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HomeMy WebLinkAboutMINUTES - 09181984 - T.1 TO: ' BOARD OF SUPERVISORS ContraFROM: Phil Batchelor, County Administrator Costa DATE: September 17, 1984 C"rty SUBJECT: Proposition 41 , The Public Assistance Initiative SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATION: Oppose the passage of Proposition 41 , The Public Assistance Initiative on the November 6, 1984 ballot. BACKGROUND: On August 7, 1984, the Board asked our office to analyze Proposition 41 , the Public Assistance Initiative and make recommendations on what position the Board should take on the initiative. This report was prepared with substantial assistance from the staff of the Social Services and Health Services departments. If approved by the voters, this initiative would limit the amount of funds which could be spent in California for some, but not all , public assistance programs beginning July 1 , 1986. Among programs subject to this limitation are: (1 ) AFDC, including various employ- ment and training programs and foster care; (2) Medi-Cal ; and (3) family planning. Exempted are programs primarily involving the aged, blind, and disabled, and county programs. Proposition 41 provides for the following: 1 . It creates a Public Assistance Commission consisting of seven (7) members, as follows: 2 county welfare directors 2 county administrative officers 3 county supervisors Members of the Commission are appointed by the Governor and serve at his pleasure. The Governor designates the Chair of the Commission. Members receive a $50 per diem plus expenses. In addition, the Secretary of Health and Welfare and the Director of Finance serve ex officio without vote. Also, one member of the Senate appointed by the Senate President Pro Tempore and one member of the Assembly appointed by the Speaker serve as non-voting members. 2. The principal function of the Commission is to survey the other 49 states to gather information on their expenditures for public assistance grants , administra- tive costs, and eligibility criteria and present reports on these items to the Q� CONTINUED ON ATTACHMENT:X YES SIGNATURE: X RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE X APPROVE OTHER SIGNATURE(S). 4.j ACTION OF BOARD ON September 18. 1984 APPROVED AS RECOMMENDED x OTHER VOTE OF SUPERVISORS } UNANIMOUS (ABSENT I. III ) I HEREBY CERTIFY THAT THIS IS A TRUE AYES: NOES: AND CORRECT COPY OF AN ACTION TAKEN ABSENT.".' ABSTAIN: AND ENTERED ON THE MINUTES OF THE BOARD County Administrator OF SUPERVISORS ON THE DATE SHOWN. CC: County Welfare Director ATTESTED Acting Health Services Director CCC Mayors Conference* PHIL BATCHELOR, Clerk of the Board Cities* of Supervisors and County Administrator News Media M982/7'89 00285 ����� * c/o C/A BY �a'�`r"''� - DEPUTY -2- 2. (continued) Legislature and the Governor by January 31 of each year. The grant and administrative expenditures are to be expressed in terms of average state per capita expenditures. The Commission is also to recommend how to amend statutes to achieve the spending levels required by the initiative. By the end of two years from the effective date of the initiative, the Commission is to present a report to the Legislature and the Governor on several specific issues related to public assistance programs. $250,000 is appropriated annually for the Commission. 3. The initiative affects programs provided for in Part 3 (commencing with Section 11000) of the Welfare & Institutions Code, with several exceptions. Generally, the programs affected include AFDC (including AFDC-FG, AFDC-U, and AFDC-FC) , Medi-Cal , and Family Planning. 4. The initiative provides that for each program, expenditures shall not exceed the national average state per capita expenditures for that program (excluding California) plus 10%. Some transfers between programs is permitted by the Legislature, but the overall average cannot exceed the 110% figure. 5. Likewise, state and county administrative costs cannot exceed 110% of the national average state per capita expenditures (excluding California) although the limits appear to lump all of the programs together. 6. The initiative permits , but does not require, the use of any reduction in State General Fund expenditures to improve the scope and quality of public assistance programs for the aged, blind and disabled, including the programs excluded from inclusion in the limitations set by the initiative. 7. The initiative allows amendment to the initiative by the Legislature by a two-thirds roll call vote and approval by the Governor, but only after 20 days after the bill in its final form has been distributed to the Commission for distribution to the news media and to any person who has requested to be so notified. The only other method provided for amendment to the initiative is a statute approved by the voters. 8. The initiative becomes effective February 1 , 1985 except for the reduction in benefit levels and administrative costs which are effective July 1 , 1986. The Commission thus would be created February 1 , 1985 and their first set of reports would be due January 31 , 1986 to affect expenditures beginning July 1 , 1986. 9. The initiative, except for the overall limit on benefits and on administrative costs, does not tell the Legislature how to achieve the necessary reductions. The Legislature thus has several possible options for complying with the provisions of the initiative. Because California's welfare program must continue to comply with federal law, there are only a limited number of options available to the Legislature to comply with the terms of the Initiative and still comply with federal law. Generally, the changes which can be made within federal law include the Aid to Families with Dependent Children--Unemployed Parent (AFDC-U) Program, which is optional with the federal government. This program generally aids families where both parents are in the home, but are unemployed and are available for and seeking employment. If a state implements the AFDC-U Program, the federal government will pay 50% of the cost of the program, but a state can also terminate the program. The other major optional program is the Medically Needy portion of the Medi-Cal program. This program provides medical care for families that have enough income to keep them off the AFDC program, but not enough to cover the cost of medical care. In ,some. cases , families are required to pay a portion of the cost of their medical care (spenddown) before the Medi-Cal program takes over. Again, in a state that chooses to implement the Medically Needy Program the federal government pays its portion of the cost of medical care, but the program is optional from the federal government' s point of view and the state can terminate the program. 002('F -3- The other major way in which a state can control costs is in the level of payments it makes to families on welfare. The payment levels are entirely within the discretion of the Legislature and can be increased or decreased at will . There are also some optional services provided by the Medi-Cal Program which are not required by federal law and could be reduced or eliminated. These include dental care, wheelchairs, eyeglasses, outpatient prescription drugs, and several other similar services. Finally, the state can reduce the level of payment to Medi-Cal providers, such as physicians and hospitals. Estimates of the expenditure reductions needed to comply with the Initiative are in the areas of $2 billion in federal , state, and county expenditures plus $226 million in administrative expenditures. One analysis places the required reductions closer to $3 billion, depending on a number of assumptions that must be made. Because the Initiative leaves the Legislature with the responsibility of determining how to implement the necessary reductions , it is virtually impossible to predict exactly what will happen. In addition, the amount of any reduction required is effectively delegated to the Legislature of the other 49 states. Their actions to increase or decrease welfare benefits and administrative costs will directly impact what must be done in California and how much of a reduction will be necessary. In addition, the various options cannot be viewed as discreet actions since an action to eliminate individuals from, for instance, AFDC-U also impacts their eligibility for Medi-Cal . What is clear is that the big winner of any combination of actions is the federal government. The federal government effectively pays 50% of the cost of most welfare programs and their administrative costs. Counties pay only about 5% of the welfare payments and 25% of the administrative costs for the welfare programs. Since a state initiative cannot require any specific action on the part of the federal government, the passage of Proposition 41 will simply return between $1 billion and $1 .5 billion to the federal government which Congress will be free to spend in whatever way it wishes. The Initiative likewise does not require any state General Fund savings to be returned to the taxpayer. The savings will be available for the Legislature to spend on other programs and priorities if it wishes. Therefore, despite the substantial reductions in expenditures mandated by Proposition 41 there is no guarantee that any of these savings will be passed on to the taxpayer. In attempting to assess the impact of Proposition 41 on the County General Fund, it is necessary to make several assumptions about what the Legislature will do and how those actions will impact counties. In addition, it is necessary to make several assumptions about what private medical providers will do if their reimburse- ments under the Medi-Cal Program are reduced. No private provider has to accept Medi-Cal patients and at some level of reimbursement it is assumed that some will stop participating for purely economic reasons. At the same time, we must recognize that Proposition 41 in no way changes the current statutory responsibility that counties have to provide food, clothing, shelter, and medical care for those unable to provide for themselves and who are not eligible for any other federal or state program. This open-ended responsi- bility will be impacted by almost any combination of actions taken by the Legis- lature to implement Proposition 41 . Anyone cut off of welfare or Medi-Cal has a perfect right to turn to the county for help and many would be eligible--in nearly every case--at 100% county cost. Therefore, while the federal and state governments will see substantial savings from the passage of Proposition 41 , counties will be severely impacted. To assess this impact, we have listed a number of impacts from various changes which the Legislature might make. These include the following: 0il2PJ�, -4- IMPACT OF VARIOUS ACTIONS ON COUNTY PROGRAMS 1 . If the AFDC-U program were eliminated and the medically needy program were retained, the children would remain eligible to Medi-Cal , but the parents would become a county responsibility for both General Assistance and medical care because they have little or no income. 2. If the medically needy program is reduced or eliminated, those individuals become a county responsibility for medical care, but probably not for General Assistance since they have other income or property. 3. Counting food stamps and housing subsidies as income will throw some AFDC families with income off AFDC. If the medically needy program is continued, they remain eligible for it and most probably will not be eligible for General Assistance since they have income. 4. If optional Medi-Cal benefits are reduced or eliminated, the county will have to reduce its benefits accordingly and not continue to provide such optional benefits. 5. If the AFDC-U and medically needy programs were both eliminated, counties would probably be responsible for both cash grants under GA and medical care costs under Welfare & Institutions Code Section 17000 for most of the people eliminated from the state program, although the medically needy probably would not be eligible for General Assistance since they have income. 6. If provider reimbursements are reduced under the Medi-Cal program, many hospitals and private providers would refuse to participate, putting pressure on the county to serve them. 7. If AFDC benefits are reduced and the medically needy program is reduced or eliminated, anyone falling off AFDC is a county responsibility for medical care, but probably not for General Assistance since. they have income. 8. If AFDC benefits are reduced and the medically needy program remains as is, there should be relatively little impact except for any losses from shares of cost patients can't pay. 9. AFDC-FC payments will have to be maintained, resulting in increased pressure to cut AFDC-FG, AFDC-U and Medi-Cal . 10. State and county administrative costs will have to be cut by 47% and this will translate into a 47% reduction in this county with no reduction in Social Services other than the overhead cost shift which will occur. To assess what the Legislature is likely to do, we have reviewed the impact of various actions they might take and have, for purposes of this analysis, concluded that the Legislature will take the following actions: ASSUMPTIONS RE: LEGISLATIVE ACTIONS The medically needy program will not be eliminated because of the adverse impact on the aged, blind, and disabled. 2. Optional Medi-Cal benefits will be reduced and eliminated as per Mr. Gold's assumption on page 24 of his paper because they are optional . 3. Food Stamps and housing subsidies will not be taken into account as income because of the unfair appearance of doing so. Q02F8 -5- 4. The AFDC-U program will be eliminated with the children remaining eligible for Medi-Cal and the parents becoming a county charge for medical care and the families being eligible for General Assistance, but with an enhanced workfare program in place. 5. Medi-Cal provider reimbursement rates will be reduced by 10% and in this county only the county hospital and the three district hospitals will receive inpatient contracts. 6. AFDC grant levels will be reduced by an amount necessary to bring overall expenditures within the 110% limitation. Based on these assumptions we have made several assumptions regarding what will happen in this County. We must emphasize that these are only assumptions. A different set of assumptions may be equally valid and would produce somewhat different costs. However, we have agreed to use these assumptions in order to arrive at some assessment of county General Fund impacts. ASSUMPTIONS FOR COUNTY IMPACT 1 . All AFDC-U families will be terminated. 2. 25% of AFDC-U families will return to AFDC-FG within one year. 3. Remaining 75% of AFDC-U children will be eligible for Medi-Cal with no share of cost. 4. Remaining AFDC-U parents will be eligible for county medical care at 100% county cost. 5. All 75% of the AFDC-U families will be eligible for General Assistance, but one-third (1/3) will not qualify because of workfare. Thus, 50% of original AFDC-U caseload will be on General Assistance. 6. Health Services will restrict Medi-Cal optional benefits to the same extent the state does so there will be no cost increase to the county. 7. District hospitals in this county will not increase their current percentage of Medi-Cal patients; thus all Medi-Cal patients no longer served by private hospitals will go to county hospital . 8. County hospital inpatient contracts will be cut by 10%, partially offset by increased census. 9. Private Medi-Cal provider reimbursement reductions of 10% will result in 25% of existing providers withdrawing from the Medi-Cal program. The resulting patients will come to county clinics. 10. County hospital outpatient reimbursement will be cut by 10% partially offset by increased utilization from private sector withdrawal . 11 . AFDC-FG grant levels will be cut by 25%. 12. AFDC-FC grant levels will not be affected. Working with these assumptions, the Social Services and Health Services departments have attempted to assess the impact of those assumptions on county costs. The attached chart shows the changes which would occur. The bottom line is that, given the assumptions we have made, county costs would increase by $6.9 million in the first year. Since these cost increases must be met, and since the County has little or no ability to increase general revenue sources in order to meet these increased expenditures, reductions in most other county programs would be required in order to free up enough money to meet these new welfare requirements. 0025. -6- The County would also be at risk for increased audit exceptions caused by an arbitrary reduction in administrative costs which may cause additional errors to be made. Finally, the impact on the general economy of the county has not been addressed in this analysis. The loss of federal and state funds presently being spent on rental of housing, food and other necessities, will have a clear impact on such elements of the private sector as the rental housing market, grocery store sales, sales tax revenue, and federal and state income taxes, to an extent impossible to measure at this point. For these reasons, and because of the impact on the County General Fund, we recommend the Board oppose Proposition 41 . 00290 GENERAL FUND IMPACT PROPOSITION 41 (FIRST YEAR) COST REDUCTIONS COST INCREASES (COUNTY) (COUNTY) SOCIAL SERVICES Discontinue AFDC-U Aid Grants $ 682,000 Staff Costs 254,000 936,000 25% U Families--Return to FG Aid Grants - 1st year -0- $ 56,500 Staff Costs -0- 31 ,750 -O- 88,350 U Families Eligible for GA Aid Grants -0- 5,856,000 Staff Costs -0- 287,300 Work Test/Workfare -O- 47,000 -0- 6,190,300 25% Cut in AFDC-FG Grants Aid Grants 698,000 -0- SUBTOTAL $1 ,634,000 $6,278,650 HEALTH SERVICES Increased MIA' s -0- $2,084,940 SUBTOTAL -0- $2,084,940 TOTAL COSTS $1 ,634,000 $8,363,590 REVENUES Medically Indigent Children -0- ($1 ,042,420) AFDC-U ($ 845,420) -0- Outpatient ($ 408,800) -O- TOTAL REVENUES ($1 ,254,220) ($1 ,042,420) GRAND TOTAL $ 379,780 $7,321 ,170 NET COUNTY COST = $6,941 ,390 CAO 9/11/84