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

900 Lydia Street - Austin, Texas 78702 Phone (512) 320-0222 – fax (512) 320-0227 - www.cppp.org. State Budget Issues for 2006-07 and Effects on Substance Abuse Programs. February 3, 2005 Presentation to Texas Association of Addiction Professionals Legislative Conference

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

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  1. 900 Lydia Street - Austin, Texas 78702 Phone (512) 320-0222 – fax (512) 320-0227 - www.cppp.org State Budget Issues for 2006-07 and Effects on Substance Abuse Programs February 3, 2005 Presentation to Texas Association of Addiction Professionals Legislative Conference Eva De Luna Castro, Senior Budget Analyst deluna.castro@cppp.org

  2. 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

  3. 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 billion Rainy Day Fund: $1.3 billion Federal Fiscal Relief: $1.4 billion Revenue Measures: $1.8 billion Cuts to 2004-05 Budget: $7.5 billion Estimated General Revenue shortfall of $15.6 billion for 2004-05

  4. 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

  5. State vs. Federal Funds, 2004-05 Budget Source: Texas Legislative Budget Board, Fiscal Size Up 2004-05.

  6. 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.

  7. Budget Proposal for 2006-07 (SB 1) Source: Texas Legislative Budget Board, Fiscal Size Up 2004-05.

  8. Very Little of State Budget Would Go To Substance Abuse Services

  9. Substance Abuse Funding by Program TDCJ = Texas Department of Criminal Justice; DSHS = Department of State Health Services

  10. Annual Funding, in Million $

  11. SB 1 Assumptions: Caseloads for DSHS

  12. SB 1 Assumptions: Caseloads (cont’d)

  13. SB 1 Assumptions: Cost Trends

  14. Major Federal Source of Funding for Substance Abuse Programs

  15. 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)

  16. Indicators of Texas’ Need for Public Social Services Source: U.S. Bureau of the Census, March CPS and American Community Survey

  17. 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

  18. Other Price Tags

  19. 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)

  20. State/Local Taxes: Lower than a Decade Ago

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

  22. From a Taxpayer’s Point of View Source: Comptroller of Public Accounts, Annual Property Tax Report; Cash Report.

  23. From the State’s Point of View: All Revenue

  24. From the State’s Point of View: Taxes Only

  25. 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)

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