August 18, 2013

California shows inconsistency in fee for parents of disabled children

Martin Smith said he and his wife tried for months to negotiate with the state before it sued them two years ago to collect a fee for their disabled daughter's 24-hour, out-of-home care.

Martin Smith said he and his wife tried for months to negotiate with the state before it sued them two years ago to collect a fee for their disabled daughter's 24-hour, out-of-home care.

Smith had heard of other parents persuading the California Department of Developmental Services to reduce their monthly assessments, and he wondered, "Why are we so special?"

After the state sued, a deputy attorney general said it was counterproductive for the family's lawyer to claim "that somehow your clients are being treated unfairly or the department is selective in its responsibility" to collect a fee.

Records obtained by The Sacramento Bee, however, show that the Department of Developmental Services has in recent years exhibited selectivity in its application of the law.

It has negotiated fees with parents based on unclear and sometimes conflicting criteria while failing to collect much of what it claims the state is owed, according to an analysis of department data and employee correspondence with parents.

Of nearly 650 cases in which a parent was eligible to pay a fee for a child's out-of-home care, the department in more than 300 instances assessed no fee as of September 2012, according to data provided to The Bee in response to a California Public Records Act request. Even among parents who were assessed a fee, about 100 paid nothing in the 12-month period ending that month. Among those non-paying parents, monthly assessments ranged from $50 to $1,877.

Yet the state has sued only five families to recover delinquent balances in the previous two years, according to Developmental Services. All of those cases were filed in one four-month period in 2011, and the department filed no lawsuits to collect outstanding parental fee balances in the years since, according to a document provided by the department to another parent, George McElroy, in response to a public records request in February.

"It seems to me that it's not a system that's being enforced in a fair and equitable manner," said Dena Hernandez, executive director of an area board of the California State Council on Developmental Disabilities in Amador, Calaveras, San Joaquin, Stanislaus and Tuolumne counties. "It just seems very murky."

The Department of Developmental Services declined to make employees available for interviews for this story, responding to only some of The Bee's questions via email. It confirmed in an email that it took legal action in five cases.

California has for decades imposed a fee on the parents of children requiring state-funded, out-of-home care.

The fee represents a tiny fraction of Developmental Services' $5 billion annual budget, with collected fees totaling about $1.1 million in the year ending September 2012. But the state's oversight of the program concerns disability-rights advocates because of its implications for the Lanterman Act, which guarantees state services to people with disabilities.

Developmental Services is responsible under the act for coordinating services for more than a quarter-million disabled children and adults in California, largely through the state's 21 regional centers.

Among measures taken by the state in recent years to contain costs, the Legislature in 2009 authorized the department to increase fees for children in out-of-home care.

The state had not substantially adjusted rates in more than 20 years, and the increase was expected to save the state general fund about $2.2 million annually, according to a legislative analysis.

"Again, we've taken the entitlement, and we've put it on the backs of the families," said Michael Rosenberg, executive director of the area board of the State Council on Developmental Disabilities serving Sacramento and nine other Northern California counties.

For the parents of children receiving 24-hour, out-of-home care, monthly fees are tied by law to a family's size and income and to government estimates of the cost of raising a child in California. They rise and fall, on average, in proportion to family earnings, and are the same regardless of where a child is placed.

But assessments can differ by hundreds of dollars a month even among parents of similar means. According to department data, 10 families reporting annual incomes of more than $100,000 were assessed a fee of less than $500 a month last year, while 11 families making between $70,000 and $100,000 were charged a monthly fee of more than $1,000.

One family's bill tops $60,000

In 2011, when the state filed its lawsuit against Smith and his wife, Eleanor Pracht-Smith, of Davis, the department set the parents' fee for their daughter's care at $1,570 a month, with an outstanding balance at the time of $28,005.

Paying anywhere near that amount, Martin Smith said, would force him and his wife to cash in their son's college fund and stop saving for retirement, among other hardships. He said his total bill now exceeds $60,000.

The record of how much the state charged other parents throughout the state was first provided to the lawyer representing the Smiths in the course of their litigation with the state.

"With that spreadsheet, it's shocking, isn't it?" Smith said.

According to the Department of Developmental Services, the state's calculation of a parental fee is a straightforward exercise based on a family's size and gross income, and on the age of the child receiving services. Parents earning below the federal poverty level are not required to pay a fee.

In practice, the department's assessments are more subjective.

Last year, department employees notified McElroy, a Tracy resident whose autistic son, GJ, lives at a treatment center in Los Angeles, that his fee would increase from $50 a month to $1,005.

McElroy appealed, and the department notified him in October that his fee had been reduced to $750.

Though Dean Shellenberger, a manager at Developmental Services, told McElroy in an email "there are no provisions within the statute or regulation that provides for an additional review of your appeal at this time," Mark Hutchinson, the department's chief deputy director, later agreed to personally review the calculation of his fee.

Hutchinson arrived at $400 a month, less than half the amount originally proposed.

McElroy, a senior accountant for Santa Clara Superior Court, agreed to settle with the state at the reduced sum, though he disagreed with figures Hutchinson used to arrive at a reduced fee.

There appeared to be inconsistencies in the assessment. Early in McElroy's appeal process, Shellenberger told McElroy in an email that review of his case "took into account your debt-to-income ratio." But when McElroy submitted a California Public Records Act request for the department's debt-to-income ratio criteria used in the assessment, the department responded, "The debt-to-income ratio criteria are not formalized in a written format."

In another part of the review, Hutchinson said McElroy held assets he could use to pay a higher rate, but the reduction of his fee to $400 was "based on the assumption you have not already taken action during the fiscal year to convert these assets to available cash resources or reduce other expenditures to meet your obligation."

McElroy said the assets to which Hutchinson referred were two rental properties in Texas and one in Nevada.

Yet in a separate case – the one involving the Smith family – the state asserted that "the defendants' investments are not a factor in determining the parental fee they are to pay."

In Los Angeles to visit his son one recent Saturday, McElroy looked up from a pile of fee-related paperwork and said, "This is just a quagmire."

He said later, "They're just making it up as they go along."

Fee is appropriate, AG argues

The McElroy and Smith families have both engaged in previous litigation involving their children: the McElroys sued over care their son received several years ago in Tracy Unified School District. The Smiths unsuccessfully tried to set aside their Ukrainian adoption of a girl they learned upon returning to the United States suffered from fetal alcohol syndrome, post-traumatic stress disorder and other conditions that Martin Smith said prevented his daughter from living at home.

While the 3rd District Court of Appeal, ruling it could not undo an adoption brought about in another country, called the matter "a tragic case in which there can be no good ending for anyone," deputy attorney general Michael Hammang seized on it in correspondence with the family's lawyer concerning the parental fee.

"I will observe, as the attorney for the department who has just recently assumed responsibility for this case, that a substantial obstacle to resolution of this matter appears to be the reluctance or refusal of your clients to accept financial responsibility for this child," Hammang told the Smiths' lawyer, Larry Schapiro.

"I have some awareness of the background of this case, saliently, the effort of your clients to set aside their adoption of this child; efforts which include an appeal to the California Court of Appeal."

Hammang said in his letter that the fee assessed by the department was appropriate for a family of four – in addition to their daughter, the Smiths have a son who lives at home – with a gross annual income of more than $135,000. He cited as evidence of the Smiths' disposable income their retirement contributions and payments that between 2003 and 2011 allowed them to reduce the principal on their home mortgage by $116,900.

Martin Smith, a faculty member in the human ecology and population health and reproduction departments at University of California, Davis, said he and his wife could pay about $350 a month.

"We have never said we wouldn't pay something," said Smith, whose daughter, Magdalena, is 13 and living in a group home in Sacramento. "We have just said, from the beginning, that we can't afford the $1,200 to $1,500 they're trying to charge us a month. We've always asked for an explanation as to why our appeal's denied. They've never given us an explanation."

Of the five families the state has sued, the department appears to have reached a settlement in at least one case, in Contra Costa County.

The state sued Nicholas and Karen Benitez in 2011 for $8,693 in unpaid fees for the care of their son, Domino. The family did not respond to a request for comment, but their interaction with the state was detailed in court documents in Contra Costa County.

The couple, who had been assessed a monthly fee of $373, wrote a letter to the court pleading for consideration of their financial difficulties, including the father's loss of employment and the prospect of foreclosure.

"Our 2010 state income tax refund was over $3,000 and every bit was applied to offset our obligation to (the state)," the San Ramon couple wrote. "We were surprised to receive this summons since we had thought that this arrangement was satisfactory, especially since the $3,000 tax refund covered almost a full year of payments."

In a settlement agreement, they agreed to apply future income tax refunds to their outstanding balance until it is paid in full.

No fees sought in 300-plus cases

The Department of Developmental Services refused to make any of its employees available for comment, including Shellenberger, Hutchinson and the department director, Terri Delgadillo.

In a prepared statement, the department said parents who owe a fee "continue to pay down their assessed fees over a period of time," and that the department regularly contacts parents who fail to pay by phone or in person.

"If there is no response from the parent, the department proceeds to collection through the Franchise Tax Board, small claims court or Superior Court, as was done for five delinquent accounts after all other state required collection efforts were exhausted," the statement said.

Developmental Services would not say why it had filed no lawsuits since 2011 to collect outstanding fees, or why it did not assess fees in more than 300 eligible cases.

Mary Sheehan, clinical director at Valley Mountain Regional Center, which provides services to people with disabilities in San Joaquin, Stanislaus, Amador, Calaveras and Tuolumne counties, described the parental fee and other cost-reduction measures by Developmental Services as a reflection of the state's economic difficulties in recent years.

"The Lanterman Act is an entitlement, nobody will touch that," Sheehan said. "But what the state has done, because the money's been tight, what they've done is say, 'OK, you can still have the required services, but if you have a child between birth and 18 and you're not at the poverty level, you have to pay for those services.' "

She added, "I don't think it's wrong to expect parents to pay for their children."

The state's case against the Smith family is moving forward in Yolo County. A settlement conference is scheduled for next month, but Schapiro said he expects the case to go to trial.

After settling his dispute with Developmental Services, McElroy is seeking legislation to cap the parental fee at 4 percent of adjusted gross income, and provide parents with greater rights to appeal. He said representatives of his local assemblywoman, Susan Talamantes Eggman, have been receptive.

Christian Burkin, a spokesman for Eggman, D-Stockton, said office employees are working with McElroy, but it is unclear to what end.

"It's a very complicated issue," he said, "and our staff are looking into it."

Call David Siders, Bee Capitol Bureau, (916) 321-1215. Follow him on Twitter @davidsiders.

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