overview of mental health services act funding: collection to expenditure

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Overview of Mental Health Services Act Funding: Collection to Expenditure. Tom Greene, Chair, Mental Health Funding and Policy Committee Mark Heilman, Policy Advisor, Department of Mental Health. What Well Cover. Funds at the State Level - PowerPoint PPT Presentation

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Follow the Money

DMH1Overview of Mental Health Services Act Funding:Collection to ExpenditureTom Greene, Chair, Mental Health Funding and Policy Committee

Mark Heilman, Policy Advisor, Department of Mental HealthDMH2What Well CoverFunds at the State LevelMillionaires tax generates an uneven funding stream.How does cash accumulate in the Fund?When are deposits made and whats their effect on the Fund balance?Why is the Annual Adjustment important?

Funds at the County LevelHow does the deposit cycle affect the distribution of funds?Why do we use a cash balance approach?How are funds accessed by Counties?How are funds distributed to Counties?

Why there are cash balances in the MHSA Fund?

Selected Policy Issues

DMH3How is MHSA Funded?The MHSA imposed an additional tax for each taxable year beginning January1, 2005

The new tax was imposed at the rate of 1% on that portion of a taxpayers taxable income in excess of one million dollars (MHSA, Section 17043)Represents between 20,000 to 30,000 returns (1/10 of 1% of total), and highly sensitive to fluctuations in the economy, specifically capital gains.

DMH4How Does Cash accumulate in the MHSA Fund?Three primary sources of deposits to the MHSA Fund:Cash Transfers 1.76% of all monthly Personal Income Tax payments (not just millionaires)

Annual Adjustment Settlement between monthly Cash Transfers & actual tax returns of millionaires

Interest Income posted quarterlyDMH5 ___ ___ _______ ___ __ ___ ___ When are Deposits Made to the MHSA Fund?

DMH6How Do Deposits Affect the Overall MHSA Fund Balance?MHSA Fund Balance lumpy throughout the year Causes:Monthly cash transfer amounts varyAny overage or underage handled with an annual adjustment (difference between monthly Cash Transfers and actual revenue from tax)Interest paid when money deposited to MHSA account.

Timing of MHSA Fund Deposits (Example: SFY 2007-08)

DMH8Why is the Annual Adjustment Important?Recently has been 1/3 of all MHSA annual funds.Calculated on tax returns from two years priorDeposited 18 months following end of the tax year when earned.Can vary significantly from year to year, depending on economy

DMH9Effect of the Annual Adjustment(Accrual to Cash Comparison)Source: Governors Budget

DMH10How Does the MHSA Deposit Cycle Affect the Distribution of Funds?Counties need to rely on a steady stream of funding to ensure program continuity

Because of the variables associated with the MHSA Deposits, funding for local MHSA Programs reflect revenue on a cash basisBased on funds deposited not revenue estimates

DMH11Why do we use a Cash Basis Approach?Based on funds deposited in order to be available for immediate distribution

Allows counties to rely on level of funding known in advance

Allows for program continuity over time

DMH12How Are Funds Accessed by Counties?Counties are notified of available cash through Planning EstimatesCrucial document - Represents the amount of MHSA funds available to a county to provide MHSA services.Fund amounts in Estimates are considered committed to counties.Generally based on all cash deposits projected to be on hand on 7/1 of the planning year.For example, revenues collected in FY 2008-09 will fund Planning Estimates in FY 2009-10.

DMH13How are Funds Distributed to Counties?Generally counties receive 75% of cash requested when Plans Are Approved.Exception is that 100% of Community Planning funds are released when approved.

The remaining 25% of approved cash is released upon receipt of required fiscal reports.

14Issue: Money in the Bank MHSA has generated more than $4.1 billion in additional revenues through the end of Fiscal Year (FY) 2007-2008 [but] [j]ust under $2 billion has been distributed through the end of FY 2007-08. (DMH, MHSA Expenditure Report, 1/09)

DMH15Why will there always be a Balance in the MHSA Fund?Primary Reasons

Cash accumulates so that counties can receive their funds whenever they request them

Revenue accrues to the Fund throughout the year.

16Other Reasons for Cash on HandPolicy Decisions to Advance Services Over Infrastructure, Technology and Training. Money May Be Committed But Not Yet Distributed.Delays in Planning Process and DMH/MHSOAC Review. (Finance, MHSA Performance Audit, 6/08)2-Year Cycle for Annual Adjustments17Issue: Estimated Revenues Are Declining (Millions)Source: CMHDA Consultants Report (1/15/09)Fiscal Year2007-08a/2008-09a/2009-10a/2010-112011-122012-13Estimated Revenues-Cash BasisCash Transfers$983.9 $831.0 $837.0 $866.0 $903.0 $957.0 Annual Adjustment$423.7 $438.4 $529.0 $150.0 $50.0 $100.0 Interest Income$94.4 $60.8 $27.4 $25.0 $25.0 $25.0 Estimated Revenues$1,502.0 $1,330.2 $1,393.4 $1,041.0 $978.0 $1,082.0 a/ Source: Department of Mental Health, Mental Health Services Act Expenditure Report, Fiscal Year 2008-09, January 200918AssumptionsSource: CMHDA Consultants Report (1/15/09)AssumptionsCash Transfers based on Department of Finance estimate through FY 2009-10 (January 2009)Cash Transfers after FY 2009-10 will change based on Legislative Analysts Office estimates of change in PITs (November 2008)Relatively slow growthDepartment of Finance estimate of Annual Adjustment through FY 2011-12 (January 2009)Capital Gains will be a significantly smaller portion of PITs in future based on LAO estimates (November 2008)Interest Income unchanged from FY 2009-10 due to lower fund balance and lower interest rates19Challenge of Supplantation[F]undingshall be utilized to expand mental health services[and]..shall not be used to supplant existing state or county funds to provide mental health services. (MHSA, sec. 15.)

The FY 2009-10 Governors Budget proposes to achieve $226.7 million in General Fund savingsbased on amending the non-supplantation requirement. (DMH, 1/09)20Issue: Prudent ReserveWIC Section 5847(a)(7) requires each county to establish and maintain, at the local level, a Prudent Reserve for the Community Services and Supports component.

The Prudent Reserve has been set by DMH at a level of 50% of the most recent annual approved CSS funding level.

DMH Guidelines call for each county to fully fund the prudent reserve by July 1, 2010, unless the county would have to reduce MHSA services below those funded in FY 2007-08.

21Policy Issues: Prudent Reserve

Timing? What Impact on Programs?

Too Much or Too Little?

Who Can Release Reserves?

22Issue: 2-Tiered System/System FlexibilityNeed for Clarification of Policies in Order to Avoid Two-Tiered System.NAMI Survey reports this is a major problem.

Detailed Planning Criteria May Deny Counties Flexibility Needed to Meet Local Priorities.ConclusionMillionaires tax a variable source of $sFunding in current year based on current year revenues + lagging annual adjustment.Cash balances built into system.Major policy issues: Revenues projected to declineSupplantation Prudent Reserve2-Tier System/System Flexibility 23JanAprJulyOctJan

Deposits into Fund

Cash Transfers

(monthly)$$$$$$$$$$$$$

Interest

(quarterly)$$$$$

Annual Adjustment

(annually)$

Chart151506252.13423701032.3117951305.19493158589.6353436141.873932339323546594731.5100188898.723935139351646783630.2256962876.093938425494231.19729240737.547688909.393941539415776929646.8980912777.893944739447857842424.78152744507.713947726309254.471036896186.9621864572.0739506395061058760759.0332057907.0739534395341090818666.1211099364.673956724624448.041326542478.8178897743.2939597395971405440222.196577147.739625396251502017369.8

Cash TransfersAccrualInterestTotal

TotalMENTAL HEALTH SERVICES FUND (3085)DEPOSITS INTO FUND AS OF October 31, 2008DATEDOCUMENTMonthCash TransfersAccrualInterestTotalFY 04-05 Total169,546,950.58715,569.257/0541,876,397.008/0550,582,920.329/0583,229,140.4410/0550,904,229.901,663,276.0411/0543,214,901.5812/0577,974,526.061/06142,131,926.653,539,009.382/0622,042,968.343/0625,974,618.824/06162,369,381.836,020,995.035/0659,701,582.006/06134,548,078.857/0645,308,527.908/0651,983,694.6683,576,652.429/0698,168,581.7610/0652,862,460.7011/0640,037,985.7911,940,337.4812/0689,314,463.848,774,375.301/07137,650,769.9613,397,142.272/0725,661,662.533/0731,032,776.044/07176,773,075.3715,098,016.385/0790,000,411.116/0796,267,740.367/077/0751,506,252.13423,701,032.3117,951,305.19493,158,589.638/078/0753,436,141.87546,594,731.509/079/07100,188,898.72646,783,630.2210/0710/0756,962,876.0925,494,231.19729,240,737.5011/0711/0747,688,909.39776,929,646.8912/0712/0780,912,777.89857,842,424.781/081/08152,744,507.7126,309,254.471,036,896,186.962/082/0821,864,572.071,058,760,759.033/083/0832,057,907.071,090,818,666.104/084/08211,099,364.6724,624,448.041,326,542,478.815/085/0878,897,743.291,405,440,222.106/086/0896,577,147.701,502,017,369.807/0852,846,103.04438,387,908.7519,961,902.608/0850,978,631.959/08100,762,297.2410/0853,891,348.3219,314,898.19

Estimated Revenues- Accrual Basis

(Millions)Fiscal Year

2007-082008-092009-10

Cash Transfers$983.0$831.0$837.0

Annual Adjustment$529.0$150.0$50.0

Interest Income$96.4$60.8$27.4

Estimated Revenue$1,608.4$1041.8$914.4

Estimated Revenues-Cash Basis

(Millions)Fiscal Year

2007-082008-092009-10

Cash Transfers$983.9$831.0$837.0

Annual Adjustment$423.7$438.4$529.0

Interest Income$94.4$60.8$27.4

Estimated Revenue$1502.0$1330.2$1393.4

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