Leaving hundreds of millions on the table

By Jim Stergios
August 20th, 2008

It has been over a decade since Massachusetts took advantage of a federal waiver for its welfare programs. At the time, over 240,000 individuals were recipients of the old Aid to Families with Dependent Children (AFDC) program. Today that number has been reduced to just around 100,000 individuals.

Massachusetts’ waiver allowed it flexibility to experiment with time limits, work requirements, and family cap restrictions to encourage self-sufficiency.

A decade after welfare reform, the Heartland Institute has taken a look at what worked and what didn’t across the 50 states and the District of Columbia.

Heartland’s data suggests we in Massachusetts have some hard questions to answer. By the Institute’s reckoning, on the quality of its policies and the state’s implementation, Massachusetts ranks 46th out of the 51 jurisdictions analyzed. On results, though on the face of it impressive, our 60 percent reduction in the number of TANF recipients low on a relative basis. Massachusetts was dead last in percentage of TANF recipients who joined the workforce.

The Institute also is critical of the Bay State’s policies which are too rigid (drawing people unnecessarily into TANF), lack lifetime limits on benefits, and have few sanctions to enforce compliance with work and other eligibility requirements.

What I find most disturbing is probably what is least politically charged — Massachusetts is among the worst states in the nation in terms of leaving federal income tax credits for the poor unused. The Earned Income Tax Credit (EITC) is federally funded (read: “free” from the state’s perspective) and it was a critical part of the welfare reform law. EITC is a strong incentive for single mothers to seek work. In 2007, a filer with two or more qualifying children could take a credit of up to $4,716. Not bad. And it works: The EITC, according to a number of researchers, lowers dependence on welfare programs and increases the participation of single mothers in the workplace.

OK, so what gives? Reduces the dependence of single mothers on welfare; fully paid for through federal coffers… So why is it that in just a single year almost $2 billion in EITC benefits, or 80 percent of total value, went unclaimed in 2004? Why is it that state agencies do not put more emphasis on educating the poor on this opportunity?

Heartland opines:

The answer seems to be that since the tax credit flows directly to individuals and not through welfare bureaucracies, there is little incentive for state and local welfare agencies to invest in public education programs.

Smells like the agencies are focused on their navels.