Early Implementation of the Welfare-to-Work Grants Program: Report to Congress. Policy and Economic Context for the WtW Evaluation


The policy and economic environment affecting welfare recipients is now dramatically different than it was before Congress enacted the PRWORA and the BBA.  The purposes of and organizational responsibility for income support programs have been redefined.  TANF programs must not only provide income support, but also help recipients make a transition to lasting employment.  The BBA also places a share of responsibility for that objective with workforce development agencies.  Meanwhile, the strong economy has combined with the cumulative effects of earlier state welfare reforms and the more recent federal policy changes to reduce welfare rolls dramatically, leaving a much smaller caseload than that of a few years ago.

Shift from Long­Term to Limited Financial Assistance.  The Aid to Families with Dependent Children (AFDC) program provided cash assistance indefinitely, and the Job Opportunities and Basic Skills (JOBS) program created for AFDC recipients by the Family Support Act of 1988 allowed (and, in some states, encouraged) recipients to participate in long­term education and training as a way to prepare for employment.  In contrast, TANF provides short­term, work­oriented assistance, while giving states considerable flexibility in designing programs and setting policies.  TANF recipients are required to work once they are job­ready or have received assistance for 24 months, and most families can receive federally funded TANF for a total of only 60 months during their lifetime.  To ensure that state TANF programs emphasize work, Congress mandated through PRWORA that states meet steadily increasing requirements for the percentage of their TANF caseload that is in employment­related activities.

As a result of time limits and the increased emphasis on work, most TANF programs stress job search assistance and encourage or require recipients to find jobs as quickly as possible, rather than encouraging extended education and training as preparation for employment.  Many states, as allowed, reinforce work requirements by having even more stringent penalties for noncompliance and shorter lifetime limits than the levels prescribed in the PRWORA.  Most states also reinforce work requirements by shifting to more generous earned income disregards and assistance with child care and transportation expenses than they provided under the AFDC program.

Organizational Separation of TANF and WtW.  Congressional action creating TANF and WtW has created two distinct structures for program responsibility and funding.  Under the PRWORA, states were given greater discretion and flexibility to run their welfare programs.  The legislation provides the 50 states and the District of Columbia with a total of about $16.5 billion annually as a block grant from DHHS through fiscal year 2002.  The legislation establishes a broad policy framework for state and local programs.  However, it transfers to the states much of the decision­making authority that the federal government previously held over the AFDC program.  The states may spend these resources on a combination of financial assistance and employment or support services of their own design, although they still must meet several federally defined goals and requirements.

The WtW initiative is different from TANF in several respects.  It was created to give states and localities additional resources to help the hardest­to­employ segments of the TANF population, including the noncustodial parents of children on TANF.  Funding allocation formulas favor areas with the greatest need by incorporating measures of the concentration of poverty and benefit receipt.  Its administrative structure is separate from that of TANF; whereas TANF is operated by human services agencies, primary responsibility for WtW rests with DOL at the federal level and its state counterparts.  WtW funds can be used not only to promote job entry, but retention and advancement.

WtW programs are also meant to be designed and operated primarily at the local level.  Seventy­five percent of the federal WtW funds are allocated to states based on a formula that considers states' shares of the national poverty population and TANF caseload.  States must in turn pass 85 percent of the funding they receive to local private industry councils (PICs) or workforce development boards (WDBs).1  PICs and other groups working with them can also receive separate competitive grants directly from DOL.

Heavy Emphasis on Employment for the Most Disadvantaged.  WtW programs as defined in the BBA are intended to complement the "work first" programs established under TANF.  The WtW initiative was developed to help states and localities focus on helping the most disadvantaged segment of the TANF population move into the labor market.  To ensure that grantees target use of their WtW resources as intended, the legislation established specific spending rules, requiring that 70 percent of grant funds be spent on (1) long­term TANF recipients or recipients within a year of reaching a TANF time limit, who also have two of three specific problems affecting employment prospects; or (2) noncustodial parents of children in a long­term TANF case, who themselves face two of the three specified problems.2

Decline in Welfare Caseloads.  From January 1994 to September 1998, the number of families receiving AFDC (and then TANF) declined by 43 percent, from 5.05 million to 2.90 million (U.S. Department of Health and Human Services 1999).3  This sharp decline can have several possible implications for implementation of the WtW programs.  First, it leaves many states with TANF funds that, when added to their state spending, allow increased spending on services that promote employment.  Second, to the extent that the decline in caseloads results from the strong national economy and job market, it suggests that the environment in which WtW programs are beginning their operations is conducive to success.  Meanwhile, states must still meet the federal TANF requirement that 50 percent of the cases must be working or in work activities.  As caseloads decline, the remaining TANF recipients may be those most unprepared for or resistant to sustained employment.  How these simultaneous effects and implications of caseload decline affect the operation and success of WtW programs will be an important issue for the evaluation as it continues.