Association for Public Policy Analysis & Management

This work considers how federal financing of state foster care influences adoption outcomes of children in care. I analyze the effect of the Title IV-E matching grant, which provides federal reimbursement to states for expenditures made on behalf of eligible children, on the probability of and time to adoption, special needs designation, and generosity of adoption assistance provided to adoptive families. My analysis uses the rollout in expansions in federal Title IV-E eligibility criteria to estimate states’ response to the federal matches for adoption-related expenditures.

The Title IV-E expansions, beginning in fiscal year 2010 and rolling out through 2018, are based on children’s age and duration in care and de-link a child’s eligibility from 1996 AFDC income standards. This results in a large increase in the percentage of children qualifying for federal matching dollars in each year of the rollout. Under a matching grant framework, increased eligibility among children waiting for adoption may increase state spending on adoption-related activities on behalf of eligible children, as well as spending on other child welfare activities, including adoption-related activities for ineligible children.

I use data from the 1998 through 2012 Adoption and Foster Care Analysis and Reporting System (AFCARS) files. I first analyze whether a child’s own Title IV-E eligibility raises the child’s probability of adoption. I use a semi-parametric hazard model to compare the probability of adoption among children who meet the federal qualifications for federal matching funds through the new qualifications before and after the rollout. I capture variation across states in the effect of the policy on the marginal cost of adoption to the state using variation in the federal match rate across states. Preliminary results suggest that neither Title IV-E eligibility nor a more generous federal match rate increase a child’s probability of adoption.

I next consider whether states increase spending on adoption-related activities for all children by estimating the relationship between the adoption rate and the share of waiting children that meet federal Title IV-E qualifications. My results suggest that the matching grant does not increase the overall rate of adoption.

Second, I analyze the relationship between whether children meet federal qualifications and whether children are designated special needs. This relationship potentially exists because a child must be designated special needs in order for the state to claim the federal match. I analyze whether the share of adopted children designated special needs increases when children meet federal qualifications for a federal match. I find that states are not more likely to increase special needs designation among children who are eligible for Title IV-E matching funds.

Last, the expansions in the Title IV-E federal qualifying criteria for a federal match generate surplus to states through lowering adoption costs for eligible children. To see whether states choose to share the generated surplus with adoptive families, I provide analyses that see whether states are more likely to provide adoption assistance or to provide more generous adoption assistance with the expansions in the share of children meeting federal Title IV-E qualifications.