Legislative Analyst's Office
Analysis of the 2001-02 Budget Bill
The In-Home Supportive Services (IHSS) program provides various services to eligible aged, blind, and disabled persons who are unable to remain safely in their own homes without such assistance. An individual is eligible for IHSS if he or she lives in his or her own homeor is capable of safely doing so if IHSS is providedand meets specific criteria related to eligibility for the Supplemental Security Income/State Supplementary Program (SSI/SSP).
The IHSS program consists of two components: the Personal Care Services Program (PCSP) and the Residual IHSS program. Services provided in the PCSP are federally reimbursable under the Medicaid program. The PCSP limits eligibility to categorically eligible Medi-Cal recipients (California Work Opportunity and Responsibility to Kids and SSI/SSP recipients) who satisfy a "disabling condition" requirement. Personal care services include activities such as: (1) assisting with the administration of medications; and (2) providing needed assistance with basic personal hygiene, eating, grooming, and toileting. The following cases are excluded from the PCSP and, therefore, receive services through the Residual IHSS program: cases with domestic services only, protective supervision tasks, spousal providers, parent providers of minor children, "income eligibles" (generally, recipients with income above a specified threshold), "advance pay" recipients (eligible for payments prior to the provision of services), and recipients covered by third party insurance.
The budget proposes $843 million from the General Fund for the IHSS program, which is an increase of 13 percent over estimated current-year expenditures. This spending growth is primarily attributable to increases in the caseload and the minimum wage.
Although budget trailer bill legislationChapter 108, Statutes of 2000 (AB 2876, Aroner)authorized increased state participation in specified wage and benefit increases for In-Home Supportive Services providers working in counties that have established "public authorities," the actual wage increases provided by counties have been less than budgeted. We summarize the wage increases provided by this legislation and their potential fiscal impact.
Background. Chapter 108 authorizes the state to pay 65 percent of the nonfederal cost of a series of wage increases for IHSS providers working in counties that have established "public authorities." The wage increases began with $1.75 per hour in 2000-01, potentially to be followed by additional increases of $1 per year, up to a maximum wage of $11.50 per hour. We note that state participation in wage increases after 2000-01 is contingent upon General Fund revenue growth exceeding a 5 percent threshold. Chapter 108 also authorizes state participation in health benefits worth up to 60 cents per hour worked.
Revenue Triggers. Starting in 2001-02, state participation in the $1 hourly wage increases is contingent upon the state achieving General Fund revenue growth (excluding transfers) of 5 percent. For example, if General Fund revenues (excluding transfers) in 2001-02 exceed General Fund revenues (excluding transfers) in 2000-01 by 5 percent, state participation in a $1 wage increase is triggered in 2001-02. Similarly, if 5 percent growth is achieved in 2002-03, then participation in another $1 increase is triggered. As noted above, maximum state participation is capped at a wage of $11.50 per hour, plus 60 cents per hour for benefits. The statute also allows for a wage increase if the 5 percent revenue growth takes more than one year to accrue. For example, if revenue growth in 2001-02 was only 3 percent followed by an additional 3 percent growth in 2002-03, state participation in the $1 hourly wage increase would not occur in 2001-02 but would be triggered in 2002-03 (when cumulative revenue growth would exceed the 5 percent threshold).
Wage Increases Less Than Budgeted in 2000-01. As noted above, Chapter 108 authorized state participation in wage increases of up to $1.75 in the current year (from the $5.75 per hour minimum wage in 2000 to $7.50 per hour). The 2000-01 Budget Act provided sufficient funds for all counties that currently have public authorities to increase wages by $1.75. However, several counties did not increase wages by the full $1.75. This results in General Fund savings of $96 million compared to the amount appropriated for 2000-01.
Outlook for 2001-02. For 2001-02, the Governor's budget makes two important assumptions. First, it assumes that revenue growth will be 3.3 percent, so no further increase in state participation in wages is triggered in the budget year. Second, it assumes that some counties will have wages and benefits below the maximums for which the state would otherwise participate. If instead, all counties were to participate at the state authorized maximums, General Fund costs would be $41.1 million greater than budgeted. If at the May Revision revenue growth is projected to grow at least 5 percent and if all counties participated in the higher wage levels that would be triggered by higher revenues, General Fund costs would increase by about $70 million beyond the $41.1 million mentioned above.
The proposed budget does not reflect likely savings from (1) actual costs being lower than budgeted for certain current- and budget-year augmentations and (2) an expansion in Medi-Cal eligibility that should result in reduced costs in the In-Home Supportive Services (IHSS) program. Accordingly, we withhold recommendation on the savings of up to $5 million in the IHSS program.
In addition to the wage and benefit increases for IHSS providers working in public authorities, the 2000-01 Budget Act also funded (1) a 3 percent wage increase for nonpublic authority IHSS workers and (2) a 10 percent increase in the contract rates for counties that contract with public and private agencies to administer IHSS. The combined General Fund support for these augmentations is $13.2 million in the current year and $16.9 million in 2001-02. As with the public authority wage increase discussed previously in this chapter, counties have not increased nonpublic authority wages or contract rates as much as was budgeted. Such savings, however, are not reflected in the budget.
In addition, the budget does not reflect savings from a recent Medi-Cal policy change. Specifically, effective January 2001, Medi-Cal benefits, without a share of cost, were expanded for aged, blind, and disabled individuals. This change will result in unknown net savings in IHSS.
Because better information reflecting actual experience will be available at the time of May Revision, we withhold recommendation on savings of up to $5 million in the IHSS program.