LAO Publishes 1991 Realignment Report

The California Legislative Analyst’s Office (LAO) recently released its long-awaited report, “Rethinking the 1991 Realignment,” which examines the impacts of recent changes to 1991 Realignment, including the impact of the In-Home Supportive Services (IHSS) Maintenance of Effort (MOE) agreement that was reached in 2017. The report details the history of 1991 Realignment, discusses increased program costs and responsibilities, and evaluates the benefit of 1991 Realignment to the State and counties.

In assessing 1991 Realignment and impacts, the LAO established four guiding principles for Realignment:

  • Counties’ share of costs reflect their ability to control costs in the program;
  • Revenues generally cover costs over time;
  • Flexibility to respond to changing needs and requirements; and
  • Funding is transparent and understandable.

Due to various changes to 1991 Realignment without corresponding changes to its funding structure, the LAO concludes that 1991 Realignment no long meets the core principles of a successful state-county fiscal partnership. Counties’ share of several program costs exceeds their ability to control those costs, and overall Realignment revenues are not sufficient to cover costs of programs over time. Further, LAO determines the flow of funds in Realignment is extremely complex and not flexible enough to allow counties the ability to respond to changing needs and requirements.

The LAO outlines a number of options to better align the fiscal structure of 1991 Realignment and achieve its four guiding principles. The options available include:

  • Change cost-sharing ratios by reducing county share for IHSS and increasing county share for another program;
  • Better align revenues and costs by updating growth allocations and increasing funding to address existing shortfalls; or
  • Other improvements to align principles including applying lessons from 2011 Realignment, tracking Realignment revenues and costs, encouraging counties to maintain reserves, and considering long-term impact of policy decisions on ability to control program costs.

The LAO report is expected to contribute to the ongoing conversations between key entities at the state and local level regarding 1991 Realignment and the impacts of the IHSS MOE. The full LAO report is available here.