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Home > Advocacy > CWLA 2005 Children's Legislative Agenda > The Federal Budget and Children


CWLA 2005 Children's Legislative Agenda

The Federal Budget and Children


  • There must be "No Cap on Kids!" Oppose any attempt to use the budget reconciliation process to cut children's programs.

  • Reject any budget proposal that would cap federal foster care funding by converting the Title IV-E Foster Care program into a block grant or by imposing an overall cap on all federal entitlement programs that could result in extreme cuts in child welfare funding.

  • Reject restrictions on the use of Medicaid targeted case management (TCM) and rehabilitative services to provide services to children in the child welfare system.

The FY 2006 Federal Budget

On February 7, President Bush released his proposed federal budget for fiscal year 2006. The proposal reflects an overall increase in federal spending by 2.5%. Spending increases for the defense budget and homeland security are isolated within the budget, but other discretionary spending is actually cut. The President's budget seeks to reduce the federal deficit from $420 billion in 2005 to $390 billion in 2006.

The President's budget, however, does not include the request of $82 billion in additional funds for the wars in Iraq and Afghanistan or the complete cost of extending tax cuts.

Capping Federal Funding for Foster Care
The Administration's FY 2006 budget again proposes a child welfare financing option that would restructure the current Title IV-E Foster Care program. Under the proposal, each state would have an option to receive a fixed, predetermined allocation, or block grant, of Title IV-E foster care maintenance payments, administrative costs, and training funds. States currently receive federal funding as an entitlement--they receive funds based on the number of eligible children. The Administration's proposed financing option would freeze federal support for children in out-of-home care regardless of any increases in foster care caseloads or the rising costs associated with caring for children with complex needs.

The Administration's proposal suggests that states would receive annual grants over five years. Funding would equal the projected growth in federal foster care expenditures. These projections would be based on the current restrictions that require states to base eligibility on 1996 standards under the old Aid for Families with Dependent Children (AFDC) program. States would be allowed to draw up to 20% of this five-year total in any one year. Once a state chooses the option, it may not opt-out during the five years.

States could spend funds on foster care and any services now provided under Title IV-E, Title IV-B Child Welfare Services, and the Promoting Safe and Stable Families program. If a state experienced an unusual increase in its foster care population, the state could draw funds from the Temporary Assistance for Needy Families (TANF) block grant. The Title IV-E Adoption Assistance program would remain unchanged, and eligibility would continue to be linked to a state's 1996 AFDC standards.

Restrictions on the Use of Medicaid to Provide Services for Children in the Child Welfare System
Many states access TCM to support a range of services for children in the child welfare system, including
  • assessing a child's needs;

  • arranging delivery of needed services;

  • helping the child and his or her family to access services;

  • tracking the child's progress by making referrals, tracking appointments, following up on services, and periodically reassessing the child's needs;

  • consulting with service providers to determine the progress of the child's plan; and

  • arranging for crisis assistance.
The President's budget would restrict states' ability to use TCM to provide services for children in the child welfare system. The budget proposal caps TCM costs to no more than a 50% federal matching rate, the same as Medicaid administrative services. This is a significant reduction for many states. TCM funds represent a significant source--in some instances, the major source--of child welfare funding. The budget would also restrict when states can use TCM. Restricting the use of TCM, and limiting reimbursement to 50%, would leave states with less federal support to provide these needed services.
  • States' reliance on Medicaid as a percentage of all federal funds used to support child welfare services varies widely, ranging from 0% in five states to 55% in one state. Variation in Medicaid use exists because some states do not have TCM or rehabilitative services for child welfare clients as an option in their Medicaid plans, thus child welfare agencies cannot claim Medicaid for these costs. Interpretation of the federal policy on TCM for child welfare clients also has varied by regional offices of the U.S. Department of Health and Human Services. 1

  • Medicaid funding, not including basic health care, represents 11% of total federal funding for child welfare. 2 States used $1.1 billion in Medicaid funds to provide important rehabilitative and case management services for children in child welfare in state fiscal year 2002. 3

  • Although it is a significant source of funding for services for children in the child welfare system, Medicaid spending for these children constitutes only a fraction of total Medicaid spending.

  • Although children account for approximately 50% of all people covered by Medicaid, the $45 billion spent on these children represents only 19% of the Medicaid's total cost. 4 In other words, restricting services to children does not result in as significant a savings as some may think.
Budget Resolution
Now that the President has submitted his budget, Congress must take the next step. The Senate and House Budget Committees will each draft their own versions of an FY 2006 budget resolution. This annual budget resolution serves as a blueprint that sets limits on total federal spending. The target date for both the Senate and House to pass their own budget resolutions is the week of March 15. The Senate and House must then negotiate and adopt a single, final budget resolution by April 15.

Budget Reconciliation
To meet the reduced federal spending targets outlined in the President's budget proposal, Congress is expected to use the budget resolution process this year to issue budget reconciliation directions to various congressional committees to cut entitlement programs. The Budget Committees sometimes use the reconciliation process to direct all other congressional committees to come up with cuts in mandatory and entitlement spending. The Budget Committees could direct the appropriate committees to cut spending in Medicare, Medicaid, Title IV-E Foster Care, nutrition, and other programs.
In examining the cost of legislation enacted since January 2001, when the federal government was still showing a surplus, entitlement spending represented only 9% of new costs, defense and homeland security represented 29% of new costs, and tax cuts represented 58% of new costs. 5 Today, Title IV-E Foster Care and Adoption Assistance represent one-half of 1% of all entitlement spending--making it a minor entitlement expenditure.
A reconciliation bill makes it easier to cut entitlement programs. Under reconciliation, several proposals would be wrapped into one omnibus bill. In the Senate, a reconciliation bill cannot be stopped by filibuster and requires only 51 votes to pass. The time allowed for debate in the Senate is also limited.

History of Block Grant Funding Shows Reduced Investments Over Time
States currently receive federal funding to support children and families in the child welfare system through several sources that are block grants, meaning states receive capped federal funding or allotments each year. Some of these block grants help subsidize the child welfare system. These sources may include funding from TANF, the Social Services Block Grant (SSBG, Title XX), and the Child Care and Development Block Grant (CCDBG).

Block grant funds generally have fewer restrictions on their use, thereby allowing states and communities to make their own decisions within certain parameters about how the funds are used. Over time, however, federal funding for these block grants has eroded. As this happens, children and families remain on waiting lists to receive services.
  • Funding for SSBG, a major source of federal funding to address the needs of vulnerable children and youth, was capped in the early 1970s, then converted to a block grant in 1981. As a block grant, SSBG funding was intended to bypass the annual appropriations process and automatically receive the level set in the statute--$2.8 billion. SSBG funding was cut in 1996, however, and again in 1998. Since 1973, SSBG has lost 84% of it value. 6

  • This year, Congress will attempt to pass legislation to extend TANF, which evolved from the AFDC entitlement program in 1996. Since that time, federal funding for TANF has remained at $16.5 billion. Congress plans to extend the program at that same funding level for another five years. If this happens, the TANF block grant will have lost 22% of its value between 1998 and 2009. 7

  • The Administration's FY 2006 budget assumes no funding increase for child care. If Congress adopts the Administration's recommendations, funding for CCDBG will have been frozen from 2002 through 2006. Estimates suggest that between 300,000 and 375,000 children will lose child care between 2004 and 2010 as a result of this freeze in funding levels. 8


  1. Bess, R.; Scarcella-Andrews, C.; Jantz, A.; Zielewski, E.; Warner, L, & Geen, R. (2004). The Cost of Protecting Vulnerable Children IV: How Child Welfare Funding Fared During the Recession (Assessing the New Federalism Occasional Paper). Retrieved online, January 10, 2005. Washington, DC: Urban Institute.
  2. Ibid.
  3. Ibid.
  4. Kaiser Commission on Medicaid and the Uninsured. (2004). Health Coverage for Low Income Children (Fact Sheet, Publication No. 2144-04). Retrieved online, January 13, 2005. Washington, DC: Author.
  5. Calculations made November 2004 by the Center on Budget Policy and Priorities, from the Congressional Budget Office (CBO) data. Does not total 100% due to rounding, and may not include the latest funding on the war. The calculation of IV-E funding as a percentage is based on CWLA calculations based on CBO data, January 2005.
  6. Greenstein, R. (January 13, 2005). The Threats Facing Domestic Programs in This Year's Budget Debate. Washington, DC: Center on Budget Policy and Priorities.
  7. Ibid.
  8. Ewen, D. & Mathews, H. (2005). President's Budget Projects 300,000 Low-Income Children Lose Child Care by 2010. Retrieved online, February 15, 2005. Washington, DC: Center for Law and Social Policy.

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