LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session April 15, 1997 TO: Honorable Judith Zaffirini, Chair IN RE: Senate Bill No. 940 Committee on Health & Human Services By: Nelson Senate Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB940 ( Relating to the state's mental health and mental retardation services system; providing penalties.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB940-As Introduced Implementing the provisions of the bill would result in a net positive impact of $2,544,000 to General Revenue Related Funds through the biennium ending August 31, 1999. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. Fiscal Analysis This bill would amend the Health and Safety Code to designate the Department of Mental Health and Mental Retardation (TDMHMR) as the state's lead agency in policy and services related to mental health, mental retardation, and behavioral health. Each state agency or local mental health and mental retardation authority with a responsibility related to mental health, mental retardation, or behavioral health policy or services would be required to conform to TDMHMR s policies and standards regarding that responsibility. Savings from implementing the provisions of this bill are estimated to be $1,272,000 in fiscal years 1998 and 1999, and $723,000 in fiscal years 2000-2002. Methodolgy The bill would partially implement Texas Performance Review (TPR) recommendation HHS19 in Disturbing the Peace: The Challenge of Change in Texas Government. The sections of the bill that would implement TPR recommendations having a fiscal impact to the state are described below. Section 3 of the bill would require that TDMHMR to conform to state agency space standards. The Comptroller estimates that since the release of the report, TDMHMR has avoided $570,000 in lease costs by eliminating all Central Office lease space in the Austin area and consolidating staff into available space at the Central Office facility and Austin State Hospital. The Legislative Budget Board recommendations for the 1998-99 biennium include a reduction of $1,200,000 for the move from rent to state-owned office space. This recommendation has been adopted by the House Appropriations Committee and Senate Finance Committee. No additional savings from implementing this provision of the bill are anticipated. Section 5 would provide penalties for violations of a service provider contract. These sanctions could result in fines, penalties, or withholding of payments and would reduce provider contract violations. Section 6 would require TDMHMR to establish a reimbursement system for local mental health and mental retardation centers designed to contain costs for services funded from the General Revenue Fund. Standardized rates would reduce payments for various services provided by health professionals. According to the Comptroller's estimate, general revenue savings in fiscal 1998 and 1999 would be $1,272,000 each year, and beginning in fiscal year 2000, annual savings in general revenue would be reduced to $723,000 due to the offset effect of disproportionate share funding. Section 12 would require TDMHMR to conduct a comprehensive review of a local mental health or mental retardation authority every three years. Current law requires these audits each year. More frequent reviews could be conducted if warranted. This would help the department focus its audit resources where they would be most productive, thus utilizing the department's resources more efficiently. According to HHS 19 in Disturbing the Peace, TDMHMR has reviewed applicable policy and practice issues and has written new procedures which would most effectively be implemented on a maximum three-year cycle. Section 13 would require TDMHMR to incorporate a voucher reimbursement system for certain programs. Savings would result from a change in the reimbursement methodology for the Home and Community-based Services (HCS) program and other programs. According to the Comptroller, the estimated savings would be $4,840,000 in fiscal 1998, $9,680,000 in fiscal 1999, $14,520,000 in fiscal 2000, and would increase to $19,360,000 each year beginning in fiscal 2001. In response to legislative direction during the previous session, TDMHMR has already implemented a new HCS reimbursement rate methodology. The Legislature enacted a $10.4 million general revenue reduction for the 1996-97 biennium based on implementing this new reimbursement methodology. In January 1997, TDMHMR's Board of Directors approved the revised HCS reimbursement methodology. TDMHMR anticipates collecting $110 million in additional federal funds for the 1998-99 biennium based on the new rate methodology. Implementing TPR's recommendation and further reducing general revenue in order to incorporate the savings from Section 13 of the bill could jeopardize the department's collection of the additional federal funds. No additional savings are assumed from implementing this provision of the bill. Section 14 would create a conservatorship program at TDMHMR to allow TDMHMR to assume operations of a service provider. Implementation of the conservatorship program should help to ensure better use of TDMHMR funds and allow appropriate client services to continue without interruption. The probable fiscal implications of implementing the provisions of the bill during each of the first five years following passage is estimated as follows: Five Year Impact: Fiscal Year Probable Savings/(Cost) from General Revenue Fund 0001 1998 $1,272,000 1998 1,272,000 2000 723,000 2001 723,000 2002 723,000 Net Impact on General Revenue Related Funds: The probable fiscal implication to General Revenue related funds during each of the first five years is estimated as follows: Fiscal Year Probable Net Postive/(Negative) General Revenue Related Funds Funds 1998 $1,272,000 1999 1,272,000 2000 723,000 2001 723,000 2002 723,000 Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. No fiscal implication to units of local government is anticipated. Source: Agencies: 302 Office of the Attorney General 304 Comptroller of Public Accounts 655 Texas Department of Mental Health and Mental Retardation LBB Staff: JK ,BB ,MG