by Mike Kroll

The Knox County Board is but weeks away from approving the issuance of $5 million in bonds to fund improvements at the Knox County Nursing Home. These bonds would be paid back over 20 years with interest – bringing the total cost to approximately $7.5 million. Nursing Home Administrator Ben Perkins and Knox County Board member Bill Abel (chair of the Social Services committee that oversees nursing home operations) have told the County Board that revenues from the special tax levy approved by county voters in April 2001. However, two Knox County officials are sounding the alarm that such an expectation is probably unrealistically optimistic. In the event that the proceeds of the Nursing Home levy prove insufficient, the shortfall must be made up through additional property taxes.

"It's all about the numbers. Based on my projections and the past financial history of the Nursing Home, I am convinced that a couple of years down the road the taxpayers of Knox County will face an additional property tax burden because these plans are simply too ambitious," explained Knox County Treasurer Robin Davis. "With the closing of Maytag and the downsizing of Butler, Gates and others our local economy is in a downward spiral that’s going to reduce assessed valuation significantly and could bankrupt the county even without the added stress of these bonds."

Joining Davis in expressing concern is County Board Finance Committee Chair Wayne Saline: "The timing is just awful! I am really afraid that the county board is rushing headlong into a decision that could result in exactly what the voters hoped to avoid when they passed the Nursing Home referendum. Over recent years the nursing home's financial position has deteriorated despite an earlier decision by the County Board to subsidize its operational costs to the tune of nearly a half million dollars annually."

Since December 2000, retirement expenses for all county nursing home employees have been paid from the county general fund. The annual cost of IMRF and Social Security at the Nursing Home in 2003 was $479,977 and that figure can be expected to increase three to four percent each year. Davis points out that this is money the county could desperately use in tough economic times. When the County Board voted in the fall of 2000 to assume this expense, the members understood that without this subsidy the continued existence of the nursing home was at risk.

When Davis says, "I don't feel that the real numbers have ever been made public," she is referring to how precarious the financial picture is at the Knox County Nursing Home. At the beginning of fiscal year 2000 (Perkins was hired in June 2000) total liquid assets at the nursing home were more than $1.4 million but they closed out that year with just $454,484 cash. More than $1.1 million of those assets composed the nursing home's capital improvement fund, money theoretically dedicated to repair and maintenance of the facility. Over the course of the 2000 fiscal year, $932,000 was drained from this capital improvement fund.

When fiscal year 2001 began the nursing home had $454,484 in cash but ended the year with a mere $177,471. During those two fiscal years the nursing home did not invest anywhere near a million dollars in maintenance or capital improvements. These funds were consumed by operating expenses far beyond income, even after the annual half million dollar subsidy began. For a public operation that is supposed to be run like a business, it is clear that the nursing home has been hemorrhaging so much money that comparing its finances to a private competitor is impossible. By the end of fiscal year 2002, the nursing home had totally depleted the entire capital improvement fund.

One area where expenses have skyrocketed is administrative personnel costs. Before Perkins was hired as administrator in June 2000, there were eight administrative/management employees at the nursing home with a total annual salary of $261,122. Three years later, two new administrative positions have been created (actually three but the assistant administrator left last year and that position has not been replaced) and the total annual salary is $419,222. That's a sixty percent increase in administrative salaries alone in just three years. Perkins' own salary is now $76,076 while his predecessor left at a salary of just $51,500. Perkins' contract also specifies that he is to receive five weeks of paid vacation annually and while he must take at least two weeks off annually "...the employee may elect to take three weeks vacation wage in lieu of time off."

To put these administrative costs in perspective, if these salaries had been subject to the three percent annual raises received by virtually all other Knox County employees; the nursing home would have saved $142,198. Perkins has slashed over 30 staff positions at the nursing home just since the last union contract was signed, mostly through outsourcing of the laundry services.

The April 2001 nursing home referendum sought approval to add ten cents per $100 of assessed valuation to Knox County property taxpayers for the "support and maintenance of the Knox County Nursing Home." Tuesday afternoon, county board member Bill Abel explained the referendum campaign thusly: "At the time we told the voters that this money was solely for the maintenance and capital improvements necessary at the nursing home – not a penny was to go for operational expenses like salaries. The voters understood that repairs and upgrades were necessary to keep the nursing home open and they showed their support at the polls."

Indeed, 62 percent of the voters supported that referendum with an unexpectedly high voter turnout in an off-year election. And Abel is correct when he states that the nursing home is badly in need of repair and maintenance. The Knox County board hired Peoria-based architectural firm LZT Associates to study the facility and present a "Master Plan for the Renovation and Development" of the nursing home. LZT found many areas requiring renovation or modernization. That is to be expected of a building that was constructed in 1965 and, because of constant financial pressures, has seen only minimal maintenance and absolutely necessary upgrades since that time.

The LZT study pointed out numerous areas where the Knox County Nursing Home falls below standards for fire and life safety, building codes, Illinois Department of Public Health standards and regulations as well as issues of energy and operational efficiency.

LZT recommended replacement of all exterior windows and doors, roof repairs, "replacement of all [interior] finishes through out the facility, replace flooring, meet current accessibility standards, massive plumbing improvements, installation of a sprinkler system for fire control, replacement of the boilers (already completed), replace interior lighting, replace fire alarm system and general modernization of the facility. Any visitor would be hard pressed to disagree with these recommendations but one could – and several county officials do – question the wisdom of incurring the estimated $10 million plus price tag to modernize the current facility.

The base recommendation from LZT calls for more than $10 million but the County Board is approaching the project in stages. The plan for this first stage includes construction of a new 24-bed wing and renovation of existing space for a new Alzheimer's care unit. The 24 new beds would be constructed first and used to relocate residents from the existing wing that is to be renovated into the Alzheimer's wing. According to Abel this should minimize the loss of bed space during the project.

While this initial expense will result in a new segregated Alzheimer's unit plus the 24 new single-bed room, relatively few of the actual facility upgrades are included at this stage. Opponents question whether it makes more sense to construct new bed space or bring the existing space into code and regulation compliance first. Another issue pointed out by Saline is that nearly a million dollars of this first five million goes to pay architect's fees. "We not only seem to be paying dearly for the architect's services but we are doing so all up front. Rather than trying to address the most pressing needs first and at a more manageable pace from the expense viewpoint we are in effect expanding the nursing home at a time when census is down and one can question if we will be able to fill all these beds."

Saline's points are backed up by the figures. At the end of fiscal year 2002 the additional revenue attributable to the referendum amounted to $423,443. As of November 2003 this fund had $803,860. Noting that the County averaged little more that $400,000 annually in referendum income before the impact of declining property values start being reflected in property tax receipts, Saline and Davis question how much this figure will decline in the coming years?

"We both recognize the importance of the Knox County Nursing Home and support the need to maintain and update it but we question whether or not Knox County can afford to expand the nursing home without any real evidence of increasing revenues to cover the higher costs," explained Saline. "We need to behave more cautiously at time like these if we are to insure the survival of the nursing home."

From a census viewpoint there are additional reasons for concern. The Knox County Nursing Home is licensed for 204 beds and, according to Abel, the current census has hovered between 168-170 residents. He acknowledges that census is down but says it is a seasonal thing. This perspective is disputed by the administrator of a competing private nursing home in Galesburg. Sandra Kendrick of Rosewood Care Center says, "The census for all area nursing homes in this county and all of the surrounding counties have been down for months. We all have empty beds. My personal opinion is that area nursing home population is down and has been declining for the last couple of years – and I just don't see that trend reversing anytime soon."

Kendrick notes that the nature of nursing home patients is also changing. "Recuperation is becoming a bigger and bigger part of our business and the same is true for most other nursing homes I'm familiar with. The number of nursing home beds devoted to long-term care has been steadily decreasing. Increasingly patients are coming to nursing homes to recuperate from illnesses or surgery and are returning to their homes as soon as medically practical. The home health care industry has made it possible for more and more people to spend their last years at home."

While Alzheimer's may be a growing concern nationwide, will that translate into sufficient additional demand to permit a new wing to make economic sense? How have the nursing home priorities been arrived at and who is really driving this expansion?

"You know, as a county board member I am hugely dependent on the knowledge and expertise of our professional staff at the nursing home," said Abel. "Neither I nor my committee have any desire to micromanage Ben Perkins. Our committee looks to Ben and his staff for recommendations on how best to operate the nursing home. We wouldn't have even begun this project unless we were confident we could afford to repay these bonds. At the present point in time I am very optimistic about the financial condition of the nursing home."

The real guiding hand in this plan is Perkins. It is he and his top lieutenants who have convinced Abel's committee as well as the County Board as a whole. Supporters of the nursing home expansion have put their faith in their hired expert. Why would Perkins push a plan that isn't financially sound?

An examination of his four-year employment contract may justify questioning Perkins’ motivation. "Wages may be renegotiated when/if the nursing home becomes involved in renovation or new construction projects due to the added responsibility and business growth demands and opportunities."

"I know that some will say I am simply out to close the nursing home but that is just not the case," said Saline. "Quite the opposite. I am concerned that if we don't begin operating the nursing home in a financially prudent manner we will bankrupt not only the nursing home but Knox County as well."

Davis and Saline question just how much of the raw financial data has been shared with the Social Services committee before they made their recommendation. It is clear that very little specific financial information has been provided to County Board members as a whole and most of the transactional bookkeeping is done at the nursing home rather than within the Treasurer's office. As explained by Saline, "I just don't see the need to rush into a commitment of this size without a complete understanding of the financials. The voters and taxpayers of Knox County expect County Board members to exercise good judgment with their tax dollars that just doesn't seem to be the case when it comes to running the nursing home."

"He [Perkins] holds his financial numbers very close," said Davis. "Whenever I have requested detailed numbers from him he has simply ignored me and when he reports finances to the County Board he does so orally without providing any real numbers on paper. I believe County Board members have gone along with this plan with little thought about how financially realistic it is. I'm afraid the financial position of the nursing home is far more precarious than anyone realizes."