Gov. Gavin Newsom has vetoed a bill preventing California counties from taking benefits, such as Social Security checks, from orphaned or disabled children in their custody, to pay for their foster care.

The veto disappointed children’s advocates who have pushed for California to instead save those benefits for children to access when they’re adults.

It also defies a nationwide trend. Increasingly, states led by Republicans and Democrats are stopping their child welfare agencies from the decades-old practice of essentially reimbursing themselves for providing foster care by cashing in certain children’s Social Security checks.

Recently Arizona, New Mexico and Oregon have halted the practice, which came under increased scrutiny in 2021 after NPR and The Marshall Project published an investigation. This summer the federal government encouraged states to help children save their benefits instead, or find loved ones who could receive the payments on their behalf.

In California, boards of supervisors in both San Diego and Los Angeles counties have pushed for the state to halt the reimbursement practice. San Diego County is being sued by two former foster kids for taking nearly $25,000 of their benefits.

But in a veto letter issued Sunday, Newsom wrote that the measure to stop the practice, AB 1512, would have cost too much, in a year he and lawmakers have to close a more than $30 billion budget shortfall. The bill would have required the state to pick up the tab for foster care costs that counties would have been barred from collecting with the children’s benefits.

In a statement, Amy Harfeld, national policy director of the Children’s Advocacy Institute at the University of San Diego, called the reimbursement practice “unscrupulous.”

“Governor Newsom let down thousands of hopeful, disabled and orphaned foster youth by vetoing AB 1512,” she wrote. “Budget challenges or not, picking the pockets of California’s most vulnerable foster youth to fund their care is morally and fiscally indefensible.”

Under the reimbursement practice, county child welfare agencies apply for certain foster children to receive federal benefits — Supplemental Security Income (SSI) if they have disabilities, or survivor’s benefits if they have lost a parent. The agencies then step in to receive the payments on the child’s behalf, though federal regulations list a preference for the money to be sent to an adult relative or friend.

The counties then use the children’s payments to defray the monthly checks they send to foster parents or group homes, often without the children or their loved ones even knowing the money existed.

The practice forces the most vulnerable children in the child welfare system to unknowingly pay for their own foster care, say children’s advocates and bill author Isaac Bryan, the Assembly majority leader from Culver City. For all other children, counties use regular foster care funding — a mix of federal, state and local dollars — to pay for their care.

Foster children are at increased risk of poverty and homelessness. One long-term study in California found a quarter of foster youth surveyed had experienced homelessness after reaching adulthood.

The state contends child welfare agencies are spending the benefits appropriately — on the children’s care — just as if they were the children’s parents.

“Both Supplemental Security Income (SSI) and foster care benefits are intended to provide for the daily care and supervision of youth, including costs for housing and food,” Newsom wrote in his veto letter. “If counties are not permitted to use SSI to cover the cost of providing care to foster youth, the General Fund will need to offset those costs. This was not contemplated as part of the budget process.”

California does not know how much the counties actually take from children’s benefits each year or how much it would cost to backfill those funds.

The practice applies to the relatively few foster children who are eligible for the federal benefits. Last year CalMatters reported that Los Angeles County, which cares for about a third of the state’s 50,000 foster kids, withholds the benefits of about 600 kids in its custody any given month, and in one year it took $5.4 million from children’s benefits.

Bryan, a former foster child, described the potential costs to the state as negligible. The entire state’s overall child welfare system costs nearly $5 billion a year.

He said he will push for state money to be included in next year’s budget to halt the practice.

“This is not lost revenue for the county; this is stolen money to begin with,” he said of the Social Security benefits. “This was an opportunity for California to lead, and we missed it.”

Jeanne Kuang is a reporter with CalMatters.