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I. TRENDS IN CASELOADS AND EXPENDITURESCaseload DataWelfare caseloads have declined dramatically since their peak at 14.4 million recipients in March 1994. This decline has continued at an even more rapid pace since the enactment of welfare reform in August 1996. Overall, between January of 1993 and March of 1998 there has been a 37% decline 5.2 million fewer recipients on welfare. The percent of the U.S. population receiving assistance in March 1998 is the lowest since 1969. As Chart 1:1 shows, these declines are spread across almost all of the states. Tables 1:1 and 1:2 provide information on state by state welfare caseloads since 1993 for both recipients and families. Even before the Personal Responsibility Act became law, many states were well on their way to changing their welfare programs to jobs programs, and had declining caseloads. By granting Federal waivers, the Clinton Administration allowed 43 states - - more than all previous Administrations combined - - to require work, time limited assistance, make work pay, improve child support enforcement, and encourage parental responsibility. The vast majority of states have chosen to continue or build on their welfare demonstration projects approved by the Clinton Administration. Expenditure DataThere are several general considerations to keep in mind when reviewing this expenditure data.
Under the block grant, the Federal dollars states receive do not decline with the caseload. Early data tell us that although states are reducing the overall spending on programs for this population in the aggregate as caseloads decline, most states are not reducing their spending per case, and a few are actually increasing their own investments. States are using these extra dollars in a variety of ways including investing in child care, up front diversion, rainy day funds, cash and work based assistance, and on state earned income tax credit (EITC) provisions. TANF Financial Reports for FY 97States are required by statute (Social Security Act, title IV-A, section 411) to report on Temporary Assistance to Needy Families (TANF) program expenditure data. States are also required (Social Security Act, title IV-A, section 409) to maintain the expenditure of state funds at certain historic levels. The Administration for Children and Families has received FY 1997 financial reports from all 50 states and the District of Columbia. The data received from states is summarized on the attached Tables. Table 1:3 shows how the states expended Federal funds in TANF, while Tables 1:4 and 1:5 show how they used state funds. Table 1:6 combines the state expenditures as shown on Tables 1:4 and 1:5 to determine the total amounts states expended in their maintenance of effort (MOE) spending. Highlights of Fiscal DataOverall Spending on Welfare Programs As the number of welfare recipients has declined, so has state spending, although the amount of the decline varies considerably across states. Overall, the number of people receiving aid declined by 35 percent to 9.4 million recipients between March 1994 and December 1997 (the most recent monthly report available). Reported state spending on welfare and related programs is about 18% below the level seen in 1994. In comparison to 1994 spending levels, on average states are spending somewhat less per recipient on cash assistance, but somewhat more in overall spending per recipient. Cash and Work-Based Assistance In FY 1997 states report $13.9 billion in spending on cash assistance and work-based assistance. $7.7 billion of the funds expended were Federal funds and $6.2 billion were state funds. The Federal funds expended in this way are 57% of the total $13.4 billion in Federal TANF funds awarded to the states last year. The remaining Federal funds were either expended in one of the following categories or remain unexpended. Transferring Funds out of TANF Section 404 of title IV-A of the Social Security Act gives states the authority to transfer portions of their TANF grant to either the Child Care and Development Block Grant (CCDBG) or to the Social Services Block Grant (SSBG). Eleven states reported transferring funds out of the TANF program in amounts ranging from 2.2% of available Federal funds (in CT) to 30% (in MA). Approximately $180 million, or 1.3% percent of the TANF funds awarded, was transferred to CCDBG, while $304 million or 2.3% was transferred to SSBG. Work Activities In FY 1997 states reported spending a total of $404 million of Federal TANF funds and $261 million in state funds on work activities, such as employment training and job search. Although the total expenditures on work activities may appear relatively low, it is important to note that FY 1997 was a transition year and states were still operating their JOBS program (the welfare to work program that preceded TANF) for a portion of the year. Consequently, states were spending JOBS funds on similar activities during this period. In fact, California, the state with the largest TANF grant, used JOBS funds exclusively and, therefore, reported no expenditures on work activities in TANF. Overall the states have reported spending $203 million to date on the JOBS program in FY 1997. They have until 8/21/98 to claim the Federal share of JOBS program expenditures, so the claimed JOBS expenditures for FY 1997 could increase. By combining the expenditure of $404 million Federal TANF funds expended on work activities with the $203 million of Federal funds expended in the JOBS program, we know that states spent at least $607 million in Federal funds in FY 1997 on work activities. Since this is the first report on TANF expenditures, it is possible that the reported expenditures on work activities do not reflect actual total expenditures on work activities, but instead represent some difference in the way states understood and applied the definitions of certain elements in the fiscal reporting form. For example, some work activities expenditures could be included in the reported expenditures for "Cash and Work Based Assistance." States had to obligate JOBS funds before the implementation date of their TANF program, while unobligated TANF funds can be carried over into future fiscal years. Therefore it is possible that some states were concentrating on using or liquidating this prior funding stream before accessing new TANF funds. Declining caseloads and the rapid entry of many welfare recipients into the work force may decrease the extent of state spending on work activities during the current period. Use of TANF Funds for Child Care Child care is a vital support for families moving from welfare to work. The primary Federal and state funding for child care services is through the Child Care Development Block Grant (CCDBG). States report FY 1997 CCDBG spending separately. States may also transfer Federal TANF funds to CCDBG to increase child care resources. In addition, states are permitted to use TANF funds to provide child care services directly, without transferring funds to CCDBG. In FY 1997 states reported spending a total of $748 million of state TANF MOE funds and $13 million of Federal TANF funds on child care. (NOTE: State funds spent on child care for TANF-eligible families may count as MOE for both TANF and CCDBG.)Also, beginning in FY 1997, states received mandatory and matching grants under the new Child Care Development Block Grant program. States have reported obligating over 99% of these child care grant funds. Administrative Costs All States show administrative costs within the 15% limit set by statute. The total administrative costs shown in column 8 of Table 1:3 is 8.5% of the total expenditures reported in column 11. Computer systems costs are excluded by law from the 15% limit. Nine States did not break out their computer systems costs from their administrative costs, however all nine still reported total administrative costs under 15%. Maintenance of Effort (MOE) Spending The welfare reform statute requires States to spend State funds to meet maintenance of effort requirements which were tied to an historical spending level and can vary depending on whether the state achieves a required work participation rate. In FY 1997, almost half of the states reported spending more than they were required to spend. Specifically, 22 states, or 43%, reported state spending above the maximum level. Five states reported expenditures at or above 125% of the maximum required MOE level : Alaska, Arkansas, Delaware, Missouri and South Dakota. (See Table 1:6.) Since states are not required to report any expenditure of state funds in excess of the MOE requirements, the reported amounts represent the minimum that states spent in meeting MOE requirements. The national total of state MOE expenditures is $8.81 billion which is $450 million more than the amount states would be required to spend on MOE if all states met their work participation targets. Since it is likely that some states will not meet their work participation target an consequently will have a higher MOE requirement, it appears that overall states are spending at a level that meets the MOE requirement. Expenditures in Separate State Programs Sixteen states show that they expended some state funds in a separate state program. (See Table 1:5). Under TANF states have the option to operate a separate state program serving TANF-eligible individuals and funded with state TANF MOE funds. These expenditures must meet the statutory requirements for "qualified state expenditures" including the requirement that they are made on behalf of "eligible families," but are not subject to requirements which apply to the TANF program. Because the statutory language for Contingency Fund MOE is different, states cannot count expenditures under separate state programs for the purpose of meeting the Contingency Fund MOE. Expenditures on separate state programs range from 0.2% (in Tennessee) to 52% (in Hawaii) of the total state funds expended on TANF in FY 1997. Fifty-four percent of the total separate state program expenditures were spent on child care, with the majority of the remaining funds spent on cash and work-based assistance. Other examples of separate state program expenditures include benefits to qualified aliens, benefits to minor parents not in a qualified living arrangement, and emergency assistance. Transitional Services In FY 1997, five states spent a total of $289,000 of Federal TANF funds on transitional services for families who no longer receive TANF because they are employed. Four states spent a total of $9.2 million of state MOE funds on transitional services. It is important to note that child care provided to those who have left welfare for work and transitional Medicaid, two important transitional services, are not included here as they are paid through other funding streams. States are providing transportation, counseling services, and vocational education with these dollars. Other Expenditures In FY 1997, states spent a total of $915 million of Federal TANF funds and $877 million in state MOE funds on "Other Expenditures" not reported under any other category. States were required to submit descriptions of the services included in this line item. The descriptions show that the states' other expenditures include: Electronic Benefit Transfer development, fraud programs, quality control, emergency assessments, school readiness, teen pregnancy prevention, payments for TANF families in shelters, Emergency Assistance, outreach advertising and , expanding state earned income tax credit (EITC) provisions. The total unobligated balance of federal funds is $1.2 billion, which is 9% of the $13.4 billion awarded to the states. These unobligated balances are Federal funds which remain available to the states indefinitely. Since TANF is a program covered by the Cash Management Improvement Act, any unobligated reserves remain in the Federal treasury until the states have an immediate need to draw the funds to make a TANF expenditure. Appendices:Chart 1:1 Recipient Count Down 3.3 Million Since Enactment of New Welfare Law Chart 1:2 State TANF MOE: Estimated Expenditures of State Funds in FY 1997 Table 1:1 State by State Welfare Caseloads Since 1993 (Recipients) Table 1:2 State by State Welfare Caseloads Since 1993 (Families) Table 1:3 Federal Awards, Transfers and Expenditures in FY 1997 Table 1:4 State TANF Maintenance of Effort, Expenditures of State Funds in FY 1997 Table 1:5 State TANF Maintenance of Effort, Expenditures of Separate State Programs in FY 1997 |
