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

15.1 Funding Flexibility

Children, and their families, are not one dimensional and yet funding for services is largely focused on a single problem or issue, which contributes to the fragmented approach to serving families. To improve service delivery agencies are encouraged, and in some instances mandated, to work cooperatively across systems which requires constructing methods of funding to support services either at the micro level (e.g. a child’s service plan) or at the macro level (across agencies). Over the years various financing strategies have been developed, but to date the research is not available that evaluates the effects of funding flexibility separate from the outcomes of the overall initiative. [i] As a result, the financing approaches tend to be guided by the functions of the initiative and fall into four broad categories: decategorized, redirected, braided, or blended/pooled. Decategorized is defined as removing the restrictions on the use of the dollars, such as eligibility requirements, targeted populations, or restricted services. Blended funding is taking multiple funding streams and commingling them into a single source or pool (also known as pooled funding). Braided funding retains the categorical restrictions and is separately administered but allows multiple agency funding streams to be directed in a coordinated fashion towards the same initiative or objective. Redirected funds takes money targeted at one project or program and shifts it to a new target, this is frequently used for moving investments from ‘deep-end’ services to early intervention programs. Each of these financing strategies is designed to support a full range of services not covered by strictly categorical funding sources and permit interagency collaborations the opportunity to sufficiently resource their defined goals.

In Ohio the “Kids in Different Systems” project (KIDS) is financed through pooled funding from five agencies, child welfare; education; juvenile justice; the Alcohol, Drug Addiction and Mental Health Board; and the Mental Retardation/Developmental Disabilities Board. KIDS provides community- based services for dual custody children at risk of out-of-home placement or those stepping down from a restrictive setting. The Monroe County Health Department in Rochester, New York, decategorized seven funding streams into one Child and Family Health Grant to support the delivery of integrated health services. [ii]

While Iowa is commonly known for decategorizing funding, the initiative also contained an incentive component. In 1987 the Iowa General Assembly directed the Department of Human Services to decategorize funding into a single locally controlled fund with the goal of reducing the child welfare system’s reliance upon institutional and out-of-home care. As result, between 1994 and 1998 there was a 21 percent decline in out-of-state placements with $16.5 million savings retained by counties and reinvested in preventive services. [iii]

An example of the use of blended funds with an incentive structure is Maryland’s Local Management Boards (LMBs). The initial work of LMBs focused on family preservation services for children at-risk of placement and community-based services for youth returning from out-of-state placements. Funds from the state child serving agencies were pooled which could be used flexibly by the LMBs on any service the child and family needed. The LMBs were authorized to keep up to 75% of any savings (the difference between the granted amount and the actual cost of services). The remaining 25% of the savings was retained by the state. Through this incentivized process LMBs significantly reduced the number of children placed out of state. ^[iv]

Policy Options: States can promote funding flexibility across programs, agencies, and categorical funding streams through one of the following mechanisms (listed in order of increasing effectiveness):

· Incentives and encouragement only

· Decategorization and pooling only

· Both decategorizing/pooling and incentives

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