The Indiana welfare reform evaluation: Five-year impacts, implementation, costs and benefits

Nearly a decade has passed since Indiana began planning its approach to welfare reform. In January 1994 Governor Evan Bayh announced an initial plan, called the “Partnership for Personal Responsibility.” The U.S. Department of Health and Human Services approved a revised plan in December 1994 and, in May 1995, Indiana randomly assigned its entire welfare caseload (more than 60,000 families) to one of two groups for purposes of evaluation. The first was subject to the State’s new welfare reform rules and the other to its previous welfare policies. The goals of the program, as specified in 1995, were to increase clients’ employment and decrease their reliance on welfare, to make work more financially rewarding than public assistance, and to encourage responsible parenting.

Since 1995, Indiana’s welfare reform goals and approach have been consistent. Under Governor Frank O’Bannon, the Family and Social Services Administration (FSSA) made policy changes in 1997 and 2000 intended to strengthen welfare reform, but these changes were consistent with the program’s original goals and most of the original policies remain in place. Relatively minor changes were required as a result of enactment of welfare reform at the federal level, in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA).

Despite the consistency over time in goals and approach, both Indiana’s welfare caseload and the State’s economy have fluctuated substantially since 1995. Indiana’s welfare caseload dropped precipitously in the early phase of welfare reform and continued falling until mid-2000, when it began to increase sharply. The economy has gone from very low levels of unemployment in the early years of welfare reform to a current recession and State budget difficulties.

In the face of these changes, and given the time that has passed, it is important to assess Indiana’s approach to welfare reform. The key question is: How has Indiana’s welfare reform program affected participating families, and have those effects changed over time? Especially relevant given the current budget situation is a second, related question: Has the program been cost-effective?

The answer, provided in this report, is that the program has had real effects on participants, increasing employment and decreasing their use of welfare. The size of these effects is generally in the middle range of impacts found for welfare reform programs in other states. Indiana’s program also has been cost-effective, with the savings in welfare payments outweighing the costs of providing additional child care and employment services. The observed impacts, however, have not on average resulted in increased income for families. By that measure, therefore, the program has not made families substantially better off financially. (author abstract)

*managed by OPRE, funded by Indiana Family and Social Services Administration