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The recession that began in December 2007, and the loss of 3.6 million jobs since, has raised
issues about policies to address the threats to the economic security of people and families from
an economic downturn. The unemployment rate had already reached 7.6% in January 2009, with
the Congressional Budget Office (CBO) forecasting that it will top out at over 9% in early 2010.
Families that were economically disadvantaged before the recession are highly likely to face risks
to their well-being—unemployment rates for women maintaining families, minorities, and those
with less than a high school education are above the average for all workers.
The emphasis of public policy for low-income families with children with able-bodied parents is
supporting and requiring work. The system of needs-based benefits underwent major changes
over several decades, culminating in policy changes in the mid-1990s that included the major
welfare reform law of 1996. This recession will likely be the first real test of how policies put in
place in the mid-1990s affect the well-being of families with children during a steep economic
downturn and high unemployment. Unemployment insurance (UI) is the major program to
replace lost wages for unemployed workers. However, low-wage workers and those with
intermittent employment are less likely to receive UI than higher-wage workers with stronger
labor force attachment. In the past, the “safety net” for families with children included cash
welfare. The 1996 welfare reform law created the Temporary Assistance for Needy Families
(TANF) block grant with fixed funding and altered rules that apply to the cash welfare caseload.
TANF is best known as a funding source for cash welfare for needy families with children, but it
also funds a wide range of benefits and services that seek to address some of the root causes or
ameliorate some of the effects of structural poverty on families with children. The cash welfare
caseload declined by two-thirds from 1994 to 2008 and stood at 1.7 million families. The share of
poor children receiving TANF plummeted from over 60% before welfare reform to 23% by 2007.
TANF poses both risk and opportunities for states to help disadvantaged families as they face a
deep economic slump. The opportunities that TANF offers states is rooted in its flexibility—states
can design new and innovative programs, either through cash welfare or outside of their cash
welfare program, to meet the needs that arise because of the recession. However, fixed TANF
funding combined with potential increases in families eligible for TANF cash welfare pose states
the choice of either cutting back TANF funding for the nonwelfare benefits and services or
curtailing cash welfare benefits or rolls in the midst of a recession. Additionally, the rules of
TANF cash welfare—benefits that pay only a fraction of poverty-level income and a “work-first”
orientation that seeks to move recipients quickly into a job—may limit its effectiveness to
respond to a recession.
The American Recovery and Reinvestment Act (ARRA, P.L. 111-5) creates a new, temporary
TANF fund to help pay for the increased costs of cash welfare, short-term aid, and subsidized
employment for FY2009 and FY2010. ARRA temporarily modifies the caseload reduction credit
states receive toward their TANF work participation. A state’s credit will not be reduced for any
caseload increases occurring in FY2008 through FY2010. ARRA also extends TANF
supplemental grants through the end of FY2010. It further allows states to use their TANF
reserves for any TANF benefit or services. Under prior law, reserves could be used only for
TANF cash welfare programs. This report will be updated.
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Introduction ..................................................................................................................................... 1
The Recession and the Economic Insecurity of Disadvantaged Families ....................................... 1
Public Policy Toward Low-Income Families with Children: Rewarding and Requiring
Work....................................................................................................................................... 1
The Recession, Unemployment, and the Economically Disadvantaged ................................... 2
A Safety Net for Disadvantaged Families with Children? ........................................................ 4
The TANF Block Grant ................................................................................................................... 6
TANF and Its Potential Role in the Recession ................................................................................ 8
Cash Welfare for Needy Families With Children...................................................................... 8
Cash Welfare Benefit Amounts........................................................................................... 9
Requirements to Receive Cash Welfare.............................................................................11
The Cash Welfare Caseload and Economic Conditions.....................................................11
Nonwelfare Economic Support from TANF in the Recession ................................................ 14
Meeting Recession-Related Costs by Cutting Other TANF Services?.................................... 15
Legislative Issues .......................................................................................................................... 16
Funding ................................................................................................................................... 16
The Contingency Fund...................................................................................................... 16
Supplemental Grants......................................................................................................... 18
TANF Program Rules.............................................................................................................. 18
TANF Work Participation Standards................................................................................. 18
Use of TANF Reserve Funds ............................................................................................ 19
Definition of Short-Term Aid............................................................................................ 19
Child Care for Unemployed Families ............................................................................... 19
ȱ
Figure 1. Child Poverty and Unemployment Rates, 1959 to 2007.................................................. 4
Figure 2. Child Recipients of Cash Welfare, SNAP/Food Stamps, and Medicaid, FY1995
and FY2007 .................................................................................................................................. 6
Figure 3. FY2006 Use of TANF Funds and MOE Expenditures..................................................... 7
Figure 4. Number of Families Receiving Cash Welfare and the Unemployment Rate,
1959 to 2008............................................................................................................................... 12
ȱ
Table 1. Unemployment Rates for Selected Groups........................................................................ 3
Table 2. Monthly TANF Cash Welfare Maximum Benefit Amount for a Family of Three,
2008.............................................................................................................................................. 9
Table 3. Number of Families Receiving TANF Cash Assistance, September 2007 and
September 2008.......................................................................................................................... 13
Table 4. Illustrative Scenarios for the TANF Contingency Fund, FY2009 ................................... 17
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Author Contact Information .......................................................................................................... 20
Acknowledgments ......................................................................................................................... 20
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It is now generally acknowledged that the economy entered recession in December 2007, and has
since lost 3.6 million jobs. In January 2009, the Congressional Budget Office (CBO) issued its
economic outlook, forecasting that this recession will be the longest and, by some measure,
deepest since the World War II, with unemployment rates topping 9% by early 2010.1 This has
raised the profile of economic insecurity among people and families caused by the recession.
Those who were economically disadvantaged before the recession hit are particularly at-risk of
economic insecurity. This report discusses the potential role that the block grant to states of
Temporary Assistance for Needy Families (TANF) may play in mitigating the effects of the
recession for poor families with children.
ȱȱȱȱȱ ¢ȱȱ
ȱȱ
Many children were in families that were already poor as the economy entered recession. The
child poverty rate in 2007 (the last year of an economic expansion that dated back to 2001), stood
at 17.6%—higher than the rate for the elderly (9.7%) or that for non-aged adults (10.9%). High
poverty rates among families with children are correlated with certain characteristics.2 Children in
female-headed families are more likely to be poor than those in married couple families.
Additionally, those in families with young parents, parents with low levels of educational
attainment, and racial and ethnic minority children were more likely to be poor than their
counterparts in other groups.
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While some poor families lacked a wage earner, more than two-thirds of poor children were in
families where the head or spouse worked at some point during 2007. Public policy toward low-
income families has emphasized work, at least for those who are not disabled. A work-based
approach toward economic disadvantage and poverty among children evolved over several
decades, culminating in several legislative initiatives in the mid-1990s. The Earned Income Tax
Credit (EITC), an earnings supplement usually received as a tax refund, was expanded and its
amount increased by legislation in 1993.3 Health care from Medicaid was gradually expanded to
cover all poor children, followed by legislation in 1997 that established the State Children’s
Health Insurance Program (SCHIP).
The 1996 welfare reform law (P.L. 104-193) substantially altered the policy landscape for low-
income families. It ended the New Deal program of Aid to Families with Dependent Children
1 Congressional Budget Office, The Economic and Budget Outlook 2009-20019, January 2009, http://www.cbo.gov/
ftpdocs/99xx/doc9957/01-07-Outlook.pdf.
2 CRS Report RL32682, Children in Poverty: Profile, Trends, and Issues.
3 CRS Report RL31768, The Earned Income Tax Credit (EITC): An Overview, by Christine Scott.
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(AFDC) and with it the entitlement to needy families for cash assistance. AFDC was replaced by
the TANF block grant, with work participation requirements and time limits for cash welfare
recipients. The 1996 welfare reform also significantly increased federal funding to the states to
subsidize child care, further supporting work among low-income families.
Partially as a result of the policies put into place in the mid-1990s, and partially as a result of the
economic boom that followed, the welfare caseload plummeted and work among single mothers
increased.4 In September 2008, the cash welfare caseload had fallen to 66% below the September
1994 caseload figure. Child poverty declined from 1994 through 2000, but the welfare rolls
declined faster. As a result, fewer poor children were in families receiving cash welfare, though a
greater proportion of poor children were in families with earnings. The period after 2000 saw
slower economic growth than in the late 1990s and child poverty rose, but the welfare rolls still
declined. In 2007, the welfare recipiency rate among poor children stood at 23%—down from
about 60% before welfare reform.
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The current recession is the second one to test the work-based policies put into place in the mid-
1990s and directed toward poor families with children. The first recession was the relatively mild
one in 2001. The unemployment rate in this recession – standing at 7.6% in January 2009 –
already far surpasses the peak unemployment rate of 6.3% reached in 2003 after the 2001
recession.5
Table 1 provides the unemployment rate for all workers, and then for some groups that are at risk
of being economically disadvantaged. Over the past year, unemployment rates for all groups have
increased as the economy slumped. As expected, those in groups at risk for being economically
disadvantaged had higher unemployment rates than the overall population. Several groups—those
with no high school diploma, African-Americans, and young adults had double-digit
unemployment rates. Though not all unemployed workers in at-risk groups are in families with
children, many are.
4 For statistics on the prevalence of work and receipt of cash welfare over this period, see CRS Report RL30797,
Trends in Welfare, Work, and the Economic Well-Being of Female-Headed Families with Children: 1987-2006, by
Thomas Gabe.
5 Unemployment rates, like other indicators of family economic distress, including the poverty rate, tend to be lagging
indicators of economic activity. That is, they tend to peak some time after economic activity reaches its low point,
which marks the end of a recession.
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Table 1. Unemployment Rates for Selected Groups
(data seasonally adjusted unless otherwise noted)
Demographic
Unemployment
Unemployment
Unemployment
Group
Rate: Dec. 2007
Rate: Dec. 2008
Rate: Jan. 2009
All workers
4.9%
7.2%
7.6%
Women
6.9 9.5
10.3
maintaining families
(not seasonally
adjusted)
No high school
7.5 10.9
12.0
diploma (25 years
and older)
African-American
7.6 11.0
11.5
(20 years and
older)
Hispanics (16 years
6.2 9.2
9.7
and older)
Young adults (20
9.2 12.1
12.1
to 24 years old)
Source: Congressional Research Service (CRS) based on data from the U.S. Department of Labor, Bureau of
Labor Statistics.
The most visible indicator of economic disadvantage is the poverty rate. Historically, child
poverty rates have increased during recessions and fallen during periods of economic growth. The
child poverty rate tends to peak soon after the low-point of the economic cycle. During the
decade of the 1980s, the child poverty rate peaked in 1983, a year after the end of the back-to-
back recessions of 1980 and 1981-82, and in the 1990s it peaked in 1993, two years after the
1990-91 recession.
Figure 1 shows the historical trend in the child poverty rate and compares it with the trend in the
unemployment rate. While there is a clear association between the two indicators, the child
poverty rate is affected by more than just the national economy. The child poverty rate remained
high in the 1980s, as the percent of children living in female-headed families increased. After the
2001 recession, child poverty increased from its low point of 15.6% in 2000 to 17.3% in 2004,
before falling for a couple of years, and then rising again to 17.6% in 2007.
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Figure 1. Child Poverty and Unemployment Rates, 1959 to 2007
Poverty Rate is on the Left Axis, Unemployment Rate is on the Right Axis
Child Poverty Rate
Unemployment Rate
30%
16%
14%
25%
Child Poverty Rate
12%
(left axis)
20%
000000000000000000
000000000000000000
0000000000
10%
000000000 0000000000
0000000000
000000000
000000000 0000000000
0000000000
000000000
000000000 0000000000
0000000000
000000000000000000
000000000 0000000000
15%
0000000000
000000000000000000
000000000000000000 0000000000
000000000
000000000
0000000000 Unemployment
8%
0000000000 000000000000000000 0000000000
000000000
000000000000000000000000000
000000000
0000000000
0000000000
0000000000
000000000
0000000000
000000000 0000000000
000000000000000000
000000000000000000
0000000000
0000000000Rate (right axis)
0000000000
000000000
0000000000
000000000
0000000000
0000000000
000000000000000000
000000000
0000000000
000000000
0000000000
000000000000000000000000000
0000000000
000000000
0000000000
000000000
0000000000
0000000000
000000000000000000
000000000
0000000000
000000000
0000000000
0000000000
000000000
000000000
0000000000
000000000000000000000000000
0000000000
000000000000000000000000000
0000000000
0000000000
0000000000
000000000
0000000000
000000000000000000
000000000000000000000000000
0000000000
0000000000
000000000000000000
6%
000000000000000000
0000000000
0000000000 000000000000000000
0000000000
000000000
000000000000000000
0000000000
0000000000
000000000000000000
10%
000000000
0000000000
0000000000
0000000000 000000000000000000
000000000
0000000000
000000000
0000000000
000000000
0000000000
000000000
0000000000
0000000000
0000000000
000000000000000000000000000
000000000
0000000000
0000000000
000000000000000000 0000000000
000000000000000000000000000
0000000000
000000000000000000000000000
0000000000
4%
5%
2%
0%
0%
9
1
9
1
3
3
5
7
9
1
3
5
7
195 196 196319651967196 197 197 1975197719791981198 198 198 19891991199319951997199 200 200 200 200
Source: Congressional Research Service (CRS) based on data from the U.S. Department of Commerce, Bureau
of the Census, and the U.S. Department of Labor, Bureau of Labor Statistics.
ȱ¢ȱȱȱȱȱ ȱǵȱ
There is cause for concern about the state of the “safety net” for workers and families who were
economically disadvantaged before the recession. Unemployment insurance (UI) is the primary
government program to help the involuntarily unemployed replace a portion of their lost earnings.
However, UI was not designed to provide benefits to all unemployed persons. New entrants and
those re-entering the workforce after prolonged absences are not eligible for UI. However, even
among job losers, UI receipt is not universal. UI requires sufficient recent employment (and often
a minimum amount of earnings in a recent period) to be eligible for benefits upon becoming
unemployed. Additionally, some unemployed persons already have exhausted their weeks of
unemployment benefits. In November 2008, the percent of the unemployed receiving
unemployment benefits was 45%.6
Research shows that low-wage workers, part-time and contingent workers, and women, have
lower rates of UI receipt when they become unemployed.7 Additionally, policies to increase the
6 This number reflects the UI from all programs: regular state UI, federal-state extended benefits, and emergency
unemployment compensation (EUC) benefits.
7 See U.S. Government Accountability Office. Unemployment Insurance: Role as Safety Net for Low-Wage Workers is
Limited, GAO-01-181, December 2000. See also: U.S. Government Accountability Office, Unemployment Insurance:
(continued...)
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financial rewards from work and the welfare reforms of the 1990s (discussed in more detail,
below) helped spur more single mothers into the workforce. Those who leave welfare for work
often fail to stay employed. Studies of those who left welfare indicate that, among those who left
welfare for work, only between 30% and 50% stayed employed all four quarters after leaving the
rolls.8 A recent study of welfare leavers in four large states (Florida, Ohio, Michigan, and Texas),
showed that of all welfare leavers who became unemployed, only 13% drew UI.9 Less than 25%
of unemployed leavers applied for UI. Most of those who applied for UI were monetarily eligible
(earned sufficient wages), but many failed to receive unemployment benefits for other reasons.
Voluntarily quitting a job often disqualifies a person from receiving UI, and in many states a
person who quits for “family” reasons (e.g. caring for a sick child, need to align hours to
accommodate family responsibilities etc.) cannot receive UI. During a recession, those who left
jobs for such reasons have to compete in a more difficult labor market along with others. Many
states also bar unemployed persons available only for part-term work from receiving UI.
The second tier of the safety net for families with children are programs that provide benefits
based on financial need. Before the economy entered recession, poor children were far more
likely to be in families receiving benefits from the food stamp program (now renamed
Supplemental Nutrition Assistance Program, or SNAP), and health care than cash welfare. Figure
2 shows the number of children in families receiving cash welfare, compared with children in
SNAP/Food Stamp households and children enrolled in Medicaid in both FY1995, before the
enactment of welfare reform, and FY2007. The other two programs had more child recipients
than cash welfare in both years. However, by FY2007 the number of children benefitting from
SNAP/food stamps and Medicaid dwarfed the number of children in families receiving cash
welfare. By FY2007 there were 3.1 million children in families receiving cash welfare, compared
with the 12.7 million children in food stamp households and the 23.5 million children enrolled in
Medicaid.
(...continued)
Receipt of Benefits Has Declined, with Continued Disparities for Low-Wage and Part-Time Workers, GAO-07-1243T,
September 19, 2007.
8 U.S. Department of Health and Human Services, Office of the Secretary, Office of the Assistant Secretary for
Planning and Evaluation, Final Synthesis Report of Findings from ASPE’s “Leavers” Grants, December 2001, pp. 23-
44.
9 See Christopher J. O'Leary and Kenneth J. Kline, UI as a Safety Net for Former TANF Recipients, W.E. Upjohn
Institute for Employment Research, Kalamazoo, MI, March 2008, http://aspe.hhs.gov/hsp/08/UI-TANF/report.pdf.
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Figure 2. Child Recipients of Cash Welfare, SNAP/Food Stamps, and Medicaid,
FY1995 and FY2007
(monthly average number of children in millions)
23.5
25
20
16.5
13.8
15
12.7
9.3
10
5
3.1
0
1995
2007
Cash Welfare
SNAP/Food Stamps
Medicaid
Source: Congressional Research Service (CRS) based on data from the U.S. Department of Health and Human
Services (HHS), Administration for Children and Families; HHS, Center for Medicare and Medicaid Services; and
U.S. Department of Agriculture.
ȱȱȱ ȱ
The TANF block grant is best known as a funding source for cash welfare. However, it also funds
a wide range of benefits, services, and activities for disadvantaged families with children as well
as programs to achieve the goals of reducing out-of-wedlock pregnancies and promoting two-
parent families.
In creating TANF in the 1996 welfare law, open-ended matching grants (unlimited funding) for
AFDC cash welfare, emergency assistance, and a capped matching grant for employment and
training services for cash welfare recipients were converted into a single block grant to help
needy families. The TANF block grant provides states with fixed funding but broad authority to
use federal TANF funds (and associated state funds) on a wide range of benefits and services to
aid needy families and to reduce out-of-wedlock pregnancies and promote two-parent families.
The 1996 welfare reform law set TANF’s basic block grant at $16.5 billion, which together with a
requirement that states maintain at least $10.4 billion in spending from their own funds, has not
changed since TANF’s inception. That basic block grant and the state maintenance of effort
(MOE) requirement constitute the bulk of TANF funding to the states. TANF also includes some
additional funding sources, including a limited contingency fund (discussed in detail below) and
supplemental grants that have totaled $319 million and have been targeted to 17 states.
Figure 3 shows the use of TANF grants and MOE spending for FY2006. As shown on the figure,
basic cash assistance (what most people call cash welfare) accounted for only 35% of all TANF
and MOE funds in that year. Even when expenditures on administration and work activities, the
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other categories associated with traditional welfare programs, are added to cash, only a little more
than half of all TANF and MOE funds are accounted for.
A second major category of TANF funding is work supports—particularly child care. Child
care—either through expenditures or transfers to the Child Care and Development Fund—
accounts for almost one-fifth (19%) of total TANF funds and MOE. Other work supports, such as
expenditures for the refundable portion of tax credits for low wage workers and transportation
aid, account for an additional 6% of all funds
Figure 3. FY2006 Use of TANF Funds and MOE Expenditures
(as a percent of total used TANF funds and MOE expenditures)
Total Transfers and Expenditures = $28.4 billion
Transfers to
SSBG
Other
3%
expenditures
17%
Basic (cash)
assistance
Family formation
35%
expenditures
3%
Other work
supports
6%
Transfers to
Administrative
CCDF
expenditures
7%
9%
Child care
Work program
expenditures
expenditures
12%
8%
Source: Congressional Research Service (CRS) based on data from the U.S. Department of Health and Human
Services (HHS).
The categories shown on the figure above are based on reports to HHS made by states on their
TANF expenditures. However, the categories poorly capture some benefits, activities, and
services provided under TANF. For example, TANF makes a substantial contribution to programs
that deal with child abuse and neglect—but that is not captured in the reporting system. A survey
by the Urban Institute for state FY2004 reported that TANF contributed at least $3 billion to those
programs.10 Also not captured in the expenditure reports and categories is the breadth of benefits
and services funded, particularly in the categories labeled “family formation” and “other.” TANF
is used on a wide range of human services programs that address issues faced by disadvantaged
families or children: home visiting programs for new parents; youth services, such as grants to
Boys and Girls Clubs; pre-Kindergarten education programs; after-school programs for teens;
10 These programs are known as “child welfare” programs, and the Urban Institute survey figure reflects the TANF
funds that are used by state and local child welfare agencies.
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responsible fatherhood programs, such as employment services and training for noncustodial
parents; and marriage education and counseling.
ȱȱ ȱȱȱȱȱȱ
Evaluating what potential role TANF can play in helping families deal with the recession is
difficult because it is not a program, but a funding stream to the states for a myriad of economic
supports, services, and activities. Additionally, each state is unique in its use of TANF funding.
Generalizations about TANF made from nation-wide data imperfectly describe the situation in
any given state.
Historically, cash welfare has been viewed as a part of the “safety net,” albeit part of the second
(low income assistance) tier of the safety net that addresses needs not met through the first (social
insurance, UI) tier. Such needs may still exist, as UI may not be there for many disadvantaged
families. Low-income families often receive food assistance from the SNAP program or have
their children covered through Medicaid or SCHIP. However, the diminished role of cash welfare
in the post-welfare reform era leads to a number of key policy questions:
• Where can low-income families with an unemployed parent who is ineligible for
UI turn for cash to meet basic needs other than those provided by SNAP and
medical coverage?
• Can TANF cash welfare programs provide a viable safety net for low-income,
working parents when they lose a job?
• What role can TANF’s “nonwelfare” benefits and services play in responding to
the recession?
• Can TANF-funded services that are intended to address the root causes of
structural poverty among families with children—or to ameliorate the effects of
such poverty—survive funding battles in the states, particularly in states that
experience recession-related costs within TANF?
ȱȱȱ¢ȱȱȱȱ
The TANF cash welfare system of today reflects a historical legacy of controversy. Federal
involvement in funding cash welfare for needy families dates back to the Great Depression, and
concern about risks to the economic security of families. At the time, the major risk addressed by
policy was the loss of the earnings of one parent (the father) because of death. However,
“welfare” issues were entwined with many of the social changes in second half of the 20th
Century. The increase in women’s labor force participation raised the expectation that mothers
heading families work. Welfare raised racial issues, as an increasing share of the welfare caseload
became nonwhite. Payments that went primarily to fatherless families also raised issues of
personal responsibility and morality. Welfare increasingly became a program associated not with
economic risks, but with the personal characteristics and behavior of its recipients.
ȱȱȱ
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ȱ
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TANF cash benefits represent only a fraction of poverty income. TANF cash welfare can help a
family avoid total destitution, but is unlikely to allow a family to maintain its standard of living
when even a low wage earner loses his or her job.
Under both TANF and its predecessor, AFDC, states set the benefit amounts. States generally
have not raised cash benefits sufficiently to offset the effects of inflation. Therefore, the
purchasing power of these benefits has continued to decline.
Table 2 provides TANF cash welfare benefits by state for 2008. In all states, the maximum TANF
benefit pays only a fraction of poverty-level income. States are ranked by the maximum benefit as
a percent of the 2008 poverty thresholds. Alaska is the state with the highest maximum benefit
amount, providing $923 per month for a family of three, about half of the poverty-level income
for that state. Among the 48 contiguous states and the District of Columbia, California has the
highest maximum benefit, paying $723 per month for a family of three, just shy of half of the
2008 poverty threshold. The median state (ranked 26th among the 51 jurisdictions) is New Jersey,
which paid $424 per month for a family of three, 29% of poverty-level income. Mississippi’s
$170 per month for a family of three is the lowest in the nation, representing 12% of poverty-
level income.
Table 2. Monthly TANF Cash Welfare Maximum Benefit Amount
for a Family of Three, 2008
Maximum Benefit as
Maximum a Percent of the 2008
State
Benefit
Poverty Threshold
Alaska $923
50.3%
California 723
49.3
Vermont 709
48.3
New York
691
47.1
New Hampshire
685
46.7
Connecticut 674
46.0
Massachusetts 618 42.1
Maryland 565
38.5
Washington 562
38.3
Rhode Island
554
37.8
Hawaii 636
37.7
South Dakota
539
36.8
Minnesota 532
36.3
Wyoming 506
34.5
Utah 498
34.0
Michigan 489
33.3
Maine 485
33.1
Oregon 485
33.1
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Maximum Benefit as
Maximum a Percent of the 2008
State
Benefit
Poverty Threshold
North Dakota
477
32.5
Montana 472
32.2
New Mexico
447
30.5
Illinois 434
29.6
Kansas 429
29.3
District of Columbia
428
29.2
Iowa 426
29.0
New Jersey
424
28.9
Pennsylvania 421
28.7
Ohio 410
28.0
Virginia 389
26.5
Nevada 383
26.1
Wisconsin 373
25.4
Nebraska 364
24.8
Colorado 356
24.3
Arizona 347
23.7
West Virginia
340
23.2
Delaware 338
23.0
Idaho 309
21.1
Florida 303
20.7
Missouri 292
19.9
Oklahoma 292
19.9
Indiana 288
19.6
Georgia 280
19.1
North Carolina
272
18.5
South Carolina
263
17.9
Kentucky 262
17.9
Texas 244
16.6
Louisiana 240
16.4
Alabama 215
14.7
Arkansas 204
13.9
Tennessee 185
12.6
Mississippi 170
11.6
Source: Center on Budget and Policy Priorities, TANF Benefits are Low and Have Not Kept Pace With Inflation; But
Most States Have Increased Benefits Above a Freeze Level in Recent Years, by Liz Schott and Zachary Levinson,
November 24, 2008.
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The receipt of cash assistance for a family triggers a number of requirements on both the state and
the family. The most visible of these are the work participation standards. This is technically a
requirement for the states: they must have a sufficient number of families engaged in activities
that count toward the work requirements. Though states have some flexibility in how they meet
these standards, these requirements influence the design of state programs and the requirements
and rules that ultimately apply to individuals.
The activities that count toward the work participation standards for adult (aged 20 and older)
recipients reflect a “work-first” focus. Job search is a countable activity for a maximum of 12
weeks in a fiscal year. Education and training is countable for one year in a lifetime. The
remaining activities that count for adult recipients are employment, subsidized employment, on-
the-job training, community service, work experience, and providing child care for the children of
a community service participant. Education beyond the one-year limit may only be countable in
conjunction with those activities more closely associated with work. States are also required to
sanction (penalize) recipients who do not comply with work requirements, though states
themselves determine the sanctions. Thus, the work standards reflect the policy goals of moving
recipients quickly from welfare to work. This recession is likely the first major test of these rules
for a prolonged period of high unemployment and lack of jobs.
States also cannot use TANF funds to assist a family with an adult recipient for more than five
years, though 20% of the caseload can be the rolls for more than five years because of hardship.
Again, this is a requirement on the state, not individuals, and states can use TANF MOE funds to
aid families beyond five years. States have considerable flexibility in implementing the time
limit, but it has influenced the design of state programs and most states do impose a time limit on
welfare receipt.
Additionally, families on TANF cash welfare must assign (legally turn-over) any child support
payments from noncustodial parents to the state. States can pass-through that child support to the
family, but must bear a share of its cost. However, the family is not entitled to receive any child
support owed to it while it is on the cash welfare rolls.
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Historically, the relationship between the cash welfare caseload and economic conditions is not
simple. There have been periods when the number of families receiving cash welfare and the
unemployment rate increased or decreased together. There also have been periods when the trends
in the cash welfare caseload and the unemployment rate have differed. Demographic and policy
changes also contributed to the trends in the cash welfare caseload.
Figure 4 shows trends in the number of families receiving cash welfare and the unemployment
rate for 1959 to 2008. Caseloads rose while unemployment fell during the 1960s. The number of
families receiving cash welfare continued to rise through the recessions of the 1970s, but then
leveled-off after the 1974-1975 recession. They began to rise again during the back-to-back
recessions of 1980 and 1981-82, but fell beginning in October 1981 with policy changes enacted
in the early years of the Reagan Administration. This decline occurred despite continuing
increases in the unemployment rate through 1982. Caseloads again began to rise in 1988,
continued through the 1990-91 recession, and reached their historical peak in 1994. The dramatic
decline in the caseload post-welfare reform occurred amid a booming economy. The caseload
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decline slowed with the economy in 2001. However, national caseloads did not rise during the
(albeit brief and shallow) 2001 recession, the only recession up until this one to occur since the
enactment of the 1996 welfare reform law.
Figure 4. Number of Families Receiving Cash Welfare and the Unemployment Rate,
1959 to 2008
Number of Families Receiving Cash Welfare
Unemployment Rate
6
20
18
5
Number of Families Receiving Cash Welfare
16
14
4
12
3
10
8
2
6
4
1
Unemployment Rate
2
0
0
l-59
-62
-65
-68
71
-77
-80
-83
86
89
l-92
-95
-98
01
04
l-07
Ju
Jul
Jul
Jul
Jul-
Jul-74 Jul
Jul
Jul
Jul-
Jul-
Ju
Jul
Jul
Jul-
Jul-
Ju
Source: Congressional Research Service (CRS) based on data from the U.S. Department of Health and Human
Services (HHS) and the U.S. Department of Labor, Bureau of Labor Statistics (BLS).
In September 2008, the TANF cash welfare caseload of 1.7 million families stood 1.3% below the
September 2007 caseload figure. (Nationally, the caseload reached a low point in July of 2008,
and increased slightly in August and September of 2008. It is unclear whether this is the
beginning of a sustained increase in caseloads.) This is in sharp contrast to the SNAP (food
stamp) caseload, which in September 2008 stood 17% above the previous year’s level.
Though it is not known whether the slight rise in caseloads in August and September 2008
portends a new trend, 16 states had caseload increases from September 2007 through September
2008. California, the most populous state with the largest cash assistance caseload, had a
September 2008 caseload increase of 5.8% over the previous year’s level. Table 3 compares the
September 2008 and September 2007 TANF cash assistance caseload by state, ranked in
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descending order of percentage change in the caseload so that the states with caseload increases
are shown at the top.
Table 3. Number of Families Receiving TANF Cash Assistance, September 2007 and
September 2008
States Ranked in Descending Order of Percentage Caseload Change
Percentage
Change: Sept.
September
September
2007 to Sept.
2007
2008
2008
Massachusetts 46,483
61,700
32.7
Oregon 18,645
22,537
20.9
New Mexico
12,503
14,069
12.5
Delaware 4,034
4,484
11.2
Washington 49,076
54,373
10.8
Florida 46,864
51,012
8.9
Nebraska 6,913
7,477
8.2
South Carolina
14,936
16,119
7.9
California 470,502
497,719
5.8
Maryland 19,630
20,701
5.5
Utah 5,069
5,333
5.2
Ohio 78,129
82,128
5.1
Wyoming 255
260
2.0
South Dakota
2,842
2,887
1.6
Virginia 31,563
31,970
1.3
Maine 12,352
12,355
0.0
Idaho 1,506
1,496
-0.7
Rhode Island
8,107
8,050
-0.7
Hawaii 6,426
6,374
-0.8
North Carolina
24,537
24,294
-1.0
Arizona 36,934
36,467
-1.3
Kentucky 29,492
29,006
-1.6
Arkansas 8,472
8,330
-1.7
Wisconsin 17,824
17,508
-1.8
Alabama 18,104
17,756
-1.9
Indiana 42,058
41,249
-1.9
Montana 3,217
3,136
-2.5
Mississippi 11,658
11,270
-3.3
New Jersey
34,123
32,722
-4.1
New York
156,420
148,548
-5.0
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Percentage
Change: Sept.
September
September
2007 to Sept.
2007
2008
2008
Tennessee 58,244
55,054
-5.5
North Dakota
2,156
2,033
-5.7
Iowa 19,872
18,709
-5.9
Nevada 7,411
6,937
-6.4
Alaska 3,127
2,890
-7.6
West Virginia
9,699
8,928
-7.9
Missouri 39,544
36,359
-8.1
Connecticut 20,322
18,663
-8.2
New Hampshire
4,733
4,324
-8.6
Puerto Rico
12,617
11,488
-8.9
Louisiana 11,023
10,018
-9.1
Georgia 23,600
21,378
-9.4
Kansas 13,892
12,458
-10.3
Colorado 9,355
8,270
-11.6
Michigan 71,892
62,371
-13.2
District of Columbia
6,231
5,346
-14.2
Texas 59,972
51,045
-14.9
Minnesota 26,642
21,015
-21.1
Pennsylvania 60,167
46,895
-22.1
Illinois 26,222
19,034
-27.4
Vermont 4,503
2,934
-34.8
Oklahoma 18,645
7,920
-57.5
Totals 1,728,938
1,705,399
-1.3
Source: Congressional Research Service (CRS) based on data from the U.S. Department of Health and Human
Services (HHS).
Notes: TANF cash assistance caseload includes families receiving assistance from Separate State Programs (SSPs)
other than TANF that have their expenditures counted toward the TANF MOE requirement. Guam currently
does not report caseload data.
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The statutory purpose of TANF is to “increase state flexibility” to achieve the block grant’s goals.
This provides broad authority to spend TANF dollars on a wide range of benefits and services.
These include economic support other than “welfare” to aid families during the recession. In
1999, the Department of Health and Human Services (HHS) published a “TANF Funding Guide,”
that lists allowable uses of TANF funds. Among those uses are:
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• Rental assistance, including security deposits, application fees, and payment of
back rent to avoid evictions;
• Moving allowance and loans to needy families to assist them in obtaining stable
housing; and
• Supplemental Unemployment Compensation programs, to help families
ineligible for regular state unemployment benefits.11
Additionally, much of the types of economic aid discussed above need not trigger TANF
requirements, such as the work participation standards or the time limits. Under HHS regulations,
short-term non-recurrent benefits are not considered cash welfare and thus do not trigger the
requirements that apply to cash welfare. Short-term non-recurrent benefits must be for an
“episode” of need, rather than to meet ongoing needs. They are also limited to a maximum of four
months in a year.
The distinction between short-term non-recurrent benefits and ongoing cash welfare is not in
statute, but was created through HHS regulation. The line between short-term aid and ongoing
cash welfare is also not always clear. The Bush Administration recently issued a program
instruction to states that attempted to restrict some activities states were claiming as “short-term”
benefits; they admonished states against classifying certain aid as “short-term” benefits just to
avoid the work participation standards applying to families receiving it.12 Still, the exemption
from TANF requirements for short-term non-recurrent benefits provides states and families
choices other than ongoing cash welfare to meet some needs.
Another activity states could expand during a recession is subsidized employment. Under HHS
regulations, if a family only benefits from a wage subsidy paid directly to the employer, that
family is not considered to be receiving welfare, and TANF requirements do not apply.
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About half of TANF and MOE funding is not in cash assistance or associated administrative and
work program costs associated with a traditional welfare program. This “other half” of TANF
supports work and provides services that address the root causes or effects of structural poverty—
poverty that exists in good economic times as well as bad, and will still exist when the economy
recovers from its current recession.
One of the key questions facing states is whether to cut other TANF services to pay for increased
recession-related expenditures within TANF. Recession-related costs might stem either from
increases in the cash welfare rolls or through states use of TANF flexibility to provide
“nonwelfare” benefits such as short-term aid or subsidized employment. TANF’s fixed funding
poses this policy dilemma: curtail increases in cash welfare caseloads and not expand other forms
of recession-related aid or cut TANF funding for initiatives launched in better economic times.
These initiatives potentially serve a larger population than does cash welfare, and include items
such as child care (which might be needed to support job search, as well as employment, during
11 The HHS funding guide can be found on the world wide web at http://www.acf.hhs.gov/programs/ofa/resources/
funding_guide.htm.
12 See U.S. Department of Health and Human Services. Office of Family Assistance. Diversion Programs. Program
Instruction TANF-ACF-PI-2008-05 (amended), May 22, 2008.
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the recession), responsible fatherhood programs, marriage education and counseling, and funding
for programs that address child abuse and neglect. Additionally, TANF funds are used to fund
programs and initiatives of recent policy interest. For example, recent research shows the
importance of the very early years of a child’s life in his or her development,13 and TANF helps to
fund early childhood intervention programs, including pre-Kindergarten programs. Additionally,
activities such as after-school programs for teens address a finding in welfare-to-work research
that points to potential issues with adolescent behavior in moving their parents from welfare to
work.14
Funding for these activities are at risk if a state faces increased recession-related costs in its
TANF program. That is, the same “fixed funding” that freed-up money during times of economic
growth for such activities could operate in the reverse.
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The Deficit Reduction Act of 2005 (DRA, P.L. 109-171) extended TANF funding through the end
of FY2010. Therefore, TANF legislation is not needed until FY2010. However, the American
Recovery and Reinvestment Act (ARRA, P.L. 111-5, H.R. 1) makes certain changes to TANF for
recession-related purposes. It also includes non-TANF provisions that affect the “safety net” for
disadvantaged families, particularly changes to UI.15
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In order to provide extra funding during recessions, there are two potential sources of extra
funding: (1) reserve funds, which allow states to save unspent TANF monies in case of a
recession; and (2) a contingency fund. As of September 30, 2007 (the latest available data), TANF
reserves nationwide totaled $1.7 billion, though 12 states held no reserves. Additionally, TANF
spending patterns for FY2008 indicates that these reserves likely diminished during the most
recent fiscal year.
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The TANF contingency fund provides states that meet specified criteria of economic need with
extra, matching grants. The maximum contingency fund grant for a state is 20% of its basic block
grant. As of February 6, 2009, HHS reports that 12 states were drawing or were expected to soon
draw contingency funds: Arizona, Arkansas, Delaware, Massachusetts, Michigan, Nevada, New
York, North Carolina, South Carolina, Tennessee, Washington, and Wisconsin.
The 1996 welfare law established the contingency fund with $2 billion, and at the beginning of
FY2009, $1.3 billion remained in the fund. One issue is whether the $1.3 billion is sufficient to
cover contingency fund costs for the duration of the recession. The Congressional Budget Office
13 James J. Heckman, “Schools, Skills, and Synapses,” Economic Inquiry, vol. 46, no. 3 (July 2008), pp. 289-324.
14 Lisa A. Gennetaian, Greg J. Duncan, and Virginia W. Cox, et al., How Welfare and Work Policies for Parents Affect
Adolescents, MDRC, New York, NY, May 2002.
15 See CRS Report RL33362, Unemployment Insurance: Available Unemployment Benefits and Legislative Activity, by
Julie M. Whittaker.
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(CBO) estimates that the contingency fund will remain solvent through FY2009, but run out of
money in FY2010. However, there is a great deal of uncertainty in this estimate, as the solvency
of the TANF contingency fund depends on whether some large states, particularly California,
access the fund. (HHS reports that New York began accessing the fund for December 2008.) This
is illustrated in Table 4 which shows several scenarios for contingency fund grants and balances
by the end of FY2009.
If only the current 12 states draw contingency funds, the fund would remain solvent through the
end of FY2009. However, if only California joins the current 12 states—and California is
currently economically eligible and is experiencing caseload increases—the fund would become
insolvent by the end of the year. The table also shows that a combination of the current 12 states,
and some other large states could exhaust the fund.
Table 4. Il ustrative Scenarios for the TANF Contingency Fund, FY2009
$ in millions
Balance at
Total
End of
Grants
Year
Current 12 States
988
331
Current 12 States + CA
1,735
-416
Current 12 States Plus Other Large States (Except CA)
1,605
-286
All Currently Eligible States (Includes CA)
2,933
-1,614
All Currently Eligible States Less CA
2,186
-267
Source: Congressional Research Service based on data from HHS
Notes: Other large states represented are the top 10 states ranked based on their basic TANF block grant.
Total grants and balance at the end of the year are hypothetical computations based on numerous assumptions.
Two of these assumptions are as follows. First, that the current 11 states that qualify for contingency funds
continue to qualify for the remainder of the fiscal year and draw contingency funds for all 12 months of the fiscal
year.
A second issue related to the TANF contingency fund is whether it is effective in supporting states
that are experiencing recession-related costs from increased cash assistance caseloads. As shown
above, 16 states experienced caseload increases from September 2007 to September 2008, yet
only four received contingency funds. Eight states drew contingency funds without an increase in
the cash assistance caseload.
The mismatch between states with caseload increases and those drawing contingency funds likely
stems largely from the way the TANF contingency fund state spending requirement operates. The
basic TANF MOE requires states to spend at least 75% of what they spent in FY1994. On the
other hand, the TANF contingency fund requires a state to meet a 100% of FY1994 spending
requirement before it can begin to draw the first matching dollar. It then needs to put up matching
funds to draw down contingency funds. This state spending requirement had been, in the past,
viewed as a steep one, and the major barrier for state access to the contingency fund. However,
the types of expenditures that count toward this state spending requirement are quite broad—they
cover all TANF-type activities except for child care. States may claim human service
expenditures that previously were considered apart from the TANF program as TANF MOE
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expenditures to help them meet the contingency fund state spending requirement, and thus draw
contingency funds. Some states may have such expenditures; other states may not.
The ARRA retains the existing TANF contingency fund, but also creates a temporary new
emergency contingency fund for FY2009 and FY2010. States will receive an additional capped
TANF grant equal to 80% of the increased costs of cash welfare, short-term aid, or work subsidies
in FY2009 and FY2010. Each state’s cumulative, combined funding from both the existing
contingency fund and the new temporary emergency fund for FY2009 and FY2010 is capped at
50% of its annual basic block grant. ARRA provides total funding of $5 billion for emergency
contingency fund grants made in the two years.
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TANF includes supplemental grants that total $319 million for 17 states. The 17 states, mostly in
the South and West, are those with historically high rates of population growth and low welfare
grants per poor person. Under prior law, supplemental grants expire at the end of FY2009. The
ARRA extends supplemental grants through FY2010. Extension of supplemental grants through
the end of FY2010 (when other TANF funding expires) eliminates uncertainty that these grants
will continued to be funded for FY2010.
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States that fail TANF work participation standards are subject to a penalty through a reduction in
their block grant. The penalty is reduced based on how far away they were from achieving their
standard. The HHS Secretary may also reduce the penalty if a state failed the work standards
because they met the economic need criteria of the TANF contingency fund. Most states currently
meet these criteria.
Though there is relief from the financial penalty for failure to meet TANF work participation
standards already in the law, Congress could act to further relieve states from the sanctions for
failure to meet the participation standards. First, HHS has yet to penalize states for failure to meet
the FY2007 or FY2008 participation standards. States that failed these standards would be
penalized through a reduction in FY2009 and later block grants. Congress could either eliminate
or defer these penalties as a response to the recession. Second, Congress could act to either help
states meet the FY2009 and FY2010 standard or eliminate the penalty for failure to meet these
standards because of a recession. TANF’s work participation standards emphasize rapid job
attachment—something more difficult to achieve during a recession. Work rules related to job
search could be further liberalized to account for a deteriorated job market.
TANF’s work standards also include a caseload reduction credit. Under the credit, state work
participation standards are reduced by 1 percentage point for each percent decline since FY2005.
This, together with fixed funding, provides states with an incentive to reduce the caseload. The
ARRA allows states to “freeze” their caseload reduction credit at pre-recession levels. Therefore,
any caseload increases caused by the recession would not reduce the credit, and thus increase
state work participation standards.
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TANF permits states to “reserve” unused TANF grants without fiscal year limit. Before the
enactment of the ARRA, reserve funds were restricted to be used only for the purpose of
providing cash welfare. The ARRA modifies TANF’s reserve fund provision, allowing reserves to
be used to fund any TANF benefit or service.
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As discussed above, one form of flexibility TANF gives states is to provide short-term economic
aid to families and not have it considered “welfare,” and thus not trigger TANF work
participation, time limit, and child support enforcement assignment requirements. These short-
term benefits can be used by states to provide a varied range of economic help to families with
children to respond to specific episodes of need. However, as discussed above, the Bush
Administration issued a program instruction in May 2008 that sought to reign in certain state
practices in designating certain types of aid as “short-term” and thus not subject to the rules of
“welfare.”
The new Obama Administration might consider reinterpreting this provision. Alternatively,
Congress could act and add to the statute a definition of short-term aid. (This issue is not
addressed in the ARRA.)
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The TANF implementing regulations cited above also created a distinction in the rules governing
TANF-funded child care for those who were employed and child care for those not employed.
TANF-funded child care for families not employed operates under the same rules as cash
welfare—it triggers work participation requirements, time limits, and the child support
assignment requirement. TANF-funded child care for families with an employed member does
not operate under these rules. This distinction makes sense from the presumption that TANF-
funded child care for those who are not employed goes to those who also receive cash welfare
and thus are already under these rules. However, that may not always be the case, particularly
given that many disadvantaged families do not receive TANF cash welfare. This distinction poses
a barrier to continue to provide subsidized child care to newly unemployed persons who do not
receive cash welfare.
The welfare reauthorization proposals of 2002 to 2005 generally included language to eliminate
the distinction between TANF-funded child care for employed and not employed. Under these
proposals, unemployed persons could receive TANF-funded child care without triggering the
requirements of welfare. Congress could revive that proposal as a response to the recession. (This
issue is not addressed in the ARRA.)
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Gene Falk
Specialist in Social Policy
gfalk@crs.loc.gov, 7-7344
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This report benefitted from the thoughts and comments of Karen Spar, Karen Lynch, and Thomas Gabe of
the Domestic Social Policy Division of the Congressional Research Service.
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