$321 billion spending plan approved last week by California Gov. Gavin Newsom provided an emergency bailout to private foster family agencies (FFAs) who have been threatened by the skyrocketing costs of liability insurance. The budget for the next fiscal year also preserves a landmark child welfare reform that would enrich the lives of children growing up in foster care.
“These funds will serve as a lifeline for FFAs on the brink of shutting their doors and are vital to meeting the state’s goal of a supportive family home, including kinship care, for every foster youth,” California Alliance of Child and Family Services CEO Pete Weldy said in a statement. The group represents dozens of foster care agencies, residential treatment facilities and behavioral health care providers in the state.
But the budget also makes deep cuts to some child welfare programs, including a hotline for kids in crisis and child care subsidies for foster parents.
The spending plan was finalized on Friday through 16 pieces of legislation, though several remaining trailer bills must still be approved. Lawmakers hailed the agreement at a time when the state is grappling with lower-than-expected revenue and massive cuts in federal health and education spending prompted by the Trump administration.
“The State is delivering a responsible on-time budget in a challenging year focused on fiscal restraint and investing in the people and programs that make this State great,” Senate Pro Tem Mike McGuire said in a statement. “This agreement helps prepare our state for the ongoing chaos and massive uncertainty caused by the Trump administration.”
The new budget has a notable carveout for foster family agencies, which oversee placements for about 7,000 of the state’s foster children. These nonprofit providers will receive a one-time payment of $31.5 million in taxpayer funds — which they’ve said will prevent many from going out of business. California’s FFAs have been hit hard by increased insurance costs following a change to state law that allowed survivors of childhood sexual abuse to sue for damages well past the prior statutes of limitations. As a result, thousands of lawsuits have been filed through 2024, with billions of dollars in judgments entered against school districts, foster care providers and other government agencies. In Los Angeles County alone, roughly 7,000 adult victims of childhood sexual assault were awarded nearly $4 billion for abuse suffered in the county’s child welfare and juvenile justice systems.
Last year, in the wake of a $25 million judgment against a Sonoma County FFA, a major insurer of private foster care providers halted coverage. With higher insurance premiums, at least 10 providers have ceased operations, according to reporting published in The Intersection. A recent survey by the trade group representing FFAs found that roughly one in three agencies polled said they had laid off staff as a result of the insurance hikes, and were in danger shutting down entirely.
The budget calls for the state Department of Social Services to consult with the California Alliance of Child and Family Services and the County Welfare Directors Association to determine how the funds will be distributed.
California’s spending agreement also preserved a major foster care reform that was threatened during the budget process.
Last year, California lawmakers approved a $1 billion rate reform plan that will triple the total foster care budget beginning in 2027, and includes a unique new payment for foster youth designed to pay for enrichment and extracurricular activities.
The new “strengths-building” fund would allow California foster youth to claim a $500 to $900 monthly check to use for art classes, sports teams and other nonacademic interests. The new investment would also allocate hundreds of millions of dollars for specialized therapy and wraparound services to help young people heal from childhood trauma.
That plan was threatened in May when Gov. Newsom added a “trigger” to the program’s implementation, indicating that its rollout would be contingent on the state’s fiscal health in spring 2027. But a coalition of advocacy groups and state legislators pushed back.
A compromise hammered out over the past week in a trailer bill has preserved the ambitious reform.
Kristina Tanner, a former foster youth and special projects coordinator with the Youth Law Center, said if the trigger had remained in place, it would have made the ambitious rate reform plan hard to launch, under a new administration facing a tight budget.
A multiyear budget outlook by the state’s nonpartisan Legislative Analyst’s Office said California is likely to face “persistent” budget deficits over the next few years. Despite the cost, Tanner suggested the plan will help foster youth thrive if lawmakers see it through.
“The state is already failing foster youth, who have been waiting to get their needs met where they’re at, in family homes,” she said. “We really think this can change the landscape of what child welfare looks like.”
In other budget news, to address its $12 billion budget shortfall, Gov. Newsom announced several potential cuts to the state’s child welfare system.
One of the programs the termed-out state leader targeted was the Emergency Child Care Bridge. The program provides subsidized child care to caregivers of foster children, who often arrive at their homes with little warning. A lack of child care has dissuaded some potential resource parents from taking in the state’s most vulnerable children, according to past surveys of caregivers. The program would have been slashed by nearly half, but lawmakers settled on a $30 million cutback moving forward.
Another program that took a hit is a 24/7 statewide hotline offering support to caregivers and foster children during crisis situations. The Family Urgent Response System sends county-run mobile response units to the homes of foster youth during family conflicts and mental health emergencies. The workers are trained to de-escalate crises that can result in hospitalization or placement disruption. Under the budget agreement, the program lost $9 million funding on a permanent basis, which represents about 30% of its overall budget.
Jeremy Loudenback is a senior reporter for The Imprint. The Imprint is a partner of The Intersection and CVJC.