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Measuring Poverty: A New Approach
simpler definition of family resources or by linking eligibility less closely to the poverty thresholds because of possible budgetary constraints—to better serve program objectives.
Need Standards for AFDC
In most government assistance programs, the benefit standard—that is, the maximum amount of benefits provided to people with no other income—and the eligibility or need standard are the same. People who are eligible because their countable income falls below the benefit standard are entitled to receive benefits up to the amount of the standard.32 AFDC is unique in that federal legislation requires each state to establish a standard of need for families with no other means of support. In a separate process, each state determines the maximum benefit that it will actually pay to such families, which does not have to equal the state's need standard. As prescribed by federal statute, the need standard restricts eligibility for AFDC: currently, families must have gross income below 185 percent of the state need standard to be eligible to receive benefits. In addition, they must have net countable income (as defined by federal law) below 100 percent of either the state need standard or the state payment standard, whichever is lower. As of January 1994, 40 states had a maximum benefit that was below their need standard (in some states the maximum benefit was below both their need and payment standards; U.S. House of Representatives, 1994: Table 10-11; see also Solomon and Neisner, 1993: Table 1).
Historically, there has been great variation among the states in how they derive their need standard, in how often and by what method they update it, in how benefits relate to the need standard, and in the level of the need standard. The differences in state AFDC need standards are much wider than can be explained by differences in the cost of living across states, even allowing for the problems with subnational cost-of-living indicators (see, e.g., Peterson and Rom, 1990).
One could argue that the level of the need standard is irrelevant to families' welfare because states are not required to pay benefits at that level—and three-quarters do not. It is also true that welfare policy is currently in a state of flux: the AFDC program as it has operated historically may change in significant ways, possibly rendering moot the question of the soundness or adequacy of the need standard for the current program. Nonetheless, until the program is changed, there is a requirement that the states develop a need standard, which is important for several reasons: it sets limits for eligibility; it is linked to benefits, directly in those states that pay 100 percent of need and
Strictly speaking, this statement applies to cash benefit programs (e.g., SSI, veterans' pensions). Near-cash programs (e.g., food stamps and assisted housing) have a benefit standard that falls below the eligibility standard because the benefit pertains to a single commodity.