Analysis of the 2006-07 Budget Bill Legislative Analyst's Office February 2006

Child Welfare Services

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 2006-07 Governor’s Budget proposes $2.2 billion from all funds and $630 million from the General Fund for CWS. This represents an increase of 1.7 percent (0.2 percent General Fund) from the current year. The increase is primarily due to the Governor’s children’s initiative and a small increase in the average cost per case.

California Failing to Meet Performance Improvement Goals

Federal law requires California to improve its performance on federal outcome measures established for the child welfare system. We review the state’s progress toward meeting the federal outcome measures, and provide an estimate of the risk of penalties based on current performance.

Background

What Are the Federal Requirements? In 2002, the federal Administration for Children and Families (ACF) conducted a performance review of California’s child welfare system for the first time. The performance review, referred to as the Federal Child and Family Services Review, included two broad sets of evaluation criteria. Both sets of criteria contained seven separate subareas for review. The first part of the review, referred to as “systemic,” focused on factors such as training, statewide data collection, and the state’s quality assurance processes. The second part of the review focused on seven measurable outcomes within three broad areas: safety, well-being, and permanency of children involved in the system.

In 2002, California passed two of the seven systemic factors and failed all seven of the outcome measures pertaining to child safety, well-being, and permanency. As a result, the state was required to develop and implement a Performance Improvement Plan (PIP) in order to avoid penalties in the form of reductions in federal funding. The PIP outlined the degree of improvement that the state needed to achieve in order to avoid penalties, as well as a number of action steps that the state was required to take.

California’s Current Performance

As of July 2005, ACF certified that the state had successfully met all seven of the systemic factors and completed the required action steps in the PIP. Final data review for the other seven outcome measures will not occur until April 2007, based on data collected through the third quarter (end of September) of 2006.

Current Status. Although final federal review will not occur until 2007, we have compiled outcome data for California based on the most recent information available. Figure 1 shows the state’s standing as of January 2006 with respect to the seven outcome measures. Child safety outcomes focus on the protection of children from abuse in either out-of-home care or if they remain in their homes. Permanency outcomes measure the state’s success at providing stability to children in foster care and providing a permanent resolution for children when they cannot return home. Finally, the well-being outcomes seek to measure other issues that affect children in the child welfare system such as educational, physical, and mental health needs, and connections to their family and communities. Each outcome may contain a number of sub-goals, all of which must be met in order to receive a “passing” grade for the measure. Current results show that the state, though improving in some areas, has not yet fully passed any of these outcome measures.

Assessing California’s Performance. Although the state has not passed any of the seven outcome measures, it has improved its performance in some important subgoals. For example:

• Within the permanency category (outcome number 3), the state has exceeded the goal for the percentage of children who are reunified or adopted within the specified time period.

• Also within the same category, the state has increased the proportion of cases that have a plan for permanency in a timely manner.

• Within the safety category (outcome number 1), the state has met the standard for a reduction in the repeat maltreatment of children who have previously been referred for abuse and neglect.

Other positive progress has been made on some of the subgoals for the well-being outcomes shown in Figure 1, but few have yet to surpass the PIP goal of 3 percentage point improvement required to pass an outcome.

There is significantly less improvement for safety (outcome number 2), which measures the rate of recurrence of abuse for children who remain in their homes, and for the rate of maltreatment of children in foster care. The state is also still below the level required to meet the outcome for stability in foster care placements.

Penalty Exposure

How Are Penalties Calculated? As previously indicated, the federal review of the state’s performance will not occur until April 2007. Consequently there is time for the state to improve its performance beyond that shown in Figure 1, thereby avoiding federal penalties. Nevertheless, should federal penalties be assessed at that time, this is how they would be calculated.

The federal penalties are assessed based on whether the state meets its goal for each outcome. For each outcome not met, a penalty of 1 percent is assessed on a portion of the state’s federal fund allocation. This penalty formula is applied to each year’s federal funding, beginning with federal fiscal year 2002. Because the state has negotiated a PIP, the federal government holds these penalties in abeyance until a final review of the state’s progress, however they continue to accumulate for each year. At the time this analysis was prepared, the state still had not met seven outcome measures. As of July 2005, the federal funding penalty for the current level of performance is $42 million. However, penalties will continue to accumulate until ACF’s final review of the state’s data in April 2007, adding approximately $17 million if no additional outcomes are met, resulting in a total penalty of about $59 million. If, at that time, the state successfully meets any of the seven outcomes, the penalty would decrease accordingly.

Assuming California fails to attain compliance in its PIP by April 2007, a new PIP based on a second federal review would be negotiated. The penalty for each missed outcome rises from 1 percent to 2 percent of federal funds during the second PIP.

When Will Penalties Be Applied? Once ACF receives the final data for review in April 2007, it is anticipated that penalties will be applied soon after, possibly by the summer of 2007.

Current Improvement Efforts

What Has the State Done to Improve Performance? The state has funded performance improvement activities in each year since the development of the PIP. Specifically, $19.5 million ($0.9 million General Fund) and $ 28.4 million ($12.3 million General Fund) were allocated, respectively, for 2004-05 and 2005-06. The budget proposes $28.6 million ($16.3 million General Fund) for these activities in 2006-07. These improvement funds have been applied to two major efforts, system improvement pilots and the implementation of the statewide outcome and accountability system created by Chapter 678, Statutes of 2001 (AB 636, Steinberg). Each of these efforts are described below.

System Improvement Pilots. Beginning in 2004-05, 11 counties have received funds for pilot projects to improve their CWS outcomes. The pilots have focused on three methods for improving CWS delivery: (1) differential response intake, (2) standardized safety assessment, and (3) improving permanency and youth services. Differential response focuses on improving the child abuse hotline response system to provide multiple paths for child safety and to refer families for community services when appropriate. The standardized safety assessment system provides consistent procedures to determine if a child is safe when a situation is initially assessed and throughout the course of a child welfare case. Improving foster youth permanency focuses on team-based case planning to support family reunification or transition planning. This strategy also increases the involvement of youth and families in their own case planning. Together, these projects have been allocated $32.5 million (all funds) in the past two years, in order to test their potential to improve outcomes.

Outcome and Accountability System Established by Chapter 678. The other major effort to improve the state’s performance on the federal outcomes is the implementation of Chapter 678, which established a framework for measuring performance and tracking improvement in CWS, hereafter referred to as the AB 636 system. The AB 636 system also aligned state performance outcomes with the federal performance outcomes described earlier. The implementation of this system began in 2004 when counties examined their performance data, met with their communities, and developed Self Improvement Plans (SIPs). These SIPs, like the state’s PIP, identify the level of improvement counties anticipate making on outcomes, and their action plans to make the improvements. Counties receive quarterly reports from the Department of Social Services (DSS), in order to monitor their progress on outcomes and adjust their approaches accordingly. (The state contracts with UC Berkeley to compile data by county for each outcome measure.)

Funding to implement changes outlined in SIPs began in the current year, when the state made $12.8 million available through a grant process, for counties to execute performance improvement strategies. The DSS has requested reports on the interim results of this funding from the counties in April of 2006. Based on our review, 38 counties received funds for various strategies, many of which are closely modeled on the System Improvement Pilot activities.

Further Improvement Efforts

We recommend that the Department of Social Services report at budget hearings on evaluation results for the 11 improvement pilots.

Report Evaluation Results for System Improvement Pilots. Though funding has been provided to the 11 pilot counties since 2004-05 to improve their CWS performance, there has been no evaluation of the pilot strategies used by these counties. The original intention of these pilots was to disseminate statewide the three strategies they have used, once lessons and evaluation results were available from them. In the intervening two years, however, many other counties have begun to implement similar strategies without this information to guide their efforts. Although a formal evaluation has not begun, DSS has indicated that it will use preliminary information regarding the operations of these pilots to adjust the budget for the May Revision. We believe that the Legislature should have this same information when it is available to guide its decisions about further investment in these strategies. Accordingly, we recommend that DSS report at budget hearings on the evaluation results for the 11 pilot improvement counties.

Funding for CWS Should Be Flexible

The Governor proposes a total of $32.8 million ($19.1 General Fund) for (1 ) new initiatives in adoption, kinship support, and transitional housing for foster youth, and (2) implementation of recently enacted legislation. We recommend approval of the $18 million proposed to fund recently enacted legislation and transitional housing for foster youth. However, we recommend that the Legislature redirect the remaining $15 million (all funds) from the Governor’s initiative into flexible grants which would allow counties to target resources to the needs they have identified as part of the state’s outcome and accountability framework.

Outcomes and Accountability Framework

Counties Have Identified Critical Areas for Improvement. As discussed earlier, Chapter 678 established a statewide outcome and accountability system, commonly referred to as the AB 636 system. Through this system, counties now receive data quarterly that measures their performance against state and federal outcome standards. In addition, through the development of SIPs, they then target specific efforts to the areas that need improvement. This process provides counties, who are in the best position to assess children’s needs, with the flexibility to adopt appropriate performance improvement strategies.

Current Funding. In 2005-06, the state provided $12.8 million to assist counties to implement the strategies they had identified in their SIPs. This funding allocated grants, through a competitive proposal process, to 38 counties to fund improvement strategies identified in their SIPs.

Governor’s Proposal

The Governor proposes an initiative which funds recently enacted legislation, increases the number of adoptions finalized, and augments funding for two existing programs providing services to children and families in the child welfare system. Figure 2 summarizes the funding for each component of the initiative, which is discussed in detail below.

Increasing Adoptions. The Governor’s budget proposes a total of $12.5 million to fund additional adoptions social workers. Of this amount, $ 1.3 million ($0.7 million General Fund) would support 16.5 additional positions within the state’s adoptions services bureau, which provides adoption services to 28 counties. The remaining $11.2 million ($6.3 million General Fund) would be provided to the counties who operate their own adoption programs. The new adoptions workers are projected to increase finalized adoptions by 1,121 cases through 2007-08.

Expanding Kinship Support Services. The Governor’s budget proposes to increase kinship support funding by $2.5 million to a total of $4 million. Kinship support is provided to relatives caring for foster children and typically includes services such as respite care; mentoring/tutoring; or assistance with furniture, clothing, food, or transportation. Eleven counties currently operate kinship support service programs. The additional $2.5 million would be available to these counties as well as other counties who wish to offer this service.

Transitional Housing for Foster Youth. The budget proposal would add approximately $2.6 million total ($1.4 million General Fund) to the existing transitional housing program for foster youth. The program provides grant payments to foster youth as they leave foster care to enable them to find housing independently. Though this program has been in effect since 2002, some counties have not participated because the funds require a county match of 60 percent.

Funding for Recently Enacted Legislation. The Governor proposes $0.8 million ($0.3 million General Fund) to fund Chapter 630, Statutes of 2005 (SB 500, Kuehl), which increases foster care payments for the child of a teen parent in foster care. The budget also proposes $14.4 million ($7.8 General Fund) to implement Chapter 640, Statutes of 2005 (AB 1412, Leno). This statute expands activities to engage foster children in their own case planning as well as increases efforts to find and support mentorship relationships for them.

Comments on the Governor’s Proposal

We have no issues with the $18 million that is proposed to fund recently enacted legislation and to expand the transitional housing program. However, the remaining $15 million for adoptions and kinship proposals raise several issues as described below.

Preserve County Flexibility. Although providing additional resources for adoptions and kinship services has merit, we believe that the Governor’s proposal represents a “one size fits all” approach. Counties, rather than the state, are in the best position to allocate resources among various CWS improvement strategies. As discussed earlier, through the AB 636 system, counties have analyzed outcomes and developed improvement goals. Some counties may choose to focus on adoptions while others may choose strategies such as foster home recruitment or developing networks of community services.

Adoptions Funding Choice Not Justified by Performance. As discussed earlier, (see Figure 1) current data indicate that reducing the length of time for adoption is an area in which the state has successfully improved its performance. Specifically, the state has increased the percentage of adoptions occurring within 24 months, to 29 percent, up from 18 at the start of the PIP. Given the recent improvement in meeting both state and federal adoption outcomes, we believe that directing funds to this area is not the best use of resources.

Additional Reporting Requirement Unnecessary. The kinship support services proposal would require that counties provide outcome improvement goals in order to receive grants. However, counties have already set improvement goals in their SIPs as part of the AB 636 system requirements. Since these detailed plans are approved by the administration, it is not necessary to require counties to establish additional goals and provide measurement data outside of the existing accountability system.

Analyst’s Recommendation. The Legislature has already established a statewide performance and tracking system to improve CWS that relies heavily on county assessments and improvements. Consistent with that framework we recommend that $15 million ($9.6 General Fund), designated for improving adoptions outcomes and increasing kinship support services, be redirected into flexible grants to continue support for county self-improvement strategies, pursuant to this AB 636 system. This would allow maximum flexibility for counties to improve outcomes in their communities.

Dependency Drug Court Funding

Current law requires that the dependency drug court (DDC) program be funded unless it is determined that the program is not cost-effective with respect to the Foster Care and Child Welfare Services Programs. The proposed budget does not provide funding for DDCs or provide trailer bill language to suspend this requirement. Accordingly, we recommend that the Department of Social Services report at budget hearings on why they have not funded this program.

Background. The DDCs provide intensive substance abuse treatment along with close court supervision to parents who are involved in dependency court cases. Prior evaluations of the DDC model, including one conducted for the federal Department of Health and Human Services, have produced evidence that the model reduces time to reunification, increases reunification rates, and increases participation in substance abuse treatment. This approach would result in cost avoidance in Foster Care and CWS programs. Based on our review of existing studies, we believe that cost avoidance in Foster Care and CWS exceeds the cost of the drug court program.

During the 2005-06 budget process, the legislature approved funding for the continuation of DDC activities in nine counties, in coordination with the Department of Alcohol and Drug Programs. This funding also supported an evaluation to determine the cost-effectiveness of the programs. Trailer bill language accompanied the 2005-06 Budget Act to specify that “dependency drug courts be funded unless an evaluation… demonstrates that the program is not cost effective.”

Analyst’s Recommendation. We recommend that DSS report at budget hearings regarding why this program has not been funded according to the requirements of current law.