Legislative Analyst's Office
Analysis of the 2002-03 Budget Bill
California's state-supervised, county-administered Child Welfare Services (CWS) Program provides services to abused and neglected children, children in foster care, and their families. The CWS Program provides (1) immediate social worker response to allegations of child abuse and neglect; (2) ongoing services to children and their families who have been identified as victims, or potential victims, of abuse and neglect; and (3) services to children in foster care who have been temporarily or permanently removed from their family because of abuse or neglect. The 2002-03 Governor's Budget proposes $1.9 billion from all funds and $590 million from the General Fund for CWS. This represents an increase of less than 1 percent from the General Fund over current-year expenditures.
Currently the state uses a combination of federal Temporary Assistance for Needy Families (TANF) funds and county funds to provide case management services for children in the child welfare system. We recommend (1) replacing the TANF funds with General Fund monies in order to draw down additional Title IV-E federal funds and (2) using the freed-up TANF funds to offset General Fund costs in the Department of Developmental Services. Together, these actions result in net General Fund savings of $31.6 million. Finally, we recommend that the Department of Social Services report at budget hearings on the potential to draw down more federal Title IV-E funds, thereby resulting in additional General Fund savings in both the current and budget years. (Increase Item 5180-151-0001 by $38,300,000 and reduce Item 4300-101-0001 by $69,900,000).
Background. The Emergency Assistance (EA) Program, a component of the CWS Program, provides a variety of services to children who are placed in foster care or are at risk of foster care placement. Case management, one portion of the EA Program, provides funds for case planning and reviews; foster and adoptive parent orientation; and a variety of other services to support children and families in the CWS program.
Current Budget Practice. Federal Title IV-E funds are the largest federal funding stream for child welfare and foster care services. The 2002-03 budget, however, does not propose to use Title IV-E funds to support EA case management services in the CWS program. Instead, the budget proposes to continue the existing practice of using a combination of federal Temporary Assistance for Needy Families (TANF) and county funds. Together, the TANF funds ($69.9 million) and the county funds ($12.3 million) total $82.2 million. While TANF funds are received in the form of a fixed block grant, Title IV-E funds are available to match state funds on a dollar-for-dollar basis.
Substituting IV-E Funds for TANF Funds. If alternatively the state opted to draw down federal Title IV-E funds, the Department of Social Services (DSS) estimates that approximately 77 percent of California children in the CWS and foster care programs would be eligible for such funding in 2002-03. Thus, 77 percent of EA case management spending, or $63.3 million, would be eligible for 50 percent federal financial participation. The nonfederal costs of this option would be shared 70 percent state and 30 percent county. Accordingly, shifting the EA case management costs from TANF to Title IV-E would result in (1) a draw down of $31.6 million in federal Title IV-E funds, (2) a General Fund cost of $35.4 million, (3) an increase in county costs of $2.9 million (to a total of $15.2 million), and (4) $69.9 million in freed-up TANF funds.
Converting the TANF Funds Into General Fund Savings. As described more fully in our analysis of the CalWORKs budget, TANF funds may be transferred into the Title XX Social Services block grant. Once transferred, they then may be used to offset General Fund costs in the community-based programs in the Department of Developmental Services (DDS). Taking the actions described above would free up $69.9 million in TANF funds. These funds could then be used to offset $69.9 million in General Fund costs in DDS. Combining this General Fund savings of $69.9 million in DDS with the $35.4 million General Fund cost in the EA case management program would result in net General Fund savings of $34.5 million, and county costs of $2.9 million.
Analyst's Recommendation. We recommend replacing $69.9 million in TANF spending for case management in the EA Program with $34.5 million from the General Fund. This action would draw down an additional $31.6 million in federal Title IV-E funds and would free up $69.9 million in TANF funds. We further recommend transferring this $69.9 million to the Title XX Social Services block grant and using the transferred funds to offset existing General Fund costs in the community-based programs in DDS. Taken together, these recommendations would result in a net General Fund savings of $34.5 million with no reduction in service or change in program operation. In order to hold counties harmless, we also recommend redirecting $2.9 million of the General Fund savings, back to the counties. Finally, given the potential for additional General Fund savings we recommend that DSS report at budget hearings on the potential to (1) draw down Title IV-E funds in the current year by changing our current claiming practice and (2) use Title IV-E funds to pay for other EA services.