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HomeMy WebLinkAboutMINUTES - 03092004 - C.41 CONTRA TO: BOARD OF SUPERVISORS OTA FROM: John Sweeten,County Administrator +�� Dr.Gilliam Walker, Health Services Director ooMr�`c" 1"� COUNTY DATE: March 9, 20041,, SUBJECT: Proposed Reallocation of Realignment Revenues SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATION(S): 1. CONCLUDE that now is not the time for legislation to reallocate growth in realignment revenues to the "under-equity" counties, since re-opening the realignment issue could result in realignment inadvertently becoming part of the budget solution for the State of California, to the detriment of all counties. 2. RECOMMEND that the Urban Counties Caucus, California State Association of Counties and other counties oppose for the time being any legislation to reallocate realignment revenue. BACKGROUND/REASON(S) FOR RECOMMENDATION($): When realignment was enacted in 1991, the State allocated a new one-half cent sales tax and 24.33% of the vehicle license fees to the counties in exchange for greater responsibility for health and human services program funding. Each county's initial allocation was based on historic ("baseline") expenditures, supplemented by subsequent growth in the two sources of revenue. Revenue growth was distributed first to caseload growth in the Social Services account, then to the Medical Services account, then to the Health Services and Mental Health accounts and finally to non-caseload driven programs within the Social Services account. CONTINUED ON ATTACHMENT: ;e_YES SIGNATURE: -Ia� /�/ p,--RECOMMENDATION OF COUNTY ADMINISTRATOR_RECOMMENDATION OF BOA TTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOAR APPROVED AS RECOMMENDED_X_OTHER ,l VOTE OF SUPERVISORS 1 HEREBY CERTIFY THAT THIS IS A UNANIMOUS(ABSENT 1, IV ) TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ABSENT: ABSTAIN: ON MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN. Contact:Sara Hoffman,335-1090 )arca 9, 20(Y4 ATTESTED cc: CAO JOHN SWEETEN,CLERK OF Health Services Department THE BOARD OF SUPERVISORS Urban Counties Caucus AND COUNTY ADMINISTRATOR CSAC Orange County �� €� ` qty BACKGROUND/REASON(S) FOR RECOMMENDATIONS (cont'd): As a part of the implementation legislation, an effort was made to address differences among counties in the base level of State funding each received in the above program areas. This involved the creation of an "equity subaccount" for each of the above accounts, into which a portion of all realignment revenue growth was deposited for allocation to "under-equity" counties in proportion to each county's per capita share of poverty in the State. Approximately $246 million in equity funds were allocated to those "under-equity" counties. However, the statutory cap on these equity allocations was reached in 2401, and the under-equity counties are not longer receiving additional revenues. Orange County's analysis shows that 21 counties currently are "under-equity," for a total funding shortfall of $240 million annually. Contra Costa County is an under-equity county with an estimated net shortfall of$3.9 million annually(over-equity by$1.5 million in mental health and under-equity by$5.4 million in health). Most counties agree that there are multiple issues of concern regarding realignment. For example, In-Home Supportive Services costs have skyrocketed in recent years, absorbing virtually all of the realignment revenue growth. Nonetheless, realignment has provided a relatively stable source of predictable revenue that has permitted counties to maintain important services to the public. Introducing legislation during a year of severe State budget shortfalls could result in realignment being part of a State budget solution, to the detriment of all counties. Last year, Governor Davis proposed realigning $8.2 billion in state funded programs to counties. There were numerous problems with the proposal, including revenue adequacy and volatility. His proposal would have increased the sales tax by one cent, re-instituted the 10 and 11% income tax brackets and increased the cigarette tax by $1.14 per pack. As we know, sales tax revenues track the economy, going down when the demand for county services are highest. The high income tax bracket is a volatile revenue source, as seen in recent years. The cigarette tax is a declining revenue source. The proposed programs for transfer were also of serious concern, including higher shares for Medi-Cal medical benefits, Medi-Cal long term care and In-Home Supportive Services funding. These are rapidly growing programs that will continue to grow with the aging of the population, and programs over which counties would have little, if any, ability to control costs. Last year, the counties' message to the State was clear: realignment is complex and should not be part of a budget "solution," but rather a deliberate discussion as part of restructuring the state/local relationship. Introducing realignment legislation at this time to address the under-equity/over-equity issue could easily put realignment back into the budget solution mix. Now is not the time to deliberately expose counties to that possibility.