The Short Answer

1. Fund flexibility is a means to the ends of better results for children, adults, families and communities. It is not an end in itself.

2. Create individual child case level flexibility through wrap around: Take all the money that is being spent on a child by the various service systems. Allow the service team to buy any plan of service for the child with the combined funding, provided that the total expenditure does not exceed some percentage of the original total.

3. Combine discretionary money into a funding pool: This is the most common kind of funding pool and the least useful.  The small advantages that can be gained are the ability to fund joint projects and align the use of money for maximum impact.

4. Negotiate a core dollar deal: A more powerful form of fund pool involves the pooling of core dollars, such as base funding for child welfare, juvenile justice, mental health or education. The principal reason to combine core dollars into a funding pool is to allow the combination of prevention and remediation funding. This brings with it a natural incentive to save on remediation so that savings can be captured and reinvested in prevention. Such deals can be structured around the answers to six questions: Who is accountable? For what results? With what money? With what standards and safeguards? With what risks, rewards, and penalties? For what period of time?

5. Consider creating a “unified budget,” as a special variation of core dollar deals.  No funds are physically combined. Each agency retains full control of the funds in question. But an oversight body of some sort creates and manages a unified budget which displays the full range of funding from prevention, early intervention to deep end expenditures.  By considering this range of expenditures AS A WHOLE, the oversight group can begin to make the connections between expenditures that allow investments in prevention to be tracked, and savings in remediation to be captured, retained and reinvested.

Full Answer

(1) “If only we had a funding pool, all would be right with the world.” There is widespread lack of understanding of how fund flexibility can and does work. The value of fund flexibility structures, including fund pools, are all dependent on the details of construction. There are a few simple things to keep in mind:

  • Fund flexibility is a means not an end. The purpose of fund flexibility is to improve results for children and families. When fund flexibility becomes an end in itself, the work can actually be counterproductive, leading to turf battles and unnecessary conflict among partners who need to work together.
  • Program must drive financing, not the other way around. The design of fund flexibility structures must be supportive of good program practice. If it’s not, don’t do it.
  • Fund flexibility does not mean a lessening of accountability. It means substituting one form of accountability for another. The new form of accountability is based on results, not procedural compliance. But in no case should traditional accounting controls on misuse of funds be lost.

(2) Here are four things you can do or rather four things that can be done. The actual doing of any of these depends on the cooperation of many players, any one of which can block the work.

  • Individual child case level flexibility through wrap around: This is a well established technique pioneered in Alaska in the early 1980’s, and now widely practiced. The concept is simple. Create a service team for a child. Take all the money that is being spent on a child by the various service systems. Allow the service team to buy any plan of service for the child with the combined funding, provided that the total expenditure does not exceed some percentage of the original total. It is often possible for case teams to buy much better plans of care and support in the child’s home and/or community for less total cost, sometimes as low as 60%. This is possible for two reasons. First, the case team is permitted to buy services which the individual service systems can not buy. The team can actually create individualized service that the child or family need to keep the child in home and/or community. Second, the combined purchasing power of the team and the elimination of duplicative case management allows less money to buy more effective service. This practice is particularly effective in returning children from expensive out of state care.
  • Combine discretionary money into a funding pool: This is the most common kind of funding pool and the least useful. If the money was discretionary before it entered the pool, there is no real gain in flexibility. Fights about allocation of discretionary money just changes venue. The small advantages that can be gained are the ability to fund joint projects and align the use of money for maximum impact.
  • Negotiate a core dollar deal: A more powerful form of fund pool involves the pooling of core dollars, such as base funding for child welfare, juvenile justice, mental health or education. Pooling core funding in any form is a much more complex task, since core dollars support mandated services and there are many strings attached to, not just the use, but the administration of such funds. The principal reason to combine core dollars into a funding pool is to allow the combination of prevention and remediation funding. This brings with it a natural incentive to save on remediation so that savings can be captured and reinvested in prevention. This is the concept behind managed care, although the introduction of the profit motive shifts the logic to: save on remediation to increase profit, not prevention. Core dollar deals must be negotiated to balance the many interests and restrictions on fund use. Such negotiated deals can be structured around the answers to six questions:

1. Who’s accountable?

2. For what results?

3. With what money?

4. With what standards and safeguards?

5. With what risks rewards and penalties?

6. For what period of time?

 

Such deals have been successfully created in Iowa, Vermont and Maryland. The creation of fund flexibility deals is discussed in more detail in “Trading Outcome Accountability for Fund Flexibility,” which can be read on the FPSI website.

Consider creating a “unified budget,” as a special variation of core dollar deals. This is an important alternative to the concept of a fund pool. No funds are physically combined. Each agency retains full control of the funds in question. But an oversight body of some sort creates and MANAGES a unified budget which displays the full range of funding from prevention, early intervention to deep end expenditures. For example, in juvenile justice, the range might go from neighborhood recreation services to mentoring  programs to diversion programs to non-secure detention to secure detention to adult detention.  In the combined out of home care system (child welfare, juvenile justice, mental health and education) the range of funding might go from respite care and family support services to family preservation to family foster care to group and institutional care. By considering this range of expenditures AS A WHOLE, the oversight group can begin to make the connections between expenditures that allow investments in prevention to be tracked, and savings in remediation to be captured, retained and reinvested. This is the concept behind the Iowa Decategorization program, one of the country’s oldest successful fund flexibility programs.

(3) One powerful way of thinking about the notion of fund flexibility is the “Front Room Back Room” view of the service system. In the front room, people get what they need, based on what they need, not all the crazy categories we have created over the last 50 years. In the back room we categorize the hell out of them so we can claim every conceivable dollar to pay for what’s in the front room. The challenge for fiscal folks is to rearrange the back room so that the front room is possible.