CA Alliance2023-24 May Revision Budget AnalysisMay 12, 2023 Governor Newsom released the May Revision for FY 2023-24, which starts on July 1, 2023. The Governor is projecting a $31.5 billion deficit for the fiscal year, an increase of $9 billion from the January Budget. In addition, with the tax filing deadline for 55 of 58 counties being pushed to October from April due to disaster declarations, there is far greater uncertainty on the potential revenues and forecasting for next year. The CA Alliance is active throughout the entire state budget process, advocating for our policy priorities on behalf of members and the youth and families that you all serve. We have testified in budget hearings, published Op-Eds, held an Advocacy Day, met with numerous legislative staff, and written letters. The next month is the most intensive and important part of the budget process, and the CA Alliance will continue to be a forceful voice for members and the youth they serve." The Legislature now will work to put their influence on the budget and negotiate with the Administration. The Legislature must pass a balanced budget by June 15th, and the Governor must sign the budget on or before June 30th to start the new fiscal year on July 1st. Please find below a summary of the state’s fiscal outlook and proposals and programs critical to California Alliance members. Please feel free to contact CA Alliance policy staff with any questions you may have about the Governor’s Budget.
Fiscal Update Big Picture The overall state budget is $306 billion with $224 billion of General Fund expenditures. Proposed General Fund expenditures are down 5.3% overall from the FY 2022-2023 enacted budget. The Budget acknowledges several increased risks to the state budget since the Governor’s Budget, which could significantly change the state’s fiscal outlook in the near term. These include potential economic fallout from a Debt Limit Impasse at the federal level, higher interest rates by the Federal Reserve slowing economic growth, uncertainty in financial institutions (e.g. collapse of Silicon Valley Bank), and the delayed tax receipts with the tax filing deadline pushed out to October instead of April. The May Revision does not predict a recession, but if a moderate recession occurs, which is difficult to predict the depth and duration of a recession, it could amount to a decrease of revenue by $40 billion in FY 2023-24 alone. Given all of this, the Governor does not propose dipping into the sizable reserves built up over the last decade ($37.2 billion total) and instead closes the shortfall through a mix of spending reductions and pull backs, delayed spending, fund shifts (shifting spending from the General Fund to other fund streams), limited increased revenue, and borrowing from special funds. Please find below further details on specific policy areas of interest to CA Alliance Members.
Behavioral Health New Proposals in the May Revision: Behavioral Health Community-Based Organized Networks of Equitable Care and Treatment (BH-CONNECT) Demonstration (formerly referred to as the California Behavioral Health Community-Based Continuum, or CalBH-CBC, Demonstration). The Department has changed the name of the CalBH-CBC Demonstration to BH-CONNECT. Through this proposal, DHCS will seek federal approval of a Medicaid Section 1115 demonstration waiver to expand behavioral health services for Medi-Cal members living with serious mental illness and serious emotional disturbance. The Department plans to submit the BH-CONNECT Demonstration proposal for federal approval in the summer of 2023 with implementation beginning no sooner than January 1, 2024.The May Revision fiscal impact for the DHCS and Department of Social Services over the five years of the waiver is estimated to be $6.1 billion total funds ($306.2 million General Fund). The DHCS budget includes $6 billion ($185 million General Fund, $87.5 million Mental Health Services Fund, $2.1 billion Medi-Cal County Behavioral Health Fund, and $3.6 billion federal funds) over five years to implement BH-CONNECT. Medi-Cal Mobile Crisis Services Benefit. The Department is implementing the Medi-Cal Mobile Crisis Services benefit. Mobile crisis services are a community-based intervention designed to provide de-escalation and relief to individuals experiencing a behavioral health crisis wherever they are, including at home, work, school, or in the community. Mobile crisis services are provided by a multidisciplinary team of trained behavioral health professionals in the least restrictive setting. In December 2022, DHCS released policy guidance outlining Mobile Crisis Services implementation and operational requirements for all counties. In April 2023, DHCS extended the implementation timeframe for rural counties by six months to June 30, 2024 for Alpine, Amador, Colusa, Del Norte, Glenn, Inyo, Mariposa, Modoc, Mono, Plumas, Sierra, and Trinity Counties. All other counties continue to be required to implement the service during calendar year 2023. 988 Update. The May Revision includes a one-time augmentation of $15 million in FY 2023-24, for a total of $19 million, from the 988 State Suicide and Behavioral Health Crisis Services Fund for California’s 988 centers to maintain operations and services in FY 2023-24. This funding augmentation will support workforce expansion to handle increased answered call volume, extensions of service hours, and the availability of chat and text options for callers utilizing the 988 services. California currently funds 988 services through federal grants, state funds, and multiple county/local funding streams. While these state and federal funds have supported initial implementation of 988 services, most of the funds are not recurring, sustainable funding sources. AB 988 establishes the 988 State Suicide and Behavioral Health Crisis Services Fund for the purposes of supporting the 988 Suicide and Crisis Lifeline. California currently has the highest 988 call volume in the country, with an answer rate of 88%. California is in the top 21 states for 988 in-state answer rates, while answering more 988 calls than the combined call volume of 26 other states. The Department will re-assess the ongoing funding need for FY 2024-25 and beyond. Children and Youth Behavioral Health Initiative (CYBHI) Fee Schedule. As part of CYBHI, the Department is mandated to establish a statewide all-payer fee schedule to reimburse school-linked behavioral health providers who provide services to students at or near a school-site. Specifically, the Department is required to: • Develop and maintain a school-linked statewide fee schedule for medically necessary outpatient mental health or substance use disorder services provided to a student 25 years of age or younger at or near a school site, who is an enrollee of the plan or delivery system. • Develop and maintain a school-linked statewide provider network of school site BH counselors. Commercial health plans and the Medi-Cal delivery system, as applicable, must reimburse these school-linked providers at the published fee schedule rate, regardless of network provider status. The May Revision includes $10 million General Fund in FY 2023-24 to begin the development and implementation of a statewide infrastructure that will centralize provider management functions, including credentialing and quality oversight, and manage billing and claiming for the behavioral health services furnished to students by school-based and school-linked providers, under the CYBHI fee schedule. Community Assistance, Recovery and Empowerment (CARE) Act. The May Revision includes $67.3 million General Fund in FY 2023-24, $121 million General Fund in FY 2024-25, and $151.5 million in 2025-26 and ongoing to support estimated county behavioral health department costs for the CARE Act (Chapter 319, Statutes of 2022). Compared to the Governor’s Budget, this is an increase to account for additional activities required in draft rules released by the Judicial Council, changes in the hourly rate assumed for each activity performed by the counties, and updates to the length of time in hearings. The May Revision also includes $15 million one-time General Fund for Los Angeles County start-up funding given the December 1, 2023 implementation. The May Revision also includes some adjustments to reduce General Fund costs in light of the state’s overall General Fund situation including the following which will be of interest: Mental Health Services Fund (MHSF) Support for Behavioral Health Bridge Housing (BHBH) and CalHOPE. The May Revision effectively eliminates the Governor’s Budget’s proposed delay of $250 million in the BHBH program from FY 2023-24 to FY 2024-25 and includes $500 million one-time Mental Health Services Fund in 2023-24, in lieu of General Fund. Compared to the Governor’s Budget, this results in $250 million in General Fund savings in FY 2023-24 and another $250 million in General Fund savings in FY 2024-25. In addition, the May Revision includes $50.5 million in one-time Mental Health Services Fund, in lieu of General Fund, to temporarily extend support for the CalHOPE program. We are anticipating more details soon about the Behavioral Health Modernization proposal, which includes amendments to the Mental Health Services Act and a Housing Bond. We do understand that DHCS will be seeking a Budget Change Proposal to support implementation of these policy changes. The Governor addressed the need for this proposal in his press conference this morning and expressed a desire to not accept the “status quo.”
Child Welfare The May Revision includes $908.3 million General Fund for services to children and families in child welfare. When combined with 1991 and 2011 Realignment funds, total funding for children’s programs is over $9.5 billion in 2023-24. There are only a few modest changes within child welfare that do not capture the breadth of the need for additional funding. The child welfare California Necessities Index (CNI) based COLA is expected to be 6.85%. This has been revised downward from the 8.3% COLA earlier this year. This applies to resource families, THP-NMD programs, STRTPs, and SILPs, but notably not to the FFA administrative rate or to the infant supplement. We are advocating for an increase to the FFA rate and supporting a proposal to increase the infant supplement championed by one of our members. Child Welfare Services-California Automated Response and Engagement System (CWS-CARES) Project. The May Revision includes $163.7 million ($83.4 million General Fund), in alignment with Special Project Report 6, to support ongoing project development costs, and the authority to access an additional $36.6 million ($18.3 million General Fund) should project activities accelerate. The CWS-CARES will replace the existing case management system to benefit state, local, and tribal child welfare agencies and will align with state and federal requirements. California Statewide Automated Welfare System (CalSAWS) Interface. The May Revision includes $25 million General Fund, available over two fiscal years, to develop a bi-directional interface between CalSAWS and CWS-CARES that allows for data exchange necessary to make Title IV-E eligibility determinations. Court Appointed Special Advocate Program. $20 million in 2023-24 and 2024-25 to restore funding for the Court Appointed Special Advocate program, which was proposed for reductions in the Governor’s Budget.
Prevention SSI/SSP Increases. The May Revision includes $3.6 billion General Fund in 2023-24 for the SSI/SSP program, including CAPI. The average monthly caseload in this program is estimated to be 1.1 million recipients in 2023-24. The May Revision continues to include $146 million General Fund in 2023-24 and $292 million ongoing for an additional SSP increase of approximately 8.6%, effective January 1, 2024. CalWORKs Grant Increase. The May Revision reflects a 3.6% increase to CalWORKs Maximum Aid Payment levels, effective October 1, 2023, which is estimated to cost $111.2 million in 2023-24.
Juvenile Justice The Division of Juvenile Justice (DJJ) will close on June 30, 2023. DJJ ceased intake of new youth on July 1, 2021, with limited exceptions. DJJ estimates that approximately 150 youth will remain at the time of DJJ’s closure. DJJ continues to work closely with counties, and youth who have not been released from DJJ by June 30, 2023 will be transferred to the county probation department within their county of commitment. Consistent with the Governor’s Budget, the May Revision reflects a decrease of $92.1 million ($89.3 million General Fund and $2.8 million various funds) in 2023-24, and $95.8 million beginning in 2025-26 ($93 million General Fund and $2.8 various funds) associated with the closure of DJJ.
Education The decrease in revenues projected for FYs 2021-22, 2022-23, and 2023-24 results in a corresponding decrease in resources for California’s K-14 schools. Proposition 98 funds have decreased since the introduction of the Governor’s budget in January, so several one-time investments have been impacted in the May Revise. Proposition 98 is estimated to be $110.6 billion in 2021-22, $106.8 billion in 2022-23, and $106.8 billion in 2023-24, representing a three-year decrease in the minimum Guarantee of $2 billion below the level estimated in the Governor’s Budget. Cost of Living Adjustment. The 2023-24 COLA increased from 8.13% at the Governor’s Budget in January to 8.22% in the May Revision. This adjustment, when combined with further declining enrollment, would increase year-over-year discretionary funds available to local educational agencies (LEAs) by approximately $3.4 billion. The May Revision also reflects the utilization of approximately $2.7 billion one-time Proposition 98 General Fund to support the overall costs of the LCFF in 2023-24. Emergency Assistance for Non-Public Schools. One-time funding of $2 million under the federal American Rescue Plan Act to provide services and support to eligible non-public schools to address the impacts of the COVID-19 pandemic.
Restorative Justice Practices. The May Revision includes an increase of $7 million one-time Proposition 98 General Fund to provide support for local educational agencies opting to implement the Restorative Justice best practices that will be developed and posted on the Department of Education’s website by June 1, 2024, per AB 2598. Golden State Teacher Grant Program. The May Revision includes an increase of $6 million one-time federal funds for the program to support grants to teacher candidates enrolled in a special education teacher preparation program who agree to teach at a high-need school site. Additionally, the May Revision maintains the requirement that awardees serve in high-need schools.
The Assembly and Senate budget committees and Legislative Leadership will be reviewing and discussing these proposals during their subcommittee and budget committee process. CA Alliance staff will be meeting with the Administration and legislative staff to continue to advocate for our sponsored proposals. We will review these topics and investments during our regular policy committee meetings, and we encourage you to participate. For any questions, please reach out to the CA Alliance Policy Team | 
