The 2024‑25 Budget

Preliminary May Revision Analysis for
Child Welfare

This post provides some initial high-level takeaways and considerations for the Legislature regarding May Revision proposals for child welfare programs under the Department of Social Services (DSS). We include comments on the overall budget—focusing on new proposals at the time of the administration’s May Revision—as well as some comments and questions related to the administration’s updated proposal for the statutorily required permanent foster care rates structure. For more background on these programs and proposals, please refer to our February 2024 analysis of the Governor’s budget proposals for child welfare programs, online here.

Overall Budget for Child Welfare Programs

Proposed General Fund Spending for Child Welfare in 2024-25 Decreases Compared to 2023-24. As shown in Figure 1, May Revision funding for child welfare and foster care programs implemented by DSS is proposed to decrease by $165 million General Fund from the current year to the budget year (this year-over-year decrease in General Fund is larger than a proposed $66 million decrease in the Governor’s January budget). The change in total funding, which is a net increase of $173 million total funds, reflects the General Fund decrease, offset by projected increases in county and federal expenditures. The General Fund net decrease is driven primarily by:

• Expiration of one-time funding provided in 2023-24, such as $100 million for Los Angeles County child welfare stabilization and $50 million for flexible county funds to support home-based foster placements.

• Proposed reductions beginning in 2024-25 for:

• Foster care caregiver approvals state funding elimination ($50 million ongoing), newly proposed at May Revision.

• Emergency Child Care Bridge program reduction ($34.8 million ongoing), newly proposed at May Revision.

• Family Urgent Response System elimination ($30 million General Fund), proposed as part of the Governor’s January budget.

• Housing supplement for Supervised Independent Living Placements (SILPs) elimination ($18.8 million General Fund at full implementation), proposed as part of the Governor’s January budget.

• Los Angeles County public health nurse pilot program elimination ($8.25 million General Fund), proposed as part of the Governor’s January budget.

• One-time reduction for Bringing Families Home ($80 million General Fund). This was proposed as a funding delay in January, but is now proposed as a reduction at May Revision.

The General Fund net decrease is partially offset by:

• Augmentations for continued implementation of the Child Welfare Services-California Automated Response and Engagement System (CWS-CARES), Behavioral Health Community-Based Organized Networks of Equitable Care and Treatment federal Medicaid waiver project, and Continuum of Care Reform (CCR).

• Increases to projected expenditures for the Adoption Assistance Program and Kinship Guardianship Assistance Payment Program.

A more detailed accounting of the changes resulting in the year-over-year General Fund net decrease is laid out in Figure 2.

LAO Comments on New Reductions Proposals

As described in Figure 2, the administration’s May Revision proposal includes three new reductions within child welfare. Our comments on these proposals are below. (For more information and our questions related to the proposed reductions included as part of the Governor’s January budget, please refer to our previous analysis.)

Foster Care Caregiver Approval Funding Reduction. According to the most recent data we have seen (from July 2023), median resource family approval (RFA) times—including for emergency placements with relatives—continue to exceed 100 days. This exceeds the target time frame of approval within 90 days. We are working with the administration to understand what are current RFA approval times, if more current data are available, and to what extent eliminating this funding will result in additional backlogs and longer processing times. While the proposed $50 million reduction would be an elimination of General Fund dollars, the administration has pointed out that counties are able to use their 2011 realignment local revenue funds to support resource families, including the application approval process. However, counties have expressed that realigned funds are insufficient for them to conduct what they view as new and expanded responsibilities under RFA, compared to prior foster family approval processes. (The County Welfare Directors Association estimates that counties spend more than $100 million annually on RFA.)

Emergency Child Care Bridge Reduction. The $34.8 million proposed reduction represents around 40 percent of overall program funding for vouchers, training, and administrative dollars. The administration frames this proposed reduction as “rightsizing” funding for the Emergency Child Care Bridge program, rather than being a reduction to current service levels. Based on data shared by DSS, the proposed reduction does appear to be in line with recent expenditure trends. However, the program recently received augmented funding and stakeholders have pointed out that the program still may be ramping up. Additionally, we are working to better understand how this proposed reduction fits within the context of the administration’s other proposed reductions and delays for child care programs more broadly.

Bringing Families Home (BFH) Reduction. In 2021-22 and 2022-23, BFH received large one-time augmentations ($92.5 million in each year, available for expenditure over a few years) that significantly expanded overall funding for the program and resulted in a number of additional counties newly participating in the program. Specifically, 53 counties and 25 tribal entities now participate in the program, compared to 12 counties that participated when the program began in 2016. Due in part to various implementation challenges, including difficulties finding available affordable and safe housing for eligible families, expenditures to date have been lower than anticipated. Based on information shared by the administration during initial May Revision hearings, our understanding is that as of March 2024, there is $87.5 million General Fund remaining for BFH from the 2022-23 one-time augmentation. The administration proposes to reduce this amount by $80 million, leaving around $7.5 million from the 2022-23 allocation (and around $20 million remaining from the one-time 2021-22 allocation) for grantees to continue the program in the current year and budget year. Because the program does not have an ongoing allocation, the program would end once remaining current funding expires June 30, 2025. Although the proposed reduction likely will mean that many grantees will need to cease program operations sooner—and there will be fewer families able to access the program—than previously anticipated, the funding always has been one time in nature. One aspect we are working with the administration to better understand is whether certain counties or grantees may be expending funds more quickly than others, and whether there are opportunities to reallocate any remaining dollars across counties to maximize program utilization.

Permanent Foster Care Rates Structure Proposal

For more background on foster care rates under CCR and context for this proposal, please refer to our previous analysis.

Updated Trailer Bill Language (TBL) Seems Responsive to Some Stakeholder Feedback. After publishing the initial TBL proposal in March 2024, DSS conducted around 15 feedback sessions to engage stakeholders on various elements of the new proposed rates structure. Stakeholders shared significant feedback, particularly related to the new program elements proposed for the rates structure, namely the strengths building and immediate needs components. Based on our understanding of stakeholder feedback and initial review of the updated TBL, it seems that the administration has made numerous amendments to the proposed language that are directly responsive to stakeholder feedback. For example, DSS received feedback related to non-minor dependents (NMDs) and concerns that the proposed tier 1 rates for NMDs in SILPs would amount to a reduction (relative to current rates) for some youth. Concerns also were raised that NMDs should be able to directly control their allocated strengths building dollars, rather than the dollars being managed by a DSS-contracted spending plan manager. In response, the updated TBL clarifies that strengths building dollars for NMDs in SILPs should go directly to the youth, rather than through a spending plan manager.

Some Questions Remain, DSS Will Continue Engaging Stakeholders. While the amended TBL makes significant updates in response to some stakeholder feedback, some issues still will need to be addressed prior to finalizing the language. In particular, stakeholders continue to have questions around the latent class analysis (LCA) process used to determine the proposed tiers for the new rates structure, as well as questions around the timeliness, uniformity, and applicability of the Child and Adolescent Needs and Strengths (CANS) assessment tool. Stakeholders also continue to raise that the proposed administrative portion of the rates across tiers is too low for short-term residential therapeutic programs and foster family agencies, and that all rate components should receive an annual California Necessity Index cost-of-living adjustment. DSS plans to continue engaging stakeholders on these and other issues that remain to be addressed. For example, DSS conducted a webinar on May 22 to discuss the CANS and LCA process.

Updated TBL Includes Trigger Language. The administration’s amended TBL proposal includes trigger language, specifying that the Department of Finance (DOF) would determine in spring 2026 whether sufficient General Fund resources over the multiyear forecast are available to support the new permanent rates structure (that is, the proposed tiered rates structure). Should the determination be made that an appropriation is not feasible, language specifies that the existing (interim) rates structure shall remain in effect and continue to be fully funded as provided by law and the permanent rates structure shall not be implemented until an appropriation is made.

Making Implementation Subject to Trigger Determination Seems Questionable. We question whether trigger language for this proposal makes sense. The proposed tiered rates, along with the completely new strengths building and immediate needs rate components, represent a significant restructuring of foster care rates that warrants legislative input. DSS, county partners, service providers, and other stakeholders will need to undertake significant preparations over the next couple years in order to position themselves to begin implementation. Given these up-front administrative costs and requirements, predicating implementation on a trigger could make these efforts fruitless and result in an inefficient use of state resources. Moreover, while this rates structure proposal itself is new, the development of a permanent rates structure has been part of the Legislature’s policy for foster care since the implementation of CCR beginning in 2015.

Due to Planned Implementation Time Line, Adopting Trigger Language Not Necessary This Year. Because implementation of the new rates under the administration’s proposal is not anticipated to begin for two years, trigger language particularly at this point in time seems unnecessary. Moreover, the trigger language would defer a policy decision—whether to implement the long-anticipated permanent rates structure under CCR—to DOF without a clear role for the Legislature at that time.

Identify Core Pieces of TBL to Keep Process Moving. In order to continue forward toward eventually implementing the permeant rates structure under CCR, the Legislature could pass abridged TBL as part of this year’s budget cycle, adopting the elements necessary to allow DSS and automation partners to begin preparing for implementation. Passing only what is necessary this year would allow more time for the remaining stakeholder questions and policy issues to be worked out and give the Legislature the chance to assess whether the rates structure is in line with its vision for permanent CCR rates.

Next Year, Determine Whether Delay to Full Implementation Is Necessary. Then, over the next year or so, the Legislature could direct DSS to continue working with stakeholders to address the remaining questions and policy considerations. This could result in an implementation date after July 1, 2026, at least for some components of the new rates structure as proposed by the administration. This delay may be acceptable to the Legislature given the complexity of the proposal and outstanding questions. Furthermore, additional time prior to full implementation could be advantageous within the context of the state’s currently projected multiyear budget deficit. The additional time would allow the Legislature to make its own determination around implementing the new rates once the state’s future fiscal picture is clearer and the specifics of the proposal are more certain.

Questions Regarding Proposed Automation Funding for 2024-25. At May Revision, the placeholder funding amount included to begin automation in preparation for implementing the new rates structure has increased to $14.465 million, up from $12 million at the time of the Governor’s January proposal. Our understanding is that Statewide Automated Welfare System and CWS-CARES partners need detailed implementation guidance from DSS prior to automation, so we are unsure what exactly this now-more-precise estimate reflects.

Questions Around Multiyear Cost Estimate. We continue to have questions around how the administration developed its cost estimate for implementing the proposed new rates structure, beginning in 2026-27 and ramping up to full implementation in 2029-30 (totaling around $1 billion total funds [$780 million General Fund] annually as of 2029-30). Furthermore, our understanding is that the estimates provided are for local assistance only and do not include state operations costs. We will continue to work with the administration to better understand the overall estimates methodology for the proposed permanent rates structure.