WHT Law

Nonpublic Facilities Funding Alert

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Nonpublic Facilities Funding Alert

The ISBE Superintendent is putting through minimum 7% across the board cuts in the budget unveiled this month.  In addition, there is a BIG push to take what we call the “categoricals” — funds absolutely reserved for such things as room and board — and allow districts more leeway on how to use these dollars.  This means that if it passes, there will not be a reserved pot of money for extraordinary costs such as room and board.  In the past, this cost was reimbursed to local school districts at a 80-100% rate, so it wasn’t really that painful for districts to pay for residential placements.  However, they are still operating on last year’s money, and our guess is that with the new budget for 09-10, the reimbursement rate may drop dramatically to possibly as low as 40%.  In practical terms, this means districts’ share of room and board costs may skyrocket to 60% from zero to 20%.  This of course means they may not be so happy about paying for residential placements.  This in concert with the RTI requirements built into the federal law for phase-in in 09-10 and 10-11 will put pressure on all residential facilities in a very dramatic way.  The superintendents are enthusiastic over possibly freed-up money they can use to reduce their red ink, and the management attorneys are pushing hard for this statutory change. The argument is that the current Illinois funding system favors more restrictive placements, which is likely to encounter a sympathetic legislative ear.

Our worst-case guess, from a private sector point of view, is that Illinois will see a drop in residential placements by up to 50% over the next 2 years.  Referrals will be much harder to get, and there will be a huge increase in hearings to obtain residential placements.  Many facilities will decline unless dramatic and creative strategies are developed.  The change in how the funds are reserved for categorical costs will likely pass in some form.  Part of that might be reservation of a percentage for services devoted to returning students to their communities, i.e., payment for localized, intense family therapy and psychotherapy services.  Some facilities will, in anticipation, implement transition programs to include these services and charge for them in a separate, new rate, using budgeted costs and treating it as a wholly new program.

We cannot overstate how potentially devastating the upcoming changes are likely to be to nonpublic residential facilities.  We strongly recommend that the boards of all nonpublic facilities do some focused strategic planning to hedge against this inevitable development.