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State projects $35.5M childcare shortfall; DHHS proposes rate changes and TANF reallocation
Summary
Department of Health and Human Services projects about $35.5 million in childcare assistance over-expenditure for the 2025–27 biennium due to higher utilization and a new workforce benefit; agency plans provider-rate adjustments, a waitlist for new applicants, and using TANF federal authority to cover the gap.
The Department of Health and Human Services told the Legislative Audit Committee on Dec. 9 it expects the Child Care Assistance Program (CCAP) to exceed the 2025–27 budget by roughly $35.5 million if no changes are made.
Donna Auckland, DHHS chief financial officer, said the biennial direct-benefit budget was set at $112.2 million with supplemental one-time bonuses added, but utilization rose during the legislative session and in the months after. "If we make no changes ... we would project to spend $160,200,000," Auckland said.
Michelle Gee, director of the economic assistance section, said the major driver was higher-than-projected enrollment in the new childcare workforce benefit, which launched July 2024 and served roughly 1,442 children versus an original projection of about 660. Gee said the program provides childcare assistance to families of workers employed at licensed childcare facilities at least 25 hours per week "without regard to that family's income."
DHHS proposed a package of savings measures: reduce part-time care reimbursement to 50% of full-time rates (estimated savings $8.7M), lower state maximum rates for certain age groups from 75% to 50% of state max (estimated $3.1M), and reduce quality-rating (QRIS) bonus payments (estimated $1.4M). The department plans to use available TANF block-grant authority (up to 30% of the TANF grant) to provide roughly $22.3M in federal TANF funds to help bridge the biennium, and to implement a waitlist for new applicants to curb growth.
Lawmakers pressed DHHS on timing and data: the department freezes expenditure assumptions in April for the budget submitted in September and acknowledged an eight-month lag in near-real-time caseload data contributed to the projection miss. Committee members asked DHHS to coordinate with the governor's office and OMB on emergency authority if needed and to monitor impacts on providers and families.
DHHS officials said they have communicated changes to families and providers and are holding listening sessions with providers. The department warned that using multi-year TANF authority reduces future-year TANF flexibility and may require further budget adjustments next biennium.
