CH v. Payne

Decision Date26 January 2010
Docket NumberNo. 1:09-cv-1574-SEB-JMS.,1:09-cv-1574-SEB-JMS.
PartiesC.H., et al., Plaintiffs, v. James W. PAYNE, Defendant. The Indiana Association of Residential Child Care Agencies, Inc. d/b/a IARCCA, an Association of Children and Family Services ("IARCCA"), Plaintiff, v. Indiana Department of Child Services and Hon. James Payne, Director in his official capacity, Defendants.
CourtU.S. District Court — Southern District of Indiana

Gavin Minor Rose, Kenneth J. Falk, ACLU of Indiana, Anne Kramer Ricchiuto, April Edwards Sellers, Jon Laramore, Baker & Daniels, Indianapolis, IN, for Plaintiffs.

Betsy M. Isenberg, David S. Christoff, James J. Hutton, Indiana Office of the Attorney General, Indianapolis, IN, for Defendants.

ENTRY GRANTING A PRELIMINARY INJUNCTION

SARAH EVANS BARKER, District Judge.

This matter is before the Court on Plaintiffs' Motions for Preliminary Injunction, filed pursuant to Federal Rule of Civil Procedure 65. The cases at bar have been consolidated for pretrial proceedings. A hearing was held on January 20, 2010, at which the parties presented evidence and oral argument. Having considered the parties' briefing, the documentary and testimonial evidence, and oral arguments, the Court orally summarized from the bench at the conclusion of the hearing its conclusions. For those reasons, as well as the additional reasons detailed below, the Court GRANTS Plaintiffs' motions for injunctive relief.

Factual and Procedural Background1
A. C.H., et al. v. Payne

One group of Plaintiffs represents themselves and four classes of litigants consisting of foster parents and foster children directly receiving foster care maintenance payments from the Indiana Department of Child Services ("DCS") and adoptive parents and adopted special needs children directly receiving adoption assistance payments from DCS ("Class Action Plaintiffs"). Title IV-E of the Social Security Act, 42 U.S.C. § 670 et seq. ("Title IV-E"), provides federal funding for the purposes of foster care and adoption assistance to states which have submitted state plans to the federal government and have had them approved. The State of Indiana has submitted such a plan which has been approved and, thus, has agreed to be bound by all of the federal requirements under Title IV-E. DCS, headed by Director James Payne, is the state agency which administers the Title IV-E monies provided by the federal government.

Under Title IV-E, the federal government underwrites a set percentage of the State's expenses which are allowable and reimbursable under federal law.2 The funds used to provide the non-federal share of the Title IV-E expenses come from state-appropriated funds. Prior to January 1, 2009, county tax levies and funds were used for this purpose. However, effective January 1, 2009, Indiana's law changed, so that now only state money is used to match the federal IV-E funds.

Foster care maintenance payments are funds paid directly by DCS to DCS-licensed foster parents (among other persons and entities), who are caring for or supervising children who have been removed from the homes of their relatives and are wards of DCS. If a child is eligible to receive foster care maintenance payments,3 the State is required to pay an amount sufficient to "cover the cost of (and the cost of providing) food, clothing, shelter, daily supervision, school supplies, a child's personal incidentals, liability insurance with respect to a child, reasonable travel to the child's home for visitation, and reasonable travel for the child to remain in the school in which the child is enrolled at the time of placement." 42 U.S.C. § 675(4)(A). DCS agrees that foster care maintenance payments must cover all the reasonable costs of each of the items listed above. These payments are paid as a per diem each month for the prior month's services. Therefore, the monthly payment made on January 1, 2010, was for services rendered in December 2009.

Adoption assistance payments paid under Title IV-E are paid to eligible special needs children4 and include one-time, non-recurring payments for costs such as attorneys' fees for the adoption. Such assistance also includes continuing monthly payments for the children until they are at least eighteen years of age or are no longer receiving support from the adoptive parents. The statute provides that the amount of the adoption assistance payments "shall be determined through agreement between the adoptive parents and the State . . . which shall take into consideration the circumstances of the adopting parents and the needs of the child being adopted, and may be readjusted periodically, with the concurrence of the adopting parents (which may be specified in the adoption assistance agreement), depending upon changes in such circumstances." 42 U.S.C. § 673(a)(3). Under federal law, adoption assistance payments cannot exceed the foster care maintenance payment which would have been paid had the adopted child been in foster care. Id. As with foster care maintenance payments, adoption assistance payments are paid prospectively (i.e., the January 1, 2010 payment was for the month of December 2009).

The federal government does not direct the specific amounts of the payments; each state determines the amounts of its own payments. From 2006 until the payment incurred for services beginning January 1, 2010, the standard per diem for foster care maintenance payments for children not requiring special needs or therapeutic foster care was $25 per day. However, on January 1, 2009, when the State of Indiana assumed responsibility for the rates, DCS undertook to reexamine the rate structure and determined that the rates needed retooling. In an attempt to arrive at a reasonable rate for payment, DCS engaged in a benchmarking process which included a comparison of Indiana payments to other states' rates.

As part of this review, DCS also relied heavily on a 2008 report from the United States Department of Agriculture entitled "Expenditures on Children by Families" ("USDA Report"), which contains data on the actual expenditures made by all categories of parents for various categories of items for their children. In that report, the data is separated by age of child, income level of the family, size of the family, and general geographic area. The USDA report is not specifically focused on foster children, and, thus, includes certain expenses that are not part of the foster care rate, such as mortgage, rent, health care, and various education costs, but also excludes some expenses which are particular to the care of children in foster care, including traveling costs incurred for visits to the foster child's biological family.5 As part of its process of rate determination, DCS began with the amount of the total expenditures listed in the report for children aged fifteen to seventeen who were living in the lowest income group in the geographical region titled "the Urban Midwest" and deducted from that amount expenditures deemed to be non-reimbursable under Title IV-E, such as health care, education, and child care expenditures.6 Using that amount, DCS divided by a factor of 365 (days in a year) to reach a per diem of $20.68.7

DCS also examined a 2006 nationwide report concerning foster care per diem rates entitled "Hitting the M.A.R.C.—Establishing Foster Care Minimum Adequate Rates for Children" ("the M.A.R.C. Report"). This report sets M.A.R.C.'s, or "minimum adequate rates for children" for three age-groups of children for each state. Although the M.A.R.C. Report focuses on foster children, it does not include the costs of transporting such children for visits with family or the costs of childcare for working parents, some of which are reimbursable expenses under Title IV-E. The 2006 figures disclose that Indiana's foster care reimbursement rate was among the highest in the country per the M.A.R.C. Report. At that same time Indiana's rates were above the M.A.R.C. for two- and nine-year-old children, but below the M.A.R.C. for the sixteen-year-old group.

Based on its analysis of these reports, DCS concluded that Indiana's foster care maintenance payments needed to be reduced, and in late fall of 2009 DCS announced an across-the-board ten percent (10%) reduction in those payments, which reduced the per diem rate from $25 to $22.50. This is the amount scheduled to be paid beginning February 1, 2010, for foster care maintenance services rendered in January 2010.8 This figure, while above the amount reached using calculations based on the USDA Report, is below the 2006 M.A.R.C., both with regard to the nine- and sixteen-year-old age groups. However, according to Douglas Weinberg, Deputy Director and Chief Financial Officer of DCS, even after the ten percent reduction, Indiana's payments still rank as the fifth-highest of all the states in the country. Prior to reaching its decision to impose this cut, DCS made no attempt to contact foster care parents who were receiving such payments to inquire as to the impact of any reductions in the current per diem rate or to otherwise solicit public comment or input.

With regard to adoption assistance payments, as with foster care maintenance payments, the federal government does not impose any requirements on states as to the exact amount of the payments to recipients, but provides only that those payments not exceed the foster care per diem if the child were in foster care. Thus, in Indiana, the 2009 adoption assistance per diem was set at seventy-five percent (75%) of the $25 per day foster care rate, that is, $18.50. Defendants contend that duly promulgated Indiana regulations require that the adoption assistance payments not exceed seventy-five percent of the per diem rate for foster care maintenance payments.9 See 465 Ind. Admin Code 2-7-3. Thus, in reducing the amount of the adoption assistance rates to correlate with the reductions in the reduced foster care maintenance rates, DCS set the 2010...

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