Agenda

Return

D. 4

To:	Board of Supervisors
From:	David Twa, County Administrator
Date:	December 13, 2011

Contra

Costa

County

Subject:

State Budget Impact Update

APPROVE	OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR	RECOMMENDATION OF BOARD COMMITTEE

Action of Board On: 12/13/2011

APPROVED AS RECOMMENDED

OTHER

Clerks Notes:

VOTE OF SUPERVISORS

AYE:

John Gioia, District I Supervisor
Gayle B. Uilkema, District II Supervisor
Mary N. Piepho, District III Supervisor
Karen Mitchoff, District IV Supervisor
Federal D. Glover, District V Supervisor

Contact:	Lisa Driscoll, County Finance Director (925) 335-1023
cc:	Robert Campbell, County Auditor-Controller

I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown.
ATTESTED: December 13, 2011
David Twa,

BY:	, Deputy

RECOMMENDATION(S):

ACCEPT report from the County Administrator on impacts of the State Budget.

FISCAL IMPACT:

This report is for informational purposes only; however, the 'Background' section and presentation materials describe the potential impacts on the County's Budget of the State Budget triggers.

BACKGROUND:

On December 6, 2011, the Board requested that a budget update be provided regarding State "Trigger Cuts". The following addresses that request.

BACKGROUND: (CONT'D)

In a November report, the Legislative Analysts Office projected that economic recovery would be even slower than previously expected. They wrote:

Economic Recovery Closer Than Expected. One year ago, we wrote that the U.S. economic recovery was progressing more slowly than previously expected. Once again, we have to make the same observation. While the economy has some bright spots, including export growth and strength in technology-related service sectors (which are important to California), weakness in the housing market continues to affect both the construction industry and the financial services sector. The end of the federal fiscal stimulus program and declining governmental employment also are limiting economic growth. In this forecast, we project continuation of this slow, arduous recovery, with California’s unemployment rate remaining above 10 percent through mid-2014 and above 8 percent through the end of 2017.
LAO Revenue Forecast Would Translate into $2 Billion of "Trigger Cuts". Our updated assessment of California’s economy and revenues indicate that General Fund revenues and transfers in 2011-12 will be $3.7 billion below the level assumed in the 2011-12 budget package passed in June. Under provisions of the 2011-12 budget package, this revenue shortfall would translate into $2 billion of trigger cuts to various state programs. (This includes all of the “Tier 1” trigger cuts and about three-fourths of the “Tier 2” trigger cuts.) The Director of Finance will determine the actual amount of trigger cuts to K-14 education and several other programs next month based on the higher of this 2011-12 revenue forecast and the forecast of the administration. Our expenditure forecast assumes that this amount of trigger cuts is implemented in 2011-12 and maintained throughout the forecast period.
$3 Billion Deficit at End of 2011-12. The net effect of (1) the lower projected revenues for 2011-12, (2) the trigger cuts, and (3) the expected inability of the state to achieve about $1.2 billion of other budget actions—as well as a few other minor changes—would leave the General Fund with a $3 billion deficit at the end of 2011-12.

These projections will have a profound impact on Contra Costa County. Some of the impacts are summarized below:


EMPLOYMENT AND HUMAN SERVICES DEPARTMENT


Community Services: A statewide reduction of $23 million to the State Department of Education will impact child care services across Contra Costa County.

Contra Costa County children, families, and child development providers are bracing for the impact of the Mid-Year, Tier One Trigger Cuts expected to be imposed in January 2012 as a result of the 2011 Budget Act and AB 121. The County Office of Education's Local Planning Council and the Employment and Human Services Department have gathered information from local State Department of Education Child Development Division contractors to provide specific data around the expected impact. As a result of these cuts, the following highlights the impact to Contra Costa County:

The loss of nearly $800,000 in contract reductions county-wide;
Childcare services for over 250 children, ages 0-5 will be lost county-wide;
These cuts will most likely result in the loss of employment for over 100 working poor families who depend on full-day childcare services each day;
Part-day preschool slots will be reduced by at least 130;
Twenty-three (23) teachers, staff and administrators will lose their jobs, while another 15 will experience reduced hours;
At least seven (7) classrooms will close.

Early Childhood Education is an essential and vital public service that has proven to have short-term and long-term economic benefits. High-quality care and education offers one of the highest returns of any public investment - more than $7 for every dollar spent - by reducing future expenditures on special education, public assistance, and the criminal justice system. A recent study by the UC Berkeley Labor Center demonstrates that Early Childhood Education as an industry increases parents' ability to work and continue with their education, promotes the development of a workforce that meets the needs of California's businesses and supports an approximate 200,000 jobs in multiple industries.

One in every four children under age five live in poverty and children are becoming the fastest growing population of poor. Research has shown that poverty is the single greatest threat to children's well-being. For these children, it is critical to provide access to high quality child development services that provide school readiness opportunities for cognitive and social-emotional development that serve to close the achievement gap as early as possible and provide opportunities for significantly improved life-long outcomes for these children.

These trigger cuts come on the heels of already devastating cuts to the County's childcare field. Contra Costa's families and Child Development agencies State-wide experienced a 13% cut in program services in July 2011 which meant over $2 million and hundreds of childcare slots lost. As a result, centers closed, families lost services, and working Californians (parents and staff alike) lost their jobs. As program costs continue to increase while contracts are reduced and reimbursement rates remain static, agencies will be forced to terminate services to families mid-year, lay-off staff, and close classrooms. In addition, communities will see less quality providers able to make ends meet over time and more doors will close as a result. The additional anticipated cuts will further weaken the now fragile system of care and support for the working poor and our most needy children.

Of the $800,000 cuts countywide, the Employment and Human Services Department anticipates a three percent (3%) trigger reduction- estimated at $325,000 - in funding to Community Services Child Development programs. This funding reduction will negatively impact the department’s ability to provide needed childcare services to 70 eligible children. The Department is working with community partners to mitigate the impact to children by reducing one time and non-essential costs.

Aging and Adult Services - In-Home Support Services: Included in the State budget are two trigger cuts to the In-Home Supportive Services Program, a reduction of hours and elimination of anti-fraud grants.

The State anticipates saving approximately $100 million by imposing an across-the-board 20% reduction in service hours provided to recipients. The implementing legislation, SB 73, contains detailed provisions on the appropriation of the 20 percent reduction in authorized hours. SB 73 also establishes an IHSS Care Supplement application for recipients who believe he or she is at serious risk of out-of-home placement due to the reduction in hours. The state will develop an assessment tool for counties to use to determine who is at risk of out-of-home placement.

In Contra Costa County the 20% reduction in authorized In-Home Supportive Services hours to recipients is equivalent to approximately 1,500,000 hours. This reduction could result in General Fund savings of approximately $1.3 million. However, recipients have the ability to apply for a waiver from the reduction. It is not known at this time how many individuals will submit applications. Therefore, it is not possible to accurately predict any actual savings.

There is a pending lawsuit contesting the validity of the reduction in IHSS authorized hours by the State. The US District Court in San Francisco has issued a temporary restraining order on the State’s plan to take any actions to implement the reduction in the IHSS hours and has scheduled the case for hearing on December 15, 2011.

The elimination of funding for IHSS Anti-Fraud grants is anticipated to save the State approximately $10 million. The Employment and Human Services Department has already submitted grant applications amounting to $658,313. The entire funding application is in jeopardy. The Department has withheld implementation pending receipt of the funding.

PROBATION DEPARTMENT


Youthful Offender Services: A statewide reduction of $99-150 million will impact probation services to youthful offenders in Contra Costa County by increasing charges to counties for youthful offenders sent to California Department of Corrections and Rehabilitation (CDCR) facilities.

The Trigger cut would increase charges, effective January 1, 2012, to counties for youthful offenders currently committed to CDCR. These charges are projected to generate $99 million in State Budget savings in the current year and $150 million annually thereafter. They are estimated to cost Contra Costa County nearly $2.75 million in the current year and approximately $5.5 million annually thereafter. On an annual basis, this trigger basically eliminates our County's realignment allocation. It is the equivalent of the state shifting all of its realignment programs to our County without providing any revenue. If this trigger is pulled without any mitigation by the state, then the County would need to quickly develop more affordable local commitment alternatives and seek the cooperation of the Juvenile Court Bench in utilizing such alternatives to CDCR incarceration. Contra Costa County juvenile detention facilities are not designed to hold youth for two years at a time. Attached are letters from the State Chief Probation Officers of California imploring the Governor to look at options to mitigate the effect if the projections force the triggers.

CONSEQUENCE OF NEGATIVE ACTION:

None. This is not an action item.

CHILDREN'S IMPACT STATEMENT:

None.