For many individuals and organizations,
uncertainty has been the prevalent feeling as the effects of the recent
economic downturn are felt across the country. These effects will certainly be
discussed for many months (and years) to come; including how the recession will
affect mental health and substance use (M/SU) financing. Although it’s
difficult to tell for certain, the impacts will likely resonate through the
M/SU and healthcare communities for years to come through increased case loads,
reduced funding, and difficult state and local fiscal conditions.
With increased economic anxiety about jobs,
portfolios, and mortgages comes increased stress on individuals and their
families. There is evidence that concerns related to employment have a negative
impact on mental and physical health. [1]
Based on the downturns in the 1990s and early 2000s, health and human services agencies and
organizations in many states are likely to experience an increased case load,
resulting in higher Medicaid and other human service program expenditures.
Unfortunately, while
there may be an increased need for behavioral health services, there may not be
enough funding to support the increase, which may spur eligibility changes or
programming reductions. In Fall 2008, the National Association of State Budget
Officers (NASBO) reported that state spending was projected to decrease by 0.1
percent in Fiscal Year 2009 compared with the historical average growth rate of
6.7 percent per year. [2] In
the time since the State Budget Officers’ report, states have dramatically
altered their projections. It is
anticipated that spending for FY09 will be lower than NASBO originally reported
and state budgets will likely contract.
According to recent figures published by the National Governors
Association, at least 30 states are currently facing budget shortfalls for
FY09, totaling $30 billion. [3]
While the last
economic turndown lasted just eight months, ending in November 2001, its
effects on state budgets were felt well into fiscal 2004 [4]. During that time, states were able to mitigate the
effects of the downturn by drawing on tobacco settlements funds, raising
tobacco excise and fuel taxes, and drawing down accumulated reserves. In 2002,
NASBO reported that it typically took 12 to 18 months following a recession for
states to experience revenue growth. Today it is anticipated that the current
economic downturn will be longer and deeper than the 2001 recession and states
will have a more difficult time accommodating declines in tax revenues that
fund M/SU programs. 25 states are already reporting shortfalls in FY10 of $60
billion. [5]
Non-governmental M/SU funding is also at
risk. Many foundations and non-governmental organizations rely on investment
income from trusts or endowments to fund projects and services. While some have
committed to maintaining funding for programs and services, many others are
likely to trim back programs to adjust to current financial conditions. [6]
The good news is that economic downturns
are not permanent and this downturn will ultimately come to an end. States are
currently lobbying for a stimulus package to ease Medicaid funding through an
increase in the “federal match,” fund social programs to prevent budget cuts,
and increase infrastructure funding to create new jobs. However, given the long
budget cycle in most states and the federal government we should not overlook
the need to also deal with longer term planning since renewed funding
appropriations will become available after the downturn has subsided and
caseloads are back to normal levels.
Although the outlook is not yet known, this
downturn may present the M/SU community with an opportunity to discover new and
diverse financing approaches for M/SU services, create new partnerships, and
consider new possibilities for its mission. Now, more than ever, we will have
to collaborate and share ideas across organizations as the fallout from the
current economic situation is sorted out.
[1] M W Linn, R Sandifer and S Stein, American Journal of Public Health,
Vol. 75, Issue 5 502-6
[2] “The Fiscal Survey
of States: Spring 2003,” National Governors Association and National
Association of State Budget Officers
[3] “State Economic
Review, December 2008,” National Governors Association
[4] “The Fiscal Survey
of States: Spring 2003,” National Governors Association and National
Association of State Budget Officers
[5] “State Economic
Review, December 2008,” National Governors Association
[6] Statement from A
Message from Risa Lavizzo-Mourey on the Effects of the Global Financial Crisis
on the Robert Wood Johnson Foundation, Oct 31, 2008
