[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
                       EFFECTS OF WELFARE REFORM

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 27, 1999

                               __________

                              Serial 106-9

                               __________

         Printed for the use of the Committee on Ways and Means


                                


                      U.S. GOVERNMENT PRINTING OFFICE
 58-372 CC                   WASHINGTON : 1999
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                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma                LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida

                     A.L. Singleton, Chief of Staff
                  Janice Mays, Minority Chief Counsel

                                 ______

                    Subcommittee on Human Resources

                NANCY L. JOHNSON, Connecticut, Chairman

PHILIP S. ENGLISH, Pennsylvania      BENJAMIN L. CARDIN, Maryland
WES WATKINS, Oklahoma                FORTNEY PETE STARK, California
RON LEWIS, Kentucky                  ROBERT T. MATSUI, California
MARK FOLEY, Florida                  WILLIAM J. COYNE, Pennsylvania
SCOTT McINNIS, Colorado              WILLIAM J. JEFFERSON, Louisiana
JIM McCRERY, Louisiana
DAVE CAMP, Michigan


Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
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current publication process and should diminish as the process is 
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                            C O N T E N T S

                               __________

                                                                   Page

Advisory of May 20, 1999, announcing the hearing.................     2

                               WITNESSES

U.S. Department of Health and Human Services, Howard Rolston, 
  Director, Office of Planning, Research and Evaluation, 
  Administration for Children and Families.......................    37
U.S. General Accounting Office, Cynthia M. Fagnoni, Director, 
  Education, Workforce, and Income Security Issues, Health, 
  Education, and Human Services Division.........................    85

                                 ______

American Enterprise Institute, and University of Maryland School 
  of Public Affairs, Douglas J. Besharov.........................     8
Center on Budget and Policy Priorities, Wendell Primus...........    29
Children's Defense Fund, Deborah Weinstein.......................    98
Manpower Demonstration Research Corporation, Robert C. Granger...   108
Maryland Department of Human Resources, Richard E. Larson........    77
O'Neill, June, Baruch College....................................    22
Wisconsin Department of Workforce Development, J. Jean Rogers....    73

                       SUBMISSIONS FOR THE RECORD

NETWORK, statement and attachment................................   147
Stark, Hon. Fortney Pete, a Representative in Congress from the 
  State of California, statement.................................   149



                       EFFECTS OF WELFARE REFORM

                              ----------                              


                         THURSDAY, MAY 27, 1999

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Human Resources,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:53 a.m., in 
room B-318, Rayburn House Office Building, Hon. Nancy L. 
Johnson (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

                    SUBCOMMITTEE ON HUMAN RESOURCES

FOR IMMEDIATE RELEASE                         CONTACT: (202) 225-1025
May 20, 1999
No. HR-7

                       Johnson Announces Hearing
                      on Effects of Welfare Reform

    Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on 
Human Resources of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a hearing on the effects of welfare 
reform. The hearing will take place on Thursday, May 27, 1999, in room 
B-318 of the Rayburn House Office Building, beginning at 10:30 a.m.
      
    Oral testimony at this hearing will be from invited witnesses only. 
Witnesses will include representatives from the Administration, State 
welfare directors, child advocacy groups, and researchers. However, any 
individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    The ``Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996'' (P.L. 104-193), dramatically changed American social 
policy. Perhaps the most dramatic change was that the entitlement-based 
Aid to Families with Dependent Children (AFDC) program was replaced 
with the Temporary Assistance for Needy Families (TANF) program. The 
new program has five major features. First, it ends the entitlement to 
cash welfare created by the AFDC program. Second, it creates a block 
grant with fixed funding that transfers a great deal of control over 
welfare programs to the States. Third, the law requires both States and 
individuals to meet stringent new work standards that require an 
increasing percentage of the adults on welfare to be involved in actual 
work; by 2002, 50 percent of the adults on welfare in every State must 
be involved in a work program. Fourth, it imposes strong sanctions on 
both States and individuals if they fail to meet program requirements. 
Fifth, the law imposes a five-year limit on cash welfare benefits 
funded by the TANF program. Taken together, these provisions represent 
one of the most substantial changes in a major American social program 
ever enacted.
      
    It has now been well over five years since a majority of States 
implemented welfare-to-work programs under waivers from pre-1996 
welfare law, three years since enactment of the Federal welfare reform 
law, and nearly two years since all States were required to implement 
their work programs. Many research and evaluation studies have been 
undertaken to study the effects of these programs on families, and many 
studies have already published results. Thus, it is now possible to 
formulate an initial judgment about whether the new work programs are 
having their intended effects.
      
    In announcing the hearing, Chairman Johnson stated: ``The 1996 
welfare reform law is one of the most important pieces of legislation 
enacted in recent years. Now we have a wealth of information about the 
effects of the legislation on welfare programs and families on welfare. 
We have examined this evidence carefully and come to the conclusion 
that so far welfare reform has been a solid success. There are some 
issues we need to carefully address--and we are committed to do that--
but I believe an unbiased assessment of the evidence is that the 
nation's welfare programs are at last helping poor and low-income 
Americans find work and improve their economic status.''
      

FOCUS OF THE HEARING:

      
    The goal of this hearing is to review important evidence on the 
effects of welfare reform, more specifically, information available on 
the details of state implementation, State spending, caseload declines, 
women's labor force participation, poverty, and the income of female-
headed families.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect 5.1 format, with their name, address, and 
hearing date noted on a label, by the close of business, Thursday, June 
10, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways and 
Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Human Resources office, room B-317 
Rayburn House Office Building, by close of business the day before the 
hearing.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette WordPerfect 5.1 
format, typed in single space and may not exceed a total of 10 pages 
including attachments. Witnesses are advised that the Committee will 
rely on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
    4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
      
    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.
      

    Note: All Committee advisories and news releases are available on 
the World Wide Web at `HTTP://WWW.HOUSE.GOV/WAYS__MEANS/'.
      

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      

                                

    Chairman Johnson  of Connecticut. Good morning. My 
apologies for starting this hearing late. I do not like to do 
that. The journal vote detained us, and it is hard to get away.
    We are here today, though, on a very, very important 
purpose. It is very important when you legislate to look back 
at what you did--not something that the Congress has been 
strong on, but something that is very, very important. And 
today, we are going to take a sustained look at what we know 
about the effects of the welfare reform legislation that we 
passed 3 years ago.
    We have a group of witnesses who represent the academic 
world, government research, program administration, and the 
advocacy community. There will be some disagreements, and that 
is healthy. We need to know what those who are out there in the 
field following this more closely are concluding about what is 
working and what problems remain.
    I urge those who have come today and everyone interested in 
the effects of welfare reform to read the papers that have been 
submitted for today's record. They are sophisticated, based on 
national data, well-reasoned, and provocative. This is exactly 
the way democracy is supposed to work, and I am proud to be 
part of the process and proud of all of you who have brought 
the information that we need to us today.
    The Republicans have also published a report that details 
some of the information about how welfare reform has worked. 
There has been a dramatic change in the offices, in the 
bureaucracy, amongst the people administering the program, and 
frankly, rarely in my 22 years in government have I passed laws 
that actually have affected the environment, the mindset, what 
is happening in the offices between government and its people 
to the degree that welfare reform has succeeded in doing that. 
We needed to jostle ourselves up, and we have done that. And I 
have been really excited to read some of the reports that have 
been done as to what actually is happening out there in the 
offices and for the people.
    I have been startled and proud of the drop in the number of 
people on welfare; the rise in the amount of money that the 
States have per welfare recipient to deal with the kinds of 
problems that many still face; the drop in poverty and child 
poverty, and particularly in black child poverty; the rise in 
the number of women heads of households that are now in the 
work force. The statistics at this point are for only a few 
years, but they are startling. They are unprecedented, both in 
their dimensions and in the consecutive number of years that we 
are seeing trend lines develop. We have made some profound and 
significant change. That does not give us the right to rest.
    This Subcommittee will be developing a ``welfare reform 
two'' bill, and it is for that reason that we are holding this 
hearing, as we held hearings on fatherhood issues earlier.
    [The opening statement follows:]

Opening Statement of Nancy L. Johnson, a Representative in Congress 
from the State of Connecticut

    I have seldom looked forward to a hearing as much as I have 
looked forward to this one. Today we are going to take a 
sustained look at what we know about the effects of the welfare 
reform legislation we passed nearly 3 years ago. To help us 
with this examination, we have invited a dazzling set of 
witnesses who represent the academic world, government 
research, program administration, and the advocacy community. 
I'll bet we will have some disagreements among our 
distinguished witnesses.
    I urge those who have come today and everyone who is 
interested in the effects of welfare reform to read the papers 
submitted for the record of today's hearing. They are 
sophisticated, based on national data, well reasoned, and in 
many cases provocative. This is exactly the way democracy is 
supposed to work. We passed an important law; now we want to 
study its effects. And much to my delight, we find that truly 
intelligent, dedicated, and honorable people have been 
conducting illuminating studies of the effects of the welfare 
law. Here is something we can all agree on--We have a lot to 
learn.
    Unfortunately, our witnesses do not all come to the same 
conclusions. As always, it is up to members of this committee 
to survey the evidence and come to our own lessons for public 
policy.
    If there is to be disagreement, let me speak for myself and 
Republicans on our Committee. This morning, Republicans 
published a detailed report of what we know to date about the 
impacts of welfare reform. Here are the results in brief:
    1. There has been dramatic change in welfare offices around 
the country. Now when able-bodied adults walk into the welfare 
office, they are given help preparing for and finding work. 
They are given to understand that welfare is temporary and they 
must learn to support themselves--with government assistance if 
necessary. Most respond positively. For those who refuse to 
work toward self-reliance, sanctions in the form of benefit 
reductions are frequently employed.
    2. There has been an amazing decline in the welfare rolls. 
Since the summer of 1994, the rolls have declined 45 percent. 
This decline is completely without precedent in the history of 
American social policy. By comparison, the biggest continuous 
decline in the AFDC rolls between the Korean War and the 
enactment of welfare reform in 1996 was 8 percent.
    3. There has been a big increase in the per-family money 
available to states to both pay cash benefits and to help 
people move into the work force. There has been no race to the 
bottom. In fact, if states use their money wisely, they can 
maintain benefits and launch new and sophisticated programs to 
help even very disadvantaged adults get into the labor force.
    4. There has been a striking increase in labor force 
participation by mothers. In 1997 we saw an increase of well 
over 400,000 in the number of mothers working. Even more 
important, between 1993 and 1998, the number of never-married 
mothers in the labor force increased 40 percent.
    5. Although many predicted the strong work requirements and 
time limits in the welfare reform law would increase poverty, 
in fact the poverty rate has declined every year as the welfare 
rolls were plummeting. In 1997, for example, while the welfare 
rolls were falling 20 percent, the biggest single-year decline 
in history, overall poverty, child poverty, and poverty among 
minority children all declined. In fact, the decline in poverty 
among black children was the largest ever.
    6. For the first time in several generations, the ratio of 
nonmarital to marital births has leveled off and the rate of 
nonmarital births per 1,000 unmarried women has even declined 
modestly--and in 1998 the rate of teen pregnancy declined for 
the sixth year in a row.
    We do not argue that all these outcomes were caused by the 
welfare reform law. But there is strong evidence that some of 
them were. And even a cynic must agree that we're witnessing 
some very positive social trends in our nation.
    Later this year our Subcommittee will study some of the 
problems we see in the implementation of welfare reform. But by 
the end of our hearing today, I believe we will find that there 
is lots of positive news and very modest bad news.
      

                                

    Chairman Johnson of Connecticut. So with that, I would like 
to yield to my Ranking Member, Mr. Cardin, again, with my 
apologies to Mr. Cardin and my colleagues on the Subcommittee 
who had to wait and to all of you.
    Mr. Cardin. Thank you, Madam Chair. And, Madam Chair, let 
me compliment you for holding this hearing on the oversight of 
welfare reform. I think that is one of the most important 
responsibilities of this Subcommittee.
    I must tell you--and I would ask that my entire statement, 
which is very well balanced, be put into the record--my 
comments may not be so balanced right now. And my reason is 
that it is my understanding that the Republicans held a press 
conference before the hearing, which is a little bit unusual, 
to talk about all of their partisan accomplishments on welfare 
reform.
    I find that regrettable. Reading from the Republican 
statement, they said this system was especially generous in 
cases of families with children--like it is some crime for us 
to take care of children in our society. I would hope that we 
would be generous for children in our society. And I was 
disappointed that the Republican news conference did not talk 
about the 1993 economic program that was passed with Democratic 
votes only. It gave us the strong economy we have right now, in 
which welfare reform has a much better chance of success 
because of what is happening in our economy.
    Madam Chair, I am one of those who voted for the welfare 
reform bill and worked very hard with Democrats and 
Republicans, so that we could change our welfare system. We did 
not do that in a partisan way. We did it because we thought the 
current system needed to be changed. But make no mistake about 
it, we have not achieved our objectives of welfare reform.
    Our goal is not to reduce the welfare rolls. Our goal is to 
reduce poverty. And as we look at the some of the recent 
statistics--we have major concerns as to whether, in fact, we 
are reducing poverty in our country. We find that, yes, people 
are moving from welfare to work, but, in many cases, they are 
worse off than they were before, and not able to continue in 
the job for long periods of time. We are finding that a lot of 
people who are being forced off of welfare are living in 
poverty. What are we doing about that?
    People who are entitled to food stamps and Medicaid are not 
being enrolled. Why? In some cases, we think that the States 
are being overly aggressive, in some cases violating law. Is 
that success? I do not think so. These are concerns that I 
would hope all of us would have, Democrats and Republicans.
    There is a child care gap in our society. It is very 
difficult for people to be able to afford decent child care. 
Recent events tell us one thing--tell us many things--is that 
we have to do a better job in society of taking care of our 
children. Is welfare reform succeeding in that regard? I think 
that is an open issue and one that we need to debate. Many 
individuals have multiple barriers to being able to find 
employment. And yet, what are we doing for that population? 
Very little.
    And then for noncustodial fathers, Madam Chair, you and I 
have both talked about doing more for noncustodial parents. So 
before we start bragging that we have accomplished our job, let 
us look at what is really happening in our community. We have a 
long way to go. Yes, we made some initial progress in this 
area, but we have a long way to go, and we are never going to 
be able to achieve it by partisan news conferences before very 
serious hearings.
    I regret the way that we have started today's hearing, and 
I know the Chair and I know how well she wants to work in a 
bipartisan way, and we have worked in a bipartisan way. But I 
would hope that this hearing can be conducted in a bipartisan 
way; that we can work together for the next chapter of 
improving everyone's lot in our society.
    [The prepared statement follows:]

Opening Statement of Hon. Benjamin L. Cardin, a Representative in 
Congress from the State of Maryland

    Madame Chairman, overseeing the implementation of welfare 
reform is one of the most important responsibilities of this 
Subcommittee. I therefore commend you for holding this hearing 
to evaluate the impact of welfare reform on low-income 
families.
    Before we immerse ourselves in statistics and research 
findings, I want to offer a few words of general caution to 
both supporters and opponents of welfare reform.
    To my friends who may have grave misgivings about the 
legislation enacted by Congress almost three years ago, I urge 
you not to simply wait for welfare reform to fail. The initial 
success States have shown in moving many welfare recipients 
into work provides a tremendous opportunity to promote the 
permanent self-sufficiency of millions of individuals, not to 
mention future generations. With the lowest unemployment rate 
in 29 years, there may never be a better time than today to 
help even the hardest-to-employ get a foothold in the 
workplace.
    And to my colleagues who may have concluded that the work 
on welfare is done, I remind you that the purpose of welfare 
reform is to reduce poverty, not caseloads. On this central 
issue, the preliminary data on welfare reform sends us two 
cautionary messages.
    First, some portion of the poorest Americans have fallen 
even deeper into poverty because they have been sanctioned off, 
or diverted from, welfare. The rise in the reported use of food 
banks and soup kitchens during such a strong economy appears to 
reflect this trend, which should be a concern to all of us.
    And second, many of those leaving welfare for work have yet 
to leave poverty for a better life. Employment is very 
important, but replacing a generation of welfare-dependent poor 
with a generation of working poor is not my definition of 
success. Such a result would strike at the very heart of our 
uniquely American concept that every citizen can make a better 
life for themselves, and for their children, through hard work.
    Therefore, we should not only assist welfare recipients in 
finding employment, but we must also help them keep and improve 
their jobs. In other words, our focus should evolve from job 
placement to career development.
    I look forward to hearing from our witnesses on this 
critical issue of transforming recent employment gains into 
permanent poverty reductions.
    In addition, I hope our witnesses will explore four issues 
that are important to the long-term success of welfare reform.
    First, there are disturbing reports about reduced access to 
food stamp and Medicaid benefits for individuals leaving or 
being diverted from cash welfare. This Subcommittee needs to 
hear how widespread this practice is and how best to prevent 
it.
    Second, there is evidence that most States are spending the 
vast majority of their child care funding on individuals 
exiting welfare, leaving little if any resources for other poor 
families. In fact, it appears many low-income, working families 
have fallen into a child care gap--caught between ineligibility 
for day care subsidies and not benefitting from child care tax 
credits. I would like to hear from our experts about the need 
for increased child care assistance for these families 
attempting to meet the dual challenges of working and raising a 
family.
    Third, I hope to hear suggestions about how to help welfare 
recipients with multiple barriers to work, such as a substance 
abuse problem, a disability, or the lack of a high school 
degree, make the transition to employment.
    And fourth, I would like to hear recommendations about how 
to help non-custodial fathers play a greater role in the lives 
of their children.
    I will close by reminding the Subcommittee that the 
Administration's proposal to reauthorize the Welfare-to-Work 
program addresses both the need to help hard-to-employ welfare 
recipients and the need to assist fathers in supporting their 
children. And of course, the President's proposal to increase 
child care funding would make great strides in filling the 
child care gap faced by millions of working families.
    Madame Chairman, I look forward to a detailed discussion of 
these and many other issues. Thank you.
      

                                

    Chairman Johnson of Connecticut. Well, I certainly hope so, 
too. There were certain partisan controversies during the 
welfare reform debate. Luckily, they mostly came together in a 
lot of bipartisan agreement, but I think the revolution that 
has made welfare reform a success is truly a bipartisan 
revolution, because it has to do with expanding the EITC, the 
earned income tax credit, which certainly was in the 
President's proposal as has been in Republican Presidents' 
proposals, and the other support systems for working people, 
and we did certainly point out that bipartisan aspect of the 
revolution.
    We will call the first panel now.
    Mr. Camp. Madam Chairman, if I could make a comment?
    Chairman Johnson of Connecticut. Well, certainly.
    Mr. Camp. I just want to say that I think, when we got to 
the end of the welfare process, it became fairly bipartisan, 
but it certainly did not start that way. And I think you are 
very gracious in your comments, and I certainly admire that. 
But we had a lot of partisan shots, and I do not think the fact 
that some Members hold a news conference is going to affect 
what we do in this hearing. There are news conferences all over 
this Hill every day and on every issue, and you certainly 
cannot control what people say.
    You know there has been tremendous progress made. We are 
all here because we know there is more we need to do. And I 
just want to be a part of doing that, but I do not really see--
and I was not at that press conference, so I do not know 
exactly what was said there, but I do not think that is going 
to get in the way of what we are trying to do here.
    Chairman Johnson of Connecticut. Thank you, Mr. Camp.
    Now we call the first panel: Doug Besharov, resident 
scholar of the American Enterprise Institute; June O'Neill, 
Wollman Professor of Economics at the Zicklin School of 
Business, Baruch College, New York; Wendell Primus, director of 
income security, Center on Budget and Policy Priorities; and 
Howard Rolston, Director of the Office of Planning, Research 
and Evaluation, from HHS.
    Mr. Besharov.

 STATEMENT OF DOUGLAS J. BESHAROV, RESIDENT SCHOLAR, AMERICAN 
  ENTERPRISE INSTITUTE; AND PROFESSOR, UNIVERSITY OF MARYLAND 
                    SCHOOL OF PUBLIC AFFAIRS

    Ms. Besharov. Thank you very much, Chairman Johnson and 
Members of the Subcommittee. Thank you for inviting me to 
testify here today. Like most of the other witnesses today, I 
find that the result of welfare reform has been more work and 
less dependency. My testimony is long and has a number of 
charts. Chart 1 portrays what you all know, which is the sharp 
decline in the caseload.
    Although a strong economy, no doubt, helped a lot to reduce 
this caseload, and the major expansions of aid to the working 
poor, as Chairman Johnson mentioned, also has helped, I think 
most impartial experts agree that without welfare reform, the 
caseloads would not have fallen nearly as much as they did. And 
that is widely agreed upon, even by the administration, by 
outsiders, and so forth.
    Why is that? Because the key elements of welfare reform--
work first, diversion, job search, yes, even sanctions and time 
limits--encourage mothers to work, help them to work, and make 
some other mothers think twice before seeking benefits. I will 
get back to that point in a moment.
    So what is happening to the people who have left the rolls? 
That is the big question, and that is the question that Mr. 
Cardin mentioned, and which I think Wendell Primus will be 
talking about as well.
    Today's Washington Post summarizes the GAO report. My own 
sense is that the GAO report is about right, although if I use 
the phrase regular work as opposed to any work, it is more in 
the neighborhood of 50 to 60 percent. What about those leaving 
welfare who are not working? Either way, we have large numbers 
who are not working.
    My own work, and I think those of many others, suggests 
that many of those leaving are living with others, living in 
households either with their parents, relatives, or a 
boyfriend, often with the boyfriend being a parent of one of 
their children.
    And that is why so many people are worried that the folks 
who have left welfare are suffering more hardship. So my 
testimony, the rest of it, is really somewhat defensive, and I 
wasn't sure how I was going to bring it up until I heard Mr. 
Cardin speak.
    Let me draw your attention to my chart 2, which is 
relatively complicated. I am not going to walk you through it. 
I just want you to see that especially between 1994 and 1998, 
the Congress has sharply increased child care spending to about 
$3 billion a year by 1998. My assessment, which is in my 
testimony, and which I believe is concurred--I do not want to 
assert that too strongly--by the Children's Defense Fund, is 
that there is enough money in what you all have already passed 
to meet the child care needs of people leaving welfare. The big 
issue is the working poor. That is a different issue, but for 
welfare reform, I think there is no disagreement that you all 
have appropriated enough money.
    Second, there has been an argument--and Mr. Cardin 
mentioned it--about declines in food stamp participation, so I 
am glad that I have chart 5, which actually is a play on 
something that the center on Budget and Priorities presented. 
The center tends to talk about the period from 1995 to 1997 in 
order to show that a large number of people--I think six times 
larger--left food stamps than left poverty.
    However, if you examine the longer period, from 1993 to 
1997, and if you include the people excluded from the Food 
Stamp Program by policy decisions of this Congress, mainly 
legal aliens and able-bodied workers, what you find in chart 5 
is that the differences between the declines in food stamps and 
the declines in poverty are about equal. As usual in this town, 
it depends on when you measure.
    Getting to measurement issues, take a look at chart 6. 
Again, in the time I have I won't walk through this whole 
chart, but what this says is you should take everyone's 
statistics, including mine, with a grain of salt. Most analyses 
use the Current Population Survey of the Census Bureau to 
determine what is happening to low-income Americans. This chart 
shows you that, whether it is Medicaid receipt, AFDC, Aid to 
Families With Dependent Children, TANF, Temporary Aid to Needy 
Families, or food stamps, the Census is becoming increasingly 
unable to measure accurately participation in these programs. 
If you look at these numbers, we are talking about only 65 
percent of TANF recipients being identified.
    Where does that take me in conclusion? Again, take all 
these numbers with a grain of salt. There is a concern that Dr. 
Primus mentions about the reductions in income among the lowest 
quintile of single-mother families. You will see in my last 
chart, chart 7, that if you look at households, that is, where 
these families live: First, the income is almost twice as high 
as what we are used to seeing. And second, there is not a 
downward trend in the income.
    What this says to me is that when we think about welfare 
reform, we should think not just about people leaving welfare 
for work, but we should also think about the households in 
which these families are embedded. And we should be worrying 
about the well being of those households. And in the 10 seconds 
or so I have left, what that means is strengthening those 
relationships when they are cohabitations. I applaud the 
Subcommittee, because I understand that you are considering 
legislation to help erase the marriage penalties, both in the 
tax law in general, but more particularly in the EITC and in 
child support. Those marriage penalties affect these numbers 
very directly.
    Thank you very much.
    [The prepared statement and attachment follow:]

Statement of Douglas J. Besharov, Resident Scholar, American Enterprise 
Institute; and Professor, University of Maryland School of Public 
Affairs

    Chairman Johnson and Members of the Subcommittee on Human 
Resources:
    Thank you for inviting me to testify about the impact of 
the 1996 welfare reform law and associated policy changes. My 
name is Douglas Besharov. I am a resident scholar at the 
American Enterprise Institute for Public Policy Research, where 
I conduct research on children and families. I am also a 
professor at the University of Maryland School of Public 
Affairs, where I teach courses on family policy, welfare 
reform, and evaluation.
    Welfare reform in 1996--embodied in the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 
(PRWORA) and the Temporary Assistance for Needy Families (TANF) 
block grant--resulted in massive changes in the operations of 
state and local welfare agencies. Many have gone from being 
check-writing offices to being engines of employment and 
personal and family responsibility. Contemporaneously, welfare 
caseloads declined sharply. (This was actually the first 
serious caseload decline in at least 30 years.) Although the 
strong economy helped, experts are unanimous that ``welfare 
reform'' is a major explanation for this unprecedented 
decline--now reaching 44 percent since March 1994. (Chart 1.)
[GRAPHIC] [TIFF OMITTED] T8372.014

    Even many of the harshest critics of the welfare reform law 
have been impressed with what has been accomplished. Besides 
lower caseloads, there has been an explosion of work among 
never-married mothers with children--the women most likely to 
become long-term welfare dependents. Since 1993, their 
employment rate has risen from 44 percent to 61.5 percent.
    I recount some of these developments below. But my real 
focus is on the concerns of those who say that this decline in 
welfare and increase in work has been accompanied by increased 
levels of material hardship on what once would have been 
welfare families. Any such increase in material hardship should 
be of concern to us all. If we found increased hardship, we 
would have to make the difficult ethical determination about 
whether the hardship was justified by all the good that has 
also been accomplished by the welfare reform law. However, and 
this is the key point in my testimony, with the measures 
available, there is no evidence of significant increases in 
material hardship.

                       Why Caseloads Are Falling

    As I mentioned, welfare rolls are down an amazing 44 
percent since their historic high in March 1994. That's about 
2.2 million fewer families (or about 6.7 million fewer parents 
and children) on welfare. At least fifteen states have seen 
declines of over 50 percent. Fewer families are going on 
welfare, and more are leaving.
    Unfortunately, political credit claiming and ideological 
preconceptions, assisted by limited data, have obscured what is 
really going on. There is nothing new in that, of course. But 
without a true understanding of what is driving down welfare 
rolls, we cannot judge whether the decline is a good thing, nor 
capitalize on its lessons.
    A strong economy is the obvious first explanation, and the 
one most attractive to those who think that welfare dependency 
is largely a reaction to a lack of opportunity. Between January 
1994 and September 1998, for example, the unemployment rate 
fell a remarkable 30 percent, from 6.7 percent to 4.6 percent. 
In that period, 7.5 million more people entered the labor 
force. Even more striking: Never-married mothers, the group 
most prone to long-term welfare dependency, are 40 percent more 
likely to be working since 1993 (from 44 percent to 61.5 
percent).
    But we have had strong economies before, without such sharp 
declines in welfare. In fact, most studies suggest that the 
good economy accounts for no more than about 20 percent of the 
total decline. What else is going on?
    The end of the welfare entitlement, or, as Candidate Bill 
Clinton used to say, the ``end of welfare as we know it,'' 
seems to be the best explanation. Across the nation, the 
culture of welfare offices has changed--from places where 
mothers sign up for benefits to places where they are helped, 
cajoled, and, yes, pressured to get a job or rely on others for 
support.
    Many welfare offices are now ``job centers,'' where workers 
help applicants and recipients find employment. Depending on 
the office, they teach how to write resumes and handle job 
interviews; provide access to word processors, fax machines, 
telephones and even clothes; offer career counseling and 
financial planning services; and refer them to specific 
employers with job openings. In a survey of former welfare 
recipients in Texas who left the rolls in December, 1996, over 
60 percent said the welfare agency ``gave me the kind of help I 
needed.''
    Some of this is boosterism, plain and simple, with workers 
giving young mothers the moral support they so often need. As 
one worker said, ``Some of these women never thought that they 
could get a job. We give them the confidence to try.''
    Also helping are the recent massive increases in federal 
aid to low-earning parents, to ``make work pay.'' Since 1993, a 
conservative estimate is that total aid to the working poor 
increased by about $30 billion, almost doubling. For example, 
between 1993 and 1997, the Earned Income Tax Credit's cash 
subsidy to single mothers with two children working full-time 
at the minimum wage more than doubled, rising from $1,511 to 
$3,656. Often of even more importance to mothers with young 
children, most welfare agencies can now offer child care to any 
applicant or recipient who gets a job.
    This genuine help to mothers--and it permeates the 
implementation of welfare reform in most states--unquestionably 
assists many to leave welfare for work. But this isn't the 
whole story: Only about half the mothers who leave welfare seem 
to have jobs, often very low-paying jobs. The other half are 
just leaving--perhaps to work eventually, but more immediately 
they are moving in with family, friends, or boyfriends, or 
being supported by them. Some are simply getting by with less 
income. (So far, there is little evidence of more marriage, 
even though that has traditionally been a major reason for 
leaving welfare.) Why are they leaving without having jobs?
    The other palpable aspect of welfare reform has been the 
reintroduction of a long-gone aspect of being on welfare: 
hassle. In most places, a new element, ``diversion,'' has been 
added to the application process. Diversion is encapsulated in 
two simple questions now asked of welfare applicants: Have you 
looked for a job? Can someone else support you? Many welfare 
agencies maintain a bank of phones that applicants must use to 
call 5, 10, or even 20 potential employers before they can 
receive benefits. When told of these requirements, many 
applicants simply turn around and walk out.
    New York City's ``Job Centers,'' for example, exemplify 
this interplay between new welfare's help and hassle. All 
applicants are encouraged to look for work (and offered 
immediate cash support for child care) or support from 
relatives or other sources. For those who still decide to apply 
for welfare, the new rules require that they go through a 30-
day assessment period during which they complete the 
application process and go through a rigorous job-readiness and 
job-search regimen involving many sessions at the Job Center 
and other offices. At the end of this period, eligible able-
bodied adults who choose to receive assistance are required to 
participate in the city's workfare program. As a result, the 
percentage of mothers who walk in the door who are eventually 
enrolled has fallen by about 40 percent, from about around 50 
percent to around 30 percent.
    Being on welfare has also changed with the imposition of 
various mandatory activities. In almost all states, recipients 
are required to sign ``self-sufficiency agreements'' describing 
their plan for becoming self-sufficient within a specified time 
frame. Iowa, for example, requires able-bodied recipients 
without infant children to develop and sign a Family Investment 
Agreement, which describes the person's plan for becoming self-
sufficient within a specified time frame. Failure to sign or 
comply with this agreement can result in an initial reduction 
in benefits, followed soon thereafter by complete termination 
of cash assistance. About 10 percent of those who begin this 
process have their benefits terminated for a six-month period 
for failure to sign or comply with the agreement.
    Although these new requirements are intended to help 
recipients find and keep jobs, they undeniably raise what 
economists would call the ``cost'' of being on welfare. By a 
rough calculation that assumes recipients value their time at 
the minimum wage, this kind of hassle can reduce the advantage 
of being on welfare versus working to zero in very low-benefit 
states and, nationally, can reduce the advantage by about 50 
percent.
    How much of a factor is this hassle? When these new 
requirements are explained to applicants and recipients, they 
often say things like: ``I guess I might as well get a real 
job'' or ``I might as well move back home.'' In the survey of 
Texas recipients leaving welfare, about a quarter said that 
important factors were either ``unfriendly caseworkers'' or 
``new program requirements.'' And in a survey of those who left 
welfare in South Carolina between January and March 1997, 60 
percent said they felt ``hassled,'' and 13 percent said that's 
why they left. About a third said that the state's welfare 
program ``wants to get rid of people, not help them.''
    So far, at least, this combination of helping and hassling 
mothers off welfare--and discouraging them from signing up in 
the first place--does not seem to have caused undue hardship. 
Surveys of those who have left welfare indicate that, although 
some are worse off, most families are doing as well or better 
after having left. Perhaps more tellingly, despite intensive 
efforts, journalists have found few horror stories with which 
to document the harmful effects of welfare reform. And in the 
same South Carolina survey where 60 percent of those who left 
welfare complained about being hassled, 80 percent said that 
the caseworkers treated them ``with perfect fairness.'' Only a 
quarter reported that ``life was better'' when they were 
receiving welfare.
    Indeed, an analysis by Richard Bavier of the Office of 
Management and Budget suggests that the decline in welfare 
benefits caused by families leaving welfare was offset by two-
or three-fold gains in income due to work. According to Bavier, 
from 1993 to 1997, female family heads with children 
experienced reductions of $6.7 billion in cash welfare and $2.1 
billion in food stamps. However, their earnings increased by 
$26.9 billion and their EITC benefits by $5.1 billion. After 
including taxes and other noncash benefits in the calculation, 
he finds that ``income for this family type increased $19.6 
billion in 1997 dollars.''\1\ Although household surveys have 
problems of underreporting or misreporting income, the 
magnitude of this income gain suggests that it is both real and 
substantial.
---------------------------------------------------------------------------
    \1\ Richard Bavier, ``An early look at the effects of welfare 
reform,'' March 20, 1999, p. 7.
---------------------------------------------------------------------------
    As I note below, some argue that these overall gains mask 
losses in income among the poorest female-headed families. For 
example, Wendell Primus of the Center on Budget and Policy 
Priorities has written: ``Between 1993 and 1995, the earnings 
and incomes of the poorest fifth of single mother families 
increased despite a modest decline in income from welfare 
programs. Between 1995 and 1997, however, the very poorest 
single mother families faced a significant decline in their 
incomes after including all government taxes and transfers 
largely due to sizeable declines in their welfare 
assistance.''\2\ For the reasons I describe below, I think that 
the available data does not support this conclusion.
---------------------------------------------------------------------------
    \2\ Wendell Primus, Testimony before the Committee on Government 
Reform and Oversight, April 22, 1999.
---------------------------------------------------------------------------

                        Assessing Welfare Reform

    Others today, I am sure, will discuss these developments in 
greater detail. Let me focus on the concerns that have been 
raised by various advocacy groups.
    1. Insufficient child care? During the debate leading up to 
the passage of TANF, the provision of adequate child care was a 
major bone of contention. As a result, the Congress sharply 
increased funding. Was it enough? Testifying before this 
committee on March 16 of this year, Helen Blank of the 
Children's Defense Fund said: ``enormous gaps still remain in 
our efforts to help low-income parents work and take care of 
their children. Much more needs to be done to ensure that 
families on welfare have the child care assistance they need to 
get and keep jobs, without sacrificing low-income families who 
are struggling to keep their jobs and stay off welfare.''\3\
---------------------------------------------------------------------------
    \3\ Testimony of Helen Blank, Director, Child Care and Development, 
Children's Defense Fund, before the Ways and Means Committee, March 16, 
1999; p. 4.
---------------------------------------------------------------------------
    I have tried to calculate child care needs under welfare 
reform compared to this increased funding. Between 1994 and 
1998, state and federal child care spending increased by at 
least $3.1 billion. If the President's FY 2000 proposals are 
approved, they will add another $3.053 billion. Furthermore, if 
states use their unexpended TANF funds for child care, that 
could add another $4.302 billion by the year 2000. (Chart 2.)
[GRAPHIC] [TIFF OMITTED] T8372.015

    As my third chart illustrates, states have enough money to 
cover the child care needs generated by welfare reform--so long 
as they are not forced to monetize and formalize child care. 
(Chart 3.) That is, so long as we do not discourage family 
members from caring for children without charging the 
government and so long as we do not drive low-cost providers 
out of business with onerous (and, in the end, sterile) 
regulations.
[GRAPHIC] [TIFF OMITTED] T8372.016

    2. Declines in Food Stamp receipt? The critics of welfare 
reform often compare changes in program caseloads to changes in 
poverty to make claims about the effects of public policy. 
Consider a recent statement released by the Center on Budget 
and Policy Priorities:

        During the two-year period from 1995 to 1997, the decline in 
        the number of people receiving food stamps--4.4 million--was 
        five times greater than the decline in the number of people 
        living in poverty.

        The food stamp figures are especially noteworthy because the 
        income limit for food stamps is slightly above the poverty 
        line; as a result, families moving from public assistance to 
        low-wage work that leaves them in poverty do not lose 
        eligibility for food stamps. These data indicate that the 
        reductions in the number of households receiving food stamps 
        have exceeded reductions in need and that the proportion of 
        poor people receiving basic food assistance to help them secure 
        an adequate diet has declined.\4\
---------------------------------------------------------------------------
    \4\ Center on Budget and Policy Priorities, ``Poverty Rates Fall, 
but Remain High for a Period With Such Low Unemployment,'' October 8, 
1998.

    This analysis is very misleading. It is very sensitive to 
the time period chosen. The 1995-1997 period chosen by the 
Center just happens to be the one that shows the greatest 
difference in the decline between the number of poor and the 
number receiving food stamps. Had the Center used 1993 as the 
starting point of its comparison, a very different picture 
would have emerged. (Chart 4.)
[GRAPHIC] [TIFF OMITTED] T8372.017

    Between 1993 and 1995, for example, the figures were 
reversed. The decline in poverty was 3.3 times greater that the 
decline in food stamps. Thus, if the Center had viewed the 
period 1993-1997, the declines would have been more comparable: 
5.2 million fewer food stamp recipients compared to 3.7 million 
fewer people living in poverty. That would be a decline in food 
stamp receipt 40 percent greater than the drop in the number of 
poor, not five times greater. (Chart 5.)
[GRAPHIC] [TIFF OMITTED] T8372.018

    Furthermore, part of the decline in the food stamp rolls 
can be attributed directly to policy decisions contained in the 
1996 welfare reform law to remove from the Food Stamp program 
certain immigrants and unemployed childless adults (ABAWDs). 
According to the U.S. Department of Agriculture, the 1996 
welfare reform law made about 1.3 million food stamp 
recipients, primarily immigrants and unemployed childless 
adults, ineligible for benefits.\5\ Indeed, from July 1996 (the 
month before the landmark welfare reform legislation passed) to 
September 1997, the number of permanent resident aliens and 
ABAWDs declined by 953,000 and 477,000, respectively, for a 
total decline of 1.43 million.\6\
---------------------------------------------------------------------------
    \5\ Craig Gundersen, Michael LeBlanc, and Betsey Kuhn, ``The 
Changing Food Assistance Landscape: The Food Stamp Program in a Post-
Welfare Reform Environment,'' U.S. Department of Agriculture, Economic 
Research Institute, Agricultural Economic Report No. 773, March 1999, 
p. 5.
    \6\ Scott Cody and Laura Castner, Characteristics of Food Stamp 
Households: Fiscal Year 1997 (Alexandria, VA: U.S. Department of 
Agriculture, Food and Consumer Service, February 1999). The declines 
using the average monthly caseloads for FY 1996 to FY 1997 are bit 
smaller: 440,000 and 174,000 for a total of 614,000.
---------------------------------------------------------------------------
    Taking this longer view and accounting for the deliberate 
removal of certain groups from the Food Stamp program almost 
erases the difference in declines between poverty and food 
stamp recipiency.
    I want to emphasize that I believe that the intersection of 
the Food Stamp and welfare programs has received insufficient 
policy attention. The two programs are in desperate need of 
coordination, as I wrote in a recent article for Policy & 
Practice, of the American Public Human Services Association. 
But that is a very different point.
    3. Declines in Medicaid Coverage? A recent report from 
Families USA asserts that ``state administrative systems often 
continue to treat Medicaid as an extra welfare benefit. This 
means that when a family is terminated from welfare, its 
Medicaid case is often closed at the same time. Because the two 
programs remain connected in the minds of caseworkers and 
recipients as well as in state computer eligibility systems, 
the new emphasis on closing welfare cases as quickly as 
possible is causing many families to be cut off Medicaid, even 
when they are still eligible.''\7\ Perhaps, in some places. But 
that seems to be a substantial exaggeration of state practices.
---------------------------------------------------------------------------
    \7\ Families USA Foundation, Losing Health Insurance: The 
Unintended Consequences of Welfare Reform, by Rachel Klein (Washington, 
D.C.: Families USA Foundation, May 1999), p. 7.
---------------------------------------------------------------------------
    First, there has be a decline in Medicaid recipiency. Two 
prime reasons are the strong economy and welfare reform 
(including the delinking of Medicaid and TANF eligibility). 
Another reason is that many families that are Medicaid eligible 
simply forego signing up until a family member gets sick 
(something that was almost automatic under AFDC). After all, 
unlike private insurance, there is no pre-existing condition 
rule for Medicaid.\8\
---------------------------------------------------------------------------
    \8\ See Expanding Health Insurance Coverage for Children Under 
Title XXI of the Social Security Act (February 1998: Congressional 
Budget Office, Washington, D.C.); p. 12, stating that, most likely, 
``many children . . . are joining the ranks of those with contingent 
coverage: as families sever their ties to the welfare system, they have 
less opportunity to enroll their children in Medicaid--if, indeed, they 
are even aware that their children may still be eligible for the 
program. Although such children are not currently enrolled, they are 
still likely to use the program if they become sick.''
---------------------------------------------------------------------------
    Second, assertions about declines in Medicaid coverage are 
often based on analyses of the Census Bureau's Current 
Population Survey (CPS), the government's primary data source 
for measuring employment, earnings, poverty, welfare receipt, 
and a range of other important outcomes. Unfortunately, the 
survey appears to miss about one-third of AFDC/TANF, food 
stamp, and Medicaid recipients. Perhaps even more important, 
this problem has been getting worse in recent years, a 
deterioration that has important implications for judging the 
impact of welfare reform. (Chart 6.)
[GRAPHIC] [TIFF OMITTED] T8372.019

    For example, according to the CPS, between 1993 and 1997, 
the number of children under 15 enrolled in Medicaid declined 
by 3.2 million. But reliable administrative data from the 
Health Care Financing Administration show an increase of 
400,000.\9\ (For the period 1995-1997, HCFA data also show a 
decline of 700,000 children, but CPS shows a much larger 
decline of 1.7 million.) These kinds of discrepancies led the 
authors of an Urban Institute report to conclude: ``until the 
phenomenon of Medicaid underreporting is better understood, it 
will be difficult to reach firm conclusions about the changing 
Medicaid caseloads and their effect on the number of 
uninsured.'' \10\
---------------------------------------------------------------------------
    \9\ The Census Bureau cautions that ``In the Current Population 
Survey (CPS), Medicare and Medicaid coverage estimates are 
underreported, compared with enrollment and participation data from the 
Health Care Financing Administration (HCFA). A major reason for the 
lower CPS estimates is the fact that CPS is not designed to 
specifically collect health insurance data. Instead, it is largely a 
labor force survey, with minimum interviewer training on health 
insurance concepts. Data from HCFA represent the actual number of 
people who were enrolled or participated in these programs and is 
therefore a more accurate source of data on levels of coverage.'' See 
Robert L. Bennefield, Health Insurance Coverage: 1997 (Washington, 
D.C.: U.S. Department of Commerce, Bureau of the Census, September 1, 
1998), pp. 6-7.
    \10\ Kimball Lewis, Marilyn Ellwood, and John L. Czajka, ``Counting 
the Uninsured: A Review of the Literature,'' The Urban Institute, June 
1998.
---------------------------------------------------------------------------
    This problem of underreporting of government benefits also 
undermines estimates of income declines for low-income 
families. For example, analyses of income trends involving low-
income single mothers will understate their incomes because 
they miss an increasing percentage of welfare income.
    4. Declines in income? In recent testimony before the 
Committee on Government Reform and Oversight, Wendell Primus 
said, ``While some poor single mother families have been able 
to maintain or raise their income levels because of increased 
earnings and the expanded EITC, other poor single mother 
families' incomes have fallen substantially and they are now 
deeper in poverty than earlier in the decade.'' \11\ As we will 
see, on the basis of available evidence, one should not 
conclude that ``incomes have fallen substantially'' for a large 
number of families. (emphasis added)
---------------------------------------------------------------------------
    \11\ Wendell Primus, Testimony before the Committee on Government 
Reform and Oversight, April 22, 1999. Dr. Primus also asserted that, 
``Between 1995 and 1997, the economic status of persons in the bottom 
decile declined. The average incomes of families in the poorest decile 
fell by almost $1,000, a statistically significant decline of 16.3 
percent.''
---------------------------------------------------------------------------
    Such estimates are tremendously dependent on the 
assumptions embedded in the analysis. For example, Dr. Primus's 
initial estimates did not include a correction for the growing 
deterioration of the accuracy of the CPS in reporting welfare 
payments. I understand that he has now made a correction for 
this problem. His current numbers, which I have not seen, now 
suggest a small decline in incomes for some groups of low-
income mothers. My judgement is that the declines he finds are 
too small--and too dependent on the assumptions that any 
analyst would make--to be the basis of policy.
    But Dr. Primus's analysis did encourage us to look further 
at what was happening in the female-headed families with the 
lowest incomes. His research showed than many of them had zero 
incomes. That is, they neither had earnings from work, nor 
income from investments, nor did they receive welfare benefits. 
But they were also not homeless, nor in shelters. My next chart 
helps explain what is happening. (Chart 7.)
[GRAPHIC] [TIFF OMITTED] T8372.020

    Based on data from the CPS, as analyzed by Richard Bavier 
of the Office of Management and Budget, it appears that about 
30 percent of the female family heads with children in the 
bottom fifth of the income distribution (based on post-tax, 
post-transfer family income) were living with other non-family 
household members. The average income of these household 
members was over $20,000, with some much higher.
    Adding this ``household income'' to the families that Dr. 
Primus said lost income suggests that the households containing 
these families have at least held their own--and perhaps 
improved their situation. (Remember, this is only reported 
income.)
    This explains, by the way, why as many as a third to half 
of the mothers who leave welfare do not report that they are 
working. TANF has raised the ``cost'' of being on welfare, as 
described above, and these women are simply deciding to forego 
the heightened ``hassle'' of being on welfare. They can leave 
welfare because someone else--usually a boyfriend--is 
supporting them or will support them. This brings me to my 
final point.

                  Cohabitation and marriage penalties

    Cohabitation was once unusual and largely limited to low-
income and less-educated couples, whereas now it is more 
mainstream. In the mid 1950s, for example, cohabitors were five 
times more likely to be high school drop outs than college 
graduates, but in either case, the proportions were low (5 
percent vs. 1 percent). By the mid 1980s, the figures were 
strikingly higher (45 percent vs. 22 percent), with the 
difference cut almost in half.\12\
---------------------------------------------------------------------------
    \12\ Data from the National Survey of Families and Households shows 
that about 5 percent of people with less than a high school education, 
and who were born between 1928 and 1932 lived in a cohabiting 
relationship prior to age twenty-five (somewhere between 1953 and 
1957). The corresponding figure for persons with a college education 
born during the same time frame was less than 1 percent. Among the 
cohort born between 1958 and 1962 (who hit age twenty-five between 1983 
and 1987) the chances of cohabiting before age twenty-five increased 
dramatically. A little over 45 percent of people with less than a high 
school education born between these years cohabited before age twenty-
five, compared to 35 percent of those with some college education and 
about 22 percent of those with a college degree. Thus, over the thirty 
year period the differences in cohabitation rates between the least and 
most educated were reduced from 80 percent to about 50 percent. [Andrew 
J. Cherlin, Marriage, Divorce, Remarriage revised and enlarged edition 
(Cambridge, Mass.: Harvard University Press, 1992), p. 12.]
---------------------------------------------------------------------------
    The foregoing statistics are for women who have ``ever'' 
cohabited. What about ``current'' cohabitations? In 1995, about 
7 percent of women were currently cohabiting.\13\ Larger 
numbers of mothers on welfare report that they are cohabiting, 
between 9 and 24 percent,\14\ depending on the survey question. 
According to the Panel Survey of Income Dynamics, for example, 
9 percent of welfare mothers were cohabiting in 1987. This 
included 18 percent of welfare mothers under thirty, with less 
than a high school education, and with children under age 
eighteen.\15\
---------------------------------------------------------------------------
    \13\ National Center for Health Statistics, Fertility, Family 
Planning, and Women's Health: New Data From the 1995 National Survey of 
Family Growth, by Joyce C. Abma, Anjani Chandra, William D. Mosher, 
Linda S. Peterson, and Linda J. Piccinino (Hyatsville, MD: U.S. 
Department of Health and Human Services, 1997), Table 33.
    \14\ Robert A. Moffitt, Robert Reville, and Anne E. Winkler, 
``Beyond Single Mothers: Cohabitation, Marriage, and the U.S. Welfare 
System.'' (Discussion paper #1068-95, Madison, Wisc., University of 
Wisconsin-Madison, Institute for Research on Poverty, July 1995), pp. 
5-6.
    \15\ Ibid. These figures may be as much as one-third higher, 
however, if they are calculated as the proportion of unmarried women 
who receive welfare as opposed to the proportion of all women who 
receive welfare.
---------------------------------------------------------------------------
    Finally, according to preliminary data from the Fragile 
Families study of unmarried parents in twenty-two major 
American cities,\16\ as many as half of the children born out 
of wedlock may have an unwed father living at home.'' \17\ 
Similarly, Larry Bumpass and Hsien-Hen Lu, of the Center for 
Demography and Ecology at the University of Wisconsin-Madison, 
report that according to the National Survey of Family Growth 
about 41 percent of births to unmarried mothers from 1990 to 
1994 were to women who were currently cohabiting.\18\
---------------------------------------------------------------------------
    \16\ Julien Teitler, ``Father Involvement, Child Health, and 
Maternal Health Behavior.'' (Paper prepared for the Urban Seminar on 
Children's Health and Safety, Cambridge, Mass., April 23-24, 1999), 
Table 1.
    \17\ Julien Teitler, ``Father Involvement, Child Health, and 
Maternal Health Behavior.'' (Paper prepared for the Urban Seminar on 
Child's Health and Safety, Cambridge, Mass., April 23-24. 1999), p. 5.
    \18\ Larry Bumpass and Hsien-Hen Lu, ``Trends in Cohabitation and 
Implications for Children's Family Contexts in the U.S.'' (CDE Working 
Paper No. 98-15, Madison, Wisc., University of Wisconsin-Madison, 
Center for Demography and Ecology, March 1999), p. 13.
---------------------------------------------------------------------------
    To some extent, cohabitation--``informal marriage,'' in the 
phrase some analysts use--is a reality of the modern world. 
Increasing numbers of affluent couples around the world are 
choosing to forego marriage. However, these ``unions'' tend to 
be less stable than marriages, and therefore less nurturing for 
children. I don't know how (or whether) the government should 
encourage marriage, but I do know that it should not discourage 
marriage. But that it just what it does with the marriage 
penalties embedded in the Earned Income Tax Credit (EITC) and 
our refusal to conform child support laws to the realities of 
life for low-income families.
    I know that many members of congress are concerned about 
the marriage penalties embedded in our tax laws. As a 
percentage of household income, those penalties pale when 
compared to the penalties faced by welfare recipients and the 
working poor. According to Eugene Steuerle of the Urban 
Institute, for example, ``the marriage penalty faced by a young 
couple consisting of a man who is working full time at the 
minimum wage and a mother on welfare with two children. He 
concluded that, if they marry, the new family's combined 
earnings plus benefits would be $16,194, or $3,862 (almost 20 
percent) less than the couple's premarriage income.'' \19\
---------------------------------------------------------------------------
    \19\ Douglas Besharov and Timothy Sullivan, ``Welfare Reform and 
Marriage,'' The Public Interest, No. 125 (Fall 1996), p. 88.
---------------------------------------------------------------------------
    If we do not examinine what is happening in these 
households, we will miss half of what is happening under 
welfare reform.
    I sincerely recommend that, in addition to worrying about 
good jobs for former welfare recipients, we also worry about 
the well-being (and safety) of these informal unions--and do 
the best we can to strengthen them by removing the obstacles to 
marriage embedded in our welfare laws.
    Thank you.
      

                                


Data Sources and Assumptions


    Spending is converted to 1998 dollars using the CPI-U, 
including projections from the Budget of the United States, 
Fiscal Year 2000.
    Head Start: For FY1981-1996, appropriations; source: 
Administration for Children and Families. For FY1997-98, 
obligations and for FY1999-2004, budget authority; source: 
Budget of the United States, Fiscal Year 2000. The budget 
authorized Head Start funding for FY2000 only, thus the 
``President's Increase'' reflects the increase in spending for 
FY2000 above the inflation-adjusted FY1999 level. Although Head 
Start has a 20 percent matching requirement, this can be in-
kind or waived, and it was not included here.
    Child and Adult Care Food Program (CACFP): For FY1981-1997, 
outlays; source: various editions of the Budget of the United 
States. For FY1998-2004, budget authority; source: 
Congressional Budget Office.
    Social Services Block Grant (SSBG): Child care spending was 
estimated to be 20 percent of the SSBG in FY1997 (Children's 
Defense Fund, ``Federal and State Government: Partners in Child 
Care,'' October 24, 1997); this assumption is applied to 
spending throughout the entire period. For FY1981-1997, 
outlays; source: Historical Tables, Budget of the United 
States, Fiscal Year 1999. For FY1998-2000, budget authority; 
source: Budget of the United States, Fiscal Year 1999. For 
FY2001-2004, budget authority, source: Congressional Budget 
Office, H.R. 2400, Transportation Equity Act for the 21st 
Century, CBO pay-as-you-go estimate.
    JOBS Child Care and Transitional Child Care (TCC): For 
FY1991-1996, federal and state outlays are included; source: 
Committee on Ways and Means, 1998 Green Book, for federal 
outlays; state spending is estimated assuming that federal 
outlays are 56 percent of total spending.
    At-Risk Child Care: For FY1991-1996, federal and state 
outlays are included; source: 1998 Green Book, for federal 
outlays; state spending is estimated assuming that federal 
outlays are 56 percent of total spending.
    Child Care Development Block Grant (CCDBG): For FY1991-
1996, outlays; source: Congressional Budget Office.
    Child Care Development Fund (CCDF): For FY1997, federal 
budget authority and state matching funds; source: Budget of 
the United States, Fiscal Year 1999 and Administration for 
Children and Families data on FY1997 state allocations for the 
CCDF. For FY1998-2000, federal budget authority and state 
matching funds; source: Budget of the United States, Fiscal 
Year 2000 and Administration for Children and Families data on 
FY1998-2000 state allocations for the CCDF. For FY2001-2004, 
federal budget authority and maximum state matching; source: 
Budget of the United States, Fiscal Year 2000 and author's 
calculations of state spending based on Administration for 
Children and Families data on FY1997-2000 state allocations for 
the CCDF. State spending was estimated by assuming that the 
federal ``Child care entitlement to states'' amount represents 
57 percent of total spending. This assumes that states spend 
all of their guaranteed federal entitlement (about $1.2 
billion) plus their entire MOE amount (the amount they spent of 
their own funds in FY1994 or FY1995, whichever is higher, under 
the previous AFDC-related child care programs). In addition, it 
includes the state share of matching funds for the remaining 
entitlement funds. Finally, an additional $1.2 billion in 
discretionary federal funds is authorized for each year. The 
``President's Increase'' for FY2000-2004 reflects an additional 
$7.5 billion over five years plus state matching funds, 
assuming a 20 percent state match rate; source: Budget of the 
United States, Fiscal Year 2000. Although the budget does not 
specify a match rate, analysts at the Office of Management and 
Budget and the Congressional Budget Office indicated a 20 
percent state match rate would be applied.
    TANF Transfers and Expenditures: For FY1998, Congressional 
Research Service, Data on Temporary Assistance for Needy 
Families (TANF) and Child Care and Development Fund (CCDF) 
Expenditures, statement of Gene Falk before the Subcommittee on 
Human Resources, House Committee on Ways and Means, March 16, 
1999. For FY1999-2004, 1998 amount was inflation adjusted over 
five years.
    Unspent TANF Funds: For FY1997-2004, Congressional Budget 
Office, Spending Projections for the Temporary Assistance for 
Needy Families Program and Federal Child Care Programs, Paul 
Cullinan, Unit Chief, Human Resources Cost Estimates Unit, 
Budget Analysis Division, Congressional Budget Office, 
statement before the Subcommittee on Human Resources, House 
Committee on Way and Means, March 16, 1999. TANF is a block 
grant, therefore annual unspent TANF funds decrease over the 
years as a result of inflation, population growth and other 
factors (communication with Paul Cullinan, Unit Chief, Human 
Resources Cost Estimates Unit, Budget Analysis Division, 
Congressional Budget Office, May 12, 1999).
    President's Early Learning/School-Age Proposal: For FY2000-
2004, Overview of Additional Funding Proposed in 
Administration's 1999 Child Care Initiative, FY2000-FY2004, in 
Child Care Issues in the 106th Congress, Congressional Research 
Service.
    The estimated number of children leaving AFDC/TANF, by age 
group, was estimated by subtracting the estimated number of 
children on TANF, by age group, in December 1998 from the 
number of children on AFDC, by age group, in 1994. The 1994 
data are reported in ACF's ``Characteristics and Financial 
Circumstances of AFDC Families: FY 1994.'' This information is 
not available for December 1998, the last month for which data 
on the number of TANF recipients are available. According to 
ACF, there were about 7,600,000 TANF recipients in December 
1998. Historically, about 70 percent of the recipient caseload 
was composed of children, so there were about 5,300,000 child 
recipients in December 1998. The age distribution of children 
was last reported by ACF for the first nine months of fiscal 
year 1997. It was assumed that the same distribution would 
apply in December 1998. With the number of children in each age 
group for each time period, the difference was used as a proxy 
for the number of children who potentially need child care as a 
result of the caseload decline.
    It was assumed, from a review of leavers' studies, that (at 
most) 65 percent of those not on the rolls would be employed. 
It was also assumed that 70 percent of those working worked 
full-time and 30 percent worked part-time. (This was not an 
empirically based assumption, but was deemed reasonable since 
part-time work would often not generate enough in earnings for 
a case to ``leave'' the rolls.) These percentages were applied 
to each age category.
    Child care costs were estimated separately by age of child 
and whether the employment was full-time vs. part-time. Census 
data from 1993 were used to derive these estimates. The cost of 
part-time care was about 60 percent of the cost of full-time 
care. The cost per school-age child was about 70 percent of the 
cost per preschooler. However, because the costs vary by a 
number of factors, such as poverty, and the cross-tabulations 
available were limited, these estimates should be viewed as 
proxies. All estimates are adjusted by the CPI-U and reported 
in 1998 dollars.
    For preschoolers, child care needs followed the work 
patterns of parents. Full-time work was assumed to require 
full-time child care and part-time work would require part-time 
child care. For four year olds and above, however, the cost of 
care for children with full-time earners was based on the part-
time cost of child care, since the children were assumed to be 
in Head Start or school most of the time. For children with 
part-time earners, the cost of care was assumed to be one-
quarter the rate for part-time employment, since these children 
were assumed not to need child care during the school year, but 
only for 3 months over the summer.
    Census data for all families that use child care. The 
annual cost of full-time care for preschoolers was estimated at 
$4,100 and the cost of part-time care was estimated at $2,900. 
About 63 percent of child care arrangements for preschoolers 
are paid when the work is full-time and about 41 percent of 
child care arrangements are paid when the work is part-time. 
Thus, the average cost was reduced to reflect the fact that a 
considerable amount of child care provided is at no cost to the 
family. Thus, the average across all preschoolers (including 
those who do not pay for child care) was estimated to be $2,583 
for full-time care and $1,189 for part-time care. A similar 
procedure was applied to school-age children. For school-age 
children, the cost of part-time care for those with full-time 
working parents was estimated to be $1,740 and for those whose 
parents are working part-time, it was estimated to be $435. 
Applying the 41 percent estimate for those who pay for child 
care results in an estimated $714 for school-age children whose 
parents work full-time and $178 for those whose parents work 
part-time.
    Census data for those families that pay for child care. 
This estimate assumes that all children classified as 
``leavers'' need paid child care. Thus, the cost for 
preschoolers is estimated at $4,100 per child for full-time 
care and $2,900 for part-time care. The respective numbers for 
school-age children were $1,740 and $435. (The assumptions for 
these numbers were described above.) Assuming that all children 
who potentially need child care use paid child care overstates 
the actual cost needed to provide child care to these children.
    Costs under Child Care Development Fund (CCDF). These child 
care costs were estimated by dividing the total cost of the 
CCDF program by the average monthly number of children in child 
care subsidized by the program. Full-time and part-time 
payments were approximated by examining state payment 
schedules.
    Head Start and Head Start-Like Services. The estimated cost 
for part-time care under Head Start is $5,411 based on program 
data and discussions with ACYF and Head Start officials. For 
full-time Head Start care, the cost per child was estimated at 
$14,000. This was based on discussion with ACYF and Head Start 
officials and a report by the General Accounting Office. (GAO, 
``Head Start Programs: Participant Characteristics, Services, 
and Funding Letter Report,'' March 31, 1998, GAO/HEHS-98-65.) 
The cost increase is based on taking a program that currently 
runs part-time, part-year to one running full-time, full-year.
      

                                

    Chairman Johnson of Connecticut. Thank you.
    Welcome Ms. O'Neill.

STATEMENT OF JUNE O'NEILL, PROFESSOR OF ECONOMICS AND FINANCE; 
AND DIRECTOR, CENTER FOR THE STUDY OF BUSINESS AND GOVERNMENT, 
            BARUCH COLLEGE, CUNY, NEW YORK, NEW YORK

    Ms. O'Neill. Madam Chairman, I appreciate the opportunity 
to testify today on welfare reform. I can only echo your 
comments and Doug Besharov's comments that the welfare reform 
legislation that passed in 1996 and the waivers that preceded 
it are true landmarks in social policy, and the results have 
certainly exceeded what I and many other long-time observers of 
the welfare scene anticipated would be possible. The changes 
have been quite dramatic, and, as you mentioned, not only in 
the results on caseload declines, but also in reports that 
confirm the relationship between the legislation and the 
results. Onsite investigations of welfare offices suggest that 
in many States the culture has really been transformed. So, it 
is not a sheer coincidence that these caseload changes have 
occurred.
    My testimony addresses whether the shift off of welfare is 
having beneficial effects on those affected by the program 
change. To preview my conclusions, I find reason for a lot of 
optimism, even at this early stage. Single mothers are the 
group most closely identified with welfare. Their employment 
has surged as the welfare rolls have declined. Their employment 
gains are stronger than could be expected based on the 
performance of the economy alone. Many critics had doubted that 
single mothers would be able to adapt to the stringent work 
demands of the reform because of skill deficiencies in addition 
to child care burdens. Yet, despite these handicaps single 
mothers have significantly changed their lifestyles already, as 
a substantial proportion has shifted from welfare to work.
    My comments focus specifically on labor market effects and 
changes in the level and composition of income for never-
married women with children. First, however, I would like to 
point out that the plunge in the welfare caseload is likely to 
have occurred in part because of an acceleration of exits from 
the program and in part because of a slowdown in the rate of 
entrance onto the program. Even under the old AFDC Program, Aid 
to Families With Dependent Children, there was considerable 
turnover. Although attention is usually focused on the effects 
of the policy changes on welfare leaver rates, the ultimate 
efficacy of welfare reform is going to turn on the extent to 
which it will have changed the incentive structures in the 
program, and whether that change is enough to deter young women 
from entering in the first place.
    It is apparent that the decline in the welfare caseload has 
been mirrored by a surge in labor market activity. Let me give 
you a few numbers. In March 1994, close to 58.5 percent of 
nonmarried mothers were employed. By 1998, just 4 years later, 
that percentage had increased to 69 percent, more than a 10-
percentage point gain.
    Moreover, those women who are working are working more than 
a trivial amount. Close to 70 percent of those who were 
employed in March 1998 were full-time workers, that is, they 
worked 35 hours a week or more. And looking at both hours and 
weeks worked during the year, among those who worked at all 
during the year, that was in 1997, the most recent year for 
which we have the data, 56 percent worked full time, year 
round. That is a considerable work effort.
    How much of this change can be attributed to welfare and 
how much to the economy? One way to try to answer the question 
is to look at changes in employment among groups of women with 
differing attachment to welfare. Without longitudinal data, it 
is difficult to do that, but we can use marital status as a 
proxy for welfare attachment. I would point you to my chart, 
which is in the back of the testimony. I have disaggregated 
single mothers into the usual categories. Never-married women 
have the closest attachment to welfare. Longitudinal data from 
the National Longitudinal Survey of Youth show that close to 80 
percent of women with a first child born out of wedlock 
eventually go on welfare. So we know that this group in the 
past has considerable welfare attachment. However, mothers who 
were previously married, divorced, separated, or widowed are 
less likely to go on welfare. And married mothers have the 
lowest incidence of welfare receipt of all.
    Now, as the chart shows, married mothers' work 
participation has increased. The chart shows the changes in 
employment of women in these different marital status 
categories over the period 1983 to 1998. You will see that 
married mothers' work participation has increased gradually 
throughout the period.
    However, the employment rates of never-married and 
previously married mothers show a sharp upturn in employment, 
starting in 1993 to 1994, which is about the time that States 
were beginning to change their welfare programs through 
waivers. It is particularly striking that the employment rate 
of never-married mothers began to soar after 1996, the year of 
enactment of TANF, rising much more rapidly even than that of 
previously married mothers, while married women's employment 
rates appear to have leveled off.
    If the economy was the whole story, we would expect to see 
much more similar patterns of change between married mothers 
and the two unmarried groups. Of course, a full assessment of 
the effect of welfare policies on the employment of women with 
children would need to control for the effects of the economy 
and State welfare policies in a much more detailed and 
systematic way, and, in addition, take account of demographic 
characteristics of women and changes in their education and 
skill. Together, with Terry Devine, I have been working on such 
a study and our preliminary results suggest that welfare 
policies, after controlling for all of those other factors, 
appear to account for one-third to one-half of the increase in 
employment for never-married and previously married mothers 
after 1995.
    The other part of my comments, and I see I do not have much 
time to discuss them, but one point that is important to keep 
in mind is that wage rates, plus, of course, the amount of 
employment, determine the income people earn. And work, finding 
and keeping employment is very important, because that is an 
important way that work skills are obtained. There is 
frequently a focus only on the earnings of single mothers when 
they first leave welfare. At that point in time, wages are 
going to be low for two reasons: one is that these women have 
lower skills than other people in terms of their years of 
school completed and their past work experience.
    But the other reason is that they are new entrants to the 
labor force. This is true of all new entrants, whether they are 
immigrants, whether they are veterans who are leaving the armed 
forces, whether they are women, married women, who are first 
going to work. For example, it was apparent during the sixties 
and seventies that married women, who initially entered the 
labor force with low earnings, pulled down the average earnings 
of women on the whole. So it was assumed that the earnings of 
experienced women were falling, particularly compared to that 
of men. But that was not really the case. It was only because 
there was a compositional change--an influx of inexperienced 
women.
    But eventually, new entrants, if they hang in there, 
develop work experience and their earnings rise.
    Chairman Johnson of Connecticut. I think this is something 
we will have to come back to.
    Ms. O'Neill. Yes. And I think that that is beginning to be 
illustrated, and in looking at income data, these are important 
things to keep in mind. But even without adjustment, the income 
data that I have attached show that earnings have certainly 
increased as a share of the income of nonmarried women. And in 
addition to that, I think Doug Besharov's point should be 
emphasized that standard data really are not very accurate when 
it comes to assessing the income of people in lower portions of 
the income distribution.
    Chairman Johnson of Connecticut. Thank you.
    Ms. O'Neill. And half of the never-married women lived in 
households that were contributing considerable amounts to the 
their general well-being----
    Chairman Johnson of Connecticut. Thank you.
    Ms. O'Neill. I would certainly commend the Subcommittee not 
only for their role in developing the legislation in the first 
place, but for monitoring the results.
    [The prepared statement follows:]

Statement of June O'Neill, Professor of Economics and Finance; and 
Director, Center for the Study of Business and Government, Baruch 
College, CUNY, New York, New York

    Madam Chairman and Members of the Committee:
    Thank you for the opportunity to testify on the effects of 
welfare reform. The sweeping welfare reform legislation enacted 
in 1996 and the associated state waivers that preceded it are 
landmarks in social policy. In my opinion they have begun to 
bring positive solutions to problems that not too long ago had 
seemed intractable. The dramatic decline in the welfare 
caseload since 1994 is well known. Although researchers may 
disagree on the precise contribution of welfare reform to the 
decline, there is little doubt that it is responsible for much 
of the change.
    My testimony today addresses a parallel issue--the question 
whether the shift off of welfare is having beneficial effects 
on those affected by the program change. To preview my 
conclusions, I find reason for optimism, even at this early 
stage. Single mothers are the group most closely identified 
with welfare. and their employment has surged as the welfare 
rolls have declined. Their employment gains are stronger than 
could be expected based on the performance of the economy 
alone. Many critics had doubted that single mothers would be 
able to adapt to the stringent work demands of the reform 
because of skill deficiencies in addition to child care 
burdens. Yet despite these handicaps single mothers have 
significantly changed their lifestyles as a substantial 
proportion has shifted from welfare to work.
    It is useful to recall that the reason why welfare reform 
became an urgent policy concern in the first place was the 
growing realization that the old AFDC program was itself 
inducing long-term welfare dependency with detrimental 
consequences for vulnerable women and their children. Those 
consequences included the blunting of normal incentives for 
self-betterment and marriage.
    The 1996 federal legislation that created Temporary 
Assistance for Needy Families (TANF) and the preceding State 
initiatives implemented through the waivers were intended to 
change the perception of welfare from a long-term means of 
support to a temporary helping hand. Although earlier efforts 
had also aimed to move recipients to jobs, they had done so 
mainly by trying to enhance the skills of recipients through 
training programs, leaving in place the basic entitlement to 
welfare and the financial incentives to claim it. By contrast, 
the new welfare reform has terminated the entitlement status of 
welfare, converting it instead to a State block grant, and it 
has imposed stringent conditions such as a lifetime limit of 60 
months for receipt of TANF benefits and a requirement that 
adult recipients engage in proscribed work activity within 24 
months of welfare receipt. States have moved to the foreground 
in the design and implementation of welfare programs and many 
States have taken the opportunity to transform the 
organizational culture of their programs. One example is the 
successful transformation of Massachusetts's program through 
its ``Chapter 5'' welfare reform implemented by Governor Weld, 
which has been detailed by my colleagues M. Anne Hill and Tom 
Main in their study ``Is Welfare Working? The Massachusetts 
Reform Three Years Later.''
    The momentous changes in the welfare program have not gone 
unnoticed and researchers around the country have begun to 
evaluate the results. I will briefly review some of the results 
of analysis that I have conducted together with colleagues. I 
will focus specifically on labor market effects and changes in 
the level and composition of income for non-married women with 
children, the basic groups which makes up more than 90 percent 
of the welfare caseload.
    First, however, I would like to point out that the plunge 
in the welfare caseload since 1994 undoubtedly occurred in part 
because of an acceleration in exits from the program and in 
part because of a slowdown in entrants onto the program. Even 
under the old AFDC program there was considerable turnover. 
Close to half of those who went on welfare did not accumulate 
more than five years on the program (frequently involving more 
than one spell), although 35 percent stayed on for more than 
seven years. The time limit directly aims to reduce welfare 
duration. The work requirement reinforces that aim and promotes 
self-sufficiency. Although attention is often focussed on the 
effects of these policy changes on the welfare leaver rate, the 
ultimate efficacy of welfare reform will turn on whether it 
will have changed the incentive structure of the program enough 
to deter young women from entering in the first place.

                         Changes in Employment

    It is apparent that the decline in the welfare caseload has 
been mirrored by a surge in labor market activity among 
unmarried mothers with children under age 18. In March of 1994, 
58.5 percent of non-married mothers were employed; by 1998 that 
percentage had increased to 69.2 percent--more than a 10 
percentage point gain. Moreover, these women are working much 
more than a trivial amount. Close to 70 percent of those who 
are employed are now full-time workers--that is, they work 35 
hours or more a week. And looking at both hours and weeks 
worked during the year, among those who worked at all during 
the year, 56 percent worked full-time and year-round in 1997.
    How much of this change can be attributed to welfare 
reform? Clearly the booming economy is likely to have played a 
role. One simple way to try to answer the question is to look 
at changes in employment among sub-groups of women with 
differing attachment to welfare. Mothers who have never married 
have had a high propensity to go on welfare. Using data from 
the National Longitudinal Survey of Youth (NLSY) I find that 
close to 80 percent of women with an out-of-wedlock first birth 
eventually have gone on welfare. However, mothers who were 
previously married--that is, divorced, separated or widowed--
are less likely to have been on welfare. And currently married 
mothers have had the lowest incidence of welfare receipt of 
all.
    I would like to direct you to the Chart at the end of my 
Statement which shows the percentage of mothers employed by 
these marital status categories. The chart indicates that 
married mothers' work participation has increased gradually 
throughout the period 1983 to 1998, while never-married and 
previously married mothers show a sharp upward turn in 
employment starting in 1993-1994, a time when the states were 
beginning to change their welfare programs through waivers. It 
is particularly striking that the employment rate of never-
married mothers began to soar after 1996, the year of enactment 
of TANF, rising much more rapidly than even that of previously 
married mothers, while married women's employment rates 
appeared to have leveled off. If the economy was the whole 
story we would expect to see much more similar patterns of 
change between married mothers and the two unmarried groups.
    Of course a full assessment of the effect of welfare 
policies on the employment of women with children would need to 
control for the effects of the economy and State welfare 
policies in a more detailed and systematic way and in addition 
take into account changes in the demographic characteristics of 
women, such as the number and ages of their children, and 
changes in their education and skill levels. Theresa Devine and 
I have been conducting such a multivariate analysis examining 
the entire period 1984-1998. Our preliminary results suggest 
that after controlling for year to year changes in unemployment 
in a woman's state of residence along with other economic, 
demographic and human capital variables, welfare policies 
appear to account for one-third to one-half of the increase in 
employment for never-married and previously married mothers 
after 1995.

                          Earnings and Income


    A key issue in evaluating welfare reform is the extent to 
which persons with the attributes of welfare recipients can 
actually become self-sufficient. Finding and keeping employment 
is one component of self-support; the other is the wage rate of 
jobs obtained. The two are related, since work experience and 
the skills acquired on the job have significant positive 
effects on earnings. Moreover, a woman who stays on welfare 
long term will not only lose the experience she could have 
gained while working, but may also find that skills acquired in 
school or obtained from early work experience have eroded over 
time. For those reasons, women who leave welfare for work are 
likely to earn less than women who were never on welfare in the 
first place, even if they had similar years of schooling and 
skill attainment.
    Welfare recipients, however, have lower skills than other 
women as reflected in a higher high school dropout rate, a much 
lower rate of post secondary schooling and much weaker 
performance on achievement tests such as The Armed Forces 
Qualifications Test (AFQT). Therefore, it is to be expected 
that the annual earnings of women who leave welfare may 
initially be considerably lower than those of other women. But 
if former recipients persist in the labor force, the gap 
between their earnings and those of other workers never on 
welfare, is likely to narrow over time.
    Data on the earnings and incomes of unmarried mothers in 
1997 and 1988 permit a comparison of a post welfare reform year 
with a pre-reform year that is also at a peak in the business 
cycle. Tables 1 and 2 show the comparison for never married and 
for previously married mothers respectively. The income data 
are expressed in 1997 dollars and only cash income sources are 
included.
    Among never-married women the declining role of welfare is 
apparent. In 1988, 48 percent received welfare benefits; in 
1997, only 31 percent did. Because the average welfare benefit 
also declined for those receiving it (perhaps because of fewer 
months of collection during the year) welfare declined even 
more sharply as a share of total income, accounting for only 
8.5 percent in 1997 (down from 22 percent). However, both the 
percentage with earnings and the average value of earnings for 
recipients increased over the decade, and as a result the share 
of income from earnings grew to 79 percent. The percentage 
receiving child support increased sharply, but is still 
incredibly low--only 19 percent. There was also an increase in 
SSI, although that remains a minor source of income over all. 
On balance, the average income of never married mothers 
increased by $2000 to $13,100. Because these amounts exclude 
all non-cash sources of income and also exclude the Earned 
Income Tax Credit (EITC) they do not give a complete picture. 
While food stamp benefits are likely to have declined with 
rising earnings, income from the EITC is likely to have 
increased, both because of the increase in women with earnings 
and the increase in the generosity of the EITC. (Between 1989 
and 1997 the average EITC payment per recipient for heads of 
household--largely single parents--increased in real terms from 
$760 to $1902.)
    The income picture for never-married mothers is incomplete 
in other ways as well. About six percent report no income from 
any source of their own. But a substantial proportion are part 
of families and households with other sources of income. Thus 
in 1997 about 48 percent were part of households in which other 
household members added $27,500 in income.
    Previously married women have more education and are likely 
to have had more work experience because of their lower welfare 
participation. Consequently their earnings and total money 
incomes are considerably higher than those of never-married 
mothers. The composition of their incomes also has shifted to 
more income from earnings and less from welfare, but the change 
is smaller because their welfare dependence was always at a 
lower level than that of never-married mothers.
    On average, the incomes of unmarried mothers have improved 
over the past decade. Even the incomes of never-married mothers 
show a gain. Fortunately, the dire predictions of some skeptics 
have not materialized. In the short run, difficulties could 
have been anticipated. Women coming off welfare likely added 
significantly to the low skill labor force in certain areas and 
that could have depressed wages. Undoubtedly the booming 
economy helped. But it should be recognized that in time new 
entrants to the labor force gain experience and that will boost 
their future earnings.
    In conclusion, the initial changes surrounding the 
implementation of welfare reform provide grounds for optimism 
that the old welfare system and the dysfunctional behavior that 
it engendered may finally begin to wane. This committee is to 
be commended both for their role in the development of the 
legislation and for their continued monitoring of the results.
      

                                

[GRAPHIC] [TIFF OMITTED] T8372.021

[GRAPHIC] [TIFF OMITTED] T8372.022

[GRAPHIC] [TIFF OMITTED] T8372.023

      

                                

    Chairman Johnson of Connecticut. Thank you. Thank you.
    Wendell, welcome back.

   STATEMENT OF WENDELL PRIMUS, DIRECTOR OF INCOME SECURITY, 
             CENTER ON BUDGET AND POLICY PRIORITIES

    Mr. Primus. Thank you. Chairman Johnson and Members of the 
Subcommittee, thank you for this hearing and the invitation to 
testify on the impact of welfare reform.
    My testimony today draws upon a larger study that the 
Center will be releasing in the near future. Participation in 
AFDC and food stamp programs began to decline in 1994. This 
decline was gradual until 1996, and then accelerated sharply 
after the enactment of the welfare law. And because of that, 
the conventional wisdom is welfare reform is working well.
    Caseload reduction, however, is a very inadequate measure 
of success. The ultimate criterion should include whether the 
economic well-being of children and families has been enhanced.
    Over the past several years, two major trends have 
influenced the economic well-being of the Nation's poorest 
families with children. Strong economic growth, unusually low 
unemployment rates, continued expansion of the EITC, expanded 
availability of Medicaid coverage, and welfare policy changes 
have contributed to an increase in employment. Other changes in 
the policies of means-tested programs--increased sanction 
rates, diversion policies, restricted eligibility for legal 
immigrants has led to a dramatic decrease in the number of 
families receiving public assistance, many who have left 
without having a job.
    This analysis uses Census data as well as administrative 
data to make an assessment. We employ the same methodology as 
the CBO has done in its analysis of family income, and we use a 
comprehensive measure of income. We have three major findings, 
and it really it is a tale of two time periods.
    If you look at that first chart, the caseload declines in 
AFDC basically match the decline in poverty between 1993 and 
1995. But between 1995 and 1997, the decline in people 
receiving cash plummeted by 22 percent, and yet the decline in 
poverty was only 5.4 percent for single-mother families.
    The next chart shows exactly the same pattern for food 
stamps. The caseloads declined here sharply between 1993 and 
1995 versus 1995 and 1997. Again, you can see that same 
pattern. Poverty declined and food stamps declined at the same 
rate between 1993 and 1995, and then very sharp declines in 
caseload between 1995 and 1997. And not that much of a change 
in poverty.
    What has this meant for incomes? Between 1993 and 1995, the 
average earnings and incomes of single-mother families 
increased substantially. The increases were particularly large 
for the poorest 60 percent, or three quintiles, of persons in 
single-mother families. They experienced double digit gains in 
disposable income.
    And the chart here shows that even the income of the bottom 
quintile increased by 13.7 percent.
    But then the picture changes. Between 1995 and 1997, the 
poorest single-mother families experienced a significant 
decline in their disposable income, primarily due to sizeable 
declines in welfare assistance and food stamps. For the poorest 
quintile, income fell by $660. About 80 percent of this, or 
$540, was due to the decline in means tested assistance. For 
the poorest 10 percent of persons in single mother families, 
average income declined by $860. This represents a decline of 
15.2 percent, and, again, about 80 percent of this was due to a 
decrease in the average amount of means tested assistance.
    June and Doug are right that our instrument is not the 
best, but we have tried to adjust these numbers for 
underreporting.
    The next to the poorest fifth had earnings increases of 
$900 between 1995 and 1997, and an average EITC increase of 
$400 per family. But these gains were completely offset by a 
loss of $1,580 in means tested assistance.
    As a result, also the antipoverty effectiveness changed 
between 1995 and 1997. In 1997, seven hundred thousand fewer 
children were lifted out of poverty than in 1995. And about 
two-thirds of that was offset by the increase in the 
effectiveness of the EITC. It illustrates a simple point: that 
when you strengthen a program, you get more poverty reduction; 
when you weaken it, you get less.
    These findings should be considered an issue. We would like 
to see if they are confirmed when we get the 1998 CPS, Current 
Population Survey, data, when SIPP, the Survey of Income and 
Program Participation, becomes available--the 1997 SIPP becomes 
available later.
    I think the conclusion I would reach from this is that 
there is no doubt that the average income of a significant 
number of the poorest single-mother families is lower in 1997 
than 2 years earlier compared to their counterparts. And this 
is a very surprising and unanticipated finding, given the 
strong economic growth. And when I look at that chart and say 
what is going on here? The only policy change I can come to is 
the difference in the decline in the number of people getting 
welfare assistance.
    So, Chairman Johnson, I am not here today to argue that 
welfare reform has been a complete failure. I think you have 
done the right thing by writing to States and saying to spend 
their surplus TANF money wisely. And I think the administration 
has also done the right thing by changing the final TANF 
regulations considerably. What I think these data suggest is 
that we make a midcourse correction, and that we deemphasize 
caseload reduction and emphasize the goal of increasing the 
welfare, the income, of our poorest single-mother families with 
children. And we have to do that by making sure that families 
who are entitled to Medicaid and food stamps actually receive 
that assistance.
    My further suggestion would be that the high performance 
bonus that the Secretary controls under the law be changed to 
reward States that have increased the number of children 
getting food stamps among the working poor and that have 
increased the amount of children getting Medicaid and emphasize 
poverty reduction in addition to emphasizing work. And I think 
there are also some other suggestions I will make. But I think, 
again, some families have been hurt by welfare reform. I think 
no matter how you cut the data, that will stand up. I would 
like to see it change in the future if we do change some things 
that are going on in State welfare offices. And, yes, some 
families are better off. But it is a very mixed picture right 
now. And it is way too early to pronounce welfare reform an 
unqualified success.
    Thank you.
    [The prepared statement and attachments follow:]

Statement of Wendell Primus, Director of Income Security, Center on 
Budget and Policy Priorities

    Mr. Chairman and Members of the Subcommittee on Human 
Resources of the Committee on Ways and Means:
    I very much appreciate your invitation to testify on the 
impact of welfare reform on low-income families. My name is 
Wendell Primus and I am Director of Income Security at the 
Center on Budget and Policy Priorities. The Center is a 
nonpartisan, nonprofit policy organization that conducts 
research and analysis on a wide range of issues affecting low-
and moderate-income families. We are primarily funded by 
foundations and receive no federal funding.
    My testimony today will draw on some preliminary findings 
from a much larger analysis of the initial impacts of welfare 
reform that is nearing completion and will be released by the 
Center on Budget and Policy Priorities in the near future.

                              Introduction

    Participation in the Aid to Families with Dependent 
Children (AFDC) and food stamp programs began to decline in 
1994; this decline was gradual until 1996 and accelerated after 
enactment of the federal welfare law. Because AFDC (which has 
been replaced by the Temporary Assistance to Needy Families or 
TANF block grant) and food stamp participation have declined so 
sharply, the conventional wisdom is that the federal welfare 
law and state welfare reforms are working very well.
    Caseload reduction alone, however, is an inadequate measure 
of the success of welfare reform. The ultimate criteria should 
include whether the economic well-being of children and 
families has been enhanced. For that to occur, the loss of 
benefits would have to be more than offset by increases in 
other sources of income: through increased labor force 
participation and earnings of custodial parents, increased 
child support collections received by custodial parents, or an 
increase in the number of children who reside with both 
parents.
    Over the past several years, two major trends have 
influenced the economic well-being of the nation's poorest 
families with children. First, strong economic growth, 
unusually low unemployment rates, continued expansion of the 
Earned Income Tax Credit (EITC), expanded availability of 
Medicaid coverage for children in low-income working families, 
and welfare policy changes have contributed to an increase in 
employment among poor families. Second, at the same time, other 
changes in the policies of means-tested programs \1\ (e.g., 
increased sanction rates, diversion policies, and restricted 
eligibility for legal immigrants) have led to a dramatic 
decrease in the number of families receiving public assistance, 
many of whom have left without having a job.
---------------------------------------------------------------------------
    \1\ Means-tested programs include cash assistance such as welfare 
and SSI as well as non-cash means-tested programs including food 
stamps, school lunch, and housing assistance.
---------------------------------------------------------------------------
    Data that begin to shed light on the combined effect of 
these divergent trends on the economic well-being of poor 
families with children are just becoming available on a 
national basis. This study focuses on the effects on single-
mother families and their children, as reflected in Census 
data.
    These data show that the disposable incomes of single-
mother families rose substantially and across-the-board from 
1993 to 1995. The data from 1995 to 1997, which cover the 
period from just before passage of the federal welfare law in 
1996 to just after, tell a different and less promising story. 
Despite continued growth in the national economy and further 
expansion in the EITC, the average disposable income of the 
poorest fifth of single-mother families fell during this two-
year period, with a substantial drop in means-tested benefits 
the primary contributing factor. The average disposable income 
of the next-to-the-bottom fifth of single-mother families was 
unchanged--earnings and EITC gains were completely offset by 
declines in means-tested assistance, leaving the families no 
better off.

                  Data Sources and Methodology Issues

    This analysis uses the Census Bureau's Current Population 
Survey (CPS) data as well as administrative data from means-
tested programs to examine trends in the economic well-being of 
mothers and children in single-parent families, with a 
particular focus on the poorest single-mother families. We 
examine a cross-section of families each year.\2\ We measure 
the welfare receipt and income of a cross-section of families 
over the four years from 1993 to 1997, a period of sustained 
economic growth and increasing employment. This analysis 
examines how the average income of single-mother families 
changed between 1993 and 1995, a time when many states were 
implementing state welfare reform policy through waivers, and 
also examines changes in the economic status of these families 
between 1995 and 1997, the year prior to and the year after 
enactment of the federal welfare law. During the second period, 
state-level reforms began taking effect on a larger scale, and 
program participation fell sharply.
---------------------------------------------------------------------------
    \2\ The study does not follow the same families over several years; 
it is not a longitudinal study. The Current Population Survey is not a 
longitudinal survey. The CPS examines a representative sample of 
families, including low-income families, each year.
---------------------------------------------------------------------------
    To examine changes in the economic well-being of single-
mother families by income level, we first array all single-
mother families from poorest to richest by their incomes, 
adjusted for family size. (The methodology used is identical to 
that employed by the Congressional Budget Office in its 
analyses of family incomes.) We use a comprehensive measure of 
income, which includes as income the approximate cash value of 
food stamps, school lunch, and housing assistance, and EITC 
benefits, and deducts state and federal income taxes as well as 
payroll taxes. This is similar to the recommendations of a 
distinguished National Academy of Sciences panel in 1995 
concerning how to count income when measuring poverty.
    As noted, we divided the population into groups of equal 
size (such as fifths or tenths of the population) and compared 
the average income of persons in one part of the distribution 
in a given year to the average income of persons in the same 
part of the income distribution in another year. For example, 
the average incomes of those in the poorest fifth of single-
mother families in 1995 can be compared to the average income 
of those in the poorest fifth of single-mother families in 
1997. Each tenth, or decile, of individuals in single-mother 
families consists of about three million individuals. Each 
fifth, or quintile, includes about six million people.
    The analysis examines changes in the average incomes of 
single-mother families throughout the income distribution but 
with a special emphasis on the bottom three-fifths of single-
mother families, most of which are eligible for means-tested 
benefits. All of the single-mother families in the bottom three 
quintiles have disposable incomes of below 155 percent of the 
poverty line.
    Between 1993 and 1997, the under-reporting of means-tested 
benefits in Current Population Survey increased. Under-
reporting of income occurs when the total amount of benefits 
from a means-tested benefit, as reported in the Current 
Population Survey, is less than the total amount of benefits 
that data from the program show to have been issued. Under-
reporting of means-tested benefits in the CPS is a well-known 
phenomenon; as long as the degree of under-reporting from year 
to year remains unchanged, under-reporting does not distort 
comparisons of data from different years. In the 1990s, 
however, the degree of under-reporting of income from means-
tested benefits increased in the CPS. To ensure that the 
results of this analysis are not an artificial result of the 
increase in under-reporting of these benefits, this analysis 
adjusts both AFDC/TANF benefit receipt and food stamp benefit 
receipt to compensate for this decline in reporting.
    The analysis does not adjust for work-related expenses 
incurred by single-mothers leaving welfare for work. A better 
measure of family well-being would take into account the fact 
that a family may not be better off if increased earnings are 
more than offset by increased work expenses such as child care. 
If, on the other hand government expenditures on such work 
supports as child care and transportation are sufficient to 
compensate families entering the labor force fully for their 
increased expenses, income gains among these families would 
represent true improvements in well-being. Some preliminary 
estimates of the annual cost of child care incurred by single 
mothers that have left TANF for work seem to indicate that 
increased government expenditures on child care have not been 
sufficient to fully compensate families leaving TANF for their 
increased child care costs.

                                Findings

    Caseload declines exceed decline in need. AFDC/TANF and 
food stamp participation has declined far more sharply in 
recent years than can be explained by increases in the earnings 
of poor households. For example:
     From 1995 to 1997, the number of people in single-
mother families who had income below the poverty line before 
receipt of means-tested government benefits declined by 0.8 
million people, or 5.4 percent. By contrast, the number of 
people receiving AFDC/TANF benefits fell by 3.0 million, or 
22.6 percent.
     Similarly, from 1995 to 1997, the number of people 
(both in single-mother families and in other families) who had 
incomes below the poverty line before considering the effects 
of means-tested benefits fell 2.5 percent. The number of people 
receiving food stamps dropped by 16.6 percent, five times as 
much.
    Trends in disposable income.\3\  This paper examines 
changes in earnings, the EITC, and other sources of income as 
well as changes in means-tested benefits. By examining the 
change in the income that single-mother families received from 
each income source, we can identify the causes of these trends. 
(All of the figures noted below are adjusted for inflation and 
expressed in 1997 dollars, rounded to the nearest ten dollars; 
thus $702 is expressed as $700.) Table 1, which summarizes the 
findings of this analysis, shows the following:
---------------------------------------------------------------------------
    \3\ Disposable income includes all cash income including both 
means-tested and non-means-tested cash transfers, the approximate cash 
value of means-tested non-cash transfers including food stamps, school 
lunch benefits, and housing assistance, and the EITC, less state and 
federal income and payroll taxes.
---------------------------------------------------------------------------
     Between 1993 and 1995, the average earnings and 
incomes of single-mother families increased substantially. The 
increases were particularly large for the poorest 60 percent of 
persons in single-mother families, who experienced double-digit 
percentage gains in disposable income, on average. For the 
poorest 20 percent of individuals in single-mother families, 
disposable income increased an average of 13.7 percent between 
1993 and 1995, or more than $1,000 per family, after adjusting 
for inflation. Earnings increased by one third, or $430 per 
family. Income from the Earned Income Tax Credit and means-
tested benefit programs also increased.
     Between 1995 and 1997, by contrast, the poorest 
single-mother families experienced a significant decline in 
their disposable incomes, largely due to sizeable declines in 
welfare assistance and food stamps, but also due to a drop in 
earnings. Table 2 shows how the various components of income 
have changed for the poorest single-mother families. As shown, 
among the poorest 20 percent of the population in single-mother 
families, average disposable income fell by $660, a 7.6 percent 
decline.\4\ About 82 percent, or $540, of this income loss was 
due to declines in means-tested assistance.
---------------------------------------------------------------------------
    \4\ This is statistically significant at the 90-percent confidence 
level.
---------------------------------------------------------------------------
     For the poorest 10 percent of persons in single-
mother families, average income declined by $860. This 
represents a decline of 15.2 percent.\5\ Nearly 80 percent, or 
$660, of this income decline was due to a decrease in the 
average amount of means-tested assistance these families 
receive.
---------------------------------------------------------------------------
    \5\ This is statistically significant at the 90-percent confidence 
level. Several other statistical tests show this finding to be robust 
and not a product of data anomalies at the bottom of the income 
distribution.
---------------------------------------------------------------------------
     The next-to-the-poorest fifth of single-mother 
families experienced an average increase in earnings of $900 
from 1995 to 1997 and an average EITC increase of $400. These 
gains were fully offset, however, by an average loss of $1,580 
per family in means-tested benefits.\6\ \7\ As a result, their 
average incomes remained unchanged despite strong economic 
growth.
---------------------------------------------------------------------------
    \6\ \7\ These families also gained an average of $274 in ``other'' 
income. The increase in earnings of $901 plus the increase in the EITC 
of $398 and an increase in other income of $274 minus the reduction of 
$1,581 in means-tested benefits meant these families had average 
incomes of $8 less in 1997 than in 1995. ($901 + $398 + $274-$1,581 = 
-$8). The $8 change is not statistically significant.
    The average disposable income of the middle fifth of single mother 
families did not change significantly from 1995 to 1997. Their average 
disposable incomes jumped by $2,400 from 1993 to 1995. The fifth of 
single mother families with the highest disposable incomes experienced 
a large boost in income from 1995 to 1997, of $4,000 on average. From 
1993 to 1995 their disposable income increased by $320 on average.
---------------------------------------------------------------------------
    Anti-poverty effectiviness of the safety net. Between 1995 
and 1997, a period of rapid caseload declines and extensive 
policy changes, certain parts of the safety net for poor 
children weakened significantly. Table 3 shows the number and 
percent of children lifted from poverty by government programs 
in 1989 and each year since 1993. As shown, in 1997, means-
tested benefit programs lifted from poverty smaller percentages 
of children who otherwise would be poor--and did a less 
effective job of increasing the incomes of children who remain 
poor--than in 1995. Some 700,000 more children would have been 
lifted out of poverty in 1997 if means-tested benefits had not 
weakened since 1995.
    The decline in the number of children removed from poverty 
by means-tested assistance is offset to a large extent by the 
increase in the number of children removed from poverty by 
federal tax policy due to the impact of the EITC. Approximately 
450,000 more children were removed from poverty by federal 
taxes in 1997 than in 1995 due to the strengthening of the 
EITC, offsetting slightly less than two-thirds of the decline 
in the strength of means-tested assistance. As this example 
illustrates, when government programs have been strengthened, 
as in the case of the EITC, the number of children removed from 
poverty has increased. In contrast, when government programs 
have been weakened, as in the cases of TANF and food stamps, 
the number of children removed from poverty has declined.
    Findings should be considered initial. These findings are 
based primarily on data from the Current Population Survey for 
1997. Data from another Census Bureau survey, the Survey of 
Income and Program Participation, are not yet available for 
1997, and 1998 CPS data will be available in several months. 
When those data become available, they should be carefully 
evaluated to see if they confirm the income trends found in the 
1997 CPS data for single-mother families. These results also 
should be more carefully reconciled with data from state 
studies of families that have left public assistance rolls and 
other national evaluations of changes in welfare policies. 
(State ``leaver'' studies are surveys of a random sample of 
families who have left the TANF or AFDC programs during a given 
time period. These surveys examine the employment and financial 
circumstances of families that have left the rolls. The 
findings from our study are not inconsistent with the leaver 
studies conducted to date, which have found that families 
leaving welfare for work have below-poverty earnings, that many 
leave welfare without work, and that, in some states, the 
financial well-being of some children has worsened.)

                 Conclusions and Policy Recommendations

    Among other findings, this study finds that the average 
disposable income of a significant percentage of the poorest 
single-mother families was lower in 1997 than the average 
disposable income of their counterparts (families in the same 
place in the income distribution) two years earlier. It also 
finds that whereas income trends among poor single-mother 
families were very positive from 1993 to 1995, these trends 
changed for the worse in the 1995 to 1997 period. These 
surprising and unanticipated findings occurred during a period 
of strong economic growth and before any sizeable number of 
welfare recipients reached their time limits. They suggest 
considerable caution ought to be exercised before pronouncing 
welfare reform an unqualified success.
    Many states now have substantial amounts of unspent TANF 
funds that can be used to aid poor families. These funds could 
be used to provide more adequate support for families that have 
gone to work but remain poor and to provide more intensive 
assistance to help families with serious barriers to employment 
surmount these barriers. For instance, efforts should be made 
to improve the performance of the food stamp program in serving 
eligible working poor families. Benefit restorations could be 
made to poor households no longer eligible for assistance. 
Additional efforts are also needed to reach children and 
parents, primarily in working families who are eligible for 
health insurance under Medicaid or a state child health 
insurance program. States should continue to work with families 
that lose assistance due to non-compliance to ensure that the 
requirements are understood and that there is a way for these 
families to overcome the barriers to compliance.\8\
---------------------------------------------------------------------------
    \8\ The states of Tennessee and Connecticut have implemented 
innovative approaches in this area.
---------------------------------------------------------------------------
    In addition, the formula used to award the ``high 
performance'' bonuses provided to some states under the welfare 
law should be reexamined in the light of the findings discussed 
here. The federal government could allocate a portion of these 
funds to reward the states that are most successful in serving 
low-income working families in food stamps and Medicaid and in 
reducing child poverty. The bonuses currently are rewarded 
entirely on state performance in increasing work effort among 
TANF recipients, an important goal, but one that should be 
supplemented.
    The federal welfare law has provided more funding and more 
flexibility to states. Many families have benefitted from these 
changes. Employment has increased, and there has been a greater 
emphasis on work. The flexibility has allowed states to expand 
earnings disregards and thereby provide supplemental cash 
assistance to more families that go to work, to increase 
funding for child care, to treat two-parent families more 
equitably, to assist more non-custodial parents, and to 
experiment with some innovative measures to assist families 
with the most severe employment barriers. One key aspect of the 
federal legislation--federal and state time limits--had not yet 
been implemented to any great extent by 1997. Most families 
will not begin to reach the federal time limits until 2001 or 
later. In addition, the law has been in effect for only a short 
period of time, during which states have run budget surpluses.
    The wide-ranging features of welfare reform are still being 
implemented. A final judgment on the law's impacts is 
premature. Such a judgment should not be rendered until several 
years after time limits are in full effect and we also have 
seen how the incomes of the poor change through all phases of 
the economic cycle, including recession. In the interim, these 
findings provide a preliminary picture of some of the impacts 
of welfare reform on the incomes of single-mother families with 
children. Some aspects of this picture must be considered 
troubling.
      

                                


                 Table 1.--Average Earnings and Income of Single-Mother Families by Income Level
                                                 [1997 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                        Change 1993- Change 1995-
                                                     1993         1995         1997          95           97
----------------------------------------------------------------------------------------------------------------
Average Earnings:
    Poorest Decile.............................         $870         $973         $862       $153**        $111*
    Poorest Quintile...........................       $1,270       $1,705       $1,523       $435**      -$182**
    Second Quintile............................       $3,314       $4,956       $5,857     $1,642**       $901**
    Third Quintile.............................      $10,044      $13,404      $13,299     $3,360**        -$105
    Fourth Quintile............................      $20,724      $22,742      $23,687     $2,018**         $945
    Fifth Quintile.............................      $45,738      $47,218      $52,453       $1,480     $5,235**
Average Disposable
Income:
    Poorest Decile.............................       $4,888       $5,688       $4,825       $800**      -$863**
    Poorest Quintile...........................       $7,588       $8,627       $7,968     $1,039**       -$659*
    Second Quintile............................      $13,433      $15,754      $15,746     $2,321**          -$8
    Third Quintile.............................      $17,908      $20,304      $20,454     $2,396**         $150
    Fourth Quintile............................      $25,757      $27,972      $27,454      $2,215*        -$518
    Fifth Quintile.............................      $47,638      $47,960      $51,959         $322      $3,999*
----------------------------------------------------------------------------------------------------------------
Note: Averages in the tables are weighted by persons
*Statistically significant,  = .1
**Statistically significant,  = .05
Explanation of Table 1 : Table 1 shows the average family earnings levels and average family incomes, including
  government benefits, of single-mother families weighted by persons by income group for 1993, 1995, and 1997.
  Figures in the ``Change'' column with asterisks designate statistically significant differences between 1993
  and 1995, and between 1995 and 1997. Figures without asterisks indicate that changes were not statistically
  significant. For example, in the poorest quintile, average disposable income was $8,627 in 1995 and was $7,968
  in 1997. This represents a $659 difference or a 7.6% decrease in income, which was found to be statistically
  significant. The earnings figures in the table represent average family earnings over all single-mother
  families, including both families with a worker and families without a worker. Average earnings just among
  families with a worker are higher than the average earnings figures in the table.


                  Table 2.--Income Amounts by Source for Single-Mother Families by Income Level
                                                 [1997 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                        Change 1993- Change 1995-
                                                     1993         1995         1997          95           97
----------------------------------------------------------------------------------------------------------------
Poorest tenth:
    Earnings...................................         $820         $973         $862       $153**       -$111*
    EITC.......................................         $123         $250         $261       $127**          $11
    Means-tested...............................       $2,778       $3,370       $2,706       $592**      -$664**
    income.............................
    Other......................................       $1,413       $1,095         $996        -$318         -$99
    Disposable income..........................       $4,888       $5,688       $4,825       $800**      -$863**
Poorest quintile:
    Earnings...................................       $1,270       $1,705       $1,523       $435**      -$182**
    EITC.......................................         $171         $399         $472       $228**        $73**
    Means-tested...............................       $4,868       $5,163       $4,623         $295      -$540**
    income.............................
    Other......................................       $1,279       $1,360       $1,350          $81         -$10
    Disposable income..........................       $7,588       $8,627       $7,968     $1,039**       -$659*
Second quintile:
    Earnings...................................       $3,314       $4,956       $5,857     $1,642**       $901**
    EITC.......................................         $454         $971       $1,369       $517**       $398**
    Means-tested...............................       $7,620       $7,594       $6,013         -$26    -$1,581**
    income.............................
    Other......................................       $2,054       $2,233       $2,507         $179         $274
    Disposable income..........................      $13,433      $15,754      $15,746     $2,321**          -$8
----------------------------------------------------------------------------------------------------------------
 Includes AFDC/TANF, food stamps, SSI, and housing assistance
*Statistically significant,  = .1
**Statistically significant,  = .05 Averages in the tables are weighted by persons
Note: Tests for statistical significance were not performed on the ``Other'' source of income category.


                                Table 3.--Child Poverty and Means-Tested Benefits
                                                 [in thousands]
----------------------------------------------------------------------------------------------------------------
                                                                              Percentage of
                                                                              Children Poor
                                         No. of Poor      No. of Children   before Receipt of      Percentage
                                       Children before      Removed from        Government        Reduction in
            Calendar Year             Receipt of Means-  Poverty by Means-  Benefits who were  Child Poverty Gap
                                       tested benefits    Tested Programs      Removed from      due to Means-
                                                                            Poverty by Means-   tested Benefits
                                                                             Tested Benefits
----------------------------------------------------------------------------------------------------------------
1989................................             13,846              2,437              17.6%              52.1%
1993................................             16,685              2,811              16.8%              52.2%
1994................................             16,324              3,112              19.1%              52.3%
1995................................             15,717              3,241              20.6%              52.1%
1996................................             15,426              2,850              18.5%              49.6%
1997................................             14,898              2,379              16.0%              45.0%
----------------------------------------------------------------------------------------------------------------
Source: CBPP calculations based on Census data

      

                                

    Chairman Johnson of Connecticut. Thank you.
    Dr. Rolston.

  STATEMENT OF HOWARD ROLSTON, DIRECTOR, OFFICE OF PLANNING, 
   RESEARCH AND EVALUATION, ADMINISTRATION FOR CHILDREN AND 
   FAMILIES, U.S. DEPARTMENT OF HEALTH  AND  HUMAN  SERVICES

    Mr. Rolston. Madam Chairman, Members of the Subcommittee, I 
am pleased to be here today to discuss the critical role of 
research and evaluation in the implementation of welfare 
reform.
    This Subcommittee played a central role in ensuring that 
these activities would be an integral part of the Temporary 
Assistance to Needy Families, or TANF, Program.
    Today, I will describe key elements in the Department's 
welfare reform research agenda: what we have learned and what 
we will learn.
    The broad flexibility provided by TANF creates the 
opportunity to evaluate different approaches to welfare reform 
to determine which strategies are most effective in moving 
families to work and self-sufficiency. We are grateful that 
Congress has appropriated funds for HHS to allow us to support 
over three-quarters of the States in activities related to the 
assessment of welfare reform. Some of the primary areas for 
these grants include evaluations of the effectiveness of 
welfare reform programs and studies of families leaving 
welfare.
    While State and local studies provide depth, only national 
studies can provide representative information about how 
families are faring overall. An important source of national 
data is TANF data reported to HHS by the States. In addition, a 
number of surveys will be central to the study of welfare 
issues, including the Census Bureau's Current Population 
Survey, as we have talked about today; its Survey of Income and 
Program Participation; and its Survey of Program Dynamics, 
which this Subcommittee was instrumental in creating.
    The panel study on income dynamics and the National 
Longitudinal Survey of Youth are also very important.
    Except for the CPS and one fiscal year's quarter of TANF 
administrative data, post-TANF data from these national sources 
are not yet available.
    I will now, though, discuss the information we do have in 
three areas: employment, earnings, and income.
    First, all available sources show that the employment of 
welfare recipients and former recipients has increased 
significantly. Analysis of the CPS reveals the employment rate 
for previous year recipients increased from 20 percent in 1992 
to 34 percent in 1998. Waiver evaluations also indicate 
substantial employment gains, and about 18 percent of TANF 
adults currently on the roles were employed in the last quarter 
of fiscal year 1997, compared to 14 percent in the first three 
quarters.
    Second, earnings have also increased, but not uniformly. 
Welfare reform demonstrations that were strongly oriented 
toward increasing employment activities and mandatory 
participation typically achieved annual earnings gains in the 
$600 to $700 range. But programs which provided only financial 
incentives did not increase earnings.
    CPS data suggest average earnings for female-headed 
families with children have increased substantially between 
1993 and 1997. But the early data suggest the gains are not 
evenly distributed over the period, with roughly three-quarters 
of the gain occurring between 1993 and 1995.
    In addition, while employment gains for the bottom one-
fifth of female-headed families with children were stronger 
from 1995 to 1997, the average earnings of this group did not 
increase over the period.
    Better understanding these trends will require both longer 
term followup and analysis of other national data as they 
became available.
    Third, income has increased for some families, but there is 
also some preliminary evidence that other families are 
experiencing losses.
    Data from the four waiver evaluations in which the reform 
program succeeded in increasing mandatory work activities, 
employment, and earnings suggest mixed effects on family 
income, depending on the generosity of benefit levels and of 
earnings disregards.
    Findings in one State suggest that these effects are not 
uniform across recipients, and that higher skilled recipients 
may gain income whereas the income of lower skilled recipients 
may decline.
    CPS data indicate that from 1993 to 1997, the average 
annual income of all female-headed families with children 
increased. The income increases were unevenly distributed over 
the period and across the income distribution. The bottom 
quintile in particular did not fare as well as the top four-
fifths, especially in the 1995 to 1997 period, suggesting 
preliminarily that we need to be alert to monitoring more 
disadvantaged families.
    All the findings I have noted are preliminary. Time and 
resources will be necessary to produce more definitive results. 
These will include longer term followup and more comprehensive 
information, especially regarding income. And in addition, we 
will obtain more information on more outcomes, with an emphasis 
on measuring child well-being. States now have significant 
financial resources that are available for investments to 
assist families on the caseload to become self-sufficient and 
to assist families who leave the rolls to keep their jobs and 
move up.
    HHS is working with the States to develop and evaluate the 
effects of alternative investment strategies. As more post-TANF 
data become available from the national surveys, it will be 
possible to merge findings from indepth studies in States and 
localities with these national data to develop a comprehensive 
picture on how the Nation's families are faring under welfare 
reform, along with the determining what strategies are most 
effective in increasing family sufficiency.
    I will be happy to answer your questions.
    [The prepared statement follows:]

Statement of Howard Rolston, Director, Office of Planning, Research and 
Evaluation, Administration for Children and Families, U.S. Department 
of Health and Human Services

    Madam Chairman, members of the subcommittee, I am pleased 
to be here today to discuss the critical role of research and 
evaluation in the implementation of welfare reform. This 
subcommittee played a central role in ensuring that these 
activities would be an integral part of the Temporary 
Assistance to Needy Families (TANF) program.
    A central focus of the Department of Health and Human 
Services' (HHS') welfare reform research and evaluation effort 
is to develop reliable, credible information about how 
different strategies are working in order to inform federal and 
state policy makers and the public about how welfare reform is 
progressing and how families are faring. Today I will describe 
key elements of the Department's welfare reform research 
agenda, what we have learned so far and what we will learn in 
the future. Our efforts have two major parts: working in 
partnership with states to develop in-depth information; and 
using national data to understand the overall progress of 
welfare reform. (There are other important areas, however, for 
brevity I'll focus on these two parts today.)

                      State Evaluation Activities

    The broad flexibility provided by TANF creates the 
opportunity and the challenge to evaluate a variety of 
different approaches to welfare reform to determine which 
strategies are most effective in moving families to work and 
self-sufficiency. A state-federal partnership is critical to 
any successful strategy to evaluate welfare reform for several 
reasons.
     Studies of processes, programs and populations 
that are carried out at a local level can have a depth that is 
not possible at the national level, especially given the great 
flexibility in program design that TANF permits.
     Studies that employ random assignment methods, 
which are the most rigorous methods for measuring the magnitude 
of the effects of alternative policies and program designs, 
must be implemented at the state or local level.
     States and localities have access to a rich set of 
administrative data, including linked administrative data sets, 
that can be used for tracking recipients and former recipients.
     Involving states as partners assures that the 
information produced will be relevant to state policy makers 
and thereby greatly increases the likelihood that states will 
use the information as they re-design their TANF programs.
    We are grateful that Congress has appropriated funds for 
the Administration for Children and Families (ACF) and the 
Office of the Assistant Secretary for Planning and Evaluation 
(ASPE) to allow us to fund over three-quarters of the states 
for activities related to the assessment of welfare reform. 
Some of the primary areas for these grants include:
     Evaluations of Specific Employment Programs and 
Welfare Reform Policies Using Randomized Field Experiments--As 
authorized under TANF, we provided funds to nine states to 
continue evaluations that began under waivers and use random 
assignment to address the effects of alternative welfare reform 
programs and policies. In addition, we continued previous 
multi-site experiments of welfare-to-work strategies and post-
employment services. Recently, we also funded two 
demonstrations to rigorously evaluate: (1) an innovative 
strategy to identify and provide treatment linked to employment 
and training for welfare recipients who are substance abusers, 
and (2) an innovative approach that combines a strong 
commitment to work (requiring at least 20 hours of work a week) 
with a strong commitment to post-secondary education.
     Welfare Leavers--We are providing grants to 11 
states and three counties (or consortia of counties) to collect 
and analyze, using a combination of administrative and survey 
data, information on families that have left welfare. In the 
next several months we intend to fund additional studies with 
an emphasis on studies of families that have been formally or 
informally diverted from coming on the rolls.
     Implementation--We are funding numerous studies of 
the implementation of particular policies and programs in order 
to identify problems and solutions. For example, we're funding 
a study of local devolution across the counties of Maryland, a 
study of implementation of state TANF in rural and tribal areas 
in Montana, and a study of relocation of families from 
economically depressed areas in South Carolina.
    Two weeks ago the strength of the state-federal partnership 
was demonstrated in ACF's Second Annual Welfare Reform 
Evaluation Conference. The two and one-half day meeting was 
attended by about 300 people from state and federal agencies, 
universities and policy research and evaluation organizations. 
The attendees included research and program staff from 49 
states plus the District of Columbia who participated in a 
lively meeting both presenting and hearing the latest findings 
from evaluations. The gathering also provided the venue for two 
one-day meetings: an ASPE/ACF-sponsored meeting for states 
conducting studies of families leaving assistance and a meeting 
of researchers and states working on a book to improve the 
design of implementation studies.

                       Analysis of National Data

    While state and local studies provide us with depth, only 
national studies can provide nationally representative 
information about how families are faring overall. Another 
important source of national data is, of course, the national 
TANF data reported to HHS by the states. These data provide 
information on the characteristics and conditions of families 
that continue to receive TANF assistance. There are also a 
number of surveys that have long been central to the study of 
welfare issues. All capture information on income from various 
sources including earnings and transfer payments, and several 
contain detailed information on employment, childbearing, 
family structure, and child well-being. While the strength of 
these surveys is their ability to capture very detailed and 
rich information, they also generally suffer from some degree 
of underreporting, and there is some evidence that 
underreporting of Aid to Families with Dependent Children 
(AFDC)/TANF benefits is increasing over time. Specific examples 
of the most important national surveys for assessing welfare 
reform follow.
     The Census Bureau's March Income Supplement to the 
Current Population Survey (CPS) provides an annual snapshot of 
the economic and employment condition of families.
     The Census Bureau also conducts the Survey of 
Income and Program Participation (SIPP) which collects in-depth 
information three times a year on families' income and program 
receipt over four-year periods. This committee was instrumental 
in providing an additional $70 million to the Census Bureau to 
extend two panels of the SIPP and create the Survey of Program 
Dynamics (SPD) which will track some families up to ten years.
     The Panel Study on Income Dynamics (PSID) has 
tracked a representative sample of families for nearly 30 
years, collecting in depth information on income, family 
formation, and program participation.
     The National Longitudinal Survey of Youth (NLSY) 
has tracked a representative sample of youth and young adults 
for nearly 20 years collecting detailed information on how 
these individuals have moved into adulthood.
    No one national survey will provide us with all the 
information needed. It is important to link information across 
surveys, and also to take advantage of administrative data. For 
example, we are funding a project to link SPD data to earnings 
records kept by the Social Security Administration, both to get 
a better understanding of biases in that SPD sample that may 
result for attrition, and to get a longer earnings history to 
complement the survey data.
    Except for the CPS and one quarter of TANF administrative 
data, post-TANF data from these national sources are not yet 
available, but ultimately they will provide a critical 
complement to data derived from state and local sources. An 
important part of what I'll discuss today is based on some 
early analysis, by staff in the Administration, of CPS data.

                       What We've Learned So Far

The employment of welfare recipients and former recipients has 
increased significantly.

    A key measure of the success of welfare reform is its effect on 
employment. Analysis of all available sources of information shows that 
the employment rate of current and former TANF recipients has increased 
significantly. Each March the CPS, which is used to calculate 
unemployment rates, collects information about households' income and 
program participation in the previous calendar year in addition to 
employment and earnings data reflecting individuals' March employment 
status. As a result we know whether adults who received AFDC or TANF in 
the preceding calendar year were employed the following March. Between 
1992 and 1996, the employment rate increased from 20 percent (its 
approximate level for the previous four years) to 27 percent. However, 
in the last two years it jumped even more dramatically to 34 percent in 
1998. Thus, whereas in 1992 one in five previous year recipients was 
working the following spring, in 1998, the figure was one in three.
    Large employment gains are also evident from rigorous waiver 
evaluations that measure the effects of reform policies by comparing 
randomly assigned individuals who were subject to either welfare reform 
or standard AFDC rules. Unlike the CPS analysis, which does not 
separate out the effects of state welfare reform policies from those of 
the economy, other policies which promote employment such as the 
enhancement of the Earned Income Tax Credit (EITC) or the expansion of 
child care subsidies, the strength of experimental studies is that they 
do precisely that. Several studies examined policies which are typical 
of state TANF programs in that they increase participation in mandatory 
work activities and/or increase the amount of assistance a family can 
receive when they go to work. The persistent employment effects of 
these programs are in the five to 13 percentage point range. I would 
also note that these are probably quite conservative estimates in that 
the treatment groups are compared to control groups which received a 
substantial level of mandatory employment services and also were not 
isolated from the atmosphere of welfare reform, even though they did 
not directly experience welfare reform policies.
    Preliminary findings from four of the ASPE-funded studies of 
families leaving welfare indicate that between one-half and three-
fifths of former TANF recipients found work in jobs which were covered 
by their state's Unemployment Insurance program. Employment rates were 
even higher--75 to 82 percent--when measured as the percentage of those 
who were ever employed within the first 12 months. These employment 
rates are consistent with findings in many other leavers' studies, 
although methodological differences cause rates to be slightly higher 
in some studies (e.g., rates are sometimes higher in studies using 
survey data, or limiting study population to leavers who do not return 
to welfare). While these employment rates are not radically different 
from the patterns of AFDC leavers in earlier studies, they indicate a 
dramatically large increase in the absoluteGt1 number of families 
leaving welfare with earnings, given the significant caseload decline 
in the past few years.
    Finally, there has also been a significant increase in employment 
of current welfare recipients. Between 1992 and 1997, the percentage of 
adults on welfare in direct work activities (including employment, work 
experience and community service) has tripled. All states met the 
overall work participation rate requirement for 1997. And, the percent 
of TANF adults who were employed rose from 14 percent in the first 
three quarters of 1997 to 18 percent in the last quarter of 1997. Thus, 
each of these sources of information consistently points to higher 
levels of employment, among current and former welfare recipients.

            Earnings have also increased, but not uniformly.

    A second important measure of success in welfare reform is 
whether welfare recipients and former recipients are earning 
more. Although welfare reform is having a positive effect on 
the earnings of some categories of recipients, the story here 
is somewhat more complicated than the employment story. For 
example, an examination of welfare reform waiver demonstrations 
suggests that those programs which were strongly oriented 
toward increasing employment activities and mandatory 
participation (as measured by an increase in participation and 
sanction rates) achieved annual earnings gains in the range of 
$600-$700 for a least one primary target group of applicants or 
recipients. One employment and training program in Portland 
which combined a strong employment focus, an emphasis on moving 
recipients into higher paying jobs with benefits, and the 
provision of necessary child care produced even larger effects 
with averaging earnings gains of over $900 per year. Of state 
welfare reform approaches which relied primarily on incentives 
without work requirements, earnings gains were not observed.
    Along with the employment gains described above, the CPS 
data suggests average earnings for all female-headed families 
with children have increased substantially between 1993 and 
1997 from $14,668 to $17,646 (both in 1997 dollars). However, 
the early CPS suggest preliminarily that the gains are not 
evenly distributed over the period with roughly three-quarters 
of the gain occurring between 1993 and 1995, and only one-
quarter between 1995 and 1997. In addition, while employment 
gains for the bottom fifth of female-headed families with 
children were stronger from 1995 to 1997, the average earnings 
of this group increased from 1993 to 1995 but did not increase 
from 1995 to 1997. Better understanding of these trends will 
require both longer term follow up and analysis of other 
national data sets as they become available.
    Finally, TANF administrative data just for welfare 
recipients who remain on the rolls indicate that average 
monthly earnings for those who are working increased 
substantially from $506 in the first three quarters of FY 1997 
to $592 in the last quarter.

    Income has increased for some families, but there is also some 
    preliminary evidence that some families are experiencing losses.

    Income is another central measure of how families are 
faring under welfare reform. Here our results are even more 
preliminary than for employment and earnings, although we will 
have much better data over time. Much of our current 
information relies on administrative records which typically 
examine family income defined as the total of TANF, Food Stamps 
and earnings. However, these analyses do not take into account 
other sources of income, such as the EITC, child support and 
Supplemental Security Income (SSI); the income of other 
household members; in-kind supports such as child care or 
Medicaid; nor, on the other side of the ledger, the expenses 
that families incur when they are working. A few current data 
sources such as the CPS and some early studies of families 
leaving welfare are based on household surveys, and many more 
of our studies ultimately will have this information.
    Data from the four waiver evaluations in which the reform 
program succeeded in increasing mandatory work activities, 
employment and earnings suggest mixed effects on family income, 
depending on the generosity of benefit levels and earnings 
disregards. In the two states with both generous benefits and 
earnings disregards, there were increases in average annual 
income of $762 for applicants in Iowa, and $1,065 for long term 
recipients in Minnesota. In Florida, a program that 
accomplished comparable earnings gains, but had low benefits 
and generous earnings disregards raised family income by $289, 
whereas a fourth program in Indiana that accomplished 
comparable earnings gains but had low benefits and retained the 
standard AFDC earnings disregards had no effect on income.
    Examination of the Florida findings also suggests that 
these effects are not uniform across recipients and that 
higher-skilled recipients may gain income, whereas the income 
of lower-skilled recipients may decline. In Florida, recipients 
who had both a high school degree and recent work experience 
averaged $752 higher average annual income for the three years 
following entry into a welfare reform program, while those with 
neither experienced losses of about $485. This gain/decline 
pattern is consistent with patterns in some earlier leaver 
studies. For example, a study in Iowa of families that lost 
their entire benefit because they failed to establish a self-
sufficiency plan showed that about 40 percent increased their 
income, about 50 percent suffered a decrease, and about 10 
percent had unchanged income.
    For the period 1993 to 1997, CPS data indicate that the 
average annual income of all female-headed families with 
children increased, as did employment and earnings as described 
above. This measure of income includes both earnings and a 
broad range of transfer programs. Again, the income increases 
were unevenly distributed over the period, with larger gains in 
the 1993-1995 period, and across the income distribution. The 
bottom quintile did not fare as well as the top four fifths, 
especially in the 1995-1997 period, suggesting preliminarily 
that we need to be alert to monitoring more disadvantaged 
families.

                           What We Will Learn

    As described above all the findings I've noted are 
preliminary. In almost all the studies I've described above, 
additional administrative data are being collected and surveys 
are being fielded or will be in the next several years. In the 
national surveys, data for 1997 and 1998 have been collected 
and are being processed. Thus, time and resources are necessary 
to produce more definitive results. I'll describe some of the 
more important information that we'll be obtaining.

Longer Term Follow-Up

    Our findings are currently based on follow-up periods 
ranging from 6 months to 3 years. To understand the effects and 
outcomes of welfare reform will require longer term follow-up 
on the order of four to six years. Particularly important is 
that in most states, very few individuals have reached time 
limits, and in many larger states, none have.

More Comprehensive Information

    As indicated above most of our current measures of 
employment, earnings and income are from administrative 
records. Over time we will obtain much more comprehensive 
information through surveys, both in conjunction with waiver 
demonstrations and through studies of families that have left 
TANF. Most importantly, we will be able to learn a great deal 
more about the income families have to support themselves and 
in particular, what happens to families who leave welfare and 
do not have earnings.

More Outcomes, Especially Related to Child Well-Being

    A critical measure of the success of welfare reform is how 
it affects children. In 1996 ACF provided grants to 12 states 
to work with a team of researchers (funded by ASPE) to develop 
measures of child well-being to examine how different welfare 
reform programs and policies are affecting children. The 
partnership proved to be very successful, and subsequently ACF 
has augmented the funding of five state welfare reform 
evaluations (Connecticut, Florida, Indiana, Iowa, and 
Minnesota) to rigorously evaluate the effects of welfare reform 
on family processes and child well-being. In addition, ASPE has 
provided funds to 13 states to work with the Chapin Hall Center 
for Children at the University of Chicago and other experts to 
develop indicators of child well-being. Some of the 13 states 
are exploring using similar measures to those used in the five 
states as well as other administrative and survey data. The 
importance of measuring child well-being is vividly illustrated 
by the presentation you are hearing today on the New Hope 
demonstration. A central finding of the interim effects of this 
program designed to support working families was that it 
increased significantly boys' school performance along with 
increasing their participation in extended day child care and 
other structured activities, while having other positive family 
effects.

More Rigorous Information about What Works and What Doesn't

    Because of caseload reduction, states now have significant 
financial resources that are not required for immediate cash 
assistance, and thus are available for investments in those 
families still on the caseload, including those with the 
greatest problems, and to enable families who leave the rolls 
to keep their jobs and move up instead of returning to welfare. 
As a result, many states are increasingly focused on strategies 
to increase job retention and advancement for recipients and 
former recipients. ACF is working with thirteen states to 
develop, pilot and ultimately rigorously evaluate the effects 
of alternative strategies. Through this activity and others, we 
will be learning about the role of supports for working 
families such as child care, child support and other services 
in sustaining and advancing in employment. These kinds of 
evaluations are critical to using the flexibility provided by 
TANF to maintain a learning environment in which federal and 
state tax dollars are used to make investments that really 
work.

More Information about Sub-Populations, especially the Harder-
to-Employ

    As more in-depth information is developed it will be 
possible to understand better how particular sub-populations 
are faring. We currently have projects underway to examine 
issues related to: non-custodial parents, rural populations, 
families with disabled members, Native Americans, victims of 
domestic violence, child-only cases and families with mental 
health or substance abuse problems. In addition, we will learn 
more about the impact of strategies to serve the hardest-to-
employ through our Department's recently begun evaluation of 
the Department of Labor's Welfare-to-Work grants program. The 
evaluation, which is at an early stage, will include an 
examination of the impact of Welfare-to-Work on participants' 
employment and wellbeing. We will share these results with 
Congress as the project progresses.

More Nationally Representative Data

    Over time as more post-TANF data become available from the 
national surveys, especially longitudinal data, it will be 
possible to merge findings from in-depth studies in states and 
localities with nationally representative data and use the 
strengths of each to develop a comprehensive picture of how the 
nation's families are faring under welfare reform.

                               Conclusion

    The preliminary results I've described above illustrate the 
promise of how investments in careful research and evaluation 
can produce information that can inform policy makers at all 
levels. Perseverance in these investments can play a critical 
role in supporting strategies that can realize the goals of 
welfare reform.
    I will be happy to answer your questions.
      

                                

    Chairman Johnson of Connecticut. Thank you. Thank you very 
much. I thank the panel for their testimony.
    Wendell, would you repeal welfare reform?
    Mr. Primus. No, but I would make the midcourse corrections. 
I think, again, I said it is too early for me to give a 
definitive recommendation, but I do think the Subcommittee has 
to be much more concerned that families who are eligible are 
indeed served, particularly under food stamps and the Medicaid 
Programs. And I think----
    Chairman Johnson of Connecticut. I was very interested in 
that part of your remarks, as we are concerned about that, and 
we are going to have a special hearing with the States to see 
if we can understand better how we might help them make sure 
that the intent of the law is passed, that is, the intent that 
there should be eligibility for Medicaid and food stamps, and I 
think particularly in the diversion program, we probably are 
losing eligible people. And that certainly would have an impact 
on not only poverty but well being.
    Mr. Primus. The only other thing I would say, Chairman 
Johnson, is that I think some changes need to be made in terms 
of the welfare-to-work reauthorization. The moneys that are the 
pipeline, I think, need to be--the regulations need to be 
loosened up so that money can really be spent.
    I agree with Mr. Cardin that we have to be concerned also 
with noncustodial parents. So there are--and that the $50 
passthrough has been completely repealed about 30 States. I 
think when dads pay, they should get--their children should 
actually be better off when dads pay.
    I think there are some changes that I clearly would 
recommend, but I think the main thing is that you and the 
administration can do is send a signal that we care more about 
economic well being and less about caseload reduction.
    Chairman Johnson of Connecticut. Well, I guess that is the 
part of your testimony that I really would not agree with. I do 
not think it is an either or. I think the caseload reduction is 
spectacular. We now do want to be sure that the people who are 
going off welfare are being supported and that ultimately the 
money in the system finds a way to deal with the issue of 
career development. And I do not think we know how to 
legislate. And furthermore, I think States are just beginning 
to figure that out. Once they get someone in a low-paying job, 
particularly if it is a half-time job, how do you then help 
them get the training they need to not only get a full-time 
job, but a higher paying job.
    But I think there is a material difference, a profoundly 
significant difference between getting a half-time wage and 
some income disregards, some public stipend as well and getting 
the same amount from public stipend, and I think we overlook 
the difference between those two things at our peril. And while 
I am keenly aware of some of the families that do not seem to 
be doing as well as we would think they should be doing, the 
comments of the children are touching and should be kept in the 
forefront of our mind. The pride, the greater attention to 
schoolwork, the greater ambition the children have.
    And so, I think those are things that we do not see 
reported on here at this moment. We do have to find a way to 
understand, because I think they are generationally really the 
reason for welfare reform. The reason for welfare reform is not 
to save stipend money. The reason for welfare reform is to give 
every American the opportunity to make the best of their 
abilities. And the old system certainly was not doing that.
    I certainly want to see how we get Medicaid and food stamps 
going, and we will be doing a lot of work on the welfare-to-
work program. Frankly, it is a total failure. And when you have 
$3 billion, and you are spending $84 million. This is a 
failure, especially when you know that there are people out 
there. When you go out and people say to you, we can get them 
the psychological analysis they need, or we know they are 
abusing a substance, but we cannot pay for the treatment 
program, even though we think they can pay for the treatment 
program, you have got a problem.
    There are lots of ways we can better use reform two money, 
and we are very interested in everybody's thoughts about how to 
best do that.
    And it is really a joy in today's environment to have some 
money that you actually can use to better advantage. But I want 
to--my question really goes to the other panelists, because you 
are more knowledgeable about data and so on. What do you make 
of Wendell's data that there is more, not less, poverty among 
some of the people leaving welfare?
    Ms. O'Neill. I really do not think one can be sure of that 
because the census data are extremely limited, particularly for 
the lowest portion of the distribution. For one thing, you can 
only infer noncash benefits received by those who are on 
welfare and for those who have left welfare and are still 
entitled. Food stamps are probably reported reasonably well, 
but everything else is inferred like the EITC or not measured 
at all.
    Also, we are looking at snapshots. These are not the same 
people in the bottom quintile from year to year; and without 
longitudinal data, one cannot be sure how welfare leavers are 
doing over time. Eventually SIPP may offer a better view of 
what is actually going on. Also, with these snapshots, you are 
picking up people in March and asking them about their sources 
of income, their cash income, in the preceding year. And 
somebody who collected welfare in January, February, March of 
the preceding year, but not hereafter, may not recall and 
certainly might not remember how much it was.
    And another thing, I was truly surprised at the large 
extent to which there was additional household income--that is, 
on average--I did not separate the data by quartiles or 
deciles, just for the average. In 1997, 48 percent of never-
married women with children were in households and additional 
income, apart from the mother's, was $27,500. Should it be 
counted or not? Is there cohabitation or other reasons for 
sharing of income amongst these household members? We do not 
really know. So, without having more information on these 
matters, I do not think that we are getting a reliable 
barometer of real resources available to those families.
    The data certainly do not show what has happened to 
particular women who have left welfare. But from what I see, 
these women are not worse off. And in terms of the resources 
that they have available to live on they may be better off. 
Another factor, of course, is the underground economy. There 
are strong temptations because of taxes and particularly in 
low-income levels, many employers are quite willing to pay 
under the table; it is certainly not uncommon. That is another 
factor that we do not know about.
    Chairman Johnson of Connecticut. Thanks.
    Mr. Besharov. I know the red light is on, but could I take 
a crack at that?
    Chairman Johnson of Connecticut. Yes.
    Mr. Besharov. Today's Washington Post has an article about 
how the Deputy Chief of Staff in the White House and Chris 
Edley are going to cohabit here in Washington, DC. And Chris' 
comment here is that a mortgage is much more serious than a 
ring, because they are not going to get married.
    We have a number of surveys that say--there are a number of 
surveys--when we survey welfare recipients, over 20 percent say 
they are living with the father of one of their children--live 
with. We have two new surveys that say that 50 percent, 50 
percent of the children born out of wedlock last year, the 
father of that child was living in the home. My message to you 
today is that this discussion of just the income of the single 
mother is both tremendously limited and misleading. I would ask 
you to think of the following:
    When we think of middle-class couples and a decision being 
made about whether the wife will work--and I hate to put it in 
those terms, but that is the tendency--the husband and wife sit 
at the proverbial kitchen table, and they decide: Does it pay 
for the wife to work, or for the husband to work more hours? 
That is the question. They weigh questions about child care, 
and so forth.
    What you see in these data--what I believe Wendell is 
describing in welfare reform--is two things happening. One, in 
those households and in those single-mother families, where it 
pays for the mother to work, she is going to work and her 
income is going to go up.
    In the chart I showed you, which shows you the households 
in which those women live, you see something else going on. You 
see that the income in those households, at least the nonsingle 
mothers' income is rising, even when the total is flat. And I 
think it is inescapable. I cannot put 15 footnotes on this, but 
it is inescapable to me that the following conclusion is true. 
Welfare reform is saying to a woman on welfare that she has to 
either work or leave welfare. And in some of these embedded 
households, a decision is being made to forego the welfare and, 
he--and that is what it is, unfortunately, in our kind of our 
sex role society--he is working more hours or earning more 
money because of the economy.
    Now, what is the message there? That is not the message 
about a fight about what is going on with welfare reform. My 
message and my conclusion here would be: Do not focus all your 
efforts on welfare-to-work because many of the households and 
families we are most concerned about are couples--these are 
families just like Chris Edley and the President's Deputy Chief 
of Staff. We should respect those relationships, try to 
strengthen them, and the most direct way to raise their 
combined income is to raise the income of that household, which 
may mean the man working more, and not pushing the mother into 
the labor force.
    Now there is a difficult and challenging question of how to 
do that. And I mentioned just in passing about the marriage 
penalties in the earned income tax credit, which can be 
substantial, in the thousands of dollars. Gene Steuerle has 
estimated that if the couples we are talking about get married, 
they lose 20 percent of their income--20 percent of their 
income. That is an easy fix, as I understand.
    The same is true, as Wendell was mentioning, about child 
support. If we do not watch out about how we enforce child 
support, we take 30 percent of the income from these 
households. So we have to be very careful about how we do it.
    Chairman Johnson of Connecticut. Thank you. Let me yield to 
my Ranking Member, Mr. Cardin.
    Mr. Cardin. Thank you, Madam Chair.
    Dr. Rolston, we look at the number of people leaving the 
welfare rolls, and certainly those numbers are one indication 
of what is happening as far as success of a program. But a 
person might be leaving the welfare roll and getting a good 
job, and that is great. Other people are leaving the welfare 
rolls, getting employment, and living below the poverty or 
close to the poverty line. And then you have a third category 
that do not have regular employment.
    Can you give us some indication as to how many people fall 
into those various categories of employment?
    Mr. Rolston. I do not think we have good answers to that 
right now. I think we will have much better answers to it as 
time progresses, as I mentioned in my testimony. Most of the 
information we currently have about families leaving welfare 
comes from administrative records, mostly from unemployment 
insurance, so we know what somebody earned in a quarter.
    Currently, many of the activities we are carrying out, the 
evaluation activities, are surveys, and there are surveys to 
come. It is in that setting that we can get a much better idea 
of how these earnings are coming about; and, also, from some of 
the national surveys over time.
    But right now, we are limited in what we can say about 
that.
    Mr. Cardin. How much more--how much longer will it take 
before we have good, reliable information that tracks people 
who have left welfare as to the type of employment that they 
have?
    Mr. Rolston. I think we will have much better information 
over the course of the next year. I think it is broadly 
recognized that this is an important issue, and that there need 
to be investments made in order to improve people's work 
trajectory so that they do not end up in part-time jobs that do 
not pay very much and have no benefits.
    I think it is also a really important part of learning 
agenda, because right now we do not know how to make those 
investments very well. But, with diligence and good evaluation, 
we can really learn about those things.
    Mr. Cardin. I think that information is critically 
important to us. We have two programs out there--the earned 
income tax credit and minimum wage--that I would suggest have 
had as much impact on getting people out of poverty who have 
left welfare and found employment as any other program. They 
are at least able to get some help from these programs.
    I think it would be useful to us in evaluating EITC and 
minimum wage as to whether we need to make further adjustments 
is to know what is happening to this new wave of people who are 
leaving the welfare rolls. I understand that you are dependent 
upon the reliability of information, but to the extent that 
this information becomes available, I think it will be very 
useful to us. Any of you--any one of you, if you could make 
that available to our Subcommittee.
    One of the very disturbing trends is the fact that there 
are a large number of people who are eligible for Medicaid who 
are not receiving Medicaid and food stamps. And I am just 
wondering whether you all share that observation and what we 
can do to make sure that people who are eligible to have 
Medicaid, in fact, are enrolled in the program. Is this a 
problem with the States just not--doing something that is wrong 
or lack of information? What is happening out there?
    Mr. Rolston. We certainly share your concern, and I think 
it is a complicated situation, and it is a complicated 
situation because the world has changed so much in this regard. 
Certainly, the Department believes that it is important to 
enforce the law as it exists and to make sure that people who 
are entitled and eligible and apply for assistance and can 
qualify for assistance have access to Medicaid.
    We are doing a number of things to encourage States to look 
at how some other States are doing this. We recently issued a 
handbook, a guidebook, to States around this issue. And we are 
also doing a significant amount of research on this issue--for 
example, looking at families that have been diverted from 
assistance and looking at the underlying processes and how 
States can be allowing that to happen and how those processes 
can potentially be fixed. I think the issue has a lot to do 
with outreach, improving people's knowledge, their access to 
the program, and their desire to participate in the program. 
So, we think it is a very central agenda.
    Mr. Besharov. Could I just jump in on one thing that Howard 
just said, their desire to participate? It is a very 
complicated issue here because, unlike the rest of us, people 
who are Medicaid eligible do not face a preexisting condition 
rule. And so, the reason we want them to sign up for Medicaid, 
and we all do, is for preventive service. That is the only 
reason when you get right down to it. And that is very tricky 
to persuade people about. I daresay most of us, if we did not 
have to face a preexisting condition rule, would not pay for 
health insurance until somebody in the family got sick. There 
is evidence that that is a real issue. That does not explain it 
all. But it means that any efforts that the Congress makes to 
increase eligibility have to fight that problem in the field.
    Mr. Cardin. Well, there have at least been some reports 
that there has been confusion generated by State administrators 
because of the changes in welfare rules that have added to 
people not enrolling in Medicaid. Do you subscribe to that?
    Mr. Besharov. I surely do. I surely do, and I also would 
add, as my chart six shows, that the data we use to make these 
judgements are seriously flawed. The CPS, as everyone has 
talked about here, is now showing only 69 percent of the people 
that HCFA say are getting Medicaid. It is a tremendous problem 
of underreporting as well.
    Mr. Cardin. And let me just conclude, Mr. Primus, with your 
point about the fatherhood programs or the noncustodial parents 
with the passthrough of their child support payment to the 
family. We had a very interesting debate yesterday in the Ways 
and Means Committee on a bill that deals with removing the hold 
harmless to the States on child support enforcement. An 
amendment was offered by Mr. Kleczka that would have permitted 
a set-off for those States that pass through their support. I 
see that our next witness will talk about that. I thought that 
was a really--it would accomplish two good purposes.
    One, it would negate, mitigate some of the pain of removing 
the hold harmless, but, second, it would move forward the good 
policy of encouraging the States to allow the noncustodial 
parents support to actually go to the benefit of the family. 
Your comments?
    Mr. Primus. I think that is a good amendment. I think it is 
small step in the right direction. I think you need to do more 
than that, but it clearly is a good first step. But I also--I 
guess the point I want to make is to Chairman Johnson in all of 
this, is really the issue that we do not have to confuse the 
message of work in caseload reduction.
    In other words, we can keep a strong message about work, 
and I am going around the country urging that some of the same 
changes that have been happening to welfare in terms of culture 
of the office, in terms of trying to get noncustodial parents 
into work, and then making sure that their child support is 
actually all passed through, I think you can send the message 
about work without necessarily implying that caseload reduction 
is, also, comes with it. And, you know, most of the mothers who 
go to work here will remain eligible for Medicaid and will 
remain eligible for food stamps.
    And so that really I think is what has got to change here. 
And I think the TANF funds, which is really good right now--
there is lots of it. Maybe a lot of it should be spent on child 
care, but there is also a lot of other needs that need to be 
addressed. And if we really value child support, why do not we 
subsidize it, just like we subsidize the earnings of mothers 
through the EITC. I mean, and that is what I think--we have a 
long way to go yet to help both parents meet their parental 
responsibility.
    Mr. Cardin. Thank you. Thank you, Madam Chair.
    Chairman Johnson of Connecticut. Mr. English.
    Mr. English. Thank you, Madam Chair.
    Dr. Besharov, I was intrigued by the parting shot in your 
testimony in which you expressed concern about the obstacles to 
marriage in the welfare laws. Can you enumerate what you regard 
as the biggest barriers, building on your previous testimony?
    Mr. Besharov. Sure, and here it goes back to the same 
question: Where are these low-income women living today? What 
are the relationships they have today, not in some time in the 
future, with the men in their lives and the fathers of their 
children. Remember that finding. According to a study from 
Princeton University and so forth, 50 percent of those newborns 
born out of wedlock have a father living at home.
    The conversation for the last half hour or so has been 
limited to single-mother families and ignores men; ignores them 
whether they are living at home, or living outside. When 
Wendell speaks about noncustodial parents in child support, I 
respond by saying, What about custodial parents? These guys are 
living in these households. When we worry about eligibility for 
Medicaid, and we determine it by the status of the mother, in 
the family, she is embedded in the household. Often the 
household is not eligible for either Medicaid or food stamps. 
She does not tell the authorities and so forth. I am not 
getting into fraud and abuse. What I am into here is that there 
is a reality about cohabitation, not just, by the way, for low-
income Americans--8 percent of Americans today live in what we 
used to say was ``without benefit of clergy.'' And this 
Congress has shown itself to be relatively flexible about these 
issues. It is time to be flexible about them when it comes to 
low-income Americans, and that means an across-the-board 
rethinking of all this.
    I have the floor for a second. Look, Wendell's figures say, 
these families have $6,000 or $7,000 of income. There are a few 
places in Idaho or someplace--I hope no one here--where you can 
live on $6,000 a year. Mr. Cardin knows we are from the same 
State. I think it is impossible for someone, on their own, to 
be living on $6,000. They are living with someone or someone is 
providing additional money. That is a reality that ought to 
permeate our discussions about welfare.
    Now, what does that mean? That means you have one heck of a 
problem with, for example, the question of child support. 
Twenty or thirty percent of those dads are living at home. If 
you dun him for up to 30 percent of his income and keep it in 
the welfare, you have made that family poorer. You have not 
reflected that he is there and providing some kind of support. 
That is a tough fix. It is an expensive fix. It means that the 
first step is to not have the kind of conversation we have had 
only about single-mother families, but to think about these as 
households. An easy fix, and then I will stop talking, is on 
the EITC. The EITC has a large marriage penalty. It also has a 
marriage benefit. But it has a penalty. I understand it can be 
fixed within the dollar amounts--I do not do this kind of 
thing--that are available to this Subcommittee. I pass on that.
    I know, though, that the marriage penalty in the earned 
income tax credit is quite significant. And if I were, in 
today's day and age, where there is no stigma to living 
unmarried without benefit of clergy, and if you told me that 20 
percent of my household income would disappear the day I 
married my wife, I would have second thoughts, especially if my 
household income were $20,000 a year.
    So, one thing we could do here to fix this, and it would 
change Wendell's charts immediately, is to deal with the 
marriage penalty in the EITC.
    Chairman Johnson of Connecticut. Thank you.
    Mr. English. Dr. Primus, do you want to comment on that?
    Mr. Primus. Yes, let me make a couple of comments. One is 
this is a very complicated subject, and right now there are 
both marriage bonuses and marriage penalties. And you have to 
be aware of that, because if a mother with zero income marries 
a single guy with about $13,000 of income, the EITC that is a 
big marriage bonus.
    The second is if you look at participation of two-parent 
families, and I will agree with Doug, their rate of 
participation is even lower. The programs right now do not 
serve two-parent families. And that is another thing this 
Subcommittee ought to be very concerned about. And I think some 
of those barriers are being eliminated, but unfortunately the 
Welfare Act, with its 90 percent work participation rate, is 
really causing a lot of States to say, we want to stay away 
from a two-parent family, because, otherwise, we are going to 
be concerned about getting a work penalty; and the last thing 
you want as a welfare administrator is having your State 
assessed with a penalty.
    The last thing I want to say, Doug implies that my research 
here, if I had just looked at cohabiting, that these income 
declines would go away. That is false. The change in the amount 
of cohabiting between 1995 and 1997 is maybe somewhere between 
1 out of 100, of these single-mother families and 3 out of 100, 
at the most. So the declines that I am finding in the bottom 
quintile and in that bottom decile are not being eliminated, 
and, in fact, I have seen preliminary numbers where the 
analysis has been done right, and the cohabiting situation does 
not turn around the decline in the numbers that I presented to 
the Subcommittee this morning.
    Mr. Besharov. Could I have 30 seconds to the word 
``false?''
    Mr. English. That would be up to the Chair.
    Chairman Johnson of Connecticut. Yes, go ahead. Certainly.
    Mr. Besharov. The issue is not declines and increases. The 
issue is when you do this analysis, you add as much as $6,000 
and $7,000 to the money these women have. This is why the 
consumption data about these families shows vastly more 
consumption than their income. We are not disagreeing about 
trends. We are disagreeing about where the base is, and it is a 
lot higher, thank goodness.
    Chairman Johnson of Connecticut. This is a key issue that I 
did not focus on specifically. Let me get through the other----
    Mr. English. Madam Chair, I did have a followup question. 
Can I hold it possibly until the end after other Members have 
asked questions?
    Chairman Johnson of Connecticut. That will be fine.
    Mr. English. Thank you.
    Chairman Johnson of Connecticut. I do think we need to give 
the others a chance.
    Mr. Stark.
    Mr. Stark. Well, Madam Chair, thank you for the hearing. I 
hate to rain on your press conference and the glowing glory of 
the welfare reform bill, which I might add that four out of the 
five Democrats on this Subcommittee oppose. And I might further 
add that it is the--I guess the arrogant obscenities that the 
Republicans bask in--it is a kind of arrogance that would let 
Chairman Archer say, in his press conference today, ``Today, 
there are no children on the sewer grates. None of those things 
we worried about have come true.'' It does not say what he 
worried about, but he sure must be checking all those sewer 
grates in this district.
    Clay Shaw, who used to chair this Subcommittee, said that 
liberals fell down--that may very well be as we did not have 
enough votes--and that he has faith in human spirit. But this 
is the same man who when referring to children with mental 
illness who receive SSI disability checks called those payments 
``crazy checks.'' I wonder if he says crazy checks to senior 
citizens with Alzheimer's disease.
    It is under this attitude that Republicans--Nancy Johnson, 
Archer, Shaw, Hastert--refer in this document to illegitimacy 
as the scourge of American social policy. In Shakespeare's day, 
which is about the political climate that would satisfy the 
Republicans, we called them bastards. We do not say 
``bastards'' anymore, and we do not say illegitimate. There is 
no illegitimate child in the United States, and I hope the 
Republicans some day will have enough humanity to understand 
that they are harming children who had nothing to do--they do 
not vote yet. They have not chosen a religion that some right-
wing religious wacko might suggest will lead them out of 
poverty. I get very sick and tired of hearing people say to 
children, when you pray right, vote right, things will be good.
    Then, they want to go on, and we are talking about 
fatherhood programs. Well, let us just force people to be 
married. I can suggest to you at least two women in this 
country who think that having remained married to their 
original husband would have been foolhardy. I can suggest that 
in many cases where we force a husband and wife to stay 
together, it can lead to abuse and other sorts of problems that 
I suppose most adult white males in the Congress would not 
understand or recognize.
    So, to say that marriage will solve illegitimacy, and 
marriage, according to the Bible, and letting faith-based 
groups train these people will solve these problems to me is an 
obscenity. And it is the height of arrogance. And you ought to 
know where this comes from.
    And I might add that there were three experts in the 
Department of Health and Human Services, Dr. Rolston, who 
resigned in protest--Mary Jo Bane, Peter Edelman, Wendell 
Primus--considered the leading authorities in this country on 
welfare. They resigned in protest, as they should have.
    Now, unfortunately, I cannot ask career civil servants to 
resign. That is not fair, and it is not fair to blame them for 
what the political leaders for whom they work decide.
    I presume, Dr. Rolston, that your testimony today was 
cleared by the Assistant Secretary for the Administration of 
Children and Families, is that correct?
    Mr. Rolston. That is correct.
    Mr. Stark. All right. I have a letter, if the Chair will 
indulge me, to Ms. Golden and to you, sir, with a list of 
questions. I would ask unanimous consent that it be placed in 
the record, and I would ask you if you could find in the next 
30 days to respond, having it cleared, please, to these 
questions. They deal with research and research that you are 
about to do. Would you do that for us?
    Mr. Rolston. Certainly.
    Mr. Stark. Thank you. Madam Chair, I would like this in the 
record, and would you give Dr. Rolston a copy of this letter?
      

                                

                                                       May 27, 1999

Olivia Golden, Assistant Secretary,
Administration for Children and Families
901 D St. S.W.
Washington, D.C. 20477

Howard Rolston, Director of Planning,
Research and Development
370 L'Enfant Promenade S.W.
Washington, D.C. 20447

    Dear Olivia and Howard,

    This is a request for HHS to provide answers to the following 
questions, which will shed light on the impact of welfare reform on 
low-income families. In your response, which I would like to have 
within six weeks, please provide copies of relevant research, data and 
surveys.
    I look forward to reading your responses to these queries at your 
earliest possible convenience.

            Sincerely,
                                                 Pete Stark
                                                 Member of Congress
      

                                

                                                       July 9, 1999

The Honorable Pete Stark
House of Representatives
Washington, D.C. 20515

    Dear Mr. Stark:

    I am pleased to have the opportunity to address the important 
questions you raised in your letter of May 27, 1999 regarding welfare 
reform. I also appreciate the opportunity to lay out the critically 
important agenda that we share: ensuring that supports such as child 
care, Medicaid, and food stamps are available to all eligible low-
income families and investing in all families on welfare, including 
those with the greatest barriers to employment. To achieve these goals, 
in addition to continuing aggressive implementation, enforcement, and 
technical assistance activities, I also want to highlight two key 
legislative next steps. First, as I noted in my testimony before the 
Committee on Ways and Means Human Resources Subcommittee on March 16, I 
believe that the President's child care proposal is enormously 
important to parents and children in low-income working families. 
Second, the proposal to extend and expand the funding authority to 
allow States to address the challenges created by the de-linking of 
Medicaid from welfare is critical to ensuring access to and enrollment 
in the Medicaid program by all eligible families.
    The many important questions you raised are part of our on-going 
research agenda. For some of these questions, we do not yet have 
sufficient evidence to reach definitive conclusions because we are 
awaiting findings from ongoing studies and analyses or we have only 
preliminary information. However, we are using what information we have 
and we are not waiting for each of these studies to be concluded to 
begin working on the issues because we believe it is important to have 
a strong strategy in place to help families. We will utilize results as 
they become available to build on and enhance our efforts.
    My responses are presented in the enclosure with the questions in 
the order in which they were presented in your letter. We will be 
providing relevant reports and studies to supplement those you cite and 
we will continue to provide you and your staff with copies of future 
research reports on these and related topics as they become available.
    I look forward to additional opportunities to discuss new findings 
from our observations and sponsored research and related activities. My 
staff and I are available to answer any additional questions you may 
have or meet with your and your staff to further discuss these 
important issues.

            Sincerely,
                                   Olivia A. Golden        
                                            Assistant Secretary    
                                          for Children and Families

Enclosure
      

                                

Question 1. There are many who maintain that welfare reform is 
a success because fewer people are on the rolls today. Aside 
from the fact that our booming economy is clearly playing a 
role, caseload reduction is a narrow measure that ignores the 
question of whether those who are no longer receiving cash 
assistance are better off economically once they return to 
work, or are diverted or sanctioned off the rolls. Does DHHS 
agree that claims of welfare reform ``success'' are premature 
until we have answers to the following critical questions:
    How many are getting jobs that provide a wage that allows 
them to escape poverty?
    How many of those leaving welfare--or those who are 
diverted--are able to find jobs with health insurance?
    How many have jobs where their kids have health insurance?
    How many have access to good child care?

    Answer. The Department of Health and Human Services (DHHS) 
believes that the success of welfare reform has to be judged 
based on a multiplicity of outcomes including parental 
employment and earnings, family income, and child and family 
well-being. There is clear and consistent evidence that welfare 
reform has been successful in increasing the employment of low-
income mothers. For example, Census data show that the 
percentage of people on welfare who were working the following 
year has increased from 20 percent in 1992 to 34 percent in 
1996. Studies show that many families are earning more than 
they received on welfare. On the other issues there is 
currently insufficient evidence to judge success. The specific 
questions you raise are important ones. We agree that answering 
them is also central to assessing the success of welfare 
reform.
    We have specifically targeted our research effort and 
funding to address many of these questions. Most of the 
evaluations of State welfare reform programs include data 
collection efforts that will provide valuable information about 
the families' circumstances when they are no longer receiving 
TANF cash assistance. This will include information on 
employment, wage levels, benefits such as health insurance 
coverage, and child care arrangements utilized. The special 
studies funded to track ``leavers'' and those diverted from 
TANF will also provide important information about wage levels 
and earnings, benefits available from the job such as health 
insurance coverage, family income, and utilization of other 
program services, such as Medicaid and food stamps. Interim 
reports from several large-scale welfare reform evaluation 
studies and some of the first round of ``leavers'' studies have 
been received. Additional reports are expected to be submitted 
to DHHS over the coming months. We will be reviewing findings 
and analyzing the information produced. We would be pleased to 
brief you on this work as it is completed.

Question 2. Census data suggests that the poorest families 
leaving welfare have ``lost'' economic ground in the last few 
years, despite our robust economy. Why is this, and what steps 
is HHS prepared to take to get states to start meeting the 
needs of extremely poor families?

    Answer. The most current post-TANF data available from the 
Census Bureau is the March 1998 Current Population Survey 
(CPS), reflecting calendar year 1997. As indicated in Howard 
Rolston's testimony before the Ways and Means Subcommittee on 
Human Resources, analysis of all available sources of 
information, including the CPS, shows that the employment rate 
of current and former TANF recipients has increased 
significantly. Along with these employment gains, early 
analysis of the CPS data suggests substantial increases in 
average earnings for all female-headed families. When we look 
at the bottom fifth of female-headed families with children, we 
find that there are employment gains but the average earnings 
of this group did not increase from 1995 to 1997. CPS data 
indicate that the average annual income of all female-headed 
families with children increased. But when we examine 
differences between the top four fifths and the bottom group, 
those in the latter group did not fare as well. The role of 
welfare reform in these changes cannot be determined from these 
analyses. Nevertheless, the early indications of a reduction in 
income among those in the lowest income group are of concern to 
us. We will further examine these outcomes using the March 1999 
CPS data as soon as they are available.
    The Administration has put in place a number of initiatives 
to help families with the greatest challenges. In the 1997 
Balanced Budget Act we fought for and obtained an additional $3 
billion to assist long-term recipients in high poverty areas. 
The Administration's $1 billion proposal to reauthorize this 
Welfare-to-Work Program will help long-term welfare recipients 
in areas of concentrated poverty get and keep jobs and will 
help more low-income fathers increase their employment and 
support their children. The Administration secured $7.5 million 
for Access to Jobs transportation grants to help welfare 
recipients and other low-income workers get to work and has 
proposed doubling resources in FY 2000. The Administration has 
proposed 25,000 additional welfare to work housing vouchers, 
building on a successful request for 59,000 in FY 1999. 
Finally, the Administration has proposed extending tax credits 
to encourage businesses to hire and retain long-term welfare 
recipients and the President has challenged the business 
community and the Federal government to do their part. To date, 
companies participating in the Welfare-to-Work Partnership have 
hired over 410,000 people from the welfare rolls, and the 
Federal government has hired over 12,000 recipients.
    In addition, we have undertaken a number of efforts to 
strongly encourage States to use their existing funds to make 
investments in families who are likely to have the greatest 
barriers to self-sufficiency. We have taken active steps to 
promote and encourage State and local TANF agencies to utilize 
the flexibility provided through the final TANF regulations, 
including issuance of a guidebook on the use of TANF funds (May 
1999). The guidebook provides guidance and examples of how 
existing Federal TANF funds, as well as State Maintenance of 
Effort (MOE) funds, may be used to address multiple barriers 
faced by current or former TANF families. For example, the 
guide points out that Federal TANF funds may be used to provide 
appropriate counseling services (e.g. mental health services, 
anger management counseling, non-medical substance abuse 
counseling services) to family members with barriers to 
employment and self-sufficiency. Both Federal and State MOE 
funds may be used to provide non-medical substance or alcohol 
abuse services, including room and board costs at residential 
treatment programs. Further, TANF or MOE funds can be used to 
help victims of domestic violence relocate somewhere else where 
employment or safe housing has been secured. Among other 
things, these funds can be used to support collaboration with 
domestic violence service providers to screen and identify 
victims applying for TANF, establish confidentiality procedures 
and ensure safety, and develop appropriate staff training. 
Further, we have actively promoted use of the EITC and 
encouraged States to make significant investments in strategies 
that can move families who enter the workforce at low wages up 
to higher wage jobs.

Question 3. Last January, a federal district judge issued an 
injunction against New York City, which until then had a policy 
of blatantly denying welfare applicants the opportunity to 
immediately apply for food stamps and Medicaid. This practice 
is not only illegal, it's despicable. Does HHS have any 
authority to sanction New York for illegally denying Medicaid 
to welfare applicants? If the agency does not have the 
authority under TANF to penalize localities and states for this 
kind of behavior, does it have any other authority to impose 
financial sanctions on localities that are caught denying 
benefits? Did HHS recommend that any sanctions be applied in 
the New York City case? Would you recommend that sanctions be 
used in the future if similar circumstances arise? Or do you 
think the courts and letters of guidance like the one HHS 
issued on March 22, 1999, are a sufficient response, and that 
penalties are inappropriate?

    Answer. The Administration is taking aggressive steps to 
ensure that States and communities do not undermine the 
Medicaid guarantee of coverage in implementing their welfare 
programs. DHHS recently issued guidance to States explicitly 
underscoring that States with joint applications for TANF and 
Medicaid must provide Medicaid applications upon request and 
must process Medicaid applications without delay, regardless of 
the State rules governing the TANF application. HCFA is 
undertaking numerous other activities to ensure that States are 
in compliance with the law in this area.
    When concerns are identified, HCFA begins the process by 
working with the State to reach a satisfactory resolution. If 
these efforts fail, HCFA would take all steps available under 
the law to ensure that the State takes corrective action. This 
could include withholding Federal Financial Participation (FFP) 
for the State's program. If HCFA determines that a State is not 
in substantial compliance with Federal Medicaid requirements, 
there is authority in section 1904 of the Social Security Act, 
after notice to the State and a hearing, to withhold FFP from 
the State.
    After court action and significant HCFA efforts to address 
the problems you cite, the New York City Human Resources 
Administration has agreed to provide Medicaid applications 
without delay at TANF offices in New York City. To ensure 
compliance, HCFA has been reviewing several aspects of New 
York's eligibility process. HCFA will continue to investigate 
all allegations of improper enrollment practices.

Question 4. Some studies show that states using initial full-
check sanctions have seen the highest welfare caseload 
declines. At the same time, we know that the very poorest 
families who need help the most are losing assistance, and are 
not getting jobs that pay anything close to a living wage. In 
HHS' view, is it appropriate for states to use full-check 
sanctions against these very poor families?

    Answer. TANF provides States the flexibility to establish 
the size of a sanction for families who fail to cooperate with 
work, child support, and other requirements, as long as the 
minimum sanction for failure to cooperate with work 
requirements is a pro rata reduction of the TANF assistance 
grant. Therefore, within the overall structure of welfare 
reform, we believe that the amount of the sanction is 
appropriately a matter of State flexibility. However, we 
believe that it is important for States to apply fairly and 
accurately all sanctions, and to provide appropriate assistance 
and services where needed in order for parents to comply with 
requirements.
    As we state elsewhere in our responses, we are taking 
various steps through regulations, policy guidance, and 
technical assistance to encourage States to use TANF 
flexibility and resources to develop policies and strategies to 
help TANF families who may have more barriers to self-
sufficiency. For example, we are funding direct technical 
assistance and sponsoring conferences and workshops to allow 
for important information sharing about promising approaches 
among policy makers and practitioners. We also expect that 
findings from several research studies will provide important 
information about these families and methods to most 
effectively help them meet their goals for employment and 
meeting the needs of their children. Some of the leavers 
studies, for example, explicitly examine the outcomes for 
families that leave due to sanctions, as compared to those that 
leave for other reasons.

Question 5. There are several published reports suggesting that 
many welfare case workers are failing to check the eligibility 
of TANF applicants and those leaving welfare for food stamps 
and Medicaid. Why aren't all eligible families moving through 
the new TANF system, which emphasizes employment, getting 
Medicaid and food stamps, as required by law? What policy 
changes does HHS recommend to ensure that crucial eligibility 
linkages, which are really work supports for low-income 
families, are promptly and consistently made?

    Answer. We agree that work supports such as Medicaid, food 
stamps, transportation, housing, and reliable child care are 
needed and should be available to eligible former TANF 
recipients and other low-income families, including those 
diverted from cash assistance. We have strongly advocated for 
policies that support access to and participation in these 
programs as reflected in the Administration's budget request. 
The request would extend and expand the funding authority for 
outreach for Medicaid and help States address other challenges 
associated with the de-linking of Medicaid from welfare and the 
establishment of section 1931. Examples of the use of funds 
under this authority include outreach, education campaigns, and 
worker training.
    The major changes in the organization and culture of cash 
assistance delivery brought about by welfare reform have 
created both opportunities and challenges. In many cases, State 
and local agencies have been innovative and creative in 
developing new policies and practices and utilizing the 
flexibility provided to link programs and help to ensure that 
families have access to the supports needed as they move toward 
self-sufficiency. Federal law and regulations require that 
States that use a joint TANF-Medicaid application must furnish 
a Medicaid application upon request, may not impose a waiting 
period before providing it, and must process Medicaid 
applications without delay. We will continue to work with State 
and local TANF and Medicaid agencies to ensure that they comply 
with existing law and regulation and to find new ways to reach 
eligible children and families through the welfare system as 
well as outside of it.
    We have sent notices to State Medicaid and TANF Directors 
outlining the requirements of the law and Federal policy, 
alerting them to possible problem areas that may need 
attention, and providing them with guidance on ways to improve 
their systems and expand Medicaid coverage. Specifically, DHHS 
developed and issued a 24-page guide: ``Supporting Families in 
Transition: A Guide to Expanding Health Coverage in the Post-
Welfare Reform World.'' This publication was sent to all State 
Medicaid and TANF Directors and many other interested parties.
    We have a follow-up strategy to this guide that includes an 
educational component, aggressive outreach, and a proactive 
enforcement process. In the isolated examples where specific 
problems have been identified, DHHS has acted aggressively. For 
example, in New York, HCFA has been reviewing several aspects 
of the eligibility process in the State. We are also 
undertaking research activities to find ways to promote 
increased participation of eligible individuals in these 
programs. While we believe the problems derive from State and 
local practices and procedures rather than from problems with 
current Federal law and policy, we will continue to consider 
proposals to address these issues.

Question 6. There is also research documenting that food bank 
use is up in the last several years. At the same time, food 
stamp enrollment has declined nationally by 33%, or 9.1 million 
people, since September 1994. The Department of Agriculture 
says almost all of the drop in food stamp caseload is due to 
welfare reform. Does DHHS think this precipitous decline is due 
in large part to the fact that TANF recipients and leavers 
simply aren't being told they're eligible for food stamps? If 
so, what is the agency going to do about it?

    Answer. As indicated in our response to the prior question, 
we believe that access to and receipt of food stamp benefits, 
in addition to Medicaid, transportation, housing, and child 
care, are critical work supports which can help meet the 
nutritional needs of low-income children and families, 
particularly former TANF families. The USDA believes that the 
reasons behind the rapid drop in food stamp participation are 
complex. Part of the drop is due to the strength of the economy 
and the success of welfare reform, which helped move families 
from welfare to work. Part of the drop is due to new 
restrictions on the participation of certain legal immigrants 
and able-bodied unemployed adults without dependent children. 
But other factors may also be at work.
    Some families who leave welfare for work may not be aware 
that they still may be eligible for food stamps; in other 
instances, State or local agencies may have discouraged or 
prevented those eligible for benefits from applying. In both of 
these cases, this ought not to happen. In some cases, families 
may have decided that participation was not worth the ``costs'' 
in terms of time, paperwork burden, or stigma. In any case, 
families that work hard and play by the rules ought to have 
access to sufficient and nutritious food.
    The Administration believes this is a very important issue 
and has proposed $7 million for nutrition education and 
outreach in the Administration's FY 2000 budget for USDA. We 
will continue to work with officials within the USDA and with 
State and local agencies to identify and correct policies and 
practices that discourage or deter participation, to encourage 
outreach, and ensure that families have complete information 
about their eligibility.

Question 7. Medicaid enrollment dropped by 2% in 1996 (600,000 
people) and by another 3% (800,000 people) in 1997. A recent 
Families USA study argues that more than a million people who 
were eligible for Medicaid were not covered by the program in 
1997 as a consequence of welfare reform. Families USA further 
calculates that 675,000 of that 1.25 million were uninsured, 
including nearly 420,000 children. These are children who would 
have been enrolled in Medicaid under the old linked AFDC-
Medicaid system. This means that the rate of uninsurance among 
children has actually increased, according to the study--
despite the fact that States have been busy passing laws in the 
last two years to expand Medicaid eligibility among children. 
What explains this phenomena and what does DHHS plan to do 
about it? What steps is DHHS prepared to take to make it 
clearer to States that Congress did not intend for people to 
lose access to Medicaid as a result of welfare reform?

    Answer. While there are likely many factors that have 
contributed to the decline in the number of Medicaid 
beneficiaries, such as the robust economy and the strong job 
market, the Administration and DHHS believe that people 
entitled to Medicaid should be enrolled and we have developed 
aggressive responses to address the declines, whatever the 
reasons.
    As mentioned earlier, we are continuously promoting 
approaches to improve access and enrollment by all eligible 
families. Our technical assistance and research activities will 
be at the forefront of our efforts. We will offer to train 
staff in the States on the provisions of law and the 
opportunities to fund outreach and expand coverage as outlined 
in the ``Expanding Health Coverage'' guide. We are actively 
working with States to maximize coverage of low-income working 
families under Medicaid and to ensure compliance with the 
Medicaid statute. We will support research activities to assess 
program policies and practices and document lessons for program 
administrators and interested parties. These are important 
issues and we are actively taking steps to address them.
    In addition, we have fought to expand health care coverage 
in the following ways:
    Creation of the Children's Health Insurance Program (CHIP). 
The President, with bipartisan support from the Congress, 
created the CHIP. The Balanced Budget Act of 1997 allocated $24 
billion dollars over five years to extend health care coverage 
to uninsured children through State-designed programs. States 
project that they will ensure 2.5 million children when their 
new CHIP programs are fully implemented.
    Allowing States to Expand Medicaid to Cover Families. The 
welfare law allows States to expand Medicaid coverage under 
section 1931 to families who earn too much to be eligible for 
Medicaid but not enough to afford health insurance. These 
expansions allow States to present Medicaid as a freestanding 
health insurance program for low-income families--an important 
step towards removing the stigma associated with the program 
and reaching families who do not have contact with the TANF 
system.
    Providing Medicaid Coverage to Low-Income Two-Parent 
Families Who Work. In August 1998, the President eliminated a 
vestige of the old welfare system by allowing all States to 
provide Medicaid coverage to working, two-parent families who 
meet State income eligibility requirements. Under the old 
regulations, adults in two-parent families who worked more than 
100 hours per month could not receive Medicaid regardless of 
their income level. Because the same restrictions did not apply 
to single-parent families, these regulations created 
disincentives to marriage and full-time work. Prior to 
eliminating the rule entirely, the Administration allowed a 
number of States to waive this rule. The new regulation 
eliminates this requirement for all States.

Question 8. Section 1931 of the 1996 welfare law allows States 
to count income and resources far more liberally than they 
could under the old AFDC law for purposes of determining 
eligibility for Medicaid. As I understand Section 1931, this 
means that States can offer Medicaid to a far larger number of 
the working poor if they choose to do so. Indeed, an August 
1998 letter to State Medicaid Directors says that the 
implementing regulation allows all ``States.., to provide 
health care coverage under Medicaid to virtually all TANF 
recipients and to continue that health coverage after a parent 
has found employment.'' How actively has DHHS been urging 
States to take advantage of this new flexibility to decrease 
uninsurance among the working poor? How many States have 
submitted 1931 plans, and how many are expanding Medicaid 
eligibility under this section to date, and how many more would 
you expect to see expand eligibility within the next year?

    Answer. DHHS is aggressively promoting State coverage of 
working poor families through section 1931. As previously 
indicated, we issued the 24-page guide that addresses 1931 
expansion options and developed a follow-up strategy to work 
with States. In addition, the letter you cite is just one of 
many that we issued that discusses the flexibility available 
under 1931. We have worked closely with States in the 
development of expansions that will assure that the TANF 
population is eligible for Medicaid. At this time, 45 States 
have submitted 1931 State Plan Amendments (SPAs). Most of these 
involve an eligibility expansion, though the degree of 
expansion varies considerably. Some have only increased the 
vehicle or resource exclusion. At the opposite end, the 
District of Columbia will effectively exclude all income below 
200 percent of poverty in order to cover all the working poor. 
A number of States have already revised their original 1931 
amendments to add additional expansions. While we have no way 
of predicting how many will do so in the next year, we will 
continue to encourage States to expand coverage through 1931. 
We do expect that States will continue to use the 1931 
flexibility to both simplify and expand Medicaid eligibility in 
the future.
    As indicated elsewhere, we are taking steps through 
research activities, technical assistance, and information 
sharing through conferences and workshops to encourage States 
to develop policies to support working families, particularly 
those leaving TANF rolls.

Question 9. In March 1998, DHHS issued a high performance bonus 
guidance document that proposes to reward the 10 States deemed 
to be doing the best job at welfare reform every year. It 
incorporates only work-related measures in the form of job 
gain, job retention and job gain earnings. Wendell Primus of 
the Center on Budget and Policy Priorities argues in his 
testimony today that additional factors that provide a measure 
of how many are receiving Medicaid and food stamps should be 
part of any assessment of how well States are doing in 
implementing welfare reform. Conceptually, do you agree or 
disagree with the Center's approach? Are you willing to 
recommend that some measurement of how well States do in 
serving low-income families, or a measurement of childhood 
poverty, should be a component of a final rule for State high 
performance bonuses? If not, then how do you really expect to 
convince States that they have to do a far better job than they 
have been in enrolling welfare leavers in these work support 
programs in order to make welfare ``reform'' truly successful?

    Answer. We are exploring a number of possible additional 
measures that could be used to assess TANF high performance. In 
making decisions about the measures that will be included, it 
is important to consider the consistency of measurement across 
States, the degree to which there is accurate measurement of 
the variable at the state level, and other similar factors. We 
plan to issue a proposed rule this summer regarding the High 
Performance Bonus in which we will address the issue of moving 
beyond the current work measures and hope to obtain valuable 
feedback and input from experts and interested parties in 
response to the proposed rule.
    In addition, as you note, the current High Performance 
Bonus measures include retention and earnings gains on the job, 
as well as job entry. These measures are likely to reward 
States that do a good job of providing supports to working 
families such as health care and child care because these 
supports help families keep their jobs and move up on the job.

Question 10. On the issue of child care, is there any evidence 
that are States are denying child care services to TANF 
recipients and leavers? I am told that in the State of Utah, 
parents who are being sent to work must first seek out free 
child care before they are allowed access to TANF-based child 
care services. In how many States is this practice replicated?

    Answer. The availability of quality child care is 
critically important for all low-income working families, 
including those who are transitioning from welfare to work, and 
for their children. The Administration and DHHS are dedicated 
to increasing our investments in quality child care for TANF 
and low-income working families.
    We are not aware of any States denying child care services 
to TANF recipients if it is needed for participation in 
required activities or employment. Federal law and regulations 
for the Child Care and Development Block Grant (CCDBG) and TANF 
specify that TANF agencies may not impose a sanction on a 
single mother of a child under age 6 for refusal to participate 
or work if the parent demonstrates an inability to obtain 
needed child care based on the State's definitions of 
``appropriate child care,'' ``reasonable distance,'' 
``unsuitability of informal care,'' and ``affordable 
arrangements.'' Both the TANF and CCDBG regulations specify 
steps that the State must take to carry out this provision, 
including a requirement that State TANF and child care agencies 
must inform families about these provisions.
    With regard to the practice you were informed about in Utah 
in which families are encouraged to find free care as a first 
option, we are told that the State does not require that 
families seek out free child care prior to approval of child 
care subsidies. State workers ask parents if child care is 
available at no cost. If the parent states that such care is 
not available, the TANF worker proceeds with a subsidy request. 
The State assures us that no parent is refused child care 
services or required to find free care prior to approval of 
child care subsidies. We are not aware of any other State that 
engages in a similar practice. We will be in a better position 
to learn more about current State practices once the State 
CCDBG Plans for the 2000-2001 biennium are received and 
analyzed. The plans are due July 1. We would find it useful to 
hear if you learn of other practices that cause concern.
    We also know that after families leave TANF, there is 
considerable variation among States in the availability of 
child care subsidies. Some States seek to provide child care to 
leavers for a set period of time, while others have moved to an 
income-based system where low-income families are served on an 
equal basis whether or not they came from welfare. The critical 
issue for all the States, however, is that there are 
insufficient resources to serve all the low-income working 
families, both former TANF families and other low-income 
families, who need child care subsidies in order to hold onto 
their jobs and ensure that their children are in safe and 
stable care. Nationally, despite considerable State investments 
as described below, data from 1997 showed that only about 1.25 
million of the 10 million children who met the Federal income 
eligibility standards for the Child Care and Development Block 
Grant received a subsidy in 1997.
    Because the Administration believes the availability of 
safe, affordable, quality child care is so important to working 
families, the President has proposed a major initiative to 
ensure that America's working parents are not forced to choose 
between a job they need and a child they love. We very much 
appreciate your and your colleagues' support for this 
initiative, which proposes to expand the Child Care and 
Development Block Grant by $7.5 billion over five years to 
serve an additional 1.15 million children in low-income working 
families; to help low and moderate income families who earn too 
much to qualify for subsidized care, but still need help paying 
for child care by expanding benefits for the Child and 
Dependent Care Tax Credit; to expand after-school care to one 
million children; and to strengthen the quality of care for our 
youngest and most vulnerable children through an investment of 
$3 billion over five years for an Early Learning Fund that 
communities would use to ensure healthy, safe, and high quality 
care for babies, toddlers, and preschoolers.
    As indicated in my testimony before the Subcommittee last 
spring, States are making considerable investments in child 
care but simply cannot meet the needs of low-income working 
families for stable care without an additional Federal 
commitment. In FY 1998 States obligated 100% of the entitlement 
funds available to them through the CCDBG, including the 
matching funds that they must supply in order to draw down the 
Federal assistance. In 1998 12 States reported expending TANF 
funds for child care and 28 States transferred TANF funds to 
their CCDBG programs. Yet, even in the States that have made 
the largest resource commitments, eligibility levels are often 
set far below the allowable Federal level and there are long 
waiting lists for services among eligible families. And, States 
that have studied the impact on families on waiting lists of 
failing to get a child care subsidy report that such families 
often return to welfare, having problems paying their bills, 
and shuffle their children between unsatisfactory child care 
arrangements. For these reasons, we believe that it is 
extremely important to families that the President's child care 
initiative be enacted.

Question 11. Can you discuss the research showing that the 
quality of child care directly affects employment, and can make 
a difference in whether low-income women are willing and able 
to return to the work force for the long term? And would you 
agree that care that is convenient, affordable, and of high 
quality may help parents succeed in their transition from 
welfare to work while deficits in any of these dimensions may 
interfere with parents' education and work activities, not to 
mention compromise a child's well-being?

    Answer. Child care is centrally important to children's 
well-being and to parents' ability to work. As you note, 
convenience, affordability and quality of child care are all 
critically important dimensions that can enhance parents' 
ability to succeed in the transition from welfare to work and, 
as noted above, can also influence the ability of low-income 
working families to keep their jobs and succeed at work. In 
addition, the quality of care is important to children's well-
being, healthy development, and school readiness, as 
demonstrated by an expanding body of research. Over the past 
several years, in partnership with the Congress, the 
Administration has provided leadership by expanding public 
investment to serve more needy children and families, by 
stronger efforts to improve program quality and accountability, 
and by creative work to support partnerships across different 
early childhood programs. Yet, as noted above, there are 
critical next steps we must take at the Federal level to ensure 
quality care. These include enacting the President's proposal 
for an Early Learning Fund that would enable communities to 
improve care for the youngest children and enacting the 
President's proposed budget for Head Start, the nation's 
premier early childhood program, which still serves less than 
half of eligible children.
    Among the most important recent research findings on the 
impact of quality child care on children are the following:
     The National Institute of Child Health and Human 
Development recently reported that higher caliber child care 
was consistently related to high levels of cognitive and 
language development. In addition, research shows that higher 
quality child care is related to stronger pre-mathematics and 
social skills.
     A recent follow-up to the Cost, Quality, and 
Outcomes in Child Care Centers study, co-sponsored by the 
Department of Education and several foundations, found that 
children who had experienced high quality child care had higher 
language and mathematics skills than those who had been in 
poorer quality care. Most strikingly, the effects lasted into 
the second grade. High quality child care particularly 
benefited children whose mothers had lower levels of education.
     A rigorous evaluation of a Milwaukee program 
designed to provide child care, health care, earnings 
subsidies, and guaranteed jobs to low-income working families, 
Project New Hope, found that a key impact of the program was to 
substantially increase boys' school performance and 
substantially reduce boys' behavioral problems. Researchers 
attributed this finding to several aspects of the program, 
including especially increased participation by the boys in 
preschool care, extended-day child care, and other structured 
activities.
    Given the growing body of research that indicates the 
fundamental importance of quality, we have significant concerns 
about the quality of care that is available. As noted above, 
the President's initiative includes the Early Learning Fund to 
support higher quality child care in communities across the 
country. The Early Learning Fund will provide challenge grants 
to communities for children aged zero-to-five to enhance the 
quality of early care and education services for our youngest 
and most vulnerable children. A variety of research also 
suggests that child care makes a difference in parents' ability 
to sustain employment as well as their consistency and 
productivity on the job. For example, several studies have 
shown that improvements in employee absenteeism, lateness, and 
turnover have been shown to be related to the availability of 
employer provided child care services. A study sponsored by the 
National Conference of State Legislatures (1997) found that 
child care issues were cited by surveyed employers as causing 
more problems in the workplace than any other family-related 
issue.
    Continued research and evaluation of issues affecting child 
care are essential to improve Federal, State and local 
policies, promote effective practice, and increase our capacity 
to better serve low-income children and parents. We appreciate 
your efforts and those of others in authorizing $10 million for 
child care research and evaluation that will become available 
in fiscal year 2000. We support continuation of this research 
funding authority because it provides us an important 
opportunity to enhance our knowledge in critical areas and in 
ways that will be helpful to parents, providers, employers, 
communities, States, and the country as a whole.

Question 12. Testimony presented by Wendell Primus of the 
Center on Budget and Policy Priorities at a May 27 Ways & Means 
Human Resources Subcommittee hearing concludes that the average 
disposable income of the poorest fifth of single-mother 
families fell from 1995-97 by about $660, a 7.6% decline. 
Income in the next-to-the-bottom income quintile remained 
unchanged. For these families, welfare reform has not produced 
``success,'' but dramatic failure. Part of that failure is due 
to these families not getting food stamps. How does DHHS think 
this poverty gap should be addressed?

    Answer. As stated above, analysis of all available sources 
of information, including the CPS, shows that the employment 
rate of current and former TANF recipients has increased 
significantly and for some the analysis suggests there have 
also been substantial increases in average earnings. Based on 
early analysis of the data, the average earnings for those in 
the bottom fifth of female-headed families with children did 
not increase. We are concerned with this preliminary finding 
and will continue to monitor it. At the same time, we are 
aggressively promoting strategies to increase investments to 
provide supports to the hardest to employ families and to 
increase access to and participation in both the Medicaid and 
Food Stamp programs by all eligible families. Our technical 
assistance efforts and those of USDA, as well as our recently 
issued guidance on the flexibility on the use of TANF funds 
based on the final regulations, will encourage States to invest 
resources to provide needed supports for the poorest families 
and those with multiple problems. As we note in response to 
other questions, there are many examples of promising 
strategies that State and local TANF agencies are putting in 
place to assist families who face more difficult challenges to 
self-sufficiency.

Question 13. In other testimony by the American Enterprise 
Institute, it is suggested that the poorest women--those in the 
bottom income quintile--are doing reasonably well because 
they're moving in with non-family members. In DHHS' view, is it 
appropriate that very low-income women are being ``hassled'' by 
``job centers'' to the extent that no cash assistance or other 
aid is extended to them whatsoever?

    Answer. While we support State and local TANF agency 
efforts to implement strong work requirements for families 
applying for and receiving TANF cash assistance, work 
requirements must not be applied in a way that deters families 
eligible for Food Stamps and Medicaid from applying for and 
receiving them. As we have noted in responses to other 
questions, we are using a variety of approaches to correct 
inappropriate or illegal practices.

Question 14. The ``hassle'' factor referenced in AEI's May 27 
testimony has been institutionalized in some State diversion 
policies. Unfortunately, these tactics can cause potential 
welfare applicants to walk out the door before talking at 
length with a caseworker, and in some cases, transformed into 
policies to effectively deny benefits illegally, as happened 
last year in New York City. Does DHHS believe this suggests 
that Federal parameters on State diversion policies are needed?

    Answer. DHHS sponsored a research project that examined 
State policies to divert families from receipt of TANF cash 
assistance and the implications for Medicaid enrollment. The 
study surveyed state-level administrators to gain information 
about policies and included case studies of five local offices 
to examine field operations and practices more closely. The 
study found that the new administrative requirements brought 
about by de-linking Medicaid and cash assistance and the use of 
diversion strategies created both opportunities and challenges 
for State and local policymakers and operators. While some 
States used the flexibility and expansion opportunities to 
directly support their diversion programs, the researchers 
found that there were also situations where applications for 
Medicaid could potentially ``fall through the cracks'' where 
there were diversion programs.
    As a result of these and similar findings, DHHS used 
issuance of the Guide to Expanding Health Coverage as well as 
several letters to State Medicaid and TANF Directors to 
emphasize the requirement for States to process applications 
for Medicaid without regard to eligibility factors related 
solely to TANF and to notify families of their continuing 
eligibility for Medicaid despite ineligibility or noncompliance 
with TANF requirements. USDA has issued similar guidance 
regarding the Food Stamp program. We will continue to address 
the issue through a variety of approaches, including technical 
assistance, further research, and program monitoring. We will 
react quickly to any information about illegal practices. At 
this time, DHHS does not believe that Federal parameters on 
State TANF diversion policies are necessary.

Question 15. There is information from a number of sources that 
some families are indeed worse off since the passage of PRWORA 
in 1996. Wendell Primus has testified that the bottom fifth of 
single mothers experienced a drop in annual incomes from 1995 
to 1997. Also, the Children's Defense Fund has reported that 
former welfare families are reporting that they are unable to 
pay for food, are falling behind in rent, losing health 
coverage, and going without needed medical care. NETWORK, a 
National Catholic Social Justice Lobby, also reports that 
parents report that they and their children are skipping meals 
or eating less per meal. In light of this information, how can 
we deny that some families are in fact worse off?

    Answer. As noted above, there is clear evidence from 
multiple sources that employment rates have increased and that 
earnings have increased for many families. But, the early, 
preliminary evidence from the CPS does suggest that the income 
picture is more complicated, that some families may have gained 
income while others lost, and that there is particular reason 
for concern about families at the bottom of the income 
distribution. We believe that it is important to continue to 
monitor this issue. In many of the leavers studies, the States 
are examining subgroups of families leaving welfare in order to 
understand which are succeeding and which are struggling. This 
will enable them to target additional resources to those 
families who are most vulnerable.
    We are aggressively encouraging States to invest TANF funds 
in strategies that will make a difference to these families; 
both strategies that support low-income working families who 
have left welfare, and strategies that invest in families on 
welfare, particularly the most disadvantaged. Further, we 
believe that the flexibility provided within the recently 
issued final regulations for TANF will make it easier for 
States to invest resources to support former welfare families. 
We are encouraged by initial State reaction and response to 
this new flexibility. In addition, the Administration fought 
for an additional $3 billion investment in Welfare-to-Work 
funds which are now helping long-term recipients in high 
poverty areas get jobs and succeed in the workforce and we have 
proposed an additional $1 billion for this effort.
    Moreover, the Administration and DHHS have advocated for an 
array of important supports for working families so that 
families are better off when they choose work over welfare. 
These include the Earned Income Tax Credit, increased minimum 
wage, expanded Medicaid eligibility, access to food stamps, 
transportation and housing vouchers, strong child support 
enforcement provisions, and the availability of affordable 
quality child care. We are pursuing an aggressive strategy to 
work with State and local TANF agencies to support working 
families.

Question 16. An amendment was recently offered in the Senate to 
require DHHS to submit a report annually to Congress on how 
well those leaving welfare do in the first two years after 
leaving cash assistance. It failed by only one vote. The 
amendment called for DHHS to track employment status, wages, 
health insurance status and child care information. Do you 
agree that this kind of an overarching broad examination of the 
economic well-being of those leaving welfare is integral to a 
fair evaluation of welfare reform?

    Answer. As we stated in response to the first question in 
your letter, we agree that the success of welfare reform should 
be judged using a multiplicity of outcomes. We will be 
obtaining information about the measures you mentioned from a 
variety of research projects that we sponsor (e.g., the 
``leavers'') studies, child outcome studies, national surveys) 
as well as from studies sponsored by other organizations. Some 
relevant measures will also be expected to be available through 
the data reported by States participating in the High 
Performance Bonus.

Question 17. States have a substantial amount of TANF monies 
that have not yet been obligated--about $3 billion in 
unobligated funds. Will DHHS recommend that it be used for 
helping the hardest-to-serve welfare recipients, for improving 
the food stamp program and for Medicaid outreach. Are States 
prepared to use the money for these purposes, or should the 
Federal government direct States to do so?

    Answer. We believe that assisting the ``hardest to serve'' 
to become self-sufficient and facilitating job retention and 
advancement are two of the most central uses for directing 
unobligated TANF funds. We are promoting these strategies 
aggressively through ongoing technical assistance, information 
provision, and research activities. We will use the flexibility 
provided in the final TANF regulations and the written guidance 
we have provided on the use of TANF funds to aggressively 
encourage States to make important investments in those 
families facing multiple challenges in their effort to become 
self-sufficient.
    The types of services or approaches needed to help families 
with multiple barriers may be different from those used with 
families that exited earlier. State and local agencies are 
using a variety of approaches to work with families with 
significant barriers to employment. The opportunity provided to 
furnish employment-focused services specifically for the 
hardest to serve through the Welfare-to-Work Program is 
critical to this goal. That is why we fought for the $3 billion 
investment in the Welfare-to-Work Program and why we support 
reauthorization of the Welfare-to-Work Program and an 
additional investment of $1 billion. As mentioned elsewhere, we 
are working with other agencies and organizations to identify 
promising strategies and practices for working with the hardest 
to serve families (e.g., those with substance abuse and mental 
health problems, victims of domestic violence, individuals with 
disabilities) through peer-to-peer technical assistance, 
workshops and conferences, and research.
    As noted throughout, we have taken numerous steps to 
encourage States to conduct outreach and to examine and correct 
policies and practices that result in families being deterred 
or discouraged from making application for Medicaid and Food 
Stamps. We will continue to address this issue through our 
technical assistance strategy, research activity, and program 
monitoring.

Question 18. I understand that DHHS will soon be issuing a 
proposed regulation on State high performance bonuses, worth 
$200 million per year. Temporary guidance for 1999 focuses only 
on work-related measures of job entry, job earning gains, and 
job retention. Does DHHS think broader measures of family well-
being should be included as incentives to States to bolster 
food stamp and Medicaid participation among welfare 
participants to help lift them out of poverty?

    Answer. As stated above, we are exploring a number of 
possible types of measures for inclusion in the High 
Performance Bonus that could be used to assess TANF high 
performance. We expect that the comments we receive on the 
proposed rule will help us in making final decisions about the 
types of measures to include. In the meantime, we will continue 
to use other means to assist and encourage States to increase 
access to and participation in the Medicaid and Food Stamp 
programs among former TANF families and other low-income 
families.

Question 19. Does DHHS agree that caseload reductions are only 
one possible measure of welfare reform? What are some other 
markers we should be looking at to assess the success or 
shortcomings of welfare reform?

    Answer. DHHS believes that the success of welfare reform 
has to be judged based on a multiplicity of outcomes including 
parental employment and earnings, family income, and child and 
family well-being.

Question 20. The General Accounting Office points out in a 
report released on May 27, ``Welfare Reform: Information on 
Former Recipients' Status,'' that ``there are no Federal 
requirements for States to report on the status of former 
welfare recipients. As a result, the only systematic data 
currently available on families who have left welfare come from 
research efforts initiated by States.'' Those State studies 
vary considerably in the way they are conducted and are not 
generalizable, making it harder to do cross-comparisons. Does 
DHHS support a requirement for States to provide data every 
year in a report to Congress on uniform parameters--employment 
status, wages, health insurance, and child care information--in 
order to greatly increase the understanding of the impact of 
welfare reform?

    Answer. As we stated above, we agree that the success of 
welfare reform should be judged using a multiplicity of 
outcomes. In addition to the state-sponsored leavers studies 
mentioned by GAO, we will also be obtaining information about 
the measures you mentioned from a variety of research projects 
that we have sponsored as well as from studies sponsored by 
others organizations. The number of studies with findings that 
were available to GAO at the time of their study was somewhat 
limited. Over time, we will have much more information when all 
of the studies are completed. DHHS has provided funding to 
support 14 ``leavers'' studies using comparable methodologies 
and definitions, where possible, and will fund additional 
projects or expansions this year. While we will not be able to 
generalize the findings to all States, we will have a 
considerable amount of information from a large number of 
States with different benefit levels and other program 
characteristics. Some relevant measures will also be expected 
to be available through the data reported by States 
participating in the High Performance Bonus and through case 
closure data required by the final TANF rules.
    The President's budget has requested $27 million in 
mandatory and discretionary funding and an additional $5 
million for policy research for FY 2000 to continue to support 
these and other welfare research efforts. We hope that Congress 
will fully fund this request. Proposals to require states to 
track all former TANF recipients and collect data about their 
employment status, wages, health insurance and child care 
services would be a very costly undertaking that raises a 
number of complex data collection issues.

Question 21. There are now 31 States using diversion tactics in 
their welfare offices, according to GAO. Any comprehensive 
assessment of welfare reform and outcomes must determine 
whether these diversion practices are negatively affecting 
families. What State diversion policies identified by DHHS are 
hurting low-income families?

    Answer. We believe that any policies that deny individuals 
the right to apply for Food Stamps and Medicaid are illegal and 
hurt families. Such policies need to be eradicated wherever 
they exist and we have taken steps to ensure that States comply 
with the law and regulations. Under Federal regulations, 
families must be given the opportunity to apply for Medicaid 
and Food Stamps without delay.
    As mentioned previously, DHHS sponsored a study of State 
diversion policies with a special focus on implications for 
Medicaid. The findings from the study highlighted both 
challenges and opportunities brought about by diversion 
programs and the ``de-linking'' of Medicaid from cash 
assistance eligibility. We have used the findings from this 
study and other sources in developing the Guide to Expanding 
Health Coverage to provide specific recommendations and 
examples for State and local use and to encourage expansion of 
health care coverage. DHHS' follow-up strategy will help to 
ensure that States understand and comply with Federal policies.

Question 22. As welfare rolls shrink, some States are concerned 
that a growing proportion of people on the rolls are the 
hardest-to-employ, such as those with mental health and 
substance abuse problems, or victims of domestic violence. In 
DHHS' experience visiting States and learning about their TANF 
programs, what are some of the programs that have been put into 
place to help this population?

    Answer. State and local agencies are using a variety of 
approaches to work with individuals with these types of 
problems. For example, in some areas (e.g., Oregon), the TANF 
agency has established an agreement with the local substance 
abuse or mental health agency to have a professional from such 
organization stationed in the TANF office to conduct 
assessments of applicants or recipients or to provide 
additional information or consultation to workers. Some States 
(e.g., North Carolina and New York) are using Employee 
Assistance Programs to address these types of problems and 
increase employment. Others have committed resources 
specifically for treatment and services to individuals and 
families identified as having substance abuse problems (e.g., 
New Jersey) and many have taken steps to provide additional 
training to front-line staff in the use of tools to help 
identify the existence of problems which could impede the 
transition to self-sufficiency.
    Under TANF, States have flexibility to give special 
treatment to the victims of domestic violence. Under the 
``Family Violence Option,'' States may certify that they will 
assist victims by: screening for them when they apply for TANF; 
referring them to counseling and supportive services; and 
waiving program requirements (such as time limits, residency 
requirements, child support cooperation, or family cap 
provisions) if necessary. Our latest information indicates that 
twenty-seven States have certified that they will assist 
victims of domestic violence. Examples of State and local 
actions include authorization of special appropriations for 
services for TANF recipients who are victims of domestic 
violence (e.g., Pennsylvania); implementation of demonstrations 
to examine new approaches to serving battered women (e.g., 
Tennessee, Illinois, Texas, Massachusetts, Kansas, Arizona, 
Utah, Minnesota); and hiring of domestic violence experts as 
employees of the TANF agency to work with caseworkers and to 
advise on policy (e.g., Massachusetts).
    In order to promote policies and practices in these areas, 
we have co-sponsored, with the Substance Abuse and Mental 
Health Services Administration, numerous conferences throughout 
the country which have been attended by hundreds of State and 
local welfare staff and practitioners from many disciplines. 
Attendees have participated in day-long sessions by experts on 
practical approaches to working with the hardest to employ, 
including those with mental or physical health problems, 
substance abuse problems, and those with very low basic skills 
or learning disabilities as well as those who face difficult 
challenges simply because they live in very rural areas. In 
many cases, the barriers faced by some TANF families may not be 
completely overcome in a short period of time. We believe the 
flexibility provided in the final TANF regulations will 
encourage State and local TANF agencies to continue to work 
with working families who face greater challenges to their 
continued self-sufficiency. (Under the final TANF regulations, 
the expenditure of TANF funds to provide supportive services to 
working families will not count towards the 60-month Federal 
time limit on the receipt of assistance.)
    We have taken active steps to promote and encourage State 
and local TANF agencies to utilize the flexibility provided 
through the final TANF regulations, including issuance of a 
guidebook on the use of TANF funds (May 1999). The booklet 
provides guidance and examples of how Federal TANF funds, as 
well as State Maintenance of Effort (MOE) funds, may be used to 
address multiple barriers faced by current or former TANF 
families. For example, the guide points out that Federal TANF 
funds may be used to provide appropriate counseling services 
(e.g. mental health services, anger management counseling, non-
medical substance abuse counseling services) to family members 
with barriers to employment and self-sufficiency. Both Federal 
and State MOE funds may be used to provide non-medical 
substance or alcohol abuse services, including room and board 
costs at residential treatment programs. Further, TANF or MOE 
funds can be used to help victims of domestic violence relocate 
to an area where employment or safe housing has been secured. 
These funds can be used to support collaboration with domestic 
violence service providers to screen and identify victims 
applying for TANF, establish confidentiality procedures and 
ensure safety, and develop appropriate staff training.
    We will be using multiple approaches (e.g., presentations, 
instructional workshops on the final TANF regulations, 
sponsorship of conferences, provision of technical assistance) 
to encourage creativity, innovation and replication of 
promising practices. In addition, the Department of Labor has 
made a special effort to attract applications for competitive 
Welfare-to-Work grants in these areas by including substance 
abuse, disabilities, and domestic violence as priority groups 
for funding.

Question 23. GAO finds that the average hourly wage rates in 
leaver studies varies between $5.67 an hour in Tennessee to 
$8.09 an hour in Washington State. At $5.67 an hour, annual 
income at 32 hours per week for 50 weeks is only $9,072. That's 
not enough to break through the Federal poverty level of 
slightly over $13,000 for a family of three in 1998. At $8.09 
per hour, annual income is $12,944, still below the Federal 
poverty level. Is this what DHHS considers a successful outcome 
for welfare reform?

    Answer. DHHS believes that it is important that working 
families have a package of supports available to assist them as 
they transition from welfare to self-sufficiency. As indicated 
by the findings in the GAO study, a low-wage job may be the 
first step for many former welfare recipients. In fact, given 
the work experience and skill level of many recipients, we 
believe that it will be the likely first step for many parents. 
That is why it is critical for such families to receive other 
supports such as food stamps, Medicaid, the Earned Income Tax 
Credit, and subsidized child care. For example, for tax year 
1998, for a family with two qualifying children with earnings 
of $9072 and no other income, the EITC would be $3,630. If the 
same family earned $12,944, the EITC would be $3,616.
    We also believe, and have reflected in all of our 
activities, that a key investment area for States is employment 
advancement strategies that can move families who enter the 
workforce at low wages up to higher wage jobs.

Question 24. In general, state evaluations of people leaving 
welfare all point to the fact that individuals who leave 
welfare for work earn low wages, with most not earning enough 
to raise their income above poverty. The Urban Institute points 
out that most of these people get jobs in low-wage industries, 
such as fast food restaurants, or clerical or retail positions. 
These aren't positions with generous salaries, and you note 
that ``a key issue in evaluating welfare reform is the extent 
to which persons with the attributes of welfare recipients can 
actually become self-sufficient.'' Without work supports such 
as child care and health insurance, is it realistic to expect 
that former welfare recipients can, as you recommend, ``persist 
in the labor force'' until ``the gap between their earnings and 
those of other workers never on welfare'' narrows?

    Answer. As we cited elsewhere, we believe that families 
transitioning from welfare to work and other low-income working 
families need a package of supports to help them make and 
sustain the transition. We have and will continue to work 
aggressively to see that these supports are in place and are 
accessible to those who need them. Adequate funding for child 
care is critical. High utilization of the EITC by welfare 
families is an important step in helping parents in low-wage 
jobs move out of poverty.
    As we have indicated in responses above, we are actively 
working with States to ensure access to the Food Stamp and 
Medicaid program benefits by all eligible families, including 
those who leave the TANF rolls and ensuring families have the 
child care, transportation and housing they need. In addition, 
Welfare-to-Work funds can be used to support working families, 
and we are supporting a $1 billion reauthorization of that 
program. We will continue to use a variety of strategies to 
accomplish our goals including technical assistance and 
research activities.
      

                                

    Mr. Stark. Yesterday, Senator Wellstone offered an 
amendment to require Health and Human Services to submit an 
annual report on how well those leaving welfare do in the first 
2 years after leaving cash assistance. It would ask HHS to 
track employment status, wages, health insurance status, and 
child care information. The amendment failed by one vote. It 
sounds to me as if we do not want to know what is happening. 
All we want to do is get people off the welfare rolls and that 
in this case ignorance is bliss.
    Wendell, your analysis shows the poorest lost ground. It 
seems to me that we report here that under the rosiest 
circumstances in the article this morning in the paper that no 
one got up to the level of $13,000, even if they worked for 
$8.09 an hour in Washington, or $5.67 in Tennessee. Under the 
statistics that Ms. O'Neill quoted, they still are not above 
poverty. Is there something wrong with those measures? Am I 
hearing that all these people are getting so rich, and they are 
not making $13,000? Can you comment on that? Am I being misled? 
Why are these people doing so well?
    Mr. Primus. I think, Congressman, that these data will 
stand up under scrutiny. One thing that bothered about Doug's 
written testimony is there is the implication, when he compares 
analysis being done at OMB with the analysis that I have done 
that we are reaching diametrically different results. The truth 
is that there is a small cadre of us that are looking at this 
same data. And the pattern of results are the same----
    Mr. Stark. Just to interrupt for just 1 second, has there 
been one advocacy group for children that has applauded this 
welfare reform bill?
    Mr. Primus. Not that I am aware of, Mr. Stark.
    Mr. Stark. OK. Thank you.
    Mr. Primus. But I guess the point is here that, again, when 
you look at this data, and it is the best data we have, that 
the pattern of results from all the researchers that I know of 
that have looked between 1993 and 1995 and 1995 to 1997, it is 
the same pattern. And I think this Subcommittee has the 
resources, they can ask and I recognize that the majority may 
not trust analysis that comes from yours truly. But you have 
the ability to ask CBO or GAO or CRS to redo the methodology 
that we are doing. And I think you will find the same results.
    And I think when you look at that, you know, you have to 
scratch your head and say, what was going on. Why was 1993 to 
1995 so good? And the results change between 1995 and 1997. And 
that is really I think the question that this Subcommittee 
needs to grapple with.
    Mr. Stark. Thank you. Thank you, Madam Chair.
    Chairman Johnson of Connecticut. Thank you. I would just 
say for the record that this is not the first hearing we have 
held in our work to oversee the implementation of welfare 
reform. It is at least the third, and there will be a number of 
others coming. And that in planning those hearings, we have 
invited every witness the Minority has suggested. I regret my 
colleague from California's rather intemperate description, 
characterization of some of my colleagues and our motives. But 
I think there is enough good and enough problems in this new 
reform for us to be both proud and concerned. And I, as a 
Chairman of this Subcommittee, feel exactly that way.
    Mr. McCrery.
    Mr. McCrery. Thank you, Madam Chair. The gentleman from 
California is a friend of mine. I consider him a friend, and I 
also know, from having numerous conversations with him, that he 
is very concerned about the poor. He is very well-intentioned 
and a very capable advocate for his position.
    So is Mr. Primus. And, Mr. Primus, I was intrigued by your 
response to the Chairwoman's question, would you repeal welfare 
reform? And you said no. I suppose--I am inferring from that 
anyway--that you have had a change of heart, because, indeed, 
as Mr. Stark pointed out, you did resign in protest over the 
President's signing this welfare bill. Is my inferring that 
correct? Have you had a change of heart?
    Mr. Primus. Yes and no. In many ways, the implications of 
this bill, as it actually has played out, is different than I 
think the analysis that we made in 1995 and 1996. The fact is 
the States do have a lot more money than we anticipated them 
having, and so it has not played out exactly the way that we 
predicted.
    That answer was also tempered by the fact that when you 
say, what is welfare if I repeal it. What takes its place? And 
I look at the political situation, and I am not so sure that I 
think I want this replaced by something else that you might 
produce at this particular time. [Laughter.]
    That was also part of the answer. And I do--I believe that, 
again, there has been some success here. The employment rates 
are up. But I also think there has been some down side. And we, 
again, we put too much emphasis on caseload reduction, and we 
have not paid enough attention to the fathers side; and we have 
not paid enough attention--and there is some very good 
examples. Tennessee is one, and the State of Connecticut, where 
they have gone and carefully reviewed the cases that have been 
closed due to noncompliance, due to sanction. And then, when 
they reexamine it and make sure recipients really understand 
their obligations, 30 percent of that noncompliance goes away. 
And more States need to do what Tennessee and Connecticut are 
doing, because we are taking off the rolls arbitrarily too many 
families. And I think that is what is causing this income 
decline, and that is what I think the Subcommittee should be 
concerned about.
    Mr. McCrery. Well, thank you. That is a fair answer, and I 
am pleased that you do recognize some virtue in what we have 
done. I would point out that Mr. Stark's comments do 
underscore, I think, the fact that welfare reform would not 
have happened had it not been for the Republican majority in 
place. This was not really a bipartisan effort at its 
beginning. It ended up with a bipartisan vote on the House 
floor. But, as you will recall, and Mr. Stark just revisited, 
we were called all kinds of names at the beginning of that 
process that I do not want to repeat. But it was not very 
pleasant. Mr. Stark might. But, for those of us who were being 
called those names, it was not a pleasant experience.
    And the fact is that I remain proud of the effort that we 
made in the face of all of that, and I am convinced that 
welfare reform has been one of the most successful changes in 
social policy in this country in a long, long time. And if we 
stick with it, and if we continue to have hearings like this 
that examine the things we could do better, then it will, 
indeed, I think, pay dividends for future generations in this 
country. I see that you would like to make a comment on that.
    Mr. Primus. Can I just--two more thoughts? One, I would 
also say that these income declines were not necessarily the 
result of the 1996 Welfare Act. The States did not have to take 
those families off of food stamps and Medicaid. It is 
happening.
    Mr. McCrery. Well, we think it is happening. You think it 
is happening. But HCFA data do show that there is a greater 
percentage of folks that are actually getting the benefits than 
is being reported by the Census data. So, we are not really 
sure what the level of participation is, and we will continue 
to work on that. And I agree, but getting to your point, Mr. 
Primus, about income decline--and it has been alluded to here a 
couple of times--if you look at expenditures by household, 
expenditures in the bottom 20 percent and even the bottom 10 
percent have gone up, not down. And they have gone up 
significantly--6 percent in the bottom decile; 20 percent in 
the bottom quintile. So, there is an upward trend in 
expenditures for the very people that you are talking about, 
and that you are concerned about.
    I do not think it is clear from your data or from any other 
data that there has, in fact, been a worsening of the condition 
of those folks at the lower end. And my conclusion is bolstered 
by the fact that poverty data remain down. It continues to show 
a decline in overall poverty in this country, so I would say 
that the jury is still out at worst, but to me it is--the data 
that I have reviewed point to the fact that things are getting 
better, not worse, even for the lower quintile, the lowest 
quintile and the lowest decile. And if we do some things right, 
from here forward in welfare reform, I think it can get even 
better.
    Mr. Primus. Can I add just one more comment? And that is 
that when we made the prediction of some of the declines--what 
we thought would have been the declines, and that was due when 
the Federal time limits and the State time limits take effect. 
I did not anticipate that we would find income losses in 1997. 
The time limits are not in effect yet. And I guess I think the 
primary thing that I find troubling about the legislation, the 
underlying legislation, is when those time limits take effect. 
And I think there are some parents in our society, through no 
fault of their own, and sometimes they need to work harder--I 
do not doubt you there, either--but, they are not going to be 
able to support their children without some assistance from the 
government, whether that is child care or Medicaid or an 
earnings subsidy. And the expectation that we can completely, 
especially working families, who are working, doing the right 
thing, that we should say, let us withdraw all cash assistance, 
I think is still very troubling to me.
    Now, some States are doing innovative things. They are 
stopping the clock when families are working.
    Chairman Johnson of Connecticut. Mr. Primus, we must give 
two more Members that have not had a chance to question, their 
right to question.
    Mr. Camp.
    Mr. Camp. Thank you, Madam Chairman.
    It is sort of doodling social science data here. But I 
think there are a lot of ways to try to get at this idea of 
what is happening to families with low income.
    And, Mr. Besharov, if I understand some of your testimony, 
if you use another look at this, use another measure, which 
would be their personal consumption or personal expenditures, 
it seems to me the data are saying that families with incomes 
under $10,000 and families with incomes under $5,000 are 
spending more each year. Is that a fair statement? Is that, 
therefore, an indication that they are better off?
    Mr. Besharov. Well, consumption data are quite complicated. 
But the short answer to your question is yes. These are not my 
data. I think these are Committee staff data, but we 
historically have seen that low-income Americans, poor 
Americans, consume much more than what their family income 
indicates.
    Chairman Johnson of Connecticut. These are CRS data?
    Mr. Besharov. Yes, and it is--some people have always 
puzzled and say, ``Where is that? They must have it wrong. That 
VCR does not exist there.'' And the answer is that we are a 
relatively rich country. And these folks, and I would not want 
to trade places with them--I think there is tremendous 
disadvantage and suffering and hardship in this country, and we 
ought to be doing something about it, or we ought to be 
identifying what the culprit here is--these folks are usually 
either embedded in family situations or with boyfriends or 
someone else is supporting them, or, as June said, there is 
other income coming into the household that they are not 
reporting. That is why there is more consumption.
    This indicates that we are in a range where things are 
maybe getting a little better, maybe getting a little worse. I 
keep arguing here that we should not worry about $300 or $400 
differences between year to year. In these data sets, they are 
measurement errors. What we should be looking at is that these 
folks are at a level much higher in consumption and in earnings 
than when we think about just family income. And, again, that 
does not mean we turn our backs on them. It changes the nature 
of the discussion. It goes from a discussion of what Wendell 
mentioned about welfare response to working mothers to a 
discussion on tax policy, EITC, and child support policies that 
could be entirely outside the welfare world.
    If we are serious about work, and we are looking at incomes 
like this, we do not need to talk about welfare. Welfare reform 
may have already done its work if it has moved more mothers 
into the labor force. And no one argues that that did not 
happen.
    We should take a positive spin, whatever this welfare 
reform number two is, and recognize that these families are 
doing not as well as we would like them to do, but better than 
before. And let us build on this.
    Mr. Camp. So, you are saying there are other things we 
should look at for a more accurate view, and particularly the 
work among never-married mothers--the dramatic increase there 
is a much better measure, or at least a very good measure of 
what is happening.
    Mr. Besharov. Absolutely. To echo what Dr. O'Neill said, 
you expect earnings to be low when people first enter the labor 
force. These numbers, one would predict, will go up over time 
if history is any kind of indication.
    Mr. Camp. I do think, though, it is important to clear up 
some of the fog, and I am interested particularly in this whole 
idea, and I know you do not like the words decline in the 
poverty rate, and the relationship to food stamps--if I 
understand what you are saying is if you include EIC, the 
number of people in poverty is much, the number of people, the 
decrease in the number of people in poverty is much greater; 
that there are fewer people in poverty.
    Mr. Besharov. That is correct. Yes, at the risk of Wendell 
saying again that what I say is false, let us remember the big 
picture. As the President would point out, poverty in this 
country is down substantially, not just since he took office. 
It is down in the period we are talking about here. African-
American poverty is down the last time I looked 24 percent 
during the last 6 years. As a nation, we are richer. But what 
we are arguing about here is we have taken this loaf of bread, 
and we have sliced it and sliced and sliced it until we found a 
group that, on average, is either doing about the same as 4 
years ago or a little worse. And what I have said is that is 
the wrong slice, because a lot of those folks do not even 
exist. They live with someone else. Their household earnings 
are higher.
    Mr. Camp. You have to take into account other factors. You 
have to take into account the timeline. You have to take into 
account the deliberate removal of people from the Food Stamp 
Program, as you have testified to, and to get a--if you want to 
slice it down, you have to take in other factors I think is 
what I hear you saying.
    Well, I appreciate all the witnesses testifying today. I 
was around for all the heated debate and rhetoric, and, in 
fact, when the Chairman of the Committee was in a working group 
when we were in the Minority trying to put this legislation 
together quite a few years ago. I appreciate the fact, Dr. 
Primus, that you said that, and I think you used the words that 
it is not an unqualified success, this legislation. I presume 
that means it is a qualified success, and I think you have 
testified to that.
    And I realize that no piece of legislation is perfect, but 
given the doom and gloom we heard about ``race to the bottom'' 
and 1 million children in poverty and all of that sort of 
thing, I think that, looking at some of these other factors, 
poverty has declined. More people are working. I think this has 
certainly been a very positive hearing, and my time has 
expired.
    Chairman Johnson of Connecticut. Mr. Coyne. I really need 
to go on to Mr. Coyne. There has been a----
    Mr. Coyne. I would yield to Mr. Stark.
    Mr. Stark. I just wanted to ask, under these expenditure 
figures, if somebody buys a car for $5,000, the full $5,000 is 
in the expenditure figure, is that correct?
    Ms. O'Neill. I do not know how they handle it. They might 
handle it according to the consumer's installment expenditure--
and not count the full durable good. But how many people are 
buying cars?
    Mr. Stark. Well, most working people--most of the poor 
people buy a car and pay for it $50, $75, $100 a month. But if 
they include the cost in these figures and also the fact that 
we just heard that bankruptcies are going up among poor people 
because of increased credit card----
    Mr. McCrery. If the gentleman--will the gentleman yield? I 
will be glad to try to clear that up.
    Mr. Stark. OK.
    Mr. McCrery. It is possible that those figures are 
included. But the fact is that the trend is up. The overall 
trend is up 6 percent in the bottom decile.
    Mr. Stark. I was just trying to figure out how we arrived 
at these figures.
    Mr. McCrery. Twenty percent up in the bottom quintile. So 
even if----
    Mr. Stark. No quarrel. I was just curious.
    Mr. McCrery [continuing]. Even if all that is included, the 
trend is up, not down.
    Chairman Johnson of Connecticut. Mr. Coyne.
    Mr. Coyne. Dr. Rolston, we have all heard the stories about 
welfare recipients who were given misinformation about the new 
rules relative to welfare. And, for example, one woman was told 
that she could not receive benefits unless she went to work 
immediately. She had to drop out of the welfare rolls, even 
though she was in the midst of a 1-year program for a nursing 
training program. It is misinformation, as we understand it, 
but what are the States doing to retrain caseworkers in these 
instances and so they make sure that they are giving applicants 
accurate and up-to-date information?
    Mr. Rolston. Well, I think that a lot of has been done to 
retrain caseworkers, and I think there is also a long way to 
go. It is----
    Mr. Coyne. So not enough has been done.
    Mr. Rolston. It appears to be where we are in general----
    Mr. Coyne. Not enough has been done, is that right?
    Mr. Rolston. I think more needs to be done. That is my 
personal opinion.
    Mr. Coyne. Are we doing anything at the Federal level to 
move that along?
    Mr. Rolston. I think in a number of areas, for example, 
related to Medicaid participation, part of the information and 
best practice that go out would relate to training of workers; 
would relate to outreach activities to ensure that people are 
knowledgeable about benefits that they are eligible for.
    We have actually over a period of years--I do not know that 
we are currently are--have been involved with States and 
localities on culture change projects that do have a lot to do 
with training workers to have to train for a different set of 
skills that they needed to have before, because they are not 
just writing checks now and do eligibility work. They are very 
heavily focused on self-sufficiency activities. But I think 
there is still a long way to go on these issues, and a lot more 
they can do and that we can do.
    Mr. Coyne. Is there anything your Department, any 
initiatives you are making to try to rectify the situation as 
quickly as possible?
    Mr. Rolston. Well, the ones that I mentioned--putting out 
the guidebook related to Medicaid eligibilities has been an 
important one; the activities I mentioned related to culture 
change did involve training of workers. We are currently 
working with HCFA and the Department of Agriculture around a 
new project to try to assist States in picking up practices 
that other States have had that are effective, and in trying to 
measure what the effects of these changes are. So, yes, we are 
involved in that.
    Mr. Coyne. Thank you.
    Chairman Johnson of Connecticut. Thank you. I am going to 
move on now to the next panel and forgo any further questions 
of this panel because the Speaker has called the Republicans to 
a conference at 12:45 p.m., and I want the Republican Members 
to be able to at least hear the testimony of the next panel. 
But while this panel is leaving, I will stay afterward as long 
as people want to question. But----
    Mr. Besharov. Can we come to the speakers?
    Chairman Johnson of Connecticut. While this panel, though, 
is adjourning and the other panel is assembling, I have one 
thing I do want to say. And I want to say it very clearly. One 
of the things that really makes me angry is stereotypes. And 
when Mr. Primus said that he did not want to have--and I do not 
object to this. This is his right. I know him very well, and 
this is fine for him to say. One of the concerns that he had 
was what kind of welfare bill we might write. I was offended by 
the laughter that went through the crowd. And this is why I am 
offended.
    If you look at the statistics, we are providing more money 
per recipient than has ever been provided to the States in 
America's history. And that is because we froze the TANF 
funding, and we kept it there. I was on this Subcommittee when 
we reformed welfare under Tom Downey. I was sitting right in 
that chair, and I worked hard on it. And you know what happened 
to the 1988 reform, the Congress, then controlled both the 
House and the Senate, by Democrats, would not provide the money 
for day care or for anything else. So we had a great bill, and 
we did not have the resources.
    Now that is a thumbnail sketch. But I am very proud, and I 
consider it a mark of compassion and concern for children that 
not only did we freeze our money, but we forced the States to 
continue spending 75 percent of the money they had been 
spending, even if their caseload dropped 80 percent. And that 
does not count the 4.5-percent increase in day care funding.
    So I ask you to come to these hearings, and if you are 
going to express yourself, remember to be fairminded.
    The next members should be sitting here. We do have to move 
forward.
    Mr. Cardin. Yes, Madam Chair, as a matter of personal 
privilege, I think that Mr. Primus was responding to a question 
asked by a Member that was a rather difficult question for him 
to figure out an appropriate answer. So, I am not so sure we 
should be blaming Mr. Primus for that set up. Maybe I should 
blame Mr. McCrery.
    Chairman Johnson of Connecticut. No, I intended not to 
blame Mr. Primus.
    Mr. McCrery. I thought it was a pretty clever dodge myself.
    Chairman Johnson of Connecticut. I think Mr. Primus was 
answering and with some humor. But, you know, when that kind of 
laughter goes through, it tells you something. Old stereotypes 
are still alive and well, and, by gum, you are each responsible 
to wipe them from your mind if you are going to help us face 
the future.
    Jean Rogers, administrator of the Wisconsin Department of 
Workforce Development, Madison.

     STATEMENT OF J. JEAN ROGERS, ADMINISTRATOR, WISCONSIN 
    DEPARTMENT OF WORKFORCE DEVELOPMENT, MADISON,  WISCONSIN

    Ms. Rogers. Thank you, Madam Chairman. Over the 21 months 
that Wisconsin Works has been in operation, we have seen our 
cash assistance caseload drop over 75 percent.
    Chairman Johnson of Connecticut. Could you speak a little 
more directly into the microphone, please? Thank you.
    Ms. Rogers. Is that better?
    Chairman Johnson of Connecticut. Yes.
    Ms. Rogers. OK. Over the 21 months that W-2 has been in 
operation, we have seen our cash assistance caseload drop over 
75 percent, to under 8,300 families. This has led to a growing 
national interest in how our families are doing. Why is 
national concern surfacing now? Because with the AFDC Program 
in operation, it was too easy to assume that the guarantee of a 
welfare check solved these problems.
    In contrast, W-2 staff act as counselors and mentors, 
helping parents address personal and family problems that may 
prevent them from working. Wisconsin has ensured that necessary 
support will continue through a package of supportive service.
    Public opinion strongly favors the direction that we are 
taking in Wisconsin, 83 percent, in fact, on our UW-Milwaukee 
poll. AFDC created a culture of dependency that produced 
families with several generations living in poverty. Yet, 
critics of welfare-to-work restructuring have predicted that 
child welfare would suffer as a result of the new focus. Has 
it? Let us see.
    An Urban Institute study offers a first look at the well 
being of children and adults on a variety of measures. How are 
we doing? Among the 13 States surveyed, Wisconsin has the 
lowest child poverty level and the highest rate of employed 
parents. In addition, Wisconsin has the third highest incidence 
of children living in two-parent families, at 66 percent, and 
what else? Kids Count ranks Wisconsin sixth best in the Nation 
in overall child welfare; second best for the lowest percentage 
of teen high school dropouts ages 15 to 17; second best for the 
lowest percentage of teen high school--of children, excuse me, 
not attending school; and in addition, first in the Nation for 
SAT and ACT scores. And Wisconsin has more people covered by 
health insurance, including children than any other State in 
America.
    Anecdotal evidence also supports the belief that children 
are thriving. A Milwaukee child care director, Vicky Hill, says 
home life is getting more structured, and the children also 
show new respect for their mothers. Hill says, we hear them say 
mom's at work, or grandma's picking me up because mom is 
working late, and you can hear the pride in their voices. And 
Hill is seeing more dads with their children. She says, we even 
had some dads offer to be volunteers.
    In January, Wisconsin released the first in a series of 
four reports on people who have left W-2. Among the findings: 
62 percent were employed at the time of the interview, and that 
is compared to 69 percent in the entire work force as an 
average. The average wage of those employed was $7.42. An 
additional 21 percent were not employed right at that moment, 
but had worked since leaving the program. Ninety-four percent 
of those who were not working received other family or 
government support. Sixty-eight percent said getting a job was 
easier than being on welfare, and 60 percent said they would 
probably not need welfare again.
    As pleased as we have been with the results of W-2, our 
remaining families need more expensive services, increased 
focus on AODA, alcohol and other drug abuse, treatment. And 
with more than 50 percent of our remaining caseload lacking a 
high school diploma, more emphasis is being put on basic 
education.
    W-2's success is also dependent on strong partnerships with 
the employer community, and we do so by appealing to the bottom 
line, not their sense of social consciousness. And it is 
working. Seventy percent of employers rate welfare recipients 
positively in terms of attitude and reliability.
    It is also important to note another, perhaps most critical 
partnership, and that is between the Federal Government and the 
States. Wisconsin urges you not to jeopardize our continued 
success by abrogating those agreements that were included in 
the 1996 welfare reform law. There have been proposals to cut 
both our TANF block grants and funding for child support 
enforcement. We strongly object to such proposals. We have kept 
our part of the bargain, and we urge you to please keep yours.
    What is the bottom line? We are training an underutilized 
segment of the population to enter the work force. We are 
providing the needed support for individuals to sustain those 
jobs. The employers are getting workers who are loyal and eager 
to get the job done. And through their jobs, our people are 
gaining new skills that, over time, will bring them better 
employment opportunities, in other words, hope.
    Pearlie Duncan, a 17-year veteran bus driver with a 
Milwaukee inner-city route, said it best, and I quote: Now that 
many people have gotten into it, their morale and self-esteem 
is boosted. And you can tell they feel good. Most of the kids 
are happy, too. You look into their eyes, they are happy. The 
eyes tell no lies.
    Thank you.
    [The prepared statement follows:]

Statement of J. Jean Rogers, Administrator, Wisconsin Department of 
Workforce Development, Madison, Wisconsin

    Thank you for the opportunity to share some highlights with 
you of the impacts we are seeing from the Wisconsin Works 
program. Over the brief period of time (21 months) that W-2 has 
been in operation, we have seen our caseload reduced from 
34,491 families at the start of the W-2 program down to the 
current cash assistance caseload of 8,567 families (as of March 
1999). This has lead to a growing national interest, in how 
these families are doing.
    But stop and think about why this national concern is just 
surfacing now. Because with the AFDC program in operation, it 
was too easy to assume that the guarantee of a welfare check 
solved these families problems. Let me tell you a little bit 
more about this welfare guarantee:
     In 1994, The Center on Addiction and Substance 
Abuse at Columbia University found that more than one in every 
four welfare recipients abused alcohol and drugs. And, many of 
these recipients were actually excused from the AFDC work 
program for this reason. What kind of message were we sending 
these individuals?
     According to a 1995 study by Kathryn J. Edin 
titled, The myths of dependence and self-sufficiency: Women, 
welfare, and low-wage work, more than one-third of welfare 
mothers interviewed said their total benefits did not cover 
their basic housing and food costs. On average, their benefits 
were a staggering $311 less than their monthly household 
expenses.
    Imagine families living under these conditions for years at 
a time.
     Other studies have found that between 25% and 40% 
of the women who left welfare for work were back on AFDC within 
a year (1, 2, 3, 4).
    When times got tough for these working mothers, under AFDC, 
there were no case managers to help them. It wasn't until after 
the individual had quit her job or significantly reduced her 
work hours and returned to welfare, that the program took 
notice of her needs.
    In contrast, W-2 staff act as counselors and mentors, 
helping parents address personal and family problems that 
prevent them from working and providing the parents with 
continued support as they make that transition into the 
workforce. If the first real job is not successful, the 
participant is reassessed to determine what W-2 services are 
still needed in order to achieve a better employment outcome.
    Of course for some families, the ability to permanently 
leave welfare for work requires ongoing support. Wisconsin has 
ensured that the necessary support will continue through a 
package of services including job retention services, food 
stamps, Medicaid, child care assistance, and the state earned 
income credit. And, the Governor's 1999-2001 Budget proposal 
strengthens these services even more through several different 
approaches: 1) increasing the income eligibility limits and 
reducing the co-payment amounts for child care assistance; 2) 
expanding education and training opportunities for parents 
already in the workforce; and 3) funding local projects aimed 
at strengthening workforce retention and advancement among low-
income working parents.
    Wisconsin views the 60 month time-limits as an important 
means of motivation for the participants. But, for the time-
limits to work in our favor, Wisconsin ensures that all of our 
participants are getting immediate, intensive work-training 
services that enable them to rapidly move into the workforce. 
This is an important distinction from other states who are 
continuing to exempt segments of their caseload from 
participation while their time-limits loom ever closer. The 
time-limits have also impacted on how W-2 caseworkers do 
business. They know that a job-opening for a participant today, 
may be gone tomorrow if they don't act quickly.
    AFDC created a culture of dependency that produced families 
with several generations living in poverty. Yet, critics of 
welfare to work restructuring have predicted that child welfare 
would suffer as a result of the new focus. Has it? Lets see:
    An Urban Institute study entitled Snapshots of America's 
Families (1/99) offers a first look at the well-being of 
children and adults on a variety of measures. The survey sample 
included 13 states and was taken between February and November, 
1997. Since it was done literally on the eve of W-2 
implementation--a point at which Wisconsin had already made a 
major shift to a work focused set of reforms--it can also be 
used as a measure of effects.
    How are we doing? Among the 13 states surveyed:
     Wisconsin has the lowest child poverty rate at 
11.4%. Nationally the child poverty rate is 20.5%.
     Wisconsin has the highest rate of employed 
parents. 74.4% of our low-income parents and 86.9% of all our 
parents are working. Nationally, 65% of low-income parents and 
79.8 percent of all parents are working.
      And, Wisconsin has the third highest incidence of 
children living in two-parent families at 66.6%. Nationally, 
this figure drops to 62.6%.
    Anecdotal evidence also supports the belief that children 
are thriving in the era of welfare-to-work. A Milwaukee Child 
Care Director, Vicky Hill says ``Homelife is getting more 
structured. It's 8:30--time to go to bed. It's morning--time to 
get up.'' The children also show new respect for their mothers. 
Hill says ``We hear them say, `My mom's at work,' or `Grandma's 
picking me up cause Mom's working late,' and you can hear the 
pride in their voices.'' And, Hill is seeing more dads with 
their kids. ``They're coming to check on the kids. We've even 
had some dads offer to be volunteers,'' she said. W-2 is 
pulling families together and teaching them how to rely on 
themselves and their larger communities for support.
    As we seek to learn about the status of families who leave 
our program, we must be careful not to be too intrusive with 
people who are striving to be independent of the system that 
has bound them for so long. But hearing their story is an 
invaluable tool for program improvement, and so ... we are 
asking. And we're learning a great deal that is gratifying 
about the progress these families are making, and things we 
need to change in order to make the program stronger.
    In January, Wisconsin released the first in a series of 
four reports on people who have left W-2. The first report is 
the result of surveys completed with participants who left 
during the first quarter of 1998, a period which contained both 
W-2 and AFDC leavers.
    Among the findings:
     62% were employed at the time of the interview 
(69% in entire WI workforce is average).
     The average wage of those employed was $7.42.
     21% were not employed then, but had worked since 
leaving the program.
     94% of those not working received other family or 
government support.
     68% said getting a job was easier than being on 
welfare. And,
     60% would probably not need welfare again.
    Governor Thompson has made a habit of visiting with small 
groups of participants periodically, to hear first-hand what 
they think. They are usually very forthright, like the woman 
who said, ``I hated the program, and I hated you. But I was 
really just scared. Now, I'm so proud, and my kids are too. 
Look, what I can give you--my very own business card. Can you 
believe it?
    Another one of those visits with the Governor resulted in a 
woman named Michelle Crawford being invited to speak along side 
the Governor at this year's State of the State Address. 
Michelle summed up her thoughts at the end of the speech with 
the following comments: ``My kids see a difference in me. They 
see their mother making it. W-2 gave me a chance and I feel 
good about myself--so thank you to everyone involved. I 
especially want to thank my employers who are here tonight for 
believing in me. And I ask others to take a chance on W-2 
workers. We won't let you down.''
    Michelle was recently the subject of a New York Times 
article that focused on the difficulties in her personal life. 
That story serves to accentuate how important W-2 really is. 
The transition from welfare into a full-time job will not by 
itself alleviate all of the personal problem these families 
face. But, it's the first step. As individuals increase their 
level of confidence in their personal abilities, they develop 
positive strategies for dealing with their personal problems. 
And they no longer view welfare as their panacea.
    As pleased as we've been with the results of W-2, the 
dynamics that shape our program are constantly changing, 
requiring us to rethink and adjust our policies over time.
    While we've been successful in moving parents into the 
workforce, our remaining cases have more severe barriers. And 
so our efforts must be focused on strategies that help remove 
those barriers. Other community based organizations with 
expertise in such areas as substance abuse and domestic 
violence are partners with the W-2 agencies in this process. 
And, with more than 50% of our remaining caseload lacking a 
high school or equivalency diploma, more emphasis is being put 
on basic education. And, through W-2 case management services 
we are encouraging individuals to enhance their skills with 
additional education or training in order to help them advance 
in their careers.
    W-2's success is also dependent on strong partnerships with 
the employer community. We do so by appealing to the bottom 
line, not their sense of social consciousness. A national 
telephone survey of 500 employers conducted for the Assessing 
the New Federalism project showed that 70 percent of employers 
rate welfare recipients positively in terms of attitude and 
reliability. Employers who have already hired welfare 
recipients are even more likely to express positive views.
    It is also important to note another, perhaps most 
critical, partnership--that between the federal government and 
states. We would urge you not to jeopardize our continued 
success by abrogating those agreements included in the 1996 
welfare reform law. There have been proposals to cut both our 
TANF block grants and funding for child support enforcement. We 
strongly object to such proposals. We have kept our part of the 
bargain, we urge you to keep yours.
    What's the bottom line? We're training an underutilized 
segment of the population to enter the workforce. We're 
providing the needed support for individuals to sustain those 
jobs. The employers are getting workers who are loyal and eager 
to get the job done. And, through their jobs, our people are 
gaining new skills, that over time will bring them better 
employment opportunities.
    Pearlie Duncan, a 17 year veteran bus driver with a 
Milwaukee inner-city route said it best. ``When W-2 first 
started, there were a lot of complaints. People were afraid--
how would they fit in, everything was new and different. But 
now that many people have gotten into it, their morale and 
self-esteem is boosted, and you can tell they feel good. Most 
of the kids are happy too. You look into their eyes; they're 
happy. The eyes tell no lies.''

                                Sources

    1. Pavetti, L.A. The dynamics of welfare and work: Exploring the 
process b which women work their way off welfare. Cambridge, MA: 
Malcolm Wiener Center for Social Policy, Harvard University, 1993.
    2. Thornton, C., and Hershey, A. After REACH: Experience of AFDC 
recipients who leave welfare with a job. Princeton, NJ: Mathematica 
Policy Research, October 1990.
    3. Harris, K.M. Life after welfare: Women, work, and repeat 
dependency. American Sociological Review (1996) 61,3:407-26
    4. Gleason, P., Rangarajan, A., and Schochet, P. The dynamics of 
AFDC spells among teenage parents. Working paper. Princeton, NJ: 
Mathematica Policy Research, January 1995.
      

                                

    Chairman Johnson of Connecticut. That was very interesting, 
and thank you.
    Mr. Larson, the director of the Office of Policy, Research 
and Systems, Maryland Department of Human Resources.

  STATEMENT OF RICHARD E. LARSON, DIRECTOR, OFFICE OF POLICY, 
    RESEARCH AND SYSTEMS, FAMILY INVESTMENT ADMINISTRATION, 
  MARYLAND DEPARTMENT OF HUMAN RESOURCES, BALTIMORE, MARYLAND

    Mr. Larson. Madam Chairman and Members of the Subcommittee, 
thank you very, very much for the opportunity to come and speak 
before you today. I would also like to personally thank you as 
a 30-year veteran of welfare, starting as a caseworker in 
Baltimore City, for the political risks that the Congress took 
in passing welfare reform and in trusting the States. And I 
particularly want to thank my Congressman, Mr. Cardin, for 
voting for that bill.
    It has given Maryland and myself personally the opportunity 
and flexibility to develop programs that are specifically 
tailored to the citizens of our State and to move them into 
independence and to safeguard and take care of those people 
with problems that will not be cured by employment.
    The Maryland Family Investment Program is the first effect 
of welfare reform. We were an early TANF implementer. We 
specifically designed the program to help families move into 
the work force, and at the same time protect individuals who 
were vulnerable and the disabled. Our specific program tools 
were devolving to our counties the flexibility that was granted 
to us by the Congress and then taking caseload savings, which 
we planned for, and ploughing them back into the program, 
because we knew from the very beginning, from work we had done 
with the University of Maryland, that some of our customers 
could, indeed, move off welfare very quickly. Others were going 
to have a great deal of difficulty getting there.
    The effect on our caseload is reflected in my written 
statement. We have had a 61-percent decline in our caseload 
since January 1995. There has been some discussion by other 
people in this testimony about how much of that do we attribute 
to welfare reform and how much of that do we attribute to the 
economy. We have actually tried to answer that question with 
some work we have done with the Regional Economic Studies 
Institute at Towson University. They attribute about 8.1 
percent of the decline to the booming economy, and the balance 
to welfare reform.
    The other chart in the additions to my testimony is one 
reflecting the caseload shifts and the way the caseload is 
shifting in the State, from primarily the suburbs--it used to 
be 60 percent suburbs, 40 percent city. It is now 60 percent 
city, 40 percent suburbs. This is pretty much a national 
phenomenon, a concentration of the caseload in the urban areas.
    With such a decline in caseload, one is going to ask two 
questions. One, what happened to the people who left and what 
is happening to the people who are still on.
    I would like to briefly summarize the results of two 
studies we have published as a result of a long research 
partnership with the University of Maryland School of Social 
Work. The first one is--deals with people who have left, ``Life 
After Welfare,'' the third of a series of reports. We are now 
reporting on samples of cases of individuals who have left 
welfare. We have now gotten about 3,171 families in that 
sample. And I do want to point out that Maryland studies all 
welfare leavers. Unlike other studies, we look at everybody who 
left for whatever reason and whether they came back or not from 
day one. So we have probably the most conservative estimates. 
Also, our employment data is matched with administrative 
records rather than surveys. And again, that produces 
conservative findings.
    We found out that most people are leaving welfare 
voluntarily. Maryland has a very low sanction rate. Only 8 
percent of the exits were caused by Maryland's full family 
sanction.
    We found that over, about 60 percent of the people were 
able to find work in unemployment insurance covered employment.
    We found that that employment persists over time and that 
people's earnings do increase over time.
    We also found out that recidivism, true recidivism, not 
just caseload churning, is relatively rare. For 3 months post 
exit, only about 6 percent of the people come back.
    And finally, and a very important question not reported in 
Life--what we call ``Life Three'' but ``Life Two,'' our 
previous report, is the effect on children. At that time, we 
had 3,467 children in our sample of children who left welfare. 
Only 15 of them showed up in the foster care caseload after 
that. A very, very small number.
    We also have begun looking at those who are still on 
welfare. I will report briefly on a study we did on Frederick 
County. We read all of their cases, everybody who was on cash 
assistance in March 1998. We found, in some instances, no 
surprises, but we also found the glimmers of the challenges 
ahead. For example, of those people still on the caseload, 
there were long-term receivers, about three times as many as 
those people who have left. They have formidable problems. This 
group is going to present a formidable challenge--problems of 
substance abuse, physical and mental disability, teen 
childbearing, domestic violence. Getting these people to 
transition from welfare to work is going to be difficult, time 
consuming, and, I think, relatively expensive.
    In closing, I would like to make some suggestions based on 
all of this.
    First of all, we have answered the easy questions. We are 
moving into the harder questions. The bar, in a very real 
sense, is being raised. We are moving from questions such as, 
Are children going to be harmed? Will people go to work? Well, 
now that they have gone to work, what kind of jobs are they 
going to get? So the bar is constantly raising. We are looking 
at job skills enhancement through a pilot project in Maryland, 
relooking at the role of education, and really realigning our 
Department to look not just at moving people off welfare and 
making them satisfied in doing that, but in supporting low-wage 
working families.
    In closing I have four brief suggestions:
    First, avoid premature closure; don't declare victory too 
soon--we still have yet to see the results of a recession on 
this program; please maintain your current levels of support; 
continue and expand State flexibility. And, I know all about 
committees of jurisdiction and everything else, but for 
somebody who has been on the line for a long time, you need to 
come up with common definitions of income and resources among 
TANF, food stamps, and medical assistance. These are an 
absolute must. The more you--the more we can simplify, the more 
we can make clear the better off we will all be. The real end 
of the social policy continuum is an individual worker talking 
things over with an individual customer. And if we confuse them 
we are losing the battle.
    Thank you very much for your time.
    [The prepared statement follows. Attachments are being 
retained in the Committee files.]

Statement of Richard E. Larson, Director, Office of Policy, Research 
and Systems, Family Investment Administration, Maryland Department of 
Human Resources, Baltimore, Maryland

    Good morning, my name is Richard Larson, Director of the 
Office of Policy, Research and Systems at the Maryland 
Department of Human Resources' Family Investment 
Administration. It is a great privilege to be here today to 
discuss the early successes of Maryland's welfare reform 
program. I would like to thank Chairman Johnson and the 
Committee for this opportunity. I would also like to thank all 
of you, particularly my Congressman--Ben Cardin, who took the 
risk of passing the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996. Based on my thirty 
years of experience in this field, starting as a caseworker in 
Baltimore City, I think the Temporary Assistance to Needy 
Families program has had a dramatic and positive impact not 
only on welfare but on the entire human services delivery 
system. In Maryland and across the nation, we are making great 
strides in assisting families to become independent of welfare 
and to enter the workforce. At the same time, we are 
safeguarding children, people with disabilities, and other 
vulnerable populations by providing needed services. Thanks to 
the collaborative efforts and foresight of Governor Parris N. 
Glendening and the Maryland General Assembly, our state has 
become a leader in welfare reform. Today I will discuss 
Maryland's approach to moving families from welfare to work, 
our substantial caseload decline and the results of our ongoing 
research studies of those who have left welfare and those who 
remain on welfare in Maryland.

   The First Effect of Welfare Reform: Maryland's Family Investment 
                                Program

    The Family Investment Program is Maryland's welfare reform 
initiative. We implemented it in October of 1996. The program 
is based on the new vision of a Maryland where everyone works, 
families are strong, children are nurtured and partnerships are 
found among families, businesses, faith and nonprofit 
communities and government. Our welfare reform represents a 
major shift from an ``income maintenance'' focus to one that 
promotes family independence through work, personal and family 
responsibility, and community involvement.
    We included a broad base of stakeholders in the design of 
the Family Investment Program including: legislators, the 
president of the local social services directors' association, 
local service providers, businesspeople and former customers.
    Maryland adopted a workforce attachment model to move as 
many families as possible into the work force as quickly as 
possible. We are committed to helping Temporary Cash Assistance 
customers find employment, keep employment and progress in the 
job market.
    To do this we:
     Designed a program in close partnership with the 
Maryland Legislature (Especially its Joint Committee on Welfare 
Reform)
     Built on the strengths of our recipients
     Changed the culture of our welfare offices
     Carefully invested our resources
     Reinvested savings from caseload declines into 
services aimed at those families with multiple barriers to 
employment
     Pushed resources down to the local level where the 
real problems and opportunities exist
     Created partnerships with the private and public 
sectors
     Measured our results
    The program has as its two key strategies the innovative 
concepts of local flexibility and reinvestment of program 
savings. To maximize creativity and experimentation after the 
transition from Aid to Families with Dependent Children to 
Temporary Assistance to Needy Families, we recognized that one 
size does not fit all. We have operated on the principle that 
the local departments of social services know best how to meet 
the needs of their customers. They know the customers, the 
services needed, the resources available, the opportunities 
that exist for customers in their area and the creative 
partnerships that can be forged. As a result, the Maryland 
Department of Human Resources has allocated funds directly to 
local departments of social services. We gave them only a brief 
outline of a plan which they then filled in to meet the unique 
needs of their communities and the families and children in 
them. Each local department is implementing its own plan with 
measurable performance standards to achieve mutually agreed 
upon outcomes.
    We also recognized that our labor force attachment model 
would result in many people leaving welfare relatively quickly 
with the hard to place remaining on the caseload for a longer 
time. As the caseload declines due to these early exits, 
savings can be plowed back into services for those with 
multiple barriers to independence. This reinvestment strategy 
allows the local departments to continue their success in 
placing customers in appropriate activities that will result in 
independence. Local departments use these funds for a variety 
of creative programs and partnerships. The accomplishments of 
the Family Investment Program are largely attributable to the 
partnerships among other State departments, community 
organizations, businesses and other agencies that serve our 
customers. We have already established fruitful partnerships 
with a dynamic group of stakeholders who share in the 
commitment to build a program that fosters responsibility and 
independence for our customers.

                       The Effect on Our Caseload

    On the highest level--that of caseloads--we have built on 
the strengths of our customers and moved many of them to 
independence. Since January 1995, we have helped 139,265 
Marylanders become independent of welfare. As of April 1999, 
our caseload has gone from 227,887 customers to 88,622 
customers, a decline of 61.1%. Based on work done by the 
Regional Economic Studies Institute of Towson University, the 
caseload decline in Maryland can be attributed largely to the 
implementation of the Family Investment Program. Towson 
University has been forecasting the State's welfare caseload 
since 1992 and has projected the caseload in the current 
economic environment both with and without welfare reform. 
Their forecast shows that without welfare reform, but with the 
booming economy, the caseload in Maryland would currently be 
209,289, a decline of 8.1%, instead of the actual caseload of 
88,622, a decline of 61.1%. The dramatic difference in the rate 
of caseload decline is at least partially due to the strong 
economy, but even more importantly, is a result of sound policy 
decisions.
    Maryland's caseload also mirrors the national trend in that 
the population remaining on cash assistance is 
disproportionately located in urban areas. While the state 
caseload has declined 61.1%, the caseload in Baltimore City has 
declined 49.8%. As a result of the difference in the rate of 
decline, Baltimore City now has 60% of the state's caseload. In 
addition, estimates show that the majority of job opportunities 
available to people exiting welfare are located in suburban 
communities outside of Baltimore City and are difficult for 
city residents to access.

             The Effects--Those Who Have Left the Caseload

    On the more important level of what happens to people after 
they leave welfare, our results have also been good. For nearly 
20 years, the Department of Human Resources and the University 
of Maryland School of Social Work have had a research 
partnership to develop solid information to craft welfare 
policies. This information provided, and continues to provide, 
the empirical backbone for the customer-specific, investment-
focused, locally tailored approach that is Maryland's Family 
Investment Program.
    The University of Maryland School of Social Work has drawn 
a five percent random sample of cash assistance cases that 
closed each month during the first 18 months of welfare reform 
(October 1996 through March 1998). Together, the 18 monthly 
samples include a total of 3,171 families. We note that 
Maryland includes in its exit studies all people who leave: for 
whatever length of time, for whatever reason, no matter if they 
come back, or stay off. We also match with administrative 
records. Consequently, our findings are conservative. Based on 
this research, we have recently published Life After Welfare: 
Third Interim Report (March, 1999) It is clear that the trends 
remain positive.
     The vast majority of families leaving welfare have 
done so voluntarily (92.0%) and not due to full family 
sanctions imposed for noncompliance with work requirements 
(7.3%) or child support (0.7%).
     The majority of exiting adult payees is able to 
secure work (59.3%) and work efforts persist in subsequent 
quarters. At least 50% of all exiting adults work in the 2nd 
through 5th quarters after they stop receiving welfare.
     There has been little change in the profile of 
exiting cases over time. There is no evidence that early and 
later welfare exiters differ in family size, length of time on 
welfare, number or age of children. Most adults do work in 
unemployment insurance covered jobs after leaving welfare.
     Work effort and employment persist over time. Of 
those who worked during the first post-exit quarter, 86.7% had 
earnings in the second post exit quarter and 77.3% were 
employed in the third quarter. Additionally, small gains in 
median earnings were reported over time for exiting families.
     The most frequent types of employment for 
customers exiting welfare were in the areas of wholesale and 
retail trade (35%), personal services such as temporary 
agencies and motels (23%) and organizational services such as 
hospitals and nursing homes (21%).
     Research shows that recidivism (returns to 
welfare) is relatively rare, but ``administrative churning'' 
(cases that close but reopen in 30 days or less) happens more 
frequently. True recidivism, however, is fairly rare. Excluding 
churners, at the three-month post-exit point, only 5.2% of 
customers have come back on cash assistance.
    In addition to the positive employment outcomes for 
families leaving welfare, there is also evidence that children 
are not being adversely affected by welfare reform. As reported 
in Life After Welfare: Second Interim Report (March, 1998), the 
University of Maryland research indicated that foster care 
usage among children in families who leave cash assistance has 
not increased. Of the 3,467 children in the October 1996 
through August 1997 samples, 92 children (2.7%) had been in 
foster care at some point before their families left welfare. 
After leaving the welfare rolls, fifteen children (0.4%) from 
eleven families had at least one foster care placement. Seven 
of these fifteen children had a pre-exit history of abuse and/
or neglect and two children had experienced a pre-exit foster 
care placement. We are planning a separate report in the near 
future updating and expanding our findings in this area.

            The Effects--Those Who Are Still on the Caseload

    There are still many important challenges in the evolving 
welfare-to-work environment in Maryland and across the nation. 
One of them is to obtain a better understanding of who is left 
on the rolls. Using one county in Maryland which, like many 
local subdivisions, has experienced a precipitous drop in the 
size of its cash assistance population, the School of Social 
Work at University of Maryland has also examined the 
characteristics of those still on the rolls 18 months (March 
1998) into welfare reform. In keeping with our multi-method 
approach to welfare reform research, the researchers took a 
different approach from sampling and record matching. They 
attempted to look specifically at obstacles or barriers which 
may help explain why these families are on assistance and/or 
which may impede their ability to exit in the future. This 
research attempted to add flesh to the skeletal phrase ``hard 
to place,'' that has been used to describe customers who may 
not be job ready and/or who, for various reasons, may be at 
heightened risk of hitting the five-year lifetime time limit. 
The report is Life On Welfare: Who Gets Assistance 18 Months 
Into Reform? (November, 1998)
    Drawing heavily on case narratives recorded in Maryland's 
automated eligibility system for every one of 358 Frederick 
County families who received a Temporary Cash Assistance check 
in March 1998, the researchers selected 72 study cases and 
coded each as to the primary problem or major issue affecting 
each family.
     In some respects, there are no surprises in the 
profile of these cases. The vast majority of Temporary Cash 
Assistance families (95%) are headed by women. About half (48%) 
of the payees are never-married women, few of them (4.5%) are 
under the age of 20 years, and the majority (58.7%) have been 
receiving Temporary Cash Assistance continuously for 12 months 
or less. Notably, the proportion of families (58%) with a 
current spell length of 12 months or less is identical to the 
proportion of such cases among those who exited cash assistance 
during the first year of reform. Likewise, the median or 
midpoint current spell length (10 months) is relatively short 
among the active cohort and is again identical to the median 
spell length observed among Frederick County families who left 
Temporary Cash Assistance during the first year of reform.
     However, in other key areas, these cases do differ 
from cases which have exited. The most dramatic difference 
between on-welfare and off-welfare families is in the 
proportion of long-term welfare users. There are about three 
times as many families who have been on welfare continuously 
for more than five years in the on-welfare group (11.5%) as in 
the group who exited welfare (4%) during the first year of 
reform. When lifetime welfare use is examined, differences 
between the two groups are more dramatic, especially at the 
extremes. Among those on Temporary Cash Assistance in Frederick 
County in March of this year, just about one of every four 
(24.2%) have more than five years of total welfare receipt. 
About two-fifths (41.3%) have 12 or fewer months of lifetime 
welfare use. In contrast, about one in five cases (20.7%) who 
exited Temporary Cash Assistance in the first year of the 
Family Investment Program implementation had a lifetime welfare 
history of 12 months or less and three in ten (29.7%) had more 
than five years of total lifetime welfare use.
     It is apparent that families on Temporary Cash 
Assistance 18 months post-implementation are a diverse group. 
Except for female-headship (95% of cases), there is no one 
characteristic which describes the March 1998 caseload in the 
study county. The 358 families include those who have been on 
Temporary Cash Assistance for just a few short months, but also 
those who have received cash assistance continuously for many 
years. There are many families who appear to have turned to 
Temporary Cash Assistance in times of short-term crisis; for 
these families, the transition from welfare to work may not be 
terribly difficult. There are many other families, however, for 
whom the prospects of a swift, lasting exit from welfare do not 
seem very good.
     There appears to be an identifiable cohort of 
families where problems such as substance abuse, physical/
mental disability, teen childbearing, domestic violence and the 
like, acting singly or in combination, present a formidable 
challenge insofar as a welfare-to-work transition is concerned. 
The case vignettes reveal that many of the families are 
struggling with one or more serious issues. Furthermore, these 
problems are frequently of longstanding duration. For certain 
situations, the needed service, intervention, or behavioral 
change seems fairly obvious, but in many other cases, 
especially when problems are numerous and heavily intertwined, 
solutions are not at all clear-cut.
     One group of families--those in which the adult 
custodian is a grandparent or other relative--may be of 
particular interest and concern, especially with regard to 
forecasting future assistance payment expenditures. Although it 
is a trend which, in Maryland and nationally, began before 
welfare reform, the researchers were struck by the number of 
Temporary Cash Assistance cases headed by relatives other than 
the child(ren)'s parent, largely by grandmothers. This 
situation is not unique in our state, or to Frederick County. 
Fully one in four (24.9%) active Temporary Cash Assistance 
cases in Maryland in August 1998 were child-only cases. This 
compares to a historical, statewide figure of roughly 10-15%. 
We note that the actual numbers of this type of case are not 
increasing. Rather, they are not declining as rapidly as the 
general caseload.
    We are finding that it is prudent to take a closer look at 
the characteristics and circumstances of these families for 
several reasons. First, in a number of such families, there may 
be unidentified need for other supportive services. This may be 
especially true in cases headed by older grandmothers where 
there is no other adult in the home. Second, child-only cases 
are exempt from work and time limit requirements and, all else 
equal, it might be expected that child-only cases will remain 
on cash assistance for longer periods of time than other cases. 
Thus, our ability to more accurately forecast likely overall 
expenditures for cash assistance in future years would probably 
be enhanced by more detailed information about these families.
     There is reason for optimism, but also reason for 
concern. The quantitative data and the case vignettes indicate 
that many families have turned to cash assistance for support 
in a time of crisis. Most of them probably will not remain on 
Temporary Cash Assistance for extended periods of time and the 
majority do not seem at risk of reaching the five-year time 
limit in the foreseeable future. There is also reason for 
concern, however. The vignettes establish what front-line staff 
has long known and what Maryland's welfare reform plan 
explicitly recognizes as well: there is a sizeable minority of 
families for whom making a successful transition from welfare 
to work will be difficult, time consuming and relatively 
expensive. For some, transition seems unlikely to happen at all 
despite customers' and agencies' best efforts. For this group 
of families, the 20% exemption provided for in federal law will 
be essential.
    To be successful, welfare reform must be understood to be a 
community-wide challenge. The case narratives make clear that, 
for a great many of the more troubled families especially, 
state and local welfare agencies cannot be expected to ``go it 
alone.'' Among services clearly needed by families in this 
study are: detoxification/rehabilitation, counseling, stress 
management, family-life skills training, education, and child 
support enforcement, as well as child care and transportation.
    Two specific, important examples of the importance of 
viewing welfare reform as a community-wide challenge were 
thought to be most relevant to the cases reviewed for this 
study. One is the invidious problem of substance abuse which 
state policy explicitly acknowledges cannot be addressed solely 
within the welfare department.
    A second example concerns the separate Welfare to Work 
Block Grant funds which Maryland also receives. Helping many of 
today's Temporary Cash Assistance families to successfully 
transition from welfare to work will not be a simple matter. It 
seems clear, too, that traditional job placement strategies may 
be inappropriate or inadequate in many cases. Thus, it is 
imperative for elected and appointed officials to insure that 
these Welfare to Work funds are spent effectively and that 
results are closely monitored. In this area, as is true with 
regard to substance abuse and, indeed, ``welfare reform'' in 
its entirety, neither our state nor its low-income families can 
afford for us to do any less than our best. The stakes are 
simply too high.

               Effects on the Program Development Cycle:

    The last set of effects I would like to discuss is the one 
that affects the Program Development Cycle. In this process, 
Maryland used the research we have done to:
     Debate and plan the program
     Create and operate the program
     Define the initial open questions
     Answer the initial open questions
     Define the new questions
    In response to the concerns of Governor Glendening and the 
Maryland General Assembly, the Department and the University 
have answered, in at least a preliminary way, the open 
questions from the initial debate:
     Would our customers go to work? They did.
     Would they come back? They did not.
     Would they be sanctioned off? They were not.
     Would there be adverse effects on the Child 
Welfare System? There were not.
    We have also learned that our work is not finished. Our 
answers to the initial questions are giving rise to newer, more 
difficult issues, which we are addressing. Among these:
     Job Retention. With assistance from planning 
grants, and more importantly the exchange of ideas with other 
states and HHS, we are devising strategies to insure those who 
have left the rolls to become employed stay employed. Among 
these is Project Retain which attempts to mobilize existing 
resources to help those who experience a post-employment 
problem. We have found that this is not enough.
     Job Skills Enhancement. While we have seen gains 
in earnings, for some there have been none. Accordingly, 
Governor Glendening and the Maryland General Assembly have 
enacted and funded a Job Skills Enhancement Pilot Project aimed 
specifically at those who have left the cash assistance rolls 
and who find themselves in need of upgrade training.
     The Role of Post-Secondary Education. Maryland has 
adopted a Labor Force Attachment Model as its principal and 
successful means of helping our customers move quickly into 
unsubsidized employment. However, our locally driven, 
individually focused approach has also demonstrated that there 
are some persons for whom such an approach may not be the most 
appropriate. Accordingly, Governor Glendening, advocates and 
the Department established a pilot project at the Baltimore 
City Community College. This enabled an experimental group to 
use post-secondary education as their work activity. Dr. 
Catherine Born and her staff at the School of Social Work will 
do an evaluation of this pilot project by comparing the welfare 
and employment experience of this group with a matched control 
group from the rest of the caseload in Baltimore City.
     Re-Aligning the Major Welfare Reform Goals of the 
Department. In the first stages of our welfare reform effort, 
Governor Glendening and the Department developed a Reinvestment 
Strategy. Our major articulated goals were caseload reductions 
and customer satisfaction with an overall objective of creating 
caseload savings and then reinvesting those savings back into 
programs that would help those with greater barriers to 
independence. The Maryland General Assembly endorsed this 
strategy and gave the Department unprecedented fiscal 
flexibility to carry forward caseload savings into the future. 
Faced with issues of job retention, earnings gain, diversion 
and prevention, we are more clearly articulating a goal of the 
Support of Low Wage Working Families. The policy shift to 
welfare as a temporary support has accentuated the fact that 
other means-tested programs are supports to employment and 
independence.
    --Child Support. We have a Child Support First component in 
our program. It is becoming increasingly evident that we need 
to formalize a Child Support Last component for those exiting 
welfare to ensure that families have the multiple sources of 
income necessary to get through the temporary loss of one of 
them.
    --Child Care. As our welfare caseload projections go down, 
our child care projections increase. We are transferring more 
TANF funds to Child Care.
    --Medical Assistance. In Life After Welfare: Third Interim 
Report, our researchers noted the difference between the 
reported reason of employment for case closure and the number 
of people who were working in the quarter the case closed. The 
conclusion was that our customers were not aware of their 
eligibility for benefits while working, particularly 
Transitional Medical Assistance. Consequently, we are 
developing review mechanisms to ensure that Medical Assistance 
denials and closing are proper. We are also developing 
materials for our customers to ensure that they better 
understand the importance of giving us accurate information so 
that they can continue to get the benefits for which they are 
eligible.
    --Food Stamps. This program has taken on increased 
importance as cash assistance caseloads have declined. This 
program, unfortunately, does not have the flexibility that 
exists in TANF.
    --Earned Income Tax Credits. The Department continues to 
aggressively market both the federal EITC and Maryland's 
refundable EITC.
    Some Suggestions Based on These Effects: In closing, I 
would like to offer the following general observations/
suggestions as you review the effects of welfare reform.
     Avoid premature closure. We have been very 
successful. However, our research tells us that there are still 
many problems we are only beginning to uncover and understand. 
We also have yet to see how our progress and programs will fare 
in a time of economic downturn.
     Maintain current levels of support. We understand 
the Subcommittee's concern that some states have accumulated 
substantial TANF reserves. I think that these reflect prudence 
on the part of the states. We also have yet to see how our 
progress and programs will fare in a time of economic downturn.
     Continue and expand state flexibility. The final 
regulations promulgated by HHS are a dramatic improvement over 
the draft regulations. There is a real attempt to create and 
maintain a true federal/state partnership. However, there are 
some statements that indicate HHS thinks it is constrained by 
the statute to limit state flexibility. I would suggest 
examination of these areas to consider granting HHS the 
explicit authority to increase state flexibility. Areas of 
specific concern include: 1) granting flexibility to meet the 
two parent work participation rate requirement since these 
families have been very difficult to serve in Maryland because 
of their relatively small numbers, 2) not limiting the spending 
of accumulated reserves to ``assistance,'' and 3) eliminating 
the distinction made between supportive services, e.g. child 
care and transportation, for unemployed families as 
``assistance'' and employed families as not being 
``assistance.''
     Program Coordination and Simplification. Finally, 
I simply cannot stress too strongly the need for program 
simplicity and coordination, especially between TANF and Food 
Stamps. Nothing confuses customers, workers and the general 
public more than the lack of consistency among the rules for 
federal means tested programs. Perhaps the truest test of real 
welfare reform is that different programs look at the same 
thing the same way. That certainly does not happen with a car. 
In Maryland's cash assistance program, we do not count the 
value of any car against a customer's family because we see it 
as means to independence. As long as the family remains on cash 
assistance, Food Stamps (because of categorical eligibility) 
does not count it either. The minute that family leaves cash 
assistance the value of the car has to be figured out (no easy 
task) and then, sometimes yes other times no, may make the 
family ineligible. Such is a recipe for confusion, error, and 
lack of access. I fully realize that this issue is not totally 
within the purview of this subcommittee, but I plead it to 
whomever I can, wherever I can.
    Thank you for your time, attention and the continued risk 
of giving Maryland the flexibility we need to succeed in 
operationalizing your vision of welfare reform.

    [Attachments are being retained in the Committee files.]
      

                                

    Chairman Johnson of Connecticut. Thank you very much, Mr. 
Larson.
    Cynthia Fagnoni, Director of Education, Workforce, and 
Income Security Issues, HEHS, U.S. General Accounting Office.

     STATEMENT OF CYNTHIA M. FAGNONI, DIRECTOR, EDUCATION, 
 WORKFORCE, AND INCOME SECURITY ISSUES, HEALTH, EDUCATION, AND 
    HUMAN SERVICES DIVISION, U.S. GENERAL ACCOUNTING OFFICE

    Ms. Fagnoni. Madam Chair and Members of the Subcommittee, 
thank you for inviting me here today to discuss our work on 
State implementation of welfare reform and information on 
families who have left welfare.
    My testimony today focuses on States' implementation of 
welfare reform, what State-sponsored studies tell us about the 
status of children and families leaving welfare, and key issues 
involved in assessing the success of welfare reform.
    My testimony is based on completed and ongoing work for the 
Subcommittee.
    Our work shows that States are transforming the Nation's 
welfare system into a work-focused, temporary assistance 
program for needy families. Many States are refocusing their 
programs on moving people into employment rather than signing 
them up for monthly cash assistance.
    To better support this new work focus, many States are 
changing how their offices and workers do business, expanding 
the roles of welfare workers to include helping clients address 
and solve problems that interfere with employment. In some 
instances, applicants are expected to engage in job search 
activities as soon as they apply for assistance.
    Such changes, made in times of strong economic growth, have 
been accompanied by a 45-percent decline in the number of 
families receiving welfare, from a peak of about 5,000,000 
families in 1994 to under 3,000,0000 as of December 1998.
    Caseload reductions serve as only one indication of 
progress in meeting the goals of welfare reform, however. An 
essential question is: What do these program changes and 
caseload reductions mean for needy families with children? 
There are no Federal requirements for States to report on the 
status of former welfare recipients. As a result, the only 
systematic data currently available on families who have left 
welfare come from research efforts initiated by States.
    Early indications from our review of State-sponsored 
studies in seven States are that most of the adults who left 
welfare were employed at some time after leaving the rolls, 
often at low-paying jobs. Studies measuring whether an adult 
and a family had ever been employed since leaving welfare 
reported employment rates from 63 to 87 percent.
    Regarding the incomes of those who left welfare, average 
quarterly earnings for former recipients ranges from $2,378 to 
$3,786 in the studies that either reported quarterly earnings 
or for which we estimated quarterly earnings.
    Extrapolating these quarterly earnings to a year results in 
estimated average annual earnings for former welfare recipients 
in the seven States ranging from $9,512 to $15,144. These 
amounts of annual earned income are greater than the maximum 
amount of cash assistance and food stamps that a three-person 
family with no other income could have received in these 
States. However, if these earnings were the only source of 
income for families after they left welfare, many of them would 
remain below the Federal poverty level.
    While the tracking studies provide information on 
individuals' earned incomes, much remains unknown about 
families' total household incomes. For example, the studies 
generally do not provide complete information on other forms of 
household income, such as earnings by other household members, 
child support payments, or financial assistance from relatives 
and friends.
    In addition to information on total household income, 
information on the receipt of government supports is key to 
understanding the condition of former welfare recipients and 
the extent to which they continue to rely on government aid and 
have not become economically self-sufficient. Five of the seven 
State studies had some information on the receipt of benefits. 
For example, between 44 and 83 percent of the families who left 
welfare received Medicaid benefits. And between 31 and 60 
percent received food stamps.
    In addition to interest in welfare recipients who have left 
welfare and are employed, there is great interest in how those 
families who have left welfare and are not employed are faring. 
The South Carolina and Wisconsin surveys asked nonworking 
former recipients what stopped them from working for pay. In 
both States, the most frequently mentioned reason was their own 
physical or mental illness, followed by the inability to find a 
job, lack of transportation, and lack of child care.
    The Wisconsin study attempted to determine how these 
families were supporting themselves. Of the 142 former 
recipients not currently working, 18 percent were living with 
employed spouses or partners; 65 percent of the families of the 
remaining nonworking former recipients were receiving Social 
Security, State unemployment insurance, child support or foster 
care payments; and 23 percent were not receiving cash 
assistance, but were receiving noncash assistance, such as free 
housing, rent subsidies, Medicaid, or food stamps.
    Two studies, South Carolina's as well as Wisconsin's recent 
survey of families leaving welfare during the first quarter of 
1998, asked former recipients to compare several aspects of 
their general well-being after leaving welfare with their 
situation while they were on welfare.
    While former recipients in both States were more likely to 
experience some deprivations after leaving welfare, over two-
thirds disagreed or strongly disagreed with the statement that 
life was better when you were getting welfare.
    While these studies help us learn some things about the 
status of former welfare recipients in several States, we could 
not draw conclusions about the status of most families that 
have left welfare nationwide. However, many efforts are 
underway to provide information to better understand the 
effects of welfare reform on families. In the near and long 
term, these efforts promise to provide more data to help us 
understand the effects of welfare reform on families. 
Additional information from ongoing and future studies will 
help us better understand the evolving story of welfare reform 
and its impact on families and children.
    Madam Chair, that concludes my formal remarks. I will be 
happy to answer any questions you may have.
    [The prepared statement and attachments follow:]

Statement of Cynthia M. Fagnoni, Director, Education, Workforce, and 
Income Security Issues, Health, Education, and Human Services Division, 
U.S. General Accounting Office

    Madame Chair and Members of the Subcommittee:
    Thank you for inviting me here today to discuss our work on 
state implementation of welfare reform and information on 
families who have left welfare. The Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (PRWORA) (P.L. 104-
193) significantly changed federal welfare policy for low-
income families with children, building upon and expanding 
state-level reforms. The act ended the federal entitlement to 
assistance for eligible needy families with children under Aid 
to Families With Dependent Children (AFDC) and created the 
Temporary Assistance for Needy Families (TANF) block grant, 
designed to help low-income families reduce their dependence on 
welfare and move toward economic independence. Under TANF, 
states have much greater flexibility than before to design and 
implement programs that meet state and local needs. At the same 
time, states must impose federal work and other program 
requirements on most adults receiving aid and enforce a 
lifetime limit of 5 years, or less at state option, on the 
length of time federal assistance is received.
    These recent federal and state reforms represent 
significant departures from previous policies for helping needy 
families with children. To better understand states' program 
changes and the status of families who have left welfare, your 
Subcommittee, in concert with the Senate Finance Committee, 
asked us to review and report on state implementation of 
welfare reform and information on families who have left 
welfare. To respond to your requests, in June 1998 we issued a 
report on implementation of welfare reform in seven states,\1\ 
and today the Subcommittee has released a second report that 
reviews and summarizes state-sponsored studies of families who 
left the welfare rolls during or after 1995.\2\ Today I will 
summarize these reports' findings, discussing (1) states' 
implementation of welfare reform, (2) what state-sponsored 
studies tell us about the status of children and families 
leaving welfare,\3\ and (3) key issues involved in assessing 
the success of welfare reform.
---------------------------------------------------------------------------
    \1\ See Welfare Reform: States Are Restructuring Programs to Reduce 
Welfare Dependence (GAO/HEHS-98-109, June 18, 1998). States reviewed in 
depth were California, Connecticut, Louisiana, Maryland, Oregon, Texas, 
and Wisconsin.
    \2\ See Welfare Reform: Information on Former Recipients' Status 
(GAO/HEHS-99-48, Apr. 28, 1999).
    \3\ For the purposes of this report, the term ``welfare'' will 
refer to cash assistance received under AFDC or TANF.
---------------------------------------------------------------------------
    In summary, our work shows that states are transforming the 
nation's welfare system into a work-focused, temporary 
assistance program for needy families. Many states are 
refocusing their programs on moving people into employment 
rather than signing them up for monthly cash assistance. To 
better support this new work focus, many states are changing 
how their offices and workers do business, expanding the roles 
of welfare workers to include helping clients address and solve 
problems that interfere with employment. These changes, made in 
times of strong economic growth, have been accompanied by a 45-
percent decline in the number of families receiving welfare--
from a peak of about 5 million families in 1994 to fewer than 3 
million families as of December 1998.
    Caseload reductions serve as only one indication of 
progress in meeting the goals of welfare reform, however. An 
essential question is: What do these program changes and 
caseload reductions mean for needy families with children? 
Early indications from our review of state-sponsored studies in 
seven states conducted at various periods from 1995 to 1998 are 
that most of the adults who left welfare were employed at some 
time after leaving the rolls, often at low-paying jobs. There 
was little evidence of increased incidence of homelessness or 
of children entering foster care after families left welfare, 
in the few cases in which these studies addressed these issues. 
However, much remains unknown about the economic status and 
well-being of most former welfare families nationwide.
    Many efforts are under way to provide more information on 
the families who have left welfare and the effects of welfare 
reform. As this information becomes available, it will permit a 
more comprehensive assessment of welfare reform, which will 
need to address the following key issues:
     How do low-wage earners and their families fare 
after leaving welfare for work?
     What is happening to eligible families seeking 
welfare who are provided other forms of aid, such as job search 
assistance, instead of welfare or other aid?
     How effectively are states working with hard-to-
serve welfare recipients who remain on the TANF rolls?
     How would an economic downturn affect states' 
welfare reform programs?

                               Background

    PRWORA specified that the goals of TANF include providing 
assistance to needy families so that children may be cared for 
in their own homes or in the homes of relatives; ending the 
dependence of needy parents on government benefits by promoting 
job preparation, work, and marriage; preventing and reducing 
the incidence of out-of-wedlock pregnancies; and encouraging 
the formation and maintenance of two-parent families. In fiscal 
year 1998, states expended or obligated $12.2 billion of the 
$14.8 billion in federal funds available for TANF.\4\ In 
addition, states spent $11 billion of their own funds on needy 
families with children, meeting the requirement to maintain a 
specified minimum level of their own spending to receive 
federal TANF funds. The Department of Health and Human Services 
(HHS) oversees TANF at the federal level.
---------------------------------------------------------------------------
    \4\ The Department of Health and Human Services (HHS) awarded 
states a total of $16.6 billion under TANF. After some states 
transferred some of their TANF funds to the Child Care and Development 
Fund or the Social Services Block Grant, as allowed under TANF, $14.8 
billion remained available for TANF.
---------------------------------------------------------------------------
    Before PRWORA, many states received waivers from federal 
rules under the AFDC program to allow them to strengthen work 
requirements for adults, impose time limits on the receipt of 
aid, and change other aspects of their programs. As a result, 
at the time PRWORA was enacted, states were at different stages 
of implementing their reform efforts. State programs continue 
to evolve at different paces. The great extent of state 
experimentation and sweeping changes at the federal level have 
generated interest among program administrators, state and 
local policymakers, welfare advocates, and the public in 
general about state and local welfare programs and the status 
of families no longer receiving cash assistance under AFDC or 
TANF.

      States Are Changing Their Welfare Programs To Emphasize Work

    States' have made progress in restructuring their programs 
to emphasize work and to reduce families' dependence on 
welfare. State efforts include requiring more welfare 
recipients to look for work or participate in work activities; 
providing other forms of aid, such as child care and 
transportation, to keep families from needing monthly cash 
assistance; and focusing more on helping families solve 
problems that interfere with employment. Although caseloads 
have declined, it is not yet clear to what extent states' 
program changes, rather than the strong economy, have 
contributed to the decline.
    Our work and other studies show that many states and 
localities are transforming their welfare offices into job 
placement centers. The seven states we reviewed in depth 
generally had increased the percentage of their clients 
required to participate in work-related activities from an 
average of 44 percent in 1994 to 65 percent in the early months 
of TANF implementation in 1997. In some instances, applicants 
are now expected to engage in job search activities as soon as 
they apply for assistance. To emphasize the importance of work, 
five of the seven states have more strongly enforced work 
requirements by adopting provisions for terminating assistance 
to the entire family for noncompliance with program 
requirements. In addition, we recently reported that 17 states 
are drawing upon their existing workforce development systems 
to help welfare clients get jobs, often through the use of the 
Department of Labor's one-stop career center system.\5\
---------------------------------------------------------------------------
    \5\ See Welfare Reform: States' Experiences in Providing Employment 
Assistance to TANF Clients (GAO/HEHS-99-22, Feb. 26, 1999).

Many States Are Using New Strategies to Divert Families From 
---------------------------------------------------------------------------
Welfare

    Requiring applicants to search for work as soon as or 
before they apply for aid is part of a major new strategy many 
states are using to divert some applicants from monthly cash 
assistance. With the end of the entitlement to cash aid and the 
increased flexibility now granted states under TANF, states are 
sometimes providing other forms of assistance--such as one-
time, lump-sum payments; support services, such as child care 
and transportation; and assistance with job searches--in an 
attempt to keep families from needing monthly cash assistance. 
One-time cash payments can help families to catch up on rent, 
repair their car, or get through a medical emergency, allowing 
adults within the families to be more able to obtain or retain 
a job. Support services such as child care and transportation 
may also enable families to maintain their self-sufficiency 
without going on the welfare rolls. A study sponsored by HHS 
showed that, as of August 1998, 31 states had reported using at 
least one ``diversion'' strategy in at least part of the 
state.\6\ A 1999 Rockefeller Institute review of 20 states' 
welfare programs found that states and localities have 
developed a range of diversion programs.\7\ For example, a 
diversion program in Texas allows caseworkers to provide 
families with employment counseling or refer them to public or 
private agencies for a variety of services, while Arizona's 
diversion program offers families emergency shelter, rent or 
mortgage assistance, or assistance with utility payments.
---------------------------------------------------------------------------
    \6\ See Kathleen Maloy and others, A Description and Assessment of 
State Approaches to Diversion Programs and Activities Under Welfare 
Reform (Washington, D.C.: George Washington University, Aug. 1998) and 
Diversion as a Work-Oriented Welfare Reform Strategy and Its Effect on 
Access to Medicaid: An Examination of the Experiences of Five Local 
Communities (Washington, D.C.: George Washington University, Mar. 
1999).
    \7\ See Richard P. Nathan and Thomas L. Gais, Implementing the 
Personal Responsibility Act of 1996: A First Look (Albany, N.Y.: 
Federalism Research Group, The Nelson A. Rockefeller Institute of 
Government, 1999).
---------------------------------------------------------------------------
    Along with this new emphasis on diverting families from 
receiving monthly cash assistance comes concern among some 
policymakers, program administrators, and others that families 
in need of and eligible for Medicaid and food stamps may not be 
receiving these benefits. To ensure continued Medicaid coverage 
for low-income families, PRWORA generally preserves the 
Medicaid entitlement, setting eligibility standards at the AFDC 
levels in effect on July 16, 1996.\8\ Moreover, many families 
who do not meet state-defined eligibility criteria for TANF can 
still be eligible for food stamps. We have ongoing work for 
Representatives Levin and Coyne addressing Medicaid and food 
stamp issues that we will be reporting on later this year.
---------------------------------------------------------------------------
    \8\ For more information, see Medicaid: Early Implications of 
Welfare Reform for Beneficiaries and States (GAO/HEHS-98-62, Feb. 24, 
1998).

States Are Providing Supportive Services to Families to 
---------------------------------------------------------------------------
Decrease Welfare Dependence

    As many welfare offices have increased their emphasis on 
work activities, welfare offices and workers are also focusing 
more on helping clients address and solve problems that 
interfere with employment. The seven states we visited used 
some of the additional budgetary resources available under TANF 
\9\ to provide services to help families address barriers to 
employment, including lack of child care,\10\ lack of 
transportation,\11\ and more complex mental and physical health 
problems. States are also continuing to provide services to 
families that have left the welfare rolls as a result of 
employment, including, in some cases, providing case management 
services to help ensure that families can deal with problems 
that might put parents' jobs at risk. In addition, some states 
are providing services to low-income working families not 
receiving cash.
---------------------------------------------------------------------------
    \9\ For more information, see Welfare Reform: Early Fiscal Effects 
of the TANF Block Grant (GAO/HEHS-98-137, Aug. 18, 1998).
    \10\ For more information on welfare reform and child care, see 
Welfare Reform: State Efforts to Expand Child Care Programs (GAO/HEHS-
98-27, Jan. 13, 1998).
    \11\ See Welfare Reform: Transportation's Role in Moving From 
Welfare to Work (GAO/RCED-98-161, May 29, 1999) and Welfare Reform: 
Implementing DOT's Access to Jobs Program (GAO/RCED-99-36, Dec. 8, 
1998).

States Are Anticipating Difficulty in Serving Families Still on 
---------------------------------------------------------------------------
the Welfare Rolls

    As states require larger percentages of their welfare 
caseloads to participate in work-related activities--including 
some recipients who were previously exempted because of a 
determination of physical or mental disability--and as the most 
readily employable recipients leave welfare for employment, 
states are concerned that they will be left with a more 
difficult-to-serve population. Finding ways to involve these 
recipients in work activities was one of the most challenging 
and widespread implementation issues cited in the seven states 
we visited.
    Studies of these hard-to-serve recipients have found that, 
in addition to being less likely to have prior work experience 
and more likely to have lower literacy levels, they tend to 
have multiple problems that make participation in work-related 
activities more difficult. These problems include physical and 
mental health issues such as depression, anxiety, personality 
disorders, substance abuse, and domestic violence. To move 
these recipients toward economic self-sufficiency, states have 
sought to enhance their capacity to provide mental and physical 
health services. For example, in our June 1998 report, we noted 
that Oregon officials had estimated that about 50 percent of 
the state's welfare caseload requires drug or alcohol treatment 
services. Oregon introduced mental health and drug and alcohol 
services by integrating them into some of their training 
classes for welfare recipients and by placing counselors on-
site at welfare offices.

Welfare Caseloads Have Declined, but No Consensus Exists on the 
Cause of the Decline

    States' implementation of more work-focused programs, 
undertaken under conditions of strong economic growth, has been 
accompanied by a 45-percent decline in the number of families 
receiving welfare--from a high of about 5 million families in 
1994 to 2.7 million families as of December 1998. A large part 
of the reduction occurred after enactment of federal reform in 
August 1996: the national caseload declined 32 percent between 
January 1997 and December 1998 alone. Thirty-five states had 
caseload reductions of 25 percent or more during that same time 
period. While economic growth and state welfare reforms have 
been cited as key factors to explain nationwide caseload 
declines, there is no consensus about the extent to which each 
factor has contributed to these declines. In any case, it is 
important to view caseload reductions as only one measure of 
progress in meeting the goals of welfare reform. As stated, the 
goals of PRWORA include ending the dependence of needy parents 
on government benefits by promoting job preparation, work, and 
marriage; encouraging two-parent families; and helping families 
care for their children in their own or relatives' homes. As a 
result, outcomes for families in the areas of economic status, 
family composition, and family and child well-being need to be 
assessed.

   Several Studies Show Most Adults in Former Welfare Families Were 
  Employed at Some Time After Leaving Welfare; Little Is Known About 
                           Family Well-Being

    There are no federal requirements for states to report on 
the status of former welfare recipients. As a result, the only 
systematic data currently available on families who have left 
welfare come from research efforts initiated by states. We 
identified a total of 18 state-conducted or -sponsored studies 
in 17 states--2 studies in Wisconsin and 1 in each of the other 
16 states--that reported on the status of families who left 
welfare in 1995 or later. (See app. I for a list of the 
studies.) These state studies differed in important ways, such 
as when they were conducted, the categories of families 
tracked, the length of time families were tracked, and the 
extent to which the families for whom data were available were 
representative of all families in the population from which the 
sample was drawn.
    Taking these factors into account, we determined that only 
8 of the 18 tracking studies, covering seven states, had 
sufficient data on a sample of families to conclude that the 
sample represented the population from which it was taken.\12\ 
These states are Indiana, Maryland, Oklahoma, South Carolina, 
Tennessee, Washington, and Wisconsin. The eight studies from 
these states had data on at least 70 percent of the sample of 
families from the population of interest in the state or 
included a nonresponse analysis that showed no important 
differences between the respondents and the nonrespondents. We 
estimated that these seven states accounted for about 8 percent 
of the families who left welfare nationwide between October 
1993 and June 1997. (See app. II for more information on the 
seven states' studies.)
---------------------------------------------------------------------------
    \12\ While the Iowa study had an 85-percent response rate, results 
could be generalized only to families assigned to an alternative 
assistance program for AFDC recipients who did not comply with program 
rules and for some who volunteered to be in the program, and not to 
families leaving welfare for other reasons. None of the 18 studies were 
able to locate all families included in the samples to be tracked. The 
nonresponse rates ranged from 15 percent to 88 percent for the studies 
using surveys; for the two studies using administrative data only, 
information about 8 percent and 18 percent of the families being 
tracked could not be found in the data being used.
---------------------------------------------------------------------------
    Because the seven states' studies differ in key ways, 
including time periods covered and categories of families 
studied, the results are not completely comparable. However, 
the studies provide information on the status of families who 
had left welfare in these states at the time of the studies 
and, because certain results are consistent across the studies, 
suggest a pattern of what is happening to such families.

Adults Had Employment Rates of 61 Percent to 87 Percent, but 
Little Is Known About Household Income

    Seven of the state studies reported that most of the adults 
in families remaining off the welfare rolls were employed at 
some time after leaving welfare. As shown in table 1, 
employment rates ranged from 61 percent to 87 percent for 
adults in these families. However, these employment rates were 
measured in different ways. Studies measuring employment at the 
time of follow-up reported employment rates from 61 percent to 
71 percent. Studies measuring whether an adult in a family had 
ever been employed since leaving welfare reported employment 
rates from 63 percent to 87 percent. These employment rates 
generally exclude families who returned to welfare, which can 
be a substantial portion of the families who leave welfare.\13\ 
The percentages of families who initially left welfare and then 
returned to the rolls were significant, ranging from 19 percent 
after 3 months in Maryland to 30 percent after 15 months in 
Wisconsin. The issue of families' needing to return to welfare 
will become more important as increasing numbers of recipients 
reach their time limit on aid, since returning to the rolls 
will no longer be an option for them.
---------------------------------------------------------------------------
    \13\ Removing families who return to welfare from the employment 
rate calculations results in higher employment rates, since many former 
recipients who return to the welfare rolls are not employed

                       Table 1.--Employment and Earnings Data From Studies in Seven States
----------------------------------------------------------------------------------------------------------------
                                    Employed at    Ever employed                     Estimated       Estimated
 State and  period during which   time of follow-  since leaving  Average hourly      average         average
 families studied left  welfare         up            welfare      wage rate \2\   earnings per    earnings per
               \1\                 (percentage)    (percentage)                     quarter \3\        year
----------------------------------------------------------------------------------------------------------------
Indiana (1995-96) \4\...........            64.3            84.3           $6.34          $2,637         $10,548
Maryland (1996-97)..............           (\5\)        63.0 \6\           (\5\)       2,384 \6\           9,536
Oklahoma (1996-97)..............            64.5           (\5\)            6.51           2,877          11,508
South Carolina (1997)...........            61.8            85.6            6.45           3,019          12,076
Tennessee (1997) \7\............            61.0             \5\            5.67           2,727          10,908
Washington (1998)...............            71.0            87.0            8.09           3,786          15,144
Wisconsin (1995-96) \8\.........           (\5\)            82.1             \5\       2,378 \9\           9,512
Wisconsin (1998) \10\...........            62.0            83.0            7.42       3,473 \9\          13,892
----------------------------------------------------------------------------------------------------------------
Note: Except where noted, these data include only families who did not return to welfare.
\1\ The year noted indicates the period during which the families studied left welfare. For more detailed
  information on the different time periods covered and frequency and length of follow-up of these studies, see
  app. II.
\2\ These figures represent the mean wage. While the mean wage tends to be higher than the median wage, we did
  not have the median wage for all studies.
\3\ For all studies except Maryland's and the first Wisconsin study, we had to estimate quarterly earnings on
  the basis of reported average hourly wages and average number of hours worked per week. Because it is unlikely
  that all members of the sample worked all 13 weeks in a quarter, most of these estimates are likely to be
  somewhat higher than the actual average earnings per quarter.
\4\ Wage and earnings data for Indiana include those of recipients with earned income who were also on welfare.
  Because Indiana did report that average wage rates were significantly higher for former welfare recipients
  than for those combining work and welfare, the average wage rate for the combined groups may underestimate the
  wage rate for former recipients who are no longer on welfare.
\5\ Data were not available.
\6\ This figure also includes individuals who returned to welfare.
\7\ The Tennessee study reported separately for families who left welfare for noncompliance and for those who
  were employed, whether on or off welfare. Employment rates presented here are for both groups, whereas wage
  data and earnings estimates are for the employed group only.
\8\ These data are based on a study using administrative data for families leaving welfare from July 1995 to
  July 1996.
\9\ Caution must be used in comparing these earnings figures because the earlier study used administrative data
  and the later one used survey responses. The administrative data may underestimate earnings because not all
  earnings were included. The survey data may be more inclusive of earnings but, because these date were self-
  reported, they could understate or overstate earnings.
\10\ These data are based on interviews with families leaving welfare from Jan. 1998 to Mar. 1998.

    Turning to the incomes of those who left welfare, average 
quarterly earnings ranged from $2,378 to $3,786 in the studies 
that either reported quarterly earnings or for which we 
estimated quarterly earnings, as shown in table 1. 
Extrapolating these quarterly earnings to a year results in 
estimated average annual earnings for former welfare recipients 
in the seven states that range from $9,512 to $15,144, as also 
shown in table 1. These amounts of annual earned income are 
greater than the maximum annual amount of cash assistance and 
food stamps that a three-person family with no other income 
could have received in these states.\14\ However, if these 
earnings were the only source of income for families after they 
left welfare, many of them would remain below the federal 
poverty level.\15\
---------------------------------------------------------------------------
    \14\ As of Jan. 1997, in these seven states, the maximum annual 
amount of cash assistance and food stamps combined for a single-parent, 
three-person family with no income ranged from $6,000 in Tennessee to 
$9,744 in Washington.
    \15\ For 1998, the federal poverty level for a family of three was 
$13,650.
---------------------------------------------------------------------------
    While the tracking studies provide information on 
individuals' earned incomes, much remains unknown about 
families' total household incomes. For example, the studies 
generally do not provide complete information on other forms of 
household income, such as earnings by other household members, 
child support payments, and financial assistance from relatives 
and friends. Three of the eight state studies provided some 
information on total household income. In the Oklahoma study, 
57 percent of the former welfare families reported household 
incomes at or below the federal poverty level. In the Indiana 
study, 57 percent of the families off welfare at follow-up 
reported monthly household income below $1,000. In contrast, 
the Washington study reported average total family income, 
including child support payments, equal to 130 percent of the 
federal poverty level for a family of three. In addition, the 
1995-96 Wisconsin study, which focused on earnings rather than 
income, found that the proportion of families who had left and 
remained off welfare for at least 1 year who had earnings above 
the federal poverty level varied by family size. While 35 
percent of the families with one child and 24 percent of the 
families with two children had earnings above the poverty 
level, only 11 percent of the families with three or more 
children did.
    In addition to information on total household income, 
information on the receipt of government supports is key to 
understanding the condition of former welfare recipients and 
the extent to which they continue to rely on government aid and 
have not become economically self-sufficient. Five of the seven 
states' studies had some information on the receipt of 
benefits. For example, between 44 and 83 percent of the 
families who left welfare received Medicaid benefits, and 
between 31 and 60 percent received food stamps. As we discussed 
earlier, some policymakers and administrators are concerned 
that families seeking assistance and being diverted from 
welfare may be inappropriately diverted from receiving Medicaid 
and food stamps and that those who leave welfare may not 
receive Medicaid and food stamps even though they continue to 
be eligible for those programs. For example, families that 
leave TANF for employment generally may continue to receive 
Medicaid for 12 months. In addition, Medicaid coverage is also 
available for many low-income children even if their parents 
are not eligible.
    In addition to interest in welfare recipients who have left 
welfare and are employed, there is great interest in how those 
families who have left welfare and are not employed are faring. 
The South Carolina and Wisconsin surveys asked nonworking 
former recipients what stopped them from working for pay. In 
both states, the most frequently mentioned reason was their own 
physical or mental illness, followed by the inability to find a 
job, lack of transportation, and lack of child care. The 
Wisconsin study attempted to determine how these families were 
supporting themselves. Of the 142 former recipients not 
currently working, 18 percent were living with employed spouses 
or partners. Sixty-five percent of the families of the 
remaining nonworking former recipients were receiving Social 
Security, state unemployment insurance, child support, or 
foster care payments; 23 percent were not receiving cash 
assistance but were receiving noncash assistance, such as free 
housing, rent subsidies, Medicaid, or food stamps.

Studies in Seven States Provided Limited Information on the 
Well-Being of Children and Families

    The seven states' studies generally provided no information 
on changes in family composition, such as changes in marital 
status or formation of two-parent families, and provided little 
information on how former welfare children and families were 
doing relative to housing, health, education, and 
nutrition.\16\ However, preliminary evidence from a few of 
these studies shows no increased incidence in homelessness or 
entry of children into foster care at the time of follow-up.
---------------------------------------------------------------------------
    \16\ These and other factors are considered indicators of well-
being.
---------------------------------------------------------------------------
    Three studies--from Maryland, Oklahoma, and Washington--
reported on the number of children in former recipient families 
that had ever been involved with child protective services and 
found few cases in which children had been involved with child 
protective services since leaving welfare. For example, the 
Maryland study reviewed state data from its foster care program 
to determine the number of children placed in foster care after 
their families left welfare. This study reported that less than 
one-half of 1 percent of the children studied entered foster 
care after their families left cash assistance. In addition, 
South Carolina, in separate analyses, compared the number of 
incidents of maltreatment reported to the Child Protective 
Services' Central Registry for a sample of families who had 
left welfare with the number of incidents for families still on 
welfare; it also compared the number of incidents of 
maltreatment in a sample of former welfare families before and 
after leaving welfare. The differences were not statistically 
significant for either comparison.
    Two studies, South Carolina's as well as Wisconsin's recent 
survey of families leaving welfare during the first quarter of 
1998, asked former recipients to compare several aspects of 
their general well-being after leaving welfare with their 
situation when they were on welfare. Because Wisconsin used a 
modified version of the interview schedule developed in South 
Carolina, the data are comparable, even though the programs 
that the recipients participated in are not. Table 2 shows the 
results from the two states' surveys. Former welfare recipients 
in both states more often experienced deprivations after 
leaving welfare than while on welfare. At the same time, 76 
percent and 68 percent of respondents in South Carolina and 
Wisconsin, respectively, disagreed or strongly disagreed with 
the statement that ``life was better when you were getting 
welfare.'' Regarding housing status, an important aspect of 
well-being, the limited information from the studies did not 
suggest increased incidence of homelessness at the time of 
follow-up.

              Table 2.--Recipients' Comparisons of Deprivations While on and After Being on Welfare
----------------------------------------------------------------------------------------------------------------
                                                                 South Carolina \1\           Wisconsin \2\
                                                               (Percentage respondiing   (percentage responding
                          Question                                    ``yes'')                  ``yes'')
                                                             ---------------------------------------------------
                                                                   On      Off welfare   On welfare  Off welfare
----------------------------------------------------------------------------------------------------------------
Did you ever get behind in rent or house payments?..........           13           15           30       37 \3\
Did you ever get behind on a utility bill?..................           16           18           49           47
Was there ever a time when you could not buy food?..........            6            9           22       32 \3\
Was there ever a time when you could not afford child care             11            9           22       33 \3\
 when needed in order to work?..............................
Did somebody in your home ever get sick or hurt when you                1        7 \3\            8           11
 could not get medical care?................................
Did you have to go to a homeless shelter?...................            2            1            5            3
----------------------------------------------------------------------------------------------------------------
\1\ Based on a sample of 403 former welfare recipients.
\2\ Based on a sample of 375 former welfare recipients.
\3\ These differences are statistically significant at the .05 level.
Sources: South Carolina's Survey of Former Family Independence Program Clients: Cases Closed During July Through
  September 1997 and Wisconsin's Survey of Those Leaving AFDC or W-2 January to March 1998, preliminary report.

   Efforts Under Way to Further Assess the Success of Welfare Reform

    While we were able to learn some things about the status of 
former welfare recipients in several states, we could not draw 
conclusions about the status of most families that have left 
welfare nationwide. In our attempt to describe the condition of 
former welfare families, we were constrained by the data 
available from these early state tracking studies. However, 
efforts are under way at both the federal and state levels to 
improve the usefulness of the data being collected to assess 
the status of former welfare families. A total of 39 states and 
the District of Columbia already are tracking or plan to track 
families leaving welfare. In addition, HHS has recently funded 
14 projects to track and monitor families who have left welfare 
as part of its overall strategy to evaluate welfare reform and 
to respond to the Congress' earmarking of $5 million for HHS to 
study the outcomes of welfare reform. The HHS projects will 
cover families who leave welfare in 10 states, five counties in 
2 other states, and the District of Columbia and, in some 
cases, will study eligible families diverted from welfare. The 
limited nature of the information currently available 
emphasizes the importance of additional state efforts such as 
those funded by HHS. HHS is funding other efforts also, 
including 23 studies in 20 states of welfare reforms that began 
under waivers of the AFDC program. Most of these efforts are 
looking at issues such as duration and amount of welfare 
receipt, rates of self-sufficiency, and participation in 
employment. Five of these states' studies also will include 
information on outcomes for children.\17\
---------------------------------------------------------------------------
    \17\ For more information, see Web sites http://www.acf.dhhs.gov/
programs/opre/rd&e.htm and http://aspe.os.dhhs.gov/hsp/
hspres.htm#outcomes.
---------------------------------------------------------------------------
    Other efforts are also under way to provide information to 
better understand the effects of welfare reform on families. 
For example, to assess the post-reform status of all low-income 
families, not just former welfare families, the U.S. Census 
Bureau at the direction of the Congress is conducting a 
longitudinal survey of a nationally representative sample of 
families called the Survey of Program Dynamics. The survey 
particularly asks about eligibility for and participation in 
welfare programs, employment, earnings, out-of-wedlock births, 
and adult and child well-being. In addition, the Urban 
Institute is conducting a multiyear project monitoring program 
changes and fiscal developments along with changes in the well-
being of children and families. As part of this project, the 
Urban Institute has surveyed nearly 50,000 people to obtain 
comprehensive information on the well-being of adults and 
children as welfare reform is being implemented in the various 
states.\18\ A second survey is planned for 1999. Full results 
from the Census Bureau and Urban Institute surveys may not be 
available until the year 2000. In addition, a multitude of 
other studies--some by us, HHS, and other federal agencies; 
states and localities; and other researchers--that will be 
providing information in the future on various aspects of 
welfare reform are under way or planned.\19\ In the near and 
long term, these efforts promise to provide more data to help 
us understand the effects of welfare reform on families.
---------------------------------------------------------------------------
    \18\ The Urban Institute, a research organization located in the 
District of Columbia, is analyzing the devolution of responsibility for 
social programs from the federal government to the states, focusing 
primarily on health care, income security, job training, and social 
services. Initial results from the 1997 National Survey of America's 
Families are available at the Urban Institute' Web site: www.urban.org. 
The survey is representative of the nonelderly population in the nation 
as a whole and in 13 states: Alabama, California, Colorado, Florida, 
Massachusetts, Michigan, Minnesota, Mississippi, New Jersey, New York, 
Texas, Washington, and Wisconsin.
    \19\ For a listing of completed and ongoing studies of welfare 
reform, see the Web site www.researchforum.org, created and maintained 
by the Research Forum on Children, Families and the New Federalism, 
National Center for Children in Poverty, 154 Haven Avenue, New York, NY 
10032-1180.
---------------------------------------------------------------------------
    In the meantime, our work shows that states have clearly 
made progress in restructuring their programs to emphasize the 
importance of employment to both clients and welfare workers. 
In addition, the information currently available from several 
states consistently shows that most families who have left 
welfare have at least some attachment to the workforce. In the 
longer term, the information that becomes available from 
ongoing and future studies will permit a more comprehensive 
assessment of welfare reform. Such an assessment will need to 
take into account some key questions.

How do families fare after leaving welfare for work?

    Our work and other studies consistently show that many of 
the individuals in families who have left welfare are employed 
in low-wage jobs. While they are now employed, these families' 
prospects for achieving some measure of economic stability 
remain an important issue in light of prior research showing 
that AFDC mothers, who often found jobs with low wages, 
generally experienced little rise in wages over time after they 
began working.\20\ To the extent that these families' earnings 
do not increase over time and their employment-based fringe 
benefits are limited, the families' ability to maintain 
employment and support themselves may depend to a great extent 
on the availability of income supports, such as Medicaid, food 
stamps, subsidized child care, and the earned income credit. 
The recently expanded earned income credit, for example, can 
increase the incomes of qualified low-income families by as 
much as $2,271 for families with one child and $3,756 for 
families with two or more children.\21\ In some instances, 
states and localities have undertaken efforts to help these 
low-wage workers upgrade their skills to improve their job 
prospects.\22\ Federal and state policies and programs for 
assisting low-income working families are likely to play a 
critical role in the future success of welfare reform.
---------------------------------------------------------------------------
    \20\ See Gary Burtless, ``Employment Prospects of Welfare 
Recipients,'' the Work Alternative: Welfare Reform and the Realities of 
the Job Market, eds. Demetra Smith Nightingale and Robert H, Haveman 
(Washington, D.C.: The Urban Institute Press, 1995).
    \21\ The earned income credit is a refundable tax credit for 
qualified working people who have earned incomes below certain 
specified levels.
    \22\ See Rebecca Brown and others, Working Out of Poverty: 
Employment Retention and Career Advancement for Welfare Recipients 
(Washington, D.C.: National Governors' Association and HHS, 1998); Mark 
Elliott, Don Spangler, and Kathy Yorkievitz, What Next After Work 
First? (Philadelphia: Public/Private Ventures, spring 1998); and 
Brandon Roberts and Jeffrey D. Padden, Welfare to Wages: Strategies to 
Assist the Private Sector to Employ Welfare Recipients (Chevy Chase, 
Md.: Brandon Roberts and Associates, Aug. 1998). The Work Alternative: 
Welfare Reform and the Realities of the Job Market, eds. Demetra Smith 
Nightingale and Robert H. Haveman (Washington, D.C.: The Urban 
Institute Press, 1995).

What is happening to families who sought but were diverted from 
---------------------------------------------------------------------------
cash or other assistance?

    In recent years, welfare caseloads have dropped 
dramatically. While we have focused in this testimony on 
families who have left welfare, states' diverting eligible 
families from receiving cash assistance may have contributed to 
the large decline. Any comprehensive assessment of welfare 
reform and outcomes for families will need to explore state and 
local practices of diverting families from aid and the impact 
of these practices on families.

How effective are states in working with welfare recipients who 
are difficult to employ?

    Another issue that has emerged as states have experienced 
large caseload reductions is that many of the remaining 
recipients have multiple barriers to participation in work 
activities, such as mental health and substance abuse problems 
and domestic violence. As a result, even if economic conditions 
remain favorable, states' initial successes with moving 
applicants and recipients into employment will probably slow 
over time. In response, states will need to adjust their 
approaches to better enable families with a range of problems 
to take steps toward becoming more self-supporting. More 
research will be needed to identify promising approaches for 
working with these welfare families.

How would an economic downturn affect states' welfare reform 
programs?

    In many states, favorable economic conditions appear to 
have facilitated implementation of more work-focused 
approaches. It is not yet known, however, how states' welfare 
reform programs will perform under weaker economic conditions. 
For example, some adults who had previously left welfare for 
work could become unemployed. While they could be eligible for 
unemployment insurance, some could once again apply for cash 
assistance after their unemployment insurance ran out. 
Furthermore, if caseloads did increase significantly in a 
worsening economy, it is unclear what budgetary responses 
states would take in an environment of fixed federal TANF 
funding.
    While welfare agencies' increased emphasis on employment, 
the large number of welfare recipients transitioning into jobs, 
and caseload reductions indicate progress in meeting the goals 
of welfare reform, additional information from ongoing and 
future studies will help us better understand the evolving 
story of welfare reform and its impact on families and 
children.
    Madam Chair, this concludes my formal remarks. I will be 
happy to answer any questions you or other Members of the 
Subcommittee may have.

       Reports from States' Studies of Families Who Left Welfare

                               Appendix I

IDAHO

    Project Self-Reliance TAFI Participant Closure Study II, Idaho 
Department of Health and Welfare, spring 1998.

INDIANA

    The Indiana Welfare Reform Evaluation: Assessing Program 
Implementation and Early Impacts on Cash Assistance, Abt Associates, 
Inc., Aug. 1997.

    The Indiana Welfare Reform Evaluation: Who Is On and Who Is Off? 
Comparing Characteristics and Outcomes for Current and Former TANF 
Recipients, Abt Associates, Inc., Sept. 1997.

    The Indiana Welfare Reform Evaluation: Program Implementation and 
Economic Impacts After Two Years, Abt Associates, Inc., and The Urban 
Institute, Nov. 1998.

IOWA

    Iowa's Limited Benefit Plan: Summary Report, Mathematica Policy 
Research, Inc., and the Institute for Social and Economic Development, 
May 1997.
    A Study of Well-Being Visits to Families on Iowa's Limited Benefit 
Plan, Mathematica Policy Research, Inc., June 1998.

KENTUCKY

    From Welfare to Work: Welfare Reform in Kentucky, Welfare Reform 
Evaluation No. 1, Center for Policy Research and Evaluation, Urban 
Studies Institute, University of Louisville, Jan. 1998.

LOUISIANA

    Exiting Welfare: The Experiences of Families in Metro New Orleans, 
School of Social Work, Southern University at New Orleans, June 1998.

MARYLAND

    Life After Welfare: An Interim Report, University of Maryland 
School of Social Work, Sept. 1997.

    Life After Welfare: Second Interim Report, University of Maryland 
School of Social Work, Mar. 1998.
MICHIGAN

    A Study of AFDC Case Closures Due to JOBS Sanctions April 1996, 
Michigan Family Independence Agency, May 1997.

MONTANA

    Montana's Welfare Reform Project: Families Achieving Independence 
in Montana FAIM, February 1998 Update, Montana Department of Public 
Health & Human Services, Feb. 12, 1998.

NEW JERSEY

    WFNJ (TANF) Sanction Survey, New Jersey Department of Human 
Services, July 2, 1998.

NEW MEXICO

    Survey of the New Mexico Closed-Case AFDC Recipients July 1996 to 
June 1997, Final Report, University of New Mexico, Sept. 1997.

OKLAHOMA

    Family Health & Well-Being in Oklahoma: An Exploratory Analysis of 
TANF Cases Closed and Denied October 1996 to November 1997, Oklahoma 
Department of Human Services, Sept. 1998.

PENNSYLVANIA

    TANF Closed-Case Telephone Survey, Pennsylvania Department of 
Public Welfare, Mar. 1998.

SOUTH CAROLINA

    Survey of Former Family Independence Program Clients: Cases Closed 
During January Through March 1997, South Carolina Department of Social 
Services, Division of Program Quality Assurance, Mar. 3, 1998.

    Survey of Former Family Independence Program Clients: Cases Closed 
During July Through September 1997, South Carolina Department of Social 
Services, Division of Program Quality Assurance, Oct. 9, 1998.

TENNESSEE

    Summary of Surveys of Welfare Recipients Employed or Sanctioned for 
Non-Compliance, University of Memphis, Mar. 1998.

WASHINGTON

    Washington's TANF Single Parent Families Shortly After Welfare: 
Survey of Families Which Exited TANF Between December 7 and March 1998, 
Washington DSHS Economic Services Administration, July 1998.

    Washington's TANF Single Parent Families After Welfare, Washington 
DSHS Economic Services Administration, Jan. 1999.

WISCONSIN

    Post-Exit Earnings and Benefit Receipt Among Those Who Left AFDC in 
Wisconsin, Institute for Research on Poverty, University of Wisconsin-
Madison, Aug. 17, 1998.

    Post-Exit Earnings and Benefit Receipt Among Those Who Left AFDC in 
Wisconsin, Institute for Research on Poverty, University of Wisconsin-
Madison, Oct. 30, 1998.

    Survey of Those Leaving AFDC or W-2 January to March 1998, 
Preliminary Report, State of Wisconsin, Department of Workforce 
Development, Jan. 13, 1999.

WYOMING

    A Survey of Former POWER Recipients (Personal Opportunities With 
Employment Responsibilities), Western Management Services, LLC, for 
Wyoming Department of Family Services, May 1998.
      

                                


              Appendix II.--Information on Seven States' Studies of Families Who Have Left Welfare
----------------------------------------------------------------------------------------------------------------
                                                           Follow-up
   Categories of families and  time   --------------------------------------------------     Data collection
           periods involved                   Frequency                  Timing                 method(s)
----------------------------------------------------------------------------------------------------------------
Indiana:
Families receiving AFDC May 1995 to    Once...................  12 to 18 months after    Telephone survey
 May 1996 who subsequently left AFDC.                            enrollment.
Maryland:
Families who left TANF Oct. 1996 to    Quarterly..............  Up to 12 months after    Review of
 Sept. 1997.                                                     exit.                    administrative data
Oklahoma:
Families who left or were denied TANF  Once...................  2 to 18 months after     Telephone survey
 Oct. 1996 to Nov. 1997.                                         exit or denial.
South Carolina: \1\
Families with a household member       Once...................  9 to 14 months after     Telephone survey and
 required to seek employment who left                            exit.                    some in-person
 welfare July to Sept. 1997 and had                                                       interviews
 not returned at time of follow-up.
Tennessee:
Families who lost TANF benefits Jan.   Once...................  Approximately 3 months   Telephone survey
 to Oct. 1997 because they did not                               after exit.
 comply with program rules and TANF
 families whose head was employed
 full-or part-time Feb. to Oct. 1997.
Washington: \1\
Single-parent families who left TANF   Once...................  2 to 4 months after      Telephone survey and
 Apr. to July 1998                                               exit.                    review of
                                                                                          administrative data
Wisconsin:...........................
Single, female-headed families who     Five times.............  Quarterly for 5          Review of
 left AFDC July 1995 to July 1996.                               quarters after family    administrative data
                                                                 left welfare.
Families who left TANF Jan. to Mar.    Once...................  5 to 10 months after     Telephone survey and in-
 1998 and did not return prior to                                exit.                    person interviews
 survey.
----------------------------------------------------------------------------------------------------------------
\1\ Both South Carolina and Washington reported on groups of families who had left welfare earlier. We included
  the most recent sample in our summary.
Source: GAO analysis of state studies.

      

                                

    Chairman Johnson of Connecticut. Thank you very much.
    Ms. Weinstein.

    STATEMENT OF DEBORAH WEINSTEIN, DIRECTOR, FAMILY INCOME 
               DIVISION, CHILDREN'S DEFENSE FUND

    Ms. Weinstein. Madam Chair, thanks very much for the 
opportunity to testify about the impact of the recent welfare 
changes on children and families.
    The Children's Defense Fund and the National Coalition for 
the Homeless sought to answer the question we are asking today: 
welfare to what, in a report we jointly issued last November.
    We found that work is up, but that above poverty work is 
rare. Looking just at people with earnings in March 1998 who 
had received welfare in the previous year, seven out of ten had 
below poverty wages.
    More than half had earnings below three-quarters of the 
poverty line, that is, below $185 a week for a family of three. 
Their earnings are so low because their work is unstable.
    Wisconsin, with some of the most favorable outcomes 
reported, found that almost one-third of those surveyed had 
spent from a few days to 3 months at their best job, and the 
typical was 34 weeks.
    Some families leave welfare because they are unable to 
comply with program requirements and earn little, if at all. 
Families with severe barriers to employment are likely to fail 
to meet work requirements. In Minnesota case managers found 
that families being penalized were twice as likely as other 
welfare families to have serious mental health problems, five 
times as likely to have family violence problems. They will 
leave welfare because they are unable to comply with the rules, 
not because they found success in the job market.
    Some families leaving welfare for below-poverty wages or 
for no wages experience hardship trying to secure necessities. 
In Wisconsin, about one-third of families leaving welfare 
reported not being able to buy food at some point in their 
first months off welfare, compared to one in five while they 
still received benefits. Reports from Indiana, Kansas, South 
Carolina, New York show children and adults doing without 
health care.
    Projects in six States reported that one-quarter of former 
welfare recipients were doubling up in housing to save money.
    Poverty matters, and please remember that while the overall 
poverty level is down, the number of children living below half 
the poverty line, less than $6,400 a year for a family of 
three, rose from 1995 to 1997. As for combined household 
earnings, those are also low. Only one in five recent welfare 
recipients, counting all household earnings, were above poverty 
in March 1998. And that is the lowest level in 5 years.
    The hardships exacted by continued child poverty have 
significant costs. Poor children are more likely to have health 
problems, to fall behind in school, to experience mental health 
problems and antisocial behavior. That is why lifting families 
out of poverty ought to be our national goal for real reform. 
So far, for most families, we are not succeeding.
    In order to stabilize families' work and raise their 
children out of poverty, families need work supports--help like 
Medicaid or food stamps, child care, transportation help and 
wage subsidies. But while this Subcommittee and Congress 
intended that such supports should continue for low-wage 
workers who no longer receive TANF, in many States eligible 
families are not receiving these vital benefits. Families USA 
earlier this month issued a report documenting that by 1997, 
675,000 people lost Medicaid and became uninsured. Three out of 
five were children.
    Families often do not know they are eligible for help. In 
South Carolina, over half of former recipients did not know 
about child care aid. Food stamp use is declining far more than 
poverty is.
    Far too often, our new world of welfare includes stories 
like one mother, Jo, who got a job and then was wrongfully 
denied Medicaid and food stamps. It took 4 months of phone 
calls for Jo to get a fair hearing and for Medicaid to be 
restored for herself and her children. During the period 
without health coverage, Jo came down with pneumonia and other 
illnesses. She went without proper treatment, had to borrow 
money to fill prescriptions. That is not a recipe for stable 
employment.
    But Michelle Crawford was luckier. She was struggling with 
domestic violence. Her welfare-to-work program let her combine 
community service with mental health counseling. Then, she was 
placed in a training program to operate a plastics molding 
machine and got a job at $7.40 an hour. She got the services 
she needed to overcome barriers to employment that, if ignored, 
might have made it impossible for her to work. Programs like 
Project Match in Chicago, among others, allow that kind of 
broad range of activities to count as work as part of a 
multistep plan toward work readiness.
    What next steps are needed? The Subcommittee should 
continue, as it plans wonderfully, to hold oversight hearings 
about whether families are getting the package of work supports 
they need, to identify good practices as well as determine 
whether State practices or omissions are resulting in eligible 
families doing without benefits. Hearing more about good 
outreach efforts or transportation plans or comprehensive 
service delivery systems would help States to do what Madam 
Chair Johnson memorably exhorted them to do: to spend the 
money.
    Based on what is learned from hearings, the Subcommittee 
should consider future legislative changes to broaden allowable 
work activities to help families with severe employment 
barriers, reward States to do a good job with outreach, 
penalize States that do not; permit the State-Federal time 
limit clock to stop for families who combine partial TANF aid 
with low-wage work, approve the extension of the welfare-to-
work programs and increase funding for a seamless web of child 
care services.
    The real goal of welfare reform is not accomplished until 
supports are in place to make work possible and to make work 
pay for parents trying to raise their children out of poverty. 
There is still much more work to do.
    Thank you.
    [The prepared statement follows:]

Statement of Deborah Weinstein, Director, Family Income Division, 
Children's Defense Fund

    Thank you very much for the opportunity to testify about 
what the Children's Defense Fund (CDF) has learned so far about 
the impact of new welfare policies on families with children. 
CDF is a privately supported charity that advocates for the 
interests of low income children, and that monitors closely the 
effect of welfare changes on child well-being. CDF receives no 
federal grants or contracts. In my testimony today, I am not 
representing any entity that receives federal grants or 
contracts.
    The growing body of research about the lives of families in 
the aftermath of the 1996 welfare law illuminates three broad 
categories of families leaving welfare. One, a distinct 
minority, includes parents who are able to secure above-poverty 
wages sustained over time. The second category includes 
families who have worked after leaving welfare, but at 
unstable, below-poverty jobs. A third category includes 
families who have left welfare because parents were unable to 
comply with various program requirements, and who earn little 
if at all. Families certainly move from one to another of these 
categories, but considering them separately is important if we 
are to encourage policies that increase the likelihood and 
stability of work, and to prevent children and families from 
being abandoned when severe barriers block their ability to 
succeed.
    Some, like Jo, get jobs (in her case, a temporary one) and 
are wrongfully denied the Medicaid and food stamp help they 
need. After four months of fruitless phone calls, Jo was 
granted a fair hearing and finally received Medicaid for her 
children and herself. Jo and all her children suffer from 
asthma. During their period without health coverage, Jo came 
down with pneumonia, and an illness that resulted in a lowered 
immune system. She went without proper medical treatment, and 
had to borrow money to fill urgently needed prescriptions.\1\ 
Jo's experience is not a recipe for stable employment.
    For others, the inability to find or keep work has 
devastating consequences. A social service provider in Roxbury, 
Massachusetts reported a sharp increase in homelessness among 
the mothers with whom she works. She attributed this to 
problems in keeping jobs. ``When it doesn't work out for a 
variety of reasons, they lose housing, and can't get back on 
the system. Hearing from the women, once you're off the system, 
everything falls apart.'' \2\ Families unable to keep jobs need 
help to keep everything from falling apart: they need services 
to overcome barriers to employment, and supports to keep their 
families from destitution.
    The Children's Defense Fund and the National Coalition for 
the Homeless collaborated on an analysis of more than 30 
studies of the new law's effects on families with children. We 
looked at national data collected from the Census Bureau's 
Current Population Survey and at many state and local surveys. 
Our report, Welfare to What: Early Findings on Family Hardship 
and Well-Being, compiled data to document these central themes:
    Work is up. Of those who received welfare in 1997, almost 
one-third had a job in March of 1998, according to annual 
surveys conducted by the Census Bureau. In contrast, only 20.7 
percent of those who had received any welfare in 1989 had a job 
in March 1990.\3\
    But above-poverty work is rare. By March 1998, only 8 
percent of individuals who had received welfare benefits in the 
previous year had weekly wages above the three-person poverty 
line, barely up from 6 percent in March 1990. That figure 
includes all individuals who had received welfare assistance in 
the previous year, whether or not they had any earnings. But 
even looking solely at the subset of that group with earnings, 
only 29 percent had above-poverty wages. Seventy-one percent 
did not. While employment increased from 1990 to 1998, two-
thirds of the growth in employment among individuals who had 
received welfare in the previous year involved jobs paying far 
below poverty levels.
    The National Governors' Association (NGA) compiled findings 
from state surveys of the effects of changing welfare policies. 
They found that ``most of the jobs (held by former recipients) 
pay'' between $5.50 and $7 an hour ... not enough to raise a 
family out of poverty.''\4\
    Not everyone who leaves welfare works. State surveys have 
tended to show that about half to two-thirds of families that 
leave welfare find employment. (These proportions are higher 
than the Census data because the state surveys include only 
families who have left welfare. The Census data looks at a 
sample of people who had received welfare in the previous year, 
and who may or may not still receive benefits during the March 
period of the annual survey.) That means about one-third to 
one-half do not.
    Employment barriers drive some families off the caseload. 
Many of the families without work leave welfare because they 
are judged not to have complied with program rules. Some fail 
to show up for required appointments or fail to bring proper 
documentation, and are dropped from the caseload. Others are 
penalized for not meeting work requirements. In Minnesota, case 
managers found that penalized families were twice as likely as 
other welfare families to have serious mental health problems 
and five times as likely to have family violence problems.\5\ 
Similarly, a 1997 Michigan study found much higher rates of 
physical or mental health problems, domestic violence, and 
lower rates of school completion among mothers on welfare 
compared to women in national samples. The more barriers to 
employment like these faced by mothers, the less likely they 
were to work 20 hours or more per week.\6\ Since work 
requirements imposed by the 1996 welfare law are at least 20 
hours per week, those with barriers to employment will be far 
more likely to face reduced or terminated cash benefits.

                            Poverty matters

    Some treat the news of the dramatic reduction in welfare 
caseloads as proof that the new welfare policies are a success. 
We ask ``welfare to what?'' because we believe that success 
cannot be judged until we know what is happening to children 
and families when they leave welfare. The overwhelming evidence 
so far is that families who leave welfare do not escape poverty 
even when they work. For some families leaving welfare, poverty 
and/or specific experiences of hardship have even increased. 
Our national commitment to welfare reform ought to promise more 
than that to families with children.
    It is troubling that despite years of economic recovery, 
child poverty has edged downwards only slightly, and that one 
in five American children remains poor. It is even more 
disturbing that the number of children living below half the 
poverty line increased by almost 400,000 from 1995 to 1997 \7\ 
(half the poverty line for a family of three was less than 
$6,400 a year in 1997). This increase in extreme poverty 
occurred in female-headed working families, a group likely to 
be heavily drawn from families moving from welfare to work. 
Changes in welfare policies are not the only reason for the 
increase in deep poverty among children in working single-
mother families, but it is fair to say that those changes have 
played a part.
    We emphasize persistent and deepening poverty among 
children because the consequences of continued deep poverty are 
grave: \8\
     A baby born to a poor mother is more likely to die 
before its first birthday than a baby born to an unwed mother, 
a high school dropout, or a mother who smoked during pregnancy.
     Poor children are more likely to have health 
problems, to suffer from stunted growth or unstable living 
arrangements, and to score lower on reading, math, and 
vocabulary tests, compared to non-poor children.
     Poor children are more likely to fall behind in 
school and to complete fewer years of education.
     New research in 1998 showed that the longer 
children are poor in the pivotal first years of childhood, the 
more signs they show of anxiety-depression and anti-social 
behavior later in their childhood years.
    In other words, the hardships exacted by continued child 
poverty have significant costs. The goal of real reform of the 
nation's welfare system ought to be to help as many families as 
possible move out of poverty through work. So far, the findings 
from around the nation show that for most families, we are not 
succeeding. But that goal is attainable, if we learn from 
families' real experiences trying to work and care for their 
children, and offer them the supports they need.

                         Barriers to Employment

    Michelle Crawford was struggling with domestic violence and 
the break-up of her marriage. Her welfare-to-work program let 
her combine community service and several months of mental 
health counseling. Then it placed her in a training program to 
operate a plastics-molding machine. Within eight months, she 
had found a job at $7.40 an hour.\9\
    If Michelle had simply been required to work, without any 
help to deal with her problems, she might have been 
overwhelmed. Her family's aid might have been terminated for 
failure to comply with the work requirement. They would have 
added to the caseload reduction statistics, but their departure 
would not have represented a ``success.''
    States like Minnesota and Michigan have led the way by 
revealing that severe problems including disability, 
illiteracy, and family violence are frequently at the root of 
parents' inability to work or comply with program rules. Still, 
Michelle was one of the few lucky ones: most states have not 
moved effectively to identify the presence of such barriers and 
to provide services to overcome them. The Children's Defense 
Fund sent a written survey to all fifty states in 1997, to 
learn what procedures and services were in place to assist 
families with barriers to employment. We received 37 responses, 
and we conducted follow-up telephone interviews with certain 
states. States were still in early stages of planning their 
welfare programs, so the information we collected, while 
raising important questions for follow-up, is preliminary.
    Many states have some policy accommodations for families 
with employment barriers. Twenty-three out of the 37 states 
surveyed reported waiving time limits for families facing 
severe barriers. Twenty-two reported waiving work requirements, 
while 21 reported some form of case management targeted to 
families with severe barriers. But adequate training of 
caseworkers to help them identify the presence of barriers was 
rare, as was a coordinated approach across state agencies to 
refer parents to appropriate services. Most states reported 
that they had procedures to provide such follow-up, but a 
majority either had no knowledge of whether there were 
sufficient services available to meet the need, or reported 
that the services were insufficient. Our survey plus other 
research in this area suggests that only a relative handful of 
families with special needs are receiving case management and 
services to allow them to make progress. Others are at risk of 
penalties for failure to satisfy state requirements without 
having barriers to compliance identified or addressed.
    As long as states do not identify and serve families to 
enable them to overcome their barriers to employment, sanctions 
and case closures for failure to comply with various state 
policies will continue to hit them hard. HHS data on case 
closures for these reasons are not fully informative, because 
states do not code reasons for case closures uniformly. But the 
wide variation reported by states is troubling. In Florida, 
Mississippi, and South Carolina, for example, more than one-
fifth of closed cases in those states occurred through 
sanctions; in Indiana, sanctions accounted for more than two-
fifths of closures. Michigan, New Jersey, and Wisconsin 
terminated more than half of their closed cases because of 
``state policy''--for example, failing to show up for 
appointments or to provide required documentation.\10\

        Work Experiences for Families: Low Wages, Unstable Work

    Findings across state surveys are quite uniform in showing 
low earnings and less than full-time, year-round employment. In 
Maryland, employed former recipients earned an average of 
$2,439 in their second quarter of work--equivalent to less than 
$9,800 a year, or about three-quarters of the three-person 
poverty line in 1997.\11\ A Cuyahoga County (Cleveland) Ohio 
study found that only one in four former TANF recipients who 
left the rolls in the last quarter of 1996 showed as much as 
$3,000 in quarterly earnings a year later. Nearly half showed 
no quarterly earnings at all.\12\
    A more recent study tracking Wisconsin's W-2 participants 
who left welfare between January and March 1998 contained some 
of the most favorable work outcomes revealed so far. But these 
findings turn out so favorably in part because families who 
left welfare and then returned during the six-to nine-month 
period of the survey are excluded from the analysis. In effect, 
those who did not succeed are taken out of the calculations. 
Eighty-three percent of those who did not return to welfare had 
worked at some point since leaving W-2, and 62 percent had jobs 
at the time of the survey. Those leaving the rolls were asked 
to describe their best current or previous job. The average 
wage reported was $7.42 and the typical (median) wage was $7.00 
an hour, with an unusually high 40-hour typical work week. The 
typical number of weeks at the ``best'' job was 34, with 31 
percent of those employed at the time of the survey having 
spent a few days to three months at their best job. The 
analysis does not show what typical annual earnings were; 
without that information, it is impossible to know how sporadic 
or steady these employment experiences are.\13\
    The recently released two-year evaluation of Milwaukee's 
New Hope Project shows that low-income individuals want to 
work, but that their work is not steady. These voluntary 
participants, who received earnings supplements, child care, 
and health coverage if they worked at least 30 hours per week, 
worked on average 5.9 quarters out of a possible eight, with 
earnings far below the federal poverty level. New Hope was 
successful in increasing the amount of work and earnings levels 
among its participants (compared to a control group), but its 
findings illustrate the difficulty that low-wage workers have 
in sustaining employment over time.\14\
    The data from states is still very sketchy in tracking 
families' job histories over time. Policymakers need to note 
that survey findings showing that individuals have worked at 
some point during a year may mask sporadic work histories. 
Hourly wage rates are an important indicator, but tell a very 
incomplete story without taking into account quarterly and 
annual total earnings.

              Low-income Families: Experiences of Hardship

    Whether they find employment or not, troubling numbers of 
families experience difficulty in paying for food, housing, 
utilities, or health care. These findings occur both in local 
surveys of families seeking aid at social service agencies and 
in state studies tracking samples of families leaving welfare.
    Food: In South Carolina, almost one in five (19 percent) 
families were unable to purchase food at some point in their 
first few months off welfare, compared to 8 percent while still 
receiving welfare benefits.\15\ Strikingly, despite its strong 
economy, the situation was worse in Wisconsin. There, about 
one-third of all families leaving welfare (32 percent) reported 
not being able to buy food at some point in their first months 
off welfare, compared to one in five (22 percent) while they 
still received benefits.\16\
    Early findings from the Children's Defense Fund's Community 
Monitoring Project (in seven sites in six states) showed that 
38 percent of families who sought help from participating 
social service agencies and who had lost welfare benefits in 
the preceding six months reported going without food for one or 
more days in the past month. Twenty-seven percent of families 
currently receiving welfare were experiencing the same 
inability to buy food.\17\
    The recently released study by NETWORK (compiled from 59 
Catholic social service agencies in ten states) documents 
hardship among working and non-working poor families (many of 
whom do not receive public assistance benefits). NETWORK found 
that 41 percent of working parents surveyed at the social 
service agencies reported that their children were eating less, 
close to the 44 percent of non-working parents reporting such 
hardship for their children. Twenty-two percent of employed 
parents said their children were going hungry, compared to 25 
percent of non-working parents.\18\
    Housing: The Community Monitoring Project's seven-site 
survey found that 25 percent of former welfare recipients 
reported that they had doubled up in housing to save money 
(compared to 15 percent of current recipients).
    In South Carolina, 26 percent of former welfare recipients 
had fallen behind in rent or mortgage, compared to 17 percent 
of the same group while they were still receiving benefits.
    There is no question that the nation's shortage of 
affordable housing causes problems for families whether or not 
they have ever been on welfare. Urban Institute's and Child 
Trends' Snapshots of America's Families, drawn from extensive 
interviews with a large national sample, found that among 
parents with incomes below 200 percent of the federal poverty 
guidelines, 28 percent reported being unable to pay for rent, 
mortgage, or utilities at some point in the preceding twelve 
months.\19\ If more than one-quarter of families with incomes 
up to about $26,000 (twice the poverty level for a three-person 
family) fall behind in housing expenses, it is not surprising 
that families leaving welfare for below-poverty wages struggle 
with their housing costs.
    An early Wisconsin study showed increased homelessness 
among families as the state implemented its new welfare 
policies in advance of the federal law change. In La Crosse 
County, researchers found that the number of children sleeping 
in Salvation Army shelters shot up by 50 percent from 1994 to 
1996, a period during which the number of homeless men rose by 
only one percent.\20\
    In Atlanta, a survey of homeless families with children 
found that almost half (46 percent) had lost TANF benefits in 
the previous 12 months. In contrast, only one-fifth (20 
percent) of families in public housing had lost TANF in the 
previous year.\21\
    Health care: In Indiana, 35 percent of the children of 
former recipients had no public or private health 
insurance.\22\ Among those working about six months after 
leaving welfare in New York City, 46 percent reported no health 
insurance coverage.\23\
    In Johnson County, Kansas, in a study of 202 Catholic 
Community Services clients, 40 percent of former welfare 
recipients told researchers they had found it harder to get 
health care for their children during the preceding six months. 
Only half as many (20 percent) of current recipients reported 
similar difficulties.\24\ And nearly one in ten South Carolina 
former recipients (9.7 percent) reported that someone in their 
home had been sick or hurt and was unable to obtain medical 
care, more than three times as many as the 2.8 percent 
reporting similar hardship when they were still receiving 
welfare.\25\

                 Failure to Receive Basic Work Supports

    When the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 was being debated, proponents 
assumed that families that no longer received cash benefits 
would still receive Medicaid and subsidized child care at least 
for a transitional period if their incomes remained low, and 
that low-income families would continue to receive food stamps 
indefinitely. But far too often, families leaving welfare do 
not receive these basic supports. The inability to secure food 
and health care described above is directly related to the loss 
of food stamps and Medicaid by families, although many remain 
eligible for these benefits.
    Medicaid: As of 1997, 1.25 million people with incomes 
below 200 percent of the federal poverty line lost Medicaid due 
to welfare policy changes, according to a reported issued this 
month by Families USA. Of those, 675,000 did not secure other 
health insurance. Sixty-two percent of the uninsured were 
children.\26\
    The Families USA findings are consistent with reports from 
states that families do not realize they are still eligible for 
Medicaid, or are wrongly dropped from Medicaid by states when 
TANF benefits are terminated. In South Carolina, 60 percent of 
former recipients did not know that a parent could get 
transitional Medicaid. North Carolina announced it would 
investigate whether welfare workers erroneously stopped 
Medicaid help for 24,000 children who were not receiving 
Medicaid coverage two months after their families lost welfare 
help.\27\
    Food Stamps: From 1996 through November 1998, food stamp 
caseloads declined by 21 percent.\28\ Some of this drop can be 
attributed to the improving economy, but much occurred either 
because eligibility was restricted in the 1996 welfare law or 
because eligible families did not know they could receive this 
help.
    Legal immigrants and able-bodied childless individuals lost 
food stamps under the 1996 law. A March 1998 study of Latino 
and Asian legal immigrants, conducted by medical researchers in 
California, Texas, and Illinois, found high levels of food 
insecurity and hunger. Fully 79 percent of the households 
surveyed reported that they had cut back on nutritional quality 
and quantity of food (seven times the rate of food insecurity 
in the general population). \29\ Congress has restored food 
stamp benefits for some legal immigrants, and should complete 
the restoration this session.
    Eligibility changes and the improved economy do not explain 
the entire drop in the use of food stamps. Despite the fact 
that federal law requires that those who seek food stamps 
receive an application immediately, when families are diverted 
from receiving TANF, they sometimes do not realize they can get 
food stamps. Sometimes, as in the case of New York City, they 
are actively discouraged. New York has been cited by the USDA 
and in federal court for violations of food stamp and Medicaid 
law.\30\ Similarly, when families leave TANF, they may not 
realize they continue to be eligible for food stamps and 
Medicaid, or they may be unable to get to the welfare office 
during business hours to be recertified every month or quarter, 
depending on state practice.
    Child Care: Child care is one of the most basic work 
supports, but it is not uniformly available. There is evidence 
that parents do not always know about the possibility of 
subsidized child care. In South Carolina, over half of former 
recipients in the survey cited above were unaware of child care 
assistance (although those who were currently employed were 
somewhat better informed). In Milwaukee, a bureaucratic mix-up 
resulted in up to 60 percent of child care placements begun by 
one agency being canceled by another.
    Some parents have been steered towards inexpensive and at 
times inadequate child care. In Utah, families were directed to 
seek free child care before being offered a subsidy. In 
Maryland, caseworkers were sent a memo telling them to 
encourage parents to use cheaper, informal care. That policy 
was rescinded, but workers were not informed of the change.
    Many states do not provide a continuum of child care 
available not only to those trying to get off welfare but also 
to low-or moderate-income families who cannot work without 
affordable child care. As of January 1998, about half the 
states had to turn away eligible low-income working families or 
put them on waiting lists. Texas, for example, had a waiting 
list of 30,000 families.\31\

                          Promising Approaches

    These findings demonstrate that earnings alone rarely place 
a family on a route to self-sufficiency. In order to find and 
keep jobs, and in order to raise their children in safety and 
out of poverty, parents need access to a menu of work supports. 
Some states and localities are providing some or all of the 
necessary supports: child care, health coverage, continued 
access to food stamps, transportation, education/training, job 
placement, services to overcome barriers, effective child 
support collection, and wage supplements among them. Few areas 
offer a comprehensive approach where all of the needed supports 
are readily at hand. But good efforts in each of these areas 
separately exist, and can point the way for states to develop 
the comprehensive menu of items that families need.
    Lifting families out of poverty through work and work 
supports. The New Hope Project in Milwaukee provided a set of 
services and benefits that helped families to increase 
earnings, increase work, and increase income. New Hope was a 
three-year demonstration offering poor families or individuals 
health coverage, child care, and a wage supplement if they 
worked at least 30 hours per week. New Hope promised to 
supplement low earnings if work plus state and federal earned 
income tax credits were not enough to raise the worker and his/
her family out of poverty. The project offered community 
service jobs if participants could not work the required hours 
through regular employment. New Hope's project representatives 
offered referrals to services, guidance about New Hope's rules, 
and personal encouragement. An evaluation after two years 
showed significant earnings gains, particularly for individuals 
who had not worked full-time at the project's outset, and who 
had one barrier to employment such as an arrest record or long-
term unemployment. These participants earned 30 percent more 
over two years, compared to the control group. Another benefit 
emerged from New Hope: boys in New Hope participant families 
did much better in school performance and behavior than did the 
control group boys. New Hope resulted in more work, higher 
earnings, and benefits for children. But it did not provide 
solutions for everyone. It was less beneficial for participants 
who had multiple barriers to employment, perhaps because New 
Hope was not set up to handle such problems. New Hope saw its 
approach as necessary, but not in all cases sufficient, to meet 
the needs of low-income people.\32\
    Illinois also helps to make work pay for families earning 
low wages. Families working at least 25 hours per week at low 
wages qualify for partial cash assistance benefits. Since 
Illinois uses state dollars to pay benefits for these wage-
earning families, their aid does not count towards the federal 
time limit.
    Helping families to overcome barriers. Project Match in 
Chicago has been a pioneer in providing services to families 
with multiple barriers to employment. Individualized plans are 
modified on a monthly basis, recognizing that in some cases 
many steps may be necessary to prepare a parent for employment. 
Helping at a child's school, arranging for child support 
enforcement help, or signing up for therapy are among the 
activities that may be steps in an individual's plan. Project 
Match also maintains contact with participants as they move in 
and out of employment or training, helping them to make the 
transition to the next job or other activity.
    While more than twenty states offer waivers of work or time 
limits for families with severe barriers, far too few accept 
the broad range of productive activities in the Project Match 
individual plans as fulfilling the work requirement. Vermont 
and Utah are two states that do allow parents who need to take 
these steps to count them towards the work requirement.
    Making sure that eligible families get food stamps, 
Medicaid, or CHIP. At minimum, states must do a better job of 
reaching out to poor and near-poor families that do not receive 
TANF, so that they know about health coverage and nutrition 
help for which they are eligible. Georgia's Right From the 
Start Medicaid Project placed 185 eligibility workers in 
clinics, hospitals, etc., to sign up children and/or families 
eligible for Medicaid.\33\ South Dakota's food stamp caseload 
dropped less than the national average from 1994 to 1998. This 
may be because the state directs families to food stamps and 
Medicaid when they divert them from receiving TANF cash 
assistance.
    Investing in work supports. Just a few examples: \34\ 
Maine's Parents as Scholars program provides work-study 
opportunities for up to 2,000 post-secondary students who would 
otherwise have received TANF. Illinois, Minnesota, North 
Carolina, and Arizona are among the states that have committed 
state funds to expand the supply of low-cost child care. Rhode 
Island has guaranteed child care for all working families below 
185 percent of poverty, regardless of welfare status. The 
Suburban Job-Link Corporation in Chicago operates a fleet of 
eight-passenger buses to transport inner city workers to 
suburban jobs. Ten states provide state earned income tax 
credits, of which six are refundable. Maryland is one example 
of a state that both instituted its own refundable credit and 
engages in outreach to inform low-wage workers about the 
federal and state credits.

                            Recommendations

    Successful efforts towards welfare reform require 
initiatives that can help families in differing stages of work 
readiness. For those who can work, supports are needed to 
increase work stability while protecting children through 
above-poverty income and quality child care. For families with 
significant barriers to employment, services are needed that 
can overcome barriers. Parents' efforts to progress beyond 
their employment barriers should count toward meeting their 
work requirements. Among the actions the Subcommittee on Human 
Resources of the House Committee on Ways and Means should take 
to spur improved performance for families at all stages of work 
readiness:
     The Subcommittee should continue to hold oversight 
hearings about whether families are getting the package of work 
supports they need. Since success in welfare-to-work is so 
dependent on children and families getting supports such as 
Medicaid or CHIP, food stamps, and child care, oversight would 
be especially important to determine whether state practices or 
omissions are resulting in eligible families doing without 
these benefits. Such hearings would serve a very useful purpose 
if they identified good state practices, including effective 
outreach to ensure that eligible families get the services or 
benefits they need. Since the research summarized here 
demonstrates the need for a comprehensive menu of services 
ranging from education/training to protection from family 
violence to transportation help, hearings should illuminate 
effective approaches that both (1) provide those services and 
(2) guide families to the help most appropriate for them. 
Current or former TANF recipients, advocates, and service 
providers, as well as state or county officials, would be 
important voices to include in oversight hearings.
     Looking ahead, the findings from such oversight 
should lead to consideration of future federal legislation to 
encourage good practices and protect families. Some 
possibilities include (1) broadening allowable work activities 
to include activities that help parents to overcome work 
barriers, as part of an overall self-sufficiency plan; (2) 
penalizing states with poor track records in reaching eligible 
families with Medicaid, food stamps, and child care benefits 
(for example, by denying high performance bonuses to those 
states), and specifying rewards for good achievements in these 
areas; (3) restoring food stamp eligibility for legal 
immigrants; and (4) permitting the federal time limit clock to 
stop for families combining partial TANF aid and low-wage work.
     The Subcommittee should approve extension of the 
Welfare-to-Work program, with funding of $1 billion in FY 2000, 
including the changes sought in H.R. 1482, the Welfare-to-Work 
Amendments of 1999. The Welfare-to-Work program can provide job 
training and placement for non-custodial fathers whose children 
need their support. Further, the program will become an 
increasingly important part of the menu of work supports as 
more families approach time limits.
     Child care funding should be increased in order to 
provide a seamless web of support to families leaving welfare, 
and to low-income working families trying hard to avoid it.
    With the necessary supports, and when jobs are available, 
work is possible for a majority of parents on welfare. The 
Subcommittee is right to look beyond the mere numbers of 
caseload decline to see what life is like for the families with 
children who leave Temporary Assistance for Needy Families. The 
goal of welfare reform is not accomplished until supports are 
in place to make work possible, and to make work pay for 
parents trying to raise their children out of poverty. The 
evidence so far is clear, on this at least: there is much more 
work to do.

                                Endnotes

    \1\ Families USA Foundation. (1999, May). Losing Health Insurance: 
the Unintended Consequences of Welfare Reform. Washington, DC: 
available on the internet at http://www.familiesusa.org/medicaid.htm
    \2\ Cahill, S. (1999, March). Tip of the Iceberg or Bump in the 
Road: The Initial Impact of Welfare Reform in Dorchester. Boston: 
Massachusetts Human Services Coalition.
    \3\ Census Bureau. Unpublished data from the March 1989 Current 
Population Survey. Tabulations by the Children's Defense Fund; cited in 
Sherman, A., Amey, C., Duffield, B., Ebb, N., & Weinstein, D. (1998). 
Welfare to What: Early Findings on Family Hardship and Well-Being. 
Washington, DC: Children's Defense Fund and National Coalition for the 
Homeless.
    \4\ National Governors' Association, National Council of State 
Legislatures, and American Public Welfare Association. (1998, April). 
Tracking Recipients After They Leave Welfare. Washington, DC: Author. 
Available on the Internet at www.nga.org.
    \5\ Minnesota Family Investment Program, Minnesota Department of 
Human Services. (1995). Survey of Participant Barriers to Employment.
    \6\ Danziger, S., Corcoran, M., Danziger, S., Helfin, C., Kalil, 
A., Levine, J., Rosen D., Seefeldt, K., Siefert, K., & Tolman, R. 
(1998, October). Barriers to the Employment of Welfare Recipients. 
Paper presented at the Annual Meeting of the Association for Public 
Policy Analysis and Management, New York. Ann Arbor: Work, Poverty 
Research and Training Center, School of Social Work, University of 
Michigan.
    \7\ Information retrieved from the Internet, http://stats.bls.gov, 
Feb 19, 1999. See the Selective Access System, Bureau of Labor 
Statistics, Current Population Survey. Calculations by the Children's 
Defense Fund.
    \8\ The first three of the following findings are citations from 
Sherman, A. (1997). Poverty Matters. Washington, DC: Children's Defense 
Fund. Available on the Internet, www.childrensdefense.org/
fairstart.html. The fourth is a citation from Shanahan, M., Davey, A., 
& Brooks, J. (1998). Dynamic Models of Poverty and Psychological 
Adjustment Through Childhood (Unpublished paper). University Park: 
Pennsylvania State University. Available on the Internet, http://
www.jcpr.org/shanahan.html.
    \9\ New York Times. (1998, October 18). Welfare Experiment: Easy to 
Say, Difficult to Do.
    \10\ Administration for Children and Families, U.S. Department of 
Health and Human Services. (1998). Characteristics and Financial 
Circumstances of TANF Recipients. Washington, DC: Author.
    \11\ University of Maryland, School of Social Work. (1998, March). 
Life After Welfare: Second Interim Report. Baltimore: Author.
    \12\ Coulton, C., et al. (1998). Briefing Report No. 9803, Work 
After Welfare: Employment in the 1996 Exit Cohort, Cuyahoga County. 
Cleveland, OH: Center on Urban Poverty an Social Change.
    \13\ Wisconsin Division of Economic Support. (1999, January). 
Wisconsin Works: Survey of Those Leaving AFDC or W-2, January to March 
1998 (Preliminary Report). Madison: Wisconsin Department of Workforce 
Development.
    \14\ Bos, H., Huston, A., Granger, R., Duncan, G., Brock, T., & 
McLoyd, V. (1999, April) New Hope for People With Low Incomes: Two Year 
Results of a Program to Reduce Poverty and Reform Welfare. New York: 
Manpower Demonstration Research Corporation.
    \15\ South Carolina Department of Social Services. (1998, June). 
Survey of Former Family Independence Program Clients: Cases Closed 
During October Through December 1997. Columbia: Author.
    \16\ Wisconsin Division of Economic Support.. (1999, 
January).Wisconsin Works: Survey of Those Leaving AFDC or W-2, January 
to March 1998 (Preliminary report). Madison: Wisconsin Department of 
Workforce Development.
    \17\ Sherman. A., Amey, C., Duffield, B., Ebb, N., & Weinstein, D. 
(1998, November). Welfare to What: Early Findings on Family Hardship 
and Well-Being. Washington, DC: Children's Defense Fund.
    \18\ NETWORK. (1999). Poverty Amid Plenty: The Unfinished Business 
of Welfare Reform. Washington, DC: Author.
    \19\ Urban Institute and Child Trends, Inc. (1999). Snapshots of 
America's Families: A View of the Nation and 13 States from the 
National Survey of America's Families. Available on the Internet, 
http://newFederalism.urban.org/nsaf/index.htm.
    \20\ Whitman, L. (1998, March). In Our Own Words: Mothers' Needs 
for Successful Welfare Reform. Parkside, WI: Women and Poverty Public 
Education Initiative.
    \21\ Task Force for the Homeless. The Impact of Welfare Reform on 
Homelessness in Metropolitan Atlanta, and Task Force for the Homeless. 
The Impact of Welfare Reform on Homelessness.
    \22\ Fein, D. (1997, September). The Indiana Welfare Reform 
Evaluation: Who Is On and Who is Off? Cambridge, MA: Abt Associates.
    \23\ Bush, A., Desai, S., & Mead, L. Leaving Welfare: Findings From 
a Survey of Former New York City Welfare Recipients.
    \24\ Smith, C. (1997, December). Monitoring Welfare Reform: A 
Report to the Community on the Impact of Welfare Reform in Johnson 
County. Overland Park, KS: United Community Services of Johnson County.
    \25\ South Carolina Department of Social Services. (1998, June). 
Survey of Former Family Independence Program Clients: Cases Closed 
During April Through June 1997.
    \26\ Families USA Foundation. (1999, May). Losing Health Insurance: 
the Unintended Consequences of Welfare Reform. Washington, DC. 
Available on the Internet at http://www.familiesusa.org/medicaid.htm.
    \27\ Greenberg, M. (1998). Medicaid and the Uninsured. Washington, 
DC: Kaiser Family Foundation.
    \28\ Food and Nutrition Services Division, Department of 
Agriculture. (1999, February). Food Stamp Program Actual Participation, 
November 1998. Washington, DC: Author.
    \29\ Physicians for Human Rights. (1998, May). Medical group finds 
high prevalence of food insecurity and hunger among United States legal 
immigrant population. Retrieved from the Internet, www.phrusa.org/
research.html, February, 1999.
    \30\ Swarns, R. New York Times. (1998, November 8). Welfare 
Policies of the City Face Federal Scrutiny.
    \31\ Adams, G., Schulman, K., & Ebb, N. (1998) Locked Doors: States 
Struggling to Meet the Child Care Needs of Low-Income Working Families. 
Washington, DC: Children's Defense Fund.
    \32\ Bos, H., Huston, A., Granger, R., Duncan, G., Brock, T., & 
McLoyd, V. (1999, April) New Hope for People With Low Incomes: Two Year 
Results of a Program to Reduce Poverty and Reform Welfare. New York: 
Manpower Demonstration Research Corporation.
    \33\ Welfare Information Network, Issue Notes, Vol. 1, No. 10. 
(1997, December). Also see the National Governors' Association, http://
www.nga.org/Pubs/IssuesBriefs/1997/970304HealthCare.asp. For a 
thoughtful discussion of ways states can ensure families continue to 
get Medicaid, see Liz Schott and Cindy Mann, Assuring That Eligible 
Families Receive Medicaid When TANF Assistance Is Denied Or Terminated. 
Washington, DC: Center on Budget and Policy Priorities.
    \34\ Sherman, A., Amey, C., Duffield, B., Ebb, N., and Weinstein, 
D. (1998, November). Welfare to What: Early Findings on Family Hardship 
and Well-Being. Washington, DC: Children's Defense Fund and National 
Coalition for the Homeless.
      

                                

    Chairman Johnson of Connecticut. Thank you very much, 
Deborah, from the Children's Defense Fund.
    And now Mr. Granger, senior vice president, Manpower 
Demonstration Research Corp., New York.

STATEMENT OF ROBERT C. GRANGER, SENIOR VICE PRESIDENT, MANPOWER 
     DEMONSTRATION RESEARCH CORPORATION, NEW YORK, NEW YORK

    Mr. Granger. Thank you, Madam Chair. Good afternoon, I 
guess, and thank you for the opportunity to testify.
    In mid-April, the Associated Press reporter filed a story 
on the recent report chronicling the 2-year followup to a study 
that we released on the New Hope Project. Her story was picked 
up in about 135 papers around the country. And the headlines 
tell you and other Subcommittee Members something about this 
project's findings and the public's reaction to them.
    ``Program Assists Working Poor'' the Daily, Oklahoman; and 
``Wisconsin Program Found to Help the Working,'' Baltimore Sun. 
Somewhat in contrast, another reporter at the Milwaukee Journal 
Sentinel focused on how New Hope affected the next generation. 
``New Hope Families Have Less Stress: Study Finds Improved 
School Work.'' And then, indeed, in further contrast, more 
recently in the New York Times on the front page above the 
fold, ``Project to Rescue Needy Stumbles Against the 
Persistence of Poverty.''
    Now, while headlines are unquestionably written to get 
attention, these are all frankly reasonable responses to the 
results that we have released so far. The sample of headlines 
also sends I think an important message to Members of this 
Subcommittee and to others about the strengths and limits of 
policies meant to support the working poor.
    I am Bob Granger, senior vice president, at MDRC. We are a 
nonprofit research firm dedicated to improving the well being 
of low-income people and the effectiveness of public policies 
and programs through rigorous research. I direct the evaluation 
of something called the New Hope Project. That evaluation team 
includes MDRC staff and prominent university-based scholars.
    Having submitted the executive summary of this report for 
the record, I am only going to highlight four things in my few 
moments.
    First, a package of earnings supplements, health and child 
care benefits, and full-time jobs opportunities can 
substantially increase the work effort, earnings, and income of 
those who are willing to work full time, but need assistance to 
do so. That is true even in an environment of falling 
caseloads, a hot economy, and assertive welfare policies. It is 
going to be truer in harder times.
    Second, such changes in income, employment, and family 
supports can have a significant and positive effect on family 
well being and on how the children are doing in those families.
    Third, that the supports for the working poor may lead to 
modest reductions in work effort, especially among those that 
are already working lots of hours but happen to be poor. That 
can be minimized, but it is going to occur.
    And that finally, most of those who applied to New Hope 
remain poor 2 years and reliant on some form of public subsidy 
to make ends meet.
    The New Hope program was designed and operated by a 
community-based organization in Milwaukee. It was premised on a 
simple assumption: those people who work full time in this 
country should not be poor. They should at least be at the 
level of poverty. It provided four things: an earnings 
supplement, when combined with the EIC got you, on your 
earnings up to the level of poverty for your household, at 
least.
    Two, if you needed child care assistance, it provided child 
care assistance.
    Three, if you needed health care support, it provided 
subsidized health care support.
    And finally, if you could not find full-time employment in 
the unsubsidized regular employment sector, it provided on a 
short-term basis wage paying community service jobs in 
nonprofit organizations--jobs meant to be a bridge to 
unsubsidized employment.
    Let me tell you about the key findings on employment 
earnings and how the kids were doing.
    The report distinguishes between two groups of people that 
came forward. One large group of people were not working full 
time. They were poor. Some of them were not working at all. 
Some of them were working part time. In that group, this set of 
supports increased their earnings. It increased their 
employment rates. It increased their family incomes, and, in 
fact, it allowed for only the earnings-related income for a 
significant proportion of the families in that group on 
earnings-related income alone to move their families above the 
poverty threshold.
    On the other hand, there is another third of the group that 
came forward: those people who in this country are working full 
time, but are still poor. Within this group, the New Hope 
supports caused some reduction in work effort. This was not 
cutting back from 30 to 20 hours a week. This was giving up the 
over 50-hour second job. It was also giving up the extra 
overtime. And as we looked more closely, it seemed that some of 
those reductions in time were coursing through the families in 
ways that the public and this Subcommittee might find 
interesting.
    Let me focus on New Hope's effects on the children. A 
critical aspect of this and eight other studies that MDRC is 
currently doing involves taking a look at the question that you 
have posed: What is happening to the kids?
    In this study, we found that, using surveys of parents, 
children, and their teachers, that the children in these 
families were doing better on school achievement, were having 
reductions in behavior problems, were having increases in 
positive behavior. And as close as we can come to it, it seems 
that the possible pathways are a combination of more economic 
resources for some of these families through these supports, 
better formal child care and other kinds of afterschool 
programs for some of these families, decreased stress and 
increased family well being among some of these families, and 
that all of those things together accumulate and seem to be 
showing up in how the kids are doing.
    In summary, supports for work such as those embedded in New 
Hope help some people earn their way out of poverty. As with 
any approach, they are not going to be a panacea.
    Second, that supports for work can create important, 
positive nonmonetary effects for families and children.
    Third, policymakers who want to increase the economic and 
emotional well being of families should focus some of their 
efforts, as I have heard today, on health insurance and 
improving child care resources.
    And fourth, concerns that support for work may reduce some 
work effort are, in fact, founded, but such reductions can be 
minimized and society may benefit in nonmonetary ways.
    No single study is definitive. It would be wise to 
replicate this kind of work in other environments. But it is 
reasonable to assume that in an environment with a less 
favorable labor market, less State attention to work, that 
these initial results may be, in fact, more encouraging. And 
these initial results are encouraging, indeed.
    Thank you very much.
    [The prepared statement and attachment follow:]

Statement of Robert C. Granger, Senior Vice President, Manpower 
Demonstration Research Corporation, New York, New York

    Good morning and thank you for the opportunity to testify.
    On April 15, 1999 Laura Meckler of the Associated Press 
filed a story on the recent report chronicling the two-year 
follow-up of participants in the New Hope Project. Her story 
was picked up by approximately 135 papers on April 16-18. The 
headlines tell you something about the project's findings and 
the popular reaction to them. ``Program Assists Working Poor'' 
(Daily Oklahoman, April 16, 1999); ``Wisconsin Program Found To 
Help Working Poor'' (Baltimore Sun, April 16, 1999).
    Another reporter at the Milwaukee Journal Sentinel focused 
on how New Hope affected the next generation: ``New Hope 
Families Had Less Stress: Study Finds Improved School Work.'' 
(Mary Beth Murphy, Milwaukee Journal Sentinel, April 16, 1999).
    More recently, the New York Times announced, on the first 
page above the fold: ``Project To Rescue Needy Stumbles Against 
the Persistence of Poverty,'' (Jason DeParle, New York Times, 
May 15, 1999).
    While headlines are unquestionably written to grab 
attention, these are all reasonable responses to the interim 
results from this project. The sample of headlines also sends 
important signals to this Subcommittee and others about the 
strengths and limits of policies meant to support the working 
poor.
    I am Bob Granger, a Senior Vice President at the Manpower 
Demonstration Research Corporation (MDRC). MDRC is a non-profit 
research firm dedicated to improving the well-being of low 
income people and the effectiveness of public policies and 
programs through rigorous research. We have been pursuing that 
mission for the last 25 years. I direct the New Hope evaluation 
team, which includes MDRC staff and prominent university-based 
scholars. The work is being done with funding from private 
foundations as well as the City of Milwaukee, the State of 
Wisconsin, the Federal Department of Health and Human Services, 
and the National Institute of Child Health and Development. The 
current report will be followed by a long-term follow-up in 
three more years.
    Having submitted the Executive Summary of our recent report 
for the record (attached), I want to briefly highlight four 
messages:
    1. A package of earnings supplements, health and child care 
benefits, and full-time job opportunities can substantially 
increase the work effort, earnings, and income of those who are 
willing to work full-time, but need assistance to do so. This 
is true even in an environment of falling caseloads, a hot 
economy, and assertive welfare policies. It may be more true in 
harder times.
    2. Changes in income, employment, and family supports can 
have significant, positive effects on family well-being and 
child outcomes.
    3. Supports for the working poor may lead to modest 
reductions in work effort among those already working a lot of 
hours. This can be minimized, but it is likely to occur.
    4. Most of those who applied to New Hope remain poor two 
years later and reliant on some public subsidy to make ends 
meet.
    The New Hope Program. New Hope was designed and operated by 
the New Hope Project, Inc., a community-based nonprofit 
organization in Milwaukee. Focused on any adult who was poor 
and living in two low-income areas in Milwaukee, it offered 
participants an earnings supplement designed to lift them out 
of poverty, when combined with state and federal Earned Income 
Credits, provided they worked at least 30 hours a week. The 
program also offered these workers low-cost health insurance 
and child care if they needed these services. For participants 
who could not find full-time work, the program offered access 
to wage-paying ``community service jobs''--short-term 
subsidized jobs in nonprofit agencies, designed to be stepping 
stones into regular employment. With the help of New Hope 
staff, participants could access any or all of these services 
on an as-needed basis for a three-year period. The program 
operated in a flexible, client-focused, and respectful 
environment. Designed as a demonstration project, New Hope 
began operating in 1994, enrolling approximately 1,360 people 
through December 1995. These adults were assigned at random to 
one of two groups: the New Hope program group who were eligible 
to receive New Hope benefits and the control group, who 
differed from the program group only in that they could not 
receive New Hope benefits. The evaluation team collected 
follow-up data on both groups and the differences between 
outcomes for the two groups are attributable to New Hope.
    Key Findings on Employment and Income. The report 
distinguishes between two groups of New Hope participants. Two-
thirds of the participants were not working full time when they 
entered the study. Among these participants, and compared to 
the control group that was not in New Hope, the program reduced 
by half the number who were never employed during the two years 
of the study (from 13 percent for the control group to less 
than 6 percent for New Hope participants). Over the two years, 
participants earned $1,389 more than the control group, a 
difference of more than 13 percent. (This does not include the 
earnings supplement.) Their incomes were $2,645 (also 
approximately 13 percent) more than the control group's. As a 
result, more of these participants had earnings-related income 
that was enough to raise their households above the federal 
poverty level, although the majority remained poor, primarily 
because they did not consistently work full time (and could 
receive New Hope benefits only when they did). Also, many did 
not apply for the state and federal Earned Income Credits, even 
if they qualified. Many used community service jobs, and most 
of those who used these jobs found regular unsubsidized 
employment afterwards. In short, for this group New Hope showed 
how policies can increase work by making work pay and offering 
opportunities where they are needed.
    One-third of the participants were working full time when 
they entered the study. Thus, New Hope had little opportunity 
to increase employment among such workers. However, the program 
did not leave them unaffected. Having the support of the 
program, these workers somewhat reduced their work hours 
(compared to the hours worked by the control group), mostly by 
cutting back on overtime and second jobs. New Hope improved 
parent-child relations in the families in this group, possibly 
because these families were better able to balance work and 
family life. New Hope did not increase the income of 
participants who already were employed full time, but it 
reduced these participants' use of public assistance, cutting 
second-year AFDC and Food Stamp benefits by $719, or more than 
30 percent, compared to control group levels.
    New Hope's Effects on Children. A critical aspect of this 
study is its complementary focus on assessing the well-being of 
families and children, capturing outcomes that are not easily 
measured in dollars and cents. Using surveys of parents, 
children, and teachers, compared to the control group, parents 
in New Hope had less stress, fewer worries, and better parent-
child relations. As judged by teachers, there were substantial 
positive effects on children's classroom behavior, school 
performance, and social competence. These effects occurred 
primarily for boys, who also showed reductions in problem 
behavior and higher educational and occupational expectations. 
(On these measures, girls generally do better than boys, 
leaving less room for improvement. New Hope brought the 
outcomes of boys and girls closer together.)
    There are several possible pathways to the improved child 
well-being. From our analyses, the causes appear to be a 
combination of more economic resources for some families, 
better parenting for others, the general improvements in adult 
well-being, and increased child participation in formal child 
care, after-school programs, and structured activities such as 
sports and clubs.

                               In Summary

     Supports for work, such as those embedded in New 
Hope, help some people earn their way out of poverty. As with 
any approach based on employment, they are not a panacea.
     Supports for work can create important, positive, 
non-monetary effects for families and children.
     Policy makers who want to increase the economic 
and emotional well-being of low-income families should focus 
some of their efforts on providing health insurance and 
improving child care resources.
     Concerns that supports for work may reduce work 
effort for some people appear accurate, but such reductions can 
be minimized and society may benefit in non-monetary ways.
    No single study is definitive and it would be wise to test 
the effects of similar interventions in other locales. But it 
is reasonable that the effects might be larger in an 
environment with a less favorable labor market or less state 
attention to encouraging work. This makes these initial results 
encouraging indeed.
    Thank you for the opportunity to share my thoughts. I look 
forward to your questions and reactions.
      

                                


Executive Summary--New Hope for People with Low Incomes: Two-Year 
Results of a Program to Reduce Poverty and Reform Welfare, by Hans Bos, 
Aletha Huston, Robert Granger, Greg Duncan, Tom Brock, Vonnie McLoyd, 
with Danielle Crosby, Christina Gibson, Veronica Fellerath, Katherine 
Magnuson, Rashmita Mistry, Susan Poglinco, Jennifer Romich, Ana Ventura

               Executive Summary and Policy Implications

    This is the second report from the evaluation of New Hope, 
an innovative project developed and operated in Milwaukee, 
Wisconsin, that has sought to improve the lives and reduce the 
poverty of low-income workers and their families. New Hope 
relied on several components and services to increase the 
income, financial security, and access to full-time employment 
of low-income workers in two areas of Milwaukee. In these 
target areas, all low-income workers (and those not employed, 
but willing to work full time) were eligible to receive New 
Hope benefits. New Hope began operating as a demonstration 
program in 1994, enrolling volunteers during an intake period 
that lasted through December 1995.
    Reflecting its broad eligibility rules, New Hope served a 
diverse group of low-income people. For example, 37.5 percent 
were employed at enrollment, and 84.9 percent had been employed 
full time during their adult work life (with the average 
longest full-time job lasting about three years). While 59.8 
percent were never married and 18.3 percent were separated, 
divorced, or widowed, 21.8 percent were married. Men made up 
28.4 percent of the full sample, and 37.1 percent of the sample 
were not receiving AFDC, Food Stamps, General Assistance, or 
Medicaid at enrollment. Participants, on average, were 32 years 
old.
    New Hope offered access to four distinct program 
components: an earnings supplement to raise participants' 
income to the poverty level for their household, affordable 
health insurance, child care subsidies, and a full-time job 
opportunity for those unable to find one. (Part-time jobs also 
were available for those who needed to supplement an existing 
part-time job.) In return, the program required its 
participants to work full time (at least 30 hours a week) and 
to document their work hours in order to qualify for program 
benefits. Program representatives (``project reps'') would meet 
frequently with participants to collect their wage stubs, 
verify their full-time employment, and discuss any needs or 
concerns related to participants' employment. Thus, the project 
combined a requirement to work full time with the necessary 
supports and guarantees to enable its beneficiaries to meet 
this requirement.
    New Hope operated outside the existing public assistance 
system, though it was designed to be replicable as government 
policy. It was funded by a consortium of local, state, and 
national organizations interested in work-based antipoverty 
policy, as well as by the State of Wisconsin and the federal 
government. It was designed and operated by a community-based 
nonprofit organization, the New Hope Project, and thus provides 
insights into the role nongovernmental agencies can play in 
income support.
    One goal of the project was to provide credible information 
to policymakers on the implementation, effectiveness, and costs 
of the New Hope approach. To this end, New Hope contracted with 
the Manpower Demonstration Research Corporation (MDRC) to 
conduct an independent evaluation, which began with the start 
of enrollment. In order to provide a reliable test of the 
difference the program made, 1,357 applicants were randomly 
assigned in a lottery-like process to either a program group 
(with access to New Hope services) or a control group (with no 
access to New Hope services, but able to seek other services). 
The difference in the two groups' outcomes over time (for 
example, their differences in employment rates or average 
earnings) are the observed effects or--in the language of 
evaluations--``impacts'' of the program. The 678 participants 
(that is, the program group members) and their households were 
entitled to New Hope's benefits and services for a period of 
three years, and the last enrolled participants ended their 
spell of New Hope eligibility in December 1998. To determine 
New Hope's effectiveness, this report compares the experiences 
of these participants during the first two years of their 
eligibility with the experiences of the 679-member control 
group.
    The previous report presented findings on recruitment, 
program operations, participation patterns, and participant 
characteristics.\1\ Shorter working papers were prepared to 
convey early impressions from focus groups with participants, 
to describe the neighborhood context of New Hope, and to report 
on the program's work opportunity component: community service 
jobs, or CSJs.\2\ The present report is the first to show how 
the program changed the experiences and lives of New Hope 
participants during their first two years in it. A subsequent 
report will cover the last year of the program and two further 
years of follow-up.
---------------------------------------------------------------------------
    \1\ Thomas Brock, Fred Doolittle, Veronica Fellerath, and Michael 
Wiseman, Creating New Hope: Implementation of a Program to Reduce 
Poverty and Reform Welfare (New York: MDRC, 1997).
    \2\ Dudley Benoit, The New Hope Offer: Participants in the New Hope 
Demonstration Discuss Work, Family, and Self-Sufficiency (1996); 
Michael Wiseman, Who Got New Hope? (1997); and Susan Poglinco, Julian 
Brash, and Robert Granger, An Early Look at Community Service Jobs in 
the New Hope Demonstration  (1998). All were published by MDRC.
---------------------------------------------------------------------------
    This report addresses important policy questions pertaining 
to the lives of low-income workers and their families, the 
choices they make in the labor market, and the effects of 
financial and other supports on their material and overall 
well-being.
    Following a brief summary of the report's key findings, the 
Executive Summary introduces the New Hope Project, its context, 
and key policy questions. It then presents the report's 
findings in detail and concludes with policy implications. 

                           Findings in Brief

    Overall, New Hope increased employment and earnings, 
leading in turn to increased income during the first year of 
follow-up and enabling more low-income workers to earn their 
way out of poverty. New Hope's effects on employment and 
income, coupled with its provision of health insurance and 
child care subsidies, set off a chain of beneficial effects for 
participants' families and their children. On average, New Hope 
participants were less stressed, had fewer worries, and 
experienced less material hardship (particularly that 
associated with lack of health insurance) than control group 
members. Participants' children had better educational 
outcomes, higher occupational and educational expectations, and 
more social competence; boys also showed fewer behavior 
problems in the classroom.
    Analyses found that New Hope's effects varied with the 
employment status of its participants at random assignment. On 
the one hand, those working part time or not at all needed to 
either find a full-time job or increase their hours of work to 
qualify for earnings supplements, health insurance, and child 
care subsidies. New Hope project staff assisted them in this 
process, sometimes by offering CSJs when they were needed. On 
the other hand, those working full time (30 hours or more) 
could take advantage of program benefits immediately, without 
having to increase their work effort. Indeed, New Hope allowed 
these participants to make ends meet without excessive overtime 
or simultaneously holding multiple jobs.
    Among those not employed full time at random assignment 
(about two-thirds of the sample), New Hope increased \3\ both 
work effort and earnings. Compared to the control group, New 
Hope reduced by half the number who were never employed during 
the two years of follow-up (from 13 percent for the control 
group to less than 6 percent for New Hope participants). 
Program group members who were not employed full time at random 
assignment worked in 5.5 out of 8 quarters (three-month periods 
covered by the earnings data for this report) compared with 4.8 
quarters for control group members. The program increased 
average two-year earnings of the program group (including those 
who had no earnings) by $1,389, from $10,509 for the control 
group to $11,898 for the program group. This increase in 
earnings, boosted by New Hope's earnings supplement and the 
Earned Income Credits (EICs), resulted in a substantial income 
gain of $2,645 over the two-year follow-up period, which made 
it possible for many of these participants to work their way 
out of poverty.
---------------------------------------------------------------------------
    \3\ In discussion of impacts ``increases'' and ``decreases'' refer 
to differences between the program and control groups, not to change 
over time in outcomes for the program group.
---------------------------------------------------------------------------
    CSJs were important in bringing about the employment effect 
for participants who were not employed full time at random 
assignment. However, it is unlikely that the entire employment 
effect was due to this program component. For that to be the 
case, one would have to assume that no CSJ user would have 
worked if there had been no CSJs. The data suggest the 
opposite, because most CSJ users transitioned into unsubsidized 
employment once their eligibility for CSJ employment ended, and 
many CSJ users had both CSJ earnings and earnings from 
unsubsidized employment in the same quarter.
    For the remaining one-third of the sample (those employed 
full time at random assignment), there were modest reductions 
in hours worked and earnings. These participants were less 
likely to work more than 40 hours a week and did not experience 
net income gains, partly because New Hope reduced their receipt 
of AFDC and Food Stamps. In the second year of follow-up, New 
Hope's effect on income for this group was a reduction of 
$1,148, or 7.5 percent.
    The evaluation includes a ``Child and Family Study'' (CFS) 
of family dynamics and outcomes for children. Focusing on 
sample members with children aged 3-12 at the two-year follow-
up--89.8 percent of whom were women, and 69.4 percent of whom 
were receiving AFDC at enrollment--this study found evidence 
that New Hope increased the use of center-based child care and 
other structured out-of-school activities. Among those employed 
full time at random assignment, New Hope increased the quality 
of parent-child interactions. This may reflect participants' 
greater ability to achieve a sustainable balance between work 
and parenting by cutting down on long work hours.
    To capture possible effects on participants' children, the 
CFS obtained permission to survey teachers of these children. 
From the teacher reports, it appears that New Hope had 
substantial positive effects on the classroom behavior, school 
performance, and social competence of children in the sample. 
These effects occurred primarily for boys, who also showed less 
problem behavior and higher educational and occupational 
expectations than boys in the control group.
    This report has important implications for policymakers and 
program developers who are concerned with improving the lives 
of low-income working families. The analyses show that a 
package of earnings supplements, health and child care 
benefits, and full-time job opportunities can substantially 
increase the work effort, earnings, and income of those who are 
willing to work full time, but need assistance to do so. Such 
effects are not limited to nonworkers and welfare recipients, 
but extend to many different groups of low-income people.
    On the other hand, the analyses show that earnings 
supplements may lead to modest reductions in work effort among 
those already working full time or more than full time. 
Interestingly, New Hope shows that such reductions can be kept 
to a minimum and can actually benefit the families involved to 
the extent that these reductions limit excessive overtime or 
multiple jobs.
    Finally, the New Hope evaluation shows how modest changes 
in income, employment, and family resources can have 
significant effects on noneconomic outcomes, such as family 
well-being and child outcomes. A narrow focus on economic 
outcomes may understate the effects of interventions like New 
Hope, whose benefits extend beyond those outcomes. 

                          The New Hope Project

    New Hope offered low-income workers in two areas of 
Milwaukee an opportunity to use a comprehensive set of 
integrated program services, designed to address longstanding 
problems associated with the low-wage labor market and 
delivered in a small-scale, friendly, and respectful 
environment. The program had broad eligibility rules, applying 
to any adult in the target areas (two zip codes) whose income 
was below 150 percent of the federal poverty level and who was 
willing to work full time. It was not limited to welfare 
recipients or families with children. The program had four 
components, which could be used separately or in any 
combination suiting program participants. For persons who 
worked at least 30 hours a week, New Hope provided the 
following:
     Earnings supplements, which were designed to 
complement the state and federal Earned Income Credits (EICs)--
refundable tax credits for low-income working families--in 
order to raise the income of full-time workers to the poverty 
level. In designing the structure of these supplements, program 
developers tried to make sure that additional work effort or 
higher wages would always increase participants' overall 
income. This was done by reducing the proportion of each 
additional dollar earned that is lost to taxes or reduced 
benefits. In other words, program participants were able to 
keep more of their earnings gains, giving them an incentive to 
increase their hours of work and look for better-paying jobs. 
At the same time, the supplements raised their income to the 
poverty level. On average, the 78.0 percent of program group 
members who received any earnings supplements received $1,165 
over the two-year follow-up period. (The average for all 
participants was $911.)
     Affordable health insurance, which was available 
to any participant who did not already have access to such 
coverage through an employer or government-provided health 
plan. Lack of such insurance is a continuing source of concern 
for low-wage workers, one they often cite as an impediment to 
their trying to leave welfare for work. New Hope required a 
copayment, increasing with income. This service was used by 
47.6 percent of participants. (New Hope spent an average of 
$1,464 per program group member over two years.)
     Child care subsidies, which were available to 
parents of children under age 13. The cost of child care is a 
major concern to low-income workers and their families. 
Although there are public child care subsidies for welfare 
recipients who go to work, the programs that provide these 
subsidies sometimes have long waiting lists. Low-income workers 
who have not recently received welfare have an even harder time 
accessing such subsidized child care. New Hope allowed 
participants to find their own licensed child care arrangements 
and then paid most of the expenses involved (the copay 
increased with a family's income). This service was used by 
27.9 percent of New Hope participants (38.8 percent of program 
group members with children). (New Hope spent an average of 
$2,376 per participant over two years.)
    For those willing to work 30 hours a week, but unable to 
find such full-time employment, New Hope provided:
     Community service jobs (CSJs), which were wage-
paying positions with local nonprofit organizations, available 
to those who wanted to work full time, but could not find a 
full-time job on their own. CSJs were not automatic: 
Participants had to apply for them and could lose their CSJ if 
their attendance or performance on the job was poor. Each CSJ 
was limited to six months in duration, but participants could 
work in CSJs for a total of 12 months. CSJs were used by 32.0 
percent of all participants. On average, participants who 
worked in a CSJ earned $3,000 during the two-year follow-up 
period. (The average for all participants was $945.) 

                            Program Context

    The New Hope evaluation unfolds in the context of rapidly 
changing labor markets and welfare environments, both in 
Milwaukee and across the United States. In many ways, the New 
Hope Project foreshadowed some of these changes, and in some 
instances it directly influenced state and local welfare 
policy. During the years covered by this evaluation, active 
social policy and a generally vibrant economy combined to make 
work easier to find and more rewarding for many low-income 
people in Wisconsin. Since New Hope was first conceived, 
unemployment in Milwaukee County has fallen from 6.5 percent to 
as low as 3.6 percent, the minimum wage has increased from 
$4.25 to $5.15, and the state and federal EIC programs have 
been expanded twice. Since the end of the two-year follow-up 
period covered in this report, state Medicaid programs are 
being expanded to include low-income working adults even if 
they do not receive public assistance.
    At the same time, the state's welfare system has been 
dismantled, replaced with a work-based system of public 
assistance called Wisconsin Works (W-2). It began during the 
last four months of the period covered in this report. More 
relevant to the findings presented here was a program preceding 
W-2, entitled Pay for Performance, which required work and 
work-related activities of every welfare recipient in 
Wisconsin. All these changes in state welfare policy took place 
within the larger context of federal welfare reform. The 
landmark 1996 federal welfare law ended the 60-year-old Aid to 
Families with Dependent Children (AFDC) program and its 
entitlement to cash welfare assistance, placed a five-year 
limit on most families' receipt of federally funded cash 
welfare, and required states to place an increasing share of 
their caseload in work or work-related activities. States now 
have major responsibility for designing programs for the poor, 
and they receive block grants of federal Temporary Assistance 
for Needy Families (TANF) funds.
    The Milwaukee economy, and the policy changes that affect 
the supports available to members of both the program and 
control groups, makes this a conservative test of New Hope. The 
changes have diminished the difference between what New Hope 
offers and what is available outside New Hope, making it more 
difficult for the project to create a net difference. 

            Policy Lessons: What Can We Learn from New Hope?

    The New Hope Project offers an opportunity to learn about 
relevant and innovative approaches to the ongoing problems of 
low-income workers. Following are some of the questions that 
are particularly important in the current post-AFDC policy 
debate about helping families, supporting work, and increasing 
self-sufficiency:
     With supports that make work pay, will low-income 
people work their way out of poverty? How much will various 
incentives induce people to work? Is the problem that people 
need some support, or are they just unable or unwilling to 
work?
     Can such supports foster full-time work? Many low-
income people work part time or intermittently. With better 
supports, will they work full time?
     Is it possible to make work pay without reducing 
work effort? The New Hope program supplemented the earnings of 
its participants, which in theory is a good way of providing 
financial support to low-income families because it rewards 
work instead of idleness. However, past research involving 
income subsidies for low-income workers (implemented without 
providing work incentives like those in New Hope) has left a 
legacy of discouraging findings, showing that such subsidies 
reduced work effort. Could New Hope do better?
     Should interventions like New Hope be targeted at 
those not already working full time? Inclusiveness was an 
important aspect of the New Hope program, seeking to serve not 
just welfare recipients or people with poor work histories. 
However, what is the price of inclusiveness? Does it 
dramatically increase program cost? Do those already employed 
benefit from the program? Does being inclusive have other 
benefits?
     Does subsidized employment work? New Hope provided 
CSJs to participants who could not find full-time work on their 
own. This is another promising approach to helping low-income 
workers who may have a hard time finding their way into the 
labor market. But does it work? Do these jobs increase 
employment or do they just offer an easy alternative for people 
who otherwise would have found a regular job on their own? Did 
they set up and maintain a pool of public service jobs that are 
more than ``make work''?
     How much do health insurance and child care 
subsidies matter? New Hope offered health insurance and child 
care subsidies. The need for these services is widely 
documented and proclaimed. But would low-income workers use 
them? Would they appreciate these benefits as making a 
difference in their lives?
     How important is the nature of staff-participant 
interactions? New Hope operated on a small scale and was based 
in the target areas it served. Staff developed a more positive 
relationship with participants and interacted with them more 
frequently than is typical in welfare offices. Does such an 
approach affect the quality of program operations and the use 
of program services?
     If more people work and their income increases, is 
their family life improved? Poverty and low-wage work can be 
stressful for families. Is it possible to improve family life 
by supporting employment and increasing available income? Could 
increased employment have negative consequences for family 
well-being?
     How do make-work-pay policies affect children? The 
American public wants those parents who can work to do so. But 
the public remains concerned about the children in poor 
families. How might these children be affected by policies that 
support work? 

                     Limitations of This Evaluation

    In this demonstration, the New Hope offer was available to 
program participants alongside the existing welfare system. 
While New Hope designers thought of the program as an 
alternative to this system, many participants continued to use 
public assistance or Medicaid, either along with or instead of 
New Hope benefits. Therefore, the demonstration does not fully 
answer the question: What if we replaced the current welfare 
system with a work-based set of supports like those available 
in New Hope? Rather, it addresses the question: What if we 
added the supports available in New Hope on top of existing 
policies and programs? In addition, the demonstration provides 
a definitive answer to that question only for persons like the 
volunteers who enrolled in New Hope and who live in labor 
markets like Milwaukee. 

                        Theory and Expectations

    The design of the New Hope program was guided both by 
practical consideration of the challenges facing low-income 
workers and by theoretical expectations about how people 
respond to financial incentives. As mentioned above, New Hope 
was targeted primarily at specific problems inherent in the 
low-wage labor market, such as ``poverty wages,'' lack of 
health care coverage, intermittent unemployment, and lack of 
good, affordable child care. However, as the program was being 
developed, the expected behavioral responses of those who would 
benefit from program services were very much part of the 
discussion. As noted above, prior evaluations of other 
interventions targeted at low-income workers had found that 
income subsidies could significantly reduce the work effort of 
some workers, even if the same programs enticed others to seek 
employment. This phenomenon, discussed more extensively in 
Chapter 4 of the report, is potentially costly to society and 
to participants. In the case of New Hope, these considerations 
led program designers to limit benefits to those working at 
least 30 hours a week. This ensured that any reductions in work 
effort would be small, and it also provided an added incentive 
to those not already working full time to make an effort to 
reach a higher level of employment.
    The goals and expectations of program designers were not 
limited to participants' earnings and income. In addition to 
those ``economic'' outcomes, they targeted other aspects of 
participants' lives, including their access to health insurance 
and affordable child care and their overall financial 
situation. By guaranteeing a full-time job and by supplementing 
participants' earnings, New Hope was expected to reduce the 
stress and financial worries that are common among low-income 
workers. By allowing some workers to reduce overtime and drop 
second jobs, the program might free up more of their time for 
personal development and family time. And by exposing sample 
members' children to subsidized, good-quality child care and 
after-school care, the program might improve their well-being 
and school readiness, just as the expected increase in family 
income and greater financial stability might benefit these 
children. 

                  Data, Samples, and Research Methods

    This report relies on a number of data sources for its 
estimates of New Hope's effects. All in all, 1,357 applicants 
to the program were included in the study and randomly assigned 
to program or control group status: 678 to the program group 
and 679 to the control group. For each of these sample members, 
the researchers collected two years of earnings data from 
unemployment insurance (UI) records and AFDC, Food Stamp, and 
Medicaid data from other state databases.\4\ These 
administrative data were augmented with information collected 
from a two-year follow-up survey. This survey covered details 
on employment histories, job characteristics, and additional 
income sources. It also measured material hardship, access to 
health care, and sample members' feelings about their financial 
situations, job security, and, in the case of program group 
members, their experiences with the New Hope program.
---------------------------------------------------------------------------
    \4\ The researchers supplemented the administrative data on 
earnings, welfare recept, and program participation with data from the 
State of Wisconsin on use of the state and federal EIC. Aggregrate EIC 
data (provided in groups of 15 to protect individual confidentiality) 
were used to approximate individual EIC benefits, which constitute an 
increasingly important source of work-related income for low-wage 
workers.
---------------------------------------------------------------------------
    Although all program and control group members were 
approached for this survey, some could not be found and others 
refused to participate, leaving a sample of 1,086 for analyses 
involving survey questions.
    For the 678 program group members, data from the New Hope 
management information system (MIS) were added to the 
administrative and survey data. These MIS data cover 
participation in the program, use of program benefits, and 
earnings from CSJs. Administrative data from New Hope were also 
used to estimate program costs.
    The analyses of child and family outcomes rely mostly on an 
expanded version of the two-year survey, conducted in 
respondents' homes. Special age-appropriate modules were added 
to the survey to be administered to respondents' children. The 
Child and Family Study (CFS) survey was targeted at 745 adult 
sample members and completed by 591. In many cases, more than 
one child per family was included in the study, resulting in a 
sample of 927 children for most analyses.
    Finally, if children were in school, their teachers were 
sent a questionnaire (with permission and assistance from the 
children's parents) which contained a number of scales 
measuring behavior and performance in school. These assessments 
are a primary source of data on relevant child outcomes; they 
are available for 420 children in the study.
    Most analyses presented in this report identify program 
effects using straightforward comparisons of outcomes for 
program and control group members. Because sample members were 
randomly assigned to either the program group (and thus 
eligible to participate in New Hope) or the control group (not 
eligible), the only systematic difference between the two 
groups is the assignment of program group members to New Hope. 
This means that any differences in outcomes measured at follow-
up are attributable to the New Hope program; as noted earlier, 
such differences are called the program's ``impacts.'' 

                   Program Implementation and Context

     New Hope was implemented successfully and 
delivered benefits and services to those who qualified. Some 
participants did not access benefits as often as they could 
have, either because they did not fully understand the program 
procedures or chose not to report their earnings each month as 
required.  
    Implementing a program like New Hope poses important 
challenges to program developers, managers, and staff. The New 
Hope program was designed around a set of complex rules 
centered on the requirement that participants work 30 hours a 
week on average to qualify for program benefits; they were 
required to submit wage stubs monthly, which then were 
incorporated into a management information system for 
calculation and distribution of benefits. New Hope program 
staff were successful in developing such a system and 
implementing it in a real-world setting. Participants were paid 
their benefits on time. In interviews, participants expressed 
their satisfaction with New Hope, comparing the program 
favorably with other employment and welfare programs they had 
experienced. They consistently rated the support received from 
project reps as ``what they liked best'' about New Hope.
    However, New Hope staff and management did experience some 
difficulty in getting participants to understand and follow 
program rules. Many participants did not maximize their use of 
program benefits because they failed to comply with these 
rules, falling short of the required work hours or neglecting 
to submit required documentation. Participants also 
occasionally expressed dismay at the month-to-month variation 
in benefit levels, which was a function of sometimes small 
month-to-month changes in earnings or in the number of pay 
periods in a month. The fact that participants had to ``renew'' 
their commitment to the program monthly (because they were 
required to hand in their pay stubs) may have led some to leave 
New Hope even when they were still eligible for benefits. Staff 
also had difficulty getting participants to make full use of 
the EIC, which is an integral part of the New Hope benefit 
calculations. It is likely that some of this confusion would 
not occur if New Hope was an ongoing, widely available program.
     People's initial experience with New Hope differed 
depending on their employment status at the time they enrolled. 
Those employed full time could receive benefits immediately, 
but those not employed full time were more focused on finding a 
job or increasing their hours.
    New Hope's requirement that participants work 30 hours a 
week made their initial program experience dependent on their 
employment status. About one-third of program participants 
entered the study working full time, attracted by the financial 
benefits and help with health and child care. Program staff 
would explain the program rules to participants and help them 
access health insurance and child care benefits. The remaining 
two-thirds of participants experienced a different initial 
contact, which was focused on their need to find a full-time 
job. After a job search of eight weeks, these participants 
would have access to the program's CSJ component. In the 
meantime, project reps would give them job leads and advice on 
how to get a job. Thus, these participants would be more likely 
to actually experience a change in their initial employment 
status, either finding a job if they were not working or 
finding a full-time job if they were working part time.
     The New Hope program operated in two inner-city 
target areas with high rates of poverty and limited economic 
opportunities. However, the regional economy was healthy and 
other changes in the environment also promoted work among low-
income residents of Milwaukee.
    A neighborhood survey conducted in New Hope's target areas 
before the program began found high rates of poverty and a 
large contingent of low-income workers who could have been 
eligible for New Hope if it had operated on a larger scale. 
Analyses of job opportunities found most openings to be 
dispersed in the suburbs surrounding Milwaukee, either 
difficult or impossible to access without a car. Many positions 
also required post-secondary educational credentials, which few 
low-income residents in New Hope's target areas had. 
Nevertheless, the Milwaukee economy was generally very good 
during New Hope's implementation, making it relatively easy for 
many participants to find and maintain full-time employment.
    As discussed earlier, the welfare environment was changing 
rapidly during the time of this study. General Assistance (cash 
welfare for low-income adults who do not have dependent 
children) was eliminated and welfare rolls were reduced through 
new welfare-to-work programs like Pay for Performance. New 
federal legislation eliminated the AFDC program, replacing it 
with TANF, whose incarnation in Wisconsin (labeled Wisconsin 
Works, or W-2) took effect, however, near the end of the two-
year follow-up period covered in this report. Changing welfare 
rules and attitudes together with an improving economy caused 
increasing numbers of welfare recipients to leave the rolls and 
enter employment, offering both New Hope participants and 
control group members a substantial incentive to work. 

                        Use of Program Services

     A large majority of those assigned to New Hope 
(79.2 percent) received program benefits, but few received such 
benefits every month and for many participants program benefits 
were limited in scope and duration. 
    The design of the New Hope offer directly influenced, and 
often limited, the use of program benefits. First, the offer 
was extended only to those willing and able to work at least 30 
hours a week. If, for any reason, a participant could or did 
not want to comply with this requirement, his or her 
eligibility for program benefits may have been interrupted 
(project reps did continue to extend help and support).\5\ 
Second, the value of benefits was linked to participants' 
income and decreased substantially as their income approached 
200 percent of the poverty level for their family, or $30,000 a 
year, whichever was higher. At that point, earnings supplements 
were quite small, and copayments for health care and child care 
were larger. Third, three of the four primary benefits (health 
insurance, child care, and CSJs) were useful only to a subset 
of participants. For example, participants with Medicaid or 
free employer-provided health insurance did not need New Hope's 
health coverage or its contribution to employee copayments; 
those with steady employment (or good job-seeking skills) did 
not need CSJs; and those without children had no use for New 
Hope's child care subsidy. Consequently, the program allowed 
participants to use the components they needed when they were 
ready to use them.
---------------------------------------------------------------------------
    \5\ Also, health insurance could be extended for a month if 
participants lost their job and were actively looking for a new one. 
Similarly, participants who lost a job would be provided with three 
hours of child care per day for up to three weeks, as long as they were 
actively looking for work. After three weeks, they were eligible for a 
CSJ.
---------------------------------------------------------------------------
    The consequences of this approach for participation 
patterns are presented in Table 1, which shows that 79.2 
percent of program group members used any financial program 
benefit, with almost all of them (78.0 percent of program group 
members) receiving at least one earnings supplement.\6\ In 
contrast, only 47.6 percent used New Hope's health plan (or 
received help in paying an employee copay), and only 27.9 
percent used child care assistance. About a third of all 
program group members (32.0 percent) worked in a CSJ. Program 
rules and variation in participant needs affected not only 
overall benefit use rates, but also the length of time that 
participants used New Hope's services. The table shows that 
those who received any financial benefit did so for an average 
of only 10.8 of the 24 months of follow-up.
---------------------------------------------------------------------------
    \6\ All the tables in this Executive Summary summarize more 
detailed information given in the main body of the report. For 
additional measures and analytical details, see the tables in the full 
report.
[GRAPHIC] [TIFF OMITTED] T8372.001

    Comparing program benefits across the two employment 
subgroups defined above shows that those employed full time at 
random assignment received more benefits than those not so 
employed, reflecting the fact that the former group could begin 
receiving benefits immediately, while the latter group had to 
secure a 30-hour-a-week job first. Also, more participants 
among those not employed full time at random assignment 
experienced significant obstacles to employment, preventing 
them from ever meeting the 30-hour requirement (or working in a 
CSJ).
    In analyzing these figures, it may appear that New Hope's 
effect on participants' lives was less profound than it could 
have been. However, that is not necessarily the case. First, it 
is important to consider the program's effects on participants' 
behavior even if they did not receive an earnings supplement or 
child care assistance in a particular month. If, for some 
reason, participants failed to work 30 hours a week or were not 
``ready'' for full-time work, New Hope still offered them an 
incentive to continue pursuing full-time employment, an 
incentive that was backed up by a CSJ when they needed it. If 
participants already had health insurance or child care 
arrangements, the availability of a reliable backup might offer 
some peace of mind. Second, New Hope's project reps met with 
most participants on a regular basis. These meetings, and what 
they accomplished, are not reflected in the figures in Table 1, 
but the findings on social support shown in Table 7 suggest 
that the one-on-one support from project reps meant a great 
deal to participants. In fact, it may have been a key program 
component, setting New Hope apart from other programs and 
benefits available to low-income workers.

                        Employment and Earnings

     New Hope increased the work effort and earnings of 
those not already working full time.
    For the two-thirds of the sample not employed full time at 
random assignment, New Hope provided a clear positive incentive 
to work and to work longer hours. The lower panel of Table 2 
shows that such an incentive can increase employment, 
especially when backed up with CSJs for those who need them. In 
the two years of follow-up, New Hope reduced by half the number 
of sample members who were never employed (from 13 percent for 
the control group to less than 6 percent for program group 
members), and it increased the number of quarters that these 
sample members were employed by 0.7 of a quarter and increased 
earnings by 13.2 percent ($1,389). Both of these effects are 
substantial, especially given the high level of work effort 
among control group members. (Again, these data are for all 
sample members, including those with no employment or 
earnings.)
[GRAPHIC] [TIFF OMITTED] T8372.002

    Not shown in the table is the extent to which CSJs 
contributed to these program effects. Although it is not 
possible to know how program group members would have responded 
to New Hope in the absence of CSJs, we do know that 32 percent 
worked in one and that CSJs contributed $945 to participants' 
average two-year earnings. This suggests that CSJs played an 
important role in bringing about New Hope's impacts on 
employment and earnings.
     New Hope did not change the rate of employment of 
those employed full time at random assignment, and while it 
does appear to have reduced earnings somewhat, this effect was 
not statistically significant.
    As pointed out above, New Hope offered different incentives 
to those who were employed full time at random assignment and 
those who were not. One might expect those employed full time 
to reduce their work effort in response to the increase in 
disposable income experienced while in New Hope. On the other 
hand, imposing a 30-hour-a-week minimum on hours worked would 
limit any such reductions, and other New Hope services and 
guarantees might help these participants to stay employed full 
time throughout the follow-up period.
    The upper panel of Table 2, showing impacts on employment 
and earnings for this group, indicates that New Hope was 
moderately successful in preventing reductions in work effort 
among those employed full time at random assignment. The very 
high levels of employment in the control group make program-
induced increases in employment very difficult to achieve. The 
estimated impacts on two-year earnings are negative for this 
group, but this reduction is not statistically significant.\7\ 
It appears that New Hope's supports may have slowed the growth 
in earnings of participants who were employed full time when 
they entered the program.
---------------------------------------------------------------------------
    \7\ A ``statiscally significant'' result is one that has less than 
a 10 percent probability of having occurred simply to chance and not as 
a result of the program.
---------------------------------------------------------------------------
     New Hope somewhat reduced hours worked by those 
employed full time at random assignment. It did so primarily by 
reducing the number of weeks in which these participants worked 
more than 40 hours. There were no statistically significant 
reductions in full-time work.
    The upper panel of Table 3 shows impacts on hours worked 
and on other job characteristics for those employed full time 
at random assignment. Aside from the program effects, it is 
noteworthy how high the average levels of work effort were in 
this subgroup. Members of the control group worked an average 
of almost 3,600 hours in the two years of follow-up, which 
translates into a weekly average of 34.6 and includes any 
periods of unemployment or part-time work. Thus, many control 
group members (and program group members) must have worked 
substantially more than 35 hours a week when they worked.
[GRAPHIC] [TIFF OMITTED] T8372.003


    New Hope reduced hours worked by those employed full time 
at random assignment, mostly in the first year of follow-up and 
mostly by limiting overtime (and second jobs). In the first 
year of follow-up, program group members in this group worked 
150 fewer hours than their counterparts in the control group, a 
reduction of 8.1 percent.
    As expected, given New Hope's program rules, there was no 
reduction in the number of people who worked at least 30 hours 
a week. There were also no statistically significant reductions 
in the number of people working at least 40 hours a week. 
However, program participants were less likely to work more 
than 40 hours in an average week.
    If one looks at job characteristics, it appears that the 
jobs held at follow-up by program group members employed full 
time at random assignment might not have been as good as those 
held by control group members. The average hourly wage at 
follow-up was 46 cents lower for program group members than for 
control group members, an effect that may be related to the 
reduction in overtime, but may also reflect program group 
members working in CSJs (which pay only minimum wage). In 
addition, control group members had more fringe benefits than 
program group members, possibly a result of the fact that New 
Hope provided health insurance, reducing participants' 
incentive to find a job that provided it.\8\
---------------------------------------------------------------------------
    \8\ It is possible that New Hope participants did not always fully 
understand the survey question asking them about the availability of 
employer-provided health benefits. These participants may have had 
access to employer-provided benefits, but may have chosen to use New 
Hope-provided health insurance insdtead. In that case, they may have 
incorrectly indicated in the survey that they did not ahve employer-
provided health benefits. This, in turn, would have caused the 
reduction in employer-provided health insurance to appear larger than 
it was.
---------------------------------------------------------------------------
     New Hope increased hours worked by those not 
employed full time at random assignment. This effect is a 
combination of nonworkers becoming employed and others 
increasing their hours to meet the 30-hour minimum to receive 
benefits.
    Program effects on hours worked among those not employed 
full time at random assignment were substantial in both years 
of follow-up. Overall, hours of work were increased by 285, or 
12.1 percent (lower panel of Table 3). This was achieved by 
reducing the number of months with no work from 9.2 to 7.9 and 
reducing the number of months with some, but fewer than 30, 
weekly hours worked from 3.4 to 2.4. These effects represent a 
shift in the work patterns of these sample members, brought on 
to some extent by participation in CSJs.
    There were no statistically significant program effects on 
characteristics of the jobs held by those not employed full 
time at random assignment.
     Among those not employed full time at random 
assignment, the strongest earnings effects were found for 
participants with only one of a number of potential barriers to 
employment.
    A further breakdown of the group that was not employed full 
time at random assignment revealed a pattern of program impacts 
that depended on the number of potential employment barriers 
that participants had, such as having limited work experience, 
having very young children, or lacking an educational 
credential. New Hope program participants best able to 
translate program benefits into sustained earnings increases 
came into the program with one potential barrier to employment. 
The program made less of a difference for those with none of 
the potential barriers or those who had two or more. This 
pattern of findings (not shown in tables) suggests limits to 
the New Hope model, which may be less necessary for some 
participants and not strong enough for others.
     New Hope's effects on employment and earnings 
showed similar patterns across a wide range of subgroups and 
did not vary between the two target areas served by the 
program.
    In addition to the subgroups defined by employment status 
at random assignment, program effects were examined for people 
varying in family status, gender, ethnicity, welfare receipt at 
random assignment, and target area. None of these analyses 
showed significant variation in impacts. This implies that New 
Hope's effects were widespread and not limited to a single 
group or target area. (These analyses are not shown in tables.) 


            Welfare Receipt, Income, and Material Well-Being

     Overall, New Hope participants did not receive 
fewer AFDC and Food Stamp benefits than their counterparts in 
the control group. However, in the second year of follow-up 
those employed full time at random assignment experienced 
larger reductions in their receipt of public assistance than 
control groups.
    New Hope was not designed or operated as a welfare-to-work 
program, although it was billed as an alternative to welfare or 
working poor families; that is, the program did not emphasize 
typical welfare-to-work services, such as job club and job 
training. Although program designers expected to find indirect 
effects on welfare receipt by increasing sample members' 
earnings or income, pursuit of such effects was not part of the 
original program design. New Hope program group members who 
were receiving welfare continued to be subject to any mandates 
imposed by the welfare department, such as those in the Pay for 
Performance program.
    One might expect to see reductions in the receipt of AFDC 
and Food Stamps as a consequence of the increases in earnings 
discussed above. However, this pattern of impacts was not 
found. Both program and control group members received 
substantially reduced public assistance during the follow-up 
period. But rather than further reducing welfare receipt among 
those not employed full time at random assignment (the group 
experiencing impacts on earnings), the program accelerated 
transitions from welfare for those who were employed full time, 
and only during the second year of follow-up. Table 4 shows 
that in the second year those employed full time at random 
assignment received $445 less in AFDC benefits (a reduction of 
37.7 percent) and $274 less in Food Stamps (a reduction of 23.5 
percent).
[GRAPHIC] [TIFF OMITTED] T8372.004

    Thus, rather than reducing welfare receipt through 
increased employment, it seems that New Hope effected such 
reductions by offering those who were close to leaving welfare 
anyway alternative sources of support. In other words, to some 
extent New Hope's supplements and in-kind benefits replaced 
welfare and Food Stamps for these families.
    One might have expected to see reductions in welfare 
receipt tied to increased work effort for those not employed 
full time at random assignment, but no such reductions 
materialized. (In fact, New Hope increased the amount of Food 
Stamps received by this subgroup in the second year of follow-
up, a program effect that is difficult to explain.) The lack of 
reduction in welfare receipt in this group may be due to 
changes in welfare rules that would have delayed or prevented 
such reductions--for example, increased earnings disregards, 
which allow people to earn more without having their welfare 
grant reduced. On the other hand, all participants and control 
group members volunteered to enroll in New Hope, expressing 
their ability and willingness to work full time. This means 
that many would have left welfare anyway, limiting New Hope's 
effects on this outcome.
     New Hope caused a modest increase in sample 
members' income, an effect that was concentrated among those 
not employed full time at random assignment.
    One of New Hope's primary goals was to increase the income 
of low-wage workers and to reduce poverty among them. Table 5 
documents the extent to which the program met this goal, 
focusing on two-year cash income and Food Stamps for the full 
sample and the two employment subgroups. The table shows that 
by increasing and supplementing earnings, New Hope increased 
both ``earnings-related income'' (income directly tied to one's 
earnings) and total income. However, these effects were modest 
for the full sample, representing increases of $1,718 and 
$1,611 for earnings-related income and total income, 
respectively. This represents 10.8 and 7.1 percent of the 
income available to these participants in the absence of New 
Hope (as captured by the control group).
[GRAPHIC] [TIFF OMITTED] T8372.005

[GRAPHIC] [TIFF OMITTED] T8372.006

    The subgroup breakdown shows that all of this effect is 
concentrated among those not employed full time at random 
assignment, for whom there was a more substantial increase in 
total income of $2,645 (11.8 percent), mostly resulting from an 
increase of $2,450 in earnings-related income (20.3 percent). 
No such effects were found for those working full time at 
random assignment, who actually lost some income in the second 
year owing to the aforementioned reductions in receipt of AFDC 
and Food Stamps.
     By supplementing earnings, New Hope increased the 
number of sample members whose employment yielded enough income 
to lift their family out of poverty.
    Another way to look at New Hope's effects on income is to 
focus on sample members' ability to rise above the poverty line 
using only their own earnings and benefits directly connected 
to their work (EIC and New Hope earnings supplements). 
Ultimately, this outcome best captures New Hope's underlying 
philosophy: making work pay so that full-time workers would not 
be poor. Table 6 summarizes the program's effects on this 
poverty measure for the two employment subgroups. For the 
program group as a whole (not shown in the table), New Hope 
increased the number of participants whose earnings-related 
income was above the federal poverty line for their family by 
5.6 percentage points in year 1 and by 7.8 percentage points in 
year 2.
[GRAPHIC] [TIFF OMITTED] T8372.007

    Nevertheless, most program participants were unable to 
``work their way out of poverty'' using only the regular 
earnings and CSJ wages of a single worker, even after New Hope 
supplements and EIC were included. The impacts on poverty 
status did not vary significantly across the two subgroups 
defined by employment status at random assignment.
     New Hope reduced material hardship, partly by 
increasing participants' incomes, but more importantly by 
providing participants' households with health insurance and 
subsidized child care.
    The effects on income and poverty presented thus far fail 
to consider the contributions made by the program in providing 
health insurance, child care subsidies, and support by project 
staff. As discussed in an earlier section, New Hope spent more 
money on health insurance and child care than on earnings 
supplements and CSJ wages. Having access to these benefits and 
being able to afford them can greatly add to the material well-
being of low-income households. The New Hope survey measured 
impacts on material well-being by asking respondents about a 
number of different material hardships that commonly affect 
low-income households, including unmet medical and dental 
needs, periods without health insurance, housing problems, and 
utility shutoffs. Program effects on these outcomes are shown 
in Table 6.
    The table shows that New Hope did not produce improvements 
in all of these areas, but significantly reduced material 
hardships associated with lack of health insurance. Those 
effects were stronger for those not employed full time at 
random assignment, although differences across subgroups were 
not statistically significant.
    Also, analyses of survey data found that program group 
members spent significantly less of their own funds on child 
care than control group members, despite the fact that they 
were more likely to use center-based care, which tends to be 
more expensive. (Impacts on child care use are discussed in 
more detail in a later section of this Executive Summary.) 

               Stress, Worries, and Emotional Well-Being

     New Hope reduced stress and worries reported by 
participants, but it increased time pressure in the lives of 
those who worked more in response to the program's incentive. 
The program also increased the social support available to 
participants. However, New Hope did not improve participants' 
feelings of depression, mastery, or self-esteem.  
    To gauge the less tangible benefits of New Hope, the survey 
asked sample members about issues like stress, financial 
worries, satisfaction with their standard of living, and social 
support. Sample members who were part of the Child and Family 
Study (CFS) were also asked about depression, mastery, self-
esteem, feelings of agency, and time pressure. An analysis of 
the program's effects on these outcomes showed an interesting 
pattern, summarized in Table 7.
[GRAPHIC] [TIFF OMITTED] T8372.008

[GRAPHIC] [TIFF OMITTED] T8372.009

    First, sample members in the CFS reported large and 
significant increases in social support as a result of their 
participation in New Hope, probably because the program 
provided valuable advice, assistance, and emotional support. 
This effect was strong for both employment subgroups and 
identifies an aspect of the program that has not yet been 
discussed extensively, namely, the role of project reps. The 
frequent interaction of these program staff members with New 
Hope participants can almost be considered a fifth program 
component (in addition to the earnings supplements, CSJs, 
health insurance, and child care subsidies), which may have had 
its own effects on sample members' well-being. These services 
were especially valuable to participants who were employed full 
time at random assignment and were less likely to find case 
management in other venues).
    Overall, New Hope program group members reported being less 
stressed than control group members (effects for the full 
sample, not shown in Table 7, were statistically significant). 
Reasons for the reduction in stress may include, for example, 
greater financial security, less overtime work, and fewer child 
care hassles. Among those not employed full time at random 
assignment, New Hope also reduced a number of specific worries. 
These program group members were less worried about their 
medical care, about being able to afford housing, and about 
their financial situation in general.
    Among CFS parents, effects were found on their feelings of 
agency (measured with the Hope Scale), capturing their sense 
that they could achieve their goals, but these positive 
socioemotional effects were accompanied by an increase in time 
pressure, especially for those not employed full time at random 
assignment.\9\
---------------------------------------------------------------------------
    \9\ The latter two effects were measured only for the CFS people.
---------------------------------------------------------------------------
    The evaluation did not find significant program effects for 
CFS parents on more stable, personal dispositions such as 
depression, mastery, and self-esteem. 

         Impacts on Parent-Child Relations and Child Care Use 

     For parents employed full time at random 
assignment, New Hope moderately increased parental warmth and 
monitoring of children's activities.
    The Child and Family Study (CFS) component of the New Hope 
evaluation measured family dynamics and the interaction between 
parents and children using the participant survey and surveys 
administered to children. (See Table 8.) It was expected that 
changes in parental employment, material resources, and 
emotional well-being would play themselves out in the 
relationships between parents and children and in the home 
environments in which children grow up. Boys in New Hope 
families perceived relationships with their parents to be more 
positive (not shown in a table).\10\ Parents in New Hope who 
were employed full time at random assignment expressed more 
feelings of warmth to their children and monitored their 
activities more. These positive effects on parents' behavior 
suggest that New Hope modestly improved the lives of these 
families, perhaps by allowing parents to cut back their work 
hours without significantly reducing their earnings-related 
income.
---------------------------------------------------------------------------
    \10\ All of these findings are based on scales used in the two-year 
follow-up survey. Because it is diffcult to gauge the size of effects 
on such scales, researchers like to express them in terms of ``effect 
sizes,'' which correspond to the effect divided by the standard 
deviation of the outcome. In those terms, New Hope increased reported 
warmth and observed warmth by .27 and.22 standard deviations and caused 
an effect of .31 of a standard deviation on parental monitoring. All of 
these effects are considered moderately large compared with effects in 
other intervention studies. For more details, see Chapter 6 of the full 
report.
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    Those not employed full time at random assignment did not 
experience similar effects on parenting, which may reflect 
increased demands and time pressure for these parents that 
could offset positive effects from increased resources and 
employment.
     Through its provision of child care subsidies and 
its effects on parental employment, New Hope substantially 
increased children's exposure to formal child care, after-
school care, and other organized activities.
    The provision of child care subsidies coupled with 
increases in parents' employment were expected to increase the 
use of child care and to allow parents to select the care they 
preferred. As parents consolidated their employment, many used 
New Hope to provide formal center-based and school-based child 
care for their preschool and school-age children. Although the 
program effect was significant for the full sample (not shown 
in a table), there was a somewhat stronger effect on use of 
center-based care during the preschool and early school years 
for girls and on use of school-based extended day care for 
school-age boys (see Table 9).
    The New Hope subsidy could be used for licensed home-based 
child care, but there was no effect of the program on using 
this type of care. There was some tendency for program group 
members to use less home-based child care (licensed or 
unlicensed) than control group members; program group boys were 
less likely to be cared for by someone outside the household, 
and program group girls received less care by household 
members.
[GRAPHIC] [TIFF OMITTED] T8372.010

[GRAPHIC] [TIFF OMITTED] T8372.011

    In addition, 9- to 12-year-old children whose parents were 
New Hope participants were more likely to engage in structured 
out-of-school activities (such as lessons, organized sports, 
religious classes, clubs and youth groups, and recreation 
centers). They also watched more TV on weekends (not shown in a 
table). 

                       Impacts on Child Outcomes

     Teachers reported that boys whose parents were in 
New Hope had better academic performance, stronger study 
skills, higher levels of social competence, and fewer behavior 
problems than control group boys.
    The Child and Family Study (CFS) component of the New Hope 
evaluation included a survey of teachers of children who were 
in school. New Hope had large effects on the behavior and 
school performance of boys. Using standardized scales, teachers 
rated their students' academic performance, classroom skills 
(for example, ability to work independently and to make 
transitions), positive behavior (for example, social 
competence), and behavior problems (for example, aggression). 
The teachers, who were unaware of the program or control group 
status of their students' families, rated boys whose parents 
were in New Hope significantly higher than control group boys 
on school performance, classroom skills, and positive behavior 
and significantly lower on behavior problems (see Table 
10).\11\ No effects occurred for girls, but girls in both 
research groups scored better than boys on the above measures, 
possibly indicating less need for improvement.
---------------------------------------------------------------------------
    \11\ Expressed in effect sizes, the effects on academic 
performance, classroom skills, positive behavior, and behavior problems 
were .33, .38, .50, and -.48 of a standard deviation, respectively. All 
of these effects are considered large compared with effects in other 
intervention studies.
[GRAPHIC] [TIFF OMITTED] T8372.012

[GRAPHIC] [TIFF OMITTED] T8372.013

    For families in which parents were not employed full time 
at random assignment, these effects on school outcomes were 
reflected in two measures of school progress: Children in New 
Hope families were less likely to be receiving educational 
services or to have been retained in a grade than control group 
children.
     Boys whose parents were in New Hope reported 
higher educational expectations and higher occupational 
aspirations and expectations, implying that the program 
affected their ambitions for future study and careers.
    The New Hope survey asked children about their educational 
and occupational aspirations. It was hypothesized that New Hope 
might change children's feelings in this regard, following its 
effects on their parents' employment and the children's own 
increased participation in child care and after-school 
programs. Again, substantial impacts were found, but they were 
limited to boys. Boys whose parents were in New Hope expected 
to attend and finish college in greater numbers and were more 
likely to aspire to professional and managerial occupations 
with high social prestige than boys in the control group.

                       Two-Year Costs of New Hope

     Over two years, New Hope cost about $7,200 per 
participant.
    It is too soon to write any final assessment of New Hope's 
costs and benefits. Two years of costs had been incurred, but 
the ultimate benefits for families (in terms of employment, 
income, and poverty) and children (in terms of general well-
being and school performance) are not known. Beyond this, the 
New Hope vision is not easily summarized in any traditional 
benefit-cost framework, since many of its key goals and 
achievements cannot be captured in dollar terms. New Hope 
sought to reduce poverty, improve family functioning, and 
improve the well-being of children.
    With this caveat, the results to date do provide some 
information on cost effectiveness. Through two years, it cost, 
on average, approximately $9,000 per participant to provide the 
New Hope package of services and benefits. Offsetting 
reductions in public assistance and the value of the work 
produced in CSJs reduce the costs to about $7,200 per 
participant. In return, New Hope produced clear impacts on 
children, moved families out of poverty, and provided 
participants with about $4,600 in cash or in-kind benefits. 
Future reports will show the extent to which these total 
benefits cumulate over time.

                          Policy Implications 

     The New Hope program represents a useful tool for 
improving the ability of people to earn their way out of 
poverty. As with any single approach based on employment, 
however, it is not a panacea.
    It is unlikely that any effort to reduce poverty through 
employment could succeed for all participants, even with bolder 
incentives. To the degree that policymakers hold antipoverty 
goals, they will need to consider both employment-based 
solutions and other means to transfer income.
     It is insufficient to focus solely on work effort 
and earnings when evaluating employment-related approaches to 
reducing poverty. The kinds of positive, nonmonetary effects 
for families and children New Hope achieved are important to 
many policymakers and the public at large.
    While the public wants all low-income adults who are able 
to work to do so, it also hopes that policies and programs will 
help (or at least not harm) the well-being of families and 
children. New Hope demonstrates that packages like the one it 
offered can affect families and children in positive ways. This 
is encouraging and underscores the need to assess such outcomes 
as part of the evaluation of such efforts.
     Subsidized community service employment appears to 
play a central role in a package of incentives and supports 
like New Hope's.
    New Hope had strong employment effects for those not 
employed full time at random assignment, effects at least 
partly accounted for by the CSJs provided by New Hope. However, 
it is unlikely that providing full-time employment without 
making sure that it benefits participants financially will 
produce sustained employment effects. More important, these 
findings suggest that it is possible to operate a system of 
subsidized employment, providing real wage-paying jobs, and 
have people progress into regular employment as these jobs end. 
There is little evidence that the availability of CSJs enticed 
workers to leave regular jobs to take subsidized employment 
instead. However, this may happen and policymakers who are 
considering a CSJ-like program should develop safeguards and 
disincentives to reduce its occurrence.
     Policymakers who want to increase the material and 
emotional well-being of low-income families should focus at 
least some of their efforts on providing health insurance, 
improving child care resources, and offering a user-friendly 
support system.
    Some of New Hope's strongest impacts were only tangentially 
related to participants' employment or cash income, centering 
on the other services provided through the program. New Hope's 
provision of health insurance and child care subsidies 
significantly reduced material hardship and worries, may have 
reduced stress, and may have improved both family relations and 
child outcomes. In the provision of child care assistance, it 
appears important to provide immediate and seamless access to 
these benefits. This means anticipating and addressing the 
communication difficulties that can occur between parents, 
child care providers, and the program. New Hope developed a 
functional system to manage this process.
    One possible drawback of providing health insurance to low-
income workers is that it dissuades them from looking for a job 
that provides these benefits. The evaluation found some 
evidence along these lines, and such an effect could have 
adverse long-term consequences.
    Finally, a key contribution of New Hope to the lives of its 
participants was the provision of ``social support.'' Project 
reps were not only eligibility workers, but also provided 
advice and emotional support that was highly valued by 
participants. Although it is difficult to prove, the value of 
New Hope's subsidies and services was likely enhanced by the 
way in which they were delivered.
     Policies that encourage parents with low incomes 
to be employed full time, while allowing some reduction in 
second jobs and overtime, may represent an optimal strategy.
    By increasing the hours worked by some parents and reducing 
overtime for others, New Hope enabled its participants to find 
a more sustainable balance between work and family life. This 
effect translated into important noneconomic benefits for these 
families, suggesting that work-based programs should not focus 
on increasing employment and earnings at all cost.
     Policymakers interested in improving the well-
being of children in low-income families should ensure that 
child care is actually provided and that out-of-school 
activities for preschool and school-age children are readily 
available.
    New Hope produced substantial positive impacts on the 
behavior and classroom skills of boys, which held up across 
different age groups and were consistent across different 
measures. This is encouraging, because academic failure and 
problem behavior are predictors of later school failure, 
dropping out, and delinquency. These risks are high for boys in 
low-income families and promising policy alternatives to 
improve child outcomes are scarce. Although at this point it is 
not clear which features of New Hope affected the outcomes of 
these children, formal child care and structured out-of-school 
activities are strong candidates. Family dynamics and changes 
in income may also have contributed.
     Policymakers interested in employment-based 
approaches to reducing poverty should consider the strengths 
and limits of having broad eligibility rules, rather than 
limiting interventions to particular groups of low-income 
adults. In New Hope, such rules led to positive economic and 
nonmonetary effects for many groups. However, such a policy of 
inclusion appears to increase the cost of the program.
    One of New Hope's accomplishments was its ability to reach 
out to a wide variety of people with low incomes in the target 
areas it served, including underserved groups such as men, 
families without children, and working poor families without a 
welfare history. All of these groups used some parts of the New 
Hope offer, even though some groups experienced more profound 
effects on their circumstances and well-being than others.
    A major benefit of targeting a program like New Hope to 
welfare recipients or people with limited work experience is 
that those groups are more likely to respond to the program by 
increasing their employment and earnings. Such an employment 
effect benefits society, offsetting some of the cost of 
providing program services. The lack of positive employment 
effects among those already working full time makes it more 
likely that the program will operate at a net financial loss 
for these individuals, especially if they reduce their hours of 
work as happened in New Hope. Thus, policymakers face a trade-
off. They can operate a program of work supports that is 
narrowly targeted at those least likely to seek employment on 
their own or they can choose to extend those services to the 
larger population of low-income working families. The former is 
likely to be less costly, but the latter may generate 
additional nonmonetary benefits that are valued by society.
     Other states and localities should consider 
testing policies like those New Hope implemented. Such a 
program might have bigger effects in a different context: a 
weaker labor market, a less employment-driven public assistance 
system, or a low-income population with less work experience.
    In some ways, this evaluation is a conservative test of New 
Hope. The job market was healthy, the welfare system was being 
restructured, and the state and federal EIC programs were 
expanding, making work an increasingly attractive alternative 
for low-income residents of Milwaukee. Adding New Hope to this 
picture further enhanced this climate of promoting and 
supporting work, producing the program effects detailed in this 
report. However, had New Hope been implemented in a less 
favorable environment, its effects might have been more 
substantial. This report chronicles the potential of a new 
approach to helping low-income families succeed in the world of 
work. This approach deserves to be put to the test in a wider 
range of local environments and economic settings.
      

                                


April 1999

Manpower Demonstration Research Corporation

    MDRC is evaluating the New Hope program under a contract 
with the New Hope Project, Inc., supported by the John D. and 
Catherine T. MacArthur Foundation, the Helen Bader Foundation, 
the Ford Foundation, the State of Wisconsin Department of 
Workforce Development, the W. T. Grant Foundation, the Annie E. 
Casey Foundation, the U.S. Department of Health and Human 
Services, and the National Institute of Child Health and 
Development.
    Dissemination of MDRC's work is also supported by MDRC's 
Public Policy Outreach Funders: the Ford Foundation, the 
Ambrose Monell Foundation, the Alcoa Foundation, and the James 
Irvine Foundation.
    The findings and conclusions presented in this report do 
not necessarily represent the official positions or policies of 
the funders of the New Hope Demonstration.
    For information about MDRC, see our Web site: www.mdrc.org.
    MDRC is a registered trademark of the Manpower 
Demonstration Research Corporation.
    Copyright  1999 by the Manpower Demonstration 
Research Corporation. All rights reserved.
      

                                

    Chairman Johnson of Connecticut. Thank you. Thank you very 
much. I appreciate the panel's testimony.
    It is very important that we continue to do the research 
and try to determine, for example, why though poverty is 
declining, the number of children in acute poverty is actually 
increasing and how much of that is related to our ability to 
gather data or not gather data. We certainly want to keep our 
attention on that. I think also, as we look at the new welfare, 
you know, better use of the welfare-to-work dollars, how do we 
take people who are entering the work force at a minimum wage, 
but have children, and help them move up the career ladder so 
that maybe not after 2 years, but eventually, they do earn 
enough to support their children above the poverty level of 
income.
    It is not surprising to me that on minimum wage, you are 
below poverty with children. That is just the way it is, and 
you are not going to get above the minimum wage until you have 
gotten in the work force for a while. So, I think the problems 
in some areas that we are seeing are not surprising, but they 
do mean we need a system, and this is one of the reasons why 
that TANF level of funding is so terribly important. We need a 
system that is able to do things that the current system has 
not yet learned how to do. And some of it has to do with 
getting people with very difficult problems into the work 
force. People with problems such as lack of basic education, or 
with serious substance abuse or other kinds of mental health 
problems. But, a lot of it is how do we advance this latter 
group.
    But there were two things that interested me in your 
testimony. One, which I just want to call to the attention of 
my colleagues. One of you mentioned that--I cannot find it 
right now--oh, yes, it was you, Mr. Granger, that some were not 
applying for EITC. That is the first time--well, I guess 
someone else mentioned it earlier. But in addition to the 
Medicaid, food stamp problem, we really have to have a system 
that better makes sure that people do get the benefits that are 
there, because it is sort of new to have tax benefits as 
important as they are now, through EITC and the child benefit. 
But I did want to come back to Ms. Fagnoni's comment on annual 
earnings. Average annual earnings to former welfare recipients 
in the seven States, it ranged from $9,512 to $15,000. That is 
such a different picture than we got from Wendell, that I 
wonder--you know, maybe I am just not hearing it right. It is 
hard when you just hear the statistics for the first time in a 
hearing, but is it that you picked States that are pretty 
affluent; I mean, that they are the ones that reported, so we 
have different information?
    Ms. Fagnoni. Well, I should talk about the universe of what 
we looked at versus the kinds of national data Wendell and 
others are looking at.
    What we looked at specifically were State--efforts States 
have made to try to determine what has happened to those 
individuals who have left welfare. And after looking through 
about 17 or 18 different studies that attempted to do that, we 
identified eight studies in seven States where the information 
was good enough. They get a high enough response rate. It was 
generalizable enough that we could learn something about what 
was happening to people leaving welfare in those seven States. 
So it gives us a more limited universe, I think, than what he 
was looking at. We only looked at those leaving welfare in some 
specific States where there were enough data collected by those 
States for us to be able to look across the studies and talk 
about what the findings were.
    Chairman Johnson of Connecticut. Thank you. Mr. Cardin.
    Mr. Cardin. Thank you, Madam Chair. And let me thank all of 
you for your testimony. I particularly appreciate those of you 
that are on the frontlines of the States for the work that you 
are doing.
    Mr. Larson, obviously, I am very proud of what Maryland has 
achieved and what you have been able to achieve in our State. 
We do always cite Maryland here frequently, usually in good 
terms. So, thank you.
    But you know, it is interesting, in your testimony, you 
point out what is happening to people who are leaving welfare, 
but also who is left on welfare. And I thought that was a very 
important point because we have a very difficult assignment 
ahead of us for people who are still receiving cash assistance. 
These are more complicated individuals. And we are not going to 
have the same degree of success and be using the same 
resources. We need to develop new strategies. We have a bill 
here that I encourage you to take a look at to reform the 
welfare-to-work law, to make it easier and more flexible for 
the States to get at that money. And we are hoping that during 
the course of this Congress, we will be able to deal with the 
welfare-to-work issue so that you can take some of that money 
and use it for the people who still are on welfare in a more 
flexible way.
    Ms. Rogers, let me compliment you also in Wisconsin. We are 
very pleased, as I have mentioned earlier, on your way that you 
allow the child support collections for the noncustodial parent 
to go directly to the family. I think that is a very fine 
program. I think only three States do that today, so you are 
one of the three States that allow that. And we also understand 
that you have established some new initiatives to try to 
provide entitlement to childcare subsidies to all low-income 
families, which is also encouraging.
    But let me just mention a couple facts that have us 
somewhat concerned. First, the participation rate in the child 
care subsidies is rather low. It appears to be rather low.
    Second, there has been at least some reports that some of 
the savings in Wisconsin have not been plugged back into the 
program or reserved for the more difficult people who might 
need additional attention; that it has been used for a property 
tax cut within your own State. If, in fact, that is true, it 
just lends credibility to those in Congress who say there is 
too much money out there for the States; we should be cutting 
back.
    I do not subscribe to that. I am fighting very hard to 
protect the money in TANF and the money in the welfare-to-work 
and expand programs to give our States additional resources, 
knowing full well that you have a very difficult assignment on 
your hands. But if some of these savings are being used 
directly, that we are providing, for property tax relief, a 
very laudable goal, but it makes it difficult to sustain funds 
here. And I would appreciate your comments.
    Ms. Rogers. First of all, relative to child care.
    Mr. Cardin. Yes.
    Chairman Johnson of Connecticut. Would you pull the 
microphone closer, please, Ms. Rogers. Thank you very much.
    Ms. Rogers. Relative to child care, we are doing a 
tremendous amount of outreach and have been, as a matter of 
fact, since early last fall, because we want very much to make 
sure that everybody is aware of the fact that if they are 
entitled to child care subsidy that they take advantage, 
particularly the working poor who have never touched the cash 
assistance programs, because they are the ones that are least 
likely to be familiar with the program. In fact, we have been 
investing----
    Mr. Cardin. Does that also apply to their eligibility for 
Medicaid, because the information we had is that----
    Ms. Rogers. Yes.
    Mr. Cardin. You were not doing much outreach there also.
    Ms. Rogers. Oh, no. We are doing a tremendous amount of 
outreach there as well. In fact, specifically on the child care 
side, there was an investment of over $85,000, and it is 
packaged with information about MA and food stamps just to do 
employer-based outreach and specifically with regard to 
Medicaid and food stamp outreach in another arena, we are 
investing a tremendous amount of effort, as are our local 
agencies in establishing additional outreach points. In 
Milwaukee alone, we have 40 additional outreach stations at 
which people can get full information, places where they are 
likely to come--emergency health care and other sites. Where we 
can sign them up and let them know what is available in terms 
of these supportive services, Medicaid and food stamps, so they 
can continue.
    With regard to your comment about some of the things that 
you have been hearing in terms of potential investment for the 
dollars, I think it is important to--for me to share the issues 
and programs and proposals that the Governor has put forth in 
his budget, all of which are reinvestment of the TANF dollars 
in programs that do, in fact, go back to supporting the very 
population that we need to help most with these dollars, 
including such things as a work force advancement program for 
people who are either just leaving the programs or at risk of 
falling back into them, and that is, alone, to the tune of $30 
million; tremendous increase in additional investment in the 
next generation child care programs for developmental 
advancements in helping children in child care settings.
    Wisconsin is already one of the tops in the Nation in terms 
of our child care program, not to mention the dollar amount 
that we put into subsidies, all of which child care subsidies 
are also being increased in the Governor's budget proposal, 
again using these TANF dollars to lower the copays, increase 
the scope of the number of people that are covered for 
subsidized child care, including disabled children up through 
age 18, and the list goes on. Thank you.
    Mr. Cardin. Well, so the property tax cut did not use any 
of the savings from welfare reform or Federal funds?
    Ms. Rogers. I am saying there are a number of discussions 
and proposals that are underway. As you might imagine in the 
legislative process, but none of what you see there is a part 
of the Governor's budget proposal.
    Mr. Cardin. OK. Is he supporting the----
    Ms. Rogers. Well, he has always been a supporter of tax 
breaks, but, in addition to that, he first and foremost is a 
supporter of helping of our most----
    Mr. Cardin. Let me just caution that it is--again, those of 
us who really are working hard to maintain the money. We are 
doing it for children. We are doing it for the success of the 
program. I love to see States able to. I would like to see the 
Federal Government provide tax relief, but let us make sure 
that the programs that we are working on, the money is directed 
for those needs. And I take your answer to say that you support 
that, which I appreciate.
    And my time has expired, but I just really want to make an 
observation about Mr. Granger and your program. That is exactly 
what we should be doing. I am very much impressed by what you 
have been able to accomplish. You have put together the 
combination of actors that give us a much better chance of 
success, and just really wanted to compliment you on what you 
are doing and assure you that we are watching.
    Mr. Granger. Mr. Cardin, I should take no credit for the 
program itself. That was put together by a group of 
extraordinary people in Milwaukee. And it was a very bipartisan 
coalition that put it together. What we put together was the 
evaluation of, and I appreciate your remarks.
    Chairman Johnson of Connecticut. Mr. Stark.
    Mr. Stark. Thank you, Madam Chair.
    Ms. Weinstein, it is my understanding that in Utah parents 
who are being sent to work must first seek free child care 
before they are allowed access to TANF-based child care 
services. Are there other States where this practice is 
occurring?
    Ms. Weinsten. Well, yes, there are, and I cannot list them 
out for you, but we have heard that there are other States 
where there is a strong encouragement that people make use of 
either the least expensive or no-cost child care.
    Mr. Stark. Ms. Rogers, I am--I am troubled and the State of 
California is troubled by the State of Wisconsin. I am going 
back to Wauwatosa in September for my 50th reunion at Wauwatosa 
High School, and most people in California will tell you they 
wish I had not left. But, if it was a trade between me and 
Eloise Anderson, they would have taken me a thousand times 
over.
    I remember the Governor testifying here a few years ago on 
welfare reform, and he was informed that Archbishop Meyer 
opposed the welfare reform, and Governor Thompson said he did 
not really care what the Archbishop thought. He does not know 
what he is talking about. Anyway, so I want to put into 
perspective the good Governor's approach to people who may, 
particularly in Milwaukee County, have some strong commitment 
to the welfare of children.
    Do you still operate--I notice here in item seven in 
chapter one of the Wisconsin Works manual, you say that the new 
system should provide only as much service as an eligible 
person asks for or needs. Many persons will do much better with 
a light touch. Is that still the predominant philosophy in your 
program?
    Ms. Rogers. Absolutely, it is.
    Mr. Stark. OK. That is what I thought.
    Ms. Rogers. But let us defer to share what the definition 
of that----
    Mr. Stark. Look, ma'am, I can read. I do not need a whole 
lot of definitional mumbo jumbo. It seems to say to me--
particularly when we find the Milwaukee Journal reports that in 
one case, the reporter went to one of the contractors on a 
Wednesday at 3 p.m. and was told there were no forms available 
for food stamp applications, which is, by the way, against the 
law, and was told to come the back the next day--that this goes 
on quite repeatedly.
    I have some other reports here about Milwaukee, they tell 
us that 65,000 fewer children receive public support than 5 
years ago, which I suppose is all right, except that the 39 
percent more Milwaukee County single parents are working poor, 
and one out of every three employed single parents had income 
earnings below the poverty level in 1997; and two out of three 
had income earnings below 185 percent of poverty. And at least 
61,000 Milwaukee County children are in employed families with 
earnings below poverty. And 111,500 children are in families 
with income earnings below 185 percent of poverty. And the 
number of children receiving county-administered day care 
assistance doubled in the last 3 years, but fewer than 15 
percent of eligible low-income families are receiving day care 
support; and that the Federal and State earned income tax 
credit raised family earnings above poverty level for 16,000 
children and about 90 percent of the eligible families are 
claiming the credit. Good for them. But the number of working 
poor employed families has increased. The number of children 
receiving food stamps benefits, however, has dropped by nearly 
30,000, and there are numerous articles in newspapers 
suggesting that it is your own employees and your policy that 
is encouraging people to not inform people, or to make it 
difficult for them to get Medicaid and food stamps. And they 
point, with some pride, to this idea of light touch, and 
interpret it to mean that Wisconsin is denying eligible people 
these services.
    I think that is inhumane, and you might care to comment on 
that.
    Ms. Rogers. I would, sir, and thank you for the opportunity 
because I would agree with you that if, in fact, that what was 
happening, indeed, it would be inhumane.
    Mr. Stark. It is happening.
    Ms. Rogers. When in reality what is occurring in Wisconsin 
is that we are investing a tremendous amount in making sure 
that people understand what supportive services are available 
to them because those are the very thing that help them----
    Mr. Stark. There were no signs posted in these offices, 
according to law?
    Ms. Rogers. That is not true, sir, and that has since--I 
understand you read that in the article. The reporter has since 
retracted that statement because it was pointed out to him that 
the signs were, in fact, there, and he did agree----
    Mr. Stark. He just could not find it.
    Ms. Rogers [continuing]. And he did agree that they were 
there, but he did not understand what they meant. They are the 
kind of signs and specifically the signs that appear all over 
the United States. And they really are quite clear, so I am not 
sure what his problem was. But that has been clarified. It was 
an error in the newspaper.
    I must go on, however, and clarify, sir, the kinds of 
things that we are doing in Wisconsin, because we believe so 
strongly, as you have just mentioned, that these supports are 
critical to the ongoing ability of people to make it from 
welfare on, because, by definition, people who are on welfare, 
even in Wisconsin by the old benefits were generous, were at 
about 78 percent below the Federal poverty level. And while we 
still have many people who are not above the Federal poverty 
level, they are better off, by far, and have an opportunity for 
a future that they did not have before.
    Compared to the national average, Wisconsin had the fewest 
families that worried about buying food, according to the Urban 
Institute study. And health insurance coverage in Wisconsin is 
the highest of low-income children in the Nation. Medicaid and 
family coverage in August 1997 compared to March 1999, we have 
had only a very slight decrease in the amount of----
    Mr. Stark. But, nonetheless, the number of children 
receiving medical assistance coverage declined in Milwaukee 
over the last 2\1/2\ years by 24,800.
    Ms. Rogers. That is true, but it is a very small amount, 
and it is strictly a function of eligibility.
    Mr. Stark. What is a smaller--24,000 children in Milwaukee 
County is not a small, indeed.
    Ms. Rogers. By comparison and relative to Medicaid----
    Mr. Stark. Well, I look--comparisons, ma'am--by comparison 
to Kosovo, Milwaukee may be doing very well, but do not say 
that on the south side.
    Ms. Rogers. I would only say, sir, that pick another State, 
because we are the best in the Nation for that coverage.
    Mr. Stark. And that is good enough?
    Ms. Rogers. Never.
    Mr. Stark. All right. Then why do you continue to say that 
a person should receive only as much service as they ask for 
and need. Is not that suggesting to your employees and 
contractors that they minimize exposure of the people to these 
services? Is not that a sort of a do not ask, do not tell?
    Ms. Rogers. No, because the emphasis that seems to be 
missed is that they need, and many, many of these families do 
need these supportive services, and we do, in fact, do 
everything we can to make sure they----
    Mr. Stark. Like not having the forms in the office for them 
to fill out and asking them to come back the next day.
    Ms. Rogers. Not at all. The reporter was not interested in 
filling one out at the time.
    Mr. Stark. Ma'am, let us take just this report, then, where 
they find the same kinds of problems happening time and time 
again; that day care support has risen but reaches fewer than 
15 percent of the eligible children. I would like to suggest 
that while you may be better than the State of California, as I 
say because you sent us Eloise, and she will kill children if 
she had her way. But I do not know why you can take any pride 
in a program that tries to deny entry to people who need it, as 
a policy.
    Ms. Rogers. Because child per child, sir, we are investing 
more in child care subsidy than any other State in the Nation.
    Chairman Johnson of Connecticut. Ms. Rogers, I would like 
to ask you a question about the really astounding data from the 
county department of health and human services regarding child 
abuse and neglect referrals in Waukesha County. Would you just 
acquaint the Subcommittee a little bit with that? You also did 
a followup study of what happened to people who left welfare in 
that county, where welfare recipients went from 1,118 
recipients down to 37 families. Would you just talk a little 
bit about that and also particularly this issue of child abuse 
and neglect referrals.
    Ms. Rogers. Thank you, Madam Chairman, I would be happy to 
do so. And Waukesha County, by the way for those of you who 
might not be aware, is right next door to the Congressman from 
California's area in Waukesha. Their caseload did, in fact, 
drop, from 1995, April 1995 high of 1,118 families down to 37 
families in January 1999.
    Their population, by the way, was growing at the same time 
at the rate of about 5,000 residents for every year since 1990. 
Their shelter use, when you compare April 1995 to January 1999, 
fell from 235 episodes to 102, down 66 percent. And 
specifically relative to families, the number of families that 
were served in our shelters remained constant from those two 
date line points, so a zero-percent increase in that.
    Food pantry usage from January to June 1997 compared to the 
same months in 1998 shows that there were 3 months of increase 
and 3 months of decrease, but the decreasing months were down 
as much as 18 percent, and the increasing months were only up 7 
percent. And, of 50 randomly selected families in that county 
who received AFDC in 1995 and were then followed again in the 
fall of 1998, 86 percent of them reported earned income, with 
an average income of $15,892 per family, and that is a 
conservative number, because it did not include self-employed, 
out of State earnings, EITC, or other household members' 
income.
    Chairman Johnson of Connecticut. And as to the child abuse 
and neglect referrals?
    Ms. Rogers. Yes, a decrease of 66 percent.
    Chairman Johnson of Connecticut. Sorry, I missed that.
    Ms. Rogers. Oh, I am sorry. Excuse me. I am giving you the 
wrong statistic. Also down dramatically. In 1994, 963 down to 
639 in 1998, about a 25-percent drop.
    Chairman Johnson of Connecticut. Now, I want to call the 
Subcommittee's attention to this, not just because I think it 
is really terrific and really reflects an ability to implement 
our service laws and our benefit programs in a way that is 
really helping children, but because if this is happening, 
around the country, and I am sure it is not happening to this 
degree, but that drop in referrals for child abuse and neglect 
means that there were also fewer kids referred to foster care. 
Right now, Federal money goes to States according to out-of-
home placements. Very, very little of it goes for prevention, 
and it goes for prevention only as appropriated. The only 
entitlement is for placed children.
    With that kind of decline in just one county, in one State, 
folks, let me tell you, if we do not reform the way we fund 
foster care and child protective services, we need our heads 
examined, and we will have neglected the very children we hope 
to serve. So, we will be talking about that more in this 
Subcommittee. But I was stunned at that decline, and I think it 
is very impressive, particularly in a county moving forward.
    Now, let me conclude by saying that I appreciate the 
excellent testimony of all of you. And, Mr. Larson, I had noted 
your interest in expanded flexibility and uniform definitions. 
I invite any of you in the audience to submit to us written 
recommendations as to what we need to do in the welfare-to-work 
money, that is, it is an opportunity to make that money far 
more flexible and far more useful to the States. And we intend 
to do that. So we appreciate your good work. And, Mr. Larson, I 
appreciate your many years of experience out there in the 
frontline. And all of you. I thank all of you for excellent 
testimony.
    [Whereupon, at 1:23 p.m, the hearing was adjourned.]
    [Submissions for the record follow:]

Statement of NETWORK

                              The Problem

    Contrary to the widespread publicity about unparalleled 
economic prosperity in the United States today, a significant 
percentage of the population lives in abject poverty. The 
nation rarely hears the voices of most people who are poor 
since they are routinely overlooked by poll and census takers. 
Many live on the fringes of society--without telephones or 
stable addresses--while their struggles and suffering go 
unnoticed by society as a whole.
    Today, government officials are quick to point out that 
national welfare caseloads are at their lowest point in 30 
years. However, they are unable to tell us for the most part 
what is happening to people after they leave the welfare 
rolls--and what is happening to people living in poverty who 
never received assistance in the first place. The Welfare 
Reform Watch Project provides some early answers to these 
critically important questions.

                              The Project

    The Welfare Reform Watch project is an in-depth look at the 
lives of people living in poverty. Subsequent to the enactment 
of ``welfare reform'' legislation in 1996, and realizing that 
virtually nobody had a genuine understanding of the 
legislation's impact on people who are poor, NETWORK joined 
forces with other faith-based groups to reach out to these 
people whose voices had been little heard. NETWORK and its 
partners in the study were able to utilize the resources of a 
large number of affiliated social services agencies to conduct 
one-on-one interviews with people in soup kitchens, homeless 
shelters and other facilities. This direct connection among 
study sponsors, service providers and clients made the project 
a uniquely powerful instrument through which people who are 
poor could at last tell their own stories.
    As part of the study, a statistical survey instrument 
designed by Dr. Douglas Porpora was distributed to 59 Catholic 
social service facilities in ten states (California, Florida, 
Illinois, Massachusetts, Michigan, New Jersey, New York, Ohio, 
Pennsylvania, and Texas). The ten states were selected based on 
their heavy caseloads of people who were eligible for AFDC. A 
total of 2,555 questionnaires were returned for analysis in 
three phases--October 1997 (829 cases), March 1998 (926 cases) 
and October 1998 (800 cases). Statistical information in this 
report is based on Dr. Porpora's analysis of the questionnaire 
responses.
    Four hundred fifty ``watchers,'' individuals who followed 
implementation of the welfare changes in their own communities, 
also took part in the project. Their role was to monitor 
effects of the legislation and to report on their findings to 
local media outlets and legislators.
    The Participants:
     41% of the respondents are without operative 
telephone numbers, making them difficult to reach for most 
surveys and studies.
     Clients of the social service facilities included 
in this study are predominatly female (79%), with most women 
respondents (75%) having minor children who live with them.
     38% of the women respondents had not completed 
high school, while only 13% received education beyond high 
school.
     Female respondents under age 30 are less likely 
than men of the same age to have jobs (22% versus 36%). Women 
and men over 30 have roughly equal levels of employment (20% 
and 18%).
     Survey respondents are almost evenly divided 
according to race/ethnicity: White (29%); Black (35%); Latino 
(36%).
     38% of the respondents live in non-urban settings.

                              Key Findings

    1. Poverty continues as people receive less government 
assistance.
     Percentage of respondents receiving welfare 
whether unemployed or in transition to work, down sharply (33% 
in October 1997--less than 5% in October 1998).
     Percentage of the ``disconnected,'' unemployed 
people who do not receive welfare benefits, up sharply 
(52%-79%).
     Percentage of respondents receiving Medicaid down 
(76%-60%).
     Percentage of respondents receiving food stamps 
down (63%-52%).
    2. Suffering continues as basic needs go unmet.
     Hunger and poor health continue.
    --Nearly half (49%) of the respondents report that their 
health is only ``fair'' or ``poor.''
    --31% unable on accasion to fill physicians' perscriptions 
for needed medication due to cost.
    --45% unable to meet dental needs due to cost.
    --43% eat fewer meals or less per meal due to cost
     Women and children are suffering
    --14% of the parents unable at times to secure needed 
medical care for their shildren due to cost.
    --25% of the parents unable at times to secure needed 
dental care for their children due to cost.
    --24% of the parents report that their children are 
skipping meals or eating less per meal due to cost.
    --52% of soup kitchen patrons and 42% of respondents at 
food pantries unable to provide sufficient food for their 
children.
    --70% of respondents without any government assistance are 
female.
    --63% of respondents without any government assistance have 
children.
     The working poor are suffering.
    --41% of respondents with jobs experience hunger.
    --The children of respondents with jobs suffer the effects 
of their parents' low wages:
    --lack of food (22%), lack of adequate health care (14%), 
unmet dental needs (24%).
     People without government assistance are 
suffering.
    --Of respondents without government assistance: 51% report 
inadequate dental care, 36% report inadequate medical care.
     Parents without government assistance report that 
their children receive: inadequate dental care (36%), 
inadequate medical care (21%).

   The Challenge of Poverty in the Midst of Plenty--A Call to Action

    In the United States today, a staggering 35 million people 
live in poverty while the nation as a whole enjoys unparalleled 
economic prosperity. The situation is intolerable. We can and 
must do better.
    U.S. citizens, policy makers and media must move the 
conversation from:
    ``Wefare reform is working because welfare rolls are 
dropping.'' to
    ``The unfinished agenda of our nation is moving people out 
of poverty.''
    To alleviate poverty and suffering, the United States must 
establish social policies that aim to provide opportunity for 
economic security for every household.
    The life experience of the people in the Welfare Reform 
Watch Project are riddled with debilitating poverty and 
suffering. Their experiences raise questions that demand 
further study and resolution.
    NETWORK will participate in creating social, political and 
economic structures that promote economic well-being.
    What actions will you take to move people out of poverty 
and create economic justice for all?
      

                                


                           Project Sponsors:

Daughters of Charity United States Provinces
7800 Natural Bridge Road, St. Louis, MO 63121
Telephone 314-382-2800

Federation of the Sisters of Saint Joseph
1841 Glenmore Ave., Baton Rouge, LA 70808
Telephone 504-927-0273

Institute of Sisters of Mercy of the Americas
8300 Colesville Road, Suite 300, Silver Spring, MD 20910-3243
Telephone 301-587-0423

Pax Christi USA
532 West 8th Street, Erie, PA 16502-1343
Telephone 814-453-4955
  

NETWORK, A National Catholic Social Justice Lobby
801 Pennsylvania Avenue, Suite 460, Washington, DC 20003
Telephone 202-547-5556
Kathy Thornton, RSM
NETWORK National Coordinator
  
  
      

                                


Statement of Hon. Fortney Pete Stark, a Representative in Congress from 
the State of California

    In the aftermath of welfare reform under the 1996 Personal 
Responsibility and Work Opportunity Reconciliation Act, many 
are pointing to plummeting welfare caseloads as a sign of 
welfare reform's success. While the rolls have fallen by 4.6 
million people, or 38 percent, since the signing of the welfare 
reform law, any claims that welfare reform is a success are 
premature.
    A main factor to consider when assessing the success of 
welfare reform is whether individuals and families leaving the 
rolls (``welfare leavers'') are better off economically. 
Various reports illustrate that these welfare leavers are 
earning low wages that do not pull them above the poverty line, 
are typically not finding jobs with employment-based health 
coverage, and are not being signed-up for food stamps or 
Medicaid, two assistance programs that could serve as critical 
work supports. In fact, it appears that in their efforts to 
deter people from cash assistance, some States are wrongfully 
diverting families from Medicaid and food stamps.
    Following is an overview of several studies that illustrate 
the downside of welfare reform and underscore the need to be 
cautious before declaring victory or failure.

    Sharon Parrot, Center on Budget and Policy Priorities, Welfare 
 Recipients Who Find Jobs: What Do We Know About Their Employment and 
                       Earnings?, November 1998.

     This report synthesizes findings from recent 
studies on employment and earnings patterns for welfare 
recipients who left their state's cash assistance program or 
who were subject to new rules under welfare reform 
``demonstration'' programs. Across the studies, the following 
patterns emerged:
     Employed former recipients and recipients 
combining work and welfare typically are paid less than $8 per 
hour and a substantial portion earn less than $6 per hour.
     Those who find jobs tend to work a substantial 
number of hours--typically more than 30 hours per week during 
weeks in which they are employed.
     Despite this relatively high number of weekly work 
hours, recipients who find jobs typically earn between $2,000 
and $2,700 per quarter (or between $8,000 and $10,000 
annually), a total well below the poverty line for a family of 
three.
     Most recipients who do find jobs do not receive 
paid vacation or sick leave from their employer or employer-
sponsored health insurance. Many individuals are also not 
covered by the Family and Medical Leave Act because they do not 
meet the minimum work requirements (worked for their current 
employer for at least one year and who worked at least 1,250 
hours in the last year).
     The report concludes that recipients who find jobs 
are likely to have incomes that are inadequate to meet their 
families' basic needs. For many families, a combination of 
earnings, cash and in-kind government income support, and child 
support for single-parents, will be necessary to make ends 
meet.

 Sharon Parrot and Stacy Dean, Center on Budget and Policy Priorities, 
Food Stamps Can Help Low-Income Working Families Put Food on the Table, 
                            March 31, 1999.

     This report builds on the state evaluation data 
discussed above.
     The authors illustrate that, given recent data 
indicating that families leaving welfare for work are earning 
wages below the poverty line, food stamps can contribute 
greatly to a family's income. In combination, food stamps, the 
EITC and family earnings can lift a full-time minimum wage 
worker almost to, or above, the poverty line.
     Data show that as cash assistance rolls have 
fallen, so has food stamps participation. However, the decline 
in food stamps caseloads far outstrips the decline in the 
number of people eligible for food stamps. Many families are 
still eligible for food stamps, yet are not participating in 
the program. The most recent data on food stamp participation 
among low-income households with earnings showed that only 55.2 
percent of food stamp eligible households with earnings and 
children participated in the food stamp program.
     These working poor families could use food stamp 
benefits to boost their incomes and the report provides 
examples to illustrate that point. For instance, in a family of 
three with one person working 30 hours per week at the minimum 
wage, ``take-home earnings'' (after taxes, before EITC) 
increase by $223 to $283 due to food stamps.

    Kaiser Family Foundation, Participation in Welfare and Medicaid 
                      Enrollment, September 1998.

     This report summarizes eight state studies that 
examined AFDC/TANF exits and health care coverage. The 
overarching theme is that when families stop receiving AFDC/
TANF, Medicaid enrollment goes down.
     The magnitude of the decline varies between 
studies, but often one-third or more of children and most 
adults in families that have exited AFDC/TANF are no longer 
reported to be receiving Medicaid.
     Furthermore, most families entering employment 
after having received AFDC/TANF do not have employment-based 
health care coverage. Typically, among families who are 
employed, the share reporting employment-based coverage is 25% 
or less.

Urban Institute, Where Are They Now? What States' Studies of People Who 
                    Left Welfare Tell Us, May 1999.

     This report summarizes the findings of eleven 
studies examining the well-being of welfare leavers.
     While all the studies report employment rates for 
welfare leavers of over 50 percent, it is important to note 
that these rates can be skewed since some studies may not count 
individuals who leave welfare for work but then subsequently 
return to welfare, and some studies may count individuals as 
employed even if they make only $100 in a three-month period.
     In general, the studies show that leavers are not 
earning enough to raise their income far above the poverty 
line, and that the jobs they find are typically concentrated in 
low-wage industries.

  Children's Defense Fund, Welfare to What: Early Findings on Family 
                Hardship and Well-Being, November 1998.

    This report found the following:
     Only a small fraction of welfare recipients' new jobs pay 
wages sufficient to lift a family of three above the poverty line; most 
of the new jobs pay far below the poverty line.
     Many families who leave welfare are losing income or not 
finding steady jobs at all.
     Extreme poverty (below one-half of the poverty line) is 
growing more common for children, especially those in female-headed and 
working families. The number of children in extreme poverty grew from 6 
million in 1995 to 6.4 million by 1997, an increase of nearly 7 
percent. This increase is surprising since it occurred during a time of 
economic growth and a decline in overall child poverty.
     Former TANF recipients report increasing difficulty buying 
sufficient food, paying their rent and utilities, as well as loss of 
Medicaid and greater signs of homelessness.
     Potential welfare recipients face administrative barriers 
to cash assistance including complex application policies, procedures 
discouraging applications, agency errors and poor communication.
     Furthermore, workers may fail to tell parents about 
protections that can keep them from being sanctioned (e.g., that they 
may be exempt from work requirements if they cannot find child care for 
pre-school age children.)

 Jocelyn Guyer and Cindy Mann, Center on Budget and Policy Priorities, 
 Employed but Not Insured: A State-by-State Analysis of the Number of 
  Low-Income Working Parents Who Lack Health Insurance, March 1, 1999.

     This report uses 1997 U.S. Census Bureau data to 
analyze the number of parents of low-income working families 
who are without health insurance.
     The data show that these parents are at high risk 
of being uninsured. In fact, more than 5.4 million low-income 
working parents were uninsured in 1997. These parents have 
limited access to publicly funded coverage and are often not 
covered through their employers.
     Working poor parents are twice as likely to be 
uninsured as their unemployed counterparts. In 1997, some 23 
percent of poor parents without earnings were uninsured 
compared to 46 percent of working poor parents.
     A review of state policies found that although 
states generally provide Medicaid to parents who are receiving 
welfare, and all have recently expanded coverage for low-income 
children, few states cover low-income working parents who have 
no current or recent attachment to the welfare system. In fact, 
43 states do not cover working parents whose earnings bring 
them just to the poverty level.
     Until passage of PRWORA, federal Medicaid law 
limited coverage to parents who were receiving welfare or who 
recently had left welfare. Under PRWORA, states now have a new 
option to expand coverage more broadly to low-income working 
parents. Rhode Island and DC have taken advantage of this, and 
Missouri and Wisconsin recently adopted parent coverage 
expansions under federal Medicaid waivers.

 Families USA, Losing Health Insurance: The Unintended Consequences of 
                       Welfare Reform, May 1999.

     In the aftermath of welfare reform, Medicaid 
enrollment declined and the number of low-income people without 
health insurance increased.
     Specifically, Families USA reported that as of 
1997, 1.25 million people with incomes under 200 percent of the 
poverty level lost their Medicaid coverage.
     Of those who moved off of Medicaid in 1997, more 
than half, or 675,000 children and adults, were instead 
uninsured in 1997.
     For the 675,000 people who lost Medicaid after 
welfare reform and were uninsured, more than three out of five 
were under the age of 19. Most of these children were probably 
still eligible for Medicaid and should not have lost coverage.
     There are three ways in which these low-income 
people lose health care coverage as a result of welfare reform: 
(1) they or a family member successfully move from welfare to 
work, often to a job with no health insurance, and lose 
coverage even though they may still be eligible for 
transitional Medicaid; (2) they are terminated from welfare, 
resulting in a wrongful loss of Medicaid; and (3) state efforts 
to deter people from welfare often can result in people being 
denied the opportunity to apply for Medicaid.

 NETWORK's National Welfare Reform Watch Project, Poverty and Plenty, 
          The Unfinished Business of Welfare Reform, May 1999.

     NETWORK is a National Catholic Social Justice 
Lobby that utilizes the resources of a large number of social 
service agencies to conduct one-on-one interviews with people 
in soup kitchens, homeless shelters and other facilities
     Survey findings highlighted by NETWORK were as 
follows:
     People are receiving less government assistance 
while still living in poverty: the percentage of respondents 
receiving Medicaid decreased from 76 percent to 60 percent, the 
percentage receiving food stamps decreased from 63 percent to 
52 percent, and the percentage receiving welfare, whether 
unemployed or in transition to work, decreased from 33 percent 
in October 1997 to less than 5 percent in October 1998.
     Low-income families report their basic needs are 
not being met: among all respondents, 31 percent report being 
unable at times to fill physicians' prescriptions due to cost; 
14 percent of parents reported being unable to secure medical 
care for their children. 45 percent are unable to meet dental 
needs; 42 percent eat fewer meals or less per meal due to cost.

                                  
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