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Archive for Saturday, July 22, 2000

Legislators unpack safety net

State obliged to pay adoption agency’s debts, lawmakers say

July 22, 2000

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A Lawrence legislator Friday said the state has an obligation to see that its former adoption contractor's bills are paid in full.

"We cannot, in good conscience, allow the system we've put in place to care for these kids to fail," said Rep. Tom Sloan, R-Lawrence. "The Department of Social and Rehabilitation Services should ask the Legislature for the funds because if they do, I think they'll be granted.

"It's been my experience that the Legislature, when it's fully informed, almost always does the right thing. And in this case that means taking responsibility for making sure programs get paid what they're owed," Sloan said.

Earlier this week, Lutheran Social Services, the state's adoption contractor for the past four years, offered its subcontractors 74 cents on the dollar after a private audit revealed it had about $9.8 million in debts and access to only $7.3 million to pay them.

Subcontractors were told that Wichita-based Lutheran Social Services' liquid assets total less than $500,000. Lutheran Social Services declined to explain its access to the remaining $6.8 million.

"That's something we're not going to go into at this time," Mark Bloomingdale, the agency's chief operating officer, said in an interview with the Journal-World.

Bankruptcy threat

Subcontractors were asked to respond to Lutheran Social Services' offer by July 31.

Unless the offer is overwhelmingly accepted, subcontractors were told Lutheran Social Services is likely to file bankruptcy.

SRS began privatizing its services for abused, neglected and disturbed children in 1996, awarding Lutheran Social Services a four-year contract for finding adoptive homes for children whose parental rights had been severed.

Earlier this year, SRS switched adoption contractors, dropping Lutheran Social Services in favor of Kansas Children's Service League.

Kansas Children's Service League, in turn, is now subcontracting with Lutheran Social for services for roughly 1,000 of the state's 1,500 children awaiting adoption.

On Friday, several Lutheran Social Services' subcontractors said they felt trapped.

"This is a very tough situation for us," said Melvin Goering, chief executive officer at Prairie View, a regional mental health program based in Newton.

"We provided needed services in good faith, and now we're being told we're not going to be paid in full," he said. "It makes you cautious about continuing to put yourself in this situation, but when you're a mission-driven organization and your mission is to care for children and families, what do you do? It's a very uncomfortable position to be in."

'Depressing'

Dub Rakestraw, director of the Family Service and Guidance Center in Topeka, said his governing board had given him permission to sue Lutheran Social Services for nonpayment a few days before the 74-cents-on-the-dollar offer was made.

"This whole thing is depressing -- that's the only word I can think of," Rakestraw said. "We provided service in good faith and now we're getting burned."

A spokesperson for Lawrence's Bert Nash Community Mental Health Center, another of Lutheran Social Services' subcontractors, could not be reached for comment.

Sen. Sandy Praeger, R-Lawrence, said she wants SRS to make sure Lutheran Social Services' subcontractors are paid in full.

"We can't leave them hanging out there," Praeger said.

"You can argue that 'a contract is a contract,' and that SRS has paid Lutheran what it's owed by the state. But it's also true that everybody underestimated the costs of caring for these kids.

"No one to my knowledge has pinned this on mismanagement on Lutheran's part, so, really, we asked them to do something that couldn't be done. We can't walk away from that," she said.

Joyce Allegrucci, assistant secretary in charge of children and family policy at SRS, said SRS has no plan to pay the subcontractors.

"Lutheran Social Services has been paid every dime it is owed -- and our payments were amended in 1999 and 2000 to the tune of an additional $10 million to cover the costs of the required services being underestimated," Allegrucci said.

"SRS has paid all it can pay, that's all there is to it."

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