Blog Series: Local Health Departments Part 6: Conclusions and Recommendations

This is the final segment of a series on local health departments.  The previous five blogs have provided an introductory overview of local health departments; specifics on services provided, organizational structure, and funding; the history of local health departments and the core funding formula; an overview of the current formula and recent challenges with respect to budget and legal interpretation; and formula shortcomings with respect to compensation related adjustments.  This blog will draw conclusions and make recommendations with respect to the funding of local health departments.

Funding Challenges

Local Health Departments (LHDs) play a vital role in delivering health services to the public.  These services may range from maternal health and drug abuse treatment, to the inspection of food facilities and environmental testing.  One obvious finding from this series, is that our local health departments are underfunded and struggling to meet service demand.

Funding for Maryland’s LHDs is a combination of federal, State (Core Funding), and county funds as well as fee collections.  Core Funding is determined through a statutory formula.  The minimum funding level for the program was established at $41.0 million in fiscal 1997, with subsequent increases based on inflation and population growth.  These inflationary factors increased funding to a high of almost $70 million in FY 2008.  However, cost containment actions of the Board of Public Works in August 2010 and further action during the 2010 General Assembly session, reduced the base funding level to $37.3 million for FY 2010 to FY 2012.  LHDs have been funded at this level again in the Governor’s FY 2013 proposed budget.

Not only has funding been cut significantly for LHDs, a new interpretation of the statute has affected the application of inflationary increases.  Instead of the inflationary increases providing for cumulative growth, under this new interpretation, inflationary increases would only be applied as one year’s growth in inflation and population, permanently reducing and restructuring LHD funding.  These actions have already had a profound impact on LHDs and will continue to do so for years to come unless action is taken to restore funding and provide for inflationary increases to accommodate expanding needs.

Recommendations:

1.  As the State’s fiscal condition improves, funding to LHDs should be restored and a new base established to ensure funding levels are commensurate with the needs of constituencies across the State.

2.   Considering the new statutory interpretation with respect to inflationary increases, legislation should be introduced to clarify that inflationary increases should provide for cumulative growth, not one year’s growth in inflation and population.

Compensation Related Adjustments

As discussed in Part 2 of this blog series, with the exception of Baltimore City and Baltimore, Montgomery and Prince George’s counties, health department employees are State employees whose salaries are paid through a combination of State, local and grant funds.  Whereas, the Core Funding Formula provides for inflationary adjustments, COLA adjustments and other compensation related adjustments are not mandated through the formula.   This has resulted in local governments covering a greater proportion of increases in personnel costs as adjustments have been made to State employee salaries and benefits.

Reductions in state funding for compensation-related adjustments have the potential to influence local support for health departments. State contributions through Core Funds may be used to leverage matching funds from local governments. The level of state funding may also influence overmatch funds. In light of the recent cuts in state funding, LHDs have increasingly relied upon these discretionary overmatch funds to cover necessary compensation adjustments. In addition, approximately 75-80% of local health department budgets go to personnel costs, with the remaining 20-25% allocated to general operating costs.  Consequently, if LHDs fail to identify funding sources that allow them to keep pace with required compensation-related adjustments, the departments will be forced to lay off workers and accordingly reduce service delivery hours to the public as a result.

The 2007 Joint Chairmen’s Report requested the Department of Health and Mental Hygiene and the Maryland Association of County Health Officers (MACHO) to examine this funding issue. In DHMH’s response to the budget committees, recommendations were given to provide more equity in compensation adjustments between State employees in the LHDs and State employees generally. MACo would like to reiterate these recommendations.

Recommendations

  1. Amend the current statute to base a portion of the annual change in the State share of Core Funds on the percentage change in State salaries and fringe benefits.  Examples of  changes in salaries and fringe benefits would include salary increments and COLAs as well as increases in the State share of retirement and health insurance costs.  The same annual percentage change in salaries and fringe benefits would be applied to other operating expenses.  This overall change would more closely align funding to the costs for operating LHDs.  Existing statutory language that bases a portion of the annual change in the State share on a change in population would remain unchanged.  The overall annual percentage change in the State share would be applied to the total amount of the State share in the base fiscal year to determine the State’s contribution in the following fiscal year.  All 24 LHDs would be included in this revised calculation of the annual formula adjustment.
  2. Amend the current statute (or adopt language in the annual budget bill) to require COLAs and other compensation-related adjustments to be equitably distributed to all LHDs.  State and local government positions supported by Core Funds (and State positions in general) should be treated in the same way, whenever these adjustments are approved for State employees.

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
Blog Series: Local Health Departments Part 4 – Core Funding Formula and Recent Challenges
Blog Series: Local Health Department Part 5: Core Funding Formula and Its Shortcomings

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