Appeal from the United States District Court for the Northern District of California Marilyn H. Patel, District Judge, Presiding D.C. No. 3:06-cv-04095-MHP.
The opinion of the court was delivered by: Rymer, Circuit Judge
Argued and Submitted October 7, 2009-San Francisco, California.
Before: Alfred T. Goodwin and Pamela Ann Rymer, Circuit Judges, and George H. Wu,*fn1 District Judge.
Opinion by Judge Rymer; Concurrence by Judge Wu
California Alliance of Child and Family Services, an association of private, non-profit agencies that provide adoption, foster care, and group home services, appeals the summary judgment entered in favor of Cliff Allenby, the interim director of the California Department of Social Services (the State). We must determine whether the State is in compliance with the federal Child Welfare Act's (CWA) mandate that a participating state "cover the cost" of certain enumerated items for foster care group homes when it pays at a rate that is approximately 80 percent of actual 1986-1987 costs adjusted for inflation. The district court concluded that this substantially complies with the CWA. We disagree; the natural meaning of "cover the cost" is to pay in full, not in part. As the State isn't doing this, we reverse.
The CWA, codified at 42 U.S.C. §§ 670-679b, was enacted in 1980 and creates an opt-in scheme whereby states can receive federal funding to assist in the costs associated with raising children who are dependants or wards of the state. To qualify for federal funding, the state agrees to abide by certain requirements.
The state must first submit a plan to the Secretary of the United States Department of Health and Human Services (DHHS). See 42 U.S.C. § 671(a). Among other things, the plan must "provide[ ] for foster care maintenance payments in accordance with" other provisions of the CWA. 42 U.S.C. § 671(a)(1). The state must also designate a state agency to administer the plan once approved, and must agree to amend its plan to comply with any changes made to the CWA or other applicable federal law. 42 U.S.C. § 671(a)(2); 45 C.F.R. § 1356.20(d)(1).
The CWA further provides that any state with an approved plan "shall make foster care maintenance payments on behalf of each" qualifying child. 42 U.S.C. § 672(a)(1). The phrase "foster care maintenance payments" is defined as payments to cover the cost of (and the cost of providing) food, clothing, shelter, daily supervision, school supplies, a child's personal incidentals, liability insurance with respect to a child, reasonable travel to the child's home for visitation, and reasonable travel for the child to remain in the school in which the child is enrolled at the time of placement. In the case of institutional care, such term shall include the reasonable costs of administration and operation of such institution as are necessarily required to provide the items described in the preceding sentence.
California has created its own statutory scheme in an attempt to comply with the CWA.*fn2 It has designated the California Department of Social Services (CDSS) as the agency responsible for administering California's CWA plan. See Cal. Welf. & Inst. Code §§ 11229, 11460(a). The plan calls for CDSS to pay foster care providers on "a per child per month rate in return for the care and supervision of the [ ] child placed with them." Cal. Welf. & Inst. Code § 11460(a). "Care and supervision" is defined in such a way that it substantially mirrors the federal definition of foster care maintenance payments. It covers "food, clothing, shelter, daily supervision, school supplies, a child's personal incidentals, liability insurance with respect to a child, and reasonable travel to the child's home for visitation." Cal. Welf. & Inst. Code § 11460(b).
California uses the Rate Classification Level system (RCL) to determine the amount of the foster care maintenance payments it makes. See Cal. Welf. & Inst. Code § 11462. The RCL uses a point system that classifies group homes in fourteen categories-the funding they receive depends on the category. See Cal. Welf. & Inst. Code § 11462(b), (d)-(f). A group home's RCL is based on "the level of care and services that the group home operator projects will be provided during the period of time for which the rate is being established," Cal. Welf. & Inst. Code § 11462(e), and payments are made on a per child, per month basis, Cal. Welf. & Inst. Code § 11460(a). The rates were initially made effective on July 1, 1990, relying on data from a study of 1985 calendar year costs and since then reflect adjustments made, starting with the 1986-1987 fiscal year, based on the California Necessities Index (CNI). See Cal. Welf. & Inst. Code § 11462(c). The CNI is a weighted average of changes in various costs of living for low-income consumers, including food, clothing, fuel, utilities, rent and transportation. See, e.g., Cal. Welf. & Inst. Code § 11453(a). Thus, these annual adjustments reflect any increase or decrease in the cost of living, as measured by one constant calculation of inflation-the CNI. See id. Beginning with the 2000-2001 fiscal year, the California statute has provided that "the standardized schedule of rates [for group homes] shall be adjusted annually by an amount equal to the CNI computed pursuant to Section 11453, subject to the availability of funds. The resultant amounts shall constitute the new standardized schedule of rates." Cal. Welf. & Inst. Code § 11462(g)(2).*fn3
The Alliance accepts the State's system for calculating costs to be covered, but takes issue with the State's under-funding of foster care maintenance payments as a result of having failed to adjust the standardized schedule of rates by an amount equal to the CNI since 2001. Accordingly, it brought this action, asserting that the State is violating CWA's mandate to cover costs, and seeking declaratory and injunctive relief under 42 U.S.C. § 1983.
After discovery, the parties filed cross motions for summary judgment. In a joint statement of undisputed facts they agreed that since the inception of the RCL, the payment schedule has increased by approximately 27 percent; that since the 1990-1991 fiscal year, the actual costs incurred by group homes for the care and supervision of children has increased by more than 27 percent; and that the CNI has increased by approximately 59 percent since the 1990-1991 fiscal year. The State admits that as of 2005-2006, it was making foster care maintenance payments at an amount approximately 80 percent*fn4 of what they would have been had it made yearly CNI adjustments.
The district court granted summary judgment in favor of the State. The court concluded that the State based its initial reimbursement standard on the statutory criteria mandated by the federal statute. Although the court recognized that the standard rate schedule could become so out of sync with the cost of items listed in the CWA that the California system would be in violation of federal law, it concluded that the process for determining foster care payment rates remains substantially compliant given that today, the RCL provides for about 80 percent of the costs ...