State sanctions and the decline in welfare caseloads.

• Author: New, Michael J.
• Position: Report

Much of the scholarship analyzing fluctuations in welfare caseloads focuses on such factors as the strength of the economy and the generosity of welfare benefits. However, with the passage of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) in 1996, states obtained significantly more control over welfare policy. Despite this shift, there has been relatively little academic research on the role of state policy variation in welfare caseload fluctuations. This article provides solid evidence that strength of state sanctioning policies, which give caseworkers the ability to restrict the benefits of welfare recipients, has played a very significant role in recent welfare caseload declines. A comprehensive regression analysis of welfare caseloads from all 50 states from every year from 1996 to 2002, finds that strong state sanctioning policies are highly correlated with both large welfare caseload declines and low caseload levels.

Welfare Reform in 1996

In 1996, President Bill Clinton signed landmark welfare reform legislation into law. While previous attempts at reform resulted in relatively cosmetic changes, the Personal Responsibility and Work Opportunity Reconciliation Act has had a meaningful and lasting impact on federal welfare policy. PRWORA ended the entitlement status of Aid to Families with Dependent Children (AFDC) and replaced it with a time-limited assistance and work requirement program called Temporary Assistance to Needy Families (TANF).

The most important policy change brought about by PRWORA was the fact that it gave states more control over welfare policy. Under PRWORA, states receive federal block grant allocations. These allocations allow states to use TANF funding in any manner reasonably calculated to accomplish the purposes of TANF, as long as the states maintain historical levels of spending agreed to in "maintenance of effort" plans. To continue receiving their full federal TANF allocations, states must also conform to specific requirements regarding current recipients' work participation rates and length of time on the rolls (Blank 2002).

Although PRWORA passed by wide margins in both the House and Senate, it was still politically controversial. The Senate minority leader at the time, Tom Daschle (D-SD), opposed the bill, saying that "When it comes to kids this bill is too punitive" (Vobejda and Dewar 1996). Likewise, then House minority leader Richard Gephardt (D-MO) voted against the bill, saying, "It could put a million children into a difficult situation" (Dine 1996). Senator Daniel Patrick Moynihan (D-NY) was even more strident, declaring that the new law was "the most brutal act of social policy since reconstruction" (Moynihan 1997: 58). He predicted, "Those involved will take this disgrace to their graves" (Welch 1996).

Between the passage of PRWORA and 2002, welfare caseloads declined by approximately 60 percent (U.S. Dept. of Health and Human Services 2003). (1) This result has generated a considerable amount of debate in both the academic and policy communities. Many conservatives supported welfare reform in 1996 and argue that the caseload declines provide evidence that welfare reform is working (National Review Online 2006). Additionally, some onetime opponents of PRWORA have become supportive. Wendell Primus, former deputy assistant secretary in the Department of Health and Human Services (HHS), who resigned in protest after President Clinton signed the welfare reform bill, remarked in 2001, "In many ways welfare reform is working better than I thought it would." He added, "Whatever we have been doing during the past five years, we ought to keep doing" (Harden 2001).

However, others credit the 1990s economic boom for the welfare caseload decline. Donna Shalala, who as secretary of HHS opposed the welfare reform bill, said, "What happened on welfare reform was this combination of an economic boom and a political push to get people off the welfare rolls" (Wall Street Journal 2001). Others who argued that the economy deserved most of the credit for the decline in caseloads included Marian Wright Edelman of the Children's Defense Fund (Gray 1996).

Literature Review

Since the passage of welfare reform, some states have experienced considerably larger caseload declines than others. As such, an analysis of the states might provide insights as to which factors were most responsible for the overall decline in welfare caseloads. Indeed, since 1996, states have experienced differing rates of economic growth. States have differed in the generosity of benefits they offer to welfare recipients. Also, since PRWORA gave states greater control over welfare policy, states have pursued varying welfare reforms since that time.

Prior the passage of PRWORA, most studies that have analyzed fluctuations in welfare caseloads primarily focused on factors like the strength of the economy and the generosity of welfare benefits. A number of academic studies find statistically significant evidence that the caseloads rise during times of high unemployment and fall during times of low unemployment (Moffit 1999, CEA 1997, Hoynes 2000, Blank 2000, Blank 2001, Figlio and Ziliak 1999, Levine and Whitmore 1998, Wallace and Blank 1999, Ziliak et al. 2000, Bartik and Eberts 1999). Black, McKinnish, and Sanders (2003) also find that the strength of the economy has a robust and statistically significant effect on welfare caseloads.

Similarly, a number of studies have found that more generous welfare benefits are correlated with higher welfare caseloads (Blank 2000, Blank and Wallace 1999, Bartik and Eberts 1999, CEA 1997, Niskanen 1996). In her paper, Blank (2001) argues that the expansion in government public assistance programs was a factor behind the sharp increases in AFDC caseloads during the 1960s. However, she and other authors (Moffit 1987) also argue that other factors contributed to this caseload increase. These include a Supreme Court decision, King v. Smith (1968), that allowed single mothers to continue to receive AFDC benefits even if they were residing with a man, and a subsequent decision, Dandridge v. Williams (1970), that gave "employable mothers" equal rights to AFDC benefits (Blank 2001).

Furthermore, a number of static models of welfare participation also find that higher levels of welfare benefits increase the likelihood that a female head of household will receive AFDC (Willis 1980, Barr and Hall 1981, Moffitt 1983, Moffitt 1986, Robins 1986, Robins 1987, Blank 1989). Likewise, dynamic models of welfare participation, which track single women over a number of years, also find that increases in cash welfare benefits raise the likelihood of receiving welfare (Hutchens 1981, Plotnick 1983). These models also find that high benefit levels reduce the likelihood that AFDC recipients will cease receiving benefits (Hutchens 1981, Plotnick 1983, O'Neil et al. 1984, Blank 1989, Ellwood 1986, Fitzgerald 1991).

In recent years, there has been a shift in the scholarship about welfare caseloads. A number of scholars have authored studies to explain the decline in welfare rolls that took place during the 1990s. In the early and mid 1990s, a number of states applied for and received waivers from the U.S. Department of Health and Human Services. These waivers granted states greater latitude to set welfare policy (Blank 2002). Overall, a total of 43 states received waivers between 1993 and 1996 (CEA 1997).

While some studies have found that these waivers are correlated with reductions in welfare caseloads (CEA 1997, Levine and Whitmore 1998, O'Neil and Hill 2001, Moffit 1999) other researchers contend that other factors, like the economy, have had a considerably greater effect (Figlio and Ziliak 1996, Ziliak et al. 2000). However, critics of these studies argue that many states applied for waivers at around the same time to pursue policies to move welfare recipients to work. As such, the economy could be masking the effects of the waivers in these studies.

Among those studies that analyze data after 1996, there exists a broad consensus that the enactment of PRWORA resulted in caseload declines (CEA 1999, Grogger 2000, O'Neil and Hill 2001, Schoeni and Blank 2000, Wallace and Blank 1999). A number of studies also find that the strong economy played a...