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. 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. 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. 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 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.)