Federal Foster Care Financing: How and Why the Current Funding Structure Fails to Meet the Needs of the Child Welfare Field. Differing Claiming Practices Result in Wide Variations in Funding Among States


States vary widely in their approaches to claiming federal funds under title IV-E. Some are quite conservative in their claims, counting only children in clearly eligible placements and defining administrative costs narrowly. Other States have become more skilled in the administrative processes necessary to justify more extensive title IV-E claims. Further, not all States have the financial means or budgetary inclination to invest in the full array of foster care related services for which federal financial participation might be available. The result of these different approaches is a complex pattern of title IV-E claims covering a great range of funding levels. However, the disparities in title IV-E claiming are so wide and so lacking in pattern as to undermine the rationale for the complex claiming rules.

Figure 2 shows the average amount of funds each State claimed from the federal government for title IV-E foster care during FY2001 through FY2003, shown as dollars per title IV-E eligible child so as to make the figures comparable across States. That is, for each State the three year average annual federal share in each spending category is divided by the three year average monthly number of title IV-E eligible children in foster care, to give an average, annualized cost per child. Three year averages are used to smooth out claiming anomalies that may occur in a single year because of extraordinary claims or disallowances.

There is a wide range in the amounts claimed as well as in the division of claims between maintenance payments and the category that includes both child placement services and administration. These are the two principal claiming categories. The remaining categories, training and demonstrations, were relatively small in most States. Spending on State Automated Child Welfare Information Systems (SACWIS) has been excluded since these system development costs can vary substantially from year to year in ways unrelated (at least in the short term) to services for children.

Figure 2.
States Foster Care Claims  Federal Funds
(excluding SACWIS) per IV-E Child (average of fiscal years 2001 to 2003)

Figure 2. States' Foster Care Claims -- Federal Funds(excluding SACWIS) per IV-E Child (average of fiscal years 2001 to 2003).

Total federal claims per title IV-E child (averaged across three years), excluding funds for the development of State Automated Child Welfare Information Systems (SACWIS), ranged from $4,155 to $33,091. The median value was $15,914. The range in maintenance claims was $2,829 to $20,539 per title IV-E child, with a median of $6,546. Claims for child placement services and administration ranged from $1,190 to $23,724 per title IV-E child, with a median value of $6,840. These per-child amounts reflect only the federal share of title IV-E costs, which vary according to the match rates used for different categories of expenses. If one were to include the State share in such calculations, the expenditure figures would be substantially higher. This discussion has been framed in terms of the variation in federal share so as to best illustrate and isolate issues related to the federal funding rules.

As shown in figure 3, the balance between maintenance and administrative claims also varies considerably among the States. Claims for child placement and administration vary from 10 cents per dollar claimed of maintenance to $4.34. Six States claim less than 50 cents in administration for every maintenance dollar claimed, while 9 States claim more than $2 in administration for every dollar of maintenance. These differences reflect the extent to which States use a wide or narrow definition of child placement and administrative costs. In addition, some States claim administrative expenses for non-IV-E children as title IV-E candidates over extended periods of time, even if those children or the placement settings they reside in never qualify under eligibility rules. In such States this drives up administrative costs as a proportion of total title IV-E payments. A Notice of Proposed Rulemaking published by HHS January 31, 2005 proposes to prohibit this practice except under limited circumstances.

Figure 3.
Administrative Dollars Claimed per Dollar of Foster Care Maintenance Varies Widely
(calculated on the basis of average claims FY2001 through FY2003)

Figure 3. Administrative Dollars Claimed per Dollar of Foster Care Maintenance Varies Widely (calculated on the basis of average claims FY2001 through FY2003).

Below, factors such as the quality of child welfare services are examined in relation to the funding differences across States. Here it is simply observed that the spread of claims is far wider than one would expect to see based on any funding formula one might rationally construct. It is unlikely that differences this large are the result of actual differences either in the cost of operating a foster care program or reflect actual differential needs among foster children across States.

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