COFAR blog

The state has appropriated more than $400 million in taxpayer funds to a human services provider reserve fund over the past two years, with at least three quarters of that amount supposed to be used to raise wages of direct-care staff of human services providers in Massachusetts.

Low wages have caused a continuing staffing shortage and worsening care in corporate provider-run group homes funded by the Department of Developmental Services (DDS).

Governor Healey is now pledging an additional $390 million to the “Chapter 257 Human Services Reserve” line item in the coming Fiscal Year 2025 budget, bringing the total appropriations to nearly $800 million. Chapter 257 was a law passed in 2008 that was intended to biennially set and increase state payment rates to human services providers.

But there seems to be little or no available information thus far as to:

• The amount of money in the reserve fund that has actually been spent to date to boost direct-care wages;
• How the administration or Legislature are able to track whether providers are raising those wages.

The reserve line item has included language in the FY ’23 and ’24 budgets stating that “any human service provider receiving revenue under said Chapter 257 shall use not less than 75 percent of received funds for compensation for their direct-care, front-line and medical and clinical staff.” However, the line-item language does not explain how that requirement would be carried out or enforced.

An administration spokesperson told us that that the governor’s proposed $390 million appropriation to the provider reserve fund in FY ’25 “is based on a model that supports wages no lower than $20/hour.”

One provider executive told us their agency was paying direct-care workers $17.50 an hour. So, presumably, the administration expects that that provider’s workers will receive at least a $2.50 per hour increase in their wages.

But whether those wage increases will actually happen is unclear. Similar promises in the past haven’t been met.

Funding rates for provider-run group home and day programs are set by regulation, after a public hearing process. Those rates are calculated based on what appear to be “benchmarked” expenses for wages and non-salaried costs. It isn’t clear, however, that the providers are required to pay those benchmarked wages.

What does seem to happen regularly is that the provider executives are paid higher and higher salaries and other compensation, while direct-care worker wages stay relatively stagnant.

Compare, for instance, the average direct-care salary in Massachusetts in FY ’22 of $43,260 (see below) with the total compensation that year to David Jordan, president of the Seven Hills Foundation, a DDS provider, of $1.2 million, and to his wife Kathleen Jordan, executive vice president and CEO, of $455,351.

Inspector general and state auditor had similar oversight concerns about payment of wages

In 2022, the Massachusetts Inspector General’s Office stated it had investigated complaints that state Executive Office of Health and Human Services (EOHHS) providers had misused $139 million in COVID pandemic relief funds that were supposed to be spent on direct-care staffing and other activities. Instead, providers allegedly spent the funds on executive salaries.

The IG stated that EOHHS did not fully implement its recommendations to develop detailed provider expenditure reports regarding state funding intended to be spent on staffing. The IG also stated that EOHHS failed to provide guidance to providers on reporting those expenditures.

In 2019, the state auditor found that major increases in funding to the human services providers Under Chapter 257 had led to surplus revenues for the providers, but had resulted in minimal increases in wages to direct-care workers.

We are asking both the IG and State Auditor to investigate the management and oversight of the reserve fund.

No clear oversight or tracking of direct-care wages by the state

It remains unclear how the state verifies or tracks the amount that human services providers pay in wages to their direct-care and other frontline workers. We asked this question of both administration officials and legislators, and have received no answer to it.

Oversight processes used by the state involving the provider reserve fund raise a number of similar questions.

For instance, in the FY ’23 and FY ’24 state budgets, the provider reserve fund language required EOHHS to provide a report to the Legislature’s House and Senate Ways and Means Committees on “ongoing and proposed initiatives” to increase direct-care wages. Those reports were required to be submitted in March 2023 and April 2024 respectively.

However, the March 2023 report, which COFAR obtained under a Public Records request, did not appear to provide that information. There was no mention in the report of any specific initiatives to raise direct-care wages, or even of the amount of funding appropriated under the provider reserve line item in that fiscal year.

The requirement that providers spend 75% of their reserve account funding on direct-care wages wasn’t mentioned in the March 2023 EOHHS report. The report was simply a spreadsheet that listed provider wage information, which the report stated had been collected from state Uniform Financial Reports (UFRs) and from the federal Bureau of Labor Statistics (BLS).

The EOHHS report did show that the average direct-care wage in Massachusetts as reported on provider UFRs was $43,263, or $20.80 per hour, in FY ‘22. That average had increased from $18.38 – or by 13% — from FY ’21.

Those wage averages were lower than BLS median numbers listed in the EOHHS report. The BLS median for FY ’22 was $21.94 per hour. It doesn’t appear that there is any requirement that providers pay the BLS median amount.

Also, based on our own review of UFRs, it doesn’t appear that those reports offer a way to track whether individual providers are actually spending 75% of their state revenues on direct-care wages. The reports we reviewed showed the amounts providers paid in total salary and wages, but did not appear to us to clearly break out the providers’ expenditures on direct-care wages.

We asked OSD for an explanation of the breakdown of expenses under the UFR system. An OSD official referred us to EOHHS, which did not respond to our request.

No directives issued on raising direct-care wages

In January, we also sent two Public Records Law requests to EOHHS and DDS, seeking documents concerning the impact of the Reserve fund on direct-care wages and any directives that have been issued to providers about spending 75% of their reserve account funding on direct-care wages.

In response to our Public Records requests, both EOHHS and DDS stated that they had no records of any such directives; and they provided no records concerning the impact of the reserve account funding on wages.

Healey’s budget doesn’t include wage increase language

It appears that the administration and the Legislature have at least one major difference in their planned approach to addressing the wage problem.  Governor Healey’s proposed budgets for FY ’24 and ’25 have not included the provider reserve fund language inserted by the Legislature requiring providers to direct 75% of their funding to direct-care wages.

That language was inserted by the Legislature in the Fiscal ’23 and ’24 budgets. It remains to be seen whether the Legislature will once again insert the language in the FY ’25 budget.

It’s unclear why the governor has not included that language in her budget proposals. A request to the governor’s Office of Constituent Services and to EOHHS for a response to that question about the reserve fund requirement has gone unanswered.

We support higher pay to direct-care and frontline workers. We ourselves have called for a minimum wage of $25 per hour for those workers.

At the same time, we have heard the promises before. Each year, more taxpayer money is given to the providers in line with those promises. DDS-funded group home providers received roughly $1.7 billion this year. Yet, the promises don’t appear to be kept. A few years ago, the state auditor found that those providers were earning surplus revenues as a result of all of that state funding.

We think the state needs to enact tighter controls over the billions of dollars it gives to the providers in order to ensure that they really do honor the promises of higher direct-care wages. To the extent providers are still earning surplus revenues due to funding from the reserve account, the state needs to make sure that the money really is going to direct-care workers and not to executives.