Welfare Research Perspectives
Past, Present, and Future, 2002 Edition

This is an excerpt from the full report.

This is the fourth 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 September 30, 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:

• Provide support to poor families so that children may be cared for in their own homes or in the homes of relatives.
• Promote job preparation, work, and marriage in order to reduce families’ receipt of government benefits.
• Prevent and reduce the incidence of nonmarital pregnancies.
• Encourage the formation and maintenance of two-parent families.

Under the 1996 law, states have been allowed greater flexibility in the design and implementation of their welfare programs, but have been required to impose work requirements and enforce a five-year limit on the receipt of federal assistance. PRWORA has made available $16.8 billion to states each year to help them achieve TANF goals.

As the first working paper in the series published in August 1999 indicated, welfare policies in the United States have changed profoundly since the passage of PRWORA. Foremost among the effects of these changes is the dramatic reduction in the number of individuals participating in the TANF program. By 1999, fewer than 2.5 million families were receiving cash assistance from TANF, a reduction of 51 percent from the caseload of more than five million families receiving AFDC in 1994. In 2000, the caseload continued to decline to 2.18 million families. By December 2001, rates of caseload declines had diminished, and total coverage was provided to 2.1 million families. Changes in the caseload came from movement into the workforce, departures due to sanctions or time limits, and reduced entries reflecting 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, sustained these earlier trends. The softening economy of the past year has affected the trend.

While recent figures published by the U.S. Department of Health and Human Services in May 2002 showed no increase in the overall TANF caseload between October and December 2001, the caseload did in fact increase from July to December 2001, and most states have experienced increases. These increases are masked in nationwide totals by noninclusion of cases receiving state cash assistance (e.g., New York, California, and Michigan) as they exit TANF due to time limits. These cases are counted as reductions in the TANF caseload; they are, however, still dependent on public assistance, albeit state-financed public assistance.

Caseload reductions of a 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, due to changes in immigrant eligibility under TANF and problems administering TANF. Many individuals are not informed that they can apply for these benefits regardless of their TANF status. Although PRWORA legislation was responsible for many caseload reductions, changes in immigration law, Supplemental Security Income (SSI) benefits, and health programs have affected TANF recipients as well as low-income working families.

Cash assistance and Medicaid reductions produced substantial fiscal surpluses for most states, providing an opportunity to support resources for new initiatives that advance the objectives of PRWORA. Of the $17.1 billion available in total funds in fiscal year (FY) 2001, only $2.6 billion remained unobligated, and some states are spending in excess of their TANF appropriations and Maintenance of Effort (MOE) requirements. The Center on Budget and Policy Priorities reported that in FY 2001, 27 states and the District of Columbia used unspent TANF funds from prior years to finance their TANF expenditures. Now, with state deficits increasing as tax and other revenues are reduced, providing cash assistance to a growing caseload could become problematic, especially in states where TANF funds were used to supplant state funds.