Must Reads, The Devil's in the Details

The Devil’s in the Details: Health and Human Services

The Devil's in the Details

This article is part of a series contrasting budget cut options identified by NC General Assembly joint appropriations subcommittees with revenue options that would preserve decades of public investment in the economic and social advancement of North Carolina. Click here for other articles in the series so far.

Legislative leaders announced their intent to cut $592 million from the state’s health and human services budget next year, which is $372 million more than the $212 million in FY11-12 cuts proposed in the Governor’s budget. To put the legislature’s proposal in perspective, the state’s $4.9 billion health and human services budget is second only to the $11.9 billion total state education budget. Over two-thirds of all state health and human services spending is used to provide medical assistance for low-income children and families, pregnant women, and aged, blind, and disabled individuals.[1] In addition, approximately 79% of state appropriations to health & human services are used to draw down millions in federal funding[2], making state spending in this category one of the best-leveraged investments state government can choose to make.

The spending cuts below[3] represent a selection of “options” under legislative consideration, which are presented to illustrate the severity of a “cuts-only” approach to balancing the North Carolina budget. A balanced approach to the budget shortfall would include raising revenue[4], making it possible for North Carolina to continue caring for its most vulnerable citizens.[5]

The legislature is considering the
following budget cuts …
… but instead of making cuts,
they could:
$372.9 million
Amount of additional budget cuts over the Governor’s suggested cuts that the Joint Appropriations Subcommittee on HHS will have to identify in order to meet their declared $4.3 billion total spending target
$307.0 million
Keep the corporate income tax at the current rate of 6.9 percent instead of cutting it to 4.75 percent
$15.8 million
Eliminate or reduce state funding for many child care services for low-income families, including transportation, facility registration fees, funds to county departments of social services for child care, and more limited eligibility for child care services for community college students (DCD)
$14.5 million
Eliminate business subsidies included in the NC Senate’s 2009 revenue plan (excludes research and development and a few others)
$9.3 million
Reduce nonprofit funding by $2.3 million and do not award any new Community Health Grants in FY11-13 (CMS)
AND
Eliminate state funding for county departments of social services (DSS)
$9.1 million
Eliminate tax credit for companies that export cigarettes from North Carolina port
$6.8 million
Cut state funding for local departments of public health (DPH)
$6.6 million
Eliminate the cap on sales tax paid on jet fuel by interstate passenger air carriers
$16.5 million
“Modify” – and if program modifications do not yield adequate cost savings, eliminate – optional and mandatory health services provided under Medicaid. In addition to making even fewer health services available to the very poor, this cut will result in the loss of $31.6 million in federal funds, for a total economic impact to participating health providers of $48.6 million over the biennium (DMA)
$17.0 million
Eliminate tax credit for insurance company payments to the Insurance Guaranty Association
$1.7 million
Change the eligibility requirement for the Independent Living Program administered by the Division of Vocational Rehabilitation from 125% to 100% of the federal poverty level (FPL), making the program available to fewer individuals (DVR)
$11.4 million
Apply general sales tax rate to items sold in vending machines
Total Cuts: $423.0 million Total Revenue:$365.6 million

— Brenna Burch and Edwin McLenaghan, Public Policy Analysts, NC Budget and Tax Center

References:

[1] NCGA Fiscal Research Division’s “Department of Health and Human Services Overview” available at http://www.ncleg.net/documentsites/committees/JointAppropriationsHHS2011/2011_02-08 Meeting/FRD_Budget Overview DHHS_2011-02-08.pdf

[2] “North Carolina Department of Health and Human Services,” presented to the Joint Appropriations Subcommittee on Health and Human Services by Secretary Lanier M. Cansler, February 9-10, 2011: available at http://www.ncleg.net/documentsites/committees/JointAppropriationsHHS2011/2011_02-09_Meeting/DHHS_Sec. Cansler%27s Presentation_2011-02-09.pdf

[3] Joint Appropriations Subcommittee budget cut options for the Health & Human Services budget are available at http://www.ncleg.net/documentsites/committees/JointAppropriationsHHS2011/2011_03_15_Meeting/JtSubCommReport_15Mar2011 (4).pdf

[4] Revenue options are based on NC Budget & Tax Center calculations, data provided by the Institute on Taxation and Economic Policy (ITEP), and the NC Department of Revenue’s Biennial Tax Expenditure Report available at http://www.dornc.com/publications/nc_tax_expenditure_report_09.pdf

[5] The budget cuts presented in the right column of the table are followed by an abbreviation indicating which division within the HHS budget is impacted by the cut. The abbreviations are: Division of Child Development (DCD), Central Management Services (CMS), Division of Public Health (DPH), Division of Social Services (DSS), Divison of Medical Assistance (DMA), and Division of Vocational Rehabilitation (DVR)

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