Treatment programs face shutdown because of minimum wage increase

March 15, 2017
Jim Walsh

Ahwatukee parents of adult-aged developmentally disabled children are worried they’ll become victims of the unintended consequence of voter- approved increase in the state’s minimum wage.

Increases in payroll costs are prompting some providers to consider shutting down or curtailing day treatment programs that developmentally disabled people need.

They are people like Kate Noll, 29, who was isolated and depressed when she first moved to Arizona with her family, before her mother discovered her lifeline, Marc Community Resources.

Cheryl Noll said Kate thrives on structure and a sense of purpose. Kate had neither during her first three months in the East Valley. She became irrational. Her eating and sleeping habits changed.

“If I had Kate at home all day, I would be at home,” Cheryl Noll said, forcing her to give up her job. “We would lose our (health) insurance, we would lose our home.

“Kate would be miserable. It is invaluable to us. It’s our lifeline.”

Like most parents of developmentally disabled children, David Hardaway wondered where his daughter, Jennifer, 23, would go after she “timed out” in the public education system at age 21.

Hardaway is not alone. Arizona has 35,000 developmentally disabled persons in its Medicaid program.

Jennifer, who suffers from cerebral palsy and other conditions, cannot walk and can only say a few words, such as yes or no. She communicates mainly through facial expressions.

Her condition requires expensive one-on-one care. The answer for Hardaway was the day treatment program at The Centers for Habilitation, which operates group homes in Ahwatukee, Mesa and Tempe.

“It starts with socialization. It increases communication,” Hardaway said, adding that he has noted improvement in Jennifer’s ability to function, even if it comes at a painfully slow pace.

“An organization like TCH is a lifesaver for us. Without these organizations, they graduate (from high school), and go home,” Hardaway said.

He shudders at the thought of TCH’s day treatment program closing.

“I think it’s a parent’s worst nightmare,” Hardaway said. “She would be in a state of isolation.”

It would be a cruel ripple effect if there is no increase in Arizona Gov. Doug Ducey’s proposed budget for the developmentally disabled. That’s an impact most voters probably never considered when they approved an initiative that raised the minimum wage from $8.05 to $10 an hour.

The initiative did not specify a “revenue source,” a constitutional question that was argued before the Arizona Supreme Court on Thursday in a suit filed by the Arizona Chamber of Commerce. The chamber opposed the minimum wage hike and is now trying to get it declared unconstitutional.

Marc is one of several petitioners in the Chamber of Commerce lawsuit.

The issue was taken under advisement by the Supreme Court and a decision is pending. In the meantime, non-profits are wondering if the Legislature will increase funding or if programs will get shuttered or curtailed.

The non-profits have been advised to make plans for a worst-case scenario while hoping for a funding increase from the state.

“We are aware that Prop. 206 has increased costs on industries across the state, including providers of services for the disabled. We hope to address this issue in the budget discussions that will come in the weeks and months ahead,” said Patrick Ptak, a spokesman for Ducey’s office.

Ptak said that because the suit could have an impact on the state budget, "it's one thing we're tracking.''

In reaction to the initiative’s approval, the Governor’s Office was able to come up with $25.1 million that was intended to cover the additional costs between January and June.

The actual full impact for the 2018 fiscal year is estimated at $73.8 million, according to the Arizona Association of Providers for People with Disabilities.

Marc Community Resources makes for a classic example of the problem, with 70 percent of costs tied up in salaries and the new minimum wage increasing salaries more than 20 percent, CEO John Moore said.

Moore said he would drain the savings Marc has built up over the past 40 years. He said he’ll appeal to philanthropists before he shuts down the Freestone Center. That’s a move he would consider morally reprehensible and a step back into the dark ages for the disabled.

Marc’s work with the developmentally disabled revolves around three goals: socialization, self-sufficiency and community integrity. Some developmentally disabled clients, with a higher level of functioning, end up supporting themselves with jobs at supermarkets and other businesses.

He said Marc is more capable of handling the cost increase than many other providers, because Marc also offers a variety of behavioral health services that are reimbursed at a higher rate.

In essence, the agencies’ behavioral health programs have been helping to compensate for the drain created by programs for the developmentally disabled.

Although the emergency state funding was helpful, it wasn’t enough for a system already underfunded at about 80 percent of its true cost, Moore said. The reimbursement for the developmentally disabled rose only 1.6 percent.

“I worry people will become isolated. I think it would have a devastating effect on their treatment,” Moore said.

Shana Ellis, The Centers for Habilitation’s CEO, said her day treatment program is losing more than $8,300 a month. She said she has room to expand and could help more disabled people, but that is not possible because she cannot afford to hire staff.

Some residents of the group homes work if they are capable but many also come to the day program. About half of them have no relatives.

It troubles Ellis that she is paying her staff the same wages as someone who works at a fast food restaurant, even though their jobs require great sensitivity, patience and skills in dealing with others.

“The funding mechanism is a problem. We have to pay more but our rates are not automatically adjusted to compensate for that,” Ellis said. David Hardaway shakes his head at the thought of his daughter’s life without The Centers for Habilitation.

“Sometimes you say, why me, what did I do?” Hardaway said. “It’s not about me. My job is to take care of Jenny. Organizations like TCH help me do that.”

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