The William P. Hobby Policy Conference

1. THE FACTS THE FUTURE The William P. Hobby Policy Conference Federal Budget and Policy Issues Eva DeLuna Castro, deluna.castro@cppp.org Budget Analyst, CPPP May 14, 2004

2. THE FACTS THE FUTURE The William P. Hobby Policy Conference PRESENTATION OUTLINE: • The “Big Picture” of federal spending in Texas • More specific information on major federal sources of HHS and education spending in Texas: funding formulas, match requirements, beneficiaries and benefits in Texas, changes being proposed by White House or Congress • Additional resources

3. THE FACTS THE FUTURE The William P. Hobby Policy Conference

4. THE FACTS THE FUTURE The William P. Hobby Policy Conference 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.

5. THE FACTS THE FUTURE The William P. Hobby Policy Conference • 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 billion • Social Services Block Grant (SSBG) $150 million • Title I of Workforce Investment Act $289 million • Wagner-Peyser Act (Employment Services) $ 54 million • Adult Education/Family Literacy $ 41 million • Child Care Development Block Grant $406 million • Housing 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

6. THE FACTS THE FUTURE The William P. Hobby Policy Conference Medicaid (Title XIX) • Open-ended entitlement with state match (for most of 2004, match ratio is 36.83% state, 63.17% federal). Federal Medicaid spending rose by only 18.1% in TX from 1996-2001, vs. 34.7% nationwide. (Texas rank in federal Medicaid growth: 46th) • Medicaid funds health care for low-income people, as well as some elderly & persons with disabilities. States decide (after federal minimum requirements are met) who’s eligible, what benefits they get, and what providers are paid. In March 2004, 2.6 million Texans were on Medicaid; 1.7 million were under 19.

7. THE FACTS THE FUTURE The William P. Hobby Policy Conference 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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9. THE FACTS THE FUTURE The William P. Hobby Policy Conference FEDERAL PROPOSALS: • Analysis by Center on Budget and Policy Priorities: The White House first proposed a Medicaid “block grant” under the guise of fiscal relief to states in mid-2003. States would receive extra federal Medicaid funds from 2004 to 2010, in exchange for converting their Medicaid and CHIP programs into capped block grants. • But the “extra” would have to be repaid from 2011 to 2013, through lower match rates. And states, not federal government, would have to pay for any unanticipated cost increases or improvements in health coverage. • Under this proposal, federal Medicaid spending nationwide would have been $8.3 billion lower by fiscal 2013 than under current law.

10. THE FACTS THE FUTURE The William P. Hobby Policy Conference Title I Education Grants • Formula grant to states; no match requirement. States then distribute money to school districts based on the number of children from low-income families. • In the 2002-03 school year, 2.2 million kids (52% of students) in Texas schools are “economically disadvantaged.” Title I funds are meant to “improve the teaching and learning of children failing, or most at-risk of failing, to meet challenging state academic standards.”

11. THE FACTS THE FUTURE The William P. Hobby Policy Conference FEDERAL PROPOSALS: • Title I originally authorized by Elementary & Secondary Education Act of 1965, now known as the “No Child Left Behind” Act, signed into law January 2002. NCLB has new requirements for testing and other accountability (similar to Texas TAKS). President’s 2005 proposal has $105 million more in Title I funding for Texas (a 9.5% increase compared to 2004). • Education advocacy groups are working to “fix” NCLB by calling for full funding of Title I; more support for teacher quality programs; less emphasis on testing, and more priority placed on improving low-performing schools (instead of vouchers).

12. THE FACTS THE FUTURE The William P. Hobby Policy Conference School Lunch Program: • Formula grant to states to reimburse schools (on a per-meal basis) serving lunches to eligible children. Lunches must meet nutritional requirements set by U.S. Secretary of Agriculture. • Children from households with incomes up to 130% of poverty are eligible for free lunches in participating schools. Eligibility for reduced-price lunches ranges from 130% to 185% of the poverty line. In 2004, an average 2.5 million lunches* will be served in Texas schools every day (*Total is for all lunches served, not just free or reduced-price lunches).

13. THE FACTS THE FUTURE The William P. Hobby Policy Conference FEDERAL PROPOSALS • House: on March 30, passed the “Child Nutrition Improvement and Integrity Act” (HR 3873) to reauthorize the School Lunch & Breakfast Programs, Child & Adult Care Food Program, After-School Snacks, Summer Food Service Program, and WIC. • Senate: hope is that a bill will be completed soon so that programs will be reauthorized this year (continuing resolution already passed for 3 provisions that expired March 31) • Key Issues: reaching more children who are already eligible; expanding eligibility; improving integrity in application process; reducing child obesity

14. THE FACTS THE FUTURE The William P. Hobby Policy Conference Special Education • Formula grant to states. No match requirement, but as in the case of Title I, federal law requires that money be spent to supplement, not supplant, state efforts to educate the children eligible for services. • In the 2002-03 school year, almost 491,300 Texas students (12% of K-12 enrollment) were in special education classes.

15. THE FACTS THE FUTURE The William P. Hobby Policy Conference FEDERAL PROPOSALS: Special Education funding is authorized by Individuals with Disabilities Education Act (IDEA of 1975, most recently reauthorized in 1997). Expired in September 2002, with continued appropriations by Congress. President’s budget would mean an 11% increase for Texas in 2005. • House: Passed HR 1350 on April 30, 2003. Main sticking point : does not fully fund federal part of program (40%). • Senate: In June 2003, S 1248 passed committee, but full Senate has not yet acted on the bill. Senate version also lacks full federal funding; proposes change in disciplinary actions for special ed students.

16. THE FACTS THE FUTURE The William P. Hobby Policy Conference Temporary Assistance for Needy Families • Block grant and supplemental payments to states; bonuses awarded for performance; state maintenance of effort required (tied to pre-TANF levels of spending on child welfare — for Texas, $251 million/year). Purpose of grant is to “increase state flexibility in operating programs 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 governmental benefits; (3) reduce out-of-wedlock pregnancies, or (4) encourage the formation and maintenance of two-parent families.” • Texas’ major uses of TANF: Cash assistance, foster care, job services for welfare recipients (CHOICES), child protective services, eligibility determination, state employee benefits

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18. THE FACTS THE FUTURE The William P. Hobby Policy Conference FEDERAL PROPOSALS • President: Priorities include family formation • House: HR 4 passed the House in 2003. On March 30, 2004, approved another extension through June 2004 • Senate: Multi-year reauthorization is stuck. Key issue: new money for child care (Senate wants $6 billion more over 5 years, versus House’s $1 billion. Both House & Senate would keep basic funding at $16.5 B/year through 2008, continue supplemental grants through 2007, and allow annual transfers of up to 50% to child care, 10% to Social Svcs. Block Grant.

19. THE FACTS THE FUTURE The William P. Hobby Policy Conference CHIP (Children’s Health Insurance Program) • Also known as SCHIP or Title XXI; passed by Congress in 1997. National and state-level funding is formula-determined; funds unused after 3 years can be reallocated. Match is an enhancement of Medicaid match rate (in fiscal 2004, ratio is 27.85% state, 72.15% federal). CHIP is NOT an entitlement. • Texas began enrolling children in CHIP in May 2000. Covers most Medicaid-ineligible children under age 19, in families with incomes up to 200% of poverty. In April 2004, 377,051 children were in CHIP, down from 508,176 in April 2003 (a 26% decline).

20. THE FACTS THE FUTURE The William P. Hobby Policy Conference FEDERAL PROPOSALS: • White House would have included CHIP in Medicaid block grant to states. • Congress considering various changes: some would make adults in working-poor families eligible for coverage; others would expand income eligibility to 300% of poverty, or to certain legal immigrant children. States also using Sec. 1115 demonstration projects or state CHIP plan amendments to expand coverage for children and adults. • CHIP has to be reauthorized in 2007

21. THE FACTS THE FUTURE The William P. Hobby Policy Conference Child Care and Development Block Grant • Has three components: Discretionary and Mandatory are 100% federal, with levels set by Congress; Matching component requires state maintenance of effort and state or local match (at the same match rate as for Medicaid) • In Texas, CCDBG funds low-income child care subsidies (TWC and local workforce boards) and child care regulation (now at DFPS).

22. THE FACTS THE FUTURE The William P. Hobby Policy Conference FEDERAL PROPOSALS: • President’s proposed budget for CCDBG in fiscal 2005 has only $1.2 million in new funding for Texas (a 0.6% increase compared to 2004). Proposal would also create a 9-state pilot program coordinating Head Start, federal child care funds, and preschool programs. • House/Senate: reauthorization of child care funds is part of the same legislation that would reauthorize TANF (see earlier slide).

23. THE FACTS THE FUTURE The William P. Hobby Policy Conference WIC • No match for WIC; 30% state match for related Farmers Market program. Congress sets annual funding levels; USDA formula determines state funding. • WIC benefits are for low-income women who are pregnant, breastfeeding, or postpartum, and infants/children up to age 5 who are at risk of poor nutrition. WIC provides nutritious food supplements, nutrition education, and referrals to health care. In 2004, an estimated 837,800 women and children will get WIC food supplements in Texas; almost 4.6 million will get nutrition education and counseling.

24. THE FACTS THE FUTURE The William P. Hobby Policy Conference FEDERAL PROPOSALS • President’s proposed budget for fiscal 2005 has almost $19 million more for WIC in Texas (a 4.3% increase compared to 2004). • House/Senate: WIC is part of reauthorization of other children’s nutrition/meals programs (see earlier slide on School Lunch program)

25. THE FACTS THE FUTURE The William P. Hobby Policy Conference ROOM FOR IMPROVEMENT: • Census Bureau’s State Government Finances, 2002: Texas relied on federal funds for one-third of its general spending. This is the 15th highest ranking among the states. • But according to the Tax Foundation, in 2002 Texas got only 92 cents worth of federal spending for every $1.00 in federal taxes paid by Texans (down from 93 cents in 1992). National ranking in 2002: 36th

26. THE FACTS THE FUTURE The William P. Hobby Policy Conference Need more information on federal funds in the Texas Budget? • Legislative Budget Board: http://www.lbb.state.tx.us/The_LBB/Access/Federal_Funds.htm ; Federal Funds Watch newsletter • HHSC: http://www.hhsc.state.tx.us/about_hhsc/finance/FedFunds/fs_funds.html(Annual Federal Funds Reports) • Office of State-Federal Relations: http://www.osfr.state.tx.us/ ; News From Washington newsletter