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Moving Beyond Flexibility to Adequate Funding

February 12, 2013

By Amy Lemley, Policy Director

In January, the United States Government Accountability Office released, Child Welfare: States Use Flexible Federal Funds, but Struggle to Meet Service Needs, a report documenting the inadequacy of funding for services that prevent children from being placed in out-of-home care. The report documents both how our government underfunds prevention, and how states across the country are diverting funds from other poverty programs to make up the shortfall.

The main source of federal child welfare funding to prevent the removal of a child is provided under Title IV-B of the Social Security Act, commonly referred to as Title IV-B funding. The report examine show four states (Virginia, Minnesota, New Mexico and Florid) consistently supplement Title IV-B funds with other federal funding not designated for child welfare. According to the report, a full 31 states use Temporary Assistance for Needy Families (TANF) funding for child welfare purposes that should be covered by Title IV-B, totaling $1.5 billion annually. The Social Services Block Grant program is used even more frequently, with 44 states spending SSBG funding on categories covered by Title IV-B. Medicaid is also an important supplement to Title IV-B, although the exact level of federal Medicaid reimbursement claimed by child welfare agencies is unknown.

Despite drawing funds from these other programs, the needs of families remain woefully unmet. According to the report, a full 91 percent of caregivers who needed substance abuse services in the past 12 months did not receive it, while over half of children under age 10 who required behavioral health services did not receive them. The report also documents unmet needs in housing, domestic violence services, parent education, in-home services and transportation. Together, the report paints a picture of a system that does not adequately fund the essential preventative services that can help children remain safely with their parents, even when it is supplemented with funds diverted from other poverty programs.

What could be the solution to this problem of inadequate funding? The most obvious answer is “more money.” Clearly, Title IV-B programs are underfunded, and it’s certainly no solution to take money from other programs that help needy people, such as TANF. Unfortunately, that’s not the conclusion of the report. Instead, it highlights the opportunity provided by more flexibility, which would allow states to use Title IV-E funds to fund services covered by Title IV-B.

Title IV-E is the major source of funding for foster care placements, adoptive placements and guardianships. It is a federal entitlement and as such it is an open-ended funding source available to all individuals who meet eligibility criteria. Unlike IV-B which funds prevention, Title IV-E funding is largely used to fund out-of-home placement costs and administrative costs.

The approach of the last two Administrations has been to authorize “waivers” that allow states to use Title IV-E funding for preventative services traditionally funded by Title IV-B. The catch is that the waiver must be cost-neutral. Instead of increasing the level of funding to the system overall, waivers “cap” the total spending, making what was formerly an open-ended funding source effectively into a block grant.

The thinking behind this approach is that increasing preventative services will reduce the need for children to be removed from their homes, and therefore reduce the need for Title IV-E funding. Unfortunately, the child welfare system has little ability to control how many children are maltreated. The best available research has identified a set of factors that predict child welfare involvement by age 5 and most are related to poverty. That’s bad news for California, which ranks #1 in poverty, according to the Census Bureau’s Supplemental Poverty Measure.

Another problem with the waiver approach is that it is based on an assumption that fewer children in foster care is a good thing. In its discussion of Florida’s waiver, the report cites its 27 percent reduction in the number of children being placed in out-of-home care as evidence of their waiver’s efficacy.

However, the goal of the child welfare system is not a low foster care caseload. The foster care caseload should be as small or large as necessary to respond to the level of child maltreatment. The 1996 “reform” of welfare is a good case study in the error of using caseload to measure effectiveness. Since 1996, the national welfare caseload has fallen 58 percent, yet just poverty has grown and the TANF program serves fewer poor families than ever.

The biggest concern about waivers is that they are setting the stage for a national block grant of Title IV-E funding. As Angie Schwartz of the Alliance for Children’s Rights and I have written before, former entitlement programs that have undergone this transformation have not fared well. Since becoming a block grant in 1996, TANF funding has remained frozen in the face of mounting poverty nationally. Similarly, the Social Services Block Grant has lost 84% of its value since 1998–the most recent Congress has proposed to eliminate it altogether.

In child welfare, it’s time to think beyond flexibility and demand what we really need: more money. Instead of buying into policies that pit prevention funding (Title IV-B) against placement and administration funding (Title IV-E), let’s work to strengthen the federal government’s overall commitment to the most vulnerable children and youth.

A step in the right direction is to call on Congress to reform federal foster care eligibility. Currently, federal foster care eligibility is linked to the 1996 income standard for Aid to Families with Dependent Children (AFDC), which has not been adjusted for inflation. Children removed from households that earn more than this are not eligible for federal foster care. Over the 17 years since 1996, this policy has resulted in a steady loss of federal funds for states, as fewer and fewer children qualify as federal foster care. In some states, as few as 1 in 4 children qualify for federal foster care funding, leaving states to meet the budget shortfall.

Instead of waivers, let’s address this problem by updating the federal foster care eligibility criteria. One proposal is to make federal foster care eligibility consistent with Medicaid eligibility to be implemented as part of the Affordable Care Act, so that all children removed from households with an income below 133% of the federal poverty level would be federally eligible for foster care.

No matter how much flexibility you have, you can’t build a house with $20. Instead of moving our system towards a block grant, we need to increase funding. This would affirm the role of the federal government in child welfare and restore funding to states.

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