[House Hearing, 107 Congress]
[From the U.S. Government Printing Office]




                             WELFARE REFORM

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 15, 2001

                               __________

                            Serial No. 107-5

                               __________

         Printed for the use of the Committee on Ways and Means


                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota               GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa                     JOHN LEWIS, Georgia
SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington            MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia                 WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio                    JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania           XAVIER BECERRA, California
WES WATKINS, Oklahoma                KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona               LLOYD DOGGETT, Texas
JERRY WELLER, Illinois               EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
                     Allison Giles, Chief of Staff
                  Janice Mays, Minority Chief Counsel
                                 ------                                

                    Subcommittee on Human Resources

                   WALLY HERGER, California, Chairman
NANCY L. JOHNSON, Connecticut        BENJAMIN L. CARDIN, Maryland
WES WATKINS, Oklahoma                FORTNEY PETE STARK, California
SCOTT McINNIS, Colorado              SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  LLOYD DOGGETT, Texas
PHIL ENGLISH, Pennsylvania
RON LEWIS, Kentucky

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                            C O N T E N T S

                              ----------                              
                                                                   Page
Advisory of March 8, 2001, announcing the hearing................     2

                               Witnesses

U.S. General Accounting Office, Cynthia M. Fagnoni, Managing 
  Director, Education, Workforce, and Income Security Issues.....     6
Library of Congress, Christine Devere, Analyst in Social 
  Legislation, Domestic Social Policy Division, Congressional 
  Research Service...............................................    17
                                 ------                                
Center for Law and Social Policy, Mark Greenberg.................    41
Rector, Robert, Heritage Foundation..............................    50

                       Submissions for the Record

Association for Children for Enforcement of Support, Inc., 
  Sacramento, CA, Geraldine Jensen, statement and attachment.....    84
Coalition on Women and Job Training, statement...................    87

 
                             WELFARE REFORM

                              ----------                              


                        THURSDAY, MARCH 15, 2001

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Human Resources,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 11:00 a.m., in 
room B-318 Rayburn House Office Building, Hon. Wally Herger 
(Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                                CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE
March 8, 2001
HR-1

                        Herger Announces Hearing

                        Series on Welfare Reform

    Congressman Wally Herger (R-CA), Chairman, Subcommittee on Human 
Resources of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on the effects of the 1996 welfare 
reform law. The hearing will take place on Thursday, March 15, 2001, in 
room B-318 of the Rayburn House Office Building, beginning at 11:00 
a.m.

    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.

BACKGROUND:

    The Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996 (P.L. 104-193), commonly referred to as the 1996 welfare reform 
law, made dramatic changes in the Federal-State welfare system designed 
to aid low-income American families. The law repealed the former Aid to 
Families with Dependent Children program, and with it the individual 
entitlement to cash welfare benefits. In its place, the 1996 
legislation created a new Temporary Assistance for Needy Families 
(TANF) block grant that provides fixed funding to States to operate 
programs designed to achieve several purposes: (1) provide assistance 
to needy families, (2) end the dependence of needy parents on 
government benefits by promoting job preparation, work, and marriage, 
(3) prevent and reduce the incidence of out-of-wedlock pregnancies, and 
(4) encourage the formation and maintenance of two-parent families. 
Associated changes included individual time limits and work 
requirements intended to reinforce the new focus on work and 
independence for families needing assistance.

    Recognizing the significance of the changes made in the 1996 
legislation, the authors of the 1996 law authorized the new TANF 
program through only fiscal year 2002. As a result, evaluating the 
effects of the 1996 changes will play a central role in determining 
whether and what adjustments to TANF and related programs may be 
necessary. This is the first of a series of hearings the Subcommittee 
will conduct during the 107th Congress to answer those questions in 
preparation for reauthorization of the 1996 law next year.

    In announcing the hearing, Chairman Herger stated: ``Our 
Subcommittee looks forward to taking a close look at the effects of the 
historic 1996 welfare reform law. We already know there have been 
dramatic changes resulting from that law--work is up, caseloads are 
down 50 percent, and child poverty is down, too. Now our task is to 
evaluate what these and other impacts mean, as well as assess new 
priorities as we move toward reauthorization of the 1996 law next 
year.''

FOCUS OF THE HEARING:

    The focus of this hearing is to review research on the effects of 
the Personal Responsibility and Work Opportunity Reconciliation Act of 
1996, particularly related to the four primary purposes of the Act 
described above. The Subcommittee also will seek information on lessons 
learned from innovative State programs and on continuing challenges 
facing States and localities as families move from welfare to work.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect or MS Word format, with their name, address, 
and hearing date noted on a label, by the close of business, Thursday, 
March 29, 2001, to Allison Giles, Chief of Staff, Committee on Ways and 
Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Human Resources office, room B-317 
Rayburn House Office Building, by close of business the day before the 
hearing.

FORMATTING REQUIREMENTS:

      Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.

      1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect or 
MS Word format, typed in single space and may not exceed a total of 10 
pages including attachments. Witnesses are advised that the Committee 
will rely on electronic submissions for printing the official hearing 
record.

      2. Copies of whole documents submitted as exhibit material will 
not be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
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      3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
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      4. A supplemental sheet must accompany each statement listing the 
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the designated representative may be reached. This supplemental sheet 
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      The above restrictions and limitations apply only to material 
being submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                


    Chairman Herger. Good morning. I will convene this hearing.
    Welcome to the first hearing of the Human Resources 
Subcommittee in the 107th Congress. The subject of today's 
hearing is ``Research on the Effects of Welfare Reform.'' Since 
this is my first hearing as chairman, I just want to begin with 
a personal word about what a privilege it is for me to take 
part in the important debate on welfare reform that is about to 
unfold.
    I know that many Members of this Subcommittee, the full 
Committee, and the rest of the Congress, played important roles 
in passing the 1996 Welfare Reform law and subsequent 
legislation. I will count on all of your expertise and insight 
as we move forward with reauthorization in the next 19 months.
    Our first hearing will cover research on the effects of the 
1996 law. This law, and what we know about its impacts, will 
guide us throughout the reauthorization debate. Those impacts 
have been, in a word, remarkable. More than two million 
families have left welfare, work is up, child poverty is down, 
and welfare caseloads have dropped over 50 percent. Everyone, 
from those who supported the bill, to those who opposed it, 
accepts these facts. So we will be building on a very strong 
foundation.
    But there is still a lot of work to do. No one should read 
anything into our starting this process on the Ides of March. I 
am convinced we can and will work together to produce excellent 
legislation that builds on the 1996 law. That is my mission, 
and I know it is one that is shared by my colleagues on both 
sides of the aisle.
    For today's purposes, we will pay special attention to 
evidence about whether the 1996 law achieved its major 
purposes, which include: one, providing assistance to needy 
families; two, ending dependence on government by promoting 
work and marriage; three, preventing and reducing the incidence 
of out-of-wedlock pregnancies; and four, encouraging the 
formation and maintenance of two-parent families.
    We also are particularly interested in lessons learned from 
innovative State programs and ways to address continuing 
challenges as families move from welfare to work. Today, we 
have a distinguished set of witnesses to answer these questions 
and more.
    First, we will hear from nonpartisan representatives of the 
Congressional Research Service and the General Accounting 
Office, who will review what is known from some of the major 
studies of welfare reform. Then we will hear from two outside 
experts who are very familiar to this Subcommittee, Robert 
Rector of the Heritage Foundation, and Mark Greenberg of the 
Center for Law and Social Policy.
    They will add their perspective on what the research tells 
us about impacts of the 1996 law. They will also provide 
suggestions for us to consider as we set about making further 
changes in the coming year-and-a-half.
    Without objections, each Member will have the opportunity 
to submit a written statement and have it included in the 
record at this point.
    Now, before I turn to Mr. Cardin for his opening statement, 
I understand we have a vote starting after 11:15, so hopefully 
we can at least get through the testimony and maybe even some 
questions for our first panel before we have to recess.
    I now recognize Mr. Cardin for his opening statement.
    [The opening statement of Chairman Herger follows:]

   Opening Statement of the Hon. Wally Herger, M.C., California, and 
               Chairman, Subcommittee on Human Resources

    Welcome to the first hearing of the Human Resources Subcommittee in 
the 107th Congress.
    Since this is my first hearing as Chairman, I just want to begin 
with a personal word about what a privilege it is for me to take part 
in the important debate on welfare reform that is about to unfold.
    I know many of the Members of this subcommittee, the full 
committee, and the rest of the Congress played important roles in 
passing the 1996 welfare reform law and subsequent legislation.
    I will count on all of your experience and insight as we move 
forward with reauthorization in the next 19 months. Our first hearing 
will cover research on the effects of the 1996 law.
    This law and what we know about its impacts will guide us 
throughout the reauthorization debate. Those impacts have been, in a 
word, remarkable. More than 2 million families have left welfare, work 
is up, child poverty is down, and welfare caseloads have dropped over 
50 percent. Everyone--from those who supported the bill to those who 
opposed it--accepts these facts.
    So we will be building on a very strong foundation, but there is 
still a lot of work to do. No one should read anything into our 
starting this process on the Ides of March. I am convinced we can and 
will work together to produce excellent legislation that builds on the 
1996 law.
    That is my mission, and I know it is one shared by my colleagues on 
both sides of the aisle. For today's purposes, we will pay special 
attention to evidence about whether the 1996 law achieved its major 
purposes, which include:
    1. Providing assistance to needy families;
    2. Ending dependence on government by promoting work and marriage;
    3. Preventing and reducing the incidence of out-of-wedlock 
pregnancies;
    4. Encouraging the formation and maintenance of two-parent 
families.
    We also are particularly interested in lessons learned from 
innovative State programs and ways to address continuing challenges as 
families move from welfare to work.
    Today we have a distinguished set of witnesses to answer these 
questions and more.
    First, we will hear from nonpartisan representatives of the 
Congressional Research Service and the General Accounting Office, who 
will review what is known from some of the major studies of welfare 
reform.
    Then we will hear from two outside experts who are very familiar to 
this subcommittee--Robert Rector of the Heritage Foundation and Mark 
Greenberg of the Center on Law and Social Policy.
    They will add their perspective on what the research tells us about 
impacts of the 1996 law. They also will provide suggestions for us to 
consider as we set about making further changes in the coming year and 
a half.
    With that, Mr. Cardin, do you have an opening statement?

                                


    Mr. Cardin. Thank you, Mr. Chairman.
    I want to thank you for, as your first hearing as chairman, 
focusing in on TANF, because clearly, the most important 
responsibility of this Subcommittee will be the reauthorization 
of TANF and the related programs. I look forward to working 
with you.
    As I listened to your opening statement, you are correct, 
that we all have the same purpose for looking at the TANF 
program and seeing what will be coming next.
    Mr. Chairman, I hope that we won't get into a debate during 
this hearing and in future hearings dealing with whether the 
1996 welfare law worked. The question of whether it's been 
successful or whether it's the benefit of a strong economy--
although, quite frankly, the economy doesn't look quite as 
strong today as the stock market opens--or whether we are just 
creating a lot of people working in poverty misses the point. 
The truth is that all three of those observations have some 
truth. Our focus should be what comes next, what is the next 
chapter.
    Our hearings are important, because there's a lot of 
information that we don't know about. We don't know about a lot 
of people who have left welfare who are not working, what has 
happened to that group.
    I was very impressed with Secretary Thompson's testimony 
before our full Committee yesterday, Mr. Chairman, and his 
commitment to helping people who have left welfare, who are 
working, but need the skills and training in order to succeed 
in the workplace. What Secretary Thompson was basically saying 
is that we don't want to replace generations of families that 
were dependent upon welfare with generations of families that 
are trapped working in poverty. As Secretary Thompson said--and 
I agree--that's going to require a stronger Federal presence, 
not a reduced Federal presence.
    So as we start our process of evaluating the TANF program 
and how it has achieved its initial objectives, I hope that we 
will concentrate on what should be the Federal role in the next 
level, the next chapter in welfare reform. I would hope that it 
will have a strong presence in reducing poverty, particularly 
among working Americans who have left welfare, so that we can 
truly say the people have left welfare for a better life, a 
life where they can succeed in the workplace. We need to take a 
look at our welfare programs to make sure that, in fact, they 
will achieve those objectives as we reauthorize the programs.
    I do look forward to listening to our witnesses, not only 
today but in the future hearings of our Committee.
    Chairman Herger. Thank you very much, Mr. Cardin, for your 
remarks.
    At this time I would like to call up our first panel, 
Cynthia M. Fagnoni, Managing Director, Education, Workforce and 
Income Security Issues, U.S. General Accounting Office, and 
Christine Devere, Analyst, Social Legislation, Domestic Social 
Policy Division, Congressional Research Service.
    Miss Fagnoni, we would be happy to receive your testimony.

STATEMENT OF CYNTHIA M. FAGNONI, MANAGING DIRECTOR, EDUCATION, 
WORKFORCE, AND INCOME SECURITY ISSUES, U.S. GENERAL ACCOUNTING 
                             OFFICE

    Ms. Fagnoni. Good morning, Mr. Chairman. Thank you.
    Mr. Chairman and Members of the Subcommittee, I am pleased 
to be here today to discuss welfare reform. Since the Congress 
passed welfare reform legislation in 1996, this Subcommittee 
has asked us to examine a broad range of welfare reform issues. 
Today I will focus on States' progress in implementing TANF and 
what we know about families who have left welfare and those who 
remain on the rolls.
    Our work shows that States are moving away from a welfare 
system focused on entitlement to one that emphasizes finding 
employment as quickly as possible. In keeping with this ``work 
first'' approach, many States and localities have transformed 
their welfare offices into job placement centers. In these 
offices, welfare workers help TANF applicants and recipients 
find jobs and link them to services, such as child care and 
transportation, to support their work efforts.
    In addition, welfare workers focus more on helping 
recipients address and solve problems that can interfere with 
employment.
    Some States are providing services to low-income working 
families not receiving cash assistance, which can help these 
families avoid welfare dependency. States' implementation of 
more work-based programs facilitated by strong economic growth 
has been accompanied, as you mentioned, by a 50 percent decline 
in the number of families receiving cash welfare since welfare 
reform legislation was signed into law, from 4.4 million 
families in August, 1996, to 2.2 million in June, 2000.
    With this dramatic drop in the welfare rolls has come 
increased interest in how former welfare recipients are faring. 
Information available shows that most adults who left welfare 
had at least some attachment to the workforce. Our 1999 review 
showed employment rates ranging from 61 to 87 percent for 
adults and families who had left welfare in seven States. In 
some instances, these rates measured whether an adult in the 
family had ever been employed since leaving welfare, rather 
than steady employment.
    A recent report by the Urban Institute, based on its 1999 
nationally representative sample, finds that 64 percent of 
former TANF recipients reported that they were working at the 
time of their follow up, while another 11 percent reported 
working at some point after leaving welfare.
    Former recipients in the seven States we reviewed had 
average annual earnings that generally ranged from $9,500 to 
about $15,000, if the families had worked all year long--and 
many did not. This estimated annual earned income is greater 
than the maximum annual amount of cash assistance and food 
stamps that a three-person family with no other income could 
have received in these States. But if these earnings were the 
only source of income for these former welfare families, many 
of them would remain below the Federal poverty level.
    More comprehensive information on total household income 
and use of other government supports is needed to fully 
understand the circumstances of these families. The State 
studies we reviewed typically did not provide such 
comprehensive information.
    Regarding the adults who continue to receive cash 
assistance, a higher percentage are combining welfare and work 
than previously. In fiscal year 1997, 17 percent of TANF 
recipients worked, compared with 25 percent in fiscal year 
1999. But a majority of TANF recipients are not working or 
engaged in work activities. This is in part because many have 
characteristics, such as health problems and disabilities, that 
make it difficult for them to get and keep jobs.
    To better meet the needs of these TANF recipients, all six 
of the States we recently visited have modified their ``work 
first'' programs to include strategies for hard-to-employ 
recipients. These strategies include improving and expanding 
case management, providing programs and services targeted 
specifically to prepare the hard-to-employ for work, and 
drawing on programs run by non-TANF agencies and organizations 
that deal with specific problems, such as substance abuse and 
mental illness.
    During our site visits, State and local officials reported 
program success at the local level. For example, in Grand 
Rapids, MI the local TANF agency had stationed two case 
managers at a large company that employs TANF recipients to 
help the hard-to-employ retain their jobs. These on-site case 
managers serve as a resource, both for employees and for the 
employer, helping employees cope with crises that might 
otherwise cause them to lose their jobs and intervening on 
behalf of the employer at the first sign of trouble.
    Company officials directly attributed the higher retention 
rates for TANF than for non-TANF employees to on-site case 
management and cooperation from the local TANF agency. While 
hard-to-employ recipients may find the transition to work 
difficult, the States have found that some do, in fact, find 
jobs.
    In closing, States have made significant progress in 
transforming the Nation's welfare system into a work-based, 
temporary assistance program for low-income families. As 
welfare reform evolves, attention will be focused on 
emphasizing and enhancing work-based strategies, both for 
families who have already left welfare for work, and for those 
who may need more assistance to become employed.
    Mr. Chairman, this concludes my prepared statement. I would 
be happy to answer any questions you or Members of the 
Subcommittee may have.
    [The prepared statement of Ms. Fagnoni follows:]

     Statement of Cynthia M. Fagnoni, Manager Director, Education, 
 Workforce, and Income Security Issues, U.S. General Accounting Office
      Welfare Reform: Progress in Meeting Work-Focused TANF Goals

    Mr. Chairman and Members of the Subcommittee: Thank you for 
inviting me here today to discuss the progress of welfare reform and 
our related work. The 1996 Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (P.L. 104-193) (PRWORA) significantly 
changed federal welfare policy for low-income families with children, 
building upon and expanding state-level reforms. It ended the federal 
entitlement to assistance for eligible needy families with children 
under Aid to Families With Dependent Children (AFDC) and created the 
Temporary Assistance for Needy Families block grant (TANF), designed to 
help needy families reduce their dependence on welfare and move toward 
economic independence. Under TANF, states have increased flexibility to 
meet four broad goals:
     Providing assistance to needy families so that children 
may be cared for in their own homes or in the homes of relatives;
     Ending the dependence of needy parents on government 
benefits by promoting job preparation, work, and marriage;
     Preventing and reducing the incidence of out-of-wedlock 
pregnancies; and
     Encouraging the formation and maintenance of two-parent 
families.
    In addition, PRWORA requires states to impose federal work and 
other program requirements on most adults receiving aid and to enforce 
a lifetime limit of 5 years, or less at state option, on the receipt of 
federal assistance.
    As states have implemented TANF, this Subcommittee has asked us to 
examine a broad range of welfare reform issues. My testimony today will 
focus on the progress of welfare reform related to the goals of 
providing assistance and reducing dependency by promoting work. More 
specifically, it discusses (1) states' progress in implementing TANF, 
(2) the status of families who have left welfare, (3) the 
characteristics of adults currently receiving TANF and state strategies 
for helping hard-to-employ recipients find jobs, and (4) emerging 
issues as welfare reform evolves. The information on former welfare 
recipients is from our 1999 review of state studies and more recent 
studies. Information on current welfare recipients and state strategies 
for serving hard-to-employ recipients is drawn from our latest review 
of national data, numerous research studies, and visits to six states 
from a new report to this Subcommittee to be released soon.
    In summary, our work shows that states are transforming the 
nation's welfare system into a work-based, temporary assistance program 
for needy families, with a focus on moving people into employment 
rather than signing them up for cash assistance. States' implementation 
of TANF, undertaken in a time of strong economic growth, has been 
accompanied by a 50 percent decline in the number of families receiving 
cash welfare--from 4.4 million in August 1996 to 2.2 million as of June 
2000. Our review of state-sponsored studies available in 1999 and 
several more recent studies show that most of the adults in families 
remaining off the welfare rolls were employed at some time after 
leaving welfare. Of adults who continue to receive TANF cash 
assistance, national data show that a higher percentage is currently 
engaged in work than previously--17 percent in fiscal year 1997 
compared to 25 percent in fiscal year 1999. A majority of those on the 
rolls, however, are not working or engaged in work activities, in part 
because many have characteristics that make it difficult for them to 
get and keep jobs. All six of the states we visited have modified their 
``work first'' programs--designed to move recipients quickly into 
jobs--to better serve recipients who face difficulties in entering the 
workforce. States have found that some of the recipients with such 
difficulties do, in fact, find jobs. While states have made significant 
progress in meeting work-focused goals, as welfare reform continues to 
evolve, attention should be paid to these issues:
           Emphasizing and enhancing work-based strategies, 
        including engaging hard-to-employ recipients in work and 
        helping families stay off welfare and increase their earnings; 
        and
           Fostering and facilitating improved management and 
        service delivery approaches by states.

   AS STATES IMPLEMENTED WELFARE REFORM AMID STRONG ECONOMIC GROWTH, 
                  WELFARE CASELOADS DROPPED 50 PERCENT

    Consistent with the thrust of the federal welfare reform law, 
states are moving away from a welfare system focused on entitlement to 
assistance to one that emphasizes finding employment as quickly as 
possible, called a ``work first'' approach. Our work and other studies 
show that many states and localities have transformed their welfare 
offices into job placement centers. In some locations, applicants are 
expected to engage in job search activities as soon as they apply for 
assistance and may be provided support services, such as child care and 
transportation, to support their work efforts without adding them to 
the welfare rolls. Our recently issued report on child care noted that 
spending on child care programs for low-income families under TANF and 
the Child Care and Development Fund increased substantially in recent 
years, from $4.1 billion in fiscal year 1997 to $6.9 billion in fiscal 
year 1999 in constant dollars.\1\
---------------------------------------------------------------------------
    \1\ Child Care: States Increased Spending on Low-Income Families 
(GAO-01-293, Feb. 2, 2001).
---------------------------------------------------------------------------
    As many welfare offices have increased their emphasis on work 
activities, welfare offices and workers are also focusing more on 
helping clients address and solve problems that interfere with 
employment. In addition, some states are using the flexibility allowed 
under TANF to continue providing services to families who left the 
welfare rolls as a result of employment, including, in some cases, 
providing case management services to help ensure that families can 
deal with problems that might put parents' jobs at risk. Some states 
are also providing services to low-income working families not 
receiving cash assistance.
    States' implementation of more work-based programs, undertaken 
under conditions of strong economic growth, has been accompanied by a 
dramatic decline in the number of families receiving cash welfare. As 
shown in figure 1, the number of families receiving welfare remained 
steady during the 1980s and then rose rapidly during the early 
1990s.\2\
---------------------------------------------------------------------------
    \2\ A Congressional Budget Office (CBO) model attributes more than 
half of the growth in AFDC caseloads between 1989 and 1992 to increases 
in the number of female-headed families (especially never-married 
females) and approximately one-fourth of the growth to the recession 
and to the weak economy that preceded and followed the recession. CBO 
Staff Memorandum, Forecasting AFDC Caseloads, With an Emphasis on 
Economic Factors (CBO, Washington, D.C.: July 1993).
---------------------------------------------------------------------------
    The caseload decline began in 1995 and accelerated after passage of 
PRWORA, with a 50 percent decline in the number of families receiving 
cash welfare--from 4.4 million families in August 1996 to 2.2 million 
families in June 2000. Caseload reductions occurred in all states, 
ranging from 10 percent in the District of Columbia to 85 percent in 
Wyoming.\3\ While economic growth and state welfare reforms have been 
cited as key factors to explain nationwide caseload decline, there is 
no consensus about the extent to which each factor has contributed to 
these declines.\4\
---------------------------------------------------------------------------
    \3\ Data on caseload reductions for families by state utilize 
January 1997 to June 2000 data.
    \4\ Studies have specifically cited the following reasons for the 
caseload decline: changes made by PRWORA; state changes to welfare 
programs that preceded PRWORA; changes in client and caseworker 
behavior; past increases in the minimum wage; and low unemployment 
rates. See Council of Economic Advisers, The Effects of Welfare Policy 
and the Economic Expansion on Welfare Caseloads: An Update (Washington 
D.C.: Council of Economic Advisers, Aug. 1999). See also Rebecca M. 
Blank, What Causes Public Assistance Caseloads to Grow? (Cambridge, 
Mass.: National Bureau of Economic Research, Dec. 1997).

 Figure 1: Number of Families Receiving Welfare From 1982 Through June 
                                  2000

[GRAPHIC] [TIFF OMITTED] T3533A.001


MOST ADULTS IN FORMER WELFARE FAMILIES WERE EMPLOYED AT SOME TIME AFTER 
                LEAVING WELFARE, OFTEN AT LOW-WAGE JOBS

    Information on former welfare recipients shows that most adults who 
left welfare had at least some attachment to the workforce. Our 1999 
review on the status of former welfare recipients identified studies 
from seven states that provided representative data on families leaving 
welfare.\5\ Employment rates among adults in the families who left 
welfare in these seven states ranged from 61 to 87 percent.\6\ However, 
the employment rates were measured in different ways. Studies measuring 
employment at the time of follow-up reported employment rates from 61 
to 71 percent. Studies measuring whether an adult in a family had ever 
been employed since leaving welfare reported employment rates from 63 
to 87 percent. A more recent review of state and local-level studies 
supported by funds from HHS' Office of the Assistant Secretary for 
Planning and Evaluation (ASPE) shows similar patterns.\7\ In addition, 
a recent report by the Urban Institute, using data from its 1999 
National Survey of America's Families (NSAF)--a nationally 
representative sample--finds that 64 percent of former recipients who 
did not return to TANF reported that they were working at the time of 
follow-up, while another 11 percent reported working at some point 
since leaving welfare.\8\
---------------------------------------------------------------------------
    \5\ See Welfare Reform: Information on Former Recipients' Status 
(GAO/HEHS-99-48, Apr. 28, 1999). In this report we identified 18 
studies about former recipients and summarized the findings from eight 
of these studies (representing seven states) based on whether the 
results could be generalized to most families who left welfare in the 
state at the time of the study. The states we studied are Indiana, 
Maryland, Oklahoma, South Carolina, Tennessee, Washington, and 
Wisconsin. Because the seven states' studies differed in time periods 
covered--from as early as 1995 to as late as 1998--and categories of 
families studied, the results are not completely comparable.
    \6\ Employment rates in various studies generally excluded families 
who returned to welfare. Removing families who return to welfare from 
the employment rate calculations results in higher employment rates, 
because many former recipients who return to the welfare rolls are not 
employed.
    \7\ ASPE has encouraged the use of comparable measures among 
research focused on former recipients. ASPE awarded grants to states 
and the research community in fiscal years 1998, 1999, and 2000 for 
studies in 10 states and three large counties.
    \8\ Pamela Loprest, How Are Families Who Left Welfare Doing Over 
Time? A Comparison of Two Cohorts of Welfare Leavers (Washington, D.C.: 
Urban Institute, Dec. 8, 2000). Respondents had been off TANF from 
between 3 months to more than 12 months at time of follow-up interview.
---------------------------------------------------------------------------
    Not all families who leave welfare remain off the rolls. In the 
seven studies we reviewed, the percentages of the families who left 
welfare and then returned to the rolls ranged from 19 percent after 3 
months in Maryland to 30 percent after 15 months in Wisconsin. In 
ASPE's recent review of state and local-level studies, the proportion 
of families who returned to welfare within 12 months after exit ranged 
from 12 percent in San Mateo County, California, to 29 percent in 
Cuyahoga County, Ohio.\9\ The study using 1999 NSAF data reported that 
22 percent of those who had left the rolls were again receiving 
benefits at time of the survey follow-up.
---------------------------------------------------------------------------
    \9\ Julia B. Isaacs and Matthew Lyon, A Cross-State Examination of 
Families Leaving Welfare: Findings From the ASPE-Funded Leavers 
Studies, presented at the National Association for Welfare Research and 
Statistics 40th Annual Workshop in Scottsdale, Ariz. (Aug. 1, 2000; 
revised Nov. 6, 2000).
---------------------------------------------------------------------------
    Of those who left welfare, former recipients in the seven states we 
reviewed had average quarterly earnings that generally ranged from 
$2,378 to $3,786 or from $9,512 to $15,144 annually.\10\ This estimated 
annual earned income is greater than the maximum annual amount of cash 
assistance and food stamps that a three-person family with no other 
income could have received in these states.\11\ However, if these 
earnings were the only source of income for families after they leave 
welfare, many of them would remain below the federal poverty level.\12\
---------------------------------------------------------------------------
    \10\ We estimated annual incomes by extrapolating quarterly 
earnings; states did not provide information on annual earnings. Using 
this method may overestimate the annual earnings, as a former recipient 
may have worked fewer than four quarters.
    \11\ In these seven states, for a single-parent, three-person 
family with no income, the maximum annual amount of cash assistance and 
food stamps combined ranged from $6,000 in Tennessee to $9,744 in 
Washington as of January 1997.
    \12\ For 1998, the federal poverty level for a family of three was 
$13,650.
---------------------------------------------------------------------------
    In addition to information on individuals' earned incomes, former 
recipients' total household income and use of other government supports 
are key to understanding the circumstances of these families. For 
example, the recently expanded earned income credit (EIC) can increase 
the incomes of qualified low-income families by as much as $2,271 for 
families with one child and $3,756 for families with two or more 
children.\13\ The ASPE review of state and local-level studies reported 
that there were limited data on total household income. Reports from 
the few states that attempted to gather this information found that 45 
to 50 percent of household income comes from the adult leaving TANF, 20 
to 40 percent from others in the household, and between 3 and 8 percent 
from other sources, such as child support and Supplemental Security 
Income. More is known about former recipients' use of other government 
supports. Some of the state studies we reviewed reported that between 
44 and 83 percent of the families who left welfare received Medicaid 
benefits, and between 31 and 60 percent received food stamps. More 
recent research at the state level and nationally also shows 
differences in the rate of Medicaid and food stamps receipt among 
former welfare recipients.
---------------------------------------------------------------------------
    \13\ The EIC is a refundable tax credit for qualified working 
people who have earned incomes below certain specified levels.
---------------------------------------------------------------------------

  STATES ARE TAKING STEPS TO HELP HARD-TO-EMPLOY RECIPIENTS FIND JOBS

    While many adults have left the welfare rolls for work, those 
remaining on the rolls have increased their work efforts. Nationwide, 
the percentage of TANF recipients combining welfare and work has risen 
from 17 percent in fiscal year 1997 to 25 percent in fiscal year 1999. 
Most current recipients, however, are not engaged in work or work 
activities as defined by PRWORA. At least in part, this may be because 
many current recipients have characteristics that make it difficult for 
them to work, according to data from national surveys and several 
studies, as well as from officials in the six states that we 
visited.\14\ The states we visited had taken steps to help hard-to-
employ recipients move into jobs, such as improving and expanding case 
management or providing programs and services targeted specifically to 
prepare them for work. While recipients with one or more work-impeding 
characteristics may find the transition to work difficult, the states 
have found that some do find jobs.
---------------------------------------------------------------------------
    \14\ For Welfare Reform: Moving Hard-to-Employ Recipients Into the 
Workforce (GAO-01-368, forthcoming), we visited six states: California, 
Connecticut, Florida, Maryland, Michigan, and Washington. In addition, 
we collected and analyzed caseload data from these states and from 
Oregon, New York, and Wisconsin.
---------------------------------------------------------------------------
A Majority of TANF Recipients Are Not Engaged in Work Activities, in 
        Part Because Many Have Characteristics That Make It Difficult 
        for Them To Get and Keep Jobs
    The proportion of TANF recipients nationwide who were engaged in 
unsubsidized employment increased during the past few years. According 
to our analysis of HHS data, the percentage of recipients who were 
engaged in unsubsidized employment increased from 17 percent in fiscal 
year 1997 to 25 percent (or 400,000 recipients) in fiscal year 
1999.\15\ In the states we reviewed that provided us with data on their 
caseload characteristics, the percentage of the caseload that was 
employed ranged from 6 percent to just under 40 percent.\16\ This wide 
range of rates may be explained in part by the varying state policies 
on the amount of earnings a person may retain while still remaining 
eligible for welfare.\17\
---------------------------------------------------------------------------
    \15\ Percentages represent the average monthly number of families 
with at least one adult engaged in unsubsidized employment divided by 
the number of families in the overall work rate, as defined by the 
Administration for Children and Families. The families included in the 
overall work rates are all TANF families except (1) child-only cases 
and (2) families disregarded for one of the three reasons allowed under 
federal law: (a) they have a child under age 1; (b) they are 
participating in the tribal work program; or (c) they were sanctioned 
during the month but not for more than 3 of the past 12 months.
    \16\ Data were reported by states and may not be consistent with 
each other.
    \17\ Some experts have speculated that this wide range may also be 
because states that have enforced ``work first'' are likely to have 
experienced the greatest caseload decline and thus lower work levels 
for those remaining on the rolls.
---------------------------------------------------------------------------
    Although more TANF recipients are combining welfare and work, in 
fiscal year 1999 a majority did not participate in work activities--a 
monthly average of nearly 60 percent of all TANF recipients nationwide. 
Although this may have been caused by weak implementation of state work 
programs, the characteristics of TANF recipients may affect their 
abilities to engage in work and work activities. Studies have shown 
that having certain characteristics, such as poor health or disability, 
no high school diploma, limited work experience, exposure to domestic 
violence, substance abuse, and limited English proficiency, makes 
engaging in work activities more difficult. Based on data from its 1997 
National Survey of America's Families (NSAF), the Urban Institute found 
that the greater the number of these characteristics a TANF recipient 
has, the less likely that recipient is to be engaged in work or work 
activities.\18\
---------------------------------------------------------------------------
    \18\ NSAF is an ongoing, nationally representative survey, of the 
non-institutionalized, civilian population of persons under age 65 in 
the nation as a whole. Sheila Zedlewski. Work-Related Activities and 
Limitations of Current Welfare Recipients (Washington D.C.: The Urban 
Institute, July 1999).
---------------------------------------------------------------------------
    The survey showed that 88 percent of recipients who had none of 
these characteristics were working or engaging in work-related 
activities, compared to 59 percent with one of these characteristics 
and 27 percent with three or more (see figure 2).\19\ Officials in all 
six of the states we visited agreed that recipients with one or more 
work-impeding characteristics find it hardest to successfully enter the 
workforce, and are often referred to as hard-to-employ recipients. 
However, states have found that while having these characteristics 
makes employment difficult, some recipients do, in fact, find jobs.
---------------------------------------------------------------------------
    \19\ The Urban Institute analysis counted only those 
characteristics shown to significantly depress work activity as 
obstacles to employment: less than a high school education, last 
employment 3 or more years ago, child under age 1, either very poor 
mental health or health condition that limits work, caring for a 
disabled child, and limited English. NSAF did not collect data on 
domestic violence or substance abuse.

[GRAPHIC] [TIFF OMITTED] T3533A.002


    Our analysis of existing studies showed that a considerable 
percentage of TANF recipients have characteristics that make it 
difficult for them to work. Table 1 identifies the range of estimates a 
number of studies provide on the prevalence of some of these 
characteristics in the welfare population. For example, estimates of 
the proportion of the welfare caseload with health problems or 
disability range from 20 to 40 percent, and the proportion of the 
caseload with no high school diploma from 30 to 45 percent.

  TABLE 1: PREVALENCE OF SELECTED CHARACTERISTICS AMONG TANF RECIPIENTS
                        BASED ON SELECTED STUDIES
------------------------------------------------------------------------
                                        Estimated range      Number of
                                            of TANF          selected
            Characteristic              recipients with       studies
                                         characteristic   measuring this
                                           (percent)      characteristic
------------------------------------------------------------------------
Health problems or disabilities......              20-40             12
Lack of high school diploma..........              30-45              8
Current domestic violence............              10-30              7
Lack of job skills...................              20-30              3
Substance abuse......................               3-12              8
English as a second language.........               7-13              4
Multiple barriers....................              44-64              5
------------------------------------------------------------------------

    Note: Studies were conducted between 1997 and 1999. The estimates 
provided by each study are not directly comparable to those from other 
studies because each defines characteristics slightly differently and 
examines a different specific population. For example, when measuring 
the incidence of substance abuse, one study counted only recipients who 
self-reported seeking substance abuse treatment while another counted 
recipients believed by case managers to need to address substance abuse 
problems. Likewise, the scope of the studies varies; most cover only a 
single state or community while one is national in scope. Because of 
difficulties identifying and measuring these characteristics, these 
studies may understate the prevalence of these characteristics among 
TANF recipients. Nonetheless, together these studies give a rough 
indication of the prevalence of these characteristics among TANF 
recipients.
    Information from the states we visited is consistent with the 
studies' data. Officials in these states indicated that many recipients 
have poor mental or physical health, have substance abuse problems, or 
were victims of domestic violence. Some officials noted that the actual 
extent of these characteristics can be hard to determine because most 
states and localities rely on recipients to disclose this information 
about themselves to their case managers, which they are often reluctant 
to do.

All Six of the States We Visited Have Modified Their ``Work First'' 
        Programs to Better Serve Hard-to-Employ Recipients
    The six states we visited implemented a TANF program that can be 
characterized as ``work first'' and, as a result, their TANF programs 
share a few common elements. All of the programs seek to move people 
from welfare into unsubsidized jobs as quickly as possible. Officials 
expressed the belief that the best way to succeed in the labor market 
is to join it, and the best setting in which to develop successful work 
habits and skills is on the job.\20\ However, to varying degrees, these 
six states have modified or enhanced their approach to better serve 
recipients for whom the ``work first'' approach is not successful 
because they have characteristics that may impede employment. The 
states we visited differ markedly in their approach to identifying 
recipients who have these characteristics so that they can either be 
exempted from work requirements or provided with targeted programs and 
services that would help them obtain employment. Some states and 
localities require TANF recipients to look for a job and offer enhanced 
services only to those who are unsuccessful, while others begin by 
screening and assessing new applicants to identify those with 
characteristics that might impede their ability to get a job. The 
strategies states use to assist those recipients identified as hard-to-
employ also vary. Some of the states we visited have focused their 
efforts on improving and expanding case management, while others have 
targeted programs and services specifically to prepare hard-to-employ 
recipients for work. All six of the states we visited also refer 
recipients to programs run by non-TANF agencies and organizations that 
help recipients deal with specific problems such as substance abuse and 
mental illness that may affect their ability to get and keep a job.
---------------------------------------------------------------------------
    \20\ A recent study by the Manpower Demonstration Research 
Corporation (MDRC) reviews 20 welfare-to-work programs and assesses the 
effectiveness of these programs at increasing the employment and 
earnings of single-parent welfare recipients. The study found that 
employment-focused welfare programs resulted in higher earnings for the 
most disadvantaged recipients than education-focused programs, but that 
programs with a mix of activities tended to help the broadest range of 
people. See Charles Michalopoulos, Christine Schwartz, and Diana Adams-
Ciardullo, What Works Best for Whom: Impacts of 20 Welfare-to-Work 
Programs by Subgroup (New York, N.Y.: MDRC, Aug. 2000).
---------------------------------------------------------------------------
    During our site visits, state and local officials reported program 
success at the local level. For example, in Grand Rapids, Michigan, the 
local TANF agency has stationed two case managers at a large company 
that employs TANF recipients to help hard-to-employ recipients retain 
their jobs. These on-site case managers serve as a resource both for 
employees and for the employer, helping employees cope with crises that 
might otherwise cause them to lose their jobs, and intervening on 
behalf of the employer at the first sign of trouble. The company's 
retention rate for current and former TANF recipients was 81 percent, 
as compared to only 33 percent for their non-TANF employees. Company 
officials directly attributed the higher retention rates to on-site 
case management and cooperation from the local TANF agency.

               EMERGING ISSUES AS WELFARE REFORM EVOLVES

    As states have taken steps to implement a work-based, temporary 
assistance program for needy families, key issues have emerged, 
including continuing support for work--for those on the welfare rolls 
and those already employed--and building state and local management and 
service delivery capacity.

Emphasizing and Enhancing Work-Based Strategies
    As many TANF recipients have moved into employment, emerging issues 
are related to helping those remaining on the rolls move into the 
workforce, enforcing work requirements in future years, and helping 
former welfare recipients maintain their employment. The states we 
visited in 2000 said that while some TANF recipients with work-impeding 
characteristics are able to successfully enter the workforce, many need 
considerable time and support in order to become work-ready, including 
services and work-preparation activities that address their specific 
needs. To be successful in moving hard-to-employ TANF recipients into 
the workforce within their 5-year time limit for federal benefits, 
states will need to provide work-preparation activities tailored to the 
needs of their hard-to-employ recipients. To help states with this 
challenge, we have recommended that HHS do more to promote research and 
provide guidance that would encourage and enable states to estimate the 
number and characteristics of hard-to-employ recipients. In addition, 
we have recommended that HHS expand the scope of its guidance to states 
to help them use the flexibility they have under PWRORA to provide 
appropriate work-preparation activities for hard-to-employ recipients 
within the current TANF rules. During our site visits we discovered 
that some states and localities did not understand the full range of 
flexibility they have under the law.
    In addition to working with hard-to-employ recipients, states must 
enforce federal work requirements for most TANF recipients. The robust 
economy has generally helped states meet federal work participation 
rates. In fiscal year 1999, the highest percentage of TANF adult 
recipients meeting federal work participation rates--66 percent--was in 
unsubsidized employment. Moreover, states were also aided in meeting 
federal participation rates by receiving credits for the recent 
caseload reductions as allowed under PRWORA. In the event of an 
economic downturn when jobs may be less readily available, more states 
may turn to alternative activities for meeting their work requirements. 
These activities could include subsidized employment, work experience, 
community service, and on-the-job training, which we call work-site 
activities. However, states have more limited experience with work-site 
activities; nationwide only about 14 percent of TANF recipients meeting 
federal work participation rates were in such activities in fiscal year 
1999. As a result, implementing large-scale work programs may prove 
challenging.\21\ To provide valuable information for administrators and 
policymakers on what could in the future become an increasingly 
important part of TANF programs nationwide, we recommended that HHS 
take steps to collect more information on work-site activities, 
including supporting evaluations of them, and disseminate such 
information to the states. HHS has taken steps to support some 
evaluations in this area.
---------------------------------------------------------------------------
    \21\ Welfare Reform: Work-Site Activities Can Play an Important 
Role in TANF Programs (HEHS-00-122, July 28, 2000).
---------------------------------------------------------------------------
    While promoting work among those receiving welfare is essential, 
some states have turned their attention to supporting the work efforts 
of those who have left the rolls. Many former welfare recipients are 
employed in low-wage jobs and at risk of returning to welfare. TANF 
provides states the flexibility to devise and implement strategies that 
help such families maintain and advance in their jobs. Some states and 
localities have undertaken efforts to help low-wage workers upgrade 
their job skills to improve their job prospects. For example, when we 
visited states in 1998, we found that Michigan had set aside $12 
million for postemployment training for TANF clients who were already 
meeting their work requirements. Similarly, Wisconsin had a $1 million 
Employment Skills Advancement Program under which poor working 
parents--including TANF clients--received grants for attending training 
programs through the workforce development system.\22\ HHS is 
evaluating some projects designed to help former welfare recipients 
retain their jobs and advance in the workplace.
---------------------------------------------------------------------------
    \22\ Welfare Reform: States' Implementation and Effects on the 
Workforce Development System (GAO/T-HEHS-99-190, Sep. 9, 1999).
---------------------------------------------------------------------------
Fostering and Facilitating Improved Management and Service Delivery 
        Approaches
    As welfare agencies focus on moving needy families toward economic 
independence by providing a wide array of services, such as child care, 
food stamps, and employment and training services, they are drawing on 
numerous federal and state programs--often administered by separate 
agencies.\23\ These are sweeping changes that have profound 
implications for the information needs of states and the automated 
systems designed to meet those needs. Although automated systems in the 
15 states we examined in 1999 supported welfare reform in many ways, a 
number of these systems have major limitations in one or more of three 
key areas--case management, service planning, and program 
oversight.\24\ We found, for example, that some state and local 
agencies had difficulties in accessing data on the characteristics of 
TANF recipients that the agencies could use to identify and meet the 
service needs of their caseloads. We also identified a gap in the 
ability of automated systems to support enforcement of the 5-year TANF 
time limit across states. While states are making efforts to improve 
their systems, they face obstacles--including some at the federal 
level, such as the complexity of obtaining federal funding for systems 
projects that involve multiple agencies. To facilitate states' efforts, 
we recommended that HHS establish an interagency group to help overcome 
this and other difficulties. HHS, Labor, and Agriculture have begun 
meeting regularly to address these issues. Sustained high-level 
attention will be needed to move forward in this important area.
---------------------------------------------------------------------------
    \23\ The Department of Health and Human Services oversees programs 
such as TANF, Medicaid, child care, and child support enforcement; the 
Department of Agriculture oversees food stamps; and the Department of 
Labor oversees employment and training programs.
    \24\ Welfare Reform: Improving State Automated Systems Requires 
Coordinated Federal Effort (GAO/HEHS-00-48, Apr. 27, 2000).
---------------------------------------------------------------------------
    Welfare agencies' increased focus on helping needy adults with 
children find and maintain employment brings them directly into the 
province of the workforce development system.\25\ When we reviewed the 
role of the workforce development system in providing services to 
welfare recipients in the states in 1998, we observed that workforce 
development and welfare systems were still largely independent. When 
the Congress created the Welfare-to-Work grant program in 1997, under 
which it authorized $3 billion in grants to be administered through the 
Department of Labor to help hard-to-employ individuals, it provided an 
opportunity for the two systems, in participating states, to 
collaborate. In addition, the passage of the Workforce Investment Act 
(WIA) of 1998, designed to integrate and streamline federal employment 
and training services, requires most employment and training services 
to be provided through a single system, called the One-Stop Center 
System. These recent changes in the workforce development system, along 
with welfare reform, give states and localities an opportunity to 
reassess how employment-related services are coordinated and delivered. 
While providing TANF services through one-stop centers is a state and 
local option, we noted in our 2000 report that at the local level, 24 
states reported providing at least some TANF services on-site at a 
majority of their one-stop centers.\26\ Seven states provided TANF 
employment and eligibility services, Medicaid, and food stamp services 
at a majority of their one-stop centers. While it is too early to know 
what service delivery approaches may prove most effective and 
efficient, as welfare reform and WIA implementation evolve, research 
will be warranted to determine best practices.
---------------------------------------------------------------------------
    \25\ We define the workforce development system as the state or 
local entity responsible for administering programs that originate 
through the Department of Labor, such as the state Employment Service 
or Workforce Investment Act programs.
    \26\ Workforce Investment Act: Implementation Status and the 
Integration of TANF Services (GAO/T-HEHS-00-145, June 29, 2000).
---------------------------------------------------------------------------
    Mr. Chairman, this concludes my prepared statement. I will be happy 
to respond to any questions you or other Members of the Subcommittee 
may have.

                    GAO CONTACTS AND ACKNOWLEDGMENTS

    For future contacts regarding this testimony, please call Cynthia 
M. Fagnoni at (202) 512-7215 or Sigurd Nilsen at (202) 512-7003. 
Individuals making key contributions to this testimony included Sonya 
Harmeyer, Gale Harris, Katrina Ryan, Kim Scotten, and Andrea Romich 
Sykes.

                            RELATED PRODUCTS

    Child Care: States Increased Spending on Low-Income Families (GAO-
01-293, Feb. 2, 2001).
    Welfare Reform: Work-Site-Based Activities Can Play an Important 
Role in TANF Programs (GAO/HEHS-00-122, July 28, 2000).
    Welfare Reform: Improving State Automated Systems Requires 
Coordinated Federal Effort (GAO/HEHS-00-48, Apr. 27, 2000).
    Welfare Reform: State Sanction Policies and Number of Families 
Affected (GAO/HEHS-00-44, Mar. 31, 2000).
    Welfare Reform: Assessing the Effectiveness of Various Welfare-to-
Work Approaches (GAO/HEHS-99-179, Sep. 7, 1999).
    Welfare Reform: Information on Former Recipients' Status (GAO/HEHS-
99-48, Apr. 28, 1999).
    Welfare Reform: States' Experiences in Providing Employment 
Assistance to TANF Clients (GAO/HEHS-99-22, Feb. 26, 1999).
    Welfare Reform: Status of Awards and Selected States' Use of 
Welfare-to-Work Grants (GAO/HEHS-99-40, Feb. 5, 1999).
    Welfare Reform: Early Fiscal Effects of the TANF Block Grant (GAO/
AIMD-98-137, Aug. 18, 1998).
    Welfare Reform: Child Support an Uncertain Income Supplement for 
Families Leaving Welfare (GAO/HEHS-98-168, Aug. 3, 1998).
    Welfare Reform: States Are Restructuring Programs to Reduce Welfare 
Dependence (GAO/HEHS-98-109, June 18, 1998).
    Welfare Reform: HHS' Progress in Implementing Its Responsibilities 
(HEHS-98-44, Feb. 2, 1998).
    Welfare Reform: Three States' Approaches Show Promise of Increasing 
Work Participation (GAO/HEHS-97-80, May 30, 1997).

                                


    Chairman Herger. Thank you very much, Ms. Fagnoni.
    Miss Devere.

 STATEMENT OF CHRISTINE DEVERE, ANALYST IN SOCIAL LEGISLATION, 
    DOMESTIC SOCIAL POLICY DIVISION, CONGRESSIONAL RESEARCH 
                  SERVICE, LIBRARY OF CONGRESS

    Ms. Devere. Thank you.
    Good morning, Mr. Chairman, Mr. Cardin, Members of the 
Subcommittee. Thank you for inviting me to appear before you 
today.
    My testimony this morning will briefly summarize what we 
have learned from major welfare reform efforts in two areas: 
first, what has been the impact of policies designed to promote 
work, and second, what do we know about the circumstances of 
families who have left welfare.
    The main points from my testimony this morning are: Point 
number one, mandatory welfare-to-work programs increase 
employment and earnings. However, only when mandatory welfare-
to-work programs are combined with cash incentives have these 
programs increased income.
    Point number two. There has been little, if any, impact on 
decisions to marry or have additional children among welfare 
mothers, although this has received relatively little 
attention.
    Point number three. Mandating work among welfare mothers 
does not appear to systematically harm or help children.
    Point number four. Most leave welfare for employment and 
are employed for a period of time. Loss of employment is the 
most common reason they return.
    The bulk of welfare reform research completed since the 
mid-1980s has focused on the impact of mandatory welfare-to-
work programs on promoting work. Evaluations indicate that 
mandatory welfare-to-work programs--both ``work first'' 
programs that emphasize immediate work, and programs that 
provide education and training--generally increase employment 
and often also increase earnings and decrease cash assistance 
payments.
    However, only when mandatory welfare-to-work programs are 
combined with cash incentives have these programs increased 
income among participants. These income gains have come at the 
cost of increasing welfare payments and prolonging the duration 
of welfare receipt. At least in the short run, evaluations 
indicate that many TANF recipients will be unable to escape 
poverty through work unless provided with some form of earnings 
supplement.
    The TANF law has two new goals for family welfare: reducing 
nonmarital pregnancies and promoting and maintaining two-parent 
families. To date, the impact of welfare-to-work programs on 
these outcomes has received relatively little attention. A 
Minnesota program reported an increase in marriage among 
welfare mothers, but the majority of studies indicate little, 
if any, impact on these outcomes.
    The impact of welfare reform on child well-being has also 
received relatively little attention, although research is 
forthcoming on this issue. Available studies indicate that 
mandating work among welfare mothers does not appear to 
systematically harm or help children. In programs that combine 
mandatory work with cash incentives, parents report 
improvements in school achievement among elementary school age 
children. However, these children still appear to be 
disadvantaged when compared to the overall child population. 
There is very little information on the effects of these 
policies on infants or adolescents.
    While a number of these findings have application to many 
State TANF programs, these programs do not encompass all the 
initiatives in the State TANF programs. For example, the first 
families will not begin reaching the Federal 5-year lifetime 
limit until the fall of this year. Individuals have begun 
reaching shorter, State-imposed time limits, but these 
individuals were also receiving cash incentives. The cash 
incentives led to an increase in income, but when the recipient 
reached the time limit, they were no better off than those not 
subject to the time limit as their income decreased when they 
lost the cash incentives. As the evaluations illustrate, it is 
possible that these policies may have offsetting effects.
    Recently, there has also been considerable interest in the 
circumstances of those who have left welfare. Based on results 
from studies in 38 States and the District of Columbia, the 
majority leave welfare for employment. Thus far, a relatively 
small share of the national caseload has been removed from the 
rolls for time limits or reported as sanctioned off the rolls. 
Compared to those who left welfare for other reasons, 
individuals whose benefits were cut off by a time limit do not 
face increased difficulties or hardships.
    Between 55 and 65 percent of welfare leavers are employed 
at any given time, with average hourly wages ranging from $5.50 
to $8.80 an hour. Although the majority of leavers are 
employed, based on wages alone, many remain poor.
    A number of welfare leavers continue to receive food stamps 
and Medicaid. Among those not participating in these programs, 
some welfare leavers did not think they were eligible, while 
others said they did not need these services or that it was too 
much hassle to receive them. A number of eligible welfare 
leavers received child care subsidies, while some indicate a 
lack of need for these subsidies.
    In a very small number of studies, less than half said that 
they had filed for or received the earned income tax credit. 
Between 18 and 35 percent of leavers have returned since exit, 
with lack or loss of employment the most common reason for 
return.
    Mr. Chairman, this concludes my formal statement. I would 
be happy to answer any questions that you or Members of the 
Subcommittee may have.
    Thank you.
    [The prepared statement of Ms. Devere follows:]

Statement of Christine Devere, Analyst in Social Legislation, Domestic 
  Social Policy Division, Congressional Research Service, Library of 
                                Congress

    Good morning Mr. Chairman, Mr. Cardin, Members of the Subcommittee. 
Thank you for inviting me to appear before you today. My testimony this 
morning will briefly summarize what we've learned from major welfare 
reform efforts in two areas. First, what has been the impact of 
policies designed to promote work; and second, what do we know about 
the circumstances of families who have left welfare? This testimony is 
an update of work completed by the Congressional Research Service at 
the request of the House Committee on Ways and Means, included as 
Appendix L in the 2000 House Committee on Ways and Means Green Book.
    The main points from my testimony today are as follows:
    1. Mandatory welfare-to-work programs \1\--both programs that 
emphasize work and programs that emphasize education--increase earnings 
and employment, and generally decrease cash assistance payments.
---------------------------------------------------------------------------
    \1\ For purposes of this testimony, mandatory welfare-to-work 
programs are those programs that require participation in some activity 
as a condition of continuing welfare benefits. Some of these programs 
have emphasized a work-first approach where the focus is immediate 
employment,while others have reburied participation in education or 
training.
---------------------------------------------------------------------------
    2. The impact of welfare-to-work programs on decisions of welfare 
mothers to marry or have additional children has received relatively 
little attention. Available findings suggest little, if any impact on 
these outcomes.
    3. Most mandatory welfare-to-work programs have reported no impact 
on total income, as participants often replace welfare benefits with 
earnings. Some mandatory work programs that include financial 
incentives to work have been particularly effective in raising income 
among program participants, although these income gains have come at 
the cost of increasing welfare payments and prolonging the duration of 
welfare receipt.
    4. Mandating work among welfare mothers does not appear to 
systematically harm or help children. Parents in mandatory work 
programs that also include financial incentives to work, that raise the 
income of working parents, report improvements in school achievement 
among elementary school-aged children. However, this finding is based 
on a small number of studies, and these children still appear to be 
disadvantaged when compared to the overall child population.
    5. Among those who leave welfare, the majority attribute their exit 
to employment and are employed for a period of time, although the data 
suggest that some employment is not continuous. Based on wages alone, 
many former welfare recipients remain poor and continue to receive 
Medicaid and food stamps, although participation rates in these 
programs have also fallen as the welfare caseload has declined. Among 
those who have returned to welfare, loss of employment is the most 
common reason.

                  EVALUATING POLICIES TO PROMOTE WORK

    Since the mid-1980s, states and localities have increasingly 
experimented with policy initiatives designed to promote work and end 
dependency on government benefits. These welfare reforms have included 
work requirements, financial rewards for work, financial penalties for 
failure to engage in work, time limits on benefits, rules to promote 
marriage, and rules to penalize additional births to welfare mothers. 
Formal evaluations were required of many of these initiatives as a 
condition of waiving federal rules under AFDC, prior to enactment of 
the welfare reform law of 1996. Congress and welfare reform 
administrators wanted to know what worked and for whom and at what 
cost. To date, what we have learned from policies to promote work is 
from programs initiated before the 1996 welfare reform law. Many states 
have built their TANF programs on elements of their AFDC waiver 
programs and some have converted their welfare-to-work provisions under 
these waiver programs into their TANF programs. Thus, while evaluations 
discussed in this review are of programs that precede the 1996 law, 
some of the findings have application to TANF programs.
    Evaluation studies of welfare-to-work programs examine the 
difference that policy changes made on selected outcomes, or their 
``impact.'' They do so by comparing outcomes, such as earnings and 
employment rates under a new set of policies versus what would have 
occurred in the absence of these policies. These impact evaluations 
have examined two kinds of programs that seek to move recipients from 
welfare to work. The first type of program is a ``work first'' program 
with a strong employment focus, where immediate job search is usually 
required among participants. The second type of program requires 
participation in education or training among participants, also 
referred to as a ``human capital development'' program. While the focus 
of these programs is employment or education, these programs often 
include other policy initiatives such as increased supportive services, 
time limits on assistance, financial penalties for noncompliance, and 
policies to discourage out-of-wedlock births.
     Mandatory welfare-to-work programs--both work-first 
programs and programs that provide education--increase employment and 
earnings, and generally decrease cash assistance payments.
    The bulk of welfare-to-work research has focused on the impact of 
these policies on promoting work and ending dependence on cash 
benefits. Among welfare-to-work programs, evaluations find that 
mandatory welfare-to-work programs generally increase employment, and 
often also increase average earnings and decrease cash assistance 
payments. These findings apply both to work-first programs and programs 
that provide education and training. This increase in employment 
reported in the evaluations is also consistent with national data that 
illustrate an increase in the employment rate among single mothers from 
57% in 1992 to almost 73% in 2000.\2\ Though both types of programs 
have succeeded in raising employment and earnings, their impacts appear 
at different times. Work-first programs produce immediate impacts 
because they emphasize immediate work. However, their impacts sometimes 
fade, as individuals subsequently lose their jobs or those in the 
comparison group find employment. Programs that emphasize education 
have delayed impacts, as individuals receive education or training for 
a period of time before they enter employment. Of the welfare-to-work 
programs evaluated, two of the most effective provided ``work first'' 
for some participants, but provided basic education for those 
determined to need it before entering the labor force. These programs 
are commonly referred to as ``mixed services'' programs.
---------------------------------------------------------------------------
    \2\For additional information, see CRS Report RL30797, Trends in 
Welfare, Work, and the Economic Well-being of Female-Headed Families 
with Children, by Thomas Gabe.
---------------------------------------------------------------------------
     The impact of welfare-to-work programs on decisions of 
welfare mothers to marry or have additional children has received 
relatively little attention. Available findings suggest little, if any 
impact on these outcomes.
    The TANF law set two new goals for family welfare: reducing 
nonmarital pregnancies and promoting and maintaining two-parent 
families. The impact of welfare-to-work programs on encouraging 
marriage and reducing out-of-wedlock births has been the subject of 
much less systematic analysis than changes in employment and earnings. 
Among the small number of evaluations that examine these outcomes, the 
majority report that these policies have had no impact on decisions to 
marry or have additional children among women receiving welfare. One 
evaluation of a welfare-to-work program in Minnesota reported that the 
state's welfare policy initiatives led to an increase in marriage among 
single mothers and a decrease in marital break-up among two-parent 
families, but these results have not been reported in other 
evaluations. Evaluations of programs targeted at teenage mothers have 
also found no significant impacts on rates of pregnancy or 
childbearing. Evaluators of these programs contend that the ``right'' 
mix of interventions to help teenage parents has not been found.
     Most mandatory welfare-to-work programs have reported no 
impact on total income, as participants often replace welfare benefits 
with earnings. Some mandatory work programs that include financial 
incentives to work have been particularly effective in raising income 
among program participants, although these income gains have come at 
the cost of increasing welfare payments and prolonging the duration of 
welfare receipt.
    A recent focus of welfare reform research has been to examine 
programs that mandate work, but also offer financial incentives to 
work. These programs, which include the Minnesota program mentioned 
above, allow participants to combine work and welfare by disregarding a 
larger percentage of their earnings than was previously allowed in 
determining their continuing eligibility for cash benefits. Under TANF, 
the vast majority of states are offering some form of a financial work 
incentive to welfare recipients. Evaluations illustrate that financial 
incentives to work have been particularly effective in increasing 
employment and earnings. Additionally, while programs that mandate work 
report no impact on income, these financial incentives to work have 
been effective in raising the total income among program participants. 
However, these income gains have come at the cost of increasing welfare 
payments and prolonging the duration of welfare receipt. Evaluations 
indicate that, at least in the short run, many TANF recipients will be 
unable to escape poverty through work unless taxpayers provide an 
earnings supplement of some kind.
     Mandating work among welfare mothers does not appear to 
systematically harm or help children. Parents in mandatory work 
programs that also include financial incentives to work, that raise the 
income of working parents, report improvements in school achievement 
among elementary school-aged children. However, this finding is based 
on a small number of studies, and these children still appear to be 
disadvantaged when compared to the overall child population.
    Most federal and state welfare policies apply directly to parents, 
not children. At the time of passage of TANF, some proponents 
maintained that the new program would help children by increasing 
earnings and hence family income, thereby providing more resources to 
meet children's needs, and by also giving children the positive role 
model of a working parent. However, policies that promote and support 
work may also alter the child's well-being in other ways. For example, 
they may increase tension or stress in the adult's life because of the 
need to balance work with home and child care responsibilities. In 
addition, requiring mothers to work reduces their time to nurture 
children and requires them to find other caregivers. Some critics 
maintained that TANF time limits and mandatory work requirements could 
result in harmful outcomes for children.
    Evaluations of mandatory welfare-to-work programs report few 
impacts on child outcomes, with the bulk of this research focused on 
elementary school-aged children. The few impacts have been small, and 
have been both positive and negative. Parents in mandatory work 
programs that also include financial work incentives report 
improvements in school achievement among elementary school-aged 
children, but these children appear to remain at risk given their high 
levels of disadvantage. At the same time, parents in a time-limited 
welfare-to-work program in Florida also reported a decrease in school 
achievement among adolescents. Additional research on the impact on 
child well-being is forthcoming.
    While evaluations discussed in this review are of programs that 
preceded the 1996 law, some of the findings have application to TANF 
programs as many states have included similar policy initiatives in 
their state TANF programs. However, it is important to point out that 
these programs do not encompass all the initiatives undertaken by the 
states in their TANF programs. Additionally, while some individuals 
have reached state-imposed time limits in these programs, families will 
not begin reaching the 5-year lifetime limit on federal TANF assistance 
until the fall of 2001. Evaluations of shorter, state-imposed time 
limits thus far provide little evidence that time limits had led 
recipients to leave the rolls early or that recipients have seen a 
decrease in income after reaching the time limit, when compared to 
welfare recipients who were not subject to time limits. However, 
results thus far are from programs that include both time limits on 
assistance and financial incentives to work, policies that may have 
offsetting effects. The time limit may induce some persons to leave 
welfare quickly and ``bank'' welfare months for later use in time of 
need (although research has not found this effect), but generous 
earnings disregards are an incentive to remain on welfare while 
working.

         MONITORING FORMER WELFARE RECIPIENTS (THE ``LEAVERS'')

    Recently, there has been considerable interest in the circumstances 
of those who have left welfare, commonly referred to as welfare 
``leavers.'' The large decline in the welfare caseload that has 
occurred since 1994 has been welfare reform's biggest surprise. States 
have initiated and completed studies of welfare leavers to better 
understand how those who exit welfare are faring. These leaver studies 
have used administrative data or survey data (and in some instances, 
both types of data), and the results differ by the type of data used. 
The studies also illustrate the difficulty in finding individuals once 
they leave welfare. The results presented here are an update to the 
work completed in the House Committee on Ways and Means 2000 Green Book 
and provide an overview of results from studies of those who have left 
welfare in 38 states and the District of Columbia.
     Among those who leave welfare, the majority attribute 
their exit to employment and are employed for a period of time, 
although the data suggests that some employment is not continuous. 
Based on wages alone, many former welfare recipients remain poor and 
continue to receive Medicaid and food stamps, although participation 
rates in these programs have also fallen as the welfare caseload has 
declined. Among those who have returned to welfare, loss of employment 
is the most common reason.
    The majority of those who leave welfare attribute their exit to 
employment, as was the case under AFDC. Thus far, a relatively small 
share of the national caseload has been removed from the rolls because 
of time limits or reported as sanctioned off the rolls. Compared to 
those who left welfare for other reasons, individuals whose benefits 
were cut off by a state-imposed time limit do not appear to face 
increased difficulties or hardships.
    Employment rates vary considerably, but the majority of studies 
report employment rates between 55% and 64% within three months of exit 
or at the time of the survey. However, the percent of leavers never 
employed since their exit is much higher (between 63% and 91% of 
respondents) and indicates that a number of leavers are not 
continuously employed. The average hourly wage reported among welfare 
leavers ranged from $5.50 to $8.80 per hour. Among those who leave 
welfare and are not employed, the two most common barriers to 
employment or reasons for unemployment are health, physical or mental 
illness, or the inability to find a job.
    Although the majority of welfare leavers are employed, based on 
wages alone, welfare leavers in a number of states remain poor. For 
example, a Missouri leaver study reported that 2 years after exit, 63% 
of single mothers with children under the age of 18 were below poverty, 
and 92% were at or below 185% of the federal poverty level. The leaver 
studies illustrate that between 58% and 87% of families had at least 
one member, either an adult or child, receiving Medicaid since exit or 
at the time of the survey. When examined separately, the rates of 
participation in Medicaid are higher for children than adults, and 
adults are more likely to be uninsured. The studies also report that 
between 46% and 78% of leavers are participating in food stamps. 
Reasons for not participating in Medicaid and food stamps among leavers 
vary. Some welfare leavers did not think they were eligible for these 
services, while others indicate that they did not need these services 
or that it was too much hassle to receive them. Between 20% and 67% of 
eligible welfare leavers were receiving child care subsidies, while a 
number of respondents indicate no need for these subsidies. Child 
support also appears to be an important source of income among welfare 
leavers. While a large number of individuals are leaving welfare for 
work, less than half of welfare leavers indicate that they have filed 
for or received the Earned Income Tax Credit.
    State leaver studies illustrate that less than half of leavers 
appear to be experiencing hardships after exit from welfare. Whether 
these problems have increased or decreased since exit varies by state 
and by the outcome measured. A few states have reported increases in 
instances where leavers experienced difficulties paying bills and/or 
arranging housing since exit, while other states have reported 
decreases in these hardship measures since exit. However, problems 
acquiring medical care and, on occasion, food have increased among 
leavers since cash welfare exit.
    Employment is the reason the majority of recipients leave welfare, 
and lack or loss of employment is the most common reason individuals 
return to welfare. Among leavers who remained off welfare for at least 
2 months, between 18% and 35% had returned for a period of time since 
exit. Although lack of employment is the most common reason individuals 
return to welfare, there is some evidence that those who leave for 
income-related reasons are less likely to return than those who leave 
welfare for failing to comply with program requirements.
    Mr. Chairman, that concludes my formal statement. I'd be happy to 
answer any questions that Members of the Subcommittee may have. Thank 
you.

                                


    Chairman Herger. Thank you, Miss Devere and Miss Fagnoni.
    We will recess for the vote and come back immediately after 
voting and continue with questions. Thank you.
    [Recess.]
    Chairman Herger. If we could have our witnesses again, 
please, we will return for questions. Thank you.
    Miss Fagnoni, our hearing today is on research on the 
effects of welfare reform, and we have seen some very dramatic, 
I think, positives. Caseloads are down by more than 50 percent; 
work by current and former welfare recipients is higher than 
ever before; and at the same time, child poverty is down 
significantly. More than two million children have been lifted 
out of poverty since the law passed, which is certainly not 
what some felt might be the case before, so that is very 
positive. These changes are without precedent, I believe, in 
the history of welfare reform, which dates back many decades. 
But I know there is much left to be done.
    Would you agree that the '96 welfare reform law, in 
general, so far has been a success on these counts, and maybe 
some further thoughts in some areas that we might be 
concentrating on as we go into the reauthorization for next 
year.
    Ms. Fagnoni. Certainly, Mr. Chairman, there is an agreement 
on the facts you have stated, that there has been a dramatic 
decline in the welfare caseload, much more dramatic than I 
think either opponents or proponents might have predicted. As 
our research and others has borne out, those who have left 
welfare have an attachment to the workforce, not always a 
consistent one, but a start at working. So there have certainly 
been changes that are consistent with the goals of welfare 
reform legislation, particularly as they relate to moving from 
welfare to work.
    Two areas that we and others have identified as ones that 
will need continued attention as welfare reform evolves have to 
do with, helping those people who move from welfare to work 
stay in the workforce and, while they're in the workforce, 
enhance their ability to increase earnings as most of them do 
enter into low-paying jobs. We also need to pay more attention 
to people who remain on welfare and try to understand what 
States need to do to help make sure that those welfare 
recipients are employable, particularly as the Federal time 
limits start to come into play this fall.
    So I think those areas, the whole area of work-based 
strategies, both for those who have left welfare as well as 
those who remain, need continued attention and focus on 
specific strategies that might help people move forward from 
here.
    Chairman Herger. Thank you.
    Miss Devere, would you have any comments on this?
    Ms. Devere. I would concur with everything Miss Fagnoni has 
said about those who leave, in terms of their employment, in 
terms that they appear to have attachment to the workforce. I 
would also probably add that, with the impact evaluations, 
where we have looked at the policies designed to promote work, 
they have shown an increase in earnings and employment. So in 
terms of promoting work among welfare recipients as the stated 
goal of TANF, these policies appear to be successful in doing 
that.
    Chairman Herger. Thank you.
    Again, Ms. Fagnoni, in your testimony you mentioned that a 
majority of TANF recipients in 1999 were not working, and that, 
of course, is after a steep decline in the caseload during 
which many of the former recipients went to work, while others 
never came on to the rolls and instead supported themselves and 
their families.
    It is useful to note that the percentage of working welfare 
recipients rose from 17 to 25 percent between 1997 and 1999, so 
the trend is in the right direction. But still, some have 
expressed concern that this 25 percent figure seems low. So I 
would like to get a little context for that number.
    First of all, how does this compare with the percentage of 
AFDC and TANF recipients who worked prior to welfare reform, 
say, in 1994 and 1995?
    Ms. Fagnoni. As you correctly point out, the numbers of 
people who are receiving TANF and in unsubsidized work has 
increased, and prior work on AFDC indicated that at any point 
in time a very small percentage of AFDC recipients were 
combining welfare with unsubsidized work, and as you also point 
out, part of what has happened is the caseloads have declined 
and part of that is people moving from welfare to work.
    But at the same time, one of the reasons we were asked to 
look at what we know about people who remain on TANF, is to 
recognize or understand, what might be some specific issues 
that we have to pay attention to as we get closer to the 
Federal time limits. So I do think we have seen a trend moving 
upward, not just in terms of people combining welfare with 
unsubsidized work, but also with States efforts to ensure that 
people are in some kind of work activity, even when they are 
not employed. I think this is also something that States are 
paying increasing attention to, to make sure that people 
currently on TANF are receiving the kinds of work activities 
they need to help them become employed.
    Chairman Herger. Thank you.
    Would the gentleman from Texas wish to inquire?
    Mr. Doggett. Very much, Mr. Chairman.
    Texas, my home State, is one of those that benefits from 
the supplemental grant program under TANF. I'm just wondering 
what impact you found--I missed the first part of your 
testimony--that has had in the States that receive it.
    Ms. Devere. In terms of the evaluations, they haven't 
specifically looked at the impact of a supplemental grant, what 
they have done or what we know. There is a CRS report on this 
topic that I would be happy to pass along to you, that 
supplemental grants have increased the average rate of payment 
in these States, for those families that may have received 
lower payments under TANF. So they were designed to increase 
the rate of payment to the individuals in these States, and 
they have accomplished that.
    In terms of what impact they have had, I don't know that we 
have any specific evidence that would relate specifically to 
the supplemental grants.
    Mr. Doggett. What portion of the TANF funds are being spent 
to promote employment?
    Ms. Fagnoni. I don't think we really have aggregate figures 
on that. We do have some specific information that tells us 
that States are spending a smaller percentage of their TANF 
funds on direct cash assistance to individuals and a greater 
percentage of those funds on supportive services, such as child 
care, transportation subsidies, other kinds of services that an 
individual might need.
    Mr. Doggett. What impact have income supports, like child 
care and food stamps, had on encouraging people to move from 
welfare to work?
    Ms. Fagnoni. I think there's pretty widespread agreement 
that, particularly those supportive services that are most 
closely linked to helping somebody move into the workplace--
particularly in most cases these are mothers with children, 
often young children--that the child care subsidy is important 
for those who choose to use it, and transportation--not just 
subsidies, but also arrangements to help people with their 
transportation needs--are very important.
    Mr. Doggett. We've had a pretty big backlog in the area 
that I represent, with almost as many people on the waiting 
list for getting subsidized child care as receiving it. Does 
the lack of access to affordable child care remain a barrier to 
people moving from welfare to work?
    Ms. Fagnoni. We just issued a report where we looked at the 
States' child care funding. What we found was that States have, 
in fact, increased their funding for child care, both through 
TANF funds as well as their own State funds. But at the same 
time, States have set priorities in terms of who they will 
serve through those child care subsidies.
    What States told us was that they are able to meet the 
needs of the people for whom they have set the higher 
priorities, and those tend to be women receiving TANF, but they 
are more concerned that they may not be able to meet the needs 
of all those who are eligible for child care subsidies, 
including those who may not be receiving TANF but are still low 
income mothers in the work force.
    I will say, too, that it's very difficult to really know 
what the demand for child care is that may be unmet, because 
not all States keep waiting lists. I know Texas does, but other 
States don't. So it is not easy to get a handle on what might 
or might not be unmet needs.
    Not all mothers who need child care rely on subsidies. They 
may rely on more informal kinds of arrangements that don't 
require subsidies.
    Mr. Doggett. Thank you very much.
    Chairman Herger. Thank you.
    Would the gentleman from Michigan, Mr. Camp, like to 
inquire?
    Mr. Camp. Thank you, Mr. Chairman, and thank you both for 
testifying today.
    I just wanted to highlight something that I keep hearing a 
lot about. Sometimes we have to clear away some of the 
misunderstandings because people use information in different 
ways. But I just think it is significant that child poverty has 
fallen as a result of welfare reform, and that we had a lot who 
predicted that one million children would be cast into poverty 
as a result of the reform legislation that we passed. What we 
have really found is that more than two million children have 
been lifted out of poverty since 1996.
    I think what happens is that some organizations use 
statistics that do not include the government benefit levels 
that families receive or that children receive to skew these 
numbers.
    Could both of you comment on that, on the decline? I think 
that's probably----
    Ms. Devere. Do you mean in terms of calculating income 
that's available to these children in relation to the poverty 
rate?
    Mr. Camp. Yeah. If you could tell us how much percentage 
the rate has fallen, you know, some of the statistics behind 
this. For example, I understand it's the lowest level since 
1979.
    Ms. Devere. Right. In 1996, the poverty rate among all 
children in families was 19.8 percent, and it fell to 16.3 
percent as 1999. Among children in female-headed households, 
the rate was 49 percent in 1996, and it fell to 42 percent in 
1999. So it has fallen since the enactment of the welfare 
reform law.
    Mr. Camp. What do you attribute that to, outside the scope 
of----
    Ms. Fagnoni. It's not something we have----
    Mr. Camp. You have not studied or analyzed?
    Ms. Devere. Right. It would be purely speculation.
    Mr. Camp. OK. Thank you.
    Thank you, Mr. Chairman.
    Chairman Herger. Thank you.
    Our Ranking Member, Mr. Cardin.
    Mr. Cardin. Thank you, Mr. Chairman. Let me thank both of 
our witnesses, not only for their testimony but for the 
continued help of both of your agencies in the work of our 
Committee. We very much appreciate that.
    Ms. Fagnoni. Thank you.
    Mr. Cardin. It seems to me, as I listen to your testimony, 
we have some inconsistencies in the current law; that is, Miss 
Devere, you were indicating that families do much better and 
they can't get out of poverty unless there is some supplemental 
income or incentives--I think you said cash incentives--and 
that vocational training helps a person succeed more in the 
workplace.
    Yet, if I understand the current restrictions in TANF, if a 
State wants to provide direct supplemental help, the clock 
continues to run. So there is a direct disincentive for a 
State, even though we claim to give them maximum flexibility, 
there is a direct disincentive for a State to provide cash 
incentives for people that are working.
    The second point is, vocational training is not considered 
an acceptable work activity, so we are again making it 
difficult for people to get training that they need. Am I 
correct in interpreting your testimony, that in both of those 
cases, if we want people to be out of poverty, they need one or 
two of those combinations?
    Ms. Devere. In terms of what the evaluations have shown 
us--when I speak of the cash incentives, what I'm speaking of 
are what are also referred to as earnings disregards in the 
States, where they disregard a portion of income among those 
receiving welfare, to allow them to continue to work at a 
higher wage and continue to receive welfare.
    Mr. Cardin. Cash assistance.
    Ms. Devere. Yes. Exactly, cash assistance. That's what I--
--
    Mr. Cardin. Doesn't the 5-year clock run?
    Ms. Devere. In terms of Federal TANF funds, yes, it 
continues to run. If the State wants to stop the clock--and 
there are some States that have stopped the clock, in terms of 
continuing to provide assistance----
    Mr. Cardin. They use 100 percent State money.
    Ms. Devere. They have to use 100 percent State money.
    Mr. Cardin. Maryland is one of those States that's looking 
at using 100 percent State money. But it seems like you're 
really putting a burden on the individual and on the system, if 
you believe that cash incentives are appropriate for people who 
are working so that they can make it. But some States are doing 
it by using the clock or using their own dollars.
    Ms. Devere. Yes.
    Mr. Cardin. Now, if I understand, when you took a snapshot, 
there was 64 percent of the people that were in the workplace 
that had left welfare.
    Ms. Devere. Yes.
    Mr. Cardin. I'm curious as to where the other 36 percent 
are. I am also curious as to--You have also indicated that the 
average income is between $9,500 and $15,000, I believe.
    Ms. Devere. Yes.
    Mr. Cardin. Which is below the poverty level for most who 
are receiving it. Do we have any indication of how many are 
succeeding to move up the economic ladder that are currently in 
the workforce? Do we have any information on that? Either 
people who are not working, where are they, and what happened 
to them? Either one.
    Ms. Devere. Among those not working, we have very little 
information on the population of people who have left TANF and 
are not working. What we do know is that they tend to be in 
families where there is income of others that they rely on. So 
they tend to perhaps be living with a boy friend or with other 
family members and relying on that income.
    In terms of what they're doing, we don't have other 
information with regards to that.
    Ms. Fagnoni. The other thing about that measure is, at a 
given point in time, a survey will ask at a given point in 
time, ``are you working?'' They will get one statistic. But if 
they ask another question, which is, ``have you ever worked 
since you left TANF'', let's say, or ``worked within the past 
12 months'', the percentages will be a little higher. So what 
it shows is a picture of people who have worked at some point 
after they left welfare but not necessarily continuously.
    Mr. Cardin. Do you have any information about the 
promotional ability of people who have left welfare, that are 
in the workplace, whether they have been able to move up the 
employment ladder, the economic ladder? Do we have any 
information on that?
    Ms. Fagnoni. I think you cited some that suggested a little 
bit of earnings increase; is that correct?
    Ms. Devere. In my testimony, as far as wage progression, we 
actually don't have any information from the current leaver 
studies. The Department of Health and Human Services is 
currently doing an evaluation of employment retention and 
advancement strategies in a number of sites, to get at this 
exact question of what is the wage progression, but we 
currently don't have a lot of information.
    Mr. Cardin. Lastly, do we have any information about those 
States that have provided post-employment services, where there 
has been greater success with people in the workplace staying 
in the workplace and progressing in the workplace?
    Ms. Fagnoni. We have some anecdotal information from our 
site visits. We have some specific examples--and I cited one 
from Grand Rapids, where they have placed case workers with the 
employees, trying to work with them once they've moved into the 
workforce. What they have shown is actually a retention rate 
higher than those people who work at that same company who were 
not on welfare. In other words, when you compare them to other 
workers, that kind of assistance--case management-seems to be 
helping keep people in the workforce; case management could 
involve giving a worker some assistance if they have a problem 
that might prevent them from coming to work. But that's pretty 
anecdotal at this point.
    But like I said, there are some examples from site visits 
that suggest there are some strategies that help keep people in 
the work force.
    Mr. Cardin. Mr. Chairman, I guess the bottom line is that 
we really don't have hardcore data. We just know--the gut view 
is that it helps--but we don't have anything that would 
empirically show----
    Ms. Fagnoni. Not that it tells us on a broader basis, 
right.
    Mr. Cardin. Thank you.
    Chairman Herger. Thank you very much.
    I was just looking at the testimony of one of our next 
witnesses, Mr. Greenberg, and if I can just quote from that, he 
mentions the Institute for Research on Poverty's tracking, 
where they did some tracking in Wisconsin. Of the families 
there that left welfare in 1995, it says the median earnings in 
1998 were $8,608 the first year, and then it went up to $9,627 
in the second year, and then up to $10,924 in the third year, 
which was an increase of at first 12 percent, and then 13 
percent. So evidently, in at least one study we know that 
earnings went up--and I'm sure we can get into that with our 
next witnesses.
    The gentleman from Pennsylvania, Mr. English. Do you have 
any questions?
    Mr. English. Thank you, Mr. Chairman. I appreciate the 
opportunity to inquire.
    Ms. Fagnoni, it's great to have you back before the panel. 
You state in your testimony that while many recipients have one 
or more characteristics that are considered barriers to work, 
like, for example, substance abuse, poor health, low basic 
skills, many, in fact, do find jobs. This was a very important 
part of our debate when we were originally passing TANF.
    Is there now any evidence from some States that, with the 
right supports, most people are able to find work and should be 
able to find work?
    Ms. Fagnoni. I think what we see right now, based on our 
most recent study--we have a report that will be issued within 
the next month--we find that States are focusing on the people 
who remain on TANF. States are trying to develop some 
strategies to help those who remain on the TANF move into the 
work force particularly where they have determined that they 
failed to get a job initially. I think at this point it's too 
early for us to be definitive about which strategies work. But 
certainly States are in the process of working through that.
    Mr. English. But there seems to be a fair amount of 
evidence, though, that some of the State strategies clearly are 
overcoming these barriers; isn't that fair to say?
    Ms. Fagnoni. What people told us was that it's not so much 
a particular, say, barrier or problem that an individual has, 
but, rather, what kind of support structure that individual 
might have in place to help them overcome that barrier.
    For example, two women may have some of the same problems, 
with one having more of a support structure, both at home, and 
perhaps with some help from case workers. The one with more of 
a support structure might be able to make that transition from 
welfare to work, while somebody else might not. So I think it's 
correct that supports can make a difference.
    I think what we don't know is how many people who remain on 
welfare really can----
    Mr. English. Looking at it from a different perspective, 
have you done any assessments, or have there been assessments 
done of how many parents, who never went on welfare, have faced 
such hurdles and remained actively engaged in the work force on 
a year-to-year basis?
    For example, we know there are millions of workers with low 
basic skills, who work and don't draw welfare. Can we draw any 
conclusions from that?
    Ms. Fagnoni. Let me say two things. First of all, I don't 
think there's been any study that's tried to get at the array 
of issues that people face, that include types of problems that 
are more difficult to document, such as substance abuse and 
domestic violence.
    But I do think, if one looks at some of the characteristics 
of people that are more easily measured--such as not having a 
high school diploma or not having any prior work experience--
that these are challenges for people, whether or not they are 
receiving TANF. It is also a challenge if they are a single 
parent trying to raise a child.
    Quite frankly, a number of the women receiving TANF are 
individuals who, at some point, may very well have not been 
receiving TANF and working at low-income jobs. So I think what 
you have is a population that faces challenges. Certainly you 
have variations and patterns in terms of who can work and who 
hasn't been able to work. But I think people are sort of 
pushing at this notion that, even with some challenges, with 
the right kind of supports they can work. People with low 
skills are vulnerable.
    Mr. English. Let me bring out a specific example. Under the 
Thompson administration, Wisconsin cut its caseload by roughly 
90 percent. Certainly many of those parents faced these same 
sorts of hurdles, as we see among current recipients in the 
studies you cite.
    I'm wondering, is Wisconsin an anomaly? What did Wisconsin 
do to make sure they were able to go to work, and are other 
States capable of replicating this record?
    Ms. Fagnoni. Wisconsin certainly is an example where they 
were one of the early leaders in terms of revamping their 
welfare system. They gave strong signals to welfare recipients 
and those applying for welfare, that they expected people to 
first look for a job, with their assistance. They actually 
merged their human services and their work force departments to 
send that signal.
    In Wisconsin, when one goes to apply for welfare benefits, 
one goes to a work force office, where they can get a whole 
range of services that are related to jobs. But Wisconsin has 
also increased funding on child care, on transportation 
subsidies. They have their own State earned income tax. So what 
they have done is a combination of more stringent requirements, 
sanctions if the requirements aren't met, but also a more 
generous set of supports to help move people from welfare to 
work.
    Mr. English. Thank you for your testimony. Thank you, Mr. 
Chairman.
    Chairman Herger. Thank you.
    Mr. Levin from Michigan.
    Mr. Levin. Thank you. I'm sorry I missed your testimony. I 
am glad to join you, Mr. Chairman, and Mr. Cardin and Mr. 
English.
    If I might, let me ask a few questions that I have, and 
find out if they have been covered already. I don't think so.
    Number one, does your study estimate the number of people 
who have moved from welfare to work who remain under the 
poverty level?
    Ms. Devere. There are a number of studies that have done 
that. For example, there is a study in Missouri of people who 
have left welfare, and 24 months after exit, 63 percent of 
single mothers with children under the age of 18 were in 
poverty. That's just an example. The States all do it very 
differently, and they include different measures. But the study 
in Missouri included a measure of total income to try to come 
up with that number.
    Mr. Levin. OK. I take it that that should give us some 
pause and indicate the work ahead, that there has been 
substantial progress in people moving from welfare to work and 
less progress in their moving out of poverty, if the Missouri 
study is any indicator.
    By the way, we're not gathering that data on a rigorous, 
systematic basis, State by State? We don't require States to do 
that, do we?
    Ms. Devere. Not on a rigorous, State-by-State basis. The 
State leaver studies primarily, to date, have been initiated by 
the States. There is a small core of these that have been 
funded by the Department of Health and Human Services. But the 
States have been doing them on their own and, therefore, they 
have been exploring questions that relate specifically to the 
State policies. So whether or not they ask the mother to report 
income in order to calculate how it compares to a poverty level 
differs and varies among the studies.
    Mr. Levin. Mr. Chairman, I would hope we would look at the 
whole issue of whether we're collecting adequate data to know 
what is really happening in the lives of people. Though, again, 
there has been substantial success and people moving into the 
work structure.
    Secondly, data on health care coverage for those who have 
moved from welfare to work, I have seen some from Michigan and 
some from other States. Have you already covered that?
    Ms. Devere. I haven't covered it. It's in my written 
testimony. The percentages that I report in my written 
testimony shows that, among those who have left welfare, when 
they're asked this question, the range is from 58 percent to 
about 87 percent of someone in the family receiving Medicaid.
    It is far more likely that an adult would be uninsured when 
they leave welfare than it would be for a child. But it varies, 
generally, though, indicating that at least half are receiving 
Medicaid, or someone in their family is receiving Medicaid at 
the time of the study.
    Mr. Levin. But that would mean a substantial number, mostly 
women, who are moving from welfare to work, especially after 
the year in which the transition to Medicaid is supposed to be 
in effect, that a substantial number of people who have moved 
from welfare to work no longer have health care?
    Ms. Devere. They may no longer have health care through 
Medicaid. There is a small percentage who are receiving 
employer-provided health insurance. Again, it's a very small 
percentage.
    There is evidence that there's a percentage of those who 
have left welfare for work who do not have health insurance.
    Mr. Levin. Again, we don't require the States to gather 
that data on a systematic basis. I don't think we do.
    Ms. Devere. I don't know that information.
    Mr. Levin. One last question so we can go on.
    I understand that there has been some discussion about the 
number of people who remain on TANF and how many of them have 
health problems. Is there any evidence as to how many of them 
have problems with mental health?
    Ms. Fagnoni. There have been some specific studies that 
have tried to take a look at that. We don't have anything at a 
national level.
    Actually, one of the most comprehensive studies comes out 
of your State. The University of Michigan has some researchers 
who have done very in-depth studies, looking at a range of 
disabilities. I think the ranges are anywhere from about--I 
think they hover around 60 percent, in terms of one or more 
difficulties. I think mental health is an area where there are 
problems. It's very difficult to measure. They have developed a 
strategy, an assessment tool, to try to help them measure that. 
It's probably one of the better sources of information on that.
    Mr. Levin. Mr. Chairman, for those who remain on TANF, a 
very substantial number, according to that study, anyway, have 
some serious--I'm not sure the word ``serious'' was used--have 
some substantial health problems. Again, I think that points to 
the challenge ahead.
    Thank you very much.
    Chairman Herger. I want to thank our panelists for your 
great testimony.
    Ms. Devere. Thank you.
    Ms. Fagnoni. Thank you.
    [Questions submitted from Chairman Herger to the panel, and 
their responses follow:]
                             U.S. General Accounting Office
                                               Washington, DC 20548
    1. It is useful to note that the percentage of working welfare 
recipients rose from 17 percent to 25 percent between 1997 and 1999, so 
the trend is in the right direction. Still, some have expressed concern 
that this 25 percent figure seems low. So I'd like to get a little 
context for that number:

    A. How does this compare with the percentage of AFDC/TANF 
recipients who worked prior to welfare reform, say in 1994 or 1995?
    In fiscal year 1995, 8.8 percent of AFDC mothers held part-time or 
full-time jobs in an average month, based on data from HHS' 
Characteristics and Financial Circumstances of AFDC Recipients, 1996. 
Our analysis of HHS data on TANF showed that 17 percent of adult 
recipients were engaged in unsubsidized employment in 1997 and 25 
percent in 1999. While the data sources and employment measures for the 
AFDC and TANF data are somewhat different, it appears that more welfare 
recipients than previously are combining welfare and work.

    B. How many current recipients were working, but perhaps not enough 
hours to satisfy the Federal definition of ``work'' (which is 30 hours 
per week)?
    As noted above, in fiscal year 1999 about 25 percent of adult TANF 
recipients were in unsubsidized employment in an average month. 
However, many more recipients--a total of 885,466 adults or 42 percent 
of all adults receiving TANF assistance--were participating in 
unsubsidized employment or some other PRWORA-specified work activities 
for an average of 27.5 hours per week during this time. Information is 
not currently available from HHS on TANF recipients whose average 
weekly hours of participation in PRWORA-specified activities did not 
reach 25 hours per week, which was the minimum weekly average required 
in fiscal year 1999. This rose to 30 hours per week for fiscal year 
2000.

    C. How many were participating in other activities to prepare them 
for work, but which do not satisfy the definition of ``work 
activities'' in the law?
    As allowed under TANF, state TANF programs may include work 
activities beyond those specified in PRWORA as counting for the 
purposes of calculating Federal participation requirements. According 
to the Congressional Research Service in Welfare Reform: Work 
Activities and Sanctions in State TANF Programs, Nov. 2000, most states 
provide activities in addition to those federally-specified. These 
activities range from postsecondary education to rehabilitative 
services to substance abuse and mental health treatment. However, HHS 
does not require states to report on the participation in these 
activities.

    D. Isn't there recent data from the Urban Institute's National 
Survey of America's Families that show the numbers of people working 
while receiving TANF continues to increase?
    The Urban Institute's National Survey of America's Families (NSAF) 
shows that there was a statistically significant increase in the 
percentage of TANF recipients who were working from 1997 to 1999--from 
22 percent in 1997 to 32 percent in 1999. The 1999 NSAF data show that 
an additional 25 percent of TANF recipients were looking for work and 
another 9 percent were in school. This leaves 33 percent who were 
identified as having no activity--a statistically significant decrease 
from the 43 percent with no activity in 1997. See How Well Does TANF 
Fit the Needs of the Most Disadvantaged Families?, Dec. 2000, a report 
by Sheila Zedlewski and Pamela Loprest of the Urban Institute.

    2. Please describe the range of benefits and work supports outside 
of TANF that help recipients find and keep jobs. I'm thinking here of 
Federal and state programs like food stamps, Medicaid and other health 
coverage, housing, job training and education, child care, child 
support, transportation, and cash supplements like the EIC.
    In our welfare-related work, we reported that frontline TANF 
workers are drawing on other non-TANF Federal and state programs as 
state welfare agencies focus on moving needy families toward economic 
independence.\1\ These programs, often administered by separate 
agencies, provide a wide array of services ranging from those designed 
to meet families' basic needs for food and shelter to those that 
provide employment and training services and support services, such as 
subsidies for child care. While local welfare agencies typically 
administer eligibility determination for TANF, food stamps, and 
Medicaid, other programs that provide key services to TANF clients may 
be administered by separate entities, such as housing authorities or 
education agencies. In addition to TANF, the following programs, among 
others, can be important in helping low-income adults with children 
find and keep jobs:
---------------------------------------------------------------------------
    \1\ See Welfare Reform: Improving State Automated Systems Requires 
Coordinated Federal Effort (GAO/HEHS-00-48), April 27, 2000.
---------------------------------------------------------------------------
       Food Stamps
       Medicaid
       Child Support Enforcement
       Child Care Subsidies
       Housing Subsidies
       Welfare-to-Work Grant
       Workforce Investment Act programs, including employment 
services
       Earned Income Credit (EIC)
    Welfare agencies have increased their focus on employment, bringing 
the welfare system and the work force development system closer 
together. We reported in Work force Investment Act: Implementation 
Status and the Integration of TANF Services (GAO/T-HEHS-00-145 mo. 
YEAR, Jun. 2000), that with the passage of the Work force Investment 
Act (WIA) in 1998, states and localities are now required to use one-
stop centers to provide most Federally funded employment and training 
services. These one-stop centers provide at least 17 major education 
and employment and training programs either on-site, through electronic 
linkages with partner agencies, or by referral. While services funded 
by TANF are not a mandatory part of this one-stop center system, a 
majority of states reported at least some relationship between the one-
stop centers and TANF at either the state or local level.

    A. Approximately how much do Federal and State taxpayers spend on 
these programs? How does that compare with spending prior to welfare 
reform?
    The Congressional Research Service (CRS) reported that, in fiscal 
year 1998, Federal and state governments spent almost $392 billion on 
approximately 80 income-tested programs that provide a range of 
services and programs to low-income individuals.\2\ These programs' 
expenditures are broader than what is actually spent on helping low-
income families move from welfare to work; for example, a substantial 
portion of spending on Medicaid is for the elderly and disabled, as 
opposed to cash welfare recipients trying to become self-sufficient. 
CRS found that in FY1998, medical services represented 50 percent of 
total income-tested spending; cash benefits, 24 percent; food and 
housing benefits, 17 percent. Services, energy aid, education, and 
jobs/training accounted for the remainder. Table I provides an overview 
of spending on the larger income-tested programs.
---------------------------------------------------------------------------
    \2\ See Vee Burke. Cash and Noncash Benefits for Persons With 
Limited Income: Eligibility Rules, Recipient and Expenditure Data, 
FY1996-FY1998. Congressional Research Service: Washington D.C., 
December 15, 1999.

                        TABLE I. PROGRAMS WITH BILLION-DOLLAR TOTAL EXPENDITURES, FY1998
                                                 [$ in billions]
----------------------------------------------------------------------------------------------------------------
                              Program                                   Federal      State/local       Total
----------------------------------------------------------------------------------------------------------------
1. Medicaid........................................................       $100.177        $77.187       $177.364
2. SSI.............................................................         29.656          3.945         33.601
3. Earned Income Tax Credit (refund)...............................         25.3            0             25.3
4. Food stamps.....................................................         20.397          1.987         22.384
5. TANF \1\........................................................         11.286         10.227         21.513
6. Section 8 low-income housing assistance.........................         16.114          0             16.114
7. Medical care for veterans (no service-connected disability).....          9.603          0              9.603
8. Federal Pell grants.............................................          6.274          0              6.274
9. Foster care.....................................................          3.73           3.303          7.033
10. Title XX social services.......................................          2.299      \2\ 3.586          5.885
11. Head Start.....................................................          4.347          1.087          5.434
12. School lunch (free/reduced price)..............................          5.196  .............          5.196
13. General assistance (medical component).........................          0          \2\ 4.956          4.956
14. Child care and development block grant.........................          3.123          1.567          4.69
15. HOME (Home investment partnerships)............................          1.461          2.601          4.062
16. Low-rent public housing........................................          3.899  .............          3.899
17. WIC............................................................          3.896          0              3.896
18. Rural housing loans (Section 502)..............................          3.830          0              3.83
19. Subsidized Federal Stafford and Stafford/Ford loans............          3.77           0              3.77
20. Veterans' pensions.............................................          3.071          0              3.071
21. General assistance (cash and nonmedical).......................          0          \2\ 2.625          2.625
22. Indian health services.........................................          2.099          0              2.099
23. Child and adult care food program..............................          1.404  .............          1.404
24. Adoption assistance............................................          0.695          0.59           1.285
25. School breakfast (free/reduced-price)..........................          1.266  .............          1.266
26. Job Corps......................................................          1.246          0              1.246
27. LIHEAP (home energy assistance)................................          1.132          0              1.132
28. Maternal and child health services block grant.................          0.678           .424          1.102
                                                                    --------------------------------------------
    Program total..................................................        265.949        114.085        380.034
----------------------------------------------------------------------------------------------------------------
\1\ The TANF block grant replaced AFDC, effective July 1, 1997 at latest (P.L. 104-193).
\2\ Estimate.
 
Source: Vee Burke. Cash and Noncash Benefits for Persons With Limited Income: Eligibility Rules, Recipient and
  Expenditure Data, FY1996-FY1998. Congressional Research Service: Washington D.C., December 15, 1999.
 

    Total spending on income-tested benefits has remained fairly 
constant from 1995 to 1998; Medicaid and education benefits increased 
slightly, while there were more significant decreases in jobs and 
training programs, energy aid, and food stamps (See Table II). State 
declines in spending on cash aid were approximately 18 percent, but 
total spending on cash aid decreased only slightly (3 percent). As a 
part of cash aid, the Earned Income Credit (EIC) increased 23 
percent.\3\
---------------------------------------------------------------------------
    \3\ The difference in EIC spending is based on a comparison 1996 
and 1998 spending levels.

  TABLE II. FEDERAL AND STATE/LOCAL SPENDING FOR INCOME-TESTED BENEFITS BY FORM OF BENEFIT: COMPARISON 1995 TO
                                                  1998 SPENDING
                                      [Millions of constant FY1998 dollars]
----------------------------------------------------------------------------------------------------------------
                                                              1995                             1998
              Fiscal year program                Federal     state/     Total     Federal     state/     Total
                                                             local                            local
----------------------------------------------------------------------------------------------------------------
Medical Benefits..............................     108489      78327     186816     113779      82610     196389
Cash Aid......................................      72662      25327      97989      73872      20690      94562
Food Benefits.................................      39365       1958      41323      33451       2060      35511
Housing Benefits..............................      26689       2487      29176      26897       2614      29511
Education Benefits............................      16193       1022      17215      16989       1137      18126
Jobs/Training.................................       4949        868       5817       3785         71       3856
Services......................................       6431       5688      12119       7300       5153      12453
Energy Aid....................................       1713         87       1800       1257         64       1321
                                               -----------------------------------------------------------------
    Total.....................................     276491     115764     392255     277330     114399     391729
----------------------------------------------------------------------------------------------------------------
Source: Vee Burke. Cash and Noncash Benefits for Persons With Limited Income: Eligibility Rules, Recipient and
  Expenditure Data, FY1996-FY1998. Congressional Research Service: Washington D.C., December 15, 1999.


    B. I know there is some concern about families receiving all the 
benefits for which they might be eligible, like food stamps, to help 
them work. What are States doing on that front? What more should be 
done?
    Our work on food stamps and Medicaid enrollment since welfare 
reform sheds light on these issues. In Food Stamp Program: Various 
Factors Have Led to Declining Participation (GAO/RCED-99-185, Jul. 
1999), we reported that the number of people who received food stamp 
benefits has declined each year from fiscal year 1994 to 1998, dropping 
about 28 percent. Food stamp participation declined in each state, 
ranging from about a 32-percent decline in Wisconsin to 6 percent in 
Hawaii. We also found that the primary reasons for the declines in food 
stamp participation include: the U.S. economy; tighter food stamp 
eligibility requirements; and welfare reform initiatives. More 
specifically, we reported that some households have had problems 
obtaining food stamps because some state and local governments, as part 
of their welfare reforms, have limited benefits beyond what the law 
permits. For example, Michigan denied food stamp benefits to whole 
households rather than to individual members of households when these 
members had violated welfare requirements--a procedure that a Federal 
court ruled was illegal. In addition, the United States Department of 
Agriculture (USDA) found that many former welfare recipients do not 
receive food stamp benefits because several state and local governments 
have not publicized differences in the eligibility requirements for 
welfare and food stamps. We recommended that the USDA's Food Stamp 
Program work with states to address these issues; the USDA agreed to 
publicize eligibility requirements for the Food Stamp Program and to 
target issues associated with participants' access to food stamp 
benefits.
    In November 2000, USDA promulgated regulations that give states an 
option to reduce periodic reporting requirements for food stamp 
recipients with earnings. In our recent report Food Stamp Program: 
States Seek to Reduce Payment Errors and Program Complexity (GAO/01-
272, Jan. 2001), we noted that while frequent reporting of income and 
other information allows caseworkers to make appropriate adjustments to 
benefit amounts, it can inhibit program participation because it 
creates additional reporting burdens for food stamp recipients.
    We reported on Medicaid enrollment and welfare reform in our 1999 
report entitled Medicaid Enforcement: Amid Declines, State Efforts to 
Ensure Coverage After Welfare Reform Vary (GAO/HEHS-99-163, Sept. 
1999). Between 1995 and 1997, Medicaid enrollment declined nationwide 
among the nonelderly and nondisabled adults and children by about 1.7 
million. This decline has been attributed to strong state economies, 
low unemployment rates, and new state welfare-to-work initiatives. We 
also reported that while most states experienced declines in Medicaid 
enrollment, enrollment increased in some states, in part as a result of 
individual state program expansions. For example, shifts in individual 
states' Medicaid enrollment for these adults and children during this 
period ranged from a 19-percent decline in Wisconsin to a 26-percent 
increase in Delaware. Moreover, these declines are generally less than 
for welfare enrollments. The smaller declines in Medicaid enrollment 
may be due to Federal eligibility protections built into welfare reform 
and ongoing expansions of Medicaid coverage for low-income children 
that predate welfare reform. One eligibility protection that predates 
welfare reform--transitional Medicaid assistance--provides an 
additional year of Medicaid coverage for individuals who lose Medicaid 
eligibility as a result of employment or increased income. We reported 
that in at least one state, only 1 in 25 eligible individuals 
participated in the transitional program. Moreover, some states did not 
even track the program's participation rates. In our research on 
automated systems for welfare, local officials told us that automated 
systems sometimes close Medicaid cases that should not be closed or 
fail to correctly process cases for transitional Medicaid.\4\ As a 
result, we recommended that the Health Care Financing Administration 
(HCFA) provide states with guidance or other appropriate technical 
assistance regarding best approaches for implementing transitional 
Medicaid such that eligible beneficiaries could benefit from this 
entitlement. Concurring with our recommendation, HCFA has taken steps 
to work with each state to review and address states' eligibility and 
enrollment policies.

    \4\ See Welfare Reform: Improving State Automated Systems Requires 
Coordinated Federal Effort (GAO/HEHS-00-48), April 27, 2000. 
---------------------------------------------------------------------------
    C. Have other benefits been conditioned on work like TANF? I know 
this falls outside our jurisdiction, but should those other programs be 
similarly conditioned on work?
    Work requirements in the nation's key programs for families with 
children evolved over time, reflecting demographic and labor force 
changes. The Congress created the Aid to Dependent Children program in 
1935, adding Federal support to state systems of pensions for widows 
with children. As administered in subsequent years (when it became 
known as Aid to Families With Dependent Children or AFDC), this program 
became a major support for single parents, typically mothers, who 
earned little income. Over time, as more women with children joined the 
labor force, welfare recipients were expected to look for work. The 
Congress first explicitly required mothers receiving AFDC benefits to 
register for work and training in 1971. However, this requirement 
exempted mothers with a child under age 6. When the Congress created a 
new welfare-to-work program in 1988, it narrowed the exemption to 
mothers with a child under age 3. Finally, when the Congress created 
TANF in 1996, it did not exempt any adults from work requirements 
although states may exempt a parent with a child under age 1. The 1996 
welfare reform legislation generally conditioned the receipt of cash 
benefits on work or work-related activities, such as unsubsidized 
employed or subsidized employment, community service, on-the-job 
training, and work experience, and other work-related activities.
    The Food Stamp and public housing programs are also conditioned on 
work. Food Stamp recipients who are also receiving TANF are not subject 
to Food Stamp work rules. To receive food stamps, non-TANF unemployed 
adults able to work who are not caring for a disabled dependent or a 
child under age 6 must fulfill state-established employment 
requirements, which can include working in exchange for the benefit 
(workfare), training, job search, education, or other activities. 
However, states may exempt any category of persons. While receipt of 
section 8 low-income housing does not have a work requirement, low-rent 
public housing programs require that residents must participate in an 
economic self-sufficiency program or contribute 8 hours monthly of 
community service unless they are engaged in education or a work-
related activity or are at least 62 years old.
    In addition, two other major supports for low-income families--
child care subsidies provided through the Child Care and Development 
Block Grant (CCDBG) administered by HHS and the Earned Income Credit--
are generally only available to people who are working or, in the case 
of the CCDBG, working or preparing for work through training or study. 
For more information on this topic, see Work Provisions in Programs for 
Low-Income Families with Children, Congressional Research Service 
Testimony Before the House Ways and Means Committee, April 3, 2001.
    Several factors would need to be considered in assessing whether a 
program should have work requirements, including the program's purpose 
and target population, what is known about its effects on participants' 
work efforts, an understanding of the infrastructure and capacity needs 
associated with implementing and administering such a requirement, and 
the costs and benefits of doing so.

                                         Cynthia M. Fagnoni
                                                           Director

                                


                                Library of Congress
                             Congressional Research Service
                                          Washington, DC 20540-7740
    This memorandum is in response to your follow-up questions to my 
March 15, 2001 testimony before the Subcommittee on Human Resources.
    Question 1. In your testimony, you point out that little is known 
about what programs are effective in encouraging marriage. Are you 
aware of any programs that have actually tried to address this problem 
directly? Is it possible that research can't tell us much because too 
few programs have been expressly directed at the problem?
    Response. The Family Support Act (FSA) of 1988 authorized a set of 
experiments that liberalized AFDC eligibility for two-parent 
(unemployed) families by permitting them to work 100 or more hours 
monthly without losing the status of being ``unemployed.'' The ``100-
hour'' rule was seen as a potential disincentive to marriage for low-
wage fathers with full-time jobs. By limiting other policy changes, 
many hoped that the evaluations of the three approved state 
demonstrations--in California, Utah, and Wisconsin--would provide 
insight into the impact of changes to the 100-hour rule. Reports on 
these demonstrations have been completed, but have not been 
released.\5\ Outside these demonstrations, the bulk of research 
completed since the FSA has focused on broader efforts to alter 
welfare, especially by increasing work, and the impact of these efforts 
on earnings and employment. Most states liberalized special two-parent 
eligibility requirements in these programs, but this change was part of 
a package of policy initiatives, which limits the ability to determine 
the effect of one specific policy change. The impact of welfare reform 
policy initiatives on marriage rates has received very little 
attention.\6\

    \5\ The Department of Health and Human Services (HHS) has indicated 
that these reports are available upon request.
    \6\ For additional information on welfare reform impact 
evaluations, see CRS Report RL30724, Welfare Reform Research: What Have 
We Learned Since the Family Support Act of 1988?, by Christine Devere, 
Gene Falk, and Vee Burke.
---------------------------------------------------------------------------
    Question 2. You mention that among those who left welfare because 
of work and then later returned to welfare, loss of employment is the 
most common reason for the return to welfare.
    A. What are some of the most common reasons for the loss of 
employment?
    B. How many leave work voluntarily versus involuntarily?
    C. Is it hard for such individuals to get back on welfare?
    Response. Among the state studies that examine former welfare 
recipients, information on reason for return to welfare is captured 
through state surveys of individuals who have returned to welfare. Some 
of the most common reasons given by these individuals for loss of 
employment, including both voluntary and involuntary loss of 
employment, are as follows:
     In New Mexico, 24% of leavers returned to welfare because 
they were laid off or fired. Other employment-related reasons for 
welfare returns were: 10% could not find a job, 6% quit their job, 6% 
experienced a decrease in hours worked or a decrease in their wages, 
and 4% had a spouse who was fired or laid-off.\7\
---------------------------------------------------------------------------
    \7\ Maximus. (2000). New Mexico TANF Longitudinal Study: Results of 
the First-Year Follow-up Surveys. McLean, VA: Author.
---------------------------------------------------------------------------
     Among leavers in Washington state, 25% returned to welfare 
because they were laid off or fired, 12% returned because they quit 
their job for health reasons, and 10% returned due to lost work 
hours.\8\
---------------------------------------------------------------------------
    \8\ Du, J., D. Fogarty, D. Hopps, and J. Hu, (2000). A Study of 
Washington State TANF Leavers and TANF Recipients: Findings from the 
April-June 1999 Telephone Survey Final Report. Olympia, WA: Department 
of Social and Health Services (hereafter cited as ``Du et al., 
Washington Leaver Study'').
---------------------------------------------------------------------------
     A study of Illinois leavers found that 24% reported that 
they returned to welfare because they had no job or they couldn't find 
a sufficient job; 19% had lost their job, were terminated, or were laid 
off. The authors also report that 27% stated that they returned to 
welfare because they were ``broke'' and needed money, and it is likely 
that many of these individuals who returned to welfare had experienced 
employment difficulties.\9\
---------------------------------------------------------------------------
    \9\ Julnes, G., A. Halter, S. Anderson, L. Frost-Kumpf, R. Schuldt, 
and F. Staskon, (2000). Illinois Study of Former TANF Clients: Final 
Report. Springfield, IL: Illinois Department of Human Services 
(hereafter cited as ``Julnes et al., Illinois Study of Former TANF 
Clients'').
---------------------------------------------------------------------------
     Among leavers in Virginia who had reapplied for welfare, 
19% said that they were fired or laid off from their job, 9% quit their 
job, 7% reported that there were no jobs available, 5% quit their job 
because it did not pay enough, and 4% had their hours or pay 
decreased.\10\
---------------------------------------------------------------------------
    \10\ Kuhns, C., A. Gordon, R. Agodini, and R. Loeffler, (1999). The 
Virginia Closed Case Study: Experiences of Virginia Families One Year 
After Leaving Temporary Assistance for Needy Families. Richmond, VA: 
Department of Social Services (hereafter cited as ``Kuhns et al., 
Virginia Leaver Study'').
---------------------------------------------------------------------------
    In terms of whether or not it is hard for leavers to return to 
welfare, this would vary by person and by state, depending on the 
individual's history on welfare and variations in state policies such 
as time limits and sanctions. However, the state leaver studies do not 
capture persons who are experiencing difficulties returning to welfare. 
They provide information only on reasons for welfare returns among 
those who have already returned to welfare.
    Question 3. You mention (page 6) that ``less than half of welfare 
leavers indicate they have filed for or received the Earned Income Tax 
Credit,'' an important benefit to help make work pay. Isn't it possible 
that when asked this question the individual might not yet have filed 
for the credit, which is normally done in tax season around April 15? 
Could there be other reasons for confusion on this? Are states taking 
any steps to ensure that leavers know about and file for earned income 
credits?
    Response. Information on take-up rates for the Earned Income Tax 
Credit (EITC) are from surveys administered to welfare leavers. It is 
possible that individuals may not realize at the time of the survey 
that they are eligible to receive the EITC. The low participation rates 
may also be a function of how the question is asked, as individuals may 
simply not recognize what they have received as the EITC. Additionally, 
a number of leavers in these survey studies indicate that they had 
never heard of the EITC, ranging from 24% of leavers in Illinois to 47% 
of leavers in three counties in California.\11\ In the three counties 
in California, where 47% of the leaver sample indicated that they had 
never heard of nor used the EITC, the study reported that 51% of the 
single-parent families and 65% of two-parent families in the study 
sample estimated to be eligible had never used the EITC.\12\
---------------------------------------------------------------------------
    \11\ Julnes et al. Illinois Study of Former TANF Clients.
    \12\ Moses, A., D. Mancuso, and C. Lieberman, (2000). Examining 
Circumstances of Individuals and Families Who Leave TANF: Assessing the 
Validity of Administrative Data. Belmont, CA: County of San Mateo Human 
Services Agency. The counties included in the study are San Mateo, 
Santa Clara and Santa Cruz.
---------------------------------------------------------------------------
    While the state leaver studies report that between 27% and 47% of 
former welfare recipients had never heard of the EITC, the Urban 
Institute reported that only 17% of former recipients have never heard 
of the EITC using data from the 1999 National Survey of America's 
Families (NSAF). Compared to the state leaver studies, the NSAF also 
illustrated higher receipt of the EITC among former recipients, 
reporting that 65% of former welfare recipients in the NSAF had 
received the EITC. The take-up rate is even higher when calculated 
among those leavers who had ever heard of the EITC (79%).\13\
---------------------------------------------------------------------------
    \13\ For more information, see Phillips, Katherin Ross. (2001). Who 
knows about the Earned Income Tax Credit? Washington, DC: Urban 
Institute.
---------------------------------------------------------------------------
    The low take-up rates in the state leaver studies may also be a 
function of the study sample, as the majority of state leaver studies 
ask this question of all former welfare recipients, regardless of 
employment status. A study in Colorado reported that among a subsample 
of leavers who were employed at the time of the survey, 82% reported 
claiming the EITC on their last federal income tax return.\14\ Among 
individuals who are aware of the credit, reasons for not participating 
vary. Among leavers in Arizona who were aware of the credit but not 
receiving it, 45% reported that they did not believe they were eligible 
for the credit, 29% said they did not apply, 2% said it was not worth 
the effort, and others indicated that they were not sure why they had 
not received the credit.\15\
---------------------------------------------------------------------------
    \14\ London, R., and V. Valvano, (1999). Evaluation of the Colorado 
Works Program: First Annual Report. Oakland, CA: Berkeley Planning 
Associates.
    \15\ Westra, K. and J. Routley, (2000). Arizona Cash Assistance 
Exit Study: First Quarter 1998 Cohort Final Report. Phoeniz, AZ: 
Department of Economic Security.
---------------------------------------------------------------------------
    Question 4. In your discussion of former welfare recipients--the 
leavers-- you note that the majority of welfare leavers are employed 
and that, based on wages alone, welfare leavers in a number of states 
remain poor.
    A. Isn't everyone on welfare ``poor''? How many people who left 
welfare had higher disposable incomes than when they were on the rolls?
    B. How many are using other federal programs such as job training 
and education, food stamps, housing assistance, Medicaid, the Earned 
Income Credit, and child care? Do these benefits get counted in 
determining who is poor?
    C. How about state benefits, including state earned income credits 
and other assistance? Are these counted?
    Response. Financial eligibility rules for welfare recipients vary 
among the states. Under TANF, states decide how much to aid a needy 
family, although there are no Federal guidelines for determining 
whether a family is financially needy and no requirement that states 
aid all financially needy families. The states have differing resource 
limits and income eligibility limits. Further, the states treat 
earnings among recipients differently through disregards that allow 
individuals to work and receive welfare at higher earnings. Attachment 
1 shows the maximum monthly combined TANF and food stamp benefit for a 
single parent with two children. The figure shows that in all states 
combined monthly maximum TANF and food stamp benefits are below the 
1999 federal poverty income threshold for such a family of $1,119 per 
month.\16\
---------------------------------------------------------------------------
    \16\ If the food stamp excess shelter deduction were used in the 
calculations, benefits in two states, Alaska and Hawaii (exempt), would 
surpass the Federal poverty threshold.
---------------------------------------------------------------------------
    The official definition of poverty counts most sources of money 
income received by families during the prior year (e.g., earnings, 
Social Security, pensions, cash public assistance, interest and 
dividends, alimony and child support, among others). For purposes of 
officially counting the poor, noncash benefits (such as the value of 
Medicare and Medicaid, public housing, or employer provided health 
care) and ``near cash'' benefits (e.g., food stamps) are not counted as 
income, nor are tax payments subtracted from income, nor are tax 
credits added (e.g., Earned Income Tax Credit (EITC)).\17\ The state 
leaver studies illustrate that welfare leavers in a number of states 
remain poor. However, the number who fall below the poverty level will 
vary among the studies based on what types of money income the state 
includes when determining the individual's total income. A study of 
leavers in New York City reported that 63% of leavers were below 
poverty based on earned income.\18\ Among studies that used the 
official definition of poverty (as described above), 63% of single 
mothers with children under the age of 18 in Missouri and 53% of 
families in Washington state were below poverty.\19\ A study of Utah 
leavers also included food stamps in total income and reported that 52% 
of families were below poverty.\20\
---------------------------------------------------------------------------
    \17\ For more information, see CRS Report 95-1041, Poverty in the 
United States: 1999, by Thomas Gabe.
    \18\ Bush, A., S. Desai, and L. Mead, (1998). Leaving Welfare: 
Findings from a Survey of Former New York City Welfare Recipients. New 
York, NY: Human Resources Administration Office of Policy and Program 
Analysis.
    \19\ Midwest Research Institute. (2000). Missouri Leaver Study: 
Chapter 2--Household Income and Poverty. Kansas City, MO: Author. Also 
see Du et al, Washington Leaver Study.
    \20\ Taylor, M., and A. Barusch, (2000). Multiple Impacts of 
Welfare Reform in Utah: Experiences of Former Long-Term Welfare 
Recipients. Salt Lake City, UT: Department of Workforce Services.
---------------------------------------------------------------------------
    There is some information available to compare income among 
recipients while they were receiving TANF as well as after their exit. 
Among leavers in Virginia, 87% had total household income (excluding 
the EITC) below the poverty level while receiving TANF, but 12 months 
after exit 72% reported total household income below poverty. This 
percentage also varied by employment status, with leavers unemployed at 
the time of the survey more likely to report total household income 
below the poverty level (87% of unemployed leavers vs. 60% of employed 
leavers).\21\
---------------------------------------------------------------------------
    \21\ Kuhns et al., Virginia Leaver Study.
---------------------------------------------------------------------------
    Although leavers in Virginia reported higher levels of income after 
exit, a study of Wisconsin leavers reported lower levels of income. The 
Wisconsin study used a definition of income that included respondent 
wages (as collected in the unemployment insurance data), estimated 
Federal income taxes, estimated payroll taxes, estimated EITC, cash 
assistance, and food stamps. Therefore, while this definition of income 
includes an estimated EITC, it does not include income from a partner, 
child support, or other unearned income (e.g., Supplemental Security 
Income). Among a group of leavers who left welfare in 1995, 72% 
reported lower or similar levels of income 12 months after their exit. 
However, 81% reported earnings that were higher or similar 12 months 
after exit. The study concludes that while earnings increase 
substantially after exit among leavers, the accompanying increase in 
the EITC is offset by other increased taxes, and welfare and food 
stamps are much lower. Therefore, the total income among these leavers 
is lower.\22\
---------------------------------------------------------------------------
    \22\ Cancian, M., R. Haveman, D. Meyer, and B. Wolfe, (2000). 
Before and After TANF: The Economic Well-Being of Women Leaving 
Welfare. Madison, WI: University of Wisconsin-Madison Institute for 
Research on Poverty.
---------------------------------------------------------------------------
    As these results show, the percent of leavers who are below poverty 
varies among the studies, in some part due to what each state includes 
in its definition of income. A number of states have attempted to 
gather a comprehensive measure of total income by including the value 
of other assistance programs such as housing, Medicaid, and food 
stamps, not all of which are included in the official definition of 
poverty. In addition, as some states include ``other'' categories, it 
is possible that these reported incomes include other programs (e.g., 
fuel assistance). Although the leaver studies vary in what they include 
when measuring income, they illustrate that a number of leavers 
continue to receive other assistance after exit.\23\ Examples include:
---------------------------------------------------------------------------
    \23\ Additional information on leaver studies cited in these 
examples can be found in CRS Report RL30882, Welfare Reform Research: 
What Do We Know about Those Who Leave Welfare?, by Christine Devere.
---------------------------------------------------------------------------
     Medicaid: Among studies that ask if anyone in the 
household was receiving Medicaid since exit or at the time of the 
survey (adults or children), the responses range from 58% in New Mexico 
to 87% in Wisconsin. However, the studies that examine participation 
rates among adults and children separately report that adults are more 
likely to be uninsured after exit from welfare.
     Food Stamps: The majority of studies report food stamp 
participation rates between 46% and 78% after exit.
     Child Care: Use of government subsidies varies 
considerably among leavers, ranging from 3% in the New Orleans 
metropolitan area to 55% in Missouri. When examining the percent who 
receive child care subsidies among those who are eligible for 
subsidies, the percentages increase but still vary considerably from 
20% in Illinois to 67% in North Carolina.
     Child Support: Among the studies that report the percent 
who collected child support, the range varied from 8% of leavers in 
metropolitan New Orleans to 41% of leavers in Idaho. In general, the 
studies show that less than half of those who have court-ordered child 
support arrangements actually receive a payment.
     Housing Assistance: The majority of studies report that 
between 14% and 34% of leavers received housing assistance such as 
Section 8 housing or public housing. Massachusetts reported the highest 
rates of housing assistance among welfare leavers; 56% of those who 
left for a time limit, and 50% of those who left for reasons other than 
a time limit.
    Other types of assistance reported by welfare leavers include fuel 
assistance, Supplemental Security Income, Unemployment Insurance, 
transportation assistance, and participation in the School Lunch 
program. However, the extent to which these benefits are included in 
income as calculated by the leaver studies is unclear. While some 
states explicitly indicated food stamps, child care, and Medicaid as 
included in the ``total income'', it is possible that these other forms 
of assistance are being captured in ``other'' categories (for which 
additional detail is not available). There is no information available 
as to whether states are including the receipt of state benefits, such 
as state EITCs, in calculating income as individuals may also be 
reporting this income when asked to report ``other'' sources of 
support.
    Question 5. The research shows that most recipients have higher 
incomes after welfare reform. However, there is significant concern 
about those at the very bottom of the income ladder whose reported 
incomes dropped slightly (about 4%) since 1995. What have we seen that 
tells us about this group's spending habits, as opposed to income? 
Hasn't consumption risen for them like everyone else? What does that 
tell us?
    Response. Information on consumer expenditures comes from the U.S. 
Bureau of Labor Statistics Consumer Expenditure Survey (CEX).\24\ The 
CEX has a relatively small sample size of 5,000 households, compared to 
the Current Population Survey (CPS) which has a sample of 47,000 
households. The CEX data show that consumer expenditures grew 18% over 
the period from 1994 to 1997 among single mother families. Some of this 
overall increase is attributable to work expenses. Information from the 
CEX also shows that, even among the poorest single-mother families, 
consumption expenditures have increased over the period from 1994 to 
1997. Among the poorest single mothers, the CEX data also show that 
consumption expenditures typically exceeded reported incomes. Possible 
explanations are that some who have low incomes are temporarily poor or 
perhaps some low-income mothers might access credit markets to pay for 
spending that exceeds income. It is also possible that income, related 
to spending, is underreported on these surveys, as many agree that it 
is difficult to capture all sources of support available to a household 
when collecting this information.
---------------------------------------------------------------------------
    \24\ This response draws from a longer discussion of the CEX 
included in the 2000 House Committee on Ways and Means Greenbook. See 
``Appendix L. Monitoring the Effects of Pre- and Post-TANF Welfare 
Reform Initiatives,'' p. 1427-1430.
---------------------------------------------------------------------------
                                           Christine Devere
                                      Analyst in Social Legislation
Attachment 1. Maximum Monthly Combined TANF and Food Stamp Benefits for 
             a Family of Three on July 1, 2000a

[GRAPHIC] [TIFF OMITTED] T3533A.003

    Source: Figure prepared by the Congressional Research Service (CRS) 
based on a survey of the states. For more information, see CRS Report 
RL30579, Welfare Reform: Financial Eligibility Rules and Cash 
Assistance Amounts under TANF, by Craig W. Abbey.

    a Food stamp calculations assume that the family does 
not receive an excess shelter cost deduction. In very low TANF benefit 
states, combined benefits shown reflect the maximum Food Stamp 
allotment for the family size, but in some states the excess shelter 
deduction would increase benefits by up to $83 monthly--more in Alaska 
and Hawaii.

                                


    Chairman Herger. We will now move to our second group of 
panelists, Mr. Mark Greenberg, Senior Staff Attorney, Center 
for Law and Social Policy, and Mr. Robert Rector, Senior Policy 
Analyst, Heritage Foundation.
    Mr. Greenberg.

STATEMENT OF MARK GREENBERG, SENIOR STAFF ATTORNEY, CENTER FOR 
                     LAW AND SOCIAL POLICY

    Mr. Greenberg. Mr. Chairman, Members of the Subcommittee, 
thank you very much for holding this hearing. We think these 
issues are extraordinarily important, and that it's enormously 
valuable to begin the conversations by focusing on what 
research findings can tell us about what the experience has 
been since the 1996 law was enacted.
    I find myself in substantial agreement with much of what 
you have heard from the Congressional Research Service and the 
General Accounting Office, in part because we are looking at 
many of the very same studies in trying to develop a picture of 
what has happened.
    There are some important things we can see from those 
studies. At the same time, there are some significant gaps 
where information isn't available that would help us get a 
better picture of what has happened.
    Broadly, we know that there has been an enormous caseload 
decline, historically unprecedented, and it began in 1994, 
although it accelerated after the law was enacted in 1996.
    We also know that child poverty has gone down in a very 
dramatic way, as other witnesses have already noted. At the 
same time, we know that the welfare caseload has fallen more 
rapidly than child poverty has fallen, and that raises some 
questions.
    In trying to get an understanding, I think we are confident 
from the leaver studies that most of the families who have left 
welfare did enter employment. It's hard to get a precise 
picture because every State does its study a little bit 
differently, and it makes it difficult to do comparisons 
between States. But there is a pretty consistent picture that 
tells us roughly that about 60 percent of those who have left 
are working at any point, that a higher share have worked at 
some point. If you look at those working consistently, four 
quarters in a row, it's probably in the range of about 40 
percent or so. We see that as a very consistent picture.
    The problem of low earnings is a constant feature running 
throughout the studies. Typically, the best information comes 
from unemployment wage records, and from in the studies funded 
by the Federal Government, that try to do things in about the 
same way, we see initial earnings of about $2,500 in the first 
quarter after leaving, growing over the course of the year to 
about $2,800. So there is some evidence of growth in earnings. 
We really can't tell if that's growth in wages or whether it's 
just that individuals are working more weeks over a quarter. At 
the same time, the overall picture is that family earnings 
remain low. The Wisconsin data that I cited in my testimony, is 
probably the best place to see three-year numbers from a State. 
In that data, we do see evidence of earnings increasing over 3 
years, but poverty remains very high and doesn't change much 
over that period of time.
    Broadly, what seems to be happening is that many of the 
families are essentially replacing public benefits income with 
employment income. They are less likely, of course, to be 
receiving TANF assistance, and they are less likely to be 
receiving food stamps. So in terms of overall family income, 
there is a big replacement effect. At the same time, very 
frequently families are incurring additional expenses as they 
go into the workforce, such as child care. However, in our 
examination of the studies of families that have left welfare, 
typically only about 25 to 30 percent of those who were working 
were getting child care assistance.
    Nevertheless, it's clear that there actually have been 
significant improvements in providing child care assistance to 
low-income working families since 1996. Partly it's because of 
the increases in the child care block grant, but most 
strikingly, it's been because of the States' ability to use 
TANF funds. As their cash assistance caseloads have fallen, the 
single, clearest redirection of funds has been to child care.
    In the year 2000, about $3.5 billion from TANF was 
redirected to child care. All but two States redirected TANF to 
child care. The amount of TANF funds going into child care in 
the year 2000 seems to have been about as large as the entire 
child care block grant. So there is a very strong expression by 
the States of the importance of child care focus.
    In addition to understanding the situation of working 
leavers, it is important to understand the situation of those 
who have left and are not working. There is clear indication 
that some of the parents are living with a spouse or partner. 
However, my reading of the leaver studies is that it appears 
the majority are not. New research from the Urban Institute 
suggests there is a group who are not living with a spouse or 
partner, are not working, haven't worked, aren't receiving 
disability benefits, and many of those families demonstrate the 
very same, very serious barriers to employment that we see 
among many of the families still receiving assistance. So there 
are important questions about why this group of families seems 
to have fallen out of the public system, despite the fact that 
they are not working and despite having very serious barriers 
to employment.
    The last point that I would emphasize is that among State 
and local administrators, much discussion now focuses on the 
issue of multiple barriers among the families that are still 
receiving assistance. Administrative data doesn't capture this 
in a good way and, frankly, there haven't been nearly as many 
studies of families still in the system as of the families that 
have left.
    I would urge, as the Committee proceeds, that you talk with 
the State agencies about this issue. When I do so, I hear 
routinely that the families that are left face a whole set of 
barriers that States are now trying to determine how to best 
address: Barriers concerning health, mental health, domestic 
violence, substance abuse, extreme literacy issues. For many 
States, these are issues that historically they didn't have a 
lot of experience working with. However, they now frame some of 
the key challenges ahead for States.
    Thank you very much.
    [The prepared statement of Mr. Greenberg follows:]
Statement of Mark Greenberg, Senior Staff Attorney, Center for Law and 
                             Social Policy
    Mr. Chairman and Members of the Subcommittee: Thank you for 
inviting me to testify. I am a Senior Staff Attorney at the Center for 
Law and Social Policy (CLASP). CLASP is a nonprofit organization 
engaged in research, analysis, technical assistance and advocacy on a 
range of issues affecting low income families. Since 1996, we have 
closely followed research and data relating to implementation of 
Personal Responsibility and Work Opportunity Reconciliation Act. In 
addition, we often talk and visit with state officials, administrators, 
program providers, and individuals directly affected by the 
implementation of welfare reform efforts.
    Today's hearing focuses on the experience since 1996 in addressing 
the four goals of the Temporary Assistance for Needy Families block 
grant structure. These goals are to: (1) provide assistance to needy 
families so that the children may be cared for in their homes or in the 
homes of relatives; (2) end the dependency of needy parents on 
government benefits by promoting job preparation, work, and marriage; 
(3) prevent and reduce the incidence of out-of-wedlock pregnancies and 
establish annual numerical goals for preventing and reducing the 
incidence of these pregnancies; and (4) encourage the formation and 
maintenance of two-parent families.
    I want to begin with two general observations. Since 1996, there 
has been a large research effort funded both by governments and private 
organizations, and much is known as a result of this effort. This 
research makes it possible to discuss what has happened, i.e., changes 
in caseloads, employment, income, family structure, but it is more 
difficult to state what role the 1996 law or particular components of 
the law played in affecting these changes. Second, the fact that the 
law is scheduled for reauthorization next year makes this a logical 
time to consider the experience; at the same time, this is still a 
relatively early point in a major national policy shift, and to date, 
we've only seen the experience in the context of a strong national 
economy, and before families have reached the five-year time limit 
restricting federally funded assistance. So, while it is important to 
look at the story so far, it is also important to recognize that more 
time will be needed to know how the new structure will function over 
time.
    Since the law was enacted, both the TANF assistance caseload and 
the nation's child poverty rate have fallen significantly. However, 
participation in TANF assistance has fallen much more rapidly than 
child poverty has declined.
    Since 1994, there has been a historically unprecedented decline in 
the number of families receiving assistance. In early 1994, five 
million families were receiving AFDC. The number fell to 4.4 million by 
the time the 1996 law was enacted, and then dropped to 2.2 million by 
June 2000. Since enactment of the law, the caseload has fallen by at 
least 50% in twenty-nine states and by at least 20% in all states.
    Caseload decline is sometimes cited as evidence of success in 
itself, but a state's caseload can fall either because families no 
longer need assistance or because families who need assistance are not 
receiving it. Part of the caseload decline is clearly due to reduced 
need--during this period, child poverty fell, from 21.8% in 1994 to 
16.9% in 1999. However, participation in welfare fell much more rapidly 
than child poverty. In 1994, 62% of poor children were receiving AFDC 
assistance; by 1998, only 43% of poor children were receiving TANF 
assistance.
    Why did the share of poor children receiving assistance fall? There 
are three main possibilities: a) parents got jobs and stopped receiving 
TANF, even though family income was still below poverty; b) families 
left assistance without finding work; and c) families who were poor and 
potentially in need of assistance chose not to apply or applied and 
were unable to get assistance. As discussed below, there is evidence 
that most families leaving welfare are working, but that many of these 
families remain poor; there is also evidence that a significant group 
of families have left welfare but are not working. It is less clear 
whether there has been a drop in applications or application approval 
rates. Under TANF, states are required to report to HHS on the total 
number of applications, denials, and approvals, but not the reasons for 
denials. In any case, none of this information about application 
processing under TANF has been published.
    Since 1996, there has been a significant increase in employment 
among female-headed families. There's broad agreement that TANF has 
played an important role, but is not the only factor, in these 
increases in employment.
    A set of data sources all point to a significant increase in 
employment among TANF recipients, and more generally among female-
headed families. The principal information about why families have left 
welfare has come from studies looking at the circumstances of families 
who have left assistance. These studies consistently find that about 
60% of leavers are working, and that employment is the most common 
reason given for why families left assistance. Typically, an even 
larger share report having worked at some point since leaving 
assistance. The share of adults working while receiving TANF assistance 
also increased--from 8% in 1994 to 28% in 1999. Part of the explanation 
for this increase in employment among recipients is that under TANF, 
most states have liberalized the rules for reducing assistance when a 
family has earnings; as a result, a family is more likely to retain 
eligibility when a parent enters a low-wage job.
    Census Bureau data also point to a large increase in employment 
among female-headed families in recent years. In 1994, married mothers 
were more likely to be employed than were single mothers. (64.7% vs. 
57.1%). By 1999, the employment rate of single mothers (68.4%) was 
greater than the rate for married mothers (67.1%). The differences are 
more dramatic among low income families. For families with incomes 
below 200% of poverty, between 1994 and 1999, employment rates stayed 
essentially flat for married mothers but grew by thirteen percentage 
points for single mothers. As a result, in 1999, 59% of single mothers 
in families with incomes below 200% of poverty were working, versus 
43.4% of married mothers.
    It is probably impossible to isolate the independent role of TANF 
in this increase in employment. The process started before 1996--the 
nation's caseload decline began in 1994, and the growth in employment 
of low income single mothers with young children began between 1992-93. 
And, during the 1990s, a set of factors supported or contributed to 
employment growth for single mothers: the strong national economy, the 
large expansion of the Earned Income Tax Credit, increased availability 
of child care subsidies, expansion of health coverage for children, the 
minimum wage increase, improved child support enforcement. There seems 
to be a consensus among researchers that welfare reform efforts did 
play an important role, with the effects more pronounced in latter 
years. At the same time, a set of factors occurring at the same time 
all pushed in the same direction, and we don't know how the same 
policies would have worked in a different economy, or how one component 
would have worked without the others.
    When we talk about the effect of ``TANF'' or ``welfare reform,'' it 
is important to appreciate that there are a number of components in 
what states have done under TANF. In formal rules, states generally 
expanded requirements to participate in work-related activities; 
increased the penalties for failure to comply with such requirements; 
restricted access to education and training; provided increased income 
support for families with earnings; liberalized program asset 
requirements; broadened eligibility for two-parent families; imposed 
time limits on assistance; and expanded the availability of 
``transition'' benefits for families leaving assistance. In addition 
state agencies often emphasize that there has been a fundamental change 
in the basic orientation of their systems, as the principal focus has 
shifted from providing income support to an emphasis on requiring and 
supporting employment.
    TANF implementation also meant an infusion of additional funds for 
states. Since funding levels were generally set to reflect welfare 
caseloads from the early-mid 1990s, and caseloads began falling in 
1994, the effect of TANF from the beginning was to provide increased 
federal funding to states. The General Accounting Office estimated that 
if all states had participated in TANF throughout 1997 and had met 
applicable maintenance of efforts, states would have had an additional 
$4.7 billion above the funding level that they would have had under 
prior law. And, since block grant funding remained constant as 
caseloads declined, the funds potentially available for services 
steadily increased over time. This additional funding made it possible 
for states to expand employment-related services, child care, and 
support services.
    In summary, TANF has contributed in important ways to the increase 
in employment among female-headed families. However, it is not possible 
to precisely state its independent impact; we do not know how the same 
policies would operate in different economic circumstances; and we need 
to recognize that TANF implementation has been far more than work 
requirements and time limits--it has also involved additional resources 
and an array of new and expanded supports to help families enter and 
maintain employment.
    Much of the employment for families receiving or leaving TANF 
assistance, at least initially, is in low-wage jobs. There is evidence 
of some earnings growth over time, but so far, earnings remain low for 
most of the affected families.
    Families still receiving assistance tend to have low earnings--
according to administrative data, earnings for working adults receiving 
assistance averaged $597.97 per month in FY 99. Leavers studies also 
report generally low wages and earnings for those who have left welfare 
and entered employment. According to the Urban Institute's Nation 
Survey of America's Families, the median wages for leavers in 1997 were 
$6.61 an hour; individual state studies typically report wages at or in 
that range. In a set of leavers studies funded by HHS, the median 
quarterly earnings for the first full quarter after leaving were $2526, 
i.e., $842 a month. So, unless these families have additional sources 
of income, they are often likely to still be in poverty. In fact, 
studies in Missouri and Washington reported poverty rates of 58% for 
TANF leavers.
    The fact that many families are entering low wage employment was 
not unexpected, because a strong focus in TANF implementation was to 
encourage parents to enter employment as rapidly as possible, even at 
low wages, with the hope that earnings would grow over time. To find 
out if this is occurring, one would want to follow the experiences of 
families over time. Unfortunately, state reporting to the federal 
government provides only limited longitudinal data. To compete for the 
federal ``high performance bonus,'' states report earnings data for 
families during a quarter and the second subsequent quarter for people 
employed in both quarters. From this data, we can see that in 1999, 
national average earnings grew from $2114 in a quarter to $2578 in the 
second subsequent quarter. However, since the first quarter includes 
both individuals continuously employed and those entering employment 
during the quarter, we cannot tell the extent of earnings growth from 
this data, and we cannot get a longer-term picture from this data.
    A limited number of states have reported longitudinal data for 
families leaving welfare and entering employment. From that data, it 
looks like earnings do increase after leaving assistance, but remain 
low. For example, in nine federally-funded leavers studies, median 
earnings grew from $2526 in the first to $2821 in the fourth quarter of 
employment. Probably the best longitudinal data comes from the 
Institute for Research on Poverty's tracking of families that left 
welfare in Wisconsin in 1995. In the IRP study, median earnings (in 
1998 dollars) were $8608 in the first year after leaving, $9627 in the 
second year, and $10,924 in the third year.
    Some states have responded to evidence of low earnings for families 
leaving assistance by creating new initiatives to help working families 
who have left assistance advance to higher earning jobs. Most of these 
initiatives are still in the earliest stages, and there isn't yet clear 
evidence of their effectiveness. There are also indications that in the 
last several years, a number of states have softened some of their 
prior restrictions on access to education and training programs, though 
participation in such activities by TANF recipients remains low.
    The fact that many exiting families have low earnings has focused 
attention on the importance of access to Food Stamps, Medicaid, child 
care assistance and child support services for families leaving 
assistance. Studies consistently report sharp declines in participation 
in Food Stamps and Medicaid after families leave assistance. Probably 
not more than one-third of working leavers receive child care 
assistance. Child support enforcement has improved, though most leavers 
still do not receive child support.
    Because many leavers have low incomes, continued access to Food 
Stamps and Medicaid are important for families leaving TANF. However, a 
consistent finding has been a sharp drop in receipt of these benefits 
after exiting TANF. In a set of state and county leavers studies funded 
by HHS, the share of single parents receiving food stamps in the 
quarter after leaving TANF ranged from 33% to 57% (and was 9% in one 
county). The share of adults receiving Medicaid in the quarter after 
leaving was between 41% and 57% in seven of nine sites. There are 
indications that these drops in participation are partly due to 
eligibility rules, partly due to lack of awareness of continued 
eligibility, partly due to administrative practices that sometimes 
resulted in closing Food Stamp and Medicaid cases at the same time TANF 
cases were closed.
    There are also indications that families who could benefit from 
child care assistance after leaving welfare do not consistently receive 
such assistance. In state leavers studies with data on this issue, only 
about one third or less of working leavers were receiving child care 
subsidies. However, the Urban Institute has calculated that 50% of 
working low-income single parents (income below 200% of poverty) with 
children under age 13 have child care costs, averaging $230/month, and 
representing 19% of family income.
    Federal administrative data indicate that some child support is 
collected for 40% of welfare leavers. This probably reflects 
significant improvement in recent years, though a substantial share of 
leavers are still not receiving regular child support payments. 
(Moreover, about half of support arrears collected on behalf of leavers 
are not paid to the family, but instead are retained by government to 
recover prior assistance costs.)
    Families still receiving assistance are a heterogenous group, but 
generally have more serious barriers to employment than those who have 
left assistance.
    Most families now receiving assistance are either working or do not 
include an adult receiving assistance. In FY 99, 28% of adults 
receiving assistance were working, and 29% of families receiving 
assistance were ``child-only'' cases, i.e., cases in which no adult 
received assistance because the child is living with a grandparent or 
other non-parent relative; the parent is disabled and receiving 
Supplemental Security Income, the parent is an ineligible alien or 
under sanction.
    State and local agencies often note that many of the families still 
receiving assistance are likely to have serious employment barriers. It 
is difficult to provide a precise picture, because the types of 
problems often identified--health and mental health, domestic violence, 
substance abuse, limited or no English proficiency, severe basic skills 
deficits--are not the types of information routinely collected or 
reported in program administrative data. The Urban Institute reports 
that among adults receiving assistance in 1999, 44% had less than a 
high school education, 38% either had poor health, a health condition 
preventing work, or very poor mental health; and 27% last worked three 
or more years ago. Most (56%) of those with no identified barrier to 
work were working; in contrast, only 20% of those with two or more 
barriers to work were working.
    People sometimes ask if the incidence of these problems is more 
severe now than was the case in the past. It is difficult to know, 
because most states have not had consistent measures of these potential 
obstacles over time. The Urban Institute found that the incidence of 
barriers in 1999 did not look substantially different from 1997. It is 
clear, though, that families still receiving assistance are much more 
likely to have multiple barriers to employment than families who have 
left. State leavers studies also consistently report that those still 
receiving assistance are likely to have less education and less work 
history than those who have left. And, for many states, the key 
question isn't really whether the prevalence of these problems has 
increased, because five years ago, families with multiple barriers were 
typically exempt from program requirements. Now, these families are 
subject to work and time limit requirements, and states need to develop 
appropriate service strategies to work with them, so the issues of how 
to structure services for such families have become an increasingly 
significant challenge in TANF implementation.
    A group of families with serious barriers to employment is no 
longer receiving assistance.
    About 40% of families who have left assistance are not working. 
Generally, there is less information about these families, and it would 
be helpful to have a clearer picture of why they left and how they are 
managing. On one hand, families have always left assistance for reasons 
besides work--for example, the family might move, or children might 
turn eighteen. And, nonworking leavers are sometimes living with 
spouses, partners, or other adults. However, there are indications 
that, as compared to working leavers, the nonworking leavers are likely 
to have more serious employment barriers--e.g., less education and work 
history, greater likelihood of illness or disability. They are also 
likely to be poorer than working leavers.
    In a recent analysis, the Urban Institute focused on one group of 
nonworking leavers: those adults who had not worked since leaving, were 
not receiving disability benefits, and were not residing with a working 
spouse or partner. This group of ``at risk'' leavers was estimated to 
be 17% of all leavers, and they showed a greater likelihood of having 
multiple barriers to employment than current TANF recipients 50% of 
this group was in very poor health; 47% had not worked in at least 
three years; 38% had less than a high school education; 19% were caring 
for a disabled child.
    Why are families with such severe barriers leaving assistance 
despite not working? There is a clear need for additional research, but 
one part of the explanation is likely the increased use of 
``sanctions,'' i.e., grant reductions and terminations and other case 
closures for noncompliance under TANF. States vary in their extent of 
sanctioning; in some leavers studies, only a small share of case 
closures are attributable to sanctions and in other studies, 25% or 
more of case closures are for such reasons. Studies of sanctioned 
families consistently report that such families are likely to have less 
education and work history than other leavers, and that they are less 
likely to be working and more likely to have lower earnings when they 
do work.
    The concern, then, is that at the same time that many states 
articulate a goal of working with those families with the most severe 
employment barriers, state practices are sometimes having the effect of 
terminating assistance to those families. Some states have responded to 
these concerns by developing ``second look'' procedures before imposing 
sanctions or additional efforts to engage in outreach to sanctioned 
families. However, at this point, the TANF law does not actively 
encourage such efforts, and the federal government does not collect 
information on state practices to avoid terminations of assistance to 
families with multiple employment barriers.
    The large gains in employment have resulted in increased income for 
many female-headed families; at the same time, the average incomes of 
the bottom 20% have declined since 1994, because losses in public 
benefits have been as large or greater than gains in earnings.
    Researchers have examined Census data during the 1990s and examined 
the circumstances of female-headed families. Typically, this work has 
looked at post-tax, post-transfer income, taking into consideration 
both the Earned Income Tax Credit and food stamp benefits. The 
research, summarized in recent interchanges between Wendell Primus and 
Ron Haskins, essentially finds that when one divides female-headed 
families into five quintiles, there have been both earnings and income 
gains in the second-lowest quintile, though the rate of gain was 
stronger from 1993-95 than from 1995-99, and most of the earnings gains 
from 1995-99 have been offset by declines in public benefits. However, 
for the bottom quintile, average income in 1999 is actually lower than 
it was in 1994 and 1995, because losses in means-tested income have 
been greater than increases in earnings. (While 1999 income is lower 
than 1994 income, it is higher than 1993 income; however, the key point 
here is that whatever base year is used, the story is that for the 
bottom quintile, gains in earnings have been more than offset by losses 
in public benefits.)
    Why have the earnings gains not translated to greater economic 
gains for families? While the Census data cannot directly answer this 
question, the findings seem consistent with those already described 
from the leavers' studies: many families entering low wage employment 
have lost public assistance despite still being in poverty; Food Stamp 
participation has sharply declined for families leaving TANF; and a 
group of families has left TANF without finding work.
    These findings are particularly striking in light of recent work by 
the Manpower Demonstration Research Corporation, looking at 
experimental studies to examine the impact of work-welfare initiatives 
on children. MDRC found that while many programs raised employment 
rates, only some raised income, because gains in employment were often 
offset by losses in benefits. In those programs where employment was 
associated with increased family income, MDRC found evidence of 
positive effects on childrens' school achievement. In addition, two of 
three programs that raised incomes found increases in positive 
behaviors by children, and one found a decline in problem behaviors. In 
contrast, programs in which increased employment did not translate to 
increased incomes had mixed effects, and no clear positive impact on 
childrens' well-being. The authors conclude: ``[W]e found that programs 
that provided earnings supplements had consistently positive impacts on 
children's achievement... Raising employment without increasing income 
may not be sufficient to boost the healthy development of children in 
low-income families.'' Morris, et. Al, How Welfare and Work Policies 
Affect Children: A Synthesis of Research (Manpower Demonstration 
Research Corp. 2001).
    The TANF caseload decline has made it possible for states to make a 
major redirection of resources to child care. The freed-up resources 
have also allowed for significant program expansions in other areas, 
though the existing federal reporting system does not provide a good 
picture of how funds are being used.
    In 1996, TANF funding was set to reflect historic federal funding 
levels, and to remain essentially constant through 2002. The decline in 
TANF caseloads meant that federal and state funds became available for 
redirection to other services and activities to further the goals of 
TANF. Initially, many states were hesitant to redirect TANF funds, 
because they understood that federal funding would remain fixed even if 
caseloads began rising, they were uncertain whether the caseload 
decline would continue, and they were often unclear about when and how 
TANF funds could be used for expenditures outside of the traditional 
welfare system. A key shift occurred when HHS issued final TANF 
regulations in April 1999. These regulations made clear the breadth of 
state flexibility in using TANF, explaining that states could use the 
funds to benefit ``needy families'' whether or not those families were 
receiving traditional welfare assistance and that states could use TANF 
to structure supports for working families outside the traditional 
welfare system.
    In exercising this new flexibility, the clearest response has been 
in committing resources to child care. States can transfer up to 30% of 
their TANF block grants to their programs under the Child Care and 
Development Block Grant, and can also spend TANF funds directly for 
child care. Each year, the amount of TANF funding redirected to child 
care has grown; in 2000, we calculate that $3.5 billion in TANF funding 
was redirected to child care, an amount as large as the entire federal 
child care block grant. This additional funding has allowed states to 
increase the numbers of families receiving subsidy assistance, raise 
eligibility levels, improve payment rates to child care providers, and 
expand spending for child care quality initiatives. At the same time, 
state administrators often express apprehension about the extent to 
which child care expansions have relied upon a source of funding that 
is not seen as stable or predictable.
    The expanded funding has made an important impact, there are still 
significant indicators of unmet needs. As noted above, most working 
leavers do not receive child care subsidies. There is no available 
national data on the share of TANF children receiving child care 
assistance; a study by the National Center for Children and Poverty and 
Abt Associates reported that in 1999, the share of TANF children 
receiving child care subsidies in ten states ranged from 7% to 26%. (An 
eleventh state reported a higher figure, but there appear to be data 
problems affecting the reliability of that figure.) And, HHS has 
estimated that nationally, 12% of potentially eligible children were 
receiving subsidy assistance under the Child Care and Development Block 
Grant in 1999. While the numbers receiving assistance would be higher 
if all funding sources were considered, the basic picture of unmet need 
would remain. Moreover, resource constraints in child care are 
expressed in a range of ways: in state eligibility levels, fee scales, 
payment rates to providers, limited outreach to eligible families. For 
example, state child care payment rates are important in determining 
whether families receiving subsidies have equal access to child care 
arrangements comparable to families above CCDBG income levels, as 
envisioned under federal law. The federal government has said that a 
payment rate high enough to encompass 75% of the local market would be 
considered sufficient to provide equal access. However, according to 
the Childrens' Defense Fund, in 1999, most states were not making 
payments that met this standard based on a recent (within two years) 
market survey. Moreover, there continue to be concerns about high staff 
turnover, compensation and training issues for child care providers; 
shortages of care for particular populations and needs (e.g., infant 
care, special needs care, sick care, non-traditional hour care); and 
about the uneven quality of care in a range of settings.
    In other areas, TANF funding has made it possible for states to 
undertake initiatives such as creating or expanding refundable Earned 
Income Tax Credits, initiating programs of Individual Development 
Accounts to promote asset formation, expanding services for victims of 
domestic violence and for families in need of substance abuse and 
mental health treatment, increasing services for non-custodial fathers, 
expanding ``diversion'' assistance for families in need of short-term, 
emergency help, and increasing services for family preservation and 
reunification. However, there are also accounts of states that have 
used some of their TANF funds to ``supplant'' state spending, i.e., to 
use TANF funds to replace existing state expenditures for allowable 
activities under the TANF law. Unfortunately, the current federal 
reporting structure does not provide a clear picture of TANF spending; 
state plans often provide only cursory detail about state spending 
choices, and the broad categories in federal spending reports are not 
very informative. Accordingly, one key challenge for researchers and 
for the structuring of federal reporting involves efforts to better 
describe the choices states are making in their use of funds.
    During the 1990s, teen birth rates declined and the share of 
children born out of wedlock appeared to level off, though remaining at 
about one-third of all births. These changes began before states 
implemented TANF. In advancing the law's family formation goals, there 
is a need for both a stronger research agenda and a recognition of a 
set of difficult issues about the appropriate role of government.
    Between 1991 and 1999, the nation's teen birth rate dropped 20%. 
The teen birth rate in 1999 was 49.6 births per 1000 women aged 15-19, 
a record low for the nation, though still high in comparison to many 
other countries, and still involving nearly 500,000 births to 
teenagers. The decline in the rate of teen births is significant, both 
because of concerns about outcomes for children born to teenagers and 
because nearly 80% of teen births are out of wedlock births.
    As in other areas, it is difficult to determine the role of TANF in 
contributing to the decline in teen births. On one hand, the trend 
began well before implementation of the 1996 law. However, almost all 
states are funding teen pregnancy prevention initiatives using TANF 
funds, and TANF funding has made it possible for states to create or 
expand after-school programs, pregnancy prevention programs, stay-in-
school programs, and an array of youth development initiatives aimed at 
reducing teen pregnancies and promoting stronger outcomes for low-
income teens.
    During the 1990s, the birth rate for unmarried women declined 
slightly, and the share of births to unmarried women appears to have 
flattened. At the peak year, 1994, the birth rate for unmarried women 
aged 15-44 was 46.9 per 10000; preliminary data indicates that the rate 
declined to 43.9 by 1999. After many years of growth, the percentage of 
births to unmarried women has hovered around 32-33% since 1994. Again, 
the change was evident before enactment of the 1996 law. (The National 
Center for Health Statistics reports that because of underreporting in 
some states, the actual peak would have been in the early 1990s rather 
than 1994 had numbers been fully reported.)
    It is possible to characterize the out of wedlock birth numbers in 
one of two ways. On the one hand, the upward trajectory of recent 
decades clearly slowed and perhaps stopped during the 1990s. At the 
same time, it seems to be the case that the dramatic declines in 
welfare participation and increases in employment have, at least to 
date, not yet been associated with equally dramatic changes in out of 
wedlock birth patterns.
    In 1996, some observers argued that welfare itself was a principal 
factor accounting for the rise of out of wedlock births in the United 
States, and that to alter these trends, it was necessary to eliminate 
or curtail the availability of assistance for single parent families. 
It is possible that reduced welfare participation and increased 
employment will eventually result in significant changes in family 
formation. However, it is not yet apparent whether that is occurring, 
and the other possibility is that the role of welfare benefits in 
contributing to out of wedlock births may have been overstated.
    A TANF provision provides $100 million a year, to be divided among 
up to five states that have demonstrated the largest reductions in the 
share of out of wedlock births while also demonstrating a decline in 
the number of abortions in the state. Five states were awarded $20 
million each under this provision in 1999 and 2000. It remains unclear 
whether these states had initiated distinctive programming, or whether 
the bonus was principally rewarding demographic changes. Thus, it is 
not clear that awarding these bonuses is contributing to our 
understanding of effective approaches for reducing out of wedlock 
births. Similarly, under HHS rules announced last year, states will be 
eligible for a high performance bonus if the share of children residing 
in married families in the state increases, although there are 
comparable concerns that this type of bonus may also result in 
rewarding demographic changes rather than state performance.
    In recent months, some observers have argued that states have 
failed to actively advance the TANF goals of promoting marriage, 
reducing out of wedlock births and encouraging the formation and 
maintenance of two parent families. On the one hand, there was only 
limited discussion in 1996 of what Congress expected states to do to 
advance these goals--for many, it was assumed that reducing welfare 
caseloads was the intended strategy toward accomplishing them. However, 
as discussions of the family formation goals of TANF have increased, it 
seems clear that states face at least three questions in deciding how 
to proceed: what would work; what's the appropriate role for 
government; and how can the goals be advanced in ways that do not risk 
unintended adverse effects for children or parents.
    In efforts to promote employment, states have often been able to 
rely on an extensive research base developed over many years; there is 
not a comparable research base to draw from in efforts to reduce out of 
wedlock births or promote family formation. There is a stronger 
research base for teen pregnancy prevention efforts, but less to point 
to for initiatives affecting adults. Recent evidence suggest that 
stronger child support enforcement is correlated with reduced out of 
wedlock births and reduced marital break-ups. And, the evaluation of 
the Minnesota Family Investment Program found that a welfare reform 
effort that expanded eligibility for two-parent families, combined a 
work requirement with a modest sanction (10% grant reduction for 
noncompliance) and included a substantial earnings supplement for 
employed families, was associated with an increased likelihood that 
participants would enter or stay in two-parent families. A set of 
programs have demonstrated success in increasing engagement of fathers 
in the lives of their children. And, it has been suggested that a 
strong focus on promoting employment for young men could have an 
important impact in increasing their likelihood of marriage. Overall, 
though, a federal research agenda could strengthen the knowledge base 
in these areas.
    Even with additional knowledge, states still face difficult issues 
in determining the appropriate role for government and how to advance 
these goals without risking unintended consequences. In their efforts 
to promote work, states drew on a strong public consensus that, with 
limited exceptions, adults of working age ought to be working. There is 
not a comparable public consensus that adults of marriageable age ought 
to be married. There are strong indications from research findings 
that, all else being equal, better outcomes for children in a number of 
areas are associated with having been raised in a two-parent family. 
Part of the effect is because two-parent families are likely to have 
more income, but the research does suggest an independent effect for 
family structure. However, all else is not always equal, and it is 
difficult for states to determine how to translate these broad research 
findings into advice for an adult contemplating marriage or divorce. 
While marriage is often the best arrangement for parents and children, 
there are some circumstances where marriage or continued marriage may 
not be the best arrangement, e.g., in high-conflict marriages or 
circumstances of domestic violence. Moreover, because marriage and 
divorce involve highly personal decisions in which people must weigh an 
array of factors, there are concerns that strong government pressures 
or creation of financial incentives to marry could distort decisions in 
ways that may not necessarily be best for parents or children. While it 
is possible that such policies could increase the number of marriages, 
they might also increase martial dissolution rates and high conflict 
marriages.
    Government can clearly communicate that parents have an obligation 
to support their children, and states have done so through strong 
emphases on work and child support. Government can also seek to ensure 
that its policies are not having the effect of creating barriers to 
marriage and family formation. At the same time, the focus on family 
formation in TANF draws from a concern about seeking to improve 
outcomes for children, and efforts to address these goals need to 
proceed in ways that are both sensitive to the appropriate role of 
government and that do not present risks of leading to worse outcomes 
for children.
                               conclusion
    Thank you for inviting me to testify today. We appreciate the 
Subcommittee's interest in seeking to develop a picture of the 
experience since 1996, and hope this information can be helpful.

                                


    Chairman Herger. Thank you, Mr. Greenberg.
    Mr. Rector.

  STATEMENT OF ROBERT RECTOR, SENIOR POLICY ANALYST, HERITAGE 
                           FOUNDATION

    Mr. Rector. Thank you, Congressman. It's a pleasure to be 
here, and I thank you for the invitation.
    Let me begin with two points of background which I think 
are necessary to frame this issue of the analysis of the 
effects of welfare. The first point is that conventional 
welfare harms children. It destroys their lives and it reduces 
their prospects for success.
    In my written testimony I cite, for example, excellent 
research by Dr. June O'Neill, the former head of CBO, who shows 
that a child who even spends a small amount of time on welfare, 
compared to another child who is otherwise identical but not on 
welfare, has a significant drop in the child's IQ of up to 20 
percent. A huge, huge deficit for that child to overcome.
    Other research that I cite shows that children who are 
raised on welfare have significantly lower earnings when they 
become adults, when compared to similar poor children who spent 
less time on welfare. Even if the welfare increases the family 
income, it actually harms that child as the child becomes an 
adult.
    Welfare also increases the rate of drop out, and it 
increases the probability that a child will receive welfare as 
an adult. All of these comparisons, the effect is due to 
welfare, per se, not to poverty. A child who is poor and not on 
welfare will do significantly better than a child who is also 
poor but is on welfare.
    A second point. Being born out of wedlock and raised in a 
single-parent house has significant negative effects on 
children. About 75 percent of the child poverty that exists in 
the United States is to single-parent families. A child born 
out of wedlock and raised by a never-married mother is 700 
percent more likely to live in poverty than a child in an 
intact family.
    Being raised in a single-parent family dramatically 
increases behavioral and emotional problems. It increases the 
probability of physical child abuse, in some cases by 40-fold. 
It increases the probability that a girl or a boy will engage 
in early sexual activity. It increases the probability of 
school failure. If it's a boy, it increases dramatically the 
probability that that boy will be involved in crime and end up 
in jail. And it increases subsequent out-of-wedlock births by 
girls, thereby creating a self-perpetuating problem of social 
pathology.
    Again, these effects are the result of single parenthood, 
per se. A child who is poor and raised by two parents will do 
dramatically better than a similar child who is poor but raised 
without a father in the home.
    Now, if I could go directly to the effects of welfare 
reform, the first effect, if I could show this chart coming up 
here, this is the dramatic effect of welfare and reducing 
welfare dependence. There is some argument about whether the 
huge drop in caseload of 50 percent that we see there on the 
red line on the chart is due to the economy or due to welfare 
reform. The white periods on the chart represent economic booms 
from 1950 to the present. As you can see from the chart, no 
prior economic boom, since the Korean war, has resulted in any 
significant drop in caseload. Yet, somehow this period we have 
a huge drop in caseload in the period of economic booms.
    What is the difference in the nineties from all those 
previous periods of economic boom? The difference is clearly 
welfare reform and workfare. Those States that have stronger 
workfare programs have much more rapid drops in caseloads, and 
also greater drops in child poverty.
    The second effect is child poverty. We have to emphasize 
again and again that, at the present time, the black child 
poverty rate in the United States is the lowest ever in U.S. 
history, since this country was formed in 1775. The child 
poverty rate among children and single mother families is at 
the lowest point ever in U.S. history.
    Why did this poverty drop this way? It dropped because we 
have had an unprecedented surge in the employment of single-
parent families, of single-mother families, about a 50-percent 
increase in the rate of employment in those families, 
unprecedented and clearly correlated to the onset of welfare 
reform.
    These figures are very different than what you heard from 
the previous panel because I'm looking at the entire population 
of single parents and I am not looking at leaver studies. In 
the discussion, we must get into detail about what is wrong 
with leaver studies.
    Finally, if we could have the next chart, this is the 
effect of welfare reform on single parenthood and out-of-
wedlock births. Starting back in 1965, at the beginning of the 
war on poverty, about 7 percent of children were born out of 
wedlock. That figure, by 1995, had risen to 33 percent. Among 
blacks, which is the top line there, the figure had risen from 
about 20 percent up to 70 percent.
    As you can see in the last 4 years on that chart, clearly 
something happened. A line which was consistently going up has 
kinked over and is now relatively flat or increasing at a slow 
rate.
    Is it an amazing coincidence that, after 30 to 40 years of 
consistent increases, the out-of-wedlock birth rate dropped at 
exactly the time that welfare reform was being discussed, that 
President Clinton announced that out-of-wedlock childbearing 
was a threat to children in society, that we had a huge 
national debate about out-of-wedlock childbearing and we had an 
emphasis on personal responsibility and time limits?
    Clearly, that kink-over is the result of the symbolic 
messages that surrounded welfare reform. It gives us a great 
cause for optimism, because as the previous panelists 
indicated, there has been really no consistent programs at the 
State level to promote marriage. Yet, even by the symbolic 
messages that we've seen here alone, we're seeing some 
improvement, or at least an arrest of the deterioration.
    I think this shows us great prospects for the future, and I 
would hope that welfare reform would continue to emphasize work 
fair and promote, to a significant new degree, programs to 
promote marriage.
    [The prepared statement of Mr. Rector follows:]

 Statement of Robert Rector, Senior Policy Analyst, Heritage Foundation

                                SUMMARY

    The intention of welfare programs is to benefit low income 
Americans, especially children. Yet the evidence indicates that 
children and parents are actively harmed rather than helped by welfare.
    Nearly all welfare aid for children goes to single parent 
households. But current research indicates that both welfare dependence 
and single parenthood have significant deleterious effects on 
children's development, impeding their ability to become successful 
members of mainstream society.
     Prolonged welfare dependence reduces children's IQ levels. 
Dependence also reduces a child's earnings in future years; the longer 
a child remains on AFDC in childhood the lower will be his earnings as 
an adult. Being raised on welfare also increases the probability that a 
child will drop out of school and will be on welfare as an adult. 
Analysis shows that these effects are caused by welfare per se, not 
simply poverty; a poor child without welfare will do better than a 
similar poor child with welfare.
     Out-of-wedlock childbearing and single parenthood are the 
principal causes of child poverty and welfare dependence in the U.S. 
Children raised in single parent families are more likely to: 
experience behavioral and emotional problems; suffer from physical 
abuse; engage in early sexual activity, and do poorly in school. Boys 
raised in single parent households are more likely to engage in crime; 
girls are more likely themselves to give birth outside of marriage. 
These effects are the result of the collapse of marriage per se rather 
than poverty; a poor child living with a mother and father united in 
marriage will do better than a similar poor child living in a single 
parent home.
    Conventional welfare programs were based on the assumption that 
material poverty or low family income is the principal cause of social 
and behavioral problems. Thus welfare seeks to artificially boost 
household income. But the simple historical record calls into question 
this basic assumption. In 1950 around one third of Americans were poor; 
back in the 1920's more than half of Americans were poor by today's 
standards. If having a low income were the key cause of crime, 
illegitimacy, drugs, or child abuse, for example, then earlier periods 
should have been simply awash in those problems. Instead the opposite 
is the case, most social problems seem to have gotten worse as incomes 
rose.
    Clearly poverty is not the cause behind the growth of these social 
problems. Instead, it is the ethos within families that is critical; 
the norms and values imparted to children concerning: marriage, work, 
education, and self-control. Conventional welfare, by undermining this 
ethos (especially with regard to work and marriage), has increased 
rather than diminished most social problems.
    The Goals of Welfare Reform. The Personal Responsibility and Work 
Opportunity Reconciliation Act (PRWORA) enacted in 1996 set forth three 
legislative goals: (1) To reduce dependence; (2) to reduce child 
poverty; and (3) to reduce illegitimacy and strengthen marriage. The 
reform has been effective in meeting each of these goals.
     Reducing Dependence.--Since the enactment of welfare 
reform, the AFDC/TANF caseloads have dropped by roughly 50 percent. 
Some argue that this decline in welfare dependence is due to a strong 
economy; however, in the last 50 years no previous economic boom has 
ever resulted in an appreciable decline in AFDC caseload, let alone a 
50 percent drop. (See Chart 1.) It is welfare reform, not economic 
conditions, that has produced the huge decline in dependence in the 
mid-1990's.
    This conclusion is borne out by an examination of changes in 
dependence between individual states. The fifty states vary enormously 
in their rates of caseload decline, but these rates of decline are 
uncorrelated to differences in underlying state economic factors such 
as unemployment or job growth rates. States with better economies have 
not had greater drops in caseload. By contrast, declines in dependence 
are directly and strongly linked to the rigor of state workfare 
policies.
     Reducing Poverty.--Opponents of welfare reform charged 
that reform would throw millions of children into poverty. In reality, 
child poverty has dropped substantially since reform was enacted, from 
20.8 percent in 1996 to 16.9 percent in 1999. (See Chart 2.) The black 
child poverty rate and the poverty rate of children in single mother 
families are now at the lowest points in U.S. history. States with 
strong workfare systems have tended to have more rapid declines in 
child poverty than have states with lenient work requirements.
     Out-of-Wedlock Childbearing.--Starting in the mid-1960's 
the out-of-wedlock birth rate began a rapid and relentless climb. This 
increase continued without pause for three decades. (See Chart 3.) 
Then, in 1993 and 1994, former President Clinton gave a series of 
speeches on social harm of illegitimacy; he was the first president to 
address this topic in nearly three decades.\1\ He also proposed that 
welfare use be limited to two years.\2\ Then, in 1994, Republicans 
gained control of both chambers of the U.S. Congress for the first time 
in over fifty years. With this political shift came a dramatic change 
in the rhetoric concerning welfare. It became clear that future welfare 
would indeed be time limited and would place a far heavier emphasis on 
self-reliance. Further, both parties now publicly asserted that 
illegitimacy was harmful to children and society; the new Speaker of 
the House of Representatives suggested that children born out-of-
wedlock might be placed in orphanages.\3\
---------------------------------------------------------------------------
    \1\ Former President Clinton gave three major addresses on the 
harms of illegitimacy in 1993 and 1994. He was the first president to 
address this topic since Lyndon Johnson. These speeches played an 
important role in changing public perceptions and in opening subsequent 
political discourse on the issue.
    \2\ Former President Clinton merely intended that a small 
percentage of AFDC recipients would be required to work for benefits 
after two years on the AFDC rolls. However, his proposal was generally 
represented as ``two years and off.'' Most politicians and the public 
thought this meant a termination of cash aid after two years on the 
rolls. In addition, a number of state governments were introducing 
their own work related reforms with a new emphasis on personal 
responsibility from 1993 to 1996; these programs may also have 
contributed to the halt in the growth of the illegitimacy rate in the 
mid-1990's.
    \3\ Former President Clinton gave three major addresses on the 
harms of illegitimacy in 1993 and 1994. He was the first president to 
address this topic since Lyndon Johnson. These speeches played an 
important role in changing public perceptions and in opening subsequent 
political discourse on the issue. In addition, a number of state 
governments were introducing their own work related reforms with a new 
emphasis on personal responsibility from 1993 to 1996; these programs 
may also have contributed to the halt in the growth of the illegitimacy 
rate in the mid-1990's.
---------------------------------------------------------------------------
    The very next year (1995) the out-of-wedlock birth rate dropped for 
the first time in nearly a half-century. In each subsequent year, the 
rate has remained flat or increased far more slowly than in the pre-
reform period. The black out-of-wedlock birth rate has actually fallen 
each year since 1994.
    The unique and dramatic slowdown in the growth of illegitimacy 
clearly coincided with welfare reform. The slowdown is undoubtedly the 
result of changes in the social messages surrounding welfare, 
particularly the new emphasis on limited aid and personal 
responsibility.
    The slowdown is all the more remarkable given the fact that almost 
no states have active programs designed to reduce illegitimacy or 
increase marriage. The fact that behavior changed in a positive manner 
even without specific efforts to promote that change is encouraging; it 
offers cause for optimism concerning the potential effects of programs 
specifically developed to increase marriage and reduce illegitimacy in 
the future.

                 HOW WELFARE DEPENDENCE HARMS CHILDREN

    The traditional welfare system has led to high levels of welfare 
dependence. Dependence, in turn, has profound negative effects on the 
well being of children. Dr. June O'Neill and Anne Hill, comparing 
children who were identical in social and economic factors such as 
race, family structure, mothers' IQ and education, family income, and 
neighborhood, found that the more years a child spent on welfare, the 
lower the child's IQ. The authors make it clear that it is not poverty 
but welfare itself which has a damaging effect on the child.
    Examining the young children (with an average age of five-and-a-
half), the authors found that those who had spent at least two months 
of each year since birth on AFDC had cognitive abilities 20 percent 
below those who had received no welfare, even after holding family 
income, race, parental IQ, and other variables constant.\4\
---------------------------------------------------------------------------
    \4\ M. Anne Hill and June O'Neill, ``Family Endowments and the 
Achievement of Young Children With Special Reference to the 
Underclass,'' Journal of Human Resources, Fall 1994, pp. 1090-1091.
---------------------------------------------------------------------------
    A similar study by Mary Corcoran and Roger Gordon of the University 
of Michigan shows that receipt of welfare income has negative effects 
on the long-term employment and earnings capacity of young boys.\5\ The 
study shows that, holding constant race, parental education, family 
structure, and a range of other social variables, higher non-welfare 
income obtained by the family during a boy's childhood was associated 
with higher earnings when the boy became an adult (over age 25). 
However, welfare income had the opposite effect: The more welfare 
income received by a family while a boy was growing up, the lower the 
boy's earnings as an adult.
---------------------------------------------------------------------------
    \5\ Mary Corcoran, Roger Gordon, Deborah Loren and Gary Solon, 
``The Association Between Men's Economic Status and Their Family and 
Community Origins,'' Journal of Human Resources, Fall, 1992, pp. 575-
601.
---------------------------------------------------------------------------
    Typically, liberals would dismiss this finding, arguing that 
families which receive a lot of welfare payments have lower total 
incomes than other families in society, and that it is the low overall 
family income, not welfare, which had a negative effect on the young 
boys. But the Corcoran and Gordon study compares families whose average 
non-welfare incomes were identical. In such cases, each extra dollar in 
welfare represents a net increase in overall financial resources 
available to the family. This extra income, according to conventional 
liberal welfare theory, should have positive effects on the well being 
of the children. But the study shows that the extra welfare income, 
even though it produced a net increase in resources available to the 
family, had a negative impact on the development of young boys within 
the family. The higher the welfare income received by the family, the 
lower the earnings obtained by the boys upon reaching adulthood. The 
study suggests that an increase of $1,000 per year in welfare received 
by a family decreased a boy's future earnings by as much as 10 
percent.\6\
---------------------------------------------------------------------------
    \6\ Corcoron et al.
---------------------------------------------------------------------------
    Other studies have confirmed the negative effects of welfare on the 
development of children. For example, young women raised in families 
dependent on welfare are two to three times more likely to drop out and 
fail to graduate from high school than are young women of similar race 
and socioeconomic background not raised on welfare.\7\
---------------------------------------------------------------------------
    \7\ R. Forste and M. Tienda, ``Race and Ethnic Variation in the 
Schooling Consequences of Female Adolescent Sexual Activity, Social 
Science Quarterly, March 1992.
---------------------------------------------------------------------------
    Similarly, single mothers raised as children in families receiving 
welfare remain on AFDC longer as adult parents than do single mothers 
not raised in welfare families, even when all other social and economic 
variables are held constant.\8\
---------------------------------------------------------------------------
    \8\ Mwangi S. Kimeny, ``Rational Choice, Culture of Poverty, and 
the Intergenerational Transmission of Welfare Dependency,'' Southern 
Economic Journal, April 1991.
---------------------------------------------------------------------------

          HOW ILLEGITIMACY AND SINGLE PARENTHOOD HARM CHILDREN

    The most obvious consequence of the rising tide of illegitimacy and 
declining marriage has been a dramatic increase in child poverty. Chart 
4 shows data from the National Longitudinal Survey of Youth (NLSY) 
which contains a national representative sample of young mothers and 
their children. The charts divide children into four groups:
    1. Out-of-wedlock--Never Married--Children born out of wedlock 
whose mother has never married after the birth of the child;
    2. Out-of-wedlock--Subsequent Marriage--Children born out of 
wedlock whose mother marries subsequent to the child's birth;
    3. Within Wedlock--Divorced--Children born to married parents who 
later divorce;
    4. Within Wedlock--Marriage Intact--Children born to parents who 
were married at the time of birth and remained married.
    The chart shows the amount of time since birth that a child has 
lived in poverty for the four different categories of children. 
Children born out-of-wedlock to never married women are poor fifty 
percent of the time. By contrast children born within a marriage which 
remains intact are poor 7 percent of the time. Thus the absence of 
marriage increases the frequency of child poverty 700 percent. However, 
marriage after an illegitimate birth is relatively effective, cutting 
the child poverty rate in half.
    Additional Social Consequences of Rising Illegitimacy.--Children 
raised by never-married mothers have significantly more behavior 
problems when compared to children raised by both biological parents. 
When comparisons are made between families that are identical in race, 
income, number of children, and mother's education, the behavioral 
differences between illegitimate and legitimate children actually 
widen. Compared to children living with both biological parents in 
similar socioeconomic circumstances, children of never-married mothers 
have three times more behavioral problems than children raised in 
comparable intact families.\9\
---------------------------------------------------------------------------
    \9\ Deborah A. Dawson, ``Family Structure and Children's Health and 
Well-Being: Data from the 1988 National Health Interview Survey on 
Child Health,'' paper presented at the annual meeting of the Population 
Association of America, Toronto, May 1990.
---------------------------------------------------------------------------
    Children born out of wedlock have less ability to delay 
gratification and poorer impulse control (control over anger and sexual 
gratification). They have a weaker sense of conscience or sense of 
right and wrong.\10\ Adding to all this is the sad fact that the 
incidence of child abuse and neglect is higher among single-parent 
families.\11\
---------------------------------------------------------------------------
    \10\ E.M. Hetherington and B. Martin, ``Family Interaction,'' H.C. 
Quay and J.S. Werry (eds.), Psychopathological Disorders of Childhood 
(New York: John Wiley & Sons, 1979), pp. 247-302.
    \11\ A. Walsh, ``Illegitimacy, Child Abuse and Neglect, and 
Cognitive Development,'' Journal of Genetic Psychology, Vol. 15 (1990), 
pp. 279-285.
---------------------------------------------------------------------------
    Being born out of wedlock increases the probability of teen sexual 
activity. Boys and girls born out of wedlock and raised by never-
married mothers are two-and-a-half times more likely to be sexually 
active as teenagers when compared to legitimate children raised in 
intact married-couple families.\12\
---------------------------------------------------------------------------
    \12\ Research by the Heritage Foundation based on the National 
Longitudinal Survey of Youth.
---------------------------------------------------------------------------
    The absence of married parents is related to poor academic 
performance during school years. The longer the time spent in a single-
parent family, the lower the education attained by a child. In general, 
a boy's educational attainment was cut by one-tenth of a year for each 
year spent as a child in a single-parent home. Controlling for family 
income does not reduce the magnitude of the effect noticeably.\13\
---------------------------------------------------------------------------
    \13\ Sheila F. Krein and Andrea H. Beller, ``Educational Attainment 
of Children From Single-Parent Families: Differences by Exposure, 
Gender and Race,'' Demography, Vol. 25 (May 1988), p.228.
---------------------------------------------------------------------------
    Perhaps the worse feature of illegitimacy is that it is passed, 
like a virus, between generations. Being born outside of marriage 
significantly reduces the chances the child will grow up to have an 
intact marriage.\14\ Daughters of single mothers are twice as likely to 
be single mothers themselves if they are black, and only slightly less 
so if they are white.\15\ Boys living in a single-parent family are 
twice as likely to father a child out of wedlock as are boys from a 
two-parent home.\16\ Children born outside of marriage themselves are 
three times more likely to be on welfare when they grow up.\17\
---------------------------------------------------------------------------
    \14\ Neil Bennet and David Bloom, ``The Influence of Non-marital 
Childbearing on the Formation of Marital Unions.'' Paper given at the 
NICHD conference on ``Outcomes of Early Childbearing,'' May 1992.
    \15\ Sarah S. Mclanahan, ``Family Structure and Dependency: Early 
Transitions to Female Household Headship,'' Demography, Vol. 5, No. 1 
(1988), pp. 1-16.
    \16\ William Marsiglio, ``Adolescent Fathers in the United States: 
Their Initial Living Arrangements, Marital Experience and Educational 
Outcomes,'' Family Planning Perspectives, Vol.19 (1987), pp. 240-251, 
reporting a study of 5,500 young men.
    \17\ Kristin Moore, ``Attainment among Youth from Families that 
Received Welfare.'' Paper for DHHS/ASPE and NICHD, Grant #HD21537-03.
---------------------------------------------------------------------------
    Illegitimacy is a major factor in America's crime problem. Lack of 
married parents, rather than race or poverty, is the principal factor 
in the crime rate. It has been known for some time that high rates of 
welfare dependency correlate with high crime rates among young men in a 
neighborhood.\18\ But more important, a major 1988 study of 11,000 
individuals found that ``the percentage of single-parent households 
with children between the ages of 12 and 20 is significantly associated 
with rates of violent crime and burglary.'' The same study makes clear 
that the widespread popular assumption that there is an association 
between race and crime is false. Illegitimacy is the key factor. The 
absence of marriage, and the failure to form and maintain intact 
families, explains the incidence of high crime in a neighborhood among 
whites as well as blacks. This study also concluded that poverty does 
not explain the incidence of crime.\19\
---------------------------------------------------------------------------
    \18\ Arthur B. Elsters et al., ``Judicial Involvement and Conduct 
Problems of Fathers and Infants Born to Adolescent Mothers,'' 
Pediatrics, Vol. 79, No. 2 (1987), pp. 230-234.
    \19\ Douglas Smith and G. Roger Jajoura, ``Social Structure and 
Criminal Victimization,'' Journal of Research in Crime and Delinquency, 
February 1988, pp.27-52.
---------------------------------------------------------------------------
    Research on underclass behavior by Dr. June O'Neill confirms the 
linkage between crime and single-parent families. Using data from the 
National Longitudinal Survey of Youth, O'Neill found that young black 
men raised in single-parent families were twice as likely to engage in 
criminal activities when compared to black men raised in two-parent 
families, even after holding constant a wide range of variables such as 
family income, urban residence, neighborhood environment, and parents' 
education. Growing up in a single-parent family in a neighborhood with 
many other single-parent families on welfare triples the probability 
that a young black man will engage in criminal activity.\20\
---------------------------------------------------------------------------
    \20\ M. Anne Hill and June O'Neill, Underclass Behaviors in the 
United States: Measurement and Analysis of Determinants, New York City, 
City University of New York, Baruch College, March 1990.
---------------------------------------------------------------------------
              the effects of welfare reform on dependence
    The War on Poverty created an expensive welfare system that 
encouraged dependence and penalized work and marriage. Until very 
recently, most liberal welfare experts argued that the flaws of the 
welfare system were unavoidable: Employment for most welfare recipients 
was seen as impossible; swollen welfare budgets and high levels of 
dependence were inevitable. Even the most aggressive reforms, it was 
argued, could reduce welfare caseloads by only a few percentage points 
and would cost more than the existing system.
    In the last few years, these liberal myths about the impossibility 
of reducing dependence have been shattered.\21\ In the mid 1990's 
states began significant work-related reforms; this process was greatly 
accelerated by the passage of national reform in the summer of 1996. 
Coinciding with these changes was an unprecedented drop in AFDC/TANF 
caseload, which has declined some 60 percent from its peak level in 
March 1994.
---------------------------------------------------------------------------
    \21\ See Robert Rector, ``Wisconsin's Welfare Miracle,'' Policy 
Review, March/April 1997.
---------------------------------------------------------------------------
    Once it became indisputable that the AFDC/TANF caseload could drop 
enormously without a social catastrophe, liberal welfare experts 
retreated to another line of defense, claiming that the declines in 
caseload were the result of economic conditions rather than welfare 
reform. However there are definite problems with a primarily economic 
explanation of caseload changes. Historically, as Chart 1 shows, the 
link between periods of economic growth and recession and changes in 
AFDC/TANF caseloads is tenuous at best. Modest increases in AFDC 
caseloads occurred during some, but not all, recessionary periods. In 
contrast, although the chart shows eight previous periods of economic 
expansion prior to the 1990's, not one of these growth periods resulted 
in a substantial decrease in AFDC caseloads. In fact, previous economic 
booms coincided either with relatively flat caseloads or with 
substantial caseload growth (during the late 1960s and early 1970s). In 
reality, as the chart makes clear, no sustained and significant 
declines in AFDC caseload occurred at any point before the mid-1990's. 
Thus, claims that the recent unprecedented drop in dependence has been 
caused largely by the current economic expansion are clearly refuted by 
the historical record.
    Another way to disentangle the effects of welfare policies and 
economic factors on declining caseloads is to examine the differences 
in state performance. The rate of caseload decline varies enormously 
among the fifty states. If economic conditions are the main factor 
driving caseloads down then the variation in state reduction rates 
should be linked to variation in state economic conditions. On the 
other hand, if welfare polices are the key factors behind falling 
dependence, then the differences in reduction rates should be linked to 
specific state welfare policies.
    In a 1999 paper, ``The Determinants of Welfare Caseload Decline'' 
the author examined the impact of economic factors and welfare policies 
on falling caseloads between January 1997 and June 1998.\22\ (Useful 
data on state welfare policies were not available beyond that period.) 
This analysis showed that differences in state welfare policies, 
specifically stringency of sanctions and timing of work requirements 
were highly successful in explaining rapid rates of caseload decline. 
By contrast, the relative vigor of state economies, as measured by 
unemployment rates, changes in unemployment, or state job growth had no 
statistically significant effect on caseload decline. (See Table 1.)
---------------------------------------------------------------------------
    \22\ Robert E. Rector and Sarah E. Youssef, ``The Determinants of 
Welfare Caseload Decline'' Report of the Center for Data Analysis, The 
Heritage Foundation, May 11, 1999.
---------------------------------------------------------------------------
     During the period analyzed, states with immediate work 
requirements and strong sanctions for non-compliant behavior had an 
average caseload reduction of 50 percent.
     By contrast, states with weak sanctions and no immediate 
formal work requirement had an average caseload reduction of 14.2 
percent during the same period.\23\
---------------------------------------------------------------------------
    \23\ Based on a regression analysis holding the rate of 
unemployment in the state constant. The values predicted by the 
regression model closely conform to the actual observed values in the 
states. The mean caseload reduction over the 18 month period among the 
states with both a strong full check sanction and a formal immediate 
work requirement was 55.2 percent. The mean caseload reduction among 
the fourteen states with weak sanctions and no immediate work 
requirement was 16 percent.
---------------------------------------------------------------------------
    Thus while the overall health of the U.S. economy has been a 
positive background factor contributing to the reduction of welfare 
dependence, the economy has been neither a sufficient nor a primary 
factor in that reduction. The huge state variations in the rate of 
caseload decline cannot be attributed to differences in state economic 
factors, but can be convincingly explained by differences in the rigor 
of work-related welfare reforms. Policy reform, not economics, has been 
the principal engine driving the decline in dependence.
    Critics may charge that it is easy to cut caseloads simply by 
kicking individuals off welfare whenever they commit a minor 
infraction. In reality, very little of the present caseload reduction 
is the result of states using sanctions simply to remove individuals 
from the rolls. Instead, serious work requirements sharply reduce 
dependence because they lower the attractiveness of welfare compared to 
private sector employment.

                  EFFECTS OF WELFARE REFORM ON POVERTY

    During the debate over welfare reform in 1995 and 1996, reform 
opponents shrilly predicted that the reform would produce large 
increases in child poverty. In reality, decreases in dependence would 
have had beneficial effects on children's long-term development, even 
if they were accompanied by decreasing family income. However, as Chart 
2 shows, the fall in the national AFDC/TANF caseload has resulted in a 
significant decrease in child poverty, not an increase.
    Indeed, if the earned income tax credit, Food Stamps, and other 
means-tested benefits are counted as income, the child poverty rate now 
stands at 12.0 percent, the lowest rate since 1979. The black child 
poverty rate and the poverty rate of children living with single 
mothers are now at the lowest points in U.S. history.
    This positive picture is confirmed at the individual state level. 
Wisconsin, for example, which has led the nation in reducing 
dependence, is also among the leading states in reducing child poverty. 
Wisconsin has cut its child poverty rate almost in half and now has one 
of the lowest rates of child poverty in the nation.
    In general, those states, which have strong workfare systems and 
strict sanctions for non-compliant behavior by recipients, have seen 
more rapid drops in child poverty. By contrast, states, which have weak 
work requirements and lenient sanctions, on average, have seen the 
least decline in child poverty.

           EFFECTS OF WELFARE REFORM ON OUT-OF-WEDLOCK BIRTHS

    As Chart 3 shows, when the War on Poverty began, 7.7 percent of 
American children were born out of wedlock. Today, that figure is 33 
percent. The collapse of marriage among blacks has been particularly 
disturbing: At the outset of World War II, the black illegitimate birth 
rate was slightly less than 19 percent. Beginning in the late 1960s, 
however, the rate of black illegitimate births skyrocketed, reaching 49 
percent in 1975 and 70 percent in 1995. Rapid increases in illegitimacy 
are also occurring among whites. The illegitimate birth rate among 
whites is 26 percent; among white high school dropouts, it is 48 
percent.
    In nearly every year since the mid-1960s, the percentage of births 
that were out-of-wedlock increased steadily. However, starting in 1995, 
there was an abrupt shift in the growth of illegitimacy. The growth of 
the white out-of-wedlock birthrate slowed considerably, and the black 
rate actually declined slightly.
    It is no accident that this halt or slowdown in the growth of 
illegitimacy coincided with the debate and national passage of welfare 
reform. Prior to the mid-1990's there had been a 30 year taboo on 
discussion of illegitimacy. While marriage disintegrated few 
politicians in either party were willing to even mention the topic. 
However, in 1993 and 1994, this gag rule was breached; then President 
Clinton gave a series of speeches on the social harm of illegitimacy. 
In 1994, serious legislation to reduce illegitimacy was introduced in 
both the House and the Senate; this legislation opened a vigorous 
public discussion on the harmful effects of illegitimacy for the first 
time in three decades. Both parties publicly acknowledged that 
illegitimacy was harmful to children and society. During this period 
press treatment of illegitimacy and its links to welfare expanded 
tenfold.
    In addition, in 1993, then President Clinton proposed placing a two 
year time limit on the receipt of AFDC.\24\ Many states began moderate 
self-sufficiency programs placing work-related behavioral requirements 
on AFDC recipients. Most critically, in 1994, Republicans gained 
control of both chambers of the U.S. Congress for the first time in 
over fifty years. Republican control of Congress heralded a dramatic 
change in the rhetoric surrounding welfare. Through the ``Contract with 
America'' and repeated public announcements, it became clear that 
future welfare would indeed be time limited and would place a far 
heavier emphasis on self-reliance. The newly elected Speaker of the 
House of Representatives suggested that children born out-of-wedlock 
might be placed in orphanages.
---------------------------------------------------------------------------
    \24\ Former President Clinton merely intended that a small 
percentage of AFDC recipients would be required to work for benefits 
after two years on the AFDC rolls. However, his proposal was generally 
represented as ``two years and off.'' Most politicians and the public 
thought this meant a termination of cash aid after two years on the 
rolls.
---------------------------------------------------------------------------
    It was no mere coincidence that just one year later (in 1995) the 
illegitimate birth rate fell for the first time in nearly a half-
century. In subsequent years the rate remained flat or increased only 
slightly. This slowdown in the growth of out-of-wedlock childbearing is 
undoubtedly the result of changes in the social messages surrounding 
welfare, particularly the new emphasis on limited aid and personal 
responsibility.
    The slowdown is all the more remarkable given the fact that almost 
no states have active programs designed to reduce illegitimacy or 
increase marriage. The fact that behavior changed in a positive manner 
even without specific efforts to promote that change is encouraging; it 
offers cause for optimism concerning the potential effects of programs 
specifically developed to increase marriage and reduce illegitimacy in 
the future.

                          RECOMMENDED POLICIES

    Future welfare reform should be focused on three themes: 
encouraging marriage, requiring work, and controlling costs.
     Encouraging Marriage. The erosion of marriage is the 
principal cause of child poverty, welfare dependence, and a host of 
other social problems. The welfare reform act of 1996 established 
illegitimacy reduction as a principal goal with the expectation that 
state governors would take the lead in developing innovative programs 
to restore marriage.\25\ But, today, only a handful of governors even 
mention marriage and no state has a significant program to reduce 
illegitimacy.\26\ Thus, it should be no surprise that the illegitimacy 
rate has not fallen more, and for whites has even begun to creep slowly 
up again. A major challenge in welfare reauthorization will be to 
create new programs that carry out the original goals of PROWRA to 
increase marriage and reduce illegitimacy.
---------------------------------------------------------------------------
    \25\ Much of the discussion about illegitimacy has been 
deliberately sidetracked into the non-controversial and far less 
important topic of ``teen pregnancy.'' Only around 15 percent of out of 
wedlock births occur to girls under 18. Illegitimacy is primarily a 
problem of young adult men and women. Teen pregnancy could be 
eliminated completely without having much effect on the far larger 
problem of illegitimacy.
    \26\ Governors George W. Bush of Texas, Frank Keating of Oklahoma, 
and Mike Leavitt of Utah have been unusual in their willingness to 
speak out in defense of marriage.
---------------------------------------------------------------------------
     In the future, 5 to 10 percent of federal TANF funds 
should be allocated to pro-marriage programs in at risk communities. 
These should include: pro-marriage education in high schools, public ad 
campaigns, marriage mentoring programs for young couples at risk of 
having children out-of-wedlock, pro-marriage counseling and services 
for pregnant non-married women participating in Medicaid, and divorce 
reduction programs.
     Requiring work. Welfare should not be a one way handout. 
Yet current data suggest that roughly half of the two million mothers 
presently on TANF sit idly on the rolls and are not engaged in any 
activity leading toward self-sufficiency. As part of reauthorization, 
states should be required to have 90 percent of their adult TANF 
recipients engaged in work activities or off the rolls. If this sort of 
serious work requirement were established, it would be reasonable to 
expect the national TANF caseload to fall to 700,000 or lower by the 
year 2010.
     Controlling Costs. As the TANF caseload continues to fall, 
there is no reason to maintain the high historic levels of federal TANF 
spending. Future TANF authorization levels should be cut by 10 percent.
                                 ______
                                 
    *Members of The Heritage Foundation staff testify as individuals 
discussing their own independent research. The views expressed are 
their own, and do not reflect an institutional position for The 
Heritage Foundation or its board of trustees.
                                 ______
                                 
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    Chairman Herger. Thank you. I appreciate your testimony.
    Mr. Rector, just as a parent of several children myself, I 
know how difficult it is to raise children with two parents, 
let alone just one. So I believe the obvious challenges that 
you're mentioning are certainly there in spades.
    But do you have any comments on this correlation between 
when workfare came in and the illegitimacy went down, and also, 
do you have any suggestions, as we're looking towards 
reauthorization, on perhaps any programs that promote marriage? 
Obviously, we can't mandate or legislate marriages--but do you 
have any thoughts on what we might do as we look ahead?
    Mr. Rector. Yes. If we could put the chart on legitimacy 
back up, what you see on that chart is illegitimacy rising at 
almost a straight line there since the early fifties on, 
greatly accelerating at the beginning of the war on poverty 
back in the mid-sixties. Then you have this amazing kink-over 
where it drops for the first time in almost 50 years in 1995, 
and has increased at a relatively slow rate.
    What happened at that period in the mid-nineties--let me 
back up. Between roughly 1965 and 1995, no single political 
leader in the United States mentioned the topic of growing out-
of-wedlock births. Lyndon Johnson tried it in the mid-sixties, 
and he was trashed and attacked. We then had what I call the 
``gag rule'' over this issue. We did not talk about it.
    In 1993 and 1994, former President Clinton actually began 
to talk about the issue and had a series of major speeches 
about the huge negative effects of out-of-wedlock childbearing 
on children. And then in '94 we also had legislation introduced 
here in the Congress for the first time ever that tried to 
reduce out-of-wedlock childbearing, and we had about a tenfold 
increase in press treatment of the topic.
    At the same time we had workfare programs, moving forward 
at the States, and when the Contract with America was enacted, 
we had very serious talks about time limit. The former Speaker 
of the House was talking about putting children born out of 
wedlock into orphanages, and there was this huge symbolic 
change about how people perceived welfare and what welfare was 
going to be like in the future.
    As a result of that change in the symbolic messages alone, 
you can see that, quite clearly, something happened to 
behavior. It's not nearly enough. We need to bring those out-
of-wedlock birth rates back down to where they were in the 
1950's. But it's very optimistic that, having no specific 
programs, just by rhetoric alone at the political level, we 
seem to have had an effect on behavior.
    I would look forward in the future to having specific set 
asides of money within TANF to go to pro-marriage activities, 
communicating the value of marriage, providing skills to help 
young people keep their marriages together.
    I will just cite one example that I consider very tragic. 
Eighty-five percent of the out-of-wedlock births in the United 
States are paid for by the Medicaid system. That means that the 
mother is on Medicaid at the time she's pregnant. She is 
already in contact with the government. And in close to half 
those cases, this is generally a young woman in her early 
twenties.
    In close to half those cases, that woman is going to be 
cohabiting with the biological father of the child while she's 
pregnant and at the time she gives birth. Yet you could go from 
Maine to Alaska, across this country, and you would not find, 
in any government jurisdiction, that the government even passes 
out a single brochure to that young couple affirming the value 
of marriage to them, as far as I'm aware of, let alone offering 
them positive suggestions, skills, mentoring and even reducing 
some of the penalties that would occur to them if they did get 
married.
    So that's a clear example of the kind of opportunity that 
we must seize in the future. We should go into each of those 
couples and, noncoercively, say ``Have you thought about 
marriage?'' And the answer is, in most cases, yes, they have. 
``What could we do to help?'' We should try to give them 
information, kind of consumer information. ``Let us explain to 
you what the difference in well-being for this child will be if 
you two do get married. Let me explain what the difference will 
be to you as a young man, the father, and to you as a young 
woman.'' Then I would go on and provide them with skills to 
help keep their relationship together, rather than having them 
go through one fractured relationship after another.
    There are many, many opportunities like that which we can 
take to help improve the well-being of the lives of these young 
people and their children, and dramatically reduce child 
poverty. Because if you're interested in child poverty, 
increasing marriage is the way to go after it.
    Chairman Herger. Thank you.
    Mr. Greenberg, do you have a comment on this?
    Mr. Greenberg. Yes, thank you. I would be happy to.
    Mr. Chairman, let me distinguish two issues. One is the 
research question, about what has happened and when has it 
happened, and the other is how do we think about where to go 
from here.
    At the research level, it does seem that there was a 
leveling off of out-of-wedlock births, roughly starting around 
1994, 1995. However, the National Center for Health Statistics 
indicates that there had been some under reporting of numbers 
in some States, and that, if that had been taken into account, 
the peak would have been several years earlier.
    We also know that teen births were declining throughout the 
1990's, that that also began at an earlier stage. So clearly, 
something happened in the early 1990's which did change the 
trajectory. But it seems very unlikely that changes that began 
in the early 1990's could be explained by enactment of the 1996 
law or the public discussions in 1994 and 1995.
    We see the declines in welfare participation starting in 
1994. We see increased labor force participation by female-
headed families starting earlier than that. So a whole set of 
changes are occurring in the 1990's. I think at this point 
there is not a research base for us to be saying it's because 
this set of people started talking about out-of-wedlock births. 
I think we should be cautious on that score.
    More generally, just emphasizing the changes in the 1990's, 
in addition to the changes happening in welfare systems, we 
were at the same time seeing a strong national economy, the 
expansion of the earned income tax credit, the expansion of the 
child care funding, expansions of health care, strong child 
support enforcement; a whole set of things happening all at the 
same time. It's very difficult, from what we have, to say this 
caused that.
    More generally, as you look ahead to next year, a starting 
point is that for many people in 1996, I think there was an 
expectation that, if welfare caseloads came down, it would 
translate into a reduction of out-of-wedlock births. So far, we 
have seen a leveling out, but we haven't seen a decline. It's 
possible that more is going to change over time, that as more 
families are in employment over longer periods, we may see 
changes. But it is also possible that welfare wasn't as big a 
factor in out-of-wedlock births as was suggested by some in 
1995 and 1996.
    More broadly, as States now face questions about what to do 
around family formation, and how they should think about next 
steps, my own sense from a lot of conversations, is that, on 
the one hand, there is genuine interest in wanting to get a 
better sense of what would work. There would be a genuine 
interest in seeing a research agenda developed around it.
    At the same time, there is a sense of that decisions about 
marriage are enormously complicated personal decisions, that 
the process of a public agency saying, ``Yes, we think you 
ought to get married,'' is a difficult one. One can look at 
research about effects of marriage or the effects of raising 
children in single-parent families.
    But the research doesn't tell you in any individual case 
when you would advise somebody ``Yes, I think you should get 
married,'' or ``No, I think you should or shouldn't get 
divorced.'' Those are difficult personal issues, and I think 
there's a real concern on the part of States both about trying 
to determine what's the appropriate role of government, and 
also wanting to be sure that government doesn't inadvertently 
encourage people to get married for the wrong reasons--to get 
married because they feel that they're being pressured by 
others to do it; to get married because they feel there's a 
financial incentive, that they'll make money when they do it; 
to enter into marriages which may not be stable marriages and 
may not be the best for their children in the long run.
    So, I do think it's an important discussion to have. At the 
same time, trying to determine what's the appropriate role of 
government and what's the role that doesn't have unintended 
adverse effects, is an important part of the conversation, 
also.
    Chairman Herger. Thank you.
    Mr. Cardin.
    Mr. Cardin. Thank you, Mr. Chairman. Let me just concur 
with Mr. Greenberg's response to the questions you asked Mr. 
Rector.
    Mr. Rector, in listening to your analysis, if the Soviet 
Union would have fallen one decade later, I assume you would 
have said it was the welfare reform bill that Congress passed. 
It seems to me that you're oversimplifying a lot of the 
problems we have out there.
    Mr. Greenberg pointed out that we reached a peak in births 
by teenage parents in 1991. Now, that was prior to any of the 
events that you have referred to. I point that out because I 
personally believe that a lot of what you said is important. 
Many of the policies that Congress has done, many of the 
societal changes, have had a very positive impact on reducing 
teenage parents. I think that's important.
    But I just think it's important that we don't try to 
oversell this. I listened to you go through the child of a 
family that was receiving cash assistance versus other children 
in poverty, and I don't think there's any empirical evidence on 
that.
    I do know, though, that the quality of a school, or the 
quality of health care, the quality of child care, all directly 
affect a child's ability to succeed, and that there is a direct 
correlation, which is reverse, on the quality of the school 
that a child attends, of a family on welfare, or the health 
care they receive, the child care they receive, or the 
nutrition the child receives. I think all that makes it more 
difficult for a child born in poverty to be able to advance.
    I want to ask a question, though, because I am very 
concerned about part of the Heritage Foundation's budget for 
America, in which you would take TANF funds and use some of 
that for--and also our child support funds--and divert that to 
the Office of Marriage Initiatives.
    I mention that because I think in the last Congress we were 
able to do some very positive things. For example, the 
fatherhood initiative that Mrs. Johnson and I have been working 
on. It passed the House, and we hope we will be able to get 
that done. The President has put it in his budget. But he has 
put it as an addition, not taking away from the dollars that 
are otherwise available for poverty programs.
    In child support collections, there is evidence that there 
is less chance of out-of-wedlock births where child support is 
actually received. And yet your organization wants to divert 
money from child support collections, which I think is directly 
opposite to one of the objectives we're trying to achieve, 
namely having less out-of-wedlock births.
    I just want to caution you. If you're interested in a 
bipartisan effort in this Congress to deal with these issues, 
don't take money out of TANF. If you do, you're going to have a 
fight on your hands.
    Mr. Rector. Congressman, with all due respect, when we 
passed the TANF law, we set three goals, as you well recall.
    Mr. Cardin. I believe it was four. But go ahead.
    Mr. Rector. Four, OK. Even a stronger point. It was 
reducing dependency, reducing poverty, reducing illegitimacy, 
and increasing strength in marriage, or two-parent families.
    Now, as we looked at the last 5 years, it is difficult for 
me to find, out of tens of billions of dollars of spending, 
even a single million here or a million there that has been 
spent on those last two goals.
    Mr. Cardin. The States are not spending money on----
    Mr. Rector. On reducing out-of-wedlock births and 
increasing marriage, absolutely not. The only two States that 
I'm aware of that have efforts in that area are Arkansas and 
Oklahoma, and they are spending less than $10 million out of 
the whole pot.
    So the point that I would make is that those two goals have 
largely been neglected, and they were largely neglected--I can 
only find four Governors that even mention the word 
``marriage''--they were largely neglected because we did not 
mandate.
    What we will be recommending is that we carry out those 
goals, which have been universally and almost totally ignored 
at the State level. To do that, we will have to earmark a small 
portion of the TANF funding to go to those purposes, vis-a-vis 
child support. The entire reason that child support exists, 
Congressman, is because we have an astronomically large divorce 
and out-of-wedlock child caring record. If we could take a 
tiny, tiny portion of child support, which is what we're 
recommending, and significantly reduce the divorce rate, we 
would improve the well-being of children vastly more than we 
can do through the child support system, and we would make the 
collection of child support less necessary.
    I think you believe that we can do that, and I think that 
we can agree that that would be a good thing to achieve.
    Mr. Cardin. I would just make this final point.
    If this Congress believes that we can afford $1.6 trillion 
in tax relief, we can afford to put the extra money into these 
programs. That's where you're going to be able to get a 
bipartisan agreement.
    I feel like a good Republican here today, trying to protect 
the States on flexibility. I find it interesting that the 
Heritage Foundation only wants earmarks of categorical grants 
when it suits your purpose, but not on the general philosophy 
that we respect the States. I spent more time in the State than 
I have the Federal government so far. I spent 20 years in the 
State legislature. I do have confidence in our States. It seems 
a little strange that you pick your narrow agenda to have the 
Federal Government mandate how the States respond to the 
overall objectives.
    We've had a good run on the welfare changes. We've had some 
good results. States have used innovative new programs. We've 
had programs in Maryland to deal with teenage pregnancy, and 
they've been effective. Yes, we've used different resources, 
different pots of funds, in order to accomplish that result. We 
haven't relied solely on Federal assistance to do that.
    But we wouldn't have been able to do that if we didn't have 
the flexibility under TANF. And now you want to take away our 
flexibility under TANF. I think you really are violating the 
understanding we had between the Federal government and the 
State governments on TANF reform.
    Now we should build on it. We shouldn't weaken it. There 
should be more resources provided because, you're right, the 
problems are great problems, so let's agree together to put 
more resources into the programs and trust our States to 
respond to the issues.
    Thank you, Mr. Chairman.
    Chairman Herger. Thank you.
    The gentleman from Pennsylvania, Mr. English.
    Mr. English. Mr. Rector, I won't call on you to comment on 
bipartisanship because you're here really to analyze policy in 
this particular area, rather than some of those things that are 
really more in our jurisdiction. I don't know if Heritage, in 
fact, would have established a causal link between the fall of 
the Soviet Union and welfare reform, if the timing had been 
better. But I do remember----
    Mr. Rector. They're two different departments, so we 
probably would have----
    Mr. English. I do remember some of the predictions and 
analyses that Heritage provided when we were doing the original 
welfare reform, and some of the predictions and analyses 
provided by other groups. Others, as I recall, suggested at the 
time that one million children would be cast into poverty 
because of welfare reform. The latest figures suggest two 
million children have left poverty since 1996. This is a huge 
disparity. It seems to me Heritage was a little more accurate 
in predicting what happened than some of the other groups.
    Can you comment and elaborate on that, and perhaps--I 
realize other groups have attributed the success of welfare 
reform to the powers and principalities of the year, but how 
would you square that circle?
    Mr. Rector. One of the things that we have to recognize is 
that the bulk of the research that was done in this area before 
welfare reform was simply, absolutely incorrect. It was 
incorrect then, and the bulk of the research being provided 
today is also quite incorrect and very misleading.
    If I could just cite one example, which I'm sure you 
remember. Back in '95, the conventional wisdom of welfare 
experts was that a workfare program, at its maximum intensity--
as in Riverside, CA, which you may remember, that was the big 
success--might reduce welfare caseloads by five percent over 
two to three years.
    At the exact point that that debate was going on here in 
Washington, the welfare caseload in many counties in Wisconsin 
was dropping at 5 percent per month. I was out there in 
Wisconsin watching it go down, and I could see with my own 
eyes--and we had known for 10 years why these analyses were 
wrong and why they would fail. They are very similar to the 
leaver studies today. They are systematically and dramatically 
incorrect in their basic structure.
    Mr. English. Could you comment on the leaver studies for a 
moment?
    Mr. Rector. OK. The problem with the leavers studies is 
that they start with a population that's already on TANF, and 
then they measure them as they exit off.
    Perhaps the strongest effect that welfare reform and 
workfare has is that mothers never enter the TANF system at 
all, so they are never even on the radar scope for these 
studies. As welfare reform becomes more and more effective and 
the caseload goes down, the people that will be exiting off 
TANF are increasingly the bottom of the barrel. You would 
expect a declining set of results.
    Meanwhile, the most effective mothers, the most employable 
ones, never are going anywhere near TANF at all. In Wisconsin, 
at least half of the drop in caseload was women who never 
entered the front door because they knew, once they came in, 
they were going to have to work for benefits.
    That's why, if you want to study the overall effect, 
particularly of workfare, on employment and poverty, you have 
to look at all single mothers, not just those that exit off 
TANF, because the ones that never got on are very important. 
That's why, when you look at the whole population of single 
mothers, in stark contrast to the leaver studies, you show this 
dramatic spike up in employment, from about 55 percent employed 
to over 75 percent employed today, exactly coinciding with 
welfare reform, and a concomitant huge drop in poverty. That's 
why the child poverty rate of children in single-parent 
families is the lowest point ever in our history, and you won't 
get that just by looking at the leavers.
    Mr. English. I have a question about the charts you 
displayed, which are, granted, impressive looking. But it seems 
to me that they deal with aggregate numbers and we are dealing 
with nationally, really 50 different experiments and welfare 
reform.
    Do you see any differences in the approaches in States to 
welfare reform with differing levels of welfare dependence and 
the decline of welfare dependence? Can you extrapolate from 
those differences what kinds of approaches at the State level 
work and which ones don't?
    Mr. Rector. Absolutely. We did a study a few years ago 
looking at the 50 different States, looking at the intensity of 
the workfare programs in those States, and looking at the 
economic factors in those States, and seeing their explanatory 
value in determining welfare caseload decline. The results of 
that are actually shown in the final table in my written 
testimony.
    But what we found was that--as you know, you have huge 
differences in the rate of caseload decline between the States, 
with Hawaii, where the caseload actually goes up, and Wisconsin 
and Wyoming and some of the others, where it is going down 
dramatically. If the dependency reduction was largely due to 
economics, then you would tend to find that that would be 
correlated with economic variables at the State level, the 
unemployment rate, the job growth rate. We found absolutely no 
correlation whatsoever, zero correlation, between State 
economic factors and the rate of caseload decline.
    On the other hand, the workfare factors, the strength and 
rigor of the workfare system, which is rather complex, but I 
think we measured it reasonably well, overwhelmingly explained 
this variation in caseload decline. We found that the States 
that had rigorous workfare systems over an 18-month period had 
a 50 percent drop in caseload; those that had weak workfare 
systems had a drop in caseload of about 14 percent.
    For the future, this is very important, because the 
remaining TANF caseload, because of the ineffectiveness of 
their program, is now clustering up in those States that have 
very weak workfare programs, specifically New York and 
California. As it goes down in the other States, all the 
remaining caseload is remaining in the States that really have 
not embraced workfare.
    We also find, although the correlation is not nearly as 
strong, those States that had the stronger workfare programs 
had the greatest drops in child poverty. Wisconsin is a 
beautiful example. Wisconsin----
    Mr. English. I was going to ask that.
    Mr. Rector. Yeah. Wisconsin is the only State that really 
has a universal workfare requirement. For the caseload where 
there are adults present, it has dropped 90 percent, and the 
child poverty rate, when you measure it with the addition of 
EITC and things like that, which you should, has roughly been 
cut in half and is now among the lowest child poverty rates in 
the country. It is very difficult to find the dark side of this 
picture, although I'm sure the opponents of reform will try.
    What we need to do is go on and insist that the other 
States that have not fully embraced work requirements have the 
sort of system that Wisconsin has on work.
    Mr. English. I'm out of time, but I have a lot more 
questions. Thank you, Mr. Chairman.
    Chairman Herger. Thank you very much, Mr. English.
    The gentleman from Michigan, Mr. Levin, will inquire.
    Mr. Levin. First of all, Mr. Rector, I'm not sure it's very 
useful to fight last decades' battles. I mean, we had differing 
views in our institution about welfare reform. The President, 
who favored it, vetoed a couple of bills because they did not 
have adequate child care and health care. And he was right. It 
had some other problems with it, but despite that, he signed it 
and a number of us voted for it.
    What bothers me is those who either are fighting the 
battles of the past, for reasons I don't always understand, or 
I think are trying to draw lessons for the future that aren't 
based in reality, that's why I think it's useful to get your 
testimony and Mr. Greenberg's. I have read Mr. Greenberg's 
material and I congratulate you on trying to paint both the 
pluses and the minuses and acknowledging the pluses.
    There is no doubt that the caseload has gone down. There is 
no doubt that welfare reform played a substantial role. If we 
hadn't had economic prosperity, I don't think anybody would 
deny those caseloads would not be where they are today. I think 
to endlessly argue as to which is the major factor may not be 
very productive, especially today, when we face the 
possibility, according to the President, of economic 
difficulties.
    But, you know, Mr. Rector, I was glad you kept going, 
because I think, in the end, you tipped off where you're going. 
We don't have a verbatim record, but I did write it down, I 
think accurately. You said, ``If one's interested in child 
poverty, marriage is the way to go after it.''
    Now, I'm all in favor of promoting marriage. I'm all in 
favor of governors speaking out. But the notion that we're 
going to get at child poverty, we're going to get at the 
problems of people moving from welfare to work and still being 
in poverty by the single symbol or flag of marriage, is 
unsustainable. You said, if you're interested in child poverty, 
marriage is the way to go after it.
    I think there are lots of ways to go after it, including 
getting health care for kids, including making sure they are 
not hungry, making sure they have a decent education 
opportunity, so when they go to a high school like the one I 
went to many decades ago, the roof doesn't leak and there 
aren't any clocks in the hallways and the holders which once 
held clocks which tell kids we don't care about you, the 
lessons you draw for the future--I mean, is marriage the way to 
go after child poverty? The way? Nothing else matters?
    Mr. Rector. Marriage is the most important thing, as I 
think, maybe in a less contentious atmosphere, we would 
actually agree with that. Basically, about 75 to 85 percent of 
the child poverty that exists in the United States today is in 
some form of never married or broken type of family. That's----
    Mr. Levin. Look, I agree with that. I agree. But we are not 
going to force people to marry.
    Mr. Rector. I didn't mean to say it's the exclusive way. I 
do think it's the most important way.
    Mr. Levin. You said it's ``the'' way. I mean, we don't have 
programs to force people to marry.
    Mr. Rector. We have programs that severely penalize them 
when they do through the welfare system. I think those should 
be corrected.
    Mr. Levin. What are the programs today that penalize 
people?
    Mr. Rector. All means-tested benefit programs penalize 
marriage in the following way, Congressman. If you have a young 
woman, for example, who is on welfare and she has the father of 
the child that is making, say, $14,000 or $15,000 a year; as 
long as the two of them are not married, then his income is not 
counted toward her welfare eligibility. If they do get married, 
his income is counted toward her eligibility and her benefits, 
in a whole range of programs--public housing, food stamps, 
Medicaid, TANF, WIC--and everything will be significantly 
reduced. That is a huge marriage penalty. It's much more 
significant than the marriage penalty of the Tax Code.
    Mr. Levin. Mr. Greenberg, do you want to--I mean, when you 
say that, I wonder what the policy implications are and whether 
we're willing to act on what you call a policy detriment.
    Mr. Greenberg.
    Mr. Greenberg. Thank you.
    Under the TANF structure, it is up to each State to decide 
how it wants to count income, and who should be included in the 
family when there's an application for assistance. So when a 
mother and father are living together, in the TANF structure, 
whether they are married or not, the State is free to treat 
their income exactly the same, whether the family is co-
habiting or married. That's left up to each State.
    In the Food Stamp Program, the question that matters in 
determining eligibility and benefits isn't whether they're 
married or not; it's whether they're purchasing and preparing 
food together. So for people who are living together, there is 
not a penalty for getting married.
    I do agree that it's important to be sure that benefits 
programs don't have the effect of penalizing families for 
getting married and don't have the effect of penalizing two-
parent families.
    One of the things that the great majority of States have 
done as they implemented TANF is they got rid of the old 
restrictions that used to exist in the old welfare program that 
made it difficult or sometimes impossible for two-parent 
families to receive assistance. They have been able to do that 
because of the flexibility they've had in the structure.
    Mr. Levin. I think, Mr. Rector, we can reach agreement on 
that. If we're willing to provide adequate Medicaid and 
adequate food stamps and have adequate realistic levels of 
poverty, we'll reach agreement on that. But all I'm suggesting 
is we have to do those things.
    I'm in favor of encouraging marriage, but to assume that 
the way out of child poverty is marriage--I understand getting 
kids health care, food stamps, decent education. We can do 
those things in this country. We haven't yet found a magic way 
to bring about marriage. That is true across this country, 
across all kinds of lines, if you look in my district, any 
district. So don't put your chips on an approach that I think 
will continue to leave millions and millions of kids in poverty 
in this country.
    My time is up.
    Chairman Herger. Thank you very much, Mr. Levin.
    I want to thank each of those who serve on our 
Subcommittee. I particularly want to thank our panelists for 
your testimony today.
    Also, we may have several more questions that we may want 
to submit to you for the record that we would appreciate your 
cooperation with.
    Again, thank you very much, each of you, who have 
participated. Beginning this year and leading into next year, 
we want to examine a program just about all of us believe is a 
good program, to see how we can make it even better. So, again, 
I thank each of you for your time and cooperation.
    This hearing will stand adjourned.
    [Questions submitted from Chairman Herger to the panel, and 
their responses follow:]

                   Center for Law and Social Policy
                                       Washington, DC 20036
                                                     April 9, 2001.
Rep. Wally Herger
Chairman, Subcommittee on Human Resources
House Ways and Means Committee
Rayburn House Office Building
B-317, Rayburn
Washington, DC 20515
    Dear Rep. Herger:
    Thank you again for inviting me to testify at the March 15 
Subcommittee hearing. I am writing to respond to the additional 
questions provided to me after the hearing. I would be happy to 
supplement any of these responses if you would like to receive 
additional detail. My responses follow the sequence of your questions.
    1. Many critics of welfare reform feared that there would be a 
``race to the bottom'' as States, given fixed funding and more 
flexibility, would shred their programs in the interest of saving 
money. Has this occurred?
    In 1996, much of the concern about a race to the bottom flowed from 
apprehensions about how states would respond to a funding shortfall. 
States have never faced a funding shortfall in the current structure, 
and state responses could be very different if states had less funding. 
I do not think there has been a ``race to the bottom'' in the sense of 
sharp cuts in benefits and eligibility; however, states have sometimes 
competed to reduce their caseloads, and have sometimes used practices 
that have denied, terminated or restricted assistance to needy families 
in efforts to do so.
    When the 1996 law was pending before Congress, many people feared 
how states would respond if they faced a situation in which federal 
funds were insufficient to provide assistance to eligible families. 
Caseloads had been rising rapidly during the early 1990s, and the law 
proposed to fix Federal funding through 2002 at approximately 1994-95 
spending levels, while permitting states to reduce state spending to 
75% or 80% of their 1994 spending levels. Thus, the concern was that if 
the law simultaneously froze Federal funding, allowed states to 
withdraw state funds, and eliminated the duty to provide assistance to 
eligible families, it seemed very foreseeable that if caseloads began 
to approach or exceed available funding, states would cut back 
eligibility rather than increase unmatched state spending.
    The actual experience has been quite different, possibly because we 
have never faced a time in which block grant funding levels have been 
insufficient to provide assistance to eligible families. Although this 
was not generally recognized at the time the law passed, the nation's 
caseload had begun declining in early 1994. Therefore, for most states, 
the provision of block grants in 1996 based on earlier-year funding 
resulted in an increase in Federal funding. As noted in my testimony, 
the GAO calculated that if all states had participated in TANF for the 
full year in 1997 and had met applicable maintenance of effort 
requirements, they would have had an additional $4.7 billion in Federal 
funds above what they would have received under the prior funding 
formula. This margin continued to grow in subsequent years as caseloads 
continued to fall. As a result, we have never seen how states would 
respond if they were faced with a situation in which funding was 
insufficient to provide assistance to eligible families. I think this 
is an important cautionary note for next year when Congress considers 
future block grant funding levels.
    More generally, it is certainly true that most states have not 
reduced basic benefit levels (though most state benefit levels have not 
kept pace with inflation despite states having much smaller caseloads, 
a strongly work-focused system, and additional available resources.) It 
is also true that the principal new eligibility restrictions that 
states have imposed have been ones expressly required or encouraged in 
the Federal law, e.g., time limits, restrictions on assistance to legal 
immigrants.
    At the same time, the concern about a ``race to the bottom,'' was 
not just about formal eligibility rules; rather, it was a fear that 
states seeking to manage within block grant funding levels would deny 
or terminate assistance for needy families in efforts to reduce 
caseloads as rapidly as possible. As discussed in my testimony, much of 
the caseload decline is clearly attributable to employment, but a 
substantial share is also attributable to sanctions and other practices 
that deny or terminate assistance for failing to meet program and 
administrative requirements. The frequency of such practices increased 
dramatically after enactment of TANF. I continue to be concerned that 
the strong Federal signal encouraging caseload reduction has not been 
accompanied by a comparably strong signal emphasizing the need to 
actively work with all families to promote employment, and that in the 
current structure, states are rewarded for caseload reduction whether 
or not it is attributable to employment or to decreased need.

    2. I note your concerns about the poverty rates for families 
leaving welfare, especially for those who are sanctioned for failing to 
work. That is an important point to consider, but we also need to look 
at the importance of sending a strong message about work. Can we send 
that strong message without imposing sanctions on families who fail or 
refuse to work?
    I agree that it is important to send a strong message about work. 
However, there is evidence that current sanction practices often result 
in termination of assistance to families with serious barriers to 
employment. In TANF reauthorization, I hope the Subcommittee will 
consider modifying the law governing sanctions to emphasize the 
importance of states actively working to promote participation among 
families with serious employment barriers.
    First, the problem of poverty rates for families leaving welfare is 
not just or even principally a problem of sanctioned families. It is 
certainly the case, though, that poverty rates are much higher for 
families in which the parent or parents are not employed.\25\ However, 
in the state studies in Washington and Missouri, most families (58%) 
were poor after leaving assistance, even though most families were 
working.\26\ And, in a longitudinal study of families leaving welfare 
in Wisconsin, the researchers compared the combination of earnings, 
cash assistance, Food Stamps, and Earned Income Tax Credit to the 
Federal poverty line, and reported poverty rates of 63% in the first 
year, 61% in the second year, and 59% in the third year for 1995 
leavers.\27\ These high and persistent poverty rates underscore the 
need to help ensure that families entering employment are linked with 
work supports--child care, health care, Food Stamps, child support, and 
the EITC. In addition, they suggest the importance of continued 
attention to employment retention and advancement initiatives and the 
need to address job quality in employment placements.
---------------------------------------------------------------------------
    \25\ For example, a study examining circumstances of New Jersey 
leavers reported poverty rates of 29% for leavers who were off TANF and 
employed and 82% for leavers who had left TANF and were not employed. 
Rangarajan and Wood, How WFNJ Clients Are Fairing Under Welfare Reform: 
An Early Look (Mathematica Policy Research, 1999), available at http://
www.mathematica-mpr.com/PDFs/wfnj.pdf. A Utah study found that 32% of 
those who left assistance due to increased income were poor, compared 
to 73% of those who left due to time limits and 58% of those who left 
for ``other'' reasons. Vogel, Taylor and Barusch, Multiple Impacts of 
Welfare Reform in Utah: Experiences of Former Long-Term Welfare 
Recipients, (Graduate School of Social Work, University of Utah, June 
2000) available at http://www.socwk.utah.edu/
    \26\ Du, Fogarty, Hops, and Hu, A Study of Washington State Leavers 
and TANF Recipients--Findings from the April-June 1999 Telephone Survey 
Final Report, (Office of Planning and Research, Economic Services 
Administration & Department of Social and Health Services, March 2000); 
available at http://www.wa.gov/WORKFIRST/about/Exit3Report.pdf. The 
relevant portion of Missouri's study, by the Midwest Research 
Institute, is available at http://www2.kclinc.org/downloads/
MRIChapter2.pdf.
    \27\ Cancian, Haveman, Meyer, and Wolfe, Before and After TANF: The 
Economic Well-Being of Women Leaving Welfare (Institute for Research on 
Poverty, May 2000) available at http://www.ssc.wisc.edu/irp/sr/
sr77.pdf.
---------------------------------------------------------------------------
    Looking specifically at sanctioned families, only a limited number 
of state studies examine their circumstances. The consistent finding 
from those studies is that sanctioned families are less likely to have 
graduated high school, less likely to have recent work history, more 
likely to report health or mental health problems. Families terminated 
due to sanction consistently display poorer outcomes than families 
terminated for other reasons. They are less likely to be employed after 
leaving assistance, and if employed, likely to have lower earnings than 
other leavers.\28\ And, a recent study finds that most sanctions and 
case reductions or closures for noncompliance are due to missing 
appointments or not filing paperwork, rather than for refusing to work 
or not showing up for work.\29\
---------------------------------------------------------------------------
    \28\ A number of these studies are summarized in Goldberg and 
Schott, A Compliance-Oriented Approach to Sanctions in State and County 
TANF Programs (Center on Budget and Policy Priorities, October 2000), 
available at http://www.cbpp.org/10-1-00sliip.pdf.
    \29\ Cherlin, et al., Sanctions and Case Closings for 
Noncompliance: Who is Affected and Why (Policy Brief 01-1, Welfare, 
Children and Families Study, Johns Hopkins University), available at 
http://www.jhu.edu/\welfare/18058____Welfare____Policy____Brief.pdf. 
According to respondents, the most common reasons for reduction or 
termination of assistance were missing an appointment (32%) and not 
filing paperwork (21%). In 12% of cases, the basis was not complying 
with work-related rules.
---------------------------------------------------------------------------
    I appreciate that the goal of sanction policy is often to 
communicate the importance of work and ``get the attention'' of 
families. However, these findings suggest that for families with very 
severe barriers to employment, merely imposing sanctions for 
noncompliance is not a sufficient strategy. Rather, if the hope is to 
actively engage these families and to link them with appropriate 
services, states need to make stronger efforts to assess circumstances, 
identify the reasons for nonparticipation before imposing sanctions and 
make active efforts to reach out to families after they have been 
sanctioned. Such practices would not diminish the importance of a focus 
on work, and could result in greater participation in work-related 
activities by those families with the most serious barriers to 
employment.

    3. What do recipients themselves say about welfare reform, 
including those who have left welfare?
    While there has been much research concerning the 1996 law, I think 
that too little of it has directly sought to gather information about 
the perspectives of the families seeking or receiving assistance. I 
would urge the Subcommittee to consider using field hearings and other 
approaches to gain further insight into the perspectives of affected 
families during the course of this year.
    A number of studies have asked questions about well-being and 
hardship since leaving welfare. However, typically, these studies have 
not asked families which services they received while receiving 
assistance or their opinions about which services were or could have 
been most helpful. Generally, the picture that emerges from these 
studies is that most leavers state they are ``better off'' since 
leaving assistance, with employed leavers more likely to agree they are 
better off. However, a group of leavers indicate that their situations 
are worse since leaving assistance. Moreover, leavers often report a 
range of hardships that is disturbingly high.
    As to overall well-being, in a recent South Carolina leavers' 
study, 20% agreed with the statement ``Life was better when you were 
getting welfare;'' 80% disagreed. Among those working, only 11% agreed; 
34.5% of those not working agreed.\30\ In an Arizona study, 68% of 
leavers reported being better off; 15% reported being worse off.\31\
---------------------------------------------------------------------------
    \30\ Richardson, Schoenfield, LaFever, Larsh, Tecco, & Reniero, 
Welfare Leavers and Diverters Research Study--One-Year Follow-Up of 
Welfare Leavers--Final Report (Maximus, March 2001).
    \31\ Westra & Routley, Arizona Cash Assistant Exit Study--First 
Quarter 1998 Cohort Final Report. ( Arizona Department of Economic 
Security Office of Evaluation, January 2000).
---------------------------------------------------------------------------
    In a Florida study, 51% reported being better off; 18% reported 
being worse off; 32% said they would go back on WAGES [the state's TANF 
Program] if they could.\32\ In Utah, 52% of those who left due to 
increased income said life was better since cash assistance closed (18% 
saying worse), while only 21% of those who left due to time limits said 
life was better (49% worse) and 35% of those who left due to other 
reasons said life was better (38% worse.) \33\
---------------------------------------------------------------------------
    \32\ Crew & Eyerman, After Leaving WAGES (Florida State University, 
1999).
    \33\ Vogel, Taylor and Barusch, supra.
---------------------------------------------------------------------------
    While leavers often indicate that life is generally better, they 
also report significant levels of continuing hardships. Studies tend to 
ask these questions in different ways, making it somewhat difficult to 
combine responses. Nevertheless, in the tables below, we present the 
extent of certain hardships reported in some of the recent leavers' 
studies. (We have combined responses to similarly-phrased questions for 
the sake of brevity.) The first table presents housing-related 
hardships leavers experienced after exiting welfare programs. The 
numbers seem to indicate that around one-tenth of all leavers have been 
evicted since departing the rolls, more have suffered a loss of 
utilities, and still more--up to one-third--have lost their telephone 
service. And, these figures may under-report the true prevalence of 
these hardships, since those who have been evicted or had their phone 
service terminated are presumably harder to contact.

----------------------------------------------------------------------------------------------------------------
                                                                                     Utilities
                                                                  Evicted/forced    (heat/gas/       Telephone
                                                                    to move (in      electric)    turned off (in
                                                                     percent)     turned off (in     percent)
                                                                                     percent)
----------------------------------------------------------------------------------------------------------------
Arizona.........................................................            17.0            12.0              --
Colorado........................................................            10.5            14.4            27.5
District of Columbia............................................             5.7             5.8              --
Florida.........................................................            20.2            26.8            38.3
Minnesota (working leavers only)................................  ..............            13.0            17.0
New Mexico......................................................            10.9            10.0              --
Cuyahoga County, Ohio...........................................             5.0            15.0              --
South Carolina..................................................            12.1            11.4            34.9
Utah............................................................             7.0            10.0            23.0
Washington......................................................             7.0            12.0              --
Wisconsin.......................................................            12.0            10.0            27.0
----------------------------------------------------------------------------------------------------------------

    The second table presents food- and medical-related hardships. 
Although prevalence varies most of the studies indicate a rather high 
occurrence of difficulty in obtaining or having enough food or medical 
care.

----------------------------------------------------------------------------------------------------------------
                                                                                    Difficulty
                                                   Received food    Hungry/not    affording food/  Went without
                                                   from shelter   enough to eat/   no way to buy   medical care
                                                   or food bank    skipped meals     food (in      (in percent)
                                                   (in percent)    (in percent)      percent)
----------------------------------------------------------------------------------------------------------------
Arizona.........................................            21.0            24.0              --            24.0
Connecticut.....................................            11.5            14.8              --              --
Colorado........................................            30.8              --            58.5              --
Florida.........................................              --              --            42.6              --
Minnesota (working leavers only)................              --            11.0              --            28.0
New Mexico......................................              --              --            25.2            18.5
Cuyahoga County, Ohio...........................              --            28.0              --              --
South Carolina..................................              --              --            12.6             9.5
----------------------------------------------------------------------------------------------------------------

    Fewer studies seek direct information about families' opinions 
concerning the assistance they received while participating in TANF. In 
studies that have sought this information, opinions among families seem 
divided. In Wisconsin, 60% of leavers agreed with the statement 
``Welfare more about rules and red tape than helping'' (38% disagreed); 
49% agreed that ``Welfare wants to get rid of people, not help (46% 
disagreed); 67% agreed that they had been ``treated with perfect 
fairness by caseworker (32% disagreed) \34\ In South Carolina, 46% 
agreed that the welfare program was more about rules and red tape than 
about helping people (54% disagreed); 32% agreed the welfare program 
wants to get rid of people, not help them (68% disagreed); 83% agreed 
that their caseworker treated them with perfect fairness (17% 
disagreed).\35\ In Mississippi, 55-60% reported that the agency had 
treated them fairly and attempted to help them; the remaining 40-45% 
did not feel they had been treated fairly.\36\
---------------------------------------------------------------------------
    \34\ Survey of Those Leaving AFDC or W-2. January to March 1998 
Preliminary Report (State of Wisconsin, Department of Work force 
Development, January 13, 1999).
    \35\ Survey of Former Family Independence Program Clients: Cases 
Closed During January through March 1998 (South Carolina Department of 
Social Services, Division of Program Quality Assurance, June 1999).
    \36\ Beeler, Brister, Chambry and McDonald, Tracking of TANF 
Clients: First Report of a Longitudinal Study. Mississippi's Temporary 
Assistance for Needy Families Program (Center for Applied Research, 
Else School of Management, Millsaps College under contract with the 
Mississippi Department of Human Services. (December 15, 1998--revised 
January 28, 1999).
---------------------------------------------------------------------------
    A new report, based on telephone surveys with single mothers in 
Milwaukee, reported that most (59%) considered W-2 an improvement on 
AFDC, but that most (62.5%) thought there were problems with the 
present system. The most commonly identified problems were ``don't 
provide adequate training; money received is not adequate for support; 
program is unorganized/hassle to go through; staff is rude/uncaring; 
services are too slow; staff is unorganized/not helpful.'' The most 
frequent recommendations were to provide more/better training and to be 
more individualized to each case.\37\
---------------------------------------------------------------------------
    \37\ S & R Piper Family Foundation, Single Mother Needs Assessment 
Study Phase II Telephone Interviews (Dieringer Research Group, Inc., 
October 2000), available at http://www.pieperline.com/pf/Surveys/smnas/
SMNAS.PDF.
---------------------------------------------------------------------------
    One recent report provides information about the opinions of 
families who had applied for assistance. The report was based on 1512 
surveys of current and former recipients conducted by community groups 
in fourteen sites. While there were substantial variations between 
sites, some of the findings included: 53% of applicants stated that 
they had experienced rudeness during the application process; 42% 
reported needing to make three or more visits to get their application 
approved; 49% reported waiting 30 or more days before starting to 
receive benefits; and only 39% reported having been told of fair 
hearing rights.\38\
---------------------------------------------------------------------------
    \38\ Gordon, Cruel and Unusual: How Welfare ``Reform'' Punishes 
Poor People, (Applied Research Center, 2001), available at http://
www.arc.org/downloads/arc010201.pdf.
---------------------------------------------------------------------------
    In short, families who have left assistance are likely to report 
that they are better off, particularly if they are working, though 
hardship levels are significant for many welfare leavers. In studies 
that seek information about the experience of receiving assistance, 
there are indications of difficulties, and I hope the Subcommittee can 
look more closely at these concerns.

    4. In your testimony, you note that TANF implementation has been 
far more than work requirements and time limits--it has also involved 
additional resources and an array of new and expanded supports to help 
families enter and maintain employment. Do you think this would have 
happened if TANF had not been enacted? Why or why not?
    I think that because of the block grant structure and the decline 
in welfare caseloads, state spending on a set of supports has probably 
been higher than it would have been had there been no change in federal 
law. However, there was broad agreement in the mid-1990s about the need 
to change Federal law to move to a work-based welfare system, and many 
(though not all) of those advocating change were urging an increase in 
federal funding to support the shift. It certainly would have been 
possible to increase the availability of Federal funds for states 
without implementing a block grant structure or eliminating many of the 
protections and safeguards for families that existed in prior law. I do 
think, though that the fact that Federal and state funding has remained 
essentially constant as state caseloads have declined has played an 
important role in increasing the resources available for state efforts 
to promote work and support low income working families.

    5. Taking a look at some of the figures in your testimony, you 
state that earnings for working adults receiving assistance averaged 
$597.97 per month in FY 99. You also reference a study funded by HHS 
that found the median earnings for the first full quarter after leaving 
welfare were $842 a month. Although these are low, they are still 
higher than the U.S. average amount of TANF cash assistance in FY 99, 
which was $357.27 per month. Please comment.
    The clear picture emerging from data about current recipients and 
families leaving welfare is that they are most frequently entering into 
jobs with low earnings. The earnings are typically higher than the 
basic TANF grant. So, if families were simply entering employment and 
losing a cash assistance grant, they would usually have higher cash 
income (particularly if they began to receive the EITC.) There are 
three factors, though, that complicate the picture: loss of Food 
Stamps, loss of Medicaid, and uneven receipt of child care.
    First, families leaving assistance often stop receiving food 
stamps. The National Survey of America's Families, the nationally 
representative study conducted by the Urban Institute, has reported 
that in 1997, only 47% of those families who had left assistance in the 
last six months were receiving food stamps,\39\ even though about \2/3\ 
of leavers seemed to still meet income eligibility guidelines for the 
Food Stamp Program.\40\
---------------------------------------------------------------------------
    \39\ Loprest, Families Who Left Welfare: Who Are They and How Are 
They Doing?, Assessing the New Federalism Discussion Paper 99-02 
(1999), available at http://newfederalism.urban.org/pdf/discussion99-
02.pdf.
    \40\ See Zedlewski and Brauner, Declines in Food Stamp and Welfare 
Participation: Is there a Connection?, Assessing the New Federalism 
Discussion Paper 99-13 (October 1999), available at http://
newfederalism.urban.org/pdf/discussion99-13.pdf.
---------------------------------------------------------------------------
    Second, families leaving assistance often stop receiving Medicaid. 
According to the NSAF's data, only 55% of children and 52% of adults 
who had left assistance within the last 6 months were continuing to 
receive Medicaid in 1997.\41\ In more recent data, the picture for 
children looks somewhat better, but there is still a drop in children's 
receipt of Medicaid and a larger drop in adult receipt. This drop in 
receipt is particularly troubling because typically, employed leavers 
are not receiving employer-provided health care coverage at their jobs. 
Thus, leaving assistance results in a decline in heath care coverage.
---------------------------------------------------------------------------
    \41\ Loprest, supra.
---------------------------------------------------------------------------
    Third, whether a family has more disposable income after going to 
work also depends on the family's work expenses. One of the most 
significant work expenses can be child care. Not all working families 
have child care expenses, but for those with expenses, the cost of 
child care can represent a substantial part of family income. Thus, it 
is troubling to see that only about 25-30% of working leavers are 
receiving child care assistance.\42\
---------------------------------------------------------------------------
    \42\ Schumacher and Greenberg, Child Care After Leaving Welfare: 
Early Evidence from State Studies (Center for Law and Social Policy, 
October 1999), available at http://www.clasp.org/pubs/childcare/
Child%20Care%20after%20Leaving%20Welfare.PDF.
---------------------------------------------------------------------------
    In pointing to these concerns, I want to emphasize that (as noted 
above) there is much reason to believe that most of the families that 
have entered employment are glad that they have done so and much prefer 
to be working. At the same time, if a national policy goal is to ensure 
that entering employment translates to improved economic well-being, it 
is important to find ways to improve the operation of the system of 
work supports.
    Further, the problems described above are not unique to welfare 
leavers. Participation in Medicaid, Food Stamps, and child care by low-
income working families who have not recently left welfare appears to 
be even lower than the participation by welfare leavers. Thus, this 
suggests a broader issue about the need to improve the accessibility of 
benefits for low-income working families.

    6. You describe (page 9) how ``almost all states are funding teen 
pregnancy prevention initiatives using TANF funds, and TANF funding has 
made it possible for States to create or expand after-school programs, 
pregnancy prevention programs, stay-in-school programs, and an array of 
youth development initiatives aimed at reducing teen pregnancies and 
promoting stronger outcomes for low-income teens.''

    a. What are the effects of the teen pregnancy prevention 
initiatives States are running?
    While it is possible that some teen pregnancy prevention 
initiatives funded through TANF are being evaluated, the law has no 
general requirement that these initiatives be evaluated. According to a 
survey by the American Public Human Services Association, ``State Teen 
Pregnancy Prevention and Abstinence Education Efforts: Survey Results 
on the Use of TANF and Title V Funds'' published in July 1999, 
available at http://www.aphsa.org/publicat/teenpreg.pdf, thirteen 
states reported that they were using funds to develop and implement 
evaluation methods for statewide and local abstinence and/or teen 
pregnancy prevention/out-of-wedlock birth programs.
    While initiatives that are supported by TANF may or may not have 
been evaluated, a number of teen pregnancy prevention interventions 
(not necessarily TANF funded) have been subject to evaluation in recent 
years. A synthesis of key findings was published by The National 
Campaign to Prevent Teen Pregnancy, entitled ``No Easy Answers: 
Research Findings on Programs to Reduce Teen Pregnancy'' in March 1997; 
the summary is available at http://www.teenpregnancy.org/fmnoeasy.htm. 
An updated review, ``Emerging Answers'' will be published shortly.

    b. While it is possible for States to run all sorts of teen 
pregnancy prevention programs using TANF money, how many actually are 
doing so?
    According to the APHSA survey, ``State Teen Pregnancy Prevention 
and Abstinence Efforts'' published in July 1999, forty-six states 
responded that they fund teen pregnancy/out of wedlock initiatives 
using TANF or MOE (some of these efforts may reach non-teens). Brief 
descriptions of some of these pregnancy prevention initiatives are 
available from APHSA. In addition, CLASP's ``Tapping TANF: When and How 
Welfare Funds Can Support Reproductive Health or Teen Parent 
Initiatives,'' available at http://www.clasp.org/pubs/TANF/6-
517tappingtanf.PDF, also describes a number of state initiatives.

    c. What have been some of the results of the Minnesota Family 
Investment Program in promoting two-parent families?
    The evaluation of the Minnesota Family Investment Program (MFIP) 
found that a welfare reform initiative that broadened eligibility for 
two parent families and provided increased assistance when families 
entered employment was associated with an increased likelihood that 
single parents would marry and that two parent families would stay 
together.\43\
---------------------------------------------------------------------------
    \43\ Knox, Miller, and Gennetian, Reforming Welfare and Rewarding 
Work: A Summary of the Final Report on the Minnesota Family Investment 
Program (Manpower Demonstration Research Corporation, September 2000), 
http://www.mdrc.org/Reports2000/MFIP/MFIP-ExSum-Final.htm.
---------------------------------------------------------------------------
    MFIP had a number of notable features: the program eliminated 
restrictions on eligibility for two parent families; offered an 
enhanced earnings disregard for families entering employment; imposed 
work-related requirements after 24 months for single-parent families 
and after 6 months for two parent families, with a 10% grant reduction 
for noncompliance; did not impose a time limit on benefits; 
consolidated cash assistance, family general assistance and food stamps 
into a single program. The program was evaluated using a random 
assignment design, with a control group subject to the old AFDC rules.
    Over a 3-year period, for long-term single parent family 
recipients, the program was associated with increased employment and 
earnings, increased receipt of assistance; increased total earnings, 
and an increase in the share of families with income above the poverty 
line. At the end of 3 years, the share of single-parent long-term 
recipients who were married and living with a spouse was 10.6%, versus 
7% for the control group, reflecting a 51.4% increase. The evaluation 
also found a decrease in the likelihood that the mother had been a 
victim of domestic abuse over the three-year period.\44\
---------------------------------------------------------------------------
    \44\ The evaluation also reported a set of positive child outcomes. 
For children, the evaluation reported an increase in the likelihood 
that children had continuous health care coverage, an increase in use 
of formal child care arrangements, a reduction in reported problem 
behaviors, an increase in the level of school engagement and 
improvement in school performance.
---------------------------------------------------------------------------
    Often, when a program is evaluated using a random assignment 
design, it is difficult to determine which components of the program 
structure were most significant in affecting the program. In this case, 
the program design allowed evaluators to determine the independent 
effect of the incentive rules apart from the program's work mandate. 
The evaluators concluded that ``MFIP's incentives and benefit rules 
rather than the participation mandates were largely responsible for the 
increase in marriage rates.''
    For two-parent families, there was no increase in employment, and 
family earnings actually declined; evaluators concluded that the 
program's primary effect was to cause one parent in some families to 
cut back on work, either by reducing hours or leaving work entirely. 
However, because two-parent MFIP families were more likely to receive 
assistance, their total income from earnings and assistance was 
somewhat higher than that of the control group, and the share with 
income above the poverty line was higher.
    At the end of 3 years, the share of the original MFIP two-parent 
family group in which parents were married and living together was 
67.3%, as compared to 48.3% for the AFDC group, which translates to a 
39.5% increase in the likelihood of being married and living with a 
spouse. The share cohabiting was less in the MFIP group (13.5% for MFIP 
versus 22.8% for AFDC) and the share divorced or separated was also 
less (8.9% for MFIP versus 21.5% for AFDC). The evaluators suggest that 
the program's less restrictive eligibility criteria for two parent 
families, increased benefits for working families, and greater family 
discretion in how to spend their resources may have all played a role 
in affecting the result.
    The MFIP results are strikingly encouraging. At minimum, they 
suggest the need for active dissemination of the findings, further 
follow-up research, and for Congress to ensure that Federal law does 
not discourage states from implementing similar approaches. Under 
current law, states are not required to impose more stringent 
eligibility rules on two-parent families, though it is sometimes 
suggested that the very high two-parent participation rates have the 
effect of discouraging states from providing assistance to two-parent 
families in state TANF programs. Similarly, states are free to 
implement generous earnings disregard and work supplements for employed 
families, but if Federal TANF funds are used, such support counts 
against the Federal 5-year limit on use of Federal TANF funds to 
provide assistance. Accordingly, if Congress wants to make it easier 
for states to implement MFIP-like approaches, then it will be important 
to consider whether the higher participation rate for two-parent 
families is appropriate or desirable, and to consider whether states 
should be free to use Federal TANF funds to provide supports for 
working families without having those supports count against the 
Federal time limit.
                               conclusion
    Thank you for your consideration. I hope these responses are 
helpful to the Subcommittee.
            Sincerely,
                                             Mark Greenberg
                                              Senior Staff Attorney

                                


                                        Heritage Foundation
                                          Washington, DC 20002-4999
    Question 1. I noted your suggestion that the TANF block grant 
should be cut by 10 percent, owing to the steep caseload decline since 
1996 and even before then. It is worth noting that the TANF block grant 
has been fixed at $16.5 billion per year since 1996, without adjusting 
for inflation. That amounts to a real reduction of about 13 percent 
since 1996. So you are talking about an additional reduction compared 
with what we have already achieved in this program, correct?
    The goal of welfare reform should not be to have an ever-greater 
number of persons on welfare. Nor should the goal be to give an ever 
greater array of benefits to those on welfare. Unfortunately, this has 
too often been the pattern in the past. After adjusting for inflation, 
the U.S. now spends 10 times as much on means-tested welfare as it did 
when the war on poverty began.
    Since the onset of welfare reform the AFDC/TANF caseload has been 
cut in half. Given this decline in caseload, a cut in constant dollar 
spending of 13 percent seems modest. If work requirements are 
strengthened, the TANF caseload will continue to fall dramatically over 
the next 5 years. As caseload declines, a further reduction in TANF 
funding would be completely appropriate.

    Question 1.A. Are you at all concerned that if TANF is reduced and 
States encounter problems with a slowing economy we might end up where 
we were on unemployment compensation in the 1980s and early 1990s, that 
is, in something of a bidding war to provide additional ``emergency'' 
benefits whenever the economy falters?
    Many have expressed concern that the current or a reduced level of 
TANF funding will prove inadequate if TANF caseloads rise during a 
recession. There are six reasons why current or reduced TANF funding 
will be sufficient during a recession.
    First, the present level of Federal TANF funding sustained over 5 
million families during the AFDC caseload peak in 1994. Caseloads have 
now fallen nearly 60 percent from those peak levels. States are now 
spending roughly twice as much per family as they were a few years ago. 
If, during a recession, the current caseloads rose by a quarter, the 
nation would still have roughly half as many families on TANF as it did 
in 1994. But Federal funding remains about the same as in 1994, some 
$16.5 billion. Thus TANF funding will be more than adequate to cover 
costs even during a recessionary period, and can be reasonably reduced 
in future years.
    Second, evidence from the last 50 years shows that, in general, 
economic conditions result in only modest changes in AFDC caseloads. In 
many instances, caseloads have risen during recessions, but these 
increases have generally been modest, 10 percent or less. Thus the 
expectation that a recession will produce huge increases in caseload is 
unsupported by the record.
    Third, evidence suggests that work requirements have not only been 
effective in reducing caseloads since the mid-1990's, but they can also 
limit the growth of caseload during a recessionary period. For example, 
during the recession of the early 1990's the national AFDC caseload 
grew by 30 percent. However, in Wisconsin (an early pioneer of 
workfare) the caseload did not rise at all. The Wisconsin experience 
suggests that states with strong workfare programs will not experience 
substantial growth in caseload, even during a recession.
    Fourth, many states have unspent and unobligated TANF surpluses, 
which can be expended if caseloads rise during a recession.
    Fifth, nearly all states have reduced their state contributions to 
TANF to 80 or 75 percent of historic levels. If welfare costs rise 
during a recession, states should be required to raise their own 
spending back to historic levels before asking for added Federal funds.
    Sixth, during the last 5 years, TANF caseload has fallen and the 
employment of single mothers increased. As this change occurred, states 
reduced spending on cash benefits and increased TANF funding for 
daycare. If, during a recession, this pattern is reversed (employment 
falling and caseload rising) states will be able to reverse the flow of 
TANF funds: reducing subsidies to daycare as employment drops and 
increasing funding for basic cash benefits. Just as the drop in TANF 
caseload automatically freed up funds which could be used for daycare, 
a drop in employment of single mothers will automatically reduce the 
need for daycare subsidies and free up funds to be used to pay for the 
benefit costs of rising caseloads.

    Question 2. Please expand on some of your suggestions to promote 
marriage and reduce illegitimacy. Specifically, are there any programs 
that have been successful in these areas? What new efforts should be 
undertaken? What evidence is there that these new efforts would be 
successful?
    Efforts to promote marriage and reduce illegitimacy should be 
preventative: they should seek to reduce out-of-wedlock births, to 
increase marriage before the birth of a child, and to reduce divorce. 
These programs should be pro-active; they should seek to keep Humpty 
Dumpty from falling off the wall rather than trying to glue him 
together after the fall. While current welfare and social service 
programs seek to deal with the consequences of single parenthood, pro-
marriage programs would address the core problem by reducing the level 
of single-parent families and increased the number of married families.
    Pro-marriage reforms must endeavor to restore the culture of 
marriage in at risk communities. They must seek: to instill an 
understanding of the value of marriage; to provide skills needed to 
sustain successful long term marital relations; and to reduce the 
disincentives to marriage implicit in most government welfare programs. 
Such pro-marriage efforts should include the following.
    Marriage education programs--Marriage education programs should be 
provided in junior high and high schools in at risk communities. Such 
programs should teach the value of marriage to men, women, children and 
society at large. The programs could operate as adjuncts to existing 
abstinence education programs.
    Public education ad campaigns--Public advertising campaigns should 
disseminate pro-marriage messages throughout the popular culture. 
Celebrities should be used to affirm: the linkage between marriage and 
personal happiness; the centrality of marriage in becoming a mature man 
or woman; and the harm which comes to children through the 
deterioration of marriage.
    Marriage mentoring programs--A wide range of marriage mentoring 
programs should be established to provide non-married and married 
couples with the information and tools necessary to build and maintain 
strong marriages, including an understanding of the major reasons why 
relationships and marriages fall apart. The programs should seek to 
develop skills for handling conflict, dealing with change, and 
enhancing enjoyment and intimacy in the marital relationship. Such pro-
marriage services should be offered in a variety of venues, such as 
churches, community centers, courts, maternity and childbirth clinics, 
health centers, welfare offices, and military bases. Particular 
emphasis should be placed on offering pro-marriage mentoring to low 
income couples who are at risk of bearing children out-of-wedlock. The 
programs should teach these vulnerable couples how to reduce conflict 
and to develop skills leading to long term marital commitment; they 
should also stress the importance of marriage to the well-being of 
children.
    Pro-marriage counseling during pregnancy--The government currently 
pays for the medical costs of 85 percent of all out-of-wedlock births 
through the Medicaid program. Medicaid's role means that the government 
is in contact and involved with most unwed mothers-to-be during their 
pregnancy. In nearly half these cases, the expectant mother will 
actually be cohabiting with the father during pregnancy. Yet despite 
this obvious opportunity, the government never affirms the value of 
marriage to these fragile young couples, let alone facilitates their 
marital union. Such indifference to marriage must be overturned, pro-
marriage counseling should be offered to all pregnant women and 
unmarried mothers receiving Medicaid services. Couples expressing an 
interest in marriage should be channeled to community-based mentoring 
groups.
    Community-wide marriage policies programs--The centerpiece of this 
policy is the establishment of Community Marriage Covenants in which 
all--or most--churches within a community agree to move beyond offering 
pro-forma wedding ceremonies and begin to offer services which will 
allow couples to flourish in lifelong marital commitment. The churches 
agree to conduct mandatory marriage preparation programs for couples 
seeking to marry; such preparation programs can identify and resolve 
potential problems in relationships before the marriage begins. The 
churches also assist couples in troubled marriages to avoid divorce 
through the support of other couples who have faced and overcome 
similar marital difficulties. A well-executed Community Marriage 
Covenant project appears to save up to 80 percent of marriages headed 
toward divorce, and to reconcile more than half of separated couples.
    Divorce education--Many couples have an illusory view of divorce as 
a cost-free escape from their current problems. Divorce education can 
help couples resolve problems and save their marriage. In particular, 
requiring a co-partnering plan as part of divorce education enables the 
couple to develop a more realistic picture of what life will be like 
after divorce and can serve as an impetus for the couple to make 
renewed efforts to save their current marriage.
    The welfare reform act 1996 set the national goal of reducing 
illegitimacy and increasing marriage. The last 5 years should have been 
a period of experimentation in the types of marriage programs outlined 
above. Unfortunately, this experimentation has not occurred. Therefore 
no evidence on the effectiveness or limitations of such programs is 
available. On the other, there is a growing body of evidence on the 
effectiveness of abstinence education and divorce reduction programs. 
It is fairly certain that pro-marriage programs when they begin to be 
implemented they will also show similar strong levels of effectiveness.

    Question 3. Please describe for us the range of benefits and work 
supports outside of TANF that help recipients find and keep jobs. I'm 
thinking here of Federal and State programs like Food Stamps, Medicaid 
and other health coverage, housing, job training and education, child 
care, child support, transportation, and cash supplements like the 
Earned Income Credit (EIC).
    The Federal government operates over seventy major means-tested 
welfare programs aiding poor and low income individuals. These programs 
include cash aid, food, housing, medical care, training, education, 
social services, and community development. While daycare subsidies do 
help single mothers maintain employment, most other welfare programs 
reward and encourage non-work.
    For nearly three decades the government tinkered with various 
incentives and services to encourage (but not require) employment of 
welfare mothers. These ``work support'' programs were a complete 
failure. For example, job training is intended to raise the hourly wage 
rates of trainees but has proved largely ineffectual. If the goal is to 
reduce dependence and increase employment then one principle is key: 
welfare recipients must be required to take jobs, perform community 
service or undertake other constructive activity as a condition of 
getting aid. This rule alone is effective in limiting dependence and 
increasing employment.
    Question 3.A. Approximately how much do Federal and State taxpayers 
spend on these programs? How does that compare with spending prior to 
welfare reform?
    Total means-tested welfare spending by Federal and State 
governments was $434 billion in FY 2000. This was a record high. Total 
welfare spending has grown from $375 billion in 1996 to present levels, 
an increase of 16 percent. Overall cash, food, and housing aid has 
grown at a rate equal to inflation since 1996, while medical aid has 
grown more rapidly than inflation.
    Greater detail in means-tested welfare spending is shown in the 
table below.

                                         TOTAL WELFARE SPENDING FY 2000
                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                      Federal                                       Percent of
                                                     spending     State spending  Total spending  total spending
----------------------------------------------------------------------------------------------------------------
Cash............................................           77.8            22.78          100.58           23.2
Food............................................           34.71            1.34           36.05            8.3
Housing and Energy..............................           28.26            2.12           30.38            7
Medical.........................................          130.81           90.79          221.6            51
Education.......................................           22.46            1.34           23.8             5.5
Training........................................            5.79            0.07            5.85            1.3
Services........................................            7.74            2.93           10.67            2.5
Community Aid...................................            5.41            0               5.41            1.2
                                                 ---------------------------------------------------------------
    Total.......................................          312.95          121.38          434.34          100
----------------------------------------------------------------------------------------------------------------
Note: Some Numbers may not add due to rounding.
Source: Office of Management and Budget, Budget of the U.S. Government, Fiscal Year 2000, appendix. State outlay
  calculated based on legally required and historic ratios from Congressional Research Service publications.


    Question 3.B. Have other benefits been conditioned on work like 
TANF? I know this falls outside our jurisdiction, but should all or 
some of those other programs be similarly conditioned on work?
    Modest work requirements currently exist for able-bodied parents on 
food stamps. An important next step in reform would be to establish 
strong work requirements for all able-bodied non-elderly adults 
receiving food stamps or housing aid.

    Question 4. Mark Greenberg talks in his testimony (page 8) about 
``a basic picture of unmet need'' when it comes to funding for child 
care for those who leave welfare. Do you agree? How much are we 
spending on child care today compared with before 1996?
    For nearly three decades liberal experts have claimed that welfare 
dependence could not be reduced because of ``barriers to employment'': 
lack of daycare, lack of jobs, lack of skills, and lack of 
transportation. The experience of welfare reform shows these claims to 
be utterly incorrect. Similarly, it has long been shown that employed 
mothers use a wide variety of informal child care, both paid and 
unpaid. Liberal experts use informal care as evidence of ``unmet need'' 
but there is no real evidence to back their claim. The present level of 
daycare funding seems more than sufficient. Moreover, as TANF caseloads 
fall in the future, more TANF funds will become available for daycare.

                                

                                              Robert Rector
                                              Senior Policy Analyst
    [Whereupon, at 12:50 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

Statement of Geraldine Jensen, President, Association for Children for 
      Enforcement of Support, Inc. (ACES), Sacramento, California

    ACES has 45,000 members and 400 chapters located in 48 
states. We are representative of the families whose 20 million 
children are owed $71 billion in unpaid child support. We have 
banded together to work for effective and fair child support 
enforcement. Most families affected by welfare reform are 
entitled to child support payments. ACES has been monitoring 
State IV-D Child Support Agencies to determine if they are 
assisting families who leave the welfare rolls in collecting 
child support.

  states are failing to distribute child support payments to families 
                         leaving welfare rolls

     State government's new central payment systems are 
failing to properly distribute payments to families leaving the 
welfare rolls.
     States had $440 million \1\ in undistributed child 
support payments at the end of 1999 (see Chart 1).
    ACES has been monitoring the current child support 
enforcement system since 1984. In addition to obtaining 
information about the child support enforcement system for our 
members, ACES operates a national toll-free Hot Line for 
families with child support problems, issues, and questions. We 
receive up to 100,000 calls per year from parents throughout 
the U.S. From these calls and our members, we gather statistics 
and data on the status of the current child support enforcement 
system.
    The average ACES member is a single-parent, and she has two 
children. About 50% of ACES members are divorced, and the other 
half were never married. Members average income is $14,000 per 
year as of the end of 1999, and 85% have, in the past, received 
some form of public assistance. At present, about 33% of our 
membership receives public assistance. ACES members report that 
collection of child support, when joined with available earned 
income, allows 88% to get off public assistance. Collection of 
child support enables our low-income working-poor members to 
stay in the job force long enough to gain promotions and better 
pay so that they can move their family out of poverty, and onto 
self-sufficiency. The collection of child support, when joined 
with earned income, means our members can pay their rent and 
utilities, buy food, pay for healthcare, and provide for their 
children's educational opportunities. Lack of child support 
most often means poverty and welfare dependency. At the very 
least, it means having to work two or three jobs to survive. 
This leaves our children with literally no parent who spends 
time providing their children adequate nurturing, supervision, 
and the attention they need and deserve.
    About 33% of our nation's children have a parent living 
outside the household. They are four times more likely to be 
poor and five times more likely to receive food stamps than 
children who live with two biological parents. Child support, 
when received, accounts for 16% of the family's income, and 
averages $3,795 per year. Child support is even more important 
for poor children where it represents 26% of the family's 
income.

           FAMILIES REPORT PRWORA HAS NOT HELPED AND HAS HURT

    ACES members have seen neither the synergy nor improvement 
in collections that is being touted by federal and state 
government. In fact, in some states, the situation is even 
worse than it was pre-PRWORA. These states are having problems 
setting up State Disbursement Units. States have more 
undistributed funds on hand than ever before, $440 million. 
Undistributed funds are payments collected not sent to families 
due to problems identifying payee or payor, location of payee, 
or problems determining how to distribute it if the family was 
or is on public assistance. This means thousands of families 
leaving the welfare rolls are not receiving child support 
collected by the state. This undermines their self sufficiency 
efforts.
    In February, 2001, ACES filed a Writ of Mandamus in State 
Appeals Court against the Ohio Department of Jobs and Family 
Services (ODJFS). ODJFS knowingly brought online a computer 
system in October 2000 that miscalculates distribution of child 
support payments owed families in order to avoid further late 
penalties from being assessed against the State under Federal 
Law. The net effect is to reduce monthly payments to families 
under terms mandated by the 1996 welfare reform law. In doing 
so, ODJFS put the interests of the State ahead of those of 
affected children. Legal action was taken only after 
negotiations with ODJFS failed to produce an acceptable plan 
for fixing the problem.
    Our members in North Carolina report delayed and missing 
payments when the new State Disbursement Unit went into 
operation. Many have been unable to buy needed food, pay rent, 
or take care of their families because payments that had been 
processed by local Clerks of Courts are now lost in the state's 
new distribution computer system. North Carolina reports having 
more than $10 million in undistributed funds on hand. Reasons 
cited are that Clerk of Courts bundled checks, money orders, 
and cash brought in by non-resident parents and mailed it to 
Raleigh without identifying information attached, and employers 
did not use the new case numbers assigned to them for income-
withholding cases. Each case was given a new number in the 
distribution unit system. The number was neither parent's 
social security number nor the court docket number. Rather than 
obtaining a list of names and addresses from employers for whom 
the payments have been sent, the money was returned to the 
employers.
    In Illinois, ACES members report the same type of problem 
as in North Carolina. County Clerks of Courts mailed checks and 
money orders paid to them by non-resident parents to the state 
with no identifying social security numbers. Illinois has more 
than $6 million in unidentified funds on hand. Tennessee, 
Nevada, part of Pennsylvania, and Missouri are reporting 
similar problems. States chose to set up systems where all 
payments are sent to a central intake and then disbursed. This 
process has made it more difficult for parents to pay. The lack 
of adequate planning and testing has led to missing payments, 
long delays, and other problems for some of the poorest 
families in our nation. North Carolina made families pay back 
emergency aid checks out of the first child support check 
issued, after months of not receiving payments. This newest 
bureaucratic glitch has caused thousands of children to go to 
bed hungry.
    In Florida, ACES members have received letters from the 
state telling them the computer is unable to calculate the 
correct amount of support due to them and due to the state for 
welfare. It is taking one year for the state to audit cases to 
make sure the correct amount of support due to families is 
distributed. Families report that the state continues to seize 
and keep IRS offset checks for much more money than the family 
ever received in welfare benefits. Florida is reporting $33 
million in undistributed funds as of the end of the 2000 fiscal 
year.
    In Georgia, there is legal action pending against the state 
for failure to release child support payments collected when a 
family leaves the welfare rolls, and for incorrect calculation 
of the amount due to the family and due the state.
    California is reporting that is has $127 million in 
undistributed funds. The state plans to set up a public 
awareness campaign to notify families that they may be holding 
their child support payment within the next few months. 
California's current system of four separate computer systems 
is causing a variety of problems distributing payments, 
especially in cases which involve more than one county.
    In a survey done by the Inspector General, the percentage 
of states that report the following problems with 
implementation of SDU's are:
     100%--distributing payments for interstate cases;
     86%--identifying poorly labeled payment;
     86%--identifying payments with no case in the 
system;
     60%--redirecting payments mailed to wrong place;
     71%--meeting customer serve demands;
     60%--securing, training and retaining staff;
     31%--disbursing support payments within two days;
     40%--predicting volume for staffing purposes; and
     34%--monitoring SDU performance.
    The Office of Inspector General recent report, Child 
Support Enforcement State Disbursement Units, August 2000, 
reported that 38 states have fully implemented the federal law 
to centralize payment processing of most child support 
payments. Indiana, Wyoming, and South Carolina asked for 
waivers to link local disbursement units. Arkansas, Georgia, 
Kentucky and Oklahoma report they have central payment 
processing but are not yet using it for the federally required 
caseload. Michigan and Nevada were granted extensions to 
implement their SDUs until October 1, 2000 and October 1, 2001, 
respectively. Alabama, California, Kansas, Nebraska, Ohio, and 
Texas report they have not yet begun central payment 
processing.
    Payment distribution reform is needed. ACES supports 
measures such as those in the bill passed in the U.S. House 
last session which allowed states to pass-through $400-$600/
month in child support to families receiving TANF. States have 
incentive to pass-through child support collections to TANF 
families because they do not have to repay the federal share of 
TANF to the federal government, as in the past. They can use 
TANF funds to pay the state's share of the losses they incur 
from passing-through the money rather than by recouping it for 
TANF benefits. Also, families receive all back-support due to 
them before the state receives any back-support due it. 
Complicated distribution regulations which allowed states to 
require families to assign all support due to them, even 
support accumulated before they went onto public assistance, is 
clarified to ensure that the state recoups the lessor of the 
amount they gave family in benefits or the amount of unpaid 
child support which was due while they were on TANF.
    SDU's federal policies should be immediately reviewed and 
revised. Payments should be able to be made at many places, 
such as ATMs, utility payment sites, banks, and the central 
payment collection site. This would ensure employers one place 
to send payments while, at the same time, make it easy for 
parents to pay. Payments received off-site could be sent via 
Electronic Funds Transfer (EFT) to the central payment site. 
The Federal Office of Child Support should immediately audit 
states with undistributed funds to ensure that an adequate plan 
is being put in place to provide for emergency and long term 
needs.
    States have $440 million undistributed funds on hand, more 
than ever before. For example, ACES found $30 million 
undistributed funds in Florida, $2 million in Georgia, and $10 
million in Los Angeles, CA. The Federal Office of Child Support 
has listed distribution of unidentified funds as one of their 
major priorities for the year 2000, due to the growing total 
reported by states in 1999.
    Please act today to reform child support distribution laws. 
Our children need support now--the rent is due and we need to 
buy them food.

          CHART 1--TOTAL UNDISTRIBUTED FUNDS AT THE END OF 1999
------------------------------------------------------------------------
                                                            Amount
                       State                          undistributed (in
                                                              $)
------------------------------------------------------------------------
Alabama............................................            3,264,610
Alaska.............................................            1,747,989
Arizona............................................            9,506,700
Arkansas...........................................            3,990,073
California.........................................          127,951,700
Colorado...........................................              629,475
Connecticut........................................            1,381,554
Delaware...........................................            3,509,654
District of Columbia...............................            1,361,607
Florida............................................           45,637,093
Georgia............................................            2,518,115
Guam...............................................            1,721,121
Hawaii.............................................            1,220,932
Idaho..............................................               16,940
Illinois...........................................              261,935
Indiana............................................           14,909,881
Iowa...............................................              989,989
Kansas.............................................              327,474
Kentucky...........................................           11,072,597
Louisiana..........................................              387,290
Maine..............................................            4,464,573
Maryland...........................................            7,828,829
Massachusetts......................................            7,220,855
Michigan...........................................           28,818,050
Minnesota..........................................                    0
Mississippi........................................            2,800,100
Missouri...........................................            4,273,822
Montana............................................              262,725
Nebraska...........................................               98,217
Nevada.............................................            1,555,070
New Hampshire......................................            1,401,060
New Jersey.........................................            4,058,470
New Mexico.........................................              123,011
New York...........................................           52,860,921
North Carolina.....................................           10,097,638
North Dakota.......................................            1,288,608
Ohio...............................................           19,070,984
Oklahoma...........................................            2,277,525
Oregon.............................................            1,796,673
Pennsylvania.......................................           18,971,240
Puerto Rico........................................            5,534,273
Rhode Island.......................................            1,488,480
South Carolina.....................................            5,013,990
South Dakota.......................................              715,738
Tennessee..........................................           72,480,009
Texas..............................................            4,935,212
Utah...............................................              926,179
Vermont............................................            1,622,436
Virgin Islands.....................................              254,396
Virginia...........................................            4,714,466
Washington.........................................            3,099,927
West Virginia......................................            4,278,930
Wisconsin..........................................            7,179,526
Wyoming............................................            1,000,698
                                                    --------------------
    Total United States............................     \2\ 560,713,864
------------------------------------------------------------------------
\1\ Chart 1 shows $560 million in undistributed funds. This needs to be
  reduced by $120 million to account for the 2-day delay in distribution
  of funds ($15.8 billion in 260 workdays/year).
\2\ This needs to be reduced by $120 million to $440 million to account
  for the 2-day delay in distribution of funds ($15.8 billion in 260
  workdays/year).

                                

          Statement of the Coalition on Women and Job Training

    The Coalition on Women and Job Training is comprised of more than 
30 members from national women's, civil rights, religious, and labor 
organizations. Since its inception in 1992, the Coalition has been at 
the forefront of the federal debate on job training reform and has 
worked to increase low-income women's options for achieving economic 
self-sufficiency through an improved job training system. In the past, 
the Coalition has successfully outlined a progressive vision and made 
recommendations for achieving real gender equity in federal education 
and job training policies. For example, during the Workforce Investment 
Act debate and Welfare-to-Work legislation's implementation, the 
Coalition worked to ensure the provisions for nontraditional employment 
training, services for displaced homemakers, and other services for 
low-income women were included.
    Our role in the upcoming welfare reform debate is to see that the 
needs of low-income women and mothers are addressed in the 
reauthorization of TANF. Toward this end, the Coalition is developing 
The Working Mother's Agenda. Taking into consideration some of the main 
goals of the 1996 welfare reform law, such as providing assistance to 
needy families and ending dependence on the federal government by 
promoting work, The Working Mother's Agenda will focus on five key 
issues:
                               CHILD CARE

    While we appreciate the recent funding increases for child care 
services, the Coalition believes that child care provisions require 
more than just dollars. We recognize the need for resources that 
provide greater access to quality, affordable, and dependable child 
care for women making the transition from welfare to work.

                             TRANSPORTATION

    In order to better assist families to make the transition to work, 
TANF reauthorization must include provisions for greater access to 
reliable, affordable and alternative means of transportation. 
Transportation for welfare mothers is particularly challenging because 
often, they do not own reliable cars, they work nontraditional shift 
hours, and they must make more trips each day to accommodate their 
child care and domestic responsibilities.

                       EDUCATION AND JOB TRAINING

    Preliminary TANF regulations were particularly restrictive in terms 
of work participation and time limits, and although the final 
regulations were more open to flexibility in those areas, many states 
continue to implement welfare-to-work programs that are focused on job 
placement and provide limited access to training. The Coalition 
believes that TANF reauthorization needs to encourage training and 
education activities, including post-secondary education, in order to 
move welfare participants into higher skilled jobs. Participants need 
jobs that provide better wages and benefits, and opportunities for 
advancement to adequately provide for their families and to become 
economically self-sufficient.

                          EMPLOYMENT READINESS

    As Cynthia Fagnoni of the GAO has testified, follow-up research 
shows that many participants who remain on the welfare rolls are not 
employed in any real capacity. Many participants have characteristics 
which make it difficult for them to work, such as poor mental and 
physical health or disability, lack of high school education, limited 
work experience, a history of domestic violence and substance abuse, or 
a limited proficiency in English. The Coalition believes that TANF 
reauthorization needs to provide work preparation activities and life 
skills development services that are tailored to these participants' 
needs.

                           RESEARCH COMPONENT

    The Coalition believes that TANF reauthorization should include, at 
the national level, a research component to evaluate the impact of the 
legislation on individuals who leave welfare.
    The Coalition on Women and Job Training looks forward to working 
with the Committee on the reauthorization of welfare reform so that 
more women may achieve economic self-sufficiency.