I am pleased to report that the first day of our reorganization was a success. We had a few blips in the Medicaid check writing process, but if you consider the size and scope of the reorganization effort, our first day was a success. This was due to the work of the employees of this department and the time and effort that went into the reorganization plan. It was no small task-and you deserve congratulations. This is the largest reorganization in our 84-year history as a department, one that we undertook to provide better service to Alaskans.
We reached this milestone as a result of a tremendous amount of care and preparation by a lot of people, both inside and outside of the department. Most importantly, I want to acknowledge that you, the staff in each and every division, are the ones who made this new organization a reality.
I know that change is never easy and that changes are happening in virtually every part of DHSS. The overall effect is stress and uncertainty. I know that it will affect you personally. As we transition into a new organization, I want you to know that we are undertaking this effort as a department to improve the service we provide our clients-be they grantees, providers, or beneficiaries. Thank you for your part, whether it be adjusting to working with new people, continuing to do your job in the midst of change, or being uprooted into a new location. Each and every one of you is a valued employee.
The Division of Behavioral Health is a good example of the effort that is involved in this restructure. The new Division of Behavioral Health integrates functions from two former divisions, the Divisions of Alcoholism & Drug Abuse, and Mental Health & Developmental Disabilities. With this integration, we are acknowledging something that our grantees already knew--that the person receiving alcohol and drug abuse services and the person receiving mental health services is often the same individual. Many states and local organizations have already combined these programs and our new structure will allow us to improve the quality of the services we provide.
The reorganization is a big deal for our department. And this reorganization occurred simultaneous to the development and implementation of our FY 2004 budget. The DHSS budget is complex, and to understand it takes time-more than a single sound bite from a television story or newspaper article. There was a process that led to our final budget.
To carry current operations into the new fiscal year, DHSS had to finance $71.9 million in program growth. The majority of this cost inflation is due to our Medicaid program which is continuing to serve more Alaskans. As we developed our budget, we established a goal of minimizing the impact on Alaskans we serve. To accomplish this, we placed the preservation of direct client services as our top funding priority. Our internal financing effort relied upon restructuring, identifying new sources of revenue, increasing administrative efficiencies, and prioritizing around core services.
We underwent the reorganization to improve the delivery of service, creating a single point-of-entry for children's services and seniors, along with other major organizational changes. We looked for new sources of revenue and found $55.3 million in general fund savings from refinancing (reductions in state funds replaced by federal funds dollar for dollar), the alcohol tax, and new federal Medicaid funds. These new sources of revenue replaced most of the state general funds vetoed or reduced this legislative session. We also developed cost containment measures for our Medicaid program, and were able to save $11.3 million with no impact to eligibility or services through use of an approved drug list, better contracting with non-emergency patient transportation and similar efforts.
To complete our financing of $71.9 million in program growth, administrative reductions in the amount of $5.3 million were also taken. These are jobs and people in our Department. Under the pressure of the current budget we are not able to continue our level of service without finding ways to deliver our services with a lower overall administrative cost.
This was a difficult decision because the people affected by it were doing a good job, contributing their knowledge and skills to the mission of this department. I've said this to our grantees and to the public-that the administrative positions reduced in the department were filled by good people who do good work. The loss of those positions was not a reflection on the work they were doing, but rather on the budget environment and our desire to minimize the impact of direct services to clients. Our grantees will also be challenged to find ways to deliver services more efficiently, and we must join them in this effort.
Our work to provide quality health and social services in the most effective and efficient way continues. It will continue into Fiscal Year 2005 and beyond. As commissioner, I am committed to our mission, and I appreciate your commitment and your day-to-day contribution to this department.
Sincerely,
Joel Gilbertson, Commissioner