West Virginia's response to federal welfare reform encompassed three phases. In the first phase, West Virginia officials designed the state's early TANF program to reduce caseloads to minimize financial risks associated with the new block grant structure of TANF and federal penalties for not meeting federal work participation rates. The state experienced a dramatic 71 percent decline in caseload from 1995 to 1999, compared to 45 percent for the nation. Specific policies that contributed to this decline included 1) more restrictive income eligibility guidelines (reducing the state's monthly eligibility threshold from $498 to $420 a month and counting SSI as income - the SSI requirement was later overturned by court and legislative action), 2) changes in administrative procedures requiring AFDC recipients to re-certify eligibility in early 1998 and instituting a more complicated application process, and 3) clear "work first" signals including a full-family sanction for non-compliance with work requirements.
Like most states, West Virginia amassed a surplus of federal TANF funds due to the block grant structure of the program and caseload decline. By the spring of 2000, the state's $160 million TANF surplus exceeded its $110 million annual federal block grant. This surplus of federal funds coupled with the flexibility in the final TANF regulations, provided incentive for the state to expand its TANF program, the second phase. Significant changes to West Virginia's TANF program during this period included: 1) an increase in income disregard rates from 40 to 60 percent, 2) a gradual, $200 increase in monthly cash assistance payments, 3) more generous diversion payment of up to four months of cash assistance payments, and 4) new supportive services to TANF recipients and others at risk of TANF recipiency. In addition to efforts to expand eligibility and services, West Virginia sought ways to use its federal TANF funds to support TANF-eligible services in its foster care and child protective services programs that had been funded with state funds. The state's TANF caseload began to increase during this period, earlier than in most states, yet it remained approximately half the 1995 pre-TANF level of 39,231 cases.
The third phase of West Virginia's TANF program was marked by budget deficits and the need to limit program expansion. In early 2001, the West Virginia Department of Health and Human Resources announced a projected $90 million deficit in the state's TANF program for federal fiscal year 2003. This announcement and subsequent efforts to restrain spending attracted media attention.
The state used an open process to tackle the projected deficit which included a TANF advisory council of non-profit stakeholders, advocates, and state officials appointed by Governor Bob Wise to recommend a cost reduction plan. The Council recommended a series of cuts to TANF funded benefits and services, giving priority to fund those services that were more closely aligned with goals one and two of the federal TANF program - to assist needy families and promote employment. Changes recommended by the Council that have been enacted include reducing the state's 1) earned income disregard rate from 60 to 40 percent, its previous level, 2) child support pass-through from $50 to $25 a month, and 3) eligibility for services to individuals not in receipt of TANF from 185 to 150 percent of federal poverty level. The following recommendations have met resistance from stakeholders and have either been taken off the table or scaled back 1) use non-TANF funds to support $43 million in foster care and other services provided by the Bureau of Social Services - these services were previously funded by a TANF transfer 2) discontinue $27 million in contracts with mostly community-based organizations for supportive services, 3) reduce eligibility for child care services, and 4) eliminate the state's marriage incentive of $100 a month.