Welfare Reform: Information on Changing Labor Market and State Fiscal Conditions

A letter report issued by the General Accounting Office with an abstract that begins "With the enactment of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), the Congress made sweeping changes to federal policy for needy families. PRWORA ended the Aid to Families with Dependent Children (AFDC) program and created the Temporary Assistance for Needy Families (TANF) block grant to states. The Department of Health and Human Services (HHS) oversees the TANF block grant program, which provides grants to states totaling up to $16.5 billion each year and requires states to maintain a historical level of state spending on welfare reform programs. Under TANF, states have greater flexibility and face greater uncertainty than they did under AFDC. States have greater flexibility to design, finance, and implement programs for low-income families, including determining who is to be served and what services to provide. TANF also emphasizes the transitional nature of assistance and the importance of employment for welfare recipients. Because the amount of the TANF block grant is fixed, as caseloads decline--as they did in all states through the late 1990s--states have had additional resources that they have used to expand their programs, achieve some budgetary savings, and create reserves; however, states bear most of their TANF program's fiscal risks if their programs' costs rise as a result of higher caseloads or other factors. Welfare reform was initially implemented in a time of economic growth, when there was a strong demand for labor and the fiscal situation of the states was favorable. More recently, the economy has slowed and welfare reform is being implemented in less favorable economic conditions. To obtain information on welfare reform under changing labor market and fiscal conditions, Congress asked us to determine (1) how labor market conditions have changed in recent years; (2) how cash public assistance caseloads and the employment activities of current and former welfare recipients have changed in recent years; (3) how the fiscal situation of states has changed in recent years; and (4) to what extent states have made changes to their welfare programs as a result of fiscal changes.