DLS Finds Flaws with Local Health Formula

The Department of Legislative Services budget analysis on the Health Systems and Infrastructure Administration (where local health departments now fall) highlights some of the fiscal challenges currently facing health departments.  From the analysis:

The fiscal 2014 budget includes an increase of $2.0 million for Core Public Health Services. This includes adjustments for two factors: (1) the formula adjustment factor and (2) additional funding to account for the annualization of the fiscal 2013 COLA for State employees…More specifically, statute mandates that for fiscal 2013 and each subsequent fiscal year, the formula adjustment factor be applied to the $37.3 million base level…prior to cost containment actions that began in fiscal 2009, the inflationary adjustment had been made to the previous year’s base allocation. Given that the formula adjustment factor is applied to the base year rather than the prior fiscal year, funding for Core Public Health Services will not grow.

The analysis also points out that the current formula fails to account for ongoing compensation related expenditures.

Another consequence of applying the adjustment factor to the base level means that the formula does not account for ongoing expenditures related to the annualization of the fiscal 2013 COLA. Therefore, funding in excess of the formula adjustment factor is provided in fiscal 2014 to account for the annualization of the fiscal 2013 salary increase ($0.8 million). DLS advises that similar adjustments will have to occur in future fiscal years to account for ongoing costs associated with the fiscal 2013 and 2014 COLAs. This additional funding is not mandated by statute and is budgeted at the discretion of the Administration.

MACo raised these issues previously in a six-part blog series on Conduit Street. The following recommendations were made with respect to the funding of local health departments.

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.

3.   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.

4.  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.