National Housing Law Project Housing Law Bulletin

Formula-Based and Competitive Grants Available

The initiative is funded at $1.5 billion for FY 1998 with an additional $1.5 billion for FY 1999 for formula-based grants to states and competitive grants to local communities. A small special purpose set-aside will fund, among other things, evaluation activities and performance bonuses for successful states.

Three-fourths of the state grant funds ($1.1 billion in each of the next two fiscal years) are to be allocated to states and localities based on a formula that weighs poverty rates and TANF participation to provide a funding advantage for poor states with high welfare caseloads. These funds may be used to assist welfare recipients in their move to long-term unsubsidized employment by supporting a range of employment strategies, including job creation, on-the-job training and job readiness activities, job placement and post-employment services, in addition to any necessary supportive services such as child care and transportation. Special set-asides would allocate one percent of the funds for Indian tribes, 0.8 percent for program evaluation, and $100 million for performance bonuses to successful states.

An interagency task force will oversee implementation of the initiative. The table below lists state by state the recently announced Estimates for Welfare-to-Work State Formula Grants for FY 1988.

Alabama $13,946.266
Alaska 2,860,290
Arizona 17,486,853
Arkansas 8,440,819
California 189,158,618
Colorado 9,925,558
Connecticut 11,741,594
Delaware 2,761,875
Florida 51,399,886
Georgia 28,951,503
Hawaii $4,827,072
Idaho 2,821,590
Illinois 48,626,791
Indiana 14,740,941
Iowa 8,275,164
Kansas 6,753,540
Kentucky 17,573,480
Louisiana 23,809,809
Maine 5,149,450
Maryland 15,120,329
Massachusetts $20,592,636
Michigan 42,478,467
Minnesota 14,377,295
Mississippi 13,007,589
Missouri 19,925,594
Montana 3,191,313
Nebraska 3,979,500
Nevada 3,449,131
New Hampshire 2,761,875
New Jersey 22,239,053
New Mexico $9,770,091
New York 96,746,539
North Carolina 25,204,721
North Dakota 2,761,875
Ohio 43,859,618
Oklahoma 11,838,761
Oregon 8,789,018
Pennsylvania 44,527,566
Rhode Island 4,348,845
South Carolina 12,148,469
South Dakota $2,761,875
Tennessee 22,350,941
Texas 75,625,133
Utah 4,670,433
Vermont 2,761,875
Virginia 16,725,507
Washington 22,458,358
West Virginia 9,786,496
Wisconsin 13,284,419
Wyoming 2,761,875
District of Columbia $4,573,557
Guam 595,690
Puerto Rico 34,403,919
Virgin Islands 550,548
Total $1,104,750,000

Private Industry Councils to Play Major Role

States are required to partner with locally created Private Industry Councils (PICs) that now administer job training programs. Eighty-five percent of their grant funds must be distributed through the PICs. In determining how grant funds are to be allocated among the PICs, the distribution formula must consider the number of poor residents in a service delivery area. A maximum of one-half of the funds may be assigned through a mechanism that considers (1) the number of adults receiving TANF for 30 months or more and (2) the number of unemployed persons in the service delivery area. The remaining 15 percent of state grant funds may be used for the state’s own welfare-to-work initiatives. One dollar of state matching funds is required for every two dollars of federal grant monies.

State Plan Approval Is Funding Prerequisite

Both the Department of Labor and the Department of Health and Human Services (HHS) must approve the plan submitted by each state which describes how funds will be used, the process by which the distribution formula was established, evidence of coordination and consultation with appropriate actors in development of the plan, and assurances that the PIC will comply with the grant. States may also submit a request for a waiver to permit an entity other than the PIC to administer grant funds.³

After the first two fiscal years for which the grants are authorized, states may seek performance bonuses based on measurements developed by the departments of Labor and HHS. The performance bonus measurements must factor in job placement, duration of employment, and any increases in earnings.

Local Governments Eligible for Competitive Grants

In addition to formula grants to the states, the remaining one-fourth of funds will be competitively awarded directly to local governments, PICs and for-profit and nonprofit entities, including community development corporations, community action agencies and community-based organizations partnering with PICs or local government. Urban areas with concentrations of poverty and poor rural areas are slated to receive special consideration in the award of competitive grants.

Majority of Funds Targeted to Long-Term
Welfare Recipients

A minimum of 70 percent of the grant funds, both formula-based and competitively granted, must serve individuals who are long-term welfare recipients. In addition, the target population must be composed of individuals who face two or three "labor market deficiencies" prescribed by the Department of Labor: (1) no high school diploma or GED and low reading or math skills; (2) need substance abuse treatment in order to obtain a job; and (3) poor work history. Another target population for up to 30 percent of the grant funds are recent TANF recipients or noncustodial parents with traits identified with long-term welfare dependency such as teen pregnancy, school dropout or poor work history.

A positive feature of the initiative is that individuals are not disqualified from participating even if they have reached the 60-month TANF limit. Only in the case of individuals receiving cash assistance provided directly or through wage subsidies does such assistance count toward the 60-month limit.

The results of federally supported welfare-to-work programs predating welfare reform have been uneven at best. Past efforts, including those under Job Training Partnership Act programs, for example, have been criticized as ineffective, characterized by "creaming" and the creation of dead-end jobs, among other flaws. However, for all the shortfalls of the new welfare law, the welfare-to-work grant has the potential for positive results. The infusion of significant federal dollars and a coordinated effort by the responsible federal agencies to target assistance to those most in need marks a renewed concerted effort to pool the fiscal resources of government with the human resources in the community to help achieve economic independence.

1. The Balanced Budget Act of 1997, Pub. L. No. 105-33 (Aug. 5, 1997).
2. Source: United States Department of Labor, Daily Labor Report (Sept. 4, 1997), at E-1.
3. The Balanced Budget Amendment Act, supra note 1, § 5001(a)(1), amending 42 U.S.C. § 603(a) to add Section 5(A)(ii)(I)(ee).