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Financial Performance Incentives for United States Government Programs: WIA, TANF, and SNAP

Explore the operation of training programs under the Workforce Investment Act (WIA), Temporary Assistance for Needy Families (TANF), and Supplemental Nutrition Assistance Program (SNAP) in the US. The paper discusses performance bonuses, procedures, issues, lessons learned, and incentives for these programs.

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Financial Performance Incentives for United States Government Programs: WIA, TANF, and SNAP

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  1. Financial Performance Incentives for United States Government Programs: WIA, TANF, and SNAP

  2. The question: • What can the European Social Fund learn from the American experience with operation of training programs under the Workforce Investment Act? • This question has many facets • WIA attempts to increase effectiveness and efficiency through performance “bonuses” • This paper (in progress!) expands the perspective to include the TANF and SNAP High Performance Bonuses

  3. The Workforce Investment Act • Federal-state program, operated by the states through local “one-stop career centers” • Supported by formula-based grants to states • Beyond the formula allocations, “High Performance Bonuses” are paid states on the basis of measures of achievement • Bonuses are small and, over time, have gotten smaller

  4. WIA Procedures • Performance targets are set through negotiations between the (6) federal government regional offices and the states • Final targets depend on negotiation techniques and skills of regions and states • Performance targets cover many program outcomes • States have some control over measurement implementation

  5. Issues • Regional DOL office strategies, capabilities, and enthusiasm differ • States vary in analytical capabilities for response to regional targeting proposals. • Measures adopted offer numerous opportunities for “gaming” by states • Results have been uneven, regionally and by state • Connection of HPB accomplishment to actual achievement challenged by research

  6. Lessons (?) • Negotiation may be useful, but attention must be paid to leveling playing field • Should start with control for variation in characteristics of clients served, economic environment • Addressing problems of motivation essential Bottom line: No evidence of significant positive effects • Watch developments with reauthorization

  7. Temporary Assistance for Needy Families (TANF) High Performance Bonus • TANF famously replaced Aid to Families with Dependent Children beginning in 2007 • Enabling legislation called for “high performance” • Employment targets—job entry, job retention, earnings gain—have “face validity” • Goals multiplied over time, as did winners • Like WIA, stakes were small • Program died, unmourned, in 2005

  8. Procedures • Began with data available to states, but it was clear procedures were not uniform and states lacked access to some data • Introduced a new resource, the “National Directory of New Hires” • Ultimately major measures wholly computed at federal level, with substantial lag between reference “performance year” and award • Federal computation not always intelligible, reliable

  9. Issues • What to measure • How to measure • Control for context • Strategic response • Missing feedback

  10. Lessons (?) • Give thought to the objectives • Be cautious about statistical inference • Plan for improvement • Institutional development may be an important by-product of performance assessment effort

  11. Supplemental Nutrition Assistance (Food Stamp) Program (SNAP) • SNAP is a national negative income tax operated outside of the tax system. Does not purport to be adequate for minimum subsistence • Delivered by electronic benefits transfer (EBT) and collected when recipients purchase food • Arguably the nation’s most important means-tested benefit • Plays a significant role in economic stimulus

  12. Incentives • SNAP is operated by states • Benefits are wholly federally funded; administration costs are split between states and federal government • Incentive problems addressed by sample-based quality control system • States liable for cost of errors, but attempts made to reduce emphasis on penalty and shift to rewards • Result (2002) was --

  13. High Performance Bonus • Based on QC audit, other sources • Four bonus categories: • Payment accuracy • Negative error rate • Application processing timeliness • Program access • Only $48 million (total state administrative costs were about $3 billion in FY 2007) • Awards delivered by September of following year

  14. Issues • Assessing sample-based penalties • Program access measures • Change versus levels • Technical assistance • Net effect

  15. Lessons (?) • Link to ground-level operations • Audit the outcomes • Take care with statistics • Link to better practice But don’t get carried away: • Task is relatively simple: Deliver a well-defined benefit to a target population each month • Outcome immediate • Broad political support

  16. Conclusions • Take in the museums • Keep watch • Get back to the “Open Method” • Start on the ground • Reward process

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