murky at best, given that states can, and often do, set benefit standards that fall below their need standards.

Since the provision for separately determined need standards exists in the AFDC program, however, we believe it useful to consider the issues involved in the possible use of the proposed poverty measure by the states for this purpose. We begin by describing the basic regulatory framework within which AFDC has operated. We then describe methods of setting need standards that were used in the 1970s and 1980s, current differences in standards and equivalence scales among the states and their relationship to the current poverty line, and trends in need standards and maximum benefits over time. Finally, we discuss the potential relevance of the proposed poverty measure to AFDC need standards. We conclude by encouraging the states to give serious consideration to linking their AFDC need standard to the proposed poverty measure. On balance, that measure would be advantageous for this purpose, although it may need to be modified in some respects.

RECOMMENDATION 8.1. The states should consider linking their need standard for the Aid to Families with Dependent Children program to the panel's proposed poverty measure and whether it may be necessary to modify this measure to better serve program objectives.

Program Regulations

AFDC is a state-administered program with funding provided by both the states and the federal government through a matching provision (see Appendix D). In order to qualify for federal funding, a state must establish a standard of need that defines in monetary amounts the basic needs the state wishes to recognize as appropriate for an assistance standard of living—although neither the components of the standard nor the methods for setting the standard are prescribed by federal law or regulation. The state must apply this standard uniformly and statewide in determining financial eligibility for assistance, but it may vary the standard to account for family size or composition, area cost-of-living differentials, or other factors.

States may adopt lower payment standards and maximum benefit amounts than their need standards by such methods as paying a percentage of the difference between the family's income and the need standard, paying a percentage of the need standard, or capping benefits at a specified amount. Recently, a number of states have altered their benefit provisions to satisfy budget constraints and to try to induce recipients to adopt preferred behaviors. As examples, some states no longer provide an additional benefit for an additional child or they condition benefit amounts on such actions as the recipient's obtaining immunization shots for his or her children.13

13  

See Wiseman (1993) for a list of these kinds of changes in payment standards for which states had waivers from the federal government approved or pending in 1992.



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