The Temporary Assistance for Needy Families (TANF) Block Grant: A Primer on TANF Financing and Federal Requirements

Contents

• Introduction
• Federal Grants and State Funds
• Federal TANF Funds
• Basic Block Grant
• Contingency Fund
• State Funds: the Maintenance-of-Effort, or MOE, Requirement
• TANF Benefits, Services, and Activities
• Using Federal TANF Grants
• Achieving TANF Goals
• "Grandfathered" Activities
• Transfers to Other Block Grants
• Matching for Job Access (Reverse Commuter) Grants
• Counting Expenditures toward the MOE
• TANF Requirements for States When Funds are used to Provide "Assistance"
• Definition of Assistance
• Assistance Provided in the TANF Program or in Separate State Programs
• Federal Eligibility Rules for Assistance
• TANF Work Requirements
• Federal TANF Work Standard
• The TANF Work Participation Rate
• Penalties for States that Fail the Work Participation Standard
• Verifying Work Participation
• The TANF Time Limit
• Child Support Enforcement Requirements
• Special Provisions for Victims of Domestic Violence
• Restrictions on Cash Withdrawals at Certain Establishments
• Rules When TANF or MOE Funds Are Used for Benefits and Services Other Than "Assistance"
• State Accountability
• TANF State Plans
• Data Reporting
• Other TANF Provisions
• Healthy Marriage and Responsible Fatherhood
• Healthy Marriage Promotion Initiatives
• Responsible Fatherhood Initiatives
• Tribal TANF

Summary

The Temporary Assistance for Needy Families (TANF) block grant provides federal grants to the 50 states, the District of Columbia, the territories, and American Indian tribes for a wide range of benefits, services, and activities. It is best known for helping states pay for cash welfare for needy families with children, but it funds a wide array of additional activities. TANF was created in the 1996 welfare reform law (P.L. 104-193). At the federal level, TANF is administered by the Department of Health and Human Services (HHS).

TANF provides a basic block grant that totals $16.5 billion. It also requires states to contribute in the aggregate from their own funds at least $10.3 billion for benefits and services to needy families with children—this is known as the maintenance-of-effort (MOE) requirement. TANF and MOE funds may be used in any manner "reasonably calculated" to achieve TANF's statutory purpose. This purpose is to increase state flexibility to achieve four goals: (1) provide assistance to needy families with children so that they can live in their own homes or the homes of relatives; (2) end dependence of needy parents on government benefits through work, job preparation, and marriage; (3) reduce out-of-wedlock pregnancies; and (4) promote the formation and maintenance of two-parent families.

Though TANF is a block grant, there are some strings attached to the use of its funds. Most TANF requirements apply to families receiving assistance. Assistance is often, but not exclusively, in the form of a cash benefit. Families must be financially needy and have a minor child to qualify for assistance; however, individual states and tribes determine the exact financial eligibility rules and benefit amounts for their programs. Some families have eligible children but the adults who care for their children are ineligible for aid. These are termed "child-only" families because benefits are paid only on behalf of the children.

States and tribes must meet TANF work participation standards or risk a reduction in their block grant. For the states, the law sets standards stipulating that at least 50% of all families and 90% of two-parent families be "engaged in work." Some families receiving TANF assistance are excluded from the calculation. Additionally, these statutory standards are reduced by credits for caseload reduction and state spending in excess of what is required under the TANF MOE. These credits and the effective (after credit) participation targets vary by state and year. Activities countable toward a family being "engaged in work" are focused on employment or working off the cash benefit, or are intended to rapidly attach welfare recipients to the workforce; education and training is countable, but limited. Work requirements for tribal programs are set by negotiation between the tribes operating the program and HHS.

Federal TANF funds may not be used for a family with an adult who has received assistance for 60 months. This is the five-year time limit on welfare receipt. However, up to 20% of the caseload may be extended beyond the five years for reason of "hardship." Each state may have its own definition of hardship. Additionally, funds spent to meet the TANF MOE requirement may be used to provide assistance to families beyond five years.

TANF work participation rules and time limits do not apply to families receiving benefits and services not considered "assistance." Such benefits and services include child care and transportation aid for families with earnings, state earned income tax credits for working families, activities to reduce out-of-wedlock pregnancies, activities to promote marriage and two-parent families, and activities to help families that have experienced or are "at risk" of child abuse and neglect.

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Introduction

The Temporary Assistance for Needy Families (TANF) block grant provides federal grants for a wide range of benefits and activities. It is best known as the major source of funding for cash welfare for needy families with children. However, federal law allows TANF funds to be used for other benefits and services that provide economic help to low-income families with children and to support the goals of reducing out-of-wedlock pregnancies and promoting two-parent families. The TANF block grant was created in the 1996 welfare reform law (P.L. 104-193).

At the federal level, TANF is administered by the Department of Health and Human Services (HHS). TANF programs operate in all 50 states, the District of Columbia, Puerto Rico, Guam, and the Virgin Islands. American Samoa is eligible to operate a TANF program, but has not opted to do so.¹ The Social Security Act designates all these jurisdictions as "states," and thus that term will be used for them in this report.² Federally recognized Indian tribes may also operate TANF programs. Tribal TANF programs are funded through allocations made from the TANF basic block grant to the state in which the tribe offers TANF benefits and services. It is the states and the tribes that provide TANF benefits and services to families and individuals.

This report provides an overview of TANF financing and rules for state programs, describing

• federal TANF grants and state funds under a "maintenance-of-effort" (MOE) requirement;
• how federal TANF and state MOE funds may be used to help achieve the purpose and goals of the TANF block grant;
• rules that apply when TANF or MOE funds are used to provide "assistance" to needy families with children;
• rules that apply when TANF or MOE funds are used for benefits and services other than assistance;
• certain accountability requirements, including requirements that states submit plans and report data to the federal government; and
• provisions of TANF law not directly related to grants to states, such as competitive grants for promoting healthy marriage and responsible fatherhood, and tribal TANF provisions.

For data and statistics on the TANF block grant, see CRS Report RL32760, The Temporary Assistance for Needy Families (TANF) Block Grant: Responses to Frequently Asked Questions. For the legislative history of TANF, see CRS Report R44668, The Temporary Assistance for Needy Families (TANF) Block Grant: A Legislative History.

Federal Grants and State Funds

Under TANF, there are three federal grants³: the basic block, contingency (recession-related) funds, and competitively awarded healthy marriage and responsible fatherhood grants.⁴ States are also required to spend a certain amount of their own funds on specified TANF-related activities for needy families with children. This is known as the maintenance-of-effort or MOE requirement.

Federal TANF Funds

Federal TANF funds are considered "mandatory spending" in the federal budget. The grants are entitlements to the states and tribes—the law entitles them to a specified amount of funding. The law specifically says that TANF does not entitle individuals to benefits and services.⁵

Basic Block Grant

The basic block grant to the states is based on peak expenditures for pre-TANF programs during the FY1992-to-FY1995 period.⁶ The mid-1990s were a period when the cash welfare rolls were at their all-time high; the block grant amount is based on federal expenditures on the cash welfare, emergency aid, and job training programs for cash welfare families that existed in that period. Each state's allocation is based on those expenditures. Tribes operating their own programs within a state are given a portion of the state allocation based on FY1994 expenditures for tribal members in the area to be served by the tribal program. Thus, tribal allocations reduce the amount of the basic block grant payable to the state.

Federal law provides an appropriation for the TANF basic block grant (formally, the State Family Assistance Grant) of $16.567 billion. Beginning with FY2017, 0.33% of that amount is set aside to fund TANF research; that set-aside reduces the amount available for grants to states and tribes to $16.512 billion.⁷ Table 1 shows how that amount is distributed to the states and tribes. As of October 2017, the states received $16.317 billion and tribes received $195 million for FY2018.⁸

Contingency Fund

The fixed basic grant under TANF led to concerns that funding might be inadequate during economic downturns. The 1996 welfare reform law established a $2 billion TANF contingency fund. To draw upon contingency funds, a state must both (1) meet a test of economic "need" and (2) spend from its own funds more than what the state spent in FY1994 on cash, emergency assistance, and job training in TANF's predecessor programs. Contingency funds are only available to the 50 states and District of Columbia. Tribes and the territories are ineligible for contingency fund grants.

For purposes of the TANF contingency fund, a state meets the "economic need" test if

• its seasonally adjusted unemployment rate averaged over the most recent three-month period is at least 6.5% and at least 10% higher than its rate in the corresponding three-month period in either of the previous two years; or
• its Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps)⁹ caseload over the most recent three-month period is at least 10% higher than the adjusted caseload in the corresponding three-month period in FY1994 or FY1995. For this purpose, FY1994 and FY1995 caseloads are adjusted by subtracting out an estimate of participants who would have been made ineligible for food stamps (as the program was then named) under the 1996 welfare law had it been in effect in those years. The major group made ineligible was noncitizens.

Monthly payments from the contingency fund are limited to one-twelfth of 20% of a state's basic block grant, and states may receive these monthly payments on an advance basis. However, the actual amount of contingency funds a state is entitled to for the year depends on (1) how much it spends in advance contingency funds and state funds over the FY1994 threshold, (2) its Medicaid matching rate, and (3) the number of months the state was eligible for contingency funds. A state's annual entitlement to contingency funds is calculated as the Medicaid matching rate times the state's extra spending (above FY1994 amounts) during the fiscal year, prorated by the number of months the state was eligible for contingency funds during the fiscal year.¹⁰ A state that receives more in monthly advances from the contingency fund than it is entitled to for the year must remit overpayments to the federal treasury. A state may not receive more in contingency funds for the year than the total of its monthly advance payments, under an annual cap on contingency funds of 20% of the state's basic block grant.

The original $2 billion in this fund was depleted in early FY2010.¹¹ Since FY2010, Congress has provided appropriations that continue to fund the TANF contingency fund. The FY2017 and FY2018 appropriation for the contingency fund was $608 million for each of the years.¹²

State Funds: the Maintenance-of-Effort, or MOE, Requirement

TANF consolidated and replaced programs that provided matching grants to the states. Under the pre-TANF cash welfare program, federal funding was generally provided at the Medicaid matching rate (between 50% and 83%) to reimburse states for a share of their expenditures in the program.¹³ This meant that there were considerable state dollars contributing to the pre-TANF programs. It also meant that the federal and state shares financing these programs varied by state, as the Medicaid matching rate is higher in states with lower per-capita incomes than higher per-capita incomes.

TANF requires states to spend from their own funds on TANF or TANF-related activities. (There is no requirement that tribes spend their own funds in tribal TANF programs.) For FY2018, states are required in the aggregate to spend at least $10.3 billion on specified activities for needy families with children.¹⁴ The $10.3 billion, called the "maintenance-of-effort" (MOE) level, represents 75% of what was spent from state funds in FY1994 in TANF's predecessor programs of cash, emergency assistance, job training, and welfare-related child care spending.¹⁵ States are required to maintain their own spending of at least that level, and the MOE requirement increases to 80% of FY1994 spending for states that fail to meet TANF work participation requirements (discussed below). State expenditures under this requirement are often referred to as state MOE funds.

Failure to meet the MOE requirement results in a penalty. The penalty is a reduction in the state's subsequent year's block grant by $1 for each $1 shortfall from the required spending level.

Table 2 shows both federal TANF and state MOE funds. The MOE is shown at both the 75% and 80% rates for each state. Also shown is the percent of total federal and state funds in the TANF financial "system" that is accounted for by federal funds. This percentage varies because the Medicaid matching rate used in the pre-TANF programs varied by state. Mirroring the differences in federal shares under the pre-1996 programs, federal funds account for a greater share of total TANF funding in states with low per-capita income compared to those with higher per-capita income.

TANF Benefits, Services, and Activities

Congress decided that TANF was to be named a "block grant" program. A block grant is a grant-in-aid given to states and local governments to address "broad purposes" and typically gives governmental entities discretion in both defining problems and expending funds to address them. In a general sense, TANF meets this definition of a block grant, but it does attach some "strings" to a state's use of TANF funds (discussed below).¹⁶

Using Federal TANF Grants

Federal TANF grants may be used for a wide range of benefits and services for families with children. Grants may be used within a state or tribal TANF program or a portion may be transferred to either the Child Care and Development Block Grant (CCDBG) or the Social Services Block Grant (SSBG). Unused TANF funds can also be reserved (saved), without fiscal year limit.¹⁷

Achieving TANF Goals

TANF allows its basic block grant and contingency funds to be spent "in any manner that is reasonably calculated" to achieve its statutory purpose within its state TANF program.¹⁸ TANF's purpose is to increase state flexibility to meet specified goals.¹⁹ Its four statutory goals are to

• 1. provide assistance to needy families so that children can be cared for in their own homes or in the homes of relatives;
• 2. end dependence of needy parents on government benefits through work, job preparation, and marriage;
• 3. reduce the incidence of out-of-wedlock pregnancies; and
• 4. promote the formation and maintenance of two-parent families.

The four goals of TANF encompass what is usually thought of as traditional cash welfare for needy families with children and work activities for adult recipients in these families. However, the goals also provide authority for funds to be used to provide a wide variety of benefits and services for welfare families and other low-income families with children. TANF funds are used to help support work for low-income families through providing child care or transportation aid. The authority to provide assistance to care for children in the homes of relatives has been used to provide benefits and services to children and families of children who have been, or are at risk of, neglect or abuse and are placed in the care of a relative (e.g., grandparent, aunt, uncle). Further, TANF funds have been used for programs and services aimed at accomplishing the "family formation" goals of TANF (goals three and four listed above, and ending dependence through marriage, which is a component of goal two).

"Grandfathered" Activities

In addition to using funds to promote the purpose and goals of TANF, federal law allows states to use TANF funds to carry out any program or activity that a state had conducted under its pre-1996 programs. This provision permits states to continue activities they undertook under the pre-1996 Emergency Assistance (EA) program to provide help for foster care, adoption assistance,²⁰ and juvenile justice programs.

Transfers to Other Block Grants

Federal law allows up to 30% of federal TANF grants (except contingency funds) to be transferred to the CCDBG and SSBG combined, with a separate limit of 10% of TANF grants (except contingency funds) that may be transferred to SSBG.²¹ Funds transferred to these other block grants become subject to the rules of the receiving block grant (CCDBG or SSBG), and are not subject to TANF rules. However, TANF funds transferred to SSBG must be used for families with incomes below 200% of the poverty line.

Matching for Job Access (Reverse Commuter) Grants

Job access programs are designed to provide transportation assistance for those who need to commute from inner city to suburban areas for their jobs. These programs are targeted to TANF assistance recipients and other low-income individuals. Federal law also allows federal TANF funds to be used as a state match for reverse commuter grants. If federal TANF funds are used for this purpose, it is counted against the state's 30% limit for transfers to CCDBG and SSBG; that is, it reduces the amount of federal TANF funds that could be transferred to those other block grants.

Counting Expenditures Toward the MOE

Most, but not all, benefits, services, and activities that may be funded from federal TANF funds may also be financed by MOE funds. States may count toward the MOE any expenditures made for TANF-eligible families for any program that provides cash assistance, administration, child care, education, and training (though not educational activities for the general population), and other activities to further a TANF purpose. States may also count toward the MOE any expenditures made for the general population on healthy marriage and responsible fatherhood activities.

The major restrictions that apply to MOE (but not federal TANF) funds are

• for benefits, services, and activities that were not a part of the pre-1996 welfare law programs, expenditures count only to the extent that they exceed the FY1995 level of expenditure in the program; and
• expenditures on activities that were part of the pre-1996 welfare law programs that are not aimed to achieve a TANF goal ("grandfathered" activities) are not countable toward the MOE.

There are also certain families that can be provided assistance with MOE funds that cannot be assisted with federal TANF funds. For example, states can provide MOE-funded assistance to families with an adult who received federally funded benefits for more than five years (the TANF time limit). Additionally, states can provide MOE-funded assistance to noncitizens who were made ineligible for federal benefits by the 1996 welfare reform law.

Table 3 provides a brief summary of the types of benefits, services, and activities that may be funded by federal TANF funds and with state MOE funds.

TANF Requirements for States When Funds Are Used to Provide "Assistance"

As discussed above, TANF provides states with broad authority to spend federal and MOE funds on a wide range of benefits and services. Though TANF is a block grant, there are some strings attached to states' use of funds, particularly with regard to families receiving "assistance." As discussed below, TANF funds used for benefits and services that are not considered assistance are generally free of most requirements.

Definition of Assistance

Federal law specified that most TANF requirements apply only with respect to families receiving assistance. Federal TANF law does not define "assistance." However, HHS defines assistance in regulation as payment to families to meet "ongoing basic needs" such as food, clothing, shelter, utilities, household goods, personal care items, and other personal expenses.²² Generally, such payments correspond to what most call cash welfare.

Some states use MOE funds to supplement nutrition assistance benefits provided by the Supplemental Nutrition Assistance Program (SNAP). Some provide MOE-funded nutrition assistance as an earnings supplement for working parents in the SNAP program. Some provide MOE-funded SNAP benefits for noncitizens made ineligible for federally funded SNAP by the 1996 welfare reform law. If provided on an ongoing basis, these nutrition benefits also constitute "assistance."

Further, the regulations define TANF assistance to include child care and transportation aid for nonworking persons. Child care and transportation for working parents are explicitly excluded from the definition of assistance.

Assistance Provided in the TANF Program or in Separate State Programs

As discussed above, states may count toward meeting the MOE requirement their expenditures in any program providing specified benefits and services to TANF-eligible families. Programs other than TANF that contribute toward the MOE are known as "separate state programs." Table 4 summarizes the application of TANF requirements for assistance recipients based on whether a benefit was financed from federal funds, state funds within the "TANF program," or separate state programs. Before FY2007, the major distinction in the rules for using state MOE funds under TANF and separate state programs was that the TANF work participation standards and child support requirements did not apply to families in separate state programs. Beginning in FY2007, work participation standards do apply to families in a separate state program. This leaves the major distinction that child support requirements do not apply to states for families in separate state programs.

Federal Eligibility Rules for Assistance

TANF requires that a family have a minor child to be eligible for assistance, including ongoing cash welfare. TANF law defines a minor child as a person under the age of 18 or age 18 and still in school. Childless individuals and couples are not eligible for TANF assistance, except that assistance can be provided to a family with a pregnant woman. Additionally, a family receiving assistance must be needy—that is, have income below a specified level, though the level is determined by the state.

Federal law also prohibits states from using federal TANF funds to provide assistance to the following persons and families:

• families with an adult who has received federally funded aid for 60 months (see "The TANF Time Limit");
• unwed teen parents, unless living in an adult-supervised setting;
• teens who have not completed high school, unless they are making satisfactory progress toward achieving a high school or equivalent credential or in an alternative training program;
• noncitizens who arrived in the United States after August 22, 1996, for the first five years after arrival;²³
• fugitive felons and parole violators; and
• persons convicted of a drug-related felony, unless the state affirmatively opts out of this provision.²⁴

States that misuse federal TANF funds and assist such persons or families are penalized through a reduction in their block grant. However, states may provide assistance to these persons and families using MOE funds.

Aside from the requirement that TANF assistance be restricted to needy families with children and the listed statutory prohibitions on the use of federal funds, states have broad leeway to define eligibility for TANF cash assistance. States determine actual income eligibility standards (to determine whether a family is needy) and can determine other conditions and criteria for eligibility. States also determine benefit amounts paid to families.

In certain cases, the parent or caretaker relative is ineligible for assistance, but the children in their care are eligible. In these cases, benefits are paid on behalf of the children only; there is technically no adult recipient. These are known as "child-only" families receiving TANF assistance. The most common forms of "child-only" families are those where the parent is a recipient of Supplemental Security Income (SSI), the parent is a noncitizen ineligible for TANF assistance, or the child is being cared for by a nonparent caretaker relative (e.g., grandparent, aunt, or uncle).

TANF Work Requirements

With respect to families receiving assistance, TANF requires states to

• assess each adult recipient's or teen parent's skills, work experience, and employability. The assessment is required to be made within 90 days of determination of the recipient's eligibility for assistance.²⁵
• engage each parent or caretaker adult in "work," as defined by the state, within 24 months of his or her coming on the rolls. For this requirement, the state is free to determine what constitutes being engaged in work.²⁶
• sanction a family with a member who refuses to comply with its work requirements without "good cause." States are free to determine the sanction amount, and whether to reduce benefits or terminate benefits for families that fail to comply with work requirements (a full-family sanction). States also determine what constitutes "good cause" for not complying with work requirements. States are prohibited from sanctioning a family with a single parent with a child under the age of six if he or she refuses to comply with work requirements because he or she cannot find affordable child care.²⁷
• meet numerical work participation standards. TANF sets minimum work participation standards that a state must meet.²⁸ The standards are performance measures computed in the aggregate for each state, which require that a specified percentage of families be considered engaged in specified activities for a minimum number of hours. States are also required to have systems in place to verify work participation of individual recipients.²⁹

The work participation standards apply to states, not individual recipients. Work requirements applicable to individuals, and the financial sanctions on families with individuals who fail to comply with them, are determined by the states. States have considerable latitude in designing work requirements that apply to individuals, as long as the state meets its numerical participation standard.

Federal TANF Work Standard

To comply with TANF requirements, a state must meet two standards each year—the "all-family" and the "two-parent" family participation standards. The standards are that (1) 50% of all families and (2) 90% of two-parent families must meet participation standards. ³⁰ These statutory standards are reduced by "credits" that vary by state and by year. States receive credits for caseload reduction and for spending state funds in excess of what is required under the MOE.

TANF statute includes a caseload reduction credit.³¹ The caseload reduction credit reduces the 50% and 90% standards for a state by one percentage point for each percent decline in the cash assistance caseload from FY2005 levels.³² A state is not given a credit for caseload reduction attributable to more restrictive policy changes made since FY2005.

Under HHS regulations promulgated in 1999, a state may also receive credits for spending in excess of what it is required to spend under the MOE requirement.³³ A state may consider families assisted by excess MOE as "caseload reduction," and hence receive extra caseload reduction credits for such families.

For example, if a state receives a 25 percentage point credit for caseload reduction and excess MOE spending, the statutory all-family standard of 50% is reduced by 25 percentage points—from 50% to 25%. In this example, a state's "effective standard" is 25%. If a state receives a credit of 50 percentage points for caseload reduction and excess MOE spending, its all-family standard is reduced by 50 percentage points—from 50% to 0%.

The TANF Work Participation Rate

To determine compliance with TANF federal work standards, a "work participation rate" is computed and then compared to a state's effective participation standard (i.e., statutory standard reduced by credits). The TANF work participation rate represents the percent of non-excluded families receiving assistance who are considered "engaged in work" during a fiscal year.³⁴

Families Included in the Participation Rate Calculation

Only families with a "work-eligible" individual are included in the calculation of the TANF work participation rate. Under TANF, work-eligible persons are either adults or teen heads of households who are recipients of assistance, or certain non-recipient parents of children receiving assistance who are expected to work. ³⁵

The following adults in TANF or MOE-funded households are not considered work-eligible:

• adult non-recipients who are non-parent caretakers (e.g., grandparent, aunt, uncle);
• ineligible noncitizen parents;
• at state option, parents receiving Supplemental Security Income (SSI);
• parents who are needed in the home to care for disabled family members;
• at state option, parents who are Social Security Disability Insurance (SSDI) recipients; and
• at state option, a parent who became eligible for SSI during the fiscal year.

Additionally, states may exclude from the calculation of the work participation rate (1) families consisting of a single parent caring for an infant, though this exclusion is limited to 12 months in a recipient's lifetime; (2) families being sanctioned, though this exclusion is limited to 3 months in a 12-month period; and (3) families participating in tribal TANF programs.

"Engaged in Work"

Work-eligible individuals must participate in specific activities during a month for a state to count them as "engaged in work" and have the activities count toward the work participation standard. Work-eligible individuals must also participate in activities for a minimum number of hours per week in a month to be considered "engaged in work." In general, single parents with a pre-school aged child (under the age of six) must participate for at least 20 hours per week in a month; other single parents must participate at least 30 hours per week in a month. Two-parent families must participate for more hours to be counted as engaged in work.

Most welfare-to-work activities are on the list of 12 activities that count toward the participation standards, including educational and rehabilitative activities. The statute lists the 12 activities; the Deficit Reduction Act of 2005 (P.L. 109-171) required HHS to define each of the 12 activities. Table 5 shows the 12 TANF work activities and their regulatory definitions.

There are limits on the ability of states to count participation in pre-employment activities such as education, rehabilitative activities, and job search toward the work standards:

• For work-eligible individuals age 20 and older, participation in a GED program counts only if the recipient also participates in activities more closely related to work for at least 20 hours per week. Vocational educational training may be counted only for 12 months in a recipient's lifetime.
• The combination of job search and rehabilitative activities (e.g., rehabilitation from a disability, substance abuse treatment) is limited to a maximum of 12 weeks in a 12-month period.

Teen parents (under the age of 20) may be deemed "engaged in work" through completing high school or obtaining a General Educational Development (GED) diploma.

Penalties for States that Fail the Work Participation Standard

A state that fails to meet the TANF work participation standard is at risk of being penalized by a reduction in its block grant.³⁶ The penalty is a 5% reduction in the block grant for the first year's failure to meet the standard, and increased by 2 percentage points each year (that is, a total reduction of 7% in the second year and 9% in the third year, etc.), up to a maximum penalty of 21%. The law also requires that this penalty be based "on the degree of noncompliance." Thus, actual penalties may be lower than the amounts based on the percentages set in statute.

A state may reduce or avoid penalties for failure to meet their work participation standard through either claiming "reasonable cause" for the failure, or entering into a corrective compliance plan. States in a corrective compliance plan can avoid the penalty if they come into compliance (meet TANF participation standards) within the time frame of the plan.

Further, penalties may be reduced if a state is in recession (based on the contingency fund's indicators of an economically needy state; see "Contingency Fund") or if the noncompliance was due to "extraordinary circumstances, such as a natural disaster or regional recession." Additionally, penalty relief is granted to a state that has failed to comply with participation standards because of waivers of program requirements provided to victims of domestic violence (see "Special Provisions for Victims of Domestic Violence").

Verifying Work Participation³⁷

States are required to have procedures to verify recipients' work participation: identifying who is subject to or excluded from work standards; how a recipient's activities represent countable TANF work activities; and how to count and verify reported hours of work. HHS regulations require that descriptions of these procedures be included in a state work verification plan. States that fail to comply with these work verification requirements are subject to a penalty of between 1% and 5% of the state's block grant.

The TANF Time Limit

States may not use federal TANF funds to provide assistance to a family containing an adult who has received five years (60 months) of assistance.³⁸ The federal TANF time limit does not apply to families without an adult recipient, the "child-only" cases.

The federal five-year time limit is a prohibition on states' use of federal TANF funds, not a direct limitation on how long a particular family may receive welfare. How time limits affect families is determined by states, which have wide latitude in implementing them.

Federal law provides a hardship exception to the time limit, allowing federal funds to be used in cases of hardship for up to 20% of the caseload beyond the five-year limit. Further, federal law explicitly allows a state to use state MOE funds to aid a family beyond the time limit.

TANF penalizes states that have more than 20% of their caseload on the rolls for more than five years.³⁹ The penalty is a 5% reduction in the block grant. Many states have adopted the five-year limit as their own; others have shorter time limits. A few states effectively do not limit the amount of time a family may receive assistance, either providing aid to families beyond five years using state funds (e.g., New York) or eliminating assistance paid on behalf of the family's adults after a time limit and continuing benefits indefinitely only on behalf of the children (e.g., California).

Child Support Enforcement Requirements

Families receiving cash assistance are often headed by a single mother. In most of these families, there is a noncustodial parent who is also likely to be financially responsible for the children's economic well-being. TANF has requirements that assistance recipients cooperate with child support enforcement and assign their child support to the state as a condition of receiving assistance within the TANF program. As discussed in "Assistance Provided in the TANF Program or in Separate State Programs," these requirements do not apply if assistance is provided through a "separate state program."

Families receiving TANF assistance must cooperate with the state in establishing the paternity of a child and in establishing, modifying, or enforcing orders that the noncustodial parent pay child support.⁴⁰ Federal law requires states to penalize families who do not cooperate with child support enforcement requirements by cutting their benefits at least 25%. States could penalize families by more, and even end assistance for failure to cooperate with child support enforcement requirements.

Families receiving TANF assistance must assign (legally turn over) any child support they receive from noncustodial parents to their state as a reimbursement for welfare costs.⁴¹ The federal government and the states split the receipts from assigned child support. A state has the option of passing through assigned child support to TANF families. The federal government shares in the cost of passing through child support paid to TANF families as long as the child support is also disregarded in determining TANF eligibility and benefit amounts.⁴² State expenditures from the pass-through of child support, if disregarded in determining a welfare family's benefit, are countable toward the TANF MOE.

Special Provisions for Victims of Domestic Violence

Federal law provides for an optional certification that a state has procedures in place to screen for and identify victims of domestic violence, refer such victims to supportive services, and waive certain program requirements.⁴³ The program requirements that may be waived include work requirements, the time limit, and cooperation with child support enforcement rules.

Though the state may waive certain program requirements for victims of domestic violence, federal law does not exclude them from the TANF work participation rate standard calculation or from the 20% limit on hardship cases that exceed the five-year time limit. However, HHS regulations allow a state to provide victims of domestic violence a federally recognized good cause domestic violence waiver, and provide that a state would have "good cause" for failing the requirements if that failure was due to providing such waivers.⁴⁴

A federally recognized domestic violence waiver must identify program requirements that are being waived; be granted based on an individualized assessment; and be accompanied by a services plan. These waivers must be reassessed at least every six months.

Restrictions on Cash Withdrawals at Certain Establishments

States generally pay benefits by placing funds on Electronic Benefit Transaction (EBT) cards to be used by recipients making withdrawals from Automated Teller Machines (ATMs) or making purchases at point-of-sale terminals. Federal law requires states to maintain policies and practices to prevent TANF assistance funds from being used in an EBT transaction in liquor stores, casinos or gaming establishments, and strip clubs.⁴⁵ States must prevent TANF cash withdrawals at ATMs in such establishments, and prevent purchases using TANF assistance on EBT cards at point-of-sale terminals in such establishments.

States had two years after the enactment of P.L. 112-96 (enacted February 22, 2012) to implement these policies. Additionally, TANF state plans are required to ensure that recipients (1) would have adequate access to their benefits; (2) would have access to their benefits at minimal fees or charges, including free access; and (3) are provided information on applicable fees and charges.

Rules When TANF or MOE Funds Are Used for Benefits and Services Other Than "Assistance"

As previously discussed, most TANF federal requirements relate to "assistance." However, TANF gives states permission to spend federal funds and count state spending toward the MOE on a wide range of benefits and services other than assistance. Essentially, TANF and MOE funds may be spent on benefits, services, or activities aimed to achieve any of the goals of TANF. Examples of such benefits and services include short-term, non-recurring aid,⁴⁶ child care for families with working members, transportation aid for families with working members, refundable tax credits for working families with children,⁴⁷ funding of Individual Development Accounts (IDAs), education and training for low-income parents, youth employment programs, and activities that seek to achieve the family formation goals (goals three and four) of TANF. Such benefits and services may be provided to families receiving assistance, but also might be provided to other families who have no connection to the cash welfare rolls.

State Accountability

Federal law gives states broad flexibility in designing and implementing state programs operated with TANF and MOE funds. It also requires states to develop plans that outline their intended use of funds and report data on families receiving assistance.

TANF State Plans

States are required to submit state plans every three years as a condition of receiving TANF block grant funds.⁴⁸ The bulk of these plans is an "outline" of the program the state "intends" to operate. The Secretary of HHS cannot disapprove a state plan based on its content. Rather, the role of the Secretary is to determine whether the state has included information on all required elements of the plan. State plans have no set format, and vary greatly in their content and detail.

State plans are not required to have—and often do not have—information on basic financial and nonfinancial eligibility rules for TANF assistance. For example, a state is not required to provide information on income eligibility rules, treatment of earnings, or information on its time limit in the state plan. Some eligibility information is collected for programs funded with MOE dollars in annual program reports, but it is not of the detail necessary to describe, for example, the maximum amount of earnings a family may have and still remain eligible for TANF assistance.

Data Reporting

TANF law and regulations require states to provide information on families receiving assistance.⁴⁹ States must provide both caseload counts and family- and recipient-level information on families receiving assistance. Family- and individual-level information that states must report includes basic demographic information, the work activities hours of adults, and the financial circumstances of families and individual recipients receiving assistance. Neither caseload counts nor characteristic information is required to be reported for families receiving TANF-funded benefits and services that are not considered assistance. P.L. 112-96 requires the Secretary of HHS to issue a rule to create standards for data required to be reported under TANF to better facilitate its exchange with other data systems.

Other TANF Provisions

Healthy Marriage and Responsible Fatherhood

TANF also provides funding for healthy marriage promotion, demonstration projects to test the effectiveness of Indian tribal governments in coordination of child welfare services, and responsible fatherhood initiatives.⁵⁰ Total annual funding of $150 million has been provided for healthy marriage and responsible fatherhood initiatives. Since FY2011, the $150 million appropriation has been divided by $75 million for responsible fatherhood initiatives and $75 million for healthy marriage initiatives. Any funds allocated for tribal child welfare coordination demonstrations would equally reduce the $75 million allotted for healthy marriage and responsible fatherhood initiatives.⁵¹

Healthy Marriage Promotion Initiatives

The healthy marriage promotion initiative funds (1) awards by HHS to public or private entities to conduct research and demonstration projects; and (2) technical assistance to states, Indian tribes and tribal organizations, and other entities. The activities supported by these initiatives include

• programs to promote marriage in the general population, such as public advertising campaigns on the value of marriage and education in high schools on the value of marriage;
• education in "social skills" (e.g., marriage education, marriage skills, conflict resolution, and relationship skills); and
• programs that reduce the financial disincentives to marry, if combined with educational or other marriage promotion activities.

Applicants for marriage promotion grants must ensure that participation in such activities is voluntary and that domestic violence concerns are addressed (e.g., through consultations with experts on domestic violence).

Responsible Fatherhood Initiatives

Allowable activities under responsible fatherhood initiatives include those to promote marriage; teach parenting skills through counseling; mentoring, mediation, and dissemination of information; employment and job training services; media campaigns; and development of a national clearinghouse focused on responsible fatherhood.

Tribal TANF

Federally recognized Indian tribes and certain Alaskan Native organizations have the option to operate their own TANF programs for needy families with children.⁵² Tribes are entitled to receive a grant equal to the amount of FY1994 federal expenditures in pre-TANF programs attributable to Indian families residing in the area to be served by the tribal program. This is financed by a reduction in the state's block grant amount. States may, but are not required to, provide tribes with MOE funds.

Tribes seeking to operate TANF programs must submit plans to the Secretary of HHS for approval. The Secretary of HHS—with the participation of the tribes—establishes work requirements and time limits for each tribe operating its own TANF program.

Additionally, tribes that operated pre-TANF work and education programs are provided grants to operate tribal work programs that total $7.6 million per year. The amount of each grant equals what the tribe received in FY1994 under pre-TANF programs.

Author Contact Information

Footnotes

1.	American Samoa was also eligible to operate the pre-1996 program, Aid to Families with Dependent Children (AFDC), but did not have such a program.
2.	Section 1101(a)(1) of the Social Security Act.
3.	TANF has included additional funds in earlier years. For a discussion, see CRS Report R44188, Temporary Assistance for Needy Families (TANF): Financing Issues.
4.	The territories may also qualify for additional funds under Section 1108(b) of the Social Security Act that they can use in their TANF or Title IV-E Foster Care, Adoption Assistance, and Guardianship Assistance programs.
5.	Section 401(b) of the Social Security Act says that "This part [TANF] shall not be interpreted to entitle any individual or family to assistance under any State program funded under this part."
6.	Current TANF law provides that each state's family assistance grant is based on the same share of total funds the state received of the total amount in FY2002. Through FY2016, this resulted in the same grant as was provided in the original welfare reform law (P.L. 104-193), which had a formula that was based on historical expenditures in the pre-TANF programs. Under the original formula, the national total state grant and each state's individual grant was based on the federal share of expenditures in the pre-1996 AFDC, Emergency Assistance (EA), and Job Opportunities and Basic Skills (JOBS) training programs. The formula entitled each state to the greatest of the average federal share of expenditures in these programs for FY1992 through FY1994; the federal share of expenditures for these programs in FY1994, adjusted for states that amended their EA programs in FY1994 or FY1995; or the federal share of expenditures for these programs in FY1995. The FY1994 adjustment for EA program amendments is the amount by which the federal share of EA expenditures in FY1995 exceeded that of FY1994. Beginning in FY2017, this amount is reduced by a 0.33% set-aside for TANF-related research activities.
7.	The set-aside for TANF-related research was enacted in the Consolidated Appropriation Act 2017, P.L. 115-31.
8.	Tribes may opt to begin—or end—tribal TANF programs at any time. Thus, the allocation between the tribal family assistance grants and the State Family Assistance Grant that is payable to the state might change.
9.	For a description of SNAP, see CRS Report R42505, Supplemental Nutrition Assistance Program (SNAP): A Primer on Eligibility and Benefits.
10.	For example, if a state was eligible for contingency funds for three months in a fiscal year, its proration factor would be one-fourth (three-twelfths). If it was eligible for contingency funds for six months in a fiscal year, its proration factor would be one-half (six-twelfths). A state eligible for contingency funds all year would not have its annual entitlement to funds prorated (i.e., it would receive the full amount).
11.	For FY2009 and FY2010, states were able to draw additional TANF funds from a temporary "emergency" contingency fund.
12.	Section 230(b) of P.L. 114-113.
13.	In the pre-1996 welfare law program, most administrative costs were reimbursed at a 50% rate (though some expenditure on data systems was reimbursed at a 90% rate). TANF also consolidated funding from two other programs: the Emergency Assistance program, which had a 50% matching rate, and the Job Opportunity and Basic Skills (JOBS) training program, which used the Medicaid matching rate but had a 60% (not 50%) minimum match.
14.	The TANF MOE for a state is reduced when the state family assistance grant payable to the state is reduced because a tribe opts to operate a tribal TANF program within the state. (See regulation at 45 C.F.R. §263.1(b).) States may also count toward their MOE any state funds provided to a tribe operating a tribal TANF program. See TANF-ACF-PA-2000-04, Guidance concerning State Maintenance-of-Effort (MOE) funds paid to a Tribe with an Approved Tribal Family Assistance plan), November 27, 2000.
15.	Some TANF MOE expenditures can also be counted toward meeting a separate child care "MOE" as part of the state spending requirements for the Child Care and Development Block Grant (CCDBG) matching grants. The maximum amount of funds that may be "double-counted" toward both the TANF and child care MOE requirements is $888 million, equal to the greater of FY1994 or FY1995 state expenditures in the pre-1996 child care programs. Analysis of combined federal and state funding or expenditures under the TANF and child care block grants must recognize that some state spending can be double-counted or it will overstate the amount of funding available or the amount of spending from the two block grants. The minimum amount of TANF MOE funds that cannot be double-counted toward CCDBG matching requirements is $9.5 billion.
16.	For a general discussion of block grants, see CRS Report R40486, Block Grants: Perspectives and Controversies.
17.	Before the enactment of the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5), reserved funds could only be used for the purpose of providing "assistance" (often, cash welfare). The ARRA eliminated this restriction to the use of reserve funds, so that reserve funds can be used to provide any allowed TANF benefit or service.
18.	Section 404(a)(1) of the Social Security Act.
19.	The TANF purpose is in Section 401(a) of the Social Security Act.
20.	These would be foster care and adoption assistance cases that are ineligible for other federal financing from programs under Title IV-E of the Social Security Act.
21.	The original welfare reform law (P.L. 104-193) set the limit on transfers from TANF to SSBG at 10% of the TANF block grant. P.L. 105-178 (Transportation Equity Act for the 21st Century) reduced funding for SSBG and the transfer authority from TANF to SSBG to 4.25%, effective FY2001. However, annual appropriation bills and temporary extension legislation (that continued TANF on the terms of previous years) have provided for a 10% transfer limit for FY2001 and each subsequent fiscal year.
22.	The regulatory definition of assistance is found at 45 C.F.R. §260.31.
23.	This prohibition is not found in TANF law itself, but was enacted in Title IV of the 1996 welfare law (P.L. 104-193), which generally set rules for noncitizens' access to publicly funded benefits.
24.	This prohibition is also not in TANF law itself, but was enacted in Section 115 of the 1996 welfare law (P.L. 104-193), and applies to both TANF and the Supplemental Nutrition Assistance Program (SNAP).
25.	Section 408(b)(1) of the Social Security Act.
26.	Section 402(a)(1)(A)(ii). This requirement is a part of the TANF state plan, and there is no specific penalty for a state that fails to engage a parent or caretaker in work by the 24-month deadline.
27.	Section 407(e) of the Social Security Act.
28.	Section 407(a) of the Social Security Act.
29.	Section 407(i) of the Social Security Act.
30.	Section 407(a) of the Social Security Act.
31.	Section 407(b)(3) of the Social Security Act.
32.	Before FY2007, a state was given a caseload reduction credit of one percentage point for each percent decline in the TANF caseload that occurred from its FY1995 (pre-welfare reform) level.
33.	These regulations are at 45 C.F.R. §261.43.
34.	Under the TANF statute (Section 407(a) of the Social Security Act), a participation rate is calculated for each month. The fiscal year participation rate is the (simple) average of the participation rates for each month.
35.	Before October 1, 2006, all families without an adult recipient were excluded from the work participation rate calculation. The Deficit Reduction Act of 2005 (P.L. 109-171) required HHS to issue regulations to determine the circumstances under which a family with a non-recipient parent must be included in the work participation rate calculation. The HHS regulations generally require that states include the following types of families without an adult recipient in the work participation rate calculation: (1) except for three months in a 12-month period, families subject to a sanction that removes the adult from the TANF assistance unit; and (2) families that reach state time limits that remove the adult from the TANF assistance unit but continue aid on behalf of the family's children.
36.	Section 409(a)(3) of the Social Security Act.
37.	Section 407(i) of the Social Security Act.
38.	Section 408(a)(7) of the Social Security Act.
39.	Section 409(a)(9) of the Social Security Act.
40.	Section 408(a)(2) of the Social Security Act.
41.	Section 408(a)(3) of the Social Security Act.
42.	The amount of the pass-through that the federal government will share the cost of is limited to $100 for a family with one child and $200 for families with two or more children.
43.	Section 402(a)(7) of the Social Security Act.
44.	See regulations at 45 C.F.R. §§260.50-260.59.
45.	Section 408(a)(12) of the Social Security Act.
46.	Non-recurrent short-term aid is defined in regulations (45 C.F.R. §230.31(b)(1)) as benefits that (1) are designed to deal with a specific crisis situation or episode of need; (2) are not intended to meet recurrent or ongoing needs; and (3) will not extend beyond four months.
47.	HHS regulations provide that refundable state earned income tax credits are not considered assistance. It should be noted that only the "refundable" portion of a state tax credit may be financed through either federal TANF or MOE funds. That is, the portion of the tax credit that exceeds a family's state tax liability and requires a payment (expenditure) from the state treasury may be financed via TANF. Tax credits that reduce a family's tax liability are not allowable uses of federal TANF funds nor are they countable toward the MOE.
48.	Section 402 of the Social Security Act.
49.	Section 411 of the Social Security Act.
50.	Section 403(a)(2) of the Social Security Act.
51.	These grants were established by the Deficit Reduction Act of 2005 (P.L. 109-171). For FY2006 through FY2010, up to $50 million per year was allocated for responsible fatherhood initiatives, up to $2 million per year for Indian child welfare, and the remainder (a minimum of $98 million per year) allocated to healthy marriage initiatives.
52.	Section 412 of the Social Security Act.