Thinking Creatively About Welfare-to-Work Job Creation

Potential Funding Sources

The following is a list of potential funding sources for job creation programs for welfare recipients, focusing particularly on those that would be available for local governments. It does not focus on funding for training programs, but rather those that could be used to subsidize work-related projects. It is not an exhaustive list, but one which may help begin a conversation of how to package available resources for particular project ideas.

Department of Labor

Welfare -To-Work: The most obvious source of money to capitalize on is the $3 billion appropriated for the Welfare-to-Work (WtW) Grants Program which is designed for states and localities to prepare the hardest to serve welfare recipients for jobs and create jobs for them. Half of the money is for allocation in federal fiscal year 1998 (October 1, 1997 to September 30, 1998) and half for the following year. The money can be spent over three years.

Money is available in three ways:

  1. Formula Grants: Each state receives a share of grant funds under a formula based on poverty levels and the number of people on welfare. The state can keep 15% of its grant to fund projects of its choice. The other 85% passes through to local Private Industry Councils, known as Workforce Development Boards in some areas.
  2. Competitive Grants: The U.S. Department of Labor awards some of the WtW funds competitively to local communities for innovate programs. The first round of grant applications is due in mid-March, 1998 and the second round is expected in late spring/early summer of 1998.
  3. Performance bonuses: successful states will be recognized with performance bonuses.

Each state must provide a one-third match, putting up one non-federal dollar for every two dollars available from the WtW formula grant. Up to half of the non-federal share can be in-kind contributions. The state is to pass funds on to the local Private Industry Councils to administer the grants and decide how the funds will be spent. It must coordinate with local elected officials and the local welfare agency. The governor does have an option to award WtW funds to an agency other than the PIC, but that requires specific approval by the U.S. Department of Labor.

WtW Grants can be spent for a number of services and activities to help hard-to-employ welfare recipients enter the labor market:

  • Job Creation, through wage subsidies in the public or private sector
  • On the job training
  • Contracts with providers of job-readiness, job-placement, and post-employment services
  • Job vouchers for placement, readiness and post-employment services
  • Community service or work experience
  • Job retention and supportive services (if not available elsewhere)

The "work first" philosophy of WtW means that stand-alone training isn’t an option, but training can be offered after placement in a subsidized or unsubsidized job.

At least 70% of the WtW grant must be used to serve long-term welfare recipients and those who will lose their welfare benefits within a year, who meet additional needs criteria. The remaining 30% is targeted to more recent welfare recipients who have characteristics likely to lead them to long-term dependency. The non-custodial parents of children in these welfare families are also eligible for services under these grants. Welfare recipients who have reached their five-year time limit can receive WtW services. Time spent in this program does not count toward the TANF time limit, with one exception: when cash assistance is provided directly or through wage subsidies, each month does count toward the recipient’s maximum five-year time limit on TANF.

Job Training Partnership Act (JTPA) Pilot and Demonstration Programs. Unlike JTPA formula funds, these 100% project grants may be awarded directly to local governmental entities "for the purpose of developing and improving techniques and demonstrating the effectiveness of specialized methods in addressing employment and training needs." Fundable programs include "approaches that foster participation of groups that encounter special problems in the labor market (such as . . . welfare recipients . . .)" Arguably, using funds to subsidize wages in a local government job creation program fits under this clause. Source: 29 U.S.C. 1732.

Department of Housing and Urban Development

Community Development Block Grants. These grants, which are provided to States and certain larger cities and counties, are used for a wide range of community development activities directed toward neighborhood revitalization, economic development and improved community facilities and services. For our purposes, specific activities which may be funded with CDBG dollars include (1) reconstruction and rehabilitation of residential and non-residential properties; (2) code enforcement in deteriorated or deteriorating areas in order to arrest further decline; and (3) provision of public services, e.g. those concerned with employment, child care, etc., provided such services have not been provided by the local government in the past 12 months. Thus, CDBG funds could be used by local governments to train and employ welfare recipients in rehabilitation, code enforcement and child care, among other creative ideas. Source: 42 U.S.C. 5301 et seq.; 24 CFR Part 570.

Specifically, the Section 108 program provides loan guarantees to local governments for economic development under which cities can leverage five times their annual CDBG allocation. This program was used in Wichita, Kansas to expand a Cessna manufacturing facility with an integral job training and placement component for welfare recipients which was actively supported by the International Association of Machinists.

Economic Development Initiative. $138 million was appropriated for this HUD initiative, designed to fund job creation projects with a special emphasis on employment opportunities in the wake of welfare reform. $100 million of this has been earmarked for special projects identified by members of Congress; $38 million remains for competitive grants to local governments. HUD has yet to announce the process for these grants. Source: HUD appropriations bill; Clinton’s FY98 Budget, pp. 539, 543.

Youth Build Program. This program is intended to provide economically disadvantaged young adults (ages 16-24), with a special emphasis on women, with opportunities to obtain education, employment skills and meaningful on-site work experience, and to expand the supply of affordable housing for homeless and low-income persons. Local housing development agencies, local governments and any other entities eligible to provide education and training under other Federal employment training programs, are eligible for YouthBuild competitive grants. The timing of the grant process has yet to be determined by HUD. Eligible activities explicitly include wage stipends and benefits for participants; acquisition, rehabilitation and/or construction of housing; and education and job training services and activities. $35 million was appropriated for FY 1998. Source: 42 U.S.C. 12899 et seq.

HOME Investment Partnership Program. This program provides formula grants under the Cranston-Gonzales National Affordable Housing Act to states and large local governments to increase the supply of housing for low-income persons. Eligible activities include demolition, rehabilitation and new construction and site improvements. $1.5 billion was appropriated for FY98. Source: 42 U.S.C. 12701 et seq.

HOPE VI. This program has provided $2 billion over the last five years in funding for the demolition and revitalization of 68 of the worst public housing developments. The funds are allocated by competitive grant to PHA’s which have not yet been awarded for FY 1998. $550 million was appropriated for FY 1998. Source: HUD appropriations bill; Clinton’s FY98 Budget, p. 534.

Brownfields: HUD was appropriated $25 million for Brownfields clean-up and redevelopment which could conceivably be used to provide jobs for welfare recipients at clean-up sites. Funds will be available to state and local governments through a competitive grant process yet to be announced.

Empowerment Zones and Enterprise Communities. Designated Empowerment Zones (EZs) receive approximately $100 - $130 million over a period of up to ten years to be used, broadly speaking, for community and economic development services and activities. Economic Communities (ECs) receive roughly $3 million apiece. Enhanced ECs receive more. Congress authorized HUD to designate 15 new urban and 5 new rural EZs in 1998, which will largely be tax credits only. Source: Sections 13301-03 of the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66).

Bridges to Work. While not directly related to job creation, this HUD demonstration project funds innovative ways to get unemployed inner-city residents to jobs in the suburbs, where the fastest growth in jobs is occurring. HUD has already funded a five site demonstration in Chicago, Denver, St. Louis, Baltimore and Milwaukee. $17 million is available for four years for such support services as transportation and is derived from HUD appropriations and private foundations.

Department of the Treasury

Local Partnership Act. This Act provides funds to local governments for job, education and substance abuse treatment programs to prevent crime. While the specifically enumerated activities identified in the statute which may be funded do not encompass wage subsidies for city job programs, there is a catch-all provision which, with permission from the Secretary of the Treasury, permits funds to be used "for any other activity" consistent with the overarching purpose of funding job, education and treatment programs to prevent crime. See 31 U.S.C. 6703(c). Funding for programs under this Act is unclear, since no reference to the Local Partnership Act is made in the FY98 appropriations bill for the Department of the Treasury. Source: 31 U.S.C. 6701 et seq.

Environmental Protection Agency

Brownfields National Partnership. A collaboration of 15 federal agencies, the Brownfields Action Agenda has marshaled funds to clean up and redevelop 5,000 properties, leveraging between $5 and $28 billion in private investment and creating and supporting 196,000 jobs. Proposed funding includes $125 million EPA funding for assessment, clean-up and job training; $100 million in HUD economic development funding and $400 million in loan guarantees over 4 years. The FY98 HUD appropriations bill allocates $25 million for the Brownfields initiative (see above.)

Climate Change Action Plan: Recycling Solid Waste. Through this program EPA provides grants ranging from $50,000 to $200,000 to reduce and recycle more solid waste as one means of reducing greenhouse gas emissions and mitigating climate change. Local governments, states and non-profits are eligible to apply. The deadline for submitting proposals for 1998 was December 15, 1997, so the deadline for 1999 is likely to be sometime in December 1998 (assuming the program gets continued funding). Source: Guidance on 1998 Solid Waste Funding dated 11/5/97.

Jobs Through Recycling: This EPA program provides competitive grants of up to $200,000 to states and territories to foster recycling/reuse businesses. A minimum 25% non-federal match is required. Source: EPA Bulletin 530-K-95-009; Guidance on 1998 Solid Waste Funding dated 11/5/97.

Department of Justice

Weed and Seed Program. Local governments are eligible to apply for these competitive project grants to develop a comprehensive, multi-disciplinary approach to combating drugs and crime in high-crime neighborhoods. Project examples include job development and apprentice programs. DOJ received $33.5 million for Weed and Seed in its FY98 appropriations. Source: Government Assistance Almanac, 16.595.

Department of Commerce

Special Economic and Adjustment Assistance Program. Local governments representing a "redevelopment area" can apply for a grant under this program for public works and public service projects which primarily will benefit the long-term unemployed and members of low income families. The grants generally require a 50% match (although this may be reduced in some circumstances) and are intended to assist states and local areas in addressing structural economic adjustment problems resulting from long-term economic deterioration, sudden and severe economic dislocation and natural disasters. Source: 42 U.S.C. 3131 et seq.

Public Works Impact Program. According to the Government Assistance Almanac for 1997-98, this grant program provides county and city agencies representing recognized "redevelopment areas" with funds to construct or renovate public works and development facilities to provide immediate jobs to the unemployed or underemployed. Grants require a 50% local match, except severely distressed areas which may require as little as 20% match, and range from $480,000 to $1.8 million. Note: It is not clear whether these grants can fund public works projects performed by government employees. The only public works employment operated by the Commerce Department which was listed in the U.S. Code does not permit governmental recipients to perform the work directly -- private contractors must be awarded the contracts through competitive bidding. 42 U.S.C. 6701 et seq. This public works program, however, appears to be different than that described in the Government Assistance Almanac. $340 million was appropriated to the Department of Commerce for activities under the Public Works and Economic Development Act of 1965, which encompasses much more than the Public Works Impact Program. Source: Government Assistance Almanac, 11.304.

Department of Transportation

National Recreational Trails Funding Program. This program provides formula grants to designated state agencies, which in turn award grants for projects to provide and maintain recreational trails through a competitive bidding process. City, county and other governmental entities are eligible to apply to the state agency. Funds can be used to develop urban trail linkages near homes and workplaces; to maintain, develop and restore trails; etc. $7.5 million was appropriated for this program for FY 1998. Source: National Recreational Trails Funding Program, U.S. Department of Transportation.

Health and Human Services

Job Opportunities for Low Income Individuals (JOLI). Applicants for these competitive grants, which are administered by HHS’s Administration for Children and Families, must be nonprofit 501(c)(3)’s or (4)’s. Grants can be used to promote the self-sufficiency of TANF and other low-income families through research, demonstration and evaluation projects designed to create jobs, self-employment, micro-enterprises and business employment opportunities. $5.5 million has been appropriated for 1998 to provide 10 to 15 grants of up to $500,000. HHS expects to send out announcements of the grants in February, and most grants span a period of 3 years. Source: Division of Community Demonstration Programs, Office of Community Services, Department of Health and Human Services.

Health Careers Opportunity Program. Through this program, HHS’s Health Resources and Services Administration (HRSA) provides project grants to public and private nonprofit health and educational entities to assist individuals from disadvantaged backgrounds to enter the health or allied health professions. $5 million was appropriated for HCOP grants, which range from roughly $50,000 to $600,000 this year. Because grant applications were due at the end of January, HCOP does not provide a source of funding for this year, but HRSA expects the program to receive approximately the same level of funding in future years. Source: HRSA.

Federal Reimbursement for Nurses Aides’ Training. Medicaid and Medicare each provide some reimbursement for the costs of providing state-approved nurses aides’ training and competency evaluation programs. Nursing facilities must allocate their training and competency evaluation program costs between Medicaid, Medicare and private-pay patients. The federal government will pay (1) 50% of the costs attributable to Medicaid patients and (2) the "reasonable costs" attributed to Medicare patients. Training programs which are not offered by a nursing facility cannot access these federal dollars directly, but would have to contract with a nursing facility to provide the requisite training. (Alternatively, individuals who pay for their own training and evaluations can be reimbursed through their employer, so long as they begin work or receive an offer of employment within 12 months of completing their training. Non-facility based training programs could loan money to individual trainees, who would then repay their loans once they receive the federal reimbursement.) Source: Section 2514 of the State Medicaid Manual, published by the Health Care Financing Administration.

Print Version