Welfare Reform: TANF Trends and Data

Welfare Reform: TANF Trends and Data

Order Code 98-369 EPW
Updated March 12, 2003
CRS Report for Congress
Received through the CRS Web
Welfare Reform: TANF Trends and Data
Vee Burke
Domestic Social Policy Division
Summary
The shrinkage in U.S. family cash welfare rolls has slowed to a near halt, although
national numbers still are 50% below those of August, 1996, when Congress created the
time-limited and work-conditioned block grant program of Temporary Assistance for
Needy Families (TANF). Under TANF, the nature of the caseload has changed. The
share of recipients who combine welfare and work has risen sharply (from 11% to 26%).
The share of “child-only”cases, which are free of work and time limit rules, has climbed
to 37% and in seven states exceeds one-half of all TANF cases. The number of families
who exhaust their 60-month time limit for federal aid is rising, and states with more than
40% of the nation’s caseload say they use their own funds to continue aid to “timed-out”
families not granted hardship extensions. The smaller caseload holds a rising proportion
of black and Hispanic families. To promote work, programs use tough work sanctions,
liberal work rewards, “Work First” policies, and diversion payments. Many states offer
new services aimed at TANF goals for a broad non-welfare population. Before TANF,
75% of family welfare outlays were for cash benefits, but in FY2001 ongoing basic cash
assistance accounted for only 40% of the total. This report will be updated for new data.
TANF Policy Choices Made by States
P.L. 104-193, which replaced Aid to Families with Dependent Children (AFDC)
with TANF, sets some ineligibility rules and many work rules. States may not use TANF
to assist unwed mothers under 18 unless they live in an adult-supervised setting and, if
a high school dropout, attend school. They cannot give federally funded ongoing basic
aid to a family with an adult member who has received aid for 60 months, and they must
require work, under state definition, as a condition of continued aid after 24 months of
benefits. Otherwise, states are generally free to design their own programs. To avoid loss
of TANF funds, however, the states must engage 50% of most adult recipients in specified
“work activities” for a general average of 30 hours weekly (20 hours for single parents of
preschool children.
Expansionary Policies. More than 30 states have expanded eligibility by
adopting one or more of these policies: ending special eligibility restrictions for two-
parent families, continuing benefits for those who go to work, and increasing asset limits.
Some states made these changes before TANF, under AFDC waivers. About half the
Congressional Research Service ˜ The Library of Congress

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states exempt from work single parents with an infant, and in FY2001 this policy
exempted 7% of adults (a monthly average of 98,600 mothers). All but about 10 states
have adopted the Family Violence Option (FVO), which permits exemption from TANF
rules of victims of domestic violence. To reward work, states generally disregard a
sizable share of earnings for at least a year. In 11 states TANF benefits do not end until
gross earnings exceed or come very close to the 2001 poverty guideline ($1,220 for a
family of three). Ten states ignore from 20% to 67% of all earnings in all months, and
two, 100%, subject to a gross income cap. See TANF Benefits and Earnings Limits in the
CRS Welfare Reform Electronic Briefing Book. New Jersey has launched a supplemental
work support program ($200 monthly payment for up to 2 years for families with earnings
below 250% of the poverty level who withdraw from TANF although eligible for a partial
benefit), and (until June 30, 2003) Montana offers a one-time Work Support Payment
($494) for those who leave TANF with jobs. Further, in a pilot program paid with state
maintenance-of-effort (MOE) dollars, Montana pays income-eligible mothers with a work
history to provide full-time care for their infant child or toddler for up to 24 months.
Restrictive Policies. State policy choices that tend to restrict enrollment include:
time limits shorter than federal limits, tough sanctions, welfare avoidance (diversion)
payments, and family caps (reduced or zero benefits for a new baby in a TANF family).
Some states adopted these policies under AFDC waivers. Twenty-two states have benefit
cutoff limits shorter than 60 months, and almost a dozen require work immediately, rather
than after 24 months (some defining this to include job search, some restricting it to a job
or community service). Some 19 states penalize recipients for their first failure to comply
with required work activities by suspending the family’s whole benefit, sometimes until
compliance, sometimes for specified periods. Under some conditions, eight states end
benefits permanently (see CRS Report RS21070). Pre-TANF law required states to
continue aid for the child(ren). More than 20 jurisdictions impose family caps. Georgia
reports that in FY1999, 3,596 children were subject to these caps, and in December, 2002,
North Dakota reported 276 “benefit cap” children. Two states pay flat benefits for all
family sizes. More than 30 states make lump sum payments that divert some applicants
from enrollment. Recent diversion data: Oklahoma, 107 families, equal to 5.3% of cases
opened, and New Mexico, 25 cases, 1.2% of approved applications (both December
2002); Virginia (January, 2003), 192 cases, 7.7% of cases opened; Minnesota (November)
194 cases; and Washington (July), 348 families. In FY2001, Oklahoma diverted 2,830
families and, in FY2000, Iowa made diversion payments to 304 families. (For details of
state TANF programs, see CRS Report RL30695).
Benefit Levels. According to the fifth annual TANF report, cash benefits averaged
$395 per family in FY2001 (up from $349 in FY2000), and 23% of families had non-
TANF income averaging $593. Of TANF families, 81% received food stamps averaging
$228 monthly, and 20% received subsidized housing. Between July 1996 and January
2002, most jurisdictions did not change their maximum benefit levels; five reduced
benefits (the District of Columbia, Hawaii, Idaho, Oklahoma, and Wyoming), and 18
raised them, but increases exceeded the 11.6% rise in consumer prices in only 8 states.
(See Cash Welfare Benefit Amounts in the Welfare Reform electronic briefing book.)
Two states have adopted bonuses (Oregon for cooperation with its work program and
West Virginia for marriage). Wisconsin and Idaho no longer adjust benefits for family
size. The Wisconsin Works (W-2) program pays flat monthly amounts of $673 for
community service jobs and $628 for W-2 transitional activities (e.g., sheltered
workshops, vocational rehabilitation, parenting, life skills, job skills training).

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TANF Spending. In FY1996, last full AFDC year, spending on AFDC, AFDC-
related child care, Emergency Assistance (EA), and JOBS totaled $30.4 billion ($16.3
billion in federal funds and $14.1 billion in state funds). In FY1998, first full year of
TANF, comparable spending was $21.5 billion (down 29% from 1996), and the average
monthly caseload was down 29% from its 1996 level. Thereafter the cash caseload
continued to shrink (17% in FY1999, 15% in FY2000, 7% in FY2001, and less than 1%
in the first half of FY2002), but spending rose, reaching $21.7 billion in FY1999 and
$25.5 billion in FY2001. Of FY2001 spending, $10.2 billion (40%) was for basic
ongoing cash aid and $3.4 billion (13%) for other cash payments (diversion, tax credits,
and IDA contributions). TANF-funded child care, services, and work activities accounted
for the remaining $11.9 billion. The annual federal TANF grant to states is $16.5 billion,
and states must spend at least $10.4 billion of their own funds each year (MOE rule) on
behalf of TANF-eligible families. On June 30, 2002, states had an unobligated and
unspent TANF balance of $4.5 billion.
Caseload Decline. TANF caseloads declined less than 1% during FY2002 and
stood at 2.0 million in September 2002 (see Figure 1). New York numbers were down
61,000 from a year earlier, but most of the decrease (more than 44,000 families)
apparently represented “timed-out” cases transferred to the state-funded safety net
program. In 24 jurisdictions enrollment topped September 2001 levels. Persons now on
the rolls include rising proportions of minorities, and TANF “families” include a growing
proportion with no adult recipient. The 2001 poverty rate among children in female-
headed families (no spouse present) was 39.3%, 10 percentage points below that of 1996.
Figure 1. AFDC/TANF Families, September
Cases,1989-2002
6,000
5,000
4,000
3,000
2,000
Thousands
1,000
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Many factors have helped to shrink the TANF caseload since 1996, including the “Work
First” culture, the improved economy in the early period, tougher sanctions, the benefit
limit and widespread adoption of diversion practices. Under TANF, not only have
recipients departed from welfare at a faster rate, but (at least until recently) fewer persons
have joined the rolls. For instance, an Illinois study found that annual TANF entries in
the state fell 45% from FY1997 to FY1999, while exits rose by 8%. However, Florida
case closures in January 2003 (8,241) exceeded entries (6,994), most of whom were
returnees, and California closures in November (41,566) topped entries (33,552).

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Rise in Mothers’ Employment. Among families with children that are
maintained by the mother, the share with an employed mother soared from 61.6% in 1994
to 75.5% in 2000, but slipped to 74.5% in 2001, according to the Bureau of Labor
Statistics (BLS). In its 2001 annual report, the Council of Economic Advisers (CEA)
cited an estimate that the Earned Income Tax Credit (EITC) was responsible for 34% of
the rise in annual employment among unmarried mothers between 1992 and 1996. The
poverty rate of children in female-headed families dropped from 52.9% in 1994 to 46.1%
in 1998, 41.9% in 1999, 39.8% in 2000, and 39.3% in 2001.
Time Limits. The General Accounting Office (GAO) estimates that states excluded
11% of adult recipients of TANF cash aid from the federal time limit, as of autumn 2001,
by three means: paying certain recipients with state-only funds (and thereby stopping the
federal time clock), continuing pre-TANF waivers that permit time limit exemptions, and
granting hardship exemptions (see GAO-02-501T). TANF’s 5-year anniversary marks
the earliest date that a family could accumulate 60 months of federally paid benefits, and
it varies by state, generally ranging from October 1, 2001 to July 1, 2002 (January 1, 2003
in California). States may grant hardship extensions of federally paid benefits to 20% of
adult recipients. Further, eight states containing more than 40% of the 1999 national
caseload say they use state funds to continue benefits for cases not granted hardship
extensions (this spending can be credited toward required MOE expenditures). Maine,
Michigan, Maryland, New York, and Vermont continue full benefits (generally in noncash
form in New York), and California and Rhode Island pay reduced benefits (for children
only). A state welfare official estimates that 7-8 % of New York families who reach the
60-month limit receive hardship extensions; the rest are moved into the state-funded MOE
safety net program, which pays TANF level benefits in noncash form. From December,
2001 (month of initial impact of the time limit in New York) to November, 2002, the
estimated monthly number of safety net case transfers rose from about 28,000 to 45,600,
and it appears that one-third of adults receiving aid in New York now are in the state-
funded safety net program. Michigan reports that its January, 2003 caseload included
6,796 cases that had exceeded the federal time limit (but, presumably, were granted
hardship extensions). The California state welfare agency has estimated that more than
115,000 adults will reach the CalWORKs 60-month time limit between January and June
2003 (but county estimates are smaller). Families in 20 states face state-imposed limits
shorter than 60 months (see CRS Report RS21069) but often receive extensions. At the
end of November 2002, for example, 2,570 Connecticut families who had exhausted their
original 21 months of aid received 6-month benefit extensions because they had been
unable to obtain work that paid more than TANF (another 407 families lost eligibility
because of the state time limit – and 9 because of the federal time limit). In February
2003, 4,042 Florida families who had reached the state’s time limit (24 or 36 months)
received extended benefits, some because of unsubsidized employment (under which they
earned a one-month TANF extension for each month of work).
Characteristics of TANF Families
(For details and state data, see the fifth annual TANF report to Congress at
[http://www.acf.dhhs.gov/programs/ofa/indexar.htm]
Marital Status, Race/Ethnicity. In FY2001, 66.9% of TANF adult recipients
were single, 11.7% were married and living together; 12.5% had married, but were
separated, 8.2% were divorced, and 0.8%, widowed. Compared with FY1996, the share

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of TANF children who were Hispanic or African-American rose, and the share who were
white declined in FY2001: white, 25.6% (down from 31.6% in FY1996); African-
American, 40.8% (compared with 38.4%); Hispanic, 27.8% (22.4%). Asians represented
2.7% of TANF children; American Natives, 1.2%; Hawaiian, 0.5%, and unknown race,
1.4%.
Child-only Cases. In child-only cases, which are free of TANF work rules and
time limits, the parent or other relative caretaker is ineligible because of being non-needy,
an illegal immigrant, under sanction, or for some other reason (or, though eligible,
declines TANF). During FY2001, 34.5% of TANF families had no adult recipient. This
compares with 11.6% in FY1990, 21.5% in FY1996, 29% in FY1999, and 34.5% in
FY2000. In seven states, more than one-half of TANF families in FY2001 had no adult
recipient (Alabama, Florida, Idaho, North Carolina, South Dakota, Wisconsin, and
Wyoming). The composition of child-only cases (by status of the caretaker) varies among
states. Examples: Florida (February, 2003) non-needy caretaker relative, 64%; SSI
recipient, 23%; non-citizen, 8.6%; sanctioned, 1.8%, and other, 2.7%; Nevada (January),
non-needy caretaker, 64%; SSI recipient, 15%; non-citizen, 14%, kinship case, 3.5%, and
family preservation plan case, 2.5%; and Minnesota (November), SSI, 51%; non-citizen,
16%; kinship case, 31%, sanctioned, 2%; and other, 1%.
Recipients with Jobs. Under TANF there has been a sharp increase in welfare
plus work. In FY2000 and 2001, 26% of welfare adults were employed (in paid jobs),
more than double the FY1996 rate of 11% (but below the FY1999 rate of 28%). Seven
states had TANF adult employment rates of one-third or higher in FY2001: Hawaii,
Illinois, Indiana, Maine, Michigan, Minnesota, and New Mexico. Available state data
provide more recent employment data. In November 2002, Connecticut says that 13.1%
of TANF families had earnings averaging $7.86 hourly ($799 monthly). This included
30% of families in time-limited cases. Percentages of total TANF families (including no-
adult families) with earnings in some other states: Michigan (January), 24% (39% of
“targeted” cases); Florida (February) 5% (16% of work-required group); Pennsylvania
(January) 14% (35% of work-required group); Oregon (November), 2.1% of 1-parent
families and 8% of 2-parent families; Illinois (November), 16.3% (34% of work-required
group); Indiana (January) 2.8% (8.6% of the work-required group); and Virginia
(January), 19% (55% of work-required group). Some state reports provide work
exemption data. During November, Connecticut exempted 5,196 adults and minor
household heads from work requirements (more than half because of caring for an infant;
in September, Pennsylvania exempted 27% of adult recipients from work requirements,
most because of disability; in February, Florida exempted about 9% of adult recipients
from work, more than half because of being pregnant or incapacitated, and in January,
Massachusetts (under a waiver lasting until September 30, 2005) exempted 89% of the
caseload from work requirements (and 70% from time limits). In November Minnesota
exempted about 16% of caregivers from work activity.
Sanctioned Recipients. The fifth annual TANF report attributes 7.2% of TANF
case closings in FY2001 to sanctions (4.5% were sanctions related to work; 2.7% were
sanctions related to child support, teen parent requirements, or failure to meet an
individual responsibility plan). Sanctions accounted for more than one-fifth of closures
in four jurisdictions: Florida, 26.9%; Idaho, 21.2%; Mississippi, 42% and Oklahoma,
30.9%. However, 8 states reported no FY2001 case closures attributed to sanctions of any
kind: Colorado, Maine, Minnesota, North Carolina, Pennsylvania, Rhode Island,

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Vermont, and Washington). More recent available state data on sanctions: In December,
the proportion of Oklahoma case closures attributed to TANF work refusal/failure was
42%. In February, Florida suspended parental benefits of 645 families (485 for work
violations and 160 for other reasons); the children’s benefits continued. During
November sanctions caused 3% of closures in Connecticut, and 3,773 Minnesota families
were under sanction (most for a repeat violation).
TANF Services for An Expanded Population
States are free to use TANF dollars to offer benefits and services to families
ineligible for ongoing cash aid, provided the services promote a TANF goal. In addition
to traditional welfare goals of helping needy children in their own homes and promoting
self-sufficiency of needy parents, TANF seeks to reduce out-of-wedlock pregnancies and
promote formation and maintenance of two-parent families. In their 2000-2001 plans, 40
states described special programs for at-risk families (some with income limits up to
250% of poverty) and 31 indicated they would offer special services for non-custodial
parents. (The TANF time limit applies only to basic ongoing aid and support services for
the unemployed, not to services generally. Thus, states can use federal funds to help
working poor families without exposing them to time limits.) However, rising state
budget deficits are imperiling some plans for broad services. The single largest TANF-
funded service is child care (federal/state outlays estimated at $4.3 billion in FY2000).
Estimated federal/state TANF spending in FY2000 on various support, rehabilitative, and
preventive services totaled $3.7 billion. Services provided by these funds included
transportation subsidies, parental skill building services, home energy aid, responsible
parenthood counseling, family planning, and numerous others.
Findings about Welfare “Leavers”
State studies explore the circumstances of families who have left welfare: reasons
for departure, employment and earnings, and returns to the rolls. More than 30 leaver
studies completed as of January 2000 show that most families who left TANF or AFDC
waiver programs between 1995 and 1998 did so because of employment. In the quarter
after exit, administrative data indicate that employment rates ranged from 50% to 64%,
but rose to 66%-86% when based upon employment at any time since exit. Studies using
survey data found generally higher employment rates and a broader range, from 35% to
83%, at the time of the survey. Among welfare leavers who worked, survey data indicate
that average hourly wages ranged from $5.50 to $8.16. Annualized (on the basis of
reported weekly or quarterly work hours) their earnings exceeded cash welfare guarantees
in all 22 states studied. For all these leavers, year-round work paid more than welfare.
However, in all but six of the states, income from wages alone would leave a family of
three below the poverty level. Within 1 year of exit or at the time of the leaver study,
from 13% to 36% of leavers returned to welfare. This count excludes “churners,” persons
who returned to welfare almost immediately, within 1 or 2 months of exit. (For a final
synthesis report of 15 HHS-funded studies about welfare leavers, see
[http://aspe.hhs.gov/search/hsp/leavers99/synthesis02/index.htm].)