For the Public's Health Investing in a Healthier Future (2012) / Chapter Skim
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Appendix D: Financing State and Local Public Health Departments: A Problem of Chronic Illness--Samuel Y. Sessions
Appendix D: Financing State and Local Public Health Departments: A Problem of Chronic Illness--Samuel Y. Sessions
Pages 205-252
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In the meantime, the financial challenges faced by virtually all government functions, including public health, have grown substantially. The fiscal posture of federal, state, and local governments has deteriorated as a result of the worldwide economic downturn.
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. Funding of state and local public health departments, the committee's concern, lies primarily within the first of these four categories of public health finance.
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These similarities make it possible to reach some general conclusions regarding the financing of state and local health departments despite their wide variety in size, services provided, and other circumstances. As an early draft of this paper was being written, Congress and the White House were engaged in budget negotiations concerning how to achieve large budgetary savings as part of an agreement to raise the federal debt ceiling and avoid default by the United States on its debt (Sack, 2011)
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, including uncertainties in determining the appropriate amount that state and local governments should spend on public health. In view of the difficulty that public health is likely to experience even to maintain spending at current levels, these uncertainties are set aside in the first five parts of the paper, but they are addressed in the sixth section.
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. Thus, of seven studies reporting on public health expenditures by selected state and local health departments between 1994 and 2002, no two used the same operational definition to develop or report their findings (Moulton et al., 2004)
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Policy inertia is thus much more likely to lead to a reduction than an increase in public health spending. Very few jurisdictions are immune from these trends, and they are in addition to risks posed by shorter-term fluctuations in the economy, some severe, such as those recently experienced by state and local governments (Sack, 2011)
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The survey of local public health department officials by Baum and colleagues provides a baseline for the sources of funds for local health departments. These results are summarized in Table D-1.
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reported the results of a longitudinal study finding that mortality rates from preventable causes of death, including infant mortality and deaths due to cardiovascular disease, diabetes, and cancer, fell between 1.1 and 6.9 percent for each 10 percent increase in local public health spending. All-cause mortality and deaths from influenza also were negatively correlated with increased local public health spending, while deaths from control conditions such as Alzheimer's disease did not (Mays and Smith, 2011)
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Furthermore, the finding that local health spending is more effective than spending at the federal or state level is consistent with an earlier study by Mays and Smith showing a strong positive correlation between public health system performance and local tax revenues. According to this study, local public health systems whose performance was above the mean for the population derived 65 percent of their revenues from taxes, 11 percent from state and federal funding, and 23 percent from other sources.
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government revenues at all levels in that year. The good news from a political standpoint is that even if public health spending is increased in keeping with recent public health expert recommendations, it would remain a relatively small share of total government outlays.
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Local governments depend heavily on transfers from states and the federal government, which face their own severe budgetary challenges. There is a consensus among local public finance experts that local government operations should be funded to the extent possible with local sources of revenues, and the study by Mays and Smith (2011)
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Eight states authorize local governments to impose taxes on corporate income, and local corporate income taxes raised only $4.4 billion in 2005, less than 1 percent of tax revenues (Brunori, 2007a)
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The property tax is therefore one of the few options that local governments have in raising additional tax revenues of their own, as opposed to sharing in state-level taxes or relying on intergovernmental transfers. Moreover, since funding of public health and public health performance shows a positive correlation with population, it may be the smaller localities that are most in need of additional revenue, and public health officials may be able to play a more active role in these smaller political arenas.
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As in the case of local governments, state tax systems are, of course, not uniform, and they depend both on the politics and the economic circumstances of the state. For example, only 45 states impose sales taxes, as noted previously, and 41 as well as the District of Columbia impose personal income taxes (Brunori, 2007b)
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Individual income taxes make up about 34 percent, and corporate income taxes only 5 percent, of state tax revenue. Property taxes constitute only about 2 percent of state tax revenue (Census Bureau, 2011)
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The extended baseline scenario assumes that tax cuts enacted under the Bush administration will expire, and that the alternative minimum tax (the AMT, which provides an alternative tax base that is broader than the regular income tax, but at somewhat lower rates) would not be indexed for inflation.
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Federal excise tax revenues have dropped even more than corporate taxes and currently raise about $100 billion annually, again with little change forecast. Estate and gift taxes now generate yet smaller amounts of federal revenue, $19 billion in 2010, due again to changes in law during the Bush administration.
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In any case, focusing on this option alone would not constitute a complete examination of the problem. In view of the budgetary trends discussed in the third section of this paper, as well as the evidence supporting financing of local public health departments with taxes presented in the second section, the solutions must include the possibilities of finding new sources of tax revenue as well as of providing greater stability to existing tax bases.
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. Electronic Commerce The rapid growth of the Internet and online sales has already reduced state and local sales tax revenues substantially.
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224 FOR THE PUBLIC'S HEALTH: INVESTING IN A HEALTHIER FUTURE and the benefits offered by that jurisdiction are more easily available elsewhere. This implies that the plausibility of strengthening corporate taxes gets weaker at each lower level of government -- federal, state, and local, in that order.
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Ironically, but not coincidentally, health care spending then began to increase rapidly, while the political case for public health spending began to become more challenging. This parallels trends behind the movement toward greater individualism and antistatism in general budgetary politics, but it creates a separate set of political challenges for public health finance in particular (Epstein, 2003; Gostin and Bloche, 2003)
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Similarly, more than efforts to prevent infectious, and particularly epidemic, disease, public health interventions directed at chronic disease can be seen more easily as redistributive both economically and geographically, even within a single local jurisdiction. Finally, any benefits produced in preventing chronic disease are also realized over the long run rather than immediately, making them even less visible and more subject to doubt.
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. An analysis of public health in communities with a population larger than 100,000 found that two of the 20 public health activities whose perceived effectiveness were rated as relatively low were "providing health information to the public" and "developing support and communications networks among health-related organizations, the media, and the public" (Mays et al., 2004a, p.
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Since funding for public health has historically cascaded downwards, so also do the problems. They must therefore be addressed through an approach that encompasses all three levels of government, and which also takes into account the great variety of public health departments and services in question.
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If health spending is viewed as a combination of spending on health care and spending on public health, it seems very likely that spending at the margin should be routed to the latter. On the other hand, in some ways this funding mechanism replicates the problems in funding public health it is designed to solve.
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. Private grants can also furnish an opportunity for public health agencies to obtain increased funding from the government.
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Both of these issues are likely to be greater problems in the United States than in the United Kingdom. In addition, the time horizon for prevention of chronic disease, where public health finance most needs help, may be longer than for prison recidivism, for which results may be observable even within a year.
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It appears, however, that the Fund lacks a dedicated source of revenues, meaning that it is in fact subject to the annual appropriations process each year. One source of revenues that might be considered for this or a similar public health fund is the federal estate tax.
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About half of estate tax revenues come from estates with a taxable value of $10 million or more, and more than a third from estates with a value of $20 million or more (IRS, 2011)
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In that case, the tax could be promoted using the numbers of both the threshold for the tax and the floor for public health department funding, such as "10 for 20," or "20 for 20." That is, an estate tax or tax rate on estates with a value over $10 million or $20 million would ensure that everyone has local public health services worth at least $20. Yet another alternative would be to dedicate the revenues to both public health and education, or possibly to the health and education of children.
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. Thus, an estate tax option similar to that just described might also be available at the state level.
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Local governments have relatively few options for dependable tax revenues of their own other than the property tax. Sales, excise (including
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Particularly in view of the evidence that public health spending that is locally funded is most effective, local public health officials should therefore become property tax proponents. Dedicating some property tax revenues to a specific public health purpose, as in the states mentioned in the third section of the paper, may have policy advantages as well as soften political opposition.
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Conceivably, though perhaps paradoxically, reliance might be more powerful politically than for a wellness fund specifically because the tax would not be premised on reciprocity and so would not be plagued by a continuing argument regarding how well this criterion is being satisfied. The extent to which dedicated property taxes involve relative reciprocity and reliance depend on the details, such as there would be less reciprocity for a dedicated property tax to fund senior services than one funding general public health services.
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As a political matter, other things being equal, if a dedicated source of revenues that is politically viable can be found, one can argue, again somewhat paradoxically, that it should be used to fund either popular or unpopular public health spending. In the former case, the attractiveness of the use serves to counter hostility to the tax.
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These include the estimate reported by TFAH of an annual shortfall in national public health spending of $20 billion, used as a general point of reference in this paper. The TFAH estimate was based on a consultation with 15 public health experts, which relied in turn on two analyses: the amount needed for the United States to match the average of public health spending for countries in the Organisation for Economic Co-operation and Development (OECD)
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For example, if $10 billion in spending on medical care could be saved annually by preventing obesity, then perhaps that amount should be spent instead on public health. The strength of the argument depends, however, on whether the increased public health spending would in fact improve health status, and that this would in turn lead to reducing other spending.
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Adjusting for the distortion would in turn require establishing how much ideally should be spent on health care. This presents both the same problem as the proposal of comparing public health spending to GDP and additional complexities of its own.
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The Research Agenda Although it is something of an idealization, public health finance researchers can be considered a single academic community, whose goal is to develop a consensus on the most rationally defensible answer to the question of how much public health spending is needed, supported by the best possible evidence base. The sooner that consensus is arrived at (if ever)
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As a policy matter, however, it may be desirable to increase research on local jurisdictions with very low per capita spending on public health. To the extent that this research bears out the hypothesis that such jurisdictions have significant and urgent needs for increased funding, it could be used to support a dedicated financing mechanism to provide that funding, as discussed in the fifth section of this paper.
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The Prevention and Public Health Fund included in the ACA can serve as an example. It provides for substantial increases in public health spending without specifying details, and without a dedicated financing mechanism.
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CONCLUSIONS The financial challenges faced by public health cannot be dealt with adequately in isolation from and ignorance of broader challenges to public finance. It is unlikely that state and local health departments will be able to obtain secure and adequate funding if government finance more generally is collapsing.
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2011. Resource allocation in public health practice: A national survey of local public health officials.
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2011. The association of changes in local health department resources with changes in state-level health outcomes.
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2011. The effects on population health status of using dedicated property taxes to fund local public health agencies.
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2004b. Getting what you pay for: Public health spending and the performance of essential public health services.
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2007. Refining estimates of public health spending as measured in National Health Expenditures Accounts: The United States experience.
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Paper presented at the Lincoln Institute Conference on the Changing Landscape of Local Public Revenues. Boston, MA: The Lincoln Institute of Land Policy.
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