A Race to the Bottom? Exploring County Spending Shortfalls under Welfare Reform in North Carolina

North Carolina's experiment with local control of Temporary Assistance to Needy Families programs provides a unique example of the budget implications of state to local government policy devolution. County‐level expenditure data indicate that after state to local government devolution, only 45 of 100 counties met welfare maintenance of effort (MOE) budget requirements. Several important factors, including control over program eligibility and benefit levels, were significantly associated with MOE spending variation. Counties given more flexibility spent dramatically less than others. Many failed to meet MOE requirements without penalty, year after year. These issues raise serious questions about decentralization from both the budget and policy perspectives.