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Economic Downturn Threatens State Child Welfare Budgets

Feb 27, 2009

Although child welfare spending has increased for at least a decade, several factors driven by the recession may be converging to threaten states’ capacity to serve abused and neglected children. A new study from Child Trends finds that many states are scaling back Medicaid services and facing increased demand for Temporary Assistance for Needy Families (TANF) funds. In the past, both have been significant sources of funding for child welfare services.

In recent years, states’ proportion of child welfare spending has increased while the federal share has declined. But cash-strapped states are now cutting myriad services that help families in need. Child Trends finds that states spent at least $25.7 billion in federal, state, and local funds for child welfare purposes in state fiscal year (SFY) 2006, a nine percent increase in spending since SFY 2004 and a 55 percent increase since SFY 1996, after adjusting for inflation.

With some state budgets now in crisis, it is noteworthy that, in SFY 2006, states had to rely more heavily on their own resources to pay for child welfare services. The federal share of total child welfare spending has declined and now accounts for less than 48 percent of all spending. In nine states, state and local funds accounted for at least 60 percent of all child welfare spending.

Between SFY 2004 and SFY 2006, Medicaid was the source of federal funding for child welfare that increased most substantially (19 percent). The current economic crisis has caused many states to cut their Medicaid programs. In SFY 2006, states used at least $3.1 billion of TANF funds to pay for child welfare services. The current economic crisis will likely put added pressure on states’ TANF programs, placing child welfare agencies’ continued access to these funds in doubt.

Federal, State, and Local Spending to Address Child Abuse and Neglect in SFY 2006 summarizes key findings from a survey of all 50 states and the District of Columbia regarding their child welfare expenditures in SFY 2006, the latest year for which data is available. It is available oline here.

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