February 21, 2020 Edition

Governor Newsom Dedicates State of the State Remarks to Homelessness

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.

Assembly Budget Subcommittees Convene Informational Hearing on Homelessness

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.

LAO Issues Report on 2020-21 Medi-Cal Budget

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.

LAO Report Reviews Governor’s Cannabis Proposals

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).