Initially contracted by former Mayor Lori Lightfoot in fall 2022, Favorite Healthcare Staffing was brought in to manage the burgeoning migrant shelter system as busloads of Venezuelan asylum-seekers arrived from Texas. This contract has since become the city's most significant expense related to the migrant crisis, with over $276.6 million of the $433.7 million spent on asylum-seekers going to Favorite Staffing, according to city records from July.
Despite earlier attempts by the Johnson administration to seek alternative solutions and reduce costs, city officials now acknowledge the ongoing necessity of Favorite Staffing in maintaining shelter operations. Jonathan Ernst, First Deputy Commissioner of the Department of Family and Support Services, emphasized that the firm’s capability to swiftly establish and manage facilities remains unmatched by local options, given the unpredictable nature of the asylum-seeker situation.
Chicago has seen over 45,600 migrants since 2022, with the shelter population experiencing fluctuations. The administration anticipates a potential influx of thousands more migrants ahead of the Democratic National Convention this month.
Financial Scrutiny and Procurement Challenges
An investigation last October highlighted the significant costs associated with Favorite Staffing, including premium rates and substantial overtime expenses. Invoices revealed that some employees logged work weeks exceeding 84 hours, with the city occasionally paying up to $18,000 per day for security at a single shelter.
Despite assurances from the Johnson administration of efforts to mitigate these financial burdens, Favorite Staffing’s share of migrant-related expenses rose to 71% in the fall. As Johnson faced the challenge of passing his first budget with a $150 million allocation for 2024 asylum-seeker costs, his administration extended Favorite Staffing's contract while simultaneously pursuing rate negotiations to lower expenses.
Cristina Pacione-Zayas, Johnson’s chief of staff, had previously described the Kansas-based vendor as a temporary measure, expressing hopes to replace it with more sustainable local options through a city-issued request for proposal (RFP). However, only two community organizations were ultimately selected to replace Favorite Staffing at two shelters, a result influenced by the evolving crisis and procurement regulations.
City procurement rules mandated that vendors could only be sought for shelters existing at the time of the bid issuance. Consequently, newly established shelters had to continue being operated by Favorite Staffing, while community-based organizations were not viable for shelters slated for closure within six months.
Community Organization Contracts
In April, two community organizations were awarded contracts to manage shelters. The Bright Star Community Development Corp. took over the Young Women’s Leadership Academy shelter in Douglas, with a contract estimated at $2.5 million, potentially rising to $12.5 million. Personnel costs for this nonprofit are significantly lower than those of Favorite Staffing. Additionally, K.L.E.O. Community Family Life Center began managing the American Islamic College shelter in Uptown, with a budget estimate of $12.5 million, potentially increasing to $62.3 million.
Despite these changes, Favorite Staffing continues to oversee most of the city's migrant shelters. As of December, Favorite Staffing managed shelters housing 15,700 residents across 28 sites. A new RFP may transition six of the 13 city-managed shelters to community-based organizations, according to a DFSS statement. Currently, 17 migrant shelters are operational in Chicago, accommodating 5,600 residents.
Rate Negotiations and Cost Reductions
During a June 2023 news conference, Mayor Johnson acknowledged the rising costs associated with Favorite Staffing. The Johnson administration has negotiated several contract adjustments, building on an agreement initially established under Lightfoot. These negotiations have successfully reduced per-resident costs, although expenses peaked at $6.5 million per week in February.
The city achieved significant savings by reducing hourly wages for various roles. For example, the highest wage for shelter managers dropped from $150 to $120 per hour, and the rate for resident aides decreased from $75 to $50 per hour. Subsequent renegotiations under Johnson established different rates for local and non-local hires, further reducing expenses.
By the end of July, 95% of Favorite Staffing’s workforce was classified as local, meaning they were responsible for their own living arrangements and transportation. Approximately 45% of these employees were Chicago residents, with an additional 8% from the surrounding area. Despite these measures, overtime costs remain a significant concern.
Future Implications and Uncertainty
Overtime expenses, a major driver of costs, persist despite efforts to mitigate them. The city implemented a six-day workweek starting in January to reduce overtime, but challenges remain due to the prolonged nature of the crisis.
The upcoming Democratic National Convention presents another potential surge in migrant arrivals, with city leaders estimating an influx of 15,000 to 25,000 migrants. The city currently has capacity for 11,000 migrant shelter beds, highlighting the ongoing need for effective management.
While there is no immediate evidence of an increase in migrant numbers from Texas, the evolving crisis and recent events in Venezuela contribute to the uncertainty. Local officials are not yet ready to declare an end to the current phase of Chicago’s migrant mission.
The administration has not disclosed plans for further contract extensions or renegotiations with Favorite Staffing. The most recent $85 million extension, signed in March, expires on October 23, marking the contract’s seventh increase since Johnson took office.
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