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Summary of the Governor’s May Revision of the2015-16 Budget: Impact on California’s OlderAdults and People with DisabilitiesFact Sheet May 2015On May 14, 2015, California Governor Edmund G. Brown, Jr. released the “MayRevision,” reflecting updated estimates for the state revenue and spendingfor the 2015-16 budget. This fact sheet highlights items included in the MayRevision that impact health and human service programs serving California’solder adults and people with disabilities.2015-2016GF Resources 117.4 BillionGF Expenditures 115.3 BillionThe May Revision reflectsGeneral Fund resources of 117.4 billion ( 1.7 billionincrease since January) andanticipated expendituresof 115.3 billion ( 2 billionincrease since January).

Fact Sheet May 2015OverviewThe governor’s May Revision indicates that California’s fiscal outlook continues to improve, withGeneral Fund (GF) revenues reflecting a 6.7 billion increase (across budget years 2013-14 to2015-16) compared to the January Budget Proposal. The May Revision includes total reserves of 4.6 billion, with 1.1 billion in regular budget reserve and 3.5 billion in the Rainy Day Fund. Anadditional 633 million above the January proposed budget is included to repay budget debts,per the requirements of Proposition 2. The governor maintains that while the budget remainsbalanced with higher than anticipated revenues, there still is the possibility of deficits in futureyears based on infrastructure needs, unfunded liability for state employee retiree health benefitsand pensions, and other factors. As such, the governor’s May Revision proposes new funding tospecified priorities, including: Establishing the California Earned Income Tax Credit for low-income workers, impacting 2million individuals in families with less than 14,000/year annual income; Holding tuition flat at the state’s universities for California undergraduate students; and Providing health care and other safety net services to currently undocumented immigrantswith protected status under the President’s proposed executive actions.In total, the May Revision assumes resources of approximately 117 billion GF in 2015-16, andproposes 115 billion GF expenditures. This fact sheet addresses May Revision proposals impactingolder adults and people with disabilities. 1,2Financing Proposal: Managed Care Organization TaxBackground: The Managed Care Organization (MCO) tax, a revenue tax on Medi-Cal managed careplans authorized in Senate Bill 78 (2013), is a key financing resource for certain Medi-Cal long-termservices and supports (LTSS). Half of these total funds draw down federal matching funds andreimburse Medi-Cal managed care plans for the incurred taxes. The other half of the funds willoffset GF expenditures for Medi-Cal managed care rates.3 According to federal guidance, California’scurrent MCO tax is inconsistent with federal Medicaid regulations because the tax is only applied toMedi-Cal managed care plans verses all managed care plans. The current MCO tax will no longer beallowed after it expires on June 30, 2016.4www.TheSCANFoundation.org2

Fact Sheet May 2015January Budget Proposal: The January budget assumes an MCO tax contribution of 803 million in2014-15 and 1.1 billion in 2015-16. In January, Governor Brown announced that the state wouldreplace the current tax with a broad-based MCO tax in 2016 that complies with federal law. Thisnew tax would apply to all managed care plans regulated by Department of Managed Health Careand/or the Department of Health Care Services, and must raise the same amount of general fundsavings as the current tax.4May Revision: The MCO tax proposal remains as proposed in the January budget, while theAdministration continues to work with the managed care industry, legislature, and the federalgovernment on developing the new tax.Long-Term Services and SupportsCoordinated Care InitiativeBackground: The Coordinated Care Initiative (CCI) changed how medical care and LTSS are providedfor low-income older adults and people with disabilities. 5,6 The main components of the CCIinclude: 1) provisions of Cal MediConnect; 2) mandatory enrollment of dual eligible beneficiaries(individuals eligible for both Medicare and Medi-Cal, California’s Medicaid program) into Medi-Calmanaged care; and 3) integration of Medi-Cal-funded LTSS into managed care. 7 The CCI is slated forimplementation in seven counties (Los Angeles, Orange, Riverside, San Bernardino, San Diego, SanMateo, and Santa Clara). Operations began April 2014.4One component of the CCI is to transition the Multipurpose Senior Services Program (MSSP) froma federal waiver to a managed care benefit beginning January 1, 2015, or after 19 months of MSSPbeneficiary enrollment into managed care. The MSSP, a 1915(c) Medicaid waiver program, providescare management to frail older adults by connecting them with community-based services to helpthem remain in their homes.January Budget Proposal: The proposed budget assumed that the CCI would generate GF savings of 176.1 million in 2015-16, primarily attributed to funds generated through the MCO tax by the CCIplans. In his January budget proposal, the governor noted that implementation of Cal MediConnectas part of CCI has not aligned with the assumptions made when it was established in 2012, therebyimpacting the projected savings. Specifically, less-than-anticipated savings shared with the federalgovernment, enrollment delays, lower enrollment numbers, and higher than anticipated In-HomeSupportive Services (IHSS) costs have impacted the attributed savings. As such, the Januarywww.TheSCANFoundation.org3

Fact Sheet May 2015budget projected that the CCI could result in net costs to the state without solutions to improveparticipation, address the MCO tax, and lower state costs. The January budget noted that the CCIwould stop operating in January 2017 if the program does not generate sufficient savings. 4May Revision: Core elements of the CCI remain the sameas indicated in the January budget proposal. However,the May Revision proposal would extend the MSSPtransition deadline to December 31, 2017, and allowearlier transition in a county/region when MSSP sitesand managed care plans mutually agree on the earlytransition. In addition, both the MSSP sites and managedcare plans would be required to meet readiness criteria tobe developed by the Department of Health Care Services(DHCS), California Department of Aging (CDA), MSSPproviders, managed care plans, and stakeholders. 8DHCS proposes to extendthe transition date for MSSPto become to a managedcare benefit in CCI countiesno later than December 31,2017.In-Home Supportive Services (IHSS)Background: The IHSS program provides in-home personal care assistance to low-income adultswho are over 65 years of age, blind, or disabled, and to children who are blind or disabled.Services include assistance with bathing, feeding, dressing, and/or domestic services such asshopping, cooking, and housework so that individuals can remain safely in their own homes.County social workers assess individuals using a standardized assessment to determine needand then authorize service hours per month based on functional need. IHSS is expected to serve463,000 recipients per month on average in 2015-16.4January Budget Proposal: The proposed budget included 8.2 billion ( 2.5 billion GF) for the IHSSprogram in 2015‑16, a 14.4 percent increase over the revised 2014‑15 level. Restoration of Seven Percent Across-the-Board Reduction: The budget proposed to restorethe current seven percent across‑the‑board reduction in service hours with proceeds fromthe revised MCO tax, effective July 1, 2015. The cost to restore the seven percent reductionwere estimated to be 483.1 million in 2015‑16.4 Federal Overtime Regulations: A federal district court ruled that a portion of the U.S.Department of Labor Fair Labor Standards Act (FLSA) rule requiring overtime pay fordomestic workers exceeded the Department of Labor’s authority and thus haltedimplementation of the regulations. Therefore, the state halted implementation of overtimewww.TheSCANFoundation.org4

Fact Sheet May 2015and related requirements, including compensation for providers traveling between multipleIHSS recipients, wait time associated with accompanying recipients to medical appointments,and time spent in mandatory provider training.4,9May Revision: Restoration of Seven Percent Across-the-Board Reduction: The proposal to restore the 7%across-the-board reduction in IHSS service hours beginning July 1, 2015 remains as indicatedin the January Budget proposal.2 IHSS Caseload: The May Revision reflects an increase of 147.6 million GF in 2014-15 and 179.1 million GF in 2015-16, which is primarily associated with increases in the number ofpeople enrolled, hours authorized, and wage increases. FLSA Rule: The January budget proposal included 184 million GF to the California Departmentof Social Services (CDSS) for implementation of the overtime rule in 2014-15 and 316 millionin 2015-16. To date, none of the 2014-15 funds have been spent for this purpose. SenateBill 855 included a provision requiring that any unspent FLSA-related funding in the currentyear resulting from delayed federal implementation of the rule shall be used for otherpurposes within the IHSS program. The May Revision uses these one-time unspent funds topartially offset the 326.7 million in increased IHSS costs related to caseload, hours per case,and costs per hour. The May Revision continues to assume full-year funding in 2015-16 forimplementation of the federal rule, pending further legal developments. 1Health HomesBackground: Assembly Bill 361 (2013), permits DHCS to develop a health homes program thatwould enhance care management and coordination for beneficiaries with complex needs. Uponimplementation, the program seeks to provide comprehensive care management, care coordination,health promotion, comprehensive transitional care, individual and family support, and referralto community and social support services. The program will be funded primarily through federalfunds, with non‑federal funding coming from non‑state sources.*In 2013, the United States Department of Labor announced new regulations that require overtime pay for domesticworkers, compensation for providers who travel between multiple recipients, for wait time associated with medicalaccompaniment, and for time spent in mandatory provider training.www.TheSCANFoundation.org5