State Welfare Waivers: An Overview


State Welfare Waivers:
An Overview

The federal requirements for the Aid to Families with Dependent Children (AFDC) program were set forth in Title IV-A of the Social Security Act. Section 1115 of the Act authorizes the Secretary of Health and Human Services (HHS) to waive specified requirements in order to enable a state to carry out an experimental or pilot project that promotes the purposes of the AFDC program. This authority had been used to a limited extent in prior administrations, but the Clinton Administration greatly expanded both the number and scope of waivers approved. Between January 1993 and August 1996, the Department of Health and Human Services approved welfare waivers in 43 states. Some of these waivers supported modest demonstration projects, limited to a few counties, but many others instituted dramatic statewide changes in the AFDC program. These waivers can be considered the first phase of welfare reform; many of the policies and concepts included in state waiver requests were later incorporated into the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996.

In order to receive federal approval for waivers, states were required to conduct rigorous evaluations of the impact of their demonstrations. In most cases, they were required to randomly assign applicants and recipients to a control group, which was subject to the standard AFDC rules, or to an experimental group, which was subject to the waiver rules. By comparing the outcomes of the two groups, the states could measure the impact of the waiver provisions. States also had to show that the waivers would be cost-neutral -- in other words, that they would not require additional federal spending. The Clinton Administration allowed states to achieve cost-neutrality over the lifetime of the waiver, rather than in each year, as had previously been required. This allowed states to make up-front investments, for example, in child care or job training that they expected to recoup in reduced benefit payments in later years.

This compilation of state waiver provisions serves two purposes, one historical and one forward looking. First, it shows what states were doing under the waiver authority of the AFDC program before it was replaced by the new Temporary Assistance to Needy Families (TANF) program. The number and extent of waivers granted prior to enactment of PRWORA mean that the requirements of the AFDC program do not fully reflect the actual program as operated immediately prior to enactment of the new law. In assessing the impact of TANF, it is necessary to compare it to the policies adopted by states under waiver authority as well as to the underlying federal rules.

In addition, states have the option of continuing AFDC waivers under TANF. In some cases, states will opt to continue their waivers because they allow them to provide services or impose requirements that would not be allowed under the new law. The PRWORA allows states to postpone implementation of certain provisions of the TANF program to the extent they are inconsistent with an ongoing waiver until the waiver expires. In addition, states may choose to continue a waiver in order to continue the evaluation, even if all of its components are allowable under the new law.

This report is based on the agreements as to terms and conditions issued by HHS as part of the state waiver approval process. Thus, it focuses on what states received authority to implement. In some cases, states may have later chosen not to implement the waivers that were approved or to submit an additional waiver request. In addition, a number of states have discontinued their waivers with the enactment of TANF so this document should be supplemented by state TANF plans for information on the latest state policies.


AFDC Requirement: States could require recipients who did not fall into one of the specified exemption categories to participate in the Job Opportunities and Basic Skills Training (JOBS) program, which provided education, training, and work experience activities. Individuals were exempt from JOBS participation if they: were ill, incapacitated, or aged; were under age 16 or in school full-time; were already working at least 30 hours per week; were in the second or third trimester of pregnancy; were needed in the home to care for an ill or incapacitated family member; resided in an area where the program was not available; were providing care to a child under age 3 (or age 1 at state option); or were providing care to a child under age 6 and child care was not available. Individuals caring for a child under age 6 could not be required to participate more than 20 hours per week. Individuals who did not meet one of these categories, and who did not have good cause for not participating, were considered JOBS mandatory.

States were required to provide the following JOBS activities: educational activities, including high school or the equivalent, and ESL, job skills training, job readiness, and job development and placement; states were also required to offer at least two of the following work activities: job search, on-the-job training, work supplementation, or community work experience. Post-secondary education was an optional component. States could require up to eight weeks of job search for new applicants, and up to eight weeks of job search per year for recipients. Within this framework, states were allowed to develop their own policies regarding what activities to assign recipients. States' practices varied widely, with some states encouraging participants to take advantage of the educational opportunities offered in order to improve their employment prospects, while other states focused on immediate job search and placement in the components that most resemble work. Changes in these policies did not require a waiver of federal regulations; in general, they did not even require an amendment to the state plan.

Individuals who were assigned to JOBS activities could be sanctioned for failure to participate. The sanction was the elimination of the participant's needs from the grant amount. This sanction was applied according to the following schedule: for the first failure to participate, the sanction lasted until compliance; for the second instance, the sanction lasted until compliance or for three months, whichever was longer, and for any subsequent instances, the sanction lasted until compliance, or for six months, whichever was longer.

States were not required to serve all non-exempt individuals. In FY 95, states were expected to achieve a participation rate of 20 percent of JOBS mandatory individuals, for an average of 20 hours per week. By law, states could be penalized for failure to meet this participation rate by a reduction in the matching rate on JOBS dollars. However, in practice, although some states did not meet the participation standard, no state was ever penalized. The Secretary of HHS waived the penalty, as allowed by law if the state made a good faith effort to meet the standard and submitted a plan for improvement.

Waivers: As stated in their waiver requests, many states believed that the exemption criteria from JOBS were too broad. They therefore applied for waivers to make JOBS work activities mandatory for more AFDC recipients. The waivers granted that affected JOBS exemptions are summarized in Table I.A. The most commonly requested waivers required parents of young children -- in some cases children as young as 12 weeks -- to participate in JOBS. These waivers were motivated by the fear that parents would be excused from participation for long periods of time, and would find themselves with no labor market experience or skills when their children finally reached school age. In addition, some people argued that very few working parents have the opportunity to take a year off of work to care for their children, and that it is therefore unreasonable to expect that welfare recipients should be allowed to do so. A number of waivers also allowed states to require parents of pre-school age children to participate for more than 20 hours per week.

Other waivers reduced the exemptions for pregnant women to those with a medical reason not to participate and tightened the criteria for an exemption based on a disability. Some waivers allowed teen parents attending high school and people working 30 hours per week to be considered as JOBS participants. These waivers allowed the states to provide such individuals with supportive services, but also allowed them to impose JOBS sanctions for nonparticipation. A few states eliminated virtually all categorical exemptions, and left it to caseworker discretion as to whether individuals should be required to participate in JOBS.

A concern expressed by many states was that the sanctions for non-compliance were not strong enough to motivate unwilling individuals to participate, or were too difficult to impose. States therefore applied for waivers to increase the severity of their sanctions or to reduce the administrative burden associated with imposing sanctions. Table I.B summarizes the waivers that were granted which affected the sanctions for failure to meet JOBS participation requirements. As shown in this table, 23 states received waivers which allowed them to impose full-family sanctions (i.e. termination of the entire family's AFDC grant) after a continued period of non-compliance. States also received waivers which allowed them to impose sanctions for longer periods than under the standard AFDC program.

Relatively few waivers affected the services provided under JOBS since the AFDC regulations gave states substantial flexibility without requiring waivers. One of the most common waivers was one that lifted the limit on the number of weeks during which a recipient could be assigned to job search. A number of states received waivers from the Department of Agriculture allowing food stamps as well as AFDC grants to be diverted in order to subsidize employment of people receiving assistance under both programs.

TANF Provision: TANF removes most of the federal requirements regarding exemptions and required activities, and replaces them with a more stringent participation rate requirement (25 percent in FY 1997, rising to 50 percent by FY 2002). The only remaining federal provisions are: a) single parents of children under age 6 who cannot find child care can not be penalized for failure to meet work requirements; and b) states can exempt single parents of children under age 1 from the work requirement and can disregard these individuals in the calculation of participation rates for up to a total of 12 months.

In general, TANF encourages states to require work (unsubsidized or subsidized) and training that is closely linked to work, rather than to place recipients in long-term educational activities. Although no specific types of education or training are absolutely mandated or forbidden, the limitations on what may count towards the participation rate are likely to shape the work-related services that states offer to recipients. For example, under TANF, no more than four consecutive weeks of job search, and no more than six weeks overall, can be counted towards the participation rate. States are not forbidden to spend money on job search programs beyond these limitations, but this increases the risk of being unable to meet the participation rate goals. (Note, however, that caseload reductions can be counted towards the participation rate, so if a longer period of job search is effective in placing recipients in well-paid jobs, it still might help the state meet the participation rate goals.) Similarly, no more than 20 percent of individuals can be counted as participating based on participation in vocational education or secondary school for teen parents. States that do not meet the participation rate goals will be penalized by a reduction in the amount of their block grant.


AFDC Requirement: Under the AFDC rules, families were entitled to receive assistance for as long as they met the eligibility standards. There was no federal limit on the length of time a family could receive aid, and states could not impose such limits.

Waivers: Due to concerns that families were becoming dependent on AFDC and accepting welfare as a way of life, a number of states applied for and received waivers setting time limits on welfare receipt. By the time AFDC was repealed, a total of 32 states had received waivers authorizing some form of time limits. The Center for Law and Social Policy (CLASP), an advocacy organization, developed a useful taxonomy for classifying the various time limit waivers into three broad categories. Under this classification, "termination" time limits resulted in a total loss of AFDC benefits for families who have used up their time. "Work requirement" time limits imposed mandatory work requirements on families that reached the time limits, but did not cut off aid so long as participants complied with the work requirements. "Reduction" time limits reduced the amount of assistance that a family could receive after they had been on welfare for a certain period of time, either by a set percentage, or by removing the adults' needs from the grant.

Table II.A lists the states that received approval for each kind of pre-TANF time limit waiver. Some states created more than one kind of time limit. For example, Illinois applied a work requirement time limit to families with young children, and a termination time limit to families with older children, and Delaware provided two years of unrestricted cash assistance, followed by two years of pay for performance. It should be noted that it is sometimes difficult to distinguish between a work requirement that includes a full-family sanction for failure to participate after a certain period of time, and a time limit that allows families to continue to receive assistance only if they participate in a work program. For this reason, different lists compiled by various organizations do not always count all the same states as having time limits.

Table II.B describes the provisions of the pre-TANF time limits adopted by each state. Although there is much variation among states, certain factors were constant across states. In general, individuals who were JOBS-exempt or otherwise determined to be not ready to work, were not subject to the time limit. Similarly, child-only cases were not subject to time limits. The termination time limits were typically not lifetime limits, but rather limited AFDC receipt to a certain number of months within a four- to seven-year period. Such limits forced families to take immediate steps towards self-sufficiency, but provided a safety net for families that successfully get off welfare but experienced crises later on. Finally, every state with a waiver that provided for a termination time limit allowed extensions for people who substantially met all program requirements, made good faith effort to find job, and yet could not find a job. These extensions were based on the principle that people who "play by the rules" should not be penalized for circumstances beyond their control.

Because time limits are such a significant change from prior practice, many people are highly interested in studying what happens when families begin to reach the time limits. Table II.C therefore summarizes when people will start to reach the time limits under the state waivers, and what will happen to people who reach the limit. It should be emphasized that the dates listed are the earliest dates at which any families in the state could reach the time limits; in practice, relatively few families will exhaust their benefits so quickly. Many recipients will have been off AFDC for short periods, so will not accumulate 24 months of receipt in a 24-month period. In addition, people already on AFDC when time limits were implemented were typically not subject to the time limits (i.e. "the clock did not start ticking") until their next redetermination. As indicated on this chart, based on their waivers Florida and Connecticut are the first states in which some families will begin to reach termination time limits. In both states, the time limits were first implemented in limited areas, so the number of families reaching the limits will be quite small at first. Oregon has the first program with time limits operating statewide in which families will reach termination time limits, in August 1997. Under the terms of its waiver, no more than 1 percent of the Oregon caseload or 400 cases may receive a "good faith" extension to the time limit in any month.

TANF Provision: The new law combines a termination time limit and a work requirement time limit. The law forbids the use of federal funds to provide assistance to a family including an adult who has received assistance for 60 months, or less at state discretion. This time limit begins with implementation of the TANF program, and includes assistance received in another state. States are permitted to exempt up to 20 percent of their caseload from this time limit. States may use their own funds to aid families that have reached the federal time limit and may count such expenditures towards the maintenance of effort requirement.

The law also provides that states must require adults to work after they have received assistance for 24 months, or earlier at state option. States are encouraged to require adults to participate in community service after two months of assistance, if they are not engaged in other work activities, but may opt out of this provision if the Governor so informs HHS by August 22, 1997.


AFDC Requirement: Under the AFDC rules, a family's grant amount was based on the payment standard for a family of a certain size. This means that if a family had a baby, thereby increasing the number of people in the family, the grant amount rose.

 Waivers: Some states have argued that this policy creates a perverse incentive for welfare recipients to have children, making self-sufficiency harder. Moreover, they note, other people who are working do not automatically receive raises when they have children. In response to this argument, 19 states applied for, and received, "family cap" waivers. These waivers allowed states to eliminate, or reduce, the increase in benefits upon the birth of an additional child after the family first began receiving AFDC. A related provision, adopted by some states with family caps and some states without, was eliminating or reducing the exemption from JOBS participation for caring for a young child, when the child was conceived while the family was on AFDC. According to some state proposals, this policy was adopted out of concern that some people might choose to have another child in order not to be subject to work requirements.

Under the terms and conditions of the waivers, family cap provisions did not apply to the first birth by a minor parent who was a dependent child on someone else's AFDC grant. Except in the first state to receive a family cap waiver, all such waivers indicated that the state would make an exception for children of rape or incest. The provisions otherwise varied in a number of details, as shown on Table III. One significant point of variation was that some states applied the family cap to any child conceived after the family began receiving AFDC, even if the family was not receiving any benefits during the month the child is conceived. Seven states specified that the families could keep all child support received in behalf of a child excluded from the assistance unit based on the family cap, and four allowed families to keep a larger portion of earned income in order to provide for the excluded child. The variations among plans are explained in more detail in the footnotes to Table III.

TANF Provision: TANF does not require states to base levels of assistance on the number of people in the family. States therefore have the flexibility to establish any form of family cap they desire, or none at all. States do not have to include the exceptions required as a matter of federal policy in the waivers. At least one state (Wisconsin) has proposed providing a fixed amount per participating adult, regardless of the number of children in the family.


AFDC Requirement: Under the AFDC rules, all recipients who worked were entitled to a $90 work expense disregard. In addition, for the first four months of AFDC receipt, the next $30 of earned income, plus one-third of the remainder, was disregarded in calculating eligibility and benefits. After four months and until one year, only the $30 disregard continued. After one year, there was no earned income disregard. This meant that after one year of AFDC receipt, if a recipient got a job, her grant amount was reduced by one dollar for every dollar that she earned above the amount set aside to cover her work expenses.

Waivers: Many states came to the conclusion that the termination of the earned income disregard after a short period removed the economic incentive for AFDC recipients to work. Therefore, as part of a general move to "make work pay," 32 states adopted changes to the earned income disregard. These changes, summarized in Table IV ranged from removing the time limit on the $30 and one-third disregard, to disregarding all income up to the poverty line. Although these disregards were costly in the short-term, the hope was that by promoting work, they would enable recipients to leave AFDC, saving money in the long run.

TANF Provision: TANF does not require states to adopt any particular earned income disregards. States may provide more or less generous disregards than under the AFDC program. The only requirement is that states have objective criteria for determining who is eligible.


AFDC Requirement: Under the AFDC rules, AFDC families could have no more than $1,000 in countable assets. Certain assets were not counted towards this limit, including ownership interest in a vehicle of up to $1,500, burial plots, etc.

Waivers: These resource limits were widely considered to be barriers to self-sufficiency since they made it impossible for a family to save for education or home-ownership, or even to pay the deposit on an apartment in a better neighborhood. The limit on the value of a car often forced families to depend upon highly unreliable vehicles, making it difficult to get to training programs or work. Because of these concerns, a large number of states loosened the asset restrictions. As shown on Table V, 25 states received waivers allowing them to increase the asset limit and 32 states received waivers allowing them to increase the value of a car that could be excluded from the asset limit. Some states established higher limits for recipients who are employed or otherwise participating in self-sufficiency activities. In order not to expand the eligible population, some states restricted the increase to recipients, while applying lower limits to new applicants for assistance.

Also shown on Table V, a total of 18 states received waivers authorizing them to disregard assets held in a restricted account, often called an "Individual Development Account." Each state had different rules regarding the uses to which these accounts may be spent, but they were typically restricted to such purposes as education or training, starting a business, or purchasing a home. Some states allowed funds to be withdrawn for emergencies. A few states required that employers of recipients participating in subsidized work programs pay their workers an additional amount that was deposited in a restricted account.

TANF Provision: Under the TANF program, there are no federal provisions regarding asset limits, including vehicle exclusions. States have full authority to set these limits higher or lower than they had been under the AFDC program. The only requirement is that states have objective criteria for determining who is eligible.

The TANF law explicitly addresses Individual Development Accounts (IDAs). States may use TANF funds to support the establishment of IDAs. Funds deposited into an IDA must be derived from earned income, and can only be withdrawn for postsecondary educational expenses, first-time homeownership, or business capitalization.


AFDC Requirement: Under the AFDC program, recipients were entitled to one year of transitional Medicaid and one year of transitional child care (TCC) when they lost AFDC eligibility due to increased earnings from work. Families who lost eligibility due to collection of child or spousal support were entitled to four months of transitional Medicaid. In order to prevent families from going on welfare for a short period of time in order to become eligible for these transitional benefits, only families who had been on AFDC for at least three of the preceding six months were eligible for transitional assistance. During the first six months of transitional Medicaid coverage, states were required to provide the same coverage the family had received while on AFDC, and could not charge premiums. During the second six months, states were allowed to limit the scope of coverage or to impose premiums (limited to 3 percent of gross income) on families.

Waivers: A total of 22 states received waivers expanding eligibility for the transitional child care program, and 23 states received waivers expanding eligibility for transitional Medicaid. As shown on Table VI, the most common provision was to increase the length of time during which a former recipient could receive transitional assistance. States applied for these waivers because the loss of health and child care benefits were seen as major problems which often forced poor families back on to welfare. One year was simply not long enough for many former recipients to get established in jobs that offer medical benefits and pay enough that workers can afford unsubsidized child care. Other waivers removed the three of six months requirement, in order to encourage families to begin seeking employment immediately, rather than choosing to remain on welfare for long enough to qualify for transitional benefits. With the adoption of time limits on assistance, a few states also received waivers to provide transitional assistance to families who lost eligibility for reasons other than earnings, but who needed child care or medical benefits in order to work.

TANF Provision: There are no changes in the transitional Medicaid program. States that wish to provide extended transitional Medicaid benefits for beyond 12 months must receive (or continue) a federal waiver in order to do so.

The new law removes the entitlement to child care assistance, both for current TANF recipients and for people transitioning from TANF to work. The funds previously restricted to these populations are combined with the Child Care and Development Block Grant to create a pool of funding that may be used to provide child care to welfare recipients, people transitioning off welfare, and the working poor. Since in most states the demand for subsidized child care exceeds the funding available, states will have to develop priorities for determining which populations receive assistance. At least 70 percent of the funds from the source that used to fund child care for current and former AFDC recipients must be spent on current or former TANF recipients or on low-income working families at risk of become TANF recipients. States may spend TANF funds on child care directly and may also transfer a portion of their TANF into the child care funding pool; when funds are transferred, they are no longer subject to TANF restrictions (e.g. on the duration of assistance), but become subject to child care requirements (e.g. on standards for the quality of child care provided).


AFDC Requirement: In order to be eligible for AFDC, a child had to be "deprived" of parental support, generally either by the death or prolonged absence of a parent, or in two-parent families by unemployment of the "principal earner." Unemployment was defined as being employed less than 100 hours in a month (or more if the work was intermittent and the excess was of a temporary nature). Moreover, the principal earner had to show labor force attachment: by having 6 or more quarters of work (participation in education and training could count for up to four quarters, at state option) in any 13-calendar-quarter period ending within one year before application for assistance; or by being eligible for unemployment compensation within one year of application. The principal earner must also have been unemployed for at least 30 days prior to receipt of aid. These restrictions were designed to avoid diverting able-bodied workers from the labor market.

Waivers: States believed that the restrictions on provision of AFDC to families with two parents in the household sometimes had the perverse effect of encouraging families to break up or not to form, because some ineligible impoverished two-parent households would be eligible for the basic (single parent) AFDC program if the father left the household. In addition, once a family qualified for the AFDC-UP (Unemployed Parent) program, the primary earner would be discouraged from taking a low-wage job, since if he worked 100 hours per month, the family would lose eligibility for assistance, even if he was not making very much money.

For these reasons, many states requested and received waivers of some of the restrictions on the AFDC-UP program. As shown on Table VII, 37 states received waivers of the 100-hour rule, 24 states received waivers of the labor force attachment requirement, and 17 states received waivers of the 30-day waiting period. A few states received waivers of the definition of the principal earner. Together, these were the most common AFDC waivers granted.

Until October 1, 1990, the provision of AFDC to families with an unemployed parent was optional. States which did not have AFDC-UP programs in effect at the time the law mandating the unemployed program was enacted were given the option of limiting assistance to as little as six months in a 12-month period. Table VII also shows which states opted to time-limit assistance under the AFDC-UP program 

TANF Provision: TANF does not require that children be deprived of parental support in order to be eligible for assistance. States may choose whether to provide assistance to two-parent families under the same eligibility criteria as single-parent families, or to apply additional restrictions.


AFDC Requirement: AFDC recipients were required to assign all child support collections, up to the amount of benefits they receive, to the welfare agency. States were required to pass-through the first $50 of current month child support payments to the family for which they were collected. The amount of this pass-through was disregarded, so families received this amount as additional income. It did not count against the recipients' income in determining their family's AFDC eligibility or the assistance grant amount. The remainder of the child support collected was shared between the state and the federal government to reimburse the cost of providing AFDC assistance.

AFDC recipients were required to cooperate with establishment and enforcement of child support orders, unless they had good cause not to. The sanction for failure to cooperate, or for refusal to assign payments to the state, was denial of the custodial parent's share of the AFDC grant.

Waivers: States requested and received waivers of a number of provisions related to child support enforcement. The child support enforcement waivers received by each state are summarized in Table VIII.A and a state-by-state description of the waivers is provided in Table VIII.B.

As indicated on this chart, the most common type of waiver with child support implications was allowing JOBS services to be provided to non-custodial parents, in order to enable them to find employment that would allow them to pay child support. Such waivers were received by 23 states. Some of these programs were voluntary; in other cases, courts could require parents who were delinquent in child support payments to participate.

The next most common type of waiver, received by 20 states, changed the pass-through and disregard. A total of 14 states received waivers that allowed them to increase the pass-through and/or the disregard, while three states received waivers that allowed them to eliminate the pass-through. These waivers enabled states to test the effectiveness of the pass-through in increasing child support collections. Five states received waivers from the Department of Agriculture so that they could disregard the amount of the pass-through in calculating food stamps as well as AFDC benefits. A smaller number of states increased the pass-through or disregard only for those children who were affected by a family cap provision. Since families did not receive benefits on behalf of such children, several states decided that it was appropriate for families to keep the child support collected on their behalf.

Another common group of waivers increased the requirements for cooperation with child support enforcement, and/or increased the sanction for failure to cooperate. A total of 19 states received such waivers. The majority of these increased the sanction for noncooperation to denial of benefits to the entire assistance unit, not just the non-cooperating parents. A few moved responsibility for determination of cooperation to the IV-D (Child Support) office rather than the IV-A (AFDC) office. In order to make it easier to track down non-custodial parents, some states received waivers allowing them to require parents to provide such detailed information as the social security number and the last known address of non-custodial parents.

Finally, some states received waivers that do not fall into any of these categories. These ranged from one-time bonus payments for establishing paternity, to pilot projects testing child support assurance, to projects providing counseling and other assistance to non-custodial parents.

TANF Provision: TANF recipients are still required to assign child support collections to the welfare agency. However, the $50 pass-through has been eliminated. States may still opt to pass-through some of the funds collected to the custodial family; however, they must then reimburse the federal government for its share of the collections out of state funds. States which pass through child support collections may establish their own policy as to whether to disregard this income. The distribution rules are changed so that families no longer on assistance have first priority in receipt of child support arrears.

The child support enforcement provisions have been strengthened under the new law. Individuals who fail to cooperate with paternity establishment or with establishment and enforcement of a support order will have their monthly cash assistance reduced by at least 25 percent. (States have the option to end assistance altogether.) Federal funds may not be spent to provide assistance to a family with a member who has not assigned support rights to the state. States must establish central registries of child support orders and must collect information on new hires in order to facilitate automatic withholding. States are also given a number of other new tools to enforce the payment of child support.

Updated 1/23/01