🔒State’s nonprofit-contracting system broken

Anyone looking for proof that we need governmental reform will find plenty in an op-ed published June 17th by the CT Mirror, entitled “Georgie Porgie and the Connecticut Budget Cuts.”

The editorial (penned by an active member of Our Families Can't Wait, SEIU 1199) is both a lamentation about the effect of budget cuts on Department of Developmental Services (DDS) employees who care for people with intellectual disabilities, and a condemnation of DDS's immediate efforts to hire (by contract) nonprofits to provide the care in question (because they can do so less expensively). 

While the DDS's efforts have a taxpayer-friendly common sense appeal, they are palliative at best because the “contract system” by which the state engages nonprofits to provide services must be rebuilt from scratch if we want an affordable and fully functional system.  

Let's start with some perspective on cost and size.  DDS has an annual budget of almost $1 billion and over 3,000 employees — which are deployed to provide services to the intellectually disabled. Approximately 16,000 people are receiving services, and there is a long waiting list.  The people served are of various ages, have different levels of need, and have diverse and complex medical and behavioral conditions.  This is hard work — it is labor intensive, hands-on, 24/7, stressful, emotional and heavily regulated. 

Second, over the decades DDS has fulfilled its responsibilities by providing care by both direct and indirect means.  Direct care is provided at DDS facilities with DDS employees at state wage levels. Indirect care is provided under contracts (which are long and complex pre-printed documents) with nonprofit organizations that provide care at their facilities with their employees at their much lower wage levels.  The wage differential accounts for the cost savings DDS needs, and the gap is huge.  The CT Mirror op-ed claims that nonprofit workers make “close to half” of what state workers make, a figure consistent with my research.

 Third — and here's the thing — DDS is able to save money by transferring work to nonprofit providers simply because it has manipulated and underfunded the contract-based nonprofit provider system for years.  DDS's recent moves are not (despite any contrary appearance) a free market-based decision to find lower-cost providers in lean times — because under the contract system (as it exists) DDS has more control over the nonprofits (and thereby what they can pay their employees) than it does over its own staff. 

In other words, in the current financial crisis the state is turning to a lower-cost alternative of its own making — nothing more, nothing less.

There is a legal loophole that gives the DDS leverage to treat the nonprofits (and their employees) this way.  While labor law permits state employees to bargain on a collective basis for wages, benefits and security, anti-trust law prohibits the nonprofits from bargaining collectively as an industry for reasonable sector-wide contracts. 

Nonprofit employees can unionize (and many have) but their employers remain in a “take it or leave it” position with the source of almost all of their revenue (from the state).  Even worse, the terms of the contracts relegate nonprofits to a form of indentured servitude (they may be the most one-sided documents in legal history), in contrast to the legal protections in the collective-bargaining contracts with state employees.

So, here's the bottom line:  We seem to have a system in which DDS employees make “too much” and nonprofit employees make “too little” even though they do the same work and are both paid with taxpayer dollars. This is the way the state has made the bed for everyone, leaving us with an unfortunate, unnecessary and unseemly tug-of-war between state employees and their nonprofit counterparts, as the CT Mirror op-ed demonstrates. 

We can do better. 

My experience tells me that the best way to get there is with a system with internal checks and balances that would include a reformed contracting system that gives nonprofits the ability to bargain in good faith and to bind the state to payment and other terms for the long-term benefit of the people served and employed.  This would require legislation, leadership and creativity (such as “grandfather” provisions to protect higher-paid employees in the interim). 

I have served on nonprofit boards and represented others as counsel.  I respect the efforts of DDS employees to advocate for their interests, and I am sure they provide high-quality care to the disabled people they serve.  But in this anomaly-laden situation of DDS's making a truce with their nonprofit counterparts (if not an alliance) is called for, and in a spirit of comity and with the hope of finding common ground, let me correct some misunderstandings in the Georgie Porgie op-ed. 

The nonprofits are not in this to make a profit at the expense of their employees or anyone else. “Nonprofit” means what it says, and the law prevents them from having any owners or shareholders, and any black ink in their financial statements must be used to perpetuate their tax- exempt mission. The inability to pay employees a living wage hangs over nonprofit management and governing boards as a constant worry. Finally, despite the lower wages, nonprofit quality of care has not and does not suffer, and any innuendo to the contrary is not helpful to the cause or mission.

John M. Horak has practiced law at Reid and Riege P.C. in Hartford since 1980. His opinions are his own.