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Minimum wage hike could reduce care for developmentally disabled

Malika spends time with her peers at Marc Community Resources in Mesa, where individuals with developmental disabilities are provided care during the workday. Marc and other private care providers are going to struggle financially as they try to comply with Proposition 206, which raises the state's minimum wage. (Photo by Rachel Leingang, Arizona Capitol Times)

Malika spends time with her peers at Marc Community Resources in Mesa, where individuals with developmental disabilities are provided care during the workday. Marc and other private care providers are going to struggle financially as they try to comply with Proposition 206, which raises the state’s minimum wage. (Photo by Rachel Leingang, Arizona Capitol Times)

The Blythe Center, a small mom-and-pop care provider in Peoria for individuals with physical and developmental disabilities, will likely ring in the New Year by closing up shop, leaving more than 100 disabled clients without care.

Arizona’s private care providers for individuals with disabilities desperately need an infusion of cash to comply with Proposition 206. While the ballot initiative will raise hourly wages for hundreds of thousands of workers, chronically underfunded care providers like the Blythe Center can’t cover the cost of those pay raises without an emergency appropriation from the state Legislature.

Overwhelmingly approved by voters earlier this month, Prop. 206 mandates a $10 minimum wage as of Jan. 1, and a $12 minimum wage by 2020.

Without an emergency appropriation to offset the thousands, in some cases millions, of dollars needed to fund those pay raises, services for individuals who need care will suffer, providers say.

For some, services will disappear entirely.

Susan Bastian, CEO of the Blythe Center, said she can’t survive in 2017 without legislative action. And those care providers that can barely afford to stay open won’t have the resources to take on other clients, such as the 137 individuals with disabilities who will no longer find care at the Blythe Center.

“I’m closing. I have nothing left to lose. And I don’t think (legislators) understand that the whole system is collapsing,” Bastian said. “I know I only have 137 clients, but they’re going to be stuck at home, which means a member of their family has to quit their job to take care of them, and what’s their quality of life? They’ll be sitting there watching TV all day with no stimulation, no peer interaction.”

There are more than 600 private care providers for individuals with disabilities in Arizona and roughly 37,000 Arizonans receive care through from those providers. Even before voters approved Prop. 206, providers say funding cuts by the state Legislature created a near-untenable situation.

The Division of Developmental Disabilities, a part of the Department of Economic Security, sets “benchmark rates” for services provided to the disabled community. Essentially, the rates represent how much it costs to provide services like food, transportation, and companionship. The rates must be reset at least every five years.

Funds appropriated by the Legislature to reimburse care providers for the cost of caring for individuals with disabilities have fallen well short of the benchmark rates for years.

In 2008, service providers were reimbursed 100 percent of their costs — in other words, at 100 percent of the benchmark rates.

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Lizzy Coy works in the document scanning area at Gompers Business Solutions in Glendale. (Photo by Rachel Leingang, Arizona Capitol Times)

Then the Legislature cut funding for disability services by 15 percent during the recession.

Employees at AIRES, a Phoenix-based for profit care provider, started at $9.25 prior to those cuts. Wendy Shaw, president of AIRES, said she can now only afford to pay a starting wage of $8.50 per hour.

“A lot of folks think, there was a 15-percent cut, you do less work. That wasn’t how it went. It was, provide the same amount of service for 15-percent less dollars,” said Shaw, who also serves as treasurer of the Arizona Association of Providers for Persons with Disabilities, or AAPPD.

Benchmark rates were re-based in 2014. As of the re-base, funds appropriated by the Legislature cover less than 74 percent on average of what it costs to care for the individuals with disabilities. It would have taken a $188 million appropriation increase to fund costs for the care provider community at 100 percent. That jumps to $196 million when accounting for inflation.

Many providers couldn’t survive the cuts. About 400 private care providers have closed since 2009.

Meanwhile, federal guidelines that dictate how care is provided to individuals with disabilities have expanded, and more is now required of care providers than ever before.

“We do more than we did five years ago for less pay. What industry does that?” said Scott Mueller, director of programs and services for Gompers, a Phoenix-based nonprofit service provider.

Arizona’s network of private care providers have bent, but not broken.

Failing to make payroll

For some providers, Prop. 206 is the breaking point.

“I’m not trying to be dramatic, but I will be closing,” Bastian said. “I can’t make Jan. 21 payroll.”

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Geno dances in the cafeteria at the Blythe Center in Peoria on a recent afternoon. (Photo by Rachel Leingang, Arizona Capitol Times)

Bastian, who runs a for-profit care provider, made the decision to move from a dilapidated space in Maryvale in 2015. She sunk her reserve cash into renovating an old school located in a Peoria to provide a better facility for her clients — a decision she said was made before she was aware of Prop.206.

With a budget of $2.3 million, Bastian estimates it would cost $300,000 to give the 125 workers she employs who make less than $10 an hour the appropriate pay raise.

Bastian said she has no source of revenue to provide those pay increases beyond what she gets from the state of Arizona, which uses a combination of state and federal matching funds to compensate private care providers. There is generally little funding available privately for organizations that provide services to individuals with disabilities beyond scant charitable donations.

So, if the Legislature doesn’t provide more money by Jan. 1, Bastian’s 137 disabled clients will go without care, and her 142 employees will be out of work, she said.

It’s unclear what it will cost industry-wide to cover the expenses of Prop. 206.

State employees are exempted from the provision laid out in Prop. 206. The Arizona Constitution requires that ballot measures increasing state spending must identify a revenue source other than the general fund to cover the cost. Yet the employees of care providers essentially occupy a gray area, with paychecks funded by state dollars passed through private companies who fulfill the state’s legal obligation of caring for individuals with disabilities.

While other private companies can make adjustments, such as decreasing payroll or passing on costs to customers, care providers must serve their clients based on strict federal and state requirements that must be met, or funding will be withheld.

For example, care providers must meet strict staffing requirements. At the Marc Community Resources, a nonprofit in Mesa, there must be one staff member for every four clients they serve, according to Kay Moore, the center’s chief operating officer.

Cutting some staff to cover the cost of raising wages for others would actually result in a loss of funding, and thus a loss of service to her clients.

“I can’t cut my workforce, and I can’t change the product because contractually the rule says that I have to do certain things,” Moore said. “I have to take them into the community; I have to provide them with snacks; I have to provide them with all the different changing materials and sanitation materials and hygiene materials every single day that they need. I can’t change any of those rules.”

‘Not a livable wage’

Employees at Marc Community Resources start at $8.75 per hour. It’ll take $852,000 to comply with Prop. 206 and continue providing services to individuals with physical and developmental disabilities in 2017, according to their CEO, John Moore.

Susan Bastian, CEO of the Blythe Center in Peoria, holds the center's cat, Bagheera. Bastian may have to close the center after Proposition 206 goes into effect. (Photo by Rachel Leingang, Arizona Capitol Times)

Susan Bastian, CEO of the Blythe Center in Peoria, holds the center’s cat, Bagheera. Bastian may have to close the center after Proposition 206 goes into effect. (Photo by Rachel Leingang, Arizona Capitol Times)

That doesn’t cover other new costs, such rising insurance premiums and overtime pay that’s estimated to rise with employee turnover, among other expenses. Over the years, there have been “hundreds of little things changed in the scope of work to which there were no dollars attached,” Kay Moore said.

Prop. 206 is just the latest in a series of unfunded mandates, John Moore said, but has the potential to be the most damaging new burden to service providers as of yet.

It’s not that employees who work with individuals with disabilities don’t want a raise, or that their employers don’t think they need one.

None of the employers who spoke with Arizona Capitol Times said their workers are paid enough for the difficult services they provide, but they’re paid what care providers can afford based on funding the Legislature provides.

“$8.75 and $9 an hour is not a livable wage,” Kay Moore said. “So, in some ways, yeah, I would love them to have $12 and $13 an hour, which is what I think is more close to what I think this work is worth. And yet, our rates don’t even come close to being able to support that.”

Chris Jones, 56, who’s worked with the developmentally disabled for over a decade, has been at the Marc Community Resources for about a year. He makes $9 per hour.

To make such a low wage at a job that, while rewarding, could mean being kicked, scratched, screamed at or spat on each day by persons with disabilities who require your care — “you’ve got to have a heart for this,” Jones said.

A dollar raise will help Jones, but he recognizes it could take away from the clients he cares for.

“I’m kind of conflicted because it would help us, but I don’t want it to hurt the individual,” he said.

At Gompers, employees are now paid at least $1.05 more than the minimum wage, an effort to make a difficult job more attractive to prospective workers. There are plenty of minimum wage jobs out there, Mueller said, and the extra $1.05 can be the difference between an employee taking a fast food job or working with individuals with disabilities.

Gompers needs about $33,000 in 2017 to give employees just enough of a raise to reach the $10 per hour floor. Mueller said it’s untenable for Gompers to pay employees more than $10 per hour, which they’d prefer to do in order to remain attractive in the marketplace.

“We’re in competition with every big box store and every fast food joint, which, forgive me for throwing a value judgment out there, but lining up boxes and flipping burgers doesn’t seem to be as important as taking care of human beings,” Mueller said.

A vocal advocate

Service providers warned of a loss of service to individuals with physical and developmental disabilities during the election.

From left to right, James, Joe, and Livier play Bingo with Marc Community Resources staffer Willy Daniel. (Photo by Rachel Leingang, Arizona Capitol Times)

From left to right, James, Joe, and Livier play Bingo with Marc Community Resources staffer Willy Daniel. (Photo by Rachel Leingang, Arizona Capitol Times)

“Our direct care staff have amazing hearts, but care providers are unable to pay them a livable wage for their great work. With turnover rates as high as 80 percent, direct care workers’ pay is often below what fast food chains can offer their employees, making it difficult to retain existing staff and recruit replacements. While increasing the minimum wage may sound like a simple solution to this problem, it will actually make the situation worse,” wrote Ann Monahan, the immediate past chair of AAPPD and David Schwartz, executive director of AAPPD, in information pamphlets mailed to voters by the Secretary of State.

Unable to absorb the cost of pay raises, the best case scenario for care providers is reduce staff. That will result in limited services for individuals with disabilities, they wrote.

“The more likely scenario, however, is that many care providers will have to close their doors, unable to afford the higher employment costs, leaving many of the 30,000 individuals with disabilities with no place in Arizona to receive care,” they wrote.

Bill Scheel, spokesman for the pro-Prop. 206 campaign, said it will be a vocal advocate at the Legislature for an emergency appropriation to help cover those costs.

“These clients are in extreme need. They need the best possible services they can get. It’d be horrible if any individual lost services. At the same time, those workers deserve the raise,” Scheel said. “And for residents of Arizona, for us to expect people to be doing that kind of work for $8.05 an hour is ridiculous.”

A spokeswoman for the Department of Economic Security referred questions to the governor’s office.

Daniel Ruiz, a spokesman for Gov. Doug Ducey, said the Governor’s Office anticipates funding needs for service providers will be a part of budget discussion in the 2017 legislative session.

“We are aware that industries across the state will be faced with increased labor costs in the wake of the passage of Prop. 206. 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,” Ruiz said in a prepared statement.

That won’t help care providers like the Blythe Center. And others who can scrape by will be on the hook for thousands of new dollars in payroll until the Legislature reacts, if it reacts at all.

At AIRES, Shaw needs $2.3 million to meet Prop. 206 standards. For that to happen, the Legislature is going to have to show that services for individuals with disabilities are a priority, she said.

An explanation that “there just isn’t enough money” isn’t going to cut it this time.

“Honestly, to me, we’re getting down to the point of, the things they are funding are luxuries,” Shaw said. While other agencies get new tech, service providers are left empty-handed. “Those kind of things, those are luxuries. I’m talking about having someone available to feed someone. That in my mind is a necessity. So, they have to reframe the way they look at the state budget. They need to fund the necessities.”

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One comment

  1. I did not support the Prop to raise minimum wage. I believe that no one should tell a business owner what to pay their employees of their business.
    I am however surprised at the low starting wages. My 2 sons attend a day program and the level of care of many of the centers clients is high. Employees should have at least been making $10 per hour to start even before the mandatory law.
    So now that the problem is here I would hope the AZ legislature would step up to the plate immediately and fund the much needed additional funds to cover the wage increases.

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