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DHS FY26 allowance rises to $4.2B; analysts flag FY24 closeout errors, foster‑care hotel placements and TANF drawdown
Summary
Department of Human Services officials defended a $4.2 billion FY26 allowance while analysts highlighted FY24 closeout errors that required $200.1 million in deficiency appropriations, rising foster‑care costs, use of TANF balances and hotel placements for children in care. DHS highlighted Sunbucks and new data tools.
Analysts from the Department of Legislative Services told the Health and Social Services Subcommittee on Jan. 29 that the Department of Human Services’ fiscal 2026 allowance totals about $4.2 billion, an increase of roughly $55.1 million (1.3%) from FY25, and that the department’s budget remains heavily federal‑funded.
DLS reported a set of fiscal closeout and programmatic issues that shaped the questioning. The FY26 budget includes proposed deficiency appropriations totaling about $200.1 million, including roughly $99.1 million in general funds. The largest single adjustment — $64.3 million — replaces assistance payments funds that were reverted in error during the FY24 closeout, DLS said.
"We acknowledge our accounting errors and have taken immediate corrective actions," Jessica Smith, acting chief financial officer for DHS, told the subcommittee. Smith said the department has rebuilt its fiscal leadership, implemented quarterly expenditure monitoring with local departments of social services, and begun loading detailed financial data into the state’s financial management system to improve budget alignment and oversight.
DLS also outlined problems with reporting: inconsistent closeout reporting for foster care maintenance payments and assistance payments in FY24 resulted in discrepancies between amounts reported to the comptroller and amounts reported to DLS/DBM. DLS said it was still awaiting complete responses to some closeout questions at the time of the analysis.
The analysts highlighted growing use of flexible funds and hotel placements for children in out‑of‑home care. Exhibit data showed 154 children were placed in hotels in FY23 and 180 in FY24; the department said improved data collection may explain part of the increase but that flex‑fund spending rose substantially as well. DHS said it is pursuing rate reform, expanded provider expectations and weekly staffing to reduce hotel placements; the department reported that placements have fallen since early 2024 and said it will provide requested reporting language to the subcommittee.
Principal Deputy Secretary Carnita White said DHS has prioritized kinship placements, citing the kinship care law passed in 2024 that broadens the definition of kin and directs the state to prioritize family placements. White also highlighted operational innovations: the state’s Sunbucks program distributed $120 to eligible children last summer and served more than 594,000 children, and DHS launched a Unified Benefits Screener that completed more than 42,800 checks with an average completion time of 4 minutes, 41 seconds.
DLS and committee members pressed DHS on the TANF fund balance and the use of TANF to cover child‑welfare shortfalls. DLS reported the TANF balance was about $57 million in FY24 and that the balance was drawn down in FY25 to cover assistance‑payment and foster‑care shortfalls; DLS concluded that the balance will decline further in FY26 and recommended the state align spending with ongoing annual receipt levels.
White acknowledged federal uncertainty and said DHS had already drawn down some funds while awaiting final federal guidance. Committee members asked about the potential effect of interrupted federal guidance on programs such as TANF, SNAP, refugee assistance and certain discretionary grants; White said DHS is monitoring federal changes and preparing contingency plans.
On data and reporting, White and Smith described a multistep corrective plan: rebuilding budget and finance functions, developing standard operating procedures, creating a data office to modernize collection and public reporting, and partnering with the Office of Legislative Audits to address issues.
Ending: Committee members requested additional documentation and timelines for outstanding reports and follow‑up on DHS’s corrective actions. DHS committed to provide the requested information, including more detail on closeout reconciliations and reporting on children placed in hotels.
