In ending the AFDC program and establishing TANF block grants to states, PRWORA built upon and expanded state-level reforms and significantly changed welfare policy for low-income families with children. The legislation ended the legal entitlement to cash assistance for eligible needy families with children and focused on helping needy families move toward economic independence. As specified in PRWORA, the goals of TANF are providing assistance to needy families so that children may be cared for in their own homes or in the homes of relatives; ending the dependence of needy parents on government benefits by promoting job preparation, work and marriage; preventing and reducing the incidence of out-of-wedlock pregnancies; and encouraging the formation and maintenance of two-parent families. PRWORA places a 5-year time limit (or less at state option) on federal cash assistance for most families—and requires states to impose federally established work and other program requirements on most adults receiving aid. Otherwise, the Act gives states broad flexibility to establish their own eligibility rules and the types of services provided. In fiscal year 2000, total TANF expenditures equaled almost $23.6 billion, more than half in federal dollars. About 5.8 million recipients received TANF cash assistance in September of that year. In addition to establishing a key TANF goal related to reducing out-of- wedlock pregnancies, the Congress, through PRWORA, established a “Bonus to Reward Decrease in Illegitimacy Ratio” so that HHS could reward states that showed the greatest reduction in out-of-wedlock births while decreasing their abortion rates. States win this bonus based on these reductions for the general population, not just the welfare population. In each of fiscal years 1999 through 2002, up to $100 million is available to the five states that achieve the largest reductions. HHS also requires states to set goals to reduce out-of-wedlock pregnancies. Each state has to submit a TANF plan that includes the state’s strategy for preventing and reducing the incidence of out-of-wedlock pregnancies. This plan must also include an explanation of how the state intends to establish numerical goals for reducing out-of-wedlock births. PRWORA also authorized the National Strategy to Prevent Teen Pregnancy and the Abstinence Education Grant Program to help meet the TANF goal of reducing out-of- wedlock births. PRWORA authorized federal expenditures of $50 million annually, beginning in fiscal year 1998, to support state efforts promoting abstinence education. PRWORA’s emphasis on reducing out-of-wedlock childbearing, among other goals, results from congressional concerns about the negative consequences of out-of-wedlock births on the mother, the child, and the family. The percentage of out-of-wedlock births among the total population has increased dramatically, from 3.8 percent in 1940 to 32.6 percent in 1994, although from 1994 to 1999 it remained around 33 percent. While there are still questions about the extent of the consequences of out- of-wedlock childbearing, research shows that children born out of wedlock are much more likely to be poor and receive welfare than children born to married parents. More specifically, among children living with single mothers, children born outside of wedlock are 1.7 times more likely to be poor than are those born to married parents. In addition, research shows that women aged 17 and under who give birth outside of marriage are more likely to go on public assistance and spend more years on assistance once enrolled. For example, over three-quarters of all unmarried teenage mothers began receiving cash benefits from the AFDC program within five years of the birth of their first child. The potential link between welfare receipt and non-marital childbearing has been of interest to policymakers and researchers for several years, particularly as the number of never-married mothers receiving welfare has increased, both in absolute numbers and as a percentage of all families on welfare. Studies have been conducted to understand what role, if any, the amount of welfare benefits plays in a woman’s decision to have a child. The results of studies examining the effects of various welfare benefit amounts on fertility and marriage have been mixed. A recent summary of this research found that a slight majority of studies have concluded that receiving welfare has led to a decrease in marriage and an increase in childbearing. In the early to mid-1990s, before federal welfare reform, some states responded to concerns about links between welfare and childbearing by seeking waivers from federal AFDC rules to implement their own policies to eliminate increased cash welfare grants for families who have additional children while on welfare. This “capping” of cash grants became known as the family cap. During the 2 years of debate over how to reform welfare and address the issue of rising rates of out-of-wedlock births, one version of the welfare legislation contained a family cap. PRWORA, the final welfare reform legislation passed in 1996, emphasized decreasing out-of- wedlock birth rates but remained silent on the family cap, leaving implementation decisions regarding family cap policy to the states. Although PRWORA devolved considerable authority to the states to design and implement their own welfare programs, HHS retains some program oversight and research responsibilities. Generally, the law narrowed HHS’ regulatory authority, as compared to its authority under AFDC. For example, PRWORA specifically limits HHS from regulating the conduct of states, except as expressly provided in the law. HHS is responsible for administering statutory penalties for states’ noncompliance with the law, and for developing and administering the high performance bonuses and Bonus to Reward Decrease in Illegitimacy Ratio established in PRWORA to reward states that achieve certain goals of the law. In addition, HHS is responsible and receives funding for conducting research on the benefits, effects, and costs of state TANF programs and for disseminating information among states and localities. This research role differs from the one HHS played in the past, when a state wishing to experiment with any departure from federal AFDC rules had to request a waiver from HHS, and HHS had to ensure that the waiver request included plans for a rigorous evaluation of the state’s experiment. In fact, some of the effectiveness studies of the family cap that we reviewed in this report were conducted as required evaluations of policies implemented under waiver of AFDC rules. Because of the increased flexibility states have under TANF, states no longer need to apply for waivers from federal rules. Twenty-three states, representing about half of the nation’s TANF caseload, have implemented a family cap policy, with most of these states providing no cash increase when a mother on welfare gives birth. States implement the family cap in one of three ways: a full family cap on benefits, a partial family cap on benefits, or a flat grant that applies to all TANF families. States implemented the family cap policy to reduce out-of- wedlock births and encourage self-sufficiency, with 15 states implementing the family cap policy under a waiver to the AFDC program and eight states implementing the policy after welfare reform. Most states with a family cap policy exempt families from the cap if special circumstances exist. For example, children born as the result of sexual assault, rape, or incest are exempt from the family cap in 18 states. Several states have additional support policies designed specifically for capped- benefit families, such as vouchers for food and diapers in lieu of the cash benefit increase they would have received without the family cap policy. Twenty-three states, covering approximately 52 percent of the TANF caseload nationwide, have adopted the family cap policy in some form. As Figure 1 shows, 19 states employ a full family cap. In these states a family’s cash grant is not increased by any amount with the birth of an additional child. For example, in Arizona, if a family of two receiving a monthly maximum grant of $275 per month had an additional child, their cash benefit would be capped at this amount. The family would not receive the $72 increase in benefits, which would have otherwise raised their grant amount to $347—the maximum grant for three person families. Two states have a family cap that is implemented as a partial increase in cash benefits with the birth of an additional child. For example, one state with the partial family cap increases by 50 percent the cash benefits the family would have received without the family cap for only the first child born to a family after they enrolled in assistance; the benefit cap becomes a full family cap for any subsequent children born into the family. Two other states use a flat grant to provide cash benefits to families. This policy creates an implicit benefit cap because cash benefits are the same for all families on assistance regardless of family size or the birth of an additional child. For example, in Wisconsin families receive either $628 or $673 per month. Their benefit amount depends on the work program component to which they have been assigned, rather than on family size. States implemented the family cap policies before and after federal welfare reform, often with the goals of decreasing out-of-wedlock births and encouraging self-sufficiency. For example, one state implemented the family cap based on the goal of encouraging parents to plan for security and assume responsibility for their children. The family cap policy developed out of state-based initiatives, starting with New Jersey in 1992. Fifteen states implemented the family cap as a waiver to the AFDC program. Eight states implemented the family cap policy following the passage of PRWORA as a part of their TANF state plans. In their policies, all states with a full or partial family cap include exemptions to the family cap for families in specific circumstances. Most states have the same exemptions, as shown in figure 2. For example, to account for a pregnancy that occurred before the family started receiving assistance, 20 states exempt families with children born less than 10 months after the family’s initial receipt of benefits. In addition, states commonly exempt children not living with their biological parents. This exemption typically occurs when the custody of the child is legally transferred or the parent is deceased, incarcerated or incapacitated. Most states exempt families who leave assistance for a specified period of time, give birth to a child, and return to the rolls, that is, they become pregnant “between spells.” Some state officials we spoke with expressed concern about this exemption because of the potential that families are circumventing the family cap on benefits by leaving assistance and reapplying once a new child is born. Six states have other exemptions to the family cap. For example, one state exempts children conceived as a result of the failure of certain contraceptive methods. Another state exempts children born with substantial physical or mental disabilities. All 23 states with the family cap policy have procedures in place to enroll eligible children in the Medicaid and food stamps programs even when their families’ benefits have been capped. Many states’ documents— including policy manuals, codes of regulations, personal responsibility agreements that clients must sign, and TANF program brochures—explain to families and caseworkers the availability of these services to newborn children. In addition to written notification, one state told us they have an outreach worker who is responsible for checking the Medicaid eligibility of all children whose families are receiving TANF. All states told us that when the birth of a child is reported to the TANF caseworker, there are procedures in place to enroll the child in Medicaid and food stamps. One state official expressed concern, however, that families whose benefits might be affected by the family cap may not report a birth to a TANF caseworker, making it less likely that the family would enroll the child in other support services. Some states have tailored other welfare-related policies for families with capped benefits. Almost all states in the nation have policies that ignore a portion of a family’s earned income when determining the family’s eligibility for benefits and the amount of benefits they will receive. These policies increase the amount of cash income for the households with a working adult. Three of the states with a family cap policy ignore an even larger portion of a family’s income after the family’s benefits are capped. In addition, some states make exceptions to their child support policies for capped-benefit families. Typically, states keep any child support collected on behalf of TANF families in order to reimburse the government for its welfare costs. Four states provide a portion, or the entire amount, of any child support collected for a capped-benefit family to the family instead of retaining it as they do for non-capped families. Four states with a family cap on benefits give families vouchers equal to the traditional cash benefit increase they would have received in the absence of a cap. These vouchers can be used to purchase basic goods and services for the newborn child, such as diapers and formula, from participating vendors, although data on the extent to which families used these vouchers were not readily available. Conditions under which states provide the vouchers vary. For example, one state placed a time limit of three years on the voucher, while another state provides a voucher only if the family requests one each month. Another state provides alternative resources by offering a cash payment to a third party in the amount of the incremental increase that would have been paid on behalf of the child to purchase goods or services for the newborn child. The third party can be a non-profit organization offering such goods and services, a family member not included in the assistance unit, or a caseworker not directly connected to the family receiving the benefit. During an average month in 2000, about 108,000 families received less in cash assistance than they would have if their benefits had not been capped. Capped-benefit families represented about 9 percent of the average monthly TANF caseload in the 20 states that provided us data. The proportion of the monthly caseload of families whose benefits were affected by the cap varied from 1 to 20 percent across these states. The actual effect of the family cap on cash benefits is difficult to determine because cash benefit levels are influenced by other factors, including family earnings and child support. We estimated, however, that in an average month, families whose benefits were affected by the cap due to the birth of an additional child received about 20 percent less than they would have received in the absence of a cap; we based this estimation on two person families that had an additional child while on welfare.Additional data show that 12 percent of families had more children after their TANF benefits were already affected by the family cap. The percentage increase in benefits not received by these particular families is likely to be greater than our estimate of 20 percent. Finally, families with capped benefits receive more in food stamps than families of a comparable size whose benefits are not capped. Based on responses of 20 states with family cap policies, about 108,000 families receiving TANF had their benefits affected by the family cap, in an average month during 2000. This number represented about 9 percent of the total number of TANF families in these 20 states, and is a minimum number of families who may have been affected during 2000. Table 1 shows the number of families whose benefits were affected by the family cap in an average month by state and the percentage of all TANF families whose benefits were affected by the family cap in each state. The percentage affected by the family cap varies among the states, ranging from about 1 percent in South Carolina and Tennessee to 20 percent in Illinois. These variations could be caused by differences in state’ various exemption policies and practices, or whether states have their own time- limits for cash assistance. Variations could also be due to differences in when states implemented the family cap. For example, because California only recently implemented a family cap policy, the number of TANF families with benefits affected by the cap is likely to increase, according to California state officials. In general, families that have had their benefits capped are larger than families whose benefits were not limited by the cap. Three or four person families make up about two-thirds of families whose benefits are affected by a cap. Such families might consist, for example, of a parent with two or three children, one of whom does not receive TANF benefits because of the cap. Families with five members or more make up a little over one- quarter of families whose benefits are affected by a cap. Two person families and one person families (child-only cases) make up the remaining families whose benefits are affected by a cap. Table 2 below gives family size information for capped-benefit families by state. We estimated that in a given month, the amount of cash assistance received by families whose benefits had been capped was, on average, about 20 percent less than it would have been in the absence of a cap. We estimated the cap’s effect on benefits because states were unable to report the actual amount by which families’ benefits changed as a result of the cap. Several factors, including family earnings and other resources, such as receipt of child support, influence the amount of cash benefits a family receives. Our estimate represented an average dollar amount of approximately $100 per month—representing a range from $20 in Wyoming to $121 in California. These estimates may somewhat overstate the amount by which families benefits are affected because the estimates are based upon the maximum cash benefit a TANF family is eligible to receive, which is generally greater than the average amount of cash assistance families actually receive. Overall, the average level of cash assistance for three person families whose benefits were affected by the family cap was $394 per month in federal fiscal year 2000. Depending on the state and based on maximum benefit levels, we estimated that families received between six percent (in Wyoming) to 26 percent (in Illinois) less in cash assistance due to the family cap. Table 3 shows our calculations of the amount not received by three person capped-benefit families across family cap states. For more information, see table 5 in appendix I. While we were able to estimate how the family cap affects the monthly cash benefit amount for a family, the family’s income may be affected in other ways. Consequently, the cap’s total effect on household income is difficult to determine. To some extent, the family cap’s financial impact is offset by an increase in food stamp benefits. Because food stamp benefit calculations take into account unearned income (i.e., TANF cash assistance) and family size, capped-benefit families would receive more in monthly food stamp benefits than they would if they were not capped. In addition, a capped-benefit family may receive more child support or retain more of its earnings than it would without the cap, due to the state level policies specific to capped-benefit families discussed previously. However, because the majority of TANF families do not engage in work activities or receive child support, the effect of the cap on their income is unlikely to be offset by the benefits these policies offer. While the majority of families receiving TANF have not had additional children after their benefits were limited by the cap, about 12 percent of capped-benefit families did. These families had more than one child whose benefits were affected by the cap. For these families, the estimated cash increase not received is likely to be greater than our average estimate of 20 percent. For example, because of the family cap, a TANF recipient who gives birth to two additional children while on TANF would receive from 21 percent in North Carolina to 38 percent in Oklahoma less in cash assistance. As states have varying cash benefit amounts, the actual dollar amount that would not have been received ranges from $48 a month in Mississippi to $241 in California. Due to limitations of the existing research, we cannot conclude that family cap policies reduce the incidence of out-of-wedlock births, affect the number of abortions, or change the size of the TANF caseload. There are several major difficulties in obtaining conclusive evidence on the family cap. These include appropriately measuring the number of out-of-wedlock births and separating the impact of the family cap from the impact of other major policy and program changes that took place simultaneously and from the impact of broader social, cultural, or economic changes. We identified five studies that examined the relationship between the family cap and the incidence of out-of-wedlock births. Due to their methodological limitations, none of these studies can be used to cite conclusive evidence about the effect of the family cap on out-of-wedlock births. The studies we reviewed that examined the relationship between the family cap, abortions, and caseloads also had limitations that precluded conclusions about the effect of the family cap. (See a description of the studies and their limitations in app. II). One of the major difficulties in studying the effect of the family cap is that major welfare policy changes at the state and federal levels have occurred over the past decade. These changes make it difficult to distinguish the effect of the family cap (or any other welfare policy) from the effect of other reforms, or from the impact of major changes in messages being sent to welfare recipients about self-sufficiency through welfare reform. For example, PRWORA placed more emphasis on work requirements to encourage recipients to be self-sufficient and also allowed states to have more flexibility in implementing policies such as family caps, which also encourage self-sufficiency through the goal of reducing out-of-wedlock births. In such cases, it would be difficult to separate the combined effects of the various policies into the individual effects of each on the number of out-of-wedlock births. Another major difficulty with studying the effects of family caps on the number of out-of-wedlock births is separating the family caps’ effect from societal changes occurring between 1991 and 1997. Specifically, the birth rate among teens declined and the birth rate for second children declined among women ages 15 to 24. The period in which these declining birth rates occurred overlapped with the period in which family caps were implemented. Since this overall decline began before any family caps were in effect, we can safely assume that this trend began independent of family cap implementation. Therefore, it is difficult to disentangle the true effect that the family cap policies may have had on declining birth rates from the effect of these national declines. Another barrier to understanding the effects of the family cap is the limited availability of needed information from national data sets for studying specific welfare policies relating to out-of-wedlock births. HHS only recently began collecting data on out-of-wedlock births for welfare recipients. This data will be helpful for analyzing state-level effects of particular welfare policies, such as the family cap. None of the five studies we reviewed was conducted in a way that would permit us to draw firm conclusions about the effect of the family cap on childbearing. Four of the studies we reviewed could not isolate the effect of the family cap from the effects of other welfare reform policies and had other shortcomings. For example, in one study, the participants did not understand whether their benefits were affected by the family cap. The fifth study was more successful at isolating the effects of the family caps, but had other limitations. While this fifth study was strongest in terms of the methods it used to examine the effects of the family cap, it was limited by the way it measured the occurrence of non-marital births. This study’s strengths included controlling for the effects of other factors—broader social and economic changes, differences across states over time, and other welfare reforms implemented at, or around, the same time as the family cap. However, this study evaluated the effect of the family cap by using a ratio of non-marital births to all births (marital and non-marital). Using this ratio is problematic because even if the number of non-marital births remained constant, the ratio could still decrease or increase because of changes in the number of marital births. For example, the ratio would decrease if marital births increased and non-marital births remained constant. Because of this limitation, the study cannot conclusively show the effect of the family cap on the number of non-marital births. As was the case with studies examining non-marital births, other studies we reviewed were not conducted in a way that would permit us to draw firm conclusions about the effect of the family caps on abortions, family planning, or the TANF caseload. The studies we reviewed had various limitations. The most common were limitations involving the inadequate measurement of family caps and the inability to isolate the effect of the family cap from other concurrent welfare reforms. We did not identify any studies that evaluated the impact of the family cap on poverty. While HHS’ research efforts cover a broad range of issues, including some related to reducing out-of-wedlock pregnancies, most of the studies have focused on TANF’s employment-related goal. Since the enactment of PROWRA, HHS has used its research authority and resources to encourage and support evaluations of various welfare program approaches and features. As described in its Third Annual Report to the Congress on the TANF program, August 2000, HHS’ research agenda has two main goals: (1) to increase the probability of success of welfare reform by providing timely, reliable data to inform policy and program design, especially at the state and local level where decision making has devolved; and (2) to inform the nation of policies chosen and their effects on children, families, communities and social well-being. Within this research agenda, as shown in table 4, in fiscal year 2000, HHS spent about $26 million on research and technical assistance projects. These projects include studies on the relative effectiveness of various approaches to moving welfare recipients into employment, the well-being of children of parents enrolled in welfare- to-work programs, and the effectiveness of job retention strategies for welfare recipients who become employed. Although most of the studies and research focus on employment-related issues, HHS does support some research related to the TANF goal of reducing out-of-wedlock pregnancies. For example, some of the evaluations begun under waivers as well as a few studies of families who have left welfare have gathered some information relating to the family cap and out-of-wedlock pregnancies among welfare recipients. In addition, HHS has been involved with a significant initiative aimed at reducing teenage pregnancy, has funded research projects related to helping young adults avoid premature sexual activity and unintended pregnancies, and has just recently begun a project involving interventions for unwed parents at the time of their child’s birth. HHS is also involved in a major on-going evaluation of abstinence education programs designed to strengthen the research base and public knowledge about promoting abstinence among youth and the benefits of various approaches. Moreover, in fiscal year 2000, HHS has taken steps to increase the availability of information related to out-of-wedlock childbearing activities by requiring states to include information on their strategies for reducing out-of-wedlock pregnancies in their TANF annual reports. HHS also requires states to report data on the incidence of out-of-wedlock births among the TANF caseload. This new information may help HHS, states, and researchers share information on promising approaches to reducing out-of-wedlock pregnancies and contribute to a state’s ability to qualify for the Bonus to Reward Decrease in Illegitimacy Ratio. Even with the research under way and the steps HHS has recently taken, additional efforts may prove useful in, for example, improving data availability, conducting implementation studies, and striving to improve effectiveness studies. In our recently completed comprehensive review of the data available to assess states’ progress in meeting TANF’s goals, we found limited information regarding the goal of reducing out-of-wedlock pregnancies, particularly in comparison to the more widely available information related to helping welfare parents reduce their dependence on welfare through job preparation and employment. In some ways this is not surprising, given that states have focused their efforts on helping welfare recipients find employment and become economically independent. One expert said that states have focused their efforts on employment because much more is known about effective strategies for moving welfare recipients into work than is known about strategies for reducing births. Another expert believes that states have focused more on employment goals because more consensus exists about the role of government in helping welfare recipients become employed than about its role in influencing people’s childbearing decisions. HHS could play an important role in encouraging and supporting additional research in this area to support states’ efforts in meeting TANF goals. In the new and evolving welfare environment created by PRWORA, states have tremendous flexibility to design and implement strategies to meet four key TANF goals: providing assistance to needy families; ending dependence on government aid through job preparation, employment, and marriage; preventing and reducing out-of-wedlock pregnancies; and promoting two-parent families. States have moved ahead with strategies designed to move welfare recipients into employment, an area where much research exists providing useful information about what works best and for whom. While states have been much less active in implementing strategies to reduce out-of-wedlock pregnancies, the use of family cap policies does show interest among states in meeting this congressionally- established goal. Yet, policymakers and program administrators have limited information available to help in understanding the effectiveness of the family cap or to aid in devising and implementing other strategies that may prove effective in reducing out-of-wedlock births. While overcoming the inherent difficulties in assessing the effectiveness of family cap policies and other approaches in the new welfare environment may be challenging, taking steps to improve data availability, conduct implementation studies, and improve effectiveness studies would be useful. State, local, and federal program administrators and policymakers would be well served by a stronger research base upon which to draw information on a range of effective strategies for reducing out-of-wedlock pregnancies. Even though the new welfare system is highly decentralized, PRWORA explicitly charged HHS with conducting research on state TANF programs, and HHS has played an important role in identifying and disseminating information on effective strategies for meeting welfare reform goals, with a particular focus on TANF’s employment-related goal. HHS also has supported some research that addresses effective strategies for accomplishing the goal of reducing out-of-wedlock pregnancies. In addition, HHS has taken steps to ensure that more data will be available from states on births to welfare recipients and on strategies that states have implemented to reduce out-of-wedlock pregnancies. Still, if HHS strengthened its efforts in this area and improved the research base, it could enhance states’ efforts to address this TANF goal. Moreover, if HHS submits information on its research agenda and efforts with estimated resource needs to the Congress, the Congress will have useful information to use as it considers TANF reauthorization and related research needs. We recommend that the Secretary of HHS review its research agenda and, if appropriate, take steps to identify, encourage, and support additional studies that would increase the availability of information on how best to prevent and reduce out-of-wedlock pregnancies and more fully support the goals of TANF. This additional work could include improving the availability of data to support studies, working with states to identify and disseminate information on relevant promising practices, and supporting rigorous evaluation studies. Having additional research in this area would provide important information to administrators and policymakers and support the Congress’ efforts to reward states for strategies that succeed in reducing out-of-wedlock births. We also recommend that HHS provide its research agenda, with estimated resource needs, to the Congress for its use as it considers TANF reauthorization, including decisions about the role of HHS in conducting research and the resources HHS needs to fulfill that role. This will help to ensure that the key research and technical assistance needs of this $16.5 billion federal program are met. We provided HHS with an opportunity to comment on the report. HHS agreed with our conclusion that available research does not address the effect of family cap policies and said that the report addressed an important topic. A copy of HHS’ response is in appendix III. We also incorporated technical comments we received from HHS where appropriate. Regarding our recommendation about the need for more research on effective strategies for reducing out-of-wedlock births, HHS agreed that more research is needed, but noted that additional detail in the report on the methodological limitations of existing research would be helpful for understanding the significance of the existing studies and for individuals thinking about additional research. We believe the level of discussion on limitations in the report, including the appendix, is sufficient to address the focus of this report—what conclusions can be drawn about the effectiveness of the family cap from existing research--and to point to ways to improve studies on the family cap. Regarding our second recommendation that HHS provide its research agenda to the Congress for its use as it considers TANF reauthorization, HHS noted that it already has in place several mechanisms for keeping the Congress informed about its welfare research activities. These include annual reports to the Congress on its study of the outcomes of welfare reform with brief descriptions of welfare outcomes projects planned for funding each year, a chapter describing its research agenda in the annual TANF report to the Congress, and briefings to interested congressional staff upon request. We are aware of these information sources and believe they provide important information to the Congress. However, we continue to believe that it would be useful for HHS to provide its research agenda to the key authorizing committees for the TANF program, with estimated resource needs, in a form designed specifically to aid the Congress in TANF reauthorization would serve a useful purpose. HHS also expressed concern that readers might get an unnecessarily narrow view of the strategies available to address the goal of reducing out- of-wedlock pregnancies because the report focuses solely on family cap policies and research. As HHS noted, the TANF goal of preventing and reducing out-of-wedlock pregnancies addresses the overall population, not just welfare families, and only a modest portion of out-of-wedlock births is attributable to the welfare population. Yet, family cap policies focus by definition on welfare families. We agree that this is an important point and that other strategies can address the goal of reducing out-of-wedlock pregnancies, such as the National Campaign to Prevent Teen Pregnancy, which we mentioned in the report. While a comprehensive review of the research related to strategies to reduce out-of-wedlock pregnancies was not the focus of this report, we did look beyond research on the family cap to assess whether HHS’ welfare-related research agenda supported the broad goal of preventing and reducing out-of-wedlock pregnancies and concluded that more research on strategies for addressing this goal, including those beyond the family cap, could play an important role in encouraging states efforts in this area. As suggested by HHS, we added a reference to the recently completed review of evaluation research related to reducing teen pregnancy. We also provided the draft report to two experts on welfare research, who agreed with our findings and overall conclusions. They also provided technical comments that we incorporated as appropriate. As agreed with your offices, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after its issue date. At that time, we will send copies of this report to the Honorable Max Baucus, Chairman, and the Honorable Charles Grassley, Ranking Minority Member, Senate Committee on Finance; the Honorable Bill Thomas, Chairman, House Committee on Ways and Means; the Honorable Wally Herger, Chairman, and Honorable Benjamin Cardin, Ranking Minority Member, Subcommittee on Human Resources, House Committee on Ways and Means; the Honorable Tommy Thompson, Secretary of Health and Human Services; appropriate congressional committees; and other interested parties. We will also make copies available upon request. If you have any questions about this report, please contact me on (202) 512-7215. Other GAO contacts and staff acknowledgments are listed in appendix IV. This appendix provides more detail on how we (1) assessed the number of families whose benefits were affected by the family cap in an average month and the amount of cash benefits not received by capped-benefit families and (2) identified studies on the impact of the family cap and analyzed the content of those studies. We conducted our work between July 2000 and September 2001, in accordance with generally accepted government auditing standards. To determine the number of families whose benefits were affected by the family cap in an average month, we requested federal fiscal year 2000 data from TANF programs in all states with family cap policies. Twenty states provided us with the information that was used to determine the average monthly number of families in 2000 whose benefits were affected by the family cap in these states. Not all states were able to give us this information by family size. We requested the same caseload data for all TANF families in the family cap states. In order to estimate the monthly amount of cash assistance capped-benefit families did not receive due to the family cap, we used information provided by the Congressional Research Service. We estimated how much less families would receive because of the family cap policy by calculating the difference between the maximum benefit for two and three person families. (See table 5.) To determine the average monthly cash benefit for three person capped- benefit families, we asked states for the average monthly cash benefit level for families affected by the cap by family size. We then weighted this average number for three person families by the three person family cap caseload in each state. Not all states were able to provide benefit levels for families affected by the cap, nor were all states able to provide information by family size. Many states were able to give us estimates based on the twelve months of state TANF data from federal fiscal year 2000, however some were only able to give us data for state fiscal year 2000. Most states collected data on the universe or population to respond to our request, while a few states used a sampling methodology. We collected, reviewed, and analyzed information from available published and unpublished research on the effect of the family cap. To identify the literature, we followed three procedures: 1. interviewing experts to find out what studies were completed or in the process of being completed on the impact of the family cap; 2. conducting library and internet searches; and 3. reviewing bibliographies of studies that focused on family cap issues. Our final list consisted of nine studies, as listed in the bibliography, which evaluated the impact of the family cap on the incidence of out of wedlock- births and abortions and the impact on TANF caseloads. We were unable to identify any studies evaluating the effect of the family cap on poverty. For the studies in our review, we recorded the quantitative results, summarized the methodologies used, and summarized the authors’ conclusions about the effect of the family cap. We used social science research principles to assess the methodological adequacy of these studies, and to assess the degree to which the study was able to isolate the effect of the family cap from other, concurrent welfare reform initiatives. At least two social scientists or statisticians with specialized training in evaluation research methodology reviewed each study. Conclusions in this report are based on our assessment of the evidence presented in these studies. We sent the list of research articles and summaries of our reviews of the studies to several experts who have conducted, or been involved in summarizing, extensive research in the field of welfare reform to confirm the comprehensiveness of our list of articles and the thoroughness of our reviews. We also conducted a second search in June 2001 to ensure that no new research articles or reviews had been published since our original search. We identified one new article on the effect of the family cap and other variables on child maltreatment. We did not have adequate time to incorporate an analysis of this study into our final report. Appendix II: Studies on Family Cap Effect “Lead” or “advertising” effects refer to the idea that welfare recipients may hear about, and react to, potential welfare policy changes that are advertised through popular media but have not yet actually taken effect. “Lead” or “advertising” effects refer to the idea that welfare recipients may hear about, and react to, potential welfare policy changes that are advertised through popular media but have not yet actually taken effect. In addition to those named above, the following individuals made important contributions to this report: Sara Schibanoff, Mary Abdella, and Shannah Wallace. Wendy Ahmed, Doug Sloane, Rudy Chatlos, Laura Shumay, Jim Wright, and Patrick DiBattista also provided key technical assistance. Blank, Rebecca M. What Causes Public Assistance Caseloads to Grow? Cambridge, Mass.: National Bureau of Economic Research, December 1997. http://www.nber.org/papers/w6343 (cited Oct. 17, 2000). Camasso, Michael J. and others. A Final Report on the Impact of New Jersey’s Family Development Program: Experimental-Control Group Analysis. Trenton, N.J.: New Jersey Department of Human Services, Oct. 1998. Camasso, Michael J. and others. A Final Report on the Impact of New Jersey’s Family Development Program: Results from a Pre-Post Analysis of AFDC Case Heads from 1990-1996. Trenton, N.J.: New Jersey Department of Human Services, July 1998. Council of Economic Advisers. The Effects of Welfare Policy and the Economic Expansion on Welfare Caseloads: An Update. Washington, D.C., 1999. Horvath-Rose, Ann and H. Elizabeth Peters. “Welfare Waivers and Nonmarital Childbearing,” For Better and For Worse: Welfare Reform and the Well-Being of Children and Families. Edited by Greg Duncan and P. Lindsay Chase-Lansdale. New York: Russell Sage, forthcoming 2001. Mach, Traci. Measuring the Impact of Family Caps on Childbearing Decisions. Albany, N.Y.: University at Albany-SUNY Working Paper 00-04 (cited Mar. 2001). Moffitt, Robert A. The Effect of Pre-PRWORA Waivers on AFDC Caseloads and Female Earnings, Income and Labor Force Behavior. Baltimore, Md.: Johns Hopkins University, 1999. Stapleton, David, Gina Livermore and Adam Tucker (The Lewin Group). Determinants of AFDC Caseload Growth. Washington, D.C.: the Department of Health and Human Services, the Office of the Assistant Secretary for Planning and Evaluation, July 1997. Turturro, Carolyn, Brent Benda, and Howard Turney. Arkansas Welfare Waiver Demonstration Project: Final Report. Little Rock, Ark.: The University of Arkansas, 1997. Welfare Reform: Moving Hard-to-Employ Recipients Into the Workforce (GAO-01-368, Mar. 15, 2001). Welfare Reform: Progress in Meeting Work-Focused TANF Goals (GAO- 01-522T, Mar. 15, 2001). Welfare Reform: Data Available to Assess TANF’s Progress (GAO-01-298, Feb. 28, 2001). Welfare Reform: Work-Site-Based Activities Can Play an Important Role in TANF Programs (GAO/HEHS-00-122, July 28, 2000). Welfare Reform: Improving State Automated Systems Requires Coordinated Federal Effort (GAO/HEHS-00-48, Apr. 27, 2000). Welfare Reform: State Sanction Policies and Number of Families Affected (GAO/HEHS-00-44, Mar. 31, 2000). Welfare Reform: Assessing the Effectiveness of Various Welfare-to-Work Approaches (GAO/HEHS-99-179, Sep. 7, 1999). Welfare Reform: Information on Former Recipients’ Status (GAO/HEHS- 99-48, Apr. 28, 1999). Welfare Reform: States’ Experiences in Providing Employment Assistance to TANF Clients (GAO/HEHS-99-22, Feb. 26, 1999). Welfare Reform: Status of Awards and Selected States’ Use of Welfare-to- Work Grants (GAO/HEHS-99-40, Feb. 5, 1999). Welfare Reform: Child Support an Uncertain Income Supplement for Families Leaving Welfare (GAO/HEHS-98-168, Aug. 3, 1998). Welfare Reform: States Are Restructuring Programs to Reduce Welfare Dependence (GAO/HEHS-98-109, June 18, 1998). Welfare Reform: HHS’ Progress in Implementing Its Responsibilities (HEHS-98-44, Feb. 2, 1998).

Summary: To reduce out-of-wedlock pregnancies among welfare recipients, some states have imposed family caps on welfare benefits. One factor that determines the amount of cash benefits a family receives is the family's size--larger families receive more benefits. In states with a family cap policy, however, no additional cash benefits are provided with the birth of another. Twenty-three states have implemented some variation of a family cap, breaking the traditional link between a family's size and the amount of its monthly welfare check. Generally, these states implemented family cap policies as part of their welfare reforms to reduce out-of-wedlock births and to encourage self-sufficiency. During an average month in 2000, 20 of the 23 family cap states reported that about 108,000 families received less in cash benefits than they would have in the absence of state-imposed family cap policies. In an average month, about nine percent of welfare families in these states had their benefits affected by the family cap. A family's welfare benefits are affected by several factors, including earnings and receipt of child support. Therefore, states were unable to report the precise effect of the family cap on benefits. Because of limitations of the existing research, GAO cannot conclude that family cap policies reduce the incidence of out-of-wedlock births, affect the number of abortions, or change the size of the welfare caseload.