ITUP Blog: Key Highlights in the Governor’s May Revision

May 28, 2021

By Katie Heidorn and Marissa Kraynak

Governor’s Fiscal Year 2021-22 Budget May Revision

Budget Deficit Becomes Budget Surplus

On May 14, 2021, Governor Gavin Newsom released the May Revision of the Fiscal Year (FY) 2021-22 Budget. Last year, in the wake of the uncertainty caused by the COVID-19 pandemic and the resulting recession, the Governor projected a budget deficit of $54 billion. The Legislature and Governor took a “wait and see” approach to the Budget Act of 2020 and made few cuts to the budget to allow for more information on how the state and national fiscal outlooks would change throughout the pandemic.

The May Revision, instead of confirming the budget deficit, projects an unprecedented one-time $75.7 billion surplus, with an additional $25 billion in federal aid, for a total of $100 billion to support the Governor’s proposed “California Comeback Plan”. The Legislative Analyst’s Office (LAO) concurs with the surplus amount, although they note that they believe that about half is available for discretionary spending—$38 billion—and that the other half is required to be spent on specified purposes, including $27 billion for schools and community colleges, $8 billion in reserve deposits, and $3 billion in debt payments.

Spending the Surplus:

Of that available $38 billion, the LAO notes that the Governor plans to spend $26 billion of it on approximately 400 spending proposals. With so many proposals to sift through across all policy areas, it is important to see where and how Health, Human Services, Housing, Homelessness, and other relevant initiatives fit with the rest of government spending. The LAO produced charts, shown below, to visually highlight the spending proposed for the various policy areas.

The Legislature and the Governor will need to make important decisions in the coming weeks to balance their priorities across all policy areas and government spending. Below are two charts from the LAO that illustrate how the Governor proposes to allocate over $26 billion in General Fund discretionary monies.

What’s Next—Budget Process, Resources, and Deadlines

Timeline:

Over the coming weeks, the Legislature will hold hearings on the budget, and advocacy and interest groups will lobby both the Legislature and the Administration to ensure decisionmakers hear their perspectives.
The Legislature and the Governor will then negotiate to produce a final budget. The Legislature is required to produce a “balanced budget” and send it to the Governor by Monday, June 15, 2021.
Due to the requirement that a bill be in print for at least 72 hours prior to legislative action, watch for the budget bill to be in print by Friday, June 12, at the latest, so that it can be sent to the Governor on June 15.
The Governor then has 15 days to sign it so that it will be law by Wednesday, July 1, 2021, the start of the new fiscal year.

“Budget Bill Junior” and Trailer Bills:

While there is a requirement that the Legislature sends the main budget bill to the Governor for signature by June 15, the Legislature also typically uses additional policy-area-specific bills called “trailer bills” to provide additional details around the expenditures contained in the budget bill.
These bills do not need to be sent to the Governor by June 15 and may be passed throughout the summer and before the Legislative Session ends in mid-September.
Similarly, the Legislature may choose to make revisions to the main budget bill with a “budget bill junior” before the Legislative Session ends in mid-September.

Key Government Resources

Below, we’ve provided key places to find both summary level and detailed information on the May Revision, as well as links to trailer bill language (TBL) and budget change proposals (BCPs).

Administration/Executive Branch Resources:

A. Governor’s Budget/Department of Finance (DOF):

a. This is the official page for the Governor’s Budget. It includes both detailed fiscal information (“budget detail”) and summary level information (also known as “summary” or “A Pages”).

b. It is updated at the January Budget Release, May Revision, and upon signature of the Final Budget Act.

c. You can also find past budgets here.

B. Key May Revision Summaries

a. Health and Human Services

b. Housing and Homelessness

c. Pandemic Response and Federal Assistance

d. Equitable and Broad-Based Recovery (includes Golden State Stimulus program and Broadband)

C. Department-Specific Highlights: Some departments release a “highlights” document that delves further into their department-specific budget proposals and changes.

a. Department of Health Care Services (DHCS) Budget Highlights

b. California Department of Aging (CDA) Master Plan for Aging Investments

c. California Department of Public Health (CDPH) Budget Highlights

d. California Department of Social Services (CDSS) Local Assistance Summary Highlights

D. Proposed Trailer Bill Language List (TBL)

E. Proposed Budget Change Proposals (BCPs)

Legislative Resources:

A. Legislative Analyst’s Office (LAO) Initial Comments on the 2021-22 May Revision

B. Assembly Committee on Budget

a. Highlights of the Governor’s Proposed 2021-22 May Revision

b. Subcommittee #1 on Health and Human Services

C. Senate Committee on Budget and Fiscal Review

a. Overview of the May Revision

b. Subcommittee #3 on Health and Human Services

Key Highlights from the Governor’s FY 2021-22 May Revision

Below we highlight key health and human services proposals in the FY 2021-22 May Revision, as well as proposals that promote the state’s overall economic recovery, improve health equity, and address the social determinants of health. As discussed above, these highlights represent a small fraction of the approximately 400 proposals in the May Revision.

1. Economic Recovery and Direct Assistance for Californians

The COVID-19 pandemic and the resulting recession caused California’s unemployment rate to increase from a low of 4.3 percent in February 2020 to a record high of 16.0 percent in April 2020. The pandemic also exacerbated underemployment, which averaged 17.1 percent in 2020, over twice as high as the 2019 annual average rate of 8.3 percent. [i] As of March 2021, California has added back 1.2 million jobs—43.7 percent of the 2.7 million jobs lost in March and April 2020.[ii] Almost half of all jobs in leisure and hospitality, a low-wage sector, were lost; higher wage sectors such as professional and business services largely shifted to working from home.[ii]

The May Revision’s Golden State Stimulus Package includes about $8 billion in direct aid for taxpayers and their families that make up to $75,000 annually, and did not received a stimulus earlier this year. The consumers impacted by this proposal are:

Low- to Middle-Income Californians will receive a one-time $600 direct payment if they did not already receive a Golden State Stimulus. These direct payments are expected go to 4.9 million tax filers and cost about $5.6 billion.
Families with dependents may receive an additional $500 one-time stimulus payment. This stimulus is expected to cost $2.2 billion dollars and go to 4.3 million tax filers.
Undocumented Families, ITIN taxpayers, may receive a $500 one-time stimulus payment. This stimulus is expected to reach 520,000 undocumented families and cost $260 million. Undocumented families are eligible for the “Families” stimulus as well, so they may receive up to $1,000.

2. Continued COVID-19 Pandemic Response

Overall COVID-19 Emergency Response: Overall, the May Revision estimates that California will have spent $12.3 billion total funds (no net General Fund (GF) impact) in FYs 2020-21 and 2021-22 on the pandemic response. [iii] For more information, including charts of pandemic spending, see the Budget Summary: COVID-19 Pandemic Response. Also, visit COVID19.ca.gov for the most up-to-date COVID statistics statewide and by county.

Vaccine Distribution: To date, over 31 million vaccine doses, 6.3 million in the hardest-hit communities, have been administered in California. Currently, all Californians ages 12 and older are eligible to receive the vaccine. In the American Rescue Plan Act (ARPA), the federal government assumed all responsibility to cover vaccine administration cost for Medi-Cal members beginning April 1, 2021.[iv] For more information, visit the Governor’s Vaccinate ALL 58 page and “Vax for the Win” Vaccine Incentive Program page.

Pandemic Response Review: The May Revision includes $3 million for the California Department of Public Health to conduct an assessment of the state’s public health and emergency response to the pandemic. [v]

Support for Public Hospitals and Health Systems Recovery: The May Revision includes $300 million one-time Coronavirus Fiscal Recovery Fund monies to assist public health care systems in covering costs associated with critical care delivery needs provided during and beyond the pandemic. [v]

3. Medi-Cal and Covered California—Expanding Health Care Coverage and Enrollment Services

The state’s Medicaid program, Medi-Cal, is administered by the Department of Health Care Services (DHCS). The May Revision includes a Medi-Cal budget of $115.6 billion ($21.5 billion GF) in 2020-21 and $123.8 billion ($27.6 billion GF) in FY 2021-22. [vi]

Impact of Increased Enrollment in Medi-Cal: The May Revision assumes that the Medi-Cal caseload will increase by 7.1 percent from FY 2019-20 to FY 2020-21 (assuming 13.6 million members) and increase by 6.6 percent from FY 2020-21 to FY 2021-22. [vi] In FY 2021-22, the Medi-Cal program is projected to cover about one-third of the state’s population, or about 14.5 million Californians. This projection is 1.1 million individuals less that what was projected in the January 10 Budget. [vii] The May Revision estimates the associated cost of the increase in Medi-Cal caseload to be $4.2 billion total funds ($1.1 billion GF) in FY 2020-21 and $9.4 billion total funds ($2.5 billion GF) in FY 2021-22. [vi]

Expansion of Medi-Cal Eligibility to Seniors Aged 60 Years and Over Regardless of Immigration Status: Despite not being included in the January Budget Proposal, the May Revision includes $68 million ($50 million GF) in 2021-22 and $1 billion ($895 million GF) ongoing to expand full-scope Medi-Cal, including In-Home Supportive Services, to undocumented adults aged 60 years and older effective no sooner than May 1, 2022.[v]

Medi-Cal Extension of Coverage to Postpartum Individuals: The May Revision includes $90.5 million total funds ($45.3 million GF) to adopt the new federal option to provide postpartum benefits for an additional 12 months following the last day of pregnancy, effective April 1, 2022. This proposal is expected to reduce costs by $11 million in FY 2021-22 for the state’s existing provisional postpartum care extension item. [vi]

County Administration Funding for Post-Public Health Emergency Redeterminations: The May Revision includes one-time funding of $73 million ($36.5 million GF) in each of FY 2021-22 and FY 2022-23 to resume annual Medi-Cal redeterminations upon the conclusion of the federal public health emergency and continuous coverage requirement. [vi]

Covered California and New Federal ARPA Subsidies: The 2019 Budget Act included historic subsidies to help more low- and middle-income Californians afford health coverage through Covered California, and created an individual mandate that requires Californians to obtain comprehensive health care coverage or pay a penalty. For FY 2020-21 and FY 2021-22, ARPA provides more generous subsidies than the current state subsidy program, effectively eliminating the need for the state subsidies. The May Revision assumes General Fund savings totaling $732.7 million over FY 2020-21 and FY 2021-22 combined that result from new federal subsidy levels replacing the state subsidy program. [v]

4. Medi-Cal and Social Services—CalAIM Updates and New Benefits Available to Consumers

California Advancing and Innovating Medi-Cal (CalAIM) Implementation: Effective January 1, 2022, the May Revision proposes $1.6 billion total funds ($673 million GF) for FY 2021-22, and $1.5 billion total funds ($746.6 million GF) in FY 2022-23. [vi] CalAIM, which builds upon demonstration programs such as Whole Person Care and the Health Homes Programs, will identify and manage member risk while focusing on whole person care, population health management, behavioral health, and addressing the social determinants of health, and make Medi-Cal less complex while increasing flexibility within the program. For more information on the CalAIM proposal, visit DHCS’s webpage and ITUP’s Health Policy Essential: CalAIM.

Key components of the CalAIM proposal have been updated in the May Revision, including:

Medi-Cal Population Health Management System: This new data system will support DHCS, managed care plans, counties, and providers in delivering care to Medi-Cal members. $300 million total funds ($30 million GF) for local assistance funding and $15 million total funds ($1.5 million GF) for state operations. [vi]
Providing Access and Transforming Health (PATH): The May Revision includes $200 million total funds ($100 million GF) to support justice-involved individuals in their transition back into their communities.[vi]
Medically Tailored Meals Pilot Program Augmentation: The May Revision includes $1.7 million GF in FY 2020-21 and $10.6 million GF in FY 2021-22 in one-time budget allocations to provide tailored meal interventions services available through the Pilot program to a broader population. [vi] This program serves three tailored meals per day for 12 weeks to 1,000 eligible Medi-Cal members with congestive heart failure. For more information on individual pilot counties, see here.

Audio-Only Telehealth Services in Medi-Cal: The May Revision proposes to establish rates for audio-only telehealth set at 65 percent of the Medi-Cal rate fee-for-service and comparable alternatives for prospective payment system (PPS) rates for clinics. This proposal is intended to incentivize in-person care.[vi] See ITUP’s Telehealth Fact Sheet for more information on flexibilities. See the Administration’s Telehealth Proposal for more information on the proposal.

Doula Benefits for Medi-Cal Members: The May Revision includes $402,584 total funds ($152,043 GF) in FY 2021-22 to add doula services as a preventive benefit in Medi-Cal. [v]

Access to Community Health Workers (CHWs): The budget includes $16.3 million total funds ($6.2 million GF) in FY 2021-22 for to add CHWs to the skilled and trained individuals who can provide clinically appropriate Medi-Cal covered benefits and services. [vi] ITUP has heard across the state at our regional workgroups that CHWs are an effective and needed part of the health care delivery system because they can bridge the gaps in communications and reach vulnerable communities to reduce health disparities.

Dyadic Services Benefit in Medi-Cal: The May Revision includes $200 million total funds ($100 million GF) for a new statewide benefit that provides integrated physical and behavioral health screening and services to whole families. [vi]

Medi-Cal Rx Delay to At Least January 1, 2022: Due to the acquisition of Magellan Health by Centene Corporation, the parent company of Health Net and California Health and Wellness, two Medi-Cal managed care plans, the Medi-Cal Rx transition is postponed until at least January 1, 2022. The May Revision assumes temporary costs of $32 million total funds ($14 million GF) in FY 2020-21 and $363 million total funds ($134 million GF) in FY 2021-22. The May Revision estimates that once the Medi-Cal Rx transition is complete, the state may assume ongoing annual savings of $859 million total funds ($309 million GF). [vi]

Proposition 56 Supplemental Payment Programs: The May Revision proposes to eliminate the suspensions for Proposition 56 supplemental payment increases, resulting in a cost of $550 million ongoing.[v]

CalWORKs Grant Increase: The May Revision reflects a 5.3-percent increase to California Work Opportunity and Responsibility to Kids (CalWORKs) Maximum Aid Payment levels, which is estimated to cost $142.9 million in FY 2021-22. These increased grant costs are funded entirely by the Child Poverty and Family Supplemental Support Subaccounts of the Local Revenue Fund. CalWORKs families are eligible for Medi-Cal.[v]

IHSS 7 Percent Suspension Elimination: The May Revision proposes to eliminate the In-Home Supportive Services (IHSS) 7 percent reduction in service hours resulting in a cost of approximately $248 million GF in FY 2022-23 and $496 million ongoing GF. The May Revision includes $17.2 billion ($5.5 billion GF) for the IHSS program in FY 2021-22. Average monthly caseload in this program is estimated to be 590,293 recipients in FY 2021-22; although IHSS is administered by the Department of Social Services, it is a Medi-Cal benefit. [v]

5. Other Health-Related Budget Proposals: Health Care Affordability, Health Information Exchange, Children’s Behavioral Health, Master Plan for Aging

OSHPD Reorganization: The May Revision proposes to rename the Office of Statewide Health Planning and Development (OSHPD) the “Department of Health Care Access and Information” (HCAI). This department would focus on the safety of health care facilities, increasing the health care workforce, improving the affordability and quality of health care, and financing health facilities. The renaming of the office also reflects the recent addition of administering the Healthcare Payments Database and the proposed Office of Health Care Affordability. The May Revision includes $6.3 million in FY 2021-22 and $3.9 million in FY 2022-23 and ongoing from various funds to facilitate this transition. Additionally, the May Revision also includes $50 million one-time General Fund to support grants to new residency programs. [v]

Children and Youth Behavioral Health Initiative: Building upon the January proposal for enhancing behavioral health for children and youth, the May Revision includes a substantial investment to transform California’s behavioral health system for children and youth. The May Revision includes $1 billion from ARPA in FY 2021-22, $1.7 billion ($1.3 billion ARPA, $300 million GF, and $100 million Federal Trust Fund) in FY 2022-23, and $431 million ($300 million GF) ongoing. [vi]

Services developed under the Initiative will be provided to children and youth aged 25 years and younger, available statewide (in both commercial plans and Medi-Cal), and will be evidence-based, culturally competent, and equity-focused.
Services will address a broad and complex range of issues affecting mental and emotional well-being, including alcohol and other substance use, stress, trauma, grief, anxiety, and psychological disorders. Connecting children and youth to these services will be a set of interactive tools available via virtual platform 24 hours a day, seven days a week.
The Initiative includes resources for DHCS to: implement a virtual platform to integrate behavioral health services with screening, clinic-based care, and app-based support services; provide grants to qualified entities to increase behavioral health services at or affiliated with schools; develop and expand age-appropriate, evidence-based programs offered through plans as well as the CalHOPE Student Support Program; provide dedicated funds from the Behavioral Health Continuum Infrastructure Program to build infrastructure targeted at individuals aged 25 years and younger; and, provide Medi-Cal dyadic service benefits (as noted above).

Treatment and Prevention of Adverse Childhood Experiences: The May Revision includes $12.4 million one-time General Fund for the California Initiative to Advance Precision Medicine within the Office of Planning and Research to develop seven demonstration projects focused on advancing research on, and building scalable approaches to, treating and preventing Adverse Childhood Experiences (ACEs). [v]

Implementation of the Master Plan for Aging: To better and more equitably serve the growing aging population in California, Governor Newsom released a Master Plan for Aging blueprint on January 6, 2021. California’s over-65 population is projected to grow to 8.5 million (20 percent of the population) by 2030; throughout the pandemic, nearly 80 percent of COVID-19 related deaths were age 65 or older. [v]

Master Plan for Aging Implementation: An April 1 proposal included $3.3 million GF ongoing to provide the Department of Aging policy, project management, and information technology leadership necessary to implement the Master Plan for Aging. [v]
Office of Medicare Innovation and Integration: An April 1 proposal included $602,000 ($452,000 GF) ongoing to provide the DHCS focused leadership and expertise to lead innovative models for Medicare beneficiaries in California, including both Medicare-only beneficiaries and individuals dually eligible for Medicare and Medi-Cal. [v] For more information on programs available in California to promote healthy living for older Californians, see ITUP’s Medicare and Health for Aging Californians.
Older Adult Recovery and Resiliency: To address the physical and mental health impacts from the COVID-19 imposed isolation, particularly on older Californians, the May Revision includes $106 million GF over three years to increase services of existing programs including Senior Nutrition, Senior Legal Aid, Home Modifications and Fall Risk, Behavioral Health Friendship Line, and more. [v]
CalFresh Expansion Older Adult Outreach: The May Revision includes $2 million ($1.1 million GF) ongoing for the Department of Aging to continue CalFresh Expansion outreach efforts to older adults. [v]
Housing and Disability Advocacy Program: The May Revision includes $175 million GF annually through FY 2023-24 to assist disabled individuals who are experiencing homelessness. [v]
Community Care Expansion Program: The May Revision includes $500 million in both FY 2021-22 and FY 2022-23 for the construction, acquisition and/or rehabilitation of adults and seniors in care facilities who are homeless or at risk of becoming homeless, and will further stabilize these facilities with physical upgrades and capital improvements. [v]

6. Proposals to Advance Health Equity and Address the Social Determinants of Health—Housing, Homelessness, and Broadband

Housing and Homelessness: The May Revision includes more than $12 billion over three years (approximately $6.8 billion in FY 2021-22) in state and federal funds to address homelessness.

Housing Children and Families: The May Revision includes $475 million GF in both FY 2021-22 and FY 2022-23 to support vulnerable families through the CalWORKs Housing Support Program, and $280 million GF in both FY 2021-22 and FY 2022-23 for the existing Bringing Families Home Program to provide housing-related supports to families in the child welfare system. [viii]
Homekey Program Continuation: The May Revision includes $2.75 billion over two years in one-time funding to continue acquiring and rehabbing facilities for the Homekey Program. [viii]
Aid for Renters, Small Landlords, and Homeowners: The May Revision includes $9.3 billion in FY 2021-22 for a variety of housing assistance that directly impact renters, small landlords, and homeowners, including: $5.2 billion in federal rental assistance, $1 billion from ARPA Homeowner Assistance Funds, and $1.75 billion one-time federal ARPA funds to help support affordable housing projects. [viii]
Examples of Other Proposed Housing Supports Programs:
- $60 million over three years ($20 million each year beginning in FY 2021-22) for community-based organizations to receive legal assistance grants through the Judicial Council to provide eviction and foreclosure counseling. [viii]
- $100 million one-time federal ARPA funds to California Housing Finance Agency (CalHFA) to expand its First-Time Homebuyer Assistance Program, which helps first-time homebuyers with making a down payment, securing a loan, and paying closing costs on a home. [viii]
- Repairing and Maintaining Seasonal Farmworker Rental Housing—$20 million one-time GF for critical deferred maintenance needs and improved habitability at the Office of Migrant Services (OMS) centers. The state’s OMS Centers provide affordable, seasonal rental housing near work locations for migrant farmworkers, a group disproportionately impacted by the pandemic. This proposal adds to the $10 million included in the Governor’s January Budget for a total of $30 million GF for OMS center-deferred maintenance. [viii]

Expanding Broadband Access: The May Revision includes a $7 billion investment over three years in broadband to develop equitable, affordable, statewide access to high-speed internet service through investments in middle mile and last mile service. Today, approximately 83.4 percent of Californians are using broadband at any speed, but only 52.4 percent of Californians, including rural, urban, and tribal communities, are using broadband at the modern benchmark speed of 100 megabits per second (Mbps). Service at speeds below 100 Mbps is not enough for households who are juggling the demands of distance learning, telework, and accessing telehealth. See ITUP’s Broadband and Health Basics Fact Sheet for more information about broadband.

According to the Assembly Budget Committee, Subcommittee 3 (see pages 73 and 74) the components of the proposal are:

$4 billion to build a statewide, open access (open to all internet service providers) middle mile network near California state highways.
$2 billion to provide last mile connections for communities to be administered through the existing California Public Utilities Commission’s (CPUC) California Advanced Services Fund (CASF) infrastructure program.
$500 million to create a Loan Loss Reserve Account within the CASF to help secure financing for locally-owned broadband projects sponsored by counties, municipalities, and tribes.
$500 million to incentivize telecommunications providers that participate in the CPUC’s California High Cost Fund A Program to support broadband infrastructure.