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III. Proposals for Change

During the past year, a range of reform proposals— based on the prescription that the current system is not working and needs substantial change-have emerged. These proposals reflect the economic realities and philosophical viewpoints discussed previously. Some build on the recent state experimentation in employment training and child support. Recognizing budget constraints, most call for programs that are fiscally neutral. The most popular way to achieve this goal is through a concept known as "devolution." In exchange for federal funding of various welfare changes, states would be required to take responsibility for other programs, such as community development, social services, and infrastructure programs, that are now federally funded. In most proposals, this devolution would occur without a requirement that states maintain existing programs. Thus, whether the devolved programs would, in fact, continue is not guaranteed.

Other financing mechanisms that have been suggested include changing in-kind benefits, such as food stamps, into cash programs to reduce administrative costs and/or eliminating some existing programs in order to fund others. The specifics of each proposal are presented below.

A. White House Reports

Two reports were recently issued by the White House Domestic Policy Council. One was written by the Working Group on the Family and the other by the Low-Income Opportunity Working Group. Both reports reflect a desire to return to an English poor laws-style welfare system by emphasizing the need for more local control and community self-help.

1. Working Group on the Family-The Bauer Report

The Working Group on the Family, chaired by Gary Bauer, recently appointed Director of the White House Office of Policy Development, issued its findings, known as the Bauer Report, in November 1986.62 In preparation for its report, the Working Group contacted hundreds of organizations across the country and reviewed federal regulations regarding the family. Its areas of inquiry were divorce, welfare, teen pregnancy, television, child care, child support, adoption, housing, crime, schools, and taxes. The Bauer Report reaches a number of conclusions: no-fault divorce increases the incidence of broken families; welfare contributes to family dissolution and child poverty; sex education and the availability of contraceptives encourage teen pregnancy; housing vouchers promote geographic and economic mobility for low-income families; and a strong family life is the best weapon against increasing crime rates.

Based on these conclusions, the Bauer Report makes a number of recommendations. Some of its suggestions are new, and others simply restate current law. Among its ideas are the following:

• Federal programs should not provide incentives for


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2. Low-Income Opportunity Working GroupThe Hobbs Report

The Low-Income Opportunity Working Group, chaired by Charles Hobbs, newly appointed Assistant to the President for Welfare Reform, issued its findings, known as the Hobbs Report, in December 1986.67 In preparation for its report, and with the help of the Advisory Commission on Intergovernmental Relations, the group held a series of public hearings and discussion groups around the country to solicit the views of current and former welfare recipients and caseworkers. The Hobbs Report recommends that the federal government sponsor long-term state and local experiments to test the most effective ways to provide necessary services for poor families. As the basis of its recommendation, the report cites examples of successful community efforts to provide job training and housing, improve educational options, enhance neighborhoods, and stimulate economic development. The group believes these local efforts should be expanded and encouraged because they make work more rewarding than welfare, provide employment preparation, encourage the formation and maintenance of twoparent families, and develop community support for self-reliance and family responsibility.


In addition, the Hobbs Report cites proposals suggested by state governors, such as "cashing out" certain benefit programs, providing one-year income disregards for absentee parents who return home, establishing local systems of public assistance, and extending Medicaid benefits.69 However, because the state experiments would not necessarily be conducted with both participants and control groups, it may be difficult to draw conclusions about the efficacy of the programs. In addition, the experiments would require waiver of existing federal regulations and statutory provisions without establishing criteria to measure what does and does not work. The Hobbs Working Group does believe that the federal government has a role in the delivery of public assistance by maintaining current levels of funding and continuing to enforce civil rights and due process obligations.

63. Id. at 41.

64. Id. at 46. 65. Id. at 53.

66. Id. at 64.


B. Private Groups

A number of private groups have also issued reports calling for change. Some of these private groups are composed of or sponsored by public officials acting in their private capacities.

1. American Public Welfare Association

The American Public Welfare Association (APWA) issued a report entitled Investing in Poor Families and Their Children: A Matter of Commitment in November 1986." This document reflects the concerns of the APWA membership (which includes the Council of State Human Service Administrators and the Council of Local Public Welfare Administrators), who want to reduce the incidence of poverty among children. In essence, it fleshes out a comprehensive family policy along the lines suggested by Daniel Patrick Moynihan. The report's premise is that the current welfare system must be redesigned and that a new, federally funded program is required as a long-term investment in the future.



The APWA proposals would be funded by cashing out AFDC, food stamps, and low-income home energy assistance and by devolving unspecified federal programs to the states. To ensure income security for poor families, APWA recommends a mandatory client-agency contract; a mandatory welfare-to-jobs. program; increased child support enforcement; stronger public schools; increased availability of affordable, quality child care; a state-specific "Family Living Standard"; and a case management system. The report also recommends some less specific adolescent pregnancy prevention strategies.4 The Family Living Standard would reflect the cost-of-living in each state, based on a nationally designed methodology to determine the cost of basic goods and services required by families (e.g., housing and furnishings, food, utilities, transportation, and clothing) and would allow intrastate variances where necessary (e.g., urban vs. rural housing costs).75 If one or both parents work, but their income does not meet this standard, the family would receive a supplemental cash payment.'


Work incentives would be included to encourage heads of households to continue their efforts to achieve self-sufficiency. Working families would be allowed to disregard 25 percent of their earned income when the Family Living Standard supplement is calculated and to retain their federal earned income tax credit." Recognizing the costs of this proposal, APWA recommends that the Family Living Standard be phased in over 10 years.78 All able-bodied adults who are not employed, including single mothers with children age three or older, would be required to work or to participate in a job training or educational program. Single mothers with very young children would be required to finish high school and to have a part-time activity


72. Id. at 23.

73. Id. at 6-7.

74. Id. at 7.

75. Id. at 23.

76. Id.

77. Id.

78. Id. at 24.

outside the home.79

Under the APWA proposal, states would operate welfareto-jobs programs funded with a 75-percent uncapped federal share. This program would replace the current federal WIN and food stamp work requirements and would target hard-to-place, long-term public assistance recipients. Under the work program, the state would provide transition services, including medical coverage, but no specific time period for continuing these services is recommended. 80 APWA also supports a higher minimum wage, because it recognizes that full-time work alone will not remove many Americans from the public assistance system. However, it believes that, given current economic pressures, the minimum wage is not likely to increase.81

A key element of the proposal is the contract between the state and the client, which is much like the employment plan in the ET Choices program. The contract would outline an employment and financial plan for the family to achieve economic independence. A case management system would be used to monitor client progress and to arrange the necessary support services. The federal government and the state agency would establish performance standards to ensure that adults meet their obligations under the contract. Client sanctions would include mandatory work assignments in exchange for benefits, vouchers in lieu of cash payments, and, as a last resort, benefit reductions for adult family members. 82

This proposal was introduced in Congress in February 1987 by Representatives Barbara Kennelly (D-Conn.) and Robert Matsui (D-Cal.).83

2. Babbitt/Flemming Project on the Welfare of


Bruce Babbitt, former Governor of Arizona, and Dr. Arthur Flemming, former Secretary of Health, Education, and Welfare, co-chaired the Project on the Welfare of Families. The group's report, Ladders Out of Poverty, was issued in December 1986 and recommends policy changes to help the working poor, welfare recipients who want to work, and poor people who cannot work.84 To fund their proposals, the Babbitt/Flemming group presents several options. One would reduce federal financing for transportation subsidies, economic development, agriculture subsidies, community development programs, and Defense Department impact aid to schools, and would devolve these responsibilities to state and local governments. Another would generate new revenues by taxing a greater portion of social insurance benefits (e.g., those that exceed employee contributions or that result from lower tax thresholds) and recouping revenue from middle- and upper-income workers (e.g., cap tax-free income from employer-paid health insurance premiums, raise the social security tax base, or tax capital gains at death). Other options are to tax a greater proportion of social security benefits or to raise the ceiling on payroll taxes. 85

79. Id. at 19.

80. Id. at 20.

81. Id. at 31.

82. Id. at 16.

83. H.R. 1225, 100th Cong., 1st. Sess., 133 CONG. REC. H836

(daily ed. Feb. 25, 1987).

84. B. BABBITT & A. FLEMMING, LADDERS OUT OF POVERTY (1986). 85. Id. at 21-24.

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For the poor who cannot work or who cannot earn enough to support their families, changes in AFDC and SSI are proposed. These include a mandatory AFDC-U program and a minimum national AFDC benefit.' One option is to set the benefit at somewhere between 60 and 70 percent of the poverty line and to have the states contribute, paying their current match.87 On the SSI side, increasing benefits to the poverty line is recommended. The Babbitt/Flemming project also suggests increasing outreach efforts so that more eligibles are served and revising eligibility criteria so that more adults and children are covered. 88 For families seeking to make the transition from welfare to work, certain necessary services (child care, health insurance, and transportation) should be provided.89 In addition, the report recommends:

providing more flexible AFDC and food stamp income disregards (e.g., increasing the cap of $160 per month on allowable child care deductions);90 varying the earned income tax credit by family size to offer greater assistance to families with more children;" ⚫ adjusting the tax structure for low-income workers to maintain a constant ratio of tax threshold to median family income;92 and

⚫ enforcing child support obligations. 93


The Babbitt/Flemming Project also recommends programs for welfare recipients who want to work, but need employment assistance and skills training. It supports state experiments rather than a uniform national program. These state programs must balance work requirements with other employment preparation activities, including remedial education, job search, and on-the-job training. Mothers with very young children would be exempt; other mothers would be encouraged to participate and provided with the necessary child care assistance, including a reasonable child care deduction for AFDC income calculations." However, the report notes that employment is only a partial solution to AFDC dependency because wages for this population are not sufficient to lift them out of poverty.


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FIP would be a mandatory jobs program for able-bodied AFDC applicants and recipients who are not providing dependent care for a child under six months old or a disabled family member. The program would offer skills training or GED preparation, and job-ready participants would be assigned to minimum-wage unskilled jobs, such as in child care, chore services, or nursing aid. During the program, participants would receive child care. For one year after completion of the program, they would receive subsidized child care and medical benefits. In addition, an essential component of the program would be the availability of services to strengthen two-parent


88. Id. at 20-21.

89. Id. at 5.

90. Id. at 18.

91. Id.

92. Id. at 4.

93. Id. at 5.

94. Id. at 5-6. 95. Id. at 6-7.

96. Id. at 5.

97. Id. at 8-9.

98. Id. at 5.


100. Id. at 17.

101. Id. at 9-10.

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families. Absent fathers would be required to make child support payments, and they would receive necessary employment and training services to help them meet this obligation. Parent education and family planning assistance would be provided to all program participants through volunteers trained to help them develop family management skills. 102

Families would receive one cash grant representing the combined total of their AFDC and food stamp payments. This total is viewed as a "benchmark," and participants enrolled in approved training or education programs receive 105 percent of the benchmark, while recipients who, for good cause, cannot participate in education or training receive 100 percent of the benchmark. Under this system, a full-time working family could combine earnings and their FIP grant to receive 135 percent of the benchmark, while a part-time working family would receive 115 percent. Noncooperative recipients would be subject to existing federal work program sanctions under which adult benefits are withheld. 103

To begin the new program, priority would be given to first-time applicants, with the goal of converting all AFDC recipients to FIP within five years. Current recipients could volunteer for FIP and, depending on availability of services, may be accepted. 104 The program would be operated by a public corporation and board, appointed by the governor and chaired by the Secretary of the Department of Social and Health Services. 105 Officials in Washington State view this proposal as a national model because it offers such comprehensive services. The demonstration is so different from the current AFDC program that special federal-enabling legislation is necessary to implement it. State representatives are currently meeting with. the appropriate agency officials and legislative staff in Washington, D.C., to explore the feasibility of the proposal.

2. National Association of State Budget Officers

The National Association of State Budget Officers (NASBO) approved a federalism proposal in late 1986 that would have states assume fiscal and programmatic responsibility for over $12 billion in federal categorical programs in exchange for an equivalent increase in federal funding for AFDC and Medicaid. 106 First, NASBO would eliminate food stamps and end the current AFDC financing system. It would then establish a new, nationwide, totally federally financed AFDC minimum benefit at 50 percent of the poverty line. States could pay additional benefits above this amount and receive federal matching funds at the current rates. 107 Second, NASBO suggests expanding the Medicaid program to cover all pregnant women and all children under age five whose incomes are below poverty. Coverage for these persons would be completely federally funded. Coverage for other Medicaid eligibles would be financed at existing matching rates. 108

Third, NASBO proposes establishment of a federally funded long-term care block grant for the nonmedical aspects of long-term care. 109 Fourth, it would readjust the funding of medical care for SSI recipients. The federal government would assume the total cost of coverage for those eligible for SSI under federal guidelines. States would assume the total cost of coverage for those only eligible for SSI state supplements. 110 Fifth, NASBO recommends combining WIN, Job Training Partnership Act, summer youth employment, vocational education, and dislocated worker programs into a block grant to help welfare recipients find employment. This grant would be distributed as are the current individual programs, and states would have "maximum flexibility" to design their own service delivery systems. 111

To finance these changes, the federal government would turn back the following categorical programs to the states: community development block grants, urban development action grants, economic development administration grants, urban mass transit, social services block grants, community services block grants, compensatory education, adult education, education block grants (Chapter 2), and rental rehabilitation grants.


3. Cuomo Task Force on Poverty and Welfare

Governor Mario M. Cuomo of New York convened a Task Force on Poverty and Welfare to recommend ways to reduce welfare dependence. Members of the task force included key New York State agency commissioners and academics. Its report, A New Social Contract: Rethinking the Nature and Purpose of Public Assistance, issued in December 1986, concludes that no welfare reform will succeed unless it is part of a larger strategy to improve the economy and conditions of work. 113 Thus it makes a series of recommendations to create

106. National Association of State Budget Officers, Federalism Proposals 3 (1986).

107. Id.

108. Id. at 4.

109. Id.

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102. Id. at 11. 103. Id. at 9-10.

104. Id. at 6-7.

105. Id. at 15.

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111. Id. at 5-6.

112. Id. at 5.


110. Id.

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The program for people who are temporarily poor and out of work would require them to participate in work or job preparation activities in exchange for a package of benefits equal to the poverty line. Whether single mothers with children would be required to participate would depend upon the availability of child care. With a caseworker, each participant would design a program to reflect employment goals and to meet individual needs. Support services, such as child care, would be provided. Different obligations would be imposed on different groups of participants, e.g., while teen parents would be required to finish high school, older participants could choose education, training, placement services, or supported work.'17 In this regard, the proposal is similar to that of APWA and to ET Choices.

For those participants unable to find a job after the transitional program ends, a guaranteed work program would provide the same level of benefits, but in the form of wages with health insurance and child care, rather than a welfare check. To provide an incentive to keep looking for a private sector job, the level of wages would be limited to the benefit level of the transitional program. 118 Recognizing that fears about job displacement may be reasonable, the Cuomo Task Force suggests that public sector unions help identify useful work opportunities that do not displace current public employees.' On an incremental basis, the Cuomo report also recommends that the state implement the following agenda:


Education. Preschool programs would be offered in all poor neighborhoods and gradually expanded to cover all threeand four-year-olds. High school efforts would be focused on the students defined as "high risk," with early intervention efforts to keep students at their grade level and more attention to schoolwork transition.

Child support. Enforcement efforts would be increased and a standard child support formula established. (Eventually a system somewhat like the Wisconsin experiment is envisioned.)

Child care. Priority would be given to welfare recipients and those in transition for subsidized programs, with the eventual goal of providing child care on a sliding scale to all working poor families, 120

114. Id. at ch. 3.

For the federal government, the Cuomo report suggests:

Benefit levels/coverage. A minimum benefit would gradually be adopted, beginning with cash and food stamp benefits at two thirds of the poverty line, and AFDC-U would be extended.

Health insurance. Health care would be provided free to poor families and on a sliding scale to the working poor.

Income supplements. The earned income tax credit would be revised to vary by family size. This would approximate a children's allowance that is available in many Western countries. 121 The Cuomo report does contain cost estimates for some, but not all, of its proposals.

D. Legislative Proposals

Welfare reform is a major topic on Capitol Hill, discussed either as a separate legislative agenda item or as part of the federalism proposals that redefine state and federal responsibilities. A review of the current welfare proposals illustrates the variety of concerns about welfare dependency and the different financial commitments to improve income support services for American families.

1. The Federalism Act


At the end of the 99th Congress, Senators Daniel Evans (R-Wash.) and Dave Durenberger (R-Minn.) and Representative Thomas Downey (R-N.Y.) introduced the Federalism Act of 1986 (FACT). The sponsors reintroduced the bill in March 1987.123 This legislation presents a revenue-neutral plan to reform welfare and to restructure state and federal government responsibilities to the poor. The proposal seeks to improve coverage for the poor by standardizing benefits for Medicaid and AFDC recipients and by providing a national minimum standard for AFDC. It also mandates a work-welfare program for AFDC recipients. To finance these changes and to ensure fiscal neutrality, the legislation suggests that most local community development, infrastructure, and social services programs be terminated at the federal level.

The legislation requires some significant changes in current law. The key components are:

Medicaid. In the first year, all poor pregnant women and children under age five would be eligible for Medicaid. Each succeeding year, the age of poor children covered would increase by one year. All SSI recipients and persons eligible for SSI would also receive Medicaid. The federal commitment would increase to a 90-percent match.

AFDC. A national minimum benefit level for AFDC would begin in the second year of the proposal at 50 percent of the poverty line, and would increase 2 percent annually thereafter. The federal government would pay 90 percent of the cost, but states would continue to administer the program. All states would be required to offer the current AFDC-U program.

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