This week, the Joint House and Senate Appropriations Committee held meetings to talk with Departments and Agencies about Budget proposals to fund the remainder of FY 2003 and proposed funding for FY 2004.  

          On Tuesday, the first session on the Budgets, Governor Perdue made a surprise appearance before the Joint Committee to tell them that dollars were not there to fund many items and that reality became clear to him after the election when he began meeting with the Office of Planning and Budget.  He reminded them that he had once been seated in their chairs and knew that some of the decisions that they had to make were going to be painful.  There is a $620 million  revenue shortfall.  It is hoped that the State is at the end of the fiscal downturn.  Georgia has lost the most number of jobs after being the state which created the most in the last decade.  Governor Perdue explained that his Budget proposals do not cut dollars in education.  There are however cuts in other areas.  He acknowledged that the State needs an educated workforce; it needs to be a safe Georgia ; and it needs to be a growing Georgia .  

          The Governor’s Economist, Henry Thomasson, spoke to the Joint Committee as well giving economic highlights for the fiscal year as well as the projection for the coming year.  Mr. Thomasson also spoke about the differences in the fiscal downturn (or recession) which Georgia has been experiencing versus prior recessions.  He did acknowledge that September 11 was the root as otherwise perhaps the economic downturn would not have been so readily identified.  Recovery is ongoing and has been for about a year.  Investment seems to be growing as well.  Georgia is still on the bottom with employment growth – especially in areas such as services and construction.  However, manufacturing jobs are better.  There has also been some 20-25% personal income growth over the last year.   

Of the revenue shortfall, $106 million was due to fluctuations in sales and income taxes.  The $620 million is the difference between the general funs in FY 2003 versus what has been collected thus far.  Mr. Thomasson explained that this $620 number was not as bad as it looked – some of this was due to one-time items which were encountered – pointing to the upgrades for computers within the Department of Revenue at a cost of $167 million to the State, which was actually a cost in FY 2002 but shifted to FY 2003.  Also, there were $59 million in tax refunds carried to the FY 2003 Budget.  Theses items have nothing to do with the economic situation.  Also, there was $110 million expended to update the Code to meet federal requirements and inheritance tax updates.  There were also two State Tax Holidays where the State collected no sales taxes on certain items purchased.  Thus, in the end, he believes that only $223 million is directly attributed to the weak economy (out of this $620 million).   

Currently, the State is down by approximately $116 million in revenues and there are six more months in the fiscal year. There have been two months where the State had positive revenue gains.  He expects the State to have between a one and two percent growth rate for the year and that a growth rate of 5.9% is perhaps reachable by FY 2004.   The good news is that wages, salaries, and sales taxes have been going up now for four months.  

Legislation  

          As the General Assembly was not in Session for the week, the hoppers were not active.  However, we anticipate a number of new pieces of legislation in the coming week.  One bill to be introduced shortly will be the Senate’s initiative on civil justice reform, which is purportedly to be introduced by Sen. Tom Price, the newly elected Senate Majority Leader and a physician.  

          In other legislative news, abortion activists, both pro and con, were seen around the Capitol this week.  A number of bills have been introduced thus far this Session.  With a Republican in the White House and in the Governor’s chair, it anticipated that if Roe v. Wade were to be overturned by new legislation or court action, this would be the time.  However, there are comments circulating that such limits or restrictions to be placed on abortion procedures might have a difficult time passing out of the Georgia House. For more information on abortion legislation, please see the following bills:  HB 1; HB 23; HB 52; and HB 63.   

          After last year’s enactment of HB 1361, which was the legislation to address predatory lending problems, Legislators are now working on re-writes to last year’s law, the Fair Lending Act, which went into effect on October 1, 2002.  So far, one bill has been introduced, HB 82, by Rep. Larry O’Neal.  It is anticipated that additional legislation will be introduced in the Senate, perhaps by Sen. Casey Cagle, and perhaps in the House at the urging of the Georgia Bankers Association and other lending groups.  Legislation is being drafted, in part, because of a recent announcement made by Standard & Poor when it stated that it would not rate bonds backed by mortgages written in Georgia .  Many of the loans impacted are those obtained by veterans and others through federal loan programs.  Georgia ’s law allows borrowers to sue lenders and investors who buy mortgage-backed securities.  

          In another piece of interesting news on Legislation introduced late last week, Sen. Carol Jackson introduced SB 20 which proposes to create a criminal offense when someone who knowingly has HIV or hepatitis to “assault using his or her body fluids” a peace officer or corrections officer while carrying out their duties.

Budget Specifics  

          Here are a few highlights from the FY 2003 and FY 2004 Budget proposals as discussed this week:  

Secretary of State  

          Some of Secretary of State Cathy Cox’s remarks dealt with what the costs would be if Georgia were to have a special election on the State flag.  To have a special election, it would cost the State $2.7 million.  In 2001, flag expenses were $281,000 for more than 25,000 flags supplied to various offices (such as schools, District Attorneys, courts, etc.) as mandated by law.  The postage costs were so high that these had to be borne by the recipients (these ranged from $5.00 to $12.00).  Thus, a new flag could be a great expense to the State.  Additionally, she provided a number of dates for the next elections.  It would appear that for a statewide ballot to be done, November 2004 would be the most cost efficient date in order to do such.  

Her current budget for Unit A, for FY 2003, is $34,986,020 and with cuts and one addition for operating expenses and real estate rents is proposed for Supplemental FY 2003 to be $34,238,322.  For FY 2004, Unit A, is proposed to be $32,015,482.  The Secretary of State’s austerity adjustment for FY 2004 is $1,049,580.   

There are some proposals which her office believes might reduce the dollars needed.  Some include reducing the membership on the regulatory boards which her office oversees (there are approximately 60 plus groups such as nurses, plumbers, etc. which her office licenses and regulates).  This would save on per diem and mileage expenses.  Additionally, all these boards bring in sufficient revenue to cover their administrative costs – actually they bring in $1 million more than necessary.  Secretary Cox reminded the General Assembly that court decisions on this issue state that the boards are not to receive any more in licensure fees than it takes to regulate the professions.  These funds, however, go to the State’s General Treasury and not back to the Secretary of State.  She proposes that legislation be drafted in order to direct these dollars to the boards which are regulated.  

Department of Human Resources  

          For the Department of Human Resources (“DHR”), its current FY 2003 appropriation is $1.411,487,028 billion.  With the cuts proposed for Supplemental FY 2003, this would bring the Budget down to $1,408,481,127.  

DHR’s austerity adjustment is $4.5 million for the Division of Family and Children’s Services.  There are some added dollars for foster care.  $9,430,347 is proposed for Specialized Foster Care services in order to offset increased caseloads and to meet the mental health needs of children in State care. Another $8.8 million is proposed to replace the federal funds lost due to the federal audit of the Title IV-E foster care program eligibility and program requirements.  $2.9 million is proposed for supporting services in order to close the Fulton and DeKalb Counties Emergency Shelters.   

The austerity adjustment for the Division of Public Health is $1.4 million.  Cuts include $2.75 million to reduce the Grant-In-Aid funding for County Boards of Health.  

The Division of Mental Health, Development Disabilities, and Addictive Diseases is proposed to receive an austerity adjustment of $3.1 million.  Its cuts include the $1.4 million from savings from a one-time modified hiring freeze for hospitals and the state office.  

Commissioner Martin explained to the Joint Committee that his Department had $12 million basically in the black this current year.  It was not inquired as to how these dollars will be used.  

For FY 2004, DHR’s Budget is proposed to be $1,417,306,230.  There are proposed enhancements, such as $1,048,292 for maintaining operations in the Office of Child Support Enforcement and $250,000 to expand Family Connection in five remaining counties which are currently not funded.  Also, there is a proposal of $2,484,993 in State dollars for Tobacco Use Prevention Program and $1,261,717 in State funds to replace the lost Indigent Care Trust Fund monies for the Children 1^st Program.  There are also additional child protection dollars and foster care monies.  $1,203,378 is proposed for “Unlock the Waiting List” in order to adjust the increased costs for the provision of services in the Community Care Services Program. (These are not contract administration dollars but pure service funds.)  Some cuts were made in Tobacco Settlement Funds which DHR receives:  1) $840,000 to reduce the funding for Newborn Hearing Screening Program; and 2) $2,484,993 for funding for the Statewide Tobacco Use Prevention Program.  

Commissioner Martin addressed a number of questions:  

·        Rep. Larry Walker inquired about the Phoenix Center in his District ( Houston County ).  He explained that the Center felt it was not getting its just share of dollars for mental health funds.  The Commissioner stated that DHR had a funding formula in an effort to provide an equitable distribution (based on HB 100 and HB 498).  The formula will be discontinued in July 2003.  Community Service Boards were offered technical assistance in an effort to draw more federal Medicaid dollars. DHR is aware of the problem in Middle Georgia.

·        Sen. Eric Johnson inquired about the Regional Boards and their costs.  The Commissioner explained that the Regions were reorganized without increased costs.  In April, 2003, a new system will be implemented which all providers will use in order to get their claims paid.  This should help.  Commissioner Martin agreed that there were still problems with the monitoring function within the Regions.  There are no new slots for the Unlock the Waiting Lists; these dollars are to fund an increased level of care for those currently getting services.

·        Sen. Tommie Williams inquired about computer costs incurred.  Commissioner Martin stated that DHR was a “transaction rich” enterprise and thus had a great need for computers and upgrades.

·        Rep. Tommy Smith asked about the lab proposed in Southwest Georgia .  This is still slated for Waycross .

·        Rep. Mary Margaret Oliver inquired about vendor liability for foster care placements.

·        Rep. Calvin Smyre asked about the methodologies for the austerity adjustments.

·        Rep. Childers asked if the implementation of the Olmstead v. LC decision was going to cost the State more.  Commissioner Martin stated that in some instances it would cost less; other cases will cost more.  Moreover, Georgia ’s population is growing so there will be more mental health patients who will need to be placed in community-based settings.  Rep. Sinkfield also inquired about the numbers to be cared for based on Olmstead.

·        Rep. Ron Stephens asked if there were any dollars in either Budget for trauma.  There are none.

·        Rep. Heard inquired about the Community Care Services Program care coordination dollars.  There is a weakness in the Budget, per Commissioner Martin.  These care coordinators were previously funded with Indigent Care Trust Fund monies.  These were eliminated.  There is currently no good answer on how this will be addressed as these coordination efforts save the State monies.

·        Rep. Judy Manning asked about the cuts to newborn hearing screenings.  The monies cut from the Budget are for diagnostic equipment.  There is $2 million remaining for this initiative.  

Department of Community Health  

          On Thursday afternoon, Commissioner Redding took the podium to explain his Department’s Budget proposals and address questions.  For FY 2003, the current appropriation is approximately almost $1.5 billion and the amended proposal for FY 2003, to address Supplemental needs and cuts, is $1,675,404,535.  Some of the big cuts are:  

·        Elimination of nursing home liability insurance adjustments (which would go into effect on February 1, 2003 ) in the amount of $2,620,458 (with federal dollars this would be a cut of $6,468,669).  There is also an adjustment to nursing homes DRI inflation factor, as applied to FY 2001 cost reports, such that FY 2003 expenditures do not exceed the Fy 2003 appropriation provided .

·        Reduction in the average monthly primary care case management payments to Georgia Better Health Care physicians (those who manage Medicaid patients).  These physicians currently receive $3.00 per member per month; the proposal is to reduce this to $2.00, which would become effective on February 1, 2003 .  This is a cut of $1,350,333.

·        There were a number of cuts to administratively attached agencies such as the Georgia Board of Physician Workforce.  One such cut to the Board of Physician Workforce is for $1,558,607 for funding Mercer School of Medicine’s operating grant (“to reflect the 2003 funding formula”).

·        There is also a cut of $1,663,964 for an “austerity adjustment.”  This is actually a cost to the Department in the amount of $788,000 and $878,000 to the administratively attached agencies.  

Under some adds for FY 2003:  

·        $259,178,360 is proposed as an increase to State funding for Medicaid benefits to fund the projected cost of incurred claims for prior years and the projected case need for FY 2003 claims (with federal dollars, this will be $594,663,555).  These funds, per the Commissioner, will get the Department to June 30, 2003 .  There are currently 1.2 million persons served by the Medicaid program.  Costs to the Medicaid program have increased 16%, higher than the national average, between FY 2002 and FY 2003.

·        An amount of $40,489 is proposed to transfer disabled children residing in private nursing facilities to community-based settings to comply with the Olmstead v. LC decision.  This would be a total of $99,949 and will help the two of thirteen who are Medicaid eligible.  

In the FY 2004 Budget, here are some highlights:  

·        An additional $104,612,663 is included to fund Medicaid claims incurred in FY 2003 but not billed to the Department for payment until FY 2004 (with federal dollars this will be approximately $258,814,109).

·        $276,239,700 to increase the State funding for Medicaid benefits to fund the projected cash need for FY 2004 claims (with federal dollars this would be $645,508,906).

·        $8,708,305 to increase the Medicaid benefits to reflect a change in the federal financial participation rate.  Georgia ’s federal share for Medicaid is 59.6%; its federal share for PeachCare is 71.7%.  Georgia has experienced a decrease in its federal funding share.

·        There are 10% rate cuts to providers of the following Medicaid services (with federal dollars this is a total of $277,889,041).  Here are a few providers which are cut:

a)  inpatient hospital care ($43,791,314)

b)  private nursing home care ($33,230,940)

c)  physician and physician-related services ($27,093,601)

d)  durable medical equipment ($974,453)

e) independent lab ($728,803)

f) emergency ambulance ($673,523)

g)  dialysis ($457,822)

h) home health care ($417,011)  

Per Commissioner Redding, 76% of the benefits paid are to hospitals, nursing homes, physicians and pharmacists.

·        Language is added to reflect the implementation of a policy and rate change to effect a 10% cut for dental services for adults and children.  This will be a savings of $4,769,104 in State funds and a total of $11,798,872.

·        $6,871,400 is the proposed cut by reflecting additional savings from the capitated reimbursement of pharmacy expenditures in long-term care settings (with federal dollars this would save $17 million).  Approximately $90 million was expended for those 65 and over in nursing homes for FY 2002.

·        Annualizations are also done for nursing home cuts on their liability insurance adjustments as well as the Georgia Better Health Care case management fees (these State fund savings are $6,275,128 and $3,233,600 respectively).

·        The austerity adjustment is $2,495,946 for Georgia Board for Physicians Workforce and $1.2 million for the Department.

·        A 3.2% inflationary increase for FY 2003 reimbursement rates for inpatient hospital services in the amount of $14,153,352 is proposed (with federal dollars this is $35,015,715).

·        A 4.5% inflationary increase to the FY 2003 reimbursement rates for physicians and physician-related services in the amount of $12,835,623 is proposed (with federal dollars this is $31,755,623).

·        A 3.2% inflationary increase to the FY 2004 contribution level for private nursing facilities is proposed in the amount of $9,541,263 (with federal dollars this is $23,605,302).  

Some of the questions addressed:

·        Rep. Channell asked about PeachCare program as 175,000 children are enrolled and are provided basic healthcare.  It would appear that enrollment will be limited in 2003 and 2004.  The Commissioner explained that when the appropriated funds are used it will not mean that the program will shut down.  It means that there would be a freeze on enrollment.  The Department would need $6.1 million to address the cash needs for this program.

·        Sen. Tommie Williams asked about the UPL dollars noted in the Budget.  These will be approximately $73 million for FY 2003 and $60 million for FY 2004.  Sen. Williams also inquired about the austerity cuts and computer costs for the Department.  In FY 2001, $37 million was expended on computers; in FY 2002, $82 million was expended and in FY 2003, $88 million has been expended.  These costs are due to the implementation of the Multi-Health Network.  These are primarily design costs and funds to keep EDS and other vendors on board until the Multi-Health Network system is in place on April 1, 2003 (for Medicaid and PeachCare programs).  There are some design costs as well for State Health Benefit Plan.

·        Sen. Starr expressed reservations about the cuts to providers.  Commissioner Redding explained that some of these cuts were placed out for public notice and that the Department’s Board took public comment on some of the issues.

·        Sen. Nadine Thomas asked about the 10% provider cuts as well.  She was told that the major providers are basically recipients of 76% of Medicaid’s dollars.  The Department is faced with reducing rates, reducing the scope of services provided, or reducing eligibility.  Rates were selected.  A number of services which Medicaid provides are optional services to the medically needy – Commissioner Redding explained that there were 17,000 persons in this category and 3,000 were in nursing homes.  Sen. Thomas also inquired about what potential savings could be generated if the pharmacy dispensing fees were eliminated.  These fees are all that pharmacists receive; last year, there were small reductions made to their dispensing fees when such were limited to generics.

·        Sen. Don Thomas inquired about the cuts to Medicare and what impact such cuts would have on Medicaid.  Doctors are paid 90% of the RBRVS (2000). Any reduction in Medicare directly impacts Medicaid. 

·        Rep. Channell also inquired about Mercer’s grant dollars.  He asked specifically to see the funding formula.  In FY 2003, Mercer was provided a $950,000 increase.  The Department is trying to equalize the funding between Mercer, Morehouse, and MCG.

·        Rep. Orrock inquired about ‘closing the doors on PeachCare’ and ensuring access.  She cited that healthcare was an integral part of the State’s economy – it provided jobs to many and a number of institutions would be impacted by the cuts proposed. She also expressed grave concern about the dollars lost from matching federal funds.  Rep. Orrock expressed that she thought this was unwise when these federal dollars would be lost.  Commissioner Redding agreed that he would get the total number of federal dollars which be ‘lost’ by these cuts.

·        Rep. Sinkfield inquired about actual reimbursement rates and what scales were used.  She wanted to know if providers were paid 100% of their costs.  Commissioner Redding explained that physicians were paid 90% of the 2000 scale (behind what Medicare pays).  With the 10% cut, this would bring the rate to 81% and with the added enhancement, doctors would be paid approximately 85%.  Hospitals are paid 94% of inpatient costs and 90% of outpatient costs (except Critical Access Hospitals which receive 100% of costs).  He also added that 17.5% of all hospital admissions are paid through Medicaid and 80% of all nursing home care is paid through the Medicaid budget.  

Other  

          The General Assembly reconvenes on Monday and the State-of-the-State address is Monday evening.  

          House Committee lists will hopefully be printed by Monday.