Va. Providers Brace for Cuts In Services for Poor, Elderly

By Chris L. Jenkins
Washington Post Staff Writer
Saturday, October 25, 2008

Doctors, advocates, service providers and others who work with Virginia's poor, elderly and disabled residents are bracing for what they see as inevitable as the state attempts to close a projected $2.5 billion shortfall in its two-year 2009-10 budget: steep cuts in services for the state's most vulnerable.

Advocates for those who rely on such services said the cuts would be particularly devastating because Virginia spends relatively little on such programs compared with other states, and many have not fully recovered from the last economic downturn.

Social service programs in Maryland and the District are feeling the pinch of budget shortfalls aimed at direct services. In Maryland, state officials helped close their current $350 million budget shortfall by shaving millions to Medicaid providers and eliminating a free breakfast program at 20 schools. Advocates there see more on the horizon. Meanwhile, D.C. Mayor Adrian M. Fenty (D) has suggested cutting $1 million from the Child and Family Services Agency for this fiscal year.

"It's as ugly a budget climate as I've seen in 15 years," said Christopher Bailey, a senior vice president at the Virginia Hospital and Healthcare Association, a Richmond-based lobbying group. "It's hard to see how this is not going to impact real people."

This month, when Gov. Timothy M. Kaine (D) announced a round of deep cuts for the current fiscal year, he focused on administrative jobs and functions. The $87 million in cuts to public health care, child welfare and mental health were generally steered away from services that directly affect patients in nursing homes and group homes for the mentally disabled.

Instead, Kaine laid off 570 state workers, delayed a planned 2 percent pay raise for state employees and decided to leave 800 jobs unfilled.

But for the fiscal year that begins July 1, state officials predict a shortfall that could reach $3 billion, which means that Kaine will have to sharply reduce spending or raise taxes to close the gap.

And because human services -- broadly defined as programs that deliver public health care, child welfare, services for the mentally disabled and mentally ill and services for troubled youths -- make up about one-quarter of state expenditures at $4.7 billion for fiscal 2010, they will probably bear the brunt of the cuts.

"The governor has said that everything is on the table, and that does mean everything," said Kaine spokesman Gordon Hickey. "It's not going to be pretty."

Advocates and analysts are most concerned that Kaine will target Medicaid, the federal-state program for the poor, elderly and disabled. At $3.1 billion for 2010, it is one of the state's largest single payouts, providing much of the aid for nursing homes, hospitals and health care for poor women and children. Virginia ranks 48th in the country in per capita Medicaid spending and has some of the nation's tightest eligibility requirements.

Richmond pediatrician Joseph Boatwright said he dodged a bullet during the first round of cuts when payments that he and other doctors receive to care for the city's poor children were spared.

But he expects that the funding that helps sustain his small practice in one of the city's most beleaguered neighborhoods will not be spared this time around.

"The reality is that we've always had to provide service while dealing with below-standard rates," Boatwright said. "We've always had to adjust."

In 2002, when Gov. Mark R. Warner (D) faced a $6 billion deficit, he slashed state payments to doctors, hospitals and nursing homes that treat Medicaid patients from 79 cents on the dollar to 72 cents. The program still has not returned to its funding levels before those cuts.

Such cuts would directly affect the bottom line of doctors who treat Medicaid patients and possibly discourage others from taking on such patients.

"I'm not sure what else they can cut out of Medicaid," said Jill Hanken, a staff attorney at the Virginia Poverty Law Center. "Our eligibility rates are low, most of the services we provide are mandatory, so there aren't too many places we can turn for savings."

Also of concern to advocates is whether the state will take a step backward in services for those with mental illness and mental disabilities after increasing funding for those programs this year. The state pumped $42 million into community mental-health services, largely in reaction to the 2007 Virginia Tech shootings.

Meanwhile, over the past four years, the state has spent nearly $100 million to increase the number of community placements for people with mental disabilities.

Although Kaine has said that mental-health funding is a priority for him, state officials point out that these programs were prime targets when the state last had to reduce spending because of a nationwide economic downturn. State funding for the programs dropped from $434 million to $406 million over three years, leading to higher caseloads, longer waiting lists and in some counties, the elimination of outpatient therapy for those with mental illness.

"If deep cuts are made, they would impact direct services to people and would narrow the scope of services our system can provide," said Meghan McGuire, spokeswoman for the Virginia Department of Mental Health, Mental Retardation and Substance Abuse Services.

Of further concern is that if the state reduces funding it provides to localities for certain child welfare programs, many of those programs would also lose federal matching grants. For instance, in 2003 the state cut $2.4 million out of its budget to localities for child welfare programs. Because the federal government kicked in $2.2 million to match that money, the real impact was a reduction of $4.6 million, which led to the closing of social service offices and a reduction in staff responsible for investigating child abuse.

The impending state cuts come as jurisdictions in Northern Virginia and elsewhere also plan to reduce funding for social services, adding to the worry that as the national economic downturn continues, those seeking help will find less of it. For instance, officials at the Fairfax County Department of Family Services have identified $15.7 million in potential cuts, which if fully enacted would slash 500 child-care slots and reduce money for temporary shelter for the homeless in the winter.

Because of these factors, some are holding out hope that the state will consider tax policy as well as cuts when the General Assembly returns in January. Several advocacy groups have pointed out that the state could reverse a cut in the estate tax and find tens of million of dollars to plug the budget gap. And some lawmakers have also mulled the approach, which would likely be unpopular, as they consider how to balance the budget.

"There are some of us that will be looking on the revenue side of the ledger," said State Sen. R. Edward Houck (D-Spotsylvania). "I know politically that gets much harder, but if we say everything should be on the table, that means everything, including the car tax. It's an expenditure like any other expenditure."