July 12, 2024

Key Highlights in California’s Final FY 2024 – 25 Budget Act

On June 29^th 2024, Governor Newsom and the California Legislature reached an agreement on the Budget Act of 2024.[i] The Budget Act aims to address the budget deficit of $46.8 billion and includes total expenditures of $297.9. billion in 2024-25, with $211.5 billion from the General Fund (GF).[ii] Note: The spending allocations highlighted below are not comprehensive and highlight key parts of the health and human services budget expenditures.

Here are 5 Key Highlights from the Governor’s FY 2024 – 25 Final Budget Act [i]:

1. Coverage and Access
   • Maintains funding for Medi-Cal Expansion and the In-Home Supportive Services program, regardless of immigration status, continuous coverage for children 0-5, coverage for striking workers, and the Indian Health Program.
   • Discontinues the Major Risk Medical Insurance Program.
2. Behavioral Health
   • As part of the Children and Youth Behavioral Health Initiative, the Budget Act includes funding to establish the wellness coach benefit.
   • Includes funding for behavioral health initiatives that are part of California Advancing and Innovating Medi-Cal (CalAIM).
   • Reduces funding for the Behavioral Health Bridge Housing Program.
   • Includes funding for Proposition 1.
3. Health Care Workforce
   • Although the Budget Act maintains funding for specific health care workforce initiatives, it substantially reduces funding for various other health care workforce initiatives.
   • Delays implementation of the $25 minimum wage for health care workers to October 15, 2024, pending funding. Without enough funding, the Budget Act pushes the implementation to January 1, 2025, at the latest.
   • Delays rate increases for providers at the Department of Developmental Services to January 1, 2025.
4. Addressing the Social Determinants of Health
   • Maintains funding initiatives that address homelessness, food insecurity, access to broadband, and access to early childhood programs.
   • Regardless of the reduced funding for the CalWORKs Home Visiting Program, the Budget Act maintains funding for this program.
   • Reduces funding for the housing supplement for foster youth.
   • Delays expanding food assistance programs to undocumented individuals 55 years and older to October 1, 2027, and delays funding to Broadband Last Mile to 2027-28.
5. Public Health
   • Maintains funding for public health. Although there is a reduction in state and local public health infrastructure in the Budget Act, the reduction is less than in the May Revise.

Below we highlight key health and human services proposals in the Final Budget Act by five topics: Coverage and Access, Behavioral Health, Health Care Workforce, Addressing the Social Determinants of Health, and Public Health. We describe budget items that maintain and provide access to coverage for Californians and key health and human services reductions that would hinder and interfere with efforts to improve health outcomes and health equity for Californians, especially communities of color and people with disabilities.

Coverage and Access

Medi-Cal: In 2024-25, the Budget Act includes $161 billion for Medi-Cal with $35 billion from the GF.[i] The Budget Act estimates that, in 2024-25, Medi-Cal will cover approximately 14.5 million Medi-Cal members which equates to over one-third of the state’s population.[i] Moreover, the Budget maintains acupuncture benefits for Medi-Cal members.[iii]

Medi-Cal Expansion and In Home Supportive Services Program (IHSS), Regardless of Immigration Status: The Budget Act maintains funding for Medi-Cal Expansion, regardless of immigration status.[i] This funding includes $3.3 billion in 2024-25 ($2.8 billion GF) and approximately $3.4 billion ($2.9 billion GF) in ongoing budget years to make this expansion permanent.[i] This expansion will provide coverage to an expected 764,000 adult enrollees.[iv]

Part of the Medi-Cal expansion funding will go towards providing IHSS services, regardless of immigration status.[i] The Budget Act includes $25 billion ($9 billion GF) for IHSS services in 2024-25.[i] IHSS provides crucial services that allow eligible aged, blind, and disabled Californians to avoid nursing facilities and receive essential care at home with their families.[v] The Budget Act estimates that IHSS will serve 703,921 Californians in 2024-25.[i] However, despite the preservation of funding for the IHSS program, to address the budget shortfall, there is a reduction of $3 million one-time GF in 2024-25 to the In-Home Supportive Services Permanent Backup Provider System (BUPS). The permanent BUPS allows any eligible IHSS recipient to receive temporary IHSS from a backup provider. This is available when a recipient has an urgent need for a backup related to personal care services that cannot be met by an existing provider or is transitioning to home-based care and does not yet have an identified provider.

Continuous Medi-Cal Coverage for Children Aged 0-5: Over half of California children, 56.5%, rely on Medi-Cal for health coverage.[vi] This percentage equates to 5.7 million kids on Medi-Cal. [vi] Unlike the May Revise, the Budget Act includes funding for Continuous Medi-Cal Coverage for Children Aged 0-5.[i] Continuous coverage keeps children covered by removing the administrative burden of reapplying for Medi-Cal coverage every year.

Indian Health Program: The Budget Act maintains funding for the Indian Health Program[iii], an essential program that aims to improve health equity for Native Americans who live in urban, rural, reservation, or rancheria communities.[vii]

Health Care Coverage for Striking Workers: The Budget Act includes an increase of $3 million to provide health care coverage to striking workers through Covered California.[i][iii]

Major Risk Medical Insurance Program: The Budget Act officially discontinues the Major Risk Medical Insurance Program, effective December 31, 2024.[i] This program provides subsidized coverage to uninsured Californians who cannot obtain coverage through the marketplace due to their pre-existing conditions.[viii] Although the Budget Act states that Californians currently enrolled in the Major Risk Medical Insurance Program will transition to other health care coverage options[i], it is unclear how this process will happen.

Behavioral Health

As part of the Children and Youth Behavioral Health Initiative, which maintains $4.1 billion[i], the Budget Act includes $9.5 million ($4.1 million GF) in 2024-25 to establish the Medi-Cal wellness coach benefit, effective January 1, 2025.[i] The $9.5 million amount will increase to $78 million ($33.8 million GF) starting in 2027-28.[i] Wellness coaches will be trained to support children and youth’s behavioral health care needs through wellness promotion, education, screening, care coordination, individual and group support, and crisis referral.[ix]

The Budget Act includes $202.6 million ($77.9 million GF, $29.3 million Behavioral Health Services Fund, $31.6 million Opioid Settlements Fund, and $63.8 million federal funds) and $6.4 billion in bonds for the implementation of Proposition 1, which was passed by voters in March 2024.[i] Proposition 1 enacts the Behavioral Health Services Act, formerly the Mental Health Services Act, to provide behavioral health services for Californians with the most serious behavioral health needs, with specific funding for veterans.[i]

The Budget Act includes $7.7 billion ($351.5 million GF, $87.5 million Behavioral Health Services Fund, $2.6 billion Medi-Cal County Behavioral Health Fund, and $4.6 billion federal funds) for the Behavioral Health Community-Based Organized Networks of Equitable Care and Treatment (BH-Connect) Demonstration.[i] BH-Connect are CalAIM behavioral health initiatives that require federal waiver approval. The Budget Act states that BH Connect services will be effective January 1, 2025.[i]

California’s youth are facing a behavioral health crisis amplified by the pandemic with incidents of youth causing self-harm increasing by 50% between 2009-2018, a triple increase in opioid-related overdoses among youth aged 15-19 from 2019-2020, and a double increase in the Black youth suicide rate between 2014 and 2020.[x] The Budget Act reduces funding for the Children and Youth Behavioral Health Initiative by $72.3 million GF in 2023-24 and by $313.9 million GF in 2024-25.[i] This funding would have gone towards school-linked partnership and capacity grants, services and supports platform, evidence-based and community-defined grants, and a public education and change campaign.[i]

Nearly 1 in 7 California adults have experienced mental illness [xi], almost a third, 31.7%, of California adults, experience anxiety and/or depression, and drug overdose death rates have increased in California from 10.7 per 100,000 in 2011 to 26.6 per 100,000 in 2021 [xii]. The Budget Act reduces funding for the CalWORKs Mental Health and Substance Abuse Services program by $37 million GF in 2024-25 and $26 million GF in 2025-26, leaving this program with $89 million.[i]

Furthermore, the Budget Act reduces funding for the Behavioral Health Bridge Housing Program by $250 million, leaving this program with $1.25 billion ($1.2 billion GF).[i] The last round of grants includes $132.5 million GF in 2024-25 and $117.5 million ($27.5 million GF and $90 million Behavioral Health Services Fund) in 2025-26.[i]

Health Care Workforce

The Budget maintains $98.4 million GF committed funding for Song-Brown residencies and nursing in 2023-24, $2.1 million GF in 2023-24 for work education training, and $8.4 million from 2024-25 through 2026-27 for the California Medicine Scholars program.[i] Song Brown Residencies aim to increase the primary care health care workforce and the California Medicine Scholars program aims to develop a more culturally competent health care workforce.[xiii][xiv] The Budget Act maintains funding from previous health care workforce investments including:[i]

• California Medicine Scholars Program
• Nursing
• Children and Youth Behavioral Health Initiative
• Community Health Workers
• Addiction psychiatry fellowships
• Psychiatry graduate medical education.

The Budget Act includes $133 million in 2024-25, $728 million in 2025-26, and $1.2 billion in 2026-27 for increased Medi-Cal provider rates, created with revenue from the Managed Care Organization Tax (MCO).[i] Furthermore, the Budget Act includes $40 million one-time funding in 2026-27 for the development and retention of the Medi-Cal workforce.[i] This funding will go towards the Medi-Cal Workforce Pool – Labor Management committees.[xv] The Budget Act does not provide details as to how these labor committees plan to develop and retain the Medi-Cal workforce.

The COVID-19 pandemic amplified significant stressors that California’s health care workforce has endured for far too long, including workforce shortages, a lack of diversity, and persistent burnout. The ongoing health care workforce shortage and crisis have resulted in over 7 million Californians living in provider shortage areas.[xvi] To meet the critical and urgent need for providers, California will need an additional 4,100 primary care providers by 2030 to meet projected provider demand.[xvii]

The Budget Act reduces $746.1 million for various health care workforce programs over 5 years[i]:

• $200.6 million in 2023-24,
• $299.9 million in 2024-25
• $213.6 million in 2025-26
• $16 million in 2026-27 and ongoing.

These reductions will harm all Californians, but will significantly impact communities of color and people with disabilities the most. It is vital that future budgets include significant investments in health care workforce initiatives to fully meet California’s health care needs.

Enacted into law on October 13, 2023, SB 525 (Durazo) implemented a progressive increase of the minimum wage to $25 for California’s lowest-paid health care workers. The minimum wage increase was originally supposed to start June 1, 2024.[xviii] The deadline was then pushed to July 1, 2024.[xviii] The Budget Act further delays implementing SB 525 to October 15, 2024, only if there is enough money in the first quarter of 2024-25.[i] If there is not enough money, the Budget Act states that wages will not increase until at the latest January 1, 2025.[i] In addition, the Budget Act delays increased pay for providers at the Department of Developmental Services to January 1, 2025, by reducing $510.4 million ($306.2 million GF) in previously allocated funding.[i]

The Budget Act reduces $280 million one-time funding over multiple years for grants that seek to improve quality, health equity, and primary care infrastructure through funding Medi-Cal providers.[i] The Budget Act maintains $140 million ($70 million GF) for these grants from the 2022 Budget Act.[i]

Addressing the Social Determinants of Health

Broadband. The Middle Mile Broadband Initiative (MMBI) and the Last Mile are key initiatives to addressing the disproportionate impact the digital divide has across California communities. The MMBI is the “internet superhighway” that enables last mile connections to entire communities including homes, businesses, schools, libraries and health clinics. While the May Revision proposed eliminating $700 million of the committed $750 million from the Loan Loss Revenue account for broadband, the Legislature pushed back and restored all by $125 million.[i] The fund provides credit enhancement for bonds, loans, and letters of credit to help finance local broadband infrastructure development. In addition, the Budget Act includes $250 million one-time GF in 2024-25 to expand and improve the fiber-optic network in key segments of the Middle-Mile Network.[i] In addition, the Budget Act includes provisional authority allowing up to $250 million GF in 2024-25 to build out additional segments provided the California Department of Technology Office of Digital Literacy provides a report to the Joint Legislative Budget Committee with a breakdown of stand-alone California Department of Transportation projects related to the MMBI.[i]

Despite the preservation of some funds for the MMBI, the Budget Act delays $550 million for last-mile projects, which connects the network to homes, until the 2027 budget year.[i]

Homelessness. The Budget Act includes $1 billion one-time funding for local governments to combat homelessness in California.[i] Given that this funding comes with increased accountability measures from the state[i], it is important that local governments use this funding to create policies throughout California that provide care to our unhoused communities through housing and support services. Check out ITUP’s statement discussing the U.S Supreme Court’s Recent Rulings.

The Budget Act reduces the housing supplement for foster youth in Supervised Independent Living Placements by $200,000 GF in 2024-25 and $18.8 million GF in 2025-26 leaving many foster youths to face increased housing insecurity.[i]

Food Assistance. The Budget Act includes $17.2 billion ($4.9 billion in state funding and $12.3 billion in federal funding) for CalFresh, a federally funded food assistance program, that is estimated to feed over three million households in 2024-25.[i] Furthermore, the Budget Act includes an increase of one-time $10 million GF funding for the CalFresh Fruit and Vegetable EBT Pilot to continue operating.[i] In 2024-25, the Budget Act includes $146.8 million with $73.4 million from the GF that permits California to implement federal food assistance through the Summer Electronic Benefit Transfer Program for Children (SUN Bucks) program.[i] The SUN Bucks program will provide food benefits to children who lose access to free and reduced-price meals during the summer school closure period.[i] The SUN Bucks funding of $146.8 million will focus on outreach, automation, and administration. It is estimated that this program will allow California to provide an estimated $1 billion in federal food assistance.[i]

Although the Budget Act maintains funding for Medi-Cal Expansion, it delays the California Food Assistance Program expansion to undocumented individuals aged 55 years and older to October 1, 2027 instead of October 1, 2025.[i]

Early Childhood. The Budget Act includes an increase of $228.6 million ($117.4 million GF) in 2024-25, $304.8 million ($260.8 million GF) in 2025-26, and ongoing funds in future budget years for 11,000 new childcare slots beginning October 1, 2024.[i] However, it also pauses any additional childcare slots for two years until 2026-27.[i] The Budget Act states that new childcare slots are subject to appropriation in future state budgets.[i] If there is appropriation in future state budgets for childcare slots, the Budget Act includes an additional 44,000 childcare slots in 2026-27 and 33,000 slots in 2027-28.[i] Although the May Revise proposed adding a total of 119,000 childcare slots, the Budget Act goes a step further and plans to add a total of 200,000 childcare slots by 2028.[iii]

The CalWORKs Home Visiting Program provides essential, early intervention activities for California families.[xix] The Budget Act reduces funding for the CalWORKs Home Visiting Program by $25 million GF in 2024-25 and $25 million GF in 2025-26.[i] In addition, the Budget Act includes an increase of $9 million one-time GF for diaper and wipe distribution for low-income families with infants and toddlers.[i] In addition, the Budget Act eliminates the Los Angeles County Child Welfare Services Public Health Nursing Program by $8.3 million starting in 2024-25.[xv] This program provides and coordinates essential health care services for foster children and youth.[xx]

Public Health

The May Revise proposed a large reduction of $300 million for ongoing public health funding. The Budget Act maintains $276.1 million GF funding in 2024-25 and is ongoing for state and local public health infrastructure[i]. However, the Budget Act reduces funding in 2024-25 for state and local public health by $8 million ongoing funds in state public health infrastructure and $15.9 million ongoing funds in local public health infrastructure.[ii]

The COVID-19 pandemic highlighted the historic underfunding of our public health system. To build a responsive, rather than reactive, public health and health care system, we must continue making significant investments in our systems to protect the health of all Californians.

Budget Process: What’s Next

Although the Budget has been finalized, the budget can still be amended until August 31, the last day the legislature is in session before recess.

This coming November, Californians will vote on ten ballot initiatives.[xxi] One ballot initiative, Proposition 35, that ITUP publicly supports is focused on Medi-Cal health care spending. If passed, Proposition 35 would ensure that all revenue generated from the MCO tax would fund Medi-Cal and raise Medi-Cal provider rates.[xxii] Although the MCO tax was initially designed to help fund Medi-Cal, historically, past budgets have used MCO tax money to fund other budget initiatives not related to health care, leaving less money for Medi-Cal members’ health care needs.[xxii] There is a shortage of health care providers who accept Medi-Cal resulting in limited and inequitable health care access for California’s most marginalized communities.[xxii] Proposition 35 offers the opportunity to address this issue and becomes a first step toward creating a more accessible and equitable health care delivery system for Californians.[xxiii]

Key Government Resources

Administration/Executive Branch Resources:

• • Budget Act of 2024 – Budget Summary
  • Budget Act of 2024 – Key Takeaways

Legislative Resources:

• • California Assembly Floor Report of the 2024-25 Budget
  • Senate Committee on Budget and Fiscal Review Budget Act of 2024 – Key Highlights
  • List of Budget-Related Bills

Tools to Understand the California State Budget Process:

• • California and Budget Policy Center Guide to the California State Budget Process

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References

[i] Department of Finance (DOF), Budget Act of 2024, July 2024.

[ii] Department of Finance (DOF), Budget Act of 2024: Key Takeaways , June 2024.

[iii]Senate Budget and Fiscal Review Committee, Senate Committee on Budget and Fiscal Review Budget Act of 2024 – Key Highlights, June 2024.

[iv]Legislative Analyst’s Office, Health Care Access and Affordability, February 2022.

[v]California Department of Social Services, In-Home Supportive Services (IHSS) Program,2024.

[vi]The Children’s Partnership, How Medi-Cal Continuous Coverage Protects California Kids, March 2023.

[vii]California Department of Health Care Services, Indian Health Program.

[viii]California Department of Health Care Services, Major Risk Medical Insurance Program.

[ix]California Department of Health Care Access and Information, Certified Wellness Coach,2024.

[x] CalMatters, When children suffer: California to funnel billions into mental health overhaul, March 2022.

[xi]California All, California’s Mental Health Movement, October 2023.

[xii]KFF, Mental Health in California, 2024.

[xiii]California Department of Health Care Access and Information, Song-Brown Healthcare Workforce Training Programs,2024.

[xiv] California Medicine Scholars Program, California Medicine Scholars Program. 2023.

[xv]Assembly Budget Committee, Floor Report of the 2024-25 Budget, June 2024.

[xvi]California Future Health Workforce Commission, Meeting the Demand for Health: Fact Sheet on California’s Looming Workforce Crisis, February 2019.

[xvii] Healthforce Center at the University of California, San Francisco, California’s Primary Care Workforce: Forecasted Supply, Demand, and Pipeline of Trainees, 2016-2030, August 2017.

[xviii]CalMatters, Update: California’s new health care minimum wage is changing. Here are answers to your questions, June 2024.

[xix]California Department of Social Services, CalWORKs Home Visiting Program, 2024.

[xx] County of Los Angeles Public Health, Child Welfare Public Nursing Program.

[xxi]CalMatters, 2024 California ballot measures: What you need to know, July 2024.

[xxii]CalMatters, California voters will decide who wins on health care tax: Gavin Newsom or doctors, July 2024.

[xxiii]Yes on Prop 35, Yes on Prop 35 Protect Access to Care.