Legislative Analyst's Office

Analysis of the 2000-01 Budget Bill
Foster Care

Children are eligible for grants under the Aid to Families with Dependent Children-Foster Care program if they are living with a foster care provider under (1) a court order or (2) a voluntary agreement between the child's parent and a county welfare or probation department. County welfare departments have the responsibility of placing children in foster homes. Children in the foster care system can be placed in either a foster family home (FFH) or a foster care group home (GH). Both types of foster care provide 24-hour residential care. Foster family homes must be (1) located in the residence of the foster parent(s), (2) provide services to not more than six children, and (3) be either licensed by the Department of Social Services (DSS) or certified by a foster family agency (FFA). Foster care GHs are licensed by the DSS to provide services to seven or more children.

The budget proposes total expenditures of $1.5 billion ($389 million General Fund) in 2000-01 for foster care local assistance. This represents a 1 percent (9 percent General Fund) decrease from the current year. The General Fund reduction is due primarily to (1) a one-time 1999-00 expenditure for a federal audit requirement and (2) a shift of KinGAP (Kinship Guardianship Assistance Payment) Program cases from foster care to the California Work Opportunity and Responsibility to Kids (CalWORKs) program in 2000-01.

Budget Overestimates Cost-of-Living Adjustment for Foster Family Agencies

We recommend that proposed spending for the foster care program be reduced by $792,000 from the General Fund because the budget overestimates the statutory cost-of-living-adjustment for the foster family agencies. (Reduce Item 5180-101-0001 by $792,000.)

The Governor's budget proposes to provide the statutory cost-of-living adjustment (COLA) to FFAs, effective July 1, 2000. The COLA is based on the change in the California Necessities Index (CNI) from December 1998 to December 1999. The Governor's budget, which is prepared prior to the release of the December CNI figures, estimates that the CNI will be 3.61 percent, based on partial data, for a total cost of $15.3 million ($4.3 million General Fund). Our review of the final data, however, indicates that the CNI will be 2.96 percent. Applying the actual CNI of 2.96 percent reduces the cost of providing the FFA COLA to $12.5 million ($3.5 million General Fund). Accordingly, we recommend that the budget be reduced by $792,000 from the General Fund to reflect these savings.

Budget Does Not Provide COLA for All Foster Care Providers

We recommend a $12.3 million General Fund augmentation to provide a cost-of-living adjustment (COLA) for the foster family homes and group homes because (1) there is no policy rationale for distinguishing these types of providers from foster family agencies and (2) revenues are sufficient to provide the COLA. (Increase Item 5180-101-0001 by $12,300,000.)

The budget proposes a COLA to FFAs in 2000-01, but does not provide a COLA to the other foster care providers--FFHs and GHs. The statutory COLA for the FFAs is mandatory. Current law provides the same COLA for FFHs and GHs, but makes them "subject to the availability of funds." We recommend providing a COLA to FFH and GH providers because (1) there is no policy rationale for distinguishing these types of providers from FFAs, and (2) revenues are sufficient to provide the COLA. With respect to revenues, we note that we are projecting that General Fund revenues will be significantly higher than estimated in the budget, over the two-year period in 1999-00 and 2000-01. (Please see The 2000-01 Budget: Perspectives and Issues.)

The cost of providing the 2000-01 FFH and GH COLA of 2.96 percent is $12.3 million from the General Fund ($40.6 million all funds). We note that this amount includes COLAs for Adoption Assistance, Emergency Assistance, and KinGAP, whose rates are based on FFH rates.

Return to Health and Social Services Table of Contents, 2000-01 Budget Analysis
Return to 2000-01 Budget Analysis Table of Contents
Return to LAO Home Page