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An OPEN MINDS Market Intelligence Report

In the past ten years, the size of the child welfare market has remained relatively steady; however, there was an 8% decrease in spending between fiscal years 2010 and 2012. In FY2010, total spending on child welfare services was $30.6 billion. In FY2012, states spent a total of $28.2 billion on child welfare services. Part of the decrease in federal spending can be attributed to the enhanced matching funds that states received through the American Reinvestment and Recovery Act (ARRA) of 2009. As part of the ARRA stimulus package, the federal government temporarily enhanced the federal match rate for Title IV-E funds; this is reflected in the federal funds in 2010. Further analysis has also shown that child welfare spending is not linked to the number of children in the foster care system.

Funding these services involves multiple complex funding streams—federal, state, local, and private sources—each with their own set of rules, regulations, and policy interpretations. Some funding is dedicated to children and family service activities specifically, while other sources allow for spending on children and family services, but are designed for broader purposes.

Title IV-E is the primary federal funding source for the child welfare market – over half of the total $12.7 billion total that the federal government allocates to states. Title IV-E is an open-ended entitlement program, meaning there is no cap on federal funding. However, states are required to match funds provided by the federal government, and matching funds are dependent upon the Title IV-E program. Within each program, the federal government provides funding for maintenance payments, which help cover daily expenses associated with caring for the child, administrative expenses related to the program, and expenses related to recruiting and training parents.

This report includes a detailed breakdown of child welfare spending and a state-by-state chart on program funding. The report analyzes the size of the child welfare market, explains the Federal Title IV-E and Title IV-B Programs, details the Federal programs that indirectly finance child welfare services, and shows what each state spends on child welfare services.

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