Blackgoat, who will turn 50 this month, was diagnosed with an intellectual disability. He used to live on the Navajo Nation. About 17 years ago, he made the switch to the Hozhoni Foundation in Flagstaff.

"I heard this program was a good one," Blackgoat said. "They have wonderful people here."

The Hozhoni Foundation is a 46-year-old nonprofit corporation that provides residential, vocational and educational services for indigent people with severe cognitive disabilities, autism, epilepsy and cerebral palsy. It houses close to 150 clients in its 16 Flagstaff group homes and five Prescott group homes.

But a funding crisis could put Hozhoni Foundation’s very existence - and that of similar programs throughout Arizona - in jeopardy. Thousands would lose their jobs and some of the community's most vulnerable residents would be displaced, possibly to Phoenix or Tucson for more centralized state care.

RECESSION CUTS

There are more than 30,000 people who receive services from the Department of Developmental Disabilities, which falls under the Arizona Department of Economic Security. Most service providers are private agencies. Arizona policymakers prefer that model because it saves the state money.

"A private sector model works if you fund it," said Rep. Kate Brophy McGee, R-Phoenix.

For many services, vendors like Hozhoni get one-third of their funding from the state Legislature and two-thirds from fund matching from the federal Medicaid program. DES distributes the money as reimbursement for costs of care.

In 2008, provider agencies were reimbursed at 100 percent of the actuarially determined costs. When the Great Recession hit, the state Legislature cut reimbursements by 15 percent.

Funding has only been partially restored. At a February hearing, DES Director Timothy Jeffries told the Arizona Senate Appropriations Committee DES can only reimburse providers for about 78 percent of their costs. Group homes, which do not receive federal funds, are reimbursed at a rate of about 72 percent.

Brophy McGee belongs to a group of state lawmakers trying to raise awareness about the funding gap.

"There seems to be a sympathetic ear and an audience growing, but I do not think my colleagues quite see how close the edge of the cliff is," she said.

UNDERFUNDED

Funding cuts, inflation and cost of living increases have taken a toll, said Hozhoni CEO Monica Attridge. Hozhoni's annual budget is about $6.5 million. She estimates it is underfunded by about 22 percent, or about $1.3 million.

"We spent a lot of time at the Legislature this last session educating (lawmakers) and they gave us 1 percent," Attridge said. "I am very concerned that if the same thing happens next year, Hozhoni won’t survive."

Funding is especially bad for group homes, which account for 80 percent of Hozhoni's budget. Rent for each home can be almost $2,000 in Flagstaff but the state only pays for about $1,000. Hozhoni has to feed each client on about $6 per day. They recently started getting help from the Flagstaff Family Food Center, Food Bank and Kitchen.

Neil Nepsky, founder of NCRS, Inc., was a caregiver at Hozhoni Foundation before opening his own small agency for the developmentally disabled in Prescott in 1991. NCRS, Inc. used to run 13 group homes but had to cut four due to underfunding. Nepsky is in the process of closing a fifth.

"We had to consolidate to even come close to being fiscally solvent, and we still aren't," he said.

Nepsky fears he will go out of business soon. If that happens, his clients could be absorbed by one of the larger vendors. But even those agencies are worried.

"We've got new rules from the Department of Labor, we've got wage pressure and rents are up, utilities are up," said Steve Barkley, CEO of Tungland Corporation. "Part of the recovering economy is driving our costs up but we can't raise our prices. We are operating on very thin margins."

Attridge has eliminated all middle management positions and put three group homes Hozhoni owns on the market but she said it can't make up for all the lost funding. There is industry-wide concern that most agencies in Arizona will not survive.

"A company like Hozhoni with (more than) 100 (residential clients), they're going to be out on the street," Nepsky said. "We're all going to end up having to go out of business. There’s no way for us to financially make it."

EMPLOYMENT CRISIS

Hozhoni Foundation's caregivers provide 24-hour assistance to group home residents. With rent, utilities, food, required staffing, training, insurance, maintenance, some medical and dental expenses and other costs, Hozhoni can spend $60,000 to $160,000 a year per client.

In some homes, caregivers keep clients motivated, cook, clean, and help with goals like learning how to wash their hands or express their feelings.

"It's basically their home," said Hozhoni Human Resources Recruiter and former group home caregiver Maria Begay. "We're there to just guide them through the day. It's having them live as normally as possible and being there as a support system."

In other homes, clients need extreme personal care, including assistance bathing, changing, brushing their teeth and using the bathroom.

Out of 200 caregiver positions, 50 are vacant and the annual turnover rate is about 75 percent. Nepsky and Barkley reported similar problems.

Hozhoni's starting wage is $8.55 per hour. Begay had tears in her eyes as she talked about how she had to work a lot of overtime as a caregiver just to pay rent.

"It's really hard for us to move on to something else because we know (our clients) depend on us," Begay said. "Some of us don’t even want to leave but we get better job offers somewhere else. We could make more money at Subway."

Nepsky said low pay also leaves difficult clients without the care they really need.

"You can't keep staff who are being attacked with forks at $8.50 an hour," he said.

Technically, Arizona has no waiting list for clients with developmental disabilities but it can take years to move a client with severe behavioral or mental health problems to a more suitable provider. 

Attridge said she would love to pay more but she can't afford it.

"We are working people to death," Attridge said. "Our overtime premium is through the roof. We can’t get people."

Brophy McGee said if lawmakers do not improve funding in the next Legislative session, the state will have to figure out how to care for its developmentally disabled citizens without the network of private agencies they now rely on.

"My immediate concern is, what happens to these fragile, vulnerable people? Where do they go?" she said. "The longer-term concern is, whatever solution we then come up with, we will end up paying far more than if we solved the problem right now."