Association for Public Policy Analysis & Management

The federal government reimburses states for certain costs of foster care for eligible children through an open-ended matching grant. In this paper, we measure the impact of an increase in the federal match on the placement outcomes of foster children. Outcomes include length of time in foster care, re-entry into care, number of moves while in care, likelihood of termination of parental rights, and ultimately, likelihood of exit to a permanent placement from foster care. We use individual-level data on the universe of children in foster care in the United States. To estimate causal effects, we exploit temporal variation across states in the use of waivers. In our main results, we use a difference-in-difference framework. In supplementary analysis, we use a synthetic control. Waivers allow states to be reimbursed for some of the costs of caring for otherwise ineligible children. Since 1996, 19 states have implemented 27 child welfare waivers.

The eligibility of children is defined in Title IV-E of the Social Security Act, which authorizes the matching grant program. The matching grant is the single largest source of federal funding to states for child welfare services. To be eligible, a child must have been removed from a poor family. Title IV-E, as currently written, defines a poor family as one that would be eligible for Aid to Families with Dependent Children (AFDC). Of course, the Temporary Assistance for Needy Families (TANF) program replaced AFDC in 1996. For this reason, Title IV-E income standards are commonly referred to as the “AFDC look-back.” The AFDC look-back causes “IV-E eligible children” today to be much poorer than the children Title IV-E intended to serve. Importantly, states can design waivers to remove the link between individual children’s income-eligibility and federal funding so that there is no longer a strong financial incentive tied to an income-eligible child’s foster care placement.

Our prior is that federal financing incentivizes longer stays in foster care, reduces the pressure to reunify children with their families of origin, increases the probability of termination of parental rights, and increases the total number of placements in foster care. All of these outcomes are known to reduce child well-being. We also investigate the relationship between federal financing and the likelihood of re-entry to care as a proxy for whether the duration of a child’s first spell in foster care is related to the match-quality of placement after exit.

This work has important implications for future iterations of child welfare policy. Most recently, the proposed Look Back Elimination Act of 2017 eliminates the link between children’s income eligibility and federal financial support while in foster care. This piggybacks on the recent Fostering Connections to Success and Increasing Adoptions Act of 2008, which will completely remove the AFDC look-back standard for adoption assistance by 2018.