According to the Legislative Budget Board (LBB), the fiscal implications of SB 1398 are projected to result in a negative net impact of $454,080 to General Revenue-related funds over the 2026–2027 biennium, with increasing costs in subsequent fiscal years. This reflects the implementation of new oversight responsibilities and structural changes in how family preservation services are transitioned to community-based care (CBC) providers within Texas's child welfare system.

One of the main cost drivers is the requirement for the Department of Family and Protective Services (DFPS) to develop a capitated funding model and conduct external evaluations to assess contractor readiness for delivering family preservation services. These assessments are estimated to cost $525,000 annually, starting in the fiscal year 2027. In addition, a one-time contract expense of $500,000 is anticipated in the fiscal year 2028 for the development of the capitated funding model. While the bill removes the previously required independent evaluation of contractor outcomes—saving about $215,000 annually—it shifts to a more structured but still resource-intensive oversight framework.

The bill also necessitates hiring 1.0 full-time equivalent (FTE) to manage annual performance reviews, along with minor technology upgrades to the state’s child welfare systems (IMPACT and Contracts and Grants Management), totaling just over $100,000 in combined system updates over two years. Although the bill does not impose costs on local governments, it sets the stage for substantial downstream state investments, especially if the pilot program for family preservation services is scaled statewide. DFPS estimates that full statewide expansion could cost upwards of $24.5 million annually, a figure not included in the fiscal note due to its speculative nature but important for long-term budgeting and planning.

Overall, the bill introduces modest immediate costs in exchange for laying the groundwork for broader reform and improved service integration. However, the long-term financial outlook will heavily depend on the outcomes of the new funding model and DFPS’s capacity to manage transitions effectively.

SB 1398 addresses longstanding deficiencies in Texas’s foster care and child welfare systems by clarifying procedures surrounding children without placement and expanding the scope and accountability of community-based care (CBC) providers. The bill defines “temporary emergency supervision” and prohibits courts from ordering such placements if appropriate alternatives exist. It also formally authorizes CBC contractors to provide family preservation, adoption-related, and independent living services—functions that align with the shift toward local delivery of child welfare under the state’s CBC model. Further, the bill strengthens DFPS’s contract oversight authority, enabling financial remedies and performance reviews of CBC providers based on specific outcome measures.

In situations where DFPS is appointed managing conservator, the state is acting in loco parentis. SB 1398 reinforces this duty while emphasizing family preservation and limiting state intrusion—such as preventing unnecessary emergency placements—when less restrictive alternatives are available. These protections serve both the interests of child safety and the principles of limited government, aligning with the expectations of due process and minimal intervention found in both conservative and libertarian frameworks.

That said, several provisions in the original bill that strengthened transparency and parental empowerment—such as monthly reporting requirements and limited parental choice in service providers—were removed in the Committee Substitute to reduce fiscal impact. These deletions, while easing budgetary pressure, reduce external accountability and visibility into system performance. The bill also modestly expands DFPS responsibilities and carries a projected cost of approximately $454,080 over the biennium, indicating a slight growth in government scope.

On balance, the bill represents a constructive policy solution within the state’s purview, but targeted amendments are recommended to restore key transparency mechanisms and maintain checks on administrative authority. Therefore, Texas Policy Research recommends that lawmakers vote YES but consider the amendments as described below. Our position reflects support for the bill’s intent and structure while acknowledging the need for improvements that better align the legislation with principles of limited government, individual liberty, and fiscal accountability.

Suggested Amendments:

• Restore Limited Parental Choice in Service Providers: Reinstate language from the originally filed bill allowing parents to select their own providers for family preservation services, with reasonable limits or caps on reimbursement. This would empower families, promote individual liberty, and support diverse service options while still allowing DFPS to control costs through average regional reimbursement rates.
• Reinstate Monthly Reporting on Children in Temporary Emergency Supervision: Require DFPS to submit monthly data to the Legislature and make it publicly available regarding the number of children in TES, demographic breakdowns, costs incurred, and length of TES episodes. Public transparency about children without placement reinforces limited government by ensuring legislative and community oversight without interfering in case-by-case decision-making.
• Include a Sunset Provision for TES Authority: Add a clause that the statutory authority for temporary emergency supervision will sunset in 4–6 years unless reauthorized by the Legislature. This creates a check on the potentially indefinite use of TES and requires reevaluation of its effectiveness and impact on child and family rights.
• Add Explicit Notice and Hearing Rights for Parents Before TES: Require that DFPS notify a child’s parent(s) or legal guardian before a child is placed in TES, and allow an expedited hearing to challenge the placement if requested. This ensures due process and respects the principle that government intrusion into family life must be narrowly applied and subject to judicial review.
• Clarify the Capitated Funding Model Timeline and Oversight: Require DFPS to publicly report on the progress, methodology, and evaluation framework for the capitated funding model before full implementation. Encourages budget transparency and provides the Legislature and public with clarity on a significant fiscal shift in how foster care and preservation services will be funded.
• Ensure TES Is Not Used Beyond Short-Term Crisis Stabilization: Limit TES placements to no more than 7 consecutive days unless explicitly extended by court order with documented reasons and review of all alternatives. Prevents TES from becoming a de facto long-term placement alternative, preserving the integrity of the foster care system and the rights of the child.

SB 1398 has a mixed but generally constructive impact on core liberty principles, as it balances government intervention in child welfare with reforms aimed at improving accountability, reducing unnecessary state intrusion, and reinforcing family integrity.

• Individual Liberty: The bill promotes individual liberty by limiting state intrusion into family life when safer, less restrictive options are available. Specifically, it prohibits courts and DFPS from placing a child in temporary emergency supervision if a safe, appropriate placement exists. The bill ensures that a child’s refusal to stay in a placement cannot be used alone to justify emergency supervision. These measures protect against arbitrary or excessive government custody decisions, supporting the principle that families should not be separated unless absolutely necessary. However, the bill removes a provision from the original version that allowed parents to choose their own service providers, which would have further empowered families and respected personal autonomy. The removal of this choice slightly diminishes the bill’s support for individual liberty.
• Personal Responsibility: The bill reinforces personal responsibility by requiring non-parent caregivers (e.g., guardians or relatives) to pay for services if they select a provider outside of DFPS's approved network. The bill emphasizes in-home family preservation services that help families remain intact, provided they engage in necessary behavioral and structural changes. These provisions encourage households to take an active, accountable role in meeting court-ordered service requirements when their children are at risk of removal.
• Free Enterprise: The bill neither significantly expands nor restricts free enterprise. While it does not create new market opportunities for non-contracted service providers (due to the removal of reimbursement options for outside services), it maintains the state's reliance on a network of private and nonprofit CBC contractors. This framework still supports a hybrid public-private model in child welfare services without substantial disruption to competition or choice.
• Private Property Rights: The bill does not impact private property rights. It focuses on family services, judicial procedures, and contract management, with no implications for ownership, land use, or economic takings.
• Limited Government: This is where the bill has both strengths and concerns. It limits judicial and DFPS discretion in placing children in state-controlled emergency supervision when other placements are viable, thereby checking government overreach. The bill also expands DFPS authority and scope, requiring new performance reviews, contractor oversight duties, and system updates. While this is intended to improve accountability, it represents a modest growth in government bureaucracy and long-term obligations to taxpayers. Moreover, the removal of some transparency and accountability provisions—such as public data reporting on children without placement and independent contractor evaluations—weakens the bill’s alignment with limited government ideals.