Hundreds of California Kids Lose Social Security Benefits

El Monte, CA, Monday, May 16, 2022. Exterior view of the MacLaren Children’s Center. California and other states have been siphoning money from foster kids’ federal benefits, a new report found.

A new report revealed states across the country are taking federal benefits away from foster kids to maximize their profits.

In just one example, hundreds of children lost $5.4 million in disability and survivor benefits in 2021 in California, according to CalMatters. The 600 foster kids lost that money just inside the Los Angeles County Department of Children and Family Services, signaling the situation might be far more widespread.

When they turn 18, many foster children are entitled to the money they earned from federal benefits like Social Security and disability and survivor benefits. But in a new report by the Children’s Advocacy Institute (CAI) at the University of San Diego School of Law, researchers found that states continue to siphon financial benefits intended for foster children, leaving many foster youths impoverished when they enter adulthood.

“Though it is the states’ responsibility to pay for the care of these children, states regularly apply for children’s federal benefits on their behalf, then intercept them as part of their ‘revenue maximization’ efforts, using the children’s funds to offset their obligation to pay for foster care,” the Children’s Advocacy Institute said in a statement.

The problem is troubling enough that 44 states received failing grades in the CAI report. Only a handful even received passing grades for how they handled foster children’s benefits, but this included Arizona and D.C., the only two that earned As for their treatment of foster benefits. New Mexico and Oregon received Bs, while Illinois, Maryland and Washington got Cs.

Every other state saw an F, according to the study, including California, which had proposed a law protecting foster children’s financial benefits that was ultimately vetoed by Governor Gavin Newsom.

Federal law requires that foster care agencies prioritize the best interests of children, and the Social Security Administration outlines that all benefits must be used, in consultation with the child, to pay for unmet needs or save for the future, CAI said. But the states routinely apply for the benefits and deposit the checks into their own programs.

“It seems that states are screening children in the foster care system to see if they are eligible for Social Security benefits from the federal government,” finance expert and 9i Capital Group CEO and founder Kevin Thompson told Newsweek. “States fund the majority of their foster care systems and try to find ways to minimize the cost using federal funds. So, states are incentivized to cut spending deficits and they use federal funds provided by the government to do so. The main issue is that it’s the kid’s money and they should be able to access it when they leave the foster care system. “

CAI estimates anywhere between 40,000 and 80,000 foster care children are eligible for federal benefits, which could amount to more than $11,000 a year and provide a financial safety net or college savings when the children reach 18 years of age. Instead, they often start adulthood without any savings for their future.

“Our foster care agencies and SSA are violating their legal and moral duty to do right by these most vulnerable children and center the child’s best interests at all times,” Amy Harfeld, CAI’s National Policy Director, said in a statement. “Children in foster care are not a revenue source. They are children who have experienced trauma who need the adults in their lives fully committed to their well-being. These funds amount to nothing but a rounding error for most state budgets but would be life-changing for impacted youth.”

Today, less than 3 percent of foster children end up graduating with a bachelor’s degree, and a third of those who remained in foster care after age 17 end up being homeless at some point.

“The system continues to dismiss the rights of foster youth and continues policies such as this, which we know lead to outcomes we would never tolerate for our own children,” Jessica Heldman, Fellmeth-Peterson associate professor in child rights at the USD School of Law, said in a statement. “It is up to the states and ultimately to Congress to pass critical legislation to eradicate these harmful practices and honor their legal, moral, and ethical duties to youth in care.

“These children should know that the state is in fact prioritizing their best interests and that Social Security is holding state payees accountable for the use of these federal funds.”

Action in Congress

Currently, more than half of the states are in the middle of foster care benefits reforms, and Congress has introduced a bill to stop states from taking the financial benefits for themselves. However, that first bill was voted out and Congress is still working on one that could gain bipartisan support.

Most states that engage in this practice do it in secret, the CAI report said, without ever notifying the foster children or their guardians and legal advocates.

“By taking money belonging to the children, states are not only putting these youth at a grave disadvantage once emancipated, but they are violating their due process rights and other provisions of law,” Harfeld said.

Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, said the data is unsurprising given foster children’s history.

“It’s a mixture of two elements — states unwilling to do a better job of making sure benefits are handed out fairly and children in foster care failing to have enough voices to speak out in their defense,” Beene told Newsweek.

While Beene said states need to be held more accountable for the widespread practice, foster children also need advocates calling out on their behalf.

“Unfortunately, there’s not enough of that, and the result is horror stories of children in foster care turning 18 and having little to no financial backing to make a go at having a productive life,” Beene said. “It’s incredibly disheartening and a real shame.”

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