A Brief Overview of the State-Federal Relationship in Public Welfare Programs, 1935-1996

by John E. Hansan, Ph.D.

Introduction

Public welfare is the term used to denote the different tax-supported programs that provide cash assistance or services to individuals and families who are deemed eligible on the basis of their income and assets. Public welfare programs are “means tested” and to become eligible it is necessary to prove one’s income and resources are below a specified level. Contrary to what is often heard or stated, there is no entitlement to public welfare. The purpose of this entry is to provide an overview of the state-federal public welfare programs created by the Social Security Act of 1935 lasting  until August 1, 1996 when significant changes in the law were enacted by Congress and signed by President William Clinton.

Background

The history of public welfare in the United States has been one of continuing change and growth. Prior to the 1900s, local governments shared with private charitable organizations major responsibility for the welfare of the “worthy poor” usually identified as the aged, blind, severely disabled, orphans and sometimes widows with young children. As the nation’s economy became more industrial and urban, the need for relief grew beyond the means, and sometimes the willingness, of local public and private auspices to provide. For example, the first department of public welfare was organized in Kansas City, Missouri in April 1910 as a response to a proposed march on the Mayor’s Office by a large group of unemployed workers. The Kansas City  model for organizing a public welfare department or commission was then promoted widely by its first executive director: Leroy A. Halbert.

Counties and state governments throughout the nation soon began to assume progressively more responsibility for the poor and unemployed. By 1926, forty states had established some type of public welfare program for mothers of dependent children. Such programs were labeled “mother’s pensions” or “widow’s mites.” A number of states also provided cash assistance to the needy elderly through old-age pensions. However, there were many variations among the states in the types of programs and benefits provided to eligible recipients.

This emerging system of state financed public welfare proved very inadequate to meet the challenges of the Great Depression of the 1930s. This economic crisis resulted in widespread unemployment and impoverishment. Existing systems of public relief were swamped and proved unable to cope with the flood of pleas for help. In addition to the countless numbers of people needing relief state and local tax revenues were lower because of the depression. These conditions were so grave it became essential for the federal government to step in and help the states with their costs of public relief.

The national government’s first initiative was in 1933 with the establishment of the Federal Emergency Relief Administration (FERA). In its first year the FERA distributed more than $1 billion to the states to help shore up their existing relief programs. However, like other early initiatives of the Roosevelt administration, the FERA was only a temporary measure until more fundamental reform could be arranged. The opportunity came in 1935 when the Social Security Act was passed.

The Social Security Act of 1935:  Essentially, the Social Security Act established two sets of program designed to serve very different purposes: (1) a national system of social insurance – or entitlements- for wage earners who qualified; and, (2) a system of state-federal public welfare programs for persons who were deemed destitute and unable to work for wages. To this day, the entitlement programs created by the Act, Unemployment Insurance and Old Age, Survivors, and Disability Insurance, form the bulwark of protection for the vast majority of wage earners and their families against the loss of income due to temporary unemployment, retirement, death or disability. For persons who were not then able to work, and therefore unlikely to become eligible for benefits under the wage-related social insurance programs, the Act authorized federal financial participation (FFP) in state administered cash assistance programs: Aid to the Aged, Aid to the Blind, and Aid to Dependent Children. The program of Aid to the Disabled was added in 1950.

Under the terms of the Act, each state had to first choose whether or not to participate in one or more of these new public welfare programs. When a state decided to participate in one of the programs, it was then required to submit a plan (i.e., state plan) that demonstrated that its proposed program adhered to the minimal standards in the law. States retained major control over the terms of eligibility and the level of benefits to be paid to recipients. Initially, federal financial participation in the cost of benefits was determined according to a formula that fixed federal reimbursement to the level of benefits established by a state. In addition, the federal government agreed to pay fifty percent of administrative costs, or a greater percentage  in what were designated poor states.

It is very important to note, these new state-federal welfare programs were “categorical” in nature: It was not enough for an individual/family to be deemed poor or eligible on the basis of not having any income or assets; it was also a condition of eligibility that the individual fit one of the established categories, that is, to be aged, blind, disabled or a child living in a household without a father. For this reason, public welfare programs were often referred to as “means-tested categorical programs.”

The framers of the Act also recognized that certain groups of people had needs for particular services which cash assistance alone could not or should not provide. To meet these needs, small formula grants were authorized to go to the states for Maternal and Child Health, Crippled Children, Child Welfare, and Medical Assistance for the Aged. Further expansion of medical assistance for the aged occurred in 1965 with the enactment of Medicare (Title XVIII) for Social Security beneficiaries and Medicaid (Title XIX) for welfare recipients.

The basic shape of the state-federal public welfare system formed by the Social Security Act remained largely intact until 1973 when the Congress federalized the cash assistance programs serving adults (Aid to the Aged, Aid to the Blind and Aid to the Disabled) into the Supplemental Security Income (SSI) program. In 1975, Title XX of the Act was enacted, consolidating most of the social service provisions of the various cash assistance titles into a single program of social services for needy citizens, with a cap on the amount of money the states could claim as Federal Financial Participation (FFP) for the provision of social services.

Many years of piecemeal development and legislated changes resulted in a public welfare system that was broad in scope, complicated and very expensive. Not surprisingly, the control and financing of public welfare programs became more difficult, persistently causing tension between the states and the federal government as each level sought to protect its interests. States, for example, appealed for relaxation of federal policies and rules that they felt limited their efforts to administer programs responsibly. The federal government adopted many of these strictures for the very purpose of instilling discipline in state administration. From the federal perspective, regulations insured that the needs of the poor would be met in an efficient and equitable manner.

Aid to Families with Dependent Children

Aid to Families with Dependent Children (AFDC) provided income assistance to families where children lacked adequate parental financial support. Assistance was granted in the form of cash benefits funded through a combination of federal, state and (in several states) local revenues. While federal and state rules jointly govern the determination of eligibility and payment levels, administration is the full responsibility of the states and their political subdivisions.

In FY 1982 an average 11.1 million persons per month, of whom 7.5 million were children, received AFDC benefits at a cost for the year of about $13.5 billion, $6 billion of which was paid by the states. Assistance levels were largely determined by the states. As a result, AFDC benefit levels varied widely. In 1980 the average monthly payment per person ranged from $29.83 to $162.61. The actual disparity of these amounts was narrowed by the availability of food stamp benefits for public assistance recipients. Food stamp benefits were inversely related to AFDC income.

A basic profile of AFDC mothers, from the 1979 study of AFDC by the Department of Health and Human Services, showed that more than half were over age 30, most had not graduated from high school, and fewer than one in six was employed while on assistance; fathers in the program were generally older than mothers, slightly better educated, and employed. The basic reason for family eligibility in the majority of cases was the absence of a parent–chiefly the father– because of divorce, separation or desertion, or because the parents were never married. (In 1980, families with unemployed fathers were eligible for AFDC in only 27 states.) Approximately 70 percent of the families in the study had two or fewer children receiving assistance.

Supplemental Security Income

The federal and state governments continue to provide cash assistance to needy adults who are aged, blind, or disabled through the Supplemental Security Income (SSI) program. A person who is 65 years of age or older, legally blind, or permanently or totally disabled, and who meets prescribed income and resource requirements, can receive a basic cash grant. In FY 1981, some four million persons received SSI payments, amounting to $8.3 billion in state and federal funds. The states’ share, composed of mandatory and optional supplements, was approximately 22 percent, or $1.8 billion.

Since 1974, the Social Security Administration manages the Supplemental Security Income program (Title XVI of the Social Security Act). Prior to that time, public assistance for the aged, blind and disabled was administered by the states as the adult counterpart to AFDC. The federalization of the adult welfare categories mandated by P.L. 92-603, was designed, among other things, to reduce the variations in benefit levels among the states by providing a uniform national minimum cash benefit, and to streamline administration of the programs by lodging it in the Social Security Administration which had for many years ably managed the social insurance programs. Though states were originally mandated to supplement the basic federal benefit up to the level of assistance they were providing in December 1973, and could provide optional supplements to higher levels, it was anticipated that state financial participation in SSI would decline over time as the federal benefit rose.

The Congress effectively froze some states into having to continue to supplemental SSI benefits. This was achieved in 1976 under provisions of P.L. 94-566 that mandated the “pass-along” of increased federal SSI benefits to recipients. This change prohibited states from offsetting federal benefit increases by reducing their optional supplementation. The law was enacted to assure that all SSI recipients actually received an increase in their total income when the basic federal grant is periodically adjusted for inflation

Conclusion

Through the years, public welfare programs have been subjected to many different pressures and criticisms. Essentially, the public welfare programs were for many years the only social safety net for millions of Americans who, for different reasons (e.g., age, disability, low income) were unable to maintain themselves or their children without government aid. Unlike government aid which is provided through Unemployment Insurance, Social Security, veterans pensions and the myriad subsidized programs and benefits for which , many Americans are eligible (e.g., subsidized private and public retirement programs, health insurance, tax credits and allowable deductions), public welfare is “means-tested.” To receive any “benefit” it must be proved that the applicant is truly poor. As a result, recipients of public welfare are often required to submit to conditions most people find personally repulsive and degrading.

For more information on the history of public welfare go to: the U.S. Social Security Administration: www.ssa.gov/history”
For additional historical or current information being administered at a state or local level, visit a state’s public welfare or human services website.

How to Cite this Article (APA Format): Hansan, J.E. (2011).  A brief overview of the state-federal relationship in public welfare programs, 1935-1996. Retrieved [date accessed] from /programs/public-welfare-state-federal-welfare-relationships/.