NCPA - National Center for Policy Analysis

Welfare Savings Funding Social Programs

June 9, 1999

As welfare caseloads have dropped 38 percent in the past three years, states have saved at least $6.4 billion on welfare checks. They are using the savings to fund an array of social programs, with most of the money being directed to child-care subsidies for lower-income working parents.

  • Under the 1996 welfare reform law, the federal government hands out $16.5 billion a year to the states for five years -- regardless of their caseload reduction.
  • Since the states haven't needed all the money, they left $3 billion in the U.S. Treasury in 1997 and 1998.
  • Although that money remains theirs to use, Congress has been eyeing it and could someday take it back.
  • So states have begun spending their welfare funds -- as well as money of their own -- on programs to assist other low-income families.

In addition to increasing child-care assistance, the states are funding drug and alcohol rehabilitation programs, helping fathers find work so they can meet their child-support obligations, setting up teen pregnancy-prevention programs, helping victims of domestic violence, establishing transit systems for the working poor and providing tax relief to low-income families.

While the immediate aims of these programs are apparent, the real goal remains to make sure the federal government doesn't confiscate the funds.

Source: Richard Wolf, "Welfare Law Buoys the 'Working Poor,'" USA Today, June 9, 1999.


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