indirectly in other states; and it offers a goal or target against which to assess the adequacy of benefits.

The question is whether it makes sense for states to adopt the proposed poverty measure in place of their own need standard. A related recent development in standard setting practices is that 14 states have explicitly geared their need standard to the current poverty guidelines. In many of these states, the link is more theoretical than actual in that the need standard, either by law or regulation or because of failure to adjust for inflation, is a small fraction of the poverty guidelines. In other states, the definition of the poverty guidelines has been altered to exclude some types of consumption. Still, a growing number of states have found it convenient to link their AFDC need standard in some fashion to the poverty guidelines. We believe the proposed measure represents an improvement over the current measure for this purpose, and we encourage states to consider its use.

The proposed budget concept correlates well with the objectives of the AFDC program to provide the means for low-income families to obtain basic necessities. The exclusion of medical care needs from the proposed budget concept is consistent with the separate provision of medical care to AFDC families through the Medicaid program. In many respects, the proposed definition of family resources is similar to the AFDC definition of countable income, such as the treatment of work-related expenses, including child care, as deductions from family resources rather than as part of the poverty budget. In addition, the proposed measure includes an improved equivalence scale and reflects area differences in housing costs.

The 1988 Family Support Act requires states to review their need standard every 3 years and report to HHS. In the next review, states could consider the possible use of the proposed poverty measure as a need standard for AFDC. In their review, the states would need to look at the implications of the proposed measure—both the thresholds and the definition of family resources—in relation to their current need standards (whether the current poverty guidelines or the states' own standards). They would also need to consider whether the proposed measure may need to be modified in one or more respects to be more suitable for program purposes. It may be that, for budgetary or other reasons, states will decide to set the need standard at different fractions of the poverty threshold. Nonetheless, having a link between state need standards and the proposed poverty measure would be a major step toward providing a common framework for determining AFDC eligibility and evaluating eligibility levels across states.

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.

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