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Facing the 'fiscal cliff': Beltrami County needs solutions to funding shortfalls brought on by growing foster care placements

BEMIDJI—When it comes to finances, Beltrami County is in dire straits.

Because of the ever growing cost related to the county's Health and Human Services Department's foster care work, the county is seeing its fund balance dwindle. In recent weeks, county officials have started referring to the situation as a "fiscal cliff."

"At the end of every year, we have to make every department whole," Beltrami County Administrator Kay Mack said. "We had to transfer $3.025 million from the revenue fund to the Health and Human Services Department in 2017. We can only do that about six or seven more years. If we think we have cash flow problems now, we'll really have them then."

The total expense for out-of-home placements in 2017 was $11.9 million. The property tax levy that year included $4.1 million for the foster care costs while federal, state and third party reimbursements covered $4.75 million. Because of the shortfall, though, the county had to direct the needed $3 million from its reserves.

The county's available reserves sits now at $22.5 million, down from $35 million in December 2012.

"I've told the board that in six or seven years, if something doesn't give, we are going to be out of cash, and I believe we could be looking at bankruptcy," Mack said.

At a board meeting Aug. 7, county commissioners were presented with an audit report that showed what it's dealing with. District 3 Commissioner and Board Chair Richard Anderson called the report "sobering."

"We know from monthly department reports and from our budget that it's terribly costly and we can't keep on it," Anderson said. "It is legislated, though, so we have to follow the legislation. I look at this as an unfunded mandate. There are certain revenues we get, but it's not enough to cover the cost."

The county is looking at several options to help ease the financial strain, including supporting an initiative from the Red Lake Nation and working with state legislators.

What's the cause?

According to Beltrami County Health and Human Services Director Becky Secore, there's no sign that the trend is changing and in 2019, the budget shows another shortfall of $3 million.

The referenced trend is an ongoing increase in out-of-home placements. In 2008, the number of children in placement was 471, by 2014 it reached 919 and last year there were 1,284.

In total, the department's budget went from $25.1 million in 2014 to $31.1 million in 2017.

Driving the dramatic rise in foster care placements is an increase in substance abuse. According to Secore, nearly 76 percent of current placements are related to substance abuse, with opioids and methamphetamines being the primary cause.

The same is true across the state, said Nikki Farago, assistant commissioner of the Minnesota Department of Human Services.

"In 2016, for the first time, the reason for removal was substance abuse. We've seen that again 2017," Farago said. "It's been a significant rise, both from the opioid crisis and methamphetamine addiction."

Like the county, the state as a whole has been met with rising costs.

"Looking from 2013 to 2017, we've seen about a 40 percent increase in the cost for placements across Minnesota," Farago said. "It was about $130 million in 2013, in 2017 it was at $180 million."

"What I'm hearing from other directors is the stress of out of home placement is in all counties," Secore said. "Maybe not to the extent of ours, but it exists."

Solutions will come from partnerships

One of the main responses to the financial crunch is ongoing support for the Red Lake Nation's foster care initiative. Currently, the Red Lake government is legally responsible for the out-of-home placements, yet Beltrami County is financially responsible.

Of the 1,284 placements in 2017, 1,149 or 88 percent were Native American.

"Beltrami County pays for all the placements that occur in Red Lake. So, if they reimburse their foster homes and adoptive homes, we reimburse the tribe," Secore said. "What this initiative would do is take Beltrami County, our agency, out of the picture. So, those revenues that the county receives for foster care, those would instead go directly to the tribe for Native American cases."

Red Lake's idea for an initiative is not unique. Both the Leech Lake Band of Ojibwe and the White Earth Nation have launched their own versions of the initiative, completely separate of Mahnomen County and Cass County.

"They'd work directly with the state and the federal government on the reimbursement plan," Secore said. "We would of course be their partner in how our agencies work. We would help where needed, but we wouldn't be part of the financial component."

"Our strategy is to continue supporting Red Lake. We've been doing that for two to three years already," Anderson said. "There are a lot of hoops to go through, though, and it is costly. So, we have to talk with our legislative folks and let them know that this is our No. 1 goal."

The Red Lake initiative is one of three in the county's sights to solve the problem. The other two are related to funding mechanisms from the state government.

"There was a policy put in last year where across the state, Minnesota allocated $5 million to be spread out to counties based on the tribal population for foster care needs," Secore said. "Of that $5 million, Beltrami County will get about $1.2 million. That statue was originally at $19 million, but was brought down to $5 million. We're going to push to get that raised back up."

The other solution is related to a statute passed years ago by the Legislature.

"It was developed and states that if someone in placement was tribally enrolled, we would get a reimbursement from the state," Secore said. "We get a $500,000 appropriation, while our costs have gone up. So, another thing we're going to do is push to increase that appropriation."

"I intend to have a summit with legislative minority and majority leaders, along with local legislators to speak about the issue," Mack said. "We need assistance from the Legislature, as we can't levy our way out of this."

"Speaking for myself, I think we have to advocate for this," Anderson said on the legislative ideas. "As a united force, we as a board pushed for the veterans home. Now, the next item that's as critical is the need to get some relief from the state for this."

Beltrami County Health and Human Services Department total budget:

• 2014: $25.1 million

• 2017: $31.1 million

Number of children in foster care placement

• 2014: 919

• 2017: 1,284

Cost of foster care in Beltrami County in 2017: $11,894,031

Cost of foster care statewide in 2017: $180 million

Matthew Liedke

Matthew Liedke is the city, county and state government reporter for the Bemidji Pioneer. He also covers business, politics and financial news.

(218) 333-9791