DHS forewarns of potential service cuts, rate reductions, layoffs

The Oklahoma Department of Human Services informed its employees and contractors today of the agency’s estimated $100 million state dollar shortfall ($150 million total with lost federal funds) heading into the next fiscal year and of potential cuts to services for vulnerable Oklahomans, provider rates, and additional employee layoffs. DHS Director Ed Lake warned any additional reduction to its budget will only exacerbate this significant shortfall.

 
Lake sent letters to employees and contractors summarizing the agency’s ever worsening budget situation detailing the $64 million total state and federal dollar reduction to the SFY16 budget, another $58 million total reduction from two state revenue failures, all while the agency struggles to deal with $46 million of increased costs in several programs, which includes making up for $10 million in lost federal funds.

 
“Our fiscal circumstances are so serious that we must examine the potential for reductions in every administrative, service, benefits and program area in this agency,” said Lake. “This news cannot be sugar-coated—the results will be painful, barring what would be some kind of fiscal miracle.”

He said the agency is preparing for unprecedented cuts to programs and services.  For example, DHS may be forced to reduce services that help keep aged people out of nursing homes as well as other programs focused on elder health and support. Services that provide vital health and safety supports to people with developmental disabilities are likely to be affected as well. Any additional rate reductions in these programs are certain to have devastating effects on the community service agencies that provide these services and the people served.

 
Oversight, licensing, and enforcement programs such as child care licensing and child support services will be reduced and fee structures are being considered in those areas to generate modest revenue to offset some of the costs of operating these programs. Child care subsidies for low income working families will be limited. Many contracts with outside vendors are being reduced yet again, while others will be phased out or eliminated altogether. People served by those contract partners will be impacted.

Some reductions are even being considered for Child Welfare Services that would save funds while not jeopardizing progress made in reforms and the obligations in the Pinnacle Plan. 

 
Because personnel-related costs comprise the largest share of DHS’ internal administrative budget, the agency is planning for significantly greater reductions in the number of employees. DHS has already reduced 1,200 non-child welfare positions during the past two fiscal years and is planning to cut several hundred more positions depending upon the level of appropriations.

 
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The two revenue failures since December reduced the agency’s state funding by an additional seven percent– $44 million state dollars ($58 million counting lost federal funding). Reductions from the revenue failures necessitated a hiring freeze, delaying state payments to persons receiving aid to the aging, blind and disabled, and making another round of cuts to contracts and client services such as child care subsidies and services for older Oklahomans. 

 
“These cuts have virtually eliminated any funds we normally hold for emergencies and most of the carryover funds that would have been available to maintain expenditure levels in the coming fiscal year,” said Lake. “Dire financial circumstances are forcing us to make significant cuts now while we plan with utmost seriousness for implementing potentially disastrous actions that will most assuredly compromise our ability to carry out the core services of DHS—primary “safety net” services.” 

 
On top of those reductions, Lake said the agency is projecting an additional shortfall for SFY17 of about $46 million due to increased costs of serving children in child welfare services, loss of federal funds for Medicaid programs in aging and developmental disabilities, and changes in the child care subsidy program for working families.

Governor Mary Fallin has proposed a plan to balance the state’s budget that includes an 8.6 percent increase for DHS next year; however, this plan is dependent upon the Legislature increasing revenues, eliminating some tax incentives and passing a bond measure—ideas the Legislature has not yet embraced. 
“If the Legislature does not act upon these ideas or find other ways to raise revenues for the state by the end of this session, DHS will be facing even deeper budget cuts we simply cannot make without significant consequences for people who depend on our assistance and for our many service partners whom we count on to supplement and complement our mission.  Even if the Legislature follows the Governor’s lead, our available funds will be dramatically less than what is needed to continue our agency in its current form.”

Lake said the agency is also evaluating the potential for consolidating DHS county offices around the state. No decisions have been made at this time as to which offices may be affected.

Basic assistance programs such as SNAP (food stamps) and TANF (cash assistance) are federally funded and services levels will not be impacted; however, agency leaders must ensure there are enough workers to process applications and meet federal requirements so as not to risk incurring penalties for failing to meet timeliness or quality standards.