TIME LIMITS ON WELFARE RECEIPT

I. INTRODUCTION The introduction into law of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) has imposed numerous challenges on state policy makers as they tailor welfare policies to the needs of their states but consistent with federal guidelines, in the presence of serious fiscal constraints. Looming in the not too distant future is the specter of the time limits set on receipt of federal funds from the Temporary Assistance for Needy Families (TANF) block grant. States have some flexibility regarding these time limits, deciding whether to set them more strictly than required by law and what, if any, assistance to provide once limits have been reached.(1) The task of designing appropriate polices is made more difficult by the fact that information on the effect of time limits on welfare receipt is almost nonexistent. Even with substantial previous experience with time limits, predictions about the number of families at risk of hitting time limits would still be error prone, in light of the many simultaneous changes taking place as Aid to Families with Dependent Children (AFDC) is replaced by TANF, and as modifications are made in related programs. In light of this information vacuum, this paper has the modest goal of examining welfare dynamics under AFDC in order to provide a sense of magnitude of the number of families that would have been at risk of exhausting their eligibility for federal funds in the past. In addition, simulation models are employed to assess the sensitivity of these results to changes in key variables, some of which are within the grasp of policy makers, others of which are not. The estimates provided here are not intended to be a prediction of the number of families that will reach the time limits now being imposed; rather, it is hoped that they provide a sense of how successful states will have to be in designing programs to reduce cumulative stays on welfare, to avoid having large numbers of families facing a cutoff from federal TANF funding. Past research most similar to this is the study by Pavetti (1996). An important distinguishing feature of the present study is that a wider range of "what-if" experiments is conducted to see how sensitive estimates are to changes in economic conditions, fertility rates, and policy-related variables. In addition, the duration models used here enable the baseline rate of exit from welfare to be estimated quite flexibly, increasing confidence that the results are driven by the data rather than assumptions about parametric form. The work of Duncan et al. (1998) differs from both the present work and that of Pavetti (1996) in that these authors use the actual spells over the period 1983-1991 to make their estimates rather than using a model, omitting those who may reach the limit in more than 8 years and making it impossible to gauge the sensitivity of the estimates to changing conditions. II. BACKGROUND A. Provisions of TANF The replacement of AFDC with TANF entails major changes in a number of facets of welfare policy (Greenberg and Savner 1996). The main provision of TANF regarding time limits is that families may not receive assistance through the federal TANF program for a period exceeding 5 years, measured cumulatively, though states are permitted to impose an earlier cutoff. If assistance provided in a given month is funded solely by the state, this month does not count against the 60-month limit, nor does any time spent on welfare prior to TANF's enactment. Any month in which "assistance" is received via TANF does count toward the limit, where "assistance" is defined as including not only cash assistance but also such categories as child care, vouchers, emergency assistance, and counseling. States are permitted to exempt up to 20% of their average monthly caseload from the 5 year limit. According to the language of the bill, once an adult in the family has reached the time limit, the family is ineligible for further assistance, even if aid is not being sought for that adult. …