Since Welfare Reform, States Spend Less On Poor


Since the overhaul of the welfare system in 1996, states have cut spending on programs for the poor, a new report from the Rockefeller Institute of Government finds.

In addition to spending fewer federal dollars on welfare -- more than $7 billion sits unspent in the U.S. Treasury, states are doling out less of their own money to support poor families, the report says.

While total spending is down, states are relying more heavily on federal money to fund new programs. As a result, the federal government is shouldering a larger proportion of the costs of programs for the poor -- the opposite of what Congress intended when it rewrote the welfare law in 1996.

The Rockefeller report presents the first detailed attempt by researchers to track and compare state expenditures on poverty relief in the post-reform era. It compares the social service budgets of four states -- California, Georgia, Missouri and Wisconsin -- in 1995 and 1999. State spending declines on programs for the poor ranged from 4.6 percent in Missouri to 25.4 percent in Georgia.

The report also looked at spending on other social services not designed specifically for families living in poverty. All four states have increased their investments in child welfare, mental healthcare and other programs. Officials in the four states told the authors these spending increases were not related to welfare reform. Rather, the states are using savings from welfare caseload declines to invest in other services.

When child welfare and other programs were included, the researchers found that two of the four states -- California and Missouri -- have increased their total social services budgets since 1995. Overall, however, spending on social services in all four states has declined as a percentage of the states' total budgets.

States are spending much less than they did four years ago because they are providing cash assistance to far fewer poor families. Spending declines roughly match the drop-offs in welfare caseloads, the report finds. In Wisconsin, for example, where cash-assistance caseloads fell 89 percent between 1995 and 1999, state and federal welfare spending dropped 77 percent.

Under the old welfare system, families who enrolled in the federal program, Aid to Families with Dependent Children (AFDC), received a monthly cash stipend for as long as they qualified. These checks accounted for most of federal and state welfare spending.

But when Congress replaced AFDC with Temporary Assistance for Needy Families (TANF) and tied cash assistance to mandatory work and other requirements, families abandoned the system in droves. Nationwide, caseloads have fallen 44 percent since 1996.

While all four states have dramatically increased the amount of money spent on other services for the poor, particularly child care, those increases have not come close to matching the amount states once spent on cash assistance.

"Those increases, as large as they are, are chicken feed compared to the declines in cash assistance," said Donald Boyd, one of the authors of the report. "It is possible that what is going on here is a lag. It takes time to figure out how you are going to respond to that."

Three of the four states, California, Missouri and Wisconsin, have doubled their investments in child care. In the fourth, Georgia, child care spending rose 76 percent.

In 1999, California spent $988 million more on child care than in 1995, an increase of 115 percent. Wisconsin tallied the largest percentage increase over the four-year period, 168 percent. In every state but Missouri, the bulk of the increase came from federal funds, the report says.

All four states also increased spending on job training and employment services. Again, every state but Missouri tapped into its federal allotment to finance most of the increase. California, Georgia and Wisconsin actually cut their spending on job readiness programs and used federal money to make up the difference, the report says.

By capping the federal government's contribution in an annual "block grant" and freeing the states to design their own welfare programs, Congress had intended to shift the fiscal burden of poverty relief to the states.

"The federal government expected the TANF-related elements of welfare reform to provide federal budget savings over the longer term, and higher state costs," the report's authors, Deborah Ellwood and Donald Boyd, write.

The budget analyses magnify what the authors call a "fiscal conundrum" for the states. Congress has historically linked its contribution to welfare to the amount the state itself spent. It is likely to follow that same philosophy when it reauthorizes the TANF block grants in 2001. As a result, states that cut spending will likely receive fewer federal dollars. In fact, Congress has already cast a wistful eye at the $7 billion welfare surplus the states have allowed to accumulate in the federal treasury.

If states continue to tap their federal dollars to fund new programs and Congress proceeds to cut its share, the states risk having to continue these programs with their own money.

Ellwood and Boyd note in their report how difficult it is to compare social services spending across states because each categorizes its budget differently. And the researchers did not look at the budgets of localities. California is one state that has transferred much of the authority over welfare spending to its counties. While the state budget may indicate the money has been spent, it may be sitting unused at the local level.

In fact, last week lawmakers in Sacramento threatened to take back some of the money the state has allocated to Los Angeles County. Over the past two years, Los Angeles has amassed a welfare surplus of $83 million, a pot that is expected to grow to $800 million in the next five years.

The Rockefeller report found wide disparities in per person spending between states, with Georgia spending the least on child care and job training and Wisconsin the most. Georgia in 1999 spent just $190 per poor person on those services. California spent $431 and Wisconsin spent $658.

"Even if Georgia spend its current unspent balance all in one year, and even if it confined the spending to (child care and job training), it would only reach the level of California... and it would be far below Wisconsin," the report says.

"Some people might view these numbers as evidence that states can do more," the authors write. Indeed, advocates consistently point out that welfare caseloads have declined much faster than the poverty rate, meaning most of the families who have left welfare are still poor.

"Our view certainly is that the states, first of all, still have needs to meet," said Deborah Weinstein of the Children's Defense Fund in Washington. "It is a conundrum, but it seems there is a solution to it. The dollars that are available to states need to be used to provide help to those very low-income, poor families."


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