A Franklin Circuit Court judge has ordered a state agency to resume payments for a subsidy program to 18 Louisville child care centers notified last month that they were being pulled from the program after a fraud investigation.
The child care centers would have difficulty paying to defend themselves in the Cabinet for Health and Family Service’s appeals process without the revenue from the Child Care Assistance Program, Judge Philip Shepherd wrote in the restraining order issued on Tuesday.
The program—intended to help low-income, working families cover the cost of child care—makes up as much as 90 percent of the 18 child care centers’ revenue, Shepherd wrote.
Most of the child care centers are in western Louisville or downtown.
Shepherd wrote that cabinet has an interest in assuring against fraud in the system, but that the child care centers have a “strong public interest” in serving needy families in western Louisville and also in due process.
“Based on the record as it exists at this time, the Court finds that the balance of equities weights in favor of the plaintiffs,” Shepherd wrote.
Last month, the cabinet notified 18 Louisville child care centers that their licenses were being revoked and that they were being immediately pulled for the Child Care Assistance Program.
The exact reasons for the notices was not—and has not been—publicly announced, but records indicated that the nature of the alleged violations was fraud.
The same day, the cabinet implemented a series of new regulations for child care centers.
The 18 child care centers have filed appeals to the decision.
Shepherd’s order stems from a lawsuit filed April 12 on behalf of nine of the Louisville child care centers, in which they argued, among several points, that the cabinet was alleging violation of rules that had just been put in place without their knowledge and that the notices violated the equal protection clause of the U.S. Constitution. All of the child care owners in the suit are African-American.
“We believe that the institution of the emergency regulations and the cabinet retroactively applying them regarding not paying my clients’ daycare subsidy … is a violation of my clients’ due process, and the cabinet has no authority to do this,” said Randy Strause, a Louisville attorney representing the nine child care centers.
In response to the lawsuit, the cabinet said in a statement: “The Cabinet vehemently denies that minority-owned businesses were targeted in the recent license revocations for 18 daycare facilities in Jefferson County. The Cabinet has substantial evidence that the plaintiff day cares misused hundreds of thousands of dollars in child care assistance funds. This evidence prompted the immediate discontinuation of CCAP payments to these providers under an emergency regulation.”
The child care assistance program has already been cut because of budget constraints.
But the cabinet had taken into account the ceasing of payments for these 18 child care centers into its budget. The cabinet and other agencies had pledge to help parents who sent children to the 18 child care centers find new places to put their children.
On Tuesday, the cabinet added in response to Shepherd’s order: “The Cabinet agrees with Judge Shepherd’s findings that we have ‘a strong interest in the proper administration of this program and in ensuring that public funds are not wasted or spent fraudulently.’ The recent action taken to revoke the licenses of 18 child care facilities in Jefferson County was based on a long-term investigation by the Cabinet’s Office of Inspector General that uncovered substantial evidence that child care assistance program funds were misused by the facilities in question. We are considering our options.”
Shepherd referred the case to mediation before further action is to be taken.