Legislative budget committee gives favorable review to DCS transfers to cover congregate care shortfall

The Joint Legislative Budget Committee on March 20 gave a favorable review to requests from the Arizona Department of Child Safety to move funds between budget line items to cover an immediate shortfall in congregate care and to bolster extended foster care funding.

The committee's vice chair moved the motion and members approved it by voice vote. The approved package included the transfers described in JLBC materials and the director's presentation and authorized the department to move funds from specified surplus line items into congregate care, subject to the conditions explained by JLBC staff.

JLBC director Richard (JLBC director) told the committee that DCS reported it would “run out of those monies by March 24” in the congregate care line if additional transfers were not approved. He said an initial March 5 request sought $6.5 million from the general fund and surpluses in kinship care and foster home placement; a March 19 revision asked authority to transfer up to an additional $10 million between now and June 30 if DCS confirmed surpluses in three specific line items: $3 million from adoption services, $4 million from out‑of‑home support services and $3 million from in‑home mitigation.

Alex Ong, deputy director of administration at the Arizona Department of Child Safety, told members the agency had known about a congregate care shortfall earlier in the fiscal year but had waited to request transfers until projected expenditures and provider billing gave a clearer picture. “We knew in the very beginning of the fiscal year we were going to have a shortfall,” Ong said in introducing himself and answering questions about the timing of requests. He said provider billing lag and changing caseloads affected the agency's projections and the precise date when cash would be exhausted.

JLBC staff and several lawmakers told the agency and the governor's office they were frustrated by what they described as insufficient communication about the timing and severity of the shortfall. Members repeatedly asked why earlier budget reports and prior budget submissions had not prompted a December or January line‑item request that could have reduced the need for an emergency demand letter in March. Senator Fernandez, Representative Stahl Hamilton and other members pressed agency and JLBC staff on whether the shortfall reflected mismanagement or predictable budgeting gaps.

Committee discussion summarized JLBC's fiscal review: DCS estimated a roughly $29 million congregate care shortfall in January. The March 5 transfers would address about $6.5 million; the contingent March 19 authority could add up to $10 million, leaving a remaining gap that JLBC staff said DCS and the governor's office were evaluating. JLBC staff told members DCS is spending roughly $7 million to $8 million per month on congregate care and that May payments were more uncertain. The department also requested $2.2 million from the general fund to move to the extended foster care line, funded by a surplus in adoption services, according to JLBC materials presented at the hearing.

Members asked JLBC staff and DCS to continue behind‑the‑scenes analysis to determine whether additional transfers or a general‑fund supplemental will be necessary to carry the program through June 30, and requested clearer, earlier communication from the executive branch in future. The committee chair asked the governor's budget office and DCS to work with JLBC staff on a follow‑up analysis showing projected cash flows through the end of the fiscal year.

The committee also approved two routine preliminary actions early in the meeting: adoption of the minutes from the Dec. 18, 2024 meeting and adoption of the committee's rules for the calendar year. Both motions were passed by voice vote earlier in the session.

The favorable review granted March 20 allows DCS to move the amounts described in the committee materials and to access the contingent transfers only after DCS confirms the existence of surpluses in the identified source line items and notifies JLBC leadership as specified in the committee memo.

Members stressed the action was intended to prevent immediate service disruptions for children and families while the legislature and the executive continue budget negotiations and further analysis ahead of the fiscal year end.

Ending: The committee concluded with unanimous approval of the favorable review and with requests that the governor's office and DCS improve advance notice and interagency communication on cash‑flow risks so similar emergency interventions can be avoided in the future.