INSIGHTi

Temporary Assistance for Needy Families
(TANF) and Work Requirements
April 25, 2023
The proposed Limit, Save, Grow Act of 2023 (hereinafter, “Limit, Save, Grow proposal”) would alter the
work requirements that apply under Temporary Assistance for Needy Families (TANF). TANF is a broad
purpose block grant, which is best known for helping to fund states’ family cash assistance (sometimes
called welfare).
TANF was created by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (also
known as the 1996 welfare reform law; P.L. 104-193) and is associated with policies that sought to
increase work. The statutory purpose of the TANF block grant is to “increase the flexibility of states” to
meet certain goals, including ending the dependence of needy parents on government benefits through
work, job preparation, and marriage.
TANF’s Mandatory Work Participation Standards and Caseload
Reduction Credit
The main TANF work requirements are numerical performance standards that states must meet. The law
says that a state must engage 50% of all families and 90% of two-parent families receiving assistance in
either work or activities. In turn, it is the states that determine the work participation requirements that
apply to individual recipients. States have adopted work requirements for individuals, some adopting
federal rules for what counts as being engaged in work.
A state can meet its mandatory work participation standard either partially or wholly through reducing the
number of families receiving cash assistance, and thus receiving a caseload reduction credit. Under
current law, states can receive a caseload reduction credit of 1 percentage point for each percent decline in
the caseload not explicitly caused by policy changes that have occurred since FY2005. If a state reduced
the number of families receiving assistance since 2005 by half (50%) or more, it reduced its 50% work
standard to 0%. In FY2021, 32 jurisdictions had a 0% after-credit work standard.
The Limit, Save, Grow proposal would recalibrate the caseload reduction credit, to only count reductions
in the number of families receiving assistance since FY2022. Therefore, if, beginning for FY2026, the
state had not reduced the number of families receiving assistance from FY2022 levels, it would receive a
0 percentage point credit, and face a 50% standard.
Congressional Research Service
https://crsreports.congress.gov
IN12150
CRS INSIGHT
Prepared for Members and
Committees of Congress

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Congressional Research Service
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The caseload reduction credit was a policy purposefully put into place in 1996. However, there are other
provisions and state practices that were not anticipated in 1996 that are, to some, loopholes that weaken
the TANF work standards. Two are addressed in the proposal: excess MOE credits and small checks.
Excess MOE
TANF dollars include both federal and state dollars, with states required to report that a minimum amount
of non-federal dollars are spent on TANF-eligible families. This is known as the maintenance of effort
(MOE) requirement. Under TANF regulations promulgated in 1999, states are given extra credit against
their work participation standard (further lowering the 50% and 90% numerical targets) if they spend
above that minimum amount. The Limit, Save, Grow proposal would override that regulation and end this
practice.
Small Checks
The proposal also seeks to end a state practice of providing small checks to families with working parents
and subsequently counting them toward meeting the work participation standard. In recent years, some
states have created separate programs that provide comparatively small TANF-funded benefits to parents
receiving assistance in the Supplemental Nutrition Assistance Program (SNAP) who are already working.
Funding this small benefit from TANF permits states to count these families as working TANF families,
hence helping them meet their TANF work standard.
Historical Context
Most states were never required to meet TANF’s 50% or 90% participation standards. The standards,
particularly the 50% standard that applies to all families, are round numbers that straddle sending signals
of high expectations and allowing flexibility. Pre-1996 welfare-to-work experiments, sometimes used
today as evidence of the impact of work requirements, did not achieve these participation rates. The single
national standard also does not take into account the differing characteristics of families in state assistance
programs.
The Congressional Budget Office (CBO), writing in 1996, said about the standards:
Most states will be unlikely to satisfy this requirement [TANF work participation standards] for
several reasons. The cost of administering such a large scale work and training program will be high,
and federal funding will be frozen at historical levels.... Some states may technically meet the
required participation requirement without increasing the number of recipients working.
Following 1996, states adopted policies that allowed adult recipients who got a job to stay on TANF
longer and thus count toward their participation rate. Allowing working recipients to stay on TANF longer
could boost participation rates, even if it did not change a recipient’s behavior toward seeking and
obtaining work. The number of families receiving assistance also declined faster than was anticipated.
Some of the decline was a result of fewer people being eligible for benefits, while a comparatively larger
share of the decline was due to a lower rate of receipt of assistance among those eligible.
The changes proposed in the Limit, Save, Grow proposal are similar in character to those enacted in the
Deficit Reduction Act of 2005 (DRA, P.L. 109-171). It also recalibrated the caseload reduction credit,
changing the measurement of caseload change from 1995 forward to 2005 forward. The DRA also
attempted to close certain loopholes that states had used to lessen the effect of the work standard. The
DRA changes did not change the work rates actually achieved by states. Many states reacted to these
changes by (1) taking advantage of other loopholes that previously were little used (excess MOE credits
and small checks, described above) and (2) moving their two-parent families out of TANF/state MOE
spending entirely and into solely state programs to continue to avoid to the 90% standard.

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Congressional Research Service
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Over the longer term, with a recalibrated caseload reduction credit, the number of families receiving
TANF assistance declined further from FY2005.

Author Information

Gene Falk

Specialist in Social Policy




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IN12150 · VERSION 1 · NEW

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