States slow to spend federal welfare money; Allotments piling up as recipients decline


WASHINGTON -- Billions of dollars in federal welfare money is piling up in the Treasury, unused by state officials, who won control of the money in 1996 by arguing that they knew best how to spend it for the benefit of poor people.

More than half the states failed to use the full amounts of their federal welfare grants last year, federal and state officials say. Data compiled by the Department of Health and Human Services show that states had an unused balance of $3 billion, out of $12 billion made available in the first nine months of last year.

In addition, several states, including Ohio and Mississippi, passed up the opportunity to get extra federal money from the Labor Department to help move long-term welfare recipients into jobs.

State officials said the number of people on welfare had dropped much faster than they expected, making it difficult for them to use all the federal money they were entitled to. While a few states have been innovative, many have been slow to develop new welfare programs since responsibility shifted from the federal government to the states.

In addition, some states are saving money for use in a recession. States can allow money to accumulate, and draw it when their needs increase.

The latest federal data show that West Virginia, one of the poorest states in the nation, had an unspent balance of $72 million, representing 65 percent of its annual federal grant under the new welfare program, known as Temporary Assistance for Needy Families.

Under the 1996 welfare law, the federal government provides each state with a fixed amount of money, regardless of any changes in the number of people who qualify for assistance.

Each state's annual allocation, which is to remain steady for six years, was based on federal spending in 1994 and 1995, when welfare spending and caseloads were high. States may carry over unused federal money from year to year, but they are required to spend specified amounts of state money, equal to 75 percent or 80 percent of what they spent on welfare in 1994.

Jack Tweedie, a welfare policy expert at the National Conference of State Legislatures, said, "States see the money as a reserve for a future economic downturn, but caseloads have dropped so fast that many states are building much larger reserves than they planned." The surplus, he said, could be used for social policy innovations.

Since President Clinton signed the welfare law in August 1996, the number of people on welfare has dropped 35 percent. It exceeded 12.2 million then and is below 8 million today. Reasons for the decline include an intense emphasis on work in welfare offices around the country, and a booming economy, with the lowest unemployment rate in more than 25 years.

Kansas, which receives a federal welfare grant of $102 million a year, had an unused surplus of $89 million in June 1998, and state officials predict that the balance will be $50 million in June of this year.

Minnesota receives $268 million a year from the federal government for welfare programs. As of June 30, it had a surplus of more than $110 million in its federal account.

State officials said such conservatism was justified because states bore the financial risk of any economic downturn, and would have to pay most of the cost if welfare rolls increased again.

Just as the federal government gave states wide discretion to run their welfare programs, some states transferred much of the decision-making authority to county officials. Colorado is one such state. It had a surplus of $61 million in its federal welfare account.

"It took time for counties to get up to speed in this brave new world that we have now," said Dwight Eisnach, a spokesman for the Colorado Department of Human Services, when asked why the state was not using more of its federal money.

Pub Date: 2/08/99

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