A provision in H0657 will shift foster care funding responsibility—and it affects state budget priorities that touch your industry.
Most Vermont business owners have no idea that the state has been using foster children's Social Security benefits to pay for their own care. That practice is about to stop—and the shift has real implications for how state spending gets prioritized over the next budget cycle.
Buried in H0657, "An act relating to various programming and requirements within the Department for Children and Families," is a provision that bars DCF from continuing to apply foster children's Social Security benefits—both RSDI (Retirement, Survivors, and Disability Insurance) and SSI (Supplemental Security Income)—to offset state maintenance costs.
Currently, when a foster child receives Social Security benefits, DCF can use that money to help pay for the child's care. Starting July 1, 2028, that ends. Instead, those federal benefits must be conserved in accounts for the child or used directly for the child's unmet needs—not to reduce what the state spends.
The legal change is codified in Section 3, 33 V.S.A. § 4907(a), on page 3 of the bill.
This shift moves approximately $700,000 annually back onto the state budget. That's money DCF will no longer recover from federal benefits; instead, Vermont taxpayers cover the full cost through general appropriations.
DCF will also need to establish and maintain separate accounts for these benefits, monitor federal limits on how much can be held, and ensure compliance with federal rules—adding administrative overhead.
State budget pressures ripple through priorities. When DCF's costs rise, legislatures often look to adjust funding elsewhere or raise revenue in ways that affect small business—licensing fees, tax policy, or workforce development programs that service industries rely on. Understanding where state money is being redirected helps you anticipate budget conversations in future sessions.
Additionally, if you employ people who interact with Vermont's social services system—whether as vendors, partners, or employers of young adults aging out of foster care—this change signals a commitment to preserving federal benefits for vulnerable youth rather than offsetting state costs.
The provision takes effect July 1, 2028. That gives DCF roughly three and a half years to build the infrastructure to track and manage these accounts separately and ensure compliance with federal benefit rules.
For now, the current practice continues. But if you're involved in state budget advocacy or track legislative changes affecting your industry's funding environment, this is one to note.
Source: H0657, Sec. 3, 33 V.S.A. § 4907(a), effective July 1, 2028 (Sec. 17(c)). For a full bill text, visit legislature.vermont.gov.