Blog Series: Local Health Departments Part 4 – Core Funding Formula and Recent Challenges

As discussed in Part 3 of the blog series, the Core Funding Formula was adopted in 1995.  This formula established a base level of funding for local health departments beginning in FY 1997 of $41 million, with subsequent increases based on inflation and population growth.   To receive funds through the formula, each jurisdiction was also required to meet a local match, which may not exceed the local matching percentage required in FY 1996.  Although there has been discussion about modifying the Core Funding Formula to provide funding for compensation-related adjustments, up until FY 2008, the Core Funding Formula generally worked well, providing increased funding, compounded annually, for health departments.  In FY 2008, funding for local health departments reached a high of almost $70 million.  This trend changed, however, beginning in FY 2009.

Due to State fiscal constraints, health departments saw their funding reduced by almost $12 million from the original appropriation of $73.2 million in FY 2009.  Health departments experienced further reductions in FY 2010 when the Board of Public Works, in August 2010, took action to reduce funding to approximately $37.3  million.  Further action during the 2010 General Assembly session, froze the base funding level at $37.3 million for FY 2010 to FY 2012, and did not provide for inflationary increases.

During this time, a new interpretation of the inflationary adjustment also emerged.  Since the inception of the Core Funding Formula, inflationary adjustments were compounded annually, providing for growth to accommodate increasing costs.  Based on this new interpretation, inflationary adjustments will be made annually, without compounding the increase over time.

The effects of this interpretation can been seen in the Spending Affordability Briefing document presented by the Department of Legislative Services on October 20, 2011.  Page 21 of the document shows health departments being funded at $38.7 million in FY 2013. This incorporates the base funding level of $37.3 million plus the inflationary adjustment of $1.4 million, or 3.7%.  Due to the new interpretation of inflationary adjustment, health departments will not see their funding go much beyond this level of funding for years to come.  Funding reductions have already had a profound effect on local health departments.  This change in interpretation means that health departments will continue to struggle for years to come unless action is taken to restore funding and provide for compounding inflationary increases to accommodate expanding needs.

A recent report completed by the Department of Health and Mental Hygiene in conjunction with the local health departments summarizes programmatic changes made in response to reductions to the Core Funding Formula.  This report is in response to a request by the budget committees of the General Assembly.

Previous blogs in the series are listed below.

Blog Series: Local Health Departments – Part 1
Blog Series: Local Health Departments – Part 2: Services, Structure and Staffing, and Funding
Blog Series: Local Health Departments – Part 3: History of Local Health Services and Core Funding

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