Sarlo: State might need to boost DHS funding to
support higher minimum wage
By Sam Sutton
05/02/2019
TRENTON - Lawmakers from both sides of the aisle are starting to raise concerns about how New Jersey's rising minimum wage might wipe out health care providers who rely on low-wage support staff.
On Thursday, members of the Senate Budget and Appropriations Committee directed multiple questions to Department of Human Services Commissioner Carole Johnson about how the state's new minimum wage law might affect providers offering mental health, disability support services, long-term nursing home and home health care for low-income residents.
Many of those groups are compensated through the state's Medicaid program. If reimbursement rates for those services don't increase, the margins of many of those businesses will tighten - possibly harming their ability to hire more workers or retain existing staff.
Several committee members, led by Chairman Paul Sarlo (D-Bergen) and Sen. Steve Oroho (R-Sussex), the Republican budget officer, said they were worried higher wages in other fields might drain the labor pool of qualified direct support professionals who help those living with disabilities.
Sarlo said he planned to be "vocal as we balance the budget, about trying to find some additional monies - even if it has to come from another program - to provide to these folks. I just believe it's very, very critical that we ensure that these ... providers are protected."
Gov. Phil Murphy signed the state's new minimum wage law earlier this year with the backing of Senate President Steve Sweeney (D-Gloucester) and Assembly Speaker Craig Coughlin (D-Middlesex). By design, the law contains a long on-ramp to help employers operating on tighter margins, including certain health care businesses.
New Jersey's minimum wage is scheduled to increase to $11 an hour in January and eventually hit $15 an hour for most workers by 2024.
Last year's budget, along with the coming year's spending plan, set aside $18 million to fund higher wages for direct support professionals working in the health care field. The federal government provided another $14 million in matching funds.
Johnson said the Fiscal Year 2020 budget likely contains enough to back the scheduled minimum wage hike. State and federal funds allocated through last year's budget for direct support professionals likely brought their average salary to around $11, though it might be higher, she said.
However, that doesn't necessarily take into account wage compression, which refers to the need to raise wages for those making more than minimum wage now that the floor is higher. In March, representatives from the New Jersey Association of Community Providers told the Assembly budget committee the state would need to provide $54 million in new funding, with matching federal dollars, to ensure wages are 25 percent above the new minimum wage.
"These are issues that we're going to need to work on this year so we can come back to you on what we need going forward," Johnson told the committee Thursday, later adding. "[Providers] like to stay above the minimum wage so they can recruit."
One of the conditions of the department's funding for higher wages was for providers to submit data on what they pay their employees. The state's Medicaid reimbursement rates for those services are based on utilization and other assumptions - employee wages haven't necessarily played a factor, Johnson said. The department's ability to collect wage data will "significantly help inform us how we're doing going forward."
That doesn't necessarily benefit providers who are paid through the state's Medicaid managed care organizations, said Sen. Troy Singleton (D-Burlington). Singleton floated the prospect of setting aside "seed money" to help the department reimburse providers as the minimum wage gets closer to the $15 an hour.
"If you hear from the provider community, they're not going to be able to attract a good workforce moving forward," Sarlo said at the conclusion of the hearing, echoing comments made by Oroho.
"Our ability to continue to help people succeed in the community is dependent on a strong workforce committed to this work," Johnson told the committee. "We share your concern."
