Welfare Renovation

Want to help reduce poverty? Begin with the lives of people caught up in welfare reform these days:

For instance, Nia Foster fits the pattern of dependence on government programs. She stopped getting cash payments in the late 1990s and has moved from one clerical job to another--with none providing medical benefits. The 32-year-old mother of two from Cincinnati supports her family with help from food stamps and Medicaid. Foster had been unable to get any job training when she left welfare. She earned her high-school equivalency last year at a community college.

"If you want to get educated or want to succeed, the welfare office don't care,'' Foster said. "I don't think they really care what you do once the benefits are gone.''

She began this year working in a tax office, a seasonal job that ends after April 15. She hopes to enroll at the University of Cincinnati this spring and would like to study accounting, waiting to find out if she qualifies for enough financial aid to cover tuition.

Putting her disclaimer in perspective, Nia is an example of both the effectiveness AND ineffectiveness of welfare reform. Although not getting much help along the way and having still a long way to go, she seems determined eventually to make it on her own. However, most women (historically women with their children represent the majority of qualifying welfare recipients) currently supported through TANF (Temporary Assistance to Families in Need), don't fare so well. As an illustration of the kind of person who TANF was designed to serve, Nia's journey-and her critique-coincides with what State officials have been telling Congress this year: new federal welfare rules either do not make much difference or are actually making it harder to move people from public assistance to self-sufficiency.

Responding to budget recommendation for next year, welfare administrators from around the country stated their case in early March before the House subcommittee that oversees welfare issues. They said stricter work requirements limit opportunities for education programs or vocational training, and that leaves many welfare recipients stuck in low-paying jobs. The program's methods seem to stand in the way of its promise.

Background

In contrast to TANF, in the early 1990s the welfare system seemed to encourage unemployment and promoted single-parent families. Welfare recipients, mostly unwed mothers, were given a subsistence income for just staying at home. They could lose benefits if, seeking to advance themselves, they made too much money or lived with the father of their children.

Major changes in welfare were enacted in 1996, requiring most recipients to work but allowing them to continue receiving some benefits after they started jobs. The law imposed a five-year limit on cash payments for most people in the program. Some states have shorter time limits (Ohio standard is three years with the possibility of stretching it to the federal limit)

Current Situation

In 2005, about 5.1 million people received monthly welfare payments from TANF and similar state programs, a 60 percent drop from a decade before. But other government programs grew, offsetting the declines. About 44 million people -- nearly one in six in the country -- relied on government services for the poor in 2003, according to the most recent statistics compiled by the Census Bureau. That compares with about 39 million in 1996.

Medicaid rolls alone topped 45 million people in 2005, increased in part by rising health costs and fewer employers offering benefits. And nearly 26 million people a month received food stamps that year.

This reflects the growth of multiple strands of welfare in this country despite 10 years of policies designed to wean poor people from public aid. Although the number of families receiving cash benefits has plummeted since the government first imposed time limits on payments in 1996, other programs for the poor--including Medicaid, food stamps and disability benefits--are bursting with new participants. The result is that nearly one in six people relies on some form of public assistance, a larger share than at any time since the government started measuring two decades ago.

Critics of the welfare overhaul say numbers offer fresh evidence that welfare reform didn't work if success means getting people out of poverty. The bulk of people these days under TANF are now in low-paying, dead-end jobs without benefits, and dependent upon programs like food stamps and Medicaid.

Proponents of the changes in welfare say programs that once discouraged work now offer support to people in low-paying jobs. They point to expanded eligibility rules for food stamps and Medicaid, the health insurance program for the poor that enable people to keep getting benefits even after they start working. They commend at least the switch in image from entitlement to supplemental assistance--from welfare to "workfare."

National Regulations and State Implementation

In the coming months, states will face key choices in deciding the next direction for continuing to reform welfare reform. One level of consideration will be financial cost of reducing their numbers through stepped up human services delivery funded through setting these national priorities. The second ongoing determinant occurs within the state administration and legislature in their partnership of matching federal moneys and implementing programs that encourage dependent Ohioan toward greater self-sufficiency.

Under current regulations, 50 percent of all adults in states receiving TANF assistance - and 90 percent of two-parent households receiving assistance - must participate in a set of work activities defined in the law. Few states are likely to reach this target quickly unless they choose to restrict poor families' access to assistance. TANF currently assists fewer than half of the families with children who qualify, in part because of policies in many states that make it difficult for some very poor families to get both income assistance and help to find a job.

Last year's Deficit Reduction Act (DRA)--which tamped down the 2007 budget and under which TANF was reauthorized-was ladened with new and more restrictive federal regulations. The combined result confronts states with stark choices: focus solely on meeting the work rates, even if that means making programs less accessible or less effective at helping needy families and helping families move to work, or increase work participation rates in ways that improve families' employment outcomes, even if that path is the more expensive one to take.

What Works?!

Although apparently not fully drawn upon during the TANF reauthorization, testimonies from research and states' experience over the last decade has a lot of ideas to offer in moving vulnerable populations toward being able to take better care of themselves. Their joint witness strengthens the case of advocates who believe that more emphasis needs to be placed on preliminary preparation, job training, and work support services to improve chances for moving "needy families" into greater independence:

To Have but Not Necessarily to Hold

Over the past decade, many TANF recipients found employment, only to lose jobs and return to the program during prolonged periods of labor market downward trends. Possibilities for success or failure largely parallel the strength or weakness of the economy. Therefore, safety nets must remain in place within these predictably fluctuating times. Most parents who left TANF for work had low earnings and were unable to increase their wages or earnings significantly over time. This fact points to the need for new ways to help persons find better jobs and advancement opportunities, as well as the need for new strategies to provide supports to low-income working families.

Customizing Expectations?

Most successful welfare-to-work programs adopt a "mixed strategy" rather than a narrow "work-first" approach. Preliminary opportunities for skill-building and dealing with previous barriers keeping a job are essential before they can succeed in the labor market. Serious hindrances to employment often go undetected by TANF and welfare-to-work caseworkers. Inevitably, families unable to secure stable employment in the past face serious barriers in the future. These range from emotional and physical problems and low cognitive functioning to domestic violence, substance abuse, and unstable housing. Families facing these problems often fail to participate consistently in program activities or falter in making progress toward employment. More could be done to help families overcome personal obstacles. States need to improve their screening and assessment procedures to better identify families with barriers to employment. For example, states could conduct up-front screenings; use lax program participation as a clue that further assessments may be warranted; draw on the expertise of agencies with experience in assessing disabilities; provide intensive case management to recipients who are struggling; and encourage caseworkers to devise flexible employment plans tailored to families' unique circumstances. If these families are to engage consistently in welfare-to-work activities and ultimately move toward employment, they will need more sensitivity, counseling, and overall moral support to meet these challenges. Also improving their chances of getting jobs will depend upon tailoring their personal interests, skills, and potential handicaps with the expectations of their employers.

For some individuals, such as those with chronic personal issues, untreated (or unsuccessfully treated) mental health problems, learning disabilities, or substance abuse problems, remedies to help recipients address these challenges may be necessary before they can participate in standard work activities. Vocational rehabilitation training and supportive work placements may be needed for some recipients, such as those with developmental disabilities.

Extra Financial Support

Providing income supplements to low-income working families increases employment rates and earnings, clearly reducing poverty. States can provide income supplements in a number of ways including assistance within the state's basic TANF program for families that are working and changing the benefit rules so that working recipients remain eligible for assistance until their earnings reach higher levels. Providing other more imaginary form of short-term, up-front, and not-necessarily monetary-benefits to families serve as crucial bonds for a parent is likely to find employment quickly. Such policies can help families who would have been eligible for TANF to weather a temporary period of joblessness and enable some families to avoid ongoing aid entirely. Providing bonuses to parents who leave TANF for work and remain employed is also an incentive for success. These policies can also serve as a bridge to programs designed to help low-income working families.

SUPPLEMENTAL ASSISTANCE

Four supplemental programs available within TANF, subject to local interpretation, can make or break the probability of a family's eventual emancipation from governmental entitlements. These include health coverage (see Issue 2), transportation child care assistance, and Earn Income Tax Credits (EITC).

Transportation. Often the capability and willingness to support oneself is stymied by the inability to get to work. This is especially difficult for persons lacking initial cash to afford fuel, having to travel long distances without a vehicles, and when working at other than usual public transit service hours. Trumbill County has recently responded to this need by providing the working poor with rides to their jobs. County officials have decided to use taxis rather than mass transportation because clients need the service 24 hours, seven days a week. Some also must cross county or state borders. The local Department of Jobs and Family Services has also provided rides to job sites in neighboring Pennsylvania and medical appointments at a regional health clinic.

Child Care On average, annual child care costs for just one child are higher than families' clothing and health care costs combined, and low-income families may spend as much as a quarter of their income on child care costs. To offset these costs, child care assistance is critical both to helping families move from welfare to work and to helping working families remain employed. Cutting child care assistance for working families is contrary to the goals of welfare reform, since child care assistance helps families keep their jobs and stay off TANF. Thus, states implementing effective welfare to work programs must consider their overall financial investments in child care assistance and policy changes to ensure that low-income working families have access to child care.

Earned Income Tax Credits (EITC)

Finally, available to any low income family, this program, along with TANF does more to bring working families out of poverty than anything else the government has to offer. The federal Earned Income Tax Credit (EITC) or Earned Income Credit (EIC) is a refundable tax credit available to some working individuals and families who earn less than $38,000. The earned income "credit," which more accurately is a government transfer payment. An estimated four million families were lifted above the poverty level because of the EITC program in 2004. Those taxpayers got an average of more than $2,200 from the federal program that began very small in 1975 but has grown to involve more than 22 million households and more than $41 billion annually nationwide.

The EITC, which varies in value according to family size, marital status and income, can reach a maximum of $4,536 in the 2006 tax year. Over the years, eligibility has expanded greatly. For tax year 2006, the credit can be claimed by couples making up to $38,348 or singles earning up to $36,348 with two or more children. Childless taxpayers between 25 and 65 can qualify too if they earn less than $14,120 for a couple, or $12,120 for an individual.

There are a few other rules. The filer must have some earned income from a job or self-employment, must have a Social Security number, and cannot have more than $2,800 in investment income. The maximum credits range from $412 for those with no children, to $2,747 for those with one child, to $4,536 for families with two or more children.

But even as popular as the earned income credit has become, many taxpayers either don't know about it, or are fearful of the process. The Internal Revenue Service recently reported that about a fourth of eligible Americans fail to file for the credit.

In the 2004 tax season, more than 780,000 Ohio families received the EITC at an average credit of $1,729, which brought more than $1.3 billion in federal refunds to Ohio. Only seven other states receive more EITC dollars than Ohio, and Ohio accounts for approximately 3.6% of all the nation's credits.

The Ohio General Assembly will be considering a legislation this year to offer an EITC on state taxes (29 other state now have such programs). Although costing the state up to an estimated $260 million, depending upon a range of 5%-20%), passage seems assured given likely bi-partisan support.

Opportunities in '07

As our society searches for solutions to the perpetual problem of poverty, we find hope beyond statistics and direction not only in social policy; rather, we witness transformation in the lives of those who have "overcome":

Such as Shannon Stanfield who took a different, less-traveled path from welfare, thanks to a generous program that offered her a chance to get a college education. Stanfield, 36, was cleaning houses to support her two young children four years ago when she learned about a program for welfare recipients at nearby Hamilton College, a private liberal arts school in Clinton, N.Y.

"At the time, I was living in a pretty run-down apartment,'' said Stanfield, who was getting welfare payments, Medicaid and food stamps. "It wasn't healthy.''

The program, called the Access Project, accepts about 25 welfare-eligible parents a year. Hamilton waives tuition for first-year students and the program supplements financial aid in later years. Students get a host of social and career services, including help finding internships and jobs and financial assistance in times of crisis.

Stanfield, who still gets Medicaid and food stamps, plans to graduate in May with a bachelor's degree in theater. She wants to be a teacher.

"I slowly built up my confidence through education,'' Stanfield said. "I can't honestly tell you how much it has changed my life.''

Back to top