The HHS National Incidence Study has shown since the early 1980s that children of all races and ethnicities are equally likely to be abused or neglected; however, African American children, and to some extent other minority children, have been significantly more likely to be represented in foster care, according to HHS data and other research. Nationally, African American children made up less than 15 percent of the overall child population in the 2000 Census, but they represented 27 percent of the children who entered foster care during fiscal year 2004, and they represented 34 percent of the children remaining in foster care at the end of that year, as shown in figure 1. African American children were more likely to be placed in foster care than White or Hispanic children, and at each decision point in the child welfare process the disproportionality of African American children grows. Although racial disproportionality is most severe and pervasive for African American children, Native American children also experience higher rates of representation in foster care than children of other races or ethnicities. Just over 2 percent of children in foster care at the end of fiscal year 2004 were Native Americans, while they represented less than 1 percent of children in the United States. However, there can be significant variation by state and county. It is especially important to understand local variations for Hispanic and Asian children, since they are underrepresented in foster care nationally and in most states, but are overrepresented in some counties and states. For example, in a single county in California, Hispanic children represented 30 percent of the population but 52 percent of the county’s child welfare cases. There are various options for placing children in temporary and permanent homes through the child welfare system. Temporary options include foster care with relatives or non-relatives—whether licensed or unlicensed—and group residential settings. According to HHS, approximately one-fourth of the children in out-of-home care are living with relatives, and this proportion is higher for Hispanic and African American families. For permanent placements, adoption and guardianship are options under federal law in addition to the child’s reunification with their parents. One important difference is that adoption entails terminating parental rights, while guardianship does not. (See table 1.) In the last decade, several federal laws have been enacted to help states reduce the number of children who enter and remain in foster care. These laws include the Multi-Ethnic Placement Act of 1994, as amended in 1996 by the Interethnic Adoption Provisions included in the Small Business Job Protection Act (MEPA-IEP). MEPA-IEP is intended to eliminate race- related barriers to adoption by prohibiting foster care and adoption agencies that receive federal funds from delaying or denying placement decisions on the basis of race, color, or national origin of either the adoptive or foster parent or child. MEPA-IEP also required states to diligently recruit potential foster and adoptive families that reflect the ethnic and racial diversity of children in the state who need foster care and adoptive homes. MEPA-IEP was followed by the Adoption and Safe Families Act of 1997 (ASFA), which established expedited time frames to place children in permanent homes through reunification, adoption, or guardianship and for terminating parental rights. ASFA recognized that guardianship may be an appropriate permanency option for some children in foster care and it encouraged adoption by establishing adoption incentive payments for states. The Promoting Safe and Stable Families (PSSF) program also created under ASFA supported the need to strengthen and reunify families. This program expanded dedicated funding for services that could help prevent the removal of children from their homes or could expedite children’s return home from foster care. In addition to family preservation and community-based support services, PSSF services include time-limited reunification services and adoption promotion and support services. States are required to allocate “significant portions” of their funding for each of these four service categories. (See table 2.) One of the prerequisites to finding children temporary and permanent homes is for states to ensure that criminal background checks have been conducted for prospective foster care and adoptive parents. Congress had prohibited states from receiving federal foster care or adoption assistance support on behalf of eligible children who are placed in the home of a foster or adoptive parent who had certain types of convictions. States had been allowed to opt out of certain federal criminal background requirements by providing alternative plans to ensure children’s safety, which were assessed as part of an HHS review process. According to HHS, eight states had been approved to use alternative plans. However, requirements for conducting federal background checks have recently changed: a provision of the Adam Walsh Safety and Protection Act of 2006, which was developed in response to concerns about child predators, establishes additional federal requirements for criminal background checks of prospective foster or adoptive parents and eliminates states’ ability to opt out of the federal requirements, effective October 2008. Federal funds account for approximately half of states’ total reported spending for child welfare services, with the rest of funding coming from states and localities. In fiscal year 2004, total federal spending on child welfare was estimated to be $11.7 billion based on analysis of data from over 40 states. These federal funds come from sources that are dedicated to child welfare as well as those that are provided to states under the federal block grant structure for broader purposes. Titles IV-E and IV-B of the Social Security Act are the principal sources of federal funds dedicated for child welfare activities. Title IV-E provides the majority of dedicated federal funds for support payments to foster families, adoption assistance, and related administrative costs on behalf of children who meet certain federal eligibility criteria. Title IV-E foster care maintenance and adoption assistance payments are authorized as open- ended entitlements. States may claim federal reimbursement for a specified amount of the costs for every eligible child who is placed in a licensed foster home. In addition, Title IV-E established subsidies paid to families who provide adoptive homes to children who states identify as having special needs that make placement difficult. In 2003, 2004, and 2005, states designated more than 80 percent of adoptions as special needs adoptions enabling families to receive federal financial subsidies, according to HHS data. Total federal expenditures, including administrative costs, for Title IV-E programs were about $6.8 billion in fiscal year 2006. Title IV-B authorizes funds to states for broad child welfare purposes, including child protection, family preservation, and adoption services. In contrast to Title IV-E funds, Title IV-B funds are appropriated annually and totaled about $700 million in 2006. Federal block grants such as the Temporary Assistance for Needy Families (TANF) and the Social Services Block Grant (SSBG) provide additional sources of funds that states can use for child welfare purposes. Block grants and other sources of non-dedicated funds made up about 44 percent of total federal funds spent on child welfare in 2004, or about $5.2 billion, according to the most recent research available. Under these block grants, states have discretion to provide direct social services for various populations, including child welfare families, the elderly, and people with disabilities. (See fig. 2.) In 1994, the Congress authorized the use of flexible funding demonstration waivers to encourage innovative and effective child welfare practices. These waivers, typically authorized for 5 years, allowed states to use Title IV-E funds to provide services and supports other than foster care maintenance payments. For example, states could use waivers to provide subsidies to legal guardians or services to caregivers with substance abuse problems. Waiver demonstrations must remain cost-neutral to the federal government and they must undergo rigorous program evaluation to determine their effectiveness. As of May 2007, according to HHS, 14 states have one or more approved Title IV-E child welfare waiver demonstration projects, involving one or more programmatic components, such as subsidized guardianship. With regard to guardianship specifically, four states have completed demonstrations that involved subsidized guardianships as of May 2007, seven states have active guardianship demonstrations, and one state has not yet implemented its guardianship demonstration. HHS’s ability to approve new Title IV-E waivers expired in 2006, however, and Congress has not reauthorized this program. The Administration’s fiscal year 2008 budget proposes, for the fifth consecutive year, to implement a “Child Welfare Program Option,” which would restructure the Title IV-E foster care program. Under this proposal, states could forego open-ended entitlement foster care funding in exchange for a pre-determined grant. Unlike the open-ended funds, the grant could be spent on the entire range of child welfare purposes and for any child (regardless of the child’s federal foster care eligibility status). States taking this option would need to continue to ensure child safety protections, maintain existing state funding for child welfare, and participate in federal assessments of state child welfare programs, known as Child and Family Services Reviews. Under this proposal, the Title IV-E Adoption Assistance program would continue as an entitlement program, according to an HHS official. In 2006, HHS approved two states to pilot the program option over the next 5 years under its Title IV-E waiver demonstration authority, which expired in that year. Final evaluation results for these pilots will not be available for at least 5 years. States are required to enact policies and meet certain federal standards related to child welfare programs, and HHS evaluates how well state child welfare systems achieve these federal standards through its Child and Family Services Reviews (CFSR). Implemented in 2001, these reviews focus on states’ performance in ensuring children’s safety, permanency, and well-being over a range of child welfare services, using various outcome measures. To address any areas identified as not in substantial conformity with these outcome measures, the state develops a program improvement plan. To evaluate states’ performance on these measures, HHS also relies, in part, on its Adoption and Foster Care Analysis and Reporting System (AFCARS) to capture, report, and analyze information collected by the states.