Monroe County council budget session flags health department funding gap after IU Health contract ends

Monroe County Councilors continued the 2026 budget review on Sept. 10, focusing on a shortfall in public-health funding after the county’s long-running contract with IU Health ended and state changes to the Health First Indiana program shifted how local services can be funded.

During the meeting, County Auditor Carly Woodruff presented the county’s simplified calculation of a potential total budget deficit and its levy-driven scenarios. “This shows the maximum property tax levy that we're allowed in 2026,” Woodruff said, and her spreadsheet showed a countywide deficit estimate of just over $8.1 million using the current gateway requests and a projection that the general fund could finish 2026 with about $14 million if the levy were adopted near the $23 million range described in her presentation.

The health department’s director, Lori Kelly, told councilors department staff have been moved between funds because of the state-level changes. Kelly said several positions previously supported by Health First Indiana or IU Health contracts were transitioned into locally controlled funds and that at least one nursing contract payment planned with IU Health will no longer occur. "We will be looking at removing that, and then or transferring that to be able to provide nursing services in 2026," Kelly said, describing an unsettled plan to replace the nursing contract.

Councilors pressed for options and contingency plans. Councilor Peter Iverson warned the council that the fund’s 4-B analysis “is not looking very healthy” and said the health fund will need “some pretty big work… to the tune of a little over a million dollars.” Councilor David Henry and others pressed the department and auditor for near-term options such as shifting eligible costs into grant funds, tapping carryover balances, or using one-time COVID-reimbursement dollars reserved for a possible mobile unit purchase.

Kelly described how Health First Indiana’s new eligibility and documentation requirements make it difficult to place some services in that fund. "There are individuals... who are not qualified for those services or supplies under these new guidelines," she said, noting the department is trying to avoid turning residents away while remaining compliant with new state rules. Councilors and health-department liaisons discussed short-term strategies including: (1) moving some personnel or supplies to other local or grant funds, (2) exploring a targeted account line to pay for one-off services that can’t be funded through Health First Indiana, and (3) issuing an RFP if a non-county provider can replace the IU Health contract.

The treasurer’s office, represented by Treasurer Cathy Smith, presented a comparatively small, flat budget that the treasurer described as keeping only the minimum needed to collect taxes. "Next year is gonna be an extremely painful year because there's so many different changes... it's really busy work," Smith said, explaining more frequent partial electronic payments and expanded new construction have increased transactional volume.

Auditor Carly Woodruff also walked councilors through fund-level detail and recommended some housekeeping moves between the general fund and the auditors’ ineligible fund for contractual expenses; the council approved those adjustments during the meeting.

Council amendments during the meeting included staff proposals to reduce some council-line items such as postage and legal notices, and several departmental budgets were advanced with roll-call votes. Councilors repeatedly emphasized that changes made in these sessions are not final: the public hearing is scheduled for Sept. 30 and final adoption is scheduled for Oct. 14.

Votes at a glance - Treasurer, General Fund (Fund 1000 — Treasurer): approved 7–0 (personnel $511,130; total $573,780). - Health Fund (Fund 1159 — Health fund): approved 6–1 (total $2,685,759). Councilor Hawke voted no; other members voted yes. - Local Public Health Service (Fund 1161): approved 6–1 (total $814,516). - Local Health Maintenance (Fund 1168): approved 6–1 (total $65,713). - Indiana Health Trust Fund (Fund 1206): approved 7–0 (total $61,121). - Public Health Emergency Fund (Fund 4906): approved 7–0 (total $20,000). - Auditor general fund and related amendments (auditor budgets and reallocation of contractual lines between the general fund and auditors’ ineligible fund): final amendments approved by recorded votes (several roll-call actions, most recorded 6–0 after amendments). - County Council general fund (council office budget and line-item adjustments including postage/legal notices): approved (final recorded vote shown 5–0 at close of the night, after amendments). - Rainy-day fund (Fund 1186): approved 5–0 (set-aside structure continued; cash balance reported by staff was approximately $10.1 million).

Why it matters The loss of the IU Health contract and the state’s reconfiguration of Health First Indiana funding create immediate budget and service-delivery questions for Monroe County’s public-health programs. The county must balance statutory public-health obligations, the practical limits of grant-eligible spending, and the council’s broader effort to close a budget gap driven by higher department requests and constrained revenue outlooks.

What councilors said and next steps Councilors called for quick follow-up work by the health department, the auditor and county legal to (a) identify which positions and service lines are eligible for other grant funds, (b) build a short-term contingency account for urgent one-off services the department must provide, and (c) pursue procurement options such as an RFP to replace contracted nursing services if the IU Health regional approach leaves a service gap.

The council will meet again for the final 2026 budget session on Sept. 11 and hold a public hearing Sept. 30. Final adoption is scheduled for Oct. 14. The auditor will provide updated deficit and levy scenarios before those dates so councilors can consider larger structural options and possible one-time uses of carryover or restricted balances.

Ending Councilors and department staff repeatedly stressed the temporary nature of approvals at this stage and urged continued liaison work between health staff, the auditor, county legal and council liaisons to produce concrete options before final adoption. "We can make a change tonight, and it's not permanent," Council President Crossley reminded the room during the hearing.