Welfare Reform at 20: A Block Grant is No Way to Help Children in Poverty

Chuck Sheketoff

“Welfare reform” turns 20 this month and that’s nothing to celebrate. While the redesigned program, now called Temporary Assistance for Needy Families, or “TANF,” is charged with helping low-income families with dependent children build a better life, it has fallen short of that promise. To understand why, it helps to follow the money.

Beneath the lofty goals of fostering personal responsibility, the 1996 federal welfare reform law fundamentally changed how the program is financed. The federal government stopped its partnership with states when it changed the funding mechanism to a “block grant.”

Under the block grant, states are no longer entitled to federal matching funds tied to need and a state’s willingness to invest in the program. Instead, the block grant is a fixed dollar amount with no adjustments for need or state spending. States are required only to maintain a portion of what they were spending in the program when the welfare law was passed.

History has shown the block grant amount — as well as the state’s required contribution — to be frozen in time.

Unfortunately, leading up to the 1996 legislation, Oregon was a proponent of the block grant scheme. It joined other states in arguing that a block grant meant fewer spending restrictions and increased flexibility to find innovative ways to help poor families become self-sufficient.

Three problems set up this arrangement to fail.

The first is the effect of inflation, eroding the value of that 1996 block grant dollar by 36 percent.

The second is population growth. The U.S. population, as well as Oregon’s, has of course been steadily growing. As such, the sheer number of families experiencing poverty can grow even when the poverty rate stays the same or even shrinks somewhat. And here in Oregon that has happened. We have not dramatically reduced the poverty rate and there are many more poor families with children

Third, the economy has business cycles. During downturns, when states must spend more to meet increased demand for services, the federal government is not there as a guaranteed partner to share the financial load. As a result, states can fall behind when the economy goes sour. Oregon is a good example.

Two decades after welfare reform, has Oregon TANF funding kept up with the need? Unfortunately, not even close. If we look at the effects of inflation alone, Oregon’s total TANF spending — both the federal funds and Oregon’s own contribution combined — dropped by 19 percent between 1995 and 2015. Since there are more children in poverty needing assistance now than in 1995, Oregon’s capacity to assist each one has dropped by an even larger share.

There is evidence that the block grant structure has degraded Oregon’s ability to assist families in need. To be clear, at no time has Oregon’s program helped all children in poverty; at the time of welfare reform, the program was only reaching about half of them. To be able to continue serving the same portion of struggling families into the future, the income limit would have needed to rise with inflation. However, that limit has not budged a penny in all these years, with devastating effect.

An Oregon family of three still cannot earn more than $616 per month and be considered for TANF assistance — the same income limit in place in 1991. At the time of welfare reform, a family earning up to 59 percent of the federal poverty level could qualify for assistance. Today, that family can earn no more than a paltry 37 percent of the federal poverty level. That’s less than two day’s work at minimum wage. Children and their families must be virtually destitute before TANF help can arrive.

Here at the Oregon Center for Public Policy, for a variety of reasons we are not celebrating the 20th anniversary of welfare reform. When you follow the money it’s clear that a federal block grant is no way to finance a structure intended to protect children against the worst of poverty’s life-long harm.

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Chuck Sheketoff is the executive director of the Oregon Center for Public Policy. You can sign up to receive email notification of OCPP materials at www.ocpp.org.

By Chuck Sheketoff Aug. 19, 2016