Director Hendrick: Most of the time has been spent, really, 
trying to get this budget proposal together 
and we'll run through a lot of the time on that.

No Audio: Slide titled “Site Visits” with the following bullet points: Internal assessment of HB 1304 (IT Consolidation) and the terms of the exemption needed. Reviewed and finalized an exemption request. Sovereignty Symposium presentation. Arrow Ministries Presentation to support foster care recruitment.  Oracle rules engine presentation. Pathways to Adulthood – Independent Living Services conference for teens in care. Atoka County Office visit (Atoka, OK – Area IV). Bryan County Office visit (Durant, OK – Area IV). Marshall County Office visit (Madill, OK – Area IV). Health and Human Services Cabinet Meeting with Secretary Terry Cline.  Oklahoma County Continuous Quality Improvement meeting with Oklahoma County Directors and area staff. Aging Services Authenti-care assessment. Smart Start Oklahoma Executive Committee.  OKDHS State Games – More than 1,000 employees and family members attended (Oklahoma City Zoo was the site).

But I had a chance to get out into Area IV since last we met, 
go to Atoka and Durant and Madill and it's always nice to get out
and talk to the folks who are doing the work.
Because you have one perception of reality and they can have
their reality and you kind of compare and figure out whether you
really had it all and we - really it's pretty good, actually.
We had a very good day with those folks.
We also had a really nice event this last weekend at the State Games.
This is, of course, the 75th anniversary of the agency.
But the State Games were really begun in the last... 
before I came here, actually. Back in the mid-80s 
I think when we had, or early 90s, when we had quite a bit 
of economic challenges like we do today 
and it was a morale booster for our staff. 
And we had a little over 1,000 employees, 
and their family members, together, 
participate Saturday in a variety of events.
We had some folks play golf, some folks played volleyball,
some folks did the run, we had a softball tournament, 
a volleyball tournament and then you could go to the zoo all day,
or part of the day if you wanted to, 
and then we had an all you can eat dinner at the zoo pavilion 
on Saturday night. 
And it was really nice to see all employees from across the state 
come in and participate in these events.  So that was really nice.
It proves that Phil Motely really can get off of the computer
and figure out what a golf ball looks like.
(audience laughter)
Director Hendrick: Thanks to everybody who did this.
We had a lot of great staff who worked really hard to
put the event together.
They did a terrific job and it was a record number 
of people who participated and so thanks to everybody
who showed up to participate also.
We had an exciting thing also happen in the last month.
We got to go to this adoption with … 
this is Ken Couchman and this is his new daughter, Grace.
This is their other daughter, Mr. and Mrs. Couchman, 
Judge Kirby and this is our Adoption Worker 
and this is their lawyer, Jack Petty, who handled the adoption.
This is our 1,000th adoption this year, 
or we estimated this year to be.
So this is like the … I think we've had at least 1,000 adoptions
every year except for one or two in the last decade and
we had a record number last year.
We had almost 1690-something, I think, last year.
We're not going to beat that number this year because we don't
have as many kids in care, but still we're still adopting at a
very fast pace and that was exciting also.
SNAP...
Commissioner: How many adoptions would you estimate since you've
been Director have we had? 15,000? 16,000?
Director Hendrick: Actually about 15,000.
Commissioner: Excellent.
Director Hendrick: A little over 15,000 maybe.
And you think about that, there's … we count the adoptions
but another really big success is the number of kids 
who go home with their parents.
And for every adoption there's probably three or four kids
who are reunited with their parents.
So those are exciting results also and we have a relatively
lower rate of kids who re-enter care after re-unification,
compared to other states, so we're doing a lot of things well.
We can always improve on lots of stuff but that's …
we're doing a lot of things well, also.
SNAP in May - 611,000 people.

No Audio: Slide titled “OKDHS Agency Overview – SNAP – A Brief Analysis” which shows the increase of how many persons have participated in the SNAP program every month between January of 2005 and May of 2011.


It's the fifth highest number of persons in history.
It's the highest number in history in terms of cases.
We don't have cases up here, we just have people up here.
This is the 3rd month in a row with an increase and it's
about 25,000 more or so than 1 year ago, 
and it's about 125,000 or so more than 2 years ago.
I think when we get to the budget here in a moment
you'll see that, in round numbers, our State Budget Work
Program in dollars will be about equal to what our 
State Budget Work Program in dollars was in 2008.
You can see here in 2008 we had 200,000 less people 
on Food Stamps and more employees.
So, this gives you a sense about how well people are really
working hard to try to make things work.  So, really a nice job.
And you can see our average monthly participation this
year is about 50,000 more per month, on an average month, than we
had last year and it's about 150,000 or so more... maybe 160,000 more
than we had 2 years ago.
2012 Budget Recommendation.
This is the recommendation from the Budget Committee.
We'll run through in as much detail, 
answer any questions you may have, 
but here are the big goals: One is to minimize programs and
operating reductions so that the maximum amount of service
can be sustained for the dollars we have.
We need to understand that State Fiscal Year 2013 
might be more of the same kind of budget reductions, 
so we want to position ourselves with some less dependence 
on one-time funds and reduce some recurring costs now, 
to prepare for 2013.
And we want to follow the legislative guidance that was
given to us in the legislation that was passed.
It's popularly reported that we received a 1.1% cut.
Here's the computation of that cut.
Our appropriation for the last year was $500 million 
and $43 million of one-time funds were used 
as part of the ARRA/FMAP reduction 
which was a Health Care Authority computation.
So together, the way the Legislature figured our budget, we
had about $543 million state dollars last year 
in appropriations and that reduction would be $5.9 million.
That would reduce our base to $537 million and that
$537 million was appropriated with about $514 million 
from GR and $22 million from escrowed stimulus funds.
So that's where we get the $537 million in the appropriation.
When we go back and look at what we have to do to put our
budget together you can see that we had the
budget legislative reduction $5.9 million.
Then we have another $14.4 million of unfunded
non-enhanced FMAP increases.
Now, what that means ... that's a lot of "nons" and "uns"
together so let's go see what that really means.
The enhanced FMAP, which is the amount of money on... 
which is this $43 million the Health Care Authority is using, 
or that the Legislature used, is the amount of FMAP adjustment 
that is attributed solely to ARRA.  Okay?
When we had other FMAP increases that were not attributed to ARRA.
ARRA is often referred to as "enhanced FMAP."
So the other FMAP increase that's not stimulus-related is
this $14 million.
And the reason why we have FMAP increases that are not stimulus-related 
is because our state's economy is doing better relative to other states.
So, each year CMS adjusts those rates and this is our share
of the improved economic adjustment in our FMAP increase,
which is over and above the FMAP increase attributable
to the ARRA's far change.
We have $1.2 million of increased contribution to the
Oklahoma Public Employees Retirement System.
We have a number of new revenues and budget projections that resulted in, 
actually, in improved position of about $4 million and then we have $14 million
of less one-time money proposed in this budget than what we had in 2011.
In 2011 we had about $50 million of one-time funds, 
this time we have about $35 million of one-time funds.
So, together we'll have to take about $32.2 million in reductions.
Here's kind of the big picture if you're not a numbers person
if you're a words person. This is kind of what you need.
We'll do it either way you want to do it, try to get everybody 
a little bit of insight into what's happening here.
The program cuts that are avoided; there won't be any cuts to
Senior Nutrition, we won't cut any rates, for either DDSD
providers, ADvantage Waiver providers, child care providers,
foster care rates or adoption subsidies - those won't be cut.
WE won't have to do a furlough and we won't cut
social service contracts that primarily do child welfare services.
So, the CHABS contracts and all those things will be
funded based on our estimated utilizations.
There won't be any program reductions attributable
to child welfare service cuts. We do have some new costs that are funded.
There's the employment retirement costs. We talked about that earlier.
We have the higher state dollar requirements to fund
the federal Medicaid services and then we have more background
checks in child welfare as a result of some new legislation.
Those are funded.
Where the reductions will be made; we will have 231 less positions in the agency.
Those will all be accomplished by vacancies or by voluntary out benefit offers.
So we will reduce the workforce by about 231 people 
in a variety of places throughout the agency.
We will have a lot of contract reductions, just throughout the agency, different places.
CASA, Marriage Initiative things, Smart Start,
homeless services, 211, and adult day care, voucher programs.
A lot of places throughout the agency will receive various amounts of cuts.
We will have some contracts, reductions for computer services
and we'll have reductions for some training.
And we also will capture some budget under runs 
that are projected to be experienced for 2012.

No Audio: Slide titled “Allocation of Expenditures” which shows OKDHS Expenditures and Non-OKDHS Expenditures for FY2011.

And let's talk about that for a little bit so you can appreciate what's contemplated.
Well, we can cover that in a minute, we'll come back and show you the numbers on it.
Other reductions; the budget proposal contemplates an increase in child care co-pays 
to the Schedule C-4, which under our permanent rules, 
which have been assigned by the Governor, approved by the Legislature, 
permit the Commission to vote to make adjustments to co-pays.
Those co-pays will increase co-pays for persons, 
and those co-pay increases will range from 48 cents per child, per week, 
to $13.60 per child, per week, for households with one child.
The lowest family co-pay will increase from six dollars a month to eight dollars a month.
The highest co-pays for families with one child will increase 
from $189 a month to $246 a month.
The highest family co-pays for families with households
under 5 and 4 or more kids receiving care will increase from
$439 a month to $492 a month.
This is the first co-pay increase in 14 years, rates have been
increased 6 times in the last 11 years based on market surveys 
and the co-pay increases will save about $5.8 million and the reduction eligibility 
for future applicants will save another $2.5 million.
Child care co-pays to Schedule C-1 also will mean that no one who's
presently receiving child care benefits will lose their child care benefits.
However, new applicants with the following highest income levels will not be eligible:
Future family applicants with 1 child and annual incomes exceeding $25,500 will not be eligible 
whereas presently that limit is $29,100.
Future family applicants with 2 children and an annual income exceeding $29,100 
will not be eligible when presently that limit is $35,100.
And future family applicants with 3 or more children and annual income exceeding $35,000 
will not be eligible when presently that income is $43,500.
Income levels that remain eligible in Oklahoma will not be eligible in most other states 
because we do have relatively high maximum eligibility levels.
You've seen this chart before, but just to refresh your memory,
these are 100% federal funds, those aren't going to be changed in
this budget but really the key is how do we spend the
state dollars here which are the $414 million which
generates federal funds inside the agency and federal
funds outside the agency at the Health Care Authority
together with state maintenance of effort obligation in other
programs that are funded with 100% state funds.
Reason why this is important is because we have historically
said that we have $89.1 million of state maintenance of effort.
To refresh your memory to what that means is by federal law these
are state appropriated dollars that cannot be cut.  OK?
So that means all the other cuts have to come from someplace else.
Well, when the Legislature passed the bill that directed us
as to how to spend money, they didn't tell us necessarily how to spend 
but they told us how not to spend certain money. What not to cut.
When they described to us what not to cut that effectively made
this MOE more like $300 million because there are
certain things that they said, "Don't cut."
Don't cut rates, don't cut eligibility for ADvantage Waiver,
DDSD, those kinds of things.
And so that effectively made about $300 million 
of state-appropriated funds that were not cut-able.
So that all went into the equation of how we had to reconfigure 
and honor their wishes and at the same time try to make the best 
of the reductions that we are having to be faced with.
Just to give you some sense of perspective, here's kind of the
summary of the overall budget, you can see that in 2011 ...
could someone get me some water? Some water? Get some water?
We are having a drought, you know. 
(audience laughter)
Director Hendrick: $500 million in appropriated dollars from last year.

No Audio: Slide titled “FY2012 Budget Balancing Summary” which shows the summary of the FY2012 budget as of June 14, 2011.

FMAP, ARRA funds, and one-time funds gave us a State Budget Work
Program for the current year of $559 million and a total budget of $2.2 billion.
FTEs of 7300 employees ... 7294 employees.
At the end of the day when you get down here to row 21,
we're going to have a State Budget Work Program of $572 million,
$2.2 billion in total expenditures and about 7,000 employees.
Now, there's a lot of things I'm going to go through, 
as many of them as I can go through with you on all of them, 
and you can ask as many questions as you want.
I want you to appreciate a little bit of the summary
here so you can understand what's really happening here.
Remember, our State Budget Work Program this year is going
from $559 million to $572 million so we're actually increasing our 
State Budget Work Program by $13 million but we're cutting $32 million. OK?
We're increasing our State Budget Work Program by $13 million
but we're cutting $32 million. Why is that?
We're cutting that because we have $47 million or so, let's go back here.
These expenditures of ... these $47 million of increases
that we have to do here really aren't buying us any more purchasing power, 
they're simply ... when we go total up all these increases we're going to actually fund, 
$45 million of them — this $34 million of stimulus FMAP adjustment 
and this $11.1 million of non-stimulus FMAP adjustment - these $45 million,
are simply state dollars we have to spend to keep purchasing the same number 
of total federal dollars we presently spend for the ADvantage and DDSD waivers.
So that's why the State Budget Work Program is going up
but we're having to make cuts to let it go up.
Because the program costs are going up. OK?
This gives you a little bit of a sense, we've talked about this a little bit earlier 
about how we're funding this $572 million and basically what we're saying is 
it would take $604 million to run the agency at substantially the same level 
that we are running it presently for $2.2 billion. Thank you.
So, the good news is this, if there is any good news and there's
not any really good news, the good news here is in row 20.
Row 20 shows you we're going to cut $32 million.
And normally in an agency leveraged as much as we are,
you'd think that we would at least lose at least $64 million of expenditures because, 
at least we're getting 50-50, sometimes we get 2-to-1, 3-to-1 or whatever.
But the way in which we've been able to structure the
adjustments, we're only going to lose $39 million, almost $40 million of total expenditures, 
so we're really only going to lose $8 million in federal funds even though we're cutting 
$32 million in state funds because of the way we're aligning the different cuts.
So, that's kind of the big picture overview, now let's go into more detail.
The next two slides really... I know the people out here can't see this, 
you have a more thorough detail here but, so let me run through this.

No Audio: Slide titled “FY2012 Budget Balancing – Budget Request and Funded Items” which shows an itemized list of the total dollars, state dollars, and FTE dollars that each item requires.

This is simply a summary of all the budget items that were in our
budget request and then we itemized them, what was funded,
what was funded with one-time, and what was not funded.
You can see that, in column five here, here's all the different things that we asked 
the Legislature to appropriate for, and our best estimate 
of what those things would cost - about $158 million.
We're funding $47 million of them with recurring costs,
I'm on the second slide here at the bottom row,
and we're funding with one-time costs about $2.4 million 
and we're not funding about $109 million.
You can see all the things, we're not funding here because
we weren't appropriated enough money to fund them.
You can see all the things that were funded and you can see
also that among the $47 million that are cut,
there are funded $45 million of the $47 million is really just ARRA,
so really we're funding really the very basic of the basic.
Really if you add the retirement costs that's another $1.2 million of it.
So, there's hardly much over and above that's being funded here.
What are the budget adjustments?
We've reduced a little bit of our need to cut some because we've been able 
to find some revenue source of about $1.5 million of things that we think 
we'll have in federal funds in 2012 that we didn't have in federal funds in 2011, 
so we've got a $1.5 million of that.
The budget adjustments really fall into three categories:
they fall into categories of personnel, budget reductions that are
adjustments to utilizations, in other words, we're adjusting the 2011 budget 
but we don't think we'll have any service reduction
because we believe our utilization of these services, based upon our analysis 
of the present utilization levels, will actually drop on some services.
Then there are the real cuts, the real services that are
being cut here. So they fall into those three big categories.
So you can see ... sorry here to be jumping around.
In the payroll side, we're talking about reducing 231 staff
that will save us $6.55 million and total payroll costs
$11.2 million state and federal funds together.
You can see the bulk of those are coming out of Field Operations
and that's where the bulk of the people are.
You know, we have about 4,000 people in Field Operations 
so it's 182 of the 4,000 employees there.
They will figure out what the proper mix is between all the
different programs they deliver in Field Operations.
We talk about budget adjustments to meet expected utilizations. 
These are budgets who have budget under runs this year 
or we have a trim line that supports our utilization adjustments. 
These are not cutting any eligibility, we're not
cutting anybody off. We're just saying here's $9.89 million
that we can cut our 2011 going into 2012 budget
because utilization is dropping or there's some other reason why
we had a vacancy, we're not going to fill it or whatever,
we're not really going to cut any service in this $9.9 million.
Now, what's tough about that is this: that has the effect of
pre-capturing what would normally be our carry-over into 2013.
Because we can see, at least we believe we can see at this point,
that we're going to have this much utilization drop.
The good thing about that is, we don't have to make the cut now 
so we can continue the service.
The challenging thing will be that in 2013 we won't have necessarily 
as much room to figure out how much carry-over we're going to have in 2013.
Actual service reductions $15.3 million and of course the bulk of this is in child care, 
we talked about that earlier, the $6.8 million and in various TANF support contracts,
these are different services like CASA, the Food Bank, the Marriage Initiative, 
and lots of other little things like that.
You can just go on through those different kinds of adjustments.
Bottom line: $32 million total cuts, $39 million state and federal dollars combined, 
so you can see both ... all of those adjustments there.
The next two slides are the TANF and Child Care Development Fund Budget Plan.
To some of you, this is new, too.
Some of you have seen this before so that's kind of the nature of the beast.
What we tried to do here is describe for you 
and outline the TANF budget and the TANF Block Grant.
At one time we had, I don't know how much money we had obviously, 
$24.65 million in our carry-over coming into State Fiscal Year 2010.
All of the different kinds of funding sources that went into
that $297 million... we spent $298 million.
We ended up the year with a TANF Block Grant of about $21.6 million 
going into 2011 and carry that forward to the top line here in 2011.
In 2011 we started the year with a TANF balance forward of $21.6 million.
There is ARRA revenues in here and ARRA expenditures 
so these years are a little bit out of line normally what you might
normally expect in '10 and '11.
But we had $300 million in revenues and $309 million expenditures 
so we projected our budget would be that we would end at $12.7 million at the end of 2011.
The Commission has previously expressed a direction that we not
go below $12.5 million in TANF reserve.
I think the reason is fairly obvious, if we have some kind of a crisis
down the road, we need to have a little bit of room to be able to
pull something out if we need to do it.
Our current projections are that we're going to under spend this 2011 budget 
and that we'll actually end the year with $26 million, 
not the $12 million we thought we would end with.
So when we put together the 2012 budget our current projections are we would budget 
$11 million more than the block grant to get us back down to the $12.5 million.
We'll only get down to $14.5 million as our TANF balance at the end of 2012.
That's where we'll project we'll be now: $14.5 million. 
We're still back up approaching the $12.5 million, but not all the way there.
Here's the different funding sources for TANF ... actual budgeted, projected, 
and estimated for 2012.
The TANF Block Grant is $145 million every year but once we
transfer things for example, most of the this goes to Child Care Direct, 
we'll talk about those expenditures later on.
We have this much in terms of direct TANF revenues and total TANF funding, 
about $98 million so when we come over here and say we're going to spend $110 million, 
this is the $11 million we expect to over-spend to get back down to about the $14 million.
So you can see cash assistance, work activity, family formation, stabilizations...
virtually all of these things are being reduced since we're going 
from $120 million down to $110 million in expenditures.
Child Care funding. Child Care Development Block Grant.
This is the actual for 2010, budget for '11, projected for '11, our projected budget for 2012, 
and in round numbers, total federal funds: $147 million in child care receipts. 
When we put the state funding together with it, we'll have about $171 million total 
to spend on child care programs, child care subsidy, child care quality and issues, 
child care licensing, all of the things that they'll use with federal funding for child care.
You can see the budget for 2012... the biggest issue here is with the cuts we've talked about before, 
is what to do about child care and you can see the budget for 2011 is $139 million 
and the projected budget for 2012 is $132.3 million and go on down to the different ... 
the administration, the quality initiatives, all the other things 
that go into developing the expenditures, but the main service provision
is the child care subsidies. 
So we're predicted to spend $171 million for 2012 for all child care expenditures.
TANF Cash Assistance.
You can see all of the TANF cash assistance detail here for TANF work activity ...
these are the things we have to do to get people to go to work 
or different activities associated with work and we are monitored by the Federal Government 
on our work participation, and we presently do comply with all of our work participation activities.
Family Formation: you can see we presently have a budget of about $15.2 million 
and we're reducing that budget to about $10 million for 2010.
Other TANF Programs, DDSD Family Support Payments, I want to talk a little bit about that.
We're going to reduce that from $6 million to $5.35 million.
This is a payment to about 2,000 families who, to be eligible
must have a child who has a diagnosis of developmental disabilities
and must be on the waiting list.
If they get off the waiting list, they can actually get waivered services from Medicaid, 
they are no longer eligible for this family support payment.
In round numbers, that payment is $250 per month for the first child 
and $150 for the second child and this budget contemplates 
that those payments would be reduced by $25 a month.
So that's the reason for this reduction here in this deal.
Support Services and Cost Allocation: you can see, 
not a lot of change there, same with cost allocation services coming on down. 
Total of $110 million in total TANF expenditures compared to $120 million. 
I think it's $20 million, maybe it's $30 million in 2011.
Day Care Subsidy... do you have a question?
Commissioner: I want to just clarify your point about the DDSD waiting list. So 
does this presume that the waiting list is going to be reduced?
Director Hendrick: No.
Commissioner: OK. So, can you clarify that?
Director Hendrick: We're not saying the waiting list is going to be reduced, 
we're saying these families will still continue to get their payments 
but we're going to reduce their payments by $25 a month.
Day care subsidy payments, we've talked about this already.
Child Care Services, we've talked about all these lines and this
is more detail if you have more questions about any of these, we
can talk about them individually.
Child Care Licensing, this is the budget for our licensing staff,
we are reducing that staff some.
Family Support day care administration: bottom line,
total child care expenditures drop from about $178 million to $171 million.
We could run through all those in more detail as you'd like.
What about 2013?
State Budget Work Program for '12 will still have a significant amount of one-time money 
in it when budget reductions occur.
It becomes less likely that one-time funds will occur for the next fiscal year. 
So are we concerned about that? Yeah, we're concerned about it.
This should be $32 million not $39 million up here by the way.
Therefore the presence of one-time funds for 2013 is even more remote, 
creating an even deeper hole, however, I think this is ... 
We have kind of a dilemma and what we're trying to do is 
we're trying to walk kind of down the middle of the road so we don't cut too
prematurely and yet we cut enough to where, if we don't get some help,
we don't have to take even more drastic reductions.
I would say, it's delicate because as I said earlier we're
running the agency in absolute dollars, State Budget Work Program 
about where we were in 2008 with less employees, higher costs, and more demand,
 
especially on the family support side. It's going to be close.
That's all I can tell you about it.
We've done a lot of work to try to get it where we can make it work. 
But you can just tell when you don't end up with a big carry-over to begin with, 
you know, you're within a few days of cash and breaking even.
If you take our total budget, divide it by 250 business days a year, 
that's how much money we spend every business day 
and you take that into our carry-over you know, if you look only at state dollars, 
you might have ten days of carry-over in cash.
You look at our total budget you might have less than one day of cash.
I mean, that's just how when you put all the federal dollars in
it, you know, I don't run my place at home that tight.
So, our people in Finance do a remarkable job to keep us, in my opinion at least, 
to keep us really where we need to be.
We will still have ... this is probably as big a concern for going into 2013 as just the cash position.
That is that we're going to have a significant amount of
pent-up demand for pay for our employees, we're going to have
significant pent-up demand for DDSD waiver services, we're going to have
pent-up demand for provider rates, so I mean, we continue to
push as much service out there as we can do with the dollars that
we have but the reality is costs are going up, gas is $3.75
a gallon now. It was a lot less than that way back and we're having
to pay for transportation and so it's going to be
tight. I can't tell you any other way.
But I think we've done the best we can do to get as much service
out of these dollars as we possibly can do and still meet the
wishes of the Legislature in terms of not cutting certain programs.