Iowa's Limited Benefit Plan. VIII. CONCLUSION

05/01/1997

The analyses in the LBP Study have described the flow of cases through the LBP, the circumstances surrounding assignment to the LBP, the short-run changes experienced by LBP families following the termination of cash assistance, and their efforts to cope without cash assistance during the six-month FIP ineligibility period. These analyses have relied on data from three sources: (1) DHS administrative data on approximately 4,200 LBP cases, (2) a survey of 137 families whose cash assistance was terminated under the LBP, and (3) case studies of 12 such families. This chapter summarizes key findings from the LBP Study and draws conclusions regarding the nature of the program and its impact on families. It remains for the reader to draw his or her own conclusions regarding the implications of the study findings for reforms to the LBP or other broader changes in welfare policy.

Almost all assignments to the LBP are made because a member of a FIP case who is not exempt from the requirement to participate in employment and training activities fails to make or keep an appointment with PROMISE JOBS. Very few assignments are made because an individual who developed and signed an FIA fails to make a good faith effort to carry out the terms of the agreement. Regulations provide for two reconsideration periods for most LBP assignments, during which an individual may decide to participate in PROMISE JOBS and sign an FIA. If the individual does this, his or her assignment to the LBP is canceled. An assignment to the LBP may also be canceled to correct an administrative error or in response to an appeal. In total, slightly more than half of the assignments to the LBP are canceled before cash assistance is scheduled to end.

In addition to the cases that have their LBP assignment canceled and those that remain on the LBP until their FIP benefits are terminated, there are cases that stop receiving FIP benefits early. In particular, two-thirds of cases whose assignments to the LBP are never canceled stop receiving FIP benefits before the scheduled termination of cash assistance. Presumably, such cases either enter the LBP with the intention of needing cash assistance only temporarily, or they are induced to leave FIP by the initial reduction and imminent termination of benefits. Their early exit suggests that they are departing to financially viable situations.

Among LBP cases whose cash assistance actually is terminated, there are distinct gainers and losers. That is, some people recover from the loss of cash assistance and achieve a degree of economic success, while others do not recover, falling to a lower economic status. For example, half of the individuals whose cash assistance is terminated under the LBP are employed during the immediately succeeding months, but the other half are not. About 40 percent of LBP cases experience a net increase in total monthly income following the termination of cash assistance, with the average increase being $496. On the other hand, a larger proportion of cases, about 49 percent, experience a net decrease in total monthly income following the termination of cash assistance, with the average decrease being $384. Among the 30 percent of LBP cases that moved following the termination of cash assistance, just under half experienced an improvement in housing quality, while about one-fifth experienced a decline in housing quality. These patterns in employment, income, and housing changes suggest that the termination of cash assistance may serve as a catalyst for some families to move toward self-sufficiency, while for other families it amounts to a loss of an important financial safety net and a decline in economic status. Even among families who improve their situation, the degree of success may be modest, as evidenced by the fact that only 1 of every 10 individuals in LBP families who has a job following the termination of cash assistance receives health insurance through that job.

While this study has shown that the termination of cash assistance lowers the economic status of a substantial proportion of LBP families, it provides virtually no systematic evidence of extreme economic distress. In particular, the LBP Survey provides very little evidence that the affected families live on the streets or use emergency shelters in the months during which they are ineligible for cash assistance. The survey also provides little evidence that children are separated from their parents or that affected families move into the homes of friends or relatives in order to secure affordable housing during these months.

Although the termination of cash assistance under the LBP removes an important safety net, this study has found that a number of other public and private safety nets remain. These alternatives, however, may not be available to all needy families. The Food Stamp and Medicaid programs are the most important remaining public safety nets; these programs remain available to qualified LBP cases during the FIP ineligibility period, and many families continue in these programs. This study has shown that Food Stamp benefit levels increase modestly to replace some of the purchasing power that is lost by families whose cash assistance is terminated under the LBP. These families make surprisingly little use of the safety net programs provided by private-nonprofit organizations, with the use of food pantries being a notable exception to this pattern. Thus, there is little evidence from this study that the LBP has shifted the burden of dependency from the public sector to private-nonprofit social service providers. In contrast, there is strong evidence that networks of extended family members, friends, and neighbors provide an important safety net to LBP families. These networks provide emotional support as well as money, child care, and other types of material support. As shown by the LBP Survey and the case studies, these types of private support often increase following the termination of cash assistance and may be critical to a family's success in halting or reversing its economic decline. However, the case studies suggest that assistance from family, friends, and neighbors may be subject to informal time limits, implying that reliance on private-nonprofit social service providers might be greater if the period of ineligibility for cash assistance were longer than six months.

In interpreting these results and drawing conclusions regarding the implications of these findings for broader welfare policy, it is important to remember that the LBP is not a time limit policy, such as the lifetime limit on the receipt of cash benefits mandated by the federal Personal Responsibility and Work Opportunity Reconciliation Act of 1996. While the termination of cash benefits is a feature common to both the LBP and general time limits, two other features of the LBP distinguish it from general time limits and suggest that the effects of benefit termination would be different under the LBP. First, the LBP is applied only to cases that are capable of participating in training and employment, and some of those cases voluntarily enter the LBP after determining that their need for cash assistance is temporary. Second, the termination of cash benefits is limited to six months under the LBP, whereas it is permanent under general time limits.