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Affordable Housing and Community Development Law

Child Care Policy and the Welfare Reform Act

By Peter Pitegoff and Lauren Breen

On August 22, 1996, President Clinton signed into law the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (Act), making good on his promise four years earlier to "end welfare as we know it." The Act marks a watershed of welfare reform. For the first time since the New Deal, Congress eliminated the federal guarantee of minimal cash benefits to poor families with children. The Act imposes a time limit on federal welfare benefits, reduces food stamp allotments, restricts aid to children with disabilities, and eliminates substantial benefits for legal aliens.

The Act will save an estimated $55 billion over six years, with most of the projected savings based on reductions in the food stamp program and eligibility requirements for all benefits to legal aliens. The new law gives states wide discretion in designing their own welfare programs. As a condition for federal funding, however, states must comply with certain new restrictions, including federally specified time limits and work requirements for welfare recipients. The Act’s time limits, work requirements, and stringent criteria for recipients create new administrative hurdles for states, many of which lack adequate tracking for existing programs.

The Act changes welfare law in at least seven major areas. In brief, the new law:

(1) ends the federal guarantee of cash benefits for poor families on the basis of need and replaces Aid to Families with Dependent Children (AFDC) with a new block grant program; (2) establishes stringent work requirements as a condition for receipt of cash benefits and food stamps; (3) imposes a five-year per family time limit for receipt of cash or noncash assistance using federal block grant funds; (4) narrows eligibility criteria for disability benefits for children under the Supplemental Security Income (SSI) program;(5) renders current and future legal aliens ineligible for SSI and food stamp benefits until they become U.S. citizens; (6) creates federal and state tracking systems for enforcement of child support payments; and (7) reduces aggregate food stamp funding, thereby cutting individual subsidies from 80 cents to 66 cents per meal.

The full impact of the new law on poor families is yet unknown and will depend in large part on how the states design their respective welfare programs. Although parts of the law took effect on October 1, 1996, states had until July 1, 1997 to submit their welfare plans to the federal Department of Health and Human Services to be eligible for funding under the Act. Real welfare reform can succeed, we suggest, if coupled with public policies that help generate better quality jobs and targeted support for the working poor. In this era of tremendous uncertainty, the Act guarantees two things: the federal safety net for poor families is gone, and responsibility for assistance to the poor—for better or worse—now rests with the states.

Among its other drawbacks, the 1996 Welfare Reform Act has mixed implications for child care policy. Federal funding to the states to support child care efforts will increase in the short term. Moreover, changes in the structure of that funding will give states more flexibility in administration of federal subsidies. Opportunity exists at such a fluid moment in public policy to craft new child care initiatives and to build on an already decentralized system.

The question of child care for low-income families trying to get off welfare, as well as for the working poor trying to sustain employment, is central to the welfare reform challenge. A major obstacle for obtaining and sustaining employment among the working poor is the lack of adequate and affordable child care. With the new law pushing more people from welfare to work, demand for child care services will intensify. Although federal expenditures for child care may increase in the near term, it is unclear whether funding levels now and in the future will be sufficient to meet the growing need for subsidized day care for children of the working poor.

A critical change is that federal funding for child care in the coming years is capped and may very well fall short of increasing demand. Furthermore, poor families have lost their entitlement to child care subsidies formerly associated with AFDC. As funding responsibility shifts to the states, some states will foot the cost while others will restrict eligibility and leave many poor and moderate-income families without adequate child care support.

Welfare "reform" is arguably a misnomer for this Act because it transfers the work of substantive reform to the states. With "Orwellian" flare, the very name of the Act is misleading, implying that "work opportunity" and "personal responsibility" will result from dismantling the federal welfare system. Although the Act mandates work and favors certain parenting choices, scant evidence exists that the legislation is likely to yield the desired changes in personal behavior or lead to employment opportunity and economic self-sufficiency for the working poor.

The stated goals of the Act appear disconnected from its substantive provisions. With respect to "work opportunity," the Act directs that states require adult recipients to work after two years on public assistance, and it sets overall work participation rates that each state must meet. Nothing in the Act, however, addresses the paucity of quality jobs available to those on public assistance and the obstacles faced by the working poor in sustaining employment.

Despite the Act’s emphasis on work requirements, over two-thirds of AFDC recipients are children, the adult beneficiaries are parents or relatives caring for children, and many of these adults are already working. Projected gaps in child care funding, moreover, will fall hardest on the working poor and may undermine policy efforts to promote transition from welfare to work.

The findings reported in the Act reflect an explicit aim to modify the personal behavior of welfare recipients, with particular focus on the negative consequences of out-of-wedlock births. Yet, social science research suggests that welfare programs are not among the primary reasons for out-of-wedlock births. Even if the Act were to encourage AFDC recipients to work more and bear fewer children out of wedlock, these rationales have little to do with many of the legislation’s sweeping changes.

Supporters of the Act claim that it will rescue the poor from a dependency trap and unleash new creativity in state and local policy. Critics see the Act as abandonment of the poor, predicting brutal cuts in state support and no sign of employment opportunities necessary for welfare recipients to make the transition to ongoing work. From either point of view, the new federal welfare rules present each state with the challenge of reforming its own regime for reducing and coping with poverty—all with new limits on federal funding. The result is likely to be a patchwork of policies with wide disparities among the states.

Peter Pitegoff, Professor of Law, and Lauren Breen, Clinical Instructor, are supervising attorneys in the Community Economic Development Law Clinic at the State University of New York at Buffalo.

This article is an abridged and edited version of one that originally appeared on page 113 in the Journal of Affordable Housing & Community Development Law, Winter 1997 (6:2).

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