July 22, 1998

Vermont's Community Service Employment Program
by Clifford Johnson and Mark Headings

Vermont's welfare reform initiative, like those launched by most other states in recent years, places great emphasis on work. The state broke new ground, however, when it selected the means for ensuring that work remains at the heart of its reform efforts: it was the first state to include publicly-funded, wage-paying jobs as a central element of its welfare system. Vermont's Community Service Employment (CSE) program creates temporary, minimum-wage jobs in public and non-profit agencies for parents who have received cash assistance for 30 months and are unable to find unsubsidized employment. The state's combination of work requirements and community service jobs for those who cannot otherwise find work represents an important innovation, and forthcoming evaluations of this approach should yield valuable information to guide future welfare reform initiatives.

Vermont's Community Service Employment program has been operating since November 1995. As of May 1998, 62 welfare recipients were working in CSE positions, and the state has made a total of 215 CSE placements since the program's inception. The modest scale of the CSE program reflects both Vermont's small size and the current strength of the state's economy, which has yielded what some state officials call "the best job market in the history of the state of Vermont." The state's Department of Social Welfare originally estimated that nearly 1,400 CSE positions would be needed by May 1998 to ensure that jobs were available for all welfare recipients reaching the state work requirement. Far fewer recipients actually have been assigned to CSE, and many of those who have participated remained in these positions for only a few months before moving into unsubsidized employment.

This paper provides a brief summary of the structure and current status of Vermont's Community Service Employment program. Further information can be obtained from the Center or by contacting:

Steve Gold, Welfare to Work Programs Coordinator, Vermont Department of Social Welfare, 103 South Main Street, Waterbury, Vermont 05671-1201; (802) 241-2834.



Vermont's Community Service Employment program was launched as part of an innovative welfare reform experiment, called the Welfare Restructuring Project (WRP), that was developed by the state under Governor Howard Dean between 1991 and 1993. The state received permission in April 1993 from the U.S. Department of Health and Human Services to operate WRP on an experimental basis and to waive federal rules under the Aid to Families with Dependent Children (AFDC) program, the main federal program of cash assistance to poor families that was repealed in 1996 and replaced by the Temporary Assistance to Needy Families (TANF) program. State legislation to implement this federal waiver was enacted as Act 106 in January 1994 after extensive debate by the legislature, and the program was formally launched on July 1, 1994.

Two key WRP provisions — a state-imposed time limit leading to a work requirement and a publicly-funded job under the CSE program that offers wages in exchange for work to those who cannot meet their work requirement with an unsubsidized job — reflect a vision of welfare reform that attracted much attention in the early 1990's. The Clinton administration's initial welfare reform plan, submitted to the Congress in 1994, was based on a similar combination of work requirements tied to time limits and publicly-funded jobs of last resort. WRP also includes many other important elements to encourage and support work effort, including expanded earned income disregards, new asset that exclude the value of an automobile as well as savings and interest from earnings, and transitional Medicaid coverage for up to 36 months.

Under the terms of the federal waiver, WRP will run for seven years (through June 2001) and be subject to a rigorous evaluation. During WRP's first three years, the state placed 20 percent of current recipients and new applicants into a control group that continued to receive assistance under prior AFDC rules. Another 20 percent were placed in an experimental group that was subject to all WRP provisions except the state time limit leading to a work requirement and CSE participation. The remaining 60 per-cent participated fully in all aspects of WRP, including its time limit and work requirement. This random assignment of recipients and applicants continued until July 1, 1997; since that date, all new applicants have been assigned to the full WRP program.

Despite the fact that the 1996 federal welfare law imposes a five-year time limit on cash assistance without requiring states to create jobs for recipients who are unable to find unsubsidized employment, the Vermont experiment still promises to shed light on key issues related to welfare reform. As but one example, Vermont's experience may help states decide how to implement the 1996 law's requirement that welfare recipients participate in some form of community service if they have received cash assistance for at least 24 months. Because federal law and regulation does not define "community service," wage-paying jobs modeled on Vermont's CSE program is one important option that states may wish to consider.


Program Design

The Community Service Employment (CSE) program creates temporary jobs in public and non-profit agencies at the state minimum wage ($5.25/hr). CSE positions are typically part-time, with weekly hours of work set at the level which enables a parent to earn the same amount in gross wages as they previously received in cash aid.(1) This link between hours of work and prior cash benefit levels resembles the structure of unpaid work experience programs, but a key distinction is that Vermont pays wages to CSE participants. While these earnings are subject to FICA payroll taxes, they also enable participants to qualify for federal and state Earned Income Tax Credits and to accumulate quarters of work needed to qualify for Social Security retirement benefits.

The regular earned income disregards under the state's TANF program — which allow welfare recipients who work to keep the first $150 in earnings as well as 25 percent of any additional earnings — are not applied to the earnings of CSE participants. However, CSE participants do receive child care and other support services when needed as well as $90 per month (regardless of the number of hours worked) as reimbursement for their share of FICA payroll taxes and other work-related expenses.

Before reaching the 30-month time limit that triggers the state's work requirement, welfare recipients go through a series of steps designed to help them prepare for and obtain unsubsidized employment.(2) At a point five months prior to reaching the time limit, recipients who are not already participating in Reach Up (Vermont's voluntary welfare-to-work program) are assigned to a case manager. The Reach Up case manager assesses their work readiness, prepares a family development plan, and encourages them to enroll in appropriate education or training activities offered through the full Reach Up program.

Welfare recipients who remain unemployed two months prior to the 30-month time limit are required to participate in job search activities for up to 20 hours per week. Those who find unsubsidized jobs providing at least 15 hours per week of work (or 30 hours in the case of a parent in a two-parent family) are deemed to have satisfied the state's work requirement. Those who are unsuccessful in their job search and reach the time limit are placed in CSE positions.

CSE positions last a maximum of 10 months. Participants who are unable to find unsubsidized jobs during this period are required to perform an additional two months of job search, after which they can be reassigned to another CSE position if necessary. An individual's work requirement can be deferred if the state is unable to identify a suitable CSE position or provide necessary support services such as child care and transportation, but deferrals of this nature thus far have been quite rare.

CSE participants can engage in education or training activities at any time by enrolling in the full Reach Up program. If a participant makes this choice, the family development plan is revised to specify a new employment goal, steps and services needed to achieve the goal, target dates for completion of each step, and support services which the state will provide. The case manager is permitted to scale back required hours of work (whether in an unsubsidized job or in a CSE position) to as few as five hours per week in order to enable those who enroll in Reach Up to participate in education, training, or other work preparation activities.

A wide range of jobs in public and non-profit agencies have been developed for CSE participants. The most common jobs are as clerical, maintenance, recreation and highway crew workers with local governments, public schools, and human service organizations (e.g., hospitals, food banks, community action agencies, and senior citizen centers). CSE participants also have worked in local housing authorities, National Guard centers, colleges and universities, public landfills, and the district offices of various state agencies. Initial orientation briefings on the CSE program held in each of the state's 12 welfare districts played an important role in publicizing the program and generating interest among agencies in serving as worksite providers.

If a welfare recipient in a single-parent family refuses to participate in the CSE program, or quits or is fired for unsatisfactory performance in a CSE position, the family's benefits are not reduced but the assistance is provided in the form of payments made directly by the state to vendors for housing, utilities, and food. Two-parent families in similar situations lose the portion of the welfare grant intended to meet the needs of the chief wage earner, and the remaining assistance is provided in the form of vendor payments. Parents subject to these sanctions must meet twice each month with an eligibility worker to present bills for vendor payments and once each month with a case manager to discuss participation options that would lead to removal of sanctions.

The additional costs of Vermont's wage-based CSE approach — excluding the costs of worksite development, case management, and child care that would be incurred in unpaid work activities as well as in wage-paying CSE positions — are estimated by the state at $1,687 per participant. These additional costs include the $90 monthly reimbursements for work expenses, the employer's share of FICA payroll taxes, payroll processing fees, and worker's compensation and general liability coverage for CSE participants.


Administrative Structure

The Vermont Department of Social Welfare (DSW) plays the lead role in administering the CSE program. Reach Up case managers determine which welfare recipients are subject to (and which are exempt from) the work requirement after 30 months of cash assistance. These case managers also authorize the provision of support services for CSE participants, including child care and transportation when needed, and monitor both worksites and participants' progress after CSE placements are made. Every worksite agreement and the scheduled hours of each participant are reviewed by a Reach Up case manager during the third and sixth months of CSE participation. Participants can request an immediate adjustment of work hours at any time if there is a change in family income or circumstances.

In addition, DSW assumes responsibility for key aspects of the financial management and oversight of the CSE program. All payroll functions for CSE participants throughout the state are centralized and handled by a private payroll service under contract with DSW. The department also takes steps to alleviate legal and financial burdens that might otherwise discourage public or private non-profit agencies from serving as worksites. Under a single state policy, DSW pays the costs of workers' compensation and liability insurance coverage associated with CSE positions, and DSW pays the employer share of FICA payroll taxes.(3) Finally, DSW convenes a broad-based advisory group — including state legislators as well as representatives from DSW, DET, labor unions, and agencies that may serve as worksite providers — on a periodic basis to assist in the ongoing development and implementation of the program.

The other state agency that plays a major role in the administration of the CSE program is the Vermont Department of Employment and Training (DET). DET provides job search assistance to welfare recipients who are within two months of the state's time limit. In instances when job search is unsuccessful, DET identifies CSE positions and develops detailed agreements that describe the responsibilities of all parties: state, participants, and worksite providers. Each worksite provider agrees to:

A specific description of each CSE position at a given worksite also is developed by DET and attached to the worksite agreement. These jobs descriptions are included in a separate participant agreement developed by DSW and signed by the participant, the worksite supervisor, and the Reach Up case manager.


Emerging Implementation Issues and Next Steps

In many ways, implementation of the Community Service Employment program in Vermont has proceeded quite smoothly. Because the number of CSE positions has been far lower than anticipated, DET has not had difficulty identifying suitable worksites for CSE participants. The average duration of CSE participation thus far has been less than four months. Only 26 placements (12 percent of the total) have lasted for the full 10 months allowed under the program.

One of the most significant lessons emerging from the initial period of CSE implementation is related to the short duration of CSE placements. While some participants have found unsubsidized jobs quickly, others have quit or been dismissed after relatively brief periods because they were not prepared to assume the responsibilities of CSE positions. These parents appear to have such serious barriers to employment that they require more intensive supervision and support than a typical CSE placement provides. The state is planning to respond to this problem in part by using federal welfare-to-work formula grants to hire more case managers that will provide more intensive, individualized attention to participants who are struggling in CSE positions as well as other hard-to-employ parents who need assistance to find unsubsidized jobs.

The Manpower Demonstration Research Corporation (MDRC) is conducting the evaluation of Vermont's Welfare Restructuring Project, including the CSE program. An interim report on implementation is expected later this year, but complete findings on WRP's impacts will not be available until 2002.

End Notes:

1. Single parents with children younger than 13 are not required to work more than 20 hours per week. Single parents without young children, as well as the "breadwinner" in a two-parent family, can be required to work up to 40 hours per week.

2. For two-parent families, the state's work requirement applies after 15 months rather than 30 months of receipt of cash assistance.

3. Because the state has claimed a "work relief" exemption available under the federal unemployment insurance (UI) program, neither DSW nor worksite providers are required to pay UI taxes on behalf of CSE participants. This exemption also means that earnings in a CSE position are not counted when determining whether a CSE participant who subsequently becomes unemployed qualifies for UI benefits.

Additional job creation analyses.