An issue brief written by Jane Koppelman, consultant,
with Annette Ferebee and Nancy Eichner, CHHCS
June 2003

  • A third-grader in Denver, Colorado learns from school-based health center staff how to detect and prevent an asthma attack. She checks in regularly with them to ask questions and makes sure she knows how to use her inhaler. Frequent and frantic visits to the emergency room no longer occur.
  • In a rural community in Louisiana, where there are only three physicians and no pediatricians, for most of the 9,000 children living there, school-based health centers are their only source of care.
  • An 11th grader in Stamford, Connecticut who lost two family members to violence says the grief program run by his school-based health center kept him from joining a gang.

Over the past thirty years, school-based health centers have become an increasingly familiar part of the child health safety net. According to data collected by the Center for Health and Health Care in Schools (CHHCS), the health centers that numbered a few hundred at the beginning of the 1990s now total 1500 and provide medical, mental and other health care to several million children at school annually.1

The growth of school-based health centers, a nearly seven-fold increase since 1990, speaks to their community support as well as to the mounting evidence of their effectiveness.2 The centers, usually organized by local hospitals, health departments, or community health centers, provide health care to students to prevent or treat acute and chronic health problems of young people. A mix of nurses, physicians and mental health professionals provide annual physicals, treat medical problems, offer counseling, and organize a range of other services to address student problems.

Despite the continued growth of the centers, their funding sources remain unstable and may become even more so in the absence of a broad economic recovery. Most school-based health centers have relied on a patchwork of state grants, local and federal monies, in-kind support from schools and hospital sponsors, private donations, and insurance payments. The current fiscal crisis, especially in state government, threatens most of these funding streams, and direct federal funding sources are inadequate to fill the gap.

This paper examines the status of funding sources that school-based health centers have come to rely on and considers lessons that might be drawn from states where, despite fiscal crises, the centers have survived and, in some cases, have forged ahead. Finally, the brief concludes with suggestions for stabilizing funding.

The Big Picture

A 1999 survey of 412 school-based health centers conducted by the National Assembly on School-Based Health Care revealed six major sources of funding for centers. The Assembly reported an average annual school-based health center budget of $169,000 — 29 percent of which came from state government, 20 percent from local government, 17 percent from local in-kind sources, 14 percent from private grants and donations, 12 percent from patient revenue, and 8 percent from the federal government.3

The Current State Fiscal Context

Bound by requirements that prohibit deficit spending, states have had to close more than $200 billion in budget deficits since fiscal 2001, according to the National Conference of State Legislatures (NCSL).4 As of late April, states still faced about $22 billion in budget shortfalls for fiscal 2003 and another $54 billion for fiscal 2004.5 In May, Congress voted to send states $20 billion in aid ($10 billion for Medicaid and $10 billion for general use). But 26 states have already made overall program cuts to plug budget holes, and many are proposing reductions in public education, Medicaid, and other programs for fiscal 2004.6

State Grant Funding

State grant funding is the largest source of school-based health center funding and has primarily fueled the growth of centers–through state general funds, the Maternal and Child Health (MCH) Block Grant and, more recently, through tobacco tax and tobacco settlement funds. A recent survey conducted by the Center for Health and Health Care in Schools found that state dollars totaling $71.1 million supported school-based health centers in 26 states and the District of Columbia. Of this total, 38% came from state general funds, 35% from tobacco taxes and settlement dollars, and 15% from Title V MCH Block Grant dollars. The remaining 12 percent came from various other state funding sources such as the Social Services Block Grant.7

Tobacco settlement funds and tobacco taxes are a relatively new source of funding for school-based health centers; in fiscal 2003, states reaped $9 billion and $11.6 billion, respectively, from these two sources.8 Along with state rainy day funds, tobacco dollars are also the funding streams that states are turning to first to reduce their shortfalls and preserve state general funds. In fiscal 2003, 16 states dipped into their settlement monies to lower budget deficits. And 18 states have forfeited the opportunity to rely on settlement funds in the future by accepting a discounted settlement for cash up front.9 In addition, of the 33 states proposing tobacco tax increases for the coming year, only 14 have recommended that the additional revenue be spent on health care programs, according to the NCSL.

Medicaid’s Ripple Effect

Billing Medicaid for patient care is something that school-based health centers have done for only the past decade. While a potentially generous revenue source, the National Assembly data show that Medicaid payments now only account for about 12 percent of center revenues. But because Medicaid is the single largest insurance payer for low-income people, and contributes significantly to the budgets of hospitals serving the poor, Medicaid cuts are expected to have a ripple effect on school-based health center funding. A number of states have already cut Medicaid benefits, eligibility levels, and provider payment rates, and 22 states have proposed Medicaid cuts for fiscal 2004.10

Local Funding

Twenty percent of total revenues reported in the National Assembly on School-Based Health Care study come from local and county governments. This comprised the second largest source of funding for school-based health centers. While a number of states fund localities through revenue sharing, budget shortfalls are causing at least 12 states to pare back revenue sharing programs.11 These cuts, along with declining local tax revenues, may threaten local dollars for school-based health centers.

In-Kind Support

In-kind services from sponsoring agencies such as hospitals, as well as host schools, represent about 17 percent of total school-based health center funding. However, state and local cuts are expected to affect hospitals and schools, some of which may be strained to continue offering a variety of non-reimbursable services and resources to school-based health centers. Already, California, Missouri, Oklahoma and Oregon cut public school spending midway through the 2002-2003 school year. For fiscal 2004, 18 states are planning or considering education cuts likely to result in school closings, shortened school years (as has occurred in Oregon) and teacher layoffs.12

Federal Role

School-based health centers are an important player in the health care safety net, serving many of the 12 million uninsured children in the United States.. They are also meeting the needs of insured children in many medically underserved areas, especially in inner city and rural communities.

Yet, there is little direct federal leverage that Congress, or the Department of Health and Human Services (DHHS), has available to shore up center funding. The Healthy Schools/Healthy Communities grant program, administered by DHHS’ Bureau of Primary Health Care, is the largest source of federal funding for school-based health centers. In fiscal 2003, the program funded 76 school-based health centers in medically underserved areas.13 But Congress has not designated Healthy Schools/Healthy Communities funding as a line-item in the DHHS budget, which means that the money could be used for other purposes if the department’s priorities shift.

The second largest federal grant source for school-based health centers is the MCH block grant. In 2002 states chose to spend about $12 million of their MCH block grant monies on centers.14 President Bush has proposed a $19 million increase for the MCH block grant program, which, if enacted, would create modest opportunities for maintaining or increasing school-based health center state funding.15

States and School-Based Health Centers Respond

In a number of states, advocates have been able to protect school-based health center funding and, as in the case of Michigan, reverse cuts. Due to aggressive lobbying efforts and good political timing (a gubernatorial election year), in 2001 advocates in Michigan persuaded the Republican-controlled state legislature to reverse an executive order by Republican Governor John Engler to eliminate all funding for school-based health centers to help balance the budget.16

Recently, Maine advocates representing school-based health centers, teen pregnancy prevention, smoking cessation programs, and other health promotion programs formed a coalition and convinced the legislature not to divert tobacco settlement monies to address state budget gaps. Now, Democratic Governor John Baldacci has proposed a constitutional amendment that would cement the promise that settlement funds will be used only for health prevention.17 And in New York, where school-based health center advocates each year bring busloads of students to visit the legislature, school-based health centers were one of a handful of programs spared cuts in fiscal 2003.18

In Portland, Oregon, where a network of 13 centers has relied mainly on county funding, shrewd management has kept all centers open despite rather substantial local budget cuts. School-based health center managers reduced travel, training, and over-the-counter drug spending. Staff was transferred from slower to busier centers. And efforts already underway to increase patient billing and expand productivity by opening centers to students from other schools (those without school-based health centers), and sending providers to new schools, were put into high gear.19

However, those in some states, such as Massachusetts, have already felt the impact of budget cuts. In February, when Governor Mitt Romney zeroed out the state’s fiscal 2003 tobacco settlement fund to help reduce the budget deficit, 73 percent of the state’s 71 centers reported having to reduce services; 19 were forced to close before the end of the school year. 20

In other states school-based health centers were spared cuts for fiscal 2004 but face threats to fiscal 2005 funding. In Arizona, for example, the legislature is adding new language to its tobacco settlement legislation allowing the $35 million fund to be spent on Medicaid; money previously has been restricted to funding programs for the uninsured, such as school-based health centers.

Possible Strategies for Stabilizing Funding Sources

Given the unpredictable federal and state support for school-based health centers since their inception in 1971, their presence in 43 states and the District of Columbia and their continued expansion is striking. In only a few states, such as Louisiana, are school-based health centers line items in state budgets; in a handful of states (New York, Massachusetts, Michigan, and Delaware) school-based health centers have been able to count on a history of legislative support. If state and federal lawmakers are interested in routinizing funding for school-based health centers, as has been done for other safety net providers such as hospital emergency rooms, community health centers and rural health centers, the following list of strategies can be considered:

  • State legislators and agency officials can ensure, through legislation, that school-based health centers receive some portion of tobacco settlement and tobacco tax dollars, as is being done in Maine:
  • The Department of Health and Human Services, either through a congressional mandate or regulation, can require states to use a portion of a number of federal safety net grant programs (MCH Block Grant, Preventive Health Services Block Grant, Rural Health Outreach grants) to fund school-based health centers;
  • Congress can create a line-item in the Bureau of Primary Health Care’s budget for school-based health centers in the Healthy Schools/Healthy Communities program;
  • Congress, state legislators, and Medicaid directors can mandate that school-based health centers be included in Medicaid managed care provider networks and enforce the mandate, as is done by the Connecticut Department of Public Health;
  • Congress can consider offering school-based health centers an enhanced payment rate under Medicaid that would reflect their actual costs of care. Such a policy now exists for community health centers. As a start, Congress, or DHHS can fund a study, initially recommended by the National Assembly on School-Based Health Care, to determine the value of such an enhanced payment rate.

Growth in the child health insurance rate has not sealed gaps in access to needed services. School-based health centers deliver essential care, address risky behaviors, and promote children’s healthy development. The increase in the number of centers through the current fiscal crisis speaks to a belief at the local and state level that this model of care can help public agencies protect the well being of high-need populations of children

1. Center for Health and Health Care in Schools, “2002 State Survey of School-Based Health Center Initiatives,” The George Washington University; Survey Narrative accessed online.

2. Linda Juszczak, Paul Melinkovich, and David Kaplan. “Use of Health and Mental Health Services by Adolescents Across Multiple Delivery Sites,” Journal of Adolescent Health, June 2003, Vol. 32S, 108-118; Mayris Webber et al. “Burden of Asthma in Inner-City Elementary Schoolchildren,” Archives of Pediatrics and Adolescent Medicine,, February 2003, Vol. 15, No.2; K.E. Adams and Veda Johnson, “An Elementary School-Based Health Center: Can It Reduce Medicaid Costs?” Pediatrics, March 2000, Vol 105, No. 3, 780-788; David Kaplan et al. “A Comparison Study of an Elementary School-Based Health Center: Effects on Health Care access and Use.” Archives of Pediatrics an Adolescent Medicine, 1998, vol. 153, 235-243; Paula Armbruster, SH Gerstein, T Fallon, “Bridging the Gap between Service Need and Service Utilization: A School-Based Mental Health Program.” Community Mental Health Journal, Vol. 33, No. 3, 199-211.

3. “School-Based Health Center Revenue,” Data from 1999-2000 School-Based Health Center Finance Survey, National Assembly on School-Based Health Care.  2004-05 data available at

4. National Conference of State Legislatures, “State Budget Actions 2002, Executive Summary,” April 16, 2003.  2006-07 data available at

5. Nicholas Johnson and Rose Ribeiro. “Severe State Fiscal Crisis May be Worsening,” Center on Budget and Policy Priorities, May 9, 2003; accessed at

6. National Conference of State Legislatures, “State Budget Actions 2002.”

7. Center for Health and Health Care in Schools, “2002 State Survey of School-Based Health Center Initiatives.”

8. Joy Johnson Wilson, “Summary of the Attorneys General Master Tobacco Settlement Agreement,” National Conference of State Legislatures, March, 1999; accessed at; Campaign for Tobacco-Free Kids, American Lung Association, American Cancer Society, American Heart Association, Smokeless States National Tobacco Policy Initiative, “Show Us the Money: A Report on States’ Allocation of the Tobacco Settlement Dollars,” January 22, 2003; accessed at

9. Show Us the Money: A Report on States’ Allocation of the Tobacco Settlement Dollars, report by the Campaign for Tobacco-Free Kids, American Lung Association, American Cancer Society, American heart Association, Smokeless States national Tobacco Policy Initiative, January 22,2003; accessed at

10. Johnson and Ribeiro, “Severe State Fiscal Crises May be Worsening.”

11. Ibid

12. Ibid

13. Health Resources and Services Administration Web site, accessed at

14. Center for Health and Health Care in Schools, “2002 State Survey of School-Based Health Center Initiatives.”

15. President’s fiscal 2004 HHS Budget Proposal,

16. Personal interview with Kathleen Conway, president, School-Community Health Alliance of Michigan, conducted by Jane Koppelman on April 16, 2003.

17. Personal interview with Elinor Goldberg, executive director, Maine Alliance for Children, conducted by Jane Koppelman on May 9, 2003.

18. Personal interview with Chris Koljhede, chair, New York Coalition for School-Based Primary Care, conducted by Jane Koppelman on June 12, 2003.

19. Personal interview with Valerie Whittlesey, Program Administrator, Multnomah County School-Based Health Program, conducted by Jane Koppelman on June 16, 2003.

20. “Inventory of School-Based Health Center Services,” April 17, 2003, internal memo from Massachusetts Department of Public Health.