Budget Subcommittees Convene to Hear Governor’s FY 2020-21 May Revision
Following the release of Governor Gavin Newsom’s FY 2020-21 May Revision Budget last week, Senate and Assembly budget subcommittees convened several hearings this week to assess the Newsom Administration’s proposals and to provide stakeholders and the public an extended amount of time to weigh in on May Revision proposals. Given the abbreviated budget timeline due to the ongoing COVID-19 pandemic, subcommittees are widely anticipated to only meet once prior to budget actions being taken ahead of the June 15 constitutional deadline for the Legislature to pass a budget. Below, we provide highlights from this week’s budget activities:
Assembly Budget Subcommittee No. 1 Meets on Health Issues
On Tuesday, the Assembly Budget Subcommittee No. 1 on Health and Human Services convened a hearing to assess health-related items included in the Governor’s May Revision Budget. The subcommittee convened on Monday to hear all human services-related items. In opening Tuesday’s hearing on health issues, Subcommittee Chair Assembly Member Joaquin Arambula discussed the gravity of the budget situation, indicating Tuesday’s hearing would be the only opportunity for the subcommittee and members of the public to weigh in on the Governor’s proposals given the Legislature’s compressed budget timeline.
Tuesday’s hearing featured a presentation by the Legislative Analyst’s Office (LAO) detailing highlights of Governor’s May Revision and identifying divergences in investment proposals from January to May. The LAO discussed Medi-Cal expenditures and projected caseload changes, detailed funding support provided from federal COVID-19-related measures, and withdrawn investments proposed in January. Notably, the LAO identified the proposed cuts to the Black Infant Health (BIH) Program as being potentially counterproductive to efforts in addressing health disparities among specified populations of Californians, particularly amid the COVID-19 pandemic.
Opening remarks were also provided by California Health and Human Services (CHHS) Agency Undersecretary Michelle Baass who identified the Administration’s decisions in rebuilding the FY 2020-21 budget as a result of significant economic changes due to the COVID-19 pandemic, namely by paring back on Medi-Cal optional benefits, withdrawing its CalAIM proposal, and pulling back its proposal around incompetent to stand trial (IST) individuals, among other areas.
Subcommittee members expressed significant concerns with the Administration’s revised proposals, in many cases voicing sharp criticism of withdrawn or pared back investment proposals. Assembly Member Jim Wood, joined by other subcommittee members, decried the Administration’s proposed elimination of the Community Based Adult Services (CBAS) and the Multipurpose Senior Services Program (MSSP), Medi-Cal optional benefits, and the Diabetes Prevention Program. Wood further expressed concerns with the Administration’s approach in focusing on treatment but not prevention, as well as anticipated disproportional impacts on rural areas. Multiple subcommittee members additionally expressed worries with cuts to senior services, individuals with disabilities, and health professions training programs.
Notably, Subcommittee Chair Assembly Member Joaquin Arambula posed a question to California Department of Public Health (CDPH) Director Dr. Sonia Angell about the historic underfunding of public health departments. Arambula noted the anticipated $150 million loss in 1991 Realignment funding and the lack of public health investments in the Governor’s May Revision and inquired whether the state is taking sufficient action to prepare for the next pandemic emergency. In responding to Arambula’s question, Angell discussed the state’s broad preparedness activities and underscored the need to adequately fund the public health infrastructure in California. Arambula further indicated the Legislature’s willingness and interest in supporting CDPH, particularly in preparing for future public health emergencies.
The subcommittee provided an extended amount of time for public comment which stretched several hours. CHEAC Executive Michelle Gibbons underscored the impact of decreased health realignment funding on local health department services and urged the Legislature to backfill the loss of realignment funding and invest an additional $120 million ongoing to support public health infrastructure and workforce. Ms. Gibbons further discussed the role of California local health departments in navigating communities through the COVID-19 pandemic and urged the Legislature to reject further cuts to public health programs and services.
Homelessness Investments, Vaping Tax Examined in Senate, Assembly Subcommittees No. 4
The Senate Budget & Fiscal Review Subcommittee No. 4 on State Administration and General Government and the Assembly Budget Subcommittee No. 4 on State Administration convened separate hearings on Thursday to examine May Revision items, including the Governor’s proposed homelessness investments and the proposed electronic cigarette nicotine-content-based tax. Recall, the nicotine-content-based vaping tax was proposed by the Newsom Administration in January and was maintained in the May Revision.
Both hearings featured overview presentations from the DOF and LAO, as well as extended time for public comment. DOF discussed the Newsom Administration’s May Revision pivot to dedicate previously proposed General Fund grants to local jurisdictions in responding homelessness to instead dedicate $750 million in federal funds to support local jurisdictions in purchasing hotels and motels as a permanent housing solution. The Administration’s proposal also includes $1.75 billion in CRF funds for direct aid to local jurisdictions.
Related to these proposals, Senate Subcommittee No. 4 members queried DOF on allowable local jurisdiction expenditures using federal CRF funds, legislative oversight on homelessness expenditures, hotel and motel maintenance, and the provision of homelessness services statewide. Legislators expressed concerns around the need for increased transparency and legislative oversight authority, particularly among items included in control sections of the budget. Assembly Subcommittee No. 4 members discussed progress in Project Roomkey, the need for ongoing funding to support local jurisdictions in acquiring hotels and motels as permanent housing, the possibility of exploring master leases with landlords, providing rental assistance, and increasing housing stock statewide.
DOF also presented the Administration’s proposed vaping tax in both the Senate and Assembly subcommittees, indicating that tax revenues are estimated to be $33 million in FY 2020-21 and would be dedicated to tax enforcement and Medi-Cal caseload growth. In the Senate Subcommittee No. 4, the LAO referenced its previous analysis of the proposed tax, indicating the Administration has not provided a compelling argument for its proposed tax rate. The LAO recommended the Legislature index the proposed tax to inflation and require that revenues be placed in the General Fund and not a special fund. Citing the number of policy decisions involved and the projected revenue amounts from the proposal, the LAO further recommended that the Legislature consider deferring the Administration’s proposal until a later date to allow for additional consideration. Senate Subcommittee No. 4 Chair Senator Anna Caballero discussed the proposal, generally expressing support of the concept with certain caveats around backfilling First 5 funding. The item was held open in both subcommittees.
The agenda for the Senate Subcommittee No. 4 is available here and the agenda for the Assembly Subcommittee No. 4 is available here. A video recording of the Senate subcommittee hearing is available here and a recording of the Assembly subcommittee hearing is available here.
Assembly Subcommittee No. 6 Examines COVID-19 Expenditures, Federal Funding
Today, the Assembly Budget Subcommittee No. 6 on Budget Process, Oversight, and Program Evaluation convened a hearing to examine the Newsom Administration’s proposals on federal funding, trigger reductions, and unanticipated COVID-19 response expenditures. In opening the hearing, Subcommittee Chair Assembly Member Phil Ting discussed the need for transparency in emergency spending decisions and the importance of involving the Legislature in information sharing and emergency response activities. Ting commended the Newsom Administration’s response to the COVID-19 pandemic but expressed concerns around the Administration’s expenditure authority and lack of clarity in decision-making processes during the emergency.
Friday’s hearing began with a presentation from the LAO providing an overview of COVID-19-related expenditures, federal financial support, and control section triggers. Notably, the LAO identified a handful of Newsom Administration proposals that would provide the Administration a significant amount of delegated authority from the Legislature and expressed concerns around the Legislature’s hampered oversight function due to the Administration’s limited information sharing on expenditures. Vivek Viswanathan with the Department of Finance (DOF) also provided remarks on the Administration’s proposals and discussed the need for flexibility in responding to future COVID-19-related expenditures.
Subcommittee members queried DOF and LAO representatives on a series of topics related to COVID-19 and the Governor’s May Revision, including expenditures that could be “triggered off” by federal financial support, ongoing COVID-19 response activities (particularly in skilled nursing facilities and correctional settings), oversight and accountability for emergency state contracts, allocation of federal funds appropriated in response to COVID-19, proposed reductions or eliminations in health and senior services, and corrections and criminal justice operations, among others.
Throughout the hearing, several subcommittee members expressed concerns around a lack of legislative collaboration and information sharing by the Newsom Administration, particularly in responding to COVID-19, procuring emergency supplies and materials, and contract vetting processes. Notably, Subcommittee Chair Assembly Member Phil Ting expressed sharp criticism of the Administration’s use of Joint Legislative Budget Committee (JLBC) letters to inform the Legislature of its intent to expend significant funds appropriated by the Legislature to the Administration to respond to COVID-19. Ting pressed DOF representatives on how the Administration plans to collaborate with the Legislature during the COVID-19 pandemic emergency and expressed the need for the Legislature to define its parameters and expectations of the Administration more clearly during emergency situations.
Looking Ahead to Senate Subcommittee No. 3, Full Budget Process
On Sunday, the Senate Budget & Fiscal Review Subcommittee No. 3 on Health and Human Services will convene a hearing to examine the Governor’s May Revision proposals. The Senate and Budget Fiscal Review Committee will then convene its full committee on Thursday, May 28 to finalize its budget framework and act on the 2020 Budget Act.
The Assembly will convene a Committee of the Whole on Tuesday, May 26, an historic move in which the entire Assembly will convene to hear the Newsom Administration’s May Revision proposals. No action will be taken in the Committee of the Whole, but the Assembly’s 80 members will have the opportunity to hear from the Newsom Administration and the LAO on the Administration’s revised budget. Further representing a potential departure from the Legislature’s traditional budget process, it is unclear whether a budget conference committee will be convened to reconcile divergent budget items between the two houses.
CHEAC will continue to provide budget updates as information becomes available as the Legislature moves to adopt a final budget by June 15.