Follow the Money
How Federal Adoption Incentive Awards Turned Child Welfare Into a State-by-State Bonus System
By Project Milk Carton Investigations
There is a reason every serious investigation eventually reaches the same instruction: follow the money. In child welfare, that phrase is not a cliché. It is the key that unlocks the machine. The public is told child welfare decisions are driven by safety, permanency, best interests, and professional judgment. That is the language printed in court orders, agency reports, policy manuals, grant summaries, and legislative hearings. But behind the official language sits a financial architecture that tells a very different story.
For nearly three decades, the federal government has paid states bonuses for increasing adoptions from foster care. Not for preventing unnecessary removals. Not for stabilizing families before the state intervenes. Not for successfully reunifying parents and children. Not for reducing poverty-driven neglect allegations. Adoption. The reward structure is specific, measurable, and deeply revealing.
The program is called the Adoption and Legal Guardianship Incentive Payment program. It was created by the Adoption and Safe Families Act of 1997 and codified at 42 U.S.C. § 673b. In theory, it was designed to help children escape foster care drift by encouraging states to move children into permanent families more quickly. In practice, it became a federal bonus system layered on top of a much larger child welfare funding machine that already rewards removal, placement, and adoption assistance.
The public rarely hears about the formula. That is by design, or at least by convenience. The formula is buried in federal statutes, appropriations histories, HHS award announcements, Congressional Research Service reports, GAO audits, AFCARS data, and state-level child welfare reports. It is technical enough to repel ordinary readers and obscure enough to protect policymakers from plain-language accountability. But once translated, the formula is not difficult to understand. The federal government pays states for increasing the rate of adoptions and guardianships from foster care above a baseline. It pays more for older children. It pays for legal guardianships. It stacks categories. It adjusts formulas. It appropriates funds. It sends checks.
What it does not do is pay states a comparable bonus for keeping families together.
That is the core scandal.
The adoption incentive program is often described as small compared with the full child welfare budget, and technically that is true. Annual adoption incentive appropriations now sit around $75 million, and FY2025 actual awards totaled roughly $39.8 million to 45 states. But the size of the bonus pool is not the most important fact. The most important fact is what the bonus signals. In public finance, incentives are messages. They tell bureaucracies what federal policy values. In this case, the message has remained consistent for twenty-eight years: adoption finalization is rewarded; family preservation is not.
The CivicOps database confirms the scale of the larger ecosystem. From FY2020 to FY2025, verified HHS TAGGS data shows more than $69.4 billion in federal child welfare spending across major programs. Title IV-E foster care alone accounted for more than $31.4 billion. Adoption assistance accounted for more than $22.8 billion. Together, foster care and adoption assistance totaled more than $54.4 billion for removal and permanent separation-related systems. By contrast, prevention services designed to keep families together receive a fraction of that amount. The research brief identifies the ratio as roughly 23-to-1 in favor of removal and permanent separation over family preservation.
That is not a footnote. That is the system’s moral balance sheet.
When federal spending sends $54.4 billion toward foster care and adoption assistance while prevention receives only a narrow slice of the total, the system does not need anyone to say the quiet part out loud. The money already said it. Remove first. Stabilize later. Preserve if possible. Terminate if not. Adopt if available. Pay the state when the pipeline produces the right measurable outcome.
This article follows that money state by state, formula by formula, and contradiction by contradiction. What emerges is not a child welfare system organized around family integrity. It is a federally supported throughput model in which some states receive millions in adoption incentives while operating systems under federal court oversight, poor permanency outcomes, racial disparities, missing children concerns, and documented failures of basic care.
The question is no longer whether the formula exists. It does.
The question is whether America is willing to admit what the formula rewards.
The Formula: How the Federal Bonus System Works
The Adoption and Legal Guardianship Incentive Payment program began with ASFA in 1997. Congress created it to reward states that increased adoptions out of foster care. At the time, policymakers were responding to a real problem: children were lingering in foster care for years without being reunified or adopted. The policy theory was simple. If states received financial incentives to finalize adoptions, they would move children out of temporary custody and into permanent families more quickly.
But child welfare finance is never neutral. The formula has been rewritten multiple times since 1997, and each rewrite expanded or adjusted the categories eligible for payment. The earliest version paid $4,000 for foster child adoptions above a baseline and $6,000 for special needs adoptions. Later amendments added older child categories, increased bonus amounts, shifted baselines, and eventually included guardianships. By the current era, the federal program pays $5,000 for foster child adoptions, $7,500 for pre-adolescent children ages nine to thirteen, $10,000 for older youth ages fourteen and up, and $4,000 for legal guardianships.
Those numbers matter because they reveal the market logic embedded in the policy. Older children are harder to place. Teenagers are harder to adopt. Children with complex needs are harder to move into permanent homes. So Congress created higher payments for harder-to-place children. In ordinary policy language, that sounds compassionate. In financial language, it is a market incentive designed to move supply that is more difficult to place.
The most consequential formula change came in 2014 through the Preventing Sex Trafficking and Strengthening Families Act. Before 2014, states generally earned bonuses by exceeding historical adoption numbers. That became harder over time because states had to beat their own high-water marks. After 2014, the program shifted toward a rate-based calculation. The formula began looking at current-year adoptions compared with a baseline adoption rate applied to the state’s foster care population.
The technical details matter. Under the current structure, the base rate is the lesser of the prior year’s rate or the three-year average rate. That design prevents states from gaming a bad prior year to create an artificially low baseline. But it also creates a deeper structural problem. Because the formula is tied to the foster care population, states with larger foster care systems have larger award potential. A state can maintain a large foster care population, improve adoption rates relative to that population, and earn significant bonuses.
That is the flaw hiding inside the arithmetic. The formula rewards adoption movement within the foster care system, not the prevention of unnecessary entries into the system. A state that keeps children safely with their parents earns no comparable federal adoption-style bonus. A state that reduces removals through housing support, addiction treatment, childcare, transportation, or kinship stabilization may shrink the pool from which adoption incentives are calculated. A state that feeds more children into the system and then moves them efficiently toward adoption can be rewarded.
This is not merely theoretical. The formula pays for outcomes after separation. It does not pay for the family-preserving outcome that prevents the case from entering foster care in the first place. That omission shapes state behavior because bureaucracies optimize around measurable, funded outcomes. If the federal government measures adoption increases, states will improve adoption processing. If it pays adoption incentives, states will build adoption infrastructure. If it neglects reunification and prevention in the incentive structure, those outcomes become morally praised but financially secondary.
The program’s defenders argue that the bonuses are too small to drive state behavior. That argument misses the point. The incentive awards are not the whole machine. They are the visible tip of a much larger iceberg. Beneath them sit billions in Title IV-E foster care reimbursement, billions in adoption assistance, state matching funds, court systems, contractor networks, and placement infrastructures. The adoption incentive program is the policy signal that tells the larger system which direction federal law celebrates.
And for nearly thirty years, that signal has pointed toward adoption, not family preservation.
The Twenty-Two-Year Freeze and the Politics of Adoption Funding
For more than two decades, the adoption incentive program operated under a strange contradiction. Congress created a bonus system, states earned more than the appropriated amount, and then the federal government often paid only a fraction of what states had earned. From FY2000 through FY2022, the authorized appropriation ceiling remained stuck at $43 million. Inflation rose. Child welfare costs rose. State claims rose. But the ceiling barely moved.
The result was a pro-rata cut system. States earned awards, but when claims exceeded available funding, they received cents on the dollar. In FY2015, states earned roughly $45 million to $46 million but were paid about $18 million, or roughly 38 cents on the dollar. In FY2016, states earned around $55 million but received only about $5 million from available backlog funds, around 9 cents on the dollar. FY2019 reached a record $70.4 million in earned awards, with payments spread over later years. Only after appropriations increased did states begin receiving full payments again.
The freeze reveals something important about child welfare politics. Adoption incentives were politically popular enough to survive, but not always powerful enough to command serious appropriations attention. The program’s advocates, including the Child Welfare League of America and Voice for Adoption, repeatedly warned Congress about shortfalls and pressed for increases. Eventually, Congress raised actual appropriations to $75 million in FY2023 through the Consolidated Appropriations Act, with the higher level maintained in FY2024 and FY2025.
That increase was a major victory for adoption advocates. But it also raises a question the public should ask more bluntly: why did Congress increase the pot for adoption incentives without creating an equally direct, equally measurable incentive for safely keeping children with their families? The policy debate focused on whether states were being fully paid for adoption and guardianship outcomes they had already earned. It did not confront the deeper asymmetry in the system.
The adoption incentive lobby is not massive compared with industries like defense, pharmaceuticals, or finance. Bethany Christian Services, despite being a major child welfare contractor, reportedly spent only $40,000 on federal lobbying in 2021. But adoption advocacy does not rely only on registered lobbying dollars. It relies on moral framing, bipartisan congressional relationships, faith-based networks, nonprofit coalitions, former foster youth narratives, and the political difficulty of opposing anything branded as adoption.
That is why the program survived twenty-two years of underfunding and then eventually won a larger appropriation. The adoption lobby does not need to be the richest lobby in Washington. It only needs to make opposition politically uncomfortable. No member of Congress wants to be accused of standing against adoption, permanency, or children without families. The problem is that this moral framing prevents the more serious question from being asked: how many children became adoption-eligible because the same system failed to preserve their families first?
The funding fight treated the adoption incentive program as a technical appropriations issue. It is not. It is a value statement. Every dollar Congress appropriates to reward adoption outcomes while failing to reward family preservation with comparable force tells states what the federal government wants measured, counted, and celebrated.
FY2025: The States That Got Paid
In FY2025, HHS awarded approximately $39.8 million in adoption and guardianship incentive payments to 45 states. The top recipients should concern anyone who believes federal bonuses should reflect child welfare success rather than volume, system size, or formula mechanics.
Illinois received the largest award at $6.5 million. Florida followed with $6.27 million. California received $4.16 million. Ohio received $2.84 million. Texas received $2.65 million. Arizona received $2.07 million. Washington received $1.78 million. New York received $1.285 million. Massachusetts received $950,000. Nebraska received $876,500. At the bottom, Rhode Island received $15,000, Michigan received $28,000, and Wyoming received $31,500.
At first glance, these numbers look like ordinary grant awards. But the surrounding context changes their meaning. Illinois, the top FY2025 award recipient, has been under federal child welfare oversight for thirty-six consecutive years through the B.H. consent decree. Texas, the state with the highest confirmed all-time adoption incentive receipt at roughly $107 million, has operated under federal court supervision in M.D. v. Abbott since 2011 over conditions so severe that a federal judge found the system had been broken for decades. Ohio, another top recipient, also has one of the worst TPR-to-adoption ratios in the country, terminating parental rights far faster than it finalizes adoptions.
This is the central contradiction of the adoption incentive formula. It does not ask whether a state’s foster care system is safe. It does not ask whether children are being abused in care. It does not ask whether a state is preventing removals. It does not ask whether racial disparities are improving. It does not ask whether parental rights were terminated unnecessarily. It does not ask how many children became legal orphans. It asks whether the state improved adoption or guardianship outcomes relative to the formula.
That narrowness allows states with deeply troubled systems to receive millions. The formula can reward movement through the pipeline even when the pipeline itself is failing children. A state can be under federal oversight, operate with excessive caseloads, bury abuse complaints, struggle with permanency outcomes, and still receive an adoption incentive award because the award is tied to a narrow category of measurable finalizations.
The public should understand the difference between a child welfare outcome and a formula outcome. A formula outcome is something that satisfies the federal calculation. A child welfare outcome is whether the child is actually safer, more stable, better supported, connected to family, culturally grounded, educationally secure, and protected from reentry into care. The adoption incentive program rewards formula outcomes.
That is not good enough.
The $69 Billion Iceberg
The adoption incentive awards are the part of the system easiest to describe because they are explicit bonuses. But they are not the largest money stream. CivicOps data shows that between FY2020 and FY2025, federal child welfare spending across major programs totaled more than $69.4 billion. Title IV-E foster care accounted for roughly $31.45 billion. Adoption assistance accounted for $22.88 billion. The Social Services Block Grant accounted for $9.64 billion. MaryLee Allen Promoting Safe and Stable Families accounted for $2.6 billion. Stephanie Tubbs Jones Child Welfare Services accounted for $1.65 billion. John H. Chafee foster care transition programming accounted for $1.18 billion.
The ratio tells the story more clearly than any speech. Foster care and adoption assistance together totaled about $54.4 billion over the period reviewed. Prevention services that keep families together received only a fraction of that scale. The research brief frames this as a 23-to-1 spending ratio in favor of removal and permanent separation systems over prevention.
This is where the federal money map becomes morally devastating. The United States spends lavishly after families collapse. It pays for foster care maintenance. It pays for adoption assistance. It pays for case administration. It pays for residential care. It pays for court processes. It pays for contractors. It pays for adoption finalization incentives. But when families need rent, childcare, transportation, addiction treatment, mental health services, kinship support, or direct economic stabilization before removal, the federal commitment is comparatively weak.
The system’s priorities are visible in the ledger. California received more than $4.63 billion in federal adoption assistance from FY2020 to FY2025. Florida received more than $1.19 billion. New York received $1.125 billion. Ohio received $1.122 billion. Texas received $1.039 billion. Arizona received $1.026 billion. These adoption assistance flows dwarf the annual incentive awards. In California, adoption assistance was more than 1,100 times the FY2025 incentive award. In Michigan, adoption assistance exceeded the FY2025 award by more than 28,000 to 1.
This means the incentive awards are not the main pool of money. They are the directional sign at the entrance to the highway. The highway itself is Title IV-E foster care and adoption assistance. The sign says adoption and guardianship finalizations are rewarded. The pavement beneath it is billions in ongoing federal support for systems built around removal and permanent placement.
A serious child welfare reform effort would reverse this logic. It would make prevention and family preservation the most reliably funded part of the system, not the most rhetorically praised and financially secondary part. It would pay states when children safely avoid foster care. It would reward reductions in poverty-driven removals. It would fund kinship stabilization before formal custody. It would track how many families are preserved, not only how many children are adopted.
Until that happens, the money will continue telling states the truth behind the speeches.
Illinois: The Top Award Recipient Under Thirty-Six Years of Oversight
Illinois received the largest FY2025 adoption incentive award in the country at $6,506,500. On paper, that sounds like success. In context, it raises serious questions about what the federal formula is actually rewarding.
Illinois DCFS has operated under the B.H. consent decree since 1988, meaning the state has been under federal court oversight for child welfare failures for thirty-six consecutive years. That is not a short reform period. That is an entire generation of federal supervision. Yet Illinois remains one of the largest award recipients under a federal program supposedly tied to permanency achievement.
The state’s permanency outcomes are deeply troubling. The research brief identifies Illinois permanency within twelve months at roughly 28 percent compared with a national average around 43 percent. Permanent outcomes within three years hover around 50 percent. Cook County’s racial disparity is especially severe: Black children reunified at a rate of only 22.1 percent compared with 41 to 43 percent in other Illinois regions. Placement stability remains below benchmark. AFCARS implementation problems created a data gap from February 2023 to February 2024.
The contradiction is stark. A state under decades of federal oversight, with poor permanency timelines, racial reunification disparities, data gaps, and below-benchmark placement stability, received the largest adoption incentive award in FY2025. That does not necessarily mean Illinois did nothing right under the formula. It means the formula is too narrow to distinguish between improved adoption output and overall child welfare performance.
This matters because federal awards are political signals. When HHS sends millions to a state, the public can reasonably assume the state is succeeding. But Illinois shows that adoption incentive success does not necessarily mean child welfare success. It may simply mean the state satisfied the formula while deeper system failures continued.
If the federal government is going to reward states for adoption and guardianship outcomes, those payments should be conditioned on broader child welfare safeguards. No state should receive top-tier incentive awards while failing basic permanency benchmarks, maintaining severe racial disparities, or operating under decades-long consent decrees without transparent public explanation. At minimum, every award announcement should include a warning label: adoption incentive awards do not certify that the state’s child welfare system is safe, equitable, or effective.
Without that transparency, the public sees a bonus and mistakes it for approval.
Florida: The Double-Incentive Model
Florida received the second-largest FY2025 adoption incentive award at $6,273,000. Florida is especially important because it layers state-level adoption incentives on top of federal incentives, creating what may be one of the most aggressive double-incentive models in the country.
In 2015, Florida enacted HB 7013, which created bonuses for Community-Based Care lead agencies that finalize adoptions within five months of termination of parental rights. This state-level performance bonus sits on top of federal adoption incentives. The measurable behavioral response was clear. The average time from TPR to adoption finalization dropped from 15.24 months before HB 7013 to 9.88 months afterward, a 32.8 percent acceleration.
That may sound like success. Children spent less time waiting after TPR. Finalizations moved faster. Bureaucracy accelerated. But the unanswered question is whether speed improved child welfare or merely optimized the system for finalization. The research brief notes that no independent evaluation has examined whether faster adoptions improved long-term child outcomes, reduced disruptions, strengthened family stability, or affected reunification decision-making before TPR.
Florida reported preventable adoption disruptions in FY2024 and FY2025, with behavioral and mental health challenges identified as primary causes. That should matter. An adoption finalized quickly but later disrupted is not permanency. It is another trauma event dressed as a completed outcome. If bonus systems pressure agencies to accelerate finalization without equally measuring post-adoption stability, the state may be rewarded for speed while children bear the consequences of instability.
Florida’s privatized child welfare model adds another layer. Community-Based Care lead agencies manage services regionally. These agencies can compete for performance bonuses tied to adoption finalization. Privatization creates distance between state responsibility and contractor action, and bonus structures can intensify throughput pressure at the agency level. The agency that finalizes faster can be rewarded. The family still fighting reunification receives no comparable institutional support from that incentive structure.
The Florida model should be studied nationally, but not as a simple success story. It should be studied as a warning. When states stack incentives for faster adoption, they must also measure whether reunification was prematurely abandoned, whether children reenter care, whether adoptions disrupt, whether racial disparities worsen, and whether adoptive families receive adequate long-term support. Faster is not automatically better. In child welfare, faster can mean efficient rescue or efficient erasure.
The formula cannot tell the difference unless it is designed to ask.
Texas: The $107 Million Paradox
Texas is the state that should haunt every congressional hearing on adoption incentives. It has received approximately $107 million in all-time adoption incentive awards, the highest confirmed total of any state. It also remains one of the most notorious child welfare systems in the country, operating under federal court supervision in M.D. v. Abbott since 2011.
The contradictions are almost beyond belief. A federal judge found Texas’s system had been broken for decades and that children often left state custody more damaged than when they entered. Monitoring reports identified children harmed in care, abuse complaints improperly downgraded, caseworkers carrying caseloads far above court-ordered limits, and high turnover. In FY2024, Texas reported 99 confirmed child abuse and neglect deaths. In April 2024, the court imposed a $100,000-per-day contempt fine, later blocked by the Fifth Circuit.
And yet Texas continued receiving adoption incentive payments. In FY2025, it received $2,646,500. From FY2020 to FY2025, it received more than $1.039 billion in federal adoption assistance. This is the Texas paradox: the same state rewarded for adoption outcomes also operated a system so troubled that federal litigation stretched across more than a decade.
Texas defenders might point to declining foster care entries. Entries dropped from 20,685 in FY2018 to 9,965 in FY2023, nearly a 48 percent decline. But the research brief cautions against interpreting that drop as proof of improved family preservation. Texas passed SB 2611 in 2021, narrowing the legal definition of neglect. That change mechanically reduced removals by raising the legal threshold. In other words, fewer entries may reflect definitional change rather than better family support.
The M.D. v. Abbott litigation adds another warning. In 2024, the Fifth Circuit removed Judge Janis Jack from the case after blocking her contempt order, effectively weakening federal oversight at the moment it had maximum leverage. The case moved into a new phase, with broader constitutional questions still unresolved.
This is exactly why adoption incentive awards should be tied to broader system accountability. A state should not be able to collect bonuses while failing to protect children already in its custody. The federal government cannot credibly claim to reward child welfare success while sending incentive dollars to a system under long-running constitutional scrutiny.
Texas forces the public to ask the question the formula avoids: if a state earns adoption bonuses while children die in care and abuse complaints are buried, what exactly is being rewarded?
Ohio: State Bonuses on Top of Federal Rewards
Ohio demonstrates another dimension of the incentive structure: state-level bonuses layered onto federal rewards. Ohio received $2,838,500 in FY2025 federal adoption incentive payments and more than $1.122 billion in federal adoption assistance from FY2020 to FY2025. But the state also created one of the most aggressive adoption grant programs in the country.
Launched in April 2023 and later extended, the Ohio Adoption Grant Program offered $10,000 for any non-stepparent adoption from foster care, $15,000 if the adoptive parent had been the child’s licensed foster caregiver, and $20,000 for special needs adoptions. The state appropriated $34 million per fiscal year for FY2025 and FY2026. The program reportedly ran out of funding twice as fast as projected, indicating extraordinary demand.
On its face, the program supports adoptive families. But in context, it adds another layer of financial pressure toward adoption finalization in a state already showing one of the worst TPR-to-adoption ratios in the country. As documented in the previous article in this series, Ohio terminated parental rights at more than twice the rate it finalized adoptions in FY2022, creating thousands of legal orphans.
Ohio also has a documented structural IV-E disincentive at the county level. Counties fund foster care up front and receive partial federal reimbursement, while the state funds adoption assistance. Average foster care payments can exceed adoption assistance payments. That means county agencies may face one set of incentives, the state another, and adoptive families another still. Ohio’s grant program may help move children into adoption, but it does not fix the deeper structure that produces legal orphans or separates family preservation from the strongest financial rewards.
The danger is that state grant programs can make adoption politically popular without addressing why so many children were adoption-eligible in the first place. If a state pays families to adopt while failing to pay birth families enough to prevent removal, the public should ask whether the system is subsidizing permanency or subsidizing transfer.
Adoption support may be necessary for children who truly cannot return home. But when financial support is generous after termination and scarce before removal, the moral imbalance is impossible to ignore.
Michigan: Punished for Trying to Preserve Families?
Michigan is one of the most important states in this analysis because it complicates the narrative. In FY2025, Michigan received only $28,000 in adoption incentive awards, near the bottom nationally. Yet it received roughly $788.3 million in federal adoption assistance from FY2020 to FY2025. The research brief identifies Michigan as the rare large state genuinely attempting to prioritize family preservation on the front end.
Michigan has dramatically reduced foster care entries over the past decade and operates the Families First intensive in-home crisis program. It has equalized care entries and exits more effectively than many states. In other words, Michigan appears to have done at least part of what reformers say states should do: reduce entries into foster care by investing in preservation and front-end support.
Its reward under the adoption incentive formula was nearly nothing.
That does not mean Michigan’s system is fully successful. The state still struggles with slow permanency processing, court backlogs, and only about 25 percent permanency within twelve months, below a 40.5 percent benchmark. Children who do enter care may take too long to reach stable outcomes. But the contrast is revealing. A state moving toward family preservation may earn little under a formula built around adoption and guardianship finalization improvements.
Michigan exposes the values embedded in federal measurement. If a state prevents unnecessary foster care entries, the children never enter the population from which adoption bonuses are calculated. If fewer children enter, fewer children become adoption-eligible. If fewer children become adoption-eligible, fewer adoption incentive opportunities exist. Prevention can reduce the pool that the formula rewards.
This is the perversity at the heart of the system. A state can be doing something morally right and financially unrewarded by the adoption incentive program. Another state can maintain a larger, more troubled foster care system and still earn millions by improving adoption output. The federal formula does not measure what never happened: the child who stayed safely with a parent, the eviction prevented, the treatment bed secured, the kinship placement stabilized before formal removal, the case never opened.
Michigan should not be romanticized. It has serious problems. But it demonstrates why adoption incentives cannot be the primary measure of child welfare progress. A system that values prevention must pay for prevention, measure prevention, and reward prevention.
Right now, the federal formula mostly rewards what happens after prevention has already failed.
Minnesota: The Model That Points to a Better Way
If the current federal incentive structure is broken, Minnesota offers one of the strongest pieces of evidence for a better alternative. Minnesota’s Northstar program, launched in January 2015, took a different approach. Rather than rewarding states for adoption volume, it equalized adoption and guardianship payments directly to families, especially for older children whose prior payments were far lower than foster care rates.
The results were significant. Academic research from the National Bureau of Economic Research found a 29 percent increase in the monthly probability of permanency for children age six and older. Time in foster care before permanency dropped by an average of five months. Additional monthly payments to adoptive parents averaged $128, while additional payments to kin guardians averaged $362. Three-year follow-up data showed academic achievement improvements equal to 31 percent of a standard deviation, with projected lifetime earnings increases of roughly $32,000 per child.
The key insight is where the money went. Minnesota sent support directly to families taking responsibility for children, especially kin guardians. The federal adoption incentive program sends money to states. States can use those funds for recruitment, one-time programs, administrative needs, or miscellaneous child welfare purposes. Minnesota’s model strengthened the actual family placement directly.
This distinction is enormous. If the policy goal is permanency, then support should flow to the family providing permanence. If kin are willing to take a child but cannot afford the financial burden, direct support changes the outcome. If adoption or guardianship disrupts because families lack resources, direct support reduces risk. If older children remain in care because families fear long-term costs, direct support addresses the barrier.
Minnesota’s results suggest that financial incentives are not inherently bad. The problem is where and how they are aimed. Incentives paid to states can reward bureaucratic throughput. Incentives paid directly to families can stabilize actual homes. The federal government should learn from that difference.
A reformed national system would replace state-level adoption bounties with family-centered permanency support. It would reward kinship placements, reunification stability, post-reunification support, guardianship success, and adoption durability. It would measure outcomes years later, not simply count finalized paperwork. It would pay for the home, not the agency’s completed transaction.
The money can work. But only if it stops rewarding the machine and starts supporting the family.
Missing Children and the Largest Systems
The research brief cross-references CivicOps missing children records with high-award and high-spending child welfare states. CivicOps contains 1,905 active NCMEC missing children records. The states with the highest active missing child counts overlap heavily with states receiving large adoption incentive awards and large federal adoption assistance flows: California, Texas, Florida, New York, Ohio, Arizona, Pennsylvania, Illinois, North Carolina, Tennessee, and others.
This correlation does not prove that adoption incentives cause missing children cases. It should not be framed that way. Large states naturally have larger populations, larger foster care systems, and more missing children records. But the overlap still matters because it identifies where the largest child welfare systems, largest federal flows, and highest concentrations of missing children converge.
California had 586 active missing records in the CivicOps dataset, while receiving $4.16 million in FY2025 adoption incentives and more than $4.63 billion in adoption assistance from FY2020 to FY2025. Texas had 335 active missing records, $2.65 million in FY2025 incentives, and more than $1.039 billion in adoption assistance. Florida had 286 active missing records, $6.27 million in FY2025 incentives, and more than $1.19 billion in adoption assistance. Ohio had 152 active missing records, $2.84 million in incentives, and more than $1.12 billion in adoption assistance.
The question is not whether the formula directly causes children to go missing. The question is why federal incentive awards are not conditioned on comprehensive child safety performance in the systems receiving them. If a state receives adoption bonuses while large numbers of children are missing, abused in care, legally orphaned, or stuck in unstable placements, the public deserves an integrated accountability report rather than a celebratory award announcement.
Federal child welfare finance remains dangerously siloed. Adoption incentives are evaluated through adoption metrics. Foster care funding is tracked separately. Missing children data sits in another system. Abuse complaints are monitored through state channels. Court cases proceed separately. Medicaid claims are elsewhere. The child experiences one system, but government oversight fragments that system into disconnected ledgers.
That fragmentation protects the machine. It allows a state to look successful in one category while failing in another. It allows federal dollars to flow without a unified picture of child outcomes. It allows adoption bonuses to be paid without asking whether the same system is losing children, harming children, or creating legal orphans.
A child welfare award should never be evaluated in isolation. The public deserves the full picture.
The Legal Orphan Problem the Formula Ignores
The adoption incentive formula rewards finalized adoptions and guardianships above baseline. It does not subtract for legal orphans. That omission is catastrophic. A legal orphan is a child whose parental rights have been terminated but who has not been adopted. The child has lost their legal family but has not gained a new one. The system has destroyed one permanent relationship without securing another.
This problem was documented before ASFA was passed. NYU Law professor Martin Guggenheim warned that expedited termination could produce legal orphans if adoptions did not keep pace. Early studies of states that fast-tracked termination showed exactly that pattern: children legally freed for adoption soared, while actual adoptions increased much more slowly. ASFA then accelerated the termination framework nationally while adding financial adoption incentives.
The gap persists. FY2024 AFCARS data showed tens of thousands of children legally free with adoption plans but not yet adopted. The research brief identifies 34,817 children legally free with an adoption plan but not adopted, while 46,935 children were adopted from foster care that year. Other data points show post-adoption instability, reentry into foster care after adoption, and cases in which adoptive parent rights later terminate.
The formula should account for this. If a state terminates parental rights and fails to secure adoption, that failure should reduce or offset incentive eligibility. If a state creates legal orphans at a high rate, it should not receive unqualified adoption bonuses. If adoptions disrupt or children reenter foster care, the state’s prior incentive should be clawed back or adjusted. A finalization is not true permanency if the placement collapses later.
Right now, the formula celebrates the finish line at finalization. But child welfare does not end when the adoption decree is signed. Children live with the consequences for decades. Families either stabilize or fracture. Adoptive placements either endure or fail. Legal orphans either find families or age out alone. A serious system would measure outcomes five and ten years later, not merely count finalized cases within a fiscal year.
The legal orphan problem reveals the formula’s moral blindness. It rewards exits from foster care without fully accounting for the children pushed into legal limbo along the way. That is not permanency. It is statistical housekeeping.
The International Warning: The Netherlands Saw the Logic and Stopped
The Netherlands offers a warning the United States should not ignore. Dutch adoption agencies were self-financing through placement fees, meaning their financial survival depended on completing adoptions. A 2021 government inquiry found corruption, child trafficking, and document falsification across multiple sending countries. The root problem was not simply bad actors. It was the financial structure. Agencies reliant on placement fees had incentives to maximize placements.
In 2021, the Netherlands halted intercountry adoptions pending investigation. In May 2024, it permanently ended all new intercountry adoption procedures. In December 2024, the government announced a six-year phased elimination of remaining adoption infrastructure.
The Dutch model involved international adoption, not U.S. foster care adoption. But the structural lesson is directly relevant. When the financial survival of agencies depends on placing children, the incentive to maximize placements can overwhelm child welfare considerations. When money attaches to the movement of children from one family structure to another, safeguards must be extraordinary. If safeguards fail, child rescue can become child procurement.
The United States should examine its domestic system through the same lens. State agencies may not be self-financing adoption agencies in the Dutch sense, but they do receive incentives for adoption outcomes. Contractors receive money when children are in care. Adoption agencies receive fees or contracts. Residential providers receive daily rates. Court vendors receive per-service payments. Tax credits subsidize adoptive families. The financial ecosystem is more complex than the Dutch model, but the core risk is the same: once child placement carries financial reward, systems may begin optimizing for placement rather than preservation.
The Netherlands responded to evidence of structural corruption by ending the system that created the incentive. The United States has not even fully investigated its own domestic adoption incentive structure.
That silence is not defensible.
What the Formula Should Reward Instead
The current formula rewards adoption and guardianship finalizations above baseline. A reformed formula would start from a different premise: the best child welfare outcome is not adoption; it is safety with family whenever safely possible. Adoption should be supported when necessary, but it should not be the only outcome with a bonus structure.
A better federal formula would reward states for reducing unnecessary removals while maintaining child safety. It would measure the number of families stabilized through housing, substance abuse treatment, childcare, transportation, and domestic violence support. It would reward sustained reunification, not just reunification at case closure. A child returned home and still safely home twelve, twenty-four, and thirty-six months later should count as a success worthy of federal incentive funding.
The formula should reward kinship stabilization before formal removal. If grandparents, aunts, uncles, siblings, or trusted relatives can keep children safe without the child formally entering foster care, that outcome should be financially supported. The system should not force children into state custody before money becomes available.
The formula should reward reductions in legal orphanhood. States that terminate parental rights without securing adoption should face scrutiny, not bonuses. States that reduce the number of children legally free but not adopted should be rewarded. States that reinstate parental rights when adoption fails should receive support for repairing legal harm.
The formula should reward placement stability and post-permanency durability. Adoption finalization alone is not enough. If a child reenters foster care after adoption, the state should not be able to count the original adoption as a clean success. Permanency should mean stable family life, not paperwork completion.
The formula should include racial equity measures. If Black and Native children are disproportionately removed, terminated, legally orphaned, or delayed in reunification, states should not receive unqualified incentive awards. Federal money should not reward systems producing racially unequal family destruction.
Most importantly, prevention must be funded at a scale comparable to removal. A 23-to-1 spending ratio in favor of removal and permanent separation systems over prevention is not reformable through small pilot programs. It requires structural reversal. The federal government should spend as aggressively to keep families safely together as it currently spends after they are separated.
The issue is not whether money should shape child welfare. It already does. The issue is whether money should continue rewarding the pipeline or finally reward the family.
Conclusion: The Bonus System Is the Blueprint
The federal adoption incentive program is often treated as a narrow technical program buried inside child welfare finance. It is not narrow. It is symbolic. It reveals the blueprint. For nearly thirty years, the federal government has paid states for increasing adoptions and guardianships from foster care while failing to create an equivalent reunification and family preservation incentive. That choice shaped the system.
The formula has been rewritten four times. It added categories. It raised payments. It shifted from fixed historical baselines to rate-based calculations. It incorporated guardianships. It increased awards for older youth. But through every rewrite, one thing never changed: there is still no comparable federal bonus for keeping a family together.
That omission is the indictment.
Illinois can receive the largest FY2025 award while remaining under thirty-six years of federal oversight. Texas can collect the highest confirmed all-time adoption incentive total while operating a system under long-running constitutional litigation. Florida can stack state bonuses on top of federal awards to accelerate adoption finalization without proving long-term child outcomes improved. Ohio can layer state grants onto a system producing legal orphans at alarming ratios. Michigan can reduce foster care entries and receive almost nothing from the adoption incentive formula. Minnesota can show that direct family support improves permanency, while the federal program continues sending bonuses to states instead.
The pattern is clear. The current incentive structure does not measure child welfare in any holistic sense. It measures movement through a specific exit door.
Adoption can be beautiful when it is necessary, ethical, stable, and child-centered. Guardianship can be lifesaving when it preserves kinship and prevents institutional drift. But when the federal government financially rewards these outcomes without equally rewarding safe family preservation and reunification, it distorts the system. It makes adoption the funded success story and family preservation the unfunded aspiration.
This is how policy becomes machinery. The statute creates the formula. The formula creates the metric. The metric creates administrative behavior. Administrative behavior shapes court practice, agency priorities, contractor activity, and family outcomes. Then, years later, policymakers claim the system is merely responding to child need, as if the financial architecture did not help define what the system saw as success.
The adoption incentive program tells states what Washington values. And for twenty-eight years, Washington has valued adoption finalization enough to pay bonuses for it.
Now the public must ask why Washington never valued keeping families together the same way.
Call to Action: Publish the Ledger
The first step toward accountability is transparency. Every state should be required to publish a plain-language annual child welfare money ledger that shows adoption incentive awards, Title IV-E foster care reimbursement, adoption assistance, prevention spending, legal orphan counts, reunification rates, racial disparities, adoption disruption rates, missing children records, congregate care use, and the number of children aging out after termination of parental rights.
HHS should stop issuing adoption incentive award announcements without full context. Every award should be accompanied by a child welfare accountability profile showing whether the state is under federal court oversight, whether it meets permanency benchmarks, how many children are legally orphaned, how many reentered care after adoption, how many children went missing, and whether racial disparities are worsening or improving.
Congress should rewrite 42 U.S.C. § 673b to replace the current adoption bounty structure with a balanced child welfare incentive system. States should earn federal bonuses for safe family preservation, sustained reunification, kinship stabilization, legal orphan reduction, adoption durability, and racial equity. Finalized adoption should remain supported when appropriate, but it should no longer be the only outcome treated as bonus-worthy.
State lawmakers should audit whether local agencies are optimizing for adoption finalization because of federal and state incentives. Courts should ask whether termination of parental rights is being pursued because reunification is truly impossible or because the system has already moved administratively toward an adoption outcome. Journalists should request state award data, child outcome data, and contractor payment records. Parents, foster youth, and advocates should demand that states show not only how many adoptions they finalized, but how many families they could have preserved and did not.
The adoption incentive formula is not hidden because it is secret. It is hidden because it is technical, boring, bureaucratic, and protected by moral language. That ends when the public learns to read the ledger.
Follow the money long enough, and the system stops looking like a mystery.
It looks like a machine.
And machines can be dismantled.
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SOURCE LIST
PRIMARY STATUTES & REGULATIONS
• 42 U.S.C. § 673b — Adoption and Legal Guardianship Incentive Payments (current text)
• P.L. 105-89 — ASFA (1997) | P.L. 108-145 (2003) | P.L. 110-351 (2008) | P.L. 113-183 (2014) — GovInfo
• H.R. 2882 — Second Consolidated Appropriations Act, 2024 (signed March 23, 2024)
CONGRESSIONAL RESEARCH SERVICE
• CRS Report R43025 — Child Welfare: The Adoption Incentive Program (11 editions) — EveryCRSReport.com
• CRS Report RL32296 — Adoption Incentives: State Survey (2004)
• CRS Report R43757 — P.L. 113-183 Summary
• GAO REPORTS • GAO-05-292 — Child Welfare: Better Data and Evaluations Could Improve Adoption Programs
• GAO-22-6 — Child Welfare: Better Data Could Help States Reinvest Adoption Savings
• GAO-02-585 — ASFA Implementation Review (2002)
HHS / ACF DATA
• ACF Adoption & Legal Guardianship Incentive Awards History — acf.gov/cb/grant-funding/
• ACF FY2024 Award Press Release (September 2024) — $61.1M to 48 states + DC + PR
• ACF Trends in Foster Care and Adoption FY2013-2022
• ACF NSCAW Adoption Follow-Up Study — post-adoption instability data
CIVICOPS DATABASE (VERIFIED QUERIES)
• taggs_fostercare_congressional_districts — $69.4B total FY2020-2025 (live query)
• form_990_schedule_i — Bethany Christian Services of Michigan $49.4M (live query)
• missing_children — 1,905 NCMEC active records by state (live query)
STATE-SPECIFIC
• Illinois DCFS APSR FY2024 | CFRC Permanency Monitoring | Illinois CASA statistics
• Florida DCF CFSP 2025-2029 | OPPAGA Report 23-15 | 2025 Adoption Incentive Annual Report
• Texas DFPS FY2024 Child Maltreatment Fatalities Annual Report
• M.D. v. Abbott case materials — Children's Rights org | Texas Tribune coverage
• Michigan CFSR 2025 Statewide Assessment | Children's Rights Michigan report
• Ohio Senate adoption grant press releases | Ohio IV-E disincentive analysis (AdoptionSubsidy.substack.com)
• Texas SB 2040 — BillTrack50.com | Texas Attorney General adoption grant page
ACADEMIC & POLICY
• NBER Working Paper 32560 (2024) — Minnesota Northstar financial incentives study
• CHOP PolicyLab — ASFA 25-year review (2022)
• Cato Institute — Misaligned Incentives in Foster Care (2021)
• NCCPR — Family Preservation and Adoption (Issue Paper 14)
• CWLA — Adoption Incentive Funding Growing Shortfall series
• Voice for Adoption — Letter to Congress on incentive shortfall
INTERNATIONAL
• Netherlands Government — Permanent end to intercountry adoption (May 2024)
• Netherlands Government — 6-year phased elimination (December 2024)
• AdoptionLand.org — Hague Convention Perverse Effects (academic analysis)
PROJECT MILK CARTON | 501(c)(3) | EIN: 33-1323547
Such disheartening info all thru out. Due to leaving abusive spouse when CPS came to visit I was terrified for my child. I applaud your actions for children❤️