WELFARE REFORM AFTER TEN YEARS

You asked for a summary of the Heartland Institute's June 2008 report, “Welfare Reform after Ten Years: A State by State Analysis.” Specifically, you asked us to summarize the report's methodology and findings and discuss Connecticut's ranking.

The Heartland Institute is a nonprofit, public policy think-tank that addresses healthcare, environment, taxation, information technology, and education issues. It is a nonpartisan organization often described as libertarian. In June 2008, the institute issued a report, “Welfare Reform after Ten Years: A State by State Analysis, in which it surveyed the welfare reform programs in all 50 states and the District of Columbia. (A copy of the report is enclosed.)

The report ranks and grades state welfare reform programs by the success of the anti-poverty efforts and welfare reform policies they adopted during the 10 years after enactment of the federal Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). It measured five anti-poverty variables and seven welfare reform policies states could adopt to encourage economic self-sufficiency. (States were graded on only five of the seven policies.) The two overall scores for anti-poverty success and welfare reform policies were averaged to produce a single overall ranking for each state.

According to the report, the five states with the most successful welfare programs overall are Maryland, Idaho, Illinois, Florida, and Virginia while the five least successful states are Rhode Island, New Hampshire, Kansas, Vermont and Missouri. Connecticut received an overall ranking of 7^th and an overall grade of A-. It was ranked 11^th for its anti-poverty success, receiving a grade of B+ and 14^th for its welfare reform policies, receiving a grade of B.

According to the report, Connecticut's strengths include its reduction in the number of Temporary Assistance for Needy Families (TANF) recipients. Between 1996 and 2006, the state reduced its welfare rolls by 78%, well above the national average of 67%. It also received high rankings for its success in reducing its poverty (15^th), teen birth (15^th), and unemployment (16^th) rates. But, the state received its lowest ranking (32^nd) for its 2006 TANF work participation rate of 30.8%, which fell below the national average of 32.5%.

Connecticut's welfare policies also scored well. TANF work requirement, time limit, and cash diversion policies all received high marks. In addition, the state's integration of TANF and social services was considered “good.” (States were not graded on this measure.) On the negative side, the state received low grades for its sanctions and family cap provisions. While not graded on this measure, Connecticut was also among the states with the highest percentage of unclaimed federal EITC funds in 2004 (79%).

In 1996, Congress passed welfare reform legislation, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193, “PRWORA”). The program was reauthorized through 2010 as part of the 2005 Deficit Reduction Act (P.L. 109-171). PRWORA eliminated the federal entitlement program, Aid to Families with Dependent Children (AFDC) and replaced it with a non-entitlement, federal block grant program, Temporary Assistance for Needy Families (TANF).

Some of TANF's major provisions include (1) a five-year lifetime limit on “assistance,” with a 20% maximum number of recipients states can exempt from the limit; (2) a requirement that parents or caretaker relatives receiving TANF work once the state determines they are ready but no later than 24 months after receiving assistance; and (3) work participation rates (currently 50%) for all families, with higher rates for two-parent families, and financial penalties for failure to meet these rates. It also allows states to provide other benefits and services to low-income families with children that support TANF's goals of reducing out-of-wedlock pregnancies and promoting two-parent families. OLR Report 2006-R-0041 provides a history of welfare reform in Connecticut in response to PRWORA.

The Heartland Institute is a nonprofit, nonpartisan, public policy think-tank based in Chicago that addresses healthcare, environment, taxation, information technology, and education issues. Often described as libertarian, its mission is to “discover, develop, and promote free-market solutions to social and economic problems.”

In June 2008, the institute issued a report, “Welfare Reform after Ten Years: A State by State Analysis, in which it surveyed the welfare reform programs in all 50 states and the District of Columbia. The report ranks and grades states by the success of their anti-poverty efforts and welfare reform policies adopted during the 10 years after PRWORA's enactment. It measured five anti-poverty variables and seven welfare reform policies states could adopt. (States were graded on only five of the seven policies.) The two overall scores for anti-poverty success and welfare reform policies were averaged to produce a single overall ranking for each state.

The report measured five poverty-related variables: the percentage decline in the number of TANF recipients, change in poverty rate, TANF work participant rate, change in unemployment rate, and change in teen birth rate. States were ranked on a scale of 1 to 51 on each variable. The five rankings were then averaged to produce an overall score for each state. Louisiana, Florida, and Maryland had the highest anti-poverty score; Iowa, Michigan, and New Hampshire had the lowest. Connecticut scored relatively high with a ranking of 11^th.

To measure this variable, the report used data from the U.S. Department of Health and Human Services' (HHS) Administration for Children and Families. The number of TANF recipients declined 67% nationally from 1996 to 2006. The three highest scoring states, Wyoming, Louisiana, and Idaho, reduced the number of TANF recipients by more than 87%. The three lowest scoring states, Kansas, Tennessee, and Indiana experienced reductions under 36%. Connecticut ranked 12^th with a 78% reduction.

The report used the U.S. Census Bureau's Small Area Income and Poverty Estimates (SAIPE) data to rank states on this variable. SAIPE data is derived from models that incorporate data from various sources. The three highest scoring states, California, West Virginia, and Hawaii, reported poverty rate reductions of more than two percentage points. Connecticut ranked 15^th with a reduction of just under one percentage point (0.7). The three lowest scoring states, Nebraska, Wisconsin, and Indiana, reported poverty rate increases of over two percentage points.

To measure this variable, the report used 2006 data from HHS's Office of Family Assistance. The study found a wide variation in workforce participation rates among states and cited the law's several exceptions to the federal work participation requirements as the likely cause. Montana, Kansas, and Wyoming had the highest workforce participation rates (over 77%) for TANF recipients. The three lowest scoring states, the District of Columbia, Oregon, and Massachusetts, had participation rates below 18%. Connecticut ranked 32^nd with a participation rate of 30.8%.

The report used state unemployment rate data between 1997 and 2006 provided by HHS's Office of Family Assistance. The authors believed this was a necessary anti-poverty measure that reflected how state tax policies and employer regulation affected job availability. The national unemployment rate declined by just under one percentage point (0.9%) between 1997 and 2006. Unemployment rates in the three highest scoring states, Hawaii, New Mexico, and the District of Columbia dropped by over two percentage points. The three lowest scoring states, Indiana, South Carolina, and Michigan, experienced unemployment rate increases between 1.7 and 2.6 percentage points. Connecticut ranked 16^th with a reduction of just under one percentage point (0.5).

Data for this measure was provided by the Guttmacher Institute and the Centers for Disease Control. The teen birth rate declined 12.5 percentage points nationally between 1996 and 2005. California, Nevada, and Louisiana experienced the highest decrease (over 17.9 percentage points). South Dakota, North Dakota, and Wyoming experienced the lowest decrease (less than 2.5 percentage points). Connecticut ranked 15^th with a decrease of 13.7 percentage points.

In addition to measuring states' success in reducing poverty, the report also examined how welfare reform policies encouraged economic self-sufficiency. The authors identified seven policies as the most important contributors to the success or failure of state welfare reform efforts:

1. service integration,

2. increased filing for the federal Earned Income Tax Credit (EITC),

3. work requirements,

4. cash diversion programs,

5. family cap provisions,

6. lifetime limits on aid, and

7. sanctions

Because some of these policies are not easily quantified, states were assigned letter grades ranging from A (excellent) to F (failing) on five of the policies. (The study did not grade states on service integration and EITC utilization.) The five letter grades were averaged to yield a single overall grade. The report found Idaho, Maryland, and Illinois to have the most successful welfare reform policies. Welfare reform policies in Missouri, Rhode Island, and Vermont were determined to be the least successful. Connecticut was ranked 14^th indicating moderately successful welfare reform policies.

The report examined the extent to which states coordinated welfare and social services, allowing TANF recipients to easily access comprehensive services. The authors measured this variable through direct inquiries to state public aid directors, their own knowledge from consulting with several state governments and agencies, and a literature review of social services research. When evaluating states, the authors determined the most important indicator of service integration to be the integration of basic TANF services with state substance abuse rehabilitation programs.

Twelve states, including Connecticut, were labeled as “good,” 21 states as “average,” and 18 states as “poor.”

The report examined, but did not grade, the amount of federal EITC funds unclaimed by residents in each state. According to Internal Revenue Service data, approximately $90 billion in federal EITC funds went unclaimed in 2004. The report notes that the states with the lowest amount of unclaimed EITC in 2004, Mississippi, Louisiana, and Alabama, still had over 50% in unclaimed funds. Wisconsin, Massachusetts, and New Hampshire, had the highest percentage (between 79% and 81%) of unclaimed EITC funds. Connecticut was near the bottom of the list with 79% unclaimed funds.

According to the report, the IRS no longer provides state-by-state estimates of unclaimed EITC funds. Consequently, states were not graded on this measure because their progress could not be assessed over time. OLR Report 2008 R-0102 provides detailed information on the EITC in Connecticut.

The report examined state work requirements for TANF recipients. States were grouped into three categories and graded based on their work requirements as follows: