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Block Granting Welfare: Fiscal Impact on the States

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  • Elizabeth T. Powers

    (University of Illinois)

Abstract

Welfare reform changed the federal funding mechanism for state-run welfare programs for families from an open-ended match to fixed block grants. Major concerns about reform were that states would receive less federal funding in the long run and face hard-to-plan-for volatility in demands for state funds. This article uses historical expenditure data to explore the potential increased burden on state fiscal systems due to welfare reform. The author simulates states’ use of the Temporary Assistance to Needy Families Block Grants, the Treasury Fund, and the Federal Contingency Fund. Potential changes in state spending burdens and state funding volatility are analyzed. This fiscal accounting exercise reveals that although the total expense to the federal government would be reduced little by this switch, the new system creates huge disparities in both the resources available to various states and their potential scope for reducing the cost of their welfare programs.

Suggested Citation

  • Elizabeth T. Powers, 2000. "Block Granting Welfare: Fiscal Impact on the States," Economic Development Quarterly, , vol. 14(4), pages 323-339, November.
    • Handle: RePEc:sae:ecdequ:v:14:y:2000:i:4:p:323-339
    DOI: 10.1177/089124240001400401
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    References listed on IDEAS

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    1. Dye, Richard F. & McGuire, Therese J., 1991. "Growth and Variability of State Individual Income and General Sales Taxes," National Tax Journal, National Tax Association, vol. 44(1), pages 55-66, March.
    2. Howard Chernick, 1998. "Fiscal Effects of Block Grants for the Needy: An Interpretation of the Evidence," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(2), pages 205-233, May.
    3. Saavedra, Luz Amparo, 2000. "A Model of Welfare Competition with Evidence from AFDC," Journal of Urban Economics, Elsevier, vol. 47(2), pages 248-279, March.
    4. Dye, Richard F. & McGuire, Therese J., 1991. "Growth and Variability of State Individual Income and General Sales Taxes," National Tax Journal, National Tax Association;National Tax Journal, vol. 44(1), pages 55-66, March.
    5. Figlio, David N. & Kolpin, Van W. & Reid, William E., 1999. "Do States Play Welfare Games?," Journal of Urban Economics, Elsevier, vol. 46(3), pages 437-454, November.
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    Cited by:

    1. Mildred Warner, 2009. "Civic government or market-based governance? The limits of privatization for rural local governments," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 26(1), pages 133-143, March.
    2. Geiguen Shin & Jeremy L. Hall, 2018. "Exploring the Influence of Federal Welfare Expenditures on State-Level New Economy Development Performance: Drawing From the Diffusion of Innovation Theory," Economic Development Quarterly, , vol. 32(3), pages 242-256, August.
    3. Marton, James & Wildasin, David E., 2007. "State government cash and in-kind benefits: Intergovernmental fiscal transfers and cross-program substitution," Journal of Urban Economics, Elsevier, vol. 61(1), pages 1-20, January.

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