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Notes for Welfare Reform Two Years Later

by Douglas J. Besharov

WELFARE'S GROWTH AND DECLINE

U.S. Department of Health and Human Services, Administration for Children and Families, "Temporary Assistance for Needy Families (TANF): 1936-1998," May 1998.

SANCTIONS

For work-related sanctions: L. Jerome Gallagher, Megan Gallagher, Kevin Perese, Susan Schreiber, and Keith Watson, One Year After Federal Welfare Reform: A Description of State Temporary Assistance for Needy Families (TANF) Decisions as of October 1997 (Washington, D.C.: The Urban Institute, May 1988), pp. V6-V9. For the time frame for mandatory work and other sanctions: National Governors' Association, "Selected Provisions of State TANF Plans -- Part II," March 24, 1998. The share of the national caseload subject to the various provisions was calculated using data for March 1998 from: U.S. Department of Health and Human Services, Administration for Children and Families, "Change in Welfare Caseloads As of March 1988," June 1998.

Under TANF, a parent or caretaker receiving assistance is required to work or participate in work activities after receiving assistance for 24 months or earlier, at state option. The mandatory work provision refers to the time frame states have selected to require participation.

A partial sanction results in the partial reduction of assistance. A full family sanction results in complete termination of assistance. A progressive sanction begins as a partial sanction and with continued noncompliance leads to a full family sanction. A lifetime sanction results in permanent benefit termination; no state imposes a lifetime sanction with the first sanction.

In some instances, the sanction policy for self-improvement contracts and child cooperation was not specified. In these cases, the size of the sanction was assumed to be the same as for work-related sanctions. However, information on the duration of these sanctions and whether any are lifetime sanctions was not available.

TIME LIMITS

L. Jerome Gallagher, Megan Gallagher, Kevin Perese, Susan Schreiber, and Keith Watson, One Year After Federal Welfare Reform: A Description of State Temporary Assistance for Needy Families (TANF) Decisions as of October 1997 (Washington, D.C.: The Urban Institute, May 1988), pp. IV1-IV13. The share of the national caseload subject to the various time limit provisions was calculated using data for March 1998 from: U.S. Department of Health and Human Services, Administration for Children and Families, "Change in Welfare Caseloads As of March 1988," June 1998.

Under TANF, states may not use federal funds to provide assistance to a family that includes an adult who has received assistance for more than 60 months. A state may exempt up to 20 percent of its caseload from the time limit for hardship or the family's inclusion of a battered woman. (The 20 percent exclusion is based on the proportion of cases that have received federal TANF benefits for 60 months.)

A termination time limit ends a family's eligibility for assistance, whereas a reduction time limit reduces the family's assistance, generally by removing the adult's portion of the grant, but continuing the portion provided on behalf of the children. A periodic time limit allows a family to receive a limited number of months within a longer time frame. For example, in Arizona, a family may receive assistance for 24 out of 60 months.

An exemption from a time limit allows states to exclude families with certain characteristics from the time limit. In general, as long as a family meets one of the criteria for an exemption, those months do not count toward the time limit. TANF requires the following exemptions: families that do not contain an adult receiving assistance; months of assistance received by an adult as a minor child not the head of a household or married to the head of a household; any month in which the family lived on an Indian reservation of Alaskan Native village with an unemployment rate above 50 percent. Many states have their own exemptions for state-specific time limits, including: age; disability or illness; caring for a disabled adult or child; high unemployment; or victim of domestic violence. In some cases, exemptions apply to those who have hit the time limit, most notably, the 20 percent exemption allowed under federal law for those who reach the 60-month federal time limit.

An extension to the time limit allows a family to receive aid after reaching the time limit. For example, in some states an extension is provided to those who have "played by the rules," are in areas with high unemployment, are victims of domestic violence, or simply need more time to become self-sufficient. There is some arbitrariness in choosing whether to call some criteria exemptions or extensions. For example, disability can be classified as an exemption or as an extension. TANF does not authorize "extensions" to the 60-month time limit, but some states appear to have such policies. Such extensions could be funded from state-only funds.

Many states had more than one time limit. The shortest time limit was listed. For example, Texas has three time limits (12, 24, and 36 months), so it was classified under the 1-24 month category. Iowa's time limit is individualized and some families have very short time limits, so it too was classified in this category. Two states, Michigan and Vermont, do not have a time limit, and will pay for families reaching the 60-month limit with state funds. New York has a 60-month limit, after which families will receive a voucher or restricted third-party payment. These three states were classified as not having a time limit.

The table does not include exemptions required by federal law. In some states, the exemption/extension policy was "not specified", and it was coded as not having a policy. However, some of these states will undoubtedly develop policies in these areas before the imposition of a time limit.

EARNINGS DISREGARDS

L. Jerome Gallagher, Megan Gallagher, Kevin Perese, Susan Schreiber, and Keith Watson, One Year After Federal Welfare Reform: A Description of State Temporary Assistance for Needy Families (TANF) Decisions as of October 1997 (Washington, D.C.: The Urban Institute, May 1988), pp. VI4-VI7. The share of the national caseload subject to various time limits and earnings disregards was calculated using data for March 1998 from: U.S. Department of Health and Human Services, Administration for Children and Families, "Change in Welfare Caseloads As of March 1988," June 1998.

Under AFDC, states were required to disregard a portion of recipients' earnings in determining benefits: a $90 work expense disregards; $30 for 12 months; one-third of remaining earnings for four months; and actual child care expenses up to $175 per child ($200 per child under age two). In addition, the "$30 plus one-third" disregards generally did not apply to applicants. Under TANF, states can structure their earnings disregards in anyway they choose.

Some states have several different disregards or disregards that change over time. Each state's policy is classified by what appears to the most common, but some choices are clearly judgment calls. The following are examples of how some state policies with a mix of disregards were categorized. Alabama disregards 100 percent for the first three months and 20 percent after that; the disregard was coded as 20 percent. Mississippi disregards 100 percent for six months and 0 percent after that; the disregard was classified as 100 percent. Six months was the minimum period for a policy to be classified as being representative. Nevada disregards 100 percent for the first three months, 50 percent for the next nine months, and 20 percent after that; the disregard was classified as 50 percent. Nine states retained the old AFDC earnings disregard structure and were classified as 0 percent, since only a flat disregard amount remained after four months. Some states only expanded the basic disregard amount, e.g., from $90 to $200. This expansion did not affect their classification, since most such changes were relatively minor. However, in some cases, the expansion in the disregard was so large, it was classified as 100 percent. For example, Virginia disregards 100 percent up to the poverty level; this disregard was classified as 100 percent. Wisconsin is excluded from the table, because the Wisconsin Works program is structured in such a way that disregards are not used.

The time limit classification is based on the shortest time limit in the state. Although Michigan, New York, and Vermont do not have a time limit, they are classified in the 60-month time limit category in this table.

In some states, families exempt from the time limit are not eligible for more generous earnings disregards. Also, focusing on just earnings disregards may understate the treatment of earnings. For example, Delaware is a fill-the-gap state. This is an alternative methodology for excluding income (earned and unearned) in the benefit computation process.

BEHAVIORAL REQUIREMENTS

For family caps, L. Jerome Gallagher, Megan Gallagher, Kevin Perese, Susan Schreiber, and Keith Watson, One Year After Federal Welfare Reform: A Description of State Temporary Assistance for Needy Families (TANF) Decisions as of October 1997 (Washington, D.C.: The Urban Institute, May 1988), pp. VI8-VI10. Seventeen states do not provide this automatic increase for children conceived while the mother was receiving cash assistance. (In two of these states, Idaho and Wisconsin, the family cap is an implicit feature of the state program, because the grant does not vary with family size.) Two states, Connecticut and Florida, provide a partial increase. Three states provide the full increment, but not in the form of cash. Oklahoma and South Carolina provided it as a voucher for food and clothing. In Maryland, it is paid to a third party, such as a community group or church. In some states, the benefit loss may be offset by special earnings disregards. Delaware will apply its family cap to first-time minor mothers.

For learnfare requirements: U.S. Department of Health and Human Services, Setting the Baseline: A Report on State Welfare Reform Waivers (Washington, D.C.: Department of Health and Human Services, June 1997). The states reflected are those with learnfare policies for dependent children approved through waivers from the U.S. Department of Health and Human Services at the time the new welfare law was passed. The table does not include special education requirements for teen parents.

For immunization requirements, Douglas J. Besharov, Kristina Tanasichuk White, and Mark B. Coggeshall, Health-Related Welfare Rules (Washington, D.C.: American Enterprise Institute for Public Policy Research, November 1996). The states reflected are those with immunization requirements for dependent children approved through waivers from the U.S. Department of Health and Human Services in 1996.

EMPLOYMENT AND TRAINING: 1997

Welfare-to-Work Grants. The Balanced Budget Act of 1997 authorized grants to states and local communities to create new job opportunities for the hardest to employ welfare recipients. Allowable activities include: community service; work experience; wages subsidies; on-the-job training; and contracts or vouchers for job readiness placement, child care, and other services. At least 70 percent of Welfare-to-Work funds must be spent on individuals who: have been on welfare at least 30 months or more; are within 12 months of losing TANF due to a time limit; or are noncustodial parents of children whose custodial parent meets these criteria. In addition, they must have at least two of the following labor market barriers: (1) lack of high school diploma or GED; (2) require substance abuse treatment; or (3) have a poor work history. Up to 30 percent of the funds may be spent on who are current or "recent" TANF recipients, or noncustodial parents, who have characteristics associated with long-term dependency.

Half of the $3 billion welfare-to-work funds will be available in FY 1998 and half in FY 1999. States and communities have three to spend the funds once they receive the grants. Seventy-five percent of the funds are allocated to states based on a formula that includes the states' share of poor individuals and adult TANF recipients. States must spend $1 of their own funds to receive $2 in federal funds. This may include state expenditures beyond the TANF maintenance-of-effort requirements (MOE). Funds not claimed by states in FY 1998 will be added to the amount available in FY 1999 and reallocated across all states. Twenty-five percent of the funds are awarded by the Department of Labor through competitive grants. There is no matching requirement for these funds.

Welfare-to-Work Tax Credit. The Taxpayer Relief Act of 1997 established a new welfare-to-work tax credit for hiring long-term welfare recipients. It is limited to newly hired employees who work at least 400 hours or 180 days. The credit is 35 percent of the first $10,000 of eligible wages in the first year of employment and 50 percent of the first $10,000 in eligible wages during the second year of employment. The maximum credit is $8,500 per employee. The new hires must be long-term TANF recipients who are members of a family that: has received TANF for at least 18 consecutive months or at least 18 months (whether or not consecutive) after August 5, 1997; or that lost TANF assistance due to a time limit after August 5, 1997.

EMPLOYMENT SUBSIDIES

For the past three decades, a variety of public programs and tax credits have been available to subsidize private sector job creation. In recent years, the subsidies for hiring long-term welfare recipients have become much more generous. The table compares potential subsidies under the law as it existed in 1996 to the law in 1998 for an individual with earnings of $12,500. (This is the level of earnings for a female head of household, aged 18-24 without a high school degree in 1996.)

Old Law (1996). The employment subsidy includes the Work Opportunity Tax Credit (WOTC) and the AFDC work supplementation program. The WOTC is 40 percent of qualified wages up to $6,000, or a maximum of $2,400, for up to one year. Under work supplementation, the AFDC grant could be diverted to an employer for up to nine months. Assuming an average grant of $425 per month, this results in a subsidy of $3,825. The combined subsidy is $6,225, or 50 percent of the earnings in year 1. No subsidy is available in year 2.

New Law (1998). The employment subsidy is based on the provisions of the Welfare-to-Work Tax Credit (authorized by the Taxpayer Relief Act of 1997). The credit is 35 percent of the first $10,000 of qualified wages in the first year of employment and 50 percent of the first $10,000 in qualified wages during the second year of employment. The maximum credit is $8,500 per employee. Thus, in the first year, the tax credit is $3,500 and in the second year it is $5,000. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 expanded state flexibility in using welfare payments, as well as food stamps, to subsidize employment. States can use the combined TANF and food stamp payment to subsidize a job in year 1 and can use the entire TANF amount in year 2. (USDA has indicated that it may limit the duration of food stamp-funded employment subsidies.) Thus, the total subsidy, assuming the mean TANF (and corresponding food stamp) payment, could be $8,808 in year 1 and $5,100 in year 2. The combined subsidies are $12,308 in year 1 (98 percent) and $10,100 (81 percent) in year 2.

CHILD SUPPORT PAYMENTS

For award rates from 1978-1989: U.S. Bureau of the Census, Child Support and Alimony (Washington, D.C.: GPO, 1978-1989).

For award rates in 1991: U.S. Bureau of the Census, Child Support for Custodial Mothers and Fathers: 1991. (Washington, D.C.:GPO, 1993), Table 1.

For award rates in 1993 and mean child support payment for one child: U.S. House of Representatives, Committee on Ways and Means, Subcommittee on Human Resources, 1998 Green Book (Washington, D.C.: GPO, May 19, 1998), Table 8-7.

TOUGHER CHILD SUPPORT

For automated collection systems: Vicki Turetsky, Child Support Administrative Processes: A Summary of Requirements in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (Washington, D.C.: Center for Law and Social Policy, January 1997), 19-21. The new law requires states to operate a centralized, automated support and disbursement system before October 1, 1998. The system is not responsible for tracking all child support awards, however. The system tracks only those awards where the recipient of the award has assigned collection rights to the state and awards issued after January 1, 1994, where support is collected through wage withholding.

For interstate enforcement: U.S. House of Representatives, Committee on Ways and Means, Subcommittee on Human Resources, 1998 Green Book (Washington, D.C.: GPO, May 19, 1998), 585. The law requires states to adopt the Uniform Interstate Family Support Act (UIFSA). The most important part of UIFSA is its requirement that child support awards be the responsibility of the state in which the award is issued. This has the potential to eliminate cross-jurisdictional disputes and prevent child support awards from being adjusted when the noncustodial parent or child support recipient moves to another state. States were required to adopt UIFSA before January 1, 1998, but do not have to use it in interstate enforcement cases if alternative procedures would work more effectively.

For hospital paternity acknowledgments: Vicki Turetsky, Child Support Administrative Processes, 30-33. Previous law required states to establish on-site paternity establishment centers at all birthing hospitals so that paternity could be voluntarily established before nonmarried parents left the hospital. The 1996 law requires states to establish centers at other sites such as state birth record agencies and to conduct outreach efforts to publicize the availability of paternity establishment centers.

For state directory of new hires: Vicki Turetsky, Child Support Administrative Processes, 17-18. The law requires states to maintain a database of all new hires containing the information found on a W-4 form. Employers must send the information to the state directory within twenty days of hiring a new employee. States then report the information to a national directory of new hires and conduct searches to match the information in the state directory to information in the state’s case registry database. States without a directory of new hires were required to have one before October 1, 1997. States currently maintaining a directory of new hires have until October 1, 1998, to modify their systems to meet the federal standards.

For former welfare recipients receive payment despite arrears: U.S. House of Representatives, 1998 Green Book, 591-94. Under AFDC rules states had the option of using payments against arrears to offset the amount of welfare paid to the child support recipient, even if the recipient no longer received AFDC benefits. The new law requires states to give payment against arrears to the family before using the money to offset TANF benefits. Arrears collected after October 1, 1997, are subject to these rules. After October 1, 2000, states must disburse payments against arrears in the following order: first, all post-TANF arrears are paid to the family; second, all pre-TANF arrears are paid to the family; third, payments against arrears are paid to the state to offset TANF benefits paid to the family.

TOUGHER CHILD SUPPORT (2)

Jessica Yates, Child Support Enforcement and Welfare Reform (Washington, D.C.: Welfare Information Network, May 1997).

Liens on property for arrears: The 1996 law mandates that states must have automatic and administrative procedures in place under which liens can be placed on real and personal property of noncustodial parents who owe overdue child support. These liens can also be placed on bank accounts. States must also give full faith and credit to liens placed on property by other states provided the state originally imposing the lien has complied with the rules of the state where the property is located.

License suspensions for non-payment: States must have procedures in place to restrict, suspend, or withhold state-issued licenses. These licenses must include drivers', professional, occupational, and recreational licenses. States are not required to enforce these restrictions, however.

Court ordered "Pay-or-Work" programs: States must implement procedures giving the state child support enforcement agency the power to issue (or request a court to issue) an order for noncustodial parents who owe back child support to participate in specific work activities. The term "work activities" is consistent with the definition of the term as used elsewhere in the legislation.

Potential grandparent liability: The provision on grandparent liability for overdue support is subject to two special circumstances. First, the noncustodial parent of the child must be a minor. Second, the custodial parent of the child must be receiving TANF benefits. Under these two criteria, states can, if they wish, require the parents of the noncustodial parent to pay the back child support.

TANF FERTILITY-RELATED RULES

U.S. House of Representatives, Committee on Ways and Means, Subcommittee on Human Resources, 1998 Green Book (Washington, D.C.: GPO, May 19, 1998), 509.

see also Jodie Leven-Epstein, Teen Parent Provisions in the New Law (Washington, D.C.: Center for Law and Social Policy, November 1996).

Bonuses to states that most decrease "illegitimacy ratio": The welfare law provides a bonus payment of $20 million to each of the five states that most decrease the number of out-of-wedlock births while at the same time reducing the abortion rate. The rates in question apply to all of the state’s residents, not just those receiving TANF benefits. If there are not five states eligible for the bonus, the bonus will be raised to $25 million for those states which do qualify. At present, the bonus will be awarded in Fiscal Years 1999-2002.

TANF TEENAGER-RELATED RULES

U.S. House of Representatives, Committee on Ways and Means, Subcommittee on Human Resources, 1998 Green Book (Washington, D.C.: GPO, May 19, 1998), 495-96.

see also Jodie Leven-Epstein, Teen Parent Provisions in the New Law (Washington, D.C.: Center for Law and Social Policy, November 1996).

Live in adult supervised setting: The law prohibits states from using TANF money for teenage parents who do not live in a residence maintained by a parent, legal guardian, or other adult relative of the teenager’s parent or guardian. States retain, however, the power to define good-cause exceptions to this rule.

Be in school or training program: States are prohibited from giving TANF benefits to unmarried parents under age eighteen if the parent has not obtained a high school degree. Teenage parents without high school degrees are eligible for TANF benefits if they participate in a program whereby they will receive a high school diploma, or if they participate in an education or training program approved by the state.

$50 million/yr. for abstinence-only education: The 1996 law grants $50 million a year for abstinence education programs. The law requires that programs funded by the provision must teach, among other things, that abstinence from sexual activity outside marriage is the expected standard for school-aged children, that a monogamous relationship within marriage is the expected standard for all human sexual activity, and that illegitimate births have undesirable psychological and physical effects on both parents and child.

WELFARE'S GROWTH AND DECLINE

U.S. Department of Health and Human Services, Administration for Children and Families, "Temporary Assistance for Needy Families (TANF): 1936-1998," May 1998.

THE ECONOMY

Unemployment rate: Council of Economic Advisers, 1998 Economic Report of the President (Washington, D.C., Government Printing Office, February 1998). AFDC recipiency rates are calculated from: HHS Administration for Children and Families, "Temporary Assistance for Needy Families (TANF): 1936-1998," May 1998. Food stamp recipiency rates are calculated from: U.S. House of Representatives, Committee on Ways and Means, 1998 Green Book (Washington, D.C.: Government Printing Office, May 19, 1998).

The AFDC and food stamp caseload data are presented as a percentage of the 1980 caseload. This gives both programs a common reference point.

AID TO THE WORKING POOR

Labor force participation data for never-married mothers with a child under age 3: unpublished data collected by the Bureau of Labor Statistics, Department of Labor. Child care includes expenditures from the following programs: Child and Adult Care Food Program; the estimated share of the Title XX Social Services Block Grant devoted to child care; and the Child Care and Development Fund (CCDF) or its predecessor programs. Expenditures are derived from: Office of Management and Budget, Historical Tables, Budget of the United States, Fiscal Year 1999 (Washington, D.C.: Government Printing Office, 1998) and estimates of state expenditures under the CCDF. The Earned Income Tax Credit (EITC) reflects the revenue loss and the outlays associated with the refundable portion of the credit; source: U.S. House of Representatives, Committee on Ways and Means, 1998 Green Book (Washington, D.C.: Government Printing Office, May 19, 1998).

WORK FIRST

U.S. General Accounting Office, Welfare Reform: States are Restructuring Programs to Reduce Welfare Dependence (Washington, D.C.: GAO/HEHS-98-109, June 1998), p. 31.

Under the previous JOBS program, many state programs emphasized education and training activities. "Work First" programs place the emphasize on activities related to immediate employment, such as job search and job readiness training. Only those who are unsuccessful are then considered for more intensive education and training services. The chart compares the percent of active participants assigned to job placement activities in 1994 and in 1997. It includes only those participating in a JOBS or TANF employment, training, and education program. Job placement includes job search, job readiness, job development, community service, work experience, subsidized employment, and on-the-job training.

MAKING WORK PAY

The AFDC/TANF benefit is the weighted state average for a single mother with two children in 1996. (Unpublished data from the Administration for Children and Families, U.S. Department of Health and Human Services.) For AFDC, the calculations assume a $90 earned income disregard plus 20 percent of earnings for child care. The time-limited "$30 plus one-third" earnings disregards are not counted because of their relatively short duration. The TANF earnings disregards are $200 plus 50 percent. About half of the nation's TANF caseload is in a state with a 50 percent earnings disregard, although the fixed dollar portion of the disregard varies considerably from state-to-state. (TANF cases are assumed to have no out-of-pocket child care costs, because such costs are paid directly on their behalf. Thus, there is no child care disregard.)

The food stamp benefit is based on the benefit schedule and other program parameters in effect during fiscal year 1996. This includes a standard deduction of $134, a deduction for child care expenses equal to 20 percent of earnings, a 20 percent earned income disregard; and an excess shelter costs to the extent that they exceed 50 percent of counted income after all other deduction, not to exceed $247. In determining excess shelter costs, the household's rent was assumed to be $400 per month.

The WIC benefit is the estimated national average cost of a WIC children's food package. Source: U.S. Department of Agriculture, Food and Consumer Service, Office of Analysis and Management, "Fiscal Year 1996 WIC Food Package Costs," March 18, 1998, p. 2.

Child care expenses are assumed to be 20 percent of earnings up to $4,200 per year. For the "AFDC" line, child care expenses are disregarded in the calculation of AFDC and food stamp payments. For the "TANF" line, it was assumed that child care was provided directly or through a voucher or certificate (rather than through the disregard). When the family left TANF, it was assumed that they would continue to receive a child care subsidy through the expanded Child Care and Development Fund. Copayments are assumed to be 6 percent of gross income from $12,600 (the point where TANF eligibility is lost) to $23,293, and 10 percent of gross income beyond that point to $28,495, where it is assumed that the child care subsidy through the CCDF ends. Although there is considerable variability in copayments and income eligibility thresholds nationally, the assumptions used here appear representative. See, Gina Adams, Karen Schulman, and Nancy Ebb, Locked Doors: States Struggling to Meet the Child Care Needs of Low-Income Working Families (Washington, D.C.: Children's Defense Fund, March 1998). Out-of-pocket child care expenses were disregarded in the calculation of food stamp benefits.

Work expenses are assumed to equal 10 percent of income up to a maximum of $1,000 a year.

The FICA tax is 7.65 percent of earnings.

The federal income tax is based on the 1996 federal income tax schedule. The Child and Dependent Care Tax Credit (CDCTC) allows working families to claim a tax credit against federal income taxes owed for up to 30 percent of their employment-related child care expenses for children under age 13. The credit is calculated on a sliding scale, based on the taxpayer's adjusted gross income. Taxpayers with an adjusted gross income (AGI) up to $10,000 may claim 30 percent of employment-related child care expenses. The percentage declines by one percentage points for each additional $2,000 in income up to $28,000. Taxpayers with AGIs above $28,000 may claim 20 percent of allowable expenses. At 30 percent, the maximum credit is $720 for one dependent and $1,440 for two or more dependents. The Earned Income Tax Credit (EITC) is a refundable tax credit available to certain low-income families. For a family with two children in 1996, the EITC provided a 40 percent earnings subsidy up to $8,890, resulting in a maximum credit of $3,556. It remained constant until $11,610, at which point it was phased out at a rate of 21.06 percent, reaching zero at $28,495.

The Post-TANF welfare calculation reduces the value of welfare by the amount of foregone leisure. This is estimated by multiplying the following four variables: the minimum wage of $5.15 an hour; the average participation rate under TANF over the next six years (37.5 percent); the average number of weekly hours of participation (25.8 hours); and the number of weeks in a year (52). This total ($2,590) is subtracted from the Pre-TANF value of welfare ($9,100), yielding a post-TANF value of welfare of $6,510. Other factors that could be considered include sanctions, time limits, and other behavioral requirements.

The amount of unreported earnings in one four-city study was about 15 percent of the welfare grant, or $90 in unreported earnings compared to total welfare payments of $565. See, Kathryn Edin and Laura Lein, Making Ends Meet: How Single Mothers Survive Welfare and Low-Wage Work (New York, NY: Russell Sage Foundation, 1997), pp. 39 and 150. Using the 15 percent estimate translates into an unreported earnings estimate of $1,365.

SANCTIONING DIFFERENCES

Michigan Family Independence Agency, various data reports. The number of monthly sanctions is as of March 1998; the total case closure due to sanctions percentage is based on the October 1996 to March 1998 period. In Michigan, recipients who do not comply with the Work First program receive a 25 percent sanction for each month they refuse to cooperate. If noncompliance continues for four months, the case is closed.

Delaware Department of Health and Social Services, Division of Social Services, A Better Chance Monthly Report, May 1, 1998. Delaware has separate sanctions for failure to comply with work requirements and the contract of mutual responsibility. Both can lead to case termination for continued noncompliance.

In both states, the denominator for determining the proportion of cases closed due to sanction includes the sanctioned cases; the caseload figures reported, however, do not.

PARTICIPATION RATES

The caseload reduction credit permits states to reduce the participation rate by the number of percentage points equal to the number of percentage points by which the caseload has declined in the preceding fiscal year compared to fiscal year 1995. However, caseload reductions required by federal law or due to eligibility changes do not count.

By March 1998, the caseload had declined 34 percent from fiscal year 1995. The predicted requirement is based on the assumption that the caseload will remain constant through 2002 (or that subsequent declines would not count toward the caseload reduction credit). Although this assumption is unrealistic, there is no way of knowing the direction of bias, so it is perhaps the most reasonable assumption. Moreover, it shows that in the early years of the new welfare law, the work participation requirement is very weak. Finally, there could be significant variation from state-to-state. Indeed, there has been considerable variation in the degree to which caseloads have dropped.

The fiscal year 1995 caseload of 4,869,000 is from: U.S. Department of Health and Human Services, Indicators of Welfare Dependence: Annual Report to Congress (Washington, D.C.: U.S. Department of Health and Human Services, October 1997), p. A-6. The caseload as of March 1988 is from: U.S. Department of Health and Human Services, Administration for Children and Families, "Temporary Assistance for Needy Families (TANF): 1936-1998," May 1998.

HITTING THE TIME LIMIT

Data for the welfare caseload are from: U.S. Department of Health and Human Services, Indicators of Welfare Dependence: Annual Report to Congress (Washington, D.C.: U.S. Department of Health and Human Services, October 1997), p. A-6, and U.S. Department of Health and Human Services, Administration for Children and Families, "Temporary Assistance for Needy Families (TANF): 1936-1998," May 1998. The caseload for 1997 is estimated based on the caseload in selected months. For 1998, it is based on the March 1998 caseload.

The proportion of the caseload on TANF five or more years is from: LaDonna Pavetti, "Who is Affected by Time Limits?" in Isabel Sawhill (ed.), Welfare Reform: An Analysis of the Issues (Washington, D.C.: The Urban Institute, 1995), p. 32.

SELF-REPORTED BARRIERS

David J. Fein, The Indiana Welfare Reform Evaluation: Who Is On and Off? (Bethesda, MD: Abt Associates Inc., September 1997), p. 4.

HUMAN CAPITAL

David J. Fein, The Indiana Welfare Reform Evaluation: Who Is On and Off? (Bethesda, MD: Abt Associates Inc., September 1997), p. 4. Educational status was measured at the time of the survey and employment history was measured at the time the person entered the research study.

DRUG USERS

National Governors’ Association, Summary of Selected Elements of State Plans for Temporary Assistance for Needy Families (Washington, D.C.: National Governors’ Association Center for Best Practices, November 1997).

TANF WINDFALL

The AFDC Projection and TANF amounts are outlay projections from Congressional Budget Office, Federal Budgetary Implications of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (Washington, D.C.: Congressional Budget Office, December 1996). TANF includes the basic TANF block grant, plus estimated outlays from: supplemental grants related to population growth and poverty level; grants to states to reduce out-of-wedlock births; bonuses to reward high-performance states; funding for research, evaluations, and national studies; grants to Indian Tribes; savings associated with penalties for states' failure to meet work requirements; and grants to territories. CBO had originally projected outlays of $2.1 billion over six years related for the Contingency Fund to help states with high unemployment or growing food stamp caseloads. Since the economic and caseload trends have been more favorable than projected by CBO, these costs were not included as part of TANF outlays. The "AFDC" line represents what federal AFDC (and JOBS) costs would have been in the absence of a block grant. It is calculated by taking the average annual per case cost for AFDC (and JOBS) in FY 1996 and multiplying that by the caseload in FY 1997 and FY 1998. (The FY 1998 caseload is based on the caseload in March 1998. This implicitly assumes that the caseload will continue to decline throughout the year so that the average for the year equals the March level.)

The U.S. General Accounting Office (GAO) undertook a similar calculation for FY 1997: "For the United States as a whole, we estimated that if all states had received a full year's TANF allotment in 1997 and maintained state funding at 80 percent of historic levels, they would have had about $4.7 billion more than we estimate they would have spent in 1997 under prior methods of financing. On average, given the actual caseload in 1997, we estimated that states would have had about 25 percent more budgetary resources under TANF than they would have had under AFDC funding rules." (U.S. General Accounting Office, States are Restructuring Programs to Reduce Welfare Dependence (Washington, D.C., GAO/HEHS-98-109, June 1998), p. 78.)

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