Early Impacts of the Virginia Independence Program

Transcription

1 Contract No.: CR MPR Reference No.: Early Impacts of the Virginia Independence Program Final Report November 1999 Anne Gordon Roberto Agodini Submitted to: Virginia Department of Social Services 730 E. Broad Street Richmond, VA Under Subcontract to: Center for Public Administration and Policy Virginia Polytechnic Institute and State University 7054 Haycock Road Falls Church, VA Submitted by: Mathematica Policy Research, Inc. P.O. Box 2393 Princeton, NJ (609) Project Director: Anne Gordon

2 ACKNOWLEDGMENTS This report was prepared by Mathematica Policy Research, Inc. (MPR) under a subcontract with the Virginia Polytechnic Institute and State University (Virginia Tech). The authors would like to thank the many individuals who contributed to the report. Renee Loeffler and Carole Kuhns of Virginia Tech and Carol Baron and Mark Golden of the Virginia Department of Social Services (VDSS) provided thoughtful comments on several drafts. Carol Baron, Mike Theis, and Molly Sheahan of VDSS developed the data extracts on which this analysis was based and answered countless questions about the data. They also worked extensively with the five research sites to implement random assignment and maintain its integrity over time. Mark Golden and Dottie Wells of VDSS answered important questions about data and policy. All levels of staff in the five research sites played a vital role in implementing random assignment. We would particularly like to acknowledge the evaluation coordinators in the five sites: Sharon Swedlow, Donna Patton, Florence Rhue, Judy Mallory, and Charlotte Kiser. At MPR, Walt Corson and Harold Beebout reviewed the report and suggested important improvements. West Addison constructed the analysis database and Michelle VanNoy and Rob Cederbaum programmed the tabulations and regressions. Donna Pavetti, Nancy Wemmerus, and Amy Johnson helped us interpret the findings based on what they learned from interviews with staff in the research sites. Walt Brower and Patricia Ciaccio edited the report. Monica Capizzi patiently produced multiple versions of the complex figures. Cathy Harper produced the report, with help from Monica Capizzi, Jill Miller, Jennifer Baskwell, Doreen Ambrose, Jane Nelson and Cindy McClure. We gratefully acknowledge these important contributions and accept full responsibility for any errors that remain. iii

3 CONTENTS Chapter Page EXECUTIVE SUMMARY... xiii I INTRODUCTION...1 A. OVERVIEW OF VIP Eligibility Reforms VIEW Transition to TANF...6 B. THE VIP IMPACT EVALUATION Why Do an Experimental Impact Evaluation? Research Questions Evaluation Design Limitations of Early Impact Results...12 C. DESCRIPTION OF THE RESEARCH SITES Lynchburg Wise County Prince William County Petersburg Portsmouth...19 D. PLAN OF THE REPORT...20 II IMPACTS ON EMPLOYMENT-PREPARATION ACTIVITIES AND SANCTIONS...21 A. DID VIEW AFFECT PARTICIPATION IN EMPLOYMENT-PREPARATION ACTIVITIES? Research Base: Activity Data and Outcome Measures Participation Overall: Higher Under VIEW Job Search: Greatest Impact CWEP: Used Surprisingly Little Job Readiness: Use Varied by Site Education and Training: Less Change than Expected...28 v

4 CONTENTS (continued) Chapter Page II B. DID VIEW LEAD TO MORE SANCTIONS?...29 (continued) 1. Research Base: Sanction Data and Outcome Measures Employment-Services Sanctions: More Under VIEW...31 III IMPACTS ON EMPLOYMENT AND EARNINGS...33 A. RESEARCH BASE: EMPLOYMENT DATA AND OUTCOME MEASURES...34 B. DID VIEW AFFECT EMPLOYMENT RATES AND EARNINGS? Employment Rates: Higher Under VIEW Earnings: Also Higher...39 C. DID VIP ELIGIBILITY REFORMS ALONE AFFECT EMPLOYMENT OR EARNINGS?--NO...41 IV IMPACTS ON PUBLIC ASSISTANCE RECEIPT AND BENEFITS...45 A. HOW DID VIP AFFECT TANF PARTICIPATION AND BENEFITS? Research Base: TANF Data and Outcome Measures TANF Participation and Benefits in VIEW Sites: Impacts Varied by Site TANF Participation and Benefits in Non-VIEW Sites: No Impacts...51 B. HOW DID VIP AFFECT FOOD STAMP PROGRAM PARTICIPATION AND BENEFITS? Research Base: Food Stamp Data and Outcome Measures Food Stamp Program Participation and Benefits in VIEW Sites: Consistently Lower Food Stamp Program Participation and Benefits in Non-VIEW Sites: Scattered Impacts...59 V IMPACTS ON COMBINING WORK AND TANF AND ON TOTAL INCOME...63 vi

5 CONTENTS (continued) Chapter Page V A. DID VIEW AFFECT HOW FAMILIES COMBINED WORK (continued) AND TANF? Combining Work and TANF: Higher Under VIEW On TANF and Not Working: Lower Under VIEW Working and Off TANF: Higher in Petersburg Only Not Working and Off TANF: Little Difference...70 B. DID VIEW LEAD TO HIGHER INCOMES? Research Base: Income Data and Measure Total Income: Mixed Impacts...70 VI IMPACTS ON CHILD CARE SUBSIDIES...75 A. RESEARCH BASE: CHILD CARE SUBSIDY DATA AND OUTCOME MEASURES...76 B. HOW DID VIEW AFFECT CHILD CARE SUBSIDIES? Subsidy Receipt Overall: Much Higher Under VIEW Dollar Value of Subsidies: Even Higher TANF Child Care Subsidies: Much Higher Under VIEW Transitional Child Care Subsidies: Mixed Impacts...81 VII SUMMARY OF FINDINGS...85 A. OVERVIEW OF FINDINGS VIEW s Impacts Differences in VIEW Implementation and Impacts Among the VIEW Sites Accounting for Differences Among the Sites...90 B. RESULTS IN CONTEXT...91 REFERENCES...95 vii

6 CONTENTS (continued) Chapter Page APPENDIX A: CHARACTERISTICS OF RECIPIENT CASES...A.1 APPENDIX B: VIP S IMPACT ON EMPLOYMENT PREPARATION AND SANCTIONS OF RECIPIENTS: TABLES...B.1 APPENDIX C: VIP S IMPACT ON EMPLOYMENT AND EARNINGS OF RECIPIENTS: TABLES...C.1 APPENDIX D: VIP S IMPACT ON PUBLIC ASSISTANCE RECEIPT AND BENEFITS OF RECIPIENTS: TABLES...D.1 APPENDIX E: VIP S IMPACT ON COMBINING WORK AND AFDC AND ON TOTAL INCOME OF RECIPIENTS: TABLES.. E.1 APPENDIX F: VIP S IMPACT ON CHILD CARE SUBSIDIES TO RECIPIENTS: TABLES... F.1 APPENDIX G: VIP S IMPACT ON APPLICANT CASES...G.1 viii

7 FIGURES Figure Page I.1 VIP PROGRAM MILESTONES...2 II.1 II.2 VIEW LED TO HIGHER PARTICIPATION IN EMPLOYMENT-PREPARATION ACTIVITIES...25 JOB SEARCH ACCOUNTED FOR MOST OF THE HIGHER ACTIVITY PARTICIPATION RATE UNDER VIEW: CWEP PARTICIPATION RATES WERE LOW...26 II.3 MORE EMPLOYMENT-SERVICES SANCTIONS UNDER VIEW...32 III.1 VIEW LED TO HIGHER AVERAGE EMPLOYMENT RATES...36 III.2 VIEW INCREASED AVERAGE EARNINGS...37 III.3 VIP ELIGIBILITY REFORMS ALONE DID NOT AFFECT EMPLOYMENT.. 42 III.4 VIP ELIGIBILITY REFORMS ALONE DID NOT AFFECT EARNINGS...43 IV.1 IV.2 IV.3 IV.4 VIEW S MIXED INCENTIVES FOR LEAVING TANF HAD VARYING EFFECTS...48 VIEW HAD DIFFERENT EFFECTS ON AVERAGE TANF BENEFITS BY SITE...49 VIP ELIGIBILITY REFORMS ALONE DID NOT AFFECT TANF PARTICIPATION...52 VIP ELIGIBILITY REFORMS ALONE DID NOT AFFECT TANF BENEFITS...53 IV.5 VIEW LED TO LOWER FOOD STAMP PROGRAM PARTICIPATION...57 IV.6 VIEW LED TO LOWER FOOD STAMP BENEFITS...58 IV.7 IV.8 VIP ELIGIBILITY REFORMS ALONE HAD LITTLE EFFECT ON FOOD STAMP PROGRAM PARTICIPATION...60 VIP ELIGIBILITY REFORMS ALONE REDUCED AVERAGE FOOD STAMP BENEFITS IN ONE SITE...61 xi

8 FIGURES (continued) Figure Page V.1 VIEW INCREASED THE PROPORTION OF CASES COMBINING TANF AND WORK...65 V.2 VIEW SUBSTANTIALLY DECREASED THE PROPORTION OF CASES ON TANF AND NOT WORKING...67 V.3 VIEW INCREASED THE PROPORTION OF CASES WORKING AND OFF TANF IN PETERSBURG ONLY...69 V.4 VIEW HAD LITTLE EFFECT ON THE PROPORTION OF CASES OFF TANF AND NOT WORKING...71 V.5 VIEW SOMETIMES LED TO HIGHER INCOMES...72 VI.1 MORE CASES RECEIVED CHILD CARE SUBSIDIES UNDER VIEW...77 VI.2 VIEW CASES RECEIVED HIGHER AVERAGE CHILD CARE SUBSIDIES.. 80 VI.3 VI.4 TANF CHILD CARE SUBSIDIES WERE SUBSTANTIALLY HIGHER UNDER VIEW...82 IMPACTS ON TRANSITIONAL CHILD CARE SUBSIDIES VARIED AMONG THE VIEW SITES...83 xii

9 EXECUTIVE SUMMARY Virginia s multifaceted welfare reform program--the Virginia Independence Program (VIP)--is a prime example of the new philosophy of welfare reform that focuses on promoting work and family responsibility. VIP has two distinct components. The first is changes in eligibility requirements for Aid to Families with Dependent Children (AFDC). These changes were intended to encourage family responsibility. The second is the Virginia Initiative for Employment not Welfare (VIEW). VIEW is one of the nation s strongest examples of a work first program, emphasizing rapid movement of public assistance clients into jobs. Overall, VIP represents a substantial commitment to changing the culture of welfare, both for program staff and for clients. The VIP eligibility requirements were implemented on July 1, VIEW was implemented locality by locality from July 1995 to October In 1996, the federal Personal Responsibility and Work Opportunity Reconciliation Act replaced AFDC with a block grant for Temporary Assistance for Needy Families (TANF). Having already shifted its AFDC program to a temporary assistance program with employment as its central focus, Virginia implemented TANF in February 1997 with 1 minimal modifications to VIP. The VIP eligibility requirements include: C C C C C Stronger requirements for cooperation with child support enforcement Cap on benefits for children born more than 10 months after assistance is authorized Age-appropriate immunizations for children Compliance with school attendance laws Determination of benefits for two-parent families using the same standards as those for single-parent families Key provisions of VIEW, which applies to able-bodied parents with no child under the age of 18 months, include: C Signing of an Agreement of Personal Responsibility as a condition for receiving benefits 1 To simplify terms, this report uses TANF to refer to Virginia s cash assistance program, except when referring to the pre-vip program. xiii

10 C Required job search for 90 days or until employed, followed by mandatory work either through regular employment or participation in the Community Work Experience Program (CWEP), which involves work in a nonprofit or public setting in exchange for benefits C Full family sanctions (complete loss of benefits) for noncompliance 2 C C C A 24-month time limit on TANF benefits A generous earned income disregard, which allows families to continue to receive their full TANF grant as long as their net earned income plus TANF benefits remains below the federal poverty line Supportive services, including subsidized child care, transportation assistance, and Medicaid, while on TANF and for one year after the TANF case closes IMPACT STUDY OBJECTIVES Both the outcomes and the impacts of VIP are of interest to policymakers. Outcomes such as the percentage of cases that close within a year of entering the program are of interest in themselves. However, cases close for a variety of reasons, regardless of the specific policies applied. For example, increased demand for low-wage workers has contributed to the decline in TANF caseloads. Thus, information on outcomes must be compared to some benchmark or counterfactual to tell policymakers if a program is effective. This impact analysis examines whether VIP/VIEW led to outcomes different from those of the old AFDC/JOBS policies. The impacts of the program are measured as the difference in outcomes for cases under VIP/VIEW from what they would have been under AFDC/JOBS. This report describes the outcomes and impacts of VIP during the early phase-in period (July 1995 to October 1997) in five areas in Virginia--the cities of Lynchburg, Petersburg, and Portsmouth and the counties of Prince William and Wise--in which the local offices randomly assigned both new and existing TANF cases to experimental or control status. Experimental cases were covered by VIP policies and were converted from the old Job Opportunities and Basic Skills (JOBS) training program to VIEW when VIEW started in the local agencies. Control cases remained subject to the old AFDC policies and received employment-related services only under the old JOBS program. The random-assignment evaluation design ensures that we can attribute differences in outcomes between the experimental and control groups to VIP. 2 Failure to sign the Agreement of Personal Responsibility results in case closure. Failure to comply with the job search or work requirements after signing the agreement results in a 100 percent sanction for a minimum period. During the sanction period, the sanction months count toward the 24-month time limit unless the client chooses to close the case. xiv

11 The impact study addresses four questions: 1. How does the VIEW component of VIP affect program activities and services used? How do client experiences in VIEW differ from client experiences in JOBS, in terms of their overall participation in activities, the types of activities they engaged in, the frequency with which they were sanctioned, and their use of child care assistance? 2. What economic outcomes are observed for VIP cases? What are the trends over time in key outcomes--employment, earnings, TANF participation, TANF benefits, Food Stamp Program participation, food stamp benefits, and total income--for VIP cases? 3. What is the impact of VIP on economic outcomes? How do the outcomes for those in VIP differ from what they would have been had these clients remained subject to the old AFDC/JOBS program? 4. How does the impact of VIP vary among the demonstration sites? Are impacts larger in sites that implemented VIEW? Among the VIEW sites, how and why do impacts vary? EVALUATION DESIGN This report focuses on the experiences of 7,568 cases that were receiving AFDC in July At that time, half were randomly assigned to the experimental group, and half were assigned to the control group. Outcome data were available on these cases for nine quarters, from July 1, 1995, to September 30, These data are from administrative records of the Virginia Department of Social Services or the Virginia Employment Commission (VEC). Because the estimates of impacts described in this report are estimates of early impacts, they have limitations. First, at the end of the follow-up period, two of the five research sites--wise and Portsmouth--had not implemented VIEW. Experimental cases in those two sites were not subject to the reforms likely to have the largest effects on outcomes, such as employment and TANF receipt. Thus, to learn about the impacts of VIEW, only data from the three sites that implemented VIEW during the follow-up period--lynchburg, Prince William, and Petersburg--can be used. These sites implemented VIEW at different times: the post-view follow-up period is 24 months for Lynchburg, 18 months for Prince William, and 9 months for Petersburg. However, an advantage of the staggered implementation schedule is that it allows us to distinguish with some confidence the effects of VIEW from the effects of the VIP eligibility reforms. Second, even in the sites that implemented VIEW, no cases had reached the two-year time limit on TANF benefits by the end of the follow-up period. Thus, further investigation of the long-term impact of VIP policies is needed. We will pursue this investigation in a follow-up report. xv

12 Two other factors may lead the impact estimates to understate the full effects of VIP. First, control cases may have been affected by publicity about VIP or by the changes in the atmosphere of 3 the welfare office or the community associated with the program. Second, VEC wage records data cover only employment in Virginia in nonfederal jobs. If experimental group members were more likely than control group members to take jobs in neighboring states or with the federal government, then VIP s employment and earnings impacts would be understated. KEY FINDINGS There are three main findings: 1. The VIEW component of VIP quickly increased employment relative to what it would have been under pre-reform policies. VIEW also led to higher earnings, but its impact on earnings was less consistent than its impact on employment. 2. VIEW s mixed incentives for leaving TANF led to different effects by site: TANF participation and benefits were lower in Petersburg, but there were no impacts in the other VIEW sites. VIEW s time limit and work requirement provide incentives for clients to close their cases, but VIEW s generous earnings disregard provides incentives to stay on TANF. Site visit findings suggest that the emphasis workers placed on encouraging clients to close their cases affected clients decisions about how to balance the competing incentives. 3. The VIP eligibility reforms in themselves did not affect employment, earnings, or TANF receipt in the first nine quarters. This finding is based on impacts in the two sites that did not implement VIEW. The finding is not surprising, because the goals of the eligibility reforms were primarily to affect other outcomes (such as birth rates and receipt of child support). IMPACTS ON PARTICIPATION IN EMPLOYMENT-PREPARATION ACTIVITIES VIEW s impact on participation rates in employment-preparation activities and on sanction rates indicates that VIEW was implemented as intended and that it represented real change from JOBS. 3 In addition, a small number of control cases were directly exposed to VIEW when they moved to a nonresearch site that had implemented VIEW. The evaluation also does not account for effects of VIP/VIEW on families decisions to apply for TANF, since random assignment occurred only among those who applied and were approved. xvi

13 C C C C C VIEW led to a much higher participation rate in employment-preparation activities. More cases were mandatory for VIEW than for JOBS. In addition, all VIEW-mandatory experimental clients had to participate in an employment-preparation activity right away if not employed. JOBS-mandatory control clients could remain on a waiting list for employment services for some time. Job search accounted for most of the higher activity participation rate under VIEW. When they entered VIEW, all clients not yet employed had to participate in job search or be sanctioned. JOBS clients had other options or were on a waiting list. CWEP participation rates were low for both the experimental and the control groups. VIEW clients who did not find work within 90 days had to participate in CWEP, and this requirement was enforced. Nonetheless, because most VIEW clients found employment, at most five percent of experimental cases were enrolled in CWEP annually. Although VIEW was expected to lead to lower levels of participation in education and training, the difference was less than expected. Among the three VIEW sites, in Lynchburg the control group had a higher rate of participation in education activities as expected, since VIEW emphasized rapid attachment to the labor force. However, in Petersburg the experimental group had a higher rate of participation in educational activities, and in Prince William the two groups had similarly low levels of participation in education and training. VIEW led to more employment services sanctions. In all three VIEW sites, there was a significant difference between experimental and control cases in sanction rates for failure to participate in employment services. VIEW s strong job search and work requirements were major reasons for the higher sanction rate. Sanctions were more common under VIEW despite their more severe consequences. IMPACTS ON EMPLOYMENT AND EARNINGS Much as expected, VIEW--the work component of VIP--led to higher employment rates and earnings, but the VIP eligibility reforms alone did not affect employment or earnings. Several aspects of VIEW were expected to increase employment. These include the expanded earnings disregard, the 90-day work requirement, the two-year time limit on receipt of TANF benefits, and enhanced transitional child care eligibility. In contrast, the VIP eligibility reforms seemed unlikely 4 to affect employment, although indirect effects were possible. 4 For example, mothers who did not want to meet the new paternity-reporting requirements or who were subject to the family cap might be more likely to work to make up for lost TANF benefits. However, such effects were never expected to be large. xvii

14 C C C VIEW led to higher average employment rates. In all three VIEW sites, more experimental cases than control cases worked. In the quarters after VIEW was implemented, employment rates were from 5 to 27 percent higher among experimental cases than among control cases. VIEW also increased average earnings. In all three VIEW sites, average quarterly earnings were higher for experimental cases than for control cases in at least some quarters after VIEW implementation. However, the impact on earnings was less consistent than the employment impact. The VIP eligibility reforms alone did not affect employment or earnings. No significant impacts on employment or earnings were observed in the non-view sites. IMPACTS ON TANF AND FOOD STAMPS In the short term, VIEW reduced TANF participation and benefits in Petersburg, and it reduced Food Stamp Program participation and benefits in all VIEW sites. VIEW s effect on TANF participation and benefits before cases reach the 24-month time limit could not be predicted, because its provisions create incentives in both directions. Impacts depend on how clients balance the incentive to stay on TANF provided by the enhanced earnings disregard with the incentive to leave provided by the work requirements and the time limit. In contrast, VIEW was expected to reduce Food Stamp Program participation and benefits or, at a minimum, keep them the same, because 5 employment levels and earnings were expected to increase. The VIP eligibility provisions could reduce TANF and Food Stamp Program participation and benefits, but any effects were expected to be small. C C VIEW s mixed incentives for leaving TANF led to different effects by site: TANF participation and benefits were lower in Petersburg, but there were no impacts in the other VIEW sites. The cross-site difference in impacts may be because, in discussions with clients, Petersburg VIEW staff placed more emphasis on the time limit than staff in other sites did. VIEW led to lower Food Stamp Program participation and benefits--a natural consequence of VIEW s impacts on employment and TANF. VIEW led to higher earnings but generally did not reduce TANF benefits. Thus, experimental cases in the VIEW sites had larger cash incomes than control cases, which automatically reduced their Food Stamp Program benefits. 5 All impacts of VIP/VIEW on Food Stamp Program participation and benefits were indirect, as VIP and VIEW did not in any way change Food Stamp Program rules or benefits. xviii

15 C The VIP eligibility reforms alone did not affect TANF participation or benefits. VIP had no impact on TANF participation or benefits in the two sites that had not yet implemented VIEW. Because no research site had implemented VIEW for a full two years by the end of the follow-up period for this report, no sample cases had yet reached the 24-month time limit. Once experimental cases begin to reach their 24-month time limit, their TANF participation rates are likely to be lower than those of control cases, who were not subject to the time limit. IMPACTS ON WORK/TANF COMBINATIONS AND TOTAL INCOME Progress toward self-sufficiency means that families are relying more on their own resources and less on public assistance. A full picture of how VIEW affected progress toward self-sufficiency requires understanding of VIEW s impacts on the four possible combinations of participating or not participating in TANF and working or not working. Effects on total income depended on whether earnings increases were larger than decreases in TANF and Food Stamp benefits. C Clients who combined work and TANF accounted for most of the increase in employment rates. The larger earnings disregard offered through the VIEW program allowed most VIEW clients who worked to continue to receive a TANF benefit. In this period before the two-year time limit, many took advantage of the expanded disregard. C C VIEW increased the percentage of clients both working and off TANF in the short term in one site, Petersburg. This is because Petersburg was the only site in which VIEW led to lower TANF participation. VIEW had little impact on total income from work, TANF, and food stamps. Income was higher in one post-view quarter in Petersburg and Prince William, but not in Lynchburg. IMPACTS ON CHILD CARE SUBSIDIES VIEW child care policies were intended to make child care subsidies available to all clients who needed them. Most TANF clients are single parents with young children, so difficulty finding adequate and affordable child care has traditionally been one of their major barriers to employment. Under the JOBS program, participation in work or work-preparation activities was limited in part by lack of child care funding. To make VIEW s work requirement viable for all mandatory cases, Virginia substantially increased funding for child care. In addition, VIEW made it easier to qualify for transitional child care for those who left TANF. xix

16 C C C Under VIEW, more families received some type of child care subsidy. Experimental cases also received higher average subsidy amounts than control cases. Subsidies counted include child care subsidies for families on TANF, transitional child care for those whose TANF cases had closed within the past 12 months, and other stateadministered subsidies. Under VIEW, child care subsidies for cases still on TANF increased substantially. More experimental cases than control cases combined work and TANF. Experimental cases thus received more TANF child care subsidies to support their movement into work. Impacts on transitional child care subsidies varied among the sites, in part because impacts on the percentage of cases working and off TANF varied. In Petersburg, where more experimental than control cases worked and did not receive TANF, experimental cases also received more transitional child care. In the other VIEW sites, experimental cases were no more likely than control cases to work and be off TANF. They received the same or less transitional child care funding than control cases. ACCOUNTING FOR DIFFERENCES AMONG THE VIEW SITES There were important differences in impacts among the VIEW sites: C C C In Lynchburg, VIEW had a strong impact on employment but almost no impact on earnings. There were no impacts on TANF receipt or benefits, but Food Stamp Program participation and benefits were significantly lower. In Prince William, VIEW s impact on employment was smaller than in the other sites. Impacts on earnings were not found initially, but were strong in later quarters. VIEW had no impact on TANF participation or benefits, but led to significantly lower Food Stamp Program participation and benefits. In Petersburg, VIEW led to higher employment rates and earnings. VIEW also led to significantly lower TANF participation and benefits. Food Stamp Program participation and benefits were also lower under VIEW. It seems likely that the differences in the results in Lynchburg and Petersburg reflect, at least in part, differences in the VIEW implementation strategies that the two sites adopted. Lynchburg placed substantial emphasis on enforcing the work requirement. Once clients were working, however, they were encouraged to use their two years of benefits to build a basis for self-sufficiency. In Petersburg, in contrast, more emphasis was placed on making clients aware of the time limit and on encouraging them to close their cases. At this time, we do not know which approach is more effective in promoting long-term self-sufficiency. xx

17 VIEW probably had less measured impact in Prince William because of the characteristics of its caseload and because of its location. Prince William s caseload was less disadvantaged than those in the other sites, and it was in an area with a particularly strong labor market. Prince William is also near Maryland and the District of Columbia. Therefore, the impact there is more likely to be understated than in the other sites because of employment not covered by the VEC data. CONCLUSION The VIP impact study shows the VIEW component of VIP to have been effective in its immediate goal of moving TANF clients into work. Along with the increased employment rates, Food Stamp Program participation and benefits declined in all VIEW sites. TANF participation and benefits declined in one site. Little change in TANF participation or benefits occurred in the other VIEW sites because most of the increase in employment rates was for cases still on TANF and taking advantage of the disregard. That is, more cases combined work and TANF. No cases in these sites had reached the 24-month time limit on cash assistance under VIEW during the period covered by this report. Thus, it is too soon to tell how effective VIP will be in its longer-term goals of promoting the self-sufficiency and well-being of Virginia s families. xxi

18 I. INTRODUCTION Virginia s multifaceted welfare reform program--the Virginia Independence Program (VIP)--is a prime example of the new philosophy of welfare reform that focuses on promoting work and family responsibility. VIP has two distinct components. The first is changes in policies regarding eligibility for Aid to Families with Dependent Children (AFDC). These changes were intended to encourage family responsibility. The second is the Virginia Initiative for Employment not Welfare (VIEW). VIEW is one of the nation s strongest examples of a work first program, emphasizing rapid movement of public assistance clients into jobs. Overall, VIP represents a substantial commitment to changing the culture of welfare both for program staff and for clients. VIP passed the state general assembly with widespread bipartisan support and was signed into law by Governor George Allen on March 20, VIP eligibility changes were implemented on July 1, 1995, after the program received waivers of federal AFDC program rules. VIEW was phased 1 in by locality between July 1995 and October In 1996, the federal Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) replaced AFDC with a block grant for Temporary Assistance for Needy Families (TANF). Virginia implemented TANF in February with minimal modifications to VIP. Figure I.1 illustrates the timeline of VIP implementation. This report describes the early impacts of VIP on various outcomes. These outcomes include TANF clients employment and earnings, total income, receipt of public assistance, and use of child 1 During most of this period, one or two Economic Development Districts (EDDs)--contiguous groups of 2 to 13 localities--implemented VIEW each quarter. Based on early success, implementation was speeded up, with roughly half the state s localities implementing VIEW in July or October For simplicity, this report uses the term TANF to refer to Virginia s cash assistance program, unless pre-vip policies are explicitly being discussed. 1

19 Figure I.1 VIP Program Milestones July 1995 VIP eligibility reforms implemented statewide. October 1995 Lynchburg implements VIEW. January 1996 April 1996 Prince William implements VIEW. July 1996 October 1996 January 1997 February 1997 April 1997 Petersburg implements VIEW. TANF is implemented. VIEW phasein period July 1995 to October 1997 July 1997 October 1997 Portsmouth and Wise implement VIEW. 2

20 care subsidies. To study the impacts of VIP, the Virginia Department of Social Services (VDSS) ran VIP as an experiment in five localities: the cities of Lynchburg, Petersburg, and Portsmouth, and the counties of Prince William and Wise. To set the experiment in motion, as soon as VIP was implemented in July 1995, VDSS began randomly assigning both new and existing cases in those localities to either an experimental group or a control group. All experimental cases were covered by VIP eligibility policies. They were enrolled in the VIEW work component (unless exempt) when VIEW started in their area. Control group cases remained subject to the old AFDC policies and received employment-related services only under the old Job Opportunities and Basic Skills (JOBS) program. The purpose of random assignment was to create a situation in which people in the experimental group were similar to those in the control group, on average, in all respects except for whether they were covered by VIP policies. The random-assignment evaluation design allows us to attribute differences in outcomes between the experimental and control groups to the VIP reforms with the maximum level of statistical confidence. This report focuses on the impacts of VIP from July 1995 to October During this period, the VIEW component of VIP was still being phased in. Because the impact estimates described in this report are estimates of early impacts, they have limitations. First, at the end of the follow-up period, two of the five research sites--portsmouth and Wise--had not implemented VIEW. Experimental cases in those two sites were not subject to the reforms likely to have the largest effects on outcomes such as employment and TANF receipt. Thus, much of this report focuses on the three sites that implemented VIEW during the follow-up period--lynchburg, Prince William, and Petersburg. These three localities will be referred to as the VIEW sites. Second, even in the VIEW sites, no cases had reached the two-year time limit by the end of the follow-up period. 3

21 Therefore, further investigation of the long-term impacts of VIP is needed. Longer-term impacts will be covered in a follow-up report. The rest of this chapter describes VIP and the evaluation in more detail. It also provides background information on the research sites and on the clients they serve. A. OVERVIEW OF VIP VIP reforms fall into two distinct groups: (1) eligibility reforms, and (2) VIEW work requirements and incentives. This section describes each in turn. 1. Eligibility Reforms With a few exceptions, the VIP eligibility provisions primarily encourage adults to be responsible parents. The exceptions focus on supporting parents efforts to find or keep a job. The VIP provisions that were implemented statewide in July 1995 include: C C C C Diversionary Assistance. Working families who face a temporary loss of income are able to receive a one-time cash payment as long as they agree to forgo welfare benefits for up to 160 days. Paternity Establishment. Mothers are required to name the fathers of their children and provide three additional pieces of information to help locate the noncustodial parent. Mothers who do not comply face an immediate sanction of their portion of the TANF grant and have their TANF case closed if they have not complied within six months. Family Cap. A child born more than 10 months after a family begins to receive assistance is not eligible to have his or her needs included in the TANF grant (i.e., benefits do not increase). All child support received for a child subject to the family cap is passed through directly to the family and is not considered income when determining a family s eligibility for TANF. Compulsory School Attendance. Compulsory school attendance laws apply to all school-age children receiving assistance. Children who do not comply with the laws are removed from the TANF grant. 4

22 C C C C Immunization. TANF applicants must provide verification that all children are immunized or face a monthly reduction of TANF benefits ($50 for the first child who is not immunized and $25 for each additional child who is not immunized). Minor Parent Restrictions. Minor parents are required to live with a parent or other adult in loco parentis to be eligible for assistance. Two-Parent Expansions. Eligibility for benefits for two-parent families is determined using the same eligibility criteria as for one-parent families. Savings Incentive. Families are allowed to accumulate $5,000 in savings, provided that the money will be used for education, home ownership, or starting a business. 2. VIEW VIEW emphasizes moving clients quickly into the workforce with appropriate supports, as well as the temporary nature of cash assistance. Unlike the VIP eligibility provisions, which apply to all cases, VIEW applies only to able-bodied parents with no child less than 18 months old. VIEW includes: C C C C Agreement of Personal Responsibility. VIEW participants must sign an Agreement of Personal Responsibility (APR) to receive benefits. Families who fail to sign the APR have their TANF cases closed. Work Requirement. VIEW participants must begin looking for unsubsidized employment immediately. They are required to work in a subsidized or unsubsidized job or participate in a community work experience program (CWEP) within 90 days of signing the APR. Families who do not comply with the work requirement face the loss of all TANF cash benefits. They remain subject to the time limit as long as their TANF case remains open. Two-Year Time Limit. Receipt of cash assistance is limited to 24 months followed by a one-year period of eligibility for transitional benefits only (child care, transportation, and medical assistance) and a two-year period of ineligibility for all TANF benefits (including transitional benefits). Generous Earned Income Disregard. VIEW families are eligible to receive their full grant as long as the total of their TANF benefit plus net earned income does not exceed the federal poverty level (and they have received assistance for 24 months or less). 5

23 C C Enhanced Support Services. VIEW extends eligibility for transitional Medicaid and child care benefits (previously available to individuals who lost eligibility as a result of increased earnings) to essentially anyone who closes his or her TANF case. VIEW also provides enhanced funding for child care, transportation, and work-related expenses when clients work but continue to receive TANF. Fewer Exemptions. Under JOBS, the employment program which VIEW replaced, parents with a child under three years old were exempt. Under VIEW, this age cutoff was lowered to 18 months. Requirements for temporary medical exemptions also became stricter. Implementing VIEW required major changes in the way that local welfare agencies delivered employment-related services. These changes included a shift from an education and training focus to a work first focus. Workers now must emphasize helping clients find jobs rapidly. They must also communicate to clients the importance of personal responsibility and the consequences of noncompliance. 3. Transition to TANF On December 6, 1996, Virginia submitted its state plan for the TANF program. According to this plan, Virginia will continue to operate the VIP program as approved under the 1995 federal waivers. The only program changes were the addition of the mandatory TANF provisions, which were implemented on February 1, These provisions include a five-year lifetime limit on federally funded cash benefits. However, because a VIEW case is limited to 24 months of cash benefits followed by 12 months of transitional benefits and 24 months of ineligibility, no VIEW cases will reach the federal limit until 11 years have passed. B. THE VIP IMPACT EVALUATION In 1995, VDSS planned a comprehensive evaluation of VIP, including an experimental impact study. The passage of federal welfare reform led to delays in the evaluation and to some changes 6

24 in its design. In late 1997, VDSS contracted with the Virginia Polytechnic Institute and State University (Virginia Tech) and its subcontractor, Mathematica Policy Research, Inc. (MPR), to conduct a series of studies to examine the implementation, outcomes, and impacts of welfare reform in Virginia. Funding was provided by the U.S. Department of Health and Human Services, Administration for Children and Families, and by VDSS. The evaluation consists of five studies: (1) an early impact and outcomes analysis, based on the original experimental design; (2) an implementation study; (3) a longitudinal study of what happens to cases after they reach the two-year time limit; (4) an impact and implementation study of VIEW- PLUS, a new job retention program; and (5) a study of VIEW-exempt cases, focusing on childonly cases. This is the first of two reports MPR is preparing on the early impact and outcomes analysis. The second report will extend the follow-up period and examine additional outcome measures. 1. Why Do an Experimental Impact Evaluation? The outcomes of a program such as VIP are both programmatic and economic. Programmatic outcomes include how many clients are enrolled in VIEW, how many are sanctioned, and how many receive child care subsidies. Economic outcomes include employment rates, average earnings, and TANF participation rates. Describing these outcomes for those in VIP provides useful information, such as how often cases are closed because clients failed to sign the APR and what percentage of VIEW cases close within a year of entering the program. However, some level of sanctioning would occur under most welfare programs, and cases close for a variety of reasons, regardless of the specific policies applied. Thus, information on outcomes must be compared to some benchmark or counterfactual to tell policymakers if the program is effective. This impact analysis examines whether VIP/VIEW policies lead to outcomes different from those of the old AFDC/JOBS policies. 7

25 The impacts or net effects of the program are measured as the difference in outcomes for cases under VIP/VIEW from what they would have been under AFDC/JOBS. An experimental evaluation design was used because it provides the most rigorous foundation for an evaluation of program impacts. This design involved random assignment of cases to an experimental group subject to VIP/VIEW policies or to a control group that remained covered by AFDC/JOBS policies. Random assignment ensured that the experimental and control groups were alike, on average, in all respects except for the welfare programs and policies available to them. Thus, differences in average outcomes for the two groups represent the impacts of VIP/VIEW, rather than the effects of other factors. 3 The companion implementation study report (Pavetti et al. 1999) examines the implementation of VIP/VIEW in the five research sites. That report focuses on the operational challenges of making the new policies work in the varied settings of the five sites and on the lessons learned that may apply to implementing similar policies elsewhere. Information from the implementation study is also used in this report to interpret differences in impacts across the research sites. 2. Research Questions This report focuses on four research questions: 1. How does the VIEW component of VIP affect program activities and services used? How do client experiences in VIEW differ from client experiences in JOBS, in terms of participation overall and in terms of types of activities engaged in, frequency of sanctioning, and use of child care assistance? 2. What economic outcomes are observed for VIP cases? What are the trends over time in key outcomes--employment, earnings, TANF participation, TANF benefits, food stamp participation, food stamp benefits, and total income--for cases subject to VIP/VIEW? 3 Because results are based on a sample of the entire welfare caseload, some differences may reflect sampling variability rather than true program impacts. Thus, we focus on differences that are statistically significant, which implies that they are very unlikely to be due to chance. 8

26 3. What are the impacts of VIP on economic outcomes? How do outcomes for those in VIP differ from what would have been observed under the old AFDC/JOBS program? 4. How do the impacts of VIP vary among the demonstration sites? Are impacts in sites that implemented VIEW larger than in those that did not? Among the VIEW sites, how and why do impacts vary? In some instances, the nature of the reforms suggested specific hypotheses about their likely impacts, but in other cases, their impacts could not be predicted. The VIP eligibility reforms alone were not expected to have major impacts on employment and earnings or on TANF and Food Stamp Program participation and benefits. These provisions would affect TANF benefits directly only for 4 the small numbers of families who were sanctioned or affected by the family cap. Indirect effects were possible, for example, through increased child support collections, but also were not expected 5 to be large. In contrast, the VIEW initiatives provide clients with strong incentives to find work and stay employed, as well as important supports to help them achieve this goal. Thus, VIEW was expected to increase employment. However, the implications of VIEW policies for TANF participation during the first two years in VIEW were not certain. The time limit and expanded transitional benefits create incentives for clients to close their cases and bank their months of eligibility. In other words, some people may elect to close their TANF cases even if they are eligible to keep them open, because they want to ensure that they will be eligible to receive TANF again in the future, if they need it. The work requirement could also have a smoke-out effect, if it leads some who were working and not reporting their jobs to close their cases rather than comply. On the other hand, the expanded earnings disregard creates an incentive to combine TANF participation and work, as it is 4 This study does not examine the effects of the compulsory school attendance or minor parent residency requirements, as these provisions were implemented for the control group as well. 5 Data on the impact of VIP on child support collections will be analyzed in a future report. 9

27 possible to remain eligible for TANF benefits (for 24 months) at much higher levels of earnings than in the past Evaluation Design The specifics of the evaluation design for the VIP impact study are as follows: C Research Sites. Random assignment occurred in five localities selected to be approximately representative of the state geographically and demographically. VIP was implemented for all cases in the rest of the state (with VIEW phased in by EDD, as discussed). The five research sites are described in Section C. C C Recipient and Applicant Samples. Recipients are cases in the five sites that were active for AFDC in early July 1995 and were randomly assigned at that time. This report focuses on the recipient cases. Applicants are cases who were randomly assigned as they were approved for AFDC/TANF from July 1995 to August Results for these cases are omitted from the main body of this report because very few of these cases were exposed to VIEW during the available follow-up period. Preliminary results for applicant cases are presented in Appendix G. 7 Random Assignment Methodology. Cases were assigned based on the value of a digit in their TANF case number. VDSS found this digit to be approximately uniformly and randomly distributed. For recipients, the assignments were made by VDSS centrally. For applicants, cases were assigned their previous case number if they had received benefits before. Otherwise, they were assigned the next available case number before any assessment of eligibility. In some sites this process was completely automated, while in others it was handled by a receptionist. Analysis of the pre-assignment characteristics of the experimental and control groups found few significant differences (see Appendix A). Furthermore, use of this simple assignment approach made random 6 Each of these policies, however, creates these incentives only if clients understand the policy and its implications. 7 Appendix G presents impacts for the 3,045 applicant cases who were randomly assigned between July 1995 and September The follow-up period for applicants is the four calendar quarters after the case entered the sample. This period ranges from October 1995 to September 1996 for the earliest applicants to October 1996 to September 1997 for the latest group included. The quarter of random assignment is omitted, because many applicant cases did not receive TANF until late in the quarter. 10

28 assignment immediate and made it easy for eligibility workers to keep track of which policies applied to each case. 8 C C Follow-Up Period. Data on recipients are available for 27 months (nine quarters), 9 covering the period July 1, 1995, to September 30, Exposure to VIEW During the Follow-Up Period. Because VIEW was implemented at different times in the five research sites, the follow-up period includes different periods of exposure to VIEW across the sites. Portsmouth and Wise did not implement VIEW until after the follow-up period, so impacts in these sites represent impacts of the VIP eligibility reforms alone. Among the VIEW sites, the follow-up period includes 24 months after VIEW implementation in Lynchburg, 18 months in Prince William, and 10 9 months in Petersburg. Impacts in these sites after VIEW implementation are the result of both VIP eligibility reforms and VIEW. C Sample Size and Assignment Ratio. The sample used in this report includes 7,568 recipient cases. Half of these cases are in the experimental group, and half are in the control group. C Data Sources. All data for this study are derived from administrative databases maintained by VDSS or the Virginia Employment Commission (VEC). Administrative data provide a strong basis for an evaluation of this type, particularly for outcomes such as TANF participation and benefits, which often are not accurately recalled in surveys. The VEC wage records are data employers report to the state for determining unemployment insurance eligibility and are the source of our estimates of impacts on employment and earnings. All other data in this report come from extracts from VDSS administrative data systems. These extracts were developed and maintained by VDSS evaluation staff. 8 Because there were more cases than needed to meet sample goals, some recipients and applicants were assigned to a secondary experimental group in the two largest sites. Data on these cases are not used in the analysis. 9 This report analyzes data for the 27-month period in which the experimental and control groups were subject to different policies--july 1995 to September The state began phasing out control group policies on October 1, 1997, when it decided to implement VIP statewide. All control group cases were subject to the VIP eligibility policies as of October 1, 1997, and VIEW-mandatory cases were converted from JOBS to VIEW over the next six months. 10 These figures are the maximum post-view follow-up period in each site. Existing cases were enrolled in VIEW over a six-month period, as they came up for redetermination, so that the post- VIEW follow-up period for many recipient cases would be less. 11