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REALIGNMENT 101

REALIGNMENT 101. The Road to Realignment. 1978 Proposition 13 1% property tax rate (average was 2.5%) Loss of $6.8 billion State assumes allocation of property tax 1-year bailout: shift of property tax State assumption of certain health and welfare shares of cost

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REALIGNMENT 101

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  1. REALIGNMENT 101

  2. The Road to Realignment 1978 Proposition 13 • 1% property tax rate (average was 2.5%) • Loss of $6.8 billion • State assumes allocation of property tax • 1-year bailout: shift of property tax • State assumption of certain health and welfare shares of cost • Limits local ability to raise revenue

  3. 1979 AB 8 Long Term Fiscal Relief • Same formula as the 1978 1-year bailout • State created AB 8 health program – block grant • State assumed county shares of Medi-Cal and SSI/SSP • Other shares of cost changed • Included a Deflator – activated if state General Fund revenues insufficient to maintain funding

  4. What Happened Next? • 1982-83 Deflator would have been activated but VLF reductions instead • 1983-84 Governor Deukmejian called special session. Deflator would have activated but VLF reductions instead • Local governments complained loudly • Governor called for New Partnership Task Force

  5. Task Force Recommendations • Constitutional protection of VLF • Repeal AB 8 Deflator • Shift a portion of existing state sales tax to locals to replace subventions • Realign programs shared by state and counties • Capitated health and welfare programs • Shift a portion of state sales tax to fund • Entitlement programs stay as they are

  6. The 80’s. What ? No Realignment? If at first you don’t succeed …….. Realignment Restructuring Disengagement Attempt to swap AFDC and Trial Courts but little interest and hard to accomplish

  7. 1991 – The Stars Are Aligned • 1989 and 1990 significant budget reductions to county programs including AB 8 Health and Mental Health • Governor Wilson elected • January $7 billion budget gap • Discretionary programs: AB 8 Health, Indigent Health and Mental Health proposed for elimination • Willing to tax? Could “realign” programs

  8. 1991 January Budget Proposal • Transfer responsibility for AB 8, Indigent Health, Community Mental Health and Local Health Services to counties ($942 million) • Increase the alcoholic beverage tax to national average; change the VLF depreciation schedule and allocate revenues to counties for programs ($942 million) • Provide local agencies authority to increase sales tax ½% for drug enforcement and crime prevention

  9. Reactions LAO Report: The County-State Partnership plus principles Legislature: Realignment Task Force – 7 Members plus principles reporting to the Budget Conference Committee CSAC: Work groups plus principles

  10. How Did Realignment Change? • Grew to $2.2 billion • Swapped taxes to VLF depreciation increase and ½ cent sales tax • Added changing shares of cost in primarily social services programs • Got much more complicated • Chapters 87, 89 and 91, Statutes of 1991

  11. Complications • Other calls on the money? • How many accounts are needed? • Shares of cost = mandate? • VLF constitutionally protected – specify use? • Potential loss of federal funds • Allocation and structure of the funds • Flexibility • Pending lawsuits and legal challenges

  12. What Was Realigned (in millions)

  13. State/County Shares of Cost ($s in m)

  14. Structure of Realignment • A State “Local Revenue Fund” with 3 accounts • Needed a Social Services Account - mandates • Programs wanted their own accounts • Each County establish a Local Health and Welfare Trust Account with 3 accounts • The allocation of funds and how the number of “pots” grew • What is equity?

  15. Lawsuits/Challenges/Poison Pills • Medically Indigent Adult transfer of 1982 – if mandate, Poison Pill to repeal VLF increase • Proposition 98 – share in the sales tax? Poison Pill to repeal new ½ cent sales tax • If any provision determined to be a reimbursable state mandate, Poison Pill to render Realignment inoperative

  16. Other Issues • First year estimates short – had to redefine the base • MOEs • What happens when a formula changes – IHSS to PCSP with federal funds • MIA mandate case decision • Policy changes imposed by the State • Does Realignment affect Net County Costs • Transfers between accounts

  17. Issues For Consideration • Lessons Learned • What program level being realigned • What authority over the program • What might the State require in the future • Are there new “equity” issues • Data and reviews

  18. What Does the Future Hold • Governor’s May Revision Proposal – move money from “discretionary” mental health to shares of cost in Social Services Account • Federal Health Care Reform • The Unknown

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