California School Districts Misspent Millions Of Cafeteria Money, State Senate Report Finds

 California school districts have misspent tens of millions of dollars intended to provide subsidized meals to low-income students, according to a state Senate report released Wednesday.

The California Department of Education recently ordered eight districts to repay about $170 million to programs that offer free and reduced-price lunches and breakfasts, according to the investigation by the Senate Office of Oversight and Outcomes.

In most cases, the cash-strapped districts used the misappropriated funds to pay for other expenses, such as salaries and equipment, according to the report, titled "Food Fight: Small team of state examiners no match for schools that divert student meal funds."

The cafeteria fund diversions have led to cost-cutting measures, such as shorter lunch periods, inadequate staffing and serving processed foods instead of fresh fruits and vegetables, the report said.

The cases mentioned in the report may only represent a fraction of misappropriated meal money in California because the state doesn't have the resources to monitor how its nearly 3,000 school districts spend their cafeteria funds, the report said. Most of the investigations were prompted by whistleblowers.

Chief Deputy Superintendent Richard Zeiger said Wednesday that the Department of Education plans to hire and train more staff members to monitor district meal programs and conduct more frequent reviews later this year.

"Our goal is to be sure every dollar set aside to feed California's children is spent for that purpose, and that purpose alone," Zeiger said in a statement. "From my point of view, they are literally taking food out of the mouths of kids."

The department ordered the Los Angeles Unified School District to repay $158 million to its cafeteria fund after state officials found misappropriations and unallowable charges, according to the report.

The Los Angeles district, the nation's second largest, said in a statement Wednesday that it has been working with state education officials to "ensure full compliance to federal and state guidelines. All disputed costs for the years in question have been adjusted accordingly."

The Department of Education also ordered repayments, ranging from $369,000 to $5.6 million, from the Baldwin Park, Centinela Valley, Compton, Oxnard, San Diego, San Francisco and Santa Ana districts. Another six districts were ordered to repay smaller amounts.

The San Diego and Santa Ana districts are challenging the department's findings.

California school districts provide 2.4 million free and reduced-price meals every day. The U.S. Department of Agriculture provides more than $2 billion a year in meal subsidies to California, which provides an additional $145 million.

via The Huffington Post

CPEHN: Brown Administration Introduces Medi-Cal Expansion Proposal

Last week, Governor Jerry Brown's Administration introduced their proposal for the Medi-Cal expansion authorized as part of the Patient Protection and Affordable Care Act (ACA). This proposal, while an important first step, fails to take advantage of all of the opportunities available in the ACA to ensure our most vulnerable populations, the majority from communities of color, can access affordable health coverage through a fully expanded Medi-Cal program.


You have the opportunity to contribute to this critical discussion. The Department of Health Care Services (DHCS) is hosting a stakeholder call to discuss the proposal tomorrow, Wednesday, February 6th, from 1:30 to 2:30 pm. To access this call, dial (877) 708-9768 and enter the passcode: 5143546.


If you have further questions, email Cary Sanders at csanders@cpehn.org.

Prison Nation!

Come check out Prison Nation on February 21st at the Day Reporting Center, an exciting event filled with art, guest speakers, and education. 

High-Yield in California Gives Governments Bonanza

California’s rebounding finances are drawing investors to the riskiest debt of the world’s ninth- largest economy, buoying prospects for a revival in bond sales by its blight-fighting organizations.

The successor to the San Francisco Redevelopment Agency sold $123 million of debt last week, a year after lawmakers abolished the issuers. The offer marked the first new bonds to back a redevelopment project since all of the more than 400 authorities were eliminated as part of steps to balance the state budget. The securities are unrated, placing them among the most default-prone local obligations.

With the state poised for its first surplus in almost a decade and muni yields close to 47-year lows, some investors are turning to riskier California bonds. U.S. high-yield local bonds have gained 1.3 percent this year, double the investment-grade return, Standard & Poor’s data show. Debt of former redevelopment agencies is also rallying, fueling demand for San Francisco’s sale and raising prospects other cities may follow.

“People are more comfortable that this type of debt is going to pay,” said Bill Black, Oakbrook Terrace, Illinois- based co-manager of the $7.3 billion Invesco High Yield Municipal Fund, which bought some of the issue. “There’s also a demand for high-yield debt, particularly in California.”

Boats Lifted

The most-populous state had its bond rating raised by S&P last week for the first time since 2006 as the revenue outlook improves for the home to companies such as Apple Inc. and Facebook Inc. The fourth-biggest crude oil producer among states has also seen home values rise more than the national average in the past year, according to Zillow Inc. data.

Under California’s redevelopment program, municipalities formed taxing authorities that issued bonds to improve blighted areas and repaid them with levies on property values enhanced by the projects. The local authorities had nearly $30 billion in debt as of June 30, 2010, the state controller said.

Governor Jerry Brown, a 74-year-old Democrat, and legislators eliminated the agencies effective Feb. 1, 2012, to divert about $1 billion to schools. Brown signed a bill last year clarifyingthat cities and counties taking on obligations of the former agencies could issue debt to fulfill contracts with developers.

Rail Yards

San Francisco’s agency had entered into a contract to redevelop rail yards, according to a staffreport to the oversight board of the successor agency. The project includes housing, a medical center, a police station, offices and biomedical laboratories. It represents $9 billion in new investment in the city, according to the report.

The issuer last week was the Successor Agency to the San Francisco City & County Redevelopment Agency. The tax-exempt securities included bonds maturing in August 2022 and priced to yield 3.54 percent, data compiled by Bloomberg show. The yield was about 1.9 percentage points higher than on AAA munis, Bloomberg Valuation data show.

The sale may open the door to other cities, Black said.

“From an investor’s perspective we feel that the sale was successful and should be conducive for more debt sales with issuers that are in a similar position,” he said in an e-mail.

Risk Judgement

Still, unrated bonds are riskier than most local borrowings. About 4 percent of such munis are in default, compared with 0.1 percent of rated bonds, said Matt Fabian, managing director of Municipal Market Advisors in Concord, Massachusetts. About 92 percent of munis are rated, he said.

For investors willing to take the risk, the extra yield is appealing given the rally in lower-rated local debt. Ten-year securities rated BBB, or two levels above junk, yield about one percentage point above top-rated munis, close to the smallest difference since 2008, data compiled by Bloomberg show.

Holders of securities issued by redevelopment agencies before their elimination are benefiting from a rally in California debt.

Federally taxable San Jose redevelopment bonds maturing in August 2035 traded this week at an average yield of about 5.95 percent, data compiled by Bloomberg show. That was about 2.9 percentage points more than similar-maturity Treasuries, according to BVAL analysis.

The difference is down from about 3.5 percentage points early last year. Moody’s Investors Service rates the bonds one level below investment grade.

Reimbursement Funds

Last week’s offer will reimburse the developer for public improvements such as streets and utilities. Unlike redevelopment bonds repaid through taxes on enhanced property values, the San Francisco debt is funded through three special districts that have been collecting taxes on property since 2002.

Such entities are common in California and levy taxes based on the size of parcels rather than assessed value, said Catherine Reilly, manager of the San Francisco project. The three San Francisco districts will collect taxes on properties until 2050 or the improvements are paid off, whichever comes first, Reilly said in a telephone interview.

Investors probably were reassured by the familiar repayment mechanism, Reilly said. At the same time, she said a limited number of cities and counties will be able to replicate San Francisco’s model. Under California’s tax-limiting Proposition 13, two-thirds of residents within the proposed area must vote to form such a district.

In trading yesterday, yields on benchmark munis due in 10 years were little changed at 1.83 percent after the biggest weekly jump since December, Bloomberg Valuation data show.

via Bloomberg

As Healthy Families Deficit Rises, Tax Pressure Rises With It

The Healthy Families program has run out of money, according to state health officials. The deficit currently stands at almost $100 million and will keep rising every month, accordding to Janette Casillas, executive director of the Managed Risk Medical Insurance Board, which oversees Healthy Families.

Gov. Jerry Brown's administration is pursuing two ideas for refilling the coffers: reinstitution of a recently expired tax on managed care organizations and an appropriation bill if the MCO tax isn't revived.

"The Healthy Families Program budget shortfall [is currently estimated] at $33 million general fund," Casillas said. That figure does not include $15 million the state has used from the general fund to help make Healthy Families ends meet, Casillas said. The sum of those two figures -- $48 million -- represents half of what the state is missing. California's share of Healthy Families funding is matched by the federal government so the state is almost $100 million short.

That amount -- reflecting a shortfall of less than two months -- will increase, Casillas said.
Health plans serving Healthy Families need to wait for payment until the deficiency is resolved, said Diana Dooley, state Secretary of Health and Human Services.

"We have a deficiency process every year," Dooley said. "They will be paid, as happens whenever there's a deficiency. Ultimately, they will be paid."

Healthy Families, California's Children's Health Insurance Program, serves 860,000 children. The state is shifting beneficiaries from Healthy Families to Medi-Cal managed care plans and eventually intends to eliminate Healthy Families. The deficit does not affect the transition or the program's beneficiaries.

Since 2009, the Healthy Families program has relied on some of its funding from the MCO tax, which expired despite the Brown administration's effort last year to reinstitute it.
"It has to do with a failure to extend the MCO tax," Dooley said. "So now there will be a deficiency that will be met through the deficiency process."

That could be a sticky process because of the complexity of reinstituting the MCO tax.
Numerical, Political Hurdles in Reinstating Tax reinstating a managed care tax requires a two-thirds vote in the Legislature, which will require Republican support if the governor can't line up every Democratic vote in the supermajority Legislature. Ironically, Republican lawmakers four years ago were fully behind the MCO tax to support Healthy Families, but support has eroded because the state is phasing out the program.

A tax on managed care companies still could pass -- assuming it has the support of the health plans -- but there seems to be some political arm-wrestling in Sacramento over how the money from that tax would be spent.

Patrick Johnston, president and CEO of the California Association of Health Plans, said insurers could support reinstating the MCO tax, but he hoped it would augment coverage and not just go into the existing Medi-Cal fund.

"The state owes the plans, and we expect the plans will be paid for covering children in Healthy Families," Johnston said.

"The state has a cash flow problem, and we expect the state to resolve it and that the plans will get paid. I mean, it's clearly not a dispute about the plans being owed," he said. "So now the state has the option of internal borrowing or seeking a supplemental appropriation."
Internal borrowing is an unlikely fix, Casillas said.

"We would refer to this as a need for a supplemental appropriation," Casillas said. "Borrowing internally was not an option for us, although that was explored. Collectively, we had explored the possibilities or options, given that the MCO tax expired and was not reinstituted. It is apparent we will need a supplemental appropriation, where a bill goes to the Legislature and asks for X amount of money."

Casillas pointed out that MRMIB is stuck in an unusual position because the state's budget relies on an extension of the MCO tax, but those dollars aren't coming into Healthy Families. Basically, part of the Healthy Families budget is funded with money that doesn't exist, once the MCO tax expired.

Measuring the shortfall is made more complicated by the transition of children from Healthy Families to Medi-Cal managed care plans. Enrollment will decline every month, so the monthly additional deficiency must be determined based on changing numbers of enrollees.
"It's very odd that I find myself -- that the program finds itself -- in this position," Casillas said. "We will have to figure out each month and see how that deficiency is growing, even though it's growing off a declining enrollment base."

Health Plans Can Wait Johnston said health plans will wait for the state to resolve its deficiency.

"Just like with anyone else, timely payment is better than late payment," he said. "But the health plans have contracts with the state to provide services, and we'll count on the state honoring its obligation to pay according to the contracts. What the state does internally to manage its cash flow is its problem."

Johnston likened it to selling a car, where the seller doesn't ask how the buyer is going to come up with payment. "Whether you get it from checking or savings is your decision-making process. My expectation is that you'll make the payment. I mean, you don't turn to me and say, 'How do you think I should get the money?'"

The real question is whether the governor can muster the political capital to reinstitute the MCO tax. When the Healthy Families program was in financial trouble in 2009 and was about to restrict enrollment, the health plans were the ones that came up with the idea of the MCO tax, Casillas said.

The state likely needs health plan support to make the reinstatement of the MCO tax palatable to Republicans. However, the health plans association has ideas about how the money should be spent that may differ from the Brown administration's.

All of that makes a bit of a political minefield, so Johnston paused from the discussion, to carefully consider his words.

"We will await further guidance," he finally said.

Health Plan Backing According to Johnston, health plans would support reinstatement of the MCO tax as long as it all doesn't go in the general Medi-Cal pot, but is spent at least in part on beefing up services for seniors and the disabled.

"We would consider a renewal of the MCO tax to supplement the Medi-Cal program and contribute to its long-term integrity," Johnston said. "Medi-Cal is underfunded in many areas, including seniors and persons with disabilities, so a tax on Medi-Cal plans that would draw down federal funds should use the money to supplement and not supplant existing funding.
"
Although the Brown administration has not said publicly where it wants the MCO money to go, Johnston said the state is considering putting all the money from the MCO tax into the general Medi-Cal fund and he doesn't think that's right.

"A tax on Medi-Cal plans must meet the task of being used for Medi-Cal programs, and we think this added money should augment existing funds to fund particular areas that have struggled, most recently the transfer of elderly and frail beneficiaries to Medi-Cal managed care programs will need additional support," Johnston said.

"Health plans have not opposed the MCO tax, but where the money goes always matters," he said. "We would hope that our voice would matter."
The deadline for resolving the issue is June 15, assuming the budget is passed on time.

California GOP sees role to protect education funds

What's a marginalized minority party to do?

It's a key question for Republican lawmakers staring down a newly enshrined Democratic supermajority. Part of the answer so far seems to be a renewed emphasis on higher education.

Both Sen. Anthony Cannella, R-Ceres, and Assemblyman Jeff Gorell, R-Camarillo, have introduced a pair of bills that would freeze tuition at the University of California andCalifornia State University for the seven-year duration of the higher tax rates mandated by Proposition 30.

Since voters approved the tax measure last fall, the authors say they have a role to play in ensuring that an influx of new money from Proposition 30 is exclusively used for education. They say failing to do so would betray voters to whom the initiative was sold as a vehicle for averting more education cuts.

"A lot of people made a lot of implied promises to college students that everything would be OK if Prop. 30 passes," Cannella said. "If anyone thinks the state of California will just keep that money in a bank account," he added, "it's just not going to happen."

Democrats are more skeptical of Republican lawmakers' motives, given that they resisted putting such a measure on the ballot in the first place. Had it failed to pass, resulting cuts in higher education would likely have spurred a tuition hike.

"They're in a situation where they have been fundamentally irrelevant to most of the public policy discussions in Sacramento for quite a while now, and their first step to have some credibility is to say something in the public policy debate," said Democratic strategist Bill Carrick. "So what they've done, obviously, is say, well, people care about education, let's get out front on this."

The fact that Republicans went from opposing Proposition 30 to casting themselves as responsible stewards of the money it raised is a move born more of expedience than of principle, said Steve Maviglio, a Sacramento political consultant who worked for two Democratic Assembly speakers. He called the emphasis on higher education "a post-election gimmick."

"It's like they woke up the day after the election and decided they have a commitment to education," he said.

The focus on higher education was evident in GOP responses to Gov. Jerry Brown's budget proposal last month, which Brown trumpeted as a testament to the new-found fiscal stability Proposition 30 is set to provide.

While many Republican lawmakers praised Brown's budget, they also exhorted Brown and Democrats to ensure that the influx of new funding goes to schools.

In a written response to the budget, Republican Connie Conway, R-Tulare, called the tuition freeze bills an effort to "ensure that this revenue goes to boost higher education funding and prevent tuition and fee increases at our public colleges and universities, just as the voters intended."

In a follow-up interview, Conway affirmed that "we see our role as a watchdog."

"I believe that promises made should be promises kept, so if you're out there telling people 'if you vote for this to raise taxes then it's going to go to education,' then it should," Conway said.

Assemblyman Dan Logue, R-Marysville, has also introduced a pair of higher education bills. They would create pilot programs enabling students to obtain a degree for $10,000 and $20,000, respectively, an effort to hold down ballooning tuition costs.

"We're pricing kids out of a good education, especially the middle class," Logue said.

Democrats campaigned heavily for Proposition 30 on college campuses, mobilizing student voters by saying the ballot measure would prevent a tuition hike.

Logue is also promoting his measures to the young voter bloc, which had some of the highest turnout rates of any age group in California during the November elections.

In a recent press release, he said students have "some of the most powerful voices when it comes to getting involved in government" and called his bills "the beginning of a revolution to the very pressing issue of the rising costs of education."

The 2012-13 budget promised the University of California and California State University $125 million each in 2013-14 if Proposition 30 passed, and the schools agreed to hold tuition steady for 2012-13. Dianne Klein, a spokeswoman for the University of California, said the funding levels in Brown's budget should be enough to prevent a tuition bump this year.

Pushing to ensure that remains the case is one way for Republicans to exert influence when they otherwise have little room to maneuver, said Aaron McLear, political consultant and former press secretary to Gov. Arnold Schwarzenegger.

"They have limited leverage, no question about it," McLear said. "So I think they're using what power they have to try and effect change in the state instead of just curling up and moaning about being in the superminority."

Cannella did not publicly take a position on Proposition 30. But now that the voters have spoken, Cannella said, "the equation has changed." New revenues are coming, and that presents a chance for Republicans to make the most of their diminished status.

"On a political landscape in which support for education is measured predominantly by the amount of money you're willing to spend, Republicans don't get many opportunities to play the education issue to their advantage," said Dan Schnur, director of the University of Southern California's Unruh Institute of Politics. "By arguing about how the Prop. 30 money is going to be spent, they get a chance to look like the big guys."

via The Sacramento Bee

Read more here: http://www.sacbee.com/2013/02/03/5161070/minority-california-republicans.html#storylink=cpy

California farmers eager for immigration reform

At Chandler Farms, just outside of Selma in the San Joaquin Valley, about three dozen workers are needed each season to pick acres of delicate peaches, plums, nectarines and citrus.

In recent years, however, owners Carol and Bill Chandler have struggled to find laborers as immigration from Mexicohas slowed to a near standstill.

"When the crops are ripe, we need a reliable labor force," she said. "That's what we're worried about going forward."

The Chandlers are among the state's farmers who welcomed a move this week by Congress to make immigration reform a legislative priority this year.

But the promised changes may not be enough to solve their chronic labor problems, which have been exacerbated by deportations, a stronger Mexican economy and, in good times, the lure of construction jobs.

On Monday, a group of Republican and Democratic senators unveiled a blueprint that aims to grant legal status to an estimated 11 million illegal immigrants in the country.

President Obama also joined the fray Tuesday, urging Congress to move legislation along quickly this year.

Immigration reform has been a rallying cry among farm groups in California and around the country for years.

According to data from the U.S. Department of Agriculture, roughly half of all hired crop farmworkers are in the country illegally. Of all workers, 7 of 10 are from Mexico, a country that has provided a steady supply of farm laborers to California since the middle of the last century.

With immigration reform back on the table this year, California farm groups are fiercely lobbying to make sure proposed legislation includes provisions for their workers.

There have been false starts in the past, including efforts by former President George W. Bush, who sought to create a guest worker program and overhaul immigration laws during his administration.

But the latest push to tackle the highly politicized issue is "one of the best signs we've seen in a long time," said Ken Barbic, senior director of government affairs for Western Growers in Irvine, a trade group that represents farmers in California and Arizona.

If Congress passes legislation, "the folks who are currently working here with false documents, it takes them out of the shadows," Barbic said.

Barbic added that immigration reform would remove legal liabilities for employers who hire illegal immigrants.

Diego Olagaray, 51, who grows 750 acres of wine grapes in Lodi, just north of Stockton, said that granting legal status to the state's agricultural workers ensures that both farm hands and employers would be able to breathe a little easier.

"Some of these workers go back to Mexico on a regular basis," Olagaray said. When they travel, "they're fearful of something happening to them. With amnesty, it'll make them feel more comfortable. They'll also feel that they're part of society.… And it will make it easier for employers as well."

Olagaray said that if immigration isn't resolved soon, labor shortages will become more pronounced. Last spring, he said he had trouble filling his usual crew to work on his vineyard, and other growers saw ripe crops languish in the fields.

Still, any policy effort may do little to solve the labor shortage for California farmers, said Edward Taylor, a professor of agriculture and resource economics at UC Davis.

Such shortages predate the recession. During boom times, contractors persuaded many workers in the fields to work in construction jobs, according to farmers and Taylor, who recently co-wrote a study that examined the decline in the number of farmworkers from Mexico.

A key finding in Taylor's study was that more immigrants were staying home to work on Mexico's farms. They were taking advantage of a strengthening Mexican economy and a growing middle class that ramped up agricultural production.

Now, American farmers find themselves competing for a dwindling supply of workers.

"Immigration policy stops being a solution if you can't find workers," Taylor said.

Farmers in California have already begun adapting to the drying supply of laborers.

Growers, for instance, have swapped out labor-intensive crops such as tomatoes and peaches for less labor intensive ones such as tree nuts.

Almonds, which were the second-most valuable crop in California in 2011, were ranked No. 11 in 2000. Sales of almonds have skyrocketed from $682,000 to $3.9 billion during that time period, according to the California Department of Food and Agriculture.

Technology is also playing a role. Using robots that shake loose crops from trees, farmers have been able to cut back on labor costs.

Paul Wenger, president of the California Farm Bureau Federation, said farmers are well-aware that their industry is changing.

And although he agrees that a dwindling labor supply will cause problems further down the line, he said Congress should still pass immigration reform that will allow farmers to hire legal farmworkers.

"Within the next two decades, we're going to have a problem. A domestic workforce will not want to work in the fields," he said. "It's going to be a problem. But that still doesn't mean we shouldn't fix the problems that exist today."

via LA Times