National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Aid to Families with Dependent Children

« Previous: Low-Income Home Energy Assistance Program (LIHEAP)
Suggested Citation:"Aid to Families with Dependent Children." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 444
Suggested Citation:"Aid to Families with Dependent Children." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 445

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APPENDIX D 444 lowest income and highest energy costs relative to their incomes, taking account of family size. LIHEAP benefits cannot be counted as income for purposes of determining eligibility or benefits for any other federal or state assistance program. In fiscal 1992, average benefits for heating assistance ranged widely, presumably as a function of climate conditions as well as state choices regarding eligibility and benefit levels, from $39 in Texas to $459 in Massachusetts. Weatherization Assistance Weatherization aid is available to families receiving AFDC, SSI, or state assistance program benefits or whose family incomes are below 125 percent of the federal poverty guidelines. SELECTED PROGRAMS WITH THEIR OWN INCOME ELIGIBILITY STANDARDS Aid to Families with Dependent Children AFDC is a state-administered program with funding provided by both the states and the federal government through a matching provision. The program was established by the Social Security Act of 1935. 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; however, neither the components of the standard nor the methods for setting the standard are prescribed by federal law or regulation. Each state must apply this standard uniformly and statewide in determining financial eligibility for assistance, although it may vary the standard to account for family size or composition, area cost-of-living differentials, or other factors. Although states are required to establish need standards, they may adopt lower payment standards for benefits: they may set a maximum payment that is below the need standard; they may pay a percentage of the difference between a family's income and the need standard; or they may pay a percentage of the need standard. Recently, a number of states have lowered their payment standards 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 recipients' obtaining immunization shots for their children. (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.) Over the years, amendments to the law, court decisions, and federal regulations have formally reaffirmed the states' autonomy in setting AFDC benefit levels. In particular, the 1967 amendments to the Social Security Act affirmed the right of states to set payment maximums and to apply "ratable reductions" in order to set benefits lower than their standards of need. The

APPENDIX D 445 1967 amendments included a provision to require states to update their need standards to reflect cost-of-living increases since the standards were adopted; however, states were not required to pay benefits consistent with these increases. No such requirement to adjust need standards for inflation has been legislated since 1967. Although the states have very wide latitude in setting their need and payment standards, federal regulations have always been more specific about the resource side of the equation for determining AFDC eligibility and benefits (see U.S. House of Representatives, 1994:327-329; Solomon and Neisner, 1993). Currently, to receive AFDC payments, a family must pass two income tests. First, a family's gross monthly income cannot be higher than a certain percentage of the state's need standard. This provision was first adopted in 1981, with the limit initially set at 150 percent and raised to 185 percent in 1984. Second, a family's net or countable monthly income must not exceed 100 percent of the need standard or 100 percent of the payment standard in the many states in which the payment standard is below the need standard. Families must also meet an asset test. Federal regulations currently limit assets or "countable resources" to $1,000 per family, excluding a home and car (provided the equity value of the car does not exceed $1,500). States must also exclude burial plots from countable resources and may exclude such essential items for daily living as clothing and furniture (U.S. House of Representatives, 1994:331). Finally, families must meet various other state and federal requirements (e.g., provisions for work, education, or training). The definition of countable income for AFDC is gross income minus various exclusions. Currently, states must deduct from gross income the following unearned income components: the first $50 of monthly child support receipts; certain Department of Education grants and loans to college students; the value of Department of Agriculture donated foods; benefits from child nutrition programs; and payments to participants in Volunteers in Service to America (VISTA), some payments to certain Indian tribes, and Agent Orange settlement payments. In addition, states must deduct from gross income the following earned income components: a standard work expense deduction of $90 per month and actual child care expenses up to a ceiling of $175 per month per child ($200 for a child under age 2 and less for part-time work). For AFDC recipients who obtain employment subsequent to enrollment, the states must deduct an additional $30 of earnings per month for the first 12 months and an additional one-third of remaining earnings for the first 4 months. The states must also ignore any benefits from the EITC. Finally, although states have the authority to count food stamp benefits as income for purposes of determining AFDC benefits, no state currently does so. Rather, the process works the other way: AFDC benefits are counted as income for purposes of determining food stamp benefits. In January 1994 the AFDC need standards for the 50 states and Washington, D.C.,

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Each year's poverty figures are anxiously awaited by policymakers, analysts, and the media. Yet questions are increasing about the 30-year-old measure as social and economic conditions change.

In Measuring Poverty a distinguished panel provides policymakers with an up-to-date evaluation of:

  • Concepts and procedures for deriving the poverty threshold, including adjustments for different family circumstances.
  • Definitions of family resources.
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The volume explores specific issues underlying the poverty measure, analyzes the likely effects of any changes on poverty rates, and discusses the impact on eligibility for public benefits. In supporting its recommendations the panel provides insightful recognition of the political and social dimensions of this key economic indicator.

Measuring Poverty will be important to government officials, policy analysts, statisticians, economists, researchers, and others involved in virtually all poverty and social welfare issues.

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