Government Report 

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President Clinton submitted his FY 2000 budget request to Congress on Feb. 1. The administration’s proposal received mixed reviews from both the disability community, including The Arc, and the Republican leaders in Congress, but for different reasons.

The good news for the disability community is that the president's budget contains several new initiatives that are in line with The Arc’s legislative goals. These include long term care, health, work incentives and family support. The bad news is that most existing programs strongly supported by The Arc, like special education, vocational rehabilitation and low-income housing, receive little or no increases. The single largest beneficiary of the president's proposal would be the Department of Defense.

Fueling the debate is the concern that, in spite of projected surpluses in the federal budget, the administration and Congress are still constrained by self-imposed discretionary budget caps. Both Republicans and Democrats recognize that these caps put severe limits on any new spending. Unless the Congress agrees to break the 1997 budget agreement and raise the caps, the new initiatives mentioned above must be paid for by cuts in other spending or revenue increases. If Congress doesn’t go along with some or all of the offsets proposed in the president's budget, the president’s proposals are not likely to pass.

The president's budget was attacked by Republican leaders the day after it arrived as full of gimmicks and a return to "big government." Most Republican leaders agreed with the president's proposal to save part of the surplus for Social Security. However, they also professed major disappointment in its increased domestic spending and the absence of any large tax cuts. Rep. John Kasich (R-Ohio), chairman of the House Budget Committee (and a year-2000 presidential candidate), responded to the president's budget with a proposed 10 percent across-the-board tax cut that would use most of the surplus. This large of a tax cut worries many Republicans. They fear that it is too expensive and opens them up to criticism for trying to help the wealthy more than anyone else. For this reason, other Republicans have proposed smaller, targeted tax cuts. The Republicans are also looking for an increase in defense spending. All of these proposals will be competing over the next year.

The part of President Clinton’s budget that received the most attention was his proposal to keep the Social Security Trust funds solvent until at least 2055. He proposed to do this by devoting approximately 60 percent of the projected surplus to Social Security.

The following analysis reviews the major parts of the budget that affect people with mental retardation and their families. The chart below compares the president’s FY 2000 budgets for the Departments of Labor, Health and Human Services and Education compared with the budget for FY 1999.

Use of the Surplus

A large part of the president’s budget is his plan for allocating the federal budget surpluses over the next 15 years. According to the Congressional Budget Office (CBO), the federal budget surplus for the year 2000 will be about $131 billion. However, this figure represents the surplus in the Social Security Trust Fund that is already obligated to future beneficiaries. In fact, if the Social Security surplus was not used in the calculation, there would still be a deficit of $19 billion this year. There would not be a true surplus until at least the year 2001. Some factions argue that dedicating the majority of the surplus, which comes from the Social Security Trust Funds, to "fix" Social Security is a sham. How to spend this unified surplus will continue to be the focus of controversy as the budget and appropriations process moves forward.

The president's budget proposes to apply 62 percent of the so-called "surplus" to Social Security (and invest one-quarter of that 62 percent in the stock market), 15 percent to Medicare, 12 percent to "Universal Savings Accounts," and 11 percent to domestic and defense spending.

The Universal Savings Accounts (USA) proposal is the most controversial part of this plan. These 401(k) style plans would supplement, not replace, existing Social Security benefits. This proposal was not well received by Capitol Hill proponents of privatizing Social Security. They would like to convert the existing system into private accounts, not add a new component to the old system. Others question how these accounts would continue to be paid if there is no surplus in the future. The Arc’s position on Social Security reform is presented in an article below.

Department of Labor

The Department of Labor budget would increase slightly overall, but most programs intended to assist individuals with disabilities do not fare well. The Workforce Investment Act programs (formerly Job Training Partnership Act) would be cut by $27.5 million. The School-to-Work program is cut by $70 million, a 44 percent reduction.

Department of Health and Human Services

The good news is that all the work done by advocates to educate the administration about the value of the Title XX Social Services Block Grants (SSBG) appears to have paid off. The president’s budget would restore funding for SSBG to its original authorization level of $2.38 billion. This would be an increase of $471 million over the FY 1999 level.

The Health Care Financing Administration (HCFA) is the agency that operates the Medicaid, Medicare and State Children’s Health Insurance Programs (SCHIP). For FY 2000, HCFA would receive an increase of $18.2 billion. A number of the administration’s new HCFA-related legislative initiatives include extending Medicare coverage for people with disabilities who return to work; giving states the option to provide Medicaid to older foster children and pregnant immigrants; and allowing states to use more of their SCHIP funds for outreach. According to the administration budget proposal, basic HCFA research funds will be used to design a study to look at barriers to care among vulnerable populations in Medicaid managed care and to study the use of Medicaid waivers for home and community-based care. Both of these are major priorities of The Arc.

The budget includes a $15.9 billion increase for the National Institutes of Health (NIH). Several NIH programs of importance to The Arc would receive small increases. The National Institute of Child Health and Human Development would receive a $16 million increase and the National Institute of Neurological Disorders and Stroke would receive a $21 million increase.

The Centers for Disease Control (CDC) received a very small increase in the president's proposed budget — only $201 million. The majority of this increase ($118 million) is targeted to bioterrorism activities. Except for the immunization program which would receive an increase, the CDC prevention programs of greatest importance to The Arc would be level funded.

The Developmental Disabilities Act programs — DD Councils, University Affiliated Programs, Protection and Advocacy Systems and Projects of National Significance — are level funded. Four million is included (under the Projects of National Significance line item) for the Family Support Program. This is the same amount that was provided for FY 1999.

Department of Education

The Arc applauds the attention being paid by Congress and the president to education issues this year. However, the president’s budget is very disappointing in the area of special education. His budget would increase funding for the basic Individuals with Disabilities Education Act (IDEA) state grant program by only one-tenth of 1 percent ($3 million). Despite a doubling of funding in the last three years, spearheaded principally by the Republican leadership, IDEA state grant funding represents only 12 percent of the excess cost of assisting states to provide educational services to students with disabilities. This amount falls far short of the 40 percent originally authorized under the law.

On the positive side, the Early Intervention and Infants and Toddlers programs under IDEA both receive increases ($28 million and $20 million respectively). A new discretionary program, targeted at students with reading difficulties and behavior disorders, would be funded at $50 million. The Parent Training Centers also receive a slight increase ($4 million). All other IDEA programs are basically frozen at current funding levels.

The Vocational Rehabilitation State Grant would receive only the cost of living increase required by law. This increase amounts to $461 million over the FY 1999 funding level. The Assistive Technology program would receive a 50 percent increase ($15 million). The National Institute for Disability, Rehabilitation and Research (NIDRR) would receive a small increase ($10 million). Most other Vocational Rehabilitation programs are level funded.

Dept. of Housing and Urban Development

The administration’s budget proposal for the U.S. Department of Housing and Urban Development (HUD) is disappointing in many ways. While HUD titled its budget "Opening Doors," it will not be opening many more doors for people with mental retardation and other disabilities. The proposal includes no additional funds for Section 8 tenant-based rental assistance for people with disabilities. It is hoped that Congress will continue to respond to this need. Over the last three years Congress has added $130 million to this part of the HUD budget. The Section 811 Supportive Housing Program for Persons with Disabilities would be level funded at $194 million. Fair housing programs would be increased by $7 million.

New Disability Initiatives

In the weeks just prior to the release of the president’s budget, the White House announced —with much fanfare — several new disability initiatives that are included in the administration’s budget. The Arc is still analyzing the implications of these programs for people with mental retardation.

One of the initiatives would provide $6 billion over five years to address long-term care needs of individuals and families. This initiative includes a $1,000 tax credit to individuals and families. This tax credit would help individuals and families pay for critical services such as respite care and personal assistance services.

The president’s budget includes funds ($5 million in FY 2000 and $110 million over five years) to promote more flexibility in the Medicaid program so that more services and supports for people with disabilities are available in the community. This initiative represents a first step in further removing the "institutional bias" in the Medicaid program. The initiative would eliminate one incentive for institutionalization by giving states the option of increasing the eligibility for home and community based care for people with incomes up to 300 percent of the SSI level ($1,500 per month in 1999). The announcement of this initiative is the first time any president has supported this effort to remove the institutional bias in Medicaid — a move long advocated for by The Arc.

The Arc is pleased that the president also included full support for the Work Incentives Improvement Act (WIIA). This would amount to $1.2 billion over five years. WIIA would assist many people with disabilities to return to work by removing some of the barriers that exist in the Social Security system. The WIIA was introduced in the Senate on Jan. 28 as S. 331. Two other new work-related initiatives are included in the administration’s budget:

• a $1,000 tax credit for employment-related work expenses to help people with disabilities pay for the extraordinary costs related to working with a disability; and
• funding for research and development for new assistive technology for people with disabilities and a state loan program to help make these technologies more affordable.

Future

Much of the president’s budget proposal depends on a deal with Congress on Social Security reform. It is also unclear if Congress will continue to stay within the discretionary budget caps or change the rules to raise the caps. Other proposals to change the budget rules could also have an effect on the outcome.

SSA Proposes Increasing the SGA Level to $700 a Month

The Social Security Administration has announced its intention to raise the substantial gainful activity (SGA) level from $500 per month to $700 per month for people with disabilities (who are not blind). The change would affect applicants and beneficiaries of the disability programs in the Old Age, Survivors, and Disability Insurance programs of Title II of the Social Security Act and the Supplemental Security Income program of Title XVI.

The announcement is in the form of a proposed regulation that was published in the Federal Register on Feb. 16. There is a 30-day public comment period (comments are due March 18). There is also a 60-day public comment period for issues in addition to the amount of SGA, such as SGA increases in the future (comments are due April 19).

The Arc has worked for years for an increase in the SGA level to reflect average wage growth since it was last raised in 1990. The Arc commends the Social Security Administration and the White House for taking this important step.

The Arc has also advocated establishing an automatic annual increase (indexing) of the SGA level to reflect average wage growth. Average wage growth is the measure used in Social Security programs to adjust earnings levels rather than cost-of-living measures. The proposed regulation does not propose indexing the SGA level. This is one of the issues which may be addressed in the 60-day comment period.

With increases in the minimum wage in recent years, more people with mental retardation have had difficulty continuing to work without jeopardizing the benefits upon which they must depend for basic support. The failure to adjust SGA on an annual basis has meant a steady decline in the value of earnings allowed to beneficiaries. In effect, the SGA level has served to make the definition of disability stricter each year that it has not been indexed.

The Governmental Affairs Office of The Arc sent an Action Alert to state chapters and the email list regarding the proposed regulation. n

The House Ways and Means Subcommittee on Human Resources held a hearing on Feb. 3 regarding fraud and abuse in the Supplemental Security Income (SSI) program. The subcommittee followed the hearing with a markup on a bipartisan bill (H.R. 631) to address fraud and abuse on Feb. 10.

The subcommittee’s current efforts regarding SSI fraud and abuse stem from efforts begun in the subcommittee last year in the 105^th Congress. Numerous proposals in the last Congress would have caused substantial harm to people with disabilities. Members of The Arc and other advocacy organizations expressed great dismay over the proposals. Then-Chairman Clay Shaw (R-Fla.) withdrew a number of the more egregious proposals and the remaining proposals were never acted upon by the subcommittee or the Congress.

In opening the Feb. 3 hearing, Rep. Nancy Johnson (R-Conn.), chairman of the subcommittee, indicated her intention of working in a practical, bipartisan way with Ranking Minority Member Ben Cardin (D-Md.) and all of the members of the subcommittee. Both Chairman Johnson and Rep. Cardin, as well as other members of the subcommittee, co-sponsored the SSI Fraud Prevention Act of 1999 (H.R. 631). This is the bill addressed at the hearing and the markup.

At the Feb. 3 hearing, Marty Ford of The Arc’s Governmental Affairs Office testified on behalf of the Consortium for Citizens with Disabilities (CCD) Task Force on Social Security. The CCD testimony proposed a number of refinements or clarifications to the bill that would lessen unintended negative impact on people with disabilities. In addition, the testimony focused on the experiences of people with disabilities who report their earnings to the Social Security Administration (SSA) yet receive substantial overpayments because earnings information is not properly recorded. Chairman Johnson expressed concern about the issues raised and the potential disincentive that such overpayments become for people who want to work.

Chairman Johnson pledged to work with the administration and advocates to address the issues regarding overpayments. Language is included in the bill to require a study of administrative improvements necessary for timely processing of income data reported by beneficiaries. Other provisions in the bill had also been modified to address some of the advocates’ concerns.

Major provisions of H.R. 631 include:

• Improvements in collection of overpayments, including establishing representative payees as primarily liable for overpayments made to deceased beneficiaries; requiring SSA to share its prisoner database with other federal agencies to prevent continued payment of other fraudulent benefits (such as food stamps or education aid); requiring SSA to offset lump sum back payments by at least 50 percent to collect prior unpaid overpayments (a hardship waiver would be available); establishing requirements for fugitives or past prisoners to cooperate with SSA in collection of any unpaid overpayments; and requiring SSA to use credit reports, debt collection agencies, and other means to recover overpayments from people who have left the SSI program.
• Changing the treatment of certain trusts and transfers of assets, including requiring that the funds that an individual places into trust would be counted as available resources for SSI eligibility unless the trusts are exempted under Medicaid law; and establishing a penalty period for applicants who transfer resources for less than fair market value within 36 months before their SSI application, unless such transfer falls within specified exemptions of Medicaid law.
• Establishment of new penalties for fraud, including: new administrative procedures and loss of benefits for beneficiaries who have made fraudulent claims; and exclusion of attorneys and doctors from participation in the program and establishment of monetary penalties if they are found guilty of fraud.
• Numerous other provisions designed to reduce the potential for fraud, including annual reviews of consultative examiners to ensure compliance with program rules; requirement for periodic comparisons between Medicare and Medicaid data and SSI data to prevent overpayments to facility residents; a requirement that applicants for SSI authorize SSA to obtain financial information from banks and other financial institutions; facilitation of data sharing with states; a requirement that SSA, together with the SSA Inspector General and the Attorney General, report within a year on legislative and administrative reforms to prevent fraud and on administrative reforms that would improve the timely processing of income changes reported by beneficiaries; and a requirement that SSA annually itemize within its budget request the funds needed to combat fraud by applicants and beneficiaries.

The Arc will continue to work with other advocates and the bipartisan co-sponsors to refine and improve the bill as it goes to the full Ways and Means Committee.n

CCD Task Force Testifies on Social Security Reform

On Feb. 10, Marty Ford of The Arc’s Governmental Affairs Office testified on behalf of the Consortium for Citizens with Disabilities (CCD) Task Force on Social Security regarding the impact of Social Security reform efforts on people with disabilities. The testimony was presented to the House Ways and Means Committee’s Social Security Subcommittee, chaired by Rep. Clay Shaw (R-Fla.). The subcommittee held the hearing to consider Social Security’s role in reducing poverty and protecting minorities, surviving families, and individuals with disabilities.

CCD’s testimony made several points critical to the understanding of the impact of reform proposals on people with disabilities. They included:

• The Title II Old Age, Survivors, and Disability Insurance (OASDI) programs are insurance programs – not investment programs -- designed to reduce risk from certain specific or potential life events for the individual. They insure against poverty in retirement years; they insure against disability limiting a person’s ability to work; and they insure dependents and survivors of workers who become disabled, retire, or die.
• More than one-third of all Social Security benefit payments are made to 16.7 million people who are non-retirees.
• People with disabilities benefit from the Title II trust funds under several categories of assistance. Those categories include: disabled workers, based on their own work histories, and their families; retirees with benefits based on their own work histories; adult disabled children who are dependents of disabled workers and retirees; and adult disabled children who are survivors of deceased workers or retirees.
• People with disabilities cannot be easily separated out of the debate. For instance, adult disabled children receive benefits from the retirement and survivors programs, based on the work history of their parents.
• Partially or fully privatizing the Social Security trust funds would shift the risks that are currently insured against in Title II from the federal government back to the individual. Such a shift would be devastating for people with disabilities.

The CCD Task Force made the point that the current system works and that Congress should only consider legislation that:

• maintains the basic structure of the current system based on workers’ payroll taxes;
• preserves the social insurance disability, survivors, and retirement programs;
• guarantees benefits with inflation adjustments; and
• preserves the Social Security trust funds to meet the needs of current and future beneficiaries.

The Task Force noted that changes will be necessary within the basic structure of the Social Security programs to bring the trust funds into long-term solvency. However, those changes must not be so drastic as to undermine or dismantle the basic structure of the program.

Many privatization proposals try to address the very high transition costs associated with privatization through very deep cuts in the current program. In addition, although many solvency proposals claim to leave disability benefits untouched, they include elements that will hurt those with disabilities. Proposals that claim to offset cuts by the creation of individual accounts ignore the fact that many people with disabilities are significantly limited in their ability to contribute to those accounts for themselves and their families. (See Budget article above.) The testimony highlighted basic components of the major proposals that could negatively impact people with disabilities.

Finally, the CCD task force urged the subcommittee to request a beneficiary impact statement from SSA on every major proposal, or component of a proposal, under serious consideration. The Task Force pointed out that in a program with such impact on millions of people of all ages, it is simply not enough to address only the budgetary impact of change; the people impact must also be studied and well understood before any change is initiated.n

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