February 21, 2020 Edition
On Wednesday, Governor Gavin Newsom delivered his second
State of the State Address before a joint session of the Legislature. Despite
taking a moment to recognize the successes in our state, including a strong
reserve, growing economy and recent investments made in concert with the
Legislature last year, he dedicated the bulk of his remarks to California’s
homelessness crisis, referring to it as a “disgrace”. He acknowledged “our
crisis was not created overnight and will not be solved overnight” and referenced
failures in California’s mental health system and disinvestments in the social
safety net, income inequality and California’s housing shortage as the cause.
The Governor highlighted activities since signing his
Executive Order including the deployment of trailers to Oakland and Los Angeles
County and several jurisdictions slated for the next round. He announced the
Administration is making nearly 300 properties available to local jurisdictions
free of charge, with template leasing language prepared. He also highlighted
the opportunities being created through CalAIM (Medi-Cal Healthier California
for All) and his investment of $695 million to support its success.
Governor Newsom spent a considerable amount of time
discussing mental health, policy changes over previous decades, and limitations
to getting individuals the care they need. He mentioned reforms needed to the
Mental Health Services Act (MHSA) to focus funding on street homeless, at-risk
and foster youth and others involved in the criminal justice system, as well as
allowing funding to be used to treat substance use disorders.
He discussed his vision for the California Access to Housing
Fund, where he proposed an investment of $750 million to invest in homeless
solutions. Permissible uses of the funding included expanding and stabilizing
board and care, providing rental subsidies and rapid rehousing, and funding
innovative housing models. However, he also called for accountability and clear
metrics and “deep regional coordination.”
The Governor rounded out his remarks with a personal story of
an individual that was once homeless with a substance use disorder and in need
of services and support, but who now – three years later – is a community
volunteer and has his own home. He emphasized homelessness can be solved and closed
with a called for action.
The full transcript of the Governor’s remarks are available here.
Video footage of his remarks can be found on the Governor’s Facebook
page.
On Wednesday, the Assembly Budget Subcommittee No. 1 on
Health and Human Services, chaired by Assembly Member Joaquin Arambula, and the
Assembly Budget Subcommittee No. 4 on State Administration, chaired by Assembly
Member Jim Cooper, convened a joint informational hearing on the Governor’s
2020 budget proposals on homelessness. The hearing took place after the
Governor’s State of the State Address, which largely focused on homelessness
and set the tone for much of the hearing discussion. Assembly Member Arambula
led with acknowledging the Governor’s leadership in this area and underscored
his encouragement of the State to lean in. Assembly Member Cooper’s opening
remarks acknowledged that two aspects of homelessness that must be addressed,
getting people off the streets and preventing people from ever entering
homelessness.
Lourdes Morales from the Legislative Analyst’s Office (LAO) provided
committee members with an overview of the Governor’s budget proposals, walking
through their recently published report.
She led with a few key statistics framing the homelessness crisis in our state
with California having 27 percent of the nation’s homeless population, of which
23 percent are severely mentally ill and 27 percent are chronically homeless.
Key takeaways from her presentation included concerns that the regional
approach included in the Governor’s California Access to Housing and Services
(CAAHS) Fund proposal could further complicate the state and local relationship
to deliver services. In addition, while sharing that the Governor’s investments
merit consideration, she cautioned about the lack of a cohesive approach.
The hearing included a state panel with Jennifer Troia,
California Department of Social Services (CDSS), Jacey Cooper, Department of
Health Care Services (DHCS), and Stephanie Clendenin, Department of State
Hospitals (DSH). During the panel, Ms. Troia shared some of the early thinking
around the CAAHS fund given CDSS is tasked with the administration of the
funding and stressed the Governor’s interest in incentivizing collaboration.
Ms. Clendenin focused her remarks on the Community Care Collaborative Pilot
project aimed at addressing challenges with the incompetent to stand trial
(IST) population. Ms. Cooper’s remarks highlighted opportunities within
Medi-Cal Healthier California For All (also known as CalAIM) through the
proposed enhanced care management (ECM) benefit and in-lieu of services (ILOS).
She framed ECM services as high touch enhanced care that would be community
based and serve key target populations such as individuals that are homeless,
recently incarcerated and those with severe mental illness or substance use
disorders. She provided a few examples of the ILOS that plans could offer such
as housing navigation, first and last month’s rent and utility deposits, liaison
services to assist people with staying housed, recuperative care, and day
habilitation for the homeless.
The final panel provided discussion on additional
homelessness funding priorities. Assembly Members Santiago and Wicks and Phil
Ansell from Los Angeles County presented their request for $2 billion in
ongoing funding to address homelessness statewide, with 55 percent for
continuums of care in counties, 40 percent for cities and 5 percent for
affordable housing. Michelle Cabrera, Executive Director of the County
Behavioral Health Director’s Association (CBHDA), provided further demographics
on California’s homelessness population and discussed services provided by
county behavioral health. She discussed opportunities for behavioral health in
CalAIM and additional resources needed to further address homelessness
including dedicated funding board and care. Other presenters included
representatives from the San Francisco Department of Public Health,
underscoring the need for board and care funding and a County Employment
Resources Specialist and SEIU representative reaffirming the value of services
provided by county staff.
The hearing agenda can be viewed here
and a recording of the hearing can be viewed here.
The Legislative
Analyst’s Office (LAO) recently released its report examining the Governor’s
2020-21 Medi-Cal Budget, which proposes to invest $25.9 billion General Fund
($103.5 billion total funds) in 2020-21 representing a $2.9 billion (12.4
percent) increase over estimated 2019-20 levels. According to the LAO, the
increase is largely due to workload budget adjustments, as well as funding to
support a series of new policy proposals, including $348 million General Fund
($695 million total funds) for the Medi-Cal Healthier California For All
(CalAIM) initiative.
The LAO
provides an overview of the full Medi-Cal budget picture and discusses a number
of federal actions that could have significant impacts on California’s Medi-Cal
program and budget. Among the federal actions examined by the LAO is the
managed care organization (MCO) tax proposal which was recently rejected by the
U.S. Centers for Medicaid and Medicare Services (CMS). California recently
submitted a modified MCO tax proposal for federal consideration which, if
approved, would generate a smaller annual General Fund benefit ($1.3 billion to
$1.7 billion) than the original proposal (around $2 billion) and have different
impacts on MCOs’ tax liability. The LAO indicates federal approval of the modified
proposal remains uncertain; however, the Governor’s 2020-21 Budget proposal
does not include any receipt of revenues from the MCO tax given the need for
federal approval.
Another federal
action of consideration is the proposed Medicaid Financial Accountability Rule
(MFAR) which would require significant changes to Medi-Cal financing
mechanisms, potentially resulting in several billion dollars of higher General
Fund costs. The ultimate impact of the proposed regulations is highly uncertain
and depends on what provisions are ultimately implemented, if any. The LAO
recommends the Legislature to approach proposals to significantly increase
ongoing General Fund expenditures in the 2020-21 budget with caution given the
potential for a sweeping fiscal impact on Medi-Cal financing under the proposed
rule.
The LAO goes on
to further examine various proposals made by Governor Newsom such as those to
transition Medi-Cal pharmacy benefits to fee-for-service (FFS), expand
comprehensive Medi-Cal coverage to income-eligible older adults regardless of
immigration status, proposed skilled nursing facility (SNF) rate reforms, and
the end of dental managed care. The LAO examines increased oversight of county
Medi-Cal administration and recommends the Legislature require the Newsom
Administration to provide an update on county performance and efforts to
improve performance of county Medi-Cal administration prior to approving the
Governor’s proposals related to this area.
The LAO’s
Medi-Cal budget report does not included an analysis of the Medi-Cal Healthier
California for All (CalAIM) initiative; a separate report on this topic is
forthcoming. The full LAO report on the 2020-21 Medi-Cal budget is available here.
Governor Newsom has released a number of cannabis related
proposals as part of his 2020-21 budget package including changing how cannabis
taxes are collected in California and consolidating cannabis licensing
functions into a new State Department. Last week, the Legislative Analyst’s
Office (LAO) released a brief analysis of these
proposals and were generally supportive of both concepts.
Their recommendation included agreeing with the Governor’s
proposal to modify California’s cannabis tax structure to simplify how taxes
are remitted to the State as well as which entity is responsible for remitting
those amounts. The LAO also recommended the Legislature consider broader
changes to California’s cannabis tax structure and rates including replacing
the state’s existing cannabis taxes (retail excise and cultivation) with a tax
designed to reduce harmful cannabis such as a potency tax or a tiered ad
valorem tax (set as a percentage of price with different rates based on potency
and/or product type).
Furthermore, the LAO agreed that consolidating all three
state licensing agencies (currently the Bureau of Cannabis Control, the
Department of Food & Agriculture, and the California Department of Public
Health) was a reasonable proposal and would allow for a single statewide entity
housing both cannabis-related licensing and enforcement functions that could
improve the accountability and effectiveness of the State’s cannabis
activities. On a final note, the LAO also recommended the Legislature use its
oversight role for how Cannabis Tax Fund revenues are generally spent and to
delineate clear outcomes for how these funds should be used (such as those
allocated to Go-Biz for the Community Reinvestment grant program and the Youth
Education Prevention, Early Intervention, and Treatment account programs among
others).