Texas spent $528.3 million in fiscal 2025 on its privatized foster care system, and that system is estimated to cost the state an additional $135 million a year by 2030, according to a staff report released Nov. 6 by the Sunset Advisory Commission, the legislative panel that reviews whether state agencies should continue and how. The staff recommend a new state law requiring the private contractors that run foster care in each region to file financial reports with the state.
The report concerns the thousands of children in state custody whose care is now managed by those contractors rather than by state caseworkers. Under Community-Based Care, the Department of Family and Protective Services (DFPS) hands case management and placement in a region to a nonprofit or company called a single source continuum contractor, or SSCC. Sunset staff concluded the system “faces a compounding set of internal fiscal pressures and structural risk.”
Most of the $528.3 million went to services the state would have bought anyway, the report shows. About $274.8 million passed through the contractors to foster homes, residential providers and other subcontractors, and $172.2 million was work shifted from DFPS to the contractors. About $71.5 million was spending specific to the contractor model, and $9.8 million went to state oversight.
The higher cost comes partly from structure. The contractors “are not the state,” the report notes, so they do not share state offices or statewide purchasing power. The Legislature has added funding streams just for them, including yearly payments equal to a quarter of each contractor’s initial transfer of state resources.
The staff found DFPS lacks the tools to watch those dollars closely. Recommendation 1.5 reads: “Require SSCCs to submit financial reports to DFPS.” It would set a statutory requirement for the contractors to file financial reports in a format DFPS sets with them, so the agency can check that they are putting enough money into hiring and keeping caseworkers. Other recommendations would give DFPS direct access to contractor staffing data and direct it to review contractor performance measures periodically. The report says the cost of the financial-reporting requirement cannot be estimated yet.
The report points to Dallas as the clearest warning. A judge placed EMPOWER, the contractor for the Dallas region, in receivership on March 18, 2026, “based on a petition from DFPS describing system failures that created an imminent danger to children in foster care and led to infant deaths and the medical mismanagement of a child with serious medical needs.” The state later ended EMPOWER’s contract. The report ties those failures to high caseworker turnover: “basic tasks like regular safety visits are overlooked.”
The staff would also abolish the Office of Community-Based Care Transition and fold its work into DFPS, saving about $149,240 a year and $896,200 over five years.
Sunset staff attached an addendum the same day. It says the staff report “does not fully capture the extensive efforts” of the state, the Legislature and the agency to build the system, and adds background on appropriations and how other states run child welfare. The addendum “does not include recommendations or conclusions,” it says. No formal DFPS response was posted on the review page as of Nov. 12.
The DFPS report follows staff reports on the Health and Human Services Commission’s contract management and the Department of State Health Services, part of the same review cycle.
The Sunset Commission, chaired by Sen. Lois Kolkhorst, has tentatively set public testimony on DFPS and the health agencies for Dec. 2-3 and decisions for Dec. 15-16. Its recommendations then go to the 90th Legislature, which convenes Jan. 12, 2027, and would have to pass any changes in law.
Key facts
- Sunset staff report on DFPS released Nov. 6, 2026.
- Community-Based Care spending, fiscal 2025: $528.3 million ($274.8 million subcontractor pass-through; $172.2 million shifted from DFPS; $71.5 million contractor-specific; $9.8 million oversight).
- Estimated additional cost to the state: $135 million a year by 2030.
- Recommendation 1.5: require foster care contractors (SSCCs) to file financial reports with DFPS.
- EMPOWER (Dallas region) placed in receivership March 18, 2026; contract later terminated.
- Sunset hearing tentatively Dec. 2-3; decisions Dec. 15-16.