STATE WELFARE-REFORM IMPACTS: CONTENT AND ENFORCEMENT EFFECTS

Good legislation is about ten percent of what's required to achieve true welfare reform. The other ninety percent is implementation. - U.S. Congressman Clay Shaw, September 1996 I. INTRODUCTION The Personal Responsibility and Work Opportunity Act (PRWOA) of 1996 has spawned an array of competing claims about the efficacy of welfare reform. Politicians at every level of government have credited reform legislation for the precipitous drop in welfare caseloads that began in 1994. The Council of Economic Advisers has even claimed that the caseload declines that occurred as much as a year before the PRWOA was signed were an anticipatory response to pending program changes (Council of Economic Advisers, 1997). Skeptics (e.g., Martini and Wiseman, 1997) have questioned both the theoretical and empirical foundation for such claims. The resolution of competing claims has been impeded by the misspecification of program parameters in econometric models. Specifically, virtually all economic models of program impact assume an interjurisdictional homogeneity in program content, timing, and enforcement that simply does not exist. In doing so, economists are ignoring a storehouse of public administration and public policy literature that documents the variation in interjurisdictional program content created in the implementation process at subnational levels that extend all the way to "street-level bureaucracies" (Lipsky, 1980). The model misspecifications that result generate inefficient and inconsistent impact estimates - the fodder of the continuing controversy. Neither the debate over program efficacy nor the underlying specification problem is unique to the 1996 reform legislation. The same controversy has arisen over the efficacy of earlier state-level reforms. From 1989 through 1995, individual states obtained a spate of "waivers" from the U.S. Department of Health and Human Services (HHS) to modify the parameters of the Aid for Families with Dependent Children (AFDC) program. Analysts have yet to reach a consensus on whether or how these state-initiated "demonstrations" affected welfare caseloads. That uncertainty is also due in part to the incomplete specification of program parameters. This paper attempts to refine estimates of program impact in two ways: first, by incorporating more of the explicit interjurisdictional variability in program parameters into the evaluation model, and second, by recognizing the implicit variation across jurisdictions caused by local discretion in program implementation. These empirical innovations are more demonstrative than definitive. However, they may help pave the way toward more comprehensive evaluation models and ultimately more precise estimates of program impacts. II. EXPLICIT VARIATION IN STATE WELFARE DEMONSTRATIONS The Family Support Act (FSA) of 1988 mandated structural reforms in the AFDC program and a timetable for their implementation. The most important elements of that reform legislation were (1) the extension of AFDC eligibility to two-parent families (AFDC-U) in all states, (2) the establishment of mandatory self-help activity for an increasing portion of the AFDC caseload, and (3) the creation of transitional eligibility for in-kind benefits for welfare recipients who begin paid employment. The AFDC-U expansion fostered a potential short-run rise in AFDC caseloads, while the second and third features were expected to reduce caseloads over time. This was particularly true for the self-help mandate, which set rising participation thresholds in all states during the implementation period (1990 - 1995 for AFDC, 1990-1997 for AFDC-U). The FSA also established the authority of the HHS to grant waivers to states seeking to modify the provisions of that act. This strategy was based on similar provisions introduced in the Omnibus Budget Reconciliation Act of 1981, which also both set new national welfare regulations and encouraged state-level experimentation. …