Economic Development

Welfare Workout

The feds thought the states were gaming welfare reform. Now states have to deal with a new round of rules.
by | November 2006

After cutting its welfare caseload in half over the past decade, California thought it deserved a pat on the back: Its welfare agency was moving people off the rolls and getting them to participate in work activities.

The federal government agreed. Until last year. That's when the U.S. Congress narrowed the interpretation of what constitutes work and what are bona fide work activities. Under the new criteria, California is out of compliance and a failure. "All of our past successes have been wiped out," says Charr Lee Metsker, deputy director of the Welfare to Work Division at California's Department of Social Services.

The stringent new rules have reset the clock so that caseload reduction since the original 1996 welfare-to-work law no longer counts. States must increase the share of their caseloads that participate in work or work-related activities. Although California currently has more than 60,000 of its welfare caseload making their way to and through acceptable work activities, it must find a way to double that total. That means both increasing the number of hours that people work and getting others into some work activity. "That's going to make it a real stretch for us," Metsker says.

When it comes to meeting new welfare work requirements, some states see a molehill but most, like California, see a mountain. Under the new rules, which took effect on October 1, 50 percent of one-parent families on Temporary Assistance to Needy Families must be working or in work-related programs; 90 percent of two-parent TANF families must meet that criteria. If states fail to achieve this goal, they could experience a steep financial penalty: cuts in their federal block grant allocation of as much as 5 percent next year, 2 percent above that penalty the following year and an additional 2 percent the year after that if they're still not in compliance. For California, that would come to a $187 million bite out its 2007 block grant. Moreover, the state might be required to spend another $180 million out of state funds due to a second penalty assessment on what is known as "maintenance of effort" money.

Some states are in better shape. About a dozen meet the 50 percent goal. But the federal crackdown flipped the fortunes of many in an instant. The majority of states are like California: They are no longer deemed to be meeting caseload requirements, even though many of them did so under the old rules. Nearly a dozen states must increase the work participation of their welfare recipients by 100 percent or more. In Pennsylvania and Oregon, it's more than 200 percent.


Work participation doesn't necessarily mean a 9-to-5 job. It also can include job training, education and counseling. And therein lies the rub--and the creative use of flexibility.

The 1996 welfare reform bill set 12 categories for what is considered work, ranging from on-the-job training to vocational education to community-service programs. Welfare agencies had some leeway in how they defined work-related activities or assigned those activities to categories. Some took that leeway too far, in the eyes of many at the federal level. A 2005 Government Accountability Office review of 10 states found, for instance, that five counted caring for a disabled family member as community service. Six placed substance-abuse treatment in the category of job search/job readiness, work experience or community service, and two put counseling for domestic violence in those categories as well.

But those definitions weren't as troubling as some others. The study also reported that a few states allowed activities such as massage, personal journaling and smoking cessation to be counted in the category of job search/job readiness. GAO called it a "very broad definition," and some in the U.S. Department of Health and Human Services viewed it as a method of gaming the system. "None of those are bad things," says Wade Horn, assistant secretary for Children and Families at HHS, referring to massage and other activities. "It's just that most Americans don't consider those activities work." When Congress revisited the welfare law, it asked HHS officials to specify what could be counted in those 12 categories. Massage and personal journaling didn't make the list.

States don't deny they might have played a little fast and loose with the categories but say it was for the good of clients. The welfare rules don't have a logical category for many activities, such as having to care for a disabled child, so they found a category to put them into in order to complete the federal forms.

The new congressional rules about categories severely curtails the time allowed for core activities essential to getting and keeping a job. That's because activities such as education and training, searching for a job or undergoing substance-abuse treatment are usually placed in the job-readiness category. Under that category, recipients in one of its activities are limited to a maximum of six weeks total and no more than four weeks consecutively.

States consider that limit to be counter-productive. Welfare workers could push people who aren't ready into jobs, but these caseworkers say they know from experience that the clients will just end up back on welfare.

States and welfare advocates say the federal decision to clamp down on the program is going to make things worse, not better. "It's tightening the screws with the attitude that what's been going on in the states has been a game, that they haven't been serious with this," says Evelyn Ganzglass, director of workforce development for the Center for Law and Social Policy, a non-profit advocacy organization.

And the new rules may have unintended consequences. States may keep working welfare recipients on the rolls just to be able to make the numbers fit the federal formula, says Elaine Ryan, a deputy executive director at the American Public Services Association, a nonprofit, bipartisan organization. Or states may have to come up with community- service jobs to get people into a workplace. But most welfare workers agree that those aren't stepping stones to legitimate and well-paying jobs, and doing community service may take time away from needed treatment or education.

Horn at HHS doesn't disagree with these assessments. But there's not a whole lot he or anyone else at HHS can do about it. The agency was given the task of clarifying work rules based on the original 1996 statute. "I don't have the authority to say, 'I don't like that law,'" Horn says. "I can't by fiat change the statute."


The new interim rules will entail a good deal more administrative work--for welfare supervisors as well as recipients. The rules require, for example, a work-verification system that can provide an audit trail of daily activities. So, recipients enrolled in a community college course might have to get the professor to sign a paper every day to prove they attended class. The problem, state workers say, is that that "outs" them as welfare recipients, creating a stigma that isn't necessary or fair and may keep clients from continuing at school.

Horn doesn't see a problem with the daily reporting. "Why wouldn't you want someone to know what a person on a time-limited benefit program is doing on a daily basis in preparing for work and working?" he asks. "You don't want to find out after six months that someone never went to class."

In developing verification systems, states have "enormous flexibility," Horn adds. "The amazing thing is why this is controversial at all. Would it be good for Medicaid to say, 'Whatever doctor bill comes in, we don't care what procedure was done, we'll just pay it?'"

His comparison of welfare rules under TANF with the Medicaid program raises an interesting issue. Unlike Medicaid, the TANF block grant program is not an entitlement program that is vulnerable to ballooning costs depending on the size of the caseload or misuse of the money. The block grants are capped, and funding has stayed the same since TANF's inception in 1996--thereby losing value every year, Ryan points out. That being the case, she doesn't understand the federal government's sudden heavy hand. "This kind of federal micromanagement," she says, "is really absurd after a decade of real success in being able to achieve a 60 percent reduction in welfare."

Particularly onerous is the two-parent rule that requires 90 percent of two-parent families to work a minimum of 35 hours per week or 55 hours if they receive federal or state child care assistance. No state has ever been able to achieve this, except Montana, which did so for one year, according to Ryan. HHS's Horn agrees that the 90 percent rate is "pretty much unattainable." He says the Bush administration proposed to do away with it, but that's not what came out of Congress. To avoid the hefty penalties of non-compliance, states may have to remove two-parent families from the welfare rolls and pay for them with state funds.

The one-parent family caseload has to meet a 50 percent work- participation rate. On that point, according to states' 2004 data, at least 58 percent of welfare recipients "did not do one hour of any activity countable under the law," Horn says.

That comment irritates state welfare workers who feel those numbers don't reflect reality. Knowing they wouldn't count for anything, many states didn't bother to report the activities of those who didn't meet the 30-hour work-participation standard. If someone worked 28 hours, notes Robin Arnold-Williams, secretary of the Washington State Department of Social and Health Services, those hours didn't get put in the federal reporting data at all.

The federal data collection is designed to ask whether states are meeting the federal requirements, not what welfare recipients are actually doing, says Elizabeth Lower-Basch, senior policy analyst with the Law and Social Policy Center and a former HHS employee. In some cases, people are working but not the required hours. In other cases, they're in substance-abuse treatment but there's no place on the form that says, "other," where they can stick that in. "Some states routinely reported what they had," she says. "Other states said if someone's only participating a few hours a week, don't worry about entering it into the system. In hindsight, that was a mistake given the way the data was used."


The rules are the rules and states are coming up with ways to abide by them. California, one of about a dozen with a state-supervised, county-run welfare program, has asked counties to analyze their welfare populations and come up with strategies for how to work with welfare families. The state has developed a performance-incentive program with a pool of $40 million available for counties that do a good job of getting people employed or into work activities. The incentive money also applies to county agencies that get people into jobs that pay better-than-average wages. "We're trying to encourage counties to look at how to get folks into the next job and the next job, on an upward mobility path," Metsker says.

The counties also will share the pain. If California ultimately is slapped with a financial penalty for not meeting work participation rates, it will pass on half of the penalty to those counties that contributed to its failure.

Michigan needs to increase work participation by 117 percent to keep its $775 million in block-grant money. That means putting an additional 7,000 welfare recipients into work activities. Three years ago Michigan began implementing a new jobs, education and training program, known as JET. The welfare agency is working with clients to develop self-sufficiency plans and is trying to deal with the underlying reasons why families are on welfare. One major cause: About 50 percent of clients are functionally illiterate.

The JET program was rolled out a few weeks ago in four counties where about half the welfare recipients live. A work incentive bonus for clients will give them $10 per month and transitional Medicaid coverage for 90 days after they land a job, in an effort to keep them in the workforce. "Too many people lose benefits when they start working," says Marianne Udow, director of Michigan's human services department, noting that the need for those benefits often pushes them back on the rolls. "Fifty percent of those who get a job today recycle back to our caseload," she says.

Pennsylvania, too, has the arduous job ahead of placing nearly 23,000 people into work activities, a 220 percent increase over the current number. In the past decade, the state had reduced caseloads by 54 percent. That success was due to "good old-fashioned face-to-face contact," says Ted Dallas, executive deputy secretary for the Pennsylvania Department of Public Welfare.

Now that Pennsylvania is marked as a low-performing state, the state welfare agency plans to change how it works with contractors who provide employment and training programs. More contracts will be performance-based and fewer based on a system of reimbursing costs. Performance means clients getting and keeping a job. One of the benchmarks will be retaining that job for at least six months. "It's not enough to enroll in a program or get a job for a day," says M.L. Wernecke, policy director at the welfare agency. The governor also put $31 million in his budget for child care and support services that bolster job retention among welfare recipients.

Although the rules make the job much tougher, Dallas is confident Pennsylvania will meet the goal the federal government has set. He would have preferred that the new rules focus on education and support for some of the realities states face, such as clients with long-term substance-abuse problems. Six weeks is not enough to deal with those issues, he believes. "We lobbied for a different change, with more emphasis and value on education," Dallas says. "We're working within the constraints."

In the end, the state and the federal government want the same thing: improved performance in the system for getting welfare recipients into jobs. "We're adapting to changes in the rules of the game," Dallas says, "but the goal is always the same."


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