May 1st, 2013

Sequestration: an unknown future for social service agencies

On March 1, the deadlocked debate on the economic future of the country resulted in approximately $85.4 billion in federal spending cuts. Known as the sequester, the funding reductions are part of the Budget Control Act of 2011 (BCA) and have set in motion proactive attempts to reduce budgets, while preserving key programs and services.

The federal government is scheduled to apply the spending cuts evenly to domestic and defense programs, although Medicaid, Social Security, Temporary Assistance for Needy Families (TANF), other low-income programs and Supplemental Nutritional Assistance Program (SNAP/food stamps) will be spared.

State social service agencies across New England are preparing to manage their programs with less federal assistance, uncertain about future consequences.

According to Anna Chinappi, director, Office of Communications and Community Engagement, Massachusetts Department of Mental Health (DMH), “The sequester’s effect on DMH and mental health services is potentially small and we are still assessing how it will impact us. For DMH, the reduction will be seen in our federal block grant, which totals $8 million and funds community services; we are estimating a reduction of about $450,000. We may be able to manage short-term sequestration cuts with minimal impact to service recipients.”

The state of Connecticut also reports a potentially small impact on its mental health and substance abuse and prevention programs, says James Siemianowski, director of evaluation, quality management, and improvement for the Department of Mental Health and Addiction Services (DMHAS).

The federal mental health block grant funding Connecticut receives is distributed among 10 agencies, while funding on the substance abuse side supports 70 prevention and treatment agencies, according to Siemianowski. “Historically, we have received less money on mental health block grants than we do for substance abuse and prevention grants,” he says. “Not all the agencies are getting the same amount of money. On average, there would be little less than a $10,000 reduction, if all the agencies were funded at the same amount.”

Connecticut’s DMHAS works with a budget of $800+ million, and the combined reduction in mental health (approximately $145,000) and substance abuse (approximately $900,000) funding would be just under $1 million, says Siemianowski.

“Theoretically the sequester went into effect on March 27, but there continues to be negotiations to deal with its effects,” says Siemianowski. “We feel we’re in a state of fluidity. We will monitor closely and will work with the provider with what gets passed on to us.” He adds that one way to implement the reductions would be an across-the-board cut of the same percentage for every agency. “We’re evaluating how we will implement this. We might have to submit a revised allocation plan to the legislature, based on the manner in which we plan to implement the cuts.”

Residents of Vermont can expect “considerable impact” from the federal funding cuts according to Jim Giffin, CFO, Vermont Agency of Human Services. “Medicaid is exempt from the sequester, so there should be no changes there related to sequester. We expect a reduction of $44,000 in the mental health block grant that goes through DMH to designated agencies,” he says. “We expect a $300,000 reduction in the substance abuse block grant that purchases residential and outpatient services. Other reductions in federal funding e.g. social services block grant may have some indirect reductions, in funding for ‘psychological/ mental health and substance abuse treatment resources and access.’ We are still in the process of identifying potential impacts.”

New Hampshire reports a similar situation. “The one area where we have been affected pertains to our federal block grant payments, which support New Hampshire’s Peer Support Agencies. We are taking a total reduction of seven percent. We are fortunate to have some carryover funds from a previous year that the effect of this reduction, at least in the first year, will be fairly minimal,” says Erik G. Riera, bureau administrator, N.H. Bureau of Behavioral Health. “I think the true test will be going into the next federal fiscal year, which starts October 1. If the reductions continue, we will likely have very specific impacts on our programs.”

Sequestration also calls for a $500 billion reduction over the next 10 years in planned defense spending; however, hospitals under the Veterans Administration umbrella need not be concerned about possible personnel or funding cuts. “The Office of Management and Budget has made it clear that VA is exempt from sequestration. This includes care, benefits and administrative expenses,” says Diane Keefe, director of public relations, Boston VA Healthcare System.

By Phyllis Hanlon

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