WELFARE REFORM: Challenges in Saving for a "Rainy Day"
Abstract
Mr. Chairman and Members of the Subcommittee: Thank you for inviting me here today to discuss states plans for operating their welfare programs in the event of an economic downturn. In the block grant environment, the federal government has an interest in encouraging states to save for future contingencies, but within a framework that recognizes that the size of the reserve will remain largely a state determination made under conditions of inherent uncertainty. In 1998 we reported on states plans for financing their welfare programs in the event that the economy unexpectedly turned down. 1 At that time most states budget forecasts predicted that the robust economy would continue providing strong revenue growth potential and, more important for states Temporary Assistance for Needy Families (TANF) budgets, diminishing costs in many social services programs. Last year, this subcommittee asked us to revisit the states examined in our 1998 report and to, among other things, look anew at their contingency plans. In part, my statement today includes research we conducted in 10 states (California, Colorado, Connecticut, Louisiana, Maryland, Michigan, New York, Oregon, Texas, and Wisconsin). As we will discuss more fully later in this testimony, the data available on the levels and adequacy of states reserves is insufficient and misleading. Furthermore, our case studies suggest that most states have done little planning for economic contingencies. Because states new welfare programs remain untested in times of downturn, these uncertainties make it difficult for anyone to predict how states will respond and how former welfare recipients will be affected if and when economic conditions change. Despite the significant changes made to the nation's welfare program, the economy will no doubt play a role in determining how many people return to the welfare rolls and
Document Details
- Document Type
- Technical Report
- Publication Date
- Apr 26, 2001
- Accession Number
- ADA389394
Entities
People
- Paul L. Posner
Organizations
- United States Government Accountability Office