A provision in H0657 will stop DCF from using foster children's Social Security benefits to offset state costs—and that has budget implications for contracted care providers.
Most Vermont child care and residential facility owners don't realize that the state has been using foster children's Social Security benefits to help pay for their own care. That practice is about to change, and the shift could affect contract negotiations and reimbursement rates for providers across the state.
Under H0657—An act relating to various programming and requirements within the Department for Children and Families—a new provision prohibits the Department for Children and Families (DCF) from offsetting foster care costs with Social Security benefits that belong to the children in state care.
Currently, when DCF receives Social Security benefits on behalf of a foster child, the state uses that money to reduce its own expenses for that child's care. This practice has offset approximately $700,000 annually from the state budget.
Starting July 1, 2028, DCF will no longer be allowed to use those benefits this way. Instead, the full cost of foster care will shift to state appropriations.
For contracted residential care providers—many of which are small businesses—this change creates a budget pressure on the state side. When DCF loses $700,000 in offsetting revenue, that gap has to be filled somewhere. While the law doesn't directly cut provider reimbursement, it can create indirect pressure: tighter state budgets often lead to renegotiated contract terms, slower rate increases, or reduced relief on reimbursement rates during budget cycles.
If you operate a residential care facility, group home, or similar program that contracts with DCF, this is worth monitoring as we approach the effective date. Understanding the state's budget pressures helps you anticipate conversations with your contract manager and plan accordingly.
The provision is found in Section 3 of H0657, which amends 33 V.S.A. § 4907(a) (page 3 of the bill). The change takes effect July 1, 2028, giving the state nearly four years to adjust its budget planning.
The timing is important: it's not immediate, which means DCF has time to work through the fiscal implications with the legislature. However, providers should begin factoring this into their own long-term planning now, especially if you're considering expansion or refinancing.
If you contract with DCF, stay informed about how the state plans to absorb this $700,000 annual shift. Ask your contract manager whether rate discussions or contract terms are likely to be affected. Document your current reimbursement structure and any cost pressures you're already facing, so you have a clear baseline if negotiations do shift.
This is a technical change buried in a larger bill, but it has real operational implications. The Vermont Child Care Association and similar trade groups may offer more detailed guidance as the effective date approaches.
For a free, detailed summary of H0657 and how other provisions may affect your program, contact your industry association or local business resource center.