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Federal Child Welfare Funding

State child welfare systems receive funding from a variety of federal sources, the majority of which stem from the U.S. Department of Health and Human Services.

Title IV-E is the largest source of federal funding. It is a permanently authorized, open-ended entitlement that provides reimbursement to states for every eligible child placed in a licensed foster home or institution or adopted from foster care. Under Title IV-E, states are reimbursed for (1) monies provided to foster and adoptive families that cover the cost of food, shelter, and clothing, (2) the cost incurred by the state agency through placement and administrative duties, and (3) training for staff and foster or adoptive parents. It is important to note that the process of determining which families meet eligibility requirements and filing appropriate paperwork is itself a drain on state resources. Furthermore, the standards set in 1996 have not been adjusted for inflation, leaving fewer and fewer children eligible for federal reimbursement. In FY 2008, federal IV-E foster care expenditures are estimated at $4.6 billion.

Title IV-B provides more flexible funding in comparison to Title IV-E because it does not contain any eligibility restrictions regarding which families can receive aid with these funds; however, it is also a much smaller resource, representing only 5 percent of all federal child welfare spending in SFY 2000. Because it is a combination of capped entitlement monies and discretionary funding, Title IV-B’s overall funding level is subject to the annual appropriations process. Title IV-B accounted for $692 million in federal child welfare spending in FY 2008. There are two important subparts to this amendment. The first, known as the Child Welfare Services Program, provides for matching grants to states for a variety of child welfare services predominantly but not exclusively targeted at enabling children to remain in their homes whenever possible. The second, called Promoting Safe and Stable Families, is a capped state entitlement that can be used for prevention, family preservation, time-limited family reunification, or adoption promotion and support.

Title XX, also known as the Social Services Block Grant (SSBG), is a capped entitlement that cannot exceed $2.8 billion and has not even come close to this level in recent years. In FY 2008, Title XX received $1.7 billion in funding. It is estimated that Title XX will receive $1.2 billion in 2009. Moreover, as it is not indexed for inflation its true value continues to shrink, dropping 56.6 percent between 1977 and 1993 . States are given considerable flexibility in determining which programs and individuals are to be served with this funding and therefore many states allocate money from this grant to child protection rather than to other child welfare programs.

TANF, the Temporary Assistance for Needy Families block grant, was established as part of the welfare overhaul in 1996. States use TANF funds to provide parenting classes, mental health counseling, or substance abuse treatment — programs which fall under the federal guideline of providing assistance to families so that children may be cared for in their own homes. States are also permitted to allocate TANF money for kinship care payments. The TANF block grant is a capped state entitlement for which states must meet a “maintenance-of-effort” spending requirement. In 2008, it was authorized at $16.5 billion.

Funding Challenges

The current financing system has been widely criticized for its inflexibility. The vast majority of dedicated federal funding requires that a child be removed from their biological families. Oftentimes, the provision of basic services to a family has to be forgone because funding is exclusively designated for children placed in foster care. Open-ended federal funding sources that specifically target the prevention of child abuse and neglect are relatively limited; for these efforts, states often depend on money designated for child welfare programs, including foster care and adoption. Thus, states are restricted in terms of their choices regarding aid for a child who has been a victim of abuse or neglect. Finally, in order to maximize federal aid for child protection programs, states must expend a considerable administrative effort that not only slows the entire funding process but also diverts resources from direct service provision.

 

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