OLR Research Report

August 24, 1998 98-R-1017

FROM: Robin Cohen, Principal Analyst

RE: Cars for Welfare Recipients

You asked for information on state vehicle ownership programs that help welfare recipients get to work. And you wanted to know what Connecticut would need to do to enable a nonprofit group to start a similar program here.

We are attaching a copy of a very recent OLR report (98-R-0972) which describes what Connecticut is currently doing in this regard, as well as an innovative car donation and repair program in Vermont.


Federal and state welfare reform legislation makes clients going to work the principal objective. To aid them in this endeavor, several states have begun programs that get cars to clients, since transportation historically has been a major work barrier, especially in areas not served by public transit. In many instances local nonprofit and church groups have initiated such programs, while in others state welfare agencies and legislatures have started them. These programs tend to fall into three categories: car donations, loan programs, and lease-to-own programs. Some programs have vehicle repair components where a client can purchase a vehicle after he repairs it. Most programs are run as pilots in certain parts of the states. According to Dana Reichert of the National Conference of State Legislatures, most donated cars are no more than five years old and are in good working condition.

It does not appear that Connecticut would need to do anything special to enable a nonprofit group to start a program here. If it were to give seed money to a group, it could look at a number of existing sources to do so. For example, federal law enables states to use their Temporary Assistance to Needy Families (TANF) block grants and Welfare-to-Work (WTW) grants to pay for these programs, and allows states to meet their TANF “maintenance of effort” requirements when they pay for these programs using state funds.

States are also using a number of other strategies to get welfare recipients to work, in addition to, or as alternative to getting them cars. Subsidies for car insurance repairs, free bus passes, the use of school buses and vans, vehicle exemptions in welfare eligibility determinations, and auto repair payments are just a few examples. We are enclosing a recent article from Innovation Briefs, which offers two perspectives on the issue of existing mass transit versus car purchase programs.


Vehicle Donation Programs

Florida's Charity Cars, Inc. Since 1996, Charity Cars, Inc., a nonprofit organization, has provided vehicle and transportation support services to assist disadvantaged individuals in their transition from welfare to work. The auto industry and local citizens donate cars, which are reconditioned and serviced at the Charity Cars facility.

Vehicles are registered and titled in the recipient's name, but Charity Cars retains a lien on each vehicle for three years so they cannot be sold. Recipients must be employed for at least 30 days and must remain employed during the lien period. Recipients must also maintain car insurance and participate in follow-up case studies. Charity Cars provides a free American Automobile Association membership and can repossess a car if it is not maintained.

Social service agencies refer prospective recipients to the program. The employment counselors and caseworkers must cite the lack of transportation as the major barrier to employment. The program's estimated cost is $1,000 per individual.

A “replication model” is now available. If you would like us to request this, please let us know.

Sale and Donation of State Surplus Vehicles: North Carolina and Ohio. In Forsyth County, North Carolina a collaborative effort produced the Wheels-To-Work program. This program sells surplus county vehicles in good working condition to Work First participants who have jobs but no access to cars or public transportation. Local automobile dealers do tune-ups and repairs at a discount. Goodwill Industries places a lien on the vehicle for one year but after that the clients can purchase them by reimbursing Goodwill for the cost of the repairs, liability insurance, taxes, license, and title fees. All monies received go back into the program, making additional cars available.

A 1997 Ohio law allows the board of county commissioners to donate any motor vehicle with a value of up to $4,500 to a nonprofit organization to meet the transportation needs of participants in the state's Ohio Works First program (welfare-to-work) and participants in its Prevention, Retention, and Contingency program.

Texas's Wheels for Work. In 1997, the Texas legislature passed a law requiring the Texas Workforce Commission (TWC) to develop a “wheels for work” pilot in four sites. The program, which is run by the workforce development boards (WDBs) in the four areas, makes donated cars available to welfare recipients at a low cost to enable them to find and keep jobs. The legislation required that the program be modeled after Maryland's Wheels to Work program. Only people who have found jobs but cannot accept or keep them solely because of a lack of transportation can participate. The law also requires that the accompanying program “rules” ensure that people donating cars receive charitable donation receipts for tax purposes.

TWC policy guidelines allow the local WDBs maximum flexibility. As required by federal law, in addition to being a current or former TANF recipient, an individual must be eligible to be served with a welfare-to-work grant (see below). Eligible clients are referred to the donating organization once an automobile becomes available. The local WDB is responsible for ensuring that client's cost for insurance down payment, tax, title, and license are met. The board can solicit contributions from community partners to pay these costs, or it can request a co-payment from the client.

The TWC estimates that the total out-of-pocket costs for the vehicle transfer and ownership range from $224 to $337.

Clients must sign a release from liability and statement of understanding before obtaining the vehicle. This is the client's acknowledgment that (1) the vehicle will carry a lien held by the donor, (2) the donor has the power to monitor the client's employment and welfare status and prevent his selling or trading the vehicle, and (3) the vehicle can be repossessed for reasons such as the client returning to welfare within the length of the lien or not obtaining a job within 30 days of going on welfare.

Loan Programs

The McKnight Foundation's Family Loan Program. For over 10 years the Family Loan Program has provided small loans to low-income parents who need help to keep a job or stay in school, demonstrate an ability to pay, and cannot get loans elsewhere. Most loans are for car purchases and repairs. Begun in Minnesota, the program is a cooperative effort between Family Service America and the McKnight Foundation and is being operated in a number of demonstration cites (in Minnesota) with an ultimate goal of nationwide replication.

The program operates through family service agencies. With the help of a volunteer loan committee (composed of people with an extensive knowledge of the circumstances of low-wage-earning single parents and their communities), the agencies recruit and screen applicants and approve loans. A limit of $2,200 is available for car purchases, with lower limits for other types of loans. The money must be repaid within two years, and interest rates range from zero to 8%.

Qualification guidelines vary somewhat from site to site, but normally borrowers must (1) be working at least 20 hours a week and have been at their present jobs for at least six months or (2) be pursuing post-high school education, having received at least nine credits in the past quarter. In addition, they must have exhausted all other available loan sources and demonstrate sufficient disposable income to make monthly loan payments.

Given its longevity, the program has been evaluated several times. A 1995 evaluation showed that women who received the loans were better able to reach their education and career goals and had less need for public assistance. In fact, among 222 borrowers reached for follow-up interviews, public assistance use had dropped by 40%, according to a program publication.

The McKnight Foundation provided the seed money, which was used to establish the first sites in the Minneapolis-St. Paul area.

Wisconsin. Wisconsin has one of the nation's first, and probably most far-reaching welfare reform programs in the nation. One element of that program is the Job Access Loan. These loans are available to people who are eligible for the state's cash assistance program and (1) need the loan to meet an immediate and discrete financial crisis (which is not the result of failure to accept a job or a job termination without good cause), (2) need the loan to obtain or continue working, and (3) are not in default of any other job access loan or repayment of any grant or wage overpayment. Individuals under age 18 are also eligible for these loans if they are in a supervised out-of-home placement, have graduated from high school or have the equivalent credentials, and will be 18 years old within two months after applying for the loan.

Lease-to-Own Programs

Wythe County, Virginia's Cars Assist Recipients in New Growth (CARING). The CARING program allows Wythe County participants in the Virginia Initiative for Employment not Welfare (VIEW) program to lease-to-own vehicles the state Department of Social Services (DSS) purchases from the state's General Services Division of Purchases and Supply. The county provides driver training as well as assistance in auto maintenance.

DSS purchases the cars with VIEW administrative funding. It then negotiates a lease with the client that lasts for about 12 months. Monthly payments range from $125 to $175, and these payments are recycled back into the program (in a designated account) for future purchases. DSS also reimburses clients for maintenance costs once presented with an invoice. The maintenance funds are held in a separate account, and the unused portion is given to the client at the end of the agreement.

To be eligible to lease, individuals must:

1. be VIEW registrants,

2. be employed or provide evidence that they have been offered a job,

3. have a demonstrated need for or lack of reliable transportation,

4. provide evidence of receipt of vehicle liability coverage,

5. possess a valid Virginia driver's license,

6. provide a copy of their driving record,

7. demonstrate a positive and serious commitment and cooperative response to welfare reform, and

8. be able to pay for the lease.

Tony Fritz, DSS's Western Regional Office Director, indicates that the program faces one major obstacle in the state's motor vehicle law. While the law allows for the purchase of surplus vehicles, anyone who purchases more than five must have a dealership license and is subject to the rules of dealership ownership. (DSS is currently attempting to get the legislature to waive this requirement.) The state has bypassed this requirement by purchasing vehicles at wholesale directly from car dealers. But, according to Fritz, these cars cost almost twice as much as the state surplus vehicles and are often of lesser quality.

The following table provides a more complete listing of state vehicle ownership programs.

Table 1: State Vehicle Ownership Programs


Program Type (Name)



Vehicle donation

State working with automobile association and auto dealers to get salvaged cars donated or made available to clients at no or low interest.



State encourages clients to use their annual Alaska Permanent Fund Dividend to purchase a reliable vehicle or pay for needed maintenance, repairs, and insurance.


Vehicle donation

In Ventura County, the Bank of America has donated cars to the county's welfare-to-work program through a nonprofit group and leased through a county credit union. The leases are long-term for minimal monthly payments. Lease proceeds go for purchase of additional vehicles.


Vehicle donation programs (Wrecks to Rides; Project Self-Sufficiency)

1. State works with Goodwill Industries to encourage people to donate used cars, which are taken to area high schools for repairs. Welfare clients get cars (for free) and up to three months of insurance. They are responsible for subsequent upkeep; 2. Loveland-Fort Collins area program for people enrolled in Project Self-Sufficiency needing work-related transportation.


Vehicle donation

Bridgeport will soon have a vehicle donation program where vehicle are repaired by WTW participants enrolled in vocational-technical auto repair program. Cars priced at cost of repairs.


Vehicle donation (Charity Cars, Inc.)

Provides vehicles (donated by auto industry and private citizens), low-cost services and towing, and if necessary, the tag and down payment for insurance. Charity Cars retains lien on vehicle for three years.


Loan program (Peach on Wheels)

State works with used car dealers to enable welfare recipients to purchase salvaged or auctioned cars at no or reduced interest.


Vehicle donation

Big Sandy Area Development District is working with state agencies and charities to secure auctioned or donated cars for job-ready welfare recipients.


Vehicle donation (Wheels for Work)

Public-private partnership in Anne Arundel County offering used cars to people who have found jobs but cannot accept them due to a lack of transportation. Uses both private donations and state surplus vehicles.


Loan program

Low-interest loans are offered to qualifying individuals to purchase vehicles or fix those they already own.


State subsidies for vehicle purchase

State purchases (with TANF funds) vehicles, for up to $2,000, for recipient who becomes employed, full-time or part time. Three months of insurance is provided as is an additional $500 for taxes, licensing, and registration. No liens on vehicles.

New York

Vehicle donation/loan combination (20/20)

Steuben and Allegheny counties program in which clients refurbish donated automobiles for eventual ownership once they get jobs. Insurance and registration pre-arranged once job secured. Loans obtained through Steuben Educators Federal Credit Union. Loan covers repair costs, insurance, and registration.

North Carolina

Vehicle donation (Wheels-To-Work)

Forsyth County program provides cars to Work First participants who have jobs, no access to car, and cannot use public transit. Goodwill holds lien on car for one years after which client owns car after costs reimbursed.


State surplus vehicles

State law allows donation of surplus vehicles to meet transportation needs of welfare clients.


Vehicle donation (First Wheels)

Project sells donated cars to participants at no interest. Donations come from many sources, including church groups and rural co-op.

Table 1, Continued


Program Type (Name)



Vehicle donation (Wheels-for-Work)

Cars donated and liens placed on vehicles until specific amounts paid, community service is performed, or both.


Vehicle donation (Good News Garage); Loan program (Vermont Transportation Loan Program)

1. This Burlington-area project solicits donated cares which are repaired and renovated and sold to welfare recipients at cost. 2. State loan program for recipients to purchase cars (starts in September).


Lease-to-own programs (CARING Program (Wythe County) and Cars for Work (Southwest Virginia-six counties)). Loan program (Fairfax County)

1. Wythe County Social Services department and six southwest Virginia counties purchase surplus and dealer-owned vehicles and lease them to welfare recipients who ultimately own them; 2. Community Action Agencies use state grant to offer no interest loans for clients to purchase donated used cars in Fairfax County. A nonprofit agency helps recipients buy used cars. State money used for downpayments, car inspection, and enrollment in maintenance plans, with recipients responsible for other costs. The cost of regular maintenance and tires is included in the monthly repayment, which averages between $80 and $100.


Loan program

Welfare recipients with special needs can get loans to purchase vehicles.


Under the TANF provisions in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, welfare was devolved to the states and block grants replaced the 65-year-old program of federal rules and reimbursements for state welfare expenditures. States must meet very strict work participation rates or their block grants are reduced.

The Balanced Budget Act of 1997 made a number of changes to the TANF legislation but also created a new program of “welfare-to-work” grants. Seventy-five percent of the grants will be made available to states as “formula” grants, with the remaining 25% distributed competitively. The Department of Labor is responsible for awarding the competitive grants (such as the one awarded to Bridgeport's The Workplace, Inc.) To qualify for formula grants, states must meet their TANF MOE requirement (TANF requires states to spend 80% of what they spent in FY 1993-94 for welfare, or 75% if they meet the work participation rate requirement), and spend state money on allowable activities equaling 50% of their formula grant.

Funds from both TANF and WTW can be used to pay for “allowable activities.” These are activities that move individuals into, and keep them in lasting, unsubsidized jobs. They can include community service, work experience, and job creation activities using public or private wage subsidies. In a recent joint guidance policy transmittal from the secretaries of Health and Human Services, Labor, and Transportation, states were encouraged to use their TANF, WTW and MOE dollars to provide necessary transportation services. The letter listed loans for the lease or purchase of vehicles and facilitating the donation and repair of previously owned cars as allowable activities.

Federal law specifies that at least 70% of an entity's WTW formula or competitive grant must be spent for TANF recipients (or noncustodial parents of children whose parents are TANF recipients) who meet both a “barriers to employment” test and a “TANF/AFDC” receipt test. The individual must have at least two of three barriers to employment: not having completed secondary school or obtained a GED and having low skills in reading or math, requiring substance abuse treatment for employment, or having a poor work history. The second test requires that a recipient have received TANF or Aid to Families with Dependent Children (AFDC) assistance for at least 30 months or be within 12 months of reaching a TANF time limit (21 months in Connecticut).