HD9 - Review of the Funding Formula for the Older Americans Act

  • Published: 1991
  • Author: Joint Legislative Audit and Review Commission
  • Enabling Authority: House Joint Resolution 130 (Regular Session, 1990)

Executive Summary:
The federal government's primary means of providing social services for the elderly is the Older Americans Act. This law mandates that these services be carried out through Virginia's local Area Agencies on Aging. Further, federal regulation requires the Virginia Department for the Aging (VDA) to develop a formula for distributing federal and matching State funds for these services. In fiscal year 1990 the Commonwealth of Virginia distributed approximately $18.2 million using this formula.

The current formula benefits those areas of the State with large numbers of persons 60 years of age and older living in poverty. Since 1988, Virginia's funding formula has been subject to legal challenge. The current formula was developed in 1989, by a task force consisting of members of the General Assembly, the Governor's Advisory Board on Aging, members of boards and directors of local area agencies on aging, service providers, and the academic community. House Joint Resolution No. 130, of the 1990 General Assembly session, requested the Joint Legislative Audit and Review Commission (JLARC) to study the funding formula.

JLARC staff assessed 27 potential factors in terms of appropriateness and feasibility for inclusion in the formula, and examined the assumed relationships in the formula among the most appropriate factors. Several research activities were undertaken in the course of this analysis, including: interviews with VDA staff, local agency directors, and experts on demographics and statistics; reviews of the Older Americans Act and related federal regulations; and a review of other states' Title III funding formulas.

The JLARC staff's analysis of Virginia's formula indicates that the formula appears to be a reasonable and acceptable means for distribution of Older Americans Act funds. The VDA appears to interpret federal laws and guidelines for the intrastate funding formula in a way that is consistent with other states' interpretations. The Virginia formula has much in common with other states' formulas. Each factor currently used in the formula appears to be consistent with federal and State laws and guidelines, and to promote equity. The statistics used in the current formula appear to represent the factors reasonably well, although there is room for improvement and refinement. The weights selected for use in the formula by the 1989 task force are primarily the result of public policy decisions, and appear to be legitimate choices of the VDA.

Some ways in which the funding formula could be improved are described in the following JLARC staff recommendations.

Recommendation (1). The Virginia Department for the Aging should consider adding a more direct measure of social need to the funding formula. This additional factor should reflect the number of homebound and impaired elderly who are not institutionalized. The Department should assess the advantages and disadvantages of future alternative approaches for developing a measure to represent this factor, such as: refinements of the Department's "unmet need" data collection; a sample survey (which may be contracted with an outside consultant); and data requests from other State agencies.

Recommendation (2). The Virginia Department for the Aging should consider subtracting populations of institutionalized older persons, when possible, from factors in the formula, as described in Chapter II of this report. These populations include older persons who are institutionalized in nursing homes, State correctional facilities, DMHMRSAS facilities, and perhaps homes for adults.

Recommendation (3). The definition of "rural localities" should be based on population density differences alone, rather than on inclusion or exclusion in a Standard Metropolitan Statistical Area, when determining the "rural population" factor in the formula.

Recommendation (4). The Virginia Department for the Aging should consider stating further some rationale explaining how the factors in the formula relate to each other, and why particular weights are assigned to the factors. The Department should consider basing the values of some weights on differences in costs of providing services to different target groups.

In addition, three potential factors do not appear as appropriate as the current factors for inclusion in the formula, but are sufficiently appropriate to be considered as viable policy options:

• population age 60 and over with limited English speaking ability, as a social need factor addressing federal regulations that refer to language barriers.

• minority population age 60 and over (regardless of income level), as a social need factor addressing federal regulations that refer to cultural or social isolation.

• adjustments to the poverty indicators used in the formula, to take into account local differences in cost of living or housing costs. This policy option would require better data than is currently available on older persons' incomes within each locality, and on local cost of living differences.

Finally, Virginia's formula has been revised seven times since 1981. While there will always be differences of opinion concerning the factors and weights, changing the formula almost annually causes problems for local agencies.

It is the VDA's responsibility to maintain continuity in the funding process, sensitivity to local perspectives, and leadership in providing a rationale for the weights that are chosen. Therefore, the VDA should reassess the formula every two biennia, with local agencies participating in the assessment process.