NC Budget Update Week of February 7

From legislation directing the governor to make changes to the current year's budget to daily Appropriations meetings, the budget continued to be a hot topic this week.  House and Senate Appropriations subcommittees (i.e., HHS, Education, Justice & Public Safety, etc.) met Tuesday, Wednesday and Thursday to hear an overview of each department's budget and began hearing presentations from department and division heads about where the money goes and implications of budget reductions in the coming year.  Highlights from the Health and Human Services subcommittee meetings are below, after a summary of the budget planning calendar and subcommittee guidance and along with a summary of relevant legislative action.
House and Senate Appropriations 2011 Budget Planning Calendar

• February 8, 9, 10, 15: Departments present to Subcommittees (exact schedule varies by sub-committee)
• February 16: Full Appropriations Meeting to hear Governor's budget
• February 17: Review of Governor's Proposed HHS Budget
• (Depending on subcommittee - on HHS subcommittee calendar) February 22 and 23 Interested Parties Public Hearing
• (Depending on subcommittee - on HHS subcommittee calendar) February 24 Presentations by Various Groups by Invitation
• Joint budget meetings and process continues through March
• April 4-15: House Budget developed
• April 17: Publish House budget
• April 20-22: House Readings and votes on House Budget
• April 25 - May 6 Senate Budget developed
• May 8: Publish Senate Budget
• May 11-13 Senate Readings and votes on budget
• May 14 - 26 Conference Committee meets on budget
• May 27: Publish Conference Committee Report
• May 30 - June 1: Readings and votes on final budget

House and Senate Appropriations Subcommittee Guidance
Subcommittees were given guidance for developing the budget.  I will not go through all 13 points, but of particular note are the following:

• Focus funding on the core functions of each agency (Constitutional requirements, state and federal mandates, prioritize other programs)
• Manage growth in mandatory programs
• Consider reduction strategies that, among other listed strategies, streamline and consolidate departments, programs, offices, and services; reduce non-profit funding; minimize the loss of non-state revenues; utilize privatization and restructure contracting practices
• Subcommittee reports should not include expansion funding and should not include negative reserves or "management flexibility" reductions

Highlights of HHS Appropriations Meetings

Tuesday began with an overview of the HHS budget by the Fiscal Research division

• HHS is 20.83% of the General Fund budget (2d to Education, which is 57% of the budget)
• Make-up of the DHHS $3.9 billion budget: 60% Medical Assistance; 18% MH/DD/SAS (community based services and state-operated facilities); Child Development 6%; Social Services 5%; Public Health 4%

On Wednesday, DHHS Secretary Lanier Cansler provided an overview of the department and the consequences of any further reductions.  He emphasized how far-reaching DHHS services are, Maintennace of Effort requirements, and the importance of leveraging federal funds.  Reports from divisions began with the Division of Medical Assistance (Medicaid).  Of particular note:

• 60-70% of residents of nursing homes, adult care homes and assisted living facilities receive services through DHHS.
• Payments for services account for 98% of total expenditures in Medicaid.  Of that 98% for services, the breakdown is: 30% acute medical; 26% foundation services(physician, prescription drugs, case management and transportation); 23% behavioral health; 15% long term residential; and 6% premiums
• Children account for 55% of total enrollment but their expenditires only represent 26% of payments made for services.
• Medicaid spends an average of $6300 per enrollee per year.

On Thursday, reports from the DHHS divisions continued, with the Division of Mental Health, Developmental Disabilities and Substance Abuse Services (DMH/DD/SAS), Division of Public Health and the Division of State Operated Healthcare Facilities (DSOHF) presenting.

• Of the 281,699 people served by the DMH/DD/SAS, 196,319 are served through the state's Medicaid program.
• DMH/DD/SAS total expenditures $578,825,453 = $446,896,775 (state) + $131,928,678 (federal)
• DSOHF budget breakdown: Psychiatric hospitals (53% of DSOHF total budget & 80% of DSOHF appropriated budget, 51% receipts, 49% state appropriations); Alcohol and Drug Abuse Treatment Centers (5% of DSOHF total budget & 15% of appropriated budget, 10% receipts, 90% state appropriations); Neuro-medical Treatment Centers (13% of DSOHF total budget & 1% of appropriated budget, 97% receipts, 3% state appropriations); Wright and Whitaker Schools (1% of DSOHF total budget & 2% of DSOHF appropriated budget, 57% receipts, 43% state appropriations); Developmental Disability Centers (28% of DSOHF total budget & 2% DSOHF appropriated budget, 98% receipts, 2% state appropriations).
• The state psychiatric hospitals served 7188 individuals in FY 10.  Length of stay of 7 or fewer days has decreased from 50% in FY07 to 27% in FY10. On ER wait times, it was stated that the average wait is over two days and 60% waiting for a bed are eventually admitted. The readmission rate has gone from 10% to 3-4%.
• The Developmental Centers served 1323 individuals in FY10.
• The Wright and Whitaker schools served 91 children and adolsecents in FY10.

Senate Bill 13, Balance Budget Act of 2011


This bill, summarized in last week's budget post, passed the House and Senate this week and is on its way to be vetoed or signed by the Governor.  SB 13, sponsored by Senators Stevens, Brunstetter and Hunt, seeks to reduce the current year's budget by at least $400 million, and directs transfers from various funds.