American Public Human Services Association

Issues & Policy

Testimony of Elaine M. Ryan, Deputy Executive Director for Policy and Government Affairs, American Public Human Services Association before the Subcommittee on Human Resources Ways and Means Committee, U.S. House of Representatives on Foster Care Flexible Funding Proposal

June 11, 2003

Introduction

Good afternoon, Mr. Chairman and Members of the Subcommittee, I am Elaine M. Ryan, Deputy Executive Director for Policy and Government Affairs at the American Public Human Services Association (APHSA). I am pleased to have the opportunity to testify about child welfare financing reform and the proposal to create a foster care funding option for states.

Child Welfare Financing Reform Goals

As the national organization representing state and local agencies responsible for the operation and administration of public human service programs, including child protection, foster care and adoption, APHSA has a long-standing interest in developing policies and practices that promote improved performance by states in operating these programs for our nation's most vulnerable children and families. Indeed, APHSA members have dedicated nearly seven years discussing and crafting policy recommendations with respect to the financing of the child welfare system. APHSA has embraced two fundamental goals for child welfare financing reform outlined in our policy document, Crossroads: New Directions in Social Policy. First, there should be federal financial participation in support of all children in the child welfare system and, second, there should be increased flexibility in the use of IV-E funds.

APHSA policy supports delinking IV-E eligibility from AFDC so that the federal government can share in the support of all children in the child welfare system, regardless of income. With respect to increased flexibility, we strongly believe that the current IV-E structure fails to support the outcomes for children and families that we seek to achieve. Federal funding is disproportionately directed to funding out of home care-the very part of the system agencies seeks to minimize in order to achieve greater permanence for children. The IV-E entitlement should fund front-end services, reunification, post-permanency for children and families in the system as well.

Over the past several years, the demands on the child welfare system have increased significantly. State administrators have focused their efforts on implementing the requirements of the Adoption and Safe Families Act and setting forth plans to achieve improved outcomes for children with respect to safety, permanency and well-being. At the same time, fewer and fewer children served in the child welfare system are supported with federal funds, due to the "look back" provision of the welfare reform act that links IV-E eligibility to the former AFDC eligibility rules in effect as of July 16, 1996. In addition, since 1996, the Social Services Block Grant, a critical source of federal funding for child welfare, has been dramatically reduced from $2.8 billion to $1.7 billion. And recent federal policy announcements and actions threaten to restrict federal IV-E reimbursement for administrative costs incurred on behalf of children in unlicensed foster family homes as well as for targeted case management under Medicaid. Given the growing demands on the child welfare system and in light of the fragmented and fragile funding infrastructure, we believe Congress must address the critical issue of child welfare financing.

With so much at stake, we urge this subcommittee to engage in a thorough and comprehensive examination of all possible reform proposals.

The Administration's Foster Care Flexible Funding Proposal

We want to commend the Administration for highlighting the need for child welfare financing reform by setting forth a foster care flexible funding option in its FY 2004 Budget. Shortly after the release this year of the Administration's proposal, APHSA formed a working group of interested states to discuss various aspects of the proposal. In addition, Dr. Horn, Assistant Secretary for the Administration for Children and Families and various administration officials have met with our members and have solicited input on the proposed idea and the design of a state option. I am pleased to have the opportunity to share some of our preliminary thoughts on the broad construct of the foster care flexible funding proposal, based on the feedback we have received from our working group. However, it is important to note that APHSA has not taken a formal position on the Administration's proposal to date. When legislation is introduced in Congress, we will bring the proposal before our membership for consideration at that time.

As we understand the proposal, there are several strong aspects of the Administration's foster care flexible funding option. First, states would have the flexibility to use their IV-E funding allotments, as well as their MOE funds, for a broad range of services to children and families. We assume any legislative language would enable states to invest in prevention, subsidized guardianship, case-management, post-adoption services, and cross-system collaborative efforts with substance abuse agencies and juvenile courts and other activities and services as they see fit. Second, under the option, states could use the federal and MOE funds for all children in their foster care system, without regard to income. Third, under the option states could stem the decline in IV-E funding, due to the "AFDC look-back." Fourth, states would have the option of spending a greater proportion of their annual allotments in the first several years and could opt to roll any unspent funds from one fiscal year to the other. Finally, states would have access to a contingency fund in the event of a significant increase in their foster care caseload.

Determination of Baseline and Opt-in Period

As the subcommittee members are well aware, states child welfare systems are at various stages of reform and their state fiscal situations vary. Some states have experienced dramatic declines in IV-E eligibility claims in recent years, some have achieved reductions in foster care caseloads, some have seen increases, and some have operated waiver demonstrations. In addition, states differ in the resources used to support their child welfare systems-some have used TANF, SSBG, Medicaid, and a host of state and local resources. Therefore, states will need to engage in a complex calculation of whether to embrace the option or continue to operate under the entitlement structure.

States will have great interest in the calculation of the baseline, the base year, treatment of claims filed vs. claims paid, the treatment of child support collections, disallowances and deferrals. States should be consulted in the development of the criteria used to calculate the baseline. In addition, we would urge the subcommittee to consider adding a state option to exclude the cost of AFCARS and SACWIS systems from the baseline calculation and retain the current federal match for these data systems. Lead time will be important to states interested in opting in to allow for calculations to determine benefits of participating, to make any needed regulatory and/or statutory changes, systems changes, and to instruct the field of changes in practice. A significant time period may be required due to the need for extensive discussions with their local jurisdictions who administer child welfare. In addition, the proposed one-time opt-in period may limit some states from taking advantage of the option, due to the need to seek legislative approval or to undertake the aforementioned approval process. The subcommittee might explore the idea of allowing states to opt in within a two or three year period.

Opt Out

Some states have expressed concerns with the provision in the foster care option that would require states to stay in the option for five years. In light of the fiscal difficulties in the states, and the uncertainty related to the rising cost of child welfare, caseload dynamics and other factors, we urge the subcommittee to consider affording states the opportunity to opt out within the five year period. The creation of a contingency fund, while helpful, may not be able to shield states from unexpected revenue shortfalls or rising state deficits. With the protection of children our paramount concern, state should be able to opt out of the plan.

Maintenance of Effort

As in the TANF statute, we recommend the maintenance of effort (MOE) requirement should be limited to the historic share of state match for the base year identified in the law.

Links to Other Programs

As the subcommittee considers the option, we encourage you to look in-depth at the relationship this foster care option will have to other federal programs such as IV-E Adoption Assistance and Medicaid. While states may serve all children without respect to income under the foster care option, IV-E eligibility for Adoption Assistance must be simplified. Medicaid coverage must be continued for all previously eligible children under the option.

Contingency Fund

Under the Administration's proposal, states would need to meet a federal and state trigger in order to draw contingency funds. We recommend that the subcommittee consider one trigger linked to a significant increase in the state's foster care caseload. In addition, Congress should ensure that the match rate under the contingency fund is no greater than the state's current IV-E match rate.

Additional Congressional Actions

As stated earlier, state child welfare systems vary widely. For some states, the proposed option may not be viable. Cost neutrality conditions and financial risks may not be acceptable to some states. Therefore, in addition to considering the foster care funding option, we encourage the subcommittee to consider the following revisions to the IV-E entitlement.

Address the "Look Back"

Under the welfare law of 1996, states were given greater flexibility to establish Medicaid eligibility, including an inflation factor. However, with respect to IV-E eligibility, no inflation factor was included in the provision. In 1996, Congress acknowledged that they would need to address the IV-E eligibility criteria at a later date. Nearly seven years have passed and no action has been taken. We urge action on this critical issue. We want to acknowledge the legislation sponsored by Congressman Cardin that would update the IV-E eligibility by linking it to TANF eligibility. While we believe the proposal does not go far enough, we believe it is a positive starting point for further discussion.

Expand IV-E Flexibility

We appreciate that the Cardin bill recognizes that states will need additional resources in order to implement their Program Improvement Plans resulting from the federal Child and Family Service Reviews. We urge the subcommittee to examine the ways IV-E funding might be made more flexible so that states could use these resources to improve the outcomes for children and families in the system.

Restore the Social Services Block Grant

I cannot discuss child welfare funding without mentioning the Social Services Block Grant (SSBG). SSBG is a critical source of federal funding for child welfare services, and $1.3 billion in increased funding is currently pending in the Senate as part of the CARE Act. It is also through the leadership of several members of this committee including Representatives Johnson, Levin, Camp, Cardin, McDermott, English, and Stark who have called for full restoration of SSBG to $2.8 billion as part of the Social Services Block Grant Restoration Act. APHSA strongly encourages the subcommittee to support SSBG Restoration, either through passage of this legislation or as part of HR7, the companion bill to CARE that may move through the House. There are a host of SSBG services that support children and their families involved in the child welfare system; it is significant that in FY 2001 49 states used over $825.5 million for such child welfare services such as foster care, child protection, prevention and intervention, and adoption. According to an Urban Institute survey, SSBG was the second major funding stream for child welfare services after Title IV-E. Also, with only $21 million available federally under the Child Abuse and Prevention and Treatment Act (CAPTA) for the protection of children, states made use of over $314 million in SSBG funds for the same purpose.

Reauthorize and Expand IV-E Child Welfare Waivers

We appreciate the leadership of this subcommittee to reauthorize IV-E waivers in H.R. 4, the welfare reform act and call on Congress to include this provision in any final TANF legislation. The current waiver process limits innovation, prohibits approval for multiple states to test similar innovations, such as subsidized guardianship; restricts research, control groups, and random assignment requirements; cost-neutrality methodology; and limits statewide approaches. While the waiver program has enabled some states to reinvest federal foster care funding in services and other activities to improve their systems and promote permanence, in its current mode of HHS implementation, it is a promise unfulfilled and will not meet state's needs for the flexibility necessary to achieve broad systems change. APHSA strongly supports making substantial modifications to the current Title IV-E waiver process to allow more flexibility and to foster system change, including eliminating the limited number of waivers HHS can approve; eliminating approval criteria that require random assignment and control groups that limit statewide approaches; eliminating the limited number of states that may conduct waivers on the same topic; eliminating the limited number of waivers that may be conducted by a single state; and enabling states to continue their waivers beyond five years. The Title IV-E Demonstration Waivers would afford states another option to achieve flexibility and improve performance.

Conclusion

APHSA's vision for child welfare is a society where children are free from abuse and neglect, and live in safe, stable, permanent families-where children and families have needed supports and can help themselves. When children are at risk and come to the attention of the public agency, the agency can provide services and supports to them and their families to mitigate their problems and prevent them from being removed from their families and communities. When children must come into care, the agency can address children and family needs expeditiously and enable a safe reunification or, where that is not possible, find an alternative permanent placement expeditiously, while assuring their well-being in the interim. This is a vision where the safety and protection of children is the shared responsibility of all parts of the human service agency and the larger community. It is a vision where the child welfare system has the capacity to improve outcomes for children and families and the federal government and states are equal partners in serving all children in all parts of the system. The child welfare financing system, developed 23 years ago, no longer supports states' efforts to achieve this vision. We need reform and look forward to working with the subcommittee to devise a financing construct that can meet the needs of the most vulnerable children and families we serve. Thank you for the opportunity to testify. I would be pleased to respond to any questions you may have.