Over the course of the last quarter century, the epidemic has spread to every region of the country. HIV and AIDS cases have been reported in all states, the District of Columbia, and U.S. territories, but the impact of the epidemic varies by region and within states. The South is estimated to have the highest cumulative number of diagnosed AIDS cases, people living with AIDS, and deaths from AIDS. In 2003, 7 of the 10 states with the highest estimated rates of individuals living with HIV were located in the South. The CARE Act was enacted in 1990 to respond to the needs of individuals and families living with HIV or AIDS and to direct federal funding to areas disproportionately affected by the epidemic. Titles I and II of the act provide base funding to affected EMAs and states based on the proportion of each jurisdiction’s caseload of AIDS cases. These titles also establish other types of grants to provide supplemental funding. For example, Title II includes Severe Need grants for states with demonstrated need for supplemental funding to support their ADAPs. Title II also includes funding for emerging communities that are affected by AIDS but do not have the 2,000 AIDS cases reported in the last 5 calendar years in order to be eligible for Title I funding as EMAs. In order to address the impact of the disease on racial and ethnic minorities, Minority AIDS Initiative grants are distributed through both Title I and Title II to EMAs and states. Metropolitan areas heavily affected by HIV or AIDS have always been recognized within the structure of the CARE Act. We previously found that, with combined funding under Title I and Title II, states with EMAs receive more funding per AIDS case than states without EMAs. To adjust for this situation, the 1996 reauthorization instituted a two-part formula for Title II base funding that takes into account the number of AIDS cases that reside within a state but outside of any EMA’s jurisdiction. Under this distribution formula, 80 percent of the Title II base grant is based upon a state’s proportion of all AIDS cases, and twenty percent of the allocation is based on the number of AIDS cases within that state’s borders but outside of EMAs. A second provision included in 1996 protected the eligibility of EMAs. The 1996 CARE Act amendments provided that once a jurisdiction is designated an EMA, that jurisdiction is “grandfathered” so it will always receive some amount of funding under Title I even if its reported number of AIDS cases drops below the threshold for eligibility. Hold-harmless provisions and the grandfather clause were maintained in the 2000 reauthorization of the CARE Act. Table 1 describes selected CARE Act formula grants for Titles I and II. The 2000 reauthorization specified that CARE Act Title I and Title II funding formulas should use HIV case counts as early as fiscal year 2005 if such data were available and deemed “sufficiently accurate and reliable” by the Secretary of Health and Human Services (HHS). The 2000 reauthorization also required that HIV data be used no later than the beginning of fiscal year 2007. In June 2004 the Secretary of HHS determined that HIV data were not yet ready to be used for the purposes of allocating formula funding under Title I and Title II of the CARE Act. The Secretary cited a 2004 Institute of Medicine (IOM) report, which identified several limitations in the ability of states to provide adequate and reliable HIV case counts for use in CARE Act formula allocations. Some CARE Act provisions have led to jurisdictions receiving different amounts of funding per AIDS cases. The counting of AIDS cases within EMAs once to determine Title I funding and once again to determine Title II funding results in states with EMAs receiving more funding per AIDS case than states without an EMA. In addition, Emerging Communities grants are awarded to eligible communities that are separated into two tiers based on each community’s AIDS cases reported in the most recent 5 calendar years. Because one half of the total Emerging Communities grant award is allocated to each tier regardless of the total number of reported AIDS cases in each tier, a disproportionate amount of funding per case was distributed among the grantees in fiscal year 2004. States with EMAs receive more funding per AIDS case than jurisdictions without EMAs because cases within EMAs are counted twice. The number of AIDS cases used to allocate CARE Act Title I base grants for EMAs is also used in the allocation of 80 percent of Title II base grants for states. The remaining 20 percent is based on the number of AIDS cases in each state outside of any EMA. This 80/20 split was established by the CARE Act’s 1996 amendments to address the fact that states with EMAs received more funding per case than states without EMAs. However, even with the 80/20 split, states with EMAs still receive more funding per AIDS case. States without an EMA receive no funding under the Title I distribution, and thus, when total Title I and Title II CARE Act funds are considered, states with EMAs receive more funding per AIDS case. Appendix I shows the combined fiscal year 2004 funding for all Title I and Title II funding received by each state. Table 2 illustrates the effect of counting EMA cases twice by comparing the relationship between the percentage of a state’s AIDS cases that are within an EMA’s jurisdiction and the amount of funding a state receives per AIDS case. Table 2 shows that as the percentage of a state’s AIDS cases within EMAs increases, the total Title I and II funding per AIDS case also increases for the state. For example, states with no AIDS cases in EMAs received on average $3,592 per AIDS case. States with 75 percent or more of their cases in EMAs received on average $4,955 per AIDS case, or 38 percent more funding than states with no EMA. If the total Title I and Title II funding had been distributed equally per AIDS case among all grantees, each state would have received $4,782 per AIDS case. The impact of counting EMA cases twice is that states with similar numbers of AIDS cases can receive different levels of combined Title I and Title II funding. For example, for fiscal year 2004 funding, Connecticut had 5,363 AIDS cases while South Carolina had 5,563 AIDS cases. However, Connecticut had two EMAs that accounted for 91.3 percent of its cases while South Carolina had none. Connecticut received $26,797,308 ($4,997 per AIDS case) in combined Title I and Title II funding while South Carolina, with 200 more cases, received $20,705,328 ($3,722 per AIDS case). Connecticut received 29 percent more funding than South Carolina, a difference of $6,091,980, or $1,275 per AIDS case. The two-tiered division of Emerging Communities grants results in disparities in funding per case among states. In addition to the base grants for states, Title II provides a minimum of $10 million in supplemental grants to states for communities with populations greater than 50,000 that have a certain number of AIDS cases in the last 5 calendar years. The funding is equally split so that half the funding is divided among the first tier of communities with 500 to 999 reported cases in the most recent 5 calendar years while the other half is divided among a second tier of communities with 1,000 to 1,999 reported cases in that period. The funding is then allocated within each tier by the proportion of reported cases in the most recent 5 calendar years in each community. In fiscal year 2004, the two-tiered structure of Emerging Communities funding led to large differences in funding per case because the total number of AIDS cases in each tier was not equal. Twenty-nine communities qualified for Emerging Communities grants in fiscal year 2004. Four of these communities had between 1,000 and 1,999 reported cases and 25 communities had between 500 and 999 cases. This meant that 4 communities with a total of 4,754 reported cases split $5 million while 25 communities with a total of 15,994 cases split the remaining $5 million. This resulted in the 4 communities receiving $1,052 per reported case while the other 25 received $313 per reported case. These 4 communities received 236 percent more funding per case than the other 25. If the total $10 million Emerging Communities funding had been distributed equally per case among the communities, each would have received $482 per reported case. Table 3 lists the 29 emerging communities along with their AIDS case counts and funding. Titles I and II of the CARE Act both contain provisions that benefit certain grantees by protecting their funding levels. Title I has a hold-harmless provision that guarantees that the Title I base grant allocated to an EMA will be at least as large as a legislated percentage of a previous year’s funding. The Title I hold-harmless provision has primarily benefited one EMA. Title I also contains a grandfather clause that has resulted in a large number of EMAs maintaining funding despite no longer meeting the eligibility criteria. One hold-harmless provision for Title II ensures that the total of Title II and ADAP base grants awarded to a state will be at least as large as the total of these grants it received the previous year. This provision has had little impact thus far, but it has the potential to reduce the amount of funding to states with severe need in ADAPs because it is funded out of amounts reserved for that purpose. The hold-harmless provision and the grandfather clause in Title I and the hold-harmless provisions in Title II protect grantees from decreases in funding from one year to the next, but they also make it more difficult to shift funding in response to geographic movement of the disease. In fiscal year 2004, the Title I hold-harmless provision primarily benefited the San Francisco EMA.