Revised December 5, 1996
THE TIME LINE FOR IMPLEMENTING THE NEW WELFARE LAW
by Jocelyn Guyer, Cindy Mann and David A. Super
The Personal Responsibility
and Work Opportunity Reconciliation Act of 1996 includes nine titles,
affecting most major low-income programs, including AFDC, food stamps,
Medicaid, Supplemental Security Income (SSI), child welfare and child support.
The scope and potential impact of the changes in low-income programs in
this bill are unprecedented. Some of the changes are effective upon or
soon after enactment of the bill. Other changes will be implemented over
the course of the next fiscal year or later, and still other changes are
subject to state discretion -- when and how these changes are made are
matters left largely to the states.
This paper reviews the dates by which the major changes in welfare, Medicaid and the food stamp program must be implemented, or could be implemented at state option. While many of the changes required by this bill must be put into effect quickly, states have time for a thoughtful implementation process in some key areas, including most of the basic decisions about the design and direction of their welfare programs. Given the scope and potential consequences of the changes that are about to occur, it is imperative that states take full advantage of every opportunity for careful consideration of the policy choices and implementation issues presented by this historic legislation.
Overview of the Effective Dates for the Key Welfare, Medicaid and Food Stamp Provisions
Welfare and Medicaid Provisions
States have until July 1, 1997, to submit a new state plan to the Secretary of Health and Human Services outlining how they intend to run the programs funded under the Temporary Assistance to Needy Families block grant ("TANF"). In general, submission of a new state plan signals a state's entrance into the new block grant system. States have the option of entering the new system early by submitting their state plans prior to July 1, 1997. The date a state enters the new system is the effective date for most of the welfare-related provisions in the new law, including the 60-month lifetime limit on receipt of federally funded assistance.
The TANF block grant will begin to affect all states during federal
fiscal year 1997, which runs from October 1, 1996 through September 30,
1997. During federal fiscal year 1997, states cannot receive more assistance
than they are due under the bill's block grant funding formula, but they
also are not guaranteed their full block grant allocations unless they
spend the entire federal fiscal year under the new system.
Because of caseload declines, the block grant allocations for most states, which are based on historic spending levels, will be higher than the federal payments the state would receive in federal fiscal year 1997 under the AFDC program. Most states, therefore, will not experience fiscal pressure in fiscal year 1997 to make changes to keep spending below their block grant allocations; they can take time to consider how they want to structure their new programs and implement program changes. (For example, the states must be ready when they enter the new system to track the months of receipt of aid under the new time limit.) On the other hand, these same states have a financial incentive to enter the new system at the earliest possible date in order to capture "surplus" block grant allocation dollars for as much of federal fiscal year 1997 as possible.
States may be able to resolve the tension between needing time to plan and implement major changes and wanting to maximize federal funding in fiscal year 1997 by submitting state plans that largely keep their current systems intact and perhaps amending their state plans at a later date. As of November 1, 1996, 33 states have submitted their TANF plans; most do not propose major changes in their cash assistance programs.
There are caveats to the rule that most of the welfare-related provisions in the new law go into effect when a state enters the new system. States have at least an additional six-month grace period after entering to comply with selected provisions of the law, including the work requirements. Additionally, the Secretary of Health and Human Services has limited or no explicit authority to enforce many provisions in the law. Consequently, states may not face adverse consequences for not having their programs conform to all of the new requirements by the operative effective date.
States that currently have an AFDC waiver -- and states that secure approval from the Secretary of Health and Human Services for a pending or new waiver submitted prior to the date of enactment of the law -- may follow the terms of their waivers even if they are inconsistent with provisions in the law. States whose waivers are submitted prior to the date of enactment but approved after that date must, however, follow the work requirements established by the new law.
States must have Medicaid procedures in place when they enter the new system to ensure that any changes made in their welfare programs will not affect children and parents' eligibility for Medicaid.
The entitlement of any person to AFDC under Parts A and F of Title IV of the Social Security Act is terminated on October 1, 1996 or earlier in any state that enters the new system before this date. Individuals may continue to be entitled to AFDC under the existing state plan or pursuant to state law.
Effective immediately upon enactment, states are prohibited from using federal block grant funds to provide aid -- and they also are prohibited from providing Medicaid -- to most legal immigrants who enter the country on or after August 22, 1996. The ban extends five years after an immigrant's date of entry. States have the option to grant or to deny assistance under TANF or Medicaid to legal immigrants already residing in the United States, although the earliest date on which they can terminate aid to legal immigrants currently receiving benefits is January 1, 1997. States are required to indicate in their state plans whether or not they intend to continue to provide benefits under TANF to legal immigrants.
Food Stamp Provisions
Most legal immigrants not receiving food stamps on August 22, 1996, are ineligible for food stamps as of September 22, 1996. Legal immigrants who were receiving food stamps may receive food stamps through April 1, 1997, if they remain otherwise eligible. States must terminate these immigrants' benefits the next time their certification period ends on or after April, but not later than August 22, 1997. (Most legal immigrants also will lose SSI benefits prior to August 22, 1997.)
Several other changes in the food stamp program are effective upon enactment,
including changes in income exclusions and pro-rating rules. USDA gave
states until September 22, 1996, to implement these changes. The quality
control (QC) system, however, will not count errors states make in applying
these provisions between the date the state implements them and January
States have until November 22, 1996, to notify those unemployed food stamp recipients between the ages of 18 and 50 who are subject to a new three-month time limit on the receipt of benefits during any 36-month period. The clock on the three-month limit on benefits does not begin to run until notice has been provided. USDA has announced that states need not review their caseloads after three months have elapsed to determine who has reached the end of the time limits. Instead, states may continue issuing food stamps to this population without regard to the time limits until they next come up for recertification. States can immediately request waivers for areas with unemployment rates over 10 percent or for other areas in which insufficient jobs exist for people affected by this provision. USDA has promised to issue guidance on the acceptable criteria for waiver applications shortly.
Many of the major provisions in the law that reduce food stamp benefits are effective when states would otherwise be adjusting food stamp benefit calculations in October 1996 or January 1997. Thus, the inflation adjustments scheduled for October 1, 1996, will be modified according to provisions in the law, the adjustments in the standard deduction will be canceled, while the adjustments in the basic benefit level (the "thrifty food plan") and the limit on the value of vehicles that households may own will both be curtailed. On January 1, 1997, instead of removing the cap on the shelter deduction, states will raise the cap by $3, to $250.
At any time after August 22, 1996, states can exercise numerous new
state options created by the law, including the option to adopt "simplified"
food stamp program rules that are consistent with TANF program rules.
The remainder of this paper provides more detail on when states must implement the changes described above. In addition, a chart is attached at the end of the paper summarizing the implementation dates and enforcement mechanisms of the major TANF, Medicaid and food stamp provisions in the new law.
Implementation Dates for the TANF and the Welfare-related Medicaid Provisions, in General
In general, the date on which a state enters the new system and on which most of the TANF provisions and the related Medicaid changes in the law go into effect for that state is the date on which it submits its state plan. States must submit a plan by July 1, 1997. They have the option, however, to enter the new system earlier, at any time after the date of enactment.
Most of the TANF provisions go into effect on the date that a
state enters the new system. Beginning on that date, for example, a state
must track the number of months that families with an adult receive assistance
funded under the block grant in order to apply the bill's 60-month lifetime
limit on receipt of federally funded welfare assistance.
There are caveats to the general rule that the TANF provisions in the new law go into effect on the date that a state enters the new system. First, the new law terminates individuals' entitlement to AFDC under Part A and F of Title IV of the Social Security Act on October 1, 1996, although nothing in the law precludes a state from guaranteeing assistance to all individuals eligible for aid under its TANF program.(1) Second, as described in the next section, states have a grace period of at least six months after they enter the new system during which they cannot be financially penalized for non-compliance with selected welfare provisions. Most significantly, states will be given at least six months after they enter to come into compliance with the work participation requirements. Third, as described in the financing section, block grant financing limits begin to take effect on October 1, 1996 regardless of when the state enters the new system.
Submitting a State Plan
To enter the new welfare system, a state must submit a TANF plan to
the Secretary of Health and Human Services. The Secretary must determine
that a plan is complete before the state can receive TANF funds, but she
has no authority to disapprove a state's plan as long as the plan contains
the required elements. The plan must include a set of certifications and
provide an outline of how the state intends to run its TANF program(s).
For example, plans must describe how the state intends to meet the work
requirements, and it must set forth the objective criteria the state will
use to determine eligibility and deliver benefits. With the exception of
the scenario discussed below, the date on which a state submits its plan
is the date on which it "enters the new system" for the purpose
of applying both TANF financing provision and TANF program rules.
Treatment of the 45-Day Comment Period
The law requires that states certify in their plans that they have consulted local governments and "private sector organizations" about the plan and allowed them at least 45 days to submit comments.(2) In a "Question and Answer" piece released on October 9, 1996, the Department of Health and Human Services advised states that they could rely on a public comment process that occurred prior to enactment of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. This type of process considerably limits the value of the required comment period.
States do not have to sacrifice the comment period in order to maximize their fiscal 1997 block grant dollars. In the same "Q&A", the Department also advised states that they could submit their state TANF plan at the same time they were proceeding with their comment period. The Department will calculate the state's TANF allocation for fiscal year 1997 based on the date the plan was submitted even if the state has not completed its 45-day comment period. Once the state certifies that it has fulfilled the comment period requirement, the federal TANF rules, including the 60-month time limit would begin to take effect. Thus, states that proceed in this matter can promptly file their state plan, go forward with their comment period and implement the federal rules after the comment period has ended.
The Role of State Legislatures
Under the federal law, federal TANF funds received by a state must be
subject to appropriation by the state's legislature. It is unclear, however,
whether further legislative action is required during the first year (federal
fiscal year 1997) in states where legislatures have already passed their
budgets appropriating funds under the AFDC system. The extent to which
legislative involvement is required with respect to the fiscal year 1997
appropriation and the development of the TANF state plan may depend on
the laws in an individual state.
Effective Dates for Specific Welfare and Related Medicaid Provisions
The new law contains a number of restrictions on states' use of federal block grant dollars.(3) While the federal government has no clearly defined authority to enforce many of the new restrictions, the Secretary of Health and Human Services is directed to reduce the block grant allocations of states that fail to comply with specific provisions of the new law.(4) This section briefly describes the various requirements and restrictions imposed on states, beyond the general requirement that they submit a state plan by July 1, 1997, organized with reference to the date on which the provision becomes effective and whether the provision is clearly enforceable by the Secretary.(5)
Provisions Enforceable Beginning on the Date a State Enters the New System
The following provisions go into effect on the date a state enters the new system. For states that wait until the deadline, that date will be July 1, 1997. These provisions are clearly enforceable in the sense that the Secretary of Health and Human Services is specifically directed to reduce the block grant allocations of states that fail to comply with them.(6) The related Medicaid provision is enforceable by the Secretary under the current rules governing the Medicaid program.
Time limit. The law prohibits states from providing any aid using federal block grant dollars to a family that includes an adult who has received assistance for 60 months (not necessarily consecutive) except for families granted a hardship exemption.(7) A state must start the 60-month clock for recipients on the date that the state enters the new system. The federal time limit is prospective -- a state may not count toward the time limit any months that a family spent on welfare prior to the date it entered the TANF system.(8)
States that fail to comply with the 60-month limit will have their basic block grant allocations reduced by five percent. One implication of the 60-month time limit and the penalty that attaches to a state's failure to comply with this provision is that states are at risk if they enter the new system before having the capacity to track the number of months spent on welfare, including the cumulative receipt of aid by families who move on and off of programs funded under TANF.
Prohibition on sanctioning parents who cannot obtain care for a child
under age six. In applying the work requirements (discussed below),
states cannot reduce or deny assistance under the block grant to a single-parent
with a child under age six who is unable to comply with these requirements
because she cannot find child care. The Secretary is directed to reduce
the federal block grant allocations of states that violate this provision
by up to five percent. Note that the lack of child care does not stop the
time-limit clock from running, although states may decide to treat lack
of child care as a basis for granting a hardship exemption from the time
Medicaid for children and parents who qualify based on current AFDC rules. As of the date a state enters the new TANF system, it must comply with new Medicaid rules that assure that children and parents do not lose their eligibility for Medicaid as a result of changes in welfare program rules. Under new law, the state must cover under Medicaid all children and parents who meet the AFDC family composition rules (i.e., those rules that largely limit AFDC to single-parent families) and whose income and assets are below the state's AFDC standards as of July 16, 1996.(9) Eligibility for Medicaid is no longer linked to the receipt of cash assistance, although states can maintain a single eligibility process for the two programs at state option.(10)
Provisions Enforceable No Earlier Than Six Months After a State Enters the New System
The following provisions also are technically effective on the date that a state enters the new system and can be enforced by the Secretary with financial penalties. They will, however, be enforced with respect to conduct that occurs no earlier than six months after that date. Specifically, they will be enforced beginning six months after the date on which a state enters the new system unless a state enters early. States that enter early will have six months or until July 1, 1997, whichever is later, before they will face financial penalties for failing to comply with these provisions.
Thus, states that enter the new system between August 22, 1996 and January 1, 1997 will have until July 1, 1997 to comply with these provisions; states that enter the system between January 1, 1997 and June 30, 1997 will have six months from the date the plan is submitted to comply with these provisions; and states that enter the new system on the latest allowable date, July 1, 1997, will have until January 1, 1998 to comply.
Work program participation rates. States are required to have
a growing portion of their caseloads in work activities over the next several
years, according to the schedule provided below.(11)
States must meet two separate work participation requirements -- one for
all families and one for two-parent families.(12)
The new law defines what constitutes a countable work activity and prescribes
the number of hours a week an individual must be engaged in such an activity
to be counted as a work "participant." For example, during fiscal
year 1998, a single-parent will qualify as "participating" only
if she is engaged in a countable work activity for at least 20 hours per
week, while the worker in a two-parent family must be engaged in a work
activity for at least 35 hours per week.(13)
In practice, lower participation rate requirements than those listed in the table below may apply in individual states in light of a provision known as the "caseload reduction credit." The credit reduces a state's required work participation rates by the extent to which a state's caseload has declined relative to federal fiscal year 1995 levels. Specifically, a state's participation rates are reduced by the number of percentage points by which the number of families receiving assistance under TANF fell below the number that received assistance under the AFDC program in fiscal year 1995. For example, if a state's caseload fell by eight percent between fiscal year 1995 and fiscal year 1996, in fiscal year 1997, the state would be required to meet a work participation rate for all families of 17 percent (25 percent - eight percentage points), instead of the standard 25 percent. Caseload declines attributable to federal restrictions and changes in state eligibility criteria, however, are not allowed to be counted toward this caseload reduction credit.
Sanctions for failure to cooperate in collecting child support. Under the new system, states are required to impose harsher sanctions than allowed under current law on families where the parent does not cooperate fully in establishing paternity and collecting child support. States must reduce by at least 25 percent the payments made to any family not cooperating fully, as well as eliminate assistance for an entire family if the head of the family declines to assign support rights to the state.
Additional Provisions. States also may face financial penalties, subject to the grace period, if they do not comply with new data reporting requirements; if they do not operate a system to verify the accuracy of information they receive from applicants about their income, citizenship status and other issues affecting their eligibility for TANF assistance; and if they do not satisfy child support enforcement standards.
Major Requirements for Which There is No Specified Federal Penalty
The effective date of the provisions listed below is the date on which a state enters the new system. The Secretary of Health and Human Services has not been given any specific authority to impose penalties to enforce these requirements, although there is a general penalty clause in the law that allows the Secretary to reduce a state's block grant allocation if an audit establishes that it has used federal funds "in violation" of the requirements in the new law. The Secretary's enforcement authority is particularly unclear with respect to the first requirement regarding work that is listed below. States must indicate in their state plans how they intend to comply with this requirement, but the law does not directly impose this requirement on states.
States must include in their state plans a description of how they intend to require adults to engage in work after receiving TANF assistance for 24 months (not necessarily consecutive).
States may not use federal block grant funds to aid unmarried minor
parents who are not living at home or under the supervision of another
adult relative or legal guardian or who are not attending high school or
an alternative education program.
States must make an initial assessment of the skills, work experience, and employability of most TANF recipients.
The Effect of Waivers on Implementation Requirements
States that have AFDC waivers, and states that secure approval from the Secretary of Health and Human Services for a pending or new waiver request prior to the date of enactment (August 22, 1996), can operate their programs under the terms of these waivers until their waivers expire. States that have applied for a waiver prior to enactment of the law whose waivers are approved after enactment -- but before July 1, 1997 -- also may follow the terms of those waivers, except that these states must comply with the work requirements in the new law.
Within these parameters, the law specifically provides that amendments to the title of the law pertaining to TANF shall not apply to the extent such amendments are inconsistent with a state's waiver.(14) Thus, although the language is somewhat vague, it appears that states with waivers do not need to change their systems to conform with specific features of the law to the extent that the state's waiver already addresses the issue. For example, if a state has already imposed a time limit on the receipt of aid and has adopted exemptions and extensions applicable to its time limit, it would appear that the 20 percent cap on exemptions to the 60-month time limit would not apply to that state. Instead, the state's exemptions would be based on the exemption criteria included in its waiver.(15)
In general, states will receive block grant allocations from the federal government that are based on historical spending and are frozen over the next six years, regardless of the actual cost of serving needy families. The financing provisions may bear significantly on the decisions a state makes about how quickly to enter the new system.
Block Grant Allocations - General Rules
Under the new system, states will receive a fixed block grant allocation from the federal government to help finance their programs for low-income families with children. Unlike under the AFDC matching system, the federal government's contribution to a state will not rise when a state's spending rises, nor fall when a state's spending declines as long as a state meets its maintenance-of-effort requirement (see below).
Each state will receive an amount equal to the highest of its federal payments for AFDC, JOBS, and Emergency Assistance during (1) fiscal year 1995, (2) fiscal year 1994, or (3) the average of federal payments for these programs during federal fiscal years 1992 through 1994. Each state's basic block grant allocation will remain unchanged beginning in federal fiscal year 1997 and continuing through federal fiscal year 2002.
Block Grant Allocations - Federal Fiscal Year 1997
The amount of federal assistance that states can receive during federal fiscal year 1997 will be capped at the level of their block grant allocations.(16) States, however, are not guaranteed their full block grant allocations in fiscal year 1997. The actual amount of federal funds a state receives in fiscal year 1997 will depend on when the state enters the new system.
So long as states operate their welfare systems under the old AFDC rules, their federal payments will be based on the AFDC matching formula. Once a state enters the new system, it will receive its block grant allocation prorated according to the number of days left in the fiscal year. Thus, a state that enters the new system on March 1, 1997 will receive federal AFDC matching payments from October 1, 1996 through April 30, 1997 plus half of its federal fiscal year 1997 block grant allocation. Under no circumstances, however, can the combination of payments under the old and new system exceed a state's block grant allocation for federal fiscal year 1997 as a whole.
For the majority of states, the full federal block grant allocation for fiscal year 1997 may be greater than the amount of federal funds they would have received under the AFDC matching rate system. This is because AFDC caseloads, and, to a lesser extent, AFDC-related expenditures, have been declining since the base year(s) used to determine the states' block grant allocations.
As Table 1 (attached at the end of this paper) indicates, AFDC caseloads in the most recent period for which preliminary data for all states are available -- the first eight months of federal fiscal year 1996 -- are lower than they were during the base year(s) used to determine all but two states' block grant allocations. Although national expenditure data are not yet available on a state-by-state basis for recent years, expenditures in most states appear to have declined along with caseloads although not always as steeply.(17)
The implications of states' declining caseloads and expenditures relative to the block grant base year(s) are two-fold. On one hand, many states will not need to reduce benefits or restrict eligibility to keep spending within the confines of their block grant allocations in the near future. Thus, most states do not have to rush to submit a state plan and enter into the new system in order to make major changes that would keep spending below federal block grant levels. States have time to consider the implications of making any changes, assure broad input in the decision-making process, and make all necessary system adjustments. This is particularly important given the many questions that will need to be resolved about the meaning of various provisions in the legislation, the interrelationship between the welfare changes and the changes in food stamps, Medicaid, SSI and other programs, and the profound consequences for needy families and low-income communities of the changes that might be made.
At the same time, the phenomena of declining caseloads and expenditures creates an incentive for states to enter the new system at the earliest possible date. As noted above, the length of time during federal fiscal year 1997 that states are operating their programs under the new system will determine how much of their 1997 block grant allocations they will receive in addition to any matching payments they get while operating under the old system. Some states where block grant allocations are expected to bring in more federal funds in federal fiscal year 1997 than the state would receive under the AFDC matching system may want to spend as much of the year under the new system as possible.(18)
States may be able to resolve the tension between the need to proceed thoughtfully and the desire to maximize federal payments in federal fiscal year 1997 by submitting a state plan that initiates the block grant payment but that does not make significant changes in the current system. Then, after the state has considered alternatives and solicited input from affected parties, the state plan could be amended if necessary to reflect additional program changes. There are no specific limitations or requirements imposed on states with respect to the state plan amendment process.
In addition, as noted above, a state may be able to continue to operate its current system based on waivers submitted prior to the enactment of the new law, even if those waivers are inconsistent with provisions of the law. In such cases, a state may be able to submit a state plan based on the waivers and receive all or most of its federal fiscal year 1997 block grant allocation.
Beginning in federal fiscal year 1997, states must maintain spending at no less than 80 percent of 1994 levels on AFDC benefits and administration, Emergency Assistance, JOBS, and selected child care programs. The Secretary of Health and Human Services is directed to reduce a state's block grant allocation during the following federal fiscal year by the amount a state comes up short.(19) States that comply with the work participation rates will be subject to a lower, 75 percent, maintenance-of-effort requirement.
Beginning in federal fiscal year 1997, states may be eligible to receive additional federal payments worth up to 20 percent of their block grant allocations if they experience particularly severe economic conditions (as evidenced by high unemployment rates or large increases in food stamp caseloads(20)). The fund contains $2 billion for federal fiscal year 1997 through federal fiscal year 2001. States cannot access the contingency fund unless they maintain state spending on welfare at 100 percent of base year levels.
Additional Sources of Funds for States
The law includes four other sources of funds for states that may provide them with very modest amounts of additional federal assistance. They are: (1) supplemental grants for states with relatively rapid population growth and/or a history of low spending on their AFDC programs, available to states beginning in federal fiscal year 1998; (2) grants to states deemed by the Secretary of Health and Human Services to qualify as "high performing" states based on the quality of their TANF programs, available to states beginning in fiscal year 1999; 3) grants to the five states that experience the largest decline in their out-of-wedlock birth ratios, available beginning in federal fiscal year 1999; and 4) a loan fund from which states that have never been penalized for failing an audit of their TANF programs may borrow money beginning in fiscal year 1997.
Limits on Eligibility for Aid under TANF and Medicaid for Legal Immigrants
Effective immediately upon enactment, states are prohibited from providing aid under the AFDC program and from using TANF block grant funds to aid most legal immigrants who enter the country on or after the date of enactment (i.e., August 22, 1996). The prohibition remains in effect for the immigrants' first five years in the country.(21) These same rules apply to the Medicaid program. States can, but are not required to, use state funds to aid these immigrants.
Limitations on providing aid under AFDC, TANF or Medicaid to most legal immigrants who entered the country before August 22, 1996 are left to the states to decide. Thus, states have the option to grant or deny welfare or Medicaid to most legal immigrants already residing in the United States on August 22, 1996. They must indicate whether they will provide aid to legal immigrants in their state plans under TANF. If states opt to terminate aid to immigrants now in the country, they must wait at least until January 1, 1997 before eliminating assistance for those legal immigrants receiving welfare or Medicaid on the date of enactment. However, states may deny AFDC, aid under TANF, or Medicaid at any time after August 22, 1996 to those already in the United States who are not receiving aid on that date.(22)
Food Stamp Program Changes
This section briefly describes the major changes in the food stamp program included in the new law. It is organized generally around the dates on which states must implement these changes, beginning with provisions that states must start to implement within one month of the date of enactment. The section then describes changes to the arithmetic formula for computing benefits and eligibility that will affect the adjustments that states already are scheduled to make on October 1, 1996, and January 1, 1997. It concludes with the TIME LINE for implementing the new limit on benefits for certain unemployed recipients and with a section on the new option to adopt simplified food stamp program rules.
Required Food Stamp Provisions Effective Upon Enactment
Several food stamp changes are effective upon enactment. By a letter sent to all states on August 26, 1996, USDA allowed states until September 22, 1996, to begin implementation. Although states are required to implement these changes immediately, the food stamp quality control (QC) system will not penalize states for mistakes made in applying these provisions between the date the state implements them and January 20, 1997.(23) This effectively gives states until that date to bring local offices into full compliance.
Among the mandatory changes that will require specific action from states to implement are the following:
1) Ending the income exclusions for state energy assistance, certain vendor payments for homeless households, and the earnings of high school students between the ages of 18 and 22.
2) Increasing the penalties on people violating various food stamp work rules as well as rules in other programs.
3) Pro-rating the food stamps of households (other than migrant farm
workers) who reapply after having been off of the program for periods of
less than one month.
USDA also directed states to implement the food stamp rules for new legal immigrants by September 22, 1996.(24) Legal immigrants who were not receiving food stamps on August 22, 1996, will not be eligible for food stamps from that date. Under changes in the welfare law enacted as part of the immigration law on September 30, 1996, those legal immigrants who were receiving food stamps on August 22 may continue receiving food stamps through March 31, 1997. Under the language of the immigration law, an immigrant -- such as a migrant farm worker -- who was receiving food stamps in one state on August 22, 1996 should be allowed to receive food stamps through August 1997 even if he or she has moved to another state (assuming the immigrant is otherwise eligible for food stamps). The law does not require continuous receipt of food stamp benefits to take advantage of this protection. Beginning April 1, most immigrants who are receiving food stamps will lose their eligibility when their certification period ends or on August 22, 1997, whichever comes first.(25) States can act now to maximize these immigrants' ability to receive food stamps by recertifying them, or extending their existing certification periods, before April 1.(26)
Required Food Stamp Changes Effective October 1, 1996 and January 1, 1997
Many of the major food stamp changes made by the welfare law involve changes to the arithmetic formula for computing benefits that will affect the adjustments that states are scheduled to make under current law on October 1, 1996 and January 1, 1997. As a result of these changes, on October 1, 1996 states will not make scheduled adjustments in the standard deduction and the homeless shelter deduction. These adjustments are canceled permanently by the bill. Also, the adjustments in the basic benefit level (the "thrifty food plan") and the limit on the value of vehicles that households may own will both be curtailed. States will not remove the cap on the excess shelter deduction on January 1, 1997 as previously scheduled. Instead, they will increase the cap from $247 to $250 on that date; then it will remain frozen at $250 for 21 months.
Time Limit on Benefits for Unemployed Recipients
The law imposes a new three-month time limit within any 36-month period on certain unemployed food stamp recipients between the ages of 18 and 50 who are not caring for a dependent child. (Under some circumstances a recipient could qualify for one additional three-month spell of benefits). The time limit goes into effect once a recipient has received notice of it, which states must give by November 22, 1996. Since few states issue food stamps to current recipients after November 22, for all practical purposes the first month in which current recipients will receive food stamps subject to the limit will be December 1996. Once notification is provided, the clock starts to run and aid is limited to three months in any 36-month period.(27)
USDA has announced that states need not review their caseloads after three months have elapsed to determine who has reached the end of the time limits. Instead, states may continue issuing food stamps to this population without regard to the time limits until they next come up for recertification. States are not liable for QC errors due to any benefits issued to persons who have received more than three months of food stamps since the time limit begins to run because USDA's August 26, 1996, letter to states advises states that they need not conduct case file reviews to find people who have reached the time limit. Indeed, until individuals reach the time limit, states are free to recertify them this winter and to establish the same certification periods that they would otherwise provide.
At any time after August 22, 1996, states can request waivers from this provision for areas in which unemployment rates are over 10 percent or other areas in which there are insufficient jobs available for this population. The lack of sufficient jobs can be measured in numerous ways from a range of data or lists available from the U.S. Department of Labor's Bureau of Labor Statistics and Employment and Training Administration and from data collected by state employment security agencies. USDA promised to issue guidance on the acceptable criteria for waiver applications by September 22, 1996, but at this writing still has not done so. States are not required to wait for this guidance to prepare and submit waiver applications.
State Option to "Simplify" Rules
The bill gives the states an option to implement a "simplified food stamp program" under which similar rules on matters such as calculating income are used for both welfare and food stamps. The simplified food stamp program can be applied to households "in which all members receive assistance under a State program funded under part A of title IV of the Social Security Act," and, if USDA approves, to households in which some but not all members receive such aid. Since both AFDC and TANF exist under subtitle IV-A of the Social Security Act, the simplified food stamp program can be applied to both; a state need not have implemented TANF before opting into the simplified food stamp program.
On the other hand, since the simplified food stamp program allows states to conform food stamp rules with welfare rules, states planning significant changes in those rules when they move from AFDC to TANF will probably prefer to wait to implement the simplified food stamp program until they have made the transition to TANF. There is no limit on when a state can opt to apply simplified rules from AFDC or TANF.
|Table 1: Recent Trends in States' Caseloads and Changes in Caseload Since the Year(s)|
|That Will be Used to Determine Block Grant Allocations|
|used to||AFDC caseload||between base|
|determine a||during the||year(s) and the|
|Average AFDC Caseload in Recent Years||state's block||first 8 months||first 8 months|
|FY92||FY93||FY94||FY95||grant allocation||of FY96||of FY96|
|Dist. of Col.||22,566||24,784||27,117||26,789||1994||25,907||-4.46%|
|South Carolina||49,710||53,314||51,925||48,981||92-94 avg.||46,429||-10.11%|
Note: CBPP estimated the year(s) on which block grant allocations will be based using data from the Department of Health and Human Services and block grant allocation figures prepared by the Congressional Research Service. See Falk, "Welfare Reform: Estimated State Allocations Under the Proposed Block Grant for Temporary Assistance for Needy Families," Congressional Research Service, July 30, 1996. Caseload data are from the Department of Health and Human Service; figures for FY96 are preliminary.
Key Implementation and Enforcement Dates in the New Welfare
|Provision||Effective Date||Enforcement Mechanism||Comments|
|Temporary Assistance to Needy Families ("TANF") Provisions -- Financing|
|Block Grant Allocations||Fiscal Year 1997
(begins October 1, 1996)
|N/A||Based on federal welfare spending in the state in FY94, FY95 or the average of FY92 - FY94. States can receive no more than their block grant allocations during FY97, but they may receive less depending on when they file their new state plans.|
|Contingency Fund||Fiscal Year 1997||N/A||Limited supplemental funds for states experiencing higher costs due to caseload increases or rises in unemployment. States can access only if they maintain state spending at 100% of historical levels.|
|Supplemental Grants||Fiscal Year 1998||N/A||Limited supplemental funds for states that experience rapid population growth and/or have historically spent relatively little on AFDC.|
|Grants to High Performance States||Fiscal Year 1999||N/A||Limited supplemental funds for states deemed by the Secretary of HHS to run high quality programs. FY99 grant based on performance during FY98.|
|Out-of-Wedlock Birth Reduction Grants||Fiscal Year 1999||N/A||Limited supplemental funds for the five states with the largest reductions in their "illegitimacy ratios".|
|TANF and Related Medicaid Provisions -- Major New Program Requirements**|
|State must file new state plan||No later than July 1, 1997||No federal block grant funds will be paid to a state in the absence of a state plan||Must include a description of the state program(s) funded with TANF block grant funds and other certifications.|
|60-month time limit||Months begin to count toward the federal time limit on
the date on which a state enters the new system
July 1, 1997 at the latest
|Enforced with a specific financial penalty||States cannot use federal TANF funds to provide assistance to families with an adult who has received assistance for 60 months over their lifetime. Up to 20 percent of a state's caseload may be exempt, and state funds can be used to provide aid beyond the 60-month limit.|
|Work participation requirements||Date on which a state enters the new system
July 1, 1997 at the latest
|Enforced with a specific financial penalty
Enforcement delayed at least six months*
|States must meet specific targets for the portion of their caseloads that must be in work activities. Participation rates increase over time.|
|Work rule exemption for single-parents who cannot find child care||Date on which a state enters the new system
July 1, 1997 at the latest
|Enforced with a specific financial penalty||When applying work requirements, states cannot reduce or deny benefits to single-parents who cannot find child care if they have a child under age six .|
|Child support sanctions||Date on which a state enters the new system
July 1, 1997 at the latest
|Enforced with a specific financial penalty
Enforcement delayed at least six months*
|States must impose harsher sanctions than allowed under current law for failure to cooperate fully with child support requirements.|
|Living arrangement requirements for minor parents||Date on which a state enters the new system
July 1, 1997 at the latest
|No specific penalty for non-compliance||States cannot use federal block grant funds to aid unmarried teen parents who are not living at home or under approved adult supervision.|
|School requirements for minor parents||Date on which a state enters the new system
July 1, 1997 at the latest
|No specific penalty for non-compliance||States cannot use federal block grant funds to aid unmarried teen parents who are not attending high school or an alternative educational program.|
|Assessments||Date on which a state enters the new system
July 1, 1997 at the latest
|No specific penalty for non-compliance||States must make an initial assessment of the skills, work experience, and employability of most TANF recipients.|
|Current standards continue for purposes of determining Medicaid eligibility||Date on which a state enters the new system
July 1, 1997 at the latest
|Enforced under Medicaid rules||Current AFDC income and asset standards and "deprivation " rules are carried over to the Medicaid program to assure that children and parents may qualify for Medicaid coverage without regard to welfare changes. The link between welfare and Medicaid eligibility is largely severed.|
|Limits on providing Medicaid and aid under TANF to legal immigrants||Date of enactment||Specific financial penalty for states that fail to participate
in an income and eligibility verification system which gathers data on
citizenship under AFDC or TANF
Medicaid limits enforced under Medicaid rules
|Most legal immigrants who enter the country after the
date of enactment are ineligible for aid under the block grant and for
Medicaid for five years from date of entry.
States have the option of granting or denying aid under TANF and Medicaid to most legal immigrants who are already in the country.
|Elimination of federal entitlement under the Social Security Act||October 1, 1996 or earlier in a state that enters the new system before this date||States may continue to treat their program(s) funded under TANF as entitlements, but their federal block grant allocations remain capped||Entitlement to AFDC under the Parts A and F of Title IV-A of the Social Security Act is terminated. Entitlement may continue under the state plan or state law. States have the option to guarantee coverage to all individuals meeting their TANF eligibility criteria.|
|Major Food Stamp Provisions|
|Elimination of eligibility for legal immigrants not currently receiving food stamps||Date of enactment, to be implemented by Sept. 22, 1996.||Enforced under current food stamp rules***||Most legal immigrants who are not receiving food stamps on the date of enactment are ineligible for benefits. See text for a list of exempt groups of legal immigrants.|
|Termination of food stamps for legal immigrants currently receiving benefits||At next scheduled recertification on or after April 1, but in no event later than August 22, 1997.||Enforced under current food stamp rules***||Most legal immigrants who are currently receiving food stamps must be terminated from the program. See text for a list of exempt groups of legal immigrants|
|Ending selected income exclusions||Date of enactment, to be implemented by Sept. 22, 1996.||Enforced under current food stamp rules***||State energy assistance, vendor payments for homeless households, and the earnings of older high school students are no longer excluded from the definition of income.|
|Increasing penalties for violating work rules in food stamps and other programs||Date of enactment, to be implemented by Sept. 22, 1996.||Enforced under current food stamp rules***||States must impose harsher penalties than allowed under current law on people who violate various food stamp work rules as well as rules in other programs.|
|Pro-rating food stamp benefits for most households after brief gaps in participation||Date of enactment, to be implemented by Sept. 22, 1996.||Enforced under current food stamp rules***||States must implement pro-rating of food stamp benefits for households reapplying after having been off of the program for periods of less than one month.|
|Reducing benefits through formula changes at the time of October 1, 1996 adjustments||October 1, 1996||Enforced under current food stamp rules***||Previously scheduled increases in the standard deduction and the homeless shelter allowance will not be made. Adjustments to the maximum benefit level and the vehicle resource limit will be curtailed.|
|Continuing the cap on the excess shelter deduction||January 1, 1997||Enforced under current food stamp rules***||Instead of ending the cap on excess shelter deductions (as would have occurred in the absence of the new law), states must increase the cap by $3, to $250.|
|Three-month time limit for childless, unemployed adults ages 18 - 50||The time limit begins to run as soon as recipients are notified, which must occur by Nov. 22, 1996. States may wait to review cases until the next scheduled recertification.||Enforced under current food stamp rules***||Unemployed adults between the ages of 18 and 50 who are not caring for children in most cases can receive food stamps for no more than three months during any 36-month period unless the state requests that this limit be waived. Waivers can be requested immediately.|
*States will be given until July
1, 1997 or until six months after they submit their new state plans, whichever
occurs later, before they will be subject to financial penalties for non-compliance
with these provisions.
** States that choose to follow an AFDC waiver that was submitted and approved prior to the enactment date do not have to comply with provisions in the law that are inconsistent with their waiver(s). States whose waivers are submitted prior to the enactment date and approved after that date but before July 1, 1997, must, however, comply with the work requirements in the new law.
***The food stamp quality control (QC) system does not penalize mistakes made between the date the state implements a change and January 20, 1997, for changes effective upon enactment. For the three-month time limit on food stamps, states that implement the provision will have QC errors excused for the 120 days following the date three months after the state notifies recipients that the provision is going into effect.
1. The entitlement may extend beyond October 1, 1996 based on state plan provisions or state law. The entitlement to AFDC under the Social Security Act may be terminated before October 1, 1996 in states that enter the new system prior to that date.
2. There is no definition of private sector organizations in the bill.
3. For a detailed description of the legislative provisions relating to TANF, see Greenberg and Savner, A Detailed Summary of Key Provisions of the TANF Block Grant of H.R. 3734, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, Center for Law and Social Policy, August 13, 1996.
4. The new law also includes a general penalty clause allowing the Secretary to reduce a state's block grant allocation if an audit reveals it has used federal funds in violation of the purposes of the TANF program. It is possible that this general penalty could be used to enforce provisions of the law not associated with a specific financial penalty.
5. One provision that does not fit into this framework is a requirement that not later than one year after the date of enactment states must require selected adults -- those who have received assistance for two months and who are subject to work requirements, but not yet engaged in work -- to participate in community service employment. States may opt out of this provision by notifying the Secretary of Health and Human Services. They also have the authority to define the tasks that constitute community service employment and to establish the number of hours per week affected individuals must participate in those tasks.
6. States that face a reduction in their block grant allocations due to non-compliance with provisions of the bill must replace their lost federal dollars with state spending on TANF. The state spending must be in addition to any spending a state does to satisfy the maintenance-of-effort requirement included in the bill. States that fail to replace lost federal dollars will have their federal block grant allocations further reduced in the following fiscal year.
7. A state may offer hardship exemptions from the time limit to up to 20 percent of its caseload.
8. States have the option of imposing a shorter time limit and may be allowed to impose a retrospective time limit. States also are allowed to use their own money to provide assistance to families beyond the 60-month federal time limit. Expenditures for this purpose can be counted by a state to meet the maintenance-of-effort requirements.
9. States can lower their income standards but not below May, 1988 levels, and they can raise their standards but not by an amount greater than the increase in the Consumer Price Index. States can also change the methodology for calculating income and assets as long as the new methods are not any more restrictive than those in place on July 16, 1996. For a detailed discussion of the new Medicaid rules, see Cindy Mann, An Analysis of the AFDC-Related Medicaid Provision in the New Welfare Law, Center on Budget and Policy Priorities, revised November 7, 1996.
10. States also must assure that transitional Medicaid assistance is provided to families who would otherwise become ineligible for Medicaid due to earnings or child support. Families do not have to be receiving cash assistance under TANF to qualify for transitional Medical assistance.
11. The work participation requirements are a particularly complex and detailed section of the law. They are covered here in only a general fashion.
12. The law directs the Secretary of Health and Human Services to reduce the block grant allocations of states that fail to meet the work participation requirements by up to five percent in the next fiscal year. If non-compliance continues, the penalty increases by up to two percentage points a year but cannot exceed 21 percent of a state's block grant allocation.
13. The welfare law does not address how the work participation requirements are to be calculated for states where the requirements are not in effect for the full fiscal year.
14. The law does not elaborate on how to evaluate whether a waiver is inconsistent with a provision in the bill, nor does it specify who has the authority to make this judgement.
15. States' exemption policies under waivers are likely to be more generous than the 20 percent cap created by the new law. According to an analysis of state waivers conducted by the Center for Law and Social Policy (CLASP), the portion of the caseload exempt from time limits in states terminating all cash aid to families after a specified period of welfare receipt range from an estimated 19 percent of all welfare families in the state with the narrowest exemption policy to 91 percent in the state with the broadest exemption policy. These estimates do not take into account state policies granting extensions of a time limit to selected individuals, nor do they reflect the exemption policies of states that continue to provide some cash aid or to require work after a family has received welfare for a specified period. For details, see Limits on Limits: State and Federal Policies on Welfare Time Limits by Greenberg, Savner, and Swartz, CLASP, June, 1996.
16. A state could submit a state plan before October 1, 1996 and receive part of its funding for federal fiscal year 1996 under the block grant system.
17. Thus, the Congressional Budget Office has estimated that block grant allocations in fiscal years 1997 and 1998 will be higher than expenditures projected for states under the AFDC system. Over time, however, block grant allocations will be increasingly inadequate as inflation erodes their value and as caseloads expand in response to natural population growth or to economic conditions. CBO projects that by 1999, federal funding will fall short of what would be provided under the AFDC program, and by 2002, the funding shortfall is projected to reach more than $1 billion per year. Moreover, the bill provides states with no new funds with which to implement the increasingly stringent work requirements.
18. Another consideration with respect to the fiscal consequences of entering the new system on a particular date is that the new law allows states to receive additional federal dollars for costs attributable to making Medicaid eligibility determinations that would not have been incurred but for the Medicaid changes in the new law. A state can receive these funds for expenses incurred in the first 12 calendar quarters in which it operates a program under TANF. A state that enters the new system after the quarter begins may be foregoing some of the funds it would otherwise receive under this provision.
19. There are complicated and important rules governing what spending qualifies as "maintenance-of-effort" spending. These rules are not discussed in detail here.
20. To qualify for contingency funds, a state's food stamp caseload would have to increase at least 10 percent over the lower of its 1994 or 1995 level, or its unemployment rate would have to rise to at least 6.5 percent and be at least one-tenth higher than the state's unemployment rate in the same months of either of the two prior years.
21. States may determine how legal immigrants are treated after the five year bar.
22. The law exempts selected groups of immigrants from these provisions, including (1) refugees, asylees, and immigrants granted withholding of deportation during their first five years in the country; (2) legal immigrants who are veterans and members of the U.S. Armed Forces, as well as their spouses and unmarried dependent children; and (3) certain legal immigrants with extensive work histories. Immigrants generally need 40 quarters of work to qualify under the exemption for those with work histories, although they may claim quarters worked by their current or deceased spouses, and minor children may claim quarters worked by their parents. Therefore, if an immigrant couple with children has been in this country for five years, with both parents working steadily, all members of the family will be exempt (each adult will have 20 quarters of his or her own and 20 more claimable through his or her spouse and the children can claim a total of 40 from their parents). Where an immigrant makes a plausible claim to have 40 quarters that cannot immediately be verified, guidance from federal agencies directs that they be provided with assistance pending the completion of the verification of their exemption.
23. To benefit from this QC "grace period," a state must have implemented the change, at least on the state level. Thus, if a state does not direct its local food stamp offices to begin implementation until November 1, the state could be liable for errors committed between September 22 and October 31 but would be excused from any liability for errors committed between November 1, 1996, and January 20, 1997. A state in this position could, however, ask that any errors committed before November 1 be excused for good cause because of the large number of changes the state is having to implement on a short notice. Section 16(c)(9)(D) of the Food Stamp Act provides for waiver of QC sanctions in response to "a change in the food stamp program or other Federal or State program that has a substantial adverse impact on the management of the food stamp program of a State."
24. See footnote 24 for a description of the groups of legal immigrants exempt from these limits on food stamp eligibility.
25. Note that similar immigrant eligibility rules also apply to the SSI program. And, many of the people who lose SSI as a result of these rules also may lose their Medicaid coverage as well unless their state has an optional Medicaid eligibility category that would cover them (or establishes such a category in response to this legislation). Current SSI recipients must be sent notice of the new law by March 31, 1997. The Social Security Administration then must hold individual redetermination interviews with each affected recipient. Those found ineligible must be terminated the month following the finding.
26. USDA has granted all states a waiver allowing them to extend any immigrant's certification period until August 22, 1997, provided that the total certification period (including the extension) for elderly and disabled households cannot exceed 24 months and for other households cannot exceed 12 months. If a state seeks to recertify an immigrant household -- because it cannot or chooses not to extend the household's certification period under USDA's waiver -- the household's new certification period must begin before April 1, 1997, to protect the household from the effects of the new rules on immigrants.
27. If a person subject to this provision who has used up his or her initial three months of benefits returns to work or participates in an acceptable employment and training program for 80 hours in a month (or works off a month of benefits through workfare) , he or she may regain eligibility for food stamps. If such a person subsequently becomes unemployed or no longer has a slot in a work program, he or she may continue receiving benefits for one additional three-month period during the same 36-month period.