As many states face budget shortfalls, several states are cutting their welfare programs during the trimming process. California is contemplating cutting its entire welfare/cash assistance program, while Arizona and Rhode Island have already passed budget cuts to their programs.[1]

Although the elimination of a state Temporary Assistance for Needy Families (TANF) program would not have the disastrous effect that some might expect--TANF cash benefits account for only 5 percent of total means-tested aid to poor families with children--there are other less controversial ways for states to save substantial funds within their welfare programs. Strengthening work requirements, limiting benefits to non-citizens, and clamping down on waste, fraud, and abuse within state welfare programs would generate a healthy saving of taxpayer dollars.

History of Welfare Reform

It is important to understand the basic History and success of welfare reform before states move to cut certain elements of the program.

Prior to the 1996 welfare reform, recipients spent an average of 13 years on the rolls. Roughly one child in seven was enrolled in the program. Then in 1996, the welfare reform bill put in place work requirements of 20-30 hours a week and a five-year time limit on the receipt of benefits.

State welfare agencies were transformed overnight into job placement centers. Social workers helped recipients find child care, housing, transportation, or whatever other work support was necessary to move people into jobs and self-sufficiency. Welfare caseloads shrunk by more than half from 4.4 million to 1.7 million families over a 10-year period--2.7 million fewer families receiving a welfare check. As the welfare caseload fell, employment of single mothers surged upward, and their poverty rate dropped dramatically.

Good welfare-to-work programs actually save taxpayers money by moving many people off the rolls and into employment. The 1996 reforms allow a state to keep excess federal funds if their caseloads shrink, and those monies can be spent on a variety of other related programs, thereby freeing up more state dollars for other purposes.

The savings in federal TANF dollars to a state are fungible enough to be used to pay for other services such as child care, transportation for the poor, job training, vocational education, marriage and fatherhood programming, and more. Services that states fund with their own dollars could be paid for instead with excess TANF dollars. Therefore, it makes little sense to eliminate the welfare-to-work portion of a state's welfare budget. Instead, states should strengthen welfare-to-work programs as a means of saving billions of dollars.

Need for Renewed Reform

During the first five years after welfare reform, many state welfare bureaucracies were effective in engaging able-bodied welfare recipients in work-related activities, increasing employment while decreasing caseloads, costs, and child poverty.

In the last five years, however, most state bureaucracies have reverted to the pre-reform pattern of simply mailing checks to recipients, rarely challenging those on the rolls to escape dependence and seek employment.

States should take the following steps to revive their welfare to work programs and reduce welfare costs:

1. Increase the Number of Welfare Recipients Participating in Work Activities. According to the U.S. Department of Health and Human Services, in 2006 on average only 32 percent of the able-bodied adult TANF caseload was working or preparing for work.[2] The percentage drops even further to 16 percent when child-only cases (cases in which the parent or guardian are disregarded) are added back into the denominator.

States should aggressively apply work participation requirements to all of its recipients through upfront job search, obtaining a GED, getting practical hands-on experience, or, more importantly, working in unsubsidized employment in the private sector. States that implement serious work activity programs achieve results in shrinking welfare caseloads, saving money, and moving former recipients toward independence and self-sufficiency.

2. Eliminate Fraud and Abuse among So-Called Child-Only Cases. Nationwide, 47 percent of TANF cases are "child-only" cases, in which there is allegedly no parent in the household who can be required to work or prepare for work; the TANF check is therefore provided for the "child only."

Child-only welfare cases are rife with fraud and abuse. Less than a quarter of child-only cases involve a parent who is actually disabled and unable to work. In many cases an able-bodied parent continues to reside with the child to benefit from the child-only welfare check. Often, a single mother seeks to evade TANF work rules and obligations by declaring that the child's grandmother or aunt is the caregiver. Once the mother is no longer named as the caregiver, she is exempt from all work rules. Since the aunt or grandmother is not covered in the TANF payment, she is also exempt from work rules.

Often the mother will continue to reside in the same home with her child and the "caregiver" grandmother. In these circumstances, child-only status is used as a ruse by the mother to evade her obligation to work or prepare for work and to financially support the child. As long as the parent continues to reside with a child receiving a child-only check, the parent should be required to work or prepare for work.

In other child-only cases, a single parent has placed the child with a grandmother or other relative who resides in another location. In such situations, the absent single parent should be required to prepare for work or, if already working, to pay child support to the government in recompense for the welfare benefits going to the child. Enforcing this obligation would reduce burdens on taxpayers and shrink the number of ostensibly child-only cases.

3. Eliminate the Work Exemptions for Illegal Immigrants on Welfare. A substantial portion of child-only cases involve American-born children of illegal immigrants. Most states provide TANF benefits for these children but rule the illegal immigrant parents exempt from normal work requirements. The welfare system thus discriminates against American citizens and in favor of illegal immigrants by unequally applying the work requirement.

This abuse should be ended. When an illegal immigrant applies for welfare aid for a child, the U.S. Citizenship and Immigration Service should be notified and deportation proceedings should be commenced. If the child is given welfare, the illegal immigrant parent should be subject to the same work rules as a citizen parent.

Many illegal immigrant parents work off the books; they do not tell the welfare office about their hidden earnings, as that would limit the eligibility of their children for welfare. If the illegal immigrant parents with hidden employment are required to make daily trips to the welfare office to engage in formal job search and job preparation activities, they are likely to simply take the child off welfare.

4. Add Work Requirements to Separate State and Solely State Funded Welfare Programs. TANF has a work requirement of 20-30 hours a week per able-bodied beneficiary. After the 1996 reform became law, many states created their own taxpayer-financed programs known as SSPs (Separate State Programs) and SSFs (Solely State Funded).

It is commonly viewed that this was done in order to circumvent the TANF work requirement. State legislatures should enact real work requirements in these programs along the lines of the federal requirements. Not only will this help shrink those caseloads and move people into self-sufficiency, but it stands to save millions of state budget dollars.

5. Institute Full Check Sanction Policies for Able-Bodied Adults Who Fail to Participate in Work Activities. When a recipient refuses to participate in the necessary job or job advancement activity required, states have the ability under federal law to sanction that recipient. Unfortunately, this policy is not widely used by states. Many have weak versions of sanction policies where only a small portion of the check is revoked or delayed. However, states that have instituted strong sanction policies have seen positive outcomes, including changes in behavior, drops in caseloads, and increased participation rates.[3]

6. Eliminate Welfare benefits for Non-Citizens. Productive activity is the key to assimilation of legal aliens to the U.S., and the availability of welfare benefits has greatly complicated this process.

Federal welfare law allows states to provide TANF benefits to legal aliens after they have been in the U.S. for at least five years or to those who were already in the country at the date of enactment of the law (August 22, 1996). The Congressional Research Service notes that 34 states are providing checks to legal aliens who have been in the country at least five years. Further, 26 states are using their own state dollars and some federal funds to give welfare checks to legal aliens who were in the U.S. prior to the five-year ban or who exceeded the five-year time limit.[4] Providing welfare checks to non-citizens encourages them to assimilate to a culture of poverty rather than a path of upward mobility.

Good on Two Counts

Enhancing work requirements, eliminating fraud and abuse, eliminating welfare benefits for non-citizens, and stopping the preferential treatment of illegal immigrant parents can both save states billions of dollars on their balance sheets and help people move from welfare to self sufficiency.

Katherine Bradley is Visiting Fellow in the Richard and Helen DeVos Center for Religion and Civil Society and Robert Rector is Senior Research Fellow in the Domestic Policy Studies Department at The Heritage Foundation.