Federal Funding Update

New Era in State-Federal RelationsAugust 2011

Federal Funds Information for States

Overview: What’s in Store for States?

Significant reductions in federal spending– Program consolidations, eliminations, funding cuts– Potential changes in Medicaid financing, matching rates (no

longer the unthinkable) Increased focus on program accountability, performance,

and transparency– New reporting requirements

Even more program uncertainty– Program expirations, extensions– Health care reform

Pieces of the Federal Budget Pie

Grants to State and Local Government

State/Local Grants by Program Area

HHS makes up 15%

HHS makes up 37%

Federal Outlays to State and Local Governments, FY 2010($ in Billions, % of Total)

Federal Debt Negotiations

Federal Debt Negotiations

What will it mean for states if the debt limit isn’t raised?

– Reduced or delayed paymentsFederal revenue = 20% state/local revenue

– Bills paid in order they come dueTreasury officials – don’t have legal authority to pay bills

based on political, moral, or economic considerations– Bipartisan Policy Center Analysis

Daily inflow vs. committed spending (by program)

Federal Debt Negotiations

What will it mean for states if an agreement is reached to raise the debt limit and reduce federal spending over the next several years?

– Deep cuts in discretionary spendingMost state impacts not immediately knownMacro-level cuts (discretionary spending caps)

– Funding reductions will vary by program, determined through appropriations process

– Mandatory program changes inevitableCreate committee to propose further deficit reduction

Major Themes of Various Deficit Reduction Commissions, Plans

Reduce federal debt to a sustainable level Bring federal budget into balance within the

next several years Implement fundamental tax reform Restrict domestic discretionary and defense

spending Reduce improper payments Cap growth of entitlement spending Implement health care cost containment

Focus on Debt, Deficit Reduction

Examples of Medicaid Reforms– Greater use of managed care for “dual eligibles”– Modifying current federal matching payment

systemBlock grantReduce administrative costsRestrict/eliminate provider taxesIncrease state flexibility, waiversBlended Medicaid matching rate

Blended Medicaid Matching Rate: Much Attention, Few Details

President’s deficit reduction framework:“Under current law, states face a patchwork of different federal payment contributions for Medicaid the Children’s Health Insurance Program (CHIP). The President’s framework would replace the current complicated Federal matching formulas with a single matching rate for all program spending that rewards States for efficiency and automatically increases if a recession forces enrollment and State costs to rise.”

Blended Medicaid Matching Rate: Much Attention, Few Details

What we are hearing:– Proposal focuses on services, not administrative costs– A single blended rate for each state

What we don’t know:– Effective date– How calculated, assumptions (particularly regarding

health care reform changes)

Current Medicaid Matching Rates

Description of Exception Federal Match Rate

Certain populations, services, and payments:

Newly eligible individuals in new eligibility group for non-elderly, non-pregnant adults at or below 133% federal poverty level (FPL)

Calendar years (CY) 2014-2016 = 100%CY 2017 = 95% CY 2018 = 94%CY 2019 = 93% CY 2020+ = 90%

Individuals in early-expansion states that are enrolled in above eligibility group

Varies based on formula, effective CY 2014

Certain women with breast or cervical cancer

Enhanced FMAP

Qualifying Individuals Program 100%

Family planning services and supplies 90%

Certain preventive services and adult immunizations

Effective CY 2013, a one percentage-point increase in FMAP

Current Medicaid Matching Rates

Description of Exception Federal Match RateSmoking cessation for pregnant women (if states also cover preventive services and adult immunizations)

Effective CY 2013, a one percentage-point increase in FMAP

Health homes for certain individuals with chronic conditions

As of CY 2011, 90% for first eight quarters

Home and community-based attendant services and supports to certain individuals

Effective FY 2011, six percentage-point increase in FMAP

Increased Medicaid physician reimbursement rates for certain primary care services (as mandated by ACA for CYs 2013-2014)

100% of the incremental cost (only CYs 2013-2014)

Services through Indian Health Service Facility

100%

State balancing incentive payments for long-term care services and supports

FYs 2011-2015, two or five percentage-point increase

Federal Budget: FY 2011 Recap

Enacted via CR, not regular appropriations bill– No explanatory statements, funding tables– Account-level funding, some program detail– Provided agencies with wide discretion

Cut spending by $40 billion, approximately $10 billion from state/local programs

– Included 0.2% across-the-board cut– Canceled $3.5b in CHIPRA performance bonuses – Reduced funding for major HHS programs (-2.4%)

President’s FY 2012 Budget - Overview

Overall freeze on non-security discretionary spending for five years

Major restructuring of education and transportation programs, few changes in other areas

Program consolidations (chronic disease) A few new programs (substance abuse/mental health) Focus on program integrity (LIHEAP, Medicaid, Child

Care)

President’s FY 2012 Budget - Overview

Replaces existing formula programs with competitive programs

Increased focus on performance, incentive payments (CSBG, CSE, Foster Care)

Major Discretionary Programs: 20% increase (absent transportation, level funding)

– Health and Human Services – 1.7% reduction (some program eliminations)

Major Mandatory Programs: 7% increase

FY 2012 Congressional Action

House adopts budget resolution (4/15/11)– Sharply reduced spending ceilings– Major program assumptions

Convert Medicaid to block grant in FY 2013 Repeal key provisions of health care reform Convert SNAP into block grant with time limits and work requirements And more!

No budget resolution in Senate, action on hold Behind schedule, even more than usual (another year of

CRs, great uncertainty); most difficult bills not yet tackled

Progress on Appropriations Bills

Bill House Senate Conference

Agriculture Full:6/16/11

Commerce/Justice/State

Committee:7/13/11

Defense Full:7/8/11

Energy/Water Full:7/15/11

Financial Services Committee:6/23/11

Homeland Security Full:6/2/11

Progress on Appropriations Bills

Bill House Senate Conference

Interior/Environment

Committee:7/13/11

Labor/HHS/Ed

Legislative Branch Full:7/22/11

Military/Veterans Full:6/14/11

Full:7/20/11

State/ForeignOperations

Transportation/HUD

Overall Cap, Subcommittee Allocations

Appropriations Subcommittee

President’s Request (in millions)

Senate House v. President

House v. FY 2011

Agriculture $22,868 -22.6% -13.4%

Commerce/Justice 60,539 -12.9 -5.8

Defense 530,891 -1.7 3.3

Energy/Water 35,343 -16.1 -3.3

Financial Services 25,514 -22.6 -9.4

Homeland Security 43,636 -6.8 -2.6

Overall Cap, Subcommittee Allocations

Appropriations Subcommittee

President’s Request (in millions)

Senate House v. President

House v. FY 2011

Interior/EPA $32,377 -12.2% -7.1

Labor/HHS/Ed 170,611 -23.0 -11.6

Legislative Branch 5,124 -11.1 -5.0

Military/Veterans 75,996 -1.7 -0.8

State/ForeignOperations

56,656 -22.1 -17.8

Transportation/HUD

68,739 -36.2 -13.9

TOTAL $1,128,294 -10.7% -2.9%

Funding Levels for Major Health and Human Services Programs

Program FY 2010 (in millions)

FY 2011(in millions)

FY 2011 v. FY 2010

President v. FY 2010

President v. FY 2011

Substance Abuse Block Grant

$1,799 $1,783 -0.9% -17.0% -16.2%

Mental Health Block Grant

421 420 -0.3 3.3 3.5

Maternal & Child Block Grant

662 656 -0.9 -1.2 -0.4

Consolidated Health Centers

2,190 1,581 -27.8 -3.3 34.0

Preventive Health Block Grant

102 80 -21.5 -100.0 -100.0

Family Planning 317 299 -5.6 3.2 9.2

Funding Levels for Major Health and Human Services Programs

Program FY 2010 (in millions)

FY 2011(in millions)

FY 2011 v. FY 2010

President v. FY 2010

President v. FY 2011

Immunization Grants

$497 $426 -14.3% -12.8% 1.7%

Ryan White AIDS Grants

2,291 2,312 0.9 4.8 3.9

Hospital Preparedness Formula Grants

420 378 -10.0 -10.7 -0.8

CDC-State & Local Capacity

761 654 -14.0 -14.5 -0.5

Head Start 7,235 7,560 4.5 12.0 7.1

Child Welfare Services

282 281 -0.4 0.0 0.4

Funding Levels for Major Health and Human Services Programs

Program FY 2010 (in millions)

FY 2011(in millions)

FY 2011 v. FY 2010

President v. FY 2010

President v. FY 2011

Community Services Block Grant

$700 $679 -3.1% -50.0% -48.4%

Child Care & Development BG

2,127 2,233 4.5 37.6 31.7

Low-Income Home Energy Assistance

5,100 4,701 -7.8 -49.6 -45.3

Refugee Assistance

731 729 -0.2 12.9 13.1

Administration on Aging

1,516 1,497 -1.3 6.9 8.3

All Eyes on Program Accountability, Performance, and Transparency

Digital Accountability and Transparency Act– Passed House committee in June– Support from Senate, administration

Key provisions– Mandates full multi-tier reporting– Requires recipients to report on use of funds– Fewer exemptions from reporting requirements– Establishes FAST Board (Federal Accountability and Spending

Transparency Board) Focus on waste, fraud, and abuse

All Eyes on Program Accountability, Transparency, and Integrity

State concerns– Increases cost for states without funding or ability to

increase administrative caps within existing programs– Leaves significant discretion to FAST Board,

particularly regarding reporting frequency– Excludes state/local representative from FAST Board– Retains duplicate reporting for states– Creates new reporting system, less than a year after

FFATA was fully implemented

Even More Program Uncertainty

Upcoming program expirations (require congressional action)– TANF, Child Care Development Fund – matching and

mandatory (September 30, 2011) TANF supplemental grants (June 30, 2011)

– Medicaid Qualifying Individuals (QI) Program (December 31, 2011)

– Transitional Medical Assistance (TMA) Program (December 31, 2011)

Many discretionary programs w/ lapsed authorization

Health Care Reform Funding Remains at Risk

Affordable Care Act (ACA) included more than 100 funding opportunities of interest to states

Some programs received both authorizations and appropriations (most of these funds have been announced or awarded)

– Prevention and Public Health Fund (PPHF) Most programs received only an authorization

– Require funding through appropriations process– No new funding to date, some programs have received PPHF transfers

Proposals to restrict/repeal funding

Health Care Reform Grant Allocations(dollars in thousands)

State Total State TotalAlabama $15,747 Nevada 16,675Alaska 14,803 New Hampshire 8,191Arizona 27,663 New Jersey 36,565Arkansas 18,028 New Mexico 59,343California 177,945 New York 120,519Colorado 57,589 North Carolina 50,515Connecticut 37,218 North Dakota 6,820Delaware 7,701 Ohio 137,749District of Columbia 26,645 Oklahoma 75,358Florida 90,358 Oregon 91,870Georgia 26,352 Pennsylvania 40,179Hawaii 16,641 Rhode Island 35,750Idaho 28,813 South Carolina 17,788Ill inois 80,264 South Dakota 3,828Indiana 27,500 Tennessee 165,510Iowa 22,251 Texas 59,711Kansas 41,064 Utah 12,541Kentucky 37,196 Vermont 29,817Louisiana 26,211 Virginia 49,778Maine 21,432 Washington 53,386Maryland 24,477 West Virginia 49,724Massachusetts 219,505 Wisconsin 66,298Michigan 47,287 Wyoming 14,529Minnesota 201,575 Puerto Rico 23,587Mississippi 46,766 Virgin Islands 2,830Missouri 42,347 Territories 7,674Montana 9,161 Unallocated 4,120Nebraska 18,018 TOTAL $2,651,213

Take-Aways

FY 2012 budget won’t happen anytime soon Program extensions continue (few, if any,

reauthorization bills will pass) Entering an era of restrained federal spending for

foreseeable future Major restructuring of state-federal programs

– Program consolidations– Entitlement reform

What does this mean for states?

Federal Revenue as a Percent of State and Local General Revenue, FY 2008

Rank State Percent Rank State Percent1 Louisiana 35.8% 27 Michigan 20.3%2 Mississippi 35.5 28 Texas 20.13 District of Columbia 30.0 29 Utah 20.14 Montana 28.0 30 Pennsylvania 19.95 South Dakota 26.5 U.S. Average 19.86 Vermont 26.5 31 Nebraska 19.77 New Mexico 26.3 32 Hawaii 19.68 Arkansas 25.9 33 New Hampshire 19.69 Wyoming 25.7 34 New York 19.510 West Virginia 25.0 35 Indiana 19.411 Kentucky 24.9 36 Massachusetts 19.112 Alabama 24.8 37 Maryland 18.213 Maine 24.0 38 Ill inois 18.214 Oklahoma 23.8 39 Minnesota 18.115 North Carolina 23.5 40 Washington 17.716 Missouri 23.4 41 California 17.617 Rhode Island 23.1 42 Wisconsin 17.618 Arizona 22.6 43 Kansas 17.319 Tennessee 22.6 44 Florida 17.120 South Carolina 22.4 45 Delaware 17.021 North Dakota 22.0 46 Colorado 15.122 Georgia 22.0 47 Connecticut 14.623 Oregon 21.6 48 New Jersey 14.124 Ohio 21.4 49 Virginia 14.125 Idaho 21.2 50 Alaska 13.326 Iowa 20.8 51 Nevada 12.5

The End

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