Lutheran Social Services of North Dakota to close its doors; 283 jobs will be affected

FARGO — Lutheran Social Services of North Dakota CEO and President Bob Otterson told employees in a company-wide video meeting Friday, Jan. 15, that the 102-year-old agency will be closing its doors.

In an emotional exchange, Otterson — who has only been in the position for 45 days — told employees that, due to the heavy drain on resources caused by LSSND's housing department, the agency could no longer survive. Otterson said the ongoing financial strain caused by the COVID-19 pandemic also compounded the agency's financial difficulties.

The agency's annual budget for Fiscal Year 2021 is about $19 million, Otterson said. He told The Forum that one projection put the potential shortfall for LSS at nearly $3 million for the fiscal year.

Otterson said several LSSND programs will continue, including the Unaccompanied Refugee Minor program and Abound Counseling, but they will no longer be known as part of the agency.

Otterson said that as part of the agency's controlled liquidation plan, many employees will receive notification that their jobs have ended today, but some staff will continue working for several more weeks to help transition clients to other agencies.

He said the employees have taken "the life-altering news" with courage.

"The professionals of Lutheran Social Services are caring, empathetic people who have made a difference in the lives of hundreds, and thousands of people over the years. They are people who bring healing and health and hope and they have done that with each other today,” he said.

Otterson said employees were reaching out to behavioral health and mental health clients, but he was not confident that everyone could be reached quickly.

“It is unfortunate, but some people will hear this from a third-party source," Otterson said.

He said the agency is also working with New American families that have been assisted by the agency.

“Our people are not only working with the families that have come through that program, but have been looking for agencies that can play an important role in those services," Otterson said.

He said he has reached out to some area social services agencies, and he's fielded calls from others.

"I have been in conversations with several peers at agencies with other nonprofit agencies, who certainly have interest" in some of the services LSS provides to its clients, “and how those agencies might be able to fill a void," Otterson said.

Late Friday afternoon, the North Dakota Department of Human Services announced that it will begin reviewing contracted services with LSSND to determine how to continue vital programs.

“In partnership with Lutheran Social Services, we’ve improved the lives of thousands of North Dakotans,” said Chris Jones, executive director of the department. “It’s our goal now to coordinate the transition of LLSND programs and clients wherever possible.”

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First founded in 1919, LSSND had grown into a statewide presence, offering programs in senior citizen support, child trauma treatment, family support, gambling addiction, refugee resettlement and numerous other services.
According to an LSS blog post Friday afternoon, the agency's board of directors passed a resolution that confirms the actions leading to the liquidation, including a bankruptcy filing, if needed.

The blog post said the decision was very much driven by the struggles of Lutheran Social Services Housing. LSS Housing, which started in 2009, drained reserves and projections indicated losses ahead, according to Otterson.

"LSS Housing in recent years has been draining the reserves of the affiliated agency," Otterson said. "This financial pressure has hampered the ability of an essential, faith-based organization to serve its clients, specifically those in primary mission areas such as services to children, families, seniors and others."

The ongoing coronavirus pandemic has played a role in the financial troubles, but not a primary role.

Some people will assume this is a product of the global pandemic. I will tell you the global pandemic is an additional factor in that it has reduced perhaps the way that services have been provided but is not a primary factor, Otterson said.

The action will affect 283 full-time and part-time staff and several long-term contractors, the blog post said.

The issues came to a head early this week, Otterson said.

"While developing a systematic exit from the housing market, agency leaders and external advisers determined over the past six weeks that the agency's financial health had been compromised to the point where a positive cash flow has become unachievable in the next six months," Otterson said.

Some of the properties had too much debt and couldn't produce enough income to weather the ups and downs of the housing market, Otterson said.

Some assumptions in the business plans “required steady, high occupancy rates. And particularly people in western North Dakota would understand that the unpredictability of the oil markets affects rentals. And to be specific in some cases, high occupancies have not been sustainable," Otterson said. "That high (occupancy) rate couldn't be maintained."

Decisions made in the last two to 10 years helped created the financial crisis that has forced a bankruptcy resolution, Board Chairman Murray Sagsveen said in the blog post.

"Obvious economic realities — such as the downturn in oil production and a global pandemic — have been factors in this outcome," Sagsveen said. "However, the primary factors remain the LSS Housing business model, its accumulated debt, its inability to cover its expenses and other agency-level decisions made in previous years."

Otterson said the agency has lived up to his mission of bringing healing, help and hope to neighbors.

"Unfortunately, some chronic financial issues have forced the actions of this very difficult day," Otterson said.

LSS Housing was created to address the need for affordable housing in communities across the state, particularly as demand was driving up housing costs in oil-producing areas of western North Dakota. Further study noted the housing needs of people on fixed incomes across the state.

LSS invested about $16 million in cash and secured additional funding that provided safe, sustainable housing for hundreds of families, seniors and individuals. LSS Housing owns and operates 22 properties in 14 communities and manages another 14 residential properties in 10 communities.

LSS’s roots go back to 1919, when the Lutheran Children’s Finding Society was formed to establish, maintain and conduct receiving homes for orphans, homeless, abandoned, neglected and dependent children.

In 1936, the organization became known as the Lutheran Welfare Society of North Dakota.

It would become a vital support to families during the Great Depression and World War II, holding clothing and food drives and providing foster homes to children whose families were destitute.

As the years passed, the organization became involved in disaster relief, helping victims of the devastating 1957 tornado in Fargo, and historic flooding in 1997 and 2009. It became known as Lutheran Social Services in 1969.

The scope of social services LSS offers is broad, including counseling, aid for youth and families, and affordable housing. However, in recent years, the organization is perhaps most often associated with refugee resettlement.

It’s taken criticism over the number of refugees who have come to North Dakota, in recent years in particular. However, its help for refugees escaping war-torn parts of the world dates back many decades.

In 1948, following WWII, Polish-born teenager Alex Golubowicz was the first refugee to arrive in Fargo through the federal Displaced Persons Act