TODAY’S SAFETY NET: STRENGTHS AND SHORTCOMINGS

Kathryn Edin Bloomberg Distinguished Professor of Sociology and

Public Health Johns Hopkins University

kathy_edin@jhu.edu

SUMMARY

q  The U.S. has increased its financial commitment to fighting child poverty over the past few decades

q  More aid is now directed to low-income, working families q  Less goes to families unable to maintain employment, and

what there is often takes the form of in-kind aid q  Low-income families today experience high levels of income

instability q  Our safety net is not well designed to address this, both

because of its reliance of annual tax credits and its patchwork nature

q  Changes to the safety net should target cash assistance for our very poorest families, and increased stability

INTRODUCTION

q  The 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) ended the only cash entitlement program for poor families with children, AFDC

q  It was replaced with TANF, a block grant for which a small fractions of dollars are spent on cash assistance

q  TANF is known for imposing time limits and work requirements, but loopholes mean that states are able to circumvent these to a large degree

q  What is the state of TANF? q  “They just aren’t giving that out anymore.” – Modonna, $2.00 a

Day q  TANF declines to 3.9 million recipients (600,000 adults) in 2016 q  Down from 13.4 million recipients in 1995

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Indicator 4. Program Participation Among Those Eligible Indicators 1 and 2 compared the number of individuals who received benefits from means-tested programs to the total population. However, most of the population is not eligible for assistance targeted to families and individuals at the lowest levels of income. The size of the population that is income-eligible to receive benefits from TANF, SNAP, or SSI is important for understanding overall levels of benefit receipt. In this report the number of people who enroll in programs compared to the number of people eligible for benefits is called the participation rate. Not all eligible families and individuals participate in the programs designed to help them meet basic needs. Indicator 4 is based on administrative records for each program as well as a microsimulation model and survey data. These sources best estimate “take-up” or participation rates—the proportion of families who participate in a particular program as a percentage of those legally eligible for benefits.

TANF Figure 8 presents program participation rates for AFDC and TANF from 1981 through 2013.

Figure 8. Rates of Participation in AFDC/TANF Cash Assistance, Among Those Eligible to Participate, 1981 to 2013x

Source: Administrative data from the U.S. Department of Health and Human Services, Administration for Children and Families. Microsimulation model TRIM3 and the Current Population Survey’s Annual and Social Economic Supplement.

Since 2008 the proportion of the poorest families with children who met their states’ TANF eligibility requirements and received cash benefits from TANF in an average month has been about one-third. A historic low, 30.7 percent, received benefits in 2013. Twenty-two states set earnings limits for TANF eligibility at between 50 percent and 85 percent of the poverty guideline. An additional 24 states plus the District of Columbia set the earnings ceiling at 50 percent of the

80.2 82.2

85.7 84.3

69.2

55.8 51.8

48.1 42.0

39.0 33.0 33.9 30.7

0

25

50

75

100

1981 1985 1988 1990 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Perc

ent

Part

icip

atio

n in

AFD

C/TA

NF

TANF replaces

AFDC

2

Currently, states spend only slightly more than one-quarter of their combined federal TANF funds and the state funds they must spend to meet TANF’s “maintenance of effort” (MOE) requirement on basic assistance to meet the essential needs of families with children, and just another quarter on child care for low-income families and on activities to connect TANF families to work. They spend the rest of the funding on other types of services, including programs not aimed at improving employment opportunities for poor families (see Figure 1). TANF does not require states to report on whom they serve with the federal or state funds they shift from cash assistance to other uses, let alone what outcomes they achieved. Thus, there is no evidence that giving states this broad flexibility has improved outcomes for poor families with children.

This report examines 2014 spending data to understand spending patterns nationally and to

examine the wide variations across states in how TANF/MOE funds are used; fact sheets and the underlying spreadsheet that CBPP issued separately provide state-by-state information.1 (See Box 1 for more detail about this analysis.) The report’s key findings include:

x The share of state and federal TANF spending used for basic assistance (cash welfare

grants) has fallen significantly. At TANF’s onset, 70 percent of combined federal TANF and state MOE funds went for basic assistance for poor families. By 2014, that figure had plummeted to 26 percent. There is significant variation across states; ten states spent less than 10 percent of their TANF/MOE funds on basic assistance in 2014.

1 “State Fact Sheets: How States Have Spent Federal and State Funds Under the TANF Block Grant,” Center on Budget and Policy Priorities, updated October 2, 2015, http://www.cbpp.org/research/family-income-support/state-fact-sheets-how-states-have-spent-federal-and-state-funds-under.

INTRODUCTION II

q  Other means-tested income support has grown since the 1990s, but aid is directed to working poor families: q  SNAP eligibility is liberalized in the 2000s, mainly impacting the working

poor q  Refundable tax credits are greatly expanded q  Public health insurance is extended to the children of low-income

working families q  Result: Aid to the poor has become stratified

q  The amount of federal aid dollars flowing to poor families with children grows, but not uniformly so

q  More aid is provided to working poor families than ever before q  The amount of aid for non-working families has been reduced, and

shifted away from cash and toward in-kind sources

those in pretransfer deep poverty—by a remarkable 35 %. At the same time, thetransfers made to single-mother families in shallow poverty rose (by 73 %) as didthose in the near-poor and nonpoor groups (75 % and 80 %, respectively).10 Thesepatterns are explained by the changes in the AFDC-TANF, Food Stamp, EITC, andCTC programs. On the one hand, the drastic decline in the AFDC-TANF programmeant that although 57 % of single-mother families in private income deep povertyreceived support from the program in 1983, only 20 % did by 2004. Real benefits ofrecipients also fell. In addition, the percentage of families in deep poverty receivingFood Stamps declined from 73 % to 54 % over the same period, probably becauseAFDC recipients were automatically eligible for Food Stamps, whereas non–AFDCrecipients have to make an independent application to the program. On the other hand,the major expansion of the EITC program in the late 1980s and early 1990s providedsignificant additional support to working single-mother families above about $10,000of annual earnings. And the introduction of the CTC, which is a nonrefundable taxcredit—meaning that only families with positive tax liability are eligible, and thereforethe size of the credit grows as earnings grow, up to a point—led to additionalgovernment support for working single-mother families but little or no support to thosewith low levels of private income. The net result was another redistribution of benefits,in this case from the poorest single-mother families to those with higher incomes.

Figure 7 shows the same pattern for married-parent families, with declines in supportamong those in pretransfer deep poverty (31 % decline) and large increases for thosewith higher incomes (ranging from 75 % to 138 % increases).11 Part of the declineamong the poorest families of this type was also from the decline of the AFDC-TANFprogram because although the participation rate of married couples in 1983 was lessthan one-half of what it was for single-mother families, it was still substantial. TheAFDC program did allow two-parent families to participate in the program; in addition,

10 The percentage of single mothers in the income groups did change somewhat over the period. In 1983, thepercentage of families in the four groups (of those with private income less than 200 % of the povertythreshold) from lowest to highest were 53 %, 16 %, 16 %, and 14 %, and they had changed to 41 %, 22 %,21 %, and 16 % by 2004.

0

200

400

600

800

1,000

1,200

1983 1983 1983 19832004 2004 2004 2004

Less than 50 %

50 % to 100 %

100 % to 150 %

150 % to 200 %

Fig. 6 Monthly benefits received in 1983 and 2004 for non-elderly, nondisabled single-parent families byprivate income level. All values are in 2009 CPI-U-RS dollars

11 There are many fewer married-parent families in deep poverty: 20 % in 1983 and 17 % in 2004.

The Deserving Poor, the Family, and the U.S. Welfare System 741

Moffitt, 2015, Data from the Survey of Income and Program Participation

AID INCREASES AMONG SINGLE PARENT FAMILIES ABOVE 50% OF POVERTY; FALLS FOR THOSE BELOW

NUMEROUS RESEARCHERS FIND THAT POLICY SHIFTS HAVE LEFT THE POOREST FAMILIES BEHIND

q  Moffitt’s work (2015) shows stratification of the poor, other research yields similar conclusions (Ziliak 2015; Trisi & Sherman 2016)

q  A series of papers document the rise of “disconnected” single mothers (Blank 2007; Haskins 2004; Loprest 2011)

q  Recent research finds TANF was not responsive during the Great Recession, and deep poverty became more cyclical (Bitler & Hoynes 2016; Garfinkel, McLanahan and Wimer 2016)

q  Circa 2010, I found myself in more and more homes where families were surviving on virtually no cash

q  We wanted to see if there was evidence of this trend in the aggregate q  Earlier work shows evidence of increases in extreme poverty using a

variety of definitions of income

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Number of Children in Annual $2-a-Day Poverty in TRIM Data Adjusted for Underreporting in TANF and SSI

See www.twodollarsaday.com/blog/

0

90,000

180,000

270,000

360,000

450,000

540,000

630,000

720,000

810,000

900,000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

NumberofChildreninFemaleHeadedHouseholdsinAnnual$2-a-DayPovertyinTRIM

See www.twodollarsaday.com/blog/

0100,000200,000300,000400,000500,000600,000700,000800,000900,0001,000,0001,100,0001,200,0001,300,0001,400,000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

SNAP (Food Stamps) Households with Children Reporting No Other Source of Cash Income

CharacteristicsofSupplementalNutritionAssistanceProgramHouseholds,Incomeatcertification.FiscalYears 1995-2015.Reportsavailablebyyear:www.fns.usda/ops/supplemental-nutrition-assistance-program-snap-research.TheseHouseholdsreportnoothercountableincome.

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

1,100,000

1,200,000

1,300,000

1,400,000

Count of Homeless/Residentially Unstable Students in the U.S.

Children are counted if doubled up temporarily, in shelters or unshelteredSource: National Center for Homeless Education, Data Collection Summarieshttp://center.serve.org/nche/pr/data_comp.php

“Spikes and Dips” The Financial Diaries Project

INCOME INSTABILITY

Recent research further finds that families face significant income volatility, both during and across years, and this appears to be getting worse over time: q  Sandstorm & Huerta 2013 q  Jacobs & Hacker 2008 q  Morduch & Schneider 2017 q  Western et al 2016 Our reliance on annual refundable tax credits means the safety net is not well designed to account for this q  Halpern-Meekin et al. 2015