State Budget Issues for 2006-07 and Effects on Substance Abuse Programs

State Budget Issues for 2006-07 State Budget Issues for 2006-07 and Effects on Substance Abuse and Effects on Substance Abuse

Programs Programs February 3, 2005February 3, 2005

Presentation to Texas Association of Addiction Professionals Legislative Presentation to Texas Association of Addiction Professionals Legislative ConferenceConference

Eva De Luna Castro, Senior Budget AnalystEva De Luna Castro, Senior Budget Analyst

[email protected] [email protected]

900 Lydia Street - Austin, Texas 78702Phone (512) 320-0222 – fax (512) 320-0227 - www.cppp.org

Discuss: What happened last session Current state budget picture,

in general and for substance abuse

Budget needs for 2006-07 Revenue available for 2006-

07

Estimated General Revenue

shortfall of $15.6 billion for 2004-05

The “Balancing” of the 2004-05 State Budget

Cuts to 2003 Budget: $1.4 billion

Cost shifting: $1.0 billion“Smoke and mirrors”: $1.2

billionRainy Day Fund: $1.3 billion

Federal Fiscal Relief: $1.4 billion

Revenue Measures: $1.8 billion

Cuts to 2004-05 Budget: $7.5 billion

Where Budget Cuts Were Made

•Health Care (not just Medicaid and CHIP, but also teachers’ and state employees’ health coverage)

•K-12 textbook funding; grant programs such as kindergarten and pre-K expansion grants; Telecom Infrastructure Fund (now funds Technology Allotment)

•Layoffs of state employees

•More details available in CPPP’s July 2004 report, at http://www.cppp.org/products/reports/budget-impact04/index.html

Source: Texas Legislative Budget Board, Fiscal Size Up 2004-05.

State vs. Federal Funds, 2004-05 Budget

All-Funds Spending: $126.6 billion, total

$27.2$16.6 $17.2

$7.3 $7.8 $6.0

$7.4 $26.8

$8.4 $1.2$0.4

$0.3

$-

$10

$20

$30

$40

$50

K-12Education

HigherEducation

Health &HumanSvcs.

Business &Eco. Dev.

PublicSafety &

Crim.Justice

All Other

Billion $

Federal

State*

* "State" is General Revenue, General-Revenue dedicated, and Other Funds.

Source: Texas Legislative Budget Board, Fiscal Size Up 2004-05.

Drafting the 2006-07 Budget •Agencies were told in June 2004 how to request funding for next budget cycle

•For most programs, budget requests described what could be done with 5% less General Revenue

•Exceptions: More GR needed for K-12 enrollment; maintaining a constitutional school finance system; debt service; maintaining caseloads for federal entitlement services (Medicaid, foster care)

•What’s left out of original baselines: growth in entitlement caseloads, higher ed enrollment, and inmate populations; more money needed to cover inflation and utilization

•LBB added some of these, such as higher ed, inmate, and entitlement growth, to draft budget (SB 1); left many other “current services” items out, along with most restorations

Source: Texas Legislative Budget Board, Fiscal Size Up 2004-05.

Budget Proposal for 2006-07 (SB 1)

All-Funds Spending: $134.4 billion, total

$28.6$17.7 $18.8

$9.1 $7.9 $5.6

$8.1 $27.6

$9.5

$0.3

$0.3 $0.9

$-

$10

$20

$30

$40

$50

K-12Education

HigherEducation

Health &HumanSvcs.

Business &Eco. Dev.

PublicSafety &

Crim.Justice

All Other

Billion $

FederalState*

* "State" is General Revenue, General-Revenue dedicated, and Other Funds.

State Govt. Spending as a Share of the Economy

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

1991 1993 1995 1997 1999 2001 2003 2005 2007

Per

cen

t o

f G

ross

Sta

te P

rod

uct

Solid lines are historical or recommended (SB1 spending; dotted line shows amounts requested. Sources: Legislative Budget Board; Comptroller of Public Accounts.

All-Funds

General Revenue

All-Funds Spending for 2006-07, Draft Budget Bill (SB 1)

All other5%Public Safety/

Crim. Justice6%

Business& Eco. Dev.

14%

All Other HHS34%

Higher ed13%

K-1228%

Substance abuse programs

0.3%

Very Little of State Budget Would Go To Substance Abuse

Services

Substance Abuse Funding by Program

Historic and Proposed (SB 1) Funding

DSHS treatment

$-

$50

$100

$150

$200

$250

2001 2002 2003 2004 2005 2006 2007

Mill

ion

s

TDCJ: Substance abuse treatment

DSHS: intervention

DSHS: prevention

DSHS: grant monitoring

TDCJ = Texas Department of Criminal Justice; DSHS = Department of State Health Services

Annual Funding, in Million $

2004 2005 2006 2007Change, 2005

to 2007

TDCJ: Treatment $35.7 $36.8 $34.4 $34.4 -6.5%

State Health Services:

Prevention 44.8 48.4 43.8 44.0 -9.0%

Intervention 18.4 16.8 15.8 15.7 -6.7%

Treatment 86.1 96.0 94.9 93.6 -2.5%

Grant Monitoring 1.6 1.8 1.9 1.9 5.1%

TOTAL $186.6 $199.9 $190.9

$189.7

-5.1%

SB 1 Assumptions: Caseloads for DSHS

292,912 298,119 298,119

222,515

259,841241,802 241,802255,001

54,35054,35052,97746,563

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2004 2005 2006 2007DSHS prevention clients DSHS intervention clients DSHS treatment clients

SB 1 Assumptions: Caseloads (cont’d)

5,7006,265 6,082 6,082

5,4005,4005,4005,360

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2004 2005 2006 2007

Confinees completing treatment in TDCJ Substance Abuse Felony Punishment Facilities

Dual-diagnosis clients served by DSHS

SB 1 Assumptions: Cost Trends

$-

$10.00

$20.00

$30.00

$40.00

$50.00

2003 2004 2005 2006 2007

Intervention Costs

$-

$1,000

$2,000

$3,000

$4,000

$5,000

Treatment Costs

Youth served in DSHS intervention

Youth completing DSHS treatment

Adult served in DSHS intervention

Adult completing DSHS treatment

Major Federal Source of Funding for Substance Abuse Programs

$-

$40

$80

$120

$160

1993 1995 1997 1999 2001 2003

Million $

Substance Abuse Prevention and

Treatment Block Grant

Title V Delinquency; Drug Courts

Residential Abuse Treatment for Prisoners

More Details: Federal Substance Abuse Prevention and Treatment

Block Grant•In state fiscal year 2004, this grant brought $137.2 million to Texas

•Funds allocated to states based on weighted population and criteria that take into account different states’ costs of delivering services

•Maintenance of effort requirement: States at a minimum must maintain spending at the average level spent for two years before the grant year in question. Spending on services for pregnant women and women with dependent children must be kept at or above levels for fiscal 1994.

•Uses: at least 35% has to fund alcohol prevention/treatment activities; at least 35% on prevention and treatment for other drugs; at least 20% for primary prevention services. 5% cap on administrative expenses.

•Eligibility: No eligibility criteria for chemical dependency primary prevention services. For treatment programs, client’s income must be at or below 200% of poverty for free services, 200 to 300% of poverty for sliding scale fees. (For one person, poverty in 2004 < $9,310)

Indicators of Texas’ Need for Public Social Services

TexasUS

AverageTexas rank

% of Population under 18, 2002 28.0 % 25.3 % 3rd

Child Poverty Rate, 2003 22.8 % 17.7 % 8th

Elderly Poverty Rate, 2003 13.0 % 9.8 % 7th

% of Under-65 Population with No Health Insurance, 2003

26.9 % 17.6 % 1st

% of Residents Aged 25 or over with at least a High School Diploma, 2003

77.8 % 83.6 % 49th

% of Residents Aged 25 or over with at least a Bachelor’s Degree, 2003

24.5 % 26.5 % 27th

Source: U.S. Bureau of the Census, March CPS and American Community Survey

State Health Services: Major Exceptional Items in original request (Fall 2004)

•$107 million in GR to restore 5% cuts to GR: major programs include child immunizations; HIV/Sexually Transmitted Disease & Hepatitis C Prevention; TB, Hansen’s, & Refugee Health; Kidney Health; Children with Special Health Care Needs; Mental Health Services for Adults & Children; Northstar Behavioral Health; Women & Children’s Health Programs; Family Planning; Substance Abuse Prevention, Intervention, & Treatment; County Indigent Health Care; State Hospitals; Radiation Control; Food (Meat) & Drug Safety

•Medicaid match rates and loss of one-time funding: $8 million

•Texas HIV Medication program: $5.7 million

•General Revenue restoration for Substance Abuse programs: $10 million

•State facilities/infrastructure: $29 million

•Salary upgrades for nurses/LVNs: $10.5 million

Biennial GRBiennial GR %%

State Budget, 2004-05 $59.7 billion

Replacing Robin Hood At least $2.3 billion

4 %

“Buying down” local school property taxes by 10 cents per $100 taxable valueTeacher health “pass through”

$2 billion

$1.1 billion

3%

2%

State employee health insurance

$427 million 0.7%

Reaching the national average in state/local spending from taxes

$16 billion 27%

Other Price Tags

Outcome Depends on Available Revenue

•Comptroller gave legislators the official revenue estimate on January 10. Good news: 2004-05 revenues show higher-than-expected growth, unspent balance of $2.3 billion by end of fiscal 2005. Rainy Day Fund balance will be back up to $2 billion by fiscal 2007 (RDF not part of General Revenue)

•Bad news: health care costs—one-third of state budget—expected to continue rising at double-digit rates

•Long-term structural inadequacies of state/local tax system are putting too much pressure on property taxes

•Heavy reliance on sales taxes also makes Texas taxes very regressive (take more from families with the lowest incomes)

Texas state & major local taxes as a share of personal income

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

1990 1992 1994 1996 1998 2000 2002 2004

State/Local Taxes: Lower than a Decade Ago

Tax Effort Would be Even Lower if Not For Local Decisions to Fund Basic

Services

3.0%

3.4%

3.8%

4.2%

4.6%

5.0%

5.4%

1990 1992 1994 1996 1998 2000 2002 2004 2006

State taxes as % of Personal Income

Local taxes as % of Personal Income

Source: Comptroller of Public Accounts, Historic and Estimated Revenue and Economic Forecasts; Census Bureau.

Source: Comptroller of Public Accounts, Annual Property Tax Report; Cash Report.

From a Taxpayer’s Point of View

Major State and Local Taxes in Texas, 2004

County Property7%

Special District Property

5%

School Property28%

Other State Taxes21%

State Sales25%

City Property7%

Local Sales7%

Sales Tax 32%

Property Tax 47%

From the State’s Point of View: All Revenue

State Revenue Sources, 2004(Total: $62.1 billion)

Federal Funds35%

Other6%

Lottery3%

Taxes45%

Interest/Investment Income

2%

Licenses, Fees, Permits, Fines,

Penalties9%

From the State’s Point of View: Taxes Only

State Tax Collections, 2004(Total: $27.9 billion)

Motor Fuels10%

Motor Vehicle Sales and Rental

10%

Sales55%

Franchise7%

Insurance4%

Sin (Cigarette, Tobacco,Alcohol)

4%

Other6%

Gas/Oil Production3%

Revenue Options Likely to be Considered•Cigarette tax: $1/pack increase raises $1.7

billion biennially

•Video lottery terminals: $1.1 billion biennially. “Crack cocaine” of gambling.

•Revised Franchise Tax (Business Activity Tax): Pre-tax net income, add back compensation minus first $30,000 per job times 1.95%

•Sales tax rate increase — but this is extremely regressive, and TX already has one of the highest rates

•Sales tax base expansion (to services not covered now)

Texas State and Local Taxes as a Percent of Household Income, by Quintile*

11.9%

5.8%4.6% 4.1%

3.3%

0.0%

3.0%

6.0%

9.0%

12.0%

15.0%

Under $26,816 $26,816 to$52,844

$52,844 to$81,990

$81,990 to$126,345

Over $126,345

Household Income

* Each bar represents approximately 1.6 million households.Source: Comptroller of Public Accounts, Tax Exemptions and Tax Incidence