Welfare reform in Wisonsin with an asterisk

WELFARE REFORM is at stage center in America today. And on that stage, Wisconsin's Republican Gov. Tommy Thompson is a star. As chairman-elect of the National Governor's Association, he is entitled to attention and certain to see his initiatives copied or, at least, seriously studied. After all, he's governor of a state that has reduced its caseload in Aid to Families With Dependent Children by 24% since 1987.

Thompson began state-initiated welfare reform in 1987, long before such efforts became fashionable. Not only have the apparent consequences been dramatic, but Thompson has demonstrated that welfare reform is a winning political issue.

The message has not been lost on the governors, Congress or, for that matter, the president. In his State of the Union message, President Clinton noted that he had approved welfare reform demonstrations in more states than had Presidents Reagan and Bush together.

But suppose you're a governor and you want to imitate Wisconsin's success. What do you do? Here's the recipe:

First, you cut benefits. The longest-standing Wisconsin welfare reform is a freeze in both the level of payments in AFDC and the maximum level of income a family can have to be eligible for assistance. The result is a purchasing-power decline of about 27% since 1986.

Second, you propose many state welfare-reform experiments, but for the most part you keep them small. This strategy, which is sensible from a research standpoint, limits state fiscal exposure while not detracting from the political mileage you gain from announcing reforms. Does anyone remember the "Bridefare" initiative announced in the Rose Garden with so much fanfare in 1992?

Third, you take advantage of federal funds to spend a great deal of money on employment and training initiatives. Wisconsin has increased its level of outlays on employment and training efforts almost fourfold in real terms since Thompson came to office.

The state has mixed this infusion of funds with major and imaginative efforts to restructure its county-run welfare operations.

Fourth, you do all this in the context of a vigorous economy. In part because of the governor's own economic policies, the state's economy is very healthy with an unemployment rate hovering close to 4%.

While we may like what this recipe seems to have produced, a closer look reveals some problems for Thompson, for potential imitators and, indeed, for national policy.

The Thompson problem is this: That 24% caseload-reduction figure covers two distinct episodes, roughly coincident with the governor's two completed terms in office.

From January 1987 to January 1991, the caseload fell by 19%. But the record for the second term was less auspicious. While the data are still incomplete, it appears that the caseload decline recorded for the past four years will be a more modest 7%. Now that the recession appears genuinely to be over and employment is expanding, many other states will begin to match Wisconsin's welfare reductions.

Many of the governor's touted reforms came after the major portion of the caseload decline was achieved, and it may be difficult to achieve further reductions an objective made particularly important by the 1996 elections.

The governor and legislature have responded by pumping more money into training programs. The budgeted increase for employment and training outlays for fiscal year 1995 exceeds actual expenditures last year by 25%.

While this outlay will probably keep the caseload decline going, it cannot be sustained. About 40% of budgeted training funds come from state general- purpose revenues. The governor and the legislature have committed the state to $1 billion in school property tax relief beginning in the 1996-'97 school year.

To date, the governor hasn't found the $1 billion needed for schools, and he has sworn no new taxes. In the struggle between welfare and tax relief, welfare is likely to lose. The fallback could be an acceleration of the dark side of the Wisconsin miracle benefit cuts and eligibility restrictions.

The problem for imitators is the same. If welfare-to-work programs do account for a significant part of Wisconsin's achievement, the stake required to play the same game is substantial.

Moreover, the Thompson prescription calls for hard work at reforming bureaucracy and delivery systems but few if any cuts in personnel. This is not the message most governors want to hear.

Nationally, there is much talk about converting welfare funding to block grants. Under current funding arrangements for work- to-welfare efforts, every dollar states spend is matched by more dollars from the federal government. Policies such as Wisconsin's have therefore been cheap from the perspective of taxpayers.

While many Republican governors have endorsed the idea of block grants and fewer strings, it is doubtful that Wisconsin or any other state would be willing to sustain employment and training efforts when dollars spent are not matched with federal aid. That's the way most block grant proposals would operate.

The challenge is to find a way to imitate the Thompson administration's success in welfare administration, to continue funding welfare-to-work efforts and to resist a rush to indiscriminate cuts in benefits. It is not evident at all that either President Clinton or Tommy Thompson knows how.

Michael Wiseman is professor of public affairs and associate director of the La Follette Institute of Public Affairs at the University of Wisconsin-Madison and a scholar at the university's Institute for Research on Poverty. This commentary first appeared in Newsday.

Copyright 1995
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