Meeting the Challenge of Welfare Reform: Overview

Overview: Meeting the Challenges of Welfare Reform

State and federal reforms are bringing an end to welfare as we know it. States now are engaged in the process of creating the "new welfare." Most states did not wait for the long-anticipated federal reforms and already had legislated new programs focused on work. Within one year after the federal welfare reform legislation-Temporary Assistance to Needy Families (TANF)-almost all the states have in place a foundation for work-based welfare. States now are monitoring those programs and making adjustments to improve them.

And welfare is changing. Caseloads are decreasing as never before, at remarkable rates: by 27 percent from January 1994 to July 1997. Five states witnessed drops of more than 50 percent and welfare rolls went down by more than 40 percent in seven others. Of course, the decline is not due only to reform. The strong U.S. economy is the most significant contributor. Reducing caseloads, however, cannot be the sole measure of success. The key measurement is whether families leave the welfare rolls because the parents have found work that can support the family without welfare. But the caseload drop shows that welfare can be improved, that what seemed like an intractable system could be jolted into change. It also indicates that continued efforts might produce the desired transformation to a work-based system where most families who cannot support themselves can receive temporary cash assistance and the training and services they need to find work and have a chance to become self-sufficient.

The next year will present a critical opportunity for lawmakers to build on this new foundation. First, lawmakers recognize that transforming welfare into a work-based system cannot be accomplished with a single set of reforms. Legislators are attempting to accomplish ambitious goals that welfare programs have never been able to achieve-keeping recipients in jobs, helping them advance to jobs that enable them to support their families without welfare, addressing the multiple barriers that face hard-to-serve recipients, overcoming problems of substance abuse and family violence, helping recipients who live in areas with few jobs, avoiding large caseload increases during weak economies, and protecting children and families when the adults are not able to meet the new program requirements. Legislators recognize that, although considerable progress has been made, new programs have to meet the challenges of enabling most recipients to find and keep work and to support their families without welfare.

Second, the huge caseload reductions show that welfare can be changed. Caseloads across the country have dropped by more than one-quarter, even before most new welfare programs have become fully effective. These caseload reductions clearly depend on a strong economy, but the reductions offer stunning proof of the possibilities of change in welfare. Policymakers realize that there is more to be done; but the caseload reductions provide momentum for continued program development to respond to the remaining barriers.

Third, the U.S. economy remains strong. It is clear that the economy is the primary reason welfare rolls have dropped. Welfare programs can continue to channel more recipients into jobs and work to improve the skills and jobs of ex-recipients, so more of them keep their jobs when the economy declines, more can find jobs with adequate benefits and pay, and more families can move out of poverty. Continued success during the current strong economy can reduce the effect of an economic decline.

Fourth, the caseload reductions mean that states have resources already allocated to welfare programs that are available for further investments in new and expanded programs to help recipients. States' budgets were based on what has turned out to be conservative estimates of the change in the caseload. States are paying out less in cash assistance to fewer cases and more families with earned income, so states are building surpluses in their welfare spending accounts. Most of this money must be spent on welfare (targeted to TANF families) if states are to avoid losing federal money, so many legislators see this as a critical time to strengthen the welfare reforms already under way.

Finally, many states developed creative new approaches to the challenges of welfare reform. By focusing on the barriers that recipients face in obtaining jobs, states have been able to develop policies to help recipients overcome these barriers. Where recipients lack job skills and experience, states create programs that provide practical work experience and help finding jobs. Where adequate child care is lacking, states provide more subsidized positions and provide incentives to create quality child care. Where recipients face transportation problems, states supplement existing public transit services to transport recipients to suburban jobs and establish programs to help recipients purchase cars. Where potential employers are reluctant to hire welfare recipients because of concerns about unemployment insurance, states create temporary exemptions to eliminate the risk. Never before have states had such a great opportunity to try new ideas. As a result, the pool of new program ideas is growing rapidly. Because these ideas are not yet fully tested, their potential to realize the ambitious goals of welfare reform are unknown. But they do provide possibilities for states that want to capitalize on the strong economy and put more recipients into jobs.

The size of the challenges that remain should not be underestimated. States have just begun to transform a system that has defeated past efforts. They embarked on this effort without knowing how to achieve their goals-how to keep recipients in jobs that will support families, how to prepare hard-to-place recipients for work, how to overcome problems of substance abuse and family violence, and how to avoid large caseload increases during weak economies. But states are taking on these challenges aggressively. They have developed a variety of approaches to address these difficulties, given their own economic and social conditions. The different strategies provide an opportunity to learn as some programs succeed and others fall short. (The quality of lessons depends on careful state evaluation of their programs.) Although the necessary answers may not be readily apparent, there is a real chance to learn them as new state programs unfold.

The Foundation for Work-Based Welfare

State legislators, along with governors and welfare agency officials, have taken several important steps in creating new and different welfare programs. Most states have enacted legislation that provides the foundation for a work-based welfare system. States require recipients to work and to find jobs so they can leave welfare, but states also provide needed supports-job training, child care and transportation-that will enable more recipients to find jobs and to keep them.

Thirty-seven states enacted major, statewide welfare reforms before the federal TANF program was enacted. Passage of TANF prompted several of these states to make changes in their programs, but most closely followed their original designs that were adopted under the Aid to Families with Dependent Children (AFDC) programs. Several legislatures that had not enacted comprehensive reforms were prompted to act. With laws passed during the summer of 1997 in California, New York and North Carolina, all but four states now have a statutory basis for work-based welfare. And those four states have made considerable progress. Missouri began welfare reforms in 1994 and has aggressively pursued work-based reforms administratively. Kentucky did not have a legislative session in 1997 and Alabama legislators could not come to agreement on reform legislation 1997; however, both states have moved forward administratively. In 1997, New Mexico's reform efforts were sidelined in a dispute between the governor and the Legislature, but it is likely to pass legislation in 1998 that contains far-reaching reforms. Illustrating the way reforms have been shared across the country, New Mexico's proposals borrow heavily from other states' new ideas, such as individual development accounts, increased earnings disregards and marriage bonuses. The proposals also contain some innovations of their own, such as TANF housing subsidies and expanding income-based eligibility for the full range of support services.

Examining state reforms demonstrates the idea of states as the laboratories for policy experiments. States have developed a wide array of new policies as they attempt to transform welfare. NCSL has tracked the different components of state welfare reform. State changes include several similar elements that have been combined in different ways and to which states have added new ideas of their own.

Time Limits

Almost every state with reforms has adopted time limits, although the nature of these limits varies. Following the enactment of TANF, many states adopted lifetime limits that provide for a definite end to benefits unless the recipient family meets a limited definition of hardship. These limits provide an end for benefits like that envisioned in the federal five-year time limit. Few states had legislated lifetime limits before TANF, in large part because the U.S. Department of Health and Human Services would not approve waiver requests that did not provide for the continuation of benefits as long as recipients tried to get a job or were willing to take community service positions. Thirty-five states now have adopted lifetime limits. Most of these limits are 60 months. Only six states have lifetime limits of less than five years. Three others have authorized welfare agencies to set shorter limits.

Indiana, which has a two-year limit, allows clients to earn back a one-month extension of their time limit for every six months of work. Most states with lifetime limits have not specified what circumstances qualify a family for an exemption, so it remains to be seen how many families will be affected.

A few states have set shorter, periodic time limits that function like lifetime limits in that they end benefits after a certain period and allow only hardship exemptions; however, recipients can reapply for benefits after a certain period of time. Ohio, for instance, provides that a family can receive benefits for only 36 cumulative months and then, unless it receives a hardship exemption, must wait 24 months to reapply.

Some states' lifetime limits do not result in the termination of benefits to the family. Indiana's two-year limit applies only to the adults in the case. California's five-year limit has the same effect. After five years, New York continues to provide a lower level of benefits to the family through a safety net program.

States also have enacted conditional time limits, many of which predate TANF, when states could not obtain a waiver for more stringent limits. After conditional limits expire, commonly after 24 months, recipients face a new obligation, such as community service work or increased cooperation with welfare agency efforts to find a job. They continue to receive benefits as long as they meet the new conditions. Most states have these kinds of time limits, often in combination with a longer, lifetime limit.

Work Participation Requirements

Most states have increased work requirements. Almost all recipients now are included. Only parents of very young children (under 3 months) and disabled adults are commonly exempt. The requirements also apply more quickly-often immediately or within a few months-and require more hours per week, following the federal rules. Some states are reducing or eliminating recipients' ability to count job search and education as the primary activities that count toward their participation requirements. This follows the federal TANF emphasis on work as well as the "work first" principle. Other states have continued to allow recipients to pursue educational activities under some conditions. Maine created a separate state program so that recipients in college would not count against their work rates. New Jersey allows participants to combine education and community service for their work activity. Figure 1 illustrates state work participation requirements.

Welfare Office Changes

Many states have transformed their welfare offices into welfare-to-work offices. They have increased employment and training staff or have changed the function of caseworkers, who are increasingly serving as job developers and counselors. Some states have added these work responsibilities to those of welfare caseworkers. States such as Wisconsin and Michigan have refocused the entire agency on work; others, such as Florida, have created one-stop welfare-to-work offices where applicants complete their application and consult with labor and employment specialists.

Expanded Child Care

States have expanded child care programs substantially, with spending increased by 30 percent to 50 percent in some states, by more than 100 percent in Minnesota and by more than $100 million in Illinois. They have created more places and increased availability in ways that serve the needs of welfare recipients-infant care, night and weekend centers, and sick child care, for example. Some states, in response to early brain research, have emphasized quality and developmental activities. Many states also have expanded child care accessibility for the working poor regardless of whether they have been on welfare.

Increasing Access to Transportation

States, recognizing the barrier that transportation poses to recipients who must get their children to child care and themselves to work, are expanding transportation services. Louisiana guarantees transportation where needed, and Minnesota, South Carolina and Ohio exempt recipients from work requirements or sanctions if transportation is not available. States have contracted with transit services to provide "reverse commute" routes that take recipients from city centers into the suburbs where the growth in entry level jobs has been greatest. Most states have eased rules that made it difficult for recipients to own cars and for the state to provide cash for repairs and gas. Several states-Virginia, Maryland, Florida, Texas and Tennessee-have gone one step further by making surplus government or donated cars available to recipients for purchase at low cost.

Allowing Recipients to Keep more Earnings

Most states have increased the amount of money that recipients can earn without losing eligibility for some benefits. Connecticut and Indiana allow recipients to earn up to the federal poverty threshold ($13,330 for a family of three) before they lose benefits. Other states have increased the percentage of earnings that are disregarded from the calculation of the family's benefits. The Aid to Families with Dependent Children (AFDC) program provided that $30 and one-third of recipients' benefits would be disregarded for four months. Many states have extended that disregard and others have also increased it substantially. In Massachusetts and Nebraska, families subject to the work requirement can keep 50 percent of their earnings.

Allowing Recipients to Build Assets

Many states now allow recipients to open individual development accounts where they can deposit up to $5,000 or $10,000 for education, starting a business or buying a home. Illinois, Arkansas and Mississippi also have created programs that help recipients start small businesses.

Diverting Applicants from Welfare

Some states offer TANF applicants one-time lump sum payments to help with short-term expenses when that help might enable them to avoid going on welfare. Diversion recipients then are ineligible for welfare for a period of time. The lump sum payments represent three or four months of benefits and can be used to settle debts, repair a car or avoid eviction. And, even more importantly for some families, some diversion programs also give them access to medical, child care and transportation assistance.

Not Increasing Benefits when a Child Is Born on Welfare

Four states enacted family caps this year, where families that have additional children while on welfare do not receive the regular increase in benefits. Twenty-two states now have this policy, which varies by state. South Carolina allows the increase in vouchers for the child's expenses or the mother's education or training expenses. Florida provides for one-half the increase for the first child born on welfare. Mississippi allows the welfare office to waive the cap for particular families.

Requiring Increased Collaboration among State Agencies

State welfare reform efforts recognize that human services agencies offer only some of the services that welfare recipients need to find jobs and become self-sufficient. Other agencies also have expertise and services that can contribute to recipients' finding jobs and becoming self-sufficient. States need to pool the efforts of several agencies-human services, education, higher education, child care, employment security, transportation, labor, and economic development. Florida established a state board with similar local boards to oversee implementation and collaboration. Arkansas created an advisory council made up of the heads of the agencies to develop implementation plans.

Devolving Responsibility to Counties

Several states used the new TANF program as an opportunity to pass broader authority and responsibility to local governments. California, Colorado, Maryland, New York, North Carolina, Ohio and Wisconsin have taken the lead in this state-to-county devolution. They maintained many statewide policies where eligibility, benefit levels, work requirements, time limits, and sanctions are set by state laws and regulations. Counties are given the responsibility to administer the system and to develop programs for work requirements and prepare recipients for work. These states structure financial incentives in various ways to help counties focus on getting recipients into work. Counties can keep a large share of the savings when recipients work and reduce or lose their benefit payments. The states also have provisions to penalize counties that fall short of the federal work participation rates.

North Carolina has gone further by allowing some of its counties to choose not to participate in the state system. "Electing counties" can change any or all welfare rules-including time limits, eligibility standards, benefit levels and work requirements.

Federal Welfare Issues

The federal law also explicitly raised several issues for states.

Fourteen states now have laws providing lower benefits for recipients who moved into the state during the past year. Most of these states provide that applicants will receive the benefit level from their former state for 12 months if that benefit level is lower. These laws were challenged in the AFDC program and a recent decision in Pennsylvania found them to be an unconstitutional limit on travel between the states. The legal questions probably will not be resolved for several years.
The federal law requires states to pass a law if they allow persons convicted of drug felonies to be eligible for benefits. Several states have incorporated this restriction into their laws. Other states have provided that recipients can receive benefits if they participate in an approved drug treatment program, usually after a certain period of time (such as six months). Oregon and Maine have passed laws providing that drug felons will not be ineligible. Still other states did not address the issue, raising the question of whether they will provide assistance.
The federal law included the family violence option, which highlighted the importance of screening for domestic violence in welfare families and recognizing that domestic violence can hinder women's work participation. Most states have followed the federal lead by incorporating special screening for victims. A few states, such as Mississippi, have exempted victims from work requirements and time limits. Many states have authorized agencies to waive work requirements and time limits in particular cases. Minnesota allows victims to enter a safety plan and does not count months in that plan toward the time limit.

The federal law eliminated food stamps and supplementary security income for many legal immigrants. It also allowed states to choose whether to exclude these legal immigrants from TANF and Medicaid. Two states have limited legal immigrants' access to TANF and Medicaid. Alabama denied eligibility to legal immigrants and Georgia provided benefits for only one year. On the other hand, several states-such as Washington and New York-created state programs to help legal immigrants who lost benefits from other federal programs, such as food stamps and Supplementary Social Security.

Looking Forward

State reforms that focus welfare on work coupled with the continuing decrease in caseloads provide a strong foundation for transforming welfare in ways that few people thought possible even a few years ago. There remain, however, several critical questions or challenges-questions that states must answer if they are to succeed in this transformation of welfare. Five questions deserve special attention.

How will we help the least able of our recipients prepare for work and find jobs?

With the recent caseload decline, the families that remain on welfare are in greater need of assistance and support. Most of the "easy cases"-recipients with the skills and ability to work or find other forms of support-have left welfare. Families that remain on welfare have, on the whole, deeper problems-less connection with work, fewer skills, lower levels of education, and more serious problems of mental health, family violence and substance abuse. They will need more help than did the participants who already have left welfare. And, despite recent progress, the design and operation of programs that will succeed with most of this population are yet to be determined. States and local governments will need to develop new programs to help these families so that they can have the opportunity all families should have-to be able to support themselves without needing welfare assistance.

How will we help recipients in areas where few entry-level jobs exist?

In many areas of our states, recipients can attempt to find work but are unsuccessful either because there are no suitable jobs in the area or potential jobs require long travel and they have no car. States have to decide whether to target economic development programs that create entry level jobs in these areas. They also have to decide whether to extend benefits beyond families' time limits when there are not enough jobs for recipients. Maintaining these time limits would force many of those families to move to places where jobs are available and away from family and community support systems.

How can we support recipients who find jobs so that they remain in those jobs and move to better ones?

Leaving welfare for work often is not a final departure. Many people leave when they get a job, only to lose that job six or nine months later and return to welfare. One of the greatest challenges for welfare reform is to stop the cycle of recipients who leave and return to welfare. Most recipients leave welfare and most of those who leave come back: They become discouraged and quit because they find themselves in worse straits than when they were on welfare, they are habitually late to work, their child care or transportation arrangements break down, they are fired because of a drinking problem or they become frustrated with their supervisors. Post-employment service programs are designed to help recipients make the transition to work, both in terms of back-up support services and adjustment to the world of work. These programs also can be designed to prepare recipients for jobs with increased wages and benefits so they can earn enough to adequately support their families. These programs will be critical if states are to sustain increased work participation and the recent caseload drops.

How will we protect the children in families where the adults do not fulfill their new obligations or whose time-limited benefits expire?

The large drop in caseloads and the number of adults who did not schedule or attend assessments means that some families now are in need of help. A more realistic assessment is necessary to determine 1) how many families are finding and keeping jobs and 2) how many have left welfare because they are unable or unwilling to work or comply with new requirements and whose families will need further assistance in the future. Studies in several states that track recipients who leave welfare show that about one-half find work that, at least for now, enables them to support their families. In many cases, families who have left welfare are facing difficult circumstances and are likely to return. In addition, even recipients who find work often have difficulty keeping those jobs and moving to a job with a wage and benefits that are sufficient to support their families. The true measures of success involve how many participants move from welfare into better lives by working and supporting their families and by reuniting or forming new families. Caseload reductions are a good initial indication, but it is vital to look deeper and examine the effects that welfare changes are having on the lives of poor children and families. Where children are put at risk because of the family's difficult financial situation, alternatives must be provided to protect those children.

How will we respond to an economic decline? How will we maintain assistance while increasing spending on support services and job creation so that we can sustain the move of welfare recipients into the workforce?

Part of this challenge involves helping recipients obtain jobs and skills that reduce the chance that they will lose their jobs in poor economies and increase the chance that those who do lose their jobs can find other jobs without the necessity of again relying on welfare. When the economy weakens, more families will again turn to welfare-that is an undeniable lesson of history. By developing programs that focus-through training and work-on locating good jobs for recipients, the effect of a poor economy can be reduced.

Resources also need to be available when the economy declines. This is a difficult proposition-at the same time less state money is available, more benefits will be necessary and more investments must be made in job training and job development. States need to prepare for these changes by planning how they will respond to poor economies and where money will come from to pay for these programs. Several states-such as Florida, Ohio and North Carolina-have set aside state money in a reserve fund; others are relying on unspent TANF block grant money as a reserve.

States have begun to address these questions as they move beyond creating a foundation for work-based welfare. They are increasingly experimenting with new ideas and looking to other states for help-borrowing promising ideas from other states and expanding successful programs of their own. States are hopeful as they view what could be the most remarkable achievement in social policy-the creation of a program that successfully requires and helps welfare recipients to work and support their own families.

Resources

American Public Welfare Association Welfare Reform Information Center. Survey Notes: TANF Eligibility, Benefits, Work, Sanctions, and Exemptions. Washington, D.C.: American Public Welfare Association, 1997.

National Governor's Association Center for Best Practices. "Summary of Selected Elements of State Plans for Temporary Assistance for Needy Families As of November 20, 1997." URL=http://www.nga.org/Welfare/TANF971120.pdf; World Wide Web.

Watson, Keith, et al. Temporary Assistance for Needy Families (TANF) One Year After Federal Welfare Reform: A Description of State TANF Decisions as of October 1997. Washington, D.C.: The Urban Institute, 1998.

Welfare Reform: How Will We Know If It Works? Washington, D.C.: Family Impact Seminar, 1998.

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