Welfare Reform, Two Years Later


WASHINGTON -The most profound consequence of the 1996 federal welfare law is the steep drop in caseloads in every state. The new rules, combined with the robust economy, have helped states reduce caseloads 44% nationally since 1993. 

But as families abandon welfare at a record-setting pace, we have only a vague understanding of how they are continuing to support themselves. From a handful of early studies, it appears Temporary Aid for Needy Families, as the current welfare program is called, has made only slight improvements over the old system, Aid to Families with Dependent Children. Preliminary studies indicate 50-60 percent of welfare recipients are leaving TANF for jobs. Under AFDC, 45-50 percent of recipients left welfare for work.

The jobs former welfare recipients are finding most often pay minimum wage, not enough to move a family of three out of poverty. Often, they do not offer benefits, nor are they stable turnover is high. More important, almost half of welfare leavers, the other 40-50 percent, are not finding jobs at all.

The Sanctions Factor

Another key question: how much of the caseload decline can be attributed to state sanction policies? And, who is most effected by those policies? Every state reduces or terminates benefits to recipients who fail to comply with work rules. Some of these folks may bow out of work because they already have jobs. But, many do not understand or are otherwise incapable of meeting the new requirements.

Who's Left

According to the Department of Health and Human Services, as caseloads drop, the proportion of families who have relied on welfare for many years is increasing. Historically, the easiest to employ those with high school diplomas and some work experience tend to move off welfare most readily, leaving the least educated and the chronically unemployed as a bigger percentage of the caseload. State sanction policies, however, may be changing that trend and may be forcing the most needy cases off the roles first.

Fewer Cases Means More Money

Under the new law, state and federal welfare spending is set, for the most part. The federal government kicks in about $17 billion each year, while states are expected to dole out at least 75% of what they spent in 1994. But, caseloads have fallen so fast welfare coffers at both the state and federal level are now bulging. The federal government, the National Conference of State Legislatures and the National Governors' Association are all urging state lawmakers to use this money to expand services to better help the hard-to-employ and to extend the reach of services beyond the shrinking pool of welfare recipients to include the working poor.

If state legislatures act on welfare this year, they likely will: (1) offer more job training so recipients can land and keep better jobs; (2) improve access to child care, transportation, drug treatment, and mental health counseling so the hard-to-employ can move more easily from welfare to work; (3) extend services beyond the pool of welfare recipients to include the working poor; or (4) cut welfare spending.


Two powerful political trends, devolution and deficits, propelled the 104th Congress to overhaul national welfare policy in 1996. A new Republican majority was looking for ways to cut federal spending. At the same time, the nation's activist governors, Michigan's John Engler among others, were continuing a decades-long push for a transfer of power and responsibility from the federal to the state level.

The 1996 law partially satisfied both agendas: It trimmed federal spending by a projected $55 billion over six years and it shifted primary responsibility for the welfare program to the states, giving the nation's governors their first, best chance to prove devolution works.

Welfare was an easy target for "reform." Upon its death in 1996, the old federal program, AFDC or Aid to Families with Dependent Children, had few friends and many enemies. Politicians and advocates on both sides of the aisle called it a failure. But, many of those same critics endorsed the program's underlying philosophy: Since the Great Depression, Washington had promised cash aid to struggling families for as long as they needed it few strings attached. To the dismay of many on the left, the new law ended this 61-year federal commitment of open-ended assistance to the poor. Under the 1996 welfare law, federal support is now capped.' Congress contributes about $17 billion each year with no guarantee that funding will rise with an increase in the number of families in need.

Whereas AFDC encouraged training and education, the new law demands work. In general, states must move recipients into work activities' within 24 months or stop using federal funds to support them. A second, separate provision of the law demands states meet a work participation rate.' In 1998, states were required to move 30% of single parents into jobs. In 1999, that work participation' rate rises to 35%. A third provision requires that after 60 months, whether or not consecutive, states must kick recipients off the rolls forever, or, again, stop using federal funds to support them. (States may exempt 20% of their caseloads from this requirement, which many critics consider the law's most draconian.) Finally, each state must spend from its own coffers at least 75% of what it spent in 1994. A state that fails to meet any of these requirements risks losing a chunk of its federal block grant.

Within these guidelines, states can design and run their programs as they see fit. Should the economy falter, they can spend their own money to make up any federal shortfalls. Or they can choose to turn recipients away. They can raise or lower the amount of cash assistance they provide. They can end benefits before the federal 60-month deadline. They can demand welfare recipients begin work sooner than 24 months. They can also sanction' recipients (i.e. reduce or terminate their benefits for failing to comply with program rules). A January 1998 report on Delaware's welfare program found the state had sanctioned 50% of recipients over 18-months.

In taking on the welfare system the states have inherited no small task. Many analysts say success will demand the most wrenching changes in state government in decades. To identify and help the hardest to employ, states must turn poorly educated welfare bureaucrats into quasi-social workers. Clerks accustomed to filing paperwork and cutting checks will have to learn to judge whether a person can successfully hold down a job and, if not, direct her to appropriate help. In most states, those services child care, drug treatment, transportation, mental counseling, tutoring are still largely unavailable to welfare families, either because space is limited or because families don't know they exist. Two and a half years after President Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act most states have yet to face these fundamental challenges.


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