CDCAN REPORT #214-2010: Lawsuit filed in Sacramento Superior Court to stop additional 1.25% cut to most regional center providers

• Lawsuit Filed in Sacramento Superior Court To Stop Additional 1.25% Cut To Most Regional Center Providers From Being Implemented Retroactively
• Lawsuit Does Not Seek To Stop Reduction – Only Effective Date – Cut Is On Top of Existing 3% Reduction and In Addition to Previous 2009 Permanent Cuts To Regional Centers That Total Over $500 Million (Including Federal Matching Funds)

SACRAMENTO, CA  (CDCAN) [Updated 11/05/2010  06:35 PM   (Pacific Time)]  -  Under the shadow of the news that the State’s budget deficit next year could swell to over $15 billion, a lawsuit was filed in Sacramento Superior Court today by 12 community-based providers who provide services to people with developmental disabilities that is seeking to stop the State from implementing retroactively to July 1, 2010,  the additional 1.25% reduction in payments to most regional center providers (on top of an existing 3% cut)  arguing that the State cannot retroactively change contracts or adjust rates on services already delivered.

The lawsuit does not seek to stop the cut itself however – only the date it should go into effect citing violations of the State and Federal Constitutions and State and federal laws.  No hearing date has been set yet by the court.

[Attached to this CDCAN Report is the 27 page lawsuit titled “2010-11-05 - Retroactive Payment Reduction Lawsuit (CDSA v. Delgadillo).pdf”  Like many lawsuits and legal documents filed with the courts, this document was scanned as an image, so people who are blind or sight impaired who use screen reading devices will not be able to read it.  I reproduced key parts of the lawsuit in this report – and will post a pdf text version as soon as I can obtain one – Marty Omoto]

What the Lawsuit Is Asking For

The lawsuit filed today wants  the Superior Court to issue an immediate “temporary restraining order” [TRO –  a court order that is issued immediately that temporarily stops something from happening], and a subsequent preliminary injunction [a more permanent court order that stops something from happening] that stops the State and 21 regional centers from implementing the 1.25% payment reduction retroactively back to July 1, 2010, rather than the effective date of the legislation that authorized it (October 19, 2010).

The lawsuit is not asking the court to block the cut from occurring – only the date from which the 1.25% reduction should be effective.

The lawsuit is asking that the Court order the State to instead make the reduction effective on the date the legislation that contained that actual provisions of the cut was signed into law by the Governor – October 19, 2010.   That budget related bill included a provision that listed the effective dates - retroactively to July 1, 2010 – of the additional 1.25% cut  – well over 100 days after the budget trailer bill was actually signed into law.

Lawsuit Claims Violations of State & Federal Laws

The lawsuit contends that implementing the additional 1.25% cut to regional center providers retroactively to July 1, 2010 instead of October 19, 2010 (the date the bill was signed) violates state and federal laws in the following ways:

• Violates the State Constitution (Article IV, Section 8(c ) (3) and Section 9600 of the California Government Code that says urgency legislation takes effect immediately upon enactment (through approval of 2/3rds vote by the Legislature and signature of the Governor) and cannot be applied retroactively. 
• Retroactive implementation of the cut violates “ex post facto” (retroactive) laws in the State Constitution (Article I Section 9 and the US Constitution (Article I, Section 10).
• Retroactive implementation of the cut is unlawful interference by the State with existing contracts between regional centers and service providers
• The retroactive implementation of the cut violates laws that impairs (diminishes or weakens) the requirements or obligations of contracts, contained in the California Constitution (Article I, Section 9) and the US Constitution (Article 1, Section 10) by retroactively reducing payments already made for services already provided.
• Retroactive implementation of the reduction violates the due process rights of the organizations (service providers) filing the lawsuit under California Constitution (Article I, section 8 and the 14th Amendment of the US Constitution.
• Different implementation of the retroactive payment cut by the 21 different regional centers violates the equal protection rights of the organizations (service providers) who filed the lawsuit, under the California Constitution (Article I, Section 7(a) and the 14th Amendment of the US Constitution.

Advocates Say Cut Implemented Retroactively Unfair In A Situation Caused by the Failure of the State to Pass A Budget On Time

Advocates – who opposed the reduction that comes on top of an existing 3% cut that went into effect February 1, 2009 – felt that making the additional cut retroactive was unfair because it was caused by the inability of the Legislature and Governor to pass and enact a State Budget.

In addition, many community-based providers and advocates are deeply worried about the prospect of the retroactive cut being applied all at once either in November or December – meaning a onetime cut of 5% (July, August, September, October) on top of the 4.25% that would have a “devastating” effect given the lower reimbursements – due to mandatory holidays and certain unpaid furlough days for many providers during those months.

“This is a precedent that we cannot let stand,” said Chris Rice, executive director of the California Disabilities Services Association (CDSA), the lead organization filing the lawsuit, adding that,  “…it would mean we could never trust that we would actually be paid the price at which we agreed to provide these important services.  After enduring many years of rate cuts and program reductions, any new cut can threaten solvency of a nonprofit service provider.”

Rice said that the issue has critical consequences not only to community-based providers but to the thousands of children and adults with developmental disabilities that they service because “…to ensure continuity of support for persons with disabilities, service providers have to provide a 30-day notice if they cannot continue services. Agencies have no way to respond” when cuts are applied over 100 days retroactively.

Additional 1.25% Cut Passed By Legislature & Approved By Governor As Part of the 2010-2011 State Budget in October

The additional 1.25% reduction was passed by the Legislature and approved by the Governor as part of the budget deal to close an over $19 billion budget deficit.  The actual provisions calling for the additional 1.25% cut to most regional center providers – on top of the existing 3% cut that was first imposed February 1, 2009, was included in the budget related bill – referred to as a budget “trailer bill” – SB 853, that the Governor signed October 19th.

The 3% cut first passed in February 2009 and the additional 1.25% approved in October 2010 (effective retroactively to July 1, 2010), combined for a total 4.25% translates into a reduction of over $163 million to the budget that funds regional center community based services and operations (nearly $86 million of that money is State general funds) in the 2010-2011 State budget year that ends June 30, 2011.

This 2010 reduction is on top of the over $500 million in permanent reductions in State general fund spending (including matching federal funds) made in 2009 as part of the 2009-2010 State Budget passed four months early in February and revised in July.

Exempted from the 3% payment reduction and the additional 1.25% cut on top of that amount are supported employment services (who received a major rate reduction in 2008), the  SSP supplement for independent living, and services with  "usual and customary" rates  as established in regulation.  In addition, the budget related bill in 2009 and 2010 provides that other services may be exempt from the payment reduction if a regional center demonstrates that a non-reduced payment is necessary to protect the health and safety of a consumer and  the Department of Developmental Services has granted prior written approval.

Regional center operations – which includes administration, but also intake and assessment and other eligibility related task was also reduced by 3% effective February 1, 2009 and continues on through at least June 30, 2011.  An additional 1.25% cut was made on top of that to regional center operations (for a total 4.25% cut), retroactively  to July 1, 2010, which was referenced only in the main budget bill that was signed into law October 8, 2010 and not in SB 853.   This retroactive reduction however is not part of the lawsuit filed today.

Original 3% Cut Was Made Retroactive to February 1, 2009

The original 3% in payments to most regional center providers and 3% cut to regional center operations was part of the 2009-2010 State Budget passed four months early in February 2009.

That budget related legislation was signed into law February 20, 2009, but the effective date of the 3% was made retroactive in the bill to February 1, 2009. (the difference of 19 days retroactively in February 2009 rather than the over 100 days in 2010).

Lawsuit Filed by Provider Associations and Individual Organizations

The lawsuit was filed by Chad Carlock, a Davis attorney, on behalf of 12 disability provider associations and organizations: 

California Disability Services Association (CDSA), the lead plaintiff or organization filing the suit; Arc California, California Supported Living Network (CSLN), Easter Seals Southern California, Inc.; Easter Seals Society of Superior California, Inc.; Easter Seals Tri-Counties, California; ResCoalition Group, Inc.; Jay Nolan Community Services, Inc.; Training Toward Self Reliance (TTSR); The Comprehensive Continium of Services, Inc.; Towards Maximum Independence, Inc.; and Ukiah Valley Association for Habilitation.

The lawsuit names Terri Delgadillo, in her role as director of the Department of Developmental Services (DDS) – the state agency that oversees the funding and services for over 240,000 children and adults with developmental disabilities that are coordinated by the 21 non-profit regional centers.  The department is also is responsible for 4 state owned and operated developmental centers and one smaller facility where 2,018 (as of October 27, 2010) people with developmental disabilities reside.

In addition, the lawsuit names the 21 non-profit regional centers that coordinate the services and supports for people with developmental disabilities that are in turn provided by thousands of community-based organizations and individuals.

Regional centers also coordinate – under the Department of Developmental Services as the lead agency (with other agencies involved the state’s early intervention program – called “Early Start” in California that provides services and supports to infants (up to 36 months) who have a developmental delay or disability or an established risk condition with a high probability of resulting in a delay.

Persons with developmental disabilities also may be eligible and receive services that are not coordinated by regional centers and are not under the budget of the Department of Developmental Services including most Medi-Cal related services, SSI/SSP (Supplemental Security Income/State Supplemental Payment) grants, In-Home Supportive Services (IHSS), special education, mental health services under the Department of Mental Health.

File Attachments: 

2010-11-05 - Retroactive Payment Reduction Lawsuit (CDSA v. Delgadillo).pdf