Lawmakers budget money to help private foster agencies weather insurance crisis

In contrast to Gov. Gavin Newsom’s budget, the Legislature’s budget proposal includes $31.5 million in bridge funding to help California’s private foster care agencies navigate a fast-moving insurance crisis that developed around the time lawmakers were leaving Sacramento last year.

In August 2024, the Nonprofit Insurance Alliance, which insured 90 percent of the 220 private foster agencies in California, announced that it would not renew coverage of the organizations.

Private foster agencies, known as foster family agencies or FFAs in California, are nonprofits that recruit and oversee foster families. As of the beginning of the year, FFAs housed 7,159 of California’s roughly 38,894 foster kids, about 18 percent.

The alliance’s decision to drop private foster agencies came after it had tried to get a bill through the legislature last year to change how the agencies were held liable for negligence. According to some interpretations of the language, the bill would have made it impossible for private foster agencies to sue their insurance companies if the insurer failed to accept a legal settlement – which is what the alliance did in an abuse case and a jury subsequently issued a $24.8 million judgement against a foster agency.

When the bill was amended in the Senate Judiciary Committee in July to remove the language the alliance wanted, it responded by announcing the non-renewals. The alliance’s president and CEO said in a statement that without the changes it had requested private foster agencies in California were “uninsurable.”

The alliance’s decision has thrown California’s child welfare system into a crisis because it’s come to rely on private foster agencies. Foster care is typically seen as the sole purview of government, but that’s not the case in America today. While only governments have the authority to remove abused or neglected children from their homes, in California and across the nation both governments and private organizations now recruit and oversee foster homes.

In fact, private foster agencies exist because the government-run foster care system is often underfunded, making private recruiting agencies a necessity to meet the need. Deep mistrust of government in some circles also plays a role. Becoming a foster parent requires answering a lot of invasive questions during the screening process, and some would-be foster parents are simply more comfortable with a private organization asking those probing questions.

The California Alliance of Child and Family Services, an organization representing foster family agencies, recruited Assemblymember James Ramos (D-Highland) to request $47 million in bridge funding over two years to stabilize the state’s private foster agencies.

In a March 3 letter to Assemblymember Corey Jackson (D-Perris), the chairman of Assembly Budget Subcommittee No. 2 on Human Services, Ramos wrote that while foster family agencies “serve 1 in 5 foster youth in California” they are “at risk of closing and downsizing due to the insurance crisis and recent budget cuts.”

The Legislature responded with its plan, released today, which calls for one year of funding, with $23 million coming from the General Fund.

“California’s leaders in the Senate and Assembly are standing up tall for foster youth with their 2025-2026 budget proposal which extends a critical lifeline to Foster Family Agencies (FFAs) and the youth and families counting on them,” said Christine Stoner-Mertz, CEO of the California Alliance of Child and Family Services, in a statement. “We thank members of the Legislature who listened to FFAs in their communities and made foster youth a priority in today’s proposal. We also applaud the Legislature’s funding of the Family Urgent Response System, a critical tool for keeping foster youth in stable placements and for the Bringing Families Home program, which is key for prevention, to reduce the number of families in the child welfare system experiencing, or at risk of homelessness.

In May, the alliance, in partnership with the state Department of Social Services, released the results of a survey of FFAs, assessing the impact of the Nonprofit Insurance Alliance’s exit from the California market.

The survey found that 60 percent of FFAs say they will not be able to cover the higher costs of insurance by their next renewal date. Twenty-seven percent said they are at risk of reducing capacity; 33 percent said they are at risk of closing entirely.

“In California, there are over 7,000 foster youth at risk of losing their supported family placement if the state does not take action to financially address the insurance crisis that is putting FFAs at risk of having to close their doors,” said Stoner-Mertz in the statement. “FFAs provide crucial support for family reunification, and when that is not an option, they help to recruit, train and support foster parents. The $31.5 million prioritized by the Legislature is essential for FFAs to keep their doors open while a long-term solution to the insurance crisis facing not only FFAs but non-profit youth and mental health organizations across the safety net – is secured. We strongly urge Governor Newsom to prioritize this funding in a final budget agreement.”

(Editor’s note: Capitol Weekly reporter Brian Joseph previously spent more than a year investigating privatized foster care during a fellowship at the University of California, Berkeley. The results of that investigation were published in a 2015 story in Mother Jones magazine that you can read here.)