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
 Limits local ability to raise revenue
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
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
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
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
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
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
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
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
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
What Was Realigned (in millions)
Community Mental Health
$452
State Hospitals/County Clients
210
IMDs
88
AB 8 Health Care
503
Local Health Services
3
Indigent Health
435
Local Block Grants
52
Stabilization
15
Juvenile Justice Grants
37
TOTAL
$1,795
State/County Shares of Cost ($s in m)
CCS
75/25
50/50
$30
Foster Care
95/5
40/60
363
CWS
76/24
70/30
42
IHSS
97/3
65/35
235
CSBG
84/16
70/30
13
Adoptions
100/0
75/25
12
GAIN
100/0
70/30
26
AFDC
89/11
95/5
-155
County Adm
50/50
70/30
-95
$549
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?
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
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
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
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