85% Local Share
Where do these monies live?
California’s combined 85% local share is distributed to its cities and counties from two sources:[1]
Seventy percent (70%) derives from the Abatement Accounts Fund share and is distributed to all participating local governments.[2]
Fifteen percent (15%) derives from the California Subdivision Fund share and is distributed to certain local governments that filed litigation against opioid-related companies prior to October 1, 2020.[3]
Note: This allocation applies to all of California’s opioid settlements except the Mallinckrodt bankruptcy, which allocates 60% of funds to local governments and 40% to the state.[4]
What can this share be spent on?
In general, and with limited exceptions,[5] California’s local shares must be spent on the uses described in the national settlement agreements’ (non-exhaustive) Exhibit E,[6] which includes prevention, harm reduction, treatment, recovery, and other strategies.
Monies from the 70% Abatement Accounts Fund must be spent on forward-looking Exhibit E uses only,[7] with at least half spent on the California High Impact Abatement Activities (HIAA) list.[8] Indirect costs are capped at 10%,[9] and several law enforcement uses of this share are prohibited outright.[10] Localities must spend or encumber funds from this share within five years of receiving them, or seven years for capital outlay projects, or the funds are returned to the state.[11]
Monies from the 15% California Subdivision Fund are not subject to the same restrictions. After certain fees and costs,[12] the remaining funds — “no less than 50% of the total CA Subdivision Fund received in any year” — may be spent on future opioid-related projects, to reimburse past opioid-related expenses, and attorneys’ fees.[13]
Who ultimately decides how to spend this share (and how)?
Localities decide autonomously (with California Department of Health Care Services oversight). Though decisionmakers for California’s cities and counties will ultimately decide for themselves how to spend their monies,[14] they must report their expenditures to the California Department of Health Care Services,[15] which must monitor their compliance with the agreements.[16] Additionally, settlement funds allocated to a city from the Abatement Accounts Fund are paid to the county in which the city is located unless the city specifically requests direct payment(s).[17]
Are supplantation uses prohibited for this share?
No, supplantation is not prohibited. Like most states, California does not explicitly prohibit supplantation uses of its opioid settlement funds. This means that local governments may spend funds from their share in ways that replace (or “supplant”) — rather than supplement — existing resources.
Can I see how this share has been spent?
Eventually (public reporting required). Local expenditures will be published on the California Department of Health Care Services’ Opioid Settlements website each year.[18] Localities are required to report settlement expenditures to DHCS, and DHCS is then required to post an annual written report regarding the use of settlement funds on its website.[19]
Visit OpioidSettlementTracker.com’s Expenditure Report Tracker for an updated collection of states’ and localities’ available expenditure reports.
What else should I know?
Not applicable.
Citations
See Proposed California State-Subdivision Agreement Regarding Distribution and Use of Settlement Funds – Distributor Settlement (“CA Distributor State-Subdivision Agreement”), Secs. 2(a) (defining “CA Participating Subdivision” as “a Participating Subdivision that is also (a) Plaintiff Subdivision and/or (b) a Primary Subdivision with a population equal to or greater than 10,000” but excluding “Litigating Special Districts”), 2(d) (defining “Plaintiff Subdivision” as “a Subdivision located in California, other than a Litigating Special District, that filed a lawsuit, on behalf of the Subdivision and/or through an official of the Subdivision on behalf of the People of the State of California, against one or more Opioid Defendants prior to October 1, 2020”), 2(c) (defining “Litigating Special District” as “a school district, fire protection district, health authority, health plan, or other special district that has filed a lawsuit against an Opioid Defendant”), 4.B(i)(a) (allocating 70% share to “CA Participating Subdivision[s]”), 4.C(i) (allocating 15% share to “Plaintiff Subdivisions that are Initial Participating Subdivisions”). See also California State-Subdivision Agreements Regarding Distribution and Use of Settlement Funds for the Allergan Settlement, CVS Settlement, Janssen Settlement, Kroger Settlement, Teva Settlement, Walgreens Settlement, and Walmart Settlement (substantively identical provisions). All other footnotes will cite to only the CA Distributor State-Subdivision Agreement. ↑
CA Distributor State-Subdivision Agreement, Sec. 4.B(i)(a). ↑
CA Distributor State-Subdivision Agreement, Sec. 4.C(i).. ↑
California Mallinckrodt Statewide Abatement Agreement In re: MALLINCKRODT PLC, et al. Bankruptcy Case No. 20-12522, Sec. 4 (allocating 40% to the state and 60% to local governments). See also Payment Information (“Mallinckrodt Bankruptcy Distribution”). California Department of Health Care Services website. Accessed August 28, 2024; OpioidSettlementTracker.com’s Global Settlement Tracker. ↑
Administrative, reimbursement, and attorneys’ fee uses depend on the share (see later footnotes). See also Distributor Settlement Agreement, Sec. I.SS (“Exhibit E provides a non-exhaustive list of expenditures that qualify as being paid for Opioid Remediation. Qualifying expenditures may include reasonable related administrative expenses”). ↑
CA Distributor State-Subdivision Agreement, Secs. 4.B(ii)(a), 4.C(i); Distributor Settlement Agreement, Sec. I.SS (“Exhibit E provides a non-exhaustive list of expenditures that qualify as being paid for Opioid Remediation. Qualifying expenditures may include reasonable related administrative expenses”). ↑
CA Distributor State-Subdivision Agreement, Sec. 4.B(ii)(a). This means that reimbursement uses of opioid settlement funds are specifically prohibited for this share. ↑
CA Distributor State-Subdivision Agreement, Sec. 4.B(ii)(b). See also Allowable Expenditures (“California High Impact Abatement Activities (HIAA)”). California Department of Health Care Services website. Accessed August 28, 2024 (“Detailed definitions of the HIAA can be found in the DHCS BHIN 24-002 California Participating Subdivision Use of Opioid Settlement Funds Allocated from the California Abatement Accounts Fund”). See also CA Distributor State-Subdivision Agreement, Sec. 4.B(ii)(c) (“The California Department of Health Care Services (‘DHCS’) may add to this list (but not delete from it) by designating additional High Impact Abatement Activities. DHCS will make reasonable efforts to consult with stakeholders, including the CA Participating Subdivisions, before adding additional High Impact Abatement Activities to this list”). ↑
Enclosure 1: Reasonable Administrative Costs Policy. California Department of Health Care Services. Accessed August 28, 2024 (“Indirect costs are not considered to meet the intent of the HIAA”). See also Behavioral Health Information Notice No: 24-002. California Department of Health Care Services. January 4, 2024 (“Funds received from the CA Abatement Accounts Fund may be used to cover indirect and administrative expenses pursuant to DHCS’ Reasonable Administrative Costs Policy (Enclosure I)”). ↑
Law Enforcement Expenses with Opioid Settlement Funds Fact Sheet. California Department of Health Care Services. April 2024. Accessed August 28, 2024. See also Behavioral Health Information Notice No: 24-002. California Department of Health Care Services. January 4, 2024 (“Examples of unallowable expenditures include, but are not limited to: … Paying for law enforcement activities or equipment (e.g., vehicles, apprehension or restraint devices, drug checking devices, etc.) related to interdiction or criminal investigation, apprehension, and processing”). ↑
CA Distributor State-Subdivision Agreement, Sec. 4.B(i)(f); Cal. Gov't Code Sec. 12534(i). ↑
CA Distributor State-Subdivision Agreement, Sec. 4.C(i)(c). See also Allowable Expenditures (“California Subdivision Fund”). California Department of Health Care Services website. Accessed August 28, 2024 (“allocations from the CA Subdivision Fund shall be used to fund future opioid remediation projects and reimburse past opioid-related expenses, which may include fees and expenses related to litigation against a relevant Opioid Defendant”). ↑
See CA Distributor State-Subdivision Agreement, Sec. 5(c) (“Unless otherwise exempt, Subdivisions’ expenditures and uses of CA Abatement Accounts Funds and other Settlement Funds will be subject to the normal budgetary and expenditure process of the Subdivision”). ↑
CA Distributor State-Subdivision Agreement, Secs. 5(b)-(d). See also QUESTION & ANSWER California Opioid Settlement Expenditure Report, California Department of Health Care Services. June 2024. Accessed August 29, 2024. ↑
Cal. Gov't Code Sec. 12534(h) (“The State Department of Health Care Services shall administer the Opioid Settlements Fund and shall oversee those activities funded by the Opioid Settlements Fund. This shall include, but not be limited to, designating additional high-impact abatement activities, conducting related stakeholder engagement, monitoring the California participating subdivisions for compliance, and preparing periodic written reports”). See also California Opioid Settlements Frequently Asked Questions (FAQs). California Department of Health Care Services. June 2024. Accessed August 29, 2024 (“What happens if Participating Subdivisions expend funds on unallowable activities? If DHCS determines that a CA Participating Subdivision’s use of California Abatement Accounts Funds is inconsistent with eligible uses, records may be requested as part of a meet and confer, an audit, or legal action”). ↑
CA Distributor State-Subdivision Agreement, Secs. 4.B.i(c) (“The Local Allocation share for a city that is a CA Participating Subdivision will be paid to the county in which the city is located, rather than to the city, so long as: (a) the county is a CA Participating Subdivision, and (b) the city has not advised the Settlement Fund Administrator that it requests direct payment at least 60 days prior to a Payment Date. A Local Allocation share allocated to a city but paid to a county is not required to be spent exclusively for abatement activities in that city, but will become part of the county’s share of the CA Abatement Accounts Funds”), 4.B.i(d) (“A city within a county that is a CA Participating Subdivision may opt in or out of direct payment at any time, and it may also elect direct payment of only a portion of its share … the Cities of Los Angeles, Oakland, San Diego, San Jose and Eureka will be deemed to have elected direct payment if they become Participating Subdivisions”). ↑
See also Aneri Pattani and don Thompson. In California, opioid settlement money helps fund lifesaving drugs and police projects. Los Angeles Times. July 11, 2024. Accessed August 29, 2024. ↑
CA Distributor State-Subdivision Agreement, Sec. 5(a)-(d). ↑
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