PPA786: Urban Policy

PPA786: Urban Policy Class 17: The New World of Welfare Policy

PPA786, Class 17: New Welfare Policy • Class Outline • Brief history of welfare laws • Provisions of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 • Early Impacts of PRWORA • PRWORA and the Great Recession

PPA786, Class 17: New Welfare Policy • AFDC • Aid to Families with Dependent Children, part of the 1935 Social Security Act, was the main federal welfare program until 1996. • Low-income families with children were entitled to AFDC if one parent was absent or disabled or (in some states) both parents were unemployed. • The AFDC “tax” rate was 100% from 1935 -1967, 67% from 1967-1981, and 100% from 1981-1996.

PPA786, Class 17: New Welfare Policy • FSA • The Family Support Act of 1988 was an unusual bipartisan compromise. • It placed some work requirements on AFDC recipients through the JOBS Program, but the requirements were flexible and could be satisfied through education and training as well as through employment. • Moreover, FSA mandated that states provide child care to JOBS participants.

PPA786, Class 17: New Welfare Policy • The Waiver Era • After FSA was passed, many states wanted to experiment with new provisions, especially ones to encourage work. • In the 1990s, HHS started to give states waivers to allow them to implement various reforms of this type, with an obligation to study the impacts. • By 1996, 27 states had major waivers and several others had minor ones.

PPA786, Class 17: New Welfare Policy • PRWORA and TANF • AFDC was repealed by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). • PRWPRA followed up on President Clinton’s campaign promise to “end welfare as we know it.” • This act replaced AFDC with the Temporary Assistance for Needy Families program (TANF). • The original legislation authorized TANF until 2010; it has only received temporary re-authorization since then.

PPA786, Class 17: New Welfare Policy • TANF: Funding • TANF replaced AFDC’s matching grant system (which had higher matching rates for poorer states) with • Block grants based on 1996 state welfare spending. • This approach: • Eliminated the counter-cyclical impact of federal welfare funding. • Freed up a great deal of money for state experiments when caseloads dropped. • Does not adjust funding when the number of eligible families changes, as in a recession.

PPA786, Class 17: New Welfare Policy • TANF: Benefit Schedules • TANF benefits exhibit the same wide variation across states that was seen in AFDC. • Since 1996, most state have lowered the implicit welfare tax rate, usually from 100% to 50%, although several states are in the 50-75% range and a few still use 100%. • A few states have a zero tax rate combined with a cut-off when income reaches a certain point—a type of notch!

PPA786, Class 17: New Welfare Policy • TANF Benefits and Poverty (CBPP)

PPA786, Class 17: New Welfare Policy • The Real Value of TANF Benefits (CBPP)

PPA786, Class 17: New Welfare Policy • TANF: End of Entitlement • Under AFDC, every family that met the eligibility criteria was entitled to receive benefits. • TANF is a funding stream (with strings), not a program. • If federal funds cannot pay for every family eligible for TANF, a state is not required to raise the funds needed to fill this gap. • This has become a big issue in the current economic downturn (more later). • But states do have to contribute something, based on maintenance-of-effort provisions and financial penalties.

PPA786, Class 17: New Welfare Policy • TANF: Time Limits • Federal TANF benefits cannot be given to anyone who has received (or who lives in a family that has received) any federal assistance (not just TANF) for more than 60 months. • Up to 20 percent of a state’s caseload can be exempted from this requirement based on hardship or abuse. • A state can give benefits beyond 60 months using its own funds, set shorter time limits, and/or add “intermittent” limits.

PPA786, Class 17: New Welfare Policy • TANF: Work Requirements • TANF requires that at least 50% of recipients (90% for 2-parent families) must be working. • States face severe financial penalties if this requirement is not met. • A state can define “Work” as subsidized or public-sector employment or community service, as well as job search or job readiness assistance for up to 6 weeks. • Education and training generally do not count as “work” unless they are in addition to 20 hours in a job or the recipient is a single parent under 20. • Recipients who do not comply must be penalized (although Medicaid cannot be taken away from children).

PPA786, Class 17: New Welfare Policy • PRWORA: Work First Programs • The shift to a block grant combined with the decline in case loads freed up a lot of money for welfare-to-work programs. • Many of these programs build on the experimental evidence from the waiver era. • This evidence suggests that • Training alone doesn’t help much. • Work First programs do boost employment and earnings. • Work First programs with selective training do even better. • So do Work First programs with lower tax rates.

PPA786, Class 17: New Welfare Policy

PPA786, Class 17: New Welfare Policy • TANF: Use of Funds • TANF funds can be used for many purposes, such as: • Child Care • Work Related Activities such as Transportation • Pregnancy Prevention • Emergency Assistance • Because the block grant is fixed, this has led to movement away from the use of these funds for basic grants.

PPA786, Class 17: New Welfare Policy • PRWORA: Child Care • The shift to a block grant combined with the decline in case loads freed up a lot of money for child care. • PRWORA also set up the Child Care Development Fund to support education and training for parents. • However, a state is not required to provide child care for families who receive benefits. • Moreover, parents are not exempt from work requirements because they can’t find child care unless they have a child younger than 6.

PPA786, Class 17: New Welfare Policy • PRWORA: Child Support Enforcement • PRWORA increased emphasis on child support enforcement • Recipients of TANF funds must cooperate with child support enforcement efforts (i.e. they must identify the father).

PPA786, Class 17: New Welfare Policy • TANF: Participation • All these changes have led to a drop in TANF participation. • This change mainly reflects a drop in participation by people who are eligible, presumably because the program has become so much more complicated. • Of those eligible, 78.9% participated in 1996, compared with only 33.7% in 2010.

PPA786, Class 17: New Welfare Policy Check out: http://www.urban.org/safety-net-almanac/index.cfm

PPA786, Class 17: New Welfare Policy • PRWORA: Coverage of Immigrants • TANF excludes immigrants arriving in the U.S. after 8/22/96 from eligibility for cash assistance, SNAP, and other means-tested programs, including SSI, for a period of 5 years. • Between 5 and 10 years (or until they became a citizen), they could receive benefits under the original law, but only if their sponsor’s income was counted in determining their benefits. • In 1997, many children, elderly, and disabled immigrants had their eligibility for SNAP and SSI restored, and the provision counting sponsor’s income was dropped.

PPA786, Class 17: New Welfare Policy • PRWORA: SNAP Provisions • PRWORA also altered the Supplemental Nutrition Assistance Program (formerly known as Food Stamps). • SNAP has a 30% implicit tax rate (after disregards), but no work requirement for people with dependents. • “Able-bodied adults without dependents” have to work 20 hours per week or else be limited to 3 months of Food Stamps in any 36 month period. • But able-bodied adults with dependents must only “register for work, accept suitable employment, and take part in an employment and training program to which they are referred.” • In 2014, the House passed a farm bill with huge cuts to SNAP, but they were dropped from the final legislation.

PPA786, Class 17: New Welfare Policy • SNAP: Participation • Presumably because it is a lot less complicated than TANF, SNAP has not seen a drop in participation. • Quite the contrary! It was an important source of support for low-income people in the recent recession (more later). • Of those eligible for SNAP, 53% participated in 2001, compared to 75% in 2010.

PPA786, Class 17: New Welfare Policy • Overall Impact of Government Programs on Poverty • Scholars have estimated the poverty rates with and without government programs. • These estimates include both means-tested programs, such as TANF and SNAP, and social insurance, such as Medicare and Social Security. • The following figure gives results reported in Alicia Parlapiano, “Fifty Years of Poverty, The New York Times, January 4, 2013.

PPA786: Urban Policy