KYLE has not been home for 29 days. When the car door opens in front of his building, the preschooler looks a bit anxious, and begins to moan softly. Taking the child's hand, his caseworker leads him to the front steps. As they trudge up the five flights to his mother's apartment, the autistic boy begins to sob with emotion. When he arrives on the top floor and spies his mother waiting with a huge smile at her open door, Kyle breaks loose and runs to her for a big hug.

Kyle's (not his real name) case, in a city where 52,568 child-abuse or neglect investigations were conducted in the past fiscal year, illustrates both the best and the worst of the city's beleaguered child-welfare system. The largest system in the United States, it has for years been the target of criticism, lawsuits, and calls for reform.

There has been progress - such as the development of a plan to care for ``boarder babies,'' who are drug-addicted or HIV-infected infants. They were simply languishing in hospitals, instead of being placed in homes. Too often, though, it takes a crisis to provoke action.

But despite the barrage of public attention and progress on some fronts, advocates say the New York City Special Services for Children (SSC) is still struggling. Some critics say the system is not working. They cite the increasing emphasis on ``congregate care'' facilities that care for six or more children, and what they term a ``lack of political will'' at the high levels to improve services to poor children and families.

Take Kyle's case. Before he was removed from his home, the state should have determined whether Kyle and his mother could have received services, such as a homemaker to help the mother, to prevent the removal. This determination would have followed the mandate laid down in the state's 1979 Child Welfare Reform Act. But it didn't. Instead, faced with an allegation of neglect and declaring an emergency, a city worker removed Kyle and a baby brother from the home. The infant was placed in a foster home in the neighborhood.

During Kyle's 29 days in the foster-care system, the boy was an ``overnighter.'' That made him one of several hundred children who receive nightly placements rather than one where they stay day and night while they are in the system. While Kyle did not go to a different placement each night, every day he was shuttled back into the makeshift nursery in the SSC offices in Manhattan.

Overnight placement is damaging to any child, but for an autistic child ``it is devastating,'' says Rose Firestein, a Legal Aid Society lawyer.

Marguerite Sutherland, Kyle's SSC caseworker, agrees that the time on the overnight circuit was not particularly good for Kyle.

``I didn't know he could talk'' at first, she says. ``I don't have the time to devote to him that he needs. The nursery doesn't have the time.''

In the end, SSC decided Kyle's mother was not abusive or neglectful. She was just ``overwhelmed'' by the double challenge of caring for an infant as well as an autistic child who needs special attention. Despite her poverty, she had regularly taken Kyle to a special nursery school at a local hospital, and officials there lobbied SSC on her behalf.

Now, finally, the family is getting services. Ms. Sutherland has arranged for a homemaker to come to the apartment seven days a week, while the mother gets her feet back on the ground.

Although Kyle is currently reunited with his mother, the situation may be temporary. SSC's formal plan for Kyle is to place him in long-term foster care, where, the agency says, he can get special care and his mom can visit. THERE are more than 24,000 children in the city's foster-care system. Yet in fiscal 1989 the Human Resources Administration (HRA) projects that it will be responsible for 30,000 children in fiscal year 1989. The increase, it says, is directly related to the increase in crack-related drug abuse.

Some children will be taken from their homes temporarily, while parents overcome a crisis. Others are likely to remain in foster care until they become adults. There are mothers who simply disappear after giving birth. And a growing number of babies are born drug addicted or HIV-positive and could develop AIDS. Parents sometimes kick hard-to-handle kids out of their homes.

In one day in family court, cases included a 12-year-old in foster care who had just become a mother, a 16-year-old who had asked to be returned to a group home because his mother dealt crack, and four siblings in three separate foster homes whose parents' whereabouts were unknown.

Though most cases are charges of neglect - like Kyle's - there are horrifying examples of abuse.

The trend in New York City is that an increasing number of younger children are coming into the system. Children under two years old are 25 to 30 percent of the children in the system - a 42 percent jump in the past three years. And, while the number of teens coming into the system has decreased overall, there is an increasing number of particularly troubled kids with drug and behavior problems, city officials say. These troubled teens are hard to place in foster homes, and often end up in overnight placements without proper services.

HRA commissioner William Grinker underlines the correlation between the increase of kids in the foster-care system and the rise of crack, a highly potent form of cocaine, in New York City. An alarming number of young mothers are deemed unable to care for their children because along with crack can come violence, and an addiction so strong that it dominates their lives. It affects, disturbingly, both children and young mothers.

``Unless we can as a society figure a way to deal with this epidemic of drugs ... I don't see a way out of the increase of abuse and neglect and foster care - which are also an epidemic,'' says Mr. Grinker.

Others say that although crack is a major problem, it is not the only reason the system doesn't always work well. Rather, they say, crack use has only exacerbated deeper problems that already existed in the foster-care system.

``The systemic problems were there prior to crack,'' says Poul Jensen, deputy commissioner of SSC and director of the direct-care services there. ``And they will continue, whether we are able to address the crack problem or not.'' Mr. Jensen says overregulation by the system ties the hands of those working with children in foster care. Critics say the system is simply in chaos with little forward planning and not enough commitment to innovative community-based preventive services.

Also swelling the ranks of foster care is the recognition of children who are placed with relatives after being removed from their home. In the past, grandparents or others were told to apply for Aid to Families with Dependent Children (AFDC) when they took in their kin. Now these families, often poor and in cramped housing, can receive foster-care aid. But grandmothers, like Joan Howard, testify that the process is still too arduous. She sometimes receives the aid three months late.

The city's answer to the current crisis has largely been to increase the system's available bed space. Now the city says it is moving beyond simply creating new beds to addressing the specific problems of hard-to-place children. Preventive services sometimes take a back seat. It's a decision other cities and states are likely to face, as well, if the crack epidemic and housing crunch continue to spread across the US.

The controversy - more placements for children vs. more services for families - is not yet settled, even among national experts in the child-welfare field. Federal law clearly requires states to make efforts to keep children and parents together, and many professionals contend that this is the only humane way to proceed. But others wonder whether such policies put children in peril.

GRINKER is not entirely sold on spending more money on preventive services at this time.

``Nobody's given me a good handle on what it is we would do with a lot more resources,'' he says. ``In fact, there are some very legitimate questions about the effectiveness of the resources we are spending.'' While New York will continue to fund preventive services, Grinker wonders whether all families should be kept together.

``When you've got a crack-using mother, and a very unstable paternity situation, is that a family you want to keep together?''

David Tobis of Welfare Research answers that little is being done to keep kids in their families. He believes the drug problem is overplayed.

``You can get homemakers, you could provide more day care, you can provide emergency cash assistance. You can try a program like Homemakers,'' where a worker goes into the home for a month to stabilize it, he says. ``The family defines what kind of help they need, whether it is resolving conflicts between parent and child, or getting back on welfare. SSC has been supportive, but it is one program. We need many more. And it takes funding. It's more expensive than traditional preventive services, but it's far less than foster care.''

A recent survey by researchers at the University of California at Berkeley determined that 25 percent of children who are returned to their homes are re-abused by parents. Less than 5 percent of children in foster care are abused in their foster homes, the report found.

Grinker says the toughest areas - special-needs infants and problem teens - are being addressed. Mr. Jensen at SSC has proposed a plan to get children off the overnight circuit.

``Kids on the overnight circuit are operating without ballast,'' he says. ``They are operating in a fragmented environment, their relationships are aborted or disrupted. And a service plan cannot work under those conditions.''

Karen V. is a happy 18-year-old with a three-month-old daughter. Both are in foster care, but they are together in a home that has two other foster children with children. Today Karen is confident that she will be able to take her baby, Cheetara, out of the system with her when she reaches 21.

She talks proudly of the ``home sweet home'' she now has in a solid, working-class neighborhood of single-family homes. She tells of the secretarial job she will return to this fall when her baby is older, and of her determination to ``make a living and be somebody.'' Cheetara's father comes by regularly from Brooklyn to visit his girlfriend and child.

But Karen has had a tumultuous life since she entered the system, when she was just barely a teen-ager. Her stepmother kicked her out of the house when Karen's father died.

Between several failed attempts to live again with her stepmother, Karen stayed in group homes and one of the infamous diagnostic centers, where children were sent for what was supposed to be a maximum 90-day psychological examination before permanent placement. These centers were objects of scandal after investigations showed that children were staying there for extended periods in conditions that included drug-dealing and physical abuse of the children.

Karen herself has been a drug abuser, and was beaten by other foster-care children in institutions, including one stabbing that required stitches. Now all that has changed, and Karen calls her foster mother ``Mom'' and the other young women ``my sisters.''

``I am doing well, and I want other people in foster care to know they can do well,'' says Karen, who doesn't like the term ``foster children.''

``They are so depressed over that word. It used to get to me. I thought I would be in foster homes for the rest of my life. I got so tired of moving those heavy boxes around!''

In today's second part of the Monitor series ``America's Troubled Children,'' there is reference to a program in New York City that works intensively with families in crisis. The name of the program is Homebuilders, not Homemakers.

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