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Governor Releases Revised State Budget

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On May 14, Gov. Newsom presented the Legislature with revisions to the budget he proposed in January, the process referred to as the May Revise. Throughout the week leading up to the release of the revision, the governor had been presenting various proposals as part of his “California Roars Back” plan, touted as a recovery package tackling the most persistent challenges facing California. His plan includes state tax rebates, small business relief, $12 billion to tackle homelessness, $20 billion in proposed investments in schools, and a $5 billion package supporting the state’s drought response and water infrastructure.   

The state has a $75.7 billion surplus, something unimaginable one year ago when the state was facing a serious deficit. Along with the state’s surplus, California is also expected to receive $26 billion from the federal stimulus package signed earlier this year by President Biden. 

In health care, the governor’s revision contained a number of significant announcements: 

  • Full Funding of CalAIM. The broader system, program, and payment reforms included in the California Advancing and Innovating Medi-Cal (CalAIM) program allow the state to take a population health, person-centered approach to providing services with the goal of improving outcomes for all Californians. Attaining such goals will have a significant impact on an individual’s health and quality of life and will ultimately reduce the per-capita costs over time. The May revision makes additional investments to lift and support the promise of the CalAIM proposal. 
  • Medi-Cal Caseload. The revision assumes that Medi-Cal caseloads will increase by approximately 7.1% from 2019-20 to 2020-21 and increase by 6.6% from 2020-21 to 2021-22. Medi-Cal is projected to cover approximately 14.5 million Californians in 2021-22, over one-third of the state’s population.
  • Medi-Cal Coverage to Undocumented Older Adults. The May revision includes funding to expand Medi-Cal, including In-Home Supportive Services, to undocumented adults ages 60 and older effective no sooner than May 1, 2022.  
  • Medi-Cal Extension of Five Years for Postpartum Care. The American Rescue Plan allows states to receive federal funding if they extend Medi-Cal eligibility from 60 days to 12 months for most postpartum individuals, effective April 1, 2022, for up to five years. The May revision includes funding to implement this extension. 
  • Doula Benefit. Effective Jan. 1, 2022, the revision includes funding to add doula services as a covered Medi-Cal benefit. 
  • Telehealth Audio-Only Visits. The administration proposes extending telehealth flexibilities utilized during the pandemic while at the same time providing assurances of appropriate access to in-person care. The Department of Health Care Services will establish rates for audio-only telehealth that is set at 65% of the Medi-Cal rate for the service rendered in fee-for-service, and comparable alternative to prospective payment system rates for clinics to maintain an incentive for in-person care.   
  • Proposition 56 Suspensions. The May revision proposes to eliminate suspensions for Proposition 56 supplemental payment increases, resulting in a cost of approximately $550 million ongoing. 
  • Public Hospitals. The revision includes $300 million in one-time Coronavirus Fiscal Recovery Funds to help public health care systems cover costs associated with critical care delivery needs provided during and beyond the pandemic. 
  • Children’s Behavioral Health Initiative. The May revision includes approximately $4 billion for the Children and Youth Behavioral Health Initiative. The children’s behavioral health system, for youth ages 25 and younger, needs more focus on prevention, increasing the number of behavioral health professionals, providing more crisis services, and adding acute care services and beds. The goal of this initiative is to transform California’s behavioral health system for children and youth into an innovative and prevention-focused system where all children are routinely screened, supported, and served for emerging and existing behavioral health needs. The initiative will identify children who need help early, provide services where and when needed, and make programs and services available to meet their needs. In addition, it includes resources for the Office of Statewide Health Planning and Development (OSHPD) to support behavioral health providers through existing and new health workforce development programs.   
  • OSHPD Recast and Modernization. The May revision includes funding to recast OSHPD as a department, strengthen health workforce and other data assets, build a more robust health workforce data system, and analyze that data to better inform policy recommendations to help support the state’s health care workforce.    
  • Health Care Workforce Training Program. This would be $50 million in one-time funding to support grants for new residency programs, which will be added to the Song Brown Program. 
  • Health Information Exchange. The revision includes $2.5 million in one-time funds for the Health and Human Services Agency to lead efforts and stakeholder engagement in building an information exchange for health and social services programs. 
  • Expansion of Childcare. The administration will continue to build on key recommendations from the Master Plan for Early Learning and Care to transform the state’s childcare system. The revision proposes to expand childcare access by adding 100,000 subsidized childcare slots.   
  • Homelessness. The May revision builds upon investments that have been made to address the state’s problem of homelessness with $4.7 billion to end family homelessness and expand access to housing. Some of the key investments include: 
    • $475 million from the general fund to expand the CalWORKS Housing Support Program 
    • $280 million from the general fund to expand the Bridging Families Home Program 
    • $150 million from the general fund for Project Roomkey 
    • $35 million from the general fund over five years for Universal Basic Income pilot programs to be administered by local governments 

With the release of the revisions to the budget, budget deliberations move into high gear over the next four weeks. The Legislature must provide the governor with a budget by June 15; the governor has until June 30 to sign it.