DHS announces budget reductions for revenue failure, agency-wide voluntary buy outs for projected shortfall

​Oklahoma City--The Department of Human Services detailed budget reductions today to be made in response to the state revenue failure declared in late December 2015 and announced an agency-wide voluntary buy-out offer for employees to prepare for a $40 million projected shortfall in state fiscal year 2017.  
On December 23, 2015 the Cabinet Secretary of Finance declared a state revenue failure and ordered all state agency appropriations to be reduced by three percent of the current year appropriation (state fiscal year 2016). 

For the Department of Human Services, this amounts to $18,748,396 state dollars; however, the agency must reduce its total budget by $28,070,000 due to the resulting loss of federal matching funds.

“The three percent reduction actually equaled a six percent cut in our budget because the reduction percentage is applied to the full-year budget,” said DHS Director Ed Lake. “It was paramount to us and to the people we serve that we protect core services and direct client payments wherever possible. I believe we have achieved that with reductions which will minimize impacts on client services and avoid a disruption of normal business operations.”

Budget reductions for the revenue failure will include cuts to contracts but will not apply to fixed-rate contracts or to Medicaid waiver services in Aging or Developmental Disabilities Services. In addition to measures to reduce costs implemented already this year, DHS will reduce:

• personnel costs for the remainder of the year by implementing a hiring freeze for all positions except Child Welfare Specialists;
• contracts that are spending below the contracted amount and also reduce all contracts by three percent, the same required of the agency as a whole; and
• budgets and reserve accounts for certain services to the amount expected to be spent during the remainder of the fiscal year.

On top of the immediate budget cuts that must be made for the state revenue failure, DHS leaders are projecting a $40 million shortfall next fiscal year, if appropriations remain the same, due to:

• a third consecutive reduction in FMAP (federal matching funds) for all Medicaid-funded services, the largest impact will be in Medicaid waiver services in Aging and Developmental Disabilities;
• continually increasing costs related to meeting the needs of the high number of children in state custody; and
• increased numbers of adoptions and adoption subsidies 

“In this fiscal year we have been using our resources responsibly and found ways to pay for increasing costs without additional appropriations,” said Lake.  “Our agency has modernized and streamlined its operations, downsizing considerably over the last two years. More than 400 full-time positions were eliminated from the closure of the two resource centers for people with developmental disabilities, the closing of the Pauline Mayer Shelter, and through previous agency buy-out offers and restructuring.

“Last year, all of our carryover funds were used in combination with deep internal cuts, and reductions to contracts and Medicaid waiver rates to make up a $42 million budget reduction,” said Lake.

“We are doing our best to prepare the agency for an even more difficult year next fiscal year.  But even with further significant internal reductions in DHS, it may not be possible to avoid impacting services to the most vulnerable people we and our contract partners serve. We will do everything we can to ensure our essential responsibilities are met.”

To prepare for the projected $40 million shortfall in SFY 2017, DHS will immediately begin implementing an agency-wide Voluntary Out Benefit Offer (VOBO).

Even though this offer is being made to all employees, agency managers in every DHS office must strategically select the number and type of positions that can be eliminated.

“I am extremely proud of our dedicated DHS employees,” said Lake. “Year after year, they have responded to reductions in the workforce by taking on more and trying to ensure that our clients do not suffer.  However, at some point, there is a human limit to what they can continue to do at the same level of quantity and quality.”

This VOBO offer consists of:

•  a payment based on years of state service: The minimum is $5,000 and the maximum is $10,000;
• a payment equal to 18-months of the employee-only health premium;
• the employee’s next longevity payment they would have received after separation; and
• a payment of the employee’s accumulated vacation hours in accordance with state policy.

For DHS employees who are selected to receive a VOBO, their last day on duty will be March 15, 2016.  Employees who are eligible and wish to retire have until Wednesday, January 27th to submit retirement papers to OPERS for an April 1st retirement date. 

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