Temporary Assistance for Needy Families and Related Programs: The President’s FY2017 Budget Proposal

Temporary Assistance for Needy Families and Related Programs: The President’s FY2017 Budget Proposal

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February 25, 2016
Temporary Assistance for Needy Families and Related
Programs: The President’s FY2017 Budget Proposal
Introduction
TANF Financing
Temporary Assistance for Needy Families (TANF) is a
The 1996 welfare reform law “froze” federal and state
broad-purpose block grant to states, Indian tribes, and
funding for TANF. The federal block grant is based on
certain territories to address the effects and root causes of
federal funding for TANF’s predecessor programs in the
child economic and social disadvantage. It was created in
early to mid-1990s and totals $16.5 billion per year for the
the 1996 welfare reform law and is best known for helping
50 states and the District of Columbia; the required
states finance their cash assistance programs for low-
minimum amount of state spending, under what is known as
income families with children, but there is broad discretion
the “maintenance of effort” (MOE) provision, is 75% of
in how funds are spent. President Obama’s Fiscal Year
what states spent in FY1994. The minimum state MOE
(FY) 2017 budget proposes an increase in TANF funding
dollar amount is $10.4 billion per year. The 1996 law also
from current levels and a number of other policy changes.
established a “contingency fund” to provide extra funding
This report provides some background on TANF and a
in the event of a recession. Basic TANF funding has not
description of the President’s FY2017 budget proposals for
been adjusted for changes in circumstances (inflation, child
TANF and related programs.
poverty, cash assistance caseload) that have occurred since
the enactment of the 1996 law. Further, the contingency
Background
fund has not always responded to changes in economic
The debates preceding the 1996 law focused on whether
conditions. (See CRS Report R44188, Temporary
providing cash assistance, mostly to single mothers, created
Assistance for Needy Families (TANF): Financing Issues.)
“welfare dependency,” lessened work effort, and led to an
increase in the number of children living in single parent
In the years after welfare reform, states shifted TANF
families. (Research generally confirmed lessened work
funding from cash assistance to other types of benefits and
effort; results were more mixed for the impact of welfare on
services (Figure 2). From FY1995 to FY2014, the share of
family structure). In March of 1994, the cash assistance
expenditures on basic (cash) assistance fell from $22.8
rolls had reached their historic peak of 5.1 million families.
billion (71% of the total) to $8 billion (26% of the total).
Following the enactment of the 1996 law, the cash
Some expenditures were shifted to increase the amount
assistance caseload declined rapidly, reaching levels that
spent on child care and work activities and supports.
had not been seen since the 1960s (see Figure 1). The
However, in FY2014, $11 billion (34% of total
caseload rose slightly in response to the recession, but then
expenditures) were in the broad “other” category which
fell to stand at 1.6 million families in March 2015.
included services such as pre-kindergarten programs;
programs for disadvantaged youth; and benefits and
Figure 1. Number of Families Receiving Cash
services for families with children who have suffered, or are
Assistance: 1959-2015
at risk of, abuse and neglect.
Figure 2. TANF and Predecessor Program Federal
and State Expenditures, FY1995, FY2000, and FY2014.

Source: Congressional Research Service (CRS), based on data from
the U.S. Department of Health and Human Services (HHS).
Notes: Shaded months denote periods of recession.

Source: Congressional Research Service (CRS) based on data from
The decline in the caseloads in the late 1990s occurred
the U.S. Department of Health and Human Services (HHS).
during a period of declining child poverty. Child poverty
began to increase after 2000 (even before the 2007-2009
TANF and the Federal Budget
recession). Despite this, the cash assistance caseload
In FY2015, federal outlays for TANF totaled $16.7 billion,
continued to fall.
or 0.5% of total federal outlays. Under federal budget rules,
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Temporary Assistance for Needy Families and Related Programs: The President’s FY2017 Budget Proposal
TANF is a mandatory spending program. Federal
spending increases from this proposal would total $636
authorizing law entitles states to a specific grant based on a
million over 10 years, all of which would be in the first five
formula in law. (TANF is not an entitlement to individuals
years. However, in the event of an economic downturn, all
or families.)
$2 billion would be available to states.
As a mandatory spending program, TANF is subject to “pay
Subsidized Employment and Two-Generation
as you go” rules. Spending increases or decreases are
Demonstration
measured from a budget “baseline.” For TANF, this
The budget proposes to fund new “pathways to
baseline represents the dollar amount of the basic block
employment” grants to states to operate subsidized
grant plus the current year’s funding for the contingency
employment programs ($473 million per year); and a
fund. Like the block grant itself, the baseline for TANF
demonstration project to test “two-generation initiatives”
contemplates no increases for inflation, caseloads,
that provide services to both parents and children ($100
population growth, etc. The “pay as you go” rules require
million per year). The cost of these initiatives would be
any proposed increases in TANF spending beyond the
offset by repealing the current contingency fund.
baseline to be offset by corresponding reductions in other
mandatory spending and/or increases in federal revenues.
Policy Changes
Those costs are measured over a 5-year and 10-year period
The President’s budget also proposes a number of TANF
for the purposes of those rules.
policy changes, many of which were subject to discussion
during bipartisan negotiations leading to the release of draft
The President’s FY2017 Budget Proposal legislation by the House Ways and Means Committee in the
President Obama’s FY2017 budget proposes to (1) increase
summer of 2015. (See CRS In Focus IF10315, TANF
funding for the basic block grant; (2) create a new “TANF
Reauthorization: House Ways and Means Committee
economic response” fund to provide counter-cyclical
Discussion Draft of July 10, 2015.) The committee and
funding in the event of a future recession; (3) re-purpose
Congress have not acted on these proposals as of the date of
some existing funds to provide TANF grants for subsidized
this report. The policy changes that the Administration
employment programs and two-generation demonstration
proposes include requiring a minimum amount of TANF
grant programs; and (4) make policy changes to TANF.
and MOE funds to be spent on “core activities” (basic
assistance, work activities, and child care); prohibiting
Basic Block Grant Funding
states from counting donated “third party” (non-state)
The President’s budget proposes what would be the first
expenditures toward the TANF MOE; requiring that all
increase in basic TANF block grant funding in 20 years.
TANF funds be spent on families with incomes of 200% of
For FY2017, funding for basic block grants would be
poverty or below; altering TANF performance
increased by $750 million. Funding would incrementally
measurement related to welfare-to-work activities;
increase through FY2021, when it would be $2.250 billion
providing states with the flexibility to create individualized
above current levels in that year. Based on budget
approaches with families; giving states the flexibility to
documents, this increase would be temporary and in
coordinate with programs under the Workforce Investment
FY2022 grants would revert to their current policy level.
and Opportunity Act (WIOA); and extending the health and
The Administration estimates the cost of the increase in the
safety requirements of the Child Care and Development
basic block grant at $8 billion over the 10-year budget
Block Grant to TANF-funded child care.
window, FY2017 to FY2026 ($7.2 billion in the first five
years).
Related Programs and Initiatives
The President’s budget also proposes $2 billion over 5
How much each state would receive from these funding
years to fund pilot programs testing strategies that provide
increases would depend on the allocation of funds among
emergency aid to families facing an economic distress.
the states. The Administration does not specify a formula
These strategies may include short-term financial assistance
for allocating new funds, saying it hopes to work with
and connection to longer-term supports. In addition to the
Congress on this. Required state spending under the TANF
proposals discussed above, the President’s FY2017 budget
MOE would increase along with federal block grant funds.
would increase funding for state child care programs, with
Indian tribes, whose funding comes out of state allocations,
additional dollars targeted to children aged 0-4; reauthorize
would also see their grants increase in proportion with the
the Assets for Independence Program (AFI), a
increase in state allocations.
demonstration that tests initiatives to provide individual
development accounts to low-income families, with some
Economic Response Funds
new pilot programs such as child savings accounts;
The FY2017 budget proposes a “TANF economic response
establish a pilot program to provide low-income families
fund” of $2 billion. The fund would be available to states
assistance in purchasing diapers; and expand the Earned
with high rates of unemployment, and would be based on
Income Tax Credit (EITC) for “childless” workers,
expenditure increases for basic assistance, non-recurrent
including noncustodial parents.
short-term benefits, and subsidized employment. This is
essentially patterned after the temporary “Emergency
Gene Falk, Specialist in Social Policy
Contingency Fund” that was in place for FY2009 and
FY2010. (See CRS Report R41078, The TANF Emergency
IF10367
Contingency Fund.) The President’s budget estimates

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Temporary Assistance for Needy Families and Related Programs: The President’s FY2017 Budget Proposal

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