Statement of Joel Potts, TANF Policy Administrator,
Ohio Department of Job and Family Services
Testimony Before the Subcommittee on Human Resources
of the House Committee on Ways and Means
Hearing on "Rainy Day" and Other Special TANF Funds
April 26, 2001
Good morning, my name is Joel Potts and I am the TANF Policy Administrator for the Ohio Department of Job and Family Services. I am here today to discuss TANF funding issues and the unspent reserves in Ohio.
Ohio's 88 counties and the state have successfully implemented the Ohio Works First welfare reform program. The unprecedented flexibility and approach afforded the agency by Congress in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 has allowed Ohio to move forward with fundamental reform in the welfare system. While a safety net remains to serve children and those who cannot work, the primary focus of welfare reform in Ohio moved from a system focused on providing cash payments to a system bringing stability and self-sufficiency to people's lives through promotion of a work first/work force philosophy.
Today, there are fewer Ohioans receiving monthly benefits than at any time since 1967. When our caseloads peaked in March of 1992, 748,717 individuals were receiving cash assistance at an average cost of $82 million per month. Today, that number is below 210,000 at an average cost of $27 million per month. The reduction in caseload has provided the state significant funding to go along with the flexibility provided by Congress. The result is a model for welfare reform highlighted with more families being served, fewer welfare dependent families, increased earnings, decreased poverty for those formerly on the system and broad community support and involvement.
Ohio's welfare reform program is divided into two major categories. The first category provides temporary cash assistance to families for a maximum of three years and is referred to as Ohio Works First. During their time on assistance, families must sign a self-sufficiency contract outlining work activities and other obligations recipients must fulfil as a condition of receiving cash assistance.
On October 1, 2000, Ohio passed a significant milestone in the implementation of Ohio Works First. That was the first date on which households faced the risk of cutoffs as a result of utilizing all three years of eligibility. On October 1, 1997, there were 117,000 families that potentially faced termination on October 1 of 2000. Of that 117,00, fewer than 4,000 families ultimately utilized all 36 months of eligibility. The 88 counties deserve tremendous credit for the manner in which the 36 month limit was implemented and for the care that they showed in working with these families.
Ohio is reinventing welfare by reinvesting in its communities. Ohio's counties have been given more flexibility than ever before in designing and implementing a service delivery system that addressees the needs of the people they serve.
The second category of our welfare reform program is referred to as Prevention, Retention and Contingency, or PRC. The PRC program focuses on providing people with the help they need to stay off of public assistance and assume personal responsibility. Counties determine what services to provide and also set eligibility levels. Individuals do not have to receive cash assistance to qualify for this portion of the program.
To meet the needs of poor families, counties have made use of the program in a wide variety of ways to deal with problems unique to their local communities. For example:
Hamilton County - This metropolitan county contracts with a private non-profit consortium of providers to work with "hard to serve" families. These families are generally recognized as multiple needs families that have a long-term history of public assistance dependency. In the past four years, nearly 3,000 families have been served with only 150 families returning to public assistance.
Appalachian Counties - To address the chronic need to improve attendance in Appalachian schools, most Appalachian counties have implemented head-lice programs. (Head lice is the number one cause for absenteeism in Appalachia Ohio.) PRC programs have aggressively dealt with this problem and in many school districts absenteeism has declined by as much as 50 percent.
Cuyahoga County - The Cleveland area has effectively used their PRC program to address the needs of families facing welfare cut-offs by partnering with numerous county organizations and developing programs to ensure that every family has access to services they desire or need to succeed. Their time-limit cut-off plan includes providing immediate employment opportunities for work ready clients, transitional employment for those that are not necessarily ready to enter the job market and short term transitional assistance. Additionally, a child safety review process is in place which provides home visits by community based agencies, linking families to support services and assessing the viability of a family's plan for meeting its basic needs.
Montgomery County - Only 6 percent of low income families have a computer in their home compared to 56% of families earning more than $50,000 per year. In an effort to provide computers, technology and training to poor families, Montgomery County has developed a program that provides inner-city youth with the opportunity to "earn" a new computer by participating in an intense computer training program that includes education in software and hardware as well as exposing teenagers to the computer field and possible employment opportunities after graduation. Students that complete the course and meet all of the requirements will get to keep the computer they actually build during the 4 week course. This program has the endorsement of local community and business leaders and costs the county less than $600 per student.
PRC is now the largest program in the state providing assistance to poor families in Ohio (excluding Medicaid). Through county departments, the state anticipates expenditures in the current biennium of nearly $700 million dollars with nearly half of the money being utilized for employment, training, work support and diversion. (Please see attached report on the utilization of the PRC Program in Ohio.) During the Fall of 2000, the Ohio Legislative Welfare Oversight Council, Co-chaired by State Representatives Netzley and Boyd, visited with 19 separate counties to discuss the progress of welfare reform. Without exception, PRC was highlighted by each county as one of the most significant programs in addressing the challenges counties face in meeting the challenges of long-term dependency.
Additional major categories of expenditures include youth education and support, emergency services, pregnancy prevention, child welfare, non-custodial parent services and domestic violence counseling. Furthermore, it should be noted that Ohio has been one of the leading states in the nation for actively involving the faith-based community in welfare reform. Counties project expenditures for the current biennium of nearly $90 million in contracts with faith-based organizations to provide many of the services mentioned above.
In short, Ohio's welfare reform program is paying off for families and communities. According to studies commissioned by ODJFS and mandated by the General Assembly, Ohio Works First's emphasis on employment, personal responsibility and community support is working. According to a study produced by Macro International of families formerly participating in Ohio Works First, we found:
They're working
A full week
Their earnings are up
Their kids have health care
They're not coming back
A cornerstone of welfare reform in Ohio was to make work pay and we're meeting that goal. A family of three on welfare receives a maximum benefit of $ 373 per month. A typical former recipient who works, earns in excess of $1400 per month. In addition, expansions in health care coverage for working families, child care and PRC help to assure a family's transition to the workforce have the critical supports needed to be successful.
The most important point in understanding the federal TANF program is to realize that TANF is a program and NOT a funding stream. Over the past few years the Ohio Department of Job and Family Services has received numerous innovative ideas for use of the TANF funds that, while worthy of consideration, were not within the federal parameters for the TANF program.
In order to make use of TANF funds, the federal law outlines the four goals of the program that must be met in order to be a qualified expenditure.
Ohio has taken a responsible approach to welfare reform and the block grant. Our strategy has been to provide tremendous flexibility and funding for programs and services never before possible, while still maintaining a responsible cash reserve to protect against a major downturn in the economy. Our approach has been responsive to meet the needs of the clients, responsible to the integrity of the TANF program and fiscally prudent.
For the first time in Ohio's history we are spending more welfare dollars to support work than to support dependency. As our caseloads continue to decrease we are able to shift more revenues to families to stabilize their lives and prevent long-term dependency.
In Ohio, over the past several months, the primary focus of the welfare reform debate is the TANF surplus. How much is it, what is obligated, what's available, how should we spend it and who should spend it are just a few of the many questions being asked. I wish I could provide you with an easy answer to all of these questions but unfortunately understanding the block grant and the surplus is not simple.
Each year, Ohio receives a $728 million federal TANF grant. To secure those funds, Ohio spends an additional $400 million in General Revenue Funds to meet our federally mandated maintenance of effort (MOE). During the term of the block grant, especially during the first couple of years of the TANF block grant, Ohio had accumulated a significant cash reserve.
According to the federal expenditure report filed at the end of the last federal fiscal year, Ohio's TANF surplus stands at $721 million. However, that figure does not take into account obligations that have not yet been charged to that account, nor does it reflect what Ohio has to spend. The myth that $721 million exists for Ohio to spend continues to mislead, confuse and threaten the Ohio Works First program.
The Ohio Department of Job and Family Services accounts for TANF in much the same manner as an individual balances a check book. At any point in time, the bank may say you have $721 in the account, but if you've written checks for xx amount and those checks haven't cleared the process, then you know the bank's statement is not what you actually have available to spend. The TANF block grant and the State's surplus are no different. Since TANF dollars can only be drawn down to the state based on actual expenditures delays the process and thus balloons what appears to be unspent revenues when in fact, the funds have been spent but not yet billed.
At the beginning of the TANF program, Ohio has decided to set aside $75 million annually in a caseload contingency fund to protect against an economic downturn. With $300 million currently in the contingency fund, prudent reserves are set aside for the remaining two years of the grant. Based on historic economic downturns in Ohio, this reserve could be used up in 27 to 45 months for caseload increases, based on the severity of the recession. Furthermore, we felt that this was fiscally responsible based on the fact that we have the lowest caseloads in the past 34 years in Ohio and one of the best economic conditions since the end of WWII.
Additional obligations to the unspent TANF reserve include county incentives for exceeding state and federal mandates. In an effort to ensure meeting federal requirements, avoid penalties and encourage creative and innovative approaches to serving poor families, Ohio has made available $45 million annually for counties that exceed performance standards. In many instances counties are utilizing these dollars as their own contingency accounts in the event of local economic downturns or funding decreases so that they may continue to operate successful prevention or retention programs. By the end of Federal Fiscal Year '01, Ohio estimates that $130 million of the federal reserve will be obligated to counties as incentives but not drawn down.
Finally, the federal estimate of Ohio's reserve does not reflect nearly $300 million made available over the past 18 months to address the 36-month time limit which went into effect on October 1, 2000. Counties utilized these funds to ensure the safety of children and families facing termination, provide job mentoring, training, education and work support. Many of these expenditures have not yet been submitted to the state and thus have not been drawn down form the federal reserve.
Obviously, while the appearance in Washington is that Ohio has substantial reserves, the reality is that we have fully committed all of the available TANF funds. Clearly, the federal estimate of Ohio's reserve is overstated. In fact, for the next biennium we anticipate deficit spending for TANF programs which could result in our contingency reserve being reduced.
Understanding the unspent TANF reserves is difficult, managing such reserves is even more challenging. A lot of attention has been paid to the amount of cash reserves available to states through the TANF program. Unfortunately, for various reasons, rarely are the stories we read in the papers or hear about through various sources, accurate.
TANF fundamentally changed the way we look at, manage, measure and operate public assistance programs. One of the more significant changes in administering the program through PRWORA was to get away from the one size fits all approach of a federally run system and move to a state driven program. Thus, in order to truly and fully understand a state's welfare reform program, including spending, you must look at each state on a case by case basis state. However, states continue to be measured on arbitrary data that does not necessarily reflect the local programs, standards or outcomes the states are attempting to achieve.
This lack of understanding has resulted in tremendous pressure from various sources including the federal government to spend the TANF funds or risk losing them. This pressure comes at a time when there is tremendous uncertainty of reauthorization, the definition of "supplantation" and the status of the economy. States have become sitting ducks for federal, state and advocacy leaders to find ways to spend the money.
Many states, including Ohio, have funded one-time only type programs without reoccurring expenses. However, we have found that even with this approach a state establishes a level of demand and expectation. This is also difficult given the parameters of the TANF program.
The pressure put on states to spend the money now also puts at risk some potentially effective long-term programs that could prove to be highly effective in working with youth to prevent out-of-wedlock births and to encourage the formation of two parent families. Without a long-term funding commitment, or the ability to operate an effective long-term reserve, states and providers are discouraged from attempting meaningful prevention programs.
Throughout the past few years we have been able to utilize surpluses to avoid potential crises and address others. Through the use of the surplus we have been able to shift funds to cover expansions in day care programs, and operate expanded Summer school programs, thereby helping students prepare for grade advancement and proficiency testing. Furthermore, we have been able to administer the PRC program, which has enabled counties to more thoroughly address the needs of their communities.
Ohio has made the fundamental shift in administering welfare reform programs. We did not make the mistake of rushing out and spending the block grant on short-sighted programs without significantly altering the programs that were already in place under the old AFDC program. We have been able to increase services to poor families, help families move out of poverty, train and prepare individuals for work, and provide support services. In addition, we have been able to accomplish the successes of welfare reform with adequate reserves in place to ensure that funding is available in a manner which can successfully address unforseen problems or crises.
[The attachment is being retained in the Committee files.]