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Analysis of the 2006-07 Budget BillLegislative Analyst's Office
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We recommend that the Legislature direct the Department of Finance (DOF) to include in the annual Governor’s budget document a schedule of local assistance appropriations for Medi-Cal and public health programs for the prior, current, and budget year. It should also incorporate additional information on the proposed expenditure of Proposition 99 funding. Finally, the Legislature should establish new budget item numbers for certain major health programs so that the Legislature can more easily track the budgetary changes that are being made to these programs using a DOF information system. All of these changes are proposed to take effect for the 2007-08 budget.
Health Program Spending Information. Every year, during the development of the Governor’s budget, the Department of Health Services (DHS) prepares detailed information about local assistance health expenditures by program category and source of funding. For example, the so-called supplemental local assistance schedule shows that the administration is proposing to increase General Fund expenditures for AIDS-related programs by $12 million in 2006-07. This information is useful in tracking spending for Medi-Cal and public health programs from year to year, and provides additional data, such as the cost of eligibility determinations for Medi-Cal and utilization of services by enrollees in the program. However, this information is not readily available to the Legislature and the public. We note that this information was previously available in the DHS section of the Governor’s budget document but was dropped from the document several years ago.
Additionally, the administration also prepares each year information indicating how Proposition 99 tobacco tax revenues are proposed to be distributed in the current and budget years under the budget plan for various state departments and specific programs (mainly for health, tobacco education, and resources). Information on past spending, estimated current-year spending, and proposed budget year expenditures for these local assistance expenditures also are not available in one summary in the Governor’s budget document.
System for Tracking Budget Changes. Each year, the Legislature and the administration propose a number of changes to the Governor’s January 10 budget plan, a large number of which end up being adopted. The computerized information system for tracking changes made by the Legislature and the administration to the Governor’s budget does not separately provide detailed information about changes made to several of the largest state health programs.
For example, the tracking system is currently configured to group together changes made to Medi-Cal local assistance with those made to other DHS public health local assistance programs. Similarly, changes made to the proposed budget for Healthy Families Program (HFP) local assistance are grouped in the Department of Finance (DOF) reporting system with other local assistance programs operated by the Managed Risk Medical Insurance Board. Also, budgetary changes to state operational costs for the developmental centers (DCs) and state mental hospitals are grouped with those made to the budgets for headquarters administration.
Because the dozens of budgetary changes to these major health programs are not tracked separately, it is difficult for the Legislature to monitor on a timely basis how these actions are affecting the overall proposed level of expenditures for these major programs, some costing the state billions of dollars annually.
We are advised by DOF that it is not possible to easily modify the present budget change tracking system to separately track budgetary changes to these major health programs. The DOF indicates an alternative approach would be to create new and separate budget items for the programs that the Legislature desired be tracked separately.
We note that precedent for this alternative approach can be found in the budget for the state Department of Veterans Affairs (DVA). Each of the state’s three veterans homes is budgeted as a separate budget item, which permits changes to their budgets to be tracked on an ongoing basis in DOF’s budget change tracking system. The Yountville home is the “8960” budget item, the Barstow home is “8965,” and the Chula Vista home is “8966.”
The budgets for major health programs could similarly be renumbered to allow them to be tracked separately. For example, the Medi-Cal Program could be changed to create a new “4265” budget item and its expenditures removed from the current “4260” category, where Medi-Cal local assistance expenditures are now grouped together with DHS public health local assistance.
Analyst’s Recommendation. We recommend that additional information detailing DHS local assistance and Proposition 99 expenditures by program and subprogram be included in the Governor’s budget document as a schedule.
The DOF has expressed concerns about this proposed approach, on the grounds that it would be difficult for the department to complete these schedules in time to be included in the budget galley. They propose instead that such information be posted on the DHS Web site to improve public access.
We nonetheless recommend that the Legislature direct that these changes proceed for next year. Both DHS local assistance and Proposition 99 expenditures involve very large amounts of state funding-cumulative more than $14 billion in 2006-07-for which key budget issues regularly arise for the Legislature. On those grounds, we believe that the need for better legislative and public access to this information in budget documents outweighs this objection. As for DOF’s alternative, we believe the DHS Web site has so much information that the public would probably find it challenging to search for local assistance and Proposition 99 schedules even if they were placed there. (However, we do not object to this additional action being taken by the administration.)
We acknowledge that such a change could affect DOF’s timetable for preparing budget documents. But we would also note the likelihood that improved access to this information in budget documents will help reduce the existing workload of DOF and state agencies, which must frequently respond to legislative and public requests for information about the past, present, and proposed future spending for these state programs. In the future, some of these information requests would be avoided because the information about these expenditures would henceforth be found where it is expected to be-on display within the Governor’s budget document.
In addition, we recommend that the Legislature further direct DOF to establish Medi-Cal, HFP, DCs, and state mental hospital systems as new budget items so that changes to these budgets can be tracked separately and more easily in DOF’s budgetary change tracking system. We note that there is a precedent for this approach in the DVA budgets for veterans homes.
Accordingly, we recommend the adoption of the following Budget Bill language in the DOF state operations budget, Item 8860-001-0001, given that DOF is primarily responsible for preparing the Governor’s budget plan:
Provision X. The Department of Finance (DOF) shall revise the numbering of budget items for certain major health programs as soon as possible, but in any event no later than by January 10, 2007, so that proposed changes in expenditures to the Governor’s budget for the following programs can be more easily identified and tracked separately by users of the DOF budget changebook tracking system. This change shall occur for at least the following major health programs: (1) Medi-Cal, (2) the Healthy Families Program, (3) the developmental center system, and (4) the state mental hospital system.
Provision Y. The DOF shall revise the Governor’s budget documents display for the Department of Health Services to include a display of the following information: (1) the supplemental local assistance schedule, including past year, estimated current year, and proposed budget year expenditures for each listed program and subprogram; (2) a Proposition 99 expenditure plan for both the current year and for the budget year detailing proposed expenditures for each department, program, and subprogram that has been allocated Proposition 99 funding, including the adjustments proposed in the Governor’s budget plan relative to the budget act that year enacted for the current year.
In summary, we believe these changes would better enable the Legislature and the public to understand the Governor’s January 10 budget proposal and would subsequently assist the Legislature in making sound decisions about the appropriate level of funding for its major health programs as budgetary changes are made.