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Youakim v. McDonald

December 6, 1995






Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 73 C 635--John A. Nordberg, Judge.

Before H. WOOD, JR., ROVNER, and EVANS, Circuit Judges.

ROVNER, Circuit Judge.



The dispute before us in this twenty-two year old case concerns the implementation of legislative reforms to Illinois' foster care benefit program. See P.A. 89-21, amending, 20 ILCS 505/5. Earlier this year, the Illinois Department of Children and Family Services ("DCFS" or "the Department") proposed its Home of Relative Reform Plan ("HMR Reform"), which was passed by the Illinois General Assembly and signed into law by Illinois' Governor in June of this year. Under HMR Reform, all homes providing foster care must be licensed under state law before resident children will be eligible to receive foster care benefits. Prior to the effective date of the reforms (July 1, 1995), however, Illinois required a license only for homes providing foster care to non-relative children. Children who were cared for by relatives, by contrast, were eligible to receive benefits although they resided in unlicensed homes. The effect of the reforms, then, is to terminate the foster care benefits of children in relative homes while the homes attempt to become licensed.

Plaintiffs, a class of foster parents and children who stand to lose their benefits because their homes are not yet licensed, invoked the district court's continuing jurisdiction to enforce the August 24, 1976 judgment entered in this case for the purpose of challenging the implementation of the reforms. Plaintiffs do not quarrel with the new licensing requirement but contend that their benefits cannot be terminated before they are provided an adequate opportunity to become licensed. They argue that the transition process, by denying them such an opportunity, violates the earlier judgment and the Due Process Clause of the Fourteenth Amendment. On the day before the reforms were to take effect, the district court enjoined the Department's Director from terminating or suspending foster care payments to children in unlicensed relative homes without first providing those homes the opportunity to have a license application determined on its merits. The district court explained in a detailed opinion how the proposed implementation of HMR Reform would violate the 1976 judgment and plaintiffs' right to due process. See Youakim v. McDonald, No. 73 C 635, slip op. (N.D. Ill. June 30, 1995). The Director appeals that interlocutory injunction to this court, invoking our jurisdiction under 28 U.S.C. sec. 1292(a)(1). *fn1 We now affirm the district court's injunction as modified below.


The relevant facts are not disputed. The parties stipulated to many of the facts below, and the district court made further factual findings after a two-day evidentiary hearing. Because the Director has not challenged the district court's findings here, we accept them as true and describe them below along with the stipulated facts. First, however, we provide a brief history of the earlier litigation that culminated in the entry of the 1976 judgment.

A. The Earlier Case

The initial dispute in this case involved Illinois' decision to exclude children in relative homes from eligibility for foster care benefits. See Miller v. Youakim, 440 U.S. 125, 130-31 (1979) (citing Ill. Ann. Stat. ch. 23, sec. 2212.17 (Supp. 1978)). Illinois paid such benefits only to children in homes that were licensed under state law, and it prohibited the licensing of relative homes. Thus, a child placed with a relative was ineligible to receive foster care benefits although the same child would have been eligible had he been placed in the home of a non-relative. The district court certified a class of related children and foster parents and subsequently held that Illinois' policy of denying foster care benefits to otherwise eligible children in relative homes violated secs. 401 and 408 of the Social Security Act, 42 U.S.C. secs. 601 & 608. See Youakim v. Miller, 431 F. Supp. 40 (N.D. Ill. 1976). In a judgment dated August 24, 1976, the court invoked the Constitution's Supremacy Clause to enjoin Illinois from enforcing any state law or administrative policy that had the effect of denying full foster care benefits to such children. The district court's judgment was affirmed by this court, 562 F.2d 483 (7th Cir. 1977), and by a unanimous United States Supreme Court, 440 U.S. 125 (1979). The present dispute involves developments in Illinois since the Supreme Court's 1979 decision.

B. Pre-Reform System

When DCFS takes over custody or guardianship of a child, it attempts to make a substitute placement with either a relative, a non-relative, a group home, or an institution. Subsequent to the Supreme Court's decision in Miller, Illinois has paid foster care benefits to children placed in three categories of homes--preapproved, approved, and licensed. Both the preapproved and approved categories were comprised entirely of relative homes, because Illinois law still required, as it had prior to the Miller decision, that all non-relative caregivers be licensed. Although a relative home could also obtain a license, it was not required to do so before a child could be placed and receive foster care benefits.

In contrast to non-relative homes, DCFS is permitted to place a child in a relative home even before that home becomes licensed or approved under state law. The home must only pass an initial safety check that is considerably less detailed and onerous for both DCFS and the caregiving family than the licensing and approval processes. See 89 Ill. Admin. Code sec. 335.202 (detailing "pre-conditions" for placement of child in relative home) (repealed effective July 1, 1995). A home that has passed this initial safety check is referred to as a "preapproved" home. Such a home could subsequently become approved or licensed under state law, although it had no financial incentive to do so because licensure was not a requirement for the receipt of full foster care benefits. Because these homes were neither approved nor licensed under state law, however, the federal government did not reimburse the State for benefits paid to resident children under the terms of the Social Security Act. See 42 U.S.C. sec. 672(c) (providing for federal reimbursement of payments made only to children in licensed or approved homes).

In 1986, Illinois officially recognized a category of "approved" relative homes, which were required to meet standards "substantially the same with regard to the safety, health and welfare of children as those promulgated for licensure of unrelated foster family homes pursuant to the Child Care Act of 1969." 89 Ill. Admin. Code sec. 335.102 (repealed effective July 1, 1995); see also 89 Ill. Admin. Code sec. 402 (setting out licensing standards for foster family homes) (amended effective July 1, 1995). *fn2 Once DCFS confirmed that a relative home met its licensing standards, the State of Illinois qualified for federal reimbursement of foster care benefits paid to resident children even if the home was not actually licensed. See 42 U.S.C. sec. 672(c) (a "foster family home" under the Social Security Act includes a home that "has been approved, by the agency of such State having responsibility for licensing homes of this type, as meeting the standards established for such licensing"). The district court found that Illinois created the approved category in 1986 at least in part to make it easier for DCFS to place dependent children with relative caregivers.

When a child is first placed in DCFS custody or guardianship, she is assigned a caseworker who attempts to procure a placement for that child. The caseworker also has the responsibility, once a placement is made, of shepherding the caregiver through the approval and licensing processes. The caseworker assigned in any given circumstance may be employed by DCFS itself, or by one of sixty-seven child welfare agencies (e.g., Catholic Charities) that work on behalf of the Department. As of April 30, 1995, the cases of 31,596 out of 47,007 dependent children placed in private homes were managed by private welfare agencies rather than by DCFS itself. *fn3 Nine of the sixty-seven participating private welfare agencies are what we will call "approval only," meaning that caseworkers from those agencies have no authority to license or to participate in the licensing of a foster family home. Children who were assigned to a caseworker from such an agency thus had little if any opportunity to reside in a licensed home.

The district court found, moreover, that to the extent DCFS and the private agencies encouraged preapproved relative caregivers to become either approved or licensed, they generally encouraged the approval process, which was less onerous for both the placing agency and the care-giving family. Whether a relative home was licensed or merely approved also made no difference to the State's ability under the Social Security Act to receive federal reimbursement for dispersed benefits. See 42 U.S.C. sec. 672(c). The statistical evidence before the district court revealed that as of April 30, 1995, only 1.2 percent of all children residing in relative homes lived in licensed homes, whereas 42.6 percent of those children lived in approved homes. An additional 22.2 percent lived in preapproved homes that had applications for approval pending. *fn4 The district court found from the statistical evidence that the private welfare agencies had been more successful than the Department in getting relative homes approved or licensed--44.8 percent of private agency homes were approved or licensed as compared to only 21.4 percent of DCFS homes. The Department's failure in this regard is surprising in light of the fact that the State of Illinois is entitled to federal reimbursement only for foster care benefits paid to children in licensed or approved homes. Because the State also paid unreimbursed benefits to relative children in preapproved homes, DCFS had a significant incentive to shepherd relative homes at least through the approval process. The fact that so many relative children received unreimbursed benefits from the State was one factor that prompted the reforms.

C. HMR Reform

DCFS proposed HMR Reform on March 1, 1995, and it became law a little more than three months later. The operative reform provision relevant to this litigation provides as follows:

Effective July 1, 1995, only foster care placements licensed as foster family homes pursuant to the Child Care Act of 1969 shall be eligible to receive foster care payments from the Department. Relative caregivers who, as of July 1, 1995, were approved pursuant to approved relative placement rules previously promulgated by the Department at 89 Ill. Adm. Code 335 and had submitted an application for licensure as a foster family home may continue to receive foster care payments only until the Department determines that they may be licensed as a foster family home or that their application for licensure is denied or until September 30, 1995, whichever occurs first. P.A. 89-21, amending 20 ILCS 505/5(u-5).

Under HMR Reform, then, Illinois will pay foster care benefits only to those relative and non-relative homes that are licensed under state law. The new licensing requirement has no effect on non-relative homes, as Illinois has always required such homes to be licensed. For existing relative homes, however, the impact of the reforms is significant and potentially devastating. Children in preapproved relative homes who qualified to receive foster care benefits prior to July 1, 1995 would have their benefits eliminated on that date, regardless of whether their caregiving home applied to DCFS for a license on or before June 30, 1995. *fn5 Foster care benefits to children in preapproved homes would be reinstated under HMR Reform only if the home were to ultimately succeed in obtaining a license, and the affected child would not then be entitled to recover the benefits lost between July 1 and the date of licensing. As of July 1, children in preapproved homes would begin to receive assistance under two alternative programs, but at significantly reduced benefit levels.

While HMR Reform cuts off benefits to children in preapproved relative homes, it eliminates entirely the category of approved relative homes. Those homes that were previously approved by the State of Illinois as meeting its licensing standards must also become licensed in order for resident children to retain their foster care benefits. In contrast to its treatment of preapproved homes, however, HMR Reform provides a transition process that enables approved homes to apply for a license while resident children retain their current benefits. If an approved home submits a license application on or before June 30, resident children retain their benefits until the Department denies the application or until September 30, 1995, whichever occurs first. *fn6 But this procedure does not ensure that a child's benefits will not be eliminated before the Department renders a decision on the license application. Indeed, the district court found from the statistical evidence that the Department would be unable to process and decide the applications of approved homes prior to the scheduled cut-off date. *fn7

After the implementation of HMR Reform, relative and non-relative caregivers will be required to meet the same licensing standards, which are slightly more stringent than those that were in place prior to HMR Reform. A home that was licensed as of July 1, 1995, however, need not meet the new standards until its current license expires. *fn8 Approved and preapproved relative homes, ...

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