The 1997-98 fiscal year will be the first full year of implementation of the extensive state cash assistance changes enacted last May and the new federal welfare law euphemistically referred to as the Personal Responsibility and Work Opportunities Reconciliation Act. The federal law replaced the AFDC entitlement program in which the federal government paid approximately 53% of the costs with the Temporary Assistance to Needy Families [TANF] Block Grant.

     For each of the five fiscal years beginning October 1, 1996, Pennsylvania will be entitled to $719 million in federal TANF funds. That amount was determined by the size and cost of the Pennsylvania AFDC program in the federal fiscal year 1994-95, with some adjustments relating to emergency assistance.

     Between December 1994 and March 1997, however, the number of persons on AFDC in Pennsylvania dropped from 571,140 to 444,433, a decline of 126,707 persons or 22.2%. Inasmuch as the new state and federal welfare legislation did not take effect in Pennsylvania until March 17, 1997, this reduction has occurred with little change in the law as it was applied to the recipients.

     As a consequence, in 1996-97, the year of transition from AFDC, Pennsylvania will earn $35-40 million more in federal funds than it will need. Thus Pennsylvania will have $755 million in federal TANF funds to spend in 1997-98 instead of the $719 million.

     The TANF caseload will continue to decline during the current fiscal and next year. In addition, there has been an enormous reduction in the General Assistance caseload from nearly 140,000 in July of 1994 to 70,000 in March of 1997.

     The administration intends to reduce the cash grant appropriation by $186 million. That savings is made up primarily of the following:

	DOLLARS IN 000'S
Excess TANF and other Federal Funds	110,050
Annualization of the 1996-97 Welfare Changes	54,024
Other Caseload Reductions	10,000
Increased Support Collections due to Driver License Suspension of Parents in Arrears	6,700
Special Medical Benefits to make persons employable	8,784

     The Special Medical Benefits Initiative will "provide a limited medical package for adult General Assistance recipients who require health sustaining medications but are otherwise employable and to eliminate cash benefits for these recipients."

     According to the budget, the Special Medical Benefit will save a total of $11.137 million, most of which would be in cash grants and the remainder [$2.35 million] in Medicaid. The limited benefits package will contain pharmacy, doctor, and clinic visits as well as laboratory tests and x-rays. According to DPW, this plan will affect 7,700 persons and can be accomplished administratively. It is not clear whether DPW expects to go through the regulatory process or simply change policy.

     In addition to the new TANF block grant the federal welfare law created the Child Care and Development Fund Block Grant [CCDFBG]. The administration intends to spend approximately $49 million in TANF and CCDFBG funds to provide training and support services to persons moving from welfare to work. Interestingly, the additional services will be funded through the Cash Grant appropriation, with little expansion of New Directions.

     This plan is supposed to provide additional employment and training services for 1,000 persons, job retention services for an additional 13,561 persons, additional daycare for 16,607 children. Furthermore $2 million in state funds will be matched with $720,000 in federal funds to provide support services to Food Stamp-only recipients.

     One of the justifications for the drastic welfare changes of 1996 was that additional funding would be provided for daycare and other support services to assist welfare recipients leave the welfare rolls. From the information set forth below, it is readily apparent that the Administration has failed to keep its promises with regard to the provision of daycare and other support services for welfare recipients and other low-income families.

     Child Care for Welfare Recipients is the child care funded from the Cash Grants Appropriation.. As the table above indicates, DPW's own figures show that $16 million of the state funds appropriated in Cash Grants for daycare will not be spent. The Governor's requested funds for this program in the 1997-98 budget appears to be a large increase over the current year, until it is compared with the Governor's promised 1996-97 budget.

     On the other hand, the department spent the funds allocated to it for other day care programs including Subsidized Day Care, At-Risk Child Care and Child Development Programs. The state fund increase of $936,000 is the 2% COLA provided for in nearly all state social service appropriations. According to DPW materials the additional federal funding will support:

3,920 children in families moving from welfare
2,800 children in working poor families [6 months funding]
enhancing the resource and referral capacity of the Local Management Agencies

When these two sources of day care funding are combined, the $67.7 million increase in support for daycare heralded by the Governor is readily identified.

     The total funds for daycare budgeted for 1997-98 is $67.7 million above the level the Department of Public Welfare says it will spend in the current fiscal year. Of that amount, $39 million comes as the result of the increased federal funding from the recent federal Welfare Reform legislation. The state fund increase is approximately $28.7 million. However, these are DPW estimates of current year expenditures with a bias of overestimating those expenditures. Furthermore, if one compares the state fund budget increase for daycare compared to the amount the General Assembly authorized in the current year, the increase is only $12.8 million.

     While even $12.8 million may seem to be a large increase, it should be placed in the perspective of a $185 million reduction in the Cash Grant appropriation due to state and federal welfare changes and the improving economy.

     A review of the Department of Public Welfare's record regarding support services to transition clients from welfare to work is equally dismal. Support Services include transportation, auto repair, and clothing as well as a number of other miscellaneous expenses.

     As the following table relating to Support Services indicates, the Governor promised more in state funds for 1996-97 than he has budgeted for 1997-98. Thus, the increase of nearly $17 million for next year exists only because the department admits that it will spend $19 million less than that allocated for the 1997-98 fiscal year. It is only because of the increased availability of federal funds coming from the federal Welfare Block Grants, that more funds are being made available in 1997-98 than were made available for 1996-97.

Medicaid

     The 1997-98 Medicaid budget is the continued implementation of three changes that began in the 1996-97 budget: [1] elimination of eligibility for 200,000 persons, [2] expansion of mandatory managed care [Health Choices], and [3] vast expansion of the Intergovernmental Transfer mechanism to fund nursing home care.

     Primarily as a consequence of removing more than 200,000 from the medical assistance eligibility list, state medical expenditures in 1996-97 are projected to be $2.4 billion, or $148.4 million less than the prior year. In 1997-98 Medical Assistance expenses are expected to increase by $141.1 million. Thus, expenditure for next 1997-98 are expected be $7.245 million less than those two years earlier.

     The Behavioral Health Services Appropriation was instituted in 1996-97 to provide substance abuse remedial services to persons who were removed from the Medical Assistance caseload. Funds are allocated to the counties in this appropriation.

     The Conference Committee Report cut the requested annualization of this appropriation by $6.7 million. There appears to be no programmatic rationale for the cut.

     The state funded allocation for capitation is nearly one billion dollars, an increase of more than $368 million over the current fiscal year. The Governor requested a separate appropriation of the mental health and substance abuse carve-out from the physical health capitation funding under mandatory managed care; however the budget combines all capitation into one appropriation.

     The statewide mandatory managed care program is scheduled to expand slowly. Health Choices began in the southeast on February 1, 1997 for approximately one-half of the caseload, with the remainder to be included in July.

     In December of 1996, DPW issued a Statewide Managed Care Discussion Paper which was the basis of a number of public meetings around the state. Now it has issued its plan for statewide mandatory managed care entitled: Health Choices - Next Steps. The outline of that plan is as follows:

The program will be implemented on a voluntary basis in Allegheny, Fayette, Greene, Washington and Westmoreland counties in July of 1998, and in Armstrong, Beaver, Butler, Indiana and Lawrence counties in October 1998. Mandatory participation will be effective September, 1998 for the first group of counties and December, 1998 for the second group.

Lehigh Valley and the Capital Area will be implemented in July 1999 and the rest of the state by July 2000.

The Benefit Consultant role will be expanded and the term changed to Enrollment Assistance. There will be one Enrollment Assistance contract for the balance of the state.

More attention will be given to people with special needs, children in substitute care and persons residing in ICF/MRs. There also will be more attention to issues of continuity of care between fee for service and managed care systems.

     The administration has placed a heavy reliance on the Intergovernmental Transfer form of pooling in order to balance its Medicaid budget. In 1995-96, Intergovernmental Transfers accounted for approximately $325 million. In the current fiscal year and next fiscal year, the administration has or will rely on more than $725 in Intergovernmental Transfer funds. As the U.S. Congress looks at ways to reduce federal Medicaid payments, the use of IGTs will certainly come under scrutiny. Since the state and the counties shuffle funds solely for the purpose of creating a federal obligation, this type of transaction may not be permitted to continue indefinitely.

     The 1996-97 budget assumed the passage of a federal block grant Medicaid law which would have reimbursed Medicaid expenditures at a 57% rate. That law was not passed, costing the Medicaid budget approximately $250 million. Approximately 2/3 of that loss has been made up by the IGT; supplemental appropriations will make up the remainder.

     The 1995 agreement between the Ridge Administration and the Hospital Association relating to rates paid to hospitals under the Medicaid system expires on June 30, 1997. Negotiations will probably continue beyond the expiration date. The budget continues the Community Access program within the inpatient appropriation. Funds from this program are to help the hospitals that suffer the most ill effects from the medical assistance eligibility changes.

Mental Health and Mental Retardation

     During the current fiscal year, Embreeville, Eastern State School and Hospital, and Somerset have been or will be closed. Western and Laurelton MR Centers as well as Danville, Mayview and Torrance mental hospitals will have a substantial decline in resident population during the current year and 1997-98.

     There were 7,336 filled positions in the mental health institutions on July 1, 1996. During the September-October period there were 129 furloughs. In addition, during the current fiscal year, the department expects a reduction in 344 filled positions due to attrition. If projections for the current year are accurate, the number of filled positions as of July 1, 1997 is expected to be 6,863. The budget projects a further reduction in complement of 408 positions due to attrition during the 1997-98 fiscal year. As of April 1, there were 7,003 filled positions.

     As of April 1, 1997 there were 5,836 filled positions in the state mental retardation centers. The budget projects 5,776 persons on the payroll as of the beginning of the 1997-98 fiscal year. The budget then projects a 30 person reduction by September and further 180-person reduction by January 1998 at Embreeville. A 37-person reduction is scheduled by September at Western Center with a further reduction of 30 persons by March of 1998.

     Funding for EPPI was included as part of the 1996-97 mental health budget at the expense of community programs, particularly Philadelphia. The supplemental included in the General Appropriations Act adds $3.5 million separate appropriation for EPPI without reducing the mental health appropriation. The 1997-98 budget increases the appropriation to $3.65 million.

     The mental health community budget contains funds for an additional 100 community placements. The Mental Retardation budget assumes the community placement of 350 persons from state MR Centers. The community MR budget plans to fund services for 723 persons now on county waiting lists and specialized services for 116 mentally retarded persons in nursing homes. The Assistive Technology Loan Program is funded at a cost of $700,000.

     The budget provides for the expansion of Early Intervention to provide services for an additional 500 children birth through two. It assumes the continued participation in Part H of the applicable federal legislation. Last year, the Governor said Part H hampered proper administration of the Early Intervention program. Reductions in the Early Intervention appropriations made by the Conference Committee do not represent a change in policy, but reflect a lower participation rate than initially projected by the administration.

Delinquency Programs

     A $9 million spending increase has been provided for state detention of juvenile offenders. These funds are to cover the cost of the new 16-bed Allentown unit at Loysville, plans for two new 50-bed secure units, a 64 bed secure unit, and a new 24-bed secure residential program for serious and habitual juvenile offenders.

     Spending for the Juvenile Court Judges Commission includes $963,000 to establish a unified information technology system for tracking juvenile offenders. County Juvenile Probation Grants are not increased, but the budget includes a new $1 million appropriation for community crime prevention programs.

Social Services

     The budget provides a 2% cost of living increase for nearly all social services including mental health and mental retardation, day care, domestic violence, rape crisis, breast cancer screening, homeless assistance and attendant care. A two percent increase was not provided to the Legal Services. Due to the reduced amount of federal Social Services Block Grant funding, all of the above appropriations will have a reduced amount of SSBG augmentations next year.

     While the Homeless Appropriation looks like it will be receiving a $7.5 million increase, $3.5 million represents funds transferred from the Cash Grant appropriation. The remaining $4 million will be for an expanded homeless assistance program theoretically designed to serve an additional 17,500 persons.

     The Attendant Care appropriation has $1 million to annualize the current-year efforts to provide services to an additional 117 persons. While the Medical Assistance waiver program instituted last year eliminated the waiting list for persons eligible for that program, there still remains a waiting list for the state supported program, which will not be addressed by the appropriation.