Welfare Savings (Could) Build Stronger Communities
September 28, 1999
by Jay F Hein
Former U.S. Senator Everett Dirksen once famously remarked, "A million dollars here, a million dollars there, soon we'll be talking real money." The $7 billion in welfare savings has certainly gotten people talking lately.
Since the 1996 welfare reform act, states have slashed their caseloads by nearly half, far ahead of schedule. The result is that the five-year federal block grants issued to the states to pay for the reform are piling up in their coffers. A recent study projected that the surplus could reach $22 billion by 2002.
And so the tug-of-war has begun. Congress, stopped by the nation's governors from ransacking the surplus to fund a tax cut, will continue to try to get the money back. Rep. Nancy Johnson (R-CT), chair of the congressional welfare oversight committee, recently wrote to governors saying that it will not be possible to protect the surplus for long. Translation: spend it before we spend it on something else!
The states response has been to persuasively argue that a deal is a deal. Washington shouldn't penalize their effectiveness by stealing back the funds. Besides, transforming the entire public assistance system is not a one-shot event, but a process that requires funding to address the new challenges arising when large numbers of people move into entry level jobs.
In case Washington doesn't buy their argument, however, the states have begun spending the money.
New York has used federal dollars to pay for services it formerly funded itself. Wisconsin has increased welfare benefits, provided car loans and transportation, and funded a tax cut. Florida is pumping $66 million into drug abuse and mental health services for non-welfare families. Colorado is paying for low-income citizens' dentist bills and car repairs, and giving them $100 bonuses for completing their GEDs.
While there is clear evidence that many states are making good decisions about where they direct their savings, it is also clear that they are funding more stop gap measures rather than using their surpluses for long-term, poverty-fighting strategies.
State after state confirms that the next greatest phase of welfare reform is helping the poor attach long-term to the job market. Getting people jobs has proved to be the easy part. Keeping jobs and moving out of poverty is another matter.
Barriers to sustainable workforce attachment include poor education, inadequate skills, single-parenting, and a host of personal problems. Government is ill-equipped to address this complex and often interconnected array of problems facing poor workers.
This presents a quandary. States need to spend their welfare surpluses before someone else spends it for them. But spending new resources on old solutions appears to be an inadequate response to the post-welfare reform challenge.
The answer rests in government investing in intermediary organizations whose care is situated closest to the poor, and whose business is helping people help themselves. This strategy would build a new care giving infrastructure that includes a limited role for government and unleashes the myriad of assets in neighborhoods.
Consider the example of Ottawa County, Michigan, the first county in the nation to reduce its welfare caseload to zero. Ottawa County officials place the lion's share of credit for their success to the contract they established with Good Samaritan Ministries to mobilize the church community to assist former welfare recipients transition to the workplace.
Compared to local government efforts in San Diego, which spent 18 months recruiting 18 churches to staff a service center information desk, Good Samaritan enlisted over 50 churches in just a few months to perform the more challenging work of mentoring and counseling. Good Samaritan possessed a credibility with the faith community that government cannot fabricate - and it produced results.
Performance-based contracting with intermediaries would keep costs down and allow those who provide the care, not government, to decide which programs and organizations would best achieve the terms of the contract.
A second area of investment is capacity-building. Intermediary agencies and the organizations with whom they work need training in administration, securing grants, and building effective partnerships.
Indianapolis Mayor Steve Goldsmith's Front Porch Alliance schools community-based organizations in accessing resources and useful partnerships. For every dollar the Goldsmith administration has spent on the effort, three additional dollars have been leveraged from outside organizations, foundations, and individuals.
Capacity-building must extend to the business community as well. Marriott Hotels and United Airlines have enjoyed unexpectedly high retention rates of former welfare recipients through their personalized, mentoring-based training procedures. Investing in welfare reform education for corporations and small businesses alike pays for itself many times over in the form of jobs, benefits, and even career paths.
States are smart to direct funding for needed child care, transportation, and job training services. But they are wise if they also invest their surplus dollars in creating a new and expanded infrastructure capable of reducing poverty. Poverty reduction, after all, is a much more reliable indicator of a state's general welfare than caseload reduction.
Ryan Streeter is a research fellow at the Indianapolis-based Hudson Institute. The co-authors also are writing a book on community-based care giving.
Jay F. Hein is president of Sagamore Institute for Policy Research.
Ryan StreeterRyan Streeter is Vice President of Civic Enterprises, LLC, a public policy development firm in Washington, DC. Streeter was a research fellow of the Welfare Policy Center at Hudson Institute from 1998-2001.