Public Assistance Benefits Vary Widely From State to State, but Generally Exceed the Poverty Line

GAO analyzed over 1,000 active Aid to Families with Dependent Children (AFDC) cases in 13 states to determine the collective benefits actually received by those families. GAO also analyzed, through hypothetical situations, the effect that working would have on benefits received from certain groups of public assistance programs. States control the amount of AFDC payments to welfare families, the standards of need for various family sizes, and the services covered by Medicaid. Because of this, benefits for families with similar needs differ greatly among the states. States may choose to offer certain AFDC program extensions which could allow more families to receive Medicaid and AFDC. By not electing to provide such AFDC extensions as benefits to families headed by an unemployed father, or to pregnant women, the state can limit the number of families receiving benefits. The diversity of coverage among states creates inequities because families with similar needs and circumstances are treated differently.

In the sample used by GAO, about 80 percent of the cases had benefit income packages exceeding the poverty line. The cash component alone would generally not exceed poverty; thus, the significance of in-kind benefits is evident. Families that had earned income averaged about $2,600 per year more than their nonworking counterparts. AFDC clients were generally eligible for other types of welfare programs and, for the most part, participated in them. AFDC clients generally did not take advantage of programs providing jobs, training, and higher educational opportunities, probably because most mothers in the GAO sample had very young children and were exempt by law from work requirements under current regulations, or because they lacked the necessary secondary level of education required to take advantage of higher educational opportunities. GAO found that an AFDC mother, working even at a full-time minimum wage job, would improve her financial well-being. However, she would face the loss of significant welfare benefits as income is earned. These lost benefits can be construed as an additional tax on the income earned. The combined effect of employee taxes and lost benefits raises questions as to whether the client subject to them retains an adequate financial incentive to work.