CONNECTICUT GENERAL ASSEMBLY

LEGISLATIVE PROGRAM REVIEW AND INVESTIGATIONS COMMITTEE

The Legislative Program Review and Investigations Committee is a joint, bipartisan, statutory committee of the Connecticut General Assembly. It was established in 1972 to evaluate the efficiency, effectiveness, and statutory compliance of selected state agencies and programs, recommending remedies where needed. In 1975, the General Assembly expanded the committee's function to include investigations, and during the 1977 session added responsibility for "sunset" (automatic program termination) performance reviews. The committee was given authority to raise and report bills in 1985.

The program review committee is composed of 12 members. The president pro tempore of the Senate, the Senate minority leader, the speaker of the house, and the House minority leader each appoint three members.

2005-2006 Committee Members

Committee Staff

Carrie Vibert, Director

Catherine M. Conlin, Chief Analyst

Jill Jensen, Chief Analyst

Brian R. Beisel, Principal Analyst

Michelle Castillo, Principal Analyst

Maryellen Duffy, Principal Analyst

Miriam P. Kluger, Principal Analyst

Anne E. McAloon, Principal Analyst

Renee La Mark Muir, Principal Analyst

Scott M. Simoneau, Principal Analyst

Carrie O. Evangelinos, Legislative Analyst II

Bonnine T. Labbadia, Executive Secretary

Project Staff

Maryellen Duffy

Miriam P. Kluger

Chris Andrews, Legislative Fellow

STATE CAPITOL ROOM 506 HARTFORD, CT 06106 (860) 240-0300

Email: pri@cga.ct.gov www.cga.ct.gov/pri/index.htm

Legislative Program Review

& Investigations Committee

Connecticut's Welfare Reform Initiative

December 2006

CONNECTICUT'S WELFARE REFORM INITIATIVE

Executive Summary i

Introduction 1

I. An Overview of Welfare Reform in Connecticut 5

Background 6

Jobs First Administrative Organization 7

Key Features of Connecticut's Jobs First 9

Work Participation Rate Requirements under Federal Law 11

II. Jobs First Caseload and Funding Trends 15

Overall Jobs First Caseload 15

Jobs First Employment Services (Time-Limited Clients) 18

Jobs First Expenditure Trends 25

III. Jobs First Program Client Process 31

Initial Jobs First Eligibility Determination 31

Employment Plan Activities 38

TFA Extensions and Sanctioning 39

IV. Programs Available for Jobs First Program Recipients 45

Jobs First Employment Services (JFES) 45

Empowering People for Success Program 45

Transitionary Rental Assistance Program 48

Diversion Program 49

Care 4 Kids 49

Food Stamps 50

Medicaid 50

V. Description of TFA Study Sample Population 51

Key Findings 51

Sample Compilation 53

Description of Approved TFA Applicants in Sample 55

Description of Time on Cash Assistance 56

Financial Condition of Families in Study Sample at Case Opening 63

VI. Jobs First Employment Services: Study Sample Experience 67

Key Findings 67

JFES Orientation 69

Study Sample Participation Rates in JFES Activities 71

JFES Activities and Barriers to Employment 73

VII. Performance Outcomes for Study Sample 75

Key Findings 75

JFES Program Goal Outcomes: Earnings and Independence from TFA 77

WIB Performance Measures 82

Reason for Case Closing 85

Financial Condition of Families Before, During and After TFA 87

Factors Associated with Outcomes 94

Returning to TFA 99

VIII. Federal and State Earned Income Tax Credit 105

Federal Earned Income Tax Credit 105

State Earned Income Tax Credit 108

IX. Measures of Poverty and Connecticut's TFA Payment Standard 113

Federal Poverty Thresholds 113

Poverty Levels in Connecticut 115

Eligibility for TFA and Connecticut's Payment Standard 116

Self-Sufficiency Measure for Connecticut 119

X. Strategies to Achieve TANF Work Participation Rates 125

Removing Certain TFA Client Groups from WPR 129

Exempt Status for Women with Children under Age One 130

Eliminating Financial Cliffs 131

Engage Families in Work Activities More Quickly 135

Fully Engaging Families Already Involved in Work Activities 135

Using Sanctions to Reduce Noncompliance 135

XI. Verification and Monitoring 137

Plan Content 137

Federal Monitoring with Plan Compliance 138

Eligibility and Staffing 139

Monitoring of JFES Performance 143

Other Reporting Activities 146

APPENDICES

A. PRI Staff Contact with Organizations/Interested Parties and Trends in Interviews

B. Comparison of Welfare Program Key Provisions in Selected Other States

C. TFA Payment Regions by Town

D. Definitions of Allowable Work Activities to Count Toward WPR under DRA

E. Counters for Time-Limited TFA Cases

F. JFES Program Operating Principles

G. Study Sample Compared with Connecticut TFA Population

H. Comparison of Families in Urban, Suburban, and Rural Areas

I. Connecticut TFA Recipients that Received TANF in Another State

J. Time When Sample Clients First Began Receiving Time-Limited Cash Assistance

K. Number of Extensions for Time-Limited and Exempt Families

L. Sanctioning Process

M. Reason for JFES Exemption and Differentiating Characteristics

N. Demographic Differences Across the Three DSS Regions

O. Department of Social Services: Town Codes by Region and Office

P. Demographic Differences Across WIB Regions

Q. Additional Information About Barriers to Employment

R. Change in Assets and Income from TFA Opening to Closing

S. TFA Recipients and Food Stamps, Housing, Child Care, and Health Insurance Assistance

T. Activities Participated in By JFES Clients Previously in the Program

U. JFES Activities and Literacy Level

V. Financial Condition at Various Points in Time

W. Financial Condition Over Time for JFES Active, Inactive, and Exempt Clients

X. Percent of Clients Employed Above the TFA Payment Standard

Y. Percent of JFES Active, Inactive and Exempt Clients Earning Above the Federal Poverty Level

Z. Reason for Case Closure for Exempt Families

AA. Financial Condition of Exempt Families Caring for a Child Under One or Due to Temporary Incapacity

BB. Outcomes for Time-Limited Non-JFES Participants

CC. Number of Times Households Cycled On and Off TFA Between October 2003 and August 2006

DD. Employment Sectors for JFES Active, Inactive, and Exempt Clients

EE. Percent of People Below Poverty Using EITC by State, 2003

FF. State TANF Work Participation Rate Gaps to Avoid Federal Penalties in FFY 2007

GG. Agency Responses

Executive Summary

Connecticut's Welfare Reform Initiative

The Jobs First program, Connecticut's welfare program, is financed by both the federal Temporary Assistance for Needy Families (TANF) block grant and state matching funds, known as Maintenance of Effort (MOE) funds. There are two parts to the Jobs First program – temporary family assistance (TFA), which gives cash benefits to clients, and the Jobs First Employment Services (JFES) program, which provides employment services to TFA recipients who are not considered “exempt” from work requirements. For these “time-limited” clients participating in the JFES program, cash assistance is limited to 21 months (although extensions to the time limits are possible) and recipients are required to work or participate in employment services. TFA recipients who are exempt from the JFES program fall under specific exemption categories, and their status can change from exempt to time-limited if their circumstances change.

The Legislative Program Review and Investigations Committee authorized a study of Connecticut's welfare reform initiative in April 2006. The scope of study approved by the committee required the review to: 1) describe the exempt and non-exempt families currently enrolled in the Jobs First program by comparing barriers to employment, financial conditions, and the services received by each group; 2) evaluate the implementation and success of the JFES program including measuring the level of economic change experienced by participants; and 3) describe how Connecticut has allocated its TANF block grant and related state funds.

The TANF block grant was reauthorized in February 2006 by Congress under the Deficit Reduction Act (DRA) of 2005 and contains several changes that will affect how states operate their programs. A major change will require Connecticut to more than double the number of time-limited clients participating in work activities -- from about 2,200 clients to almost 5,000. Failure to meet federally mandated work participation rates (WPRs) could result in a reduction of TANF funds because of potential penalties imposed by the U.S. Department of Health and Human Services (HHS).

The committee believes the goal of the state's welfare program should be focused on not only engaging many more clients in work activities that lead them towards employment in order to meet these aggressive work rates, but to help families become and remain better off. Thus, the reauthorization also provides an opportunity to reassess state policies and set new goals that will help Jobs First clients meet with success. These goals should include helping families address barriers to employment, such as attaining a GED or high school diploma, identification and treatment of substance abuse, and offering work supports to promote employment retention.

The report describes the Jobs First program, highlighting caseload and funding trends, and analyzes recipient characteristics, JFES experience, and outcomes for families based on a study sample of 1,278 welfare clients (1,171 families). The report also discusses the federal earned income tax credit, explains how different poverty measures are used to identify the poor, proposes a variety of recommendations aimed at increasing the work participation rates in Connecticut, and discusses federal requirements regarding how states must verify that clients are actually engaged in work activities.

Welfare Caseload and Funding Trends

The program review committee found that the Jobs First caseload decreased sharply from approximately 59,000 families in FY 96 to about 20,000 in June 2006. Combined federal TANF block grant and state matching MOE funds totaled $469.1 million in FFY 06 and were used to fund more than 60 programs across 12 state agencies, departments, and offices.

Welfare Recipient Characteristics and Experience with JFES

Program review committee staff compiled a database consisting of 1,278 Jobs First clients that were granted TFA in October 2003. Based on the study sample, three-quarters were found to have previously received cash assistance, some dating back to the 1990s. Many families faced barriers to employment such as lack of transportation, child care, high school diploma or GED, low math and reading skills, and limited work history.

The committee found that while there was a host of possible JFES work activities, only four were used with any regularity: job search/job readiness; unsubsidized employment; vocational education; and education directly related to employment.

Outcomes for Welfare Families

Approximately one-quarter of the committee's study sample left welfare earning above the federal poverty level; however, there was a dramatic drop in financial condition for many of the families, with almost half of JFES clients having no earnings in the quarter after they left cash assistance. The committee found that the current safety net programs need to be used more often, as early as possible, and be available to those who are unable to seek or maintain employment despite making a good faith effort.

The program review committee also found that more favorable outcomes occurred when JFES clients participated in three or more types of JFES activities, rather than just job search/job readiness training, for example. More favorable outcomes were also associated with having more education (at least a high school diploma or GED), work history and wages prior to TFA case opening, and staying on cash assistance a shorter period of time.

Overall, there were a number of families exempt from work participation with earnings --some above the federal poverty level -- and there were other families mandated to participate in the JFES program who were not doing so. Some of the difficulty in monitoring families and their earned income and JFES participation is attributed to the current Department of Social Services (DSS) automated system Eligibility Management System (EMS), which was found to have significant limitations.

Given the pressure faced by the state, it is clear that the two agencies responsible for aspects of Connecticut's welfare program, DSS and the Department of Labor (DOL), need to make every effort to capture working clients in the WPR and ensure all required clients are participating in JFES. The current DSS automated system is a serious barrier to agency staff efficiently and effectively performing their responsibilities.

Earned Income Tax Credit and Poverty Measures

The Earned Income Tax Credit (EITC) is a tax credit that is used by the federal and some state governments for low-income working individuals and families. The committee found Connecticut participation in the federal EITC is low compared to states with similar demographics that have their own EITC programs.

The Standard of Need is used to determine eligibility for TFA, and a separate measure, the Payment Standard, is used to determine the amount of the cash benefit received by families. Neither standard, though, has been updated since the early 1990s. In addition to increasing cash benefits, the committee recommends a revised measure of poverty be established to determine TFA eligibility and the level of cash benefits.

Recommendations for Increasing Work Participation Rate

Clients have historically faced difficult hurdles in obtaining and maintaining employment especially given two features of the Jobs First program: low client payments and the significant drop-off in payments that occurs between the 21^st and 22^nd month. The TFA cash benefit amount has not been increased since 1991 and actually was reduced in 1995. In addition, although Connecticut allows clients to earn up to the federal poverty level (FPL) without eliminating cash assistance during the 21-month time limit, after that, clients are ineligible if their incomes exceed the very low TFA cash benefit amount, not the FPL. This policy creates a very large and abrupt financial cliff at the very time a client needs this work support. The committee believes that both these issues need to be addressed if the state is going to improve its work participation rate as required by federal law. In the absence of meeting the work participation rate, the state will potentially face financial sanctions, resources that could go to address these two key problems.

Work Activity Verification Requirements

The U.S. Department of Health and Human Services issued interim regulations requiring states to submit a plan detailing how states would ensure clients are actually participating in scheduled activities for the required number of hours as mandated under federal law.

The committee found that the JFES case manager-to- client ratios are too high given the fact that the case managers will be responsible for doubling the number of JFES clients engaged in countable work activities, as well as having the additional administrative burden of verifying client participation in those activities.

Further, more frequent verification of client employment is needed because while case managers make work projections for six-month periods based on a single month of employment, the majority of clients work less than a six-month period.

Recommendations

The committee adopted the following 30 recommendations:

1. The Department of Social Services (DSS) should find a simple way to identify child-only cases, such as adding this category to the reason for exemption menu in EMS.

2. EMS levels of alerts should be developed by DSS so that when quarterly wages are found to be above the Federal Poverty Level, they are tagged as a high priority alert, and the appropriate parties can then further research the family's earned wages.

3. The Department of Social Services should begin exploring software options to enhance the current Eligibility Management System in a way that will support staff and management in their efforts to efficiently and effectively perform their responsibilities.

4. DSS should give added attention to monitoring families that change from exempt to time-limited status.

5. To more accurately capture families whose cases close because they are earning above the federal poverty level, and therefore receive credit in the work participation rate calculations, DSS should check available wage databases such as the DOL Earned Wage Database and New Hire Wage Database, and update information accordingly.

6. DSS should strengthen its case monitoring to reduce the number of time-limited families that are not enrolled in JFES but are still receiving cash assistance.

7. C.G.S. Sec. 17b-112e shall be amended to increase the use of the Employment Success Program, Prevention Services, and the Safety Net Program to address barriers to employment as early as possible. Requirements regarding the number of sanctions and time-limitations for delivery of the three programs should be relaxed, and clients who have made a good faith effort to seek and maintain employment or who are at risk of unsuccessfully completing the Jobs First Employment Services Program should be served in addition to the current clients served who have not made a good faith effort.

8. DOL should increase the intensity of the JFES program by increasing the number of different types of JFES activities that clients participate in as a way to increase JFES program success.

9. More emphasis should be placed on helping TFA recipients gain their GED or high school diploma, including consideration of requiring time-limited clients to enroll in an adult education program if they have been unable to secure employment after trying for one year.

10. More emphasis should be placed on identifying and treating substance abuse.

11. JFES staff should encourage families to prepare for and find employment in the more lucrative sectors.

12. The Departments of Social Services and Labor should use the following strategies to increase federal EITC filing participation rates:

• discuss the EITC at regular client meetings;

• advertise with posters and flyers in agency offices;

• insert information in agency mailings to clients; and

• partner with utility companies to include EITC information in mailings with billing statements.

13. There shall be a study comparing the costs and benefits of adopting a state earned income tax credit program at either 5 percent, 10 percent, 15 percent or 20 percent of the federal earned income tax credit as opposed to using the funds for programs that address barriers to employment, such as child care and transportation.

14. The Payment Standard shall be increased to the current Standard of Need. The new Payment Standard would be temporary while a more valid methodology for determining the Standard of Need is developed.

15. The Department of Social Services shall revise the methodology used to establish the Standard of Need for determining eligibility for cash assistance programs and establish payment thresholds consistent with those standards by January 1, 2008. Such standards shall be updated each fiscal year by the Consumer Price Index for urban consumers. The standards may vary by geographical areas and family size. Such standards shall be based on studies of actual living costs and generally recognized inflation indices and shall include reasonable allowances for childcare, shelter, fuel, food, transportation, clothing, household maintenance and operations, personal maintenance, and necessary incidentals. Separate standards may be established for families that reside in subsidized or public housing. Other public in-kind benefits shall be considered when establishing the standards.

16. Two-parent families enrolled in the Jobs First program should be funded with Separate State Funds.

17. C.G.S. Section 17b-112(a) shall be amended to allow portions of the Temporary Family Assistance program to operate outside the Temporary Assistance for Needy Families program.

18. C.G.S. Sec. 17b-112(b)(4) shall be amended to limit the exemption for a single custodial parent caring for a child who is under six months of age rather than one year old.

19. C.G.S. Sec. 17b-112(d) shall be amended so that a TFA client who earns at or above the FPL during the initial 21-months of TFA eligibility shall have his or her TFA benefit reduced by one-third for three months and an additional one-third for the next three months before becoming ineligible for TFA.

20. C.G.S. Sec. 17b-112(c) shall be amended so that the state's maximum 60-month time limit shall be suspended so these benefits do not count toward the state time limit.

21. The Department of Social Services shall determine if a client should be granted an extension of Temporary Family Assistance using the Standard of Need as the financial measure. If a client is eligible for a second or subsequent extension and does not earn at or above the Standard of Need, the client shall receive the full TFA benefit.

22. If a non-exempt family's gross income is below the Federal Poverty Level at the 21-month time limit but above the Standard of Need, the family shall be eligible for two income supplements for three months each. The income supplements shall be a continuation of TFA but at reduced levels. The first supplement shall result in a benefit reduction of one-third of the benefit. If a family receives a second income supplement because income is still below the Federal Poverty Level, the benefit shall be reduced by an additional third.

23. C.G.S. Sec. 17b-112(c) shall be amended so that the state's maximum 60-month time limit shall be suspended so these benefits do not count toward the state time limit.

24. C.G.S. Sec. 17b-112(d)(3)(c) shall be amended to increase the child support income disregard for the TFA program from $50 to $100.

25. Jobs First Employment Services case managers should review a client's Care 4 Kids application before the client submits it to the Care 4 Kids program in order to ensure it has been completed correctly and the proper documentation has been included with the application.

26. The Department of Social Services should examine its sanction policy to identify issues with regard to inconsistent and/or low enforcement.

27. JFES case managers should verify client employment on a monthly basis by having clients provide copies of pay stubs.

28. C.G.S. Sec. 17b-698 shall be amended to transfer the responsibility of evaluating job training programs funded by the Department of Labor from the commissioner of the Department of Social Services to the commissioner of the Department of Labor.

29. Access to the earned wage database reported by employers to the Department of Labor shall be provided to the Workforce Investment Boards so that they are able to provide outcome information as required by law.

30. The Department of Labor should develop a reasonable definition of employment that will fairly measure the number of JFES clients employed in a given wage quarter and whether they have retained employment in subsequent quarters. The definition should include the length of time a client must be working to be considered employed and the amount of wages a client must have earned in a particular quarter.

Introduction

Welfare Reform

The Jobs First program, Connecticut's welfare program, is financed by both the federal Temporary Assistance for Needy Families (TANF) block grant and state funds. There are two parts to the Jobs First program – temporary family assistance (TFA), which gives cash benefits to clients, and the Jobs First Employment Services (JFES) program, which provides employment services to TFA recipients who are not considered “exempt” from work requirements. For these “time-limited” clients participating in the JFES program, cash assistance is limited to 21 months (although extensions to the time limits are possible) and recipients are required to work or participate in employment services. TFA recipients who are exempt from the JFES program fall under specific exemption categories, and their status can change from exempt to time-limited if their circumstances change.

In April 2006, the program review committee authorized a study of Connecticut's Welfare Reform Initiative. The scope of study approved by the committee required the review to: 1) describe the exempt and non-exempt families currently enrolled in the Jobs First program by comparing barriers to employment, financial conditions, and the services received by each group; 2) evaluate the implementation and success of the JFES program including measuring the level of economic change experienced by participants; and 3) describe how Connecticut has allocated its TANF block grant and related state funds.

The TANF program was reauthorized in February 2006 by Congress under the Deficit Reduction Act (DRA) of 2005 and contains several changes that will affect how states operate their programs. A major change will require Connecticut to more than double the number of time-limited clients participating in work activities. Failure to meet federally mandated work participation rates (WPRs) could result in the loss of TANF funds.

The committee finds that the changes in the DRA have increased the pressure on states, including Connecticut, to enroll clients in countable activities in order to meet WPRs. As a result, the JFES program, as currently structured, will most likely fail to meet the WPR without program changes and thus the state faces potential penalties (a $13 million reduction in the TANF block grant received the first year and steeper reductions in subsequent years).

Connecticut will face considerable obstacles in meeting the new federal work participation rates. However, based on the results of a sample of welfare clients, the committee made a number of findings that suggest steps the state can take to improve its work participation rate, some administrative:

• there are some exempt and time-limited clients who are working but currently are not being counted toward the WPR;

• some time-limited clients are not participating in JFES and are falling through the cracks even though their 21-month time counters are running;

• many single mothers, while exempt from participating in JFES due to caring for a child under one, actually have jobs;

• most individual JFES activities do not make much of a difference in terms of clients obtaining employment but the combination of multiple types of activities do; and

• clients frequently switch between exempt and time-limited status.

Given the pressure faced by the state, it is clear that the two agencies responsible for aspects of Connecticut's welfare program, the Department of Social Services (DSS) and the Department of Labor (DOL), need to make every effort to capture working clients in the WPR and ensure all required clients are participating in JFES. The current DSS automated system is a serious barrier to agency staff efficiently and effectively performing their responsibilities.

The committee found many families left cash assistance without jobs. The current safety net programs need to be used more often as early as possible, and be available to those who are unable to seek or maintain employment despite making a good faith effort.

The committee believes the goal of the state's welfare program should be focused on not only engaging many more clients in work activities that lead them towards employment in order to meet these aggressive work rates, but to help families become and remain better off. Thus, the reauthorization also provides an opportunity to reassess state policies and set new goals that will help Jobs First clients meet with success. These goals should include helping families address barriers to employment, such as attaining a GED or high school diploma, identification and treatment of substance abuse, and offering work supports to promote employment retention.

Recommendations put forth by the committee focus on rewarding work in order for families to achieve economic and employment stability. Clients have historically faced difficult hurdles in obtaining and maintaining employment especially given two features of the Jobs First program: low client payments and the significant drop-off in payments that occurs between the 21^st and 22^nd month. The TFA cash benefit amount has not been increased since 1991 and actually was reduced in 1995. In addition, although Connecticut allows clients to earn up to the federal poverty level (FPL) without eliminating cash assistance during the 21-month time limit, after that, clients are ineligible if their incomes exceed the very low TFA cash benefit amount, not the FPL. This policy creates a very large and abrupt financial cliff at the very time a client needs this work support. The committee believes that both these issues need to be addressed if the state is going to improve its work participation rate as required by federal law. In the absence of meeting the work participation rate, the state will face financial sanctions, resources that could have gone to address these two key problems.

Another program that supports working families is a state earned income tax credit (EITC). Currently, the committee found Connecticut participation in the federal EITC is low compared to states with similar demographics that have their own EITC programs. Thus, it also is an effective way for a state to maximize participation in the Federal EITC program. Therefore, the committee recommends a study comparing the costs and benefits of adopting a state earned income tax credit program versus using the funds for programs that address barriers to employment, such as child care and transportation.

Methods

Program review committee staff reviewed national literature as well as Connecticut specific studies conducted on welfare. Federal and state laws and regulations, as well as DSS policies and procedures governing TANF, were also examined. The committee held a public hearing in October 2006 to solicit testimony from clients, advocacy groups, DSS, DOL, and others on the impact of Connecticut's welfare reform initiative.

Committee staff also conducted a multitude of on-site interviews with key stakeholders. These included legislators, legislative staff, members of the TANF Council, DSS and DOL central office and regional staff, Connecticut Employment and Training Commission (CETC) members, staff from the Office of Workforce Competitiveness (OWC), directors of the Workforce Investment Boards (WIBs), and advocacy organizations. Appendix A contains a list of the more than 20 organizations and other interested parties interviewed and a summary of the trends found in these interviews.

Program review committee staff compiled a database consisting of 1,278 Jobs First clients that were granted TFA in October 2003. Answers to many of the study questions are based on the background and experiences of these clients throughout their time on TFA, in contrast to a snapshot approach of all TFA recipients at a given point in time. Committee staff built a database from four automated sources: 1) DSS' Eligibility Management System; 2) DOL's CTWorks Business System; 3) DOL's Wage Records Database; and 4) DOL's Unemployment Insurance Benefits Database.

The study also provides additional information on current federal and state welfare funding streams, changes that occurred over time during the transition from AFDC to TANF funding, and the types of programs being funded.

Report Format

The report contains eleven chapters. Chapter One provides an overview of welfare reform in Connecticut, discusses the administrative structure of the program, and outlines major program components. The second chapter identifies funding sources available to operate the TFA and JFES programs and provides caseload and funding trends. Chapter Three describes the case flow process from initial application for TFA through system exit. Chapter Four examines the programs available for TFA recipients. Chapters Five, Six, and Seven analyze recipient characteristics contained in the 1,278 sample cases (representing 1,171 families), describe their experiences with JFES, and examine outcomes of the sample client population.

Chapter Eight discusses the federal earned income tax and proposes study of a state EITC program for Connecticut. Chapter Nine explains how different poverty measures are used to identify the poor and recommendations are put forth modifying the thresholds for TFA eligibility and extension criteria. Chapter Ten proposes a variety of recommendations aimed at increasing the work participation rates in Connecticut. Finally, the last chapter discusses federal requirements regarding how states must verify that clients are actually engaged in work activities, and outcomes reported by various state agencies and other organizations. Committee recommendations may be found in the relevant chapters.

Agency Response

It is the policy of the Legislative Program Review and Investigations Committee to provide agencies subject to a study with an opportunity to review and comment on the recommendations prior to publication of the final report. Appendix GG contains responses from the Department of Social Services and the Department of Labor.

Chapter One

An Overview of Welfare Reform in Connecticut

Connecticut's welfare system has undergone dramatic changes in the 13 years since the Department of Social Services initially obtained a waiver in 1993 from the U.S. Department of Health and Human Services (DHHS). The waiver, which was modified in 1995, allowed Connecticut to deviate from the rules of the earlier national welfare program called Aid to Families with Dependent Children (AFDC), now referred to as Temporary Assistance for Needy Families, and be one of the first states in the country to embark on a major reform of its welfare system. Implemented in 1996, Connecticut's Reach for Jobs First program, renamed Jobs First in 1997, uses a three-prong approach to encourage clients to transition from welfare to work:

1. a limitation of 21 months of cash assistance, called “Temporary Family Assistance” for certain welfare recipients classified as time-limited (although extensions to the time limits are possible);

2. a “work-first” approach, requiring recipients to work or participate in employment services intended to assist in finding jobs quickly (called the “Jobs First Employment Services Program”); and

3. a financial work incentive that permits employed recipients to retain their full welfare grant for up to two years.

Figure I-1 shows a timeline of key legislative actions to reform welfare, beginning in 1992 when the Connecticut General Assembly established a task force to study whether the welfare system needed to be changed. As the timeline shows, there have been several modifications to the state and federal welfare system, culminating in the recent passage of the Federal Deficit Reduction Act of 2005 that reauthorizes TANF until the year 2010. The DRA modifies welfare further by strengthening work requirements and requiring states to verify that clients are actually engaged in work activities. These changes are discussed fully in Chapters Ten and Eleven of this report.

Components of federal welfare reform. In August 1996, six months after Connecticut began implementing the Reach for Jobs First program, the U.S. Congress passed national legislation -- the Personal Responsibility and Work Opportunity Reconciliation Act (P.L. 104-193, also known as PRWORA). Eliminating entitlement programs such as AFDC, Emergency Assistance (EA), and Job Opportunities and Basic Skills Training (JOBS) programs under Title IV of the Social Security Act, PRWORA embraced many of the reforms that were already underway in Connecticut. The act established the TANF program, a non-entitlement federal block grant, which replaced the AFDC entitlement program. The federal law established a five-year lifetime limit for assistance for most recipients and mandated work requirements.

Under PRWORA, states were given flexibility to design their programs within certain parameters. The act changed the welfare funding formula by replacing the open-ended federal funding of AFDC that matched state expenditures, with the federal TANF block grant that provides fixed federal funding and requires a specified matching level of state spending, called maintenance of effort (MOE). Under AFDC, Connecticut received a 50 percent federal match regardless of enrollment caseload.

The new law shifted the fiscal risk for managing the program's costs from the federal government to the states. As a result, states were given broader discretion over the types of services and activities to fund in order to meet welfare reform goals and could set different eligibility criteria depending on the type of program being offered. The 2005 Deficit Reduction Act tightened some requirements, restricting discretion over what are allowable work activities.

Jobs First Administrative Organization

Administration of the Jobs First program is currently divided between two state agencies -- DSS and DOL. The social services department determines eligibility for benefits and administers the cash assistance portion of the program (TFA). Most Jobs First clients also receive other assistance from DSS-administered programs, including medical services under the HUSKY program, food stamps, daycare under the Care 4 Kids program and rental assistance; all described more fully in Chapter Four.

The labor department operates the employment services portion of the program, called JFES, for clients that are time-limited. Time-limited clients are non-exempt from job requirements and must participate in job activities and are, as the term implies, cut off from cash assistance after a period of time. The JFES program provides employment services such as job search assistance and skills training to time-limited Jobs First clients. The department contracts for these services through CTWorks -- a partnership of the Department of Labor, five regional Workforce Investment Boards (WIBs), and other state and local agencies -- to promote workforce development. The JFES program is described in Chapter Four.

Organizational structure. Figure I-2 shows the relationship between the entities involved in the operation of the Jobs First program. The WIBs are statutorily required under federal law and receive federal funds under WIA, the federal Workforce Investment Act. They also receive state MOE funds through contracts with the Connecticut labor department who contract with the WIBs for case management services. The WIBs, in turn, subcontract for case management services to develop Jobs First clients' employment plans and perform assessments (WIBs are prohibited by state and federal laws from operating any program without special exception). WIBs also contract with a variety of other programs, described later in this report, based on client assessment outcomes. The Connecticut Department of Labor retains part of JFES funding for direct employment services that are provided in the region and assist clients with job search activities. Clients actually access services at one of 14 state “one-stop centers,” known as Connecticut Works (CTWorks) centers. JFES case managers and DOL regional staff are located at these centers.

Interagency Design Group. The JFES Design Group (referred to in Figure I-2) was informally established in order to monitor the implementation of the JFES program and to address issues of concern among various stakeholders. The group meets monthly and includes three representatives each from DOL, DSS, and each of the WIBs. The group is responsible for promoting continuous improvement in JFES and initiating new policies to meet client needs.

TANF Council

State law (C.G.S. Sec. 17b-29) establishes a statutory oversight council, created initially in 1994 to oversee the implementation of the federal waiver for the AFDC program. Its charge was modified in 1997; the council is now required to monitor the Jobs First program. The council meets at least quarterly and DSS and DOL update the council on TFA and JFES implementation. The council submits recommendations to each of these agencies on issues including child care, family planning and pregnancy prevention information, client education rights and responsibility, Medicaid coordination, time limits and increased sanctions, and the fiscal impact of program changes.

Most recently, the council has held meetings to determine what the impact of the recently adopted federal DRA and ensuing regulations on Connecticut's TFA population will be, how funding will be affected, and whether program delivery and services offered need to be modified. The council will continue to monitor and make recommendations on how DSS and DOL should implement these changes.

Key Features of Connecticut's Jobs First Program

Eligibility criteria. Table I-1 shows the key components of the Jobs First program as it is currently operated (for information on selected other states' programs, see Appendix B). To be eligible for the Jobs First program, families and pregnant women must meet the definition of a needy family. Connecticut defines a needy family as one with gross income less than 75% of CT's median income level¹ and include a dependent child and a caretaker relative.² There are also asset limits that are shown in the table. A dependent child must be either:

• less than 18 years of age;

• 18 years of age and attending secondary school or its equivalent; or

• less than 24 years of age and attending a postsecondary school and considered a dependent student through the Free Application for Federal Student Aid (FAFSA) process.

A Jobs First client must comply with other provisions of the law, including any child support enforcement actions needed, and participate in JFES if a non-exempt individual. The program requirements, including agency administration and responsibilities, are described more fully in Chapter Three.

Time-limited versus exempt clients. Table 1-1 also shows the criteria used to determine if a case is time-limited (i.e., non-exempt) or exempt from job participation requirements. The major criteria used to determine whether a client is time-limited or exempt from time limits and job requirements are described fully in Chapter Three.

Work Participation Rate Requirements under Federal Law

In order for states to receive full TANF block grant funding, federal law requires states to prove that a certain number of their welfare recipients are involved in work activities by meeting federally specified work participation rates. The 1996 law reforming the welfare system (PRWORA) provided for a phase-in of the WPR requirements. Beginning in 1997, states had to have 25 percent of their caseloads participating in countable work activities--with five percent annual increases each year -- to meet a WPR of 50 percent of all time-limited families by 2002 (and 90 percent for two-parent welfare families). The phase-in gave states time to change their welfare programs from providing ongoing cash assistance to preparing welfare recipients to enter the workforce. Also, a caseload reduction credit, described later in Chapter Ten, provided further relief for states.

The reauthorization of the TANF block grant program under the federal DRA ushers in many changes. The act significantly increases the number of adults that states must have meet the TANF work participation requirements and adds new verification requirements that states must adhere to in documenting the number of hours that adult members of these families are engaged in work activities. As a result, states will be facing considerable pressures over the next year to substantially increase the percent of welfare recipients engaged in work activities in order to meet federally mandated WPR. Failure to meet the higher WPR, or to follow the verification procedures, could result in significant fiscal penalties being imposed on states.

Specifically, the DRA makes four key changes to the WPR structure. It:

• modifies the caseload reduction credit so that as of October 1, 2006, adjustments to participation rates are based on caseload declines after 2005 rather than after 1995;

• specifies that as of October 1, 2006, a state's participation rate calculation will be based on the combined number of families receiving assistance in TANF and state-funded programs that count toward the state's MOE requirement.³ (Programs funded solely with state MOE dollars did not count toward work rates under the previous law.);

• requires HHS adopt regulations no later than June 30, 2006, specifying uniform methods for reporting hours of work, the type of documentation needed to verify reported hours of work, whether an activity can be treated as one of the federally listed work activities for purposes of participation rates, and the circumstances under which a parent who resides with a child receiving assistance should be included in the work participation rates; and

• establishes two penalties – one if a state fails to meet the WPR (5 percent of a state's TANF block grant the first year) and a separate penalty of up to 5 percent of a state's block grant if a state fails to implement verification procedures and internal controls consistent with the regulations (this is discussed in the Chapter Eleven).

Effective October 1, 2006, the all-families work participation requirement is 50 percent and the two-parent work participation requirement is 90 percent; both rates are then reduced by the number of percentage points by which the state's caseload falls below 2005 levels for reasons other than eligibility rule changes.

Impact on Connecticut

To increase work participation rates significantly, states will have to engage more recipients in welfare-to-work activities. Based on July 2006 estimates produced by Connecticut's labor department, 9,972 Jobs First recipients will be federally mandated to participate and 4,986 (50 percent) will need to meet the federal participation requirements. Based on this data, the Departments of Labor and Social Services estimate that about 2,181 Jobs First recipients were engaged in work activities that meet the 30-hour threshold needed to count toward inclusion in the WPR. Thus, Connecticut faces a major and very difficult undertaking, given that Connecticut will have to increase participation by 128 percent.

The penalty for not meeting the participation requirements is up to 5 percent ($13 million) of Connecticut's $266.8 million TANF Block Grant the first year and would increase by 2 percent ($5 million) per year for each subsequent year of noncompliance.

The new work mandates will require the commitment of additional resources not only to the JFES program, but also to the state's child care program, Care 4 Kids. Jobs First program changes will focus on how to quickly increase Connecticut's WPRs in order to avoid hefty federal monetary penalties and identify better strategies to engage more Jobs First recipients in work activities. Any debate will most likely include whether the Jobs First program, as it is currently structured, is adequate or should be modified to provide more support to clients facing significant barriers to employment and/or increase opportunities for working clients to achieve greater economic self-sufficiency. Committee recommendations aimed at increasing the WPR are contained in Chapter Ten.

WPR components. The WPR has two components and is unchanged by the 2005 DRA It applies to cash assistance recipients who must participate in work activities (non-exempt) and includes the:

• minimum number of hours Jobs First non-exempt recipients must participate in order to be counted as engaged in work activities (shown in Table I-2); and

• percentage of Jobs First non-exempt recipients that a state must have engaged in work activities (50 percent for single-parent and 90 percent for two-parent).

Types of activities that states can count toward meeting WPRs. Federal law outlines 12 categories of work activities that count in calculating WPR (Table I-3). These are further subdivided into two types -- core and non-core activities. As the table shows, only a few of the core activities are limited for WPR purposes while those in the non-core category all have time restrictions imposed. Hours spent in some non-core activities do not count toward the WPR unless 20 hours are also spent in other countable core activities. A more detailed description of each of these activities is found in Appendix D.

TANF reauthorization. Reauthorization of DRA makes several significant changes, effective October 1, 2006, that will impact countable work activities. Under PRWORA, states were given considerable flexibility in defining allowable work activities as long as they fell into one of the twelve categories. However, the General Accountability Office (GAO) issued a study in 2005 that found states used a range of different definitions and there was little consistency among states.⁴ The report further noted some states counted questionable activities with little oversight by the federal Department of Health and Human Services (HHS). Thus, a state's high participation rate in a given activity may indicate actual high participation in a distinct set of activities, or it may reflect differences in definitions -- for example, one state included activities to promote a healthier life style, such as personal journaling, motivational reading, exercise at home, smoking cessation, and weight loss promotion as a Job Search/Job Readiness activity; while other states did not allow this.

As a result of the GAO study, DRA requires the adoption of federal regulations that define:

• the specific work activities that are “countable” toward the WPR (rather than allowing states to use their own definitions of activities); and

• uniform methods for tracking, verifying, and reporting each recipient's participation hours.

Interim regulations were issued on June 29, 2006. The department accepted comments on the regulations until August 28, 2006, and the interim regulations are effective as published until HHS revises them. The department asked states that believe they cannot meet the required participation rates without state legislative action to submit comments explaining why and to make suggestions on how HHS should use the “reasonable cause” exemption to provide penalty relief.

Although the new work definitions will not have any significant adverse consequences for Connecticut since the state's definitions were similar (and Connecticut adopted the federal definitions as of October 1, 2006), the state will need to develop a process that will track and validate recipient participation in countable work activities. All states were required to submit plans to HHS for approval on how they will verify work participation by clients. Connecticut's plan is described in detail in Chapter Eleven.

Summary

There have been many changes to Connecticut's welfare program since family entitlement to cash assistance (AFDC) was eliminated in 1996 and the state moved to a time-limited program with work participation requirements for many of its recipients (TANF). Since then, cash assistance spending has fallen over the decade, driven by declining caseloads, no cost-of-living increases granted since 1991, and an actual reduction in payment in 1995.

Additional program changes are contained in the 2005 DRA that reauthorized the federal TANF program. Effective October 1, 2006, the DRA modifies TANF by significantly increasing the number of adults that states must have meet the TANF work participation requirements, defining acceptable work activities, and requiring states to verify time-limited recipients are actively engaged in work activities. The act requires more TANF recipients be engaged in work activities or states could receive significant fiscal penalties in the form of TANF block grant reductions. Issues surrounding how work participation rates will be calculated to determine if states are meeting the DRA are discussed in Chapter Ten.

Chapter Two

Jobs First Caseload and Funding Trends

This chapter examines changes in the Jobs First client population since 1996, and how the Temporary Assistance for Needy Families and state Maintenance of Effort funds have been used to support the four goals of the TANF program. The program review committee collected caseload and financial information from the two state agencies involved in administering the Jobs First Program -- DSS and DOL.⁵ The information obtained from DSS focuses on the cash assistance portion of the program for both exempt and non-exempt clients. The labor department produces reports on Jobs First clients who participate in Jobs First Employment Services activities. These participants include both time-limited clients and those who are exempt but choose to voluntarily participate in JFES.

Overall Jobs First caseload. Figure II-1 shows the dramatic drop in the average monthly Jobs First caseload since FY 96. While caseloads decreased 66 percent -- from an average monthly caseload of almost 59,000 in FY 96 to about 20,000 in June 2006 -- the greatest drop occurred between FY 98 and FY 00 when many of the first recipients obtained jobs or reached the time limits and were removed from the welfare rolls. As of June 30, 2006, there were 42,154 Jobs First recipients -- 13,034 were adult recipients and 29,120 were children.

Time-limited versus exempt. Figure II-2 trends the number of cases that were time-limited and therefore subject to the 21-month time limit and those exempt from participation in JFES. For the first six years of the program, Connecticut operated under a federal waiver and placed some clients in a control group to measure certain waiver elements. The waiver expired in 2001 and those recipients were placed into either the time-limited or exempt category. Over the years, as shown in the figure, not only have caseloads shrunk significantly since the advent of welfare reform, but since FY 01 the number of exempt cases has either equaled or exceeded those that are time-limited. As of June 2006, there were 7,555 cases that were time limited and 12,305 exempt.

DSS noted a steady decline in the time-limited Jobs First caseload from FY 04 to FY 05: “The exempt caseload has remained fairly stable over the past year while the time-limited caseload has shown a steady decline on average of approximately 120 cases per month. The drop in families served was attributed to declining applications for assistance and to the impact of the requirement of engagement at DOL prior to qualification for benefits.”⁶

Figure II-3 compares the number of “child-only” cases to the total Jobs First caseloads for each federal fiscal year since 2000. While the number of “child-only” cases has remained relatively steady, they represent a greater percent of the shrinking TFA caseload. “Child-only” cases comprised about 28 percent of the total caseload in FY 00 and 43 percent by FFY 05. “Child-only” cases accounted for almost 70 percent of the 12,614 exempt cases as of June 2006. Thus, the traditional notion that welfare is a “family” program is not entirely true given that almost half the Jobs First caseload supports only children.

Clients in extensions. Figure II-4 shows the number of clients who received one or more extensions and the extension number for six points in time for which data were readily available. In 2003, it became much more difficult to gain more than two extensions when the legislature adopted stricter criteria under P.A. 03-2. In June 2006, there were 1,438 clients on their first or second extension, and 138 clients with three or more. Almost all of the clients in their first or second extension were granted the extension because they had made a “good faith effort” to comply with program requirements, but still were below the financial thresholds used to determine continued eligibility. Reasons for receiving more than two extensions included multiple barriers to employment, followed by households experiencing issues of domestic violence.

Clients under sanction. When a time-limited client does not comply with an employment service requirement without good cause, the client is sanctioned through a penalty process. During the first 21 months, the penalties are imposed as follows:

• 1^st penalty – TFA is reduced by 25 percent;

• 2^nd penalty – TFA is reduced by 35 percent; and

• 3^rd penalty – TFA is discontinued and client may not reapply for TFA for at least three months

If a client is sanctioned during an extension, TFA is discontinued, the client is referred to the Safety Net program (discussed in Chapter Four), and is not eligible for future TFA extensions. Clients can only receive TFA again if they become exempt rather than time-limited, or experience circumstances beyond their control that prevent them from working.

Sanctions affect the TANF work participation rate formula described in the Chapter One. During the first 21 months, clients who receive their first sanction are removed from the work participation denominator, while clients in their second sanction are included in the denominator. Since clients on their second sanction are unlikely to be engaged in work participation activities, this has the effect of lowering the work participation rate.

Figure II-5 shows the number of sanctioned cases and the number imposed over six periods of time. In June 2006, there were 390 cases that had received a first sanction, 68 cases were in their second sanction, and only four had been sanctioned for a third time.

In terms of the percent of cases sanctioned compared to the total time-limited caseload, in 1999 about 4.5 percent of cases had received a first sanction and in 2006 it was about 5 percent. Less than one percent of time-limited cases ever receive a second or third sanction in any of the years shown.

Jobs First Employment Services (Time-Limited Clients)

Trends. The Performance Measurement Unit within the Department of Labor has produced an annual report since June 1999 (except for 2001 when no report was published) on Jobs First clients participating in JFES. The report, entitled “At-A-Squint” includes demographic information on clients as well as the types of activities that individuals participated in. Comparing the June 1999 and June 2006 reports shows:

• the vast majority of time-limited clients are female (90 percent in 2006 compared to 86 percent in 1999);

• ethnicity has remained relatively the same over the eight years;

• almost 50 percent of clients in 2006 had completed 12^th grade compared to 45 percent in 1999; and

• 13 percent of JFES clients had some college in 2006 compared to only 6 percent in 1999.

Age of JFES participants. Figure II-6 shows the age of JFES participants at a point in time (June of each fiscal year). As the figure illustrates, the bulk of participants fall between the ages of 22 and 29 years old (35 percent in 2000 growing to 41 percent by 2006). The next largest age group is clients between 30 and 39 years old (31 percent in 1999 and decreasing to 23 percent by 2006). Three percent of the clients were under age 18 in 2006.

Ethnicity. Figure II-7 shows the number of JFES clients by ethnicity. The number of Hispanic clients increased from 38 percent of total JFES clients in 1999 to 40 percent of the clients in 2006. While clients who are African-American decreased slightly (from 31 percent in 1999 to 30 percent in 2006) over the same time period, the proportion of other ethnic groups remained the same.

Education. JFES participants have become more educated over time (Figure II-8). In June 1999, the client educational profile was:

• 49 percent had not completed high school;

• 45 percent had a high school diploma;

• 5 percent had some college; and

• 1 percent had 4 years of college or more.

By 2006, 50 percent of clients had completed high school; 11 percent had some college; and 2 percent had four years of college.

Employment activities. Almost 8,000 clients were enrolled in JFES in June 2006. Of those: 5,972 clients were enrolled in employment activities (clients may be enrolled in more than one activity) and the most frequent activity was participation in job search (Figure II-9). The percent engaged in this activity dropped from 75 percent in June 1999 to 50 percent in June 2006, while 29 percent were employed. Basic education as an activity accounted for only 6 percent of clients and vocational education was 11 percent in June 2006.

Months elapsed. Figure II-10 identifies the number of months elapsed for time-limited clients enrolled in the JFES program. The number of clients who were on the program for 27 or more months has decreased dramatically from a high of 5,040 in 1999 to 873 in 2006 (i.e., the 21-month initial period plus at least one six month extension).

Employment barriers. The number of client employment barriers identified at the time of JFES registration is shown in Figure II-11. This represents the number of barriers identified by JFES case managers in developing participants' employment plans and do not necessarily reflect the total actual number of current employment barriers experienced by clients. Most research indicates that certain client barriers remain unidentified, either because the client is not reporting the problem (such as a substance abuse or mental health problem) or it is not being detected by the case manager (such as learning disabilities).

Even though the overall number of clients has decreased since 2002, the number of clients with barriers has remained relatively the same. In addition, the number of clients with four or more barriers has grown over the five years shown and now comprises an even larger proportion of the 2006 caseload.

TANF and State Maintenance of Effort Dollars

States fund their welfare programs with a combination of federal and state funds from two primary sources – the annual federal TANF block grant and state MOE dollars to meet federal MOE standards. These federal standards require states to maintain historical levels of state spending of at least 75 percent of what they were spending in FY 94 on cash assistance-related programs.

TANF block grant. Since 1997, Connecticut has received a flat TANF block grant of almost $266.8 million annually.⁷ Federal law allows states to transfer up to 30 percent of their TANF grant to the Social Security Block Grant (SSBG) and the Child Care Development Fund (CCDF), and up to 10 percent to the Job Access Transportation Grant. To date, Connecticut has only transferred funds to SSBG (in FFY 06, $26.4 million (10 percent was transferred)).

State maintenance of effort requirement. Connecticut's MOE requirement has been $183.4 million since 1997, although Connecticut has exceeded its MOE requirement each year with spending ranging between $183.5 and $217.4 million. In FFY 05, Connecticut spent $217.4 million in MOE and $240.1 million in TANF dollars for a combined total of $457.5 million.

Purposes of TANF. States must use all federal TANF and state MOE funds to meet at least one of the four purposes articulated in PRWORA or to continue providing services and benefits that they were authorized to provide under their former Title IV-A or Title IV-F state plans (which covered AFDC, Emergency Assistance, and JOBS). The four purposes of the TANF program are:

4. to provide assistance to needy families – programs funded for this purpose cover only needy families so children must live with their parents or other relatives.⁸ It does not cover children living with non-relatives. (Assistance is defined in federal regulations as cash payments, vouchers, and other forms of benefits designed to meet a family's ongoing basic needs);

5. to end dependence of needy parents by promoting job preparation