In order to be eligible for federal matching (Title IV-E) subsidies (federal plus state funds), children must have been removed from families that would have met income criteria for the Aid for Families with Dependent Children (AFDC) program, and have special needs that would preclude their adoption without subsidies (U.S. House of Representatives, 2004). Each state defines their criteria for special needs within broad federal guidelines. Under Title IV-E adoption assistance, a portion of the subsidy payment is federally funded, with the remaining share subsidized with state and/or county dollars. The federal medical assistance percentage (FMAP), or Medicaid matching rate, is used to determine the federal share of maintenance payments. This rate is between 50 percent and 83 percent (Spar and Devere, 2001). States with low per capita income have higher matching rates while high per capita income states have lower matching rates. If the child does not meet Title IV-E criteria, then a state may use state and/or county funds to provide a subsidy.
Adoption subsidies, up to the amount of the maintenance payment the child would have received if in foster care, are eligible for federal matching funds; higher adoption subsidies can be paid using state and or county dollars. Most states offer deferred payment agreements, which allow families the option of negotiating a subsidy at a later date even if they do not need one at the time of adoption.
Studying adoption subsidies is complicated by the fact that jurisdictions vary widely in the assumptions that underlie the design of their subsidy programs. Some consider that subsidies should be set at a rate sufficient to provide general support for needed services. Others set subsidy amounts at a level that can only support the basic care for a child, unless there are time-limited requests for subsidy funds to address specific problems. According to a recent report from the North American Council on Adoptable Children (NACAC), analysis of NACAC's State Subsidy Profiles(1) found that the subsidy rate in four states slightly exceeded the USDA rate needed to raise a family in a low-income family. In three states, however, the typical state subsidy is just half the USDA estimate (Bower and Laws, 2002). These disparities may be offset to some extent by options for one-time payments or by use of augmented subsidies that supplement the typical rate.