INDIANA — Indiana’s child welfare agency expects to require a $300 million cash infusion from the state in the coming months to cover rising operational costs, according to financial documents presented to lawmakers this week.
During a hearing before the Indiana State Budget Committee on Tuesday, the Department of Child Services (DCS) submitted an operating account summary indicating that an estimated $300 million transfer will be needed for the 2027 fiscal year, which began in July. The funds are slated to come from the Financial Responsibility and Opportunity Growth Fund, a reserve established by lawmakers specifically to cover anticipated budget shortfalls in DCS, Medicaid, and corrections.
The projected deficit comes on the heels of a year in which DCS expended nearly $1.3 billion in state funds alongside roughly $400 million in federal dollars, with 72% of that spending directed toward direct services for children and families.
Rising Costs Prompt New Review Measures
DCS Director Jennifer Dorfmeyer, who assumed leadership of the agency in April, told lawmakers that while overall child welfare caseloads have leveled off, the average cost per case continues to climb.
To curb spending and ensure resources are deployed effectively, the department established a service utilization review team. In mid-September, the team launched a pilot program across two high-spending Marion County offices, with a third office scheduled to join next week.
Under the pilot, all service referrals undergo pre-approval review to prioritize individualized care plans over standardized service packages. According to agency data, roughly 30% of referrals are being returned for adjustments, yielding significant early savings:
- September (Partial Data): Average referral costs per case dropped by 19% compared to the prior three-month average.
- October (Full Data): Average referral costs fell by 34% compared to the same three-month baseline.
Additionally, DCS has partnered with consulting firm Milliman to evaluate and streamline its service offerings, aiming to break apart overly broad programs into targeted interventions that better address high-acuity needs and maximize alternative funding streams like Medicaid. A second consulting firm, Myers & Stauffer, is assisting the agency in modeling potential adjustments to provider payment rates.
Staffing Turnover and Efforts to Eliminate Office Stays
Alongside budget pressures, Dorfmeyer highlighted ongoing workforce challenges, noting high turnover rates among critical roles such as family case managers and staff attorneys. Recruiting and training replacements continue to strain agency finances and slow case progression.
The agency is also working to address placement shortages. Currently, 16 children in state care have yet to be placed with relatives, foster families, or residential facilities. Following a 2024 Indianapolis Star investigation that revealed at least 168 removed children had spent days—and in some cases over a month—sleeping in DCS offices, Dorfmeyer reiterated her commitment to ending the practice.
While the agency utilizes welcome centers like Cooper and Isaiah 117 Houses to provide transitional care, Dorfmeyer stated that her overarching goal during her tenure is to completely close DCS offices to overnight child stays.
Despite financial and staffing hurdles, Dorfmeyer noted bright spots in federal compliance, reporting that Indiana recently became one of the few states to successfully complete its federal Performance Improvement Plan (PIP)—exceeding federal benchmarks in timely case initiation, risk assessments, and caseworker family visits.
The presentation was part of a broader series of agency budget reviews as state lawmakers prepare for the upcoming legislative session beginning in January.
