Sources of Revenue:

General Fund,Special Fund,Other Fund federal 8792

Legislation creates:

Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

The proposed legislation eliminates the Governor's Cabinet on Children and Families and all support functions provided by the "Cabinet Office". The legislation gives all the current powers and duties of the Governor's Cabinet on Children and Families to the Secretary of the Department of Health and Human Resources. The legislation also gives the Secretary the responsibility for carrying out all functions and support services currently provided by the "Cabinet Office". A portion (79.5%)of the state funds appropriated to the Governor's Cabinet on Children and Families for FY05 is recommended in the Governor's budget proposal for FY06 as a line item titled Family Resource Networks and these funds are placed within the DHHR Bureau for Children and Families (the Bureau is designated as the "Division of Human Services" within the state budget). These funds are intended to be used to support grants to community initiatives that have previously been funded by the Cabinet Office. The state funding recommended for DHHR is $145,516 less than the amount that would be necessary to sustain the sub-recipient community grants at current levels. The net effect of the proposed bill is to eliminate the Cabinet Office and all staff (5 state positions and 1 contract position). Nevertheless, all functions currently carried out by the Cabinet Office are transferred to Secretary of DHHR in the proposed bill. No additional funding is provided to the Secretary in the Governor's budget proposal to support the necessary staff functions required in the proposed bill. The specific functions required in the HB2891 and transferred to the Secretary include: establishing, overseeing, evaluating, and providing technical assistance to community grantees; developing a cross-agency, multi year state plan; analyzing the budgets of the departments of state government; managing the state's children's fund; and providing staff support,travel expenses and meeting costs so that the Citizens Advisory Council is able to carry out their official duties and purposes as defined in the bill. The Cabinet Office is currently the recipient of an annual federal grant(CAPTA Title II)of $241,363(FY05) and the Cabinet has an agreement in place that allows for $718,000 in federal funds (Medicaid administrative cost sharing)to be drawn down each year to help support the grants to local Family Resource Networks. There is no provision in the bill or plan in place to assure that these federal funds can be retained if the Cabinet Office is eliminated. The impact of the proposed bill on the costs and revenues of state government is, at best, very uncertain. If all necessary staffing, services, and necessary support functions required by the bill could be provided by DHHR at no cost to the Department, there is a potential net reduction in state supported costs of approximately $365,000 by eliminating all staff and current expenses related to the Cabinet Office. However,the support functions required by the proposed bill cannot be provided at no cost and the grants to local communities cannot be maintained at the present level with the funds made available to DHHR in the Governor's budget proposal. Elimination of the Cabinet on Children and Families and the subsequent transfer of the duties and responsibilities to DHHR may result in a significant loss of federal funding. $250,000+ in annual federal grant funds is put "at risk" by the bill. Furthermore, the negotiated agreement that allows the Cabinet Office to access $718,000 in federal cost sharing through the Medicaid program may no longer be valid if there is no Cabinet on Children and Families. If these federal funds are lost, or if DHHR incurs any additional costs to carry out the new and expanded responsibilities under the bill, the net effect on revenues could be little or no savings of state funds and a significant loss of federal funds.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2005 Increase/Decrease (use"-")	2006 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	3,349,000	3,349,000
Personal Services	0	195,495	195,495
Current Expenses	0	20,000	20,000
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	3,133,505	3,133,505
2. Estimated Total Revenues	0	1,941,926	1,941,926

Explanation of above estimates (including long-range effect):

There are no anticipated increases or decreases in costs for FY 2005 since the proposed bill would not be effective until July 1, 2005. The "Estimated Total Cost" for FY06 and beyond reflects the funding necessary to maintain community grants and essential functions now carried out by the Cabinet Office and the estimates are based on current year (FY05) budgeted funds(state and federal)less any anticipated savings from reducing administrative costs and eliminating non-required functions. Responsibility for all support services and functions currently provided by the Cabinet Office are transferred by the proposed bill to the Secretary of DHHR and the Cabinet on Children and Families is eliminated. Therefore, all anticipated costs to DHHR related to providing community grants and carrying out the statutorily required functions currently provided by the Cabinet Office are considered to be net increases in costs to the Department beginning in fiscal year 2006. The amounts listed in "Personal Services" for FY06 reflect a potential cost savings over current year (FY05) expenses at the Cabinet Office based on the assumption that DHHR may be able to achieve some economy of scale and carry out the administrative functions currently provided by the Cabinet Office at one half the current cost of these services. These administrative functions include costs related to making grant awards, contract development and compliance, fiscal management, and secretarial and support services. Professional staff services necessary to carry out the mandated functions in the bill are retained in the estimates. "Current Expense" costs related to rental of office space, utilities, phone, equipment, printing, postage, and 50% of the staff travel amounting to a potential savings of $65,000 over current year costs have been subtracted from the estimated current expenses required in FY06. There is an assumption made in this estimate that a large portion of the current expenses incurred by the Cabinet Office will be eliminated effective July 1, 2005; however, there is a lease in place for the current office space that may require some significant portion of the anticiapted "current expense" savings to be paid out. "Other" costs that are expected to be transferred to DHHR for FY06 include grants to Family Resource Networks, Starting Points Centers, and Early Parent Education Programs currently funded by the Cabinet Office; technical assistance and training currently provided; costs for evaluation; and costs to provide staff support and expense reimbursement to the Citizens Advisory Council. The current level of expenditures for grants and contracted services paid from federal funds are also included in other costs. The above "estimated total revenue" available is the amount proposed in the governor's budget for community grants only. Federal funds are not included in the estimate of revenues given the uncertainties about whether or not the federal funds currently available to the Cabinet Office will continue to be available to the state if Article 5 Chapter 26 of the state code is repealed and the Cabinet on Children and Families is eliminated. If these federal funds can be maintained at the current levels, the "Estimated Total Revenues" above would be increased to $2,909,926.

Memorandum

It is difficult to provide accurate estimates of fiscal impact of the proposed bill due to a number of unknowns. It is not known how the federal funding currently available to the state will be affected. It is also not known how the Department on Health and Human Resources will provide the support services and functions required by the bill or what costs will be involved in doing so. There is no funding provided in the Governor's proposed budget for the numerous functions and support services currently carried out by the Cabinet Office yet these services and supports are required to be provided by the Secretary of DHHR in the proposed bill. It is not plausible that the necessary staffing and other expenses related to the mandated duties and responsibilities transferred to DHHR by the bill can be appropriately provided at no cost. Also, the effect of the bill on federal revenues is impossible to definitively evaluate. The federal agreement that provides for cost sharing of the expenses related to grant awards and support of Family Resource Networks was negotiated by Cabinet staff and approved by the federal Health Care Financing Administration (HCFA) based on the mission and purposes of the Cabinet on Children and Families at the state level and the activities carried out by local Family Resource Networks at the local level. It is questionable as to whether this agreement would have any validity if there is no Cabinet on Children and Families. Also, a "lead entity" to replace the Cabinet Office that meets the federal requirements to receive the CB-CAP federal grant under CAPTA Title II, has not been identified nor is there a plan in place to develop such an entity or estimate the costs involved in such development. An additional unknown related to long term fiscal impact is the effect of the bill on the ability of local Family Resource Networks to secure private and federal discretionary funding for local community initiatives. During the most recently completed fiscal year (FY04), FRNs assisted local communities across the state in securing 33 Million dollars in grant funding.

Person submitting Fiscal Note: Steven Heasley, Senior Assistant - GCCF
Email Address: heasley@wvnet.edu