Extended Foster Care Across the US

The net cost of EFC is calculated from foster care maintenance payments, offset by cost savings from reduced homelessness and incarceration. The paper calculates these components for youth who responded to the NYTD survey at age 21 in the FY2011 and FY2014 cohorts.

Foster care maintenance payments totaled $89.3 million over the three-year period from ages 18 to 21. This reflects varying lengths of participation — while the median youth exited care around age 18.2, some remained in care up to age 22. The average cost per youth during their time in extended care was $8,727 in states with federal policy, $4,476 in states with state policy, and $3,501 in states with no policy. States without an extended foster care policy still occasionally support youth who are in high school or have a disability which is why these states may spend money on foster care maintenance payments.

The paper estimates two fiscal externalities. First, the paper estimates that one year of exposure to federally-funded EFC reduces the likelihood of experiencing homelessness between ages 17 and 21 by 4.8 percentage points. The baseline likelihood of experiencing homelessness in states with no EFC is 49.1%, which means the program reduced the likelihood by 9.78%. The paper then assumes that full exposure to EFC for three years would thus reduce the likelihood of experiencing homelessness by 29%. The paper uses this result to estimate that EFC prevented 1,181 youth from experiencing homelessness (149 in state EFC states + 1,032 in federal EFC states). The paper assumes that one less youth experiencing homeless means one less 7-day homeless shelter stay. Thus, at $252 per youth for a 7-day homeless shelter stay, EFC reduced government costs related to homelessness by $298,000.

Second, one year of the program reduced the likelihood of incarceration between ages 17 and 21 by 4.5 percentage points. The paper assumes that full exposure would thus make the reduction 13.5 percentage points. The baseline likelihood of incarceration for foster youth in states with no EFC is 35.4%, suggesting the probability with EFC is 21.9%. The paper uses this result to estimate that EFC prevented 1,097 youth from being incarcerated (129 in state EFC states + 968 in federal EFC states). At $334,230 per incarcerated youth (including detention costs, costs to society, and recidivism), this EFC reduced government costs related to incarceration by $366 million.

Subtracting the total reduction in costs ($366.3 million) from the program costs ($89.3 million) yields a net cost of -$277 million, indicating that the program more than pays for itself through cost savings.

The paper computes an alternative net cost that does not take into account the reduced incarceration costs to put an upper bound on net costs. Taking the average monthly foster payment across all states ($1,649.94) and subtracting the average monthly cost of being homeless ($1,008) yields a net cost of $641.94

A positive willingness-to-pay and a negative government cost implies an infinite MVPF for extended foster care in the US.

The paper provides a lower bound on the MVPF by dividing the lower bound on willingness to pay by the upper bound on net costs. This exercise yields an MVPF of $975.5/$641.94 = 1.52.