Children's Voice Sep/Oct 2009

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Losing Financial Footing

Private and public agencies share reactions to economic harship

By Meghan Williams

Budget negotiations always involve a healthy amount of back-and-forth, but this year it's been more like a tennis match than a task most states face annually. The governor takes the first step and serves, the legislature sees what's coming and returns it with a volley, the executive branch adds more spin and more force and lobs it back... and this repeats, with both sides trying to keep the action in-bounds.

Meanwhile public and private agencies alike have been shifting nervously in their seats, trying to follow the progress of the budget as it bounces back and forth across the political court. CWLA members from Illinois, Arizona, and California-where the budget process has been particularly acrimonious in varying ways-shared their perspectives.

Illinois

In Illinois, there have been at least six distinct incarnations of the fiscal year 2010 budget. The state's Department of Children and Family Services received $907,686,300 from general revenue funds in FY09 (July 1, 2008-June 30, 2009) but can only expect $856,45-5,500 for FY10. The difference amounts to slightly more than $50 million (almost 6%) below last year's budget.

At several points in the budget process, however, DCFS was slated to have much less than that. The budget as enacted by the Illinois legislature gave DCFS not quite $593 million, a 35% drop from FY09 funds, and another plan reduced the number further to $584 million. As the situation became more dire-one of Illinois's drafts was called the 'doomsday budget'-DCFS began taking immediate action to prepare for the losses.

"We didn't have to wait for doomsday," DCFS Director Erwin McEwen says. "Agencies were responding to the situation, they were not taking any new clients."

One of these private agencies was Kids Hope United. Executive Director Fotena Zirps says the doomsday rhetoric and the reality it accompanied "was a nightmare through the summer." There were layoffs, furloughs, and cuts from full-time to part-time immediately. "They had to happen," she explains. "We laid some people off, there was going to be no funding... There was no way to keep people on, even an extra two weeks." Fewer staff meant a strain on programs, some of which Zirps and her colleagues made the decision to close right away. "We had to do some really on-the-fly case planning with families as to what services and support we could give."

Zirps, whose experience is split nearly equally between time in the public and private sectors, says budget time is always particularly anxious for private agencies that must demonstrate the value of their programs year after year. "That's the problem with being a private agency, you're the end of the line [for funding]," she says.

It wasn't just the agencies feeling stretched to their limits, either. Foster parents did not reach the point where they had to return children they had been caring for, but McEwen says it was close, and many were extremely reluctant to take in additional foster children. "We had kids spending the night in the office on a few occasions," he admits. That hadn't happened in a long time in Illinois, and workers at those offices, too new to remember the past hardships, were very affected by the experience.

The Silver Lining: More Advocacy

Despite the disappointment of budget cuts, both private and public agencies alike have been encouraged by a swell of support from their communities.

Fotena Zirps of Kids Hope United says the Illinois budget problems were not publicized immediately, but she and other agency leaders wanted to make sure their staff knew what was going on. "Internally we decided that we really needed to communicate constantly with the staff," Zirps said. They send e-mails almost daily.

"It really reinforced for us the value of that type of communication." As a result, the agency pulled together to stay focused on their work. Inspired, the staff started what Zirps calls "a real rally to advocacy." "The staff, the board, the clients, the community-they really got on those legislators," she says. "They really did some great advocacy that I think helped restore some of the funding."

Illinois DCFS Director Erwin McEwen believes lobbying is a critical role for private agencies. "A lot of times they have better relationships with the legislators than the state agencies do," he says. The leadership of public agencies is often more fluid than that of private agencies, so private executives can build up relationships and leverage funds for their community-based services through contracts with the public agencies. "Sometimes it's private versus public," McEwen says, "but they need to understand the importance of that private-public partnership in child welfare moving forward."

In Sacramento, California, county director of Health and Human Services Ann Edwards-Buckley says awareness of child welfare services and advocacy for their improvement has been ongoing after negative press. "We've seen a surge of that [advocacy] over the last year, because of the focused attention because of child deaths," she explains. "It has been helpful, and I hope it continues."

Last fall's elections in Arizona ushered in many new state legislators who were surprised to learn how heavily privatized child welfare services were. "The vast majority of child welfare services in Arizona are delivered by agencies like us," Fred Chaffee of Arizona's Children Association says. In response, there were community efforts to increase awareness of the services and their needs. "There's been enormous advocacy in the area," Chaffee says. He only wishes it could do more. "That's good, but it doesn't make up for the loss of services to those children and families."


What saved Illinois was a 20-year-old consent decree. Though he was named as the defendant, McEwen testified in an emergency hearing in U.S. District Court, agreeing with the plaintiff's position: that in responding to the doomsday budget cuts, DCFS was violating the consent decree. Essentially, court documents contend, slashing the department's budget would prevent it from complying with the terms of the decree and force it to operate illegally. Without enough money, DCFS would not be able to obey the law.

The emergency hearing was at the end of June, as FY09 was fading. The judge's injunction caused the governor to restore some of DCFS's funding. Zirps believes the consent decree was the safety net for the department: "I think without that, the outcome of this would have been very different," she says. While their state funding was not left totally intact, Zirps said that the partial restoration allowed her to rehire some staff. "We had to pretty planfully bring people back," she said.

In fact, the outcome for other departments and partner programs is very different. McEwen explains that the structure in Illinois is rare, if not unique: DCFS is a stand-alone, Cabinet- level department. All the other services their families may need-physical and mental health, substance abuse, housing, general aid like Temporary Assistance for Needy Families-go through other departments. And many of those other departments are facing budget reductions greater than DCFS's. "They're struggling with those issues," McEwen says. "Human services in Illinois still took a very large hit."

It's an inauspicious time for cuts, because in economic turmoil more families need all the support they can get. McEwen says they aren't yet seeing an increase in the number of children in out-of-home care, but the pressure has increased on what he calls "barometer services." Safe Families for Children, a Chicago-based nationwide program, is a network for parents who want a short-term, voluntary placement for their children. Illinois also has crisis nurseries, which provide the same service on an emergency basis. McEwen said the number of families using both of these programs has gone up dramatically; he believes Safe Families has served twice the number of families they had at this time last year. Day care, another barometer service, is also beginning to be in higher demand.

"I start to look at all of these things-what is a year to 18 months [from now] going to look like?" McEwen wonders, envisioning a troubled future. "And what can we look at now to prevent that from happening?"

And of course, even before a year has passed, McEwen will have to contend with the next budget cycle. A recent Supreme Court case, Horne v. Flores, is questioning the legitimacy of some consent decrees. At issue is whether aging settlements or more recent legislation should take precedence when there is a conflict. Currently, Baltimore and Washington, DC, are working to clarify their positions; McEwen says that Illinois should not be affected by the ruling, as the state's decree seeks to enforce the same standard that legislation does and there is no conflict. Hence, they can probably use the consent decree as a tool to protect DCFS's budget again next year. "It's still going to have an impact next year, the same issues are on the table," McEwen explains.

If the budget negotiations really were a tennis game, McEwen would be an umpire: he doesn't hesitate to say what's fair and what's foul. He encourages other directors to join him in his mindset: that when children enter out-of-home care, the state takes on a parental role, and parents do their utmost to make situations better for their children. "I think the state has a higher level of responsibility to these children-they are the state's children," McEwen says. "Nobody has any excuses for not funding child welfare. When they do that, they're behaving like a neglectful parent." He notes that a parent's instinct is to buffer their children from difficult situations and that when the state takes on the parental role it should do the same. Accordingly, reducing funding for child welfare programs ought to be the last step. "Being a parent means making sacrifices. Kids don't get those [positive] outcomes if parents don't make sacrifices. That's a mindset that agency directors need to take on and articulate."

Zirps appreciates this position: "If there's a hero anywhere in this story, it's Director McEwen," she says. "He has such a clear mission for children and families."

Arizona

"In this recession, Arizona is probably proportionately the worst state in the country for revenue," Fred Chaffee contends. Chaffee is the president and CEO of Arizona's Children Association, and serves on the CWLA Board of Directors. Even if the numbers are hard to determine, Arizona is unarguably in a precarious position: the state entered September- the third month of the new fiscal year-without a final budget, as the Republican governor and the Republican-controlled legislature kept volleying drafts back and forth.

But the trouble is not new. Chaffee explained that the FY09 budget, finalized in June 2008, predicted a 2% revenue increase in the state. In reality, revenues are down more than 30%.

"The legislature in January was looking at the shortfalls in the midst of that current budget year-and they were continuing to be enormous," Chaffee says. A budget amendment was passed, "and they cut all over the place," he continues. "It was draconian."

And devastating to child welfare programs, which in Arizona are run through the Department of Economic Security, which was told to trim $100 million from the budget. The total reductions were even greater, as some of the money DES cut had provided matching funds to federal dollars, which Arizona then lost. There were layoffs and furloughs, payments to foster parents were cut 20%, and programs suffered. The state's Healthy Families program was reduced to a quarter of its previous operations, and in-home services were drastically reduced.

"On the in-home program, they had typically in Arizona looked at framing cases as either intensive in-home or moderate in-home, and they virtually eliminated all of the moderate in-home across the state," Chaffee explains. He calls it "a significant compromise of the child welfare system," and discussed a particular difficult management decision that it caused.

There were two bicultural, bilingual programs in Maricopa County that were really helping the community. Staff spoke English and Spanish, and many had worked in the child welfare system for 10 years. "The data around success of those programs was astounding," Chaffee said. Yet both were classified as moderate in-home services, and when the funding for them disappeared, both programs were eliminated in two weeks. Not only is it an immediate loss, Chaffee said, but the decision to lay off staff means their experience and expertise will not be available "when you want to regroup and restart" a similar program if the economic situation improves in a few years.

Of course these reductions at DES meant Arizona's Children Association was faced with a shrinking budget too. As a relatively large organization with diverse funding streams, Chaffee explains, the agency could weather the storm. Still, they cut the equivalent of $3 million and 64 positions in 2 weeks. More than a dozen upper-level staff took furlough days; more concretely, there was no increase in the reimbursement for mileage. The agency now serves 2,000 fewer families than it did in January. "Our story is just one story," Chaffee says. "A number of providers across the state suffered similar cuts." He reinforces a point that no one liked what they had to do, but everyone was having to do the same thing. He actually praises DES for working closely with private agencies and other community partners to make their actions as clear as possible.

"They were very transparent in this. They were told they had to cut," Chaffee says. "The revenues weren't there... They didn't have very many alternatives." He says conversations focused on the three goals of child welfare-safety, permanency, and well-being-and an effort was made to keep safety at the forefront. The budget Arizona is currently operating on allows DES to investigate 100% of child protection referrals. Chaffee says if the budget presented by the legislature is passed, the state will likely not be able to maintain that rate.

The future in Arizona is unclear, but it doesn't look promising. A survey of foster parents said they could make do with the dip in payments, but that they might not be able to keep fostering if further cuts were made. But at the same time, foster homes are in greater demand, according to Chaffee: "We have seen an upsurge in the number of youth going into foster care," he reports. "It makes sense when you don't have a lot of the services that kept kids out."

California

Trying to track a budget for any local-level public agency is a little like following the score during the qualifying rounds for Wimbledon: there are a slew of numbers coming from disparate sources that aren't always compatible, and unexpected results can throw years of preparation off track. Just as the stakes get higher at Wimbledon, so too do they rise in Sacramento, California, the nexus of political power in the most populous state in the country.

Ann Edwards-Buckley is the director of Sacramento County Department of Health and Human Services. She says that getting the full picture of the budget difficulties the department faces is hard because funds are coming from the local county revenues, state allocations, and federal grants. "Ours is a multilayered issue," she summarizes.

"The funding situation has become much worse," Edwards-Buckley continues, adding that it's been bad for a while. "Our county has consistently been in an overmatch system, because the state has not done any cost of doing business increases," she explains.

Counties are required to put up a certain amount of matching funds when they receive state dollars, and Edwards-Buckley said that Sacramento County had been providing more than those required minimums to reflect the county's commitment to children and families. Additionally, more local contributions meant the ability to draw down more federal matching funds. Sacramento started with $10.8 million in overmatch, Edwards-Buckley said. But that was cut when the general fund revenue started to shrink, losing tangible local dollars as well as some federal funding, for a loss that nears $15 million total.

The state budget, which has gotten national attention during its lengthy process this year, is a complicating factor. California has decided to reduce payments to foster parents by 10% from levels that were already low. Most recently, the governor cut more than $500 million in line-items from the budget passed by the state legislature, many of which impact vulnerable populations, including children.

"I do think children and other vulnerable populations have been disproportionately affected-children, the poor, the elderly, the mentally ill," Edwards-Buckley says. Going further in criticism, Ted Lempert, president of Children Now, was quoted in the Los Angeles Times with a statement reminiscent of Illinois Director McEwen's viewpoint. "A struggling family puts their kids first," Lempert told the Times. "What the governor and what the state has done is the opposite."

In a plan that was about to be voted on by the county's Board of Supervisors, Edwards-Buckley's department proposed cutting 199 full-time employee positions from the child protective services division. She knew it would be a tough decision for the board: "I don't think there's a whole lot of money out there to save these workers, but I know that the board has historically been reluctant to cut CPS." She admits CPS will not be able to investigate all its referrals with these reductions.

Sacramento County already went through a round of reductions in June. "We were able to do some shuffling around into vacant funded positions," Edwards-Buckley says. But she is pessimistic that a similar solution could be used again. "We have very few vacancies now; our vacancy rate is the lowest it's been in a long time."

Working to draft the budget, Edwards-Buckley said they tried to spare early childhood services, for birth to age 5, as much as possible because they know making positive changes at that point can lessen a child's risk for many years to come.

"We did take some cuts across the board in the division, but the focus of the cuts were voluntary services," she explains. The children and families who would utilize these services may be considered at risk, but not at high risk. Her department is trying to define a threshold for their work. And, she notes, "We are leaving more of the resources on the front end for emergency response." Meanwhile, applications for financial assistance are up 30% higher than last year's levels, with both TANF and general assistance requests increasing. She says this is "directly related to the economy."

Looking ahead, Edwards-Buckley does not expect a better situation soon: "We'll have another shortfall next year, absolutely." As the last several years of declining revenue continue, she says the department reviews projections on an almost monthly basis, so they can beg in to plan for next year's budget. "Certainly we're thinking about it," she says. "It will be challenging."

Meghan Williams is a Contributing Editor to Children's Voice.

To comment on this story, e-mail voice@cwla.org.


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