LINCOLN — Nebraska lawmakers launched an investigation Monday into the state's problematic contract with a Kansas-based nonprofit managing Omaha-area child welfare cases.
Legislative Resolution 29, passed 40-6, calls for the creation of a special legislative committee to look into how Nebraska ended up signing a $197 million, five-year contract with St. Francis Ministries of Salina, Kansas, in July 2019 and the events that followed.
Those events include revelations of financial mismanagement by St. Francis officials, an admission that the contract had been underbid and the signing of a second, emergency contract this year that boosted payments to the private agency by 55% monthly.
State Sen. Machaela Cavanaugh of Omaha, who introduced LR 29, said the investigation is "what we can do to protect children in the state."
"This isn't a fishing expedition, this isn't a witch hunt," she said, while acknowledging that the process could be uncomfortable for Gov. Pete Ricketts' administration and for members of the investigative committee.
Other senators said the investigation needs to pursue multiple avenues of inquiry and look at the roles played by the Department of Health and Human Services, which signed the contract and is responsible for child welfare services; the Department of Administrative Services, which handled the procurement process; and St. Francis itself.
Sen. Mark Kolterman of Seward pointed out that Nebraska will have to seek bids in the near future on millions of dollars worth of Medicaid managed care contracts. He said he wants to avoid a repeat of the problems that occurred with the St. Francis contract.
"Let's find out where we went wrong, correct the problem and then move forward," he said.
While few senators spoke against LR 29, there was a lengthy debate about the investigative committee's power to subpoena witnesses and documents. An amendment to the resolution spells out that any subpoenas must be approved by the Legislature's Executive Board.
Speaker of the Legislature Mike Hilgers of Lincoln argued for that change, saying it would make the subpoenas less vulnerable to a potential court challenge.
He pointed to a constitutional showdown between the administration and the Legislature over a subpoena issued to Scott Frakes, the state corrections director, in 2018. The battle went all the way to the Nebraska Supreme Court, which ended up dismissing the case without deciding on the issues.
On the other side, Sen. Steve Lathrop of Omaha, who led two investigative committees during his previous time in the Legislature, said the committee should have the authority to issue subpoenas on its own. He and other senators raised concerns that the Executive Board might "slow walk" subpoenas or deny them to protect the administration.
Hilgers, who sits on the Executive Board, said it would be "inappropriate" for the board to succumb to political pressure from the executive branch.
St. Francis won the initial contract by offering to oversee the care of abused and neglected children in Douglas and Sarpy Counties for about 40% less than the bid from PromiseShip, the Omaha-based agency that had been managing cases for most of a decade. The contract was signed in July 2019 and the transition of cases was completed by January 2020.
But by the end of October, the St. Francis board had suspended the agency's two top executives after a whistleblower report of serious financial mismanagement. The allegations included failing to properly bid on the Nebraska contract.
Interim St. Francis CEO William Clark told lawmakers in late January that the agency was facing a shortfall and would be out of money to operate by Feb. 12, unless Nebraska agreed to pay it more. He said the shortfall was one of the top financial problems facing the nonprofit.
HHS ended up signing a 25-month emergency contract with St. Francis at the end of January. The new $147.3 million contract, which ends Feb. 28, 2023, the month after the end of Ricketts' term, boosted payments above the level bid by PromiseShip. It also covered St. Francis’ $10.5 million shortfall from the first half of 2020.
Meanwhile, three key child welfare measures have worsened under St. Francis’ management, and the agency has yet to bring caseloads down enough to comply with state law. St. Francis has also repeatedly failed to meet the state's performance standards, including conducting background checks on all new employees and documenting where children have been placed within 72 hours.