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DHS hearing focuses on child care; lawmaker blasts First Things First

A joint legislative panel approved a recommendation on Nov. 9 to extend the Department of Health Services, which was the subject of a sunset review, for another decade.

That was the easy part.

The hard part for lawmakers was trying to find a workable way to carry out a policy they had approved as part of the budget package this year that could lead to higher licensing fees for child care facilities and increased costs for parents who use them.

The Legislature had cut in half the general fund allocation for the health department’s Division of Licensing Services. Lawmakers then gave the agency the authority to increase its licensing fees to make up for the reduction. The Legislature also created a fund where license fees would be deposited.
In a way, the Legislature is just beginning to vet the policy – ex post facto.
During the hearing, some lawmakers asked why they weren’t told of the potential impact of the policy change they were going to approve.
“Why wouldn’t anybody have given us a heads-up as to the fact that there might be an 8,000-percent increase if we went forward?” asked Sen. Barbara Leff, a Republican from Paradise Valley. “Why didn’t anyone say anything?”
The Legislature has taken a similar approach with other agencies, giving them access to fees they collect from individuals or companies that they regulate to help pay for their operations.

But here’s the problem: The department’s proposed fees would hit hard the child care industry, which hasn’t seen a fee increase since the 1970s. Under the proposal, some large child care facilities could face a fee increase of as much as 8,800 percent, according to the Arizona Child Care Association.

As a result, the child care industry is in an uproar.

The department has acknowledged that the proposed increases are sharp and are being done in a very short period. But the department said they are necessary to cover the costs of regulation, which include inspections of health care and child care facilities as mandated by law.

Additionally, the department also faces a January 1 deadline to start depositing fees into the fund the Legislature created. The department will be using money from that fund for its licensing and regulating operations.

In Arizona, there are approximately 2,300 child care facilities and more than 400 group homes. Last year, the department conducted nearly 500 initial inspections, some 1,800 annual inspections and about 450 mid-year inspections.

Will Humble, the health department’s interim director, has asked for help from the Early Childhood Development and Health Board, requesting a grant or scholarship from the fund that the board controls.
Humble presented the idea to the board on Oct. 27, but he failed to persuade board members.
“They have the financial ability to help right now,” Humble said. “I am hopeful, not optimistic, but hopeful that they’ll come forward with a couple million dollars between now and the summer.”
Elliott Hibbs, the executive director of Early Childhood Development and Health Board, said money should not be diverted away from the purposes for which the program was created.

Hibbs said state law does not permit the money to be used to supplant state funding.

“Secondly, it is that if we were to provide funding out of early childhood investment, that is the same thing as a cut to early childhood and it is saying that that’s not important as some of these other things,” he said.
As of June 30, this year, the Early Childhood Development and Health Board had a fund balance of about $356 million. The board appropriated $144 million for fiscal 2010.
The board’s refusal to provide financial aid at this point is likely to exacerbate its already complicated relationship with the Legislature. Lawmakers have been eyeing the money since voters approved the First Things First initiative in 2006.

The early childhood money is voter-protected, and lawmakers cannot touch it. In fact, when the Legislature swept the fund’s interest earnings as part of a budget adjustment early this year, the board filed a legal challenge and won.

Sen. Carolyn Allen, a Republican from Scottsdale who chairs the Senate Healthcare and Medical Liability Reform Committee, blasted the Early Childhood Development and Health Board, also known as First Things First, for hesitating to help.

“I am shocked and disappointed with First Things First’s refusal to help mitigate skyrocketing childcare licensing costs,” Allen wrote in a media statement.

“It is disgraceful and shameful that they have been watching this situation unfold, and [they] don’t help. We’re talking about $2 million. If they have that kind of money and are still willing to sit on their hands and say this is not their role, then what is their role?” she wrote.

Allen noted that Early Childhood Development and Health Board is missing out on an opportunity to act on something that is line with its mission and is putting its future in jeopardy.

The board, she noted, should be cautious about leaving families and child care centers “out to dry or I could see this going back to the ballot and letting the voters decide.”

Hibbs, though, said the Early Childhood Development and Health Board has helped the state during the economic crisis.

For instance, the board approved $23.2 million for child care scholarships after the Legislature cut child care funding early this year. The board also approved another $24 million for family-support programs, including those designed to prevent abuse and neglect. Both were approved as emergency funding mechanisms in February.

“Is everybody going to be coming to First Things First? If that’s the case, then there no longer would be that investment, that very important investment in preparing children to succeed when they start school,” Hibbs said.

Humble said he is now looking for other ways to help child care providers, including looking inside his agency for federal money he could tap and checking to see whether he could legally divert some voter-protected funds.

During the Nov. 9 hearing, Rep. Phil Lopes, a Democrat from Tucson, said he is trying to figure out whether the situation is “enormously humorous or incredible irony.”

“Because we did this to you,” Lopes told Humble. “We are the ones who put in statute what you ought to do with those fees and we are now beating you up while you are trying to do as much as creative stuff as you possible can.”

Lopes added: “One last point – to those of you who are in the audience, (experiencing) some surprise on our part in hearing that we did something to some agency that we didn’t first talk to them about, we do that all the time.”

Bruce Liggett, executive director of the Arizona Child Care Association, said his group wants the governor to use federal stimulus money to temporarily fund the health department’s licensing and regulatory operations, so that policymakers have more time to put together a “more thoughtful plan” on increasing fees.

“We are calling a time out,” Liggett said. “Private childcare providers are scared and frankly, they are angry.”

But Paul Senseman, the governor’s spokesman, shot down suggestions of using federal dollars under the governor’s purview to address the problem. He said the idea is a non-starter.

“They go against completely the purposes of the fund (federal stimulus money). She prioritized the use of those funds for education, public safety and care for our state’s most vulnerable population,” Senseman said.

Like some lawmakers, Brewer is hoping that Early Childhood Development and Health Board would help in the situation, Senseman said.

“When the voters ratified the use of these funds, it was for this specific population and for child care activity,” Senseman said, referring to the board’s funds.

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