New findings about child welfare financing

BlogChild WelfareNov 9 2016

One of my favorite things in my work at Child Trends is conducting focus groups with child welfare staff who work directly with children and families. These men and women commonly say that they would like to do more for children, but they are sometimes limited by child welfare program funding requirements. Until recently, I’ve had a hard time understanding those limitations because the federal funding structure is pretty complex. What helped? Our biennial child welfare financing survey report, released in October.

For nearly a decade, Child Trends has been tracking state spending on child welfare activities so we can better understand the challenges faced by child welfare agencies, and the opportunities they have, in protecting and promoting the well-being of children and youth. During federal fiscal year 2014 (October 1, 2013 to September 30, 2014), child welfare agencies received an estimated 3.6 million referrals for suspected child abuse or neglect of approximately 6.6 million children. These agencies served approximately 653,000 children in foster care. States rely on multiple funding streams for this work, each with its own unique purposes, eligibility requirements, and usage limitations.

Child welfare work is expensive: a total of $29.1 billion was spent on child welfare activities nationwide in state fiscal year (SFY) 2014. More than half (57 percent) came from state and local sources, with the remaining 43 percent coming from federal sources. As you can see in the chart below, of the six main federal funding categories, Title IV-E of the Social Security Act was the largest, at $6.8 billion.

Breakdown of federal spending by states on child welfare activities, SFY 2014


Title IV-E supports foster care, adoption and guardianship assistance, and self-sufficiency training for youth in foster care. That’s great, right? Well, there’s a catch. Title IV-E has strict eligibility requirements, so it can’t be used to cover costs for all children or for all activities. States cannot, for example, be reimbursed for services for children who do not come from financially “needy” homes or those that remain in their homes. That rules out about half of children in out-of-home foster care placements!

However, states have had the opportunity to apply for a Title IV-E Child Welfare Waiver Demonstration Project (“waivers”), which allows them the flexibility to waive some IV-E requirements. In addition to regular IV-E expenditures that states are required to cover regardless of having a waiver (such as foster care payments), states can use waivers to help cover the costs of caring for children who do not meet the IV-E eligibility criteria, for innovative or new initiatives to support the children and families in their states, and for project development or evaluation costs that go with having a waiver.

So how did states end up spending their waiver dollars? There are two things to consider when talking about waivers: 1) eligible services/activities and 2) eligible children. First, let’s focus on the activities. As you can see in the graph below, in the 18 states that reported spending waiver dollars in SFY 2014, 10 percent (roughly $100 million) of funds were used to support activities that are not traditionally eligible under Title IV-E (e.g., prevention services, parenting services, and kinship supports). That means the other 90 percent were spent on activities that are eligible under IV-E, and would have been permitted without the waiver.

Title IV-E spending in SFY 2014


Now, let’s take a look at children who received services/activities. States used almost one third (32 percent) of waiver funds on IV-E eligible activities for children who are not traditionally eligible for IV-E. In other words, they were able to provide services for more children because they had the waiver. However, the waiver program is set to expire after the current round of waivers ends in 2019, so states will have to find other funds to cover those activities for children and youth.

But the Title IV-E waiver program is only a very small piece of the child welfare financing pie. The child welfare finance survey provides critical data on a variety of child welfare funding sources that will help you understand how funds are spent by child welfare agencies, and inform discussions about finance reform. In addition to the full report, we also have fact sheets that provide additional detail about each of the major funding sources and offer state-level information for all 50 states as well as Washington, D.C. and Puerto Rico.