Beyond general fund: environmental health revenues in a down economy.
This month we bring you Part 2 of a two-part series about the impact economic hard times have been having on the profession.
As the Journal of Environmental Health (JEH) reported in this space last month, demands for environmental health services are up while traditional sources of revenue are stagnant or declining. How are health departments coping with the situation? Many are looking to fee-for-service arrangements and grant funding to support revenue-starved programs. In some cases, these strategies offer health departments a measure of independence from the politically driven budget decisions made in statehouses. They also, however, bring with them a new set of challenges and controversies for the profession.
Fee for Service--The Future of Environmental Health?
In Napa County, California, the environmental health program traditionally has been funded partly by general-fund revenues (primarily from property taxes) and partly by fees charged to consumers. That is changing. "We are one of the last counties in California that has huge subsidies from property taxes," says Jill Pahl, assistant director of the Napa County Department of Environmental Management. The subsidies are being reduced, and the program is being "re-oriented" with the goal of recouping most, if not all, of its costs through fees.
"That's really the future," Ms. Pahl says. "That's how you assure care." Fee-based financing also will protect the program against cuts in personnel because county decision makers will know that if they reduce the program, they'll lose revenues from the associated fees.
Tom Hart of Linn County, Iowa, agrees. Fees will help insulate environmental health programs from political whim, he says. Mr. Hart envisions developing "salable products" that industries like building and construction will buy because it will be to their commercial advantage to say that their product has been certified. He cites mold as an issue that has been "hyped" by the media and for which no national standards exist. Environmental health programs could step in, he suggests, and charge a reasonable personnel and processing fee to handle the issue for the real estate community. Environmental health practitioners could find other such issues "that have a legitimate scientific basis," he says, and with which a recognized hazard is associated. It may even be a question of developing recognition of a hazard--of "seeding the program with some awareness." Once that has been done, environmental health practitioners call start generating revenue based on public demand for the service."
Michael Kirsch of Zanesville-Muskingum County, Ohio, says that the majority of his environmental health programs are funded through fees. Indeed, he puts leftover environmental health money into a pot that helps fund other health department programs. Food service inspection rates in his jurisdiction range from $130 to $599.
Many jurisdictions have instituted or raised fees for noncompliance or late renewal of permits. "We charge $75 per visit to a food establishment when we have to visit for a second time because of noncompliance," Brian Collins says. Even when such fees do not cover the cost of the program, he believes, they help reduce the number of inspections the department needs to do by encouraging compliance.
The use of fees can be complicated, however. In some jurisdictions, any fees the health department collects just go back into the general fund. In North Carolina, according to Tom Ward, the money goes to the state, and then some of it comes back, depending on how many facilities a county has and what percentage of inspectors it has. The fees are very low. "Out of the $25 food service inspection fee," Mr. Ward says, "$16 comes back to me." In Colorado, the state legislature sets fee levels and is generally reluctant to raise them (see companion article starting on page 47). Cuyahoga County, Ohio, by contrast, conducts a cost methodology study every year to prove it needs to have the fees it does to support its program. "Everybody should be able. to show how they arrived at a $400 food license, instead of just picking one out of the air," says Peter Schade, environmental health director in Cuyahoga County, Ohio. The county regularly raises fees, and the increases are prudent, he says: 10 or 12 percent every three years. He says the industry is supportive of the increases.
According to Howard Roitman of Colorado, certain kinds of fees are not stable if they are not spread across a broad-enough base. Roitman, who stresses that he is expressing a personal opinion here, and not the official position of his agency, gives the example of a hazardous waste program that relies on fees in Colorado. Until about five years ago, the bulk of the funding came from fees assessed for large volumes of waste disposed at a commercial hazardous waste facility. "Well," he says, "that market changed." A fee that used to generate several hundred thousand dollars suddenly yielded less than a hundred. The result was a fiscal crisis for that program, which then had to change its fee structure. Now more people have to pay fees, but they pay smaller fees.
Roitman, again expressing a personal opinion rather than official agency position, thinks the best approach might be some kind of general environmental fee. "Right now," he says, "we regulate entities that may pay a dozen different fees, which is somewhat inefficient for us and for them." Under this model, one overall fee, covering items such as stormwater, wastewater, and air, would be assessed per facility. Roitman thinks that kind of fee structure would not only be more efficient, but also would provide a more secure funding base for environmental health programs.
How are consumers and regulated industries reacting to increases in fees? Pat Maloney of Brookline, Massachusetts, thinks that with the publicity in the media about state budget crises, most people aren't surprised. The Boston Globe, he says, has reported that all state fees are just about tripling, in his jurisdiction, the base fee for a tobacco permit has risen from $60 to $250. In addition there are steep surcharges if there has been a violation of the law. Some facilities have had to pay a couple thousand dollars to renew tobacco licenses. "I received very few calls on that," Maloney says.
Brian Collins of Piano, Texas, however, is leery of raising fees in a slow economy. "It's tantamount to squeezing water from a rock," he says, since many of the regulated businesses have been hard hit by the downturn.
"The feedback we got from food service establishments was, 'We're barely making it. Why would you think we could pay extra fees?'" There has been resistance to increases in fees in Colorado, as well, and some controversy about who should determine the amount. For more on that story, see the companion article starting below.
"The interesting thing," says Jill Pahl of Napa County, California, is that when her department implements new fees and raises existing ones, "we'll be charging significantly more for the same service that clients have had in the past." That can be uncomfortable, she acknowledges. But Napa County is looking for ways to be more efficient so as to provide even better service.
Peter Schade of Cuyahoga County, Ohio, agrees. In a down economy, he says, it's hard for a food service establishment to get a bill that's risen, for example, from $400 to $428. "But you know what?" he says. "We've got to turn it around and say, 'Look what you're not taking advantage of from the health department. We'll train your new employees. We're here at your beck and call."
Reliance on fees has had other repercussions, however. "We're becoming more focused on financial issues," Maloney says. "I feel like a collection agent at limes." Sometimes when surcharges and penalties are involved, he finds himself on the phone "dickering over cost." He has also found himself in the position of giving notice or closing facilities down simply for nonpayment of fees. "It's not what environmental health people are traditionally trained to do," he adds, and environmental health education will have to adjust.
Maloney adds that the new fees "don't come close to" covering the cost of the environmental health programs. Policy makers and financial people sometimes look at the budget, he says, and wonder why the public health division can't earn its keep. "I don't know of anyone who can do that. People don't ask that of the fire department." Maloney believes that the public protection element of environmental health is part of what people pay for with their taxes. "We try to soften the burden by adopting some of these innovative financial approaches," he says, "but we'll never break even."
Breaking even partly depends on where the lines between departments are drawn. Steve Roy of St. Paul, Minnesota, says that his environmental health programs are entirely supported by a fee-based special fund. In his jurisdiction, however, the environmental health department includes the building department, which generally takes in more than it would cost to issue permits for new construction. The money from building fees goes into a general environmental health fund.
Inversely, particular environmental health programs may be sheltered from funding difficulties if their fees are kept entirely separate from other parts of the environmental health program. An example of a sheltered program of this type is the hazardous waste division of Seattle-King County, Oregon (see the companion article starting on page 50).
However a department is organized, though, there will always be a need for programs for which fees aren't or can't be charged. "We continue to struggle with that," says Jill Pahl, because "sometimes the things that you can do to achieve a higher public health status are not things that are fee generating."
In Napa County, the animal shelter falls under the environmental health division because of the disease risk to the public. And the department can't charge the animals for the cost of their board and care. County leaders are going to have to make "some really interesting and tough decisions," Pahl says.
In Massachusetts, says Pat Maloney, health departments are mandated to respond with housing inspections to citizen complaints of inadequate living environments--inadequate heat, for example, or lack of screens in windows. The department does not charge citizens for such calls.
In Michigan, according to Ron Grimes, indoor air issues are affected. The impact of this issue dates from the mid-1970s, when, as a result of the energy crisis, buildings were made airtight. Meanwhile, demand for other services is rising, department resources are stretched, and, because fee-generating services cannot be neglected, IAQ complaints don't always get prompt attention.
In Foxborough, Massachusetts, the environmental health program is supported entirely by general-fund revenues. Would George Young, the local environmental health practitioner, like to be able to charge fees? "It's a tossup," he says. His program has been particularly hard hit in the latest economic downturn (see "Practicing Environmental Health in a Down Economy: Put on Your Superman Cape" in the November 2003 issue of the Journal.) But he is wary of lees. "l could imagine that a community could just get greedy and set outrageous fees--to have a whole fleet of inspectors." That sentiment is echoed by Peter Meersman of the Colorado Restaurant Association. For more on industry worries about abuses of fee-for-service systems, see the companion article starting on page 47.
Peter Thornton of Volusia County, Florida, sees the need for non-revenue-generating programs as just one more reason to look to fees for as much revenue as possible. He has been holding a series of meetings with policy makers and industry representatives in an effort to raise fees on a number of services. He reports success. Onsite sewage contractors, he says, "no longer want to hear about the possibility of environmental health general-revenue reductions; they want the program completely funded by their fees." Precisely because environmental health programs also have to provide unfunded or poorly traded services related to emerging pathogens, re-emerging pathogens, and the threat of terrorism, routine programs should be "as self-supporting as possible."
Grants and Bioterrorism Funding--How Much Help Are They?
Despite the down economy, Tom Hart of Linn County, Iowa, reports that he's actually looking at hiring planners and educators, on the basis of grants he expects to receive from the Centers for Disease Control and Prevention (CDC). The grants, which support bioterrorism response and education, should run through 2005.
Other revenue sources are down, and Mr. Hart acknowledges that there has been a shift from the traditional environmental health focus to counterterrorism. But, he says, "The aspect of that I appreciate is that we're encouraged to think about dual-use capabilities with these resources that are coming through bioterrorism." The grants are helping him build the public health infrastructure with high-speed Internet access, laboratory capabilities, and communication capabilities and experience that will facilitate interactions with other health providers.
"That," he thinks, "is in the nature of environmental health: trying to spend money in ways that meet the definition of bioterrorism preparation. It's one of the benefits, but one of the hardships, of having money staring you in the face."
There are limits, he admits. Finding a way to make this kind of money cover West Nile virus prevention efforts would take a lot more "creativity" than he has, he says. "The trouble with bioterrorism money," says Brian Collins of Piano. Texas, is that while it is good for the counties, it is not "filtering down expeditiously" to the city level. He thinks it will be two to three years before his department sees any of the money.
Ron Grimes of Jackson County, Michigan, agrees. The amount of funding that has filtered down to the local level has probably not been adequate to cover the additional demands the need for terrorism readiness has placed on departments. Financial support has not increased in tandem with increases in expectations. In other words, the threat of bioterrorism is not a windfall for local environmental health programs. "The funding that we receive here," Mr. Grimes says, "really is only one position."
In Zanesville-Muskingum County, Ohio, Environmental Health Director Michael Kitsch used to be very involved in local disaster preparation. He still attends meetings, but he has reduced staff time devoted to preparedness.
Bioterrorism preparedness too?
"Yes, because I don't get any money for it," he says.
Tom Ward of Union County, North Carolina, however, believes that the bioterrorism issue has had some positive effects on his program, regardless of the level of direct funding associated with it. "There's a realization that some of those preventive things we've been doing all along are important," he says. He believes the principle of prevention is catching on in public consciousness, even beyond the issue of terrorism, influencing apparently distant areas of public health like food safety.
What about other kinds of grants?
Ron Grimes of Jackson County, Michigan, and Peter Tabbot of West Caldwell, New Jersey, warn that grants are not a panacea for the budget woes of environmental health programs. Federal, state, and local grants are drying up, says Grimes, and competition for funds has increased among agencies.
To help environmental health programs claim more of the shrinking grant pool, Peter Schade is proposing to establish a grant clearinghouse through NEHA. He acknowledges that a resource of that sort might increase competition for grants still further. But, he says, it might also help departments from different jurisdictions work together. He envisions collaborative grant applications in which, for instance, several health departments would propose a pilot food-sampling program across the boundaries of three to four jurisdictions.
Conclusion: Changes Ahead
Economies have ups and downs. The current down is just one of many--perhaps a bit more severe than usual--that environmental programs have survived over decades. Still, this economic "moment" promises to leave a more lasting imprint than most because it has prompted an extensive restructuring of funding mechanisms. Perhaps the conjunction of economic downturn with political events that have raised new public concerns--bioterrorism, for instance--also has contributed to the effect. At any rate, if changes in funding entail changes in environmental health priorities, the implications may continue to unfold for years.
TABLE 1 Interviewees Jurisdiction or Name Title Organization Ken Armstrong Administrator Local Hazardous Waste Management Program, Seattle--King County, Washington Brian Collins Director of Plano, Texas Environmental Health Ron Grimes Health Officer/Director Jackson County, Michigan Tom Hart Environmental Linn County, Iowa Supervisor Michael Kirsch Environmental Health Zanesville-Muskingum Director County, Ohio Adrienne LeBailly Director Larimer County Department of Health and Environment Pat Maloney Director of Brookline, Environmental Health Massachusetts Peter Meersman CEO Colorado Restaurant Association Jill Pahl Assistant Director of Napa County, California Environmental Management Howard Roitman Director of Colorado Environmental Programs Steve Roy Environmental Health St. Paul, Minnesota Specialist 3 Peter Schade Deputy Director of Cuyahoga County, Ohio Environmental Health Ed Schemm Assistant Director of Larimer County, Environmental Health Colorado Peter Tabbot Health Officer West Caldwell, New Jersey Peter Thornton Director of Volusia County, Florida Environmental Health Thomas Ward Environmental Health Union County, Director North Carolina George Young Health Agent Foxborough, Massachusetts Name Type Population Ken Armstrong Urban, suburban 1,737,034 Brian Collins Urban 236,539 Ron Grimes Rural, suburban 158,422 Tom Hart Rural, urban 191,701 Michael Kirsch Rural, urban 84,900 Adrienne LeBailly Rural, urban, 251,226 national park Pat Maloney Suburban 57,101 Peter Meersman Industry group -- Jill Pahl Rural, urban 128,145 Howard Roitman Statewide 4,506,542 Steve Roy Urban 287,151 Peter Schade Rural townships, 1,380,421 inner-ring suburbs Ed Schemm Rural, urban, 259,472 national park Peter Tabbot Town 11,233 Peter Thornton Rural, urban 443,343 Thomas Ward Suburban 123,677 George Young Suburban town 16,246
Food Safety and Fees in Larimer County, Colorado: Impasse
In Colorado, the state legislature traditionally has helped fund county health department programs, distributing money according to a per capita formula. In other words, the state paid counties a dollar and some cents per resident. In Larimer County, the per capita money amounted to about $350,000--until last year, when the governor used his line item veto to cut funding for local health departments from the state budget.
Located in north central Colorado, Larimer County covers 2,640 square miles and has a population of 251,226. It includes the cities of Fort Collins and Loveland, the towns of Estes Park and Berthoud, and in Rocky Mountain National Park.
The loss of $350,000 brought to head a budget crisis that had been brewing for some time. In fact, according to Adrienne LeBailly, M.D., director of the Larimer County Department of Health and Environment, the department is facing a shortfall of twice that amount. Over the years, she says, there has been a "slow erosion" of support for public health services that made Larimer County vulnerable going into the latest economic downturn.
"It's not that county contributions have gone down," she observes. "It's just that county Contributions haven't kept up with increases in costs, particularly salary and benefits costs."
Over the past 15 years, the department has had to eliminate a number of services, including an encephalitis surveillance program, pollution prevention, and a hazardous waste program. With the latest blow--the loss of state per capita funding--even the county food safety program is in jeopardy.
The county commissioners gave the health department stopgap money from county property tax funds to keep the program going from January through June of 2003; the hope was that after that the health department could obtain increases in licensing fees. They doled out a little more for the following six months when it became clear that, for reasons examined below, fee increases would not be sufficient.
What happens when the current six-month funding period ends--this month? We're at risk," says Ed Schemm, assistant director of environmental health. "We're in limbo six months at a time." Which is why the department has been losing staff and, to the extent that it is replacing those who leave, has been replacing them with temps.
The Larimer County Department of Health and Environment used to hold food safety classes for restaurant managers and staff--no more: Inspections of low-risk establishments have been cut, with establishments in the lowest risk category not being inspected at all. Another loss has been to inspections of special-event activities--the festivals and weekend events that are so numerous in the area;
"We still have really good people," says Ms LeBailly. "But we had a super food program." Indeed, in 2001. Larimer County placed in the top three for the Crumbine Award.
"But of course we aren't applying for that award now," LeBailly adds. The department has been searching for new sources of revenue. In November 2002, it got a proposal on the ballot asking the public to approve a mill levy that would fund public health programs. The proposal had a lot of support, not only from the county commissioners, but also from the restaurant industry.
"Local restaurants--and even the Colorado Restaurant Association--contributed to that campaign," LeBailly says.
Still, the mill levy didn't pass. LeBailly thinks the Latimer county public health programs have been victims of their own success, so effectively preventing disease that people can't see the risks being averted. It might require losing the programs, she says ominously, "to help people understand what they provide."
LeBailly would like to increase restaurant licensing fees so that they cover two-thirds to 80 percent of inspection costs, at least. But in Colorado, food service license fees are set by state law. And the Colorado legislature, LeBailly says, "has repeatedly failed to" increase fees to amounts that would support the food program.
As of the latest survey, taken in 2001, the average licensing fee for Colorado establishments was $366 per establishment, says LeBailly. The median cost was $377, with a range of $157 to $598. The average cost in Larimer County was $366.
Recently, the legislature did raise fees Charged to the food service industry by about 40 percent overall with the increases varying according to the size and type of establishment, For each establishment licensed, the county has to send $25 back to the state (up from $20 prior to the recent fee increase). LeBailly says that a typical restaurant seating fewer than 100 people now pays $154 per year, of which the county gets to keep $129. The fees cover about 35 percent of the inspection costs.
Why won't the legislature allow higher fees--or allow counties to set their own fee structures?
"The Colorado Restaurant Association is really powerful in the legislature," LeBailly says, "and they have fought increases that would have been able to fund the program fully."
Peter Meersman, CEO of the Colorado Restaurant Association (CRA), bristles at the implication of obstructionism. "It's difficult to get the legislature to raise those fees. Every time they have been raised, they have been raised with our support." He points out that CRA supported the most recent increase.
"However, as a matter of policy," he says, "we do not support paying the entire amount that it costs local health departments to inspect the restaurants." He acknowledges that CRA does have influence with the legislature: "There's no question that they're responding to lobbying on our part." He sees nothing objectionable in that. The legislators are elected officials, and they respond to lobbying from the other side, toe, he says.
Meersman also wants it on record that his organization supported the Latimer County mill levy proposal put before the voters in November 2002.
Adrienne LeBailly is cynical about that support. "That would have been a tax, and they [the Colorado Restaurant Association] support taxes paying for food safety inspections."
If the state won't provide per capita funds, voters won't approve a mill levy, and fees can't be raised to cover the shortfall, how should restaurant inspections be paid for? Meersman believes the funding arrangements should continue as they are now, with the local jurisdiction paying part of the costs and the licensees paying part of the costs. The problem, he says, is that health departments have to struggle to get county commissioners to increase their budgets.
When JEH asks if that means raising local taxes, Meersman laughs. "I'm not suggesting that anybody raise taxes, especially in a down economy." He says the county commissioners should simply determine what their priorities are given the money they have.
Meersman also does not believe counties should be allowed to set their own fee schedules, as happens in other states and, in Colorado, in the city of Denver. (Denver's special dispensation was grand-fathered into the current law.) "It's not as simple as allowing health departments to charge what they need," he says. Some departments may do a better job than others. There is no par level for the services provided, he points out, and no check on extravagant programs: "A county could charge $2,000 because it wanted to inspect 10 times a year."
Any discussion of changing the Colorado law would need to address the following issues, he adds:
* What limits might there be on fees?
* What would the programs look like?
* How often would inspections be conducted?
Would CRA consider a change in the law if those issues were addressed?
"Right now our official position is that we will share in paying fees; we will not pay the entire amount," Meersman says.
It sounds as if the health department is at loggerheads with the industry in Latimer County, but LeBailly disagrees. She says that many local restaurants appreciate the educational work the department used to do and would support greater fee increases. CRA represents only some of the restaurants in the state, she points out. She puts the number at about one-third. Meersman's estimate is 40 percent--about 4,000 restaurants statewide.
At any rate, Ed Schemm says, without some new source of revenue, the department may have to give its food safety program up entirely. If that happens, the state agency--the Colorado Department Of Public Health and Environment--would have to pick up the program, because restaurant inspections are mandated by state law. There is an irony here: The state, which precipitated the crisis by cutting per capita funding, would have to shoulder the entire cost of the inspections.
It's not yet clear how significant that burden would be and how the level of service would be affected.
"As I understand it, we'd be able to get the fees that would be otherwise paid to Latimer," says Howard Roitman, director of environmental programs with the state agency. "But what we could do for that amount of money, we haven't looked at yet."
Hazardous Waste Fees in King County, Washington: Stability
Does the fee-for-service trend inevitably work to the detriment of education and prevention activities? Perhaps. Broad-based programs that serve general public rather than specific private interests do not seem likely to thrive on fee-based funding. It is hard to imagine having an effective West Nile virus prevention program or an effective bioterrorism preparedness program without some sense that public health is a collective responsibility. Nevertheless, under certain circumstances, the imaginative use of fee-based funding can support education and prevention programs.
Readers may recall an article that was featured in last month's issue of the Journal, "Helping the Auto Repair Industry Manage Hazardous Wastes: An Education Project in King County, Washington." Written by environmental health specialists from the Seattle-King County Local Hazardous Waste Management Program, the article described visits environmental health staff made to auto repair shops to analyze waste streams and discuss proper handling of materials such as waste oil, oil filters, used shop towels, antifreeze, sludge from parts washers, and batteries.
It can take months to put together a scholarly report like the one on the King County project--and still more time for the report to proceed through the submission, revision, and approval process of a peer-reviewed journal. So it occurred to JEH that if the educational program described in the article was funded with general revenues, it might be a thing of the past. Or, if the program was still flourishing in the current climate of budget cuts, perhaps it had some source of funding that was sheltered from the storm, so to speak.
The auto repair shops did not pay for the visits, which had no licensing or enforcement component. Nor did they pay penalties if violations were found. The project was purely educational.
So how was it funded? JEH called to ask.
"We have a dedicated fund," said Ken Armstrong, administrator of the Local Hazardous Waste Management Program for Seattle--King County. A hazardous waste fee is collected from every residential and nonresidential account in a region that covers the city of Seattle and the surrounding King County. The fees are not high: $0.66 per month for residential accounts and $6.77 per month fur nonresidential accounts. Wastewater treatment plants pay $25 per million gallons. Some money also comes from interest on the fund, and about 5 percent of the budget comes from "prevention grants" that the Washington State Department of Ecology distributes in two-year cycles.
"Revenues are fairly stable," Armstrong said.
The program has been in existence since 1991, when the Washington State Hazardous Waste Management Act mandated the creation of local plans. The county board of health sets the fees, which do not pay for any specific service but go into the dedicated fund that supports all of the hazardous waste programs.
It is this funding structure that allows Seattle--King County to maintain its educational projects for hazardous wastes. Indeed, in the 12 years since its inception, the program has shifted its emphasis from waste management to prevention.
Recent projects include educational visits to autobody repair shops (a variant of the auto repair shop project described in last month's article) and educational outreach centered on a geographic area of Seattle that has long been contributing pollution to regional waters through storm drains.
Another undertaking was a chemical-safety project that addressed conditions in school laboratories.
"We found highly toxic chemicals that were Stored in incompatible ways," Armstrong said. "In the case of an earthquake, you Could imagine a worst-case scenario in schools."
The program also has addressed mercury. The Seattle-King County Hazardous Waste Management Program was able to get the board of health to ban the sale of mercury thermometers. Its advocacy also played a part in a statewide ban later passed by the legislature.
Still, the picture isn't entirely rosy. While revenues have been stable, real costs have been rising. Personnel costs, particularly the costs of benefits, have been "skyrocketing," according to Armstrong. "Government agencies everywhere are having to look critically at what they're doing, and we're no different," he said, "This has provided the opportunity to really refocus what we're doing."
Although the focus now is on the highest priorities, that does not mean the program has been forced to abandon its educational activities.
"Education is one of the highest priorities," Armstrong said.