Feds Call Out Wisconsin, 38 Other States For Diverting Benefits Owed To Foster Kids

By Erik Gunn, Wisconsin Examiner

December 15, 2025

Federal officials are urging 39 states, including Wisconsin, to quit hoarding federal benefits that are supposed to go to children in foster care, but that agencies instead take to help pay for their foster care expenses.

The practice has been going on in various states for two decades or more, according to advocates who have been calling to ban it for nearly as long.

Wisconsin is among the states that received letters last week from the federal Administration for Children and Families, calling on them to stop diverting Social Security survivor’s benefits that are supposed to go to foster children.

“Every earned benefit dollar belongs to these foster youth, not the government agencies or bureaucrats,” said Alex J. Adams, the ACF assistant secretary, in a press release from ACF and the U.S. Department of Health and Human Services.

“ACF has notified all 39 governors who allow this practice and aims to work with states to end it,” the press release stated. “The goal is to ensure these earned benefits are no longer taken from foster youth and are instead preserved to support them as they transition out of state care.”

In Wisconsin, the office of Gov. Tony Evers pointed to a provision Evers included in his proposed 2025-27 state budget to end the practice, but that Republican lawmakers removed without comment at the start of budget deliberations.

“It’s been a long-time issue now, but unfortunately it has been largely under the radar,” said Daniel Hatcher, a University of Baltimore law professor and an early critic of the practice. Hatcher has advocated on behalf of affected foster children for more than two decades and written extensively about the issue, including in the Wisconsin Law Review.

A Marshall Project-National Public Radio project in 2021 found that 49 states at the time were rerouting foster children’s federal benefits to cover some of their costs. Hatcher said that has helped raise more attention to the issue.

“I think most people, when you talk to them about this practice, when they understand what’s going on, they’re outraged,” Hatcher told the Wisconsin Examiner.

Foster children who would qualify for Social Security survivors’ benefits or veterans’ survivor benefits because their parents have died, as well as foster children who themselves have disabilities and qualify for Social Security disability payments (SSI) have all been affected, Hatcher said.

Hatcher first publicized the practice in a 2006 law review article that documented how state and local child welfare agencies, or the private contractors that they engage to manage their programs, were intercepting federal benefits that are supposed to go to foster children.

“The agencies identify foster children who are disabled or have deceased or disabled parents, apply for Social Security benefits on the children’s behalf, and then take the children’s benefits to reimburse foster care costs for which the children have no legal obligation,” Hatcher wrote.

A U.S. Supreme Court ruling in 2003 upheld the practice, but advocates have been fighting to end it ever since.

In Wisconsin, Hatcher wrote in a 2018 op-ed article for the CapTimes, the administration of then-Gov. Scott Walker signed a contract in 2011 with Maximus Inc. that the management company used to “increase the number of children classified as disabled and to locate children with deceased birth parents — not to provide more services to the children, but so the state can take their resources.”

Drawing on public records, Hatcher estimated that the contract yielded at least $3 million “in survivor and disability benefits from foster children each year” in Milwaukee County alone, “and the state has been taking millions more from foster children in other jurisdictions.”

Earlier this year the Evers administration estimated that about $3.2 million each year was being diverted from foster children’s SSI or Social Security survivors’ benefits, with about 95% going to fund the foster care system. The figures were cited in a Legislative Fiscal Bureau’s March summary of Evers’ proposed 2025-27 budget.

The governor’s budget proposal included a provision to end the diversion and instead deposit the benefits in trust funds for each child in foster care.

The proposal also included language to prohibit the Department of Children and Families or county child welfare agencies from using those funds to pay for foster care. DCF officials said the department would seek additional funding in the state budget to replace what counties lost as a result, according to the fiscal bureau’s summary.

The proposal to stop diverting the benefits was one of more than 600 items in Evers’ draft budget that the Republican majority on the Legislature’s budget-writing Joint Finance Committee deleted on the first day of budget deliberations.

Asked whether the Evers administration had any comment on the federal notice last week, the governor’s communications director, Britt Cudaback, replied in an email message, “Nothing beyond the fact we already tried to address this, but Republican lawmakers rejected the effort.”

Before his confirmation as ACF assistant secretary, Adams was director of the Idaho Department of Health and Welfare. In May, he directed the department to stop diverting foster children’s survivor benefits, the Idaho Capital Sun reported.

Idaho is one of 11 states that have ended the diversion of survivor benefits, according to the DHS/ACF press release.

The Children’s Advocacy Institute at the University of San Diego has identified at least eight states and the District of Columbia that have completely banned the diversion of all benefits designated for foster children. A number of other states have attempted to stop the diversion of selected benefits.

The federal notice marks an important step in the campaign to end the practice, said Amy Harfeld, the institute’s national policy director.

“We’re very excited about what this does,” Harfeld told the Wisconsin Examiner. “It doesn’t fix the whole problem but it sets a really solid marker in the ground that not only keeps states moving forward but leads toward the next changes that need to be made to actually put an end to it.”

The Children’s Advocacy Institute acknowledges Wisconsin’s unsuccessful attempt to curb the practice in the 2025 budget.

With the failure of that effort, however, “Wisconsin isn’t looking so good right now,” Harfeld said. “It’s one of only 11 states that haven’t done anything.”

The Wisconsin Examiner, a nonpartisan, nonprofit news site, offers a fresh perspective on state politics and policy through investigative reporting and daily coverage dedicated to the public interest. The Examiner is part of States Newsroom, a national 501(c)(3) nonprofit supported by grants and a coalition of donors and readers.