oversight

Welfare Reform: Few States Are Likely to Use the Simplified Food Stamp Program

Published by the Government Accountability Office on 1999-01-29.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to the Ranking Minority Member,
                 Subcommittee on Children and Families,
                 Committee on Health, Education, Labor
                 and Pensions, U.S. Senate

January 1999
                 WELFARE REFORM
                 Few States Are Likely
                 to Use the Simplified
                 Food Stamp Program




GAO/RCED-99-43
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Resources, Community, and
      Economic Development Division

      B-281593

      January 29, 1999

      The Honorable Christopher J. Dodd
      Ranking Minority Member
      Subcommittee on Children and Families
      Committee on Health, Education,
        Labor and Pensions
      United States Senate

      Dear Senator Dodd:

      Over the years, state agencies have operated federal welfare programs that
      have provided food stamps, cash assistance, and other benefits to needy
      households. Each program has its own set of regulations that the states
      must follow to determine participant eligibility and benefits. Although
      these regulations provide extensive guidelines for the workers who must
      implement them, they also create determination processes that are
      expensive to conduct and are often subject to error.

      In an effort to streamline program administration, the Personal
      Responsibility and Work Opportunity Reconciliation Act of 19961
      —referred to in this report as the Welfare Reform Act—provided the
      states2 with the option of operating the Simplified Food Stamp Program
      for households whose members are receiving Temporary Assistance for
      Needy Families (TANF) assistance.3 The simplified program was designed
      specifically to be a vehicle for creating conformity between TANF and the
      Food Stamp Program by merging the programs’ rules into a single set of
      requirements for individuals receiving both types of assistance.

      The Welfare Reform Act also allows the states to implement a limited, or
      “mini,” simplified program in which only the food stamp work requirement
      is replaced by TANF’s work requirement, according to officials from the
      U.S. Department of Agriculture’s (USDA) Food and Nutrition Service (FNS).
      By requiring food stamp participants to comply with TANF’s work
      requirement, the states may count the combined value of TANF and food
      stamp benefits to determine if participants are receiving assistance in an
      amount that is at least equal to the minimum wage multiplied by the

      1
       P.L. 104-193, Aug. 22, 1996.
      2
      As treated in the Food Stamp Act of 1977, as amended, “states” includes the 50 states, the District of
      Columbia, Guam, and the U.S. Virgin Islands.
      3
       Title I of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 replaced Aid to
      Families With Dependent Children (AFDC) with TANF.



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                   number of hours they must work to receive their benefits, as required by
                   federal law.4

                   Since not all needy households receive both TANF and food stamps, the
                   states selecting the simplified program option will, in effect, be operating
                   three programs, according to both FNS and state officials. That is, they will
                   continue to separately operate TANF, the regular Food Stamp Program, and
                   the simplified program. Furthermore, to whatever extent the states use the
                   simplified program, they must also, as required by the Welfare Reform Act,
                   demonstrate that total federal costs will not be more than the costs that
                   would have been incurred under the regular Food Stamp Program for the
                   affected participants in any fiscal year—that is, the program has to be cost
                   neutral.

                   You asked us to study several issues concerning the impact of welfare
                   reform on the Food Stamp Program. This report is the third in a series
                   responding to that request.5 In this report, we (1) identify the number of
                   states that have adopted or are planning to adopt the Simplified Food
                   Stamp Program, (2) describe the concerns that may be preventing other
                   states from adopting the simplified program, and (3) examine the impacts
                   that the adoption of the simplified program may have on households’
                   eligibility and benefits.

                   As part of our review, we mailed questionnaires in July 1998 to 53 state
                   agencies that administer the Food Stamp Program and received responses
                   to our questionnaire from 52 (Iowa declined to participate in our survey).
                   Appendix I contains a more detailed description of our methodology.
                   Appendix II provides summary information on our survey responses.


                   Our July 1998 survey indicated that seven states had implemented a
Results in Brief   limited, or “mini,” Simplified Food Stamp Program. Of the 45 states that
                   had not implemented the simplified program, 6 were planning to do so; 30
                   indicated that they did not plan to do so; and the 9 remaining states were

                   4
                    Among other provisions, the Welfare Reform Act requires that, to avoid financial penalties, the states
                   must impose work requirements for adults receiving federal welfare assistance. In 1997, the U.S.
                   Department of Labor ruled that welfare participants are not excluded from the protection of the Fair
                   Labor Standards Act of 1938, as amended (29 U.S.C. 207). Under the Fair Labor Standards Act, the
                   maximum number of hours that welfare participants can be required to work to receive their benefit is
                   calculated by dividing the value of their benefit by the applicable minimum wage.
                   5
                    Our first report is entitled Food Stamp Program: Characteristics of Households Affected by Limit on
                   the Shelter Deduction (GAO/RCED-97-118, May 14, 1997). Our second report is entitled Welfare
                   Reform: State and Local Responses to Restricting Food Stamp Benefits (GAO/RCED-98-41, Dec. 18,
                   1997).



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                       uncertain about their plans. One of the six states—Arkansas—was
                       planning to adopt the simplified program and subsequently implemented a
                       “full,” or more comprehensive, program that establishes a uniform set of
                       eligibility requirements for both food stamp and TANF assistance.

                       The states that had not implemented the simplified program cited several
                       concerns that discouraged them: (1) increasing caseworkers’ burden by
                       creating a third set of eligibility criteria for a simplified program that are
                       different from those associated with the separately administered TANF and
                       the Food Stamp Program; (2) restricting the options for designing a
                       simplified program by requiring it to be cost neutral; and (3) other Welfare
                       Reform Act requirements that had a higher priority.

                       The simplified program would have little or no impact on either the
                       number of households participating in the Food Stamp Program or on the
                       amount of their benefits, according to the majority of states that have and
                       have not implemented a simplified program. The simplified program has
                       limited impact, according to one state, primarily because a relatively small
                       number of households participate in it compared with the state’s total food
                       stamp population. According to another state, since most TANF households
                       also receive assistance under the regular Food Stamp Program, there is
                       little change in total benefit costs as a result of the state’s adoption of the
                       simplified program.


                       The Welfare Reform Act gives the states the opportunity and authority to
Background             streamline their operations by allowing them to experiment with ways to
                       standardize their eligibility and benefit requirements for households
                       participating in both TANF and the Food Stamp Program. Specifically, the
                       act provided the states with the option of operating the Simplified Food
                       Stamp Program. This program allows them to establish eligibility and
                       benefit levels on the basis of household size and income, work
                       requirements, and other criteria established under TANF, food stamps, or a
                       combination of both programs—as long as federal costs are not increased
                       in doing so.


The TANF Block Grant   The TANF block grant, administered by the U.S. Department of Health and
                       Human Services, helped the states provide assistance to about 3.9 million
                       needy families with children in fiscal year 1997. Among other things, the
                       grant is intended to allow children to be cared for in their own homes and
                       to reduce welfare dependency by promoting job preparation and work.



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The fixed amounts of the states’ TANF grants under the Welfare Reform Act
are based on the amount of the grants they received in specified fiscal
years under prior law, adjusted for population increases under certain
circumstances.6 For fiscal year 1997, the federal grants available to the
states totaled $16.7 billion and ranged from $21.8 million in Wyoming to
over $3.7 billion in California. With respect to state funding, the Welfare
Reform Act included a “maintenance-of-effort” provision requiring the
states to provide 75 to 80 percent of their historic level of funding.7

Because of congressional concern that welfare had become a way of life
for some participants, a key purpose of the new law is to promote work
over welfare and self-reliance over dependency. In support of this goal, the
law provides that the states must require able-bodied participants to
engage in work or work-related activities and must impose a 5-year
lifetime limit on federal assistance. The states must require adults in
families receiving TANF assistance to participate in work or work-related
activities after receiving assistance for 24 months, or sooner, as defined by
the state. If recipients fail to participate as required, the states must at
least reduce the families’ assistance and may opt to terminate it entirely.

To avoid financial penalties, the states must ensure that a certain specified
minimum percentage of their beneficiaries are participating in work or
work-related activities each year. These percentages are referred to as
“minimum mandated participation rates.” To count toward these
mandated rates, adults in families receiving welfare must participate for a
certain minimum number of hours in work or a work-related activity as
prescribed in the Welfare Reform Act—such as job readiness workshops;
on-the-job training; and, under certain circumstances, education. The
required number of hours of participation and the percentage of a state’s
caseload that must participate to meet mandated rates increase over time
are shown in table 1.




6
 Under the Welfare Reform Act, the states’ grants are based on the greater of one of three options for
determining the amount of their grants: (1) the average amount of grants received for fiscal years 1992,
1993, and 1994; (2) the amount of grants received for fiscal year 1994 (with some adjustments for
states with high expenditures for emergency assistance in fiscal year 1995); or (3) a formula based on
grants received for fiscal year 1995.
7
 Under the Welfare Reform Act, the states must have a certain number of participants working or
enrolled in work-related activities. The states that meet these mandated minimum participation rates
must provide at least 75 percent of their historic level of funding; the states that fail to meet these rates
must provide at least 80 percent.



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Table 1: Federal Law Sets Increasing
Requirements for Work or Related                                                                 Fiscal year
Activities for One-Parent and                                 1997          1998          1999          2000           2001          2002
Two-Parent Families
                                       Minimum weekly average participation required (hours)
                                       One-parent             20            20            25            30             30            30
                                       families
                                       Two-parent             35            35            35            35             35            35
                                       familiesa
                                       Minimum mandated participation rates (percentage of states’ caseload)
                                       One-parent             25%           30%           35%           40%            45%           50%
                                       families
                                       Two-parent             75%           75%           90%           90%            90%           90%
                                       families
                                       a
                                        To receive federally funded child care assistance, two-parent families must participate for a
                                       combined total of at least 55 hours a week.

                                       Source: 42 U.S.C. sec. 607.



                                       Instead of prescribing in detail how the states should structure their TANF
                                       programs, the Welfare Reform Act authorizes the states to use their block
                                       grants in any manner that is reasonably calculated to accomplish the
                                       purposes of TANF. For example, the states are allowed to set forth their
                                       own criteria for defining who will be eligible and what assistance and
                                       services will be available, provided they ensure fair and equitable
                                       treatment. The states may opt to deny assistance altogether for
                                       noncitizens, drug felons, minor teen parents, or those they determine are
                                       able to work. The states may also choose when to require adults to
                                       participate in work activities, what types of activities are allowed, who
                                       should receive a participation waiver, and whether to terminate grants to
                                       entire families for noncompliance.8


The Food Stamp Program                 The Food Stamp Program is the cornerstone of federal food assistance
                                       programs. It is an entitlement program that helped put food on the table
                                       for about 8.3 million households each day during 1997 at a federal cost of
                                       about $19.5 billion. It provides low-income households with paper
                                       coupons or electronic benefits that can be redeemed for food in about
                                       200,000 authorized stores across the nation. U.S. citizens and some legal
                                       immigrants who are admitted for permanent residency may qualify for

                                       8
                                        However, the act defines the types of activities that may count toward the states’ mandated
                                       participation rate, as well as the cases that must be included in the calculation. The act also stipulates
                                       that if a one-parent family with a child under age 6 is unable to obtain needed child care, the state may
                                       not sanction the family for noncompliance with the work requirement and that failure to maintain
                                       assistance to such families is grounds for a penalty of up to 5 percent of the state’s grant.



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                            food stamps. Household eligibility and benefit amounts are based on
                            nationwide federal criteria, including household size and income;
                            eligibility is also based on assets, housing costs, work requirements, and
                            other factors. The program operates in the 50 states, the District of
                            Columbia, Guam and the U.S. Virgin Islands.9

                            FNS administers the program in cooperation with state agencies. FNS is
                            responsible for approving state plans for operation and ensuring that the
                            states are administering the program in accordance with regulations. The
                            program is administered at the local level by either a state agency or a
                            local welfare agency, depending on the state. Local office staff are
                            responsible for determining eligibility and the level of benefits issued to
                            participating households. The federal government pays the full cost of
                            benefits and shares administrative costs with the states. The federal cost
                            to administer the program was about $1.7 billion in fiscal year 1997, and
                            the average monthly household food stamp benefit was $169.10

                            The Welfare Reform Act requires most able-bodied adult participants
                            receiving food stamps to work in return for their benefits. Able-bodied
                            participants ages 18 to 50 with no dependent children may receive food
                            stamp benefits for only 3 months in every 36-month period unless they are
                            engaged in work or work programs. Qualifying work includes participating
                            in a work program for a monthly average of 20 hours or more a week.
                            Exclusions to the work requirement vary by program. For example, single
                            parents with children under the age of 6 may be exempted from the food
                            stamp work requirement, while TANF allows the states to exempt single
                            parents with children under the age of 1.


The Simplified Food Stamp   The Simplified Food Stamp Program allows the states to determine
Program                     eligibility and benefits under one set of program criteria for families
                            receiving assistance from both the Food Stamp Program and TANF. Under
                            the simplified program, the states can merge their TANF and food stamp
                            rules into a single set of eligibility and benefit requirements and control
                            the extent to which the program’s rules are merged. Some states, for
                            example, may elect to implement a “full” simplified program in which an
                            extensive set of TANF requirements—such as income and asset limits—are
                            adopted to determine eligibility. Other states may adopt a more limited, or

                            9
                             In Puerto Rico, the Food Stamp Program was replaced in 1982 by a block grant program. The
                            Commonwealth of the Northern Marianas Islands and American Samoa in the Pacific also operate
                            under block grants.
                            10
                              Benefit amounts are higher for Alaska, Hawaii, Guam, and the U.S. Virgin Islands, reflecting higher
                            food prices in those areas.



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                     “mini,” simplified program—incorporating only TANF’s work requirement
                     into their simplified program. With a mini program, the states can
                     administratively combine the value of their TANF and food stamp benefits
                     in calculating whether participants are being provided with benefit
                     amounts that are at least equal to the minimum wage—currently $5.15 an
                     hour—multiplied by the number of hours they are required to work. (App.
                     III describes in more detail how the adoption of a simplified program helps
                     the states to comply with the requirement to provide the minimum wage.)

                     The Welfare Reform Act requires the states to retain several features of the
                     regular Food Stamp Program, such as issuance procedures and the use of
                     the Thrifty Food Plan11 as the basis of benefits in their simplified program.
                     The states must also obtain FNS’ approval to implement a simplified
                     program.12 To establish a program, the states must demonstrate that their
                     simplified program will not cost the federal government more than the
                     Food Stamp Program would have cost for the affected participants in any
                     fiscal year—that is, the program has to be cost neutral. The simplified
                     program’s cost-neutrality requirement is more restrictive than the
                     cost-neutrality requirement approved for some welfare reform
                     demonstration projects, which have allowed states to calculate cost
                     neutrality over several years.


                     In response to our July 1998 survey, seven states—Arizona, Delaware,
Few States Have      Georgia, Idaho, Mississippi, New Jersey, and New York—reported that
Implemented the      they had implemented a simplified program. Each of these states
Simplified Program   implemented a mini simplified program. Six states—Arkansas, Florida,
                     Illinois, Maine, North Carolina, and South Carolina—indicated that they
                     were planning to implement the simplified program. Since July, one of
                     these states—Arkansas—has implemented it—bringing the total number
                     of states with simplified programs to eight and reducing the number of
                     states planning to implement the program to five. Appendix IV presents
                     the status of each state’s implementation as of July 1998.

                     Unlike the seven states that had implemented a mini simplified program,
                     Arkansas adopted a more extensive simplified program, using a number of
                     TANF requirements to determine eligibility and benefits. For example,



                     11
                      A low-cost model diet plan that is based on the National Academy of Sciences’ Recommended
                     Dietary Allowances and on the food choices of low-income households.
                     12
                       Households in which all members receive TANF are automatically eligible to participate in a
                     simplified program, while households with one or more, but not all, members who receive TANF may
                     participate with FNS’ approval.



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under the regular food stamp rules, the portion of the fair market value of
a household vehicle that exceeds $4,650 is counted toward the household’s
resource limit.13 However, Arkansas’ simplified program uses a
state-defined TANF rule that exempts the total value of the vehicle from the
resource limit. Arkansas’ primary goal in adopting the simplified program
is to create a “one-stop” process for approving TANF and food stamp
benefits, thereby eliminating separate participant interviews, forms, and
reporting requirements for each program. The state expects that
caseworkers will then be able to spend more time helping program
participants find employment. (App. V describes the Arkansas program in
more detail.)

According to the survey responses, of the five remaining states (excluding
Arkansas) planning to implement a simplified program, all but Florida plan
to adopt it within the next year. Florida was uncertain about when it
would adopt a simplified program.

Figure 1 identifies the eight states (including Arkansas) that have
implemented a simplified program and the five states that are planning to
implement a program.




13
 Federal law set a maximum resource limit of $2,000 for most households. Households with at least
one member age 60 or older may have up to $3,000 in resources. Certain resources are not counted,
such as a home and lot.



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Figure 1: States That Have Implemented or Plan to Implement a Simplified Program




                                                  Has not implemented a program

                                                  Plans to implement a program

                                                  Has implemented a program




                                         Source: GAO’s July 1998 survey and FNS’ data.




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                       Thirty states are not planning to implement the simplified program, and 9
                       states—California, Colorado, Connecticut, Massachusetts, New
                       Hampshire, Pennsylvania, Rhode Island, Utah, and the U.S. Virgin
                       Islands—reported that they are uncertain about whether they will
                       implement the simplified program.


                       Thirty five of the 45 states that had not implemented a simplified program
Various Concerns       indicated that, as currently structured, the simplified program was hardly
Have Discouraged       or not at all helpful in achieving a more efficient and streamlined
States From Adopting   operation. Nine states indicated that the program was somewhat or
                       moderately helpful, and one state did not indicate whether it was helpful
the Program            or not. As figure 2 shows, the states that have not implemented a
                       simplified program cited a number of concerns that have discouraged its
                       adoption.




                       Page 10                                         GAO/RCED-99-43 Welfare Reform
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Figure 2: Major Concerns That Discouraged States From Implementing the Simplified Program

Number of states
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                                          Source: GAO’s July 1998 survey.




                                          The most frequently cited concern for 34 of the states that had not
                                          implemented a simplified program was increasing caseworker burden
                                          because of an additional set of program criteria. The additional criteria
                                          would be produced by the states’ merging of TANF and food stamp
                                          provisions under their simplified program. For example, under the
                                          simplified program, a state may replace the regular food stamp provision
                                          exempting single parents with children under age 6 from work with a TANF
                                          provision exempting single parents with children under age 1. Such




                                          Page 11                                           GAO/RCED-99-43 Welfare Reform
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changes can produce a distinct set of simplified program work
requirements not found in either TANF or the regular Food Stamp Program.

The next most frequently cited concern for 28 of the states was that the
program’s cost-neutral provision restricted the states’ options for
simplifying the program. That is, a simplified program that incorporates
eligibility or benefit determination criteria that result in higher food stamp
benefit costs must be offset by other program features that reduces benefit
costs to what they would have been under the regular Food Stamp
Program—in effect, requiring the states to make program design trade-offs
to achieve cost neutrality.

Finally, the third most frequently cited factor discouraging program
implementation for 24 of the states was that other Welfare Reform Act
requirements had a higher priority. For example, the Welfare Reform Act
required the states to submit their TANF plans for federal approval and
begin implementing the program by July 1, 1997. In contrast, the states
were under no deadline or requirement to develop and implement a
simplified program.

Some of the other frequently cited concerns that discouraged states from
implementing the program included the states’ difficulties in aligning food
stamp requirements with TANF, the absence of state automation to support
program implementation, and the potential increase in the states’ food
stamp error rates, which would result in financial penalties. (App. VI
discusses our review of North Dakota, which had obtained FNS’ approval to
implement a full simplified program and subsequently decided against it
for many of the same concerns cited by other states.)

Thirty-four of the states that had not implemented a simplified program
suggested ways to improve the program to make its adoption more
attractive to the states. Suggestions included extending the simplified
program to all food stamp households, eliminating or relaxing the
cost-neutrality requirement, and providing a moratorium on the financial
penalties associated with increased food stamp error rates. The states’
suggestions are summarized in appendix VII.




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                                      Most states did not expect the simplified program to affect the level of
Most States Report                    participation in the Food Stamp Program or the benefits provided. As
That the Simplified                   figure 3 shows, according to 6 of the 7 states that had implemented a mini
Food Stamp Program                    simplified program and 32 of the states that had not implemented a
                                      simplified program, the program would have little or no impact on the
Would Have Little                     number of households receiving food stamps.
Impact on Food
Stamp Participation
and Benefits

Figure 3: Impacts of the Simplified
Program on the Number of              Number of states
Households Receiving Food Stamps      40


                                      35


                                      30


                                      25


                                      20


                                      15


                                      10


                                       5


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                                                                    Have implemented a program

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                                      Source: GAO’s July 1998 survey.




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                                      Similarly, as figure 4 shows, the 7 states that had implemented a mini
                                      simplified program and 24 of the states that had not implemented a
                                      simplified program reported that the program would have little or no
                                      impact on the benefit amounts received by participants.


Figure 4: Impacts of the Simplified
Program on Average Household Food     35     Number of states
Stamp Benefits Amounts
                                      30


                                      25


                                      20


                                      15


                                      10


                                       5


                                       0
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                                                                 Have implemented a program

                                                                 Have not implemented a program



                                      Source: GAO’s July 1998 survey.




                                      According to Georgia’s food stamp director, the simplified program has
                                      had minimal impact on participation or benefit levels because most of the
                                      state’s TANF households are already receiving food stamps. Food stamp
                                      officials in Idaho told us that the minimal impact on food stamp
                                      participation and benefit levels in their state is due to the relatively small




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                                                          number of households that participate in the simplified program compared
                                                          with the state’s total food stamp population.

                                                          The states also assessed other impacts that would occur as a result of the
                                                          implementation of a simplified program. For example, 35 states indicated
                                                          that there would be little or no change in their TANF or Medicaid costs
                                                          resulting from implementation of the simplified program, whereas 24
                                                          states reported that their food stamp administrative costs would increase.
                                                          (See fig. 5.)



Figure 5: Other Impacts of the Simplified Program

Number of states
40
                                                                                                                   38


            34


30

                                                     25
                               24

                                                                                21
20                                                                                               19

                                        16                                                              16
                                                                 15
                                                                           13
                                                                                       12
                                                                                                             11
10   9

                                             6
                                                             5                                                             5
                                                                                                                               3
                    2

 0

         State costs for         Administrative       Caseworker            Time taken to         Errors in         Uniformity
         TANF and/or             costs of the Food    burden                qualify applicants    qualifying        between the food
         Medicaid                Stamp Program                              for food stamp        applicants for    stamp and TANF
                                                                            benefits              food stamps       programs



                  Greatly/somewhat increase

                  Little or no change

                  Greatly/somewhat decrease



                                                          Source: GAO’s July 1998 survey.




                                                          Page 15                                                       GAO/RCED-99-43 Welfare Reform
                  B-281593




                  Although the Welfare Reform Act was, in part, intended to simplify the
Conclusions       administration of welfare assistance, this goal is not being achieved with
                  the simplified program. Most states have not implemented the simplified
                  program, and, under current legislation, few states are likely to take full
                  advantage of this option. While the legislation seems to offer the states a
                  great degree of flexibility in designing a simplified program, its restrictive
                  cost-neutrality provision, potential to increase caseworkers’ burden, and
                  difficulties in aligning strict food stamp rules with different
                  state-developed TANF regulations, leave the states with little incentive for
                  adopting the program. If the simplified program’s authorizing legislation
                  remains unchanged, the program will continue to be of little value to the
                  states—with the exception of the flexibility it gives them to combine the
                  value of their TANF and food stamp benefits in order to meet the minimum
                  wage requirements for workfare participants.


                  To fulfill the Simplified Food Stamp Program’s potential, the Congress
Matters for       may wish to consider working with USDA to develop modifications to the
Congressional     legislation that established the program in order to address the
Consideration     implementation concerns discussed in this report. Among other things, the
                  Congress could consider providing the states with more flexibility in
                  meeting the simplified program’s cost-neutrality requirement by, for
                  example, allowing a longer period of time to measure cost neutrality,
                  instead of annually as is required by the current legislation. The Congress
                  could also examine the feasibility of granting the states a grace period in
                  which increased error rates attributed to the implementation of the
                  simplified program are exempted from financial penalties.


                  We provided USDA with a copy of a draft of this report for review and
Agency Comments   comment. We met with officials from the Food and Nutrition Service,
                  including the Director of Grants Management and the Chief of Food Stamp
                  Program Design, who generally agreed with the facts presented in this
                  report. The Food and Nutrition Service had two overall comments. First,
                  the barriers to implementing the program cited by the states as being of
                  most concern, such as it’s cost neutral provision, are imposed by the
                  program’s authorizing legislation, not by the Food and Nutrition Service or
                  the Food Stamp Program. Second, it will be difficult to identify legislative
                  changes that balance the states’ desire for more flexibility with the
                  Congress’s concern for cost containment and the Food Stamp Program
                  mission of ensuring the nutritional security for low-income families. We
                  agree that the barriers of most concern to the states originate in the



                  Page 16                                           GAO/RCED-99-43 Welfare Reform
B-281593




program’s authorizing legislation and that legislative actions effectively
satisfying both state and congressional concerns may be difficult to
develop. Nonetheless, we continue to believe that the actions we identified
as matters for congressional consideration, such as granting the states a
grace period from financial penalties due to increased error rates, offer the
promise of making the program more useful to the states without
necessarily increasing federal costs. In addition to its two overall
comments, the Food and Nutrition Service suggested technical
clarifications to the report, which we incorporated as appropriate.


As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after the
date of this letter. At that time, we will send copies of this report to the
Senate Committee on Agriculture, Nutrition, and Forestry; the House
Committee on Agriculture; other interested congressional committees; and
the Secretary of Agriculture. We will also make copies available to others
upon request.

Please contact me at (202) 512-5138 if you or your staff have any questions
about this report. Major contributors to this report are listed in appendix
VIII.

Sincerely yours,




Robert E. Robertson
Associate Director, Food and
  Agriculture Issues




Page 17                                           GAO/RCED-99-43 Welfare Reform
Contents



Letter                                                       1


Appendix I                                                  20
Objectives, Scope,
and Methodology
Appendix II                                                 22
Aggregated Responses
to Our July 1998 Mail
Survey
Appendix III                                                33
Use of the Simplified
Program to Comply
With Minimum Wage
Requirements
Appendix IV                                                 34
Status of States’
Implementation of the
Simplified Food
Stamp Program as of
July 1998
Appendix V                                                  35
Arkansas Implements
the Simplified Food
Stamp Program




                        Page 18   GAO/RCED-99-43 Welfare Reform
                        Contents




Appendix VI                                                                                     41
North Dakota Decides
Not to Implement a
Simplified Program
Appendix VII                                                                                    46
Summary of
Suggested Changes to
the Simplified
Program
Appendix VIII                                                                                   47
                        Resources, Community, and Economic Development Division,                47
Major Contributors to     Washington, D.C.
This Report
Table                   Table 1: Federal Law Sets Increasing Requirements for Work or            5
                         Related Activities for One-Parent and Two-Parent Families


Figures                 Figure 1: States that Have Implemented or Plan to Implement a            9
                          Simplified Program
                        Figure 2: Major Concerns That Discouraged States From                   11
                          Implementing the Simplified Program
                        Figure 3: Impacts of the Simplified Program on the Number of            13
                          Households Receiving Food Stamps
                        Figure 4: Impacts of the Simplified Program on Average                  14
                          Household Food Stamp Benefits Amounts
                        Figure 5: Other Impacts of the Simplified Program                       15




                        Abbreviations

                        FNS        Food and Nutrition Service
                        GAO        General Accounting Office
                        TANF       Temporary Assistance for Needy Families
                        TEA        Transition Employment Assistance
                        TEEM       Training, Education, Employment, and Management
                        USDA       U.S. Department of Agriculture


                        Page 19                                       GAO/RCED-99-43 Welfare Reform
Appendix I

Objectives, Scope, and Methodology


              In October 1996, the Ranking Minority Member, Subcommittee on
              Children and Families, Senate Committee on Labor and Human Resources
              (now known as the Committee on Health, Education, Labor and Pensions),
              asked us to study several issues concerning the impact of welfare reform
              on the Food Stamp Program. This report addresses the status and impact
              of the states’ implementation of the Simplified Food Stamp Program.
              Specifically, we (1) identify the number of states that have adopted or are
              planning to adopt the Simplified Food Stamp Program, (2) describe the
              concerns that may be preventing other states from adopting the simplified
              program, and (3) examine the impacts that the adoption of the simplified
              program may have on households’ eligibility and benefits.

              To address the first objective, we mailed a national survey in July 1998 to
              53 state agencies that administer the Food Stamp Program.1 To encourage
              their responses to our survey, we used follow-up mailings and telephone
              calls. We received survey responses from 52 of the 53 states, a response
              rate of 98 percent. (Iowa declined to participate in our survey.)

              To address the second and third objectives, we collected pertinent studies,
              reports, and program literature on the welfare reform changes contained
              in the 1996 Welfare Reform Act. Our survey also collected information on
              the actual or anticipated changes in the number of participating food
              stamp households and officials’ views on whether benefit levels were
              expected to increase or decrease as a result of the simplified program. We
              also collected information on the problems or concerns that the states
              perceive may result from adopting the simplified program. In addition, we
              interviewed officials at the headquarters of the U.S. Department of
              Agriculture’s (USDA) Food and Nutrition Service (FNS) and at all of its seven
              regional offices to collect information on the effect of the simplified
              program on household participation and benefit levels. We interviewed
              food stamp officials in the eight states that have adopted the simplified
              program: Arizona, Arkansas, Delaware, Georgia, Idaho, Mississippi, New
              Jersey, and New York. We also interviewed food stamp officials in North
              Dakota—the only state that has decided against implementing the
              simplified program after receiving program approval from FNS—to obtain
              information on their assessment process for the adoption of the simplified
              program.

              We performed our work from April through December 1998 in accordance
              with generally accepted government auditing standards. We did not,

              1
              As treated in the Food Stamp Act of 1977, as amended, “states” includes the 50 states, the District of
              Columbia, Guam, and the U.S. Virgin Islands.



              Page 20                                                           GAO/RCED-99-43 Welfare Reform
Appendix I
Objectives, Scope, and Methodology




however, independently verify the accuracy of the state food stamp
directors’ responses to our questionnaire.




Page 21                                       GAO/RCED-99-43 Welfare Reform
Appendix II

Aggregated Responses to Our July 1998 Mail
Survey




              Page 22            GAO/RCED-99-43 Welfare Reform
Appendix II
Aggregated Responses to Our July 1998 Mail
Survey




Page 23                                      GAO/RCED-99-43 Welfare Reform
Appendix II
Aggregated Responses to Our July 1998 Mail
Survey




Page 24                                      GAO/RCED-99-43 Welfare Reform
Appendix II
Aggregated Responses to Our July 1998 Mail
Survey




Page 25                                      GAO/RCED-99-43 Welfare Reform
Appendix II
Aggregated Responses to Our July 1998 Mail
Survey




Page 26                                      GAO/RCED-99-43 Welfare Reform
Appendix II
Aggregated Responses to Our July 1998 Mail
Survey




Page 27                                      GAO/RCED-99-43 Welfare Reform
Appendix II
Aggregated Responses to Our July 1998 Mail
Survey




Page 28                                      GAO/RCED-99-43 Welfare Reform
Appendix II
Aggregated Responses to Our July 1998 Mail
Survey




Page 29                                      GAO/RCED-99-43 Welfare Reform
Appendix II
Aggregated Responses to Our July 1998 Mail
Survey




Page 30                                      GAO/RCED-99-43 Welfare Reform
Appendix II
Aggregated Responses to Our July 1998 Mail
Survey




Page 31                                      GAO/RCED-99-43 Welfare Reform
Appendix II
Aggregated Responses to Our July 1998 Mail
Survey




Page 32                                      GAO/RCED-99-43 Welfare Reform
Appendix III

Use of the Simplified Program to Comply
With Minimum Wage Requirements

               The Department of Labor has determined that under the Fair Labor
               Standards Act of 1938, as amended, welfare participants who are required
               to work must receive benefits that are at least equal in value to the
               minimum wage multiplied by the number of hours worked. Some states
               that provide low levels of assistance through Temporary Assistance for
               Needy Families (TANF), such as Mississippi, have found it difficult to
               require participants to work the hours mandated by the Welfare Reform
               Act to receive benefits and remain in compliance with the federal
               minimum wage restriction.

               For example, a Mississippi household consisting of a single parent and two
               children received a TANF benefit of $120 in October 1997. The maximum
               hours that the state could require the parent to work under the minimum
               wage restriction would have been a little more than 5 hours a week (the
               product of $120 divided by 4.3 average number of weeks per month
               divided by the minimum wage of $5.15 equals 5.4 hours)—about 15 hours
               short of TANF’s 20-hour weekly work requirement in October 1997.

               According to the Mississippi food stamp director, the state addressed this
               shortfall in work hours by adopting a “mini” simplified program that
               allowed it to administratively combine the value of its monthly TANF and
               food stamp benefits when calculating the maximum number of hours that
               participating households can be required to work under the minimum
               wage restriction. In the above example, combining the $120 monthly TANF
               benefit with the maximum food stamp benefit—at that time, $321 for a
               family of three—brought the total value of the household’s October 1997
               assistance to $441. With the combined benefit amount, the maximum
               number of hours allowed under the minimum wage restriction increased
               from about 5 to 20 hours a week. As a result, Mississippi was able to meet
               TANF’s fiscal year 1998 work requirement for participants without
               exceeding the maximum number of work hours allowed.




               Page 33                                         GAO/RCED-99-43 Welfare Reform
Appendix IV

Status of States’ Implementation of the
Simplified Food Stamp Program as of July
1998

              Status of implementation        States                          Number of states reporting
              State has decided definitely Alabama, Guam, Hawaii,
              not to implement the program Kentucky, Maryland,
                                           Minnesota, Missouri,
                                           Nebraska, Nevada, New
                                           Mexico, North Dakota,
                                           Oklahoma, Oregon, South
                                           Dakota, Tennessee, and
                                           Washington                                                16
              State will probably not         Alaska, District of Columbia,
              implement the program           Indiana, Kansas, Louisiana,
                                              Michigan, Montana, Ohio,
                                              Texas, Vermont, Virginia,
                                              West Virginia, Wisconsin,
                                              and Wyoming                                            14
              State is uncertain if it will   California, Colorado,
              implement the program           Connecticut,
                                              Massachusetts, New
                                              Hampshire, Pennsylvania,
                                              Rhode Island, Utah, and
                                              Virgin Islands                                          9
              State has implemented a         Arizona, Delaware, Georgia,
              program                         Idaho, Mississippi, New
                                              Jersey, and New York                                    7
              State will probably implement Florida, North Carolina, and
              the program                   South Carolina                                            3
              State will definitely implement Arkansas, Illinois and Maine
              the program                                                                             3
              Data not available              Iowa
                                                                                                      1




              Page 34                                                   GAO/RCED-99-43 Welfare Reform
Appendix V

Arkansas Implements the Simplified Food
Stamp Program

                           Arkansas was the first state to obtain FNS’ approval to implement a
                           simplified program that merges several Food Stamp Program and TANF
                           requirements. Arkansas’ goal in adopting a simplified program is to
                           streamline and simplify the process of applying for food stamp and TANF
                           benefits. By implementing a “seamless” procedure for approving the two
                           benefits at the same time—a “one-stop” process—caseworkers should
                           save time in interviewing clients, completing forms, and reporting
                           requirements. Caseworkers would use the additional available time to help
                           welfare recipients pursue employment opportunities. Reducing time in the
                           clients’ application process would also help decrease the need to hire
                           additional caseworkers to meet the increased responsibilities resulting
                           from implementing welfare reform changes. Arkansas serves about
                           100,000 households, or 1 percent of the nation’s food stamp household
                           population. This appendix describes the state’s experiences in adopting a
                           simplified program.


Initial Challenges in      In 1996, Arkansas began developing proposals for a simplified program
Obtaining Approval for a   with the idea that it would implement the program at the same time as
                           TANF.1 By March 1997, Arkansas had drafted a plan and contacted FNS for
Simplified Program
                           guidance. FNS provided contract assistance to help ensure that the
                           simplified plan was cost neutral, and subsequent analyses showed that
                           Arkansas stayed well within the cost-neutrality requirement. However,
                           with regard to the process of aligning the regulations for the Food Stamp
                           Program and TANF to achieve a simplified program plan, Arkansas’ food
                           stamp officials told us that the lack of FNS regulations and detailed
                           guidance resulted in a learn-as-you-go, ad-hoc approval process that was
                           full of uncertainties. As a result, Arkansas officials were not sure which
                           proposed program changes FNS would approve. According to FNS officials,
                           Arkansas submitted its proposal for a Simplified Food Stamp Program for
                           review and approval in October 1997. FNS officials stated that some of
                           Arkansas’ proposed simplified plan provisions could not be approved
                           because of the strict statutory requirements of the Food Stamp Program or
                           the adverse impact of the proposed program changes on recipients’
                           benefits. FNS officials said they took great care in reviewing and approving
                           the Arkansas plan because Arkansas’ simplified program and the
                           modifications suggested by FNS officials would be instrumental in shaping
                           federal policies for the Simplified Food Stamp Program nationwide. FNS
                           approved Arkansas’ plan for pure-TANF households (all household

                           1
                            Arkansas officials refer to their TANF program as the Transition Employment Assistance (TEA)
                           Program. The TEA Program, which provides assistance for up to 2 years, would help (1) economically
                           needy families become more responsible for their own support and less dependent on public
                           assistance and (2) recipients recognize their employment possibilities and direct them to jobs.



                           Page 35                                                        GAO/RCED-99-43 Welfare Reform
                           Appendix V
                           Arkansas Implements the Simplified Food
                           Stamp Program




                           members are eligible to receive TANF assistance) in February 1998.
                           According to agency officials, FNS approved Arkansas’ simplified program
                           plan for mixed-TANF households (some, but not all, household members
                           are eligible to receive TANF assistance) in March 1998 after Arkansas
                           modified the plan to reduce the amount of benefit loss for these
                           households and Arkansas implemented it in August 1998.


Difficulties in Aligning   Arkansas officials cited three major changes to the simplified program that
Food Stamp Rules and       FNS either did not approve or only partially approved because the strict

Procedures                 statutory requirements for the Food Stamp Program were difficult to align
                           with TANF. These proposed rules and procedures would have greatly
                           contributed to Arkansas’ goal of creating a “seamless” process to reduce
                           application processing time. These changes were to (1) use an average
                           dollar amount to determine the shelter costs under a simplified program,
                           (2) change Arkansas’ application process so that the approval of both TANF
                           and food stamp benefits could be given at the same time, and (3) change
                           the definition of households to exclude children born while the mother
                           was receiving TANF assistance.2

Shelter Costs              To determine whether a household’s net monthly income qualifies for the
                           Food Stamp Program, a shelter expense deduction is included in the
                           calculation. Under program regulations, a household is entitled to a
                           deduction equal to its shelter costs (such as rent, mortgage payments,
                           utility bills, property taxes, and insurance). Also, under the regular Food
                           Stamp Program, a household without elderly or disabled members
                           receives a deduction for the portion of shelter expenses exceeding
                           50 percent of net income, not to exceed the capped amount. Households
                           containing elderly or disabled members are entitled to subtract the full
                           value of their shelter costs when those costs exceed 50 percent of their
                           adjusted income. In fiscal year 1996, the limit on the excess shelter
                           expense deduction for a household without elderly or disabled members
                           was generally $247.

                           Arkansas’ proposed simplified program would have changed how shelter
                           costs are considered in determining food stamp benefits. Specifically,
                           Arkansas would have applied a county’s average shelter costs to both
                           pure- and mixed-TANF households. Arkansas wanted to use the average
                           shelter cost because, in keeping with the goal of creating a “seamless”
                           process, each county could then be assigned a standard shelter cost.

                           2
                            While the federal law under TANF is silent on whether to prohibit benefit increases for families on
                           assistance when another child is born (referred to as “family cap” provisions), many states have
                           adopted some type of family cap provision to discourage subsequent births.



                           Page 36                                                           GAO/RCED-99-43 Welfare Reform
                         Appendix V
                         Arkansas Implements the Simplified Food
                         Stamp Program




                         However, using each county’s average shelter costs in calculating
                         simplified program benefits would have reduced the food stamp benefits,
                         particularly for the mixed-TANF households, especially those containing
                         elderly or disabled members, according to an FNS contractor’s analysis.3
                         While benefit amounts for pure-TANF households would increase an
                         average of less than 1 percent, benefits for mixed-TANF households would
                         decrease an average of more than 8 percent. Furthermore, approximately
                         one-half of all the mixed-TANF households participating in the simplified
                         program would lose benefits, and about one-third of the households would
                         lose more than 20 percent. FNS said that such a level of reduction in
                         benefits compromised the program’s nutritional support for a significant
                         number of mixed-TANF households, most of which contain elderly or
                         disabled members, who are particularly vulnerable to nutritional loss.

                         FNS would not approve any policy changes that would have a negative
                         effect on food stamp benefits. Consequently, FNS instructed Arkansas to
                         modify its simplified program and consider changes in the calculation of
                         shelter expenses on the basis of standardized and actual expenses for each
                         county. Arkansas modified its simplified program to allow mixed-TANF
                         household recipients to choose between the standard shelter costs and the
                         household’s actual shelter costs. However, Arkansas also kept the average
                         benefit calculation.

                         FNS commented that the simplified program’s authorizing legislation
                         requires FNS to approve implementation plans for pure-TANF households so
                         long as these plans comply with the law. Using the simplified program
                         authority, FNS established a single criterion for approving mixed-TANF
                         households, and that criterion does not prohibit, but only limits, the
                         amount that benefits can be reduced for these households. According to
                         FNS, as long as a state’s plan for mixed-TANF households does not reduce
                         benefits beyond specific thresholds and meets the statutory requirements,
                         FNS will approve any state’s plan. FNS officials stated that they offered their
                         services to work with Arkansas officials in developing several appropriate
                         alternative ways to consider shelter costs in determining benefits in the
                         simplified program. The use of actual expenses was only one of several
                         suggestions made by FNS to limit the amount of benefit loss.

Application Processing   Arkansas had proposed approving the applications for TANF and food
                         stamp benefits at the same time. In effect, any household submitting an
                         application to participate in TANF would be automatically submitting an

                         3
                          Results For Arkansas’ Simplified Food Stamp Program Plan 1, Mathematica Policy Research, Inc.,
                         Sept. 15, 1997.



                         Page 37                                                        GAO/RCED-99-43 Welfare Reform
                        Appendix V
                        Arkansas Implements the Simplified Food
                        Stamp Program




                        application to participate in food stamps. FNS officials did not approve this
                        program change because, under the Welfare Reform Act, the recipient has
                        to be eligible for TANF assistance before being eligible for benefits under
                        the simplified program. Consequently, Arkansas officials changed the
                        simplified program rules to certify applicants’ eligibility for food stamp
                        benefits after the TANF application is approved. If an applicant is not
                        approved for TANF assistance within 30 days, the applicant is approved to
                        receive benefits under the regular Food Stamp Program rules, if otherwise
                        eligible. The TANF application form was revised to include information
                        needed to determine eligibility for the regular Food Stamp Program. Once
                        the applicant completed all the necessary paperwork and was
                        subsequently approved for TANF assistance, the Arkansas caseworker
                        would then convert the applicant’s regular food stamp eligibility to the
                        simplified program.

                        This application procedure causes the caseworker to take extra time to
                        process an application for food stamp benefits under the regular Food
                        Stamp Program rules. Moreover, moving applicants back and forth
                        between the regular Food Stamp Program and the simplified program can
                        cause confusion and give the caseworkers an additional workload burden.

                        FNS  commented that it approved the Arkansas plan for joint application
                        filing, and the only restrictions on joint application processing pertain to
                        situations in which the state is not able to approve the TANF application
                        within 30 days. If TANF cannot be approved within 30 days, the food stamp
                        application must be processed using regular Food Stamp Program
                        procedures. This procedure ensures that food stamp benefits are not
                        delayed while the state is making its determination regarding TANF.

Household Composition   Arkansas had proposed changing the food stamp definition of households
                        to exclude children born while the mother was receiving TANF assistance.
                        FNS advised Arkansas that the definition of a household4 under the food
                        stamp regulations could not be altered. Children ineligible for TANF
                        assistance because of the family cap provision would still be included as
                        household members for simplified program benefits. FNS advised Arkansas
                        that it must use the regular food stamp regulations governing household
                        composition in determining whether a household is eligible to participate
                        in the simplified program. In addition, the households affected by the
                        family cap provision must have their food stamp benefits determined



                        4
                         In general, individuals who live in a residential unit and purchase and prepare food together
                        constitute a household.



                        Page 38                                                            GAO/RCED-99-43 Welfare Reform
                               Appendix V
                               Arkansas Implements the Simplified Food
                               Stamp Program




                               under the regular Food Stamp Program.5 Arkansas revised its simplified
                               program to allow households with children ineligible for TANF assistance
                               solely because of the family cap provision to participate in the simplified
                               program.

                               The change in the definition of a household can cause that household to
                               move between the simplified program and the regular Food Stamp
                               Program. Once a household becomes ineligible for TANF assistance, the
                               household’s eligibility for food stamps under the regular Food Stamp
                               Program must be determined. FNS understood the administrative
                               difficulties in switching households between the simplified program and
                               the regular Food Stamp Program when TANF benefits are suspended for a
                               short period of time. FNS notified Arkansas that it would be appropriate to
                               allow a household to retain its simplified program status for a period of
                               time—but no longer than 4 months. Households that are suspended from
                               TANF for longer than 4 months must have their benefits redetermined under
                               the regular Food Stamp Program.

                               FNS commented that the simplified program plan Arkansas submitted did
                               not request an alteration in household composition because of children
                               subject to the family cap. It stated that these households would participate
                               in the simplified program and would have their food stamp benefit
                               amounts adjusted. Furthermore, FNS officials stated that because the
                               Arkansas plan includes households with children subject to the family cap,
                               benefits for these households are determined using the simplified program
                               procedures.


Arkansas Simplified Plan       In spite of some of the difficulties, Arkansas still implemented a version of
Adopts TANF Rules              a simplified program. The Arkansas’ simplified program adopted TANF’s
                               processing standards and rules to the extent possible, including the
                               following:

                           •   No medical costs are allowed under the simplified program because TANF
                               recipients are covered by Medicaid. Under the regular Food Stamp
                               Program, medical deductions of costs incurred over $35 are available to
                               households that contain elderly and disabled members.
                           •   No dependent care costs are allowed under the simplified program
                               because the state pays child care costs for TANF recipients. Under the
                               regular Food Stamp Program, households with dependents receive a

                               5
                                According to Arkansas officials, households affected by the family cap provision will not be
                               considered categorically eligible for benefits through the Simplified Food Stamp Program but must
                               meet the gross income and resource limits of the regular Food Stamp Program.



                               Page 39                                                         GAO/RCED-99-43 Welfare Reform
                                 Appendix V
                                 Arkansas Implements the Simplified Food
                                 Stamp Program




                                 deduction up to $200 for expenses involved in caring for children and
                                 other dependents while household members work, seek employment, or
                                 attend school.
                             •   Countable income and resources will be determined by TANF rules, which
                                 limit resources to $3,000 for households. The regular Food Stamp Program
                                 permits up to $2,000 in countable assets for most households. Countable
                                 assets include cash; assets that can easily be converted to cash, such as
                                 money in checking or savings accounts, savings certificates, stocks or
                                 bonds; and lump-sum payments and nonliquid resources. Furthermore,
                                 TANF allows resource exemptions, such as the total value of one motor
                                 vehicle, while the Food Stamp Program exempts the fair market value up
                                 to $4,650.
                             •   Households will be certified as eligible for assistance under the simplified
                                 program for up to 12 months, and benefits can be automatically extended.
                                 The regular Food Stamp Program certification period is also up to 12
                                 months in Arkansas, but at the end of the period applicants must reapply
                                 for benefits, according to Arkansas officials. This certification period
                                 varies across the states and averages about 10 months.


Benefits and Expectations        Arkansas invested a small amount of resources to develop its simplified
for the Simplified Program       program. The program serves approximately 10 percent of the state’s food
                                 stamp households. Arkansas officials stated that, although it is too early to
                                 determine whether the simplified program will meet its goals, some of the
                                 program’s potential benefits may include the following:

                             •   Eligible TANF households will not have to apply for food stamps.
                             •   Households receiving food stamps through the simplified program will
                                 have no change in reporting requirements, other than the TANF program
                                 requirements.
                             •   County caseworkers will not be required to process a separate set of
                                 income and eligibility verification system reports generated through the
                                 Food Stamp Program.
                             •   Households participating in the simplified program will not be subject to
                                 quarterly reporting.
                             •   The state’s administrative costs will be cut because workers will no longer
                                 have to process two applications and report changes and will therefore be
                                 free to assist households in obtaining employment.

                                 Arkansas officials believe that they should be able to make their informal
                                 assessment of the simplified program in January 1999.




                                 Page 40                                          GAO/RCED-99-43 Welfare Reform
Appendix VI

North Dakota Decides Not to Implement a
Simplified Program

                 After investing significant resources to simplify program administration,
                 North Dakota officials, believing that the obstacles to implementation
                 were insurmountable, decided not to implement the Simplified Food
                 Stamp Program. North Dakota serves only about 16,000 households, or
                 about two-tenths of a percent of the nation’s food stamp households. This
                 case study describes North Dakota’s experience in attempting to
                 implement a simplified program and become more administratively
                 efficient in providing public assistance to its clients.


Efforts Toward   In 1993, North Dakota officials, in anticipation of welfare reform,
Simplification   developed a conceptual plan for program simplification with the ultimate
                 goal of getting people off welfare. North Dakota planned to develop a
                 single cash benefit program based on family size that would replace
                 assistance programs such as food stamps, Aid to Families with Dependent
                 Children (AFDC), and Low Income Energy Assistance.1 Under this cash
                 benefit program, eligibility determinations would be made with one set of
                 rules for TANF, food stamps, and energy assistance, and benefits would be
                 provided as a lump sum “cash out payment.” North Dakota also planned to
                 develop a comprehensive system to meet essential training, education, and
                 employment needs of persons receiving public assistance. The conceptual
                 welfare reform plan resulted in a comprehensive program and an
                 automated management system—referred to as Training, Education,
                 Employment, and Management (TEEM)—which determines individuals’
                 eligibility for public assistance and the level of benefits they should
                 receive.

                 During 1996, the state planned to initiate a TEEM demonstration project.
                 However, the Food Stamp Program was suspended from the
                 demonstration project because FNS did not approve the policy changes
                 requested by the state as a part of its Food Stamp Program and TANF
                 merger. During this period, the Welfare Reform Act, containing the
                 Simplified Food Stamp Program, was enacted. State officials believed that
                 the simplified program provisions would allow their TEEM effort to obtain
                 greater uniformity between the food stamps and TANF programs. Although
                 the act disallowed a cash benefit for food stamps, North Dakota officials
                 believed that the simplified program’s provisions would afford greater
                 opportunities for implementing major policy changes, including the
                 opportunity to provide a “single lump sum benefit.” In addition, the
                 proposed TEEM demonstration project would have been limited to

                 1
                  The Low Income Energy Assistance Program is a block grant, administered by the U.S. Department of
                 Health and Human Services in conjunction with the states. It provides eligible households with
                 assistance for home heating and cooling, energy crisis, and weatherization.



                 Page 41                                                        GAO/RCED-99-43 Welfare Reform
                              Appendix VI
                              North Dakota Decides Not to Implement a
                              Simplified Program




                              operating in only 10 North Dakota counties, whereas the simplified
                              program would operate statewide. Ultimately, however, North Dakota
                              decided not to implement a simplified program and is proceeding in its
                              efforts to establish TEEM without the Food Stamp Program.


Obstacles Encountered by      North Dakota officials told us that they encountered a number of obstacles
North Dakota                  when working towards approval of a simplified program. Overall, they said
                              the lack of federal regulations contributed to uncertainty regarding the
                              type of program changes that could be achieved under the simplified
                              program. The development of the program was a learn-as-you-go process,
                              and although numerous concerns were resolved, new ones surfaced. State
                              officials said that these roadblocks were a continuing source of frustration
                              and created an environment of uncertainty and vagueness as to what
                              simplified policy changes could be achieved under the simplified program
                              legislation. Some of the major obstacles North Dakota faced are discussed
                              below.

Increased Caseworker Burden   According to North Dakota officials, caseworkers’ burden would increase
                              as a result of implementing the simplified program. In addition to the TANF
                              and regular Food Stamp Program, the simplified program creates an
                              additional set of regulations and procedures—in essence creating a whole
                              new program. This new program would comprise a mixture of TANF and
                              Food Stamp Program regulations. Generally, caseworkers determine
                              welfare benefits by applying multiple program regulations and procedures,
                              including those for food stamps, TANF and Low Income Energy Assistance.
                              According to state officials, with all the changes occurring in welfare
                              reform in general, and TANF and TEEM in particular, the addition of a new
                              set of program regulations and procedures would increased the
                              complexity of the process to determine eligibility for welfare assistance.
                              North Dakota caseworkers are located in small rural counties, and
                              depending on the location, would have different degrees of experience and
                              responsibilities. Some caseworkers manage all aspects of their county
                              offices, some are also secretaries, and some are newly hired, long-term,
                              and seasonal employees. Because many caseworkers do not administer
                              these programs full-time and do not routinely determine eligibility for
                              welfare assistance, North Dakota officials believe that these caseworkers
                              are not as familiar with current welfare regulations as are full-time
                              caseworkers. Thus, to add an additional set of program regulations and
                              procedures would increase caseworkers’ burden.




                              Page 42                                         GAO/RCED-99-43 Welfare Reform
                               Appendix VI
                               North Dakota Decides Not to Implement a
                               Simplified Program




Increased Error Rates          North Dakota, like other states, is required by FNS to conduct quality
                               control reviews of its food stamp cases to identify and measure any
                               erroneous food stamp issuances. Using the results of the review, the state
                               determines an error rate that is the percentage of benefits either issued to
                               ineligible households or issued in improper amounts (under- or
                               over-payments) to eligible households. This error rate is reported to FNS.

                               North Dakota officials stated that the addition of the simplified program
                               would definitely increase the state’s food stamp error rates because of the
                               additional burden it would place on the caseworkers. North Dakota’s error
                               rate was 11.03 percent in fiscal year 1997, which exceeded the national
                               average of 9.88 percent. This higher error rate resulted in a sanction of
                               $38,978. North Dakota officials informed us that many of the mistakes
                               were caused by seasonal workers. Other errors resulted from households’
                               fluctuating earned income, changes in welfare reform processes, and other
                               local circumstances.

                               Considering the state’s high error rate, and the fact that the simplified
                               program would add an additional set of program regulations and
                               procedures, North Dakota officials believed that implementation of the
                               simplified program would contribute to caseworkers’ burden and could
                               result in even a higher error rate. If the error rate increased by as much as
                               1 percent over the fiscal year 1997 rate, North Dakota would have incurred
                               a corresponding increase in the sanction liability of $97,260, or an increase
                               of 350 percent.

Ambiguity of Simplified Food   According to North Dakota officials, the Simplified Food Stamp Program
Stamp Legislation              as outlined in the Welfare Reform Act is not simple. While the act’s
                               provisions establishing the simplified program appear to allow the states
                               the flexibility to make almost any type of program change, the Food Stamp
                               Program is restrictive and some of its statutory provisions cannot be
                               changed. In this regard, state officials told us that the Food Stamp
                               Program differs from TANF and the Low Income Energy Assistance
                               Program, which are block grants and therefore provide the state with
                               flexibility in changing program operations. For example, state and FNS
                               officials could not agree on the time period beneficiaries would have for
                               notifying program officials of any significant changes in income earnings
                               according to North Dakota officials. That time period varies between TANF
                               and the Food Stamp Program—for TANF, it is 10 days, and for food stamps,
                               it is up to 2 months. According to state officials, they could not agree with
                               FNS officials because the time period allowed under the Food Stamp
                               regulations could not be changed.



                               Page 43                                          GAO/RCED-99-43 Welfare Reform
                                 Appendix VI
                                 North Dakota Decides Not to Implement a
                                 Simplified Program




                                 FNScommented that it approved for the simplified plan the TANF
                                 requirement for reporting changes. According to FNS officials, since the
                                 Food Stamp Act places no restrictions on the states with respect to
                                 changes in reporting requirements, the states may use their TANF rules,
                                 food stamp rules, or a combination of the two.

Strict Food Stamp Rules Are      Two major reforms that North Dakota officials sought to initiate under the
Hard to Align                    simplified program were not approved by FNS. FNS officials stated that
                                 these changes would alter the fundamental concepts of the Food Stamp
                                 Program. The two major policy reforms were (1) redefining household
                                 composition and (2) proposing a single benefit calculation for TANF, Food
                                 Stamps, and the Low Income Energy Assistance programs. According to
                                 FNS officials, approval of the changes for household composition and
                                 benefit calculations would alter the Food Stamp Program’s most
                                 fundamental features by eliminating the national nutrition safety net for
                                 low-income households. In addition, the approval of these two policy
                                 changes would reduce food stamp benefits for the elderly and disabled
                                 recipients who share living quarters with a TANF recipient. FNS officials
                                 stated that North Dakota’s proposal would replace the Food Stamp
                                 Program with essentially a state program, which the Congress elected not
                                 to do under welfare reform. When FNS did not approve this change, North
                                 Dakota abandoned its simplified food stamp proposal because the
                                 simplified program would not achieve the TEEM goals of providing a single
                                 lump sum benefit. FNS officials commented that North Dakota was aware
                                 even before submitting its simplified program proposal that FNS would not
                                 approve the major points of its plan, because these proposals had been
                                 previously denied in a demonstration project proposal for North Dakota’s
                                 TEEM effort. According to FNS officials, FNS advised North Dakota that the
                                 two proposals could not be approved under the simplified program
                                 because they violated the Food Stamp Act. However, North Dakota
                                 continued to seek these program changes as a part of its simplified
                                 program proposal.

Concerns About Cost Neutrality   Although North Dakota’s simplified program proposal was cost neutral
in the Future                    initially, state officials told us they feared that the program would not be
                                 cost neutral in future years. They were concerned about federal and/or
                                 state policy changes that could take place over time and that could have a
                                 negative impact on cost neutrality. Under such conditions, the state might
                                 no longer meet the cost-neutral requirement. Under the Welfare Reform
                                 Act, if FNS determines that a state’s program has increased federal costs for
                                 any year (or portion of a year), it must notify the state within 30 days.
                                 Within 90 days, the state must then submit, for FNS’ approval, a corrective



                                 Page 44                                          GAO/RCED-99-43 Welfare Reform
                      Appendix VI
                      North Dakota Decides Not to Implement a
                      Simplified Program




                      action plan designed to prevent its simplified program from increasing
                      federal food stamp costs. If the state does not submit or carry out a plan,
                      its simplified program will be terminated, and according to the act, the
                      state will be ineligible to operate a simplified program in the future. In the
                      opinion of North Dakota officials, if the cost-neutrality provision was
                      extended beyond 1 year, there would be a greater opportunity to achieve
                      the goal.


Decision to Abandon   In April 1998, shortly before receiving FNS’ final approval, North Dakota
Implementation        officials decided to abandon the implementation of the simplified
                      program. According to state officials, it became obvious that the
                      program—revised from its original proposal in order to obtain FNS
                      approval—would not meet the needs of North Dakota’s TEEM effort. FNS
                      officials stated that these changes were necessary to meet the Food Stamp
                      Act’ s requirements. State officials believed that its 5-year welfare reform
                      effort, including the approximately 1-year effort to develop a simplified
                      program, had wasted hundreds of hours of staff time. Since North Dakota
                      did not achieve its goal, the expenditure of valuable personnel resources
                      that could have been put to more productive use represent a great loss to
                      the state, according to state officials.




                      Page 45                                           GAO/RCED-99-43 Welfare Reform
Appendix VII

Summary of Suggested Changes to the
Simplified Program


                                                                              Number of states making
               Suggested change                States making suggestion                    suggestion
               Extend the simplified           California, District of
               program to all food stamp       Columbia, Hawaii, Kansas,
               households                      Maine, Minnesota, Nevada,
                                               Texas, Virginia, Wisconsin,
                                               West Virginia, and Wyoming                         12
               Change rules (i.e., remove      Alaska, Alabama, California,
               restrictions; allow states to   Illinois, Indiana, Maryland,
               use same financial penalties    Michigan, Missouri, North
               across programs; base           Dakota, Pennsylvania, and
               benefits on income only)        South Carolina                                     11
               Eliminate or relax the          Alabama, California,
               cost-neutrality requirement     Connecticut, Maryland,
                                               Minnesota, New Hampshire,
                                               Rhode Island, South
                                               Dakota, Tennessee, and
                                               Utah                                               10
               Grant categorical food stamp Alaska and Michigan
               eligibility for TANF
               participants                                                                        2
               Provide funding for             Nebraska and Tennessee
               implementation costs                                                                2
               Allow an increase in food       California and Utah
               stamp benefits                                                                      2
               Allow mixed-TANF                Arkansas and South Dakota
               households to participate
               under same rules as
               pure-TANF households                                                                2
               Provide moratorium on           Tennessee
               quality control errors                                                              1




               Page 46                                                  GAO/RCED-99-43 Welfare Reform
Appendix VIII

Major Contributors to This Report


                        Patricia A. Gleason, Assistant Director
Resources,              Peter M. Bramble, Jr., Evaluator-in-Charge
Community, and          Jacqueline A. Cook, Senior Evaluator
Economic                Melissa M. Francis, Evaluator
                        Carolyn M. Boyce, Senior Social Science Analyst
Development             Carol Herrnstadt Shulman, Senior Communications Analyst
Division, Washington,
D.C.




(150286)                Page 47                                     GAO/RCED-99-43 Welfare Reform
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