General Interest

Governor Gavin Newsom Proposes 2020-21 May Revision

On Thursday, May 14, California Governor Gavin Newsom released the May Budget Revision for 2020-21. The $203.3 billion proposal is 5.4% lower than January’s projected budget and projects a $54.3 billion deficit, which stands in sharp contrast to the January projection of a $5.6 billion surplus. The Governor introduced a multi-year recovery strategy and emphasized that budget cuts can be triggered and eliminated subject to Federal support of the HEROES Act and subsequent relief packages.
While LeadingAge California will be working very closely with the Administration and other stakeholders to ensure that quality providers are assured long-term financial viability in caring for Medi-Cal beneficiaries, it is important to note that this budget is more fluid than usual and may not closely reflect state spending over the next year. The Governor has stated that this budget has been issued due to the obligation to pass a balanced budget by June 15. It is very likely there will be more changes to the budget as the COVID-19 pandemic response evolves and there is more clarity about the state’s financial situation and prospects for federal funding.  
LeadingAge California’s policy team continues to dissect the May Revision, however, the initial major takeaways are outlined below:
In January, the Governor announced a plan to allocate $750 million from the State’s General Fund to establish the California Access to Housing and Services Fund with the goal of reducing homelessness. However, the COVID-19 Recession has substantially altered the state’s fiscal outlook. Given the state’s current fiscal constraints, the Governor is proposing a new strategy.
Instead of General Fund, the May Revision proposes $750 million in federal funding to help local governments and nonprofit providers purchase and operate hotels and motels through Project Roomkey. Project Roomkey is a multi-agency state effort to provide safe isolation motel rooms for vulnerable individuals experiencing homelessness. 
The May Revision does not include any new money for housing, however, it does maintain:

– $500 million for the State Low-Income Housing Tax Credit Program;
– $277 million (estimated) from the SB 2 Fund (real estate transaction fees);
– $452 million (estimated) from the Cap and Trade Auction Program; and,
– $4 billion from Prop. 1 for veterans and affordable housing programs.

The Governor is also estimating funding from federal sources, including $1.1 billion from the Community Development Block Grant Program and $532 million from the CARES Act. The May Revision proposes to leverage federal funds to implement a comprehensive strategy to increase housing supply and to support preservation, protection, and production of housing. This includes:

– Preserving existing subsidized affordable housing stock by stabilizing existing deed-restricted affordable housing and guarding against private sector actors buying up distressed assets;
– Seeking strategies to stabilize tenants in existing units; and,
– Significantly streamlining, upzoning and producing new housing units, especially on excess and surplus lands, in transit-oriented infill areas and on public land.
– Seeking to streamline housing production, the May Revision is proposing to create a joint application for tax credits between the Tax Credit Allocation Committee and California Debt Limit Allocation Committee and realign HCD’s program award schedules to expedite funding awards.
Health & Human Services
The May Revise is starkly different than the Budget Proposal issued by the Governor in January. Notably, the May Revision assumes the Medi-Cal caseload will increase and peak at 14.5 million (2 million increase).
The below changes have been sorted reflecting the reduction and elimination that are categorized as priorities if requested federal funds are received.
The following is a proposal maintained from the January proposal along with an additional proposal:

– SNF Reform: The May Revision maintains the nursing facility reform framework proposed in the January proposal. In addition, the May Revision assumes a 10-percent rate increase for SNFs for four months during the COVID-19 pandemic, at a General Fund cost of $72.4 million in 19/20 and $41.6 million in 20/21. The Administration is awaiting approval from the federal Centers for Medicare and Medicaid Services to implement this increase.
The following proposals have been withdrawn from the January Budget:

– The $3.6 million proposal for the California Cognitive Care Coordination Initiative.
– Income level expansion of aging, blind, and disabled with income between 123 percent and 138 percent of the federal poverty level.
– Assisting with cost of hearing aids for households with incomes up to 600 percent of the federal poverty level.
– $25 million in 19/20 and $10 million 21/22 for caregiver resource centers.
– California Advancing and Innovating Medi-Cal (CalAIM): The May Revision proposes to delay implementation of the CalAIM initiative, resulting in a decrease of $695 million ($347.5 million General Fund) in 2020-21. In addition, the May Revision removes $45.1 million General Fund in 2020-21 and $42 million General Fund in 2021-22 in associated funding for the Behavioral Health Quality Improvement Program. 
The following are proposed reductions to existing expenditures that will occur without federal funds:

– The state will eliminate audiology, incontinence creams and washes, speech therapy, optician/optical lab, podiatry, acupuncture, optometry, nurse anesthetists services, occupational and physical therapy, pharmacist services, screening, brief intervention and referral to treatments for opioids and other illicit drugs in Medi-Cal, and diabetes prevention program services.
– Elimination of funding for Community-Based Adult Services effective January 1, 2021 and Multipurpose Senior Services Program effective no sooner than July 1, 2020.
– A decrease in $33.3 million in the Sobng-Brown Healthcare Workforce Training Program
Please contact Alexandria Smith-Davis or Meghan Rose with any questions.