Spending on Social Welfare Programs in Rich and Poor States. Final Report.. 3. Recent Changes in Spending: TANF Benefits

07/01/2004

Spending on cash assistance has declined sharply in most states over the last several years, especially since the implementation of welfare reform (Boyd et al., 2003). As noted above, the declines in cash assistance spending through 2000 were steep for wealthy states but smaller for poor states.

Although the categories we combined and labeled Cash Assistance under the Census Bureau definitions might include state SSI and federal SSI that passes through state accounts, state and local general assistance programs, and some other programs, for these six poor states, most of the spending in the cash assistance category seems to be TANF benefits.31 Before 2000, per capita spending on cash assistance dropped in all of these six states. Some of the declines, especially among the southern states, began long before state welfare reforms were implemented, with the western states showing more volatility.

The graph at the top of Exhibit IV-6 shows changes in per capita TANF benefits from 1997 through 2002. Among the six poor states, cash assistance spending typically changed little, continuing the dominant trend among states in the lowest fiscal capacity quartile before 2000. New Mexico was an exception among the poor states: its cash assistance spending continued to fall. But declines after 2000 were not found among the other low fiscal capacity states. Louisiana, Mississippi, and South Carolina saw little change through 2002. Some of the poor states saw increases in cash assistance spending: our site visits indicated that Louisiana's spending on TANF benefits increased dramatically between FY 2002 and 2003, and Arizona's spending on assistance increased, as well. West Virginia was more volatile, dropping steeply through 1999, rising in 2000, and then falling and rising again. Thus, through 2002, most of the poor states either stayed close to the already low levels of spending on cash assistance they had reached by 2000, or their spending began to creep up. The regional differences between states in their cash assistance spending, evident in the 1977-2000 Census data, continued through the early 2000s, as South Carolina, Louisiana, and Mississippi's TANF per capita expenditures remained lower than the other states through 2002.

Exhibit IV-6.
Changes in TANF Spending and Caseloads, 1997-2002

TANF Per Capita Expenditures
Changes in TANF Spending and Caseloads, 1997-2002

Number of TANF Cases Per Capita
Changes in TANF Spending and Caseloads, 1997-2002

The flat spending levels for TANF benefits among the poor states contrasted with changes in other, mostly wealthier, states, where drops in spending on assistance continued past 2000. In the nation as a whole, the average state's TANF per capita spending declined between 2000 and 2002, as shown in the graph at the top of Exhibit IV-6, freeing some money for services and other programs. The trend in Census data toward convergence in per capita spending on cash assistance between rich and poor states before 2000 thus also appeared in the expenditure data for TANF cash assistance, even after 2000.

Changes in TANF spending roughly reflected changes in TANF caseloads among the poor states, which are displayed in graph at the bottom of Exhibit IV-6 as the number of TANF cases per capita. After the large and widespread caseload declines through 1999, caseloads in most of the six states began to hold steady or climb. New Mexico and, to a lesser extent, Louisiana were exceptions; their caseloads fell through 2002. The other states either showed little change or drifted upwards. West Virginia's caseloads rose sharply from 2000 through 2002, while Arizona, Mississippi, and South Carolina's cases grew more slowly and later.

One reason spending on assistance tracked caseload changes was that, with few exceptions, these six states made few major changes in their cash assistance benefits, eligibility criteria, or other policies since 2000. Exhibit IV-7 shows AFDC/TANF benefits levels (based on the amount a three-person family would receive if it had no other income), adjusted for inflation, between 1980 and 2001. These six states rarely changed their benefit levels, producing a long-run downward trend in benefit levels due to inflation. Exceptions included Mississippi, which used its TANF surplus to raise its maximum benefits for a three-person family in the late 1990s, the state's first increase in benefits in more than two decades. West Virginia increased its benefits in 2000 to pay recipients the equivalent of a minimum wage for their hours in the state's work experience program (required under the rules of the Fair Labor Standards Act). And New Mexico raised and then lowered its maximum benefits between 1998 and 2000. As these exceptions indicate, most of the change among these states was upward, not downward, with respect to cash assistance benefits.

Exhibit IV-7.
AFDC/TANF Maximum Benefit Levels in Six Poor States, Adjusted for Inflation, 1980-2000

AFDC/TANF Maximum Benefit Levels in Six Poor States, Adjusted for Inflation, 1980-2000

Only West Virginia made substantial cuts in its assistance program through other policy changes: it reduced its earned income disregard and child support pass-through in 2002.32 But the remaining states made few changes in other TANF policies, including their income disregards, time limits on assistance, and sanctions for noncompliance with work activities. The interviews with state officials revealed little interest in making these rules less generous during a recession.33

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