The 2025‑26 Budget

Child Welfare

Introduction

California’s children and family programs include an array of services to protect children from abuse and neglect and to keep families safely together when possible. This analysis outlines the Governor’s proposed 2025-26 budget for child welfare and foster care programs under the Department of Social Services (DSS), and raises questions and issues for the Legislature to consider.

For background on child welfare and foster care programs—including information about youth/families served by the child welfare system, recent legislative initiatives/reforms, and funding background—please refer to our recent report, California’s Child Welfare System: Addressing Disproportionalities and Disparities.

Overview of Governor’s Budget for Child Welfare

Proposed General Fund Spending for Child Welfare in 2025-26 Increases Compared to 2024-25. As shown in Figure 1, local assistance funding for child welfare is proposed to increase by around $1 billion total funds ($100 million General Fund) from the current year to the budget year. There are no new programs proposed, nor any significant discretionary funding expansions included. Rather, the increase reflects higher budgeted costs primarily due to:

• Increased costs of continued implementation of the state’s comprehensive child welfare data system, the Child Welfare System-California Automated Response and Engagement System (CWS-CARES).

• Ramp up of implementation for Behavioral Health Community-Based Organized Networks of Equitable Care and Treatment (BH-CONNECT).

• Preparations and initial automation funding for implementation of the new permanent foster care rate structure, referred to as the Tiered Rate Structure.

• Increased cost of child welfare services administration, as well as foster care, Approved Relative Caregiver, Kinship Guardianship Assistance Payment, and Adoption Assistance Program (AAP) rates due to annual increases in monthly maintenance payments, partially offset by projected lower caseloads for certain programs. For realigned programs, increases are budgeted mostly as higher projected federal and county shares of costs. We are working with the administration to understand more detail around what is driving the increases, particularly to the projected county share of costs.

The drivers of the overall year-to-year change in child welfare funding are described more in Figure 2. Additionally, more detail about some relatively newer programs—for which implementation is continuing to ramp up—is provided in the next section.

Program Updates Tied to Budget Increase

This section provides more detail about key program implementation updates associated with the net funding increase proposed for child welfare local assistance in 2025-26.

Tiered Rate Structure

Overview of Tiered Rate Structure. Continuum of Care Reform (CCR) is a series of state legislation enacted over the past decade making fundamental changes to the way the state cares for youth in the foster care system. As part of implementing CCR, the state developed a new foster care maintenance payment rate structure to replace the previous age-based and group home rate structure. Under CCR, foster care rates must be based on the assessed level of need of individual youth (“level of care,” or LOC), with youth requiring higher levels of behavioral health supports and other more therapeutic and intensive services receiving higher rates. Since 2017, the state has been implementing interim LOC rates for resource families, Short-Term Residential Therapeutic Programs (STRTPs), Foster Family Agencies, Intensive Services Foster Care, and other specialized models of foster care.

The 2024-25 spending plan amended and added substantial new statutory language establishing the permanent rate structure—referred to as the Tiered Rate Structure—and extending the duration of the interim rate period until permanent rates can be implemented (Chapter 46 of 2024 [AB 161, Committee on Budget]). The Tiered Rate Structure will rely on data collected via the state’s functional assessment tool—the Child and Adolescent Needs and Strengths (CANS) assessment—to determine a youth’s needed level of care and corresponding rate, which will not depend on placement types. (In other words, a youth will be able to receive the same level of financial support and services whether they are placed with a resource family, in an STRTP, or another placement type).

In addition to restructuring foster care maintenance payments, the 2024-25 statutory changes also added two new foster care programs and corresponding rate components: (1) Strengths Building and Child and Family Determination Program, and (2) Immediate Needs Program. Over the next few years, DSS will work toward implementation—in terms of developing detailed program guidance and taking other necessary steps to prepare for the Tiered Rate Structure—with the new rates slated to begin rolling out to youth and caregivers in 2027-28.

Governor’s Budget Proposal for Tiered Rate Structure. To continue preparing necessary automation systems for implementation of the Tiered Rate Structure, the Governor’s budget includes around $16 million total funds ($11 million General Fund) in 2025-26 for the California Statewide Automated Welfare System (CalSAWS) and CWS-CARES. In addition, the budget proposal includes $1.7 million total funds ($1.2 million General Fund) to support training and fidelity tools for counties on CANS assessments.

Questions. When reviewing the administration’s proposal for initial funding around the Tiered Rate Structure in the budget year, some questions for the Legislature to consider asking the administration include:

• What will the proposed training and fidelity tools for counties on CANS assessments entail?

• Aside from CANS assessments, are there other processes implemented as part of CCR with which counties could benefit from state assistance prior to implementing the Tiered Rate Structure?

• What are the major implementation milestones that will need to be completed prior to initial roll out of the new rates to families in 2027? Has the department developed a roadmap indicating anticipated timing for achieving these milestones that could be shared with the Legislature?

CWS-CARES

Overview. CWS-CARES will replace the current child welfare case management system as the state’s comprehensive and federally compliant child welfare data system. The system has been under development for more than a decade (with initial approval for the project to develop CWS-CARES provided in 2013). The project is jointly managed by DSS and Office of Technology and Solutions Integration (OTSI). Total project costs are projected to be around $2 billion total funds ($1 billion General Fund). However, the administration is updating its financial analysis for the project and updated cost estimates are forthcoming. Version 1 of CWS-CARES is anticipated to launch statewide in October 2026.

Governor’s Budget Proposal for CWS-CARES for 2025-26. To continue implementing the CWS-CARES project, $256 million total funds ($130 million General Fund) is proposed under child welfare local assistance. An additional $93 million ($46 million General Fund) in prior-year savings and additional new funding would be available pursuant to provisions in proposed budget bill language. (Additional expenditure authority is also requested by OTSI.) Major project milestones for 2025-26 are expected to include the design, build, and testing of numerous system modules related to case plans, aftercare, adoptions, hearings, facilities, tracking costs and claiming, and tracking service delivery.

Questions. When reviewing the administration’s proposal for increased CWS-CARES funding, some questions for the Legislature to consider asking the administration include:

• In recent years, the project has significantly underspent its funding allocations. What is the likelihood that the project will fully expend the requested funding for 2025-26? Are there savings from prior years that the project could use to offset costs in the budget year?

• Is the project on track for the anticipated statewide launch of Version 1 in October 2026? What are the risk factors that could delay implementation? What would be the impacts of delayed implementation?

Our office plans to publish a more detailed analysis of the CWS-CARES project and budget proposal—with additional comments and questions for legislative consideration—in the coming weeks.

BH-CONNECT

Overview. A federal Medicaid waiver demonstration project, BH-CONNECT allows the state to use healthcare dollars for certain services and activities that would not otherwise be eligible for federal Medicaid (Medi-Cal in California) funding. Broadly, the intention of the project is to use Medi-Cal funding to enhance community-based behavioral health care services to support individuals facing significant behavioral health challenges. Among other aims, the project seeks to deliver early interventions to reach children and families to help prevent entry into or deepening involvement with the child welfare system. The federal government approved the state’s project proposal in December 2024, and the demonstration period is January 1, 2025 through December 31, 2029. Over this period, the state Department of Health Care Services (DHCS) estimates around $8 billion in total funding will support the various components of the project.

Governor’s Budget Proposal for BH-CONNECT Under DSS. DHCS is the lead entity for BH-CONNECT and accordingly most funding for the project included in the 2025-26 Governor’s budget falls under DHCS (approximately $1.3 billion total funds, $40 million General Fund). However, the approved federal waiver includes a new Medi-Cal benefit for eligible foster youth that DSS will help to implement in coordination with DHCS, as described below.

• Activity Funds. The demonstration authorizes expenditure authority under federal funds over five years for coverage of “activity funds”—services and items to support the social and emotional well-being of eligible youth involved with the foster care system, AAP, or Family Maintenance Program. To be eligible, a youth must have a behavioral health condition, or be at high risk for a behavioral health condition. The funds may be used for physical wellness activities and goods that promote a healthy lifestyle (such as sports club fees and gym memberships, bicycles, and related safety equipment) as well as for strengths-developing activities (such as music lessons, art lessons, and therapeutic summer camps). Funds must be used for services/items that meet an assessed need and must (1) promote inclusion in the community, (2) increase safety in the home environment, and/or (3) facilitate age-appropriate participation or autonomy in making decisions that improve physical or behavioral health outcomes. A health/behavioral health service provider will document the need for these services in a youth’s clinical record and coordinate delivery of the activity in collaboration with the youth, their caregiver(s), and social worker, as appropriate. DHCS will contract with a third-party vendor to administer the benefit payments, which will go directly to the activity provider. Funding included in the Governor’s budget for DSS to support coordination of the activity funds in 2024-25 (half-year implementation) is $4.7 million total funds ($3.5 million General Fund). We are working with the administration to understand proposed costs for 2025-26 (full-year implementation). The funding for the stipends themselves and for the third-party vendor to administer the payments is budgeted under DHCS.

DSS Implementing Additional Activities in Support of BH-CONNECT. In addition to the new Medi-Cal benefit approved as part of the waiver demonstration project, DSS is implementing other child welfare program changes in support of the goals of BH-CONNECT as well as the goals of the state’s broader Medi-Cal reform initiative California Advancing and Innovating Medi-Cal (CalAIM). These program changes do not require a federal waiver to implement but are intended to support these Medi-Cal initiatives overall.

• Child and Family Team (CFT) Meetings for Family Maintenance (FM) Cases. As part of CCR, county child welfare agencies are required to coordinate a CFT meeting for youth within 60 days of entering foster care, and at least every six months throughout their time in care. In line with the goals of BH-CONNECT to help prevent entry into or further escalation within the child welfare system, DSS expanded the CFT requirement to include FM cases. (FM cases are those where a youth has been the subject of a maltreatment allegation but the child welfare agency determines the youth is able to remain safely at home, with any necessary interventions.) DSS provided guidance, and the state provided initial funding to counties in 2023-24 ($3.6 million total funds [$2.5 million General Fund]), for workforce readiness ahead of implementation, which is planned for January 2025. Funding included in the Governor’s budget for 2024-25 (half-year implementation) is $13.2 million total funds ($9.7 million General Fund). We are working with the administration to understand proposed costs for 2025-26 (full-year implementation).

• Joint Home Visits. Another policy/practice change being implemented in line with the goals of BH-CONNECT is that child welfare social workers will coordinate joint home visits with specialty mental health workers following substantiated maltreatment allegations. The joint child welfare/specialty mental health behavioral assessment will guide service recommendations that can be coordinated during CFT meetings. Funding included in the Governor’s budget for 2024-25 (half-year implementation) is $3.1 million total funds ($2.3 million General Fund). We are working with the administration to understand proposed costs for 2025-26 (full-year implementation).

Some Other BH-CONNECT Provisions Also Support Foster Youth. As noted above, DHCS is the lead entity for this project and most new BH-CONNECT initiatives focus on a broader population. Nonetheless, foster youth likely will benefit from some of these broader initiatives. Most notably:

• Transitional Rent Benefit. Youth transitioning out of foster care are one target population who may be able to receive up to six months of rental assistance, provided through Medi-Cal managed care plans. This new benefit initially will be optional for managed care plans to provide, beginning July 1, 2025. However, the service will become mandatory for Medi-Cal managed care plans to provide for certain beneficiaries beginning no sooner than January 1, 2026 and mandatory for all eligible populations no sooner than January 1, 2027.

Additional Medi-Cal Change to Establish Managed Care Plan Child Welfare Liaisons. In support of implementing BH-CONNECT and CalAIM, DHCS in 2023-24 began requiring managed care plans to designate child welfare liaisons, whose role includes overseeing and delivering Enhanced Care Management for foster youth, attending CFT meetings, ensuring managed care services are coordinated with other services, and supporting care managers if they face operational obstacles.

Questions. When reviewing the administration’s proposal for BH-CONNECT funding related to child welfare, some questions for the Legislature to consider asking the administration include:

• The Governor’s budget includes a half-year of funding in 2024-25, assuming implementation of the activity funds, CFT meetings for FM cases, and joint home visits will begin January 1, 2025. Has implementation begun? If not, when does the administration anticipate it can begin? If implementation did not begin January 1, will the full funding amount for 2024-25 be needed?

• How much funding is proposed in 2025-26 for DSS for each BH-CONNECT component to be implemented by the department (that is, what are the individuals amounts proposed for activity funds, CFT meetings for FM cases, and joint home visits)?

• Implementing these activities will require close coordination between DSS and DHCS at the state level, and between child welfare and mental health staff at the county level. What coordination has occurred/is occurring at the state level? What guidance will the state departments provide to county agencies?

• The implementation period for the activity funds as part of the BH-CONNECT project will overlap with the anticipated launch of the Strengths Building and Child and Family Determination Program as part of the Tiered Rate Structure. These two programs seem to be similar in that both provide funding for foster youth to participate in extracurricular activities, among other things. How will DSS/DHCS ensure the two programs complement one another?

Oversight of Recent Augmentations

No New Child Welfare Programs for 2025-26… As noted in the overview above, the Governor’s budget does not propose any new programs or discretionary funding expansions for child welfare in 2025-26. Given our office’s assessment that the 2025-26 budget is roughly balanced, the budget does not have capacity for new augmentations for child welfare this budget year (without reductions or revenue solutions elsewhere across the budget). Additionally, both our office and the administration project significant budget deficits in future years, meaning the Legislature will need to identify additional budget solutions to keep future expenditures balanced with forecasted revenue growth. To help the Legislature take on this task, understanding which programs are working well and those ones in need of adjustment is a key starting place for considering these future budget solutions.

…But DSS Continues Implementation of a Number of Newer Programs in the Current Year. In recent years, the state has adopted and/or significantly augmented a number of child welfare program areas. Using this year’s budget process to further the Legislature’s oversight of these newer programs/program expansions in particular could prove useful in helping the Legislature gain insight into program effectiveness and better position the Legislature to enact any necessary future budget solutions. Figure 3 provides an overview of child welfare programs that have been newly implemented or significantly augmented in recent years.

Key Questions for Oversight. Some key questions for the Legislature to consider as it oversees these programs include:

• What are the major outputs, outcomes, and impacts of the funding to date? What do youth and families view as the most notable results or effects of the funding?

• What have been obstacles, challenges, or delays to implementation? To what extent and how have DSS and program partners been able to address these issues? Is further Legislative guidance (or anything else) needed to address any remaining barriers?

• For programs that received one-time funding or augmentations, how sustainable are program gains? What will be the impact on youth and families when the funding expires?

• Are there policy changes that could continue any recently successful initiatives?