Beds at the Portland Homeless Services Center Thursday. Shawn Patrick Ouellette/Portland Press Herald 

Portland and state officials are clashing over millions of dollars in annual funding for General Assistance, the safety net program that pays for shelter and other basic needs for residents who can’t afford them.

Portland’s mayor says the state is proposing a rule change that could cost the city $4.4 million a year in reduced funding for emergency shelter operations.

“This proposal would slash state reimbursement of local emergency shelter expenses, weakening Maine’s emergency shelter network and putting the people who need it at further risk,” Mayor Mark Dion wrote in a Nov. 25 letter to the director of the state’s Office of Family Independence in the Department of Health and Human Services. The change could mean a reduction in services or a 5.5% increase in the municipal portion of the city’s tax rate this spring, the city said.

State officials, however, say the proposal would simply codify long-standing policy and that Portland has been charging the state for more funding than it should have.

The dispute is the latest in a long series of conflicts between the city and state over General Assistance funding to support local shelters, which take in residents from around the state and beyond.

STATE: CITY IN VIOLATION

The state issued Portland a notice of violation in September saying the city is out of compliance with the General Assistance statute and that its shelter reimbursement requests for the Homeless Services Center on Riverside Street have exceeded the maximum amount allowed. The violation notice does not say how much funding the state believes Portland received in error.

The state said the maximum amount the Department of Health and Human Services can reimburse for a stay at the city’s shelter is based on the rate the agency has set for a studio or efficiency apartment, a standard known as the “zero-bedroom rate.”

That means the maximum that could be reimbursed per bed per night at the HSC is $44, according to the state’s notice, which said Portland has been requesting reimbursement at a rate of $84 per night determined by shelter operating expenses.

In February alone, the state said that added up to the city claiming $157,170 of ineligible expenses for reimbursement.

General Assistance is distributed at the local level to residents who can’t afford to pay rent or keep the heat and lights on. Under state law, municipalities can receive 70% reimbursement from the state for eligible General Assistance expenses.

General Assistance housing rates are published each year by the department based on federal Housing and Urban Development fair market rent figures. Municipalities may adopt those rates or propose their own, subject to DHHS approval.

The state also said that according to a 2015 agreement with the city, the zero-bedroom rate is to be prorated into a daily figure for anyone staying at a municipal shelter.

But the city, which is appealing the notice of violation, has argued that the 2015 plan did not include a specific formula for calculating rates and that there is nothing in the city code or the General Assistance statute and rules that sets a maximum rate for emergency shelters. The rules also state that municipalities may need to disregard the rates in an emergency, the city said.

“The department’s reliance on the 2023 zero-bedroom rate of $44/night fails to recognize that the city’s reimbursement requests related to the (Homeless Services Center) are not for rental housing, but for emergency shelter costs,” the city wrote in a Sept. 23 response to the notice.

The city also said the $84 per night is an accurate reflection of the actual costs to operate the shelter, including rent, utilities, routine maintenance and essential supplies. That total does not include ineligible expenses such as administrative costs or costs associated with other services offered at the center beyond overnight shelter.

The Portland Homeless Services Center. Shawn Patrick Ouellette/Portland Press Herald

ARE RULE CHANGE AND DISPUTE RELATED?

It’s unclear if the rule change, which the state posted online on Nov. 6, is directly related to the violation notice. The proposal makes several changes to General Assistance rules, but the part the city has taken particular issue with seeks to add language specifying that municipalities are limited to the “zero-bedroom” rate for reimbursement at emergency shelters.

According to DHHS spokesperson Lindsay Hammes, the department reimburses all municipalities for emergency shelter beds using the zero-bedroom rate. Only six municipalities around the state have sought shelter reimbursements so far this fiscal year, she said.

“We are unaware of any other shelter that receives more than the zero-bedroom rate for an eligible single individual in reimbursement through GA,” Hammes said in an email, adding that as of Oct. 1 the applicable rate for reimbursement in Portland should be $48 per night, but the city has requested $84 per night.

“The department’s proposed rule reasserts its long-standing practice for shelter reimbursement,” Hammes said.

A city spokesperson said, however, that prior to September the state hadn’t indicated there were any issues and had been reimbursing the city at the $84 rate since July 2023. The rate was lower prior to July 2023, but the city also changed the services it provides around that time with the Homeless Services Center opening in March, said city spokesperson Jessica Grondin.

Hammes said the department could not comment further because of the ongoing appeal of the notice and because the rule is in the process of being adopted. It should be finalized within the next few months, Hammes said.

Dion, Portland’s mayor, said he couldn’t speculate about why the rule proposal has come forward, though he noted that the timing seemed to coincide with the notice issued to the city.

“It would be one thing if they gave us a notice of violation, we have a chance to respond and have a hearing and we’re arguing about a rule we all agree on,” Dion said. “But now we’re trying to dispute a decision that was made under a rule that now appears to be subject to something entirely different. It’s like, can we resolve one issue before we decide another one?”

CITY SAYS RULE UNDERMINES EFFORTS

City officials say the new rule would result in cuts to services or a 5.5% increase to the municipal portion of the property tax rate.

It also comes as Portland has significantly increased its number of shelter beds over the last two years. The city opened the Homeless Services Center in March 2023, growing capacity by 54 beds compared to the old Oxford Street Shelter. And in May of this year the planning board approved an expansion by another 50 beds.

Late last year the city also opened a new 179-bed shelter for asylum seekers in Riverside.

Still, the amount the city is spending on General Assistance dropped by about $8.2 million from fiscal year 2023 to fiscal year 2024, and the amount of state reimbursement to Portland fell by about $10 million as the city reduced operating costs by getting away from more costly temporary housing options like hotels.

In the 2024 fiscal year, Portland spent $22.4 million on General Assistance, of which $11 million was reimbursed by the state.

“Rule #26 would, ultimately, undermine the city of Portland’s recent efforts to increase shelter capacity so that beds could be made available to people sleeping in large encampments, which posed serious health and safety risks,” Dion said in his letter.

Preble Street, a nonprofit social services provider that runs three shelters in Portland, has also raised concerns about the rule. The agency receives General Assistance funds through the city to help pay for shelter beds.

“Our shelters are not adequately funded,” said Andrew Bove, Preble Street’s vice president of social work. “We have to cobble funds together, and I think that’s the case with shelters across the state. It’s tough out there. So anything that seeks to reduce what shelters can access in terms of funding, we have a problem with.”

Dion, a former state legislator, has argued that the rule should be considered a “major substantive rule” requiring legislative review and approval, as opposed to a “routine technical” rule that can be finalized by an agency alone. “The Legislature might not agree with us, but that’s the proper forum in which to have this conversation,” he said.

Portland’s legislative delegation has also written to the state to oppose the rule and has said it should be considered a major substantive rule.

“The proposed change will overly burden municipalities and nonprofit entities across the state that are currently struggling to offer emergency shelter services,” the delegation wrote in a Dec. 4 letter. “Furthermore, this is not the time to engage in rule-making that will have an immediate, far-ranging, and negative impact on unhoused persons.”