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June 2004Vol. 5, No. 5More Flexible Child Welfare Funding May Improve Child Outcomes

Current Federal child welfare financing rules, which are targeted to supporting children in foster care rather than on services to keep children safe in their own homes or in alternative permanent placements, may limit States' ability to engage in service innovations and improve their performance on the Federal Child and Family Services Reviews (CFSRs), according to a recent report by Fostering Results. The report shows that when States are given greater flexibility--such as through the Title IV-E waiver program--some have succeeded in improving outcomes for children in foster care.

The report, The Foster Care Straitjacket: Innovation, Federal Financing & Accountability in State Foster Care Reform, begins with an overview of State performance on the CFSRs. According to results from 39 States whose reviews had been completed when the report was written, States are struggling in a number of areas, including securing timely permanence for children who enter foster care and minimizing the number of times a child is moved from placement to placement. Although States are seeking ways to address these challenges, many of the services needed to improve outcomes for children (such as substance abuse treatment, mental health services, and support for legal guardianship) are difficult to fund under current Federal financing rules.

Expansion of Title IV-E child welfare waivers, which allow States to waive certain funding requirements to facilitate the demonstration of new approaches to service delivery, could help alleviate this difficulty. This expansion is part of the TANF reauthorization that has been put forth by the Bush Administration. The report cites examples from several States that have successfully implemented demonstration projects to improve the child welfare system's performance. Among the examples discussed:

  • Illinois used a Federal funding waiver to subsidize private guardianship and provide more than 6,800 children with stable, permanent homes. The State then reinvested the more than $28 million in "savings" created by the waiver into other services that helped cut the number of children in foster care from 51,000 to 19,000 in 5 years.
  • Connecticut was granted a waiver to use Federal funds to offer intensive residential mental health services to children in residential placements while in foster care, reducing the time these children spent in care and improving their behavior once they returned home--at no additional cost to the Federal government.
  • North Carolina received a waiver to allow 19 counties to use IV-E funds more flexibly to support services to ensure safe, permanent outcomes for children in or at imminent risk of placement. Evaluators found a decreased probability of placement for children in the demonstration counties (versus comparison counties).

In addition to improving outcomes for children and families, the report claims, such waivers also offer the potential to reduce total IV-E costs over time.

Fostering Results is a public education and outreach campaign working to address Federal child welfare financing mechanisms and improve court oversight of child welfare cases. The full report can be downloaded from the Fostering Results website at

Related Items

President Bush's child welfare proposal addresses the issues raised in this report by allowing States the option to receive their foster care funding as a flexible grant. This flexibility would help States enhance the array of services for families and improve outcomes for children. Read more about the proposal in "HHS Assistant Secretary Testifies Before Congress on the President's Child Welfare Proposal" in the August 2003 issue of Children's Bureau Express.

Demonstration projects are already exhibiting some of the promise of the President's proposal on a smaller scale. Read about waiver projects in four States--Indiana, North Carolina, Ohio, and Oregon--in "Flexible Funding Demonstration Projects Show Promise" in the September 2003 issue of Children's Bureau Express.

More information about the Child Welfare Waiver Demonstration Projects is available on the Children's Bureau website at

In May, the Pew Commission on Children in Foster Care released recommendations addressing the current Federal financing structure as well as challenges within the court system. Among the recommendations is a call to expand and simplify the Federal waiver process. An executive summary and the complete report can be accessed on the Pew Commission website at