SECTION 12. SOCIAL WELFARE PROGRAMS IN THE TERRITORIES
Coverage and Participation in Selected Programs
Expenditures for Selected Social Welfare Programs in the
Territories
Special Rules
SSI Coverage
Nutrition Assistance Block Grant for Puerto Rico and Programs
for the Northern Marianas and American Samoa
Public Assistance Funding Caps
Medicaid Caps and Matching Rate
State Children's Health Insurance Program
Consolidation of Certain Grants for Insular Areas Other than
Puerto Rico
Certain Tax Provisions that Affect Low-Income Families with
Children
References
COVERAGE AND PARTICIPATION IN SELECTED PROGRAMS
Most social welfare programs available to the 50 States
and the District of Columbia are also available to the
territories. The territories are: the Commonwealth of Puerto
Rico, Guam, the Virgin Islands, the Commonwealth of the
Northern Marianas, and American Samoa.\1\ Social welfare
programs discussed in this chapter provide retirement and
disability benefits, unemployment compensation, public
assistance for low-income persons or families, education
benefits, job training, and social services.
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\1\ For an overview of how the territories are politically
organized and their history see Brunno & Laney (1996). This section
discusses the availability of social programs in the five major
territories and provides an overview of special rules that apply there.
It does not discuss Federal financial assistance for three areas that
were formally part of the Trust Territories and are now independent in
``free association'' with the United States: the Marshall Islands, the
Federated States of Micronesia, and Palau. (The fourth area of the
Trust Territories, the Northern Marianas, became a Commonwealth of the
United States.) These areas remain eligible for some residual aid from
the United States.
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Social welfare programs can be divided into two
categories:
1. Federal programs that make direct payments for
individuals.--These programs have Federal eligibility
and benefit rules and are administered directly by the
Federal Government.\2\
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\2\ This chapter's classification of programs as ``direct''
payments for individuals differs from that found in Federal budget
documents and the Census Bureau publication Federal Expenditures by
State. This chapter classifies unemployment compensation (UC) as a
Federal-State program because States administer and design their own
programs within Federal guidelines. UC is not a grant-in-aid program,
so that other documents classify it as a direct payment for
individuals. Food stamps is also classified as a Federal-State program
because it is administered by the States.
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2. Federal-State programs.--For these programs, States and
sometimes localities have a role in the design,
administration, and often financing of benefits and
services. For the territories to participate in the
joint Federal-State programs, Federal law must make
them eligible, but the territory's government must act
to meet conditions for Federal assistance.
Table 12-1 shows the coverage of residents of the
territories by selected social welfare programs directly
administered by the Federal Government. With the exceptions of
Supplemental Security Income (SSI), residents of the
territories are eligible for social benefits on virtually the
same basis as residents of the States.
TABLE 12-1.--COVERAGE OF RESIDENTS OR WORKERS IN THE TERRITORIES FOR
SELECTED SOCIAL WELFARE PROGRAMS MAKING DIRECT PAYMENTS FOR INDIVIDUALS
------------------------------------------------------------------------
Program Puerto Virgin Guam Northern American
Rico Islands Marianas Samoa
------------------------------------------------------------------------
Social Security.............. Yes Yes Yes Yes Yes
Medicare..................... Yes Yes Yes Yes Yes
Supplemental Security Income No No No Yes No
(SSI).
Guaranteed student loans..... Yes Yes Yes Yes Yes
Pell grants.................. Yes Yes Yes Yes Yes
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Source: Congressional Research Service.
Table 12-2 summarizes the availability in each territory of
major social programs that are operated jointly by the Federal
Government and the respective territory. Coverage of the
Unemployment Compensation Program is determined in the Federal
Unemployment Tax Act (FUTA), which applies to Puerto Rico and
the Virgin Islands but not the other territories. Though
coverage is determined in FUTA, program design is left to the
territory. The Food Stamp Program itself operates only in the
Virgin Islands and Guam, with a special block grant operating
in Puerto Rico and special ``food-stamp-like'' grant programs
in the Northern Marianas and American Samoa. The other
nutrition programs, for which benefits are fully federally
financed but administration is left to the States, generally
apply in the territories.
Most Federal-State social welfare programs other than
those discussed above are grant-in-aid programs by which the
Federal Government helps finance benefits and services in State
or local programs. Territories, like States, may choose not to
participate in grant programs. Participation in a program
entails accepting Federal rules and guidelines and sometimes
providing State or local dollars to match Federal dollars.
Table 12-2 shows whether Federal law makes the territory
eligible to participate and whether the area participated in
the program in fiscal year 1997 (TANF entry indicates whether
the area met the requirement to submit a plan by July 1, 1997).
Federal law permits some agencies to consolidate funding and
waive certain requirements of grant programs for territories
other than Puerto Rico.
TABLE 12-2.--FEDERAL-STATE SOCIAL WELFARE PROGRAMS IN THE TERRITORIES, FISCAL YEAR 1997
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Puerto Rico Virgin Islands Guam \1\ Northern Marianas American Samoa
Program -------------------------------------------------------------------------------------------------------------------------------------------------------------
Eligible Participating Eligible Participating Eligible Participating Eligible Participating Eligible Participating
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Unemployment compensation:
Unemployment compensation.... Yes Yes Yes Yes No NA No NA No NA
Public assistance and related
programs:
TANF......................... Yes Yes Yes Yes Yes Yes Yes No Yes No
Aid to the Aged, Blind, and Yes Yes Yes Yes Yes Yes \1\ Yes No No NA
Disabled.
Child Support Enforcement.... Yes Yes Yes Yes Yes Yes Yes No Yes No
Foster Care and Adoption Yes Yes Yes No Yes No Yes No Yes No
Assistance.
Medical assistance:
Medicaid..................... Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
State Children's Health Yes NA Yes NA Yes NA Yes NA Yes NA
Insurance Program.
Maternal and Child Health Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Block Grant.
CCDBG........................ Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Social Services Block Grant Yes Yes Yes Yes \2\ Yes Yes \2\ Yes Yes \2\ Yes Yes \2\
(title XX).
Food and nutrition assistance:
Food Stamp Program............ No NA Yes Yes Yes Yes No NA No NA
Nutrition Assistance Block Yes Yes No NA No NA Yes Yes Yes Yes
Grant (Puerto Rico) and
special grants for ``food-
stamp-like'' programs
(Northern Marianas and
American Samoa).
Child nutrition.............. Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
WIC.......................... Yes Yes Yes Yes Yes Yes Yes No Yes Yes
Education and training:
Compensatory education for Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
the disadvantaged.
JTPA......................... Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Child protection:
Child welfare services (title Yes Yes Yes Yes \2\ Yes Yes \2\ Yes Yes \2\ Yes Yes \2\
IV-B Part 1).
Family preservation services Yes Yes Yes Yes \2\ Yes Yes Yes Yes Yes Yes
(title IV-B Part 2).
Child Abuse Prevention and Yes Yes Yes Yes \2\ Yes Yes \2\ Yes Yes \2\ Yes Yes \2\
Treatment Act.
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\1\ Guam operated adult public assistance programs in fiscal year 1997, but did not receive Federal funding for them because it used all of its limited public assistance funds for Aid to
Families with Dependent Children (AFDC) in that year.
\2\ Programs operating under consolidated grants.
NA--Not available or not applicable.
Note.--The State Children's Health Insurance Program (S-CHIP) will begin in fiscal year 1998.
Source: Congressional Research Service.
EXPENDITURES FOR SELECTED SOCIAL WELFARE PROGRAMS IN THE TERRITORIES
Table 12-3 summarizes Federal expenditures for programs
that make direct payments from the Federal Treasury for
individuals. These programs are the largest of the social
welfare programs and require no fiscal contribution from the
States or territories.
TABLE 12-3.--FEDERAL EXPENDITURES FOR DIRECT PAYMENTS TO INDIVIDUALS IN THE TERRITORY, FISCAL YEAR 1996
[In thousands of dollars]
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Puerto Virgin Northern American
Program Rico Guam Islands Marianas Samoa
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Social Security........................................... $3,135,526 $55,024 $56,661 $1,208 $17,897
Medicare.................................................. 1,031,896 1,010 17,882 NA NA
Supplemental Security Income.............................. NA NA NA 1,976 NA
Pell grants............................................... 257,919 1,306 1,141 489 820
Federal family education loan--interest subsidies......... 58 NA 47 NA NA
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NA--Not available.
Source: Congressional Research Service based on U.S. Bureau of the Census (1997). Residents of all territories
are eligible for Medicare and Federal family education loans, but reported data for some areas are either $0
or round to $0 (less than $500).
Table 12-4 shows expenditures for selected Federal-State
social programs in the territories. The table shows both total
expenditures and the amount of those expenditures for which the
territory received reimbursement from the Federal Government.
The Federal Government reimburses the territories for 50
percent of Medicaid expenditures up to the territorial funding
ceiling set in statute. Similarly, the Federal Government
reimburses these areas for 75 percent of their public
assistance expenditures, up to a statutory cap. The table also
shows financial information for the Child Support Enforcement
Programs. The territories are provided a 66 percent match for
child support administrative expenses, though some expenses are
reimbursed at a higher rate. They also receive incentive
payments based on their child support collections and the ratio
of those collections to expenditures.
TABLE 12-4.--TOTAL EXPENDITURES AND FEDERAL ASSISTANCE FOR SELECTED FEDERAL-STATE PROGRAMS OPERATING IN THE
INSULAR AREAS, FISCAL YEAR 1996
[In thousands of dollars]
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Puerto Virgin Northern American
Program Rico Guam Islands Marianas Samoa
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Unemployment compensation:
Federal expenditures................................ $308,671 NA $11,817 NA NA
Medicaid:
Total medical assistance payments................... 235,617 $11,047 7,292 $2,140 $10,807
Total administrative expenses....................... 20,584 743 1,081 220 NA
Total expenditures.................................. 256,201 11,790 8,373 2,360 10,807
Total Federal reimbursement (subject to caps)....... 128,100 4,060 4,193 1,180 2,350
Public assistance expenditures:
AFDC benefits....................................... 63,448 14,100 4,174 NA NA
Emergency assistance................................. 413 0 0 0 0
AFDC administrative................................. 14,627 1,580 702 NA NA
Adult assistance benefits........................... 13,097 2,066 854 NA NA
Total public assistance expenditures................ 91,586 17,745 5,730 NA NA
Total Federal grants (subject to caps).............. \1\ 68,90
8 3,800 2,800 NA NA
JOBS (includes child care funding for AFDC recipients):
Total expenditures.................................. 16,809 581 337 NA NA
Total Federal grants (subject to caps).............. 11,552 391 252 NA NA
Child support enforcement (preliminary fiscal year 96
data):
Administrative costs................................ 28,569 2,624 2,418 NA NA
Federal share of administrative costs............... 19,504 1,744 1,597 NA NA
Incentive payments.................................. 372 281 67 NA NA
Nutrition assistance programs:
Food Stamp Program.................................. NA 28,174 44,302 NA NA
Nutrition Assistance Block Grant (Puerto Rico) and
grants for food-stamp-like programs................. 1,143,000 NA NA 4,459 4,427
Child nutrition..................................... 165,018 4,769 5,583 3,111 6,294
WIC................................................. 132,779 5,200 6,025 NA 4,325
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\1\ In fiscal year 1996, Puerto Rico transferred $13.1 million to the Social Services Block Grant (SSBG), so
that grants subject to the ceilings under section 1108(a) as then in effect totaled $82 million.
NA--Not available.
Source: Congressional Research Service. Data are from the U.S. Census Bureau, Department of Health and Human
Services (DHHS) and the Department of Agriculture.
SPECIAL RULES
SSI Coverage
The Social Security Amendments of 1972 (Public Law 92-603)
ended matching grant programs to the 50 States and the District
of Columbia for assistance to needy adults who were aged,
blind, or disabled and replaced them with Supplemental Security
Income (SSI). The new SSI Program provided a Federal
entitlement program of cash payments for individuals in these
groups. However, SSI was not extended to Puerto Rico, Guam, and
the Virgin Islands. The old grant programs for the needy, aged,
blind, and disabled authorized under four separate titles of
the Social Security Act \3\ continue there. The territories
determine benefit amounts. In contrast, the regular SSI Program
has federally determined benefits (though States may supplement
them). SSI also is fully federally financed. SSI is available
in the Northern Marianas.
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\3\ Title I, Grants to States for Old-Aged Assistance for the Aged;
Title X, Grants to the States for Aid to the Blind; Title XIV, Aid to
the Permanently and Totally Disabled; and Title XVI, Grants to the
States for the Aid to the Aged, Blind, and Disabled.
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Nutrition Assistance Block Grant for Puerto Rico and Programs for the
Northern Marianas and American Samoa
Among the territories, the regular Food Stamp Program
operates only in Guam and the Virgin Islands. The Omnibus
Budget Reconciliation Act of 1981 (Public Law 95-35) replaced
the Food Stamp Program in Puerto Rico with a special Nutrition
Assistance Block Grant. Puerto Rico was given a great deal of
flexibility in program design. Funding is limited to an amount
set in law, which for fiscal year 1998 is $1.204 billion,
making it by far the largest Federal needs-tested program in
the Commonwealth. The Northern Marianas and American Samoa are
also given fixed grants with which they administer food-stamp-
like programs, though the program in American Samoa is limited
to the elderly and disabled.
The programs that operate instead of the regular Food
Stamp Program in Puerto Rico, the Northern Marianas, and
American Samoa were generally unaffected by the changes to the
Food Stamp Program made in the 1996 welfare reform law.
Additionally, the bar on food stamp eligibility that applies to
most noncitizens does not apply in these programs. Instead,
these territories are governed by the law's rules for public
benefits that apply to needs-tested programs other than food
stamps. That is, the territory may aid those who arrive after
August 22, 1996, after they have resided in the United States
for 5 years.
Regular food stamp rules apply in Guam and the Virgin
Islands, and noncitizens are generally ineligible for food
stamps in these areas. Guam and the Virgin Islands have higher
food stamp benefits than are paid in the 48 contiguous States
and the District of Columbia (higher food stamp benefits are
also paid in Alaska and Hawaii), and households in these areas
are also subject to special rules governing deductions from
gross income when calculating countable income to determine
food stamp payments.
Public Assistance Funding Caps
Combined Federal funding for public assistance programs
for Puerto Rico, Guam, and the Virgin Islands is capped at a
maximum dollar amount. The cap for the territories covers the
combined Federal grants of Temporary Assistance for Needy
Families (TANF); the grant programs discussed above that
operate in these areas instead of SSI; and programs under title
IV-E of the Social Security Act (foster care, adoption
assistance, and independent living programs).
Before July 1, 1997, the public assistance cap covered
Federal matching grants under Aid to Families with Dependent
Children (AFDC), assistance programs for needy adults; and
title IV-E programs. The welfare reform legislation (Public Law
104-193) ended AFDC and related programs, and established the
new TANF Program, which provides capped Federal funding for all
jurisdictions. The bulk of TANF funding is contained in a basic
block grant which allocates funds through a formula based on
Federal payments from fiscal year 1992 through fiscal year
1995.
For Puerto Rico, Guam, and the Virgin Islands, the welfare
reform bill also:
1. Raised the overall cap on public assistance expenditures by
approximately 10 percent, effective October 1, 1996;
and
2. Authorized a new special matching grant (section 1108(b)
grants) for their TANF or title IV-E (foster care,
adoption assistance, and independent living) programs.
It provides 75 percent reimbursement for expenditures
made on these programs above the fiscal year 1995
levels.
Table 12-5 shows the public assistance funding caps and
the TANF block grant and the total public assistance funding
caps for the territories. These caps are not subject to
adjustment or increases under current law. Funds above the TANF
cap amount are available on a 75 percent matching basis for
adult public assistance, TANF, or title IV-E (foster care,
adoption assistance, and independent living) programs. This
superblock feature of funding for the territories provides them
with added flexibility in using Federal funds to attack social
problems.
TABLE 12-5.--PUBLIC ASSISTANCE FUNDING FOR THE TERRITORIES
[In thousands of dollars]
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Funds available
TANF State for adult
family assistance, child Total funding
Territory assistance protection, and cap
grant 1108(b) matching
grants
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Puerto Rico.................................................. $71,563 $35,692 $107,255
Guam......................................................... 3,465 1,221 4,686
Virgin Islands............................................... 2,847 707 3,554
American Samoa \1\........................................... NA 1,000 1,000
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\1\ American Samoa is not eligible for grants under the adult public assistance programs.
NA--Not available.
Source: Congressional Research Service.
Puerto Rico, Guam, the Virgin Islands, and American Samoa
are also eligible for certain TANF funds in addition to these
caps. They can receive additional funding for welfare-to-work
grants created in the Balanced Budget Act of 1997 (Public Law
105-33), bonuses for high performance and reductions in out-of-
wedlock births, and evaluations.
Medicaid Caps and Matching Rate
For the States, there is no limit on Federal payments for
Medicaid. As with public assistance programs, however, the
territories are subject to spending caps for Medicaid. The
Balanced Budget Act of 1997 raised the Medicaid funding caps
for the territories. Table 12-6 shows the Medicaid caps for
fiscal year 1998 under prior law, the increase enacted in the
Balanced Budget Act, and the new caps for fiscal year 1998. For
fiscal year 1999 and subsequent fiscal years, these caps will
be increased by the percentage change in the medical care
component of the Consumer Price Index (CPI) for all Urban
Consumers. The Medicaid matching rate, which determines the
share of Medicaid expenditures paid for by the Federal
Government, is statutorily set at 50 percent for the
territories.
TABLE 12-6.--MEDICAID FUNDING CAPS FOR THE TERRITORIES, FISCAL YEAR 1998
[In thousands of dollars]
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Increase
provided by New fiscal
Territory Prior law cap Public Law 105- year 1998 cap
33
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Puerto Rico..................................................... $137,000 $30,000 $167,000
Virgin Islands.................................................. 4,150 750 4,900
Guam............................................................ 4,340 750 5,090
Northern Marianas............................................... 1,310 500 1,810
American Samoa.................................................. 2,510 500 3,010
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Source: Congressional Research Service based on discussions with Health Care Financing Administration staff.
State Children's Health Insurance Program
All territories are eligible to participate in the State
Children's Health Insurance Program (S-CHIP) created in the
Balanced Budget Act of 1997 (Public Law 105-33). Except for a
special rule for funding, S-CHIP will operate in the
territories on the same terms as in the States. The program
provides funds at a 65 percent matching rate to the territories
up to a maximum cap. The cap for the territories is a special
set-aside 0.25 percent of total available funding. For fiscal
year 1998 through fiscal year 2001, Puerto Rico's cap is $9.8
million; Guam's cap is $374,063; the Virgin Islands cap is
$277,875; American Samoa's cap is $128,250; and the Northern
Mariana's cap is $117,563.
CONSOLIDATION OF CERTAIN GRANTS FOR INSULAR AREAS OTHER THAN PUERTO
RICO
Public Law 95-134 authorized any Federal agency to
consolidate grants for the territories of Guam, the Virgin
Islands, the Northern Marianas, and American Samoa. Each of
these areas is permitted to submit a single application and are
paid a single sum that could be expended on any purpose
allowable under any of the programs in the consolidated grant.
The areas are permitted to determine the proportion of the
consolidated grant to be spent on various activities. Public
Law 95-134 also permits the administering agency to waive
matching and application or reporting requirements.
The Department of Health and Human Services (DHHS) permits
Guam, the Virgin Islands, the Northern Marianas, and American
Samoa to consolidate up to 22 grant programs, including the
Social Services Block Grant (title XX), Maternal and Child
Health, child welfare services, and Child Abuse and Neglect
State Grants.\4\ DHHS permits these areas to submit a single
report in lieu of individual reports required for the programs
included in a consolidated grant. All eligible insular areas
have opted for consolidated grants, though for only some of the
programs (see table 12-2 for an indication of which major
programs are consolidated in each area).
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\4\ See regulations at 45 CFR 97.10-97.16. The regulations list 21
programs that may be consolidated. In addition to these 21 programs,
information from DHHS indicates that the territories can also
consolidate the title IV-B subpart B program for family preservation
(which is not listed in the regulations).
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CERTAIN TAX PROVISIONS THAT AFFECT LOW-INCOME FAMILIES WITH CHILDREN
\5\
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\5\ For a general discussion of the application of Federal taxes in
the territories see Brumbaugh (1994).
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Residents of Puerto Rico are generally exempt from the
Federal personal income tax, and hence are not eligible for tax
provisions that affect low-income families with children such
as the earned income tax credit (EITC) and the dependent care
tax credit (DCTC). Residents of the other territories also do
not pay Federal personal income taxes. However, residents of
the Virgin Islands, Guam, and the Northern Marianas benefit
from the EITC and the DCTC of the Federal Tax Code because
their territorial tax systems ``mirror'' that of the Federal
income tax. That is, the territories generally use the Federal
income tax system as their own, though residents actually pay
their taxes to the territory and not the Federal Government.
Federal law requires the Virgin Islands to use the Federal
income tax system as the territorial tax system. Guam, the
Northern Marianas, and American Samoa are also required to
mirror the Federal income tax unless they execute an agreement
with the Treasury Department meeting certain conditions
required to establish an independent tax system. Only American
Samoa has executed such an agreement.
The corporate Tax Code includes two tax credits offered to
employers who hire welfare recipients: the work opportunity tax
credit (WOTC) and the welfare-to-work tax credit enacted in
Public Law 105-34. U.S. chartered corporations operating in the
territories are eligible for these two credits because the
Federal corporate tax is levied on their worldwide income.
However, U.S. chartered corporations operating in the
territories may already have their Federal tax liability
eliminated or significantly reduced by the possession's tax
credit, a special incentive provided to companies that operate
in the territories.
Corporations chartered in territories are considered
``foreign'' corporations under the Federal Tax Code. Therefore,
companies chartered in Puerto Rico would not benefit from
Federal tax credits for employers that hire welfare recipients.
However, companies chartered in the Virgin Islands, Guam, and
the Northern Marianas that operate under mirror tax systems do
benefit from these credits under territorial tax systems.
REFERENCES
Brumbaugh, D.L. (1994, June). Federal taxes and the
territories: An overview (CRS 94-498E). Washington, DC:
Congressional Research Service.
Brunno, A., & Laney, G.P. (1996). U.S. insular areas and their
political development (CRS Report 96-579 GOV).
Washington, DC: Congressional Research Service.
U.S. Bureau of the Census. (1997, April). Federal expenditures
by state for fiscal year 1996 (Report FES/96).
Washington, DC: U.S. Department of Commerce.