Children's Voice July/Aug 2006

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Budgeting Child Welfare

How will millions cut from the federal budget affect the child welfare system?

By David Laird and Jennifer Michael

At its 2005 National Conference, CWLA launched a campaign to ward off Washington's attempts to cap, limit, or freeze funding for child welfare services. The "No Caps on Kids!" campaign rallied CWLA members, staff, and national and regional advocates to prevent reduced funding for foster care and adoption assistance proposed in the President's FY 2006 budget.

The campaign's initial efforts were successful, and federal funding for foster care and adoption assistance under Title IV-E of the Social Security Act was not converted into a limited funding stream. But efforts to reduce funding for child welfare programs continued on Capitol Hill.

At 6:00 a.m. on December 19, 2005, after two hours of review, the House of Representatives voted 212-206 to pass a final budget reconciliation bill that cut $577 million over five years--and $1.29 billion over 10 years--from Title IV-E. Two days later, the Senate made technical changes to the final budget agreement approved by the House before adding its stamp of approval to the budget reconciliation.

Due to these technical changes, and the fact that 16 House members had failed to make the early morning vote on December 19, the House scheduled a second vote on the cuts for February 1. In the weeks leading up to the second vote, CWLA and other child advocacy organizations fought an uphill battle and continued lobbying hard against the cuts. The fight helped: The House vote on February 1 was even closer, but a razor-thin 216-214 majority still voted in favor of the $577 million cut to Title IV-E for FY 2006. The cut was retroactive to October 1, 2005--the beginning of the fiscal year.

"Reconciliation was a closed-door process that allowed for no debate," says CWLA Government Affairs Codirector John Sciamanna. "They were hoping you wouldn't notice."

Addressing CWLA's 2006 National Conference this past February, Representative Jim McDermott (D-WA) pointed out the cuts happened despite child poverty rising in this country. "Most members of Congress never get near the children you are helping," said McDermott, who voted against the cuts. "Congress can and should do more."

Attempting to explain the cuts, House Budget Chair Jim Nussle (R-IA) points out they will help curb spending on "automatic-pilot programs" he charges are growing at an unsustainable rate of about 6% annually. "If nothing is done, they will continue crowding out other priorities--such as education, veterans' benefits, heath care--and the list goes on...The problem will continue to get worse--the baby-boomers will retire, medical costs will continue to skyrocket, and the strain on our economy will continue to grow."

But with $577 million cut from the largest funding source for child welfare, what does this mean for children and families down the road? During CWLA's 2006 National Conference, foster parents and child welfare advocates from around the country descended on Capitol Hill to meet with lawmakers and express their concern about the funding cuts and future proposals that could jeopardize their work with children in need.

Wearing a bright blue and red "No Caps on Kids!" button, foster parent Raynard Price from Palmdale, California, eagerly sought out the representative from his district. Over the past 11 years, Price has cared for 24 teenage boys in foster care. "I can't recall the last time I had an increase in the money I receive to care for the kids," he said, "but all the costs around me have gone up."

Building the Budget Structure

A 2004 Urban Institute study highlights the complexities of the federal funding streams supporting child welfare. The latest data shows that the combined allocations for child welfare nationally exceeded $22 billion in FY 2002. This number represents all direct and administrative costs for services to children and families. Out of the $22 billion, the federal government funded more than 50%, states assumed 37%, and the remaining 12% came from local sources.

A glimpse at the history of our nation's child welfare system might be helpful in better understanding the federal government's complex funding structure. According to the U.S. Census Bureau, in 1904, more than 93,000 children were deemed dependent and relied on outside sources for care, and another 50,000 were in the private care of foster homes.

The role of child protective services as an organized, established office came about following the 1909 White House Conference on the Care of Dependent Children, when President Theodore Roosevelt called for the establishment of the U.S. Children's Bureau to coordinate all federal and state child welfare efforts.

"Each of these children represents either a potential addition to the productive capacity and the enlightened citizenship of the nation," Roosevelt said, "or, if allowed to suffer from neglect, a potential addition to the destructive forces of the community."

The Children's Bureau was established in 1912 to coordinate and design all federal activity related to child welfare, including services related to child abuse and neglect, child protective services, family preservation and support, adoption, foster care, and independent living.

In 1920, 68 child welfare agencies banded together to found the Child Welfare League of America. CWLA soon became a guiding voice for abused and neglected children.

The Social Security Act of 1935, designed to provide relief for veterans and the elderly who were unable to enter the work force after the onset of the Great Depression, included provisions (Title V) to provide initial federal support for child welfare activities. Closely linked to Title V was establishment of Aid to Dependent Children (ADC), which provided financial support to widowed mothers who did not have sustainable income to meet the essential needs of the children in their homes.

In 1958, amendments to Title V required states to commit resources to child protection. Previously, state activity was limited to those states that took up the cause independently. By 1961, ADC became Aid to Families with Dependent Children (AFDC), expanding federal support for low-income families and allowing the use of dollars to assist children eligible for foster care. This service expanded a community's ability to find proper placements with the needed supports for children.

The Child Abuse Protection and Treatment Act was enacted in 1974, mandating the first reporting system for children suspected or confirmed of being abused or neglected. It remains the only federal law directed solely at the prevention, assessment, identification, and treatment of child abuse and neglect.

Substantial child welfare reform came in 1980 with the Adoption Assistance and Child Welfare Act, which strengthened funding for Title V Child Welfare Services and created Title IV-E Foster Care and Adoption Assistance. Today, Title IV-E accounts for 48% of federal child welfare funding.

Reforms in the 1990s were aimed at curbing the rising number of children entering foster care as a result of increased substance abuse. The expansion of Title IV-B in 1993 established the Promoting Safe and Stable Families and Family Preservation programs, which provide prevention and other services for children and families. The Adoption and Safe Families Act of 1997 established strict time guidelines for states to follow in seeking permanency solutions for children.

AFDC was dismantled in 1996 and replaced by Temporary Assistance for Needy Families (TANF). Although it is separate from Title IV-E funding, states can use TANF to fund child welfare services. TANF represents 20% of federal funding for child welfare and, as an entitlement program, is a guaranteed federal funding source.

Controlling Spending

Growth in entitlement spending for such programs as Medicare and Medicaid has sparked recent debate about the need to control the federal deficit. The White House estimates federal spending in FY 2007 will result in a $437 billion deficit--the fourth consecutive year the federal deficit will exceed $400 billion.

Since 2001, entitlement spending, including allocations for child welfare, has accounted for only 8% of new federal legislation contributing to the deficit. On the other hand, increased funding for defense and homeland security, along with the loss of revenue from tax cuts, has accounted for 85% of the federal deficit. The remaining 7% of new legislation was allocated to domestic discretionary spending, excluding homeland security.

The budget reconciliation act Congress passed in February is known as the Deficit Reduction Omnibus Reconciliation Act of 2005 (DRA). The first attempt to curb entitlement growth since 1997, DRA slashed federal entitlement programs by $39.7 billion, including the $577 million cut to Title IV-E Foster Care and Adoption Assistance, $12.7 billion to student loan programs, $5 billion to child support enforcement, and $6 billion to Medicaid.

DRA also reauthorized TANF for five years without increasing funding. The reauthorization requires states to meet higher work requirements in 2006--at least half of TANF adult recipients in single-parent families, and 90% of two-parent families, have to meet work requirements in FY 2007. To lower these requirements, a state must reduce the number of families receiving TANF assistance since 2005. Most states will face difficulty meeting these requirements, as they lack appropriate support services. States that fail to meet the requirements, however, may be subject to penalties, such as loss of TANF block-grant funding.

Reductions to Title IV-E

Out of the $577 million Congress cut from Title IV-E Foster Care and Adoption Assistance, $397 million came from repealing a 2003 Ninth Circuit judicial ruling known as Rosales v. Thompson. The ruling had expanded Title IV-E foster care eligibility to some children being cared for by grandparents and other relatives in nine states--Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington--as well as Guam and the Mariana Islands, and was seen as a bellwether for other states. Most of the states in the Ninth Circuit had passed FY 2006 budgets anticipating this expanded eligibility.

In overruling Rosales, however, Congress prohibited families from receiving Title IV-E benefits unless they meet all the requirements of foster placement--requirements that are sometimes unnecessary for relatives caring for children. IV-E eligibility will be based only on the income of the family found to be abusive, not on the income of the family with whom the child is living while in foster care. A child placed with a low-income relative, therefore, may no longer qualify for IV-E benefits.

David Berns, Director of Arizona's Department of Economic Security, estimates his state will lose between $600,000 and $1 million a year as a result of Congress overruling the court decision.

Last February, during an audio conference organized by the Center for Law and Social Policy (CLASP), Berns said, "[Congress's] decision is really contrary to what I think is the philosophy of promoting relative care, because it really is going after the funds exclusively for those grandparents and other relatives who have come to the rescue of their children and then find that they need this assistance. Now we won't have the federal support to maintain that; we'll have to do it entirely with state funds."

California, which serves 63% of the children in foster care out of the nine states affected by the repeal of Rosales, expects an estimated 4,000 children will lose Title IV-E assistance. The reduction in federal foster care eligibility will also cost California $20 million per year and reduce the income of a grandparent serving as a foster parent for two grandchildren by $592 per month, or $7,000 per year.

The $577 million cut to Title IV-E Foster Care and Adoption Assistance also included $180 million lost as a result of new restrictions on the use of Title IV-E administrative case management funding for the placement of children in kinship homes, children considered candidates for foster care, and children leaving ineligible facilities--such as psychiatric and crisis centers and some juvenile detention facilities--and moving to foster care.

The cut to Title IV-E concerns California foster parent Raynard Price. "Cutting this budget just may put more families in crisis than there already are...More kids are going to go to prison, and that's going to cost taxpayers in the long run. It's that simple."

Other Cuts

Other programs adversely affected by DRA include child support enforcement and Medicaid. Child support enforcement will be cut by $1.5 billion over five years, and $4.9 billion over 10 years. The Congressional Budget Office estimates this will result in the loss of $2.9 billion in child support payments over five years, and $8.4 billion over 10 years.

DRA also clarifies states' use of Medicaid-funded targeted case management services (TCM) for children in the child welfare system, limiting the ability of state child welfare agencies to use Medicaid TCM services for children in foster care, but resulting in federal savings of $760 million over five years and $2.1 billion over 10 years.

Changes to Medicaid will allow states to charge families a copayment of 10% of the cost of services if their income is at the poverty level or up to 150% of the federal poverty level--$16,000-$24,000 for a parent and two children. Previously, the law restricted copayments to $3.

"Children in foster care are protected [from] some of these cuts," said CLASP Senior Staff Attorney Rutledge Hutson during CLASP's audio conference, "but [we need] to pay attention to...the families who are not yet in the child welfare system, whose children have not yet been removed from their care. If they are impacted by these increased copayments, or premiums, or restricted benefits, they may fall into the child welfare system.

"We have lots of good research that shows many children in the foster care system are there because their parents aren't able to access medical care they need...they basically end up surrendering their child[ren] to the child welfare agency to try and get [them] the services they need."

One of the few increases as a result of DRA is $40 million for Promoting Safe and Stable Families, and the allocation of two $10 million grants for improving how courts handle child welfare cases.

DRA also reauthorized the federal child care program, with few changes. Child care funding will increase by $200 million in the first year--a less than 5% increase in funding--but funding will be frozen for the last four years of the reauthorization. Any future increases in federal child care funding will depend on annual appropriations decisions. Congress has not approved any increases in child care funding since 2002--funding has only been reduced.

At press time, eight separate lawsuits had been filed to challenge DRA's passage. The lawsuits, filed by parties outside of child welfare, noted the version of the bill signed by President Bush contained some technical changes that had not been made to the version passed by Congress. The Constitution mandates that the version of a bill signed by the President must be identical to the version passed by Congress.

Ongoing Debate Over Federal Budget Reform

Over the past several years, repeated proposals have been offered to reform federal and state supports that provide services to abused and neglected children, their families, and children who are at risk for abuse and neglect. Currently, of those children in the United States who are found to have been abused and neglected, 40%-46% receive no services.

Opinions differ greatly among federal policymakers and children's advocates over how these proposals can improve supports. Every year since 2002, President Bush has offered a child welfare reform proposal--which has not yet been approved--that would convert federal child welfare funding into a block grant, allowing states the option of receiving a lump sum over five years. States electing this plan would receive a fixed, capped funding allotment to cover all child welfare operating and service expenses over the five years. This option, proponents say, would create greater fiscal responsibility and allow states to redirect any unallocated funds toward greater prevention efforts.

Opponents charge that block grants are a piecemeal approach and cannot address unexpected situations, such as a sudden rise in foster care caseloads due to the spread of methamphetamine abuse. And history shows that block grants can fail to keep up with inflation. The Social Services Block Grant, for example, was converted into a fixed annual funding stream in 1981 and has lost 84% of funding when inflation is taken into consideration.

"CWLA is supporting a comprehensive review of the child welfare funding structure," says CWLA President and CEO Shay Bilchik, "one that recognizes and fully utilizes the interplay between federal, state, and local supports. These reforms include providing a flexible array of services aimed at prevention, greater supports for children presently in foster care, and continued services for those after they are adopted or age out of formal care."

David Laird is a former CWLA Program Manager for Government Affairs. Jennifer Michael is Managing Editor of Children's Voice.


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