Top L.A. city and county leaders are promising to fix long delays in reimbursing nonprofits that provide the bulk of local homeless services after they warned of possible cuts to staff and services.
The issue was front and center at Tuesday’s meeting of L.A. County supervisors, who acknowledged the problem and convened a two-hour public discussion with officials who oversee the payments and five leaders of major nonprofit providers. They spoke of months-long delays in getting reimbursed by the city and county’s joint Los Angeles Homeless Services Authority (LAHSA), which were confirmed by officials.
“We've collectively reached the breaking point and can no longer carry the system,” said John Maceri, CEO of the nonprofit provider The People Concern, calling it “a perfect storm.”
He and other nonprofit leaders said providers are struggling to make payroll for their staff and are taking out private loans to cover the gaps. That can mean hundreds of thousands of dollars a year just in interest payments, which are not reimbursed by the government, they said.
Maceri said it often takes three months or longer for providers to get reimbursed for their costs, which often are millions per month. At supervisors’ request, LAHSA officials presented data showing $48 million in past due reimbursements to providers as of Friday.
“The greatest impact will be felt in the next seven days, when [the nonprofit] LA Family Housing will be unable to process” $1.2 million due to landlords for over 565 households in permanent housing, said Kimberly Roberts, the group’s chief program officer.
Another $1.5 million will be needed to continue temporary housing, “placing 1,000 households — households that make up over 3,000 men, women, and children — at risk of losing shelter,” she added.
County and city leaders say they’re taking the issue seriously and working quickly to fix it.
“The time for action is now,” said Supervisor Lindsey Horvath, who convened Tuesday’s public discussion along with Supervisor Kathryn Barger.
“Our payment system is broken,” Horvath added. “Too often, we have conversations that are siloed … Today's exercise is about fixing what is broken, not about pointing fingers. Because this isn't any one person's fault, it is a system failure.”
Supervisor Holly Mitchell went so far as to call the current payment system “the devil.”
“The cost reimbursement model is the devil. Hard stop,” she said.
“There is no flexibility, it's old, it's antiquated,” she added. “It is obscene to think that government is going to expect nonprofit organizations to carry us.”
Supervisors ordered county staff to report back within three weeks with options for overhauling the payment system, and plan to discuss the options at their June 18 public meeting. One approach being explored is providing money upfront to providers before they spend it, rather than having to wait for government agencies to review the bills.
Service providers also raised concerns about LAHSA’s payment rates not keeping up with the increasing actual cost of services, which county officials also acknowledged as a problem they’re trying to fix.
LAHSA’s executive director, Va Lecia Adams Kellum, said she inherited numerous payment delay problems when she took the helm a year ago, and that she’s working to fix them.
“This issue right here is my primary focus. And I'm losing sleep, as you can imagine. And I should, because this must get addressed,” she told supervisors.
Hanging in the background is an effort to ask voters to double the county’s homelessness sales tax, known as Measure H, and extend it.
“The reality is, we are soon going to be faced with going out to our voters again. And let me tell you, there will be people listening to this discussion. And we've got to fix it. And it is doable,” said Supervisor Hilda Solis. “This [effort] is really something that should have happened probably a couple years ago.”
Several officials said the discussion was “long overdue.”
In a letter to county supervisors Monday, L.A. Mayor Karen Bass said she’s trying to fix “cumbersome and inefficient payment methods” and that the city recently sped up $17 million in payments to LAHSA after service providers flagged that they face cash flow problems.
The amount still remaining for the city to reimburse LAHSA, to then reimburse providers, is estimated at $26 million, Bass wrote.
L.A. Councilmember Nithya Raman, who chairs the council’s housing and homelessness committee, told LAist she investigated the issue in recent weeks to find out what exactly is causing the delays. She brought forward a motion, approved by the city council last week, ordering staff to pay all overdue bills within 30 days and report back in that same timeframe on how to speed up payments to providers.
“I think we are reaching a point of crisis that we really need to be proactive about addressing,” Raman said. “It has been an ongoing issue for quite some time.”
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But once nonprofits “started saying, ‘we will not be able to provide services anymore if this situation continues,’ [that] woke everyone up,” Raman added.
“I also think that there is something about this moment which is different from the past, which is that you have a lot of people who are in leadership, who are working on the issue of homelessness, who are interested in going beyond finger pointing, who are interested in going beyond blaming LAHSA or blaming the county for poor outcomes, and really saying, ‘What can we all do better if we work together?’” she said.
“I wish that it didn't have to get this bad before we were able to focus our energies on taking action. But I'm hopeful that we will not have to find ourselves in this situation again if we act on this moment with all the steps that we need to take, if we can use this moment of crisis to really propel ourselves into a better system.”
