The $5 Billion Blunder

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Suppose that, five years ago, you had a large sum of money to invest and two financial advisors competing for your business.

One of them, call him Mr. Smith, struck you as brash and obnoxious. The other, Mr. Williams, was your kind of guy, and you saw the whole world the same way.  So you went with your gut and gave the money to Mr. Williams.

Five years later, it turns out your portfolio tanked. Even if Mr. Williams meant well, he lost a whole lot of your money.  At the same time the portfolio recommended by Mr. Smith didn’t soar, but it least it would have earned you a little interest.

Now, once again, you have to decide whose advice to take.

That’s roughly the choice facing the people who run child welfare systems and the public officials to whom they report. And it’s the choice facing Congress as the current session draws to a close.  Because child welfare’s equivalent of Mr. Williams cost those state and local governments $5 billion in desperately-needed funds since 2005.  And they haven’t learned a thing.

This story actually begins a couple of years earlier, when Mr. Smith – that would be the Bush Administration – proposed a big change in how to fund child welfare. 

States get their foster care money under a funding stream known as Title IV-E as an open-ended entitlement.  For every eligible child, the feds pick up a large share of the cost, and just under half of all foster children are eligible.  But the states only get this money if they throw the children into foster care.  There is no such entitlement for alternatives to foster care, which get far less federal aid.

So while safe, proven alternatives to foster care typically cost less in total dollars, it sometimes can cost a state or local government less to use foster care.

Under the Bush plan, and a similar plan proposed by Rep. Wally Herger (R-Ca.) states would have gotten their foster care money as a flat grant based on how much had been spent in previous years, adjusted for inflation.  But they would be free to use the money for better alternatives instead of squandering it all on foster care.  If states reduced foster care they could keep the savings, as long as the money was reinvested in child welfare.  But if foster care increased, states would have to pay for the increase themselves.  Both sides would be locked into this arrangement for five years.

There was one crucial difference: The Herger bill would have mandated the change.  The Bush plan was strictly voluntary for each state.  I’m still not sure what part of “voluntary” my fellow liberals didn’t understand.

In a joint op ed column for USA Today, then-Sen. Hillary Clinton (D-NY) joined then- Rep. Tom DeLay (R-TX) in saying the Bush plan “deserves careful consideration.”

That never happened.

Instead, “Mr. Williams” warned that the sky would fall if everyone didn’t invest with him. In other words, my fellow liberals in the child advocacy community, like the Children’s Defense Fund, and, of course, the giant trade association for child welfare agencies, the Child Welfare League of America, launched a campaign of fear and smear that Karl Rove would envy.

CDF declared that the plan “puts abused and neglected children in harm’s way” and would “dismantle … foster care.”

CWLA, whose members include many private agencies paid for every day they hold a child in foster care, warned states not to be fooled by the siren song of flexibility – and, like CDF, declared its steadfast opposition to even offering states the option.

They and their allies all conjured up that menace to all good 1960s-era liberals: the Block Grant Bogeyman.

‘It’s a block grant!’ they shouted. Block grants are easier to cut than “entitlements”!  States won’t have an incentive to maintain their own funding for child welfare!  Beware!  Beware!

The campaign of fear and smear was a huge success.  The Herger bill never found a sponsor in the Senate and the Bush Administration plan never even was turned into a bill at all.  In what apparently was a failed effort to pressure Congress, the Administration closed off the one way states could gain some flexibility under existing law – it allowed the authority of the Department of Health and Human Services to issue waivers to expire.  (I never said Mr. Smith was a nice guy.)  But one state, Florida, got in under the wire, getting what amounted to the Administration plan in waiver form.

So how’d it all work out?

The new research on the enormous inherent harm of foster care – including two massive studies documenting better outcomes for children left in their own homes – began to reach the frontlines. States got tired of throwing their own share of the money at a failed intervention, and most managed to curb the needless removal of children.

The result: Almost every state has fewer children in foster care now than in 2005. So almost every state would have gotten more money under either the Herger bill or the Bush Administration plan than they are getting now.

The Congressional Research Service estimates that nationwide, America’s child welfare systems would have had $5 billion more over these past five years, had the Herger bill become law.

And what happened in the one state that wised-up and took a waiver?  Since 2006, Florida reduced its foster care population by 35 percent, independent evaluations found no compromise of child safety, and they’ve been able to plow all the savings right back into building a better infrastructure of prevention and family preservation.

When the recession hit and the Florida Legislature targeted child welfare for deep budget cuts, lawmakers were stopped in their tracks when they learned that, under the maintenance of effort provision of the waiver, the state would lose all its federal child welfare money.  So rather than being easier to cut than an entitlement, Florida’s locked-in multi-year flexible funding option protected child welfare from deep budget cuts.

As far as I know, neither CDF nor CWLA has explained to its members that their lobbying wound up leaving $5 billion behind. 

Worse, they don’t seem to have learned much.

No one in the Obama Administration has proposed revisiting the Bush Administration plan, and there is no legislation proposed in Congress.

It’s even been suggested that the fact that states were able to reduce foster care shows there’s no need to reform how it is financed.  That’s like saying if someone escaping a sinking ship barely makes it to shore swimming against the tide, there’s no reason to throw him a life preserver.  Indeed, one can only imagine how many more children would be safe in their own homes today had every state been offered, and accepted, the kind of deal Florida has.

At least there’s a bill to revive HHS’ authority to give other states waivers like the one Florida got.  But it was introduced with enormous reluctance.  Never have I seen a sponsor express so many reservations about his own bill as Rep. Jim McDermott (D-WA), expressed over this one.

Similarly, thanks to Florida’s success, no one in the child welfare establishment dares oppose it outright.  Instead, they line up to try to “yes, but…” reform to death.

Given how much else Congress has on its plate, that may well be enough to kill it.  If states are to get a chance to avoid losing billions more, the child welfare establishment is going to have to throw the full force of its persuasive power behind waivers, without reservation. 

So far that’s not happening.  Even as CDF and CWLA alert their followers on Twitter about the things they really care about during the current lame duck session, there’s been not a peep – or a Tweet – about the waiver bill.

So state and local child welfare leaders are going to have to stop believing what they hear from CDF and CWLA, and fight for the right to waivers of their own. They need to stop investing with kindly Mr. Williams, the nice guy who finished last.

Richard Wexler is Executive Director of the National Coalition for Child Protection Reform, www.nccpr.org