Costs of Mandatory Education and Training Programs for Teenage Parents on Welfare: Lessons from the Teenage Parent Demonstration. Introduction

07/12/1993

From late 1987 through mid-1991, the States of New Jersey and Illinois conducted demonstrations of innovative approaches to reducing long-term AFDC dependency among teenage parents -- the Teenage Parent Demonstration.  With special grant funds from the U.S. Department of Health and Human Services (DHHS), the New Jersey Department of Human Services and the Illinois Department of Public Aid operated demonstration programs in three sites -- Camden and Newark, New Jersey, where the program was known as Teen Progress, and in the south side of Chicago, where it was known as Project Advance.  All three programs provided comprehensive services designed to promote self-sufficiency, including education, job training, job readiness preparation and job placement, a variety of life skills workshops, support service payments for child care and transportation expenses, and case management.  Thus, the demonstration provided a useful test of the range of services envisioned in the Family Support Act (FSA) of 1988 for custodial adolescent parents served by the Job Opportunities and Basic Skills Training ( JOBS ) program.  This report presents the results of an analysis of the resource cost of operating the demonstration programs.

The cost analysis is one component of a comprehensive evaluation of the demonstration that is being undertaken by Mathematica Policy Research, Inc. (MPR), under contract to DHHS.  The evaluation of the Teenage Parent Demonstration is based on an experimental design, which allows rigorous estimation of program impacts based on comparison of key outcomes for randomly assigned program and control groups.  In the three demonstration sites, all eligible teenage parents -- those with a single child who began receiving Aid to Families with Dependent Children (AFDC) for the first time for themselves and their child -- were sent letters instructing them to attend a mandatory intake and baseline data collection session.(1)  At the conclusion of this session, the teenage parents were randomly assigned, for evaluation purposes, to an enhanced-service program group or a regular-service control group for the duration of the demonstration.  Those in the enhanced-service group were required to participate in the demonstration as a condition of receiving AFDC.(2)  If they failed to participate as required, they risked program sanctions -- the reduction of their AFDC grant by removal of the teenage parent's needs from the grant calculation.  Control group members could not receive the special services provided by Teen Progress or Project Advance, but could pursue training, education, and other services from other sources.

A key objective of the demonstration evaluation is to determine the combined impact of the special services provided to the program group and of program-induced changes in the level of utilization of pre-existing services.  Program impacts are being estimated based on comparisons between the enhanced-service and control groups of key outcomes, such as employment, earnings, continued school attendance and completion, child support received, and avoidance of repeat pregnancies.  Estimates of program impacts will be based on follow-up interviews with enhanced-service and control group members about two years and five to six years after intake, as well as on administrative records of earnings, AFDC receipt, and child support outcomes. 

The demonstration evaluation is also designed to provide policy-makers with information on the cost-effectiveness of the demonstration services -- the relationship between program impacts and the costs of delivering program services.  The demonstration cost analysis is intended to provide direct guidance to policy makers and program planners concerning the costs of teenage parent programs, as well as to provide critical input into the subsequent benefit-cost analysis.  There are three steps in developing this information.  First, we must analyze the resources used in delivering demonstration services to the program participants and the costs of these resources.  This report focuses on the results of that analysis.  Second, it is necessary to estimate the costs of services utilized by the control group, and thus the incremental cost of the demonstration program.  Third, the incremental cost of the demonstration will be compared to its impact as a measure of cost-effectiveness, and the costs and benefits of the demonstration will be analyzed from the perspective of government, participants, and society as a whole.  Estimates of the incremental cost of the demonstration, its cost-effectiveness, and relative costs and benefits from alternative perspectives will be based on longer-term follow-up of the sample. 

A thorough and detailed analysis was conducted to identify the program resources used to deliver services to demonstration participants, and to determine their value based on actual costs incurred by the demonstration programs or estimates of the costs incurred by other agencies that delivered services.  This approach to cost measurement -- including both actual program expenditures as well as estimates of the value of services provided by other agencies to program participants -- fully recognizes the resources required in a program that draws together service components from various sources, and provides a consistent basis for comparing programs that may provide similar services but differ in the degree to which they deliver them directly.(3) 

Despite the careful analysis leading to these results, shortcomings in available data inevitably introduce some degree of uncertainty or imprecision.  The estimates may be subject to some error, for example, due to some lapses on the part of case managers in recording activity durations precisely, the need to use general service cost rates for groups of similar providers, and the use of approximations based on program staff's estimates of time spent delivering particular services rather than detailed time-sheet records. 

With these minor reservations, the analysis described in detail in the following chapters nevertheless provides a useful measure of the costs of the Teenage Parent Demonstration programs.  The findings of the analysis can be summarized as follows: 

  1. The full resource cost of the demonstration for one program year (fiscal year 1989) -- including services to participants, supervision, and site management -- were about $1.05 million in Camden, $0.76 million in Newark, and $2.0 million in Chicago.  Direct expenditures by the programs (subtracting out the value of in-kind services from the resource cost estimates) were significantly less -- about $0.8 million in Camden, $0.5 million in Newark, and $1.0 million in Chicago.  Program-paid costs represent approximately 75 percent of the full resource cost of the two New Jersey site programs and about half of the resource cost of the Chicago program. 
  2. The average monthly resource costs to serve a program group member during the period she spent on AFDC -- and was thus considered eligible for demonstration services -- was $344 in Camden, $292 in Newark, and $206 in Chicago.  Cost per person-month on AFDC was considerably lower in Chicago than in the New Jersey sites, in part, because Project Advance had higher case manager caseloads and thus lower case management costs. 
  3. Based on the average periods for which participants received AFDC in fiscal year 1989, the full resource cost per participant in that year was estimated at $3,130 in Camden, $2,657 in Newark, and $1,730 in Chicago.  The average annual resource cost per person across the three demonstration sites was $2,141.  Annual per person costs to federal and state agencies (program-paid costs) were $2,379 in Camden, $1,887 in Newark and $917 in Chicago. 
  4. Costs are considerably higher when participants are involved in major ongoing activities, due to the costs of education and training courses and related support services (child care and transportation).  Average resource costs per month for participants in these major activities were $920 in Camden, $560 in Newark, and $498 in Chicago.  Based on estimated time spent in education, training, or jobs in fiscal year 1989, the resource cost per person for those who took part in major activities in that year was estimated as $5,351 in Camden, $3,726 in Newark, and $3,087 in Chicago.  The programs paid directly for only a portion of these costs, or about $4,067 in Camden, $2,645 in Newark, and $1,636 in Chicago. 
  5. The cost of the Teenage Parent Demonstration programs was about equal to that of work-welfare demonstrations for adults in the early 1980s, which were found by Maynard, Maxfield et al. (1986) to have cost on average about $2,089 per person where job training was offered.  Real annual costs of the programs were lower than costs at the four sites of the Minority Female Single Parent Demonstration, which ranged from $2,679 to $4,824 per enrollee with durations averaging 6 months (Handwerger and Thornton, 1988), compared to about 9 months in the Teen Parent Demonstration programs. 

PLAN OF CHAPTER

The remainder of this chapter provides additional background on the demonstration and the cost analysis.  Later chapters provide details on resources used, cost measurement methods, and cost estimates.  In the two sections immediately below, we describe the settings in which the demonstration was conducted and the samples of teenage parents the programs served, and the general framework of the cost analysis.  In Chapter II, we describe in detail the types of services delivered and enumerate the resources drawn upon for the demonstration.  Chapter III describes the methodology for estimating program costs, including the period over which costs were measured, the treatment of explicit program expenditures and implicit costs, the allocation of costs to various program components or functions, and the computation of unit costs.  Chapter IV then presents the detailed results of the cost analysis.