SDC Asks Federal Government to Reverse State’s Funding Cutoff

SDC attorney William Sulton gives an opening statement at a public hearing on the Social Development Commission on April 4 at the Milwaukee State Office Building, 819 N. 6th St. (Photo by PrincessSafiya Byers/NNS)

The Social Development Commission, or SDC, is asking the federal government to reverse a decision made by the state that could alter the anti-poverty agency’s funding options. 

Here’s what we know.

The community action decision

The Wisconsin Department of Children and Families decided in May to remove the SDC’s community action agency status, effective July 3.

Although the department believes SDC has not been operating anti-poverty services since it shut down in April 2024, despite reopening in December, SDC’s leaders have said the state did not follow the proper process to make this decision.

Without this designation, SDC will not be eligible for the Community Services Block Grant, which is a small portion of its budget but significant to its efforts to pay back employees and rebuild its service programs.

How does a federal review work?

When a state decides to rescind community action status or the related block grant funding from a local agency, the agency can request a review from the U.S. Department of Health and Human Services within 30 days.

SDC submitted a request for a review of the state’s community action decision to the department on June 9, citing concerns about due process.

The Department of Health and Human Services, or HHS, will evaluate if the state’s determination process followed the guidance on the termination or reduction of funding for entities eligible for the Community Services Block Grant, according to a spokesperson from the department.

The Division of Community Assistance, which is part of the Office of Community Services within the federal department, oversees block grant funding for community action agencies.

“I think that HHS is concerned about the process that was used to de-designate SDC, and so my expectation is that they will be talking to the state about the process,” said William Sulton, SDC’s attorney.

The Department of Children and Families received notification on June 11 from the Office of Community Services that SDC requested a review, but did not receive the request itself, according to Gina Paige, communications director for the department.

The review will be completed within 90 days of receiving all required documentation from the state, according to federal law. If not completed in the 90-day timeframe, the state’s decision will be upheld.

As part of the request, SDC is asking the Department of Health and Human Services for direct financial assistance.

According to the CSBG Act, if a state violates the de-designation process –  by terminating or reducing funding of an eligible entity before the state hearing and the secretary’s review – the Health and Human Services secretary is authorized to provide financial assistance to the entity affected until the violation is corrected.

SDC’s concerns

SDC raised two main concerns with the state’s determination process in the request, based on state and federal laws.

The first concern is that the public hearing on SDC’s community action status, held by the Department of Children and Families on April 4, did not meet the legal requirements of a “hearing on the record.”

“You’re supposed to be permitted to call witnesses and present evidence..,” Sulton said. “We were given seven minutes to make a speech and that was it.”

SDC also says that both the Department of Children and Families’ secretary and the legislative bodies of the City of Milwaukee and Milwaukee County would have to sign off on the decision, based on a state statute that requires the legislative body that initially granted the agency community action status to approve rescinding it.

“They didn’t go out and get position statements from the city and the county’s legislative bodies,” Sulton said.

The department did not comment on these claims. (Paige previously said it has worked closely with the Office of Community Services and Milwaukee County to determine the process needed to move forward with de-designating SDC.)

Although Milwaukee County’s Office of Corporation Counsel submitted a letter to say it found no records of the Board of Supervisors taking action on SDC’s status as a community action agency, Sulton said that doesn’t mean there are no records.

He argues that this provision of the law, added in 1983, was put in place to protect SDC from arbitrary state action.

Funding deadline

In May, three state lawmakers asked SDC to consider voluntarily de-designating, which would allow the state and Milwaukee County to more quickly find an interim service provider to use SDC’s allocated funds in Milwaukee County.

The $1.18 million in 2024 block grant funding could be recouped by the federal government if not spent by Sept. 30, 2025, according to the Department of Children and Families.

However, Sulton said when he reached out to the Department of Health and Human Services before filing the review, an employee told him the 2024 funds had to be obligated by 2026.

“To the extent that anybody has the impression that this money has to be obligated by September or it’ll be lost, HHS says it’s not the case,” he said.

States and subrecipients usually have two years to distribute funds, but it depends on state specific policies, according to HHS.

The state’s Sept. 30 deadline marks two years after the beginning of the 2024 fiscal year in October 2023, according to Paige.

Though Paige said that SDC’s request for review is perpetuating the lack of services in Milwaukee County, she added that the department plans to seek a six-month liquidation extension from the federal government.

“It’s quite possible that we’re gonna be on a really tight timeline to get that money out the door, so that’s why we’re hoping that we can work with the federal government and see if they can allow us an extension to expend it a little bit longer,” Paige said.

Board member changes

The SDC board added two commissioners in May – Milwaukee Public Schools appointed Michael Harris and the Interfaith Conference of Greater Milwaukee appointed Peter Fetzer, an attorney at Foley & Lardner LLP.

In the last seven months, the SDC board has expanded from three to 10 commissioners, thanks to several appointments to vacant seats. The board is designed to have 18 members at full capacity.

Commissioner Lucero Ayala‘s term has ended, according to Sulton. Ayala was nominated and selected last year to fill the remainder of Serina Chavez’s term as an elected commissioner.

Meredith Melland is the neighborhoods reporter for the Milwaukee Neighborhood News Service and a corps member of Report for America, a national service program that places journalists in local newsrooms to report on under-covered issues and communities. Report for America plays no role in editorial decisions in the NNS newsroom.

This article first appeared on Milwaukee Neighborhood News Service and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.