Michigan, 20 years after “welfare reform”

It was 20 years ago, in 1996, that Bill Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act that transformed cash assistance from a federal entitlement program (meaning that all who meet the eligibility requirements receive a direct federal benefit) to a block grant through which states fund their own programs. The Family Independence Program (FIP) is Michigan’s cash assistance program that is funded by the block grant—Temporary Assistance for Needy Families (TANF).

Unlike Aid to Families with Dependent Children (AFDC), TANF gave states wide latitude to set their own eligibility levels and work requirements. It allowed states to use federal funds for other things besides cash assistance as long as the expenditure fit within four general purposes of TANF.

Advocates were concerned at the time that transferring cash assistance to the state level would lead to a “race to the bottom” in which states would spend as little money as possible on needy families and push them into low-wage jobs that would not help them leave poverty. Some even within the Clinton administration warned that it would actually increase poverty.

As preparations begin for the reauthorization of TANF, the national Center on Budget and Policy Priorities takes a look at the past 20 years and finds that “welfare reform” did not in fact help poor families in the way that it could have. Fewer families below the federal poverty line are receiving cash assistance and the benefits have eroded with inflation over time. Moreover, states in general have been spending only half of their TANF block grants on basic assistance, child care or work activities, with the other half going to other uses that fit within the four purposes of TANF (including supplanting state funding for popular programs with TANF funds).

Immediately before the passage of the welfare reform legislation in 1996, 184,000 Michigan families received cash assistance and 88 families received benefits for every 100 families with children in poverty. In 2014, only 39,000 families in our state received cash assistance and the cash assistance-to-poverty ratio was only 14 to 100. By May 2016, the number of families receiving cash assistance fell even further, to 22,573 families.

Between 2001 and 2011, Michigan’s unemployment and poverty rates soared and Michigan had what was sometimes referred to as a one-state recession (Michigan led the nation in unemployment for four straight years). During that time, FIP caseloads remained flat overall and even decreased at some points, showing a serious inability to respond to very real need. Currently, a family must be at HALF the federal poverty line in order to begin receiving cash assistance through FIP.

Michigan’s monthly FIP benefit is also very low: only $492 per month for a family of three without any other income. A family of three can combine earnings with cash assistance only up to $1,183 a month, with benefits decreasing as the parent earns more money, but that still only brings the family to 74% of the poverty level.

Michigan also does not spend any of its TANF block grant on child care for families who are leaving cash assistance, making it difficult for such families to become economically self-sufficient. As a result, the child care subsidy is far lower than market rates, making it difficult for struggling families to find quality child care and putting their jobs (and perhaps their children) at risk.
Michigan can do much better with the $775 million it receives each year in federal TANF funds. While conversations go on at the national level about how to make TANF more effective in responding to need, Michigan has to have that conversation as well. A few good steps would be:

• Increasing the cash assistance monthly benefit to a level that will bring families up to at least the federal poverty line if they are working full time.
• Modify eligibility rules to enable more working families living in poverty to qualify for assistance.
• Strengthen the child care subsidy to help working parents meet their children’s needs without risking losing their jobs.

— Peter Ruark