Supports For Low-Income Families: States Serve a Broad Range of Families through a Complex and Changing System
Released: 2004-01-26T00:00:00

Letter

Background

Supports for low-income families are funded, designed, and administered by a combination of federal and state governments. Recent changes to federal laws have modified supports for low-income families in many ways and, in some cases, have altered the roles of the federal and state governments in the provision of these supports. Changing economic conditions have also affected the provision of supports for low-income families.

Roles of Federal and State Governments in Providing Supports for Low-Income Families

Both the federal and state governments are involved in the provision of supports for low-income families, but the relative roles that the federal and state governments play with regard to funding and design vary by the type of support. Specifically, supports for low-income families vary in terms of whether they are funded with federal funds, state funds, or a combination; whether funding is fixed; and the extent to which the federal government, state governments, or a combination is responsible for determining eligibility rules, availability, and benefit structures. In addition, some supports, such as food stamps and Medicaid, are entitlements, for which eligible applicants are guaranteed receipt. For other supports, such as subsidized child care and transportation assistance, provision of the supports is not mandatory and receipt is not guaranteed. Table 1 illustrates the relative roles of the federal and state governments in the funding and design of supports, and indicates whether the supports are entitlements.

Changes in Programs for Low-Income Families

Several federal programs for low-income families have been enacted or significantly revised in the last decade, as detailed below and in figure 1: 1990—Federal EITC expansion—In 1990, as part of the Omnibus Budget Reconciliation Act (1990 OBRA), the Congress changed the qualification standards and substantially increased the size of the EITC, at least in part to increase the progressivity of the overall federal tax system by reducing the federal tax burden of qualified low-income workers. In 1991, the first year that these changes were in effect, the number of families receiving the EITC increased by 1.4 million families to a total of 13.9 million, and they claimed a total of $11.2 billion in credits, which was an increase of $3.8 billion over 1990. 1993—Federal EITC expansion—As part of the August 1993 Omnibus Budget Reconciliation Act (1993 OBRA), the Congress increased the size of the maximum EITC for families with children, beginning in 1994, and extended coverage to very-low-income workers without children. The number of taxpayers claiming the EITC and total program costs increased steadily between tax years 1990 and 1994, partly because of both the 1990 and the 1993 OBRA expansions. 1996—PRWORA—With the enactment of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), the Congress made sweeping changes to federal welfare policy for needy families. PRWORA ended the Aid to Families with Dependent Children program and authorized the TANF block grant to states at $16.5 billion annually. TANF provides temporary cash assistance and emphasizes work and responsibility over dependence on government benefits. PRWORA also combined several existing child care programs into one program designed to provide states with more flexible funding for subsidizing the child care needs of low-income families who are working or receiving education or training in preparation for employment. In fiscal year 2003, the Child Care and Development Fund (CCDF) provided states with up to $4.8 billion in federal funds for these purposes. In addition, PRWORA severed the link between cash assistance and Medicaid benefits and restricted legal immigrants’ access to public welfare benefits. 1997—SCHIP—The State Children’s Health Insurance Program (SCHIP) was created under Title XXI of the Social Security Act for states to offer coverage to children in families with incomes up to 200 percent of the federal poverty level (FPL) who do not qualify for Medicaid. Congress appropriated $40 billion in federal funds over 10 years (from fiscal year 1998 to 2007), to provide each state an annual allotment, which can be spent over 3 years, for SCHIP expenditures. State SCHIP expenditures are matched by federal payments up to the state’s annual appropriated allotment. The federal share of each state’s SCHIP expenditures ranges from 65 to 83 percent; the federal share of total SCHIP expenditures is about 72 percent. In designing their SCHIP programs, most states chose to establish separate, stand-alone components, often concurrent with a Medicaid expansion. 1998—WIA—The Workforce Investment Act (WIA) was passed in 1998 to consolidate services of many employment and training programs, mandating that states and localities use a centralized service delivery structure – the one-stop center system – to provide access to most federally funded employment and training assistance. Under WIA, the federal government appropriates funds to states each year, and states have three years to spend those funds. In each fiscal year from 2000 to 2002, approximately $3.9 billion in federal WIA funds was appropriated to the states. 1998—Quality Housing and Work Responsibility Act—Under the 1998 Quality Housing and Work Responsibility Act, provisions were put in place to provide public housing agencies with increased flexibility while also increasing accountability. In addition, the Act facilitated the implementation of mixed-income communities, aimed to reduce the concentrations of poverty in public housing, and created incentives and opportunities for residents to work and become self-sufficient. Further, the Act introduced a new Section 8 housing voucher program designed to be more market-driven and accommodated the replacement or revitalization of severely distressed public housing projects. Most provisions in the Act became effective October 1, 1999. 2001—Economic Growth and Tax Relief Reconciliation Act—As part of the 2001 Economic Growth and Tax Relief Reconciliation Act, the Congress introduced several marriage tax penalty relief provisions, including one that affects the structure of the EITC. This provision increased the EITC phase-out start and end points for married couple joint tax returns by $3,000, with the increase phased in over a 7-year period starting in calendar year 2002. 2002—Farm Bill Changes to Food Stamps—The Farm Security and Rural Investment Act of 2002, reauthorized the Food Stamp Program through fiscal year 2007. The law also introduced a variety of changes to the Food Stamp Program, including the expansion of eligibility for certain groups of noncitizens, the addition of a provision that allows states to provide “transitional” food stamp benefits for up to 5 months for families leaving TANF, and the addition of a number of other state options to ease access to the program and administrative burdens on applicants/recipients and program operators.

Changing Fiscal Conditions

Though the last decade brought significant economic expansion across the country, recently states have dealt with changing fiscal conditions, and consequently, states are now facing one of their most challenging budgetary situations in years. Most states are required to balance their operating budgets, and since their revenues have been much lower than forecast, state officials have struggled to bring expenditures into line with available resources. A state’s need to cut spending or increase revenues can be mitigated if it has accumulated surplus balances in reserve. States accumulated significant reserves during the late 1990s. However, these reserves have dropped appreciably as states address their fiscal crises. Because of the recent fiscal changes at both federal and state levels, support programs have also undergone cyclical spending changes in recent years. For example, because the amount of the TANF block grant is fixed, as caseloads decline—as they did in all states through the late 1990s—states have additional resources to expand their programs and create reserves. However, as caseloads increase—as they have in some states since 2000—or other factors cause program costs to rise, states bear most of their TANF program’s fiscal risks.

States Provide a Wide Range of Supports to Low-Income Families although Extent of Receipt Varies

States draw on a mixture of federal and state funds to provide low-income families with a wide range of supports, although the specific types of supports offered and the extent to which eligible families are able to receive the supports they seek vary by state and sometimes within states. The supports available to low-income families range from those that address basic needs to those intended to promote economic independence, and include subsidized child care, cash assistance, transportation support services, utility assistance, health services, job retention and advancement services, and tax credits, as well as various other supports. As shown in table 2, state officials responding to our 50- state survey reported using state funds and federal TANF funds for most or all of the supports listed, but they also used other federal funding sources specific to each type of support. In particular, states used Child Care and Development Fund (CCDF) and Social Services Block Grant (SSBG) funds for subsidized child care, Job Access and Reverse Commute (JARC) funds for transportation support services, Low-Income Home Energy Assistance Program (LIHEAP) funds for utility assistance, and WIA funds for both job retention and advancement services and transportation support services. State officials also reported that county or local funds were used for transportation support services. Clearly, of the supports listed in the table, transportation support services draw on the largest number of different funding sources, and of the federal funding sources identified, TANF funds appear to be the most flexible, as states are using them to provide several different types of supports in addition to cash assistance.

Supports for low-income families are also administered at different levels of government within each state. In most states, officials reported that supports were administered at the state level, although in some states, county or local governments administered supports, as shown in table 3.

States offered a wide variety of supports, although not every specific type was offered in every state, according to officials responding to our 50-state survey. (See table 4.) For example, most states subsidized several types of child care, subsidized individuals’ public transportation costs, and offered employment services in at least one location in the state, but somewhat fewer states subsidized child care for sick children, assisted with the purchase of used cars, or offered employment retention bonuses to parents who found and kept jobs. Many of the state officials responding to our survey also indicated that when their states do provide supports, the supports are often not available in all areas of the state, although most officials reported that there were not differences in access to supports in urban and rural areas. In several instances, state officials were not able to provide complete information on the extent to which supports were offered.

According to data collected through our survey, although states may offer supports, not all eligible families who apply for supports receive them, as illustrated in figure 2. For the most part, state officials who could provide the data reported that a majority of eligible families who applied for supports did receive them, especially subsidized child care and utility assistance. However, it is worth noting that officials in some states reported that less than half of eligible applicants received certain types of transportation support services and job retention and advancement services. For nearly every type of support, an official in at least one state reported that less than half of eligible applicants received that type of support. The most common reasons cited for eligible applicants not receiving supports were an insufficient supply of services, insufficient state or federal funding, and the applicants’ physical or logistical difficulties gaining access to the supports that were offered. Figure 2 also illustrates that several officials responding to our survey did not know the extent to which eligible applicants received some types of supports. The officials reported, most frequently, that the reasons they did not have this information were that services varied broadly by locality and that data were not available or not complete at the state level. Further, figure 2 refers only to the eligible families who apply for supports and does not include families who would be eligible but who do not apply for them.

In some cases, whether a family receives support services may depend on whether the family is receiving cash assistance. In the past, receipt of support services sometimes was linked to receipt of cash assistance, and as a result, cash assistance recipients may have been more likely to receive supports than other low-income families. However, as the emphasis of support programs has shifted toward promoting employment and economic self-sufficiency for a broader population, states have targeted some supports to low-income families who are not receiving cash assistance. In our 50-state survey, only a limited number of state officials were able to provide information on the extent to which low-income families receiving each type of support were also currently receiving TANF cash assistance. Among those who did provide this information, most reported that transportation support services and job retention and advancement services were received primarily by families also receiving TANF cash assistance, while subsidized child care and utility assistance were received primarily by families not receiving TANF cash assistance.

In addition to the supports discussed above, states offer several other supports to low-income families. In particular: TANF cash assistance is provided in all states for eligible low-income families.

Short-term cash benefits are provided to low-income families in 39 states, according to our survey. These benefits are provided through TANF diversion programs, state emergency assistance programs, or other programs. TANF diversion programs provide low-income families who are eligible for TANF cash assistance with short-term cash or in-kind benefits, on a case-by-case basis, in lieu of TANF cash assistance. State emergency assistance programs provide similar short-term support outside of TANF.

State tax credits for low-income families were offered by almost half of the states in 2002, according to our survey, with the most frequently provided type of state tax credits—child care tax credits—provided by 23 states. In addition, 19 states reported offering a state earned income tax credit, and 7 states reported offering a housing credit.

While Medicaid and SCHIP services are offered in nearly all states, 12 states reported in our survey that they offered additional health insurance programs so that low-income families not eligible for Medicaid or SCHIP could obtain health insurance for a reduced fee.

Some other key supports for low-income families are available nationally, such as food stamps, the federal EITC, and housing assistance.

In our site visits, several states mentioned other supports they consider to be important for low-income families, namely, before- and after-school programs and child support enforcement programs. Oklahoma contracts with several different organizations to provide after-school programs that focus on mentoring, teen pregnancy prevention, drug abuse prevention, and the overall goals of promoting child well-being and strengthening families. Several states consider child support to be a significant income support for welfare families. Wisconsin has established a unique program through waivers that allows welfare recipients to receive the entire amount of child support collected on their behalf each month. Though several states mentioned before- and after-school programs and child support efforts as important supports for low-income families, some of the states we visited noted supports that were more distinctive. For example, Oklahoma has gained national prominence because of its efforts to create programs that focus on supporting marriage and family formation through welfare reform.

Selected States Have Structured Supports to Serve a Broad Range of Low-Income Families in a Coordinated Manner

On the whole, the five states we visited structured their supports to serve a broad range of low-income families in a coordinated manner, although the specific structures varied by state and type of support. Officials reported that they structured the eligibility criteria and benefits of many supports in ways that allow them to serve families with different levels of income and employment. For example, while the income eligibility criteria for supports like TANF cash assistance typically limit receipt to families with the lowest incomes, the states we visited reported that for other supports, such as subsidized child care and transportation support services, the maximum income eligibility thresholds are often set at higher income levels in order to provide support for a broader range of low-income families, including some with earned income. Families with higher incomes, though, might receive smaller benefit amounts or might be required to pay for part of the cost of a service. State officials in the five states we visited also reported that they have made efforts to deliver supports to low-income families in a coordinated manner, such as by allowing families to access multiple supports through a single caseworker or a single application form.

States We Visited Have Structured Supports to Serve a Broad Range of Low-Income Families

The five states we visited established income eligibility criteria that allow a broad range of families with different levels of income to gain access to supports. Because each state establishes its own maximum income eligibility levels for many supports, such as subsidized child care and utility assistance, the population eligible for each support differs across the states. As shown in table 5, in Oklahoma, families with incomes below 110 percent of the FPL are eligible for utility assistance, while in Wisconsin, families with incomes up to 150 percent of the FPL are eligible for this support. Overall, the five states we visited set the maximum income eligibility levels for many supports at 200 percent of the FPL or higher, as shown in table 5. In fiscal year 2003, 200 percent of the FPL was equivalent to approximately $31,000 for a family of three, which means that families whose annual incomes were less than or equal to $31,000 would be eligible for these supports as long as they met other eligibility criteria, such as having dependent children or not having other means of support. Setting higher income eligibility thresholds for some supports allows states to serve both families with very low incomes as well as families who may be working and earning somewhat higher incomes, which can assist families transitioning from welfare to work as well as other working families who have not received welfare.

While New York, North Carolina, and Wisconsin set 200 percent of the FPL as the maximum income eligibility level for several supports, in Oklahoma and Washington, income eligibility criteria varied widely by support. These two states set the maximum income eligibility level at 200 percent of the FPL or higher for subsidized child care but set it lower for other supports. Washington officials reported that income eligibility criteria for supports in their state were deliberately graduated to ensure that as families’ incomes rose, they would not lose eligibility for several supports simultaneously. According to officials, this approach attempts to minimize the potential work disincentive associated with losing eligibility for several supports at once, as families with increasing earnings instead lose eligibility for supports gradually.

Across the five states we visited, the form of supports for low-income families and the frequency of provision varied by state and support. Supports for low-income families can take several different forms, including cash benefits, vouchers, in-kind benefits, and services. For example, families might receive cash benefits through TANF cash assistance, vouchers to pay for public transportation, wood to heat their homes in the winter, or job-search assistance services. In addition, the frequency of support provision, or how often a family receives a support, varies depending on how the support is structured. Some supports, such as TANF cash assistance, are provided on a monthly basis, while other supports, such as utility assistance and tax credits, are provided on a one- time basis or once annually.

When structuring supports, states also make decisions about the benefit amounts provided to eligible families. In the five states we visited, the average benefit amount provided to support recipients varied by state and support, as shown in figure 3. For example, though in all five of the states we visited the average monthly benefit for subsidized child care was larger than the average monthly benefits for other supports, the benefit value differed across states, with the most significant difference between two states equaling approximately $300. Although average benefits provide some idea of the value of each support to a recipient family, because many supports are structured to provide benefits to a broad range of families with different income levels and family sizes, individual family benefits often differ from the average family benefit.

To determine each individual family’s benefits for supports, such as subsidized child care and TANF cash assistance, states often use a sliding scale, which adjusts the benefit amount received based on a range of factors, including family size and income. By using a sliding scale to determine benefit amounts, states are able to serve a broader range of low- income families with varied benefits. For other supports, such as utility assistance, while some states use a sliding scale method to determine each family’s benefit, other states provide each family with a flat grant. For example, North Carolina determines the flat grant for utility assistance recipients by dividing the number of eligible applicant families into the total funding available each year.

When structuring benefit amounts, states also make decisions about the structures of payments to service providers and cost-sharing with recipient families. Though families receive benefits directly from the state for some supports, such as TANF cash assistance, states pay benefits through vouchers or directly to service providers for several other supports, such as subsidized child care and utility assistance. These provider payments consist of the family’s calculated benefit amount, and payments are also typically based on the rate charged by the provider for the service. For example, federal regulations direct states to pay market rates to child care providers receiving child care subsidies, but each state is responsible for completing its own market rate survey and determining what rates will be paid to each provider. In North Carolina and Oklahoma, child care centers are assigned “star” ratings based on quality and other factors, and the state sets provider payment rates based on type of provider, market rates, and star levels, such that higher-quality providers receive larger payments relative to other providers.

Concerning cost sharing, state policymakers sometimes require families to pay part of the support cost, or a copayment, for services, as shown in figure 4. In the five states we visited, states typically pay a portion of each family’s cost for subsidized child care and SCHIP services, but some or all recipient families must also pay copayments for these services. By having either some or all recipient families pay copayments, the state is likely able to serve a broader range of families with available funds. For example, Wisconsin’s BadgerCare program, which provides health insurance for families whose incomes make them ineligible for Medicaid, requires recipients with incomes over 150 percent of the FPL to pay monthly premiums as well as copayments for certain BadgerCare services.

Selected States Deliver Supports in a Coordinated Manner

Each of the five states we visited made efforts to deliver supports in a coordinated manner. In each of these states, several supports for low- income families were colocated at local offices, thereby providing families with a single access point for a variety of supports. Across the five states, supports that were typically colocated in local offices included TANF cash assistance and TANF diversion, subsidized child care, transportation support services, food stamps, Medicaid, and SCHIP. For example, in North Carolina, each local social service office includes staff members who assist with applications and determine eligibility for food stamps, TANF cash assistance, TANF diversion, subsidized child care, Medicaid, SCHIP, utility assistance, transportation support services, and emergency assistance. This colocation of supports at local offices is similar to our previously reported findings on the colocation of support services, such as food stamps, TANF cash assistance, and Medicaid, at WIA one-stop centers, which provide employment and training assistance. Though this trend toward increased colocation of supports seems to be taking place in many states in a variety of local offices, officials in several of the states we visited reported that housing assistance often is not colocated with other supports for low-income families, in some cases because the supports are administered by separate state or local agencies.

When supports are colocated in a single location, it is likely that caseworkers also help coordinate the provision of supports for low- income families. In each of the five states we visited, state officials reported that the delivery of supports was sometimes coordinated among multiple caseworkers or directly coordinated by a single caseworker who provides families with case management services, assistance in identifying support needs, and eligibility determination. States cited several examples of coordinated case management, including the following: In Washington’s local offices, a single caseworker determines an applicant family’s eligibility for TANF cash assistance, food stamps, General Assistance, emergency assistance, and health insurance programs, such as Medicaid and SCHIP.

North Carolina and Washington colocated substance abuse caseworkers in the local offices that provide TANF cash assistance in order to improve caseworkers’ abilities to coordinate the delivery of these services for families who need services from both programs. In contrast to these efforts to improve coordination between substance abuse caseworkers and staff delivering other supports for low-income families, Washington officials noted that less coordination existed between mental health staff and staff delivering other low-income supports.

Wisconsin provides a case management program that assists low-income families not receiving TANF cash assistance with the coordination of supports. Wisconsin implemented this case management program in order to improve access and delivery of supports to low-income families who have left TANF cash assistance or are not receiving TANF cash assistance, as many studies have reported that these families are less likely to receive the supports for which they are eligible than are families receiving TANF cash assistance.

To provide coordinated case management and streamlined supports, states typically combine funding streams from several different programs, which can prove challenging. For example, in 2002, Oklahoma combined funding streams from several different programs when the state adopted a “one family, one caseworker” philosophy for low-income families receiving TANF cash assistance, food stamps, and subsidized child care. Oklahoma officials reported that although they initially faced the challenge of determining how to allocate caseworker costs to each separate support program, officials addressed this challenge by surveying caseworkers engaged in the provision of these supports at several points in time to determine the amount of time they spent delivering each support.

In three of the five states we visited, officials reported that integrated applications, which allow a family to apply for several supports at once, and integrated computer systems, which store information on recipients of several different supports, have been implemented to help coordinate the delivery of supports. In particular, families in Oklahoma apply for TANF cash assistance, subsidized child care, Medicaid, and food stamps through a single, comprehensive application. Further, though some state officials noted that the development of computer systems that simultaneously comply with the rules of several federal programs continued to be a challenge, Washington officials reported that they designed both an integrated application and a single computer system to coordinate the delivery of several supports for low-income families and to gather data on support recipients. In addition, Wisconsin has implemented a computer system that allows simultaneous application and eligibility determination for many supports for low-income families, excluding housing assistance and utility assistance. Concerning utility assistance, Wisconsin officials noted that the use of both a separate computer system and application somewhat prohibits its coordination with other supports, but the ease of applying for utility assistance on a straightforward application that gathers only the information related to a family’s eligibility for utility assistance may also improve families’ ability to access this support.

In the states we visited, the delivery of some supports is also coordinated through categorical eligibility rules, which make recipients of certain supports automatically eligible to receive other supports. For example, in North Carolina, families who receive food stamps are automatically qualified to receive utility assistance and federal telephone assistance. Further, in Washington, families who receive any of the support programs administered by the Washington Department of Social and Health Services are automatically eligible to receive state-funded telephone assistance. This direct link between receipt of two or more separate support programs can facilitate low-income families’ access to these supports.

Although efforts to deliver supports for low-income families in a coordinated manner were under way statewide in the five states we visited, because of local variation in offices and staff, the level of support coordination might differ within the state. For example, North Carolina officials reported that variation exists in how counties organize and coordinate the provision of food stamps with other support services. In all counties, food stamps are colocated in the same local offices with other supports. However, in some counties, separate staff provide each type of support, while in other counties individual staff provide both food stamps and other supports. Also, though efforts to coordinate the delivery of some supports were apparent in all five of the states we visited, state officials also reported instances where support coordination was not occurring or had been reduced and cited challenges to support coordination, such as the complexities of combining multiple funding streams and satisfying the various requirements of separate federal programs.

Many States Have Expanded Supports in Recent Years, but Express Uncertainty about the Future

Over the last several years, states have made substantial changes in their supports for low-income families, with most of these changes expanding the provision and receipt of supports, but state officials expressed uncertainty about their continued ability to provide the current level of support. Though many federal policy changes affecting support programs have occurred in the last decade, welfare reform played a central role in changes to a broad range of supports for low-income families. States made significant changes to the structure of their welfare programs in order to focus their new TANF cash assistance programs on the goals of employment and economic independence. To further this effort, states began spending increased amounts of funds on work supports for a broad range of low-income families. Since 2000, states have implemented many programmatic changes that affect the availability of supports for low- income families. While, in general, the availability of supports has increased during this time period, according to officials, as states have responded to recent fiscal constraints, they have made additional changes that limit the provision of some supports to low-income families. Further, as states plan for the future of supports in the current fiscal environment, officials reported that they are considering changes that would likely limit the availability and provision of supports for low-income families.

Welfare Reform Played an Integral Role in the Expansion of Supports for Low-Income Families

Since the enactment of PRWORA, welfare caseloads have fallen dramatically, and TANF spending on support services for low-income families has increased. Under TANF, states have the flexibility to provide both income maintenance and work support services that help low-income families find and maintain employment. In addition, as allowed under the TANF block grant structure, states are also able to set aside or reserve TANF funds for use in later years. Figure 5 shows that as states implemented their TANF programs during the strong economy of the late 1990s, the number of TANF cash assistance recipients decreased significantly, while the annual amount of federal funds provided to the states for TANF remained constant, as provided for under the fixed amount of the block grant. This resulted in a significant amount of funds available to states for supports and other services or saving for future use.

As TANF cash assistance caseloads fell, states shifted their spending priorities from cash assistance to support services. As illustrated in figure 6, states decreased the share of TANF expenditures for cash assistance between fiscal years 1998 and 2002 and increased the share spent on services. Specifically, spending on cash assistance decreased from 58 percent of TANF expenditures in fiscal year 1998 to 33 percent in fiscal year 2002. Over the same time period, the proportion of TANF expenditures on child care increased from 9 percent to 19 percent. The proportion of TANF expenditures for workforce development also increased, from 7 percent in 1998 to 10 percent in 2002. In addition to this increased emphasis on spending on supports, states reported leaving some TANF funds unspent, although the amount varied by state.

Consistent with figure 6, several state officials reported that their support program expansions in the last several years were often funded with TANF dollars that the states had accumulated as a result of falling TANF cash assistance caseloads. However, some state officials responding to our survey indicated a reversal in this spending trend, which may be due in part to increasing cash assistance caseloads. Approximately half of the state officials responding to our survey reported that since 2000 the number of TANF cash assistance recipients had increased (23 states), while about half of the officials reported that the number of recipients had decreased (24 states). Officials from two states reported no change in the number of recipients. Officials from 9 states with increased cash assistance caseloads reported that between 2000 and the time of survey completion in spring 2003, funding of other supports was reduced in order to redirect funds to TANF cash assistance. Among these 9 states, TANF funding was most commonly reduced for job training, basic education for adults, and transportation, while funds were less often redirected from child care, job search, and case management, as table 6 displays.

During our site visits, several officials explained that they no longer have sufficient TANF funds set aside to continue to fund support programs at current levels, which is consistent with TANF spending trends at the national level. As shown in figure 7, since 2001, states have spent more TANF funds than they received in their annual awards. To support this level of spending, states are drawing more heavily upon their TANF balances.

Many States Have Expanded Supports since 2000

Many states reported in our 50-state survey that the availability of supports and the number of families receiving supports have increased since 2000. Figure 8 shows that in most states the number of families receiving assistance with child care, transportation, utilities, and job retention and advancement increased. While the number of recipients can increase as a result of changes in the needs of the population, it can also increase because of changes in state policies that affect the availability of supports.

States can expand or limit the availability of supports by increasing or decreasing the number of benefits and services available or the types of services provided. Most states reported that the number or types of child care subsidies, transportation support services, and job retention and advancement services stayed the same or increased between state fiscal year 2000 and spring 2003, an outcome that we have characterized as causing the availability of these supports to stay the same or increase, as shown in figure 9. Few states decreased the number or type of services provided, with the notable exception of Medicaid services, which were decreased in 16 states.

Few changes were reported in the provision of state tax credits. According to officials responding to our 50-state survey, none of their state earned income tax credits, child care tax credits, or housing credits were eliminated, reduced, or suspended between state tax years 2000 and 2002.

States can affect the availability of supports indirectly by changing low- income families’ awareness of supports through outreach efforts, such as billboards, fliers, and radio announcements. By increasing or decreasing outreach efforts, states may affect low-income families’ awareness of supports and the number of low-income families applying. States’ outreach efforts for most supports increased or stayed the same between state fiscal year 2000 and spring 2003, an outcome that we have characterized as causing availability to increase or stay the same, as shown in figure 10. Outreach efforts for Medicaid and SCHIP, however, decreased in 11 and 15 states, respectively. Officials in one of the states we visited explained that they had cut back on outreach efforts for their Medicaid and SCHIP programs because of budget constraints and a decrease in the number of doctors who would accept patients covered by Medicaid or SCHIP.

Since 2000, states generally have modified income eligibility criteria in ways that expanded the availability of support services. However, some states reported changes to income eligibility criteria in recent years that limited the availability of some supports. (See fig. 11.) Changes to eligibility criteria often affect the number of families receiving supports, as such changes affect the size of the eligible population. In our site visit states, officials often noted that recent changes in federal support policies, such as those for Medicaid, SCHIP, and food stamps, have allowed states to expand their income eligibility criteria to cover a broader range of low- income families with these supports. Further, as shown in figure 11, most states responding to our 50-state survey reported that as a result of changes in income eligibility criteria between state fiscal year 2000 and spring 2003, the eligible populations for utility assistance, Medicaid, and SCHIP increased. For other supports, such as subsidized child care, transportation support services, and job retention and advancement services, survey responses were mixed, and though several states reported that the eligible population increased because of changes in eligibility criteria between state fiscal year 2000 and spring 2003, a substantial number of states reported that changes in eligibility criteria caused the eligible population to stay the same or decrease, as shown in figure 11. These mixed responses concerning changes in subsidized child care income eligibility criteria are similar to those we previously reported in May 2003. In that study, we surveyed subsidized child care officials directly about changes to income eligibility criteria between state fiscal year 2001 and the spring of 2003, and a majority of respondents reporting changes noted that these resulted in narrowed coverage.

See U.S. General Accounting Office, Child Care: Recent State Policy Changes Affecting the Availability of Assistance for Low-Income Families, GAO-03-588 (Washington, D.C.: May 5, 2003), p.26. figure 12. A majority of the states responding to our 50-state survey reported that provider payments for SCHIP, Medicaid, job retention and advancement services, utility assistance, and subsidized child care increased between state fiscal year 2000 and spring 2003, though some states reported that provider payments for many of these supports decreased during the same time period.

Regarding changes to copayments, most states responding to our survey reported that families’ copayments for SCHIP, Medicaid, and subsidized child care stayed the same between state fiscal year 2000 and spring 2003, while some states reported that families’ copayments increased during that time. We have classified increases in copayments as decreasing the availability of supports because as families’ copayments increase, fewer families may be able to afford to participate in the support program. (See fig. 13.) Both North Carolina and Washington officials reported in our site visits that since state fiscal year 2001, they have increased families’ copayments for subsidized child care. These findings are similar to those we previously reported that showed several states increased families’ copayments for subsidized child care between state fiscal year 2001 and the spring of 2003, resulting in decreased availability of subsidized child care.

State officials also reported a few changes to the delivery of supports since 2000 in both written responses to our 50-state survey and our five site visits, and of those who reported changes to delivery, most of the changes expanded the provision of supports to low-income families. For example, Washington officials reported that the number of family violence counselors colocated in local offices with other supports for low-income families increased between state fiscal year 2000 and the spring of 2003. Similarly, South Carolina officials responding to our survey noted that they have expanded utility assistance delivery in recent years by adding more offices and staff and by colocating staff in WIA one-stop centers. Concerning transportation support services for low-income families, officials from both North Carolina and Georgia reported that they have made efforts to expand and coordinate services in recent years. In contrast, North Carolina officials also reported during our site visit that the number of substance abuse caseworkers colocated in local offices with other supports for low-income families was reduced in 2002 because of budget cuts.

States Are Considering Changes That Would Limit Supports in the Future

During our site visits, officials expressed concern that the progress they have made in recent years to promote employment and economic independence for low-income families may erode, given the fiscal crises that states currently face. Officials in several of the states we visited explained that their support program expansions in the last several years, which were funded with TANF dollars that the states had accumulated because of falling TANF cash assistance caseloads, may be at risk. These states reported that without sufficient TANF funds to continue these efforts, some support programs face elimination. Oklahoma officials explained that their budget cuts are due not only to declining TANF reserves, but also to decreased state revenues. Although Oklahoma still has TANF reserves, officials there stated that these would probably be depleted soon and they, too, might need to cut back on services that had been expanded.

Many states added written comments to our 50-state survey that expressed concern about the future of supports. Half of the states surveyed reported that the current economic, budget, or funding situations in their states might limit the provision of supports in the near future. In addition, a small number of states reported that decisions had already been made to implement changes in supports between the summer of 2003 and the end of their state’s fiscal year 2004. These changes include reducing the number or type of services offered, changing the eligibility criteria to limit the number of families eligible for supports, decreasing payment amounts made to service providers, increasing the copayment amounts that families pay, and decreasing outreach efforts. Planned changes were particularly prevalent for Medicaid and subsidized child care programs.

Concluding Observations

Overall, supports for low-income families have undergone many changes over the past several years, and they will likely continue to evolve as federal and state governments further develop policies and respond to cyclical fiscal conditions and changes in the demand for services. With a focus on promoting employment and economic independence, states have adjusted support programs to provide not only services to families receiving TANF cash assistance but also services to other low-income families not receiving TANF cash assistance. States have used TANF funds to experiment with new support programs and have recognized that supports like subsidized child care are an increasingly important support for low-income working families. Most recently, states have faced fiscal crises and tough choices about reducing their supports for low-income families. The emphasis on moving people into work, though, remains a priority. As states continue to adjust supports for low-income families in efforts to move forward with the reforms of the last decade and improve efficiency, access, and coordination, they will also continue to face the pressures of competing priorities and fiscal constraints.

Agency Comments

We provided a draft of this report to the Department of Health and Human Services (HHS) for the department’s review and comment. HHS agreed with the findings and conclusions of the report. HHS also noted that to address the fiscal uncertainty that some states face, reauthorization of the TANF and child care programs by the Congress will enable states to know with certainty the level of federal TANF and child care resources that will be available to support low-income families over the next 5 years. HHS’s written comments appear in appendix IV. HHS and an expert on supports for low-income families also provided technical comments, which we have incorporated where appropriate.

We are sending copies of this report to the Secretary of HHS, relevant congressional committees, and others who are interested. Copies will be made available to others upon request, and this report will also be available on GAO’s Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me on (202) 512-7215. Additional GAO contacts and acknowledgments are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

We designed our study to provide information on (1) the extent to which states provide supports for low-income families, (2) how states have structured programs to support low-income families, and (3) the changes states have made to supports for low-income families in recent years. To obtain information about these objectives, we conducted a mail survey of the social services agency directors in each state and the District of Columbia, conducted in-person interviews with state officials in five states, and reviewed information available from prior GAO work and relevant federal agencies.

We conducted our work between December 2002 and November 2003, in accordance with generally accepted government auditing standards.

Survey of State Social Services Directors

To obtain information on the extent to which states provide supports for low-income families and how this has changed in the last few years, we conducted a survey of support programs in each state and the District of Columbia. We pretested our survey instrument with state social service directors in four states: Colorado, Delaware, Maryland, and Virginia. Surveys were mailed to state social service directors in April 2003, and follow-up phone calls were made to states whose surveys were not received by May 5, 2003. The survey was addressed to the state social service agency directors and instructed them to have the staff members most knowledgeable about their states’ support programs complete the survey. We received responses from the District of Columbia and all states except Michigan, providing a 98 percent response rate. We did not independently verify the information obtained through the survey. Data from the surveys were double-keyed to ensure data entry accuracy, and the information was analyzed using statistical software. The survey included questions about the provision and receipt of the states’ child care subsidies, transportation support services, utility assistance, job retention and advancement services, health assistance (including public health insurance, domestic violence programs, substance abuse treatment programs, and mental health treatment programs), and income assistance (including state tax credits, TANF cash assistance, and TANF diversion programs). The survey also included questions on recent changes in the availability and structure of these support programs. Respondents who frequently answered “don’t know” were prompted to answer questions regarding their reasons for this response. The officials reported most frequently that the reasons they did not have this information were that services varied broadly by locality and that data were not available or not complete at the state level.

State Site Visits

To obtain information about each assignment objective and, in particular, to gain a deeper understanding of how selected states have structured programs to support low-income families, we interviewed state officials in New York, North Carolina, Oklahoma, Washington, and Wisconsin. In selecting these states for our in-depth fieldwork, we included those that appeared, based on their federal and state TANF expenditures, to provide support services, and we also included states that, when viewed as a group, provide variation across characteristics such as state median income, poverty rate, population, and geographic location.

The interviews were administered using a semistructured interview guide that included questions about the structure and receipt of states’ child care subsidies, transportation support services, utility assistance, job retention and advancement services, health assistance (including public health insurance, domestic violence programs, substance abuse treatment programs, and mental health treatment programs), and income assistance (including state tax credits, TANF cash assistance, and TANF diversion programs). The survey also included questions about efforts to coordinate supports and recent changes in the availability and structure of support programs. We also encouraged state officials to share information about any additional programs that they believed were important for low-income families in their states. During our site visits we spoke with program administrators or program analysts for each type of support program as well as budget and data analysts. For example, we spoke not only with social services officials, but in most states we also spoke with transportation officials, tax officials, Medicaid officials, and so on, if these supports were provided by separate state agencies.

To ensure that our understanding of the availability and characteristics of supports for low-income families was accurate and objective, following our site visits we conducted phone interviews with advocacy organizations that either included low-income families in their membership or that work directly with low-income families in promoting issues related to supports.

Some limitations exist in any methodology that gathers information about programs undergoing change, such as those included in this review. Results presented in our report represent only the conditions present in the states we visited at the time of our site visits, between December 2002 and April 2003. Although, as we have presented, state officials reported on their expectations of program changes in the near future, we cannot comment on any actual changes that may have occurred after our fieldwork was completed. Furthermore, we cannot generalize our findings beyond the five states we visited, but we have used these data for illustrative purposes.

Review of Federal Reports

To obtain information about policies, participation rates, and other characteristics of the support programs that are administered largely at the federal level, such as food stamps, rental housing assistance, and the federal EITC, we reviewed reports and information readily available from prior GAO work and relevant federal agencies.

Reliability of Data Obtained from HHS and Treasury

To determine the completeness and accuracy of data obtained from HHS and Treasury, we reviewed related documentation and conducted tests of the data for obvious omissions and errors. In addition, we interviewed knowledgeable agency officials regarding the HHS data. We determined that the data were sufficiently reliable for use in this report.

Appendix II: Proportion of Eligible Applicants Who Receive Supports, by State and Type of Support

Tables 7 through 11 display individual state responses to survey questions regarding the extent to which eligible low-income families who apply for supports actually receive supports. These data are summarized graphically in figure 2 in the report.

Appendix III: Changes in the Number of Recipients and Availability of Supports between State FY 2000 and Spring 2003

Tables 12 through 17 provide information on changes between state fiscal year 2000 and spring 2003 that states reported in the number of support recipients and in the number or type of services provided, state outreach efforts, eligibility criteria, provider payments, and families’ copayments. The data in these tables are summarized in figures 8 through 13 in the report.

Appendix IV: Comments from the Department of Health and Human Services

Appendix V: GAO Contacts and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments

Kathy Larin, Angela Miles, Cathy Pardee, and Rachel Weber made significant contributions to this report. In addition, Alison Martin and Elsie Picyk provided technical assistance in the development and implementation of the 50-state survey, Patrick Dibattista provided writing assistance, and Marc Molino and Avy Ashery assisted with the graphics.

Related GAO Products

Welfare Reform: Information on TANF Balances. GAO-03-1094. Washington, D.C.: September 8, 2003.

Welfare Reform: Information on Changing Labor Market and State Fiscal Conditions. GAO-03-977. Washington, D.C.: July 15, 2003.

Transportation-Disadvantaged Populations: Some Coordination Efforts among Programs Providing Transportation Services, but Obstacles Persist. GAO-03-697. Washington, D.C.: June 30, 2003.

Child Care: Recent State Policy Changes Affecting the Availability of Assistance for Low-Income Families. GAO-03-588. Washington, D.C.: May 5, 2003.

Child Care: States Exercise Flexibility in Setting Reimbursement Rates and Providing Access for Low-Income Children. GAO-02-894. Washington, D.C.: September 18, 2002.

Workforce Investment Act: States and Localities Increasingly Coordinate Services for TANF Clients, but Better Information Needed on Effective Approaches. GAO-02-696. Washington, D.C.: July 3, 2002.

Welfare Reform: States Provide TANF-Funded Work Support Services to Many Low-Income Families Who Do Not Receive Cash Assistance. GAO-02-615T. Washington, D.C.: April 10, 2002.

Welfare Reform: States Provide TANF-Funded Services to Many Low- Income Families Who Do Not Receive Cash Assistance. GAO-02-564. Washington, D.C.: April 5, 2002.

Human Services Integration: Results of a GAO Cosponsored Conference on Modernizing Information Systems. GAO-02-121. Washington, D.C.: January 31, 2002.

Means-Tested Programs: Determining Financial Eligibility Is Cumbersome and Can Be Simplified. GAO-02-58. Washington, D.C.: November 2, 2001.

Welfare Reform: Challenges in Maintaining a Federal-State Fiscal Partnership. GAO-01-828. Washington, D.C.: August 10, 2001 Welfare Reform: Improving State Automated Systems Requires Coordinated Federal Effort. HEHS-00-48. Washington, D.C.: April 27, 2000.