DCF presents proposed funding formula for community‑based care lead agencies; senators seek details on costs and incentives

Casey Penn, chief of staff for the Florida Department of Children and Families, presented the department's report and recommended funding formula for community‑based care (CBC) lead agencies to the Senate Committee on Children, Families, and Elder Affairs, saying the model responds to statutory direction in HB 7089 to propose an actuarially sound, reimbursement‑based approach.

Nut graf: The proposal uses historical expenditures, actuarial adjustments and a two‑tier payment structure — a largely fixed Tier 1 for operational costs and a variable Tier 2 for per‑child per‑month (PCPM) service costs — with an optional Tier 3 for performance incentives and a 2% risk corridor. Senators focused questions on whether the formula properly accounts for high‑acuity placements, how federal and pass‑through funds are treated, and how administrative versus direct service costs are identified.

Penn told the committee that KPMG conducted the actuarial modeling under a department procurement. The formula draws on two years of expenditure data (including funding added under the 2022 Florida Funding for Children model) and applies geographic wage, housing and CPI inflation adjustments. Tier 1 covers primarily fixed operating costs — rent, insurance, salaries and case‑management contractor costs — and was designed to minimize year‑to‑year fluctuation. Tier 2 blends placement types into ten groups and produces a per‑child‑per‑month rate that updates annually as census and acuity change. Tier 3, Penn said, is optional and intended for legislatively chosen performance incentives such as prevention and permanency measures.

Penn presented estimated funding totals: a recommended budget of $1,391,000,000 and a delta of about $45,000,000 compared with last year's CBC schedule; he said about $15,300,000 of hold‑harmless funding is recommended for the first year while the model is adopted, and that, because of fund consolidation, the net appropriation increase would be approximately $28,600,000 (a cited 2%). He described a proposed 2% risk corridor applied to Tier 2 so that costs exceeding expected expenditures by up to 2% would trigger a mitigation mechanism if expenditures were "valid and unavoidable," such as spikes in group‑care placements or unusually high acuity.

Committee members pressed for technical detail. Senator Gail Harrell said the report did not appear to include strong incentives for prevention and asked whether future iterations could separate prevention into its own category. Penn said CCWIS finance modules and standardized data collection would allow the department to model prevention funding and incentive options in subsequent years.

On administrative costs, senators asked why salaries and benefits were difficult to parse between operational and direct services. Penn and the department staff said historical reporting used OCA (object code/account) structures that lacked consistent granularity; they told senators the CCWIS modernization and a new general ledger taxonomy would improve classification and allow clearer separation of "c‑suite" and direct‑service compensation going forward. Senator Harrell requested written responses to a series of line‑by‑line questions and the department agreed to provide them.

Several senators and the public commenter raised concerns about blending fund sources. Penn acknowledged that the model incorporated historical expenditures that included state and federal funding and some pass‑through line items; outside presenters and CBC representatives argued this blending complicates oversight and reconciliation because some pass‑through items (for example maintenance adoption subsidies) are federal entitlements that do not have state administrative offsets.

Mike Watkins, chair of the Florida Coalition for Children and CEO of Northwest Florida Health, offered public comment and said coalition members see the proposed formula as an improvement but raised four concerns: the model mixes federal and state funds, it blends pass‑through dollars with CBC‑managed funds, it uses a single blended rate across diverse placement types, and it lacks an administrative spending cap. He urged more granular treatment of groups of care and clearer reconciliation at the lead‑agency level.

Penn said the funding model is adaptable, can be run annually, and can be modified with policy levers (including Tier 3 incentives and different risk‑management thresholds) if the legislature chooses. The committee did not adopt the model or take a funding vote; senators asked for additional written answers and indicated they may request further briefings from DCF and KPMG.