Does Welfare to Work, Work? Assistance to Needy Families Program was Slow to Respond to Recession

Oct 1, 2012

When Illinois passed legislation in 1997 to help implement the federal overhaul of the welfare system, then-state Sen. Barack Obama voiced concerns about poor residents falling through the cracks.

“It is easy for these folks to drop out of our line of sight. They generally are not represented down here in Springfield,” Obama said on the Senate floor. “They don’t have powerful lobbies. They do not contribute to our political campaigns. And as a consequence — if, in fact, we start having problems in this bill — it is not clear unless we are firm on it that those folks are going to be protected.” 

 

Credit WUIS/Illinois Issues

Sixteen years after drastic federal reforms to the welfare system and after an economic downturn that many economists characterize as the worst the country has seen since the Depression, the Temporary Assistance for Needy Families program was slow to react to the then growing unemployment rate and the continuing rise of poverty in Illinois. 

In 1996, Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act, which was meant to “end welfare as we know it,” as then-President Bill Clinton famously said. The law moved the welfare system away from being a traditional entitlement program, such as Social Security, where anyone who meets set criteria, such as reaching a certain age or having a household income below a certain level, is generally eligible for benefits. There are some exceptions, such as government employees in Illinois who do not receive Social Security benefits and instead rely on the state for pensions. 

Thus began the program known as Temporary Assistance for Needy Families (TANF), which provides block grants to states and gives them broad leeway in determining how to spend the money and who gets direct cash aid. States are generally required to use funds to further four core goals of the program, set out in the law as: “assisting needy families so that children can be cared for in their own homes; reducing the dependency of needy parents by promoting job preparation, work and marriage; preventing out-of-wedlock pregnancies; encouraging the formation and maintenance of two-parent families.” State spending under these goals includes cash relief to families, subsidized child care and education and training programs. States also must put up their own funds for efforts that further the four goals or risk losing federal money. 

Under federal requirements, half of single-parent families who receive TANF benefits and at least 90 percent of two-parent households must engage in work or education programs. Single parents must work 30 hours a week. If they have children younger than 6, the requirement is dropped to 20 hours a week. Parents in two-parent households must work a combined total of 35 hours a week or 55 hours if they receive subsidized childcare. States that do not meet work requirements risk losing a portion of the federal block grants. If states cannot meet the work requirements, they can avoid losing federal funds by reducing the number of people receiving benefits or spending more state funds. 

Households with an adult receiving direct cash benefits are limited to a total of five years of assistance in the adult’s lifetime. After that time is up, cash benefits for both adults and children are cut off. Working or going to school can “stop the clock” on the five-year time limit in Illinois. The state also makes exemptions for parents caring for sick or disabled children or survivors of domestic violence. In his budget proposal for the current fiscal year, Gov. Pat Quinn proposed shortening the time limit in Illinois to three years. The idea was not included in the final budget passed by lawmakers. 

The federal reforms were meant to help people find work, encourage stable families and end long-term dependence on cash assistance. After they went into effect, the roll numbers began to drop dramatically. The national caseload decreased by 50 percent between 1997 and 2011. In Illinois, the monthly average TANF caseload was 195,584, or 572,586 individuals, in 1997. Caseloads in Illinois hit an all-time low in 2008, when the monthly average was 27,178 caseloads or 63,351 individuals.

Dan Lewis, a professor of human development and social policy at Northwestern University, was the principal investigator on a study that, from 1999 to 2004, tracked about 1,300 Illinois families who received assistance from TANF. 

He found that many people who fell off the TANF rolls did not go on to find steady work. “Results from four years of the Illinois Families Study show that close to one half of those leaving welfare do not regularly participate in the labor market,” Lewis says. 

However, most were getting by and had more money than the relatively meager TANF benefits they had been living on. Many were receiving support from families and getting other government aid, such as the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. “What the data showed us in a nutshell is that over the period of the four years when people got off [TANF], they actually ended up with more money in their pockets.” 

Lewis says dire predictions by liberals opposed to the changes did not materialize, but the reforms also have not created the upward mobility that many conservatives said the former welfare program had been stifling. “So things were more OK than liberals would have thought, but the other thing that also happened was about half of the people who got off welfare didn’t really find a solid job.” 

He adds, “So it wasn’t a picture of everybody living happily ever after once they left the rolls.”

The study did not stretch into the recent recession, and some say Illinois was slow to respond to the needs of the poor during the economic downturn. 

TANF caseloads in Illinois held steady during the recession, which spanned from December of 2007 into the summer of June 2009. In December 2007 the caseload total was 28,436. In June 2009, when most economists agree the recession ended, the caseload was 28,479 or 68,996 individuals. Caseloads began to increase in 2010 with a monthly average of 34,927. The 2011 monthly average was 45,235 and the 2012 monthly average is 49,739 or 127,618 individuals. 

Liz Schott, a senior fellow specializing in family income support at the Washington, D.C-based Center on Budget and Policy Priorities, says Illinois made a “very late response” to the recession, in terms of increasing the number of people who received cash assistance. “Even with what looks like a jump [in the number of caseloads], Illinois still serves very, very few and spends a really small share of its funding on basic [cash] assistance.”

According to an analysis from the center, 8 percent of Illinois TANF spending in 2008 went to families in the form of direct aid. The bulk of the spending, 46 percent, went to subsidized childcare, which enables parents to work. The second largest portion of the spending, 27 percent, was used in areas that are not directly related to furthering the four objectives of TANF. Some spending that does not fall under the mission was grandfathered-in so programs would not experience immediate drastic cuts when the welfare system was revamped. But instead of slowly stepping down such spending, some states have increased it over the years. Schott said many states, including Illinois, are using the loophole to spend federal TANF funds on gaps elsewhere in their budgets. States have only recently begun reporting on such spending to Congress. In 2011 reports that included such spending from March through June, Illinois reported that all of its grandfathered in spending was going toward “child welfare.” 

“Consistently over a long period of time, a third of [Illinois’] money is going toward something that is not really welfare reform,” Schott says. “To spend a third of its money over a decade, I would say that’s too much flexibility, and that’s not what Congress originally intended.”

In Fiscal Year 2012, the state budget did not include enough money to cover TANF cash benefits and fund the state’s subsidized child care program. DHS notified childcare providers in early May that they would have to wait for payments until FY 2013, which began July 1. 

“How come childcare and safety net assistance are competing with each other? Where else is the money being spent?” Schott asks. “It’s using TANF as a slush fund to pay for other things. Worthy things — but there’s not that much money available. TANF is not meeting basic needs. The benefits are very low in Illinois, and not many poor families are being served. It’s not like there’s extra TANF funding laying around.” The potential crisis was averted when the General Assembly passed and Quinn signed additional funding for child care in May. But as part of the deal to get the spending passed, applicants must now wait longer to receive their first benefits. 

Dan Lesser, director for economic justice at the Sargent Shriver National Center on Poverty Law, says he does not expect Illinois to run into the same problem later this fiscal year. “I think they’ve done a reasonable job of putting enough money in to cover the program. They haven’t under-budgeted for the program like they did last year.”

He is generally positive about the TANF response to the recession in Illinois. “We actually have been on the right track [in recent months] compared to other states, which have been on the decline.” Both Lesser and Schott agree that DHS deterred people from applying for benefits in the past but has since made improvements to the application process. Lesser credits a 2010 law that made all families earning half of the federal poverty level automatically eligible for TANF as a milestone in ending such discouragement as policy at DHS. “We saw an immediate increase of the caseload after that came into effect,” he says. “We just think that they no longer have this sort of closed door policy on TANF.”

The state was able to use additional TANF funding included in the 2009 American Recovery and Reinvestment Act to administer what many saw as a successful subsidized employment program called Put Illinois to Work. It provided temporary jobs, with wages of $10 an hour, to about 25,000 Illinoisans in the wake of the recession. “It was a great success in terms of just how quickly that grew, and they got the money out, and they got people working,” Lesser says. Republican leaders criticized Quinn for using $122 million in state funds to keep the program afloat after federal money ran out. “It gets into a major philosophical difference about whether the government should be subsidizing employment and paying people to work, but that program certainly was successful,” Lesser says. 

Though the state was able to capitalize on stimulus funding for a subsidized work program, it left federal funds for cash benefits on the table. Illinois missed out on almost $40 million in matching federal funds that could have been used for cash benefits. “Had Illinois been more responsive earlier, there would have been less hardship on families, and they would have gotten more federal help to cover that response,” Schott says. “Its caseload growth happened so late. Had it happened earlier, [the state] would have gotten more federal help.”

DHS says that Illinois did not have the money needed to capture all the matching funds. “The TANF stimulus money reimbursed states 80 percent for allowable activities, meaning states had to come up [with] a 20 percent match,” DHS spokeswoman Januari Smith Trader said in a written statement. “Therefore, Illinois was fiscally responsible and only accepted the amount of money that we were financially able to match, especially considering the state’s financial situation at the time.” 

Lewis says that overall, Illinois has a responsive system that is not as punitive as many other states. He told Illinois Issues in 2007, “I would argue that we’ve done the best job of any state in the nation” when it comes to reducing caseloads without “doing great harm to the people who left the rolls.” In terms of the recession, he says he thinks the Quinn administration has done the best it can with the TANF program in a difficult situation. 

But Lesser and Schott both point out that even with recent increases, the program falls vastly short of covering all who are eligible, and federal TANF grants have not grown to match inflation or kept pace with the need created by the rocky economy. “The value of [the block grants has] eroded by 30 percent. There’s never been an increase. It’s stayed flat since 1996,” Lesser says. “At most, three out of every 10 children in deep poverty are receiving TANF assistance.” Deep poverty is an income that is below half the federal poverty level. 

Lesser says reviewing the rolls of other assistance programs, such as SNAP, to find families who may also be eligible for TANF would help DHS reach more people who need assistance. A projection created by the Urban Institute for the Illinois Commission on the Elimination of Poverty estimated that if half of Illinois families eligible for TANF received benefits, 32,000 people would escape poverty and 15,000 would be lifted out of extreme poverty. According to the model, such a move would increase TANF caseloads to approximately 92,000. 

However, Schott says the block-grant nature of TANF funding gives states little reason to take on more caseloads. “Illinois gets no more [federal] money if it serves more people, so states really have disincentives to respond to need.” 

Illinois Issues, October 2012