(a)  There is a five percent (5%) annual funding increase to provide quality residential programming and treatment for children in out-of-home care to all department of children, youth, and families contracted residential providers which will be effective for fiscal years 2001 and 2002. These annualized increases shall be utilized for direct care staff for the purpose of achieving skill development and improving staff retention rates through measures including pay increases.

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(b)  These annualized increases shall not prohibit contracted residential providers from seeking, from the department, increases for other costs as may be required, either individually or collectively, in the future due to clinical, environmental, economic or other factors.

(c)  These annualized increases do not apply to nonresidential programs nor to those programs that do not contract with the state. The department shall report to the general assembly and the chairpersons of the house and senate finance committees not later than April 30, 2001, and April 30, 2002, as to the methods whereby the increased funding was allocated to residential service providers and the extent to which the funding has contributed to positive outcomes for children. In the 2002 report, the department shall have in place and shall describe a performance measure system which shall include incentives to residential programs for positive outcomes.