Chart Book: TANF at 15

August 29, 2011 Related

Policy Basics: An Introduction to TANF

Related Areas of Research

Welfare Reform/TANF o Federal Policies o State Policies o Trends

In a four-part series from LaDonna Pavetti, we highlighted the 15th anniversary of Temporary Assistance to Needy Families (TANF) which was created under the 1996 welfare reform law by examining what it was accomplishing, where it was falling short, and how policymakers could strengthen it. Heres a chart book based on the series.

How Well Does TANF Provide Income Support for Poor Families?
TANFs early years witnessed unprecedented declines in the number of families receiving cash assistance and unprecedented increases in the share of single mothers working, especially those with less than a high school education. But since then, nearly all of the employment gains have disappeared, and TANF caseloads have responded only modestly to increased need during this deep and long downturn. As the following charts make clear, TANF remains an important source of income support for a small, but vulnerable group of families. However, because relatively few families receive TANF and benefits are very low, TANF plays a much more limited role in helping families escape poverty or deep poverty (i.e., income below half the poverty line) today than AFDC did.

TANFs role in providing income support to poor families has declined dramatically.

Over the last 15 years, the national TANF caseload has declined by 60 percent, even as poverty and deep poverty have worsened. While the poverty rate among families declined in the early years of welfare reform, when the economy was booming and unemployment was extremely low, it started increasing in 2000 and now exceeds its 1996 level.

These opposing trends TANF caseloads going down while poverty is going up mean that a much smaller share of poor families receive cash assistance from TANF than they did prior to welfare reform.

TANF cash benefits have not kept pace with inflation and are below half the poverty line in all states.

Not only are fewer needy families receiving TANF cash benefits, but benefit levels for those who are on TANF are extremely modest. In the median state in 2010, a family of three received $429 per month; in 14 states, such a family received less than $300.

In all but three states, the real (inflation-adjusted) value of TANF cash benefits has declined since welfare reforms enactment.

How Have States Spent Their TANF Dollars?

Under the 1996 welfare law, which replaced AFDC with the TANF block grant, states receive fixed federal funding each year in exchange for greater flexibility in using that funding. Unlike AFDC, therefore, federal TANF funding does not decrease in good economic times when cash assistance caseloads fall or rise in hard economic times when cash assistance caseloads increase. Here is a brief look at TANF funding over time and how states have spent their TANF dollars

The TANF block grants value has declined by almost 30 percent over the last 15 years.
Because the $16.6 billion annual federal TANF block grant was never adjusted for inflation, it has lost significant value over time. States receive 28 percent less in real (inflation-adjusted) dollars than they did in 1997, a year when the unemployment rate averaged just 4.9 percent. State minimum required contributions to TANF have declined even more. To receive their full TANF block grant, states only have to spend on TANF purposes 80 percent of the amount they spent on AFDC and related programs in 1995, and that maintenance of effort requirement isnt adjusted for inflation, either.

TANF spending on cash assistance has declined dramatically.

As TANF cash assistance caseloads have dropped, so has the amount of TANF spending used for this purpose. Federal and state TANF spending on basic assistance declined from $13.9 billion in 1997 to $9.3 billion in 2009, the most recent year available.

States have shifted their TANF funds to pay for a broad range of services, including some that Congress did not envision when it created the block grant.

The declines in the TANF caseload, combined with broad state flexibility in the use of federal and state TANF funds, freed up substantial resources that states have used to fund other services. In 2009, states used just 28 percent of TANF funds to provide basic assistance, compared to 71 percent in 1997. In TANFs early years, states used some of the freed-up funds for services directly related to welfare reform, such as increased child care assistance for recipients participating in work activities and low-income working families. As more funds were freed up, however, states increasingly used TANF funds to cover the costs of services that the TANF statute allows but that Congress did not anticipate, such as child welfare services.

What Is TANFs Record of Success?

In the early years of welfare reform, the combination of a strong labor market and state policies such as work mandates and work supports (like child care assistance) significantly increased employment among participants in TANF. At the same time, however, many families left the welfare rolls without gaining employment, leading to a substantial increase in the number of families disconnected from both welfare and work.

Over the years, TANF has become less effective both in assisting working families affected by economic downturns and in helping very-low-income families in crisis. The result is a weakening safety net that is falling short of its promise to help families become self-sufficient and to protect families with children who are unable to work, often because of health problems.

Employment among single mothers increased substantially during the early years of welfare reform, but many of those early gains have been lost.

The data suggest that a strong labor market is central to the success of a work-based assistance system. In the early years of welfare reform, employment rates increased significantly among single mothers, including those with the lowest levels of education. However, as the economy has weakened, a substantial portion of the early gains have been lost.

TANF caseloads, unlike AFDC caseloads, havent responded to changes in the number of jobless single mothers.

In most years, the AFDC caseload rose and fell to reflect changes in the number of jobless single mothers. Beginning in 2002, however, the two trends diverged: the number of jobless single mothers started ri sing, whiles the number of families receiving TANF kept falling. While TANF caseloads have increased modestly more recently, the gap between the number of jobless single mothers and the number of families receiving assistance remains very wide.

TANF does far less to help families escape deep poverty than AFDC did.

TANF benefits are too low to bring many families out of poverty, but they can help reduce the depth of poverty. Unfortunately, TANF has proven far less effective at lifting families out of deep poverty that is, incomes below half the poverty line than AFDC did, mostly because fewer families receive TANF benefits than received AFDC benefits. (The erosion in the value of TANF benefits also contributed.)

Looking Ahead
In renewing TANF, Congress should strengthen it both as a work program and as a safety net for unemployed parents and their children. Congress could help to achieve these goals by making changes that include:

Redesigning and adequately funding the TANF Contingency Fund. Congress created the fund along with the TANF block grant to give states extra resources during economic downturns, since the block grant itself doesnt respond to changes in need. But the fund was poorly targeted and has provided limited help to states during the current downturn. Congress can significantly improve the fund by: (1) making it easier for states with high unemployment to qualify for money from the fund; (2) requiring states to use the fund for activities that respond directly to a weak economy such as subsidized employment rather than to simply help cover their ongoing costs; and (3) providing adequate funding. Redefining how TANF measures state performance. Under TANF, each state must have a certain share of its caseload participating in work activities or face fiscal penalties. The easiest way to meet this target (known as the Work Participation Rate) is to serve fewer families over time and to avoid serving families with significant employment barriers, even though they have the most to gain from employment assistance. Congress should give states the option to develop alternative measures of success that more adequately reflect TANFs goals, such as participants employment rates and earnings. States that serve a greater share of families in need should be rewarded, not penalized, for providing a strong safety net to families who have nowhere else to turn for basic support. Redefining TANFs work requirements to better reflect the diversity of the TANF caseload. Under current rules, only a very narrowly defined set of activities count toward the Work Participation Rate, and these are not a good match for the needs of the current caseload. Simplifying the work requirements and expanding the types and duration of activities that can count toward the work rate would encourage states to serve more needy individuals, especially those whose employment prospects are the most limited.

Congress should not only strengthen TANF, but do so promptly. The last time TANF came up for renewal, in 2001, it took Congress more than four years to pass comprehensive reauthorization legislation a delay that set back state program innovations permanently. We should not allow the same thing to happen again.