As reported in the Crain’s article below, New York State has unveiled calculations that are being used to determine the level of funding that will be provided to Behavioral Health and Developmental Disability Providers to offset personnel costs as the minimum wage increases over the next few years. While we applaud the state for being transparent with their methodology, we strongly disagree with their assumptions that only a handful of positions will be impacted, needing adjustments.
The state used information from Consolidated Fiscal Reports (CFRs) obtained from all not-for-profit providers to determine the minimal impact created by increasing minimum wage. New York City will be increased incrementally to $15.00 per hour by 2018. Long Island and Westchester County will reach the $15.00 per hour rate by 2021. The Rest of State (ROS) will be increased incrementally to $12.50 per hour by 2020.
Unfortunately, the State’s calculations only take into account raising the salaries of positions that would need to be brought up to the new minimum wage amounts. This method of looking at the impact of increasing the minimum wage only addresses a fraction of the impact to community based mental health providers. The hourly rate for many positions in the community mental health sector will need to be adjusted up for there to be any hope of attracting and retaining a qualified workforce. An example is a worker that is currently paid $13.50 per hour. This worker is currently valued and paid at 50% above the current minimum wage of $9.00 per hour. When the minimum wage is increased, the salary of the worker making $13.50 per hour needs to be adjusted to keep the same percentage differential with minimum wage. So if the new minimum wage reaches $15.00 per hour, the worker in this example would need to make $22.50 per hour to retain the 50% differential with minimum wage. Adjusting the pay of not only workers below the new minimum wage, but including positions that would also be impacted by the increase is referred to as compression. Using compression as a factor, there are over 18,000 positions in the community mental health sector alone that will be impacted by increasing minimum wage.
In addition to the compression issue, fast food workers state-wide are set to see their minimum wage increase to $15.00 per hour over the next few years. This will create a scenario where fast food workers will have a minimum wage above the $12.50 per hour being set for community mental health providers in ROS, further increasing the recruitment and retention problems faced in our sector. New York State needs to support the community mental health sector by increasing contracts and Medicaid payments to address the problems providers are facing when minimum wage is increased.
Just as New York State relied on information from the CFRs of community based not-for-profits, ACL along with a coalition of other advocacy groups in the mental health community, have developed a projected impact to the community mental health sector as minimum wage is increased using CFR data from the entire New York State community health system. The total impact once all of the targeted increases to minimum wage are met is in excess of $423 million.
The following shows the year by year impact to the mental health system as the minimum wage is increased:
12/31/16 New Minimum ___Impact
NYC $11.00 $72,985,110
LI & W $10.00 $14,451,118
ROS $ 9.70 $23,801,841
TOTAL $111,238,069
12/31/17
NYC $13.00 $145,847,806
LI & W $11.00 $28,854,578
ROS $10.40 $47,603,683
TOTAL $222,306,067
12/31/18
NYC $15.00 $218,700,754
LI & W $12.00 $43,245,738
ROS $11.10 $71,287,782
TOTAL $336,628,930
12/31/19
NYC $15.00 $218,700,754
LI & W $13.00 $57,660,760
ROS $11.80 $94,631,851
TOTAL $370,993,365
12/31/20
NYC $15.00 $218,700,754
LI & W $14.00 $72,078,897
ROS $12.50 $118,713,528
TOTAL $409,493,179
12/31/21
NYC $15.00 $218,700,754
LI & W $15.00 $86,463,088
ROS $12.50 $118,713,528
TOTAL $423,877,370
Some $230 Million to Cover Minimum Wage Hikes for Behavioral Health Providers
Crain’s Health Pulse April 15, 2016
Behavioral health and developmental disability providers have not been forgotten in the state’s efforts to cover the direct costs of raising the minimum wage. State and federal supplements for those providers will total more than $232 million in the first three fiscal years of the wage increases. That funding is in addition to money that was appropriated for home care agencies, nursing homes and hospitals.
In a rare move, the state unveiled the calculations behind its funding decisions in a handout distributed to providers and advocacy groups last week.
“I’ve been in this field for 25 years I have to say, I’m really impressed that they showed their justification [for the funding],” said Christy Parque, chief executive of the Coalition of Behavioral Health Agencies. “I think I’ve only seen that a handful of times.”
The Division of the Budget broke down the costs of raising the minimum wage over the next three years by state agency. It showed that the state would cover more than half of those costs, and a spokesman for the Division of the Budget confirmed that the remaining amount would be covered through federal Medicaid matches.
The handout also offered some of the reasoning behind the figures. Calculations were based on how many full-time employees would need to have their wages raised to meet the new minimums being rolled out across the state. For example, in fiscal 2017, about 14,500 people who work for agencies providing services on behalf of the Office of People with Disabilities will be directly impacted by the wage mandate; it will cost $7.5 million to raise them up to the new wage floor. That translates to a 0.47% Medicaid rate adjustment for their employers, according to the state’s calculations.
Despite efforts to be transparent, questions and concerns remain, however. Representatives of mental health, disability and social services providers say they still want to negotiate with the state to secure funding to cover the cost of raising the wages of employees farther up the pay scale.
“We want to make sure we maintain career ladders within the nonprofit sector,” said Allison Sesso, executive director of the Human Services Council of New York.
The higher minimum wage is a good way to recruit employees, but retaining them will be difficult without the ability to pay more over time, said Parque.
Both Sesso and Parque emphasized that they support the wage increases.
“We just have to ensure that nonprofits that get the bulk of their funding from the government are able to make ends meet,” said Sesso, whose organization campaigned for “15 and funding” in the months leading up to the wage hike.
Sesso added that the human services providers she represents also want to know the breakdown for other relevant state agencies, including the Office of Children and Family Services, the Office for the Aging and the Office of Temporary and Disability Assistance.
Parque said the transparency the state has shown so far has been welcome. “I hope it’s not a one-time thing.”