Senate Budget and Fiscal Review Subcommittee No. 3 on Health and Human Services

Senate Budget Subcommitee 3 will now come to order. Want to thank the Committee Members who are here, this Committee Committee and welcome all of you for coming today. This hearing will cover the Governor's proposed May Revision. We have 11 Department items up for discussion.

Department of Social Services, all programs except in Home Supportive Services, which will be heard tomorrow.

California Health and Human Services Agency, State Council on Developmental Disabilities, Emergency Medical Service Authority, Department of Managed Health Care, California Department of Aging, Department of Developmental Services, Department of State Hospitals, Commission on Behavioral Health, Department of Community Services and Development and the Department of Child Support Services.

We will solicit public comment after completion of all of the presentation items within the agenda, at which time the public may comment on any of the previous items. We will begin with issue number one with the Department of Social Services. You may begin when you're ready. Thank you.

Good afternoon. Jennifer Troia. I'm the Director of the Department of Social Services. It's good to be here with you this afternoon. The first item is the overview of the May revision agenda for child care.

Specifically, I will provide the overview asked for in the first question and then turn it over to Jackie Barocio from CDSS and the Department of Finance for the remaining questions on this item. The May revision includes $6.8 billion total funds in 2425 for child care. And. In 25-266.4 billion total funds to address the projected budget shortfall.

The May revision includes General Fund solutions to achieve a balanced budget. There are two that are significant. The first is a reduction of $60.7 million General Fund in 25-26, which represents the amount of funding that would have otherwise been provided to child care for the cost of living or COLA adjustment.

And the second is a reduction of 42.7 million General Fund in 25-26 and ongoing to the Emergency Child Care Bridge program for foster children. That proposal is to align with the amount of expenditures in the program.

The two other significant changes in the May revision related to child care are $52 million General Fund which will help to ready us for implement of a federally required policy where we will begin in 2026 to pay providers prospectively for care and $91.8 million total Fund to support development of the single rate structure for subsidized child care reimbursement rates based on the alternative methodology approved by acf.

There are also two budget change proposals related to direct deposit administrative support and prospective payment for child care providers providers. Those represent the State Administration costs. I'll turn it over to the Department of Finance and to Ms. Barocio for the remaining questions.

Good afternoon Chair and Senators. I am Tamar Weber with the Department of Finance. We would like to provide the Committee broader comments on the Governor's May revision. Changes in federal policy and declining revenue combined with increased expenditure above the Governor's Budget means the state must now close an estimated shortfall of $12 billion to balance the budget.

Opportunities to roll back one time and temporary funding were largely exhausted as part of budget actions last year. This means that going forward, decisions to balance the budget will involve more difficult trade offs. The May revision proposes some tough solutions but significantly begins addressing the budget's long term structural imbalance.

We look forward to continued discussions with the Legislature as we work to enact the 2025-26 budget. Thank you to the Committee's specific question about the proposal to suspend the Child Care COLA in 2025-26 that's listed in the agenda. The this proposal results in 60.7 million ongoing General Fund savings while maintaining current reimbursement rates for all providers.

Good afternoon Chair and Members. Khrishan Malhotra, Department of Finance. Issue number three or question three on the agenda regarding the emergency child care bridge program. The May revision proposes a reduction of 42.7 million General Fund in 25-26 and ongoing. This proposal also maintains 51 million in annual ongoing ongoing funding for this program.

Jackie Barocio, Department of Social Services. Just to close out the response to question number three regarding emergency bridge program reallocation in 2425 the Department in partnership with CWDA did create a survey to bridge counties to identify opportunities for redistribution of Bridge admin dollars and those redistributions occurred in April20.

We are aware of the specific example highlighted in the agenda and we are working on identifying another way to work on counties self identifying themselves for additional redistributions that have occurred since that April redistribution and we will work in partnership with CAWDA on mapping out the opportunity.

I think I would also want to flag that the intent behind the bridge services is just that is to provide bridge child care with the hopes of then facilitating facilitating the family and getting permanent placement in a ongoing child care program. We've had recent expansions in those more permanent programs with slot expansion.

So that is another way in which services can still be provided to these eligible families because they are also prioritized in those permanent ongoing child care programs today. Regarding the questions to number 4 and 5 about rate reform. I'm sorry, go ahead.

So I just want to make sure that the questions are actually answered. So the third question what assumptions is the Administration making about child care bridge program trends to determine the permanent reduction? So what are you seeing and what assumptions did you make to make you come to this conclusion? To reduce it to almost 43 million.

So counties have to report data to the state and to the Department of Social Services on a regular basis from that expenditures. As of 202324 fiscal year from June, only a portion of the money that was allocated was actually spent. And so on average 48% of the non voucher spending.

So this is navigator Services, Trauma, Informed Coaching and county admin was spent for vouchers. Only 47% of the money was expended. That was leaving about $30 million unspent on the voucher side of it. So with that information, some of these numbers are not audited just yet. We took that information point in time and then made this reduction.

So about 30 million was unspent, but reducing it by 42 or 43.

Yeah. So there was another 12.9 million in Navigator Services, Trauma, Informed Coaching and county Administration that was unspent.

Okay, so this is this money that you came to this almost 43 was based on money that was unspent in the previous year. So it's not necessarily taking stuff away, it's just that it wasn't being used. Correct. Okay. Okay, thank you. Now you can go to number four.

Okay. So moving to question number four on the agenda regarding the $21.81,000,001 time federal funds. Those resources would be used to support automation startup costs associated with the implementation of the single rate structure. And I would also want to kind of take a step back.

And the last time that we were in this space, a lot of information has been shared out publicly regarding the alternative methodology through the Rate and Quality Advisory Panel. That is inclusive of selection points values that then were inputted into the cost model that got us annual cost outputs.

In addition, in those public meetings we shared the General design features and rate categories of the single rate structure. So this proposal also aligns with federal guidance associated with these one time funds that they be used to make system and technical upgrades consistent with CCDF or Child Care and Development Fund requirements.

And that includes updates related to implementing rates that are informed by the alternative methodology itself. So in terms of timeline, we've previously shared that automation changes likely would take more than one year to complete at this time.

Based off of the department's point in time preliminary assessment, we believe that it will take at a minimum two years not only to complete these automation changes, but then also other implementation activities such as program guidance that needs to go out to the field training staff and modifying program fiscal and policy handbooks and resources so the exact timing of implementation and completion.

Again this is a point in time estimate will of course also depend on just the pacing and the actual rollout of these changes across all programs because that is what we are identifying. Programs require their unique and different automation updates and program implementation activities.

So adopting the proposed language as a part of the 25-26 budget would just allow CDSs to promptly and in a timely manner work on these automation updates to implement the single rate structure and of course any final budget and bargaining decisions. Moving on to question number five.

So is the 21.81,000,001 time? Is that to cover the two years or is that just.

So the one time federal dollars There is a federal liquidation date of September 302028 and our intent is to use it prior to that federal liqu date and based off a preliminary timeline. Ideally we would be spending it within that two year window.

But of course as we start doing this work, we'll definitely through quarterly updates, those reports that we're required to submit to the Legislature on implementation. We'll provide updates as needed. Thank you.

In terms of question number five regarding existing law, I would just reiterate in my prior comment that we're looking at a minimum two years and then of course we'll provide updates through the quarterly reports. But I also would note that implementation of the single rate structure is also subject to those future budget decisions and availability of funding.

And for family child care providers, of course, the collective bargaining process itself. So overall, while the exact implementation date may be subject to change because of these various factors, the Administration is dedicated to prioritizing the implementation of the single rate structure. Thank you.

Thank you. Any comments from LAO?

Good afternoon Madam Chair. Dylan Hoggs with Lutso with the LAO. Just a brief totaling up May revision includes 189 million in new child care proposals and 103.4 million in new solutions.

Two of these new proposals, totaling 114.8 million relate to previous or existing administrative costs, costs of making payments to child care providers and were previously funded in the last MOU. The other two are proposed increases to support changes in how child care providers are paid, for which we have more questions.

Although we are still examining recent child care bridge spending levels, the proposed solutions seem reasonable. We are currently still investigating these proposals. However, we have one recommendation to share now and have some comments for the Legislature to consider. So first, regarding the 21.8 million in federal funds for rate reform support costs.

We have concerns about the proposed exemption from review or approval from the Department of Technology. As a rule, our office opposes similar exemptions as that review can help prevent projects from exceeding proposed timelines and budgets. So we recommend rejecting that particular language. The Legislature may want to consider additional oversight on some of these proposals.

We are not yet certain how the total proposed funding amounts for the rate reform support costs and the prospective payments for provider proposals were arrived at and what activities these proposals would cover.

As we have not seen final details on the alternative methodology, we have questions about what exactly those that $21.8 million for rate reform would be used for.

Regarding the prospective payments, the proposal includes $43.8 million of ongoing funds and we are still following up on what those funds will be used for in the budget year, given the state has a waiver for this requirement until August 2026.

So the Legislature could consider requiring more details regarding automation activities and prospective payments as part of the existing statutorily required quarterly reports. I would highlight those are expected to end in January 2026, so the Legislature could consider extending those reporting requirements. Thank you.

Thank you. Anything further from the Department of Finance?

No.

Tamar Weber, Department of Finance. I thank the LAO for the comments, and we are open to working with the Legislature to make sure that the exemption language covers what is intended.

Thank you, Senator Menjivar.

Thank you, Madam Chair. Angela, can you clarify? You talked about a timeline of potentially two years. Is that the timeline for the implementation of the COLA?

No, that was regarding the earliest data, the single rate structure. Okay. And then of course, that's just the implementation activities for the program and automation. There's of course, those funding considerations, of.

Course, for the COLA suspension. The language says reduction for this year and then ongoing. How long is ongoing?

So the suspension is just for the COLA for 2526 but because when you increase the funding through the COLA, that funding becomes part of the baseline. So even though we're proposing a suspension for one year, the savings are ongoing.

Okay, so you're only proposing one year suspension of COLA, correct? Correct. Okay. And then going back to you, Angela, you spoke a little bit about the emergency child care bridge. Can you dive into a little bit into more detail how each county will get.

Are they getting an equal amount of decrease across each county or is it dependent on their usage?

We can take that back to get used to the specific county by county breakdown. But I would just reiterate what the Department of Finance says. This is a right sizing based off of actual utilization. So to the extent that there are any adjustments, the intent here is not to impact services.

And of course, with those counties that have identified the need of redistribution, we are definitely working in partnership with CWDA to identify those potential future opportunities. Opportunities.

Okay, Director, we just heard about investment into one federal rule, but there's another outstanding federal rule that we don't see any movement on. I'm wondering what happens after we surpass that date Again. We don't implement an enrollment based structure versus an attendance base.

You got to hit me. I was going to clarify that. That was the one that you meant. So, yes, it is the case that there is a final federal rule which requires us to to pay based on enrollment rather than attendance. That is currently how the law is structured. Right now.

There is not a proposal pending before you to continue that implementation. That is the current law. Now it is on the family child care provider side a subject of bargaining. And we are actively bargaining with CCPU as we speak.

So maybe I need clarification. Maybe. So if I'm understanding correctly, the federal rule requires us to pay them based on enrollment. That's correct. And if we don't do that, what happens?

I'm not sure we can take it back. I'm not sure if there's a particular penalty or consequence unless anyone else at the table knows immediately we can take that back.

Okay. Okay. So, I mean, that would be really important if we're going to see a penalty come down and we're already facing one penalty in another Department. Right. It'd be important if that's going to hurt us even more if we're not following a federal final rule.

And ma' am, I don't know if this is a question I can ask here, but I'd love to talk about the CARES IT Project. Would Director Ridger be a good person to talk to about that? We can talk about it. I know it's not nothing in the may revise, but we have it here. Maybe.

I think this is. This is a question for Department of Finance. Actually, I think somewhat of your North Star here is that you were looking at programs that were underspent, usually historically, and you reduced funding to match their previous years of spending. And you did that across various very huge programs.

I'm wondering why that approach wasn't applied to the Cares IT Project if it has historically been underspent.

Kitchen Department of Finance. So I think for the CARES Project, I mean, we do, in the Governor's Budget proposal, BCP are proposing to spend. Some of those first years, Right?

Like the first on year spent.

Yeah, yeah, yeah. And I think like at this point in time, like, you know, absent any additional information, like we're expecting that, you know, what we've budgeted. Well, I mean, obviously the project has already shared like what they think their projection is for the year.

And I think we're going to need to use some of those savings from current year to help Fund the production pilot. So which is why we amended the provisional language. So I think, yeah, the project. Feel free to add on.

But you know, I think at this point we're, we're expecting that we're going to be utilizing all the funds to.

Your point, like you took feedback that, you know, Department shared that they were going to spend all that funding, but you're going to hear from counties, providers telling Department of Finance and Department they're going to use those funds that are being cut.

So I'm just wondering why their word wasn't taken, but this word was taken because Lao recommended a couple of things for savings. Subtract 25.7 million. 10% cut 10% to reflect the project's historical underspending. That wasn't taken into consideration. There's other LAO recommendations to reappropriate. I think some of that you're doing prior savings, but that's a net zero.

Yeah. And I'll just clarify that the OA's recommendations is not really a cut to the budget overall, but it's more a shift of what's in the appropriation versus what's in provisional language that we would have to access through like a JLBC notification demonstrating progress as specified in the provisional language.

I hear you that. I guess going back to my previous point, if we're cutting all these services that are underspent, I think we should also look at it programs that have been funneling money into a black hole for years. And last year again was underspent and this year again was under or this underspent.

So it just doesn't justify cutting other programs versus this. That was my only point to that.

So I guess to piggyback off of Senator Menjavar's point, I would leave. Leave. Don't leave. Don't leave. All right, so if the program was underspent in the previous years, why do you think this year it will not be the same or in the upcoming years?

All right, is it on? So I would say there's a couple of things. In prior years, we had had a challenge in the initial year with vendor delays bringing Vendors on board.

So the budget was built for the project before the vendors had onboarded, before we had right sized the work and been able to set the full project schedule. I think in the early year we found that some of the planning was as if we were building at full speed, which we were not.

We were still onboarding vendors to build at full speed. So there was some initial delays. With the onset of the first couple of years through changes that we've made once we onboarded all of our primary vendors, speed has sped up and changed direction.

So instead of being that early planning where it's a ramp up, we're now building at full speed. Last summer we realigned the entire project budget and finalized an updated schedule. And we're looking to realign all activities that were remaining for that schedule.

So things that had not been done in the prior year that had shifted because of changes in how we were building the product and how the work was being scheduled is now happening here at the current spend down. We are on track to fully expend the funds. We believe that we will complete it.

We are already a little ahead of development for where we thought we'd be in overall schedule and we are continuing to move down that road. We will be code complete on the initial build by the end of November.

And then the remaining activities that are occurring are the final user testing all the readiness activities for the county, development of the final training curriculum, the train the trainers and then delivering the training statewide as well as the pilot and then the go live.

So this final year we're in the last 67 months of development activities and then we move into implementation. So we're very close to being complete. And the remaining activities are all things that are critical to being able to deliver the system on time, including all the engagement with the counties and all the readiness activities.

That's really what's ramping up that you weren't necessarily seeing in the prior years. We expect to see a lot more expenditure of county use of those county dollars in the engagement and the readiness activities.

Thank you. All right. Well, thank you all for that first part. We will now move to issue number two, may revision child care trailer bills.

Jackie Burris, State Department of Social Services the agenda does a great job in just providing a high level overview of the two trailer Bill proposals on the following topic. One is to amend language to continue the cost of care plus payments.

And this just supports current statute that requires that rates established effective July 12025 shall not be reduced from reimbursement rates that were in effect June 302024 which was inclusive of these out of contract cost of care plus payments.

And then the second trailer Bill Language is related to the suspension of the COLA, that one year suspension. Thank you.

Thank you. Anything further from lao?

No comments at this time.

Anything from the Department of Finance? No comments, but happy to take any questions. Okay, great. Senator Menar, just logistical question.

How, how are we able to suspend something that stat.

Statutory acquired, statutorily required. That is what the trailer Bill is proposing is the statutory changes that would be necessary to effectuate that pause.

The trailer Bill wasn't available when we had this agenda. Is it available now?

We should be able to work with Ledge staff to be able to share the trailer Bill. I'm not sure if it's been posted. Yet, but it's available already. Yes. Okay.

I'm just, I guess I get it. Tough, tough times, right? But we keep breaking our promises to our most vulnerable communities and Department of Finance, like throughout this whole thing. I'm just wondering, like, what is our principle here? What is our, what was like your principles in looking at this budget?

I think, you know, as we mentioned in the opening remarks, it's a tough year and we're looking to see where we can make adjustments in order to close that shortfall. In these cases, what we were able to do was again, right. Size one program which would not take away services from anyone and then maintain rates. So.

I'm sorry, yeah.

Did you just say not take away services from anyone? Well, I would.

I'm speaking to the health care adjustments. Yeah. So in these cases, we were able to preserve services and preserve provider rates.

To my previous question of ongoing, like the word ongoing in there can keep people up at night. Ongoing has no end date. It could be proposed forever and ever and ever.

The trigger on language I think I've shared in previous years, I think that's one of my most hated phrase in the budget here is, you know, just one takes away the full power of the Legislature when putting trigger on right. Removes the ongoing conversation, removes the ability to come back each year and say, can we reassess? Right.

That trigger language. Like, I understand we have to make tough decisions, but to put a never ending kind of phrase in there is what really worries people even the most. I know these providers sitting in the front rows, they're not making ends meet here, they're struggling here. It's really hard. It's really hard.

I know we have to make tough decisions, but giving some kind of like assurance of when we can look at this again. I think brings a little bit of more reprieve to the situation. Just that trigger language. That's it.

Thank you. We will now move to issue number three. CDSS resume revision overview, non IHSS items.

I'll give everyone a second to change chairs.

Again, Jennifer Troia with the Department of Social Services. The May revision does include a number of General Fund solutions to achieve a balanced budget in the non IHSS and non child care, but still within CDSS areas. This includes under foster care related to the tiered rate structure implementation that trigger language that we were just discussing.

So statutory language that would make implementation of the tiered rate structure subject to a trigger on based on the availability of General Fund in the spring of 2027 as determined by the Department of Finance.

The budget maintains funding to begin the transition or continue the transition to the foster care tiered rate structure which is currently projected to be implemented in July 2027. Subject to that trigger on in the proposal, there's $27.4 million included in 25-26 for automation, County Administration and CDSS state operations activities to support this transition. And that's proposed to continue.

Similar to the conversation we had about the emergency bridge, the May revision also includes an adjustment to the Family Urgent response system or FERS. The reduction is of 13 million General funded 25-26 and ongoing that maintains $17 million in ongoing General Fund for FERS.

The funding level is intended to correspond to the expected expenditures or utilization in the program. The second major trigger proposal is related to the California Food Assistance Program expansion. So the expansion was enacted a few years ago to expand CFAP to all adults ages 55 and over.

It is now being proposed that it would be subject to a trigger based on the availability of General Fund in the spring of 2027. Your agenda also outlines a wide variety of less major or significant proposals.

They include resources and positions to support workload associated with implementing programs like the Sun Buck Summer EBT program and immigration services, the implementation of recent legislation and of the foster care tiered rate structure.

They also include a number of technical changes related to General Fund versus Federal Fund or special fund availability, as well as a backfill of federal TANF funds. There are resources and investments for information systems and the automation of policies and finally various reappropriations and extensions of funding for support and local assistance.

I will turn it over to the Department of Finance to address the questions related to the rationale for the triggers.

Yeah, Anne Gaunt Department of Finance. So to answer your question, how would this affect ongoing implementation activities? So in regards to CFAP expansion, the budget still proposes to reappropriate that 30 million to move forward with automation related to the expansion.

So at this point in time understanding your concerns on the trigger language, but we're hoping that you know, come the 2026-27 Budget Act there will be the funds there so we can continue that expansion which is the intent.

KHR Department of Finance. So for the tiered rate structure, as you are aware, there's like significant cost to implement the rate structures in the out years. And so you know, in trying to balance the budget in the current year, but also begin to address that structural shortfall in the out years, we are proposing a trigger on for that.

But as the Department mentioned, like all the implementation activities will continue. We've included in the May revision automation funding that was provided last year. We've included the state operations funding that the Department has requested as well as the funding for the cans fidelity and training activities. So all of that will kind of continue as it normally would.

And then we would just in the spring of 2027 see if there's available General Fund to support the actual rates.

For question number two, there was something that said how would the Administration move forward in 2027 if the Department of Finance decided not to trigger the implementation in spring of 2023? Yes.

So if the tariff rate structure is not triggered in the spring of 2027, then the existing rate structure would continue until there's an appropriation made for the TARE rate structure. Thank you. And then moving on to question three about the FERS reduction.

So I think similar to what you heard in the previous panel, like what we're trying to do here is to right size expenditures to help address the budget deficit. And so in looking at the expenditures I think but I think the actual expenditures in 2324 was roughly it was a little over 14 million.

And then expenditures in the current year are also tracking to a similar amount. And we are actually leaving the proposal is actually leaving about 17 million General Fund for the program. So there is a little bit of room to help address like increase utilization. But again the intent here is just to right size.

So we're happy to work with the Legislature if you guys think there's a more appropriate number to be using.

Thank you. Any comments from LAO?

Angela Short with the Legislative Analyst Office. To preface our comments, I would just note that of course we're still actively reviewing May revision proposals. We would also note that some key trailer bill language such as for the triggers is not yet available.

So some of our questions are high level at this point until we are actually able to have that language to review. So with that said, our first comment is related again to the triggers both for the foster care tiered rate structure and to the CFAP expansion, again, pending actually being able to review the specific language.

Some questions we have around those are similar to what is asked in your agenda in terms of what exactly would happen in terms of moving forward in the future with those proposals.

If the Department of Finance determines in the spring of 2027 that General Fund does not have sufficient resources, is the intention, for example, for the tiered rate structure that this would be a delay of a year or two, or would it really essentially would implementation at that point cease until the Legislature would at a future date be able to make an appropriation?

So, you know, we're still working with the Administration to just fully understand the mechanics that are proposed for those triggers and I'll hand it over to my colleague for a few additional comments.

Thank you. Sonia Schrager Russo LAO as has been mentioned, we are still reviewing the proposals, but at this time the administration's caseload estimates appear reasonable, but we'll continue our review there. Coming next to the elimination of the RADAP and E2 Lite Systems, which is listed as an item in this section in the agenda.

We are working with the administration to better understand this proposal and the other streamlining CalWORKS proposals, which we'll discuss in more detail in the next issue.

But specifically on the RADAP and E2 Lite item questions we are hoping to work with the Administration on Center around proposal implementation if the savings that the administration has scored will materialize and what feedback the Administration has received thus far on this proposal, as well as other streamlining proposals from counties and other stakeholders, especially the savings estimate that's currently included.

Reviewing we are currently reviewing the other May revision adjustments that have been indicated in this item, including the BCPS RE appropriations and the WPR penalty that is mentioned here. Just a note on the WPR penalty.

Some of the questions that we are hoping to work through with the Administration at this time surround the potential for a pass through of a portion of the penalty to counties. So we're seeking more information on that as well as if the Administration anticipates future penalties of this nature from the Federal Government.

So more to come on that.

Thank you. Senator Menjivar.

Department of Finance the first time we heard these VCPs in the Department we talked about FFA's closing and since the compensation another location just closed with a potential delay in the foster rate tier, the Foster Care tier rate structure. It further pushes FFAs into uncertainty.

So if this is delayed even past the 2027 more and more FFAs will close, adding to the crisis that we're in now. DOF, I'm wondering how if we're looking at, if you are looking at out year savings, this in fact will increase our cost down the line.

If we're looking to scramble to find homes for our kids and I know so far it's worked, we've been able to find them homes again, I mentioned last time, it's not sustainable. What is our rationale here if we're adding more problems to the state?

I'll defer to my colleague.

Good afternoon. Lourdes Morales with the Department of Finance. The Administration to the Department of Social Services has really been engaging with sort of stakeholders to really understand the experiences of the FFA. Really working with the Department of Insurance as well to sort of understand sort of the insurance dynamics.

And the Department can sort of speak more to those efforts as well. I think sort of more broadly the sort of solution sort of reflects the sort of the General Fund condition. As my colleague noted, we're really working towards implementation.

All of the implementation work related to the tiered rate structure is maintained and the budget and the Department will sort of continue that work. It's just a matter of sort of whether the state can support the rates and the out years. So we're sort of hoping that effort can be successful.

In the meantime, we're engaging with stakeholders to understand the issue sort of track and the children sort of have that sort of safe portability with the efforts taken last year.

What savings are we scoring with putting a trigger in for the structure this year?

The sort of out year cost?

No, this year. What savings are we scoring?

Their costs this year continue the implementation so that the savings of the trigger are all in the out years.

So what is the purpose of point of trigger language for this year? I thought we were looking to solve a $12 billion deficit. This doesn't solve it. This doesn't play a part in it.

It sort of helps address the sort of state's fiscal condition. As we sort of look not only through sort of current year but into sort of the three years moving forward, as the Department of Finance always does, the sort of trigger solution sort of helps.

The $12 billion deficit that we're in, is that for one current budget year or is it current budget year plus one?

The $12 billion reflects the budget window. Which is sort of prior year, current year and budget year. The Department of Finance also looks at the solvency of the state sort of more broadly.

There's been broader conversations with the Legislature around the sort of sustainability of sort of state programs, conversations around Medi Cal and in home supportive services as well. And really looking at the sustainability given sort of program costs more broadly.

And so the Department of Finance's budget more broadly not only looks at budget year solutions but also the sustainability of the General Fund. And so we look at--

Next year, what cost savings are we scoring with the trigger?

I believe the first year of savings for the trigger is in 27-28.

So current year and plus one, no savings.

For the trigger solution. That's correct.

So what's the point of it for two years? What's the point of it? Couldn't you come back next year and reevaluate?

Sort of ensures that sort of in the out years the sort of state's condition is more stable. And as we assess--

More than two years, you're solving something from past two years.

Sort of looking forward. Looking at the cost that might materialize for the General Fund. The sort of trigger sort of ensures that the state sort of starting point is on stronger footing. And then we could assess based on sort of the conditions of sort of revenues and cost at that point, whether the trigger, whether the rates, excuse me, could be implemented.

I have a broken ankle and I'm looking at my finances and I'm like, I don't know if I should go fix it because in two years I don't know if I'm going to have money. That's really the approach you're taking here. That makes no sense to me. It's not.

It's no cost saving for this year, it's no cost saving for next year. What you are doing is creating panic across California for individuals who like FFAs are banking on this or there are foster care kids in the system who know they're going to get more increases in their soaps or foster care providers. Why are we creating a chaos for no reason?

As I mentioned, all the implementation efforts sort of continue. And so there's proposals as part of the May revision to sort of continue that effort as well.

No savings, but creating chaos. I'm just wondering what we're hanging our hat on. What are we saying we're being successful in? Are we just doing busy work? Master plan on aging, master plan on developmental disability. Let's put together a workforce to do the foster care tiered rate structures, CFAP expansion.

We're doing all these busy work, but then we don't implement it. I just wonder, Department of Finance was you're putting this plan together, how are you making us look good across the United States and saying, oh, California just does all this busy work just for headlines and doesn't implement things and then breaks promises.

Just trying to figure out your North Star here as you're putting together a budget and presenting to us. I haven't found the North Star, and if I have, if I would put what the North Star would be, it would be that you're just looking to--

You're just looking to push poor, marginalized, vulnerable people further down. I don't see. I mean, we talked this big game that we're this, we're this and that. But so far in the May revise, we're doing things that don't save any money for no reason.

So in total, the May Revision does propose $12 billion in sort of savings to address the deficit, sort of as the Department of Finance is scoring. I think put more broadly, as I mentioned, it really is around sort of the sustainability of the state's General Fund into the long term.

We know that there is a sort of structural imbalance and so there are efforts to look at.

Then why would you approve a new funding allocation for facility management systems? 14.78. Why is this approved? This wasn't in the January budget. Why would you approve this? And you're making all these cuts to services.

We do sort of take a sort of what is workload sort of necessary. So I can have my colleagues sort of speak to more specifically sort of why that IT system is sort of necessary to sort of continue sort of current operations. But there is definitely scrutiny within the administration about any sort of discretionary actions.

Is it possible for the funds to go on spend here? Every single IT project that we put forward always goes unspent. There's a delay, we can't hire folks, and then you come next year, hey, 14.78 was in use. We want to push it down the next year.

I think we can.

The FMS project is the IT system that underlies our licensing functions. And it is in the very final stages at this point. It's actually pulling, I think, eight outdated systems into one more modernized system.

And it's at the very end of the road for going live to provide those improvements, not only for our licensing program analysts out in the field, but also for the public seeking information about our facilities.

So while this is the latest proposal of funding, it's as expected in the course of development and we're pretty far down the path of that development. So just want to clarify that.

Why wasn't it in the January Budget was it just overlooked?

It's just the timing of when the information became available. I don't know if finance has anything to add.

LAO, is this the right time to do? You've been pretty aligned with Department of Finance. This go around about not approving new projects. I don't know if you had time to look at this specific project.

We have done just a very preliminary review of the BCP that is available for this augmentation for the project. My understanding at this point point is as the Director noted that the project is in the final stage of the process to go live.

I would also note, I believe that the funding is for three years, for two years of development and then an initial year of maintenance and operations. I would note based on the information that we saw in the BCP, this project has been underspending. So I think this is an area that we would like to look into more.

We haven't been able to yet, but we will plan to work with the Administration to see if there could be additional savings or you know, potentially a reduction to the amount that's needed here. Thank you.

For the Immigration Services Bureau workload, we see an increase request how many people are currently working maintaining the workload.

I don't have that information in front of me. But the Immigration Services Bureau there was those three positions approved because in the past that branch has received pretty big lump sums of funding that have not had associated permanent positions associated with them.

So what these permanent positions do is sort of right size that branch for the increased workload that they've received without receiving those permanent positions.

So we have funding, we just don't have individuals to work under that funding. And this is to fund people.

This is for to make those, those limited term resources ongoing.

For the CAMS training, are there any accountability guard roles in there? Like what is our goals, what are our training activities going to come or the funding for.

The CAMS fidelity training funding supports the integrate the tiered rate structure. But also the CAMS is the assessment we are using under any rate structure. And so the fidelity is important to make sure that as we assess how individual children are doing across the state, it is consistent.

The funding facilitates the development, the training and the implementation of both system level and case level fidelity tools. So there's like a county practice, an implementation profile, a CFT observation tool which provides that level of accountability to monitor and improve the quality of the practice across the state.

How will we know are we going to track like how many people are being trained or is there certificates after?

I don't know that level of detail of how we will use the observation tool and what the specific data is, but we can get back to to you on that.

And then on the work WPR penalty coming down. One, if I understand correctly, some counties are going to pay part of it and the rest were paying part the other part.

There is currently in state law a penalty pass on for counties that contributed to the penalty. They would be receiving a portion of the penalty. We've never actually operationalized it before so. So this will be the first time that there is a penalty that we would be paying.

There are some provisions in the law that do allow for us to both reduce the amount that is passed on to the counties based on things like for example, where federal law and state law are different and that might be contributing to the penalty. So we allow more welfare to work activities than the Federal Government does.

That might result in less compliance with the WPR. That's not the county's responsibility. That's a state policy choice. So we wouldn't pass on a portion of the penalty that would be assigned to that state policy choice. So a portion of the penalties can be passed on to the counties.

Having said that, the counties also have an appeal process similar to the one that we have with the Federal Government. If there have been natural disasters, if there's certain rates of unemployment, they can appeal to have the penalty reduced.

So what is budgeted is the full exposure of the full General Fund on the assumption that we don't know how all of those processes are going to play out yet. In terms of what the counties will ultimately share in versus what the state will.

When will counties, when should counties know? When will they know if they have. If they're responsible for a part of it?

So I believe we're working on that now to sort of assess the different amounts per county and we'll relay that information once finalized.

And I think LAO mentioned that we could potentially be anticipating other penalties coming down.

There are two different work participation rates. There's one for one parent or single parent families and there's one for two parent families. The most significant penalties that we face are back penalties related to both sets of family categories.

And that was prior to our implementation of the WINS solution which provided a benefit to individuals related to food, which created our ability to meet the WPR. For the last several years we have met the WPR related to the single parent families which is the largest amount of the caseload.

So the most significant penalty years are the 2012 to 2014 years which these penalties reflect. Because it was both the one parent and two parent families where we had not met the WPR. We did engage in a back and forth with the Federal Government and also in corrective action plans.

We have very significantly reduced the amount of these penalties from 2012 to 2014. So what we are paying is a fraction of what was originally assessed. But these are the years with the largest penalty amounts. After that there are several years where there are still penalties only associated with the smaller two parent caseload that would exist.

Having said that, last year when the Federal Government made changes to the law, they changed the work participation rate so that the caseload reduction credit works differently and our current WPR is well for the next year our WPR will be effectively zero because of the way the caseload reduction credit works so prospectively in the near future.

We do not expect any future penalties. What we are needing to do though is deal with the back penalties and these are the most significant years.

So we don't anticipate anything in this current budget year. Correct.

We actually have relief from the Federal Government in the current year because we were chosen for the pilot and a part of the pilot was relief from the wpr. Even though they rescinded their approval of our participation in the pilot, they continued to provide us the WPR relief for the budget year that caseload reduction credit kicks in and so our WPR is effectively zero.

Thank you.

Thank you all so much. We will now move to the next item on the agenda. Issue number four. CDSS May Revision Trailer Bills.

Again, Jennifer Troia on behalf of the Department of Social Services so we have a number of policy changes included in the May revision. The first set are related to CalWORKS and to streamlining the CalWORKS program experience by implementing a set of policy changes consistent with that approach we've talked about in the past.

For a more holistic set of interventions and a family centered approach to the CalWORKS program, there are three changes. The first is to expand the list of allowable activities to include meaningful and goal oriented activities like case plan development, welfare to work plan revisions or coaching with a case manager.

The second is to make job club an optional activity so we preserve the ability to participate when it's an appropriate fit, but we also provide the flexibility to focus on other appropriate work activities as appropriate. And then the third is simplifying the curing of sanctions.

So this eliminates the requirement for an actual signature to complete the welfare to work cure plan instead relying on the conversations between the caseworkers and the clients as sufficient evidence of the intent to cure.

As was referenced earlier, those proposals were paired with the elimination of the rad at the E2 light systems and the total between them all is 1.5 million total fund in automation cost on a one time basis and 18.2 million total fund in ongoing savings. So that is sort of a package of CalWORKS streamlining proposals.

We also have a proposal related to the SAR7, the semiannual report form. It removes a requirement for all households to receive a paper pre populated SAR7 and instead allows them to select whether they prefer to really receive it by mail or electronic submission.

We have some technical cleanup related to the tiered rate structure for foster care and then we have the child and family team requirements for family maintenance cases.

The proposal clarifies that the existing requirement for child and Family teams for children meetings for children in foster care also applies to children receiving services through family maintenance, both voluntary and court ordered. The funding for family maintenance CFTS was included as part of the BH Connect initiative.

So this is this is just trailer bill clarifying that it is indeed required. The triggers for both the foster care weight structure and California's food assistance program changes are also Trailer Bill proposed here. And then I have my colleague Laurel Cima has one last item that we can present related to the adoption assistance program.

And I want to speak to the wraparound service and out of home placement paid by the adoption assistance program. This proposal will make technical clarifications to eligible out of home placements and authorize adoption assistance program payment for wraparound services. Statutory changes will strike out references to statutes specific to foster care that are now optimized obsolete.

As written, the current statute has created confusion regarding out of home placements and contributed to inconsistent interpretation in the field. Additionally, statutory changes will address the authority to authorize adoption assistance payments to cover the cost of wraparound services and the expectation that wraparound services must be aligned with the California wraparound standards.

Thank you. Anything else from LAO?

Yes, thank you. Sonia Schrager Russo, LAO. When it comes to the streamlining CalWORKS proposals as a reminder, refreshing our memories from our hearing a few weeks ago on this topic, these proposals came out of ongoing conversations between the Legislature and the Administration, also involving advocates and other stakeholders around low or no cost ways to continue reimagining CalWORKS despite the rescinding of the federal TANF pilot that the Director mentioned.

So just wanted to, you know, pin those within that broader conversation. We do understand that these proposals are just a few of the items originally put forward as options for the pilot. So if there is interest amongst the Legislature, there could be others to think about as well.

But we are continuing to assess these proposals as opposed to some of the others that were in the original list. As has been mentioned, the costs are very low with these proposals with a potential for some workload related savings as mentioned in the prior issue.

That is where our primary questions are surrounding these proposals in terms of how those savings would be effectuated and then how the proposals would be implemented if adopted. Nothing to raise at this time on the other CalWORKS trailer Bill Item.

And as it comes to the expansion trigger, we are still awaiting TBL on that, but we'll report back with any comments or concerns for the Legislature and I will pass it to my colleague to talk about a few child and family items as well.

Thank you. Just one final comment regarding the adoption assistance program trailer bill. We have heard from stakeholders that there are potentially some concerns with that language. So we'll be working to fully understand those concerns and we'll report back to the Legislature once we know more.

Thank you. Senator Menjivar.

I'm really happy that we were able to add some Items to streamline CalWORKS. You know, like it was being mentioned, it's really low cost. I'm grateful for that. I do have similar questions. I'm wondering the timeline for these changes, the implementation. Do we have any information on that?

We're conferring with each other. I think the trailer bill does actually expect them to take effect in the budget year, but we can confirm whether that's July 1st right away.

How are we scoring savings? Like, I know if I got my numbers correctly here for removing things like job club, that saves us about $2 million. So maybe that's the incorrect number.

Yeah. So actually the way that the proposal works, there's one time automation costs related to the three streamlining proposals that I outlined. So the change of welfare to work activities, the mandatory activities including job club being changed, and the simplification of the curing of sanctions. We're not scoring savings associated with those particular proposals.

The scoring of savings is associated with the elimination of RADAP and E2Lite. So those are data systems that we use to track the wer. Yes. And the reason for those savings is that those are activities now where social workers have to take time to do the data entry to report.

For purposes of the WPR reporting, they claim dollars as a part of the single allocation associated with those hours. And we have identified a way to say, we don't need you to do those hours anymore.

We can administratively extract that data from CalSAAS without a social worker needing to go in and do the work, and so they won't need to claim for those expenditures anymore. So the proposal is to recognize that workload relief by savings through the single allocation.

Okay. That's county savings and state savings.

That's a part of. It's the single allocation. So the single allocation for CalWORKS is a mix of TANF and General Fund. Yeah.

Okay. And then can you just share a little bit, Director, on conversations or where we landed or we weren't able to land on that one final piece, the elimination of sanctions within the first 90 days. What were the barriers there?

I can defer to my colleagues at the Department of Finance. There are costs associated with that proposal.

Was it fully on the cost, the 1.5 million?

Yes, I believe so. So we tried to score what we could or not score, but include what we could on cost neutral proposals, those that had costs. Unfortunately, at this time we weren't able to implement because of the General Fund cost pressures.

And so on the ELI and the other one like 18 million, that's within calories. We weren't. So we just used that for General Fund offset. Right. And then the January budget had a 0.2% increase due to a modest growth in the child poverty family supplemental sub account, but that's no longer included.

Were we miscalculating how much was in that sub account?

Right. So the 0.2% map increase, that was a projected point in time estimate estimate at this time. So the map increase was not repealed as of May revision, but provided an update as to whether the ongoing increase can be provided on top of the ongoing fund already allocated. So at Junior's budget, we didn't propose the 0.2% increase.

That was our projection of what would be available based on the realignment accounts. But looking at, you know, out years and then that ongoing pressure that it costs. We're not proposing a grant increase.

Okay. So the sub account doesn't have enough money to provide that increase. Director, I know one of our goals is to increase grants to 50% federal poverty level, and we're falling short of that. Do we have a timeline when we can reach that goal?

I think there's different ways that we've measured the 50%. So within the Administration, we typically look at 50% for the assistance unit as it exists, and we're actually over that now.

But I think the Legislature has looked at the assistance unit plus one to account for the cases where there are individuals who are not included in the assistance unit. We don't have a set schedule for that. It's been applicable to Finance to talk about that.

I don't have that information in front of me.

But we never adopted the Legislature nor the Administration has adopted like a specific schedule. I think that's a goal that the Legislature has clearly expressed and established. But it's been an ongoing conversation every year to say how does it compare?

Okay, thank you.

Want to thank all of you from this Department of Social Services before you all leave with the Department of Finance. You know, I know that you all have been working on this for, for a while and you all knew what was coming in the May revision way before any of us.

A lot of these trailer Bill Language is not complete. Like we haven't been able to see them yet. And yet we are supposed to enter into conversations, negotiations and ultimately vote on them. When exactly should we expect to see this trailer vote language so that we can properly analyze it and really truly engage in meaningful conversation?

Yeah, I can take that. Just generally we're working as fast as we can to sort of evaluate and sometimes the decision is not a month long process. Sometimes the decisions do come down last minute. So needing to evaluate, I think looking at the statutory changes required in some of these larger programs takes a little bit of time.

But we'll do what we can to sort of provide your staff with the language as soon as we receive it.

Yes, I think we would all prefer to get that as soon as possible, including LAO. And it's really hard to have these conversations. It's really hard to really dig deep if we don't even know what you're talking about. So appreciate if we can get that as soon as possible. Thank you all so much.

We will now move to the Next Department, California Health and Human Services Agency.

Chair and members, Kimberly Chen here on behalf of the California Health and Human Services Agency. We have three items in the May revision that I will run through quickly. First, CalHHS is requesting 154,000 from the BHSF, the Behavioral Health Services Fund, for funding for 25-26 and ongoing going to fulfill its increased responsibilities to implement the BHSA, the Behavioral Health Services Act Prop 1.

Agencies, departments, and offices play a role in the successful ongoing administration and implementation of Prop 1 and other efforts to improve behavioral health. Agency is requesting resources to support the coordination, engagement and accountability needed amongst departments and stakeholders to successfully implement the behavioral health initiatives within Prop 1.

I can go into details if needed, but if not I will move to the second item which is the Child Welfare Services California Automated Response and Engagement System, CARES. The May revision includes a technical request from agency related to this.

This BCP is a technical request that includes no new project funding and only seeks to adjust expenditure authority and modify proposed budget bill language. The 15 million requested by OTSI, the Office of Technology and Systems Integration, is solely expenditure authority related to previously budgeted funding included in the CDSS local assistance.

And finally we have one final technical item, the Preschool Development Grant Award Authority Adjustment agency with DSS is requesting one time reimbursement authority of 280,000 and one time federal fund authority for agency to expand the Preschool Development Grant Awards Fund by the December 30, 2025 award liquidation deadline. This increase in expenditure authority allow us to expand the remaining federal funds. With that, happy to take any questions.

Thank you. Any comments from LAO?

Karina Hendren, LAO. No comments.

Department of Finance?

Jennifer Ramirez with the Department of Finance. Nothing further to add.

Thank you. Senator Menjivar.

Department of Finance, this isn't part of the topics, but since it's under this department. Little disappointed that we don't have any updated TPL on the JJRBG grant formula. I know we had conversations that there are still outstanding things. I'm wondering if there's any update on conversations there.

I know we have like three weeks left and I know the Legislature is working on something, but I really wanted to see something different here. I don't think we are we should be again sending funding down to facilities that are in violation or close to being under receivership. Again also, I think we shouldn't score points for diversion if a judge does this versus probation. I still think those conversations still need to happen. Any insight on that?

Hi, this is Shelina Noorali with the Department of Finance. At this point, we have no new updates on the language. But we continue to working with the Legislature on reaching a landing spot with the final language.

Okay, thank you. My second point was, you know, the previous department we talked about how we can do. We're looking at a COLA suspension, so forth for childcare care providers. But this one request from this one PCP from January is still in place. The Early Childhood Policy Council. A little shy of 1 million.

I know it's not a lot of dollars, but this board is made up of 27 people to come together and give recommendations on early childhood system. I think the recommendation is that people need to be paid a fair wage to do this work.

I don't see how we're funding a council again to do that work for us if we're making cuts, serious cuts here. I think this is one of the things that should have been on the chopping block and should have been on the may revise to be proposed for cuts. How did we justify keeping this in here?

Hi, Shelina with the Department of Finance. So my understanding is that was a reappropriation of existing funds. They were not new funds being requested. So at this point, the reappropriation maintains in the budget since there is no new general fund impact.

In my short three years here, we have reappropriated funds to various departments because they've gone unspent. Those have been examples that have been utilized by the Department of Finance. This could have also been reappropriated somewhere else. I mean, we score savings in health and Human Services and it's used for general fund altogether.

Like the money just goes everywhere in the general fund because it was unspent. And we're looking to cut services to actual people and advisory boards should be the first thing to go. Again, I don't know how. Again, I don't know the North Star that Department of Finance is utilizing, it doesn't seem to be consistent across these cuts.

If we're doing these drastic cuts somewhere, an advisory council like this that is not necessary in this time should have been number one. What do you got for me, Angela? No. Okay. All right. Jesus Christ. Sorry. I knew that. Jackie, I apologize. But again, it's inconsistent all across. That's all I had, Madam Chair.

Thank you. I do want to piggyback on what Senator Menjivar was stating. So with the Childhood Policy Council, what reports recommendations have come out that have been in a report that have been implemented? Anything?

I don't know if we have the staff here available. Yeah.

Jackie Barocio, Department of Social Services. Would you mind please repeating the question?

So with that particular council, what kind of recommendations reports that have come out that have been implemented. We're just trying to figure out how when we are cutting, we're doing some deep cuts to some significant programs that you know, have you know, data that show that they're working and this particular council didn't use this fund. What kind of information have we gotten from this council that states this is something that we definitely need to continue?

Right. So the Early Childhood Policy Council, they're the advisors to the Governor, Legislature and Department of Social Services on statewide early learning and care policies. So that includes planning and implementation of activities included in the master plan for early learning and care. And then also they were involved in the Assembly Blue Ribbon Commission.

I would also flag that they are noted key stakeholder group when it comes to meeting the public engagement requirement under the alternative methodology, their specific product or outcome of work. We hold quarterly ECPC meetings our next one May 28th I believe. And that's where we get the opportunity to engage multiple stakeholders that include contractors, agencies, providers on various topics related to the early learning space.

So this is a council that you're stating that we must have.

They do serve that role. And again like I flagged in relation to the alternative methodology specifically, we specifically in the preapproval federal plan that we submitted identified the ECPC as being that body in which we would meet our public engagement requirement.

And again they are also those key stakeholder group that is advising as we move forward with that master plan for early learning and care. They are making many, many recommendations that were included in there and it is a long term plan. So they do serve that value of advising not only the administration but the Legislature as we move forward in making those programmatic decisions and considerations.

So a requirement then because we didn't get that feedback in the January during the January meeting. So it's a requirement. It's part of a requirement that we're submitting. You said to the Federal Government to check off that we're doing public comment on the specific program.

For the alternative methodology, that is how we leverage the specific body in meeting that stakeholder component of associated with the alternative methodology and submitted it in our state plan in our federal pre-approval plan.

Because without that body we would not have met that requirement.

Correct. There are multiple other stakeholder groups that we're advising like the rate and quality group that was propped it up. But the ECPC was specifically called out.

But this is for a contractor to help provide meeting assistance.

Right. For those quarterly meetings requiring the staff to support not only the meetings, but then also any required follow up that comes from the quarterly group's meetings.

Okay. LAO, any additional? Okay.

And then I would flag they also develop mid year and annual reports. And we're happy to follow up with more information.

Yes. Madam Chair, members, Mark Newton with the Legislative Analyst Office. Just to quickly comment on Senator Menjivar's point about reappropriations. Our office would view reappropriations as discretionary spending. And no matter what size the spending in the state's fiscal situation, we think those should be reached a very high, high bar. So point just in agreement with Senator Menjivar of reappropriations really are in a sense discretionary.

Thank you. And so I just want to clarify before we move on without this council, we would not have the ability to have reached that, you know, blue ribbon standard. We wouldn't have another method for public engagement. This is the only way.

We are leveraging other stakeholder groups like the Rate and Quality group. But this one does provide that unique perspective and a long standing being that 27 member body that have elevated the needs of young children and families and provided guidance and recommendations to meet the mission and goals of the master plan.

So what you're saying is that we can get it from some of the other groups that we currently have, but from your perspective, this one group just provides everything, but we could get it from multiple others that are already established.

I'll take that back because again, there's unique compositions that are catered to the specific goals and mission of the ECPC. So to the extent if that were to go away, who's to say that now I have to piece together across five different groups and then support create some ad hoc support spaces as well.

That is just replicating the work that this BCP is trying to do in a streamlined one group way. And again, these are quarterly meetings that are also open to the public. So we don't want to eliminate those spaces where we are leveraging key perspectives and informing that implementation for the master plan.

Thank you. All right, so we will now move to the next next issue item, State Council on Developmental Disabilities to do an overview of may revision. Thank you. You may begin.

Thank you. Madam Chair Members, I'm Aaron Carruthers with the State Council on Developmental Disabilities and we have before you a technical adjustment where we are seeking an overall reimbursement authority for a contract we have with the Department of Developmental Services.

Under this contract, we collect customer satisfaction data from regional centered consumers and families and provide the data back to the department. Salary, benefits, other cost drivers have increased the cost overall. We've adjusted this with the department. We're seeking an increase in reimbursement authority. This would not impact the general fund.

Thank you. Any comments from Lao? Department of Finance? Not seeing any questions. Thank you so much.

Just one question. We talked about the Public Records Act AB 1147 last time and the positions needed across to implement that. I think some conversations we had were if we could evaluate. Is this the wrong topic? Sorry. Disregard.

I think you're right, Senator Menjivar. That's with the Department of Developmental Services. We're the State Council. Very easy confusion. Thank you so much.

All right. Thank you so much for your presentation. We will now move to the Emergency Medical Services Authority issue. Item number one. You may begin.

Thank you, Madam Chair and members. Gabrielle Santoro with the Emergency Medical Services Authority. We've been asked to provide a brief overview of our three May revision proposals. First, we have a request for general fund authority of 1,072,000 and a reimbursement authority to spend out of the Health Resources and Services Administration or HRSA grant of about 1.626 million ongoing to cover the cost of our contract with the UC for the California Poison Control System that we contract with for poison control issues.

Our second issue is a technical correction. We're requesting an ongoing $5.5 million general fund increase to correct an error where over the past couple of budget acts there was a duplicative reduction unintentionally made to budget that we'd like to right size for the May revision.

And third, we are requesting reappropriation of up to 3.562 million general fund from the 21 Budget Act to continue planning with our ESDM solution. That concludes my comments. Happy to answer any questions.

Thank you. Any comments from LAO? Department of Finance? Senator Menjivar.

And the last point you mentioned. Three point how much since 2021?

3.562 million.

So for the past four years that hasn't been used. It's been sitting there.

That balance is what has not been spent. We have been spending towards this solution. So that is just the unspent balance of what has been appropriated.

Was it appropriated for like three years? Is that why now it's unspent?

Apologies, I don't have the entire history handy, but I believe we had an original $10 million appropriation as part of the 21 Budget Act.

Got it. And this one's left over. And it's going to be utilized this next year?

Yes, our plan is to use it this next year.

What is it going to be utilized for again?

We have our Enterprise Systems Solution. It's a consolidation of the IT functions we have within EMSA, including our pulsed form, our data solution to connect all of the local EMSA entities across the state to provide information between emergency providers and hospitals as well as our central registry.

And then the project will be complete. Okay.

All right. Thank you so much. We will now move to the Department of Managed Health Care.

Good afternoon. Mary Watanabe, director of the Department of Managed Health Care. Our first issue is related to SB 326 or Proposition 1. With the signing of SB 326 and the passage of Prop 1 in March of 2024, California seeks to make mental health and substance use care and treatment more accessible, equitable, and data driven.

It also requires counties to make a good faith effort to contract with commercial health plans for behavioral health services. Counties may report complaints to the DMHC if a health plan fails to work in good faith, to contract with the county to be an in network provider, or to timely reimburse the county for services the health plans must cover as required by state and federal law. If the DMHC receives a complaint, it's required to investigate that complaint.

We're requesting one position and 194,000 in 25-26, decreasing to 188,000 in 26-27, and annually thereafter to coordinate with the counties and health plans on a complaints related to contracting or reimbursement. Our second issue is related to pharmacy benefit manager licensure to address the need for greater transparency in drug pricing to address the high cost of prescription drugs.

The May revision proposes replacing the current pharmacy benefit manager PBM registration requirement with a licensure mandate for all PBMs that contract with either a licensed DMHC health plan or a California Department of Insurance licensed insurer.

The current PBM registration requirement would sunset at the end of 2026, and PBMs would be required to obtain a license on or after January 12027 or the date on which the department has established the licensure process. This proposal requires plans and insurers to ensure PBMs they contract with are licensed by the DMHC. It requires PBMs to submit quarterly financial statements and other information to the DMHC. It gives us the authority to audit licensed PBMs to ensure compliance with the law.

There's also requirements for the PBMs to report information to the Department of Healthcare Access and Information regarding pricing and payments for prescription drugs, including fees paid for PBM services, rebates, and affiliations. It also gives the DMHC the authority to enforce the reporting requirements.

Additionally, it imposes annual assessments on licensed PBMs to fund the work of both the DMHC licensure and HCIs. We work related to PBM reporting. We're requesting six positions and annual funding of approximately 2.3 million to implement the PBM licensure requirements. And let's see, Issue three is related to our web accessible service Portable Addendum.

We're requesting Consulting Funding Resource. Excuse me, we did request resources during the 2025-26 governor's budget earlier this year related to our what we call WASP implementation. These amounts included California Department of Technology Project Approval Life Cycle oversight costs.

Recently the IT project was delegated back to the California Health and Human Services Agency for oversight so we no longer require the CDT PAL oversight. Since it's been delegated back and no longer requires CDT oversight, we're requesting to reduce the expenditure authority by 274,000 in 25-26 and 136,000 in 26-27.

Lastly, we are working with the Department of Technology on stage four of the project approval life cycle for our Corrective Action Plan Modernization product project. But we've experienced delays due to the delay in executing a contract and encumbering the funds prior to June 30th of 2025.

Or let's see, we're asking for a single budget act appropriation and a technical adjustment to reallocate about 2.8 million in funding authority from 24-25 to 25-26 to address this issue. That concludes my presentation. Happy to answer questions.

Thank you. Anything from LAO?

Yes, Good afternoon, members. Mark Newton, Legislative Analyst Office. We would like to comment on the trailer bill proposal for pharmacy benefit managers. Our office and our recently released initial comments on the May revision commented in that the May revision includes a number of what are substantially policy proposals with limited budgetary implications.

We think without prejudice to the merit of the policy proposal, we would recommend just deferral of consideration of those proposals until later in the year. We think that the Legislature is going to have some just very very challenging decisions to make regarding sort of fiscal trade offs in the budget and really focusing on the fiscal picture and delaying the sort of these policy proposals to later in the year. Thank you.

Thank you. Anything from the Department of Finance?

Hi, Albert Pineda, Department of Finance. I just want to clarify regarding the Pharmacy Benefit Manager BCP, the resources requested are for the budget year, not annual. And then I also wanted to clarify that we are going to be posting. All may revision budget documents as soon as possible.

Thank you. Senator Menjivar.

But won't you need budget allocation for the ongoing years?

Yeah, the administration is going to continue to evaluate the program once it's implemented and look at the resources at a later time.

Just inconsistency. I thought we were looking to solve out years for the next 5-10 plus years apparently, but in this one we're not going to look at at word years and how much it's going to cost us.

Maybe I'll just note that none of this is being funded through the general fund. We're funded through assessments on health plans, if that helps any.

Great, thank you. Yeah.

So I am very excited that we are finally going to do something in the realm of pharma pharmacy benefit managers and licensure. This has been something that we have been grappling through policy and you know, the last bill dealing with PBMs I believe was vetoed by Governor Newsom. Just out of curiosity, why is the policy establishing this going to be within the budget and not folded into one of the current PBM bills?

Do you have an answer? I don't know that I have a good answer for that. I mean, I think in the governor's veto message he indicated the need for more transparency and understanding the role of PBMs in the market.

Again, this would give us the initial resources to set up a licensure structure as well as the reporting to the health payments database at HCAI. So I don't know if I have much more to add, but I think we're excited to share your excitement about getting this off the ground.

Joseph Dawson, Department of Finance. Yeah, just kind of echoing those sentiments for this proposal that obviously Department of Managed Health Care has done a lot of work in the realm of healthcare compliance. So we want to leverage those efforts. Along with the collaboration of the Department of Health Care Access and Information too.

Okay. Well, you know, very excited about the fact that we're moving in this area, but do share the concerns of LAO. There is a purpose for policy committees. There is a difference between policy and budget. And I'm generally not a huge fan of putting policy in budget, especially when we are grappling with such significant issues here.

Going through the policy committees really allows for us to do a deeper dive and discussions with departments, but also with other stakeholders just so that what we pass is hopefully the best thing that we could possibly do. When you're doing it through the budget, it's a very different process and you don't have as many expert eyes on it. And so I'm a little bit, you know, questioning that a little bit. But I'm glad that we're doing something this year instead of continuing to, like, veto our PBM bills. All right, thank you so much. We will now move to California Department of Aging.

Sorry about that. Nicole Shimosaka, I'm the deputy director of administrative services at the California Department of Aging and we have three items for you today. First is a technical baseline adjustment. This was a technical adjustment of a net zero shift of existing funds and this was simply a hyperion cleanup in our fiscal accounting system.

This was a net zero technical adjustment within the system that moved funding out of the unallocated budget line item and into the proper budgeting line items. Our second item is regarding our Older Americans Act funds, our federal funding.

It was another technical adjustment. As a state unit on aging, the California Department of Aging oversees and administers Older American act and Older California act programs. The programs provide older adults, people with disabilities, and caregivers with the resources to support and promote their mental, physical, and emotional needs.

This includes supportive services, congregate nutrition, home delivered meals, preventative health, family caregiving, and legal services. Currently, the department lacks sufficient baseline federal authority to cover its full operational and programmatic needs. Annually, the department is required to submit mid year budget revisions to the Legislature to increase the baseline federal fund authority.

These requests are administratively cumbersome, time consuming, and they delay the department's ability to provide payments to the local Area Agencies on Aging. This request, which would increase Federal Authority by 3.9 million in state operations and 23.2 million in local assistance, would write size the baseline funding for vital Older American Act programs that the department oversees.

This request would eliminate burdensome administrative processes and reduce the risk of delayed payments for the Area Agencies on Aging so they could provide continuity to their services for older adults, adults with disabilities, and caregivers. The last item is regarding provisional language for our Multipurpose Senior Services Program.

The California Department of Aging oversees Multipurpose Senior Services Program, also known as MSSP, which is a 1915 C Federal Medicaid Home and Community Based Services Waiver Program. This program provides services to enable frail older adults who are nursing home certified to remain in their home or in the community to avoid premature nursing home placement.

This program requires that participants be 65 of age or older, currently eligible for Medi-Cal and certified replacement in a nursing facility. Currently, the department contracts with 37 MSSP site providers to provide these services across the state.

The MSSP site providers currently collect data and conduct reporting requirements through a variety of methods including manually, electronically and a hybrid of both. This has led to inconsistency in data and errors in reporting.

On April 22, 2024 the Center for Medicare and Medicaid Services, known as CMS, released final regulations to ensure access to Medicaid home and community based services, commonly known as the Access Rule.

A required component of the Access Rule is that states will now be responsible for adjudicating level of care determinations which was previously overseen at the local level and the department anticipates overseeing 13,500 level of care determinations annually.

Further, the Access Rule requires states to report on payment adequacy and transparency of Medicaid payment rates to direct care workers, critical incident management, participating HIPAA protected specific data substantiating quality measures and person centered service planning, timelessness of access to services and establish a grievance system and fee for service programs.

To enable the MSSP sites to comply with the new reporting and compliance requirements of the Access Rule, CDA proposed an implementation of a new software solution in the January 10th Governor budget. The language that's being proposed would provide the Department of Finance with the ability to remove all or a portion of the software funding should the Access Rule not move forward.

At the federal level, this solution would promote other reporting and data exchange efficiencies for the MSSP sites and the Department understands the tough fiscal times that we're in and would halt implementing this project should the Access Rule not move forward.

Thank you and any comments from LAO?

Thank you, Madam Chair. Ginni Bella with the Legislative Analyst Office. Just one note on the item you just heard about on the Multipurpose Senior Services Program. The language. We're still looking at it, trying to understand other places where it might exist throughout the Health and Human Services budget this type of language and better understand the role of Legislature in that and what oversight we'll have. So more to come on that.

Thank you. Anything else from the Department of Finance?

Jennifer Ramirez with the Department of Finance. Nothing further to add.

Okay, thank you. Thank you so much for your presentation. We will now move to the Department of Developmental Studies.

Director, go ahead.

Thank you, Member. Pete Cervinka, Director at the Department of Developmental Services, give you just a very quick overview and then describe the proposals as requested by the agenda based on updated projections. The May revision brings down our current year funding and caseload estimates relative to the January, 10 Governor's budget.

We still in May revision have a proposed year over year increase in our budget of roughly $3 billion, year over year, our caseload is projected to rise the same 39,000 folks that we projected at the January budget, bringing us to 491,000 people.

That's down from a 504,000 estimate at Governor's Budget, but still the same increase off a lower base.

We do have major adjustments in the budget, include funding for that caseload, all the services for those people, as well as associated Regional Center operations to coordinate it, and full year annualization of the multi year investment we made in rate reform.

The budget continues to protect the Letterman act entitlement, it continues to protect services to young children and it continues to protect direct services as well to all populations. The May revision does include some proposals to address the identified budget deficit and begin conversations with the Legislature and the community about bending the future cost curve.

Of note, because it comes from prior years, we deliberately adopted a policy coming out of COVID to ensure services were available for people. The General Fund is now experiencing reversions from the 2023 and 2024 fiscal years of 862 million. So that's a major contribution to the General Fund balance from prior fiscal years.

The budget also includes additional solutions just under $124 million General Fund. These are described in your agenda and I'm happy to answer any questions about them. The major adjustment is 75 million for ending the hold harmless policy and rate reform four months earlier than originally planned.

And there's a proposal, as I mentioned, to open conversations about bending future cost curves. There's an estimate of 22.5 million in the self determination program. That's the value of 10% of the actual proposed growth in the program of $230 million. We have associated trailer Bill for these proposals.

They maintain the programs in statute, but simply make them subject to appropriation with the exception of the hold harmless where there's a date change and I'm happy to run through the individual ones if the Committee's of interest. There's also several relatively minor investments that address either imperatives or mandates subject to it.

One of the imperatives that we have is the Life Outcomes Improvement System. This is modernization of case management and fiscal functions across Regional Centers and then we have several mandates that we have, basically health and safety complaints and workload adjustment.

We have the compliance with the federal Centers for Medicare and Medicaid Services final rule that impacts it requires us to have a new grievance process by July of 2026, and we have a couple positions proposed for monitoring of some our facilities that care for people with larger needs, enhanced behavioral support homes and community homes and a compliance with the Legislature and Governor signed last year AB 1147 that makes Regional Center subject to the Public Records Act.

That particular proposal is not an investment, but actually an adjustment downwards to our January request. When we wrote that proposal originally, shortly after the Bill was enacted, we envisioned the Department would have a role in the ongoing redaction and review of releases by Regional Centers of information in response to Records act requests.

We're no longer going to play that role in that process. So we're eliminating the six - not eliminating, withdrawing the request for the six IT positions that we had originally envisioned in that and it saves roughly $600,000. A May revision, as you've heard, is a budget proposal.

We're happy to talk with the community and the Legislature about alternatives and we're really looking forward to resolving the budget that is before us at this time because a majority of our time we know will be sucked up in whatever Congress and the Administration do at the federal level. We're watching very closely Medicaid developments there.

We have a number of great partners and stakeholders in the system doing great work for people, and we're happy to propose a budget that grows year over year despite the situation we're in, in a significant way. Happy to take questions.

Thanks, Director. Department of Finance Anything to add.

Omar Sanchez, Department of Finance Nothing further to add.

Karina Hendren LAO, we do have comments on just one of the proposed solutions and these are preliminary comments as we're continuing to work with the Administration to understand the proposals.

The proposal we want to comment on is that the Administration has proposed to implement a set of requirements that DDS providers would be required to satisfy in order to be eligible to earn quality incentive payments starting in July 2026.

These are existing requirements that providers are expected to meet already, but they have not previously been a condition of funding. We have a few questions about the budgetary implications of the proposal.

First, the Administration indicated that its estimate of the number of providers that could be non compliant with the new requirements, and who would therefore fail to earn the Quality incentive payments is an uncertain estimate. Given this, we recommend that the Legislature ask the Administration to explain its methodology and assumptions to project savings from this proposal.

Second, while some providers might not achieve compliance for the first year that the new requirements are in effect, which would be 26-27, it's likely that more providers would come into compliance over time as they have more time to adjust to the requirements.

It's therefore unlikely that the same number of providers who are Non compliant in 2026-27 would remain non compliant in subsequent years. This means that savings from the proposal would likely decrease over time.

We therefore recommend that the Legislature ask the Administration to explain its assumption that the amount of savings achieved in the initial year 26-27 would remain constant over future years. And third, we recommend that the Legislature ask the Administration to clarify what would happen if providers come into compliance with the new requirements mid year.

Would these providers, for example, be eligible for the quality incentive payments or is the proposal based on fiscal year compliance. And then aside from the budgetary implications, we also have a couple of questions about the programmatic implications of the proposal.

First, the Administration stated that the requirement for the electronic visit verification requirement has historically been more challenging for smaller providers.

And we therefore recommend that the Legislature ask the Department how this specific requirement could affect access to services provided by these smaller providers, as well as how the Department could respond if the proposal reduces small providers ability to meet demand for services.

And finally, this proposal comes at a time when DDS is in the midst of efforts to establish individual level quality measures by 2026-27 in consultation with the public as well as subject matter experts, according to a process established in statute.

This is part of the broader rate reform implementation process that's happening in DDS and has been happening for a number of years. We recommend that the Legislature ask the Department to explain how it reconciles this proposal with the process established in statute to develop quality measures. Thank you.

All right, Senator Menjivar. Director, I just wanted to make sure I was adding the numbers here incorrectly. You said some solutions that amounted to 100 and something million. But I just see one specific solution. The quality incentives program. That's a total of 221 million.

With apologies, that's a budget year plus one number. We would have 13 months roughly from today for people to become compliant before we would expect to see savings. That's an out year proposal, not a budget year proposal.

The budget year number is 75 million in the hold harmless, roughly 15 million for what we call DSP University or the Workforce and training. It's the tiered wage proposal. There's 5.6 million.

50 million in the, there were two programs in there for both. Are they both getting cut under DSP?

No, the bilingual stipend program would continue unaffected. That's much smaller. It's I think 4.5 million in the budget. The other solutions, 5.6 million for Regional Center implicit bias staff for their, I'm sorry Regional Center implicit bias training for public facing staff, 3 million for health and safety waiver assistance.

But the ability to request health and safety waivers would remain in place. Go ahead, sorry.

Department of Finance. I don't know if you were the implicit bias training like for years advocates have talked about and there's data that shows that certain Regional Centers treat different demographics differently where services are allocated or provided to different individuals based on their race.

Obviously, as always, black and brown communities don't always get the same kind of services offered to them even though they're entitled to it compared to other demographics. The implicit bias training for me when I look at this will help close that gap so we don't further create a gap of individuals not getting the resources necessary for them.

As you're looking at the things to cut, I'm wondering why something like that that will add more barriers for certain families in getting the support they need from Regional Centers.

Omar Sanchez, Department of Finance. I'd like to start off here by saying, you know that as noted in the, you know, you'll see in the trailer Bill fact sheet there, it's noted that the Department and the training with the implicit bias training here has been done with most outward facing employees.

So a large part over the last two years have been have undergone this training. And so that's one component. Right.

Like over the two years training has already occurred and of course acknowledging the importance of this training, but I'd also like to note that the language here and this potential solution as part of it, it's open to an appropriation by the Legislature. So it's not eliminating this completely. It's open to an appropriation here.

So for the past few years some people have gotten this training already.

I can run that. We ran the contract for that. Yes, for the last two years all public facing employees and Regional Centers, at least service coordinators and the majority of other public facing staff received that.

May 9th we received proposals for another two year cycle of that training where we would catch new employees and do a refresher training. To your question about why this not that, one it's a discretionary activity, and two it hasn't yet started its next cycle.

And I would also add this is not the only way that we address inequities in our system. There's a very long conversation to be had about other things that we're doing to address it as well.

I'm not saying this isn't an important part of the toolkit, but I'm saying equity is a focus for us across the board in many of the things we're doing, starting with transparency and language access.

Director, you mentioned the cut to the SDP updates. The 22.5 you said was like 10% of the program.

The program is growing $230 million year over year in the proposed May revision budget. And 22 and a half is, give or take, 10% a little bit. But then the ongoing year is double. Yeah. Why the change? Full year annual, Full year annualization.

And what are going to be the impacts to the STP program?

Until we know what the specifics are, this is an area where we need to have conversation. We expect that adjustments to how budgets are initially calculated when people enter the program could be potentially one part of that solution. Can you clarify that? Sure.

We have seen large year over year increases from the year before somebody was in SDP to the year they enter SDP. And we want to get a better understanding of that. That's in current statute. Our trailer Bill touches on that to clarify it.

And we're also proposing language in the trailer Bill again for conversation that would have Regional Centers certify that budgets are cost neutral, would be what people would otherwise have received had they not gone into the SDP. We don't see that kind of year over year increase outside the SDP program.

So we want to understand why entrance into SDP results in such a large year over year increase. But these are all things that we can have conversations about. Okay.

And then for the hold, harmless. I know we talked about this previously and we're doing it. What is that, four months.

four months, earlier than June 30.

Yes, four months earlier. And last time I asked a question around, you know, certain entities that were already, you know, the ones that were providing more. And I asked, are they, how are they going to continue services? Are they going to be prepared? That's a cut for them. This is an additional, like an earlier cut.

How are, what do conversations look like with those entities too?

I think one, is providing certainty for them is soon as possible as to what the budget finally includes so that they can make planning decisions. Two, the rate models exist to provide some statewide consistency in the rates paid for specific services.

So there's a state policy goal in kind of bringing in the ends of we're raising the bottom of the bell curve and bringing the top of the bell curve down. There are people that can successfully provide this service and in certain areas.

And the second part of the conversation with these providers is if there's truly some reason that the rate model has an error or doesn't work in certain situations. That's the reason that the statute for rate reform allows the Department to revisit rate models.

So we're asking rather than them decide to go out of business to please come to us and have a conversation about where the rate model is flawed in its assumptions.

And and then Department of Finance, I'd love through the chair and the staff to get responses on the LAO, particularly around if an entity comes into compliance mid budget year, what would happen? Would they get that extra 10% mid budget year? Would they have to wait until the next year? Interested in those questions.

But that one in particular stood out to me. That is all. Madam Chair.

Omar Sanchez, Department of Finance Pardon. We'll gladly take the question back here and we can continue to look into this. Thank you for the question.

And actually all of what for me, all of what LAO brought up, including, you know, how would this impact smaller programs?

I am curious though as well, how did you come up with 221 million that you would see a reduction in what was the data points that you used to determine that that was going to be the amount of money that you saved, because what if more people actually came into compliance, What are you looking at? Where did that come from?

I'll get us started here and then I'll pass it over to my colleagues if there's anything I missed here. So just on the estimate here for the just to confirm the quality incentive program.

So just on the estimate here that the savings for the over 220 million General Fund amount, that's a reflection of the budgeting assumption that it's roughly one third of providers, that one third of the providers will not be compliant with at least one of the three criteria that we listed here and that's generally how that the assumption for that amount was generated.

Of course these are assumptions here and so that's at this time is the best number for the 220 portion.

How many providers are compliant with the current recommend or current requirement?

Long and complicated answer. We have reported that 100% of the providers are compliant with the HCBS rule in EVV compliance. We think we're around 47% based on the numbers that we have today.

And we think most of those providers are on the larger side because our analysis of billing data shows that roughly roughly 70% of claims billed come through an EVV compliance system, despite the lower percentage of providers who've adopted that.

And I can come back to talk about EVV compliance a little more on the independent fiscal review and audit requirement. I would say this is an opportunity for the Department to do vastly better than it historically has. We don't have good numbers that would allow us to give you an estimate on this.

Simply put, if a provider receives more than a quarter $1.0 million, they're required to have an independent fiscal review and half a million dollors, they get a full blown independent audit contracted by a CPA, for example. And we don't have good data to answer that.

The provider directory, which we talked in our prior hearing about, is the place where we would be asking people to upload that to.

Okay, and then Madam Chair. Chris O'Neill, Department of Finance. Just to respond to another question, from LAO on the that's you're saying and how they're held flat.

And I think it's just from a budgetary standpoint, we often carry cost assumptions related to specific policies flat into the out years, which is what we've done in this case, but would note that as you know, caseload and utilization likely increases in future years.

The number that you see there, we would assume would actually become a smaller portion of the POS - sorry, the Purchase Of Services Associated with the quality incentive program.

So if this proposal is adopted, you know, those savings assumptions associated with this policy, you know, may change as we reevaluate estimates year to year, as we do with DDS's budget on an ongoing basis. So I just wanted to clarify.

Okay, thank you. So, like Senator Menjavar alluded to, I do have some concerns over the, you know, reduction or removal of the implicit bias training. There was clearly a reason why it was established understanding that there may be other modalities in place to ensure equity.

However, implicit bias training goes beyond just talking about a different language or, you know, it gets deeper into the weeds. And so there was clearly some inequity that required this to happen.

The 5.6 million that you are assuming that you'll save, which in the grand scheme of things is fairly low, that was an assumption for new people and retraining some of the others, a refresher course or something.

I'm not sure I personally remember the funding assumption. I Think it was based on the bid that we awarded for the service the last two year go around roughly based on what the contractor proposed would be needed to serve the number of Regional Center employees.

Okay, so. But you stated that over the last two years we'll say the vast majority of employees have gone through this training.

Public facing, yes. Not the accounting shift.

And so we wouldn't be talking about the same number over the last two years.

We would be talking about roughly the same number because in that time period there are both new employees. But the other component is a refresher training for those who've already done it.

Right. And so did you consider, because of the significance in ensuring that, you know, people who come in at least have the baseline initial training, was there any consideration on maybe not doing a refresher course and just ensuring that those who are coming in brand new that didn't get anything actually get this initial training? Is that a possibility?

That's a possibility. That's not what we asked for in terms of proposals, but it certainly could be part of the final award. As I mentioned May 9, we received proposals and I think on the day of May revision, we began to rate them.

So we're continuing to move forward as if nothing's changed until we have a final budget agreement. We don't intend to award the contract, however, until the budget's enacted.

I would suggest maybe us going back and looking to see how much would it cost and if it's possible for us to just implement something to train those that are just coming on board as of right now and kind of push off the refresher course, especially since those one's got it within the last few years to sometime in the future once our budget forecast looks better.

The other question I have is around the Health and Safety Waiver Assistance program reduction of 3 million to the General Fund.

Now again, to me, this kind of jumps out as an equity issue, based on the fact that in the past some people who may have been a little bit more savvy could navigate the system and those that weren't, didn't, but may still need it.

Any thoughts behind why this is an option for removal and what new programs will be put in place to ensure that those who had not gotten this assistance in the past will still get this assistance.

So on this one we actually have numbers for you. In its first year of implementation, in 21-22, 102 people got assistance. In 22-23, that number jumped to 738.

Reflects full year implementation and the actual practice but in the last two fiscal years 23-24 and 24-25 we respectively have a report of 43 people and 26 people getting assistance with this funding. So I think it tells us a couple things. Those who needed help probably have gotten it by now.

And also we think practice at Regional Centers continues to make this available. And we don't have data that would indicate that inequity and access to these waivers continues to be an issue.

Thank you.

Yep.

Okay. All right. Seeing no further questions on issue number one, we can go to issue number two. DDS may revision trailer bills.

With apologies to the chair, I kind of covered that in my opening. I'm happy to take questions about it. Other than the Quality Incentive Program and the self determination Program, we're simply making the statute subject to appropriation but leaving them intact. I'm happy to answer any questions.

Sorry, they're listed in your agenda if you want me to run through them. I'm happy to provide more detail on.

All go through the fiscal allocation letter Authority, please.

Yeah, sure. This language is really pretty simple. Most of the major departments in the Health and Human Services Agency have the ability to allocate funds to county government just by issuing what they call a county fiscal letter. And we're seeking to do the same with Regional Centers.

The way that we currently allocate funding for years has required a formal contract amendment. And that process is time consuming both in our ability to get it out. It requires review by multiple people inside our Department as well as through the Department of General Services.

And we're experiencing delays of between 60 and 120 days to get basic things out. This language ensures that any allocations we do remain consistent with the amounts available in the budget.

And basically the equivalent of swapping out an attachment to the contract we have with Regional Centers without requiring all of their boards to act on it as well. So we're just trying to do what everybody else does and make money go as fast and smoothly as possible. The contract will still be there.

The contract's still reviewed by DGS. We do a five year contract and amend it for terms and conditions. But now we won't have to amend it four times during the year to fully allocate the budget. We'll just be able to issue basically a spreadsheet or a list of who gets how much.

That that's all we're simply looking for here.

Thank you. Anything else from LAO, DOF, not seeing any questions. Thank you so much. We will now move to the Department of State hospitals.

Good evening, Chair and Members. Stephanie Clendenin, Director, Department of State Hospitals. And I'm joined by Chief Deputy Directors Brent Houser and Chief Deputy Director Chris Edens. We are going to tag team to provide a brief overview of the May Revision adjustments, and I will start off with the IST Solutions. The Department of State Hospitals proposes several adjustments to its IST Solutions budget. The adjustments are comprised of both General Fund budget solutions and caseload estimate updates.

In 22-23, the Department received a large investment to support both short term and long term IST programs, and we have made great strides in implementing these programs and accomplished reducing the waitlist and meeting the court mandated 28 day time to treatment. The General Fund budget solutions adjust right sizing the funding for IST Solutions related programs to meet current IST referral levels and current program expenditure and service levels.

The proposed savings include the reversion of 232.5 million of unused IST infrastructure grant funding originally appropriated in fiscal year 22-23, which had encumbrance availability through 26-27. Right sizing. We are also proposing to right size the IST Solutions overall appropriation by reducing a total of 161.1 million in 25-26, 238.8 million in 26-27, and 157.3 million in 27-28 and ongoing.

This reduction would adjust the funding for early access and stabilization services, community based restoration and diversion, and County Collaborative Work Group grant funding to reflect the current contract and expenditure levels with private providers and the counties and provides funding to maintain on an ongoing basis the current service levels in these programs.

For community based restoration and diversion, we are also proposing an additional reduction of 12.3 million in budget year and ongoing to right size the existing contract with LA County to the current year funding levels to reflect current enrollment rates, which are trending lower than we initially assumed when the contract was executed.

Lastly, as part of the IST General Fund Budget Solutions, the Department proposes to revert $4.6 million in unused funding originally appropriated in fiscal year 23-24 and 4.5 million in 24-25 for the Judicial Council to develop training for court appointed evaluators. The Judicial Council contracted with an expert to develop and deliver the training.

However, not all funds were utilized. For the IST Solutions caseload estimate, the Department proposes additional savings of 10.9 million in fiscal year 24-25, 37.8 million in fiscal year 25-26, and 39 million in 26-27 related to the Early Access and Stabilization Services Program and the Jail Based Competency Treatment Program.

Lastly, regarding IST Solutions, I would note that in total the adjustments right size the appropriation based on current operating program service levels and IST referral levels. When the IST solutions were initially funded in 22-23, they were based on the best assumptions that we had at the time.

Now that these programs are implemented, we can adjust the appropriation to reflect current IST Solutions operations expenditures and we do not anticipate any negative impacts to the delivery of services for incompetent to stand trial individuals from these adjustments. I'll now hand it over to Chief Deputy Director Houser to continue with the updates.

Good evening. Brent Houser, Chief Deputy Director of Operations. Brent Houser... Sorry. For the Department of State Hospitals. DSH requests an increase in Reimbursement Authority of 13.4 million in 25-26 and 21 million in fiscal year 26-27 ongoing to an projected increase in Lanterman-Petris-Short patient census and the negotiated increases to the daily bed rates.

DSH also plans to increase capacity for Lanterman-Petris-Short patients by 69 beds through utilization of existing bed capacity of about 25 beds and repurposing one of the units associated with the DSH Metropolitan Increased Bed Capacity Project for 44 beds. Going to another estimate adjustment specific to the Coalinga Telepsychology Pilot..

Historically, it's been difficult for the Department to recruit and retain individuals, particularly in our hospitals that are more rural such as Department of State Hospitals Coalinga. The use of telepsychiatry services has been largely successful and increased access to to services and treatment for patients and largely modeled after that program.

DSH request Pilot Telepsychology at DSH Coalinga. Specifically, the Department proposes to redirect 4.0 existing vacant psychology positions at DSH Coalinga to provide telepsychology services for a three year pilot program, specifically requesting $474,000 in 25-26 and $342,000 through 27-28 for 2.0 limited term positions to be on site to support the telepsychologists as well as the associated information technology equipment.

Switching gears to DSH we have two Capital Outlay Program proposals. The first is a reappropriation of $21.6 million General Fund for the construction phase of the Patton Fire Alarm System Upgrade Project. This project removes and replaces fire alarm systems and four secure patient housing buildings and treatment areas at DSH Patton. This action is necessary to ensure the Critical Fire Life Safety Project will continue to safeguard DSH staff and its patients should a fire related emergency incur in one of the four buildings.

Additionally, DSH proposes a reversion of 26.2 million General Fund and a new appropriation of 34.4 million for the construction phase of the DSH Coalinga Hydronic Loop Replacement Project. This project replaces the deteriorated hydronic loop system which provides hot and cold cold water distribution at DSH Coalinga. The new system will provide that and connect nine connection points for six existing buildings. At this time, I'll transition it over to Chief Deputy Director Edens for additional presentation.

Good evening. Chris Edens, Chief Deputy Director, Program Services, Department of State Hospitals. So as part of the 2025-26 May Revision, DSH proposes several General Fund solutions in addition to those covered by Director Clendenin to assist with aligning program expenditures with available General Fund revenues to maintain a balanced budget.

First, the Department includes savings related to various operational efficiencies of 4.8 million in fiscal year 25-26, 5.9 million in 26-27, and 2.3 million in 27-28 and ongoing. This item includes savings related to various things, such as canceling some operational contracts, reducing cell phone usage, transitioning to soft phones, increasing state compensation insurance funds delegated authority to settle workers comp claims, and reducing anti-ligature risk funding.

Second, DSH includes savings of 250,000 in fiscal year 25-26, 500,000 in 26-27, and 1 million in 27-28 and ongoing related to the implementation of prior authorization and utilization management software for certain specialty care services to confirm medical necessity of referrals of patients to specialty medical providers and specialists.

Additionally, the Department is including savings associated with a reduction in isolation unit staffing resources to reflect current utilization levels. This proposal would reduce isolation unit staffing resources across all five state hospitals for a total of 124.1 positions, resulting in 22 million in General Fund savings.

While the Department is still required to isolate patients with COVID 19, these units largely remain vacant throughout the year, and when surges do occur, typically around the summer and winter, they have trended lower in the last two cycles, summer of 2024 and winter of 2025, lower than during the state of emergency.

Lastly, for General Fund solutions, DSH proposes trailer bill language and a reduction of three positions and one and a half million in 25-26 and ongoing to modify requirements for reporting to the court from semiannually to annually for the not guilty by reason of insanity population. This change will align the reporting requirements for this population with that of other longer term populations. Transitioning to other adjustments, we do propose several other May Revision adjustments, the first being our Electronic Health Record Project.

The Department proposes to reappropriate 7.5 million General Fund to cover the cost of 26.4 positions, independent verification and validation services, and Department of Technology contract execution costs for the EHR project. This will allow the Department to complete remaining planning activities and initiate project implementation by entering into a contract to procure the EHR system.

DSH also requests that budget bill language be added to allow DSH to seek Department of Finance and legislative approval for one time mid year funding under specified conditions to avoid any delays in implementation into the budget year. Moving on for the the Department of State Hospital's Metropolitan Increase Secure Bed Capacity Project.

The Department reports one time savings of 5.9 million in the current year. Three of the five units related to this project have been open. The other two are currently being used for treatment of the SNF patients while the existing SNF building is undergoing renovations.

That project is expected to be completed this spring, with the SNF patients transferring back to that SNF unit and then making the last two units available to activate. Additionally, DSH projects it will activate the first two units for LPS patients rather than IST patients as originally planned.

Moving on for the patient driven operating expenses and equipment estimate item, the Department reports a reduction of 1.5 million in the current year and a request for an additional 290,000 in fiscal year 25-26 and ongoing for utilities, pharmaceuticals, foodstuffs, and outside hospitalization as part of support for patient driven OE&E.

And then lastly for our Conditional Release Program, Non-SVP or Non-Sexually Violent Predator Program, the Department reports an additional one time savings of 3.3 million in fiscal year 24-25 as a result of reduced census and program closure. That concludes our testimony. We're available to take any questions you may have.

Thank you. Anything from LAO?

Will Owens with the Legislative Analyst Office. This nothing to add but available for questions.

Thank you. Anything from the Department of Finance?

Victoria Rappleye, Department of Finance Nothing to add.

Senator Menjivar.

Thank you so much. On the LA County Community Based Restoration Diversion Program, we were seeing some savings. Is that due to the program not being offered to individuals, Director?

We, so we were funded for all counties to participate initially, and ultimately Los Angeles County has opted not to participate in this program largely due to two things primarily. One is that they are under a consent decree and were concerned about the interplay of this program with the work that they were doing with respect to their consent decree. And then secondly, the county is very focused on community based restoration and diversion programming, and so they put a lot of effort in working with us and moving individuals into community based restoration and diversion.

Okay. In the first, during the January budget discussion, we talked about some barriers to that were causing some of the delays in programs and ongoing savings and so forth. We talked about staffing as one of the barriers. On this telepsychology pilot, are we going to be hiring more people for this pilot?

Yes. The proposal for this is specific to DSH Coalinga. We're having recruitment challenges with civil servants on site, so we're proposing to redirect for existing vacant positions to hire telepsychologists so that we can broaden our recruitment pool statewide rather than just focus in that geographic region to be able to provide telepsychology services.

So this is a reappropriation to a new certain job description to expand the pool?

Specific to the psychologists, it would be not requesting funding for those particular positions since we have, it's not there's not a fiscal associated with seeking to convert those from on site to telehealth positions. However, there is a minor request to be able to provide the administrative support staff on a limited term basis to be on site to be able to facilitate that treatment being provided. So there is a minimal investment to be had here.

For the two limited term coordinators?

Correct. And the IT equipment associated.

Do we feel like we're going to be able to staff those positions?

We do feel we'll be successful. We have implemented telepsychiatry at this specific location and we have around 12 telepsychiatrists, so modeled off of that program, we do feel like we would be successful. But we did start with four to be able to demonstrate that success, and it is a pilot program to be able to assess the outcomes if its return on investment merits an ongoing request in the future.

There's another pilot program, the Enhanced Treatment Program, pilot program, was also delayed. That pilot program delayed. We're asking for another pilot program. Department of Finance, how confident are we? Why are we funding more pilot programs?

Reiterating some of the... Sorry. Joseph Donaldson, Department of Finance. As noted, this is a small investment, but given the kind of challenges that this specific location has, we felt that the investment was warranted and it met that merit, especially given the return on investment it could been have have for this Department. So while we do have a small investment, we're going to be monitoring the program's efforts along with State Hospitals to see if an ongoing investment is needed after the fact.

And then Department of... Joseph, Department of Finance. With that same kind of mentality, on the capital outlay, do we anticipate any delay or could you explain a little bit further. On the fire alarm system and the hydronic loop, there's some shifting or reversion. Is that because of delay in program and there's some new appropriation. Is it being offset here?

Hello. Matt Schuller, capital outlay for Department of Finance. So you're curious about the Coalinga reversion?

The capital outlay, yeah, there are two specific programs.

Yeah. So for Coalinga, the reversion is essentially based on bids. So we got bids in, looks like February 2025. And when that happens we also try to draw as much information from the bidders as we can. And we had a bid bust, we couldn't award the construction. So we get information, ask them what's the technical details, and they gave us a variety of issues. Things including 15 of the 20 buildings are in the secure treatment area past the sally port.

And so to maintain project schedule, you have to add more people to maintain project schedule because they have to check in, get everything inspected, put things on roofs, and it's just the complex nature of checking into a secured area. On top of that we have the remote location of course of Coalinga, and we get the feedback that it's just going to take a long time to get resources out there, longer than initially estimated, things like that.

Department of Finance, I'm always wondering, continue my curiosity here. Why is it that these kind of requests always get approved regardless, it's just ongoing. Hey, we got feedback, we're going to need more money, we're going to continue putting money. But then we, other programs get cut?

I think it's a good question. With facilities, you're looking at baseline care, right. These are patients that are at the mercy of the facilities. So when you look at Coalinga, you look at Patton with fire alarm system. I'm glad that this facility has a fire alarm system.

So things become outdated. As we sort of turn the dial on the microscope when we go through all of our different phases, this is the time, especially at bidding is the time when we find more data to add to the mix of increasing the budget, changing the scope, or adding to the schedule. So this is how we, this is how we do it in this process with Legislature.

Just like a common, just part of doing business you would say?

Correct. Absolutely. That's why we have these projects in phases and then we have them scheduled out and we come to Legislature annually to make our adjustments and change our, change our requests based on new information.

Do we utilize the same vendors every time?

Absolutely not. It's bidding, competitive bidding.