A Close Call in Alabama

Poverty & Family Economics

Earlier this year, when the Alabama State Legislature asked the Commissioner of Human Resources to detail the consequences of a 25 percent pro-rata budget cut, she mentioned that the state might discontinue its cash assistance (TANF) and Child Support services altogether.

Just eliminate it. No more cash assistance. No more child support. Many, including me, did not know that was possible, that a state can simply take down two critical strands of the safety net.

The Alabama legislature avoided the worst case scenario for fiscal year 2012, imposing a pro-rated budget cut of only 10 percent. Until yesterday’s close call.

In a statewide referendum, voters were asked to approve a one-time transfer of $437.4 million from the Alabama Trust Fund, a state savings and investment account that receives most of Alabama’s royalties from offshore drilling activities, to the state’s General Fund. The budget for this state fiscal year, which begins on October first, depends upon a “yes” vote. And Governor Bentley has insisted that there’s really no Plan B, such as the combination of increased cigarette and lottery taxes.

When welfare reform converted cash assistance from an entitlement (AFDC) to a block grant (TANF) in 1996, advocates raised concerns that the overhaul would incite a “race to the bottom,” among states. For the most part, the race to the bottom never occurred. Unprecedented economic prosperity, record caseload declines, and intense political scrutiny created a climate of experimentation and healthy competition among states.

Times are very different fifteen years after welfare reform and in the immediate aftermath of the Great Recession. States have spent down the stimulus funds provided by the American Recovery and Reinvestment Act (ARRA) and their own TANF reserves. For many states, fiscal year 2012 was the third successive year of substantial budget deficits. Hard times are especially difficult for states like Alabama, which has one of the worst imbalances in the nation between fiscal need and revenue capacity.

Making matters worse, last year the federal government broke a deal of welfare reform, under which 17 low-income or high-population states were given supplemental grants to bring their TANF spending closer to the cross-state average. Alabama lost $11 million in TANF Supplemental Grant funds, roughly 12 percent of its annual base allocation.

Alabama did not initiate a race to the bottom in the mid-1990s, but the Commissioner’s comments signal the clear danger that states might drift to the bottom. None have eliminated TANF altogether, but states have often reduced eligibility and benefits in TANF-funded supports like child care and child welfare. In fact, subsequent comments from Alabama state officials clarified that while the state would try to maintain some semblance of a TANF program for as long as possible, cuts to these programs were almost certain.

State budget deficits don’t stop with black and red ink on a ledger. They affect children. In 2011, Alabama had a child poverty rate of almost 28 percent. One in ten Alabama children lived in a household with income less than half of the federal poverty line. Nearly one in five (18.2 percent) lived in a household that experienced food insecurity.

Contrary to the political rhetoric of this campaign, neither low-wage work nor TANF alone provide income security for poor children in Alabama. One quarter of Alabama workers earn less than $9.57 per hour, or approximately $19,140 per year, which is just barely above the federal poverty line for a family of three ($19,090). To qualify for TANF in Alabama, a single-mother with two children must have countable income of less than $269 per month, or $3,228 per year. If she qualifies, she may receive up to only $215 per month in cash assistance, or $2,580 per year. Children accounted for nearly three-quarters (73.6 percent) of cash assistance recipients in Alabama in the 2011 calendar year.

Fortunately, Alabama citizens passed the referendum, recognizing the duties articulated in that now famous Letter from a Birmingham Jail, “We are caught in an inescapable network of mutuality, tied in a single garment of destiny. Whatever affects one directly, affects all indirectly.”