This is the third part of a series on local health departments. The previous two blogs have provided an introductory overview of local health departments and specifics on services provided, organizational structure, and funding. This piece will discuss the history of local health services and of the core funding formula. The actual development of the Core Funding Formula will be discussed in the next segment of the series.
The text for this blog has been taken from a document titled “Core Funding for Local Health Departments: An Analysis of the Maryland Funding Formula and its Impact on Local Health Services.” This document was prepared by Christine O’Malley, a student of the Johns Hopkins School of Public Health, for the Maryland Association of County Health Officers (MACHO).
History of Local Health Services
The first health department in Maryland was developed in Baltimore City in 1793 in response to a yellow fever epidemic. The first State Board of Health was established in 1874, which in turn established county boards of health starting in 1880. County boards of health first gained the authority to appoint Health Officers in 1886. Health Officers at that time generally served on a part-time basis while maintaining their own medical practices. The first State Board of Health in Maryland was established in 1874, but the Maryland State Health Department did not come into existence until 1910. Increased interest in public health following World War I led the General Assembly to give county boards of health the authority to require specific public health training for Health Officers and to have Health Officers serve on a full-time basis. The state then decided to make an effort to ensure that health departments in every county had full-time Health Officers. The first full-time county health department was developed in 1922 in Allegany County, and by 1934, all counties in Maryland had health departments. 
To facilitate this transition, however, the state needed local support. The state argued that county Health Officers created greater efficiency, because the state had full-time Deputy State Health Officers overlapping service areas with local Health Officers, and if one person filled both positions, both state and local governments could save money. Combining the positions would allow the local health officer to simultaneously serve as a Deputy State Health Officer (which gave him some power to enforce state regulations) and provide health services at the local level. With this in mind, the state proposed that counties add a small sum to the salary for the local Health Officers, and the state would also add money for local health officer salaries, and possibly some funds for additional staff, depending on availability of funds. Today, Health Officers still retain this dual role of serving as a state and local agent, though the term ‘Deputy State Health Officer’ has fallen out of common use. Currently, the term ‘Deputy Health Officer’ refers to the Health Officer’s second in command within the local health department, and should not be confused with this historical title that applied to Health Officers themselves. This traditional role of the Health Officer, now reflected in the overall mission of LHDs in general, represents a more efficient model of service delivery because the Health Officer is able to deliver services at the local level and at the same time contribute to a collective goal of improving health for the entire state.
History of Core Funding
Prior to the 1950s, there was no set formula for determining the relative shares of cost to be borne by state and local entities, and the state negotiated its share of costs for LHDs with each county individually. This arrangement provided for the basic needs of LHDs in each locality, but resulted in significant inequities between counties. As LHDs expanded services and expenditures grew, the state did not continue its original commitment to share roughly half of the budget of each county. Larger counties were able to rely on local funds to expand services while smaller counties depended more on state dollars to finance budget increases for LHDs. As a result, county health departments were growing at different rates. In addition, county Health Officers had little discretion in how the funds for their own health departments were spent under this system.
The basic idea for a specific funding formula for local health services originated in 1955, when the state of Maryland realized that the lack of a single state policy for financing local health services had led to significant inequities in the distribution of state aid to counties. The formula was developed by the Subcommittee to Review the Financing of Maryland Health Activities, part of the Maryland State Planning Commission.
The recommendations developed by the committee were based on several key principles. The committee recognized disparities in state aid to counties were associated with wide variation in health services across jurisdictions, and sought to develop recommendations that would provide a more transparent and equitable method of distributing financial responsibility for local health services. The committee believed matching requirements should be based on a county’s relative ability to pay. In addition, the committee aimed to develop a more transparent system of distribution and to give Health Officers the authority to have greater discretion in the use of resources available to them.
The committee recommended that cost sharing between state and local governments for local health services be based on certain minimum standards derived from fixed ratios of health department personnel to population. These ratios would be expressed as minimum annual per capita expenditures which would vary depending on county population. These figures in turn formed the basis of the Estimated Minimum Budget (EMB) for each county. Once the EMB was calculated, the counties’ relative wealth would be used to determine the appropriate state/local share for each county.
The committee recognized the importance of maintaining a state-local partnership in financing local health services. It recommended that the state continue to provide approximately 50% of total health expenditures for all counties put together, with the state share varying from 20% for counties with the greatest ability to contribute to LHDs to 80% for counties with the least capacity to raise local funds. This variation was meant to provide for a basic level of services for each county while accounting for relatively higher per capita costs in smaller counties. The state-local share was to be determined through the use of a state-wide formula based on the equalized assessed value of real and personal property subject to local taxation. This measure was thought to be the best proxy for each county’s ability to pay for health services. The formula provided funding for basic infrastructure for each county, but recognized that smaller counties would end up paying significantly more for health services per capita if the state share of funding were equal across all counties.
This formula, which became known as the Case formula, (after Richard Case, the Chair of the Commission that developed the formula) was adopted in the Code of Maryland Regulations (COMAR) in FY 1956 and was used for many years as the primary method for determining state and local shares of financing for local health services, though the state’s share of funding was never legislatively mandated. The methodology of distributing state funds to LHDs under the Case formula was outlined in COMAR regulations, but state funds were appropriated through the annual budget process, rather than being required by statutory law. This process of distribution remained in effect until the adoption of the Core funding law in 1995. The lack of dedicated funding made state contributions to LHDs vulnerable to cutbacks in the annual budget process, particularly during state fiscal crises in times of economic difficulty. The adoption of the Core funding formula in 1995 included a legislatively mandated base level of funding for LHDs which would require the Governor’s Annual Budget for LHDs to be consistent with statute. Over the years, there have been several attempts to modify the law to provide a clear and comprehensive legislative mandate for state funding for LHDs, but difficult economic circumstances and lack of political will have prevented the adoption of a sustainable solution to the challenge of providing adequate and equitable support for LHDs.
- Maryland Funding for Local Health Departments – Timeline
This brings this piece of the blog series to an end. Part 4 will discuss the development of the Core Funding Formula and current issues with respect to the formula
Previous blogs in the series are listed below.