DLS Suggests Interesting Change to Health Department Funding Formula

health-2082630_1280In an interesting twist, the Department of Legislative Services (DLS) has recommended a change to the Local Health Department’s Core Funding formula.

The recommendation was announced at the Wednesday, February 12 Maryland Department of Health Public Health Administration Budget subcommittee meeting. It is based on concerns that the funding formula is too complicated and that the Maryland Department of Health (MDH) has inconsistently applied it in past years.

From the Department of Legislative Services Operating Budget Analysis of the MDH Public Health Administration:

The formula, as currently written in statute, does not account for ongoing expenditures related to annual general salary increases, salary increments, or additional health insurance expenditures. Because the formula does not specify whether the base number should include or exclude these costs, formula adjustments have been inconsistent between fiscal 2020 and 2021. In fiscal 2021, the administration used the fiscal 2020 legislative appropriation ($54.4 million), which includes the annualized fiscal 2019 general salary increase. However, this base number does not include funds for contractual health insurance that were budgeted under the MDH Office of the Secretary in fiscal 2020. Had the administration used its methodology from prior years, the base would have excluded the general salary increase and only included $51.7 million representing the fiscal 2019 base amount plus the formula increase budgeted in fiscal 2020.

Due to the inconsistencies in recent years in how the inflation and population growth adjustments have been applied along with the inconsistencies in how the base has been calculated for Core Public Health Services, DLS recommends adding a provision to the BRFA of 2020 to simplify the statute related to funding for Core Public Health Services. DLS recommends amending the statute so that future funding is based on the legislative appropriation from the prior year inflated by the projected General Fund revenue growth rate in the proposed budget year. DLS also recommends that the statute specify that the growth factor should be applied only to total State operating funds budgeted under the Core Public Health Services program.

MDH opposed the recommendation on the basis that the change would increase funding for the local health departments which they view as a legislative mandate.

The MDH’s response to the DLS analysis:

The Department respectfully disagrees with the recommendation. While the Department agrees with DLS’ intent to simplify the Core funding formula to reduce the formula’s administrative burden, the Department estimates that projected State General Fund growth consistently exceeds the formula’s population and inflation adjustments currently in statute. An analysis from FY 2017 to FY 2021 estimates that DLS’ recommendation would have increased the Core funding formula by an average of 3.2% each year compared with the actual average growth of 1.9% each year. In particular, for the FY 2021 Allowance, DLS’ recommendation would have increased the Core funding formula by the projected State General Fund growth of 2.4% versus the current population and inflation adjustments of 1.7%, a difference of nearly $400,000. The DLS recommendation, therefore, would likely increase legislatively mandated spending for the Core funding formula in out years and add to the State’s structural deficit.

For more information:

Department of Legislative Services Operating Budget Analysis of the MDH Public Health Administration

MDH Response to DLS Budget Analysis of the MDH Public Health Administration Budget