Celebrating 20 Years of Welfare Reform – Part 2: Life Under Waivers – The Early 1990s

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August 22, 2016

Insights and Reflections from the Front Lines
A Series of Blogs by Welfare Reform Veteran Doug Howard

Part 2: Life Under Waivers – The Early 1990s

The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) was signed into law on August 22, 1996, marking one of the most significant social policy reforms in recent history. It dramatically transformed the entitlement system Aid to Families with Dependent Children (known as AFDC or ADC), which had emphasized cash welfare payments over employment. Doug Howard, a former state administrator who ran welfare programs in Iowa and Michigan, shares his insights in a series of blogs about the transformation that started before 1996 and has continued over two decades.

In the 1980s, there was a growing recognition of the role that employment programs could play in challenging welfare dependency. However, funding for work programs continued to be limited and strategies tended to focus on small portions of the welfare caseloads and had minimal impacts.

I heard many say that the AFDC program was broken. I personally thought of it as “ineffective.” Broken means that the system isn’t doing what it was designed to do, and the AFDC program was fulfilling its charter of giving people financial support so that they could meet some of their basic needs. Ineffective, on the other hand, meant it suppressed upward mobility and kept recipients at a very low income level, actually financially discouraged individuals from taking employment that could affect their benefits eligibility, and fostered multi-generational dependence.

This required dramatic change.

By the early 1990s, states demanded change and it wasn’t just agencies – governors were champions for this change as well. States turned to federal waiver authority. The Social Security Act of 1935 authorized the Secretary of Health and Human Services to waive specified requirements for states that proposed an experimental or pilot project. However, acquiring a waiver was challenging and took many months, sometimes years. The waiver path often involved state legislation, significant state agency efforts and months of negotiation at the federal level. Governors talked about having to go to Washington on “bended knee” to get approval.

As a condition of a federal waiver approval, states had to conduct “rigorous evaluations” of changes. This entailed randomly assigning some participants to a control group that received the old AFDC policies and, the rest to an experimental “treatment” group that received the demonstration/new policies. By comparing the outcomes of the two groups, impacts of the changes could be measured. While I appreciated the high value of the research, I found it very frustrating to know that we were designing a better system, but that some families could not access the redesigned program because they were randomly assigned into the old welfare policy. We wanted opportunity for everyone.

In Iowa, our vision for the waiver-based welfare reform that we implemented in 1993 focused on increasing the earned income of families who were on or applying for welfare. We believed a meaningful work program needed to recognize employers as customers (in addition to the job seekers) and should mirror “real-world” expectations of personal responsibility and accountability. The simplest way to translate this was to increase opportunities and expand the risk and reward expectations associated with the welfare program. There were many policy components; I’ll highlight two of the key changes that address the above concepts.

  • Work Incentives. Similar to other states, we implemented an income disregard. Under old AFDC policies, for every dollar a person earned, they lost a dollar in welfare benefits. This meant at some point (often at part-time or low-wage pay) the person could become automatically ineligible for subsidized child care, Medicaid and other services. This created disincentives to work. Under waivers, we “disregarded” a portion of what they earned – less than a dollar of benefits was reduced for each dollar earned, creating an incentive to go to work. This made work pay, creating a desirable “glide path” off of welfare, rather than the scary “cliff effect” of simply earning too much and being cut off from all support before achieving a sustainable income. We also invested in longer-term child care to support employment and established employment and training activities to prepare individuals for work.
  • Sanctions for Noncompliance/Nonparticipation. Iowa was the first state to implement full-family sanctions. I had the responsibility to personally approve the first group of sanctions – an approach that both raised expectations for participation in work programs and enforced consequences for not doing so. Don’t go to work in the private sector – you lose your job. Don’t participate in our program – you lose your eligibility. Scrutiny was high on this provision, but it proved to be significant in changing the culture of the program.

State-initiated waivers in the early 1990s were the first aggressive efforts to truly reform the system to focus on personal responsibility and employment. They kicked off what we often referred to as the “devolution revolution” and established states as the “laboratories of innovation.” There was a lot of scrutiny and concern about unintended consequences. The “devil’s in the detail” phrase was thrown around a lot. We had to prove to Washington and the world that our “laboratories of innovation” were improving outcomes for low-income families. Was it perfect? Nothing that large can be, but then and now I adamantly believe that significantly more families were better served under reforms. And it allowed for more individual approaches than the old AFDC system that was “one size fits all.”

The results were positive. Caseloads dropped. The earned income of welfare participants went up. Case managers saw the difference they could make. New stakeholders came to the table in the form of employers and community groups. We experienced growing public support and the media published positive stories. I saw waivers as the first step toward the comprehensive welfare reform embodied in PRWORA.

In the next post, I’ll discuss the beginnings of comprehensive national welfare reform.

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