United States General Accounting Office

GAO Report to the Ranking Minority Member,

Committee on Finance, U.S. Senate

May 1997 WELFARE REFORM

Three States’

Approaches Show

Promise of Increasing

Work Participation

GAO/HEHS-97-80

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-271515 

May 30, 1997

The Honorable Daniel P. Moynihan

Ranking Minority Member

Committee on Finance

United States Senate

Dear Senator Moynihan:

This report, prepared at your request, reviews states’ experiences under waivers with increasing

the participation of welfare recipients in work and work-related activities. The report examines

the policies and programs states initiated to increase participation in such activities, determines

what participation rates states have achieved under their programs, and assesses whether states

are likely to meet the work participation rates specified in the new welfare law.

We are sending copies of this report to the Chairman, Committee on Finance, U.S. Senate; the

Chairmen and Ranking Minority Members, Committee on Ways and Means and its

Subcommittee on Human Resources, House of Representatives; the Secretary of Health and

Human Services; the Assistant Secretary for Children and Families; and other interested parties.

We will also make copies available to others on request.

If you or your staff have any questions concerning this report, please call me at 202-512-7215 or

David P. Bixler, Assistant Director, at 202-512-7201. Other GAO contacts and major contributors

to this report are listed in appendix II.

Sincerely yours,

Mark V. Nadel

Associate Director, Income Security Issues
Executive Summary

Purpose The Personal Responsibility and Work Opportunity Reconciliation Act of

1996 (P.L. 104-193) ended the individual entitlement to welfare benefits

established by the Social Security Act in 1935. Under the new law, welfare

benefits are time limited and recipients are required to participate in work

and work-related activities. Moreover, the new law requires states to have

a minimum percentage of their caseload participating in work or

work-related activities to avoid a financial penalty. Even before passage of

the act, many states were experimenting with ways to increase

participation in work by reforming their welfare programs through waivers

of Aid to Families With Dependent Children (AFDC) program rules, which

allowed them to try innovative approaches beyond the rules.

To get an early indication of likely state progress in meeting work

participation requirements as well as issues facing welfare administrators

under the new welfare law, the Ranking Minority Member of the Senate

Committee on Finance requested that GAO review (1) the policies and

programs states initiated under waivers to increase participation in work

and work-related activities and (2) whether states with statewide waivers

achieved participation rates comparable to those specified by the new

federal law.

Background AFDC provided assistance to economically needy families with children

who lacked support from one or both of their parents because of death,

absence, or incapacity. Recipients typically were not required to prepare

for, or look for, work and needed only to establish and maintain income

eligibility to receive benefits. The federal and state governments shared

the costs of AFDC. The states administered the program, and the

Department of Health and Human Services (HHS) had oversight

responsibility.

As welfare caseloads grew and more women with young children entered

the labor force, a major theme of welfare reform debates through the years

was the need to increase the employability of welfare recipients to enable

them to work their way off assistance. In the 1970s, the Congress changed

the AFDC program to require certain recipients to participate in activities

aimed at increasing their employability. In 1988, as part of the Family

Support Act (FSA), it expanded these requirements by creating the Job

Opportunities and Basic Skills Training (JOBS) program to provide

education, training, and employment services to welfare recipients and to

make AFDC a transitional path to self-sufficiency. In an attempt to focus

their welfare programs more on work and increase participation further,

Page 2 GAO/HEHS-97-80 Welfare Work Participation Requirements
Executive Summary

many states more recently requested waivers of federal law to reform their

programs. As of June 1996, HHS had granted 33 states waiver authority to

test policies intended to increase the number of welfare recipients

participating in work and work-related activities.

The new welfare reform law completely transforms AFDC by replacing the

individual entitlement to benefits with Temporary Assistance for Needy

Families (TANF) block grants to the states. In addition, the law includes

several provisions to ensure cash assistance is transitional and that those

receiving aid work, or prepare for work, in exchange for benefits. While

states have a great deal of discretion over the design of their programs, the

new law establishes a 5-year lifetime limit to assistance and requires

recipients to work after 2 years of benefit receipt. Furthermore, the law

requires states to achieve specified levels of recipient participation in

work activities to avoid financial penalty. In fiscal year 1997, 25 percent of

a state’s entire caseload—the all-families rate—must be participating in

work and work-related activities. The rate increases by 5 percent a year to

50 percent by fiscal year 2002. A separate and much higher minimum work

participation rate is specified for two-parent families: 75 percent in fiscal

year 1997 and 90 percent in fiscal year 1999. Each state’s minimum

participation rates are reduced by an amount equal to the percentage that

the state’s welfare caseload has declined since fiscal year 1995.

GAO selected Massachusetts, Michigan, and Utah to review. These states

had statewide waiver programs with work requirements that were

sufficiently mature to allow for analysis of participation data.

Results in Brief The three states GAO reviewed—Massachusetts, Michigan, and

Utah—initiated policy changes designed to increase the proportion of

welfare recipients participating in activities intended to move them toward

self-sufficiency. These states increased the percentage of those

participating and, at least in the first year, are almost certain to meet the

all-families participation rate specified by the new federal welfare law.

The three states changed their requirements regarding who must

participate and what constitutes participation. Michigan and Utah

eliminated prior exemptions, thereby requiring all recipients to participate

in some activity, while Massachusetts exempted a substantial portion of

the caseload, mandating only parents with school-age children to

participate in a work-related activity. Utah permitted a broad range of

activities to count as participation, tailoring activity to client

Page 3 GAO/HEHS-97-80 Welfare Work Participation Requirements
Executive Summary

circumstances, while Massachusetts and Michigan limited the activities for

recipients required to participate to job search, followed by a job or, in the

case of Massachusetts, by community service if a job is not found after 60

days. All three states reported being able to provide the services specified

in their plans to support clients in their activities. They accomplished this

in different ways: by increasing available services, by limiting participation

requirements to fit the available resources, or by providing lower cost

services. The three states had a common strategy of strengthening

sanctions for noncompliance as a tool to increase participation.

Massachusetts, Michigan, and Utah were able to engage a substantial

number of welfare recipients in work and work-oriented activities. Most

recipients who counted as participating were working in unsubsidized

jobs, which reflects the emphasis placed on work in all three programs as

well as changes to the amount of income they can earn and continue to

receive benefits. Compared with prior participation in JOBS program

activities, the three states achieved higher participation rates under their

waiver programs.

On the basis of GAO’s analysis of state participation data, it is almost

certain that these three states will meet their all-families target

participation rate in the first year; but according to state officials, future

rates may prove more difficult to achieve. Furthermore, Massachusetts

and Michigan are concerned about their ability to meet the higher

two-parent families rates; and all three states are concerned about meeting

the future all-families rates, which not only are higher but require more

hours of work participation. State officials expressed concern that as

employable recipients find jobs, the remaining caseload will consist of

individuals with substantial barriers to employment, making the higher

future target rates difficult to achieve.

Principal Findings

States Took Different

Approaches to Increase

Participation

Under waivers, many states attempted to increase welfare recipients’

participation in work-related activities. The three states GAO

reviewed—Massachusetts, Michigan, and Utah—took different approaches

to increasing the participation of welfare recipients in work. Michigan and

Utah eliminated exemptions, expecting the entire caseload to participate

in some activity. In contrast, Massachusetts mandated that only parents of

Page 4 GAO/HEHS-97-80 Welfare Work Participation Requirements
Executive Summary

school-age children participate—approximately 20 percent of its caseload.

Massachusetts and Michigan emphasized work-focused activities, such as

a short job search/job readiness program or simple job search; while Utah

allowed a broad range of activities tailored to individual needs, including

education and training.

To encourage employment, states used different strategies. First, they

informed individuals early in the application process of their obligation to

participate in an activity that would lead to employment. Then they

monitored and tracked client progress toward that goal and offered

needed supportive services, such as child care and transportation

assistance. To further promote employment, the states changed incentives

in the AFDC program by allowing working recipients to disregard more of

their earned income in the calculation of their benefits, thereby enabling

them to earn more before becoming ineligible. To help recipients who

earned their way off welfare make the transition to self-sufficiency, some

services such as transitional Medicaid and child care were extended

beyond the 12 months required by the JOBS program. Utah diverted needy

job-ready individuals from the welfare rolls by offering them a one-time

payment to cover emergency expenses until they received a paycheck.

Finally, these states used sanctions to enforce the participation

requirements by first reducing benefit amounts for failure to participate in

planned activities and, if the failure persists, terminating benefits entirely.

The three states’ different approaches reflect the strategies that they

believe work to help welfare recipients in their states move toward

self-sufficiency; consequently, these states plan to continue their

programs, with minor changes, under the new law. Michigan and Utah,

which attempted universal participation, are concerned about the welfare

recipients left behind after the job-ready clients become employed and

leave the rolls. They believe this group, which in the past generally was

exempted or deferred from participation requirements because of their

multiple barriers to employment, will require intensive services to be able

to participate in the activities that meet the restricted definition of work

participation under the new law.

Through their waiver programs, Massachusetts, Michigan, and Utah were

able to increase the percentage of their AFDC recipients participating in

activities designed to move them toward self-sufficiency. Reflecting the

underlying work focus of their programs, the largest percentage of all

participants in each of the three states were engaged in unsubsidized

employment. Counting only activities allowed by the JOBS program, GAO

Page 5 GAO/HEHS-97-80 Welfare Work Participation Requirements
Executive Summary

compared the participation levels that these states achieved under their

statewide waiver programs in September/October 1996 to the levels that

they reported for their fiscal year 1995 JOBS program. GAO’s analysis found

that Massachusetts’ participation increased from 19 to 36 percent of the

adult caseload, Michigan’s from 21 to 42 percent, and Utah’s from 42 to

57 percent.

States Likely to Achieve

Initial All-Families

Participation Rate, but May

Be Challenged to Meet

Other Rates

GAO’s analysis showed that all three states are almost certain to meet the

first year all-families TANF participation rate requirement. Taking credit for

their caseload reductions since 1995, Massachusetts and Michigan officials

estimate that their actual target participation rate for fiscal year 1997 will

be about 13 percent, while Utah officials believe their rate will be about

14 percent. Using the definition of work participation in the new law, all

three states were achieving participation rates higher than their estimated

target rates under their waiver programs. GAO estimates that

Massachusetts was achieving an overall participation rate of 25.3 percent;

Michigan, 32.6 percent; and Utah, 30.9 percent. However, officials in

Massachusetts and Michigan reported they will have difficulty meeting the

separate two-parent families participation rate, and officials in all three

states expressed concern over their ability to meet the higher future rates.

As those recipients who are able become employed and move off the

welfare rolls, officials are concerned that the remaining caseload will

consist of less employable recipients, making it difficult to meet the higher

future participation rates. Furthermore, since these programs were

implemented under favorable economic conditions, which many believe

contributed to the large caseload reductions, officials are concerned that

an economic downturn could limit future program success. Also, as states

are left with a more difficult population to serve, they are concerned about

the cost and availability of services to meet this population’s multiple

needs in moving toward work and self-sufficiency.

Recommendations GAO is making no recommendations in this report.

Comments From HHS

and States

GAO received comments on a draft of this report from the three case study

states: Massachusetts, Michigan, and Utah. These states provided technical

clarifications about their programs and additional interpretations about

certain data, which were incorporated as appropriate. Comments were

requested from HHS, but none were received.

Page 6 GAO/HEHS-97-80 Welfare Work Participation Requirements
Page 7 GAO/HEHS-97-80 Welfare Work Participation Requirements
Contents

Executive Summary 2

Chapter 1 

Introduction

12

Past Legislative Efforts to Impose Work Requirements on AFDC

Recipients

12

TANF Work Participation Requirements 15

Objectives, Scope, and Methodology 16

Chapter 2 

States Increased

Participation Rates

Through Different

Approaches

17

States Changed Participation Requirements 17

States Implemented Policies to Encourage Participation in Work

and Work-Related Activities

23

States Implemented Stricter Sanctions for Noncompliance With

Participation Requirements

31

States Achieve Higher Participation Rates Under Waiver

Programs

33

Three States Also Increased the Percentage of the Caseload

Participating in JOBS Activities Under Waivers

36

States Plan to Continue Programs Under TANF 38

Chapter 3 

States Likely to

Achieve Initial TANF

All-Families

Participation Rate but

May Be Challenged to

Meet Other Rates

40

Calculating Participation Rates Under TANF 40

Three States Likely to Achieve the All-Families Participation Rate

in the Short Run

42

States May Have Problems Meeting the Two-Parent Participation

Rate

43

States May Have Difficulty Meeting Future Participation Rates 44

Chapter 4 

Conclusions and HHS’

and States’ Comments

47

Comments From HHS and States 48

Appendixes Appendix I: Selected Characteristics of Welfare Reform Programs

in States With Waivers Changing Work Requirements

50

Appendix II: GAO Contacts and Staff Acknowledgments 56

Page 8 GAO/HEHS-97-80 Welfare Work Participation Requirements
Contents

Bibliography 57

Related GAO Products 60

Tables Table 2.1: Work-Related Policy Changes Under Waivers in Three

States

18

Table 2.2: Participation in Allowable Activities in Three States’

Waiver Programs, September/October 1996

34

Table 2.3: Distribution of Participant Activities in Three States’

Waiver Programs, September/October 1996

35

Table 3.1: Estimated FY 1997 All-Families TANF Target

Participation Rates and TANF Rates Achieved Under Waiver in

Three States in September/October 1996

42

Table 3.2: Estimated FY 1997 Two-Parent Families TANF Target

Work Participation Rates and TANF Rates Achieved Under

Waiver in Three States in September/October 1996

43

Table I.1: Age of Youngest Child Exemptions Cited in Waivers for

States Changing Work Requirements

50

 Table I.2: Expanded Activities Meeting the Participation

Requirement in States Changing Work Requirements

51

 Table I.3: Changes in Age of Youngest Child Exemption and

Work-Related Activities Cited in Waivers for States Changing

Work Requirements

52

 Table I.4: Diversions Cited in Waivers for States Changing Work

Requirements

53

 Table I.5: Changes to Sanctions and Incentives Cited in Waivers

for States Changing Work Requirements

53

 Table I.6: Changes to Transitional Child Care and Transitional

Medicaid Requirements for States Changing Work Requirements

55

Figures Figure 2.1: Average Monthly Participation Rates in JOBS

Activities and Comparable Activities in Three Statewide Waiver

Programs

37

Figure 3.1: Caseload Declines in Three States, FY 1994-96 41

Page 9 GAO/HEHS-97-80 Welfare Work Participation Requirements
Contents

Abbreviations

AFDC Aid to Families With Dependent Children

AFDC-UP Aid to Families With Dependent Children-Unemployed

Parent

FEP Full Employment Program

FIS family independence specialist

FSA Family Support Act

HHS Department of Health and Human Services

JOBS Job Opportunities and Basic Skills Training

SPED Single Parent Employment Demonstration

TANF Temporary Assistance for Needy Families

Page 10 GAO/HEHS-97-80 Welfare Work Participation Requirements
Page 11 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 1 

Introduction

From fiscal years 1989 through 1994, average monthly Aid to Families With

Dependent Children (AFDC) caseloads rose sharply, from 3.8 million

families to 5 million. Caseloads began to decline in 1994 and in fiscal year

1996, the federal and state governments spent over $20 billion on AFDC

benefit payments for about 4.6 million families. Concerned about the

growth in the number of recipients and believing that the permanent

guarantee of benefits contributed to welfare dependency, the Congress

fundamentally altered the nature of welfare when it passed the Personal

Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L.

104-193). This major welfare reform law ended the individual entitlement

to assistance under AFDC and replaced it with capped block grants to the

states called Temporary Assistance for Needy Families (TANF), making

cash benefits temporary and conditional upon work participation. The

new law promotes self-sufficiency through employment and time limits,

imposing obligations on welfare recipients to engage in work-related

activities after 2 years of benefit receipt—or sooner if a state determines

the recipient is ready to work—and limiting the length of time individuals

may receive federal assistance to 5 years. The law specifies the types of

activities that are considered work-related and establishes minimum

yearly requirements for the percentage of each state’s welfare caseload

that must be participating in one of these activities.

Before enactment of the new law, many states were experimenting with

work requirements for welfare recipients through waivers of AFDC program

rules that the Department of Health and Human Services (HHS) approved.

Section 1115 of the Social Security Act allows the Secretary of HHS to

waive provisions of the act for the purpose of permitting states to innovate

within the AFDC program. As of June 1996, 33 states had received waivers

to test policies aimed at increasing the participation of welfare recipients

in work and work-related activities.

Past Legislative

Efforts to Impose

Work Requirements

on AFDC Recipients

AFDC provided assistance to economically needy families with children

who lack support from one or both of their parents because of death,

absence, or incapacity. The federal and state governments shared the costs

of AFDC. States had discretion over the amount they paid to entitled

individuals. They administered the program, and HHS had oversight

responsibility.

Since AFDC’s beginning, a number of developments have generated

discontent with the program. First, by the early 1990s, close to 90 percent

of all AFDC families were headed by separated, divorced, or never-married

Page 12 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 1 

Introduction

mothers, rather than the widows who constituted most of the single-parent

population when the law was passed in the 1930s. Second, employment

rates for all women, including single parents and women with very young

children, have increased dramatically, making it difficult to defend the

equity of supporting poor mothers who are unemployed. Third, there was

a rapid increase in the size of AFDC caseloads, resulting in increased costs

both to states and the federal government. Finally, concern that welfare

fostered dependency was fueled by research that identified a substantial

portion of the caseload who remain poor and receive assistance for long

periods of time.

In the late 1960s, changes were made in AFDC eligibility requirements so

that certain groups of recipients were expected to take a job or participate

in activities designed to enhance their employability. In addition, attempts

were made to encourage work by excluding a portion of earnings from the

benefit calculation—a provision known as an earned income disregard.1

These efforts were not successful in stemming the increases in AFDC

caseloads during the 1970s; and, in 1981, the Congress passed legislation

that restricted the amount of money working welfare recipients could

disregard from their benefit calculations, resulting in many working

welfare recipients losing their eligibility for benefits.2

In 1988, the Congress passed the Family Support Act (FSA), which

established the Job Opportunities and Basic Skills Training (JOBS) program

to provide education, training, and employment-related activities to help

recipients support their families and avoid long-term welfare dependency.

However, approximately one-half of the adults receiving AFDC were exempt

1

Initially, if a person on AFDC earned a dollar, their AFDC benefit would be reduced by that amount,

imposing a 100-percent marginal tax rate on earnings. This was viewed as a strong work disincentive,

since working would not necessarily result in increased income.

2

In a 1985 report, An Evaluation of the 1981 AFDC Changes: Final Report (GAO/PEMD-85-4, July 2,

1985), we estimated that these changes decreased the national monthly AFDC caseload by 442,000

cases.

Page 13 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 1 

Introduction

from the JOBS program, usually because they were caring for a young child.3

FSA also expanded eligibility for AFDC to certain two-parent families.4

The JOBS program established explicit and gradually increasing

participation rates that states had to achieve to receive the full federal

match of JOBS funds. These participation rates allowed the federal

government to promote uniform goals among states with different

program models. Minimum participation requirements conveyed to both

welfare program administrators and recipients that welfare receipt was

conditioned on recipients’ involvement in employment-promoting

activities or in work itself. The JOBS participation rates started at 7 percent

of the nonexempt caseload in fiscal year 1991 and rose to 20 percent in

fiscal year 1995. While most states met the minimum participation rates

specified under JOBS, the number of AFDC recipients actually participating

was only about 13 percent of the entire adult AFDC caseload in fiscal year

1994. In addition, our previous work showed that the JOBS program was

not well focused on employment, despite its objective of preparing

recipients for work.5

Since passage of FSA, many states have been using waivers to change their

AFDC programs to increase work participation and decrease welfare

dependency. Waivers were designed to allow states to experiment with

programs and try out policies that were not allowed under current law.

States were required to evaluate these waiver programs to determine

whether they were successful and, therefore, worth continuing. In the

early 1990s, waiver authority was granted almost routinely to states

interested in reforming their welfare programs. States that reformed their

welfare programs to focus more on work and work-related activities made

changes in their JOBS program participation requirements, their sanctioning

policies, and their earned income disregards.

3

Individuals aged 16 through 59 were exempt from the JOBS program if they were ill or incapacitated;

caring for a child under age 3 (or age 1 at state option); attending high school; in the second or third

trimester of pregnancy; caring for an ill or incapacitated family member; employed 30 hours or more

per week; residing in an area where the program was not available; or providing care to a child under 6

and child care could not be guaranteed. Teenagers with children under age 3 and who were not in

school were not exempt from JOBS.

4

Under the original Social Security Act, two-parent families were ineligible for AFDC unless one parent

was incapacitated. However, in 1961, states were given the option to extend coverage to two-parent

families in which one parent was unemployed. In 1988, FSA required all states to offer an unemployed

parents provision to their AFDC programs. States that did not have an AFDC-Unemployed Parents

(AFDC-UP) program before FSA were allowed to place a time limit on benefits for these families. As of

February 1996, 12 states had time limits on eligibility, including Utah.

5

Welfare to Work: Current AFDC Program Not Sufficiently Focused on Employment

(GAO/HEHS-95-28, Dec. 19, 1994).

Page 14 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 1 

Introduction

TANF Work

Participation

Requirements

While the new welfare law gives states broad discretion over program

design, states are required to meet minimum performance standards for

work participation to avoid financial penalty. States are required to have

25 percent of their entire caseload participating in work and work-related

activities in fiscal year 1997, a rate that will increase by 5 percent each

succeeding year until it reaches 50 percent by fiscal year 2002. A second,

substantially higher, participation rate applies to two-parent families:

75 percent in fiscal years 1997 and 1998, and 90 percent in fiscal year 1999

and thereafter. The required number of hours of participation each week

for single heads of household is 20 hours in fiscal years 1997 and 1998, 25

hours in fiscal year 1999, and 30 hours in fiscal year 2000 and thereafter.

However, if the single parent has a child under the age of 6, the parent can

meet the work requirement by participating 20 hours per week. For

two-parent families, one parent must participate 35 hours and, in cases

where a family receives federally funded child care, the second parent

must participate 20 hours. States’ target work participation rates are

lowered if they have had caseload reductions since fiscal year 1995.

Activities that count toward participation under the new law are oriented

toward work rather than education and training. The emphasis on

activities directly related to work reflects the objective of the law to

involve welfare recipients in employment-promoting activities or in work

itself, so that they can leave welfare and become self-sufficient. Although

actual movement off welfare through employment is not counted in the

participation rate, to the extent that employment results in caseload

reductions, states receive credit for these terminations through reductions

in the target participation rates they are required to achieve. HHS can

penalize states for failing to meet the federal participation requirement.

The penalty starts at 5 percent of the state’s block grant amount and rises

gradually to 21 percent of the grant if the state continues failing to satisfy

the minimum participation requirements.

TANF funding is capped at $16.4 billion per year through fiscal year 2002.

The amount of TANF funds that a state receives is based on recent federal

expenditures for that state’s AFDC program. Consequently, states that spent

more for AFDC in the past will receive more in TANF funds. However, states

will not automatically receive additional funds should their caseloads

increase. States are required to maintain at least 75 percent of their 1994

level of AFDC spending on the new program. States that fail to meet

required work participation rates must maintain 80 percent of their past

spending.

Page 15 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 1 

Introduction

Objectives, Scope,

and Methodology

The Ranking Minority Member of the Senate Committee on Finance

requested that we review states’ early experiences with increasing the

participation of welfare recipients in work and work-related activities

under waivers. This review would provide an early indication of states’

progress in meeting work participation requirements as well as issues

facing welfare administrators under the new federal law. Specifically, we

were asked to examine (1) the policies and programs states initiated under

waivers to increase participation in work and work-related activities and

(2) whether three states with statewide waiver programs achieved

participation rates comparable with those specified by the new federal

law.

To determine what programs states initiated under waivers to increase the

work participation of welfare recipients, we analyzed the terms and

conditions of waivers, as of June 30, 1996, for all states that HHS indicated

had waiver provisions related to work participation. We also reviewed

three states in depth that had implemented their waiver programs

statewide. The three states selected—Massachusetts, Michigan, and

Utah—had programs in operation long enough to have generated data for

preliminary analysis. In addition, these states took distinctly different

approaches toward increasing participation. To review the strategies these

states used to implement their welfare reform, we analyzed program

reports and documents and met with state and local welfare officials, state

employment agency officials, service providers, welfare advocates in

Michigan, and program evaluators in Utah and Michigan.6

 In addition, we

met with HHS officials responsible for monitoring these states’ waiver

programs as well as welfare policy experts familiar with these programs.

We also reviewed the published work of research organizations that

studied state welfare reform efforts. To determine why some recipients do

not participate, we conducted reviews of case records in Michigan and

Utah. To estimate JOBS and TANF participation rates for the waiver

programs in Massachusetts and Utah, we relied on aggregate data

submitted to us by the states; program administrators in these states

helped us interpret their data and calculate their participation rates. For

Michigan, we worked with Abt Associates, the contract evaluator for the

state, using data supplied by the state to calculate the participation rates.

We conducted our work between March 1996 and March 1997 in

accordance with generally accepted government auditing standards.

6

Massachusetts has yet to contract with an evaluator to do their waiver evaluation.

Page 16 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 2 

States Increased Participation Rates

Through Different Approaches

When the Personal Responsibility and Work Opportunity Reconciliation

Act was enacted, Massachusetts, Michigan, and Utah already had

implemented statewide programs designed to increase the work

participation rates of welfare recipients. All three states had changed their

programs to be more work-focused, supporting participation in activities

designed to help recipients move off the welfare rolls and into

self-sufficiency. These states had changed the rules regarding the

categories of recipients required to participate and the activities in which

they were allowed to participate; actively encouraged participation by

providing incentives and support services as well as information

emphasizing the obligation to work; and enforced participation by

establishing stricter sanctions for nonparticipation in agreed-upon

activities. These approaches were also found in other states’ waiver

programs. Through their redesigned programs, Massachusetts, Michigan,

and Utah increased the proportion of their caseloads participating in

activities designed to promote self-sufficiency.

States Changed

Participation

Requirements

The three states we reviewed changed their policies regarding who must

participate, as defined under their respective programs, and the activities

in which they must participate, in two cases eliminating exemptions and

requiring all adult AFDC recipients to engage in some activity as a condition

of benefit receipt. Thus, while the JOBS program exempted many recipients

from participation, both Michigan and Utah eliminated exemptions while

Massachusetts strictly mandated a smaller segment of the caseload to

participate than under the JOBS program. Moreover, while JOBS broadly

defined the activities states could require to meet the participation

requirement, Utah further expanded allowable activities, while

Massachusetts and Michigan restricted activities to those more closely

linked to work. Eliminating exemptions can enable states to achieve

greater levels of participation by including a larger portion of the caseload.

Restricting activities to those closely linked to work can enable states to

more quickly move job-ready recipients into employment.

States Changed Policies

Regarding Who Must

Participate

The three states reviewed took different approaches to required

participation. Michigan and Utah expanded participation requirements to

the entire caseload as a way to increase participation, while Massachusetts

required only a fraction of its caseload to engage in a work-related activity

but strictly enforced the requirement in an effort to increase participation

of those recipients mandated to participate. Table 2.1 and the following

Page 17 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 2 

States Increased Participation Rates

Through Different Approaches

pages summarize the work-related policy changes made under waivers in

Massachusetts, Michigan, and Utah.

Table 2.1: Work-Related Policy Changes Under Waivers in Three States

Massachusetts Michigan Utah

Program name Welfare Reform ’95 Family Independence Program Single Parent Employment

Demonstration Program

Participation requirements 60 days of job search followed

by a job, subsidized

employment, or community

service

4 weeks of job search followed

by unsubsidized employment

Activity based on individualized

self-sufficiency plan

Activities that count as

participation 

— Unsubsidized employment

— Community service

— Subsidized employment

— Job search for 60 days only

— Unsubsidized employment

— Community service 

— Job search

— Unsubsidized employment

— Job search

— Training

— Education

— Mental health and substance

abuse counseling, among others

Exemptions — Disabled or caring for a

disabled person

— Third trimester of pregnancy

— Child in assistance unit is

under mandatory full-time

school-age, usually age 6, or

child not in assistance unit but

living with recipient is under 3

months old

— VISTA volunteer

— Dependent under 16

(Others are deferred for

reasons such as having a child

under 3 months old or caring for

an incapacitated household

member, or being ill, under age

16, or over age 65; however,

they are required to participate

in a social contract activity)

Children under 16

Time limit 2 years in any 5-year period for

families with no children under

age 2

No change No change

Sanction

process

Eliminate conciliation 

Parent’s benefit removed first,

then entire family’s benefit

eliminated

25-percent grant reduction for 1

year, followed by termination of

the entire family’s benefit

Extensive conciliation/case

staffing/home visit; $100 grant

reduction for 2 months, then

termination of the entire family’s

benefit

Amount of earned income

excluded from benefit calculation

First $30 of earnings + 1/2 of

remainder excluded with no

time limit for families with no

children under age 2; for

families with children under age

2 there is no change in

disregard amount but it is no

longer time limited

First $200 of earnings + 20

percent of remainder excluded

with no time limit

First $100 of earnings + 50

percent of remainder excluded

with no time limit

Eliminate 100-hour rule Yes Yes Yes

(continued)

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Massachusetts Michigan Utah

Transitional child care (TCC) and

transitional Medicaid (TM)

Eliminate requirement that

recipient have received welfare

benefits for “3 of last 6 months”

to be eligible for TCC and TM

No change Eliminate requirement that

recipient have received welfare

benefits for “3 of last 6 months”

to be eligible for TCC and TM

Extend TCC until family income

exceeds sliding fee schedule;

extend TM for 24 months if still

income-eligible

Unique features One-stop career centers

AFDC benefit of families with no

children under age 2 reduced

by 2.75%

Postemployment services

One-time diversion from AFDC

Note: VISTA stands for Volunteers in Service to America.

Utah, which has a history of work requirements for welfare recipients,

achieved higher JOBS participation rates than most other states between

fiscal years 1991 and 1995 and was attempting, under its waiver program,

to place 95 percent of its caseload in activities that ultimately would lead

to self-sufficiency. Under its Single Parent Employment Demonstration

(SPED) program, implemented in part of the state in January 1993, Utah

required all recipients to participate in an activity, even those with

significant barriers such as drug abuse and mental health problems. Since

this expansion meant working with recipients who had been exempted or

deferred from participation in the past, Utah was exploring new territory

in terms of what is required to enable these recipients to move toward

self-sufficiency. The SPED program director believes that the greatest

savings come from moving recipients with multiple barriers into

employment because these are the recipients most likely to become

long-term welfare recipients. Like many other states, Utah has

experienced substantial caseload declines over the last several

years—attributable, according to officials, in part to its good economy and

low unemployment rates—freeing up resources for recipients who may

need more than a strong economy and the more traditional JOBS services to

help them exit welfare through employment. Utah does excuse some

recipients from participation for reasons such as lack of transportation or

child care, or the existence of a family medical condition or emergency;

however, the program’s self-sufficiency worker and the recipient are

expected to work on resolving problems so that the recipient can

ultimately participate. If recipients do not participate, they are subject to

sanctions and the possibility of benefit termination.

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Under Michigan’s Family Independence Program, established in

March 1996, all adult welfare recipients have an obligation to engage in an

activity leading to self-support, referred to as their social contract.7

 In

contrast to this universal participation requirement, approximately

35 percent of Michigan’s recipients were exempted from JOBS participation

requirements in fiscal year 1994.8

 Although the goal is for all recipients to

work, they can be deferred from job search if they are not immediately

employable, for example, if they have children under 3 months of age, are

under 16 years of age, are ill, or are caring for an incapacitated household

member. They are, however, still obligated to participate in some activity

defined in their social contract. Recipients required to participate in work

activities are subject to sanctions and benefit termination for failure to

participate.

In contrast to Michigan and Utah, Massachusetts mandates only a small

segment of its caseload to participate in a work-related activity as a

condition of eligibility for benefits. Under Welfare Reform ’95,

implemented starting in November 1995, recipients with children under

the age of 2—that is, approximately 46 percent of the caseload on

October 31, 1996—are not required to work in order to keep their benefits.

Recipients with children aged 2 to 6—approximately 34 percent of the

caseload—are expected to work but are not subject to sanctions for

failure to participate in a work-related activity.9

 Only recipients with

school-aged children—approximately 20 percent of the caseload—are

strictly mandated to work. If they fail to comply with the work

requirements, they are subject to a progressive set of sanctions for

continued noncompliance after which the entire benefit is eliminated.

Like Michigan and Utah, other states with work requirement waivers

changed exemptions, requiring a larger portion of the caseload to

participate than in the past. Eleven states, including Michigan and Utah,

extended the participation requirement to include parents with children

7

Michigan began its reform effort in 1992 with the demonstration program To Strengthen Michigan

Families. Additional waivers granted in 1994 eliminated exemptions from work participation and

instituted Work First, a mandatory job search program.

8

During the period that To Strengthen Michigan Families was in effect, the state was required to report

JOBS participation rates to HHS.

9

Recipients with children between the ages of 2 and 6 who volunteer to participate in the work

program and complete an employment development plan are subject to sanctions for failure to

participate. Furthermore, all recipients with no children under the age of 2 are subject to a need and

benefit payment standard that is 2.75 percent lower than that used for families with children under the

age of 2.

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under 1 year of age (see table I.1).10 In contrast, seven states, including

Massachusetts, increased the age for the youngest child exemption,

thereby decreasing the number of adults required to participate because of

the age of their youngest child. The age for the youngest child that

exempts a parent from participation in states with work requirement

waivers ranges from under 12 weeks in Indiana, Maryland, Michigan,

Nebraska, Oregon, Utah, and Vermont to under 6 years in Ohio and New

Hampshire.11

States Changed Policies

Regarding Allowable

Activities

In addition to changing who must participate, states changed the activities

allowed to meet the participation requirement. Their choices regarding

which activities to allow reflect their approach toward moving welfare

recipients into self-sufficiency as well as their fiscal situations. Some

states chose “labor force attachment” models emphasizing rapid entry into

the labor market, believing the market to be the best indicator of who is

employable. Other states chose a human capital development approach

that provides education and training to support employment at higher

wages. In general, waiver programs have reflected states’ move toward

more work-focused models. Massachusetts and Michigan implemented

programs in which mandated individuals participate in short-term,

work-focused activities. In contrast, Utah tailored activities to the

individual, reflecting the notion that there is no one route to

self-sufficiency appropriate for all. Consequently, in Utah, a client’s

employment plan may consist of immediate job search or it may consist of

education or training.

Recognizing that not all welfare recipients are immediately ready to enter

the labor market and find a job, Utah permits participation in a range of

activities aimed at getting previously exempted or deferred families with

multiple barriers to participate in some activity. Consequently, Utah has

expanded allowable activities to include activities such as substance abuse

and mental health counseling in addition to the more traditional

employment, job search, training (including on-the-job training), and

education (including 2 years of college). Believing that recipients should

be able to compete in the labor market for unsubsidized jobs, Utah does

not allow subsidized employment to count as participation. The number of

hours of participation required is individualized. For example, a client with

10Under the JOBS program states were to exempt parents with children under the age of 3 with an

option to exempt only parents of children under the age of 1.

11Some states have a separate rule for children conceived while the mother is receiving AFDC. For

example, in Massachusetts, such children are not eligible for a welfare benefit and can exempt the

mother from a work participation requirement only while they are under the age of 3 months.

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a mental health problem might be required to see a therapist for 1 hour a

week to meet the participation requirement, while another client could be

expected to conduct a job search for 20 hours a week. The emphasis of the

program is on making progress toward self-sufficiency. For a person with

a mental health problem, dealing with that particular condition is viewed

as an essential first step toward self-sufficiency.

Michigan, like Utah, attempts to include the entire adult caseload in some

activity; however, unlike Utah, Michigan requires all applicants and

recipients, unless deferred or considered not immediately employable, to

participate in Work First, a short mandatory job readiness/job search

program. After 4 weeks in the program, Work First participants who do

not find a job are reassessed and engage in further job search activity, but

officials expect most recipients to succeed in finding a job within the

allotted period. Recipients who are deferred from Work First are required

to engage in productive activities leading to their personal growth or to

their community’s enhancement. The activity in which a deferred recipient

agrees to participate is established by a social contract between the client

and the welfare agency; actual participation in the agreed-upon activity is

self-reported and not closely monitored. A final group of recipients,

including teen parents, for whom immediate employment is not

appropriate, participate in Michigan’s JOBS program, where they can, for

example, continue their educations. Originally, under its waiver, Michigan

did not provide on-the-job training or subsidized employment; however,

effective January 1997, on-the-job training will be available to two-parent

families. Officials indicated that when attempts to find a job have failed, a

client may be placed in community service for a maximum of 6 months, at

which point the client is assessed for further appropriate

employment-related activities.

Massachusetts requires all nonexempt recipients with no children under

school-age to conduct a 60-day job search.12 Those who do not find

employment at the end of the job search period must participate in

community service or one of two subsidized work programs, the Full

Employment Program (FEP) or supported work. The community service

must be 20 hours or more per week as an uncompensated volunteer in a

public, quasi-public, or nonprofit organization. For example, a recipient

could be a volunteer in his or her child’s school or at a hospital. Under FEP,

the Massachusetts Department of Transitional Assistance provides a direct

subsidy to employers who hire welfare recipients. Designed to benefit

12In Massachusetts, aliens who are not allowed to work in the United States are not subject to the

60-day job search requirement; they are assigned directly to community service sites.

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individuals with no prior work experience, the subsidy is intended to allow

the employer to provide on-the-job training to the recipient. Under the

supported work program, the Department pays contractors to work with

recipients and place them in jobs. The contractor supplies a “shadow” to

continually supervise the participant.13 Some officials believe that

subsidized work or supported work may be more successful than

community service at moving welfare recipients into paid employment.

A total of 13 states expanded the definition of “work activity” under

waivers to include activities that did not meet the participation

requirement under the JOBS program, such as family counseling or drug

and alcohol abuse counseling. Twelve of the 13 states added parenting or

family skills training as an option (see table I.2). In addition, 19 states

waived the JOBS program limits on job search, extending the time they

could require individuals to look for work.14 Under the new law, job search

is limited to a total of 6 weeks, which cannot be continuous for more than

4 weeks. However, if the state’s unemployment rate is 50 percent greater

than the U.S. rate, the allowable job search period is extended to 12

weeks. Eighteen states also increased their use of subsidized work

programs or community services jobs (see table I.3).

States Implemented

Policies to Encourage

Participation in Work

and Work-Related

Activities

In addition to redefining what constitutes participation under their waiver

programs, states implemented policies designed to encourage recipients to

meet the new requirements and thereby increase actual participation in

work and work-related activities. Strategies included providing emergency

assistance to divert applicants from becoming welfare recipients,

delivering a strong work message to clients early during the application

process, continually reinforcing the work message through close

monitoring to ensure clients attend work-related activities, and allowing

recipients to keep more of their earnings once they become employed.

Additionally, the states structured their programs to provide the support

services clients needed to work, such as child care and transportation.

13The Manpower Demonstration Research Corporation’s evaluation of the Supported Work

Demonstration found this approach increased the employment of long-term welfare recipients. Sites

included in the study were Atlanta, Chicago, Hartford, Newark, New York City, Oakland, and Fond du

Lac and Winnebago counties in Wisconsin. See Stanley H. Masters and Rebecca Maynard, The Impact

of Supported Work on Long-Term Recipients of AFDC Benefits (New York: Manpower Demonstration

Research Corporation, Feb. 1981).

14Under the JOBS program, states could require up to 8 weeks of job search for applicants and

recipients each year, resulting in a possible 16 weeks of required job search in the first year, with 8

weeks per year thereafter. Additional job search could not be required unless combined with some

other activity designed to improve a participant’s prospects for employment, and in no case could a

state require a recipient to participate in more than 3 weeks of job search before conducting an

employability assessment.

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States Prevent Welfare

Receipt by Diverting

Potential Participants With

One-Time Payments

One way some states encourage work is to divert job-ready individuals

from becoming welfare recipients. In Utah, individuals applying for

assistance who have immediate job prospects or other sources of income

are offered job placement assistance and a one-time financial payment to

meet immediate needs, such as car repair or rent. The purpose of the

diversion is to provide the family with financial security until a paycheck

arrives, thereby curtailing the family’s need for welfare. Utah also makes

these diverted families eligible for transitional child care and Medicaid,

benefits that usually are only available to individuals who have earned

their way off welfare. According to Utah’s program director, about

20 percent of eligible applicants are diverted from ever going on assistance

in this manner. Five other states divert individuals from AFDC with lump

sum payments. In most cases, if individuals do apply for assistance before

a specified period, the amount of the diversion is taken into account in

determining the amount of the family’s benefit. Massachusetts and

Michigan did not have a diversion component in their programs. (See 

table I.4.)

Clients Informed During

Application Process of

Participation Requirement

To emphasize their obligation to participate in activities that will help

them become employed, clients in the three states we visited are told early

in the application process that they must engage in a work-related activity

as a condition of benefit receipt. In Michigan, an assistance payment

worker explains at the time of application that all recipients must

participate, even clients who typically had been exempted or deferred in

the past. For example, recipients with a child under 3 months of age who

are deferred from Work First might be expected to attend parenting

classes or medical appointments to meet their obligation to participate

under the social contract. The obligation to participate is again discussed

at orientation to Work First. To address the chronic problem of welfare

recipients failing to show up for orientation, beginning in October 1996,

Michigan made attendance a condition of eligibility for benefits.

In Utah, applicants for assistance meet with a self-sufficiency worker

before income eligibility is determined. They are shown a special slide

presentation, developed by the state, that emphasizes the client’s

responsibility to participate and take immediate steps toward achieving

self-sufficiency. The self-sufficiency worker establishes a self-sufficiency

plan with the individual. If an individual is determined to be eligible for

cash benefits, the benefit is viewed as a support enabling the individual to

meet the participation requirements spelled out in the self-sufficiency plan.

Caseworkers commented that early participation in some activity is

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crucial for program success. Their experience shows that clients not

assigned to an activity within 2 months will conclude that the new

program is the same as the old program and disregard the mandate to

participate.

Our review of state waivers found that other states used similar strategies

to inform individuals of their obligation to participate in a work-related

activity. In Indiana, for example, the state developed a script for staff to

use at the initial eligibility meeting with applicants that focuses the

meeting on job placement and assistance rather than entry into the welfare

system.15 In addition, states such as Florida, Indiana, Virginia, and

Wisconsin require clients to sign personal responsibility agreements that

set forth the expectation that the client will participate in activities leading

to self-sufficiency.

Caseworkers Responsible

for Monitoring Client

Activities

Caseworkers in the states we visited also encourage work by monitoring

client participation in work-related activities. Under the previous AFDC

program, most of the caseworkers’ time was spent determining eligibility,

and they had little ongoing contact with recipients. Utah has a

self-sufficiency worker position whose primary functions have changed

over the years as the state’s program changed. Currently, these workers

negotiate a self-sufficiency plan and monitor client progress with frequent

follow-up calls to ensure that clients participate in the activities agreed to

in the self-sufficiency plan. The self-sufficiency workers have smaller

caseloads than income maintenance workers to enable them to make the

additional client contacts. Utah officials have found that many of the

recipients they currently serve require a lot of time and attention because

they are the more difficult cases left behind after the employable

recipients have found jobs. To become self-sufficient, these recipients may

need assistance in addressing a number of problems, including drug or

alcohol abuse, physical or mental disabilities, family responsibilities,

domestic violence, and learning disabilities. In the past, many of these

recipients would have been exempted or deferred from participation.

Officials commented that working with such clients requires more skill

and education, such as a degree in social work.

The Michigan Family Independence Agency is in the process of converting

the assistance payments worker position to the position of family

independence specialist (FIS). The FIS workers will have a target caseload

15Welfare Waivers Implementation: States Work to Change Welfare Culture, Community Involvement,

and Service Delivery (GAO/HEHS-96-105, July 2, 1996). We reviewed the changes made under waiver

programs to implement time limits and work requirements in Florida, Indiana, Virginia, and Wisconsin.

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of 65, compared with the average caseload of 200 for the traditional

assistance payments worker. If a client fails to attend a Work First

appointment, the workers are responsible for learning why and attempting

to remove any barriers to participation. While Michigan is making an effort

to monitor recipients in Work First, the state does not closely monitor

recipients assigned to social contract activities, who self-report their

participation.

In Massachusetts, the caseworker role has been expanded to include

responsibility for making referrals to employment and training services.

Caseworkers contact recipients by telephone or scheduled office visit

after 30 days and again after 45 days into their 60-day job search period to

discuss the clients’ progress and to remind them of the approaching

deadline for finding a job. Although caseworkers inform clients of the job

search services available, it is the client’s responsibility to request needed

services and assistance in their job search. On day 60, any client who does

not have a job is given 10 days in which to select or be assigned to a

community service position. Participation in community service is tracked

through automatically generated attendance sheets that the client fills out

and the supervisor at the community service site signs.

Other states also encourage clients’ participation through close monitoring

to ensure they are making progress toward self-sufficiency. Florida

created a case manager position to coordinate and broker a

comprehensive set of services clients might need to become employed.

Escambia County in Florida expanded the responsibility of its existing

staff to include both eligibility and case management functions. Former

eligibility workers now are responsible for overseeing client activity and

coordinating support services. Other states also report an increased

monitoring of clients’ participation. For example, in Fond du Lac County,

Wisconsin, caseworkers monitor certain clients’ participation in activities

by receiving daily attendance reports from the local technical college.

States Allow Participants

to Keep More of Their

Earnings

In an attempt to encourage recipients to work, the three states we

reviewed disregard a larger portion of their earnings in determining

eligibility and benefits, thereby enabling more recipients to combine work

and welfare and, thus, to be better off financially than when only receiving

welfare or earnings. These states not only changed the amount of the

earnings disregard, but also allowed it to remain in effect indefinitely. Utah

allows recipients to disregard the first $100 of income plus 50 percent of

the remainder, Michigan allows $200 plus 20 percent of the remainder, and

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Massachusetts allows $30 plus 50 percent of the remainder for working

recipients with no children under the age of 2. Families with children

under age 2 receive the traditional $30 and one-third disregard with no

time limit. Twenty-four other states with work requirements also changed

the amount of earned income disregarded in determining eligibility and

benefit amounts (see table I.5).

States Eliminate 100-Hour

Rule to Increase

Two-Parent Families’

Participation in Work

Some states waived the special rules that affected AFDC eligibility for

two-parent families. Federal regulations specified that poor two-parent

families in which neither adult was disabled could receive aid only if the

principal wage earner was working less than 100 hours per month and had

a significant work history. This restriction was believed to have a negative

effect on recipients’ work effort since families would lose eligibility if one

parent worked more than 100 hours a month, regardless of how much they

earned. By abolishing the 100-hour rule, more two-parent families with

earnings qualify for assistance. These are poor families that are already

working part time that would have been ineligible for AFDC because they

were working more than 100 hours a month, rather than because they had

made enough money to be ineligible for benefits. The three states we

visited eliminated the 100-hour rule so that poor two-parent families could

work more hours and still receive welfare until they earned enough to no

longer be eligible for benefits. Of all states with expanded work

requirements under waiver, 25 states eliminated the 100-hour rule for

two-parent families.

States Use Different Means

to Provide Needed Support

Services

To make the transition from welfare to work, many recipients need

services such as training or job search and job readiness activities, child

care, and transportation assistance. The three states we reviewed reported

they were able to provide the services their programs were designed to

offer and did not need to exempt clients because resources were

unavailable. They achieved this outcome in different ways as discussed

below.

Tailoring Services to Fit

Available Resources

Both Massachusetts and Michigan stressed immediate movement into

work after a period of job search. This labor force attachment approach

allows states to serve larger numbers of clients because recipients

generally participate in job search for shorter periods of time than they do

in education and training programs. Manpower Demonstration Research

Corporation results show that labor force attachment programs increase

the number of recipients who leave the rolls because of employment,

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which can result in welfare savings because recipients leave the rolls

sooner than they would have without the program. Savings can also occur

when recipients’ earnings reduce AFDC benefits.16

Massachusetts officials said the state has not experienced shortages of

resources needed to meet its participation goals. Costs are contained by

providing services during the 60-day job search to only those recipients

who request them. Furthermore, only parents of school-aged children are

required to participate and they are expected to work or perform

community service during school hours whenever possible.

Expanding and Enhancing

Services for More Recipients

In contrast to Massachusetts and Michigan, Utah’s approach is

individualized. The state provides a broader range of services tailored to

individual need, allowing recipients to engage in longer-term activities,

such as postsecondary education and training, for a maximum of 2 years.

State officials believe that the cost of Utah’s range of services is offset by

the savings resulting from moving more difficult-to-serve clients into

employment since they tend to become long-term recipients. Officials

indicated that the savings resulting from the caseload decline allow Utah

to provide more intensive services to its remaining caseload. To be able to

serve everyone, Utah began its program at only three sites and gradually

phased in the remaining areas of the state. Furthermore, funds were added

to pay for work activity programs and supportive services. At one of the

initial sites in the Salt Lake City area, the state hired 13 new workers for

the program.17

Child care is an important support in the welfare-to-work transition, and

Utah has used savings from caseload declines to ensure that child care

resources are adequate. According to an Urban Institute report, the overall

reduction in AFDC expenditures 10 months after the Utah demonstration

was implemented greatly exceeded the increase in child care

expenditures. As a result, total expenditures on child care and AFDC

payments actually declined by 20 percent.18

16Stephen Freedman and Daniel Friedlander, The JOBS Evaluation: Early Findings on Program Impacts

in Three Sites (New York: Manpower Demonstration Research Corporation, Sept. 1995). Study sites

were Atlanta, Georgia; Grand Rapids, Michigan; and Riverside, California. According to the study, most

of the savings appear to be associated with recipients’ having left the rolls sooner rather than with

lower grants for recipients who did not earn enough to become ineligible for welfare.

17Though the program added staff at the beginning, during its 1997 session, the state’s legislature

eliminated 40 positions in Utah’s Office of Family Support as a result of caseload declines.

18LaDonna Pavetti and Amy-Ellen Duke, Increasing Participation in Work and Work-Related Activities:

Lessons from Five Welfare Reform Demonstration Projects (Washington, D.C.: The Urban Institute,

Sept. 1995). States studied were Colorado, Iowa, Michigan, Utah, and Vermont.

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During the first year of its welfare reform, Massachusetts increased

spending on child care for welfare recipients and transitional assistance

for former recipients by 13 percent. Michigan’s child care expenditures

increased by 26 percent from fiscal year 1995 to fiscal year 1996 with the

average monthly number of child care cases increasing by over 3,000.

However, Michigan has not run out of child care funds and officials report

no increase in the use of child care funds by recipients subject to

participation requirements. Other states initiating welfare reform also

increased available resources for child care. Wisconsin, for example,

dramatically increased expenditures for child care since implementation

of its waiver demonstration, Pay for Performance, from $12 million in 1987

to $52 million in 1995.19 Under a new program, Wisconsin Works, the

exemption for age of youngest child will be reduced from 1 year to 12

weeks, and officials anticipate child care expenditures to triple to

$158 million. To decrease demand for child care generated by its welfare

reform, Iowa lowered the income level qualifying a family for a child care

subsidy, thereby reducing the number of low-income working families

eligible for subsidies.

Reorganizing Services The states structured their delivery of services in different ways to

emphasize recipients’ responsibility to become self-sufficient. Utah

provided services through its social service agency, the Department of

Human Services. Employment counselors and mental health/drug

counselors are co-located in the local social service agency. This

client-centered approach may be most appropriate in states, such as Utah,

that have succeeded in assisting the most job-ready clients to earn their

way off welfare, leaving behind harder-to-serve recipients. Clients who

receive all services in one location coordinated by the same caseworker as

they do in Utah may be less likely to fall through the cracks than when

they are referred to other agencies for services.20

Michigan’s Family Independence Program provides services to clients

through two agencies. The Michigan Jobs Commission, a newly created

agency responsible for all economic development programs in the state,

19We visited these two states as part of a companion assignment on welfare benefit termination,

Welfare Reform: States’ Early Experiences With Benefit Termination (GAO/HEHS-97-74, May 15, 1997).

20As part of its seven-site JOBS program evaluation, the Manpower Demonstration Research

Corporation evaluated the impact of different case management approaches on client participation.

They found that in Columbus, Ohio, an integrated case management approach in which one case

manager did both benefit determination and monitoring of employment and training activities resulted

in significantly higher levels of client participation in orientation and JOBS activities than the case

management approach that separated income maintenance and JOBS activities. See Two Approaches

to JOBS Case Management in Columbus, Ohio: Implementation, Participation, and Impact Findings

(New York: Manpower Demonstration Research Corporation, Nov. 1996).

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provides job search services, while the Family Independence Agency

oversees the case and tracks client compliance. With its large caseload,

organizing the delivery system along functional lines may allow Michigan

to provide services more efficiently and at lower cost per client served.

Massachusetts recently added one-stop career centers as an available

source of assistance during the 60-day job search period for recipients

who are required to work. The centers are funded through demonstration

grants from the U.S. Department of Labor, and the Private Industry

Council/Regional Employment Boards have contracting and oversight

responsibility for the centers that are accessible to all citizens. The

Department of Transitional Assistance negotiates agreements with the

centers to serve an expected number of welfare recipients; however, the

centers are reimbursed only for recipients actually served. When welfare

recipients visit the center, they usually attend an orientation and meet with

a career counselor to develop and sign an action plan for searching for a

job. The Department of Transitional Assistance assists the client with

health insurance, child care, and housing; the career center develops job

search strategies for the client.

Other states have made similar efforts to structure their programs to

deliver services differently to emphasize the responsibility to become

self-sufficient. In addition to Utah, for example, Florida and Wisconsin

brought together a variety of staffs at one location and formed case

management teams to quickly help provide a comprehensive set of

services that clients need to participate. Indiana adopted a policy requiring

that local public assistance offices co-locate with workforce and job

placement agencies as well as other social service agencies. Like Michigan,

Iowa reorganized its service delivery along functional lines. Its Department

of Economic Development contracted with workforce development

agencies to provide job services such as assessment, job club, job search,

education and training, and support services, while its Department of

Human Services maintained responsibility for eligibility determination.

Transitional Services

Expanded to Encourage

Work

To aid the transition from welfare to self-sufficiency, Utah extended

supportive assistance to recipients who earned their way off welfare. This

extra support is designed to help recipients stay off welfare. For example,

the state extended Medicaid coverage to 2 years after a recipient leaves

welfare and transitional child care for as long as the family is eligible

based on income. In addition, Utah created a new caseworker position,

called transitional caseworker, to continue assisting individuals who have

Page 30 GAO/HEHS-97-80 Welfare Work Participation Requirements
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States Increased Participation Rates

Through Different Approaches

earned their way off financial assistance. These case management services

are available to individuals for 2 years after leaving welfare. While

Michigan and Massachusetts provide transitional child care and Medicaid

to individuals for 1 year after they leave welfare, this does not represent a

change from JOBS, which required states to offer 1 year of transitional child

care and Medicaid.

Of states with work requirement waivers, 11 states extended transitional

child care, most increasing the period from 12 months to 24 months after a

client becomes ineligible for AFDC because of earnings; and 7 states waived

the former requirement that a recipient have received AFDC for 3 of the last

6 months to be eligible for transitional child care (see table I.6). Ten states

also extended transitional Medicaid, most increasing the period to 24

months, and 10 states waived the “3 of the last 6 months” requirement for

Medicaid.

States Implemented

Stricter Sanctions for

Noncompliance With

Participation

Requirements

Strict sanctions for failure to comply with work requirements are intended

to encourage reluctant recipients to participate to retain their benefits.

The three states we visited implemented tougher sanctions than they had

in the past for failure to comply. After varying lengths of time under a

progressive set of sanctions, the states terminate the entire family’s

benefit, called a full-family sanction, for not cooperating with the program

requirements. In contrast, under the JOBS program, only the parent’s

portion of the grant was removed as a sanction and the family continued

to receive the child’s portion of the benefit until the parent complied. For

the first noncompliance, the sanction lasted until the participant complied.

For the second and subsequent cases of noncompliance, the sanction

lasted for 3 months or 6 months, respectively, or until compliance,

whichever was longer. As a result of these rules, a client could remain in

sanction status with a reduced benefit indefinitely.

Officials from all three states viewed the full-family sanction as a way to

get a participant’s attention and eliminate from the rolls those who do not

participate because they have other sources of support. Caseworkers

report that clients often ignore all attempts to contact them until they are

notified their grant will be terminated. Furthermore, officials in all three

states said a grant reduction was not sufficient to get all recipients to

comply and that the ultimate consequence of benefit termination was

useful in some cases.

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States Increased Participation Rates

Through Different Approaches

As part of the sanction procedure in Michigan and Utah, a process called

conciliation is used to discover and help alleviate reasons for

nonparticipation previously not disclosed to caseworkers. Conciliation, a

requirement of the JOBS program, protects clients against unwarranted

benefit terminations by providing an opportunity to resolve

misunderstandings or disagreements before they result in a sanction. Both

Michigan and Utah do home visits to ensure that clients understand their

obligations prior to benefit termination for failure to participate.

Massachusetts eliminated its conciliation process, allowing a client to be

sanctioned for failure to participate with no formal procedure for dispute

resolution. Massachusetts replaced conciliation with a set of progressive

sanctions prior to benefit termination.

Utah requires an extensive conciliation process before terminating a

recipient’s benefits. A meeting called a case staffing is held to discuss

barriers to employment and offer additional assistance. This meeting to

which the client is invited, is attended by the case manager and other

Department of Human Services and allied agency representatives familiar

with the case. Home visits are made in some cases. Officials said the

conciliation process was established to ensure the client understands the

choice that is being made: to not participate and to have benefits

terminated. They indicated the process is expensive because it is

labor-intensive. In November 1995, Utah initiated the sanction policy of

full benefit termination for noncompliance with work requirements.

Before that time, clients who did not participate received a $100 reduction

in their benefit amount indefinitely. This could lead to recipients

remaining in sanction status for long periods; for example, one case we

reviewed had been in sanction status for 3 years. From the time the first

family’s benefits were terminated in December 1995 through December

1996, 180 families had their benefits terminated for failure to comply with

the new program requirements.21

Michigan’s conciliation process involves phone contact, scheduled office

visits, and home visits if necessary. Clients can resume receiving full

benefits at any point if they agree to comply, subject to a 5- or 10-day

compliance test. If the client still does not comply after repeated attempts

at contact, the grant is reduced 25 percent. After 12 months of receiving a

reduced grant, the case is closed. Michigan terminated the benefits of its

first cases for failure to participate in April 1996, and as of December 31,

21A small number of these cases—three as of June 30, 1996—had their benefits terminated for failure

to comply with child support enforcement requirements.

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States Increased Participation Rates

Through Different Approaches

1996, 765 cases had their benefits terminated for failure to comply with the

work requirements.

Massachusetts imposes stringent sanctions for failure to comply on the

group of recipients mandated to work. Clients are given an opportunity to

discuss any hardship or barriers to participation when they are assessed,

and agency workers are expected to review legitimate reasons for not

participating, called good cause, before mandating employment or

imposing sanctions. However, once a client fails to comply, there is no

formal opportunity for conciliation and the adult portion of the grant is

removed after a 10-day notice is sent. For an average grant of $468 per

month, this results in a reduction of about $84. If the noncompliance

continues, a second 10-day notice is sent and the entire grant is terminated

unless participation occurs within the 10-day period. No home visit is

required before benefits are terminated. Clients can return to assistance at

any time if they comply with their participation requirements for 2 weeks.

Furthermore, the sanction process stops if the recipient demonstrates an

exemption or good cause, or files a timely appeal. As of December 31,

1996, Massachusetts had terminated the benefits of 1,322 families for an

adult’s failure to comply with the work participation requirements.22

Under waiver, many additional states increased the duration and severity

of sanctions imposed on mandatory participants who do not comply.

Twenty-two states with expanded work requirements now allow the entire

benefit to be terminated for failure to comply with work requirements (see

table I.5).

States Achieve Higher

Participation Rates

Under Waiver

Programs

By changing the rules and strengthening sanctions for noncompliance,

Massachusetts, Michigan, and Utah were able to involve a substantial

portion of their welfare recipients in some activity they believe will move

them toward self-sufficiency.

Most Participants Are in

Work-Related Activities

During September and October 1996, when all three states had their

waiver programs operational statewide, 11 percent of the caseload in

Massachusetts, 32 percent in Michigan, and 90 percent in Utah were

22An estimated 386 additional families had their benefits terminated for noncompliance by a dependent

child aged 16 to 18 required to participate in JOBS. Benefits can be terminated for reasons other than

failure to comply with work requirements, such as the failure to comply with requirements for teen

living arrangements or school attendance. For detailed discussion of benefit termination under waiver,

see GAO/HEHS-97-74, May 15, 1997.

Page 33 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 2 

States Increased Participation Rates

Through Different Approaches

participating in activities that count as participation under the

requirements of the states’ waiver programs. (See table 2.2.) The largest

percentage of those participating in all three states were engaged in

unsubsidized employment, reflecting the work focus of these programs.

Table 2.2: Participation in Allowable

Activities in Three States’ Waiver

Programs, September/October 1996

Massachusetts Michigan Utah

Average number participating 8,491a 43,271 9,813

Average monthly adult caseload 79,521 136,852 10,881

Percentage of adult caseload participating 11% 32% 90%

Note: Percentages are rounded to nearest whole number.

aIn Massachusetts, only individuals who are strictly mandated to participate and are participating

for 20 hours are counted as participating in the work program. During this same period,

approximately 19,793 additional recipients not subject to the work requirement or not

participating for 20 hours a week were participating in a work-related activity.

Utah has the highest overall participation rate, reflecting the fact that its

program requires almost all recipients to participate and more broadly

defines participation, allowing a range of activities to meet the

participation requirement that are not counted in other states. Of those not

participating, the largest number, over 5 percent of the caseload, were

excused because of a family medical condition. Utah also has no minimum

required number of hours of participation for some activities, tailoring the

required hours to the recipient and the activity.

Although Michigan also has a universal participation requirement, it defers

a substantial number of recipients from work participation whose

participation in social contract activities is neither counted toward

participation nor monitored. In addition, Michigan requires 20 hours per

week of participation in most work activities. If Michigan counted

everyone who was participating in an activity for any number of hours

during a week, its participation rate would be closer to 42 percent for the

same period.

Massachusetts had the lowest participation rate reflecting the fact that

only one-fifth of its caseload is strictly mandated to participate and the

state only counts the participation of that mandated group as meeting the

participation requirement for its work program. However, the

participation for this group is substantial. In September and October 1996,

for example, an average of 15,734 individuals were mandated to

participate in a work activity. During that period, 8,491, approximately

Page 34 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 2 

States Increased Participation Rates

Through Different Approaches

54 percent, of these individuals were participating in an activity meeting

their participation requirement. Table 2.3 shows that of those

participating, 58 percent were employed, 23 percent were in community

service, 13 percent were in their 60-day job search period, and 6 percent

were grandfathered into educational activities. Reflecting the different

definitions of participation in the three states, table 2.3 shows the

percentage of those participating in the different countable activities.

Table 2.3: Distribution of Participant

Activities in Three States’ Waiver

Programs, September/October 1996

Activity Massachusetts Michigan Utah

Unsubsidized employment 56% 76% 34%

Subsidized employment 2% 1% NA

Community service/community work experience 23% 1%a 2%

Job search/job readiness 13% 13% 23%

Vocational education and job training NA 8% 6%

Education 6% 2% 12%b

Life skills training NA NA 9%c

Being assessed NA NA 14%

Average number participating 8,491d 43,271 9,813

Note: Percentages are rounded to nearest whole number. NA means that either the state does not

have this component or it is not counted as participation.

aOnly Michigan has a community work experience program.

bIn Utah, 32 percent of the participants in this category are in postsecondary education.

cLife skills includes such activities as parenting, mental health, drug, and alcohol abuse

counseling.

dIn Massachusetts, only individuals who were mandated to participate are included in the total.

In each of the three states we reviewed, the largest percentage of all

participants were engaged in unsubsidized employment. This pattern

reflects the work focus of these programs and the fact that the income

disregards were changed, allowing more recipients to simultaneously

work and receive welfare benefits.23 Of those participating in an activity,

56 percent in Massachusetts, 76 percent in Michigan, and 34 percent in

Utah were in unsubsidized employment. After unsubsidized employment,

the percentage of recipients engaged in other activities varied, reflecting

23Increasing the amount of the earned income disregard can simultaneously increase recipients’ total

income while allowing them to count toward states’ work participation rate under the new law.

However, in states with low benefit levels, small amounts of earned income can lead to ineligibility for

welfare benefits, leaving smaller numbers of working welfare recipients to count toward the work

participation rate. The time recipients receive benefits, even while they are working, may count toward

their time limit on benefit receipt.

Page 35 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 2 

States Increased Participation Rates

Through Different Approaches

the different program designs. In Michigan and Utah, the second largest

group was engaged in job search/job readiness activities; but in

Massachusetts, a significant group participated in community service.

While Massachusetts had 6 percent in education,24 many of these were

grandfathered in from the previous JOBS program. Participation in

subsidized employment was very low in Massachusetts and Michigan and

nonexistent in Utah.

Three States Also

Increased the

Percentage of the

Caseload Participating

in JOBS Activities

Under Waivers

To determine whether states had actually increased participation under

their waiver programs over what they had been achieving in the prior year

under the JOBS program, we assessed participation rates using the JOBS

program definition of allowable activities. In addition to

employment-related activities such as job search, community work

experience, on-the-job training, and job entry, JOBS activities include high

school or high school equivalency, remedial education, English as a

second language, higher education, jobs skills training, and vocational

training.

In comparison to reported participation in their JOBS programs for fiscal

year 1995, all three states increased the percentage of their AFDC recipients

participating in JOBS activities under their statewide waiver programs

during September/October 1996. Through their waiver programs,

Massachusetts increased the proportion of its caseload participating in

such activities for any number of hours from 19 to 36 percent, Michigan

from 21 to 42 percent, and Utah from 42 to 57 percent, as illustrated in

figure 2.1.

24These recipients are in English as a second language, adult basic education, and postsecondary

education programs.

Page 36 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 2 

States Increased Participation Rates

Through Different Approaches

Figure 2.1: Average Monthly

Participation Rates in JOBS Activities

(FY 1995) and Comparable Activities in

Three Statewide Waiver Programs

(September and October 1996)

Adult Caseload (in Percent)

0

5

10

15

20

25

30

35

40

45

50

55

60

Massachusetts Michigan Utah

FY 1995

September/October 1996

We used the percentage of the caseload participating in a federally defined

JOBS activity for any number of hours as a consistent benchmark. To

calculate comparable rates, we included in the numerator any welfare

recipient active in a JOBS activity for any number of hours, and in the

denominator we used total adult caseload for the comparable period.

Consequently, although the absolute number of recipients participating in

Utah actually declined slightly from fiscal year 1995 to

September/October 1996, because of substantial reductions in the overall

caseload, the number participating was a larger percentage of the

caseload. Both Massachusetts and Michigan had large increases in the

absolute numbers of recipients participating as well as caseload declines.

Page 37 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 2 

States Increased Participation Rates

Through Different Approaches

States Plan to

Continue Programs

Under TANF

Since the enactment of the new welfare reform law, states no longer need

to use waivers of AFDC rules as a vehicle for instituting policies aimed at

increasing the number of welfare recipients participating in work-related

activities.25 The policies that Massachusetts, Michigan, and Utah pursued

under waivers provide an indication of what strategies they believe are

effective in attaining greater participation. First, to overcome recipients’

frequent failure to attend program activities, these states deliver a stronger

message to clients regarding their obligation to participate in required

activities and then monitor their participation.26 All three states also

changed the disregard for earned income to remove financial disincentives

in the AFDC program. In addition, officials emphasize that these efforts

must be coupled with the threat of benefit termination for failure to

comply with work participation requirements. All three states underscored

the importance of sanctions in achieving increased participation.

Massachusetts, Michigan, and Utah plan to continue their welfare

programs relatively unchanged under TANF. The major change that

Massachusetts will be making to its program is limiting benefit receipt for

all nonexempt recipients—two-parent families and single heads of

household with no children under the age of 2—to 24 months in any

60-month period, a policy that had been denied in the state’s request for

waivers. Otherwise, Massachusetts will continue to require that mandatory

recipients work or perform community service for 20 hours per week and

not increase the hours to 30 as specified in the new law. In addition,

Massachusetts will not limit the length of job search to 6 weeks as

required in the new law. These differences between the state’s plan and

the law require that waivers stay in force until the scheduled end of the

waiver demonstration, at which time the state will be required to comply

with requirements of the new welfare law. Utah had no time limit in its

waiver program but plans to implement a 36-month limit on benefit

receipt, from which a maximum of 20 percent of the caseload can be

exempted for hardship. Eligible individuals who are employed at least 80

hours a month in unsubsidized employment and had worked at least 80

hours per month in 6 of the past 24 months can have their benefits

extended on a month-to-month basis beyond the 36th month up to the 60th

month. Michigan added a 2-year work requirement and a 5-year limit on

25TANF provides that if a state had a waiver in effect on the date of enactment, it can continue the

waiver until its expiration and will not be required to comply with provisions of the act that are

inconsistent with the waiver. If a state had a waiver pending on the date of enactment and the waiver

is approved on or before July 1, 1997, the state may not be required to comply with provisions of the

act that are inconsistent with the waiver though the state will be subject to the work participation

requirements of the act.

26See Pavetti and Duke, pp. 43 and 46.

Page 38 GAO/HEHS-97-80 Welfare Work Participation Requirements
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States Increased Participation Rates

Through Different Approaches

benefit receipt, the same work requirements and time limits specified in

TANF, and is reducing from 12 months to 4 months the length of time a

client can be noncompliant before benefits are terminated. The state is

considering using state funds to support certain unemployed recipients

beyond the end of the 5-year limit.

Page 39 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 3 

States Likely to Achieve Initial TANF

All-Families Participation Rate but May Be

Challenged to Meet Other Rates

Massachusetts, Michigan, and Utah are likely to meet the TANF work

participation rate for all families in the short run. However, state officials

in Michigan and Massachusetts are concerned about their ability to meet

the initial two-parent families’ rate, and officials in all three states are

concerned about the higher future rates for all families and two-parent

families.

Calculating

Participation Rates

Under TANF

Under the new law, states are required to meet a participation rate for the

entire caseload—the “all-families rate”—and a separate participation rate

for families with two parents—the “two-parent families rate.” For the

all-families rate, the numerator includes the number of families receiving

assistance in which an adult or a minor child head of household is engaged

in work. The denominator includes the total number of families receiving

assistance reduced by the number of families who are being sanctioned for

failure to participate. States have the option to exclude from the

denominator families with children under the age of 1. For the two-parent

families rate, the numerator includes only families in which both parents

meet their participation obligation and the denominator includes all

two-parent families except those being sanctioned.

To count as a participant for purposes of calculating the all-families rate in

the first year, a single head of household must work at least 20 hours per

week, and one adult in a two-parent family must participate 35 hours a

week, at least 30 hours of which must be in one of the following activities:

• unsubsidized employment,

• subsidized public or private sector employment,

• work experience,

• on-the-job training,

• community service,

• provision of child care to an individual participating in community service,

• vocational education, not to exceed 12 months for any individual, or

• job search and job readiness assistance, but not to exceed 6 weeks.

If a two-parent family receives federally funded child care and an adult in

the family is not disabled or caring for a severely disabled child, the

second parent must participate for 20 hours for the family to be counted as

participating.

The minimum participation rates specified in the law for each year are

lowered to the extent that state caseloads have declined since 1995. Given

Page 40 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 3 

States Likely to Achieve Initial TANF

All-Families Participation Rate but May Be

Challenged to Meet Other Rates

that all but three states nationwide have experienced declines in their

caseloads beginning in 1994, the majority of states should have target

participation rates for fiscal year 1997 that are lower than the minimum

25 percent specified in the law. Figure 3.1 illustrates the caseload decline

since 1994 in Massachusetts, Michigan, and Utah.

Figure 3.1: Caseload Declines in Three

States, FY 1994-96 Average Monthly Number of Cases (in Thousands)

0

20

40

60

80

100

120

140

160

180

200

220

Michigan Massachusetts Utah

FY 1994

FY 1995

FY 1996

Under the new law, caseload reductions not only provide states a lower

target work participation rate, they also contribute to states having more

money per recipient than in the past. This results from the fact that TANF

block grant amounts are based on federal expenditures in prior years,

when most states had higher caseloads, and remain fixed until fiscal year

2002. Recent statistics compiled by the U.S. House of Representatives’

Committee on Ways and Means estimate the average benefit available per

family in fiscal year 1998 will be $5,662 compared with $3,624 in fiscal year

1994.

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Chapter 3 

States Likely to Achieve Initial TANF

All-Families Participation Rate but May Be

Challenged to Meet Other Rates

Three States Likely to

Achieve the

All-Families

Participation Rate in

the Short Run

Using the new law’s definition of work participation and reducing the

minimum participation rate by the caseload reduction credit, all three of

the states we reviewed should be able to meet the all-families participation

rate for fiscal year 1997. Table 3.1 shows the target participation rates the

three states will need to achieve under the new law in fiscal year 1997,

taking into account the reductions in the caseloads these states have had

from 1995 to 1996.27 The table also shows the participation rates the three

states would have achieved if the TANF participation rules were applied to

their welfare programs in September/October 1996.

Table 3.1: Estimated FY 1997

All-Families TANF Target Participation

Rates and TANF Rates Achieved Under

Waiver in Three States in

September/October 1996

Percent

State

Estimated target rate with

credit for caseload reduction

Participation rate

achieved using TANF

definition of participation

Massachusetts 13 25.3

Michigan 13 32.6

Utah 14 30.9

Since Massachusetts has had a caseload decline of over 12 percent from

fiscal year 1995 to fiscal year 1996, its first-year TANF participation rate is

estimated to be about 13 percent. Michigan’s caseload reduction over the

same period is just under 12 percent, and Utah’s is just over 11 percent.

Therefore, Michigan’s first-year TANF target will be about 13 percent, and

Utah’s about 14 percent.

Table 3.1 also shows that Michigan and Utah, the two states with a

universal participation requirement, would easily make the all-families

participation rate in the first year, even without the adjustment for the

caseload decline. Massachusetts, which exempts a substantial portion of

the caseload from participation requirements and is the only state of the

three opting to exclude families with children under age 1 from the TANF

work participation requirement, has a lower estimated work participation

rate but would also meet the minimum 25-percent all-families participation

rate in the first year. Since Massachusetts’ target rate is estimated to be

13 percent, officials are confident about meeting this target. Because the

27As of March 1997, HHS had not yet promulgated regulations telling states how to calculate caseload

reductions for purposes of TANF participation rates. However, state program administrators are using

the law and their own data to project what they think their reductions will be. According to the law,

the minimum participation rate for a year is reduced by the number of percentage points equal to the

number of percentage points by which the average monthly number of families that received

assistance during the immediately preceding fiscal year is less than the number of families receiving

assistance in fiscal year 1995. Therefore, the 1997 credit is equal to the percentage change between the

1996 and 1995 average monthly caseloads.

Page 42 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 3 

States Likely to Achieve Initial TANF

All-Families Participation Rate but May Be

Challenged to Meet Other Rates

three states are experiencing continued caseload declines in fiscal year

1997, their targets for fiscal year 1998 should also be lower than those

specified in the law.

States May Have

Problems Meeting the

Two-Parent

Participation Rate

The two-parent families participation rate under the new law is higher

than the two-parent rate under the JOBS program, both in terms of the

hours of participation required and the percentage of the two-parent

families required to participate. Though Massachusetts, Michigan, and

Utah reported meeting the JOBS program’s two-parent participation rates in

1994 and 1995, many states failed to meet them.28 As shown in table 3.2,

Michigan is unlikely to meet the initial two-parent TANF work participation

rate of 75 percent for fiscal year 1997 without some program changes.

Massachusetts was not able to provide us data to estimate a TANF

two-parent family participation rate.

Table 3.2: Estimated FY 1997

Two-Parent Families TANF Target

Work Participation Rates and TANF

Rates Achieved Under Waiver in Three

States in September/October 1996

Percent

State

Estimated target rate with

credit for caseload reduction

Participation rate

achieved using TANF

definition of participation

Massachusetts 66 NA

Michigan 60 35

Utah 53 87

Note: NA means data were not available.

Michigan’s concern over meeting the two-parent families participation rate

has led the state to develop an on-the-job training program specifically for

this population. Of the three states we visited, Utah is the most likely to

meet the two-parent rate in the first year. The state has a very small

two-parent family caseload, approximately 110 cases, and has required this

population to work in exchange for benefits since 1983. One parent is

required to participate 40 hours per week and the other parent 20 hours.

Also, Utah limits the length of time the benefit can be received to 6 months

in any 12-month period. Utah officials estimate the state’s current work

participation for two-parent families using the criteria established by the

new law would be 87 percent. Consequently, Utah officials are not

concerned about meeting their estimated target rate for two-parent

families of 53 percent in the first year.

28The JOBS participation rate target for AFDC-UP families was 40 percent in 1994 and 50 percent in

1995. Forty-three states failed to make the rate in 1994, and 28 states failed to meet the 1995 rate.

Page 43 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 3 

States Likely to Achieve Initial TANF

All-Families Participation Rate but May Be

Challenged to Meet Other Rates

Massachusetts plans to maintain its waiver provision requiring 20 hours a

week of work participation for its mandatory work participants, including

two-parent families, rather than the higher number of hours specified in

the new law. Consequently, Massachusetts officials are not as concerned

about their ability to meet the initial two-parent participation rates as are

Michigan officials. However, they are concerned about the future rate

increase to 90 percent and the fact that when their waiver authority

expires in 2005 they will be required not only to meet the minimum

participation rates but also the increased hours of participation specified

in the law.

States May Have

Difficulty Meeting

Future Participation

Rates

Officials in the three states we visited are concerned about their ability to

meet higher future participation rates established under the new law

because of the requirement that larger numbers or recipients work more

hours, the possibility of a future recession undermining employment

opportunities, and the unique employment problems in urban areas.

Finally, there is concern that as those who are more employable get jobs

and move off welfare, the remaining caseload will be increasingly difficult

to employ and participation rates increasingly difficult to achieve.

Increases in Hours of

Participation May Be

Difficult to Achieve

According to state officials, it may be easier for recipients to find part-time

employment than full-time employment because employers may not want

to pay the fringe benefits associated with full-time employment. Initially,

states can count recipients engaged in employment for 20 hours per week;

however, as the required hours increase to 30 hours in the year 2000, the

officials said it may be more difficult for recipients to find employment for

at least this many hours. Moreover, in many states, especially those with

low benefit levels, working 30 hours or more is likely to make a family

ineligible for benefits. Once recipients have earned their way off the rolls,

they will not count toward the participation rate. In Utah, during

September and October 1996, only about 16 percent of the caseload

participated over 30 hours a week, whereas about 31 percent participated

over 20 hours in activities that would count toward the TANF participation

rate. In Michigan, approximately 24 percent of the caseload participated 30

hours per week compared with almost 33 percent participating 20 or more

hours per week in activities that meet the TANF participation requirements.

The concern may be mitigated to some degree by the fact that TANF limits

required work participation to 20 hours a week for single parents with a

child under the age of 6. Furthermore, since these three states did not

require more than 20 hours of participation under their waivers, the low

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States Likely to Achieve Initial TANF

All-Families Participation Rate but May Be

Challenged to Meet Other Rates

levels of participation for more hours may not reflect what can be

achieved in the long run.

Changes in the

Employment Outlook

Could Affect States’ Ability

to Meet the TANF

Participation Rates

Many observers believe that low unemployment rates have contributed to

the dramatic decline in welfare caseloads during the past several years. A

recent study of caseload declines concluded that most of the changes in

the AFDC single-parent caseload since 1994 are attributable to factors such

as the unemployment rate and demographic trends, including the number

of children under age 18 in a state.29 There are a number of factors beyond

the control of policymakers and program officials that could contribute to

changes in the caseload. Should the economy deteriorate in the future and

unemployment rates go up, states may not receive the target rate

reduction associated with a caseload drop and they will be trying to

achieve higher target participation rates under less favorable economic

conditions.

States With Welfare

Populations Concentrated

in Urban Areas May Have

Difficulty Meeting the

Participation Rates

Many argue that the urban poor on welfare tend to have significant

barriers to employment. Frequently lacking in education and prior work

history, they are uniquely unsuited to the jobs available, which

increasingly demand more skills. The estimated TANF work participation

rate in Wayne County, Michigan, which includes Detroit, is 23 percent,

approximately 19 percent lower than for the rest of Michigan.30

Furthermore, early results from Project Zero, a Michigan initiative to have

the entire caseload employed in demonstration sites, suggests that a site in

Detroit is experiencing greater difficulty getting participants employed

than are other Michigan sites.

Recipients Who Do Not

Find Jobs Tend to Have

Multiple Barriers to

Employment

Officials in the three states expressed concern that recipients who do not

find employment have multiple barriers and therefore are considered hard

to serve. In Utah, where all welfare recipients are required to participate,

approximately 30 percent of the caseload is described by the program

director as being hard to serve. Studies of recipients in this group have

found that, in addition to being less likely to have prior work experience

and being more likely to have lower literacy levels, they have multiple

problems that make program participation difficult. The problems include

29David J. Fein, Understanding Recent Declines in State AFDC Caseloads: An Analysis of Cross-State

Variation (Cambridge, Mass. : Abt Associates, Oct. 1996).

30For October 1996, the estimated TANF participation rate for Wayne County was 23 percent compared

with 42 percent for the remaining Michigan counties and 33 percent for the entire state.

Page 45 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 3 

States Likely to Achieve Initial TANF

All-Families Participation Rate but May Be

Challenged to Meet Other Rates

mental health issues, such as depression, anxiety, and personality

disorders; domestic violence; substance abuse; behavior problems with

children; and legal problems. Since the new law allows states to exempt

20 percent of their caseload from the time limit, they may choose to

exempt these hard-to-serve individuals; however, they will be included in

the denominator of the participation rate calculation.

While Utah’s waiver program is the only one of the three state programs

we reviewed that allows participation in mental health or substance abuse

treatment programs to meet the work participation requirement, Michigan

will temporarily defer from work participation a recipient who is receiving

such treatment. Officials reported services were insufficient to meet client

need in this area. Even if clients cannot participate because they need, but

do not receive, such services, they will remain in the denominator of the

participation rate calculation, potentially lowering a state’s participation

rate.

Page 46 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 4 

Conclusions and HHS’ and States’

Comments

One of the goals of the Personal Responsibility and Work Opportunity

Reconciliation Act of 1996 is to end the dependence of needy parents on

government benefits by making welfare a transitional program that moves

recipients into employment and off the rolls. To this end, the act

encourages states to increase the proportion of those receiving cash

assistance in work and work-related activities, ultimately requiring

recipients to work as a condition of benefit receipt and limiting the total

time of benefit receipt. The three states we reviewed were attempting to

accomplish this goal under waiver and, although these states were taking

different approaches, they all appeared to have been able to increase

participation. While we cannot conclude whether any of the specific policy

changes were linked to changes in participation, we did observe some

common elements across programs. For example, although these states

differed on their participation requirements, they used similar strategies to

get recipients to meet the requirements. The sanction of benefit

termination as a way to motivate client participation was found in all three

programs we reviewed and in 19 other states with waivers to increase

work participation. Officials in the three states viewed sanctions as a

powerful tool to increase participation rather than as a punishment for

noncompliant behavior.

While the new law limits the types of activities that count as work

participation, the experience of states, such as Utah and Michigan, that are

trying to engage the entire caseload in self-sufficiency activities has been

that some portion of the caseload requires more than job search and

assistance with child care and transportation to be able to engage in a

strictly defined work-related activity. To the extent that states move the

more job-ready recipients into employment, they will be challenged to

provide the services necessary to help clients with multiple barriers move

into employment. Since these are the recipients who would have been

exempted or deferred from participation in the past, states have limited

experience in what is required to enable them to become employed, earn

sufficient wages, and sustain employment in order to exit welfare

permanently.

The experience of the three states we reviewed demonstrates that, with

the programs they had in place and with credit for caseload reductions

since fiscal year 1995, the initial all-families participation rate should be

attainable. However, these states are unsure of their capacity to reach

higher rates in the future, in part because they believe that their success in

moving families off the rolls will make it increasingly difficult to meet

future participation rates. As states assist recipients who are employable

Page 47 GAO/HEHS-97-80 Welfare Work Participation Requirements
Chapter 4 

Conclusions and HHS’ and States’

Comments

into jobs and off the rolls, they are concerned that they will be left with

recipients who are essentially unemployable or at least in need of multiple

supportive services. On the other hand, the large reductions in caseload

that appear to be continuing not only will lower states’ target participation

rates, but also will result in more money per recipient under the block

grant, providing an opportunity for states to develop the range of services

required to help the least job-ready make the transition to employment.

If a state chooses to provide the services necessary to enable recipients

with multiple employment barriers to participate in an activity that will

ultimately lead to self-sufficiency, the particular activity may not meet the

strict definition of work participation under the new law. Consequently,

even though the state may actually assist many of these recipients in

getting jobs and leaving the rolls, it may not appear to be successful in

meeting the participation requirements of the new law during the time it is

preparing the least employable to make the transition from welfare to

work. To ensure that participation rates are promoting the desired

program outcome, they need to be carefully studied and monitored in the

future.

Comments From HHS

and States

We obtained comments on a draft of this report from our three case study

states: Massachusetts, Michigan, and Utah. The states provided technical

clarifications about their programs and data interpretation. We

incorporated their comments in the report as appropriate. We requested,

but did not receive, comments from HHS.

Page 48 GAO/HEHS-97-80 Welfare Work Participation Requirements
Page 49 GAO/HEHS-97-80 Welfare Work Participation Requirements
Appendix I 

Selected Characteristics of Welfare Reform

Programs in States With Waivers Changing

Work Requirements

Table I.1: Age of Youngest Child

Exemptions Cited in Waivers for States

Changing Work Requirements

State Parent exempt from participating if age of youngest child is...

Arizona Under 1 year old

Colorado No change requested in waiver

Connecticut Under 1 year old

Delaware Under 13 weeks old

Florida Under 6 months old

Georgia Under 5 years old

Hawaii Under 6 months old

Illinois Under 5 years old

Indiana Under 12 weeks old

Iowa Under 3 months old

Louisiana No change requested in waiver

Maryland Under 12 weeks old

Massachusetts Under mandatory school-age, usually 6 years old, if child is

included in the assistance unit, under 3 months old if the child was

conceived while the parent was receiving AFDC

Michigan Under 12 weeks olda

Mississippi No change requested in waiver

Missouri No change requested in waiver

Montana Under 1 year old

Nebraska Under 12 weeks old

New Hampshire Under 6 years old if child is included in the assistance unit, under

3 months old if the child was conceived while the parent was

receiving AFDC

North Carolina Under 5 years old

North Dakota Under 3 years old or at the state option, less than 3 but not less

than 1 year old

Ohio Under 6 years old

Oklahoma No change requested in waiver

Oregon Under 3 months old

South Carolina Under 1 year old; no exemptions for parents under 25 years old

who have not completed high school

South Dakota No change requested in waiver

Texas Under 5 years old; after September 1997, exemption changes to

children under 4 years old

Utah No exemptions

Vermont Under 6 months old

Virginia Under 18 months old; temporary 6-week extension granted for

children conceived while the parent was receiving AFDC

West Virginia No change requested in waiver

(continued)

Page 50 GAO/HEHS-97-80 Welfare Work Participation Requirements
Appendix I 

Selected Characteristics of Welfare Reform

Programs in States With Waivers Changing

Work Requirements

State Parent exempt from participating if age of youngest child is...

Wisconsin Under 1 year old for one parent

Wyoming Under 1 year old; 3-month exemption for children conceived while

the parent was receiving AFDC

aOriginally, under Michigan’s waiver, all exemptions were eliminated; however, the state legislaure

made single parents with children under the age of 12 weeks exempt from the work requirement.

Source: The terms and conditions in the state waivers, HHS.

Table I.2: Expanded Activities Meeting

the Participation Requirement in

States Changing Work Requirements

State

Life skills

training

Parenting or

family skills

training

Family

counseling

Drug and

alcohol

counseling

Mental

health

counseling

Delaware X

Florida X

Georgia X

Iowa X

Nebraska X

North Dakota X X X

Oregon X X

South Carolina X X

Texas X

Utah X X X X

Vermont X

Wisconsin X X

Note: Other states that changed their work requirements did not count these activities, if

provided, as meeting the participation requirements under their waivers.

Source: The terms and conditions in the state waivers, HHS.

Page 51 GAO/HEHS-97-80 Welfare Work Participation Requirements
Appendix I 

Selected Characteristics of Welfare Reform

Programs in States With Waivers Changing

Work Requirements

Table I.3: Changes in Age of Youngest

Child Exemption and Work-Related

Activities Cited in Waivers for States

Changing Work Requirements State

Changed age

of youngest

child

exemption

Extended job

search

component

Subsidized

work

component

Community

service

component

Arizona X X

Colorado

Connecticut X X X

Delaware X X

Florida X X

Georgia X X

Hawaii X X

Illinois X X X

Indiana X X X X

Iowa X X

Louisiana

Maryland X X

Massachusetts X X X X

Michigan X X

Mississippi X

Missouri X

Montana X X

Nebraska X X

New Hampshire X X X X

North Carolina X X X

North Dakota X X

Ohio X X

Oklahoma

Oregon X X X

South Carolina X X

South Dakota X

Texas X X X

Utah X

Vermont X X X X

Virginia X X X X

West Virginia

Wisconsin X X X

Wyoming X

Source: The terms and conditions in the state waivers, HHS.

Page 52 GAO/HEHS-97-80 Welfare Work Participation Requirements
Appendix I 

Selected Characteristics of Welfare Reform

Programs in States With Waivers Changing

Work Requirements

Table I.4: Diversions Cited in Waivers

for States Changing Work

Requirements

State Diversion amount available Waiting period to reapply

Maryland Not to exceed 3 times the monthly

benefit amount unless determined

to be warranted by the local

department, but in no case to

exceed 12 months’ AFDC benefit

amount

Not eligible for the number of

months covered by the one-time

payment

Montana Not to exceed 3 times the monthly

benefit amount

Ineligible to receive 2 months of

future AFDC benefits for each

month’s AFDC benefit received as

part of the one-time payment

North Carolina Not to exceed 3 times the monthly

benefit amount

Required to repay these benefits

following procedures used for

AFDC overpayments

Texas $1,000 regardless of family size 12 months

Utah Not to exceed 3 times the monthly

benefit amount

3 months; eligible for prorated

AFDC benefits if reapplies before

3-month period

Virginia Not to exceed 120 days’ benefit

amount

160 days

Note: Other states changing work requirements did not cite diversions in their waivers.

Source: The terms and conditions in the state waivers, HHS.

Table I.5: Changes to Sanctions and

Incentives Cited in Waivers for States

Changing Work Requirements

State

Full-family

sanctionsa

Changed

earned

income

disregards

Changed

asset limit

Changed

vehicle

value limit

Allow

individual

development

accounts

Arizona X X X

Colorado X X X

Connecticut X X X X

Delaware X X X X

Florida X X X

Georgia X X

Hawaii X X X

Illinois X X X

Indiana X X

Iowa X X X X X

Louisiana X

Maryland X X X X

Massachusetts X X X X X

Michigan X X X

Mississippi X X X X

(continued)

Page 53 GAO/HEHS-97-80 Welfare Work Participation Requirements
Appendix I 

Selected Characteristics of Welfare Reform

Programs in States With Waivers Changing

Work Requirements

State

Full-family

sanctionsa

Changed

earned

income

disregards

Changed

asset limit

Changed

vehicle

value limit

Allow

individual

development

accounts

Missouri X X X

Montana X X X

Nebraska X X X X

New

Hampshire

X X X X

North Carolina X X X

North Dakota X X X X

Ohio X X X

Oklahoma X

Oregon X X X X X

South Carolina X X X X X

South Dakota X X X X

Texas X X X X

Utah X X X X

Vermont X X X X

Virginia X X X X X

West Virginia X

Wisconsin X X X X X

Wyoming X

aTable shows states with full-family sanctions for failure to comply with work requirements. Four

other states, Idaho, Kansas, Minnesota, and Tennessee, which did not change work requirements

with waivers, did initiate full-family sanctions for failure to comply with existing work requirements.

Full-family sanctions can be applied for other reasons, for example, failure to comply with teen

living arrangement requirements. For a detailed discussion see Welfare Reform: States’ Early

Experiences With Benefit Termination (GAO/HEHS-97-74, May 15, 1997).

Source: The terms and conditions in the state waivers, HHS.

Page 54 GAO/HEHS-97-80 Welfare Work Participation Requirements
Appendix I 

Selected Characteristics of Welfare Reform

Programs in States With Waivers Changing

Work Requirements

Table I.6: Changes to Transitional

Child Care and Transitional Medicaid

Requirements for States Changing

Work Requirements

Changed 3 of last 6 months

participation requirement for

transitional benefits

Transitional benefits extended

after AFDC case closed

because of increased earnings

State Child care Medicaid Child care Medicaid

Arizona 24 months 24 months

Colorado Eliminated

Connecticut Eliminated Eliminated Extended until

family’s income

exceeds 75% of

state median

income

24 months

Delaware 24 months 24 months

Florida 24 months

Illinois Eliminated 24 months 24 months

Iowa 24 months

Massachusetts Eliminated Eliminated

Mississippi Eliminated Eliminated

Montana Changed to 1

month

Eliminated

Nebraska 24 months 24 months

New Hampshire Eliminated

Ohio 18 months

South Carolina Eliminated Eliminated 24 months 24 months

Texas Eliminated 18 months

Utah Eliminated Eliminated Extended until

family income

exceeds sliding

fee scale

24 months

Vermont 36 months as

long as income

does not

exceed 185% of

poverty line

Virginia Eliminated 24 months 24 months

aOther states that changed their work requirements through waiver did not change their

transitional benefits.

Source: The terms and conditions in the state waivers, HHS.

Page 55 GAO/HEHS-97-80 Welfare Work Participation Requirements
Appendix II 

GAO Contacts and Staff Acknowledgments

GAO Contacts David P. Bixler, Assistant Director, (202) 512-7201

Margaret Boeckmann, Senior Social Science Analyst, (202) 512-6992

Staff

Acknowledgments

In addition to those named above, the following individuals also made

important contributions to this report: Ellen Soltow, Evaluator, conducted

fieldwork in Massachusetts, Michigan, and Utah and contributed to the

data analysis and report writing; Karen Brown, Evaluator, conducted the

analysis of the terms and conditions of state waivers; and Rachel

Rosenthal, Intern, assisted in the early design phase of the assignment.

Page 56 GAO/HEHS-97-80 Welfare Work Participation Requirements
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Page 58 GAO/HEHS-97-80 Welfare Work Participation Requirements
Bibliography

Page 59 GAO/HEHS-97-80 Welfare Work Participation Requirements
Related GAO Products

Welfare Reform: States’ Early Experiences With Benefit Termination

(GAO/HEHS-97-74, May 15, 1997).

Welfare Waivers Implementation: States Work to Change Welfare Culture,

Community Involvement, and Service Delivery (GAO/HEHS-96-105, July 2,

1996).

Employment Training: Successful Projects Share Common Strategy

(GAO/HEHS-96-108, May 7, 1996).

Welfare to Work: Approaches That Help Teenage Mothers Complete High

School (GAO/HEHS/PEMD-95-202, Sept. 29, 1995).

Welfare to Work: Child Care Assistance Limited; Welfare Reform May

Expand Needs (GAO/HEHS-95-220, Sept. 21, 1995).

Welfare to Work: State Programs Have Tested Some of the Proposed

Reforms (GAO/PEMD-95-26, July 14, 1995).

Welfare to Work: Most AFDC Training Programs Not Emphasizing Job

Placement (GAO/HEHS-95-113, May 19, 1995).

Welfare to Work: Participants’ Characteristics and Services Provided in

JOBS (GAO/HEHS-95-93, May 2, 1995).

Welfare to Work: Measuring Outcomes for JOBS Participants (GAO/HEHS-95-86,

Apr. 17, 1995).

Welfare to Work: Current AFDC Program Not Sufficiently Focused on

Employment (GAO/HEHS-95-28, Dec. 19, 1994).

Child Care: Current System Could Undermine Goals of Welfare Reform

(GAO/HEHS-94-238, Sept. 20, 1994).

Families on Welfare: Sharp Rise in Never-Married Women Reflects Societal

Trend (GAO/HEHS-94-92, May 31, 1994).

Families on Welfare: Teenage Mothers Least Likely to Become

Self-Sufficient (GAO/HEHS-94-115, May 31, 1994).

Families on Welfare: Focus on Teenage Mothers Could Enhance Welfare

Reform Efforts (GAO/HEHS-94-112, May 31, 1994).

(106609) Page 60 GAO/HEHS-97-80 Welfare Work Participation Requirements
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