Welfare spending: more for less.

• Author: Tweedie, Jack

Block grants and caseload drops are allowing states to put more money into services that help welfare recipients find jobs

When the federal welfare reforms passed, no one thought about welfare caseloads going down. Policymakers were too worried that they would go up, and states would have to choose between increasing welfare spending or cutting benefit levels.

That hasn't happened. Instead, states find that they have more money to help their poor find work. Welfare rolls have dropped 27 percent nationwide and benefits are holding steady, so there's more money for job training, child care and transportation. All this and states can still reduce total welfare spending and put money in a cash reserve.

Most of this good fortune is traceable to our strong national economy. So states can invest money in services that help recipients become self-sufficient. But there's still a long way to go to develop and fund the new programs needed for the work-based welfare system envisioned in state and federal reforms. Under the new block grant funding, states have that money.

As state legislatures return to welfare policy in the current sessions, many are in the unexpected position of having to take money already appropriated for benefit payments and use it to increase support services for recipients trying to find jobs.

NEW MATH OF STATE SPENDING

The Temporary Aid to Needy Families (TANF) block grants adopted by Congress in 1996 changed the structure of federal financial assistance to states. In the old Aid to Families with Dependent Children program, the federal government reimbursed states for welfare spending by 50 percent to 80 percent, depending on per capita income.

STATE APPROPRIATIONS AND CASELOAD CHANGES FOR THE TANF BLOCK GRANT FY '98 STATE State State Caseload Welfare MOE Change Appropriations Level FY 1994 to FY 1998 FY 1998 July 1997 (millions) Alabama $42.9 82% -44% Alaska 53.6 82 -11 Arizona 114 90 -31 Arkansas 31.9 115 -26 California 2,915.0 80 -14 Colorado 89.6 81 -49 Connecticut 217.7 89 -13 Delaware 25.9 89 -21 District of Columbia n/a n/a -13 Florida 460.4 93 -39 Georgia 225.6 98 -38 Hawaii 94.0 97 20 Idaho 14.5 79 -66 Illinois 510.1 89 -23 Indiana 113.4 75 -50 Iowa 65.8 80 -33 Kansas 80.2 97 -45 Kentucky 89.8 100 -27 Louisiana 59.1 80 -28 Maine 42.6 85 -30 Maryland 202 86 -30 Massachusetts 364.1 76 -36 Michigan 470.7 75 -36 Minnesota 217.1 91 -19 Mississippi 28.9 100 -45 Missouri 150.0 99 -31 Montana 17.5 84 -39 Nebraska 48.7 126 -17 Nevada 30.2 89 -26 New Hampshire 32.1 75 -37 New Jersey 303.0 75 -24 New Mexico 46.8 94 -23 New York 1,807.0 79 -20 North Carolina 213.8 104 -30 North Dakota 9.7 80 -36 Ohio 417.0 85 -34 Oklahoma 61.2 75 -43 Oregon 100.5 82 -51 Pennsylvania 411.5 76 -30 Rhode Island 68.8 85 -17 South Carolina 54.0 113 -45 South Dakota 11.7 100 -35 Tennessee 104.0 94 -46 Texas 252.3 80 -30 Utah 26.9 80 -36 Vermont 26.7 78 -19 Virginia 136.7 80 -39 Washington 321.3 89 -18 West Virginia 32.9 75 -30 Wisconsin 169.2 75 -56 Wyoming 11.3 79 -70 Puerto Rico 78.4 -23% Source: NCSL survey by Dana Reichert and Laurie McConnell. Now, states receive a fixed amount - the block grant. Each state's block grant is based on the federal money it received for AFDC from 1992 to 1995 when caseloads were high. The federal law also includes a maintenance of effort (MOE) requirement. States have to spend at least 80 percent compared with what they spent in the baseline year (or 75 percent if they met the work participation requirements in the federal law). For every dollar the state falls short in its MOE level, the block grant is reduced by $1. States also lose eligibility for their Welfare-to-Work grants. When the TANF block grants were enacted, caseloads had declined from those baseline levels, so most states received more federal money under TANF than they would have under the old system. However, the block grant will not change automatically when a state's assistance spending increases or decreases. This shifts much of the financial risk of welfare programs to the states.

States' early concerns involved spending increases, especially since economic factors outside state control have such a large effect on welfare caseloads and spending. What no one anticipated at the time was the stunning rate at which caseloads would drop. Between January 1994 and July 1997, the number of families on welfare nationwide dropped 27 percent. In five states, the number came down by more than 50 percent, and in seven others, more than 40 percent. This decrease is larger...