MENDING ILLINOIS’ SOCIAL SAFETY NET

Illinois Comptroller
Sep 6 · 12 min read

Two years removed from Illinois’ historic budget impasse, state human service providers are still in recovery mode, facing challenges old and new in an effort to repair the social safety net for people in need.

It’s well established that the impact of the impasse itself was devastating, causing providers to restrict offerings, cut staff, and, in many instances, close completely while directly affecting an estimated 1 million Illinoisans.

The term “human services” encompasses a range of occupations and functions that support the wellbeing of individuals beyond primary health care. Providers give assistance to the disabled and care for seniors. They support people struggling with substance abuse and those in need of food and shelter. Mental health, after-school programming, food delivery, and care for the developmentally disabled fall under the purview of the state’s providers.

Beyond offering aid, providers are an economic engine found in nearly every community across Illinois. Their sector employs 169,000 people, or about 3.5% of the state’s workforce, and has an estimated annual economic impact of $4.5 billion.

The state’s remaining providers are looking for a sustainable path into the future while facing historically low funding levels for the work they perform. While the state’s fiscal year 2020 budget offered small increases, funding for human services as a percentage of the state’s General Revenue Fund is at a 20-year low, dropping from 26% in 1997 to less than 16% in 2017.

Changing state contracting rules, funding shortfalls, unpredictable revenue streams, and other challenges make for an uneven road forward.

PARTNERS IN CAREGIVING

For decades, the work of helping people in the United States was performed largely by religious entities or government, including state institutions. In the 1960s and 1970s, government started taking another look at the best ways to deliver care and determined the work could be done more effectively by community-based not-for-profit organizations, said Judith Gethner, former executive director of Illinois Partners for Human Service in Chicago.

“Over the course of the last 50 years, you will look at why these not-for-profits started, and it’s because government said, ‘Would you take this agreement and have this person with, for example, cerebral palsy, be able to stay in their family’s home, but we’ll deliver service and help you as parents while you help take care of your child?’” Gethner said.

“There was an interest in finding a more humane way to take care of people who were aging, to allow them to stay at home and provide services for them.”

Over time, government funding for the now-outsourced service functions failed to keep pace with costs for not-for-profits. The shift forced service providers to move toward grant-based funding and charitable fundraising to supplement revenue.

DEADBEAT ILLINOIS

In 2016, Illinois Partners for Human Service — a coalition of more than 800 Illinois human service providers — reported that between 2000 and 2015, the state’s reimbursement rates in nearly every field of service had fallen far behind the cost of living. In addition to difficulty covering basic operational and administrative costs, stagnant reimbursement rates drove employee turnover as high as 25% and prevented providers from meeting a growing demand for their services.

Just to meet the increased cost of living between 2000 and 2015, reimbursement rates for a wide range of services would need to ramp up. These rates are set by the state and codified in contracts between state agencies and service providers.

After adjusting for inflation and population growth, state funding for human services fell by $4.4 billion between 2002 and 2010. Between fiscal years 2009 and 2014, Illinois cut funding for the largest human service categories by 23%.

Gethner said the numbers validated what people in the human services sector have long known — that government wasn’t keeping up with its end of the bargain.

While diminishing funding levels or small delays in payment were factors that service providers incorporated into their business model, going unpaid for services rendered and indefinite delays in payment were not considerations they took into account. A growing bill backlog under Democratic Gov. Pat Quinn that reached $9 billion served as a sobering preview of a bill backlog that ballooned to nearly $17 billion under Republican Gov. Bruce Rauner, causing an unprecedented fiscal calamity that affected nearly every sector in the state.

A HISTORIC IMPASSE

Between July 1, 2015, and Aug. 31, 2017, Illinois went without a state budget. A stalemate between Gov. Rauner and legislators in the General Assembly resulted in a virtual government shutdown that lasted 736 days. Bills went unpaid as Illinois became a deadbeat to the tune of $16.7 billion. Credit agencies threatened the state with junk bond status.

The state’s social safety net was cut to ribbons as payments seized. Service providers sought relief from the courts as vendors sued the state with the goal of being paid via judicial order. With their share of unpaid bills at $161 million, Pay Now Illinois, a coalition of 100 service providers, sued Gov. Rauner to force the state to issue payments.

As it dragged on, the impasse claimed many victims among service providers. According to United Way of Illinois, 91% of the 429 service providers surveyed cut services to clients. Other entities reported spending through rainy day funds and opening lines of credit, collectively taking on $37 million in debt to stay afloat. Thirty-six percent of them said they expected to close within six months. Nearly 1 million Illinoisans were left without critical services.

For those already struggling, it got worse. The Chicago Coalition for the Homeless found that 90% of service providers to the homeless were forced to limit their intake of new clients, reduce services for current clients, lay off staff, eliminate programs, or close work sites because of the impasse.

The number of women receiving preventative health screenings via state-funded programming dropped 34%. Access to nutrition programs for seniors was reduced as providers like Meals on Wheels cut staff and food deliveries from seven to three days a week. Across the state, few providers were spared, including shelters, soup kitchens, job-training facilities, nursery schools, senior centers, and more.

EXTREME MEASURES

Andrea Durbin, who led the Pay Now Illinois coalition and today serves as CEO of the Illinois Collaboration on Youth, said that, starved of funds, many service providers fell apart.

“It wasn’t just when I will be paid, it was if I will be paid,” she said. “What not being paid did to the infrastructure was devastating, and organizations are not fully recovered from that. Organizations exist to advance their mission and so a lot of places began shedding anything they could to maintain a core piece of their mission.”

Pay Now documented thousands of jobs lost in addition to the job losses reported by the United Way. The most talented members of the service provider workforce shifted to jobs in health care or education, Durbin said.

“People actually risked their future freedom to try to keep their doors open because they figured, ‘Oh, it won’t go this long.’” — Andrea Durbin

Providers took extreme measures to keep their doors open, she recalled. Administrators at a senior service provider cashed out retirement funds to pay staff in an effort to continue providing services to clients. When that money was spent, they skirted the law and skipped federal payroll taxes — a situation they later resolved on favorable terms with the Internal Revenue Service.

“People actually risked their future freedom to try to keep their doors open because they figured, ‘Oh, it won’t go this long,’” she said.

Durbin described a domestic violence shelter that began hosting bake sales to raise money.

“I told them there are not enough Rice Krispies treats in the world to keep a domestic violence shelter operational,” Durbin said. “The director looked at me and said, ‘I have women in my shelter right now who have been strangled or throttled, and I know that the research shows if I send them home, they are 700 times more likely to be killed. And I can’t have that on my conscience.’”

ON THE BRINK

The damage from the loss of talented personnel and human infrastructure was paired with a lack of resources to address physical infrastructure needs, as well.

Advocates for providers describe entities that put off crucial repairs such as fixing leaky roofs or replacing outdated computers.

For example, a suburban Chicago program for expecting mothers couldn’t afford to fill the gaping holes in its parking lot, resulting in closing half the lot and having pregnant women park far away from the building, Durbin said.

“It was one of those ‘for the want of the nail, the kingdom is lost’ kind of things,” she said. “So maybe the woman who is pregnant and has to navigate a toddler in a stroller says, ‘It’s too much hassle, I’m going to skip the appointment. I’m not going to get the prenatal care because I can’t get into the parking lot and I have to walk down the street or take the bus.’”

Service providers said investments in technology or new service models were halted, and they couldn’t address the changing or growing needs of clients.

“We felt like we were on the brink. And we’re the largest and one of the most important community behavioral health providers, so we can’t operate on the brink.” — Mark Ishaug

Mark Ishaug, CEO of Thresholds, one of Illinois’ largest substance abuse and mental health service providers, said that during the impasse — after his organization extended its line of credit to $6 million — it was nearly impossible to innovate or expand.

“We felt like we were on the brink. And we’re the largest and one of the most important community behavioral health providers, so we can’t operate on the brink,” he said. “Operating on the brink means you can’t invest in new programs, and you can’t give staff raises or bonuses because to do that would come out of the line of credit.”

INHERENTLY INEQUITABLE

While service providers seek to manage the lasting impact of the fiscal impasse, among their most fundamental concerns moving forward is their relationship with state government — specifically the contracting and reimbursement processes they must engage in with state agencies on an ongoing basis.

Across the board, service providers want smart, sustainable solutions to what they describe as a complicated and unfair procurement process. Gethner said service providers view their arrangements with the state as inherently inequitable.

“If you went to the for-profit world and you sat in on a meeting and looked at one of the contracts we are issued, they would look at it and say, ‘You got to be kidding. That is not a real contract. That just benefits the state,’” Gethner said. “So there has been a conversation for a long time about why isn’t it more equitable and fair, and why are we on the hook?” Providers take issue with the timing and methods used as they contract with the state for services.

Niya Kelly, state legislative director for the Chicago Coalition for the Homeless, said providers are expected to sign contracts within a narrow timeframe with little opportunity for discussions about clauses that outline year-to-year changes, new mandates, or other statutory requirements.

“Every year the last few years it’s come up where there is not a transparent communication that says, ‘Here are the contracts and let us flag a few things that are new this year,’ which I think would be a fair thing to do,” Kelly said.

“Instead, the way it comes to us is someone on our side is reading them … and then we have to unpack it. You could have a more transparent conversation with vendors when the state wants to make changes to a contract rather than change it and see if anyone notices.”

Breaking the cycle

Not only do last-minute changes put service providers in a bind when it comes to the pressure of coming to an agreement, they also draw on resources that are already in short supply, requiring attorneys or policy advisors to carefully review the documents. Kelly said one option to break this annual cycle would be for the state to agree to multi-year contracts with service providers; however, in the past that concept has been met with “push back.”

When faced with changes, service providers typically sign on to contracts regardless of their content, said Ireta Gasner, vice president of Illinois policy for the Ounce of Prevention Fund, which focuses on early childhood development both as a care provider and resource for educators. Gasner said concerns about continuity of services and a commitment to staff typically outweigh all other considerations.

“A lot of providers are just going to sign the contracts regardless because they want to provide the service and they figure they have no option,” she said.

Providers also have found fault with the content of state contracts and they argue that they are treated differently than for-profit, private-sector state vendors. For example, some agreements require providers to cap the benefits they offer their employees.

LOOKING FORWARD

What is needed for sustained recovery, success, and growth among Illinois’ service providers? Service providers and advocates who spoke with the Illinois Office of Comptroller suggest the following solutions.

ANNUAL STATE BUDGETS

Fiscal stability is critical for service providers. The foundation of that stability is the timely passage of comprehensive annual budgets by the legislative and executive branches.

ADDITIONAL FUNDING

In their fiscal year 2020 budget, the General Assembly and Gov. JB Pritzker approved between $70 million and $80 million in additional funding for human services. Over time, additional funds will be needed to make up for historic funding shortfalls and other factors affecting service providers, such as increased demand and legislation to increase the minimum wage.

CONTRACT REFORM

The contract framework used to direct funds to the provider community could benefit from reforms such as multi-year contracts. Not only would long-term agreements give service providers additional stability and allow them to better manage program goals, they also would serve to reduce the resources committed to administrative costs. Service providers also believe they could benefit from a procurement calendar that provides them with ample time to review contracts and allow for clarification and negotiation on rule changes.

CONTRACT EQUITY

Overall, service providers largely say they don’t believe they are equitable partners in their relationship with state government. Agencies, stakeholders, service providers, and other partners should seek common ground to make the contracting process more just and fair.

IMPROVEMENTS IN BILLING & IT SYSTEMS

The integration of new systems and critical services must be carefully managed; allow time for pilot initiatives, testing, and remedial adjustment; include contingency plans with a temporary workaround if problems arise; and support legacy systems until they can be safely taken offline, while backing up, protecting, and preserving existing data to prevent loss.

MONITORING MANAGED CARE

Increasingly, funding for mental health, substance abuse, and senior care is funneled through managed care organizations before it is received by service providers. Backlogs in determinations and other challenges have resulted in delayed payments for health care providers, and care should be taken to ensure service providers receive prompt payment. Like hospitals and other medical providers, service providers need a managed care system that is transparent, responsive, and accountable.

ACTIVATE THE HUMAN SERVICES CONTRACTING TASK FORCE

Approved in 2018, the Task Force on Human Services Contracting Act asks stakeholders to study the challenges faced by service providers. Specifically, it calls for a review of data sharing, contract negotiation, reimbursement rates, business processes, and timely payment. However, task force membership has not been assigned, and it has yet to convene. Activating the task force would provide a venue to address a variety of issues and chart a sustainable course for state service providers through collaboration.

Illinois Comptroller

Written by

The official account for the Office of the Illinois State Comptroller and Comptroller Susana A. Mendoza. Follow us for Office services and #ILbudget updates.

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