Assessing the New Federalism Occasional Paper No. 61
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
About the Series
Assessing the New Federalism is a multiyear Urban Institute project designed to analyze the devolution of responsibility for social programs from the federal government to the states, focusing primarily on health care, income security, employment and training programs, and social services. Researchers monitor program changes and fiscal developments. In collaboration with Child Trends, the project studies changes in family well-being. The project aims to provide timely, nonpartisan information to inform public debate and to help state and
local decisionmakers carry out their new responsibilities more effectively.
Key components of the project include a household survey, studies of policies in 13 states,
and a database with information on all states and the District of Columbia, available at The
Urban Institute's web site (http://www.urban.org). This paper is one in a series of occasional
papers analyzing information from these and other sources.
This report is available in its entirety in the Portable Document Format (PDF), which many find convenient when printing.
Contents
Introduction
Federal Changes That Affect Child Welfare Spending
Methodology
Total Child Welfare Spending
Spending from Federal Sources
Federal Funds Dedicated for Child Welfare
Title IV-E
Title IV-B
Nondedicated Federal Funds
TANF
SSBG
Medicaid
Additional Federal Funds for Child Welfare
State Spending
Local Spending
Expenditures on Contracted Services
Conclusions
Discussion
Welfare Reform and ASFA
Financing Child Welfare during a Recession
Notes
References
Appendix Table A1
About the Authors
Introduction
Child welfare agencies provide a safety net for abused and neglected children and children at risk for abuse and neglect. Some children are able to remain in their homes, while others must be removed and placed in foster care or with relatives until they can return home. Unfortunately, some children cannot return home. These children are either adopted, moved into another permanent placement, or they "age out" of the system (i.e., they turn 18 or 21 years old and exit the system). Funding for services at all points within the spectrum described above is provided by federal, state, and local governments. In addition to state-specific events, two federal laws were enacted in the 1990s that could affect spending on child welfare
services—the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 and the Adoption and Safe Families Act (ASFA) of 1997. The Urban Institute saw the need to track how these laws would affect spending on child welfare services.
In 1997, during the first round of the Urban Institute Child Welfare Survey, researchers gathered state fiscal year (SFY) 1996 expenditure data from 48 states and the District of Columbia.1 These data provided a baseline of what was occurring
before welfare reform. Our 1997 survey found that total spending in SFY 1996 was $14.7 billion, and that states varied significantly in their spending from federal, state, and local sources (Geen, Waters Boots, and Tumlin 1999; Waters Boots et al. 1999). The survey also found that state child welfare agencies were using a large amount of funds not dedicated to child welfare services (e.g., Medicaid, Temporary Assistance for Needy Families [TANF]) to meet the needs of the children and families they were serving. In addition, the survey found that states were spending relatively little on prevention.
A second round of the Child Welfare Survey in 1999 collected SFY 1998 data and examined changes in spending between SFY 1996 and SFY 1998. Our 1999 survey found that total spending in SFY 1998 was $15.9 billion,2 and that child welfare spending was unstable—many states saw relatively large changes in their spending on child welfare during the short time between surveys (Bess, Leos-Urbel, and Geen 2001). The survey also found that states continued to rely heavily on funds not dedicated for child welfare, while spending little money on prevention services. Finally, the 1999 survey found that states' reliance on welfare dollars (Emergency Assistance in 1997 and TANF in 1999) dropped considerably compared with the 1997 survey.
This paper presents the findings of the 2001 Urban Institute Child Welfare Survey, which collected SFY 2000 expenditures. In addition to spending by source and by use, changes in spending between SFY 1998 and SFY 2000 and, when possible, between SFY 1996 and SFY 2000 are also presented. This survey was designed to identify changes in child welfare spending following states' implementation of ASFA and PRWORA (commonly referred to as welfare reform). While the Urban Institute's 1999 survey captured an early glimpse of the effects of welfare reform on child welfare spending, the 2001 survey sought to examine these effects after states had fully implemented reforms.
Federal Changes That Affect Child Welfare Spending
PRWORA changed our nation's welfare system by ending the entitlement to cash assistance and giving states considerable flexibility in the assistance programs they operate. PRWORA made few direct changes to the nation's child welfare system; however, it did make changes to four federal funding streams used by child welfare. PRWORA eliminated the Emergency Assistance (EA) program, which states were permitted to use for an array of child welfare activities, including prevention, family preservation, foster care, family reunification, and parenting education. Funds from the EA program were included in the TANF block grant. PRWORA also eliminated the Aid to Families with Dependent Children (AFDC) program. However, a child's eligibility for title IV-E funds was, and still is, linked to prewelfare reform eligibility rules for AFDC, even though AFDC no longer exists. The Social Services Block Grant (SSBG), which provides funding for a variety of activities related to child welfare, including preventive, protective, foster care, and adoption services, was reduced by 15 percent. In addition, PRWORA eliminated the individual functional assessment as a mechanism for determining eligibility for the federal Supplemental Security Income (SSI) program, thus making it more difficult for children to receive SSI
funds.3 Moreover, PRWORA removed the restriction on the use of title IV-E funds for for-profit institutions, thereby allowing states to use title IV-E funds for eligible children placed in for-profit institutions.
The Adoption and Safe Families Act (ASFA) of 1997 sought to provide states with the necessary tools and incentives to achieve the original goals of the 1980 Child Welfare and Adoption Assistance Act (P.L. 96-272): safety, permanency, and child and family well-being. The impetus for ASFA was a general dissatisfaction with states' performance in achieving these goals for children and families. The law makes safety the paramount concern in the desicionmaking and delivery of child welfare services, clarifies those situations in which reasonable efforts to prevent removal or to reunify children with their families are not required, and requires
criminal-record checks of prospective foster and adoptive parents. To promote permanency, ASFA shortens the time frames for conducting permanency hearings, creates a new requirement for states to make reasonable efforts to finalize a permanent placement, and establishes time frames for filing petitions to terminate the parental rights for certain children in foster care.
Methodology4
Collecting and comparing child welfare expenditures across states is difficult for two reasons. First, child welfare agencies do not always serve the same populations. In some states, the child welfare agency is responsible for delinquent, homeless, and runaway youth, in addition to abused and neglected children. In other states, the child welfare agency may be responsible only for abused and neglected children. Second, states may not be able to document all the spending from the various funding streams available for child welfare. In 2000, there were 30 federal programs that financed child welfare services, in addition to state and local resources (U.S. House of Representatives 2000). Federal funding for child welfare services includes block
grants that may be used for purposes other than child welfare by multiple agencies, and states cannot always determine what portion of these grants was used for child welfare. In addition, many child welfare agencies receive funds from the state that combine state and federal funds and are unable to separate the funding sources. Some states also have difficulty reporting local spending accurately because localities may not be required to report their expenditures to the state. To adjust for these variations, the Urban Institute Child Welfare Survey uses standardized definitions of child welfare expenditures, out-of-home placements, adoptions, administrative services, and other services.
In April 2001, we mailed the third round of our Child Welfare Survey to each state child welfare director. The states' responses to our 1999 survey were also sent back for confirmation or adjustments.5 The 2001 survey was also available in a web-based format, and each state was given a user identification number and password to enter their state's data and make changes as necessary. The survey was due back in June 2001, but data collection continued through December 2001. Urban Institute staff conducted extensive phone, fax, and e-mail follow-up with each state to ensure the proper interpretation of the data. In addition, administrators from all 51 states were given the opportunity to participate in a 30-minute phone interview to provide us with a better understanding of how federal policy and state-specific changes may have affected their state's spending. We used a semistructured, open-ended instrument to conduct the phone interviews. We received survey responses from all 50 states and the District of Columbia; 21 states used the web-based format. Phone interviews were conducted with administrators from 29 states between November 2001 and March 2002. Four states provided written answers to our questions.
In the past two rounds of the survey, we received data from 49 and 48 states, respectively. Although in this round we received data from all 51 states, some states were unable to provide all the requested information. Therefore, the spending amounts reported below are underestimates of true spending. This inconsistency also limits our analysis of spending over time, and throughout the report the actual number of states included in an analysis is noted. Questions have been added, expanded, or reworded on the survey instrument over the course of the three rounds. Therefore, where possible, spending changes between SFY 1996 and SFY 2000 are presented, but the majority of the analysis focuses on changes between SFY 1998 and SFY 2000. In addition, there are limitations due to the difficulty states had providing the data in the manner we requested it. States do not account for spending by use in the manner we have created for the survey's purposes, so some states could not categorize certain spending. Therefore, spending trends are not exact. We adjust for inflation using the gross domestic product (GDP) price deflator. The findings that follow are presented in SFY 2000 dollars.
This report is available in its entirety in the Portable Document Format (PDF), which many find convenient when printing.
1. For the purposes of this paper, the District of Columbia is treated as a state.
2. The original amount published was $15.6 billion, but states made adjustments to their SFY 1998 data during the third round.
3. Between 1991 and 1996, many children were determined SSI-eligible on the basis of the individual functional assessment. States have an incentive to have children receive SSI benefits instead of foster care payments, because unlike title IV-E foster care funds, states are not required to match federal SSI funds.
4. See Geen, Waters Boots, and Tumlin (1999) and Bess, Leos-Urbel, and Geen (2001) for a more detailed discussion of the methodology.
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