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Cost of Services Index (COSI)

• The authors found reductions in the proportion of expenses attributed to wages and rent and increases in the proportion of expenses attributed to supplies relative to the current formula.

MHBG formula

• Combining the best indirect scenario with a change to the COSI resulted in a reallocation of 1.8 percent of funds. Combining the direct scenario with a change to the COSI resulted in a reallocation of 13.6 percent.
• The direct scenario is recommended because it relies on annually available data and more accurately measures state differences, though precision could be improved.

SABG formula

• The current minimum allotment rules are very restrictive, limiting the impact of any changes.
• Combining the best indirect scenario with changes to the COSI does not result in large changes to the reallocation of funds. Combining the direct population need estimates with changes to the COSI would reallocate 8.61 percent of total funds (assuming that minimum allotment rules are removed).
• The direct scenario is recommended because it relies on annually available data and more accurately measures state differences, though precision could be improved.

PATH

• Improving the PATH population need indicator would result in large shifts: Approximately 13 percent of program funding (under an indirect scenario) or 26 percent of program funding (under the direct scenario) would be redistributed across states.
• As with the MHBG and SABG population need indicators, the direct method is preferable because it uses the best available information.

The formulas for distributing funds to states under three block grants (the Community Mental Health Services Block Grant [MHBG], the Substance Abuse Prevention and Treatment Block Grant [SABG], and the Projects for Assistance in Transition from Homelessness [PATH] program) have not been updated since 1992. RAND researchers conducted this congressionally mandated study to determine whether the formulas should be modified to reflect the changing landscape for mental health and substance abuse services and make use of improved data.

The current MHBG and SABG formulas have three components: population need, cost of service delivery, and state fiscal capacity. The PATH formula has only one component: population need. The authors concluded that the formulas for all three block grant programs can be revised to improve their accuracy. Specifically, the cost of services indicators would benefit from revised weighting based on current cost patterns, and population need indicators can draw on the best available data sources that directly measure need. For all formulas, the current minimum allotment rules should be removed, and the best available data should be reviewed every five years to determine whether additional updates are needed. If the formulas are changed, new hold-harmless rules for all programs should be established to protect states from large decreases in funding as changes are implemented.

• Chapter One

  Introduction and Background

• Chapter Two

  The Current Formulas

• Chapter Three

  Approach to Identifying Potential Changes to the Formulas

• Chapter Four

  Approach to Evaluating Potential Changes to the Formulas

• Chapter Five

  Cost of Service and State Fiscal Capacity Indicators for Mental Health and Substance Abuse Prevention and Treatment Block Grants

• Chapter Six

  Community Mental Health Services Block Grant

• Chapter Seven

  Substance Abuse Prevention and Treatment Block Grant

• Chapter Eight

  Projects for Assistance in Transition from Homelessness

• Chapter Nine

  Conclusions and Recommendations