The Intrastate Funding Formula is used to calculate the monetary allocations given to Pennsylvania’s 52 Area Agencies on Aging (AAA). The current formula was approved by the federal Administration on Aging on September 30, 2004.  
            
The 2000 census data revealed significant shifts in the older populations served by the AAAs and Pennsylvania’s population aged considerably during the period between 1990 and 2000.  Accordingly, planning and service areas (PSAs), across Pennsylvania experienced high levels of growth in their older population with changes in their consumer mix.  The 75 and older cohort grew much faster than the total 60-plus population.  The new formula responds to these demographic shifts. 
 
Developing the formula
        
To develop the current Intrastate Funding formula, the Department examined the old formula, reviewed federal and state laws and regulations governing the intrastate allocation of funds, and gave due consideration to the AAA recommendations. It researched available empirical data and conducted a literature review to ascertain the impact of various subsets of the elderly population on the Area Agencies resources.  It confirmed that clear differences existed on how the various demographic subsets of a population impact an Agency’s resources.
 
The Department’s goal was to develop a formula that optimizes the allocation of state and federal funds to the Area Agencies while minimizing any adverse impact.  The following objectives facilitated the achievement of this goal: 

 Public Review and Comment Process
 
The development of the Department’s new Intrastate Allocation Formula is the result of a nine-month, interactive process between the Department, Area Agencies on Aging, state legislators, and other interested individuals.  The process focused strongly on Pennsylvania’s changing demographics and the need to adjust the old formula to better address the needs of older Pennsylvanians.
 
As part of the process, the Pennsylvania Association of Area Agencies on Aging (P4A) specifically requested that the Department consider four factors: the number of persons 60+, poverty, minority, and rural status.  P4A further advised that it would “rely on the Department’s ingenuity and experience” to decide how these factors should be weighted. The Association also asked that the Department make every effort to minimize the financial harm and avoid undue hardship to any AAA.
 
The Department exercised due diligence in including the four recommended factors, utilized its insight and experience in assigning their respective weights, and made every effort to minimize financial harm to any single AAA by setting a 4% financial minimization cap on losses, consistent with the P4A recommendations.  Most important, it sought a funding formula that would distribute dollars optimally across all the diverse constituencies and interests within the Commonwealth.  In meeting this daunting challenge, the Department necessarily chose a formula that would benefit the collective “whole” as opposed to an individual PSA.  Using strategies to minimize losses, only twelve AAAs stand to lose less than 1% of their funding when the formula is implemented during fiscal year 2005-2006.  
 
In summary, the Department believes that the formula that has been put forth is the one most responsive to the changing needs of Pennsylvania’s older population. 
 
Model Description  
 
The model consists of two distinct parts: a formula and a distribution methodology. 
 
The first part, the formula, consists of selected factors, the factor weights, the values of the factors, census data, and calculated indices.  The purpose of this part of the model is to determine the number of equivalent consumers within each Area Agency. 

Where wf is the weight assigned to each of the Factors. The weights were determined by the Pennsylvania Department of Aging with input from the Pennsylvania Association of Area Agencies on Aging.  The weight provides the level of importance to the factor in relation to the other factors.

 

Where Ff is the factor.  The factor, which can also be defined as an attribute of the consumer, is the level of demand or requirement placed on an Area Agency by a particular type of consumer.  It is the census count of consumers of that type.
        
The State adjusted value is the sum of all Area Agency values and is the State number of Equivalent Consumers.  Once the State number of equivalent consumers is calculated each Area Agency value is divided by the State value providing an index number for each Area Agency. This index number is simply the Area Agency’s proportion of State equivalent consumers.
 
The second part, the distribution methodology, consists of allocation decision variables. These determine how and when the formula is applied.  
 
The model takes into account the following precepts from the law and regulations:

The formula is a mathematical expression of the requirements/needs of the consumer population within each AAA in relation to all the AAAs.  Different types of consumers have different needs and therefore require varying levels of resources.    Consumer characteristics are represented within the formula as “factors.”   Each factor represents a demographic subset of the overall 60-plus population. 
 
There are two criteria for considering a factor for inclusion in the formula.  The first is that each factor must represent an exceptional or unique set of demands or requirements on an AAA’s resources.  The second is that there is a disproportionate distribution of the factor (consumer type) among the various AAAs. 
    
In all cases the formula was first applied to the available funds to calculate the index base amount by AAA.  Then, parameters that affect the allocation (i.e., hold harmless or loss minimization) are applied.  The difference between the preceding (base) year’s allocation and the current budget year index base amount is used to calculate the marginal indices.
 
This methodology permits a gradual shift in allocations preventing AAAs from taking a drastic loss in one year. Conversely it prevents others from receiving a disproportionately large gain in a single year.  The change can be spread over a period of years allowing AAAs to adjust and plan for changes in allocations. The rate at which the change occurs is a decision that can be made in conjunction with the AAAs and other stakeholders.

 

Current Status
 
After full consideration of many factors and weights, including those discussed with Area Agencies, the following factors and weights were chosen:

 

Factor	Weight
1.Poor (at or below 100% poverty)	.25
2.Rural	.25
3.Minority       60+ Racial ethnic minorities (.14)       60+ Linguistically isolated (.06)*	.20
75+	.20
60+	.10
	100%

 

To focus resources on targeted, at risk populations, the poor and rural factors were weighted most heavily, followed by minority and persons 75 years of age and older.  To respond to overall shifts in the older population, persons age 60 and older were also included as a factor and weighted accordingly.  The Department opted to minimize single agency losses to four percent (4%) in response to the Area Agencies’ request.  Using the factors and weights selected, the four percent loss minimization assures that only 12 of the 52 AAAs will receive fewer federal dollars. In addition, the “hold harmless” provision in Pennsylvania state law requires that the state funds AAAs be at least equal to the amount received in the previous year further minimizing the losses to any single AAA while being responsive to PSAs that experienced increases in various populations.
 
As a matter of policy, the Department will utilize the most recent census data available when it allocates dollars annually.