Reforming IV-E, Part One: The Friendless Eligibility Rules

Rewriting the rules on the lion’s share of federal foster care money – the Title IV-E entitlement – is hardly a fresh notion. Legislators have undertaken more than a dozen attempts to re-formulate IV-E, which includes 90 percent of the federal spending on child welfare, but precludes states from using that money for anything but foster care.

Nearly all those attempts have failed.

The most significant legislative shift on the entitlement came in 2008 with the passage of the landmark Fostering Connections to Success and Increasing Adoptions Act. Fostering Connections expanded the reach of the entitlement to older youth and those in subsidized guardianships. It did nothing to change the way in which the federal government deems a foster youth eligible for federal IV-E money, or what states can do for that child with federal IV-E money.

But there is a renewed interest in reforming federal foster care spending, and it comes at a time when both houses of Congress include bipartisan caucuses on foster youth. Both houses and parties have members in key positions that have knowledge and interest in child welfare.

The Chronicle will look at various angles of the discussion on federal financing reform. Today, we start with the point on which there is the most agreement: ending the way the federal government decides how to reimburse states for foster care.

Right now, the federal government’s policy is to  share in the cost of foster care only for children who are removed from very poor households. The home must be poor enough that the biological parent or parents would qualify for Aid to Families with Dependent Children (AFDC), a federal welfare program that was replaced in 1996 by the Temporary Assistance for Needy Families (TANF) program.

Cash assistance eligibility standards changed in every state with the conversion from AFDC to TANF. By 2005, the TANF income ceiling for a family of three exceeded the 1996 AFDC standard in 34 states, according to data compiled for this analysis by The Chronicle of Social Change. The other 16 states have actually made it more difficult to get TANF than it was to get AFDC in 1996.

Meanwhile, the percentage of children eligible for federal IV-E money has dwindled. There were about 300,000 IV-E eligible youth in 1999; there were 179,400 in 2011.
This is in part explained by the dramatic overall reduction in foster care rolls over that period.

But the overall decline in foster care does not explain why the proportion of foster care youth deemed eligible for IV-E declined from 53 percent in 1999 to 45 percent in 2011, according to a 2013 report from the Government Accountability Office (GAO) on 14 different legislative proposals since 1999 to change the IV-E eligibility standards.

That lower share can only be explained through a combination of a few factors:

  1. Child welfare systems are removing a higher proportion of children from houses with more income.
  2. The federal government is basing its interest in foster care on income levels that, more often than not, are from nearly two decades ago.
  3. States are not seeking reimbursement for as many children as they could, or they are putting them into placement options that are not sanctioned by the federal government (an unlicensed home, for example).

“Clearly, it makes no sense to determine this based on the birth family and whether they would qualify for AFDC,” said MaryLee Allen, the director of child welfare and mental health for the Children’s Defense Fund.

The only public argument for maintaining the status quo came from Richard Wexler, the executive director of the now-shuttered National Coalition for Child Protection Reform (NCCPR). He believed that the AFDC threshold tamped down the incentive to place youths in foster care, but even he conceded that the standard itself was absurd.

“It’s a bizarre way to put a brake on the otherwise unlimited entitlement to foster care funding. But it’s the only brake we’ve got,” Wexler wrote on NCCPR’s page in 2010. “If the only brake on a runaway train is a clumsy contraption that only Rube Goldberg could love, it’s still better than no brake at all.”

So really, there’s nobody that actually supports the notion of keeping eligibility tied to a defunct welfare program. The 14 attempts to revise IV-E eligibility included in the 2013 GAO report all include one of the following two options for what to do instead:

Option One: Nothing. Get rid of any litmus test that determines whether the federal government shares in the cost of foster care services. In 12 of the 14 proposed plans for changing eligibility, the plan was to just scrap the idea of a means test.

Allen said this is the option favored by CDF. “I just don’t know how you distinguish one foster youth’s need against another” based on the income of the family from which they are being removed, she said.

Option Two: Peg IV-E eligibility to a more contemporary indicator of poverty such as the income thresholds for TANF, food stamps, or free/reduced-price lunch.

If either of those sounds expensive for the federal government, they will not be. In either of those scenarios, the per-child federal share of foster care costs will go down in such a way as to immediately neutralize the costs.

The challenge is to figure out a way to reduce the federal reimbursement rate in a way that does not disproportionately impact certain states.

That will be tricky, said Allen, because there are states where most foster youth are IV-E eligible and others where the IV-E eligible rate is far lower. Shifting to a no-test, lower-rate system would reward the latter at a cost to the former.

Shifting to a TANF means test might actually lower the universe of IV-eligible children in those 16 states where the TANF income ceiling is lower than the 1996 AFDC one. It is also worth nothing that the four states with the highest IV-E eligible proportion of foster youth –Penn., Idaho, Ohio and N.J. – have either made qualifying for TANF harder than AFDC or have barely changed the threshold.

Under either scenario, if everything else about IV-E stayed the same, the only way that the federal government would see a significant rise in IV-E costs would be if foster care placements shot up.

But many advocates would like to see other changes to IV-E made, which might make the shift away from AFDC a more dangerous fiscal prospect for the feds. More on that this week.

Check The Chronicle this month for additional analysis of federal child welfare finance reform, including:

  • The Changing Tide on Flexibility
  • Timeline: Reform Now, or After Waivers?
  • Key Congressional Players
  • What Does the White House Want?
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John Kelly, Editor in Chief, The Chronicle of Social Change
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John Kelly is editor-in-chief of The Chronicle of Social Change. Reach him at