The current federal child welfare financing structure is out-of-date and ineffective. It has not had a significant overhaul since 1996 and fails to recognize best practice findings from the field or to incentivize what works for children. As a result, many of the children and families that the system was designed to help have simply fallen through the cracks.

The major federal programs that support children and families who come in contact with the child welfare system are Titles IV-B and IV-E of the Social Security Act, Temporary Assistance to Needy Families (TANF), Medicaid, and the Social Services Block Grant (SSBG). Of these, Title IV-E is the primary source of federal dollars dedicated to child welfare services.

Currently, restrictions in the allowable use of IV-E funds result in the larger portion of federal funding being dedicated to foster care. States should be able to directly access Title IV-E funds for investments in a broad continuum of services for children and families, including prevention, early intervention, and post-permanency services. Doing so will ensure that states have the resources they need to adequately care for the countless children and families that walk through their agency doors each day. Furthermore, changes to the eligibility policy for Title IV-E foster care payments are long overdue.

As it stands, eligibility for federal foster care assistance remains tied to the defunct Aid to Families with Dependent Children (AFDC) program. As a result, the federal commitment to foster care has followed a steady downward trend, each year shifting a greater share of the burden on to states to provide for children in care. As such, states are forced to compensate by drawing funds from other programs such as TANF and SSBG to provide for children in care. As the federal share of funding for child welfare programs has declined, states have had to step in and make up for it.

Such critical limitations of the existing federal child welfare financing structure limit the ability of states to provide a diverse array of services to families in need and call attention to the need for a comprehensive reform of the fiscal system. Reform is needed now, and we can start by sharing ideas about what a “good” system looks like and how to get there.

The Annie E. Casey Foundation is helping to do just that by offering a proposal with several concrete ideas for reforming child welfare financing in When Child Welfare Works: A Working Paper. The proposal is intended to incentivize what we want to see happen in practice. Among the ideas in the proposal are:

  • Limiting Title IV-E reimbursement eligibility for foster care to no more than 3 years in a child’s lifetime to limit the use of foster care and promote permanency. Foster care is intended to be a temporary placement for children as efforts are made to re-unify children with birth families, adoptive families or other permanent home. By setting a time limit on federal funding for foster care, this proposal helps generate a conversation around the need to incentivize permanency and reduce the use of foster care as a long-term option for children and youth.
  • Eliminating federal IV-E reimbursement for group care for children under 13 (with some exceptions) to ensure that young children experience support and other benefits that come from a family setting.
  • Limiting the length of federal Title IV-E reimbursement eligibility for residential treatment settings to no more than 12 months total for children ages 13 or older to ensure that more children are placed with relatives or other family-based settings. In doing so, this proposal aims to ensure that these placements are the exception and not the norm.
  • Allowing states to establish different Title IV-E licensing standards for relatives and other kin seeking to care for a specific child or sibling group rather than a license to care for any child in state custody. These standards would allow for thoughtful matches of children with kinship foster families who can best meet their needs.

The above are just a few of the ideas posed in the Annie E. Casey proposal. While not everyone will agree with all of the policy recommendations in the proposal, what is clear is that we need to talk about financing reform and we need ideas that have traction and resonate with Congress. To keep the conversation going, today, the foundation released this infographic that highlights how the continued decline in federal funding for child welfare is dramatically hurting vulnerable children and families.

Children deserve to be a priority and federal funds must be allocated to services that have the most success and promise for children. We need to be creative and strategically reform federal financing so that every child can have a healthy and stable childhood.