Of the homes that were Approved or Licensed, only 182 were licensed. From both tables presented, it is apparent that the private agencies have done a substantially better job approving and licensing homes than DCFS (44.8% of private agency homes approved or licensed; 21.4% of DCFS homes), despite the stated DCFS policy to actively pursue approval or licensure.
Prior to HMR Reform, relatives were favored by DCFS for foster child placements. DCFS actively recruited relatives as foster care providers. In 1986, DCFS created the "approved" category, in part to make it easier for DCFS to place foster children with relative caregivers. Between the promulgation of 89 Ill. Admin. Code § 335 (establishing the approval category) and HMR Reform, DCFS's preference for relative caregivers was consistent with State law. See 20 ILCS 505/7(b) (repealed by HMR Reform). Furthermore, to the extent DCFS encouraged relative caregivers to apply to be approved or licensed, DCFS usually encouraged the approval process, which was easier for both DCFS and the family involved.
DCFS has struggled to carry out its responsibilities to the people of Illinois, due in large part to the enormity of those responsibilities. The number of children in DCFS custody has nearly doubled in the last four years, rising from 23,700 in June, 1991 to 47,000 as of April 30, 1995. Similarly, the number of children in state custody who are placed with relative care givers increased from approximately 5,500 in June, 1988 to over 25,700 in January, 1995, an increase of 367%. According to DCFS, this astronomical growth in relative care was primarily caused by a state law which established a preference for relative caregivers (and was repealed as part of HMR Reform), a broad definition of "neglected children" which included children living with relatives in the absence of a biological parent, slower rates of discharge from relative homes and the disparity between the payments available to foster parents caring for relatives and those available to non-foster parent caregivers who relied solely on other kinds of public assistance, including Aid to Families with Dependent Children ("AFDC"). In addition, the growth in relative foster care is partially due to the fact that DCFS sought out or solicited relative caregivers.
The cost of maintaining DCFS is high, particularly because Illinois provides the full foster care rate of payment to foster children even in cases where the federal government does not partially reimburse the State for doing so, such as in cases where a relative cares for a child but does not maintain an approved or licensed home. Hawaii is the only other state that pays foster care rates regardless of the eligibility for Title IV-E reimbursements. DCFS estimates that the State of Illinois lost $ 16 million in federal funds in fiscal year 1992 due to its policies regarding relative foster care payments. As the Court has noted, much of this loss was caused by the State's inability to license or approve, and therefore qualify for Title IV-E reimbursements, many of the relative foster homes. Part of this problem is due to the fact that relative caregivers lack a financial incentive to pursue licensure or approval in the pre-HMR Reform system as their benefit remains constant regardless of their status. Part of the problem also lies with administrative difficulties at DCFS. For example, DCFS and the private agencies responsible for licensing and approval of relative foster homes have lost applications filed by some foster parents. DCFS claims to have introduced steps to increase its administrative efficiency, such as the introduction of new fingerprint reading equipment which will supposedly reduce the time it takes to consider an application for licensure, but no evidence indicating any measurable improvements was submitted to the Court.
The HMR Reform at issue in this litigation is a response to these, and other, problems. Governor Edgar first announced HMR Reform on March 1, 1995. For the purposes of this litigation, three main components of HMR Reform are critical. First, HMR Reform eliminates the "approval" category for foster family homes. Second, Illinois will no longer pay the foster care rate to homes with applications pending. Therefore, under HMR Reform, which is effective July 1, 1995, foster children will receive foster care payments from DCFS only if they are placed in a foster family home that is licensed under the terms of the Illinois Child Care Act of 1969.
Third, DCFS will not provide an administrative appeal to those applicants for licensure who are rejected.
After July 1, 1995, the licensing requirements under HMR Reform are the same for relative and non-relative caregivers and slightly more stringent than those in place prior to HMR Reform. Furthermore, HMR Reform changes the prior "official" policy of requiring foster care providers to apply for approval or licensure as a condition to keeping a child.
Under HMR Reform, the caregiver has the option to pursue a license or not. Therefore, a caregiver who is not capable of becoming licensed may still have a child placed in his or her foster home, but the caregiver will not receive foster care payments.
Those homes that are already licensed will not have to re-apply until their current licenses expire, despite the changes in the substantive licensing requirements. Those homes that are not yet licensed, however, which are mostly relative homes, must apply for and obtain a license to preserve their foster care payments beyond September 30, 1995, or in many cases, beyond July 1, 1995. For those foster children and foster care providers who will lose foster care payments as of July 1 or September 30 due to the implementation of HMR Reform, the amount of the loss will depend on the number of foster children involved. Although foster care payments will be eliminated for all but licensed homes, the State will continue to provide assistance to unlicensed homes via the Department of Public Aid and the Aid to Families with Dependent Children programs. Because these programs utilize an "economy of scale" theory, the payments increase at a decreasing rate for each additional child involved. For example, for a single foster child in Cook County, an unlicensed relative caregiver will receive $ 252 per month, or 72% of the approximately $ 350 per month they had received as a foster parent. An unlicensed foster home with eight children (the statutory maximum) would receive $ 1,165 per month, or 42% of the approximately $ 2,800 it would have received in the foster care program.
Of course, relative caregiver may receive the full foster care benefits upon receiving a license as a foster care provider. The foster care payments do not incorporate economies of scale because obtaining and maintaining a license entails significant fixed costs, including maintaining certain housing standards. According to DCFS, the additional requirements placed on licensed foster homes, including having a telephone, a satisfactory water supply, and undergoing foster care training as well as a criminal check, justify the additional payments made to licensed caregivers as opposed to those who have merely passed the safety check.
DCFS began the implementation of HMR Reform by holding briefings for agencies and advocates in March, 1995. In April, 1995, DCFS provided current relative caregivers with initial written notice of the HMR Reform Plan. On April 28, 1995, DCFS issued a second notice of HMR Reform, including an application for licensure in notices sent to approved homes and homes with applications for approval pending. On approximately June 12, 1995, DCFS issued another notice to relative caregivers. This time, however, separate notices were sent depending upon whether the home was approved, pre-approved with an application pending, or pre-approved without a pending application.
These three notices were the only notice of HMR Reform sent to relative caregivers. Applications for licensure were not sent to pre-approved caregivers who did not have an application for approval pending. These caregivers were instructed to obtain applications from their case worker.
Many applications for licensure filed by relative caregivers before July 1, 1995 will not be decided by September 30, 1995. As a result, many foster caregivers will lose full foster care benefits at that time. Under HMR Reform, some of those applicants, as well as some of those who lost benefits as of July 1, 1995, will lose benefits even though they satisfy the licensure requirements under HMR Reform. In such cases, DCFS will not pay benefits retroactively.
DCFS intends to notify applicants for licensure of its decision with respect to their application by mail. If an application is rejected, the notice will include a written reason for the rejection. Under HMR Reform, there is no right to an appeal of an unfavorable decision. Appeals are available in only two situations: (1) to those homes that lose benefits and claim that the loss is the result of a DCFS mistake related to whether or not the home is already licensed; and (2) to those approved homes who lose benefits and claim that the loss is the result of a DCFS mistake related to whether an application for licensure was made in time (by June 30, 1995) to preserve benefits until September 30 or until a determination by DCFS, whichever occurs earlier.
The financial implications of HMR Reform are significant. DCFS estimates that HMR Reform will result in a net savings to the State of Illinois (and net loss to benefit recipients) of $ 44.4 million, consisting of $ 60.8 million in savings at DCFS offset by $ 16.4 million in increased cost to the Department of Public Aid.
ADDITIONAL FINDINGS OF FACT
In light of the nearly comprehensive nature of the factual stipulations submitted by the parties, the Court needs to make only these additional findings of fact.
First, the Court finds that prior to HMR Reform, the licensing process was not equally available to both relative and non-relative foster homes. This conclusion is supported by DCFS's admission that nine of the sixty-seven private agencies have been authorized to conduct approval only studies. Def.'s Resp. to Pl.'s Inter., p. 10. For the foster homes approved by these agencies, no opportunity for licensure was ever presented. Furthermore, because both licensed and approved homes received full foster care benefits, and because approval was less intrusive and had fewer requirements than licensing, approval was easier for both the foster care family and DCFS staff or the private agency assigned to that family. Morsch Direct, p. 10 ("consistent with the Reid Consent Decree and [DCFS] practice, nearly all relatives were processed through the approval, rather than the licensing, process"). This finding of fact is supported by the statistical evidence. As of April 30, 1995, only 1.2% of all related children in foster care resided in licensed homes, while 42.6% of such children lived in approved homes. In addition, 22.2% of the pre-approved homes had applications for approval pending. With respect to number of homes, the evidence is similar. As of April 30, 1995, 1.3% of all homes with related children were licensed while 35.2% were approved. Homes with pending applications for approval accounted for 26.1% of the total number of homes with related children.
Second, the Court finds that DCFS will be unable to render decisions on the applications for licensure that will be pending on July 1, 1995 in time to prevent the deprivation of benefits to many applicants who satisfy the requirements for licensure. On the record before it, the Court is unable to reasonably estimate the time DCFS will need to render decisions on the applications for licensure that will be filed by relative approved caregivers as a result of HMR Reform. Plaintiff's expert, Mary Grimes, testified that it takes approximately six months to complete the licensure process. DCFS has a policy that a decision to issue a license on an application should be made within seventy-five days of the time the application is filed. However, DCFS statistics indicate that only 19.3% of all licensing applications in Cook County in fiscal 1994 were licensed within seventy-five days. Pl.'s Ex. 6 at T316. In private agencies in Cook County during the same time period, 36.8% of the licensure applications were determined within seventy-five days. Pl.'s Ex. 6 at T384. Plaintiffs' witnesses testified to long time periods and various difficulties involved in processing applications. See Grimes Direct, pp. 7, 9, 20, 22-23, 25; Grimes Supp. Direct, p. 2; Stidhum Direct, p. 3; Sumner Direct, p.6-7; Tate Direct, p. 4; Walton Direct, p.4. The substantive requirements for licensure have not been diminished by HMR Reform. Defendant submits evidence that the process has been streamlined and benefits from new technologies since the statistics provided above were developed. However, Defendant has not produced any evidence of any actual improvements in the time it takes, on average, to process an application for a license. Plaintiffs' witnesses testified to problems in obtaining licensure applications and counseling from caseworkers. Under the new HMR Reform rules, an applicant must receive six hours of foster care training, further delaying the application process. Accordingly, the Court concludes that the average period to process a completed licensure application will be in excess of ninety days.
Third, some of the relative foster children and care providers who are currently receiving full foster care benefits as approved homes or because they have applications for approval pending will lose those benefits under HMR Reform transition schedule despite the fact that they currently meet the requirements for licensure and will eventually be licensed. This conclusion is based in large part on the definition of "approved" in 42 U.S.C. § 672(c), which defines "foster family home" as:
a foster family home which "is licensed by the State in which it is situated or has been approved, by the agency of the State having responsibility for licensing homes of this type, as meeting the standards established for such licensing.
This definition, under which the State of Illinois created the approved category in 1986, indicates that a home must meet licensure standards to be approved. Furthermore, because DCFS and the private agencies providing services to foster children and caregivers have channelled foster homes towards the approved category rather than the licensed category, the Court concludes that it is a certainty that many approved homes meet the standards for licensure.
Fourth, a substantial number of relative foster care homes that are only pre-approved will lose full foster care benefits under the HMR Reform transition schedule despite the fact that they currently meet or are able to meet the requirements for licensure and will eventually be licensed. Fifth, no non-related foster care children and caregivers who are currently receiving full foster care benefits will lose those benefits under the HMR Reform transition schedule.
Plaintiffs argue that the transition from the pre-HMR Reform system of providing public assistance to relative foster children and relative foster caregivers violates the Judgment Order entered in 1976 in this case, Title IV-E of the Social Security Act and the Due Process Clause of the Fourteenth Amendment. The Court will consider each argument in turn.
I. The Judgment Order
As a result of the District Court's conclusion, in 1976, that Illinois' statutory definition of "foster family home," which excluded relative caregivers, was in conflict with the provisions of the federal Social Security Act, a Judgment Order was entered to provide the Plaintiffs and members of the Plaintiff class full and equitable relief. Plaintiffs now claim that HMR Reform violates that Judgment Order. For the purpose of this litigation, the operative paragraph of the Judgment Order is paragraph 4, which provides, in part:
Defendants, their agents, employees and all other persons in active concert with them are enjoined from:
(a) enforcing [Illinois law] and all implementing administrative policies and procedures, insofar as they exclude from eligibility, or deny full [Title IV-E] payments or ancillary benefits to, foster children living in foster homes maintained by related foster parents, and to these related foster parents, when such children and such parents are otherwise eligible for such payments and benefits;