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Posted October 2003

What is Temporary Assistance for Needy Families?
In 1996, Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act, commonly referred to as welfare reform.  It transformed the Aid to Families with Dependent Children program (AFDC) into a block grant called Temporary Assistance for Needy Families (TANF). AFDC had provided cash assistance to families since 1935, when it was first established under the Social Security Act. The passage of TANF in 1996 made several major changes to welfare law. The primary difference is that welfare was changed from a program that provided cash assistance to needy families to one that required work in return for time-limited assistance.

Who is eligible for TANF?
Individual states have a considerable amount of flexibility in determining who is eligible for TANF, since they are given discretion to set income guidelines. The primary federal requirement is that funds be used for families with children. Around 90% of the adult TANF caseload are women, the vast majority of which are single mothers. Some states may provide TANF funds only for the neediest families, while others may provide particular kinds of assistance, like child care, to working poor families whose incomes are above the TANF eligibility cut-off. Due to massive budget shortfalls, many states are cutting assistance to these families.

How are federal TANF dollars distributed?
Under current law, federal TANF dollars are distributed in the form of block grants, which are lump sum funds allocated to the states. States must also provide funding for welfare programs through a “maintenance of effort” (MOE) requirement, which stipulates that states contribute a minimum level of funding to a program in order to receive federal funding for it. States can use federal funds for several purposes, including cash assistance, child care, transportation, education, and job training.

What are the law’s work requirements?
Under TANF, states must have 50% of welfare recipients in “work-related activities” (also referred to as “allowable” activities or “countable” activities) for a minimum of 30 hours each week. (Single parents with children under six are only required to work 20 hours.) However, the “caseload reduction credit” allows states to have fewer than 50% of recipients in such activities if their welfare caseloads decrease. States can reduce the work requirement rate by the number of percentage points that their welfare caseload has declined since 1995. Despite the break provided by the “caseload reduction credit,” most states report that well over half of their TANF recipients are engaged in work-related activities.

What are considered work-related activities under TANF?
Under TANF, 50% of welfare recipients must be engaged in a total of 30 hours of work-related activities per week. The first 20 hours must be spent in “core activities”—unsubsidized or subsidized employment, community service, on-the-job training, job search and readiness activities (up to six weeks per year), and vocational education (limited to 12 months and only 30% of a state’s caseload, including those earning their high school degree).

The 10 additional hours may be spent in educational or training activities directly related to a job or in any of the core activities mentioned above. Those who have not received a high school degree may spend these 10 hours earning a GED. Many advocates are pushing hard to expand the list of allowable activities to include drug and alcohol treatment and post-secondary education.

Are there time limits for TANF recipients?
The federal government established a 60-month lifetime limit on receipt of welfare assistance under TANF. Under current law, states can use federal dollars to extend benefits beyond this limit for up to 20% of the caseload. Individuals who can be exempted from time limits include those with disabilities, victims of domestic violence, residents of high unemployment areas, or those caring for young children. Twenty-eight states have time limits longer than 60 months, 20 have shorter time limits, and two have no time limits at all.

There is also a “universal engagement” provision in the law, which says that TANF recipients must be engaged in work activities (as defined by the state) within 24 months of receiving assistance. 

Many advocates would also like to see the law changed so that the time period during which certain benefits are received, such as child care or transportation subsidies, is not counted against the 60-month time limit as long as the individual is engaged in work activities.

How much federal funding is provided for TANF on an annual basis?
Since TANF was enacted in 1996, the federal government has provided $16.5 billion in funding for state TANF programs. This funding level is not adjusted for inflation, so its real value fell by more than 11% between 1997 and 2002 (Neuberger, Parrott, and Primus 2002). In 2001, states spent around $18.5 billion on TANF services, some of which went to individuals who were not TANF recipients, such as those whose income put them just above the program’s eligibility level.  At that time, decreasing caseloads left extra dollars from past years that states could access. However, due to increasing caseloads and state budget crises, it’s unlikely that surplus dollars will continue to be available in most states—instead, programs will have to be cut. Already many states are cutting funding for child care, transportation and other work supports. TANF was due to be reauthorized in September 2002, but has instead been extended and re-extended in its current form. It is set to expire again on September 30, 2003.

How much TANF funding goes to child care?
In 2002 the federal government allotted around $4.5 billion in child care funding for the states. Under current law, states must match a significant portion of federal funds as a part of the “maintenance of effort” (MOE) requirement. Child advocates and many state officials agree that current funding is inadequate to meet the needs of families seeking child care assistance. Currently, just 12% of children who are federally eligible for child care subsidies receive them. The Children’s Defense Fund has recommended an annual increase to $20 billion in federal spending. Due to budget shortfalls, states are further cutting child care services by lowering eligibility rates for families, raising parent fees, shuffling more families onto waiting lists, and slashing quality improvement programs.

Are immigrants eligible for TANF?
Immigrants who entered the United States before August 22, 1996 are automatically eligible for TANF.  Those who entered the U.S. after that date can receive assistance through TANF only after they’ve lived in the U.S. for five years. Some states use their own welfare dollars to provide assistance for immigrants who do not qualify for assistance under these guidelines. The nutrition title in the May 2002 Farm Bill restored food stamp benefits (as of October 2003) for immigrant children, regardless of their date of entry to the United States.

The issue of whether or not immigrants are eligible for TANF is often confused by whether or not they have a sponsor. Under “immigrant sponsor deeming,” the sponsor’s income and resources are “deemed” to be accessible to the immigrant, therefore increasing the likelihood that he or she will be ineligible for TANF benefits.

What are “barriers to employment” and how common are they among TANF recipients?
A large number of TANF recipients experience “barriers to employment”—circumstances that make it more difficult (or impossible) to find and maintain a job. The most common barriers include physical or mental health problems, a low level of skills, domestic violence, limited English proficiency, lack of reliable transportation, unaffordable child care, and inadequate housing.

Several organizations have completed studies on the prevalence of barriers to employment among TANF recipients. Here are some of their findings (Goldberg 2002):

• According to a study by the Manpower Demonstration and Research Corporation, 32% of non-employed TANF recipients reported fair or poor health.
• The Urban Institute found that 44% of adults who received assistance in 1999 did not have a GED or a high school diploma.
• Between 15-30% are victims of domestic violence, and between 50-65% have been victims at some time during their lives.

In addition, many welfare recipients experience more than one barrier to employment, thereby compounding the challenges they face in securing employment.

What improvements could be made to address these barriers to employment?
Individuals moving from welfare to work need work supports in order to secure and maintain jobs that pay an adequate wage. For example, women who receive child care subsidies are twice as likely to remain employed after two years than those who do not. And those who receive employer-provided health insurance are 2.6 times more likely to remain employed after two years (Boushey 2002).

Allowing welfare leavers to participate in “barrier removal” activities as part of their “allowable activities” would be an important way to address the challenges faced by millions of women trying to find work. Such activities could include substance abuse counseling, post-secondary education, mental health counseling, and English-as-a-second-language classes (Goldberg 2002).

Has welfare reform been a success?
It depends on who you ask. There is widespread agreement that the economic boom of the late 1990s decreased unemployment among low-income workers (including those moving from welfare to work) and consequently increased wages. However, many still had trouble making ends meet with hourly wages that averaged only around $7. Families still faced significant hardships in the areas of food security, inadequate child care, and insufficient access to housing (Boushey and Gundersen 2001). In sum, while many of these workers experienced wage increases that helped to pull them above the poverty line, they were not enough to allow families to make ends meet.

Today’s weak labor market has had a major impact on the ability of welfare leavers to secure jobs. At the same time, the social safety net that has historically been there to catch them is disintegrating. The jobless rate for low-income single mothers averaged 12.3%, or more than twice the national average. Earnings have declined by about $300 and as a consequence of their lower earnings, the Earned Income Tax Credit benefit levels for this group have also declined (Chapman and Bernstein 2003). States facing fiscal crises are cutting child care subsidies for low-income families, and overall public assistance levels are down. New research also suggests that former welfare recipients who have lost jobs are not receiving unemployment insurance at an adequate rate (Boushey and Wenger 2003). 

What is the current status of welfare reauthorization?
Since last year, Congress has extended the current welfare law through several “continuing resolutions.” These allow ongoing activities for a specific program, generally set at the previous year’s funding level, for a specified period of time. Originally, the law was set to be reauthorized by September 30, 2002, but the House and Senate did not reach agreement on a bill. The House passed a bill that increased the work requirement from 30 to 40 hours while providing no new funding for child care. In January 2003, President Bush introduced a proposal for TANF reauthorization that mirrored the House’s 2002 legislation.  In February 2003, the House once again passed a bill with a 30-hour work requirement and no spending increases for child care. Even in the best economic circumstances, increasing work requirements is a step in the wrong direction.  It is a particularly punitive move as unemployment rates continue to go up, wages drop, and subsidies for work supports like child care are cut.

The Senate has not taken action on TANF this year. Last year, the Senate Finance Committee passed a bill that included restoration of Medicaid benefits for some pregnant immigrants and children, maintained the work requirement at 30 hours, increased child care funding, and would have allowed some welfare recipients to maintain their health insurance after moving off of welfare. The Senate Finance Committee bill never went to the full Senate for a vote, primarily because it became clear that Senators could not reconcile their positions on child care funding. While funding level in the bill was $5.5 billion (an increase of $1 billion), many Democrats were requesting $11.5 billion, and the Children’s Defense Fund has endorsed a funding level of $20 billion. The last continuing resolution will expire on September 30, 2003. Both Democrats and Republicans have said that reauthorization of TANF is a priority for the 108th Congress.

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Sources:

Bernstein, Jared, and Dean Baker. 2003. The Benefits of Full Employment: When Markets Work for People. Washington, D.C.: Economic Policy Institute.

Boushey, Heather, and Bethney Gundersen. 2001. When Work Just Isn’t Enough: Measuring Hardships Faced by Families Before and After Moving From Welfare to Work. Washington, D.C.: Economic Policy Institute.

Boushey, Heather. 2002. Staying Employed After Welfare: Work Supports and Job Quality Vital to Employment Tenure and Wage Growth. Washington, D.C.: Economic Policy Institute.

Boushey, Heather, and Jeff Wenger. 2003. "In the Policy Nexus: Unemployment Insurance Eligibility Before and After Welfare Reform."  Forthcoming working paper. Washington, D.C.: Economic Policy Institute.

Chapman, Jeff, and Jared Bernstein. 2003. Falling Through the Safety Net: Low-Income Single Mothers in the Jobless Recovery. Washington, D.C.: Economic Policy Institute.

Coven, Martha. 2003. An Introduction to TANF. Washington, D.C.: Center on Budget and Policy Priorities.

Goldberg, Heidi. 2002. Improving the TANF Program Outcomes for Families With Barriers to Employment. Washington, D.C.: Center on Budget and Policy Priorities.

National Immigration Law Center. 2002. Guide to Immigrant Eligibility for Federal Programs, Fourth Edition. Los Angeles, Calif.: National Immigration Law Center.

Neuberger, Zoe, Sharon Parrott, and Wendell Primus. 2002. Funding Issues in TANF Reauthorization. Washington, D.C.: Center on Budget and Policy Priorities.

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Posted on October 31, 2003

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