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Income Support and Social Services for Low-Income People in Minnesota

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Document date: November 01, 1997
Released online: November 01, 1997

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.


About the Series

ssessing the New Federalism is a multi-year Urban Institute project designed to analyze the devolution of responsibility from the federal government to the states for health care, income security, employment and training programs, and social services. Researchers monitor program changes and fiscal developments, along with changes in family well-being. The project aims to provide timely nonpartisan information to inform public debate and to help state and local decisionmakers carry out their new responsibilities more effectively.

Key components of the project include a household survey, studies of policies in 13 states, and a database with information on all states and the District of Columbia, available at the Urban Institute's Web site. This paper is one in a series of reports on the case studies conducted in the 13 states, home to half of the nation's population. The 13 states are Alabama, California, Colorado, Florida, Massachusetts, Michigan, Minnesota, Mississippi, New Jersey, New York, Texas, Washington, and Wisconsin. Two case studies were conducted in each state, one focusing on income support and social services, including employment and training programs, and the other on health programs. These 26 reports describe the policies and programs in place in the base year of this project, 1996. A second set of case studies to be prepared in 1998 or 1999 will describe how states reshape programs and policies in response to increased freedom to design social welfare and health programs to fit the needs of their low-income populations.

The income support and social services studies look at three broad areas. Basic income support for low-income families, which includes cash and near-cash programs such as Aid to Families with Dependent Children and Food Stamps, is one. The second area includes programs designed to lessen the dependence of families on government-funded income support, such as education and training programs, child care, and child support enforcement. Finally, the reports describe what might be called the last-recourse safety net, which includes child welfare, homeless programs, and other emergency services.

The health reports describe the entire context of health care provision for the low-income population. They cover Medicaid and similar programs, state policies regarding insurance, and the role of public hospitals and public health programs.

In a study of the effects of shifting responsibilities from the federal to state governments, one must start with an understanding of where states stand. States have made highly varied decisions about how to structure their programs. In addition, each state is working within its own context of private-sector choices and political attitudes toward the role of government. Future components of Assessing the New Federalism will include studies of the variation in policy choices made by different states.


Contents

Highlights of the Report

Introduction

Minnesota: A Brief Overview

    The State's Population
    The Economy
    The Political and Budgetary Landscape

Setting the Social Policy Context

    Minnesota's Agenda for Serving the Needs of Low-Income Families
    Social Welfare Spending
    Organization of Services and Administrative Structure

Basic Income Support

    Minnesota's Income Support Programs
    Recent Innovations, Changes, and Waivers

Programs That Promote Financial Independence

    Employment and Training
    Child Care
    Child Support
    Medicaid and Other Health Insurance

The Last-Resort Safety Net Programs

    Child Welfare
    Emergency Services and Housing

Innovations and Challenges

    Pre-TANF Devolution of Responsibility to Local Governments
    Organization and Innovation
    Government vs. Privately Provided Services
    Implications of the New Federal Welfare Reform Legislation
    Conclusion

Notes

Appendix: List of Interview Sources

About the Authors


Highlights of the Report

This report focuses on the baseline conditions of cash assistance and social services in the state of Minnesota as the state embarks on its new welfare reform program.

State Overview

Minnesota is a relatively well-off state, with poverty and unemployment rates below the national average. Its workforce is quite well educated. Its income distribution is less unequal than that of many other states. And it has one of the most progressive tax systems in the country. Minnesota also has a history of generous support for social programs. Recently, its fiscally conservative governor has pressured its Democratically controlled legislature to be more conservative in its budget decisions, with the balance of power leading to generally constructive negotiations in reaching final agreements. Advocacy groups also play a significant role in shaping policy with respect to welfare and other human resources issues. The state has been in a strong budget position throughout the 1990s, avoiding deficits while keeping a safe margin of reserve funding even as spending has increased.

Setting the Social Policy Context

Minnesota's basic philosophy guiding its social programs is to help people leave poverty, not simply to reduce social program rolls. Its programs in child care, health, and welfare reflect the philosophy that making services available to working poor families will enable more families to help themselves rather than relying on government support. Its Basic Sliding Fee Child Care (BSF) program is for the nonwelfare working poor, for example. And the MinnesotaCare program offers health insurance to poor and near-poor nonwelfare families, children, childless couples, and individuals. The state's primary welfare reform waiver program—the Minnesota Family Investment Program (MFIP)—was also structured to provide a route out of poverty by making clients always better off if they work. This service infrastructure created in Minnesota for working poor families is an important foundation to build upon in coming years for welfare reform and other changes in the safety net.

Minnesota spends considerably more public dollars per poor family than the national average. Social welfare spending accounts for 28 percent of state general fund expenditures, just under 10 percent of which goes to nonhealth welfare and social service programs devoted to children and their immediate families.

State agencies in Minnesota generally set policy, make rules, monitor local practice, and offer technical assistance. Counties have major responsibility for service delivery, whether offered by county employees or contracted out. The quality of state-local relationships appears better with some state agencies than with others; the Department of Human Services (DHS) income security activities, in particular, receive very high marks.

Basic Income Support

Excluding Supplemental Security Income (SSI) and Food Stamps, Minnesota's primary income support programs in 1996 consisted of Aid to Families with Dependent Children (AFDC) (79 counties); the state's major demonstration waiver project, MFIP (8 counties); General Assistance (GA); and the Working Family Credit, a state earned income tax credit. State payment levels in 1995 were the same for AFDC and GA ($532/month for a family of three), making Minnesota's basic welfare programs for families the most generous among states in the central midwest. GA is also available ($203/month) for disabled adults. The working family credit for 1995 was 15 percent of the federal calculation, averaging $178 per claimant. In 1997 this was increased significantly.

MFIP required welfare recipients to participate in work activities after they had been on the AFDC rolls for two years. An employability plan with each client emphasized the mutual responsibilities of state and recipient; failure to comply generated a sanction of 10 percent of the grant amount. MFIP provided substantial funds for case management, education, training, and supplemental services, and was very supportive of education and training to build skills before participants had to seek employment. An ongoing evaluation of MFIP by the Manpower Demonstration Research Corporation suggests that MFIP has been quite successful to date: 56 percent of MFIP's long-term welfare families were out of poverty after 18 months compared to 40 percent of the control group.

Programs That Promote Financial Independence

To help promote self-sufficiency, cash assistance programs often need to be supplemented with employment and training, subsidized child care, child support collection efforts, and health insurance coverage.

Employment and Training

The Minnesota Department of Economic Security (DES) and DHS are administrative partners for employment and training programs aimed at low-income households receiving public cash assistance. In 1996 and 1997, these included Minnesota's JOBS program, Food Stamps Employment and Training, and several waiver projects for AFDC recipients. Regardless of the program or the funding stream, virtually all employment and training services were delivered under contract by nonprofit organizations.

In 1996 and 1997, the primary target groups for Minnesota's employment and training programs were recipients of welfare and other cash benefits, youth, and dislocated workers. However, tension surrounds the allocation of resources to meet the increasingly competing needs of these three groups—tension that will likely escalate as the demands for employment and training resources for the welfare population increase.

The overarching future strategy for supporting employment and training activities statewide is the Workforce Center system being developed by DES and its local partners. This system creates a collaboration among state and local agencies and private and public organizations that encompasses most actors in the employment and training arena, including postsecondary and secondary education and training. Twenty such centers were open in March 1997, with 20 to 30 more scheduled to be open by July. The state is also pursuing a technology initiative, seen as the foundation of the Workforce Center system, that will allow all centers to hook up via the Internet to a "virtual" center that offers a variety of job banks and other employment information through computer links.

Child Care

Historically in Minnesota, child care and child development programs have existed in separate agencies and pursued separate missions. Starting in 1995, the state began to consolidate these programs into a new state agency, the Department of Children, Families, and Learning (DCFL), although the consolidation does not yet seem to be increasing collaboration.

Lack of money for child care forces the state to treat AFDC and non-AFDC families separately. For welfare recipients, care is 100 percent subsidized. Working families whose incomes fall below the state median income are eligible for BSF, but there is a long waiting list. Families on welfare who are working or in training do not have to wait for a child care subsidy. Other working-poor families face long waiting lists for subsidies. If people have the money to pay, there is no shortage of child care in Minnesota.

Child Support

Over the past five years, Minnesota has implemented many programs to increase paternity establishment, improve collection of child support obligations, and enhance noncustodial parents' ability to pay the child support they owe. These programs include hospital-based paternity establishment, suspending driver's licenses for noncustodial parents three months in arrears, and requiring employers to notify DHS within 15 days of hiring an employee. Unlike many other services systems in Minnesota, child support enforcement has been increasingly centralized. The state is also increasing its reliance on a centralized, automated child support enforcement system. These programs are not restricted to welfare families. Because state officials are not yet satisfied with the recovery rates for AFDC families, Minnesota has developed incentives to encourage counties to improve their collection rates for AFDC.

Medicaid and Other Health Insurance

Families participating in the major cash assistance programs in 1996 were categorically eligible for Medicaid or General Assistance Medical Care, which paid virtually identical benefits. During the past several years, health care issues other than Medicaid, especially for families with children, have been a priority for the state. The MinnesotaCare program, for example, provides a subsidized health insurance program for the poor and near-poor. And insurance market reforms have succeeded in increasing insurance provision by small employers. Minnesota has a goal of no more than 4 percent uninsured by the year 2000. While it may fall short of this goal, Minnesota already enjoys one of the lowest rates of uninsured people in the country.

Last-Resort Safety Net Programs

Although one of the goals of devolution is to promote the well-being of children and families, it is important to consider what might happen to families for whom the new rules and programs do not work as designed. Child welfare and housing emergency services have existed for a long time to "pick up the pieces" when families cannot cope.

Child Welfare Minnesota is one of 13 states with a state-supervised, county-administered child welfare system. Counties are also responsible for the bulk of child welfare funding, with the result that counties vary in the adequacy of their child welfare services. The state typically ranks very low in its reported rate of child abuse or neglect but quite high in its rate of out-of-home placements. In response to the latter problem, counties have tried to emphasize prevention and early intervention programs, and the state has created a formal policy to ensure that children achieve permanency within 12 months of removal from their home.

Housing Emergency Minnesota has no state-level vision, goal, or plan for helping people out of homelessness, although several efforts are under way that have specific goals. An interagency Task Force on Homelessness, made up of representatives of all relevant state agencies, meets to supervise state activities focused on homelessness. The state also conducts a statewide quarterly shelter survey, which provides good data on sheltered homeless people and statewide shelter capacity and use.

Implications of the New Federal Welfare Reform Legislation

Minnesota DHS reorganized itself about two years ago in anticipation of significant changes in federal-state relationships as well as attitudinal and demographic changes generally. The reorganization has produced a flatter organizational structure and a restructuring around populations rather than services or diagnoses—a structure DHS staff feel puts them in a better position to handle welfare reform. Minnesota has historically favored within-state devolution of many human service functions, with its Community Health Services Act and Community Social Services Act dating back to the mid- and late 1970s. This tradition has continued more recently in the form of shared decision making about major innovations such as MFIP and devolving responsibilities and money to the control of counties or local collaboratives with special service focuses.

Minnesota's Temporary Assistance for Needy Families (TANF) program (called MFIP-S for statewide) retains most of MFIP's provisions with the following important exceptions. It has higher sanctions and altered payment arrangements, which may induce more families to comply with an employment plan rather than live with sanctions. However, the reduction in maximum income disregard from 140 to 120 percent of poverty, the limitations on education and training, and the reduction in per-person resources for case management, education, and training may affect the program's ability to help families achieve self-sufficiency.

Although the persons we interviewed in Minnesota are optimistic about the state's capacity to implement MFIP-S in the immediate future, they express more concern about the long term, given uncertainties about the economy, the impact of time limits, and characteristics of the "harder-to-serve" population.

Minnesota is also grappling with how to distribute the penalty if the state does not meet the work participation rate and loses part of its block grant. DHS has designed a preliminary plan to penalize counties that fail to meet the rate and provide bonuses for counties that do well. Minnesota plans to meet 80 percent of its full TANF maintenance of effort. DHS has proposed to keep some funds "in the bank" against future demand. The state also has increased funding for its sliding-fee child care for nonwelfare working-poor families.

With its commitment to continued within-state devolution for many human services programs for children and their families, Minnesota will be an interesting test case for the new federalism. In the coming years we will be able to examine how far down the line toward local control decision-making functions will filter, what factors will limit within-state devolution, and whether local control will fulfill its promise to create service systems that meet the needs of local residents.


Introduction

This report focuses on the findings of our case study in the state of Minnesota, looking at baseline conditions of programs and services. Urban Institute researchers visited Minnesota in August 1996, shortly after Congress passed federal welfare reform legislation, and completed in-state interviewing during a second visit in January 1997. In addition to interviews at the state level, we conducted interviews in Minneapolis and Mankato to develop a picture of local programs and issues and gain some appreciation of within-state differences. At the time of our January visit, Governor Arne Carlson had just submitted the state's welfare reform proposal to the state legislature, and debate was beginning on its provisions. Minnesota's final welfare reform legislation was signed into law on April 30, 1997. Most of its provisions affecting welfare families do not go into effect until January 1, 1998, although receipt of benefits began counting against the 60-month time limit beginning July 1, 1997, in accordance with federal law. This report describes Minnesota's programs and policies during the period just before the implementation of welfare reform and analyzes the circumstances that helped shape the state's response to federal changes in major social programs.

This report begins with a discussion of the characteristics of the state in terms of its population, economic condition, and political environment. It describes the state's agenda for serving the needs of low-income families, including a discussion of spending in this area and an overview of the service delivery structure in the state. Three broad social program areas are discussed—supports for basic income needs, policies for moving families toward financial independence, and programs that provide a last-resort safety net for families and children—as well as the challenges Minnesota faces in delivering this support system to low-income families. The report concludes with a discussion of the direction in which the state plans to move in the coming years.


Minnesota: A Brief Overview

This section provides a brief overview of Minnesota's population and economy, to establish the context for the social programs we describe later in the report. It also describes the state's political and budgetary landscape, indicating the climate of attitudes and resources within which state policy is shaped.

The State's Population

Minnesota's population of slightly over 4.5 million has experienced growth of over 1 percent a year during the 1990s, reversing trends of population loss from the 1970s and 1980s. Most of the population growth has been from interstate migration attracted by the state's booming economy, with Wisconsin, California, North Dakota, Illinois, and Iowa contributing the largest share. Minnesota's poverty rate, as shown in Table 1, is below the national average, for all people (11.2 percent in 1994 compared to 14.3 percent) and especially for children (14.8 percent compared to 21.7 percent). Slightly more than half of the population resides in the seven-county metropolitan area surrounding the Twin Cities of Minneapolis and St. Paul; about one-fourth of the state's population lives in Hennepin County, which includes Minneapolis. Fifty-four percent of Minnesotans live in urban settings, comprising the 22 percent who live in central cities and the 32 percent who live in urban fringe areas. Another 16 percent live within the same counties that contain the central cities, but outside of urbanized areas, and the remaining 30 percent live in rural communities, making Minnesota significantly more rural than the United States as a whole (46 percent rural as compared to 36 percent).

Relatively few Minnesotans are members of racial or ethnic minority groups. However, this part of Minnesota's population has undergone tremendous growth in the first half of the 1990s. As of 1995, Hispanics make up 1.8 percent of the state's population and African-Americans comprise 3.3 percent, having increased their numbers by 57 percent and 46 percent, respectively, between 1990 and 1995. 1 Most of the Hispanics in Minnesota are U.S. citizens, many of whom migrated to the state from Texas and other parts of the United States. Native Americans contribute another 1.1 percent. Noncitizen immigrants constitute 3.0 percent of the state's population. Refugees make up the vast majority of the state's legal immigrants who are not citizens.

The Economy2

Minnesota's economy is very strong now (mid-1997), and has been so since 1993, when recovery from an early-1990s recession began. Economic growth has exceeded population growth, with the number of jobs increasing almost twice as fast as the population in the years from 1990 to 1994. Unemployment is at an all-time low of about 3.3 percent for the Twin Cities metropolitan area and 4 percent for the state as a whole, accounting for a rise in per capita and family income. Minnesota has a diverse economy, ranging from farming and agriculture-related manufacturing to high-technology industries such as computers, medical devices, and the wide variety of Minnesota Mining and Manufacturing products.

Urban areas and many rural areas of the state have shared in the economic expansion; the Twin Cities area has grown tremendously, and so have other communities. New food processing businesses in particular have attracted many people who were migrant workers to establish residence in smaller Minnesota cities. In some communities during the 1990s, Hispanic, Southeast Asian, and, more recently, African residents from Somalia and Sudan have increased from virtually zero to close to 25 percent of the population, changing the face of many rural Minnesota towns.

Minnesota's workforce is quite well educated and has a high employment rate (71.7 percent); the participation rate for women is the highest in the country (69.6 percent in 1995). Per capita income recovered from a dip in the early 1990s to a level in 1995 almost 24 percent higher than it stood in 1990, slightly surpassing per capita income growth in the nation as a whole (see Table 1). Compared to other states, Minnesota's income distribution is slightly more uniform, and the state has one of the most progressive income taxes in the country. The strong economy contributes to the general feeling of optimism in the state. If the economy continues strong, it will provide a promising environment for achieving the goals of welfare reform.

The Political and Budgetary Landscape

Minnesota has a long history of support for social programs, and is known for the generosity and progressiveness of its policies. In recent years the governor has focused on fiscal responsibility, legislative reform, health care, and crime reduction. The legislature has passed sweeping health care legislation during the 1990s, including a statewide health insurance plan for the uninsured poor (the MinnesotaCare program), and has created and expanded child care funding available on a sliding fee basis for working poor families (the Basic Sliding Fee Child Care program or BSF). Property tax relief has been a perennial subject of debate, but no concrete proposals have yet been enacted. Both education spending and its source have been issues, with costs increasing significantly and proposals being considered to ease the property tax burden for education.

The dynamics between a fiscally conservative Republican governor and the Democratically controlled legislature have pressured lawmakers to be more conservative in their budget decisions. As a result, there have been no significant tax increases in recent years, and some elements of the social safety net that were maintained in years past have been eliminated, such as state-supported General Assistance for single people considered able to work. The balance of power between the governor and the legislature seems to be fairly evenly distributed, with both proposing legislation in areas of their interest and negotiating to reach a final compromise. However, the governor has used his veto on several major pieces of legislation in recent years when the legislature has not given him what he wanted; during the 1997 session he vetoed the entire education spending bill (supporting K-12 education in the state) of almost $6 billion and a bill to expand coverage for single adults under the MinnesotaCare program from households with incomes below 125 percent of poverty to those at 150 percent of poverty or below. 3 Advocacy groups also play a significant role in shaping legislation and policy with respect to welfare and other human resources issues.

The state has been in a strong budget position throughout the 1990s. General fund spending has gone from $6.4 billion in FY 1990 to $9.3 billion in FY 1997, at the same time that the budget reserve has gone from $550 million to a projected $620 million for FY 1997. In the early 1990s, fiscal projections of out-year deficits stimulated the governor and legislature to make some adjustments to spending, with the result that expected deficits have been avoided and the state kept a safe margin of reserve funding. Significant increases in total state personal income, from $80 billion in FY 1990 to $115 billion in FY 1997, have kept the budget safely in the black despite increased spending levels.


Setting the
Social Policy Context

This section describes Minnesota's policy orientation, specifically with regard to helping low-income families. Following its discussion of policy commitments, the chapter reviews state and local spending on social welfare programs, and the programs' organizational structure. This information provides important background for understanding the structure and approach of the major social welfare programs in place during 1996 and early 1997.

Minnesota's Agenda for Serving the Needs
of Low-Income Families

During the decade of the 1990s, Minnesota committed itself in a number of ways to supporting low-income working families and helping families move toward self-sufficiency. A basic philosophy underlies many of the specific programs involved in this commitment—that the goal is to help people leave poverty, not simply to reduce the rolls of social programs. To this end, Minnesota policymakers believe that government should provide access to basic tools to help people trying to support themselves and their families. One way we heard this expressed was that the state should offer programs designed to be "ropes" to help people climb the ladder to success without falling (back) into dependency. Some important ropes that figure in recent Minnesota policy decisions are education, training, child care, and access to health care.

Minnesota programs in child care, health, and welfare reflect this philosophy. Minnesota has had BSF—a program for the working poor—since the late 1980s. Funded with federal Child Care and Development Block Grant (CCDBG), state, and county funds, the program entitles families whose incomes are at or below 75 percent of the state median income to receive subsidies for child care if a parent is working or going to school and is not receiving AFDC. The state and some counties have steadily increased their funding for this program. The MinnesotaCare program, first authorized by 1992 legislation and amended almost yearly since then, is a health insurance program funded through a tax on health care providers and health maintenance organizations. It covers poor and near-poor non-AFDC families, children, childless couples, and single individuals who have no other source of medical coverage. Families who have incomes up to 275 percent of poverty and other households who have incomes up to 175 percent of poverty are eligible. In addition, the 1992 health legislation created a variety of mechanisms to improve the ability of small employers to cover their employees, increasing the likelihood of health care coverage for many working poor households. These child care and health programs are designed for people who need additional support to meet particular expenses, even though their incomes are well above the poverty line.

The state's primary welfare reform waiver program (the Minnesota Family Investment Program, or MFIP—described in greater detail below) was also structured to provide a route out of poverty. Under MFIP, clients are always better off if they work, and the program maintains eligibility through generous income disregards until the family's income reaches 140 percent of poverty. Planning for the program began in 1988. The program itself began operating in 1994 and is the basis for Minnesota's Temporary Assistance to Needy Families (TANF) plan.

The basic challenge Minnesota has set itself is to help its people, and especially its children, leave poverty. A potential consequence of the state's generous policies is the possibility of becoming a "welfare magnet." Analysis of Hennepin County's intake information in recent years indicates that 25 percent of new welfare applicants moved to the state less than 30 days before applying. Concern about this situation has been such that the state attempted earlier in the 1990s to impose a six-month residency requirement on eligibility for General Assistance. After the courts struck this provision down as unconstitutional, the state countered with a 30-day residency requirement, which is currently in place. In addition, 1995 legislation directed the Department of Human Services (DHS) to prepare a request for a waiver allowing Minnesota to apply a 30-day residency requirement for AFDC applicants, along with permission to pay AFDC grants only up to the level of the sending state for the first 12 months of eligibility in Minnesota. This waiver request was never submitted to the U.S. Department of Health and Human Services, but the concern remains. Provisions of the state's TANF plan impose the same requirements and constraints on recent movers to the state as were intended under the waiver. The governor and legislature have resisted taking part in "a race to the bottom," but there remains some tension around the issue of helping "our own" without finding that many others are also coming to Minnesota for help.

Social Welfare Spending

Social welfare spending, covering health and human services, accounts for about 28 percent of state general fund expenditures, of which about half is devoted to health care. When one focuses on the components of social welfare spending that were devoted to children and their immediate families through programs in income security, education and training, child care and child development, child welfare, emergency assistance, and health care, the proportion shrinks to less than 10 percent of state general fund outlays.

Table 2 shows a more detailed breakout of this spending for the well-being of children and their families in FY 1995. We account for federal and local government spending as well as state outlays, to illustrate which level of government bears the burden of funding for particular services, as this distribution of financial responsibility may have implications for the direction of change under federal welfare reform. Major state outlays occur for Medicaid, AFDC, MinnesotaCare, and child care and child development, with significant amounts going also to the Working Family Credit (the state's Earned Income Tax Credit or EITC) and child welfare activities. Working Family Credit expenditures will increase in the future, as the 1997 legislature recently approved a significant increase of this tax credit for low-income working families with children, from 15 percent to 30 percent of the federal EITC. Table 2 also shows that local governments (counties) incur substantial expenses totaling about 30 percent of what the state contributes for these functions. County expenses occur most heavily in the areas of child welfare and child care and development, where they account, respectively, for 56.9 percent and 16.6 percent of total spending.

Table 2 further indicates that in several programs where states have considerable discretion to select services and expenditure levels, Minnesota spends considerably more per poor family than the national average. These programs include AFDC and MFIP, AFDC Child Care, Head Start, and Medicaid. These spending levels reflect many years of decision making during which Minnesota policymakers opted to offer more services to more people, and sometimes also to pay more for them.

Organization of Services and Administrative Structure

In general, state agencies in Minnesota set policy, make rules, monitor local practice, and offer technical assistance, while counties have the major responsibility for service delivery, whether it is offered by county employees or contracted out. For income maintenance, social services, public health, and child welfare functions, Minnesota counties have considerable flexibility in how they administer the programs within general guidelines and regulations established at the state level. Counties can decide how to organize their caseloads (e.g., whether workers specialize by function or each worker follows a client from start to finish); whether, what, and how much service to contract out; whether and how much to supplement federal- and state-funded services with county funds, and for what (e.g., putting more county money into public health or child care, and specifying how it will be used); which populations will receive particular types of social services; and whether to centralize or decentralize service locations. There is a relatively constant level of tension surrounding the state-county relationship, with county departments and other local agencies such as employment and training programs sometimes chafing at what they consider overcontrol by state agencies, and state agencies sometimes worrying that local agencies will not fulfill state directives. Table 3 shows locations of major social welfare programs within the state agency structure and indicates where the primary administrative responsibility lies at the local level.

For some programs, such as public health and social services, counties have had state mandates and state funding since the early 1980s, which they use along with their own funds to provide needed services. The more county money supports a particular service area, the more these decisions seem ultimately to go the way the counties prefer. The Association of Minnesota Counties maintains a strong presence in negotiations with both the state legislature and state agencies administering critical programs.

The quality of the state-local relationship appears to be better with some state agencies than with others. The Economic and Community Support Strategies branch of DHS, in particular, received very high marks from everyone interviewed for including all relevant players in policy development, listening to input from all sources, working patiently toward solutions that would be considered acceptable to all, and involving many actors in disseminating the results of policy development throughout the state. The department followed this process during the development of MFIP. The good relationships and understandings developed during that process left interested parties willing to trust that the department would "get it right" when quick action was required in response to federal welfare reform legislation and the department had to act quickly to develop a TANF plan without the multi-year consultation process that preceded MFIP.

Minnesota state officials and others have been thinking for a long time about goals for low-income families and how to achieve them. One premise of several important policies and programs is that making services such as health care coverage and child care available to working poor families will enable more families to help themselves rather than relying on government welfare programs. State officials attribute some of the drop in AFDC caseloads over the past few years to the availability of these services. The service infrastructure created in Minnesota for working poor families is an important foundation to build upon in coming years for welfare reform and other changes in the safety net. In the next three sections we examine the key income support, employment and training, child care, and other programs that currently form the social safety net for low-income children and their families. As we do so, we keep an eye on how these programs contribute to the overall Minnesota strategy and what might happen to the effectiveness of that strategy as the programs are affected by devolutionary changes.


Basic Income Support

Minnesota officials view the elimination of poverty as the goal of their income support and associated programs (education and training, child care, and health insurance). This basic value shapes the state's approach to structuring each of these programs, to the way the programs interact, and to the state's welfare reform initiatives before TANF and now with TANF. This section describes income support programs available during 1996 and early 1997, explains the reasoning behind the state's several welfare waiver demonstration programs, and identifies trends during the mid-1990s that shape the state's response to federal welfare reform legislation.

Minnesota's Income Support Programs

In 1996, Minnesota's primary income support programs consisted of AFDC in 79 counties, MFIP in 8 counties, three other planned AFDC waiver projects, SSI, General Assistance, Food Stamps, and the Working Family Credit (see Table 2 for program expenditures and Table 3 for each program's location in the state and local administrative structures). The primary welfare programs, including General Assistance, were state-regulated and county-administered, with the state setting policy and guidelines. The average monthly AFDC caseload in 1995 was 56,065 recipients, a 12.6 percent reduction from the 64,177 caseload size in 1993. Further, caseloads have continued to decline since 1995. General Assistance was available to families who would have been AFDC-eligible except for a few aspects of their situation that violate federal eligibility rules. General Assistance was also available to disabled adults, but since 1995 able-bodied single adults have not been eligible. State payment levels for a family of three on AFDC and on General Assistance were the same ($532 per month in 1995), making Minnesota's basic welfare programs for families the most generous among states in the central midwest region. 4 For disabled single adults, the General Assistance benefit is only $203. General Assistance carries with it categorical eligibility for General Assistance (GA)-Medical Care. For the 1995 tax year, 212,000 households claimed the Working Family Credit, for a total of $37.8 million ($178 average per claimant); $28.8 million went to families with children. Eligibility for this state EITC is the same as for the federal EITC, and the credit has been 15 percent of the federal calculation. In a special session in May 1997, the legislature significantly increased the Working Family Credit, so Minnesota's future tax structure will provide significantly more benefits to working poor families. Minnesota has never drawn distinctions between citizens and noncitizens for the purpose of eligibility for income support benefits in its AFDC, General Assistance, and EITC programs. With the intent to continue that principle, 1997 legislation contained some provisions for program eligibility and compensated for some federal cuts for legal immigrants through state fiscal years 1998 and 1999. However, these provisions will end with the biennium unless future legislatures act to renew and fund them.

Recent Innovations, Changes, and Waivers

The MFIP has been Minnesota's primary welfare waiver project. It was implemented in 1994 in seven counties (including Hennepin) after several years of planning with the help of a variety of policy actors. An eighth county (Ramsey, where St. Paul is located) added MFIP-R in 1996. MFIP goals included reducing poverty and supporting work, not simply decreasing the size of welfare rolls. To this end it allowed continued participation in welfare until a household's earnings reached 140 percent of poverty. Single-parent welfare recipients were required through a time trigger to participate in MFIP as soon as they were on the AFDC caseload for two years; two-parent families had to start immediately. The mutual responsibilities of state and recipient were emphasized in the employability plan that each person in MFIP had to complete, detailing what steps the recipient would take to achieve self-sufficiency and what services the state would provide to support the recipient's efforts. MFIP included substantial funds ($1,900 per participant) for case management, education, training, and supplemental services (e.g., transportation). MFIP policies were very supportive of education and training to build recipients' skills, including college degree programs as well as shorter training courses. Thus recipients enrolled and in good standing in education or training could delay entry into actual competitive employment for a number of years after beginning MFIP. Failure to comply with the steps in the employability plan generated a sanction of 10 percent of the grant amount; recipients could reinstate this amount by showing proof of plan compliance. About half the people in sanction status had been so for less than four months. However, half chose to live with the sanction for longer periods rather than comply, and no further sanction was possible under the MFIP rules for continued noncompliance.

MFIP simplified and streamlined AFDC eligibility rules and requirements and, through its emphasis on work, changed the role of welfare workers and the culture of the welfare office. Local officials reported significant changes in attitudes and behavior among caseworkers toward promoting work and appreciation that, through them, the program had something constructive and forward-looking to offer recipients. MFIP is included in the Manpower Demonstration Research Corporation's evaluation of AFDC waiver programs. Results to date suggest that MFIP has been quite successful: After 18 months on the program, 52.1 percent of urban long-term welfare recipients were working either full or part time compared to 37.6 percent of the control group, an increase of 38.7 percent. In addition, MFIP moved a significant percentage of this group out of poverty (44 percent of MFIP families were still in poverty after 18 months compared to 60 percent of the control group). In rural areas, MFIP increased total income of long-term recipients by 14 percent and reduced the proportion of these households in poverty by 28 percent. 5 The demonstration will continue through July 1, 1998, six months after the remainder of the state shifts to the modified version of MFIP that the state has adopted as its TANF program.

Even before TANF and with MFIP operating, Minnesota had taken some steps to shift its welfare programs toward more immediate involvement with work. The Welfare Reform Act signed by Governor Carlson in May 1995 represented a shift toward work requirements, albeit a gradual one. The act included provisions expanding MFIP to Ramsey County (St. Paul; implementation date July 1996), but altered the program in that county by requiring those enrolled in MFIP to obtain work or be actively looking for employment within one year of receiving assistance, rather than MFIP's two years. Ramsey County's version of MFIP retained MFIP recipients' opportunity to pursue an educational degree, but required them to hold a part-time job if they were not going to school full time.

Minnesota's 1995 Welfare Reform Act also eliminated the Work Readiness program under General Assistance for able-bodied, childless adults (although the same individuals retained their eligibility for GA-Medical Care), and introduced a 30-day state residency requirement for General Assistance and GA-Medical Care. It also directed DHS to request a waiver allowing Minnesota to apply similar restrictions to AFDC cases (this waiver request was never submitted). The act went further in exploring work-oriented welfare reform by mandating a program called Work FIRST in two counties. Work FIRST recipients received vouchers for child care, rent, and utilities rather than a cash assistance check and were required to participate in an immediate job search for 60 days. If employment was not secured by the end of this period, the recipient was placed in a temporary public service job. These actions were the first signs of a statewide movement toward encouraging immediate employment.

Two other welfare demonstrations were never implemented before TANF and probably will not be implemented now: Work Focus and MNJOBS reflected the combined influences of the state legislature's desire to favor immediate labor force attachment and the counties' wish for more independence in designing welfare programs. Work Focus was intended to allow counties to design their own pilot projects, and MNJOBS was a framework for a demonstration project similar to GAIN in Riverside County, California, with an emphasis on quick employment and additional support for those unable to enter the labor market immediately.

Minnesota state officials have been quite pleased with the MFIP program, as are county staff interviewed in locations where the MFIP waiver operates. The state's welfare reform plan in response to federal changes takes MFIP as a model, transforming it with some significant modifications into MFIP-Statewide (MFIP-S). The shift away from supporting extensive education and training for welfare recipients has been the largest policy change over the past couple of years and became a matter of serious debate in the state legislature during consideration of the governor's proposal for MFIP-S. In the next two sections, we will examine employment and training, child care, child welfare, and other programs to gain a fuller understanding of the array of programs that form part of Minnesota's pre-TANF social safety net and how they interact. Then, in this report's last section, we will return to a consideration of the challenges that welfare reform will pose in Minnesota and the context in which those challenges will be handled.


Programs That Promote Financial Independence

The cash assistance programs described in the previous section cannot, by themselves, promote self-sufficiency, nor do they supply income levels adequate to raise recipient families out of poverty. To reach either of these goals, cash assistance programs combine their own activities with employment and training services to build recipients' skills and increase their employability, and with child care so parents can enter the workforce with the assurance that their children are being cared for and supervised. Assurance of health care when needed is also essential. Therefore, this report includes an examination of the nature, structure, and availability of publicly supported employment and training and publicly subsidized child care services in Minnesota, both for welfare recipients and for low-income nonwelfare working families. 6 A further potential source of support for low-income families is money from child support paid by an absent parent. In recent years policymakers have recognized that some families could forgo welfare altogether if they received the full amount of child support they are owed under court orders. Public laws have been passed, and public agencies have made substantial efforts to increase collection of these child support arrearages and to keep child support up to date. We therefore included state-level child support collection efforts in our examination of programs that promote financial independence. Finally, lack of health care insurance coverage in entry-level jobs has been a significant barrier to families' leaving welfare, so we looked at what Minnesota provides by way of transitional Medicaid and other publicly subsidized health insurance to reduce this barrier.

Employment and Training

Service Delivery Structure

The Minnesota Department of Economic Security (DES) and the Department of Human Services (DHS) are administrative partners for programs aimed at low-income households receiving public cash assistance benefits. In 1996 and 1997, these programs included STRIDE (Minnesota's JOBS program for AFDC recipients), Food Stamps Employment & Training, and several DHS waiver projects for AFDC recipients, including MFIP, Work FIRST, Work Focus, and MNJOBS. Food Stamp Employment & Training and employment and training for AFDC recipients, including all those participating in waivers, are managed by DES under an interagency agreement with DHS.

Regardless of the program in which the recipient participates, virtually all employment and training services in 1996 and 1997 were delivered by nonprofit organizations under contract to local service delivery agencies (SDAs—entities established to administer federal Department of Labor funds). The same nonprofit providers may offer services under several different funding streams and programs. STRIDE and MFIP funds flow from the state DHS to the counties and then either to local jurisdiction SDAs (such as Minneapolis) or to service providers. The Workforce Preparation Branch of DES oversees and administers the programs just mentioned for welfare recipients, plus some employment and training programs not related to welfare, including Job Training Partnership Act (JTPA) programs, dislocated worker and youth programs, and Community Service Block Grant Employment & Training. STRIDE and JTPA have an especially cooperative relationship, facilitated by their common administration in the same branch of DES. Sixty percent of AFDC clients are co-enrolled in STRIDE or MFIP and JTPA, giving the state access to more resources for STRIDE and MFIP populations.

Priorities

In 1996 and early 1997, Minnesota's employment and training programs that are run through DES targeted recipients of welfare and other benefits, youth, and dislocated workers as their priorities. JTPA programs, run by local SDAs, included these groups in their priority service populations and also placed a priority on serving persons with limited English ability and high school dropouts.

Youth employment is very high on Governor Carlson's list of priorities and was mentioned in both the 1996 and 1997 State of the State addresses. The legislature has backed this emphasis by replacing federal JTPA cuts in youth programs with state dollars. Programs regularly offered to youth include summer and year-round employment programs, YouthBuild (which teaches construction skills while building houses), job fairs, and significant interagency work with the Department of Corrections for court-involved youth. In addition, DES is working with the Department of Children, Families, and Learning (DCFL) on school-to-work issues, but the relevant office in DCFL has had a constant turnover in leadership, so this area is at an early stage of development.

Dislocated workers (those who lost long-term jobs because of shifts in the labor market resulting from technological changes or changes in competition or demand) are a large concern in Minnesota, and a program for this population is generously funded through a payroll tax on employers ($6 million federal; $23 million state). The program draws considerable attention because its funding mechanism is a point of contention for businesses, yet labor wants more money for the program.

There has been some tension involved in decisions about meeting the needs of welfare mothers, youth, and dislocated workers. The funding needs of youth programs often compete with those of dislocated worker programs, with the latter receiving more attention because Minnesota workers in some sections of the state have experienced many layoffs. Programs to serve welfare mothers also have a difficult time competing against those for dislocated workers, because dislocated workers draw more sympathy from legislators. These pressures will likely escalate over the next few years as the demands of welfare reform for employment and training resources increase.

Diminished federal JTPA funding for adult services in recent years drove major changes in goals for employment and training for nonwelfare clients. Providers needed to develop options for shorter term training in order to stretch dollars further. Now providers face a dilemma they see as a quality of life issue: Do nonwelfare clients have to take minimum wage jobs rather than acquiring skills for better jobs? Providers believe that without longer term training to upgrade skills, minimum wage jobs are the only ones the people they serve will be able to secure. This, of course, is the same dilemma faced by many people holding dead-end low-paying jobs, whether or not they are eligible for publicly supported job training assistance.

Services for Families on Welfare

Since MFIP began in 1994, Minnesota administered two primary JOBS-related programs (STRIDE and MFIP) for AFDC recipients, involving a two-track approach to welfare-related employment and training. STRIDE always emphasized education and training, and encouraged and supported some clients through four-year college degrees. MFIP followed a more traditional labor force attachment model: Education and training remained options, but not to as great a degree as in STRIDE. In the future, helping welfare recipients acquire educational credentials will remain a possibility, but significant early involvement in work-related activities will be the official priority. Both STRIDE and MFIP offered a range of services such as skills assessment, counseling, development of a service plan detailing commitments by the recipient and the program, educational options, training options, job search, résumé writing, establishing child care authorizations, monitoring, and periodic reassessment.

Services for Nonwelfare Clients

JTPA programs, used by both welfare and nonwelfare clients, provide the following services: classroom training, on-the-job training, vocational and personal counseling, labor market information dissemination, and assessment. No publicly supported programs offer lengthy educational opportunities such as two- or four-year degree programs to nonwelfare clients, with rare exceptions when a program will pay for a dislocated worker to complete up to two years of education. The basic priority for nonwelfare clients is to get them back into the workforce as quickly as possible. Services for youth involve strong links between classroom and on-the-job experiences to make clear the relevance of classroom learning to work requirements, and full-year programming so the gains of summer employment are not lost during the school year. Dislocated workers receive readjustment, retraining, and supportive services financed through a tax on employer payrolls. Federal funds cover 40 percent of the cost when 50 or more individuals are affected by a plant closing or mass layoff.

With respect to dislocated workers and youth, DES works both through and outside the Workforce Center system (see below). Once the centers are operational, dislocated workers will be expected to seek help through them for assessment, job counseling, job search assistance, classroom training, on-the-job training, assistance with paying health insurance, child care, transportation, and other emergency needs. More supportive services for youth may remain outside the Workforce Center system.

Workforce Centers

The overarching future strategy for supporting employment and training activities statewide is the Workforce Center system being developed by DES and its local partners. The Workforce Center system is sponsored by DES and creates a collaboration between state and local agencies and private and public organizations (including DHS and DES nonprofit subcontractors). Primary participants include Job Service/Reemployment Insurance and veterans programs, the local Workforce Councils and local elected officials who work with JTPA, Older Workers programs, Rehabilitation Services, State Services for the Blind, and Community Action Agencies. Other partners include county governments, postsecondary and secondary education and training entities, displaced homemakers programs, and other programs based on local need. Part of the impetus for the system was the decrease in funding for employment and training, which stimulated increased collaboration among employment and training service providers to serve job seekers and employers better and more efficiently.

Twenty Workforce Centers were open in March 1997, with 20 to 30 more scheduled to open by July. The centers feature case managers and job developers from each of the cooperating agencies and offer other services related to workforce development. Services for job seekers include résumé and job search workshops; listings of state and national jobs; job search clubs; career guidance; use of computers and laser printers; access to the Internet and electronic job listings; a resource library with a variety of materials; access to telephones, faxes, and modems; financial aid information; and case management. Services available to employers include job listings, interviewing/recruiting, tax and employment seminars, labor market information, and job order matching, among many others. 7

The state is also pursuing a technology initiative, seen as the foundation of the Workforce Center system, that will allow all centers to hook up via the Internet to a "virtual" center that offers a variety of job banks and other employment information through computer links. State and local Workforce Councils are being established as part of the Workforce Center system. The councils and centers are expected to work together to increase customization of services to meet the special needs of customers (both employers and aspiring employees) and to foster access to better localized labor market information for employers and job seekers.

Additional statewide workforce development strategy is provided by the Governor's Workforce Development Council, established in December 1995. This council is charged with statewide coordination, development, implementation, and evaluation of employment and training, including efforts to create a seamless delivery system, develop statewide and local performance standards, and study human investment needs in Minnesota.

Child Care

Over the past decade, Minnesota has demonstrated a strong commitment to developing and expanding child care and child development programs for low-income families. The state has allocated a considerable amount of state funds for early childhood programs, made quality improvement activities a top priority, and restructured its public agencies to create more integration of child care and child development programs. However, funding remains inadequate to meet demand, with nonwelfare families having a particularly hard time accessing assistance. Moreover, child care and child development programs appear to operate independently of each other.

During the past few years, Minnesota started to shift its focus from child care as an economic security service to child care as a preventive service designed to help children grow up healthy and to strengthen families. In shifting its focus, the state stressed the importance of quality care and has attempted to bridge the gap between the visions for child care and child development. State and county officials agreed that there exists today, more than ever, strong support for quality child care. However, officials also noted that the target population for child care programs has recently changed in two specific ways that run counter to the recent focus on making child care's preventive benefits available to a broad range of families: Nonwelfare working poor families are losing out to welfare recipients, and child care funds are supporting employed AFDC recipients rather than welfare families involved in education or training activities.

Since 1980, Minnesota has used a combination of federal, state, and county funds to provide child care assistance on a sliding fee schedule to low-income families not on welfare through BSF. Of the approximately 7,800 families receiving BSF assistance, 87 percent have incomes below 200 percent of poverty, with 53 percent whose incomes are below 150 percent of poverty. One-third have received BSF assistance for 0-12 months, about one-fourth for 12-24 months, and another one-fourth for 25-36 months.

BSF gives first priority to families who have left welfare and completed their year of Transitional Child Care (TCC) assistance. Within the past few years, as the number of families leaving welfare has increased, BSF has had to devote most of its resources to serving families in this first priority group. As a result, few new families who have never received welfare are able to get BSF subsidies for child care; such families constituted 80 percent of those on the waiting list for BSF in September 1996. Of families who were receiving BSF assistance at that time, 21 percent had also received child care assistance while on AFDC, and about 15 percent were in their "transitional year" after leaving AFDC. Moreover, until recently, child care subsidies supported about an equal number of welfare families who were employed compared with welfare families participating in education and training. However, by late 1996, almost all subsidies supported working AFDC families; some short-term child care support was available for those attending extended education and training programs, but little or no long-term support existed.

Minnesota has three major publicly supported child development programs. All have universal access (i.e., no income eligibility requirements) and all are funded exclusively with state and local money. The Early Childhood Family Education program, funded since 1974, offers parent education to all families with children aged 0-4 years to strengthen families and support parents' ability to foster healthy growth and development of their children. About 258,000 children and their families participate, representing approximately 40 percent of children aged 0-4 years in the state. The Learning Readiness Program, initiated in 1991, helps local school districts plan and deliver a continuum of coordinated services for children ages 31/2 to kindergarten entry. An estimated 91 percent of 4-year-olds participate. Finally, since 1988, the Early Childhood Screening program has provided universal health and developmental screenings to all Minnesota children between the ages of 3 and 4 years.

Service Delivery Mechanisms

Historically in Minnesota, child care and child development programs (CC/CD) have existed in separate agencies, pursued separate missions, and did not coordinate with one another. Starting in 1995, Minnesota began consolidating all CC/CD programs into a new state agency, the Department of Children, Families, and Learning (DCFL), built on the foundation of the old Department of Education. All child care and development programs spread out in numerous agencies (including the Departments of Economic Security, Human Services, Corrections, and Public Safety) moved to DCFL, with the expectation that they would increase their collaboration. To date, consolidation does not appear to have produced this result, but it is still too early to tell how the new arrangements will work out.

Minnesota's CC/CD system is state-supervised and county-administered, but the main aspects of the state and federally funded programs are determined at the state and federal levels. Eligibility requirements, payment levels, and licensing standards are all set by the state or federal governments. County flexibility comes in how they administer their CC/CD programs. Some counties contract out some or all of their CC/CD administration responsibilities, including eligibility determination, subsidy level determination, and payments to providers, while others perform all these functions within county government; most counties run their own programs. Moreover, some counties in Minnesota (e.g., Hennepin) have allocated a significant amount of county funds for CC/CD. Other counties have not invested any county funds in CC/CD programs beyond required match funds for state assistance. Overall, county funds account for 16.6 percent of child care and child development spending (see Table 2).

Access to child care occurs either through county welfare offices or through child care resource and referral agencies (CCR&Rs). Welfare recipients can and do use both, whereas nonwelfare households use only the CCR&Rs. Workers at either access point establish a family's eligibility for child care and the level of subsidy appropriate to their income. Payments are made directly to providers by the administering agencies once a client is approved for a child care subsidy, so clients do not have to cover any up-front costs.

For welfare recipients, child care is 100 percent subsidized. For those receiving assistance through BSF, only families with incomes at or below 75 percent of the state median for households of comparable size are eligible. Households with incomes at or below poverty receive 100 percent subsidies. At 150 percent of poverty, the copayment is still a low $49 a month for a family of three. At 200 percent of poverty, the copayment is $179 a month; copayments go up to $470 for a family of three with household income of 250 percent of poverty, after which the household is not eligible for assistance under BSF. 1997 child care legislation will require a $5 copayment for all families with incomes between 75 percent and 100 percent of poverty beginning in January 1998, for welfare and nonwelfare families alike.

State and county officials agreed that the system for providing child care services in Minnesota is far from seamless, both administratively and from a parent's point of view. Officials noted that a lack of money forces states to put families into AFDC and non-AFDC categories, and that particular funding sources are available to one category but not to the other. However, families constantly move onto and off welfare. When they do so, they also must change funding categories for child care. Because so much emphasis is placed on ensuring that child care is paid out of the correct funding stream, it sometimes happens that families encounter gaps in their child care coverage and providers encounter gaps in payment for their services.

Adequacy of Funding

Even though Minnesota invested almost $90 million in state and local resources in child care and development programs in 1995 (see Table 2), funding for child care remains insufficient to meet demand. Families receiving welfare who are working or in training do not have to wait for child care assistance. Similarly, all families who leave welfare are entitled to receive one year of TCC and do not have to wait. However, families who have never received welfare benefits face long waiting lists for child care subsidies.

Over the past five years, state funding for child care has increased steadily, from $19 million in 1992 to $24 million in 1995, $30 million in 1996, and $41 million projected for 1997. Almost all the increase in state child care funding is the result of the expansion of the BSF program. State BSF funding increased from $9.5 million in 1995 to $15.5 million in 1996, with $24.7 million in spending projected for 1997. Total funding for BSF is projected to be $47 million in 1997. 8

Despite the increased funds, which support child care for close to 8,000 families, the waiting list for BSF has grown steadily (from 3,500 in 1991 to over 7,000 in 1997), and about 58,000 families in Minnesota are eligible on the basis of family income. Low-income families must also wait longer for assistance (the average time on the waiting list has increased from two months in 1991 to more than two years in 1997), and in some counties the situation is even worse. For example, in Blue Earth County in 1996, no new families were added to BSF because of lack of funds. Even families coming off AFDC-TCC had to wait to receive child care subsidies until additional funds were appropriated in 1997.

Adequacy of Supply

If people have the money to pay for it, they can find child care in Minnesota; the supply of child care slots has been adequate to meet demand, at least for hours that correspond to an average working week for day workers. However, state and county officials acknowledge that, as a result of the welfare reform legislation, they will need to expand the number of child care slots significantly. In particular, officials are stressing the need to expand coverage to include evening hours and weekends.

Minnesota has observed a marked increase in the use of informal care (registered, nonlicensed) and believes that this increase will continue and probably expand under welfare reform. State officials believe that much of this increase is due to an increased need for child care while the supply of licensed child care has remained constant. As state officials have become more aware of the role of informal child care, the state has started to develop training and technical assistance for counties in the use of informal care and how to ensure and improve quality. For the first time, the state is assessing what is working and not working in informal care.

Child Support

Over the past five years, Minnesota has implemented many programs to increase paternity establishment, improve collection of child support obligations, and enhance noncustodial parents' ability to pay the child support they owe. In 1993, a pilot project in six counties that went statewide in December 1994 focused on arrearage collection through the expanded collection tools of the Department of Revenue and a private collection agency. In January 1994 the state started hospital-based paternity establishment, and by 1995 hospital-based procedures at the time of birth accounted for 56 percent of all cases where paternity was established. On January 1, 1995, Minnesota became one of the first 12 states to begin complying with the Uniform Interstate Family Support Act (UIFSA), a law that streamlines enforcement of interstate child support cases. On January 1, 1996, Minnesota began suspending driver's licenses for noncustodial parents at least three months behind in their support payments. Finally, since July 1, 1996, all Minnesota employers have been required to notify DHS within 15 days of hiring an employee. This initiative replaced past requirements for employers to ask newly hired employees about their child support obligations, and is expected to facilitate collections. State officials do not believe that TANF will significantly affect Minnesota's child support activities, since the state made these changes well before passage of federal welfare reform legislation.

The relationship between AFDC and child support enforcement activities differs from county to county. In some counties, these functions are co-located; in others they are in separate divisions. Minnesota has developed some incentives that counties can receive if they improve their collection rates for AFDC cases. However, significant resources have also been devoted to cases that are not on public assistance.

State officials are not entirely satisfied with the results of efforts to increase paternity establishment and child support collections for AFDC cases. In 1995, Minnesota established paternity in 53 percent of AFDC cases (up from 51 percent in 1994), compared to establishment in 76 percent of non-AFDC cases. The state collected $290 million in child support for approximately 196,000 cases in 1995, up from $250 million for 186,000 cases in 1994. The average yearly collection per case was $1,520. A total of $61 million was collected in AFDC cases, while $185 million was collected for non-AFDC cases.

Priorities

Unlike many other service systems in Minnesota, some aspects of child support enforcement have been moving toward increased centralization rather than decentralization during the past two years. Minnesota is increasing its reliance on a centralized, automated child support enforcement system, slated for completion in 1997, to provide more uniform statewide service with respect to payments and tracking employment and other information. Counties will retain their responsibilities for paternity establishment, eligibility determination, and enforcing compliance with court orders.

Minnesota has also shifted its focus from using courts to using administrative law judges to resolve child support cases. Use of administrative law judges is believed to reduce costs and resolve child support issues more quickly and in a less adversarial setting. Currently, 67 of Minnesota's 87 counties use administrative law judges; legislation passed in 1995 requires all counties to do so by July 1, 1998.

Noncustodial Parents

Minnesota implemented the Parents' Fair Share program in 1994 to help noncustodial parents whose children receive AFDC to find employment and improve their relationships with their children and the custodial parent. The program, which is operational in three of the seven metro counties (Ramsey, Anoka, and Dakota), provides unemployed or underemployed parents with job training, help in parent-child relations, and assistance with conflict resolution. Evaluations have documented that six months before joining the program, participants paid an average of 22 percent of their court-ordered child support, whereas six months after completing the program they paid an average of 84 percent. More than 500 parents have participated in the program.

Medicaid and Other Health Insurance9

Families participating in AFDC, MFIP, and other cash assistance programs in 1996 were categorically eligible for Medicaid (AFDC, MFIP) or GA-Medical Care, which offers virtually identical benefits. Families leaving AFDC or MFIP remained eligible for extended Medical Assistance (Medicaid) for six months and, if their gross earnings remained below 185 percent of poverty, could continue to receive extended benefits for up to 12 months. In addition, pregnant women and children aged 0-2 years who are not eligible for AFDC, MFIP, or General Assistance are eligible for Medicaid if their household incomes are below 275 percent of the federal poverty line. Since the early 1980s, the state legislature and administration have pursued a policy of leveraging Medicaid dollars whenever possible to fund public health and social services activities provided by counties. In terms of direct service provision at the local level, Medicaid reimbursements increased from 9.4 percent to 19.4 percent of total funding between 1987 and 1994. This funding has allowed expansion of county activities beyond the traditional public health functions into direct service provision, and has also supplied resources for counseling, residential care, and other child welfare services, and for case management and supportive services for welfare clients. Shifts toward more managed care are increasingly threatening these arrangements and compromising counties' ability to fund these services.

During the past several years, health care issues other than Medicaid have been a top priority on Minnesota's political and spending agenda. Many of the changes affect families with children. In 1992, sweeping health care legislation, referred to in its entirety as MinnesotaCare, created the MinnesotaCare program, a subsidized insurance program for the uninsured; created the goal of universal insurance coverage for all Minnesotans by January 1, 1997 (since modified to "no more than 4 percent uninsured by January 2000"); required that jurisdictions switch all their publicly funded populations to managed care (which has run into a number of obstacles); reformed insurance practices with regard to small employers and individuals; and regulated the rate of spending growth for health care.

The vision behind the 1992 health care reform legislation was to create a package of mechanisms through which everyone in Minnesota could be covered by health insurance, either privately purchased or publicly subsidized. The MinnesotaCare program is a subsidized health insurance program for uninsured families with children with incomes up to 275 percent of poverty and childless couples and individuals up to 135 percent of poverty (increased to 175 percent of poverty by 1997 legislation), if they have been uninsured for four months or more and have not had access to employer-provided health insurance for at least 18 months. The program has been modified by statute in each year between 1992 and 1995. It began accepting clients in October 1992 and, as of July 1996, covered 93,000 Minnesotans. It is financed by a combination of taxes on health care providers and health care plans, and enrollee premiums and copayments for adult recipients. State statistics indicate that 90 percent of the MinnesotaCare program population are in households with incomes below 200 percent of poverty, and two-thirds are under 150 percent of poverty.

The small group and individual insurance market reforms included in the legislation (e.g., development of a small employer insurance product and a state-sponsored voluntary purchasing pool for small employers) have succeeded in increasing insurance provision by small employers, and annual changes in premiums have become less volatile. Progress toward moving all publicly assisted populations into managed care has been less successful to date. The delays in this project do not have an effect on people's health care coverage (the same people are still covered, just not by managed care), but the hoped-for cost savings to Medicaid and other public payors have been delayed.


The Last-Resort
Safety Net Programs

Assessing the New Federalism focuses on the effects on children and families of the changing responsibilities, program structures, and services occasioned by devolution and increasing state flexibility to set rules and priorities for major social safety net programs. Although it is hoped that these changes will promote well-being for children and families, it is important to consider what might happen to families for whom the new rules and programs do not work as designed. Child welfare and emergency services have existed for a long time to "pick up the pieces" when families cannot meet many of their own or their children's basic needs. We felt it was important to include these programs in our state case studies to help us understand how these backup, last-resort safety net programs operated during the period of 1996 and early 1997. This information will serve as a baseline of comparison for circumstances we encounter after welfare reform initiatives have operated for a year or more.

Child Welfare

Child welfare agencies have the responsibility to protect children from abuse and neglect. They may intervene in families where such behavior is suspected, may offer services or require that families accept services if the need for them is documented, and may remove children from their parents and place them in state-supervised care if the children face imminent harm in the parental home. One pessimistic view of welfare reform is that more families will neglect and possibly abuse their children if they lose welfare benefits and have no other source of income or support. The child welfare system would be one place these effects would be noticed. Therefore, we looked at baseline operations of this system in Minnesota, to have a point of comparison against which to judge one possible effect of welfare reform.

Minnesota is one of 13 states that have a state-supervised, county-administered child welfare system. Counties are responsible for the bulk of child welfare funding. The major issue guiding child welfare policy and practice in the state has been the increasing number of children in costly out-of-home placements. 10 At both the state and county levels, the response to this increase in placements has been an increased commitment to prevention and early intervention services and efforts to achieve quicker permanent arrangements for abused and neglected children who cannot remain at home.

Funding Sources and Adequacy of Supply

According to a Minnesota DHS estimate, total child welfare spending was approximately $300 million in FY 1995. County spending, funded entirely through property taxes, accounted for $171 million, or 57 percent of total spending. 11 Thus, counties with a higher property tax revenue have a greater capacity to fund child welfare services. As a result, child welfare practices differ considerably across counties. These differences are most notable during periods when demand for child welfare services increases faster than funding, as has occurred in Minnesota since the early 1990s. In response, some counties with high demand for child welfare services have informally redefined the target population for investigation as well as intervention, reducing the number of children that would otherwise be served. For example, counties with a high demand for child welfare services may require evidence of more extensive harm before they intervene than would other counties with a lower demand. Some counties have restructured services in an effort to save resources and also deliver better care. Restructuring takes many forms, including increased early casefinding and intervention designed to decrease costly out-of-home placement, and earlier decisions about course of treatment (whether to continue working with a family or recommend termination of parental rights) to reduce the length of time that cases remain in the system and consume resources.

Type of Service

Besides funding, the main issue driving child welfare policy in Minnesota is the number of children placed outside the home and the length of time children spend in these placements. Minnesota has often ranked very low among states in its rate of reported child abuse or neglect but quite high in its rate of out-of-home placements for the cases it does see. In 1993, Minnesota ranked 48th in children reported as abused or neglected and 43rd in substantiated cases per 1,000 children. But the state ranked 18th in the proportion of reports substantiated (39 percent), 7th of the 34 states reporting in the number of children removed from their home, and 11th among all states in the total number of children in out-of-home care per 1,000 children. 12

Both the state's and counties' response to the high level of out-of-home placements has been to emphasize prevention and early intervention services. In implementing this new effort, the state relies heavily on community-based systems of care to support the child welfare system, asking county child welfare agencies to collaborate with other social service, health, and family support agencies. In some instances this is the first time the child welfare agency has collaborated with other public and private agencies in such a meaningful way. Although Minnesota has placed an emphasis on prevention services and preserving families, the state has not implemented a formal intensive family preservation program. Rather, family preservation in Minnesota is a funding stream that county Social Service Agencies can use to purchase services that they do not deliver themselves. 13

Over the past few years, DHS has also expressed concern about the increasingly long periods that children stay in foster care. As a result, the state has formulated two new policies focused on achieving faster permanency resolution. State law directs that children achieve permanency within 12 months of placement, which requires staff to make an early judgment about the permanency goal and establishes an outside parameter for families to comply with case plan activities before permanency plans will take over. In addition, a new state law allows child welfare staff to recommend immediate termination of parental rights in some instances (such as evidence of aggressive or severe harm to the child, or when previous termination petitions have been filed).

The use of, and commitment to, relative caregivers has also become a top priority for the state. Before 1990, DHS would not license or pay for relative foster care. Following a class action law suit, DHS made it a policy to license and pay all relative caregivers and to give priority to relatives when making placements. However, counties implementing this policy are finding it harder and harder to locate appropriate relatives with whom to place children, because the home still has to meet foster care licensing standards. Despite the state's emphasis on placement with relatives, relative foster care makes up a small portion (10 percent or less) of all out-of-home placements and appears to be decreasing. 14

Emergency Services and Housing

State-level responsibility for homeless services and activities consists of providing general oversight and statewide standards, as well as administering several sources of federal funds. Counties have the day-to-day responsibility for services and for eligibility determination where that is relevant. Minnesota does not have an overarching state-level vision, goal, or plan for helping people out of homelessness, but several efforts are under way that do have specific goals. An Interagency Task Force on Homelessness meets once a month and counts among its members representatives from all relevant state agencies. This task force is intended to be a mechanism to work across agency lines to coordinate homeless services, but so far it has functioned primarily in its role as the governing body for a Family Homelessness Prevention and Assistance Program (FHPAP) funded by the Minnesota Housing Finance Agency. The Office of Economic Opportunity within the state Department of Economic Security, which handles the state's McKinney-funded programs, has established Housing Partnerships in the nonmetro regions of the state, and has begun an effort to develop regional Continuum of Care Committees. These committees are intended to get every agency and organization associated with sheltering and homelessness to the table, identify available services and gaps, decide which gaps should be filled first, and begin to develop services.

In Minneapolis, the city and county (Hennepin) have long been involved in planning and carrying out comprehensive approaches to dealing with both literal and imminent homelessness through a variety of mechanisms, all of which involve a good deal of collaborative effort among government, nonprofit, private foundation, and corporate actors. Most of this effort stems from analysis that came to the conclusion that emergency shelter would never solve the problem, and that major efforts would be needed to develop the capacity to assist people so they either would not experience homelessness or could leave it for good.

State funding for homeless programs includes about $5 million a year for FHPAP, $1.3 million in FY 1996 for transitional housing, and $6.3 million through Title IV-A Emergency Assistance for AFDC-eligible families. Hennepin County spent about $3.5 million of county dollars in FY 1996 on homeless services, out of a total of slightly over $8 million that flowed through county agencies for this purpose. County funds went for adult services, including residential care for homeless adults with disabilities, health care for the homeless, and emergency assistance. No figure is available for the total amount of money expended on homeless services at either the county or the state level.

Minnesota conducts a quarterly statewide shelter survey, and has done so since 1985. As a consequence, the state has good data on sheltered homeless people and statewide shelter capacity. On November 26, 1996, 4,946 people were in homeless shelters statewide, with 1,953 in Minneapolis and 85 in the nine counties of the Minnesota Valley Action Council (Blue Earth County is one of the nine, and the county that shelters most of the homeless in the Minnesota Valley Action Council catchment area). The November 1996 statewide total is 23 percent higher than the total for the previous year at the same time. Statewide shelter capacity changed from 5,085 in November 1995 to 4,830 in November 1996—a drop of 5 percent. The biggest loss was 22 percent for overnight shelter, largely accounted for by the loss of 400 beds in Minneapolis. Battered women's and transitional accommodations have been steady.


Innovations and Challenges

In this final section we step back from particular programs and practices to present a bit of the larger picture of innovations already under way in Minnesota, and the challenges the state perceives that it faces as it tries to maintain and improve the well-being of children and families. We cover pre-TANF devolution of responsibility to local governments, governmental reorganization, privatization, and the implications of federal welfare reform.

Pre-TANF Devolution of Responsibility to Local Governments

Minnesota has a state-administered, county-operated system for income support and child welfare programs. Counties have little flexibility in their welfare programs, considerably more latitude in some other programs, and no state mandates in still other areas.

Responsibility and funding for many health and social services functions were block-granted from the state to counties many years ago through the Community Social Services Act (CSSA-1979) and the Community Health Services Act (CHSA-1976). Counties develop and the state reviews plans for these functions, but counties have flexibility to set their own agendas within broad guidelines of the acts that set forth populations to be served and services eligible for support. Counties have a great deal of flexibility to set their own child welfare practices, again within broad guidelines issued by the state. Further, in recent years county officials have had regular opportunities to help determine the overall shape and direction of state guidelines in these areas, so counties generally find state guidelines acceptable.

Philosophical commitment to within-state devolution is strong in Minnesota for most of the programs included in this study. Even with a major waiver experiment (MFIP) under way for welfare reform since 1994, the Minnesota legislature responded to local interest in following other routes with several small-scale welfare reform experiments and waivers (Work-Focus and Work FIRST). During the past few years the Departments of Human Services and Education (now the Department of Children, Families, and Learning or DCFL) created several collaborative mechanisms to promote local control and decisionmaking concerning children's mental health, family services, and the schools' role in their communities. Some state funds currently flow through these collaboratives, and the expectation is that much more state and federal funding could be channeled through these mechanisms in the future. These collaboratives hold the promise of local control over funding allocations as well as over service priorities, but to date the categorical nature of the funding streams has changed very little, and existing eligibility rules still apply (to the frustration of many local people who thought they really were going to have effective control).

Minnesota also has programs with little local flexibility and others that are moving toward more centralization of control at the state level. County welfare agencies must follow state specifications for AFDC eligibility, verification, and payment. One issue on which counties wanted more flexibility was vendor payments—to be able to use money from a recipient's cash assistance grant to issue direct payment vouchers to landlords and utility companies when they had evidence that the adult grant recipient was not meeting these obligations. The state's TANF plan includes such vendor payments. However, counties still do not have flexibility as the legislation specifies when they must be used, and there is some debate as to whether these strictures will be helpful in specific cases.

Child support enforcement is one example of some program functions moving toward centralization. Statewide computer systems run by DHS are expected to improve collections by matching support owed to employment and other records, and to improve consistency of payments. They will replace inconsistent county efforts to perform these functions (although counties will still perform most activities related to child support enforcement). Workforce Center development activity is also being pursued through detailed directives from the state DES. This strong central hand is meeting some resistance from local actors when they perceive that their locality has somewhat different priorities than those imposed by the state. In particular, rural agencies would like more flexibility to adjust the order in which they develop remote access (through computer links) and on-site one-stop-shopping, as people living in many parts of their catchment areas would have trouble coming to a single service center.

Counties in Minnesota vary widely in their capacity for managing and developing programs, which will have implications for the effectiveness of devolution. In response to pressure from counties, DHS has promised some relief from the burden of state regulations. Not much has happened to date, but DHS anticipates more pressure as counties want more flexibility to use state dollars in line with their own priorities. DHS has a process through which counties can petition for waivers from state rules and regulations, but most of the waivers granted have been for minor things. The give and take between counties and the state over points of difficulty related to control, responsibility, and funding usually produces a negotiated solution acceptable to all—but it may take some time. A recently resolved example involves a mechanism for counties interested in doing so to serve as Medicaid managed care providers for populations for whom they have statutory responsibility under the Community Social Services Act (including the mentally ill, developmentally disabled, and chemically dependent), and who have encountered difficulties receiving appropriate services from private managed health care companies.

Organization and Innovation

In recent years, Minnesota state government has undertaken some major reorganizations affecting the programs of interest to this study. Changes in DHS were inspired by internal leadership, while those that created DCFL stemmed from the recommendations of a nondepartmental task force. In addition, the introduction of several opportunities for localities to receive state funding to develop collaborative structures for service delivery is a recent change that should affect the experiences of clients and others who need to use services.

Reorganizations

DHS is Minnesota's largest state agency, with about 7,000 employees. Its primary responsibilities include health care financing (Medicaid, MinnesotaCare, GA-Medical Assistance), income security (welfare, General Assistance, emergency assistance), children's well-being (child welfare, children's mental health), and state hospitals. DHS reorganized itself about two years ago, after a long period of planning focused on rethinking its goals and ways of operating. Its intent was to better position the department to deal with anticipated significant changes (in federal-state relationships, public attitudes toward welfare, the role of government in providing services, and the aging population and its needs). DHS wanted to be an agency that helped local communities solve their own problems rather than imposing solutions from above. The reorganization produced a flatter organizational structure, a reduction in assistant commissioners from six to four, and a restructuring around populations and their needs (children, adults, aged people, and health), rather than services or diagnoses.

The process that ended in reorganization began with efforts to define core values and to develop leadership skills throughout the organization. The core values serve as the framework for DHS activities and are felt to have permeated the organization. They begin with a commitment that the agency's purpose is to help people, not to run programs ("figure out what people need, and then how to help them; don't refuse to help just because they do not fit a particular eligibility category"). Staff interviewed say they and others in the agency routinely come back to the core values as they conduct program planning and even day-to-day decisionmaking—the values help shape those decisions at every level. Most funding streams have not yet been integrated, but integration is a goal, and DHS is moving toward more outcome-based and integrated funding. Their first experiments are through the children's mental health collaboratives, the family services collaboratives, and developing outcome measures for children's programs.

DHS staff interviewed believe that the process leading to reorganization, and their new structure itself, put them in a better position to handle welfare reform. They started planning early, they have pulled together as a team across the agency, and they have developed good relationships with the broader community, including joint local workshops with nonprofit and advocacy groups, to pave the way for coming changes. It is worth noting that DHS is well respected and trusted across state and local government agencies, by legislators, and by private organizations with whose representatives we spoke, which is not always the case with state welfare agencies.

The new DCFL grew out of the joint activities of the Children's Initiative funded by the Pew Charitable Trusts in 1992 and the governor's Children's Cabinet formed in 1992. The governor proposed the original plan, which received legislative approval in 1994.

DCFL was designed to bring together children's programs from many different agencies and concentrate them in what had been the Department of Education. This is the fourth recent reorganization of the Department of Education, the previous one having occurred just two years earlier. A good deal of negotiating went on to determine which programs would actually move to DCFL; in the end only child care and the family services collaboratives were transferred from DHS and Head Start transferred from DES, although many more programs were originally designated to move. DCFL sees itself as a state-level model of desirable local reorganization, pulling together programs across the entire system to meet the needs of children. The process at the state level is just beginning and the task of integration will be challenging because of differences in culture across programs and across their original agencies. The challenge is to create a new culture that combines the best elements of the several programs.

Intended Effects on Clients/Users

DHS intends that the effect of its reorganization and reorientation will be more efficient and more appropriate services for children and their families. Of course, DHS is not a primary service delivery agency. Its role is to set the stage and create the conditions for local agencies to make programs work better. With respect to MFIP, the department's premier demonstration incorporating the new values, caseworkers say that the program has changed their relationship with clients, as the caseworkers now have something positive to offer and a method through which they can help clients plan. Where the collaboratives on children have had enough time to develop a functional capacity, there is some anecdotal evidence that they identify children in need and help them and their families in ways that did not happen before. On the other hand, many of the collaboratives have yet to begin serious activities, and in the larger communities of the state there is some question about whether they will succeed in changing the ways that services are delivered.

Like DHS, DCFL is not a primary service delivery agency, and the changes there are much newer and have not yet had time to affect practices at the local service level. There are some signs of changed practices, including policy setting across programs (e.g., developing a common grant application for all prevention programs, working toward a standard of five-year minimum time periods for prevention grant funding), but it is too early to tell what effects this reorganization will have on children and other clients of DCFL programs.

Government vs. Privately Provided Services

Nonprofit agencies perform a great many of the actual services offered to clients in the programs we studied. For both child care and employment and training activities, county staff determine eligibility for welfare households. Nonprofits deliver actual child care, but all other activities (e.g., referral for child care; assessment, services, and evaluation for employment and training) are performed by nonprofits as well as by county staff. Minneapolis experimented some years ago with including for-profit organizations in its employment and training network, but found the for-profits did not do as well. Youth-serving programs, many child development programs, and emergency and transitional shelter programs for homeless families are all operated by nonprofits, and function with both public and private funding. Child welfare is the area with the least contracting out within its basic services, including reporting, investigations, and case determination. Some functions—such as family preservation and support, and adoptions—are contracted out to nonprofits in some counties. For all functions contracted to nonprofits, the government agencies maintain oversight and, in some cases, conduct detailed performance monitoring.

Several projects are under way in Minnesota to make government programs more outcomes- or results-focused. The three biggest are Minnesota Milestones, Outcomes for Children's Programs (OCP) in DHS, and Results and Community-oriented Service (RCS) in Hennepin County.

Minnesota Milestones, initiated in 1991 and reported biannually, are the state's goals for children and youth and indicators to measure progress on them. The 21 indicators include childhood poverty, low birthweight, percent of births to mothers under 18, percent of students who report alcohol abuse at home, and percent of children abused or neglected. These indicators are reported statewide and for each county, and are used by state and local agencies as both targets and performance indicators as they plan programs to meet Milestones goals.

OCP is an outgrowth of DHS efforts to launch a client-focused approach to management. In 1994, DHS used Community Social Services Act guidelines for the seven CSSA-designated target populations to inspire counties to think in terms of desired changes in client lives, what they had to do to make these happen, and how they would know they had accomplished these changes. DHS was after goals for clients, indicators, measures, and, ultimately, performance levels that counties agreed to meet. The approach has been very flexible and is designed for counties to track their progress against their own goals rather than as a monitoring tool for DHS. Some counties are moving faster in this direction than others, but by now most are moving, and the indicators they select for themselves are beginning to converge on a reasonable list of common indicators. Hennepin County, for example, is already beginning to revise its service contracts to incorporate results-oriented performance standards developed through the OCP and other processes. Hennepin County is promoting results-oriented management throughout its functions; its RCS process is an effort to get every agency to identify goals, indicators, and measures, and to gauge its performance and the performance of its contract agencies against agreed-upon indicators and measures.

Implications of the New Federal
Welfare Reform Legislation

Minnesota's TANF Plan—MFIP-S 15

MFIP, Minnesota's AFDC waiver demonstration program, was designed to make families better off at all stages of participation through work. Evaluation results cited earlier in this report for long-term recipients after 18 months in the program suggest that MFIP is succeeding in this goal. Before federal welfare reform legislation was signed into law, Minnesota applied for and was granted a waiver to expand MFIP from its eight counties into a statewide program. This waiver gave the state permission to base its TANF plan on MFIP rules, even when these differed from the parameters in federal legislation.

Minnesota's TANF program is called MFIP-Statewide, or MFIP-S. MFIP-S retains most of MFIP's provisions, with some important exceptions detailed below. MFIP-S does not replace AFDC and STRIDE until January 1, 1998. In the eight MFIP counties, MFIP-S does not go into effect for current recipients until July 1, 1998. However, by federal law the 60-month time limit "clock" starts ticking on July 1, 1997, for every family enrolled on that date except the MFIP pilot participants. Effective January 1, 1998, new applicants for family cash assistance will be processed under MFIP-S rules. Counties have until March 1998 to convert families with open AFDC cases to MFIP-S. Table 4 shows the major provisions of the two programs.

The change in maximum income level from 140 to 120 percent of poverty and the limitations on education and training are the biggest differences between MFIP and MFIP-S likely to affect the program's ability to help families achieve self-sufficiency. The higher sanctions and altered payment arrangements available under MFIP-S (a 30 percent sanction, coupled with the government's requirement to pay landlords and option to pay utility bills directly rather than including those sums in cash to recipients) may be enough to change the tendency of some caregivers under MFIP to live with the sanctions rather than comply with an employment plan. The reduction in per-person resources for case management, education and training, and child care may be the other element that has a large effect on the success of MFIP-S. MFIP case management and other resources were targeted toward long-term welfare recipients, and made significant resources available to help clients with the greatest barriers to employment. MFIP-S does not target its services toward long-term recipients, and the legislation provides significantly less funding for case management to counties and employment and training providers. So there will be fewer resources to help counties, which will need to serve the larger number of cash assistance recipients who are now required to participate in work-related activities.

The Planning Process

DHS took the lead in developing Minnesota's TANF plan and was methodical in its approach. Clusters worked on some issues and then developed into workgroups, which focused on process. Six project areas were targeted: child welfare, health care, welfare, SSI, administrative and fiscal issues, and child care. Process teams were formed to cover Food Stamps, employment and training, electronic benefit transfers, and waivers. A liaison from each team was linked to a central team integrating work group ideas into the proposed TANF plan. The central team then set up briefings and posed issues to initiate feedback from the community. In addition, the state surveyed 26 other states to find out what they were doing to prepare for the new federal laws. Planning was simplified because the goals and principles of MFIP served as the foundation for reform, so DHS could concentrate on process rather than philosophy, and on its commitment to design a comprehensive plan. There was little change in direction from previous priorities in any of the major service areas, but of course the details changed to meet the federal law's requirements. Several provisions were broadened as a result of legislative deliberations, but the final law retains the basic structure of the plan for MFIP-S developed by DHS.

State-Local Relationships under Welfare Reform

State-local relationships will remain close to their current structure under welfare reform. If anything, MFIP-S will give localities less flexibility with respect to welfare programs than they had before, because they will all have to participate in MFIP-S rather than being able to choose among several different waiver or experimental projects. MFIP-S builds in a six-month transitional compensation for immigrant households that lose Food Stamp eligibility under new federal rules, if they are engaged in activities leading to citizenship. It will also allow disabled and elderly noncitizens who are legal residents to receive General Assistance, but will not compensate for the difference in benefit levels between SSI and General Assistance. Families with children on SSI who lose benefits under the new rules will be eligible for MFIP-S but will not receive as much as they did under SSI, and the parents will be subject to MFIP-S rules, time triggers, and time limits. Because Minnesota counties have some statutory responsibility for meeting the needs of children with disabilities, these changes could result in more demands on county funds. In the past, families with children who were not eligible for AFDC because of lump-sum payments or other anomalies could receive General Assistance, at the same benefit level. In 1998, such families will be eligible under the rules of MFIP-S, and family General Assistance will disappear as a separate program.

Challenges/Capacity

Minnesota will begin to implement MFIP-S on January 1, 1998. DHS has delayed implementation of MFIP-S until 1998 because several administrative changes must happen first. The statewide computer system needs to be respecified for MFIP-S, 3,000 financial workers across the state need retraining (500 financial workers already work with MFIP, but these workers also need to learn MFIP-S rules), and child care services need expansion. In addition, with the increase in welfare recipients receiving employment and training, the state needs to write new contracts with service providers and establish new procedures. The state wants to implement MFIP-S properly, and is giving administrative complexities a good deal of attention.

Although Minnesota is optimistic about its capacity to implement MFIP-S in the immediate future, the long term could be more problematic, given the unknown nature of the economy and the populations that DHS, DES, and their local counterparts must serve. State officials are especially concerned about the unknown impacts of time limits on children and families. In addition, MFIP-S will require attention to harder-to-serve clients; DHS wants to know more about this population before it defines "hardship" for the federal exemption and decides on programmatic approaches to help these families.

Minnesota is also grappling with how to distribute the penalty if the state does not meet the work participation rate and loses part of its block grant. DHS has designed a preliminary plan that will penalize those counties that fail to meet the rate, thus causing the entire state to fail, and will provide bonuses to those counties that do well. In addition, the state proposed providing bonuses to counties based on salaries, placement retention, placement of women in nontraditional jobs, and achievement of other desirable outcomes for clients. These plans may change as development of MFIP-S continues.

Counties took different views on whether to proceed with planning for welfare reform changes or wait for the final plan and its accompanying regulations. Hennepin County, for example, assigned staff to study the welfare reform issue while suspending their other tasks, but some other counties were waiting to see the final law rather than trying to anticipate how the agency and its staff might need to change. In counties whose caseloads have been falling and that may have caseworkers not working at full capacity, implementation may be relatively easy, and some caseworkers are excited about potential expansions in their job duties.

Minnesota plans to spend 80 percent of its full TANF maintenance of effort, and will not shift any TANF money to SSBG. DHS has proposed to keep some funds "in the bank" against future demand because of concerns that the state's strong economy will attract migrants who, failing to find jobs, will then apply for TANF benefits. Policymakers also expect increases in child care demand, because any MFIP-S participant who goes to work is guaranteed child care, as is anyone during the first year after leaving the welfare rolls. State funding for child care had already increased from a total of $23.9 million in state fiscal year 1995 to $30.1 million in 1996 and a projected $41.3 million in 1997. The 1997 legislative session substantially increased state funding for both TANF child care and BSF, so the projected totals for the next four state fiscal years are 1998, $76.1 million; 1999, $115.6 million; 2000, $134.8 million; and 2001, $142 million. These estimates for child care funding show that by the end of the century state child care expenditures will surpass those for cash assistance.

County as well as state officials are very concerned about a downturn in the economy, especially if one occurs at the end of the first five-year period, when many recipients will lose benefits. This is especially significant in some rural areas, where one plant closing can send a community into economic depression. Counties have also been quite concerned that they might be given a new statutory responsibility to "aid the poor," that is, to serve as a last-resort safety net, which they have never had before. County officials interviewed felt they did not have the fiscal capacity to pick up the slack left by the loss of Food Stamp and SSI benefits some households will suffer in the short run, or the long-run potential needs of families who exhaust their TANF eligibility and still cannot support themselves. Nor do the officials have the political or economic support to raise property taxes. They were relieved that MFIP-S does not impose this responsibility. County and state officials both expressed concerns regarding child care funding and the child care system's capacity, especially for families needing infant care and care on evenings, nights, and weekends.

Implications for Legal Immigrants

The MFIP-S legislation reiterates Minnesota's commitment to continue its open eligibility policy for the next biennium, letting legal immigrants and refugees receive benefits under all programs under the state's control (that is, all except SSI and Food Stamps), based on the same eligibility criteria that apply to citizens. Starting in state FY 2000, these provisions must be reauthorized and refunded; otherwise they will terminate. Legal immigrant families with children losing SSI will be eligible for MFIP-S, but they will have to comply with program rules related to work and time limits. Legal immigrants with disabilities losing SSI will be eligible for both General Assistance and GA-Medical Care, so although their cash grant will be significantly less (GA pays only $203 a month compared to more than $500 under SSI), they will retain coverage for medical care despite losing the Medicaid eligibility that accompanies SSI. To ease the transition for elderly and disabled noncitizens caused by the loss of Food Stamp and SSI benefits under federal law, the MFIP-S legislation provides them with $87 a month from September 1997 through June 1998 to be used for food expenses. To qualify, they must be engaged in activities leading to citizenship. For the same transition period, other 1997 legislation provides the same households with $40 a month in "Minnesota Grown" coupons to be used for any product with a "Minnesota Grown" label.

Implications for Nonprofits

The role of nonprofit agencies will not change under MFIP-S, but they may find themselves facing greater demand with no more resources. Some nonprofits such as employment and training providers, child care agencies, and family day care providers may have increased opportunities because MFIP-S rules will require more clients to use their services and funding has been increased. Other nonprofits may find themselves caught in a crunch as major resources are shifted into employment, training, and child care, and away from the services they provide. However, changes in the health care and health insurance marketplace are likely to have a greater impact on these nonprofits than changes in welfare programs. The shift toward managed care has already reduced the ability of programs to fund services needed by many welfare recipients before they are ready to participate in education, training, or employment. Supportive services surrounding treatment for substance abuse, mental illness, family violence, and similar deep-rooted problems are critical for many harder-to-serve clients if they are to avoid failure in the marketplace. These services have often been funded through Medicaid under the category of intensive case management, but managed care companies have been limiting or eliminating coverage for this type of service. Other nonprofit agencies potentially feeling the impact of Medicaid managed care are those serving chronically ill people who need ongoing care, and families and children involved in open child welfare cases. Even residential treatment programs for children may lose funding as managed care companies curtail reimbursement for this lengthy and expensive type of care.

Conclusion

Minnesota has committed itself to the goal of moving families out of poverty and has taken significant steps to achieve that goal through its health insurance reforms, child care funding, and the Minnesota Family Investment Program (MFIP). In addition, it has expanded its long-standing practice of within-state devolution (the Community Social Services Act, the Community Health Services Act) in the new areas of children's mental health, family services, and school-community relations, and is working on doing the same with child care services. The biggest constraints are financial—whether the funding levels for statewide health and child care programs will keep up with demand not only from those receiving welfare but also from the working poor who have never been welfare recipients, and whether the reduced per-person funding for case management, education and training, and child care under MFIP-Statewide will jeopardize the successes achieved with the MFIP demonstration program.

Other challenges Minnesota has given itself will be equally interesting to watch. The Department of Human Services and the Department of Children, Families, and Learning have several collaboration efforts under way for children's mental health, family services, and school-community relations. The Department of Economic Security has the Workforce Centers that, while having a centrally directed structure, are intended to bring together many local actors to design locally appropriate networks and improve services and access to information for job seekers and employers. All of these efforts are intended to place more control over decisionmaking in local hands, with the expectation that local actors will produce service structures most useful and appropriate to their own communities. Some of these structures have the potential to be the channel for a significant amount of funding; in addition, the hope is that a good deal of that funding can be decategorized to make it easier to use in ways that best suit clients. Whether these structures fulfill their promise will depend on the organizational abilities of local actors, the perseverance of state agencies in freeing up constraints on funding streams, and, ultimately, on the willingness of Congress to relax the categorical eligibility rules for federally funded programs. With its commitment to continued within-state devolution for many human services programs for children and their families, Minnesota will be an interesting test case for the new federalism. In future years we will be able to examine how far down the line toward local control many decisionmaking functions will filter, what factors will limit within-state devolution, and whether local control will fulfill its promise to create service systems that actually meet the needs of local residents.


Notes

1. Minnesota Planning Agency, Ahead at Half-Time, 1995.

2. Parts of this and the following section are adapted from a background paper prepared by the Minnesota Children's Defense Fund, which is the local collaborator for Assessing the New Federalism in Minnesota.

3. In 1997, eligibility for the MinnesotaCare program was expanded to include single adults and childless couples with incomes up to 175 percent of poverty.

4. Minnesota ranks tenth among states: January 1996 maximum payment level for a family of three was $532 per month compared to $389 per month for the median state.

5. DHS document releasing preliminary Manpower Demonstration Research Corporation evaluation findings, January 1997.

6. Health care coverage and the programs that ensure it are examined in this report's companion piece, Coughlin, T., Rajan, S., Zuckerman, S., and Marstellar, J., "Health Policy for Low-Income People in Minnesota." Washington, D.C.: Urban Institute, 1997.

7. "Minnesota Workforce Centers" from Connecting, a newsletter of the Minnesota Department of Economic Security, August-September 1996.

8. In 1996 and 1997, Minnesota used federal CCDBG, Social Services Block Grant, and IV- A At-Risk Child Care funds for the BSF program, as well as state funds.

9. Information in this section is taken in large part from Coughlin, T., et al., 1997.

10. The total number of children experiencing out-of-home care increased with each successive year until 1995. A decrease of 5 percent was experienced in 1995 and 1996. The total cost of placement has continued to increase.

11. State spending was $37.2 million and federal spending was $77 million (12.4 and 25.7 percent of the total, respectively).

12. Child Abuse and Neglect, A Look at the States. Washington, D.C.: Child Welfare League of America, 1996.

13. County Social Service Agencies are required to use this funding to deliver or purchase an array of family preservation services.

14. State Agency Survey, Child Welfare League of America, May 1, 1995.

15. This discussion is based on an examination of Minnesota's TANF legislation and an analysis of MFIP-S prepared by the Legal Services Advocacy Project, June 4, 1997.


APPENDIX
List of
Interview Sources

State Level Respondent Agencies/Organizations

Legislators involved in welfare reform, workforce development, child care, and child development

Minnesota Department of Children, Families and Learning

    Executive staff for child care, child development
Minnesota Department of Finance
Minnesota Department of Economic Security
    Executive staff for employment and training, youth and other workforce development activities, homeless programs and services
Minnesota Department of Human Services
    Executive staff for income support programs including welfare reform design, eligibility, child support enforcement, child welfare, children's mental health collaboratives, refugee and immigration issues, emergency assistance, and performance measurement
Minnesota Planning Agency
Commission on the Economic Status of Women
Association of Minnesota Counties
McKnight Foundation
Minnesota Children's Defense Fund
Minnesota Coalition for the Homeless
Minnesota Council of Non Profits
Minnesota Indian Affairs Council
Minnesota Organization for Adolescent Pregnancy and Parenting, and other state and local agencies involved in programs and policy related to teen pregnancy and childbearing
Minnesota United Way

Local Respondent Agencies/Organizations: Minneapolis

Minneapolis Department of Economic Security
    Executive staff for employment and training programs, representatives of contract agencies offering direct services
Minneapolis Public Housing Authority
Minneapolis Public Schools
Hennepin County Board of Commissioners
Hennepin County Department of Adult Services
    Executive staff for homeless-related programs
Hennepin County Department of Children and Family Services
    Executive staff and line workers for child welfare activities, child care
Hennepin County Department of Community Health
Hennepin County Department of Economic Assistance
    Executive staff and line workers for income support programs, executive staff involved in MFIP and welfare reform
Hennepin County Department of Training and Employment
    Executive staff for employment and training programs, and immigrant and refugee assistance
Hennepin County Office of Planning and Development
Community Action of Hennepin County
Family Housing Partnership
Greater Minneapolis Day Care Association and representatives of providers
Hopkins Family Service Center
Legal Services Advocacy Project/Affirmative Options for Welfare Reform
Minneapolis Urban League
Parents in Community Action
Representatives of shelters for battered women
Robbinsdale Area Redesign Council

Local Respondent Agencies/Organizations: Mankato

Blue Earth Department of Human Services
    Executive staff and line workers for cash assistance programs and child welfare, executive staff for child care, employment and training, children's collaborative
Committee Against Domestic Abuse
Legal Services
Local PIC, Workforce Council
Lutheran Social Services
Minnesota Valley Action Council
Mankato Public Housing Authority
Salvation Army


Tables & Figures

table 1
table1
Source of Area Shaded Blue: Current Population Survey (CPS) three-year average (March 1996-March 1998, 
where 1996 is the center year) edited by the Urban Institute to correct misreporting of citzenship.


About the Authors

Martha R. Burt is the director of the Social Services Research Program in the Urban Institute's Human Resources Policy Center. She has been involved in policy and evaluation research for over 20 years, covering issues related to vulnerable populations. These have included children in the child welfare system, pregnant and parenting teens, low-income elderly, persons with severe and persistent mental illness, homeless persons, and youth at risk for a variety of problems. She was the leader of the Minnesota case study team.

Rob Geen is a research associate in the Urban Institute's Population Studies Center. To date his career has focused on issues related to child welfare, family preservation, and children's well-being. In addition to work on the Minnesota case study team, where he was responsible for child welfare, child care, and child support issues, Mr. Geen directed a survey of state child welfare agencies that collected data on screening practices, funding streams, and issues related to kinship foster care.

Amy-Ellen Duke is a research associate in the Urban Institute's Human Resources Policy Center. Her career has concentrated on income support programs and related employment and training issues. She has been involved in a number of the Institute's assessments and evaluations of state welfare reform efforts. On the Minnesota case study team, Ms. Duke took lead responsibility for understanding employment and training programs and practices, current welfare practices for both AFDC and MFIP, and Minnesota's plans for statewide welfare reform under TANF.

This report is part of The Urban Institute's Assessing the New Federalism project, a multi-year effort to monitor and assess the devolution of social programs from the federal to the state and local levels. Project codirectors are Anna Kondratas and Alan Weil.

The project has received funding from the Annie E. Casey Foundation, the Henry J. Kaiser Family Foundation, the W. K. Kellogg Foundation, the John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation, the Commonwealth Fund, the Robert Wood Johnson Foundation, the Weingart Foundation, the McKnight Foundation, and the Fund for New Jersey. Additional funding is provided by the Joyce Foundation and the Lynde and Harry Bradley Foundation through a subcontract with the University of Wisconsin at Madison.

The authors would like to acknowledge the assistance of our local collaborator, the Children's Defense Fund, and the many Minnesotans from the legislature, state government agencies, Hennepin County and Blue Earth County government agencies, and the nonprofit sector who gave generously of their time to participate in interviews, send us material, and review notes, memos, and earlier versions of this report. The warm welcome we received, even in January, and the cooperation forthcoming throughout this rather lengthy process are much appreciated, and your contributions have made the report more accurate and more readable. In addition to the authors, several Urban Institute staff also contributed to this report. Sharon Long, Nancy Pindus, and LaDonna Pavetti accompanied the first author on the first site visit in August 1996, and then went on to head other state case study teams. Keith Watson and Jerome Gallagher constructed two of the tables for this report, Freya Sonenstein and Sheila Zedlewski made many substantive and editorial contributions from development of the initial outline to review of the penultimate draft, Felicity Skidmore of The Urban Institute Press ably constructed Highlights of the Report, and core staff of Assessing the New Federalism helped move the report along to its final form.



Topics/Tags: | Employment | Governing | Poverty, Assets and Safety Net


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