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In-Home Supportive Services Program It Is Not Providing Needed Services to All Californians Approved for the Program, Is Unprepared for Future Challenges, and Offers Low Pay to Caregivers Report Number: 2020-109

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• Chapter 1—Lack of Preparation for Future IHSS Needs and Low Caregiver Wages Could Result in More Recipients Not Receiving Services
• Chapter 2—Changes to the IHSS Funding Structure at Both the State and County Levels Could Address Funding Disparities Among Counties

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Chapter 1

Lack of Preparation for Future IHSS Needs and Low Caregiver Wages Could Result in More Recipients Not Receiving Services

Chapter Summary

Although the IHSS program provides services to the vast majority of its recipients, tens of thousands of recipients lack care each month. In fact, although state law requires counties to ensure that services are provided to recipients during each month, the number of recipients who lacked care grew from 33,000 on average each month in 2015 to more than 40,000 in 2019. Further, counties did not always approve applicants for the program in a timely manner nor ensure that newly approved recipients who came into the program without a chosen caregiver received timely care. Ensuring timely and consistent care is central to the program’s goal of allowing recipients to live safely in their own homes. However, providing timely IHSS care may become more difficult, as the number of recipients is expected to increase dramatically over the next 10 years. Despite the pending increase, the counties and Social Services have not planned for this influx of older Californians needing care.

Our projections indicate that a substantial increase in the number of IHSS caregivers will be necessary in the future. However, caregivers throughout the State earn far less than a living wage, and many likely qualify for public assistance. These low wages likely will affect the ability of counties to recruit caregivers to respond to current and future demand for their services. Although counties can negotiate higher caregiver wages, state law creates disincentives for them to do so, as increases in provider wages have an outsized financial impact on the counties that provide them.

A Growing Number of Recipients Lack Necessary IHSS Care Each Month

State law obligates each county to ensure that services are provided to all eligible recipients during each month of the year in accordance with a county plan. Although the IHSS program was largely effective in meeting this requirement, ensuring that 544,000 recipients (approximately 94 percent of recipients) on average received services each month from 2015 to 2019, the program’s vast size means that when even a small percentage of recipients lack care, thousands of Californians are affected. Specifically, the number of recipients statewide who did not receive services in a given month increased from about 33,000 per month on average in 2015 to more than 40,000 in 2019. Over the course of the period we reviewed, this represented 132 million hours of services approved but not provided. Appendix B, Table B.1, compares the number of hours approved versus hours not provided in 2015 and 2019. Varying numbers of recipients in all counties experienced these gaps in care, as shown in Appendix B, Table B.2. We surveyed all counties in the State regarding their IHSS programs and their ability to provide caregivers for recipients. With 51 of 58 counties responding, 32 reported that they did not have a sufficient number of caregivers to provide all approved services. The two most common barriers those counties reported were finding caregivers who could provide specific or challenging services, such as bowel and bladder care, and difficulty in matching caregivers with recipients in isolated areas. Appendix A provides selected survey responses by counties throughout the State.

The four counties we reviewed—Butte, Kern, San Diego, and Stanislaus—did not ensure that all recipients received services each month. In fact, the average number of recipients who did not receive monthly services in these four counties generally increased over our review period, as Table 2 shows. For example, the average number of recipients who lacked services in Kern County increased from 296 per month in 2015 on average to 923 in 2019, representing an increase from 6.8 percent to 11.1 percent of recipients in the program. The counties provided several reasons why a recipient might not receive services, including extended hospitalizations, an inability to hire a provider, and a move to a new location, requiring a new provider. These gaps in care can represent periods of increased risk of injury or other hardships for IHSS’s elderly and disabled recipients.

Table 2

The Average Number of Recipients Who Did Not Receive Services Each Month Increased During Our Testing Period

	MONTHLY AVERAGE NUMBER OF RECIPIENTS WHO DID NOT RECEIVE SERVICES
COUNTY	2015	2016	2017	2018	2019
Butte	378	407	373	384	406
Kern	296	406	531	738	923
San Diego	1,811	1,957	2,042	2,069	2,194
Stanislaus	436	546	649	698	679
STATEWIDE*	32,589	33,674	35,104	36,655	40,290

Some counties took greater steps than others to ensure that recipients received care. About half of the counties that responded to our survey indicated that they assist recipients in interviewing caregivers, and three of the four counties we reviewed stated that they arrange for short-term care through contracts with local care providers, as we describe below. These additional services are an important stopgap for recipients when caregivers are ill or temporarily unavailable. For example, San Diego has a contract with a service provider to render care when a recipient’s regular caregiver is unavailable. Butte stated that it has arranged care, through short-term contracts with local providers, for recipients in hard-to-serve portions of the county and those who require care—such as bowel and bladder care—that makes recruiting a caregiver difficult. If a recipient requests a caregiver and does not wish to participate in the selection process, upon request Stanislaus County will send a caregiver from its registry to that recipient. Kern County informed us that it does not provide these services as they are cost‑prohibitive; instead it refers recipients to the registry of caregivers so that recipients can make their own hiring decisions.

Despite these efforts, a lack of planning by the counties has contributed to ongoing gaps in care. State law requires that each county develop an annual county plan that specifies the means by which IHSS services will be provided and submit that plan to Social Services for review and, when appropriate, approval. However, according to Social Services, none of the State’s 58 counties have submitted plans for decades. Further, the counties we reviewed could not provide evidence of having created any county plans. The counties that responded to our survey generally indicated that they had performed no analysis to determine their future provider needs. Only two counties indicated that they have performed analysis to determine the number of caregivers they require, either currently or in the future, and only four counties had created a plan to account for future growth in the number of recipients. If counties had completed their mandated care planning, they might have identified care gaps and been able to alleviate or eliminate them.

Inaction by Social Services has contributed to the lack of planning throughout the State. Social Services’ own regulations require that it develop a county plan for counties that have not submitted plans within the required time frame. However, for at least 20 years, Social Services has neither enforced the legal requirements that counties develop and submit annual county plans nor created county plans for counties that did not do so. As the single state agency with full power to supervise every phase of the administration of the IHSS program, Social Services has failed to comply with its own regulations meant to ensure the safety of Californians. When we brought this omission to their attention, Social Services’ representatives indicated that the requirement is outdated and that it is the recipient’s duty to ensure that they receive care. However, Social Services’ responsibility to ensure proper planning is clear; moreover, this lack of attention to planning increases health risks for individuals who should receive care but do not.

Counties Generally Did Not Meet Deadlines for Approving Program Services and Ensuring That Services Were Provided

From January 2015 through December 2019, counties throughout the State failed to process applications for the IHSS program in a timely manner, delaying services for thousands of applicants. For recipients to receive necessary services under the IHSS program, a county must make an initial determination of an applicant’s eligibility, generally within 30 days following the date of an application, as required by Social Services’ regulations. The application must include all information necessary to establish eligibility, as noted in the text box. Despite this requirement, applicants approved in 2019 waited more than 72 days on average for counties to approve participation in the program. This represents an improvement from the statewide average of 82 days in 2015, but it is still well above the regulatory requirement.

In 2019 the four counties we reviewed took between 55 and 117 days on average to approve applications, and they provided several explanations for the delays. For example, Butte and Stanislaus counties told us that their delays were caused by a lack of social workers, and all four counties said that getting completed disability determinations from applicants was challenging. However, because the purpose of the IHSS program is to provide the care necessary for recipients to remain safely in their homes, delays in approving them for care increase the risk that they will suffer an injury or other hardship. Table 3 demonstrates that no county met this timing requirement in 2019.

We identified a number of counties, including two of the counties we reviewed, that took significantly longer than 72 days on average to approve applicants. For example, seven counties took 90 days or longer to process applications in 2019. Stanislaus County took 117 days on average before approving applicants for service, while Kern County took 83. According to Stanislaus County, its significant delays were the result of a backlog of applications and high turnover in its social worker positions. The county stated that it has worked to overcome these obstacles in 2020 by reassigning social workers to the IHSS program and adjusting social worker responsibilities so they can focus on assessing the care needs of applicants and approving services. However, these changes are recent, and it is too soon to assess whether they have had a positive effect on Stanislaus’ ability to process applications. Appendix B, Table B.3, provides a breakdown of applicant approval delays by county for 2015 and 2019.

Table 3

No Counties, on Average, Approved Applications In a Timely Manner in 2019

AVERAGE DAYS TO APPROVAL	NUMBER OF COUNTIES
Less than 30	0
31–60	24
61–90	27
More than 91	7

Source: Auditor analysis of Social Services’ CMIPS II data.

Although Social Services’ regulations generally requires that applications be processed in no more than 30 days, Social Services instead considers 90 days to be a reasonable time frame for processing applications. Social Services said that it based the 90‑day timeline on its 30-day regulation, added 45 days for recipients to submit documentation, and “rounded up to the month.” The agency stated that the 30-day requirement is more than 20 years old and does not incorporate more recent changes to the application process, including the requirement added in 2011 for recipients to obtain a health care certification. Social Services stated that it has begun the process of revising its regulations and hopes to complete them in 2021. However, we believe that given the critical nature of these services, 90 days—nearly three months—is too long. First, “rounding up” from 75 days to 90 days does not demonstrate an appropriate level of urgency. Second, Social Services’ calculations assume that two steps—the submission of the application and the health care certification—happen sequentially; however, these steps can happen concurrently; therefore, not all applications require a full 75 days to complete. Until Social Services begins monitoring compliance with its 30-day requirement and the 45-day exception, it will not have sufficient information to establish what a more reasonable regulatory timeline may be.

Most recipients were receiving services from a caregiver before entering the IHSS program and being approved for services, more frequently than not from a relative, according to Social Services’ data. However, 18 percent of recipients did not receive services until after they entered the program, and these recipients usually had a nonfamily caregiver. Social Services’ regulations require that services be provided, or arrangements for their provision made, within 15 days after an approval notice is mailed. However, no county met this requirement for all approved applicants. ⁶ Appendix B, Table B.4 provides a county-level breakdown of the time from approval to service for this population. In fact, almost 58,000 applicants who entered the program without a caregiver and who received service for the first time in 2015 through 2019 did not receive services for 108 days, on average, after their county approved their application. Although recipients retain the right to hire a caregiver, state law obligates each county to ensure that services are provided to all eligible recipients. Thus, counties and recipients share in the responsibility to ensure that required services are provided. Like delays in the approval of applicants, delays in care subject Californians to increased risk of injury or loss of autonomy, as recipients require care to remain safely in their homes. Social Services indicated that it does not monitor counties’ compliance with requirements related to the time it takes for new recipients to receive care. Although the data to perform this monitoring are readily available in its database, Social Services indicated that it is the recipient’s duty to choose and hire his or her own caregiver.

The State and Counties Have Not Prepared for Rapid Increases in the Number of IHSS Recipients

As we have noted, California is experiencing substantial growth in its senior population, which will significantly increase demand for IHSS services. Already seniors make up the majority—55 percent—of IHSS recipients. According to Finance, the number of seniors in California will increase from 6 million in 2019 to 8.5 million by 2030. In fact, according to Finance projections, individuals 75 years or older will be the fastest-growing age group in the State in the coming decade. As this population continues to age, its members will likely require additional assistance, driving an increase in the need for care hours and caregivers. However, when we surveyed the counties, 49 of the 51 respondents said they had not performed any analysis to identify how many providers they would need in the future and 47 said they had not planned for future recipient growth as we show in Appendix A, Table A. The counties’ lack of planning is of concern in light of the coming increases in the number of IHSS recipients and the current caregiver shortfalls reported by counties.

Among the counties responding to our survey, 32 indicated that they currently lack a sufficient number of caregivers to provide each recipient with all of his or her approved services. Because counties assign recipients’ care hours based on the services necessary for them to remain safely in their homes, this existing deficit is already troubling because a lack of sufficient caregivers increases the risk to recipients who rely on services for their safety. Adding to this concern is the fact that the number of IHSS recipients is growing significantly. Between 2015 and 2019, the number of recipients increased by 18 percent statewide. ⁷ Appendix B, Table B.5, provides a breakdown of IHSS population changes by county and statewide. Further, based on current trends, we estimate that the number of IHSS recipients could grow to 951,000 by 2030, a 52 percent increase. According to the Public Policy Institute of California, this rapid growth will occur during a period when family members—the most common type of caregiver—are less available to provide care because more seniors than in previous generations are divorced, never married, or never had children. As a result, the IHSS program will have to plan to address existing gaps in care while simultaneously preparing for a significantly expanded program. Failing to address these issues could result in rapid increases in the number of recipients who need and do not receive care.

As we discuss earlier, for decades counties have failed to develop and use annual county plans to ensure that all recipients receive care, despite being required to do so. Although not required, we also would have expected counties throughout the State to have analyzed the needs of their IHSS programs and created strategies to ensure that services are being provided to all eligible recipients during each month of the year. However, they have not. Only two of the 51 counties responding to our survey had performed an analysis to identify how many caregivers they need. Of the four counties we reviewed, only Butte County indicated that it had performed this needs analysis although it was unable to provide documentation.

Only four of the responding counties have created a plan to account for future growth in the number of recipients. Of the four counties we reviewed, only San Diego County has created such a plan. San Diego’s plan has objectives aimed at building better health in its elderly population and includes performance measures that are specific to the IHSS program, such as the percentage of initial assessments it plans to complete within 45 days through fiscal year 2021–22. Such planning will be critical to ensure that all eligible recipients receive services each month.

Counties Do Not Pay Caregivers a Living Wage

IHSS caregiver wages vary significantly across California. However, no county paid caregivers a living wage between 2015 and 2019; instead, caregiver wages averaged between 42 percent and 62 percent of a living wage. According to researchers at the Massachusetts Institute of Technology (MIT), living wage calculations represent the salary necessary for a full-time worker to afford basic necessities without public assistance. To determine whether caregivers earned a living wage in each of California’s counties, we used calculations from a model developed at MIT that relies primarily on federal data. The living wage amounts we reference represent costs for a family of two adults with one worker, including those related to food, housing, transportation, and other basic needs such as clothing. The model makes conservative assumptions, including that all meals are prepared in the home using lower-cost food options. Further, the living wage we reference excludes nonessential items such as vacations, entertainment, and all savings. In 2019 the living wage in California ranged from $17.64 an hour in Modoc County to $31 in Marin, San Francisco, and San Mateo counties.

We compared the gap between the hourly caregiver earnings in the four counties we reviewed and their respective living wage. As indicated in Figure 3, all four counties established IHSS wages that were well below their living wage. For example, in 2019 the living wage in Kern County was $18.84 per hour, while a caregiver earned $12 per hour, the state minimum wage. In San Diego County, the disparity was greater, with a living wage of $24.62 compared to hourly caregiver wages of $12.50. Appendix C compares the living wage to the caregiver wage in each of the State’s counties.

Without access to a living wage, many caregivers and their families may experience food or housing insecurity. In fact, caregiver wages generally satisfy income eligibility requirements for public assistance. The U.S. Department of Health and Human Services revises annually the poverty line and issues poverty guidelines, which were originally calculated in the 1960s and based primarily on the cost of food. Since that time, the guidelines have been determined by multiplying that original calculation by the Consumer Price Index. In 2019 caregivers earned an average of $15,920, about $1,000 less than the federal poverty guideline of $16,910 for a family of two. According to Social Services, California provides CalFresh—the new name for its food stamp program—to residents who earn less than 200 percent of the federal poverty guideline; thus, caregivers throughout the State would generally qualify for food stamps even if they received a 30 percent raise. Because the poverty guidelines are based on 1960s costs and do not fully account for changes in basic expenses or family needs, any caregiver whose compensation is below the poverty line would likely lack sufficient earnings to pay for needs such as rent, transportation, or clothing and would likely have to rely on charitable or public assistance.

Figure 3

In 2019 Caregivers Earned a Fraction of the Local Living Wage

Although some caregivers may obtain additional part-time work, the demands associated with working as a caregiver make obtaining alternative full-time employment in addition to caregiving unlikely. On average, caregivers work 23 hours per week. Caregiver workloads reflect the number of hours a county has authorized the recipient to receive, the recipient’s schedule, and the caregiver’s availability. This makes finding multiple caregiving positions difficult. Further, it is unlikely that a caregiver would obtain a full‑time position elsewhere for 40 hours per week and retain his or her role in the IHSS program. Doing so would effectively require the caregiver to work 63 hours a week on average. Instead, because the majority of caregivers serve a family member, they must choose between family obligations and full-time employment.

Compounding these issues, caregivers in certain localities earn less than the local minimum wage. For example, caregivers in the city of San Diego earned less than the local minimum wage for a part of 2016 and all of 2017. A City of San Diego ordinance set the minimum wage within the city at $10.50 and $11.50, respectively, in these years. However, after the city of San Diego established its local minimum wage, Social Services offered guidance to San Diego’s public authority that the ordinance did not apply to IHSS although the guidance did not explain why. ⁸ As we explain in the Introduction, the public authority performs administrative functions related to caregivers, such as negotiating caregiver wages. As a result, IHSS caregivers in the city of San Diego received wages that were between 50 cents and $1 per hour less than the pay of other minimum-wage workers in that city. Had this local minimum wage applied to IHSS workers, they would collectively have been paid about $19 million more over the two-year period. In 2019 the Legislature increased the statewide minimum wage to be no less than $12 per hour, an amount equal to the local minimum wage. Between 2014 and 2019, localities in seven counties passed ordinances that raised local minimum wages by varying amounts; however, these localities declined to grant the increase to local IHSS caregivers. Although this may be permissible, it creates a situation in which IHSS work is not as competitive with positions that pay the local minimum wage.

The State’s Funding Structure and Recent Shortfalls in County Funding Sources Create a Disincentive to Increase Caregiver Pay

Many counties and their associated entities, such as public authorities, did not negotiate new caregiver wage increases during the period we reviewed, and we found that the counties that did provide increases were penalized due to changes in state law. Since 2012 state law has treated caregiver wage increases differently than other county IHSS expenditures. From 1991 to 2012, state law required counties to pay a set percentage of the cost of providing IHSS services, and caregiver wage increases were no different from other program expenses that gradually grew in cost. The number of IHSS recipients in a county, the hours of care it authorized, and the amount it paid caregivers all affected how much the county would pay. However, as we describe in the Introduction, state law established a different method of calculating county contributions, based on the actual cost of the program in fiscal year 2011–12, with future adjustments using an inflation factor that the Legislature updates periodically. The Legislature made additional systemwide changes in 2017 and 2019; however, generally only increases to caregiver wages resulting from collective bargaining require an additional increase to the county’s contribution.

Furthermore, due to the adjustments to these contributions required by state law, counties that increase caregiver wages continue to pay the increased contribution, even when the State’s minimum wage surpasses their locally negotiated wage. Generally, the amount a county contributes is based on the amount it paid in the prior fiscal year plus the current inflation factor. Counties that do not negotiate wage increases generally do not have their contribution changed when the state minimum wage increases, even if such an increase results in higher caregiver wages in those counties. However, when a county negotiates a local caregiver wage increase, a portion of the cost of that negotiated increase is added to the amount the county must pay each year. Thus, when a county contribution is raised for increased caregiver wages in one year, it is also increasing the amount the county must contribute in every future year, even if the state minimum wage increases. ⁹ The increased amount counties must pay when providing a wage increase is governed by the requirements of the State’s Welfare and Institutions Code.

For example, in 2016 Contra Costa County increased its caregiver wages to $12 per hour, an increase of 50 cents that brought the pay to $2 above the State’s minimum wage at the time. When the state minimum wage increased to $10.50 an hour in 2017, Contra Costa increased its caregiver wages by another 25 cents to $12.25. Together these two increases by Contra Costa added $2.8 million to the annual amount the county had to pay in fiscal year 2017–18, as we show in Table 4. However, by 2020, the statewide minimum wage had generally increased to $13 per hour, making the previous negotiated wage increases obsolete. Nevertheless, Contra Costa will continue to contribute almost $3 million more annually because its wage increases in 2016 and 2017 created a permanent increase in its contribution. As a result, counties must weigh the impact caregiver wage increases will have on their long-term finances against the benefit they provide caregivers.

Moreover, counties that choose to pay caregivers significantly more than the state minimum wage face substantial increases in cost. To limit the State’s share of the costs for locally negotiated wage increases, state law since 1999 has limited the State’s required contribution for such increases to a specified dollar amount. The law initially limited the State’s share to 50 cents above the hourly statewide minimum wage for fiscal year 1999–2000. Changes to the law in 2000 generally increased the limit to up to $7.50 per hour, which was $1.75 per hour above the minimum wage at the time. The Legislature continued to increase the limit until it was up to $12.10 per hour by 2007, which was $4.60 per hour above the minimum wage. However, as the state minimum wage increased, the limit did not, and by 2018 the limit was just $1.10 above the general state minimum wage. In 2017 state law generally set future limits to be either $1.10 above specific state minimum wage rates or a cumulative total of up to 10 percent within any three-year period. Thus, if caregiver wages increased to more than $1.10 above specified state minimum wage rates in a given year or totaled more than 10 percent within three years, the counties would pay the increased share of those wages.

Table 4

Contra Costa Continues to Pay a Larger County Contribution Because of Wage Increases in 2016 and 2017

YEAR	2016	2017	2018	2019	2020
State minimum wage	$10.00	$10.50	$11.00	$12.00	$13.00
Contra Costa’s wage	12.00	12.25	12.25	12.25	13.00

	(In millions)
FISCAL YEAR	2016–17	2017–18	2018–19	2019–20
County contribution*	$22.0	$27.2	$29.8	$28.9
County contribution if no wage increases	19.8	24.4	26.9	26.0
Additional amount Contra Costa paid	2.2	2.8	2.9	2.9

For example, in 2018 and 2019, the City and County of San Francisco increased caregiver wages with two $1 raises, to $16 per hour; at that time, the state minimum wage increased from $11 to $12 per hour. The first $1 raise exceeded the 10 percent limit we describe above, and it increased San Francisco’s annual contribution to the State by $8 million. The second $1 also exceeded the 10 percent limit and increased San Francisco’s annual contribution to the State by an additional $13 million. Thus, San Francisco is paying the State $21 million per year because of these raises. Overall, caregiver wages in 2018 and 2019 increased by 14 percent, but San Francisco’s ongoing contributions to the State increased by 20 percent.

In addition to the initial and long-term expenses related to hourly rate increases, counties are experiencing shortfalls in the funds they use to pay IHSS costs. For decades, counties have primarily used funds from state sales taxes and vehicle licensing fees to pay their share of IHSS funding. State law allocates the use of these funds to certain purposes, including social services programs such as IHSS. However, according to Finance, as of 2017, revenue from these funds is no longer sufficient to cover counties’ IHSS costs. As a result, any increases to IHSS caregiver wages have to compete with other county priorities for unrestricted county general funds. For example, in 2019 Kern County offered to increase its IHSS caregiver wages by 25 cents an hour and determined that it could bear the more than $400,000 in additional annual cost. However, according to the chief human resources officer (chief) at Kern, the COVID-19 pandemic led the county to withdraw its offer. The chief stated that the emergency forced the county to reduce its discretionary spending, and any additional county spending on IHSS wages would have led to a corresponding decrease in other programs.

Because of these factors, coupled with increases to the state minimum wage, by 2019 IHSS caregivers in the majority of counties were working for minimum wage. The number of counties paying more than the minimum wage has decreased substantially since state law changed the required county contributions and increased the minimum wage. As Figure 4 shows, in 2014 52 counties paid caregivers above the state minimum wage. In 2019 the number of counties paying above the state minimum wage had decreased to 20. In 2019 this meant that more than 200,000 IHSS caregivers were no longer paid more than the state minimum wage. Further, in 2019 only two counties paid caregivers more than $2 above the minimum wage, compared to 16 counties in 2014. Without additional action by the State, low caregiver pay will remain a persistent issue that counties will struggle to address.

As a way to provide incentive to counties to increase wages above the state minimum wage, the Legislature recently amended state law in a manner that assists counties in increasing caregiver pay; however, the effects of the change are limited. Passed in 2017, the law exempts from county contribution adjustments those locally negotiated wage increases contingent on state minimum wage increases. These increases, which we refer to as wage supplements, increase caregiver wages by a negotiated amount whenever the State raises its minimum wage, so that IHSS wages remain above the minimum wage. By treating wage supplements as one-time events and not as a series of subsequent pay increases, the 2017 law allows counties to have their contribution increased only once and not each time the state minimum wage increases. This option limits additional contributions required of counties and, as of December 2020, 44 counties had negotiated wage supplements under the 2017 law.

Figure 4

Between 2014 and 2019, the Number of Counties Paying Above the State Minimum Wage Decreased by More than Half

Source: Auditor analysis of Social Services’ data and state law.

However, changes to state law added in 2019 will require counties that are below the $1.10 or 10 percent limit that we describe previously to pay a significantly larger contribution—nearly double the existing percentage—for any caregiver wage increases locally negotiated beginning January 1, 2022. Although wage increases could still be negotiated, this change will make such increases vastly more expensive for many counties, some of which already lack sufficient funds to support their share of the IHSS program. As such, it will likely be increasingly difficult to recruit a sufficient number of caregivers to provide services to the expanding IHSS program and counties will struggle to fully serve their recipients.

Recommendations

The Legislature

To balance the need to attract a sufficient number of caregivers into the IHSS program with the need to maintain control over the State’s costs, the Legislature should consider using the annual budget process to allocate additional funds to counties to enable counties to better afford increasing caregiver wages.

To ensure that these offset funds are used to best address wage disparities, the Legislature should prioritize their availability to counties where caregivers earn the least, relative to a living wage, and should exempt these wage increases from Welfare and Institutions Code 12306.16, subdivision (d), so that the amounts allocated are not included in adjustments to the county contribution.

To limit the disincentive for counties to provide caregiver wage increases, the Legislature should modify the State’s cost-sharing system to eliminate the ongoing costs that counties pay for local wage increases that are nullified by increases to the State’s minimum wage.

Social Services

To help ensure that all recipients throughout the State receive prompt approval for services and receive all approved services, by August 2021 and annually thereafter, Social Services should require counties to submit required annual plans. These plans should include, at a minimum, a description of how each county will ensure that services are promptly approved and that recipients promptly receive the approved services.

To help counties prepare to meet future needs for IHSS services, Social Services should revise its regulations to require counties to include long-range projections and strategies in their annual plans. To help ensure that recipients receive timely care, Social Services should, by August 2021, begin monitoring counties’ compliance with the following:

• Approval of IHSS applications within 30 days, unless an extension for obtaining a medical certification applies.
• Prompt approval of IHSS applications for which the 45-day extension for a medical certification applies.
• Provision of services within 15 days of application approval.

For counties that struggle to comply with its regulations regarding providing timely services, Social Services should require—and regularly follow up on—corrective action plans from these counties.

Counties

To help ensure that recipients at each county receive prompt approval for services and also receive all approved services, Butte, Kern, San Diego, and Stanislaus counties should, by August 2021 and annually thereafter, complete required plans that include, at a minimum, specific provisions for how each county will ensure prompt approval of services and that recipients promptly receive the approved services.

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Chapter 2

Changes to the IHSS Funding Structure at Both the State and County Levels Could Address Funding Disparities Among Counties

Chapter Summary

The State’s decision in fiscal year 2012–13 to adjust the contribution each county pays toward the IHSS program by a set percentage—or inflation factor—each year rather than updating each county’s contribution based on its proportion of the IHSS program’s costs has resulted in some counties paying significantly more than their proportional share while others pay less. This approach has effectively increased the State’s share of program costs and penalized counties whose programs did not expand as rapidly as others did. Although in 2017 the State attempted to increase the share all counties paid, its efforts were unsuccessful because counties were unable to rapidly increase their support of the program without state assistance. However, if the State incorporates more modest changes to the way that counties contribute to the IHSS program, it may be able to establish more equitable results.

Although we identified issues with the formula used to determine county support of the IHSS program, we found that counties are using their administrative funds for allowable purposes. Further, counties generally spent what they budgeted and used their administrative funds in part to provide mandated training to caregivers.

The State’s Formula for IHSS Cost-Sharing Has Led to Inequitable County Contributions and Statewide Funding Disparities

The way the State calculates the amount of IHSS costs that counties pay does not account for varying rates of growth among the counties. As we describe in Chapter 1, counties’ contributions to IHSS costs are based on costs incurred in a set fiscal year, and they increase annually at a rate the Legislature sets. By using a set inflation factor across all counties in the State, state law does not account for varying rates of growth in the number of IHSS recipients each county serves or in the number of hours of care those recipients receive. For example, because of the State’s formula, Kern and Butte paid similar county contributions in fiscal year 2018–19, even though the total costs for Kern’s IHSS program were more than $30 million higher than Butte’s, as shown in Table 5. Thus, Kern is receiving a proportionally greater state subsidy for its program and Butte is paying disproportionally more.

Table 5

The State’s Formula for Calculating Counties’ Shares of IHSS Costs Has Led to Inequities (Dollars in Millions)

	BUTTE’S IHSS COSTS, COUNTY CONTRIBUTION, AND STATE SHARE			KERN’S IHSS COSTS, COUNTY CONTRIBUTION, AND STATE SHARE
FISCAL YEAR	COST	COUNTY CONTRIBUTION	STATE SHARE	COST	COUNTY CONTRIBUTION	STATE SHARE
2012–13	$40.5	$6.8	$12.5	$45.2	$7.5	$14.2
2018–19	$66.6	$10.6	$20.0	$98.6	$11.2	$34.2
Percent Change	+65%	+57%	+60%	+118%	+50%	+142%

The State’s formula for calculating county contributions has created a significant funding disparity at both the state and county levels. Before the 2012 changes to the State’s formula, each county paid the State a set proportion of about 18 percent of their overall IHSS program costs. However, by fiscal year 2018–19, counties paid between 6 percent and 29 percent of their costs, depending on how fast or slow their program costs grew compared to the State’s annual inflation factor. For example, 21 counties paid more than their proportional share of IHSS costs in fiscal year 2018–19 because of the State’s outdated formula. Collectively, these counties paid the State $86 million more that year than their IHSS costs and caregiver wages would have indicated. Some of these counties, including Yuba and Mendocino, paid more because the IHSS costs associated with their programs—for the number of recipients, authorized hours, and caregiver wages—grew more slowly than the inflation factor. Other counties paid more because they increased caregiver wages. For example, even though Marin County increased caregiver wages each year, its actual IHSS costs increased by only 38 percent—5 percent annually—compared to the statewide average of 78 percent from fiscal years 2011–12 through 2018–19. However, because of the State’s formula, Marin paid $1.1 million more in fiscal year 2018–19 than it would have had its contribution been based on its program growth and caregiver wages.

Collectively, the remaining 37 counties paid the State $102 million less than they would have if their contributions had been calculated based on actual program costs. In these 37 counties, the growth in the cost of their IHSS programs—from increases in IHSS enrollment, in authorized hours of care, and in the state minimum wage—outpaced the inflation factor that the State’s formula required them to pay. For example, from fiscal years 2011–12 through 2018–19, the costs associated with the IHSS programs at five large counties grew by an average of 11 percent to 14 percent annually while the inflation factor in state law ranged between only 3.5 percent and 5 percent. As a result, by fiscal year 2018–19 these five counties collectively paid $76 million less per year than if their contribution was based on their actual costs. Moreover, because of the continued use of a set inflation factor for all counties, the funding disparity between slow-growing and fast-growing counties is widening each year.

The State’s current formula for calculating county contributions has also created a significant funding disparity at the state level. In the last decade, the proportional share of IHSS costs paid by many counties decreased as the State’s formula has not kept pace with their IHSS programs’ growth. Table 6 compares the annual inflation amount to the average statewide growth in program costs. When a county’s IHSS program costs grow faster than the inflation factor, the contribution the county pays the State decreases proportionally. During fiscal years 2012–13 through 2016–17, the first five years the funding formula was in effect, the number of recipients in the IHSS program grew by almost 30 percent as the federal Affordable Care Act and the State’s expansion of Medi-Cal led to expanded eligibility. At the same time, increases in the number of authorized hours per recipient and the state minimum wage added to the overall cost of care. As a result, although many counties pay more than their fair share, in January 2017, Finance estimated that collectively counties would be paying the State about $600 million less in fiscal year 2017–18 than they would have if the State had continued to base their contributions on a percentage of their costs rather than on their fiscal year 2011–12 costs plus the inflation factor.

Table 6

Growth in IHSS Program Costs Has Exceeded the Inflation Factor Used to Calculate County Contributions

FISCAL YEAR	INFLATION FACTOR	IHSS PROGRAM COST GROWTH
2012–13	N/A	12%
2013–14	N/A	3%
2014–15	3.5%	24%
2015–16	3.5%	12%
2016–17	3.5%	19%
2017–18	3.5%	7%
2018–19	5%	11%
2019–20	N/A	14%
2020–21	4%	14%

In recent years the Legislature has attempted to modify the county contribution, but the discrepancies among counties persist.  As a result of changes to state law in 2017, the amount counties were to contribute to the IHSS program collectively increased by about $600 million. However, as we mention earlier, the vehicle fees and sales taxes that counties rely on to pay their contributions have not provided sufficient revenue to cover these increases. To offset the additional cost to the counties, the Legislature appropriated funds—almost $400 million in fiscal year 2017–18 and lower amounts in later years. The Legislature made additional changes in 2019 that lowered the inflation factor and made some of its 2017 changes inoperative. In essence, the calculations for county contributions returned to a statewide inflation factor applied to the costs in a base year. Despite these modifications to the county contribution in recent fiscal years, the differences in the shares counties pay persist.

However, modest adjustments to the State’s IHSS funding formula could result in more predictable and equitable program funding. The current contributions state law requires from counties do not consider changes in IHSS enrollment or the increased costs associated with state minimum wage increases, leading, as noted, to inequitable county contributions. However, if the funding formula took into account actual county IHSS costs, the county contributions would become more equitable. Likewise, if county contributions took into account the availability of the specific funds counties receive through sales taxes and vehicle registration, many counties would more likely be able to pay their proportional contributions. The Legislature could then use the remaining offsets to assist specific counties when the funds are insufficient to cover their proportional share. Taking steps to correct this deficiency now is important because Finance has projected that IHSS expenses will continue to outpace available funds in the future. Appendix D demonstrates the effect reducing the inflation rate could have on counties currently paying more than their proportional share. For example, temporarily eliminating the inflation factor for the 18 counties that are currently contributing more than their proportional share of IHSS costs would reduce the amount those counties collectively pay by $17 million in the first year, although it would take several years without the application of an inflation factor for them to reach parity.

The Four Counties We Reviewed Complied With Administrative Funding Use and Training Requirements

The four counties we reviewed—Butte, Kern, San Diego, and Stanislaus—used their IHSS administrative funding for allowable purposes. According to Social Services, the State evaluates which county administrative expenses are allowable using federal regulations, state law, and California’s federally approved county cost allocation plan (plan). The plan lists specific types of allowable expenses, such as those related to operating costs and staff, including social workers. The plan also lists categories of unallowable costs, such as fines, penalties, and entertainment expenses. For the counties we reviewed, staff salaries and benefits accounted for between 76 percent and 87 percent of county administrative expenses. Other county administrative expenses included items such as overhead and support, and services and supplies, as shown in Figure 5. The counties we reviewed contracted with various outside service providers such as online hosting companies to provide their IHSS registry, equipment maintenance providers, and legal services companies, all of which are allowable. Although our review identified minor accounting issues, such as a single small payment charged to an incorrect account at one county, we did not identify unallowable expenditures of administrative funds.

Figure 5

County IHSS Administrative Costs in Four Counties From Fiscal Years 2014–15 Through 2018–19 Primarily Supported Staff Salaries and Benefits

Source: County IHSS accounting records.

Further, administrative expenditure amounts at the four counties we reviewed appear reasonable, although all four counties are at or above the statewide average for the percentage of costs spent on administration. As Table 7 shows, each of the counties we reviewed had administrative expenses for their IHSS program that ranged from 7 percent to 10 percent of their total IHSS program costs during the five-year period of our review, fiscal years 2014–15 through 2018–19. Overall, 46 counties spent more than the statewide average on administration as a percentage of their total program costs including the four counties that we reviewed. When we followed up with our selected counties on their administrative expenditures, they were able to adequately explain their higher administrative expenditures. For example, while Kern County’s administrative percentage was the highest of the four counties we reviewed, its number of IHSS recipients also increased by the largest percentage—over 100 percent—from 2014 to 2019. According to the administrative services officer at Kern, the county increased its administrative spending in fiscal year 2012–13 in anticipation of this program growth. By 2019 the county’s administrative spending was close to the statewide average. According to the IHSS program accountant at Stanislaus County, the IHSS program and Public Authority moved into new offices in 2016, which increased the county’s IHSS administrative costs.

Table 7

Administrative Costs Represented 7 Percent to 10 Percent of Program Costs From Fiscal Years 2014–15 Through 2018–19 in the Counties We Reviewed (Dollars in Millions)

COUNTY	COUNTY IHSS COSTS (Care and Administration)	COUNTY ADMINISTRATIVE COSTS (County and Public Authority)	ADMINISTRATIVE PERCENTAGE OF IHSS PROGRAM COSTS
Butte	$290	$21	7%
Kern*	320	33	10
San Diego	1,820	143	8
Stanislaus	380	36	9
STATEWIDE	$38,810	$2,768	7%

The counties we reviewed also generally spent what they budgeted. We examined the IHSS administrative budgets and expenses for the county welfare department and public authority at each of the four counties we reviewed. Because Social Services does not inform counties of their state administrative allocations until midway through the fiscal year, the budgets that counties create are estimates and can vary from the approved allocation. Nevertheless, the four counties we reviewed spent about 94 percent of the amounts they budgeted for IHSS administration. The individual amounts the four counties spent ranged from 90 percent to 98 percent of their budgeted amounts for their welfare departments, and from 73 percent to 102 percent for their public authorities, as we show in Table 8. When we followed up on variances between budgets and spending, the rationales the counties provided were reasonable. For example, when we asked Butte County why its public authority expenses were less than the amount it budgeted in 2017, county staff explained that before 2018 the public authority’s small staff had been contract employees likely with fewer benefits than county employees, which made filling vacancies and absences difficult. However, since 2018 Butte County has reclassified its public authority staff as county employees. At Stanislaus County, according to the IHSS program accountant, because the county does not receive its allocation letters from the State until November or later, it is sometimes hard for the county to fully use the allocation. However, the accountant stated that the county has added additional staff to support workload growth, and we observed that the Stanislaus public authority’s administrative salary expenses have recently increased.

Table 8

Counties We Reviewed Generally Had IHSS Administrative Expenses That Were Close to Their Budgets From Fiscal Years 2014–15 Through 2018–19

	PERCENT OF IHSS ADMINISTRATIVE BUDGETS EXPENDED
COUNTY	COUNTY WELFARE DEPARTMENT	COUNTY IHSS PUBLIC AUTHORITY
Butte	91%	73%
Kern*	98	102
San Diego	96	93
Stanislaus	90	79

Finally, each of the counties we reviewed provided state-mandated caregiver training. State law requires that caregivers be provided training through a public authority or nonprofit. This law does not generally specify the nature or frequency of this training; however, starting in 2009, another law has required prospective caregivers to complete a caregiver orientation developed by Social Services at the time of enrollment. This orientation must include, among other things, a description of the IHSS program and rules and provider-related processes and procedures, such as properly completing timesheets. All four of the counties we reviewed provided the required training by regularly conducting new caregiver orientations using state-mandated materials. Furthermore, San Diego also requires its registry caregivers—those who are available to care for IHSS recipients who do not come to the program with a caregiver such as a family member—to complete a three-hour county training and offers all its caregivers a voluntary 18-hour advanced training course. Similarly, Stanislaus recently signed a memorandum of understanding with its local caregiver union and will provide funding to deliver optional supplemental training classes to caregivers. Butte and Kern counties do not generally provide any caregiver training outside of the state‑mandated orientations.

Recommendation

The Legislature

To provide for more equitable financial participation by counties, the Legislature should revise the State’s IHSS funding formula to include annual updates based on current program growth and costs and a review of specific funds available to counties. To the extent that some counties’ revenues dedicated to IHSS are insufficient to cover their IHSS contributions, the Legislature should provide counties with assistance as it deems appropriate or designate additional funding sources in state law.

We conducted this performance audit in accordance with generally accepted government auditing standards and under the authority vested in the California State Auditor by Government Code 8543 et seq. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on the audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Respectfully submitted,

ELAINE M. HOWLE, CPA
California State Auditor

February 25, 2021

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