According to a new poll of public opinion commissioned by the Public Affairs Research Council of Alabama, state residents would be willing to pay more in taxes to avoid budget cuts in key areas like education, health care, and public safety. However, the public remains distrustful of government’s ability to spend tax dollars wisely.

The results serve as a backdrop to PARCA’s annual meeting, Feb. 13 at the Harbert Center in Birmingham. The meeting will focus on initiatives by leaders in those key areas to improve public trust through goal-oriented planning, targeted investment, and the transparent tracking and reporting of results.  The poll results are also relevant to lawmakers as they consider how to close a budget shortfall and improve budgeting practices.

The survey of almost 600 Alabamians was conducted between January 5 and January 21. Each year, The Public Affairs Research Council of Alabama commissions a survey of public opinion to gauge Alabamian’s attitudes toward government and the issues facing the state. Randolph Horn, Samford University Professor of Political Science and Samford’s Director of Strategic and Applied Analysis, collaborated with PARCA on the design of the survey and directed the polling operation. The results were weighted to reflect the demographic makeup of the state. Text of the questions and results of the survey can be accessed here. You can find the survey results presented graphically here.

The PARCA poll found strong support for increased spending on a variety of educational priorities. It also found public support for more investment in rehabilitation of prisoners in the interest of cutting down on criminal recidivism. Also, a majority of those polled said they support expanding Medicaid to cover more low-income individuals, including childless adults.

One of the most striking things about poll results is that, on a host of issues, there is broadly-based public consensus, a set of shared opinions that  cut across demographic and partisan lines. The one exception to that in this year’s poll, Medicaid expansion, is discussed below.

The poll results contrast with the perception that voters are deeply divided along ideological lines. This year’s results are similar to the findings of PARCA polls in previous years, which have consistently found widely shared priorities.

This year’s poll finds that among the four top areas of state expenditure — education, health care, public safety and highways —  Alabamians rank education spending are the state’s most important area of investment. Health care comes in second. Public safety comes in third, with highways ranked fourth.

A strong majority of respondents said they’d be willing to pay more in taxes to avoid cuts in public education (63 percent) and health care (57 percent). A majority said they would be willing to pay more in taxes to avoid cuts in public safety.

Focusing on education, the poll found that 79 percent of Alabamians believe that the level of funding in schools does make a difference in the quality of education provided. And 67 percent believe that too little is being spent on public education in Alabama. However, 63 percent of those polled said they thought that the money that currently goes to education is not being spent properly. Some of that sentiment may reflect Alabamian’s general distrust of government. However, in past PARCA surveys, further questioning on this subject revealed that some of that perception of improper spending stems from factors linked to inadequate spending. For instance, respondents pointed to old and tattered textbooks or parents having to pay for classroom supplies as evidence that money in education was not being properly spent. Strong majorities of those polled believed that more money should be spent in schools in a variety of categories and that the state should play a role in equalizing funding for school systems that lack resources.

Turning to corrections, the poll indicates the public believes we should be doing a better job of rehabilitating prisoners than we are currently doing. As the state grapples with a prison overcrowding problem, public support for increased investment in rehabilitation and treatment is stronger than support for simply building more prison space.

On Medicaid, there was almost universal agreement (95 percent of those polled) that the state should provide a medical safety net for low-income children, pregnant mothers, and seniors. A majority of those polled said they supported expanding Medicaid by taking advantage of federal incentives to help pay for the extension of health coverage to low-income adults, who are currently not covered.

However, it should be noted that this was the one question in the survey that produced a division along party lines.   Nearly 76 percent of those identifying themselves as Democrats favored expansion, and expansion was supported by 53 percent of those who classified themselves as either independents or as having no partisan affiliation.  However, among Republicans, 54 percent supported keeping Alabama Medicaid as it currently is, rather than expanding it.

The PARCA Quarterly Winter 2015 edition provides perspective on Alabama’s budget challenges and reform efforts in education, Medicaid, and the state prison system.

The Quarterly provides background for our upcoming annual meeting, which is February 13 at the Harbert Center in downtown Birmingham.

The meeting will feature:

       State Sen. Cam Ward and Alabama Sentencing Commission Executive Director Bennet Wright presenting proposals under consideration by the Prison Reform Task Force.

       State Health Officer Donald Williamson and Kim Eason and Julie Wells of the Patient Care Network of East Alabama discussing changing approaches in the Medicaid program.

       State Superintendent of Schools Tommy Bice providing an update on the progress of Plan 2020.

       Gov. Robert Bentley delivering the luncheon address.

Friday, February 6 is the deadline for registration. Until then, you can get more details and register online.

In tough budget years, lawmakers have often looked for alternative ways to bring in revenue to support state government operations. In the case of the judicial branch of government, the Legislature has repeatedly raised the charges, fees and fines charged to the users of the court system, shifting much of the cost burden for court operations to the courts themselves.

However, court cost collections have proven to be a less than reliable source of revenue. In 2014, total criminal and civil court collections were down by $8.5 million to 2013, a drop of 6 percent. Compared to 2011, total court cost collections are down $17 million, or 10 percent. That’s a decline in collections even through the Legislature raised fee amounts during that same time period.

About 2/3 of court costs are collected through the criminal courts, amounting to just over $96 million in collections in 2014. The biggest component of that is traffic court collections. And that’s where the steepest drop in collections has come. In 2014, the state court system collected $54 million through traffic courts across the state, compared to $72 million in 2011. That’s an $18 million decline, or a 25 percent drop, over that time period.

This decline could be linked to problems in other departments. The Department of Public Safety reports that currently it has only 289 Troopers assigned to Highway Patrol statewide, far short of past staffing levels. According to figures provided by the State Personnel Department, DPS, as a whole, had 276 fewer employees in FY 2014 than it did in 2008, which amounts to an overall decrease in employees of nearly 20 percent. According to DPS, troopers issued  792,860 citations in 2012. That number fell to 690,323 citations in 2013. From January to November of 2014, troopers had issued 663,414 tickets. Beginning in 2015, DPS will be folded into the new Alabama Law Enforcement Agency. LEA director Spencer Collier has said he plans to put a priority on putting more troopers on the road.

Collections in the civil courts make up the remaining 1/3 of collections, totaling $48 million in 2014.That total is roughly the same amount collected in 2011.

The Alabama Department of Education this week released statewide results of its Grades 3-8 assessment tests, broadly known as the ACT Aspire.

The Aspire tests, which were taken statewide for the first time last spring, replace the Alabama Reading and Math Test which had been used to measure student and school performance.

The Aspire offers several advantages. Devised by the well-known national testing company, ACT, the Aspire is more closely aligned with national performance measurements. It includes a benchmark scoring system designed to show whether a student is on track academically to graduate from high school ready for college.  You can read more about the Aspire and Alabama’s new assessments from the A Plus Education Partnership. And here you can find the State Department of Education’s discussion of statewide Aspire results.

PARCA uses test data from the Aspire and other sources as well as available financial data to help school systems identify their strengths and the areas in need of improvement.

As this is the first year the state is using Aspire as a performance measure, the results set a baseline from which future improvement and growth can be measured.  As expected though, the results establish a tougher, and likely more accurate, benchmark for academic proficiency. On the ARMT, the percentage of students scoring above proficient ranged between 68 and 93 percent, depending on the grade and subject tested. On the Aspire results, the highest percentage of proficiency could be found in 3rd grade math where just over half the students (52 percent) were deemed to have met or exceeded the proficiency level for that grade. On the other hand, only 29 percent of 8th graders scored at or above the readiness benchmark in math.

Enlarge to explore.

It’s now official. In 2014, Alabama added 12 more amendments to its constitution, bringing the total number to 892. The State Elections Canvassing Board met the final week in November and certified the election results.

The additions include amendments restating, in stronger term,s the right to hunt, fish, and bear arms. The Alabama Constitution of 1901 also now allows a sewer authority in Franklin County to provide broadband internet and requires a $1 per bale assessment on each bale of cotton to be used for cotton promotion (With the latest amendment, you can’t ask for a rebate on that assessment).

The additional verbiage added this year will allow Alabama to continue padding its lead in constitutional length. Alabama not only has longest state constitution in the U.S, it is perhaps the longest constitutional document in the world.

By comparison, the U.S. Constitution is more than twice as old and has only been amended 26 times. State constitutions do tend to be more detailed and amended more often. But the average number of amendments across the states is 150. The next closest state to Alabama is California with 527 amendments.

According to a tally kept by the Council of State Governments, Alabama’s Constitution, at more than 376,000 words (without the 12 new amendments) is more than four times as long as the Texas Constitution. That’s the second longest state constitution, at just under 87,000 words.

That makes from interesting trivia, but does it matter?

If you want clarity, efficiency, and effectiveness, it does matter. If you want responsibility and accountability, Alabama’s constitution is indeed a problem.

Typically, constitutions describe principles and fundamental philosophy, set out a framework for government structure, and divide state powers among the branches and between state and local governments.

The Alabama Constitution, by contrast, goes into tedious detail. While the constitution may have started by laying out general statewide principles, its accumulation of amendments is due in to the exceptions to those principles and special cases made for specific localities. It is estimated that 70 percent of the amendments are local in nature. Which begs the question: Why are they in the state constitution?

The framers of the Alabama Constitution of 1901 wanted to set limits on government. In particular, they wanted strict limitations on what local governments could do. So, they set up a system in which many local decisions have to flow through state government for approval. The local amendments to the Constitution are only the top layer of complexity. Below that, the state legislature has passed over 36,000 local laws which apply to specific counties or municipalities.

The heavy involvement of state legislators in local affairs tends to create confusion about who is responsible for decision-making. It also blurs the lines of accountability when things go wrong. And finally, it also interferes with the development of a culture of statewide planning and policy making, which the state needs the Legislature to play.

Despite the energy put into constitutional reform efforts over the decades, the issue of granting local governments more independence has been one of the most intractable.  The latest Constitutional Reform Commission finished its work earlier this year, and its final round of proposals included an amendment that would have granted counties limited home rule in some aspects of their operations. That proposed amendment failed to pass the Legislature.

Budget discussion, State Board of Education, Nov. 12

With the General Fund facing an acute shortfall and the education budget still struggling to recover to pre-Great Recession levels, there are beginning to be conversations about new approaches to budgeting.

At a recent State Board of Education meeting, State School Superintendent Tommy Bice told board members he was in discussion with the governor’s office and representatives of the legislative leadership about formulating a budget request that was strategic and deliberate rather than “shooting the moon.”

That would be unusual. This is the season when state agencies draw up their budget requests and submit them to the governor’s office, an annual ritual that bears some resemblance to making up lists for Santa Claus. Budget requests are typically an expression of wishes or needs, without regard to what Santa can realistically deliver, and without a clear link to achievable, measurable goals.

But in this case, the State Board of Education does have goals and will have a system of measuring progress toward those goals. The current wish list is well beyond currently available resources but it does step back from an immediate demand for a full restoration of pre-Recession spending levels.

In his presentation to the Board, Bice described conversations with the governor’s office and the Legislature under which the parties would pursue a three-year plan to fully fund the Foundation Program, the mechanism the state uses to distribute most of its support to local school systems.  He also listed items requested by the State Department that would support the goals of Plan 2020, the state’s plan to raise the quantity and quality of graduates from Alabama K-12 schools. State Board Member Mary Scott Hunter said she was encouraged in her conversations with legislators who’d said they wanted to pursue an education budget built on planning and goals.

“I think it highlights the need to be deliberate and strategic,” Hunter said, “and to be working with our colleagues across the street.”

Still, there is a wide gulf between the money available and the Department’s aspirations for K-12 schools.

Under the current controls on education spending growth, the Department of Education estimates that K-12 education could have an additional $35-40 million to spend in 2016.

But the department’s draft budget request, envisions asking for an additional $228 million for K-12 education in 2016.

The largest portion of that request is $175 million to begin the process of restoring full-funding for the Foundation Program. The Foundation Program is supposed to provide enough for an adequate and equitable education at schools across the state. Since the budget problems developed, various components of the Foundation Program — operating support, technology, textbooks, professional development, classroom and library supplies, and transportation — have been cut or zeroed out. The $175 million portion of the request also includes a one percent pay increase for employees and the first installment of a plan to restore 1,066 teaching positions lost to budget reductions.

Beyond that money for local systems, the State Department is proposing an increase of $51 million in various state-level initiatives that support the strategic priorities of Plan 2020.

Those include:

1. $10 million to pay for the new suite of assessments that measure student and school academic progress.
2. $5.1 million to expand the Alabama Math and Science Initiative.
3. $5 million to meet the demand for distance learning and to establish a virtual high school.
4. $5 million for an initiative to recruit new teachers into the profession and for creating alternative routes for career advancement other than moving into administration.
5. $5 million for expanding the network of Family Resource Centers to better connect schools and students to community resources.
6. $5 million for further Career Tech expansion.
7. $5 million for a competitive grant pool to support innovation in schools.
8. $4.8 million increase needed to support systems’ assessment of learning needs in special populations of students.
9. $3.8 million for a system of online, formative assessments provided to school systems.
10. $1 million to complete the planned expansion of Advanced Placement courses.
11. $1 million to establish a competitive grant program to help schools pay for arts education with an emphasis on those systems that currently can’t afford it.

While the looming shortfall in Alabama’s ailing General Fund has received much attention, the state’s Education Trust Fund (ETF) isn’t exactly enjoying robust growth, according the recently published year-end report on receipts to the fund.

The ETF, which pays for public K-12 and higher education plus an assortment of other smaller agencies, grew just 2.1 percent over 2013. And revenue from Alabama’s income tax was practically flat in FY 2014 as compared to 2013.

The income tax provided 60 percent of the Education Trust Fund’s $5.8 billion in revenue in 2014. Sales and use taxes provided another 32 percent. A public utility tax provided 7 percent of the total. A handful of other taxes made up the remaining 3 percent.

Since it contains the income tax and most proceeds from the state sales tax, the ETF tends to grow with the economy. For example, sales tax receipts to the Education Trust Fund increased by 5 percent.

However, that number is somewhat inflated. In 2013, lawmakers sent $52 million straight to K-12 schools rather than depositing it in the Education Trust Fund first. This year, that $52 million drops into the ETF, creating the appearance of extra growth. Growth in sales tax collections were more like 2 percent.

According to analysts, this year’s income tax receipts, at least as they compare to 2013, are also skewed. Income tax collections jumped more than expected in 2013, thanks to some selling of stocks and the end of 2012. Those moves, made in anticipation of higher tax rates, produced a one-time jump in revenues in 2013. Looking at wage income alone, taxes collected through withholding increased about 2 percent in 2014 over 2013. But thanks to the inflated 2013 number, overall income receipts to the General Fund increased just 0.8 percent.

During the current fiscal year, the state is anticipated to make its final repayment of the $437 million borrowed for education from the Rainy Day Fund during the economic downtown. The state still owes $92 million that is due by Sept. 15, 2015.

All in all, the Education Trust Fund has still not recovered enough to provide the level of funding for schools it provided in 2008, before the Great Recession. The final repayment and a pickup in job growth in recent months should allow for some improvement in the 2016 budget year.

The final tallies are in for fiscal year 2014 collections to the state’s General Fund. The results are, as usual, lackluster.

Collections from the assortment of taxes that feed the Fund grew by just 1.03 percent over 2013.

That’s pretty typical performance for the General Fund, and that anemic growth is the root cause of an impending problem the new Legislature will face when it convenes next year.

The General Fund supports the operation of the state’s non-education agencies. The cost to operate General Fund agencies exceeds the revenue available. The shortfall in 2016 is expected to be over $200 million.

According to the Legislative Fiscal Office, from FY 2008 to FY 2013, the Legislature has used over $1 billion of “intermittent” or temporary revenues used in balancing the General Fund.

Beyond that, the State has borrowed $599 million from the Alabama Trust Fund since 2010 to support the General Fund budget. And the law requires that this borrowing must be repaid.

For a more extensive discussion of the General Fund’s situation, see the PARCA’s October update on Alabama’s Ailing General Fund.

At the end of each month, the state publishes a report that tracks the revenue received by the General Fund from its various sources. The report generated at the end of September, the end of the fiscal year, allows you to compare yearend totals to those in the previous years. Results of a PARCA analysis of that report are presented in the table below. Below the table is a discussion of some of the major taxes and some notes on quirks you might detect in the data.

Notes on top sources of receipts

The table lists the amount from each tax that is credited to the General Fund. In many cases, that is not the total amount collected from the tax or fee. For many of the taxes and fees, the General Fund receives only a portion of the tax collected with the rest going to other state or local government accounts.

Insurance company licenses and premium tax: 16 percent of receipts in 2014, up 4 percent from 2013. These are taxes collected on the activities of insurance companies. This tax saw some growth this year. However, in both 2013 and 2014, these receipts have been supplemented by extra payments from the insurance guarantee fund, a pool that holds funds to be used in the event of insurance company failures. That extra support, which amounted to $12 million in 2014, isn’t expected to recur in 2015 or in the next couple of years.

Subtotal of sales, use, and lease taxes: 16 percent of the total for 2014, up 7 percent over 2013. This is a category of receipts PARCA created by combining sales, use, and lease taxes. This is by no means total state sales tax collections because most sales taxes are deposited in the Education Trust Fund. However, some components of sales and use taxes have been assigned to the General Fund. Individual taxes that make up this subtotal are listed individually as well. A couple of points on those: The large percentage increase in the remote sales tax (a tax on sales over the Internet) is explained by the fact that the 2013 figure is not a full year’s collection. In other words, the increase is not a huge jump in the overall collections. Instead, the 2014 total represents a full year’s collections. Also, lease tax receipts were boosted as a result of an audit that caused a taxpayer to shift payments into that category.

Alabama Trust Fund: 15 percent of receipts in 2014, down 4 percent over 2013. This revenue comes from the Alabama Trust Fund, the account that holds royalties from the oil and gas production. As in 2013, there was extra money coming from the Trust Fund, $146 million extra in 2014. That same borrowing will recur in 2015, but won’t be available going forward. Consequently, Trust Fund receipts will account for a smaller share of General Fund revenue in subsequent years. Additionally, that borrowing, plus an earlier instance of borrowing from the fund, will have to be repaid in the coming years.

Ad valorem tax: 9 percent of General Fund receipts in 2014, up 3 percent in 2014. These receipts come from 2.5 mills of the 6.5 mill state property tax.

Cigarette tax: 6 percent of General Fund receipts in 2014, down almost 3 percent in 2014. These are taxes on cigarettes, and the decline is part of a continuing downward trend in collections thanks to declining smoking rates.

ABC board taxes and profits: 5 percent of General Fund in 2014, down 5 percent. These taxes include a portion of the various taxes on alcoholic beverages, plus the profits from ABC board stores and licenses.  The main reason for the decline is that the previous year’s total was inflated thanks to extra distribution in 2013.

Oil and gas production tax: 5 percent of the General Fund in 2014, down 2.3 percent from 2013. This is a tax on the oil and gas that is produced in the state. This source of revenue has been gradually declining, primarily due to the aging of Gulf Coast gas wells.

Corporation tax: 4 percent of the General Fund in 2014, up 48 percent in 2014. This is the replacement tax for Alabama’s old franchise tax, which was ruled unconstitutional in 1999. The large increase is partially attributable to decline in the portion of this tax that has been used to pay corporations refunds on the franchise tax.

Court costs: 4 percent of the General Fund in 2014, down 7 percent. Charges collected by the courts continued to decline in 2014.

Cellular phone taxes: 3 percent of the General Fund in 2014, down 14 percent over 2013. Revenue from taxes on cellular phone calling plans dropped. Analysts say this is attributable to changes in the way cell phone service is structured and how it is taxed. Pre-paid cellular service taxed by sales tax and more customers are moving away from service plan to the pre-paid minutes. Also, the state cannot tax data service. As cellular plans charge less for voice phone service and more for data, the proceeds from this tax decline.

The Alabama Department of Corrections has jurisdiction over more than 32,000 individuals who’ve been convicted of a crime and are serving sentences in prisons, work release centers, supervised reentry programs, and community-based corrections programs.

That’s more than double the number of convicts the system had in its charge in 1990, but over that same period, Alabama has added little to the designed capacity of its prisons.

As a consequence, Alabama prisons hold almost twice the number of prisoners they were designed to accommodate. According to the most recent comparative figures, Alabama has the highest level of prison over-crowding in the U.S.

Alabama’s Department of Corrections depends on the state’s cash-strapped General Fund for 83 percent of its budget.

Due to the increasing costs of housing an ever greater number of prisoners, corrections spending has more than doubled since 1995, now accounting for 22 percent of General Fund appropriations, or $384 million in the 2015 budget, trailing only Medicaid as a cost to the General Fund.

State officials are expecting a shortfall of $200 million in the General Fund for 2016, which means Alabama doesn’t have the wherewithal to begin building its way out of prison over-crowding. Corrections officials estimate they’d need a minimum of $420 million to add 6,000 new prison beds and $92 million more annually to operate the added space.

The prison problem also has acute aspects needing attention. Prison officials have declared a state of emergency in response to Department of Justice findings on conditions at Julia Tutwiler Prison for Women, including overcrowding, understaffing, and sexual abuse of prisoners by system employees. The Justice Department concluded conditions there constituted a violation of the U.S. Constitution’s prohibition against cruel and unusual punishment.

In the face of this array of problems, the Legislature earlier this year created a bipartisan Prison Reform Task Force, composed of state and local leaders drawn from all three branches of government. The creation of the Task Force was endorsed by the Governor, leaders of both Houses of the Legislature, and the Chief Justice of the Supreme Court. The Task Force is charged with finding solutions for the prison-overcrowding problem while at the same time protecting public safety.

With funding support from the U.S. Department of Justice and the Pew Charitable Trusts, the Task Force is employing the technical assistance of the Council of State Governments Justice Center (CSG Justice Center). The CSG Justice Center, a nonpartisan, nonprofit organization, has helped guide 18 states through similar exercises in corrections system reform. It began work in Alabama in the spring, presented preliminary findings in June, and updated the Task Force on September 30.

The approach advocated by the CSG Justice Center is known as Justice Reinvestment. States that have been through the Justice Reinvestment process (North Carolina and Texas among them) have been able to decrease prison populations, increase successful reentry from prison, and at the same time experience drops in crime. Strategies employed included restructuring sentencing, improving treatment and diversion options, and employing more effective practices in probation and parole supervision.

The Justice Reinvestment approach assumes that money saved by reducing the prison population can be shifted to pay for improved practices elsewhere.

This will be particularly difficult in Alabama. It would take a significant decline in prison population to achieve any savings in Alabama, considering the current level of overcrowding and understaffing in the prison system.

Cutting prison costs under existing circumstances seems unlikely. Alabama spends about $43 a day per inmate to clothe, feed, house, and supervise its prisoners, about $15,308 per year, per inmate in the prison system. Alabama prisons are staffed at 58 percent of authorized levels, at a ratio of 12 prisoners per correctional officer.

Reform efforts depend on an enhanced system of community supervision as an alternative to prison. However, in Alabama, the Board of Pardons and Paroles, which administers probation and parole supervision, has seen a significant erosion of its budget. The ratio of probation and parole officers to offenders is 1 to 192, far in excess of levels recommended for a successful system of supervision.

U.S. Census Bureau data indicate that Alabama spends less on corrections, probation and parole than any state other than Mississippi and Louisiana.

Other agencies involved, including the courts and the Alabama Department of Mental Health, which also depend significantly on the General Fund, have seen erosion in their financial support as well.

To save money in the long run, Alabama may very well have to find more money to spend in the short term.

The Task Force hopes to have legislative recommendations ready for the 2015 session.

How we got here

Alabama’s prison problem has been long in the making, and our state is by no means alone in its struggles.

Most states have seen their prison populations swell in recent decades. However, Alabama is among the top states in the number of people it locks up as a percentage of its population.

Alabama’s incarceration rate ranks fourth in the United States, and the U.S. leads all other countries in the rate at which it jails its citizens.

U.S. imprisonment rates have surged since the 1970s. Several factors have contributed, including legislation requiring longer sentences and the passage of habitual offender laws, which enhanced sentences for repeat offenders. Lawmakers also responded to the proliferation of drugs and drug-related crimes by enacting long sentences for those offenses.

Efforts to move people with mental illness out of prolonged confinement in state mental hospitals may also have also played a role. Several studies have shown that close to 20 percent of the prison population suffers from serious mental illness. And once in the criminal Justice system, the mentally ill have a harder time getting out.

Data suggest that a focus on incarceration may not be the most cost- effective approach to improving public safety. Alabama, with one of the highest incarceration rates in the country, continues to experience higher than average levels of crime. According to figures presented to the Prison Reform Task Force by the CSG Justice Center, Alabama in 2012 ranked 8th among U.S. states in total crime, 14th in violent crime, and 7th in property crime. The Public Safety Performance Project of the Pew Charitable Trusts recently pointed out that between 1994 and 2012, the top five states where incarceration rates declined the most also saw significant drops in crime.

Signs of progress

In its most recent report to the Task Force, the CSG Justice Center presented findings indicating some relief in the upward pressure on Alabama’s prison population. The total number of people under the jurisdiction of the Alabama Department of Corrections declined slightly in 2013, and so far in 2014 that trend seems to be continuing.

Declining crime rates resulted in 10,000 fewer arrests in 2013 compared to 2009. Felony convictions have declined during the same period, including a 34 percent drop in felony sentences for robbery and a 33 percent drop in convictions for felony possession of a controlled substance. The number of prison sentences for drug and property crimes declined by 24 percent from 2011 to 2014, with the sharper decline coming after October 2013.

That’s when new presumptive sentencing guidelines went into effect. The guidelines establish uniform parameters in sentencing for non-violent offenders and promote community supervision for non-violent offenders in appropriate cases. The CSG Justice Center data indicate that under the guidelines there has been an acceleration in the number of offenders diverted from prison and toward probation and community corrections.

These latest changes to sentencing are only the most recent. Alabama has been working for more than a decade to relieve pressure on prisons. Drug courts have been established in 66 of Alabama’s 67 counties and mental health courts operate in some jurisdictions.

Despite these measures to decrease in in-flow, the prison population has remained stubbornly high. The number of people being released from prison has dropped. CSG is in the process of determining why the rate of approvals for parole rates is declining when there appears to be a backlog of inmates eligible for parole.

Breaking the cycle

Alabama’s approach to probation and parole and other forms of community supervision may end up being a central focus of the Prison Reform Task Force.

A robust system for improving the success rate of those on probation or parole can result in long-term savings by decreasing returns to prison, while at the same time increasing public safety. In Alabama in 2013, 40 percent of all admissions to ADOC custody had violated the terms of probation or parole.

A growing body of research suggests that recidivism rates can be reduced by careful assessment of individuals admitted to probation and parole, to determine their likelihood of reoffending. Using such assessments, intense supervision and treatment can be given to those at the greatest risk of re-offending. Research also suggests that a Parole and Probation program must have a swift, consistent, and cost-effective system for dealing with violations to parole, using a graduated range of sanctions and incentives. According to CSG Justice Center research, no such system exists in Alabama.

At its current level of support, the Board of Pardons and Paroles employs one parole officer for every 192 individuals under supervision. The American Probation and Parole Association has developed recommended staffing levels, which vary according to the type of offender being supervised: a ratio of one officer working with 20 individuals deemed to be at a high risk of reoffending; one officer for 50 medium risk individuals; and one officer for every 200 low risk individuals.

Probation and parole are very cost-effective when employed correctly. In Alabama, 64,525 individuals are under the supervision or the Board of Pardons and Paroles. That amounts to about $1.70 per day, per supervised individual. Even if the Board were staffed at twice the level of today, which would more nearly approximate the recommended staffing ratio, the cost would be $3.40 per day, less than a tenth of the cost per day in Alabama’s prisons.

However, even as the system is putting more emphasis on community supervision, General Fund support for the Board of Pardons and Paroles has declined significantly in recent years. That decline in General Fund support has been only partially offset by an increase in the fees required of those under supervision, from $30 a month to $40.

Any attempt to address the perennial shortfalls faced by the state’s General Fund account has to start with attention to Medicaid, the program that pays for the healthcare and long-term care of the poor and disabled.

Total spending on Medicaid in Alabama is budgeted to reach $6.1 billion in 2015, with about 30 percent of funding coming from state sources and 70 percent from the federal government.

Medicaid’s draw on the state’s General Fund account has nearly quadrupled over the past 20 years, rising to $685 million for 2015. That’s 37 percent of the $1.8 billion Fund, the largest General Fund expenditure. Back in 1995, Medicaid accounted for just 16 percent of the General Fund, around $140 million. Medicaid costs have risen because of rising medical costs and a rise in the number of people covered (due to population growth, changing demographics and expansions in coverage). In 1995, around 600,000 people were covered by Medicaid; today more than 1 million Alabamians qualify.

The steep rise in the cost of Medicaid has been one of the central problems in balancing the General Fund budget, which in 2016 is expected to face a $200 million gap between expenditures and anticipated revenues.

In October 2012, recognizing that health costs were rising at an unsustainable rate, the Governor convened a Medicaid Advisory Commission and charged it with finding a way to curb the Medicaid Agency’s growth trajectory while also improving the quality and types of care provided to Medicaid beneficiaries.

Growing out of the Commission’s work is a strategy to move most Medicaid beneficiaries from the existing fee-for-service system, under which providers bill Medicaid for services rendered, into a delivery system in which Regional Care Organizations (RCOs) will coordinate medical benefits and be paid on a capitated, per-enrollee basis, bearing the risk of managing costs within the established caps.

To accomplish this, the state has been divided into five regions. Within each region, RCOs will be established. RCOs will consist of a coalition of hospitals, doctors, other care providers and community representatives. These RCOs will receive a capped amount of money based on the number of enrollees they are assigned to serve. With that money, the RCOs will pay for the care of their enrollees. Through a variety of mechanisms, the RCOs will attempt to encourage better health outcomes and more cost-effective medical practices, thus, decreasing medical expenses. It is hoped that this new approach, by replacing the traditional fee-for-service model, will contain and make more predictable for the state the cost of Medicaid for the portion of the Medicaid population covered by the changes.

By capping Medicaid spending to a set level of expenditure per enrollee, the agency estimates the new delivery system will reduce future increases in state funding by between $40 million and $85 million per year compared to the current fee-for-service arrangements. Considering state and federal spending together, estimates are that the approach could save between $750 million and $1.08 billion over five years compared to expected expenditures under fee-for-service. The new system is expected to be operating by 2016.

Overview of the Medicaid Program

Alabama’s Medicaid Program pays medical providers (doctors, hospitals, nursing homes, pharmacies, etc.) for the care of the poor and disabled. The program is a key component of Alabama’s health care sector. As of July 2014, the total number of individuals eligible for Medicaid was 1,041,588, or about 23 percent of the state’s population. Medicaid provides health care services to 43 percent of Alabama’s children and accounts for more than half of the births in the State.

In addition to state general fund sources, Medicaid is funded by an assortment of taxes on providers, intergovernmental transfers, certified expenditures that meet requirements for matching Medicaid dollars, and miscellaneous other revenues.

Medicaid enrollees are the unduplicated number of individuals who qualified for full or partial Medicaid coverage in each month of the fiscal year. Annual average is the arithmetic average of the twelve months. Average cost per enrollee is calculated by dividing total local, state, and federal expenditures by the number of enrollees.

Changing Medicaid from a fee-based to a managed care approach

The Governor’s Medicaid Commission brought together representatives from state agencies, State Senators and Representatives, insurance companies, consumer advocates, medical providers, and professional organizations representing hospitals, physicians, pharmacies, nurses, primary and rural health clinics, hospices, and nursing homes.

Based on the Commission’s recommendations, the Alabama Legislature passed legislation in May 2013, outlining a reform plan for Alabama Medicaid. In April 2014, the Alabama Legislature amended the RCO legislation to make some changes to the structure and operation of the RCOs. In May of 1014, the Medicaid Agency applied for a waiver from the federal Medicaid Agency seeking permission to implement the new delivery system. The federal Centers for Medicare & Medicaid Services has acknowledged receipt of the state’s application and is considering it.

Under the reforms, Medicaid reimbursement for the services included in the waiver will no longer be based on recipients’ use of medical services; instead, the health care of recipients will be paid for, coordinated and managed by Regional Care Organizations. The RCOs will be financed through a capitated model in which the RCOs receive a set payment from Medicaid based on the number of enrollees the RCO covers. The RCOs will operate within five regions that reflect existing medical referral patterns and care provider systems.

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Under the current system, the state reimburses providers on the basis of utilization and volume, rather than value and quality. The state’s only tools for constraining costs have been to limit who is eligible, what it pays providers for services, and what services beneficiaries receive. Many of these decisions are constrained by federal law and rules.

The new system creates a limit to Medicaid expenditures for each region. As of October 2014, 12 organizations have applied to be certified as RCOs.

About two-thirds of Alabama’s Medicaid population will initially be covered by the RCOs. Included populations include Medicaid enrollees who are aged, blind and disabled, those in the breast and cervical cancer treatment program, those covered by Medicaid for Low Income Families, and those covered under SOBRA, the Medicaid program for children and pregnant women.

Not covered by the RCOs at this point are nursing home and institutional care recipients, foster children, recipients qualified for both Medicare and Medicaid, hospice patients, the mentally retarded, recipients of family planning services, and children in the custody of the Department of Youth Services. Dental services will also fall outside the RCO system and will continue to be provided on a fee for service basis.

The RCOs are designed to replicate the successes achieved by four existing primary care networks (PCN) established by the Alabama Medicaid Agency that are currently providing a level of managed care in 21 counties. The PCN model includes the assignment of each Medicaid beneficiary to a medical or health home. According to the Agency, that program has shown reductions in emergency department utilization, hospital admissions, and total cost, as well as increases in medical compliance and delivery system efficiency.

Generically, the RCOs are known as “accountable care organizations.” A recent article in Governing Magazine describes how these organizations operate: “At a basic level, an ACO gives doctors, hospitals, and clinics the responsibility to provide care for a group of patients within a specified budget. If health-care providers better coordinate care to provide good quality for less money, they can share in the savings.”

The new approach provides a financial incentive to keep clients healthy. By providing consistent and coordinated care for Medicaid beneficiaries, many of whom have chronic conditions like asthma or mental illness, RCOs have the potential to increase health outcomes and reduce unnecessary emergency room visits and hospitalizations.

Currently, some, but not all of Medicaid’s most costly care recipients, will be covered under the new system. The aged, blind, and disabled make up 31 percent of the Medicaid population, but account for 66 percent of program spending. About 17 percent of those covered under the new RCO system would fall into this most expensive category. Those in nursing home care won’t be part of the current reform effort. The Medicaid Agency is exploring further reforms that would reach the rest of its beneficiaries.

According to the Medicaid Agency’s waiver application, “the anticipated growth of the aged, blind, and disabled population in the current system threatens the State’s ability to maintain even a modest benefit package and eligibility criteria for Medicaid beneficiaries, and highlights the necessity for Medicaid reform in Alabama.”

Approaches similar to the one Alabama is trying have shown promise elsewhere. The New York Times recently reported on the reduction of costs in the Rio Grande Valley in Texas. Based on an analysis of patient data, providers in the Rio Grande Valley Accountable Care Organization (ACO) in McAllen, Texas offered quick follow-ups from hospital visits, provided cell phones for patients who had trouble communicating with their doctors, and visited patients at home who could not get to offices. By focusing on high-risk patients, and shifting to preventative care for many others, the ACO was able to reduce costs and improve a variety of health indicators, such as the number of patients in control of diabetes and those receiving vaccinations.

Alabama hopes to have similar success in improving care and decreasing costs.

Critical Dates for Implementing Medicaid Reforms in Alabama as Required by Law:

• October 1, 2013 Medicaid establishes RCO regions (Complete)
• October 1, 2014 Governing boards for each region approved (Awaiting Announcement)
• April 1, 2015 RCOs must prove their ability to establish an adequate network
• October 1, 2015 RCOs must meet solvency requirements
• October 1, 2016 RCOs must demonstrate ability to provide services under a risk contract (RCOs start bearing risk) no later than this date