The campus of St. Christopher’s Inc, a 123-year-old child welfare agency in Westchester, is bathed in summer sunshine. The boys are in classes; the girls, playing ball on the grass. The Hudson River shimmers in the background. Construction is underway on a new school building. All seems to be in perfect shape.

“Looks can be deceiving,” sighs Luis Medina, the agency’s executive director. Budget cuts are biting deep, leading to the shutdown of some projects and pay freezes for staff.

The New York City Administration for Children’s Services paid St. Christopher’s roughly $13 million last year to house foster children on this campus and in group and private homes, as well as provide them with services like counseling and education.

That’s less than he’s entitled to under New York State’s formula for paying for foster care services. But ACS can pay less if it determines that it does not have sufficient funds to pay a private agency in full–and for the last three years, the city has paid St. Christopher’s and its other foster care agencies 5 to 10 percent below the rates agreed to under their contracts, according to industry groups.

That’s not the only reason St. Christopher’s budget for foster care has shrunk. New York City’s entire foster care system is downsizing at a historically unprecedented pace.

In 2000, Medina had 1,349 New York City children housed in private homes. Today, he has 797.

And the worst may be yet to come. The agency has repeatedly scored near the bottom of ACS’ performance evaluation for foster care agencies, which examines the quality of their services, their success in securing children permanent homes, and the thoroughness of paperwork and other bureaucratic procedures. St. Christopher’s is currently under investigation by the city for allegedly prodding staff to fabricate records of visits to foster homes that never took place–a practice that has been reported by caseworkers at other agencies as well but never officially confirmed.

ACS will be deciding in the next few months which agencies get their city foster care contracts renewed–and St. Christopher’s may not be one of them.

In just a few brief years, New York City has seen a fundamental change in its child welfare system. The Giuliani administration turned to foster care as its first line of protection. For Mayor Bloomberg’s ACS, it is a last resort. Even following a recent upswing in the number of deaths of maltreated New York City children, ACS is standing firm by its commitment to keep the number of young people in foster care as low as it can.

It aims to use preventive services, not foster care, as its primary response to families’ problems. “We need to reinforce and bump up the priority and visibility of intact-family services,” new ACS Commissioner John Mattingly told Child Welfare Watch in an October interview. “You are going to see a new focus on that.”

If Mattingly and his agency can protect more and more children without removing them from their homes, it’s a moment of triumph for families facing trouble. And for operations like St. Christopher’s, it’s a threat to their continued existence.

Medina, like every child welfare agency executive in the New York region, has had to rethink his entire organization. Last year, St. Christopher’s shut down an office in the Bronx, one of a dozen outside Dobbs Ferry. As for its three group homes, which can house up to 36 residents, he’s looking into other ways to fill the beds–including housing juvenile offenders or the disabled elderly. St. Christopher’s is also considering selling one of its group homes.

There may be no turning back, not even if there’s a resurgence in demand for foster care. Longtime observers of New York’s child welfare system say we ought to be prepared for exactly that possibility. “The lesson we should learn from the mid-’80s is that the demand can turn around very quickly,” says Fred Wulczyn, a research fellow with the Chapin Hall Center for Children at the University of Chicago who is helping ACS assess the performance of private contract agencies like St. Christopher’s. As New York’s entire foster care system shrinks, adds Wulczyn, it “shouldn’t take place in a way that diminishes the capability to respond to an increasing demand.”

But Medina can’t afford to plan for a hypothetical future need for his facilities. His chief concern right now is stable income, and there are plenty of people out there who need peaceful homes and attentive care.

“Lack of predictability is hurting the system. It’s extremely hard to plan for the future,” says Medina. “That’s the world we are in.”


Controlling the Contraction

The number of children in foster care in New York City is lower than it has been since 1987. That’s when the crack epidemic pushed child welfare officials to start removing legions of children from their drug-using parents, including newborns whose blood tested positive for cocaine. In 1991, the population of kids in care in New York City reached an all-time high of more than 49,000.

Even once crack faded, the foster care census didn’t. Kids stuck around for years. And more and more went in all the time. By 1999, the city took two or three dozen more children from their parents every day.

That year, there were 38,441 New York City children in foster care. By July of this year, there were fewer than 21,000. At the press conference introducing new ACS commissioner John Mattingly in July, Mayor Michael Bloomberg called the decline a “dramatic stride forward in the protection of New York City children.”

But the organizations that have housed children for all these years are suddenly finding themselves all built up with nowhere to go. They’ve acquired extensive infrastructure, accumulating office leases and verdant campuses. These organizations are paid for this work under contract with the city–paid per child. Fewer children spell less money.

Under the Bloomberg administration, the Administration for Children’s Services suffered some of the biggest declines of any New York City government agency. Foster care spending alone declined by $82 million during the first two years of the Bloomberg administration, down from $750 million.

“The trend is for agencies to go out of business,” says Edith Holzer, the spokesperson for the Council of Family and Child Caring Agencies, a trade association of foster care providers. In the past five years, eight agencies have closed or eliminated their foster care programs, some of which were started in the 19th century. The 40 left are reinventing themselves to survive.

Under its new commissioner, ACS wants to help decide which agencies stay in the business and which don’t. “If we don’t take action we will start–and we already have to some extent–losing providers,” says Commissioner Mattingly, who took over the agency in August. “The number of kids they have in care is not going to sustain their administrative expense.”

To shrink the system, ACS will be looking at agencies’ performance evaluations. St. Christopher’s, whose group homes are currently ranked second-worst, is not the only one whose future is on the line. Another is bottom-rated Miracle Makers, which was created in the 1980s in response to the surge of demand for foster care in Bedford-Stuyvesant.

Mattingly is keen to have ACS keep the highest quality agencies open–and make sure that those without their own endowments survive their current budget troubles. “The system is at some risk if we don’t make decisions about either closing some beds, closing some contracts, moving some beds or contracts to higher performing agencies or agencies better serving the community,” says the commissioner. “Because if we don’t do that, we risk having the system contract because of fiscal pressure only. That would leave some of the better programs out.”

A managed process would go a long way toward ensuring the best possible care for children at the lowest cost. But the system has already been shrinking for years, and the agencies that provide foster care have been irrevocably reshaped in the process. “The train is 90 percent out of the station,” says Wulczyn.


Efficiency Experts

Foster care has never been a cushy business, and the most successful agencies are already vigilant about efficiency. Forestdale, in Queens, is not a big or complicated organization. It has a budget of about $10 million and runs foster boarding homes, adoption and prevention services, and a father’s education program. It’s also one of the five top-performing agencies in the city, according to ACS. Why is it doing so well? Executive director Joy Bailey points to what she calls its “task-centered team approach.”

Instead of having a single staff member handle all aspects of a case–working with the birth family, the children, the foster family and a judge, as well as handling all paperwork–Bailey has three-member teams working collaboratively. This speeds up the process, she says, and avoids delays caused by staff turnover. It also allows staff to specialize. One of the three is a social worker with a master’s degree, assigned to counsel birth parents trying to get their children back. Another worker interacts with children and their foster families, and a third does paperwork. “Before it was just one person wearing all the different hats,” says MSW Jennifer Garofalo. “Now I have a lot more one-on-one with our clients in the field.”

But efficiency hasn’t protected Forestdale from financial pressures. The number of kids in its foster care program has dropped to 280 from 504 five years ago. For each child it is still working with, Forestdale has been paid only 92 percent of the rate set by New York State. “So here I am, a top-performing agency running a deficit,” says Bailey. Last summer, when the deficit reached $100,000, Bailey cut her staff. Nine teams became seven, and their average caseloads went up to 57 from 44.

Now 150-year-old Forestdale is considering more drastic change. The board is evaluating whether to add new programs to get funding from new sources–and to possibly eliminate foster care programs entirely. They’re considering providing services to adolescents, such as job training. “If you had asked me five years ago, would this board ever give up foster care, I would say no way,” says Bailey.

Concludes Bailey: “If you are rigid, you are not going to survive. You have to be ready to switch gears.”



Most foster care agencies have either diversified their operations already or are thinking about it. They evaluate the opportunities based on how adequately government financing covers the cost of services and what their established infrastructure allows them to do.

Among the most popular new directions is to contract with the New York State Office of Mental Retardation and Developmental Disabilities (OMRDD), to provide housing and services for mentally or otherwise disabled young people and adults who require special care.

It is a viable move for agencies that own group homes, whose beds and physicians can easily be redeployed. With OMRDD, the demand is stable, and agencies can get fully compensated for what they spend.

Likewise, there are an increasing number of agencies looking to diversify into mental health services, under contract with the New York City Department of Health and Mental Hygiene, because many of them have already established the infrastructure, including clinics and therapists.

Foster care programs themselves are reaching out to find new business opportunities. Increasingly, agencies that mainly rely on referrals from ACS have started to recruit children from other counties and states. Take St. Christopher’s. Five years ago, four out of five of its kids came from New York City. Now it’s three in five; the rest are from elsewhere in the state and Connecticut. “If I was strictly relying on New York City children,” says Medina, “I really don’t know how I would make ends meet.”

However, diversification is not always an easy choice. Agencies typically have to invest their own capital, drawn from their endowments, to finance the transition before the government money starts flowing. And then the organization itself must change dramatically: revise its charter or mission, become familiar with a different bureaucracy, and so on. The whole process, according to experienced agency executives, can take two years. To agencies already in trouble, that might be too long.


The Urge to Merge

For mercyFirst, a Long Island-based agency that has operations in New York City, a merger with a sibling institution was the fastest way to diversify.

A new organization emerged last March from the marriage of St. Mary’s and Angel Guardian, two separately incorporated organizations with a shared board of directors and a history of more than a hundred years each. Before the merger, Angel Guardian was primarily a foster boarding program only for New York City children. St. Mary’s was known for its high quality group homes housing young people from all over the region.

The merged agency combines 29 sites, stretching from Riverhead, Long Island, to downtown Brooklyn. Besides existing foster care, residential treatment and homeless intervention programs, they’ve started housing and helping adults with mental illness under contract with the state Office of Mental Health. The new agency has an annual budget of $45 million. Once they connect with the agency, children and families can be steered to appropriate specialized services.

As a merged agency, mercyFirst now commands funding from five city and state agencies, including ACS, the New York State Department of Education, Department of Health, Office of Mental Health and the Office of Children and Family Services. “The services of both agencies complement each other,” says Executive Director Liz Giordano. “Economically speaking, I get more cost centers to spread my administrative overhead.”

mercyFirst has succeeded because the parent agencies shared more than a board. Both were founded by the same religious order, the Sisters of Mercy, and offered complementary programs. A catalyst for the merger was the retirement of the executive director of Angel Guardian; Giordano, who was the head of St. Mary’s, naturally became the executive director of the new agency. They were able to avoid power struggles and culture conflicts, which so often arise when two organizations merge.

More important, St. Mary’s was financially healthy and could afford to pay consultant and legal fees for the merger–rescuing Angel Guardian out of a deficit. Instead of cutting staff or programs, mercyFirst was able to hire 100 new staff for its newly established community residence program and an enlarged quality improvement department.

Though the benefits of a merger are potentially great, mercyFirst is the only one that’s pulled it off in recent years. There are many barriers to mergers between nonprofits, even when both could benefit [see “Joint Purpose,” November 2003].

The biggest is financial desperation. Facing a crisis, Brooklyn-based Brookwood had talked with Louise Wise, an agency also running a deficit, about the possibility of a merger. It didn’t work out. Brookwood–which had been around for 160 years–closed in August 2003. Louise Wise closed soon after, after the failure of merger talks with another agency, Sheltering Arms. And Sheltering Arms, although still in operation, no longer provides foster care services.

These agencies shared a fatal liability: They were already in financial trouble, and what they had been seeking was sheer survival. “Most agencies don’t even talk of mergers until the parties are feeling pressure to do so,” agrees Fatima Goldman, former executive director of Brookwood. “By that time it’s a little late.”


RIP: Death of an Agency

Eight agencies [see above] have just given up: they’ve eliminated their foster care programs or closed entirely. Among them are some of the oldest foster care providers in the city.

The demise of Brookwood is an example of how things can go wrong. Besides foster care, the agency also ran Head Start and family day care programs, allowing it, historically, to draw funding from multiple government agencies. Then the establishment of ACS in 1996 pulled all of these children’s services into one operation.

But further diversification was no longer an option: The agency had closed its two group homes in 1994, as a response to early signs of the decline of the number of children in care. At the same time, Brookwood was burdened with other real estate: a 20-year lease on an office that turned out to be larger than they needed. The excessive rent costs helped dig a $600,000 budget hole.

In the end, Brookwood found itself $1 million in the red. In the two years leading up to its shutdown, the agency tried to find creative ways to earn income. It tried to establish a for-profit child care business. It considered subletting space to other agencies. And its board voted to eliminate foster care programs.

But all of these efforts failed to avoid the inevitable. “Even if all of those had been successful, we would not have come close to closing a million-dollar deficit,” says Goldman, who had led Brookwood for nine years. “It was just way too far.” She is now executive director of the Federation of Protestant Welfare Agencies.

Brookwood wasn’t the only agency to be done in by an expensive long-term lease. In the early 1990s, when the number of children

in foster care peaked at a historic high, St. Joseph’s Children’s Services moved to a building in downtown Brooklyn, with a 25 year

commitment. At the time, it had 850 children in care. By the time it closed in 2000–after 75 years in business–it had 750. The agency cut its staff to save money, but rent was a fixed cost it couldn’t sustain.


Look Beyond Foster Care

At Children’s Village, one of the largest child welfare agencies in the country, new executive director Jeremy Kohomban has a clear vision for the future. He wants the agency to be smaller and stronger, focusing its resources on where kids need them most. In his opinion, that means helping young adults thrive after they grow up. “The most important thing in child welfare is not so much what happens when kids are here, but what happens when they leave us,” says Kohomban. “Are we truly supporting kids in getting jobs, in learning to be a son or a daughter, a husband or a wife, and a father or a mother?”

When young people arrive to live at Children’s Village, Kohomaban sees one of the most striking effects of a smaller, more selective foster care system: These teens are older and tougher. Children’s Village’s Westchester campus is a residential treatment center, where young people who need special counseling and attention live in a controlled environment. The odds against them are high, and Children’s Village has a precious chance to help vault them into successful adulthood.

Right now, the agency provides “aftercare” services to just one in five of the young people who live there. The teens get job training and paid mentors who will follow each young person for five years after he or she leaves care. The mentor is there to help them on everything they might need, such as job applications, finding housing and ongoing emotional encouragement.

Kohomban wants to expand aftercare to everyone who comes to Children’s Village. “Treatment is just one small piece of a larger picture,” says Kohomban. “We want to stay focused on what we do best, which is teach kids to go out and be young adults.”

The one thing that isn’t there is government funding. Kohomban will have to find the money to fill the gap. Already, since arriving in March, he has cut 20 top management positions. He and his board plan to triple private donations in the next five years–spending all of that money on aftercare programs. “One of the struggles the system faces in general is that we have been so dependent on government dollars,” said Kohomban. “I’m very confident that we can go out to private donors and to corporations, and get them excited about going beyond government.” •

This article was produced in collaboration with Child Welfare Watch, a project of the Center for an Urban Future and the Center for New York City Affairs. For a full report on the transformation of New York City’s child welfare system and information about a December panel discussion, visit