SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 2187 words

COMMITTEE: SENATE FINANCE

HEADLINE: LESSONS LEARNED FROM WELFARE OVERHAUL

TESTIMONY-BY: GORDON L. BERLIN, SENIOR VICE PRESIDENT,

AFFILIATION: MANPOWER DEMONSTRATION RESEARCH CORPORATION

BODY:
Testimony of

Gordon L. Berlin Senior Vice President, Manpower Demonstration Research Corporation

On the Reauthorization of the Temporary Assistance to Needy Families Program

Before the Senate Finance Committee

March 12, 2002

Good morning. I am Gordon Berlin, Senior Vice President of the Manpower Demonstration Research Corporation, a nonpartisan social policy research organization responsible for more than two-dozen rigorous evaluations of alternative welfare reform program strategies undertaken by states and localities over the last twenty years. I appreciate the opportunity to appear before this committee today to share what we have learned from these unusually reliable studies as you consider reauthorization of the Temporary Assistance for Needy Families (TANF) provisions contained in the Personal Responsibility and Work Opportunity Act of 1996. Since the passage of welfare reform in 1996, the nation has made significant progress on nearly every important measure of social well being, including unprecedented declines in welfare caseloads, historic increases in employment among low-income mothers, important reductions in family and child poverty, and fewer out-of-wedlock births to teenage mothers. The declines in welfare dependency and the rise in employment exceeded all expectations, transforming the welfare system from one that entitled poor families to public assistance to one that emphasized mutual obligation and provided temporary support while requiring work. Three forces working synergistically helped to make the whole far greater than the sum of the individual parts: (1) the strongest sustained period of economic growth in modern times, (2) the expansion of policies that support the working poor such as the Earned Income Tax Credit, and (3) the TANF welfare reforms. While unemployment rates below 4 percent meant that employers were digging deep into the ranks of the formerly unemployed to find workers, welfare reform's focus on employment and its new message that welfare was temporary undoubtedly contributed significantly to the final result.

These accomplishments are all the more remarkable when one recalls how little was known in 1996 about the likely effects of the new law's most revolutionary provisions: time limits on benefit receipt, strict work standards requiring that half of all welfare recipients in a state be working by 2002, and a block grant structure that afforded states tremendous flexibility in the design and operation of welfare programs.

Given this progress, as Congress considers reauthorizing the new law, it is reasonable to ask: Are any changes needed? Put another way, "If it's not broken, don't fix it!" But of course the context for reform is changing. Economic growth has slowed precipitously, and the population remaining on welfare today is probably less employable and has more barriers to finding and keeping jobs than when reform began in 1996. In addition, states have accumulated only limited experience with respect to several key features of the 1996 law:In more than a third of the states, the federal time limits do not actually become effective until this year; few states have actually had to meet the strict work participation standards the act established in 1996 (largely because the credit states get for welfare caseload reductions have lowered those standards to near zero); and few states have pursued programmatically the act's marriage promotion goals. Finally, the states' success in promoting employment has brought into sharper focus two newer problems - helping the working poor retain their jobs and advance in the labor market, and aiding the hard to employ left behind by welfare reform.

President Bush's recently introduced summary Plan to Strengthen Welfare Reform proposes a number of important changes that the Administration hopes will sustain reform's momentum in this new and changing environment.

First, recognizing the formidable costs of meeting the many challenges ahead, the plan would sustain funding for TANF, the Child Care Development Block Grant, and related programs, while increasing state flexibility to use those funds.

Second, building on new information about the effects of alternative welfare reform approaches on child outcomes, the plan would establish child well being as one of TANF's overarching purposes.

Third, to stimulate state interest in and know-how about sustaining and promoting marriage, the plan proposes substantial investments in innovation and experimentation in this area.

Fourth, to help simplify administration, the plan would clarify the definition of "non-assistance" - the list of TANF services and benefits that do not count as welfare benefits and, thus, are not subject to the welfare time-limit clock.

Fifth, to further support recipients who take jobs, the plan would make the Food Stamp program more worker friendly and the child support program more family friendly by getting more money into the hands of families. Child support orders would be made more responsive to the changing ability of fathers to pay.

Last, and possibly most controversially, the Administration's plan proposes to ratchet up participation standards - giving added emphasis to the strong message TANF already sends to the states, that work and the reduction of welfare caseloads are the central goals - while simultaneously expanding the role of education and training as well as services for the hard to employ. It is a precarious balancing act.

How should the Senate respond to reform's changing context, accumulated experience, and new needs as it considers reauthorization of the landmark 1996 welfare reform laws? And, as the Administration begins to fill in the details underlying the broad principles laid out in its summary plan, how might the legislative process best shape that plan so that it effectively meets the challenges ahead?

Fortunately, as a result of Congressional funding for research and the foresight of staff at the Department of Health and Human Services, the states, and several of the nation's large foundations, an extraordinary body of evidence now exists on which to ground and frame much of the reauthorization debate in these areas. While there are still important unknowns, particularly the effects of a weaker economy and tight state budgets on programs and outcomes, a great deal is now known about the effects on participation, work, welfare use, income, and child outcomes of the primary welfare reform strategies states employed following passage of the 1996 law.

In the presentation that follows, I bring to bear new evidence that particular welfare policies can benefit children, that program effectiveness could be improved by modestly expanding the role of education and training, and that new strategies are needed to promote job advancement for the working poor and to help the hard to employ overcome barriers to employment. I also underscore the risks of further increasing TANF's participation requirements while ending the caseload reduction credit. These steps could have the unintended effect of diverting resources, modifying otherwise successful programs, and increasing costs.

I will begin by describing what states did with the newfound flexibility TANF gave them, and I will summarize what we have learned about the impact of the policies they have implemented. I will conclude by applying those lessons to key reauthorization issues.

What Did States Do?

Flexibility and devolution were hallmarks of the 1996 reforms. After enumerating four broad goals- support needy families, reduce welfare dependency and increase work, reduce out-of- wedlock childbearing, and promote the formation of two parent families - and establishing a set of rewards and penalties tied to those goals, the new act devolved primary responsibility for the actual design and implementation of welfare programs to the states. In state law and in practice, states overwhelmingly emphasized the first two goals while all but a few ignored the second two. Equally important, nearly every state added a new goal - to reward work and reduce poverty for welfare recipients who took jobs, at least until their months on welfare reached the state's time limit on benefits.

Programmatically, what did states do with their new responsibilities and flexibility? Most did three things. First, they emphasized "work first" (and de-emphasized education and training) by requiring virtually all welfare recipients to begin searching for work immediately. These mandatory employment service programs also differed from past efforts in the frequency and intensity of the sanctions states imposed for failure to comply, including full-family sanctions that ended the entire family's welfare grant. Notably, only a handful of states and localities relied on "work for your benefits" work experience programs or subsidized public employment to achieve these goals.

Second, in a little noticed but path breaking development, most states also helped to make work pay by allowing welfare recipients to keep more of their earnings without losing supplemental cash support. By not counting some portion of earnings when calculating welfare benefits, states allowed welfare recipients who took jobs to combine low-wage work with welfare benefits, in effect using welfare benefits as an "earnings supplement" to boost incomes.

Third, states placed limits on the number of months a family could receive welfare benefits, although the nature, enforcement, and, thus, the reality of those limits varied widely. While 17 states have established time limits shorter than the federal limit, several of the largest states - including California, Indiana, Michigan, and New York - either do not have a time limit or have substantially modified the federal limit, choosing instead to use state funds to pay benefits for those who exceed the federal lifetime limit.

Not surprisingly, the block grant framework - and, thus, the reality that TANF is a flexible funding source, not a program - spawned tremendous diversity among the states in the mix of mandates, incentives, and time limits employed, as well as in the emphasis placed on one or the other of these component parts. Some states - Iowa, Michigan, and Montana, for example - have dramatically increased participation in work activities by emphasizing mandates. Taking advantage of the caseload reduction credit, other states have placed less emphasis on mandates. Florida, Louisiana, Ohio, and Utah adopted time limits that are significantly shorter than the federal 60-month maximum and have enforced them strictly. Michigan and Vermont have no time limit at all. California, Connecticut, and Minnesota, among other states, use incentives in the form of generous income disregards to encourage work. These policy options are not mutually exclusive; on the contrary, most states are doing some or all of these things.

The direction a given state took also depended on local circumstance. States with big cities were preoccupied with making the transition from an education-first to a work-first orientation, and tended to focus first and foremost on mandates and the new message that welfare was a temporary source of support. Predominantly rural states had to focus on building the service network required to engage everyone, solving the transportation problems that make engagement difficult, and addressing the lack of employment opportunities that often characterize rural economies and tribal areas.

In addition to these programmatic strategies, states have availed themselves of TANF's flexibility by transferring substantial sums to the Child Care Development Block Grant and the Social Services Block Grant. A handful of states also pushed the outer limits of TANF's flexibility by counting state funds spent on other low- income programs against their TANF Maintenance of Effort spending requirements, in effect freeing up state dollars for other purposes.

Research Results: What Is Known

What difference did these policies make? Fortunately, to answer this question, we can draw on more than 30 high-quality studies of state welfare reform initiatives that tested various combinations of mandatory employment services, earnings supplements, and time limits on welfare receipt. Although many of the studied programs were launched prior to 1996, these key features are central to most states' current welfare reform programs. And the range of program strategies examined reflects the diverse paths states have taken following TANF's passage. (These studies were designed to tell us what net difference a given program strategy made beyond what would have happened under the old welfare rules. Therefore, the words "increase" or "decrease," when used below, refer to how people who were subject to the new program performed relative to similar people in a control group, not to changes over time.) We look at program effects in six key areas - work, welfare, income and hardship, children, family and marriage, and program participation and mandates.



LOAD-DATE: March 13, 2002