The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 involves tens of billions of dollars going to the states in the form of block grants, with few strings attached, to pay for health, education, employment and training programs.
State and local policymakers should not see federal block grants as handouts. They are an opportunity for freedom to make adjustments that will deliver services more efficiently.
Implementing federal welfare reform is a task that policymakers should approach with the knowledge that they now have the opportunity to achieve two policy objectives: lower long-term taxpayer cost and higher performing public programs.
State legislatures and governors will have long-sought flexibility to significantly change programs that have been shown to be wasteful when run at the federal level.
There have been estimates of net reductions of federal funds to California, including the Legislative Analyst's Office projection of $6.8 billion over six years, about two-thirds of this due to cuts of federal aid to certain legal immigrants residing in the state. Further, the analyst says the state will receive additional federal funds under the new Block Grants for Temporary Assistance for Needy Families. This program replaces Aid to Families with Dependent Children.
However, policymakers should see this long-sought overhaul of the government welfare system as a chance to move away from the business-as-usual attitudes that would spend billions of dollars on a system that many experts believe is fatally flawed and broken.
Taxpayer representatives around the country are urging state and local officials to take full advantage of flexibility to modify programs to decrease future liabilities and change incentives and behavior of those who participate in federal entitlement programs. State and local officials must have freedom to create programs that will target public assistance where it will do the most good without waste.
It would be most unfortunate for taxpayers if state and local officials use block grants as an excuse to increase state and local taxes. To do so would undercut the opportunity to adopt reforms that will decrease the burden on taxpayers and change behavior of those who would view current programs as permanent entitlements.