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Great Need for Public Services

The Big Picture July 2005 F. Scott McCown, Executive Director Anne Dunkelberg, Assistant Director Dick Lavine, Senior Fiscal Analyst Eva DeLuna Castro, Senior Budget Analyst. Great Need for Public Services. Source: U.S. Bureau of the Census, March CPS and American Community Survey.

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Great Need for Public Services

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  1. The Big PictureJuly 2005F. Scott McCown, Executive DirectorAnne Dunkelberg, Assistant DirectorDick Lavine, Senior Fiscal AnalystEva DeLuna Castro, Senior Budget Analyst

  2. Great Need for Public Services Source: U.S. Bureau of the Census, March CPS and American Community Survey

  3. Context for Funding Texas’ Health Care “System” • Latest US Census Bureau statistics show: • 24.6% of ALL Texans, and 26.9% of Texans under age 65, were uninsured in 2003 • That’s about 5.5 million Texans • Another 3 million covered by Medicaid or CHIP • Culprit: Texas has one of the lowest % of employer-sponsored insurance (along with Arkansas, Louisiana, Montana, New Mexico) • 9% below national average for under-65, at 52.4%, and 11.8% below national average for under-18.

  4. Health Care for Poor & Low-Income Texans Medicaid: As of May 2005, 2.7 million Texans were enrolled in Medicaid: • 1.8 million were children • about 82,000 of these children, or 4.5%, were receiving disability-related Medicaid (97% of these on SSI) • about 13,000 were pregnant teens • 146,500 in TANF families (5.5% of total caseload) • 867,074 were adults: • 671,982 (77.5% of the adults) were elderly or disabled. Adults on SSI account for 60% of the aged and disabled recipients (76% of blind/disabled are on SSI) • Other adults: 93,800 maternity coverage; 39,400 TANF parents (1.5% of total caseload); 61,100 either TMA (Transitional Medicaid Assistance) or parents who are at or below TANF income, but not receiving TANF cash assistance Children’s Health Insurance Program (CHIP): • as of September 1, 2003 — 507,259 children • as of May 1, 2005 — 326,809 (drop of 180,450, or 36%)

  5. Medicaid Cuts:What was Reversedby 2005 Legislature Restored (effective 9/05): • Adults’ Medicaid Services Restored: • Podiatrists • Eyeglasses and Hearing Aids • Mental health servicesby social workers, psychologists, licensed professional counselors, and licensed marriage and family therapists. There is some complication with the funding for this benefit, but at this time most believe that all 4 mental health providers will be restored. • STAY TUNED! Center for Public Policy Priorities www.cppp.org

  6. Medicaid Cuts: What was Reversedby 2005 Legislature PROBABLY Restored: • The Personal Needs Allowanceof Medicaid nursing home residents (the monthly amount that Medicaid nursing home residents may keep from SSI, Social Security or other pension income; the rest goes to the nursing home) • was cut in 2003 from $60 to $45. • Though not restored by the budget or other bill, Gov. Perry has pledged to ask LBB for “budget execution” to allocate the $13 million in state dollars needed to restore this. • STAY TUNED! Center for Public Policy Priorities www.cppp.org

  7. Medicaid Cuts: What was Reversedby 2005 Legislature POSSIBLY Restored: • Medically Needy Spend-Down Program for Parents (Temporary Coverage for Poor Families with Catastrophic Medical Bills) • HHSC estimated that full restoration would cost $175 million GR for 2006-2007; SB1 authorizes just $35 million for “partial restoration” but assumes this will be funded entirely by voluntary contributions of local tax dollars (“IGT”) from the big urban hospital districts • Also says $20 million GR could be added to this IF the local funds are provided first • STAY TUNED! Center for Public Policy Priorities www.cppp.org

  8. Medicaid Cuts that Remain • Medicaid and CHIP provider rate cuts: • Most Medicaid and CHIP providers had rates cut in 2003: hospitals and doctors had a rate cut of 2.5%; nursing homes 1.75%, and community care providers 1.1%. • In August 2004, HHSC proposed and LBB approved keeping most the cuts at the same level for 2005 (i.e., not making deeper cuts); but hospitals took a deeper 5% cut. • 2005 legislature restores rates to 2003 levels for Community Care services and Waivers, and for ICF-MR (all at DADS), but not for doctors, other professionals, hospitals, or CHIP. • All other rate cuts remain. Rate cuts were the largest HHS cut made in 2003; much larger than the CHIP cuts. Center for Public Policy Priorities www.cppp.org

  9. CommunityCare and Waiting Lists:funding for enrollment increases • 2003 Legislature reduced numbers and/or levels of services in capped Community Care and Health programs • SB 1 provides funds to increase a number of non-entitlement programs’ enrollment • For children: • MDCP increased from 977 in ’03, 983 in ’05, to 1,993 in 2007. • CSHCN increased from 1,463 in ’03, 2,114 in ’05, to 2,293 in ’07 • Most Medicaid waivers, HIV Meds increased • Exceptions: • CBA: was 30,279 in ’03; 26,100 in ’05; to 28,401 in ’07, • Kidney Health Program 22,834 in ’03; 21,247 in ’05; to 20,415 in ’07 • In-Home and Family Support for aged & disabled, MR still below ’03 levels (MH IHFS program eliminated in ’03 and not restored)

  10. How CHIP Fared • Restored:Dental, vision, hospice and mental health benefits restored to 2003 levels • Funding to replace monthly premiums with more affordable and convenient enrollment fees. HHSC presentations have outlined an annual fee of: • No enrollment fee below 133% of the federal poverty level (FPL) (<$2,145/ family of 4) • $25 per family (per 6-month period) from 133-150% FPL ($2,145-$2,419/family of 4); • $35 per family (per 6-month period) from 151%-185% FPL ($2,420-$2,983/family of 4); and • $50 per family (per 6-month period) from 186%-200% FPL ($2,984-$3,225/family of 4)

  11. How CHIP Fared None of the CHIP restoration bills ever had a public hearing, not even Senator Averitt’s SB 59. Restorations made were all done via the budget. • These 2003 Changes Remain: • Coverage period reduced from 12 months to six. Language in law now makes this permanent rather than planning for a return to 12 month coverage at a future date. • New coverage delayed for 90 days. (New perinatal coverage could eliminate this for many newborns.) • Income deductions eliminated (gross income determines eligibility). • Asset test (limit) added for those above 150% of the poverty line (took effect August 2004). • Outreach and marketing were reduced in 04-05, important to monitor and push for strong investment in both in 06-07.

  12. Other Major Health Care Changes on the Horizon • Universal Services Card, possible Medicaid Biometric Finger Imaging (SB 46 by Nelson) • Medicaid Managed Care Statewide Expansion • Women’s Health and Family Planning Medicaid Waiver • System Benefit Fund used to balance budget ($426.9 million), low-income electric subsidy gone; some used pay for Medicaid MH benefits ($34.6 million or 8%) • Integrated Eligibility Rollout • Medicaid and CHIP caseloads likely to exceed budgeted • Improved Standards and Oversight for Contracting & Privatization? • Any action re: THSteps Lawsuit? Center for Public Policy Priorities www.cppp.org

  13. Comparing 2004-05 to 2006-07 • Final 2006-07 budget: $139 billion in All Funds • This is 10% more than in 2004-05, less than expected growth in population and inflation • Nationally, state spending per resident has been about 50% higher than Texas state spending, and this budget will leave Texas near the bottom in spending per resident • As a percentage of the economy, since 1991, state spending has been roughly 7%, and this budget will be about the same

  14. Public Education Spending • 2003-04 Texas spent $7,335 per student • Texas ranked 34th among the states • Average state spending was $8,208 about 12% higher than Texas • Costs of living adjustments are faulty • Austin: 106.1% of U.S. Average • Dallas: 98.5% of U.S. Average • Houston: 96.1% of U.S. Average

  15. School Funding in Next State Budget

  16. Price Tags • Biennial cost of public school enrollment growth = At least $1.5 billion • Biennial cost of 3% inflation for public schools = At least $2.4 billion • “Ending” Robin Hood = At least $2.3 billion • “Buying down” local school property taxes by 10 cents per $100 taxable value = At least $2.2 billion • Biennial cost of one candy bar per year per child is $4.3 million

  17. What State Government Pays For Source: U.S. Bureau of the Census, StateGovernment Finances series. Data for 2002 for Texas, total expenditures (including trust) of $70.3 billion.

  18. What Local Government Pays For Source: U.S. Bureau of the Census, Government Finances series. Data for 2002 for Texas, total expenditures (including trust) of $77.1 billion.

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

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

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

  22. Our Tax Base is Inadequate

  23. Indicators of Ability to Pay Source: CPPP, using data from Bureau of Economic Analysis and the Census Bureau.

  24. Households with the Lowest Income Pay the Highest Percentage in State and Local Taxes

  25. Not Taxing Where the Money Is

  26. Revenue Options • 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)

  27. If We Replaced Current School Property Taxes with Sales Taxes 28

  28. House Proposed Tax Change(H.B. 3) Source: CPPP Policy Page 232, Tax Equity Note Confirms that Most Texas Families Would Pay More Under HB 3, the “Tax Relief Bill”, March 2005.

  29. Special Session? School Finance • Fund me, not you, by ending equity • You pay, not me, through regressive taxes Cap local spending growth • Through appraisal caps • Through revenue growth caps

  30. The Texas Constitution Article 8 - TAXATION AND REVENUE Section 24 - PERSONAL INCOME TAX; DEDICATION OF PROCEEDS (a) A general law enacted by the legislature that imposes a tax on the net incomes of natural persons . . . must provide that the portion of the law imposing the tax not take effect until approved by a majority of the registered voters voting in a statewide referendum held on the question of imposing the tax. (b) A general law enacted by the legislature that increases the rate of the tax, or changes the tax, in a manner that results in an increase in the combined income tax liability of all persons subject to the tax may not take effect until approved by a majority of the registered voters voting in a statewide referendum held on the question of increasing the income tax. (f) In the first year in which a tax described by Subsection (a) is imposed and during the first year of any increase in the tax that is subject to Subsection (b) of this section, not less than two-thirds of all net revenues remaining after payment of all refunds allowed by law and expenses of collection from the tax shall be used to reduce the rate of ad valorem maintenance and operation taxes levied for the support of primary and secondary public education. In subsequent years, not less than two-thirds of all net revenues from the tax shall be used to continue such ad valorem tax relief.

  31. TEXAS CONSTITUTION (Cont’d.) (g) The net revenues remaining after the dedication of money from the tax under Subsection (f) of this section shall be used for support of education, subject to legislative appropriation, allocation, and direction. (h) The maximum rate at which a school district may impose ad valorem maintenance and operation taxes is reduced by an amount equal to one cent per $100 valuation for each one cent per $100 valuation that the school district's ad valorem maintenance and operation tax is reduced by the minimum amount of money dedicated under Subsection (f) of this section, provided that a school district may subsequently increase the maximum ad valorem maintenance and operation tax rate if the increased maximum rate is approved by a majority of the voters of the school district voting at an election called and held for that purpose. The legislature by general law shall provide for the tax relief that is required by Subsection (f) and this subsection. (Added Nov. 2, 1993.)

  32. How Would An Income Tax Work?

  33. A State Income Tax, With Property Tax Reductions, Would Benefit Most Texans

  34. Texas: One and Indivisible

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