1 new hampshire state spending in a national context summit on spending 10/27/2009 “…to raise...
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New Hampshire State Spending in A National Context
Summit on Spending10/27/2009
“…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”
Steve NortonDirector, NHCPPS
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Intent to Spend: Change in General Fund Appropriations as Passed in HB1
Data are from HB1 as passed by the Legislature.
These do not reflect actualexpenditures which can behigher or lower.
These figures make no adjustments for back of the budget changes, one time monies, changes in accounting methods, DSH payments, or foundation aid changes.
Biennium Total % Change1990-1991 $1,308,716,1571992-1993 $1,420,944,015 8.6%1994-1995 $1,858,304,390 30.8%1996-1997 $1,823,831,871 -1.9%1998-1999 $1,907,540,590 4.6%2000-2001 $2,158,306,501 13.1%2002-2003 $2,440,271,465 13.1%2004-2005 $2,732,014,547 12.0%2006-2007 $2,714,048,216 -0.7%2008-2009 $3,189,586,031 17.5%2010-2011 $3,155,159,886 -1.1%Average Compound 9.2%
Total General Funds
3
Intent to Spend: Total Funds
Data are from HB1 as passed by the Legislature.
These do not reflect actualexpenditures which can behigher or lower.
These figures make no adjustments for back of the budget changes, one time monies, changes in accounting methods, DSH payments, or foundation aid changes.
Biennium Total
% Change from Previous Biennium
1990-1991 $3,241,416,2271992-1993 $3,875,303,225 20%1994-1995 $4,942,998,832 28%1996-1997 $5,142,648,273 4%1998-1999 $5,589,662,183 9%2000-2001 $5,498,717,018 -2%2002-2003 $7,801,747,846 42%2004-2005 $8,914,499,078 14%2006-2007 $9,338,396,518 5%2008-2009 $10,347,177,822 11%2010-2011 $11,549,504,230 12%
Average Compound 14%
Total Funds
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Balancing the NH General Fund & Education Trust Fund, 1979-2013
$0
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
$2,000
$2,250
$2,500
$2,750
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
State Fiscal Year
Mil
lio
ns
of
Do
llar
s
Non-tax GF Revenue:Medicaid EnhancementTobacco Settlement (2002 & 03)Flexible Federal Grant (2003)
GF + ETF Expenditures
Merrill
GreggSununuGallen
Shaheen
Benson
Regular General Fund Taxes and Revenues
Statewide Property Tax
Other ETF Taxes
Lynch?
Stimulus (ARRA of 2009)
and JUA
Education Funding
5
Why Engage in These Summits?
• Revenues have declined considerably and spending has increased, though at slightly less than historic rates.
• Potential budget hole (this) next biennium will likely require hard choices.
• Size of the budget hole (and steps necessary) a function of– JUA decisions– Continuation of enhanced FMAP– Economic recovery– Existing efforts at controlling spending
6
The Size of Government (Employees) -- 2007
State and Local Employees FTEs per 10,000 Residents(Source: Tax Foundation)
New Hampshire, 550
US Total, 546
-
100
200
300
400
500
600
700
800
900
1,000
Wyo
ming
Alaska
Kansa
s
Miss
issipp
i
Verm
ont
Alabam
a
Louis
iana
Delawar
e
New Je
rsey
Mon
tana
Main
e
Virgini
a
Hawaii
Miss
ouri
US Tot
al
Georg
ia
Minn
esot
a
Conne
cticu
t
Mar
yland
Tenne
ssee
Mas
sach
uset
ts
Orego
n
Illino
isUta
h
Florida
Arizon
a
7
Size of State Government (Spending)
Total State Expenditures per Capita, SFY2007
New Hampshire, $3,459.69
United States, $4,773.04
$0.00
$2,000.00
$4,000.00
$6,000.00
$8,000.00
$10,000.00
$12,000.00
$14,000.00
$16,000.00
$18,000.00
Alaska
Wyo
ming
Hawaii
Alabam
a
Louis
iana
Mas
sach
uset
ts
Wisc
onsin
Arkan
sas
Orego
n
North
Dak
ota
New Je
rsey
Miss
issipp
iIo
wa
Mon
tana
Was
hingt
on
Nebra
ska
South
Car
olina
North
Car
olina
Kansa
s
Tenne
ssee
South
Dak
ota
Idah
o
Illino
is
Miss
ouri
Colora
do
Nevad
a
Source: www.statehealthfacts.org
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Where Do We spend?
Distribution of Appropriations (Total Funds) by Type of Expenditure (2009)
Program Expense73%
Consultants0%
Other0%
Debt Service4%Admin Expenses
5%
Total Personnel14%
Benefits4%
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What is Driving Total Fund Spending?
Change in Per Capita, Inflation Adjusted Total Fund Appropriations from 1999 - 2009
$347.06
$204.86
$94.63 $88.49
$8.21
-$24.21
-$100.00
-$50.00
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
Education Health andHuman
Services
Admin ofJustice andPublic Prtn
GeneralGovernment
ResourceProtection andDevelopment
Transportation
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And General Fund Spending Only? Change in Per Capita,
Inflation Adjusted Expenditures by Major Budget Line Items1999-2009
-$20
-$10
$0
$10
$20
$30
$40
$50
$60
$70
Medicaid Provider Payments
Retirement System
Retirement Health
HHS: Developmental
Catastrophic Aid
School Building Aid
Debt Service
HHS State HospMunicipal Revenue Sharing
Corrections
NHCPPS: Fiscal Feast and Famine
11
In other words
• If you really want to control spending (and demand for taxes) you must focus on – Education (adequacy, school building aid,
catastrophic aid)– The Medicaid Program– The Corrections System– The Retirement System– Constraints on hiring, travel, purchasing (e.g.
Governor’s Executive Order)
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Levels of budget compulsion and discretion
• Federal constitution– (e.g., elections for federal offices)
• State constitution– (e.g., indigent defense, Secretary of State, adequate education)
• Federal law or regulation – mandate on all– (e.g., special education)
• Federal law or regulation - quid pro quo– (e.g., Medicaid, child care, vocational rehabilitation)
• Court order against the State – (e.g., state prison system, community developmental services, juvenile services)
• State law mandating the activity– (e.g., vital records, parole board hearings, dam inspections)
• Revenue-producing and deficit-neutral activities– (e.g., DRA auditors, child support enforcement, liquor stores)
• State or federal law authorizing activity– (e.g., school building aid, hunter education program)
• Agency regulation authorizing activity– (e.g., complaint investigations at the Veteran’s Home)
• Historic practice without specific authority in law or regulation– (e.g., National Governor’s Association & NCSL dues and meetings)
Most
Least
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What’s a Reduction in Spending?
• Real Spending Reductions– Transform a system (lower the per unit cost of the delivery system)– Reduce controllable line items (aka Gov Lynch’s Executive Orders)– Eliminate programs (e.g., cancer program, MOP, Brain Injury Unit at NH
Hospital) and associated expenditures.– Reduce eligibility (e.g., disability definition), payments or reimbursements– Nickle-and-dime suggestions good, but not large, and mainly for sound-bites
(e.g., reduce number of liquor commissioners, out of state travel)• Partially real
– Shift start date for program (e.g., change in definition of disability for APTD)– Plan to withhold payment of bills at end of the year (e.g., Medicaid payments to
hospitals and other providers) • Not so real ways of reducing spending
– Reduce appropriations in areas where spending will occur anyway (e.g. indigent defense, youth “settlement” services, nursing homes, entitlement programs such as the Medicaid benefit for mental health)
• Is eliminating the distribution of local aid, changing state contributions to retirement, or changes in school-building aid a reduction in spending?
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The Questions
• How to Control Spending? – What factors are driving costs forward? – Is the state doing things that it shouldn’t be doing? – Is the state doing things inefficiently? – How do we know if we’re spending too much/too little
or just the right amount? • Outcome measures are non-existent• Comparisons across states are difficult due to reporting
differences.
• Look at four areas as examples: Corrections, Medicaid, Education and Retirement
• Unless otherwise noted, state by state financial comparison data are from the U. S. Census Bureau, Annual Survey of Government Finances
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Prison Operating CostsPrison Operating Costs
Expenditures Per Inmate (2001)
$22,650$25,949
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
Main
e
Mas
sach
uset
ts
New Y
ork
Orego
n
Penns
ylvan
ia
Wyo
ming
New M
exico
North
Car
olina
Mar
yland
New H
amps
hire
Nebra
ska
Califo
rnia
Iowa
Delawar
e
Arizon
a
Mon
tana
India
na
Kansa
s
Georg
ia
Kentu
cky
South
Car
olina
Oklaho
ma
Wes
t Virg
inia
Texas
Miss
ouri
Alabam
a
National AverageNew Hampshire
There are many possible reasons why prison operating costs are higher in NH including wages, energy, age of plant, employee counts, etc…
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State Corrections SystemState Corrections Expenditures per Inmate
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
United StatesNew EnglandNew Hampshire
Source: NHCPPS Analysis of Census data on Government Finance
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Change in Spending
Average Annualized Change in Corrections Spending Per Inmate 1998-2007NH CPPS Analysis of Census Data on State Spending
3.8%
2.4%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Califo
rnia
Wyo
ming
Verm
ont
Mar
yland
New Je
rsey
Was
hingt
on
Alabam
a
Nebra
ska
Main
e
New Y
ork
Mas
sach
uset
ts
New H
amps
hire
Delawar
e
Hawaii
Mon
tana
New M
exico
Louis
iana
Georg
ia
South
Dak
ota
Mich
igan
United
Sta
tes
Arkan
sas
Wisc
onsin
Virgini
a
Miss
ouri
Rhode
Islan
d
Conne
cticu
t
Tenne
ssee
Kansa
s
Alaska
Wes
t Virg
inia
Oklaho
ma
Miss
issipp
iUta
h
Penns
ylvan
ia
North
Dak
ota
North
Car
olina
Kentu
cky
Illino
is
Texas
Nevad
a
South
Car
olina
India
naIo
waId
aho
Orego
n
Ohio
Florida
Colora
do
Minn
esot
a
Arizon
a
New Hampshire
United States
18
Are We at a 3 Biennium Decision
Point. Build a New Prison? NH State Prison System
0
500
1,000
1,500
2,000
2,500
3,000
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
Population Capacity
North CountryCorrectionalFacility
19
We are not without options
• Understand the issues associated with recidivism (Pew and the Justice Reinvestment Project).
• Review the state criminal justice code to ensure that the state has struck the right balance between public safety and incarceration.
• Continue to review and analyze the implementation of alternatives to traditional jail and prison sentences.
• Increase the focus on re-entry support, including substance abuse and job training for inmates, as well as community supports more broadly.
20
Medicaid Spending =
# of People
Mentally Ill
Disabled
Elderly
Family and Child
* Benefit * Price/Unit * Utilization
* Benefit * Price/Unit * Utilization
* Benefit * Price/Unit * Utilization
* Benefit * Price/Unit * Utilization
Eligibility Filter
How Does Medicaid Work?
21
Growth in MedicaidAnnual Growth in Per Capita Medicaid Expenditures (1995-2004)
New Hampshire, 5.2%United States, 7.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Alaska
New M
exico
Main
e
Miss
issipp
i
Miss
ouri
Wyo
ming
Penns
ylvan
ia
Kentu
cky
Califo
rnia
India
naOhio Io
wa
Kansa
s
Florid
aUta
h
Wisc
onsin
Rhode
Islan
d
South
Dak
ota
Wes
t Virg
inia
Illino
is
Texas
New H
amps
hire
Mas
sach
uset
ts
New Je
rsey
Mich
igan
US Health Expenditure Accounts data from www.statehealthfacts.org
22
Eligibility Generosity? Medicaid Enrollees Per Person in Poverty (Income <133% of Federal Poverty Level)
86%81%
0%
20%
40%
60%
80%
100%
120%
140%
160%
Verm
ont
Main
e
Delawar
e
New Y
ork
Distric
t of C
olum
bia
Mas
sach
uset
ts
New M
exico
Iowa
United
Sta
tes
Mich
igan
Wes
t Virg
inia
Louis
iana
Hawaii
New H
amps
hire
Arizon
a
Miss
ouri
Miss
issipp
i
South
Dak
ota
Mar
yland
Kentu
cky
Florida
Idah
o
Colora
do
Orego
n
Texas
New Je
rsey
Nevad
a
United States
New Hampshire
Source: NH Center for Public Policy Analysis of Medicaid Enrollment Data from www.statehealthfacts.org
23
Reimbursement (Physicians)Medicaid Physician Payment Index
Percent of National Average
100%
98%
0
0.5
1
1.5
2
2.5
Alaska
Nevad
a
Conne
cticu
t
New M
exico
Mon
tana
North
Dak
ota
Was
hingt
on
Mar
yland
South
Car
olina
Louis
iana
Iowa
Kansa
s
South
Dak
ota
Miss
issipp
i
Kentu
cky
Arkan
sas
Wisc
onsin
Texas
New H
amps
hire
Minn
esot
aOhio
India
na
Florida
Califo
rnia
New Y
ork
New Je
rsey
New HampshireUnited States
The Urban Institute: Medicaid Physician Fee Analysis 2008
24
2008 Reimbursement (Nursing Homes)
Medicaid Nursing Home Reimbursement as Percent of Costs
89%97%
0%
20%
40%
60%
80%
100%
120%
Arkan
sas
North
Dak
ota
Mich
igan
Tenne
ssee
Mon
tana
North
Car
olina
Virgini
a
Califo
rnia
Utah
Nebra
ska
Avera
ge o
f Sta
tes
Penns
ylvan
ia
Iowa
Nevad
a
New Y
ork
Mas
sach
uset
ts
South
Dak
ota
Delawar
e
Verm
ont
Miss
ouri
New H
amps
hire
Illino
is
United States New Hampshire
NHCPPS Calculations of Data from “A Report on Shortfalls in Medicaid Fundingfor Nursing Home Care,” ELJAY, LLC
25
Medicaid Benefits and Utilization?Total Medicaid Payments Per Enrollee (FY 2006)
(Benefit X Utilization)
$4,575
$6,047
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
Distric
t of C
olum
bia
New Y
ork
Main
e
Conne
cticu
t
Mas
sach
uset
ts
Mar
yland
Nebra
ska
Wes
t Virg
inia
Iowa
Delawar
e
South
Dak
ota
Utah
India
na
Virgini
aId
aho
United
Sta
tes
Nevad
a
Wisc
onsin
Miss
ouri
Florida
South
Car
olina
Illino
is
Alabam
a
Arkan
sas
Texas
Califo
rnia
New Hampshire
United States
Source: www.statehealthfacts.org
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Options?
• Further benefits changes?– (Chiropractic is out, Podiatry is in?)– Prior authorization expansions (Currently occupational therapy,
ambulance, wheel chair van?)• Further reimbursement rate changes?
– Reductions? – Prospective outpatient hospital payment?
• More intensive management of the utilization of services? – Accountable Care Organizations– Further intense disease management opportunities (low hanging fruit
has been taken)• Medicaid Eligibility (Dec 2011, ARRA ends. Or does it?)• Reform (if it happens) may simplify Medicaid but will cost more ….• Primary drivers in the future the aging of the population.
27
NH Retirement System Hit Hard by Stock Market Losses
Source: NHRS CAFR
NH Retirement System Annualized Investment Returns
1.4%
20.0%17.5%18.6%17.5%
14.4%13.2%
-6.7%-6.4%
2.5%
14.9%
10.2%10.0%
16.0%
-4.6%
-20.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
ActualTarget
12 Mos 6/30/09 (prelim)
28
Change funding requirements for retirement?
Actuarial Funding Ratios -125 Pubic Pensions FY 2008Source: www.publicfundsurvey.org, 9/09
0
20
40
60
80
100
120
140
IN OK KYM
O HICO AZ LA KS NJ NJ
ME
MN
WA
MD NV AZ IL ND
MN VA
MO
WV PA RI
VA PA GA AR MT TX
ND ID VTGA
MO NC
WA NC NY
ME
WA
NH 67.8%
29
NH Spends Slightly More On Average Per Student
Total Education Spending by State, 2007
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
UT ID TN AZOK
MS TX NC SD NV
CO AR KYW
A AL FLM
O SCNM IA LA IN KS
OR ND MT
GA NE CAM
N ILW
V USOH M
IVA W
INH HI
PAM
EM
D DE AK RIM
A CTW
Y VTDC NJ
NY
Do
llars
per
Pu
pil
NHUS
30
State of NH Contribution to aid low relative to the rest of the country.
Percent State Revenue of Total Revenue for Education by State, 2007
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
DC NE SD IL ND PA TX NH CT RIFL
MD
MO NJ LA VA
OH CO SC TN ME
GAM
A NY IA US MT AZ
WY OK IN W
IOR M
S UT NV KY NC KS ALW
V MI
AK CAW
A DEM
N ID NM AR VT HI
NH
US
31
But state aid has grown the most quickly in NH (due to reforms of 1990)
Annual Percent Change State Revenue for Education by State1997-2007 (adjusted for inflation)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
DC UT MI IN M
OW
A OK TX NV FLW
V WI
SC IA TN GA AK NC PA KYOR CO NE IL ND AL
SD US LA ID KS MT VA RI
ME DE
MS AZ CT
NM CA NJOH M
AM
DM
N NY AR HIW
Y VTNH
Do
llars
per
Pu
pil
NH
US
32
To Control Spending
• Follow the executive orders (hiring freeze, purchasing freeze).
• Primary drivers– Medicaid – Retirement– Corrections– Local Revenue ‘Sharing’
• Education Finance– Adequacy defined and will cost $123 million in new dollars
unless new stimulus money available. Catastrophic Aid, Building Aid also large contributors.
33
Transformational Policy Opportunities
• Medicaid Care Management – Significantly broaden management of care (utilization)
• Medicaid payment reform (prospective payment for outpatient?)
• Retirement– Tiered system (new vs. old employees)– Change contribution amounts
• Corrections– Re-entry– Home-confinement– County vs. State management of the system– Reimplementation of good time
• Education?
34
What Process Issues Can We Resolve?
• Have a conversation about outcomes instead of simply spending. What value do we receive for our expenditures?
• You can’t manage what you don’t measure. Pew gave the state a failing grade for our state management and we deserve it. We do not have monthly expenditure reports.
• Budget process/documents do not link up outcomes, with assumptions– Program efficiencies (aka reducing recidivism, implementing
care management) may be available but will be politically difficult.
– Bigger savings are available if the political will is there to make the legislative changes necessary to change what government offers.
35
Summary
• Reflecting our low tax burden, spending is low relative to the rest of the nation (4th lowest, overall)
• Only in a few instances are we above the national average in level of spending or growth over time (on a per capita basis)– Corrections– Medicaid unit cost
• Opportunities for spending reductions exist, but will take political will and legislative action. – Constraining purchase, hiring, and other admin– What shouldn’t we be doing?– Transformational opportunities?
36
All of our reportsare available on the
web:
www.nhpolicy.orgwww.nhpolicy.org
New Hampshire Center New Hampshire Center for Public Policy Studiesfor Public Policy Studies
Board of Directors
Donna Sytek, Chair
John B. Andrews
John D. Crosier
William H. Dunlap
Shelia T. Francoeur
Chuck Morse
Todd Selig
Stuart Smith
James Tibbetts
Brian Walsh
Kimon S. Zachos
Martin Gross
Staff
Steve Norton
Dennis Delay
Ryan Tappin
“…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”