American Public Human Services Association

Crossroads: Temporary Assistance for Needy Families

Current Program

The enactment of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, P.L. 104-193 (PRWORA), also known as welfare reform legislation, marked the end of the federal entitlement to cash and child care assistance and ushered in a new era of work and personal and parental responsibility. The law repealed the former Aid to Families with Dependent Children (AFDC) entitlement and replaced it with the Temporary Assistance for Needy Families (TANF) block grant to states to provide time-limited assistance, to employ strict work requirements, and to address a range of family formation goals. Under the law, states were guaranteed a fixed grant amount of funding from the federal government for six years, and in return were required to maintain state spending or face penalties. States were afforded flexibility to design TANF programs that met their individual goals and respected the diversity of each state and its citizenry.

It is critical to note that prior to the enactment of welfare reform in 1996, AFDC caseloads were soaring and families were trapped in a pattern of dependency that few believed could be reversed. Despite poor family outcomes, for decades rigid federal program rules prevented state administrators from implementing innovative approaches to help families in need. In an attempt to break free from federal program restrictions, by the mid-1990s, 48 states were operating their AFDC programs under federal waiver demonstrations. Work was the hallmark of early state welfare reform experiments, and by 1996 it became clear that states were in a better position than the federal government to achieve success in this area.

Under AFDC, states could give families little more than a check to help them provide for their children. Families faced a financial cliff if they moved from welfare to work due to federal eligibility rules that restricted the amount of assets and income a family could accumulate and still receive benefits. In effect, the federal rules discouraged work.

In four short years, states have achieved unprecedented success implementing welfare reform, providing compelling evidence that the devolution of authority to states was indisputably the correct course of action. Moreover, early predictions that the welfare reform law would result in increases in child welfare cases, homelessness, and hunger have not been substantiated. The Administration for Children and Families documented these achievements in its TANF Third Annual Report to Congress, issued in August 2000. The percentage of working welfare clients reached an all-time high in 1999 and their average monthly earnings and hours of work continued to rise. The percentage of Americans living in poverty continued to decline and child poverty recorded its biggest five-year drop in 30 years. The percentage of the population on welfare fell to its lowest point since 1965, child support collections increased dramatically, and states continued to provide critical TANF-funded supports to millions of families who exited welfare for the workplace. Teenage pregnancy rates have steadily declined during this period and some states have begun to achieve progress in an effort to reduce the number of out-of- wedlock births. In short, more success has been accomplished by states in the past few years under TANF than in any three-year period of robust economic expansion under the former AFDC program.

Under the TANF block grant, however, the flexibility afforded to states enabled them to design programs and services to support families not only with cash, but with a host of other services as well. TANF cash assistance caseloads have declined by more than 50 percent; however, the number of families receiving supportive work services continues to expand. In many states, families with incomes well above the poverty level are eligible to receive a range of services, such as employment and training, child care, transportation, education, and family and parental training. The majority of states also offer diversion programs that provide short-term assistance to families in need. States have also expanded their earnings “disregard” policies, which means that families can keep more TANF benefits even if they have more earned income, removing one of the many disincentives to work in the former AFDC program. More than 40 states have policies allowing families to keep more earned income while on assistance in order to support their transition to a life of self-sufficiency. A number of states have created Individual Development Accounts (IDAs) that allow families to set aside funds for an education or the purchase of a first home.

Welfare to work is now the pathway to independence, and through unique state program designs more low-skilled women with children are working today than at any time in our nation’s history. And remarkably, last year the number of single mothers at work exceeded the number of married mothers with employment.

Challenges

The federal authorization to fund the TANF block grant ends in 2002 and the debate on the next chapter in welfare reform begins anew. The continued successes of welfare reform in the states are contingent upon three key factors: (1) maintaining the flexibility of the TANF block grant; (2) main-taining a consistent level of federal and state support for the block grant over the next six-year period and; (3) simplifying and aligning related programs.

Congress and the administration must acknowledge that while much success has been achieved, many challenges remain. Cash assistance caseloads have declined, but the number of families served with TANF funds and the need for transitional work supports have not. In order for early success in the workplace for TANF families to evolve into extended periods of job retention and earnings progression, continued investments are needed. In future years, a sustained commitment of on-going TANF work supports, such as transportation and education and training, may be required. And for those families who have not made the transition from welfare to work—those with multiple barriers to overcome— intensive services and supports will be costly. The TANF caseload is dynamic and diverse; state flexibility is essential to allow program designs to respond to changing needs and to craft innovative approaches.

While work is the centerpiece of welfare reform, it is important to note that the TANF program responsibilities have expanded far beyond cash assistance and work. Throughout the states, programs serve families—to provide support to fragile families struggling to support their children; to promote family well-being; to provide child care services and early childhood development; to improve parenting skills and to support and preserve families; to extend employment and training opportunities to noncustodial parents; to support two-parent families; to prevent teen pregnancy; to prevent the incidence of out-of-wedlock births; and to prevent intergenera-tional dependence on government assistance. These support services and investments in prevention and early intervention are critical to ensuring the continued success of welfare reform.

In addition, the implementation of the welfare reform law has brought to light policy conflicts with the federal entitlement programs—Medicaid, food stamps, and child support enforcement. The work-centered, time-limited message of the TANF program is in conflict with the “entitlement” message delivered to clients in other programs. The trend in declining Medicaid caseloads, registered during the initial TANF implementation period, has been reversed in recent years. Meanwhile, the complex interaction between TANF and food stamp rules continues to challenge both clients and administrators. Given the complexities of financing child support enforcement, paradoxically, the more success states achieve in moving families from welfare to work, the fewer resources are available to states to operate child support programs. Proposals to reform these aforementioned entitlement programs are detailed in the relevant chapters of this report.

Recommendations

Proposal

Maintain Current Federal Funding Level of the TANF Block Grant

APHSA opposes any effort by Congress or the administration to reduce the funding for the TANF block grant. To continue the success achieved during the initial years of welfare reform implementation, APHSA believes the funding of the TANF block grant should be preserved at its current level for fiscal year (FY) 2003 through FY 2008 and increased annually by the rate of inflation. Each state should receive at least its current TANF block grant allotment, including the highest supplemental grant.

The supplemental grants to states should be renewed and enhanced in order to address any inequities in state block grant allotments. Federal funding for these grants should be in addition to the amount currently provided to states.

Funding should continue to be an entitlement to states—mandatory funding—that is not subject to annual changes in appropriation level. States should be allowed to carry over funds from one fiscal year to the other without limitation. States should be allowed to draw down their funds as a block grant and not on a matching or prorated basis. In addition, once a state meets its maintenance-of-effort (MOE) level, it should be permitted to draw down prior year funds without expending additional state funds.

Finally, APHSA opposes any “set-asides” of funding.

Explanation

States continue to serve families long after their exit from TANF cash assistance. And it is important to recognize as well that the families who remain on cash assistance have multiple barriers to employ-ment, such as mental health and substance abuse addiction. In future years, it may be more costly to serve these families with the intensive services they need to move off welfare and toward self-sufficiency and work.

In the past few years, concerns have been expressed about the perceived slow rate at which states were expending federal TANF funds. Observers may have failed to appreciate the profound changes states made to move from a system of check-writing under AFDC to a program where work is a primary focus. Time was needed to adopt state legislative changes, redesign programs, train caseworkers, inform clients, and implement new program rules. Initial federal pronouncements deterred states from expending funds at the outset, and the two-year delay in the promulgation of final federal regulations stalled state implementation efforts.

Since the program’s enactment, APHSA believes states have expended TANF funds thoughtfully and prudently in a well-reasoned, well-planned, highly successful way. After the initial period of transition from the AFDC program to the TANF block grant, state expenditures increased significantly. Indeed, according to the projections of the Congressional Budget Office, state expenditures under TANF will exceed the program baseline in FY 2003 and beyond. Even though TANF caseloads have fallen by 50 percent, it is clear that the need for TANF-supported services has not declined. Federal data reporting of the TANF caseload reflects only the number of families receiving TANF cash assistance in a given state; it does not include families that receive TANF-funded child care, employment and training, counseling, and other supportive services.

Some federal interpretations of the law have presented obstacles to states’ implementation, such as the application of the Cash Management Improvement Act (CMIA) that restricts state flexibility and makes the TANF block grant look more like a matching fund program instead of a block grant. Even though states have met their MOE requirement, the federal share of their funds remains in the federal treasury giving the false impression that these unobligated funds are unnecessary or “surplus” funds.

Proposal

Maintain the TANF Block Grant Structure and Preserve the Purposes of the Act

For the most part, APHSA remains satisfied with the current four purposes of the act, believing that they have provided both a range of goals and the broad flexibility needed to address them. APHSA believes the TANF block grant structure should be maintained and that the current state flexibility in administering the program must be preserved. Restrictions on program eligibility or use of TANF funds should be rejected. These purposes allow states to continue to address the needs of low-income families that have moved into the work force and also to provide key supports to families and children in need of stability and safety. Under current law, states may use TANF funds for any purpose previously authorized under their IV-A or IV-F state plans and for any benefit or service that meets the “purposes of the Act,” and APHSA believes that they should be permitted to continue to do so.

Explanation

The block grant structure of TANF has given states great flexibility in program design. While there was initial concern that the end of the entitlement nature of funding might place a financial strain on states, over the past several years TANF administrators have prudently administered the funds and have been able to tailor programs to meet the unique needs and characteristics of their state populations.

The statute provides that a state may use the TANF grant “in any manner that is reasonably calculated to accomplish the purpose of this part…” The four purposes of the TANF program are:

to provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives;
to end the dependence of needy parents on government benefits by promoting job preparation, work, and marriage;
to prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies; and
to encourage the formation and maintenance of two-parent families.

The purposes of TANF have special significance to state administrators in that they guide states’ design of benefits and services that can be funded under the act.

Proposal

States Would Maintain Effort

If the TANF block grant is funded at $16.8 billion and increased annually by the rate of inflation over the next six years, then states would maintain their current level of MOE plus inflation. In addition, the definition of qualified state expenditure should be amended to include prior state expenditures on foster care and juvenile justice services. Child support payments that are passed through to families while on TANF should be counted toward the state MOE, even if these are not disregarded in determining TANF eligibility. Under the current law, states are required to meet either an 80 percent MOE or 75 percent if they meet the work participation rates. Rather than apply the MOE “credit” in the current federal fiscal year, APHSA proposes allowing states to apply the MOE “credit” in the subsequent year. Finally, states should be allowed to expend MOE on services to families without respect to income.

Explanation

To receive federal block grant funds, states are required to maintain funding for qualified program expenditures at a level equivalent to at least 80 percent of the state share of AFDC expenditures in federal FY 1994—when welfare caseloads were at their highest levels in recent history. If the state meets the work participation rate requirement, the MOE requirement drops to 75 percent. In the first four years of operation, all states made their MOE requirement.

States face a strict double penalty for failure to meet the MOE requirement. Not only are states penalized for falling short of the requirement, but they must also expend an equivalent amount of state funds to make up for their shortfall.

As TANF caseloads declined dramatically, some states may have been slow to obligate all of their federal block grant funds but all states have expended their state MOE funds first to avoid federal penalties. In large measure, state funds financed the early successful years of welfare reform while federal TANF funds remained in the federal treasury accumulating interest.

Due to drafting errors in the original TANF statute and subsequent federal regulation, the flexibility of the law has been reduced and administrative complexity has increased. For example, states are permitted to expend federal funds on services and benefits previously approved under the former AFDC program, yet state expenditures on these same services are not considered “qualified expenditures” for the purposes of MOE. No state expenditures on foster care or juvenile justice services are countable toward MOE. Similarly, federal funds may be used to pay for child support payments passthrough to families on assistance. The state share of these payments, however, is not counted toward MOE. Under federal regulation, MOE funds must be spent on TANF-eligible families, but TANF funds can be spent on some services to families without respect to income.

Over the past few years, a number of states have created TANF rainy day funds to protect against periods of economic downturn. States have funded this contingency with state revenues, however, according to federal regulatory interpretation, these state funds are not counted toward MOE until they are expended. APHSA believes this interpretation is a disincentive to states that want to protect their ability to provide assistance to their TANF clients in periods of recession.

Proposal

Strengthen the Contingency Fund

Changes are needed to ensure the contingency fund is a viable and sufficient source of funds for state TANF programs during periods of economic downturn or recession. The current level of funding for the fund is insufficient to provide support to a number of states that may need to draw from the fund at the same time. APHSA recommends an increase in the contingency fund level and a change in the eligibility requirements. Specifically, the MOE requirements should be the same as the TANF level and APHSA proposes that the definitions of qualified state expenditures should be aligned with TANF. These technical changes are necessary to ensure that states may not be unreasonably excluded from eligibility to draw on the fund in times of severe need.

APHSA believes the unemployment and food stamp triggers should be modified as well. Due to changing TANF caseload characteristics and a growing disconnection between the TANF and Food Stamp Programs, these triggers may not be appropriate. Considering that the U.S. unemployment rate is at or below 4 percent, states would need to experience a serious economic downturn to qualify for funds under existing rules. The food stamp trigger is also obsolete in that caseloads have dropped significantly since the enactment of welfare reform. APHSA recommends that contingency fund triggers be revised. The existing Rainy Day Loan Fund should be eliminated.

Explanation

The success of welfare reform in the states and the robust national economy has contributed to a decline in TANF caseloads and obviated the need for the majority of states to access the fund in any given year. However, aware of the cycles of the economy, a downturn is possible in future years. In that regard, as the law is reauthorized, the design of the contingency fund is an area of concern for states. Under current law, states must meet a 100 percent MOE to be eligible for the contingency fund, not the 80 percent needed to qualify for TANF funds, and the definition of qualified expenditures in the contingency fund differs from the TANF MOE requirement as well. To qualify for contingency funds, states must also meet one of two “needy state” standards. The statute currently requires that a state’s unemployment rate reach at least 6.5 percent and that a state’s unemployment rate exceed 110 percent of the level of the corresponding three-month period in either of the two preceding calendar years. States can also qualify by meeting a food stamp trigger, which requires that state food stamp caseloads increase by 10 percent in the most recent three-month period over the average for FY 1994 or FY 1995.

PROPOSAL

Restore Social Services Block Grant (SSBG) Funding and Transferability of TANF Funds

APHSA recommends restoring SSBG to the $2.8 billion level in FY 2003 and beyond. Also, states should be permitted to transfer up to 10 percent of their TANF block grant to SSBG.

Explanation

In the welfare reform law of 1996, SSBG was funded at a level of $2.38 billion for FYs 1997 through 2002 and would increase to $2.8 billion in FY 2003 and beyond. In addition, the welfare reform law permitted states to transfer up to 10 percent of their TANF block grant to SSBG for services to families with incomes up to 200 percent of poverty. Over the past four years, however, Congress has reduced federal support for this important block grant that funds services for the elderly, disabled, and low-income children and families. In 1997, to fund highway improvements in the transportation act reauthorization, SSBG funding was reduced to $1.7 billion and beginning in FY 2001, TANF transfer authority was reduced to 4.25 percent. (The transfer authority was restored to 10 percent at the end of the 106th Congress but will fall to 4.25 percent in FY 2002.)

The Social Services Block Grant funds programs for domestic violence, meals on wheels programs, child welfare services, services for disabled children and adults, child care, long-term care, and a host of other locally delivered services. Federal reductions in funding have threatened the viability of these programs and services. To address this funding shortfall in FY 1999, 39 states transferred TANF funds to SSBG—33 states transferred more than 4.25 percent. If the transfer provision is unchanged, then states that used TANF funds to compensate for the federal reductions to SSBG will suffer a reduction in services to these vulnerable populations in future years.

Proposal

Maintain State Option to Transfer to the Child Care and Development Fund

APHSA supports the continuation of the option for states to transfer up to 30 percent of their TANF funds to CCDF and supports the flexibility for states to fund child care services directly out of TANF. APHSA urges a change in the statute to clarify that child care not be categorized as “assistance” in any instance.

Explanation

As more families make the transition from welfare to work, it is likely that expenditures for child care will continue to grow. Rising costs of subsidies and new quality enhancements will push costs higher in future years as well. The costs for child care are rising rapidly—so much so that in many states child care spending has exceeded that of cash assistance. In FY 1999, nearly $4.5 billion TANF funds were spent on child care services. Forty-one states transferred TANF funds to the Child Care and Development Fund (CCDF) and even more states spent TANF funds directly on child care. Under current law, states may transfer up to 30 percent of their TANF block grant funds to CCDF. Under federal regulations, child care expenditures are considered to be “nonassistance,” except in the instances where TANF is used to pay child care costs for clients who are not working.

Proposal

Restructure Tribal TANF

Reauthorization of TANF presents an opportunity to resolve and to assign tribal TANF responsibilities in a way that all parties are held accountable. Currently states are held accountable for the consequences of needy Native American families if a tribe elects to operate its own TANF programs in a geographic area but defines its service population in a way that excludes some tribal families. States lack authority over tribal implementation of TANF; however, they are expected to provide services to those who are not included by a tribal TANF plan, in some instances, without the resources to serve them. The association recommends the creation of a separate TANF block grant for tribal governments funded with 100 percent federal funds and no state MOE requirement. The tribal TANF block grant allocation should be in addition to the $16.8 billion allocated for the state block grants. The new block grant would allow state and tribal governments to continue to collaborate absent financial and service population concerns. The tribal governments would negotiate directly with the federal government on the design and performance measurement of their programs.

Explanation

Under the 1996 welfare reform law, tribal governments may opt to administer their own tribal TANF program. Tribal governments and the federal government negotiate the size and scope of the tribal TANF program without the input or approval of the state TANF agency. If a tribe opts to administer the program, the tribal TANF block grant amount is subtracted from the state’s TANF block grant allocation and the state’s MOE requirement is decreased proportionately. A Tribal Family Assistance Grant (TFAG) is based on the federal share of the state’s expenditures for federal FY 1994 for Native American families residing in the service area(s) as defined by the Native American tribe. Two or more tribes may expect a TFAG based on the same or overlapping service area(s). Tribes’ provision of welfare-related services need not include the issuance of grants to any or all of the population to be served. Under the current law, the federal government does not consider assistance under the TFAG to be duplicative of a state TANF grant if the service provided to a family through the TFAG does not include a cash grant. In states where tribes make up 50 percent or more of their TANF caseload, the financial impact on states of these policy inconsistencies is substantial.

In addition, tribal governments may negotiate different work requirements than those mandated in the federal statute. Those tribes operating tribal JOBS programs may also use different criteria, however, the clients participating in those programs are included in the state’s denominator when calculating work participation rates. Therefore, the inconsistencies in these programs may result in states failing the work participation rates through no fault of their own.

In some states, the tribal TANF option has a profound impact on design and administration of the state’s TANF program. States have expressed concerns with the inconsistencies of federal determinations among various tribal TANF programs, particularly as they relate to the role of the state, tribal, and federal governments.

Proposal

“Assistance” Definition Should Exclude Unobligated Funds, Child Care, and Transportation Expenditures

The association recommends that states be permitted to use unobligated TANF funds for any purpose allowable under the act and that the “assistance” restriction be removed. Furthermore, child care and transportation aid should be considered nonassistance in all instances. It is unfair to apply the lifetime time limit to families that receive child care funded with TANF and treat families receiving other publicly funded child care differently. This federal regulatory interpretation is neither reasonable nor fair and should be changed.

Explanation

The federal regulations governing the use of federal TANF funds draw a distinction between “assistance” and “nonassistance” expenditures. “Assistance” is defined in the final TANF regulations as “benefits directed at basic needs” (e.g., food, clothing, shelter, utilities, household goods, personal care items, and general incidental expenses) and “child care, transportation, and supports for families that are not employed.” When a family receives “assistance,” the lifetime time limit, work requirements, and child support assignment rules apply. These rules do not apply to all other types of expenditures, termed “nonassistance.” Federal regulations also state that unobligated federal TANF block grant funds after the close of the fiscal year may be expended in future fiscal years on “assistance.”

Proposal

Strengthen Out-of-Wedlock Reduction Bonus by Focusing on Teen Pregnancy Prevention

To reduce intergenerational dependency on government assistance, APHSA recommends strengthen-ing the TANF Bonus to Reduce Out-of-Wedlock Births by adding a new performance measure aimed at reducing adolescent birth rates. Success in this area will have long-term benefits that will reduce future dependence on TANF.

Explanation

The welfare reform act calls on states to encourage the formation and maintenance of two-parent families and to end dependence of needy families on government benefits by promoting job preparation, work, and marriage. The act also established a bonus fund to reward the top five states that have been successful at reducing their incidence of out-of-wedlock births for the entire state population. Since 1996, states have increased their focus and efforts to reduce the teen pregnancy and out-of-wedlock birth rates. Additional efforts need to be conceptualized and implemented to reduce the out-of- wedlock birth rate.

Single teen parents are more likely to end up on public assistance, more likely to drop out of school, have lower job skills, and lower earning potential. A strategy that helps teens avoid this life-changing circumstance is important to human service commissioners and policymakers alike. The association believes that in addition to the goal of reducing out of wedlock births, a greater emphasis should be placed on the reduction of births to unmarried teens in an effort to address intergenerational dependency on government assistance.

Proposal

Update Work Measures

If work rates remain as the chief measure of TANF success, then they should be restructured to address major shortfalls. Under APHSA’s proposal, every TANF client should be engaged in a work preparation or employment activity. In addition to maintaining core work requirements, states should be afforded the flexibility to define work preparation in recognition of the changing characteristics of the populations served.

States with different definitions of work under welfare waiver demonstration programs should be allowed to continue to apply these definitions. Two-parent families and single-parent families should be subject to the same work participation rates.

Recognizing that each state is unique and at different phases of welfare reform, at state option, measures of job placement, job retention and earning progression could replace the current work participation rates. Under this proposal, every TANF client should be engaged in a work preparation or employment activity.

Explanation

Work is the centerpiece of welfare reform. Prior to TANF, work was a volunteer activity for clients under AFDC. Mandatory work requirements, targets, time limits, and bonuses under TANF have encouraged states to place a strong work-first emphasis on their programs. Since 1996, families have exited welfare for work in record numbers. While some originally believed states would operate large community work experience programs to meet work requirements, this has not been the case. In the most recent year data are available, more TANF clients have moved into the unsubsidized private-sector work than any other work category.

The current TANF work participation rate data show the work status of the families that remain on assistance to be part of an ever-shrinking caseload. In light of the success states have achieved in moving clients to work, a new emphasis has been placed on evaluating the circumstances of TANF “leavers,” yet, the current work data yields no useful information in this area.

For those clients who remain on TANF assistance, many of whom have serious barriers to employment, APHSA believes those clients should be on a pathway to employment as well. However, the current definitions of work fail to measure their progress toward this goal. Furthermore, restrictions on activities and minimum hours of work fall short of measuring the extent to which these clients are engaged in mental health or domestic violence counseling, substance abuse treatment and prevention services, or literacy and remedial education. These activities are essential to job preparation and should be valued as such.

Vision

The Temporary Assistance for Needy Families block grant was enacted four years ago and the success achieved by states has been remarkable. APHSA believes states should be afforded the opportunity to continue their work without tremendous change to the existing statute. TANF, a new program that replaced a 60-year-old law, is ever-evolving and changing as states devise new structures of program delivery and service design to better serve needy families. While much has been achieved, there is an unfinished agenda of welfare reform—one that involves on-going supports to low-income working families as well as one that seeks to remove the barriers for clients with multiple barriers to overcome. The work of the TANF agency does not end when families exit the cash assistance caseload; indeed, in some states many more families are being served today than ever were served under the AFDC program.

Progress for TANF and post-TANF families should be measured not only by the wages earned by an individual, but also the cash value of income supports such as the Earned Income Tax Credit (EITC), child care assistance, food stamps, and child support income. Taken together, these income-enhancing benefits lift families well above the poverty line. However, conflicting and at times contradictory federal program rules deter eligible families from gaining access to these critical benefits. States must be afforded increased flexibility in the administration of these federal programs.

APHSA believes the focus on work is an appropriate one. APHSA understands the welfare caseload is not homogeneous and that some clients can move to work easily while others require more intense interventions. And APHSA knows that in order for clients who have moved into employment to remain employed, to increase wages and to seek and obtain new and better opportunities, the work of the TANF agency must continue. The association firmly believes the flexibility afforded states under current law should be maintained in reauthorization and that the state and federal funding levels for the program should remain stable as well. We need to stay the course.