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Financial Performance Incentives for United States Government Programs: WIA, TANF, and SNAP

Financial Performance Incentives for United States Government Programs: WIA, TANF, and SNAP. The question:. What can the European Social Fund learn from the American experience with operation of training programs under the Workforce Investment Act? This question has many facets

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Financial Performance Incentives for United States Government Programs: WIA, TANF, and SNAP

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  1. Financial Performance Incentives for United States Government Programs: WIA, TANF, and SNAP

  2. The question: • What can the European Social Fund learn from the American experience with operation of training programs under the Workforce Investment Act? • This question has many facets • WIA attempts to increase effectiveness and efficiency through performance “bonuses” • This paper (in progress!) expands the perspective to include the TANF and SNAP High Performance Bonuses

  3. The Workforce Investment Act • Federal-state program, operated by the states through local “one-stop career centers” • Supported by formula-based grants to states • Beyond the formula allocations, “High Performance Bonuses” are paid states on the basis of measures of achievement • Bonuses are small and, over time, have gotten smaller

  4. WIA Procedures • Performance targets are set through negotiations between the (6) federal government regional offices and the states • Final targets depend on negotiation techniques and skills of regions and states • Performance targets cover many program outcomes • States have some control over measurement implementation

  5. Issues • Regional DOL office strategies, capabilities, and enthusiasm differ • States vary in analytical capabilities for response to regional targeting proposals. • Measures adopted offer numerous opportunities for “gaming” by states • Results have been uneven, regionally and by state • Connection of HPB accomplishment to actual achievement challenged by research

  6. Lessons (?) • Negotiation may be useful, but attention must be paid to leveling playing field • Should start with control for variation in characteristics of clients served, economic environment • Addressing problems of motivation essential Bottom line: No evidence of significant positive effects • Watch developments with reauthorization

  7. Temporary Assistance for Needy Families (TANF) High Performance Bonus • TANF famously replaced Aid to Families with Dependent Children beginning in 2007 • Enabling legislation called for “high performance” • Employment targets—job entry, job retention, earnings gain—have “face validity” • Goals multiplied over time, as did winners • Like WIA, stakes were small • Program died, unmourned, in 2005

  8. Procedures • Began with data available to states, but it was clear procedures were not uniform and states lacked access to some data • Introduced a new resource, the “National Directory of New Hires” • Ultimately major measures wholly computed at federal level, with substantial lag between reference “performance year” and award • Federal computation not always intelligible, reliable

  9. Issues • What to measure • How to measure • Control for context • Strategic response • Missing feedback

  10. Lessons (?) • Give thought to the objectives • Be cautious about statistical inference • Plan for improvement • Institutional development may be an important by-product of performance assessment effort

  11. Supplemental Nutrition Assistance (Food Stamp) Program (SNAP) • SNAP is a national negative income tax operated outside of the tax system. Does not purport to be adequate for minimum subsistence • Delivered by electronic benefits transfer (EBT) and collected when recipients purchase food • Arguably the nation’s most important means-tested benefit • Plays a significant role in economic stimulus

  12. Incentives • SNAP is operated by states • Benefits are wholly federally funded; administration costs are split between states and federal government • Incentive problems addressed by sample-based quality control system • States liable for cost of errors, but attempts made to reduce emphasis on penalty and shift to rewards • Result (2002) was --

  13. High Performance Bonus • Based on QC audit, other sources • Four bonus categories: • Payment accuracy • Negative error rate • Application processing timeliness • Program access • Only $48 million (total state administrative costs were about $3 billion in FY 2007) • Awards delivered by September of following year

  14. Issues • Assessing sample-based penalties • Program access measures • Change versus levels • Technical assistance • Net effect

  15. Lessons (?) • Link to ground-level operations • Audit the outcomes • Take care with statistics • Link to better practice But don’t get carried away: • Task is relatively simple: Deliver a well-defined benefit to a target population each month • Outcome immediate • Broad political support

  16. Conclusions • Take in the museums • Keep watch • Get back to the “Open Method” • Start on the ground • Reward process

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