Spending on Social Welfare Programs in Rich and Poor States. Final Report.. Mississippi

Population (July 2003): 2.9 Million

Total State Expenditures - SFY 2002: $10,521 Million (US Total: $1,073,816 Million)

TANF Expenditures - SFY 2002 (% of total): 0.7 % (US: 1.3%)

Medicaid Expenditures - SFY 2002 (% of total): 26% (US: 20.8%)

(Source: U.S. Department of Commerce, Census Bureau and NASBO 2002 State Expenditure Report)

Mississippi has the lowest fiscal capacity in the nation based on per capita personal income, representative tax system, and total taxable resources. Its poverty rate of 16.6 percent for 2001 is among the highest, exceeded only by New Mexico and Louisiana in the six sample states. However, in 2000 the proportion of children without health insurance was only slightly above the national average: 7.7 percent of children below 200 percent of the federal poverty level did not have health insurance, compared to an average state rate in the U.S. of 6.8 percent. Mississippi thus resembles South Carolina and West Virginia-whose percentages of children without health insurance are also near the national average-rather than New Mexico, Louisiana, and Arizona, where the percentages of children without insurance are much higher.

Although the state's poverty rate remains high, it declined greatly in the 1990s, from 25.6 percent in 1991 to 15.6 percent in 1999. Unemployment also dropped from 8.8 percent in 1991 to 5.1 percent in 1999, after which it rose to 6.8 percent in 2002. Major industries in the state have included automobiles, poultry, timber, and gambling casinos (on the river). The state's population grew more slowly than the national average: 5.5 percent between 1995 and 2002. Unlike most states, tax revenues grew every year between FY 2000 and FY 2003, though the rate of increase declined after 2000. The state has had a series of budget shortfalls due to rising needs as well as slow revenue growth.

• State Budget Development and Implementation

  • The governorship has traditionally been weak in Mississippi. The office has no line item veto power. Thus, even though the state legislature only meets 90 days per session in the early spring, the legislature has long played the dominant role in developing and enacting the budget. However, the governor has significant control over its implementation and adjustments in the budget if revenues are lower than expected.

    The state budget process lasts about one year. For the SYF 2005-06 budget the Legislative and Executive budget offices solicit budget requests from agencies beginning in July 2004. These requests will be submitted to both budget offices by August 1, 2004. Beginning September 2004 the Joint Legislative Budget Committee conducts budget hearings with top agency officials to review the requests. The Governor will submit the executive budget in November of 2004. The legislative budget recommendation will be released and published in November and December 2004. The legislative session begins in January 2005 and the appropriation bills for the FY2006 budget will be finalized and passed by April 2005.

    The governor and legislature adopt a consensus revenue estimate drawing on (though not constrained by) revenue estimates provided by the Revenue Estimating Committee, composed of people from the executive and legislative branches as well as institutions of higher learning. Division directors develop budget requests based on what services are mandated and what services may be funded with what remains. By statute, the legislature can only appropriate 98 percent of projected revenue.

    The governor has the authority to manage the budget during the fiscal year to ensure expenditures do not exceed revenues. Should revenue come in more than two percent short of projections through the current month, the governor must adjust spending to stay within projected revenues. The governor can make selective cuts to agency budgets of up to five percent to stay within revenue projections. State statute exempts several agencies from these cuts. Cuts exceeding 5% must be administered across the board.

    The Department of Human Services (DHS) administers TANF, CCDF, Social Services Block Grant (SSBG), child welfare, and most other social welfare programs. Prior to FY 2005 DHS also determined eligibility for Medicaid and SCHIP programs. However, Medicaid and SCHIP are administered by the Division of Medicaid operating within the Office of the Governor. Until 1992, the Department was largely governed by an advisory board. But the legislature disbanded the board in that year and the governor was given greater and more direct control over DHS, including appointment of its director.

    Nonetheless, legislators retain significant control over the Department's actions. The budget is very specific on programs, especially those they care about, such as Medicaid. Separate appropriation bills must be passed for each agency. Legislators also limit DHS's discretion over policies. Some state officials consider Mississippi's Medicaid program to be the most codified in the U.S., with reimbursement and coverage policies detailed in law-governing, for example, how many office visits as well as prescriptions are permitted per year.

    DHS and its administration of major social programs are centralized. Most programs are administered by state officials through local state offices, not through counties or other local governments.

    In recent years, as needs grew due to expanded enrollments in social programs and revenue growth slowed, the budget process became quite contentious between the legislature and the governor, even though both branches were controlled by Democrats from early 2000 to early 2004. A major source of uncertainty was Medicaid. Since SFY 2002, the Medicaid budget has faced recurrent deficits. At first, the shortfalls were covered with tobacco funds, but then some cuts were made in reimbursement rates to providers. More recently, Medicaid deficits have been alleviated by increases in the federal matching rate (FMAP) and last year's one-time federal grant to states. Medicaid has generally been protected from major cuts. Along with health care programs, other programs protected from significant budget reductions include economic development programs and, most of all, education, which takes up 62 percent of state general revenues.

    Compounding the budget controversies has been the tendency of the legislature and the former governor to use different revenue projections. The former governor, for example, advocated reducing the revenue estimating committee's projection of SFY 2002 revenue growth to one percent, while the legislature adopted an estimate of 3.7 percent. In the 2003 session, most observers thought that legislators knew they had padded or overstated the budget. Over-projection of revenue forced the governor to cut agencies only after the legislature enacted the budget.

• Mississippi's Response to Federal Welfare Reform

  • Mississippi began to reform its welfare programs with passage of a bill in late 1992, though its AFDC waiver request was not approved by U.S. Department of Health and Human Services until mid-1995. The waivers involved two programs, Work First and Work Encouragement. Work First, the larger program, made benefits contingent on fulfilling work requirements and introduced new mandatory processes for applicants. After the enactment of TANF at the federal level, the Mississippi legislature passed its TANF program, called the TANF Work Program (TWP), in early 1997. The debates over the early AFDC reforms and the TANF program were very divisive, especially along racial lines (Breaux, et al. 2000) and in the early 1990s, when the state legislature focused on out-of-wedlock births and marriage.

    Mississippi's TANF program features immediate work requirements, time limits, full family sanctions, a family cap, and transitional child care and transportation services. Maximum cash benefits for a three-person family are $170 per month, which was increased from $120 in 2000, the only increase in the stipend in the last 26 years. In determining benefits, Mississippi disregards all income for some families for up to six months; otherwise, it disregards $90 of earnings. Its asset rules are somewhat more liberal than average: it disregards the entire value of one vehicle and $2,000 in assets beyond that. The state's sanctions are strict, however. Its first sanction for non-compliance with work requirements is imposed for two months, a longer than average duration for full family sanctions. The state does not have a diversion program. Its lifetime time limits (60 months) follow the federal law.

    The low benefits, the severity of the sanctions, and early problems of implementation (such as complex applications processes involving multiple local agencies) probably contributed to the very large caseload declines of the 1990s-72 percent between 1995 and 2000. Since 2000, caseloads rose 23 percent through 2003. Yet, even with the caseload increases, TANF assistance plays a relatively small role in Mississippi's safety net. Only 1.3 percent of the Mississippi population received TANF assistance in 2001, compared, for example, to 10.7 percent of the population who received Food Stamps. Federal spending on Food Stamp benefits was 9.4 times greater in 2001 than total TANF assistance payments (Mississippi Department of Human Services 2003).

    Mississippi's large decline in caseloads and its low benefits meant that it was able to accumulate large TANF surpluses. By 2000, the state could pay very little of its current year TANF grant on assistance. In fact, by 2001, it spent none of its current-year TANF grant on cash assistance. The surplus allowed the state, by 2000, to transfer the maximum amounts from TANF to CCDF and SSBG (30 percent of the grant in FFY 2002), and to increase other non-cash spending. In FFY 2002, major categories of spending under TANF included work subsidies, education, and training (25 percent); child care (37 percent, including the 20 percent transferred to CCDF); transportation and other supportive services (19 percent); and transfers to SSBG (10 percent).

    In the last two fiscal years, however, moderate increases in caseloads have pushed up spending on TANF assistance, including cash payments, child care (for persons on assistance), and transportation services. The TANF block grant has also been used to fund additional programs while it pulled back from others. TANF thus serves as a "cushion" that agencies have used to fund high-priority items. For example, in FY 2004, about $26 million (about 27 percent of the annual block grant) was allocated to child welfare programs. Despite the attractive match rate for such programs (usually the same as under Medicaid), the state reduced its appropriations for this already cash-strapped, high-stakes service area-and TANF was used to compensate. By contrast, TANF funding was reduced or eliminated for several other programs in FY 2004, including fatherhood programs, SSBG, an adolescent offender program, some child care programs (not CCDF), education programs, and programs under the Attorney General.

    During these tight budget years, the state has also struggled to satisfy its Maintenance of Effort (MOE) requirement. Among other things, they moved assistance families with two parents into a separate state program funded with MOE dollars (thus freeing $2 million in TANF), and they identified dollars spent in existing state programs that they could count as MOE. Such programs included certain university scholarships for low-income families, after-school programs, and mental health services.

    Although TANF supports a wide array of services, "welfare" is still not a popular program in the state. The program is identified with minorities and the public perception is still that people do not want to work. Even state child advocacy organizations pay little attention to TANF per se. However, there have been effective advocacy efforts for child care, e.g., the Low Income Child Care Institute, run by a former director of the state Office of Children and Youth.

• Other Federal Social Welfare Programs

  • Prior to FY 2005 the DHS's Division of Economic Assistance administered the Medicaid Program. However, the Division of Medicaid operating within the office of the Governor determines the Medicaid eligibility for the poverty level aged and disabled and for nursing home residents. Mississippi's spending per Medicaid enrollee is below the national average for all categories of enrollees, with the exception of nonelderly, nondisabled adults. The state's Medicaid eligibility standards are close to federal minimums; therefore, cuts in Medicaid enrollment or benefits are difficult. Tobacco settlement funds were used to fund the SCHIP program and eligibility expansions for the aged and disabled, allowing small expansions of benefits and increases in some provider payment rates.

    Political support for Medicaid and SCHIP is strong. First, the programs have strong and organized proponents, such as hospitals, nursing homes, and doctors. Nursing homes, for example, beat back a recent legislative threat to reduce nursing home coverage. Among child advocates, SCHIP is the primary focus. The strong lobbying has been one reason why the Medicaid program is so "codified" and the executive director of the Medicaid division has so little control over the program.

    Second, many people are enrolled in the programs: 25 percent of the population is on Medicaid; 57 percent of the children are enrolled in Medicaid or SCHIP. Outreach for SCHIP expanded enrollment in the regular Medicaid program (every child in SCHIP brought two children into Medicaid).

    Third, the Medicaid program's match rate (3 to 1) is very attractive. One administrator makes the argument that the program is an economic development issue. Mississippi has also used intergovernmental transfers with Disproportionate Share Hospitals (DSH) funding to maximize federal dollars. In FY 2000, intergovernmental transfers constituted over 40 percent of the state share. The state share is funded through intergovernmental transfers and participating hospitals keep a fixed percentage of the revenues thus generated. The state began a new Upper Payment Limit (UPL) program for hospital reimbursement in 2000.

    For all these reasons, Governors pay much more attention to Medicaid than to other human services, and legislators generally have a good relationship with Medicaid officials. (By contrast, Human Services has had three directors in the last three years and has not had a good relationship with the state legislature.) In 1999, Mississippi was the first state to establish a health care trust fund with money from the state's tobacco settlement. Mississippi's tobacco settlement funds are all targeted for health, about two-thirds of which is allocated to Medicaid.

    Although Medicaid has been fairly well protected through SFY 2004, the legislature made some modifications and cuts in reimbursements. Some reductions were made in benefits, such as those involving eyeglasses and prescription drugs. In SFY 2004, the state faced a $90 million deficit, which was helped by an increase by the federal government in the state's FMAP rate.

    It has been hard for Mississippi to hold spending down in Medicaid. There is a growing number of elderly in the state, especially those over 85. Expenditures per enrollee have grown, largely among recipients who cannot be dropped, including the elderly, the blind and disabled, and cash assistance children. The state is still doing SCHIP outreach, which brings in Medicaid applicants.

    Pharmacy costs have also grown enormously, though some cost containment efforts have been underway. Other major sources of growth in costs include nursing homes, outpatient hospital services, hospices, and home and community based waiver programs. The state's managed care initiative was not very effective in holding down costs.

    As a result of Medicaid's protection and growing costs, the program's spending has taken a growing share of the state's human services budget. Its share of the budget grew from 69 percent in 1998 to 75 percent in 2003.

    The SSBG is federally funded and gets little attention from legislators, according to an administrator. It is largely used to support protective services, family planning, mental health services among other programs. The grants go to the agencies rather than the particular programs-so the block grant, like TANF, has provided state officials greater flexibility in shaping their package of social programs. However, the SSBG has declined even in nominal terms, from $23.4 million in 1998, to $16.4 million in 2004. As noted above, 10 percent of the TANF grant is transferred to SSBG, all of which goes to programs aimed at child neglect and abuse.

    The CCDF is, as noted above, partly funded with TANF dollars. Before recent cutbacks, the program was able to support low-income working parents or students below 85 percent of the state's median income. But the eligibility level has been lowered to 50 percent of median income. Child care for TANF clients is automatic for those who are working, and there is one-year transitional benefit. There are extensive waiting lists for child care subsidies, about 12 thousand in the fall of 2003.

    The state relies very heavily on federal dollars for child care, either from the CCDF or the TANF grant. Although CCDF allows states to put up state matches and draw down additional dollars, Mississippi has never been able to draw down the entire match. To increase the state's match, the agency (Office of Children and Youth) has used expenditures for Mississippi's lunch programs, reading programs, and others as MOE expenditures for TANF and CCDF. Child care does have some effective advocates, but legislators have mixed attitudes, and few pay any attention to developmental or quality issues.

    Of the several divisions in the Department of Human Services, only a few rely significantly on state funding. Youth Services gets 68 percent of its funds from state general revenues; Economic Assistance gets 26 percent from general revenues; Family and Children's Services get 13 percent; while all the other divisions get less than 10 percent of their funds from the state. Thus, this low fiscal capacity state is very vulnerable to changes in federal spending.

    Spending pressures from Medicaid will continue and probably grow with the increasing number of elderly people in the state. Since education spending is also strongly supported, pressures will fall on nonhealth services and administrative expenses in the human service system if revenues fail to expand as fast as overall spending. The state's child welfare system is strained already, yet there are few prospects for additional support. Mississippi's funding of nonhealth services will continue to rely heavily on federal funding.

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