The Context

State budgets are in the worst shape they've been in since World War II. The main cause is loss of revenue due to the economic downturn and tax cuts pushed by many governors in the 1990s and in 2001 by President Bush. But these tax cuts pale in comparison with the $2.7 trillion in federal tax cuts now on the table in Congress. Federal money that pays for countless programs administered by state and local governments will simply disappear with tax cuts of this magnitude. Moreover, declining revenues are often used as an excuse to privatize services and convert programs into vulnerable block grants. Social service and workforce programs will be particularly hit hard by tax cuts and program changes on the agenda this year in Congress.

Key Federal Programs:

* Temporary Assistance for Needy Families (TANF): In February, the House of Representatives passed legislation (H.R. 4) continuing TANF block grant funding to states for five years. H.R. 4 freezes federal allotments for TANF and child care at 1996 levels. At the same time, it substantially increases work requirements, which forces states to adopt large-scale programs for welfare recipients to "work off" their grants. Welfare recipients would be assigned to work in public agencies that are laying off workers in response to the fiscal crisis. And the House bill would allow states to "waive" federal program requirements for numerous programs, including public administration.

* New Work Requirements Will Raid State Budgets: With the states facing their worst fiscal crises in decades, the new work requirements in H.R. 4 would force states to spend an additional $11 billion over the next five years as projected by the Congressional Budget Office. These costs include states redirecting substantial amounts of TANF resources into creating and supervising hundreds of thousands of work slots.

* Workforce Programs: Posing a direct threat to the jobs of several thousand AFSCME members, the Administration is proposing to eliminate the 60-year-old Employment Service (ES), which provides assistance in matching job seekers with employers and other services. The Bush plan would combine ES with funding streams for Workforce Investment Act (WIA) adult and dislocated worker programs into a single block grant. The block grant would allow the labor exchange function to be privatized. And, the block grant would be funded at a level $122 million below the amount needed to maintain the 2002 purchasing power of the three separate programs.

* Unemployed Workers: The President has proposed "personal re-employment accounts" (PRAs) of up to $3,000 for some unemployed workers. The accounts could be used for training, child care, transportation and income support. Few workers, however, would receive the full $3,000. In fact, this new voucher system threatens the current unemployment program because it will be used to replace additional extensions of unemployment benefits for long-term unemployed workers. And, it threatens the WIA system's federally supported infrastructure for job training and will lead to federal subsidies for private temp agencies, placement firms, and faith-based groups. It has been introduced in Congress as H.R. 444, the "Back to Work Incentive Act."

* Head Start: President Bush is proposing to convert the highly successful Head Start program into a block grant to the states, and to move it from the U.S. Department of Health and Human Services to the Department of Education. Separate funds will no longer be available for quality initiatives and cost of living adjustments. And, the Administration is proposing to abandon Head Start's comprehensive approach to supporting children and families, which includes early education, health care, social services, and nutrition assistance. AFSCME's Head Start members could experience threats to their jobs if these radical changes in the Head Start program are implemented.

* Food Stamps: Continuing threats exist to public administration of the food stamp program. Food stamps is among the programs included in H.R. 4's superwaiver provision, which would allow states to privatize eligibility determinations. Several states have already attempted to do this under the current waiver system, and the Bush Administration has already approved a privatization pilot project in Florida. And, pending legislation (S. 5) would allow states to contract out Food Stamp eligibility determinations.

* Child Welfare: An Administration proposal is emerging that would give states the option to convert their open-ended entitlement to federal foster care payments into "flexibility block grants." Under a block grant, no additional federal money would be available if foster care caseloads increased.

AFSCME's Message:

* Defeat unrealistic and expensive TANF work requirements that will financially burden states

* Oppose H.R. 444, (the "Back to Work Incentive Act"), a sham unemployment and reemployment program

* Pass immediate state fiscal relief

* Oppose block grants and privatization

* Stop tax cuts for the wealthy

AM. FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES                Department of Legislation    March 2003