Vanderburgh County Health Department funding crisis may lead to fee hikes, layoffs

The biggest gut punch: The health department had anticipated receiving more than $5 million in 2026 from the state's Health First Indiana (HFI) initiative launched in January 2024 after the General Assembly passed legislation enabling it. Each of the state's 92 counties opted in to the extra funding to expand the core public services offered by local health departments.

The expected $5 million-plus for Vanderburgh County would have followed 2025's allocation of more than $4.2 million, which was roughly double the previous year's allotment. The local health department had used the extra money, among other things, to increase lead testing by more than 100% in the past year.

But a disappointing revenue forecast that projected $2 billion less in state revenue than anticipated over the next two years turned the state's expectation of $200 million for HFI funding this year into $80 million.

The health department found out on May 7 that Vanderburgh County's take for next year is $1.1 million − far less than $5 million.

Nobody knows at this point exactly how much the health department might receive from Vanderburgh County property taxes next year, but the early indications aren't promising. Indiana's cities, towns and counties will likely get hundreds of millions of dollars less in revenue over the next three years under Senate Bill 1 — the massive property tax relief bill signed by Gov. Mike Braun last month — than they would under existing law.

Joe Gries, the health department's administrator and a former county auditor, told the Vanderburgh County Health Board recently that the levies for all local funds are expected to increase by only about $725,000 — much less than the typical $4-$5 million.

"If we kept everything the same as far as where we were at, we would not be able to continue with the level of staffing," Gries said. "There's either significant cuts we have to make or we stop spending this year to try to save money to cover '26 and '27 with the levels where we're at."

The Vanderburgh County Commissioners appeared to take a preemptive step Thursday, releasing a letter stating that county department heads have been told not to bother making budget increase requests for 2026, "with the only likely exceptions being for previously signed contractual obligations."

"This proactive measure is necessary to maintain financial stability in light of the revenue shortfalls expected under SB (Senate Bill) 1," stated the letter from Commissioners Justin Elpers, Mike Goebel and Amy Canterbury.

Margaret Musgrave, chair of the health board's finance committee, noted that the Vanderburgh County Council last year asked the health department to transfer some expenses typically covered by property taxes to the agency's allotment of HFI money.

"So it's not just, 'Oh, we have this HFI money and we're not going to hire some people that we had planned to out of the HFI money," Musgrave told the health board. "It's now that and some of the line items that were covered this year by HFI money, like some rent and insurance and overhead expenses — things that we have to pay just to keep the lights on.

"That also was another double whammy. So it's not just, 'Oh, we're not going to hire new positions.'"

Grants received by the 501(c)3 Foundation for Better Health totaling several hundred thousand dollars are not endangered, Musgrave and Gries said. But Gries told the health board the prospect of the health department itself finding new grant money is poor.

"Right now, you know, when we're looking for grants at this time of the year, and to file for things, there's nothing out there," he said. "Nobody has posted things. I think everybody's just trying to understand what the impact will be before they start maybe spending money."

That's not the end of the health department's bad news.

The local agency has had for the past several years a one-year renewing contract for an immunization grant from the state. This year's award for the period July 1, 2024-June 30, 2025 was $523,000. That money has been spent, Gries told the Courier & Press.

Next fiscal year's award: $38,000.

Fee increases are on the table

The bulk of the immunization grant money goes to nurses to administer vaccines to the public.

Nobody has to connect the dots for Musgrave and the other health board members, who acknowledged with stated reluctance that layoffs must be considered.

That, and across-the-board fee increases for such services as water-quality testing, restaurant inspections and issue of birth and death certificates.

The most recent fee increase was 5%, Musgrave said, adding that more than that this time probably wouldn't fly.

It's not going to save the health department's bacon. Musgrave said fees bring in about $780,000, of which nearly half is for vital records — birth and death certificates at $15, $19 or $24 each, depending on whether the requestor lives in Vanderburgh County.

Fees don't come close to turning a profit for the health department, Musgrave said, but they can make a difference in this case. She estimated a 5% increase could raise the total to $850,000 — perhaps enough money to save a nurse or administrative position.

The health department charges $100 for an inspection that it does once to twice a year, Gries said, adding that a grocery store inspection can take two hours.

"Here's my thing, and we can talk about this," he said. "I'm not going to die on this hill. But a restaurant, to pay even double that, $200 for a year, in my opinion, is not excessive.

"Now, it does put a tax on business."

Maybe fee hikes could be phased in gradually over a few years, Gries mused. That might make them easier to swallow.

"Raising all of these is probably not the best idea all at the same time," he said. "But maybe over the next two to three years we could parcel and post all of them a little bit here and there. We could even stair step things and say, 'OK, we're going to go up, for example $100 to $200. We'll go $25, $25, $25, you know, until we get to that."

But Musgrave told the Courier & Press she'd rather raise birth and death certificate fees because "it's a smaller amount spread over a lot of people rather than getting more money from fewer people."

"I think restaurants are paper-thin margin businesses to begin with," she said. "I don't think we should be raising fees on small business owners if we can help it, and we may not be able to help it."

The next two months will be about making hard choices, Musgrave said.

"I'd rather raise restaurant inspection fees and be able to provide immunizations to children," she said.

'People are going to have to get laid off'

Such issues will likely be hashed out in a strategy meeting of the health board's finance committee to be held this week. The department has to have a budget request ready for the County Council in August.

The local agency has some tools to work with, even if only to stave off the inevitable.

It still has hopes that some of its 2024 HFI money might be left over once bills are paid, but no definitive information yet on whether the state might try to impound unused funds. Senate Bill 1 introduced new local income tax tools for counties and municipalities to help fill the funding gaps — but whether they will be willing to do so is very much an open question.

Gries is trying to be optimistic.

"We’re going to do the best we can with what we have, and we’re going to leverage our partnerships," he told the Courier & Press. "We’re going to find ways to maybe pull back a little bit as far as what we are able to expand."

Musgrave was more blunt.

"People are going to have to get laid off," she said. "Departments are going to have to shrink. Whole service lines are going to have to disappear."

The decisions that lie ahead are anguishing, she said.

"Do you have nurses lose their jobs or do you cut restaurant inspectors?" she said. "Or do you cut vital records workers, the people who make up 50% of our revenue?

"Where do you cut? How do we make these decisions?"