A Colorado fund used for nearly 25 years to loan money to families taking care of relatives with developmental disabilities – but languished with high default rates – would be gutted under a bill due for hearing next week.
The bill, HB 17-1078, would liquidate any money left in the Family Services Support Loan Fund and reallocate it to community boards that give grants to families with expenses that accommodate special-needs children and relatives.
About $124,500 remains unallocated, although new loans are due to be made in the next several months because the laws governing the program don’t allow for the state to refuse making them if a person otherwise qualifies.
that the fund received little oversight and was burdened with default rates 10 times the national average for consumer loans. have little idea about how the money is actually spent.
“It became quite obvious from those stories and looking into the program that it had quite a few problems,” said bill sponsor Rep. Lois Landgraf, R-Fountain. “The department itself isn’t a bank and they’re not at all experienced with managing loans.”
The fund was established in 1992 and administered by the Department of Health and Human Services until that role was transferred to the Department of Health Care Policy and Financing in 2014.
The House Committee on Health, Insurance and Environment is scheduled to take up the bill on Jan 31.
About $100,000 in new loans are made from the fund each year, HCPF told Landgraf in a memo shared with The Post. The maximum amount is $8,000 and repayment terms are generous, with interest rates as low as 1 percent and five years to pay.
HCPF offered Landgraf two options: move the fund to a different agency and tighten its criteria, or simply kill it.
“The department does not currently have the expertise to run a loan program and would recommend transferring this program to another agency with this type of expertise,” the memo noted.
The Post found that nearly half the loans currently outstanding from the fund are in default, with several more close to failure. It also found receipts for active loans totaling more than $660,000 — half of them in default — were virtually nonexistent.
The Post was unable to identify any family that received a loan – or the impact of losing the program — because that information is protected from disclosure by state medical-privacy laws.
“The default rate … is higher than commercial loans in part because the target population is different,” the agency said in the Dec. 23 memo to Landgraf. “The department is not able to predict the future financial status for these families when determining the family’s capacity to repay their loan.”
The memo said 41 loans totaling $178,108 are in collections and 66 others totaling $426,022 are active, though some are in arrears.
Though the state boasts in the memo that more than $845,000 in loans have been repaid over the fund’s 25-year history, an internal accounting obtained by The Post showed another $531,000 in loans have been forgiven, set aside because of bankruptcies or were simply written off as uncollectible in that time frame.
“If Landgraf’s bill passes, the remaining (fund) balance and all future payments would be transferred and the loan program would be history,” HCPF spokesman Marc Williams told The Post.
The fund is currently accepting applications for new loans, regardless of Landgraf’s bill.
“The current statute is still in effect,” Williams said. “We can’t not implement it simply because there’s a bill pending. If we waited until Landgraf’s bill is finalized — and it fails — we could be at risk of a statutory violation if we couldn’t complete our work before the (fiscal year) ends.”
Community centered boards manage millions of dollars in public money for people with disabilities, including the Family Support Services Program, which are funds used to cover costs that are beyond those normally experienced by other families.