The Big Picture July 2005 F. Scott McCown, Executive Director Anne Dunkelberg, Assistant Director Dick Lavine, Senior Fiscal Analyst Eva DeLuna Castro, Senior Budget Analyst

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The Big PictureJuly 2005F. Scott McCown,
Executive DirectorAnne Dunkelberg, Assistant
DirectorDick Lavine, Senior Fiscal AnalystEva
DeLuna Castro, Senior Budget Analyst
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Great Need for Public Services
Texas US Average Texas rank
of Population under 18, 2002 28.0 25.3 3rd
Child Poverty Rate, 2003 22.8 17.7 8th
Elderly Poverty Rate, 2003 13.0 9.8 7th
of Under-65 Population with No Health Insurance, 2003 26.9 17.6 1st
of Residents Aged 25 or over with at least a High School Diploma, 2003 77.8 83.6 49th
of Residents Aged 25 or over with at least a Bachelors Degree, 2003 24.5 26.5 27th
Source U.S. Bureau of the Census, March CPS and
American Community Survey
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Context for Funding Texas Health Care System

• Latest US Census Bureau statistics show
• 24.6 of ALL Texans, and 26.9 of Texans under
  age 65, were uninsured in 2003
• Thats about 5.5 million Texans
• Another 3 million covered by Medicaid or CHIP
• Culprit Texas has one of the lowest of
  employer-sponsored insurance (along with
  Arkansas, Louisiana, Montana, New Mexico)
• 9 below national average for under-65, at 52.4,
  and 11.8 below national average for under-18.

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Health Care for Poor Low-Income Texans

• Medicaid
• As of May 2005, 2.7 million Texans were enrolled
  in Medicaid
• 1.8 million were children
• about 82,000 of these children, or 4.5, were
  receiving disability-related Medicaid (97 of
  these on SSI)
• about 13,000 were pregnant teens
• 146,500 in TANF families (5.5 of total caseload)
• 867,074 were adults
• 671,982 (77.5 of the adults) were elderly or
  disabled. Adults on SSI account for 60 of the
  aged and disabled recipients (76 of
  blind/disabled are on SSI)
• Other adults 93,800 maternity coverage 39,400
  TANF parents (1.5 of total caseload) 61,100
  either TMA (Transitional Medicaid Assistance) or
  parents who are at or below TANF income, but not
  receiving TANF cash assistance
• Childrens Health Insurance Program (CHIP)
• as of September 1, 2003 507,259 children
• as of May 1, 2005 326,809 (drop of 180,450, or
  36)

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Medicaid Cuts What was Reversed by 2005
Legislature

• Restored (effective 9/05)
• Adults Medicaid Services Restored
• Podiatrists
• Eyeglasses and Hearing Aids
• Mental health services by social workers,
  psychologists, licensed professional counselors,
  and licensed marriage and family therapists.
  There is some complication with the funding for
  this benefit, but at this time most believe that
  all 4 mental health providers will be restored.
• STAY TUNED!

Center for Public Policy Priorities www.cppp.o
rg
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Medicaid Cuts What was Reversedby 2005
Legislature

• PROBABLY Restored
• The Personal Needs Allowance of Medicaid nursing
  home residents (the monthly amount that Medicaid
  nursing home residents may keep from SSI, Social
  Security or other pension income the rest goes
  to the nursing home)
• was cut in 2003 from 60 to 45.
• Though not restored by the budget or other bill,
  Gov. Perry has pledged to ask LBB for budget
  execution to allocate the 13 million in state
  dollars needed to restore this.
• STAY TUNED!

Center for Public Policy Priorities www.cppp.o
rg
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Medicaid Cuts What was Reversed by 2005
Legislature

• POSSIBLY Restored
• Medically Needy Spend-Down Program for Parents
  (Temporary Coverage for Poor Families with
  Catastrophic Medical Bills)
• HHSC estimated that full restoration would cost
  175 million GR for 2006-2007 SB1 authorizes
  just 35 million for partial restoration but
  assumes this will be funded entirely by voluntary
  contributions of local tax dollars (IGT) from
  the big urban hospital districts
• Also says 20 million GR could be added to this
  IF the local funds are provided first
• STAY TUNED!

Center for Public Policy Priorities www.cppp.o
rg
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Medicaid Cuts that Remain

• Medicaid and CHIP provider rate cuts
• Most Medicaid and CHIP providers had rates cut in
  2003 hospitals and doctors had a rate cut of
  2.5 nursing homes 1.75, and community care
  providers 1.1.
• In August 2004, HHSC proposed and LBB approved
  keeping most the cuts at the same level for 2005
  (i.e., not making deeper cuts) but hospitals
  took a deeper 5 cut.
• 2005 legislature restores rates to 2003 levels
  for Community Care services and Waivers, and for
  ICF-MR (all at DADS), but not for doctors, other
  professionals, hospitals, or CHIP.
• All other rate cuts remain. Rate cuts were the
  largest HHS cut made in 2003 much larger than
  the CHIP cuts.

Center for Public Policy Priorities www.cppp.o
rg
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Community Care and Waiting Listsfunding for
enrollment increases

• 2003 Legislature reduced numbers and/or levels of
  services in capped Community Care and Health
  programs
• SB 1 provides funds to increase a number of
  non-entitlement programs enrollment
• For children
• MDCP increased from 977 in 03, 983 in 05, to
  1,993 in 2007.
• CSHCN increased from 1,463 in 03, 2,114 in 05,
  to 2,293 in 07
• Most Medicaid waivers, HIV Meds increased
• Exceptions
• CBA was 30,279 in 03 26,100 in 05 to 28,401
  in 07,
• Kidney Health Program 22,834 in 03 21,247 in
  05 to 20,415 in 07
• In-Home and Family Support for aged disabled,
  MR still below 03 levels (MH IHFS program
  eliminated in 03 and not restored)

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How CHIP Fared

• Restored Dental, vision, hospice and mental
  health benefits restored to 2003 levels
• Funding to replace monthly premiums with more
  affordable and convenient enrollment fees. HHSC
  presentations have outlined an annual fee of
• No enrollment fee below 133 of the federal
  poverty level (FPL) (lt2,145/ family of 4)
• 25 per family (per 6-month period) from 133-150
  FPL (2,145-2,419/family of 4)
• 35 per family (per 6-month period) from
  151-185 FPL (2,420-2,983/family of 4) and
• 50 per family (per 6-month period) from
  186-200 FPL (2,984-3,225/family of 4)

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How CHIP Fared

• None of the CHIP restoration bills ever had a
  public hearing, not even Senator Averitts SB 59.
  Restorations made were all done via the budget.
• These 2003 Changes Remain
• Coverage period reduced from 12 months to six.
  Language in law now makes this permanent rather
  than planning for a return to 12 month coverage
  at a future date.
• New coverage delayed for 90 days. (New perinatal
  coverage could eliminate this for many newborns.)
• Income deductions eliminated (gross income
  determines eligibility).
• Asset test (limit) added for those above 150 of
  the poverty line (took effect August 2004).
• Outreach and marketing were reduced in 04-05,
  important to monitor and push for strong
  investment in both in 06-07.

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Other Major Health Care Changes on the Horizon

• Universal Services Card, possible Medicaid
  Biometric Finger Imaging (SB 46 by Nelson)
• Medicaid Managed Care Statewide Expansion
• Womens Health and Family Planning Medicaid
  Waiver
• System Benefit Fund used to balance budget
  (426.9 million), low-income electric subsidy
  gone some used pay for Medicaid MH benefits
  (34.6 million or 8)
• Integrated Eligibility Rollout
• Medicaid and CHIP caseloads likely to exceed
  budgeted
• Improved Standards and Oversight for Contracting
  Privatization?
• Any action re THSteps Lawsuit?

Center for Public Policy Priorities www.cppp.o
rg
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Comparing 2004-05 to 2006-07

• Final 2006-07 budget 139 billion in All Funds
• This is 10 more than in 2004-05, less than
  expected growth in population and inflation
• Nationally, state spending per resident has been
  about 50 higher than Texas state spending, and
  this budget will leave Texas near the bottom in
  spending per resident
• As a percentage of the economy, since 1991, state
  spending has been roughly 7, and this budget
  will be about the same

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Public Education Spending

• 2003-04 Texas spent 7,335 per student
• Texas ranked 34th among the states
• Average state spending was 8,208 about 12
  higher than Texas
• Costs of living adjustments are faulty
• Austin 106.1 of U.S. Average
• Dallas 98.5 of U.S. Average
• Houston 96.1 of U.S. Average

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School Funding in Next State Budget
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Price Tags

• Biennial cost of public school enrollment growth
  At least 1.5 billion
• Biennial cost of 3 inflation for public schools
  At least 2.4 billion
• Ending Robin Hood At least 2.3 billion
• Buying down local school property taxes by 10
  cents per 100 taxable value At least 2.2
  billion
• Biennial cost of one candy bar per year per
  child is 4.3 million

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What State Government Pays For
Source U.S. Bureau of the Census, State
Government Finances series. Data for 2002 for
Texas, total expenditures (including trust) of
70.3 billion.
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What Local Government Pays For
Source U.S. Bureau of the Census, Government
Finances series. Data for 2002 for Texas, total
expenditures (including trust) of 77.1 billion.
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From a Taxpayers Point of View
Source Comptroller of Public Accounts, Annual
Property Tax Report Cash Report.
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From the States Point of View All Revenue
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From the States Point of View Taxes Only
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Our Tax Base is Inadequate
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Indicators of Ability to Pay
Texas US Average Texas rank
Per Capita Personal Income, 2003 29,076 31,459 29th
State and Local Taxes as a Percent of Personal Income, 2002 9.3 10.2 41st
Source CPPP, using data from Bureau of Economic
Analysis and the Census Bureau.
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Households with the Lowest Income Pay the Highest
Percentage in State and Local Taxes
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Not Taxing Where the Money Is
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Revenue Options

• Cigarette tax 1/pack increase raises 1.7
  billion biennially
• Video Lottery Terminals 1.1 billion biennially.
  Crack cocaine of gambling
• Revised Franchise Tax (Business Activity Tax)
  Pre-tax net income, add back compensation minus
  first 30,000 per job times 1.95
• Sales tax rate increase but this is extremely
  regressive, and TX already has one of the highest
  rates
• Sales tax base expansion (to services not covered
  now)

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If We Replaced Current School Property Taxes with
Sales Taxes
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House Proposed Tax Change(H.B. 3)
Source CPPP Policy Page 232, Tax Equity Note
Confirms that Most Texas Families Would Pay More
Under HB 3, the Tax Relief Bill, March 2005.
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Special Session?

• School Finance
• Fund me, not you, by ending equity
• You pay, not me, through regressive taxes
• Cap local spending growth
• Through appraisal caps
• Through revenue growth caps

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The Texas Constitution Article 8 - TAXATION AND
REVENUE Section 24 - PERSONAL INCOME TAX
DEDICATION OF PROCEEDS (a) A general law enacted
by the legislature that imposes a tax on the net
incomes of natural persons . . . must provide
that the portion of the law imposing the tax not
take effect until approved by a majority of the
registered voters voting in a statewide
referendum held on the question of imposing the
tax. (b) A general law enacted by the
legislature that increases the rate of the tax,
or changes the tax, in a manner that results in
an increase in the combined income tax liability
of all persons subject to the tax may not take
effect until approved by a majority of the
registered voters voting in a statewide
referendum held on the question of increasing the
income tax. (f) In the first year in which a tax
described by Subsection (a) is imposed and during
the first year of any increase in the tax that is
subject to Subsection (b) of this section, not
less than two-thirds of all net revenues
remaining after payment of all refunds allowed by
law and expenses of collection from the tax shall
be used to reduce the rate of ad valorem
maintenance and operation taxes levied for the
support of primary and secondary public
education. In subsequent years, not less than
two-thirds of all net revenues from the tax shall
be used to continue such ad valorem tax relief.
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TEXAS CONSTITUTION (Contd.)
(g) The net revenues remaining after the
dedication of money from the tax under Subsection
(f) of this section shall be used for support of
education, subject to legislative appropriation,
allocation, and direction. (h) The maximum rate
at which a school district may impose ad valorem
maintenance and operation taxes is reduced by an
amount equal to one cent per 100 valuation for
each one cent per 100 valuation that the school
district's ad valorem maintenance and operation
tax is reduced by the minimum amount of money
dedicated under Subsection (f) of this section,
provided that a school district may subsequently
increase the maximum ad valorem maintenance and
operation tax rate if the increased maximum rate
is approved by a majority of the voters of the
school district voting at an election called and
held for that purpose. The legislature by general
law shall provide for the tax relief that is
required by Subsection (f) and this subsection.
(Added Nov. 2, 1993.)
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How Would An Income Tax Work?
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A State Income Tax, With Property Tax Reductions,
Would Benefit Most Texans
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• Texas
• One and Indivisible