One of the central challenges facing child welfare administrators has to do with managing how the foster care system is financed while working hard to achieve positive outcomes for children and families. Offering states greater discretion over the use of federal Title IV-E funds is one way to improve management of the child welfare system. However, simply giving states revenue with fewer strings attached is no guarantee that expenditure patterns will lead to better outcomes for children. For this to happen, the link between outcomes and the fiscal system has to be direct and explicit. This paper describes how that link is made, and offers reasons why this approach could lead to better federal fiscal policy.