THE FOSTER-CARE system is in abysmal shape. On average, children entering foster care languish in the system for three years, shuttled through three different placements. The federal government recently completed its final reviews of state child-protection systems; every state failed, and one of the biggest problems was states' slowness in getting foster-care children back to their homes or into adoptive families. After a year-long study, the Pew Commission on Children in Foster Care recently issued a set of thoughtful prescriptions for reform designed to prevent unnecessary placements and to speed the movement of children out of foster care.

The commission would like to fix a federal system that creates perverse financial incentives for states to place and leave children in foster care rather than preventing them from entering the system or enabling them to exit more quickly. One permanent pool of federal funding, close to $5 billion this year, goes to reimburse states for part of the cost of foster care. A far smaller amount of federal funding, less than $700 million in 2004 and at the mercy of annual appropriations, can be used for broader purposes such as family preservation services or adoption promotion and support. There should be more leeway for states to shift their foster-care payments to other child welfare uses. States that reduce their use of foster care wouldn't lose that part of the federal grant, as they do now, but would be able to put the "savings" to other uses as long as they matched the federal funds with money of their own.

Other logical fixes would make federal adoption assistance available for all children; currently help is only available based on the income of the child's birth parents, a distinction that makes little sense and imposes needless work on states to determine eligibility. Another sensible change would be to make federal subsidies available for guardians, as they are for adoptive parents; this would help, among others, grandparents who aren't in a position to become adoptive parents but would benefit from the additional legal authority bestowed by guardianship.

Some child advocates have warned that combining much of the current funding into a flexible grant could backfire, letting the costs of foster care consume all available funds. Another criticism is that the Pew recommendations don't give states enough of a push to reduce reliance on foster care. But the commission's executive director, Carol Emig, argues that the recommendations offer a balance of incentives to reduce reliance on foster care while still providing guaranteed funding in case foster-care rolls swell suddenly, as they did during the crack cocaine epidemic of the 1980s.

It's clear that the current system is poorly designed, and that children are the losers. The Bush administration has proposed an optional five-year block grant that also would give states more latitude on spending, and Rep. Wally Herger (R-Calif.) has held hearings on the issue. If the Pew report can help jump-start a serious effort to fix a broken system, that in itself will be a worthy achievement.