Chairman Reed and members of the subcommittee, I am Michael O’Keefe, Commissioner of the Minnesota Department of Human Services. We oversee programs that address the health and welfare needs of Minnesotans, including the Temporary Assistance for Needy Families (TANF) program. I also chair the Self-Sufficiency Cabinet Task Force for Governor Ventura; this is the primary vehicle the administration has used to develop strategies and policies aimed at helping low-income Minnesotans become self-sufficient, looking at job training, tax credits, child care and affordable housing, as well as welfare.
My remarks today will be focused on how we in Minnesota see the relationship between welfare reform and housing, and the success we have had in working on these two issues together.
Minnesota is a national model for welfare reform because we have used the
flexibility in TANF to build a comprehensive set of supports that help
working families escape poverty
Minnesota has one of the most successful welfare reform efforts in the country. Our program, the Minnesota Family Investment Program (MFIP), is aimed not just at moving families off welfare, but moving them out of poverty. The evaluation of our welfare pilot program drew national attention for improvements in earnings, income, poverty, and child and family well-being. The federal government has twice cited Minnesota as a leader among the states in job retention and advancement.
We have carefully evaluated our efforts and tracked how families are faring under welfare reform in Minnesota. We measure our success not by case loads going down -- which they have -- but by people going to work and becoming self-sufficient. Some evidence of our success:
Our success is the result of well over a decade of planning, researching and hard work by some very visionary and dedicated people in Minnesota. But our vision of welfare reform may have never come to fruition without the flexibility provided in the federal welfare reform legislation in 1996. That law allowed us to take the program we had been piloting and expand it statewide, to put in place our idea of how to reform welfare in Minnesota.
Minnesota has used this flexibility to pursue our goal of moving families into work and out of poverty. We do this by working individually with each family to get them prepared for work, by focusing on moving people into jobs that will pay them a decent wage, and by providing a comprehensive set of supports for working families. We are particularly proud of the supports for working families we have put in place using the flexible TANF funds, including:
Most germane to the topic of today’s hearing, we have used the flexibility provided under TANF to invest in housing strategies to help families making the transition from welfare to work.
Housing is a critically important need for families making the transition from welfare to work
I chair a cabinet-level Task Force on Self-Sufficiency for Gov. Ventura, representing his strong commitment to helping all Minnesotans become self-sufficient. The purpose of this group is to ensure that we focus broadly on self-sufficiency for families, not narrowly on specific programs or services, and that we work across agencies and programs in considering all the many ways that government impacts low-income families.
When we started our work in 1999, we decided to get out and talk to people in the field – the front-line workers who work directly with participants – to learn from them the issues and problems we should address. We found that lack of affordable housing was an issue brought up over and over again. Job counselors, staff in community agencies, wherever I’d go and whoever I’d listen to, would talk about how housing problems were impacting the families they were working with. Homeless families who could not look for work because they were in a full-time search for an apartment they could afford. Families who moved frequently or were doubled up with others. Parents who had gone to work but could not make ends meet because the cost of a decent apartment had skyrocketed. Suburban areas and communities in greater Minnesota that had good jobs available but no place to house the needed workers.
We surveyed families on welfare and asked about their housing situations. We found that many pay more than they can afford, move frequently, and some are concerned about the quality of their housing. Specifically:
Subsidized housing can be a solution to these problems, but subsidies are in short supply. Only 40% of single parent families on welfare in Minnesota have a housing subsidy, and only about a quarter of those who have left assistance have a subsidy. This is unfortunate, because we also learned from the evaluation of the MFIP pilot that families living in subsidized housing had much stronger employment and earnings outcomes than families that lived in unsubsidized housing. This is an important finding because housing subsidy programs are generally considered to have disincentives to work built in to them: when you go to work your rent goes up. The evaluation results suggest some interaction of the economic incentives in MFIP and the housing programs – perhaps the MFIP work incentives offsetting the disincentive to work in housing programs -- created the right incentive for these families. Perhaps more important, the researchers found that the families in subsidized housing moved less often, i.e., were more stable in their housing. This stability – the confidence that they have a place to live that they can afford – may go along way toward building the confidence needed to succeed in the work place.
Minnesota has used the flexibility in TANF
to address the affordable housing crisis
We concluded, looking across the broad range of needs for low-income families, that housing was one of the most critical unmet needs. It also presented some of the biggest challenges for us in how to address the problem. First, housing has historically been the purview of the federal government. Over the last twenty years, the federal government’s investment in the production of new housing is significantly less compared to 30 years ago. The historical federal role leaves some state policy-makers unwilling to take on the potentially costly solutions to this problem. Second, this is a multi-faceted problem requiring multiple solutions. While more subsidies would certainly help, it doesn’t solve every problem. Supply of low and moderate income housing is also a problem that needs a direct response, and homeless families and those families with multiple and complex barriers to employment also require more creative interventions.
Given our high priority on housing and our belief that the problem requires multiple solutions, we have used TANF funds for several key investments:
In addition to these special investments, Minnesota makes emergency assistance available to low-income families once in twelve months to help with housing related crises. We spend nearly $20 million a year on emergency assistance. Payments are made to help families avoid evictions, pay first and last months rent, avoid utility shut-offs, make critical repairs, etc., for over 14,000 families a year.
Minnesota needs more - not less - flexibility in TANF
and more production of rental housing for families with children
The evidence is that Minnesota’s welfare reform has been very successful. We want to keep it that way and make it even more successful. Minnesota’s strategy with respect with housing and family self-sufficiency is consistent with the growing body of evidence that a family’s success in moving out of poverty and sustaining employment may depend on stable, affordable housing. Building on our success in Minnesota requires help from the federal government in two areas: TANF reauthorization and housing programs.
For TANF reauthorization, my basic message is simple: Maintain and expand the state flexibility provided in the 1996 federal law. This flexibility has been the key element of the success of welfare reform. The flexibility to use TANF funding for supports for low-income working families has resulted in a revolution in our national policy for low-income families. As I have said, it has helped Minnesota in our effort to create a comprehensive set of supports for working families, and particularly important in our efforts to address the affordable housing gap and how it impacts families making the transition to work.
There are three specific areas of TANF flexibility that relate to our work on housing issues:
Because of inflexible rules around "assistance" and the prohibition on housing development, Minnesota has had to indirectly fund some of its housing initiatives using TANF to supplant state funding in other areas. When we began to consider how to invest our TANF reserve, the Ventura Administration established a principle that we would supplant when the state funds were going to be redirected to additional services or supports for the TANF target population – low-income families.
If our recommendations above were taken we would not need to supplant to fund our housing initiatives. If that kind of flexibility is not granted, we would be concerned about proposals to restrict supplantation that did not take into account the differing ways states have used supplantation. I certainly understand and support those in Congress who have criticized states that have used TANF to fund areas unrelated to the purpose of TANF. However, I hope that in the effort to stop this kind of misuse of funds, you will consider leaving enough flexibility for states like Minnesota to continue to address critical housing needs using TANF funds.
As for federal housing policy, there is renewed attention in Congress to the problems of housing families with very low and extremely low incomes. A number of bills have been introduced which, using different approaches, create a new rental production program for the lowest income households.
In the face of a worsening housing problem in the 1990s, the State of Minnesota significantly increased its investment in affordable housing production and homeless prevention and assistance efforts. Congress too took a critical step to respond to the crisis when it increased the caps on housing bonds and credits in 2000.
However the most difficult developments to fund are the ones serving the lowest income families and individuals, whether they are supportive housing projects, mixed income developments, or family tax credit projects. The scarcest and most critical resources are the subsidy funding needed to write down rents to affordable levels and the operating subsidy needed to serve households with incomes under $15,000. A new federal rental production program for extremely low income families is the single most important housing initiative Congress could take to support families moving from welfare to work.
Thank you, Mr. Chairman and members, for the opportunity to bring Minnesota’s views to this important topic today.
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