Welfare Spending in the American States: A Comparative Perspective

The federal-state system of welfare is the result of a compromise between the desire for national standards and the opportunity for each state to have its own adaptation. As a compromise, there is a constant tension in the system. During the 1970's, there was a pressure toward federalization, but the states have preserved their diversity. The Reagan Administration has clearly indicated a desire to "return" greater freedom to the states to chart their own course. The purpose of this paper is to identify variations among the states in such a way as to identify those states with consistently "high" or consistently "low" expenditures for welfare after allowance is made for differences in need, capacity, and chance variations. Individual states deviations from expected expenditures are noted over the past decade. The resilience of the states in pursuit of their own welfare paths is noted and the implication of this for tension in federal-state relationship is shown. The changing relationships between the national government and the state governments have been a significant element in shaping the debate about welfare in this nation for the last twenty years. The perception that one set of governments or another would be likely fiscal losers in any reshaping of welfare has stood as an impediment to reform. At the same time, the absence of a clear cut consensus of where power, capacity and responsibility lay in the coordinate system has fueled a significant portion of the welfare debate. The debate about welfare responsibility between those concerned with national standards and those concerned with the opportunity for state adaptations would, no doubt, have taken place even in the absence of legalistic and fiscal problems. The federal systems demand for dual responsibility along side very uneven fiscal capacities for state programs has magnified the already difficult problem of selecting and implementing welfare policy. (1) In recent years voices from virtually all points on the political spectrum have called for a reassessment of the federal-state responsibilities in AFDC, Food Stamps, and Medicaid programs. The goals of these reassessments are clearly not the same for all of the interested parties. The goals of the various reform proposals involved modification of welfare itself as well as changes in federal/ state responsibilities for welfare policy. The goals most frequently articulated are these: (1) a desire to eliminate (or at least reduce) inter-state differences in benefit schedules (2) to increase the benefits of lower paying states -177(3) to achieve a better balance between fiscal demands of welfare programs with fiscal capacity to meet the need (4) to reduce the aggregate spending on these transfer programs (or at least to reduce the rate at which these programs grow) (5) to more effectively target benefits to those in the greatest need (6) to shift fiscal responsibility from one level of government to another (7) to sort out the federal/state responsibilities to achieve a higher level of policical accountability and fiscal responsibility Particular plans for reform reflect different priorities among these goals. It is also clear that some of these goals are incompatible with one another. Each president since John Kennedy has provided some measure of leadership in a welfare reform effort, but each presidential initiative has been defeated because of internal beauracratic and legislative inability to forge a compromise among these goals. The most recent initiative has been President Reagan's proposal for a swap of welfare responsibilities. Behind each new proposal for welfare reform there lies a complex tangle of political desires and deeply held convictions about both welfare itself and the federal/state responsibilities involved in the delivery of welfare services. Any welfare proposal must address simultaniously a theory of povery and a theory of inter-governmental relations. The first issue is reasonably well addressed in the literature. If one believes that the low income condition is a function of insufficient employment opportunities of low skilled workers, then a jobs and skills enhancement strategy needs to be given priority. If one beleives that the problem lies with specific character and motivational problems of low income persons, then social work services need to be emphasized. If one believes that inequality is a systemic consequence of capitalism, then a negative income tax and direct re-distributional schemes need to be emphasized. (Sommers, 1982) At the pragmatic political level the proposals usually contain a complex misture of such goals. Two decades of poverty research reflect the diversity of poverty theories and the resulting differences of grand strategies of welfare reform. Relatively less attention has been paid to the question of inter-governmental relations. Questions of the appropriate relationship between the central and state governments are of obvious fiscal and political importance. The fact that one or another set of governments perceive of themselves as fiscal losers in a reshuffled set or responsibilities clearly affects the course of reform within Congress and the state capitols. A complete history of the welfare reform effort needs to include the details of the various cost-estimating techniques used by the administration, the Congressional Budget Office and the various state welfare establishments. During the Carter welfare reform effort the administration originally estimated that the new program would cost an additional 2.6 billion dollars, but the CBO estimated the federal cost at 25 billion dollars. Haskins, 1981 During the Reagan administration's effort the Office of Management and Budget estimated a net savings to the state of 2.6 billion dollars, but the Congressional Budget Office estimated a 4.4 billion dollar state loss.( U.S.G.A.0., 1982 ) The lack of confidence in cost estimations is only one of the problems associated with disentangling federal/state responsibilities. A second, equally difficult problem is the impact of dual federalism on interstate diversity in benefits, which appear intractable in the face of incremental reform. The present set of programs, of AFDC, Food Stamps and Medicare interact with one another in curious and unintended ways. The net effect of increasing AFDC benefit is to reduce food stamp benefit to the household by 30 cents for each dollar of benefit increase. Increase in AFDC benefits also expand Medicaid eligibility. The resulting consequences impacts on the state budgets in ways that are difficult to predict. During the 1970's there was a considerable political effort to decrease diverisity in benefits. One of the intents of the food stamp program was to reduce the inter-state diversity in total benefits to households elegible for both programs. Despite some progress, the states have acted in such ways as to retain considerable diversity. This is shown in Table I.