Existing law, the Lanterman Developmental Disabilities Services Act, requires the State Department of Developmental Services to enter into contracts with private nonprofit corporations to operate regional centers for the provision of community services and support for persons with developmental disabilities and their families. Existing law sets forth the duties of the regional centers, including, but not limited to, development of individual program plans, the purchase of needed services to implement the plan, and monitoring of the delivery of those services.

Existing law requires the regional center contracts and agreements with service providers in which rates are determined through negotiations between the regional center and the service providers to expressly require that not more than 15% of regional center funds be spent on administrative costs, as defined.

This bill would require all regional center contracts or agreements with contracting entities that provide in-home respite services and that have an annual revenue attributable to in-home respite services provided to regional center consumers of at least $7,000,000, as specified, to expressly require that at least 85% of regional center funds be spent on direct service expenditures, as defined.

Existing law, the Lanterman Developmental Disabilities Services Act, requires the State Department of Developmental Services to enter into contracts with private nonprofit corporations to operate regional centers for the provision of community services and support for persons with developmental disabilities and their families. Existing law sets forth the duties of the regional centers, including, but not limited to, development of individual program plans, the purchase of needed services to implement the plan, and monitoring of the delivery of those services.

Existing law requires the regional center contracts and agreements with service providers in which rates are determined through negotiations between the regional center and the service providers to expressly require that not more than 15% of regional center funds be spent on administrative costs, as defined.

This bill would require all regional center contracts or agreements with contracting entities that provide in-home respite services and that have an annual revenue attributable to in-home respite services provided to regional center consumers of at least $7,000,000, as specified, to expressly require that at least 85% of regional center funds be spent on direct service expenditures, as defined.

Existing law, the Lanterman Developmental Disabilities Services Act, requires the State Department of Developmental Services to enter into contracts with private nonprofit corporations to operate regional centers for the provision of community services and support for persons with developmental disabilities and their families. Existing law sets forth the duties of the regional centers, including, but not limited to, development of individual program plans, the purchase of needed services to implement the plan, and monitoring of the delivery of those services.

Existing law requires the regional center contracts and agreements with service providers in which rates are determined through negotiations between the regional center and the service providers to expressly require that not more than 15% of regional center funds be spent on administrative costs, as defined.

This bill would require all regional center contracts or agreements with contracting entities that provide in-home respite services and that have an annual revenue attributable to in-home respite services provided to regional center consumers of at least $7,000,000, as specified, to expressly require that at least 85% of regional center funds be spent on direct service expenditures, as defined.

Existing law, the Lanterman Developmental Disabilities Services Act, requires the State Department of Developmental Services to enter into contracts with private nonprofit corporations to operate regional centers for the provision of community services and support for persons with developmental disabilities and their families. Existing law sets forth the duties of the regional centers, including, but not limited to, development of individual program plans, the purchase of needed services to implement the plan, and monitoring of the delivery of those services.

Existing law requires the regional center contracts and agreements with service providers in which rates are determined through negotiations between the regional center and the service providers to expressly require that not more than 15% of regional center funds be spent on administrative costs, as defined.

This bill would require all regional center contracts or agreements with service providers contracting entities that provide in-home respite services and that have an annual revenue attributable to respite services provided to regional center consumers of at least $7,000,000, as specified, to expressly require that at least 85% of regional center funds be spent on direct service expenditures, as defined.

Existing law, the Lanterman Developmental Disabilities Services Act, requires the State Department of Developmental Services to enter into contracts with private nonprofit corporations to operate regional centers for the provision of community services and support for persons with developmental disabilities and their families. Existing law sets forth the duties of the regional centers, including, but not limited to, development of individual program plans, the purchase of needed services to implement the plan, and monitoring of the delivery of those services.

Existing law requires the regional center contracts and agreements with service providers in which rates are determined through negotiations between the regional center and the service providers to expressly require that not more than 15% of regional center funds be spent on administrative costs, as defined.

This bill would require all regional center contracts or agreements with service providers that provide in-home respite services to expressly require that at least 85% of regional center funds be spent on direct service expenditures, as defined.

SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Wieckowski, Chair

2015 - 2016 Regular

Bill No: AB 1400

SUBJECT: Hazardous waste: facilities permitting.

ANALYSIS:

Existing law:

1. Under the federal Resource Conservation and Recovery Act (RCRA) of 1976, governs the disposal of hazardous waste: 
2. Through regulation, sets standards for the treatment, storage, transport, tracking and disposal of hazardous waste in the United States.
3. Authorizes states to carry out many of the functions of the federal law through their own hazardous waste laws if such programs have been approved by the United States Environmental Protection Agency (US EPA).
4. Under the California Hazardous Waste Control Act (HWCA) of 1972:
   1. Establishes the Hazardous Waste Control program.
   2. Regulates the appropriate handling, processing and disposal of hazardous and extremely hazardous waste to protect the public, livestock and wildlife from hazards to health and safety.
   3. Implements federal tracking requirements for the handling and transportation of hazardous waste from the point of waste generation to the point of ultimate disposition.
   4. Establishes a system of fees to cover the costs of operating the hazardous waste management program.
   5. Authorizes the Department of Toxic Substances Control (DTSC) to enforce federal law and regulations under RCRA.
   6. Requires DTSC to grant and review permits and enforce HWCA requirements for hazardous waste treatment, storage and disposal facilities.
   7. Authorizes DTSC to issue an order under the hazardous waste control laws requiring that a violation be corrected and imposing a civil penalty to specified persons, including a person who has violated various provisions regulating hazardous waste or provisions concerning removal and remedial actions for hazardous substance releases. A person who is issued that order is required to pay for oversight of the removal or remedial action.
   8. Requires a facility handling hazardous waste to obtain a hazardous waste facilities permit from the DTSC.
   9. Requires DTSC to impose certain conditions on each hazardous waste facilities permit and authorizes the department to impose other conditions on a hazardous waste facilities permit, as specified.
   10. A violation of the hazardous waste control law is a crime.

This bill:

1. Requires DTSC, as a condition for a new hazardous waste facilities permit or a renewal of a hazardous waste facilities permit, to require a facility operator to install monitoring devices or other equipment at the fence line of the facility to monitor for potential releases from the facility into the surrounding community, except as specified.
2. Requires DTSC to grant such a request from a member of the public for a technical assistance grant for the purpose of getting assistance relating to, and information about, a pending hazardous waste facilities permit if DTSC receives the request within one year of the submission of the applicable hazardous waste facilities permit application, and would authorize DTSC, in its discretion, grant such a request received more than one year from the submission of the applicable permit application.
3. Requires the permit applicant to fund the grants.
4. Requires DTSC, upon receipt of an application for a new hazardous waste facilities permit or for a renewal of a hazardous waste facilities permit, to post on its Internet Web site that the application has been received, and to include with this information a description of the process for applying for a technical assistance grant.

Background

1. Exide Technologies, Vernon, California.  The Exide facility in Vernon, California was one of two secondary lead smelting facilities in California which recovered lead from recycled automotive batteries.  It has over 100 employees.  It recycles 23,000 to 41,000 batteries daily and has an average production of 100,000 to 120,000 tons of lead per year. 

The facility has been used for a variety of metal fabrication and metal recovery operations since 1922.  Previous owners have included Morris P. Kirk & Sons, Inc., NL Industries, Gould Inc., and GNB Inc.

The facility in Vernon has been operating with an interim hazardous waste facility permit since 1981. 

In recent years, the Exide facility has brought to light the failings of DTSC’s Permitting Program.  Over the 30 years that the facility operated with an interim permit, there were many violations of the permit as well as other regulatory standards, such as those by the South Coast Air Quality Management District, which caused environmental damage and risk to public health. 

In March, 2015 it was announced that an agreement was reached between the United States Department of Justice and Exide Technologies to permanently close the battery recycling facility in Vernon, CA, and in order to avoid criminal prosecution, Exide Technologies further agreed to a stipulation and order with DTSC to complete remediation activities as specified in the stipulation and order issued by DTSC. 

This example of a failed process calls into question whether the statutory authorizations, requirements and direction to DTSC is adequate to ensure that the program runs correctly and is appropriately protective of public health and the environment, especially in the vulnerable communities where there are permitted facilities.

Additionally, it called into question whether there are other facilities that may currently be similarly causing harm to the communities in which they are located.

The community crisis around Exide created significant concern about DTSC’s permitting statutory authorization and implementation. 

The DTSC Office of Permitting is authorized to issue hazardous waste facilities permits, and to impose conditions specifying the types of hazardous waste that may be accepted for transfer, storage, treatment, or disposal in California. Currently there are 117 permitted Operating Facilities, including 28 Post Closure Facilities (closed and going through final remediation) in the state, that provide for the treatment, storage, or disposal of substances regulated as hazardous waste under federal and state law. A total of 1.82 billion pounds of California toxic waste were disposed of in these facilities in 2012, with 62% treated to the point where it no longer met toxic standards, and 38% placed in landfills. From a staffing standpoint, currently there are 29 authorized positions allocated to the Office of Permitting, located in Sacramento, Berkeley, and Chatsworth.

There has been significant dissatisfaction with the performance of the Permitting Office, directed at the cost and length of time in completing the permit process and a perception that the Office does not deny or revoke permits as often as it should to address community concerns. The stakeholder interviews conducted as part of this study identified the following major concerns:

• The need to create clear and objective criteria for making denial/revocation decisions that are based on valid standards of performance and risk.
• A clear standard for violations that would lead to a denial or revocation.
• The need for the Department to document and measure a “scorecard” of attributes that would be perceived as a “good result” for the permitting program.

DTSC entered into a contract with CPS HR Consulting on February 1, 2013, to conduct a Permitting Process Review and Analysis.

CPS HR was asked to review the existing permitting program and develop a recommended standardized process with clear decision criteria and corresponding standards of performance. CPS HR was also asked to document the changes in the permitting process over the past five years based primarily on the record obtained from past internal review, and to obtain perspectives of designated subject matter experts, including representatives from the environmentalist, environmental justice, and industry communities. This report provides findings in each defined area.

The study found that the overall average permitting process time, which was 5.0 years prior to FY2003, improved to a 3.2 year average for the period from FY2003 to FY2007, before again increasing to 4.3 years in the most recent time period (from FY2008 through part of FY2013). So while there was an improvement from the oldest period studied to the most recent, the current trend is again towards longer processing time.

The study notes several key findings regarding the recent increase in permit processing time which is attributed to at least two major factors:  

• There was a reduction in staffing in the office. Permitting staffing has been reduced significantly from 95.8 personnel years utilized in FY2007 to just 24.6 personnel years utilized in FY2009. The initial change was a response to the economic recession in 2009, and its required state budget reductions. However, less than 26.1 personnel years have been utilized in each year since that time.
• The study found that the second primary reason for permitting delays is poor management practices. Between December 2009 and June 2013, the Office of Permitting did not maintain consistent uniform management, supervisory structure or clear consistent organizational structure. This is demonstrated by the fact that program managers were either re‐assigned to other duties or vacant for a majority of the time period from July 2009 through July 2013, while program supervisor positions for all personnel in the unit were either not authorized or vacant for more than half of this period. In other words, there was a four‐year period in which direct supervision of personnel lapsed.

This study concludes that while many aspects of the work process required for a permit renewal are well-defined and well-known, most of the difficult or complex steps are not clear or well-defined. This is one of the most likely reasons for prolonged delays, and for future process improvement.

The study further stated that much of the “process” knowledge within the Office of Permitting is in the individual professional knowledge of the DTSC staff which is interpretive and not documented. More importantly, a re-review of the Permit Renewal Team effort of 2007‐2009 has not found any structural changes or permanent process changes that have been implemented that could cause significantly improved permit renewals in the future. According to CPS HR the “lessons learned” from the Renewal team effort appear to have been misconstrued, and the actions taken after the team experience were damaging to management and supervision in the unit.

According to the department, for several years, DTSC’s efforts to carry out this mission were compromised by deficiencies in technical and administrative processes and procedures, from a misaligned personnel system to insufficient coordination between programs. These systemic issues resulted in a structural budget deficit; $184.5 million in uncollected cleanup costs dating back 26 years; a growing backlog of applications to renew hazardous waste permits; and decreased stakeholder confidence and public trust in the department.

In early 2012, the department embarked on its “Fixing the Foundation” initiative, which includes more than 30 different activities intended to improve its operations and restore public trust in the department. Activities include increasing cost recovery from those responsible for hazardous waste contamination, reducing permitting backlogs, strengthening enforcement, and improving the financial sustainability of its operating funds. This effort includes multiple goals at every level of the organization, from staff engagement to permitting backlogs and cost recovery.

In 2014, DTSC released its Permitting Enhancement Work Plan as a comprehensive roadmap to guide efforts to improve DTSC’s ability to issue protective, timely and enforceable permits using more transparent standards and consistent procedures.

In the 2014-15 Budget Act, DTSC requested and was granted 8 limited-term positions and $1.2 million for reduction of backlogged permitting application review.

As part of the 2015-16 Budget Act, DTSC requested an additional $1.632 million and 16 limited-term positions for two years to address the permitting backlog.

1. Independent Review Panel (IRP). The IRP was created within DTSC by SB 83 (Committee on Budget and Fiscal Review, Chapter 24, Statutes of 2015). The IRP is comprised of three members tasked with reviewing and making recommendations regarding improvements to DTSC’s permitting, enforcement, public outreach, and fiscal management. The IRP will issue reports to the Governor and Legislature every 90 days detailing updates on DTSC’s performance and backlogs. The IRP reports will additionally include recommendations for improving DTSC programs.

The IRP has submitted 2 reports thus far with a series of observations, concerns and recommendations for improving DTSC’s permitting, cost recovery and site remediation programs. Much of the reports’ focus is on budgetary improvements that have been made or are being made. In addition the IRP makes several process improvement recommendations around DTSC’s permitting program with an emphasis on increasing public participation and accountability. 

The IRP has submitted 2 reports thus far with a series of observations, concerns and recommendations for improving DTSC’s permitting, cost recovery and site remediation programs. Much of the reports’ focus is on budgetary improvements that have been made or are being made. In addition the IRP makes several process improvement recommendations around DTSC’s permitting program with an emphasis on increasing public participation and accountability. 

Comments

1. Purpose of Bill. According to the author in 2015, SB 83 established an Independent Review Panel (IRP) within DTSC. The IRP is tasked with reviewing and making recommendations regarding improvements to DTSC’s permitting, enforcement, public outreach, and fiscal management. At recent IRP meetings, members of the public have expressed concerns that: (1) DTSC’s permitting standards often do not adequately protect public health and/or the environment; (2) hazardous waste facilities are frequently located near disadvantaged communities; and (3) communities are not provided with permit application information early enough to participate in DTSC decision-making processes.

The author states, to address public participation and environmental justice concerns, IRP proposed that DTSC establish Technical Assistance Grants to increase public participation during the hazardous waste facility permit application process, stating that these grants can allow the community to raise their questions/concerns and make permitting decisions more transparent. Furthermore, the IRP recommended DTSC be given specific authority to require fence-line monitoring by permit holders in appropriate cases.

The author asserts that AB 1400, in line with the IRP recommendations and additionally, goals outlined in DTSC’s Permitting Enhancement Workplan, establishes Technical Assistance Grants and authorizes DTSC to require fence-line monitoring by permit holders. This measure will increase public participation in hazardous waste facility permit applications while additionally strengthening DTSC’s permitting standards.

1. Technical Assistance for What? It is not clear in the language of the bill what exactly a “technical assistant grant” is, for what activities the grant could be used or, how exactly it is to be funded or for how much. The bill specifies that the permit applicant is to pay for the technical assistance grant. However, community technical assistance is not a component of the applicants’ compliance with permit requirements or the facilities regulation and therefore does not appear to be consistent as a fee on the applicant.
2. A band aid on a hemorrhage? The Legislature, the Administration and stakeholders have all pointed to systemic issues and programmatic deficiencies that have impacted DTSC’s ability to fulfill its public health and environmental protection mandates. The Legislature has had nearly 20 hearings on the department’s deficiencies in the last 3 years between policy and budget committees in both houses. DTSC and the Governor have initiated audits, panels, reports, and their own initiatives to fix identified problems. The Legislature has passed several reform bills and significantly augmented DTSC’s budget and staff. 

It is not clear that a suite of bills that make small “steps in the right direction” at the 11^th hour of the Legislature’s policy deadlines at the end of a two-year session is the right direction at this point. This lacks the opportunity to do the thoughtful consideration necessary to review how these reforms impact all stakeholders and may actually hinder significant reform necessary to improve DTSC. 

It is clear however, that all review to date has pointed to systemic issues at DTSC. At the heart of the criticisms around DTSC’s failings is a lack of accountability. These bills, while they may tighten the statute, do not help solve the root problem of greater transparency and accountability.

Related/Prior Legislation

AB 1205 (Gomez, 2015) Requires DTSC, within 90 days of receiving a renewal application for a hazardous waste facilities permit, to hold a public meeting for specified purposes in or near the community in which the hazardous waste facility is located and requires DTSC review the financial assurances required to operate a hazardous waste facility at least once every 5 years. If the department’s review finds the financial assurances for a facility to be inadequate, the bill would require the department to notify the owner or operator of the facility and would require the owner or operator to update and adopt adequate financial assurances within 90 days.

AB 1102 (Santiago, 2016) requires DTSC to inspect a permitted hazardous waste land disposal facility no less than once per month, inspect a permitted and operating hazardous waste facility no less than 4 times per calendar year, and inspect a permitted hazardous waste facility no less than 2 times per calendar year.  

SB 83 (Committee on Budget and Fiscal Review, Chapter 24, Statutes of 2015) among other things, created the IRP to review and make recommendations for improving DTSC programs, as specified.

SB 673 (Lara, Chapter 611, Statutes of 2015) revises DTSC’s permitting process and public participation requirements for hazardous waste facilities.

SB 712 (Lara, Chapter 833, Statutes of 2014) requires DTSC, on or before December 31, 2015, to issue a final permit decision on an application for a hazardous waste facilities permit that is submitted by a facility operating under a grant of interim status on or before January 1, 1986, by either issuing a final permit or a final denial of the application.

SB 812 (de León, 2014) would have required DTSC to adopt regulations by January 1, 2017, to specify conditions for new permits and the renewal of existing permits, as specified, and establishes deadlines for the submission and processing of facility applications, as specified. SB 812 was vetoed by Governor Brown.

SOURCE:           Author

SUPPORT:

Asian Pacific Environmental Network

Breast Cancer Fund

California Environmental Justice Alliance

California League of Conservation Voters

Center for Community Action and Environmental Justice

Clean Water Action/ Clean Water Fund

Communities for a Better Environment

Environmental Health Coalition

Environmental Working Group

Natural Resources Defense Council

OPPOSITION:

CalChamber

Waste Management

These lists are likely incomplete as the bill was gut and amended on 6/20/16, not giving stakeholders a sufficient opportunity to review.

ARGUMENTS IN SUPPORT:

Supporters state that the DTSC reform package (AB 1102, AB 1205 and AB 1400) will improve DTSC’s hazardous waste permit program by setting minimum inspection frequencies at hazardous waste facilities, increasing public’s ability to participate in the permitting process, ensuring adequate monitoring to avoid off-site migration of contaminants and requiring financial assurances to cover hazardous waste facilities clean-up costs. 

ARGUMENTS IN OPPOSITION:

According to Waste Management, “the objection pertains to the cumulative effect of these combined proposals, the costs of which must all be borne by applicants or operators.  In brief, the cumulative effect will be large, poorly-understood, and clearly discourage the operation of DTSC-licensed facilities in California.  Please note that legislation to eliminate the flat-fee option for permit applicants is part of the budget and trailer bills.  Additionally, legislation to create an Appeals Hearing Board is being actively considered.  Can we reasonably expect DTSC to implement the totality of these changes smoothly?  It is ill-advised to inundate DTSC with a myriad of lately developed proposals. 

These proposals should not be considered in isolation.  Important issues of public policy should be considered.  For example, approximately 85% of material deposited at Kettleman Hills is non-RCRA waste.  If transported to the border, non-RCRA waste is subjected to dramatically less demanding regulatory standards.   During Waste Management’s recent permit modification “ordeal”, waste previously deposited at Kettleman Hills went elsewhere (not in California).  No one has studied where this waste went and the manner in which it was handled, treated, etc.  Enactment of the three bills (and other matters) identified above could result in the export of more waste and related activity. 

No one questions the need to reform DTSC.  But the rapid adoption of multiple bills fails to prioritize reforms, frustrates integration, and may impede reform.  Further delay and frustration may result.”

-- END --

SENATE COMMITTEE ON HUMAN SERVICES

Senator McGuire, Chair

2015 - 2016 Regular

Bill No: AB 1400

Subject: Developmental services: regional center contracts

SUMMARY

This bill requires all regional center contracts or agreements with contracting entities that provide in-home respite services and that have an annual revenue attributable to in-home respite services provided to regional center consumers of at least $7,000,000, as specified, to expressly require that at least 85 percent of regional center funds be spent on direct service expenditures, as defined.

ABSTRACT

Existing law:

1. Establishes the Lanterman Developmental Disabilities Services Act, which states that California is responsible for providing an array of services and supports sufficiently complete to meet the needs and choices of each person with developmental disabilities, regardless of age or degree of disability, and at each stage of life and to support their integration into the mainstream life of the community. (WIC 4500, et al)

2. Establishes a system of nonprofit Regional Centers, overseen by the Department of Developmental Services (DDS), to provide fixed points of contact in the community for all persons with developmental disabilities and their families, to coordinate services and supports best suited to them throughout their lifetime. (WIC 4620)

3. Establishes an Individual Program Plan (IPP) and defines that planning process as the vehicle to ensure that services and supports are customized to meet the needs of consumers who are served by regional centers. (WIC 4512)

4. Requires a regional center shall secure services and supports that meet the needs of the consumer, as determined in the IPP, and to give highest preference to those which would allow minors with developmental disabilities to live with their families, adult persons with developmental disabilities to live as independently as possible in the community, and that allow all consumers to interact with persons without disabilities in positive, meaningful ways. (WIC 4648)

5. Establishes a process for regional centers to “vendorize” or contract with service providers to serve consumers IPP-identified service needs based on the vendor’s qualifications and other requirements necessary in order to provide the service, and specifies the process and requirements for becoming a regional center vendor. (WIC 4648 (3) (a))

6. Requires DDS to enter into contracts with regional centers, which include annual performance objectives that are designed to assist consumers to achieve life quality outcomes, develop services and supports identified as necessary to meet identified needs, including culturally and linguistically appropriate services and supports and meet other objectives. (WIC 4629)

7. Within the regional center contracts, requires DDS to ensure that all regional center contracts or agreements with service providers in which rates are determined through negotiations between the regional center and the service provider, shall expressly require that not more than 15 percent of regional center funds be spent on administrative costs and defines the following expenditures and costs:

1. Defines direct service expenditures as those costs immediately associated with the services to consumers being offered by the provider. Funds spent on direct services shall not include any administrative costs.

2. Defines administrative costs to include, but not be limited to, 15 categories of expenditures items including salaries, wages, and employee benefits for managerial personnel including executive officers, facility and occupancy costs, data processing, training, contract procurement, insurance, travel and other specified costs. (WIC 4629.7 (a))

8. Requires that not more than 15 percent of all funds appropriated through the regional center’s operations budget shall be spent on administrative costs, and defines direct services and administrative costs, as specified. (WIC 4629.7 (b))

This bill:

1. Defines for the purposes of a new section, WIC 4629.8, administrative costs to include all costs other than direct service expenditures, including all amounts actually paid and all accounts payable, as calculated in accordance with generally accepted accounting principles, including, but not limited to:

   1. Compensation and benefits, including federal, state, and local payroll taxes, workers’ compensation and unemployment insurance premiums, and recruiting, training, orientation, and background checks for managerial personnel whose primary purpose is the administrative management of the entity, including, but not limited to, directors and chief executive officers.

   2. Compensation and benefits, including federal, state, and local payroll taxes, workers’ compensation and unemployment insurance premiums, and recruiting, training, orientation, and background checks for employees who perform administrative functions, including, but not limited to, payroll management, personnel functions, accounting, budgeting, and facility management.

   3. Facility and occupancy costs directly associated with administrative functions.

   4. Maintenance and repair.

   5. Data processing and computer support services.

   6. Contract and procurement activities, except those provided by a direct service employee.

   7.  Training directly associated with administrative functions.

   8. Travel directly associated with administrative functions.

   9. Licenses directly associated with administrative functions.

   10. Taxes.

   11. Interest.

   12. Property insurance.

   13. Personal liability insurance directly associated with administrative functions.

   14. Depreciation.

   15. General expenses, including, but not limited to, communication costs and supplies directly associated with administrative functions.

   16. Consultants and professional services, including, but not limited to, accounting and legal services.

   17. Distributions to shareholders.

   18. Advertising costs.

   19. Conference, convention, and meeting costs.

   20. Facility and office equipment costs, including, but not limited to, rent, lease, and mortgage payments, directly associated with administrative functions.

   21. Transfers to a corporate parent or franchisor, including, but not limited to, franchise fees, fees for copyright or trademark usage, fees for advertising materials, royalty fees, or conference fees.

   22. Other general operating and overhead costs.

2. Defines “direct service expenditures” to mean all amounts actually paid and all accounts payable, as calculated in accordance with generally accepted accounting principles, in the following categories:

1. Wages and benefits, including state, federal, and local payroll taxes, workers’ compensation and unemployment insurance premiums, and recruiting, training, orientation, and background checks for respite care aides.

2. Expenses substantially similar to those in subparagraph (a) that are directly related to the provision of in-home respite services.

1. Defines “financial management services” to mean services, as defined, and any similar service, including, but not limited to, payroll duties, processing payments for the reimbursement of services, and other employer responsibilities that are required by federal and state law, when the agency is the employer for those purposes, but the consumer or his or her family member recruits the worker.

2. Defines “service agency,” to mean an organization or corporation that provides in-home respite services, as defined.

5. Requires that all regional center contracts or agreements entities that provide in-home respite services, as defined, and that have an annual revenue attributable to in-home respite services provided to regional center consumers of at least seven million dollars ($7,000,000), shall expressly require that at least 85 percent of regional center funds be spent on direct service expenditures. Direct service expenditures shall not include administrative costs.

6. Specifies that a contracting service agency may meet the annual revenue attributable to in-home respite services in either of the following ways:

   1. The annual revenue of the contracting service agency that is attributable to in-home respite services provided to regional center consumers, excluding financial management services and other administrative services, meets or exceeds seven million dollars ($7,000,000).

   2. The annual revenue of the contracting entity’s parent organization that is attributable to in-home respite services provided to regional center consumers in California, excluding financial management services and other administrative services, whether earned directly by the parent organization or by subcontractors and subsidiaries of the parent organization, meets or exceeds seven million dollars ($7,000,000).

7. Requires service providers and contractors, upon request, to provide regional centers with access to books, documents, papers, computerized data, source documents, consumer records, or other records pertaining to the service providers’ and contractors’ rates.

FISCAL IMPACT

This bill has not been analyzed by a fiscal committee.

BACKGROUND AND DISCUSSION

Purpose of the bill:

According to the author, the rate set by the DDS for In-home Respite Services Agencies does not require that regional center funds are expended primarily for the delivery of services to ensure public funds are not expended for excessive administrative costs and profits. The author states that current law requires that no more than 15 percent of the funds received by a service provider with a negotiated rate from the regional centers may be used for administrative costs. This policy is not applicable to services that have rates established by DDS, DHCS, or statutorily established rates. In-home Respite Services Agency is set by DDS — not negotiated — based on a cost statement the provider completed and submitted to the regional center.

Current law only limits the funds devoted to overhead to 15 percent for some vendors, according to the author, but sets no minimum requirement for direct service expenditures. This leaves the remaining 85 percent of regional center funds for direct service expenses and profit with no clear guidance on the proper allocation for these costs, the author states. AB 1400 sets a minimum requirement for direct service expenditures at 85 percent for in-home respite services, leaving the remaining 15 percent for administration and profit. Direct service expenditures are those costs immediately associated with the services provided to clients.

The Lanterman Act

The Lanterman Developmental Disabilities Services Act, passed in 1974, established an entitlement to services and supports for Californians with developmental disabilities and set up an extensive system to care for individuals who living in their communities. A developmental disability is defined in statute as one that originates before the age of 18, continues, or can be expected to continue, indefinitely, and constitutes a substantial disability. Today, approximately 290,000 children and adults with developmental disabilities are served in community-based programs and supported by state- and federally funded services that are coordinated by local, nonprofit regional centers. Another 1,077 individuals are served in three state-run Developmental Centers and one smaller step-down facility, although the institutional population has decreased significantly in recent years and the Department has recently announced it plans to close all three Developmental Centers.

The state’s 21 regional centers vary considerably in size and organization. Statewide, slightly more than half of the regional center population is between age 18 and 61 years old; about two-thirds of all consumers have an intellectual disability, three in 10 are diagnosed with autism or a related disorder, and 18 percent are identified as having severe behaviors, according to data reported by the Department of Developmental Services (DDS). About 77 percent of consumers live in the home of a parent or guardian or in their own home, according to DDS.

Regional centers provide the diagnosis and assessment of eligibility and help plan, access, coordinate and monitor the services and supports that are needed because of an individual’s developmental disability. Services for consumers are determined through an individual program plan (IPP).

Vendorization

To be eligible to provide services to a regional center client, a provider must become a vendor of those services in a specific regional center’s catchment area. According to the DDS website, “vendorization is the process for identification, selection, and utilization of service providers based on the qualifications and other requirements necessary in order to provide the services. The vendorization process allows regional centers to verify, prior to the provision of services to consumers, that an applicant meets all of the requirements and standards specified in regulations.”

In truth, regional centers must vendorize any applicant who meets all the requirements for the service to be provided. The DDS website notes that vendorization in no way obligates that regional center to purchase service from that vendor. Applicants who pass vendorization requirements are assigned a service code and unique vendor identification number by the regional center, which determines the appropriate vendor category for the service to be provided.

Within the vendor community, there are roughly 75 to 100 vendor codes, designed to identify criteria for providing specific types of services and to set rates for those services. More than 45,000 vendors provide services paid for by regional centers in California.

Provider rates

Current statute and regulations set rate requirements for regional center rates that can be paid to vendors to provide various services to regional center consumers. There are different rates for different types of services, including the following:

• Rates set by DDS, which are included in statute or regulation, or can be set through cost estimates or rate schedules;

• Rates established by the DDS, which are set through a calculation of actual costs, and includes those rates for in-home respite services, which are the subject of this bill;

• Rates established by Medi-Cal, which require a regional center to pay no more than the Medi-Cal rate;

• Usual and customary rates, which align with the rates a particular business charges individuals who do not have developmental disabilities and are not served by regional centers;

• Rates set for transportation services to regional center clients; and

• Negotiated Rates set through negotiation between the regional center and the provider, which are applied to services that do not fit within any of the other established rate structures and in which case the maximum rate is capped at the regional center median rate for that service or the statewide median rate for that service, whichever is lower. An example is Supported Living Services.

In Home Respite services

In-home respite services are intended to provide temporary, nonmedical care and supervision to a regional center client, in his or her own home, in order to assist family members in maintaining the client at home, or to ensure the client's safety in the absence of family members, among other objectives. In California, there are a number of large agencies that hire in-home respite providers to provide direct care. Rates for in-home respite services are set by DDS based on actual costs submitted through cost statements for administrative costs, and may be no more than a maximum of $22.44 per hour, with some adjustments for various factors. For example, hourly rates among three of the largest providers for administration costs range $7.41 to $10.56 and the administrative portion of the rate averages around $10 statewide. The direct service rate is established statewide and will be $13.10 per hour as of January 1, 2016

According to the Department’s website, for rates established through cost statements, such as community-based day programs and in-home respite service agencies, each vendor's rate is established utilizing actual allowable cost information and consumer attendance data submitted by the vendor. If the calculated rate is within the allowable range of rates for like programs, the vendor will receive the calculated rate. If, however, the vendor's rate is below the lower limit or above the upper limit, the rate will be adjusted up to the lower limit or reduced to the upper limit, as appropriate.

Employer of record

In situations where a consumer selects and supervises her or her own caregiver, a respite agency may also serve the function of “employer of record.” This function was established by the state after federal regulators prohibited any further payments for respite caregivers directly from the regional center to the caregiver, instead requiring that payments be made to a vendorized provider. The employer of record therefore satisfies payroll and tax requirements for the consumer and his or her selected respite provider. As an example, this type of service may be used for a neighbor or relative who provides temporary or intermittent respite care for a consumer. The employer of record function is essentially administrative; no direct services are provided by the employer of record provider.

Rate Restructuring

In 2001, DDS and its stakeholders completed a four-year review of the community based service delivery system and released a 67-page document with that year’s May budget revision. The report, prompted by SB 1038 (Chapter 1043, Statutes of 1998), underscored the need to shift the current system to one of quality-based outcomes. Inherent in this process was the need restructure rates to reflect the actual cost of providing services. A recession in late 2001, forced the state to postpone implementation, although DDS committed to continue focusing on the effort with workgroups.

In 2014, the Legislature again tried to establish a rate reform process in its budget bill, however the Governor rejected the language, noting that the issue would be taken up by a task force convened by the Health and Human Services Agency.

Agency task force

In July 2014, Health and Human Services Secretary Diana Dooley convened a task force to study the community service delivery system and to recommend reforms. The Developmental Services task force and its subcommittees have met several times since fall, including last week. The task force will be considering whether to revise the existing rate structure and rate-setting methodology, how to streamline billing codes, how to allow more flexible rates, establish standards of quality and outcome measurements and consider other new state, local and federal mandates. It also is looking into staffing levels and the core staffing formula at the 21 regional centers. The task force has no specific end date for its work, although the Administration has testified in budget hearings and a 2^nd Extraordinary session informational hearing that may bring forward a restructured rate proposal as early as next January.

The task force was convened as a follow up to the work of a similar task force that looked into the state’s developmental centers and produced a report on “The Plan for the Future of Developmental Centers in California.” That task force’s report included a request to “develop recommendations to strengthen the community system in the context of a growing and aging population, resource constraints and availability of community resources to meet the specialized needs of clients and past reductions to the community system.”7

New federal HCBS requirements

In March 2014, the federal Centers for Medicaid and Medicare Services (CMS) released new regulations for federal reimbursement of home and community based services. Among the changes are requirements for consumers to live in and receive services in the most integrated setting possible, leaving open, for now, exact definitions of what changes could be required in California to comply. The new regulations affect federal HCBS waivers used by DDS to pay for consumer services. California and other states are required to submit state transition plans and DDS has begun a stakeholder process to identify service types that may be out of compliance. The state is required to have its plan in place and to shift consumers to the more-integrated models of care in 2019.

Related legislation:

SBX2 1 (Beall, 2015) provides a 10 percent increase in the funding paid to a regional center and purchase-of-service vendors; requires funding to enable the regional center and the regional center’s purchase-of-service vendors to fund certain costs related to minimum wage requirements; and

requires DDS to develop a 10-year financial sustainability plan. This bill was recently introduced in the 2^nd Extraordinary Session and has not yet been heard.

SB 638 (Stone, 2015) would have raised a variety of vendor rates, increased funding to regional centers for staffing and relaxed the percentage of funds that vendors may spend on administrative costs, based on various factors. Additionally, the bill required DDS to ensure that the rates permit the viability of certain residential facilities by establishing different rates for each facility size, as specified. The bill was held in the Senate Appropriations committee, which estimated more than $700 million annually in costs, including ongoing costs of about $420 million per year for the initial 10 percent increase in rates paid to vendors of certain services and ongoing costs in the tens of millions per year for additional purchase of services to offset the redirection of regional center funding to administrative purposed by vendors. This bill was held in the Senate Appropriations committee.

AB 1626 (Maienschein, 2014) would have made increases to the supported employment rates and fees. It died in the Senate Appropriations Committee. An Appropriations committee analysis estimated the cost of these rate and fee increases to be at least $10.1 million (GF) per year.

AB 954 (Maienschein, 2013) would have made increases to the supported employment rates and fees. It died in the Assembly Appropriations Committee. A committee analysis estimated the cost of these rate and fee increases to be approximately $12.5 million (GF) per year.

SB 74 (Committee on Budget and Fiscal Review, Chapter 9, Statutes of 2011) requires all regional center contracts or agreements involving negotiated rates to expressly require that not more than 15 percent of regional center funds be spent on administrative costs.

COMMENTS

AB 1400 will be a two-year bill in this committee and only testimony will be presented at hearing. The author has expressed intent to introduce the same language in the 2^nd Extraordinary Session on Public Health and Developmental Services.

This bill would refocus the existing 15 percent administrative cap that restricts some providers – although not the In-Home Respite providers targeted in this bill – by instead requiring that 85 percent of the rate for care be spent on direct service provision. An additional 15 percent cap is added for administrative costs, as defined. According to DDS, just four large respite providers are receiving more than $7 million in regional center funding and would therefore be affected by the rate restructuring in this bill. The sponsor of the bill, SEIU, disputes DDS’s calculation of how many providers would be affected and believes there are more providers above the threshold.

There have been a number of concerns voiced about this bill:

1. Several large providers have asked the author to exempt Employer of Record services from inclusion in this bill, which would result in many affected businesses falling below the $7 million cap. The author has amended the bill twice in an attempt to satisfy this concern. However, the current version of the bill excludes “financial management services” from inclusion on the revenue calculation, which are a different type of management entity, funded differently from employer of record services. Those providers remain opposed to the bill.

2. Should the employer of record exemption be included in the bill, according to DDS (and disputed by the sponsor), there would remain just one large in-home respite agency affected by the bill. That agency has asked the author to instead impose a 15 percent administrative cap similar to that on negotiated rate providers.

3. DDS has expressed concerns that restructuring the rate as proposed in this bill would have the effect of substantially raising the rate for in-home respite because the administrative costs are calculated based on actual costs and therefore could not be reduced. The Department provided an early estimate of $24 million in General Fund cost, for FY 2015-2016 and $52 million for 2016-2017, but has said recent amendments may expand the scope and cost of the bill. The Department has an official position of opposition.

4. The restructuring of this service category and code is concurrent with substantial discussion of rate restructuring taking place both in task force led by the Secretary of the Health and Human Services Agency and by the Legislature in the 2^nd Extraordinary Session, which was convened, in part, to consider DDS provider rates. Restructuring a single type of rate should be considered in the broader context of rate increases and revisions.

Staff recommends that should this bill be introduced in the 2^nd Extraordinary Session the author consider these concerns and mitigate any unintended effects.

PRIOR VOTES

POSITIONS

Support:

SEIU California (Co-Sponsor)

California Labor Federation

Congress of California Seniors

UDW/AFSCME

Oppose:

Accredited Family of Homecare Services

Alliance Supporting People with Intellectual and Developmental Disabilities

California Association of Health Services at Home

California Chamber of Commerce

California Disability Services Association

Maxim Healthcare Services

Premier Healthcare Services

24 Hour HomeCare

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1400

Author:(Santiago)

As Amended Ver:June 1, 2015

Majority vote

SUMMARY: Establishes an administrative cost cap for specified in-home respite service providers that receive regional center funds. Specifically, this bill:

1. Defines administrative costs as all costs other than direct service expenditures, as specified.

2. Defines direct service expenditures as all amounts actually paid and all accounts payable, as specified, as wages and benefits, including state, federal, and local payroll taxes, workers' compensation and unemployment insurance premiums, and recruiting, training, orientation, and background checks for respite care aides, and other substantially similar benefits that are directly related to the provision of in-home respite services.

3. Requires that entities that contract with regional centers to provide in-home respite services, and have annual revenue attributable to in-home respite services provided to regional center consumers of at least $7 million dollars, excluding financial management services and other administrative services, spend at least 85% of those regional center funds on direct service expenditures, as defined.

4. Prohibits funds used for direct service expenditures from including administrative costs.

5. Requires in-home respite service providers and contractors subject to the provisions of this bill to, upon request, provide regional centers with access to books, documents, papers, computerized data, source documents, consumer records, or other records pertaining to the service providers' and contractors’ negotiated rates.

EXISTING LAW:

1. Establishes an entitlement to services for individuals with developmental disabilities under the Lanterman Developmental Disabilities Services (DDS) Act (Lanterman Act). (Welfare and Institutions Code (WIC) Section 4500 et seq.)

2. Requires all regional center contracts or agreements with service providers in which rates are determined through negotiations between the regional center and the service provider to expressly require a 15% administrative cost cap for regional center funds spent by the providers. Stipulates that direct service expenditures are those costs immediately associated with the services to consumers being offered by the provider, and requires that funds spent on direct services do not include any administrative costs, as defined. (WIC Section 4629.7(a))

3. Requires that all contracts between DDS and regional centers require a 15% administrative cost cap for all funds appropriated through a regional center's operations budget. Requires that funds spent on direct services, as defined, do not include any administrative costs, as specified. (WIC Section 4629.7(b))

4. Requires the DDS Director to develop program standards and establish, maintain, and revise, as necessary, an equitable process for setting state payment rates for in-home respite services purchased by regional centers from vendored providers. Defines in-home respite services as intermittent or regularly scheduled temporary nonmedical care and supervision, provided in the client's own home, for a regional center client who resides with a family member. (WIC Section 4690.2(a))

5. Provides that, commencing July 1, 2014, in-home respite services agency providers with temporary payment rates set by DDS can seek unanticipated rate adjustments from DDS due to the impacts of the increased minimum wage, as specified. Requires that rate adjustment to be specific to increases in payroll costs only to the extent necessary to bring employee pay into compliance with the increased state minimum wage, and prohibits such a rate adjustment from being sought to provide a general wage enhancement to any employees paid above the increased minimum wage. (WIC Section 4691.6(g))

FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS:

Developmental services: The Lanterman Act (WIC Section 4500 et seq.) guides the provision of services and supports for Californians with developmental disabilities. Each individual under the Lanterman Act, typically referred to as a "consumer," is legally entitled to treatment and habilitation services and supports in the least restrictive environment. Lanterman Act services are designed to enable all individuals served to live more independent and productive lives in the community.

Direct responsibility for implementation of the Lanterman Act service system is shared by DDS and 21 regional centers, which are private nonprofit entities, established pursuant to the Lanterman Act, that contract with DDS to carry out many of the state's responsibilities under the Act. The 21 regional centers serve 280,000 consumers, providing services such as residential placements, supported living services, respite care, transportation, day treatment programs, work support programs, and various social and therapeutic activities.

Regional center vendors: Prior to being approved to receive funding from a regional center for providing services to a consumer, a service provider must become vendored by the regional center that oversees the catchment area in which the provider is located. This "vendorization" process includes verifying that the provider is qualified to provide the planned services and meets all other regulatory standards and requirements. There are over 45,000 vendors that provide services paid for by regional centers in California.

Regional center rates: Current statute and regulations set forth rate requirements for regional center rates paid to vendored providers to facilitate service delivery to regional center consumers. There are different rates for different types of services, including the following:

1. Rates set by DDS, which are included in statute or regulation, or can be set through cost estimates or rate schedules;

2. Rates established by Medi-Cal for the same service, which require a regional center to pay no more than the Medi-Cal rate;

3. Usual and customary rates, which align with the rates a particular business charges individuals who do not have developmental disabilities and are not served by regional centers;

4. Rates established by the DDS, which apply to out-of-home respite services provided in facilities with rates established by DDS;

5. Rates set for transportation services to regional center clients; and

6. Rates set through negotiation between the regional center and the provider (also known as "negotiated rates"), which are applied to services that do not fit within any of the other established rate structures and in which case the maximum rate is capped at the regional center median rate for that service or the statewide median rate for that service, whichever is lower.

In-home respite: In-home respite services are intended to provide temporary, nonmedical care and supervision to a regional center client, in his or her own home, for the purpose of assisting family members in maintaining the client at home, ensuring the client's safety in the absence of family members, relieving family members, and providing other socialization and assistance with activities of daily living that would otherwise be provided by family members. In California, there are a number of large agencies that hire or subcontract with in-home respite providers to provide direct care, or that serve as the employer of record for in-home respite providers (primarily to help comply with employment law and payroll tax requirements) for situations in which a consumer selects and supervises his or her own caregiver. Rates for in-home respite services are set by DDS either through state regulations or cost statements and vary based on the employment model.

Need for this bill: Because in-home respite services are not included among services with negotiated rate contracts, there is currently no statutory requirement for in-home respite provider contracts with regional centers to include an administrative expenditure cost cap. According to the author, "Respite care is a vital family support service that keeps individuals with developmental disabilities living at home. By investing in direct care and direct caregivers, this bill attempts to improve the consistency and continuity of respite services to family caregivers."

Analysis Prepared by: Myesha Jackson / HUM. S. / (916) 319-2089 FN: 0000858

ASSEMBLY THIRD READING

ATR Bill Id:AB 1400

Author:(Santiago)

As Amended Ver:May 6, 2015

Majority vote

SUMMARY: Establishes an administrative cost cap for specified in-home respite service providers that receive regional center funds. Specifically, this bill:

1. Defines administrative costs as all costs other than direct service expenditures, as specified.

2. Defines direct service expenditures as all amounts actually paid and all accounts payable, as specified, as wages and benefits, including state, federal, and local payroll taxes, workers' compensation and unemployment insurance premiums, and recruiting, training, orientation, and background checks for respite care aides, and other substantially similar benefits that are directly related to the provision of in-home respite services.

3. Requires that entities that contract with regional centers to provide in-home respite services, and have annual revenue attributable to in-home respite services provided to regional center consumers of at least $7 million dollars, spend at least 85% of those regional center funds on direct service expenditures, as defined.

4. Prohibits funds used for direct service expenditures from including administrative costs.

5. Requires in-home respite service providers and contractors subject to the provisions of this bill to, upon request, provide regional centers with access to books, documents, papers, computerized data, source documents, consumer records, or other records pertaining to the service providers’ and contractors’ negotiated rates.

EXISTING LAW:

1. Establishes an entitlement to services for individuals with developmental disabilities under the Lanterman Developmental Disabilities Services (DDS) Act (Lanterman Act). (Welfare and Institutions Code (WIC) Section 4500 et seq.)

2. Requires all regional center contracts or agreements with service providers in which rates are determined through negotiations between the regional center and the service provider to expressly require a 15% administrative cost cap for regional center funds spent by the providers. Stipulates that direct service expenditures are those costs immediately associated with the services to consumers being offered by the provider, and requires that funds spent on direct services do not include any administrative costs, as defined. (WIC Section 4629.7(a))

3. Requires that all contracts between DDS and regional centers require a 15% administrative cost cap for all funds appropriated through a regional center's operations budget. Requires that funds spent on direct services, as defined, do not include any administrative costs, as specified. (WIC Section 4629.7(b))

4. Requires the DDS Director to develop program standards and establish, maintain, and revise, as necessary, an equitable process for setting state payment rates for in-home respite services purchased by regional centers from vendored providers. Defines in-home respite services as intermittent or regularly scheduled temporary nonmedical care and supervision, provided in the client's own home, for a regional center client who resides with a family member. (WIC Section 4690.2(a))

5. Provides that, commencing July 1, 2014, in-home respite services agency providers with temporary payment rates set by DDS can seek unanticipated rate adjustments from DDS due to the impacts of the increased minimum wage, as specified. Requires that rate adjustment to be specific to increases in payroll costs only to the extent necessary to bring employee pay into compliance with the increased state minimum wage, and prohibits such a rate adjustment from being sought to provide a general wage enhancement to any employees paid above the increased minimum wage. (WIC Section 4691.6(g))

FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS:

Developmental services: The Lanterman Act (WIC Section 4500 et seq.) guides the provision of services and supports for Californians with developmental disabilities. Each individual under the Lanterman Act, typically referred to as a "consumer," is legally entitled to treatment and habilitation services and supports in the least restrictive environment. Lanterman Act services are designed to enable all individuals served to live more independent and productive lives in the community.

Direct responsibility for implementation of the Lanterman Act service system is shared by DDS and 21 regional centers, which are private nonprofit entities, established pursuant to the Lanterman Act, that contract with DDS to carry out many of the state's responsibilities under the Act. The 21 regional centers serve 280,000 consumers, providing services such as residential placements, supported living services, respite care, transportation, day treatment programs, work support programs, and various social and therapeutic activities.

Regional center vendors: Prior to being approved to receive funding from a regional center for providing services to a consumer, a service provider must become vendored by the regional center that oversees the catchment area in which the provider is located. This "vendorization" process includes verifying that the provider is qualified to provide the planned services and meets all other regulatory standards and requirements. There are over 45,000 vendors that provide services paid for by regional centers in California.

Regional center rates: Current statute and regulations set forth rate requirements for regional center rates paid to vendored providers to facilitate service delivery to regional center consumers. There are different rates for different types of services, including the following:

1. Rates set by DDS, which are included in statute or regulation, or can be set through cost estimates or rate schedules;

2. Rates established by Medi-Cal for the same service, which require a regional center to pay no more than the Medi-Cal rate;

3. Usual and customary rates, which align with the rates a particular business charges individuals who do not have developmental disabilities and are not served by regional centers;

4. Rates established by the DDS, which apply to out-of-home respite services provided in facilities with rates established by DDS;

5. Rates set for transportation services to regional center clients; and

6. Rates set through negotiation between the regional center and the provider (also known as "negotiated rates"), which are applied to services that do not fit within any of the other established rate structures and in which case the maximum rate is capped at the regional center median rate for that service or the statewide median rate for that service, whichever is lower.

In-home respite: In-home respite services are intended to provide temporary, nonmedical care and supervision to a regional center client, in his or her own home, for the purpose of assisting family members in maintaining the client at home, ensuring the client's safety in the absence of family members, relieving family members, and providing other socialization and assistance with activities of daily living that would otherwise be provided by family members. In California, there are a number of large agencies that hire or subcontract with in-home respite providers to provide direct care, or that serve as the employer of record for in-home respite providers (primarily to help comply with employment law and payroll tax requirements) for situations in which a consumer selects and supervises his or her own caregiver. Rates for in-home respite services are set by DDS either through state regulations or cost statements and vary based on the employment model.

Need for this bill: Because in-home respite services are not included among services with negotiated rate contracts, there is currently no statutory requirement for in-home respite provider contracts with regional centers to include an administrative expenditure cost cap. According to the author, "Respite care is a vital family support service that keeps individuals with developmental disabilities living at home. By investing in direct care and direct caregivers, this bill attempts to improve the consistency and continuity of respite services to family caregivers."

Analysis Prepared by: Myesha Jackson / HUM. S. / (916) 319-2089 FN: 0000378

Date of Hearing: April 28, 2015

ASSEMBLY COMMITTEE ON HUMAN SERVICES

Kansen Chu, Chair

ABPCA Bill Id:AB 1400

Author:(Santiago) – As Amended Ver:April 21, 2015

SUBJECT: Developmental services: regional center contracts

SUMMARY: Establishes an administrative cost cap for specified in-home respite service providers that receive regional center funds.

Specifically, this bill:

1. Defines administrative costs as all costs other than direct service expenditures, as specified, including, but not limited to the following:

   1. Compensation and benefits, including federal, state, and local payroll taxes, workers’ compensation and unemployment insurance premiums, and recruiting, training, orientation, and background checks for managerial personnel whose primary purpose is the administrative management of the entity, including, but not limited to, directors and chief executive officers, as well as for employees who perform administrative functions, including, but not limited to, payroll management, personnel functions, accounting, budgeting, and facility management;

   2. Facility and occupancy costs directly associated with administrative functions;

   3. Maintenance and repair;

   4. Data processing and computer support services;

   5. Contract and procurement activities, except those provided by a direct service employee;

   6. Training directly associated with administrative functions;

   7. Travel directly associated with administrative functions;

   8. Licenses directly associated with administrative functions;

9. Taxes;

10. Interest;

11. Property insurance;

12. Personal liability insurance directly associated with administrative functions;

13. Depreciation;

14. General expenses, including, but not limited to, communication costs and supplies directly associated with administrative functions;

15. Consultants and professional services, including, but not limited to, accounting and legal services;

16. Distributions to shareholders;

17. Advertising costs;

18. Conference, convention, and meeting costs;

19. Facility and office equipment costs, including, but not limited to, rent, lease, and mortgage payments, directly associated with administrative functions;

20. Transfers to a corporate parent or franchisor, including, but not limited to, franchise fees, fees for copyright or trademark usage, fees for advertising materials, royalty fees, or conference fees; and

21. Other general operating and overhead costs.

2. Defines direct service expenditures as all amounts actually paid and all accounts payable, as specified, as wages and benefits, including state, federal, and local payroll taxes, workers’ compensation and unemployment insurance premiums, and recruiting, training, orientation, and background checks for respite care aides, and other substantially similar benefits that are directly related to the provision of in-home respite services.

3. Requires that entities that contract with regional centers to provide in-home respite services, and have annual revenue attributable to regional center consumers of at least $7 million dollars, spend at least 85% of the regional center funds on direct service expenditures, as specified.

4. Prohibits funds used for direct service expenditures from including administrative costs.

5. Requires in-home respite service providers and contractors subject to the provisions of this bill to, upon request, provide regional centers with access to books, documents, papers, computerized data, source documents, consumer records, or other records pertaining to the service providers’ and contractors’ negotiated rates.

EXISTING LAW:

1. Establishes an entitlement to services for individuals with developmental disabilities under the Lanterman Developmental Disabilities Services Act (Lanterman Act). (WIC 4500 et seq.)

2. Grants all individuals with developmental disabilities, among all other rights and responsibilities established for any individual by the United States Constitution and laws and the California Constitution and laws, the right to treatment and habilitation services and supports in the least restrictive environment. (WIC 4502)

3. Establishes a system of 21 nonprofit regional centers throughout the state to identify needs and coordinate services for eligible individuals with developmental disabilities and requires the Department of Developmental Services (DDS) to contract with regional centers to provide case management services and arrange for or purchase services that meet the needs of individuals with developmental disabilities, as defined. (WIC 4620 et seq.)

4. Requires the development of an individual program plan (IPP) for each regional center consumer, which specifies services to be provided to the consumer, based on his or her individualized needs determination and preferences, and defines that planning process as the vehicle to ensure that services and supports are customized to meet the needs of consumers who are served by regional centers. (WIC 4512)

5. Establishes that an infant or toddler under age 3 who is eligible for regional center services shall have an individualized family service plan (IFSP) to direct services, as specified, and defines the types of services, supports and staffing that should be considered when creating the plan. (GOV 95020)

6. Requires all regional center contracts or agreements with service providers in which rates are determined through negotiations between the regional center and the service provider to expressly require a 15% administrative cost cap for regional center funds spent by the providers. Stipulates that direct service expenditures are those costs immediately associated with the services to consumers being offered by the provider, and requires that funds spent on direct services do not include any administrative costs, as defined. (WIC 4629.7 (a))

7. Requires that all contracts between DDS and regional centers require a 15% administrative cost cap for all funds appropriated through a regional center’s operations budget. Requires that funds spent on direct services, as defined, do not include any administrative costs, as specified. (WIC 4629.7 (b))

8. Requires the DDS Director to develop program standards and establish, maintain, and revise, as necessary, an equitable process for setting state payment rates for in-home respite services purchased by regional centers from vendored providers. Defines in-home respite services as intermittent or regularly scheduled temporary nonmedical care and supervision, provided in the client’s own home, for a regional center client who resides with a family member. (WIC 4690.2 (a))

9. Provides that, commencing July 1, 2014, in-home respite services agency providers with temporary payment rates set by DDS can seek unanticipated rate adjustments from DDS due to the impacts of the increased minimum wage, as specified. Requires that rate adjustment to be specific to increases in payroll costs only to the extent necessary to bring employee pay into compliance with the increased state minimum wage, and prohibits such a rate adjustment from being sought to provide a general wage enhancement to any employees paid above the increased minimum wage. (WIC 4691.6(g))

FISCAL EFFECT: Unknown

COMMENTS:

Developmental services: The Lanterman Act (WIC § 4500 et seq.) guides the provision of services and supports for Californians with developmental disabilities. Each individual under the Act, typically referred to as a “consumer,” is legally entitled to treatment and habilitation services and supports in the least restrictive environment. Lanterman Act services are designed to enable all individuals served to live more independent and productive lives in the community.

The term “developmental disability” means a disability that originates before an individual attains 18 years of age, is expected to continue indefinitely, and constitutes a substantial disability for that individual. It includes intellectual disabilities, cerebral palsy, epilepsy, and autism spectrum disorders (ASD). Other developmental disabilities are those disabling conditions similar to an intellectual disability that require treatment (i.e., care and management) similar to that required by individuals with an intellectual disability.

Direct responsibility for implementation of the Lanterman Act service system is shared by DDS and 21 regional centers, which are private nonprofit entities, established pursuant to the Lanterman Act, that contract with DDS to carry out many of the state’s responsibilities under the Act. The 21 regional centers serve 280,000 consumers, providing services such as residential placements, supported living services, respite care, transportation, day treatment programs, work support programs, and various social and therapeutic activities. Approximately 1,100 consumers reside at one of California’s three Developmental Centers—and one state-operated, specialized community facility—which provide 24-hour habilitation and medical and social treatment services.

Services provided to people with developmental disabilities are outlined in an IPP, which is developed by the IPP team—including, among others, the consumer, his or her legally authorized representative, and one or more regional center representatives—and is based on the consumer’s needs and choices. The Lanterman Act requires that the IPP promote community integration and maximize opportunities for each consumer to develop relationships, be part of community life, increase control over his or her life, and acquire increasingly positive roles in the community. The IPP must give the highest preference to those services and supports that allow minors to live with their families and adults to live as independently as possible in the community.

Regional center vendors: Prior to being approved to receive funding from a regional center for providing services to a consumer, a service provider must become vendored by the regional center that oversees the catchment area in which the provider is located. This “vendorization” process includes verifying that the provider is qualified to provide the planned services and meets all other regulatory standards and requirements. It is important to note that vendorization makes a provider eligible to provide services paid for by the regional center, but does not guarantee the regional center will refer consumers. Furthermore, there is nothing precluding a vendor from being vendorized by more than one regional center. There are over 45,000 vendors that provide services paid for by regional centers in California.

Regional center rates: Current statute and regulations set forth rate requirements for regional center rates paid to vendored providers to facilitate service delivery to regional center consumers. There are different rates for different types of services, including the following:

1. Rates set by DDS, which are included in statute or regulation, or can be set through cost estimates or rate schedules;
   
   

2. Rates established by Medi-Cal for the same service, which require a regional center to pay no more than the Medi-Cal rate;
   
   

3. Usual and customary rates, which align with the rates a particular business charges individuals who do not have developmental disabilities and are not served by regional centers;
   
   

4. Rates established by the Department of Social Services (DSS), which apply to out-of-home respite services provided in facilities with rates established by DSS;
   
   

5. Rates set for transportation services to regional center clients; and
   
   

6. Rates set through negotiation between the regional center and the provider (also known as “negotiated rates”), which are applied to services that do not fit within any of the other established rate structures and in which case the maximum rate is capped at the regional center median rate for that service or the statewide median rate for that service, whichever is lower.

In-home respite: In-home respite services are intended to provide temporary, nonmedical care and supervision to a regional center client, in his or her own home, for the purpose of assisting family members in maintaining the client at home, ensuring the client’s safety in the absence of family members, relieving family members, and providing other socialization and assistance with activities of daily living that would otherwise be provided by family members. In California, there are a number of large agencies that hire or subcontract with in-home respite providers to provide direct care, or that serve as the employer of record for in-home respite providers (primarily to help comply with employment law and payroll tax requirements) for situations in which a consumer selects and supervises his or her own caregiver. Rates for in-home respite services are set by DDS either through state regulations or cost statements and vary based on the employment model.

Need for this bill: Because in-home respite services are not included among services with negotiated rate contracts, there is currently no statutory requirement for in-home respite provider contracts with regional centers to include an administrative expenditure cost cap. According to the author, “Respite care is a vital family support service that keeps individuals with developmental disabilities living at home. By investing in direct care and direct caregivers, this bill attempts to improve the consistency and continuity of respite services to family caregivers.”

Staff comments: While this bill mirrors what is in current law for negotiated rate contracts and regional center operations, it also requires a number of additional expenditure categories to be included within an administrative costs definition that are not included in the current statutory definitions for administrative costs for providers with negotiated rates or for regional center operations. By establishing a cap on administrative costs, then mandating the categories of expenditures to be included in that capped amount, this bill could limit an in-home respite provider’s flexibility and overall fiscal sustainability.

Conversely, this bill could result in higher wages for in-home respite service workers providing direct care to regional center consumers. By designating a certain percentage of funds for all in-home respite contracts for direct services, in-home respite service workers may have a better chance of making more than the minimum wage.

Aside from potential financial impacts, it should be noted that this bill was introduced after conversations around how regional center rates might be restructured to improve the overall system and service delivery had already begun. The Developmental Services Task Force, which was established by the Secretary of the Health and Human Services Agency in collaboration with DDS, is comprised of a number of regional center representatives, consumers, consumer advocates, providers, and legislative staff. The Task Force continues to meet and discuss whether particular aspects of regional center rates, including the rate methodologies and the actual amounts paid, should be revised; discussions that encompass the in-home respite services being discussed in this bill. The author may wish to address how this bill fits within the larger context of the work of the Developmental Services Task Force.

Additionally, this bill is specific to in-home respite service providers even though there are a number of other services paid for by regional centers that have rates set by DDS and are not required to adhere to an administrative cost cap. The author may wish to explain why this bill is specific to in-home respite services.

Technical amendments necessary: As currently written, this bill does not fully achieve the author’s intent to apply this bill specifically to entities with a certain level of revenue attributable to in-home respite services provided to regional center clients, nor does it make clear that direct service expenditures are prohibited from including administrative costs. Additionally, this bill includes a subdivision that does not apply to the contracts outlined in this bill, as the services addressed in this bill are not paid for through negotiated rates.

Committee staff recommends that this bill be amended per the following beginning on page 3, line 30:

30 (b) (1) Notwithstanding Section 4629.7 or any other law, all all regional center contracts or agreements with

31 regional center contracts or agreements with service providers

32 contracting entities that provide in-home respite services and that

33 have an annual revenue attributable to in-home respite services provided

34 to regional center consumers of at least seven million dollars

35 ($7,000,000) shall expressly require that at least 85 percent of

36 regional center funds be spent on direct service expenditures. Funds

37 spent on direct Direct service expenditures shall not include administrative

38 costs.

(Page 4)

1 (2) A contracting entity may meet the annual revenue

2 attributable to in-home respite services specified in paragraph (1) in either

3 of the following ways:

4 (A) The annual revenue of the contracting entity that is

5 attributable to in-home respite services provided to regional center

6 consumers meets or exceeds seven million dollars ($7,000,000).

7 (B) The annual revenue of the contracting entity’s parent

8 organization that is attributable to in-home respite services provided to

9 regional center consumers in this state, whether earned directly

10 by the parent organization or by subcontractors and subsidiaries

11 of the parent organization, meets or exceeds seven million dollars

12 ($7,000,000).

13 (c) Consistent with subdivision (b), service providers and

14 contractors, upon request, shall provide regional centers with access

15 to books, documents, papers, computerized data, source documents,

16 consumer records, or other records pertaining to the service

17 providers’ and contractors’ negotiated rates.

REGISTERED SUPPORT / OPPOSITION:

Support

SEIU California, co-sponsor

Opposition

The Alliance

California Association for Health services at Home (CAHSAH)

Maxim Healthcare Services

Analysis Prepared by: Myesha Jackson / HUM. S. / (916) 319-2089