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Analysis Of Governor Newsom’s 2024-2025 January Budget Proposal

Analysis Of Governor Newsom’s 2024-2025 January Budget Proposal

January 11, 2024

 

On January 10, Governor Newsom released his January proposal for the 2024-25 California state budget. The Governor’s $291 billion state spending plan estimates a $37.9 billion deficit, a smaller shortfall than the $68 billion the Legislative Analyst’s Office predicted last month but with ‘reasonable’ revenues according to the LAO. We appreciate that the proposal honors past commitments, including expansion of Medi-Cal to all income-eligible adults regardless of immigration status, and that there are no cuts to caseloads or grants to our most vulnerable families on CalWORKs and SSI. However, we are concerned with proposed cuts to CalWORKs supportive services, such as family stabilization programs, which fund programs that help families get back on their feet. Economic downturns hit low-income families the hardest and often result in a slower recovery period for these families; that makes it all the more urgent that we protect and strengthen California’s safety net.

 

Below are our initial reactions to the proposed budget by issue area.

 

HEALTH CARE

 

Continued and new health care investments

  • Maintains past budget actions on Health4All and Medi-Cal asset test elimination: The Governor’s proposal maintains previous year’s budget actions to implement full-scope Medi-Cal coverage expansion to all adults, regardless of immigration status. Effective January 2024, all Californians with incomes below 138% of FPL are eligible for Medi-Cal regardless of immigration status with no need to count assets.
  • Urge timely implementation of Share of Cost Reform and continuous eligibility for children: The 2022 budget deal to update Medi-Cal Share of Cost so that seniors and people with disabilities can afford to access needed Medi-Cal services and continuous Medi-Cal coverage for children ages zero to five is subject to contingencies, so we urge timely implementation of these critical programs.
  • Medi-Cal Caseload and Eligibility Redeterminations: The proposal assumes Medi-Cal caseload of 14.8 million in 2023-24, an increase of 583,000 individuals compared to the 2023 Budget Act due to overestimate of those who would no longer be eligible for Medi-Cal and resulting in increased costs of $2.3 billion ($499 million General Fund) in 2023-24 compared to the 2023 Budget Act.
  • Covered California: The proposal maintains key affordability measures for those in Covered California by including $82.5 million in 2023-24 and $165 million annually thereafter to support financial assistance for individuals purchasing coverage on Covered California. For the 2024 coverage year, these subsidies would result in elimination of deductibles and reduction in copayments and other health care cost sharing for more than 600,000 Californians.
  • Children and Youth Behavioral Health Initiative Wellness Coaches: The proposal includes $9.5 million ($4.1 million General Fund) in 2024-25 increasing annually to $78 million ($33.8 million General Fund) in 2027-28 to establish the wellness coach benefit to serve children and youth in Medi-Cal effective January 1, 2025.

 

Health measures/savings to close budget shortfalls

  • Safety Net Reserve Withdrawal: The proposal withdraws $900 million from the Safety Net Reserve (full amount) to maintain existing program benefits and services for the Medi-Cal and CalWORKs programs.
  • Managed Care Organization (MCO) Tax: The proposal seeks early Legislative action to request the federal government approve an amendment to increase the tax to achieve $20.9 billion in total funding to the state, an increase of $1.5 billion over three years compared to the approved MCO Tax last December.
  • Assisted Living Waiver and Home-and Community-Based Services Waiver Slot Increases: The proposal increases slots for the Assisted Living Waiver and the Home and Community-Based Alternatives Waiver, resulting in $10.8 million net General Fund savings in 2024-25.
  • Health care worker minimum wage ‘trigger’ language: Last year’s chaptered SB 525 (Durazo) would incrementally raise the minimum wage to $25 for nearly 500,000 health care workers, with the first pay increases rolling out in June, but the Administration is seeking early legislative action in January to add an annual “trigger” to make the minimum wage increases subject to General Fund revenue availability.
  • Delay in behavioral health and workforce initiatives, including:
    • Behavioral Health: Delays $140.4 million General Fund from 2024-25 to 2025-26 for the final round of Behavioral Health Continuum Infrastructure Program grants; shifts $265 million from the Mental Health Services Fund that was appropriated in the 2023 Budget Act to the General Fund in 2024-25 related to the Behavioral Health Bridge Housing, and delays $235 million General Fund from 2024-25 to 2025-26.
    • Workforce: Delays $140.1 million General Fund to 2025-26 for the nursing and social work initiatives; $189.4 million Mental Health Services Fund to 2025-26 for the social work initiative, addiction psychiatry fellowships, university and college grants for behavioral health professionals, expanding Master of Social Work slots, and the local psychiatry behavioral health program.
  • Defers resources for recently chaptered bills: The proposal defers the consideration of resource requests associated with recently chaptered legislation to the May Revision, including: AB 425 related to Medi-Cal pharmacogenomic testing; AB 1163 related to lesbian, gay, bisexual, and transgender disparities reduction; SB 311 related to Medicare Part A buy-in; and SB 496 related to biomarker testing.

 

HOUSING

California is still reeling from the housing and houselessness crisis, compounded with the economic fallout of the COVID-19 pandemic, accessing and maintaining affordable housing for low-income Black and brown families is nearly impossible. The Governor’s January Budget Proposal proposes $1.2 billion in stark cuts across various critical housing programs. The proposed budget will halt progress at a time when Californians are grappling with alarming housing cost burdens, widespread housing instability, and an urgent need to solve homelessness.

The following reversions and cuts to housing programs are proposed:

  • Infill Infrastructure Grant Program: A reversion of $200 million General Fund
  • Multifamily Housing Program: A reversion of $250 million General Fund
  • Regional Early Action Planning Grants 2.0 (REAP 2.0): A reversion of $300 million General Fund
  • Foreclosure Intervention Housing Preservation Program: A reduction of $247.5 million General Fund over the next three years
  • CalHome Program: A reversion of $152.5 million General Fund
  • Veteran Housing and Homelessness Prevention Program: A reversion of $50 million General Fund
  • Housing Navigators: A reduction of $13.7 million General Fund ongoing for Housing Navigators.

 

These cuts essentially zero out funding for the state Low-Income Housing Tax Credit, Multifamily Housing Program, Infill Infrastructure Grant Program, Veterans Housing and Homelessness Prevention Program, and CalHome Programs for the coming year. It also reverts $900 million of funds appropriated to these programs in 2023. These cuts will result in 6,400 fewer affordable homes and the loss of $1.6 billion in federal housing resources, at a time when housing instability and homelessness have never been greater nor more on top of voters’ minds.

 

As it relates to homelessness, the proposal maintains the previous multiyear budget allocation to address the houselessness crisis, including continued funding for Project Homekey ($2.8 million) and expanding Community Care programs ($860 million). Additionally, the proposal maintains its past commitments to the Homeless Housing, Assistance and Prevention program, but there will be a need to secure future dollars for the 2024-25 budget to avoid a state funding cliff to local governments. Disappointingly, the Governor continues to fund houselessness encampment sweeps at $750 million instead of focusing on California’s commitment to Housing First strategies, such as funding affordable housing.

 

The federal government has stepped in and allocated California billions of dollars from the American Rescue Plan Act. These funds have been allocated to construct and preserve affordable housing for all and to rehabilitating affordable housing for people experiencing houselessness. While this is much needed funding, it is crucialto ensure that the funding is used to stabilize low-income communities, rather than promote displacement, which has been a growing trend amongst ‘trickle down housing’ advocates.

 

In addition, the challenges of this year’s budget clearly underscore the dire need to not only place AB 1657 (Wicks), the statewide affordable housing bond, on the November ballot to ensure stable funding for critical affordable housing programs over the following four years, but also to create a permanent source of robust ongoing state funding for affordable housing and homelessness programs.

 

PUBLIC BENEFITS AND ACCESS TO JUSTICE

 

CalWORKs: We appreciate that the proposal maintains grant levels for CalWORKs, which serves our poorest children, in households that are led by women of color, including 60% Latina and 17% Black, and includes intent to participate in the federal TANF pilot. However, we are concerned with potential cuts that may have significant impacts on families who continue to struggle to recover economically from the pandemic, including:

  • Family stabilization: reverts $55 million General Fund in 2023-24 and reduce $71 million General Fund beginning in 2024-25 and ongoing for family stabilization programs. These programs were created to strengthen CalWORKs families coming out of the Great Recession to ensure housing, mental health, safety, and family stability.
  • Employment Services Intensive Case Management: reduces $47 million General Fund beginning in 2024-25 and ongoing for county staff to provide one-on-one assistance to CalWORKs participants requiring exceptional support to overcome barriers to employment.
  • Subsidized employment: reverts $134.1 million General Fund in 2023-24 and reduces $134.1 million General Fund in 2024-25 and ongoing.

 

Child Welfare: Unfortunately, the proposed budget includes cuts in child welfare, including a $30 million cut in 2024-25 and ongoing to the Family Urgent Response System (FURS) which provides 24/7 emergency response for current or former foster youth, probation youth and their caregivers. There is also a $8.3 million cut to the Los Angeles County Child Welfare Services Public Health Nursing Program which ensures that foster youth receive necessary health screenings and expedited referrals. Lastly, there was a decrease of $195,000 in 2024-25 and $25.5 million in 2025-26 and ongoing to the housing supplement for foster youth in Supervised Independent Living Placements (SILPS) which helps stabilize older foster youth and helps to ensure that they will not become homeless.

 

Supplemental Security Income/State Supplementary Payment (SSI/SSP): The proposal includes the federal SSI 3.2% cost-of-living adjustment and maintains last year’s 9.2% SSP increase that was implemented on January 1, 2024, for a grant amount of $1,183 per month for individuals and $2,023 per month for couples. The individual grant is 93% of the Federal Poverty Level using the 2023 index.

California Earned Income Tax Credit (CalEITC): The proposal does not make a change to the CalEITC, but only proposes $10 million for tax credit outreach, education and free tax preparation. This figure is down from $20 million last year.

 

Overall Safety-Net Programs: We are encouraged that the proposal continues to fund expansions of life saving safety-net programs to all Californians and stand with immigrant communities who continue to advocate for the inclusion into critical safety-net programs that allow them to age with dignity, provide access to food, and access to wage replacement program.

 

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