Health department warns of salary 'underfunding,' FTE-count errors as lawmakers weigh cuts

Donna Auckland, chief financial officer for the Department of Health and Human Services, told the Senate Appropriations Human Resources Subcommittee on March 1 that the department’s salary block grant has structural and accounting problems that members should consider as they finalize biennial budgets.

Auckland said the department builds its salary budgets from a dollar block-grant rather than an FTE count and that last biennium’s accounting left the department with funded positions that were not included in its official FTE count. She said lawmakers approved funding for about 98 positions last biennium but the FTE count in the system did not include them; for the upcoming biennium the department submitted 2,688.35 FTE, but roughly 95 of those positions were budgeted at $0. ‘‘If I had the dollars in my budget right now and I hired them all at lower level positions, I could hire 2,700 people today as long as I don't go over my dollars,’’ Auckland said, adding that in practice she is constrained by the available appropriation and the department’s actual payroll (about 2,450 employees paid in February).

Auckland walked the committee through how the salary numbers were built: a legislative base she said was roughly $544 million for the current biennium, internal reallocations to reflect operational versus one-time funds (for example, moving ongoing operations to pay for 24 CCBHC positions previously funded with one‑time money), and projected expenditures. The department projects salary spending of about $535 million in the current biennium and expects ‘‘roll up’’ (vacancy savings that become available) of roughly $13.4 million.

She also said the governor’s compensation package and the legislature’s earlier increases create a ‘‘cost to continue’’ problem. Because pay increases compound, the department needs to budget 24 months of the prior biennium’s increases to keep pay whole for the next biennium; Auckland put that incremental cost at about $10.3 million in her calculations.

On underfunding, Auckland said the House proposal would reduce the salary block grant by $30 million and that the department allocated that proposed reduction across divisions based on general‑fund shares rather than FTE or vacancy patterns. She warned members that the consequences differ by position: positions that carry federal match requirements could lose the ability to draw down federal funds if the general‑fund match is eliminated. ‘‘Because I underfunded us by $30,000,000, even though I have a position that’s $200,000, I would be losing all — you might have cut me $100,000, but because I can’t match that, I was actually cut $200,000,’’ she said.

Auckland and members also discussed the treatment of prior appropriations and one‑time funds. She said last biennium a reduction of $19.5 million was allocated across divisions and that the governor’s decision packages added $9.8 million intended for FTE flexibility and $250,000 for regional pay differentials in the northwest.

FTE counting and clean‑up drew strong attention. Committee members and staff identified roughly 95 positions entered in the department’s system at $0 funding and suggested removing those positions from the official FTE count to make reports match operational reality. Auckland agreed the positions could be removed and said she had given the list to legislative counsel for verification. OMB staff on the record said that the long‑sheet FTE number reconciles with what OMB is carrying from the governor’s budget and that under the block‑grant approach FTE counts are less operationally critical than the dollar allocation.

Committee members asked for follow up details and visuals: Heather was asked to explain why certain facilities (for example LSTC) ran over budget with contract labor, and Auckland agreed to prepare a visual explanation of how cost‑to‑continue calculations work and to provide more detail on vacancy savings and roll‑up assumptions.

The department emphasized that the committee must decide how much flexibility to leave in the block grant for directors across divisions to respond to real‑time staffing needs. Auckland said the House had effectively left the department about $7 million of flexibility after the proposed reductions, and she warned that less flexibility could constrain program growth such as Certified Community Behavioral Health Clinic (CCBHC) expansion and public‑health staffing for inspections and outbreak response.

The committee held no formal votes during this discussion; members asked for additional data and options to be provided in coming weeks.