The Week in Public Finance: How One County Put a Number on the Opioid Crisis

Hennepin County, Minn., did a deep dive into what it was spending on the opioid crisis. The numbers were alarming.
by | February 23, 2018
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It's hard to put a number to the cost of the opioid crisis. But that didn't stop Minnesota’s largest county from trying. After being caught by surprise when various costs started spiking, officials decided to take a hard look at the budget.

Now, more than a year later, Hennepin County officials have laid out an ambitious plan to combat the opioid crisis and its costs. The effort provides insight for countless other localities grappling with the issue.

The exercise, says Hennepin County Deputy Administrator Jennifer DeCubellis, has shown officials the extent of the crisis on government spending. Virtually no major spending category, she says, has been left untouched.

One of the most dramatic examples of this is the changes to the county’s budget for child protection. The $122 million Hennepin County spent in 2016 is double what it was just eight years before. In a single year, reports of child abuse doubled from 11,000 to 22,000. The county has also seen a 70 percent increase in foster care placements in two years. Nine in 10 of those placements are for children under the age of five who have a parent abusing drugs. Last year, those placements cost the county $50 million.

Next year, it’s expected that the number of babies born addicted to opioids in the child services system will grow by 113 percent.

The analysis was extensive. County officials also looked at its health plan, county jails and the medical examiner's offices. For its health plan, which covers roughly 29,000 people, Hennepin spent $16 million in one year on opioids. The money went to emergency department charges, intervention, rehabilitation and other drug abuse-related expenses. Of the 851 people in a recent snapshot of its county jail population, 40 percent of them were there for charges related to opioids. And the medical examiner reported $400,000 in additional spending, mainly due to opioid-related autopsies.

The financial impact quickly adds up for a county that spends $2.3 billion from its general fund. But now that the counting is over, DeCubellis says, the real work begins in terms of better directing resources so that those costs ultimately go down.

For example, the county could keep kids with their parents and reduce child protection costs by devoting more resources to early intervention with mothers-to-be and post-natal care. Such an approach could help reverse the quadrupling of kids available for adoption the county has seen in the past nine years.

Confronting the crisis will mean thinking outside the box, too. The opioid crisis took a record number of lives in the county last year -- despite a massive decline in doctors prescribing opioid painkillers.

“Right now, we’re kind of nibbling around the edges,” DeCubellis says. “You can’t just focus on opioids. Ultimately, we need to have better support and services in our community to begin with.”

 

Other headlines in public finance this week:

More Pension Reform in Kentucky

Lawmakers in the Bluegrass State unveiled a long-awaited pension reform proposal this week after a previous version was summarily rejected last year. This marks Kentucky’s third time it is reforming its pension in the past decade. While this proposal does not mandate 401(k)s for employees, it does promise full funding of teacher pensions in exchange for reduced cost-of-living raises for retirees and puts future teachers into a hybrid 401(k)/pension plan. The proposed changes are similar to what was done for the state’s public employees plan five years ago.

The kicker is how the state will pay for the increased funding: across-the-board spending cuts of more than 6 percent and the elimination of 70 state programs. That had retirees this week urging lawmakers to consider tax reform as a way of generating revenue. And S&P Global Ratings, noting that the “reductions will be felt across all levels of government,” opined that the proposal is likely to face resistance.

 

Stopping the Brain Drain

Tax credits for brains? That’s the idea behind a proposal making its way in through the Mississippi Legislature. The bill incentivizes young, talented workers to stay in the state after college by giving them a three-year income tax exemption. It also allows for two additional years of the exemption for graduates who buy residential or commercial property in the state, start a business ot hire employees and teachers. The bill is an unusual approach to addressing Mississippi's brain drain. But on its own, it’s questionable how much impact it could given that the state is lacking the thriving, metropolitan areas that millennials crave.

 

How Slow Can You Go?

After tax reform spurred a wild December in the municipal bond market, all signs are pointing to a dull 2018. Analyst projections on new issuance are all over the place, ranging from a mild 8 percent drop off to a staggering one-third decline this year. However, says a CUSIP Global Services report released this week, historical data trends and recent changes to the tax code “suggest the drop off will be steep.” The combination of federal tax reform changing the rules plus steadily increasing interest rates, the report says, will likely make it more expensive for governments to issue new debt this year.

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