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By Athena Mandros

Last month, the Illinois Department of Children and Family Services (DCFS) announced it had forfeited about $40 million in federal funding for child welfare services over the past two years. The loss of federal funds was attributed to incomplete documentation, which the current acting director of DCFS, George Sheldon, said was the result of agency turnover – “You had this revolving door of directors. With the turmoil this agency has been under, this is the kind of attention to detail that makes a difference in the ability of the department to deliver a product” (see Illinois Child Welfare Agency Left Millions of Federal Dollars Unclaimed).

The bulk of these “missed funds” were due to miss classifications of youth between the ages of 18 and 21, who were living independently but were classified mistakenly as dependents. These youth had aged out of the foster care system, but were eligible for continued foster care benefits – the federal government would have provided Illinois with matching Title IV-E funds to provide services to these youth (see What Benefits Do States Provide To Foster Care Youth Over Age 18? An OPEN MINDS Market Intelligence Report).

The Illinois situation raised a question – how much does the federal government contribute to child welfare spending? The answer – the FY2012 child welfare market size is $28.2 billion dollars (this compares to our 2010 figure of $29.4 billion). Of that $28.2 billion dollar figure, the federal government provided states with $12.7 billion (45%) in funds. In addition, states contributed $10.9 billion (39%) toward the spending, and local government contributed $4.6 billion (16%). This includes the state matching funding required for the Title IV-E and IV-B spending, as well as other state and local programs. State and local spending for child welfare depends on how the state administers the child welfare system, which can be either at the state level, the county level, or a combination of both.

There are two major federally funded programs that are specifically designed to provide foster care assistance to states – Title IV-E and Title IV-B of the Social Security Act. In 2012, Title IV-E federal dollars to the states accounted for $6.5 billion, or 51% of total federal spending. These funds are used to provide foster care assistance, adoption assistance, and guardianship assistance. Title IV-E is an open ended entitlement program – meaning there is no cap on federal funding. States are required to match funds provided by the federal government and matching funds are dependent upon the Title IV-E program.

In 2012, Title IV-B federal dollars accounted for $595 million in state spending, or 8% of total federal spending. These funds are used in a broad variety of ways to support coordinated child and family services programs promote safe and stable families. States are also required to provide matching funds for this program, with the federal government providing 75% of the program’s funds and states providing the other 25%. The additional $5.3 billion in state spending, or 41% of total spending, was the result of states using indirect federal dollars, such as TANF funding, to fund for foster care services.

Understanding the funding streams that go into the overall spending for children and families in the child welfare system is important for both policy and practice. For most jurisdictions, it is essential to “braid” federal, state, and local funding streams to properly fund service delivery – and to determine how best to reimburse service providers. Illinois’s failure to monitor these different rules and reporting requirements resulted in $40 million of lost funding and will require additional state tax dollars to make up the difference in a state that has yet to pass a budget for the current fiscal year. (Just one related note on Illinois. Today, Illinois’ largest provider of social services, Lutheran Social Services Illinois, announced it is closing 30 senior, counseling, rehab and prisoner re-entry programs and laying off 750 people because of the budget impasse – Illinois Budget Mess: Senior, Rehab, Counseling Services Getting Cut. This will add to the pressures created from the missing federal funds.)

For more information on child welfare spending, including a detailed breakdown of spending and a state-by-state chart on program funding, check-out our report: What Is The Size Of The Child Welfare Market?: An OPEN MINDS Market Intelligence Report. The report answers a number of questions including:

  1. What Is The Size Of The Child Welfare Market?
  2. What Is The Federal Title IV-E Program?
  3. What Is The Federal Title IV-B Program?
  4. What Federal Programs Indirectly Finance Child Welfare Services?
  5. What Is Each State Spending On Child Welfare Services?

The report is free to all OPEN MINDS Circle premium and elite members, and can be purchased in the OPEN MINDS e-Store for $495.

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