Transcript 20 - Grantmakers In Health

Weathering States’ “Perfect” Budget Storms:
The Challenge for Philanthropy
The Connecticut Case
Shelley Geballe,
Co-President,
CT Voices for Children
for
Grantmakers in Health
April 15, 2004
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A Bit of Context:
Connecticut’s Wealth
- CT has the nation’s highest per capita income.
- Even without Fairfield County (the “Gold Coast”), CT has
the nation’s 3rd highest per capita income.
- CT ranks #1 in millionaires per capita
- CT ranks very high in K-12 education performance and has
one of the nation’s best educated workforces
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A Bit of Context:
Connecticut’s Divides
Slightly more than 1 in 10 of all CT children under age 18 live in poverty
and 1 in 4 below 185% of the FPL. Hartford has the second highest
child poverty rate among US cities with population over 100,000.
During the 1990s, the real income of CT’s poorest 20% of families
declined by 19%, while the real income of its wealthiest 20%
increased by 21% -- the greatest “pulling apart” of any state in the US.
Kids in CT’s school poorest districts are half as likely to come to
kindergarten with some preschool experience, 5x less likely to pass
our mastery tests in grades 4,6, and 8, and 12x more likely to drop out
of high school –perpetuating the poverty cycle.
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CT’s Health Divides Are Strongly Associated
with Its Income Divides
Hartford
Avon, Farmington,
Glastonbury, Granby,
Marlborough,
Simsbury, Tolland
Population
121,578
123,785
Median family income
$27,051
$93,511
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5
17%
12%
Lead poisoning
5%
<1%
Asthma (hospital discharge per
57
6
30
3
Infant mortality (per 1000 births)
Late prenatal care
10000)
Child abuse (per 1000 children)
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CT’s Perfect Budget Storm
5
Huge General Fund Deficits After Many Years
of Surplus (in millions)
$1,000
$576
$500
$0
($500)
SFY 01
SFY 02
SFY 03
($1,000)
($1,500)
($2,000)
($1,268)
($1,738)
Source: OFA, Year-End Analysis of the General Fund and Transportation Fund Budgets
(October 22, 2002); OFA, Connecticut State Budget 2001-2003 (October 2001)
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CT’s Perfect Budget Storm
Booming economy
generates temporary
surpluses
Revenues cut
(new tax cuts &
out-dated tax
systems)
“Down” economy results in
increased demand for state
services and sharply
declining state tax revenues
Cost of state services
grows at normal pace
“Painless”
one-time
budget
solutions
are used
up
9/11 results in increased
homeland security costs &
a growing federal deficit
leads to less federal help
for state budgets
In FY 00, CT Collected $8.57B in Taxes.
Tax Cuts Enacted in the Late 1990s Resulted in an
Annual Revenue Loss of $2.07B by FY 00.
711.5
Income Tax
496.6
Corporation Tax
Sales Tax
193.3
Hospital Tax
190.4
Gasoline/Diesel Tax
190.2
158.1
Inheritance Tax
66.1
Local Business Property Taxes
57.8
Other Taxes
0.0
100.0
200.0
300.0
400.0
500.0
Revenue Reduction (in m illions)
600.0
700.0
800.0
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CT Was Not Alone – 43 States Enacted Tax Cuts
Between 1994 and 2001
Source: CBPP calculations based on Rockefeller
Institute’s data (September 2002).
Tax Cuts as a Percent of State Tax Revenue
Between 1% to 3%
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Greater Than 3%
A General Fund Deficit Was Predicted
Even Before CT’s Recession Began
Normal state budget growth, coupled with millions of dollars of permanent
tax cuts, led to a 9/97 warning by the General Assembly’s Office of Fiscal
Analysis of a General Fund deficit by FY 00 – because of an emerging
“structural deficit.”
As the recession began, FY 02 General Fund revenues fell more than $1
billion short of the budget plan. All taxes came in below budget. Income
tax revenues were down 12%, corporation taxes down 24%, sales taxes
down 6%, inheritance taxes down 27%. Investment income also was 62%
below budget.
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CT’s Revenue Declines Were Among
the Greatest in the US
Source: CBPP calculations based on Rockefeller Institute’s data
(September 2002).
Percent Change,
Adjusted for Inflation
-30% to -10%
-10% to -5%
-5% to 0%
No Change
or Increase
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To Address CT’s FY 02 and FY 03 Deficits:
80% of the “solution” came from:
• One-time revenues (e.g., the Budget Reserve/Rainy Day
Fund, tax amnesty, transfers from cash reserves of other
funds including the tobacco settlement fund, stock
liquidation),
• Spending cuts
• Borrowing
New revenues from permanent and time-limited tax and
fee increases contributed to just 20% of the solution. 12
CT’s Budget Storm First Hit Those Most in Need
FY 02-03 deficit-reduction included (using SFY 02 spending as the baseline):
– Elimination of various medical services for single adults (e.g., vision, PT, home
health, podiatry, psychologists, non-emergency medical transportation) and
optional Medicaid services for low-income seniors & disabled
– Cuts to HUSKY(Medicaid) outreach & to Healthy Start
– 8% cut to Department of Public Health budget
– Cuts in funding for Temporary Family Assistance, Safety Net Services, antihunger programs, transitional rental assistance, services for persons with
disabilities.
The lay-offs and early retirements of thousands of state employees also made the timely
delivery of many state-funded services more difficult.
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Beginning in FY 03, CT Began To Make a More Serious
Effort at Adding Back Some of the Tax Revenues Cut
When Times Were Good
PA 03-2, adopted early in the 2003 General Assembly Session,
generated $440 million in net “new revenues,” $300 million of
which came from new taxes and fees:
•
•
•
•
•
Income Tax. Top bracket income tax rate increase from 4.5 to 5%
Sales and Use Tax. Repeal or reduce certain exemptions (health
clubs, clothing between $50-$75/item)
Cigarette Tax. Increase by 40 cents/pack
Business Tax. 20% surcharge for 2003 income year on the
corporation tax and $250 “entity”fee on LLCs, LLPs, and S corporations
Fee Increases. Adjustments to attorney’s occupation tax, court fees,
and program fees
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But To Address the Remaining FY 03 Deficit,
PA 03-2 Also Made Even Deeper Cuts
After > $900 million in cuts to mitigate FY 02-03 deficits, PA 03-2 cut
General Fund allotments by an additional $130 million, including:
Reductions in Health Services (-$21M FY 03 & -$84M FY 04), e.g.,
• reduce Medicaid eligibility for parents from 150% to 100% of FPL
• eliminate continuous and guaranteed eligibility
• impose co-pay for @ outpatient service and Rx drug for adult
Medicaid and SAGA recipients
• eliminate eligibility for many legal immigrants
• increase co-payment requirement and annual registration fee for
ConnPACE Rx drug program
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CT’s FY 04 Budget Includes Changes That Will
Further Reduce Health Benefits & Increase Costs
The FY 04 budget requires Connecticut to seek a federal waiver so that
it can:
• Impose premiums and co-pays on children, pregnant women, and their
families with incomes as low as 50% of the federal poverty level (FPL)
($7,836 for a family of 3)
• Change the Medicaid benefit package to the state-employee plan
(including eliminating EPSDT)
• Deny prescriptions to those who fail to pay the co-pay
• Change the SCHIP benefit package to the largest available commercial
plan and significantly increase co-payments
• Impose premiums on medically-needy adults and increase copayments on medical services.
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Cuts to Health Services
Are Particularly Short-Sighted
Cuts to Medicaid/SCHIP are no “miracle cure” – Kids will
continue to get sick, but care will be delayed until conditions
worsen and become more costly to treat. CT will sacrifice
federal matching funds and health care costs will be shifted.
Continued cuts to mental health and substance abuse
services will result in corrections and foster care populations
continuing to soar – at a cost to CT of $35,000/year (for
incarceration) to more than $325,000/year per child (for
certain foster children), and incalculable cost to families.
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While Philanthropy Can Make A Difference, It
Can’t Make Up the Difference
1,200
In Millions
1,000
800
600
$1,120
400
$694
200
0
FY 04 Deficit
Total CT Foundation Grants (2001)
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But Philanthropy Can Help Catalyze Change
The CT Health Foundation (one of CT’s health conversion foundations)
made a number of strategic investments to try to turn the tide on
state budget choices generally, and health care cuts specifically:
1. Commissioned a report by CBPP on CT’s restrictive spending cap
and reform options (completed when CT still enjoyed budget
surpluses).
2. Provided a grant to CT Voices to get technical assistance on
message framing and strategic communications on state tax and
budget issues. Approved a subsequent 3-year grant to CT Voices to
implement the strategic communications plan devised by the PR
firm.
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3. Commissioned four Policy Briefs by Georgetown U. Health Policy
Institute and CT Voices for Children on impact of FY 04 changes on
affected individuals & the CT economy and:
- Held press conferences as each report was released
- Scheduled private briefings on key findings by the researchers
to legislative leadership and media
- Received terrific press on key findings (e.g. that an estimated
30% of those in HUSKY A/Medicaid --nearly 87,000 children and
parents - would lose coverage because they cannot afford the
premiums; that CT can expect to lose $96M in federal funds & see a
43% increase in uninsured children under the proposed changes)
(See www.ctkidslink.org/pub_issue_12.html)
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The Result, So Far?
Legislation to repeal many of the changes made in the 2003 Session
is introduced, and co-sponsored by 20 of 36 State Senators and 85 of
151 State Representatives.
Repeal of many changes was incorporated in the Appropriations
Committee budget, and new funding provided to restore services and
eligibility.
The Finance Committee’s budget incorporates many of CT Voices’
revenue enhancement proposals (e.g., “millionaire’s tax, estate tax
decoupling) that will help fund this restoration of benefits.
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For more information contact:
Shelley Geballe, JD, MPH
([email protected])
at CT Voices for Children
33 Whitney Ave. New Haven, CT 06510
203-498-4240, 203-498-4242 (fax)
www.ctkidslink.org
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