Setting the Baseline: A Report on 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.