After minimum-wage hike, Arizona companies serving people with disabilities to face a funding crisis

November 23, 2016
The Republic
Alia Beard Rau

Companies that serve the state's most vulnerable individuals say they may not survive the state's minimum­ wage hike unless they get a pay raise of their own from Gov. Doug Ducey and the Arizona Legislature.

The companies rely heavily on minimum­wage workers to help care for individuals with developmental disabilities. And the state has not increased the funding for such care in the wake of the voter­approved minimum­wage increase (/story/news/politics/elections/2016/11/08/arizona­minimum­wage­proposition­206­ election­results/92970650/). Under Proposition 206, the minimum wage rises to $10 an hour on Jan. 1.

The hit to the more than 600 companies that serve this population is estimated to be in the hundreds of millions of dollars a year. Without an increase in state funding, many companies say they will have to cut services

while others say they won't survive.
The companies are working with state officials on a budget proposal for Ducey and the Legislature to consider.

"They are caught in the same trap that schools are," said Rep. Kate Brophy McGee, R­Phoenix. "Their rates are set by government, so they can't respond the way a small business can respond. Some are not seeing a way to continue their Arizona operations."

Brophy McGee called the companies' services vital. Increasing their funding will be a priority for her this legislative session, she said.

"These are the most vulnerable people you could possibly find," she said. "There's nowhere else for this population to go."

Saying no

With every call that now comes into Steve Barkley's company, he has to ask a tough question: Can we afford to help this person? Since the passage of Prop. 206, more frequently the answer is no.

Barkley is president and CEO of Tungland Corp., a Tucson­based company that provides services for individuals statewide and in other states. He has hundreds of employees who staff group homes, day programs, employment programs and in­home support services. He has 673 employees in Arizona who currently earn less than $10 an hour.

Raising wages and funding the new paid sick time that also was part of Prop. 206 will cost $2.5 million next year.

Barkley said he would love to pay more than that, but the state rates don't allow it. Already, he said, he has 90 percent employee turnover, and 20 percent of his job openings are unfilled.

"It's a function of what the state pays," he said. "You have to have a lot of compassion and a lot of responsibility to do this work. We have individuals who will kick you, spit on you, pull your hair. Given the option to sell T­shirts at Target for $10 an hour or do this kind of work, you've got to really have a special kind of heart to do it."

Without additional funding, he said, the company will have to keep saying no.
"We have been turning down calls for us to provide services because we just can't agree to provide services at losses," he said.

Barkley said the company already stopped accepting anyone 24 or younger into employment programs. He turned down a request out of Flagstaff to take 12 people for an employment program.

"It's a shame," he said. "Historically, we would have taken them in a heartbeat."AZCENTRAL

If Arizona voters raise the minimum wage, what happens next?

( raise-minimum-wage-what-happens/91959904/)

Facing hard choices

Harlie Garcia is president of the board of directors for the non­profit Echoing Hope Ranch in Hereford, which provides home and community­based services to about 75 people in Benson, Douglas, Sierra Vista and Tucson. Her son is among seven individuals with autism who live full time at the ranch.

"We opened the ranch because we couldn't find any programs in Tucson or Sierra Vista that really did anything with the kids other than have them in a day program standing around doing nothing," she said. "We make this ranch a home. It allows individuals with autism to make friends, have jobs."

Some of them hold jobs in the community. Others work in the ranch's agriculture program, which grows and sells produce.

"Without additional state funding, we may have to cut services such as the vocational rehabilitation, or we may have to get rid of the agriculture program," Garcia said. "We may have to have layoffs ... which will cause problems for individuals who need more care. And if we can't find a way of lowering our costs, we may have to close."

She said that would leave seven people without a home.

"Our facility is supposed to be a facility where individuals can live the rest of their lives," she said. "As parents, we won't know what will happen to our children when we're no longer here."

Years of hits

During the Great Recession, the Legislature cut reimbursement rates by 15 percent. It has since restored only about half of that.

As a result pay has been stagnant. For many positions, it hovers around minimum wage, leading to high turnover and difficulty filling jobs. Overtime costs to cover needed hours have skyrocketed, providers say.

Lobbyist Stuart Goodman, who represents the 8o-­member Arizona Association of Providers for People with Disabilities, surveyed 28 members about the financial impact of the minimum­wage hike. The assessment put the cost of Prop. 206 at $22 million for the first year, just for those 28 companies.

"And there are 631 providers statewide," Goodman said. "I think we can all agree that this is a really big number." Counting all such providers, the additional costs could reach half a billion dollars.

Goodman said if even a few companies go under, it will puts stress on those that remain. And in some parts of Arizona, there already is only one option.

"The options in rural Arizona are limited as it is," he said. "So either families don't get any services whatsoever, or they decide they need services and have to relocate to urban areas."

Both options, he said, are bad for families.

Goodman provided the association's survey results to the Arizona Health Care Cost Containment System, which oversees the contracts. He said they hope AHCCCS uses it to ask the Legislature and Ducey for more money.

Some hope the governor will call a special legislative session to address the issue before the Legislature resumes in January. But that's a tough request during the holidays and in an election year with newly elected legislative leadership.

"I think they have an interest in resolving the problem, but not necessarily in a special session," Goodman said. If the Legislature acts early in the session, it may come in time to help most providers, he said.

"We have providers who can hold on for a couple of quarters, and providers who are done in February," he said. "There is concern that some just can't hold on for those extra few weeks or months. The Governor's Office is aware of that, but I don't think they fully understand the depth of the problem."

The Governor's Office said the issue will be part of budget discussions. Ducey must produce a budget proposal by Jan. 13.

“We are aware that industries across the state will be faced with increased labor costs in the wake of the passage of Prop. 206," Ducey spokesman Daniel Scarpinato said. "Among those affected are service providers for people with disabilities, many of whom are contracted with the state to provide needed care for some of our most vulnerable citizens. We anticipate that this will be a part of the budget discussions in the upcoming legislative session.”

Asking the governor for help

Mary Collier, a direct support provider, cares for Jennifer Hardaway at The Centers for Habilitation in Tempe on Nov. 22. The company currently serves 487 individuals with intellectual and developmental disabilities. (Photo: Rob Schumacher/The Republic)

Several providers have written Ducey in recent weeks pleading for help.

Mark Monson is president of CPES Inc., one of the state's largest providers. In a letter to Ducey, he said the wage hike will cost his company $1.9 million next year.

"Over the past seven years, our organization, employees and consumers have experienced the impact of multiple funding cuts by the Arizona Division of Developmental Disabilities, which have not been fully restored to date," he wrote. "Current funding is 7.5 percent less than it was in 2009, and when adjusted for inflation, the funding impact is 21 percent less than in 2009."

Monson said the company is expanding in California while services have deteriorated in Arizona.

"Without sufficient funding increases provided by the state of Arizona, CPES would be forced to close and/or consolidate services," he wrote. "Arizona must compensate service providers fairly or face the collapse of the entire developmental­services system throughout the state."

The Tempe­based Centers for Habilitation has operated since 1967 and currently serves 487 individuals with intellectual and developmental disabilities. It operates 13 group homes. President and CEO Shana Ellis wrote to Ducey saying that without a funding increase that fully restores 2008 levels and covers increased minimum­wage costs, it will turn away people who need services.

"Without supports in place, individuals with severe and profound disabilities will be confined to their homes, many of them with aging parents struggling to support them," she wrote. "The unequivocal result will be a diminished quality of life for the most vulnerable of society."page4image17907072

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