Facing a growing budget shortfall, the Idaho Division of Vocational Rehabilitation will institute wait list for employment services for people with disabilities. (Luis Alvarez/Getty Images)
Editor’s note: This story was updated 10:08 a.m. Tuesday to include a statement from the U.S. Department of Education.
Facing a worsening budget shortfall, an Idaho state government agency that helps people with disabilities gain and retain employment has been offered another $10 million in federal emergency funds that will help the agency continue to pay for people it already committed to support.
But for the foreseeable future, the Idaho Division of Vocational Rehabilitation will process new applications through an order of selection, which lets the state implement a waitlist.
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In May, the federal Rehabilitation Services Administration — part of the U.S. Department of Education — notified Idaho that it placed the state’s vocational rehabilitation grant on “high risk” status due “significant concerns” about the Idaho Division of Vocational Rehabilitation’s ability “to ensure appropriate financial accountability,” according to a letter the Sun obtained in a public records request.
Since then, the Idaho Division of Vocational Rehabilitation — part of the State Board of Education — has been working to address the federal agency’s concerns, the Idaho State Board of Education’s new executive director, Joshua Whitworth, told the Sun in an interview Monday.
Idaho submitted a corrective action plan to the federal government that hasn’t been approved yet.
To fully access the federal emergency funds, Idaho would need to use $2.7 million in state funds, which the Idaho Division of Vocational Rehabilitation expects to ask for in a supplemental budget request, interim agency administrator Judy Taylor wrote in a letter on Thursday to the co-chairs of the Idaho Legislature’s powerful budget setting committee, which the state board provided to the Sun.
Taylor told lawmakers the agency’s deficit, “created by mismanagement” of services, would grow to around $15.6 million by next summer. She committed to work toward cutting costs in the meantime.
“We take our obligation to be financially solvent seriously and are currently in the process of implementing both policy and operational changes to correct this situation,” Taylor wrote to the co-chairs of the Idaho Joint Finance-Appropriations Committee. “(The Division of Vocational Rehabilitation) is committed to serving our clients with the work and training assistance they need, in an efficient manner and within our financial means.”
How does the order of selection work?
An order of selection involves prioritizing services for people with most significant disabilities, and people on waitlists would receive referrals and wait time estimates, according to Idaho Reports .
The order of selection won’t affect applications already processed, so people already receiving benefits will still see their benefits, Whitworth said.
The U.S. Department of Education on Sept. 6 approved Idaho’s order of selection, Taylor wrote.
The Idaho Division of Vocational Rehabilitation has started to notify clients applying to services that they may be placed on a waitlist “until funding is available for more service plans,” she wrote.
“These measures are necessary to align (the Division of Vocational Rehabilitation) spending with our current appropriation,” Taylor wrote. “… We believe this will reduce the rate of expenditures and reduce the overall shortfall for (fiscal year 2025). Based on this new waitlist, we expect the supplemental amount to be reduced once we have better projections from this new implementation.”
In April, when the budget issues became public , the Idaho Division of Vocational Rehabilitation was serving over 8,000 Idahoans with disabilities.
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Idaho agency’s budget shortfall on track to keep growing. An extra budget request is expected.
In the letter, Taylor told legislative budget writers that the Idaho Division of Vocational Rehabilitation “is facing an immediate budget and spending authority shortfall that without immediate attention to increase federal funding and federal spending authority will result in a shutdown of services to over 4,000 (agency) clients.”
That could risk up to $2 million monthly in financial losses to the agency’s service providers, she wrote, and could threaten Idaho’s future Workforce and Innovative Opportunity Act funds that support agencies beyond the Idaho Division of Vocational Rehabilitation, such as the Idaho Commission for the Blind and Visually Impaired, the Idaho Department of Labor, the Idaho Division of Career Technical Education and the Idaho Workforce Development Council.
Based on the cost of previous obligations and projections for future new obligations, Taylor estimated by the end of September, Idaho would “exhaust federal spending authority” and “will no longer be able to serve clients without additional funds.”
She projected the agency’s deficit, “created by mismanagement” of services, would grow to around $15.6 million by the end of Idaho’s fiscal year 2025, which Idaho is currently in and ends June 2026.
Those projections include $7.6 million in obligations from fiscal year 2024, which ended in June, along with other agency obligations through Sept. 6, she wrote. The agency’s total trustee and benefit budget is $10.9 million for Idaho’s fiscal year 2025, which began in July.
How Idaho would use the federal emergency funds
The federal government’s Rehabilitation Services Administration offered the Idaho Division of Vocational Rehabilitation $10 million in emergency funding by Oct. 1 “to ensure services continue for Idahoans until we are able to address this during the legislative session beginning in January 2025,” Taylor wrote.
“This emergency funding will ensure (the division) can pay the current obligations to local community providers and continue to support service plans for existing clients. Without this funding, local service would stop by the end of the month,” Taylor wrote in the Sept. 12 letter.
The Idaho Division of Vocational Rehabilitation would request a $2.7 million supplemental appropriation from state funds, Taylor wrote, “to draw down the second half of regular federal funding in March 2025 to ensure we can cover the full costs and deficit for this fiscal year.”
In a written statement Tuesday morning, a U.S. Department of Education spokesperson said the additional $10 million in federal funds weren’t emergency funds. The federal agency awarded Idaho the additional funds by prioritizing Idaho in a “reallotment” process in which state agencies relinquish unused federal funds that the federal government can then reallocate to states, said the spokesperson, who requested to not be named.
The Idaho Division of Vocational Rehabilitation “and State leadership informed (the federal Rehabilitation Services Administration) that it would not appropriate additional State funds to the (vocational rehabilitation) program nor request an increase in State spending authority, which could have led to shut down on September 3,” the spokesperson said.
While Taylor wrote that the agency was looking at “all options” to slow spending, cut costs and cover the shortfall, she wrote that the agency currently has “very limited options to address this immediate problem.”
The goal, Taylor said, is to get the agency on “a corrective course that will ensure service expenditures stay within the appropriation” for next fiscal year.
How did we get here?
In the May letter, the Rehabilitation Services Administration said the Idaho Division of Vocational Rehabilitation “failed to implement a financial and data management system that meets Federal requirements.” The agency’s case management system — to manage finance and data about program recipients — “is not aligned with the State’s accounting system, as it should be,” the federal letter said.
The agency had overcommitted resources for three years, Whitworth said. And Whitworth, who has a background in finance and formerly served in the Idaho State Controller’s Office, welcomed the additional scrutiny.
“This high risk (designation), although, if not addressed, could create an area where those federal funds wouldn’t be available to Idaho to utilize for that population,” Whitworth said. But, “the change of leadership and the focus on correcting those, I think, has opened up and provided confidence, in my opinion. That the feds see that even though we’ve been designated high risk, the actions that Idaho is taking to deliver services appropriately with what the regulations are for the feds, (has) been met with a positive reaction.”
The federal Rehabilitation Services Administration placed conditions on Idaho’s current grant award and the additional, allocated federal funds, the U.S. Department of Education spokesperson said.
The Rehabilitation Services Administration said it remains in frequent communication with the Idaho Division of Vocational Rehabilitation to resolve underlying accounting issues and ensure that the state agency continues to serve its vocational rehabilitation program participants with approved plans, the spokesperson said.
In April, as the Idaho Legislature was preparing to adjourn for the year, lawmakers drafted and then shelved a supplemental budget request for the Idaho Division of Vocational Rehabilitation, the Sun reported .
The Idaho Division of Vocational Rehabilitation has had three fiscal officers since 2022, former agency administrator Jane Donnellan told JFAC co-chairs in an April letter. Donnellan resigned in June, Idaho Reports reported .
Taylor, the director of the Idaho Commission on Aging, in June began heading the Idaho Division of Vocational Rehabilitation.
The agency has frozen new hires and canceled all non-essential travel, State Board of Education spokesperson Mike Keckler told the Sun. Whitworth said Taylor’s mentality is to “look at all the non-essential costs, operating costs and all things, and make sure that every one of those state dollars is going towards delivering those services,” saying the agency has “the right type of leadership that’s needed.”
In mid-June, the agency had new leadership in place “to determine the full impact and make recommendations for immediate corrective action,” Taylor wrote to legislative budget writers. “In reviewing past financials and preparing for (the Idaho Division of Vocational Rehabilitation) budget submission, it became clear that the problem was immediate.”
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