by John Pawasarat, Employment and Training Institute, University of Wisconsin- Milwaukee, April 1996
This study was requested by the Milwaukee County Department of Social Services to help predict which families, including employed families receiving small AFDC payments, would likely leave aid prior to the implementation of "W-2." The full report is now available online.
The explicit goal of current state welfare reform initiatives is to dramatically reduce AFDC (Aid to Families with Dependent Children) caseloads prior to implementation of "W-2," the state's new welfare initiative. Much of the current and proposed welfare reform is based on a fairly simple caseload reduction model which uses a very strict work requirement in combination with benefit reductions to reduce AFDC costs, caseloads, and new applications for assistance, and to slow in-migration. This paper attempts to assess the impact of these policies on families in Milwaukee County who are currently receiving AFDC and to estimate the residual population who will likely be subject to W-2. The December 1995 Milwaukee County caseload data is used to examine the characteristics of the population and to assess the financial impact of regulatory and policy changes over time.
Summary of Projected Caseload Reductions and Welfare Savings in Milwaukee County
State officials are requiring Milwaukee County to significantly reduce this year's AFDC caseloads by 20 percent as of September 1, 1996, if the county is to be allowed to be the presumptive deliverer of services under W-2. It is estimated that much of the required reduction will occur from more severe sanctioning policies which will result in closure of AFDC cases and strict enforcement of the current work requirement for other AFDC cases. As a result of these policies, caseloads are estimated to drop dramatically prior to W-2. Sanctioned cases are estimated to close at the rate of 5 percent per month over time. Enforcement of the new work requirements will likely result in case closures for cases with employed caseheads and other cases with low grant amounts reducing these cases an estimated 5 percent per month. Case closures are most likely for these groups because they usually do not include young children and have lower AFDC payments per month. Additional caseload reductions due to fewer case openings and increased numbers of case closures are estimated for the balance of the population, amounting to a one-half percent per month decline.
The impact of W-2 legislation and required caseload reductions are estimated using caseload data on Milwaukee County's December 1995 AFDC population. The following populations are estimated to account for much of the caseload decline:
1. Children of disabled parents will be removed from AFDC and W-2 and have their benefits cut by 60 percent, saving $10 million annually. An estimated 3,652 cases have a disabled/SSI casehead. These cases have 8,590 dependent children and would have their benefits reduced from an average of $382 per month to $154 per month.
2. Relative foster care families will be removed from AFDC and W-2 and most cases will experience benefit reductions which will save $1 million annually. Currently, there are 2,396 AFDC cases where the parents are absent and care is provided by another relative. If eligible for assistance under new kinship care, sixty-two percent of these cases who care for one child would have a 20 percent reduction in payments. At the same time 323 cases who care for three or more children would experience increased payments if the family circumstances met the new eligibility criteria.
3. Imposing stricter financial sanctions for refusal to participate in work or child- support programs will likely reduce the caseload by at least 5,000 to 6,000 cases in the next year. These case reductions will consist largely of closing current cases and denying aid to new cases refusing to participate in work programs or cooperate with child support enforcement. Currently, 4,400 cases are in sanction status. Under prior policies these caseheads were sanctioned $140 to $190 per month, but their children continue to receive AFDC assistance. Under new rules now in place, the cases will be closed for the casehead's failure to participate or cooperate. If the current 4,400 cases in sanction status are closed, this will result in an annual savings of $22 million in AFDC, $13 million in food stamps and $21 million in medical assistance payments.
4. The cap on assistance payments regardless of family size will effectively reduce benefits by as much as half to the largest families. Almost all families with more than 2 children will experience substantial benefit reductions with the largest families seeing reductions of up to $6,000 per year. Capping benefit levels at $555 or $517 per month and requiring parents to make co-payments for health insurance and day care costs will result in substantial savings mainly at the expense of larger families, where benefit levels will be cut as much as half after co-payments. For example, a mother with four children will see a one-third reduction from an average monthly grant of $710 to $468 after co-payments. New AFDC cases will likely decline sharply as strict work requirements are made a prerequisite for receipt of public assistance. In-migration now at 20 percent for recent AFDC recipients will likely drop as well. Grant reduction policies will reduce benefits by $12.4 million annually in families with three or more children.
5. Most working families on AFDC will be removed from public assistance. AFDC cases currently working or with recent work experience are likely to leave AFDC prior to the start of W-2 as a result of the imposition of strict work requirements. Most of these families (70 percent) have no small children and receive average AFDC payments of $222 while working. The annual savings of $22 million in AFDC and food stamp and $20 million in medical assistance payments would be generated based on current caseloads and would in large part occur prior to W-2 under new Pay for Performance requirements. Few of these working families are expected to remain on AFDC into the start of W-2.
6. If the welfare reform policies cited above are implemented as proposed, the AFDC/W-2 population will amount to less than one-half of the current caseload. The residual AFDC population remaining for the W-2 experiment will likely consist of 14,000 to 17,000 cases, including primarily women with less education and who have small children and larger families. Over three-fourths of the children under 2 years of age currently receiving AFDC and two-thirds of the 2 to 5-year olds are likely to be in this residual W-2 population. These cases are expected to be most difficult to place in private employment.