Chair Hoffman convened the Minnesota Senate Human Services Committee on Feb. 17 to hear Department of Human Services officials present the governor and lieutenant governor’s budget proposal and to take members’ initial questions.

The presentation, delivered by Shereen Gandhi (temporary commissioner, Department of Human Services), Elise Bailey (budget director, Department of Human Services) and Natasha Merce (assistant commissioner for aging and disability services), outlined a mix of proposals the department said would strengthen program integrity, slow spending growth and target workforce and billing reforms. "The majority of our budget is aimed at curbing increased growth and spending," Elise Bailey told the committee.

The proposals matter because they affect services used by Minnesotans across the state: disability waiver recipients, people in recovery residences or receiving substance use disorder treatment, nursing home residents and direct care workers. Committee members repeatedly pressed DHS staff about the budget’s projected savings, whether those cuts were being driven by the department’s forecast or the state’s base budget, and how much of the plan simply shifts costs to counties.

DHS officials summarized a wide set of changes. On program integrity and behavioral health, Bailey described a package that includes a provisional licensure pathway and earlier revalidation for early intensive developmental and behavioral intervention (EIDBI) providers, changes to substance use disorder billing (moving from one-hour billing codes to six 15-minute unit codes to align with ASAM guidance), and a certification process for recovery residences tied to the National Association of Recovery Residences standards. The department also proposes phasing out a freestanding room-and-board payment structure for some residential SUD placements and replacing it with housing support agreements, and creating a work group to study long-term funding for people living in recovery residences.

Bailey also described three changes to the state’s behavioral health fund: shortening state-only behavioral health payments from up to one year to 60 days of eligibility, moving eligibility processing for that fund to DHS (removing a local administrative allocation), and increasing counties’ share of certain behavioral health fund services from 22.9% to 50% except for services provided in carceral settings.

Natasha Merce presented disability and long-term care proposals. She summarized collective-bargaining-driven wage and benefit increases that apply to personal care attendant (PCA) and Community First Services and Supports (CFSS) workers, including 40¢-per-hour increases in 2026 and 2027 for workers who complete orientation training, $1,200 retention stipends and other training and matching-system investments, and a proposed trust to support retirement benefits for the bargaining unit. Merce also described several proposals intended to slow growth in the disability waiver system: tighter limits and annual revalidation for rate exceptions in the Disability Waiver Rate System (DWRS); new monitoring of rate inputs; aligning residential billing absence/utilization assumptions to a 3.9% factor (described as an average 351 days per year in residence); a study and potential distinction between awake and sleeping overnight staffing; limiting access to certain customized living services around an age threshold described as "55" in the presentation; creating a night-supervision rate for sleeping staff; and capping inflationary adjustments applied to waiver rates at 2% per adjustment.

On nursing facilities, Merce and DHS staff said the budget would transition Minnesota from the RUG system to the federally-accepted Patient-Driven Payment Model (PDPM) for determining acuity-based daily rates, repeal several annual alternative payment or incentive adjustments, and cap operating-rate inflation at 2% per year. DHS also proposed implementation of wage floors coordinated through the Nursing Home Workforce Standards Board, with tiered hourly wage floors described in the presentation.

DHS described several administrative and technical proposals: creation of a single administrator model for nonemergency medical transportation (NEMT) with a per-member-per-month fee; elimination of a local planning grant the department said receives few applications; termination of a Drug Effectiveness Review Project contract; enabling the State Medical Review Team (SMART) to access electronic health records and accept electronic authorizations to speed disability determinations; statutory changes to recognize tribes as providers of targeted case management for vulnerable adults and developmental disabilities; accounting alignment following agency reorganization; and a shift of some grants (the Adult Mental Health Initiative and the Traditional Healing Program) from grants to direct payments to counties and tribes.

Committee members pressed DHS on several fronts. Senator Gruenhagen warned the package looked like a cost shift to counties and said county property taxes and local budgets would be strained; DHS acknowledged some proposals increase local shares and said the fiscal analysis will change with package permutations. Multiple senators, including Groenhagen and Abler, asked whether nursing homes—many of which reported financial stress—could remain viable under the proposed changes; DHS said it was difficult to predict facility-level impacts and urged continued study. Senators also raised concerns about emergency medical services reimbursement, workforce shortages across human services, and implementation problems already reported as part of the CFSS transition.

Several senators asked DHS to provide follow‑up information the department did not have on hand: the number and demographics of people under age thresholds in customized living settings, the underlying forecast assumptions DHS used when setting proposed limits on growth, and the exact inflation percentages the DWRS would have received absent a 2% cap. DHS agreed to provide that data in writing and to coordinate with Minnesota Management and Budget where necessary.

No formal votes or committee actions were taken at the Feb. 17 session. Chair Hoffman said the committee will hold a public hearing on Wednesday with about two dozen sign-ups for testimony and left time for a broader public comment record. DHS officials said they look forward to working with the committee on the detailed fiscal scenarios and the package’s interactive effects.

Looking ahead, the committee signaled it will examine county fiscal impacts, nursing home solvency, CFSS implementation issues and the effects of limiting DWRS growth. DHS emphasized that the governor’s document is a proposal and that fiscal outcomes will depend on which elements the Legislature ultimately adopts.