As power has transferred hands in Washington, White House officials and congressional leaders have talked about seizing the opportunity to pass sweeping changes to federal antipoverty programs. One potential change is to give block grants of federal funds to states and allow states greater flexibility to decide who to serve with those funds and how.
Block grant supporters have held up welfare reform as a model, but that may be a mistake. In the 1990s, the federal cash assistance program Aid to Families with Dependent Children was replaced with a block grant to states called Temporary Assistance for Needy Families (TANF). House Speaker Paul Ryan has long contended that expanding the block grant model to other facets of the safety net—such as Medicaid and food stamps—would afford states the flexibility to drive innovation in combating poverty.
But examining the results of welfare reform after two decades presents a more cautionary tale of what block granting safety net programs means for people living in poverty. Simply put, all states ended up with far fewer funds and a diminished ability to meet their residents’ needs.
The nature of the block grant is a fundamental reason. For starters, because states are allotted a dollar amount that is not adjusted for inflation, the pot of money at their disposal declines over time. Consequently, the value of all state TANF grants was 30 percent lower in 2014 than at the time they were first awarded.
That state grants are fixed also means that they do not adjust to meet changing levels of need. Even without taking into account the loss of grant value because of inflation, all but three states and the District of Columbia had fewer TANF funds per poor child in 2014 than in 1999. The number of poor families in these states increased, but block grant dollars did not increase in response.
Furthermore, the block grant locks in inequality in state funding. The size of TANF grants to states was calculated based on state spending on welfare-related activities before reform. As a result, the eight states with the highest spending levels per poor child in 1999 were still at the top in 2014. Likewise, the eight states with the lowest spending in 1999 remained at the bottom in 2014. No state moved up in this ranking more than seven places.
This lack of response to inflation and need has produced sharp across-the-board reductions in the resources states have available to help their most needy residents. Between 1999 and 2014, nearly half (47 percent) of inflation-adjusted funding per child disappeared nationally. All states saw steep declines: the drop ranged from 19 percent in the District of Columbia to 66 percent in Nevada.
In contrast, entitlement programs that are potential targets for block granting allow states to be more responsive to changing needs. The level of federal spending on the Supplemental Nutrition Assistance Program (formerly Food Stamps), which states administer, varies with need. States also receive increased Medicaid funding from the federal government when more people meet the largely income-based eligibility requirements and enroll, as well as when health care costs rise. Because health care costs are rising faster than inflation, any Medicaid block grant approach that ignores health care spending growth would be cutting real support for Medicaid. A related proposal to impose per capita caps on Medicaid is similarly problematic.
If policymakers want to achieve their stated aim of better equipping states to combat poverty and increase opportunity, they should consider how turning welfare into a block grant has had the opposite effect before making similar changes to other safety net programs.
Cary Lou contributed to this post.