September 29, 2016 by Robert Franklin, Esq, Member, National Board of Directors, National Parents Organization
Next, Daniel Hatcher’s book, The Poverty Industry: The Exploitation of America’s Most Vulnerable Citizens, takes on the foster care industry. What states do to steal money from foster kids will make your blood boil, so be advised.
Title IV-E of the Social Security Act helps states provide for the needs of kids whose parents have either died, been incarcerated or otherwise lost their parental rights. Those kids go into foster care and states pay foster parents to care for them. The federal government, through Title IV-E, helps states fund the needs of those children, the overwhelming majority of whom are poor. As with other programs detailed by Hatcher, states hire private companies to try to maximize the revenue coming from Washington for those foster children.
And, as with the other programs he discusses, all that seems on its face to be benign. Who could argue with the federal government assisting states in caring for children who have no parents to do the job?
Alex could. Alex’s mother died when he was 12. Not long afterward, his father died as well.
Unknown to Alex, he was eligible to receive Social Security survivor benefits after his father died. These funds could have provided an invaluable benefit to Alex, supplying an emotional connection to his deceased father and financial resources to help with his difficult transition out of foster care.
But without telling Alex, the Maryland foster care agency applied for the survivor benefits on his behalf and to become his representative payee. Then, although obligated to only use the benefits for the child’s best interests, the agency took every payment from Alex. The agency didn’t tell Alex it was applying for the funds, and didn’t tell him when the agency took the money for itself. Alex struggled during his years in foster care, left foster care penniless, and continued to struggle on his own.
To me, that sounds a lot like outright theft. It also sounds like the state’s violation of its fiduciary duty to Alex. Both are true, but what Maryland did to Alex, it’s done to countless other foster kids. And Maryland is far from alone in its taking foster kids’ money on the sly and using it for its own needs.
When a child becomes entitled to certain benefits, like survivor’s benefits or disability benefits under the Social Security Act, someone has to make the claim. The child can’t do it because he/she is a minor and, in any event, likely doesn’t know the benefits are available. So someone has to act on the child’s behalf. Now, one way to do that would be to appoint a guardian or trustee for the child who could then do what’s necessary to ensure that the child gets what’s coming to him. Indeed, that’s a fairly common occurrence in courts across the nation. But when it comes to survivors’ or disability benefits for kids in foster care, state child welfare agencies have themselves appointed as “representative payee” for the child.
There’d be nothing wrong with that if states did what they should do – conserve the money for the child or use it for his interests, but they don’t. They use it for themselves. They put the money into the agency’s revenue or the state’s general revenue. In the latter case, the money is undeniably lost to the child.
But some states argue that by putting it into the funds for use by the child welfare agency, it helps all foster kids and therefore should get a pass. Needless to say, like all the arguments raised by states to defend their shameful practice, that one doesn’t fly. The money paid to a particular child is the property of that particular child, not the property of every child in the state’s foster care system. Alex’s survivor’s benefits were his and no one else’s according to the regulations governing the Social Security Act and simple common sense.
Likewise, whenever anyone takes control of money or other assets for the benefit of another person (as a guardian does for a ward), the first person becomes a fiduciary for the second. The law governing fiduciaries is among the strictest anywhere. Fiduciaries have to be able to demonstrate that their use of the person’s money was for the benefit of the person and the person’s “benefit” is very narrowly defined. Food and shelter qualify; a trip to Vegas probably doesn’t. If the money is invested, the investment has to be the safest of the safe. AAA bonds are a good idea. U.S. Treasury instruments are a better one.
So, at the very least, when Maryland made off with Alex’s money, it violated its fiduciary duty to him. As such, it should have become liable to pay back the money, plus interest, plus any costs incurred (like attorney’s fees) in regaining it. Maryland has done no such thing.
Why would Maryland or any other state do such a plainly immoral and illegal thing to a child? As with Medicaid funds and child support funds, it did so because it wants the money and foster kids have proven uniquely easy to fleece. They’re young, poor and largely ignorant of their rights. States are in need of money, so, according to their thinking, why not take it from those least able to resist? Yes it violates statutory and regulatory requirements, but so far, no one’s seriously attempted to hold states to account.
Of course it’s fairly rare for a child to have both parents die and thereby become eligible for survivor’s benefits. What’s altogether more common is for a child to qualify as disabled and become eligible to receive disability benefits. Enter revenue maximization companies.
According to Hatcher, they don’t target the obviously disabled kids. No, their goal is to convince the Social Security Administration that not obviously disabled kids are in fact eligible for disability benefits. In so doing, they substantially increase the revenue flow to states from Washington. That’s their job, after all. And of course, that money flows, not to the children for whom it’s intended, but to states as “representative payees” for the kids. And when the states get the money, the kids never see a dime.
This process of increasing the number of kids receiving federal benefits so the state can get its hands on them is, in the parlance of the poverty industry, the “penetration rate” and it has one particularly nasty aspect.
[A] key eligibility requirement of Title IV-E payments results in another incentive: to favor taking poor children into foster care. Children are only eligible for IV-E funds if the children are removed from low-income families who would have been eligible for welfare assistance.
So the federal government offers cash incentives to states to break up poor families. States are happy to oblige because, by becoming the children’s “representative payee,” it’s the state, not the child, who ends up with the money.
I’ll write more about this scandal tomorrow.
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