Innovation in Welfare Policy: Evaluating State Efforts to Encourage Work among Low‐Income Families1

This article examines what states are doing to help Temporary Assistance to Needy Families (TANF) recipients move into the workforce and become self‐supporting. We first present documentation regarding many different state TANF policies aimed at encouraging work, including benefit structures, time limits, work requirements, sanctions, and work supports. We then discuss how effective these policies are at helping welfare recipients get jobs and increase their income, by reviewing research on each of these elements. We conclude that the TANF program has been effective in increasing employment and decreasing welfare caseloads and expenses, but that this has not resulted in overall income gains for welfare recipients in the long run. We also conclude that the most promising state programs have a strong employment focus combined with focused training and educational opportunities. In addition, we also find that sanctions appear to be harming those most in need of assistance, and therefore that such policies should be reevaluated and refocused.     

The TANF/SSI connection

Interactions and overlap of social assistance programs across clients interest policymakers because such interactions affect both the clients' well-being and the programs' efficiency. This article investigates the connections between Supplemental Security Income (SSI) and Temporary Assistance for Needy Families (TANF) and TANF's predecessor, the Aid to Families with Dependent Children (AFDC) program. Connections between receipt of TANF and SSI are widely discussed in both disability policy and poverty research literatures because many families receiving TANF report disabilities. For both states and the individuals involved, it is generally financially advantageous for adults and children with disabilities to transfer from TANF to SSI. States gain because the federal government pays for the SSI benefit, and states can then use the TANF savings for other purposes. The families gain because the SSI benefits they acquire are greater than the TANF benefits they lose. The payoff to states from transferring welfare recipients to SSI was substantially increased when Congress replaced AFDC with TANF in 1996. States retained less than half of any savings achieved through such transfers under AFDC, but they retain all of the savings under TANF. Also, the work participation requirements under TANF have obligated states to address the work support needs of adults with disabilities who remain in TANF, and states can avoid these costs if adults have disabilities that satisfy SSI eligibility requirements. The incentive for TANF recipients to apply for SSI has increased over time as inflation has caused real TANF benefits to fall relative to payments received by SSI recipients. Trends in the financial incentives for transfer to SSI have not been studied in detail, and reliable general data on the extent of the interaction between TANF and SSI are scarce. In addition, some estimates of the prevalence of TANF receipt among SSI awardees are flawed because they fail to include adults receiving benefits in TANF-related Separate State Programs (SSPs). SSPs are assistance programs that are administered by TANF agencies but are paid for wholly from state funds. When the programs are conducted in a manner consistent with federal regulations, the money states spend on SSPs counts toward federal maintenance-of-effort (MOE) requirements, under which states must sustain a certain level of contribution to the costs of TANF and approved related activities. SSPs are used for a variety of purposes, including support of families who are in the process of applying for SSI. Until very recently, families receiving cash benefits through SSPs were not subject to TANF's work participation requirements. This article contributes to analysis of the interaction between TANF and SSI by evaluating the financial consequences of TANF-to-SSI transfer and developing new estimates of both the prevalence of receipt of SSI benefits among families receiving cash assistance from TANF and the proportion of new SSI awards that go to adults and children residing in families receiving TANF or TANF-related benefits in SSPs. Using data from the Urban Institute's Welfare Rules Database, we find that by 2003 an SSI award for a child in a three-person family dependent on TANF increased family income by 103.5 percent on average across states; an award to the adult in such a family increased income by 115.4 percent. The gain from both child and adult transfers increased by about 6 percent between 1996 (the eve of the welfare reform that produced TANF) and 2003. Using data from the Department of Health and Human Services' TANF/SSP Recipient Family Characteristics Survey, we estimate that 16 percent of families receiving TANF/SSP support in federal fiscal year 2003 included an adult or child SSI recipient. This proportion has increased slightly since fiscal year 2000. The Social Security Administration's current procedures for tabulating characteristics of new SSI awardees do not recognize SSP receipt as TANF We use differences in reported TANF-to-SSI flows between states with and without Separate State Programs to estimate the understatement of the prevalence of TANF-related SSI awards in states with SSPs. The results indicate that the absolute number of awards to AFDC (and subsequently) TANF/SSP recipients has declined by 42 percent for children and 25 percent for adults since the early 1990s. This result is a product of the decline in welfare caseloads. However, the monthly incidence of such awards has gone up-from less than 1 per 1,000 child recipients in calendar years 1991-1993 to 1.3 per 1,000 in 2001-2003 and, for adult recipients, from 1.6 per 1,000 in 1991-1993 to 4 per 1,000 in 2001-2003. From these results we conclude that a significant proportion of each year's SSI awards to disabled nonelderly people go to TANF/SSP recipients, and many families that receive TANF/SSP support include adults, children, or both who receive SSI. Given the Social Security Administration's efforts to improve eligibility assessment for applicants, to ensure timely access to SSI benefits for those who qualify, and to improve prospects for eventual employment of the disabled, there is definitely a basis for working with TANF authorities both nationally and locally on service coordination and on smoothing the process of SSI eligibility assessment. The Deficit Reduction Act of 2005 reauthorized TANF through fiscal year 2010, but with some rules changes that are important in light of the analysis presented in this article. The new law substantially increases effective federal requirements for work participation by adult TANF recipients and mandates that adults in Separate State Programs be included in participation requirements beginning in fiscal year 2007. Thus SSPs will no longer provide a means for exempting from work requirements families that are in the process of applying for SSI, and the increased emphasis on work participation could result in more SSI applications from adult TANF recipients.     

Stigma and other determinants of participation in TANF and Medicaid.

We developed a conceptual framework to examine the association between stigma, enrollment barriers (e.g., difficult application), knowledge, state policy, and participation in the Temporary Assistance to Needy Families (TANF) and adult Medicaid programs. Survey data from 901 community health center patients, who were potential and actual participants in these programs, indicated that while images of the Medicaid program and its recipients were generally positive, stigma associated with welfare stereotypes reduced both TANF and Medicaid enrollment. Expectations of poor treatment when applying for Medicaid, enrollment barriers, and misinformation about program rules were also associated with reduced Medicaid enrollment. States that enacted strict welfare reform policies were potentially decreasing TANF participation, while states with more simplified and generous programs were potentially increasing Medicaid participation. The results suggest that the image of the adult Medicaid program remains tied to perceptions about welfare and provides guidance to policymakers about how to improve participation rates.     

Transitions from AFDC to SSI before welfare reform

The Supplemental Security Income (SSI) and Aid to Families with Dependent Children (AFDC) programs serve populations with similar characteristics. SSI serves adults and children with disabilities who are in low-income families, and AFDC serves low-income families with children. Because of that overlap, policy changes in one program can affect the other. In 1996, Congress enacted the Personal Responsibility and Work Opportunity Reconciliation Act, which transformed AFDC into the Temporary Assistance for Needy Families (TANF) program. Many people have expected that implementing that welfare reform legislation would eventually increase SSI participation, for two reasons. First, TANF includes new work requirements and time limits that induce more AFDC/TANF recipients with disabilities to obtain SSI benefits. Second, the change in the funding mechanism--from open-ended funding on a matching basis for AFDC to cash assistance block grants for TANF--gives states a stronger incentive to shift welfare recipients to SSI. This article examines the interaction between the SSI and AFDC programs in the prereform period (1990 to 1996) and discusses the potential implications of welfare reform on that interaction. Using matched data from the Survey of Income and Program Participation and Social Security Administration (SSA) records, our analysis focuses on how the interaction of those programs affects young women (aged 18 to 40) and children (aged 0 to 17). We find a very strong link between AFDC and SSI for young women and children. Significant portions of young female and child SSI beneficiaries in the 1990-1993 period were in AFDC families or had received AFDC in the past. In addition, a substantial share of young women and children who received AFDC during that period eventually entered SSI. Because the SSI program is now serving a much larger population of families with young women and children than in the past, SSA might need to develop policies to better serve that group. The findings also suggest that the prereform period is a poor baseline against which to measure the impact of TANF, primarily because of the instability in programs and policies.     

The effect of disabilities on exits from AFDC.

The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 replaces AFDC, the largest means-tested cast assistance program for low-income families, with the Temporary Assistance for Needy Families (TANF) block grant. Unlike AFDC, assistance under TANF is limited to five years in a lifetime, and states are required to move families from the assistance rolls into jobs. But not all adult welfare recipients can easily move to work because either they themselves are disabled or they have a child with disabilities requiring special care. This article examines the extent and impact of disability among families on AFDC to gain insight into the potential impact of changes under TANF. Using data from the 1990 Survey of Income and Program Participation (SIPP), we find that in nearly 30 percent of the families on AFDC either the mother or child has a disability. Furthermore, we find that having a disability significantly lowers the probability that a woman leaves AFDC for work but not for other reasons, such as a change in living arrangements. Finally, we find little evidence that having a child with a disability affects the probability of leaving AFDC for any reason.     

Welfare and child support: Complements,not substitutes

In most states, child support paid on behalf of Temporary Assistance for Needy Families (TANF) participants is used to offset TANF and child support administrative expenditures; this policy primarily benefits taxpayers. In contrast, Wisconsin allowed most custodial parents to keep all support paid on their behalf. This policy, which treats welfare and child support as complements, was evaluated through an experimental design. This paper reports the key results of the experimental evaluation, using state administrative data to examine the effects on child support outcomes and governmental cost. We find that when custodial mothers keep all child support paid on their behalf, paternity establishment occurs more quickly, noncustodial fathers are more likely to pay support, and custodial families receive more support. These outcomes are achieved at no significant governmental cost. © 2008 by the Association for Public Policy Analysis and Management.     

State TANF Spending: Predictors of State Tax Effort to Support Welfare Reform

State spending on Temporary Assistance to Needy Families (TANF) greatly varies. Combined federal and state spending by the states per TANF family or recipient reflects the historic level of state generosity for Aid to Families with Dependent Children (AFDC), the failure of the federal government to set any minimum spending standard for the states, and the failure of the federal government to adjust federal grants for huge changes in state TANF caseloads. Our multivariate analysis shows that state spending for TANF is greatly influenced by the percentage of the state population that is black, the percentage of the state population that is on TANF (especially if a significant percentage of the rolls consist of black recipients), and the economic conditions within the state. Some states spend as much as their economies will allow, while other states spend far below capacity. Despite the very different goals of TANF, state spending is still heavily influenced by their historic approach to AFDC.     

Making Tradeoffs in Federal Block Grant Programs: Understanding the Interplay Between SSBG and TANF

Welfare reform gave states the option of transferring up to10 percent of their annual federal Temporary Assistance forNeedy Families (TANF) award to the Social Services Block Grant(SSBG). Drawing on administrative data, we consider the impactof TANF transfers on SSBG. We find evidence suggesting thatmore innovative states, states that experienced larger TANFcaseload declines, and states that transferred a higher percentageof TANF funds to the Child Care Development Fund (CCDF) havetransferred higher portions of their TANF allocations to SSBG,all else equal. Preliminary analysis of changes in SSBG expenditurepatterns from FY 1995 to FY 2000 indicates that states are transferringsignificant sums to SSBG, but that TANF transfers do not appearto have a consistent effect on SSBG spending priorities acrossstates.     

State Poverty Rates: Do the New Welfare Policies Make a Difference?

This article uses four models to identify the best predictors of state poverty levels and changes in state poverty rates since the implementation of welfare reform. The policy decisions based on the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) by the states are tested along with more traditional variables identified in the literature. Using several measures of state poverty, the analysis finds that those states with the lowest poverty rates are those with the healthiest economies, and the most generous state spending on Temporary Assistance for Needy Families (TANF). States with the highest percentage of their TANF rolls made up of black citizens tend to have the highest rates of poverty. Initial poverty rates are found to be important in that states with higher initial poverty levels are capable of generating a larger reduction in poverty than states with lower initial rates. With the exception of limited evidence on sanctions, none of the PRWORA–based policies were found to have any effect on poverty rates.     

Gender Role Ideologies and Marriage Promotion: State Policy Choices and Suggestions for Improvement

The 1996 Personal Responsibility and Work Opportunities Reconciliation Act (PRWORA) lists marriage as one of the major strategies for reducing welfare dependency among clients of the Temporary Assistance for Needy Families (TANF) Program along with work requirements and time limits. President George W. Bush has allocated over $240 million to the individual states to create programs to promote and sustain marriages, with specific attention given to encouraging marriage among the low‐income, welfare‐reliant population. We suggest that this policy is based upon a specific gender ideology that seems to ignore the reality of the lives of poor women with children and may be, as some critics suggest, an attempt at “legislating patriarchy.” In this work, we trace the social changes that shaped this ideology, present the options the states have taken to encourage marriage, discuss flaws in the philosophy and implementation of these policies, and provide suggestions for improving program design.     

Incentives,challenges, and dilemmas of TANF: A case study

This paper compares the incentives inherent in TANF (Temporary Assistance for Needy Families), the U.S. welfare system in place after the 1996 reforms, with those of TANF's predecessor, AFDC (Aid to Families with Dependent Children), using the experience in one state, Wisconsin, as an example. Is the new program successful in avoiding the “poverty trap” of the old welfare system, in which the marginal tax rates imposed on earnings and benefits were so high that they discouraged work effort outside a narrow earnings range? As women receiving assistance begin working more hours and earning more, income‐conditioned benefits (Food Stamps, EITC, Medicaid, and subsidies for child care) are reduced and withdrawn, in effect constituting a “tax” on earnings. Under TANF, there is more support for these families, at least in Wisconsin, and so economic well‐being should be higher for most women with earning in this range than it was under AFDC. But marginal tax rates under TANF remain high, and in some income ranges they are higher than under AFDC. Once in the work force, former TANF recipients have earnings over the long run that expose them to very high marginal tax rates, which decrease the benefits of working harder and make it very difficult to gain full eonomic independence. Evidence from other sources suggest that most low‐skilled women have earnings in the same range and so are likely to face similar reductions in benefits such as child care subsidies or the EITC as their earnings increase, even if they are not receiving welfare‐related benefits. © 2002 by the Association for Public Policy Analysis and Management.     

“It’s Great When People Don’t Even Have Their Welfare Cases Opened”: TANF Diversion as Process and Lesson

The 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) encouraged states to reduce welfare caseloads. Caseload reduction can be accomplished by promoting exit for work, marriage, or other private means of support and by diverting new applicants. Most research on caseload decline has focused on welfare‐to‐work outcomes; less is known about processes of diversion. This study employs administrative records and ethnographic data to examine diversion in West County, New York, from 1999 to 2003. Findings demonstrate a high level of diversion and suggest that application is an ongoing and at times remedial process rather than an event. Diversion occurs at all points of the expanded TANF (Temporary Assistance to Needy Families) intake process and is associated with one‐time lump sum payments as well as the hassle factor engendered by new eligibility requirements. The encumbered lives of applicants and TANF staff discretion are also implicated as factors contributing to diversion. We conclude with an analysis of the implications of TANF diversion for access to benefits.     

Does Administrative Burden Influence Public Support for Government Programs? Evidence from a Survey Experiment

Research indicates that administrative burden influences the behaviors and views of clients and potential clients of government programs. However, administrative burden may also shape mass attitudes toward government programs. Taking a behavioral public administration approach, the authors consider whether and how exposure to information about administrative burden embedded within eligibility-based programs influences citizen favorability toward those programs. It is hypothesized that if information about the existing screening mechanisms is highlighted and made salient, this will lead to greater approval of eligibility-based programs. This expectation is evaluated using a survey experiment that explores administrative burden in the Temporary Assistance for Needy Families (TANF) program. The evidence shows that being exposed to information about administrative burden increases favorability toward TANF and its recipients, though these effects are conditional on party identification. The results provide insight into a potential consequence of administrative burden, showing the way in which information regarding burden can shape citizens’ support for eligibility-based programs.     

Earned income credit utilization by welfare recipients: A case study of Minnesota's earned income credit program

This paper examines utilization of a state earned income credit by AFDC and TANF recipients. Although utilization percentages are increasing, we find that among TANF recipients in 1999, 45.7 percent of all households and 34.8 percent of eligible households did not receive the state earned income credit. Moreover, we find that utilization may depend upon TANF requirements and incentives, information resources, and barriers to work and filing of income tax returns. Finally, we investigate whether low utilization is because of little or no benefit from the state earned income credit and find this may be true for some with barriers or less incentive to work under TANF. © 2006 by the Association for Public Policy Analysis and Management.     

Politics and the New American Welfare States

Federal law allows states to create new welfare policies determining who can receive welfare, what types of clients are exempted from new welfare work requirements, and the value of cash benefits. This project tests nine different theoretical explanations of welfare policy to explain why states have reacted differently to this new authority. We test these explanations on Temporary Aid to Needy Families (TANF) policies promulgated between 1997 and 2000. Our findings confirm the strong role of race in TANF politics that Soss et al. (2001) recently reported, but we also find that other constituent characteristics, and institutions, paternalistic goals, and state resources have a consistent influence on welfare policy. These results indicate that different approaches to welfare are attributable to the unique, and very potent, combination of political characteristics in each state.     

Immigration and the Evolving American Welfare State: Examining Policies in the U.S. States

The inclusion of racial/ethnic minorities is often considered an important factor leading to a relatively limited American welfare system. However, given the federal nature of welfare eligibility rules and the states' role in determining benefit levels, few studies explicitly link questions of inclusion and benefit levels when explaining the evolution of American welfare policy. This study examines the relationship between inclusion and benefit levels by analyzing state policies related to the welfare reforms of 1996 which allowed states to decide if recent immigrants would be included in welfare benefits, and subsequently the extent to which this decision affected overall benefit levels offered by states under TANF. The results suggest that states' decisions regarding inclusion subsequently affect benefit levels, with the direction of these relationships most closely reflecting the erosion model's prediction of broader eligibility associated with lower benefit levels.     

THE IMPACT MAXIMUM BENEFIT AMOUNTS HAVE ON THE LENGTH OF TIME FAMILIES RECEIVE AFDC-BASIC BENEFITS

Analysts and program evaluators have rightly focused on the impact policies have on participants achieving programs’ goals and objectives. Yet a potentially neglected aspect of these analyses is the impact policies themselves have on who is initially eligible to participate in the programs and the impact policy parameters have on the length of time people participate in the program. This article reports the findings of a study on the length of time families receive AFDC (now TANF) benefits in two counties in a high benefit state, Wisconsin, between 1987 and 1989 and a low benefit state, Texas, from mid‐1989 through 1992 and the influence the states’ maximum benefits have on who is eligible to receive benefits and how families lose eligibility. Results of a life table analysis indicate that families in Texas receive benefits over significantly less time. However, results of a multivariate analysis indicate that when selected personal and familial attributes are held constant, the difference disappears.     

Federalism and the Safety Net: Delinkage and Participation Rates

Since the enactment of welfare reform legislation in 1996, thefederal government and the states have emphasized putting theneedy to work and reducing caseloads. Simultaneously, however,national policymakers delinked eligibility for cash assistancefrom eligibility for other safety-net benefits. Contrary tostated policy, though, this delinkage has led to declining participationin the case of Food Stamps and health-insurance programs forlow-income children. We highlight four factors that states mustshape if they are to narrow this gap between policy promiseand program performance by fostering higher participation. Weshow how our focus intersects with enduring questions of Americanfederalism—the level of state commitment to redistributiveprograms, their capacity to implement these programs effectively,and the degree to which states can augment governing capacityby becoming more genuine laboratories of democracy.