April 2001 State Legislatures magazine: From D.C. to Des Moines--the Progress of Welfare Reform

State Legislatures Magazine: April 2001

Editor's Note: This article appeared in the April 2001 issue of NCSL's magazine, State Legislatures. To order copies or to subscribe, contact the marketing department at (303) 830-2200.

From D.C. to Des Moines--the Progress of Welfare Reform

Reauthorizing TANF
51 State Programs
Caseloads--Still Dropping, but Not as Fast
Spending TANF Funds
Results for Families
Time Limits Are Approaching
Looking Forward

Five Things Legislators Should Know About Welfare Reauthorization

Spending TANF Money

From D.C. to Des Moines-the Progress of Welfare Reform

What states have already done has been successful. Now it's time to address the harder challenges posed by those who can't leave the rolls.

By Jack Tweedie
Tommy Thompson, the new U.S. secretary of Health and Human Services, knows how welfare reform works. As a former state legislator and governor, Thompson's leadership made the Wisconsin Works (or W-2) program a model for state innovation. He knows firsthand the responsibility that states took on and the effectiveness of their responses.

Thompson says that Wisconsin asked welfare mothers what they needed to get off public assistance and then set out to design a program to make it possible. "W-2 provides the support necessary for individuals to enter the workforce," he says. "For those who still need aid, we provide financial and employment planners, transportation assistance, job access loans, child care assistance and access to health care. I have always said-as loudly and publicly as I can-that for welfare reform to be successful you have to make an investment up front. It can't be done on the cheap."

Now, Thompson says, it's time to consider the next steps in the reform process. And that is to meet head-on the challenges faced by those still receiving direct benefits-those with significant health problems or people struggling with substance abuse. "We must make a concerted effort to reach these people and provide compassionate, caring assistance," he says. "And we also have a duty to those families who have successfully moved into the workforce. We must do everything in our power to help them continue to move up the ladder of economic success."

REAUTHORIZING TANF
Secretary Thompson will play a central role in the debates over the reauthorization of the Temporary Assistance to Needy Families (TANF) block grant that will occur in the next two years. And he knows the transformation of welfare policy did not start with the federal law in 1996. Nor did it stop after the law was passed. States started experimenting in the early 1990s with aggressive changes focused on work: participation requirements, allowances for increased earnings, strong sanctions and time limits. Those state initiatives and their effects shaped the federal welfare debate that produced increased flexibility and block grant financing. This, in turn, made it possible for states to go even further.

States have increased work requirements for recipients, as well as expanded child care and transportation assistance so parents can work. The states have used welfare money to help families avoid going on welfare altogether, conduct home visits to new parents, extend Head Start to 3-year-olds, fund family resource centers and offer after-school programs to teens to improve their academic achievement and help them avoid crime and sexual activity.

As we anticipate the revived federal debate, it is time to review the state stories-where they are in their reforms and what issues they are addressing. And states' reforms and their effects no doubt will be at the center of federal debates about continuing the TANF program.

51 STATE PROGRAMS
There is no single story to welfare reform. Indeed, one of the wrong notes sounded at many meetings is an attitude that we have a single national program. States and the District of Columbia have adopted such a variety of initiatives that TANF is not a single program, but 51 different programs. They all seek to move welfare recipients into jobs, but do it in different ways. They also seek to reach a variety of other goals-improve school readiness, reduce teen pregnancy, promote marriage, support working families, reduce poverty, help noncustodial parents, reduce child abuse and a host of other things. (Even that statement doesn't account for states such as Colorado, California and Ohio that give broad discretion to counties to develop their own programs.)

States' No. 1 focus has been to help recipients get jobs. Now many are trying to help those held back by substance abuse, learning disabilities and limited work experience. Arizona, for one, expanded substance abuse treatment for TANF recipients and child welfare cases. The program also helps with parenting skills and work training. Utah has social workers who help case managers in every welfare office. They monitor families that have numerous problems and offer up to six months of counseling and home visits. Kansas and Washington have special programs for recipients with learning disabilities.

Most states are expanding programs that help former recipients keep jobs and increase earnings. Illinois beefed up education and training to help people move into better jobs, and excused families from the time limit when parents were working. Colorado and New Mexico have established outreach programs to help families stay enrolled in Medicaid and food stamps after they leave cash assistance.

Several states are considering how to integrate their welfare and workforce development efforts. Washington funds community college programs for low-income adults to help them get training and certificates so they can get better jobs. Florida established Workforce Florida Inc., a $1 billion agency responsible for welfare-to-work and workforce development and training programs. Ohio combined its human services and employment services agencies into the Department of Job and Family Services.

Once states learned the full flexibility of TANF funds, they began developing broad programs and services. Minnesota uses TANF money for housing subsidies for low-income families. Maryland and California have programs aimed at giving teens additional learning opportunities and helping them avoid risky behaviors in the hours after school.

Arizona is funding marriage education programs for prospective couples so they have a better understanding of the responsibilities of marriage and parenthood and what it takes to maintain a good relationship. Wyoming uses public health nurses to provide home visits for new parents to help identify at-risk children and provide immediate services. Colorado's El Paso County assigns a coordinator to work with faith-based organizations that want to help reduce poverty.

CASELOADS-STILL DROPPING, BUT NOT AS FAST
Welfare reforms and the strong economy continue to cut into cash assistance caseloads, but the pace is slowing. From June 1999 to June 2000, the number of welfare families dropped from 2.5 million to 2.2 million-13 percent for the year and 56 percent down from their high in 1995. The rate of decrease has dropped slightly in each of the last two years. Caseloads went up in seven states, and the decline markedly slowed in 17 others.

Welfare rolls are now most apt to consist of child-only cases, recent entrants who will move on and off the roll quickly, and long-term recipients facing tough challenges, such as physical disabilities or substance abuse or depression. States are beginning to focus their services on these groups, and many have stopped planning for further large reductions.

SPENDING TANF FUNDS
States may have started slowly in creating new programs, but they are now taking advantage of the TANF flexibility and funding. Earlier concerns about the buildup of unspent TANF money are gone. In the third year of the program (even though caseloads dropped another 15 percent), states' use of TANF funds went up 14 percent as they paid for new programs for working families and low-income children, and transferred money to the child care and social services block grants. Because funding levels were based on the earlier years of high caseloads, states continued to accumulate unspent money. But the trend had turned.

One key reason for that turn was the release of final TANF regulations in April 1999 that gave states needed flexibility to establish new programs to serve low-income families, reduce teen pregnancy and promote two-parent families. By FY 2000 most states had new programs up and running. TANF spending and transfers reached $27.3 billion (including $11.1 billion in state money needed to draw down the federal grant).

States overall spent or transferred virtually all (99 percent) of the funds made available in FY 2000. And while 24 states had used less than 80 percent of their current year's money in FY 1999, only four states did so in FY 2000. In spending, as well as caseload changes, most states seem to be reaching equilibrium, although that will change if states' economies slow down.

RESULTS FOR FAMILIES
The world has changed for most welfare families. Reforms require that adult recipients work or at least actively cooperate in efforts to find them jobs. Families have left the welfare caseload, reducing by more than half the number who receive cash assistance. Most got jobs. State-sponsored surveys show that 55 percent to 65 percent were working when interviewed. Four states had work rates even higher than that.

Pay varies considerably, with most states' averages between $6 and $7.50, which is above minimum wage, but not enough to bring families out of poverty. State studies also show that a smaller number of families stay employed consistently. In Colorado, for instance, only a third of all families had work earnings all four quarters of the first year they were off welfare. For families who kept jobs, their earnings went up substantially (over 23 percent in that year). Families without steady work are at the highest risk of not having enough food, having their utilities cut off or coming back onto cash assistance. Some state surveys found that the median income of newly working families is close to the poverty level, so that about half of the families earn less and about half earn more.

Nationwide about 20 percent of former recipients do not work at all. Some of these families have regular income-spouses or partners who work or SSI payments for themselves or their children. But about half of this group do not have regular cash income. They depend on the continuing support of family and friends, who usually are poor themselves. Several states, such as Iowa and Michigan, have made efforts to check on these families to make sure they are able to care for their children.

Many states have also worried about the sharp drop-off in working families receiving food stamps and Medicaid, even though many remain eligible. Although the problem primarily stems from federal food stamp rules and financial penalties for errors, several states began to emphasize keeping families on the food stamp and Medicaid rolls, and have steadily increased the number of families remaining in these programs.

Studies find that although most families believe their lives have improved since leaving welfare, a substantial number think their lives are worse now or they would like to be back on welfare. Even those who believe things have improved describe their situation as a day-to-day struggle, demonstrating that welfare reform so far has succeeded only in transforming poor welfare families into poor working ones.

TIME LIMITS ARE APPROACHING
The 1996 federal law limited the use of federal money for assistance that went on for more than five years. Thirty-six states followed the federal lead and adopted a five-year time limit on benefits with an allowance for exemptions of up to 20 percent of the caseload.

Families will first hit these time limits between October 2001 and June 2002. Although we don't know how many will lose benefits or how that will affect them, some pieces of this picture are coming into focus.

Several states, such as Colorado and Arkansas, have been tracking recipients' progress toward time limits so that they can anticipate the effects and develop responses. What they're finding is that relatively small numbers of families stay on the welfare rolls without interruption so few will hit the time limit in the initial months. For instance, Illinois found that only 2 percent of the families on the rolls in October 1996 had stayed there every month.

This experience has played out in most states with shorter time limits. In Florida, Arkansas and North Carolina, only 3 percent to 6 percent of the recipients who were on welfare hit the two-year limits in the first several months. Under the federal exemption of 20 percent, states can still use federal money to extend these families' benefits so they won't face undue hardships. South Carolina and Arkansas boost services for recipients who are in their last six months of assistance. Connecticut contracts with the United Way and other community organizations to help families with job searches and rent and utility subsidies after they leave welfare.

Two out of three studies of families losing benefits because of time limits found that they do almost as well as families who leave welfare for other reasons. In Massachusetts and North Carolina, most recipients who lose benefits find work (73 percent and 59 percent, respectively), although they do have trouble making ends meet. Some families do not find work, and many of them either return to welfare or struggle to find stable jobs. In Utah, a study of long-term recipients found that only 42 percent were working, compared with 62 percent of other cases. These families are more likely to go hungry or be unable to pay rent, and are twice as likely to say that their life is worse since leaving welfare.

While the specter of families suffering because of time limits was one of the most compelling concerns in state and federal debates, the most dire predictions have not come to pass. Nonetheless, many states are prepared to continue helping families as they near the time limit.

LOOKING FORWARD
Most states are now reaching the third stage of welfare reform-one in which caseload declines are beginning to flatten; new state programs have absorbed most of the available TANF funds; and the first families are approaching their five-year time limits. Congress will be gearing up to reconsider TANF and could reduce the funding and the flexibility that has led to so much state progress. The possibility of an economic slowdown also looms.

These developments raise new challenges for states-how to consolidate the gains made already and continue progress in moving families toward self-sufficiency. Four issues seem central:

Identifying the barriers still facing long-term recipients and providing intensive services to help them so that more families are able to work and fewer hit the time limits.
Strengthening the post-employment services available to former recipients and other working families so they can stay in jobs.
Assessing the effectiveness of new programs aimed at improving school readiness, reducing teen pregnancy and strengthening families so that increasingly limited resources can be targeted where they do the most good.
Increasing high-wage/high growth jobs while the economy is strong, creating jobs in high unemployment areas and when an economic slowdown occurs.

States' success in welfare reform is unprecedented, even though some key issues remain unresolved and new challenges continue to arise. As Congress and the new administration approach reauthorization of TANF, states continue to address the practical questions involved in transforming welfare from a limited cash assistance program to a range of services aimed at increasing self-sufficiency and improving the lives of children and families mired in poverty.

Jack Tweedie is NCSL's welfare reform expert in the Denver office.

Five Things Legislators Should Know
About Welfare Reauthorization

It may seem like the federal government just enacted welfare reform legislation, but it's already time for Congress to act again.

The 1996 Personal Responsibility and Work Opportunity Reconciliation Act reformed our nation's welfare system, created the TANF block grant and granted states tremendous policymaking flexibility. Congress has until Oct. 1, 2002, to reauthorize the 600-page law.

Here is an early view of the issues.

1. This isn't the year, but the next 18 months are critical. Welfare reform was not an issue during the presidential campaign, and no major proposals have been introduced in Congress. All of the chairmen of the congressional committees with jurisdiction over welfare reform are new. Legislation is not expected to move until the second session of the 107th Congress. Expect this year to be focused on learning the issues and floating trial balloons.

2. Spend the money in a way you can defend. This year will feature extensive oversight hearings in Congress and numerous reports examining state efforts. The federal act featured the Brown Amendment that requires state legislatures to appropriate TANF funds. Given this level of scrutiny, it is important for legislators to show how their funding decisions and policy efforts meet TANF goals, improve the lives of children and families, and increase self-sufficiency.

3. Block grant funding remains an issue. While most congressmen support TANF block grants at current levels, funding for the block grant in reauthorization remains a concern. Given competing budget priorities, some policymakers may point to the dramatic caseload decline as an argument to cut TANF. But caseload decline is not the only goal. It doesn't illustrate how states are using TANF to support working families and targeting families who remain on welfare and face more expensive challenges like substance abuse.

4. Flexibility will be challenged. The law allows states to determine how best to meet the purposes of the welfare reform act. Advocates from the left and the right will want to change the four purposes and direct state spending. There will be pressure on Congress to require states to spend more on reducing child poverty, encouraging marriage, toughening work requirements and expanding education. There will also be scrutiny of state sanctions and a review of the five-year lifetime limit on assistance.

5. Related programs will be examined. Although dramatic change is unlikely in the TANF program, there will be discussion of changes to food stamps, Medicaid, child care, child support and child welfare programs. There is bipartisan concern that eligible working families are not receiving the food stamp and Medicaid services that would lift them out of poverty.

-Sheri Steisel, NCSL

Spending TANF Money

The states have considerable flexibility in how they spend the federal Temporary Assistance to Needy Families block grant. They can use TANF money for programs that serve any of the following purposes:

To provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives.
To end the dependence of needy parents on government benefits by promoting job preparation and work.
To prevent and reduce the incidence of out-of-wedlock pregnancies.
To encourage marriage and two-parent families.

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