Determinants of AFDC Caseload Growth. 3. Maryland

07/01/1997

Basic Caseload

In contrast to California and Florida, Maryland experienced average Basic caseload growth that was substantially below the national average over the whole period (0.5 percent per year vs. 2.2 percent nationally). The model predicts growth that is just a tenth of a percentage point higher (Exhibit 6.7, top section). Patterns of growth predicted by the state-level variables and federal legislation dummies in the model are remarkably similar to the patterns observed for the nation as a whole (Exhibit 6.1).

Exhibit 6.7
Decomposition of Maryland Caseload and Average Monthly Benefit Series
                 
  Average Annual Growth Rate Annual Growth Rate Accounted for by:
Program, Period, and Model Actual Accounted for by Model Not Accounted for by Model Population Growth and Aging Vital Statistics Variables Labor Market Variables AFDC Benefits Other Variables
Basic                
1979.4 - 1983.3 -1.6% -0.2% -1.4% 2.2% 0.6% 1.2% -4.4% 0.2%
1983.4 - 1989.3 -1.6% -1.5% 0.0% 1.5% 0.5% -4.0% 0.4% 0.1%
1989.4 - 1993.3 5.6% 4.4% 1.2% -0.1% 0.2% 3.8% -0.2% 0.7%
1993.4 - 1994.3 1.1% 1.0% 0.0% -0.6% 0.7% -0.6% 1.3% 0.2%
1979.4 - 1994.3 0.5% 0.6% -0.1% 1.1% 0.5% -0.3% -1.0% 0.3%
Unemployed Parent 1                
1979.4 - 1983.3 13.2% 5.4% 7.8% 2.1% n.a. 7.8% -4.5% n.a.
1983.4 - 1989.3 -18.4% -14.6% -3.8% 2.0% n.a. -16.9% 0.3% n.a.
1989.4 - 1993.3 12.1% 18.8% -6.7% 0.6% n.a. 18.8% -0.5% n.a.
1993.4 - 1994.3 -15.1% -7.9% -7.2% 0.2% n.a. -7.7% -0.4% n.a.
1979.4 - 1994.3 -1.6% 0.1% -1.7% 1.5% n.a. -0.2% -1.3% n.a.
Average Monthly Benefit                
1980.4 - 1983.3 -3.4% 2.0% -5.3% n.a. 0.5% -0.1% 1.5% 0.1%
1983.4 - 1989.3 2.1% 1.2% 0.9% n.a. 0.4% 0.0% 0.9% -0.1%
1989.4 - 1993.3 -6.5% -3.4% -3.1% n.a. 0.0% -0.3% -3.2% 0.0%
1980.4 - 1993.3 -1.8% 0.0% -1.8% n.a. 0.3% -0.1% -0.2% 0.0%
                 
1. The UP caseload model does not include the vital statistic variables and the AMB model does not include a variable for population growth and aging.

One distinct difference is that the labor market variables have a much larger estimated impact in Maryland during the 1989.4 - 1993.3 period than for the country as a whole (3.8 percentage points per year vs. 1.5 nationally), while they have a relatively smaller estimated impact in the 1979.4 - 1983.3 period (1.2 percentage points per year vs. 2.1 nationally). Overall, the predicted series tracks the actual series for Maryland quite closely (Exhibit 6.8, top panel).

UP Caseload

Maryland's UP caseload declined over the entire sample period, at an average annual rate of 1.6 percent (Exhibit 6.7, middle section), while the model predicts essentially no change. According to the model, the only factor contributing substantially to the decline is reductions in AFDC benefits, accounting for average annual decline of 1.3 percentage points -- about the same as for the national UP caseload. The model underpredicts growth somewhat during the first four-year subperiod of the sample, underpredicts the decline in the second five-year subperiod, and overpredicts the growth in the third four-year subperiod. In the last year of the sample, the UP caseload declines by almost twice as much (15.1 percent) as the model predicts (7.9 percent). It appears from the plot of the actual and predicted series (Exhibit 6.8, bottom panel) that the model predicts an earlier impact of economic recovery after the 1981-82 recession than actually occurred, but a later impact of recovery after the 1990-91 recession than actually occurred.

Steven Thompson reviewed our findings for Maryland and affirmed that the model provides a reasonably accurate explanation of the behavior of Maryland's caseloads.(8) He thinks that the main reason Maryland's caseload growth over the full period was less than the national average was relatively strong employment growth; from 1980 to 1990 non-agricultural employment and per capita personal income grew at a rate that was almost 50 percent higher than the national average. He also pointed out that the larger impact of the recent recession for Maryland was related to substantial cutbacks in federal spending, a major source of employment in Maryland.

Thompson has developed for Maryland the most advanced time-series model of state caseloads that we have seen. He recently has developed a version of the model with asymmetries in business cycle effects that fits Maryland's experience well, with the effects of recessions on caseload growth being substantially larger and more immediate than effects of recoveries on caseload decline. Although the pooled model tracks Maryland's experience fairly well, introducing asymmetric business cycle effects might substantially improve the fit.

Exhibit 6.8

Actual and Predicted Caseloads for Maryland, 1979.4 - 1994.3

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Average Monthly Benefits

The AMB simulation findings for Maryland (bottom section of Exhibit 6.7) are very similar to those for the nation. The average annual rate of decline of AMB during the whole period was 1.8 percent, vs. 2.0 for the nation, and in both cases the model predicts essentially no change. The estimated positive effects of benefit changes captured by the model during the first three-year subperiod are about the same as for the nation. As in California, AMB declined in the last four-year subperiod by substantially more than for the nation (6.5 percent per year vs. 4.1 percent) and the benefit variables account for more decline (3.2 percentage points per year vs. 1.9 percentage points).