Based on a projected average monthly caseload of 863,700, the Committee
staff estimates the State's General Fund will expend $520 million for the
Family Assistance program during the 1998-99 State fiscal year. This is
$43 million below the Executive forecast for the same period, which is
based on an everage monthly caseload projection of 925,100. Based on a
projected average monthly caseload of 163,900, the Committee staff estimates
the States General Fund will expend $302 million for the Safety Net Assistance
program during 1998-99. This is $34 million below the Executive forecast,
which is based on an average monthly caseload projection of 182,100. This
paper examines those factors which drive the need for these programs in
our State, and which underlie the Ways and Means Committee staff outlook
for 1998-99.
Welfare Reform in New York State
With the of enactment of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, the structure of federal welfare programs was significantly changed. Under this new federal legislation, the states were required to devise their own plans for implementing welfare reform, pursuant to federal guidelines.
The State Legislature responded by passing the Welfare Reform Act of 1997 which accompanied the 1997-98 budget. This legislation transformed the State’s Public Assistance programs into two new programs. What had formerly been known as Aid to Families with Dependent Children (AFDC) is now the Family Assistance program. Prior to federal welfare reform, the Federal Government contributed fifty percent of the benefit costs for eligible families. However, since the end of 1996, the State has received the federal contribution in the form of a block grant, called the Temporary Assistance for Needy Families (TANF) Block Grant. Beginning with federal fiscal year 1997, the State will be receiving $1.7 billion each year from the Federal Government. As of December 1, 1996, adult recipients can receive benefits over the course of their lifetimes for up to five years. Families that receive benefits after that date for a cumulative period of five years will be transitioned to the new Safety Net Assistance program and will receive assistance in the form of vouchers with restricted cash.
The new Family Assistance program possesses the same eligibility criteria as the original program with one exception. Two-parent families, which in the majority of cases were previously ineligible for the federal public assistance program, can now qualify for Family Assistance and be funded through the TANF Block Grant. However, for working adult recipients, the percentage of earned income which can be disregarded in the computation of the monthly benefit has been increased, thereby increasing the incentive to work. After two cumulative years receiving benefits, the head of household must participate in some form of a work activity.
States do not receive the full value of the federal TANF Block Grant unconditionally. The states must prove "maintenance of effort" by spending at least 80 percent of what they spent for AFDC during the 1994-95 federal fiscal year. In addition, there are statewide work activity participation targets. For example, during the first year, New York must demonstrate that, on average, 20 percent of all adult recipients were working. This target rises in future years, reaching 50 percent during Federal Fiscal Year 2002 and beyond, for single parent families. For two parent families the first year requires 75 percent, while for 1999 and beyond it reaches 90 percent.
On November 1, 1997, Home Relief, the State’s general assistance program for financially needy individuals and families who previously did not qualify for federal funding, was replaced by the Safety Net Assistance program.1) Beneficiaries under the Safety Net program primarily comprise single adults and childless couples. Recipients of Safety Net Assistance can receive cash benefits over the course of their lifetimes for up to two years. Anyone exceeding the two-year cumulative limit will be transitioned from the cash grant component of the Safety Net Assistance program to the voucher with restricted cash component of this program.
For SFY 1997-98, it is estimated that the total cost of the Family Assistance program will be $2.4 billion. Of this amount, the State and county governments will split the costs not covered by the federal TANF block grant. If the State were to continue to contribute its traditional 25 percent share of program costs, Family Assistance monthly grants will cost the State General Fund approximately $600 million. Because the Federal Government does not participate in the funding for the Safety Net Assistance program, the $730 million expected to be spent for this program by the close of SFY 1997-98, will be equally shared by the State and local governments.
Local social services district personnel assess the employability of all Family Assistance and Safety Net Assistance recipients on the basis of work history, work skills, and educational background. Family Assistance work rules are governed by both Federal and State law, whereas Safety Net Assistance work rules are governed solely by the State. Federal and State work activity provisions for the Family Assistance program require that all heads of household participate in a work activity (defined in statute) no later than 24 cumulative months from the first date they began receiving assistance after December 1, 1996, unless they are exempt or have been determined to be disabled. Within the Family Assistance program, there are specific work activity participation rates and minimum numbers of hours to be worked. These rates and hours are established by Federal law and increase each year. In the Safety Net Assistance program, non-disabled adult recipients, whose household does not contain minor children, must participate in any of the statutorily authorized work activities, including job search and workfare, as soon as they are assigned by the local social services district.3)
From a graphical presentation of the trends in caseload growth, it is easy to pick out the upturns and downturns of the New York State economy. For example, the national recessions of 1970, the mid-1970’s, the early 1980’s, as well as the early 1990’s were associated with declines in employment and increases in the unemployment rate. In Figure 1 we see that the economic expansion of the 1980's saw a steady increase in total State employment, while total public assistance caseload was generally in decline.6) As employment growth slowed down in the early 80’s caseload increased with a lag, resuming its downward trend as employment returned on a steady upward growth path. Between State fiscal years 1986 to 1990, total employment increased by about 450,000 jobs. At the same time public assistance caseload declined by almost 157,000 recipients.
Figure 1
A period of strong economic growth in New York came to an end in the late 1980’s. As indicated in Figure 1, New York State began to lose jobs before the start of the national recession in 1990. Employment in the finance, insurance, and real estate sector generally began to erode in 1988 and continued to deteriorate through the end of 1992. When the national recovery began in 1991, New York employment did not immediately increase. Indeed net job gains failed to appear until about two years into the national recovery. Hence, New York’s recent recession not only began earlier than the national recession, but lasted much longer as well. Whereas the national recession lasted only the nine months from July 1990 to March 1991, New York’s recession lasted almost six times longer than the nation’s, and was considerably deeper.7)
The severity of the most recent recession and the accompanying dramatic loss of employment are clearly reflected in the increase in the public assistance caseload during the period. At the depth of the recession, there were 550,000 fewer jobs than there had been in 1989. The State’s Home Relief caseload grew by 67.8 percent from State fiscal years 1988-89 to 1993-94, producing an addition of 157,000 recipients to the population. The AFDC population grew by 30.4 percent from fiscal years 1989-90 to 1994-95, adding 296,000 to the caseload.
In 1993 the New York economy began to recover. The State experienced solid job growth of 0.9 percent in 1994, the best showing since 1988, followed by two years of moderate growth and an estimated much stronger 1.2 percent growth in 1997. Since 1994, New York’s 58 local social services districts have intensified their efforts to move public assistance beneficiaries into the labor force. The ending of the last recession, combined with local efforts, resulted in a 327,530 decline in the Public Assistance caseload since January 1996.
Carefully examining those critical factors which determine public assistance caseloads allows us to project caseloads for the next fiscal year. There are three types of factors which can be expected to influence the need for financial assistance, economic forces, demographic factors, and administrative and programmatic policy changes. Recessions are expected to expand the caseload as earning opportunities diminish. Moreover, according to a recent study, "stress brought about by unemployment or income decline increases divorce and separation and, thus, indirectly affects the number of families who may need ADC."9)
There are several available indicators of job opportunities, including total employment, the unemployment rate, as well as the number of unemployment insurance (UI) benefits exhaustees. A rise in the number of UI benefit exhaustees is expected to be a particularly good indicator of an increase in the demand for financial assistance, because unemployment insurance benefits are the first avenue available to a displaced worker. The effect of economic forces may occur with a lag, particularly where the existence of large social networks to which individuals in need can turn, as well as informal employment opportunities, may delay the application for assistance. Fluctuations in the number of individuals who have exhausted their unemployment insurance benefits would already account in part for this lag, as beneficiaries can collect benefits up to six months after losing a job.10)
We also consider those administrative actions which have recently resulted in caseload declines independently of economic conditions. Many counties have taken initiatives to reduce the size of their caseloads either by targeting fraud or administering workfare programs. These actions have the effect of reducing caseloads beyond what would have occurred due to the economy alone. The Ways and Means Committee staff projections incorporate the effects of these actions.11)
Based upon Current Population Survey data, it is possible to identify those industries where welfare recipients report having work experience.13) For 1997, while total New York City employment stood at 3,292,535, employment in these selected industries stood at 331,918 based on the first two quarters of the year for which data are available. Figure 2 compares the path of selected industry employment with that of the New York City Family Assistance caseload from 1980 through the forecast period. The national recession of 1981-82, a relatively mild one for New York compared to the rest of the nation produced a decline in selected industry jobs. The impact of the downturn becomes evident in the caseload numbers shortly thereafter. The AFDC population increased by three percent during SFY 1983-84, and by just under one percent the next year. The subsequent period of very strong job growth for New York was again accompanied by caseload declines. About 143,000 individuals left the AFDC rolls between the 1984-85 and 1989-90 State fiscal years, a decline of almost 13 percent.
Beginning in 1989 employment levels decline rather substantially. By 1993 the City had shed almost 46,000 jobs within our selected industries. At the same time, Family Assistance rolls expanded rapidly. During the same period almost 140,000 recipients were added in the Family Assistance rolls.
Figure 2
The Committee staff estimates that the total number of Family Assistance recipients in New York City will decline by 14.5 percent for the 1998-99 State fiscal year, following a decline of 10.8 percent for the 1997-98 fiscal year.14) The decline in the number of beneficiaries for the 1998-99 fiscal year is consistent with continued growth in City employment, as well as the continuation of the City’s administrative efforts. City employment grew by 1.4 percent during the first two quarters of 1997, over the same period in 1996, adding approximately 44,000 new jobs. However these gains were not shared equally among the City's five boroughs.
The Human Resources Administration is reported to be continuing to review and contact 5,000 cases per week, the prevailing policy since January of 1997. The continuation of this effort can be expected to produce as dramatic a caseload decline as was experienced during the 1997-98 fiscal year. In addition, new more liberal employability criteria have been set by the New York State Department of Labor, increasing the number of recipients under Family Assistance who are classified as employable from 46 percent as of March 1996, to 55 percent as of December 1997.15)
During 1997, New York City experienced an increasing unemployment rate while public assistance caseloads continued to decline. Normally, an increase in the unemployment rate indicates an increase in joblessness. However, New York City has been experiencing relatively strong rates of job creation even outpacing that of the rest of the State during the last two years. Consequently, the rise in the unemployment rate must be a signal that a large number of individuals are joining the labor force in search of a job. Until they find one, they are counted among the ranks of the unemployed, thus inflating the unemployment rate. While some commentators have offered an increase in immigration as a possible explanation for the rise in unemployment, a recent study by the Federal Reserve Bank of New York identifies two different reasons.16) "One factor that does help explain the rise in labor force participation is economic growth." As the economic environment improves previously discouraged workers, who were out of the labor force, re-enter the workforce and participation rises. However, according to the study, the recent declines in public assistance caseload have been the primary factor contributing to the rise in labor force participation.
The Committee staff estimates that the total number of Family Assistance recipients in the Rest-of- State region will decline by 14.2 percent for the 1998-99 State fiscal year, following a decline of 12.0 percent for the 1997-98 fiscal year.17) Average caseload for the period from April 1997 to December 1997 (the most recent month for which data are available) was 13.7 percent below the level for the same period of the previous fiscal year. The continuing decline in the Rest-of-State caseload is consistent with the expected growth in State employment during the 1998-99 fiscal year.
Figure 3
The Committee staff estimates that the total number of Safety Net Assistance recipients in New York City will decline by 18.6 percent for the 1998-99 State fiscal year, following a decline of 23.8 percent for SFY 1997-98.18) The number of UI benefit exhaustees is expected to follow a slow decline in 1998-99, consistent with the City’s rate of job growth. The continuation of the City’s employment growth, as well as the City’s administrative efforts, will continue to reduce the caseload. As administrative efforts shift from the more employable clients to the less employable, one would expect the rate of caseload decline to slow down. However, the transition to a more liberal definition of "employability" will enable the caseload to continue on a rapid, albeit slower rate of decline.
Figure 4
Figure 5
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| Family Assistance
1997-98 1998-99 |
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| Safety Net Assistance
1997-98 1998-99 |
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