Congress to States: Use TANF Funds Or Lose Them

In 1996, Congress and the President ended “welfare as we know it” and created a new program. Temporary Assistance to Needy Families (TANF). TANF eliminated the welfare entitlement, set lifetime restrictions on benefits, and authorized $16.5 billion per year for block grants to the states. The new block grant format gives states both great flexibility and great responsibility to help low-income families.

And yet, billions of TANF dollars remain unused by states. Reports on spending in mid-2000 show that a total of $4.7 billion in TANF funds have not been earmarked (obligated) or spent. More than half of the states reported having upwards of $20 million in unobligated TANF funds and 12 states reported having between $100 million and $1.2 billion unobligated.

“Use it or lose it,” Congress Tells the States

Congress will consider the reauthorization of TANF in 2001-2002. At that time, if Congress finds that TANF funds were unspent or poorly used, the program could be cut by billions of dollars.

The imperative to spend TANF dollars is real. Over the past three years, Congress tried to raid the unused TANF funds several times. Both the House and Senate each passed separate measures to cut TANF funds by a total of $240 million. Although those cuts never made it to law, states that fail to use the full amount of their present TANF funding will have an uphill battle protecting their grants from budget cuts.

 

The Need for Assistance is Real

Thirty-four million Americans still live in poverty. While the largest number of families living in poverty are white, on average, African American and Latino families are at a higher risk of having incomes at or below the poverty line. Among all African-American and Latino families, about one in three lives below the poverty line and more than half of them earn incomes at or below 200% of poverty.

“Now, more than ever, states must put TANF dollars to work,” says Deepak Bhargava, Policy Director at the Center for Community Change. “And, they can do so in ways that help working families move from poverty to self-sufficiency.”

TANF provides states maximum flexibility to extend support programs to larger numbers of working families. States are required to contribute their own funds, known as Maintenance of Effort (MOE) funds, to maintain federal TANF funding levels. MOE funds provide even greater options to states because they are not subject to many of the TANF restrictions.

Some states have already taken advantage of this opportunity and designed strategies to help families deal with barriers that may keep them from working or staying in jobs. States are using TANF and MOE funds to provide a range of supports, such as higher education, skills training, or work experience needed to secure better paying jobs and help families become more self-reliant. Other strategies include using TANF to:

Improve child care
The lack of affordable and accessible child care is one of the most common reasons parents cite for leaving the workforce. Fully one-third of all mothers with children six and under, and 40 percent of mothers with infants (one-year-old or younger), do not work due to the difficulty securing child care. Under TANF regulations, states can directly transfer up to 30 percent of their TANF funds into the existing child care block grant – the Child Care Development Fund (CCDF).

Provide Transportation Options
Transportation is critical to help parents secure good jobs with higher wages and benefits. States have used TANF and other funds to create income-based transportation subsidies (NM, VA), facilitate car ownership with TANF funds (AZ, NY, TX, VT), and coordinate networks of alternative transportation providers (KY).

Establish State Earned Income Tax Credits (EITCs)
A state EITC provides an additional income boost to working low-income families, including those who have left welfare. It also helps to offset the state and local taxes paid by low income families, particularly regressive state local sales and excise taxes. Since 1997, fourteen states and the District of Columbia have adopted or increased state Earned Income Tax credits.

Create More Affordable Housing
A recent report by the Urban Institute found that despite the increase in the number of low-income families with jobs from 1997 to 1999, there was no change in the housing problems faced by these families. Families who cannot afford adequate housing are forced to move often or double up with family or friends, creating family instability. High housing costs also keep low-income families from moving closer to job growth areas.

States can support housing needs of families with children with TANF or MOE funds directly or by transferring TANF funds to the Social Security Block Grant (SSBG). States operating housing programs for low-income families include CT, NJ, and MN.

For resources on TANF issues see CPA’s policy pages on TANF. Also see Center for Budget and Policy Priorities’ web page at www.cbpp.org, and National Council of La Raza’s issue brief on “Welfare Reform, TANF Caseload Changes, and Latinos: A Preliminary Assessment” at www.nclr.org .