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Federal Funding Update. New Era in State-Federal Relations August 2011. Federal Funds Information for States. Overview: What’s in Store for States?. Significant reductions in federal spending Program consolidations, eliminations, funding cuts
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Federal Funding Update New Era in State-Federal Relations August 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
State/Local Grants by Program Area Federal Outlays to State and Local Governments, FY 2010($ in Billions, % of Total) HHS makes up 37% HHS makes up 15%
Federal Debt Negotiations • What will it mean for states if the debt limit isn’t raised? • Reduced or delayed payments • Federal revenue = 20% state/local revenue • Bills paid in order they come due • Treasury 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 spending • Most state impacts not immediately known • Macro-level cuts (discretionary spending caps) • Funding reductions will vary by program, determined through appropriations process • Mandatory program changes inevitable • Create 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 system • Block grant • Reduce administrative costs • Restrict/eliminate provider taxes • Increase state flexibility, waivers • Blended 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)
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
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
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
The End • Questions? • Check for updates at www.ffis.org • Almost all states subscribe to FFIS, please contact us for your password and to be added to the distribution list: ttomsic@ffis.org, 202-624-8577