Washburn Center for Children is one of several nonprofits feeling the hit of Hennepin County funding cuts that appear to be falling disproportionately on programs serving troubled children and troubled families.

Washburn runs two programs for preschool and early-elementary children with serious emotional and behavioral problems: One is day treatment offered at the center, the other an intensive in-home program. They serve 180 kids annually. These are the kids who might act out in school (swear at the teacher, stomp out of class), be rejected by their peers and who are at risk for school failure and delinquency.

Hennepin County has cut the center's reimbursement rates and made other changes that affect billing. Washburn Executive Director Steve Lepinski projects losing $220,000 to $240,000 in 2009, a 10 percent cut in those two programs.

"Bottom line, we don't know yet what we are going to do," he said.

Such cuts can't be good news for school systems that are trying to raise their third-grade reading or other test scores. If children with severe emotional and behavioral problems are losing community-based supports, it means more pressure on classrooms and school programs.

Lepinski said Washburn is meeting with four other agencies running similar programs and facing similar county funding challenges: Fraser, Family Networks, St. Joseph's Home for Children and the Storefront Group.

"We are all saying we can't continue these programs at the level of funding being discussed," he said.

For Washburn, one option is more fundraising. But Washburn already does fundraising and trying to raise an extra $220,000 in the current environment is ambitious, and perhaps naive, Lepinski said.

Another option is scaling back. But the savings from staff cuts aren't always dollar-for-dollar. Say a staff position costs $60,000 but brings in $40,000 through billing. "If we cut that whole position, we are really just saving $20,000," Lepinski said. "It is tough to just scale back."

The option that really isn't an option is ending the programs. The day treatment and the intensive in-home programs together bring in more than one third of the agency's $5.6 million budget.  "We can't just cut those programs," Lepinski said. "It affects overhead and all kinds of things."

Hennepin County by the numbers
This column has focused on nonprofit issues, but when you look at the human services safety net, the county and nonprofit roles are intertwined.

Hennepin County's administration will make its formal 2009 budget proposal Sept. 23, and initial numbers aren't promising for the safety net.

Tentative plans include cutting 120 to 125 of the county's own human services staff, in large measure because of declining federal support. Rex Holzemer, county area director of administrative services, said approximately 80 staff cuts would come from child protection, children's mental health and related programs. That's about a 10 percent to 12 percent staff reduction in children's services.

Cuts also will affect county contracts with Washburn and other nonprofits.

So why take the cuts out on children's programs? The reason has to do with federal changes in Medical Assistance, the federal health insurance program for low-income people.

During the 1990s, counties tapped special MA programs to pay for services beyond traditional medical care. Counties could divert some MA money to pay for what was termed "targeted case management," prevention services for children with mental health problems or for families considered at risk of child abuse or neglect.

The goal was to save money long term by keeping children out of more expensive services, such as out-of-home placement. Hennepin and other counties came to depend on that targeted case management money. It allowed Hennepin County to increase spending in the children's area for more than a decade.

Then came the federal Deficit Reduction Act of 2005. (PDF) The federal government tightened the targeted case management rules to save on MA costs. It has taken a while to play out. In 2009, it has put a $14 million hole in Hennepin County's child welfare funding.

Child protection
As one example, earlier this year the county reduced a contract with the Minnesota Indian Women's Resource Center to provide Family Assessment, a prevention program to keep families out of the child protection system.

The center's executive director, Suzanne Koepplinger, said American Indian families are at high risk for entering child protection. Because of the county cuts, the center laid off one of its two family assessment staff workers. That staff would have been working with 12 to15 families at a time for a three-month stretch, or up to 60 families a year.

(Yes, it's fair to ask if it's effective. The Minnesota Department of Human Services says family assessment has long-term savings.)

"When they start cutting prevention programs as a cost savings device, it is very concerning," Koepplinger said.

County postscript
When nonprofit advocates complain about cuts, the comeback often goes something like this: "We didn't cut the program; we just gave a smaller increase."

In Hennepin County, the human services safety net has taken real cuts, according to Holzemer.

In 2003, county human services (spread over six departments) had a $560 million budget, he said. Those departments merged into a single Human Services and Public Health Department in 2004, and this year's budget is approximately $516 million.

That's a $44 million drop. Now add inflation, say a 3.5 percent annual increase for salary and health insurance increases. A $560 million budget in 2003 would have grown to $665 million by 2008. By that yardstick, county human service spending is nearly $150 million short of where it was five years ago.

"It tells you how many resources we have effectively lost," Holzemer said. "Every indication is that our revenues will continue to decrease."