Current federal policy does not provide long-term incentives for AFDC recipients to seek and hold employment. Currently, working recipients are allowed to keep:

• $90 per month to cover work-related expenses such as taxes, and FICA, plus
• $30 per month as a work incentive for the first 12 months, plus
• One-third of the remaining earnings as a work incentive for the first four months.

After allowing for child-care expenses, if needed and within certain limitations, any remaining money reduces the monthly AFDC benefit dollar-for-dollar. The result is that only a small monetary incentive to hold a job exists after the first four months of employment.

Under the current system, there is much misunderstanding among recipients about the effects of employment on their AFDC grant.

To simplify this process, we will adopt a work-incentive structure which disregards a larger amount of gross income to cover work-related expenses, and also disregard a percentage of the remaining earned income as a permanent incentive to seek and hold employment. This proposal would allow recipients to budget family finances based on an accurate prediction of their monthly income from AFDC and employment until they no longer require assistance.

The State Legislature has directed the department to implement at least one pilot project to test the effects of allowing AFDC recipients to keep additional earned income beyond what is allowed by federal regulations.