Breaking up the DHS won’t address out-of-control welfare spending
Between July this year and July 2025, the Minnesota Department of Human Services (DHS) will officially be breaking off into three state agencies. Due to a law passed in the 2023 legislative session, the DHS is transferring the majority of its duties to two other agencies:
- Department of Children, Youth and Families (DCYF)
- Direct Treatment of and Care
The DCYF is a newly created agency responsible for overseeing DHS programs that are mainly focused on children and families. These include, among others:
- Cash assistance under the Minnesota Family Investment Program (MFIP)
- Hunger programs such as the Food Assistance Program and Minnesota Food Shelf Program
- Economic support under the Family Assets for Independence (FAIM)
- Licensure for daycare centers and family childcare
- Childcare assistance programs such as basic sliding fee and the Minnesota Family Investment Program (MFIP)
- SNAP
- Child safety
- Foster care and adoption work
- Child support
In addition to these DHS programs, DCYF will take over programs from two other agencies. From the Minnesota Department of Education, DCYF will take over programs focused on children such as Head Start, Early Head Start, Early Learning Scholarships, Voluntary Pre-Kindargarten and Readiness Plus program, early childhood screening program, school readiness program as well as after-school community learning programs.
From the Department of Public Safety, DCYF will take over the Juvenile Justice and Youth Intervention program, Office of Restorative Practice for the Department of Public Safety as well as grants-in-aid to youth intervention programs.
Direct Care and Treatment, which was already an existing part of the DHS, will keep its original functions. These include:
- Managing behavioral health hospitals, substance use treatment facilities, psychiatric hospitals, and inpatient substance abuse treatment centers.
- Running the sex offender treatment program
- Managing group homes and vocational programs for people with disabilities.
The new version of DHS — which will go from over 7,000 to 2,000 employees — will be responsible for running the Medicaid program as well as housing, and services for seniors and people with disabilities.
Why this could be a good thing
Serving about a quarter of Minnesota’s population, DHS is the state’s biggest agency and the biggest state expenditure by far.
In the 2022-23 biennium, for example, Minnesota spent $50 billion on Health and Human Services (HHS). This was more than double the money spent on the next biggest category, E-12 Education. And 95 percent of that $50 billion went solely to the Department of Human Services.
Figure 1: All state spending, 2022-23 biennium ($ in thousands )
Figure 2: Total Health and Human Services Spending by Department (2022-23 biennium)
Similarly in the current biennium (2024-25), Minnesota is expected to spend $58 billion on Health and Human Services. 96 percent or $56 billion will go to the Department of Human Services.
Government in general is susceptible to fraud and mismanagement. However, due to its size and sheer number of programs it runs, the DHS is especially at high risk of fraud and mismanagement.
Over the years, the Department of Human Services has been under scrutiny for its failure to prevent fraud. A 2019 report from the Legislative Auditor (OLA), for example, called out the DHS for making insufficient efforts to prevent fraud in the ChildCare Assistance Program (CCAP). OLA also found the DHS’ oversight of homelessness and housing support grants lacking in 2022. Similarly, in 2021 OLA found that DHS “lacked effective oversight” and “did not have adequate internal controls” for its $139 million Behavior Health Division.
With these issues and many more, breaking up the DHS could improve oversight, leading to better-managed agencies.
It could also be a bad thing
Breaking up the DHS could also have some negative consequences, however.
For one, having three agencies instead of one means less integration. This could affect families that rely on multiple programs, especially if there is little data sharing among the agencies. Certainly, bringing families and children under one fold into the DCYF would likely improve that integration. But distancing those programs from Medicaid (which would remain under the DHS) would do the opposite.
With too many agencies, there is also a risk of administrative bloat, since each new agency has to develop its infrastructure for oversight.
Not to mention that issues at the DHS go beyond fraud and mismanagement. There is a culture of generosity in Minnesota that is especially prevalent at the DHS. Welfare currently accounts for the largest portion of state spending and is the fastest-growing category in the general fund.
Breaking up the DHS alone won’t resolve Minnesota’s budgetary challenges. In fact, the split could intensify lobbying efforts among the new agencies, potentially leading to even greater spending on welfare programs.
For example, until the Department of Children, Youth, and Families is fully established in July 2025, the Minnesota law requires a quarterly report on the transition. In the March 2024 DCYF transition report, Minnesota Management and Budget (MMB) noted some issues that the DCYF would have to deal with and what that could entail.
Among those issues is the childcare affordability crisis. Stakeholders that MMB talked to suggested expanding eligibility to early learning scholarships and the Child Care Assistance Program (CCAP). With these programs going to an entity solely organized under families and children, these kinds of proposals would likely get special attention, leading to more funding.
True DHS reform should also deal with out-of-control spending
As the state’s biggest agency, the DHS is especially susceptible to fraud, waste, and mismanagement. Breaking the agency could mean improved oversight and accountability.
Breaking up the DHS, however, would not do anything to solve what is Minnesota’s biggest issue — out-of-control welfare spending. In fact, by giving different welfare programs specialized attention under new agencies, welfare spending could even increase as each new agency ramps up its lobbying efforts.