Portland may halt its longtime practice of using state funding to provide emergency shelter to all of the city’s homeless, according to a memo by city staff proposing several changes in response to criticism from the LePage administration about the city’s management of state General Assistance funds.

In addition to making sure that each individual shelter resident qualifies for General Assistance before billing the state, Portland officials also are proposing that the city stop using the state funds to pay the operating costs of its two shelters.

The changes would effectively increase city expenses by more than $820,000 a year, according to a memo to be discussed by city councilors Tuesday. Those costs could be significantly higher depending on how many shelter residents are found to have assets or incomes that disqualify them for state funding.

The memo notes that the loss of some state funding for the homeless shelters is one of several changes demanded by the LePage administration that could cause significant budget shortfalls and jeopardize the city’s credit rating, which “would have a snowball effect on city finances” by increasing the cost of borrowing, among other things.

“While the city’s administration of General Assistance has been found to be in compliance by the state for more than 20 years, the change in statute interpretation by the current administration puts the city in a financially untenable situation which we need to stabilize,” the staff memo says.

City officials will formally recommend the homeless shelter changes Tuesday at a meeting of the City Council’s Public Safety, Health and Human Services Committee, according to a staff memo posted on the city’s website. The meeting will begin at 5:30 p.m. in City Hall. Unless the city reverses course after hearing from councilors and the public Tuesday, the policy changes would be presented to the LePage administration in the city’s answer to a Feb. 20 audit report.

The city has until March 16 to respond to the audit report. If the city is found to be out of compliance by the state, it will have 30 days to submit a plan to correct problems.

Portland Mayor Michael Brennan said the main purpose of Tuesday’s meeting is to develop a response to the state audit based on recommendations from acting City Manager Sheila Hill-Christian, Portland’s corporation counsel and the city’s health and human services departments.

Brennan, reached Monday night at home, said he was in the process of reviewing the staff’s recommendations.

“I don’t know yet what the full impact of these recommendations will be,” he said. “But my hope is our recommendations will satisfy the (state Department of Health and Human Services) and will allow us to continue to serve the needs of the city’s homeless population.”

SHELTER USERS, CRITICISM IN AUDIT

The committee, which is chaired by City Councilor Edward Suslovic, will take public comment at Tuesday’s meeting.

Suslovic said Monday that he continues to hope that city and state officials can negotiate a compromise that does not deprive the city of state funds it needs to help run the shelters.

“Hopefully, the state will respond (to the city’s proposal) and we can actually sit down and try to work out policies and procedures that work for the state, but also are implementable,” Suslovic said. “The city of Portland simply does not have the resources to run the GA program without any assistance from the state. … It’s pretty clear Portland serves the entire state if you look at who is coming to our shelters.”

Historically, about one-third of the residents of Portland’s homeless shelters have come from other Maine communities that do not have emergency shelters or soup kitchens, according to city surveys of shelter occupants.

The state audit report, among other things, criticized the city for using state funds to cover the costs of providing shelter to homeless people who had significant assets, in some cases involving bank accounts with $20,000 or more. Many long-term residents of the shelter are mentally ill. While they may receive disability benefits and have significant assets, they end up in the shelters because they cannot care for themselves, according to city officials and advocates for the homeless.

Advocates say the situation is the result of the state not providing other support services to the mentally ill, and Portland officials argue that the use of state funds to operate its shelters dates to arrangements made in the 1980s when people with mental illness first overwhelmed the city’s shelter network.

However, the LePage administration maintains that state General Assistance funds can only be used by people with no assets and inadequate incomes to pay for basic needs such as housing and food.

BETTER SCREENING, BIGGER DEFICIT

For the past three decades, Portland has required people to fill out only a short form when they enter a shelter. They don’t go through the more time-consuming screening process that’s done when someone seeks help paying rent or buying food, including a review of banking information.

City officials are not conceding that Portland misused state funds, according to the staff memo. However, it says that as of May 1, Portland would start screening all shelter residents and would stop asking the state to pay for residents who don’t meet the strict financial eligibility standards. People would be able to stay at the shelter before the screening is complete, but the state would not be billed until eligibility is determined.

Portland also would only bill the state for the costs of providing a mattress to those qualified individuals, and not for the overall operating costs of the city’s two primary homeless shelters, according to the proposals in the memo.

Criticism about shelter funding has been part of a larger effort by the LePage administration to reduce state General Assistance funding to Portland, which accounts for more than half of the state’s overall GA spending.

According to the memo presented to city councilors, the changes could result in a multimillion-dollar budget shortfall in the current year and the additional loss of at least $3 million in annual state funding starting next year.

Staff Writer Dennis Hoey contributed to this report.