1224 5180-101-001 by $5,678,000 lind Item 5180-181-001 (d) by $64,- 000. Recommend a reduction of $12,832,000 ($5,742,000 from the General Fund and $7,090,000 in federal funds) to reflect the extension of Federal Supplemental Compensa- tion benefits. . 5. Asset Clearance Match Demonstration. Reduce Item 5180- 1225 101-001 by $350,000. Recommend reduction of $741,000 ($350,000 from the General Fund and $391,000 in federal funds) to reflect grant savings expected to result from a recommended increase in fraud investigator staff. GENERAL PROGRAM STATEMENT The Aid to Families with Dependent Children (AFDC) program pro- vides cash grants to those children and their parents or guardians whose income is not sufficient to provide for basic needs. Eligibility is limited to families with children who are needy due to the death, incapacity, con- tinued absence, or unemployment of a parent or guardian. In addition, the Aid to Adoption_sprogram provides assistance to children who would otherwise have difficulty finding adoptive homes. During the current year, 583,760 families (1,659,610 persons) are expect- ed to receive AFDC grants. Another 2,352 families will receive adoptions assistance grants. OVERVIEW OF THE BUDGET REQUEST Current-Year Deficiency The budget estimates that the AFDC program will incur a General Fund deficiency of $88,434,000 in the current year. This deficiency is the net result of several separate increases and decreases in funding require- ments, relative to what was anticipated in the 1983 Budget Act for this program. Cost Increases. The major unanticipated AFDC program costs are due to (1) increased caseload in the AFDC-Family Group and Foster Care programs ($52,444,000), (2) retroactive benefits that must be paid as a result of court rulings ($5,078,000), (3) a delay in implementing new regulations governing the beginning date of aid, per the court’s order in Miller v. Deukmejian ($4,250,000), (4) a reduced estimate of savings from the Welfare Fraud Early Detection and Prevention program and social security benefit verification system ($22,755,000), (5) a delay until 1984-85 of the savings expected to result from efforts to collect child support arrearages by reducing unemployment compensation benefits to absent parents ($2,679,000) and decreased child support collections due to tax intercept programs ($10,938,000). Additional Savings. These increased costs are partially offset by sav- ings during 1983-84 in two areas: (1) a delay in the payment of specified retroactive benefits ordered l?y various courts ($4,033,000) and (2) in- creased child support basic collections ($4,339,000). In reviewing the 1983-84 revised expenditures, we have identified two factors that may result in revised estimates. First, Federal Supplemental Compensation benefits for the unemployed have been extended beyond Item 5180 HEALTH AND WELFARE \/ 1199 the date assumed in the budget estimates. As we discuss below, DSS estimates that this will result in grant savings and a corresponding reduc- tion in the estimated deficiency of $2.9 million. Second, our analysis indi- cates that the department’s estimate of child support collections in 1983-84 is overstated, resulting in an underestimate of the 1983-84 defi- ciency by as much as $3 million. The estimated deficiency is subject to change in the May revision of the expenditure estimate. Budget Year Proposal The budget proposes expenditures of $1,562,645,000 from the General Fund for AFDC cash grants in 1984-85. The total includes $1,529,922,000 in Item 5180-101~001 and $32,723,000 in Item 5180-181-001 (d) to provide a 2 percent cost-of-living increase in maximum AFDC grants. This repre- sents an increase of $71,004,000, or 4.8 percent, from estimated 1983-84 expenditures. As shown in Table 1, total expenditures from all funds for AFDC cash grants are budgeted at $3,406 million in 1984-85, representing a $123 million, or 3.8 percent, increase from estimated expenoitures in the cur- rent year. Table 1 shows the costs of AFDC programs for 1982-83 through 1984-85. The state and county contribute 44.6 percent and 5.4 percent, respective- ly, toward the cost of grants provided to those recipients who are eligible under federal Family Group (FG) and Unemployed Parent programs. The federal government contributes 50 percent toward the costs of these grants. The federal share of total costs incurred under the FG and U programs, however, exceeds 50 percent because the grant costs for refu- gee families are 100 percent federally funded during the first 36 months in which refugee families are in the United States. For thoseAFDC recipients who are not eligible for grants under federal law, the state pays 89.2 percent of the grant costs and the county pays 10.8 percent. These sharing ratios apply to the State-Only AFDC-U program and to grants for women in their first 6 months of pregnancy. The AFDC-FG program accounts for $2,533 million, or 76 percent, of all estimated grant costs (excluding cost of living adjustment) under the three major AFDC programs. The Unemployed Parent program accoUIits for another 17 percent, and the Foster Care program accounts for 7 per- cent. Proposed General Fund Budget Changes Table 2 shows the factors resulting in the net increase of $71,004,000 in General Fund support for the AFDC program in 1984-85. This net in- crease reflects $98,490,000 in increaseo costs, offset by $27,486,000 in proposed reductions. As Table 2 shows, the largest cost increases expected in 1984-85 are due to (1) increased caseload ($23,787,000), (2) payment of court-ordered retroactive benefits ($30,407,000), and (3) a cost-of-living adjustment of 2 percent ($32,723,000). ! ! Table 1 Expenditures for AFDC Grants, by Category of Recipient 1982-83 through 1984-85 (in millions) Actual 1982-83 Estimated 1!J83…M Program State Federal County Total State Federal County fCIFa Total State AFDC family group …….. $1,068.4 $1,192.9 $126.8 $2,388.1 $1,143.0 $1,309.9 $139.6 $2,592.6 $1,189.6 AFDC unemployed par- ent ………………………….. 197.0 331.0 23.9 551.9 233.3 342.5 28.2 604.0 228.3 AFDC foster care ………….. 153.3 51.3 8.1 212.7 168.9 55.4 8.1 232.4 169.1 Adoptions programs …….. 5.2 O.Ob 5.2 5.3 0.2 5.4 6.2 Child support incentive payments to counties 10.7 22.3 -31.3 1.7 11.2 19.1 -29.9 0.6 1.0 13.5 Child support collections -67.4 -71.3 -7.7 -146.4 -70.0 -74.6 -8.2 -152.8 -76.7 — — — Subtotal ………………………. $1,367.3 $1,526.1 $119.7 $3,013.2 $1,491.6 $1,652.5 $137.9 $0.6 $3,282.7 $1,529.9 Proposed 2 percent COLA …………………….. 32.7 Court-ordered retroac- tive payments ………… (.1) (.2) (.3) (10.3) (12.1) (1.2) (23.6) (32.8) AFDC cash grants to re- fugees …………………….. (170.7) (170.7) (120.8) (120.8) Totals ………………………….. $1,367.3 $1,526.1 $119.7 $3,013.2 $1,491.6 $1,652.5 $137.9 $0.6 $3,282.7 $1,562.6 :’IIOTE: Detail may not add to total due to rounding. a Interstate Collection Incenctive Fund-represents child support payments paid to California counties by other states. b Less than $50,000. ,. … 6 8 … …… 0 \”‘1’1 ::I: ,. t’l ~ >- ;:: t; in ::I: , tit >- Prol!Qsed 1984-85 Federal County fCfF a Toti} ~ Z t:i =i ~ % t’l $1,355.9 $145.8 $2,691.2 til t\”\” m ~ \”a 314.2 27.6 570.1 m !:Xl Z t\”l 53.8 8.1 231.0 0.7 6.8 til m Z … 19.7 -32.8 0.5 0.9 -81.7 -9.0 -167.4 — — n % ;:: $1,662.5 $139.7 $0.5 $3,332.7 til :Ia m 36.8 3.7 73.3 (38.0) (3.9) (74.7) Z J, 0 ~ .. (89.4) (89.4) 5\u00b0 c $1,699.3 $143.4 $0.5 $3,405.9 CD A. -,…,. (!I S CJ1 J-o 00 0 Item 5180 HEALTH AND WELFARE \/ 1201 Table 2 Proposed General Fund Budget Changes for AFDC Grants 1984-85 (in thousands) 1983-84 Revised Expenditures ……………………………………………………. : …………… . A. Adjustments to Ongoing Costs or Savings 1. Basic Caseload …………………………………………………………………………………. .. 2. Prospective costs of court cases a. Miller v. Deukmejian …………………………………………………………………. .. b. Others ………………………………………………………………………………………… .. Subtotal ………………………………………………………………………………………. .. 3. Retroactive costs of court cases a. Green v. Obledo ………………………………………………………………………… .. b. Zapata v. Woods ………………………………………………………………………… .. Subtotal ………………………………………………………………………………………. .. 4. State and federal legislation a. Ch 323\/83 (AB 223) (i) State Only AFDC-U two month limit ……………………………….. .. (ti) 1983-S4 Cost-of-living adjustments …………………………………….. .. b. Ch 325\/82 (AB 2315)-Foster Care ………………………………………….. .. c. Ch r,m \/82 (AB 2695)-Foster Care ………………………………………….. .. d. Reduced grant costs due to 83\/84 OASDI increase ……………….. .. e. End to. Extended Unemployment Benefits ……………………………… .. Subtotal ………………………………………………………………………………………. .. 5. Fraud detection and prevention a. Asset clearance match (SB 620) ……………………………………………….. .. b. Early detection and prevention program ……………………………….. .. c. Social Security benefit verification ……………………………………………. .. d. VI \/ D I verification …………………………………………………………………….. .. Subtotal ………………………………………………………………………………………. .. 6. Adjustments in child support collections and incentives ……………… .. 7. Beginning date of aid regulations ………………………………………………….. . 8. Other adjustments ………………………………………………………………………….. .. Total Adjustments ………………………………………………………………………. .. B. New Costs or Savings 1. 1984-85 Cost of living adjustment (2 percent) ……………………………. .. 2. Retroactive costs of court decisions a. Wright v. Woods …………………………………………………………………………. . b. Wood v. Woods ………………………………………………………………………….. .. c. Lowry v. Woods ………………………………………………………………………… .. d. Angus v. Woods: ………………………………………………………………………….. . Subtotal ………………………………………………………………………………………. .. 3. Reduced grant costs due to 84-85 OASDI increases ……………………. . 4. Ch 1151\/83 (AB 1529) …………………………………………………………………….. .. 5. Foster Care audit recoveries ………………………………………………………….. .. 6. FlCA for non-profit group homes …………………………………………………. .. 7. Child support UI\/DI intercept …………………………………………… , ………… .. Total New Costs …………………………………………………………………………. . C. Total Changes for 1984-85 ………………………………………………………………….. . D. Proposed Budget for 1984-85 …………………… : ……………………………………… .. Cost -$4,933 -531 -$1,660 -5,078 -$196 738 -471 -471 -345 7,197 -$888 -3,378 1,567 104 $19,979 7,746 . 2,335 347 LEGISLATIVE ACTIONS AND COURT DECISIONS New Beginning Date of Aid Total $1,491,641 $23,787 -$5,464 -$6,738 $6,452 -$2,595 -$1,444 -$2,482 -46 ($11,470) $32,723 $30,407 -241 1,235 -I,m 732 -4,211 ($59,534) ($71,004) $1,562,645 In signing the 1983 Budget Bill, the Governor vetoed $6.6 million from the General Fund appropriation for the AFDC program. The Governor’s veto anticipated that emergency regulations woula be implemented to 1202 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued change the date on which AFDC applicants begin to receive aid. In the past, aid was provided from the date of application if the individ- ual’s application was approved within the month he\/she applied for aid. For all others, aid was provided on the first day of the month following the date of application. The governor proposed to provide aid from the date that the application is approved, rather than from the date of application. The San Francisco Superior Court has issued a temporary restraining order in the case of Miller v. Deukmejian, preventing the implementation of the proposed emergency regulations. The plaintiffs in the case contend that no emergency exists, as defined in the Administrative Procedures Act (Ch 567\/79). The court has barred the implementation of the new regula- tions, pending a finding on the merits of the case. The DSS has begun the process of approving new beginning date of aid regulations on a nonemergency basis and expects that the new rules will take effect April 1984. The DSS also estimates that the new regulations will result in General Fund savings of $2,125,000 in 19~, instead of the $6.6 million originally estimated at the time the Governor vetoed the funds. Added Child Support Incentives Chapter 1151, Statutes of 1983 (AB 1529), establishes an additional mechanism for rewarding counties that increase their child support collec- tions. The act provides that beginning in 1984-85, 50 percent of the in- creases in the state’s share of child support collections will be distributed among those counties that have contributed to the statewide increase. The DSS estimates that the total incentive to be distributed in 1984-85 will reach $1,235,000. Child Care Payments Required of AFDC Parents Chapter 1282, Statutes of 1983 (AB 1162), requires the Superintendent of Public Instruction to establish regulations to increase the fees collected from AFDC recipients whose children attend state-subsidized child care services. Under current regulations, AFDC parents aswell as other par- ents, are charged varying fees for these services based on their income. AFDC parents, however, can be reimbursed for up to 100 percent of the costs of work-related child care through increases in the AFDC grant. The budget assumes that during 1984-85, an average of 4,000 AFDC families per month will be charged an average of $160 for state-subsidized child care. It is estimated that in 1984-85, this will result in increased General Fund costs of $3,334,000 to the AFDC program. These costs are due to the fact that AFDC families can be reimbursed for up to 100 percent of their costs of child care through increases in the AFDC grant. According to the provisions of the bill, these costs will be offset by reduced General Fund expenditures in the Department of Education. The effects of this law are discussed in more detail in connection with the budget for child care in the Department of Education (Item 6100-196-001, Non-K-12 Education Programs). . ELIGIBILITY, CASELOADS, AND GRANTS Eligibility Criteria Table 3 lists the eligibility criteria for the AFDC and Food Stamp pro- grams (most AFDC recipients receive food stamps). Item 5180 HEALTH AND WELFARE \/ 1203 Rise in Caseload Chart 1 shows the number of persons receiving AFDC or adoptions assistance between 1977-78 and 1984–85. During this period, the number of individuals receiving assistance increased by 220,000, or 15 percent. This increase would have been substantially greater if it had not been for enactment of eligibility changes pursuant to the federal Omnibus Budget Reconciliation Act of 1981. These changes became effective during 1981- 82. The DSS has revised upward its estimate of the AFDC ca8eload for 19~. The 1983 Budget Act, as passed by the Legislature and signed by the Governor, assumed an AFDC caseload of 1,610,363 persons in 19~. The department now estimates that the average monthly caseload in 1983–84 will be 1,661,962 persons per month, an increase of 3.2 percent above the budget, as enacted. Caseloads in 1984–85 are expected to increase by 0.1 percent above revised 19~ levels, as shown in Table 4. The AFDC-U caseload is expected to decline by 6.3 percent, but this is more than offset by a 2 percent increase in the AFDC-FG caseload. Chart 1 AFDC Case load Persons per Month (in thousands) D Foster Care andAAP\/AAC Unemployed Parent Family Group 77-78 78-79 79-80 80-81 81-82 82-83 83-84 84-85 (Est.) (Prop.) Maximum Payment Levels Table 5 shows the maximum AFDC grant levels in 19~ for selected family sizes. It also shows the maximum grant levels for 1984–85 based on (1) a 2 percent cost-of-living adjustment (COLA), as proposed by the budget, and (2) a 5.5 percent adjustment, as required under current law. Table 6 shows comparable payment levels in California and the nine next largest states. 1. Categorical Requirements A. AFDC-Family Group ……… . B. AFDC-Unemployed Par- ent ……………………………………… . C. AFDC-Foster Care …………. . D. Food Stamps II. Income and Resource Require- ments A. Real and Personal Property B. Household Goods\/Personal Effects C. ~otor Vehicle D. Gross Income Limit …………. . E. Allowable Income Deduc- tions Table 3 Basic Eligibility Requirements For the AFDC and Food Stamp Programs Child with one parent absent, deceased, or physically or mentally incapacitated. \”Principal Wage Earner\” unemployed. Federal eligibility availble if priricipal wage earner is unemployed for 30 days and has recent work experience. Otherwise, family is eligible for 3 months of Emergency Assistance and State-Only AFDe. Child placed in foster care. Federal eligibility is for a child removed by the court from an AFDC-eligible home; the state supports court-placed children not linked to AFDC, and, for 6 months, voluntarily placed children. Any family or individual qualifies who meets federally determined income and resource requirements. AFDC $1,000 limit; home exempt Exempt First $1,500 of net market value exempt 150 percent of AFDC maximum aid payment (see Table 5) 1. Standard work expenses ($75 full time; $50 part time) 2. Child care expenses (up to $160 per child) 3. If the family has received AFDC within past 4 months, $30 and Ya of remaining income; not applied to families not previously on AFDC\u00b7 Food Stamps $1,500 limit ($3,000 for household with one member over 60) Exempt Limit of $4,500 on fair market value Limit $527 for an individual; each additional household member increases limit by $182 (family of 3 limit of $891) 1. 18% of earned income 2. Standard deduction ($89) 3. $125 limit on the sum of excess sheleter costs and de- pendent care expenses 4. Excess medical expenses (actual amount less $35) for households with member over 60 or receiving Title II dis- ability payments. F. Net Income Limit……………… AFDC maximum aid payment (see Table 5) Limit of $405 for individual; each additional household member adds about $140 (family of 3 limit is $685) a Once a family qualifies for aid, during the first four months, it is entitled to the $30 and one-third earned income exemption in calculating the AFDC grant. ~ …. 6 i -I 0 …….. \”II ::r:: ~ ~ ~ :> r: ~ m CIt :> ~ z t! :::; ~ :::c ~ c t\”\”‘ In ;;2 .\” In l:I:l Z ~ C In Z -I n :::c i= c ,., In Z I n 0 :s .. ;0 C II a.. -….. (l) S CiI ,….. ~ Item 5180 HEALTH AND WELFARE \/ 1205 Table 4 AFDC Average Monthly Persons Receiving Assistance 1983-84 and 1984-85 Estimated Proposed Change Program 1983-84 1984-85 Number Percent AFDC-Farnily Group ………………………….. 1,259,870 1,284,570 24,700 2.0% AFDC-Unemployed ……………………………. 371,180 347,720 -23,460 -6.3% AFDC-Foster Care ……………………………… 28,580 28,780 220 .8% Aid for Adoption of Children ……………… 2,352 2,716 364 15.5% Refugees’ Time-eligible …………………………………….. (71,850) (52,092) (-19,758) -27.5% Time-expired …………………………………….. (99,480) (136,888) (37,~) 37.6% Totals ……………………………………………… 1,661,962 1,663,786 1,824 0.1% ‘Grants to refugees who have been in the United States less than 36 months (time-eligible) are supported entirely by federal funds. Time-expired refugees, those in the United States longer than 36 months, may qualify for and receive AFDC grants supported by the usual share of federal (50 percent). state (44.6 percent) > and county (5.4 percent) funds. Table 5 Maximum AFDC Grant Levels 1983-84 and 1984-85 Budget Proposal 1984-85 Current Law\u00b7 FamijySize 1983–84 Amount Change Amount Change 1 ………………………………………………… . 2 ………………………………………………… .. 3 ………………………………………………… . 4 ………………………………………………… . 5 ……………………………………………….. .. $258 424 526 625 713 $263 $5 $272 $14 432 8 447 23 537 11 555 29 638 13 659 34 727 14 752 39 Based on an estimated 5.5 percent increase in the California necessities index (CN!) during 1983. Table 6 State Comparison-Maximum AFDC Grant Levels January 1984 California …………… _ …………………………………………………………. . New york\u00b7 ……………………………………………………………………… . Michigan b ……………………………………………………………………… . New Jersey ……………………………………………………………………… . i~:~:~~~~~.~.:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: Ohio ……………………………………………………………………………….. .. Florida …………………………………………………………………………….. . North Carolina ……………………………………………………………… .. Texas ………………………………………………………………………………. . Two $424 399 335 273 273 250 227 178 176 128 Family Size Three $526 474 404 360 350 302 276 231 202 148 New York City ~ate. Grants vary depending on shelter costs in each county. b Detroit rate; uses annualized value of utility allowances, and assumes family rents home. o Philadelphia and Pittsburg rate. d Rate in Chicago and 13 other couilties. Four $625 566 473 414 415 368 343 273 221 178 1206 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHilDREN-Continued Previous Increases to AFDC Grants. The Welfare Reform Act of 1971 (Ch 578\/71) requires that AFDC grant levels be increased annually. These increases are based on changes in the California Necessities Index (CNI). Chart 2 shows the increases since 1973 in the maximum grant for a family of three. The chart also shows the purchasing power of the grant measured in 1973-74 constant dollars-that is, the actual amount of the grant adjusted for inflation as measured by the CNI. The chart shows that since 1981-82, the \”real\” value of the grant has declined from $260 (1973- 74 dollars) to $237 during the current year. If the administration’s proposal for a 2 percent COLA for AFDC grants is approved, the grant’s real value would decline to $229 (1973-74 dollars). Chart 2 Purchasing Power of AFDC Grants Is Declining Maximum Grant for Family of Three Dollars 600 537\” 500 Actual Dollars 400 300 200 262 1–:\u00b7—-1 ___ …1-. __ 1 ___ _ r — r- 269 270 —-I 271 1 —- 254 265 265 260 —-1—-1 ___ _ 242 248 250 241 237 229 100 . b 1973-74 Constant Dollars 73-74 74-75 75-76 76-77 77-78 76-79 79-80 8Q-81 81-82 82-83 83-84 84-85 a Based on proposed COLA of 2% for maximlJm aid payment. b Aid payments adjusted for inflation as measured by the California Necessities Index during the preceding calendar year. BENEFITS AND RESOURCES AVAilABLE TO AFDC RECIPIENTS In addition to the monthly cash grant, AFDC recipients may qualify for and receive a variety of other benefits. Some of these additional benefits, such as Medi-Cal, are available to individuals because they are AFDC Item 5180 HEALTH AND WELFARE \/ 1207 recipients. Other benefits, such as public housing and social security, are available to AFDC recipients to the extent that they meet specific eligibili- ty criteria and, in the case of public housing, are accepted into the pro- gram. This section discusses the major benefits available to AFDC recipients, in addition to their monthly cash grants. It should be noted that, in addition to the benefits discussed below, AFDC recipients may: 1. Utilize a variety of social services, including family planning, pro- vided by local agencies; , 2. Participate in the Work Incentive (WIN) program, which provided employment services and social services to 189,130 recipients in 1982- 83; and 3. Participate in the Women, Infants, and Children Nutrition program if the parent is pregnant or if the family has children under five years of age. In a:ddition, approximately 34,034 AFDC families shared their household with an SSI \/ SSP grant recipient during 1982–83. Medi-Cal. The Medi-Cal program, administered under Title XIX of the federal Social Security Act, provides funds to health care providers for the cost of care delivered to public assistance recipients, and other medi- cally-needy individuals whose medical costs exceed their ability to pay. All AFDC recipients are eligible for Medi-Cal health care. During 1982–83, 568,400 persons, or 36 percent of all AFDC recipients, utilized Medi-Cal reimbursed fee-for-services care. An undetermined number of additional AFDC recipients utilized other Medi-Cal services provided through pre- paid health plans, dental plans, and other categories of service paid for on a per-capita basis. The average monthly cost of fee-for-service Medi-Cal services utilized by AFDC recipients during 1982–83 was $140.02. Unemployment Insurance. Unemployment Insurance (UI), support~ ed by employer contributions, provides weekly cash payments to unem- ployed persons who are actively seeking work. Approximately 57,834 AFDC recipients also received Ul benefits in 1982–83. The amount of weekly. UI benefits paid to an unemployed person de- pends upon the amount of earnings received by the claimant during a base period of employment. The average UI benefit received by AFDC cases in 1982–83 was $258 per month. Based on the average family size, the average value per family member was $91.17. Food Stamps. The purpose of the food stamp program is to ensure that low-income households are able to obtain an adequate level of nutri- tion by prOviding food stamps at no cost to eligible households. For most households, eligibility for food stamps is based on gross income and re- sources available. For households with a member age 60 or over or receiv- ing Title II disability payments, eligibility. is based on net income and resources available to the household after allowable deductions. The amount of food stamps awarded is based \u00b7on net monthly income and household size. Because their income is low, most AFDC households quali- fy for food stamps. In 1982–83, 1,164,923 persons receiving AFDC grants also participated in the food stamp program .. According to DSS, the aver- age cash value of food stamps used was $33.04 per individual AFDC recipi- ent. AFDC Special Needs. The Special Needs program provided aver- age allowances of $55.00 to 23,822 AFDC families during 1982–83 for spe- cial needs such as prenatal nutrition. The average value of benefits provided was $19.43 per individual. 39~7795S 1208\/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Social Security. The retirement, survivors, disability, and health in- surance (RSDHI) program provides benefits to retired and disabled work- ers and their dependents and to survivors of insured workers. It also provides health insurance benefits for persons age 65 and over and for the disabled under age 65. According to statistics compiled by the Department of Social Services, 10,773 AFDC families received RSDHI payments ave- raging $216 per month during 1982-83, or an average of $76.33 per individ- ual. RSDHI payments are counted as income for AFDC grant purposes. As a result, individual AFDC grants are reduced by the amount of the RSDHI payment. Child Care During Working Hours. Several different child care programs may be available to AFDC recipients, depending on where they live. The Office of Child Development (OCD) in the State Department of Education provides subsidies on behalf of children from AFDC families to a network of child care centers throughout the state. In 1982-83, an estimated 31,391 AFDC children received subsidized child care in OCD- supported centers, at an average cost of $128.67 per child per month. Another child care resource available to AFDC families in 1982-83 was the \”income disregard\” mechanism. Under this arrangement, individual AFDC families select and pay for child care, and are then allowed to deduct the cost of the care from net countable income for purposes of the AFDC grant calculation~ In 1982-83, approximately 7,639 families received child care through this indirect subsidy mechanism. These families reduced their countable in- come an average of $98 per month as a result. These child care deductions are limited to a maximum of $160 per child. Child Nutrition Programs. Low-income children, including those from AFDC families, are eligible for free meals provided through schools and child care agencies. Public schools must provide at least one such meal per day for each needy pupil, at an estimated cost of $1.35 per meal. Approximately 35 percent of AFDC recipients are school age children. Housing Programs. Several housing assistance programs are avail- able to low- and moderate-income households. These households may receive (1) subsidized shelter as tenants in public housing or (2) rental assistance to help them afford to live in new or rehabilitated units owned by public or private agencies. The availability of housing assistance, and the income thresholds for eligibility, vary among the counties. It is estimat- ed that in 1982-83, approximately 46,847 AFDC recipients resided in pub- lic housing, and an additional 123,363 received rental assistance. Low-Income Energy Assistance Program. During 1982-83, California provided cash assistance to low-income households to help them pay the cost of the energy they used. Categorical public assistance recipients, such as AFDC households, are automatically eligible for this assistance, which is not considered in calculating the amount of a household’s cash grant. During 1982-83, approximately 388,613 AFDC recipients received a cash . grant under this program. The average annual benefit provided under the Home Energy Assistance Program in 1982-83 was $162 per household, or $57.24 per individual. These federal funds also provided an undetermined number of AFDC recipients with (1) up to $300 in emergency help in paying energy bills and (2) grants of up to $1,000 to weatherproof the recipients’ hOllles. Other Income. In addition to the benefits described above, 13 per- cent of AFDC recipients report other incomein the form of child support Item 5180 HEALTH AND WELFARE \/ 1209 payments, contributions from members of their household who do not receive AFDC, their own earnings, and in-kind income. This other income is available to the recipient in addition to the actual AFDC grant awarded each month. The maximum AFDC grant may be reduced by some portion of the other income received. Calculation of A verage Benefits. Table 7 shows the average value of benefits and other income received in 1982-83 by an individual residing in a 3-person AFDC household. The averages are calculated in two ways. The \”Average Cash Value of Benefits Received\” shows the average bene- fit value per individual in those AFDC households that received the par- ticular benefit. For example, among those AFDC households that received food stamps, the average value of the coupons per individual was $33.04. The \”Value of Benefits Averaged Over All AFDC Recipients\” gives the average benefit value for all individuals in the AFDC program, including both those who received the particular benefit and those who did not. As a result, this measure of benefits per AFDC individual is less than the average benefit received per participating individual. The average value of benefits provided to a family of three was calculated by multiplying the individual average benefit value by three. Difficulties in Calculating Benefits Received by AFDC FamIlies. The average benefit value provides the best available picture of the total benefits received by AFDC families. Like all averages, of course, it masks what can be large differences among recipient families. Some families may receive more benefits than the average; others may receive less than the average. The average, however, provides a measure of the benefits pro- vided to the hypothetical \”average\” AFDC household. Several points must be kept in mind when reviewing the information on average benefit values provided in Table 7. Not all recipients receive each of these benefits. Some programs are geographically limited; others have long waiting lists; still others have distinct eligibility criteria that some AFDC recipients are unable to meet. More than one-half of all AFDC families get less than the average benefit value. This is because relatively few individuals receive unemployment compensation, child care, or rental subsidies-each of which provides relatively large benefits to those qualifying for them. This skews the distribution of benefits, causing the median family benefit to be less than the average benefit. The average number of persons receiving a benefit understates the number of persons who use the program over the year. Because some recipients enroll for only a few months at a time, the program provides aid to more individuals in the state than the monthly average figure would imply. Not all AFDC cases contain three members. Under some benefits programs, (Unemployment Insurance’, Social Security, LIHEAP), larger families get the same benefit as smaller families. Most AFDC Families Are Below the Poverty Line. Table 7 shows that the majority of AFDC recipients rely on the AFDC grant and food stamp allotment to meet their essential needs. A small group of recipients receives earned income or other income. It is possible that the combina- tion of the AFDC grant, food stamps, and other income could provide a minimum standard of living for an AFDC family. Data from a recent survey conducted by the DSS, however, shows that mostAFDC families have reported resources that put them below the poverty line. 1210 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Table 7 Monthly Benefits and Resources Available to AFDC Recipients\u00b7 1982-83 Value of OveraU Average Resource Average Recipients Percent Cash Value Averaged Times Three Using ofAFDC of Resource Over AU (Family Resource Resource Recipientsb Received Recipients of Three) AFDC Cash Grant …………………. 1,561,559 100.0% $149.18 $149.18 $447.54 Medi-Cal C ……………………………….. 568,400 36.4 140.02 50.97 152.91 Unemployment Insurance …….. 57,834 3.7 91.17 3.38 10.14 Food Stamps ……………………………. 1,164,923 74.6 33.04 24.65 73.95 AFDC Special Needs ……………… 67,416 4.3 19.43 0.84 2.52 Social Security ………………………… 30,488, 2.0 76.33 1.49 4.47 Child Care d ……………………………. 31,391 2.0 128.67 2.59 7.77 Child Nutrition e …………………….. 549,669 35.2 19.69 6.93 20.79 Public Housing E …………………….. 46,847 3.0 40.00 1.20 3.60 Rental Subsidies E. g …………………. 123,363 7.9 80.00 6.32 18.96 Earned Income ………………………. 87,399 5.6 104.59 5.85 17.55 Other Income h ………………………. 79,551 5.1 47.15 2.40 7.20 Average Total Monthly Re- sources ……………………………… $255.80 $767.40 Average Total Annual Re- sources ……………………………… $3,069.60 $9,208.80 LIHEAPi …………………………………. 388,613 24.9 $57.24 $14.25 $42.75 Average Total Annual Re- sources with LIHEAP …….. $3,083.85 $9,251.55 SOURCES: Department of Social Services, Office of Economic Opportunity, Department of Health Services, federal Departments of Housing and Urban Development and Health and Human Services, State Department ,of Housing and Community Development. b Percentages do not add to 100 percent because some recipients utilized more than one benefit. C Fee-for-service users only. Other Medi-Cal service categories, such as prepaid health plan, are paid for on a per capita basis. Data on the utilization of these fee-for-service categories by public assistance recipients is not available. , d Includes only subsidized child care provided through the Office of Child Development in the State Department of Education. e Based on $1.35 average meal value, one meal per 175 school days per year. E Based on 1981 federal study of percent of subsidized housing occupied by AFDC recipients. g Includes assistance under Sections 8 and 23 of the federal Housing and Urban Development Act and Farmer’s Home Administration’s Rental Assistance program. h Includes contributions from absent parents and other persons in the households, and in-kind income. i This amount is received in a lump sum rather than on a monthly basis. Chart 3 shows the distribution of resources for a sample of AFDCfami- lies in February 1982, The income for each family includes the AFDC grant, the food stamp allotment (prorated in food stamp households that include individuals besides the AFDC family members), gross earnings, cash contributions, and any other reported income (earned or unearned income, Social Security, unemployment benefits, in-kind income, etc.). The family’s income is calculated as a percent of the 1982 Census Bureau poverty level for the appropriate-size family. The chart shows that most families have incomes’ below the poverty l~vel, and 35 pe.rcent had incomes at less than 80 percent of the poverty level. A small group (4.8 percent) had incomes above the poverty level, with one family in the sample having an income at 152 percent of the poverty level. Item 5180 HEALTH AND WELFARE \/ 1211 It is not surprising that most AFDC families fall between 80 to 90 per- cent of the poverty level. The AFDC grant alone provides resources which equal 70 to 80 percent of the poverty level and when added to the food stamps allotment, the combined value reaches 80 to 90 percent of the poverty level. What is surprising is the large group (35 percent) with income less than 90 percent of the poverty threshold. Most of these fami- lies (about 60 percent) have only the AFDC grant as monthly income. They received no food stamps and they had no earnings or. other income. Almost all families with incomes above the poverty level had earned income. When expenses associated with working are deducted from the family’s income,only 2.1 percent of AFDC families remain above the poverty level. Most of these families are above the poverty line because they qualify for the $30 and one-third earned income disregard, which expires after four months. When this disregard expires for the families in this sample, only 0.3 percent will be left above the poverty level. Chart 3 Most AFDC Families Are Below Poverty Level 8 February 1982 AFDC Survey Percent of AFDC Population 60 51–60% 61-70% 71-80% 81-90% 91-100% 101-120% 121-140% 141-160% Percent of 1982 Poverty Level b a Source: Oeparlment of Social Services. Income includes AFDC grant and, if applicable, food stamps, earned in- come, social security, unemployment benefits, cash contributions, other cash income, and in-kind income. b Poverty Level based on 1982 Census Bureau figures. This sample provides the best picture available of the resources avail- able to AFDC families. However, the distribution of income for the AFDC population in 19~ may differ from the distribution indicated by this sample for the following reasons: Major federal program changes, originally enacted in August 1981, were in the process of being implemented during the sample month ‘(as\”.discussed below). Most families with earned income were still 1212 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued entitled to the $30 and one-third disregard, but would, in subsequent months, become ineligible for the disregard. Thus, the current AFDC caseload would be likely to have fewer families with incomes above the poverty line. . The income in this table includes only cash and in-kind resources. Some of the benefits listed in Table 7 are Medi-Cal, Low-Income Home Energy Assistance payments, public housing and rental subsi- dies, child care services, and child nutrition programs. Receipt of benefits under any of these programs would decrease the demands on the family’s cash resources for providing basic living needs. EFFECTS OF THE 1981 CHANGE IN AFDC RULES In August 1981, Congress enacted the Omnibus Reconciliation Act of 1981 (PL 97-35) which made three important changes in the rul~s govern- ing eligibility for and the calculation of AFDC benefits. First, the federal law provides that families with a gross income in excess of 150 percent Of the state’s AFDC need level (the Minimum Basic Standard of Adequate Care) are ineligible for AFDC benefits. In 1983-84, this limit in California is $789 per month for a family of three and $937 per month for a family offour. Second, the federal law limits the use of the $30 and one-third earned income disregard to four months. Under prior law, when calculating the AFDC grant, an individual could receive a standard deduction of $30 from gross income plus one-third of the remainder for an indefi- nite period of time. Finally, the law specifies that the $30 and one-third disregard be calculated after subtracting other ip.come deductions (for example, work-related expenses and child care expenses). Previously, the disre- gard was applied before other deductions were made. Calculating the one-third disregard last has the effect of reducing its value, thereby reducing the grant for a family that qualifies for the disregard. Some observers have maintained that these changes will have an ad- verse impact on the likelihood that AFDC recipients will find and hold jobs. To assess the validity of this view ,answers are needed to the following questions: First, will parents who are discontinued from receiving AFDC bene- fits because their income exceeds the gross limit, reduce their earn- ings in order to return to AFDC? Second, will AFDC recipients with jobs reduce their earnings when the $30 and one-third disregard expires at the end of four months? Finally, will AFDC recipients without earnings be less likely to get jobs under the new rules? In order to obtain data that would help answer these questions, the Department of Social Services (DSS) conducted a study of AFDC recipi- ents before and after the federal rule changes were made in California. The department identified a sample of cases with earned income in July and October 1981 and then reviewed the status of these cases a year later, after the AFDC rule changes were implemented. The DSS followed up on cases in the same county as the 1981 case appeared, and reviewed cases transferred to another county. However, no attempt was made to ensure that a family whose case was closed in one county did not reapply later Item 5180 HEALTH AND WELFARE \/ 1213 in some other county. This may cause the estimate of cases closed in’ 1982 to be too high. Do Families Who Are Discontinued from AFDC Due to Excess Income Return to Aid? The department found that families who were discon- tinued because their income exceeded the gross income limit were no more likely to return to AFDC than those discontinued for other reasons. Table 8 shows that 25 percent of families with earned income were discon- tinued from AFDC due to the new gross income limit. Only 14 percent of these cases were back on AFDC a year later. A similar return rate (15 percent) was experienced in sample cases discontinued for reasons other than the income limit changes. Table 8 AFDC Cases Discontinued Because of Excess Income Remained Off Aid\u00b7 Discontinued Cases Due to Gross Statusin 1982 of Cases Closed in 1981 Income Limit Cases remained closed b …………………………………….. ;……………………………………. 86% Cases reopened ………………………… u …………………… ,……………………………………….. 14 Totals ……………………………………………………………………. ;……………………………. 100% Number of samples cases ………………………………………………………………………….. fll Percent of total sample ……………………………………………………………………………… 25% a-Source: Department of Social Services. b Closed both July and October 1982. Not Due to Income Limit Change 85% 15 100% 87 22% Do AFDC Families Reduce Their Earnings When the Income Disregard Expires? The DSS data suggest that some AFDC families may be less likely to continue working after the income disregard expires. Table 9 compares the aid status in 1982 of two groups of cases that had earnings before the new rules took effect. While both groups retained AFDC eligi- bility under the new rules, the grants for the first group were reduced due to expiration of the four-month eligibility for the income disregard. The AFDC grants for the second group remained unchanged under the new rules because they had little or no earnings when the rules actually took effect. Compared to the second group, the families that had used up their four-month earned income disregard were more likely to be on aid a year later (89 percent compared to 82 percent) and were Jess likely to have earnings if they were on aid (16 percent compared to 50 percent). Table 9 Status of AFDC Cases Not Discontinued Due to 1981 Rule Changes Grants Reduced at end of Status of Cases in 1982′ Four Months Closed…………………………………………………………………………………………………. 11% Open with earnings ………………………………………………………………………….. 16 Open without earnings ……………………………………………. ;……………………… 73 Totals ………………………………………………………………………………………….. 100% Number of sample cases …………………………………………………………………… 81 Percent of total sample …………………………………………………………………….. 21 % a Status in either July or October 1982. Gl’anfs Not Reduced at End of Four Months 19% 50 32 100% 117 30% 1214 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Will AFDC Families Choose to Work? The DSS survey provided no data that could help answer the third question: are nonworking AFDC families more or less likely to seek and find employment under the current AFDC income rules? Since these rules took effect, the share of AFDC families with earned income has declined from nearly 19 percent in July 1981 to 5.6 percent in April 1983. Part of this decline is due to cases discontinued as a result of the gross income limit, and part is due to increases in unemployment. If the percentage of recipients with earned income continues to decline, however, it would suggest that fewer AFDC families choose to work. One reason to anticipate that fewer families will choose to work is that under some circumstances, a working AFDC family will have less income available to meet its needs than a nonworking AFDC family. Forexample, Chart 4 shows that as of December 1983, the nonworking AFDC family of three could receive $629 per month from AFDC grants, food stamps, and the state renter’s tax credit. If the parent took ajob paying a gross income between $783 and $1,225 per month, the working family would actually have less money left, after job expenses are paid, than the family that did not work. This is because a family with gross earnings of more than $783 per month exceeds the AFDC income limits and becomes ineligible for Chart 4 Available Income if an AFDC-FG Parent Takes a Job a Available (First Four Months Only) Income\u00b7 $1.200 1.00 80 60 Income for \/ Working Family b ————–~~ ……….. \/ …………… . $629 Income for nonworking AFDC Family of Three $200 $400 $600 $800 $1.000 $1.200 $1,400 Gross Monthly Earnings a Assumes one parent and two children. b Includes AFDC grant (if eligible). renter’s credit, federal earned income tax credit. and earnings, less child care expenses, other work expenses. and taxes. (Child care costs assumed to equal one-third of earnings to a max- imum of $160 er child er month. Item 5180 HEALTH AND WELFARE \/ 1215 aid. (The actual AFDC limit for a family of three is $789; this can be met with gross earnings of $783 plus federal earned income credit which is about $6 per month at this income level.) The chart does not show avail- able income after four months, when the family no longer qualifies for the earned income disregard. Mter the income disregard expires, the working family’s available income is less than that for a nonworking AFDC fam~ly for a much wider range of gross income levels (from $261 to $1,225) .. Some working families have more available income than shown in Chart 4 because they have been able to find child care at a cost less than that assumed in the chart. Chart 5 compares the available i~come of two AFDC families, both eligible for the $30 and one-third disregard. One family has \”high\” child care expenses. (one-third of income up to a maximum of $160 per child per month). The other family has lower child care expenses (one-sixth of income up to a maximum of $100 per child per month) . The chart shows that paying less for child care means more income available to pay for the family’ sother needs. In addition, if child care expenses are low, a working parent’s available income falls below the income of the nonworking AFDC parent over a much narrower range of monthly earn- ings than if child care expenses are high. ChartS Available Income for an AFDC-FG Parent Who Takes a JobS With High and Low Child Care Costs Available Income $1,00 40 20 $629 – Income for nonworking AFDC family of three a Assumes one pa(ent and two children. b Assumes child care costs equal to one-sixth of income to a maximum of $100 per child per month. C Assumes child care costs equal to one-third of income to a maximum of $160 per child per month. $200 $400 $600 $800 $1,000 $1,200 $1,400 Gross Monthly Earnings 1216 \/ HEALTH AND WELFARE Item 5180 AiD TO FAMILIES WITH DEPENDENT CHILDREN-Continued Reducing the Loss of Income for Working Families The potential loss of income facedhy AFDC parents who cannot find low-cost child care may deter some AFDC families from taking jobs pay- ing more than the gross income limits for AFDC or food stamps. There are three ways to reduce these potential disincentives to work. All seek to narrow the range of monthly earning levels where available income for a working family is less than\u00b7 what a nonworking AFDC family receives. 1. Increase A vailability of Low-Cost Child Care. One way of reduc- ing the loss of income for working AFDC families is to increase the availa- bility of low-cost child care. As Chart 5 shows, lowering the cost of child care increases the amount of earnings available to working families over all ranges of income and almost eliminates those points at which available income is less than a nonworking family’s income. To the extent that child care spaces are available when needed, child care provided through the Department of Education provides low cost child care for non-AFDC families. 2. Increase Tax Credits to Low-Income Families. Another way to reduce the loss of income for working AFDC families is to increase tax credits to low-income families. State and federal taxes determine, in part, the amount of income available to a family that works. The less a family has to pay in taxes, the less it has to earn to achieve the same income as a nonworking AFDC family. To increase the amount of income available to a family with earnings, in the ranges considered here, however, would require increases in refundable credits for low-income families similar to the federal Earned Income Tax Credit. This is because existing tax credits available to low income families more than offset state tax liability for most of the incomes assumed here. 3. Increase the AFDC Need Level (that is, the Minimum Basic Standard . of Adequate Care). Another way to reduce the loss of income for AFDC families that take jobs is to increase the AFDC need level. Increas- ing the MBSAC does not affect the size of AFDC grants and thus does not affect grant payments to most recipients. It increases the amount that an AFDC family can earn and still qualify for AFDC. This would, however, add to AFDC caseloads families that receive relatively small grants and, in turn, increase Medi-Cal caseloads. But it would also narrow the range of incomes where the nonworking family loses money if the parent ac- cepts a job. AFDC-FOSTER CARE PROGRAM The Aid to Families with Dependent Children-Foster Care (AFDC-FC) program pays for the care provided to children by guardians, foster par- ents, and foster care group homes. Children may be placed in foster care in one of three ways: Court Order. A juvenile court may place a child in foster care if the child (1) has been abused, abandoned, or neglected and (2) can- not be safely returned home-such children are referred to as de- pendents ofthe court. In addition, a court can place a child in foster care if the child is beyond the control of his or her parent(s) or guardian (s)-such children are referred to as wards of the court. In addition, probate courts may place children in guardianship arrange- ments for a variety of reasons\u00b7. Item 5180 HEALTH AND WELFARE \/ 1217 Voluntary Agreement. County welfare or probation departments may place a child in foster care pursuant to a voluntary agreement between the department and the child’s parent(s) or guardians(s). Relinquishment. Children who have been relinquished for adop- tion may be placed in foster care by an adoption agency pending their adoption. . Chart 6 shows the percentage of children in foster care that fall into each of these categories. Chart 6 Placement Status of Children in Foster Care Dependents 81.8% Relinquished 1.2% Voluntaries 2.6% Guardians 3.9% Wards 10.5% Source DSS, Foster Care Information System, March 1983 Budget Proposal The 1984-85 budget proposes total expenditures of $231,068,000 for the AFDC-FC program, including $4,590,000 for a proposed 2 percent cost-of- living increase. Of the total amount proposed, $168,621,000 is from the General Fund, $54,354,000 is from federal funds, and $8,093,000 is from county funds. The costs of the Foster Care program are shared by the three levels of government. The cost of care for children who are eligible under the federal Foster Care program is shared by the federal government (50 percent), the state (47.5 percent), and the counties (2.5 percent). The costs of care for children who qualify for the State-Only Foster Care program are shared 95 percent by the State and 5 percent by the counties. The Department of Social Services (DSS) estimates that 58 percent of all ~——— —.-.-~~~- 1218 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued children in foster care are eligible for the federal Foster Care program, while the remaining 42 percent are eligible only for the state Foster Care program. Children qualify for the federal Foster Care program if (1) they are placed in care pursuant to a court order, (2) they have been removed from homes that qualify for AFDC grants, and (3) they are not receiving care from a for-profit group home. State-only foster care is available to children regardless of their placement status, except that children placed voluntarily in foster care are eligible for the state program for only six months. In order for a child to be eligible for the state-only program, his or her family need not be eligible to receive AFDC grants. The child, however, must meet certain AFDC eligibility requirements. Expenditures for Foster Care Have Been Stable for Several Years Chart 7 displays the expenditures for the foster care program over the last several years. As the chart shows, the costs of this program have remained relatively stable in recent years. Our analysis indicates that this is due to three factors: 1. Stable Caseloads. The budget assumes there will be 28,780 chil- dren in\u00b7 foster care in 1984-85. This is an increase of 480 children, or less than 2 percent over caseloads in 1981-82. Dollars Chart 7 Foster Care Costs Have Been Stable for Several Years (in millions) 80-81 81-82 82-83 83-84 Estimated 84-85 Proposed Item 5180 HEALTH AND WELFARE \/ 1219 2. Stable Mix of Group Home and Family Home Placements. The type of hOIUe in which a child’is placed can significantly affect the costs of his or her care. This is because group homes receive substantially higher rates of reiInbursement than foster family homes. For example, in April 1983, the average monthly cost of group home care was $1,523, while the average cost of foster family home care was $364. Obviously, a substantial shift of children out of group homes and into foster family homes would result in significant reductions in the total costs of the Foster Care pro- grain. Conversely, a shift in the opposite direction would increase pro- gram costs. In recent years, the percentage of children in foster care who reside in group homes has grown only slightly-from 22.8 percent in January 1981 to 23.5 percent in April 1983. 3. Limits on Foster Care Rate Increases. Prior to 1977-78, counties paid the major share of the nonfederal costs of foster care. In addition, each county established its own rates of reimbursement for foster parents and group homes. During 1978-79, the state, through the enactment of Ch 297\/78 (SB 154) (a) assumed 95 percent of the nonfederal costs of foster care and (b) limited rate increases to the percentage cost~of-living in- creases granted by the Legislature. These provisions were extended by Ch 282\/79 (AB 8). As a result of this ceiling, rates paid to foster care providers increased 9.2 percent in 1981-82, zero in1982-83, and 4 percent in 1983-84. Recent Legislation May Affect Foster Care Costs During the Next Several Years Two pieces of legislation which were recently enacted may affect the costs of the Foster Care program during the next several years. Specifi- cally, Ch 978\/82 (SB 14) made significant changes in child welfare services that may reduce foster care caseloads. In addition,Ch 977\/82(AB 2695) changed the. way in which the government sets the rates of reimburse- ment for foster care providers. We discuss the potential effects of each measure below. Changes in Child Welfare Services made by SB 14 May Reduce Foster Care Case\/oads and Percentage of Group Home Placements. Senate Bill 14 created theexnergency response, family reunification, family main- tenance, and permanent placement service programs. These new service programs are intended, in part, to: Reduce the number of new placements in foster care by providing services to keep abused and neglected children safely iri their homes (emergency response and family maintenance); . Increase the number of discontinued foster care cases by providing services to reunite dependent children with their parents (family reunification) ; and Increase the number of discontinued foster care cases by providing for the early development of a permanent plan for children who . cannot be safely reunited with their families, with first consideration being given to adoption (permanent planning). In addition, SB 14 requires the courts to seek the least restrictive, most family-like setting when placing children in foster care. This provision may result in a reduced percentage of foster care children being placed in group homes and an increased percentage being placed in family homes. Because family home care is much less expensive than group home care, this provision of SB 14 could reduce foster care expenditures. The extent to which SB 14 will reduce the costs of the Foster Care program depends on the success of county welfare departments in imple- menting its reforms. 1220 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILI~REN-Continued Assembly Bill 2695 Changed the Way the Govemment Sets Foster Care Rates. AB 2695 made two major changes with respect to foster care rates. Specifically, it provides for: 1. Equalization of Foster Family Home Rates. Prior to the enact- ment of AB 2695, rate increases for foster family homes\u00b7 were limited to the percentage cost-of-living adjustments (COLA) provided by the Legis- lature. Because the rates paid by counties to family homes varied widely, the imposition of the COLA ceiling served to perpetuate these variations. AB 2695 provides for a gradual equalization of foster family home rates among counties. Specifically, it e.stablishes a uniform statewide basic rate. In addition, it provides that (a) homes whose rates are above the basic rate will receive a rate increase that is less than the percentage COLA pro- vided by the Legislature for the AFDC program, and (b) homes whose rates are below the basic rate will receive percentage increases that ex- ceed the COLA provided by the Legislature. Over a period of years, this will result in all foster family homes in the state receiving the same basic rate. Moreover, it will allow the Legislature to continue to exert control over increases in the costs of foster family care. 2. Group Home Rate Setting. Prior to enactment of AB 2695, rate increases for group homes were subject to the same COLA ceiling as foster family homes. As a result, the pre-existing variations among counties were perpetuated here, as well. Under AB 2695, group home rates will be established by a controlled, cost-based rate setting system. This rate set- ting system consists of two components: Cost-Based Rates. The measure requires the DSS to annually es- tablish cost-based rates beginning in 19~. These rates must reflect the actual expenditures of each group home, on a per child basis, in the base year (in mostcases, the most recent calendar year for which expenditure data are available). These cost-based rates are not the rates that group homes will be paid. Instead, they are intended to serve as a benchmark of each facility’s need. Rate Control Plan. The measure also requires the DSS to annual- ly develop and submit to the Legislature, beginning in 1983-84, a rate control plan for the subsequent fiscal year. The measure provides that beginning in 1984-85, group home rates will be set according to the rate control plan. AB 2695 did not specify the factors which the de- partment should consider in developing a rate control plan. It clearly anticipated, however, that the rates established under the plan should bear some relationship to the cost-based rates established by the de- partment. Under this two-part rate setting system, each facility’s reimbursement rate will be based on its funding need, as reflected in its cost-based rate, but the reimburseJIlent rate will be limited by the rate control plan in order to ensure that the total costs of group home foster care are kept within the amounts the Legislature is willing to pay. The. fiscal significance of the rate control plan is illustrated by the fact that the cost-based rates set by the department for 155 group homes during the current year are 21 percent higher, on average, than the rates that currently are paid to these group homes. Thus, in the absence of a rate control plan or a COLA ceiling, the cost of the care provided by these homes would increase by 21 percent in 1984-85. Item 5180 HEALTH AND WELFARE \/ 1221 Concerns Regarding Implementation of AB 2695 We recommend tha~ prior to the budget hearings, the department re- port\u00b7 to the fiscal committees on the det8J1s of its proposed rate control plan for 1984-85. We further recommend that the department provide the fiscal committees with its timetable for developing a rate control plan that is based on cost-based rates rather than on a simple extension of the COLA ceiling. Department Has Prepared Draft Regulations to Extend the COLA Ceil- ing on Group Home Rates for 1984-85. The department’s preliminary rate control plan for 1984-85 is essentially an extension with slight modifi- cations of the COLA ceiling that has been in effect since 1977-78. This plan is contained in draft regulations prepared by the department. Although we have not had an opportunity to review the draft regulations in detail, we understand, that under this plan, (1) group homes whose rates were below the median rate in 1983-84 will receive an increase of more than the COLA increase provided in the budget for 1984-85 and (2) group homes whose 1983-84 rates were above the median will receive an in- crease oEless than the COLA provided in the budget. Thus, the plan would base rate increases for 1984-85 on the median 1983-84 rate without regard to a facility’s actual cost-based rate. We have two concerns regarding the department’s draft regulations: Extension of the COLA Ceiling Will Not solve the Problem that Resulted in the Enactment of the Group Home Rate-Setting Provi- sions of AB 2695. One of the purposes of AB 2695 was to reduce the. variation in the rates at which similar group homes are reim- bursed for the foster care services they provided. The controlled cost-based rate setting system provided iuAB 2695 was designed to ensure that the rate at which group homes were reimbursed would reflect the costs of the services provided by each home, while main- taining the Legislature’s control over AFDC-FC program costs. The draft regulations would not accomplish this purpose. Instead, they would merely extend the COLA ceiling, with slight modifications, into 1984-85. While a control system of this sort will allow the Legisla- ture to- continue to exert control over total program costs, it does nothirig to reduce the rate disparities that AB 2695 was designed to eliminate . Draft Regulations are Subject to Change as a Result of Public Hear- ings. A public hearing is scheduled for February 29, 1984, on the draft regulations. It is impossible to predict what portion, if any, of the draft regulations will be modified as a result of the hearings. There- fore, it would be premature to assume that the department’s final rate control plan will be identical to that reflected in the draft regulations. We believe that the fiscal committees need to know what the rate control planfqr 1984-85 will be so that they can determine the appropriate level of funding for the AFDC-FC program. This is because the costs of the program in 1984-85 will depend, to a great extent, on the exact nature of the rate control plan. For this reaSQn, we recommend that, prior to budget hearings, the department report to the fiscal committees on the details of its proposed rate control plan for 1984-85. We further recom- mend that the department advise the fiscal coinmittees of its timetable and specific plans for developing a permanent rate control plan based on cost-based rates, ratherthan a simple COLA ceiling. . , 1222 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued CHILD SUPPORT ENFORCEMENT The Child Support Enforcement program is a revenue-producing pro- gram administered by the county district attorneys’ offices. Through this program, the district attorneys locate absent parents, establish paternity, and obtain and enforce court-ordered child support payments. This serv- ice is available to welfare recipients and nonwelfare fiunilies. Child support paymen~s collected on behalf of AFDC recipients are used to reduce state, county, and federal welfare costs. Collecti()ns made on behalf of nonwelfare clients are distributed directly to the client. Chart 8 shows collections on behalf of AFDC families from two sources: collec- tions obtained directly from parents and collections through attachment of state and federal income tax refunds. ChartS AFDC Child Support Collections Increase Projected a 1976…,.77 through 1984-85 Dollars (In Millions) O Tax Refund Intercepts .. AFDCBase Collections 76-77 77-78 78-79 79-80 80-81 81-82 82-83 83-84 84-85 a SOURCE. Department of Social ServIces\u00b7 (Est.) (Prop.) Projected Child Support Collections are Overestimated We withhold recommendation on estimated net savings of $~l99,OOO to the General Fund anticipated from child support collections~ pending receipt of revised expenditures estimate in May. The budget estimates that child support collections in 1984-85 will reach $167,436,000 (all funds), an increase of 9.6 percent over estimated collec- Item 5180 HEALTH AND WEr..FARE \/ 1223 tions for 1983-84. These collections will reduce the costs of the AFDC program paid by the state, ioeal and federal government. Part of the growth is due to increasedcolleetions resulting from a new program that attaches up to 25 percent of unemployment benefits paid to parents with un. p. aid child support obligations. In addition, collections, excluding those due to tax refund ~d UI mtercept p~ogr~s, are expected to increase 5 percent above estimated base collections m 1983-84. Our analysis indicates that DSS’ estimates of child support collections for 1983-84 and 1984-85 may be unrealistic. The department did not base its estimate of collections for 1983-84 on actual collections in 1982-83. Instead, the departInent estimated the 1983-84 collections by applying a 5 percent annual increase to actual collections in 1981–82. However, the actual rate of growth between 1981-82 and 1982-83 was only 1.7 percent. Consequent- ly, the department’s estimate for 19~ (1) begins with a base level that is too high and (2) assumes.a growth rat~ percent~which is three times the rate actually realized in the last year for which data is available. It is not surprising that collections grew by only 1.7 percent between 1981-82 and 1982-83 .. Several factors help explain this slow rate of growth in base collections, and the effects of these factors\u00b7 probably Will continue to be felt in 1984-85 . The 1981 federal law changes in AFDC eligibility have reduced case- loads and, in turn, resulted in decreased AFDC child support collec- tions. These decreases were not fully reflected in the department’s estimates for 1984-85. . Increased collecti0Ils through income tax refund intercept\u00b7 programs have been accompanied by decreases in base collections. In part, this is due to a shift of staff resources to the intercept functions. On the other hand, one factor may tend to increase collections in the coming years. Los Angeles County, which accounts for about 20 percent of statewide collections, projects large increases in base collections during 19~the first time in several years that it has done so. For these reasons, we are not able to document the validity of the estimate for child support collections in the budget year. Accordingly, we withhold recommendation on estimated net savings of $63,199,000 to the General Fund due to child support collections, pending receipt of revised expenditure estimates in May. By then, we will have more information on actual collection experience, which will provide a more reliable basis on which to estimate collections and resulting Incentive payments for 1984- 85. Delays in Payment of Incentives to Counties We recoHlmend that, prior to the budget hearings~ the department re- port. to the Legislature on its progress in reducing the backlog of county claims for child support incentive payments .. California and the federal government provide incentive payments to counties to encourage \u00b7efforts aimed at collecting child support owed to AFDC families. The federal incentive payment equals 12 percent of total AFDC-related collections, and the state provides an additional 7.5 percent incentive. These incentive payments increase the share of child support collections that the county can keep. Without the incentives, the county would retain only 5.4 percent of AFDC-related collections (the county’s share of AFDC. payments). With the incentive payments, counties can keep a total of 24.9 percent of the AFDC-related collections. 1224 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued During 1982-83, the backlog of unprocessed county claims for incentive payments grew. In that year, a total of $31,324,000 was due to be paid to counties as child support incentives. Assuming a steady flow of claims and payments, we would expect the DSS to make $2.6 million in payments to the counties each month. Between January and June 1983, however, in- centive payments to counties averaged only $1.5 million per month, result- ing in increases to the backlog averaging $1.1 million per month. The DSS reports thatit has taken several steps to alleviate the backlog in incentive claims processing. These include (1) temporarily redirecting staff and increasing overtime, (2) securing exemptions to the hiring freeze in order to fill\u00b7vacancies, and (3) focusing processing efforts on the largest claims .. As a result of these changes, payments of incentives increased during October, November, and December 1983. The DSS expects the backlog of the largest claims to be eliminated by May 1984. The DSS advises, however, that the backlog began to develop when the unit was fully staffed, and thus, if staffing levels remain constant, procedural changes will still be necesssary to preventbacklogsfrom developing in the future. Delays in providing incentive payments to the counties may work at cross purposes to the thrust of the program: to encourage adequate county staffing for child support enforcement activities. Therefore, we recom- mend that, prior to the budget hearings, the department report to the fiscal committees on the progress it has made in reducing the backlog of Unprocessed incentive payment claims submitted by the counties. BUDGET ISSUES Federal Supplemental Compensation Benefits Extended We recommend a reduction of $12,832,000 .($5,742,000 from Item 5180- 101-001 and $~~OOO trom Item 5180-101-866)\u00b7 to reflect the extension of Federal Supplemental Compensation benefits. In September 1983, Congress enacted PL 98-92, which extended until March 1985 provisions of the Federal Supplemental Compensation (FSC) Act. Under this act, the federal government provides an additional 8 to 12 weeks of unemployment compensation benefits to workers who have exhausted their basic 26 weeks of benefits. According to the Employment Development Department, California is now providing 12 additional weeks of payments, but the number of weeks of additional benefits could decrease to 8 weeks depending on the state’s Unemployment rate. At the time the DSS prepared the 1984-85 budget estimates for the AFDC program, the FSC was due to terminate at the end of September\u00b7 1983. The department’s estimate for the AFDC prograinassumed that termination of FSC benefits would occur, and its estimates of AFDGgrant costs were increased to reflect the loss of these benefits. The extension of FSG will bring about a reduction in AFDC costs in 1983-84, as well as in 1984-85. It will do so for two reasons: (1) families will submit applications for AFDC at a later date because they can rely on unemployment benefits for two to three added months and (2) those AFDG families that receive unemployment benefits will receive a smaller grant. The DSS estixnates that as a result of extending the FSC benefits through March 1985, AFDC grant expenditures in 1983-84 will be $6.8 million less than originally estimated ($2.9 million General Fund, $3.6 million federal Item 5180 HEALTH AND WELFARE \/ 1225 funds, and $0.3 million county funds). In addition, AFDC grant expendi- tures in 1984-85 from state and federal funds will be $12.7 million less than proposed in the budget ($5.7 million General Fund and $7.0 million fed- eral funds) and expenditures from county funds .will be $0.6 million less. The decreased AFDC grant costs will also result in a $143,000 reduction ($64,000 General Fund, $71,000 federal funds, arid $8,000 county funds) to provide the AFDC cost of living adjustment proposed by the budget. We recommend that the appropriations for AFDC grants be reduced to re- flect the savings expected due to the extension of FSC. In addition, as a result of the FSC extension there will be savings in administrative costs due to reduced caseloads. We have included a related recommendation under Item 5180~141-001, county administration of wel- fare programs, to reflect these savings. Asset Clearance Match Demonstration We recommend a reduction of $741~OOO ($35~OOO in Item 5180-101-001 and $391~OOO in Item 5180-101-866) to reflect grant savings expected to result.from increased fraud investigative staffrecommended in Items 5180- 141-001 and 5180-141-866. Chapter 703, Statutes of 1981 (SB 620) j authorizes afour~county demon- stration project in which welfare and Franchise Tax Board (FTB) records are matched to determine if any welfare recipients earned more than $30 in interest or dividends in any year. Because both AFDC and Food Stamp programs include eligibility rules that put limits on the assets a family may retain and still qualify for assistance, the matching of FTB records with welfare records provides a means for reducing program costs by identify- ing recipients with assets that may have exceeded the limit. Matches are referred to county investigative staff to determine whether any aid was fraudulently received. Actual workload dueto the matches has exceeded original estimates. As a result, current fraud investigator staffing is not. sufficient to review all cases that warrant investigation. Based on our review, we conclude that increased staffing will result in AFDC grant savings by (1) detecting and collecting overpayments and (2) identifying families that currently re- ceive aid who are ineligible because they do not meet the assets test. We, therefore, have recommended an augmentation to county administration of welfare programs, Items 5180-141-001 and 5180-141-866, topermit an increase in investigator staffing. In order to reflect the savings expected from additional investigations, we recommend a reduction of $741,000 in AFDC grant expenditures from this item. ($350,000 in General Fund costs and $391,000 in federal funds). . 1226 \/ HEALTH AND WELFARE Item 5180 Department of Social Services STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED Item 5180-111 from the General Fund and Social Welfare Fed- eral Fund Budget p. HW 172 Requested 1984-85 …………………………………………………………….. $1,101,124,000 a Estimated 1983-84 ………………………………………………………………… 1,097,386,000 Actual 1982-;83 ………………………………………………………………………. 1,140,480,000 Requested increase Totaf3;~~~=e~Jea~ecd~~~on ………………………… , ……………….. . None a This amount includes $35,297,000 proposed in Item 5180-18HlOl (a) for cost-of-Iiving increases. 1984-85 FUNDING BY ITEM AND SOURCE Item Description 5180-111-OO1-Payments to Aged, Blind, and Dis- abled 51BO-l11-866-Payments to Aged, Blind, and Dis- abled-Refugees 5180-181-001 (a)-Payments to Aged, Blind, and Disabled COLA 5180-181-866(e)-Payments to Aged, Blind, and Disabled COLA-Refugees Total GENERAL PROGRAM STATEMENT Fund General Federal General Federal Amount $1,065,827,000 (8,551,000) 35,297,000 (204,000) $1,101,124,000 .The Supplemental Secllrity Income\/State Supplementary Payment (SSIISSP) program provides cash assistance to eligible aged, blind, and disabled persons. Eligibilityfor theSSI\/SSP program is determined on the basis of an elderly,olind, or disabled applicant’s income and resources. The federal government pays the cost of the SSI grant. California has chosen to supplement the federal payment by providing an SSP grant. The SSP. grant is funded entirely from the state’s General Fund. In California, the SSIISSP program is administered by the federal government through local Social Security Administration (SSA) offices . . During the current year, an estimated 648,112 persons will receive as- sistance each month under this program. OVERVIEW OF THE BUDGET REQUEST Current..;Year Surplus The budget estimates that General Fund expenditures for the SSIISSP program in the current year will be $14,316,000 less than the amount budgeted. The reduced expenditure level reflects lower-than-anticipated caseloads, partially offset by higher-than-anticipatedaverage monthly grants. Lower Caseloads~ The 1983 Budget Act assumed that during 1983- 84, an average of 654,850 persons per month would receive SSI \/ SSP bene- fits. The department’s most recent estimate of the monthly caseload for 1983–84 is 648,112 persons, or 1 percent less than the projected caseload. Actual 1982-83 Category of Recipient State Federal Aged ……………………….. . $439.9 $257.6 Blind ……………………….. . 40.5 28.0 Disabled ………………….. . 660.1 658.6 Refugees: Time Eligible ………………… . (39.7) Time . Expired ……………. ; …. . ~) (13.3) Totals ………………… . $1,140.5 $944.2 a Numbers may not add to totals due to rounding: b Includes 2.0 percent COLA. Table 1 Total. Expenditures for the SSI\/SSP Program By Category of\u00b7 Recipient 1982-83 through.1984-85 (in millions) Estimated 1983-84 Total State Federal Total $697.5 $406.4 $272.0 $678.4 68.6 40.2 3Ll 71.3 1,318.6 650.8 738.3 1,389.1 (39.7 (29.6) (29.6) ~) ~) (25.8) ~) $2,0&4.7 $1,097.4 $1,041.4 $2,138.8 -@\” S Co\/{ -~ Pro[!Qsed 1984-85b State Federal Total $400.2 $271.8 $672.0 40.8 32.3 73.2 660.1 774.2 1,434.2 (22.1) (22.1) (22.6) ~) ~) ::t: $l,lOLl $1,078.3 $2,179.4 ~ ~ o ~ \” … ~ 1228 \/ HEALTH AND WELFARE Item 5180 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued Higher A verage Grants. The 1983 Budget Act anticipated average monthly SSP grant costs of $272 during 1983-84. The department’s most recent estimate, however, is that the average monthly grant will be $275, or 1.1 percent higher than originally anticipated. Our review of the current-year estimate of expenditures indicates that it is reasonable. This estimate is subject to change during the May revision of expenditures. Budget Year Proposal The budget proposes an appropriation of $1,101,124,000 from the Gen- eral Fund for the state’s share of the SSIISSP program in 1984-85. This is an increase of $3,738,000, or 0.3 percent, above estimated current-year expenditures. Federal expenditures of $1,078,278,000 are proposed for the SSI portion of the grants in 1984-85, an increase of $36,888,000, or 3.5 percent, over estimated current-year expenditures. Table 1 shows total expenditures for 1982–83 through 1984-85, by fund- ing source, for each of the three categories of recipients. Included within the amounts identified in the table are SSIISSP payments to refugees. Proposed General Fund Expenditures Table 2 identifies the components of the $3,738,000 net increase in Gen- eral Fund expenditures proposed for the SSP program in 1984-85. This amount reflects $71,279,000 in increased expenditures; partially offset by $67,541,000 in decreased expenditures. The decreases result from (1) a decline in basic caseload ($6,367,000), (2) anticipated increases in recipi- ent’s unearned income ($22,929,000), and (3) increased federal funds available to provide a cost-of-living adjustment (COLA) for SSIISSP grants ($38,245,000). The increased expenditures are due primarily to: The full year cost of funding the 3.5 percent COLA provided in Janu- ary 1984 ($21,729,000); Reduced reimbursements from the federal government on account of errors made by the state in administering the SSIISSP program ($6,- 938,000); Anticipated increases in grant costs resulting from various changes to the disability review process ($7,300,000); and The General Fund cost of providing a 2 percent COLA ($35,297,000) on January 1, 1985. Table 2 SSI\/SSP Proposed General Fund Budget Changes 1984-85 (in thousands) Amount 1983-84 Expenditures (Revised) ……………………………………………………… . 1. Baseline Adjustments a. Basic caseload decrease ………………. ….. ….. ……. …… ………………………. – $6,367 h. Cost-of-living increase (1\/1\/85) (1) Federal funds available …………………………………………………….. -38,245 (2) Total General Fund cost…………………………………………………… 35,297 Total $1,097,386 Item 51BO HEALTH AND WELFARE \/ 1229 c. Reduced grant costs due to increased recipient unearned in- come (1\/1\/85) ………………………………………………………………………… .. d. Full-year cost of 1\/1\/84 COLA ……………………………………………… .. Subtotals ……………………………………………………………………………… .. 2. Program Changes a. Federal reimbursement for errors …………………………………………. . b. Court case ……………………………………………………………………………….. .. c. Reductions in disability reviews ……………………………………………. .. d. Other ……………………………………………………………………………………….. . Subtotals …………………………………………………………………. ; ………….. .. -22,929 21,729 $6,938 3,369 3,931 15 -$10,515 1984-85 Expenditures (Proposed) …………………………………………………… $1,101,124 Change from 1983-M: . Amount ………………………………………………………………………………………….. $3,738 Percent ………………………………………………………………………………………………………………………………………….. 0.3% ANALYSIS AND RECOMMENDATIONS We recommend approval. CASE LOAD TRENDS While the SSI\/ SSP program is often thought of as primarily supporting aged individuals, the disabled are, in fact, the largest category of recipi- ents, accounting for 57 rercent of th~ projected average mon~y caseload and 66 percent of tota . grant costs III 1984-85. The DSS projects that an average of 645,113 persons will receive assistance l.lllder theSSI\/SSP pro- gram each month in 1984-85. As Table 3 shows, this is 2,999 persons, or 0.5 percent, less than the monthly caseload estimate for 19~. This reduc- tion in the average monthly caseload results from a significant decline in the aged caseload, partially offset by relatively small increases in the blind and disabled caseloads. Table 3 Avenige MonthlyCaseload SSI\/SSP Program . 1983-84 through 1984-85 Category 1!J83…84 of Eligibility Estimated Aged ………………………. ; ………………………….. ,……….. 264,055 Blind ……. ………….. …….. ……………………………………. 18,237 Disabled ………………………………………………………… 365,820 Totals ……………………………………………………… 648,112 1984-85 Projected 258,000 18,380 368,733 645,113 Percent Change -2.3% 0.8 0.8 -0.5% The department’s projection of the aged caseloadin 1984-85 is consist- ent with the long-term decline in the number of aged persons applying for and receiving benefits under the SSI\/ SSP program. One major reason for the declining aged caseload is that individuals currently reaching age 65 have spent a significant portion of their working lives paying into. the social security system and private pension funds. Thus, when these in- dividuals retire, they may have significant income and resoqrces at their disposal. To the extent that their resources are greater than the SSI\/SSP grant, these individuals do not qualify for payments under thE! SSI\/SSP program. . . c …. In contrast to the decline in the aged caseload, the DSS projects that both the blind and disabled caseloads will increase by O.B percent between 1230 \/ HEALTH AND WELFARE Item 5180 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued the current year and the budget year. Specifically, the DSS projects that: The slight growth trend in the blind caseload will continue through- out 1983-84, at which point the caseload will level off at 18,380 recipi- ents per month during the budget year. The court’sdecision in Lopez v. Heckler will reduce by 144 persons each month the number of disabled individuals who are terminated from the SSI I SSP program. This is because the court decision prohib- its termintion of disabled individuals from the program without proof of medical improvement in their condition. The federal Social Security Administration’s decision to require 31 percent fewer disability reviews of SSI\/SSP recipients in California during 1983-84, and 1984-85 will result in 133 fewer persons each month being terminated from the program. JUDICIAL CHANGES Lopez v. Heeklel’-DisabilityReview Process Disabled SSI\/ SSP recipients are reviewed periodically in order to deter- mine whether theycontinue to qualify for benefits based on their type and degree of disability .. In 1982, the federal gov~rnment made various changes in the procedures for determining whether a disabled recipient continues to qualify for theSSI\/SSP program~ A U.s. district court, howev- er, has ruled iriLopez v.Heckler that recipients may not be terminated from the SSIISSP program as\u00b7 a result of using the revised procedures. Specifically, the court ruled that (1) disability reviews must demon- strate medical improvement by a recipient in order to terminate benefits and (2) all disabled cases previously terminated as a result of applying a definition of disability which did not demonstrate medical improvement must be reinstated and receive retroactive benefits. Upon appeal, the U.S. Supreme Court stayed the requirement to reinstate previously terminat- ed cases, pending a final\u00b7 decision on the case. At the same time, the Supreme Court upheld the lower court’s decision that medical improve- ment is a necessary prerequisite to termination of benefits. The Department of Social Services estimates that terminationsdtie to disability reviews will fall to 25 percent of the cases reviewed. Previously, 41 percent of the disability cases reviewed were terminated. The depart- ment estimates that this decision will result in increased General Fund costs of $810,000 in 1983-84 and $4,179,000 in 1984-85. ELIGIBILITY AND BENEFITS Eligibility For TheSSl\/SSP Program .. . The Department of Social Services\u00b7 (DSS) estimates that approximately 645,113 individuals will receive cash assistance under the SSI\/ SSP program each month in 1984-85. These individuals fall into one of three categories: aged,blind, or disabled. In order to be eligible for the SSI\/SSP program, individuals must meet certain income and resource criteria in addition to meeting the categorical requirements for eligibility. Table 4 summarizes the eligibility requirements for the SSI\/SSP program. Item 5180 HEALTH AND WELFARE I 1231 Table 4 Basic Eligibility Requirements For the SSI\/SSP Program I. . Categorical Requirements Category I. Aged ………………………………………………………………. . 2. Blind …………………………………………………………….. … 3. Disabled ………………………………………………………… . II. Income and Resource Limits Criteria a. 65 years of age or older. a. Vision correctable to no better than 20\/200 in the better eye; b. Diagnosis by physician or optometrist. a. Mental or physical impairment which precludes \”substantial gainful employinent.\” Type Limit 1. Home ………………………………….. ;………………………… Entire value exempt. 2. Personal and Real Property………………………… $1,500 for individual, $2,250for couple. 3. Household Goods\/Personal Effects ……………… $2,000 equity value. 4. Motor Vehicle …………………… : ………………………….. $4,500 market value. 5. Gross Income Limit ………………………………………. None. 6. General Income Exclusion ………………….. ;………. $20\/month general exclusion. 7. Earned Income Exclusion a. All categories …………………………………………… . b. Blind and Disabled ………………………………….. . 8. Net Income Limit. …………………………………….. : … . a. Flfst $65\/month of earned income plus one-half of remaining earned income. b. Any income used toward gaining self-sufficiency. Maximum SSIiSSP grant (see Table 6). Real property exclusive of home is considered to be personal property. The amount of the grant received by an SSI\/ SSP recipient is partially deterIllined on the basis of the recipient’s living situation. The majority of SSI\/SSP reCipients reside in independent living arrangements. Other recipients reside in (1) independent living arrangements without cooking facilities, (2) households\u00b7of another person, and (3) nonmedical board and care facilities. The grants to these individuals differ from those to individu- als in independent living arrangements. . . . Benefits Available to $SI\/SSP Recipients In addition to the monthly cash grant, SSI\/SSPrecipients may qualify for and receive a Variety of other benefits from federal, state, and local governments. Some of these additional benefits, such as health care serv- ices under Medi-Cal, are available to individuals because they are SSI\/SSP recipients. Other benefits, such as public housing and social security bene- fits, are available to SSI\/SSP recipients only to the extent. that they meet specific eligibility criteria and, in the case of public housing,are accepted into the program. .. This section discusses six major benefits available to SSI\/SSP recipients in addition to their monthly cash grants. The discussion focuses on the benefits as they were in 1982-83, the latest year for which data is available on actual utilization. . It should be noted that, in addition to the benefits discussed in this section: 1. SSI\/SSP recipients are eligible for adult social services from county welfare departments; . 2. 34,000 households receiving SSI\/SSP also receive cash assistance through AFDC;and 1232 \/ HEALTH AND WELFARE Item 5180 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued 3. Some applicants eligible for SSII SSP received interim assistance grants while they awaited final eligibility determination for SSI\/SSP. Neither the number of eligible applicants nor the level of the interim assistance grant which they received is known. Because the combined monthly income of SSI\/SSP recipients exceeds the monthly income limits for the food stamp program, SSI\/SSP recipients are not eligible for food stamps. Social Security .. Th~ Retirement, Survivors, Disability, and Health Insurance (RSDHI) program provides benefits to retired and disabled workers and their dependents, and to the survivors ofinsured workers. It also provides health insurance benefits for persons age 65 and over and for the disabled under age 65. According to statistics compiled by the federal Social Security Administration, 368,870 SSI\/SSP recipients received RSDHI payments averaging $300 per month during 1982-83. The RSDHI payments are counted as income for SSIISSP grant purposes. As a result, individual SSI\/SSP grants are reduced by the amount of the RSDHI pay- ment, less a $20 standard deduction. The RSDHI payments constitute 90 percent of all countable income received by SSIISSP reCipients. Medi-Cal. The Medi-Cal program, administered under Title XIX of the federal Social Security Act, provides funds to health care providers for the cost of care delivered to public assistance recipients, and other in- dividuals whose medical costs exceed their ability to pay. All SSI\/SSP recipients are eligible for Medi-Cal health care. During 1982-83,461160 individuals, or 70 percent of all SSI\/ SSP recipients, utilized Medi-Cal reim- bursed fee-for-service care. An undetermined number of additional SSI\/ SSP rec;ipients utilized otherMedi~Cal services provided through prepaid health plans, dental plans, and other categories of service paid for on a per capita basis. The average monthly cost of fee-for-service Medi-Cal services utilized by SSI\/SSP recipients during 1982-83 was $197. In addition to regular Medi-Cal benefits, some SSIISSP recipients received Long-Term Care (LTC) benefits. The LTC payments are made to skilled nursing facilities and intermediate care facilities to cover the cost of board and care of beneficiaries. Because Medi-Cal covers the cost of room and board, SSI\/SSP recipients in these facilities receive only an SSI\/SSP personal and incidental needs allowance of $25. In-Home Supportive Services. The In-Home Supportive Services (IHSS) progrllffi, funded in California under Title XX of the Social Secu- rity Act,provides domestic and personal care services to aged, blind, and disabled individuals with the goal of preventing institutionalization. SSI\/ SSP recipients are eligible for this service. Other individuals may be eligi- ble for IHSS if they meet all other SSIISSP eligibility criteria but have excess income. Monthly payments are made to providers on behalf of IHSS recipients. The authorized payment level is based on need, as determined by county social workers or assessment workers. ReCipients who receive 20 or more hours of specified IHSS service each month are eligible for higher maximum monthly benefits ($838 in 1982-83) than other IHSS recipients ($581 in 1982-83). During 1982-83,94,635 SSI\/SSP recipients received IHSS services. Low-Income Energy Assistance. During 1982-83 California provided cash assistance to low-income households to help them pay the cost of the energy they used. Categorical public assistance recipients, such as SSI\/SSP recipients, are automatically eligible for this assistance, which is not con- Item 5180 HEALTH AND WELFARE \/ 1233 sidered in calculating the amount of the SSI\/ SSP cash grant. During 1982- 83, approximately 146,801 SSI\/SSP recipients received a cash grant under this program. The average annual benefit provided under the Home En- ergy Assistance Program in 1982-83 was $162. An undetermined number of SSI\/SSP recipients also received (1) up to $300 in emergency help in paying energy bills and (2) grants of up to $1,000 to weatherproof th~ir homes. .. Housing Programs. Several housing assistance programs are avail- able to 10’W- and moderate-income households. These households may receive (1) subsidized shelter as tenants in public housing complexes owned and operated by local public housing authorities or (2) rental assistance in new or rehabilitated units owned by public or private agen- cies. The availability of housing assistance and income eligibility thresh- olds vary aInong the counties. It is estimated that in 1982-83, approximate- ly 9,834 SSI\/SSP recipients resided in public housing and an additional 144,784 SSIISSP individuals received rental assistance. Senior Nutrition Programs. The Department of Aging administers community-based programs providing meals to the elderly either at group sites or in the recipient’s home. All individuals age 60 or older and their spouses under 60 are eligible for these meals. All aged individuals receiv- ing SSI\/SSP grants, therefore, ate qualified for this service. Access to these nutrition programs is limited, however, because (1) the programs are small, serving only a small portion of the potential clients and (2) there are regional variations in the availability of the services. In 1982-83, ap- proximately 222,000 individuals, or 6.1 percent of the population age 60 years or older, received 12.3 million meals at 827 sites in California. An- other 28,000 persons were served 3.3 million meals in their homes. Because of the open -door policy of these centers, which require no affiliation with other state programs, it is not possible to quantify the benefits actually received by SSI\/SSP recipients. Calculation of A verage Benefits. Table 5 shows the average value of benefits received in 1982-83 by SSI\/SSP eligible individuals. The aver- ages are calculated in two ways. The \”Average Cash Value of Benefits Received\” shows the average benefit value per individual receiving the particular benefit. For example, in the case of those SSI\/SSP participants who received social security payments, the average value of the payment per recipient was $300. The \”Value of Benefits Averaged Over All SSI\/ SSP Recipients\” gives the average benefit value for all individuals in the SSIl SSP program, including both those who did not receive the particular benefit as well as those who did. As a result, this measure of benefits received per SSI\/SSP individual is less than the average benefit received per participating individual. . Difficulties in Calculating Benefits Received by SS\/ISSP Eligibles. The average benefit value provides the best available picture of the total benefits received by SSI\/ SSP individuals. Uke all averages, however, it conceals differences among individual recipients. In using the information contained in Table 5, it should be kept in mind that: Not all SS\/ISSP recipients are eligible for all benefits. Some benefits are contingent upon health or degree of physical impair- ment . The availability of some benefits is limited. Some programs are geographically limited: In other cases, the ability of SSI\/SSP recipi- ents to travel to the site where services. are provided is limited. In yet other cases, eligible individuals may not be aware that a particUlar benefit is available. 1234 \/ HEALTH AND WELFARE Item 5180 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued Some SSIISSP recipients may choose not to receive some benefits. 1;’heymay use alternative resources, such as family, friends, the church and other nonprofit service providers, or they may choose to fend for themselves in an effort to gain or maintain independence. The average number of persons receiving a benefit understates the number of persons who use the program over the course of a year. Because some recipients are enrolled for only part of the year, the program provides aid to more individuals in the state than the month- ly average figure implies. . Table 5 Monthly Benefits Available to SSI\/SSP Recipients\u00b7 1982-83 Value of Percent Average Benefit Number of of Cash Averaged Recipients Total Value of OverAll Using SSI\/SSP Benefit SSI\/SSP Benefit Caseloadb Received Recipients Benefit SSI\/SSP cash grant …. , ………………………… . 657,017 100.0% $258.33 $258.33 Social security payments (RSDHI) …. .. 368,870 56.1 300.22 168.42 Medi-Cal: Health care c ……………………………………. . 461,160 70.2 19’7.29 138.50 Long-term care ……………………………… .. 68,010 10.4 750.94 78.10 In-home supportive services, domestic 94,635 14.4 209.71 30.20 9,834 1.5 74.55 1.12 144,784 22.0 61.93 13.62 and personal care assistance ………. .. Public Housing d ……………………………….. .. Rental Subsides de ……………………………… .. — . Average total monthly benefits ………… .. $688.29 $8,259.48 146,801 22.3% $162.00 $36.13 Average total annual benefits ……. , …… .. LIHEAPf ……………………………………………. .. Average total annUal benefits with LI- HEAP ………………………………………….. .. $8,295.61 Value of Benefit Averaged Over All SSI\/SSP Couples $412.92 414.30 3O.20b 1.12i 13.62 $1,149.16 $13,789.92 $36.l3i $13,826.05 Source: Departments of Health Services and Social Services, Office of Economic Opportunity, federal Department of Housing and Urban Development, the Social Security Administration, and the Bureau of Labor Statistics. b The percentage figures do not add to 100 percent because many recipients utilized more than one benefit. C Fee-for-service users only. Other Medi-Cal service categories, such as dental and prepaid health plans are delivered on a per capita basis. Data on the. utilization of these nonfee-for-service categories by public assistance recipients is not available at this time. d Housing aSsistance caseloads are based on a household size of two with a monthly income of $791 (aged couple). Housing authorities. and state and federal departments do not maintain specific data on public assistance recipients who reside in subsidized housing. e Includes assistance under Sections 8 and 23 of the federal Housing and Urban Development Act and the Farmers’ Home Administration’s Rental. Assistance program. f Cash benefits.shown ate total payments rather than monthly benefits. g Couples classified as two individuals for LTC. . b No data .available. Assumes same level of benefit as for individual living alone. i Benefit is calculated on basis of household, regardless of size. The Importance of the SSIISSP Grant. Table 5 shows the impor- tance of the basic SSI\/SSP grant in maintaining the income of recipients. The grant accounts for 37 percent of the average cash subsidy to individu- als. Social security benefits account for 24 percent of the benefits available to SSI\/SSP recipients. Item 5180 HEALTH AND WELFARE \/ 1235 GRANT LEVELS AND COST -OF-LIVING ADJUSTMENTS Effects ofthe Social Security Amendments of 1983 (HR 19(0) In April 1983, Congress enacted the Social Security Amendments of 1983 . (HH 1900). This measure made significant changes affecting both the . grant levels’ and cost-of-living adjustments (COLA) under the SSI\/SSP program. Specifically, the act affects California’s SSI\/SSP program in three ways: . 1. The SSI Payment Standards were Increased on July 1, 1983. HR 1900 increased the federal SSI grant by $20 for individuals and by $30 for couples, effective July 1, 1983. This increase was nota COLA. California used part of the federal grant increase to offset the cost of the SSP pro- gram. The remainder of the federal grant increase was passed through to recipients. The net result of these actions was to increase the total SSI\/SSP maximum payment level by $10 for individuals and by $15 for couples, as shown in Table 6. 2. The Federal SSI COLA was Delayed Until January 1, 1984. Each year, the federal SSI payment levels are increased by the percentage change in the Consumer Price Index (CPI).\u00b7 Previously, COLAs were granted July 1 of each year. HR 1900, however, delayed the federal COLA for SSI recipients to January 1; 1984. In addition, the act permanently changed the date on which federal SSI COLAs will be granted. Beginning January 1, 1984, the SSI maximum payment levels will be adjusted each January 1, based on the percentage change in the CPI. In order to conform to these federal changes, California provided that the statutory COLA for the total SSI\/SSP grant would be given January 1 (calendar year basis) instead of July 1 (fiscal year basis). Table 6 shows the grant levels in 198~ and 19~ for various categories of recipients as a result of these federal and state changes. Table 6 Maximum Monthly SSI\/SSP Grant Levels 1982-83 and 1983-84 Category of Recipient Aged\/Disabled Individual Total Grant …………………………………. .. SSI ………………………………………………… . SSP; ……………………………………………….. . Aged\/Disabled Couple Total Grant …………………………………. .. SSI ……………………………………………….. :. SSP ……………………………………………….. .. Blind Individual Total Grant …………………………………. .. SSI …………………………… ; …………………. .. SSP …………………………………… ; ………….. . Blind Couples Total Grant …… ; …………………………… .. SSI ………………………………………………… . SSP ……………………………………………….. .. 1982-83 $451.00 284.30 166.70 838.00′ 426.40 411.60 506.00 284.30 221.70 985.00 426.40 558.60 1!J83…84 July-December January-july 1983 1984 $461.00 $477.00 304.30 314.00 156.70 163.00 853.00 886.00 456.40 472.00 396.60 414.00 516:00 535.00 304.30 314.00 211.70 221.00 1,000.00 1,041.00 456.40 472.00 ~.60 569.00 Annualiied Percent Change\” 4.0% 8.7 -4.1 3.8 8.9 -1.5 3.9 8.7 -2.4 3.6 8.9 -0.4 a Annualized percent change equals the average increase during’l983-M OVer 1!l82–8:J. 1236 \/ HEALTH AND WELFARE Item 5180 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued 3. California is Required to Maintain Its July 1983 SSP Maximum Pay- ment Levels. Prior to enactment\u00b7 of HR 1900, states such as California that opted for federal administration of their programs could decrease their maximwn SSP payment levels under specified circumstances.Spe- cifically, states could reduce their grant levels provided that (1) their total spending for SSP did not fall below the expenditure level of the previous year or. (2) the maximum SSP payment levels did not fall below the payment levels in December 1976. Because California’s expenditures for the SSP program rose sharply during the late 1970s, the state in recent years was able to decrease spending under the program without putting itself out of compliance with federal regulations. This is because, despite the decreases, the levels of SSP grants in California were still well above the December 1976 levels. As a result of HR 1900, however, states now are required to maintain their SSP grants at or above the July 1983 levels. State Law Requires a 5.5 Percent COLA Existing state law requires that the total SSI\/SSP payment levels be adjusted January 1, 1985, based on the change in the California Necessities Index (CNI) during calendar year 1983. The Commission on State Finance estimates that the CNI increased by 5.5 percent during this period. (This estimate is subject to change as part of the May revision of expenditures.) Federal law requires that the SSI payment provided to agea, blind; and disabled recipients be adjusted on January 1, 1985, based on the percent- age change in the Consumer Price Index (CPI) between April-June 1983 and April-June 1984. TheDOF estimates that the CPI will increase by 4.7 percent during this period. Thus, a portion of the total cost-of-livingadjust- ment to the combined SSI\/SSP payment will be supported by an increase in federal funds. (The estimate of the CPI also is subject to change during the May revision of expenditures.) Budget Proposes a 2.0 Percent COLA The budget proposes a 2.0 percent increase in the maximum payment levels for SSI\/SSP recipients, effective January 1, 1985, at a cost of $35.3 million to the General Fund. This proposal assumes that legislation will be enacted to suspend the statutory requirement that the cost-of-living in- crease provided on the total SSI\/SSP grant be set equal to the change in the CNI (estimated at 5.5 percent) . If the change in the CPI between April-June 1983 and April-June 1984 is 4.7 percent, as the Department of Finance estimates, the cost of a 2 percent COLA to the General Fund-$35.3 million-would be more than offset by the increase in federal funds provided to finance the COLA to the SSI portion of the grant ($38.2 million). Maximum Payment Levels Table 7 shows what the maximum SSI\/SSP payment levels would be for selected categories of recipients in independent living arrangements, as- suming that they are granted (1) a 2.0 percent COLA, as proposed by the administration, and (2) a 5.5 percent increase, as required by current law. Under existing law, the maximum grant for an aged individual would increase on January 1, 1985, py $26, to $503. Under the administration’s proposal, the grant for an aged individual will increase by $10, to $487. Item 5180 HEALTH AND WELFARE \/ 1237 Table 7 Maximum Monthly SSI\/SSP Grant Levels 1984 and 1985 1985 Category Administration Proposal 1984 (2.0 Percent) Current Law (5.5 Percent) of Recipient January-December Amount Change Amount Change Aged\/Disabled Individual Total Grant. ……………………………… . $477 $487 2.1% $503 5.5% SSI …………………………………………….. . 314 328 4.5 328 4.5 SSP …………………………………………… . 163 159 -2.5 175 7.4 Aged\/Disabled Couple Total Grant. ……………………………… . 886 904 2.0 935 5.5 SSI …………………………………………….. . 472 494 4.7 494 4.7 SSP ……………….. …………………………. 414 410 -1.0 441 6.5 Blind Individual Total Grant. ……………………………… . 535 546 2.1 564 5.4 SSI …………………………………………….. . 314 328 4.5 328 4.5 SSP …………………………………………… . 221 218 -1.4 236 6.8 Blind Couple Total Grant ………………………………. . 1,041 1,062 2.0 1,098 5.5 SSI …………………………………………….. . 472 494 4.7 494 4.7 SSP …………………………………………… . 569 568 -0.2 604 6.2 Adjustments may not equal 2 and 5.5 percent, due to statutory requirement that payments be rounded to the nearest doUar. Fiscal Effect of COLA Table 8 shows the cost in 1984-85 of providing either a 2.0 percent or a 5.5 percent COLA to SSI\/SSP maximum payment levels, assuming that the federal SSI increase will be 4.7jercent. The table indicates that the increase in federal assistance woul more than offset the General Fund cost of providing a 2.0 percent increase to the combined SSI\/ SSP grant level. In contrast, the costto the General Fund of funding the statutory cost-of-living increase-5.5 percent-would be $97,066,000, or $61,769,000 more than the amount proposed in the budget. Table 8 Fiscal Effect of Proposed COLA to SSI\/SSP Maximum Payment Levels 1984-85 General Fund Federal Funds Base ……………………. …………………………………………… $1,104,072,000 $1,039,829,000 Increased federal funds to provide a 4.7 per\u00b7 cent increase on SSI grant, effective 111\/ 85 ………………………………………………………….. ‘ 38,245,000 Savings to the state if SSP grant is reduced by a comparable amount so as to leave SSI\/ SSP grant Wlchanged ………………………….. -38,245,000 Expenditures, assuming no change in SSI\/ SSP grant ………………………………………… .. Cost of 1.6 percent COLA for SSI\/SSP grants\u00b7 Cost of 2.0 percent COLA for SSII SSP grants Cost of 5.5 percent COLA for SSI\/SSP grants Expenditures, assuming SSI\/SSP grant in\u00b7 creases b}-‘: $1,065,827,000 $28,292,000 35,297,000 97,066,000 1.6 percent. …………………………………………… $1,094,119,000 2.0 percent . …………………………………………… $1,101,124,000 5.5 percent . …………………………………………… $1,162,893,000 $1,078,074,000 $163,000 204,000 561,000 $1,078,237,000 $1,078,278,000 $1,078,635,000 Califomia must give at least a 1.6 percent COLA to comply with federal law. Total $2,143,901,000 38,245,000 -38,245,000 $2,143,901,000 $28,455,000 35,501,000 97,6’1:1,000 $2,172,356,000 $2,179,402,000 $2,2~1,528,000 1238 \/ HEALTH AND WELFARE Item 5180 STATE SUPPLEMENTARY PAYMENT PROGRAM FOR THE AGED, BLIND, AND DISABLED-Continued Previous lricreases to SSI\/SSP Grants Chart 1 shows the increases in the SSI \/ SSP grant since January 1974, and the value of the grant during this lO-year pe.riod in \”real\” 1974 dollars- that is, the grant amount, adjusted to reflect the impact of inflation on purchasing power as measured by the CN!. The chart shows thllton January 1, 1984, the \”real\” value of the grant to an aged or disabled individual was $215, compared to $217 in 1974-75. If a 2.0 percent COLA is granted to SSI\/SSP recipients as the budget proposes, the \”real\” grant level will be $208 on January 1, 1985. Chart 1 Purchasing Power of SSI\/SSP Grants is Declining Maximum Grant for Aged or Disabled Individual Dollars $60 50 40 Actual Dollars . 30 20 1–~–:-2\”\”19—\”-;2:;;;2:;-4-\”\”-21-6-1 230 240 230 226 –,—-……ro-:\”, 214 207215203208 1973-74 Constant Dollars b 74-75 75-76 76-77 77-78 78-79 79-80 80-81 81-82 82-83 83-84 84-85 : Based on proposed COLA of 2 percent. Aid payments adjusted for inflation measured by the California Necessities Index in the preceding year. Item 5180 HEALTH AND WELFARE \/ 1239 California’s SSI\/SSP Grants Compared to Other States The federal government allows states, at their option, to supplement federal SSI benefits. California supplements these benefits through the SSP program. Table 9 shows the SSI\/SSP benefits provided to aged or disabled in- dividuals and couples by the 10 most populous states, as ofJanuary 1, 1984. The table indicates that of the 10 states, 5 chose to supplement the basic grant, and that of these 5, California provided by far the largest supple- ment to both individuals and couples. The resulting grant levels in Califor- nia are 27 percent and 62 percent higher, respectively, than the grant levels prevailing in New York, the state with the next largest supplement. California’s SSI I SSP standards exceed those of states which do not supple- ment the 5SI grant by 52 percent in the case of individuals and 88 percent in the case of couples. In addition, California is the only one of the 10 largest states that pro- vides larger grants to the blind than to the aged or disabled. While aged or disabled individuals and couples receive $477 and $886, respectively, blind individuals receive $535 and blind couples receive $1041 each month. Table 9 Maximum Monthly SSI\/SSP Grant Levels Ten Largest States January 1, 1984 Aged or Disabled Individual Aged or Disabled Couple State Total Grant State SSP Total Grant State SSP California ……… ……………………………………. $477 $163 New york……………………………………………. 375 ,61 Texas…………………………………………………… 314 Pennsylvania… ……………………………………. 346 Illinois …………………………………………………. 314 Ohio …………………………………………………… 314 Florida …………. ……………………………………. 314 Michigan …….. …………………………………….. 338 New Jersey….. ……………………………………. 343 North Carolina …………………………………… 314 40-77951; 32 24 29 $886 $414 548 76 472 521 472 472 472 508 495 472 49 36 23 1240 \/ HEALTH AND WELFARE Department of Social Services SPECIAL ADULT PROGRAMS Item 5180 Item 5180-121 from the General Fund and Social Welfare Fed- eral Trust Fund Budget p. HW 173 Requested 1984-85 ………………………………………………………………. . Estimated 198~ ………………………………………………………………… . Actual 1982-83 ……………………………………………………………………… . Requested decrease $1,334,000 (-90.6 percent) Total recommended reduction …………………………………………… . 1984-85 FUNDING BY ITEM AND SOURCE Item Description 5180-121-001-Special Adult Programs 5180-121-866-Special Adult Programs General Federal Fund $138,000 1,472,000 1,539,000 None Amount $138,000 (52,000) Analysis SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS page 1. Special Circumstances Program. Recommend that, prior 1241 to the budget hearings, the Department of Social Services advise the fiscal committees on (1) ways of controlling the administrative costs of the Special Circumstance Program and (2) the extent to which other comparable benefits are available to SSI\/SSP recipients. GENERAL PROGRAM STATEMENT This item provides the General Fund appropriation to fund grants for the emergency and special needs ofSSI\/SSP recipients. The special allow- ance programs for SSI I SSP recipients are supported entirely from the General Fund and are administered by county welfare departments. This item also appropriates federal funds to finance cash grants to repa- triated Americans returning from other nations. OVERVIEW OF THE BUDGET REQUEST The budget proposes a General Fund appropriation of $138,000 for Spe- cial Adult programs administered by the Department of Social Services (DSS) in 1984-85. This is $1,334,000, or 91 percent, less than the estimated General Fund expenditure level for Special Adult programs in the current year. This reduction reflects the administration’s proposal to eliminate the Special Circumstances programs. In addition to the request for General Fund support, the budget pro- poses $52,000 in federal funds to finance cash benefits to repatriated Americans. This is the same as the amount appropriated for this purpose in the current year. ANALYSIS AND RECOMMENDATIONS The Special Adult program consists of three -distinct programs. These programs are (1) Special Circumstances, (2) Special Benefits, and (3) Temporary Assistance for Repatriated Americans. Item 5180 HEALTH AND WELFARE \/ 1241 Special Circumstances Program We recommend that, prior to the budget hearings~ the department ad- vise the fiscal committees on (1) alternative ways of reducing or control- ling state and county costs of administering the Special Circumstances program and (2) the extellt to which benefits comparable to those pro- vided by the Special Circumstances program are available to SSIISSP recipients through other state and federally funded programs. The Special Circumstances program provides adult recipients with fi- nancial assistance in times of emergency. Payments up to specified max- imum amounts can be made to replace furniture, equipment, or clothing that is damaged or destroyed by a catastrophe. Payments also are made for moving expenses, housing repairs, and emergency rent. In addition, the Special Circumstances program reimburses foster parents for the cost of burying a foster child who was in their care at the time of death. The budget proposes to eliminate the emergency benefit component of the Special Circumstances program because of its high administrative costs, for a savings of $1,334,000 to the General Fund. The administration proposes to continue reimbursements to foster parents, at a General Fund cost of $25,000 in 1984-85. Background. In 1974, the federal government consolidated county- administered adult aid programs into the new Supplemental Security Income (SSI) program. Because the basic SSI grant did not include an amount for special nonrecurring needs, the Legislature established the Special Circumstances program to provide benefits in unusual circum- stances. The enabling legislation (Ch 1216\/73) defines special circum- stances as those circumstances \”that are not common to all recipients and that arise out of need for certain goods or services, and physical infirmities or other conditions peculiar on a nonrecurring basis, to the individual’s situation.\” . Prior to establishment of the SSI\/SSP program, the counties provided funds to meet the nonrecurring needs of individuals who were receiving aid under the adult aid programs. However, the circumstances under which an individual could receive funds for nonrecurring needs were limited. The Special Circumstances program increased the extent to which individuals could receive benefits for a variety of emergencies. Approximately 500 SSI\/ SSP recipients (or less than one-tenth of 1 per- cent of the SSI\/SSP caseload) receive emergency benefits each month through the Special Circumstances program. The average benefit re- ceived by these individuals is $222. California also provides for the special nonrecurring needs of AFDC recipients. In general, this program provides for the repair or replacement of specified household items which are lost or damaged under circum- stances beyond the control of the family. Administrative Costs. In addition to funds scheduled in this item, the state and counties incur administrative costs in delivering benefits under the Special Circumstances program. These costs, which are\u00b7 sup- ported through appropriations in Item 5180-001-001, department support, and Item 5180-141-001, county administration, are shown in Table 1. Based on the department’s estimate, for every dollar spent on emergency bene- fits in the current year, an additional $1.35 will be spent on program administration. 1242 \/ HEALTH AND WELFARE SPECIAL ADULT PROGRAMS-Continued Table 1 Special Circumstances Program-Emergency Benefits Administrative and Program Expenditures 1982-83 and 1983-84 (in thousands) Administrative Costs County administration …………………………………………………………………………. . State operations a .. . . . .. . . .. Total Administrative Cost ………………………… , …………………………………….. . Program Costs–Emergency Benefits ……………………………………………………… . Benefit to Administration Ratio ………………………………………………………………. . Actual 1982-83 $1,534 131 $1,665 $1,405 1:1.19 Item 5180 Estimated 1983-84 $1,680 123 $1,803 $1,334 1:1.35 a Includes direct costs, allocated costs, and expenses resulting from contract with State Controller’s office for program audits. Also includes estimate of chargeable expenses for Fair Hearings resulting from the Special Circumstances program. Current law requires that counties (1) verify that a special circumstance exists, (2) issue a warrant for payment, and (3) send a claim to the state for payment, The DSS informs us that counties incur high administrative costs relative to program\u00b7 costs because verification of a special circum- stance often requires a site visit to the applicant’s home in order to assess the need and determine the reasonable cost of replacement or repair. The department further informs us that no analysis of administrative cost con- trol alternatives was conducted prior to when the administration proposed the elimination of the Special Circumstances program. Moreover, at the time this analysis was prepared, no analysis of alternative means for con- trolling administrative costs at the county level had been submitted for legislative review. We recommend that prior. to the budget hearings the department re- port to the fiscal committees on the potential for reducing the costs of administering thelrogram. Identification 0 Similar Benefits. The department informs us that there are no statewide programs similar to the Special Circumstances program. However, the department advises that some programs may pro- vide similar benefits under certain circumstances or in certain locations within the state. No list of alternative programs was compiled prior to when the administration proposed the elimination of the program. The department has since compiled a list of three alternative programs provid- ing similar assistance under limited circumstances. These programs are: The Individual and Family Grant (IFG) Program. The IFG pro- gram provides cash assistance to families in need in areas which have been declared disaster areas by the president. Department of Rehabilitation (DOR). The DOR has some lim- ited federal funds to provide moving allowances to vocational rehabilitation clients only when the moving assistance is covered by the rehabilitation plan. Community Development Block Grant (CDBG) Programs. Com- munities receiving CDBG funds may allocate all or part of these funds for housing repair and modifications. The local community deter- mines the type of assistance and the eligibility criteria. Based on our review of the department’s list of alternative sources of benefits, we conclude that, in the absence of the Special Circumstances Item 5180 HEALTH AND WELFARE \/ 1243 program, California would not meet the same level or variety of emer- gency needs of SSIISSP recipients. We recommend that, prior to the budget hearings, the DSS report to the fiscal comIllittees on the number and type of programs that provide bene- fits to SSI\/ SSP recipients which are comparable to those currently avail- able through\u00b7 the Special Circumstances program. Special Benefits Program The Special Benefits program provides funds to SSI\/SSP recipients who have guide dogs. Under the program, approximately 315 persons receive a special monthly allowance of $30 to cover the cost of food for their guide dogs. The budget proposes General Fund expenditures of $113,000 for these allowances in 1984-85. This is the same amount that the DSS esti- mates will be spent for this purpose in the current year. Temporary Assistance for Repatriated Americans The federal repatriate program is designed to provide temporary help to needy U.S. citizens returning to the United States from foreign coun- tries because of destitution, physical or mental illness, or war. These per- sons can be provided temporary assistance to meet their immediate needs and continuing assistance for a period of up to 12 months. County welfare departments administer the program, based on federal and state guide- lines. The program is ~oo percent federally funded. Expenditures for the budget year are prol’.)sed at $52,000. Department of Social S.ervices REFUGEE CASH ASSISTANCE PROGRAMS Item 5180-131 from the Social Welfare Federal Funds Budget p. HW 175 Requested 1984-85’\u00b7 ……………………………………………………………….. $63,721,000 a Estimated 1983-84…………………………………………………………………. 77,459,000 Actual 1982-83 ………………………………………………………………………. 117,901,000 Requested decrease $13,738,000 (-17.7 percent) Total recommended reduction … T……………………………………… None a Includes $431,000 proposed in Item 51BO-181\u00b7866(c) for a 2 percent cost\u00b7of\u00b7living increase. 1984-85 FUNDING BY ITEM AND SOURCE Item Description 5180\u00b7131\u00b7866-Refugee Programs-Local Assist\u00b7 Federal ance 51BO-I81\u00b7866(c)-Refugee Programs-Local As\u00b7 Federal sistance, COLA Total GENERAL PROGRAM STATEMENT Fund Amount $63,290,000 431,000 $63,721,000 This item appropriates the federal funds that pay for the costs of cash grants and medical assistance provided to refugees and Cuban\/Haitian entrants under the Refugee Cash Assistance (RCA) program. In general, refugees are eligible to receive cash assistance under the RCA program if they: 1244 \/ HEALTH AND WELFARE Item 5180 REFUGEE CASH ASSISTANCE PROGRAMS-Continued Have been in this country for 36 months or less; Meet the income and need requirements of the AFDC program, but do not qualify for aid under that program due to household composi- tion (for example, the family does not have an absent or incapacitated parent); and Do not qualify for aid under the SSIISSP program (such benefits are provided only to needy aged, blind, or disabled individuals). In addition to cash assistance, refugees and entrants are eligible to receive medical assistance if they (1) have been in this country for 36 months or less and (2) are receiving public assistance under the RCA, AFDC, SSI\/SSP, or local General Assistance programs. The federal gov- ernment pays 100 percent of the cash grant and medical assistance costs under the RCA program. OVERVIEW OF THE BUDGET REQUEST The budget proposes expenditures of $63,721,000 (including a 2 percent cost-of-living adjustment (COLA), in federal funds for cash and medical assistance provided through the RCA program to refugees and entrants in 1984-85. This represents a reduction of $13,738,000, or 18 percent, com- pared with estimated current-year expenditures for these programs. Funding for the program in the prior, current, and budget years is shoWn in Table 1. Of the $13.7 million decrease, $8,567,000 is due primarily to a 28 percent reduction in projected cash assistance caseload. This reduction is partially offset by an increase of $431,000 proposed in Item 5180-181-866 for a 2 percent cost-of-living increase for cash grants. Caseloads for the RCA program are anticipated to decline primarily because of (1) the reduction in the number of refugees being allowed into the country by the U.S. State Department and (2) the 36-month limit on eligibility for special refugee programs. Program Refugee cash assistance a Refugee medical assist- ance ………………………. Totals ……………………… Table 1 Refugee Programs Department of Social Services 1982-83 through 1984-85 Federal Funds (in thousands) 1982-83 1!J83..& 1984-85 $50,647 $30,101 $21,965 b 67,254 47,358 41,756 $117,901 $77,459 $63,721 Change 1!J83..& to 1984-85 Amount Percent -$8,136 -27.0% -5,602 -11.8 -$13,738 -17.7% a Includes federal funds to reimburse counties for cash grants provided to refugees through county general assistance programs. These reimbursements are made on behalf of refugees who have been in this country for less than 18 months. b Includes $431,000 for a 2 percent cost-of-living increase proposed under Item 5180-181-866. Item 5180 HEALTH AND WELFARE \/ 1245 ANALYSIS AND RECOMMENDATIONS We recommend approval. Other Federal Funds for Cash Assistance are Limited In addi tion to the RCA funds, other federal monies are available to provide cash grants to refugees. As with the RCA program, the amount of federal funds available to the state for these programs depends on the length of time the refugee has been in this country. The federal govern- ment pays 100 percent of these costs for refugees who have been in this country for less than 36 months (referred to as \”time-eligible\” refugees). The federal government, however, pays only a part of the cash assistance costs of. refugees who have been in this country 36 months or longer (referred to as \”time-expired\” refugees). In addition to the RCA program, cash assistance is available to time- eligible and time-expired refugees through the following programs. Aid 1\”0 Families with Dependent Children (AFDC). The AFDC program provides cash grants to children and their parents or guard- ians ‘Whose income is insufficient to meet the children’s basic needs. Eligibility is limited to families with children who are needy due to the death, incapacity, or continued absence or unemployment of the paren ts or guardians. Supplemental Security Income\/State Supplementary Payment (SSI\/ SSP). The SSI\/SSP program is a federally administered program that is jointly funded by the federal and state governments, under which needy and eligible aged, blind, and disabled persons receive financial assistance. County General Assistance. Needy California residents, including refugees, may receive aid through county general assistance pro- grams. Eligibility criteria and grant levels for these programs are established by each county. Table 2 shows the number of time-eligible and time-expired refugees receiving aid in 1983-84 and 1984-85 under each of California’s cash assist- ance programs. Table 2 shows that: Table 2 Refugees Receiving Aid Time\u00b7Eligible and Time\u00b7Expired Refugees 1~ and 1984-85 1983-84 1984-85 Change Estimated Projected Amount Percent Time\u00b7Eligible Refugees: AFDC ……………………………………………………………………… . SSI\/SSP ……………………………………………………………………. . Refugee Cash Assistance ……………………………………….. . General Assistance ………………………………………………… . Subtotals ………………………………………………………………. . Time-Expired Refugees: AFDC …………………………………………………………………….. .. SSI\/SSP ……. _ …………………………………………………………….. . General Assistance ………………………………………………… . Subtotals ………………………………………………………………. . Totals …………………………………………………………………. .. 71,850 5,406 8,49l! 2,769 88,523 99,480 7,714 4,643 1ll,837 200,360 52,092 3,930 6,092 1,955 64,069 136,888 10,527 6,101 153,516 217,585 -19,758 -1,476 -2,406 -814 -24,454 37,408 2,813 1,458 41,679 17,225 -27.5% -27.3 -28.3 -29.4 -27.6% 37.6% 36.5 31.4 37.3% 8.6% 1246 \/ HEALTH AND WELFARE Item 5180 REFUGEE CASH ASSISTANCE PROGRAMS-Continued Approximately 217,600 refugees will receive some form of cash assist- ance in 1984-85. This is an 8.6 percent increase over the number of refugees receiving assistance in the current year. Of the 217,600 refugees on aid, approximately 189,000 (52,000 time- eligible and 137,000 time-expired) will receive AFDC payments. As a result, refugees will make up 11 percent of the state’s total AFDC caseload (1,661,000 in 1984-85). The number of refugees who are eligible for 100 percent federal funding will decrease in 1984-85, as increasing numbers of refugees reach their 36th month in this country. Accordingly, the number of time-expired refugees will increase significantly-by 37 percent- between 1983-84 and 1984-85. California’s Costs Will Increase Dramatically as. Federal Funds are Reduced As a result of the 36-month time limit on 100 federal funding, state and local costs for cash assistance will increase significantly between 1983-84 and 1984-85. Table 3 shows the costs of cash assistance provided to time- expired refugees in the current and budget years. The table shows that: General Fund costs for cash assistanc~ to time-expired refugees will total $147 million in 1984-85, an increase of $49.0 million, or 51 per- cent, above the current year. County costs will total $37 million in 1984-85, an increase of 45 percent over 1983-84. The expenditures shown in Table 3 understate the total costs to the state and local governments of providing services to refugees because it does not include the cost of medical assistance provided to time-expired re- fugees. Because of the time limit on 100 percent federal funding, state and county costs will continue to increase in 1985-86 and beyond. Table 3 Costs of Cash Assistance For Time-Expired Refugees 1983-84 and 1984-85 (in thousands) Program\/Funding Source 1. AFDC b a. General Fund ……………………………………… . b. County funds ……………………………………… . c. Federal funds …………………………………….. .. Subtotals, AFDC ……………………………….. .. 2. SSI!SSP a. General Fund ……………………………………… . b. Federal funds …………………………………….. .. Subtotals, SSI! SSP ……………………………… .. 3. General Assistance a. County funds ………………………………………. .. TotaJs: ………………………………………………….. .. General Fund ………………………………………………. . County funds ……………………………………………….. .. Federal funds ……………………………………………… .. 1983-84 $80,983 13,391 94,373 $188,747 $16,438 25,759 $42,197 $12,098 $243,042 $97,421 25,489 120,132 Amounts include a proposed 2 percent COLA. b Includes grant and administrative costs. 1984-85\” $124,283 20,634 144,919 $289,836 $22,577 36,565 $59,142 $16,298 $365,276 $146,860 36,932 181,484 Change Amount Percent $43,300 53.5% 7,243 54.0 50,546 53.6 $101,089 53.6% $6,139 37.3% 10,806 42.0 $16,945 40.2% $4,200 34.7% $122,234 50.3% $49,439 50.7% 11,443 44.9 61,352 51.1 Item 5180 HEALTH AND WELFARE \/ 1247 Department of Social Services COUNTY ADMINISTRATION OF WELFARE PROGRAMS Item 5180-141 from the General Fund and ~ocial Welfare Fed- eral Fund Budget p. HW 174 Requested 1984-85 ……………………………………………………………….. $129,114,000 Estimated 19~…………………………………………………………………. 116,686,000 Actual 1982-83 ………………………………………………………………………. 102,475,000 Requested increase $12,428,000 (+10.7 percent) Total recommended reduction ……………………………………………. $66,000 Recommended transfer to Item 5180-181-001 …………………….. 10,900,000 1984-85 FUNDING BY ITEM AND SOURCE Item Description 5180-141-OO1-County administration 5180-141-866-County administration 9680\u00b7101-001 (aa-ff}-Mandated local costs Fund General Federal General Amount $129,114,000 (354,827,000) (407,000) Analysis SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS page 1. Limits on State-Funded County Salaries. Recommend 1253 that $10.9 million in Item 5180-141-001 be transferred to Item. 5180-181-001 to provide a cost-of-living adjustment (COLA) for county administration consistent with COLAs provided by the Legislature to state employees. 2. Asset Clearance Match Demonstration. Augment Item 1262 5180-141-001 by $1~000. Recommend an augmentation of $373,000 ($100,000 in Item 5180-141-001 and $273,000 in Item. 5180-141-866) to increase fraud investigators for the Asset Clearance Demonstration Project. 3. Extension of Federal Supplemental Compensation Benefits. 1264 Reduce Item 5180-141-001 by $166,000. Recommend a re- duction of $543,000 ($166,000 from Item 5180-141-001 and $377,000 from Item 5180-141-866), due to the extension of federal supplemental compensation benefits. GENERAL PROGRAM STATEMENT This item contains the General Fund appropriation for the state’s share of costs incurred by the counties in administering (1) the AFDC program, (2) the food stamp program, and (3) special benefit programs for aged, blind, and disabled recipients. In addition, the budget identifies the fed- eral and county costs of administering child support enforcement and cash assistance programs for refugees. The costs of training county eligibility and nonservice staff also are funded by this item. Table 1 Expenditures for County Welfare Department Administration a 1982-83 through .1984-85 (in millions) Actual 1982-83 Estimated 1983-84 Program State County Federal Total State County Federal AFDC administration ……………. $77.5 $99.9 $183.0 $360.4 $89.2 $105.6 $200.1 Non-assistance food stamps …… 20.4 26.5 48.1 95.0 23.4 33.5 61.3 Child support enforcement a. Welfare ……………………………. 24.9 61.6 86.6 26.9 62.8 b. Non-welfare …………………….. 8.1 19.9 28.0 8.0 18.8 Special adult programs ………….. 2.4 2.4 2.5 Refugee cash assistance ………….. 9.9 9.9 6.5 Staff development.. …………………. 2.2 2.5 4.7 9.4 1.5 1.6 3.2 — — –Subtotal ……………………………. $102.5 $161.9 $327.2 $591.6 $116.7 $175.6 $352.5 COLA cap rescission b ……………. 1984-85 COLAs b …………………….. Local mandates C …………………….. (0.3) (-0.3) Emergency food and shelter …. 4.6 –Totals ……………………………….. $102.5 $161.9 $327.2 $591.6 $116.7 $175.6 $357.1 NOTE: Details may not add to total due to rounding. a SOURCE: Department of Social Services. b These amounts are included in the totals appropriated for this item. C Funding for local mandates is provided in Item 9680-101 and is not part of the table totals shown here. Total State $394.9 $101.5 118.2 25.3 89.7 26.8 2.5 0.8 6.5 6.3 1.5 — — $644.9 $129.1 (10.9) (0.4) 4.6 — $649.5 $129.1 Proeosed 1984-85 County Federal Total $113.2 $216.6 $431.3 29.1 64.4 118.7 28.5 66.4 94.8 8.5 19.9 28.4 0.8 4.9 4.9 1.8 3.3 6.6 — — $181.1 $375.4 $685.6 (-15.5) (-4.6) (17.0) (20.6) (37.6) (-0.4) $181.1 $375.4 $685.6 n o c z :;! ,. CI ~ Z ;;; … lIIJ ,. … (5 Z o \”‘1’1 ~ m r- \”‘1’1 ,. lIIJ m .\” lIIJ o Ci) lIIJ ,. ~ ~ o ::I -:i’ c CD a. … t ……. ::I: s: ~ :> z t:l ~ t%J E ~ t%J -…… (1) 3 01 -~ Item 5180 HEALTH AND WELFARE \/ 1249 OVERVIEW OF THE BUDGET REQUEST Current Year Deficiency The budget estimates that General Fund expenditures for the adminis- tration of county welfare programs will be $3,488,000 more than the amount appropriated for 1983–84. This deficiency is the net result of sev- eral separate increases and decreases in funding requjrements for this program, relative to what was anticipated in the 1983 Budget Act. In- creased costs resulting from higher AFDC caseloads ($3,929,000) and Spe- cial Adult Program Administration ($555,000) are partially offset by decreased costs attributable to the Welfare Fraud Early Detection and Prevention program ($563,000) and a 50 percent decrease in the costs of staff development budgeted in this item ($1,497,000). Based on our re- view, we conclude that the department’s estimate of the current year deficiency is reasonable. This estimate is subject to change during the May revision of expenditures. Budget Year Proposal The budget proposes an appropriation of $129,114,000 from the General Fund as the state’s share of county costs to be incurred in administering welfare programs during 19~5. This is an increase of $12,428,000, or 11 percent, over estimated current-year expenditures. The budget proposes total expenditures of $685,633,000 for county ad- ministration of welfare programs in 1984-85, as shown in Table 1. This is an increase of $36,170,000, or 5.6 percent, over estimated current year expenditures. This amount does not include $407,000 proposed in Item 9680-101-001 to reimburse counties for state-mandated administrative ac- tivities and added grant costs. Budget Year Adjustments Table 2 shows the proposed adjustments to General Fund expenditures for county administration in 1984-85. The net increase of $12,428,000 is due, in large part, to the following major cost increases: 1. $2,287,000, due to increased AFDC caseloads. 2. $10.9 million resulting from the proposed removal of the limits on state participation in county salary increases. These increased costs are partially offset by the following savings: 1. $702,000 due to decreased food stamp caseloads. 2. $1,680,000 due to the proposed end to Special Circumstances pro- gram. State Mandated Local Costs The budget proposes $407,000 from the General Fund to reimburse counties for their costs of complying with six state mandates. One of these mandates was imposed by the Legislature: Chapter 102, Statutes of 1981 (AB 251), requires counties to deter- mine whether AFDC recipients have alternative medical insurance coverage (increased administrative costs: $79,000). 1250 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued Table 2 Proposed General Fund Budget Changes for County Administration 1984-85 (in thousands) 1983-84 Expenditures (Revised) ………………………………………………………… ; …. . A. Adjustments to Ongoing Costs or Savings 1. AFDC Administration a. Increased caseload ……………………………………………………………………. . b. End to extended unemployment benefits ……………………………… .. c. Retroactive costs of court decisions …………………………………………. . d. Fraud prevention and detection programs …………………………….. . e. Other …………………………………………………………………………………………. . Subtotal ……………………………………………………………………………………….. . 2. Nonassistance Food Stamp Administration a. Decreased caseload ………………………………………………………………….. … b. Monthly reporting\/retrospective budgeting …………………………… . c. Other ………………………………………………………………………………………… .. Subtotal ……………………………………………………………………………………….. . B. New Costs or Savings 1. AFDC Administration a. End to past-year COLA limitations …………………………………………. . b. Retroactive costs of court decisions …………………………………………. . 2. Food Stamp Administration-End to past-year COLA limitations 3. Elimination of Special Circumstances Program …………………………… . C. Total Changes for 1984-85 ………………………………………………………………… . 1984-85 Expenditures (Proposed) ………………………………………………………… .. Change from 1983-84: . Amount ………………………………………………………………………………………………… . Percent ………………………………………………………………………………………………… . Cost $2,287 238 -320 61 645 -$702 461 -144 Total $116,686 $2,911 -$385 $8,657 682 2,243 -$1,680 $129,114 12,428 10.7 The other five mandates were imposed administratively by the depart- ment. These mandates: Require counties to verify the household size, shelter costs, and de- pendent care costs for food stamp recipients (increased administra- tive costs: $60,000). Make the criteria for exempting an individual from employment serv- ices registration the same for counties with and without WIN pro- grams (increased county grant costs: $4,000). Remove the $200 maximum exemption for the cost of employment- related equipment (increased county grant costs: $10,000). Exclude loans from income in determining eligibility and calculating the grant (increased county grant costs: $4,000). Requires counties to investigate discrepancies between social security numbers reported by AFDC recipients and those on file with the Social Security Administration (increased administrative costs: $250,- 000). WELFARE FRAUD EARLY DETECTION\/PREVENTION PROGRAM The 1983 Budget Act provided funds for the establishment of programs to prevent fraudulent receipt of AFDC and food stamp benefits. Under the provisions of the Budget Act, counties were required to report on their existing procedures to detect and prevent fraud. In addition, they were required to determine whether these procedures were as cost-effective in detecting fraud as a system used by Orange County. If their procedures were not as cost-effective, the counties could seek\u00b7 additional funds to develop programs based on the Orange County model. The primary fea- Item 5180 HEALTH AND WELFARE \/ 1251 tures of this model are (1) early referral of applications to investigators when the eligibility worker suspects that there is a potential for fraud, (2) investigation of the case within a few days, and (3) timely return of the results of the investigation to the eligibility worker for appropriate action. During 1983-84, a total of 18 counties are expected to participate in the program., as shown in Table 3. These 18 counties will hire a total of 31 fraud investigators and 13 eligibility workers to staff the fraud detection pro- grams. In 1984-85, one additional county is expected to start a program using 3 fraud investigators. Tlie 1983 Budget Act assumed net expenditures of $6,357,000 ($1,094,000 General Fund, $4,058,000 in federal foods and $1,205,000 in county funds) for the Welfare Fraud Early Detection and Prevention program. The department has reduced its estimate of expenditures to $855,000 ($165,000 General Fund, $510,000 in federal funds and $180,000 in county funds) due to the limited number of counties requesting funding for the program and because counties do not anticipate starting programs until January or March 1984. The 1984 Budget Bill proposes net expenditures under the program of $1,092,000 ($189,000 General Fund, $694,000 in federal funds, and $209,000 in county funds) in 1984-85. This represents the net cost of program staff, less the administrative savings due to reduced caseload as a result of the program’s investigations. AFDC grant savings attributable to the program are expected to reach $9.3 million in 1984-85. There are two reasons for the sharp increase over the $1.7 million in savings estimated for 1983-84: (1) programs that begin during 1983-84 will not become fully operational until 1984-85 and (2) grant savings due to the program accumulate as more and more fraudulent applicants are denied aid each month. Table 3 Costs and Savings Due to Welfare Fraud Early Detection\/Prevention Programs All Funds (dollars in thousands) 1983-84 Budget Act Mjd~Year County Administration Program staff ……………………………………………………………….. .. Administrative savings ………………………………………………….. . Net Administrative Cost ………………………………………….. .. AFDC Grant Savings …………………. , …………………………………… . Net Savings ……………………………………………………………….. .. Counties participating …………………………………………………. .. Staff added a ………………………………………………………………….. . a Includes both fraud investigators and eligibility workers. Estimate Revise $9,637 -3,280 $6,357 -$35,152 -$28,795 44 191 $1,046 -191 $855 -$1,739 -$884 18 44 1984-85 Proposed $2,089 -997 $1,092 -$9,273 -$8,181 19 47 The department has estimated the program savings based on the as- sumption that, each month, six applicants per investigator will be denied grants. This assumption reflects Orange County’s experience. Actual sav- ings from the program, however, could vary from this estimate for at least two reasons. First, the extent to which applicants are misrepresenting themselves when applying for aid may differ from county to county. Sec- ond, some counties are using eligibility workers to conduct investigations, 1252 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued while Orange County used only fraud investigators. Eligibility workers . could be more or less successful at identifying fraudulent applications than fraud investigators. COST CONTROL MEASURES IN COUNTY ADMINISTRATION The Department of Social Services (DSS) allocates funds to counties for the administration of welfare programs using a formula that considers (1) caseload, (2) productivity targets for eligibih.\u00b7ty workers, (3) the existing salary structure in each county, (4) allowable cost-of-living increases, and (5) allocated support costs. One of the primary objectives of this formula is to control the growth in state-funded county costs for administering welfare programs. The department calculates the county’s allocation of funds for adminis- trative costs in the following way. First, it determines the productivity targets (the number of cases to be handled by an eligibility worker) and supervisory ratios for the county. The cost control plan calls for counties to meet the average of the productivity standards achieved by counties of a similar size during a specific base year, or their own performance during the base yearifit was above average. Second, the department determines the allowable salary costs per worker, considering the limits on state fund- ing for cost-of-living increases in the last two years and actual county salaries. Third, the deparment calculates total administration costs by mul- tiplying the DSS May estimates of caseloads in AFDC and food stamps, times the average cost per case, which is derived from the productivity target and average salary costs. Several other adjustments are made in order to fund overhead costs, fraud investigation activities, and other special items. The state’s share of cost is approximately 25 percent of the total. The counties are notified of their allocation early in the budget year. The amount actually paid to a county is determined by adjusting the allocation for the actual caseload during the year. Under this system, there are two ways in which the state can limit the costs to the General Fund of county administration: (1) raise productivity targets and (2) limit the allowance for cost-of-living increases to county employees. Productivity Targets. The cost control plan specifies productivity targets that provide a basis for limiting allocations to counties. Table 4 lists the productivity targets for the AFDC and Food Stamp programs, and sh~ws the extent to which these targets are being met by the 27 largest counties. The first column of the table shows how many counties are meeting each of the productivity targets specified by the cost control plan. The second column shows the number of counties for which the target allowed by DSS results in administrative costs that are higher than they would be if DSS had required the county to meet the cost control plan’s targets. The last column shows the number of counties for which. the targets allowed by DSS result in costs that are lower than the costs that would be incurred if DSS had used the cost control plan’s targets to determine the county’s allocation. Table 4 shows that in general, the majority of counties are meeting their AFDC productivity targets except in the area of quality control workers. Thirteen of the 27 counties were allowed more quality control staff than the plan calls for. The department has allowed more staff in this area than the cost control plan would permit in order to increase the amount of Item 5180 HEALTH AND WELFARE \/ 1253 resources devoted to reducing AFDC error rates. Plan targets for nonassistance food stamps and the support ratio, on the other hand, are not being met. In 18 of the 27 largest counties, the targets allowed for food stamp cases per worker result in higher costs than plan targets. In 22 of the 27 counties, the targets allowed for the support ratio resulted in higher costs for county administration than the costs that would have been allowed under the plan targets. Table 4 Differences Between Cost Control Plan Targets and Allowed Productivity Targets (27 Large and Medium Sized Counties) 1983-84 a Allowed Target Equals Plan Target AFDC Intake cases\/worker ……………………………………… . Intake workers\/ supervisor …………………………… . Continuing cases\/worker …………………………….. . Continuing workers\/supervisor ………………….. . Quality Control workers ………………………………. . Quality Control workers \/ supervisors b . . Nonassistance Food Stamps Cases\/worker …………………………………………………. . Workers\/supervisor ……………………………………… . Support ratio C 24 21 19 19 14 19 9 20 5 Allowed Target Results in Higher Cost Than Plan Target 3 5 7 6 13 2 18 5 22 SOURCE: Department of Social Services. b Three counties have no targets for Quality Control worker\/supervisor. C Support ratio equals the ratio of support costs to eligibility staff costs. Allowed Target Results in Lower Cost Than Plan Target 1 .1 2 6 2 AdjustInent oETargets. Productivity targets are based on county performance in a particular base year (1977-78 for AFDC administration and 1979-80 for food stamp administration). In the past, there has been no provision for adjusting the targets to reflect changes in administrative procedures that may have a significant effect on the time it takes to process each case. To correct this situation, the Supplemental Report to the 1983 Budget Act required the department to prepare a plan for adjust- ing the productivity targets to take account of procedural changes identi- fied in the budget. The department reports that beginning in 19~6, it will adjust the targets to reflect the cost of ongoing procedural changes. Target adjustments will’lJe calculated based on the estimated cost of the procedural change. .0 ~ ~~: Limits on the Stote’s Share of County Salary Increases Should be Retained We recommend that:\” 1. $10.9 million from the General Fund be transferred from Item 5180- 141-001 to Item 5180-18i~W1 to fund a 1984-85 COLA for county adminis- tration~ in lieu of past-tear salary increases that exceed what the state agreed to Fund ‘. t. 2. The Legislature aif;;pt Budget Bill language limiting the extent to which the state will share in the cost of salary increases granted by the counties. 1254 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued 3. The Legislature establish the 1984-85 COLA limits for county admin- istration based on the increases provided for state employees in the 1984 Budget Act. The budget proposes to remove existing limitations on the state’s share of county costs. These limitations were imposed in prior years in order to cap the percentage increase in county welfare department salaries that the state would fund at the percentage increase granted state employees. The budget requests a $17.7 million augmentation from the General Fund in 1984-85 for the purpose of funding prospectively county salary increases in excess of the cap. This includes $10.9 million in Item 5180-141-001 for the administration of the AFDC and Food Stamp programs and $6.8 million in Item 4260-101-001 for the administration of the Medi-Cal program. The budget proposes no funds for county-granted salary increases in 1984-85. The Legislature Has Sought to Limit the States Share of County-Grant- ed COLAs. Under current law, the federal government pays 50 per- cent of the costs of administering the AFDC and Food Stamp programs. The state and counties each pay 25 percent. Since 1981-82, however, the Legislature has placed limits on the state’s share of the costs attributable to COLAs granted by counties to their welfare department employees. Table 5 shows the limits contained in the 1981, 1982, and 1983 Budget Act. It indicates that: The 1981 Budget Act provided funds to cover the state’s share of costs resulting from COLAs up to 6 percent. In addition, the Budget Act stated that counties would be responsible for COLAs that exceeded 6 percent limit. Consequently, counties that granted salary and bene- fit increases of less than 6 percent continued to receive 25 percent state participation in these costs. Counties that granted salary and benefit increases that exceeded 6 percent had to pay 50 percent of the costs above 6 percent. The 1981 Budget Act permitted state participa- tion in salary increases above 6 percent only if counties were able to improve the productivity of their staff (that is, increase the number of cases handled by staff). The 1982 Budget Act provided no funds for county salary increases and included language limiting the state’s share of county-granted COLAs. The 1983 Budget Ac~ as passed by the Legislature, contained funds for the state’s share of a 3 percent COLA for county salaries. In addition, it allowed counties that granted COLAs less than 3 percent to apply the difference to COLAs not funded in the previous two years. This provision became moot, however, when tlie Governor, citing lower inflation in 1983 and the state’s \”severe fiscal constraint,\” vetoed the funds provided for the county COLA. The Legislature had two purposes in limiting state participation in county COLAs. First, the limitation reduces the likelihood of a General Fund deficiency in county administration because counties grant COLAs exceeding what the budget anticipated. This was common before the COLA cap was established. For example, in 1980-81 (the year before the COLA cap was established), county boards of supervisors provided COLAs to welfare department employees that averaged 10.4 percent; The 1980 Budget Act, however, only appropriated enough funds to cover a 9 percent COLA. These higher-than-anticipated COLA costs accounted for Item, 5180 HEALTH AND WELFARE \/ 1255 10 percent of the $8.4 million deficiency in county administration in 1980- 81. Second, and more importantly, limits on county-granted costs avoid the situation where the state pays for salary increases to county employees that are larger than what the state provides to its own employees, includ- ing those working in close proximity to county employees. Table 5 Budget Act Controls on the State’s Share of Costs Resulting From County Granted COLAs for Welfare Department Employees Salary and Benefit Increases Budgeted Budget Salary Act Increase 1980 ………. 9% 1981 .. ; ……. 6% 1982 ………. 0% 1983 ………. 0% a 1984 ………. (proposed) 1980 through 1984 Budget Act Language None. The state would not share in the cost of salary increases that ex- ceed the percentage increase au- thorized by the Legislature unless the excesses were funded by per- manent productivity increases. Same as above. The state would not share in the cost of salary increases that ex- ceed the percentage increase au- thorized by the Legislature in the 1981 and 1982 Budget Acts unless the excesses were funded by per- manent productivity increases or in subsequent years the cost -of- living adjustments granted by counties are less than the percent- age increase authorized by the Legislature. It is intended that $10.9 million be used in county administration to restore the 25 percent state share of actual 1983-84 salaries. Effect State shared in the cost of what- ever salary increase counties granted. Actual increases aver- aged 10.4%. Counties granted an average COLA of 8.6%, resulting in Gen- eral Fund shortfall, which was 2.6% above the level authorized by the Legislature. Counties granted an average COLA of 4.6%. The department estimates that counties will grant an average sal- ary increase of 4.6% to their em- ployees. $10,900,000 added General Fund cost in Item 5180-141-001. a The Governor vetoed a 3 percent COLA provided by the Legislature. Counties Have Granted COLAs That Exceed Budget Act Limits. Table 6 compares the COLAs provided by counties to welfare department employees with increases provided to state employees and welfare recipi- 1256 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued ents, as well as with the change in the California CPr. Table 6 shows that: The COLAs provided by counties exceeded the limits established by the vanous Budget Acts. In 1981-82, when the state’s participa- tion in salary and\u00b7\u00b7benefit increases was limited to 6 percent, counties provided COLAs which averaged 8.6 percent. In 1982-83, when the state did not pay for any salary increases, actual increases were 4.6 percent. In each year, individual counties exceeded the Budget Act limits by as much as 15 percentage points. The COLAs provided by individual counties vary widely. One county (Plumas) provided salary increases of only 1.5 percent over the three years, while another county (San Francisco) provided a 26 percent increase for employee salaries and benefits during this peri- od. . County C;OLAs~ on average~ exceeded by 9.1 percent the salary in- creases glvlm:to most state employees. County salaries~ on average~ rose faster than consumer prices during the period lnaddition~ the average county salary increased faster than the increase in AFDC grants. Table 6 Comparison of State-Supported Salary Increases With Actual Increases and Other Related Measures a 1980-81 through 1983-84 Range of Salary State-FUnded Average Increases Increase County for Provided for Welfare County by State Salary Welfare Individual Civil Increases Staff Counties Service 1980-81 …………………. 10.4% 10.4% 3.6% to 14.2% 10.0% 1981-82 …………………. 6.0 8.6 o to 15.0 6.5 1982-83 …………………. 4.6 -4.4 to 14.7 1983-84 …………………. b 4.6 (est.) N\/A C 3.0 Cumulative ……………. 6.0% 18.8% 1.5% to 25.6% d 9.7% from 1981-82 through 1983-84 All increases represent average annual increases. b The Governor vetoed a 3 percent increase provided by the Legislature. C Actual 1983-84 increases are not yet available. d Includes increases only as of 1982-83. Change in California CPI 11.3% 10.8 1.8 4.6 18.0% Increase in AFDC Grants 12.9% 9.3 4.0 15.9% Distribution of COLA Funds. Table 7 shows our estimate of how the funds proposed in the budget would be distributed among the 12 largest counties. Of the $10.9 million proposed for salary increases for AFDC and Food Stamp administration, $8.7 million (80 percent) would go to these 12 large counties. Between 1981-82 and 1983-84, salary in- creases in these counties ranged from a low of 9.1 percent (3.1 percent above the state limit) in Sacramento County to a high of25.6 percent (19.6 percent above the state limit) in San Francisco. Item 5180 HEALTH AND WELFARE \/ 1257 Table 7 Cost to Fully Fund Actual County Salary and Benefit Increases for 12 Largest Counties 1984-41\/ __ Budgeted Actual Differ- M CN\”\\\”\”V’I \\~. \\ .;. 0;’\\,\\ l\\II G\\ lIIi;-~ j 5, 1- Counties Increase Increase ence Alameda …………………………………………. . 6% 23.3% 17.3% Contra Costa ………………………………….. . 6 18.9 12.9 Fresno …………………………………………….. . 6 9.9 3.9 Los Angeles …………………………………… .. 6 .19.2 13.2 Orange …………………………………………… . 6 21.6 15.6 Riverside …………………………………………. . 6 9.8 3.8 Sacramento ……………………………………. . 6 9.1 3.1 San Bernardino ………………………………. . 6 17.4 11.4 San Diego; ………………………………………. . 6 12.2 6.2 San Francisco ………………………………… . 6 25.6 19.6 San Joaquin ……………………………………. . 6 18.0 12.0 Santa Clara ……………………………………… . 6 15.2 9.2 Total-12 Largest Counties …………………………………………………………. . Total-Statewide …………………………………………………………………………. . \”6 \\ – ‘6;2. ,,’is 2.-‘< \"?> Unfunded costs of Salary Increase DSS Eftimate LAO Eftimate $816,704 306,342 107,604 4,528,117 530,827 112,254 163,074 440,461 414,167 594,293 278,875 427,577 $8,720,294 $10,900,368 $868,256 350,747 203,721 5,382,307 578,820 215,154 351,504 522,764 620,311 615,015 325,965 544,966 $10,579,530 $13,224,413 Budget Proposal is Flawed. Based on our analysis, we conclude that there are several serious flaws with the budget proposal to lift the cap on the state’s share of costs for county-granted COLAs. Cost of the Proposal is Underfunded We estimate that the budget underestimates the cost of rescinding the limit on the state’s share of cost for county-granted COLAs. As shown in Table 7, the approval of the proposal would cost the General Fund $13.2 million. This is $2.3 million more than the budget requests in 1984-85. Our analysis indicates that the department made two errors in preparing its estimate. First, it understated the cost of salary increases between 1982-83 and 198~. Second, it has overestimated costs due to salary increases in support (clerical support and administration). The net result of correcting these errors is to increase the General Fund cost of this proposal by $2.3 million. Proposal Rewards High-Cost Counties. The proposal treats coun- ties unequally. It provides additional funds to those counties that chose to grant larger cost-of-living increases than what the last three Budget Acts funded, while offering nothing to those counties that followed the state’s lead and stayed within the Legislature’s COLA limits. Some of the counties that would get nothing from the budget proposal reduced salaries in 1982-83, perhaps in an effort to stay within the limits placed on them by the COLA cap. For the most part, the counties that would receive no funds under the budget proposal are small counties with limited resources: precisely those counties least able to bear the costs of unfunded COLAs. Proposal is Based on a Faulty Premise. The budget asserts that COLA limitations have increased \”the potential for General Fund overpayments, higher quality control error rates, and federal AFDC and Food Stamp sanctions.\” The budget states that thelotential for increased errors results, in part, from reducing staff an thereby in- creasing the number of cases handled by the remaining eligibility workers_ We believe this premise is incorrect for the following rea- sons. 1258 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued First, there has been no consistent trend in error rates since enact- ment of the controls on salaries and benefits. Table 9 (below) shows that, while error rates are high when compared to the federal stand- ard of 4 percent, they-have gone down as well as up during the period since 1980-81. Secondly, we are unable to identify in those counties that granted high COLAs a consistent pattern of staff reductions and therefore increased cases per eligibilIty workers that could threaten to increase error rates. Table 8 groups counties on the basis of whether they gave either high, medium, or low cost-of-living increases in recent years, and shows the percent of counties in each group that increased the number of cases handled per worker. If staff were reduced in order to fund COLAs for the remaining employees, we would expect cases per worker to increase. Table 8 shows that high COLA counties tend- ed to increase the number of AFDC intake cases and food stamp cases per worker. This is consistent with the budget premise. On the other hand, low COLA counties were more likely than high COLA counties to increase continuing cases handled by each worker. This trend is contrary to the budget premise underlying the budget proposal. . Table 8 Counties that Increased AFDC or Food Stamp Cases Per Worker 1980-81 through 1982-83 AFDCCases Intake Cases Continuing Cases High COLA………………………………………… fJl% 53% (over 18%) Medium COLA …………………………………. 54 64 (10 to 18%) Low COLA ………………………………………… 47 fJl (under 10%) Food Stamp Activities 53% 46 33 Total Number of Counties 15 28 15 LAO Recommendation. For these reasons, we recommend that the Legislature reject the budget proposal to share in the cost of county- granted COLAs that exceed the limits established by the Legislature. Instead, we recommend that: The funds proposed in Item 5180-141-001 to fund prior-year COLAs be transferred to Item 5180-181-001 to provide a COLA in 1984-85 for county administration up to a limit established by the Legislature. The Legislature adopt the same language controlling the distribution of the COLA as it included in the 1983 Budget Act. The Legislature fix the maximum COLA for which the state will provide funding at a level comparable to the percentage salary in- creases granted to state employees. This course of action would offer several advantages over what the budget proposes. 1. . It Allows All Counties Additional Funding for Salary Increases. Under the budget proposal, only those counties that went beyond the COLA limits set by the Legislature in prior Budget Acts would receive additional state funding for salaries and\u00b7 benefits. Under our proposal, these counties would have all or a portion of the excess \u00b7COLA funded by the state. In addition, those counties that stayed within the past legislative- ly established limits could, if they wish, increase salaries in 1984-85 and receive state funding for part of the increase. Item. 5180 HEALTH AND WELFARE \/ 1259 2. State Participation in Salaries Will Increase Uniformly Throughout the State. Under the budget proposal, the state would fund salary in- creases of 19.6 percent in San Francisco (as shown in Table 6), but only 3.1 percent in Sacramento county. Under our proposal, the state would participate equally in salary increases in all counties, up to a specified limit (except in those counties granting salary increases that are less than that allowed by the COLA caps). 3. It Prevents the Legislature from Being Criticized for Funding Salary Increases Paid to County Employees that are Larger than the Salary In- creases Provided to State Employees. Since 1980-81, salary levels in the state civil service have increased by 12.9 percent. This includes a 6.5 percent increase in 1981-82 and a 6 percent increase provided for half of 1983-84. County administrative COLAs have been limited to 6 percent. Under the budget proposal, the state would pay its share of salary increases in 36 counties that exceeded the increases granted to state employees. Under our proposal, the state could limit the COLAs for which counties would receive state funding to that provided state employees. The following Budget Act language would provide for state participa- tion in county cost-of-living increases up to the established limit. It also would permit counties that increase salaries by a percentage less than the limit established in the Budget Act to apply the difference to unfunded salary increases remaining from past years. \”Notwithstanding any other provision oflaw, the funds appropriated by this item shall be used to provide cost-of-living adjustments to county welfare departments for personal, and nonpersonal services, or to fund the amount of cost-of-living increases granted by counties which ex- ceeded the levels specified in the State Budget Acts for the 1981-82, 1982-83, and 1983-84 fiscal years, not to exceed the percentage increase authorized by the Legislature for all counties in this item for the 1984-85 fiscal year. The 1984-85 county administration cost control plan shall contain a provision which specifies that any county cost-of-living increase for per- sonal and nonpersonal services which exceeds the percentage increase authorized by the Legislature shall be the sole fiscal responsibility of the county unless the excess costs are funded by permanent productivity increases, or in subsequent years the cost-of-living adjustments granted by counties are less than the percentage increase authorized by the Legislature. The department shall not allocate, reallocate, or transfer unused por- tions of county cost-of-living funds between counties nor shall the de- partment use any funds to fund cost-of-living adjustments in excess of the percentage increase authorized by the Legislature in this item.\” ADMINISTRATIVE QUALITY CONTROL REVIEWS Federal regulations require states to review samples of AFDC and food stamps case files twice a year to determine whether those receiving bene- fits are eligible for such benefits, and whether the correct amounts have been provided. Every six months, California draws a random sample of cases from the counties’ files and reviews each case. Based on its review, the state calcu- lates the percent of payments made in error to AFDC families as well as errors in the issuance of food stamps. These percents are the state’s error rates. The federal government then reviews subsamples of the original state samples for accuracy, and adjusts the state’s findings to reflect the results from the subsample reviews. These adjusted error rates are the federally recognized error rate for each program. 1260 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued State regulations further require 34 of the 35 largest counties to conduct similar quality reviews of AFDC cases twice a year. The thirty-fifth county (Los Angeles) estimates its error rate on the basis of the federal sample results. County quality control staff review about 140 cases, and calculate the county’s error rate based on the results of these reviews. A subsample of these county-reviewed cases is reviewed by the state to check on the accuracy of the original county results. The state then adjusts the county findings to arrive at the state recognized error rate for each of the coun- ties. Chart 1 shows the AFDC payment error rates in California since 1976. In the most recent period for which final federal results are available, October 1981 to March 1982, the state’s error rate jumped to 7.3 percent. Federal Sanctions. Federal regulations require states to reduce their error rates by one-third decrements, starting in October 1980. Fed- eral regulations also require that for the October 1982 to September 1983 review periods, states achieve an error rate of 4.0 percent or lower. Begin- ning on October 1, 1983, states must achieve an error rate of 3 percent or lower. A state’s failure to achieve either the interim reductions or the 4.0 percent level will result in a reduction in federal financial participation in the costs of the state’s AFDC program. Chart 1 Statewide AFDC Payment Error Rate, July 1977 through March 1983 a Percent of Payments 10 Dec. June Sept. March Sept. March Sept. March Sept. March 77 78 78 79 79 80 80 81 81 82 March 83 a SOURCE: Based on data released by Department of Social Services. Ali periods snow federal findings except April-September 1982 and October 1982-March 1983. For these two periods rates are estimated based on adjustment 01 state findings. Item 5180 HEALTH AND WELFARE \/ 1261 Because California’s error rate in the base period (April to September 1978) was below 4.0 percent, the state must achieve the 4.0 percent stand- ard for all review periods between October 1980 and September 198q, and a 3 percent standard for all subsequent review periods. Federal sanctions can be imposed upon the state when the combined error rate over two six-month sampling periods exceeds these standards. In 1983, California was notified that its error rate for the period October 1980 to September 1981 exceeded the federal standard and that California was subject to a sanction of $35,067,000. California appealed the applica- tion of the sanction, citing its good faith effort to reduce errors. The federal government has not yet decided whether to waive the sanctions. It is likely that California also exceeded the allowable error rate stand- ard of 4.0 percent during the October 1981-through-September 1982 re- view period. The final error rate for the period October 1981 to March 1982 is 7.3 percent. Although final figures are not available from the fed- eral government, we estimate that California’s error r8.i:e for the April-to- September 1981 period will be 5.6 percent. When these two error rates are combined, California can expect to be notified of a sanction totaling ap- proximately $33 million. The state then will have 65 days in which to request a second waiver of sanctions. The Secretary of DHHS will then determine ‘whether all, part, or none of the sanctions will be waived. Other Measures of Administrative Performance Besides the payment error rates cited above, quality control reviews provide several other measures of administrative performance in the AFDC and food stamp programs. Table 9 lists these measures for quality review periods since October 1979. Underpayment error rates represent the percentage of payments that county welfare departments should have made, but did not. The case-error rate shows what percent of cases in the sample had errors-that is, overpayments, underpayments, or payments to ineligible families. Table 9 Error Rates in AFDC and Food Stamp Programs October 1979 through March 1983 10\/79 to 4\/80 to 10\/80 to 4\/81 to 10\/81 to 4\/82 to 10\/82 to AFDC 3\/80 9\/80 3\/81 9\/81 3\/82 9\/82 3\/83 Dollar error rates -Overpayments and payments to ineligibles\” …………………………………. 6.3% 5.1% 8.6% 5.0% 7.3% 5.6% \” 6.4% \” -Underpayments C ………………………….. 0.6 0.5 0.7 0.6 0.4 0.2 0.5 Case error rate c ……………………………….. 15.8 14.3 15.0 14.2 14.0 9.7 10.9 Negative action errors C -Incorrect reason for discontinuance or denial …………………………………….. 0.5 0.9 1.8 4.2 3.9 N\/A N\/A -Inappropriate notice …………………….. 4.9 3.5 3.1 3.3 3.6 N\/A N\/A Food Stamps Dollar error rates -Overpayments and payments to ineligibles c …………………………………. 7.2 7.8 8.7\” 6.2\” 9.3\” 8.0\” N\/A -Underpayment\” ……………………………. 2.6 3.5 3.0 2.9 2.8 3.3 3.3 Case error rate C ……………………………….. 19.9 23.1 22.1 17.7 18.7 19.3 19.9 Negative action e \u00a3rors c …………………… 7.1 9.4 9.1 9.5 9.4 9.6 N\/A \” Estimated final Findings based on original state findings. b Final federal findings C Original state findings. 1262 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued The department also reviews a sample of cases that were denied or discontinued aid. The results from this sample show what percent of the cases were denied or discontinued for incorrect reasons, and the percent of denied and discontinued cases in which errors were made in the notifi- cation of such action. OTHER BUDGET ISSUES Asset Clearance Match Demonstration We recommend an augmentation of $100,000 in Item 5180-141-001 and $273,000 in Item 5180-141-866 to fund additional county investigator staff for the Asset Clearance Match Demonstration Project. Chapter 703, Statutes of 1981 (SB 620), authorizes a four-county demon- stration project to match welfare and Franchise Tax Board (FTB) records in order to identify welfare recipients who received over $30 annually in interest or divident payments. Because AFDC eligibility is limited to fami- lies with less than $1,000 in resources, families that earn more than $30 in interest and dividends in a year may have available assets that exceed this limit. When a match is made between a welfare record and a FTB record, the case is referred to county welfare investigators in order to determine if the family was ineligible for assistance. The first match of welfare and FTB records was conducted in Novem- ber 1982 and was based on 1981 interest and dividend data. The match used welfare data submitted by four counties: Alameda, Los Angeles, Santa\u00b7 Barbara, and Shasta. The match yielded 18,000 cases where social security numbers in the AFDC case matched a number in the FTB files for which interest and dividends were reported. A second match con- ducted in January 1984 based on 1982 records yielded 8,967 new cases. The four participating counties employ a total of 18 investigators to handle these cases .. Table 10 shows the results of their investigations through the end of October 1983. A total of 4,137 cases have been referred to counties and of these referrals, 1,565 cases have been assigned to inves- tigators. The counties have completed 552 investigations and have identi- fied 298 cases with overpayments totaling $2,405,000. This is an average of $8,069 per fraudulent case. Sixteen cases have been prosecuted. Table 10 Asset Clearance Match Demonstration Performance Measures As of October 1983 Total cases matched ……………………………………………………………………………………………………………. 17,637 Cases referred to counties …………………………………………………………………………………………………… 4,137 Cases under investigation …………………………………………………………………………………………………… 1,565 Completed investigations…………………………………………………………………………………………………….. 552 Cases with overpayments …………………………………………………………………………………………………… 298 Average overpayment ………………………………………………………………………………………………………… $8,069 Number of prosecuted cases……………………………………………………………………………………………….. 16 Item 5180 HEALTH AND WELFARE \/ 1263 Table 11 lists the costs and benefits of the Asset Clearance Match Project. In 1982-83, the project resulted in a net cost of $22,000. This is because investigations did not begin until the last half of 1982-83 and did not yield savings until the following year. The department projects net savings of $l.6 million in 1983-84 and, assuming the same staffing level, net savings of $2.7 million in 1984-85. Table 11 Costs and Benefits of Asset Clearance Match (in thousands) Costs County Administration ………………………………………….. .. State Operations ………….. : ……………………………………….. .. Totals ………….. , ………………………………………………………. . Savings Overpayments recouped ………………………………………… .. Grant costs avoided ………………………………………. ; ……… .. Totals …………. , ……………………………………………………….. . Net Fiscal Effect ……………………………………………………… . 1982-83 Actual $536 92 $628 -$606 -$606 $22 1983-84 &timated $921 124 $1,045 -$1,211 -1,416 -$2,627 -$1,582 1984-85 Proposed $921 153 — $1,074 -$1,456 -2,340 -$3,796 -$2,722 A sizeable portion of the original cases with matches have not been investigated. In Los Angeles, 7,000 cases, including many cases where the family continues to receive aid, have yet to be referred to the county for investigation. The backlog results from a lack of investigator positions because the project underestimated the percentage of matched records that would require investigations. The department estimated that 10 per- cent of an expected 28,000 cases would require investigation. Although only 17,637 :matches were discovered, counties actually have assigned’ between 25 and 36 percent of these cases to investigation (this excludes Los Angeles County):-Although Shasta and Santa Barbara Counties appear to have adequate staff to handle assigned investigations, Los Angeles and Alameda Counties may not be adequately staffed to complete cases al- ready referred for investigation. We recoIDIllend that funds budgeted for the Asset Clearance Match Demonstration Project be increased to provide for 10 additional investiga- tors. We recommend this increase for the follOwing reasons: Based on the results of the demonstration project to date, overpay- ments recouped through additional investigations would almost com- pletely offset the cost of the additional staff. In addition, the avoided grant costs due to discontinuance of fraudulent cases will more than offset the costs of additional investigators. The DSS soon will send to the counties a new list of welfare cases with 1982 interest earnings identified by FTB. Existing investigator staffing is inadequate to handle both the new cases and the remaining backlog of cases identified in November 1982. Finally, inadequate staffing may cause the savings that can be achieved by expanding the asset clearance match statewide to be underestimated. Based on the experience of demonstration counties to date~ 10 investiga- tors would be sufficient to process the 7,000 backlog of cases. (This assumes that 20 percent of these cases will require investigations and an investiga- tor can handle 140 cases per year.) We estimate that 10 additional inves- 1264 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued tigators in 1984-85 would cost an additional $500,000, as shown in Table 12. The net lldministrative costs would total $472,000 ($500,000 for added investigative staff partially offset by administrative savings of $28,000). We estimate that these 10 investigators would result in a net savings of $525,000 in collected AFDC overpayments, $259,000 in avoided grant ex- penditures, and a $28,000 reduction in AFDC administrative costs, for a total savings of $812,000 ($357,000 in state funds, $405,000 in federal funds, and $50,000 in county funds). Although the additional investigator staffing will result in overall sav- ings to the federal and state governments, it will increase county costs by $56,000. However, these added county costs are more than offset by the $172,000 savings budgeted in 1984-85 for the Asset Clearance Demonstra- tion Project at its current staffing levels. Consistent with this recommen- dation, we make a related recommendation in our analysis of AFDC Payments for Children (Items 5180-101-001 and 5180-101-866). In those items, we recommend a General Fund reduction of $350,000 ($234,000 for overpayments collected and $116,000 due to reduced caseloads) and a federal fund reduction of $391,000 ($262,000 for overpayments collected and $129,000 due to reduced caseloads). Table 12 Estimated Costs and Benefits of 10 Additional Fraud Investigators 1984-85 (in thousands) State . County Cost Added investigative staffa ………………………………. . $107 $106 Savings OverpayYIlents collected ………………………………….. . -$234 -$29 Reduced caseload -Grant savings …………………………………………….. . -116 -14 -Administrative cost savings ……………………… . -7 -7 Total Savings …………………………………………. . -$357 -$50 Net Savings …………………………………………………………… . -$250 $56 Federal Total $287 $500 -$262 -$525 -129 -259 -14 -28 -$405 -$812 -$118 -$312 a Funding ratios are based on those used for currently budgeted fraud investigators in Asset Clearance Match Demonstration. Extension of Federal Supplemental Compensation We recommend a reduction of $1~{)(}() in Item 5180-141-001 and $377,- {)(}() in Item 5180-141-866 due to extension of Federal Supplemental Com- pensation benefits. In September 1983, Congress enacted PL 98-92, which extended until March 1985 the provisions of the Federal Supplemental Compensation (FSC) Act. Under this act, the federal government provides an additional 8 to 12 weeks of unemployment compensation benefits to workers who have exhausted their basic 26 weeks of benefits. According to the Employ- ment Development Department, California is providing 12 additional weeks of payments, but the number of weeks of additional benefits could decrease to 8 depending on the state’s unemployment rate. Item 5180 HEALTH AND WELFARE \/ 1265 At the time the DSS prepared the 1984-85 budget estimates for AFDC administration, the FSC was due to terminate at the end of September 1983. As a consequence, the department’s estimate of costs for AFDC administration assumed termination of FSC benefits and a resulting in- . crease in AFDC caseload. The caseload was anticipated to increase be- cause some families would no longer receive FSC benefits and therefore would be eligible for AFDC. According to the DSS, the extension of FSC will result in reduced ad- ministrative costs of $283,000 in 1983-84. In addition, the DSS estimates that the administrative savings in 1984-85 will total $723,000, including $166,000 to the General Fund, $377,000 in federal funds, and $180,000 in county funds. Because the department’s estimates do not reflect the ad- ministrative savings that will result from continuation of FSC benefits in 1984-85, we recommend a reduction of $166,000 in Item 5180-141-001 and $377,000 in Item 5180-141-866. Department of Social Services SOCIAL SERVICES PROGRAMS Item 5180-151 from the General Fund and Social Welfare Fed- eral Fund Budget p. HW 175 Requested 1984–85 ……………………………………………………………….. $205,050,oooa Estimated 1983-84…………………………………………………………………. 169,229,000 Actual 1982-83 ………………………………………………………………….. \”… 154,122,000 Requested increase $35,821,000 (+21.2 percent) Total recommended reduction ……………………….. ; ……………….. .. Recommendation pending Item 5180-151-001 …………………… .. Recommendation pending Item 5180-181-001 (b) ……………… .. None $4,583,000 ($5,143,000) a This amount includes $9,273,000 proposed in Item 51BO-181-OO1(b) for cost\u00b7of-living increases. 1984-85 FUNDING BY ITEM AND SOURCE Item Description 5180-151-OO1-Social Services programs\/local as- . sistance 5180-151-866-Social Services programsllocal as- sistance 5180-181-001 (b)-Sociai Services programsllocal assistance, COLA 5180-181-866 (b)-Sociai Services program\/local assistance, COLA Total Fund General Federal General Federal SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS Amount $195,777,000 (379,110,000) 9,273,000 (575,000) $205,050,000 Analysis page 1. Other County Social Services (OCSS) Allocation. Rec- ommend that the companion bill to the 1984 Budget Bill be amended to specify that counties shall receive two alloca- tions for OCSS consisting of (a) an allocation for child 1278 1266 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued welfare services and In-Home Supportive Services (IHSS) administration and (b) an allocation for information and referral, adult, and optional services. Further recommend adoption of Budget Bill language specifying that funds ap- propriated for child welfare services and IHSS administra- tion shall be allocated based on a cost control plan. 2. OCSS Cost Control Plan. Recommend adoption of sup- plemental report language relating to a cost control plan for child welfare services and IHSS administration. 3. OCSS-County Match. Recommend that the compan- ion bill to the 1984 Budget Bill be amended to require that counties pay 25 percent of the total costs of the OCSS program. (Potential General Fund savings: $9,522,000.) 4. OCSS-Supportive Services. Recommend the adoption of Budget Bill language specifying that a county’s alloca- tion of OCSS funds be reduced to reflect the availability of appropriate services funded by the General Fund through the Child Abuse Prevention program. 5. IHSS-Cost-of-Living Increase. Withold recommenda- tion on $5,143,000 in Item 5180-181-001 to provide a 2 per- cent cost-of-living increase for IHSS providers, pending the May revision of expenditures. 6. IHSS-Fiscal Estimate of Statewide Standards. Recom- mend that, prior to the budget hearings, the department provide the fiscal committees with an estimate of the costs or savings resulting from implementation of statewide time-for-task standards. 7. IHSS-Needs Assessment Process. Recommend that, prior to the budget hearings, the department report to the fiscal committees concerning the establishment of a uni- form statewide needs assessment process. 8. Access Assistance for the Deaf. Recommend that, prior to the budget hearings, the department submit the following to the fiscal committees: a. A plan for including specific program definitions within requests for contract proposals. b. A report concerning progress in promulgating required regulations and establishing service regions. c. A plan to ensure recoupment of fees for interpreter services. d. A plan for assessing program goals and objectives. 9. Adoptions-Allocation. Recommend adoption of Budget Bill language requiring the department to submit a plan for allocating funds to county adoption agencies for the Relinquishment Adoption program. 10. Adoptions-Cost-of-Living Adjustment (COLA) Cap. Recommend that the department advise the fiscal commit- tees, prior to the budget hearings, of the extent to which General Fund costs of COLAs granted by county adoption agencies in excess of the 6 percent COLA cap have been offset by productivity increases. Withhold recommenda- tion on $4,583,000 in Item 5180-151-001 which we estimate is the portion of the proposed General Fund expenditure for adoptions that is attributable to excess county COLAs, pending receipt of the df’partment’s findings. 1280 1281 1282 1289 1296 1297 1298 1304 1306 Table 1 Department of Social Services Social Services Programs Including Cost-of-Living Adjustment\u00b7 . (in millions) Actual 1982-83 Estimated 1983-84 General County Federal Total General County Federal Programs Fund Funds Funds Funds Fund Funds Funds A. Other County Social Services …………………… 11.3 51.1 141.9 204.3 14.5 51.1 165.0 B. Special Adult Services ……………………………….. 121.1 1.2 153.1 275.4 124 3.7 173.9 1. In-Home Supportive Services ……………….. (117.2) (1.2) (153.1) (271.5) (119.9) (3.7) (173.8) 2. Maternity Home Care ………………………….. (2.1) (2.1) (2.1) 3. Access Assistance for the Deaf ……………… (1.8) (1.8) (2.0) (.1) C. Specialized Family and Children’s Services A 1.2 lOA 12.0 .4 .8 16.2 1. Work Incentive (WIN) Program ………… (A) (1.2) (10.2) (11.8) (.4) (.8) (10.2) 2. Child Development Services ……………….. (6.0) 3. Foster Care Information System ………….. (.2) (.2) O.Ob D. Adoptions …………………………………………………… 18.8 .1 18.8 18.8 E. Demonstration Programs ………………………….. 2.6 .1 .3 2.9 11.6 .1 .2 1. Child Abuse Prevention ………………………… (1.0) (.3) (1.2) (10.0) (.2) 2. Family Protection Act (AB 35) ……………. (1.6) (.1) (1.7) (1.6) (.1) F. Refugee Social Services ……………………………… 19.0 19.0 33.0 TOTALS: 1. Amounts ………………………………………………… \u00b7 154.1 53.6 324.7 53204 169.2 55.7 388.3 2. Percent ………………………… : ……………………….. 28.9% 10.1% 61.0% 100.0% 27.6% 9.1% 63.3% Details may not add to totals due to rounding. b Less than $50,000. ProTJOsed 1984-85 Total General County Federal Funds Fund Funds Funds 230.6 20.1 52.1 174.3 301.6 153.8 5.5 159.5 (297.4) (149.5) (5.5) (159.5) (2.1) (2.1) (2.1) (2.2) 1704 .4 .8 10.2 (11.4) (A) (.8) (10.2) (6.0) 18.8 2404 O.Ob 11.9 604 .2 (10.2) (604) (.2) (1.7) 33.0 35.5 613.2 205.1 5804 379.7 100.0% 31.9% 9.1% 59.0% Total Funds 246.4 318.7 (31404) (2.1) (2.2) 1104 (11.4) 2404 6.7 (6.7) 35.5 643.1 100.0% -~ CIt I-‘ ~ ::z:: ~ ~ t:I ~ til …….. …. ~ 1268 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued GENERAL PROGRAM STATEMENT The Department of Social Services (DSS) administers various social services programs which provide services, rather than cash, to eligible clients. The budget has grouped these programs into six categories: (1) Other County Social Services (OCSS), (2) specialized adult services, (3) specialized family and children’s services, (4) adoptions, (5) demonstra- tion programs, and (6) refugee social services. Federal funding for social services is provided pursuant to Titles IV-A, IV-B, IV-C, IV-E, and XX of the Social Security Act and the Federal Refugee Act of 1980. In addition, 10 percent of the funds available under the federal Low Income Home Energy Assistance (LIHEA) block grant are transferred to Title XX social service programs each year. OVERVIEW OF THE BUDGET REQUEST As Table 1 shows, the budget proposes total expenditures of $643 million for social services programs in 1984-85. Of this amount, $205 million, or 32 percent, is requested from the General Fund, and $380 million, or 59 percent, is anticipated from the federal government. The budget also anticipates county support for social services totaling $58.4 million. Of the total General Fund request, $9.3 million is for a two percent cost-of-living adjustment (COLA) for social services programs. The total cost-of-living increase proposed for social services programs is $11.5 mil- lion. Proposed Budget Changes Table 2 shows the proposed changes in spending for social services programs, from all funding sources. The table shows a net increase in proposed expenditures from all funds of $29.9 million, or 4.9 percent, over estimated current-year outlays. This reflects both increased and decreased costs. The major increases are: $10,774,000, due to the additional full-year costs of the Emergency Response program created pursuant to Ch 978\/82 (SB 14); $21,358,000, due to anticipated increases in the IHSS caseload for 1984-85; . $9,666,000 for the additional full-year cost to the IHSS program result- ing from the court’s decision in Community Services for the Disabled v. Woods; . $5,165,000, due to increased adoption caseloads resulting from the child welfare services reforms enacted by SB 14; and $11,476,000 for cost-of-living adjustments (COLA). These increases are partially offset by the following reductions; $19,171,000, due to proposed reductions in the IHSS program; $6.0 million, due to the elimination of one-time federal funding for child day care provided in the current year by Job Training Partner- ship Act programs; $1,684,000, due to the sunset of the Family Protection Act; $610,000, due to the termination of four respite care demonstration projects; and $2,938,000, due to a technical adjustment reflecting the use of monies during 1984-85 that were originally budgeted for 1982-83 by Ch 1398\/ 82 (AB 1733). Item 5180 HEALTH AND WELFARE \/ 1269 Table 2 Proposed 1984-85 Budget Adjustments Social Services Programs-All Funds (in thousands) Adjustments 1983-84 Expenditures (Revised) ………………………………………………………………. . A. Proposed Baseline Adjushnents 1. OCSS a. Additional (full-year) cost of Emergency Response program…… $10,774 b. Other adjushnents to SB 14 cost estimate …………………………………. 228 Subtotal, OCSS …………………………………………………………………………. . 2.IHSS a. Increased caseload costs ……………………………………………………………… .. b. Costs due to court decision in Community Services v. Woods .. .. c. Payments to spouse providers (AB 223) …………………………………… .. d. Anticipated program reductions ……………………………………………….. .. e. Other …………………………………………………………………………………………… . Subtotal, IHSS ………………………………………………………………………….. .. 3. Deaf Access Assistance a. Hold harIDiess at 1983–84 appropriation leveL ………………………… .. 4. Specialized Family and Children’s Services a. Elimination of one\u00b7time federal funds for child day care ………. .. 5. Adoptions a. Increased caseloads attributable to SB 14 …………………………………. .. 6. Demonstration programs a. Change in funding source for child abuse prevention ……………. .. b. Sunset of Family Protection Act.. ……………………………………………… .. c. Termination of Respite Care Demonstration projects ……………… .. Subtotal, demonstration programs ………………………………………… .. 7. Refugee Social Services:programs a. Basic social services programs-increased federal funds ………… .. b: Additional (full-year)cost of Targeted Assistance program (final 12 months of IS-month program) ……………………………………………… .. Subtotal, refugee programs …………………………………………………….. .. B. Proposed COLAs . 1. OCSS ………………………………………………………………………………………………… . 2. IHSS ……………………. ; ………………………………………………………………………….. .. 3. Maternity Home Care …………………………………………………………………….. .. 4. Deaf Access Assistance …………………………………………………………………… .. 5. Adoptions ………………………………………………………………………………………… .. Subtotal, COLAs …………………………………………………………………….. .. 1984-85 Expenditures (Proposed) ……………………………………………………………. .. Change from 1983-84: Amount ………………………………………………………………………………………………. . Percent ……………………………………………………………………………………………….. .. $21,358 9,666 -600 -19,171 -314 -$2,938 -1,684 -610 $71 2,398 $4,832 6,076 42 42 484 Totals $613,228 $11,002 $10,939 $72 -$6,000 $5,165 -$5,232 $2,469 $11,476 $643,119 $29,891 4.9% The proposed $29.9 million increase from all funds consists of (1) a General Fund increase of $35.8 million, or 21 percent, (2) a reduction in federal funds of $8.7 million, or 2.2 percent, and (3) an increase in an- ticipated county expenditures of $2.7 million, or 4.9 percent. The General Fund bears a disproportionate share of increases in the total costs of this program, due to limits on the county and federal share of costs, as follows: 1270 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMs.;…..continued Limits On County Share of Costs. Senate Bill 14 limits the county share of costs for the OCSS program to the percentage cost-of-living increase provided for the program. As a result, the state will fund 85 percent of the nonfederal share of the increase proposed for 1984-85 and the counties will pay for only 15 percent. Similarly, state law (Ch 69\/81) limits the county share of the costs of the IHSS program to 10 percent of any increase in total program costs over an established base. Limited Federal Funds. Federal funds (Title XX, Title IV-B, Title IV-C, Refugee, and LIHEAP) are made available to California based on federal appropriation levels and the state’s share of the nation’s population or other demographic statistics; they are not provided based on program costs as they are in other programs such as AFDC. Thus, although expenditures in those programs supported by Title XX (OCSS and IHSS) are budgeted to grow by 6 percent in 1984-85, California’s Title XX allocation for FFY 1985 is expected to be only about 1 percent higher than its allocation for FFY 1984 (reflecting an anticipated 1 percent increase in the national Title XX appropria- tion) . ANALYSIS AND RECOMMENDATIONS Un budgeted Federal Title XX Funds The DSS advises that California has received an allocation of $280.7 million in federal Title XX (social services block grant) funds for FFY 84. This is $18.4 million more than was anticipated at the time the 1983 Budget Act was enacted. Of the additional funds available, $4.6 million is available for expenditure only in 1984-85 and $13.8 million is available to be spent during 1983-84 or 1984-85. The department has budgeted the $4.6 million for expenditure in 1984-85. The department advises that the remaining $13.8 million will be authorized for expenditure in 1983-84 after the Legis- lature has been given 30 days’ advance notice pursuant to Section 28 of the 1983 Budget Act. The department advises that it plans to use the $13.8 million in unbudg- eted federal funds, as follows: $7.9 Million to Cover Increased IHSS Costs Resulting From Court Decision. This augmentation would pay for the estimated cur- rent-year costs of a judgment against the state issued by the court in connection with Community Services for the Disabledv. Woods. (We discuss this case under the section of this analysis entitled \”In-Home Supportive Services.\”) $2.0 Million for Refugee Social Services. The department esti- mates that federal funds available in the current year for refugee social services will be $2.0 million less than the department’s projec- tion of the \”need\” for these funds. The department advises it\u00b7 will propose to use $2.0 million of the additional Title XX money to sup- port additional spending for these services. $3.9 Million \”Reserve\” for Projected Current-Year IHSS Funding Shortfall. The department estimates that the amount of funds currently budgeted for the IHSS program will be $3.3 million less than needed to fully fund IHSS caseloads at existing service levek The department advises that it will hold in reserve until May 1984 ,~1 q Item 5180 HEALTH AND WELFARE \/ 1271 million of the additional Title XX monies, in case program reductions are required in the current year. Should reductions be required, the department would use these funds to reduce or eliminate the reduc- tions. At the time this analysis was prepared, the administration had not sub- mitted to the Legislature the notification required by Section 28 of the 1983 Budget Act. As a result we have not had an opportunity to review in detail the proposed use of the additional $13.8 million in the Title XX funds. OTHER-COUNTY SOCIAL SERVICES The Other-County Social Services (OCSS) program funds eight of the nine Title XX services that counties are required by the state to provide. (In-Home Supportive Services (IHSS), the ninth mandated program, is funded separately.) Under the OCSS program, counties also may provide one or more of the various services that are optional under state law. Proposed Funding for OCSs. The budget proposes total spending of $246,436,000 for the OCSS program in 1984-85. This amount consists of $174,293,OOOinfederalfunds (Titles IV-A, IV-B, IV-E, and XX), $52,087,000 in county funds, and $20,056,000 in General Fund support. The total in- cludes a cost-of-living adjustment of $3,811,000 proposed separately under Items 5180-181-001 (b) and 5180-181-866(b). REVIEW OF IMPLEMENTATION OF S8 14 Overview of S8 14 Changes Chapter 978, Statutes of 1982 (SB 14), made major changes in the OCSS program. Specifically, the measure (1) created four new child welfare service programs, (2) shifted the emphasis of the OCSS program toward child welfare services, and (3) changed the required county share of program costs. Each of these changes is described below. Child Welfare Services Programs. SB 14 created the following four new child welfare service programs: The Emergency Response Program was established effective October 1, 1983. Under this program counties are required to provide immedi- ate social worker response to allegations of child abuse and neglect. In addition to initial investigation and intake, the program provides supportive services for abused and neglected children and their par- ent(s) or guardian(s). These services may include counseling, emer- gency shelter, care and transportation. The Family Maintenance Program was established effective October 1,1983. Under this program counties are required to provide ongoing services to children (and their families) who have been identified through the emergency response program as victims, or potential ViCtiIllS, of abuse or neglect. The priIIlary goal of the program is to allow children to remain with their families under safe conditions, thereby eliminating unnecessary placement in foster care. Services provided through this program include social worker case manage- ment and planning, as well as supportive services such as counseling, emergency shelter care, temporary in-home caretakers, teaching and demonstrating homemakers, etc. The Family Reunification Program was established effective October 1,1982. Under this program counties are required to provide services to children in foster care who have been temporarily removed from 41-77951; 1272 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued their families because of abuse or neglect. The program also provides services to the families of such children. The primary goal of the program is to safely reunite these children with their families. Serv- ic~s provided through this program include social worker case man- agement and supportive services. The Permanent Placement Program was established effective Octo- ber 1, 1982. Under this program, counties are required to provide case management and case planning services to children in foster care who cannot be safely returned to their families. The primary goal of the program is to ensure that these children are placed in the most family- like and stable setting available, with adoption being the placement of first choice. Table 3 displays the proposed expenditures in 1984-$ for the four child welfare service programs created by SB 14. In addition, the table shows the number of social worker full-time equivalents (FTEs) that the budget proposes to fund in 1984-$. Table 3 Costs of Child Welfare Services 1984-85\” (dollars in millions) Case Management and Planning $14 SocW Programs Worker FTEs Emergency Response ………………………………………… 861 Family Maintenance………………………………………….. 1,115 Family Reunification ………………………………………… 700 Permanent Planning ………………………………………… 332 Totals ………………………………………………………….. 3,008 Cost! $44.1 57.2 35.9 16.9 $154.1 Supportive Services $7.4 14.9 6.0 $28.3 a Amounts include the costs of the 2 percent cost-of-Iiving increase proposed for 1984-85. b Includes costs for staff development. SOURCE: Department of Social Services Totals $51.5 72.1 41.9 16.9 — $182.4 Emphasis of the OCSS Program Shifted. Prior to the enactment of SB 14, the OCSS program was essentially a block grant to counties intend- ed to help them provide a wide range of social services programs. The allocation of OCSS funds among the various social services programs was left to the discretion of individual counties. As a result, OCSS funds were spent according to the priorities of the counties, rather than the priorities of the Legislature. With the enactment of SB 14, this arrangement has changed. Specifi- cally, SB 14 (1) changed the OCSS program from a block grant to a program with specific program and services requirements and (2) re- quired that a greater share of the total available OCSS funding be used for child welfare services. As Table 4 shows, the percentage of OCSS funding spent for child welfare services is proposed to increase from 62 percent in 1981-82 to 74 percent in 1984-85. The percent of total funding which is available for spending on the remaining OCSS programs has been reduced accordingly. Item 5180 HEALTH AND WELFARE \/ 1273 Table 4 Distribution of Funds Among the Various OCSS Programs 1981-82 and 1984-$ Expenditures as A Percent of Total OCSS Funds Available 1981-82 1984-85 OCSS Programs Actual\” Proposed 1. Information and Referral………………………………………………………… 5.7% 3.8% 2. Adult Services ………………………………………………………………………….. 6.3 5.1 3. IHSS Administration ……………………………………………………………….. 22.1 15.9b 4. Optional Programs …………………………………………………………………… 4.2 1.2 5. Child Welfare Services ……………………………………………………………. 61.7 74.0 Percentages are based on lota! spending of $216.6 million. Of this amount, approximately $11 million represents county spending in excess of the required county match. b SB 14 reduced the number of IHSS eligibility and need reassessments that counties are required to perform. SB 14 .Reduced the County Share of OCSS Costs. Prior to the enactment of SB 14, counties were required to pay 25 percent of the costs of the oess program. SB 14 limited the county share of costs to $51.1 million, instead of 25 percent. This amount reflected the sum of the re- quired 25 percent match provided by the 58 counties in 1980–81. The measure also provided that the county share would be increased each year by the percent of COLA provided in the budget for the OCSS program. Assuming a two percent COLA as proposed in the budget, the required county share of OCSS costs in 1984-85 will be $52.1 million, or 22 percent of the total costs of the OCSS program. Assuming the costs of the OCSS program continue to increase in the future, the effect of the limit on the county share will be to reduce the percentage of program costs which is paid for by the counties. Implementation of SB 14 Has Been . Incomplete There are three major differences between the child welfare service programs established by SB 14 and the programs which existed under prior law. First, SB 14 and the DSS regulations which implement the measure provide for more specific and more detailed case management and case planning standards than did prior law and regulation. Second, SB 14 places greater emphasis on supportive services than prior law. Third, SB 14 provides for greater court involvement in case management by establishing stricter deadlines for court reviews and greater emphasis on family reunification and permanent planning. The basic goals of SB 14-to protect children and to minimize the disruption of families-cannot be achieved unless each of these changes is implemented. Our analysis indicates that the implementation of these changes to date has been incomplete. Specifically, we have found that: Counties have not achieved the case management and case planning standards established in law and regulation. The availability of supportive services has been limited. Courts have complied with most case management provisions and most court deadlines have been met. Counties have not achieved the case management and case planning standards established in law and regulation. During the Spring and Summer of 1983, the DSS conducted a compliance review covering the first phase of SB 14’s implementation (Family Reunification and Perma- nent Placement). The review consisted of a detailed study of 1,462 ran- 1274 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued domly selected family reunification and permanent placement cases. Ac- cording to the department’s review, counties complied with the case management and case planning standards to varying degrees. For exam- ple, counties had completed the required assessment of the family reunifi- cation cases in 98 percent of the cases reviewed. On the other hand, counties had failed to comply with standards for (1) developing written plans for social worker action regarding the case (13 percent of the cases reviewed), (2) social worker visits with the child (52 percent of the cases reviewed), and (3) arranging for visits between the child and his or her parent (s) (52 percent of the cases reviewed). The results of the review of county compliance with permanent placement regulations are similar. For example, social workers failed to conduct the required visits with children in the Permanent Placement program in 44 percent of the cases reviewed. A vailabi\/ity of Supportive Services Has Been Limited The Auditor General sent questionnaires on SB 14 implementation to the counties and reports that 24 of the 43 counties which responded did not provide all of the supportive services required by SB 14. In addition, most counties reported that they limited those services which they did provide. We have discussed this issue with representatives of several county welfare depart- ments. Everyone of these representatives indicated that supportive serv- ices would be limited in 1983-84 due to a lack of funding. (The Auditor General has published his findings on the implementation of SB 14 in his report, Number P-332, December 1983.) Courts Have Complied with Most Case jUanagement Provisions and Most Court Deadlines Have Been Met. The Auditor General reports that courts have spent significantly more time reviewing child welfare cases as a result of SB 14. Moreover, based on our discussions with county welfare department representatives, we believe that, in general, the courts are meeting the deadlines established by SB 14. On this basis, we conclude tHat implementation of SB 14 has been incomplete in several areas. We recognize that SB 14 has brought about major changes in the child welfare services system and in the overall emphasis of the OCSS program. As a result, some delay in implementation is to be expected. Nevertheless, we are concerned about the implications of these delays. It is unlikely, for example, that the goals of the Family Reunification program-to safely reunite abused children with their fami- lies-can be fully achieved so long as social workers fail to meet the standards for frequency of parent and child visits. We also note that coun- ties have cited a lack of funding as the reason for the delays in implementa- tion. Adequacy of Funding in 1983-84 for the OCSS Program The 1983–84 budget includes $230,602,000 ($14,549,000 General Fund, $164,987,000 federal funds, and $51,066,000 county funds) for the OCSS program. The department advises that this amount is adequate to fund all of the OCSS activities and services required by state law, including those required by SB 14. However, every county welfare department represent- ative we have spoken with has indicated that the funds provided in 1983- 84 are not adequate. Moreover, 26 of the 46 counties which responded to the Auditor General’s survey reported that they had insufficient staff to implement SB 14. We believe three factors may explain the discrepancy between the Item 5180 HEALTH AND WELFARE \/ 1275 counties’ and the department’s assessments of the adequacy of funding for the OCSS program in 1983-84: The counties generally have granted their employees COLAs that are larger than what the state has agreed to fund (generally, the percent- age increase in salaries granted state employees) The counties have not allocated as large a percentage of total OCSS funding for child welfare services as the department estimates that they need to spend on these services. The department’s and the counties’ estimate of the funding required to pay for implementation of SB 14 may differ with respect to techni- cal issues regarding caseload measurements and workload standards. COLA Cap. One potential reason for the difference between the department and the counties regarding funding adequacy has to do with the way the department has treated county-granted cost-of-living in- creases. Specifically, the department’s estimate of what it will cost to implement SB 14 is not based on actualcost-of-living adjustments (COLA) granted by counties for social worker salaries and other operating ex- penses. Instead, the estimate is based on the costs of social worker salaries and other operating expenses in 1980-81, adjusted for a 6 percent cost-of- living increase. The department has estimated SB 14 costs in this way because the Legislature has limited the state’s share of the OCSS COLA to a total of 6 percent since 1980-81. Several counties, however, have granted COLAs that are substantially greater than 6 percent. In fact, the difference in costs between the actual COLAs granted by the counties and the 6 percent COLA that the state has agreed to fund is large enough in many cases to explain much of the difference between the department’s estimate of what SB 14 will cost and the counties’ estimates. Table 5 shows the significance of the COLA cap on OCSS funding for five counties. The table shows, for example, that Los Angeles County would have received an OCSS allocation of $74.5 million if its allocation had been based on the actual COLAs granted by Los Angeles County. This is $8.5 million, or 13 percent, more than Los Angeles County’s actual allocation Eor 198~. This difference is large enough to explain a substan- tial amount of the difference between the county’s estimate of SB 14 implementation costs and the department’s estimate. Table 5 Ef’fect of the COLA Cap on OCSS Allocations to Five Counties (dollars in thousands) County COLA oas AUocations-1fJ83…84 Granted Percent in Estimate by County Excess of Assuming no DifTerence County Since 1980-81′ State Limit Actual COLA Capb Amount PercentC San Francisco ._…….. 27.6% 21.6% $5,909.4 . $7,560.8 $1,651.4 27.9% Sonoma ………… __ …….. 25.5 19.5 1,704.9 2,133.6 428.7 25.1 Fresno …………… _…….. 22.9 16.9 4,709.1 5,694.3 985.2 20.9 Alameda ………. __ …….. 20.3 14.3 7,896.3 9,326.5 ‘1,430.2 18.1 Los Angeles …. __ …….. 16.2 10.2 65,911.6 74,452.4 8,540.8 13.0 a Represents so\u20acial worker salary and benefit COLAs only. Other COLAs (such as administTative staff salary and benefit COLAs and price increases for rent, utilities, etc.) may differ from the COLAs granted to social workers for salaries and benefits. Data provided by county welfare departments. b Reflects percentage adjustment to total costs, including the county share of costs as well as the state and federal share allocated by the DSS. C These percentage increases in the allocation exceed the percent by which county COLAs exceed the state limit. \”This is because, under the hold-harmless provision ofSB 14, aUincreased OCSS costs would be borne by state and federal funds. 1276 \/HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued In an opinion dated December 20, 1983, the Legislative Counsel has advised us that the DSS has the authority to limit the amount of funds provided to a county to reflect the COLA limitations established by the Legislature in prior years. The counsel also advises that, if a county needs to spend more money for SB 14 services than the amount provided by the department because the county granted COLAs that exceed the 6 percent cap, the additional funding must be provided from county sources. The counsel indicates that this rule would apply even if it results in the county spending more county funds than its share as established by SB 14. We conclude that the COLA is a major reason for the discrer>ancy between the department’s and the counties’ estimates of what it will cost to implement SB 14. In addition, we conclude that the department’s rec- ognition of the COLA cap in making its estimate is proper. To the extent that a county does not have adequate funds to fully implement SB 14 because the county chose to grant COLAs in excess of the legislatively established 6 percent cap, it should increase its spending from county funds in order to bring total funding up to the amount required for com- plete implementation of SB 14. County Allocation of Funds Among the Various OCSS Programs. Another potential reason for the difference in cost estimates concerns the proportion of OCSS funds that the counties are actually spending on SB 14 services. The department estimates that the child welfare services component of the OCSS program will cost $168,067,600 in 1983-84. This represents 73 percent, of the estimated total cost of the OCSS program in 1983-84. The Auditor General reports, however, that counties responding to his survey anticipated spending 67 percent of their OCSS funds for child welfare services. It is important to note that at the time the counties prepared their responses, they did not know how much money they would receive in state and federal funds for 1983-84. At the time, counties anticipated spending $217,513,800 for the OCSS program, which is $13.1 million less than the department now estimates counties will have available. Even assuming that counties would use all of the additional $13.1 million for child welfare services, they would spend $158.2 million for child welfare services in 1983-84. This is approximately $9.9 million less than the depart- ment estimates that they need to spend in order to fully implement SB 14. Thus, we conclude that another major reason that counties believe that they have received inadequate funding to fully implement SB 14 is that the counties have not allocated enough of the total OCSS funding available to child welfare services. Technical Issues Regarding the Departments Estimate of SB 14 Costs. We have identified two technical issues regarding the department’s esti- mate of SB 14 costs that may explain part of the difference between the department’s and the counties’ estimates of implementation costs: Caseload Measurements. It is unclear whether the statewide case- load figures used by the department to estimate the statewide costs for the Emergency Response and Family Maintenance programs are reliable. In estimating the costs of these programs, the department used, in part, caseload statistics for the Child Protective Services Item 5180 HEALTH AND WELFARE \/ 1277 (CPS) program which SB 14 eliminated. The department has indicat- ed that these CPS caseload statistics are not reliable on a county-by- county basis. If this is true, it is uncertain whether the statistics are reliable on a statewide basis. To the extent that the current caseload measurements underestimate actual caseloads, the department’s esti- mate of the costs ofSB 14 would be too low. The Department current- ly is developing a system for measuring caseloads in these programs . Social Worker Workloads. The estimates of the department and the counties also may differ because of differing assumptions regard- ing the number of cases a social worker can carry, given the require- ments of SB 14. Several counties have provided us with information on the number of cases they believe a social worker can carry and still meet the requirements of SB 14. We have compared these county workload standards with the workloads which are implied in the de- partment’s estimates of the costs for the Emergency Response, Fam- ily Re unification, and Permanent Placement programs. Our review indicates that the department and the counties are in agreement with respect to the number of cases which emergency response and family maintenance workers are able to carry. On the other hand, the de- partment’s estimate of the number of cases which a permanent place- ment worker can carry (55.1) is substantially higher than the estimates of many counties. Los Angeles County, for example, advises that permanent placement workers cannot perform all the activities required by SB 14 if their caseloads exceed 35 cases per worker. Neither the department nor any county we have contacted has been able to estimate the number of cases which the average family main- tenance worker should be able to carry. The significance of these technical issues is illustrated in Table 6. The table sho\\-Vs that the department’s estimate of the costs of SB 14 has changed substantially since the measure was enacted. Specifically, the table sho’-Vs that the current estimate of costs in 19~ is 8.8 percent higher than the department’s August 1982 estimate of the same costs. (The August 19B2 estimate was the last estimate available to the Legislature before it enacted SB 14 into law in September 1982.) Based on our review, we conclude that this increase in the department’s estimate is primarily Table 6 Department of Social Services’ Estimate of Child Welfare Services Costs Has Increased Substantially (in millions) Child Welfare Services Costs $135.7 $154.5 137.5 162.7 145.8 168.1 $10.1 $13.6 7.4% 8.8% $12.0 $34.3 9.0% 25.6% SOURCE: Department of Social Services 1278 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued attributable to technical changes in the estimates of caseloads and the number of cases which the average worker can carry. These technical changes to the department’s estimate have somewhat reduced the dis- crepancy between the department’s and the counties’ estimates. As better caseload and workload information becomes available, it is possible that the department will make additional technical adjustments to its estimate and thereby further reduce the difference between its estimate and the counties’ estimates of the costs of SB 14. Cost Control System Could Reduce the Confusion About the Costs of Child Welfare Services We recommend that the Legislature amend the companion bill to the 1984 Budget Bill to specify that counties shall receive two allocations for OCS~ consisting of (1) an allocation for child welfare services and IHSS administration and (2) an allocation for information and referral~ adult and optional services. We further recommend that the Legislature adopt Budget Bill language specifying that funds appropriated for child welfare services and IHSS administration shall be allocated based on a cost control plan. The 1983 Budget Act required the department to submit to the legisla- ture a plan for developing a cost control system for the OCSS program. The act specified that the system should include \”caseload measurements and workload standards for each of the OCSS services designed for use in budgeting for the OCSS program on a statewide basis, as well as for allocating OCSS funds to the counties.\” The department submitted its plan in January 1984. The plan proposes the development of an OCSS cost control system by December 1987. We believe, however, that an OCSS cost control system should be developed for use beginning in 1984-85 for the following reasons: A Cost Control System Would Improve County Implementation of SB 14. As noted above, the major reason cited by counties for the delay in fully implementing SB 14 is lack of funding. We believe that there are two major re~sons for the counties’ perception that SB 14 is not adequately funded: (1) counties have granted COLAs to their employees that exceed the amount in which the state has agreed to participate and (2) counties have allocated less of the total OCSS funding for child welfare services than necessary, as indicated by the department’s estimate. A cost control system would give the depart- ment the ability to resolve these issues by (1) specifying the amount of each county’s total OCSS allocation to be used for each of the OCSS programs and (2) providing clear direction to the counties regarding the effect of the COLA cap. A Cost Control System Would Provide a Basis for Resolving the Tech- nical Issues Conceming the Department’s Estimate of the Costs ofSB 14. As noted above, the department’s estimate of SB 14 costs has increased substantially, as a result of technical changes underlying the estimate. Our analysis indicates that some technical issues concerning the department’s estimate remain unresolved. A cost control system based on caseload measurements and workload standards could pro- vide the basis for resolving these issues. Child Welfare Services Costs Have Increased Substantially Since the Enactment of SB 14. Table 6 shows that the proposed cost of Item 5180 HEALTH AND WELFARE \/ 1279 child welfare services in 1984-85 is $48.6 million, or 36 percent, higher than the cost of pre-SB 14 child welfare services. This increase is especially significant in light of the fact that it is almost entirely attributable to increases in the baseline costs of the program. The only COLA included in the increase is the 2 percent COLA proposed for 1984-85. We believe that a cost control system would provide the basis for ensuring that future increases in this program’s costs are (1) neces- sary in order to provide services at the levels required by law and (2) commensurate with the Legislature’s willingness to pay for these services. Development of a Child Welfare Services and IHSS Administration Cost Control Plan for 1984-85 is Feasible. The department’s cost control report indicates that an OCSS cost control plan cannot be developed before December 1987. Our analysis indicates that the primary reason for this lengthy development period is the need to develop minimum service delivery standards for the information and referral, adult services, and optional services components of the OCSS program. Under current law, counties have broad discretion in determining both the nature and the amount of service that they provide under these programs. We agree that developing minimum service requirements for these three programs would require a considerable amount of time. In addition, current law requires the department to give counties as much flexibility as possible in providing these services and, therefore, the development of minimum service standards for these programs would require the enact- ment of legislation. In order to be effective, an OCSS cost control system would have to address the question of the appropriate level of funding for these pro- grams. One way to accomplish this would be to budget and allocate funds for these programs separately from funds for child welfare services and IHSS administration. The current OCSS allocation to counties is actually a combination of a block grant (for information and referral, adult serv- ices, and optional services) and a categorical grant (for child welfare services and IHSS administration, both of which are governed by very detailed and specific minimum service level requirements). Separating the current OCSS allocation into two different allocations would: Make It Possible to Develop a Child Welfare Services and IHSS Ad- ministration Cost Control Plan for Use in 1984-85. This is because minimum service level requirements for these programs already exist in current law and regulation. Moreover, the department currently estimates the costs of these programs each year, based on existing service requirements and caseload projections . Allow Counties to Retain The Flexibility They Now Enjoy in Provid- ing Information and Referral, Adult and Optional Services. The budge t proposes to fund these programs in 1984-85 at the current funding level (as estimated by the department). Allocating these funds separately from the funds provided for child welfare services and IHSS administration would ensure that the counties use the funds for the general purposes for which the Legislature provides them. At the same time, it would allow the counties to retain the discretion they now have regarding the nature and amount of services to be provided under each of the three programs covered by the block grant. Based on the above, we conclude that the department would be able to 1280 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued develop a cost control plan for child welfare services and IHSS administra- tion for use in 1984-85. Our analysis indicates that such a plan would reduce the confusion that exists regarding the adequacy of funding for SB 14, and thereby improve the counties’ implementation ofSB 14. Moreover, we believe that an OCSS cost control plan would provide the basis for controlling the costs of the OCSS program in the future within the amounts that the Legislature appropriates. Therefore, we recommend that the Legislature amend the companion measure to the 1984 Budget Bill to specify that counties shall receive two allocations for OCSS, consisting of (1) an allocation for child welfare serv- ices and IHSS administration and (2) an allocation for information and referral, adult and optional services. We further recommend that Items 5180-151-001 (a) and 51BO-151-866 (a) of the 1984 Budget Bill be modified to separately identify the amounts appropriated for (1) child welfare services and IHSS administration and (2) information and referral, adult, and optional services. We further recommend that the Legislature adopt Budget Bill language requiring that the funds appropriated for child welfare services and IHSS administration be allocated to the counties based on a cost control plan to be prepared by the department which utilizes the same caseload measure- ments and workload standards that the department uses to estimate the costs of this program. The follOWing Budget Bill language is consistent with this recommendation: \”The funds appropriated for the child welfare services and IHSS admin- istration components of the OCSS program shall be allocated to the counties based on a cost control plan. In preparing the cost control plan for 19~, the department shall use the caseload measurements and workload standards used in its most recent estimate of the costs of the child welfare services and IHSS administration components of the OCSS program to the extent that the estimate is consistent with the appropria- tions for these programs contained in this act.\” Cost Control Plan Should Be Flexible We recommend that the Legislature adopt supplemental report lan- guage directing the department to develop a cost control plan for 1984-85 that provides for as much county flexibility in determining the use of funds provided for child welfare services and lHSS administration as is consistent with current law and regulation. In its cost control report to the Legislature, the department noted that local service needs vary widely among counties. Specifically, the depart- ment noted that \”service delivery time and the number of services deliv- ered depend on the number and location of district offices, the physical size and terrain of the county, the availability of charitable or volunteer service organizations, the amount of outreach and variation in county organization, etc.\” We agree that these factors playa significant role in determining each county’s costs. In the long-run, a cost control system might be developed that could explicitly account for these factors. It is unlikely, however, that the depart- ment could develop such a plan for use in 1984-85. It is therefore impor- tant that the 1984-85 cost control plan allow counties the maximum amount of flexibility in determining how to use the funds available for child welfare and IHSS administration services, consistent with current Item 5180 HEALTH AND WELFARE \/ 1281 law and regulation. For example, counties should be free to determine how much of the available funding will be used to purchase supportive services and how much will be used to fund social worker FfEs. We therefore recommend that the Legislature adopt supplemental report language directing the department to develop a cost control plan for 1984-85 that provides for as much county flexibility in determining the use of the funds provided as is consistent with current law and regulation. The following supplemental report language is consistent with this recommen- dation: \”The child welfare services and IHSS administration cost control plan for 1984-85 shall provide counties with as much flexibility in determin- ing how to use the funds provided for these programs as is consistent with current law and regulation. The plan shall advise the counties of the caseload measurements and workload standards that the depart- ment used in developing the plan but shall allow counties to determine their own social worker workloads according to local needs and condi- tions, consistent with the funding available and to the extent that the minimum service levels established in current law and regulation are provided. \” County Match for the Other County Social Services Program We recommend that the Legislature amend the companion bill to the 1984 Budget Bill in order to require that all counties pay 25 percent of the total costs of the Other County Social Services (OCSS) program (Potential Savings to the General Fund: $9,522,(00). As noted above, the counties will pay approximately 21 percent (assum- ing a 2. percent COLA) of the costs of the OCSS program in 1984-85. This is because SB 14 limits the counties’ costs to a specified dollar amount. Our analysis indicates that the dollar limit on the county share of costs (1) does not promote sound management of the OCSS program and (2) results in substantial inequities among counties with respect to the distri- bution of state and federal funds. 1. The Dollar Limit Does Not Promote Sound Management of the OCSS Program. The county match limit established by SB 14 was de- signed to guarantee that no county would ever be required to pay for any of the costs of the new programs created by SB 14. As a result of this limit, however ~ all future increases in the costs of the OCSS program (including costs that cannot be attributed to’SB 14) will be borne by the state and federal governments. In fact, under SB 14, the counties will pay in 1990-91 the same dollar amount as they paid in 1980–81 (excluding cost-of-living increases). Consequently, under existing law, counties have little or no fisctil stake in controlling the costs of the OCSS program. Counties will continue to have an incentive not to spend more than the total of federal and state funds allocated to them plus the county share. This is because any spending above the total allocation will have to be financed entirely with county funds. The incentive to control spending, however ~ is not the same as an incentive to control costs. This is because counties may reduce service levels to the e.xtent necessary to maintain spending within the amount available from state and federal funds and the required county match. As discussed above, counties cite inadequate fund- ing as the major reason for the incomplete implementation of SB 14. To a great extent, the costs of providing the services required by SB 14 and other state laws will be determined by the counties because they have far more control than the state over such important cost factors as salaries, 1282 \/ HEALTH AND WELFARE Item 5180 SOCIAL\u00b7 SERVICES PROGRAMS-Continued overhead and indirect costs, and worker productivity. By making the state and federal government responsible for funding the increased costs of the OCSS program, SB 14 removes a major incentive for efficiency from the level of government which has the greatest ability to control costs. In the long run, such an arrangement is untenable because it will probably put the Legislature in the position of choosing between sharp increases in General Fund costs and reduced service levels. 2. The Dollar Limit Results in Substantial Inequities in the Distribution of State and Federal Funds. The county match limit created by SB 14 results in a distribution of state and federal funds among counties that is questionable from the standpoint of equity. During 1983-84, 11 counties received state and federal funds sufficient to pay for 75 percent of the costs of their OCSS program. The remaining 47 counties, however, received state and federal funds sufficient to pay for approximately 78 percent of the costs of their OCSS program. In fact, several counties received state and federal funds amounting to 80 percent of total costs. We know of no reasons that the taxpayers of the 11 counties that will receive state and federal funds totaling 75 percent of the cost of the OCSS program should be asked to subsidize the taxpftyers of the 49counties that will receive state and federal funds totaling 78 percent (or more) of the costs of the OCSS program. For these reasons, we recommend that the Legislature amend the com- panion bill to require that all counties pay 25 percent of the total costs of the OCSS program. This represents the county share of costs prior to the enactment of SB 14. If adopted, this recommendation would allow a reduc- tion of $9,522,000 in the amount of General Fund support budgeted for the OCSS program. This amount of General Fund support would not be need- ed as a result of the increased county funding for the program that would result from requiring counties to pay for 25 percent of the program’s total cost. This reduction would not affect the total amount of funding available for the OCSS program. Child Abuse Prevention Projects Duplicate Services Provided Through the OCSS Program We recommend that the Legislature adopt Budget Bill language speci- fying that a county’s allocation of OCSS funds shall be reduced to reflect the availability to the county of appropriate services funded by the Gen- eral Fund through the Child Abuse Prevention program. Chapter 1398, Statutes of 1982 (AB 1733), established a new child abuse prevention program. Under the provisions of Chapter 1398, funds for child abuse prevention are awarded to contractors on a competitive bid basis. At the time this analysis was prepared, the department had issued 178 contracts for child abuse prevention programs. Some of the services provided under this program are similar to the supportive services provided through the emergency response and family maintenance programs. Specifically, the new child abuse prevention pro- gram supports family counseling, respite care, teaching and demonstrat- ing homemakers, and temporary in-home caretakers, all of which counties are required to provide under the Emergency Response and Family Main- tenance programs. The children and families served through the Child Abuse Prevention program include children and families who receive services through the Emergency Response and Family Maintenance pro- Item 5180 HEALTH AND WELFARE \/ 1283 grams, as well as children and families referred from other sources. The budget includes $6,427,000 in General Fund support for the Child Abuse Prevention program in 1984-85. In addition, the budget includes $246,000 in federal funds for child abuse prevention demonstration projects. Finally, the department estimates that $2,573,000 of the original $10.0 million appropriated by Chapter 1398 for the Child Abuse Preven- tion program will remain unexpended at the end of 1983-84, and will therefore be available for expenditure in 1984-85. Thus, the total amount of General Fund support proposed for child abuse prevention programs in 1984-85 is $9.0 million-$6.4 million proposed in the budget and $2.6 million a vailable from the original appropriation from the General Fund included in Chapter 1398. The estimated $2.6 million is proposed for reap- propriation in Item 5180-490. We recommend approval of the proposed funding for these child abuse prevention programs. We are concerned, however, that the funds budget- ed under the Family Maintenance and Emergency Response programs may duplicate the funds provided through the Child Abuse Prevention program. The DSS has not reviewed the 178 child abuse prevention contracts that have been issued to date to ensure that the funds provided to contractors for services do not duplicate funding provided to county welfare depart- ments for the same services under the Emergency Response and Family Maintenance programs. We believe, however, that some duplication does exist. For example, we reviewed 13 child abuse prevention contracts and found that three of them required\u00b7 the contractor to provide supportive services .identical to those that county welfare departments are required to provide under the Emergency Response and Family Maintenance pro- grams. Of the three contracts, two specified that the contractor could provide these services only to clients referred by the county welfare de- partment, and the other required that the contractor give such clients a high priority. … . The budget includes $22.3 million from all funds for the costs of support- ive services under the Emergency Response and Family Maintenance programs. This amount is based on the department’s estimate of the costs of the su pportive services that counties are required to provide. To the extent that county welfare departments provide the required services through contracts funded from the General Fund under the Child Abuse Demonstration program they will .not need to spend General Fund mo- nies provided for the same purposes under the Emergency Response and Family ~1aintenance programs. We therefore recommend that the Legislature adopt Budget Bill lan- guage specifying that a county’s allocation of OCSS funds shall be reduced, by an amount to be determined by the department, to reflect the availabil- ity to the county of appropriate services funded by the General Fund through the Child Abuse Prevention program. The following Budget Bill language is consistent with this recommendation: \”The department shall reduce the amount of a county’s allocation of OCSS Funds by an amount to be determined by the department, to reflect the availability to the county of appropriate contracted services funded through the Child Abuse Prevention program created by Ch 1398\/82. Any reduction made pursuant to this provision shall be deemed to be rrude from the state General Fund share of the affected county’s allocation and shall not be reallocated for any other purpose but shall remain unexpended and revert to the General Fund.\” 1284 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued IN-HOME SUPPORTIVE SERVICES The In-Home Supportive Services (IHSS) program provides specified services to eligible aged, blind, and disabled persons for the purpose of enabling them to remain in their own homes when they might otherwise be institutionalized in boarding or nursing facilities. Two broad categories of services are available within the IHSS program: (1) domestic and relat- ed services and (2) nonmedical personal services. Domestic and related services include routine cleaning, meal preparation, shopping, and other household chore services. Nonmedical personal services include feeding, bathing, bowel and bladder care, and other services. In addition to these categories, recipients may also be eligible to receive essential transporta- tion services, yard hazard abatement and heavy cleaning, protective supervision, teaching and demonstration, and paramedical services. Currently, county welfare departments administer the IHSS program. Each county may choose to deliver services in one or a combination of three ways: (1) directly, by county employees, (2) by private agencies under contract with the counties, or (3) by individual providers hired directly by the recipients. The most common delivery method involves the use of individual providers who, the department estimates, will deliver 77 percent of IHSS case-months in 1983-84. Current-Year Expenditures The department estimates that in the current year, there will be a funding shortfall of $3,268,000 in the IHSS program. We believe the department has undereshmated the extent to which the IHSS program is underfunded in the current year. This is because the department assumes that $771,OOO-which it estimates will not be expend- ed for a discretionary COLA to IHSS providers-can be used to offset the program deficit. The 1983 Budget Act, however, restricted the use of COLA funds to wage and benefit increases for IHSS providers. Any funds not spent for this purpose will revert to the General Fund. Therefore, our estimate of the funding shortfall in the current year is $4,039,000 ($3,268,- 000 + $771,000). The current-year funding shortfall is caused primarily by the following factors: Program Changes. During deliberations on the 1983 Budget Bill, the Legislature made significant changes to the IHSS program (these changes are discussed below). The bill however, did not contain ade- quate funds to finance these changes. The DSS estimates that the changes will cost $1,385,000 ($1,247,000 General Fund and $138,000 county funds) in the current year. Funding Transfer. The Department of Finance transferred $1.6 million of federal Jobs Bill (PL 98-8) money from the IHSS program to the OCSS program during the current year. Because the counties are required to match state-appropriated funds for the IHSS program, the net impact of this transfer on the IHSS program is a reduction of $1,765,000 for support of the program in the current year. Funds Vetoed The Governor vetoed $589,000 in General Fund support for the program. The Legislature had augmented the pro- gram by $589,000 above the Governor’s proposed funding level in order to fund the basic program. ——–.~~— .. ‘\”—-.—–~ Item 5180 HEALTH AND WELFARE \/ 1285 Because of this funding shortfall, counties will have to reduce services to IHSS clients in order to stay within the amount of funds appropriated for the current year. We estimate that services must be reduced by 2.5 hours, on average, for each IHSS client during each of the last four months of the current year in order to compensate for the estimated funding shortfall. Budget Year Proposal The budget proposes a General Fund appropriation of $149,493,000 for the IHSS program in 1984-85. Included in this amount are funds proposed under Item 5180-181-001 (c) to provide a 2 percent COLA for the IHSS program. The proposed General Fund expenditures for 1984-85 are $29.6 million, or 25 percent, above estimated 1983-84 General Fund expendi- tures. The level of funding proposed to support the IHSS program in 1984-85 is equal to the current-year estimated expenditure level adjusted for (1) the costs of a court decision ($18.4 million-full-year costs) and (2) the costs of providing a 2 percent COLA to the program ($6.1 million). Chart 1 shows the cost-sharing relationships for the IHSS program, for the period 1976-77 through 1984-85. The county share of costs since 1980- 81 is not displayed in the chart, although county funds are included in the estimates of total expenditures. Chart 1 Expenditures for In-Home Supportive Services Continue to Increase 1976-77 through 1984-85 a (in millions) Dollars $350 300 250 200 150 —.\”…,…,.- 100 50 ~–~ —–~– -~ _ … ———- …. \”‘\” \”\”,– ,\/’ Total Funds ……….. …… …… …… .. \” …. …… …. …….. General Fund …. .. …. .- …. Federal Funds . ….. … … . . .. 76-77 77-78 78-79 79-80 80-81 81-82 b 82-83 b 83-84 b 84-85 b (+18.0%) (+30.2%) (+21.1%) (+21.0%) (+6.0%) (-1.6%) (+9.5%) (+5.7%) a b Includes proposed 2 percent COLA. County match of $1.5 million for 1981-82, $1.2 million for 1982-83, $3.7 million for 1983-84 and $5.4 million for 1984-85 nol d,splayed 1286 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued Chart 1 shows that the budget proposes to allocate less federal funds to the IHSS program in 1984-85 than what has been allocated in the current year. (These funds have been directed to support the OCSS program in 1984-85.) The chart also shows that the budget proposes to increase Gen- eral Fund support for the program. The department estimates that an average of approximately 107,775 individuals will receive IHSS services each month in 1984-85. This is an increase of 6.5 percent over estimated monthly caseloads in the current year. The cost of funding projected budget-year caseloads at current-year service levels would be $330,793,000. The administration proposes $314,- 431,000 in total funding for the program. Of this amount, $308,354,000 is available to support basic program costs and $6,077,000 is for a 2 percent COLA. In order to remain within the proposed funding level, the counties would have to reduce the level of services provided to IHSS clients by $22,439,000, or 6.8 percent, if the budget is aRproved as submitted. This means reducing services to the average client by approximately 4.3 hours each month. The size of the service reductions in each county would vary because (1) counties utilize different modes of delivering services to cli- ents, (2) the average hourly cost of these modes varies considerably, and (3) various counties may implement service reductions at different times during the year. As Table 7 indicates, the budget assumes that counties will commit $5.5 million to the IHSS program in 1984-85. The extent to which counties will, in fact, share in the cost of providing the level of service proposed in the budget for 1984-85 depends on whether actual program costs exceed the amount of state and federal funds appropriated for IHSS in the budget year. Table 7 In-Home Supportive Services Proposed Funding by Source 1982-83 through 1984-35 (in thousands) Funds General ………………………………………………………………………. .. Federal ……………………………………………………………………….. . County …………………………………………………………………………. . Totals ……………………………………………………………………. . Actual 1982-83 $117,157 153,110 1,214 $271,481 Estimated 1983-84 $119,931 173,804 3,681 $297,416 \”Includes the cost of a 2 percent COLA budgeted under Item 5180-181-001 (c) . Assessment of Eligibility and Client Need Proposed 1984-85\” $149,493 159,463 5,475 $314,431 Individuals who apply for services under the IHSS program must meet both the program’s basic eligibility requirements and need criteria. Eligi- bility for the IHSS program is tied closely to eligibility for the SSI\/ SSP program. An individual can quality for IHSS services if he\/she: 1. Is a recipient of SSI\/SSP; 2. Meets all SSI\/SSP criteria, but is not receiving SSI\/SSP grants; 3. Was once eligible for SSI\/SSP, and although now performing substan- tial gainful activity, still has the disability that was once the basis for his\/her eligibility; or 4. Meets all other SSI\/SSP eligibility criteria, but has an income which, Item 5180 HEALTH AND WELFARE \/ 1287 although higher than the SSIISSP payment standard, is not sufficient to pay the full cost of IHSS services. These individuals are required to pay a share of the cost of the services provided. Assessment of Need If an individual is found to be eligible to re- ceive services, a county social worker or assessment worker visits the individual in his\/her home. The purpose of this visit is to determine whether the individual is in need of services. County social workers deter- mine the type and level of IHSS services an individual needs in order to remain safely in his or her home. In addition to the initial determination of need made by the county, each recipient must be reassessed periodical- ly. Severely and Nonseverely Impaired Recipients. Individuals may qualify for IHSS services as either nonseverely impaired or severely im- paired. Individuals who require 20 hours or more each week of specified services are considered to be \”severely impaired.\” In the current year, severely impaired individuals are eligible for a service award of up to $872 each month. Individuals requiring less than 20 hours of the specified services each week are considered nonseverely impaired. In 1983-84, the nonseverely impaired client is eligible for a maximum service award of $604 per month. Variation in Assessed Needs. State law requires that IHSS tasks be performed for clients only when they are necessary to preserve the health and safety of the individual within his or her home. In order to ascertain the services required by a client, social workers ask questions of the client concerning his or her level of impairment and the extent to which other resources are available to provide for the person’s needs. A standard departmental form is used by counties for this task. Social worker interpretation of need in various counties, however, is not standardized. This is because few strict measures of need are used by counties; instead the social worker is expected to use professional judg- ment in determining (1) the degree to which the client’s level of frailty or disability warrants IHSS and (2) what constitutes healthful and safe living conditions. Moreover, the degree to which one client is impaired is not formally measured against the degree of impairment of other clients in order to determine an equitable number of service hours. Significant Legislative Changes Made in The IHSS Program The Legislature made significant changes in the IHSS program through enactment of Ch 323\/83 (companion bill to the 1983 Budget Act). The specific changes include the following: 1. Use oE Time for Task Standards Prohibited for Certain Services. Chapter 323 prohibits counties from using time-for-task standards when determining how many hours of certain services an IHSS client can re- ceive. Specifically, counties cannot use time-for-task standards for non- medical personal services, meal preparation, meal cleanup, and paramedical services. 2. Additional Services Are Used in Determining Severe Impairment. Chapter 323 expanded from 7 to 14 the list of services used when deter- mining if an individual is severely impaired for purposes of qualifying for the IHSS program. 3. Spouses Can Be Paid to Provide Certain Services. Chapter 323 increased the number of services for which the spouse of an IHSS client can be paid. As a result of Chapter 323, the spouse can be paid, under certain circumstances, for providing medical transportation and protec- 1288 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued tive supervision to the IHSS client. Previously, a spouse could be paid only for providing nonmedical personal care services and paramedical services. The department estimates that this change will increase the costs of pro- viding medical transportation services by $785,000 ($707,000 General Fund and $78,000 county funds) in 1984-85. The department informs us that the costs of providing protective supervision have been estimated as part of a recent court decision. This decision is discussed below. 4. Notice of Action Must Be Sent to IHSS Recipients. Chapter 323 requires that the county welfare department send a notice of action con- taining specified information to the IHSS client whenever there is a change in the number of hours of authorized service. Previously, state law required a notice of action, but did not specify the type of information that the notice must contain. Two Court Decisions Affect Program During the current year, two court cases have been decided that affect the IHSS program. In the first case, Bonnette v. California Health and Welfare Agency, the court ruled that, where IHSS services are provided through the individual provider mode, the DSS and the counties, along with the client, are joint employers of the IHSS provider. This case result- ed in increased costs of $136,910 for the payment of back wages to the plaintiffs and the payment of plaintiffs attorney fees. The department does not anticipate ongoing costs associated with this decision. In the second case, Community Services for the Disabled v. Woods, the court ruled that any housemate, regardless of his or her relationship to the client, is eligible for payment as an IHSS provider when providing protec- tive supervision. The department estimates that in the current year, this decision will increase costs in the IHSS program by $8.8 million. In 1984-85, the decision will cost $18.4 million. Of this amount. $16.6 million represents the cost to the General Fund and $1.8 million is the cost to counties in increased matching requirements. The budget proposes to offset the Gen- eral Fund cost of the decision in 1984-85 by $12.9 million in federal funds. Cost-of-Living Increase for 1983-84 The 1983 Budget Act included $7,454,600 in General Fund monies to provide a 3 percent COLA to IHSS providers. The county match for the 3 percent COLA is $828,400. Thus, th~ total amount of funds available for a 3 percent COLA in 1983-84 for IHSS providers is $8,283,000. The depart- ment now estimates that counties will approve COLAs to providers total- ing $7,512,000 ($6,761,000 General Fund and $751,000 county funds). This is $771,000 less than the amount available for support of the provider COLA in the current year. Department May Have Underestimated Amount of Unspent COLA. The department assumes that all counties will provide COLAs to IHSS providers in the current year. The initial IHSS expenditure plans submit- ted by counties, however, indicate that 35 counties do not plan to provide COLAs to IHSSproviders in 1983-84. These counties initially were allocat- ed $2.2 million in COLA funds. To the extent that these counties provide no COLAs to IHSS providers in the current year, the amount of unspent COLA funds could reach $2.2 million. The extent to which counties will provide a COLA in 1983–84 will not be known until the counties submit revisions to their IHSS plans in February 1984. Legislature Restricted Use of COLA Funds. The 1983 Budget Act Item 5180 HEALTH AND WELFARE \/ 1289 directs the department to ensure that COLA funds are used for wage and benefit increases only. Prior year budget acts did not restrict the use of the COLA funds. As a result, the department added the COLA funds to the \”basic\” program funds when it allocated funds to the 58 counties. The counties, in turn, could spend the funds in support of any wage and benefit increases the county had granted or, alternatively, in support of basic program costs. Thus, counties were able to expand their IHSS program with funds that the Legislature had appropriated to support provider wage and benefit increases. As a result of the 1983 Budget Act, counties are not able to use provider COLA funds to support basic program costs in the current year. Any COLA funds not used for wage and benefit increases for IHSS providers will revert to the General Fund. Cost-of-Living Increase for 1984-85 The budget proposes $5,469,000 from the General Fund to provide a 2 percent increase in (1) the maximum allowable monthly payments pro- vided under the IHSS program ($326,000) and (2) salary increases to IHSS providers ($5,143,000). If the budget proposal is approved, the mllXimum grant for a nonseverely impaired recipient will increase from $604 in 1983-84 to $616 in 1984-85. The maximum grant for a severely impaired client will increase from $872 in the current year to $889 in the budget . year. General Fund Cost of Proposed IHSS COLA Is Underbudgeted. We withhold recommendation on ~l43,OOO requested to fund a 2 per- cent cost-oE-living increase for IHSS providers~ pending the May revision of expenditures. The budget proposes $5,143,000 in General Fund support for a 2.0 per- cent COLA to IHSS providers in 1984-85. In estimating the amount of the COLA, the department assumed that program costs would total $289,910,- . 500 in the budget year. The budget, however, proposes expenditures of $308,354,000 for the IHSS program in 1984-85. This is $18.4 million more than the base on which the COLA was calculated. Calculating the COLA on the increased base results in the need for an additional $332,000 from the General Fund. The department informs us that this error will be corrected in the May revision of expenditures. Therefore, we withhold recommendation on $5,143,000 budgeted in Item 5180-181-001 (c) to fi- nance a 2.0 percent COLA for IHSS providers pending the May revision of expenditures. EFFECTS OF SB 633 ON COUNTY ADMINISTRATION AND CLIENT SERVICES Chapter 69, Statutes of 1981 (SB 633), made significant changes in the IHSS program. As a result of these changes, the county share of costs has increased and the rate of growth in the state’s cost of the program has slowed. In addition, some observers maintain that SB 633 has created incentives For counties to limit services to clients. Changes in the IHSS Program Made by SB 633 Senate Bill 633 made significant changes in the IHSS program. Specifi- cally, it: EliminJlted Comfort as a Basis for Assessing Services. In 1981-82, counties were required to eliminate all service hours granted to cli- 1290 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued ents for their comfort. Previously, clients were provided services in order to ensure their health, safety, or comfort. As a result of this change, clients may only receive services necessary to preserve their health and safety. Required Counties to Share in the Costs of the Program. Coun- ties must pay 10 percent of the General Fund costs in excess of the expenditures for the IHSS program in 1980-81 ($255.5 million). Before SB 633, counties administered the program but were not re- quired to contribute funds towards its support. Autflorized Counties to Make Necessary Program Cuts. A county may reduce services to clients in order to stay within its allocation of state and federal funds. State law requires that reductions in services be made in a specified order. Prior to SB 633, state law did not provide for reducing services to clients. As a result, supplemental appropria- tions had been necessary in some years. Required Counties to Submit Expenditure Plans to the DSS. Counties must submit plans to the department indicating how they intend to remain within their allocation of state and federal funds for the year. Previously, counties were not required to submit such plans and frequently overspent their allocations. In addition, Senate Bill 633 made other changes in the program. For example, it limited the number of services for which a spouse could be paid as an IHSS provider. Chart 2 Expenditures for the IHSS Program 1981-82 through 1984-85 (proposed) (In millions) Dollars !!!kJM!ll[\\wmllll!l Funds Reversion a Anticipated Service Reductions b 90-10 State-County Funds 81-82 82-83 ~ $5.0 million in 1981-82 and $8.5 million in 1982-83. $4.0 million in 1983-84 and $22.4 million in 1984-85. c 1984-85 proposed, including 2 percent COLA. 83-84 84-85 C Item 5180 HEALTH AND WELFARE \/ 1291 Chart 2 shows the funding arrangement that resulted from enactment of SB 633. The chart shows that counties contribute to the support of the program only above a set level ($255.5 million). Below this level, General Fund and federal funds pay for all program expenditures. Impact of IHSS Funding Mechanism on State and County Expenditures It appears that SB 633 has been successful in curbing aggregate growth in the IHSS program. In the period before implementation of SB 633, state and federal fund expenditures for the program grew at an average annual rate of 22 percent. Since passage of SB 633, the annual growth rate has slowed to 4.8 percent each year. Two changes made by SB 633 probably account for much of the decline in the rate at which IHSS expenditures are growing. First, counties can reduce services to clients in order to stay within their allocation of federal and state funds. As Chart 2 shows, counties will need to make service reductions in the current year in order to remain within the appropriation for 198~. Moreover, the DSS projects that service reductions totaling $22.4 million will be necessary in order to stay within the funding level proposed in the 1984-85 budget. Second, SB 633 requires counties to share in the costs of the IHSS pro- gram above $255.5 million. As Chart 2 shows, the proportion of the pro- gram for which counties must pay a share of the cost has increased between 1981-82 and 1984-85. Specifically, the counties contributed $1.5 million toward total IHSS program costs in 1981-82, and will contribute $5.5 million toward the program in 1984-85, as shown in Table 8. The proportion of the program for which counties have a share of costs has more than tripled since enactment of SB 633. More important than the actual amount paid, however, is the fact that-at the margin-counties have a stake in controlling costs because of the 10 percent matching requiremen t. Table 8 County Share of Costs for the IHSS Program is Increasing (in millions) Total Expenditures County Funds 1981-82 ………………………………………………………….. $275.8 1982-83 ………………………………………………………….. 271.5 1983-84 ………………………………………………………….. 297.4 1984-85 ………………………………………………………….. 314.4 $1.5 1.2 3.7 5.5 Percent Of Program 0.5% 0.4 1.2 1.7 The county share of costs will continue to increase as a result of caseload growth and programmatic changes. Table 9 shows, for example, the added county costs in the current year as a result of legislative, judicial, and administrati ve changes in the IHSS program. Effects of IHSS Funding Mechanism on Clients It is evident that the implementation of SB 633 has given the state a means of controlling gross expenditures for the program. The ongoing effect of SB 633 on IHSS recipients is less clear. Table 10 shows that after the enactment of SB 633, the monthly cost of the average IHSS case declined to $214 in 1981-82. By 1982-83, the average monthly cost had 1292 \/ HEALTH AND WELFARE SOCIAL SERVICES PROGRAMS-Continued Table 9 Item 5180 Changes to the IHSS Program for the Current Year Affect County Match Requirements (in millions) Basic Costs ……………………………………………………………………………………. . Program Changes Spouse-provider payments ……………………………………………………… . 3 percent provider COLA ……………………………………………………… . Court cases ………………………………………………………………………………. . Funds transfer to OCSS …………………………………………………………… . Subtotals ………………………………………………………………………………… . Total ………………………………………… : ………………………………………….. . Percent Increase Above Basic Cost …………………………………………… . Total Cost $281.3 1.4 7.5 8.8 -1.6 $16.1 $297.4 5.7% County Match $2.1 0.1 0.8 0.9 -0.2 $1.6 $3.7 76.2% fallen to $212. In both the current year and the budget year, however, the department estimates that the average cost for each case will increase. If the department is correct, this suggests that the decline in the average monthly cost per case in 1981-82 and 1982-83 may have been due to one-time adjustments on the part of counties to the implementation of SB 633. Specifically, the reductions may be wholly attributable to the elimina- tion of comfort services, the limitations placed on payments to spouse providers, and the cap placed on the number of domestic service hours for which a client may be assessed. Pre-SB633 Table 10 IHSS Average Monthly Cost Per Client 1979-80 through 1984-85 Cost\/Client 1979-80 ………………………………………………………………………… $181 1980-81 ………………………………………………………………………… 222 Post-SB633 1981-82………………………………………………………………………… 214 1982-83 ………………………………………………………………………… 212 1983-84 (estimated) a…………………………………………………. 243 1984-85 (proposed) a…………………………………………………. 252 a Anticipated program reductions not included. Percentage Change From Prior Year 22.7% -3.6 -0.9 14.6 3.7 Some observers maintain that SB 633 has had an adverse impact on clients. Specifically, these observers believe that counties have restricted services to clients in order to stay within their allocations. We are unable to assess the extent to which SB 633 has had an adverse impact on clients. This is because two other factors also may influence the amount of services provided to clients. Specifically, (1) the manner in which funds are allocat- ed to the counties may affect the way in which counties deliver services to IHSS recipients and (2) there are no statewide standards by which counties can determine the type and number of hours of services needed by a client. Item 5180 HEALTH AND WELFARE \/ 1293 The IHSS Allocation Formula State and federal funds for the IHSS program are allocated to the 58 counties in a three-step process, as follows: (1) the DSS determines the percentage of funds that should be reserved in case of emergency, (2) the DSS allocates the remainder of the funds to the counties, based on an allocation formula, and (3) counties then submit plans to the DSS that explain how they will remain within their allocations. The allocation for- mula used by the department is based on prior-year expenditures by the county and caseload growth. Because the allocation formula relies on past expenditures, it favors some counties and penalizes others. Some county welfare department staff point out that county efforts to manage the IHSS I>rogram in one year so as to avoid program reductions cause the county to be penalized in the next year. This is because counties in which fiscal restraint within the program is emphasized are unlikely to show a growth in either caseloads or expenditures during the year. This means, in turn, that under the formula, these counties lose funds in next year’s allocation relative to other counties that have had significant caseload or expenditure growth. Statewide Time-for-Task Standards Currently, state law mandates the types of services that are available to recipients under the IHSS program. Within broad guidelines set by the state, counties (1) determine the manner in which the services are pro- vided to clients and (2) develop the policies used by social workers to determine the number of hours that a client will receive. Most counties have implemented some method of limiting the number of hours granted to clients. One method that has been employed by counties to limit hours to clients has been the establishment of time-for-task standards. Under time-for-task standards, a county specifies the maximum amount of time a social worker can allow for a given task. Time-for-task standards, however, vary signifi- cantly among counties. To the extent that the standards vary among coun- ties, clients in different counties, but with similar disabilities and impairments, will receive different levels of services. DSS Concludes Statewide Standards are Feasible in Certain Services. The 1983 Budget Act required the department to report to the Legislature concerning the feasibility of implementing statewide time-for-task stand- ards in the IHSS program. The department’s report concluded that state- wide standards are feasible for those tasks where the individual’s condition does not determine the length of time necessary to complete the task. Specifically, the department concluded that the following tasks could be covered by statewide standards without endangering the welfare of the IHSS client: Meal preparation Meal cleanup Laundry Food shopping Other shopping and errands Bed baths Bathing Dressing Oral hygiene and grooming 1294 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued In addition, the DSS report noted that the department has established a statewide standard for domestic services, as required by current law. As a result, no more than a total of six hours per month can be granted for such domestic services as sweeping, vacuuming, dusting, cleaning kitchen and bath, and storipg supplies. This six-hour cap on domestic services acts as a time-for-task standard Within which all domestic tasks can be accom- plished in a manner sufficient to protect the health and safety of the client. The department also concluded that there are certain services for which statewide standards should not be implemented. In general, these services are those where (1) social workers would need to make an excessive number of exceptions to the standards in order to ensure that the IHSS client received proper care or (2) no standard could be determined be- cause the amount of time required to complete the task depends on the individual client’s disability and level of impairment. According to the DSS, 14 services offered under the IHSS program do not readily lend themselves to statewide time-for-task standards. These services include (1) accompaniment and essential transportation, (2) bowel and bladder care, (3) respiration, (4) feeding, (5) ambulation, (6) bed and seating transfers, (7) repositioning, (8) care and assistance with prostheses, (9) paramedical services, (10) protective supervision, (11) heavy cleaning, (12) snow removal, (13) yard hazard abatement, and (14) teaching and demonstration. DSS Report Reveals Wide Variations in Assessments For Services Among Counties. The department’s report provides information on the extent to which counties vary in their assessment of services for IHSS clients. For example, Table 11 shows (1) the average number of hours assessed for clients receiving meal preparation in six counties, (2) the percent of IHSS clients within the county who receive meal preparation services, and (3) the number of hours of meal preparation each week an individual could expect to receive in each county. Table 11 Assessment for Meal Preparation Services May 1982 A verage Weekly Assessed Hours Los Angeles . …. ……………………………………… 6.4 San Francisco ………………………………………… 5.4 San Diego……………………………………………….. 5.6 Orange …………………………………………………… 3.4 San Bernardino ………………………………………. 6.0 Santa Clara……………………………………………… 8.3 Average for six counties…. …………………….. 5.9 Percent of Clients Receiving Service 79% 77 68 68 40 58 65 Weekly Assessed Hours Averaged Over Total Caseload 5.1 4.2 3.8 2.3 2.4 4.8 3.8 Table 11 shows that the counties vary widely in their delivery of meal preparation services under the IHSS program: The Number of Assessed Hours of Meal Preparaion Varies Among Counties. For example, the \”average\” IHSS client receiving meal preparation in Orange County receives 3.4 hours of meal preparation each week. His or her counterpart in Santa Clara County, however, receives 8.3 hours of services each week. This is 4.9 hours-or 144 Item 5180 HEALTH AND WELFARE \/ 1295 percent-more than the client in Orange County . The Proportion of County Clients Receiving Meal Preparation Varies Across Counties. An IHSS client is more likely to receive meal preparation in some counties than in others. In fact, almost twice as many clients, proportionately, receive meal preparation in Los Ange- les (79 percent) as in San Bernardino (40 percent). As Chart 3 shows, the number of hours of service that the average client can expect to receive varies among counties. The chart displays the ex- pected value of assessed weekly hours of service for meal preparation, dressing, and grooming. The expected value is based on the average week- ly assessed hours for the service spread across the total IHSS caseload in the county. For example, in Los Angeles, the average IHSS recipient could expect to receive 1.2 hours per week of assistance with dressing and 2.9 hours per week of help with grooming. In contrast, a client in San Fran- cisco could expect 0.4 hours of dressing aid and 0.6 hours of grooming services each week. Chart 3 County Assessments of Client Need Vary for In-Home Supportive Services TasksB Expected Value of Assessment Meal Preparation Hours\/Week o Dressing Grooming San An~eles Francisco Diego. Orange Bernardino Santa Clara a Source: \”Report on the Feasibmty of Implementing Time-per-Task Standards in the In-Home Supportive ServicasProgram,\” DSS. 1983. . . Chart 3 shows that in the case of three services, county assessment practices vary widely. In fact, data presented in the department’s report indicates that assessment practices vary widely from county to county for all tasks for which the department has indicated that statewide time-for- task standards could be implemented. Chart 4 shows the effect of these varying assessment practices when applied to all the services for which the DSS found time-for-task standards to be appropriate. For example, the 1296 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued average client in Los Angeles is likely to receive 68.1 hours per month of service. This is more than twice as much as the average client in San Bernardino, who is likely to receive only 30.2 hours each month for the same services. Chart 4 Assessments Vary Among Counties for Service Tasks in Which Time-For-Task Standards are Feasible 8 Total Hours\/Month b Los Angeles San Francisco San Diego Orange Expected value of county assessment for services identified in DSS report. San Bernardino Santa Clara a Source: \”Report on the Feasibility of Implementing Time-per-Task Standards in the In-Home Supportive Services Program\”, DSS, 1983. b Total expected monthly hours assessed for domestiC services, meal preparation, meal clean-up, laundry, food shopping, errands, bed baths. dressing, and grooming. Fiscal Effect of Time-for-Task Standards We recommend that~ prior to. the budget hearings~ the department pro- vide the fiscal committees with an estimate of what the fiscal effect would be from implementing statewide time-for-task standards for specified serv- ices. The 1983 Budget Act required the department to include in its report on time-for-task standards an estimate of what the fiscal effect of such standards would be on the IHSS program. The department did not pro- vide the estimate because the report did not propose specific standards upon which to base such an estimate. The department has advised us that it has collected data that can be used to provide a gross estimate of the fiscal effect of establishing statewide standards for those services for which it believes such standards are appropriate. We believe that such an esti- mate would be useful to the Legislature in determining the extent to which the implementation of statewide time-for-task standards will result in costs or savings to the program. Item 5180 HEALTH AND WELFARE \/ 1297 For this reason, we recommend that, prior to budget hearings, the department provide the fiscal committees with an estimate of the effect that implementing statewide time-for-task standards for specified IHSS services would have on program costs. These services include meal prepa- ration, meal cleanup, laundry, food shopping, other shopping and errands, bed baths, bathing, dressing, and oral hygiene and grooming. The depart- ment’s estimate should assume that statewide standards are set at (1) the unweighted average of the weekly hours assessed for individuals across all counties included in the study, (2) 150 percent of the average for weekly assessed hours or the highest of the county averages for weekly assessed hours, whichever is less, and (3) 25 percent of the average or the lowest of the county averages for weekly assessed hours, whichever is greater. The departInent should further assume that counties in which average weekly assessed hours are greater than these assumed standards would be required to reduce their assessments to these standards while counties in which average weekly assessed hours currently are less than these stand- ards would retain their current average. Uniform Needs Assessment Process We recomDJend that, prior to the budget hearings~ the department re- port to the fiscal committees concerning (1) the time-frame for imple- menting a statewide unifonn needs assessment process~ (2) specific progress made to date in establishing a unifonn needs assessment process~ and (3) the extent to which further action is necessary to ensure that clients with similar needs receive a similar number of service hours. Social workers determine the extent to which a client needs services provided. by the IHSS program. Social workers determine the need for services by assessing the client’s level of impairment. The policies and standards for determining the client’s level of impairment vary greatly among counties. In its report on time-for-task standards, the DSS proposes to make the needs assessment process more uniform by (1) clearly defining the serv- ices to be provided by IHSS and (2) establishing rigorous definitions of need to be applied statewide. In addition, the departInent anticipates expanding the statewide payrolling system to provide a case management data base for the counties. The departInent asserts that these changes to the program, coupled with statewide time-for-task standards, will allow the departInent to ascertain the extent to which IHSS clients are receiving appropriate levels of service. Because the legislature has not been informed of the manner in which the DSS will implement its proposed changes, we are unable to evaluate the extent to which these changes will improve the management of the program. Therefore, we recommend that, prior to the budget hearings, the department advise the fiscal committees concerning (1) the time- frame for implementing a statewide uniform assessment process, (2) spe- cific progress made to date in establishing a uniform needs assessment process, and (3) the extent to which further action is necessary to ensure that clients \\Nith similar needs receive like hours of service. 1298 \/ HEALTH AND WELFARE SOCIAL SERVICES PROGRAMS-Continued ACCESS ASSISTANCE FOR THE DEAF Review of the Deaf Access Program Item 5180 We recommend tha~ prior to the budget hearings~ the Department of Social Services submit to the fiscal committees the following: 1. A plan for including in the 1984-85 request for contract proposal (RFP) specific definitions and standards for specified aspects of the Deaf Access program. 2. A report concerning progress in promulgating required regulations and the establishment of service regions. 3. A plan to ensure that centers recoup the costs of interpreter services provided to public and private agencies. 4. A plan for assessing basic program goals and objectives. The Deaf Access program, established by Ch 1193\/80 (AB 2980), pro- vides funds for social services to deaf and hearing-impaired persons. The budget proposes $2,165,000 in General Fund support for the Deaf Access program in 1984-85. Chapter 1193 requires the Legislative Analyst to review the Deaf Access program, including the department’s supervision of the program. In a separate report, we evaluate both the Deaf Access program and the department’s administration of it. The recommendations listed above are contained in that report and are based on the following findings: When contracting with deaf access centers~ the department has failed to adequately define (1) categories of services to be provided to cli\u00b7 ents~ (2) staffin~ and (3) workload measures. The department has failed to (1) issue regulations which define deaf- ness and (2) adequately define statewide service regions~ as required by current law. The program lacks adequate fiscal controls to ensure that interpreter services are reimbursed Without adequate controls, the state is absorbing the costs of these services. The department has not established reasonable means by which pro\u00b7 gram performance can be evaluated. Without adequate perform- ance measures and valid evaluation techniques, it is not possible to determine the long-term effects of the various centers on the lives of clients. ADOPTIONS PROGRAM The Department of Social Services (DSS) administers a statewide pro- gram of services to parents who wish to place children for adoption and to persons who wish to adopt children. Adoption services are provided through three state district offices, 28 county adoption agencies, and a variety of private agencies. There are three components to the Adoptions program: (1) the Relin- quishment Adoption program, which provides adoption services to chil- dren in foster care; (2) the Independent Adoptions program, which provides adoption services to birth parents and adoptive parents when both agree on placement and do_ not need the extensive assistance of an adoption agency; and (3) the Intercountry Adoptions program, which places children from foreign countries for adoption in the United States. The Adoptions program is supported primarily from the General Fund. The General Fund pays for the cost of case work activities provided by the state and county agencies, and reimburses private adoption agencies for Item 5180 HEALTH AND WELFARE \/ 1299 placing children who are hard to place due to their physical, mental, or emotional handicaps or other factors. Budget Proposes Increased Funding for the Adoption Program in 1984-85 The budget proposes total spending of $30,235,000 for the three adop- tion program.s in 1984-85. This is an increase of $5,762,000, or 24 percent, over estimated expenditures in 1983-84. Of the amount proposed for 1984- 85, $5,807,000 is budgeted in Item 5180-001 for the department’s costs of (1) administering the Adoptions program and (2) providing direct adop- tion services through the three state district offices. The remaining amount ($24,428,000) is proposed for local assistance (Item 5180-151). It would be used to reimburse (1) county adoption agen- cies ($24,311~OOO) and (2) private adoption agencies for relinquishment adoption services provided to children in foster care ($117,000). Table 12 shows that proposed local assistance expenditures for the Adoptions pro- gram in 1984-85 are $5.6 million, or 30 percent, above estimated expendi- tures for 1983-84. The table shows that most of the increase is due to anticipated caseload growth in the Relinquishment Adoption program, which is expected to result from various changes in child welfare services made by Ch 978\/82 (SB 14). Table 12 Adoptions Program-Local Assistance Proposed Budget Changes All Funds (in thousands) Adjustments 1983-84 Revised Expenditures …………………………………………………………………………… .. 1. Baseline AdjustInents a. Relinquishment adoptions caseload increases due to Ch 978\/82 (SB 14) (1) Increased costs of adoptions assessments ………………………………………….. $164 (2) Increase casework for children assessed but not served in 1983-84 .. 4,968 Subtotal …………………………………………………………………………………………… . b. Other adjustnlents …………………………………………………………………………………… .. c. Cost-of-living increase (2.0 percent) ………………………………………………………. .. Total baseline adjushnents ………………… : …………………………………………. . 2. Proposed Budget for 1984-85 ………………………………………………………………………. .. Totals $18,779 $5,132 $33 $484 $5,649 $24,428 Chapter 978, Statutes of 1982, Will Affect the Relinquishment Adoption Pro- gram Chapter 978, Statutes of 1982 (SB 14), made various changes in child welfare services that will affect the Relinquishment Adoption program. These changes were designed to reduce the number of children who remain inappropriately in foster care by ensuring that as many of the children in long-term foster care placement as possible are placed in adoptive homes. Specifically, this measure requires that: An assessment be made of the adoption potential of all children who have been in foster care for more than one year. Chapter 978 re- quires that the staffs of the public adoption agencies and the child welfare services programs conduct a joint assessment to determine the adoptability of all children who have been in foster care for more than one year. While prior laW required yearly assessments, as a prac- tical matter, these reviews were often perfunctory. As Table 12 shows, 1300 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued the budget proposes an increase of $164,000 to pay for these assess- ments . The juvenile court conduct a hearing (referred to as a permanency planning hearing) in order to determine the best long-term plan for children who have been in foster care for more than a year and who cannot be safely retumed to their parents. Prior law required an annual juvenile court hearing for each case involving a child in foster care. It did not, however, require the court to determine a long-term plan for the child. The juvenile court give first consideration to adoption as the most desirable permanent plan for any child who cannot be retumed to his or her parents. Prior law did not specify that adoption should be given the highest priority by the court in considering the best plan for a child’s future. Adoption Caseload is Projected to Increase in 1984-85 We recommend approval. The department estimates that the adoption caseload will increase in 1984-85 as a result of Chapter 978. Specifically, DSS anticipates that county adoption agencies will provide various adoption services to 5,850 children in 1984-85. This is an increase of 1,340 children, or 30 percent, above the number of children that the department estimates will receive adoption services in the current year. The department advises that this increase represents the backlog of children who will be assessed for adoption by county agencies in the current year, as required by SB 14, but who will not receive adoption services in 19~. Table 12 shows that the budget proposes an increase of $4,968,000 to reimburse counties for the costs of providing adoption services to these children in 1984-85. Budget Proposal Will Result in General Fund Savings in the Long Run. The department estimates that of the additional 1,340 children who will receive adoption services in 1984-85 as a result of the proposed increase in funding, 610, or 46 percent, will ultimately be placed in adoptive homes. Based on information provided by the department, we estimate that these 610 adoptions will result in long term General Fund savings of $20.0 mil- lion, on the assumption that the children would otherwise be in foster care facilities. Thus, the proposed increase will result in a net General Fund savings of $15.0 million ($5.0 million in increased costs offset by $20.0 million in savings). These savings reflect the General Fund share of the foster care grant and social services costs that will be avoided as a result of these children being placed in adoption. Because the proposed increase in funds will result in an increase in the number of children placed in adoption, we recommend approval. Weare concerned, however, about the implications of the department’s projec- tion that only 46 percent of the 1,340 children estimated to be accepted for adoptive study in 1984-85 as a result of SB 14 will be placed in adoptive homes. This means that the remaining 730 children will remain in long- term foster care indefinitely, despite the fact that all of these children were determined to be adoptable as a result of the adoption assessment required by SB 14. We believe that a substantially higher percentage of these children could be placed in adoptive homes. We base this conclusion on our review of the 29 public adoption agencies’ performance in 1981-82-the last year Item 5180 HEALTH AND WELFARE \/ 1301 for which data was available at the time this analysis was prepared. Review of Public Adoption Agencies Performance in 1981-82 In order to compare the performance of each of the 29 public adoption agencies in 1981-82, we developed a performance indicator for the Relin- quishment Adoption program. The performance indicator measures the extent to which each agency was successful in placing potentially adopta- ble children in adoptive homes. Specifically, the performance indicator reflects the number of adoptive placements made by each agency in 1981-82, divided by the total number of dependent children under the age of 16 in foster care in the counties served by the adoption agency. We chose this measurement of agency performance because: The majority of the foster care children who are placed through the Relinquishment Adoption program are dependents under 16 years of age. Thus; the performance measure reflects each agency’s success in providing service to the potentially adoptable children in foster care in the county(ies) served by the agency. The measure provides the basis for comparing the performance of agencies that serve foster care populations of differing size. Chart 5 Efficiency and Staffing Levels Affect Public Adoption Agencies’ Performance-Relinquishment Adoption Program, 1981-82 Percent of Children Adopted a 4- – 2- Merced b – Monterey 0- Orange San Diego San Francisco 8- San Luis Obispo EI Dorado b Santa Cruz Tulare Imperial 6- Marin Placer 4- Riverside San Bernardino Santa Barbara 2- Shasta – Ventura High EffiCiency Low EffiCiency High Staffing Alameda b Fresno Sacramento San Joaquin San Mateo Contra Costa b DSS-District Stanislaus Offices Kern Los Angeles Santa Clara Solano High EffiCiency Low EffiCiency Low Staffing a Percentages reflect ttle Leglslativt! Analyst’s estimate of the number of successful adoptive placements made by the agencies III each group diVided by the number of dependent children under the age of 16 years old in the county or counties served by the agencIes b AdoptIon agencIes are Irsted In alphabetical order 1302 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued Adoption Agency Performance is Affected by Staffing and Efficiency Levels Chart 5 shows the performance of the public adoption agencies in 1981- 82. The chart groups the agencies into two major categories: (1) agencies with higher-than-average staffing levels and (2) agencies with lower-than- average staffing levels. These groups are further divided into agencies with higher-than-average efficiency levels (that is, number of adoptions per full-time equivalent (FTE) adoption worker) and agencies with low- er-than-average efficiency levels. The chart shows that those agencies with both high staffing levels and high efficiency levels placed significantly more children for adoption, as a percent of the potentially adoptable children they served, than did any of the other three groups of agencies. Specifically, the eight agencies in the highest performance category placed in adoptive homes an average of 13 percent of the foster care children under the age of 16. It is important to note that this 13 percent placement rate is notcompa- rable to the 46 percent rate anticipated by the department with respect to the increased adoption caseloads resulting from SB 14. The 13 percent rate achieved by the high staffing, high efficiency agencies in 1981-82 reflects the number of potentially adoptable children who were placed. In contrast the 46 percent rate projected by the department reflects the placement rate for children who have been assessed as adoptable and who are expected to be accepted for adoptive study by adoption agencies in 1984-85. High Staffing Does Not Guarantee Good Performance The chart clearly shows that high staffing levels alone do not guarantee good performance. For example, agencies with high staffing levels, but low efficiency levels, performed only slightly better (8.4 percent place- ment rate) than agencies with low staffing levels and high efficiency levels (8.2 percent placement rate). Based on 1981-82 performance data, we conclude that merely increasing the number of staff available to agencies with high staffing, but low efficiency levels, would not be a cost-effective means of ensuring an increase in the number of adoptive placements they arrange in 1984-85. Rather, the efficiency of these agencies would have to be increased if their overall performance is to be improved. Efficiency of Adoption Agencies Varies Widely Chart 6 compares the efficiency of each of the 29 public adoption agen- cies in 1981–82. The chart shows that there was a wide variation among the adoption agencies in the efficiency with which children were placed in adoptive homes in 1981-82. Specifically, the placement rate ranged from 2.2 placements per adoption social worker per year (Placer) to 8.9 place- ments per worker per year (Stanislaus). The statewide average was 4.7 placements per adoption social worker. Given Placer County’s low effi- ciency, it is probable that providing one additional adoption worker to that county would not have resulted in nearly as many additional adoptions as would result from providing the additional position to Stanislaus County. Conversely, the Placer County adoption agency could more than double the number of adoptions it arranges without a staff increase if the agency simply brought its efficiency up to the statewide average. Item 5180 HEALTH AND WELFARE \/ 1303 Chart 6 Efficiency of the 29 Public Adoption Agencies Varies Widely- Relinquishment Adoption Program, 1981-82 Public Adoption Agency Placer EI Dorado Santa Clara San Bernardino Riverside Kern Imperial Santa Barbara Shasta Solano Contra Costa Los Angeles StateDSS Ventura Marin Merced San Diego Orange Santa Cruz Sacramento Fresno San Luis Obispo San Mateo Monterey Tulare Alameda San Francisco San Joaquin Stanislaus Statewide Average: 4.7 Successful Placements 2 3 4 5 6 7 8 9 10 Successful Placements Per Adoption Worker FTE a a Based on L~islative Analyst’s estimate of the number of placements made by each agency in which the child remained in the home of the adoptive parents for at least six months 42\u00b7–77H.’5~ 1304 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued Efficiency of the Adoption Agencies Can be Improved We recommend that the Legislature adopt Budget Bill language requir- ing the department to submit a plan for allocating funds to countyadop- tion agencies for the Relinquishment Adoption program that (1) places a high priority on funding the more-efficient agencies, (2) sets efficiency goals for the less-efficient agencies, and (3) establishes statewide goals for the number of children to be placed in adoptive homes in 1984-85. In the past, the department has allocated funds to county adoption agencies using a formula that resulted in individual counties receiving approximately the same funding level each year, regardless of their per- formance. This funding mechanism provides no incentive for the counties to improve the efficiency of their adoption agencies. As a result, the maximum number of children may not be placed in adoptive homes each year. We have identified two ways in which the department could ensure that the funds available for the Relinquishment Adoption program in 1984-85 are used to maximize the number of children who are placed in adoptive homes: 1. The Department Could Ensure that the Most Efficient Agencies Receive Adequate Funding. Our review indicates that six of the most efficient agencies in the state had staffing levels that were 17 percent below the statewide average staffing level. (These are the agencies in the high-efficiency, low-staffing level group on Chart 5). Providing these agencies with staffing levels comparable to those of the agencies in the high-efficiency, high-staffing group would give them an opportunity to place even more children in adoptive homes and should, therefore, be given a high priority. At the same time, however, it is important to ensure that the performance of the high-efficiency, high-staffing agencies is not undermined by any change in the funding mechanism. 2. The Department Could Take Steps to Ensure that the Least Efficient Agencies Become More Efficient. One way to accomplish this would be to set an efficiency goal for any agency that falls below the statewide average of adoptions per adoption worker. If the department established reasonable goals (based on adoptions per PTE), and if the agencies were required to agree to meet the goals prior to receiving their adoption funds allocation, we believe the less efficient agencies would have a greater incentive to use the funds made available to them more effectively. The department has advised us that several factors may explain why some agencies make significantly fewer placements per adoption worker than other counties. Specifically, the department stated that differences in (1) local judicial systems, (2) the number of hard-to-place children in an agency’s caseload, and (3) the availability of adoptive homes may affect individual agencies’ efficiency as measured by placements per PTE. However, the department has been unable to provide any data which indicates that the least efficient agencies are, in fact, adversely affected by these factors. We recognize that the factors cited by the department may explain part of the disparity illustrated by Chart 6. We therefore agree that the depart- ment should take each of these factors into account in setting efficiency goals for the least efficient agencies. At the same time, the department, in cooperation with the affected agencies, should prepare corrective ac- Item 5180 HEALTH AND WELFARE \/ 1305 tion plans designed to improve these agencies’ efficiency. These plans might include proposals to improve the agencies’ court liaison or adoptive parent recruiting activities. In addition, the department could set statewide goals for the number of children to be placed through the Relinquishment Adoption program in 1984-85 and succeeding years. Statewide goals would give the Legisla- ture a basis for assessing the department’s success in improving the effi- ciency and performance of the Relinquishment Adoption program. In order to improve the performance of the Adoptions program, we recommend adoption of Budget Bill language which requires the depart- ment to submit a plan to the Legislature that (1) gives high priority to funding the more efficient adoptions agencies, (2) sets efficiency goals for the less efficient agencies, and (3) establishes statewide goals for the number of children to be placed in adoptive homes in 1984-85. The follow- ing Budget Bill language is consistent with this recommendation: \”The Department of Social Services shall submit to the chairpersons of the fiscal committees of each house and the Chairperson of the Joint Legislative Budget Committee, no later than 30 days before such alloca- tions are made, a plan for allocating to the public adoption agencies the funds appropriated under this item for the Relinquishment Adoption program.. The amount of the allocation shall be based on each public adoption agency’s caseload, but shall be allocated in the following man- ner: \”1. Caseload-based allocations shall be made first to those agencies that have maintained high levels of efficiency, as measured by the num- ber of placements per adoption worker FTE during the most recent one-year period :for which information is available at the time the plan is submitted. An’ agency shall be considered to have maintained a high level of efficien:cy if its placements to FTE ratio is at or above the statewide average. \”2. Caseload~based allocations shall be made second to those agencies that have perfor:med at efficiency levels that are less than the statewide average. Funds shall only be allocated to these agencies, however, on the condition that each of the agencies agrees to meet an efficiency goal established by the department. For each agency, the goal shall be ex- pressed in terms of either (a) the number of placements that the agency shall make per adoption worker FTE or (b) a percentage by which the agency will increase its placements per FTE during 1984-85. In estab- lishing this efficiency goal, the department shall consider whether the agency’s low-efficiency level is due to (a) unusual characteristics of the local judicial system, (b) the number of hard-to-place children in the agency’s caseload, or (c) a lack of availability of adoptive homes in the agencies’ jurisdiction. If the department determines that the reason for an agency’s low-efficiency level is either .the local judicial system or a lack of availability of adoptive homes, the department shall develop, in cooperation with the affected agency, a corrective action plan to ad- dress these problems and shall submit such plans to the Legislature by December 1, 1984. In addition to’ the allocation plan, the. department shall submit a report tt:> the Legislature by December 1, 1984, which identifies a state- wide gom for the number of children to be placed in the Relinquishment Adoption program during 1984-85 and the resulting backlog of children who are expected to be under adoptive study and receiving adoption services, but not yet placed in adoptive homes by the end of 1984-85.\” 1306 \/ HEALTH AND WELFARE Item 5180 SOCIAL SERVICES PROGRAMS-Continued Effect of the COLA Cap on the Adoptions Program The 1981 Budget Act limited the state’s share of COLAs provided by county boards of supervisors to county welfare departments and adoption agencies to the amounts provided in the Budget Act (6 percent), unless such increases were offset by \”permanent productivity increases.\” The Legislature extended this policy through the Budget Acts of 1982 and 1983. Because no state funds were provided for COLAs for county welfare departments and adoption agencies in either the 1982 or 1983 Budget Acts, the effect of this policy is to limit to 6 percent the COLAs for which state funds will be provided, unless the costs of the COLAs are offset by perma- nent productivity increases. DSS Has Not Complied With the Legislatively Established COLA Cap. The DSS estimates that the average General Fund cost of a county adop- tion agency social worker is $61,100 in 1983-84. This is an increase of $14,715, or 32 percent, over the General Fund cost of an adoption worker in 1980-81. Such an increase would be consistent with the COLA cap established by the Legislature only if the county adoption agencies have increased their productivity by 26 percent (32 percent COLA increase less 6 percent COLA cap = 26 percent). The department advises us that it is unable to measure productivity in the adoptions program and therefore has never determined whether the increased costs of adoption workers have, in fact, been offset by perma- nent productivity increases. In the absence of documentation that ade- quate productivity increases have been achieved by the county adoption agencies, it would appear that the department has paid out funds for COLAs in excess of the 6 percent, contrary to the policy established by the Legislature in the last three Budget Acts. The department’s failure to observe the COLA cap established by the Legislature may have caused a reduction in the number of children re- ceiving adoption services, and presumably, in the number of children being placed for adoption. This is because cost increases that are not offset by productivity increases can only result in reduced program activity. Conversely, if the department had complied with the COLA cap estab- lished for the adoption program, more children would have been placed in adoptive homes since 1980-81. This is because any county that had granted COLAs in excess of 6 percent and had failed to achieve the required productivity increases would have been required to pay for the excess costs of the COLAs from local funding sources. This, in turn, would have increased the total funds available to the county adoption agency, the number of adoption workers employed by the agency, and therefore the number of children placed. Budget May Include Funds to Pay for County COLAs in Excess of the COLA Cap We recommend that prior to the budget hearings, the department advise the fiscal committees of the extent to which COLAs granted by county adoption agencies in excess of the 6 percent COLA cap have been offset by productivity increases. We withhold recommendation on $4,583,000, which we estimate is the portion of the proposed General Fund expendi- ture for 1984-85 that is attributable to excess county COLA, pending receipt of the departments findings. Item 5180 HEALTH AND WELFARE \/ 1307 The budget proposes total reimbursements to county adoption agencies of $24,308,000 in 1984-85. We estimate that of this amount, $4,583,000 reflects the cost of COLAs granted by the counties in excess of 6 percent since 1980-81. The department has not attempted to determine the extent to which this cost has been offset by permanent productivity increases. Therefore \”We are unable to advise the Legislature at this time what por- tion of the $4,583,000 represents costs that should, under the provisions of the Budget Acts of 1981, 1982, and 1983, be paid by county adoption agencies and what portion represents costs that should be paid by the General Fund. While the department maintains that it is unable to measure productiv- ity in the adoptions program, we believe such a measurement is possible. One such measure might be the number of successful placements per FTE, which we discussed in our review of the performance of the adoption program in 1981-82. While the data necessary to determine successful placements per FTE for 1982-83 and 1983-84 are not currently available, we have determined that the statewide average for successful placements per FTE declined from 5.1 in 1980-81 to 4.7 in 1981-82, a decrease of 8 percent. In the same period, the average annual cost of an adoption worker FTE rose from $46,395 to $52,503, which is an increase of 13 per- cent, or 7 percentage points, more than the COLA cap. Thus, on the basis of statewide average performance, the costs of the excess COLAs granted by counties for 1981-82 do not appear to have been offset by productivity increases. With respect to some individual county adoption agencies, however, the results are quite different. For example, the Los Angeles County Adoption Agency placed 3.5 children per FTE in 1980-81 and 4.0 children per FTE in 1981-82, a productivity increase of 15 percent. At the same time, the annual cost of an adoption worker in Los Angeles County increased by approximately 12 percent, or 6 percentage points, more than the COLA cap. Thus, the Los Angeles County Adoption Agency achieved productiv- ity increases in 1981-82 that were more than sufficient to offset the costs of the excess COLA granted by the county. We recognize that placements per FTE is not the only possible measure- ment of adoption agency productivity. For many years, the DSS has col- lected detailed data on adoption caseload changes. We believe that the departmen t could use this data to determine the extent to which the $4,583,000 proposed in the budget to pay for the costs of county COLAs that exceed 6 percent has been offset by permanent productivity in- creases. Therefore we recommend that prior to the budget hearings, the department advise the fiscal committees of the extent to which the Gen- eral Fund costs of COLAs granted by county adoption agencies in excess of the 6 percent COLA cap have been offset by productivity increases. Since we cannot at this time determine how much of the costs of excess county CO LAs should be paid by the state and how much should be paid by the counties, we also withhold recommendation on $4,583,000 request- ed from the General Fund for the local assistance portion of the adoptions program, pending receipt of the department’s findings. 1308 \/ HEALTH AND WELFARE Department of Social Services COMMUNITY CARE LICENSING Item 5180 Item 5180-161 from the General Fund and Social Welfare Fed- eral Fund Budget p. HW 180 Requested 1984-85 ………………………………………………………………. . Estimated 1983-84 ………………………………………………………………… . Actual 1982-83 ……………………………………………………………………… . Requested increase $150,000 (+2.0 percent) Total recommended reduction Item 5180-161-001 ……………. .. Total recommended reduction Item 5180-181-001 (c) ………. .. $7,665,000 a 7,515,000 6,309,000 501,000 ($10;000) Includes $150,000 in Item 5180-181-001 (c) to provide a 2 percent cost-of-living increase. 1984-85 FUNDING BY ITEM AND SOURCE Item Description 5180-161-OO1-Community Care Licensing 5180-161~ommunity Care Licensing 5180-181-001 (c)-Cornrnunity Care Licensing- COLA 5180-181-866(f}-Cornrnunity Care Licensing- COLA Total General Federal General Federal Fund Amount $7,515,000 (2,707,000) 150,000 (54,000) $7,665,000 Analysis SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS page 1. Overbudgeting. Reduce by $501~OOO. Recommend Gen- 1310 eral Fund reduction of $501,000 to correct for overbudget- ing. GENERAL PROGRAM STATEMENT This item contains the General Fund appropriation needed to cover the state’s cost of contracting with counties to license foster family homes and family day care homes. The Department of Social Services (DSS) also directly licenses foster family homes and family day car-e homes, as well as other community care facilities through its 11 district licensing offices. Funds for direct state licensing activities are proposed in Item 5180-001- 001, departmental\u00b7 support. Foster family homes are licensed to provide 24-hour residential care to children in foster care. In order to qualify for a license, the homes must be the residence of the foster parent(s) and must provide services to no more than six children. Family oay care homes are licensed to provide day care services to up to 12 children in the provider’s own home. The DSS estimates counties will license 12,600 foster family homes and 19,200 family day care homes in 1984-85. OVERVIEW OF THE BUDGET REQUEST The budget proposes an appropriation of $1,665,000 from the General Fund to reimburse counties for licensing activiti.es in 1984-85. This amount includes $150,000 proposed in Item 5180-181-001 to provide cost-of-living Item 5180 . HEALTH AND WELFARE \/ 1309 increases in 1984-85. The cost-of-living increase. is the only increase proposed for county licensing of foster family and family day care homes. ANALYSIS AND RECOMMENDATIONS LEGISLATIVE FOLLOW-UP Changes in the Family Day Care Licensing Program Chapter 323, Statutes of 1983, the companion measure to the 1983 Budget Act, made major changes in the Family Day Care Licensing pro- gram. Beginning in 19~, the measure requires: The department, or counties under contract with the department, to visit all family day care homes prior to approving a request for license renewal. (Family day care licenses must be renewed every three years.) Prior law provided for such visits only to those homes that had been cited for a major violation of licensing standards during the term of the license covering the home. The DSS estimates that this change resulted in a 25 percent increase in the workload of the Family Day Care Licensing program. The department to provide (1) ongoing training to licensing staff and law enforcement agencies, (2) consumer education for parents of children in family day care, and (3) an orientation program for pro- spective family day care providers. The department allocated $300,- 000 for these programs in 19~ and proposes spending the same amoun t in 1984-85. Funds for this purpose are proposed under Item 5180-001-001, departmental support. Funds for Family Day Care Licensing Were Reduced By the Governor. The Legislature approved an appropriation of $10,210,000 for family day care licensing in 1983-84. This amount included $7,210,000 for the county costs and $3,000,000 for the department’s direct costs of family day care licensing. The Governor reduced these amounts to $4.8 million and $2.2 million, respectively. The Governor’s reductions were based on the department’s July 1983 estimate of the costs of the Family Day Care Licensing program. The July estimate was based on: A workload standard of 228 family day care homes per county licens- ing evaluator. Our review of the workload standard indicates that it accurately reflects the amount of time required for an evaluator to perforlll the increased number of unannounced visits to family day care homes required by Chapter 323. An estimated caseload of 21,440 county-licensed and 9,770 state-li- censed family day care homes. This estimate was based on the most current data available to the department in July 1983. Changes in Case\/oad Estimates for 1983-84. Based on more recent data, the department has revised its estimate of the number of family day care homes that will be licensed in 19~. Specifically, the department’s current estimate anticipates a county-licensed caseload of 19,200 homes and a state-licensed caseload of 12,380 homes in 19~. This is a reduction of 2,240 homes, or approximately 10 percent, in county caseloads and an increase of 2,610, or 27 percent, in state caseloads. These changes are attributable to (1) transfers of licensing caseloads from the counties to the state district offices (counties can return the responsibility for family day care licensing to the state at any time), (2) an increase in the rate of growth in state caseloads, and (3) a leveling-off in the growth of county 1310 \/ HEALTH AND WELFARE COMMUNITY CARE LICENSING-Continued Item 5180 caseloads. As a result of these trends, the department estimates that county caseloads will be the same in 1984-85 as in 1983-84 (19,200 homes). The state caseloads, however, are estimated to increase from 12,380 to 14,568 homes, which represents an increase of 50 percent over the number of homes that the department estimated would be licensed by the state in its July estimate. Budget Proposal Does Not Reflect the Change in Caseload Estimate. Despite these changes in estimated caseloads, the budget proposes to continue funding the state and county components of the Family Day Care Licensing program in 1984-85 at the levels estimated for 19~ by the department in July 1983, adjusted only for a 2-percent cost-of-living increase. The department advises that it did not adjust the budget pro- posal to reflect the changes in its caseload estimate because this program has not been budgeted on the basis of caseload since the enactment of Ch lO2\/81. (Chapter 102, the companion measure to the 1981 Budget Act, made substantial reductions in the number of family day care home in- spection visits required by state law.) We have several concerns with the department’s decision not to budget for the Family Day Care Home Licensing program on the basis of project- ed caseload: The provisions of Chapter 102 that affected this program have been repealed. Specifically, Ch 323\/83 restored the Family Day Care Li- censing program to pre-Chapter lO2levels. Prior to the enactment of Chapter lO2, this program had been budgeted on a caseload basis for several years. The department’s conclusion is inconsistent with the Governor’s ra- tionale for vetoing funds appropriated for family day care licensing in the 1983 Budget Act. Specifically, the Governor based the amount of funds deleted from the Budget Act on the department’s estimate of 1983-84 licensing case loads and the number of state and county staff required to handle that caseload. By continuing funding for the state and county components of this program at the 1983-84 levels, without regard to projected caseload, the budget provides (1) more money than necessary to support county licensing activities and (2) less money than necessary to sup- port state licensing activities. We discuss the effect of the budget proposal on the state licensing of Family Day Care Homes under our analysis ofItem 5180-001-001, departmental support. In that analysis, we recommend that the department report to the fiscal committees, prior to the budget hearings, on how it plans to accommodate the Rrojected 50 percent increase in state family day care caseloads within the amounts proposed in the budget. Overbudgeting of County Licensing Program We recommend a General Fund reduction of $501,000 in county con- tracts to license family day care homes to reflect the department’s reduced estimate of the number of homes that will be licensed by counties in 1984-85. The budget proposes expenditures of $4,896,900 from the General Fund to pay those counties that license family day care homes under a contract with DSS. This is an increase of $96,000, or 2 percent, over estimated expenditures for county licensing of family day care homes in 1983-84. Item 5180 HEALTH AND WELFARE \/ 1311 Based on the department’s (1) workload standard of 228 licensed homes per evaluator and (2) current estimate that counties will license 19,200 homes in 1984-85, we estimate that county costs for the Family Day Care Licensing program in 1984-85 will be $4,299,000, which is $501,000 less than the amount proposed in the budget. Accordingly, we recommend a Gen- eral Fund reduction in Item 5180-161 of $501,000. Approval of this reduc- tion would allow a reduction of $10,000 in Item 5180-181-001 (c) which contains funds for cost-of-living increases proposed for various DSS pro- grams. Transfer of Family Day Care Licensing to the Department of Consumer Affairs The Supplemental Report of the 1983 Budget Act requires our office to address several specific issues regarding the feasibility of transferring re- sponsibili ty for licensing family day care homes from the DSS to the Department of Consumer Affairs. We discuss this issue under our analysis of Item 5180-001-001, departmental support.- Department of Social Services COST-Of-LIVING ADJUSTMENTS Item 5180-181 from the General Fund and Social Welfare Fed- eral Fund Budget p. HW 183 Requested 1984-85 ………………………………………………………………. . Total recommended reduction …………………………………………… . Recommended transfer from Item 5180-141-001 ………………. . Recommendation pending ………………………………………………….. . $77,443,000 74,000 10,900,000 5,143,000 1984-85 FUNDING BY ITEM AND SOURCE Item Description 5180-181-OO1-Cost-of-living adjustments 5180-181-866–Cost-of-living adjustments Fund General Federal Amount $77,443,000 (58,685,000) SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. County Administration COLA. Recommend that $10.9 million in Item 51BO-141-001 be transferred to Item 5180-181- 001 to provide a cost-of-living adjustment (COLA) for county administration consistent with COLAs provided to state employees. 2_ IHSS provider COLAs. Withhold recommendation on $5,143,000 for IHSS program provider COLAs, pending re- ceipt of revised estimates during the May revision of ex- penditures. 3. COLA limitations in Social Services and Community Care Licensing. Recommend adoption of Budget Bill lan- guage limiting state participation in COLAs provided to county employees in the Social Services and Community Care Licensing Programs. 4. Conforming Recommendations. Reduce Item 5180-181-001 AnalYSis page 1314 1316 1316 1317 1312 \/ HEALTH AND WELFARE Item 5180 COST -OF-LIVING ADJUSTMENTS-Continued by $7~OOO and Item 5180-181-866 by $71~OOO. Recom- mend proposed cost-of-living increases be reduced to re- flect recommended reductions in funding for basic program costs, for a General Fund savings of $74,000 and a federal funds savings of $71,000. GENERAL PROGRAM STATEMENT This item contains the General Fund appropriation to provide cost-of- living adjustments (COLAs) to various welfare and social services pro- grams. OVERVIEW OF THE BUDGET REQUEST The budget proposes a General Fund appropriation totaling $77,443,000 for cost-of-living increases for various local assistance programs adminis- tered by the Department of Social Services. Table 1 shows the fiscal effect of the cost-of-living increases proposed for each of these programs. Table 1 Department of Social Services Proposed Cost-of-Living Increases General Fund 1984-85 (in thousands) Program (Proposed Cost-of-Living Adjushnent) AFDC cash grants (2 percent) ………………….. . SSIISSP cash grants’ (2 percent) ………………. . Special Adult Programs (0 percent) …………. . County Administration (0 percent) …………… . Social Services (2 percent) …………………………. . Other County Social Services (2 percent) In-Home Supportive Services ………………… . Other Social Services ………………………………. . Community Care Licensing (2 percent) ….. . Totals ……………………………………………………. . Proposed Baseline Funding $1,529,922 1,065,827 138 129,114 195,777 (16,820) (144,024) (34,933) 7,514 $2,928,292 Cost-of- Living Increase $32,723 35,297 9,273 (3,236) (5,469) (568) 150 $77,443 Percent I!1crease iI1 Total Expenditures Expemiitures 2.1 % $1,562,645 3.3 1,101,124 138 129,114 4.7 205,050 (19.2) (20,056) (3.8) (149,493) (1.6) (35,501) 2.0 7,664 2.6% $3,005,735 The SSI\/SSP increase in maximum payments is effective January 1, 1985. As Table 1 indicates, the proposedcost-of-living increases would in- crease General Fund expenditures for these programs during 1984-85 from $2.9 billion to $3.0 billion, an increase of 2.6 percent. The increase reflects proposed cost-of-living increases in public assistance programs ranging from zero to 2.0 percent. Because of factors unique to individual programs, however, the percentage increase in General Fund expendi- tures may exceed the proposed COLA (expressed in percentage terms). For example: The percentage increase in SSI\/SSP expenditures (3.3 percent) is greater than the percentage increase in maximum SSI\/SSP grants (2.0 percent) because the state cost-of-living adjustment is given both to recipients who are eligible only for state payments (SSP) , as well as to those who are eligible for both SSI and SSP payments . The percentage increase in social services expenditures (4.7 percent) is greater than the 2 percent COLA proposed in the budget because Program AFDC cash grants ……………………………………………………….. . ssr;ssp cash grants Proposed funding sources ……………………………………….. . Actual funding sources a …………………………………………. . Special Adult Program ………………………………………………… . County Administration ………………………………………………. . Refugee Cash Assistance …………………………………………….. . Social Services …………………………………………………………….. . Other County Social Services ……………………………………. . In-Home Supportive Services ………………………………… . Other Social Services ………………………………………………….. . Community Care Licensing ………………………………………. .. Totals Table 2 Deplirtment of Social Services Proposed Cost-of-Living Increases All Funds 1984-85 lin thousands) Cost-of-Living Increases Baseline Funding $3,332,655 2,143,94)1 (2,143,901) 190 648,066 63,290 631,642 (241,604) (308,354) (81,684) 10,222 $6,829,966 General Fund $32,723 35,297 9,273 (3,236) (5,469) (568) 150 $77,443 Federal Funds $36,806 204 (38,245) 20,615 431 575 (575) 54 — $58,685 Total Cost- County Of-Living Funds Increase $3,732 $73,261 35,501 (38,245) 16,952 37,5fIT 431 1,629 11,477 (1,021) (4,832) (608) (6,077) (568) 204 $22,313 $158,441 Percent General Funds 44.7% 99.4 BO.8 (67.0) (90.0) (100.0) 73.5 48.9% Total Funding $3,405,916 2,179,402 (2,182,146) 190 685,633 63,721 643,119 (246,436) (314,431) (82,252) 10,426 $6,988,407 a Because federal funds for the SSI\/SSP program are not appropriated by this bill, the anticipated increase in federal funds of $38,245,000 to support a cost-of-living increase is reflected as a reduction in the General Fund requirement for baseline funding. As a result, the total cost of providing a 2 percent COLA to SSI\/SSP grants ($35.3 million, refugees excluded) is included in Item 5180-181-001 Ca) as a General Fund cost. …… @ tit I-‘ ~ ::t ~ ti ::t ~ o ~ ~ ~ …….. … Co) … Co) 1314 \/ HEALTH AND WELFARE Item 5180 COST -OF-LIVING ADJUSTMENTS—Continued the federal government does not provide funds for a COLA on all federally funded social services. Thus, the state and counties pay for a disproportionate share of the costs of providing COLAs for social services programs. Table 2 shows that the budget proposes total expenditures of $6,988,407,- 000 for welfare programs. Of this amount, $158,441,000 is proposed for cost-of-living increases. ANALYSIS AND RECOMMENDATIONS Cost-of-Living Adjustments for Public Assistance Recipients State law requires that recipients of assistance under the SSIISSP and AFDC programs receive an annual cost-of-living increase in their grants. The AFDC increase is effective July 1, and the SSI\/SSP increase is effec- tive the following January 1. Under existing law, the COLA required in 1984-85 is equal to the percentage change in the California Necessities Index (CNI) from December 1982 to December 1983. The Commission on State Finance estimated in January 1984 that the COLA required by existing law will be 5.5 percent. This would result in General Fund costs of $186,927,000 ($97,066,000 for the SSI\/SSP program and $89,861,000 for the AFDC program). The budget, however, proposes to suspend the statutory provision requiring a COLA based on the CNI and instead proposes that AFDC recipients and SSI\/SSP recipients be given a 2 percent COLA in 1984–85. Limits on the State’s Share of County Salary Increases Should Be Retained We recommend that: 1. $10.9 million from the General Fund be transferred from Item 5180- 141-001 to Item 5180-181-001 to fund a COLA for county administration in 1984~ in lieu of past-year salary increases that exceeded what the state agreed to fund 2. The Legislature adopt Budget Bill language limiting the extent to which the state will share in the cost of salary increases granted by the counties. 3. The Legislature establish the 1984-85 COLA limits for county admin- istration based on the increases provided for state employees in the 1984 Budget Act. The budget proposes to remove existing limitations on the state’s share of county costs. These limitations were imposed in prior years in order to cap the percentage increase in county welfare department salaries that the state would fund at the percentage increase granted to state em- plorees. The budget requests a $17.7 million augmentation from the Gen- era Fund in 1984-85 for the purpose of funding prospectively county salary increases in excess of the cap. This includes $10.9 million in Item 5180-141-001 for the administration of the AFDC and Food Stamp pro- grams and $6.8 million in Item 4260-101-001 for the administration of the Medi-Cal program. The budget proposes no funds for county-granted salary increases in 1984-85. Under current law, the federal government pays 50 percent of the costs of administering the AFDC and Food Stamp programs. The state and Item 5180 HEALTH AND WELFARE \/ 1315 counties each pay 25 percent. Since 1981-82, however, the Legislature has placed limits on the state’s share of the costs attributable to COLAs grant- ed by counties to their welfare department employees, as follows: The 1981 Budget Act provided funds to cover the state’s share of costs resulting from COLAs up to 6 percent. In addition, the Budget Act stat.ed that counties would be responsible for funding the entire non- federal share of COLAs that exceeded 6 percent limit. The 1982 Budget Act provided no funds for county salary increases and included language limiting the state’s share of county-granted COLAs. The 1983 Budget Act, as passed by the Legislature, contained funds for the state’s share qf a 3 percent COLA for county salaries, In addition, it allowed counties that granted COLAs less than 3 percent to apply the difference to COLAs not funded in the previous two years. This provision became moot, however, when the Governor, citing lower inflation in 1983 and the state’s \”severe fiscal constraint,\” vetoed the COLA funds. Budget- Proposal is Flawed Based on our analysis, we conclude that there are several serious flaws with the budget proposal to lift the cap on the state’s share of county-granted COLAs. Cost of the proposal is Underfunded. We estimate that the budget underestimates the cost ofrescinding the limit on the state’s share of cost for county-granted COLAs. Approval of the proposal would cost the General Fund $13.2 million. This is $2.3 million more than the budget requests in 1984-85. Proposal Rewards High-Cost Counties. The proposal treats coun- ties unequally. It provides additional funds to those counties that chose to grant larger cost-of-living increases t.han what the last three Budget Acts funded while offering nothing to those counties that followed the state’s lead and stayed within the Legislature’s COLA limits. The Proposal is based on a Faulty Premise; The budget asserts that COLA limitations have increased \”the potential for General Fund overpayments, higher quality control error rates, and federal AFDC and Food Stamp sanctions.\” We believe this premise is incor- rect for the following reasons. First, there has been no consistent trend in error rates since enactment of the controls on salaries and ‘benefits. Secondly, we are unable to identify in counties that granted large COLAs a consistent pattern of staff reductions and therefore increased cases per eligibility workers that could threaten to increase error rates. LAO Recommendation. For these reasons, we recommend that the Legislature reject the budget proposal to share in the cost of county- granted COLAs that exceed the limits established by the Legjslature. Instead, \\,ve recommend that: The funds proposed in Item 5180-141-001 to fund prior year COLAs be transferred to Item 5180-181-001 to provide a COLA in 1984-85 for county administration up to a limit established by the Legislature. The Legislature adopt the same language controlling the distribution of the COLA as it included in the 1983 Budget Act. The Legislature fix the maximum COLA for which the state will provide funding at a level comparable to the percentage salary in- creas\u20acs granted to state employees. 1316 \/ HEALTH AND WELFARE Item 5180 COST -OF-LIVING ADJUSTMENTS-Continued This course of action would offer several advantages over what the budget proposes. . 1. It allows all counties additional funding for salary increases. 2. State participation in salaries will increase uniformly throughout the state. . 3. It prevents the Legislature from being criticized for funding salary increases paid to county employees that are larger than the salary in- creases that it provides to its state employees. In addition, our recommendation would permit counties that increase salaries by a percentage less than the limit established in the Budget Act to apply the difference to unfunded salary increases remaining from past years. We discuss the details ofthis recommendation under Item 5180-141-001, County Welfare Department Administration. In that discussion, we present Budget Bill language to provide for the limits on county salary and benefit increases, as recommended. IHSS Provider COLA We withhold recommendation on~1~OOO in Item 5180-181-001 re- quested to fund a 2 percent cost-oE-Jiving increase for IHSS providers, pending the May revision of expenditures. The budget proposes $5,143,000 in General Fund support for a 2.0 per- cent COLA to IHSS providers in 1984-85. In estimating the amount of the COLA, the department assumed that program costs would total $289,910,- 500 in the budget year. The budget, however, proposes that the IHSS program be funded at a level totaling $308,354,000. This is $18.4 million more than the base on which the COLA was calculated. Calculating the COLA on the increased base results in additional General Fund costs of $332,000. The department informs us that this error will be corrected during the May revision of expenditures. Therefore, we withhold recom- mendation on $5,143,000 budgeted in Item 5180-181-001 (c) to finance a 2.0 percent COLA for IHSS providers, pending the May revision of expendi- tures. Cost-of-Living Increases for Social Services and Community Care Licensing Programs We recommend that the Legislature adopt Budget Bill Language and supplemental report language requiring that the General Fund appropria- tions for Social Services and Community Care Licensing programs not be used by counties for cost-oE-Jiving increases in excess of the amount au- thorized for such increases by the Legislature. The 1983 Budget Act contained language limiting the state’s share of cost-of-living increases provided by counties to workers in Social Services and Community Care Licensing programs. The language limited the state’s share of cost-of-living increases to the amounts appropriated by the act. Similar limitations were included in the Budget Acts of 1981 and 1982. The 1984 Budget Bill does not contain language similar to that included in the 1983 Budget Act. Our analysis indicates, however, that the legisla- tively established policy of limiting General Fund support for cost-of- living increases to a specified amount should be continued in 1984-85 for two reasons. First, in the absence of such a limit, the various counties, rather than the Legislature, will determine the General Fund costs of Item 5180 HEALTH AND WELFARE \/ 1317 these programs in future years. Second, it avoids the situation where the state pays for salary increases to county employees that exceed the in- creases the state is willing to provide to its own employees. In order to retain legislative control over program appropriations, we recommend that the Legislature adopt the following Budget Bill language, which is identical to that in the 1983 Budget Act. We further recommend that the following suplemental report language be adopted to make county COLAs that exceed the amounts authorized in the Budget Act the perma- nent fiscal obligation of the affected counties, unless (1) they are offset by permanent productivity increases or (2) the counties grant COLAs in subsequent years that are less than the COLAs approved by the Legisla- ture. Budget Bill Language: \”Notwithstanding any other provision of law, none of the funds appro- priated by Item 5180-151-001 or 5180-161-001, or Categories (b) and (c) of Item 5180-181-001 for Programs 20 and 30 shall be used to provide a cost-of-living increase to counties for Social Services and Community Care Licensing programs in excess of the amount specifically authorized for these purposes by the Legislature unless the excess costs are offset by permanent productivity increases.\” Supplemental Report Language: \”Social services and community care licensing cost-of-living increases- The department’s 1985–86 request for General Fund support for county Social Services and Community Care Licensing programs shall not in- clude the cost of 1984-85 cost-of-living increases for personal and nonp- ersonal services that exceeds the percentage increase authorized by the’ 1984 Budget Act, unless such General Fund costs resulted from increases in county productivity. The department shall notify the counties that the state will not pay for excess cost-of-living increases, unless funded by productivity increases, and that the increases granted in excess of the percentage approved by the Legislature shall be a permanent county fiscal obligation, unless the affected counties grant cost-of-living in- creases in 1985–86, or a subsequent year, that are less than the cost-of- living increases authorized by the Legislature. The department shall maintain documentation which indicates that county cost-of-living in- creases which exceed the amount of state reimbursement shall be ex- cluded from the 1985–86 funding requests made in January and May of 1985.\” Other Recommended Reductions We recommend that cost-of-living increases budgeted in Item 5180-181- 001 be reduced by $74,000 and cost-of-living increases budgeted in Item 5180-181 -866 be reduced by $71,000 to reflect our recommended reducHons in the baseline costs of these programs. In our analysis of AFDC Payments for Children program (Item 5180- 101-(01) and Community Care Licensing program (Item 5180-161-(01), we have recommended reductions that reduce the General Fund cost of these programs by $6,529,000. Because the proposed cost-of-living in- creases are based on percentage adjustments applied to program costs, any reduction in program costs will reduce the dollar amount needed to fund CO LAs proposed in the budget. We therefore recommend the following reductions: Reduce Item 5180-181-001 (d) by $64,000 to reflect the reduced Gen- 1318 \/ HEALTH AND WELFARE Items 5180-5190 COST -OF-LIVING ADJUSTMENTS-Continued eral Fund cost for COLAs for AFDC grants. Reduce Item 5180-181-866 (d) by $71,000 to reflect the reduced federal fund cost for AFDC grant COLAs . Reduce Item 5180-181-001 (c) by $10,000 to reflect the reduced Gen- eral Fund cost of COLAs for the Community Care Licensing pro- gram. DEPARTMENT OF SOCIAL SERVICES-REAPPROPRIATION Item 5180-490 from the General Fund Budget p. HW 179 ANAL Y\u00b7SIS AND RECOMMENDATIONS We recommend approval. This item reappropriates funds from Ch 1398\/82 for child abuse preven- tion programs. The act appropriated $10 million from the General Fund for use in 1982–83 and 1983-84. Of the total appropriation, $1 million was for \”innovative child centered\” child abuse prevention demonstration projects conducted by the Department of Social Services and $9 million was for allocation to counties for ongoing child abuse prevention pro- grams. The department estimates that $2.6 million of the $9 million appropriat- ed for ongoing programs will be unexpended at the end of 1983-84. The department advises that this amount will be unexpended due to delays in implementing the programs for which the money was appropriated. The budget proposes to reappropriate the unexpended portion of the Chapter 1398 funds for use in 1984-85. In addition, the budget proposes to appropri- ate $6.4 million in General Fund monies for the child abuse prevention programs created by Chapter 1398. Thus, the budget proposes total spend- ing for these programs in 1984-85 of $9 million. We discuss the proposed funding for child abuse prevention programs under our analysis of Item 5180-151-001-social services programs, local assistance. Health and Welfare Agency CALIFORNIA HEALTH FACILITIES COMMISSION Item 5190 from the California Health Facilities Commission Fund Budget p. HW 194 Requested 1984-85 ………………………………………………………………. . Estimated 198~ ………………………………………………………………… . Actual 1982–83 ……………………………………………………………………… . Requested increase (excluding amount for salary increases) $206,000 (+5.6 percent) Total recommended reduction …………………………………………… . $3,880,000 3,674,000 3,211,000 None Item 5190 HEALTH AND WELFARE \/ 1319 SUMMARY OF MAJOR ISSUES AND RECOMMEN~ATIONS 1. Reduce Fee Assessments. Recommend that the Legisla- ture adopt Budget Bill language directing the commission to calculate its health facilities fees based on (a) the most recent expenditure and revenue information available and (b) the need to maintain a reserve of $200,000 in order to reduce the commission’s excess contingency reserves. GENERAL PROGRAM STATEMENT Analysis page 1320 The California Health Facilities Commission (CHFC), established in 1972, collects patient and financial data from the 592 hospitals and 1,191 long-term care facilities in the state and summarizes the data in reports to government agencies and the public. The purpose of the commission’s activities are to: 1. Encourage economy and efficiency in the provision of health care services. 2. Enable public agencies that purchase health care services to do so in an informed manner. 3. Encourage both public and private payors to establish fair and rea- sonable reimbursement rates for health care services. 4. Inform the public about cost, availability, and other aspects of health care services. The commission’s responsibilities also include establishing standards of effectiveness for health facilities and forecasting hospital operating and capital expenditures for each of the state’s health service areas. Health systems agencies use these forecasts to develop area health plans. During 1983-84, a total of 83.8 staff positions are authorized for the commission,in addition to 9 nonsalaried commissioners. Statutory authorization for the commission and its functions expires on January 1, 1986. OVERVIEW OF THE BUDGET REQUEST The budget proposes an appropriation of $3,880,000 from the California Health Facilities Commission Fund to support commission activities in 1984-85. This is an increase of $206,000, or 5.6 percent, above estimated current-year expenditures. This increase will grow by the amount of any salary and staff benefit increases approved by the Legislature for the budget year. The proposed $206,000 increase is due primarily to an increase iIi staff and operating expenses and equipment for on-site audits of hospitals to ensure the accuracy of data received from these hospitals. Table 1 summa- rizes the proposed changes in the operating budget of the commission. The budget requests $217,000 and 2.4 positions to support five new commission activities. The commission proposes to: Conduct on-site hospital audits of disclosure reports ($95,000). These audits were recommended by the Auditor General as a method for improving the accuracy of data collected from health facilities. Review patient discharge data ($58,000). Study disclosure report data processing alternatives ($30,000). Increase temporary help to process penalty appeals ($11,000). Modify the document display area of the commission’s offices ($23,000) . Three of these activities were initiated administratively during 1983-84, at an estimated cost of $51,000. 1320 \/ HEALTH AND WELFARE CALIFORNIA HEALTH FACILITIES COMMISSION-Continued Table 1 California Health Facilities Commission Proposed Budget Changes California Health Facilities Commission Fund 1983 Budget Act ……………………………………………………………………………………………………………….. .. Baseline adjustments, 1983-84: 1. 1983-84 salary increase ………………………………………………………………………………………………….. . 2. Early start-up of program change proposals ……………………………………………………………….. .. 3. Miscellaneous adjustments ……………………………………………………………………………………………. .. Adjusted base budget, 1983-84 …………………………………………………………………………………………. . Baseline adjustments, 1984-85: 1. Merit salary adjustment for 1984-85 ……………………………………………………………………………. .. 2. Full-year cost of 1983-84 salary increase …………………………………………………………………….. .. 3. Governor’s 3 percent staff reduction ………………………………………………………………………….. .. 4. Other baseline adjustments …………………………………………………………………………………………… . Program change proposals 1. On-site audits of disclosure reports ……………………………………………………………………………… .. 2. On-site reviews of patient discharge data …………………………………………………………………… .. 3. Study of disclosure report data processing altematives ……………………………………………… .. 4. Temporary help to process penalty appeals ……………………………………………………………….. .. 5. Remodel document display area …………………………………………………………………………………. .. Increased reimbursements ……………………………………………………………………………………………….. .. Miscellaneous adjustments ……………………………………………………………………………………………….. .. Proposed budget, 1984-85 …………………………………………………………………………………………………. .. ANALYSIS AND RECOMMENDATIONS Reduce Fee Assessments Item 5190 $3,548,000 82,000 51,000 -7,000 —- $3,674,000 45,000 34,000 -11,000 -16,000 65,000 58,000 30,000 4,000 9,000 -13,000 1,000 $3,880,000 We recommend that the Legislature adopt Budget Bill language direct- ing the commission to (1) limit its contingency reserve to $200,000 when calculating its fee assessments and (2) update the expenditure and reve- nue data used in the calculations, in order to reduce excessive contingency reserves. The commission is funded entirely from the California Health Facilities Commission Fund, which was established by Ch 1241\/71 solely for the purpose of funding commission activity. The budget indicates that $4,110,000 will be available to the fund in 1984-85. This amount consists of a carry-over reserve from 1983-84 plus health facility fees and other reve- nue that will be received in 1984-85. The $4,110,000 exceeds the commis- sion’s proposed 1984-85 expenditures by $230,000. The $230,000 reserve could be used to (1) fund additional expenditures authorized by the Legis- lature, such as employee compensation increases, and (2) cover any reve- nue shortfalls. Actual Reserves Exceed Budgeted Reserves. During the last four years the commission’s actual reserve has averaged almost 15 percent of budgeted expenditures and has exceeded the amount estimated in the budget by an average of $266,000. Table 2 compares the actual and budget- ed contingency reserves for 1980-81 through 1984-85. Item 5190 HEALTH AND WELFARE \/ 1321 Table 2 California Health Facilities Commission Fund Reserve at Year End 1980-81 …………………………………………. . 1981-82 …………………………………………. . 1982-83 …………………………………………. . 1983-84 (estimated) ……………………. . 1984-85 (proposed) ……………………. . 1980-81 through 1984-85 Budget $32,000 73,000 500,000 200,000 230,000 Actual $203,000 285,000 780,000 600,000 Excess Reserve $171,000 212,000 280,000 400,000 Actual Reserve AsaPercent of Budgeted Expenditures 8.4% 10.3 24.6 16.3 In the current year, the commission expects to end the year with a reserve of $600,000, which is $400,000 more than the budgeted reserve: Commission staff advise that the higher-than-anticipated reserve is due to (1) a larger-than-projected carry-over from 1982-83, (2) reductions in expenditures due to the Governor’s freeze on hiring and certain operating expenses, and (3) higher-than-estimated revenue from penalties, invest- ments, and sale of documents. In addition, the commission already estimates that 1983-84 and 1984-85 revenue will exceed the amount shown in the 1984-85 budget document, due to greater-than-anticipated document sales. The commission antici- pates 1984-85 document sales will generate $11,000 more than the amount budgeted as reimbursements. . Fee Assessments Based on Outdated Budget Projections. The com- mission calculates its annual health facility fee assessment based on projec- tions of (1) gross annual health facility operating expenditures, (2) support costs for the commission, (3) miscellaneous revenues, and (4) reserves available from prior years. Although the commission performs the fee calculations in April, it does not use the most recent data as the bas~s for these calculations. Instead, it uses projections of support costs and revenues developed in the previous November for use in the Governor’s Budget, with only minor adjustments. Between November and April of any year, numerous changes occur that affect support costs and revenues. If the commission were to update the projections immediately prior to performing the fee calculations, it could consider excess carry-overs, increased document sales, and any other ex- penditure and revenue adjustments before setting the fees. This would also help the commission avoid building up excess reserves as it has done in each of the last four years. 1.984-85 Budgeted Reserve Too High. We believe the commission needs to plan for a reserve. Our analysis indicates, however, that $200,000, rather than the $230,000, would be sufficient for this purpose in 1984-85. A $200,000 reserve, which is equal to 5 percent of proposed expenditures, would allow sufficient funds to cover unanticipated revenue shortfalls of up to $25,000 and still leave $175,000 for other contingencies, such as any employee compensation adjustments adopted by the Legislature. Accord- ingly, we recommend adoption of Budget Bill language requiring the commission to (1) limit its reserve to $200,000 when calculating its fee assessments and (2) update the expenditure and revenue data immediate- ly prior to performing the fee calculations. The following Budget Bill language would accomplish this: 1322 \/ YOUTH AND ADULT CORRECTIONAL Item 5240 CALIFORNIA HEALTH FACILITIES COMMISSION-Cqntinued \”In adopting its assessment fee rates for hospitals and long-term care facilities, the commission shall update its expenditure and revenue pro- jections based on the most recent information available and provide for a contingency reserve not to exceed $200,000.\” The portion of the language limiting the reserve to $200,000 is identical to language contained in the 1983 Budget Act but not included in the 1984 Budget Bill. Youth and Adult Correctional Agency DEPARTMENT OF CORRECTIONS Item 5240 from the General Fund and Inmate Welfare Fund Budget p. Y AC 1 Requested. 1984-85 ……………………………………………………………….. $715,590,000 Estimated 1983-84…………………………………………………………………. 604,239,000 Actual 1982–83 ………………………………………………………………………. 496,199,000 Requested increase (excluding amount for salary increases) $111,351,000 (+1804 percent) Total recommended reduction ……………………………………………. 11,404,000 Recommendation pending …………………………………………………… 59,639,000 1984–85 FUNDING BY ITEM AND SOURCE Item Description 5240\u00b7001\u00b7001-Department Operations 5240-001-917-Inrnate Welfare Fund 5240-101-OO1-Local Assistance 5240-001-890–Department Operations Reimbursements Total Fund General Revolving General Federal Amount $693,281,000 11,790,000 10,519,000 (199,000) (12,444) $715,590,000 Analysis SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS page 1. Funding for Inmate Population Growth. Withhold rec- 1328 ommendation, pending analysis of population proposal contained in the May Revision. 2. Current-Year Deficiency Request. Recommend depart- 1329 ment report prior to hearings on its need for a current-year deficiency appropriation. 3. Community Work Furlough Facilities. Reduce Item 1330 5240-001-001 (General Fund) by $5,309,000. Recom- mend deletion of over budgeted funds. 4. Records Positions. Reduce Item 5240-001-001 (General 1331 Fund) by $281~000. Recommend deletion of 11 posi- tions that are not justified by workload. 5. Search and Escort Staffing. Reduce Item 5240-001-001 1331 (General Fund) by $2,2~000. Recommend deletion of 71 search and escort positions to reduce system-wide dis- ”

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1986-1987 AFDC Budget LAO Analysis

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” Item 5180 HEALTH AND WELFARE \/ 905 DEPARTMENT OF SOCIAL SERVICES SUMMARY The Department of Social Services (DSS) is the single state agency responsible for supervising the delivery of cash grants and social services to needy persons in California. Monthly grant payments are made to eligible recipients through two programs-Aid to Families with Depend- ent Children (AFDC) and the Supplemental Security Income\/State Sup- plementary Program (SSIISSP). In addition, welfare recipients, low-income individuals, and persons in need of protection may receive a number of social services such as information and referral, domestic and personal care assistance, and child and adult protective . services. The budget proposes total expenditures by the department of $8.8 billion in 1986-87. This is an increase of $424 million, or 5.0 percent, above estimated current-year expenditures. Table 1 identifies total expenditures from all funds for programs administered by DSS, for the past, current, and budget years. Table 1 Department of Social Services Expenditures and Revenues, by Program All Funds 1984-85 through 1986-87 (dollars in thousands) Program Departmental support ………………………. .. AFDC\” ………………………………………………… . SSI\/SSP b .. .. .. . . .. . .. . . . .. .. Special Adult programs ……………………… . Refugee programs ………………………………. . County Welfare Department Adminis- tration \” ……………………………………….. . Social Services programs\” ………………….. , Community Care Licensing ………………. . Totals …………………………………………… . Funding Sources General Fund ……………………………………… . Federal funds b ……………………………………. . Interstate Collection Incentive Fund .. County funds ……………………………………… . Reimbursements ………………………………… . State Children’s Trust Fund ………………. . Special Deposit Fund …………………………. . \” Includes county funds. b Includes SSI federal funds. Actual 1984-85 $185,509 3,443,17l 2,387,751 1,732 52,783 657,409 712,961 9,873 $7,451,189 $3,259,400 3,809,509 633 374,064 8,358 -1,107 332 Est. 1985-86 $226,346 3,913,851 2,667,261 1,897 55,989 685,783 829,494 1l,198 $8,391,819 Prop. 1986-87 $214,133 3,920,229 2,921,522 2,093 57,857 714,059 974,312 1l,198 $8,815,403 $3,771,497 $4,030,854 4,190,155 4,333,382 419,422 9,306 914 525 438,576 10,251 2,340 Change From 1985-86 Amount -$12,213 6,378 254,261 196 1,868 28,276 144,818 $423,584 Percent -5.4% 0.2 9.5 10.3 3.3 4.1 17.5 5.0% $259,357 6.9% 143,227 3.4 19,154 4.6 945 10.1 1,426 156.0 -525 -100.0 Table 2 shows the General Fund expenditures for cash grant and social services programs administered by DSS. The budget requests a total of $4 billion from the General Fund for these programs in 1986-87. This is an increase of $259 million, or 6.9 percent, above estimated current-year expenditures. 906 \/ HEALTH AND WELFARE DEPARTMENT OF SOCIAL SERVICES SUMMARY-Continued Table 2 Department of Social Services General Fund Expenditures 1984-85 through 1986-87 (dollars in thousands) Item 5180 Change From Actual Est. Prop.\” 1985-86 Program 1984-85 1985-86 1986-87 Amount Percent Departmental Support …………………….. $53,798 $64,266 $67,967 $3,701 5.8% AFDC ……………………………………………….. 1,591,829 1,828,902 1,833,927 5,025 0.3 SSI\/SSP ……………………………………………… 1,248,571 1,410,536 1,591,370 180,834 12.8 Specfa:J Adult programs …………………… 1,657 1,822 2,018 196 10.8 County Welfare Department Admin- istration ………………………………………. 122,627 129,181 133,848 4,667 3.6 Social Services programs …………………. 233,833 328,448 393,382 64,934 19.8 Community Care Licensing ……………. 7,085 8,342 8,342 Totals ………………………………………….. $3,259,400 $3,771,497 $4,030,854 $259,357 6.9% \” Includes proposed cost-of-livingadjustments. OVERVIEW OF ANALYST’S RECOMMENDATIONS We are recommending a net reduction of $11,233,000 from the amount proposed for expenditure from all funds. This amount consists of $7,427,000 from, the General Fund and $3,806,000 in federal funds. In addition, we are withholding recommendation on $170,622,000 in proposed expenditures, pending receipt of additional information. Our recommendations are summarized in Table 3. Table 3 Department of Social Services Summary of Legislative Analyst’s Recommendations (dollars in thousands) Recommended Fiscal Changes General Federal Program Fund Funds All Funds Departmental support …………….. ; ……….. . AFDC ………………………………………………… . -$3,367 -$3,806 -$7,173 SSI\/SSP ………………………………………………. . Special Adults …………………………………… .. Refugees ……………………………………………. .. County Administration …………………….. .. Social Services …………………………………… .. Community Care Licensing ……………… .. -4,060 Cost-of-living adjustments ……………….. .. Totals …………………………………………… . -$7,427 -$3,806 -$11,233 Recommendations Pending (All Funds) $3,661 . 34,200 2,244 119,319 11,198 $170,622 Item 5180 HEALTH AND WELFARE \/ 907 Department of Social Services DEPARTMENTAL SUPPORT Item 5180 from the General Fund and Federal Trust Fund Budget p. HW 148 Requested 1986-87 ………………………………………………………………. . Estimated 1985-86 ………………………………………………………………… . Actual 1984-85 ……………………………………………………………………… . Requested increase $3,937,000 (+5.5 percent) Total recommended reduction …………………………………………… . Recommendation pending ………………………………………………….. . 198CHS7 FUNDING BY ITEM AND SOURCE Item-Description 5180\u00b7001-001-Department of Social Services Support 5180-001-890-Department of Social Services Support Reimbursements Total Fund General Federal SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS $75,822,000 71,885,000 62,156,000 . None 2,529,000 Amount $67,804,000 (138,146,000) 8,018,000 $75,822,000 Analysis page 1. Statewide Automated Welfare System (SAWS). With- hold recommendation on $2,265,000 ($1,133,000 from the General Fund, $943,000 in federal funds, and $189,000 in reimbursements) proposed for development and im- plementation of the SA WS project, pending receipt of the 911 annual SA WS Progress Report. 2. Community Care Licensing Workload Standard. With- hold recommendation on $1,396,000 requested from the General Fund for increased licensing activities, pending re- ceipt of a revised workload standard. GENERAL PROGRAM STATEMENT 911 The Department of Social Services (DSS) administers income mainte- nance, food stamps, and social services programs. It is also responsible for (1) licensing and evaluating nonmedical community care facilities and (2) determining the medical! vocational eligibility of persons applying for benefits under the Disability Insurance program, Supplemental Security Income\/State Supplementary Program (SSI\/SSP), and Medi-Cal!medi- cally-needy program. The department is authorized 3,368.1 positions to administer these pro- grams in the current year. OVERVIEW OF THE BUDGET REQUEST The budget proposes expenditures of $75,822,000 from the General Fund and reimbursements for support of the department in 1986-87. This is an increase of $3,937,000, or 5.5 percent, above estimated current-year expenditures. The budget proposes expenditures from all funds, including reimburse- 908 \/ HEALTH AND WELFARE DEPARTMENTAL SUPPORT-Continued Item 5180 ments, of $214,133,000. This is $12,213,000, or 5.4 percent, below estimated current-year expenditures. The budget does not include additional funding for Merit Salary Adjust- ments or inflation adjustments to Operating Expenses and Equipment. We estimate that the department will have to absorb approximately $4,- 811,000 in such costs. Presumably, these costs will be financed by diverting funds budgeted for other purposes. Table 1 identifies the department’s expenditures, by program and fund- ing source, for the past, current, and budget years. Table 1 Department of Social Services Budget Summary 1984-85 through 1986-87 (dollars in thousands) Actual Est. Prop. Program 1984-85 1985-86 1986-87 AFDC-FG&U …………………………………. $16,631 $19,618 $15,921 AFDC-FC ………………………………………. 4,534 5,010 5,486 Child Support ……………………………….. 6,639 7,104 8,474 SSI\/SSP ………………………………………….. 886 1,002 1,048 Special Adult programs …………………. 248 290 303 Food Stamps …………………………………… 17,062 18,116 15,935 Refugee programs Cash Assistance ………………………….. 1,930 2,197 2,456 Social Services ……………………………. 1,439 1,293 1,211 Targeted Assistance …………………… 1,137 1,058 1,255 Child Welfare Services …………………. 2,262 2,529 2,615 County Services Block Grant.. ………. 1,343 1,415 1,492 IHSS ……………………………………………….. 2,185 2,706 2,635 Employment programs WIN ……………………………………………. 13,610 24,248 954 GAIN ………………………………………….. 1,500 1,939 Adoptions ………………………………………. 6,346 6,662 7,179 Child Abuse Prevention ……………….. 1,419 1,961 2,258 Community Care Licensing ………….. 20,939 27,401 28,081 Disability Evaluation …………………….. 80,485 96,476 108,983 Administration ……………………………….. ~ 5,760 5,908 Totals ………………………………………. $185,509 $226,346 $214,133 Funding Sources General Fund. ………………………………… $53,798 $64,266 $67,967 Federal funds …………………………………. 123,084 153,934 138,146 Reimbursements ……………………………. 8,358 7,619 8,018 Special Deposit Fund …………………….. 332 525 State Children s Trust Fund ………… (63) 2 2 Proposed General Fund Changes Change From 1985-86 Amount Percent -$3,697 -18.8% 476 9.5 1,370 19.3 46 4.6 13 4.5 -2,181 -12.0 259 H.8 -82 -6.3 197 18.6 86 3.4 77 5.4 -71 -2.6 -23,294 -96.1 439 29.3 517 7.8 297 15.1 680 2.5 12,507 13.0 148 2.6 -$12,213 -5.4% $3,701 5.8% -15,788 -10.3 399 5.2 -525 -100.0 Table 2 shows the changes in the department’s General Fund support expenditures that are proposed for 1986-87. Several of the individual changes are discussed later in this analysis. Item 5180 HEALTH AND WELFARE \/ 909 Table 2 Department of Social Services Departmental Support Proposed General Fund Changes 1986-87 (dollars in thousands) 1985-86 expenditures (revised) ……………………………………………………………………….. . Proposed Changes A. Workload adjustments 1. Expiration of limited-term positions ……………………….. ………………………….. 2. Reduction in SCO audit workload ……………………………………………………….. . 3. One-time court case costs ……………………………………………………………………. . 4. One-time attorney fees …………………………………………………………………………. . 5. One-time implementation costs Community Care Licensing Manage- ment Information system ……………………………………………………………………… . 6. Extension of office automation to district offices ………………………………. . 7. Other ……………………………………………………………………………………………………… . B. Cost adjustments …………………………………………………………………………………………. . 1. Salary and benefits ……………………………………………………………. : …………………. . 2. Retirement …………………………………………………………………………………………….. . 3. OASDI ……………………………………………………………………………………………………. . 4. Staff reclassification ………………………………………………………………………………. . 5. Disaster relief ……………………………………………………………………………………….. . 6. Other ……………………………………………………………………………………………………… . C. Program adjustments ………………………………………………………………………………….. . 1. Transfer of Work Incentive Program from support to local assistance 2. Implementation of GAIN (Ch 1025\/85) …………………………………………….. . 3. Enhancement and maintenance of Statewide Automated Welfare Sys- tems …………………………………. , …………………………………………………………………… . 4. Implementation of new Child Support outreach requirements ……….. . 5. Lower salary savings requirement ……………………………………………………… . 6. Reduction in audits backlog and contract with SCO …………………………. . 7. Increased legal support for Community Care Licensing ………………….. . 8. Implementation of Elder Abuse Prevention Pilot Projects ………………. . 9. Extension of limited-term positions in Foster Care Rate Bureau ……… . 10. Extension of Child Abuse Primary Prevention Program ………………….. . 11. Increased Community Care Licensing activities ………………………………. . 12. Community Care Licensing Management Information System Conver- sion ……………………………………………………………………………………………………….. . 1986-87 expenditures (proposed) ……………………………………………………………………. . Changes from 1985-86 Amount …………………………………………………………………………………………………………. . Percent …………………………………………………………………………………………………………. . Proposed Position Changes -$772 -122 -475 -432 -153 316 -8 1,982 334 127 228 175 4 -2,337 220 1,133 188 254 164 1,405 24 150 393 734 169 $64,266 -1,646 2,850 2,497 $67,967 $3,701 5.7% The budget requests authorization for 3,754.5 positions to staff the de- partment in 1986-87. This is a net increase of 386.4 positions, or 11.5 per- cent, over the staffing level that would otherwise be authorized in the budget for 1986-87. The net increase reflects a proposed increase of 452.9 positions and a proposed reduction of 66_5 positions_ The single . largest increase–320_9 positions-reflects the administration’s proposal to ex- pand the Disability Evaluation Division (I?ED) so that it can process the additional workload resulting from the resuinption of continuing disability reviews (CDRs) _ Most of the decrease–32.5 positions-reflects the pro- posal to reduce the department’s salary savings level by abolishing various 910 \/ HEALTH AND WELFARE DEPARTMENTAL SUPPORT-Continued Item 5180 positions throughout the department. Table 3 displays the position changes proposed for 1986-87. Table 3 Department of Social Services Departmental Support Proposed Position Changes 1986-87 Total Existing Proposed Program Positions Reductions Additions Positions AFDC-FG\/U ……………………………….. 260.6 -5.6 9.2 264.2 Employment programs ……………….. 15.5 35.0 50.5 GAIN ………………………………………… (35.0) (35.0) WIN-Demo ……………………………… (15.5) (15.5) AFDC-FC …………………………………….. 115.4 -23.2 12.9 105.1 AFDC-Child Support Enforce- ment …………………………………….. 75.2 75.2 SSI\/SSi> ………………………………………… 26.2 -0.2 26.0 Special Adult programs ……………… 2.0 -0.1 1.9 Food Stamps ……………………………….. 285.7 -2.4 7.0 290.3 Refugee programs ………………………. 87.8 -9.2 0.7 79.3 Cash Assistance ………………………… (43.3) (-0.7) (42.6) Social Services ………………………….. (24.5) (-8.5) (0.7) (16.7) Targeted Assistance …………………. (20.0) (20.0) Disability Evaluation …………………… 1,601.9 -16.1 320.9 1,906.7 In-Home Supportive Services …….. 50.0 -2.2 0.2 48.0 Child Welfare Services ……………….. 57.1 -0.4 56.7 County Services Block Grant …….. 32.1 -0.1 1.0 33.0 Adoptions …………………………………….. 142.1 -1.2 140.9 Maternity Care ……………………………. 3.7 3.7 Deaf Access …………………………………. 5.2 5.2 Child Abuse Prevention ……………… 23.0 -0.2 9.0 31.8 Community Care Licensing ………. 499.2 -5.2 50.0 544.0 Services to other agencies ………….. 85.4 -0.4 7.0 92.0 Totals ………………………………… , …. 3,368.1 -66.5 452.9 3,754.5 ANALYSIS AND RECOMMENDATIONS Net Changes Positions Percent 3.6 1.4% 35.0 225.8 35.0 100.0 -10.3 -8.9 -0.2 -0.8 -0.1 -5.0 4.6 1.6 -8.5 -9.7 -0.7 -1.6 -7.8 -31.8 304.8 19.0 -2.0 -4.2 -0.4 -0.7 0.9 2.8 -l.2 -0.8 8.8 38.3 44.8 9.0 6.6 7.7 386.4 11.5% We recommend approval of the following program changes that are not discussed elsewhere in this analysis: The transfer of $29,782,000 ($2,337,000 General Fund) from the de- partment’s support budget to the counties (Item 5180-151-001) for various employment programs. The counties would provide services through these programs either directly or through a contract with the Employment Development Department (EDD) or another contrac- tor. Currently, the DSS uses these funds to reimburse the EDD for the cost of various employment services it provides to county welfare department clients. An increase of $19,788,000 in federal funds to provide for increased workload in the DED due to the federally mandated resumption (PL 98-460) of CDRs. A net increase of $466,000 ($164,000 General Fund) to: (1) reduce the current audit backlog, (2) implement a contract with the State Con- troller’s office to perform specified audits, and (3) staff the audit resolution and application processes. Item 5180 HEALTH AND WELFARE \/ 911 A net increase of $639,000 ($254,000 General Fund) to reduce the department’s salary savings requirement by $1,284,000. An increase of $1,523,000 ($1,405,000 General Fund) for increased legal support of the Community Care Licensing program. . An increase of $2,380,000 ($1,411,000 General Fund) to implement various legislative measures, including GAIN (Ch 1025\/85), Adult Protective Services projects (Ch 1127\/85), and the Child Abuse Pri- mary Prevention program (Ch 1638\/84). An increase of $1,128,000 ($188,000 General Fund) for increased workload in the Child Support Enforcement program. An increase of $182,000 ($169,000 General Fund) to pay for staff over- time associated with the conversion of the Community Care Licens- ing Division’s Management ,Information System from a manual operation to an automated system. ‘ An increase of $273,000 ($150,000 General Fund) for continuation of six limited-term positions in the Foster Care Rate-Setting Bureau. Statewide Automated Welfare System (SAWS) We withhold recommendation on $2,265,000 ($1,133,000 from the Gen- eral Fund, $943,000 in federal funds, and $189,000 in reimbursements) requested for the SAWS project, pending receipt of the department’s annual report on the project; The budget proposes $2,265,000 ($1,133,000 General Fund, $943,000 fed- eral funds, and $189,000 in reimbursements) to support the department’s costs of developing and implementing the Statewide Automated Welfare System (SAWS) project in 1986-87. Chapter 268, Statutes of 1984, requires DSS to report to the Legislature on its progress in achieving the goals established in the SAWS project. The report is due annually in March. We withhold recommendation on the funds proposed for SAWS, pend- ing review of the annual progress report on the SAWS project. Any deci- sion concerning continued funding for this project shoula be made in light of its progress in meeting its stated objectives. Community Care licensing Activities We withhold recommendation on $1,396,000 requested from the Gen- eral Fund for support of increased activities of the Community Care Licensing Division, pending receipt of a revised workload standard. The budget proposes $1,396,000 from the General Fund in order to implement various. community care licensing requirements. These proposals involve adding staff to perform activities such as assessing penal- ties on specified facilities, collecting fines, conducting post-licensing visits, and checking criminal records. Currently, the department is in the proc- ess of revising its workload standard for community care licensing staff. Because the budget proposals were not based on an updated workload standard, we withhold recommendation on these proposals, pending re\” ceipt of a revised workload standard. Legislatively Required Reports Adoptions Performance Report. The Supplemental Report of the 1985 Budget Act required the DSS to submit a report to the Legislature, by December 1, 1985, that established specified goals for adoption agency performance during 1985-86. The report also is supposed to provide rec- ommendations regarding how the Relinquishment program’s perform- ance could be improved. At the time this analysis was prepared the report had not been submitted. 912 \/ HEALTH AND WELFARE Item 5180 DEPARTMENTAL SUPPORT-Continued IHSS Assessments and Service Awards. The Supplemental Report of the 1985 Budget Act required the DSS to submit a report to the Legisla- ture by March 1, 1986, that provides an evaluation of its efforts to (1) increase statewide uniformity in the IHSS assessment process and (2) standardize the award of service hours. The report specified that the evaluation include (1) measurable objectives and (2) an implementation plan for achieving those objectives. The department informs us that its report is in progress, and will be completed by March 1, 1986. IHSS Revised Allocation Formula. The Supplemental Report of the 1985 Budget Act required the DSS to evaluate the effect on each county’s IHSS program of the 1984-85 and 1985-86 allocations, and submit a report on its findings to the Legislature by January 1, 1986. These allocations were based on a different formula than the one used before 1984-85. The de- partment informs us that the report is complete, and that it will be submit- ted to the Legislature following the completion of a depaitmental review. IHSS Pilot Project. The Supplemental Report of the 1984 Budget Act required the DSS to submit an interim report by December 1985, based on the experience of a pilot program in Santa Cruz County. The pilot program is intended to compare the cost-effectiveness and quality of care associated with both contract and individual provider modes of ser- vice delivery. The department has submitted the required report which describes (1) the county’s experience in negotiating and awarding its contract for services, (2) the effect on some recipients of the transition to the contract mode, (3) the project’s research design, including the com- parative data that the county will collect, and (4) two project innovations, including a revised \”Equity\” program, which is a computer-assisted assess- ment system. We discuss this report further in our analysis of Item 5180- 151. Work Incentive Demonstration (WIN-Demo) Program. The Supple- mental Report of the 1985 Budget Act required the DSS to submit a report by January 1, 1986, on the transfer of responsibility for registration and referral under the WIN-Demo program from the Employment Develop- ment Department to county welfare departments. At the time this analy- sis was prepared, the department had not submitted the report to the Legislature. . County Welfare Department Performance. The Supplemental Re- port of the 1985 Budget Act required the DSS to submit a report by December 1, 1985, on its progress in implementing a system to collect data reflecting the effectiveness of counties in administering the Aid to Fami- lies with Dependent Children (AFDC) and the Food Stamps programs. The supplemental report specified a variety of performance indicators that should be included in the system, including measurements of how promptly counties process applications for aid. At the time this analysis was prepared, the department had not submitted the report to the Legis- lature. Item 5180 HEALTH AND WELFARE \/ 913 Department of Social Services AID TO FAMILIES WITH DEPENDENT CHILDREN Item 5180-101 from the General Fund and Federal Trust Fund Budget p. HW 150 Requested 1986-87 ……………………………………………………………. $1,833,927,000 a Estimated 1985-86 ……………………………………………………………. 1,828,902,000 Actual 1984-85 …………………………………………………………………… 1,591,829,000 Requested increase $5,025,000 (+0.3 percent) Total recommended reduction ………………………………. ……….. $3,367,000 Recommendation pending ……………………………………………….. $15,400,000 \” Includes $80,678,00Q in Item 5180-181-001 (c) to provide a 4.9 percent cost-of-living adjustment. 1986-87 FUNDING BY ITEM AND SOURCE I tern-Description 5180-I01-001-Payments for Children 5180-IOI-890-Payments for Children 5180-181-001 (c)-Cost-of-Living Adjustments 5180-181-890-Cost-of-Living Adjustments Fund General Federal General Federal Amount $1,753,249,000 (1,825,429,000) 80,678,000 (94,594,000) Total $1,833,927,000 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Aid to Families with Dependent Children-Family Group (AFDC-FG) Caseload. Recommend that, prior to budget hearings, the Department of Social Services (DSS) report to the fiscal committees on its progress in incor- porating specified noneconomic factors in its May revision estimate of family group caseloads. 2. Aid to Families with Dependent Children-Foster Care (AFDC-FC) Caseload. Recommend that, prior to budget hearings, the Department of Social Services report to the fiscal committees on its progress in incorporating specified factors in its May revision estimate of foster care caseloads. 3. Foster Care Services for Handicapped Children (Ch 1274\/ 85). Recommend the Department of Finance advise the fiscal committees of the amount needed to provide foster care services to handicapped children pursuant to Ch 1274\/85. 4. Foster Parent Training Fund Transfer. Recommend the Department of Finance advise the fiscal committees on how it intends to finance the transfer of $1.8 million in General Fund monies in 1986-87 from the Foster Care Program to the Foster Parent Training Fund, as required by current law. 5. Reduced Federal Funding Due to Simon v. McMahon. Recommend that, prior to budget hearings, the Depart- ment of Social Services report to the fiscal committees on its progress in securing a waiver from the federal govern- Analysis page 920 922 924 925 925 914 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-C~ntinued ment in order to avoid a cost shift to the state and county governments for AFDC cases affected by the ruling in Simon v. McMahon. 6. Greater Avenues for Independence (GAIN) Program- 927 AFDC Grant Savings. Withhold recommendation on $36 million ($15,400,000 General Fund, $18,800,000 federal funds, and $1,800,000 county funds) in grant savings budg- eted for AFDC caseload reductions expected to result from the GAIN program, pending receipt of an up-to-date esti- mate. 7. Child Support Enforcement Program. 928 (a) Recommend that, prior to budget hearings, the de- partment provide the fiscal committees with a cost estimate for a study of various child support collection techniques. (b) Recommend adoption oflegislation establishing an al- location formula that sets incentive payments equal to a fixed percentage of collections. (c) Recommend adoption of legislation phasing in the in- clusion of non-AFDC collections as part of the base on which the incentive formula will be applied. (d) Recommend adoption of legislation retaining the cur- rent requirement that counties use child support in- centive payments to support the Child Support Enforcement Program, sunsetting this requirement on July 1, 1988, and requiring the DSS to report by December 1, 1988, on the advisability of postponing the sunset date. 8. Welfare Fraud Early Detection\/Prevention (FRED) Pro- 933 gram. Recommend adoption of Budget Bill language requiring the Department of Social Services to report to the Legislature by December 1, 1986, on the potential costs and savings of mandating the FRED program. 9. Asset Clearance Match. Reduce Item 5180-101-001 by $1,- 935 931,000 and Item 5180-101-890 by $2,173,000. Recom- mend reduction of $1,931,000 to reflect more accurate estimate of the AFDC grant savings that will result from the asset clearance match. 10. Integrated Earnings Clearance. Reduce Item 5180-101-001 936 by $1,436,000 and Item 5180-101-890 by $1,633,000. Rec- ommend reduction of $1,436,000 to reflect a more accurate estimate of the savings that will result from the integrated earnings clearance. GENERAL PROGRAM STATEMENT The Aid to Families with Dependent Children (AFDC) program pro- vides cash grants to certain families and children whose income is not adequate to provide for their basic needs. Specifically, the program pro- vides grants to needy families and children who meet any of the following criteria: AFDC-FG. Families are eligible for grants under the AFDC-Family Group (AFDC-FG) program if they have a child who is financially needy due to the death, incapacity, or continued absence of one or both parents. Item 5180 HEALTH AND WELFARE I 915 In the current year, an average of 478,100 families each month will receive grants through the AFDC-FG program. AFDC-U. Families are eligible for grants under the AFDC-Unem- ployed Parent (AFDC-U) program if they have a child who is financially needy due to the unemployment of one or both parents. In the current year, an average of 75,810 families each month will receive grants through the AFDC-U program. . AFDC-FC. Children are eligible for grants under the AFDC-Foster Care (AFDC-FC) program if they are living with a licensed or certified foster care provider pursuant to either a court order or a voluntary agree- ment between the child’s parent(s) and a county welfare or probation department. In the current year, an average of 36,540 children each month will receive grants through the AFDC-FC program. In addition, the Adoption .Assistance program provides assistance to parents who adopt children who have special needs that make them dif- ficult to place in adoptions. OVERVIEW OF THE BUDGET REQUEST The budget proposes expenditures of $1,833,927,000 from the General Fund for AFDC cash grants in 1986-87. The amount includes $1,753,249,- 000 in Item 5180-101-001 and an additional $80,678,000 requested in Item 5180-181-001 (c) to provide a 4.9 percent cost-of-living increase in max- imum AFDC-Family Group (AFDC-FG) and AFDC-Unemployed Parent (AFDC-U) grants. (The budget does not propose to provide a cost-of- living increase in the rates paid to foster care providers.) This is an in- crease of $5,025,000, or 0.3 percent, from estimated 1985-86 expenditures. As shown in Table 1, total expenditures from all funds for AFDC cash grants are budgeted at $3,918 million in 1986-87. This is $6 million, or 0.1 percent, above estimated expenditures in the current year. . Table 1 shows the costs of AFDC programs for 1984-85 through 1986-87. Under state and federal laws, the federal government, the state, and the counties contribute 50 percent, 44.6 percent and 5.4 percent, respectively, toward the cost of grants provide to Non-Refugee AFDC recipients who are eligible under the federal Family. Group and Unemployed Parent programs, and 50 percent, 47.5 percent and 2.5 percent, respectively, toward the costs of foster care grants. The federal government’s percent- age share of total AFDC costs incurred under the Family Group and Unemployed Parent programs exceeds 50 percent because the grant costs for refugee families are 100 percent federally funded during these fami- lies’ first 36 months in the United States. The state’s share of total foster care costs exceeds 47.5 percent because the state pays 95 percent (and the counties pay 5 percent) of foster care costs which are not eligible for federal funding under federal law. For those AFDC-FG and U recipients who are not eligible for grants under federal law, the state pays 89.2 percent of the grant costs and the county pays 10.8 percent. These sharing ratios apply to the cost of grants provided under the State-Only AFDC-U program as well as to the cost of grants provided to women during their first six months of pregnancy. The AFDC-FG program accounts for $3,065 million (all funds), or 75 percent, of total estimated grant costs under the three major AFDC pro- grams (excluding Child Support Collections). The Unemployed Parent program accounts for 16 percent of the total, and the Foster Care program accounts for 9 percent. . Recipiellt Category Family groups ……………………………………. . Unemployed parent …………………………. . Foster Care ……………………………………….. . Adoption programs …………………………… . Child support incentive payments to counties ……………………………………….. . Child support collections ………………….. . Subtotals …………………………………………. . Court-ordered retroactive payments .. AFDC cash grants to refugees Time-expired I> Time-eligible ………………………………….. . Totals ………………………………………………. . Stilte 81,197,693 242,231 201,614 6,456 13,690 Table 1 Expenditures for AFDC Grants, by Category of ReCipient 1984-85 through 1986-87 (in thousands) Actual 1984-85 Estimated 1985-86 FedeTllI CouIl(r ICF\” Total State Federal CouII(r Total Proeosed 1986-87\” State Federal CouIl(r Total $1,363,094 S145,009 $2,705,796 $1,362,700 $1,529,867 $164,990 $3,057,557 $1,369,579 $1,529,782 $165,876 $3,065,257 327,369 29,331 598,931 268,807 357,471 32,544 658,822 266,300 358,075 32,255 656,610 68,277 10,610 280,501 245,321 82,869 12,912 341,102 248,894 84,156 13,101 346,151 1,120 7,576 8,239 2,162 10,401 10,262 3,491 13,753 19,753 -32,288 633 1,788 16,325 22,253 -38,272 306 14,964 23,404 – 38,368 -69,855 -73,407 -8,159 –= -151,421 -72,490 -75,133 -8,401 -156,024 -76,072 -78,885 -8,818 -163,775 SI,591,829 $1,706,206 $144,503 $633 $3,443,171 81,828,902 $1,919,489 $163,773 $3,912,164 $1,833,927 $1,921,802 $164,046 $3,917,996 (115) (131) (14) (260) (36,671) (42,041) (4,440) (83,152) (116,598) (128,357) (14,117) – (259,072) (138,147) (152,222) ($16,727) (307,096) (164,157) (180,881) (19,876) (364,914) __ (50,356) __ _ (50,356) ___ (93,943) (93,943) ___ (100,386) __ (100,386) 81,591,829 $1,706,206 $144,503 $633 $3,443,171 $1,828,902 $1,919,489 $163,77-3 $3,912,164 $1,833,927 $1,921,802 $164,046 $3,917,996 NOTE: Detail may not add to total due to rounding. \” Interstate collection incentive fund. I> Estimated expenditures-no actual data available. ,. Includes funds for a 4.9 percent cost-of-living adjustment. ~ CD … 0 G) …. …… 0 :I: \”\” trI > ~ t; i= :I: iii > \u00abIt Z =: t:I :::; :E :::I: trI t\”\” 0 ;:2 m \”V !:Xl m trI Z 0 m Z …. n :::I: i= 0 ~ m Z h 0 :::s .. 5\u00b0 c CD a. -….-(1) :3 01 …. 00 0 Item 5180 HEALTH AND WELFARE \/ 917 Proposed General Fund Budget Changes Table 2 Proposed Generai Fund Changes for AFDC Grants (dollars in thousands) Cost 1985 Budget Act ……………………………………………………………………………………….. . Adjustments to Appropriation 1. Caseload increase a. AFDC-FG arid D ………………………………………………………………………………. . $49,268 b. AFDC-FC (i) Group home placements ……………………………………………………….. . (ii) ‘Other ……………………………………………………………………………………….. . 23,969 ~ Subtotal…., ……………………………………………………………………………………………… . 2. Simoll v: McMahOll ………………………………………………………………………………. . 3. Reduced fraud detection savings …………………………………………………………. . 4. Other adjustments ………………………………………………………………………………… . Total, adjustments to appropriation ……………………………………………………. . 1985-86 Expenditures (Revised) … : …………………………………………………………… . A. Adjustments 1. Caseload increase a. AFDC-FG and D ………………. , ……………………………………………………….. . -6,323 b. AFDC-FC (i) Group home placements ………………………………………………….. . (ii) Other ………………………………………………………….. ……………………… 2,~85 1,088 c. Adoption assistance ……………………………………………………………………. . 2;023 Subtotal …………………………………………………………………………………………….. . 2. State and federal legislation a. Ch 1441\/84 (technical overpayments) ……………………………………… . b. Ch 1151\/83 (bonus child support incentive) …………………………….. . c. HR 4179 DEFRA …………………………………………………………………………. . -24 -1,844 38 SubtotaL ……………… , ………………………………………………………………………….. 0’ 3. Court cases u. Simoll v. McMaholl ……………………………………………………………………… . 6,304 b. Consolidated cases …………………….. , ……………………………………………… . -52,42;3 c. Other …………………………………………………………………………………………… . 2,410 Subtotal ….. ; ………………………………….. , ………………………………………………….. . 4. Increased grant savings due to fraud detection a. FRED …………………………………………………………………………………………… . -3,515 b. Integrated clearance ………………………………………………………………….. . -27 c. FTB match ………………………………………………………………………………….. . -1,549 Subtotal …………………………………………………………………………………………….. . 5. Grant sayings due to GAIN …………………………………………………………….. . 6. SAWS a. Central data base ……… , ………………………………………………………………. . -391 b. Automated intake ……………………………………………………………………….. . -1,170 Subtotal …………………………………………………………………………………………….. . 7. Child support collections a. Basic collections …………………………………………………………………………… . -1,872 b. Intercept systems ……………………………………………………………………….. . c. Collections from other states ……………………………………………………… . -420 -1,290 Subtotal …………………………………………………………………………………………….. . 8. Other adjustments …………………………………………………………………………… . Total, adjustments ……………………………………………………………………….. . B. Proposed Changes 1. 1986-87 cost-of-Iiving adjustments a. AFDC-FG and D (4.9%) …………………………………………………………… . C. 1986-87 Expenditures (Proposed) ……………………………………………………… . Change from 1985 Budget Act: Amount .: …. : …………………………………………………………….. ; ……………………………. . Percent ………………………………………………………………………………………………….. . Change from 1985-86 Estimated Expenditures: Amount ………………………………………………………………………………………………….. . Percent ………………………………………………………………………………………………….. . Total $1,731,609 $77,950 $12,730 $3,667 . $2,946 ($97,293) $1,828,902 -$727 -$1,830 -$48,529 -$5,091 -$15,400 -$1,561 -$3,582 $1,067 ( -$75,653) $80,678 $1,833,927 $102,318 5.9% $5,025 0.3% 918 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued\u00b7 Table 2 shows the factors resulting in the net increase of $5,025,000 in General Fund support proposed for the AFDC program in 1986-87. As the table shows, the largest cost increases projected for 1986-87 are attributa- ble to: A 4.9 percent COLA proposed for AFDC-FG and AFDC-U recipients ($80,678,000) . The increased costs resulting from the judgment against the state in the Simon v. McMahon court cases ($6,304,000). The expected increase in the foster care caseload ($3,573,000). These increases are partially offset by reductions attributable to: One-time costs associated with a group of court cases known as the \”consolidated court cases\” ($52,423,000). Grant savings resulting from implementation of the Greater Avenues for Independence (GAIN) program ($15,400,000). The expected reduction in the AFDC-FG and U caseload ($6,323,- 000). Grant savings resulting from increased welfare fraud detection and prevention activities ($5,091,000). Increased child support collections ($3,582,000). The table shows that the $5 million increase proposed for 1986-87 represents a 0.3 percent increase over the department’s estimate of General Fund expenditures in the current year. The level of expendi- tures proposed in the budget, however, is 5.9 percent above the amount appropriated by the 1985 Budget Act. The department estimates that General Fund expenditures in the current year will exceed the amount appropriated in the Budget Act by $97,293,000. This results from (1) AFDC caseloads that are 2.1 percent higher than the caseloads assumed in the 1985 Budget Act ($77,950,000)and (2) the unanticipated costs stemming from a judge- ment against the state handed down in the Simon case ($12,730,000). Eligibility, Caseloads, and Grants Table 3 lists the eligibility criteria for the AFDC and Food Stamp pro- grams (most AFDC recipients receive food stamps). Caseload Decrease. Table 4 shows that in 1986-87, the AFDC case- load is expected to decrease by 10,508 persons from the revised estimate of caseload in 1985-86. As the table shows, this reduction reflects (1) a reduction of 11,270 persons, or 3.2 percent, in the AFDC-U caseload and (2) a reduction of 80 persons, or 0.01 percent, in the AFDC-FG caseload. —-_ .. _———- Item 5180 HEALTH AND WELFARE \/ 919 Table 3 Basic Eligibility Requirements For the AFDC and Food Stamp Programs A. Categorical Requirements 1. AFDC-Family Group …….. Child with one parent absent, deceased, or physically or mentally incapacitated. 2. AFDC-Unemployed Parent ……………………………….. \”Principal Wage Earner\” unemployed. Federal eligibility available if principal wage earner is unemployed for 30 days and has recent work experience. Otherwise, family is eligible for 3 months of Emergency Assistance and State-Only AFDC. 3. AFDC-Foster Care ………… Child placed in foster care. A child removed by the court from an AFDC eligible home is eligible for federal support; the state supports court-placed children not linked to AFDC, and, for 6 months, volun- tarily placed children. 4. Food Starnps………………………. Any family or individual qualifies who meets federally determined income and resource requirements. B. Income and Resource Require- ments AFDC 1. Real and Personal Property $1,000 limit; home exempt 2. Household Goods Personal Effects ……………………………….. Exempt 3. Motor Vehicle …………………… First $1,500 of net market value exempt 4. Gross Income Limit ………….. 185 percent of AFDC minimum basic standard of need (see Table 5) 5. Allowable Income Deduc- tions …………………………………… 1. Standard work expenses ($75 full time; $50 part time) 2. Child care expenses (up to $160 per child) 3. If the family has received AFDC within past 4 months, $30 and one-third ofremain- ing income; not applied to families not previously on AFDC\” 6. Net Income Limit……………… AFDC maximum aid payment (see Table 5) Food Stumps $1,500 limit ($3,000 for household with one member aged 60 years or over) Exempt Limit of $4,500 on fair market value Limit $540 for an individual; each additional household member increases limit by $189 (family of 3 limit of $917) 1. 18 percent of earned income 2. Standard deduction ($95) 3. $134 limit on the sum of ex- cess shelter costs and de- pendent care expenses 4. Excess medical expenses (actual amount less $35) for households with member over 60 or receiving Title II disability payments Limit of $415 for individual; each additional household member adds about $145 (family of 3 limit is $705) \” Once a family qualifies for aid, during the first four months, it is entitled to the $30 and one-third earned income exemption in calculating the AFDC grant. For the remainder of its first year, the family is entitled to a $30 earned income exemption. 30–80960 920 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued Maximum Payment Levels Table 5 shows the maximum grant levels in 1985-86 for selected family sizes under the family group and unemployed parent components of the AFDC program. It also shows the maximum grant levels for 1986-87, based on the 4.9 percent COLA proposed in the budget. Table 4 Aid to Families with Dependent Children Average Number of Persons Receiving Assistance Per Month 1985-86 and 1985-87 Prograru AFDC-Faruily Group ………………………………….. . AFDC-UnemplQyed Parent ……………………….. . AFDC-Foster Care ……………………………………… . Adoptions Assistance program ……………………. . Refugees:\” Time-eligible …………………………………………… . Time-expired …………………………………………… . Totals ……………………………………………………. . 1985-86 1986-87 ElsDruated Proposed 1,276,560 1,276,480 344,790 333,520 36,540 37,000 3,014 3,396 (48,408) (151,217) 1,660,904 (49,733) (169,683) 1,650,396 Change Nuruber Percent -80 -0.01% -11,270 -3.2 460 1.3 382 12.7 (1,325) (18,466) -10,508 2.7 12.2 -0.6% \”Grants to refugees who have been in the United States less than 36 months (time-eligible) are funded entirely by the federal government. Time-expired refugees, those who have been in the United ‘States longer than 36 months, may qualify for and receive AFDC grants supported according to the normal sharing ratio. Table 5 Maximum AFDC\u00b7FG and U Grant Levels 1985-86 and 1985-87 1986-87\” Faruily Size 1985-86 Aruount Change 1 ………………………………………………………………………………….. . 2 ………………………………………………………………………………….. . 3 ………………………………………………………………………………….. . 4 ………………………………………………………………………………….. . 5 ………………………………………………………………………………….. . $288 474 587 698 796 $302 $14 497 23 616 29 732 34 835 39 \” Based on an estimated 4.9 percent increase in the California Necessities Index (CNI) during 1985. ANALYSIS AND RECOMMENDATIONS AFDC-FG Caseload Estimate Is Not Consistent With Recent Trends We recommend that, prior to budget hearings, the department advise the fiscal committees of its progress in incorporating in its May revision estimate of the AFDC-FG caseloads, changes in refugee caseload and changes in California’s marriage, divorce, and illegitimate birth rates. The budget proposes total spending of $3,065 million (including the costs of the proposed 4.9 percent COLA) in 1986-87 for cash grants to AFDC-FG recipients. This proposal assumes an average monthly AFDC- FG caseload of 478,080 cases, which represents 1,276,480 persons on aid. This is approximately the same case load anticipated for the current year. Item 5180 HEALTH AND WELFARE \/ 921 Chart 1 displays the actual AFDC-FG caseloads from 1981-82 through 1984–85, and the department’s projection of the caseload in the budget year. As the chart shows, the department assumes that tl;1e steady increase in caseload which has occurred in the recent past will level off by the beginning of 1986-87. This assumption has significant consequences for the budget totals. If the actual caseload trends observed between 1981-82 and 1984-85 continued through 1986-87, this would result in 495,000 cases per month, during 1986-87-17,000 cases, or 3.5 percent, more than the budget anticipates. This would increase 1986-87 General Fund costs above the budget estimate by $48 million. Chart 1 AFDC-FG Case loads, Actual and Projected Seasonally Adjusted . 1981-82 through 1986-87 (in thousands) Caseload 500 — Actual’ —– Projected 480 460 440 420 81-82 82-83 83-84 84-85 85-86 86-87 a Because the data shown is seasonally adjusted. caseloads for 1985-86 consist of projected, as well as actual, caseIoads. The reason why the department assumes that there will be no increase in the AFDC-FG caseload during 1986-87, despite recent trends, is that it can find no satisfactory explanation for the recent steady increases in the caseload. The department points out that these increases in caseload have occurred during a period of steadily declining unemployment and general economic recovery. Moreover, the available data indicate that changes in eligibility standards account for only a very limited portion of the caseload growth that has occurred since 1983. The department believes it would be unwise to project a simple continuation of the recent trend absent an understanding of the forces causing the trend, or some basis for believing that the trend will, in fact, continue into the budget year. We agree that the recent increases in caseloads are perplexing. While the correlation between economic conditions and AFDC-FG caseloads has 922 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued never been adequate to explain all of the fluctuations in caseloads, it is reasonable to expect that caseloads would at least remain stable in good economic times. There are, however, several noneconomic factors which may explain the recent caseload increases. For example, the number of refugees in the state has been increasing steadily. Because of language and cultural barriers, these individuals are less likely than are other potential AFDC recipients to take immediate advantage of improvements in the economy. Another noneconomic factor that could explain the recent increases in caseload is the change in household composition. A recent study published by the Department of Health and Human Services found that 45 percent of new AFDC recipients enter the program as a result of becoming di- vorced or widowed. Another 30 percent of new recipients enter the pro- gram as a result of becoming pregnant or having a child out of wedlock. Only 12 percent of new recipients enter the program due to a loss of or reduction in their earnings. The same study found that 45 percent of the recipients who leave the program do so because of a change in household composition, while 32 percent leave as a result of an increase in their earnings. Thus, changes in the marriage, divorce, or illegitimate birth rates within California could explain some of the recent increase in AFDC caseloads. Obviously, we cannot confirm that the recent caseload increases are due to either of these factors-the increase in California’s refugee population or changes in household composition. These factors, however, are worth exploring further to see if they can explain why caseloads have increased in the face of economic prosperity. We, therefore, recommend that, prior to budget hearings, the depart- ment advise the fiscal committees of its success in incorporating in its May revision estimate of AFDC-FG caseloads the following noneconomic fac- tors: (1) changes in refugee caseloads and (2) changes in California’s marriage, divorce, and illegitimate birth rates. Foster Care Caseload Estimate Is Not Consistent With Recent Trends We recommend that, prior to budget hearings, the department advise the fiscal committees on its progress in incorporating specific factors in its estimate of the foster care caseloads for the May revision. The budget proposes total spending of $346,151,000 for the AFDC-Fos- ter Care (AFDC-FC) program in 1986-87. This amount includes $248,894,- 000 from the General Fund, $84,156,000 in federal funds, and $13,101,000 in county funds. The expenditure proposal assumes that there will be an average of 37,000 children in foster care during 1986-87. This is approxi- mately the same caseload anticipated for the current year. Chart 2 shows the actual caseload for the Foster Care program from July 1982 through September 1985 as well as the department’s caseload projec- tion for the remainder of the current year and the budget year. As the chart shows, the foster care caseload grew at an average annual rate of 12 percent between July 1982 and September 1985. The depart- ment projected that the foster care caseload would increase to 37,000 children in December 1985, at which time it would level off for the next 18 months. At the time this analysis was prepared the department did not have the December caseload data. The chart also shows what the foster care caseload would be in 1986-87 Item 5180 HEALTH AND WELFARE \/ 923 if recent trends continue through 1986-87. Were this to happen, the foster care caseload would increase to approximately 43,400 cases per month by the end of the budget year. This increase would result in additional costs above the budget amount of about $59.7 million. Approximately $42.9 million of this amount would have to be financed by the General Fund. 44 Chart 1 Foster Care Case load, Actual and Projected June 1982 throu9h June 1987 (in thousands) — Actual monthly caseload a 40 —— DSS projected caseload === Continued caseload trend. 36 32 28-1 __ \/–, 24 20 1982-83 1983-84 1984-85 1985–86 a Because data for 1985-86 is seasonally adjusted, it includes actual and projected caseloads. 1986–87 The department advises that it chose to extend out the AFDC-FC case- load at the anticipated December 1985 level because it had no reason to believe that caseloads would continue to increase. While the foster care caseload may not continue to increase at the same rate as in the past, it is unlikely that it will suddenly level off. There are several factors which the department did not take into consid- eration which may affect foster care caseloads during 1986-87. For exam- ple, the department should consider the number of reports charging child abuse as well as the number of emergency assistance referrals when it projects the foster care caseloads. This is because children who are abused and neglected or are receiving emergency assistance services may eventu- ally be removed from their homes and be placed in foster care homes. To the extent that child abuse reports and emergency response referrals continue to increase, it is reasonable to expect a proportional increase in foster care caseloads. Another factor that may affect foster care caseloads is the Child Welfare Services (CWS) system. The budget proposes an additional $19 million from the General Fund in order to fully fund the state’s share of actual 924 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued county costs between 1981-82 and 1984-85. With these additional funds, counties are expected to increase CWS staffing. This is likely to change the rate of growth in foster care caseloads. With increased funding, counties may put more emphasis on the preplacement preventive services. These services are provided to children and their families while the child still resides in his or her own home, in hopes of avoiding foster care placement. If counties choose to increase these preplacement services, the rate of foster care caseload growth could slow down. On the other hand, counties may use the additional funds to increase staffing in the emergency response progam. This program provides emer- gency services to abused and neglected children. If the counties increase staffing for this function, they may respond to reports of abuse that, in the past, they have deemed to be low priority. An increase in emergency response (ER) staffing, coupled with increased reports of abuse, could result in a faster rate of growth in foster care caseloads. Another factor that may affect foster care caseloads is the extent to which probation departments place children who are under their supervi- sion in foster care. In general, probation departments supervise children who are considered delinquent. Probation departments can place these children in facilities which are funded almost 100 percent by the county or in foster care facilities for which the county’s share of cost is 5 percent. It would be important to determine if the recent increase in total foster care caseloads is attributable, at least in part, to an increase in the rate at which probation departments are placing children under their supervi- sion in foster care facilities. The department should examine these and other factors to see if they can explain the caseload increases shown in Chart 2. We recommend that, prior to budget hearings, the Department of Social Services advise the fiscal committees on its progress in incorporating the following factors in estimating the foster care caseloads for the May revision: (1) the number of child abuse reports, (2) the number of emergency assistance referrals which result in foster care placement, and (3) the number of children who are placed in foster care and supervised by probation departments. Costs of Foster Care Services for Handicapped Children We recommend that the department advise the fiscal committees how much funding is needed to meet the requirements of Ch 1274\/85. Foster care services are provided to children who have been placed out of their own homes due to the loss of parental support, because of a court order, or pursuant to an Individualized Education Plan (IEP). The pur- pose of IEPs is to ensure that children who have been determined as handicapped receive appropriate education and services. The education and services may include special education classes, various types of thera- py, or out-of-home placement in a private education institution. Current- ly, if the child is under the custody of the courts, the funds for these out-of-home placements are provided by the AFDC appropriation (Item 5180-101-001) . Chapter 1274, Statutes of 1985 (AB 882), requires that funds for these out-of-home care placements be appropriated from a separate item within the budget, starting July 1, 1986. The 1986 Budget Bill, however, does not contain the separate appropriation required by Chapter 1274. The department advises that the budget does not contain a separate Item 5180 HEALTH AND WELFARE \/ 925 appropriation for these costs because it does not have an estimate of the number of children receiving foster care payments pursuant to an IEP. In addition, the department could not estimate any potential caseload in- crease that might occur due to the provisions of Chapter 1274. The depart- ment advises us, however, that it intends to include an estimate of these costs in the May revision. It is possible that Chapter 1274 could increase foster care caseloads because under the provisions of the bill, parents no longer have to transfer custody of their children to the courts in order to place a child in foster care pursuant to an IEP. To the extent that more parents take advantage of this provision,: there will be an increase in foster care costs. Therefore, we recommend. that the department advise the Legislature how much is needed to proyide out-of-homecare for severely emotionally disturbed children pursuant to Chapter 1274. Budget Fails to Transfer Funds to the Foster Parent Training Fund We recommend that, prior to budget hearings, the Department of Fi- nance advise. the fiscal committees how it intends to finance the transfer of $1.8 million from the Foster Care program to the Foster Parent Training Fund as required by current law. Under current law, parents of children who are placed in foster care are required to pay for a portion of their children’s out-of-home care costs if they are financially able to do so. These collections are used to offset the state, county, and federal costs of the Foster Care program. State law requires that the General Fund share of child support collec- tions exceeding $3.75 million be transferred to the Foster Parent Training Fund. The Foster Parent Training Fund provides money to both foster parent training programs run by community colleges and foster youth services sponsored by local school districts. The budget estimates that the General Fund’s share of child support collections for the Foster Care program in 1986-87 will total $5.6 million. This is approximately $1.8 million over the ceiling of $3.75 million. There- fore under the provisions of current law, $1.8 million must be transferred in the budget year from DSS to the Foster Parent Training Fund, for use by community colleges and local school districts. The department, howev- er, did not take this requirement into consideration when preparing the budget for 1986-87. Thus, the transfer of these funds will cause the Foster Care program to be underfunded by $1.8 million in 1986-87. It also will cause General Fund expenditures in 1986-87 to exceed the amount shown in the budget by $1.8 million. We also note that foster care support collections in the current year will exceed the $3.75 million ceiling by about $1.6 million. This will cost the Foster Care program another $1.6 million because of the required transfer and further reduce the General Fund balance at the end of 1986-87. We recommend that, prior to budget hearings, the Department of Fi- nance advise the fiscal committees how it intends to finance the transfer of $1.8 million from the Foster Care program to the Foster Parent Train- ing Fund as required by current law in 1986-87. Budget Proposal Depends on the Federal Government \”Waiving the Unwaivable and Allowing the Unallowable\” We recommend that, prior to budget hearings~ the department advise the fiscal committees on its progress in securing the federal waivers need- ed to avoid a $46,855,000 ($40,030,000 General Fund and $6,825,000 county 926 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued funds) cost shift from the federal government to the state and counties which otherwise will occur as a result of the Simon v. McMahon case. The budget proposes $21,339,000 ($19,034,000 General Fund and $2,305,- 000 county funds) to pay the costs in 1986-87 of complying with the court’s ruling iIi the Simon v. McMahon case. In its ruling, the California Supreme Court struck down a state law which required that children with \”restrict- ed\” income be included as part of the AFDC family for purposes of cal- culating the family’s grant. (\”Restricted\” income is income that is received exclusively for the use of a particular child in an AFDC family.) The effect of the court’s order will be to give AFDC parents the option of excluding children with restricted income from the \”assistance unit\” (the assistance unit consist of the members of an AFDC household for whose needs the AFDC grant is intended). This will mean that the income of these children will not be counted as income to the family. In most cases, the exclusion of such children (and their income) will result in a higher grant to the family and, therefore, increased costs to the state and counties. The DSS estimates that the court’s decision will increase General Fund costs for grants under the AFDC program by $28.1 million in 1985-86 and by $42.0 million in 1986-87. In addition, the department estimates that the decision will increase the General Fund costs of administering the AFDC program by $1.1 million in 1985-86 and by $1.0 million in 1986-87. The department also estimates that total county costs will increase by $4.7 million in 1985-86 and $6.4 million in 1986-87. Table 6 displays the department’s estimate of costs attributable to the Simon case in 1985-86 and 1986-87. Table 6 Fiscal Effect a of Simon v. McMahon 1985-86 and 1986-87 (dollars in thousands) General Federal 1985-86 Fund Funds Increased Program Costs ……………………………… $13,093 Cost Shift ………………………………………………………. 16,055 -$18,792 Totals …………………………………………………….. $29,148 -$18,792 1986–87 Increased Program Costs ……………………………… $19,034 Cost Shift ………………………………………………………. 23,975 -$28,063 Totals …………………………………………………….. $43,009 -$28,063 County Funds Totals $1,922 $15,015 2,737 $4,659 $15,015 $2,305 $21,339 4,088 $6,393 $21,339 \”Includes administrative costs which would normally be budgeted under Item 5180-141-001-County Administration of Welfare Programs. As the table shows, the costs of the Simon case consist of the following two components: Increased program costs ($15.0 million in 1985-86 and $21.3 million in 1986-87). These are the increased grant and administrative costs as- sociated with the court’s ruling that AFDC parents be given the option of excluding children with restricted income from the assist- ance unit . Cost shift ($18.8million in 1985-86 and $28.0 million in 1986-87). The Item 5180 HEALTH AND WELFARE \/ 927 court’s decision will shift grant and administrative costs from the federal government to the state and counties. This is because under federal regulations, parents do not have the option of excluding chil- dren with restricted income from the assistance unit. As a result, the federal government will no longer fund its share of grant and adminis- trative costs for these families. Thus, the court, in effect, has created a \”state-only\” program, and as a result the state and counties will have to fund those costs formerly covered with federal money. The budget includes sufficient funds to cover the increased program costs identified in the department’s estimate. It does not, however, in- clude the funds needed to cover the state’s share of the costs which the federal government no longer will fund. The department advises that it did not budget funds to cover these costs because it is planning to seek a waiver from the federal Department of Health and Human Services (DHHS) that would allow the state to continue receiving federal financial participation for the grants to families affected by the Simon case. Specifi- cally, the department will ask DHHS to participate in that portion of the grants representing what the family would have received under the pre- Simon rules. A federal official has informed us that, in order for California to continue receiving federal financial participation for these costs, the DHHS will have to \”waive the unwaivable and allow the unallowable.\” There is a provision of federal law, however, that, in effect, permits the Secretary of Health and Human Services to do exactly that. The budget proposal as- sumes that the Secretary will exercise this broad authority to waive all relevant federal AFDC regulations and grant California’s request for a waiver for the Simon case. We do not know whether the Secretary will grant the department’s waiver request. Given the cuts in federal programs made necessary by the Gramm-Rudman amendment, it would be not just a little surprising if the DHHS voluntarily increased federal aid to California by nearly $30 million next year. In the event that the Secretary does not grant the request, the cost to the state and counties of the AFDC program in 1985-86 and 1986-87 will be $46,822,000 ($40,030,000 General Fund and $6,792,000 county funds) higher than anticipated by the budget. An increase of this magnitude would reduce the Legislature’s fiscal flexibility in putting together a budget for 1986-87. We therefore recommend that the department advise the fiscal committees, prior to budget hearings, on its progress in securing the federal waiver. The Grant Savings from GAIN Anticipated by the Budget Are Based on an Out-Dated Estimate We withhold recommendation on $36,000,000 ($15,400,000 General Fund, $18,800,000 federal funds, and $1,800,000 county funds) in savings anticipated from the Greater A venues for Independence (GAIN) pro- gram, pending receipt of an up-to-date estimate. Chapter 1025, Statutes of 1985, created the Greater Avenues for In- dependence (GAIN) program. This progam provides employment arid training services to AFDC recipients to help them to become financially self-sufficient. The AFDC budget anticipates that these services will result in grant savings totaling $36 million ($15.4 million General Fund, $18.8 million federal funds, and $1.8 million county funds) in 1986-87. We dis- cuss the department’s fiscal estimate for the GAIN program in our analysis 928 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued of the social services programs item (please see Item 5180-151-001). We note in that analysis that the department’s estimate of the program costs is out-of-date for several reasons, including the fact that the estimate assumes an implementation date of January 1, 1986. The department ad- vises that counties probably will not begin implementing the GAIN pro- gram prior to July 1, 1986. This delay will greatly reduce the savings that the program will generate in 1986-87. Therefore, we withhold recommen- dation on the savings budgeted for the AFDC program as a result of the GAIN program, pending the receipt of a more up-to-date estimate. CHILD SUPPORT ENFORCEMENT PROGRAM Review of Program Performance 1. We recommend that, prior to budget hearings, the department pro- vide the fiscal committees with an estimate of what it would cost to conduct a controlled study of the various child support enforcement strategies. 2. We recommend that the Legislature adopt legislation establishing an incentive allocation formula based on a fixed, rather than a varying, per- centage of child support collections. 3. We recommend that the Legislature adopt legislation phasing in of non-AFDC collections as part of the base on which the incentive payments will be paid. 4. We recommend that the Legislature adopt legislation retaining the current requirement that counties use child support incentive payments to support the Child Support Enforcement program, sunsetting this re- quirement on July 1, 1988, and requiring the DSS to report by January 1, 1988, on the advisability of postponing the sunset. The Child Support Enforcement program is a revenue-producing pro- gram administered by district attorneys’ offices throughout the state. Through this program, district attorneys locate absent parents, establish paternity, and obtain and enforce court-ordered child support payments. This service is available to welfare recipients and nonwelfare families. Child support payments collected on behalf of AFDC recipients are used to reduce state, county, and federal welfare costs. Collections on behalf of nonwelfare clients are distributed directly to the client. In a report on California’s child support program published in Septem- ber 1985 (LAO Report No. 85-21), we reviewed the performance of Cali- fornia’s child support program and the potential effect of recently enacted federal legislation (PL 98-378) on the program. In the report, we recom- mended legislative action to (1) conform state law to federal regulations, (2) identify the most effective enforcement strategies, and (3) improve the performance of the program. Specifically, the report contains the recommendations listed above. REVIEW OF THE WELFARE FRAUD EARLY DETECTION\/PREVENTION PROGRAM The 1983 Budget Act established the Fraud Early Detection\/Prevention (FRED) program in order to detect and prevent fraud at the time an individual applies for AFDC and\/ or food stamp benefits. The FRED pro- gram was modeled after a pilot program implemented by Orange County in early 1980. . . The 1983 Budget Act required all counties that processed a specified Item 5180 HEALTH AND WELFARE \/ 929 number of AFDC and food stamp applications to submit a report to the DSS by August 15, 1983, on their existing fraud prevention programs. Any county which determined that its existing program was not as cost-benefi- cial as the Orange County pilot project was authorized to seek funds from the department to implement a program comparable to Orange County’s. To date, 23 counties have applied for and received funds to operate a FRED program. One of these counties (San Mateo) began program opera- tion in 1983; 16 began in 1984; 2 began in 1985; and 4 (Santa Clara, Santa Cruz, Fresno, and Yuba) plan to commence operation of a FRED program in early 1986. While each county’s FRED program is unique, they all fit the basic structure envisioned in the 1983 Budget Act. Basically, the program in- volves assigning welfare fraud investigators or specially trained investiga- tive-eligiblity workers to work with countly welfare department eligiblity staff. The investigators are on-call to conduct in-depth investigations of the statements made by applicants for welfare. Eligibility workers refer cases to the fraud investigators whenever (1) the statements made by the applicant establish eligibility for welfare and (2) the intake worker has reason to believe that one or more of the statements in the application is false. For example, the intake worker might suspect the applicant had falsified his\/her application if the person indicates on the application that he\/she had no means of support during the current or preceding months. Such a response would raise doubts because it is difficult to understand how a family could survive for several months with no means of support. Intake workers in Orange County refer approximately 8 percent of all welfare applications they process to FRED investigators. When an investigatoJ;’ is assigned to a case, he or she uses standard investigative techniques to verify the facts set out in the welfare applica- tion. These techniques include interviews with the applicant in the wel- fare office, visits to the applicant’s home, and interviews with individuals who may have personal knowledge of the applicant’s situation. Investiga- tors in Orange County find that about 50 percent of the applications referred to them by intake workers result in a denial of aid or in the recipient withdrawing his\/her application. The FRED Program Has Been Successful in Those Counties that Have Implemented It In order to determine whether the FRED program has been successful in those counties where it has been implemented, we identified two im- portant indicators of the program’s performance-client protection and cost-effectiveness. Our review indicates that the program has been suc- cessful in achieving each of these goals. Client Protection. The Budget Acts of 1983, 1984, and 1985 con- tained provisions designed to protect the rights of applicants for public assistance benefits. Specifically, counties are required to provide a com- plaint form to every applicant who withdraws his or her application after a fraud referral. These forms advise the client of his\/her right to file a complaint either in person or through the mail. The DSS requires counties to retain all complaints. In 1984, 20 counties operated FRED programs. They completed more than 19,000 investigations, which resulted in 7,457 applications being de- nied or withdrawn. Of those persons whose applications were denied or withdrawn, only 11 filed complaints and 7 of these complaints were un- \\ 930 \/ HEALTH AND WELFARE AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued related to the FRED program. Item 5180 It seems highly likely that if any of the 20 counties were systematically using the program to intimidate applicants, a substantial number of the applicants who were denied aid would have lodged complaints. Moreover, the department advises that only nine clients who were denied aid as a result of the program in 1985, requested and received fair hearings. Of the nine fair hearings, three are still pending and five of the six that have been completed were decided in favor of the county. Based on the relative dearth of complaints and the counties’ success in FRED-related fair hearings, we conclude that the program has protected the rights of clients. Cost-Effectiveness. The 1984 Budget Act required the department to report to the Legislature on the performance of the FRED program, including its cost-effectiveness. This report, issued in June 1985, concludes that for every dollar the counties spend to support the FRED program, they generate between $8.20 and $18.10 in welfare savings. Our review of the department’s report identified the following flaws in the methodology which the department used to estimate the program’s benefit-to-cost ratio: The department estimated welfare cost avoidance based on the as- sumption that the average AFDC case receives aid for 24 months. This estimate was based on a sample of active cases. Based on a sample of closed cases, we estimate that the average duration of an AFDC case is approximately 17 months. The department assumed that 17 percent of the fraudulent applica- tions would have been detected by another fraud detection program once the recipient actually began receiving aid. (We believe that the use of the average time on aid to calculate program savings should account for this factor because the sample used to estimate the aver- age would include any cases that were closed as the result of a fraud investigation. ) The department did not take into account the possibility that some applicants who were denied aid as a result of the FRED program would successfully reapply at a later date (without necessarily com- mitting fraud in the process). In addition to these methodological flaws, the department’s report was based on performance data reflecting program results in 1983 and 1984- years iri which several counties’ programs were in operation for only a few months. We believe that a report on the Orange County FRED program, issued by the U.S. Department of Health and Human Services (DHHS) in Octo- ber 1985, provides a more reliable estimate of the benefit-to-cost ratio of the program. The report concludes that Orange County’s FRED program returns between $16.60 and $33.81 in savings to state, federal, and county governments for every $1.00 in operating costs. The benefits of the pro- gram range between $16.60 and $33.81, depending on (1) what the aver- age duration on aid is assumed to be and (2) the method used to estimate the costs of the program. We believe that the most reasonable combina- tion of these two assumptions is the one which results in an estimated benefit-to-cost ratio of 22.1 to 1. Regardless of which set of assumptions is used, however, it is clear that the Orange County FRED program is highly cost-effective. . ——-~-.–.-.-. Item 5180 HEALTH AND WELFARE \/ 931 We reviewed the performance of 15 of the 19 counties, excluding Or- ange County, that operated FRED programs during 1985 using a me- thodology similar to the one used to prepare the DHHS report. Table 7 displays our estimate of the program’s benefit-to-cost ratio, by county, as it applies to the AFDC program only. The table also shows the estimated benefit-to-cost ratio for each of the three levels of government involved in the program. The ratios are different because each level of government pays a different share of what it costs to administer the program and because each receives a different share of the savings that result from the program. The table clearly indicates that the program is highly cost-effec- tive. On average, the program returns $17.80 in AFDC savings to the General Fund for every $1.00 in operating costs to the General Fund. Table 7 The FRED Program Estimated Benefit-to-Cost Ratio by Funding Source 1985 Total Funds\” General Fund County Funds El Dorado ……………………………… 11.9 20.8 2.5 Glenn …………………………………….. 12.9 22.7 2.7 Mendocino……………………………… 15.8 27.8 3.4 Nevada …………………………………… 3.5 6.2 0.7 San Luis Obispo …………………….. 8.9 15.7 1.9 San Mateo ……………………………… 17.9 31.4 3.8 Santa Barbara ………………………… 43.8 76.9 9.3 Sonoma…………………………………… 45.1 79.2 9.6 Stanislaus …. …. ………. …. ……………. 14.1 24.7 3.0 Sutter …………………………………….. 24.8 43.6 5.3 Trinity…………………………………….. 3.3 5.8 0.7 Tulare …………………………………….. 36.6 64.2 7.8 Ventura …………………………………. 13.4 23.5 2.9 yolo………………………………………… 72 12.6 1.5 Weighted average …………………. 10.1 17.8 2.1 Federal Funds\” 11.9 12.9 15.8 3.5 8.9 17.9 43.8 45.1 14.1 24.8 3.3 36.6 13.4 7.2 10.1 \”The federal funds benefit-to-cost ratio is the same as the total funds ratio because the federal government pays the same percentage share of administrative costs as it pays of grant costs. Conclusion. We conclude that the FRED program has been highly cost-effective in the counties that have implemented it to date. In addi- tion, the cost savings have been achieved while protecting the rights of applicants. Why Haven’t More Counties Implemented the FRED Program? The 1983 Budget Act required that counties report to the DSS on the cost-effectiveness of their existing fraud detection programs. Most coun- ties reported that their existing fraud detection programs were at least as cost-effective as Orange County’s FRED program. Consequently, in the last three years, only 23 counties have requested additional funds to imple- ment the program. In other words, the majority of counties believe that their current fraud detection programs are as effective as the FRED program. There are several reasons to believe that non-FRED counties have un- derestimated the potential savings from implementing the FRED pro- gram: 932 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued 1. When the non-FRED counties analyzed their existing fraud pro- grams, they were not aware of the actual cost-effectiveness of the Orange County FRED program. The DHHS report was not published until late 1985-more than two years after the effective date of the 1983 Budget Act which required counties to compare their existing detection programs to Orange County’s program. Prior to the publication of the DHHS report, the cost-effectiveness of Orange County’s program had not been in- dependently verified. 2. The benefit-to-cost ratios displayed in Table 7 reflect FRED savings that have been achieved in addition to the savings generated by other fraud detection programs. In general, the counties that have imple- mented FRED programs continue to operate other fraud detection pro- grams. Our estimate of savings associated with the FRED program does not include any savings from these other detection programs. 3. Most non-FRED counties emphasize detection of fraud in estab- lished cases, rather than prevention of fraud during the initial intake of cases. Detection of fraud at intake is more effective than detection of fraud in continuing cases for two reasons: It eliminates the need to collect reimbursements from recipients who have defrauded the program. This is because, when fraud is de- tected at intake, it prevents wrongful payments. This is important because, on average, counties recoup only 55 percent of the money wrongfully paid to fraudulent recipients . It reduces criminal justice costs. It does so by reducing the num- ber of welfare fraud prosecutions. The FRED program results in prosecution for welfare fraud in 1.3 percent of the cases in which fraud is established. Other fraud detection programs lead to prosecu- tion in approximately 15 percent of the cases where fraud is estab- lished. 4. Orange County detects substantially more fraud than do the other large counties. We compared the total number of fraud cases identi- fied by Orange County through all of its fraud detection systems, including FRED, as a percentage of the county’s AFDC caseload with the same figures for the other large counties. Table 8 displays the results of this comparison. As the table shows, Orange County detected three times more fraud than did the other large counties. We believe the difference can be attributed to the Orange County FRED program. This is because (a) the Orange County FRED program accounts for the bulk of the fraud detected by the county and (b) prior to the implementation of the FRED program, Orange County actually detected more fraud through its tradi- tional detection programs than the other large counties were detecting through their programs. . For these reasons, we conclude that most of the non-FRED counties could significantly increase the effectiveness of their fraud detection pro- grams by implementing a FRED program. There are probably several reasons why the majority of counties (in- cluding most of the large counties) have not implemented a FRED pro- gram. Some counties may believe that the FRED program does not adequately protect the rights of clients. We have shown that this is not the case. Others may believe that their current programs detect fraud as effectively as the FRED program. We have shown that this is highly unlikely. Perhaps the most likely reason that counties have not imple- mented FRED is revealed by Table 7: the FRED program is much less cost-effective from a county’s perspective than it is from the state or federal government’s perspective. ——-.,-~——– — Item 5180 HEALTH AND WELFARE \/ 933 Table 8 AFDC Fraud Detected as a Percent of Total Caseload Orange County and Eleven Other Large Counties (July 1983 through December 1983) Eleven Large Counties Riverside ……………………………………………………………………………………………………………………………………… . San Diego ……………………………………………………………………………………………………………………………………. . San Bernardino …………………………………………………………………………………………………………………………… . Fresno\” ……………………………………………………………………………………………………………………………………….. . Los Angeles ………………………………………………………………………………………………………………………………… . Santa Clara\” ……………………………………………………………………………………………………………………………….. . Contra Costa ………………………………………………………………………………………………………………………………. . Alameda ……………………………………………………………………………………………………………………………………… . San Francisco …………………………………………………………………………………………………………………………….. . San Joaquin ………………………………………………………………………………………………………………………………… . Sacramento I> Average ……………………………………………………………………………………………………………………………………… . Orange County …………………………………………………………………………………………………………………………… . \” Fresno and Santa Clara County plan to implement FRED programs in early 1986. I> Sacramento County implemented a FRED program in May 1984. Percent 3.2% 3.1 2.7 2.3 2.2 1.8 1.8 1.7 1.5 1.3 1.2 2.2% 7.4% Currently, counties finance 25 percent of the FRED program’s operat- ing costs (this sharing ratio also applies to other fraud detection pro- grams). On the other hand, counties pay for only 5.4 percent of AFDC grant costs and therefore share in only 5.4 percent of any savings gener- ated by the FRED program. As a result, the effect of the program on county budgets is much less favorable than it is on the state or federal budget. As the table shows, counties, on average, save $2.10 for every $1.00 they spend on the program, while the state saves $17.80 for every dollar it spends. For some counties, the program actually results in a net cost. For these reasons, the counties’ fiscal in~entives to implement the FRED program, are relatively weak. Thus, counties-especially those with fiscal problems-may not consider the FRED program to be worth- while, since costs must be incurred at the front end in order to achieve savings later on. How Can the Legislature Encourage More Counties to Implement FRED Programs? We recommend Budget Bill language requiring DSS to (1) assess the costs\/savings of the FRED program in non-FRED counties and (2) report7 by December 17 1986 on the fiscal effects of mandating FRED on all counties. There are probably only two options available to the Legislature for increasing the counties’ use of the FRED program, other than increasing the counties’ share of AFDC costs (which would give counties a greater stake in the savings associated with the program). We discuss these op- tions below. Wait and see. The first option is simply to wait and see if more counties implement the FRED program. As the benefits associated with the program become better understood, more counties may decide to implement it. In fact, the recent decisions of Fresno and Santa Clara counties to implement FRED programs may indicate that counties are becoming increasingly aware of the advantages to be gained from the program. On the other hand, other counties seem steadfast in their belief 934 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued that their current detection programs are adequate. Thus, this option does not guarantee that all of the counties which could improve their fraud detection systems by implementing the FRED program will do so. To the extent counties which could benefit from the FRED program choose not to implement it, the state foregoes an opportunity to: (1) achieve substan- tial savings and (2) enhance the integrity of California’s welfare programs. Mandate FRED for those counties in which it would be cost-effective to do so. Under this option, the Legislature would authorize the de- partment to require counties to implement FRED programs under speci- fied circumstances. Specifically, the department would assess tpe potential benefits and costs from implementing the FRED program in individual counties, and require those counties where it would be cost- effective to implement the program. The drawback to this option is that it would create a state-mandated local program, obligating the state to pay for 100 percent of the program’s nonfederal costs. The obvious advantage of this option is that it would allow the Legislature to ensure that all counties capable of operating a cost-effective FRED program are required to do so. We have estimated the costs and savings that would be associated with the second option. The estimate assumes that all counties which currently do not operate a FRED program would be required to do so. (It is likely, however, that some counties would not be required to implement the FRED program because it would not be cost-effective for them to do so.) The estimate reflects a conservative assessment of the savings that would result from implementing FRED programs in counties where a program does not currently exist. This is because (1) it is based on the benefit-to- cost ratio of the current FRED counties other than Orange (Orange County’s program is more cost-effective than the average FRED pro- gram) and (2) the savings used in the estimate include only grant savings; we did not include in our calculations savings in AFDC administrative costs, food stamp costs, or criminal justice system costs. The estimate divides costs into two categories: (1) the state’s 50 percent share of program costs in those counties that do not currently operate a FRED program (the federal government would pay for the other 50 percent of the program’s costs) and (2) an additional 25 percent share of FRED program costs in counties that already operate the program. (The state currently pays 25 percent of the costs in these counties, but because the program would be mandated, rather than voluntary, the state would have to pick up the current county share of costs.) Table 9 displays our estimates of the costs and savings to be gained from mandating the FRED program statewide. Table 9 Estimated Costs and Savings to the State of Mandating Counties to Implement the FRED Program Net Fiscal Costs Savings Effect Counties that already operate FRED programs ………………………………………… $558,000 $558,000 Counties that do not currently operate FRED programs ……………………………… 7,706,000 -$68,651,000 -$60,945,000 Totals ……………………………………………… $8,264,000 -$68,651,000 -$60,387,000 Savings-to- Cost Ratio 8.9 to 1 \” 8.3 to 1 \”The General Fund benefit-to-cost ratio displayed here is one-half of the benefit-to-cost ratio displayed in Table 7. This is because, under this option, the General Fund would support 50 percent of program costs, instead of the 25 percent share currently paid in the counties listed in Table 7. Item 5180 HEALTH AND WELFARE \/ 935 The table shows that mandating FRED on counties in which it would be cost-effective to do so could result in a substantial savings to the state. Given the track record of the FRED program in preventing fraud while protecting client rights, we see no reason why the program should not be mandated in counties where the DSS believes it would be cost-effective. Therefore, we recommend that the Legislature adopt the following Budget Bill language, directing the department to (1) assess the potential costs and savings of the FRED program in counties that currently do not operate the program and (2) report to the Legislature by December 1, 1986, on the potential costs and savings in 1987-88 and future years, of\u00b7 requiring counties to implement the FRED program where it would be cost-effective to the state: \”The DSS shall assess the potential costs and savings that would result from implementation of FRED programs in counties that do not cur- rently operate such programs. The DSS shall, by December 1, 1986, submit a report to the Legislature providing its detailed estimates of these costs, on a county-by-county basis, for 1987-88 and subsequent years. In preparing its report, the department shall consider the estimat- ing methodology used in preparing federal report # 18-P-00241-9-01. The department’s report shall also provide an estimate of the increased costs to the state that would result from mandating the FRED program on counties that currently operate it on a voluntary basis.\” TECHNICAL BUDGETING ISSUES Savings From Asset Clearance Match Underbudgeted We rec()mmend a reduction of $4,337,000 ($1,931,000 General Fund, $2,173,000 federal funds, and $233,000 county funds) to reflect a more accurate estimate of the savings that will result from the asset clearance match program in 1986-87. The budget anticipates that the asset clearance match program will result in savings of $8,674,000 ($3,861,000 General Fund, $4,346,000 federal funds, and $467,000 county funds) in 1986-87. This program identifies welfare recipients who have bank accounts that accrue interest of more than $30 a year. Once these recipients are identified, county welfare departments determine whether the recipients have correctly reported these assets to their caseworkers. If these assets have resulted in the recipi- ent receiving more money than he or she was entitled to receive, the county welfare department attempts to recoup the overpayment. The department’s estimate of the savings that will be generated by the asset clearance match in 1986-87 assumes that each investigator can com- plete 16 cases per month. Based on data provided by the department, we estimate that investigators currently process 24 cases per month. The 16 cases per month figure used by the department corresponds to the un- weighted average number of cases per investigator in large, medium, small, and very small counties. Our estimate of 24 cases per month reflects the weighted average for these four groups. . If the department’s estimate is adjusted to reflect the weighted average number of cases per investigator, the savings estimate increases by 50 percent. Specifically, we estimate that the asset clearance match program will generate savings of $13,012,000 ($5,792,000 General Fund, $6,519,000 936 \/ HEALTH AND WELFARE Item 5180 AID TO FAMILIES WITH DEPENDENT CHILDREN-Continued federal funds, and $701,000 county funds). We therefore recommend a reduction of $4,337,000 ($1,931,000 General Fund, $2,173,000 federal funds, and $233,000 county funds) to reflect a more accurate estimate of the increased savings that will result from the asset clearance match in 1986- 87. Savings From The Integrated Earnings Clearance Program Are Underbudgeted We recommend a reduction of $3,243,000 ($1,436,000 General Fund, $1,633,000 federal funds, and $174,000 county funds) to reflect a more accurate estimate of the AFDC grant savings that can be expected to result from the Integrated Earnings Clearance program in 1986-87. The budget anticipates savings to the AFDC lrogram of $1,321,000 ($585,000 General Fund, $665,000 federal funds, an $71,000 county funds) due to increased activity in the Integrated Earnings Clearance (1EC) program. The IEC program is a welfare fraud detection program which identifies recipients who have\u00b7 income that they do not report to their caseworkers. The program identifies these individuals by matching wel- fare records against the records of other governmental agencies such as the Franchise Tax Board, the Social Security Administration, and the In- ternal Revenue Service. These records are matched once every quarter. The department’s estimate of the savings that will result from the IEC program in 1986-87 is based, in part, on the assumption that 80 percent of the individuals who are identified by the program as having failed to report income in each quarter were also identified by the program in the previous quarter. Based on data provided by the department, we estimate that only 30 percent of the individuals identified each quarter have been previously identified. If the department’s estimate is adjusted using the 30 percent estimate, savings from the program grow by $3,243,000 ($1,436,000 General Fund, $1,633,000 federal funds, and $174,000 county funds). Therefore, we recommend a reduction of $3,243,000 ($1,436,000 General Fund, $1,633,000 federal funds, and $174,000 county funds) to reflect a more accurate estimate -of the AFDC grant savings that can be expected to result from the IEC program in 1986-87. \\ Item 5180 HEALTH AND WELFARE \/ 937 Department of Social Services STATE SUPPLEMENTARY PROGRAM FOR THE AGED, BLIND, AND DISABLED Item 5180-111 from the General Fund and Federal Trust Fund Budget p. HW 152 Requested 1986-87 …………………………………………………………. . Estimated 1985-86 ….. , ……………………………………………………. . Actual 1984-85 ………………………………………………………………… . $1,591,370,000 \” 1,410,536,000 1,248,571,000 Requested increase $180,834,000 (+ 12.8 percent) Total recommended reduction ……………………………………… . None a This amount includes $104,732,000 proposed in Item 5180-181-001 (a) for cost-of-living increases. 1986-87 FUNDING BY ITEM AND SOURCE Item-Description 5180-111-001-Payments to aged, blind, and dis- abled Fund General Amount $1,486,638,000 5180-111-890-Payments to aged, blind, and dis- abled 5180-181-001 (a)-Payments to aged, blind, and disabled COLA Federal General (8,043,000) 104,732,000 5180-181-890-Payments to aged, blind, and dis- abled COLA, refugees Federal (226,000) Total $1,591,370,000 SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Caseload Estimates. Recommend that the Department of Finance reconcile the discrepancy between the aged caseload estimates of the Departments of Social Services and Health Services. 2. Continuing Disability Reviews. Recommend that the Legislature adopt supplemental report language directing the department to reconcile any discrepancy between its estimate of savings due to the resumption of continuing disability reviews (CDRs), and the savings actually realized as a result of implementing the new CDR regulations. 3. State Monitoring of Federal Administration. Recom- mend that the Legislature adopt supplemental report lan- guage directing the department to outline its plan for monitoring the quality of federal administration of the Sup- plemental Security Income\/State Supplementary Program. GENERAL PROGRAM STATEMENT Analysis page 942 943 945 The Supplemental Security Income\/State Supplementary Program (SSI\/SSP) provides cash assistance to eligible aged, blind, and disabled persons. A person may be eligible for the SSI\/SSP program if he\/she is elderly, blind, or disabled and meets the income and resource criteria established by the federal government. The federal government pays the cost of the SSI grant. California has 938 \/ HEALTH AND WELFARE Item 5180 STATE SUPPLEMENTARY PROGRAM FOR THE AGED, BLIND, AND DISABLED -Continued chosen to supplement the federal payment by providing an SSP grant. The SSP grant is funded entirely from the state’s General Fund. In California, the SSI\/SSP program is administered by the federal government through local Social Security Administration (SSA) offices. During the current year, an estimated 679,896 persons will receive as- sistance each month under this program. OVERVIEW OF THE BUDGET REQUEST The budget proposes an appropriation of $1,591,370,000 from the Gen- eral Fund for the state’s share of the SSI\/SSP program in 1986-87. This is an increase of $180,834,000, or 13 percent, above estimated expenditures in the current year. The budget also assumes that federal expenditures for the SSI\/SSP program will be $1,322,109,000. This is an increase of $72,941,- 000, or 5.8 percent, above estimated federal expenditures in the current year. The budget estimates that combined state and federal expenditures for the SSI\/SSP program in 1986-87 will be $2,913,479,000, which is an increase of $253,775,000, or 9.5 percent, above estimated current-year ex- penditures. Table 1 shows SSI\/SSP expenditures, by category of recipient and by funding source, for the years 1984-85 through 1986-87. Table 1 SSI\/SSP Expenditures 1984-85 through 1986-87 (dollars in thousands) Clltegory of Recipiellt Aged ……………………………………………………….. . Blind ………………………………………………………. .. Disabled ………………………………………………… . Totals ……………………………………………… .. Funding Source Gelleml FUlld ………………………………………. .. Federlll fUllds b …………………………………….. .. Actual 1984-85 $751,845 80,174 1,549,426 $2,381,445 $1,248,571 1,132,874 \” Includes 4.9 percent COLA. h Includes federal funds to support SSP costs for refugees. Est. 1985-86 $841,613 90,353 1,727,738 $2,659,704 $1,410,536 1,249,168 Percellt Chllllge Prop. From 1986-87\” 1985-86 $920,020 9.3% 98,812 9.4 1,894,647 9.7 $2,913,479 9.5% $1,591,370 12.8% 1,322,109 5.8% Table 2 shows the budget adjustments that account for the increase in SSI\/SSP expenditures proposed for 1986-87. The increase in General Fund costs can be attributed to the following significant changes proposed for the budget year: A $104.7 million increase needed to provide a 4.9 percent cost-of- living adjustment (COLA) for grants, beginning January 1, 1987. A $74.8 million increase which reflects the effect of (1) the full-year cost in 1986-87 of the 5.7 percent COLA provided for SSI\/SSP grants on January 1, 1986, and (2) the increase in recipient’s unearned in- come (as a result of the 3.1 percent COLA provided for social security benefits on January 1, 1986). A $33.9 million decrease made possible by increased federal funds that Item 5180 HEALTH AND WELFARE \/ 939 are expected to be available for a COLA to SSI grants, beginning January 1, 1987. A $45.3 million increase needed to fund an estimated 2.7 percent increase in caseload. A $15.5 million decrease reflecting an anticipated increase in recipi- ent’s unearned income (primarily as a result of the estimated 3.5 percent COLA provided for social security benefits on January 1, 1987), which reduces grant costs. A $14 million increase due to the cost of errors made by the federal government in administering the SSI\/SSP program in 1985-86 which the federal government will no longer finance. Table 2 SSI\/SSP Proposed Budget Changes 1986-87 (dollars in thousands) 1985-86 expenditures (revised) ………………………………… . Proposed changes: 1. Basic caseload increases ……………………………………….. . 2. Cost-of-Iiving adjustments a. Proposed 4.9 percent grant increase (1\/87) ….. . b. Full-year cost of 1\/86 grant increase ………………. . c. Estimated federal SSI increase (1\/87) …………….. . d. Estimated social security benefit increase (1\/87) Subtotals …………………………………………………………… . 3. Program adjustments a. Decreased federal reimbursement for errors … . b. Resumption of disability reviews ……………………. . c. $10 state supplement (Ch 1161\/85) ………………… . d. Court cases ……………………………………………………….. . e. All others …………………………………………………………… . Subtotals …………………………………………………………… . 1986-87 expenditures (proposed) …………………………….. . Change from 1985-86: Amount ………………………………………………………………….. . Percent.. ………………………………………………………………….. . General Fund $1,410,536 45,281 104,732 74,815 -33,943 -15,480 ($175,405) $14,000 -7,400 1,167 -1,852 -486 ($5,429) $1,591,370 $180,834 12.8% Federal Funds\” $1,249,168 48,531 226 22,405 32,949 -9,630 ($94,481) -$14,000 -7,900 o -126 487 (-$21,539) $1,322,109 $72,941 5.8% Total\” $2,659,704 93,812 104,958 97\/lfl1J 994 -25,110 ($271,874) $0 -15,300 1,167 -1,978 o (-$16,1ll) $2,913,479 $253,775 9.5% a Includes federal funds of $7,557,000 in 1985-86 and $8,043,000 in 1986-87 to support SSP costs for refugees. ANALYSIS AND RECOMMENDATIONS Eligibility Requirements The Social Security Administration (SSA) administers the SSI program. In addition, the SSA will administer a state’s SSP program if it is requested to do so by the state. When the SSA administers a state’s SSP program, as it does in California, federal eligibility requirements are used to determine an applicant’s eligibility for both the SSI and SSP programs. To be eligible for the SSI\/SSP program, individuals must fall into one of three categories-aged, blind, or disabled. In addition, their income and resources cannot exceed certain specified limits. Table 3 summarizes the eligibility requirements for the SSI\/SSP program. 940 \/ HEALTH AND WELFARE Item 5180 STATE SUPPLEMENTARY PROGRAM FOR THE AGED, BLIND, AND DISABLED -Continued A. Categorical Requirements Category 1. Aged 2. Blind 3. Disabled B. Income and Resource Limits Type 1. Home 2. Personal and real property Table 3 SSI\/SSP Basic Eligibility Requirements Criteria a. 65 years of age or older. a. Vision no better than 20\/200; limited visual field of 20 degrees or less with the best corrective eyeglasses. a. A physical or mental impairment which precludes \”substantial gainful employment\” and is expected to last at least 12 months or result in death. Limit Entire value exempt. 3. Household goods\/personal effects $1,700 for individual, $2,550 for couple. $2,000 equity value. 4. Life insurance policies 5. Burial plots or spaces 6. Motor vehicle 7. General income exclusion 8. Earned income exclusion a. All categories b. Blind and disabled 9. Income limit $1,500 face value. $1,500 per person. Total exclusion, or exclusion to $4,500 of market value. 2nd automobile-no exclusion. $20\/month general exclusion. a. First $65\/month of earned income plus one-half of remaining earned income. a. Any income used toward gaining self-sufficiency. Maximum SSl\/SSP grant. (see Table 5). The Deficit Reduction Act of 1984 (DEFRA) increased the limit on personal and real property that an SSI \/ SSP recipient may own and still retain eligibility for benefits. The limit will increase by $lOO for individuals and $150 for couples for each year for five years, beginning January 1, 1985. Thus, as a result of this provision, the resource limits will increase to $2,000 and $3,000, respectively, by 1989. Otherwise, the eligibility requirements for the SSI\/SSP program are essentially unchanged from last year. Status of the Current-Year Budget The department’s latest estimate of General Fund costs for the SSI\/SSP program in 1985-86 is $1,4lO,536,000. This is $20,213,000, or l.5 percent, above the amount appropriated in the 1985 Budget Act. The major factors that account for the increase are as follows: Costs have increased by $6.9 million because the amount provided by the federal government to reimburse the state for errors it made in administering the SSI\/SSP program was less than expected. Costs have increased by $6 million because the amount of federal funds provided for COLAs to SSI\/SSP grant recipients and the in- crease in social security benefits in 1985 were less than anticipated. The budget assumed an increase of 3.5 percent for both the SSI grant and social security benefits; the actual increase on January 1, 1986, was 3.1 percent. Costs have increased by $4.4 million because the moratorium on disa- bility reviews was extended from March 1985 through January 1986. Costs have increased by $4.2 million due to a 0.5 percent increase in caseload. Item 5180 HEALTH AND WELFARE \/ 941 Grant Levels and Cost-of-Living Adjustments The maximum grant amount received by an SSI\/SSP recipient varies according to the recipient’s eligibility category. For example, in 1986 an aged or disabled individual can receive up to $533 per month, while a blind individual can receive up to $597. In addition to categorical differences, grant levels vary according to the recipient’s living situation. The majority of SSI\/ SSP recipients reside in independent living arrangements. Other recipients reside in (1) independent living arrangements without cooking facilities, (2) the household of another person, or (3) nonmedical board and care facilities. The grants provided to these individuals differ from the grants received by individuals in independent living arrangements. Table 4 shows the maximum grant levels for the major recipient catego- ries in 1985 and 1986, as well as what the grant levels will be in 1987 if the 4.9 percent increase proposed in the budget is approved. Table 4 SSI\/SSP Maximum Monthly Grant Levels Calendar Years 1985 through 1987 Governor’s Budget\” Category of Recipient 1985 1986 1987 Aged or disabled: Individual: Total grant ………………………………………. 504 533 559 SSI ……………………………………………….. 325 336 347 SSp: ………………………………………………. 179 197 212 Couple: Total gran t ………………………………………. 936 989 1,037 SSI ……………………………………………….. 488 504 521 SSP ……………………………………………….. 448 485 516 Blind: Individual: Total grant ………………………………………. 565 597 626 SSI ……………………………………………….. 325 336 347 SSP ……………………………………………….. 240 261 279 Couple: Total grant ………………………………………. 1,099 1,162 1,219 SS! ……………………………………………….. 488 505 521 SSP.; ……………………………………………… 611 657 698 \” Assumes a 3.5 percent increase in SSI grants, effective January 1, 1987. Change From 1986 to 1987 Amount Percent 26 4.9% 11 3.3 15 7.6 4B 4.9 17 3.4 31 6.4 29 4.9 11 3.3 18 6.9 57 4.9 16 3.2 41 6.2 Federal Requirements. The Social Security Act Amendments of 1983 require California to maintain its SSP grants at or above the July 1983 level. This means that, for aged or disabled individuals-who represent the largest groups of recipients-the state must provide at least $157 per month in addition to the SSI grant provided by the federal government. As Table 4 shows, the SSP grant levels proposed in the budget exceed those required by federal law. State Requirements. Existing state law requires that the total SSII SSP payment levels be adjusted, effective January 1, 1987, based on the change in the California Necessities Index (CNI) during calendar year 1985. The Commission on State Finance is required to calculate the eNI and will announce the actual change in the CNI for calendar year 1985 942 \/ HEALTH AND WELFARE Item 5180 STATE SUPPLEMENTARY PROGRAM FOR THE AGED, BLIND, AND DISABLED -Continued during March 1986. The commission’s calculation, therefore, will be avail- able for use in calculating the actual grant adjustments required by cur- rent law, prior to when the Legislature completes action on the budget. Budget Proposal. The budget proposes to provide the cost-of-living increase required by state law. Based on a Department of Finance esti- mate of the change in the CNI during 1985, the budget proposes a 4.9 percent increase in the maximum grants at a cost of $104,732,000 to the General Fund. Table 4 shows the effect of a 4.9 percent increase to the grant levels for various recipient categories. Caseload Estimates Need to be Reconciled We recommend that the Department oE Finance (1) reconcile the dis- crepancy between the aged caseload estimates oE the Departments oE Health Services (DHS) and Social Services (DSS) and (2) report to the Eiscal committees, prior to budget hearings, regarding any changes that are warranted in the amounts proposed under this item and under the Medi- Cal program item (Item 4~60-101-001). The budget proposes General Fund expenditures of $1,403 million to fund the SSI\/SSP caseload in 1986–87. This is an increase of $45.3 million, or 3.3 percent, above estimated current-year expenditures and is due to caseload growth. The department estimates that the total SSI \/ SSP case- load will grow by 2.7 percent between 1985-86 and 1986–87, as shown in Table 5. The SSI\/SSP caseload is comprised of aged, disabled, and blind recipients. The aged population is 39 percent of the total caseload, and the department estimates that the aged case load will grow by 1.8 percent between the current year and 1986-87. For the most part, the aged caseloads for the Medi-Cal program (exclud- ing the medically needy only), and for SSI\/SSP consist of the same in- dividuals. It is not possible, therefore, for one caseload to increase at the same time that the other is decreasing. Despite this fact, DSS and DHS have developed conflicting estimates of the aged SSI\/SSP caseload for 1986-87. While DSS projects that this caseload will increase by 1.8 percent between the current and budget years, DHS projects that the aged popu- lation receiving medical assistance will decrease by 1.2 percent during this period. Thus, the caseload projections of DSS and DHS are inconsistent with one another. It is difficult to understand how a difference of this magnitude-3 percentage points-could have occurred in a budget that, presumably, was carefully reviewed by both the Health and Welfare Agency and the Department of Finance. Eligibility Ciltegory Aged …………………………………………… . Blind ………………………………………….. .. Disabled ……………………….. .-…………… . Totals …………………………………. .. Table 5 SSI\/SSP Average Monthly Caseload 19~5 through 1986-87 Actual Est. 1984-85 1985-86 264,283 18,804 379,800 662,887 266,646 19,446 393,804 679,896 Prop. 1986-87 271,500 20,067 406,542 698,109 Percent Change From 1985-86 1.8% 3.2 3.2 2.7%\” \”The Department of Health Services projects a 1.2 percent decrease in the aged population receiving Medi-Cal between 1985-86 and 1986-87. Item 5180 HEALTH AND WELFARE \/ 943 We are concerned about this inconsistency because it casts doubt on the validity of the administration’s estimate of the costs of both the SSI\/SSP program and the Medi-Cal program. To the extent that there are more aged SSI\/SSP recipients in the Medi-Cal program than is reflected in the DHS caseload estimate, the cost of the Medi-Cal program will be more than the amount currently budgeted in the Medi-Cal item (4260-101-001). We have no basis for determining which department’s estimate of case- load is most reasonable. Consequently we cannot advise the Legislature whether the amount of funds proposed to fund the caseload increase in the SSI\/SSP program is correct. We can only note that the budget asks the Legislature to appropriate money for two major budget items based on two contradictory estimates of the same caseload. We therefore recom- mend that the Department of Finance reconcile this discrepancy between the two department’s caseload estimates and advise the fiscal committees, prior to budget hearings, of any changes that are warranted in (1) the amounts proposed under this item for the SSI\/SSP program and (2) the amounts proposed for the Medi-Cal program (Item 4260-101-001). Savings Estimate from Continuing Disability Reviews May Be Overstated We recommend that the Legislature adopt supplemental report lan- guage which requires the Department of Social Services (DSS) to submit a report by December 1, 1986, that reconciles its estimate of savings due to the resumption of continuing disability reviews (CDRs) with the sav- ings actually realized. In 1980, Congress enacted amendments to the social security Act (P.L. 96-265) which expanded the requirement for periodic reviews of both disabled social security and SSI\/ SSP recipients, in order to determine their continued eligibility for benefits (referred to as \”Continuing Disability Reviews\” (CDRs). These reviews resulted in thousands of appeals to the federal courts by individuals whose grants were reduced or terminated, threats by federal courts to serve contempt of court citations on the Secre- tary of Health and Human Services (HHS) for refusing to pay benefits when ordered, and the decision of several states not to follow federal CDR regulations. As a result, on April 1, 1984, the Secretary of HHS imposed a moratorium on the CDR process, pending further legislative action. Con- gress established new standards for disability reviews in the Social Security Disability Benefits Reform Act of 1984 (P.L.98-460). Based on thislegisla- tion, HHS prepared new CDR regulations which became effective De- cember 6, 1985. The most significant change in the regulations brought about by P.L.98- 460 was the addition of a \”medical improvement standard.\” Under the oJd regulations a recipient could be terminated from aid even though his\/her physical or mental condition was unchanged. Under the new regulations a recipient can only be terminated from aid based on proof of improve- ment in his\/her medical condition. In addition, the new regulations make other changes such as requiring more extensive documentation of recipi- ents’ medical condition. The department estimates that resumption of the CDRs will result in savings to the General Fund because these reviews will identify some current SSI\/SSP recipients as ineligible for assistance. The department estimates that the General Fund savings from discontinuing benefits to these persons will total $700,000 in 1985-86, and $8.1 million in 198~7. 944 \/ HEALTH AND WELFARE Item 5180 STATE SUPPLEMENTARY PROGRAM FOR THE AGED, BLIND, AND DISABLED -Continued We have reviewed the basis for the department’s estimate, and we have identified a number of factors which could cause the savings from CDRs to be either higher or lower than what the budget anticipates. Specifically, we find that: The SSIISSP cases which are determined to be ineligible for aid will not be discontinued from assistance immediately, thereby reducing the estimate of savings. The department assumes that savings will start to accrue on March 1, 1986, as an average of 360 recipients per month are terminated from aid. This estimate fails to consider that recipients will receive two additional months of benefits following the receipt of a termination notice. Therefore, in the current year, costs will continue to occui’ for two months beyond the month that an individual receives a notice of termination. We estimate that this will reduce the current-year savings by $474,000. If the department is unable to make up for this loss by processing additional cases in 1986- 87, savings for the budget year will be $914,000 lower than estimated by the department. (This is because savings for 1986-87 are cumula- tive, based on. savings in the current year.) The department’s estimate fails to take into account appeals by in- dividuals who have been notified that they are no longer eligible for aid. Individuals who appeal a termination notice can continue to receive benefits during the appeals process, thereby reducing the savings still further.While it is difficult to estimate the number of appeals, it is important to note that prior to the moratorium on CDRs, there was a very high rate of successful appeals. In general, the ap- peals process takes approximately two-to-eight months to complete. If the appeal results in a reversal of the termination, the recipient will continue to receive benefits until the next review of his\/her case. There is some uncertainty as to how many individuals will be found ineligible for aid under the new \”medical improvement\” standard. The department estimates that an average of 20 percent of the cases reviewed will be terminated from aid. The SSA indicates, however, that between 17jercent and 21 percent of cases reviewed will be dropped from ai . The department based its estimate on its experi\” ence in performing CDRs prior to the moratorium. During this peri- od, the department was determining eligibility based on a decision in a court case which imposed a standard similar to the new \”medical improvement\” standard. The new regulations, however, are more detailed than the court standard, and include other changes in addi- tion to the \”medical improvement\” standard. If the department ter- minates from aid fewer than 20 percent of those subject to the CDRs, savings will be lower than projected. On the other hand, if more than 20 percent of the cases are terminated from aid, the savings will be higher than estimated. The number of cases which will be reviewed in the current year probably will be lower than the number estimated in the budget, thereby reducing the savings in the current year. This is primarily because the department will not hire the staff necessary to perform the CDRs until February, but it assumes that the full workload of CDRs will be performed beginning March 1, 1986. Although the de- partment is requiring experienced staff to work overtime to help with Item 5180 HEALTH AND WELFARE \/ 945 the reviews, it is unlikely that the department will be able to handle the projected workload immediately because (1) the new staffre- quires one year of training and work experience before becoming fully productive and (2) the overtime may be insufficient to cover both the incoming CD Rs and the regular workload. If the department processes fewer cases than it estimates, then the savings will be lower than it projects. Because of these uncertainties it is difficult to assess the accuracy of the department’s savings estimate. Accordingly, we recommend that the Legislature adopt supplemental report language requiring the depart- ment to submit a report to the Legislature by December 1, 1986, that reconciles its estimate of savings due to the resumption of CDRs with actual savings achieved. The following language is consistent with this recommendation: \”The Department of Social Services shall submit a report by December 1, 1986, that reconciles its estimate of savings due to the resumption of CDRs with its actual experience in implementing the new CDR regula- tions.\” State Monitoring of Federal Administration We recommend that the Legislature adopt supplemental report lan- guage requiring the department to (1) review the findings of the State Controller’s audit of the SS\/ISSP program and (2) submit a report by September 1~ 198~ that outlines the state’s contract proposal regarding the federal quality assurance system. The Social Security Administration (SSA) administers the SSI\/SSP pro- gram in California pursuant to a contract between the federal and state government. Under the provisions of the contract, the federal govern- ment is responsible for a number of activities, one of which is monitoring the accuracy with which it administers the program. The federal govern- ment monitors its administration of the program based on quality assur~ ance (QA) reviews. The state relies primarily on the findings from the federal QA system in order to monitor federal administration of the program. In addition, the state performs audits to monitor federal administration of the program. The contract between the state and federal government specifies the conditions under which these audits are performed and describes the federal QA system. The department currently is negotiating a new contract with theSSA. The department indicates that it has two major concerns with the new contract proposed by SSA. The proposed contract: Deletes a description of the federal QA system. Limits the effectiveness of state audits. Federal QA System Changes. Prior to 1985-86, as part of its QA sys- tem, the federal government reviewed a sample ofSSIISSP cases in order to identify erroneous payments to recipients. Subsequent to this review, the state examined a portion of the federal sample to test the accuracy of the federal review. The findings from these two reviews were combined to produce an error rate. The error rate was the basis for reimbursing the state for erroneous payments made by SSA to SSIISSP recipients. On October 1, 1984, however, the SSA eliminated federal reimburse- ment for erroneous payments. As a result, the state eliminated the staff which had reviewed the federal sample. The department explained that 946 \/ HEALTH AND WELFARE Item 5180 STATE SUPPLEMENTARY PROGRAM FOR THE AGED, BLIND, AND DISABLED -Continued since the federal government was no longer going to reimburse states for erroneous payments, the state would have limited ability to influence the quality of the QA reviews. It indicated, however, that the risk of inaccu- rate QA reviews and misspent program funds could increase. The state relies primarily on the federal QA system to monitor federal program administration. The department informs us that the contract proposed by the federal government does not describe the QA system. As a result, the department does not know what type of system SSA is plan- ning to operate in the future. Because the description of the QA system was left out of the new contract proposal, several states, including Califor- nia, New York, Michigan, and Nevada, have refused to sign the contract. The department plans to propose that the contract include a description of the QA system that will protect the state’s interest in accurate program administration. The department, however, has not yet decided what kind of QA system it will propose to the federal government. State Audits of Federal Administration. In addition to the federal QA system, the state continues to periodically audit federal administration of the program. In 1983, the Department of Finance (DO F) , and the State Controller’s office performed the last major state audit of the program. As a result of that audit, DOF estimated that SSA owed the state approxi- mately $30 million due to erroneous payments to recipients. In addition, the state recommended that SSA correct several administrative deficien- cies. The SSA agreed with most of the state’s recommendations, but it did not agree that it owed the state $30 million. Currently, the SSA is reviewing the state’s claim. Neither the old contract, nor the proposed contract provide a definite time period for resolution of claims identified in state audits. The depart- ment informs us that it intends to propose a one-year period for resolution of these claims. In addition, the new contract deletes the provision that state audit results may be used by the state to recommend improvements in the federal government’s QA process. This effectively eliminates state oversite of the federal QA process. State Controller’s Report. A planned State Controller’s audit report will provide the department with some of the information it needs in order to develop a contract proposal which protects the state’s interest in accurate federal administration of this program. The State Controller’s office advises us that the three-part audit will: Review SSA’s current QA system and SSA’s plans to modify it, Review SSA’s procedures for verifying the $30 million identified in the 1983 audit and follow-up on other recommendations made in the 1983 audit and Review regional and district offices’ administration of the program in 1981-82, 1982-83, and 1983-84. The State Controller’s office informs us that it will complete the first two parts of the audit by July 1986, and the third part later in 1986-87. The first two parts of the audit report will identify weaknesses in both the current QA system, and any planned changes. The department can use that infor- mation to develop a contract proposal for a more effective QA system. If the state’s proposal succeeds, it will allow the state to: Item 5180 HEALTH AND WELFARE \/ 947 Identify administrative errors as a result of both the QA system and state audits, and Require the federal government to reimburse the state for some of those errors. Accordingly, we recommend that the Legislature adopt supplemental language requiring the department to (1) review the findings of the State Controller’s audit report on the SSI!SSP and (2) submit a report by Sep- tember 1, 1986, that outlines the state’s contract proposal regarding the federal QA system. The following language is consistent with this recommendation: \”The Department of Social Services shall (1) review the findings of the State Controller’s audit report of the SSI!SSP and (2) submit a report by September 1, 1986, that provides the state’s proposal for the contract with the federal government regarding the federal quality assurance system.\” Department of Social Services SPECIAL ADULT PROGRAMS Item 5180-121 from the General Fund and the Federal Trust Fund Budget p. HW 153 Requested 1986-87 ………………………………………………………………. . Estimated 1985-86 ………………………………………………………………… . Actual 1984-85 ……………………………………………………………………… . Requested increase $196,000 (+10.8 percent) Total recommended reduction …………………………………………… . 1986-87 FUNDING BY ITEM AND SOURCE Item-Description 5180-121-001-Special Adult Programs 5180-121-890-Special Adult Programs GENERAL PROGRAM STATEMENT Fund General Federal $2,018,000 1,822,000 1,657,000 None Amount $2,018,000 (75,000) The Special Adult programs consist of three distinct program elements designed to fund the emergency and special needs of Supplemental Secu- rity Income\/State Supplementary Program (SSI!SSP) recipients. These elements are the (1) Special Circumstances program, which provides financial assistance for emergency needs, (2) Special Benefits program, which provides a monthly food allowance for guide dogs belonging to blind SSI!SSP recipients, and (3) Temporary Assistance for Repatriated Americans program, which provides assistance to needy U.S. citizens re- turning from foreign countries. 948 \/ HEALTH AND WELFARE Item 5180 SPECIAL ADULT PROGRAMS-Continued OVERVIEW OF THE BUDGET REQUEST The budget proposes a General Fund appropriation of $2,018,000 for the Special Adult programs in 1986-87. This is $196,000, or 11 percent, more than estimated General Furld expenditures for this program in the current year. This increase results primarily from projected caseload growth in the Special Circumstances program. The Department of Social Services (DSS) anticipates that the caseload for the Special Circumstances pro- gram will increase because the potential applicant pool-SSI\/SSP recipi- ents-is growing at an accelerating rate. The budget also proposes $75,000 in federal funds to provide cash assist- ance to repatriated Americans. This is the same amount that will be spent in the current year. ANALYSIS AND RECOMMENDATIONS We recommend approval. The 1985 Budget Act required DSS to limit state reimbursement for an individual county’s administrative costs under the Special Circumstances program to 100 percent of the county’s total benefit expenditures, or actual administrative costs, whichever was less. The department estimates that total administrative costs for this program in 1986-87 will not exceed 100 percent of benefit expenditures. Furthermore, the department indi- cates that it will restrict each county’s administrative costs to 100 percent of benefit expenditures. Department of Social Services REFUGEE CASH ASSISTANCE PROGRAMS Item 5180-131 from the Federal Trust Fund Budget p. HW 155 Requested 1986-87 ……………………………………………………………….. $57,857,000\” Estimated 1985-86…………………………………………………………………. 55,989,000 Actual 1984-85 ………………………………………………………………………. 52,783,000 Requested increase $1,868,000 (+3.3 percent) Total recommended reduction ……………………………………………. None \”Includes $1,553,000 proposed in Item 5180-181-890 for a 4.9 percent cost-of-living increase. 1986-87 FUNDING BY ITEM AND SOURCE Item-Description 5180-131-866–Refugee programs, local assistance 5180-181-866{c)-Refugee programs, local assist- ance Total Fund Federal Federal Amount $56,304,000 1,553,000 $57,857,000 Item 5180 HEALTH AND WELFARE \/ 949 SUMMARY OF MAJOR ISSUES AND RECOMM’:NDATIONS 1. Refugee Caseload Estimates. Recommend that prior to budget hearings the Department of Finance reconcile the conflict in caseload estimates and advise the Legislature of any changes that are warranted in the funds proposed. GENERAL PROGRAM STATEMENT Analysis page 949 This item appropriates the federal funds that pay for the costs of cash grants and medical assistance provided to refugees who are eligible for assistance and who have been in this country for less than 36 months. These individuals are referred to as \”time-eligible\” refugees. Refugees who have been in this country for more than 36 months, and who meet applicable eligibility tests, receive assistance under the Aid to Families with Dependent Children (AFDC), Supplemental Security Income\/State Supplementary Program (SSIISSP), Medi-Cal, and county general assist- ance programs. ANALYSIS AND RECOMMENDATIONS Refugee Caseload Estimates We recommend that the Department of Finance (1) reconcile the dis- crepancy between the refugee caseload estimates of the Departments of Health Services (DHS) and Social Services (DSS) and (2) report to the fiscal committees prior to budg~t hearings any changes that are warranted in the amounts proposed under this item and under the Medi-Cal program item (Item 4260-101-001). The budget proposes expenditures of $57,857,000 in federal funds for cash and medical assistance provided through Refugee Cash Assistance programs to refugees and entrants in 1986–87. This is an increase of $1,868,- 000, or 3 percent, above estimated current-year expenditures for this pro- gram. The $1,868,000 increase reflects three principal changes: (1) a $1,553,000 increase proposed in Item 5180-181-866 for a 4.9 percent cost-of-living adjustment to cash grant amounts provided to refugees, (2) an $825,000 increase to cover the costs of a 2.7 percent increase in caseload projected by the DSS for its cash assistance program, and (3) a reduction of $510,000 in the projected costs of providing medical services to refugees that is primarily due to a 3.6 percent reduction in caseload projected by the DHS. For the most part, the same individuals make up the caseloads for refugee cash assistance and medical assistance. It is not possible, therefore, for one program’s caseload to increase while the case load for the other is decreasing. Thus, the DSS’s and DRS’s caseload projections are inconsist- ent with one another. It is difficult to understand how a difference of this magnitude-6.3 percentage points-could have occurred in a budget that, presumably, was carefully reviewed by both the Health and Welfare Agency and the Department of Finance. Not only does this inconsistency cast doubt on the administration’s ex- penditure estimate for this item; it also brings into question the adminis- tration’s estimate of General Fund costs under the Medi-Cal program. This is because the General Fund cost estimates for the Medi-Cal program depend, in part, on the amount of federal funds ava.ilable to reimburse the DHS for medical assistance provided to time-eligible refugees. To the 950 \/ HEALTH AND WELFARE Item 5180 REFUGEE CASH ASSISTANCE PROGRAMS-Continued extent that the number of time-eligible refugees turns out to be more in line with DSS’s caseload projections, the amount of federal funds available to offset the General Fund costs of Medi-Cal services for refugees will exceed the amount budgeted in this item. If this happens, the amount needed from the General Fund to pay costs under the Medi-Cal prograin will be less than the amount proposed in the Medi-Cal item (Item 4260- 101-001). We have no basis for determining which department’s estimate of case- load is the most reasonable. Consequently, we cannot advise the Legisla- ture whether the amount of federal funds proposed for refugee cash and medical assistance under this item is correct. We can only note that the budget asks the Legislature to appropriate money for two major budget items based on two contradictory estimates of the same caseload. We therefore recommend that the Department of Finance reconcile the dis- crepancy between the two department’s caseload estimates and advise the fiscal committees, prior to budget hearings, of any changes that are warranted in (1) the amounts proposed under this item for refugee cash and medical assistance and (2) the amount needed from the General Fund for the Medi-Cal program item (Item 4260-101-001). Department of Social Services COUNTY ADMINISTRATION OF WELFARE PROGRAMS Item 5180-141 from the General Fund and Federal Trust Fund Budget p. HW 154 Requested 1986-87 ……………………………………………………………….. $133,848,000 Estimated 1985-86…………………………………………………………………. 129,181,000 Actual 1984-85 ………………………………………………………………………. 122,627,000 Requested increase $4,667,000 (+3.6 percent) Total recommended reduction …………………………………………… . Recommendation pending ………………………………………………….. . 198\u00a3Hl7 FUNDING BY ITEM AND SOURCE None 999,000 Item-Description 5180-141-001-County Administration 5180-141-890-County Administration Fund General Federal Amount $133,848,000 (394,294,000) SUMMARY OF MAJOR ISSUES AND RECOMMENDATIONS 1. Productivity Targets. Recommend that the Legislature adopt Budget Bill language requiring the Departments of Social Services (DSS) and Health Services, in conjunction with the County Welfare Director’s Association, to establish productivity standards for the AFDC, Food Stamps’ and Medi-Cal programs based on a \”model\” county methodolo- gy. AnalYSis page 955 Item 5180 HEALTH AND WELFARE \/ 951 2. Overpayment Collections Report. Recommend that the 958 Legislature adopt Budget Bill language allocating $122,000 from the General Fund to counties to cover their costs of preparing an overpayment collection report, only after the Director of Finance has certified that the DSS has taken appropriate action to ensure that the counties will report accurately and on a timely basis. 3. Statewide Automated Welfare System (SAWS). With- 959 hold recommendation on $2,244,000 ($999,000 General Fund and $1,245,000 federal funds) proposed for the SAWS project, pending receipt of the annual SAWS progress re- port. GENERAL PROGRAM STATEMENT This item contains the General Fund appropriation for the state’s share of costs incurred by the counties in administering (1) the Aid to Families with Dependent Children (AFDC) program, (2) the Food Stamp pro- gram, and (3) special benefits for aged, blind, and disabled recipients. It also funds costs of training county eligibility and non service staff. In addi- tion, this item identifies the federal and county costs of administering child support enforcement and cash assistance programs for refugees. OVERVIEW OF THE BUDGET REQUEST The budget proposes an appropriation of $133,848,000 from the General Fund as the state’s share of the costs that counties will incur in administer- ing welfare programs during 1986-87. This is an increase of $4,667,000, or 3.6 percent, over estimated current-year General Fund expenditures for this purpose. The $~33.8 million includes $6,106,000 to fund the increased General Fund costs resulting from the estimated 4.8 percent cost-of-living adjustment (COLA) granted by the counties to their employees during 1985-86. In accordance with the policy established by the Legislature in recent budget acts, during 1986-87 counties will pay for any COLAs that they grant their employees in the budget year using county and federal funds. The state will fund its share of these costs starting in 1987-88. The budget proposes total expenditures of $714,059,000 for county ad- ministration of welfare programs during 1986-87, as shown in Table 1. This is an increase of $28,226,000, or 4 percent, over estimated current-year expenditures. Proposed General Fund Changes Table 2 displays the adjustments to General Fund expenditures for cou~ty administration proposed for 1986-87. The net increase of $4,667,- 000, III large part, reflects the $6,106,000 needed to fund the estimated 4.8 percent retroactive COLA, partially offset by the elimination of one-time administrative costs in 1985-86 associated with a variety of court cases ($2,523,000) . 31-80960 Table 1 Expenditures for County Welfare Department Administration 1984–85 through 1981H17 (in thousands) Actllul1984-85 Estimuted 198~6 Pro\/losed 1986-87 Progrum Stute Federul COlln(I’ Totul Stute Federul COllnty Totul Stute Fedeml COllnty AFDC administration ……………. $95,536 $207,823 $108,786 $412,145 $99,942 $212,968 $109,418 $422,328 $102,807 $224,372 $114,749 Nonassistance Food Stamps …. 23,257 57,098 27,329 107,684 25,012 60,837 27,859 113,708 26,854 66,982 29,617 Child Support Enforcement …. 92,119 30,723 122,842 92,542 39,661 132,203 92,542 39,661 a. Welfare ………………………….. (68,703) (22,917) (91,620) (68,696) (29,442) (98,138) (68,696) (29,442) b. :..;onwelfare …………………….. (23,416) (7,806) (32,222) (23,846) (fO,219) (34,065) (23,846) (10,219) Special Adult programs ………… 2,295 52 2,347 2,494 60 2,554 2,555 109 Refugee cash assistance ………… 5,774 5,774 7,028 7,028 6,850 Staff development …………………. 1,524 3,333 1,738 6,595 1,611 3,538 1,781 6,930 1,611 3,538 1,781 Adoption assistance ……………….. 15 7 22 22 10 32 21 10 — — — — — Subtotals ……………………………… $122,627. $366,154 $168,628 $657,409 $129,081 $376,923 $178,779 $684,783 $133,848 $394,294 $185,917 Local mandates …………………….. (291) (-291) (291) (-291) Employment programs\” ………. 100 900 1,000 Totals. ………………………………….. $122,627 $366,154 $168;628 $657,409 $129,181 $377,823 -. $178,779 $685,783 $133,848 _$394,294 $185,917 \”Funds to-support employment programs in 1986-87 are budgeted under Items 5180-151-001 and 5180-151-890, social services programs. TotuJ. $441,928 123,453 132,203 (98,138) (34,065) 2,664 6,850 1,781 31 _ $714,059 $714,059 n o c z …. ~ \u00bb CI ~ z 5 ;;a- ~ o z o ‘TI :e m …. ‘TI \u00bb ;;a m .\” ;;a o Ci) ;;a \u00bb ~ ~ o ~ .. :i\” c CD A. CD U’I N ……. :I: tI:: > tl :I: > Z o ~ tIl r’ >r: > ~ tIl …… ….. (1) 8 Cil …- ~ Item 5180 HEALTH AND WELFARE \/ 953 Table 2 County Administration of Welfare Programs General Fund Changes Proposed for 198&-37 (dollars in thousands) Cost 1985-86 Expenditures (Revised) ……………………………………………………………. .. A. Adjustments to Ongoing Costs 1. AFDC Administration a. Basic Costs …………………………………………………………………………………. .. $668 b. Court Cases ………………………………………………………………………………. . -2,523 c. Fraud Detection Savings ………………………………………………………….. .. -186 d. Employment Programs Transfer ……………………………………………. .. -201 e. Other ………………………………………………………………………………………… .. 75 Subtotal ……………………………………………………………………………………. . 2. Nonassistance Food Stamps a. Basic Costs ………………………………………………………………………………….. . 56 b. Other …………………………………………………………………………………………. . -33 Subtotal …………………………………………………………………………………… .. 3. Other Programs ……………………………………………………………………………. .. B. New Costs 1. SAWS a. AFDC ………………………………………………………………………………………… .. 169 b. Nonassistance Food Stamps …………………………………………………….. .. 576 Subtotal ……………………………………………………………………………………. . 2. Retroactive COLA (4.8%) \” a. AFDC ………………………………………………………………………………………… .. 4,863 b. Nonassistance Food Stamps …………………………………………………….. .. ~ Subtotal ……………………………………………………………………………………. . 1986-87 Expenditures (Proposed) ………………………………………………………… .. Change from 1985-86: Amount ………………………………………………………………………………………….. .. Percent …………………………………………………………………………………………… . Total $129,181 -$2,167 $23 -$40 $745 $6,106 $133,848 $4,667 3.6% a This reflects the 1986-87 General Fund costs of the estimated 4.8 percent cost\u00b7of-Iiving increase granted by counties to their employees in 1985–86. COST CONTROL MEASURES IN COUNTY ADMINISTRATION The Department of Social Services (DSS) allocates funds to counties for the administration of welfare programs using a formula that considers a number of factors, including (1) caseload, (2) productivity targets for eligibility workers, (3) the existing salary structure in each county, (4) allowable cost-of-living increases, and (5) allocated support (overhead) costs. One of the primary objectives of this formula is to control the growth in state-funded county costs for administering welfare programs. The department calculates the county’s allocation of funds for adminis- trative costs in the following way. First, it determines the productivity targets (the number of cases to be handled by an eligibility worker) and supervisory ratios for the county. The cost control plan requires counties to meet the average of the productivity standards achieved by counties having a similar caseload during a specific base year, or their own perform- ance during the base year if it was above average. Second, the department determines the allowable salary costs per worker. Third, the department calculates total administration costs by multiplying the DSS May estimates of caseloads in AFDC and food stamps by the average cost per case, which is derived from the productivity target and average salary costs. Several other adjustments are made in order to fund overhead costs, fraud investi- gation activities, and other special items. 954 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued The state’s share of these costs is approximately 25 percent of the total. The counties are notified of their allocation early in the budget year. The amount actually paid to a county is determined by adjusting the allocation for actual caseload during the year. Current Productivity Targets The cost control plan specifies productivity targets that provide a basis for limiting allocations to counties. Currently, the base years used to set these targets are 1980-81 for AFDC administration and 1979~0 for Food Stamp administration. Proposed Evaluation of Cost Control System The 1985 Budget Act required the DSS and the Department of Health Services (DHS) to submit to the Chairman of the Joint Legislative Budget Committee (JLBC) , by October 1, 1985, a plan for conducting a study of the eligibility determination process under the AFDC, Food Stamps, and Medi-Cal programs. The Budget Act specified that the study should be designed to determine the appropriate productivity targets for these pro- grams. It also prohibited the DSS from changing the productivity targets for the AFDC and Food Stamps programs until the study is completed. The Budget Act, however, required the DHS to update the base year used to set Medi-Cal productivity targets for 1986-87. (We discuss the Medi-Cal target update in our analysis of Item 4260-lO6-001). The departments submitted their study plan to the JLBC in January 1986. The plan calls for reviewing three aspects of the current cost control plan over a period of at least two to three years. Specifically, the plan sets out the following schedule for the study. Alternative Approaches to Grouping Counties According to Caseload Size. Under the proposed plan, the two departments and the County Welfare Director’s Association would review the current method used to group counties based on caseload size and set average productivity targets for each group. Currently, the counties are grouped into four categories based on caseload size for the purposes of setting productivity targets. The proposed study would consider such alternatives as groupings based on level of automation and geography. The department believes it can com- plete this portion of the study during 1986-87, using available resources. Alternative Approaches to Budgeting Support Costs. This part of the study would consider changes to the way the department budgets for support (\”overhead\”) costs. Currently, DSS reviews, on a case-by-case baSis, county requests to increase their total support costs. Overhead costs are allocated to each program based on the ratio of each program’s line- worker costs to total line-worker costs within the welfare department. The proposed study would consider such alternatives as using targets for coun- ties’ support-to-line staff ratios and direct billing of some support costs. The department believes it can complete this portion of the study during 1986-87, using available resources. Evaluation of Current Productivity Targets. The two departments propose a two-step approach to evaluating the productivity targets. The first step would be to contract with an independent contractor, to provide (1) a list of the methodologies that could be used to evaluate the targets and (2) the costs, benefits, and time frames associated with each me- thodology. The second step would be to select one of the methodologies identified in the preliminary study and to conduct the actual productivity target study. The departments advise that the contract for the preliminary Item 5180 HEALTH AND WELFARE \/ 955 study would cost $50,000 and that the study could be completed by April 1987. (The DSS proposes to absorb the costs of the contract within the amounts budgeted for 1986-87.) The costs and time frames for the actual study of the targets would depend on the methodology selected. We believe that the department’s proposal to study the way counties are grouped for the purpose of setting productivity targets and to consider alternative ways of budgeting for overhead costs could improve the cur- rent cost control plan. This would be true to the extent that these studies identify ways of making the plan more reflective of the actual costs that counties incur to administer welfare programs. Moreover, these studies could be completed on a timely basis. Therefore, we recommend that the Legislature approve these elements of the department’s proposal. Proposed Evaluation of Productivity Targets Would Unnecessarily Delay Needed Improvements to System We have two major concerns regarding the department’s proposal for evaluating the current productivity targets. First, the scope and cost of the evaluation are unknown. Both would depend on the results of the me- thodology study to be completed by an independent contractor. Second, it is unlikely that the evaluation itself would be completed in time to use the results in budgeting for the 1987-88 fiscal year. In fact, the DSS advises that, depending on the methodology selected, the evaluation could take several years to complete. It is important that the evaluation be completed as soon as possible for two reasons: Potential Savings. The Budget Act prohibits any change in pro- ductivity targets until after the study has been completed. This means that under the department’s plan, it could be several years before the targets are adjusted. As we have noted above, the targets for AFDC are based on actual performance in 1980-81, and the targets for Food Stamps are based on performance in 1979-80. In recent years, there have been major changes in the complexity of the cases that counties process and in the extent to which counties rely on computers to perform major components of the eligibility determination and bene- fit issuance process. To the extent that county productivity has im- proved as a result of these, or other changes, updating the targets could result in major savings to the state . SA WS. If the Statewide Automated Welfare System (SAWS) project meets its schedule for enhancing counties’ computer systems, it will have a major impact on county productivity during the next several years. For example, the automated eligibility determination component of SAWS, if it is implemented according to the current schedule, could dramatically increase productivity in the next few years. Should this occur, the department’s proposed evaluation of the current productivity targets might well be out-of-date before it is even published. We believe that the two departments could evaluate the current pro- ductivity targets during 1986-87, by using a methodology described in the 1985 Budget Act. Improvements in Productivity Targets are Possible, Within Reasonable Timeframes We recommend that the Legislature adopt Budget Bill language direct- ing the DSS and the DHS, in conjunction with the County Welfare Direc- 956 \/ HEALTH AND WELFARE Item 5180 COUNTY ADMINISTRATION OF WELFARE PROGRAMS-Continued tor’s Association, to use a \”model\” county methodology to evaluate the current productivity targets for the AFDC, Food Stamps, and Medi-Cal programs. We further recommend that the departments report to the Chairman of the Joint Legislative Budget Committee, by December 1, 1986, on their progress in using this methodology to establish productivity targets for 1987-88. The 1985 Budget Act required that any methodology for evaluating the productivity targets address the effect of the targets on program perform- ance. (The Budget Act stated that program performance should be meas- ured by the rates of overpayment and underpayment of program benefits and the waiting times and processing delays experienced by clients.) In our view, the effect of the targets on program performance is the critical, perhaps the only issue to consider when setting the targets. We believe that the \”correct\” target for any county is that target which is consistent with the sound operation of the program. Obviously, the Legislature wants to provide counties with adequate resources to operate welfare programs with minimal errors in the amounts paid for benefits and with minimal delays for the recipients. On the other hand, we know of no reason that the Legislature would want to pay counties any more to operate the programs than they need in order to do a good job. Given this objective, the issue facing the Legislature with respect to the current productivity targets is technical-how should the department identify the highest productivity standard that is consistent with the sound operation of welfare programs? Table 3 Productivity, Error Rates, and Processing Delays for the Twelve Largest Counties 1984-85 Eligibility Worker Cilseloads a Alameda …………………………………………………………………………………. 105.8 Contra Costa ………………………………………………………………………….. 85.5 Fresno …………………………………………………………………………………….. 123.8 Los Angeles ……………………………………………………………………………. 110.4 Orange…………………………………………………………………………………….. 80.8 Riverside …………………………………………………………………………………. 102.8 Sacramento……………………………………………………………………………… 93.5 San Bernadino ………………………………………………………………………… 95:7 San Diego ……………………………………………………………………………….. 91.4 San Francisco………………………………………………………………………….. 98.7 San J oaquin……………………………………………………………………………… 113.9 Santa Clara ……………………………………………………………………………… 89.0 Twelve county average…………………………………………………… 99.3 Average of the three \”model\”‘ counties ………………………… 109.0 Error Percent of Cases Rlltes hOver 45 Days <\" 3.6% 13.0% 2.3 4.9 2.4 8.2 2.4 0.5 2.6 2.8 2.2 0.8 2.5 0.0 2.2 0.4 3.7 4.7 5.4 0.2 1.1 1.0 1.5 11.0 2.6% 1.9% 0.4% 0.8% a Figures reflect the weighted average number of intake and continuing cases processed by AFDC eligibility workers and first-line supervisors during 1984-85. h Figures reflect the simple average of the percentage of benefit overpayments in the April 1984 through September 1984, and October 1984 through March 1985, quality control samples. Underpayment errors were not available on a county-by-county basis at the time this analysis was prepared. ,. Figures reflect the simple average of the percentages of cases that were not processed within 45 days during the March 1984 and June 1984 quarters. --- -- ._ .. _- _. --.-- Item 5180 HEALTH AND WELFARE \/ 957 The Budget Act language which requires the evaluation suggests a way to do this. Specifically, it suggests that one option available for evaluating the productivity targets is to use a peer grouping approach in which counties with exceptionally high error rates or long processing delays are excluded from the sample used to establish the targets. We analyzed the AFDC eligibilty worker caseloads, error rates, and processing delays of the state's 12 largest caseload counties during 1984-85 (the most recent period for which this data was available) . Table 3 displays the data used in this analysis. As the table shows, 3 of the 12 counties-Los Angeles, Riverside, and San Joaquin-combined high productivity with exemplary program performance. The average productivity of these three \"model\" counties is 109.0 cases per worker, which is about 10 percent higher than the average for the remaining counties. We refer to these counties as \"model\" counties be- cause they represent the ideal combination of high productivity and solid program performance. Their productivity, therefore, could be used as a standard for the other large counties. It is noteworthy that the average productivity of the 12 large counties in 1980-81 (the base year used for the current productivity targets) was 92.6 cases per worker. Thus a target of 109 cases per worker would represent a 17.7 percent increase over the current target. Before requiring the other nine large counties to move toward this level of pro

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