HD26 - The Costs to Localities for Public Assistance Programs

  • Published: 1986
  • Author: General Assembly. Joint Subcommittee
  • Enabling Authority: House Joint Resolution 151 (Regular Session, 1984)

Executive Summary:
AUTHORITY FOR THE STUDY

The Joint Subcommittee was created in 1984 by House Joint Resolution No. 151, to identify and study the various costs incurred by the Commonwealth and the localities in the administration of public assistance programs.

The study was continued in 1985 pursuant to House Joint Resolution No. 255 to study in more detail issues raised in 1984 and provide time to consider the results of the State Board of Social Services Study on Mandates and Regulations (Appendix A).

BACKGROUND OF THE STUDY

The study was suggested when the Governor's budget proposal for the 84-86 biennium included the recommendation that combined federal and state reimbursement of localities for administrative costs of public assistance programs remain at the current level of 80% for the first year of the 84-86 biennium but be reduced to 75% for the second year. This recommendation was a response to data indicating that, while caseloads were remaining stable, general fund expenditures for local administrative costs were increasing more rapidly than expected and were exceeding appropriations.

This proposal included the recommendation that local administration be studied so that administrative efficiencies could possibly reduce these costs in the second year, therefore reducing the local contribution. With this savings, state and federal funds which are budgeted for direct client services may be retained rather than shifted to pay administrative expenses.

Benefit and service programs in Virginia are administered locally by 124 local departments, subject to rules and regulations promulgated by the State Board of Social Services in accordance with federal law and regulation and state law. Local governing bodies approve local department budgets and appropriate funds for administration and some program costs in anticipation of reimbursement for costs, according to a formula, by the Department of Social Services. Administrative costs are those associated with the determination of eligibility for aid programs and the delivery of some of those services. They include salaries, fringe benefits, rent, telephone, travel, depreciation/amortization and all other operational costs.

The level of reimbursement for administrative costs is governed by § 63.1-92 of the Code of Virginia, which states that:

"Administrative expenditures made by localities in connection with the providing of assistance grants, other benefits and related services, including child welfare, shall be ascertained by the State Board, and the Commissioner shall, within the limits of available federal funds and state appropriations, reimburse monthly each county, city or district fiscal officer therefor out of such federal and state funds in an amount to be determined by the State Board not less than fifty per cent of such administrative costs."

Although the reimbursement level thus established may be as low as 50% of administrative costs incurred, the policy has been reimbursement of 80% of such costs. The 80% funding is generally a combination of state and federal funds, varying in proportion by program (Appendix B).

Figures compiled in 1983 by the Department of Planning and Budget in its analysis of the 84-86 biennium budget items showed that caseloads grew steadily between FY77 and FY81 in food stamp and other public assistance programs. Since FY81, however, they have grown smaller. Social services caseloads, stable between FY77 and FY81, also decreased significantly in FY82 and FY83. The analysis also noted a slowing down of inflation.

In spite of the decrease or leveling off of caseloads and lower inflation, however, the analysis showed that the state general fund share of administrative costs increased 20% in 1982-84 over the level of the previous biennium. State expenditures for administration in FY83 were also shown to exceed adjusted appropriations by $8.7 million ($2.7 million from the general fund and $6.1 million from nongeneral funds). These deficits were experienced in all three general program areas, which are public assistance, social services, and food stamps. The Department of Social Services has, in the past, used funds from other programs and additional nongeneral funds to meet these deficits. However, because the 1984-86 target was developed using a level funding concept, the analysis suggested that these sources would be unavailable in this biennium. Also, such use of those funding sources could erode client services. Therefore, the Governor's budget proposal recommended that the first year of funding remain at a level to provide 80% reimbursement. Second year funding would then be reduced to 75% while efforts are underway to achieve savings in administrative costs. This plan is intended to relieve localities of additional financial burdens while avoiding further loss of state and federal funds for direct client services.

The 1984 Appropriations Act adopted the recommendation described above with an additional reduction of funds for the second year, bringing the reimbursement level to between 70% and 74% of administrative costs.

ACTIVITIES OF THE JOINT SUBCOMMITTEE

The Joint Subcommittee investigated the issue before it by conferring with administrative officials of the State Department of Social Services and of a number of local departments of social services from representative geographic areas of the State. A forum was provided for those representatives to discuss their problems and suggestions regarding administration of the programs.

The Joint Subcommittee also reviewed past efforts in Virginia to improve public assistance delivery systems. It reviewed the 1974 and 1975 reports of the Virginia Advisory Legislative Council on Public Welfare Programs. It also discussed the legislation passed by the General Assembly in 1978 providing for local option in the organization of local human services activities. Similar "local option" programs have been implemented in other states. The Joint Subcommittee reviewed the design of one such program in Minnesota.

The Joint Subcommittee also has reviewed the State Board of Social Services' "Study on Mandates and Regulations." The study was to result in a plan to reduce state mandates and regulatory requirements which may be contributing to high administrative costs. The study was undertaken concurrently with the Joint Subcommittee's study and results were reported in January, 1985.