The William P. Hobby Policy Conference

The William P. Hobby Policy The William P. Hobby Policy ConferenceConference

THE FACTSTHE

FUTUREFederal Budget and Policy

Issues

Eva DeLuna Castro, [email protected]

Budget Analyst, CPPP

May 14, 2004

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The William P. Hobby Policy ConferenceThe William P. Hobby Policy Conference

THE FACTSTHE FUTURE

PRESENTATION OUTLINE:PRESENTATION OUTLINE: The “Big Picture” of federal spending in The “Big Picture” of federal spending in

TexasTexas More specific information on major More specific information on major

federal sources of HHS and education federal sources of HHS and education spending in Texas: funding formulas, spending in Texas: funding formulas, match requirements, beneficiaries and match requirements, beneficiaries and benefits in Texas, changes being benefits in Texas, changes being proposed by White House or Congressproposed by White House or Congress

Additional resourcesAdditional resources

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Federal Spending in Texas: $123 billion in 2002

Defense/Veterans20%

Medicare12%

EITC - 2%

Medicaid - 7%

Food Stamps 1%

Non-defense federal agencies - 15%

Social Security and SSI - 23%

UI Benefits 2%

Other

All Other14%

Agricultural Commodity

Payments - 1%

Highway Aid 2%

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Top 10 Federal Funding Streams in State Budget, 2002

$0.711

$0.699

$0.608

$0.583

$0.536

$0.406

$0.382

$0.363

$2.5

$2.4

$8.7

$- $2.0 $4.0 $6.0 $8.0 $10.0

Medicaid

Highway Planning/Construction

Title I Education Grants

School Lunch Program

Special Education (State Grants)

Temp. Assistance for Needy Families

CHIP

Child Care and Dev. Block Grant

WIC Nutrition Program

Child Care Mandatory & Matching

All other

Billion

NOTE: The Food Stamp program brought more than $1.5 billion in federal funds to Texas in 2002, but the benefits are not appropriated through the state budget.

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Federal “Superwaiver” Proposal: •House version would let states get 5-year waivers to combine 2 or more of the listed programs

Annual Funding for Texas, Fiscal 2002

Temporary Assistance for Needy Families$583 million

Food Stamps $1.5 billionSocial Services Block Grant (SSBG)

$150 millionTitle I of Workforce Investment Act

$289 millionWagner-Peyser Act (Employment Services) $

54 millionAdult Education/Family Literacy $ 41

millionChild Care Development Block Grant

$406 millionHousing Programs (except Section 8 and some Section 7)

$348 million?Titles I-IV, McKinney-Vento Homeless Act $ 11

million?

•Senate version would limit it to TANF, SSBG, and CCDBG in ten states

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Medicaid (Title XIX)Medicaid (Title XIX) Open-ended entitlement with state match (for Open-ended entitlement with state match (for

most of 2004, match ratio is 36.83% state, most of 2004, match ratio is 36.83% state, 63.17% federal). Federal Medicaid spending 63.17% federal). Federal Medicaid spending rose by only 18.1% in TX from 1996-2001, vs. rose by only 18.1% in TX from 1996-2001, vs. 34.7% nationwide. (Texas rank in federal 34.7% nationwide. (Texas rank in federal Medicaid growth: 46Medicaid growth: 46th)th)

Medicaid funds health care for low-income Medicaid funds health care for low-income people, as well as some elderly & persons with people, as well as some elderly & persons with disabilities. States decide (after federal disabilities. States decide (after federal minimum requirements are met) who’s eligible, minimum requirements are met) who’s eligible, what benefits they get, and what providers are what benefits they get, and what providers are paid. In March 2004, 2.6 million Texans were on paid. In March 2004, 2.6 million Texans were on Medicaid; 1.7 million were under 19.Medicaid; 1.7 million were under 19.

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Texas Medicaid Beneficiaries and Expenditures, Federal Fiscal Year 2001

13%

37%13%

28%

17%

11%57%

22%

2%

0%

20%

40%

60%

80%

100%

Clients Expenditures

Other

Children

Parents & Pregnant Women

Aged

Disabled/Blind

Total expenditures ($9.7 billion, all-funds) in chart exclude administration, DSH payments, survey and certification activities, and Medicare premiums paid to federal govt. for Medicare/Medicaid dual eligibles.

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What Medicaid Will Buy for Texans, 2004-05

Long-Term Care - Mental Retardation,

$2.0 b

Prescription Drugs, $3.3 b

Other, $0.3 b Long-Term

Care, $6.7 b

Acute Care, $17.0 b

Biennial Total, All Funds: $29.3 billion

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FEDERAL PROPOSALS:FEDERAL PROPOSALS: Analysis by Center on Budget and Policy Analysis by Center on Budget and Policy

Priorities:Priorities: The White House first proposed a The White House first proposed a Medicaid “block grant” under the guise of fiscal Medicaid “block grant” under the guise of fiscal relief to states in mid-2003. States would relief to states in mid-2003. States would receive extra federal Medicaid funds from 2004 receive extra federal Medicaid funds from 2004 to 2010, in exchange for converting their to 2010, in exchange for converting their Medicaid and CHIP programs into capped block Medicaid and CHIP programs into capped block grants. grants.

But the “extra” would have to be repaid from But the “extra” would have to be repaid from 2011 to 2013, through lower match rates. And 2011 to 2013, through lower match rates. And states, not federal government, would have to states, not federal government, would have to pay for any unanticipated cost increases or pay for any unanticipated cost increases or improvements in health coverage.improvements in health coverage.

Under this proposal, federal Medicaid spending Under this proposal, federal Medicaid spending nationwide would have been $8.3 billion lower nationwide would have been $8.3 billion lower by fiscal 2013 than under current law.by fiscal 2013 than under current law.

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Title I Education GrantsTitle I Education Grants Formula grant to states; no match Formula grant to states; no match

requirement. States then distribute money to requirement. States then distribute money to school districts based on the number of school districts based on the number of children from low-income families.children from low-income families.

In the 2002-03 school year, 2.2 million kids In the 2002-03 school year, 2.2 million kids (52% of students) in Texas schools are (52% of students) in Texas schools are “economically disadvantaged.” Title I funds “economically disadvantaged.” Title I funds are meant to “improve the teaching and are meant to “improve the teaching and learning of children failing, or most at-risk of learning of children failing, or most at-risk of failing, to meet challenging state academic failing, to meet challenging state academic standards.”standards.”

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FEDERAL PROPOSALS:FEDERAL PROPOSALS: Title I originally authorized by Elementary & Title I originally authorized by Elementary &

Secondary Education Act of 1965, now known Secondary Education Act of 1965, now known as the “No Child Left Behind” Act, signed into as the “No Child Left Behind” Act, signed into law January 2002. NCLB has new requirements law January 2002. NCLB has new requirements for testing and other accountability (similar to for testing and other accountability (similar to Texas TAKS). President’s 2005 proposal has Texas TAKS). President’s 2005 proposal has $105 million more in Title I funding for Texas (a $105 million more in Title I funding for Texas (a 9.5% increase compared to 2004).9.5% increase compared to 2004).

Education advocacy groups are working to “fix” Education advocacy groups are working to “fix” NCLB by calling for full funding of Title I; more NCLB by calling for full funding of Title I; more support for teacher quality programs; less support for teacher quality programs; less emphasis on testing, and more priority placed emphasis on testing, and more priority placed on improving low-performing schools (instead on improving low-performing schools (instead of vouchers). of vouchers).

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School Lunch Program:School Lunch Program: Formula grant to states to reimburse schools (on Formula grant to states to reimburse schools (on

a per-meal basis) serving lunches to eligible a per-meal basis) serving lunches to eligible children. Lunches must meet nutritional children. Lunches must meet nutritional requirements set by U.S. Secretary of Agriculture.requirements set by U.S. Secretary of Agriculture.

Children from households with incomes up to Children from households with incomes up to 130% of poverty are eligible for 130% of poverty are eligible for freefree lunches in lunches in participating schools. Eligibility for participating schools. Eligibility for reduced-pricereduced-price lunches ranges from 130% to 185% of the lunches ranges from 130% to 185% of the poverty line. In 2004, an average 2.5 million poverty line. In 2004, an average 2.5 million lunches* will be served in Texas schools every lunches* will be served in Texas schools every dayday

(*Total is for all lunches served, not just free or reduced-price lunches).(*Total is for all lunches served, not just free or reduced-price lunches).

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FEDERAL PROPOSALSFEDERAL PROPOSALS HouseHouse: on March 30, passed the “Child : on March 30, passed the “Child

Nutrition Improvement and Integrity Act” (HR Nutrition Improvement and Integrity Act” (HR 3873) to reauthorize the School Lunch & 3873) to reauthorize the School Lunch & Breakfast Programs, Child & Adult Care Food Breakfast Programs, Child & Adult Care Food Program, After-School Snacks, Summer Food Program, After-School Snacks, Summer Food Service Program, and WIC. Service Program, and WIC.

SenateSenate: hope is that a bill will be completed : hope is that a bill will be completed soon so that programs will be reauthorized soon so that programs will be reauthorized this year this year (continuing resolution already (continuing resolution already passed for 3 provisions that expired March 31)passed for 3 provisions that expired March 31)

Key IssuesKey Issues: reaching more children who are : reaching more children who are already eligible; expanding eligibility; already eligible; expanding eligibility; improving integrity in application process; improving integrity in application process; reducing child obesityreducing child obesity

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Special EducationSpecial Education Formula grant to states. No match Formula grant to states. No match

requirement, but as in the case of Title I, requirement, but as in the case of Title I, federal law requires that money be spent federal law requires that money be spent to to supplementsupplement, not supplant, state efforts , not supplant, state efforts to educate the children eligible for to educate the children eligible for services.services.

In the 2002-03 school year, almost In the 2002-03 school year, almost 491,300 Texas students (12% of K-12 491,300 Texas students (12% of K-12 enrollment) were in special education enrollment) were in special education classes.classes.

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FEDERAL PROPOSALS:FEDERAL PROPOSALS: Special Education funding Special Education funding is authorized by Individuals with Disabilities is authorized by Individuals with Disabilities Education Act (IDEA of 1975, most recently Education Act (IDEA of 1975, most recently reauthorized in 1997). Expired in September reauthorized in 1997). Expired in September 2002, with continued appropriations by 2002, with continued appropriations by Congress. President’s budget would mean an Congress. President’s budget would mean an 11% increase for Texas in 2005.11% increase for Texas in 2005.

House: Passed HR 1350 on April 30, 2003. Main House: Passed HR 1350 on April 30, 2003. Main sticking point : does not fully fund federal part sticking point : does not fully fund federal part of program (40%).of program (40%).

Senate: In June 2003, S 1248 passed Senate: In June 2003, S 1248 passed committee, but full Senate has not yet acted on committee, but full Senate has not yet acted on the bill. Senate version also lacks full federal the bill. Senate version also lacks full federal funding; proposes change in disciplinary funding; proposes change in disciplinary actions for special ed students.actions for special ed students.

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Temporary Assistance for Needy Temporary Assistance for Needy FamiliesFamilies

Block grant and supplemental payments to Block grant and supplemental payments to states; bonuses awarded for performance; state states; bonuses awarded for performance; state maintenance of effort required (tied to pre-TANF maintenance of effort required (tied to pre-TANF levels of spending on child welfare — for Texas, levels of spending on child welfare — for Texas, $251 million/year). $251 million/year). Purpose of grant is to “increase state flexibility in operating programs Purpose of grant is to “increase state flexibility in operating programs designed to (1) assist needy families so that children may live in their designed to (1) assist needy families so that children may live in their homes or those of relatives; (2) end dependence of needy parents on homes or those of relatives; (2) end dependence of needy parents on governmental benefits; (3) reduce out-of-wedlock pregnancies, or (4) governmental benefits; (3) reduce out-of-wedlock pregnancies, or (4) encourage the formation and maintenance of two-parent families.”encourage the formation and maintenance of two-parent families.”

Texas’ major uses of TANF: Cash assistance, Texas’ major uses of TANF: Cash assistance, foster care, job services for welfare recipients foster care, job services for welfare recipients (CHOICES), child protective services, eligibility (CHOICES), child protective services, eligibility determination, state employee benefitsdetermination, state employee benefits

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TANF Federal Funds in the Texas State Budget, 2004-05:

$1.184 billion total

MHMR0%

Early Childhood Intervention

3%

Employee Benefits5%

Texas Education Agency

1%

Workforce Commission

15%

Other13%

Protective & Regulatory Services38%

Dept. of Human Services

34%

Dept. of Health4%

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FEDERAL PROPOSALSFEDERAL PROPOSALS President: Priorities include family formationPresident: Priorities include family formation House: HR 4 passed the House in 2003. On House: HR 4 passed the House in 2003. On

March 30, 2004, approved another extension March 30, 2004, approved another extension through June 2004through June 2004

Senate: Multi-year reauthorization is stuck. Senate: Multi-year reauthorization is stuck.

Key issue: new money for child care (Senate wants Key issue: new money for child care (Senate wants $6 billion more over 5 years, versus House’s $1 $6 billion more over 5 years, versus House’s $1 billion. Both House & Senate would keep basic billion. Both House & Senate would keep basic funding at $16.5 B/year through 2008, continue funding at $16.5 B/year through 2008, continue supplemental grants through 2007, and allow supplemental grants through 2007, and allow annual transfers of up to 50% to child care, 10% annual transfers of up to 50% to child care, 10% to Social Svcs. Block Grant.to Social Svcs. Block Grant.

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CHIP (Children’s Health Insurance Program)CHIP (Children’s Health Insurance Program) Also known as SCHIP or Title XXI; passed by Also known as SCHIP or Title XXI; passed by

Congress in 1997. National and state-level Congress in 1997. National and state-level funding is formula-determined; funds unused funding is formula-determined; funds unused after 3 years can be reallocated. Match is an after 3 years can be reallocated. Match is an enhancement of Medicaid match rate (in fiscal enhancement of Medicaid match rate (in fiscal 2004, ratio is 27.85% state, 72.15% federal). CHIP 2004, ratio is 27.85% state, 72.15% federal). CHIP is NOT an entitlement.is NOT an entitlement.

Texas began enrolling children in CHIP in May Texas began enrolling children in CHIP in May 2000. Covers most Medicaid-ineligible children 2000. Covers most Medicaid-ineligible children under age 19, in families with incomes up to under age 19, in families with incomes up to 200% of poverty. In April 2004, 377,051 children 200% of poverty. In April 2004, 377,051 children were in CHIP, down from 508,176 in April 2003 (a were in CHIP, down from 508,176 in April 2003 (a 26% decline). 26% decline).

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FEDERAL PROPOSALS:FEDERAL PROPOSALS: White House would have included CHIP in White House would have included CHIP in

Medicaid block grant to states.Medicaid block grant to states. Congress considering various changes: Congress considering various changes:

some would make adults in working-poor some would make adults in working-poor families eligible for coverage; others would families eligible for coverage; others would expand income eligibility to 300% of expand income eligibility to 300% of poverty, or to certain legal immigrant poverty, or to certain legal immigrant children. States also using Sec. 1115 children. States also using Sec. 1115 demonstration projects or state CHIP plan demonstration projects or state CHIP plan amendments to expand coverage for amendments to expand coverage for children and adults.children and adults.

CHIP has to be reauthorized in 2007 CHIP has to be reauthorized in 2007

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Child Care and Development Block GrantChild Care and Development Block Grant Has three components: Has three components: DiscretionaryDiscretionary and and

MandatoryMandatory are 100% federal, with levels set are 100% federal, with levels set by Congress; by Congress; MatchingMatching component requires component requires state maintenance of effort and state or state maintenance of effort and state or local match (at the same match rate as for local match (at the same match rate as for Medicaid)Medicaid)

In Texas, CCDBG funds low-income child In Texas, CCDBG funds low-income child care subsidies (TWC and local workforce care subsidies (TWC and local workforce boards) and child care regulation (now at boards) and child care regulation (now at DFPS).DFPS).

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FEDERAL PROPOSALS:FEDERAL PROPOSALS: President’s proposed budget for CCDBG President’s proposed budget for CCDBG

in fiscal 2005 has only $1.2 million in in fiscal 2005 has only $1.2 million in new funding for Texas (a 0.6% increase new funding for Texas (a 0.6% increase compared to 2004). Proposal would also compared to 2004). Proposal would also create a 9-state pilot program create a 9-state pilot program coordinating Head Start, federal child coordinating Head Start, federal child care funds, and preschool programs.care funds, and preschool programs.

House/Senate: reauthorization of child House/Senate: reauthorization of child care funds is part of the same legislation care funds is part of the same legislation that would reauthorize TANF that would reauthorize TANF (see earlier (see earlier slide).slide).

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WIC WIC No match for WIC; 30% state match for related No match for WIC; 30% state match for related

Farmers Market program. Congress sets annual Farmers Market program. Congress sets annual funding levels; USDA formula determines state funding levels; USDA formula determines state funding.funding.

WIC benefits are for low-income women who WIC benefits are for low-income women who are pregnant, breastfeeding, or postpartum, are pregnant, breastfeeding, or postpartum, and infants/children up to age 5 who are at risk and infants/children up to age 5 who are at risk of poor nutrition. WIC provides nutritious food of poor nutrition. WIC provides nutritious food supplements, nutrition education, and referrals supplements, nutrition education, and referrals to health care. In 2004, an estimated 837,800 to health care. In 2004, an estimated 837,800 women and children will get WIC food women and children will get WIC food supplements in Texas; almost 4.6 million will supplements in Texas; almost 4.6 million will get nutrition education and counseling.get nutrition education and counseling.

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FEDERAL PROPOSALSFEDERAL PROPOSALS President’s proposed budget for President’s proposed budget for

fiscal 2005 has almost $19 million fiscal 2005 has almost $19 million more for WIC in Texas (a 4.3% more for WIC in Texas (a 4.3% increase compared to 2004).increase compared to 2004).

House/Senate: WIC is part of House/Senate: WIC is part of reauthorization of other children’s reauthorization of other children’s nutrition/meals programs nutrition/meals programs (see earlier (see earlier slide on School Lunch program)slide on School Lunch program)

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ROOM FOR IMPROVEMENT:ROOM FOR IMPROVEMENT: Census Bureau’s Census Bureau’s State Government State Government

FinancesFinances, 2002: Texas relied on federal , 2002: Texas relied on federal funds for one-third of its general funds for one-third of its general spending. This is the 15spending. This is the 15thth highest highest ranking among the states.ranking among the states.

But according to the Tax Foundation, in But according to the Tax Foundation, in 2002 Texas got only 92 cents worth of 2002 Texas got only 92 cents worth of federal spending for every $1.00 in federal spending for every $1.00 in federal taxes paid by Texans (down from federal taxes paid by Texans (down from 93 cents in 1992). National ranking in 93 cents in 1992). National ranking in 2002: 362002: 36thth

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Need more information on federal Need more information on federal funds in the Texas Budget?funds in the Texas Budget?

Legislative Budget Board: Legislative Budget Board: http://www.lbb.state.tx.us/The_LBB/Access/Federal_Fuhttp://www.lbb.state.tx.us/The_LBB/Access/Federal_Funds.htmnds.htm ; ; Federal Funds WatchFederal Funds Watch newsletter newsletter

HHSC: HHSC: http://www.hhsc.state.tx.us/about_hhsc/finance/FedFuhttp://www.hhsc.state.tx.us/about_hhsc/finance/FedFunds/fs_funds.htmlnds/fs_funds.html (Annual Federal Funds Reports)(Annual Federal Funds Reports)

Office of State-Federal Relations:Office of State-Federal Relations:http://www.osfr.state.tx.us/http://www.osfr.state.tx.us/ ; ; News From News From WashingtonWashington newsletter newsletter

The William P. Hobby Policy Conference

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