State Discretion in Welfare Spending: Do Nonprofits Have an Impact?

Article excerpt

ABSTRACT

Using data compiled for the 50 states, this study examines state discretion in welfare programs by defining a set of programs that, in 1995, gave considerable discretion to the states and a set of programs that did not. It explores the effect of nonprofits on discretionary and non-discretionary programs. The study finds mat the categorization of programs by degree of discretion is problematic at best, given different forms and avenues for discretion. It also finds that the nonprofit sector had its biggest impact on programs with the most mandates from the federal government.

INTRODUCTION

This paper compares the influence of various factors on state programs that have been subject to large amounts of federal influence to those in which the states have had considerably more discretion. While there have been many studies of the impact of social, economic, and political variables on state welfare policy, most have focused on benefit levels for Aid to Families with Dependent Children (AFDC), the now-defunct entitlement program for unemployed mothers with children. Or studies have focused more broadly on total state spending on welfare. This study disaggregates state spending on welfare, separating out those programs over which states have had the most discretion. It will examine two key questions: (1) can the extent of state discretion be measured; (2) what is the role of nonprofit organizations in influencing discretionary and non-discretionary programs?

In light of recent changes in policy, giving more discretion to the states in regard to welfare, these are relevant issues. Nonprofits have always played an important role in state welfare systems. Will greater discretion result in a larger or smaller influence for nonprofits9 Conceivably nonprofit organizations are more numerous and potentially more powerful at the state and local level than at the federal level. And freedom from federal guidelines provides state legislators and administrators more leeway to address the concerns of interest groups in the state.

Since the new state welfare systems are still evolving, it may still be too early to assess the impact of nonprofits under the new welfare reform law. This study will focus on the mid- 1990s shortly before devolution to the states, to obtain an understanding of the variables that predicted state decision-making prior to the implementation of welfare reform, comparing programs with a high degree of federal oversight to those with the greatest amount of state discretion. The results of this analysis may provide us with important clues as to what to expect in the years to come as the new welfare programs become fully operational.

BACKGROUND

State Welfare Systems

In the pre-devolution period, state welfare systems involved a range of programs in which they partnered with the federal government, but with the states role in the partnership showing a great degree of variability. The two largest programs serving the poor-Aid to Families With Dependent Children (AFDC) and Medicaid-imposed extensive mandates on the states. While participation in AFDC is technically an option to the states, the only jurisdiction that had not done so by the early 1990s was American Samoa (which only gained the right to participate in 1988). Virtually all the states had been involved in the federal program since the 1930s. States were able to set their own benefit levels, but were required to provide benefits equally across the state to all families that met the their standard of need. States were also required to establish an employment and training program for welfare recipients, to provide child care for those participating in these programs, to provide transitional child care for those who begin working and for those "at risk" of becoming welfare recipients without child care, to provide Medicaid to all recipients and transitional Medicaid to those who begin working, and to pursue child support from absent parents (U. …