One Step Forward or Two Steps Back?, Rev. 9/19/02

The Temporary Assistance for Needy Families (TANF) block grant, first established by the 1996 welfare law, expires at the end of federal fiscal year 2002 (September 30, 2002). The House has passed its bill reauthorizing TANF and a reauthorization bill approved by the Senate Finance Committee in June 2002 will be taken up by the full Senate later this year. The Senate Finance bill was largely crafted by a “tri-partisan group” of Senators and passed with support from Republican, Democratic, and Independent members of the Committee. It makes important improvements to the TANF block grant and other low-income programs and offers a more balanced approach to the next phase of welfare reform than the House bill. By contrast, the House bill was not the product of bipartisan negotiation and garnered almost no support among House Democrats. It lacks a number of the Senate Finance bill’s key improvements and contains provisions that would weaken successful state initiatives to move families from welfare to work.

The Senate Finance bill, for example, while increasing the number of recipients states must engage in welfare-to-work activities, provides states more flexibility to place some welfare recipients in education and training activities and short-term programs designed to help recipients overcome serious barriers to employment (such as health problems and very low skill levels). This would allow states to address what researchers, policymakers, and states themselves have identified as two of the most important remaining welfare reform challenges: helping parents secure better-paying and more stable jobs, and improving welfare-to-work services for families with serious barriers to employment, many of whom have not received the help they need to make successful transitions to work and independence.

By contrast, the House-passed bill would raise required “participation rates” even as it severely constrains states’ flexibility to determine the types of welfare-to-work programs that would most effectively help families succeed in the labor market. The bill would reduce access to education and training programs as compared to current law and effectively would force most states to operate large-scale workfare programs. This approach is contrary to research evidence showing that large-scale workfare programs are ineffective at helping families move from welfare to work.

In a broad array of areas, the Senate Finance bill provides states with more flexibility and resources to help parents succeed in the labor force than the House bill. This report discusses thirteen important ways in which the Senate Finance bill reflects a better approach to welfare reform than the House bill.

1. While both bills increase the participation rates states must meet, the Senate Finance bill sets more reasonable hourly requirements, allows states to provide a range of welfare-to-work activities, and ensures that states are rewarded when families find jobs. The House bill, by contrast, would require recipients to participate in activities for 40 hours each week in order to fully count toward participation rates (including parents of young children and those with special circumstances), would severely limit access to education and vocational training programs, and would give states credit toward their work rates for reducing their caseloads, regardless of whether families leaving welfare were actually employed.

2. The Senate Finance bill allows states to operate welfare-to-work programs that combine a strong work focus with education and training opportunities; the House bill, by contrast, would force many states to scale back even their existing education and training efforts in favor of large-scale workfare programs. Two decades of research in this field has demonstrated that welfare-to-work programs that adopt a “mixed strategy” — combining an emphasis on finding employment with appropriate education and training activities — are most effective at increasing employment rates and earnings of recipients. Research also has shown that workfare programs are ineffective at improving recipients’ employment outcomes. The Senate Finance bill builds on this research while the House bill seemingly ignores it.

3. The Senate Finance bill would fund two innovative approaches to increasing the employment and earnings of recipients — transitional jobs programs which provide short-term, subsidized jobs and necessary support services to recipients with barriers to employment and a “business-link” program designed to foster innovation by providing low-wage workers with work-based training and advancement opportunities. The House bill, by contrast, provides no funding for new initiatives aimed at increasing employment rates and earnings of TANF recipients.

4. The Senate Finance bill allows states to make reasonable allowances for families caring for children who are ill or have disabilities. Under the Senate Finance bill, states could exempt from work participation requirements a limited number of parents who are unable to meet the requirements because of the need to care for such a child. States also could get partial credit for those parents who are able to participate in welfare-to-work activities for some, but not all, of the required hours.

5. The Senate Finance bill would help ensure that families with barriers to employment impeding their ability to meet program requirements are not inappropriately sanctioned. The House bill, by contrast, includes provisions that likely would increase the frequency and severity of inappropriate sanctioning. A growing body of evidence demonstrates that many families that are sanctioned face serious barriers to employment that impede their ability to meet program requirements. Under the Senate Finance bill, states would retain the ability to reduce or terminate assistance if a family fails to comply with requirements, but a review of the family’s welfare-to-work plan would need to be conducted before the sanction is imposed. The House bill includes no provisions to ensure that families having trouble get the help they need before imposing a sanction. To the contrary, the House bill would require states to terminate all assistance to families in which an adult has failed to meet program rules for two months, increasing the risk that states simply terminate assistance rather than actively work with families with the most serious employment barriers.

6. The Senate Finance bill provides substantially more child care funding than the House bill. Under the Senate Finance bill, mandatory child care funding would increase by $5.5 billion. While too low to ensure that states can maintain their current child care programs, meet the increased work requirements, and make a significant dent in the number of low-income children in working families who need child care assistance but do not receive it, this figure is substantially above the $1 billion in increased mandatory child care funding provided under the House bill. The House bill falls well short of what is needed just to ensure that states can maintain their current child care programs, let alone to pay for the increased costs — estimated by CBO to total up to $5 billion in additional child care costs and $6 billion in work program costs — associated with the House work requirements.

Senate Finance Bill: Areas for Improvement

The Senate Finance bill is a substantial improvement on the bill passed by the House, and improves current law in a number of ways. It has several limitations, however, that should be addressed when it is considered by the full Senate. The following are some examples of important areas that need improvement:

Funding: The Senate Finance bill freezes basic TANF funding at current levels, without adjusting for inflation, and does not provide enough child care funding to reduce substantially the number of low-income children who need child care assistance but do not receive it because of a lack of resources. Dwindling unspent TANF resources from prior years, rising TANF caseloads in some states, and overall state fiscal pressure have led a number of states to cut TANF-funded programs recently — including child care programs that receive substantial TANF funding. While the child care funding in the Senate Finance bill is more adequate than in the House bill, it still falls well short of what is necessary to address unmet need and the reduction in TANF funding for child care that many states may be forced to make.

Supporting Working Poor Families: The bill fails to afford states the flexibility to provide TANF-funded wage subsidies to low-income working families without imposing a time limit on such benefits. Without this flexibility, states are limited in the extent to which they can use TANF funds to “make work pay” and reduce the poverty of working poor families.

Helping Families with Barriers to Employment: While the bill allows states to count participation in activities designed to help recipients address barriers to employment (such as physical or mental health problems, substance abuse, limited English proficiency, or very low basic skills), it limits the amount of time such activities can count to six months. For some families with serious employment barriers, this timeframe may be too short and may reduce the effectiveness of programs designed to help such families transition to work.

Sanction-Related Policies: The bill includes only modest efforts to ensure that states review a family’s circumstances and Individual Responsibility Plan before sanctioning a family for failing to meet program expectations. The bill also does not include basic requirements on states to inform families of why they are being sanctioned, to offer assistance in resolving problems that may be impeding compliance with program rules, or to attempt to contact and reengage those who have been sanctioned. More substantial improvements in these areas are needed to help ensure that families are not inappropriately sanctioned.

7. The Senate Finance bill extends the Transitional Medical Assistance (TMA) program — a program that provides short-term Medicaid coverage for many low-income working families, including many families that leave welfare for work — for five years and includes important new state options that would allow states to simplify the program and provide coverage to more low-income working families. The House bill, by contrast, extends TMA for only a single year and does not include these important options.

8. The Senate Finance bill would allow states to provide supplemental housing benefits to low-income working families without triggering welfare requirements such as time limits and data reporting rules. This provision recognizes the critical role stable housing can play in helping families remain employed and off welfare. The House bill does not include such a provision.

9. The Senate Finance bill precludes states from discriminating against two-parent families in their TANF programs and provides $1 billion for marriage-related initiatives. The bill takes a comprehensive approach to promoting family formation by emphasizing both marriage education programs and programs that address important underlying factors that contribute to marital instability, including domestic violence and economic stress. The House bill, by contrast, would continue to allow states to discriminate against two-parent families in their TANF programs and would more narrowly focus funding on marriage education programs.

10. The Senate Finance bill provides states with new flexibility to change child support rules so that when noncustodial parents pay support, it reaches their children rather than being retained by the federal government and states. While the House bill also contains some useful child support provisions, it places more limits on state flexibility and would result in far less support reaching children.

11. The Senate Finance bill includes an effective “contingency fund” that would direct additional TANF resources to states facing a rising number of families that need assistance due to a recession. The House bill, by contrast, includes the current-law contingency fund with very minor changes, even though the current contingency fund is so poorly designed that no state received additional resources during the recent recession.

12. The Senate Finance bill provides states with options to provide Medicaid and SCHIP coverage to low-income immigrant children and pregnant women who have been in the country for less than five years and TANF benefits to legal immigrant families that have been in the country for less than five years. This would allow states to extend basic health care coverage to pregnant women, whose children will be

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citizens, and children, many of whom are future citizens. Similarly, under the Senate Finance bill, states would have the option to assist immigrants who fall on hard times with TANF-funded benefits and services. The House bill does not include these options.

13. The Senate Finance bill does not include the ill-advised “superwaiver” included in the House bill, which would allow the Executive Branch to override, at a governor=s request and without Congressional input, nearly all provisions of federal law that govern more than a dozen programs. Superwaivers could result in benefit cuts for low-income families and funding shifts at the state level that lower the overall amount of resources for programs that serve low-income families. Less risky and more effective options are available to Congress to provide greater state flexibility to coordinate low-income programs.

Despite the significant differences between the bills, there also are important areas of commonality. There is broad agreement in both the House and Senate that the block grant structure should be maintained, TANF funding should not be cut below current levels, states should be required to engage more adults in welfare-to-work programs, states should have more flexibility to direct child support to children rather than using it to reimburse government for welfare costs, and more resources should be devoted to efforts to promote and encourage marriage and strengthen families. Given these areas of agreement, the differences between the House and Senate Finance bills should be bridgeable.

Unfortunately, the Administration has, to date, sharply criticized key provisions of the Senate bill, rather than acknowledging areas of commonality and areas in which the Senate bill takes positive steps. There is still opportunity to reach agreement on a bill this year, but the process needs to begin with a clear understanding of the areas of agreement and disagreement, and a recognition that in many key areas, the Senate bill already reflects reasonable bipartisan compromise.