2022-23 State Budget Proposal Summary - 1/10/22

 

Governor Gavin Newsom unveiled the proposed Fiscal Year (FY) 2022-23 State Budget on Monday, January 10th.  This kicks off the state budget process for the next six months. The Legislature will now convene budget hearings to review and provide oversight and amendments of the Governor’s proposed budget and expenditures by agencies and departments. The Governor releases a revision to the Budget in mid-May with updated revenues and projections for the upcoming year. The Legislature must pass a balanced budget by June 15th and the new budget takes effect on July 1 for the next fiscal year.

The FY 2022-23 state budget is $286.4 billion of which $213.1 billion is state General Fund (GF). This is a 9% increase in the total budget and a 1.5% increase in GF over the enacted 2021-22 Budget. Under the FY 2022-23 Budget, the state will have $34.6 billion in reserves. The projected discretionary budget surplus is $20.6 billion after accounting for funding required to go to schools and education through Prop 98, constitutionally required reserves, and mandated debt repayments.

In this Budget, the Governor continues to make significant investments into health and human services, Medi-Cal, COVID-19, and Housing and Homelessness. Several of CA Alliance priorities are reflected in the Budget including workforce development, children and youth behavioral health, and support for STRTPs.

Following are summaries of areas of interest for CA Alliance members. The CA Alliance staff will now engage in the budget process on behalf of member agencies, and advocate for funding and changes to any proposal.

 

Behavioral Health

Revenue Forecasts

Proposition 63
Proposition 63, passed in November 2004, imposes a surcharge of 1 percent on taxable income over $1 million. Revenue from the surcharge is transferred to the Mental Health Services Fund and used to fund mental health programs. Revenues of $3 billion are estimated for 2020-21. The forecast also projects annual revenues of $3.7 billion for 2021-22 and $3.8 billion for 2022-23.  This is the largest annual amount we have seen since Proposition 63 passed.
1991 and 2011 Realignment
Realignment shifted administrative and fiscal responsibility to counties for a variety of programs, along with a dedicated source of funding. 1991 Realignment provides funding for social and health programs and 2011 Realignment provides funding for local public safety programs. Additionally, both 1991 and 2011 Realignment provide funding for mental health and child welfare programs. The programs for 1991 and 2011 Realignment are funded through two sources: state sales tax and vehicle license fees. These fund sources are projected to increase by 6.4 percent from 2020-21 to 2021-22 and by 3.9 percent from 2021-22 to 2022-23. Funding for the Behavioral Health Subaccount, of which funds EPSDT, is projected to be $1.98 billion in FY 2022-23. Growth funds for FY 2021-22 are projected to be $207.6 million.
Proposition 64 Funding.
The Budget estimates $594.9 million will be available for these purposes in 2022‐23, and the structure of these allocations is unchanged from 2021‐22: • Education, prevention, and treatment of youth SUDs and school retention—60 percent ($356.9 million). The bulk of these funds go to child care slots. • Clean-up, remediation, and enforcement of environmental impacts created by illegal cannabis cultivation—20 percent ($119 million) 6 • Public safety-related activities—20 percent ($119 million) These figures reflect a decrease of $34.2 million compared to the allocation estimates in the 2021 Budget Act.

 

Crisis Response

The Budget invests significant new funding for 9‑8‑8, or the Behavioral/Mental Health Crisis Hotline.  The Governor proposes $7.5 million General Fund ($6 million ongoing) to implement the new federally mandated 9‑8‑8 call system to increase the ease and accessibility for those experiencing a behavioral or mental health crisis. Those who dial 9‑8‑8 will be directed to one of the 13 existing Lifeline Call Centers across the state. These centers already provide immediate assistance with mental distress, and the additional funding will assist those needing services to receive help more efficiently. The Budget includes funding for call handling equipment so existing crisis hotline centers have the resources needed to process additional 9‑8‑8 calls and coordinate and transfer calls with no loss of information between the 9‑8‑8 and 9‑1‑1 systems. In 2022, the California Health and Human Services Agency will develop a plan to support connections between prevention efforts like warm‑lines and peer support services, 9‑8‑8 mental health crisis call centers, and mobile crisis response at the local level.

The American Rescue Plan Act of 2021 authorizes 85-percent federal matching funds for a Medicaid mobile crisis response services benefit, available for 12 quarters during a five-year period starting April 1, 2022. DHCS will add multi-disciplinary mobile response services for crises related to mental health and substance use disorders as a new Medi-Cal benefit, as soon as January 1, 2023. DHCS believes that providing community-based mobile crisis services will help reduce the impact of untreated behavioral health conditions on emergency departments and psychiatric facilities, by providing a system for triaging and referring people to services in the community. Over the five-year period authorized by the Act, the total costs of this new benefit are projected to be $1.4 billion ($335 million General Fund). This benefit builds on other investments in the 2021 Budget Act provided to counties for infrastructure development in preparation for the implementation of the mobile crisis benefit.

 

Medi-Cal and California Advancing and Innovating Medi-Cal (CalAIM)

Medi-Cal. The Medi-Cal budget is $123.8 billion ($26.8 billion GF) in 2021-22 and $132.7 billion ($34.9 billion GF) in 2022-23. The Governor’s Budget assumes that caseload will increase by approximately 8.3 percent from 2020-21 to 2021-22 and decrease by 3 percent from 2021-22 to 2022-23. Medi-Cal is projected to cover approximately 14.2 million Californians in 2022-23, over one-third of the state’s population. DMC-ODS is estimated to be $1.14 billion total funds for 2022-23.

The Budget includes $1.2 billion ($435.5 million General Fund) in 2021-22, $2.8 billion ($982.6 million General Fund) in 2022-23, $2.4 billion ($876.4 million General Fund) in 2023-24, and $1.6 billion ($500 million General Fund) in 2024-25 for CalAIM. CalAIM initiatives being implemented in 2022-23 include mandatory enrollment into managed care of beneficiaries eligible for both Medi-Cal and Medicare; the requirement that all managed care plans cover long-term care; the provision of a targeted set of Medicaid services to eligible justice-involved populations prior to release; and the Providing Access and Transforming Health (PATH) initiative to further the successful implementation of CalAIM. To read more about each of these initiatives, click on the following LINK.

An additional goal of CalAIM is to explore a new Foster Care Model of Care. To address the complex medical and behavioral health needs of foster youth, and to build on the Continuum of Care Reforms, a workgroup began meeting in June 2020, and the Administration intends to continue to work with stakeholders in the budget year to explore a new model of care. DHCS and the Department of Social Services will center this effort on establishing an accountability framework across systems, advancing equity, and integrating services and care.

 

Children and Youth Behavioral Health Initiative

The Children and Youth Behavioral Health Initiative was announced in July of 2021 with a $4.4 billion investment to enhance, expand, and redesign the systems that support behavioral health for children and youth.  The goal of this initiative is to reimagine mental health and emotional well-being for all children, youth, and families in California.

The proposed budget includes the following investments in FY 2022-23 as part of the Children and Youth Behavioral Health Initiative:

• $87 million total fund ($41 million General Fund) to implement Dyadic Services effective January 1, 2023.
• $429 million General Fund for evidence-based behavioral health practices.
• $450 million General Fund for school behavioral health partnerships and capacity
• $230 million General Fund for the Behavioral Health Services and Supports Platform and related e-Consult service and provider training

Workforce

The Budget includes a one-time $1.7 billion investment over three years in what the Governor is referring to as the “care economy” workforce development—across both the Labor and Workforce Development Agency (Labor Agency) and California Health and Human Services Agency (CalHHS).  Several of these investments would positively impact Alliance member organizations including:

Community Health Workers—$350 million General Fund to recruit, train, and certify 25,000 new community health workers by 2025, in partnership with the Department of Health Care Access and Information and the Department of Health Care Services, with specialty certifications in areas that include climate health, homelessness, and dementia.

Expanding Social Workers—$210 million General Fund to support social work training programs and provide stipends and scholarships to create a new pipeline for diverse social workers who cannot otherwise afford the financial or time investment required to complete full-time programs.

Psychiatric Resident Program—$120 million General Fund to create training positions for psychiatric residents, psychiatric mental health nurse practitioners, psychology interns/fellows, and psychiatric nurses. Increasing on-site training programs will assist in building the workforce while also serving as an active recruitment pool for advancement within the health and human services workforce, leading to promotional pathways and increased salaries.

The Care Economy investments will be jointly coordinated by the Labor Agency and CalHHS through the CalHHS/Health Care Access and Information (HCAI) Health Workforce Education and Training Council.

 

Opportunities for CBOs

The Administration proposes statutory changes regarding the Community Benefit Funding for Community-Based Organizations.  The proposal is to direct 25 percent of non-profit hospitals’ community benefit dollars to CBOs.  To promote additional investment in community-based organizations that are focused on public health efforts, the Administration proposes to require non-profit hospitals demonstrate how they are making investments in local health efforts, specifically community-based organizations that address the social determinants of health. Additionally, the Administration proposes statutory changes that direct that 25-percent of a non-profit hospital’s community benefit dollars go to these efforts, while giving the Department of Health Care Access and Information enforcement authority over these requirements.

 

Substance Use Programming

The Governor’s Budget reflects a one-time increase of $55 million in Opioid Settlement Fund (State Operations to support public education and awareness of opioid overdose risks and substance use disorder treatment options. The funding will also improve the California Department of Public Health’s ability to collect and analyze data on drug overdoses and other public health issues of concern. This increase includes provisional language with expenditure authority until June 30, 2025.

 

Extension of Adverse Childhood Experiences (ACES) Provider Training

The Budget includes one-time $135.1 million ($67.6 million Mental Health Services Fund, remainder is federal funds), over a three-year period to extend Medi-Cal provider training for ACEs screenings.

 

California Initiative to Advance Precision Medicine (CIAPM)

The Budget also includes $10 million to administer a competitive grant program to prevent and treat depression, as part of the California Initiative to Advance Precision Medicine (CIAPM).  CAPIM supports collaborative research and partnerships between the state, researchers, patients, and communities to advance a holistic perspective of physical and mental well-being.  The Budget includes $10 million one-time General Fund for a competitive grant program to support precision medicine-based approaches to preventing, diagnosing, and treating depression. Grant recipients will use the principles of precision medicine to harness the power of computational analytics, next-generation genetic sequencing, and data sharing and aggregation to provide interventions that are tailored to a specific patient. More details to come about this new Initiative.

 

Residential Care/Child Welfare:

The Governor’s Budget includes $217.5 billion ($64.7 billion General Fund and $152.7 billion other funds) for all health and human services programs in 2022-23. (109) The Budget includes $665.8 million General Fund in 2022-23 for services to children and families in Child Welfare Services.

 

IHSS Permanent Back-up Provider System - The Budget includes $24.8 million ($11.2 million General Fund) ongoing to establish a permanent back-up provider system for IHSS recipients to avoid disruptions to caregiving due to an immediate need or emergencies.

 

Former Foster Youth Tax Credit - The Budget proposes a refundable $1,000 tax credit for young adults aged 18 through 25 who were former foster youth at age 13 or older.

 

Family Finding and Engagement - The Budget includes $1 million ($750,000 General Fund) ongoing for the Department to provide additional technical assistance and training to counties in meeting the need for children in foster care and unaccompanied minors to be connected to permanent family.

 

STRTPs

The Centers for Medicare & Medicaid Services (CMS) has required the Department of Health Care services to individually assess each STRTP to determine if it is an IMD. The proposed budget includes $7.5 million General Fund in FY 2021-22, appropriated in the Budget Act of 2021, for grants to county mental health plans to maintain capacity while facilities transition to qualify for ongoing funding. The budget proposes an additional $7.5 million from the General Fund for this purpose in FY 2022-23.

CMS developed a waiver opportunity for states to receive federal funds for mental services provided to populations with a Serious Mental Illness or Serious Emotional Disturbance (SMI/SED).

The Department plans to submit a proposal to CMS for the SMI/SED Demonstration Waiver in the fall of 2022.

 

Care Economy

Workforce for a Healthy California for All - $1 billion one-time General Fund over three years to HCAI to strengthen and expand the state’s health and human services workforce.

Expanding Social Workers - $210 million General Fund to support social work training programs and provide stipends and scholarships to create a new pipeline for diverse social workers who cannot otherwise afford the financial or time investment required to complete full-time programs.

Opioid Treatment - $26 million to train providers to build out the substance use disorder (SUD) workforce with a focus on opioid treatment. Funding will be used to increase the number of licensed clinicians, including providers focused on addiction. Funding will also provide supportive employment services to people with SUD issues to transition them into ongoing employment.

Indian Health Program Grant Restoration - The Budget includes $12 million one-time General Fund for Tribal Health Programs. This funding will promote the retention of the health care workforce that serves these programs and decrease the health disparities experienced by Native Americans.

 

Transition Age Youth/ TAY Services:

The Budget proposes an additional $2 billion General Fund over two years to continue the state’s efforts to address homelessness by investing in behavioral health housing and encampment cleanup grants. These investments are intended to serve as a bridge to other related efforts such as Homekey and California Advancing and Innovating Medi-Cal (CalAIM), which will redesign Medi-Cal to better serve Californians, including individuals experiencing homelessness and provide long-term care.

 

FY Set Asides:

The Budget reflects a multi-year compact that provides substantial and sustained funding increases to CSU in exchange for commitments to expand student access, equity, and affordability, and to create pathways to high-demand career opportunities. The Budget includes $304.1 million in ongoing General Fund augmentations for the CSU, including $211.1 million ongoing General Fund for a five-percent increase in base resources and ongoing General Fund resources for California resident undergraduate enrollment growth of 9,434 full-time equivalent students in the 2022-23 academic year.

Foster Youth Supports in Higher Ed—An increase of $12 million ongoing General Fund to increase support for foster youth students.

The Budget reflects a multi-year compact for substantial and sustained funding increases to UC, in exchange for clear commitments to expand student access, equity, and affordability, and to create pathways to high-demand career opportunities. The Budget includes $307.3 million in ongoing General Fund augmentations for the UC, including $200.5 million ongoing General Fund for a five-percent increase in base resources and ongoing General Fund resources for California resident undergraduate enrollment growth of 7,132 full-time equivalent students.

Foster Youth Supports—An increase of $6 million ongoing General Fund to increase support for foster youth students.

CalKIDS California Kids Investment and Development Savings Program:

The CalKIDS program funds college savings accounts targeted to low-income and underrepresented public school students, in addition to establishing college savings accounts for all newborns. The 2021 Budget Act provided approximately $1.9 billion in one-time federal and state funds to establish college savings accounts for all current low-income public school students in grades 1-12 in 2021-22, as defined for purposes of the Local Control Funding Formula, with supplemental investments for foster youth and homeless students enrolled in a public school.

Approximately $170 million ongoing General Fund to establish college savings accounts for incoming first-grade cohorts of low-income public school students, as defined for purposes of the Local Control Funding Formula, with supplemental investments for foster youth and homeless students enrolled in a public school.

 

Opioid Response:

The Budget includes $96 million General Fund in 2022-23 and $61 million ongoing General Fund for the Medication Assisted Treatment (MAT) Expansion Project. Additional MAT resources would be targeted towards expanding the Naloxone Distribution Project, supporting 100 new MAT access points statewide, expanding MAT in county jails, and increasing MAT services within state-licensed facilities.

the Budget includes one-time $86 million opioid settlement funds which will be dedicated to a public awareness campaign targeted towards youth opioids education and awareness and fentanyl risk education ($50 million) and improving the state’s ability to collect and analyze data on opioid overdose trends ($5 million) for the Department of Public Health, provider training on opioid treatment ($26 million) for the Department of Health Care Access and Information, and distributing naloxone to homeless service providers ($5 million) for the Department of Health Care Services.

 

Foster Youth Independence Pilot Program:

The Budget includes $1 million one-time General Fund, available over two years, for county child welfare agencies to provide case management and support services for former foster youth utilizing federal housing choice vouchers in the Foster Youth Independence Pilot Program.

 

Juvenile Justice/DJJ Realignment:

The Budget includes $33.2 million General Fund in 2022-23 and 2023-24 and $1.6 million ongoing to implement and support remote access to courtroom proceedings pursuant to Chapter 526, Statutes of 2021 (AB 716). Specifically, these resources will be used to provide a publicly accessible audio stream for every courthouse in the state.

Infrastructure Upgrades:

Upon the closure of DJJ, counties will be responsible for serving all justice-involved youth across the juvenile justice continuum. In 2020-21, to facilitate the realignment of youth from the state to counties, the Board of State and Community Corrections (BSCC) allocated $9.6 million in one-time funds for the Regional Youth Programs and Facilities Grant Program as authorized by SB 823. These funds were available to counties for infrastructure-related needs and improvements to assist counties in the development of a local continuum of care. However, additional investment is needed to help counties prepare to serve and provide treatment to realigned youth. The Budget includes $100 million one-time General Fund for grants to be administered by the BSCC to support improvements to county-operated juvenile facilities to make these locations more conducive to serving justice-involved youth with a wide range of needs, with a focus on supporting trauma-informed care, restorative justice, and rehabilitative programming.

 

Family Finding and Resource Family Approval for Counties:

Family Finding and Engagement - The Budget includes $1 million ($750,000 General Fund) ongoing for the Department to provide additional technical assistance and training to counties in meeting the need for children in foster care and unaccompanied minors to be connected to permanent family.

Resource Family Approval (RFA) Applications - The Budget includes $6.1 million ($4.4 million General Fund) one-time, available over three years, for county child welfare agencies to address RFA applications that have pending or probationary approval for more than 90 days.

 

Early Childhood

 Early childhood is now officially all managed by the Department of Social Services.

Additional EC Slots - The Budget includes $823.7 million for 36,000 additional subsidized slots compared to 2021-22. When combined with the slots funded in the 2021 Budget Act, this brings the total to over 145,000.

Child Care Initiative Project  - $25 million to fund the Child Care Initiative Project through June 30, 2023, to address areas underserved by child care providers, increase child care slots, and support providers who want to become licensed.

Early Childhood Mental Health Consultation - $10.6 million in funding through June 30, 2023 for the California Infant and Early Childhood Mental Health Consultation program to support the mental health needs of children, families, and child care providers.

Expansion of Transitional Kindergarten -  $639.2 million General Fund to expand eligibility for transitional Kindergarten, from all children turning five-years-old between September 2 and December 2 to all children turning five-years-old between September 2 and February 2, beginning in the 2022-23 school year.

 $383 million Proposition 98 General Fund to add an educator to every transitional kindergarten class, reducing student-to-adult ratios to more closely align with the State Preschool Program.

State Preschool Program -$309 million so that the State Preschool Program better supports students with disabilities and dual language learners. These funds will support new requirements for State Preschool providers to:

(1) serve at least 10 percent students with disabilities, and
(2) provide additional supportive services for dual language learners.
$500 million one-time Proposition 98 General Fund to support the Inclusive Early Education Expansion Program, which funds infrastructure necessary to support general education and special education students in inclusive classrooms.

Prevention Services

The 2019 Budget created the Young Child Tax Credit (YCTC) to help lift children out of poverty. In most cases, the credit provides $1,000 to every household that otherwise qualifies for the Earned Income Tax Credit and has a child age 5 or younger. For the 2020 tax year, 420,000 taxpayers claimed this credit and received credits totaling $390 million. The Budget builds on the YCTC by (1) indexing the YCTC for inflation starting in the 2022 tax year and (2) expanding the YCTC to include households with zero earned income.

$50 million ongoing General Fund for the Department of Public Health (CDPH) to expand the California Home Visiting Program and the California Black Infant Health Program, serving approximately 6,000 additional families over five years.

The Budget proposes greater flexibility for the home visiting models offered to meet the diverse needs of families across the state, expands home visiting services to additional counties, and makes them accessible to families with the highest needs.

 $350 million General Fund investment to recruit, train, and certify new community health workers.

 $10 million General Fund to expand early literacy efforts by developing a partnership between CDPH and First 5 California to administer a statewide program to provide multilingual books and early literacy programing for families with young children in collaboration with other state programs such as home visiting, child care, early childcare centers, and foster care.

$1.2 million ($1 million General Fund) to increase DDS resources to make improvements to the Early Start Program to drive toward inclusive services, help streamline intake processes, align systems, and increase interagency collaboration with CDE.

 $50 million one-time General Fund for the CalFood program to mitigate increases in food needs among low-income and food-insecure populations throughout the state.

 

 Education

Local Control Funding Formula COLA of 5.33%

 Local expenditure data indicate that a significant proportion of the approximately $30 billion in one-time COVID-related federal funding provided to local educational agencies in the 2020-21 and 2021-22 fiscal years remains available for expenditure, indicating significant available cash for local educational agencies in 2022-23.

School Fiscal Stability

 In order to address issues with declining enrollment, the budget proposes to amends the LCFF calculation to consider the greater of a school district’s current year, prior year, or the average of three prior years’ ADA. This formula change will help districts with significant declining enrollment and better serve remaining students.

Independent Study

 In 2022-23 independent study will continue to be an option for local educational agencies to count instructional time for student work completed remotely. Local educational agencies can choose between traditional independent study and course-based independent study to create quality short- and long-term remote instruction models that best serve the needs of their students. To streamline the administration of these programs, the Budget:

(1) allows synchronous instruction to count for instructional time in traditional independent study, in addition to student work product; and

(2) provides flexibility on the timeline for a local educational agency to collect a signed independent study plan.

Special Education

An increase of $295 million ongoing Proposition 98 General Fund to reflect a 5.33-percent cost-of-living adjustment for categorical programs that remain outside of the LCFF, including Special Education, Child Nutrition, Youth in Foster Care, Mandates Block Grant, Adults in Correctional Facilities Program, American Indian Education Centers, and the American Indian Early Childhood Education Program.

The Budget proposes an additional $500 million ongoing Proposition 98 General Fund for the special education funding formula, paired with the following policy changes to further the state’s commitment to improving special education instruction and services:

• To improve the ability of local educational agencies to project their special education funding allocations and undertake comprehensive program planning, amend the special education funding formula to calculate special education base funding allocations at the local educational agency level rather than the special education local plan area (SELPA) level. • Consolidate two special education extraordinary cost pools into a single cost pool to simplify the current funding formula.
• Allocate Educationally-Related Mental Health Services funding directly to local educational agencies rather than to SELPAs.
• Develop a Special Education Addendum to the Local Control and Accountability Plan that will support inclusive planning and promote cohesion by linking special education and general education planning, so parents of students with disabilities have a defined role in the Local Control and Accountability Plan development process.
• Support efforts to develop comprehensive Individualized Education Programs (IEPs) by focusing a special education resource lead on IEP best practices, and establishing an expert panel to continue the work of creating a model IEP template.
• Establish an alternate diploma and a workgroup to explore alternative coursework options for students with disabilities to demonstrate completion of the state graduation requirements.