Maxwell School, Syracuse University

SYRACUSE UNIVERSITY
The Maxwell School of Citizenship and Public Affairs

 

PAI 786 - Urban Policy
Professor Yinger

 

 

Case: A Welfare Reform Plan for New York State(1)

Looking back from today, March 1997, one could say that the nation has witnessed remarkable swings in federal welfare policy since 1988. These swings culminated in the Transitional Assistance for Needy Families Program (TANF), which was passed by Congress and signed by President Bill Clinton in August 1996. In the phrase made famous by President Clinton, this act was designed "to end welfare as we know it." In this, at least, it succeeded.

This new legislation places enormous new responsibilities on state governments by giving them expanded discretion and financial responsibility. Each state must devise and implement a wide-ranging set of new welfare policies--and must do so immediately because TANF take effect on July 1, 1997. In New York, which has a long history as a leader in state welfare policy, the debate over new welfare policies is well under way. In the fall of 1996, Governor George E. Pataki, a Republican, announced a detailed welfare reform proposal, and the newspapers are now full of comments on this plan. A Democratic alternative was presented this month, and leaders of both parties are now preparing for a lively debate in the legislature, which will undoubtedly take place in the near future. All participants hope that a compromise package will emerge before the July 1 deadline.

 

Background: Welfare Reform Over the Last Ten Years

During the 1980s, a broad consensus emerged around the need for a "workfare" component in the welfare system. Liberals embraced this approach because it offers education, job training, and job search assistance to welfare recipients, who, by and large, fall short in the skills and experience they need to obtain or succeed in a job. Conservatives embraced it because it requires welfare recipients to give something back to society, namely an effort to become more productive, in return for their check.

This consensus led to the 1988 Family Support Act, which required every state to run an education, training, or work program for parents on welfare and provided up to $1 billion per year in Federal matching money to help pay for it. In addition, states were expected to meet enrollment quotas in their new programs, generally set at 15 percent of non-exempt recipients, and to reduce the grants of those who refused to join. The mothers of infants were exempt from these requirements. When it passed, Senator Daniel Patrick Moynihan of New York, one of its sponsors, said the law amounted to a new social compact that emphasized the mutual obligations of government and poor people.

This consensus did not last very long. Republicans started pushing the idea of stronger work requirements and then, in the 1992 presidential campaign, Bill Clinton uttered his famous phrase. Moreover, he promised to end welfare payments after two years. The precise meaning of this promise was not clear, but he appeared to mean that after two years, traditional welfare grants would be replaced by wages for a public service job, assuming no private employment could be found. Nevertheless, staking out this position, which was conservative by the traditional standards of the Democrat Party, may have helped Clinton win the 1992 elections.

In November 1993, Representative Newt Gingrich of Georgia and several other Republicans in the House of Representatives proposed a "tough love" approach that would cut off welfare benefits after two years, unless a recipient spent 35 hours per week working off her benefits. An even tougher plan was then proposed, and ultimately implemented, by the Republican Governor of Wisconsin, Tommy Thompson. Under this plan, welfare payments are simply ended after two years. This plan violated the federal regulations applicable at the time, so Governor Thompson asked the Clinton Administration for, and was granted, a waiver from these regulations.(2)

In contrast, several states have taken drastic steps to alter the incentives facing welfare recipients. The Learning, Earning, and Parenting (LEAP) program in Ohio pays teen-age welfare mothers an extra $62 per month when they are in school. Several other states, including Virginia, Florida, Maryland, and Oklahoma, have started similar programs. New York offers the Child Assistance Program (CAP) in New York City and in several upstate counties. This program cuts the standard AFDC benefit by one third, but allows a recipient to retain 90 percent of her earnings up to the federal poverty line and 33 percent of her earnings between the poverty line and 150 percent of the poverty line, at which point her benefits end.(3) Mothers may participate in CAP only if they have obtained court orders for child support from the fathers of their children. This requirement makes it possible for the state to pursue the fathers and recover funds from them to offset the costs of the program.

The work incentives in CAP can be quite powerful. For example, a woman with two children who is supported only by AFDC would receive $916 a month in food stamps, Federally mandated child support payments, and cash. But that same woman under CAP could have as much as $1,312 in monthly income by taking a part-time job paying $650 a month--25 hours a week at $6.50 an hour, say--and combining that salary with a portion of her welfare benefits. That has been a powerful work incentive for single mothers who say the program has given them both the financial means and the self-esteem to combat lifetimes of welfare dependency.

Consider the case of Edna Barley, a mother of two from Kingston, N.Y., who long felt trapped on the welfare rolls for the same reason many other single mothers do: the entry-level jobs that were available just did not pay enough to live on. But her outlook changed a year ago when she voluntarily joined CAP. "It gave me the chance to work myself off welfare," said Ms. Barley, a divorced mother of two who now works as a school bus driver and is no longer collecting welfare benefits. "Suddenly, I felt like I had a few more options."

 

The Draft Clinton Plan

Shortly after he took office, President Clinton assembled a welfare reform working group, which was chaired by David Ellwood and Mary Jo Bane, two well known poverty scholars who were then assistant secretaries at the Department of Health and Human Services, and by Bruce Reed, a White House domestic policy aide.(4) Isabel V. Sawhill, another well known poverty scholar who had high-ranking position in the Office of Management and Budget, also participated. The working group completed a preliminary plan in December, 1993. According to Ellwood, this plan would have changed welfare offices from places that mail checks to places that find people jobs.

The plan had four main components:

1. Significant expansion of child care, work, and training programs, which would be financed from cuts or savings in existing programs.

2. New time limits on the receipt of welfare, with some kind of work requirement after two years.

3. A national crusade against teen-age pregnancy.

4. Improvements in the child support enforcement system, perhaps with a government guarantee when legally required support payments cannot be collected from the absent parent and perhaps with new training opportunities for unwed fathers.

This draft plan left several crucial questions unresolved, however. It did not indicate how many jobs would be created for welfare recipients, how such jobs would be created, or how long such jobs would last. Without endorsing these possibilities, the plan also considered offering states financial incentives to move recipients into private jobs and giving payments to employers who hire welfare recipients or to personnel concerns that find them jobs. However, the plan did not indicate how much its various elements would cost or whether other programs would be cut to pay for it.

Because of all these questions, this plan never took final form and ultimately died on the vine.

 

The Transitional Assistance for Needy Families Program

Then came the Republican triumph in the elections of 1994. The new, Republican, very conservative majority in the House of Representatives picked up on the "tough love" approach announced the previous year by their leader, Newt Gingrich. Along with the Republican majority in the Senate, the House Republicans developed a new approach to welfare that was far more stringent than the President's. It had, for example, strict work requirements and strict time limits on the receipt of welfare benefits, without significant increases in spending for jobs, training, or child care.

The first welfare bill to come out of this Congress was vetoed by President Clinton because it went so far. But the second bill, which moved modestly toward the President Clinton's position by, for example, adding more money for child care, was passed at the end of July 1996, and signed by the President in August. This legislation was called the Personal Responsibility and Work Opportunity Reconciliation Act, and it established the new Transitional Assistance for Needy Families Program (TANF). Signing this bill probably had no impact on President Clinton's subsequent election, since welfare was by then fairly low on voters' priority list, but it certainly satisfied the letter of his 1992 campaign promise. Indeed, many people believe that Clinton went too far toward the Republican position, and several people in the Clinton Administration, including Mary Jo Bane, resigned in protest when he signed the Republican's bill.(5)

TANF put a five-year limit on welfare receipt and strengthened the work requirements for welfare recipients. Details of TANF are given in Appendix A. The full impact of these provisions is not yet known, however, because the law appears to have some loopholes. The TANF requirement that welfare recipients find "work" within two years, for example, allows states to define work however they please--one hour of basket weaving each year would do--and there aren't any penalties for missing the target. Moreover, programs financed exclusively with state funds are not covered by the five-year limitation on benefits.

 

The Pataki Plan

Under TANF, each state was required to submit, in a short time, a new welfare reform proposal that would bring their state's practices into conformity with the new legislation. Thus, in the fall of 1996, Gov. Pataki submitted a series of sweeping proposals for altering New York's welfare. Following the lead of the new federal law, and operating within its requirements, these proposals would bring the most far-reaching changes in New York's welfare system in more than 50 years, and would profoundly alter the lives of the state's 1.4 million welfare recipients, about two-thirds of whom live in the five counties of New York City.

Gov. Pataki's proposal is harsher than required by TANF in some ways, but also takes advantage of some of the loopholes in TANF to moderate the impact of other provisions. For example, the Pataki plan phases out benefits while people are on welfare, which is not required by TANF, but provides state-financed vouchers to help some people who have passed the five-year limit on federally financed benefits.

 

Here are the details of the Pataki plan:

  • It calls for progressive cuts in a family's cash assistance over its five-year eligibility period. These cuts equal 10 percent of the original benefits after 18 months, 5 percent more in year two, and 15 percent more every year thereafter up to a total cut of 45 percent in year four.
     

  • It increases the income disregard up to the poverty level, which is $1080 per month for a family of three.

  • It requires drug testing for all recipients. Those who test positive become ineligible for benefits.
     

  • It implements a cap on a family's benefits. This cap ensures that a family's benefits will not increase if an additional child is born.
     

  • It lowers the pass-through to recipients of child support payments from 50 percent to 25 percent.
     

  • It provides a waiver from the Food Stamps work requirement in areas that have an unemployment rate of 10 percent or more. It makes immigrants who arrived in the U.S. before August 22, 1996 eligible for federal funded benefits to families.
     

  • It sets up a new state-funded program to provide vouchers to immigrants not covered by the federal law and to families that have exhausted their federal benefits. These vouchers, which would be administered by the counties with $1.2 billion of state money, would cover essentials such as food, clothing, and shelter.
     

  • It gives broad new discretion to counties for determining provisions when state standards have not been provided.

Ironically, this plan has run into stiff opposition from the very people who must ultimately put it into effect: the state's county executives, an influential group dominated by the Governor's Republican allies. "Instead of making things easier," said one Westchester County official, "the state seems to be making it harder for counties to administer the program." In Rockland and Suffolk Counties, where rents are relatively high, officials worry that the cash benefit cuts proposed by the Governor could lead to greater homelessness. In Rockland and Chautauqua Counties, the executives say that requiring periodic drug tests for each and every adult recipient would be excessive and costly. And in Westchester and Nassau Counties, official sharply question the need of having to establish a new bureaucracy just to provide recipients with vouchers for everything from diapers to bread to housing.

The groundswell of opposition to Gov. Pataki's proposal is particularly noteworthy because it largely involves Republican county executives who wield enormous influence within the party, particularly among the Republicans who control the State Senate. In fact, Joseph L. Bruno, the Republican Senate majority leader, indicated during an interview that the questions being raised by counties would strongly influence the position his house ultimately takes in the welfare debate. "I think you'll see some movement away from the original proposal from the Governor," said Mr. Bruno, who is Gov. Pataki's chief ally in what will no doubt be a contentious debate within the Assembly over the future of welfare in the state. "We'll be listening and we'll be careful as we move forward."

The divisions among Republicans are likely to embolden the leaders of the Democratic-controlled Assembly, who over the last two years have blocked many of Gov. Pataki's proposals to overhaul the state's welfare system. The Assembly Speaker, Sheldon Silver, said recently, "I do not believe we should balance a budget entirely on the backs of the poor people of this state, as the Governor is." As discussed below, the Democrats have just announced their alternative to the Pataki plan.

The concerns being raised are also significant because they are coming from high-ranking officials in counties that represent suburban and upstate constituencies that played pivotal roles in Gov. Pataki's victory in the 1994 race for governor and are expected to do so again when he runs for re-election next year. Perhaps the greatest source of their worry is the Governor's proposal to abolish cash grants for able-bodied childless adults and millions of other people who are not eligible for Federal benefits. Instead, his plan would give $1.2 billion to local governments to pay for a system of vouchers, known as the safety-net program, to cover those people.

The Governor and his aides say this component of his plan gives counties greater flexibility to tailor their poverty programs, allowing them to decide what services and goods a person should receive and for how long. But a number of county officials say such a system would create administrative headaches, forcing them to create a new currency and then establish an elaborate network of grocery stores, landlords and department stores willing to accept such payments.

The idea of vouchers was first proposed by Assembly Democrats in June, 1996, after the first federal reform bill, which included time limits, came out of Congress, but before the final federal reform plan was signed into law. The Democratic plan provided recipients with vouchers for housing and food once their cash benefits were exhausted. At the time, Republicans attacked this plan as a way to get around time limits. "If you examine the Democrats' plan," said Thomas M. Reynolds, who leads the Assembly Republicans, "you see that there are really no time limits. After cash benefits expire, welfare recipients would receive noncash vouchers."

Although a Republican governor has now proposed them, vouchers still do not appear to be popular among Republicans, who now see them as taking advantage of the loophole in TANF that allows states to use their own funds to extend welfare payments beyond five years. A Republican Westchester County official said that merely deciding what things to provide vouchers for was a huge task in itself. "What are these vouchers supposed to do?" the official said. "What are they supposed to buy? People have so many incidentals. Do you provide vouchers for all of them? Its an administrative nightmare." Nassau officials have similar concerns. Lynn Kerschner, a spokeswoman for the county's Department of Social Services, and said that in a rental market as tight as Nassau's for example, it would be nearly impossible to find landlords willing to enroll in a voucher program when they can get cash readily from other tenants. "There's no guarantee that there will be landlords who accept the vouchers," she said. "That's the big concern right now."

From Nassau and Suffolk to Westchester and Rockland, Gov. Pataki is also facing a revolt over his proposal to cut cash benefits for families in stages over five years for a total reduction of 45 percent by the fifth year. Gov. Pataki and his aids contend that the cuts would be offset by allowing people to keep up to $1080 a month from jobs without losing their welfare grants. Currently, the state begins cutting benefits once a household earns more than $667 a month. But because the cost of rent, utilities and other essentials are relatively high in the suburban counties surrounding New York City many officials in those counties fear that the proposed benefit cuts could gradually result in greater poverty and homelessness. That, the officials contend, would undermine single heads of households, mostly women, who are trying to make ends meet while enrolled in, say, a job-training program or college.

C. Scott Vanderhoef, the County Executive in Rockland, contends that because new Federal rules remove families from the welfare rolls after five years, it is especially important not to enact policies like benefit cuts that undermine the efforts of people who are genuinely trying to prepare themselves to enter the work force. "The larger the benefits can be in the short run to allow for a safe transition into work, the better for a place like Rockland," he said. "We don't want to destabilize people." Bill Jones, the chief of staff for the Suffolk County Executive, Robert J. Gaffney, echoed those concerns, saying welfare recipients now need all the benefits they can get just to cover the cost of rent and utilities in the county. Reductions in benefits, he added, could also result in homelessness in the county. "Our clear priority is to prevent people from experiencing homelessness," he said. "Homelessness is expensive."

The other source of concern for counties is the Governor's proposal to require drug testing for all adults on the welfare rolls. In many instances, the county officials said they felt that such a policy was too broad and could cost them millions of dollars each year in unneeded tests. Why, they ask, bother testing someone who shows no outward signs of addiction, like a single mother who regularly attends an assigned job-training program? The county officials contend that individual caseworkers ought to have the discretion of deciding who to test. The decision, they add, should not be made in Albany. "Mandatory testing is a waste of money," said Andrew W. Goodell, the County Executive in Chautauqua County. "We ought to have the discretion to test if we want." But Dan Hogan, a spokesman for the state's Department of Social Services, said that in many instances, local counselors do not have the training to determine who should require testing. He said across-the-board testing would insure that people with addictions received the help they needed to get their lives in order.

Finally, many Democrats have criticized the Pataki plan because it does not fully extend the CAP program, despite preliminary evidence suggesting that the CAP program has been quite successful. In the 14 counties participating in it, people in the program make 20 percent more in wages, or an additional $2,600 per year, than those enrolled only in AFDC. Nevertheless, the Pataki plan does not retain the cuts in welfare "tax rates" that are at the heart of CAP. Instead, it raises the income "disregard," which is the amount of income that can be received before the welfare tax rate sets in. Once that income level is reached, however, recipients would still lose $1.00 for every $1.00 that they earned, as they did in the old system without CAP.

Advocates for the poor call this approach punitive. They say that the reason people remain stuck on welfare has nothing to do with lack of ambition but rather with scarcity of decent paying jobs. As Susan Antos, a lawyer with the Greater Upstate Law Project, said: "CAP provides a cushion in a volatile labor market like ours. So long as people are paid salaries that don't pull them out of poverty, the state should provide incentives for them to keep working." Brian Wing, the Acting Commissioner of the State Department of Social Services, counters that the benefit cuts, combined with the chance for people to keep more of their earnings before the welfare tax sets in, "should encourage people to work sooner rather than later."

The potential future role for CAP also has become controversial because of a delay in the release of a formal evaluation of the program. Critics of the Governor's plan claim that the report has been delayed because the Governor does not want people to know the truth about CAP, and in particular about its ability to encourage work without the harsh penalties in the Governor's plan. Assemblyman Martin A. Luster, and Ithaca Democrat who has been active in the state's welfare debate, said that the Governor was just playing politics with welfare reform. "Here's a program that works," he said, "and they say, 'The hell with it.'"

In fact, the final (but still unreleased) report prepared by Abt Associates, a well-known consulting firm in Cambridge, MA, claims that CAP has increased employment and earnings among participating welfare recipients and lowered expenditures for public asssistance. Although CAP produced higher administrative costs, it yielded a net savings for the state. Moreover, these findings held up even after the Abt researchers responded to several concerns about the preliminary report that were raised by officials in the Pataki Administration.

A spokesman for the Governor has countered by saying that the report has been delayed both because of the time it took to "get up to speed" on such a complex evaluation and because independent, outside evaluators said it was not yet ready for release. Moreover, the spokesman pointed out, "the effects of CAP vary from county to county, depending largely on regional job markets and how well the program is administered locally. For example, of the 12,000 people eligible for the program in Monroe County, which includes Rochester, 1,266 enrolled. By contrast, only 144 out of 14,000 candidates joined the program in downtown Brooklyn. How can you get positive job effects from a program that nobody participates in?"

 

The Democratic Alternative

Just this month, Assembly Speaker Silver announced a Democratic alternative that seeks to soften some of the benefit cuts in the Pataki proposal. Although the Democratic proposal rejects some key aspects of the Pataki plan, such as the gradual reduction in cash payments to families over five years, it retains other aspects, often with modifications. For example, the Democratic plan includes vouchers for people who have passed the federally imposed five-year limit on cash assistance. This was, of course, originally the Democrats' idea. In addition, the Democratic plan keeps aid flowing to legal immigrants, a provision that could cost the state as much as $128 million dollars.

"In designing this program, Speaker Silver wanted very much to make the transition from a generational dependency to a temporary assistance program like unemployment insurance, yet at the same time reject the inhumane and punitive measures included in the Pataki program," Silver spokeswoman Patricia Lynch said.

 

The Assignments

Your are a staff analyst for (a Republican legislator) (a Democratic legislator) (a legislative committee responsible for welfare legislation) (a state taxpayer's group) (a welfare rights organization) --take your pick-- and you have been asked to propose a welfare plan for New York. Your proposal must be consistent with the new federal law. It also should cost roughly the same amount as the Pataki proposal, but you are not required to provide a formal budgetary analysis. Instead, simply avoid any provisions that would greatly increase the cost to the state above the comparable costs in the Pataki proposal, at least not without accompanying provisions that would greatly decrease the cost somewhere else.

All students must devise a plan for discussion in class. They should be prepared to present the key details of their proposed plan, and explain why it is the best plan consistent with the federal restrictions.

 

APPENDIX: MAJOR PROVISIONS OF THE NEW FEDERAL WELFARE LAW

Aid to Families with Dependent Children (AFDC) was the main federal welfare program from the 1930s to 1996. It provided aid for needy children and their caretakers. In general, families with children were eligible to receive AFDC if one parent was absent or disabled or both parents were unemployed, and if the family met an income and resource test. In New York in 1996, total need for a family of four was about $600; the actual grant equaled this amount minus any income the family earned.

The Family Support Act of 1988 (FSA) placed some work requirements on AFDC recipients, through the JOBS Program, but the requirements were flexible and could be satisfied through education and training as well as through employment. Moreover, FSA mandated that states provide child care to JOBS participants.

The latest welfare revisions appeared in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. In particular, this act established the Transitional Assistance for Needy Families Program (TANF). The major provisions of the new legislation are:

1. Change in Federal Funding and Regulation

The new law eliminates the matching formula that has funded AFDC since its inception. Instead of a matching grant, each state will receive a block grant based on the money it received under the old formula. Thus, the amount a state spends will no longer influence the amount of money it receives from the federal government.

The law has no provision for updating a state's block grant as the eligible population in the state changes.

The states have vastly increased discretion under the new legislation. The federal government must determine whether a state's plan is "complete," but the law does not make it clear what happens if the plan is found to be incomplete or if the federal government disagrees with a state on a particular issue.

2. Elimination of Entitlement

Until TANF, every family that met the eligibility criteria was entitled to receive AFDC benefits. This is no longer true. If a state has used up its block grant from the federal government and does not want to raise any more money, it is not obligated to provide benefits to families that meet its AFDC eligibility criteria. Some analysts anticipate that, particularly during recessions, many families may lose their benefits for the last few months of a state's fiscal year.

3. Work Requirements

Unless the state specifically opts out of this provision, all recipients of cash assistance are required to participate in community service after receiving benefits for six months. This provision applies to all parents or caretakers receiving assistance.

Recipients of cash assistance face a work requirement after receiving assistance for two years. The law requires 25 percent of single-parent recipients to work in 1997 and raises this limit to 50 percent by 2002. States that fail to comply will be penalized.

The law requires 75 percent of two-parent recipients to work in 1997 and raises this limit to 90 percent by 2002. Again, states will be penalized for failure to comply.

Participation in education and training programs will generally not be counted as meeting these work requirements.

4. Child Care

The law does provide a limited amount of money for child care to help parents, particularly single parents, when they go to work.

However, a state is not required to provide child care for families who receive benefits. In fact, parents of children age six or above are not guaranteed child care and are not entitled to an exemption from the law's work requirements because they lack child care. This type of exemption will be given only for parents of children under six who can demonstrate an inability to obtain child care.

5. Five-Year Limitation

TANF imposes a five-year (60 month) limit on the receipt of welfare benefits. Specifically, states are prohibited from using federal funds to provide benefits to any family that has received benefits for 60 months.

This limit, which applies to any family in which an adult resides, counts any month in which the family receives federal assistance. This assistance is not necessarily limited to cash assistance, but could also include the receipt of subsidized housing, counseling, child care, and so on.

The five-year limit does not include any month in which the adult(s) in the family does not receive assistance. However, once the five-year limit has been reached for an adult in the family, the entire family is ineligible for assistance, not just the adult. To be specific, TANF prohibits the use of funds "to provide assistance to a family that includes an adult who has receive assistance under any State program funded under this part attributable to funds provided by the federal government for a period of 60 months."

Because of these provisions:

some families may have to move out of subsidized apartments to avoid adding time toward their five-year limit;

some children who are living with caretakers, who are, along with parents, covered under the law, may have to move into foster care to prevent a family from losing its benefits;

However, up to 20 percent of each state's annual caseload can be exempted from the five-year limit. Exemptions can be granted on the basis of hardship or if the family includes an individual who has been battered or subjected to extreme cruelty.

6. Coverage of Immigrants

According to TANF, immigrants arriving in the U.S. after 8/22/96 are denied eligibility for cash assistance, food stamps, and other means tested programs, including SSI, for a period of five years.

After five years, their sponsor's income will be "deemed" to be available to them, until they become citizens or have worked for 10 years (as measured by Social Security Administration criteria). In other words, their sponsor's income will be considered in determining whether they are eligible for benefits. (No one can immigrate into the U.S. without a sponsor.)

TANF does not provide an exemption to these provisions for immigrants who are 75 years of age or older or who are too disabled to go through a naturalization process.

Most non-citizens are no longer eligible for foot stamps or SSI. Benefits for non-citizens already in the country will end immediately after their next re-evaluation. President Clinton has allowed the Secretary of Agriculture to extend eligibility for up to 12 months, but no later than August 22, 1997.

Exemptions from these provisions are granted only for (1) refugees and people receiving asylum, but only for their first five years in the U.S.; (2) veterans, people on active military duty, and their spouses and unmarried dependent children; and (3) immigrants who have worked in the U.S. for 10 years (again following SSA criteria).

Most immigrants designated as parolees by the State Department, including refugees, will be denied benefits, regardless of the nature of their infraction.

Because of these provisions:

Many immigrant families who are self supporting will no longer be able to care for elderly relatives who lose benefits without placing themselves at financial risk.

Many working single-parent families will loose food stamp and Medicaid coverage for their children, with potential consequences for the children's nutrition, medical care, and education.

7. Food Stamps

Food Stamps remains an entitlement program, but the amount of Food Stamps benefits is cut in various ways. For example, the shelter deduction cap will be frozen at $300 in 1997. No matter what happens to housing costs in future years, shelter expenses above this amount cannot be deducted from income in calculating Food Stamps benefits.

All "able-bodied" recipients between the ages of 18 and 50 will have to work 20 hours per week or else be limited to 3 months of Food Stamps in any 36 month period. (CBO estimates that as many as 1 million unemployed individuals who cannot find work will be denied Food Stamps in an average month because of this provision.)

8. Medicaid

Medicaid remains an entitlement program, and eligibility for Medicaid will still be determined according to the AFDC that applied as of July 16, 1996, and there is no five-year limit on Medicaid eligibility.

People eligible for Medicaid through routes other than AFDC, such as being medically needy, will still be eligible, for the most part, according to the old rules.

However, people can lose Medicaid eligibility for failure to meet work requirements. Termination of Medicaid to an adult for violation of the work rules does not extend to children in the family.

ENDNOTES

1. This case was written by John Yinger for the purposes of class discussion. It draws heavily (often word-for-word) on Fred M. Stanczak, "Outline of Welfare Reform Legislation;" The Associated Press, "Democrats Try to Soften Welfare Plan," Syracuse Herald-Journal, March 27, 1997, p. A9; and on two articles in The New York Times by Raymond Hernandez, "Allies of Pataki Express Concerns in Welfare Plan," March 11, 1997, p. A1, and "Quiet Welfare Reform Experiment Has Had Mixed Success," December 9, 1996, p. B1. Material was also drawn from articles in The New York Times by Elizabeth Kolbert, "Success Story Under Wraps: Welfare Study," February 10, 1997, p. B1; by Robert Pear, "Welfare Changes, While Big, Will Be Taking Shape Slowly, August 6, 1996, p. A9; by Raymond Hernandez, "Democrats in Assembly Release a Welfare Plan," June 19, 1996, p. B5; by Jason DeParle, "'88 Welfare Act Is Falling Short, Researchers Say," March 30, 1992, p. A1, "Clinton Allows State to Limit Aid to Indigent," November 2, 1993, p. A1, "House G.O.P Proposes 'Tough Love' Welfare Requiring Recipients to Work," November 11, 1993, p. B19, and "Draft Clinton Welfare Plan States Goals but Not Finances," December 3, 1993, p. A1; by Susan Chira, "A Welfare Experiment for Teen-Age Mothers," April 28, 1993, p. A12; and by the editors, "An Answer to the Welfare Trap," November 8, 1992, p. 16. Finally, it draws on Dana Milbank, "Lawyer Helps States See the Loopholes in Welfare Law," The Wall Street Journal, March 14, 1997, p. A18.

2. The Clinton Administration also granted waivers to 42 other states, mostly for work requirement rules, as a way to foster experimentation in welfare policy. One waiver went to New York for the CAP program, which is discussed below. Under the welfare reform legislation passed in 1996, which is also discussed below, these 43 states can continue to operate their experimental programs for the time specified in the waiver, which ranges from 5 to 11 years, regardless of whether they comply with the requirements of the new law.

3. CAP also encourages recipients to save money by eliminating the asset limits that govern eligibility for AFDC.

4. Mary Jo Bane also served in the New York State Department of Human Services for several years and was briefly the head of this department before leaving to work for the Clinton Administration.

5. The other principal architect of the Clinton Plan, David Ellwood, had already returned to his teaching position at Harvard's Kennedy School by the time the bill was signed.

Trustee Professor of Public Administration and Economics