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									THE FACTS
     THE FUTURE
             The William P. Hobby Policy
                      Conference




 Federal Budget and Policy
          Issues

 Eva DeLuna Castro, deluna.castro@cppp.org
           Budget Analyst, CPPP


               May 14, 2004
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PRESENTATION OUTLINE:
 The “Big Picture” of federal spending in
  Texas
 More specific information on major federal
  sources of HHS and education spending in
  Texas: funding formulas, match
  requirements, beneficiaries and benefits in
  Texas, changes being proposed by White
  House or Congress
 Additional resources                                           2
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  Federal Spending in Texas: $123 billion in 2002
Non-defense federal                             Agricultural
                           EITC - 2%
 agencies - 15%                                Commodity
                                              Payments - 1%


       Medicare                                          Medicaid - 7%
        12%
                                                         UI Benefits 2%
                                                        Highway Aid 2%
   Defense/Veterans                                     Food Stamps 1%
                                     Other
        20%
                                                           All Other
                                                              14%
               Social Security and
                     S
                   S I - 23%




                                                                                           3
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            Top 10 Federal Funding Streams in State Budget, 2002
                            Billion $-       $2.0          $4.0   $6.0         $8.0          $10.0

                           Medicaid                                                     $8.7
     Highway Planning/Construction                  $2.4
            Title I Education Grants      $0.711
             School Lunch Program         $0.699
    Special Education (State Grants)      $0.608
Temp. Assistance for Needy Families       $0.583
                              CHIP       $0.536
   Child Care and Dev. Block Grant       $0.406
            WIC Nutrition Program        $0.382
  Child Care Mandatory & Matching        $0.363
                           All other                $2.5

 NOTE: The Food Stamp program brought more than $1.5 billion in federal          4
 funds to Texas in 2002, but the benefits are not appropriated through the state
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Federal “Superwaiver” Proposal:
• House version would let states get 5-year
  waivers to combine 2 or more of the listed
  programs
                                                         Annual Funding for
                                                         Texas, Fiscal 2002
Temporary Assistance for Needy Families                     $583 million
Food Stamps                                                 $1.5 billion
Social Services Block Grant (SSBG)                                     $150
  million
Title I of Workforce Investment Act                             $289 million
Wagner-Peyser Act           (Employment Services)                        $ 54
  million
Adult Education/Family Literacy                                 $ 41 million
Child Care Development Block Grant                                        $406
  million
                                                                                   5
Housing Programs (except Section 8 and some Section 7)                       $348
  million?
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Medicaid (Title XIX)
 Open-ended entitlement with state match (for most
  of 2004, match ratio is 36.83% state, 63.17%
  federal). Federal Medicaid spending rose by only
  18.1% in TX from 1996-2001, vs. 34.7%
  nationwide. (Texas rank in federal Medicaid
  growth: 46th)
 Medicaid funds health care for low-income people,
  as well as some elderly & persons with disabilities.
  States decide (after federal minimum requirements
  are met) who’s eligible, what benefits they get, and
  what providers are paid. In March 2004, 2.6 million
  Texans were on Medicaid; 1.7 million were under                      6

  19.
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          Texas Medicaid Beneficiaries and Expenditures,
                    Federal Fiscal Year 2001
     100%                                                              2%
                                                  Other
                                                                      22%
      80%
                                                 Children
                              57%                                     11%
      60%
                                                Parents &
                                                Pregnant              28%
                                                 Women
      40%
                              17%
                                                  Aged
      20%                     13%                                     37%
                                              Disabled/Blind
                              13%
       0%
                             Clients                             Expenditures

                                                                                                   7
Total expenditures ($9.7 billion, all-funds) in chart exclude administration, DSH payments, survey and
certification activities, and Medicare premiums paid to federal govt. for Medicare/Medicaid dual
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        What Medicaid Will Buy for Texans, 2004-05

                              Acute Care,
                                $17.0 b


Other, $0.3 b
                                    Long-Term
                                   Care, $6.7 b
   Prescription
  Drugs, $3.3 b
                   Long-Term
                  Care - Mental             Biennial Total, All Funds:
                  Retardation,                    $29.3 billion
                     $2.0 b
                                                                                   8
                                THE FACTS
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FEDERAL PROPOSALS:
 Analysis by Center on Budget and Policy Priorities:
  The White House first proposed a Medicaid “block
  grant” under the guise of fiscal relief to states in mid-
  2003. States would receive extra federal Medicaid
  funds from 2004 to 2010, in exchange for converting
  their Medicaid and CHIP programs into capped block
  grants.
 But the “extra” would have to be repaid from 2011 to
  2013, through lower match rates. And states, not
  federal government, would have to pay for any
  unanticipated cost increases or improvements in
  health coverage.
 Under this proposal, federal Medicaid spending
  nationwide would have been $8.3 billion lower by
  fiscal 2013 than under current law.                                      9
                            THE FACTS
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Title I Education Grants
 Formula grant to states; no match requirement.
  States then distribute money to school districts
  based on the number of children from low-
  income families.
 In the 2002-03 school year, 2.2 million kids (52%
  of students) in Texas schools are “economically
  disadvantaged.” Title I funds are meant to
  “improve the teaching and learning of children
  failing, or most at-risk of failing, to meet
  challenging state academic standards.”
                                                                    10
                            THE FACTS
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FEDERAL PROPOSALS:
 Title I originally authorized by Elementary &
  Secondary Education Act of 1965, now known as
  the “No Child Left Behind” Act, signed into law
  January 2002. NCLB has new requirements for
  testing and other accountability (similar to Texas
  TAKS). President’s 2005 proposal has $105
  million more in Title I funding for Texas (a 9.5%
  increase compared to 2004).
 Education advocacy groups are working to “fix”
  NCLB by calling for full funding of Title I; more
  support for teacher quality programs; less
  emphasis on testing, and more priority placed on
  improving low-performing schools (instead of
  vouchers).                                                         11
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School Lunch Program:
 Formula grant to states to reimburse schools (on
  a per-meal basis) serving lunches to eligible
  children. Lunches must meet nutritional
  requirements set by U.S. Secretary of
  Agriculture.
 Children from households with incomes up to
  130% of poverty are eligible for free lunches in
  participating schools. Eligibility for reduced-price
  lunches ranges from 130% to 185% of the
  poverty line. In 2004, an average 2.5 million
  lunches* will be served in Texas schools every
  day                                                                                 12

(*Total is for all lunches served, not just free or reduced-price lunches).
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FEDERAL PROPOSALS
 House: on March 30, passed the “Child Nutrition
  Improvement and Integrity Act” (HR 3873) to
  reauthorize the School Lunch & Breakfast
  Programs, Child & Adult Care Food Program,
  After-School Snacks, Summer Food Service
  Program, and WIC.
 Senate: hope is that a bill will be completed soon
  so that programs will be reauthorized this year
  (continuing resolution already passed for 3
  provisions that expired March 31)
 Key Issues: reaching more children who are
  already eligible; expanding eligibility; improving
  integrity in application process; reducing child
  obesity                                                            13
                         THE FACTS
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                                 The William P. Hobby Policy Conference



Special Education
 Formula grant to states. No match
  requirement, but as in the case of Title I,
  federal law requires that money be spent
  to supplement, not supplant, state efforts
  to educate the children eligible for
  services.
 In the 2002-03 school year, almost
  491,300 Texas students (12% of K-12
  enrollment) were in special education                          14

  classes.
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FEDERAL PROPOSALS: Special Education
  funding is authorized by Individuals with
  Disabilities Education Act (IDEA of 1975, most
  recently reauthorized in 1997). Expired in
  September 2002, with continued appropriations
  by Congress. President’s budget would mean an
  11% increase for Texas in 2005.
 House: Passed HR 1350 on April 30, 2003. Main
  sticking point : does not fully fund federal part of
  program (40%).
 Senate: In June 2003, S 1248 passed
  committee, but full Senate has not yet acted on
  the bill. Senate version also lacks full federal                    15
  funding; proposes change in disciplinary actions
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Temporary Assistance for Needy
 Families
 Block grant and supplemental payments to states;
 bonuses awarded for performance; state
 maintenance of effort required (tied to pre-TANF
 levels of spending on child welfare — for Texas,
 $251 million/year).
 Purpose of grant is to “increase state flexibility in operating programs
 designed to (1) assist needy families so that children may live in their
 homes or those of relatives; (2) end dependence of needy parents on
 governmental benefits; (3) reduce out-of-wedlock pregnancies, or (4)
 encourage the formation and maintenance of two-parent families.”
 Texas’ major uses of TANF: Cash assistance,
 foster care, job services for welfare recipients                                   16
 (CHOICES), child protective services, eligibility
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                                            The William P. Hobby Policy Conference



              TANF Federal Funds in the
             Texas State Budget, 2004-05:          Dept. of Health
                                                        4%
                  $1.184 billion total
                                                   Texas Education
                                                       Agency
             Protective &                                1%
              Regulatory
                                                   MHMR
               Services
                                                    0%
                38%
Workforce                                          Early Childhood
                              Other
Commission                                          Intervention
                              13%
  15%                                                    3%

             Dept. of Human                        Employee Benefits
                Services                                 5%
                  34%



                                                                            17
                           THE FACTS
                                  THE FUTURE
                                   The William P. Hobby Policy Conference


FEDERAL PROPOSALS
 President: Priorities include family formation
 House: HR 4 passed the House in 2003. On
  March 30, 2004, approved another extension
  through June 2004
 Senate: Multi-year reauthorization is stuck.
Key issue: new money for child care (Senate wants
  $6 billion more over 5 years, versus House’s $1
  billion. Both House & Senate would keep basic
  funding at $16.5 B/year through 2008, continue
  supplemental grants through 2007, and allow
  annual transfers of up to 50% to child care, 10%                 18
                           THE FACTS
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CHIP (Children’s Health Insurance Program)
 Also known as SCHIP or Title XXI; passed by
  Congress in 1997. National and state-level
  funding is formula-determined; funds unused
  after 3 years can be reallocated. Match is an
  enhancement of Medicaid match rate (in fiscal
  2004, ratio is 27.85% state, 72.15% federal).
  CHIP is NOT an entitlement.
 Texas began enrolling children in CHIP in May
  2000. Covers most Medicaid-ineligible children
  under age 19, in families with incomes up to
  200% of poverty. In April 2004, 377,051 children                  19


  were in CHIP, down from 508,176 in April 2003
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FEDERAL PROPOSALS:
 White House would have included CHIP in
  Medicaid block grant to states.
 Congress considering various changes: some
  would make adults in working-poor families
  eligible for coverage; others would expand
  income eligibility to 300% of poverty, or to
  certain legal immigrant children. States also
  using Sec. 1115 demonstration projects or state
  CHIP plan amendments to expand coverage for
  children and adults.
 CHIP has to be reauthorized in 2007
                                                                   20
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Child Care and Development Block
  Grant
 Has three components: Discretionary and
  Mandatory are 100% federal, with levels
  set by Congress; Matching component
  requires state maintenance of effort and
  state or local match (at the same match
  rate as for Medicaid)
 In Texas, CCDBG funds low-income child
  care subsidies (TWC and local workforce                      21

  boards) and child care regulation (now at
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                                The William P. Hobby Policy Conference


FEDERAL PROPOSALS:
 President’s proposed budget for CCDBG
  in fiscal 2005 has only $1.2 million in new
  funding for Texas (a 0.6% increase
  compared to 2004). Proposal would also
  create a 9-state pilot program coordinating
  Head Start, federal child care funds, and
  preschool programs.
 House/Senate: reauthorization of child
  care funds is part of the same legislation
  that would reauthorize TANF (see earlier
  slide).                                                       22
                             THE FACTS
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                                      The William P. Hobby Policy Conference


WIC
 No match for WIC; 30% state match for related
  Farmers Market program. Congress sets annual
  funding levels; USDA formula determines state
  funding.
 WIC benefits are for low-income women who are
  pregnant, breastfeeding, or postpartum, and
  infants/children up to age 5 who are at risk of poor
  nutrition. WIC provides nutritious food
  supplements, nutrition education, and referrals to
  health care. In 2004, an estimated 837,800
  women and children will get WIC food
  supplements in Texas; almost 4.6 million will get                   23

  nutrition education and counseling.
                         THE FACTS
                                THE FUTURE
                                The William P. Hobby Policy Conference


FEDERAL PROPOSALS
 President’s proposed budget for fiscal
  2005 has almost $19 million more for WIC
  in Texas (a 4.3% increase compared to
  2004).
 House/Senate: WIC is part of
  reauthorization of other children’s
  nutrition/meals programs (see earlier slide
  on School Lunch program)
                                                                24
                         THE FACTS
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                                 The William P. Hobby Policy Conference


ROOM FOR IMPROVEMENT:
 Census Bureau’s State Government
  Finances, 2002: Texas relied on federal
  funds for one-third of its general spending.
  This is the 15th highest ranking among the
  states.
 But according to the Tax Foundation, in
  2002 Texas got only 92 cents worth of
  federal spending for every $1.00 in federal
  taxes paid by Texans (down from 93 cents
  in 1992). National ranking in 2002: 36th
                                                                 25
                                  THE FACTS
                                         THE FUTURE
                                             The William P. Hobby Policy Conference


Need more information on federal funds in the
  Texas Budget?
 Legislative Budget Board:
  http://www.lbb.state.tx.us/The_LBB/Access/Federal_Funds.ht
  m ; Federal Funds Watch newsletter

 HHSC:
  http://www.hhsc.state.tx.us/about_hhsc/finance/FedFunds/fs_f
  unds.html (Annual Federal Funds Reports)

 Office of State-Federal Relations:
  http://www.osfr.state.tx.us/ ; News From Washington
  newsletter
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