Cuts will ‘destabilize’ nonprofit agencies struggling to retain staff, plaintiffs say.
Organizations that run group facilities for New York’s children and youth in foster care are fighting a rate change set to begin April 1 that represents a funding cut so significant it “will destabilize the operational budgets for many child care agencies,” according to an ongoing lawsuit.
The nonprofit foster care organizations say a new reimbursement rate formula “will destabilize the operational budgets for many child care agencies.”
State officials have until April 7 to respond to the lawsuit, filed late last year in the State of New York Supreme Court by the Council of Family and Child Caring Agencies and 34 member organizations statewide. A representative of the state’s Division of the Budget said in an email that the agency would not comment on pending litigation.
In court documents filed in November against Gov. Kathy Hochul (D) and members of her administration, the plaintiffs object to “diminished funding” related to the maximum amount of state aid they can receive for residential programs — a funding shift that takes effect in the spring. The suit alleges that the rate change violates the state’s obligations under the Federal Adoption Assistance and Child Welfare Act of 1980 and other state and federal laws.
The foster care agencies say the rate change will devastate their budgets at a time when they are struggling to retain workers and care for some of the most vulnerable children in the state, young people who can’t be safely housed at home with their parents or in foster homes.
Jody Levison-Johnson, president and CEO of Social Current, a nonprofit network of human and social service organizations said, “Unlike other sectors where if expense exceeds revenue, they can stop providing a good or a service, or in some cases, there’s a walkout or a strike — in our sector, we can’t do that.”
Levison-Johnson noted that her member agencies are “providing valuable, in some cases legally required, necessary services to these tremendously vulnerable populations.”
In the recent past, foster care agencies that rely on state funds for residential programs submitted expenses every two years for their essentials, including human service workers’ salaries and property maintenance, based on longstanding eligibility parameters set in 1985. The agency’s costs of those parameters were then compared against the agency’s historical costs for the same items. After adjusting for inflation, those parameters had long determined the amount agencies would be reimbursed.
But last July, foster care agencies were notified that their reimbursement rate would simply be extended from the prior year at the start of the Office of Children and Family Services’ fiscal year, on July 1.
Instead of using the long-standing formula that allowed rates to be set by historical individual agency costs — which allowed agencies to predict future rates when forming budgets — the Office of Children and Family Services first subtracted their prior year cost-of-living increase of 1%, then added in the state’s 5.4% cost of living increase to generate the new rates.
What this means is that for the first time, agencies are at a risk of receiving a funding reduction in the midst of their “rate year,” starting on April 1, unless the state acts to restore its previous process.
Kathleen Brady-Stepien, president and CEO of the Council of Family and Child Caring Agencies, said that as of mid-February, agencies still do not know what their exact reimbursement rate and increases will be come April 1.
The next year’s state budget is now being negotiated. In an opening salvo, Gov. Hochul’s spending plan announced in early January calls for a 2.5% cost-of-living adjustment for human service workers, far lower than the 8.5% industry leaders say is needed to recruit and retain a quality workforce.
The governor also added clarifying language that would give the Office of Children and Family Services the option of returning to the previous funding formula.
But Brady-Stepien said that the department has not indicated if they will do so, thus the pressure of a lawsuit is needed.
Struggling to keep staff
According to the November court filing, approximately 2,200 children — or roughly 15% of the state’s foster care population — currently live in congregate care settings.
The cost of running these facilities is rising, yet they continue to face funding challenges. For example, under the Family First Prevention Services Act of 2018, residential care agencies must meet new requirements to receive federal funding, such as providing 24-7 nursing and individualized mental health care. Many are still reeling from pandemic-era disruptions.
The Children’s Village, one of the petitioners in the lawsuit, is now planning for a nearly $600,000 reduction in state funding, said president and CEO Jeremy Kohomban. Under the funding formula taking effect this spring, that amounts to a 2.7% hit, for an agency with roughly 500 direct care workers and a $21.8 million budget for residential services.
Children’s Village has long had to fundraise to properly serve its 70 residential clients, Kohomban said, but “we had learned to live with it.” Then last year, amid growing insurance and utility costs “ the state changes the formula with no notice at a time when we are struggling.”
Retaining employees by keeping up with cost of living increases is key to best serving the children, Kohomban added, noting that his agency has increased salaries between 17% and 20% since 2020.
“The workforce is a critical component in our work,” he said. “Love and belonging is the heavy lifting of the work that we do.”
But keeping that workforce has been a challenge. In a 2020 survey, the Council of Family and Child Caring Agencies found a 40% to 50% turnover rate for frontline child welfare workers in the nonprofit sector, and a 24% turnover rate for caseworkers. The negative impact that has on children and their families is noted in the lawsuit’s documents.
Industry leaders say COVID-19 made recruiting, hiring and retaining workers all the more challenging.
According to the court filing, federal and state funding increased wages for direct care workers in residential programs associated with the New York State Office for People with Developmental Disabilities, the state Office of Mental Health, and the Office for Addiction and Substance Abuse Supports — but not for staff at foster care agencies.
Similarly, those agencies were left out of the state’s 2022 “health care and mental hygiene worker bonuses” that were used to attract and retain staff.
“It’s heartbreaking,” Levison-Johnson said, “because people are leaving deeply meaningful work because it’s too hard and they can’t get paid a living wage.”
*Correction: This story has been updated to reflect that state officials have until April 7 to respond to a lawsuit, not March 13 as originally published.