Evolution of the SCHIP and TANF Block Grant Programs

The TANF and SCHIP block grants arrived on the scene in the late 1990s, under similar political and fiscal conditions, to provide social goods to low-income individuals. Reviewing the timelines, the general sequence of constraints follows a similar pattern across the two programs—an implementation that was followed by a recessionary period; an extended reauthorization process under a new administration that restricted federal parameters; and, most recently, a financial crisis.

Furthermore, state level constraints cut across the two programs indiscriminately. In California, the political turmoil surrounding the governor’s recall, and severe fiscal conditions associated with the ongoing budget crisis, similarly reoriented the state’s SCHIP and TANF policy trajectories. In Texas, political opposition to generous public assistance programs predetermined a minimal response to both block grant programs.

Despite some similarities across the two programs, they differed in important ways that shaped state policy responses to these shared conditions. Federal legislation for the two programs were enacted back to back, but the infrastructure and constraints that TANF inherited from AFDC provided a different launching point. In comparison, SCHIP was new and relatively unencumbered by association with a failed entitlement program. SCHIP may have retained some links to Medicaid, especially for states adopting M-SCHIPs, but the program targeted a new population of beneficiaries and many states actively distinguished it from Medicaid.

The variation in starting points differentiated two constraints on SCHIP and TANF trajectories that were somewhat unexpected. The first revolved involved fiscal capacity. TANF replaced AFDC on federal and state budget plans, inheriting the program’s secured resources and thus bypassing some of the partisan posturing over funding. SCHIP, on the other hand, required new state funds.

The second unexpected constraint was political. In the early stages of this research, I came across numerous reports that conjured Reagan’s “welfare queen” and cited a widespread dissatisfaction with the AFDC entitlement program in the early nineties. Consequently, I expected to observe more restrictive political constraints on state TANF policy choices than on SCHIP choices. After all, relative to the larger healthcare reform effort, SCHIP had specifically targeted low-income uninsured children as a “deserving” segment of the population. On the contrary, the political constraints limiting SCHIP were more binding than those operating on TANF choices. In retrospect, it is not difficult to rationalize these findings—it is generally less palatable for states to be

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told they have to provide more (funding and services) than to be relieved of federal requirements.

TANF targeted individuals in extreme poverty who, during economic downturns, were especially vulnerable. Moreover, federal TANF statutes afforded the states more discretion than SCHIP. TANF legislative language was open-ended, setting forth policy objectives rather than specific requirements. States were able to configure their own portfolio of cash assistance, childcare and welfare-to-work services as long as they met the work participation requirements and enforced the sixty-month time limit. As states reoriented former AFDC programs to provide employment and auxiliary services in lieu of cash assistance, TANF expenditures became easier to justify to both ends of the political spectrum.

On the other hand, SCHIP created an expanded role for government in healthcare, a proposition criticized by conservative legislators at both the federal and state level. Furthermore, while SCHIP was lauded for its flexibility relative to Medicaid, when compared to TANF, the SCHIP statutes were narrowly defined and targeted children above the poverty level. Legislators with a progressive SCHIP policy agenda could advocate for offering coverage to families at higher levels of the federal poverty level or providing more extensive benefits. Both of these trajectories met with ideological opposition from conservative constituencies.

Comparing the SCHIP and TANF experiences in two different recessionary periods provides insights into the dynamics of fiscal constraints on state policy choices. In the first recession (2001-2004), most state TANF programs carried unobligated

reductions in TANF. This period coincided with the TANF reauthorization debate and growing criticism of excess reserves. State efforts to deploy unobligated balances may have been accelerated by a fear of reduced federal support. The combination of

conditions motivated states to tap into unused balances and, for the most part, to continue investing in TANF through the first recession.

SCHIP initially allowed states only three years to use their allotments, but as programs were slow to get off the ground many states carried balances into the first recession. Nevertheless, when resources were tight, states acted to contain costs in their SCHIP programs as necessary. In the first recession, TANF seemed more resistant to recession-related cuts than SCHIP, perhaps partially due to different characteristics of the beneficiary populations discussed above that would prompt states to continue TANF investments as counter-cyclical measures.

TANF and SCHIP endured contentious, prolonged reauthorization debates, under completely different political conditions than those in which they had been enacted, highlighting the temporal disconnect between institutional and political constraints (Pierson 2004). TANF’s initial charter was only five years, so its reauthorization coincided with the first recessionary period. Mired in disputes over how to curb the states’ strategic circumvention of compliance with work participation requirements and perhaps unwilling to clamp down on such practices given the economic circumstances, reauthorization of TANF was not enacted until the DRA was passed in 2005. It included the restrictive measures discussed in previous chapters.

SCHIP followed a similar trajectory, though its initial ten-year charter expired in 2007, well after the effects of the first recession had receded. Meanwhile, many states

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had been expanding their SCHIP programs in anticipation of expanded eligibility and funding under reauthorization. The CMS directive and presidential veto of CHIPRA 2007 indicated that federal dynamics had shifted and threatened an era of restrictive parameters comparable to federal interventions experienced two years earlier in the TANF program.

The TANF and SCHIP reauthorization experiences offer contradictory evidence about the stability of block grants. It is true that initial federal support splintered and state policies provoked restrictive federal parameters during reauthorization (Grogan and Rigby 2009). However, Congress had long been aware of state practices concerning work participation calculations in TANF. Considering the severity of the president’s reauthorization proposals beginning in 2002, the length of time it took to build consensus for the relatively moderate restrictions imposed by the DRA could alternately be

construed as evidence of block grant stability.

The severity of the second recession (2008-2011) provoked a federal response that deflected the direct impact of major fiscal constraints on both programs. TANF received emergency contingency funds under ARRA while SCHIP was supported both directly, through CHIPRA 2009, and indirectly through Medicaid matching rate increases in ARRA. Provisions in the Affordable Care Act in March 2010 prohibited states from reducing SCHIP eligibility and funding in preparation for broader reform through 2014, stabilizing SCHIP benefits through the worst of the second recessionary period.

A combination of conditions sheltered SCHIP and TANF choices from potentially severe fiscal constraints in both recessionary periods. While ACA continues to protect SCHIP, TANF will be fully exposed when federal ARRA funds are withdrawn in 2011.