UPDATE: Rep. Ann Pugh, chair of the House Human Services Committee, reported that after discussions between the designated agencies and the Shumlin administration, the proposal to require the designated agencies to compete for funding has been taken off the table.
Doug Racine, the secretary of the Agency of Human Services, read the riot act to the state’s designated agencies – the nonprofits that provide mental health programs and services for the developmentally disabled.
Racine proposed a rule change that would require the agencies to compete for funding through performance-based contracts. He told the House Human Services Committee on Wednesday that the 17 agencies, which he called “regional monopolies,” need to become more flexible and more accountable to the state.
Racine said the state needs to be able to measure the results of the designated agencies and determine “what we’re getting for the money.”
“We have a reality to deal with,” Racine said. “The designated agencies receive $280 million a year — out of $2 billion from the budget for the Agency of Human Services. Next year could be even more difficult (budgetwise) than this last year in which we’ve already lost federal funding.”
Gov. Peter Shumlin, a Democrat, has already asked the designated agencies to take an $11 million cut in fiscal year 2012.
Floyd Nease, executive director of the Vermont Association for Mental Health, said in an interview that the new proposal from AHS to allow private companies to compete with designated agencies for state funds would “deconstruct” the system of care.
Racine predicted that because President Barack Obama has proposed federal budget cuts to the Community Services Block Grants and the Low-Income Heating Assistance Program, that the state would be in much more dire straits next year.
“There will be intense pressure to make up the money,” Racine said. “This could get really ugly. If that is the case, this would be easier to deal with now.”
Racine pointed to a study from 2007 from the Pacifica Health Groups that stated the annual funding for the designated agencies would increase 8 percent a year just to maintain the status quo — absent reform. If the state wanted to address unmet demand the cost would be 12 percent, he said.
“We have a problem,” Racine said. “How do we get through these difficult times, without hurting Vermonters. There’s nothing left we can do except cut services.”
Julie Tessler, executive director of the Vermont Council of Developmental and Mental Health Services, told the committee that under the proposal, services would be privatized and potentially diminished as groups compete for funding.
Racine said his intent was not to privatize the system.
When he arrived at the agency, Racine said he found that the performance-based contracts that were supposed to be developed under the last administration hadn’t been put in place. “We have the authority to do it, but it hasn’t been done,” Racine said.
Rep. Topper McFaun, D-Barre Town, asked why the agency didn’t move ahead with the contracts and use them as a tool to measure the effectiveness of the designated agencies.
“Until now, I thought the agencies were doing a good job,” McFaun said. “Why not use the tools you have before you start adding (new requirements in statute)?”
Racine said his comments were not a “condemnation or criticism of the services they are providing.”
“When we closed down Brandon (training school) we asked the designated agency system to take on serious cases and there are still gaps in the system.”
Racine said he is aware of people with developmental disabilities and mental illness who become assaultive when they are in crisis and end up in the corrections system, which is incapable of dealing with inmates with mental illness.
“The police show up and they don’t know what to do, so they send them to jail,” Racine said. “That’s a gap in the system. We need to do a whole lot better than we have.”
Tessler said the designated agencies respond to crises all over the state, but that the system is too under-resourced to handle the scope of the problem.
Editor’s note: A write-through of this story was posted at 9:18 a.m.