Fiscal Note & Local Impact Statement

125 th General Assembly of Ohio

Ohio Legislative Service Commission

77 South High Street, 9th Floor, Columbus, OH 43215-6136 ² Phone: (614) 466-3615

² Internet Web Site: http://www.lsc.state.oh.us/

BILL:

Sub. H.B. 40

DATE:

February 19, 2003

STATUS:

As Reported by Senate Finance and Financial Institutions

SPONSOR:

Rep. Calvert (by request)

LOCAL IMPACT STATEMENT REQUIRED:

No —

Not required for budget bills

 


CONTENTS:

Makes program and budget modifications

 

State Fiscal Highlights

 

 

STATE FUND

FY 2003

FY 2004

FUTURE YEARS

 

General Revenue Fund

 

     Revenues

Up to $4.0 million revenue loss from the increase in the vendor discount for sales tax remittance;

$288.0 million gain from accelerated sales tax payments; $39.9 million gain in BSF transfer; Potential gain of up to $35 million due to transfer from the Unclaimed Funds Trust Fund, Up to $30 million gain from changes to  Local Government Fund freeze

-0-

-0-

 

     Expenditures

- 0 -

- 0 -

- 0 -

 

Budget Stabilization Fund

 

     Revenues

- 0 -

- 0 -

- 0 -

 

     Expenditures

$39.9 million increase

- 0 -

- 0 -

 

Occupational Licensing and Regulatory Fund (Fund 4K9)

 

     Revenues

Gain of up to $450,000 from transfer from ODADAS Credentialing Fund (Fund 5P1)

 - 0 -

- 0 -

 

     Expenditures

Increase of up to $450,000 in operating expenses

- 0 -

- 0 -

 

ODADAS Credentialing Fund (Fund 5P1)

 

     Revenues

- 0 -

- 0 -

- 0 -

 

     Expenditures

Fund balance (approximately $450,000)
to be transferred to Occupational Licensing
and Regulatory Board Fund (Fund 4K9)

 - 0 -

- 0 -

Board of Deposit Expense Fund (Fund 4M2)

 

     Revenues

$450,000 increase

- 0 -

- 0 -

 

     Expenditures

- 0 -

- 0 -

- 0 -

 

 

 

STATE FUND

FY 2003

FY 2004

FUTURE YEARS

Federal TANF Block Grant Fund (Fund 3V6)

 

 

     Revenues

- 0 -

- 0 -

- 0 -

 

     Expenditures

Minimal decrease if the Director of JFS exercises discretion to make various changes to the publicly funded child day-care program

Decrease if the Director of JFS exercises discretion to make various changes to the publicly funded child day-care program

Increase or decrease depending on if, how, and when the Director of JFS exercises discretion to make various changes to the publicly funded child day-care program

 

Minority Business Bonding Fund, Housing Guarantee Fund, and Housing Development Fund

 

 

 

 

     Revenues

Potential loss of up to $35 million

-0-

-0-

 

     Expenditures

-0-

-0-

-0-

Note: The state fiscal year is July 1 through June 30. For example, FY 2003 is July 1, 2002 – June 30, 2003.

 

·        Acceleration of sales tax payments.  The bill accelerates the schedules of sales tax payments for the various taxpayers. This provision will result in a one-time gain of up to $288 million in GRF revenues in FY 2003.

·        Increase in the vendor discount: The bill increases the sales tax vendor discount from 0.75 percent to 1.1 percent for the period between May 1, 2003 and June 30, 2003. This provision will result in a revenue loss of about $4 million in FY 2003.

·        Board of Deposit. The Board of Deposit appropriation is increased by $450,000 in FY 2003. This appropriation is needed to pay for additional expenses associated with the “acceleration of sales tax payments” provisions under the bill.

·        Local Government Funds.  Revenues to the General Revenue Fund are increased by up to $30 million in FY 2003 by reducing the amount of income tax revenue credited to the Local Government Fund, the Local Government Revenue Assistance Fund, and the Library and Local Government Support Fund.

·        BSF Transfer.  The transfer of $39.9 million is to support an increased appropriation to Department of Job and Family Services GRF line item 600-525, Healthcare/Medicaid.

·        Chemical Dependency Professionals Board.  This bill allows the Director of Budget and Management to transfer cash in an amount not to exceed the FY 2003 appropriation from Fund 5P1 (Credentialing Fund) to Fund 4K9 (Occupational Licensing).  The FY 2003 appropriation amount is $450,000.  The bill appropriates the amount transferred and restricts the use of these funds related to establishing the Chemical Dependency Board, including, but not limited to, travel reimbursement of board members.

·       Department of Youth Services. By modifying existing permanent law, the bill gives the Department of Youth Services the authority to adjust how funds are distributed under the formula for the Reclaim Ohio Program, which is currently funded by GRF line item 470-401, if its appropriation is subsequently revised. As a result, the amount of funds that could be available to cover certain departmental operational costs and/or to disburse as subsidies to counties may increase or decrease from what might otherwise have been the case under current law and practice. The magnitude of such a potential increase or decrease in funds available to either the Department or counties is difficult to predict.  

·        Unclaimed Funds Transfer.  A $35 million increase in the transfer of unclaimed funds to the General Revenue Fund before June 30, 2003, will potentially result in a $35 million decrease in funds available for the Minority Business Bonding Fund, the Housing Guarantee Fund, and the Housing Development Fund.

·        Publicly Funded Child Day-Care. The bill provides that when anticipated future expenditures will exceed available funds, the Director of Job and Family Services (JFS) may, by administrative order, limit enrollment of new participants whose incomes are at or below a specified percentage of the federal poverty line (FPL), without regard to eligibility standards established in statute, and/or disenroll existing participants with income above a specified percentage of FPL.  There are a number of approaches that the Director could choose in exercising the authority granted by the bill.  The Department expects projected growth of the program to exceed budgeted estimates in FY 2003.  According to the Department, it intends to limit eligibility criteria to those with incomes at or below 150% of FPL in an attempt to control costs of the program at this time.  Any cost impact to the program will depend on if, how, and when the Director exercises the discretion granted under the bill.  Publicly funded child day-care is funded with GRF and TANF and other federal funds.  According to JFS, all GRF and other federal funds appropriated for the publicly funded child day-care program in FY 2003 have been expended and the Department is currently using TANF funds exclusively to pay for this program.  Any decrease in expenditures would affect Fund 3V6 (TANF Block Grant).  Given the delayed effective date (most likely mid-May) of these provisions in the bill, it is unlikely that the Director would be able to implement such an administrative order until mid-May, which would result in minimal savings in FY 2003.  Any decrease in expenditures realized in FY 2004 would also likely reduce the amount of TANF dollars the Department uses to fund the program.  In future years, the Director could exercise discretion to change eligibility again, thereby increasing or decreasing overall expenditures for the program.

·        The bill permits the Director of JFS to prescribe the amount, duration, and scope of publicly funded child day-care benefits in rules establishing eligibility criteria.  The authority granted to the Director of JFS by this provision of the bill could have a significant fiscal impact on the program depending on the policy the Director decides to adopt.  Since the discretion granted by the bill lies with the Director of JFS and the Department has not indicated any intentions in this regard, LSC is not able to quantify the potential fiscal impact.

 

·        The bill eliminates a requirement that a provider of publicly funded child day-care to children of caretaker parents who work nontraditional hours be paid at the reimbursement rate set by rule regardless of whether that is higher than the provider's customary charge.  Since the reimbursement ceiling is to be set by rule, it is possible that the provider could be paid more than the current rate or less than the current rate, which could in turn increase or decrease program costs.

 

·        The bill requires the Director of JFS to set the reimbursement ceiling for a type B family day-care home provider that has limited certification, and reduces the reimbursement of providers who provide publicly funded child day-care to children who have the same caretaker parent, from 75% to 60% of the ceiling for fully certified type B family day-care homes.  According to JFS, such a reduction will likely decrease the costs of the child care program by an estimated $100,000 to $150,000 in FY 2003 and by some amount less than $1.0 million in future years.

 

·        The bill no longer exempts a caretaker parent, for whom special needs day-care is necessary, from the requirement that the parent be employed or participating in an education or training program.  If required to become employed or begin participating in an education or training program to continue receiving publicly funded child day-care, some caretaker parents may take their children off the program.  For every child that leaves the program due to this change in the law, the program costs would be reduced by $7,306 per year (based on costs in FY 2002).

 

·        The bill provides that a caretaker parent, must comply with the requirement that changes in employment or participation in an education or training program be reported not later than ten calendar days after the change occurs.  Requiring notification within ten days may result in some recipients (who are no longer eligible) leaving the program sooner, thus reducing costs of the program. 

 

·        The bill eliminates a county department of job and family services statutory authority to request a waiver of the reimbursement ceiling when a family has special circumstances or there are unique market conditions.  Through the rulemaking process, JFS may provide for acceptable reasons for requesting a waiver.  The potential impact on the number and amount of waivers will depend on the rules adopted by the Department. 

 

·        Lapse of state share of line item 600-610, Food Stamps and State Administration.  The bill requires the Director of Budget and Management to transfer to the General Revenue Fund all state dollars lapsed from the fiscal year 2003 appropriation to line item 600-610, Food Stamps and State Administration (Fund 384).  Because  these funds  could be transferred to the General Revenue Fund  under existing law it cannot be said that the provision has a fiscal effect.


 

Local Fiscal Highlights

 

LOCAL GOVERNMENT

FY 2003

FY 2004

FUTURE YEARS

County departments of job and family services

     Revenues

Minimal loss if the Director of JFS exercises discretion to make various changes to the publicly funded child day-care program

Loss if the Director of JFS exercises discretion to make various changes to the publicly funded child day-care program

Gain or loss depending on if, how, and when the Director of JFS exercises discretion to make various changes to the publicly funded child day-care program

     Expenditures

Minimal decrease if the Director of JFS exercises discretion to make various changes to the publicly funded child day-care program

Decrease if the Director of JFS exercises discretion to make various changes to the publicly funded child day-care program

Increase or decrease depending on if, how, and when the Director of JFS exercises discretion to make various changes to the publicly funded child day-care program

 

Counties, municipalities, and libraries

     Revenues

$30 million loss

- 0 -

- 0 -

     Expenditures

- 0 -

- 0 -

- 0 -

 

Note: For most local governments, the fiscal year is the calendar year. The school district fiscal year is July 1 through June 30.

 

·        Local Government Funds.  The amount of income tax revenue credited to the three local government funds is reduced by up to $30 million in FY 2003.

 

·        Publicly Funded Child Day-Care. The bill provides that when anticipated future expenditures will exceed available funds, the Director of Job and Family Services (JFS) may, by administrative order, limit enrollment of new participants whose incomes are at or below a specified percentage of the federal poverty line (FPL), without regard to eligibility standards established in statute and/or disenroll existing participants with income above a specified percentage of FPL.  The majority of funds appropriated to JFS for the publicly funded child day-care program are passed down to the counties for payment to providers.  According to the Department, it intends to limit eligibility criteria to those with incomes at or below 150% of FPL in an attempt to control costs of the program.  The impact on the amount of state and federal funds passed through to county departments of job and family services to pay publicly funded child day-care providers will vary depending on if, how, and when the Director of JFS chooses to exercise the discretion granted under the bill.

 

·        State Parity Aid.  The bill repeals, effective immediately, the parity aid spending requirements. Under current law, continuous improvement, academic watch, and academic emergency districts that are eligible for parity aid are generally required to spend their parity aid allocations on one of nine specified spending categories unless such a district receives approval from the Department of Education for alternative usage of parity aid. The bill does not change parity aid allocation formulas and will not affect the amount of parity aid each district receives. However, eliminating the parity aid spending requirements will provide school districts a greater flexibility in local spending decisions. About 493 school districts receive a total of $209.4 million in parity aid in fiscal year 2003.

 

·        State Education Formula.  The bill prohibits the Governor from reducing FY 2003 GRF appropriations for the following state education formula aid related line items: 200-500, School Finance Equity, 200-501, Base Cost Funding, 200-502, Pupil Transportation, 200-520, Disadvantaged Pupil Impact Aid, 200-521, Gifted Pupil Program, 200-525, Parity Aid, and 200-546, Charge-off Supplement. Total appropriations for these line items amount to $5,485,418,913 in FY 2003, representing 76.6% of total GRF appropriations for the Department of Education.

 

·        Prohibited GRF Reductions.  The bill also prohibits the Governor from reducing FY 2003 GRF appropriations for items 200-511, Auxiliary Services, and 200-532, Nonpublic Administrative Cost Reimbursement. Total appropriations for these two items amount to $183,325,760 in FY 2003, representing 2.6% of total GRF appropriations for the Department of Education.

 


 

 

Detailed Fiscal Analysis

 

Acceleration of sales and use tax payments

 

Remittance of sales and use tax payments vary according to the type of taxpayers,[1] the timing, and the method by which sales tax payments are made.  Payments of tax returns are required to be made by electronic funds transfer in cases where the taxpayer’s annual tax liability exceeds a particular threshold.  The Tax Commissioner notifies taxpayers required to use this payments method.  The bill requires direct pay permit holders, vendors, and sellers that remit sales and use taxes by electronic funds transfer to make tax payments more often.  Under current law, a permit holder must remit sales tax payment on or before the twenty-third day of each month for taxes due the previous month.  The bill requires such a permit holder to pay each month one fourth of the tax liability for the same month in the preceding calendar year on the eleventh, eighteenth, and twenty-fifth day of each month; and on the twenty-third day of each month, the permit holder shall report the taxes due for the previous month less any amounts already paid during the month under the new provision.  The Tax Department expects this provision to increase revenues in FY 2003 by $288 million.  This revenue increase will be a one-time pick-up in GRF revenue, and will have no effect in FY 2004 and FY 2005.

 

Increase in the vendor discount for remittance of sales tax collections

 

Under current law, a 0.75 percent discount on sales and use tax collected is granted to vendors who remit tax on or before the date the tax return is required to be filed.  The bill increases the vendor discount to 1.1 percent for the period after May 1, 2003 and before July 1, 2003. This provision will decrease GRF revenues by about $4.0 million in FY 2003. After July 1, 2003, the provision expires and the vendor discount would return to 0.75 percent. Thus, the provision has no effect in FY 2004

 


 

Reduction in Local Government Subsidies

 

Revenues to the General Revenue Fund are increased by up to $30 million in FY 2003 by reducing the amount of income tax revenue credited to the Local Government Fund, the Local Government Revenue Assistance Fund, and the Library and Local Government Support Fund by $10.6 million.

 

 

Board of Deposit

 

The bill  increases the Board of Deposit appropriation in FY 2003 to $1,288,000 from $838,000. This increase of $450,000 will be used to pay for the additional expenses related to the “acceleration of sales tax payments” provisions in this bill. This non-GRF line item is funded by transfers from the Investment Earnings Redistribution Fund (Fund 608).

 

 

Budget Stabilization Fund (BSF) Transfers for Medicaid

 

The bill authorizes, subject to Controlling Board approval, the Director of Budget and Management in consultation with the Director of Job and Family Services to transfer up to $149.6 million of cash from the Budget Stabilization Fund (BSF) to the General Revenue Fund in FY 2003.  The transfer is to support an increased appropriation to Department of Job and Family Services line item 600-525, Healthcare/Medicaid.  The transferred funds will pay the state share of Medicaid expenses in excess of the amount originally provided for in Am. Sub. H. B. 94 of the 124th General Assembly and will allow the state to draw down $55.9 million in additional federal funds for this purpose, as well.

 

H. B. 94 of the 124th General Assembly authorized the transfer over the FY 2002-2003 biennium of $150 million from the BSF to the GRF for that purpose.  Of this amount $40.35 million was transferred in FY 2002, leaving $109.7 million available in FY 2003.  This change will increase by $39.9 million the state dollars available to support Medicaid expenses.  With the $55.9 million federal match, the total additional amount available in FY 2003 to supplement the revised Medicaid estimates will be $95.8 million.

 

Chemical Dependency Professionals Board

Sub. H.B. 496 of the 124th General Assembly, effective in December 2002, created the Chemical Dependency Professional Board and required licensure or certification of chemical dependency counselors and certification of alcohol and other drug prevention specialists.  The bill also appropriated $100,518 in FY 2003 from the Occupational Licensing and Regulatory Board Fund (Fund 4K9) to fund the new board’s operations.

This bill allows the Director of Budget and Management to transfer cash in an amount not to exceed the FY 2003 appropriation from Fund 5P1 (Credentialing Fund) to Fund 4K9 (Occupational Licensing).  The FY 2003 appropriation amount is $450,000.  The bill appropriates the amount transferred and restricts the use of these funds related to establishing the Chemical Dependency Board, including, but not limited to, travel reimbursement of board members.

 

Department of Youth Services

The bill modifies existing permanent law governing how the Department of Youth Services allocates funds under the formula for the Reclaim Ohio Program, which is currently funded by GRF line item 470-401. The modification permits the Department to adjust the amount of funds distributed between the state and counties under the formula if the program’s appropriation is subsequently revised. As a result of these modifications, the amount of funds that could be available to cover certain departmental operational costs and/or to disburse as subsidies to counties may increase or decrease from what might otherwise have been the case under current law and practice. The magnitude of such a potential increase or decrease in funds available to either the Department or counties is difficult to predict.

The RECLAIM Ohio (Reasoned and Equitable Community and Local Alternatives to the Incarceration of Minors) program, launched as a pilot in January 1994 and implemented statewide in 1995, provides juvenile courts with funding to develop community-based programs for juvenile offenders. In doing so, the program is intended to reduce the number of commitments sentenced to the custody of the Department.

Funding is allocated to counties through a formula based upon each county’s proportion of statewide felony delinquent adjudications. Each month, counties are debited 75% against a per diem allocation for juveniles placed in departmental institutions and 50% for juveniles placed in community corrections facilities (CCFs). Any funds remaining after the county’s commitments to the Department are then remitted to counties and used by juvenile courts to support the development and operation of rehabilitation programs at the local level. Courts may use the funds to purchase or develop a broad based spectrum of community-based programs for adjudicated felony delinquents who would otherwise have been committed to the custody of the Department. Such programs include day treatment, intensive probation, electronic monitoring, home-based services, residential treatment reintegration, and transitional programs.

A “contingency” fund in the program, which represents up to 5% of the total RECLAIM Ohio allocation, allows courts to commit juveniles to the custody of the Department or CCFs, even if a county has exhausted its allocation. The law also provides for a category of commitments called “public safety beds” for which the counties are not debited. Public safety beds are provided for juveniles that are committed for very serious offenses like murder, manslaughter, rape, arson, and gun specifications.

Department of Rehabilitation and Correction

 

The bill eliminates the legal requirement that the Department contract for the private operation and management of the intensive program prison established for felony DUI offenders in Grafton, Ohio. This provision essentially provides the Department with more choices in its institutional operations, and does not introduce any immediate and direct cost factor to daily operations.

 

 

 


Unclaimed Funds Transfer to the GRF

 

The bill increases the total unclaimed funds transfer to the GRF by $35,000,000 to $115,800,000 in the FY 2002-2003 biennium. The General Assembly previously authorized up to $80.8 million in unclaimed funds to be transferred to the GRF in the FY 2002-2003 biennium. The Department of Commerce, Division of Unclaimed Funds, collects unclaimed funds and deposits them in the Unclaimed Funds Trust Fund. These unclaimed funds are then transferred to Fund 543 Unclaimed Funds – Operating, used for administrative costs by the Division, and Fund 543 Unclaimed Funds – Claims, used to pay the unclaimed fund owners who claim their funds. The remainder of the unclaimed funds is then available to the following funds: the Mortgage Insurance Fund, the Minority Business Bonding Fund, up to $10,000,000, the Housing Guarantee Fund, and the Housing Development Fund. The Housing Guarantee Fund and the Housing Development Fund are used to fund programs of the Ohio Housing Finance Agency (OHFA).  The $35,000,000 increase in unclaimed funds transferred to the General Revenue Fund decreases the amount available for allocation to the Minority Business Bonding Fund, the Housing Guarantee Fund, and the Housing Development Fund.

 

Department of Education

 

The bill repeals, effective immediately, the parity aid spending requirements. Under current law, continuous improvement, academic watch, and academic emergency districts that are eligible for parity aid are generally required to spend their parity aid allocations on one of nine specified spending categories unless such a district receives approval from the Department of Education for alternative usage of parity aid. The bill does not change parity aid allocation formulas and will not affect the amount of parity aid each district receives. However, eliminating the parity aid spending requirements will provide school districts a greater flexibility in local spending decisions.

 

Parity aid equalizes an additional 9.5 mills above the basic education level to the 80th percentile school district’s wealth level. Under H.B94 of the 124th General Assembly, parity aid is to be evenly phased in over a five-year period beginning in FY 2002. The phased-in funding percentage for FY 2003 is 40%.  About 493 school districts receive a total of $209.4 million in parity aid in fiscal year 2003.

 

The bill also prohibits the Governor from reducing FY 2003 GRF appropriations for the following state education formula aid related line items: 200-500, School Finance Equity, 200-501, Base Cost Funding, 200-502, Pupil Transportation, 200-520, Disadvantaged Pupil Impact Aid, 200-521, Gifted Pupil Program, 200-525, Parity Aid, and 200-546, Charge-off Supplement. Total appropriations for these line items amount to $5,485,418,913 in FY 2003, representing 76.6% of total GRF appropriations for the Department of Education.

 

These line items collectively support state foundation payment obligations to school districts (including joint vocational school districts). These funds are distributed to school districts based on various formulas specified in the Revised Code. The base cost formula amount is $4,949 per pupil in FY 2003. In addition to the base cost funding, these line items also support funding for other components of the foundation program, including parity aid, special and career-technical education weights, disadvantaged pupil impact aid, pupil transportation, gifted unit funding, excess cost supplement, charge-off supplement, and equity aid. The foundation program is also partially supported by lottery profits money through line item 200-612, Base Cost Funding (Fund 017). 

 

The bill also prohibits the Governor from reducing FY 2003 GRF appropriations for line items 200-511, Auxiliary Services, and 200-532, Nonpublic Administrative Cost Reimbursement.  Total appropriations for these two items amount to $183,325,760 in FY 2003, representing 2.6% of total GRF appropriations for the Department of Education. These nonpublic subsidies provide secular materials, health and safety assistance, and certain state mandated administrative cost reimbursement to state charted nonpublic schools.

 

Publicly funded child day-care

 

The bill makes several changes to the law governing the publicly funded child day-care (hereafter referred to as child care) program that is overseen by the Department of Job and Family Services (JFS).  Overall, the provisions of the bill related to the child care program grant greater discretion to the Director of JFS regarding operation of the child care program.  By exercising such discretion, the Director could specify the amount, duration, and scope of benefits, limit or lower day-care provider payments, limit enrollment of new participants in the program, and disenroll existing participants with incomes above a specified percentage of the federal poverty line (FPL).

 

Authority to limit and disenroll participants

 

            Under current law, whenever the Department determines that the anticipated future expenditures of the county departments of job and family services will exceed available federal and state funds for child care, the Director of JFS is to issue and implement an administrative order that specifies the priorities for expending the remaining available funds and issue instructions and procedures to be used by the county departments.  Current law grants the Director authority to suspend enrollment of all new participants in any child care program or limit enrollment of new participants to those with incomes at or below a specified percentage below FPL.  Therefore, under current law, the Director may only suspend enrollment for an entire child care program (i.e. non-guaranteed) and not just for certain categories of individuals within that program, or limit enrollment of new participants whose incomes are a specified percentage below FPL.

 

Current law also restricts the Director’s authority by specifying that the administrative order cannot limit enrollment by otherwise narrowing eligibility standards established in statute.  The bill removes this restriction.  In addition, the bill grants authority to the Director to limit enrollment of new participants whose incomes are at or below a specified percentage of FPL, and/or disenroll existing participants with income above a specified percentage of FPL.  The Director could, for example, choose to limit enrollment of those with incomes at or below 150%, 125% of FPL, or any level the Director chooses.

 

Publicly funded child day-care is funded with GRF and TANF and other federal funds.   The Department expects projected growth of the program to exceed budgeted estimates in FY 2003.  According to JFS, all GRF and other federal funds appropriated for the child care program in FY 2003 have been expended and the Department is currently using TANF funds exculsively to pay for this program. The Department is expecting a shortfall of $70 million in FY 2003.  The Department plans to use unspent TANF dollars to deal with this shortfall.

 

Currently, the child care program provides non-guaranteed benefits to those with incomes at or below 185% of FPL ($33,485/year for a family of four).  According to the Department, it intends to use the authority granted under the bill to limit eligibility criteria to those with incomes at or below 150% of FPL ($27,150/year for a family of four) in an attempt to control costs of the program at this time.  Given the delayed effective date (most likely mid-May) of these provisions in the bill, it is unlikely that the Director would be able to implement such an administrative order until mid-May. The Director also intends to allow those who are currently receiving benefits to continue to do so until the person’s scheduled redeterminiation (currently redetermination is done every six months), at which time they will be told that as of September 30, 2003, they are no longer eligible to receive child care benefits. 

 

If the Director were to limit enrollment of all new participants with incomes at or below 150% of FPL, beginning in May 2003, while allowing existing participants to remain on the program until the end of September, JFS could reduce program costs by approximately $186,000 in FY 2003,[2] $63.0 million in FY 2004,[3] $91.1 million in FY 2005 and some amount in excess of $91.1 million annually thereafter (based on JFS’ cost and caseload projections for FYs 2003, 2004, and 2005). Any decrease in expenditures would affect Fund 3V6 (TANF Block Grant).  Given the delayed effective date, any cost savings in FY 2003 would be minimal. Any decrease in expenditures realized in FYs 2004 and 2005 would likely reduce the amount of TANF dollars the Department uses to fund the program. 

 

There are a number of approaches that the Director could choose in exercising the authority granted under the bill in the future. In other words, the Director could change eligibility again (increase or decrease) and/or disenroll additional participants should the Director decide that it is necessary to do so. The discretion granted the Director under the bill could have a significant fiscal impact on the program in future years, depending on if, how, and when the Director exercises discretion.

 

The majority of funds appropriated to JFS for the child care program are passed down to the counties for payment to providers.  The impact on the amount of state and federal funds passed through to county departments of job and family services to pay child care providers will vary depending on if, how, and when the Director of JFS chooses to exercise the discretion granted under the bill.

 

Rulemaking

 

Current law requires the Director of JFS to adopt rules that, among other things, establish procedures and criteria to be used in making determinations of eligibility for child care.  The bill goes on to permit the Director to prescribe the amount, duration, and scope of benefits available as publicly funded child care.  “Amount, duration, and scope” could include things such as a maximum lifetime amount (in terms of dollars) of child care a caretaker parent  may receive, time limits on benefits, or whether or not to cover the cost of care such as special needs or protective child care.  The authority given to the Director of JFS by this provision of the bill could have a significant fiscal impact on the program depending on the policy the Director decides to adopt.  Since the discretion granted by the bill lies with the Director of JFS and the Department has not indicated any intentions in this regard, LSC is not able to quantify the potential fiscal impact.

 

Provider Reimbursement

 

            Nontraditional hours.  The bill requires the Director of JFS to adopt rules establishing reimbursement ceilings for providers rather than rules establishing reimbursement rates, including an enhanced reimbursement ceiling for providers of child care for caretaker parents who work nontraditional hours.  Under current law, if a provider provides child care to caretaker parents who work nontraditional hours, the provider is to be paid the rate established in rules adopted by JFS, regardless of whether the rate is higher than the rate the provider customarily charges.  The bill eliminates this requirement.  Since the reimbursement ceiling is to be set by rule, it is possible that the provider could be paid more than the current rate or less than the current rate, which could in turn increase or decrease program costs.

 

Type B Family Day-Care Homes.[4]  Current law provides that a type B family day-care home is eligible for reimbursement under the child care program if the home is certified by the county department of job and family services.  Eligibility for public funds extends to type B homes with limited certification, which is granted to day-care providers who provide care only for their relatives or only for the children of the same parent. Under current law, the Director is required to adopt rules establishing a reimbursement rate for a type B family day-care home that has received limited certification.  That rate is to be the greater of the rate that was in effect for the home on October 1, 1997, or 75% of the reimbursement rate that applies to a type B family day-care home certified by the same county department of job and family services.  The bill reduces the reimbursement of providers who provide child care for children of the same parent to 60% of the reimbursement ceiling for fully certified type B family day-care homes.  According to JFS, such a reduction will likely decrease the costs of the child care program by an estimated $100,000 to $150,000 in FY 2003 and by some amount less than $1.0 million in future years.

 

Work requirements – special needs day-care

 

            The bill no longer exempts a caretaker parent for whom special needs day-care is necessary from the requirement to be employed or participating in an education or training program.  If required to become employed or begin participating in an education or training program to continue receiving child care, some caretaker parents may leave the program.  Since each family’s circumstances are different, an estimate as to the number of program participants who would leave the program is unknown.  The average annual cost for FY 2002 of special needs day-care is approximately $7,306 per child.  Therefore, for every child that leaves the program due to this change in the law, the program costs would be reduced by $7,306 per year.

 

Notification of change in status

 

            Under current law, a caretaker parent receiving child care is required to report to the entity that determined eligibility any changes in status with respect to employment or participation in a program of education or training.  The bill provides that the caretaker parent must comply with the requirement to report such a change not later than ten calendar days after the change occurs.  Once an entity is notified it redetermines the caretaker parent’s eligibility.  If the entity determines that the caretaker parent no longer meets the eligibility criteria due to the status change, the person will no longer receive benefits under the program.  Requiring notification within ten days may result in some recipients (who are no longer eligible) leaving the program sooner, thus reducing costs of the program. 

 

Waiver

 

            The bill eliminates a county department of job and family services statutory authority to request a waiver of the reimbursement ceiling when a family has special circumstances or there are unique market conditions, but retains the authority to request a waiver based on the special needs of a child.  Through the rulemaking process, JFS may provide for acceptable reasons for requesting a waiver.  The potential impact on the number and amount of waivers will depend on the rules adopted by the Department.  JFS could provide for additional reasons to grant a waiver, thereby increasing costs of the program, or provide for fewer reasons to grant a waiver, thereby reducing costs of the program.

 

Lapse of state share of line item 600-610, Food Stamps and State Administration

 

            The Food Stamp Program is a federal program administered by the Department of Job and Family Services (JFS) and county departments of job and family services.  Food stamp benefits are 100% federally funded.  However, Ohio receives a reimbursement from the federal government for one half of the administrative costs of the Food Stamp Program.  Appropriation item 600-610, Food Stamps and State Administration (Fund 384, within the Federal Special Revenue Fund Group in the JFS budget), supports the administrative costs of the Food Stamp Program in Ohio.  Fifty percent of the appropriation to line item 600-610 is state funds.

 

            The bill requires the Director of Budget and Management to transfer to the General Revenue Fund all state dollars lapsed from the FY 2003 appropriation to line item 600-610.  Although there is no specific amount mentioned, this provision assures that such funds that are lapsed shall be transferred and not redirected to other purposes (as could be done through a request to the Controlling Board).  However, because it is possible that these same funds would revert to the General Revenue Fund in any case, it cannot be said that the provision has a fiscal effect.

 

 

 

LSC fiscal staff: Jean Botomogno, Economist

Nickie Evans, Economist

Allan Lundell, Senior Economist

Steve Mansfield, Fiscal Supervisor

Jeremie Newman, Budget Analyst

Laura Potts, Budget Analyst

Ruhaiza Ridzwan, Economist

Joe Rogers, Budget Analyst

Maria Seaman, Budget Analyst

Holly Wilson, Budget Analyst

Wendy Zhan, Senior Budget Analyst

 

 

 

HB0040SR.doc



[1] O.R.C. sections 5739.17, 5739.031,5739.12, 5739.17, and 5741.12 describes the various taxpayers and schedules.

[2] This amount was arrived at based on data provided by JFS and the following assumptions:

(1)      Monthly growth of 303.25 participants in the 151–185% of the FPL category of participants;

(2)      The estimated average monthly cost of day-care provided to this group in FY 2003 is $351.83.

By limiting new enrollment, the Department would avoid the cost of paying for these additional individuals each month. In other words, the Department could avoid the cost of paying the cumulative effect of one and one half months of child day-care for the 303.25 individuals who would come on the program each month, beginning in mid-May.

[3]  To estimate the amount saved  in FY 2004, if the Department were to allow participants to stay on the program until the end of September, LSC used JFS’ caseload and cost projections for FY 2004 and subtracted the amount that JFS would have to pay for those individuals who remained on the program until the end of September 2003.

[4] A Type B family day-care home is a permanent residence of the provider in which child day-care is provided for one to six children at one time and in which no more than three children are under two years of age at one time.