Welfare Research Perspectives
Past, Present, and Future, 2001 Edition

This is an excerpt from the full report.

This is the third in a series of working papers designed to examine what has been learned since the enactment of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, which is effective until fiscal year 2002. PRWORA ended Aid to Families with Dependent Children (AFDC), the federal entitlement to assistance for eligible needy families with children, and created the Temporary Assistance for Needy Families (TANF) block grant. The goals of TANF are to: (1) provide support to poor families so that children may be cared for in their own homes or in the homes of relatives; (2) promote job preparation, work, and marriage in order to reduce families’ receipt of government benefits; (3) prevent and reduce the incidence of nonmarital pregnancies; and (4) encourage the formation and maintenance of two-parent families. Under the new law, states are allowed greater flexibility over the design and implementation of their welfare programs, but are required to impose work requirements and enforce a five-year limit on the receipt of federal assistance. PRWORA makes $16.8 billion available to states each year through 2002 to help them achieve TANF goals.

As the first working paper published in August 1999 indicated, welfare policies in the United States have changed profoundly since the passage of PRWORA. Foremost among the changes is the dramatic and continuing reduction in the number of individuals participating in the TANF program. In 1999, fewer than 2.5 million families were receiving cash assistance from TANF, a reduction of 51 percent from the caseload of five million families receiving AFDC in 1994. In 2000, the caseload continued to decline and now includes 2.18 million families. Changes in caseload come from movement into the workforce, departures due to sanctions or time limits, and reduced entries that reflect diversion programs as well as participants’ reluctance to conform to TANF mandates, particularly the work requirements. Starting in the mid 1990s, a strong economy and new state waiver programs had already stimulated declining enrollment in AFDC. PRWORA’s requirements, plus continued economic strength through the late 1990s, sustained these earlier trends. The softening economy of the past year is affecting this picture.

Caseload reductions of somewhat lesser but still significant magnitude have been experienced in the Medicaid and Food Stamp programs since PRWORA’s implementation. TANF participants and many TANF “leavers”—those individuals who have left or been diverted from the program—are still eligible for these benefits. However, participation in both the Medicaid and Food Stamp programs has been reduced, largely due to changes in immigrant eligibility under TANF. In addition, there have been problems administering TANF, and many individuals are not informed that they can apply for these benefits regardless of their TANF status. While PRWORA legislation is responsible for many results, other changes in immigration law, Supplemental Security Income (SSI) benefits, and health programs continue to affect TANF recipients and low-income working families.

TANF, Medicaid, and Food Stamp reductions have produced substantial fiscal surpluses for most states, providing an opportunity to budget resources for new initiatives that can further advance the objectives of PRWORA. Of the $55 billion available in total funds from 1997 to 2000, only $3.18 billion remained unobligated. Although some states are using federal funds to create new kinds of programs and others are saving funds for use in a recession, many have still not made substantial changes to their welfare programs. More recently, there is evidence of a decline in state surplus funds. The Center on Budget and Policy Priorities reports that in FY 2000, 12 states exceeded their FY 2000 allotment and used their surpluses to finance their TANF expenditures.

In a period when most states were collecting greatly increased revenue from income and other taxes, fiscal adjustments to ensure that TANF revenues have been properly applied are critical to sustaining levels of funding that will allow states to advance the goals of welfare reform. TANF funds present an unprecedented opportunity for program development and the creation of interventions for the most vulnerable participants. Indeed, supplantation—using TANF funds to substitute for state funding—has increased during the past year. Researchers should be monitoring states’ use of these funds carefully.