Council looks to guarantee annual inflation adjustments for human services contractors

This morning, the Council passed out of committee an ordinance that would require the Human Services Department to build in annual inflation adjustments into its human-services contracts.

The annual increase is tied to the Bureau of Labor Statistics’ Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the Seattle-Tacoma-Bellevue area. Several indexes were considered, and they largely don’t differ much, but this one was believed to best match HSD contractors’ employees. In 2020, it’s predicted to cost HSD $3.98 million to make the adjustment on its existing contracts.

The requirement doesn’t apply to:

  • contracts were the city is acting as a pass-through agent for services that are not provided within the city limits;
  • contracts that are solely supported by state Medicaid funds or funds appropriated by Title XIX of the Social Security Act;
  • services provided by a consultant;
  • contracts where such increases are prohibited or incompatible with the requirements of the funding source.

There has been much said and written lately about the poor wages at many human-services providers in Seattle and around the country, and how it leads to high attrition rates — and often employees who are one tiny step away from qualifying from the very services they provide. High turnover at human services providers has been identified as a key obstacle to improving the success rate for programs, especially those requiring long-term case managers to work with people in need.

The bill, however, isn’t perfect. For one, it doesn’t require that the providers use the increases to give their employees raises; they could use the money to pay for other needs (including utility bills that also rise over time). Council President Harrell took issue with that point in today’s deliberations, and said that he would be working on an amendment to address that issue before the Council takes it final vote on the bill.

The bill also only applies to HSD contracts, which leaves out many other service providers working with other city departments (including the Office of Housing, the Department of Neighborhoods, and the Office of Economic Development) with similar issues.

And Council member Bagshaw noted that the annual increases are disconnected from the city’s revenue growth, so even in recession years where city revenues decline (such as 2009- 2011) the city would still be on the hook to provide an inflationary increase tied to CPI-W.

Bagshaw introduced an amendment that would have capped the required increase at the percentage increase in the city’s General Fund revenue stream, while still allowing the Council to opt to increase it further as it deems necessary and can find the funding to back it. However, she got little support from her colleagues and withdrew her amendment.

Most of the HSD contract funding comes from the city’s General Fund, which means that volatility will be a risk going forward (though the city does have a “rainy day fund” to cushion sudden drops in general fund revenues).

The 2019 budget included a 2% increase for all HSD contracts, and the endorsed 2020 budget included a 2% increase for only the  General Fund contracts. Under the new bill, the required increase for 2020 would be 2.9% and would apply to all HSD contracts, for a total increase of $2.69 million — $758,000 more than what’s currently in the endorsed budget.  Projecting out over the next ten years, the required annual adjustment will increase the cost of the current HSD contracts by about $36 million if local inflation remains at the ten-year average of 2.4%. The increase rises to $44.5 million if the current 2.9% inflation rate becomes the “new normal.”

The bill passed unanimously out of committee after two minor amendments, and will come up for final approval on Monday.

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3 thoughts on “Council looks to guarantee annual inflation adjustments for human services contractors”

  1. So if you are an agency currently holding a city of Seattle HSD contract you will be guaranteed a permanent contract increase every year from now on that has no requirements on that you must spend the increase on the front line staff wages. Does this mean the front line staff from all these agencies will be back at city hall every year asking for more money from the city and the city will turn around and award more money to the agencies with no stipulations that the money must go to staff wages? Sounds like the city council is promoting a myth that front line staff will be getting a raise each year but in reality the agency can spend the guaranteed raise any way they want. I didn’t hear anything in the discussion yet that city has to give up an expectation of any goals or outcomes or any results but why would there be any expectations of any outcomes or reports from the agencies since the city council wants to just write an on going blank check to the agencies. What am I missing?

    1. One of the minor amendments added yesterday was a reporting requirement so the city can understand the impacts on “contracted partner organizations’ financial stability, employee wages, employee retention, services provided, and the City budget.”

  2. The city has been receiving most of this information from the city all along (except maybe employee retention data). It Isn’t clear to me that the lack of any reports or data will have any negative impact on contract awards in the future. Maybe things will be clearer at the next discussion.

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