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Stimulus Bill Props up Social Services, Lays Groundwork for Bigger Changes

Despite soaring unemployment and the worst economic crisis in decades, cash welfare assistance has been cut in 18 states, raising questions about the program's ability to respond to rising unemployment during hard times. Nationally the number of people receiving cash assistance remained at or near the lowest in more than 40 years. In FY 2008, the following 16 states were recipients of the Temporary Assistance for Needy Families (TANF) supplemental grant: Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Idaho, Louisiana, Mississippi, Montana, Nevada, New Mexico, North Carolina, Tennessee, Texas, and Utah. As part of the American Recovery and Reinvestment Act (ARRA) of 2009, which explicitly targets low-income and working class families who are deeply impacted by our nation's recession, the TANF Supplemental Grants are extended through FY 2010. The economic stimulus also provides $5 billion for a new temporary emergency contingency fund for TANF for both FY 2009 and 2010. The funds will be used to make grants for states in three areas: cash assistance caseload increases, non-recurring short term benefits and expenditures for subsidized jobs.

By contrast to TANF, the number of food stamp recipients grew in all states. The federal government pays virtually all food stamp costs and last year every state expanded its food stamp enrollment. Nationally, the food stamp program grew 12 percent. The stimulus bill directs about $20 billion toward the Supplemental Nutrition Assistance Program (SNAP), formerly the Food Stamp Program, to increase food stamp benefits by 14 percent. Furthermore, additional funds will be provided to states for the administration of these benefits without a state match requirement. The nutrition assistant provisions of the bill also include $150 million toward The Emergency Food Assistance Program (TEFAP), of which $25 million will be available in FY 2009; $100 million for senior nutrition programs; and $100 million for equipment assistance for the school lunch program. Additionally, there is $500 million allocated toward the Special Supplemental Program for Women, Infants and Children (WIC). Of this amount, $100 million goes for state information systems for WIC, such as implementing new management information systems or improving existing systems.

While there has been an increased need for food stamps and cash welfare assistance, there has been even a greater urgency over unemployment policy due to the recession. During the last 4 months of 2008, some 1.9 million U.S. payroll jobs were lost and unemployment rate rose to 7.2 % in December. As part of the economic recovery package, the federal government will boost jobless benefits this year by $25 per week as well as spend billions to encourage states to modernize their unemployment insurance programs. The stimulus package provides $400 million for state unemployment insurance and employment service operations, in which $250 million of this amount must be used for reemployment services unemployment claimants. The Secretary of Labor will establish planning and reporting procedures of funds used for reemployment services.

The Recovery Act also includes changes in other social services programs. The Deficit Reduction Act (DRA) of 2005 created a provision that reduced federal child support funding by 20 percent. The economic stimulus legislation temporarily repeals the provision on using incentive funds earned for program performance as match to draw down additional federal child support funds to use for their Child Support Enforcement programs through September 30, 2010. In addition to the child support provisions, the bill also provides funding for the following:

  • Child Care Development Block Grant (CCDBG): CCDBG is appropriated by state legislatures. The total $2 billion is available upon enactment and the funds must be used to supplement, not replace, state spending for child care for low-income families, but there is no new Maintenance of Effort requirement.
  • Head Start and Early Head Start: The bill appropriates $1 billion for Head Start and $1.1 billion for Early Head Start. Ten percent of the amount for Early Head Start goes for training and technical assistance; three percent for monitoring the operations of these programs.
  • Community Services Block Grant (CSBG): The bill includes $1 billion in additional funding, of which one percent will be reserved by states for benefit enrollment coordination activities. Funds will be distributed by states directly to local eligible entities.
  • Adoptive/Foster Care/Relative Guardianship: $843.6 million increase over two years.
  • Supplemental Security Income (SSI): One-time payment of $250 to Social Security beneficiaries and SSI recipients receiving benefits from SSA and Railroad retirement, as well as veterans receiving disability and pension from Veterans Affairs.
Although funding increase was discussed for other programs, such as the Low Income Home Energy Assistance (LIHEAP) and Social Services Block Grant (SSBG), as part of either the Senate or the House proposal, the final stimulus legislation does not provide any funding for these programs.

GovWin's Take

  • State budgets will grow, but at a slower pace. Nonetheless, social services and unemployment will be the pain points.
  • As demand for employment and social services increases, vendors should not expect states with budget deficits to invest in millions of dollars in these areas during the economic downturn.
  • The increased need for these services will spike an interest among key decision makers in business process changes and major IT investments down the road.
  • Program offices must build more detailed business cases to justify their IT projects' return on investment.
  • Without the support of potential contractors, states will struggle to develop compelling business cases.
  • Given the intense competition for IT bucks, vendors must build a business case that revolves around ways in which technology can save money and cut costs.

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