The Minnesota Department of Human Services (DHS) is laying off staff and slashing millions of dollars in spending for care of vulnerable populations as the state’s largest agency restructures services to eliminate a looming deficit.

The cuts, disclosed in a memo to state employees Tuesday, include the closing of a state psychiatric hospital for children in Willmar by year’s end and the downsizing of a program that serves people with chemical addictions. The agency also plans to eliminate 43 managerial positions by mid-February.

The steps are part of a broader reorganization at the sprawling agency, which has moved to rein in spending after racking up millions in unexpected expenses from litigation and improvements at the state mental hospital in St. Peter. The agency, which employs about 4,700 direct care and treatment workers and has a biennial budget of $28 billion, is running a deficit of $19.3 million.

At the same time, Gov. Mark Dayton’s new budget calls for a substantial increase in funding for community mental health services, which advocates say will help ease the pressure on hospitals and jails struggling to treat people suffering from mental health emergencies.

“We need to live within our means,” Human Services Commissioner Lucinda Jesson said in an interview. “We’re trying to make appropriate cuts wherever we can without cutting direct care staff.”

But the cuts have aroused opposition from some care providers and the state’s second-largest public sector union, which questioned why DHS would reduce social services at a time when the state is forecasting a $1 billion budget surplus.

The state program most deeply affected is Community Addiction Recovery Enterprise, or CARE, which helps people suffering from both chemical addictions and mental illness. Overall, the CARE program will downsize from 174 to 70 beds by June 2016, with substantial reductions at treatment centers in Brainerd, St. Peter and Willmar. A CARE center in Carlton, Minn., near Duluth, will close by April.

Jesson said the program had become “unsustainable” because of inadequate reimbursement rates. DHS required additional money the last two years from the state’s general fund to fill budget shortfalls. Dayton’s budget would increase reimbursement rates.

The CARE centers were known for treating people with few options — too unstable for community-based treatment, but not in such urgent need of care that they could be admitted to an acute care hospital, say state employees.

“If they close any of these facilities, where are those people going to go?” asked Richard Kolodziejski, a spokesman for the Minnesota Association of Professional Employees, a union that represents about 1,800 DHS employees. “Will this result in more emergency room visits and hospital stays? Eventually this will cost the taxpayer more.”

Dayton’s budget also includes changes in the way the state serves children with mental illnesses. These include closing a 16-bed psychiatric hospital for children and adolescents in Willmar, which served children who suffer both mental illnesses and developmental disabilities, such as autism and attention deficit hyperactivity disorder (ADHD). The hospital also treated children who experienced traumatic experiences early in life, including sexual abuse, malnutrition and neglect.

To offset the closing, DHS will contract with hospitals to provide extended-stay psychiatric beds for children. Closing the Willmar facility will save the state about $1.1 million a year.

Improvements at St. Peter

The cuts are designed to bring DHS’ budget back on track after the agency incurred millions of dollars in unexpected expenses last year.

For instance, the Minnesota Security Hospital, the state mental hospital in St. Peter, had to hire nearly 60 more staff to improve security and treatment following repeated incidents of patient maltreatment and abuse, as well as the slaying of a patient a year ago.

DHS, which operates the mental hospital, also had to retrain much of the staff to engage with patients more directly and rely less on restraints and seclusion.

The agency also incurred millions of dollars in unexpected legal costs from two high-profile lawsuits — one involving the treatment of sex offenders and another involving the alleged abuse of people with disabilities.

Until now, the agency has managed to avoid layoffs and program cuts by reducing travel expenses and other discretionary items. That changed last week when 35 DHS employees received pink slips; another eight vacant positions will be eliminated this month. The agency said the layoffs affect only managerial and administrative staff, and not workers who provide direct care. Even so, agency officials acknowledged they will not be painless.

“The impact of these layoffs is not just in dollars and cents,” Deputy Commissioner Anne Barry said in an e-mail to employees. “They will have a very real effect on staff, families, workloads and morale. And the ripple effects will be felt across [direct care and treatment] for many weeks to come.”


Twitter: @chrisserres