State Child Welfare Policy Guide: Part of the Policy Matters Series

5.1 Adequate adoptions, subsidies and benefits

Research has shown that increases in adoption subsidies can result in more children who are adopted from foster care. [i]   Providing adoptive families with adequate resources to care for children who have been abused and neglected also enhances the likelihood that the adoption will be successful.

Given the substantial increase in adoption from foster care over the past decade, some policymakers might be tempted to cut adoption subsidies as a way to deal with budget shortfalls.  Yet these cuts have longer term costs down the line: costs in public benefits to support youth in long term foster care, the cost of bad outcomes for youth who age out of care, and public and private costs associated with lower earnings and unproductive lives.   

Adequate adoption subsidies are particularly important given that at least 60% of the children adopted from foster care are adopted by their foster parents.  While some states provide adoptive families with the same benefits they received while the child was in foster care, others may reduce the subsidy at the time of adoption, making it difficult for families to meet the child’s on-going needs.

Minnesota is providing continuous benefits for foster care, adoption, and legal guardianship through its Permanency Demonstration Project. Funded through a waiver from the federal government, the project equalizes subsidy rates so that families do not have to take cuts in benefits for children they had in their home as foster children and have an incentive to adopt or take legal guardianship.  Interim findings halfway into the project (2.5 years) suggest that children in families offered the single benefit have higher rates of permanency and spend less time in foster care than those who are offered subsidy levels under the traditional programs offered by the state. [ii]    In Virginia, the 2008/9 biennial budget included a 23% increase in foster care and adoption subsidies.  The increase responded to studies that showed the inadequacy of the existing subsidies. [iii]

In addition to subsidies, many adoptive children need access to educational benefits that might be beyond the reach of their adoptive families.  Educational benefits are provided to many youth in foster care.  As a result, some youth are reluctant to agree to adoption because they will lose the benefit, creating a disincentive to permanency.  Connecticut legislation enacted in 2005 allows adopted youth to receive tuition assistance similar to what youth in or aging out of foster care receive. [iv] The Fostering Connections legislation makes children who leave foster care after age 16 eligible for independent living services and education and training vouchers.

State tax credits can also supplement the federal tax credit as a way to provide further incentive for adoption from foster care.  The federal credit -- equal to $11,650 in 2008 – is available for adoption of a child with special needs.  Most children adopted from foster care qualify for the tax credit and federal statute requires states to inform all people who adopt or are known to be considering adopting a child from foster care that they are potentially eligible for the adoption tax credit.  The tax credit can be claimed in the year in which the adoption is finalized and can be used for up to five years after the adoption finalization. [v] Rhode Island statute allows families who are eligible for the federal tax credit to claim a credit against state income taxes as well. [vi]

Policy Options: States can promote lasting adoption from foster care by supporting adequate adoption subsidies and other benefits that the child would have received in foster care by adopting one or more of the following policies:

·         Adoption subsidies that are at least equal to what a child received in foster care

·         Subsidies and benefits that are adequate to meet the needs of the child

·         Benefits, including educational benefits, that are available to youth who age out of foster care

·         State tax credits