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2005 Testimony

Testimony Before the Senate Appropriations

Senator Holmberg, Chairman

HB 1012 - DHS Budget - Economic Assistance Budget Area

March 1, 2005

Chairman Holmberg, members of the Senate Appropriations Committee, I am Blaine Nordwall, Director of Economic Assistance Policy of the Department of Human Services. I am here today to provide you an overview of the budget area Economic Assistance.

  • Economic Assistance Policy is responsible for eligibility policy for Basic Care Assistance and for all aspects of state level administration, including eligibility policy, of Child Care Assistance, Energy Assistance, Food Stamps, and Temporary Assistance for Needy Families (including the Job Opportunities and Basic Skills program). This work involves:
    • Distributing benefits to recipients
    • Directing and supervising county social service board administration of EAP programs
    • Implementing all applicable state and federal law
    • Providing training, written instructions, and interpretations concerning program requirements
    • Operating electronic eligibility determination and reporting systems
    • Preparing required state and federal reports
  • Basic Care, Child Care Assistance, Energy Assistance, Food Stamps, and Temporary Assistance for Needy Families, and the Medicaid program, are served by the following services, also within this area of the budget:
    • Quality Control
    • System Support and Development
    • Field Services and Training
    • Medicaid Estate Recovery

Numbers of providers and individuals served:

  • Child Care Assistance will pay approximately 1,440 licensed, certified, or approved child caregivers each month for services to an estimated 4,878 children from 3,100 families.
  • Energy Assistance will pay approximately 400 energy providers, from the largest energy companies to the smallest firewood dealers, for heating services provided to an estimated 37,920 individuals from 15,800 households.
  • Food Stamps will pay approximately 424 grocers each month for food provided to an estimated 45,778 individuals from 21,799 households.
  • Temporary Assistance for Needy Families (including the Job Opportunities and Basic Skills program) will provide cash assistance on behalf of an estimated monthly average of 5,300 children from 3,000 families, and contract with Job Service North Dakota to provide employment related services to an estimated 1,450 families each month.

Recent trends affecting this area of the budget:

  • Child Care Assistance federal funding derived from the Child Care Development Fund is distributed among the states based on the proportion of children each state has of all children in the United States. Because the number of North Dakota children is decreasing in proportion to the total number of children in the US, this source of funding will eventually trend downward.

    Before the 2003-2005 biennium began, we started to see significant increases in applications by eligible families and increases in provider charges for child care. In order to stay within the 2003-2005 budget, it was necessary to withdraw benefits for most higher education students. Continuation of that practice is contemplated in 2005-2007. Governor Hoeven has recommended that funds be included in the Higher Education appropriation for the purpose of assisting college students with child care needs.
  • Food Stamp caseloads have continued to increase. Federal appropriations for FFY 2005 are up over 15% from 2004. Recent federal estimates state that only 76% of eligible North Dakota households are actually receiving Food Stamp benefits. Increases in Food Stamp caseloads benefit North Dakota's economy.

    The NDSU Department of Agribusiness and Applied Economics recently conducted an analysis of the impact of increasing Food Stamp participation rates by 1% (185 households using April 2004 caseload of 18,576 households). Based on an additional $448,000 of Food Stamp benefits, the initial effect (first round expenditures) would be applied to the retail sector. When these first round expenditure effects were applied to the total economic impact, NDSU estimated $935,000 in positive economic impacts (the initial $448,000 plus $487,000 in secondary economic effects arising from the multiplier process) for each 1% increase in Food Stamp participation. The estimated secondary effect includes $181,000 in additional income to North Dakota households and $122,000 in additional retail sales, as well as $184,000 distributed widely among the state's other economic sectors. These levels of additional sales and economic activity would support an estimated six full-time equivalent jobs within the North Dakota economy, mostly in the retail sector.
  • Recent fluctuations in TANF caseloads range from a high of 3,354 in May 2003 to a low of 2,801 in January 2005. These fluctuations are partly because of significant client turnover. The program served almost 5,900 different cases during state fiscal year 2004. Recent caseload reductions appear significantly related to policy changes, particularly a "dual standard of need" that reduces the grant amount for families able to share living arrangements or receive housing subsidies.

    The TANF program was due for congressional reauthorization effective October 1, 2002, but has been maintained by a series of eight continuing resolutions, the last of which is set to expire on March 31, 2005. Two TANF reauthorization bills have been introduced in the 109th Congress. HR 240 was introduced on January 4, 2005, and S 4 was introduced on January 24, 2005. We had hoped to have reauthorization take place before March 31, but that appears unlikely. Current plans in Congress are to seek another six-month continuing resolution, and complete work on the reauthorization legislation by September 30, 2005. There has been speculation that if TANF reauthorization continues to stall, the program may be consolidated with others in a larger authorization bill or a budget reconciliation act. This could lead to an increased risk of funding cuts to the TANF and Child Care block grants. There is no reason to anticipate increases in federal TANF funding in any circumstances, but reductions would be problematical for program beneficiaries. Under all of the legislation considered in the past Congress, and all the TANF reauthorization legislation currently under consideration, TANF heads of households will be required to engage in additional hours of work activity. Many states have argued that this is a basis for increasing federal Child Care Assistance funding. So far, there has been little indication that Congress will oblige, although the subject will likely come up in the U.S. Senate. We have not assumed that there will be any increase.
  • Demand for Energy Assistance increases as heating costs increase and as weather becomes more severe. Home heating costs in 2005 are projected to increase an average of 24% over costs in 2004. Congress recently increased total Energy Assistance funding for FFY 2005 by slightly over 15%, but funds required by law to be distributed to states are up only 5.5% from FFY 2004. On December 23, 2004, and again on January 31, 2005, the federal agency released part of the Energy Assistance funds subject to discretionary spending. North Dakota received $1.55 million of those "discretionary" funds after allocations to tribal programs. We have not yet been advised of any additional plans for distribution of discretionary Energy Assistance funds. Due to the relatively mild early winter, applications through February 22, 2005 have increased only 3.77% over the same time in 2004, though provider payments have increased 16.83%.
  • Since the beginning of the 1993 heating season, the Energy Assistance program has operated in a manner that requires recipient households to share in a proportion of their heating costs, providing them an incentive to conserve energy. Because program costs are difficult to control, Energy Assistance program funds not distributed as benefits are transferred to the Department of Commerce for use in its weatherization and furnace repair efforts.

Selected program performance measures and actual performance:

  • The annual Food Stamp benefit issuance error rate will be less than the national average. Actual Food Stamp benefit issuance error rate:
    • FFY 2001: 5.96% (national average 8.66%)
    • FFY 2002: 6.14% (national average 8.26%)
    • FFY 2003: 4.85% (national average 6.64%)
  • All families who apply and are eligible for Child Care Assistance will receive a benefit. Actual percentage of families who applied and demonstrated eligibility for Child Care Assistance who received benefits:
    • SFY 2002: 100% (monthly average of 2,910 cases)
    • SFY 2003: 100% (monthly average of 3,081 cases)
    • SFY 2004: 100% (monthly average of 3,016 cases)
  • 80% of System Support calls/letters will be resolved within one working day. Actual Percentage of System Support calls/letters resolved within one working day.
    • SFY 2002: 96%
    • SFY 2003: 94%
    • SFY 2004: 95%
  • $1,500,000 per year will be collected directly or under DHS supervision from estates of deceased Medicaid recipients and spouses of deceased recipients. Actual amount of Medicaid claims collected from decedent's estates:
    • SFY 2002: $1,743,802
    • SFY 2003: $1,774,067
    • SFY 2004: $1,901,546

Overview of budget changes:

  2003-2005 Budget Increase / Decrease 2005-2007 Request House Changes Request to
Senate
Salaries 3,882,893 317,646 4,200,539 (33,342) 4,167,197
Operating 10,098,229 1,542,087 11,640,316 (66,091) 11,574,225
Capital Assets 3,872 (1,891) 1,981 - 1,981
Grants 181,551,359 15,721,076 197,272,435 - 197,272,435
Total 195,536,353 17,578,918 213,115,271 (99,433) 213,015,838
General 6,190,555 974,638 7,165,193 (66,114) 7,099,079
Federal 169,160,251 17,786,077 186,946,328 (33,319) 186,913,009
Other 20,185,547 (1,181,797) 19,003,750 - 19,003,750
FTEs 41.80 - 41.80 - 41.80
  • The salary request totals $4.2 million, an increase of $317,646 over the current biennium, and comprises approximately 2% of the budget request for this area. This funds 41.8 FTEs, the same FTE level as was funded in the 2003-05 biennium. The health insurance and compensation package adjustment included in the Governor's pay plan added $258,732 to the salaries line item. Of that amount, $116,832 was from the general fund and $141,900 was federal funds. Temporary and overtime accounts for $22,943, and the remaining balance provides for the continuation of salaries and benefits for the existing staff.
  • The $1,542,087 increase in operating expenses is comprised of a general fund increase of $658,164 and a federal and other funds increase of $883,923. $1.23 million of the $1.54 million increase is for the Payment Error Rate Measurement (PERM) reviews of Medicaid and Healthy Steps payments, required by federal law to be implemented effective October 1, 2005. The PERM reviews project was included in the Governor's budget recommendation. That $1.23 million is funded with $615,000 from the general fund and $615,000 from federal funds. The remaining increase in requested operating expenses of $312,087 is mainly attributable to increases in purchased services, and is funded with $43,164 from the general fund, and $268,923 from federal and other funds.

    The $11.6 million in operating costs consists primarily of funding for contracts, including $7.7 million for the JOBS programs (TANF work requirements anticipating the reauthorization by Congress of TANF); $1.6 million for Electronic Benefit Transfer (EBT) issuance costs in the Food Stamp program; $.6 million for Employment and Training contracts for the Food Stamp program; and $1.23 million for the (PERM) reviews.
  • The total of all grants reflects an increased overall request of $15.7 million. However, included in the total are Food Stamp increases of $20.3 million and Energy Assistance increases of $5.5 million, all in federal funds. Declines in TANF and Child Care Assistance requests reduce the total.

House changes:

  • The House deducted $13,342, of which $5,023 was from the general fund and $8,319 was from federal funds, from the Salary line item. This changed the Governor's compensation package from providing for a 4% increase on July 1, 2005, and a 3% increase on July 1, 2006, to a 3% increase on July 1, 2005, and a 4% increase on July 1, 2006.
  • Salaries were further reduced by $20,000 of general funds as an allocated part of under-funding $600,000 of the DHS pay plan.
  • The operating line was decreased by $16,091 as an allocated portion of the $50,000 general fund reduction to the Program and Policy section of the budget.
  • The House deducted $50,000, $25,000 of which was from the general fund and $25,000 of which was federal funds, related to the removal of the Food Stamp outreach program.

 

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