Modelling Out-of-Home Care Allowances & Contingencies Payments

1. Modelling Out-of-Home Care Allowances & Contingencies Payments NSW Department of Community Services Nicola Robinson A/Senior Economist Economics and Statistics Branch Wednesday, 5 October 2005

2. Purpose of the Model • To assess the total expenditure impact of the proposed changes to allowances and contingencies payments to children and young people in OOHC • To determine the likely impacts for different categories of clients in OOHC for a range of different payment and eligibility scenarios

3. Purpose of the Model • The quantum and eligibility criteria of the proposed allowances in addition to eligibility criteria and thresholds for contingencies will be finalised based on the results of the modelling

4. Proposed changes • 11 allowances types  3 allowance types • Older children will receive a higher allowance rate in view of the higher costs associated with their care relative to younger children • 20 contingency types  13 contingency types, coupled with changes to eligibility

5. The Model The model will provide estimates of: • The change in DoCS overall expenditure on allowances & contingencies and individual components of expenditure • The drivers of the change in expenditure such as particular categories of clients

6. Assumptions of the model The key assumptions of the model include: • Rationalisation of allowance types • Eligibility for a payment dependent on legal status and age • Re-introduction of age-related allowances • Rationalisation of contingencies and changes to eligibility for certain classes of clients

7. Data Sources • 2002-03 data on allowances and contingencies payments by age and legal status will be used to model the changes • More recent payments data is not reliable when disaggregated by legal status and age.However, aggregate 04-05 payments data may be used for further analysis

8. Data sources • One of the new allowances will be based on the carer’s income, pro-rata with the Family Tax Benefit A • The income distribution of carers has been derived from custom tabulations of 2001 Census of Population and Housing data by the ABS

9. How the changes will be modelled - allowances • For each of the current 11 allowance types, the change in annual allowance levels per child caused by the proposed system will be calculated for each age and legal status combination • The annual change in expenditure per child will be multiplied by the number of children to calculate the total change in expenditure for the 3 proposed allowance categories

10. How the changes will be modelled - contingencies • Where a contingency item is no longer permitted or where demand for the item is expected to decline, the current expenditure becomes savings • The extent to which contingency expenditure on older children is higher than younger children will be shown as possible savings. 2 scenarios will be examined: • contingency payments are compensating for the current low level of allowance and reduce when the higher allowance come into effect • contingency expenditure will be unchanged

11. How the changes will be modelled – transitional arrangements • For transitional arrangements, entitlements will be ‘grand-fathered’ for 6 months for those clients that are worse off • The effects of transitional arrangements (grandfathering) will be estimated by isolating categories of clients that are worse-off (savings to DoCS) • The cost of delaying their changes for six months is half the annual savings

12. A range of scenarios to be modelled • 2 eligibility options for Adoption Allowance: • Only carers of adopted children with a disability are eligible • Carers of adopted children where the placement is at risk, behavioural issues are present, significant hardship is being experienced and the child has a disability • 2 options for age-based allowances • 0-4 years, 5-14 years and 15-17 year • 0-4 years, 5-13 years and 14-17 years