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The Senate Committee on Finance met on September 11 to hear invited testimony regarding an update on funds used to address Hurricane Harvey relief, the long-term impact of Hurricane Harvey on the Gulf Coast region, and coordination efforts among state agencies to improve health care and reduce costs.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing, but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

Monitor all funds currently being used to address Hurricane Harvey relief and recovery. Identify ways to maximize the use of federal funds and ensure the efficient use of state funds.

Evaluate the long-term impact of Hurricane Harvey on the Texas economy and the gulf coast region.

 

Opening Comments

  • Nelson – More than 70 agencies have reported Harvey costs, unsure when we will be reimbursed by federal funds; wants to focus on costs that state will have to pay in supplemental bill

 

Abraham Alvarenga, Legislative Budget Board

  • Presented on LBB report covering costs associated with Hurricane Harvey (link)
  • Highlights agency expenditures (total cost, 12 agencies have 98% of total costs
  • Highlights Pg 7 overview of LBB and Comptroller’s role in oversight of state revenue/spending
  • Highlights issues with contract reporting
    • Timing differences between when reports are sent to the LBB and when they are entered into USAS
    • Expenditure of funds which are held outside the treasury and therefore not captured in the CPA’s report; this includes institutional funds expended by institutions of higher education and included in the LBB reporting
    • Some agencies have no new information to report to the LBB and discontinue updates. Amounts last reported to the LBB by those agencies can vary slightly from amounts actually recorded in USAS. As those discrepancies are discovered, adjustments are made to align with amounts reported to the CPA
    • Expenditures reported to the LBB by HHSC include an estimate of the portion of D-SNAP and Medicaid-related expenditures associated with Hurricane Harvey. Since actual D-SNAP and Medicaid payments include both Harvey and non-Harvey costs, the USAS coding does not capture such differentiation, yielding a lower HHSC amount in USAS.
  • 23 Agencies and higher ed institutions have reported 171 Harvey response contracts
  • Pg 10 provides overview of state funding assistance for local entities, highlights that the TWC transferred $8.9 million in GR in FY 2019 to FY 2018 to meet federal match
  • Pg 13 highlights overview of 2017-2018 expenditures for Harvey
  • West – We estimated agencies would spend $4.6 billion, now down to $1.9 billion, what is the difference?
    • DPS did a thorough analysis with FEMA that brought total down by around ~$2 billion
  • Nelson – How much of the total is facilities damage?
    • Can get this to you
  • Nelson – Do we track FEMA reimbursements?
    • Sarah Keyton, LBB – Monthly survey to agencies and institutes of higher education tracks received reimbursements & expected reimbursements
  • Schwertner – On Pg 6, there is $150 million to reappraise 2017 taxable values, & also identifies $862 million to $1.4 billion to continue this for the 18-19; across what geographic region? This is essentially the current biennium
    • Aaron Hericksen, LBB – Primarily relate to lost local property tax revenue or lost local M&O revenue from lowered values due to hurricane impact
  • Schwertner – And this is the entire disaster declaration area? Every district in those areas would be covered
    • Yes, identified by TEA as an option
  • Schwertner – Has this been done in other disasters?
    • Not to the best of my knowledge
  • Nelson – Are school districts eligible for FEMA assistance for facility damage?
    • School district subject to recapture in Chapter 41 can reduce their recapture payment, identified as $30 million in presentation; essentially state can pick up remainder, less any insurance and FEMA costs
    • Can also consider applying this to non-recapture districts with a direct appropriation
  • Nelson – What are we doing to ensure they are applying for federal dollars?
    • Would need to refer to TEA on that, my understanding is that districts are applying for assistance and that TEA and RSCs are assisting
  • Huffman – Regarding reassessed value and loss of revenue, do we know how many districts were affected by Harvey?
    • Can’t say off the top of my head, over 100
  • Huffman – Do we know how many of those actually went through formal reassessment process and this reflected
    • 12 school districts reappraised, remaining districts that didn’t reappraise would likely see impact in 2018
  • Huffman – So the discussion is we would reimburse those who formally reassessed, and also those who didn’t?
  • Nelson – Calls TEA resource to answer as well
    • The districts who chose to appraise in tax year 2017 will see an affect, school finance is delayed according to last years property values & those who reappraised in 2017 will have lower payments going out this year
    • Districts that didn’t reappraise in 2017 and have impacts in 2018 essentially will receive state assistance in FY2020
  • Huffman – But the taxpayers will not be forced to pay more taxes on the value, it’s just the school districts saying property is worth less so we want to be reimbursed
    • We can provide more detail about this, of the $862 million to $1.4 billion identified there are costs related to lost property tax collections and not money coming from the state
    • Obviously when funding falls state funding will increase, but there is a delay
  • Huffman – I understand the function, but it is a policy discussion on whether we want to start looking forward; very supportive of those districts that did the right thing and reassessed property, I do think state should make these districts whole
  • Huffman – Do you have numbers comparing the districts broken down
    • Leo Lopez, TEA – Yes, we have numbers comparing those who reappraised versus didn’t and for the coming year there are a number of ways we could project losses
    • Looking currently at a 3 year trend of where property values were headed before the storm, but won’t know extent of decline versus trend until the Spring
  • Huffman – I think it would be useful to the committee to have this information moving into the budgeting process
  • Schwertner – there has been loss in property tax revenue, do you have any knowledge if this is the first time the state has stepped in to help make these districts to be made whole after a hurricane?
    • After Ike
  • Schwertner – what about after 09 and the economic disaster?
    • There is a provision for aid when there is a rapid decline in property values
  • Schwertner – the only options for those districts would be to reduce services or increase the tax rate?
    • They would need to increase enrollment or increase tax rate
  • Kolkhorst – noted loss of property values in Aransas pass, noted there has been aid after rapid decline in oil prices and that there has been gap funding
  • Schwertner – clarified that the idea of gap funding would be a one time supplemental or enhanced backstop, how long would or should we provide that gap funding?
  • Nelson – would think it should be on a case by case basis
  • Kolkhorst – believes it would be a one-time gap payment – the precedent would be set that the state would step in and help in the event of an emergency. Related to FEMA and insurance – districts are aggressively applying for FEMA funding and some had very good insurance, but the cash flow is difficult because they need to make some repairs as they are already in the buildings
  • Nelson – need to be sure that we are using FEMA where it is applicable
  • Hancock – noted the timing of gap funding in context of ASATR which was a similar kind of funding; are we auditing the funding requests to be sure that we are maximizing other funding sources?
    • There are provisions that the district can do to demonstrate need from the state and are subject to audit
  • Hancock – have heard similar audit capabilities, are we actually using the capabilities?
    • That is something we can work with the auditors – some things like student counts, etc. are audited constantly
  • Hancock – are we building into the budget the necessary funds for auditing?
    • Will get a response to the committee regarding that
  • Nelson – there needs to be a check in the audit that they have applied for FEMA and worked with local insurance
  • Taylor – believe that is reasonable and is being done – what are the number of students affected by Harvey?
    • 4 million students
  • Taylor – discussed 1993 hold harmless and ASATR – how long did the economic funds in 09 last?
    • It was a onetime payment
  • Taylor – believes this is what the ESF should be used for
  • Nelson – agrees
  • Nelson – related to an audit, why couldn’t the SAO do that?
    • Henricksen, LBB – will reach out to them regarding that
  • Kolkhorst – believes that is a great idea
  • Taylor – this audit would not be as complex as others, it would be more of a report than not
  • Kolkhorst – noted delayed timing of FEMA funding – some places are still waiting on Ike funding
  • Seliger – we do not what a school finance system that is built entirely on hold harmless – the priority should be to get this put behind us to prepare for the next hurricane
  • Kolkhorst – related to debris removal and the 10% local match could be reimbursed by the state, where is that?
    • There was an appropriation out of the solid waste GR-D – $28.4 million of $90 million has been awarded to local communities to be spent on that
  • Kolkhorst – is that low because people are not applying?
    • Will need to look into that
  • Kolkhorst – where are the rebuild Texas commission numbers?
    • Listed under specific agencies, will follow up with specific numbers
  • Nelson – are universities and higher ed eligible for FEMA funding?
    • They are
    • Have sent surveys to determine sources of funding for recovery for the universities

 

Nim Kidd, Texas Department of Emergency Management

  • Have been prepared for next hurricane including current disturbance over the Yucatan
    • Potential rains coming in are the concern
  • $14.7 billion in FEMA dollars are in Texas
    • Individual assistance – 610,000 families qualified for inspection from FEMA – average grand $24,000 – highlights need for insurance (average NFIP pay out $96,000)
    • Small Business Loans – $43,500 loans made – $4.3 billion
    • Public Assistance – debris – $31 million incumbered for non-federal share – initial estimate was high, are currently at half of the original estimate
  • Taylor – do you have a one pager for those numbers?
    • Will provide that to the committee
  • Related to higher education statistics – some universities have applied and withdrawn
    • Working to find out why
  • Hinojosa – do we require them to have private insurance?
    • FEMA has an obtain and maintain clause for flood insurance
  • This storm was different in how FEMA funding flows through the state due to the housing mission assigned to the GLO
  • Are working with Rebuild Texas refunds are being maximized
  • Related to reductions in overall costs are continuing to be refined
  • Local governments and state agencies have almost 10,000 projects at cost of $5.8 billion – 15% (900 million) is on the streets right now – less than 1% of FEMA funds for public assistance have been made available
  • Kolkhorst – of $14.7 billion – how much is IA?
    • $1.6 billion
    • PA -just under $1 billion
  • Kolkhorst – how much is still outstanding?
    • About $4.8 billion in PA
  • Kolkhorst – how are those repairs being funded until those funds come in?
    • There are a number of strategies with federal dollars
    • Counties can ask for advanced funds after it is scoped and bid
  • Nelson – what advise do you give to include in interim report?
    • Single inspection program would be very important
    • Integrated and streamlines disaster case management system mandated by the state
  • Whitmire – regarding release of water from water bodies – do you believe that centralized command of water authorities in Austin should be responsible for coordinating alerts, etc.?
    • Agree that there can be and needs to be a better system
  • Hinojosa – what are we doing to be sure we implement lessons learned?
    • There are many documents coming from the Rebuild Texas Commission and a manual that will address that information
  • Taylor – heard a lot about local ordinances slowing down immediate recover – we should look into what local ordinances we can waive in these instances
    • Would like to look at how to waive HOA – counties and cities can waive other ordinances
  • West – are there other model collaboratives we can get best practices from? And what state agencies need to be at the table as well as local entities?
    • Will consider and provide that information the committee

 

Heather Lagrone, General Land Office

  • 10,000 people were housed through GLO/FEMA programs
  • 16,195 homes received direct repair through DAHLR and PREPS programs
  • Described some of the FEMA/GLO programs
    • GLO has spent $220.5 million on PREPS program – all reimbursed
  • Long term recovery mission – Texas will receive 3 rounds of CDGBDR funding
    • Transition plan is using federal funding for mitigation and resiliency
    • Initial $58.7 million being used in Houston and Coastal Bend Area
    • Have used Governor’s $38 million for multifamily housing project in south east Texas – is complete expecting to be reimbursed through future HUD funds
  • August 17th HUD authorized 2nd allocation
    • GLO began conditionally awarding projects
    • Conditionally awarded $280 million
  • 3rd HUD allocation authorized in December
    • $652 million dedicated to unmet housing needs
    • Federal register has just been released
  • July 23 opened affordable rental program
    • Includes $250 million for affordable multifamily housing projects
  • West – application will be made to GLO?
    • That is correct
  • West – businesses will make an application to GLO?
    • That is correct, will bring in a vendor to help manage that
  • West – why do we need a vendor?
    • To not incur additional FTEs
  • Hurricane Harvey: Texas at Risk – document produced by GLO available on website
    • Includes 18 recommendations
  • West – related to the vendor issue – can other state agencies do that?
    • No
  • West – businesses can get up to $250,000?
    • Yes, but they have to create 5 jobs
    • For businesses that were impacted by Harvey
  • Kolkhorst – there is a lot of money flowing slowly – $4 billion in mitigation – have the FEDs said what we can use those funds for?
    • No, the rules are not out yet
  • Kolkhorst – do we expect some of that money to be used for new ways to mitigate flooding?
    • Yes – HUD always brings up detention
    • HUD has asked the GLO for recommendations on mitigation projects
  • Kolkhorst – $413 million to be used for local match
    • Yes, as long as it is used on eligible projects
  • Kolkhorst – discussed matching rates on PA – 90/10
    • Kidd – that is correct we got 90/10 match and can now count volunteer hours
  • Campbell – what checks and balances does GLO have for the funding flowing through the GLO are being administrated for their intended use?
    • There are line item invoice showing use of funds that are then reimbursed
    • There is an entire department for quality control and reimbursements
  • Nelson – the states total cost for PREPS and DAHLR, how much has been reimbursed by FEMA?
    • Will provide that information to the committee
  • Nelson – are you coordinating with other agencies related to mitigation?
    • Have been coordinating with TDEM and others, looking for opportunities to leverage funds

 

Monitor the implementation of the following funding initiative: Health Care Costs Across State Agencies – Monitor coordination efforts among state agencies to improve health care and reduce costs pursuant to Article IX, Section 10.06 and Section 10.07.

 

Andy Vasquez, Texas Health and Human Services Commission

  • Integrated healthcare information system between systems – 10.06 work group has been working toward that goal
    • Met with staff from many entities
    • Submitted report to the legislature on May 1
  • Written testimony reviewed funding by agency – led to plan design and available tools
    • Total $50 billion for all healthcare programs
    • Greatest affinity is on TRS and ERS
  • Provided services to 5.5 million Texans
  • Observations – ERS changes in population have been due to retirees
  • ERS recognized that as participants reach 50 they have 1/3 chance of developing diabetes
  • 3 options considered for integrated data system: partnered institution, 3rd party vendor, single data point and each entity gathering their own data
  • Nelson – is there a preference?
    • Leaning toward working with partnered institution
  • West – what kind of data are we talking about?
    • Enrollment information
  • West – why do you need enrollment information from other entities?
    • To be able to determine and gather demographics
  • West – we can do that already from each agency, how useful is it to have it integrated?
    • It would allow us to move toward recognizing common areas between agencies
  • Watson – it would be to have a single database to help better create outlooks for healthcare options to offer opportunities to save money in the long run -0 the goal is to find common practices, right?
    • It is a way to offer options from positive results from one agency and apply them to all of the agencies
  • Watson – one of the cons to doing this, it would cost $5 million?
    • That is correct
  • Watson – what would the savings be?
    • Have not completed that analysis yet, that is part of the follow up
  • Watson – what is the status on the UT health agreement?
    • All agencies have worked out some level agreement with UT health
  • Watson – when are we going to be done?
    • Katrina Daniel, TRS – this would be an ongoing arrangement – there is an existing database, and the value is to be able to compare our data to other data sets
  • Watson – understand concerns on spending to save, is frustrated because it it should be able to save us money if we use it in the right way – am unhappy with results we have been given up to this point
  • Nelson – the original vision was to plug this information into an existing system – this is getting more complicated that originally envisioned
  • Schwertner – the idea behind the rider was to get all of these entities into a room to discuss ways to find efficiencies, not sure who is talking at these workgroups – do not believe we have achieved that at this point
    • Those conversations are happening
    • When talking the deeper dive into the UT health science center- the data that was able to be leveraged informed ERS
  • Campbell – there is actuarial data and research, what have you done with the data you already generate, is there already a prevention arm within the agency?
    • It is twofold – each agency has been doing work toward prevention
    • This charge was a potential for new information to become available by having additional expertise and additional information
  • Kolkhorst – 40% of the budget is represented by these entities, there is no way that we cannot realize better outcomes and savings
  • Huffman – combining the ERS and TRS would cost a huge amount – as a point of clarification

 

Porter Wilson, Employees Retirement System

  • 06 rider was to look at recommendations for a plan for an integrated system
  • Is an integrated system needed? – we are doing the actuarial activity regardless of the integrated system anyway – we could find efficiencies and outcomes from it – but it is work that is being done all the time anyway
  • Noted $50 billion mentioned is not all appropriated – still needs to be well maintained
  • 07 – having groups come together in respect to administration – those conversations are happening and will continue to get more granular as we progress
  • UT health analysis – it was a proof of concept – the benefit is that it is risk adjusted data
    • When it can be risk adjusted that is wen you really are able to make comparisons
  • Schwertner – did you find that ERS is as efficient in utilization compared to other populations in the UT health data – particularly in 50 and over
    • the feedback received from them was how the costs compared to other populations
    • it was useful information though fairly limited data set they reviewed
    • received an informal report that showed proof of concept as opposed to a full analysis
    • it would help reveal some blind spots in traditional view of data
  • Schwertner – this information is important – surprised that Blue Cross is not more involved
    • There is a lot of inhouse collaboration with blue cross
  • Noted no exceptional items requests in 2019 LAR
  • Hinojosa – you have a very different population from TRS so integration could be very difficult – what would the benefit of all of the data?
    • The important part is adjusting for the demographic issues leading to more relevant analysis more opportunities for more efficient care
  • Hinojosa – how does your population and issues compare to TDCJ?
    • There are a number of engagement issues with ERS that are not present at TDCJ
  • Hinojosa – Asks after collaboration between institutions
    • This group is committed to talking and collaborating with each other, also with UT and A&M health care leaders

 

Greta Rymal, Health and Human Services Commission

  • Giving overview of cost containment riders & initiatives, link to presentation
  • If we are going to contain cost, we need to focus on Medicaid client services
  • Cost drivers in Medicaid are in four buckets, eligibility, benefits, utilization, & payments/cost sharing
  • Total cost is product of caseload and cost per client
    • Other cost drivers include changes in federal law, population growth, economy, natural disasters, consumer expectations
  • Costs are impacted by payer type, evolutionary advances in medicine, payment rates and policies, changes in clinical practice standards, and federal matching standards
  • Reviewed FY 17 Medicaid number:
    • Texas Medicaid spending – $38.4 billion
    • Medicaid payments to nursing homes – $3.1 billion
    • Medicaid prescription drug expenditures – $3.9 billion
    • Over 4 million people served in the Medicaid program
    • 78% of clients are under 21
  • Slide shows Medicaid annual budget growth since 1980s
  • Nelson – noted significant portion of state budget spent on healthcare
  • Kolkhorst – noted the trends related to prescriptions – is this group looking at escalating prescription costs?
    • It is
  • Kolkhorst – given the scenario, would like more transparency related to prescription costs
    • Will go back and check to see if the number is before rebates, will report back to the committee
  • Described caseload – 69% non-disabled children
  • Described expenditures – aged and disability related – 61%
  • From 2000-2017 Medicaid percent of state budget has grown from 20.22%-30.12%
  • Reviewed agency Medicaid cost containment initiatives – rider 33 directed the agency to save $350 million in GR
    • Have identified $312 million in savings
    • Come from: fraud prevention, fee-for service payment changes, efficiencies in vendor drug program, increased third party recoupments, pilot program on motor vehicle subrogation, efficiencies in Medicaid ID card printing, facility cost savings, and others
    • Continuing to look at additional initiatives
  • Nelson – will be looking for additional recommendations on efficiencies without having a negative impact on care going into the next session

 

Katrina Daniel, Teacher Retirement System

  • Has larger population than ERS
  • Cost drivers include inefficient utilization and high prescription costs
  • Aging population is a cost driver
  • Cost saving strategies include: competitive procurement contracts, effort to incentivize doctors to utilize cost effective prescriptions, early phases of partnership with Dell medical to reduce episodes of muscular-skeletal surgery when applicable
  • Robust telemedicine through Teledoc offered for cost avoidance
  • High deductible plans are now offered no cost generic program to save costs in the long run
  • Controlling costs through member engagement
  • Macro level cost analysis – discussing between groups is beneficial as well as comparison to S&P group
  • Average cost is lower per year than ERS due to cost sharing
  • Huffman – seems as though we have gone through the easy cost saving initiatives
    • Yes, although this is an ongoing process with areas of constant improvement with incremental changes
  • Huffman – noted spending a little for long term cost savings is very valuable moving forward
  • Nelson – a lot of what is needed is prevention to help curb healthcare costs
  • Campbell – cautioned looking at cost of healthcare as an apples to apples comparison

 

Bryan Collier, Texas Department of Criminal Justice

  • Partnered with UTMB and Texas Tech
  • Demographics are what drive the discussion
    • Closed 8 prisons and lowered population significantly
    • Had significant growth in over 65 population
  • Noted high HIV and AIDS population – consume high percentage of Pharmacy budget
  • Have seen increase in mental health offenders
  • Challenges in keeping qualified medical staff in units
    • Still have 20% vacancy
    • See high cost in sending patients to outside care
  • Cost containment areas – UTMB qualifies for 340B drug pricing, saving in recycling of unused medication, grouping similar diagnoses patients in the same unit
  • Wheelchair offenders – have higher number than previously – ADA requirements are significant cost
  • Created sheltered housing to open up infirmary beds
    • 2019 LAR will include additional funding to for similar programs for other populations
  • West – related to process for parole of older inmates – how is that going?
    • Last year there were 69 offenders released
    • Presented about 200 cases
    • Typically, those offenders will go straight into a nursing home
  • West – are there lessons learned from those who are not granted parole?
    • Parole board does a good job in their review, and do not have additional recommendations at this time
  • West – assumes the board takes diagnoses into consideration?
    • Yes, they do
  • Whitmire – what are the most expensive inmates?
    • $635,000 – person with ALS
    • $560,000 – person with bacterial infection
    • $550,000 – 3 people with coronary artery issues
    • All of these are yearly costs
  • Whitmire – would like to have dialogue related to reinvesting that funding into another source as getting those people out of prison and into a siloed situation
  • Campbell – are we keeping paralyzed offenders? How often does the board reconsider cases?
    • It is possible that we have an offender in that circumstance, and yes, the board goes back to reconsider those cases
  • Huffman – if a person is incarcerated they cannot collect Medicaid, correct?
    • That is correct
  • Nelson – you are different than the rest of the group, what if any information TDCJ got from this exercise?
    • Cannot give specific examples but significant values were found