States waver on welfare reform's next step

Some states are using welfare funds to aid former recipients; others to pay for tax cuts.

Welfare reform is one of those rare ideas that almost everyone in this city can agree on. In the five years since its enactment, the Personal Responsibility and Work Opportunity Reconciliation Act, as the reform law is named, has been praised by Democrats and Republicans alike and has become a poster child for those who wish to devolve federal powers to the states.

Outside Washington, however, grumblings persist. In particular, those who run the local programs that hold up America's new safety net claim some states are using their federal welfare money incorrectly. And they cite $8 billion slated for state programs that has not been used at all.

"There has been a failure of imagination at the state level," says Rich Stoltz, an analyst at the Center for Community Change here. "We are not seeing the innovative solutions we'd hoped for, especially in people transitioning from welfare to work."

The new system has succeeded in getting people off the welfare rolls, experts say, but beyond that, the picture is more complicated. The story of welfare reform is actually thousands of little stories - some clear successes and some more problematic. And as momentum toward devolution grows, pushed by President Bush, the system is likely to get a harder look.

By the broadest measure, the nation's welfare-reform efforts have been an unqualified success. Since 1993, more than 8 million people have moved off the welfare rolls, a reduction of nearly 60 percent. Poverty, as defined by the government, has dropped precipitously. And out-of-wedlock births have also fallen.

"There have been very dramatic changes, not just in how welfare works, but in the culture of poverty," says Ron Haskins of the Brookings Institution here.

The 1996 welfare reform act fundamentally changed the way the government dispersed aid to the poor. It replaced the 61-year-old Aid to Families with Dependent Children program with an annual $16.5 billion block grant that allowed states to create their own programs. The money was divided between the states in proportion to what they received in welfare money before reform, with the specific mission of meeting welfare-reduction targets.

But some now say that the loose strings placed upon that $16.5 billion might have been too loose. Having reached their welfare-reduction targets, some states are doing little to push reform to the next level: helping the newly employed succeed in the long term.

Advocates for welfare recipients say $8 billion in designated welfare money is sitting unused in Washington because states haven't decided what to do with it.

Saving or supplanting?

Of course, some experts say, it may be prudent for states not to spend all their funding right away - since bigger problems could crop up in coming months, especially if the economy sours.

"The smart states are at least trying to save some of their money," says David Ellwood, a professor at Harvard's Kennedy School of Government in Cambridge, Mass., and former co-chair of President Clinton's welfare-reform effort.

The real danger, says Mr. Ellwood, comes when states start "spending the grant money by redirecting it to other resources."

That practice, called "supplantation," is exactly what is happening in some states, says the National Campaign for Jobs and Income Support, a coalition of antipoverty groups here.

Wisconsin, for example, used $112 million in federal funds intended for the poor to pay for tax cuts and other nonpoverty-related programs. Virginia plans to put $10 million of welfare-reform money into its general fund, in part to offset money lost when the state eliminated its car tax.

Moves like those have a real impact on people trying to move from welfare to work, says Tony Ramos, director of the Miami Worker's Center. Florida has $435 million in unspent federal block money, he says, yet some 3,000 people in Dade County are on a waiting list for subsidized child care. And Gov. Jeb Bush (R) has proposed putting $169 million of federal welfare money into the state's general fund to replace state spending on other social-service programs.

There is nothing illegal about this practice. The welfare-reform law, as written, allows for it. Mr. Haskins says Congress realized such maneuvers could occur, but was unable to come up with a formula for preventing the practice.

The working poor

Some states and localities have avoided the issue altogether, by turning their attention to the growing numbers of working poor.

Having reduced its welfare rolls from 12,000 families in 1996 to about 1,350 today, the city of Denver is now using the $43 million it receives annually on new programs for those transitioning to work.

"The welfare rolls are shrunk, but the ranks of the working poor have grown," says Shepard Nevel of the Mayor's Office on Workforce Development in Denver.

So the city broadened its definition of "needy," created its own citywide version of the federal Earned Income Tax Credit to help working families, and made subsidized child care available to them. It also raised the reimbursement rate for child-care providers, to help make sure care would not be in short supply.

While neighboring communities support the city's efforts, says Mr. Nevel, they have not followed its lead for fear of attracting more working-poor families - another freedom that devolution brings.

Still, he says he likes the flexibility in the current system and is leery of big changes. "I just don't want them to make the process too complicated," he says. "We don't want to be swimming in federal forms."

(c) Copyright 2001. The Christian Science Monitor