Human Services: A complex, costly agency at the heart of budget impasse

Century Plaza assistance
Residents wait to be assisted with welfare-related items at Century Plaza in Minneapolis, Minn., March 3, 2010. The state's Human Services Department, which is the subject of partisan disagreement, provides funds for counties to administer welfare programs.
MPR Photo/Jeffrey Thompson

For months, the budget for the state's Department of Human Services, which oversees health care and welfare programs for more than a million Minnesotans, has been the source of sharp partisan disagreement.

The two-year budget for the state's health and human services functions, which includes the Department of Human Services and several small licensing boards, is $24.6 billion for 2010 and 2011 -- more than any other area of state government. The state's general fund pays for about $9 billion of that. The rest comes from the federal government and other funds.

The Republican-controlled Legislature and DFL Gov. Mark Dayton disagree on how much state money the department should receive in the next two years. And they disagree on larger policy issues that fall under the agency's administration, including how to provide health care coverage for the state's poorest residents.

Advocates for low-income residents say the dispute could lead to deep cuts to critical programs, marking a departure from the state's long history of providing care for its most vulnerable citizens.

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The two sides have been negotiating for weeks, but have failed to agree on a budget for HHS and all other government functions, triggering a state shutdown that began July 1.

Under the current appropriations, HHS programs are projected to cost the state's general fund $12.3 billion in the next two budget years, according to an analysis by the Minnesota Management and Budget office. That's about $3.3 billion more than the previous two-year budget. And it's more than any other area of government except K-12 education, which is projected to cost $14.3 billion.

Both Dayton and Republican lawmakers have called for the state to reduce that amount, but they disagree about the size of the cuts. Dayton's office released a document Wednesday estimating that the two health and human services budget proposals differ by $556 million. Overall, about $1.4 billion separates the two state budget proposals, according to Dayton's analysis.

A COMPLEX AGENCY

The complicated nature of the Department of Human Services' work has made it difficult for voters to understand the budget dispute.

About half of the agency's funding is spent on health care programs. The rest goes to fund or administer a long list of services, including the state's welfare programs, direct care services for people with disabilities, treatment for sex offenders, child protection services, and long-term care for senior citizens. It also oversees much of the computer support system that counties and providers use to check benefits and submit claims for payment.

To fund its work, the department receives money from the federal and state government. Many programs receive funding from several sources. Some are funded with one-time grants. For certain programs, like the Minnesota Family Investment Program, the welfare program for low-income families, the state is required to contribute a specific share in order to receive federal dollars.

The department directly runs some programs, like treatment for sex offenders at the Minnesota Security Hospital in St. Peter. But the department also works with more than 24,000 licensed service providers that contract with the state to provide care. Those providers include group homes, treatment programs, child care agencies and foster care providers. Nonprofit organizations also receive funding to operate programs like community mental health centers and case management for people with disabilities.

The department also provides funds for counties to administer welfare programs. A person in Minneapolis, for example, usually applies for welfare at Hennepin County's human services building. County financial workers process the welfare applications and work directly with low-income residents to provide assistance.

The complexity of the Human Services Department has captured attention during the ongoing state government shutdown. Every separate provider, from counties to nonprofits, had to determine the impact of the shutdown on the funding it receives.

Over the past week, many groups have testified before Special Master Kathleen Blatz, a former state Supreme Court chief justice appointed to decide which programs are critical and should continue to receive funds. Some sought reassurance that their programs would not be affected. Others worried that they would lose all funding.

HEALTH AND HUMAN SERVICES AT CENTER OF BUDGET IMPASSE

For months, it's been clear that the DFL governor and the Legislature would clash over funding for HHS programs. Dayton was elected on a promise to raise taxes on the rich to avoid deep cuts in services for the poor. In contrast, many Republican lawmakers were elected on a promise not to raise taxes at all. And both sides were elected during a time when the state faces a projected $5 billion budget deficit.

Dayton released his budget recommendations shortly after taking office. He called for $12.2 billion in funding from the state's general fund for the Department of Human Services over the next two fiscal years. His total funding proposal for HHS programs, including all sources of funding, was $26.6 billion.

The initial proposal preserved funding for most services, but included cuts to child care assistance and health care programs for working-class Minnesotans. The governor also ordered the state to enroll in the expanded Medical Assistance program offered under the federal health care overhaul. The expanded program now provides health coverage for thousands of the state's poorest residents.

The Legislature passed its health and human services budget bill in May. The bill included about $10.7 billion in funding for health and human services programs over the next two years. Overall, the proposal reduced funding by $1.6 billion.

Lawmakers reached that figure by cutting funds for welfare and mental health programs and changing the way the state provides health insurance for low-income residents. The bill would reverse Dayton's order on Medical Assistance and would instead provide a fixed amount of money for health insurance coverage for the state's poorest residents.

Dayton vetoed the bill, and Rep. Jim Abeler, R-Anoka, said Dayton has made it clear he won't repeal the early expansion of Medical Assistance in the state.

"We're not going to yield on income taxes, he's not going to yield on expansion," Abeler said.

Abeler said since the Medical Assistance expansion is so important to Dayton, Republicans will have to find room for compromise within it, by putting certain limits on eligibility that the federal government would have to sign off on.

Dayton has also offered to cut additional funds to move closer to what the GOP wants to spend on HHS programs. Overall, the governor's proposal would spend about $1 billion less than the current HHS funding forecast for the next two years. That leaves Dayton and the Legislature about $556 million apart.

Dayton spokeswoman Katharine Tinucci, reached Wednesday, declined to provide details about which programs would be impacted by the additional cuts.

Jodi Boyne, spokeswoman for the House Republican Caucus, said the governor has not indicated how he arrived at the $1 billion figure. She said the number could have been calculated by including additional tax revenue, which Republicans oppose. Republican leaders are waiting for more information from the governor's office and the Minnesota Management and Budget office.

"We need more details before we can determine if this is accurate," Boyne said.

(MPR's Elizabeth Dunbar contributed to this report)