The1st meeting of the Budget Review Subcommittee on Human Resources of the Interim Joint Committee on Appropriations and Revenue was held on Thursday, July 31, 2003, at 11:00 AM, in Room 129 of the Capitol Annex. Representative Jimmie Lee, Chair, called the meeting to order, and the secretary called the roll.
Guests: Secretary Viola Miller, Cabinet for Families and Children, Mike Cheek, Cabinet for Families and Children and Secretary Marcia Morgan, Ann Gordon, Jerry Bailey, Commissioner Rice Leach and Commissioner Margaret Pennington, Cabinet for Health Services; Beth Jurek and Jim McWilliams, GOPM.
LRC Staff: Wanda Meeks, Cindy Murray and Kristin Burton.
The first item on the agenda was a presentation by the Cabinet for Families and Children by Secretary Viola Miller. The cabinet presented the subcommittee with a handout in response to questions that were asked of them. The first handout was FY 2002-03 close-out information. In order to balance at the end of the state fiscal year, $14.5M will be transferred into Medicaid Services in fiscal year 2004. This surplus is due to the over estimation of the federal draw. A total of $88,000 of old energy trust fund dollars will be used for weatherization activities in fiscal year 2004. Secretary Miller asked the subcommittee to have the Legislature provide the cabinet with statutory language that would allow them to use this money for weatherization projects.
The next item presented was the breakdown of allotments for FY 2003-04. Secretary Miller informed the subcommittee that she had two appropriations increases request with two more to be presented at a later date as a result of increased numbers in food stamps and protection and permanency.
Chairman Lee questioned the Secretary as to whether any of the lapsed money went back into the General Fund. Secretary Miller answered that she did not know if any money went back into the General Fund. She instructed the chairman that he would have to check with GOPM. She did tell him that there was $5M that lapsed from her budget, but where it went she did not know.
The subcommittee had asked for a child care assistance update. Secretary Miller stated that this was a fragile piece of this budget and, thanks to the efforts of the chair of this committee $5M was added in the last budget cycle. Enrollment for this program, however, was closed in early May 2003 to stop the fiscal “bleed”. There are approximately 6,000 children on a waiting list at this time. When the number of recipients goes down to 56,000 from its current 58,000, then the rolls will be re-opened. At this point, there is no clear word from the federal government as to what their funding will be.
Chairman Lee asked the Secretary to share with the subcommittee the anticipated changes that are being contemplated to address some of the issues with childcare. She outlined the cost containment procedures that are outlined in the handout. She stated that they are projecting about an $11M shortfall in FY 2003-04, and are using these efforts to get their budgets reduced. If these cutbacks do not work to meet the deficit, then additional changes may have to be made to make further cuts.
Chairman Lee questioned the Secretary as to whether any adult in the household that was not attending school would affect the total household salary. Secretary Miller responded that any adult in the household with income would affect their eligibility for child care. Chairman Lee questioned using any adult income due to some relatives living with other relatives as they have no other place to live. Representative Burch asked if they live there, but don’t contribute financially to the family and may in some cases bring the family down, is it fair to use that income to decide child-care eligibility. Secretary Miller answered that all of these programs are not “good,” but have to be done to get their budgets into alignment.
Chairman Lee stated that these changes that would affect children were painful for the General Assembly to accept. He said that these changes go beyond anything that any member of the General Assembly should ever accept. He stated that we could not have children who were denied daycare due to some of the changes that were being anticipated due to budget restraints. He hoped that other members of the General Assembly would not sit by and watch these programs deteriorate and would find funding.
Representative Kathy Stein stated that Secretary Miller is doing the best she can with the budget that was passed by the General Assembly.
Representative Reginald Meeks stated that he was taken aback by the enormity of this problem with services for children. He asked what other cost containment procedures were discussed but not implemented by this cabinet. He asked the Cabinet to provide this information to the subcommittee in writing. Secretary Miller stated that they had a long list of cost-cutting initiatives along with a public hearing and would provide that information to the subcommittee. He complimented the Secretary and her staff for what they go through on these issues. He stated that he couldn’t imagine what it would be like for the legislators to go back and have to face families in their districts if these programs were cut and were unavailable.
Representative Scott Brinkman asked where the federal government is in terms of federal funds for child-care subsidies. Secretary Miller answered that there are no clear answers from the federal government on funds. She is speculating that in the Temporary Assistance for Needy Families (TANF) reauthorization there will be at least some new child-care money. There are proposals from a minimal amount to a substantial amount of money. She stated that there is still an $11M gap to just stay where they were last year. She stated that as she receives information regarding federal dollars that they should get it to this subcommittee so everyone can stay abreast of what the status of federal dollars might be. Chairman Lee stated that if they were provided with current information it would be mailed to all subcommittee members.
Chairman Lee complimented the Cabinet Secretary for the work she has done for human services, and asked her how the legislators should respond to their constituents when they asked about cutting the fat/waste out of government. Secretary Miller stated that they have been through six (6) budget cuts in the last two years, and after every cut they have trimmed and eliminated programs. She stated that the Cabinet has eliminated out-of-state travel and have cut their in-state travel. Her next cost-cutting procedure will be closing offices. She has prioritized every county and has listed them by caseloads. If she were to close these 40 offices, it would only save about $11M-half of which is federal money that the state would lose. She stated that other than the school system her offices are the major employer in rural counties.
She brought to the subcommittee’s attention that their cabinet is out of compliance with the Civil Rights Act of 1964 on Limited English Proficiency. They are creating and re-assigning tasks without hiring new staff to better address this problem. She stated that they should have all their applications and forms at least in Spanish.
Chairman Lee asked how many employees were going to retire, and if those positions were going to be able to be filled. She stated that she had huge numbers that would be retiring in August and September. She said that 78 would be retiring 8/1/03, and another large number in September. She commented that she was very concerned about the number of positions that she would have to cut due to the 8/1/03 snapshot.
Representative Joni Jenkins asked about the $11M gap from where they were a year ago. She asked what amount they would need to bring services back to where they were a year ago. Secretary Miller responded that just restoring the $11M only brings them to servicing about 20% of the eligibles.
Representative Burch asked about the projected changes in FY 2003-04. Secretary Miller stated that the food stamp rolls were increasing. This is related to the economy as more families are eligible for assistance. For the first time in a number of years the number of children in out of home care are increasing, and that hasn’t been seen in a long time. She attributes this to increased family stress causing increased child abuse and neglect and increased police attention to drug trafficking which is primarily methamphetamine labs in houses. The Cabinet has seen the increase of children put into their care due to these situations. These are often long-term cases as children are kept during the court process and trial and possible incarceration.
A motion was made and seconded to approve the appropriations increases for the Cabinet for Families and Children. All members approved the increases.
Representative Lee, on behalf of the subcommittee, thanked the Secretary and her staff. He stated that they have been and continue to be wonderful to work with. Secretary Miller responded that Representative Lee, along with his staff, had also been wonderful to work with.
Representative Lee introduced Secretary Marcia Morgan, Cabinet for Health Services. She began by going over information that had been requested, including detailing cost saving measures that were directed by HB 269. She pointed out that in FY 2001-02 the Cabinet spent $11.8M on total discretionary expenditures. State FY 2002-03 was closed at $9.9M-a $1.9M decrease. The Cabinet has reduced expenditures by cutting back on comp-time, block 50 payments, registration fees, procurement card purchases, travel, furniture and fixtures, fleet reductions by 37 vehicles, cell phones and pagers, lease arrangements, personal services contracts and memoranda of agreement. The Cabinet lapsed back into the General Fund $303,222 due to management actions that the Cabinet had undertaken.
The cabinet’s carryforwards were discussed. The Department for Mental Health and Retardation Services were able to carry forward $1.7M; however they were budgeted to carry-forward $2.3M so they started the year short. The Commission for Children with Special Health Care Needs had budgeted a carryforward of $1.22M, and they are only carrying over $328,000, and the Office of Aging Services was expected to carry over $38,200 yet they only have $29,000. Although they are carrying over $11,213,191, there are three departments that are significantly short.
Chairman Lee asked if there was any carryover for Medicaid Service Benefits. These funds are in the MART account where they can draw interest. In the Medicaid Administration budget, there is a little over $13M that will be needed in FY 2003-04 and in the Benefits line the carryforward totals almost $12.9M.
She outlined potential expenditure shortfalls for the coming year, including the Commission for Children with Special Health Care Needs. This agency is expecting an expenditure shortfall of $1.9M. She discussed the Medicaid budget shortfall which has been reduced to $4.4M for FY 2003-04, although the projected shortfall is increasing as more and more people become eligible for services. She explained that there has been a trend over the past four quarters of eligibility increases.
The subcommittee had asked about the Cabinet’s cost cutting initiatives that were slated for implementation. Secretary Morgan listed the supplemental drug rebate program that would net savings of $11.6M also they will develop a fee-based system for outpatient hospital services for a $24M savings. Medicare part B savings will net savings of $15M. The Medicaid resource limitations and estate recovery practices will be implemented for a $17.9M savings. This action will eliminate the homestead exemption and eliminate the medically needy from the nursing facility service line. They will also start the process of anyone who stays in a nursing facility for six months to be deemed institutionalized which will force the sale of assets that the individual holds. Premiums will be instituted for transitional medical assistance and the Kentucky Childcare Health Insurance Program (KCHIP) for a net savings of approximately $2M.
Two divisions in Medicaid were reorganized by Executive Order 2003-651 to more properly align the managed care functions. Administrative Order 03-05 reorganized the Division of Audits, Provider Branch and Contract Audit Branch. These actions centralized the staff and functions.
Representative Burch questioned the Secretary as to what would happen if after the sale of an institutionalized person’s property they recovered and were able to go home. She stated that the patient has six months from the time they are deemed institutionalized to make good faith efforts to sell their assets. If they were to recover after the sale, they would have to look for alternative living arrangements.
Secretary Morgan stated that the Cabinet was beyond any good management decisions. These practices have real human consequences. These are not just numbers. She stated that she knew that the budget would have real human tragedies.
Representative Jenkins asked Secretary Morgan what number it would take to make the system whole again. She responded that it would take somewhere between $200M-$300M just to hang on to the FY 2003-2004 funding. This assumes no increase in eligibles or utilization. Representative Jenkins acknowledged that the Cabinet was given a horrible task to get their budgets in line. She stated that it would be their jobs to get the message to other legislators during the next session.
Representative Stein questioned Secretary Morgan regarding who would be used to recover property from institutionalized patients. She asked if this would be General Counsel that would go after property of Medicaid Patients. Secretary Morgan answered that no one would go after the property; however, the services would be discontinued to that particular patient.
Representative Meeks asked for clarifications of the four components of the resource limitations cost saving initiatives. Representative Meeks asked the Secretary to meet with him and explain these components. She said that she would provide the subcommittee with a written summary of all of the components. He also asked her to provide recommended changes that would keep Kentucky in line with all surrounding states.
Chairman Lee acknowledged the fact that the Medicaid situation was going to be very important during the next session. He asked that the Secretary be available to work closely with the subcommittee to see that some of these issues would be resolved and that needed funds would be found.
A motion was made and seconded to accept the appropriations increases. All members approved the increases.
There being no further business, the meeting was adjourned at 12:35.