Welfare Reform: States' Implementation Progress and Information on Former
Recipients (Testimony, 05/27/99, GAO/T-HEHS-99-116).

Pursuant to a congressional request, GAO discussed: (1) states'
implementation of welfare reform; (2) the status of children and
families leaving welfare; and (3) key issues involved in assessing the
success of welfare reform.

GAO noted that: (1) GAO's work shows that states are transforming the
nation's welfare system into a work-focused, temporary assistance
program for needy families; (2) many states are refocusing their
programs on moving people into employment rather than signing them up
for monthly cash assistance; (3) 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; (4) 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; (5) caseload reductions serve as
only one indication of progress in meeting the goals of welfare reform,
however; (6) early indications from GAO's 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; (7) 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; (8) however, much remains unknown about
the economic status and well-being of most former welfare families
nationwide; (9) many efforts are under way to provide more information
on the families who have left welfare and the effects of welfare reform;
and (10) as this information becomes available, it will permit a more
comprehensive assessment of welfare reform, which will need to address
the following key issues: (a) how do low-wage earners and their families
fare after leaving welfare for work; (b) 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; (c) how
effectively are states working with hard-to-serve welfare recipients who
remain on the Temporary Assistance to Needy Families rolls; and (d) how
would an economic downturn affect states' welfare reform programs.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-HEHS-99-116
     TITLE:  Welfare Reform: States' Implementation Progress and
	     Information on Former Recipients
      DATE:  05/27/99
   SUBJECT:  Data collection
	     Program graduation
	     State-administered programs
	     Workfare
	     Welfare recipients
	     Statistical data
	     Public assistance programs
	     Surveys
IDENTIFIER:  HHS Temporary Assistance for Needy Families Program
	     Aid to Families with Dependent Children Program
	     AFDC

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WELFARE REFORM: States' Implementation Progress and Information on
Former Recipients GAO/T-HEHS-99-116 United States General
Accounting Office

GAO Testimony Before the Subcommittee on Human Resources,

Committee on Ways and Means, House of Representatives For Release
on Delivery Expected at 10: 30 a. m. Thursday, May 27, 1999
WELFARE REFORM

States' Implementation Progress and Information on Former
Recipients

Statement of Cynthia M. Fagnoni, Director Education, Workforce,
and Income Security Issues Health, Education, and Human Services
Division

GAO/T-HEHS-99-116

  GAO/T-HEHS-99-116

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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. 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.

In summary, our work shows that states are transforming the
nation's welfare system into a work- focused, temporary assistance
program for

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.

GAO/T-HEHS-99-116 Page 1

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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

GAO/T-HEHS-99-116 Page 2

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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.

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

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.

GAO/T-HEHS-99-116 Page 3

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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

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.

5 See Welfare Reform: States' Experiences in Providing Employment
Assistance to TANF Clients (GAO/HEHS-99-22, Feb. 26, 1999). 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).

GAO/T-HEHS-99-116 Page 4

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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.

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.

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

8 For more information, see Medicaid: Early Implications of
Welfare Reform for Beneficiaries and States (GAO/HEHS-98-62, Feb.
24, 1998). 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).

GAO/T-HEHS-99-116 Page 5

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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.

GAO/T-HEHS-99-116 Page 6

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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.)

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.

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.

GAO/T-HEHS-99-116 Page 7

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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.

Table 1: Employment and Earnings Data From Studies in Seven States

State and period during which families studied left welfare a

Employed at time of follow- up (percentage)

Ever employed

since leaving welfare (percentage)

Average hourly wage rate b

Estimated average earnings

per quarter c

Estimated average earnings

per year

Indiana (1995- 96) d 64.3 84.3 $6.34 $2,637 $10,548 Maryland
(1996- 97) e 63.0 f e 2,384 f 9,536 Oklahoma (1996- 97) 64.5 e
6.51 2,877 11,508

South Carolina (1997) 61.8 85.6 6.45 3,019 12,076

Tennessee (1997) g 61.0 e 5.67 2,727 10,908 Washington (1998) 71.0
87.0 8.09 3,786 15,144 Wisconsin (1995- 96) h e 82.1 e 2,378 i
9,512

Wisconsin (1998) j 62.0 83.0 7.42 3,473 i 13,892 (Table notes on
next page)

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.

GAO/T-HEHS-99-116 Page 8

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

Note: Except where noted, these data include only families who did
not return to welfare. a 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.

b 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. c 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.

d 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.

e Data were not available. f This figure also includes individuals
who returned to welfare. g 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.

h These data are based on a study using administrative data for
families leaving welfare from July 1995 to July 1996. i 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.

j 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

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.

GAO/T-HEHS-99-116 Page 9

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

after they left welfare, many of them would remain below the
federal poverty level. 15

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.

15 For 1998, the federal poverty level for a family of three was
$13,650.

GAO/T-HEHS-99-116 Page 10

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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.

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.

16 These and other factors are considered indicators of well-
being.

GAO/T-HEHS-99-116 Page 11

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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 a (percentage responding yes)

Wisconsin b (percentage responding yes)

Question On welfare Off welfare On welfare Off welfare

Did you ever get behind in rent or house payments? 13 15 30 37 c

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 c

Was there ever a time when you could not afford child care when
needed in order to work? 11 9 22 33 c

Did somebody in your home ever get sick or hurt when you could not
get medical care? 1

7 c 8 11 Did you have to go to a homeless shelter? 2 1 5 3 a Based
on a sample of 403 former welfare recipients.

b Based on a sample of 375 former welfare recipients. c 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.

GAO/T-HEHS-99-116 Page 12

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

Efforts Are 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 and measures of employment, earnings, and
income. Five of these states' studies also will include
information on outcomes for children. 17

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

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.

GAO/T-HEHS-99-116 Page 13

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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.

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

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.

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).

GAO/T-HEHS-99-116 Page 14

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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.

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

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).

GAO/T-HEHS-99-116 Page 15

Welfare Reform: States' Implementation Progress and Information on
Former Recipients

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.

GAO/T-HEHS-99-116 Page 16

GAO/T-HEHS-99-116 Page 17

Appendix I Reports From States' Studies of Families Who Left
Welfare

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.

GAO/T-HEHS-99-116 Page 18

Appendix I Reports From States' Studies of Families Who Left
Welfare

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.

GAO/T-HEHS-99-116 Page 19

Appendix I Reports From States' Studies of Families Who Left
Welfare

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.

GAO/T-HEHS-99-116 Page 20

Appendix II Information on Seven States' Studies of Families Who
Have Left Welfare

Follow- up Categories of families and time periods involved
Frequency Timing Data collection

method( s) Indiana

Families receiving AFDC May 1995 to May 1996 who subsequently left
AFDC Once 12 to 18 months after

enrollment Telephone survey

Maryland

Families who left TANF Oct. 1996 to Sept. 1997 Quarterly Up to 12
months after exit Review of

administrative data

Oklahoma

Families who left or were denied TANF Oct. 1996 to Nov. 1997 Once
2 to 18 months after exit or denial Telephone survey

South Carolina a

Families with a household member required to seek employment who
left welfare July to Sept. 1997 and had not returned at time of
follow- up

Once 9 to 14 months after exit Telephone survey and

some in- person interviews

Tennessee

Families who lost TANF benefits Jan. to Oct. 1997 because they did
not comply with program rules and TANF families whose head was
employed full- or part- time Feb. to Oct. 1997

Once Approximately 3 months after exit Telephone survey

Washington a

Single- parent families who left TANF Apr. to July 1998 Once 2 to
4 months after exit Telephone survey and review of administrative
data

Wisconsin

Single, female- headed families who left AFDC July 1995 to July
1996 Five times Quarterly for 5

quarters after family left welfare

Review of administrative data

Families who left TANF Jan. to Mar. 1998 and did not return prior
to survey Once 5 to 10 months after

exit Telephone survey and in- person interviews a 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.

(116032) GAO/T-HEHS-99-116 Page 21

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