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November 22, 2010

Where the Money Comes From: Paying for Child Welfare Services

By Tim Ross, Action Research Partners

Child neglect and abuse inflict enormous costs on children and families—and on government budgets. This document explains the major sources of child welfare funding, using examples from the “Child Welfare Financing” pages of the website www.childwelfarepolicy.org. Future columns will focus on policies and programs that can save money while improving services and outcomes.

The United States spent almost $26 billion on child welfare services in federal fiscal year 2006, the last year for which detailed information is available.  The federal government provided over $12 billion, state governments almost $11 billion, and local governments almost $3 billion. This money comes from numerous programs: at least 43 separate federal funding streams can be used to pay for child welfare services.  

Most federal funding, however, comes from five sources: Titles IV-B and IV-E of the Social Security Act, the Social Services Block Grant, and Temporary Aid to Needy Families, and Medicaid. Because federal regulations require that states provide matching funds to claim reimbursement for most of these programs, federal funding plays a large role in how states and localities spend their own child welfare dollars.

Title IV-E is the largest source of federal funds, accounting for $6 billion of spending.  Title IV-E is an entitlement program that provides states with funding for foster care, adoption assistance, youth transitioning out of foster care to adulthood (funded through the Chafee Act) and administration. Generally, IV-E funding is based on the number of children receiving assistance and for children in foster care, the number of days in care. Only children from families that meet the eligibility criteria for the Aid to Families with Dependent Children program, which ended in 1996, are eligible for Title IV-E.

Title IV-B provides about a tenth of the annual funding of IV-E ($637 million) and can be used for services to prevent child maltreatment, to help reunify families, and to maintain a qualified workforce, among other uses. Unlike Title IV-E, Title IV-B funding is capped—a fixed amount is allocated to each state each year.

Both the Temporary Assistance to Needy Families (TANF) and Social Security Block Grant (SSBG) programs can be used by states for many social services, of which child welfare is only one.  The amounts allocated by states to child welfare from TANF and SSBG vary from year to year. Arkansas, for example, more than doubled its TANF spending on child welfare services between FY2004 and FY2006, while New Mexico eliminated TANF funds for child welfare during the same period. In 2006, states spent $2.3 billion from TANF and $1.6 billion from SSBG on child welfare.

Medicaid also covers some child welfare services, above and beyond standard health care expenditures for regular checkups, dental work, and the like.  These services include targeted case management or rehabilitative services, such as behavioral health and some residential care services.  Medicaid spending on child welfare services came to almost $1.4 billion, though some states were not able to break out this spending from other Medicaid expenditures.

The structure of federal financing provides strong support to some types of child welfare services and comparatively little to others.  Federal funding, for example, may provide up to 83 percent of the cost of foster care in some states, as well as significant subsidies to families who adopt children from foster care. Funding for services to prevent placement in foster care and to help children already in foster care reunify with their families is much less.  This disparity has created widespread calls for the reform of federal financing of foster care. The following list of resources provides a range of opinions on this policy debate.

Resources:

From Child Trends:  Kerry DeVooght, Tiffany Allen, and Rob Geen. 2008. Federal, State, and Local Spending to Address Child Abuse and Neglect in SFY 2006. Child Trends: Washington, DC.

From Casey Family Programs: Child Welfare Finance Reform Principles, The Need for Federal Finance Reform, The Need to Reauthorize and Expand Title IV-E Waivers.

From the Center for Law and Social Policy (CLASP):  Testimony of Rutledge Hutson.

From the National Center for Child Protection Reform: You Get What You Pay For.

From the National Association of Public Child Welfare Administrators: Child Welfare Finance Reform Policy Proposal.

From the Child Welfare League of America: Financing Child Welfare Services

From the American Bar Association: Strengthening Families and Ending the Overuse of Foster Care.

These resources are for informational purposes only and do not constitute an endorsement by the host or funders of this website.