Like many states, Colorado has not always protected the interests of the foster youth who receive federal survivor benefits.
Before 2025, counties could use those benefits to offset the cost of caring for kids in foster care, rather than preserving the money for the children’s future.
Colorado’s big step forward
House Bill 25-1271–signed by Gov. Polis in May of last year–changes that practice by telling counties, as well as the state Department of Human Services, to stop using benefits (as of July 1, 2027) from the Railroad Retirement Board, the Social Security Administration, and the Veterans Benefits Administration to reimburse themselves.
These benefits belong to the kids whose parents have died and who qualify through a parent’s work history or service.
The new law is a big step forward in giving foster kids a financial leg up, but it also creates both administrative and budget challenge for counties, as well as the state. In meeting those challenges, the focus should be on the future of the foster youth, rather than how to fund child services agencies.
Simply doling out more state money to county departments doesn’t equate to helping set up foster kids for success.
The fiscal note in HB-1271 says that the state department received around $843,000 from children’s federal benefits, which helped reimburse the agency for the cost of foster care.
The state expenditure is expected to increase $131,017 in fiscal year 2026-27 and increase up to $1.4 million in the 2027-28 fiscal year.
This projected increase in the budget is slightly unrealistic, as they have not gone through with this new plan; they are simply estimating how much money they will be needing.
In other words, the state agency is now facing the reality that they no longer have the right to take children’s federal benefits, and are looking for ways to make up for that.
One simple solution to easing at least the administrative burden of managing the benefits are tax-advantaged Foster Accounts, which can be made on behalf of foster kids; this type of account is a spin-off of the new Trump Accounts.
While these accounts are already being used in other states, Colorado has not taken advantage of this new program to help foster kids’ financial futures.
A new reality for child services
This is no insignificant amount of money; these benefits can range from hundreds to thousands of dollars. This amount of money could change a foster kid’s life upon aging out of the system; this could be a payment on a car, renting an apartment, helping them pay for college, and so much more.
State officials must also address the budget problem. Rather than hiring more financial advisors, for example, counties could establish accounts with banks that would invest the money on each beneficiary’s behalf. This approach could reduce administrative pressure and lower the budget demands.
Although these solutions may appear modest, Colorado counties could create a new future for foster youth by swiftly adopting to their new realty created under HB-1271.
Victoria Mallory is a political science major at Hastings College in Nebraska, with plans to attend law school, and a graduate of the Future Leaders program at Independence Institute, a free market think tank in Denver.
