Evaluation report 15-06 December 2015 Distribution of State General Fund Dollars to Public Health Districts
Distribution of State General Fund Dollars to Public Health Districts
Office of Performance Evaluations Idaho Legislature
Promoting confidence and accountability in state government
Office of Performance Evaluations
Created in 1994, the legislative Office of Performance Evaluations (OPE) operates under the authority of Idaho Code §§ 67-457 through 67-464. Its mission is to promote confidence and accountability in state government through professional and independent assessment of state programs and policies. The OPE work is guided by professional evaluation and auditing standards.
Joint Legislative Oversight Committee 2015–2016
The eight-member, bipartisan Joint Legislative Oversight Committee (JLOC) selects evaluation topics; OPE staff conduct the evaluations. Reports are released in a public meeting of the committee. The findings, conclusions, and recommendations in OPE reports are not intended to reflect the views of the Oversight Committee or its individual members.
Senators
Senator Cliff Bayer (R) and
Representative Cliff Bayer Steve Vick Michelle Stennett Cherie Buckner-Webb John Rusche (D) cochair the Representatives committee.
John Rusche Maxine Bell Gayle Batt Elaine Smith 2 Distribution of State General Fund Dollars to Public Health Districts
From the director
December 2, 2015
Members Joint Legislative Oversight Committee Idaho Legislature 954 W. Jefferson St. This evaluation focuses on the formula for distributing state Boise, ID 83702 general fund dollars to Idaho’s seven public health districts. The Ph. 208.332.1470 formula is developed and administered by the Trustees of the legislature.idaho.gov/ope/
Boards of Health. The legislative requesters of this evaluation wanted to know if state funds are distributed in a way that meets the needs of public health districts. The formula is easy to understand and implement. However, the distribution of funds is not clearly or consistently linked to program needs within districts, nor does the formula necessarily reflect how funding requirements vary among districts.
We were also asked to evaluate whether state funds are being Included in the distributed equitably. Our findings in this area relate to the regulatory programs operated by districts. These programs issue back of the licenses and permits and conduct inspections—such as for report are formal sewage disposal and food establishments. We found that often responses from these programs need to be subsidized by state and county funds the Governor because the fees charged are insufficient to fully deliver services. Furthermore, subsidies differ among programs and districts; and public health subsidizing these regulatory programs affects funding for other districts. programs.
To address these issues, we have identified policy options for the Trustees and the Legislature to consider.
We appreciate the cooperation and assistance of the seven public health districts, the Department of Health and Welfare, the Division of Financial Management, and the legislative Division of Budget and Policy Analysis.
Sincerely,
Rakesh Mohan, Director Office of Performance Evaluations
3 Contents
Page
Executive summary ...... 5
Bryon Welch and 1. Introduction ...... 10 Tony Grange of OPE and Robert Thomas of 2. General fund distribution formula ...... 12 Robert C. Thomas and 3. Impact of the formula changes ...... 22 Associates conducted this 4. Adequacy and equity of distribution ...... 29 study.
Margaret Appendices Campbell copy A. Study request ...... 43 edited and desktop B. Study scope ...... 45 published the C. Methodology ...... 46 report. D. Public health in neighboring states ...... 49
Brad Foltman, E. Formula calculations ...... 54 former director of the Division of Financial Responses to the evaluation ...... 58 Management, conducted a quality control review.
4 Distribution of State General Fund Dollars to Public Health Districts
Executive summary
Why we were asked to conduct the study
Idaho’s seven public health districts are statutorily obligated to provide public health services to the state’s citizens. Although health districts are not state agencies, they rely on state appropriations to fund public health services. The state appropriates a lump sum of money to the group as a whole, and the Trustees of the Boards of Health distribute funds among the seven districts using a formula determined by the Trustees.
Before 1993, state general fund dollars were distributed proportional to county contributions. In 1993 the Trustees revised the formula to include new measures as a way to represent need for public health services. The Trustees distributed funds to each district based on population, poverty rates, and public assistance enrollment, in addition to county contributions.
5 The Trustees used the formula for approximately 20 years until State general questions arose about the reliability of the public assistance fund distribution enrollment data. For fiscal year 2014, the Trustees dropped is based on public assistance enrollment from the formula and adjusted county weights of the remaining measures. The new formula gave more contributions, weight to county contributions and poverty rates, and less weight population, and to population (see exhibit 1). poverty rates. As a result, the distribution of state funds among districts changed. Two districts saw a decrease in state funding from the previous fiscal year.
District funding changes raised questions from policymakers and stakeholders about the rationale and fairness of the formula, particularly for districts that received less state general fund dollars.
Exhibit 1 The formula’s measures and their relative weights have changed twice since the early 1990s. Before 1993 1993–2013 2014–Present Measure (%) (%) (%) County contributions 100 60 67 Population 0 20 18 Poverty rates 0 10 15 Public assistance 0 10 0
What we learned
A distribution formula should be simple and effective. It should be administratively feasible while addressing need within districts. Although a formula that maximizes both simplicity and effectiveness is ideal, tradeoffs between the two are usually necessary. The current formula is quite simple to implement but could be more effective.
6 Distribution of State General Fund Dollars to Public Health Districts
Findings Formula measures are The formula has potential to fund some districts less than 67 percent of county contributions. Idaho Code broad compared requires the state to appropriate funds equal to at least 67 percent to specific of county contributions to public health districts. We found that funding criteria total state matching funds have exceeded the combined county of individual contributions and are substantially greater than the required programs. minimum. However, because of the way the formula weights county contributions, some districts could receive less than 67 percent of their county contributions if state funding was equal to the statutory minimum.
The formula does not weigh program needs. We found no clear link between the needs of various contracted programs and the weight of measures within the formula. Two measures of the formula, poverty rates and population, intend to address public health needs. These measures are broad compared to specific funding criteria of individual programs. For example, within the contract for the general epidemiology program, a base amount of funds (40 percent of the total) is shared equally among districts, with the remaining (60 percent of the total) distributed according to each district’s number of cases reported from previous years.
Programs with regulatory fees are subsidized with state and county funds. In several programs, regulatory fees have not kept pace with district program costs. For example, restaurant health inspections are heavily subsidized by state and county funds in that affected districts must direct state and county funds to these programs instead of using the funds for other public health services where fees may not be collected.
Regulatory programs are unequally subsidized. The formula does not account for the unequal subsidization of regulatory programs. For example, restaurant inspections and sewage disposal inspections receive various levels of support from counties and the state, with restaurants receiving about twice the percentage of subsidy compared with sewage disposal.
Funding provided for contract services does not always fully cover the cost of the program. Districts receive funding through contracts for many of their programs; however, funding is often inadequate and does not fully cover program costs. When state agencies contract with districts for such programs, the state pays for services through the contract and districts subsidize the
7 program with additional state general fund dollars received The Trustees through the formula. have authority to make changes to Best practices from other states do not exist. Other states the formula. provide little guidance on methodologies for funding public health. There are as many distribution and funding methodologies as there are states.
What happens next
The Trustees are responsible for determining the general fund distribution formula and can change it at any time. Therefore, if districts want the formula to change, they need to work directly with the Trustees to fine-tune the formula in a way that meets desired goals.
A large problem with evaluating the method of distributing state general fund dollars is that neither the Trustees nor Idaho Code have formally articulated functions or desired outcomes of the formula. Is the purpose of the formula to be equitable, fair, or something else? For example, if the current formula is not equitable or fair, what would an equitable formula look like? If the Trustees agree on what the desired outcomes of the formula should be, then evaluating the formula’s ability to achieve those outcomes would be possible.
Any formula change should seek to balance simplicity and effectiveness. The distribution of funds to districts should produce desired results and be easy to administer.
Recommendations
1. The Trustees of the Boards of Health should consider adopting objectives against which the formula can be measured. Then, if the Trustees decide to make changes to the formula, they could determine whether the changes align with the objectives. The objectives would also help with periodic reviews to ensure the formula still meets its intended purposes.
2. To avoid immediate fiscal impact to districts, the Trustees of the Boards of Health should consider phasing in over several years any future changes to the distribution formula.
8 Distribution of State General Fund Dollars to Public Health Districts
3. The Trustees of the Boards of Health should consider We provide eliminating the part of the formula that weight county contributions and replacing it with one that distributes recommendations state general fund dollars for that part of the formula for the Trustees based directly on 67 percent of the county contributions. and the Legislature. 4. The Legislature should consider developing a separate funding mechanism to make the regulatory, fee-based programs administered by the health districts more self- supporting. This may include increasing regulatory fees.
5. The Legislature should consider commissioning an evaluation to more clearly link funding of districts to measures of need more specific to individual programs.
6. The Trustees of the Boards of Health and districts should consider periodically reviewing the indirect cost rate to ensure that the adopted approach reasonably reflects the actual use of indirect resources by program (e.g., costs of the staff, infrastructure, and services). This review should also take into account the tradeoffs between simplicity and effectiveness.
9 Introduction
Legislative interest
In March 2015 the Joint Legislative Oversight Committee assigned us to evaluate the distribution of state general fund dollars to Idaho’s seven public health districts. Exhibit 2 shows the division of districts, and appendix A is the study request.
Idaho Code § 39-411 gives the Trustees of the Boards of Health authority to set and change the state general fund distribution formula. In fiscal year 2014, the Trustees’ changes to the formula caused a shift in the distribution of general fund dollars to districts. Some districts received less than they would have under the old formula and others received more. The study requesters voiced concerns about the potential impact of changes, including whether the formula equitably distributed funds among districts.
Evaluation approach
We worked closely with public health officials in all seven districts to evaluate the impact of changes to the formula.
The overall goals of this study are to (1) provide an independent examination of the formula, (2) look for lessons that can be learned from other states, (3) determine any impact the formula changes caused, and (4) offer recommendations to the Trustees and the Legislature on how to improve processes and practices in the future.
10 Distribution of State General Fund Dollars to Public Health Districts
Exhibit 2 Idaho’s seven public health districts serve all 44 The Trustees of the Boards of counties. Health have a 1. Panhandle Health District representative 2. Public Health-Idaho North Central District from each of the seven district 1 3. Southwest District Health 4. Central District Health Department boards of health. 5. South Central Public Health District 6. Southeastern Idaho Public Health 2 7. Eastern Idaho Public Health
4 7
3 5 6
As assigned by our Oversight Committee, we focused our study Districts receive on the Trustees’ formula for distributing the state general fund funding from appropriation to districts. We did not design this study to be a various sources, comprehensive analysis of all district funding nor was that the one of which is desire of the study requesters. We developed six questions to the state general address concerns outlined by the requesters. These questions are fund. in our study scope (see appendix B). Information about our evaluation methodology is in appendix C.
11 General fund distribution formula
Idaho’s public health districts are funded through numerous revenue sources, such as grants, contracts, fees for services, and county contributions. In addition, Idaho Code § 39-425 requires that the state match at least 67 percent of the revenue contributed by the counties and establishes that state funds are to be distributed among districts according to a formula.
These funding sources support 69 programs that districts categorize as follows:
9 programs are mandated or delegated to districts, such as environmental health.
6 programs are considered by districts as core or fundamental to their mission, such as immunizations.
18 programs are contracted to districts—the Department of Health and Welfare is the most prevalent contract partner. Other programs not included in the 18 may also involve contracting.
36 programs are optional—programs that local district boards have chosen to meet the needs of their districts.
This study focuses mainly on one funding source: the state general fund. The Trustees are responsible for determining the formula that distributes state general fund dollars among districts.1
1. The Trustees are also responsible for determining a distribution formula for the millennium fund appropriation.
12 Distribution of State General Fund Dollars to Public Health Districts
The Legislature matches more than the required 67 percent of county contributions.
Although districts are not state agencies, they rely on state appropriations to fund public health services. In fiscal years 2005–2009, state funds averaged 135 percent of county contributions, and in fiscal years 2011–2015, state funds averaged slightly more than 100 percent. Even with a decrease in matching funds, the state general fund appropriation has been substantially greater than the statutorily required 67 percent, as shown in exhibit 3.
Since fiscal year 2011, county contributions have grown from $7.7 million to $8.4 million. The Legislature’s appropriation process for setting districts’ budgets does not explicitly consider county contributions; rather, it uses the previous year’s appropriation as a base and adjusts it for benefits, inflation, and employee compensation.
Exhibit 3 State matching funds, which exceeded county contributions, were substantially greater than the minimum 67%.
$7.7 $8.3 $7.8 $7.8 $8.0 $8.1 $8.2 $8.2 $8.4 $8.5 Millions($)
2011 2012 2013 2014 2015
13 In fiscal year 2015, the combined overall budget for districts was $50.4 million, with $8.5 million (17 percent) coming from the state general fund. The revenue sources for the entire budget are shown in exhibit 4.
Exhibit 4 State general fund dollars made up 17% of districts’ $50.4 million budget in fiscal year 2015.
Contracts (45%)
Fees (20%)
State general fund dollars (17%)
County contributions (17%)
Millennium funds (1%)
14 Distribution of State General Fund Dollars to Public Health Districts
The 1993 change introduced measures of need into the formula.
Before 1993 the allocation of state funds was based entirely on the proportional size of county contributions across districts. By the early 1990s, funding decreased and districts requested a proposal from representatives of the three state universities to address district disagreements over fund distribution. Noted in the universities’ report were factors affecting public health beyond the control of districts, such as changes in population and local economy.
The authors of the report recommended a formula that In 1993 the comprised several measures to determine fund distribution. They measures of recognized the importance of continuing the role of local effort need were and kept county contributions as an incentive. They also population, recognized the role of need and recommended the formula add poverty rates, three more measures: population growth, poverty rates, and the and enrollment number of people receiving public assistance. in public Each of those measures was weighted differently in the proposed assistance. distribution calculation. The formula measures and their weights are shown in exhibit 5 on page 16.
The formula used population as a general measure of need, which changed with population growth or decline. The other two measures, poverty rates and enrollment in public assistance, were used as indicators for the number of people who may have required district services.
The formula calculated the percentage of county contributions from each district and distributed 60 percent of the general fund match according to those values. It made similar calculations for the need measures. The Trustees adopted the new formula in 1993 and phased in weights of the measures over three years to avoid an abrupt impact on districts’ budgets.
15 The 2014 changes removed public assistance enrollment as a measure and reweighted the remaining measures.
In 2010 the state changed vendors for its Medicaid billing, leading to major shifts in estimates of public assistance across districts. As a result, districts faced potential changes in the distribution of funds.
In 2014, the In fiscal years 2011–2013, the Trustees fixed formula values for weights for public assistance enrollment at 2009 levels. In December 2012 county district directors presented formula changes to the Trustees. The contributions Trustees considered several options, including using new and poverty rates estimates of public assistance, continuing to use the latest public assistance estimate from the previous vendor, and eliminating measures were public assistance enrollment and assigning its weight to the increased. remaining three measures in various ways.
Ultimately, the Trustees decided, by a 6–1 vote, to eliminate public assistance and redistribute weights as shown in exhibit 5. This new formula decreased weight for population and increased weights for county contributions and poverty rates.
Exhibit 5 The formula’s measures and their relative weights have changed twice since the early 1990s. Before 1993 1993–2013 2014–Present Measure (%) (%) (%) County contributions 100 60 67 Population 0 20 18 Poverty rates 0 10 15 Public assistance 0 10 0
At least two trustees said they supported a 67 percent weight for county contributions because they thought it reflected the intent of Idaho Code. However, the Trustees have no requirement to include county contributions as a formula measure or apply any particular weight to it.
16 Distribution of State General Fund Dollars to Public Health Districts
For fiscal year 2015, the state appropriated $8.5 million for all seven districts. Of that amount, 67 percent ($5.7 million) was distributed by the measure based on county contributions, 18 percent ($1.5 million) on district population, and 15 percent ($1.3 million) on district poverty rates.
Exhibit 6 shows the distribution percentages of the total amount A district with and of each measure to each district. Each district accounted for 13% of the a different proportion of the statewide total for each of the statewide formula measures, and a district’s proportion varied between population measures. receives 13% of We found interesting comparisons when we examined the the state general percentages by district and by formula measure. The percentages fund dollars for county contributions and population are similar to the overall distributed by the distribution. For example, the distribution percentages in measure based district 1 were similar for all three measures (about 13 percent). on population.
How state funds were distributed by formula measures in fiscal year 2015.
District 2 received the least overall amount of general fund dollars with 9.5% of the total general fund appropriation. District 4 received the greatest proportion at 23.5%.
Contributions from counties in district 3 were 14.1% of statewide county contributions. Therefore, district 3 received 14.1% of the $5.7 million distribution based on county contributions.
The same weight approach applied to population. District 7 had 13% of the statewide population, so it received 13% of the $1.5 million distribution based on population.
District 5 received 14.5% of the $1.3 million distribution based on poverty rates, which was the district’s proportion of all seven district poverty rates combined.
17 Exhibit 6 The poverty rate distribution is disproportionate compared with the state general fund distribution in districts 2 and 4.
District 13.5% State general fund dollars 1 13.6% County contributions 13.5% Population 13.0% Poverty rates
9.5% 2 8.9% 6.7% 15.5%
15.1% 3 14.1% 16.2% 17.8%
23.5% 4 25.0% 28.3% 11.1%
13.0% 5 13.0% 11.7% 14.5%
12.6% 6 13.0% 10.6% 13.5%
12.8% 7 12.4% 13.0% 14.6%
18 Distribution of State General Fund Dollars to Public Health Districts
The distribution based on poverty rates differed sharply in districts 2 and 4. In district 2, the percentage of poverty rate funds was much higher than the other two measures. The opposite was true in district 4—the percentage of poverty rate funds was much lower.
Values of poverty rates in the exhibit do not represent actual poverty rates nor do they reflect the relative number of people in poverty in each district. Instead, values represent the relative extent of poverty in each district as compared with the relative extent of poverty in other districts.
The way the poverty rate distribution is calculated can, on a per- person basis, distribute more dollars to people in poverty in some districts than it does in others. The details of the formula calculations, including the complex method of calculation for the poverty rates, are shown in appendix E.
▲ Districts provide a variety of services for families, such as women’s health exams, family planning, and the federal WIC program.
19 Before 1993, all The formula change in 1993 was driven by state general public health demands; changes in 2014 fund dollars were distributed to were driven by data reliability. districts based We found clear differences in the process through which the on county formula was changed in 1993 and 2014. The recommendations in contributions. 1993 were made by an external, independent group, whereas the recent changes were based on trustees’ discussion, with directors providing proposals and the Trustees’ selecting the current formula.
The 1993 change was largely driven by changes in public health services, including a decrease in state funding, population growth, and the need for public assistance. On the other hand, the more recent changes were largely a result of the abrupt change in estimates of public assistance instead of a shifting need for health services within districts.
The change in 1993 was phased in over a three-year period to soften the impact of changing funding levels. In contrast, changes in 2014 occurred over a single budget cycle.
▲ When Medicaid enrollment data were no longer reliable, the public assistance enrollment measure was dropped from the formula.
20 Distribution of State General Fund Dollars to Public Health Districts
Objectives of the funding formula are not explicit.
Objectives of districts are in statute and the districts’ strategic plan. Although the Trustees may intend to distribute state funds equitably so that districts are provided a fair share to meet their goals, objectives of the funding formula are not explicit. Well- defined objectives would provide clarity in assessing whether the formula needs periodic adjustment.
Recommendation 1
The Trustees of the Boards of Health should consider adopting objectives against which the formula can be measured. Then, if the Trustees decide to make changes to the formula, they could determine whether the changes align with the objectives. The objectives would also help with periodic reviews to ensure the formula still meets its intended purposes.
21 Impact of the formula changes
The formula changed in fiscal year 2014 mainly because public assistance enrollment data were no longer reliable. Under the changes, some districts saw a decrease in general fund dollars when compared to the old formula, and others saw an increase. Fundamental to the changes was the new weights of funding measures, which rely more on county contributions and poverty rates and less on population.
▲ The Fit and Fall Proof fitness program helps senior citizens prevent injuries and the loss of independence.
22 Distribution of State General Fund Dollars to Public Health Districts
Formula changes in fiscal year 2014 caused notable impact on some districts.
We found some volatility in funding before the changes, but we found notable impact on some districts after the changes.
The elimination of one of the funding measures (public assistance enrollment) resulted in new weights for the remaining measures. Formula changes also occurred completely in one year, instead of being phased in over a period of years.
We examined year-to-year changes in fiscal years 2012–2013, before the new formula, and changes in fiscal years 2013–2014, the years immediately before and after the new formula.2 Overall, five of seven districts did not see changes in county contributions from fiscal years 2012 to 2013. Also in fiscal years 2012 and 2013, the state general fund appropriation increased by $291,000 (3.7 percent) overall, resulting in increases to these five districts.
Where county contributions did change in fiscal years 2012 and Districts 3 and 4 2013, two districts saw either a corresponding increase or saw a decrease decrease in state general fund dollars. District 4 saw a 2 percent in state general increase in county contributions and received a 5.4 percent increase in state general fund dollars. In district 2, a 3.5 percent fund dollars as a decrease in its county contributions was met with a decrease of result of the 1.2 percent in state general fund dollars. formula changes.
In contrast, exhibit 7 shows changes in county contributions and state general fund dollars from fiscal year 2013 (under the old formula) to fiscal year 2014 (under the new formula).
In fiscal year 2014, all districts saw an increase in their total county contributions from fiscal year 2013. In fact, the increase in total county contributions exceeded the total increase in state general fund appropriation. Total district contributions increased by almost $200,000, and the total increase in state general fund appropriation was approximately $96,000.
2. The calculation for state fund distribution uses the previous year’s county contribution data because fiscal year dates differ among districts and counties.
23 Exhibit 7 With 2014 changes to the formula, state general fund dollars decreased in districts 3 and 4 from 2013 levels despite increases in county contributions.
0.6% 3.0% 4.0% 3.0% 9.0% 1.5% 3.0% 2.0% 3.0% 2.6% 2.0% 1.0% -2.1% -1.4%
District 1 District 2 District 3 District 4 District 5 District 6 District 7 Change in county $31,549 $20,631 $16,596 $57,747 $20,233 $30,308 $19,235 contributions
Change in state general $43,100 $62,600 $(26,300) $(26,500) $6,000 $27,000 $10,500 fund dollars
Standing out in our analysis, districts 3 and 4 both saw an increase in their county contributions from fiscal year 2013 to 2014, but they received a decrease in state general fund dollars. We found two main reasons for this result:
The increase in total state general fund appropriation for fiscal year 2014 was approximately $96,000, of which 67 percent ($65,000) was available for allocation based on county contributions. Even with an increase in county contributions among districts, including districts 3 and 4, all districts kept roughly their same percentage of total county contributions as in the previous year. Thus, there was little proportional change in the allocation of the $65,000 available to share.
24 Distribution of State General Fund Dollars to Public Health Districts
Districts 3 and 4 had the largest percentages of people receiving public assistance—the funding measure eliminated in fiscal year 2014. When public assistance enrollment was eliminated under the new formula, the two remaining need measures, poverty rates and population, were given new weights. The weight for poverty rates went up from 10 percent to 15 percent, and the weight for population went down from 20 percent to 18 percent. These new weights had a negative fiscal impact on districts 3 and 4, the most populous districts, because the weight of population had been reduced. District 4 had the lowest poverty rate and saw a negative fiscal impact from the increased poverty weight.
The university study from 1993 had suggested that a smooth The Trustees transition from formula changes required a three-year phase in made changes to to minimize fiscal impact on individual districts. That phase in the formula in did not occur with recent formula changes. one year instead Districts’ percentages of the poverty rate and population of phasing in measures were also affected, but the effect was mitigated because changes over the formula used three-year running averages. several years.
None of the formula changes appeared to have been tied to actual changes in need for services among program clients in districts. The fiscal impact resulted from the elimination of a formula measure, the new weights of measures, and the immediate transition—from one year to the next—of formula changes.
Recommendation 2
To avoid immediate fiscal impact to districts, the Trustees of the Boards of Health should consider phasing in over several years any future changes to the distribution formula.
25 Stakeholders have conflicting opinions when considering measures that should be included in the formula.
Idaho’s public health officials do not have consensus for what alternative measures could be included in the formula. Several public health officials noted problems with the formula, such as its overwhelming reliance on county funds.
With changes to the formula, there are likely winners and losers in total funding received, as demonstrated by our analysis of formula changes in fiscal year 2014. Districts have a lot at stake, and sometimes their opinions conflict when asked about what measures should be in the formula.
District feedback on changes to the formula
District officials We asked district directors and fiscal officers in all seven districts voiced concern for feedback on the formula and suggestions for changes. about the impact Responses included opinions on measures, weights, and of weighting calculations of measures. One official suggested including a county measure of public assistance enrollment, as was done in prior contributions in versions of the formula. the formula. Several districts brought up how county contributions levels by district are used in the formula. Because data are weighted, one official noted a disincentive for districts to ask for less than their typical 3 percent annual increase. Asking for less directly affects how many state dollars districts will receive. Districts that do not increase their county contributions at the same rate as other districts will receive relatively less state funds because of how the formula proportionally distributes state dollars.
One official noted that all districts, no matter their size, have similar levels of infrastructure and staffing to maintain. For example, district fiscal staff in all districts may be handling the same number of contracts from the Department of Health and Welfare. In addition, districts may employ a similar number of information technology staff to address uniform federal patient privacy requirements. The formula does not directly account for these common costs.
26 Distribution of State General Fund Dollars to Public Health Districts
Several districts pointed to challenges of providing services in their rural areas. For example, some districts have high costs for staff to travel long distances to serve clients. Some districts have had to decrease hours of operation or close field offices because of budget reductions.
Not all officials want to see further changes to the formula, however. One district director noted that the formula in place now is functioning well and should not be changed.
Perceptions on population and poverty rate measures
We asked public health officials whether they thought population The poverty rate and poverty rates were appropriate and sufficient measures of measure is the need. A majority of officials said the measures of population and most complex poverty rates were appropriate. However, fewer agreed that those part of the measures were sufficient. formula. Many officials believe that measures of population, poverty rates, and county contributions are useful. Some disagree on the way in which poverty rates are used in the formula. Instead, they make the case for a more direct measure of the number of people in poverty in each district.
Several officials noted that program spending is not tied to funding measures—the state and county funds that districts receive are discretionary. If the formula were changed, districts would not necessarily change spending patterns. Funding measures help distribute state general fund dollars among districts, but districts ultimately decide which programs will receive those dollars.
All officials we spoke with discussed the importance of discretionary state and county funds. Districts are afforded a great deal of latitude in how state general fund dollars and county funds are used. Officials see this latitude as a benefit that gives them flexibility in using state and county resources to meet district-specific needs.
27 A standard model for public health funding does not exist.
Public health services, governance structure, and funding mechanisms vary among states. However, similarities may exist in states with comparable district sizes, in states that share demographic or geographic similarities, or in states with comparable governance or funding models. We did not find best practices from other states that could guide changes to Idaho’s formula.
When considering changes to the formula, a review could focus on the following:
Local public health funding in neighboring states and states with similar funding structures
Goals of other states’ funding appropriations and the distribution mechanisms
More information on public health governance and funding in neighboring states can be found in appendix D.
28 Distribution of State General Fund Dollars to Public Health Districts
Adequacy and equity of distribution
Members of the Legislature requested that we conduct an in- depth, impartial review of the current formula for distributing general fund dollars. They wanted to ensure that an equitable allocation of state general fund dollars went to districts and that funds were adequate to deliver a core set of public health services to Idaho’s citizens.
▲ Many district services help promote healthy communities and lifestyles, such as tobacco prevention and cessation services.
29 The need for improvements to the formula can be assessed using two criteria.
Simplicity and effectiveness can be used as criteria for evaluating an existing formula.
Simplicity. The formula should not be overly complex but easy to understand and administer.
Effectiveness. The formula should produce the desired results, be free of anomalies, and be equitable.
Districts have With the 1993 revision, the goal of the formula was to be simple flexibility in using and effective. The more simple and straightforward a formula is, state general the better, as long as effectiveness is not jeopardized. The reality, fund dollars. however, is that tradeoffs may need to occur between these two criteria, a fact that may pose policy choices for decision makers.
The formula review from 1993 as well as policy intent also suggested that any changes in the formula (1) maintain incentives for counties to contribute, (2) give districts flexibility in how they prioritize and use funds, and (3) not result in dramatic shifts in allocations.
The current formula is generally simple to calculate and understand, with one exception—how the poverty rate measure is calculated (discussed in chapter 2 and appendix E). The formula is less successful on the effectiveness scale for several reasons. We discuss those reasons in the following sections.
30 Distribution of State General Fund Dollars to Public Health Districts
Allocating 67 percent of the state general fund appropriation based on weighted county contributions may be inconsistent with the intent of statute.
Although the purpose of this study was not to evaluate the effectiveness of the distribution measures selected by the Trustees as compared with the large array of possible alternatives, we at least wanted to understand whether the current formula comports with legislative intent. The relevant statutory text is in Idaho Code § 39-425:
“The matching amount to be included in the request shall be a minimum of sixty seven percent (67%) of the amounts pledged by each county…”
We looked at what would happen if the state restricted its overall appropriation to the statutory minimum 67 percent. If this restriction occurred, the formula would allocate funds so that some districts would receive more than the minimum and others Hypothetical would receive less. As shown in exhibit 8, the total amount that scenario: most districts would receive would vary from the 67 percent If the state match of county contributions. general fund The results shown in exhibit 8 would occur because each district appropriation would receive a portion of the available funds only relative to the were equal to county contributions for other districts, not to the minimum minimum specified in state code. statutory levels, Even when state funds are greater than the limit and all districts some districts increase their contributions, under the current formula some may not receive a districts can receive an increase in state general fund dollars at 67% match on the expense of others. This condition occurs because the formula their county weights county contributions in the same manner as poverty contributions. rates and population.
31 Exhibit 8 At the minimum statutory state matching level, the current formula would result in some districts receiving less than 67 percent of their county contributions (hypothetical scenario).
Statutory minimum 67%
66% 71% 71% 63% 67% 65% 69%
1 2 3 4 5 6 7 District
Note: This hypothetical scenario assumes the total state appropriation is equal to 67% of statewide county contributions and other formula measures were equal to FY 2015 numbers.
Simplified example of formula distribution
If there were only two districts, A and B, and each district generated exactly the same amount of county contributions, they would equally split the amount of state general fund dollars allocated based on county contributions.
If, however, district A had no increase in county contributions but district B increased its contributions by 3% for the next year, their percentages of the state general fund dollars would change to approximately 49% and 51%, respectively. If there were no change in the amount of state general funds allocated based on county contributions, district A would see a decrease in state funding.
32 Distribution of State General Fund Dollars to Public Health Districts
The problem of a district receiving less funding even when it has increased its county contributions from the previous year can be addressed by applying a 67 percent general fund match to county contributions. Unweighting the part of the formula for county contributions could change the percentage of general fund dollars that would be available for allocation based on poverty rates and population measures.3 However, this unweighting would ensure that each district received the percentage match of county contributions referenced in statute and would be a more stable, predictable option for counties.
The formula may comport with statute because the state has traditionally provided more than the minimum 67 percent match. However, the formula could be out of compliance with statute if (1) the intent of the statute were that each district receive a 67 percent state match of county contributions and (2) the state limited its funding to the minimum.
The Trustees have an option to apply the county contribution measure directly to the amount of county contributions instead of the relative weight of county contributions. This application could be done without adding any complexity, while at the same time avoiding the possibility that a district would have a lower allocation of state general fund dollars even though it increased in county contributions. Each district would receive 67 percent match of their county contributions.
Recommendation 3
The Trustees of the Boards of Health should consider eliminating the part of the formula that weight county contributions and replacing it with one that distributes state general fund dollars for that part of the formula based directly on 67 percent of the county contributions.
3. Overall, unweighting the formula for county contributions would not have significantly changed the amount of state funds a district received in fiscal year 2015. Four districts would have received 0–0.5 percent more in total state funding and three districts would have received 0.3–0.5 percent less.
33 Regulatory, fee-based programs compete with and reduce funding available for other public health services.
Districts have several programs that are primarily regulatory and For many fee-based. These programs provide permits, licenses, or programs, fees inspection services, and the affected businesses, governmental have not kept entities, or individuals can be required to pay fees for these pace with the services. Most of these programs are in environmental health and rising costs of include regulation of food establishments, sewer and septic the program. systems, swimming pools, solid waste handling, land development, and child care facilities.
The programs that regulate these businesses and activities are heavily supported by dollars distributed by the formula. Their reliance on funding support has little or nothing to do with the two need-related measures in the formula—poverty rates and population. Instead, the need for funding support directly relates to fees that are inadequate to cover full funding of operations. In fact, one program, solid waste, charges little or no fees, and in the case of restaurant permits and inspections, fees have not kept pace with district program costs for many years. In fiscal year 2015, the environmental health programs collectively needed subsidies totaling 43 percent of expenditures.
All districts need state and county support for their regulatory programs. For many environmental health programs, all seven districts charge the same basic fees. Nevertheless, their costs of operating programs can be different for a variety of reasons, such as district geography and travel time, as well as population densities and economic climate. Although the total subsidy for all districts combined in fiscal year 2015 was 43 percent, subsidies among districts ranged from 34 percent to 58 percent.
For regulatory programs with no fees or fixed low fees, districts may have a disincentive to increase expenditures when needed. Funds for regulatory programs have to come from the same pot of money (the combination of county contributions and state matching funds) that support core public health programs.4 The
4. Included among what districts refer to as core programs are sexually transmitted disease, prevention programs (e.g., bioterrorism, pan flu), HIV prevention and surveillance, tuberculosis, West Nile, and epidemiology. 34 Distribution of State General Fund Dollars to Public Health Districts existence of a disincentive poses a conflict of interest because programs representing different priorities have to compete for limited dollars. Districts must direct state and county funds to these regulatory programs instead of using the funds for other public health services.
Regulatory, fee-based programs receive varied levels of subsidization.
The two largest expenditures for environmental health programs are sewage disposal and the food program. They are an example of programs receiving varied levels of subsidy. In fiscal year 2015, the percentages of district fund subsidies for all districts combined was 28 percent for sewage disposal ($928,000 out of $3.3 million) and 61 percent ($1.6 million out of $2.7 million) for the food program.
Companies, their customers, and in some cases, individual Regulatory, fee- citizens benefit by receiving subsidies from county and state based programs taxpayers. Some district officials have indicated that district rely heavily upon boards are reluctant to increase fees because of public state general intolerance to higher fees. Yet the public, who may be attuned to fund dollars fee increases, especially if they are the direct payer, still have to and county pay the bill for program subsidies, though such subsidies may be less visible as part of overall taxation. contributions.
Also, as indicated by some district officials, higher fees could discourage compliance with regulations. For example, noncompliance within the sewage program could have tangible negative effects for the public at large. At the same time, low fees may not provide the revenue necessary to ensure more or better compliance with regulations governing the sewer program.
Low fees may also encourage economic activity and development, similar to the case often made for tax incentives. We designed our 2013 report Guide to Comparing Business Tax Policies and the accompanying tax policy tool to help policymakers and the public evaluate such claims. For regulatory programs, the question is whether the clearly identified tax burden on the public, which can dampen economic activity, is outweighed by economic activity supported through subsidized fees.
Addressing equity issues for regulatory, fee-based programs is beyond the scope of this evaluation. However, if the Legislature
35 were to devise a separate funding mechanism for these programs, If regulatory fees it could isolate these issues and potentially resolve them, and at covered more of the same time avoid a funding competition with other core the cost of programs. programs, state general fund To the extent that regulatory, fee-based programs become more dollars could be self-supporting, more of the county and state tax generated funds used for other could be made available to districts. Devising a separate funding mechanism to make these programs more self-supporting would core services. not add any complexity to the formula itself but would require, at minimum, some changes in statute and modifications to the budgeting process. Districts set fees for some programs, such as environmental health, while other fees are established in code. For example, food establishment fees are set in Idaho Code § 39-1607, swimming pool fees are set in Idaho Administrative Code IDAPA 16.02.14, and day care license fees are set in Idaho Code § 39-1107 and Idaho Administrative Code IDAPA 16.06.02.
Recommendation 4
The Legislature should consider developing a separate funding mechanism to make regulatory, fee-based programs administered by districts more self-supporting, which may include increasing regulatory fees.
▲ Fees for services like restaurant inspections have not kept pace with program costs. Districts use state general fund dollars and county contributions to subsidize these programs.
36 Distribution of State General Fund Dollars to Public Health Districts
Funding for contracted programs does not cover full costs and must be subsidized from the state general fund and county dollars.
Idaho Code § 39-414(4) gives districts the authority to enter into contracts to provide services with any other governmental or public agency. The district board agrees to render services in exchange for a charge reasonably calculated to cover the cost of service.
However, funding for many contracted programs is inadequate to Districts use cover the full cost of the program. This shortage occurs in two state general ways: fund dollars to When the state enters into a contract with districts, it first compensate for pays for services through the contract. If demand is greater underfunding in than what was outlined in the contract, districts may use state some contract general fund dollars to subsidize the program. services.
Funding formulas within contracts may not account for cost differences among districts.
When contract funding or fees are insufficient to cover the full costs of programs, districts have fewer county and state general fund dollars available for optional programs, which limits local control and discretion over how county and state generated funds are spent.
An important context for understanding contract funding, districts are often asked to provide whatever services can be negotiated for a set amount of dollars. Reasons why contract funding is insufficient vary by program and may include a combination of factors:
Available funding does not reflect inflationary increases in program costs, including employee compensation and the cost of benefits.
Fees that support the program are insufficient to make up the difference between the contract funds and the actual expenses of the program. Relatively low fees can be deliberate, such as a sliding-scale fee based on family income.
37 In a small number of contracts, indirect costs are limited to Contract funding 10 percent rather than the actual indirect percentage is insufficient for calculated by districts. several reasons. Districts may not be able to control the number of clients receiving clinical services because they are required by contract to provide services to anyone in need and cannot turn away patients because of their inability to pay.
The contract funding formula itself may be flawed by not recognizing how costs can vary among districts.
▲ Districts partner with other organizations to provide contract services, which include immunizations.
38 Distribution of State General Fund Dollars to Public Health Districts
The two needs-related measures, population and poverty rates, may not allocate funds consistent with actual need.
Districts have discretion to spend funding according to their Changes to priorities. Their decisions are not determined by the formula’s program funding allocation of funds or the measures that determine the amount of would give more funds. For example, if a district receives more money because its proportion of citizens in poverty increases, the district is not discretion to required to spend proportionally more money on programs that districts in how directly benefit those in poverty.5 state general fund dollars are The measures of poverty rates and population are intended to used. address public health needs. These are broad measures compared with the specific and varied contract funding criteria of individual programs. Many contracts have a fixed statewide funding total, and the contracting agency devises a formula to determine each district’s share. Contract funding criteria vary and include such things as (1) a fixed allocation per district for part of the funds, (2) the weighted number of disease cases reported, (3) percentages of subpopulations based on age, (4) weighted numbers of annual exams, and (5) numbers of participants from the previous year.
A key challenge to making the funding formula more effective is to ensure that the allocation of state general fund dollars and county contributions is more clearly linked to the programs most in need. A major step in doing so would be to separate the regulatory, fee-based programs from the formula (also considered under recommendation 4). Two additional options would be to revise the formula or change how the state goes about contracting with districts for services.
5. Districts have programs that directly serve those living in poverty (e.g., family planning program). These programs may assess a fee, but it is on a sliding scale—those who meet criteria do not pay the fee. When a district has a higher number of clients living in poverty who use these services, it will see a fiscal impact.
39 General epidemiology
The contract for general epidemiology is a specific example of how criteria within a contract may be far different from the measures of the funding formula. A base amount of funds (40% of the total) for epidemiology is shared equally among districts that are party to the contract. The remaining funds (60% of the total) are distributed according to each district’s number of disease reports from previous years. It is difficult to see any clear link between these criteria and the measures of the funding formula, which are 67% county contributions, 18% population, and 15% poverty rates.
Addressing the matter of need by further changing the formula would require an analysis of the existing array of programs to determine the kinds and amounts of need that are present.
Addressing the matter of need by changing the contracting process would require that the allocation of dollars to districts reflect both the need within each district and the actual cost of addressing the need. Changing the contracting process to explicitly address need as well as costs would be different from the current process whereby districts are asked to provide whatever services can be negotiated for a set amount of dollars.
Either of these options for improving effectiveness could add complexity, at least initially, in terms of effort required to determine the most feasible and least administratively burdensome modification to the formula or the funding process.
Recommendation 5
The Legislature should consider commissioning an evaluation to more clearly link funding of districts to measures of need more specific to individual programs.
40 Distribution of State General Fund Dollars to Public Health Districts
Indirect costs are based solely on staff salaries.
Indirect costs, such as administrative and IT services, benefit all programs and are part of each district’s core operational infrastructure. Districts use a method for allocating indirect costs based on direct staff salaries for each program. Although district officials acknowledge some challenges to this approach, they generally said the simplicity of the approach and its rough closeness to capturing actual indirect costs per program made the approach worth retaining.
We agree with the points raised by district officials but offer some considerations that may merit further review by districts and the Trustees.
If the Legislature responds to recommendation 4 of this report by developing a separate funding mechanism for regulatory, fee- based programs, greater emphasis might need to be placed on the indirect costs attributed to those programs. Such emphasis would especially be warranted if any or all of the programs were required to achieve full-cost recovery.
When indirect charges are based on salaries alone, charges may not align closely enough with actual indirect uses of the programs. There can be many reasons for misalignment, such as variations in use of space, unequal needs for information technology, and differences in longevity and salaries among employees in these programs as compared with staff in more direct, client-based programs.
The indirect rate resulting from a salary-based cost allocation For fiscal year varies among districts. For fiscal year 2015, the indirect rate 2015, the ranged from 23 percent to 53 percent among districts and 37 indirect rate percent in aggregate. These rates contrast with a 10 percent ranged from 23% indirect cost rate allowed under the contract for preparedness to 53% among programs, such as the National Bioterrorism Hospital Preparedness Program. districts.
Under federal code, which applies to many district contracts, the indirect rate may be based on factors such as total direct costs (with some exclusions), direct salaries and wages, or another base that results in an equitable distribution. If districts had used total direct costs for fiscal year 2015, the aggregate indirect rate
41 would have been approximately 18 percent, or about half of what it was based on salaries.
Calculation of the rate does not change the amount of indirect costs to be allocated, but the method used could have an effect on revenue generated from contracts, especially if the contracting process is redirected to more closely address both need and costs (see recommendation 5).
We do not find a compelling need now for districts to change the base for calculating the indirect rate. However, circumstances may change, especially if recommendations in this report lead to revisions in the formula or funding approach.
Recommendation 6
The Trustees of the Boards of Health and districts should consider periodically reviewing the indirect cost rate to ensure that the adopted approach reasonably reflects the actual use of indirect resources by program (e.g., costs of the staff, infrastructure, and services). This review should also take into account the tradeoffs between simplicity and effectiveness.
42 Distribution of State General Fund Dollars to Public Health Districts
Study request
Bert Brackett Cliff Bayer Cherie Buckner-Webb Maxine Bell
43 44 Distribution of State General Fund Dollars to Public Health Districts
Study scope
In March 2015 the Joint Legislative Oversight Committee directed us to evaluate the general fund distribution formula for public health districts.
The study request asks us to provide the Trustees with an impartial review of the formula and develop alternatives for the Trustees to consider. The request also asks us to examine any new demands the Legislature has placed on public health districts in recent years.
Evaluation objectives
Our evaluation will attempt to answer the following questions:
1. What are the objectives of using the formula to distribute general funds to public health districts?
2. What is the process by which the formula was developed? How has that process changed over time and why?
3. What elements make up the formula? Are there other elements that stakeholders believe should be included in the formula?
4. What have been the impact to public health districts since the formula was changed?
5. Are there lessons that can be learned about how other states distribute aid to local health districts?
6. Are there improvements or alternatives that can be made to Idaho’s formula?
45 Methodology
Our evaluation scope and methodology were developed to understand how the Legislature appropriates state general fund dollars for the seven public health districts and how the Trustees of the Boards of Health distribute state funds to districts. We focused our study on answering the questions presented in the study scope and on issues raised in the study request: the distribution of state general fund dollars through a formula developed by the Trustees.
We did not examine the millennium fund appropriation nor the method used to distribute those funds to districts. We also did not extensively examine contract formulas or negotiations that districts have with other entities, such as the Department of Health and Welfare. Our focus was examining the impact of recent formula changes and presenting to the Trustees alternatives to improve the distribution of state general fund dollars.
Agencies consulted
Public health officials from all seven public health districts met with us to discuss their programs, revenue, and expenditures. We held group interviews with district directors and fiscal officers on several occasions as well as with trustees.
We sent a questionnaire to the seven district directors and seven fiscal officers to get individual feedback on their perceptions of the formula and received nine responses, representing six districts.
In our interviews with staff from the Division of Financial Management, the Budget and Policy Analysis Division in the Legislative Services Office, and the Tax Commission, we gained insight into the budgeting and appropriation process for districts.
46 Distribution of State General Fund Dollars to Public Health Districts
Documents reviewed
Public health funding:
Idaho Code § 39-401–426 and Idaho Administrative Code, IDAPA 41.01.01 and 41.02.01.
Historical minutes from the Trustees’ meetings.
Indirect cost allocations under federal contracts:
Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. 2 C.F.R. § 200.
Public health funding laws and policies in Idaho’s neighboring states of Montana, Nevada, Oregon, Utah, Washington, and Wyoming.
National and local research on public health funding:
Association of State and Territorial Health Officials. “ASTHO Profile of State Public Health,” vol. 3, 2014.
Levi, Jeffery, Laura M. Segal, Rebecca Laurent, and Albert Lang. “Investing in America’s Health: A State-by-State Look at Public Health Funding and Key Health Facts.” Trust for America’s Health, 2013.
Meit, M., A. Knudson, I. Dickman, A. Brown, N. Hernandez, and J. Kronstadt. “An Examination of Public Health Financing in the United States.” Prepared by NORC at the University of Chicago. Washington, DC: The Office of the Assistant Secretary for Planning and Evaluation, March 2013.
National Association of County and City Health Officials. We interviewed “2013 National Profile of Local Health Departments.” 2014. one of the authors of the 1993 report Ogden, Lydia, Katie Sellers, Cara Sammartino, James whose Buehler, and Patrick Bernet. “Funding Formulas for Public recommendations Health Allocations: Federal and State Strategies.” Journal of Public Health Management Practices 18(4) (2012): 309–316. ultimately led to the Trustees Zelus, Paul, Jim Weatherby, and Neil Meyer. “Proposal for adopting the first Allocating State Funding to the Idaho Public Health change to the Districts.” Idaho Policy Research Group, February 1993. formula.
47 Quantitative analysis
The majority of data used in our analysis came from public health districts. We also obtained budget and appropriations data from the Office of the State Controller’s data warehouse (IBIS).
State appropriation distribution spreadsheets for public health districts
Districts sent us distribution calculation spreadsheets for fiscal years 2011–2015 showing the values used in each formula measure (the spreadsheet for fiscal year 2015 is in appendix E). We used the documents to analyze trends in county contributions and state fund distribution and the effect of the formula change in 2014.
Appropriations
Legislative budget books were used to get details of the year-to- year changes in state funding. We queried district-level appropriations through the State Controller’s data warehouse to confirm appropriations found in districts’ distribution spreadsheets.
Revenue and expense spreadsheets
We reviewed Districts sent us revenue and expense spreadsheets for fiscal revenue sources years 2008–2015 showing the revenue sources and expenditures and for 69 different public health programs in each district. We expenditures for calculated the amount of district funds (the combination of 69 public health county contributions and state appropriations) channeled to each program as the difference between expenditures and revenues. programs. These spreadsheets were the basis of analyses of program subsidization by state and county funds, and they allowed analyses of the effect of using alternative methods of calculating indirect costs.
48 Distribution of State General Fund Dollars to Public Health Districts
Public health in neighboring states
Public health services, governance structure, and funding mechanisms vary among states. Similarities may exist in states with comparable district sizes, in states that share demographic or geographic similarities, or in states with comparable governance or funding models.
Governance
The governance of local health districts varies by state but can be broadly categorized as centralized or decentralized. In centralized states, a state health agency administers local public health programs. In decentralized states, local health districts are independent entities and often affiliated with county governments. Some states use a hybrid model where services are shared between the state and local health districts or where more than one governance type exists.
Idaho has a decentralized system where health districts operate as independent government entities. With the exception of Nevada and Wyoming, states that neighbor Idaho operate decentralized systems. Local health boards in these decentralized systems are often formed by municipal or county governments.
Boards of health of counties and cities may combine resources and form larger health districts. Idaho health districts differ from neighboring state systems because all of Idaho’s health districts have multiple counties assigned to a district, which is established in statute. Idaho also has relatively few districts compared with most neighboring states that have decentralized governance. Utah has the second fewest with twelve districts, six of which are multicounty districts.
49 There are potential similarities between states and districts with comparable governance structures. For example, the Association of State and Territorial Health Officials reported that states with centralized public health systems spent more money on public health per capita. However, governance structure may not directly relate to funding mechanisms. For instance, Oregon and Washington allocate appropriations through grants for specific services and comprehensive contracts with individual health departments.
Like Idaho, Two neighboring states use hybrid governance models. Nevada four neighboring provides local public health services in rural areas, and Wyoming states operate a provides local health services at the request of a county. decentralized Financial distribution models may not be equivalent in states where a single organization provides programs throughout a public health state because services may be based on need in each area with model. less regard to political boundaries, such as county lines.
Funding
The Idaho Legislature appropriates a fixed amount of money each year, and Idaho Code § 39-411 requires the Trustees to allocate the lump sum based on a distribution formula. Most states that neighbor Idaho use service contracts or grant programs to allocate funds. Utah’s model is most similar to Idaho.
Utah’s formula Utah funds local health districts through a single appropriation is set in divided among its districts based on a formula defined in administrative administrative code. Utah provides funding that is different for code. each district based on what the state determines is the minimum amount needed to support services. After the base amount is allocated, Utah uses the following formula to determine any increases:
20 percent equal share 20 percent rural incentive 40 percent based on population 20 percent based on square mileage of each district
Establishing a baseline of funding is one commonality among Utah and Washington. In both states, distribution of appropriations begins with a fixed operating base followed by a formula to allocate additional funding. For example,
50 Distribution of State General Fund Dollars to Public Health Districts
Formula components and features The distribution mechanisms for state appropriations vary among states. States that use a distribution formula typically use one or more of the following components:* A measure of need (e.g., population at risk for a disease or condition) A measure of jurisdictional fiscal capacity (e.g., per capita income)
A measure of effort (e.g., matching funds)
An index of costs (e.g., wages paid to heath care workers)
Formulas can include one or more of the following features: A threshold or minimum level of need a jurisdiction must meet before being eligible for funding
Base or minimum amount to cover fixed costs at each jurisdiction A hold-harmless provision, which limits funding decreases from year to year to stabilize funding
* Journal of Public Health Management Practice 18(4) (2012): 309–316.
Washington’s formula for Maternal and Child Health funding Idaho’s formula starts with a base amount for each local health district before the does not have a remainder is distributed using a formula that includes Medicaid baseline amount. enrollment, the number of individuals with disabilities, and at-risk population statistics.
A lump-sum appropriation gives districts greater latitude to meet shifting priorities. In a 2013 report, the University of Chicago noted that limited flexibility of state funding use is a concern among local health districts.
Unlike states that require service contracts with performance measures or that limit funding to specific grant programs, Idaho appropriates a lump-sum distribution to its districts. This type of appropriation allows health districts to use state dollars to meet personnel needs or operate programs that would not otherwise be supported by grants. Public health officials in Idaho have
51 emphasized the importance of this flexibility in being able to meet their unique district funding needs.
Neighboring states use a variety of sources for data in their distribution formulas. Census data is the most prevalent, followed by disease incident rates, disease prevalence, and program utilization rates. According to one study’s conclusion, the type of data used in formulas often reflects political or other values:
Timely and available data are inevitably imperfect proxies for program goals or grantees’ funding needs, and the selection of various data sources or weighting strategies reflects the spectrum of values or priorities that converge in the political process of designing an allocation formula. —Journal of Public Health Management Practice 18(4), 2012, 313
States have States have struggled to find the correct measures and data struggled to find sources in developing their distribution formulas. Chronic the correct disease rates can serve as an example. Often, areas with the measures and highest rates of disease are in sparsely populated areas. Higher data sources in populated areas might have lower rates of chronic diseases but a developing their larger population with those diseases to serve. distribution The table on page 53 summarizes public health funding in formulas. neighboring states.
52 Distribution of State General Fund Dollars to Public Health Districts
Number of local State health districts Funding summary States use a variety of Montana 49 Montana pays to fund local health board inspection accounts. Counties and cities are formulas and required to finance other public health other methods to expenses. Per the Department of Public distribute funds Health and Human Services’ budget, services to local health are also provided through state contracts with districts. local health departments.
Nevada 3 Nevada gives local health authorities funds to operate a few specific programs. The Division of Public and Behavioral Health also has service contracts with health districts.
Oregon 34 Oregon statute requires funds to be distributed by a measure based on per capita or other equitable formula determined by the conference of local health officials.
Utah 12 Utah provides baseline funding for each district and then uses the following formula set in administrative code to distribute any further increases: 20% minimum share, 20% rural incentive, 40% based on population, and 20% based on square mileage of the district.
Washington 36 State funds for local health programs come from contracts, discretionary funds to meet local needs, and service reimbursements. Funding formulas for contracts are determined every five years and include funding allocation and program requirements.
Wyoming 23 Information was not available.
53 Formula calculations
The calculations for distributing the state general fund appropriation are made by collecting the latest available information on county contributions, population, and poverty rates. The calculation for each measure is made independently, and the allocation for each measure is summed for each district to determine the total state distribution.
County contributions
Each county contributes money, generally raised through property taxes, to its health district. Districts have a goal of a 3 percent increase each year, though this is not always achieved. The percentage of statewide county contributions of each district is used as the basis to distribute 67 percent of the state general fund appropriation. County contributions are not distributed to districts via the formula. Because of differences in fiscal years between counties and the state, the formula uses the prior year’s county contributions.
Population
To calculate each district’s share of the state appropriation based on population, the latest population estimate for each county is downloaded from the US Census Bureau. The latest reference date available is July 1, two years before the fiscal year being calculated. For fiscal year 2015, the latest estimate available was July 1, 2013. The combined count for counties in each district is averaged over the three most recent estimates, and that average is used to produce the distribution percentages for 18 percent of the total state appropriation. Each district receives a percentage of the dollars available for the population measure equal to its percentage of total state population.
54 Distribution of State General Fund Dollars to Public Health Districts
Poverty rates
The latest poverty rates (number of people in poverty divided by population) for each county are downloaded from the US Census Bureau. Rates are then weighted by the three-year population average for each county, and the weighted rates are summed for each district. The summed weighted rate for each district as a percentage of the sum of the weighted rates for all districts is used to determine districts’ share of 15 percent of total state appropriation.
Although the resulting percentages for each district are derived from the poverty rates in counties and districts, they are not actual poverty rates themselves, but instead represent each district’s weighted poverty rate indexed (or in proportion) to the rates of the other districts. This method of distributing dollars is based on the relative extent of poverty in districts instead of the number of people in poverty in each district divided by the total number of people in poverty in the state.
This complex part of the distribution formula is shown in exhibit 9 using a simplified example of two hypothetical districts. The poverty rate in district B is 1.5 times the poverty rate in district A, even though district B has 3 times the number of people in poverty.
If these were the only two districts splitting the general fund dollars distributed by poverty rates, district A would receive 40 percent of the dollars while district B would receive 60 percent. This method is quite different from the calculation used for distributing general fund dollars based on population. Were the
Exhibit 9 A district with three times the number of people in poverty will not necessarily receive three times the distributed funds based on its poverty rate.
Total Population in Poverty Ratio population poverty rate Ratio weight District A 100,000 10,000 10 1.0 40%
District B 200,000 30,000 15 1.5 60%
Total 300,000 100%
55 distribution based on each district’s percentage of the total number of people in poverty in the state, the distribution shares would be 25 percent and 75 percent, rather than 40 percent and 60 percent.
Exhibit 10 shows the distribution calculation spreadsheet for fiscal year 2015. Each district’s general fund distribution amount and percentage are shown on the left. The colored sections show the calculation for each of the three formula measures.
56 Distribution of State General Fund Dollars to Public Health Districts
Exhibit 10 Distribution calculations are made for each measure separately and summed to determine districts’ total state distribution. $166,097 $198,426 $228,371 $141,949 $185,619 $172,779 $186,439 $1,279,680 Distrib. Amt Distrib. 100% 13.0% 15.5% 17.8% 11.1% 14.5% 13.5% 14.6% 0.1498 0.1789 0.2059 0.1280 0.1674 0.1558 0.1681 1.1538 weighted 2012 Poverty Rate 0.4% 0.166 0.0007 895 9,123 4.2% 0.180 0.0076 8,623 8.1%3,871 0.178 0.0144 3.6% 0.169 0.0061 3,907 1.5% 0.178 0.0027 6,8859,596 1.5% 0.154 2.1% 0.0023 0.130 0.0028 1,081 0.6%5,259 0.123 0.0007 2.8% 0.148 0.0041 5,9502,735 3.5%6,815 0.140 1.6%4,235 0.0049 4.0%7,754 0.161 0.116 0.0026 2.5% 0.0047 4.6% 0.132 0.169 0.0033 0.0077 4,304 2.1%7,812 0.145 0.0030 3.8% 0.180 0.0068 40,66110,822 18.8%12,688 5.0% 0.176 0.0331 0.178 5.9% 0.0089 0.197 0.0116 16,29037,989 15.3%39,663 35.7% 0.210 0.221 0.0321 37.3% 0.0789 0.127 0.0473 16,67511,45022,624 6.4%10,099 4.4% 0.176 8.7% 0.203 0.0113 3.9% 0.198 0.0090 0.189 0.0173 0.0074 26,246 5.8% 0.167 0.0097 21,22523,255 11.3%15,28222,565 0.107 12.4% 0.0121 8.1%20,161 0.163 12.0%78,852 0.0202 0.185 0.170 10.7% 0.0151 0.0204 42.0% 0.162 0.184 0.0174 0.0773 83,58045,572 49.3% 0.168 26.9%12,830 0.0829 0.150 0.0403 7.6% 0.124 0.0094 13,00426,633 6.3%37,590 12.9%10,164 0.163 0.131 18.2% 0.0102 0.0168 4.9% 0.274 0.0497 0.134 0.0066 142,585215,879 66.0% 100.0% 0.134 0.0885 106,436 100.0% 194,818 75.1% 0.211259,572 0.1584 100.0% 408,789 90.5%451,517 0.125 0.1132 100.0% 187,681 100.0% 169,471 100.0% 106,658 51.5% 0.144 0.0742 207,061 100.0% 1,597,616 3 yr avg. yr 3 total povertyrate pop. by oftotal % Populationofdistrict % $207,501 $102,305 $249,499 $433,994 $180,397 $162,894 $199,025 $1,535,616 Distrib. Amt 100% Population 895 9,123 8,623 3,871 3,907 6,885 9,596 1,081 5,259 5,950 2,735 6,815 4,235 7,754 4,304 7,812 40,661 10,822 12,688 16,290 37,989 39,663 16,675 11,450 22,624 10,099 26,246 21,225 23,255 15,282 22,565 20,161 78,852 83,580 45,572 12,830 13,004 26,633 37,590 10,164 142,585 215,879 13.5% 106,436 6.7% 194,818 259,572 16.2% 408,789 451,517 28.3% 187,681 11.7% 169,471 10.6% 106,658 207,061 13.0% 3-yr avg. 3-yr oftotal % 1,597,616 $779,696 $509,874 $808,382 $742,790 $741,773 $706,226 $1,427,163 $5,715,904 Distrib. Amt 100% County Contribution $729,578.00 8.9% $1,115,666.00 13.6% $1,156,713.00 14.1% $2,042,126.00 25.0% $1,062,858.00 13.0% $1,061,402.00 13.0% $1,010,538.00 12.4% $8,178,881.00 100% $810,605 9.5% $1,153,294 13.5% $1,286,252 15.1% $2,003,106 23.5% $1,108,806 13.0% $1,077,446 12.6% $1,091,690 12.8% $8,531,200 State Appropriation Distribution Distribution Amount PercentageContribution 2014 oftotal % Shoshone Benewah Bonner Boundary Kootenai Clearwater Idaho Latah Lewis Perce Nez Gem Adams Canyon Owyhee Payette Washington Boise Ada Elmore Valley Blaine Camas Cassia Gooding Jerome Lincoln Minidoka Twin Falls Bannock Bear Lake Bingham Butte Caribou Franklin Oneida Power Clark Bonneville Custer Fremont Jefferson Lemhi Madison Teton 1 2 3 4 5 6 7 District
Note: Distribution for fiscal year 2015.
57 Responses to the evaluation
“Text.” It is important to ensure that state funds are distributed equitably among the seven health districts. The Office of Performance Evaluations has . . . provided reasonable recommendations to assist the Board of Trustees and the legislature as they examine possible solutions. —Butch Otter, Governor
“Text.” We agree unconditionally with OPE that the distribution formula should be simple and effective. —Districts 1, 2, 3, 5, 6, and 7
58 Distribution of State General Fund Dollars to Public Health Districts
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Reports of the Office of Performance Evaluations, 2013–present Publication numbers ending with “F” are follow-up reports from previous evaluations.
Pub. # Report title Date released 13-01 Workforce Issues Affecting Public School Teachers January 2013 13-02 Strengthening Contract Management in Idaho January 2013 13-03 State Employee Compensation and Turnover January 2013 13-04 Policy Differences Between Charter and Traditional Schools March 2013 13-05F Coordination and Delivery of Senior Services in Idaho March 2013 13-06 Guide to Comparing Business Tax Policies June 2013 13-07F Lottery Operations and Charitable Gaming June 2013 13-08F Governance of EMS Agencies in Idaho June 2013 13-09F Equity in Higher Education Funding June 2013 13-10F Reducing Barriers to Postsecondary Education June 2013 13-11 Assessing the Need for Taxpayer Advocacy December 2013 13-12 The Department of Health and Welfare’s Management of Appropriated Funds December 2013 14-01 Confinement of Juvenile Offenders February 2014 14-02 Financial Costs of the Death Penalty March 2014 14-03 Challenges and Approaches to Meeting Water Quality Standards July 2014 14-04F Strengthening Contract Management in Idaho July 2014 15-01 Use of Salary Savings to Fund Employee Compensation January 2015 15-02 The State’s Use of Legal Services February 2015 15-03 The K–12 Longitudinal Data System (ISEE) February 2015 15-04 Idaho’s Instructional Management System (Schoolnet) Offers Lessons for March 2015 Future IT Projects 15-05 Application of the Holiday Leave Policy March 2015 15-06 Distribution of State General Fund Dollars to Public Health Districts December 2015 15-07F State Employee Compensation and Turnover December 2015
Reports are available from the OPE website at www.legislature.idaho.gov/ope/ Office of Performance Evaluations ♦ PO Box 83720 ♦ Boise, ID 83720-0055 ♦ Phone: (208) 332-1470
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