Welfare Reform: The Wisconsin Story

Abstract The experience of Wisconsin is commonly cited as evidence of the capability of states for reforming welfare. Wisconsin’s welfare caseload declined by 22.5 percent between December 1986 and December 1994. This paper argues that the decline was most likely the product of restriction of eligibility and benefits, a strong state economy, and large expenditures on welfare-to-work programs encouraged by an exceptional fiscal bargain with the federal government. Opportunities for continued reduction of welfare utilization by means other than denying access are jeopardized by proposed changes in federal cost-sharing, a prospective state deficit, and the growing share of the caseload accounted for by residents of Milwaukee. Wisconsin Works, the state’s plan for public assistance in a post-block-grant world, continues benefit reduction and eligibility restriction but expands emphasis on employment. The special circumstances enjoyed by Wisconsin are unlikely to be duplicated elsewhere. Other states and the federal government should not assume that expanded state discretion will produce comparable gains unless accompanied by major outlays for employment and training programs, reduction in benefits, and tightening of eligibility requirements. The first policy is expensive to taxpayers; the second and third approaches harm recipients. State Strategies for Welfare Reform: The Wisconsin Story Sometime in the 1980s, welfare reform turned around. Before that time, the focus of most initiatives was expansion of the federal role in public assistance. Since that time, reformers have shown increasing interest in expanding the role played by states. The welfare block grant plan contained in Republican-sponsored House and Senate welfare reform legislation (the Personal Responsibility Act of 1995 and the Work Opportunity Act) is the culmination of this new trajectory, but interest in expanding state authority is bipartisan. President Clinton regularly cites his own administra- tion’s record in approving state welfare experiments as an indication of support for devolution of welfare authority.1 The new view appears at least in part to be the product of highly publicized state experiments with welfare-to-work programs in the early 1980s. It has been encouraged by the substantial increase since 1992 in rates of proposal and initiation of multicomponent state welfare reforms.2 Proponents of welfare decentralization cite the new state initiatives as evidence that previous efforts at increasing uniformity in national welfare policy inhibited both innovation and adaptation of income support systems to local circumstances. A block grant would, it is argued, remove remaining federal barriers to beneficial restructuring of public assistance. Wisconsin is widely viewed as exemplary of the capability of states to reform welfare policy. This perception is the product of four things. First, as Figure 1 indicates,3 welfare utilization in the state has fallen substantially since 1986, while caseloads elsewhere in the United States have grown. Figure 1: National and Wisconsin Caseloads, 1986-94 (Tables and figures are bound at the end of the paper)  2 Second, these changes have been associated with a wide spectrum of welfare reform initiatives. Since 1992 Wisconsin has been involved in implementation and operation of more welfare experiments than has any other state in the country. Third, Wisconsin Governor Tommy Thompson has for almost a decade made welfare reform a centerpiece of his administration’s social policy. Wisconsin’s caseload decline is largely coincident with his administration, which began in 1987. He has demonstrated conclusively that welfare policy can be a political asset. His record and his position as chair of the National Governors’ Association assure that his judgments receive attention and that the state’s record will continue to serve as case-in- point for those promoting a larger state role in welfare reform. Fourth, the Thompson administration produced the first reasonably complete plan for public assistance operation under a system of block grants. The plan, called Wisconsin Works, provides insight into the direction of change in state welfare policy should federal restrictions be eased; as such, it is worthy of national attention. Welfare reform is politically contentious, and dispassionate discussion of the effects of state initiatives is hard to conduct. But such investigation is essential, because of the importance attached in the welfare reform debate to assertions about what states have accomplished. In a lead editorial published in early February, 1995, the Washington Post cited as the first of seven “Principles for Welfare Reform” that “states should be given broad leeway to experiment.”4 According to the Post, “these experiments should be encouraged, since they provide important clues for building a better system.” As leader, Wisconsin’s experience is certain to continue to play an important role in the reform debate. It is therefore useful to review state policy and state accomplishments to see just what the “important clues” the Post promises might be. That is the objective of this paper.