Understanding Realignment: California’s Shifts in State and County Responsibilities

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Overview of This Report

Every year, California’s 58 counties — under state oversight — deliver essential public services that support Californians’ well-being, keep communities healthy and safe, and protect vulnerable populations, including children, older adults, and people with disabilities. These programs are funded with a broad range of revenues, including federal dollars, local county taxes, and funding provided by the state.

Counties’ responsibility for these services grew substantially beginning in the 1990s. The state restructured — or “realigned” — the state-county relationship in 1991 and again in 2011 by increasing counties’ fiscal and programmatic obligations for a number of services, while also providing counties with dedicated, ongoing revenues to help support their new costs.

These state-to-county “realignments” encompass vital programs that:

• aim to protect vulnerable children and adults,
• address health inequities,
• support people facing mental health and/or substance use challenges,
• keep people from cycling through carceral systems, and
• improve Californians’ quality of life, particularly residents with low incomes.

Yet, while counties receive billions of dollars each year to deliver these critical public services, the concept of realignment is not well understood. Moreover, the framework and funding structures that underpin realignment are complex and can be challenging to grasp.

This report cuts through the complexity by explaining what realignment is, how it is structured, and key ways in which it has changed over time. This report does not describe every detail of these complex funding structures. It also does not evaluate realignment or assess how realigned services have been implemented. Instead, it provides a high-level overview that explains the basics, outlines the 1991 and 2011 realignment frameworks, and describes how realignment has evolved in recent decades.

Part 1: Realignment — The Basics

What Is Realignment?

California’s state government and the state’s 58 counties have long shared responsibility for financing and delivering a broad array of services, including public health, mental health care, and support for families with children with low incomes.

However, state and county roles are not static. Instead, they vary across programs and have shifted over time as state policymakers have redefined the state-county relationship. These periodic shifts in responsibility between the state and counties for the financing and implementation of public services are known as “realignment.”

Types of Realignment

The transfer of fiscal and programmatic responsibility for public services between the state and counties typically happens in one of two ways:

Realignment can modify how the state and counties share the cost of public services.

• Historically, the state and counties have shared the cost of many public programs operated by counties. Often, these services are also supported with federal funding, in which case the state and counties split the nonfederal share of costs (although not usually 50/50).
• Realignment can modify these state/county “cost-sharing ratios” so that one level of government pays more of the cost of a service and the other pays less. For example, counties’ share of costs for a program could be increased from 30% to 60%, with the state’s share reduced from 70% to 40%.

Realignment can transfer the full cost of a program to one level of government or the other.

• Historically, the most common transfer scenario has been for state policymakers to eliminate General Fund support for a program that counties already operate and shift 100% of the cost of the program to counties.
• The state may also require counties to take on new responsibility for a program or function that is operated at the state level, shifting 100% of the cost from the state General Fund to counties.
• In either case, instead of receiving state General Fund dollars, counties receive dedicated realignment revenues to support their new or increased costs. (See the Funding to Support Realigned Services section below.)

California’s Two Sweeping Realignments: 1991 and 2011

California has realigned multiple programs in recent decades, including transferring youth justice responsibilities entirely to counties and realigning responsibility for trial courts from counties to the state.

However, the most far-reaching realignments were adopted in 1991 and 2011 when counties took on additional responsibility for a broad range of services. These realignments — 20 years apart — expanded counties’ fiscal and programmatic responsibilities in several policy areas.

The 1991 and 2011 realignments encompass the following policy areas:

See Part 2 and Part 3 for key facts about the 1991 and 2011 realignments, respectively, and the Appendix for a description of the programs included in each realignment.

Rationale for Realignment

The goals of realignment typically fall into three categories:

Realignment can help to address state budget deficits.

• For example, Governor Pete Wilson and Governor Jerry Brown proposed major state-to-county realignments — in 1991 and 2011, respectively — in response to multibillion dollar state budget deficits.
• Realigning responsibilities to the counties helped to address these shortfalls by shifting costs from the General Fund to the newly created realignment revenues that flowed directly to counties.

Realignment can help to improve funding stability.

• Providing dedicated revenues to support realigned programs helps to insulate these programs from reductions when the state faces a budget shortfall.
• For example, the health and mental health services included in the 1991 realignment were previously funded with state General Fund dollars. Due to state budget shortfalls, these programs were cut in previous budgets, according to the Department of Finance. Moreover, these health and mental health services “would have been subject to additional major reductions” in 1991 to help close the budget deficit if state policymakers had not adopted realignment that year.

Realignment can — but does not always — promote greater efficiency and effectiveness in service delivery.

• A primary rationale for the 2011 realignment was that transferring funding and responsibilities to local governments would “allow governments at all levels to focus on becoming more efficient and effective,” helping to ensure that services are “delivered to the public for less money.” Similar claims were made for the 1991 realignment.
• Two evaluations of the 1991 realignment — in 2001 and 2018 — found some evidence of progress in terms of efficiency and effectiveness. However, these evaluations also found that counties’ flexibility over these programs and their ability to control costs had diminished substantially since 1991 due to state law changes and other factors.

Funding to Support Realigned Services

When state policymakers shift responsibilities to counties, they provide dedicated annual funding to help counties pay for their additional costs. Annual funding to support counties’ 1991 and 2011 realignment responsibilities comes from two sources — the sales tax and the Vehicle License Fee (VLF). Specifically:

• To fund the 1991 realignment, state policymakers increased the state sales tax rate by one-half cent and raised the state’s VLF. Counties continue to receive these dedicated funds each year to support the programs that were realigned to them in 1991.
• To fund the 2011 realignment, state policymakers redirected a portion of the state’s existing sales tax and VLF revenues to counties, without raising taxes. In other words, these dollars were carved out of existing state revenue streams. Counties continue to receive these dedicated funds each year to support the programs that were realigned to them in 2011.

The sales tax provides most of the revenue that counties receive to support their responsibilities under the 1991 and 2011 realignments. While sales tax revenues generally grow over time, they can decline from year to year, such as during recessions. When sales tax revenues fall, counties receive less realignment funding than they received the year before. When the economy improves, realignment revenues begin to grow again, providing counties with more resources to carry out their responsibilities.

However, under the 1991 realignment, the revenue shortfalls created during economic downturns are not filled. Even when revenues begin to grow again — providing additional funding for realigned programs — this growth comes on top of a permanently lowered funding base. This leaves counties with less revenue to carry out their 1991 realignment responsibilities over the long term. In contrast, under the 2011 realignment, counties’ funding base is restored when revenues begin to recover following a recession.

Moreover, counties are not reimbursed for their actual costs for realigned programs. Instead, counties receive dedicated revenue that is intended to cover their costs over time. However, this revenue often falls short of meeting the need for and growing cost of services, including counties’ health, public health, and behavioral health responsibilities under both realignments.

Realignment revenue comes closer to covering counties’ actual costs for social services programs, such as Child Welfare Services and In-Home Supportive Services. Under the 1991 realignment, these “entitlement” or “caseload” programs are first in line for sales tax revenue growth, with these growth revenues supporting counties’ rising costs for these services.

Part 2: Key Facts About the 1991 Realignment

What Did the 1991 Realignment Do?

In 1991, counties took on increased responsibility for a number of health, mental health, and social services programs. (See the Appendix for descriptions of these programs.) This “realignment” changed the state-county relationship in two major ways:

The state transferred responsibility for certain health and mental health programs to counties.

• Specifically, counties took full responsibility for key health and mental health programs and also absorbed larger costs as the state eliminated General Fund support for those programs (although the state still maintained an oversight role).
• The transferred services included community-based mental health, public health, and health care provided to uninsured adults with low incomes (commonly known as indigent health care).

The state generally increased counties’ share of the nonfederal costs for multiple social services programs as well as for one health program.

• Prior to realignment, the state paid most or all of the nonfederal costs of major health and social services programs using General Fund dollars.
• Realignment generally shifted more of these nonfederal costs to counties, which lowered the state’s share of costs, freeing up state General Fund dollars for other purposes.
  • Child Welfare Services and In-Home Supportive Services (IHSS) were among several social services programs for which counties’ share of cost increased under the 1991 realignment. (IHSS is generally considered a social services program but may be referred to as a health program.)
  • Counties also took on a larger share of the cost for California Children’s Services (CCS), a health program for children with certain diseases or health problems. (CCS was grouped with social services programs for the purpose of the 1991 realignment.)
• In some cases, the state reduced counties’ share of cost — and increased the state’s share — to reflect counties’ relatively limited control over spending. The state began to pay a larger share of the cost for:
  • Cash assistance for low-income families with children, which was integrated into the new CalWORKs program in the mid-1990s.
  • County administration, which reflects counties’ operational costs for key social services programs.

How Is the 1991 Realignment Funded?

In order to support the programs included in the 1991 realignment, the state Legislature increased taxes and dedicated the revenues to the realigned programs. In 2025-26, these taxes are estimated to raise $7.7 billion. Specifically:

The Legislature raised the state sales tax rate by one-half cent and increased the state’s Vehicle License Fee (VLF), allocating all of the revenue to counties to support the realigned programs.

• The half-cent sales tax rate provides almost two-thirds of annual 1991 realignment revenues, totaling an estimated $4.9 billion in 2025-26.
• The VLF increase generates about one-third of annual realignment revenues, totaling an estimated $2.8 billion in 2025-26.

How Is the 1991 Realignment Structured?

The 1991 realignment revenues flow through a series of accounts that grew increasingly complex as the Legislature modified the original framework in the decades after the 1991 realignment took effect. (See Part 4 for details on this point.)

Revenue

Annual revenues generated by the higher sales tax rate and the VLF increase first flow into “base funding” accounts.

• Realignment “base” revenue is allocated through the Sales Tax Account or the Vehicle License Fee Account, with these funds supporting the various services included in the 1991 realignment.
• Realignment revenues sometimes fail to reach the base level of funding, such as when sales tax revenues decline during a recession. When this happens, counties’ funding base is reduced for a fiscal year to match the (lower) available revenues. In other words, counties receive less realignment funding than they received the year before.
• Under this scenario, funding for the realigned programs increases only when realignment revenues grow again in future years. However, counties’ realignment base is permanently lowered — that is, the revenue that counties lose during tough budget years when revenues fall short is not made up in future years.

If available, annual revenues generated by the higher sales tax rate and the VLF increase next flow into “growth funding” accounts.

• Growth revenue — if available — is allocated through the Sales Tax Growth Account or the Vehicle License Fee Growth Account, with these funds supporting 1991 realignment services based on a complex set of funding priorities.

CalWORKs Allocation

Nearly 40% of realignment funding — an estimated $3.0 billion in 2025-26 — is used to achieve state savings by offsetting the state’s cost for CalWORKs.

• These funds flow into three accounts created in the early 2010s: the CalWORKs MOE [Maintenance of Effort] Subaccount, the Family Support Subaccount, and the Child Poverty and Family Supplemental Support Subaccount. (See Part 4 for details.)
• Using 1991 realignment dollars to offset a portion of the state’s General Fund cost for CalWORKs frees up state dollars for other purposes and reduces pressure on the state budget.

Health Allocation

About 16% of realignment funding — an estimated $1.2 billion in 2025-26 — supports counties’ role in delivering health services.

• The Health Subaccount includes funding for public health activities as well as for indigent health care (care provided to low-income, uninsured adults).
• Counties’ role in indigent health care diminished substantially starting in 2014 when California adopted the Medi-Cal eligibility expansion as allowed by the Affordable Care Act. With this expansion, millions of uninsured adults who previously accessed health care through county programs became newly eligible for Medi-Cal. With fewer adults turning to counties for health care, the state redirected some indigent health care dollars away from counties, as described in Part 4.

What Else Changed with Realignment in 1991?

In addition to establishing dedicated revenue streams and allocation formulas, the 1991 realignment legislation included other significant elements. Specifically:

Counties may transfer a limited amount of their annual revenue from one realignment account to another.

• Counties are allowed to transfer funds among the Health, Mental Health, and Social Services subaccounts.
• Specifically, up to 10% of one account’s annual allocation may be shifted to the other two subaccounts.
• In addition, under certain circumstances, counties may transfer:
  • An additional 10% of funds from the Health account to the Social Services subaccount.
  • An additional 10% of funds from the Social Services subaccount to the Health or Mental Health subaccounts.

Realignment legislation included “poison pill” provisions — one of which remains in effect today.

• When the realignment legislation was advancing, state leaders were uncertain whether any of its provisions would be challenged through a lawsuit or a “mandate” claim filed by a county seeking reimbursement from the state.
• As a result, state leaders added several “poison pills” to the legislation that were intended to nullify key components of realignment if a challenge was successful.
• Some of the hurdles created by these poison pills were ultimately overcome — specifically, provisions that would have rolled back the half-cent sales tax increase or the Vehicle License Fee increase, either of which would have reduced the revenue available to support the realigned programs.
• However, one of the poison pills remains active: If any county makes a mandate claim that results in state costs of more than $1 million, the 1991 realignment would come to an end.

Part 3: Key Facts About the 2011 Realignment

What Did the 2011 Realignment Do?

In 2011, the Legislature built on the 1991 realignment by further increasing counties’ responsibility for several health and social services programs while also realigning certain public safety functions. (See the Appendix for descriptions of these programs.) This new realignment in 2011 revised the state-county relationship in two key ways:

How Is the 2011 Realignment Funded?

To fund the 2011 realignment, state leaders carved out portions of two existing revenue streams and dedicated those revenues to counties. These revenues are estimated to total $10.7 billion in 2025-26.

The Legislature redirected to counties a portion of state sales taxes as well as a portion of Vehicle License Fee (VLF) revenue in order to fund the realigned programs.

• The Legislature shifted revenues equal to 1.0625 cents of the state sales tax rate to counties. In other words, slightly more than 1 cent of the sales tax rate on each $1 in taxable purchases bypasses the state treasury and goes directly to counties. In 2025-26, these diverted sales tax dollars are estimated to total $9.8 billion — more than 90% of all revenues that counties receive through the 2011 realignment.
  • In addition, the state uses General Fund dollars to backfill for certain exempt sales tax categories. This provides a relatively small amount of additional revenue to support counties’ 2011 realignment responsibilities. This General Fund backfill is estimated to total $44.2 million in 2025-26.
• The Legislature also redirected a portion of VLF revenues to counties. In 2025-26, the VLF revenues shifted to counties are estimated to total $919.3 million — about 9% of all revenues that counties receive through the 2011 realignment.

How Is the 2011 Realignment Structured?

The 2011 realignment revenues move through a complicated set of accounts that the Legislature last modified in 2012, the year after this realignment was adopted.

Revenue

The state sales tax and Vehicle License Fee (VLF) revenues that fund the 2011 realignment flow into an account called the “Local Revenue Fund 2011” until this fund reaches its “base” level for a fiscal year.

• These base funds support counties’ role in providing the services included in the 2011 realignment.
• Realignment revenues sometimes fail to reach the base level of funding, such as when sales tax revenues decline during a recession. When this happens, counties receive less funding, but the gap is tracked and the base is gradually restored when revenues begin to grow again.
• In other words, under the 2011 realignment, counties’ base funding is temporarily lowered when revenues decline. In contrast, when 1991 realignment revenues fail to reach the base level, counties’ base funding is permanently lowered because there is no requirement for base restoration in the 1991 realignment.

Any sales tax and VLF revenue that exceeds the base funding level for a fiscal year becomes “growth” revenue.

• Growth revenue — if available — is allocated to the programs included in the 2011 realignment based on complex rules that set funding priorities.
• For example, if sales tax revenue grows year-over-year, about two-thirds of that growth is divided among the behavioral health and social services programs, while the remaining one-third of those growth dollars go to the public safety programs.

Behavioral Health Allocation

Nearly one-third of 2011 realignment funding — an estimated $3.5 billion in 2025-26 — supports behavioral health services. This includes funding for both 1) the mental health and substance use disorder treatment services that counties took increased responsibility for starting in 2011 and 2) the mental health services that were shifted to counties as part of the earlier realignment in 1991.

Public Safety Allocation

Over one-third of 2011 realignment funding — an estimated $4.0 billion in 2025-26 — supports public safety programs.

• These funds flow into the Law Enforcement Services Account and primarily support counties’ role in “community corrections” — the management, supervision, and rehabilitation of people convicted of certain low-level offenses who, prior to 2011, served their sentences in state prison and were supervised by state parole agents upon release.

What Else Changed with Realignment in 2011?

In addition to establishing dedicated revenue streams and allocation formulas, the 2011 realignment legislation included other significant elements. Specifically:

Counties may transfer a limited amount of revenue between the Behavioral Health and Protective Services subaccounts, both of which are part of the Support Services Account.

• Specifically, counties may shift — in either direction — an amount of funding that does not exceed 10% of the funds in the smaller account, based on the prior fiscal year’s funding level. (Certain counties are not subject to the 10% cap.)
• Any transfer applies only for the fiscal year in which it is made, meaning that transfers do not create a permanent funding shift.

Counties are not allowed to transfer funds between the Support Services Account and the Law Enforcement Services Account.

• This means that funding for behavioral health programs and social services cannot be used for law enforcement purposes (or vice versa) — even on a temporary basis.

The 2011 realignment includes constitutional protections approved by California voters.

• In 2012, California voters strengthened the 2011 realignment by approving Proposition 30, which enshrined significant protections for the state and counties in the state Constitution. Specifically, Prop. 30:
  • Constitutionally protects the state revenue that was shifted to counties to fund their responsibilities under the 2011 realignment. This means the state cannot reduce or eliminate these revenues without voter approval.
  • Requires the state to provide counties with alternative funding if current realignment revenues are eliminated.
  • Allows counties to disregard state policy changes that increase realignment program costs if the state does not provide funding to offset those costs.
  • Requires the state to pay at least half of any 2011 realignment program cost increases that stem from federal court or administrative decisions or federal law or regulations.
  • Constrains the state’s ability to submit federal plans or waivers that would increase counties’ costs for realigned programs.
  • Protects the state from mandate claims related to the 2011 realignment.

Part 4: How State Leaders Reshaped Realignment to Benefit the State Budget

In the early 2010s, as California struggled to emerge from the Great Recession, state leaders made three major changes to the 1991 realignment framework to reduce cost pressures on the state’s General Fund. Notably, one of these changes involved shifting funds between the 1991 and 2011 realignments.

Taken together, these changes today provide a roughly $3 billion annual benefit to the state budget. These adjustments to the 1991 realignment funding structure — and the new accounts that were created to implement them — are described below.

CalWORKS MOE Subaccount

In 2011, state leaders approved a complex funding shift between county-run mental health programs and CalWORKs, creating over $1 billion in annual state General Fund savings.

• In 2011, as state leaders were developing California’s second major state-to-county realignment, they decided to use a portion of the revenue from this new realignment — capped at $1.1 billion per year — to pay for counties’ mental health obligations, which were shifted to counties as part of the first major realignment in 1991.
• This fund shift freed up $1.1 billion of 1991 realignment revenue that otherwise would have remained in the Mental Health Subaccount and supported counties’ mental health responsibilities. In other words, counties no longer needed those 1991 realignment dollars for mental health because those funds were replaced with revenue from the 2011 realignment.
• These freed-up revenues were redirected to a CalWORKs MOE Subaccount that was added to the 1991 realignment framework (MOE = “maintenance of effort”). These dollars replaced, or offset, the state’s cost for CalWORKs grants, resulting in ongoing annual state General Fund savings of $1.1 billion.
• Because this policy change implemented a funding shift rather than a funding cut, there was no detrimental impact on county-run mental health programs or on the CalWORKs program.

Child Poverty and Family Supplemental Support Subaccount

In 2013, state leaders redirected a portion of 1991 realignment “growth” revenue to support periodic increases to CalWORKs cash assistance for families, precluding the need for the state General Fund to pay for these increases.

• In the early 2010s, the state adjusted counties’ share of cost for the In-Home Supportive Services (IHSS) program, which counties fund largely with revenues provided by the 1991 realignment.
• With this adjustment, counties’ costs for IHSS grew more slowly than under the previous cost-sharing formula. As a result, counties needed less 1991 realignment revenue to cover their annual IHSS cost growth. Under the longstanding rules of the 1991 realignment, these freed-up revenues became available for other programs, such as public health and mental health services.
• However, state leaders changed the rules for distributing certain 1991 realignment growth revenue (“general growth”) in order to provide periodic CalWORKs grant increases with these growth dollars. These changes were included in Assembly Bill 85 (Committee on Budget, Statutes of 2013), as modified by Senate Bill 98 (Chapter 358, Statutes of 2013).
• As a result, in addition to supporting counties’ long-standing health and mental health obligations, a portion of “general growth” dollars were shifted into a Child Poverty and Family Supplemental Support Subaccount — often called the “Child Poverty” account — that was added to the 1991 realignment framework by AB 85 in 2013.
• Child Poverty funds provide automatic CalWORKs grant increases if there is enough funding to support 1) the ongoing cost of prior grant increases and 2) the ongoing cost of a new grant increase. Funds in the Child Poverty account have grown from $0 in 2013-14 to an estimated $1.1 billion in 2025-26.
• Using a portion of 1991 realignment revenue to fund periodic CalWORKs grant increases means that less money from the state’s General Fund is needed for this purpose, improving the state budget’s bottom line. Nonetheless, state leaders have continued to use General Fund dollars to provide some discretionary grant increases over the past decade. These discretionary increases — which are on top of the automatic increases provided with realignment funds — have aimed to reduce the number of CalWORKs families living in extreme poverty.

Appendix

1991 Realignment Details: Funding and Programs

This table displays estimated funding for each 1991 realignment account as of the enacted 2025-26 state budget (signed into law in June 2025):

This table describes the programs and functions included in the 1991 realignment:

2011 Realignment Details: Funding and Programs

This table displays estimated funding for each 2011 realignment account as of the enacted 2025-26 state budget (signed into law in June 2025):

This table describes the programs and functions included in the 2011 realignment:

Other Key Realignment Resources

• California Budget & Policy Center
  • Finishing the Job: Moving Realignment Toward Completion in 2012 (June 2012)
• California Department of Finance
  • 2025-26 State Budget, Enacted Budget Detail, 1991 State-Local Realignment (July 2025)
  • 2025-26 State Budget, Enacted Budget Detail, 2011 State-Local Realignment (July 2025)
  • Senate Bill 90: 1991 Realignment Report (January 2019)
• California HealthCare Foundation
  • A Complex Case: Public Mental Health Delivery and in California (July 2013)
• County Behavioral Health Directors Association of California
  • 1991 Realignment (December 2023)
• County Welfare Directors Association of California
  • 1991 Realignment (February 2017)
• Legislative Analyst’s Office
  • Rethinking the 1991 Realignment (October 2018)
  • Realignment Revisited: An Evaluation of the 1991 Experiment in State-County Relations (February 2001)

Glossary of Key Realignment Terms

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Supported by California Health Care Foundation (CHCF), which works to ensure that people have access to the care they need, when they need it, at a price they can afford. Visit www.chcf.org to learn more.