Analysis of Child Welfare Services Expenditure Data and Child Day Care Expenditure Data: Phase II Report

American Public Welfare Association

This report was prepared under contract #SA-88-1627 between the U.S. Department of Health and Human Services (HHS), Office of Social Services Policy (now the Office of Disability, Aging and Long-Term Care Policy) and American Public Welfare Association. For additional information about the study, you may visit the Office of the Assistant Secretary for Planning and Evaluation (ASPE) home page at http://aspe.hhs.gov. The ASPE Project Officer was William Prosser.

ACKNOWLEDGEMENTS

This report, Phase II Report, contains the results of the second phase of the child welfare services expenditure data clarification study that the American Public Welfare Association (APWA) conducted. The study was supported by a contract (No. SA-88-1627) awarded to APWA by the office of the Assistant Secretary for Planning and Evaluation (ASPE), the Department of Health and Human Services (HHS), and Bowers and Associates, Inc., under subcontract to APWA, prepared this report.

APWA wishes to thank the chief executive officers and their staff members in charge of child welfare expenditure data of the state human service agencies that participated in both the first and second phases of this data clarification study. Twenty states during the first phase and 26 other states in the second phase either verified the expenditure data that APWA had compiled or provided APWA with revised data. APWA is grateful to Mr. William Prosser, project officer at ASPE for his advice and guidance.

Finally, APWA is indebted to Mr. Gary Bowers and Ms. Margaret Bowers for their assistance in completing both phases of the study. These consultants analyzed information received by states and personally contacted states to further clarify/verify their responses, whenever necessary.

I. BACKGROUND

With funding assistance from the Office of the Assistant Secretary for Planning and Evaluation (ASPE), the American Public Welfare Association (APWA) has been attempting to develop a good estimate of national expenditures for Child Welfare Services and Child Day Care Services. Instead of collecting new data, the project was designed to clarify or enhance the State expenditure data which had already been gathered from most States. It is believed that such information is of extreme importance to all concerned in providing a sound foundation for future policy and program development at the national level.

This report is designed to supplement the Preliminary Report produced by the project in January 1988. It provides answers to two major questions related to these areas.

1. What were the total estimated Federal, State and local expenditures for Child Welfare Services and Child Day Care Services for the years 1984 and 1985?

2. What were the reported expenditures for the six primary areas of Child Welfare Services for 1984 and 1985?

In the preparation of this report, APWA has used the most recent reliable information available from States. This second report contains the most current expenditure data from 26 States and should serve as a supplement to the original document.

Upon completion of the project, ASPE plans to share the information with Congress, agencies in the executive branch of the Federal government and other appropriate government bodies.

II. PROJECT METHODOLOGY

The Project was conducted in two phases. During the first phase, data on Child Welfare and Child Day Care Services expenditures were assembled from the information reported by States through the Voluntary Cooperative Information System (VCIS). State Directors of Child Welfare Services were notified by letter outlining the purpose and intent of the study, and their designated VCIS contacts were asked to assemble the data in preparation for contact by the project staff. Most States were then contacted by telephone to verify the reported data, obtain updated data where none had been reported, and to clarify any anomalies found in the original data.

At the completion of the first stage in data gathering, a report was prepared containing:

• Details about the background and objectives of the project and the methodology used to compile the data

• Profiles of State expenditures for the 20 out of 32 States which responded that had significant changes from the original VCIS reports

• Tables containing the original VCIS data; the revised child welfare expenditure data and the revised child day care expenditure data

• Preliminary observations relating to the integrity of the data, and recommendations for utilizing this approach for future data gathering efforts

Problems experienced during the first phase included difficulty in reaching the appropriate staff in the States with access to the heeded information; vacation schedules, and other priorities within the States. Inasmuch as the additional data retrieved from the States who were able to respond during the first phase were a major improvement over data previously available, the project consultants recommended a follow-up effort to allow more time to complete data gathering, and to provide the States with an opportunity for a final review and verification of their expenditure information.

A second phase to complete data gathering was subsequently approved by the ASPE Project Officer. In addition to the objectives stated above, attempts were to be made to clarify if Foster Care maintenance payments and training, and Adoption subsidies were included in the reported data, as some discrepancies were noted in the Phase I data.

During the initial few weeks of Phase II, follow-up calls were made to the States who were unable to provide information for the reasons noted above. Data tables were then revised to show the latest inputs, and a letter was transmitted to each State Director of Child Welfare describing the specific actions needed in order to complete the report on national Child Welfare and Child Day Care services expenditures.

State contact persons were asked :

1. To validate the numbers as shown in the tables.

2. If the figures for Substitute Care included maintenance payments, and the figure for Adoption included adoption subsidies. If these expenditures were not included, States were asked to provide separates or actual expenditures (if available) -- including related administrative and training expenses.

3. If the figures contained only SSBG expenditures. If so, expenditures for other Federal, State, and local sources should be added.

4. To estimate general administrative costs for all Child Welfare Services. The figures provided in the data sent to the States included general and administrative costs for some States estimated by the project consultants. This estimate could be confirmed, or adjusted as necessary. Also, a brief definition of what is contained in administrative costs was requested (This cost figure is usually similar to "General & Administrative Costs" categories used by most businesses, i.e. the percentage allocation for costs that cannot be identified with a specific State government program. But many states have no system for identifying these costs, and the costs contained in this category for States who could provide figures vary considerably).

5. For estimates of the percent of expenditures for Child Welfare Services in each funding category: Federal, State, and local.

Response by States was excellent.

• Overall, 42 of the 52 States contacted by phone and/or mail responded to either the Phase I or Phase II inquiry

• Of those, 40 States either revised the existing information or provided new data

• 2 States confirmed the original data with no changes

It should also be noted that many of the States offered to provide data for 1986 and 1987 and stated that it was readily available at such time as it was desired for a similar report.

A few States were not able to provide any information due to technical difficulties or other problems. In those instances where State data were not available, estimates were made by the project consultants using various alternative sources. These included SSBG pre-expenditure reports, Title XX grant awards and Title IV-E and Title IV-B allocations, studies conducted by various ASPE contractors, and national not-for-profit organizations whose focus is children's programs.

III. PHASE I OBSERVATIONS

Observations contained in the Phase I report included the following:

A. Federal Funding As a Revenue Source

In most of the States contacted, funds received from most Federal sources are merged into a general or departmental funding pool prior to allocation to program or service areas. The State allocation method might be analogous to a water system where many rivers flow into a reservoir, but when water comes out of the tap, the amount of it that comes from a specific river cannot readily be determined.

As a result, expenditures for services are not traceable to individual Federal funding sources by specific amounts. In other words, most existing State systems for allocating resources make it impossible to identify how much a specific program such as SSBG, Title IV-B, or IV-E money went to Day Care, Substitute Care, Protection, or any other specific service.

For a few States, however, we were able to identify which funds were used for a particular service, but not the specific amount or percentage of Federal versus State funds.

B. Fungibility of Federal Monies

A related but unique situation arises from the States' desire to optimize the matching ratios from the various Federal funding sources (called 'fungibility'). Day Care and child welfare services can be funded from many Federal sources, each with different eligibility and matching requirements. Many States, often using the support of consulting experts in this area, are moving their funds among programs to obtain a larger overall amount of Federal dollars and/or to more effectively target State and local resources.

The result of these fungibility efforts are reflected in the VCIS reports as evidenced by major shifts in the amount of dollars from service to service. While our contacts with the States enabled the identification of areas where this condition had occurred, no major impact was noted in the total combined amount of Federal and State dollars expended.

C. Differences in State Service Definitions and Components

The variations in terminology used by States in describing social welfare services have long been a barrier to collecting comparative data at the national level. Differences in State service definitions and components of State services have a major effect on the way service expenditures are reported and impede comparisons of expenditure data among States.

Our contact with the States produced strong evidence that this problem has been exacerbated since the enactment of the Social Service Block Grant. Many States no longer use the previous Title XX Goal and service structure; they have moved toward a more localized description of their activities. This has served to complicate the collection of data on a service by service basis.

For example, in some States, Adoption is considered a component of Substitute Care and not a separate service. In these cases, the amount of expenditures are not reported separately for Adoption, and must be estimated (based upon client counts or other factors). In addition, some States have changed service programs so that for one year Adoption and Substitute Care are separate services and for the succeeding year one is a component of the other. In other States, Preventive Services is a component of Child Protective Services, and expenditures are not tracked separately.

Some States have a service called 'Residential Day Care'. The definitions of this service reveal that the service is really Emergency Substitute Care and should be counted under the category of Substitute Care rather than under Child Day Care, where it has been reported in some cases.

Note: For this report, Residential Day Care was counted under Substitute Care

D. Allocation of Administrative Costs

Of the 24 States who responded in Phase I, 12 included State administrative costs (and/or overhead) in their reported expenditures. The figures for New York include the administrative costs incurred locally, but not at the State level. The definition of 'administrative,' 'indirect,' or 'overhead' costs had been left to the States in the original VCIS reports and the same practice was followed for this study.

Some States collect administrative cost data as a total figure or percentage of total expenditures; others allocate administrative costs to individual services. Some States use client counts as an allocation base; others allocate administration on the basis of service costs. In most States, administrative costs are between 5 and 10 percent of total costs.

IV. PHASE II OBSERVATIONS

Most observations from the original document were validated once more, including the difficulty of tracing Federal funds once they reach the State allocation process, the differences in State service definitions and service components, and the lack of uniformity in the composition of State administrative costs. A few further notes can be made as a result of the second phase of data collection:

A. Estimated Data

Some State expenditure data are still reported in estimated amounts. Estimates are generally used either because the State service structure does not match that of the VCIS, or the State does not collect data on a service by service basis, or service data collection systems are not designed to be precise to the last dollar.

Making comparisons at the level of total service costs or total program costs is not affected greatly by estimated data, particularly if the objective is to observe trends in expenditures or to arrive at 'reasonable' national cost figures.

B. Administrative Costs

Of the 40 States responding to both phases of this study, a total of 16 included State administrative costs in their reported expenditures. The definitions of administrative, or other non-direct costs was left to the States in the original VCIS reports and the same practice was followed for this study. For most States administrative costs are between 5 and 10 percent of reported costs.

Where States have not included administration in their reported costs, the project consultants have made estimates based upon the most appropriate percentage for that State, using an average of 5 percent in most cases or 7 percent if suggested by the state contact person.

C. Foster Care Maintenance Payments and Adoption Subsidies

Twenty States included these expenditures in their reported costs. As with administrative costs, if States did not include them, the APWA project team estimated the costs based upon other data sources including SSBG pre-expenditure reports, Title XX grant awards and Title IV-E and Title IV-B allocations.

D. Sources of Funds

Only 17 States were able to provide a breakdown in percentages of Federal, State, and local funds used in Child Welfare and/or Child Day Care Services. In 11 States, the majority of funds were Federal; in 5 States, the majority of funds were State, and in 1 State, the majority of funds were local.

Thirteen States provided percentages of Federal/State/Local expenditures as estimates against TOTAL Child Welfare service expenditures. Four States were able to estimate the percentages at the individual service level.

V. RESULTS AND FINDINGS

A. Total Estimated Expenditures for Child Welfare Services

An ESTIMATED total of over $4.2 billion of Federal, State and local funds was expended in 1985 on six Child Welfare services -- Adoption, Substitute Care for Children, Protective Services for Children, Preventive Services for Children, Services for Juvenile Delinquents and Pregnancy/Parenting Services for Young Adults. This figure includes the project consultant's projections of expenditures for States who were unable to supply an all-inclusive dollar figure for one or more of the reasons noted above. The differences between the estimated expenditures ($4.2 billion) and the reported expenditures ($3.2 billion) are primarily in the areas of Foster Care Maintenance Payments and Training, Adoption subsidies, and Administrative Costs.

B. Total Reported Child Welfare Service Expenditures

Total FY 1985 Federal, State and local expenditures of approximately $3.2 billion were reported by 46 States for Child Welfare services in 6 service areas. Substitute Care accounted for 53% of total reported spending in 1985. Protective Services accounted for 25% of funds, Preventive Services accounted for 10% and the other 3 services accounted for a combined 12% of spending.

Service totals for 1985 were:

C. State Expenditure Results

The 10 States spending the most for Child Welfare services in 1985 were:

The ten highest-spending States accounted for 70% of estimated Child Welfare expenditures in 1985 ($2.97 billion). The next 10 highest States spent 16% of the total or over $680 million. Altogether the top 20 States spent almost $ 3.6 billion or 86% of estimated total Federal, State and local expenditures.

D. State Expenditures vs. Number of Children Under 18

The number of children under 18 years of age is generally a major indicator of states that have the greatest need for Child Welfare Services. The ten States shown below had the greatest number of children under 18 in 1984, and together accounted for 33,456,000 or 53% of the total number (63,026,000) of children under 18 nationwide.

Of the 10 States with the highest expenditures for Child Welfare Services, 7 are included in the States with the largest number of children under 18 years of age. While this would confirm the obvious and expected correlation between expenditures and number of children, there are some exceptions.

Massachusetts, which ranks 7th in spending for Child Welfare services, is 14th in the number of children under 18 and Oregon, which ranks 12th in expenditures, is 31st in the number of children.

On the other hand, Texas, which ranks second in the number of children, ranks 11th in expenditures, and Georgia which is 10th in number of children, ranks 31st in amount of expenditures.

E. Child Day Care Service Results

Total Federal, state and local spending reported for Child Day Care services in 47 States for 1985 was $1,030,154,699. Estimated spending adjusting for administrative and other non-direct costs for all States totaled $1,096,187,184. (These figures represent little change from those contained in the Phase I report.)

The four States with the highest expenditures for Child Day Care services in 1985 were:

The next five highest States were:

The top nine States account for $770,920 million out of a reported total of $1.096 billion which represents approximately 70% of spending on day care.

The next nine States account for $159,554 million, or 15% of the total national estimated expenditure for Child Day Care. Altogether the top 18 States spend approximately $930,474 million, or 85% of total Federal, State, and local estimated expenditures for Child Day Care.

CHILD WELFARE EXPENDITURE AND CHILD DAY CARE EXPENDITURE DATA TABLES

The following pages contain data tables for:

Child Welfare Expenditures

1. Reported and estimated total State expenditures for 1985 sorted by total estimated expenditures.

2. Reported and estimated total State expenditures for 1985 sorted alphabetically by State name

3. Reported expenditures for 1985 by individual service area -- sorted by total amount of reported expenditures

4. Reported expenditures for 1985 by individual service area -- sorted alphabetically by State name

5. Reported expenditures for 1984 by individual service area -- sorted by total amount of reported expenditures

6. Reported expenditures for 1984 by individual service area -- sorted alphabetically by State name

Child Day Care Expenditures

1. State expenditures for 1983, 1984 and 1985 with an added column for 1985 estimated expenditures -- sorted by the total amount of estimated expenditures for 1985

2. State expenditures for 1983, 1984 and 1985 with an added column for 1985 estimated expenditures -- sorted alphabetically by State name

Terminology Used in the Tables

Reported Data

Original data obtained from the APWA VCIS reports and revised data obtained from mail and telephone contacts with States

Estimated Data

Data estimated by the APWA project staff from other sources including SSBG pre-expenditure reports, Title XX grant awards and Title IV-B and IV-E State allocations.

The following States reported funding sources as a percentage of TOTAL expenditures for Child Welfare Services.

The following four States reported funding sources as percentages of expenditures for each individual service.