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78–760 2013

STATE TANF SPENDING AND ITS IMPACT ON 

WORK REQUIREMENTS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HUMAN RESOURCES 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MAY 17, 2012

Serial No. 112–HR13 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

RICK BERG, North Dakota 

DIANE BLACK, Tennessee 

TOM REED, New York 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

JENNIFER SAFAVIAN, Staff Director 

JANICE MAYS, Minority Chief Cousel 

SUBCOMMITTEE ON HUMAN RESOURCES 

GEOFF DAVIS, Kentucky, Chairman 

ERIK PAULSEN, Minnesota 

RICK BERG, North Dakota 

TOM REED, New York 

TOM PRICE, Georgia 

DIANE BLACK, Tennessee 

CHARLES W. BOUSTANY, JR., Louisiana 

LLOYD DOGGETT, Texas 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

JOSEPH CROWLEY, New York 


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C O N T E N T S 

Page 

Advisory of May 17, 2012, announcing the hearing ............................................. 2 

WITNESSES 

Ms. Kay E. Brown, Director, Education, Workforce, and Income Security, 

U.S. Government Accountability Office, testimony ........................................... 7 

Mr. Grant Collins, Senior Vice President for Workforce Services, ResCare, 

testimony .............................................................................................................. 31 

Ms. Carol Cartledge, Director, Economic Assistance Policy Division, North 

Dakota Department of Human Services, testimony .......................................... 40 

Mr. Peter Palermino, TANF Administrator, Connecticut Department of Social 

Services, Representing the American Public Human Services Association, 

testimony .............................................................................................................. 49 

Dr. LaDonna Pavetti, Ph.D., Vice President for Family Income Support Policy, 

Center on Budget and Policy Priorities, testimony ........................................... 57 

SUBMISSIONS FOR THE RECORD 

The Honorable Erik Paulsen .................................................................................. 77 

American Public Human Services Association ...................................................... 85 

Boys and Girls Clubs of America, Brian Manderfield .......................................... 88 

Center for Fiscal Equity .......................................................................................... 91 

Center for Law and Social Policy ........................................................................... 94 

Coalition of CA Welfare Rights Organizations ...................................................... 99 

Washington State .................................................................................................... 104 


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STATE TANF SPENDING AND ITS IMPACT ON 

WORK REQUIREMENTS 

THURSDAY, MAY 17, 2012 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON HUMAN RESOURCES, 

Washington, DC. 

The subcommittee met, pursuant to call, at 2:55 p.m., in Room 

1100, Longworth House Office Building, the Honorable Geoff Davis 

[Chairman of the Subcommittee] presiding. 

[The advisory of the hearing follows:] 


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HEARING ADVISORY 

Davis Announces Hearing on State TANF 

Spending and Its Impact on Work Requirements 

Thursday, May 17, 2012 

Congressman Geoff Davis (R–KY), Chairman of the Subcommittee on Human Resources of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing to review State spending requirements in the Temporary Assistance for Needy Families (TANF) program and their interaction with 

TANF work requirements. The hearing will take place on Thursday, May 17, 

2012 in 1100 Longworth House Office Building, beginning at 2:00 P.M. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. Witnesses will include a representative 

from the Government Accountability Office (GAO) as well as other public and private sector experts on State TANF spending policy and practice. However, any individual or organization not scheduled for an oral appearance may submit a written 

statement for consideration by the Committee and for inclusion in the printed 

record of the hearing. 

BACKGROUND: 

The Temporary Assistance for Needy Families (TANF) program is designed to end 

the dependence of needy families on government benefits by promoting work, marriage, and personal responsibility. Unlike its predecessor, Aid to Families with Dependent Children, which was primarily a cash welfare program for poor families 

with children, the 1996 welfare reform law created TANF to fund a variety of services to help low-income parents get jobs and become self-sufficient. 

States are required to engage 50 percent of adults in TANF families in work activities such as employment, on-the-job training, job search, and vocational education. In addition, States are required to spend a certain amount of State money 

(based on past State spending on low-income programs) to receive full Federal 

TANF block grant funds, called the State ‘‘maintenance of effort’’ or MOE requirement. However, recent reports indicate a rising number of States appear to be 

counting other State program spending and even non-State third party spending as 

TANF MOE spending. For example, a number of States now count volunteer hours 

as TANF MOE by multiplying volunteer hours by an estimated wage rate and then 

reporting this as ‘‘spending’’ in the TANF program. This evolution has also resulted 

in some States reporting significant ‘‘excess MOE’’ spending, which under a 1999 

regulation allows States to reduce the share of welfare recipients expected to work 

in exchange for TANF benefits. 

According to a September 2011 GAO report, in fiscal year 2009, 32 states claimed 

at least some ‘‘excess MOE credits.’’ Of those 32 states, 17 states would have failed 

to meet their work participation requirements without these credits, resulting in the 

loss of Federal TANF funds. 

The American Recovery and Reinvestment Act of 2009 (ARRA) created a new onetime $5 billion funding stream for States called the TANF Emergency Fund, available in FYs 2010 and 2011. Under the Emergency Fund, States received 80 percent 

reimbursement for their increased spending on cash assistance, subsidized employment, and one-time benefits provided to needy families. The availability of this new 

funding may have been one of the factors that spurred States to identify and report 

further increases in spending, a number of which relied on the counting of thirdparty expenditures as State MOE spending to qualify for this funding. Additional 

factors may have been States’ desire to increase MOE spending in order to receive 

funding from the TANF contingency fund and to respond to changes in the Deficit 

Reduction Act. 


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In announcing the hearing, Chairman Davis said, ‘‘Welfare reform in the 1990s 

established a new partnership between States and the Federal Government 

to help families move from welfare to work. In exchange for flexibility in 

operating the program, States agreed to meet Federal requirements to engage families in work activities and to continue investing State dollars for 

this purpose. However, recent reports suggest that these two key principles 

of reform may not be working as intended. The hearing will review this 

issue to ensure the Federal-State partnership continues to work toward 

helping families become self-sufficient.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on TANF State MOE spending requirements and their 

interaction with TANF work requirements. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you 

would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance 

with the formatting requirements listed below, by the close of business on 

Thursday, May 31, 2012. Finally, please note that due to the change in House 

mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House 

Office Buildings. For questions, or if you encounter technical problems, please call 

(202) 225–1721 or (202) 225–3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST 

NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised 

that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit materials 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov

f 

/. 


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Chairman DAVIS. Good afternoon. Before we get started, I want 

to thank all of our witnesses and our guests for your patience. The 

voting schedule is not always coordinated with the Human Resources Subcommittee, and we had a little bit of a delay in the last 

vote series, so thank you for your flexibility. Or, as we used to say 

in the Army, parroting that Marine motto, Semper Gumby. 

Our hearing today reviews a key provision of welfare reform: 

State spending requirements and their impact on work requirements. As part of welfare reform in 1996, States were given a Federal block grant for the Temporary Assistance for Needy Families, 

or TANF, program, which maintains Federal spending on welfare— 

or maintained record Federal spending on welfare. At the same 

time, States were allowed to reduce State spending to as little as 

75 percent of prior levels under maintenance of effort, or MOE, requirements. This requirement was meant to ensure continued Federal-State partnership in helping families move from welfare to 

work. But now there is cause for concern that in some States, this 

financial partnership is becoming a more one-sided proposition, 

with States no longer matching Federal spending reliably as they 

once did. 

Ironically, recent official data from the Department of Health 

and Human Services, including fiscal year 2011 data published yesterday, appears to suggest States have been increasing their own 

TANF spending rapidly. As this graph shows on the monitors, since 

2005, States have reported spending almost one-third more on 

TANF, including during and after the Great Recession; however, 

what appears to be behind this growth is not actual increases in 

State TANF spending, but rather increased State reporting of 

TANF spending, including spending by third parties that States 

are now claiming as their own. 

Why would States choose to start reporting more TANF spending? There are several reasons. First, under 1999 regulations, 

States can reduce the share of adults they must engage in work if 

they spend more than required. These, quote, ‘‘excess MOE credits,’’ closed quote, have attracted greater State interests since work 

requirements were strengthened in the Deficit Reduction Act 

signed into law in early 2006. 

The most recent data suggests 16 States used excess MOE credits to satisfy work requirements, effectively reducing the share of 

adults on TANF that are expected to work or train in order to 

maintain TANF benefits. 

Second, other sources of Federal TANF spending, the ongoing 

contingency fund and the one-time welfare emergency fund created 

in the 2009 stimulus law, require increased levels of State spending. So to get more Federal funds, States had to spend more State 

dollars, or at least report that they were doing so. 

This slide, taken from a presentation given to State TANF Directors at a December 2006 conference, illustrates how the hunt for 

MOE has been on, and it appears to be behind some reported increases in State TANF spending. 

Many States have scoured their budgets to find other current 

spending programs, such as for pre-K, child care, and after-school 

programs, that they could report as TANF spending. This went further to, if you will, the salesman working the plan to gain maxVerDate Mar 15 2010 01:04 Mar 09, 2013 Jkt 078760 PO 00000 Frm 00008 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78760.XXX GPO1 PsN: 78760

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imum advantage within the context, if outside the spirit, of the regulation law. Others began counting third-party spending such as 

assistance offered by food banks and Boys and Girls Clubs as 

TANF spending. One State even apparently found a way to count 

the value of volunteer hours by Girl Scout troop leaders as State 

TANF spending. 

I want to be clear that this is not illegal, but that doesn’t make 

it right. States’ ability to claim such a broad range of items as 

TANF spending, as well as the availability of excess MOE credits 

when they do so, have eroded key features of the Federal-State 

partnership in place since 1996. 

Today’s hearing will review these issues and consider whether 

the law should be adjusted to ensure TANF continues to meet its 

goal helping low-income parents find and keep jobs. 

We have an excellent panel of witnesses joining us today to review these issues, which are colleagues on both sides of the aisle. 

I look forward to working with all of our colleagues and invited 

guests on this as we consider TANF reauthorization later this year. 

Chairman DAVIS. With that, I would like to yield to my friend 

and ranking member, Mr. Doggett from Texas, for 5 minutes. 

Mr. DOGGETT. Thank you, Mr. Chairman. 

As one who supported the 1996 welfare reform legislation, I welcome this opportunity to examine how well the States have been 

fulfilling their obligations under that legislation. Having seen more 

than a few examples of mismanagement of Federal tax dollars by 

State officials in my home State of Texas, I fully appreciate the 

value and the necessity of strong oversight. 

But we also need to focus on how decisions made here in Washington are affecting all of the programs that vulnerable Americans 

depend upon, whether we have a safety net that is so frayed that 

it is all hole and no net. 

TANF is supposed to be a partnership between the Federal Government and the States. Unfortunately, both ends of that partnership seem to be fraying and, along with it, the protection that millions of poor families rely upon. 

Last year, the House Republicans targeted the 17 mostly highpoverty States for cuts in TANF by refusing to extend, without any 

justification I ever heard, the so-called Supplemental Grant Program. That includes my home State of Texas, which already had 

one of the lowest amounts of Federal TANF funding in the entire 

country relative to the number of poor children. The end of these 

grants amount to a loss of about $53 million every year. According 

to the Center for Public Policy Priorities in East Austin, this has 

meant fewer funds were available in Texas for preventing high 

school dropouts and child abuse and neglect. 

All of the Texas miracle stuff that we have heard so much about 

has done very little to those who are caught in poverty. Only last 

week House Republicans enacted from—approved here in the 

House a highly partisan bill that would completely eliminate the 

Social Services Block Grant. That is the loss of another $137 million to assist low-income families and protect vulnerable children 

in Texas, as well as senior citizens. 

Today, we are likely to hear that some States also may be withdrawing their support. I am sure Texas will withdraw as much as 


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it possibly can rather than continue to spend State funds to meet 

TANF maintenance-of-effort requirements. 

Some States do seem to be increasingly counting spending that 

is done from nonprofit insurable organizations. One report indicates that nearly half of the funds that one State, Georgia, declares 

as meeting its spending requirement actually comes from non-State 

private sources. 

While we should certainly encourage the tremendous work of 

charitable organizations across the country, allowing States to reduce their funding for services for needy families by counting existing spending by hard-pressed nonprofits threatens to reduce the 

total amount of support for our poorest children. 

As the chairman just pointed out, changes in how the States 

count spending also impacts work participation rates that the 

States are required to comply with under TANF. I firmly believe 

we should expect States to diligently work with folks to help them 

find meaningful employment. To ensure this outcome, we need 

standards that meet our bottom-line goal of helping jobless parents 

find real work so they can support themselves and support their 

children. 

We will likely hear some concerns today that the current work 

participation standard is too focused on how many TANF recipients 

are in certain activities, rather than on how many people are actually moving into real jobs. 

The current performance measure does not account for how many 

jobless parents a State is really helping. For example, a State that 

has 104 unemployed mothers, but only provides assistance to 2 of 

them, that State would meet the current Federal work participation if just 1 person was in a work activity. If that scenario sounds 

rather extreme and hypothetical, consider the fact that my State 

of Texas provides TANF assistance to only about 5 out of every 100 

children that are living in poverty today. 

Mr. Chairman, if the Federal Government and the States reduce 

their commitment to our poorest citizens once again, the path out 

of poverty will become even harder and longer for millions of our 

youngest Americans. I stand ready to work with you to ensure that 

both the Congress and the policymakers in the State meet their obligations to help these struggling families, and I look forward to 

hearing from all of our witnesses today, and thank each one of 

them for participating. 

Thank you. 

Chairman DAVIS. Thank you very much, Mr. Doggett. 

I would like to remind our witness to limit their oral testimony 

to 5 minutes; however, without objection, all the written testimony 

will be made part of the permanent record. 

On our panel this afternoon, we will be hearing from five distinguished individuals: Ms. Kay Brown, Director of Education, Workforce, and Income Security with the U.S. Government Accountability Office; Mr. Grant Collins, Senior Vice President for Workforce Services at ResCare; Ms. Carol Cartledge, Director of Economic Assistance Policy Division, North Dakota Department of 

Human Services. Mr. Peter Palermino, TANF Administrator, Connecticut Department of Social Services; and Dr. LaDonna Pavetti, 


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Vice President for Family Income Support Policy with the Center 

on Budget and Policy Priorities. 

Ms. Brown, please proceed with your testimony. 

STATEMENT OF KAY E. BROWN, DIRECTOR, EDUCATION, 

WORKFORCE, AND INCOME SECURITY, U.S. GOVERNMENT 

ACCOUNTABILITY OFFICE 

Ms. BROWN. Chairman Davis, Ranking Member Doggett and 

Members of the Subcommittee, I am pleased to be here today to 

discuss our work on State spending requirements for the TANF 

program. My remarks are based on several previously issued GAO 

reports and will focus on two points: the key features of State MOE 

requirements and changes in the role of State MOE spending over 

time. 

First on the MOE requirements. When Congress designed the 

TANF program, it coupled the $16.5 billion block grant with what 

was viewed as strong MOE requirements. This was to ensure that 

States remained solid fiscal partners. States continued to be expected to spend a minimum of 75 to 80 percent of the amount they 

spent on welfare-related programs before TANF was created. Over 

the past 15 years, this has amounted to about 40 percent of the 

$406 billion in total program spending. 

MOE provisions help ensure that State spending supports Federal goals, and that States are limited in the extent to which they 

can replace State funds with Federal funds. To count towards 

MOE, State funds generally must be spent on families that meet 

financial eligibility criteria, be used for activities that support one 

of the four broad TANF goals, and be above the prereform spending 

levels if spent outside traditional welfare programs. 

In addition to its own spending, though, a State can count towards its MOE certain in-kind or cash expenditures by third parties, such as nonprofit organizations that support program goal and 

serve eligible families. 

Turning to changes in the role of MOE spending, during 2005, 

State MOE levels remained stable, hovering around the required 

minimum. When States experienced a significant drop in caseloads 

following reform, the MOE provisions facilitated a shift away from 

cash assistance to a broader range of services, such as child care, 

transportation, and child welfare services, as long as these services 

supported TANF goals. 

Then in 2006, the MOE spending levels began to increase until 

they exceeded the minimum requirements by about $4 billion in 

fiscal years 2009 and 2010. These increases were likely the result 

of several factors. For example, additional Federal funds were 

made available during the recent recession; however, to access 

these funds, States had to increase their MOE spending. 

States also have increased the use of MOE to help meet their required work participation rate. States’ performance is measured in 

large part by their success in engaging at least 50 percent of workrelated families in allowable activities. However, States can turn to 

certain options instead. For example, when States spend in excess 

of the required MOE amount, this spending can be used to help 

lower their required participation rates. 


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When Congress tightened these requirements in 2005, some 

States found it difficult to meet them and began to claim this excess MOE, an allowable option that had rarely been used before. 

For fiscal year 2009, 32 of the 45 States that met their rate 

claimed excess MOE spending, and 16 would not have met their 

rates without claiming MOE expenditures. 

In conclusion, MOE is now playing an expanded role in TANF 

programs. Some States may be making programmatic decisions and 

budgetary decisions to claim excess MOEs in order to avoid penalties for not meeting their work participation requirements. It is 

important to ensure that MOE spending reflects the commitment 

to serve low-income families and supports the Federal program 

goals. 

While we, GAO, have not reviewed HHS’s existing efforts to monitor MOE, and we do not know how effective they are, we know 

that MOE provisions can be difficult to administer and oversee. Yet 

with appropriate attention to design, implementation and monitoring, MOE provisions can be a useful tool to help strike a balance 

between heightened State flexibility and ensuring a focus on certain national objectives. 

This concludes my prepared statement. I am happy to answer 

any questions you may have. 

[The prepared statement of Ms. Brown follows:] 


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GAO 

For Reif'a.'lf' on Df'iiwry Expp('ted at 2:00 p.m. EDT 

Thursday, May 17,2012 

GAO-12-713T 

United States Government Accountability Office 

Testimony 

Before the Subcommittee on Human 

Resources, Committee on Ways and 

Means, House of Representatives 

TEMPORARY ASSISTANCE 

FOR NEEDY FAMILIES 

State Maintenance of Effort 

Requirements and Trends 

Statement of Kay E. Brown, Director 

Education, Workforce, and Income Security 

GAO 

Accountability * Integrity· Reliability 
10 


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Highlights of GAO-12-713T, a testimony 

before the Subcommittee on Human 

Resources, Committee on Ways and Means, 

House of Representatives 

Why GAO Did This Study 

The $16,5 billion TANF block grant, 

created in 1996, is one of the key 

federal funding streams targeted to 

assist low-income families. While the 

block grant provides states with a fixed 

amount of federal dollars annually, it 

also includes state MOE requirements, 

which require states to maintain a 

significant portion of their own historic 

financial commitment to welfare-related 

programs. Over the last 15 years, this 

federal-state partnership has seen 

multiple program and fiscal changes, 

including a dramatic drop in the 

number of families receiving monthly 

cash assistance, as well as two 

economic recessions. To provide 

information for its potential extension 

or reauthorization, this testimony draws 

primarily on previous GAO work to 

focus on (1) the key features of the 

state MOE requirements and (2) how 

the role of state MOE spending has 

changed overtime. To address these 

issues, GAO relied on its prior work on 

TANF block grant and state MOE 

spending issued between 2001 and 

2010, including the May 2010 report 

examining how state MOE spending 

affects state TANF programs' work 

particIpation rates. To develop the 

spending-related findings in this body 

of work, GAO reviewed relevant 

federal laws, regulations, and 

guidance, state TANF data reported to 

the U.S. Department of Health and 

Human Services (HHS), and related 

financial data from selected states. 

GAO also interviewed relevant officials 

from HHS and selected states 

View GAO-12-713T. For more information, 

contact Kay E Brown at (202) 512-7215 or 

brownke@gao.gov 

Wffif+NF 

TEMPORARY ASSISTANCE FOR NEEDY 

FAMILIES 

State Maintenance of Effort Requirements and 

Trends 

What GAO Found 

The Temporary Assistance for Needy Families (TANF) block grant's 

maintenance of effort (MOE) provisions include specified state spending levels 

and general requirements on the use of funds. For example, these provisions 

generally require that each state spend at least 80 percent (75 percent jf the 

state meets certain periormance standards) of the amount it spent on welfare 

and related programs in fiscal year 1994, before TANF was created. If a state 

does not meet its MOE requirements in any fiscal year, the federal government 

will reduce dollar~for-dollar the state's federal TANF grant in the following year. In 

order to count state spending as MOE, funds must be spent on benefits and 

services to families with children that have incomes and resources below certain 

state~defined limits. Such benefits and services must generally further one of 

TANF's purposes, which broadly focus on providing financial assistance to needy 

families; promoting job preparation, work, and marriage; reducing out-of-wedlock 

births; and encouraging the formation of two-parent families. Withm these broad 

goals, states have significant fleXibility to design programs and spend their funds 

to meet families' needs. 

Total MOE spending reported by states remained relatively stable around the 

required minimum spending level of $11 billion through fiscal year 2005, and then 

increased to about $4 billion higher than this minimum in fiscal years 2009 and 

2010. Several reasons likely accounted for these increases, including states' 

reliance on MOE spending to help them meet T ANF work participation rates. 

Work participation rates identify the proportion of families receiving monthly cash 

assistance that participate in allowable work activities for a specified number of 

hours each week. Federal law generally requires that at least 50 percent of 

families meet the work requirements; however, most states have engaged less 

than 50 percent of families in required activities in each year since TANF was 

created, according to HHS data. Various policy and funding options in federal law 

and regulations, including credit for state MOE expenditures that exceed required 

spending levels, have allowed most states to meet the rate requirements even 

with smaller percentages of families participating. States generally began relying 

on MOE spending to get credit toward meeting TANF work participation rates in 

fiscal year 2007 because of statutory changes to the rate requirements enacted 

in 2006. For example, for fiscal year 2009, the most recent data available, 16 of 

the 45 states that met the T ANF work partiCipation rate would not have done so 

without the credit they received for excess state MOE spending. 

The expanded role of MOE in state TANF programs highlights the importance of 

having reasonable assurance that MOE spending reflects the intended 

commitment to low-income families and efficient use of federal funds. GAO's 

previous work makes clear that MOE provisions are often difficult to administer 

and oversee, but can be important tools for helping ensure that federal spending 

achieves its intended effect. ThiS work also points out that with appropriate 

attention to design, implementation, and monitoring issues, such provisions are 

one way to help strike a balance between the potentially conflicting objectives of 

increasing state and local flexibility while attaining certain national objectives 

____________ United States Government Accountability Office 
11 


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Chairman Davis, Ranking Member Doggett, and Members of the 

Subcommittee: 

I am pleased to have the opportunity to participate in today's discussion 

of state spending related to the Temporary Assistance for Needy Families 

(TANF) block grant, which is one of the key federal funding streams 

targeted to assist low-income families. State spending represents about 

40 percent of the $406 billion in total TANF and related state spending for 

the past 15 years since TANF was created in 1996. As you know, the 

federal government significantly changed federal welfare policy in 1996 

when it created TANF, a $16.5 billion annual block grant provided to 

states to operate their own welfare programs within federal guidelines. 

While the block grant provides states with a fixed amount of federal 

dollars annually, it also includes state maintenance-of-effort (MOE) 

requirements, which require states to maintain a significant portion of their 

historic financial commitment to welfare-related programs. At the same 

time, TANF gives states the authority and flexibility to make key decisions 

about how to design programs and allocate federal and state funds to 

assist low-income families. Over the last 15 years, this funding 

partnership has undergone multiple program and fiscal changes, 

including a dramatic drop in the number of families receiving monthly 

cash assistance benefits, as well as two economic recessions. 

My remarks today are based primarily on our past work on state MOE 

spending, including our May 2010 report examining how state MOE 

spending affects state TANF programs' work participation rates.' I will 

focus on (1) the key features of the state MOE requirements and (2) how 

the role of state MOE spending has changed over time. To develop our 

MOE-related findings for our May 2010 report on work participation, we 

conducted our work from August 2009 to May 2010-' In addition, in July 

2011, we obtained more recent data on MOE and work participation from 

the US Department of Health and Human Services (HHS), and we 

reported on those data in our September 2011 testimony before this 

subcommittee. 3 For today's statement we also drew on our prior reports 

1GAO, Temporary Assistance for Needy Families; Implications of Recent Legislat,ve and 

EconomiC Changes for State Programs and Work Participation Rates, GAO-10-525 

(Washington, D.C.: May 28, 2010). 

2For more Information on our methodology, see appendix I of GAO-10-525 

3GAO, Temporary Assistance for Needy Families: Update on Families Served and Work 

Participation, GAO-11-880T (WaShington, D.C .. Sept 8, 2011). 

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Background 

on TANF block grant spending issued between 2001 and 2006 as well as 

earlier reports on grant design and accountability generally. To develop 

findings for all of these reports, we used a variety of approaches, 

including interviewing officials from the HHS and selected states and 

reviewing state TANF data reported to HHS; related financial data from 

selected states; relevant federal laws, regulations, and guidance; and 

literature reviews. For more details on our methodologies, see the related 

reports cited throughout. We determined that these data were sufficiently 

reliable for the purposes of this testimony. We conducted our work in 

accordance with generally accepted government auditing standards. 

Those standards required that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 

The TANF block grant was created by the Personal Responsibility and 

Work Opportunity Reconciliation Act of 1996 (PRWORA)4 and was 

designed to give states the flexibility to provide both traditional welfare 

cash assistance benefits as well as a variety of other benefits and 

services to meet the needs of low-income families and children. TANF 

has four broad goals; (1) provide assistance to needy families so that 

children may be cared for in their own homes or homes of relatives; (2) 

end dependence of needy parents on government benefits by promoting 

job preparation, work, and marriage; (3) prevent and reduce out-ofwedlock pregnancies; and (4) encourage two-parent families. Within 

these goals, states have responsibility for designing, implementing, and 

administering their welfare programs to comply with federal guidelines, as 

defined by federal law and HHS. 

In creating TANF, the federal government significantly changed its role in 

financing welfare programs in states. PRWORA ended low-income 

families' entitlement to cash assistance by replacing the Aid to Families 

with Dependent Children (AFDC) program- for which the federal grant 

amount was based on the amount of state spending-with the TANF 

block grant, a $16.5 billion per year fixed federal funding stream to states. 

PRWORA coupled the block grant with an MOE provision, which requires 

4Pub. L. No. 104-193, § 103(a), 110 Stat. 2105, 2112 

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states to maintain a significant portion of their own historic financial 

commitment to their welfare programs as a condition of receiving their full 

federal TANF allotments. Importantly, with the fixed federal funding 

stream, states assume greater fiscal risks in the event of a recession or 

increased program costs. However, in acknowledgment of these risks, 

PRWORA also created a TANF Contingency Fund that states could 

access in times of economic distress. 5 Similarly, during the recent 

economic recession, the federal government created a $5 billion 

Emergency Contingency Fund for state TANF programs through the 

American Recovery and Reinvestment Act of 2009, available in fiscal 

years 2009 and 2010. 6 

The most recent data available, for fiscal year 2010, show that the federal 

government and states spent almost $36 billion 7 on benefits and services 

meeting one or more of the TANF goals. In that year, states provided, on 

average, about 1.9 million families per month with ongoing cash 

assistance,8 including about 800,000 families in which the children alone 

received benefits.9 This represents a significant drop from the more than 

3 million families receiving cash assistance when states implemented 

TANF in fiscal year 1997. In addition, states provide a broad range of 

services to other families in need not included in the welfare caseload 

data. The total number offamilies assisted is not known, as we have 

5pub. L. No.1 04-193, § 1 03(a){1), 110 Stat. 2105, 2122. 

6pub. L. No. 111-5, § 2101(a)(1), 123 Stat. 115,446. 

7Total federal and state TANF expenditures in fiscal year 2010 equaled $35.8 billion, of 

which about 58 percent was federal funds and 42 percent was state MOE funds. Federal 

funds spent in fiscal year 201 0 included those provided through the TANF block grant, 

supplemental grants, the Contingency Fund, and the Emergency Contingency Fund. 

Supplemental grants refer to a capped amount of federal funds that have been available 

to several states each year if they meet certain criteria related to increased need in the 

state. 

8The most recent data from HHS for fiscal year 2011 shows an average monthly caseload 

of 1.92 million families, which fell slightly to 1.89 million families in the first quarter of fiscal 

year2012. 

9These Gases are referred to as child-only cases. in which a parent or non-parent 

caregiver is not receiving TANF cash assistance for a variety of reasons. For more 

information, see GAO, TANF and Child Welfare Programs: Increased Data Sharing Could 

Improve Access to Benefits and SefVices, GAO-12-2 (Washington, D.C.: Oct 7,2011) 

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noted in our previous work.1o These allowable services under TANF can 

generally include any spending reasonably deemed to meet one or more 

of the four broad goals of TANF, and can include one-time cash 

payments, work and training activities, work supports such as child care 

and transportation, efforts to promote two-parent families or marriage, 

and child welfare services, among others. When TANF began, cash 

assistance represented the largest spending category (73 percent in fiscal 

year 1997). In contrast, cash assistance spending in fiscal year 2010 

accounted for 30 percent of total TANF spending. 

Reducing dependence on government benefits through job preparation 

and employment is a key goal of TANF, and PRWORA identified the work 

participation rate as one of the federal measures of state TANF programs' 

performance. This rate is generally calculated as the proportion of workeligible TANF cash assistance recipients engaged in allowable work 

activities." As a result, HHS is responsible for holding states accountable 

for ensuring that generally at least 50 percent of all families receiving 

TANF cash assistance benefits participate in one or more of the allowable 

work activities for a specified number of hours each week. '2 TANF 

provisions include other features to help emphasize the importance of 

work and the temporary nature of assistance, such as 60-month time 

limits on the receipt of aid for many families. 

10GAO, Welfare Reform: States Provide TANF-Funded Services to Many Low-Income 

Families Who Do Not Receive Cash Assistance, GAO-02-564 (Washington, D.C.: Apr.5, 

2002). 

1142 U S.C. § 607. The 12 work activities are: unsubSldized employment, subsidized 

private sector employment, subSidized pubhc sector employment, work experience (if 

sufficient private sector employment IS not available), on-the-Job training, job search and 

job readiness assistance, community service programs, vocational educational training, 

Job skills training directly related to employment, educat!on directly related to employment 

(for reCipients who have not received a high school diploma or certificate of high school 

equivalency), satisfactory attendance at secondary school or in a course of study leading 

to a certificate of general equivalence (for recipients who have not completed secondary 

school or received such a certificate), and the provision of child care services to an 

individual who is partlcipatmg in a community service program. 42 U S.C. § 607(d). 

12Some families receiving cash assistance benefits are excluded from work requirements, 

With the most significant group bemg certain child-only cases. 

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MOE Provisions 

Include Specified 

State Spending Levels 

with Some Flexibility 

How Much? 

The preamble to the final rule issued by HHS in 1999 noted that the MOE 

cost-sharing arrangement reflected Congress' recognition that state 

financial participation is essential for the success of welfare reform. 13 The 

preamble to this final rule also noted that Congress wanted states to be 

active partners in the welfare reform process. 14 These requirements are 

an important element of TANF-if a state fails to meet its MOE 

requirement for any fiscal year, HHS is required by law to reduce dollarfor-dollar the amount of a state's basic TANF grant for the following fiscal 

year.15 

Maintenance of effort requirements are sometimes found in federal grant 

programs to prevent states from substituting federal for state dollars. 

Such provisions can help ensure that federal block grant dollars are used 

for the broad program area intended by the Congress, in this case the 

four broad TANF purposes. Without such provisions, federal funds 

ostensibly provided for these broad areas could, in effect, be transformed 

into general fiscal relieffor the states, as states could use some or all of 

their federal block grants to replace their own money invested in the 

program area. To the extent that this occurs, the ultimate impact of these 

federal dollars would be to increase state spending in other programs, 

reduce taxes, or some combination of both. A maintenance of effort 

requirement brings its own challenges-it can be complex to monitor and 

may lock states into meeting minimum spending levels that may no longer 

be warranted given changing conditions. 16 

Under TANF, while states have significant flexibility in how to spend their 

own money, several requirements guide the use of these state funds, 

including how much, for whom, and for what. 

Each state's amount of MOE is generally based on fiscal year 1994 state 

spending for a specific set of programs. 17 The 1996 welfare reform law 

1364 Fed. Reg. 17,720. 17,821. 

14 1d. at 17,816. 

15See 42 U.S C. § 609(a)(7) 

16For more information, see GAO, Block Grants: Issues in Designing Accountability 

Provisions. GAO/AIMD-95-226 (Washington, D.C.: September 1,1995). 

1742 U.S.C. § 609(a)(7). 

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consolidated and replaced programs under which the amount of federal 

spending was often based on state spending levels, and considerable 

state dollars contributed to these pre-TANF programs. Figure 1 shows the 

federal programs with related state spending that were included in 

establishing the fixed annual amount of the TANF block grant and state 

maintenance-of-effort level for each state. 

Figure 1: Federal TANF Block Grant and State MOE Funding Levels Are Determined 

by Prior Year Expenditures for Several Terminated Programs 

Priorfunding (generally for fiscal year 1994;-) __________ --, 

Federal expenditures for 

• Aid to Families With Dependent Children 

(AFOC) 

• Jo~ Opportunities and Basic Skills Training 

Pr:>gram (JOBS) 

• Emergency Assistance (EA) 

Current funding 

L6!60ANF ~ck Grant] 

SQurce GA:l analySis of relevant federal laws 

State matching funds for 

• AFDC 

• JOBS 

• EA 

• AFDC-related child care 

Note The previous AFDC program provided ongoing monthly cash assistance, JOBS provided states 

funds for welfare-Ie-work activities for AFDC recipients: and EA provided states funds to help eligible 

families with emergency needs. Prror federal funding was also available for AFDC-relaled child care, 

federal funding targeted to child care for low-income families is now funded through the Child Care 

and Development Fund. 

The required percentages of these previous state spending levels vary 

under different conditions: 

80 percent-To receive its federal TANF funds, a state must generally 

spend state funds in an amount equal to at least 80 percent of the 

amount it spent on welfare and related programs in fiscal year 1994.'8 

75 percent-If a state meets its minimum work participation rate 

requirements, then it generally need expend only 75 percent of the 

amount it spent in fiscal year 1994.19 

1842 U.S.C. § 609(a)(7). 

191d. 

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For Whom? 

For What? 

100 percent-To receive contingency funds, a state must expend 100 

percent of that fiscal year 1994 amount. 20 

In addition to its own spending, a state may count toward its MOE certain 

in-kind or cash expenditures by third parties, such as nonprofit 

organizations, as long as the expenditures meet other MOE 

requirements, including those related to eligible families and allowable 

activities, discussed below.21 In addition, an agreement must exist 

between the state and the third party allowing the state to count the 

expenditures toward its MOE. 

Generally, to count toward a state's MOE, expenditures must be for 

"eligible families," that is, families who: 22 

include a child living with his or her custodial parent or other adult 

caretaker relative (or a pregnant woman); and 

meet the financial criteria, such as income and resources limits, 

established by a state for the particular service or assistance as 

described in its TANF plan. Each state is required to prepare and 

provide a biennial TANF plan describing its programs to HHS. 

Generally, expenditures for eligible families in these areas may count 

toward MOE:" 

cash assistance; 

child care assistance; 

educational activities to increase self-sufficiency, job training and work 

(except for activities or services that a state makes generally available 

to its residents without cost and without regard to their income); 

20See 45 C.F.R § 264.72 

21 45 C.F.R. § 263 2(e) 

22Changes made by the Deficit Reduction Act of 2005 allowed states to count as MOE 

total expenditures related to TANF purposes three and four-the prevention and reduction 

of out-of wedlock pregnancies and the formation and maintenance of two-parent families. 

These expenditures did not need to be directed solely at "eligible families" See 71 Fed. 

Reg. 37,454, 37,470. 

"45 C.F.R. §§ 263.2, 263.4. 

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MOE Spending Has 

Increased 

Significantly, But the 

Extent to Which It 

Represents Increased 

Service Levels Is 

Unclear 

MOE Levels Have 

Increased in Recent Years 

certain administrative costs; and 

other activities considered in keeping with a TANF purpose. 

These expenditures may be made on behalf of families in a state's cash 

welfare program or for other eligible families through other state programs 

or initiatives. 24 However, state-funded benefits, services, and activities 

that were not a part of the pre-reform programs generally may count as 

MOE only to the extent that they exceed the fiscal year 1995 level of 

expenditures in the programs. 25 This is referred to as the "new spending" 

test. For example, if a state has currently spent its own funds on eligible 

families on an allowable activity, such as a refundable earned income tax 

credit, it may count toward its MOE only the current amount that exceeds 

that program's expenditures in fiscal year 1995. 

State MOE levels remained stable for many years and then increased 

more recently for several reasons. As shown in figure 2, until fiscal year 

2006, MOE levels remained relatively stable, hovering around the 80 

percent required minimum or the reduced rate of 75 percent for states 

that met their work participation rates. From fiscal years 2006 through 

2009, they increased each year. 

2445 C.F.R. § 263.2. 

2545 C.F.R § 263 5. 

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Figure 2: State MOE Expenditures, Fiscal Years 1997 through 2010 

Dollars {m billions) 

16 

14 

12 

r-----~....-=---:::::-:c:--=----------------

10 ........... ••••• .. ••• .... • .. •• .. ••••• .. ••••• .... • ...... • .... ••••• .. • ......................... . 

19971998199920002001 200220032004200520062007200820092010 

Fiscal year 

MOE spending 

~--- 80% MOE 

••••••• 75%MOE 

SourCI! GA:)snalyslsofHHSdsta 

In a 2001 report, we examined issues related to the new federal-state 

fiscal partnership under TANF, noting several issues related to TANF and 

MOE spending rules.26 We found at that time that the MOE requirement, 

in many cases, limited the extent to which states used their federal funds 

to replace state funds-an intended role for MOE. 27 It also led to a 

situation in which many state officials said they were spending more than 

26GAO, Welfare Reform: Challenges in Maintaining a Federal*State Fiscal 

Partnership,GAO-01-828 (Washington, D.C.: Aug. 10, 2001). In this report, we conducted 

an In-depth analysIs of 10 states 

27TANF does not include a provision that prohibits states from using federal TANF funds 

to replace state funds. However, if states used TANF funds to replace state funds, they 

may have had to increase their own spending on other low-income programs to satisfy the 

MOE requirement. For example, a state could withdraw its own funds from a state 

refundable earned income tax credit for low-income families, and use federal TANF dollars 

instead. However, it would need to have enough other state spendrng to count toward its 

MOE. If it had enough state spending to cover its MOE and had still freed up state dollars, 

those dollars could be use for unrelated programs or for tax relief 

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might be expected in the face of the large caseload drop in the earliest 

years ofTANF.28 

However, states have additional flexibility in making spending decisions. 

While states must meet MOE requirements, federal TANF funds may be 

"saved for a rainy day," providing states additional flexibility in their 

budget decisions." In fact, many states had some TANF reserves that 

they drew down to meet increasing needs in the recent economic 

downturn. 3o Moreover, states have flexibility to provide a wide variety of 

services-as long as they are in keeping with the four broad purposes of 

TANF-to those on the cash welfare rolls and to other eligible families. 

Nationwide, the amount of MOE spending started to increase in fiscal 

year 2006 and reached its peak in fiscal year 2009. Several reasons 

account for this increase: 

Many states (20) accessed TANF Contingency Funds between fiscal 

years 2007 and 201 O-when the fund was depleted-which required 

them to meet a 100 percent MOE requirement. Further, almost all 

states accessed the Emergency Contingency Fund in fiscal years 

2009 and 2010, which required them to have had increases in one of 

two specific types of expenditures~short-term, nonrecurrent benefits 

or subsidized employment-or in the number offamilies receiving 

cash assistance. 

Following the Deficit Reduction Act of 2005, an interim rule 

temporarily broadened the types of activities on which states could 

spend state funds and be countable for MOE purposes. Between 

fiscal years 2006 and 2008, total state MOE expenditures increased 

281n calendar year 1994, which generally served as the base year for establishing the 

TANF block grant and MOE amounts, AFDC caseloads had reached their highest levels 

ever, totaling 5 million families In an average month. This number had dropped to 2.3 

million families in calendar year 2000, a period covered by the prior studies on which this 

testimony is based. 

2.942 U.S.C. § 604(e). Each year, a state may in effect reserve some of its federal TANF 

funds to help It meet increased needs and costs in later years A state's unspent funds 

can "accumulate" as a type of "rainy day fund" for its future use. Since TANF was created 

in 1996, states have been permitted to spend prior year TANF block grant funds on 

assistance-a category that includes cash benefits and supportive services for families 

receiving these benefits. However, the Recovery Act Increased states' flexibility to spend 

prior year TANF block grant funds on all TANF~allowable benefits and services. 

30For more information on this issue, see GAO-10-525. 

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MOE Spending Helped 

Some States Meet Work 

Rates 

by almost $2 billion, and much of the increase in expenditures was in 

areas that had temporarily been broadened.31 

Many states claimed additional MOE to help them meet the work 

participation rates, as discussed in the next section. 

In recent years, some states have used their MOE spending to help them 

meet TANF work participation rates. Generally, states are held 

accountable for ensuring that at least 50 percent of all families receiving 

TANF cash assistance and considered work-eligible participate in one or 

more of the federally defined work activities for a specified number of 

hours each week. 32 However, most states have not engaged that many 

recipients in work activities on an annual basis. For example, in fiscal 

year 2009, the most recent year for which data are available, less than 50 

percent of TANF cash assistance families participated in work activities 

for the specified number of hours each week in 44 states, according to 

HHS. However, various pOlicy and funding options in federal law and 

regulations allowed most of these states to meet their work participation 

rates. Factors that influenced states' abilities to meet the work 

participation rates included not only the number of families receiving 

TANF cash assistance who participated in work activities, but also 

decreases in the number of families receiving TANF cash assistance, and 

state MOE spending beyond what is required, for example. 

31Between the Interim rule issued in 2006 and the final rule issued in 2008, HHS allowed 

states to claim total expenditures related to TANF purposes three and four-the 

prevention and reduction of out-of wedlock pregnancies and the formation and 

maintenance of two-parent families. These expenditures did not need to be directed solely 

at "eligible families." and states had significant flexibility to determine allowable 

expenditures in those areas. The final rule Issued In 2008 limited the types of expenditures 

that states may count in these areas for individuals that do not meet the "eligible families" 

definition to those "healthy marriage" and "responsible fatherhood" activities specified in 

federal law 

32To be counted as engaging in work for a month, TANF families are required to 

participate in work activities for an average of 30 hours per week In that month 42 U.S.C. 

§ 607(c). However. federal law sets different weekly work hour requirements for teen 

parents attending school, single parents of children under age 6. and two-parent families. 

Further. certam families are not Included In the calculation of state work participation rates, 

such as child-only families and, at state option, single parents of children under age 1 

See 42 U.S.C. § 607(b)(5) and 45 C.F.R. § 261.2(n). In fiscal year 2009, about 130,000 

families were excluded from the calculation of the all families work participation rate 

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Since TANF was created, the factor that states have commonly relied on 

to help them meet their required work participation rates is the caseload 

reduction credit. Specifically, decreases in the numbers of families 

receiving TANF cash assistance over a specified period are accounted for 

in each state's caseload reduction credit, which essentially lowers the 

states' required work participation rate from 50 percent. 33 For example, if 

a state's caseload decreases by 20 percent during the relevant time 

period, the state receives a case load reduction credit equal to 20 

percentage points, which results in the state work participation rate 

requirement being adjusted from 50 to 30 percent. In each year since 

TANF was created, many states have used caseload declines to help 

them lower the required work participation rates. For example, in fiscal 

year 2009, 38 of the 45 states that met their required work participation 

rates for all TANF families did so in part because of their caseload 

decreases (see fig. 3).34 

However, in recent years, the Congress updated the base year for 

assessing the case load reduction credit,35 and as a result, some states 

also began to rely on state MOE expenditures to increase their caseload 

reduction credit, which lowers their required work participation rates. 

Under federal regulations, if states spend in excess of their required MOE 

amount, they are allowed to correspondingly increase their caseload 

3342 U.S.C § 607(b)(3). However, under federal TANF statutes, the credit calculation 

excludes caseload reductions resulting from changes in states' eligibility criteria 

34The caseload reduction credit is generally calculated by determining the change in the 

state's caseload-or the average number of families receiving TANF cash assistance in 

each state-between a federally-defined base year and the year preceding the current 

one. However, the Recovery Act modified the credit calculation for fiscal years 2009-2011 

by generally allowing states the option of comparing the base year to the state's caseload 

in fiscal year 2007, 2008, or the year preceding the current one. This option gives states 

that experienced caseload increases In more recent years potentially greater caseload 

reduction credits 

35 1n fiscal year 2006, the Deficit Reduction Act of 2005 reauthorized the TANF block grant 

and made several modifications that were generally expected to strengthen TANF work 

requirements and improve the reliability of work participation data and program integrity. 

For example, the act changed the caseload reductIOn credit by moving the base year for 

measuring caseload declines from 1995 to 2005. Because of this change, the dramatic 

declines in the numbers of families receiving cash assistance that immediately followed 

TANF implementation were no longer factored into state caseload reduction credits 

beginning with fiscal year 2007 

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reduction credits.36 By doing so, a state reduces its required work 

participation rate. In fiscal year 2009, 32 of the 45 states that met their 

required work participation rates for all TANF families claimed excess 

state MOE spending toward their caseload reduction credits.37 Sixteen of 

these states would not have met their rates without claiming these 

expenditures (see fig. 3). Among the states that needed to rely on excess 

state MOE spending to meet their work participation rates, most relied on 

these expenditures to add between 1 and 20 percentage points to their 

caseload reduction credits (see fig. 4). 

3645 C.F.R § 261.43. When calculating the caseload reduction credit, federal regulations 

allow a state that spent in excess of its required amount in the year preceding the current 

one to include only the pro rata share~in its overall caseload number-of the total 

number of families receiving state-funded cash assistance required to meet the state's 

basic requirement. This means that in the calculation of a state's caseload reduction 

credit, its total case load number is reduced by a number equal to an eslimate of the 

number of assistance cases the excess MOE spending would have supported. 

37We did not determine whether these increases reflect new state spending or spending 

that had been occurring before but was not reported as stale MOE spending at that time. 

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Figure 3: Factors that Helped States That Met Their Work Participation Rates for All 

TANF Families in Fiscal Years 2007 through 2009 

Number of states in each calegory, by year 

50 

30 

20 

10 

2007 2006 2009 

FI$calyear 

[3 State spending +caseload reduction cred,l + work rates 

"CaseloadreducllOncredlt+workrates 

"workratesot50%OrmOre 

Source· GAO analys,sof HHS <lata 

Note This figure reflects updated tnformatlon obtained from HHS in 2012. 

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Increased MOE Role 

Highlights Importance of 

Monitoring and Oversight 

Figure 4: Extent to Which States' Caseload Reduction Credits Increased because of 

State Spending beyond What Is Required (for those States That Relied on Such 

Spending to Meet Their Work Participation Rates for All TANF Families) 

10 

2, 

11·20 21·35 

Percentage points added to 

credit from state spending 

Source GAO aoalysis ofHHS data 

JHn: 1·10 11·20 21.35 

Percentage points added to 

credit from state spending 

21·35 

Percentage points added to 

credit from state spending 

Note: This figure reflects updated information obtained from HHS in 2012. 

MOE is now playing an expanded role in TANF programs, as many 

states' excess MOE spending has helped them meet work participation 

rates. While one state had used MOE expenditures toward its case load 

reduction credit before fiscal year 2007, over half of the states (27) relied 

on these expenditures to increase their credits and help them meet their 

required work participation rates in one or more years between fiscal 

years 2007 and 2009. 

States may be making programmatic and budgetary decisions to use 

excess MOE to help them avoid penalties for failure to meet participation 

rates and possibly losing funds. In our previous work, states have cited 

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concerns about difficulties in engaging a sufficient number of cash 

recipients in required activities for the required number of hours for 

several reasons, including limits on the types of activities that count, 

limited resources for developing and providing appropriate work activities, 

a lack of jobs particularly during tough economic times, and the 

characteristics of some cash assistance recipients that make it difficult for 

them to engage in countable work activities. 

However, this greater emphasis on the use of MOE increases the 

importance of understanding whether effective accountability measures 

are in place to ensure MOE funds are in keeping with requirements. In 

our 2001 report, some states expressed concerns that this MOE provision 

could become difficult to enforce. In doing that work, we spoke to many 

auditors who were in the midst of developing audit plans to address 

compliance with the new spending test. Several told us that developing 

these plans was relatively straightforward: the auditor should simply be 

able to establish a baseline for all the MOE expenditures the state was 

using and then trace those programs back to 1995 and certify that 

spending used for MOE was indeed new spending. However, we also 

noted that these plans could become more complex if states frequently 

changed the expenditures they were counting from one year to the next 

(Le., changed the programs for which they needed baselines). In one 

state at that time, we were told that all expenditure data were archived 

after 5 years, and that auditing the annual certification would be 

especially difficult and time consuming if the state changes the programs 

it uses to meet its MOE requirement from year to year. We expect that 

several factors, such as changes in what MOE expenditures states may 

count, grow1h in some particular spending areas, as well as the grow1h in 

MOE spending overall may have greatly increased the complexities 

involved in tracking MOE. 

In its final rule published in 1999,38 HHS provided information related to 

its plans for monitoring state MOE and noted that states recognize that 

they are ultimately accountable for their expenditure claims. HHS stated 

that states are audited annually or biennially and compliance with the 

3864 Fed. Reg. 17,720. 

Page 16 GAO-12-713T 
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Observations 

basic MOE provisions is part of the audit" HHS added that it would use 

the results of the audits, together with its own analysis of state-provided 

data-required state quarterly expenditure reports and annual descriptive 

reports on MOE activities-to assess states' compliance. It also said it 

might undertake additional state reviews based on complaints that arise 

or requests from the Congress. 

We have not reviewed existing efforts to monitor MOE and cannot 

comment on their effectiveness. However, the extent to which states have 

relied on these expenditures to help them meet work participation rates 

as well as meeting MOE generally highlights the importance of having 

reasonable assurances that current oversight is working. If MOE claims 

do not actually reflect maintaining or increasing service levels, lowincome families and children may not be getting the assistance they need 

in the current environment and federal funds may not be used in the most 

efficient manner. 

MOE provisions are important but not without implementation and 

oversight challenges. Based on our previous work on federal grant design 

as well as more recent work on some MOE provisions under the 

Recovery Act, it is clear that such provisions are important mechanisms 

for helping ensure that federal spending achieves its intended effect. With 

TANF, what is at stake are billions of federal and state dollars that 

together represent a federal-state partnership to help needy families 

provide for their children and take steps toward economic independence. 

The work also paints to administrative, fiscal, and accountability 

challenges in implementing MOE provisions, both from federal and state 

perspectives. While MOE provisions may be imperfect tools, with 

appropriate attention to design, implementation, and monitoring issues, 

such provisions are one way to help strike a balance between the 

potentially conflicting objectives of increasing state and local flexibility 

while attaining certain national objectives, including efficient use of federal 

resources in teday's fiscal environment. 

39Compliance with federal financial requirements is generally assessed annually through 

the state's single audit. Rather than being a detailed review of individual grants or 

programs, a single audit is an organizatlOnwide financial and compliance audit that 

focuses on accounting and administrative controls. A single audit is designed to advise 

federal oversight officials and program managers on whether an organization's financial 

statements are fairly presented and to provide reasonable assurance that federal financial 

assistance programs are managed In accordance with applicable laws and regulations. 

Page 17 GAO-12-713T 
28 


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GAO Contact and 

Staff 

Acknowledgments 

(131180) 

We provided drafts of the reports we drew on for this testimony to HHS 

for its review, and copies of the agency's written responses can be found 

in the appendixes of the relevant reports. We also provided HHS a draft 

of this testimony, and officials provided technical comments that we 

incorporated as appropriate. 

Chairman Davis, Ranking Member Doggett, and Members of the 

Subcommittee, this concludes my statement. I would be pleased to 

respond to any questions you may have. 

For questions about this statement, please contact Kay E. Brown at (202) 

512-7215 or brownke@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this statement. Individuals who made key contributions to this 

statement include James Bennett, Robert Campbell, Rachel Frisk, Alex 

Galuten, Gale Harris, Tom James, Jean McSween, Ronni Schwartz, and 

Michelle Loutoo Wilson. 

Page 18 GAO-12-713T 
29 


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This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted Images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately 
30 

f 

Chairman DAVIS. That was actually precisely 5 minutes and 

zero seconds. Thank you for your precision. 

Ms. BROWN. You are welcome. 

Chairman DAVIS. I would like to now introduce Mr. Grant Collins, senior vice president for workforce services at ResCare, which 

is based in my home State, the Commonwealth of Kentucky. 

ResCare provides workforce services for individuals with barriers 

to employment, as well as residential and support services for people with disabilities. 

Grant was previously the Deputy Director of the Office of Family 

Assistance at HHS, which is the office responsible for adminVerDate Mar 15 2010 01:04 Mar 09, 2013 Jkt 078760 PO 00000 Frm 00034 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78760.XXX GPO1 PsN: 78760

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31 

istering the TANF program at the Federal level. He was involved 

with the drafting of TANF regulations as a result of the passage 

of the Deficit Reduction Act in 2006, and because of his involvement, he is very familiar with the issues that we are discussing 

today. He has previously worked on welfare reform in both Wisconsin and New York City, and I am very pleased that he can join 

us today. 

Mr. Collins, would you proceed with your testimony. 

STATEMENT OF GRANT COLLINS, SENIOR VICE PRESIDENT 

FOR WORKFORCE SERVICES, RESCARE 

Mr. COLLINS. Good afternoon, Chairman Davis, Ranking Member Doggett, and distinguished Members of the Subcommittee. 

Thank you for inviting me to testify on the impact of State TANF 

spending and TANF work requirements. 

I am currently the senior vice president of ResCare Workforce 

Services. ResCare is a human service company dedicated to helping 

people achieve their highest levels of self-sufficiency. However, 

today I also wish to offer a few insights from my role as former 

Deputy Director of the Office Family Assistance, the Federal agency that oversees the Temporary Assistance for Needy Families program. 

In particular, I am here to discuss a few specific TANF provisions: State spending requirements, known as maintenance-of-effort, or MOE requirements; the counting of State and third-party 

spending towards MOE requirements; and the impact of that State 

spending on work participation rates. 

Work requirements were a key part of welfare reform in 1996. 

States must keep at least 50 percent of adults participating in activities like employment, job search, or vocational training. States 

receive credit toward meeting the 50 percent work rate if they reduce caseloads over time. 

Another key provision of welfare reform is what is called maintenance-of-effort, or MOE, requirements. That makes sure States 

continue to invest their own money in the program. The goals of 

the work and MOE requirements were to well ensure that the program continued to be a Federal-State partnership, and that both 

parties were financially invested in helping families become selfsufficient. 

After welfare reform became law, child poverty declined, unmarried birth rates fell, and many recipients went to work. As a result 

caseloads fell dramatically. Because States received credit for their 

work requirements if caseloads dropped, it also meant the 50 percent work requirement was near zero or near zero in many States. 

To strengthen the work requirement, Congress passed the Deficit 

Reduction Act of 2005. As a result many States increased their efforts to find people work. However, States also found other ways 

to meet the Federal requirements, one of which became known as 

‘‘excess MOE.’’ The excess MOE provision allows States to reduce 

their work requirement if they spend more than is required. Only 

one State used excess MOE prior to DRA, but today dozens of 

States report spending more than is required. 


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This chart shows how spending reported annually by States appears to have increased dramatically in the years since the DRA 

was passed. The post-DRA years are shaded in red. 

Why would States begin reporting increases in spending during 

that time? One reason is because excess MOE meant that they 

could reduce their work requirement by reporting additional spending. So even though the DRA was intended to strengthen work requirements, as there were 19 jurisdictions at the time with no work 

requirements, now there are more, 22, that have no work requirement partially due to excess MOE. 

Because of the excess MOE credit, States began looking at spending in other departments throughout government that could be 

claimed in the TANF program, as is allowed under current program rules. So a State may begin counting new child-care programs, prekindergarten classes, or earned income tax credits as 

TANF spending. The State may even count volunteer hours as 

MOE by multiplying the hours by an estimated wage and reporting 

this as TANF spending. States can also report spending by third 

parties as MOE. For example, a State may count the value of food 

given out at food banks as TANF spending. 

In closing, I want to point out that none of these practices are 

illegal. None of them are questionable according to current policy. 

States cannot be blamed for working within rules and regulations 

to meet Federal requirements. However, based on my experience as 

overseeing the TANF program and implementing the Deficit Reduction Act regulations, I believe that this combination of factors 

has resulted in weaker work requirements, less investment in 

TANF families, and fewer families becoming self-sufficient. 

I appreciate the subcommittee’s interest in this issue, and I hope 

that the members of this subcommittee and this panel can work together to ensure that TANF is working as intended. I look forward 

to answering any questions that you might have. 

Chairman DAVIS. Thank you very much, Mr. Collins. 

[The prepared statement of Mr. Collins follows:] 


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Testimony of 

Grant Collins, Senior Vice President 

ResCare Workforce Services 

House 'Vays and Means Subcommittee on Human Resources 

"State TANF Spending and Its Impact on Work Requirements" 

May 17, 2012 

Good afternoon Chairman Davis, Ranking Member Doggett, and distinguished members of the 

Subcommittee. Thank you for inviting me to testify on the impact of State TANf spending on 

TANf work requirements. 

I am currently the Senior Vice President of RcsCarc Workforce Services. ResCare is a human 

services company with operations nationwide. We are dedicated to helping people achieve their 

highest level of self-sufficiency. However, today I wish to afTer a few insights from my role as 

the fon11er Deputy Director of the Omee of family Assistance. Administration for Children and 

Families, U.S. Department of Health and Human Services, the agency overseeing the Temporary 

Assistance for Needy families (T ANF) program. In pmticular, I am here to discuss a few 

specific T ANF provisions-state spending requirements created during the welfare reform in 

1996, known as "Maintenance of EffOlt" or "MOE" requirements, the counting of state and 

third-party spending toward MOE requirements, and the impact of that state spending on work 

pmiicipation rates. 

The Creation ofTANf and the Purpose of MOE 

Work Requirements 

A major focus of welfare refon11 was to support and encourage work. To ensure that states 

helped t~nnilies enter the workforce, Congress established a work requirement obliging states to 

engage families in work and job preparation activities for 30 hours per week. To avoid financial 

penalties and receive their full block grant, states needed to have at least 50 percent of their 

work-eligible easelaad meet these work requirements. In addition, states received credit toward 

meeting this new 50 percent requirement if they reduced their caseloads over time. The strategy 

was designed to increase the number of people in the workforce and reduce the number of 

families dependent on subsidies. 

Maintenance a/Effort 

When welfare reform was enacted, there was concern that by making TANF a block grant states 

would lose their incentive to spend their own funds in the TANF program. To address this, 

Congress established a "Maintenance of Eftort" or "MOE" requirement to ensure state spending 

continued. It also codified the Federal/State 1inancial partnership, ensuring that both parties 

remained invested in helping families become self-sufficient. 
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According to the House Report' on the tlnal welfare reform bill, the Committee noted: 

"The tinnily assistance block grant program provides states with broad new Ilexihility in the use 

of Federal funds to operate their statc\vide welfare program&. In general, there arc few 

restrictions on the use of state funds. However, because the current welfare system requires state 

matching of Federal tLmds, some have expressed the concern that states should be forced to 

maintain a certain level of spending in order to receive full Federal funding, Thus the committee 

proposal requires states to maintain 75 percent of prior funding levels on related welfare 

programs ovcr the carly years of the block grant program. This level is designed to allow states 

that arc successful in reforming welfare and moving t~lmilies into work to achieve con~idcrablc 

savings, while also guaranteeing that a basic national safety net remains in place in every state." 

T ANF Reauthorization in the Delieit Reduction Act 

After welfare reform, TANF caseloads fell dramatically. Child poverty declined, unmarried birth 

rates fell, and many welfare recipients went to work. While this indicated the success of the 

program, it also meant that the substantial case load declines eroded the 50 percent work 

requirements. As stated in testimony to this Subcommittee in March of2007, due to this caseload 

decline, "in FY 2004 [the latest data available at the time testimony was given], 17 States and 

two Territories faced an effective overall participation rate of 0 percent, and nationally the 

adjusted target due to caseload reduction was only 6 percent." So the success of the program and 

the unforeseen generosity of the credit, led many states to have no work requirement at all. The 

states that did have a work requirement needed only six people out of every 100 on average to 

meet the requirements to succeed. 

Congress passed the Detlcit Reduction Act of 2005 to address these issues and strengthen the 

\vork requirements to ensure states move morc families from welfare to work. The bill "reset" 

the credit states received for reducing case loads, so in future years work requirements would 

only be reduced if their caseloads fell from FY 2005 levels. Along with other changes, the new 

requirements meant most states had to significantly increase their efforts in engaging families in 

work. States would have needed, on average 40 people out of every 100 to meet their work 

requirements to succeed. 

When the strengthened work requirements and other new policies became law, states began 

determining how they could satisfy the new requirements. As intended, many states reviewed 

their caseloads and worked harder to help families find work and leave welfare. However, states 

also found other creative ways to meet the Federal requirements. One way was a little-known 

provision Irom a 1999 Federal regulation which became known as "excess MOE" or 

Maintenance of Effort. 

Under Federal law states must maintain a minimum level of state spending in the TANF program 

or "'Maintenance of Effort. -, After TANF was created, there \vere debates in the Administration 

1 House Report !04~651. Welfare and Medicaid Reform Act of 1996: Report of the Committee on Budget to 

Accompany II.R. 3734. 
35 


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about some of the MOE provisions during the regulatory process and how they would fonction. 

In the 1999 final published regulations, the Department of Health and Human Services (HHS) 

included a new policy about state spending beyond the required MOE level, calling it "excess 

MOE." Under this policy, a state that reported spending more than their required level would get 

credit that would lower their work rate, similar to how a state could earn credit toward their work 

rate by reducing their cascloads oyer time. In short, the idea was that if states spent more than 

required and therefore may have had a higher caseload than if they spent only the required 

amount, HHS would not count those "extra" cases against them. HHS developed a formula that 

would reduce a state's work requirement in proportion to the excess MOE spending it reported. 

This provision was virtually unknown in 2006 when the ORA became law. At the time, only one 

state had used excess MOE credit to reduce work participation requirements. I was the Deputy 

Director of the office drafting regulations on the DRA at the time, and as the implementation or these regulations began, we soon saw the provision, which had lain dormant since TANF's 

inception, become a much bigger issue. The following graphics illustrate what happened to the 

"vork rates and state spending. 

First, in the chart below, work requirements were almost unchanged after ORA. In fact, they 

declined slightly trom prior years (post-ORA years shaded red). 

TANF Work Participation Rates: FY 1997 - FY 2009 

45% 

40% -----------~- - --~--"-- ----- "-------

35% - ,---

30% ~--- ----- --

25% e20% --- i 

15% ---

10% >-- -----

5% -.-- ---- ---- --- .- fcc. i--

0% 

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 

In the second chart, it appears state spending increased dramatically (post-ORA years shaded 

red). 
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$16 

'§' $12 

g 

~$1O 

1!' $8 

:g 

~ 

~ $6 

~ iii $4 

$2 

$0 

State Spending on TANF: FY 1998 through FY 2010 

~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 

Source: ACF-196 financial data reported annually by States 

Impact of Excess MOE on Work Requirements 

What caused this dramatic increase in what had been relatively stable spending in past years" 

Why \vould states suddenly report signi ticant increases in spending? One reason is because using 

the excess MOE provision allowed them to meet their work rate without having to put a single 

person into a job or job preparation activities. 

In the years after ORA passed, states began reporting increasingly higher levels of state spending 

leading to more excess MOE. In FY 2004, only one state repOlted spending more than 100 

percent of their required MOE level. By FY 2009, 23 states were reporting spending more than 

100 percent of the required level. This resulted in large excess MOE claims that reduced work 

rate requirements for many states. The larger the excess MOE, the greater the credit against the 

work rate, which results in fewer recipients needing to lind work in order to avoid penalties. 

One of the main components of the Delicit Reduction Act was to "reset" the credit to ensure 

states engaged more lamilies in work activities. But the intended impact of the ORA appears to 

have been mitigated because of excess MOE. In FY 2004, there were 19 jurisdictions (17 states 

and two territories) that had no work requirement, a fact ollen cited as a rcason for strengthening 

work requirements. But alier the ORA, and because of this excess MOE provision, there were 

even more jurisdictions-22 (21 states and one territory)-that had no work requirement. Instead 

of more recipients working, work participation rates have declined since the ORA and more than 

half of all TANF recipients have not been required to work for any amount of time over an entire 

year. GAO pointed out in a September 20 II report that in FY 2009, 32 of the 45 states meeting 

work rates claimed at least some credit for exccss MOE spending, and 17 would not have met 

4 
37 


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their work participation requirements without the credits, which would have resulted in penalties. 

Counting State and Third-Party Spending as TANF MOE 

State Spending on Related Programs 

States expanded their cxaminatinn or all state expenditures that might meet a TANF purpose and 

could be reported as TANF spending. This is legitimate under current program rules, although 

the state must attest that the spending they report is either for a new program created after FY 

1995, or that the amount exceeds the FY 1995 spending levels (called the "new spending test"). 

For example, some states began ncw child care or after school programs, pre-kindergaJien 

classes, or state-funded Earned Income Tax Credit programs after welfare reform becamc law. 

Although most had not decided to report this spending as MOE in the past, the strengthened 

"vork requirements in the ORA caused many states to look for and report these expenditures as 

part orthe TANF program. 

One state reviewed its expenditures across 44 state programs and secured enough excess MOE to 

avoid a work participation rate penalty in 2007. While just under $90 million (over 200+ percent 

of minimum MOE requirement) in T ANF spending was needed to avoid the penalty, the state 

actually identified additional "untapped" T ANF spending of over $1.7 billion. 

Third-Party Spending 

In 2004, while I was working at HHS on TANF policy, our agency was asked to clarify whether 

third-party cash or in-kind spending could count as state spending in the TANF program. 

Because of existing regulations, it \vas detennined that these expenditures could he claimed as 

MOE. At the time, this was not seen as monumental, as it simply reiterated the way third-party 

spending could be counted in TANF and many other programs. States looked at excess MOE as 

a way to account for these services and the claiming of third-party spending has increased 

substantially. 

Let me provide two examples of how a state would claim third-party expenditures as T ANF 

MOE: 

I. Food bank: A nonprofit decides to open a new food pantry in the state. The food bank 

primarily serves low-income families, many with children. Seeking to increase the state's 

TANF MOE, the state contacts the nonprofit and sets up an agreement under which 

cCliain food bank expenditures are counted as TANF spending. The state believes this 

service meets one of the purposes of the TANF program. The food bank estimates the 

value of the food provided to families to be S2 million over the year. They also estimate 

that half of the food boxes given out went to families with children. As a result, the state 

could now report to the Federal governmcnt $1 million in TANF MOE spending, 

provided by the food bank. 

2. Volunteer hours: An urban school district has recently set up an after school program for 

elementary school children stalTed by volunteers l[om the community. Becallse the 

purpose of the program is to keep kids constructively engaged and to teach life skills, the 

5 
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state determines this activity meets one of the T ANF purposes. The state signs an 

agreement with the district to monetize the value of volunteer time provided. The district 

determines that volunteers donated over $1 million in volunteer time to the program, and 

the state reports this S I million as TANF MOE spending. 

As you can see, claiming of third-party spending can be quite broad, and can include many 

things that most would likely not label as "spending" in the traditional sense. In addition, the 

potential sources from which to collect third-party spending is vast and these sources will likely 

expand as new programs are created and more current programs are discovered. 

While the claiming of third-party spending has undoubtedly increased since the passage of DRA, 

HilS has recently blocked some states from what they believed were beyond the bounds of the 

TANF program. In one casc~ a state calculated the value of free emergency medical care 

providcd to low-income familics and claimed this as state TANF spending. HHS rejected the 

state's claim, noting that the costs represented foregone revenue, not TANF spending. HHS also 

disagreed with the methodology used to estimate the amount and did not allow the claim. 

In another case, a state estimated the value of oil spill compensation payments to families made 

by a private company, and then sought to claim these dollars as TANF MOE spending. HHS also 

rejected this claim, saying both that the payments did not qualify as TANF spending and that the 

estimation methodology did not meet established guidelines for "reasonable estimates." 

What arc the concerns with these provisions? 

Conclusion 

a. Work rates are undermined - spending more means lowering or removing work 

requirements 

b. Counting spending in other areas (state pre-k, pregnancy prevention, youth afterschool activities, etc.) may supplant real TANF dollars 

c. Counting expenditures that arc not really cash outlays as though they arc may 

divest the program without it appearing like funds are being lost 

Tn closing, let me point out that none of these practices are illegaL None of them are questionable 

according to current policy. States cannot be blamed for working within the rules and regulations 

to meet Federal requirements. However, based on my experience in overseeing the TANF 

program and implementing the Deficit Reduction Act regulations, I believe that this combination 

of factors has resulted in \veaker work requirements, less investment in TANF families, and 

fewer families becoming self-sufficient. 

In the fall of 2008, HHS agreed that this excess MOE provision should be eliminated and 

proposed doing so. Ho"ever, the policy has continucd. 

1 appreciate the Subcommittee's interest in this issue, and 1 hope that all members of this 

Subcommittee-and this panel-can work together to ensure that TANF achieves its intended 

6 
39 

f 

Chairman DAVIS. I would like to recognize Mr. Berg from North 

Dakota to introduce the witness from his own State, Mr. Cartledge. 

Mr. BERG. Thank you, Mr. Chairman. 

I am really tickled to have Carol Cartledge here from North Dakota. She oversees the TANF program in North Dakota, and I 

asked her to come out and share some of the commonsense things 

that they are doing in North Dakota with the committee. 

And so thank you for being here. 

Chairman DAVIS. Thank you, Ms. Cartledge. You may proceed. 


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40 

STATEMENT OF CAROL CARTLEDGE, DIRECTOR, ECONOMIC 

ASSISTANCE POLICY DIVISION, NORTH DAKOTA DEPARTMENT OF HUMAN SERVICES 

Ms. CARTLEDGE. Chairman Davis, members of this subcommittee, I am here today to provide you with information on 

North Dakota Temporary Assistance for Needy Families program. 

Maintenance of effort is the amount a State must spend in order 

to receive the TANF Block Grant. Excess MOE is in excess of the 

amount that States need to meet the MOE expenditure requirements. 

A State may claim as excess MOE existing State and third-party 

spending. Using this option allows the State to reduce their target 

work participation rate and operate separate State programs to address special needs of families with severe barriers to employment. 

Target work participation rate is a percentage of a TANF household required to participate in work activities, which may be lowered by a caseload reduction credit. 

States must engage 50 percent of the TANF participants who are 

work eligible and 90 percent of two-parent TANF families in work 

activities, or States face financial penalties for failing to meet the 

work participation rate. However, the rates a State must actually 

meet for a Federal fiscal year are reduced by the amount of a 

State’s caseload reduction credit. Generally the caseload reduction 

credit equals the number of percentage points that a State reduces 

its overall caseload in the prior fiscal year compared to the overall 

caseload in base year, which is 2005. If a State utilizes the excess 

MOE option, it further reduces the caseload reduction credit. 

North Dakota took a serious look at the excess MOE option with 

the implementation of the Deficit Reduction Act. After much discussion North Dakota decided not to rely on excess MOE as a 

means of meeting the work participation rate, but instead looked 

at other options under TANF. Taking it a step further, we looked 

at ways to meet the 50 percent work participation rate without 

using the caseload reduction credit to stay within the Federal work 

requirements. In order to achieve this goal, North Dakota researched our current policies and procedures. 

In 2006, the North Dakota Department of Human Services conducted on-site visits to the counties and State levels to determine 

where improvements could be made. Many of the discussions surrounded why TANF clients could not do the work activities. Obstacles typically related to mental health, family and health issues. 

Based on these visits, we learned we needed to change the focus 

from what clients can’t do to what they can do. Further, we needed 

to look at the entities that work with our families with multiple 

barriers and agencies with the skills and the expertise to work effectively with various populations in North Dakota. 

This led to contracts for case management and employment services with three agencies: Community Options, Job Service North 

Dakota, and Tribal Employment and Training. Under TANF, 

adults receiving assistance are expected to engage in work activities and develop capacity to support themselves and their families. 

We also shifted our focus on the federally defined work activities 

and on how to make the work activities work for us instead of 

against us. North Dakota uses the full array of options, with some 


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41 

individuals involved with many activities. We have become creative 

with the work activities such as working with our tribal agencies 

for TANF clients to achieve the required hours. One of the examples is during a powwow, where we can count some of the hours 

that some of the individuals may be participating in a powwow. 

North Dakota continued to look at the TANF and how we could 

improve the program to better serve our clients and their needs. 

Today North Dakota has regular TANF benefits and these additional options: Diversion assistance, which provides short-term benefits to families that are employed or will be employed to help the 

parent or caregivers remain employed. 

We also have our regular TANF benefits. Within the regular 

TANF benefits we have—it is called Pay After Performance—workeligible individuals are required to meet work requirements before 

their needs are met. This means that the child-only payment is 

made, and if the work-eligible individual meets the work requirements, we would provide them with a supplement benefit. If the 

work-eligible individual does not meet the requirement, a sanction 

is imposed. The reasons for this requirement is so that individuals 

will become work ready, get used to what a paycheck is like. 

We have now entered into a new endeavor, which is called a career ladder, where we are allowing individuals to pursue secondary 

education. We have a Kinship Care program, which expands the 

options of placements for children who are in the care, custody, and 

control of the child welfare system. We have transition assistance, 

which promotes job retention by providing extended periods of assistance to qualified families. And then we have post-TANF, which 

is once they totally lose TANF assistance. We also provide support 

services to families. 

Implementing these changes to North Dakota has resulted in a 

work participation rate increase. In Federal fiscal year 2005 without a caseload deduction credit, North Dakota work participation 

rate was 31.45 percent. 

Chairman DAVIS. Ms. Cartledge, would you mind summing up 

briefly? We are over a bit. 

Ms. CARTLEDGE. Of course. 

With these changes, North Dakota has been able to increase its 

work participation rate by 128 percent. 

That concludes my testimony, and I would be happy to answer 

any questions that you may have. 

Chairman DAVIS. Thank you very much. 

[The prepared statement of Ms. Cartledge follows:] 


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Testimony of 

Carol Cartledge 

Director of Economic Assistance Policy Division 

North Dakota Department of Human Services 

House Ways and Means 

Subcommittee on Human Resources 

Chairman Geoff Davis 

May 17, 2012 

Chairman Davis, members of the subcommittee, I am here today to provide 

you with information on North Dakota's Temporary Assistance for Needy 

Families (TANF) program. 

Maintenance-of-effort (MOE) is the amount a state must spend in order to 

receive the TANF block grant. Excess MOE is in excess of the amount the 

State needs to meet its MOE expenditure requirement. A State may claim as 

'excess MOE' existing State and third-party spending. Using this option 

allows a State to reduce their target work participation rates and operate 

separate state programs to address special needs of families with severe 

barriers to employment. Target work participation rate is the percentage of 

TANF households required to be participating in a work activity which may 

be lowered by a case load reduction credit. 

States must engage 50 percent of TANF participants who are workeligible and 90 percent of two-parent TANF families in work activities or 

states face financial penalties for failing to meet the work participation 

requirements. However, the rates a state must actually meet for a federal 

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fiscal year are reduced by the amount of a state's caseload reduction credit. 

Generally, the caseload reduction credit equals the number of percentage 

pOints that a State reduces its overall caseload in the prior fiscal year 

compared to its overall caseload in the base year. If a state utilizes the 

excess MOE option, it further reduces the reduction credit. 

North Dakota took a serious look at the excess MOE option with the 

implementation of the Deficit Reduction Act of 2005. After much discussion, 

North Dakota decided not to rely on excess MOE as a means of meeting the 

work participation rate but instead looked at other options under the TANF. 

Taking it a step further, we looked at ways to meet the 50 percent work 

participation rate requirement without using a caseload reduction credit to 

stay within the federal work requirements. In order to achieve this goal, 

North Dakota researched our current policy and procedures. 

In 2006, the North Dakota Department of Human Services conducted onsite visits at the county and state level to determine where improvements 

could be made. Many of the discussions surrounded why TANF clients 

cannot work or be in a work activity. Obstacles typically related to mental 

health, family and health issues. Based on these visits, we learned we 

needed to change the focus from what clients cannot do to what they can 

do. Further, we needed to look at entities that work with families with 

multiple barriers and agencies with the skill set and expertise to work 

effectively with various populations in North Dakota. 

This led to contracts for case management and employment services with 

three agencies: Community Options, Job Service North Dakota, and Tribal 

Employment and Training. Under TANF, adults receiving assistance are 

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expected to engage in work activities and develop the capability to support 

themselves and their families. 

We also shifted our focus on the federally defined work activities and how to 

make the work activities work for us and not against us. North Dakota uses 

the full array of work activities to, with some individuals involved in more 

than one activity. We have become creative with the work activities such 

as work with Tribal agencies for TANF clients to achieve the required 

number of hours while participating in a Pow-wow, purchase equipment for 

self-employment business, or groups of TANF clients work together to 

support a community project. 

North Dakota continued to look at TANF and how we could improve the 

program to better serve our clients and their needs. Today, North Dakota 

has regular TANF benefit and these additional options: 

• Diversion Assistance, which provides short-term help to families 

that are employed or will be employed, to help the parents/caregivers 

to remain employed. 

• A regular TANF benefit, which is a monthly benefit with a 60-month 

lifetime limit. 

o Pay After Performance - Work-eligible individuals are required 

to meet work requirements before their needs will be met. This 

means a child-only payment is made, and if the work-eligible 

individual meets the work requirements, a supplement payment 

is made to meet that individual's needs. If the work-eligible 

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individual does not meet the work requirements, a sanction is 

imposed. This requirement is for the first four months on TANF. 

o A new endeavor is a Career Ladder started in 2011 -

Individuals pursuing secondary education in a highly employable 

field in North Dakota are allowed to pursue education beyond the 

12-month federal limitation. 

• TANF Kinship Care assistance expands the options for placement of 

children who are in the care, custody, and control of the child welfare 

system by providing enhanced funding and services to those who 

qualify eligible for the program. 

• Transition assistance promotes job retention by providing an 

extended period of assistance to qualified TANF households to further 

assist working families to remain self-sufficient from TANF. 

• Post TANF provides six months of support services once a family is 

no longer eligible for TANF or Transition Assistance. 

• Support services are provided to TANF families such as a 

transportation allowance to get to and from work activities, help with 

car repairs, clothing for work or job interviews, tools or equipment for 

work, professional license fee, and tuition assistance. All support 

services have annual dollar limitations. 

Implementing these changes to the TANF program has resulted in a work 

participation rate increase. In federal fiscal year 2005, without caseload 

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reduction credit, North Dakota's work participation rate was 31.45 percent. 

That rate increased to 71. 7 percent the first quarter federal fiscal year 2012. 

This is a 128 percent improvement. 

This concludes my testimony. I would be happy to answer any questions you 

may have. 

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NQrthJ2akQtaJANF~tQxl~s 

When "George" first started with the JOBS program, he was a recently 

divorced father of three boys ranging in age from 3-7. He came to the JOBS 

program eager to work and get his life back on track. "George" had not 

worked in a paying position since his eldest child was born, as he was a 

stay-at-home dad for his children while his ex-wife worked. He was still a 

little shaken from his divorce, but had the personal motivation and desire to 

better himself and his family. After a brief period of volunteering at a local 

thrift store and an assessment of his skills and interests, "George" found 

employment at a retail store. With his hard work and positivity, "George" 

quickly gained a department management position. At his last meeting with 

his employment specialist, "George" shared that he was offered a higher 

management position and planned to accept the offer. 

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N9rJIlDak~la_ TAli! L~t9rielil 

I graduated with a bachelor's degree in Human Services in 2010. The 

following fall I accepted a case management position. I was so excited and 

eager to work as a case manager. Throughout the next year and a half my 

knowledge of the TANF program and the customers I worked with grew 

tremendously. I learned things from first hand experiences that I could not 

have learned from a book or sitting in a lecture. I learned how to handle 

stressful and difficult situations with ease and grace. I have seen the power 

of a helping hand and believe that I have made positive, long lasting 

impressions in the lives of the customers I have served. 

In my continued quest to help people I began the journey towards my 

Master's in Social Work degree in January 2012. Shortly after that I received 

a promotion to director in North Dakota. I continue to build on a wealth of 

knowledge from my colleagues, my customers, and my schooling. All areas 

of my life seem to blend together and my knowledge in the field of Human 

Services continues to grow on a daily basis. 

TANF is a great program that gives people opportunities that they might not 

have had without the program. 

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49 

f 

Chairman DAVIS. Mr. Palermino. 

STATEMENT OF PETER J. PALERMINO, TANF ADMINISTRATOR, 

CONNECTICUT DEPARTMENT OF SOCIAL SERVICES, REPRESENTING THE AMERICAN PUBLIC HUMAN SERVICES ASSOCIATION 

Mr. PALERMINO. Good afternoon, Chairman Davis, Ranking 

Member Doggett, distinguished Members of the Committee. My 

name is Peter Palermino. I am the TANF administrator as well as 

the child care administrator for the State of Connecticut. The 

TANF program is operated through the Connecticut Department of 


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50 

Social Services. I am here on behalf of the State of Connecticut, the 

National Association of State TANF Administrators, and the American Public Human Services Association. 

I am pleased to be here to discuss the ongoing partnership between the Federal Government and the States, and the ongoing effort to support low-income or no-income families to attain self-sufficiently. I expect that today’s hearing will move us forward in an 

open discussion on how States such as Connecticut are faring in 

their efforts to help families with complicated needs, how our State 

is implementing strategies to help families through strategic investment of our State TANF MOE dollars, and possible options for 

improving the system based on our experience and experiences of 

other States across the country. 

Let me share a few stats for you for Connecticut. Our TANF Block Grant is $267 million, which brings our MOE requirement to 

$183 million, for a total of $450 million. That is a nice piece of 

change to use to help support a lot of families, and yet despite that, 

we still look for more as best we can. 

We currently serve 17,500 with direct cash assistance each 

month. That total is down from a high of 24,000 back in 2005. And 

we also serve several thousand more families with the TANF MOE 

to obtain and maintain self-sufficiency. 

Connecticut has a time limit of 21 months, with up to two 6- 

month extensions for mandatory recipients. So our typical length of 

stay for a TANF client is around 33 months. 

Since October of 2010, Connecticut’s monthly work participation 

rate has exceeded 50 percent without factoring in the caseload reduction credit or any excess MOE credit. Since the work participation rate is dependent on so many factors, including barriers of individuals’ access to jobs, education, transportation, and other supports, we are pleased to know that the State’s additional investments in excess MOE may assist us if our rate begins to drop. We 

have used the caseload reduction credit and excess MOE in years 

past, and we expect we may need to in the future. 

States do like the flexibility provided by the TANF Block Grant. 

The ability to design programs and utilize State and Federal funds 

is essential to meet differing needs of our State populations and 

economic variables, and yet still address the four TANF purposes. 

Thus, we urge you to continue to maintain this flexibility and 

honor those provisions that are in the TANF regulations. 

A little historical information. In 1996, Connecticut’s TANF program expanded beyond the Aid to Families with Dependent Children population to serve a much broader and diverse population to 

families with incomes less than 75 percent of the State median income level. 

We have other programs that are supported by TANF and MOE 

funds, and they include job training, child care, transportation. 

Those are important and critical employment support programs for 

those individuals. These programs do help targeting families get to 

and stay at work and begin the road to self-sufficiency. 

In October of 2007, Connecticut did move our two-parent cash assistance families to a solely State-funded program. We recognized 

that we could not attain the 90 percent participation rate. Hard decision in 2007, similar to other States, was eventually recognized 


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by Chairman Davis in a statement he made in 2011, which I quote: 

‘‘Current welfare rules create marriage penalties by expecting a 

greater share of married parents to be working and for more hours. 

States have responded by in effect opting out of such requirements 

altogether,’’ quotations closed. 

TANF MOE in Connecticut has been very consistent over several 

years. The excess MOE is an extension of those funds that demonstrate the additional commitment of funding by the State to 

these TANF-directed programs. Connecticut has exceeded its MOE 

requirement for several years, and we expect to continue to do so. 

We do believe that the work participation rate is limiting, and 

there are a variety of reasons why, but we believe the caseload reduction and the application of excess MOE is a thoughtful provision for our States. 

In conclusion, I believe Congress and the Department of Health 

and Human Services in the States all desire similar results, and 

we are here today to work with you and will be happy to take some 

questions. 

Thank you. 

Chairman DAVIS. Thank you, Mr. Palermino. 

[The prepared statement of Mr. Palermino follows:] 


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US House of Representatives, Ways and Means Committee 

Human Resources Subcommittee 

'"State TANF Spending and its Impact on Work Requirements" 

May 17,2012 

Testimony of Mr. Peter J. Palermino 

TANF Administrator, Bureau of Assistance Programs 

Connecticut Department of Social Services 

Chairman Davis, Ranking Member Doggett, distinguished members of 

this committee, my name is Peter Palermino and I am the TANF 

Administrator for the State of Connecticut. The TANF program is 

operated through the Connecticut Department of Social Services. I am 

here on behalf of the state of Connecticut, the National Association of 

State TANF Administrators and the American Public Human Services 

Association. I am pleased to be here to discuss the ongoing 

partnership between the Federal government and the states in the 

ongoing effort to support low income or no income families to attain 

self-sufficiency. I expect that today's hearing will move us forward in 

an open discussion on how states such as Connecticut are faring in 

their efforts to help families with complicated needs, how our state is 

implementing strategies to help families through strategic investment 

of our state TANF Maintenance of Effort (MOE) dollars, and possible 

options for improving this system based on our experience and the 

experiences of other states across the country. 

The flexibility that the TANF Block Grant provides states in designing 

programs and utilizing state and federal funds is essential to meet the 

differing needs of state populations and economic variables while 

achieving the fourTANF purposes. We urge you to maintain this 

flexibility and continue to honor the provisions that exist in the TANF 

regulations. 
53 


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In 1996, Connecticut's TANF program expanded beyond the Aid to 

Families with Dependent Children (AFDC) population, to serve a 

broader, more diverse population of families with incomes less than 

75% of the State Median Income. This means that TANF not only 

includes the Temporary Family Assistance-Cash Assistance and 

Employment Services clients, but families and children with goals and 

needs to attain and maintain employment. Other programs 

supported by TANF and MOE funds include work programs, job 

training and education, youth training and education programs, child 

care and transportation programs that help families get to and stay at 

work. Connecticut is currently serving 17,500 families with direct cash 

assistance each month (down from 2005 when we served over 24,000 

families) and several thousands more families to attain and maintain 

self-sufficiency. Connecticut has a time limit of 21 months with up to 

two 6-months extensions for mandatory recipients. While the state 

provision limits the time that work-eligible recipients have to 

complete training and/or job related activities, Connecticut is able to 

coordinate programs and services with additional TANF programs to 

provide essential supports to families to help maintain self-sufficiency 

as they transition from cash assistance. 

In October of 2007, Connecticut moved the Two-Parent cash 

assistance cases to a Solely State Funded (SSF) program. This is a state 

commitment to provide the employment services equal to TANF, with 

funds that are above and beyond state MOE and Excess MOE. Our 

2007 decision, similar to other states, was eventually recognized in a 

September 2011 statement by Chairman Davis: " ... current welfare 

rules create marriage penalties by expecting a greater share of 

married parents to be working, and for more hours. States have 

responded by in effect opting out of such requirements altogether." 

TANF MOE, in Connecticut has been very consistent over several years 

in the diverse programs that are MOE funded. The Excess MOE is an 

extension of those funds, and demonstrates the additional 

commitment offunding by the state to these TANF directed 

Testimony of Peter). Palermino May 17, 2012 

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programs. Each year the TANF Annual Maintenance of Effort Report 

(Form ACF-204) provides a platform to showcase the financial 

commitment of state dollars and highlight the number of families 

served by these programs. Connecticut has exceeded its MOE 

requirement for several years and expects to continue to do so. In 

part this allows for fluctuations in client eligibility and associated 

quarterly spending by multiple programs. It ensures enough qualifying 

MOE. 

We believe that the Work Participation Rate, as the sole measure for 

the TANF program's performance, is limiting. While initially useful in 

the 1990's and up until the Deficit Reduction Act in 2005, the Work 

Participation Rate has become an ever narrowing measurement of 

process over real results leading to today's system which 

overemphasizes the process ofTANF engagement, is less of a 

reflection of state work and goals for their TANF block grants, and that 

is providing a data and accountability tool that is growing less 

informative and useful to the federal government as time goes by. At 

this point, WPR is more a measurement of how "busy" state TANF 

agencies and their clients are as opposed to a means of measuring 

whether programs are making genuine strides in helping families with 

their federal and state TANF dollars. While this measure provides 

insight into the process of engagement in TANF work activities, 

Connecticut's TANF program, as well as other states, includes an array 

of programs and services that support families in becoming selfsufficient. The measures of success for these families are seen in 

measures outside the parameters of the Work Participation Rate, yet 

still lead to self-sufficiency. 

The Case load Reduction Credit and application of Excess MOE is a 

thoughtful provision for states. The Excess MOE provision allows a 

buffer from the raw Work Participation Rate of cash assistance clients 

fully engaged in countable work activities. Excess MOE acknowledges 

states with credit for the Work Participation Rate for spending 

additional state funds to meet the purposes ofTANF. It creates an 

Testimony of Peter j. Palermino May 17, 2012 

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opportunity to explore new program designs for improved job 

retention and to extend TANF opportunities and study the impacts on 

families that access the supports services and non-cash assistance 

programs. In Connecticut, the Excess MOE has provided a buffer of 

6% to 7% toward WPR since 2010, and has also allowed Connecticut 

to take risks in adjusting our TANF Jobs First Employment Services 

program design and delivery. For example, it allows time to study the 

impacts, determine success, continue with the modified program or 

return to the former program design if we begin to view dips in the 

monthly rate. The Excess MOE is also used as a leveraging tool for 

states during budget decisions as it demonstrates the commitment of 

the federal government for continued investment of state dollars to 

serve low-income families and meet the goals and intent ofTANF. It 

provides a means of finding ways to maximize the efficiency of the 

TANF dollar when state revenues and federal funding are being 

ca refu lIy allocated. 

Since October of 2010, Connecticut's monthly Work Participation Rate 

has exceeded 50% without before factoring in Case load Reduction 

Credit or Excess MOE credit. However, because the rate is dependent 

on so many factors including families' access to jobs, education, 

transportation and other supports, we are pleased to know that the 

states' additional investment in Excess MOE may assist us if our rate 

begins to drop. 

In Connecticut, we are moving forward with contextualized education 

and job training courses in manufacturing, health care and other fields 

to more fully support clients in obtaining jobs, completing their high 

school diploma and maintain career paths with the skills and tools that 

address business and employer needs. We are also redesigning levels 

of case management to address the differing needs of clients from the 

hardest to serve to those that are more recently unemployed or have 

exhausted the maximum unemployment compensation. The state's 

unemployment rate dropped below 8% in February of this year and as 

of this week will impact over 9,000 people who have reached the 

Testimony of Peter j. Palermino May 17, 2012 

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maximum of 73 weeks of unemployment, and will no longer collect 

benefits. Some of these unemployed persons will access TANF Cash 

Assistance and TANF support programs as their assets are depleted in 

this still struggling economy. 

In the recent past, Connecticut, like many states, extended its 

programming using the TANF Emergency Contingency Funds, with 

reimbursement funding for several quarters. We targeted our efforts 

predominantly for Subsidized Employment and Non-Recurrent ShortTerm Benefits. Our TANF Caseload had not increased significantly so a 

smaller amount of ECF funding qualified as Cash Assistance 

reimbursement. Connecticut used the opportunity provided by TANF 

ECF to leverage additional funds and resources to serve TANF eligible 

families throughout the state. Private foundation funding and third 

party programs were integral to the expansion of TANF services for 

the ECF program during the past few years. We were able to reach 

approximately 36,000 families from July to September 2010. 

State human services agencies, including Connecticut, implore 

Congress to use TANF Reauthorization as a vehicle for either 

redesigning TANF's performance measures or bolstering the current 

structure in a way that is fair for states, informative for federal 

partners, and transparent in a way that allows for ongoing discussion 

and improvement. 

Current TANF program features, such as the Excess Maintenance of 

Effort (XMOE) and the Case load Credit Reduction, should continue for 

states. Destabilizing these features when states are forced with 

increasingly difficult budgetary decisions will further complicate an 

already difficult task. 

Connecticut, like many states, was hit hard by a national recession 

that resulted in instability in the job and housing markets. State TANF 

agencies continue to work towards helping families with complicated 

needs prepare for life in the workplace and transition from assistance 

to employment; this is the primary goal of all state TANF agencies. Yet 

Testimony of Peter). Palermino May 17. 2012 

Page 5 
57 

f 

Chairman DAVIS. Dr. Pavetti. 

STATEMENT OF LADONNA PAVETTI, PH.D., VICE PRESIDENT 

FOR FAMILY INCOME SUPPORT POLICY, CENTER ON BUDGET AND POLICY PRIORITIES 

Ms. PAVETTI. Good afternoon, Chairman Davis, Ranking Member Doggett, and distinguished Members of the Subcommittee. 

Thank you for inviting me to testify today. 

The key point I would like to make today is that States rely on 

excess MOE to meet their work rate because of the work rate’s 

flaws. If the work rate was replaced with a new measure that foVerDate Mar 15 2010 01:04 Mar 09, 2013 Jkt 078760 PO 00000 Frm 00061 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78760.XXX GPO1 PsN: 78760

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cused on what States achieve through their TANF work programs, 

the excess MOE issues related to meeting the work rates would 

largely disappear. 

States didn’t begin to use excess MOE to help to meet their work 

rate until after the passage of the Deficit Reduction Act, which included changes that made it harder for States to meet the rate. 

One important change was moving the base year for the caseload 

reduction credit from 1995 to 2005. This matters because as you 

can see in figure 2 on this screen, by 2005, States had already reduced their TANF caseloads far below their prereform levels. 

For every 100 families in poverty in 2005, states served just 35 

families in their TANF programs, down from 68 families in 1996. 

In 2009, just eight States met their 50 percent work rate without 

any caseload reduction credit. That is either from reducing their 

TANF caseload or from claiming excess MOE. Comparing them to 

two larger States with much lower work participation rates, Washington and California, shows that the work rate fails to adequately 

measure whether States are meeting the primary goal of welfare 

reform, increasing the employment among participants while providing a safety net for families unable to work. 

As you can see in figure 3, Washington has done quite well at 

getting single mothers employed. In 2009, two-thirds of single 

mothers were employed, a higher share than in 38 of the 50 States. 

Yet its performance on the work rate does not paint the same picture of success. In 2009, the State achieved a work rate of just 23 

percent. Without the help of an excess MOE claim, It would not 

have met its work rate. 

California was one of five States that failed to meet its work rate 

in 2009 even with an excess MOE claim. Yet the State’s low work 

rate obscures its success. Even with the State’s unemployment rate 

at 11.4 percent, 60 percent of single mothers were employed. In 

2009, almost 90,000 TANF recipients met their work requirements, 

and that was an increase of 40,000 recipients from 2005, a measure 

of success by just about any standard except the TANF work rate. 

As figure 4 shows, what is even more telling is that for every 100 

single mothers in California who were unemployed in 2009, there 

were 13 TANF recipients, who met their work requirement. This 

ratio was the second highest in the country, and higher than the 

States that achieved a 50 percent work rate. 

Mississippi shows the other side of the story. Mississippi 

achieved the highest work rate of 61 percent in 2009, but its employment rate among single mothers was among the 10 lowest in 

the country. And for every 100 unemployed single mothers, there 

were just 4 TANF recipients who met their work requirement. 

Moreover, Mississippi was able to achieve a high work rate because it served few families in its TANF programs. As figure 5 

shows, for every 100 Mississippi families in poverty, only 10 received any TANF cash assistance, compared to 66 in California and 

49 in Washington. 

The weakening of the cash safety net for families has resulted in 

increased numbers of children living in deep poverty, and has removed the safety net from the most vulnerable families who have 

the most to gain with the help that TANF can provide, those that 


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59 

have physical or mental health issues, and those caring for a sick 

or disabled child. 

The work rate is so terribly flawed that reconsideration of it 

should be central to any TANF reauthorization discussion. In the 

interim, I offer two changes to include in a TANF extension that 

would begin to refocus State aid efforts on what matters: getting 

TANF recipients employed. 

First, allow States to count individuals that leave TANF for work 

in their work rate for up to 12 months; and second, ask HHS to 

initiate a demonstration project to encourage States to develop and 

hold themselves accountable for alternative performance measures 

that focus on outcomes. 

Now, I would like to make a few statements about third-party 

MOE, which I believe is a significant problem. States have found 

ways to withdraw State funds from programs and services that had 

been supported with TANF MOE funds and still meet their MOE 

requirement by identifying this third-party MOE. 

Importantly, this practice is not limited to States that report excess MOE expenditures. Some States have identified third-party 

spending and have used this spending simply to meet, not to exceed, their MOE requirement. This is not what Congress intended, 

and this practice should be stopped. 

These are hard economic times, and many families are struggling, and there are two actions—and I am going just do those 

quickly and end—that Congress should also consider that are related to MOE. One is redesigning the contingency fund, which has 

very complicated excess MOE provisions and makes it difficult for 

States to meet, and the other is funding the TANF supplemental 

grants, which has taken money out of State programs that really 

they need to be able to meet those requirements. 

With that, I will stop and take any questions that you might 

have. 

Chairman DAVIS. Thank you very much, Doctor, for that. 

[The prepared statement of Ms. Pavetti follows:] 


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Center on 

Budget 

and Policy 

Priorities 

TESTIMONY OF LADONNA PAVETTI, PH.D. 

820 First Street NE, Suite 510 

Washing-ton, DC lOOD2 

T c-l: 202-408-1080 

Fax: 202-408-1056 

clnt.::r(a'chpp.org 

\n\ w.cbpp.org 

VICE PRESIDENT, FAMILY INCOME SUPPORT POLICY, 

BEFORE THE HOUSE WAYS AND MEANS COMMITTEE, 

SUBCOMMITTEE ON HUMAN RESOURCES, HEARING ON 

"STATE TANF SPENDING AND ITS IMPACT ON WORK REQUIREMENTS" 

(~ood aft<:rnoo!1 Chairman Dayis, Ranking I\fcmb~r Doggett, and distin6TUishcd members of the 

Subcommitte(" Thank you for iiTdting me to testify on the relationship between TANF State 

maintenance-oF-effort (MOE) rcquirctm:nts and their interaction with work requirements. 

1 am Yice President for 1 :amily Income Support Policy at the Center on Budget and Policy 

Priorities. Prior to cOllllng to the Center two and a half years ago, 1 spent 1 G years studying welfare 

programs, including the implementation of \vclfarc reform since its inception. 1 ha\'e done 

significant work documenting ho\v states haye implemented TANF work requirements, including 

how they n:f'ponded to the changes enacted through the Deficit Reduction Act (DR,\) of2005. 

I\fter pro\~iding S0111e background on the topic of to day's hearing, T will focus my testimony on 

three key points: 

Hrst, excess t-.l0E, which states have used to help meet their TANl" \Xiork Participation 

Requirement (\,'l)R), is a symptom of a much larger problem - the failure of the T),-NF \\;PR 

to adequatdy measure states' commitment to and success in helping T;\NF recipients, most of 

'\\'hom arc single mothers, find and maintain employment. 

Second, two key prohlems related to t\10E - third-party non-governmental MOE spending and 

the 100 percent MOE requirement required to access the Contingency Fund - arc unrelated 

to TANP \vork requirements, but also arc important to address. 

Finally, the erosion of the TANF block grant and cuts in T.-\NF and otha human SC1Ticc 

funding arc making it increasingly difficult for states to hdp unemploycd individuals find work 

and to proyide a safety net for those unable to work. Expectations for states need to be 

consistent '\vith what they can do ,\\;th the resources they hm-c available. 
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Background 

Congress established rhe T\NF \'{"ork Participation Rate (\'X'PR) as part of the 1996 welfare law to 

ensure that states focus their cash assistance programs on helping recipients obtain '>.vork. The \\'PR 

measures the share of a state's T\Nl; households containing a "work-eligible indiyidual" \vho 

participates in assigned work actiyitics for the [('(luired number of hours (20 per week for families 

with a child under age G and 30 per week for cscryonc else). The rate is drlycn by its n.vo 

components: (1) the numher ofT\NF recipients \vho meet their \vork participation requirement 

and (2) the number of families sctTcd in the state's T\NI' program. \X'hilc there is some yariation 

in how states structure their work programs, there is far more yariation in who is sen cd by T\NF in 

the first place. 

States arc required to meet a SO percent \\'PR for all families and a 9() percenr WPR for twoparent families, but they can lower that target work rate by earning a "caseload reduction credit." 

This credit can come from two sources: (1) reducing the state's T.\NF caseload below its 200,) leycl 

and (2) "excess :'\[OE," or spending more state dollars on T,\:\lF-related selTices than the 

i\.[OE requiremenr stipulates.] (The Department of Health and Human SetTices has 

formula that it uses to translate the excess MOE into the number of cases by which the stat<.: can 

100\:er its current cascload. This reduced casdoad is then compared to the state's 2005 casdoad for 

purposes of determining hO\v mllch the casdoad has "declined" since 2nO).) .\ state's \'\/PR is 

reduced one percentage point for each percentage-point decline in its caseload belm:v the 20()5 lc\Te\. 

The cascload reduction credit was a response to a flaw in the \,('PR. \,\'ithout the cascload 

reduction credit, states that kept working recipients on the cascload would ha\ e been re\varded while 

those that helped people lean: \vclfare through work would have been penalized. The idea behind 

providing states \vith credit for spending more than was required was that states should not be 

penalized for setTing additional families with non-relJuired funds, 

Unfortunately, neither has e\Tr worked as intended. 

States that reduce their caseloads below their 2()05 le\'('l gct credit regardless of whether the 

recipients who lca\T T, \ Nl' find employment. Studies conducted in the of welfare 

reform found that only about half of the recipients who left the T.\NF rolls so for work.~ 

\!though more recent data arc nor ayailablc, \ve know from recent national studies that the 

number of families in extreme po\Trty has increased, because T.\NF set yes 

substantially fewer nO\v than at the start of welfare 

Similarly. it appears that some states that claim excess ;\[OE ha\-e done so flo! by increasing their 

I Th]~ rl()\']~](Hl]~ all()\1 ed under a 1 ()i)<) rcgulat](Hl 

C;rcgory \cs and Pamela), J.oprest. 1>1.\}: CII.rl'io{f(/(ompo.rifioll alltl LClII'I'I:f J]lItlJeJis l{cpIl11. \\'a~hington. D.C.: The 

l'rban ln~tltut('. :\LlIch 211, 2()O-. hltp'/ /11 II \\ UIlHII IJlg/l'llhli(AII()Il,/-I-II:;,) liUlll. 

1 H J,\lk~ Shackr ,1Ild Kathnn Fdin, E;\ilflJIf POI'('ri), ill I/!(. ('lIIfed SI(llex. \;ati(Hl.\1 J\)\(.'rt: Center Polic: B)id, Fcbnlan 

2012, Imp. / Inpc.ulllll h l'llll/puhlic\\lC )l1'/polle:_bnct, 'hncf2K, I,<)lic: IJrlcCK.pdf. 
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state contributIons to actlntles designed to help T,\NF reCIpients find and ma111tmn work or by 

serying more recipients, but instead by claimmg existing (but pl"CYiously unreported) 

gm"Crnmental and third-party, I1on-goYC1"nmcntal spending that meets one ofT.\NFs four 

purpmes as i\[()I~ spending. 

Excess MOE Issue Largely Reflects Flaws in Work Participation Rate 

- Figure 1 

It Is Common for States to Claim Excess MOE to 

Meet Their TANF Work Participation Rate 

States that claimed excess Maintenance of Effort spending for 2009 WPR 

NH 

WA 

MT NO 

10 SO WY 

NE NV UT CO 

. MA 

-RI 

CT 

- NJ 

In federal fiscal year 

2009 (the most current 

year ayailable). 37 states 

claimed a cascload 

reduction credit on the 

basis of cxcess 010E. 

(SCI.' Fi! .. ,'ure 1.) Two of 

the .3 i states achieyed a 

work rate aben"C 50 

percent e,"Co before 

taking the e'\:cess MOE 

credit into account (and 

therefore didn't need to 

ust' the credit); fiY(' 

states fatled to rncet the 

50 percent \YPR e\Ten 

after receiYing credit. 

This lean:s 30 states 

that may haye met their 

\'\,PR at least in part 

through excess :--'IOE. 

K5 ~OE 

MO AZ 

OC 

Source: u.s. Department of Health and Human Services. Office of Family Assistance 

\x;lulc states haye had the option of claiming excess MOE to help meet theix \'\'PR since 1999, 

they did not bcgtn to adopt the slraregy until after the of the Deficit Reductlon .\ct (DR.\) 

of 2()()5. The DR.\ changed the comparison year for cascload reduction credit from 1995 to 

2005, expanded the T\:\lF cases subject to the work requirement and instructed HHS to deYelop 

standardized definitions for work actiyities. These changes made the \'\'PR harder for states to meet 

and further its fla\vs as a performance measure. By 2005, states had already reduced their 

T.\Nl; far belm.v where they ,vere at the start of welfare reform - and employment among 

single mothers was already substantially abO\~c employment for married mothers and single women 

without children. 1n 200S, for e\Try 100 families in poyerty, states set\Ted just.15 famIlies in their 

TJ \NF pro,f.,l"Tams, down from 68 families in 1996. (Sec Figure 2.) 

\X'hat matters to iOlhidual families and to society as a whole is whether states help T\1"-:F 

recipients and other T. \NF-eligible parents find the through which they 

aCh1e\'e th1S. Yet, process is what the \X'PR measures. 

states to use the same strategies in rural North Dakota and 

.\ngcles. Because it is far for states to manIpulate who is counted in the \,/PR than who meets 
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the work partlCipation standard, states arc 

rewarded for setTing the families most capable of 

meeting the work participation standard, not for 

set\~ing those \'lho could most bcndit from the 

assistance T. \Nl" can proyide. The end result is 

that rhe most ntlncrable families arc left without 

a safety net and the help they need to mahe 

towards becomlllg self-sufficient. This 

not what welfare reform tntended, nor wtll it 

help us make progress in increasing employment 

among single parents e\Tn more. 

Thus, the problem we need to address first and 

foremost is the failed design of the \\/PR. 1f the 

\\'PR were replaced \'lith a new performance 

measure that captures employment outcomes, the 

excess ;\IOE issues related to meeting the \X''PR 

w()uld disappear. 

Work Participation Rate Fails to 

Figure 2 

By 2005, TANF's Role in Providing 

A Safet Net Had Alread Declined Shar I 

Number offamilies receiving AFDClTANF benefits for 

every 100familles with children in poverty 

100 1979: 82 

80 

60 

40 

20 Enactment ofthe DRA of 2005: 35 

0"""""""""""""""'" '79'81'83'85'87'89'91'93'95'97'99'01'03'05'07'09'11 

Human Services and {Since 2006} caseload data collected by 

CBPP from state agenCies 

Measure Success in Increasing Employment 

In fiscal year 2009, eight states - Georgia, Idaho, Mississippi, i\lontana, Nebraska, :\forth 

Dakota, South Dakota, and \X'yoming - achieved a ,vork participation rate of 50 percent or more, so 

they met the \,{cPR target without needing any ca~cload reduction credit (either from reducing thl'ir 

T,\I\;l" cascload or from claiming exccss 1\'10E). These states arc held up as models that the \X'PR is 

achie,'able. It is notable that, except for Ceorgia, these states arc all small, ,-cry rural states ,vith 

small T \NF caseloads. 

The important ljuestion, hO\ve\Tr, is whether these statcs arc models of what we actually ,vant a 

T.\NF program to achie\T. In othcr words, arc states that achiC\T a high work rate dTectiye in 

helping low-income mothers succeed in the bbor market? Do they prm-ide an adequate 

safety net to the most To try to answer thl'sC (luestions, I sugg:est looking at three 

different measures: (1) the share of single mothers (whether or nut they arc on T.\0JF) \\Ihn arc 

employed; (2) the ratio of the number ofT\Nl" recipients engaged in \vork actiyitics to the number 

of 1IJII'IlIpl?)'tr/single mothers in the state; and (3) the ratio of the number ofT,\Nl; cascs to the 

number of familics in poycrty. 

By these measures, this group of states docs not stand out. Comparing them to two much larger 

states that achieyed far lower work participation rates - \\?ashington State and California - shows 

that the \'\l)R fails to ade(juatcl) measure whether states arc meeting the primary goal of welfare 

reform: increasing employmcnt while pf(widing a safety net for families unable to work. 

4 

Washington State. \V'ashington State has done quite \vell at getting single mothers into the 

labor force, e\Tn during hard economic times: in fiscal year 20()9, despite the state's high 

(werali unemployment rate (8.9 percent on 3YCrage), two-thlrds of slIlgle mothers were 
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employed - a higher employment rate 

than in 38 of the 50 states. (SeC' Figure 

3.) _ \mong the eighr <;tares listed abon." 

thar achieyed a \'CPR of 50 percent or 

more, only three had a higher 

employment rate among single mothers 

- and all three had much Im.ver o\TraU 

uoc'mr,lmm,,'" rate and arc sIgnificantly 

states. 0.[or('on·r, tn an analysis 

of employment among T,\NF 

recipients in tiscal year 2007, the state 

found that 61 percent wcre employed 

during that) car. 

Yet \X'ashington State's performance on 

the \X'PR docs not paint the same 

picture of Sllccess. In 200t), the state 

achieyed a \,,'PR of 23 percent, meaning 

that a!:}{)ut one-quarter of its T,\).JI: 

cascs \vith a "work-eligible im1i\ idual" 

participated in appron'd work acti\-iti~s 

for the required number of hours. 

\'(ithollt the help of a substantial 

caseload reduction credit, based in part 

Figure 3 

The TANF WPR Is Not an Effective Measure 

Of Employment Among Single Parents 

• 2009 achieved work participation rate 

Share of single mothe~ employed in 2009 : 

80% 

70 

60 

50 

40 

30 

20 

10 

California Washington 

Sources: u.s. Department of Health and Human Services: 

httP"//www.<:lcf.llhsgov/progrClms/ob/partICIP/2009/tabOl"l1lm 

U.S. Department of Labor, Bureau of labor Statistics· 

http"//www bls gov/lau/table14fuII09 pdf ---.J 

on an excess !\lOE claim, \\'a<;hington State would not ha\T met its \VPR. 

California. J .ike \\'ashington, California achieyed a relatively low \'·PR in 2()()9: 26.8 percent. 

In fact, California was one of tive states that failed to mcet thc \'·PR target cvcn ll'il/l the 

casc]oad reduction credit it !"(.'cetyt"d. 

Y ct the state's Imv \'CPR obscures its demonstratcd success at engaging single mothers in work 

actiyities and getting them employelL EY~n with a statewide lInemploym~nt fate of 11.-+ 

percent, in 20()9, fully 60 percent of single mothers in California \VefC employed. In 2009, 

California engaged almost 90,000 T\NF recipimts in work actiyities for sufticicnt hours to 

meet the work participation standard, an increase of about 40,000 recipients since 200S. In the 

states that achieyed a work rate of 50 percent or mote, only i\Iississippi showed an appreciable 

increase in the number of recipients meeting the work participation standard bet"\veen 2U05 and 

2009. In C;eorgia, the numher of recipients meeting the work participation standard declined 

by more than half, from 7,300 to 3,300. 

E\-cn more telling, for eycry IOO singk mothers ttl Caltfomia who we1"e unemployed in 2009, 

therc were ten T,\NF recipients who met their T.\~F work r(,l.}uire111en1. This ratio was the 

second highest in the country. \mong the eight states that met (heir \'CPR without relying on 

the caseload reduction credit, only 7'lebraska had a ratio any\vhere close to CaIH()rnia's. (Sec 

hgure 4.) 

The esample the state with the hIghest aChleyed work rate, shO\vs the other side of 

high W·PRs despite ha,-ing rclati,-ely low employment rates among 
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Figure 4 

The TANF WPR Is Not an Effective Measure of Engagement of 

Unemployed Single Parents in Work Activities 

Number ofTANFwork partICipants for every 100 unemployed single mothers 

50 

40 

30 

20 

10.9 

0.8 0.4 

3.8 5.6 II 6.5 4.7 

-- • - 1.0 

10 

California Washington Geo~ _____ Mississippi Montana Nebraska N.Dakota S.Dakota Wyoming --, _____ . ___ .......J 

States with an achieved 2009 work ~artjclpation rate greater than 50% 

Sources: u.s. Department of Health and Human Services 

Ilttp"//www (let 11115 gov/progral'lsjofa/p<lI1:IClp/2009jtab01a.htm 

U.S. Department of Labor, Bureau of labor StatistiCS: Ilttp//www bls gOv/lau/1Flble14fuII09-'-p_df _____ -.J 

single morhcrs. ;\Iississippi achic\'cd a \X,'PR of 61 percent in 2009, but its cmpl()) tncnt rate am(ltlg 

single mothers percent) was among the ten lo\vest in the country. For cn::ry toO unemployed 

single mothers, just four T\Nl; cases that met their work n:guircment. \ [orem"cr, 

Mississippi achic\'ed its high work participation rate, at least in part, by serying \'I.:ry fcw need) 

famtues in lts T\"Kl-' program. In 2009, for e\Try lOll i\[lssissippl fanuhes to poyerty, only ten 

recein::d cash assistance from T,\l\:F, far below the T\NF-to-po\'crty ratios for the country as a 

\vhole (27) and for California and \'\'ashington State (GG and 49, rcspectin:l)) 

all eight states that achieved a \'\'PR of 50 percent or more, T,\NF 

net for families in need. 5.) Ceorgia, the only large state in 

families in its 'L\NF program lOO in povcrt~·, dO\vn from 82 at 

This wea1..,ening of the cash safety net families has contributed to 

siglliti,cant mcrc"scs 111 the number of children linng 111 deeply poor famihes and has rcmm-cd the 

the families \vith the greatest needs - those that han' physical or mental health 

issues and those caring for a sick or disabled child. These families are among the most vulnerable 

and also han~ the most to gain from the sen-ices that T \NF is 'iupposed to provide 

Biggest MOE Problems Are Unrelated to the Work Participation Rate 

Third-Party Non-Governmental Spending 

The most significant problem associated with l\[OE is not direcdy related to the use of excess 

~IOE to meet the \X'PR. Instead, it concerns "';){II spending states count as ;-"IOE, whether to meer 

their regular !\IOE reyuirernent or to report as excess ;'\IOE. In particular, states bave combed their 
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Figure 5 

States Can Achieve High Work Participation Rates by 

Serving Few Families in Need 

Number offamilies receiving TANF in 2009/2010for every 100 families with children in poverty 

100 

90 

80 

70 66 

60 ;;'\-",,9.' 

50 

~~~~ 49 

40 i:~i~~: 30 

10 

20 

~~~ti ~~:~~~~ C;;iY:;:~< 8 

- 18 21 

.11 california Washington Georgia N. Dakota S. Dakota Wyoming - LI -------------------rl-------------~ 

States with an achieved 2009 work participation rate greater than 50% 

Source: Center on Budget and POliCY Priorities Calculations: htlP"/jwww.cbPp.org/ciW;/mdexcfm?fa=vI0w&ld=3/00 

budgets for state expenditures that meet one of the four purposes ofT.\NF that thc~' can claim as 

;\IOE. In addition, thc~· han~ found \\lays to 1l'il!Jr/rau' a significant amount of state funds from 

programs and scn"iccs that had been supported ·with T\?\:F or i\fOE funds and still meet their 

:.\fOE requirement by iuentifying 'third-party" (i.e., non-gcn crnmcntal) ~IOE, ~uch as spendmg by 

food banks or domestic \'iolence shelters on T\'NF-elif..,rlble families. 

States' increasing aggressh-eness in existing gO\'etmncntal or third-party spending as 

:'\[OE is the main reason why toral J\IOF by states, which remained fairly consistent at S1OS11 billion per year 111 T.\NFs early years, rose to more than Sl:) bilhon by 2009. _\ number of 

states ha\'e reponed spending substanriall) more than the minimum T\[OF re<..Juired in recent years. 

The practice of ming third-party I\[OE is not limited to states that report excess \10E 

expenditures. Some states h;nT identified significant existing state or third-party spending and ha:,:e 

used thIS spending simply to meet - nor to exceed - rhelr ;\[(H·: requirement. 

,\ state that withdraws T \NF/MOE money from nrious programs and identifies other state 

spending or third-party spending as J\[OE might to be holding T.\0:iF/:'IOE spending 

steady or e\"(:n increasmg it, though in reality it has reduced T \NF programs and 

sen'ices. One dramatic example comes from :\IOE now represents 

nearly half of the MOE reported by the state, an increase of20 percent since 2010, during the same 

period that the state has cut spending on other T\NF-rclated benefits and scn·ices.~ 

1 See, Clare ~. R1Chlc, 

{;corgi:l," .lUll(' 2()11, 

J)ecrl'a~11lg- T \]\1" Flltllk \n ()\ erne\\' oflhc FY 2(112 \llocaf1()n ofT \""1" hll1ds In 

Ci)llll·ll1l:\lJlI():ltt'.':~(lU_/(l(IL ~(lll (tr)~2:1 psI! 
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Congress clearly did not intend to allow states to spend Icn on sen:tces for need~' families than 

they d1d before T,\NF's creation by using tlmd-party spending to replace state spendmg. This 

practice should he stopped. 

Third-pany spending in and of itself is not ahvays problematic. 1 ;or example, under the 11mvexpired T.\Nl: Emergency l"und, states c(mld be reimbursed for HU percent of the costs of !lCIJ) 

spending on a narrow set of recession-related expenses. Since the state fiscal crisis sOllletimes made 

It difficult for states to come up with the 20 percent match reqUired to access the funds, sta tes used 

third-party contributions to help th(>m meet that match, including In-kind donations from food 

banks, employer supen·ision of subsidized cmployecs, and cash contrtbutions from pri\'atc 

foundations, Because states had to increase total spending compared to just before the recession, 

the) could not usc the third-party contributions to replace existing spending. This type of thirdparty spending contributed to the success of the Emergency Fund and should be permitted in 

similar circumstances. 

Excess MOE and the TANF Contingency Fund 

\,{'hile this heanng is primarily focused on the relationship bet\\'een excess MOE and work 

participation requirements, the MOE issue is also n::kyant for the Contingency Fund. L'nder 

current law, a state can access the T.\NF Contingency Fund if it meets a monthl) economic 

hardship ("needy statc") trigger and an ;\fOE n:quiremcnt (described bclo\v) that is more stringent 

than the rq.,rular T.\NF T\10E requirement. ,\ state that qualifies for an entire year can recdyc an 

amount \vorth up to 20 percent of its annual block grant and can spend Contingency Funds for any 

T,\~F purpose, though it must spend the funds during the fiscal year for which they arc <l.\varded 

I ~\Tn whcn all states mct the state" economic hardship trtggcr during the reccnt recession, 

ho\\"c\'er, fewer than half orew' on thc ConrirlgcflCl' Fund because the fund's requirements arc 

complicated and daunting. 

To qualit~, for the Contingency Fund, states must speno IOO percent of their histuric spending 

on, \id to Familtes with Dependent Children, a higher threshold than the regular T.\NF \IOE 

requirement (which is 75 or SO percent of hIstoric spending, (kpending on whether a state met 

its \\'PR for the year) .. \IoreO\Ter. some spending that can count toward the regular T.\NF 

;\10F requirement, notably child carc spending, cannot count toward the Contingency Fund 

:-..r()E rcquirement. 

\ srate must not only meet the 100 percent MOE standard hut also exceed it by an amount that 

at least matches the amount of Contingency Funds recei\·e<.l. States that fail to do so may need 

to repay some of the funds receiycd. 

\,\'hen quened on why they \vere not accessing thc Contingency 1 'und, a number of state::; said they 

were unable or unwilling to take funding that they might need to repay_ The complexity and 

arbitrariness of these requirements hayc resulced in uneyen access to the fund 

Mon.'oYer, whilc it is reasonable to require states that recciyc extra federal funding to maintain at 

least their past ]e\'e! of effort, the current formula docs nor actually do that. lnstead, a state can 

rcri!fcc its spendIng in programs that prnndc benefits and selTtces to necdy famihes and offset this 
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dechne by becoming more aggn::SSlye about tdentlfY1l1g fundtng to count as MOl,; - whcther state 

or local gO\Ternment spending or third-party spendmg. I ·'oc example, some statcs in recent years 

ha\"e identified third-party spending in local c0111111unitie<; in order to exceed the 100 percent i\10E 

standard and thereby qualify for the Contingency l,'und eyen as they cut sta(l: T, \N I! spl:nding. 

?\low is an appropriate time for policymakers to redesign the Con6ngency Fund to address rhis 

problem. States continue to face high unemployment, and the Contingency l'und was intended to 

help states times lthe these .. \ redcsign should target tbe uses ofthc fund morc narrowly 

(such as on employment) so that states usc it to address incn:ascd nced dtrectly related to 

a weal... economy. In order to recei\-e Contingcncy Funds, states should also be reguired to increasc 

their spending, much as thcy werc rcquired to do to rcc<'in:: funds from thc "L\)JF Emcrgency 

Fund. 

Finally, any redesign should include a simpler and updated economic hardship trigger. The 

current tnggcrs arc an Lncreascd SN:\P (food stamp) cascload rclauyc to the mllJ-1990s or incrcascd 

uncmployment rclati\Tc ro rccent prior years; the former is outdated and the latter penalizcs statcs 

that experience a prolonged period of high (but not increasmg) unemployment, c\-en though they 

arc the states with the need. Currently, nearly state that meets the "needy state" 

criteria docs so onl} of its increased SN.\P 

The Limits of TANF Funding 

Prodding a safety net that focuses on helping recipients to find and maintain work requires 

substantial resourceS - it costs substantially mote to con_'r the COStS of child care and transportation 

for 'L\t\iF reClpii.:nts to meet their work requirement than it costs to prm-ide a monthly cash grant. 

Inadeguare and declining funding for T;\NI", funding threats to other programs that states rely on to 

help TXNF recipients and othcr low-income t~1milies (such as the Social Scrvices Block Crant), and 

significant srate budget shonfalls have the difficulties states arc already facing in 

providing a safety net and employment to families in need. 

\'Chen it was created in 1996, the federal T. \NF block grant \vas funded at S16.5 billion per year. 

It has remaincd at that lcycl C\Tr since. lkcause it was ncycr adjusted for inflation, federal block 

grant funding has lost significant yalue oyer time; states now reeeiYe 30 percent less in real (inAationadjusted) dollars than in 1 ()97, a year when the unemployment rate R'iTraged -1-.9 percent. The 

amount of state funds that states must spend to meeT their i\[OE obligation has also remained flat 

since 1996, so required i\[OF spending !eyels haye shrunk by 30 percent in real terms, as well. 

The situation is e\TIl worse for the 17 states that rccciyed Supplemental Grants. Those 

states saw thetr federal T \)JF funds reduced by as much a~ percent th1s year. The Supplemental 

Grants wcre mtentled, in part, to address the disadyamagc that poorer states and states \vith high 

population growth \vould ha\T when fixed funding is based on historical spending patterns rather 

than current population circumstances (but the originally designated stares were nl..Tl'r added to 

during the last 15 years). :'\low, nothing in the T.-\Nl' funding formula addresses the growth in 

population. 

The erosion and loss ofT \NI: funds has had a pronounced Lmpact on 100v-incomc familics: 
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TANF benefit levels now cover a smaller share of recipients' basic needs. The majority 

of states haye increased their T\).JF henefit lcyels in nominal terms since the ad\Tnt of the 

block grant, but not by enough to keep pace \vith inf1ation. \Vhcn adjusted for inthtion, benefit 

levels - which already were well belmv the poyeny line in e\Try state - haye declined by 20 

percent or more in 30 states since t 996. In the median state, the entire monthly T\NF benefit 

equals only /Jai/of the cmt of the fair market rent for a t\v()~bedro()m apartment;" this is Hl:D's 

baSK measure of the rental cost of a modest apartment and is the rental standard used in federal 

low-income housing programs . 

• Employment assistance counselors carry higher caseloads and consequently cannot 

provide as much help to people looking for work. In addition to providing cash benefits, 

one of the core services that T.\NF agencies offer is employment assistance. But because staff 

salaries ha\T necessarily risen as prices have increased, while block grant funding has remained 

frozen, T,\NI" staffs haye been cut eyen as need has Increased, and counselors who prm-ide 

employment assistance nmv generally carr)' larger cascloads than they did prior to thc recession. 

\s a result, recipients gct ieH help with finding employmcnt at the \-cry time they need JJJort 

assistance because of the shortage of jobs . 

• TANF-funded assistance provided to working families is weakening. The majority of 

parents who lea\'t~ welfare for ~mployme1lt earn low wages. ;\..Iost states proyide some 

supportive sen'ices, especially child care and transportation assistance, to help offset some of 

the costs of\vorking that these families face. Bur these work-related costs increase oycr time, 

\vhereas states' T.\~F funding is frozen. _\s a result, the amount ofT.\l\JF money spent on 

child care for T.\NF and hnv-income working families has remained flat since fiscal 

year 2000, eTen though cost of child care has increased considerably. rising twice as fast 

sincc 2000 as the median household income of families with chiklren.() \\"hen costs rise and 

funding remains flat, cither fDnilies recei\"c less assistance to offset the costs of working 01' 

fewcr families l'CCt'lYe assistance. 

States arc not tn a pOSItion to make up for dechnmg funds. 1 n recent years, states haye made 

broad and deep spendlOg cuts to address the nearly S600 blllion 111 budget gaps they haye faceu 

during the cconomie slump. The curs haye affected all major areas of state budgets - elemcntary 

and secondary education, hcalth care, higher education, ano human sen-ices. In2011, states 

implemented some of the harshest cuts in recent history for T \Nl: recipients .. \ number of states 

cut cash assistance deeply for fam:lies that already Ii\ e far below the POH:rty line, ended it entirely 

for man) other families \vith physlcal or mental health issues or other challenges, or cut child care or 

other work-related assistance that make it harder for many poor parents fortunatc enough to ha\'c 

jobs to kcep them. 

'1.11. Schorr amiltc hnch, '"T.\:\I· Iknct'irs .\rc Low and Havc Nor 

Polley Priorirics, {kruller 1--+, 2()1O, hlqr/ 1\\ \\ \\ .('1))11) ()rg! lik~/ 111-1-1 

Inf1:mon," Ccnrer on BuJgn and 

I, :\a{lonal \~soctatl()n of Child Care Re30Ufce and Referral \gellCIC~, [!"/"NlIJ"1/(1 TIN r Jd) eli;"! o/CJ,dd (.(/1"1.: 2010 Cpr/rile, 

;\: \CCRR.\,2()1lI 

10 
70 


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These cuts arc being made at a tune when the need for asststance is great. L'ocmployment 

remains \Try h1gh and the prospects of finding jobs, for people with lo\\' skills, are poor 

Last month, unemployment \vas 8.1 percent. OYer (41..1 percent) of the 12.5 million 

people who arc unemployed - 5.1 million people - haye been looking for work for 27 weeks or 

longer.-

Recommendations 

The focus of this hearing is on the interaction of Sate T,\~F MOE spending and the T\~F \vork 

participation requirements, but these issues cannot be addressed without considering the larger 

context. I:acing significant budget shortfalls, states arc not in a position ro significantly increase 

their funding for programs for needy families. That means they need to make the hest possible me 

of the funds they han' ayailable. 

The first place to look for solutions that will allow states to do this is in the design of the \'<'PR. 

Eliminating the option for states to usc excess ;\[OE to help them meet their W'PR will exacerbate, 

not solYe, the problems statcs ha\T encountered in to meet thc \'{'PR. It is very likely that 

states would respond to such a change h~ serving even families in thcir T. \NF program ~ and 

would choose to SetTe only those that demonstrate that they arc able to meet the stringent 

re(.}uirements, \ea\-ing e\'en more Htlncrable families \vithout a safety net. This iitrateh':' may reiiult in 

better \'X'PRs, but it will not result in bener outcomes for families - or for society as a whole. 

Excess 0.IOI~ is not the problem in need of a solution. It 1S the tncffectiye \X'PR that is 1n 

desperate need of repatl' - or replacemcnt. Coder the current \'{'PR structure, states fcel compellcd 

to provide employment sC1\'i«.'s to e\'crrone, including those famili('s thcy expect will k'a\T for 

employment in just a short period of time, That leaves states \'lith fewer resources to address the 

employment preparation needs of the families with thc most signiticant barriers to employment. 

The T.\0JF caseload tolla) is different than the T.\-:--JF cascload in 1996. The majority of single 

mothers nationwide are To continue to make we need to deH~lop 

the needs of the mothers who ha\'(' been left 

Complete reconsideration of th(' \VPR should be central to any T.\>JF reaurhori;-:ation 

discussions. I n the interim, I offer fiyc recommended changes that could be implemented within 

the current T.\NF structure as a pan of an extension of the existing program: 

(1) Revise the Work Participation Rate to allow states to count recipients who leave 

TANF for work in their WPR for 12 months. The cascloau reduction credit gin!s states 

no incentive to mm'e T, \i'\F recipients into paid cmployment opposed to merely moving 

them off ()fT.\'NI~ and encourages states to ::,ern: fewer and families in need. One 

short-term remedy is to allow state" to include recipients that find employment and leaye the 

T \NI-- rolls to count in their \'CPR for 12 months after they lea\-e T.\NI: rolls. This \vould 

n:cognt;-:e that the pnmary goal ofTA1'\1' work programs 1S to help reClplents fino 

- Chad Stone, "Statement on the .\rrill;rnrlo~!1lent Report," Center on Budget and Policy Pri()ritlc~, \lay --1-, 2012, 

h[:1':/ /1' \1 II .cbpp.()r,c.>;/clll'-./lIldl',.cl-Ill'Ll-, ll'\\ &Id-- 'i-(,(). 

11 
71 

f 

Chairman DAVIS. With that, we will move to questions. I essentially see two questions today. 

I see some opponents to reform are messing with our sound system now. 

The first question that I have—I am going to put two of these 

together and then ask a couple of you to respond. First, is the way 

that we define State spending in the TANF program correct, Part 

1, the right type of definition of the standard? And second, should 

States be able to reduce the share of adults on welfare expected to 

work if the State spends more than expected? 

Mr. Collins, currently States can count spending by non-State 

third parties like charitable organizations as if that were State welfare spending. Does that policy make sense to you, and do you 


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72 

think this potentially allows States to back out of their own obligations to the detriment of low-income families? 

Mr. COLLINS. Chairman Davis, I have done a lot of thinking 

about this. It is hard for me to understand how an incentive can 

be created when what it ends up doing is having people stay dependent on welfare for longer periods of time. So I don’t believe 

that it works well in the way that it is set up right now. The way 

we define State spending in the TANF program is incorrect. 

Chairman DAVIS. Dr. Pavetti, you have said this practice of allowing third-party spending to be counted as State welfare spending, quote, ‘‘should be stopped,’’ closed quote. Why? 

Ms. PAVETTI. That is third-party MOE, because I don’t think 

that that was what the intent was. It has allowed States to reduce 

State spending. 

But I would like to comment on the difference with the work 

rate. I think there are two sides to that, and in your opening statement, you basically said States are allowed to use the excess MOE, 

but that doesn’t make it right. 

I think you can make exactly the same statement about States 

reducing their caseloads in order to meet the rate or to get the 

credit. That doesn’t make it right. In the slides I showed, you can 

see States are not serving families in need, and they are not working, so we are not measuring the right things. 

So I think it is not an issue about whether or not we want TANF 

recipients to go to work, it is about whether or not we are measuring whether or not they are going to work, and that is what I 

think the issue is. 

Chairman DAVIS. I appreciate you sharing that. You know, ultimately the issue is making sure that we are measuring the right 

outcomes and also the process is correct. 

And the question of allowing apparently excess State welfare 

spending to reduce work requirements, can anyone on the panel explain the logic of this provision to me? Why should we reduce work 

requirements just because a State spends more on TANF benefits? 

Before we double back here, I would like to give a—actually Dr. 

Pavetti could be a staff member almost with the number of times 

I have seen her here. I appreciate her erudite contributions to the 

subcommittee over the last 18 months that I have chaired. 

Mr. Palermino. 

Mr. PALERMINO. What I would like to share is this, is that the 

complexities that we have encountered with some of the families, 

and some of the opportunities that we would like to provide based 

on the way the current rules are set up with providing, for example, more adult basic skills type of opportunities, we would like to 

take those risks. I think our State legislators want to work with 

us and want us to take some more risk to serve people that won’t 

count towards what the work participation rate allows us to be 

countable. 

So in taking those risks, we would like to think that if there is 

excess MOE, and we have accounted for that, and that excess MOE 

does support the purpose statements, that then if the risk we take 

did not come through, and we were unsuccessful, at least at that 

time, we would be able to still comply with the ultimate goal of the 


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TANF law and then also give opportunities for families that may 

not get it because we just didn’t have that opportunity. 

Chairman DAVIS. Ms. Cartledge, would you like to comment? 

Ms. CARTLEDGE. Mr. Chairman, Members of the Committee, 

North Dakota has chosen not to use excess MOE, and it has to do 

with not wanting to be reliant on third parties to meet our MOE 

requirements. And also we wanted to be able to look at how we can 

help our families. We do not want to shift people, and we knew 

after going out and doing research, we discussed what were some 

of the issues families were experiencing. Like I said, mental health 

issues, and also health issues, and also some of the other things 

came up as hygiene issues. 

So when we went out and did the research, it was, okay, how can 

we address those things to help our families get to work? And a 

very basic example is one of our first clients that we saw when we 

did a little bit of shifting of the individual had very poor hygiene. 

So it means that, okay, these are some of the things we are seeing. 

This is why they can’t become employed. We need to take them by 

the hand and take them to the store; here is a toothbrush. We are 

going to take you in a bathroom and show you how to brush your 

teeth. 

So we chose instead to go to this is how we can help our clients, 

because we felt that was the intent of TANF was to take them from 

where they are and move them into employment. And I did include 

several, a couple, three examples of actually how we did move some 

clients to employment. 

So I am not really an expert on utilizing excess MOEs because 

we chose not to. 

Chairman DAVIS. With that, thank you. 

I am going to recognize Mr. Doggett for 5 minutes. 

Mr. DOGGETT. Thank you very much. 

Mr. Palermino, what is your feeling about what the States will 

do if we bar them from continued use of excess maintenance-of-effort credits? 

Mr. PALERMINO. The example that I shared a few minutes ago 

with regard to the one clear example right now is with our families 

with basic skills is that if we are not allowed that flexibility to 

challenge ourselves or challenge our clients, then I think we may 

have to resort to moving those individuals out of the TANF Block 

Grant and make them State-only individuals. That would be the 

way to avoid our not being compliant in order to meet the work 

participation rate. 

So we are very concerned as a State to meet the work participation rate. No one wants to be faced with a penalty, and Connecticut’s penalty would be roughly $13 million if we failed to meet that 

rate. 

Mr. DOGGETT. So the most immediate effect would be to deny 

those individuals participation in the Federal program? 

Mr. PALERMINO. These are the more hard-to-serve individuals 

that are receiving assistance. 

Mr. DOGGETT. Yes. 

Dr. Pavetti, are there features in the current regulations—if this 

Congress does nothing, and that seems to be one of the things that 

we are best at, but if we do nothing, will there be provisions in the 


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current regulations that will reduce the work participation requirements through special credits? In other words, even if Congress 

doesn’t act, aren’t many States likely to face higher effective work 

participation requirements in TANF starting this year? 

Ms. PAVETTI. They are. One thing that happened was their 

final regulations haven’t gotten fully implemented because there 

were ‘‘hold harmless’’ provisions that were implemented because of 

the recession, knowing that States were going to have difficulty 

meeting those rates. 

So what will happen this year which is that excess MOE will be 

treated much as it was intended, which is that only the share of 

basic assistance will be counted. So it will be constrained. States 

only spend about 30 percent of their TANF dollars on basic assistance. So basically if the State spends $100, they will only be able 

to use $30 of their excess MOE spending for caseload reduction 

credit. So it is going to substantially reduce what they can do, and 

it also gets it back to what it was intended, which is that if States 

spent more on basic assistance, they should not be penalized for 

doing that. That was the idea. So if nothing happens, it will already be harder for States to meet their work rates. 

Mr. DOGGETT. I gather from the chart you presented in your 

testimony, your response to the chairman’s questions, that the real 

problem here is that these TANF requirements don’t account for 

what the States are really doing to help poor mothers find jobs; basically that the current standards are too focused on the process 

and not enough on the results in terms of women who find jobs. 

Ms. PAVETTI. Right. That is very true. 

There are lots of different ways in which this is problematic. I 

would say the biggest problem is that it is a rate. Because it is a 

rate, you can manipulate the denominator, by not serving people, 

which is what many States have done. And the other thing is that 

when you see States like California that, since 2005, has increased 

the number of people in meeting their work participation rate by 

40,000 people, but they don’t meet their work rate, something is 

wrong. They have done a lot to engage TANF recipients in work 

activities. It is the rate that creates the problem. 

So unless we fix it, we are always going to be measuring the 

wrong things, and we are not going to be necessarily helping families to move forward, which is, I think, what we all want to 

achieve. 

Mr. DOGGETT. Thank you all very much. 

I yield back, Mr. Chairman. 

Chairman DAVIS. I thank you very much. 

And with that, I recognize Mr. Paulsen for 5 minutes. 

Mr. PAULSEN. Thank you, Mr. Chairman, also for holding the 

hearing. And also for all of the witnesses who took the time to be 

here today. 

It was interesting as we heard in the testimony earlier about 

States that are counting third-party spending now as if it were 

spending towards TANF MOE, the requirements, and I am trying 

to get a sense, do we know how many States are, in fact, counting 

third-party spending in this count towards TANF? Do you have an 

idea, Ms. Brown? Do we have an idea of how many of the States 

numerically? 


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Ms. BROWN. Although we haven’t studied the third-party spending issue, we did have a recent discussion with HHS, and our understanding is they don’t know how many States, nor do they know 

the dollars involved. 

Mr. PAULSEN. Do you think that agents just would have adequate oversight to understand State MOE spending or what States 

are reporting as MOE; do they have adequate oversight to determine that? 

Ms. BROWN. When I talked about MOE spending, I mentioned 

the things that can make it effective are good design, good implementation, and good monitoring. And we have been talking a lot 

about design and implementation today, but monitoring is a really 

key part of that. HHS has some administrative reports that come 

in to them, but they also rely a lot on the Single Audit Act, on the 

single audits that are done on the programs, and our work on those 

audits has shown us that the quality is uneven, and they may not 

catch the kinds of complex policy issues that we are talking about 

here today. 

Mr. PAULSEN. Mr. Palermino, from the association’s perspective, do they have any information on how many States are using 

third-party spending, or how much they are counting? I did note 

that in a report that the Georgia Budget and Policy Institute—— 

Mr. PALERMINO. No. At this point there is no formal report 

that has been issued with regard to that specific information. 

Mr. PAULSEN. Okay. 

Mr. PALERMINO. Just to let you know for the record, for Connecticut, we have been using primarily State investments, and 

when we report on our excess MOE, we are talking about State investments and not necessarily some of the other, I think, responses 

that have been referenced in there, too. 

When we worked with our TANF ECF, we did do, we did work 

with some nonprofits. There are some community-based organizations that carry out a lot of similar functions that are similar to 

the TANF purpose statement, so they present opportunities because we know that the State government nor the Federal Government can handle this alone. In fact, we work very closely with private foundations in order to encourage them to look at investing 

some of their dollars. And that was attractive, as I am sure you 

would expect, for them to invest private dollars when they knew 

they could leverage some of the Federal funds. 

Mr. PAULSEN. I am just trying to get a sense, because it sounds 

like there is a report that Georgia Budget and Policy Institute, noting that about half of Georgia’s MOE spending is from third parties. And, you know, from my perspective—now we heard the reference to at least one State counting a Girl Scout troop leader’s 

time as State spending in the TANF program. Is that something 

that is sort of common knowledge out there? Has anyone else on 

the panel heard about that, or could anyone explain how a Girl 

Scout leader’s volunteer time or troop time would meet TANF’s 

purposes, program purposes? 

Mr. COLLINS. The opportunities to amass this type of thirdparty spending is quite vast actually, particularly in organizations 

that deal with youth, because that particular group fits purpose 3, 

and it allows the TANF agency to go in and find the program, esVerDate Mar 15 2010 01:04 Mar 09, 2013 Jkt 078760 PO 00000 Frm 00079 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78760.XXX GPO1 PsN: 78760

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tablish the TANF purpose. Once you do that, the organization can 

sign an agreement, and once that has happened, you can then use 

the actual expenditures as TANF spending. In some cases you can 

use the volunteer hours in a similar sort of way. 

So there are a number of ways to get third-party expenditures 

to count as TANF spending. I think the opportunities are far greater than actually what we know. 

Mr. PAULSEN. So if the opportunities are far greater than what 

we know, I mean, do you believe or does anyone on the panel believe that we should be counting a Girl Scout troop leader’s volunteer time towards excess MOE counts or spending? I mean, to me 

it just seems a little crazy. 

Mr. COLLINS. The challenge that I have with it is until someone 

can show me how it directly impacts more welfare recipients going 

in to work and how that actually comports with the intent of 

TANF, then I think no, I don’t think it makes a lot of sense at all 

actually. 

Mr. PAULSEN. Right. 

Mr. Chairman, if I could, just for the record, put an article or position paper that identifies the Girl Scout leader issue in—the 

State of Hawaii I believe was the State—into the record. 

Chairman DAVIS. Without objection. 

[The information follows, The Honorable Erik Paulsen:] 


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Chairman DAVIS. And the gentleman’s time has expired. I thank 

the gentleman. 

Mr. Berg from North Dakota is recognized for 5 minutes. 

Mr. BERG. Thank you, Mr. Chairman. 

And thank you, Ms. Cartledge, for being here. You know, one of 

the things in your testimony that really jumped out at me is since 

2005 where our work participation rate was 31 percent, and it has 

gone up to 72 percent in 2012. I mean, I just want to commend you 

for digging into these, each cases, and helping people. We didn’t get 

to it, but there are some great stories at the end of your testimony 


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79 

and really putting people back to work and helping them both with 

work as well as education. 

Two quick questions, and then I have a question for Mr. Collins. 

The first question is why did North Dakota decide not to count this 

outside money? What was that thinking? Why was that decision 

made? 

Ms. CARTLEDGE. Mr. Chairman, Members of the Committee, 

the reason North Dakota decided not to is we didn’t want to be dependent on a third party to meet our MOE requirement or have to 

do like a chase to get the requirement. So we preferred to be independent and wanted to meet our requirements by using our general 

funds or also other means. 

Mr. BERG. So it really creates more stability for the program—— 

Ms. CARTLEDGE. Right. 

Mr. BERG [continuing]. Rather than have some third party that 

may be there one year and gone the next? 

Ms. CARTLEDGE. Correct. 

Mr. BERG. The other question was brought up today that it may 

be easier for small, rural States to meet the work participation requirements, and that States like North Dakota have a very weak 

safety net for families in need. And I guess I would just like to— 

I mean, how do you feel about that? To me, it seems like North Dakota has a very strong safety net. Could you respond to that? 

Ms. CARTLEDGE. Yes. Mr. Chairman, Members of the Committee, North Dakota does have a strong safety net for our children. As one of the example of our TANF families, the TANF program itself has like a pre- and postprogram, so it tries to avoid the 

cliffhanger effect that once they become employed, they are done, 

they are gone. 

What we did was we have the transition assistance for 6 months. 

We give them a smaller TANF benefit, and we keep them with supportive services. Once that ends after 6 months, then they can get 

additional 6 months with transportation allowance. Those are not 

counted as part of meeting our work requirement, as also those 

who go beyond the educational point. 

So we are taking additional steps like the educational ladder, the 

career ladder, is to move people out of, further out of, poverty by 

giving them the educational skills to also work themselves totally 

off of the TANF benefits. 

Mr. BERG. Thank you very much. 

Mr. Collins, I have a question for you, and just to follow up on 

the chairman, I am having trouble with the underlying logic here 

if our goal is to put people back to work, and we are saying, gee, 

if a State spends more money, then you can have fewer people 

working. I mean, if we believe more money is the right program 

and doing the right thing, if a State has a higher maintenance of 

effort, it should, in fact, have more people working, not fewer. 

And so to me it seems like on the fundamental core here, the incentives and consequences are somehow twisted around and backwards. Could you just help me either figure out why it is the right 

thing, or what the alternative should be? 

Mr. COLLINS. Well, what is interesting is, you know, when the 

provision was created, it was in the 1990s. We have evolved. We 


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80 

have gone through the deficit reduction act (DRA); things have 

changed. So it is a fair statement to rethink really what we are 

doing with this particular incentive, because it seems to be the opposite of what it is that you would want to do. 

A couple of things. One, if you cannot tie it directly to more single parents moving into paid employment or participating in work 

activities, I am struggling with what the reward would be. That 

would be necessary. 

And, second, to be fair, a lot of this happened because the Deficit 

Reduction Act created a stronger work requirement, and States 

found a way around it, and they used the excess MOE to do that. 

I would argue that the best and safest way to guard yourself 

against penalties is to do what North Dakota did, engage your 

caseload; figure out what they are doing, where they are at, and 

make sure that they make progress. 

And the last piece I would add to that is it is about what you 

can do, not what you can’t do. There are 12 different work activities that people can do. If there are no paid employment opportunities right now, people need to get ready for when that opportunity 

comes around in the future. Sitting at home and waiting is not a 

strategy. Hope is not a strategy. 

Mr. BERG. Thank you. 

I will yield back, Mr. Chairman. 

Chairman DAVIS. I thank the gentleman. 

Mrs. Black is recognized for 5 minutes. 

Mrs. BLACK. Thank you, Mr. Chairman. 

First of all, Ms. Cartledge, I want to commend you in North Dakota for what you are doing. It seems to me that you are doing a 

very commonsense thing. You recognize that your role is to get people back to work and to help them to become self-sufficient, and I 

commend you for what you have done in going out and actually 

meeting with folks and figuring out why it is that they are having 

a hard time getting employed, and really giving them the opportunity for upward mobility. 

That is truly what this is about, and it saddens me that we get 

to that position where States will do things to try to twist and turn 

and almost cover up what they are really doing, what they are putting into the program in order for it to be successful. It really does 

bother me. 

But let me ask you, Ms. Brown, because you are the person who 

looks at the statistics and so on, in your testimony about the States 

that can count this third-party spending as if it were spending toward their maintenance of effort, do you know how many States 

are doing so today and how much in the third-party spending they 

can count in that State spending? 

Ms. BROWN. The information I gave on 2009 is the most recent 

that we have. It is not something that you can just look at a set 

of data and figure it out. It requires quite a bit of calculating to 

determine how much of someone’s caseload reduction credit is due 

to different factors. 

Mrs. BLACK. And why is that so complicated? It would seem to 

me there would be categories that say, okay, here is how much the 

State actually puts in, dollar number; here is how much the State 


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gets from volunteer hours; and here is how we figure it. Is that not 

what gets reported, or how does it get reported? 

Ms. BROWN. Well, you know, we have also gone on record about 

the problems with the work participation rate and don’t believe 

that it is achieving the goals that it should be. But beyond that, 

that is really the primary metric that they use to gauge the success 

of the program. And so as the caseloads have gone down since the 

beginning, since welfare reform, many more funds are being devoted to other types of activities, and we don’t know enough about 

what those are. We actually have some work ongoing right now 

where we are trying to figure some more of that out. 

Mrs. BLACK. And I note that in the Congressional Research report on page 9 where we have the pie chart, and when I look at 

how the money is being used, there is 16 percent of the money that 

is being used in the ‘‘other’’ category. That is a pretty large percent, 

especially when you compare that to the capability of using the 

two-parent family formation and pregnancy prevention, which 

seems to me if we were looking at it from that end of making sure 

that people are keeping solid relationships and not getting into the 

situation to begin with, because obviously prevention is the best 

medicine there. But we have got 16 percent that is in the ‘‘other’’ 

category. 

Ms. BROWN. Yes. And the tricky part about that is what we 

don’t really know—in addition to not knowing enough about every 

activity is in that ‘‘other,’’ we don’t know how many people are actually getting served, and we don’t know if it is effective or not. 

Mrs. BLACK. So obviously the point is being made that if this 

program really is a temporary assistance for needy families, and 

we call it TANF, which we talk about as an acronym, but don’t 

really talk about what its real mission is, that if we don’t know 

how the dollars are being spent in order to help someone to become 

self-sufficient, it is hard to say that the dollars are really being 

spent for the mission of the program. 

I want to go also to the child care category, because 17 percent 

of the money is being spent on child care. Is there any way that 

we can tell whether the folks who are using the child care and the 

expenditures on that are being used for parents being in school, in 

programs that are actually working, or do we know that? 

Ms. BROWN. Well, we have done some work looking at the multiple funding streams that go into funding child care in States, and 

in addition to TANF and some of the Child Care Block Grants, 

there is also Social Service Block Grant funding. Those go into a 

pool to be provided for services for people who are determined eligible. And the States actually set their own specific eligibility requirements, but they are often things that are related to needing 

child care because you are low income and you are trying to work, 

or you are doing other activities that are acceptable to the State. 

Mrs. BLACK. I see that I am on the yellow, which means I am 

going to turn red—oh, right now I turned red, so I am going to be 

out of time, but what I would ask is if I had the opportunity and 

the time to ask one more question, I would ask each of you how 

it is that we can fix this program, both in meeting the mission and, 

second, in the requirements that we should have in the reporting 

to make sure that what is being spent and the way it is being done 


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is really ultimately meeting the mission of getting people to work 

so they can fulfill their dreams. 

So thank you for that. 

Chairman DAVIS. Thank you, Mrs. Black. 

The chair now recognizes Mr. Reed from New York. 

Mr. REED. Well, thank you, Mr. Chairman, and I will be as kind 

as I can for the lady from Tennessee and go with her question to 

the panel first and use up some of my time to answer her question. 

Hope you were listening to that question. Anyone want to take a 

stab at that? Mr. Collins? Oh, no, Dr. Pavetti, you jumped up. 

Please. We haven’t heard much from you today. 

Ms. PAVETTI. I think the single most important thing we could 

do is to fix the work rate. I would just like to say I have the numbers. I looked to compare the numbers from 2005 to 2009, and Ms. 

Cartledge gave her rate and how it increased, but the numbers of 

people meeting the work rate requirement are pretty much the 

same. And so I think that we just don’t know how to measure 

whether States are doing the work to get recipients to work. So I 

think we need to really give States the opportunity to try different 

ways of saying, this is what I am doing, and this is how I think 

I should be held accountable. So that is one thing on the work rate. 

On the spending, I think that there are very detailed reports. We 

did—there was a report on the ‘‘other,’’ and I think States should 

be required to do more detail than they are now so that we do have 

a better accounting. And I think that, again, you can constrain the 

MOE spending without putting States at risk of not serving people 

because of the way it relates to the work rate. 

Mr. REED. Well, thank you very much. 

Mr. Collins, you wanted to offer something? 

Mr. COLLINS. Yes. 

My answer would be to do what North Carolina and the other 

eight States did that were able to meet the 50 percent work participation rate of which over 65 percent are in paid employment. Get 

dirty. Get in there and work with people. Get in there and build 

a fully comprehensive program, all 12 work activities. There are 

people who can work today, and there is going to be people who 

need help so they can work tomorrow, and we shouldn’t let the one 

overshadow the other. Every one of them needs help, and what we 

should do is focus on what people can do. Now. Today. 

So this isn’t about work participation hours. This is not about 

really meeting the rate. What it is about is engaging people and 

making sure that their government provides a service while they 

are on time-limited assistance. It is called Temporary Assistance 

for Needy Families. It has a time limit associated with it. I think 

you can start to understand really what the intent of the program 

is, and we should not let people sit, and we should not let them 

wait. 

I am referring to the fact that even before the DRA was passed, 

more than half of all TANF recipients who had a requirement for 

work activities had no hour in a single activity for the entire year, 

and I am suggesting, whether it is excess MOE or not, that we can 

do significantly better than that. 

Clearly, there could be other reports that would shed a light as 

to how these credits are put together, but I think that what we are 


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doing is we are diverting ourselves from what I think the real work 

needs to be. You don’t want a penalty? Build a really robust program, and it will never happen to you. 

Mr. REED. I appreciate that sentiment, Mr. Collins. 

Mr. Palermino, I want to direct my next inquiry to you because 

it is along what Mr. Collins was talking about, because when I 

read the testimony in preparing for today, the excess MOE issue, 

I know in 2008 you took a stance, or your organization may have 

taken a stance, that we should not repeal that, we need to continue 

it, encourage the State investments, spending investments and 

things. 

Do you still feel that same way? Does your organization still feel 

that same way if the repeal of excess MOE was put onto the table, 

given what everyone is talking about here today? 

Mr. PALERMINO. I think that we want to be working together 

to examine what the best strategies would be, and I think the work 

participation rate is one. I think reviewing what the purpose is, if 

we are going to change the purpose, and who the partners will be 

I think may lend itself to maybe what that decision would be. 

Mr. REED. Well, I guess I am truly focusing on the excess MOE 

issue. You think that should continue the way it is, or is there any 

need to reform that? 

Mr. PALERMINO. Well, we have seen some value with it, and 

not to the extent of some of the examples, I think, that have been 

used here, but I think we have seen some value with it, with giving 

us an opportunity to be flexible within our State, being able to— 

and we are not trying to move against families in getting adults 

in to work because ultimately they need to get a high school diploma before they can move to getting a good job, and that is some 

of the target populations we want to work to move there. 

So if we change some of the thought process around what the 

true output should be, and if we recognize that we do have partners beyond just the government—now, most of our excess MOE is 

within the State government. We do have records and data, and we 

do track to make sure it fits the purpose and all that so we can 

report about that. But I think to the extent that there are other 

viable partners to work with, maybe that is a way of rethinking 

how we revisit what the purpose statements are and who should 

participate with us. 

Mr. REED. I appreciate that. 

My time has expired, but I just have to put on the record, Mr. 

Chairman, if I could have the courtesy of 30 more seconds—— 

Chairman DAVIS. Without objection. 

Mr. REED [continuing]. The focus of the effort must be, in my 

opinion, to put people to work and provide an opportunity for people getting to work, not the policy initiative of encouraging folks 

just to spend money at the State level for the sake of making the 

policy initiative of spending more money. It just doesn’t make any 

sense to me, and I echo the sentiments of my colleague from North 

Dakota and the chairman himself. It just seems to me counterintuitive. What we should be focusing on is getting people to work and 

providing them with the tools that they can go into this competitive 

workplace sooner than later. 

And with that, I will yield back. Thank you, Mr. Chairman. 


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Chairman DAVIS. Thank you very much. 

I would like to thank, again, all of our witnesses for joining us 

today. We appreciate your input. Your different perspectives have 

all added value to this discussion. We hope you will continue to 

share your thoughts. 

We have discussed some opaque provisions of the TANF program, how they work, and some of the troubling consequences of 

how they have been used in recent years to weaken both work requirements and State spending requirements. I appreciate your 

help. 

If Members have additional questions, they will submit them to 

you in writing. What we would ask is that you share your responses with us on the committee for the record so all will have 

access to that information. 

Thank you again, and with that, the committee stands adjourned. 

[Whereupon, at 4:07 p.m., the subcommittee was adjourned.] 

[Submissions for the Record follow:] 

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American Public Human Services Association 


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June 6, 2012 

The Honorable Geoff Davis 

Chairman 

Subcommittee on Human Resources 

Ways and Means Committee 

United States House of Representatives 

Room 1102 Longworth House Office Building 

Washington, DC 20515 

Dear Chairman Davis: 

The American Public Human Services Association (APHSA) submits this letter for the record for 

the hearing held on May 17, 2012, entitled "State TANF Spending and Its Impact on Work 

Requirements." This written submission for the record is intended to both reinforce the 

remarks already submitted on behalf of our organization by Peter J. Palermino of Connecticut 

as well as respond to a number of points raised during the hearing. 

The American Public Human Services Association is a bipartisan, nonprofit organization whose 

membership includes the nation's cabinet-level government human service executives from the 

states. APHSA also houses several affiliate organizations, whose members administer programlevel operations in each state, including state TANF Directors. 

First and foremost, APHSA encourages the Subcommittee to move forward with a five-year 

reauthorization of the TANF program. The last full reauthorization occurred over five years ago 

and expired last year. The Congress has extended that authorization until September 30,2012. 

These short-term extensions are counterproductive and lead to uncertainty for states while 

prohibiting effective planning for service delivery. 

As Congress has recognized, unemployment is a multifaceted problem and states need the 

flexibility to use TANF resources to address various issues that are the underlying components 

of unemployment in their jurisdictions. That flexibility coupled with reasonable means for 

ensuring accountability of the funds must be a part of the reauthorization. 

During the Subcommittee's hearing several issues were raised that APHSA would like to 

address. First, on the issue of third-party spending and in-kind support being claimed for the 

purposes of meeting a state's maintenance of effort (MOE) requirement, we note that this 

practice has not only been understood to be permissible under TANF rules, but has been 

addressed in detail through guidance issued by the Administration for Children and Families for 
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claiming Emergency Contingency Funding during ARRA.' APHSA will be working with states to 

gather additional information on what portion of state spending claimed for the purpose of 

MOE is drawn from third-party spending or any form of in-kind support from private sources, 

and encourages the Subcommittee to work with us in developing this critical information 

before any decisions are made on the future of third-party MOE spending. 

In 2010, when the TANF program was originally expected to be considered for a full 

reauthorization, APHSA's affiliate the National Association of State TANF Administrators 

(NASTA) developed an extensive set of recommendations intended to improve and strengthen 

TANF. The TANF administrators have recommended a number of additional possible credits 

beyond Caseload Reduction Credits (CRe) or Excess MOE (XMOE), such as an employment 

credit intended to recognize states' success in moving individuals into employment for 

extended periods of time or the ability to claim a special unemployment insurance credit in lieu 

of CRC and/or XMOE.' 

Whether Congress decides to keep a modified version of the existing TANF performance 

measurement system or replace it with something new, there must be a recognition that the 

only way for individuals to find sustainable independence is through work. This is the 

underlying tenet on which TANF was created and continues to be at the heart of the work being 

done with clients. Yet, states are in agreement that TANF's performance evaluation system is 

problematic. The accounting for and verification of client hours has become increasingly 

burdensome for state TANF workforces and the data that this yields is increasingly less 

enlightening for the federal partners. APHSA is willing to work with the Subcommittee to 

develop a more workable and efficient system of performance evaluation. 

TANF reauthorization should include a thorough reexamination of what states are being 

measured on and how. APHSA urges the Subcommittee to renew exploration of better ways to 

gauge states' progress not only in work engagement, but in achieving real outcomes for those 

served. 

APHSA's policy priorities for gainful employment and independence include the following. 

Gainful employment and independence is one of four key outcomes APHSA has identified in its 

Pathways initiative, the Association's vision for a transformed human service system and for 

the outcomes such a system can help achieve. 3 

~ Public policy must promote appropriate employment supports, economic development, 

employer incentives, and education and training that recognize the needs of low-income 

persons and assure they are on a sustainable path to economic independence. 

1 See HHS FAQ Document on the Emergency Contingency Fund section on Third Party Funds, 

http://www.acf.hhs.gov/programs/ofa/recovery/tanf-faq.htm# _%20id; 

2 NASTA, "Temporary Assistance for Needy Families: Recommendations for Reauthorization," December 

2010, American Public Human Services Association 

3 http://www .a phsa .org/Pol icy/ pathways. asp. 
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Boys and Girls Clubs of America, Brian Manderfield 


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BOYS &. GIRLS CLUBS 

OF AMERICA 

Comments for the record 

Brian C. Manderiield, Senior Director 

Government Relations 

Boys & Girls Clubs of America 

House Ways and Means Subcommittee on Human Resources 

"State TANF Spending and Its Impact on Work 

Requirements" 

May 29,2012 

Chairman Davis, Ranking Member Doggett, and distinguished members of the 

Sub-committee. Thank you for the opportunity to provide comments on the impact of 

State TANF spending on TANF work requirements. 

I am the Senior Director, Government Relations, Boys & Girls Clubs of America, a youth 

development organization that serves nearly 4 Million school age children annually in 

some 4,000 locations. 

My work of over 24 years is dedicated to helping our Clubs serve the youth in our 

country so each and every young person can be productive, responsible and caring 

citizens of our great country. For over 140 years, Clubs across America have focused 

on the kids who need us the most and that is exemplified by the 198 Clubs located on 

Native American Land and the 316 Clubs located in Public Housing across the country. 

I wish to offer insight from my work with our Clubs in regard to State partnerships to 

serve TANF eligible youth and their families. It is estimated that nearly 65% of all youth 

our Clubs serve across this country meet the eligibility requirements for TANF. 

Individual Clubs as well as Clubs working together in states have numerous contracts 

with state government and the corresponding Agencies to provide necessary and vital 

services to TANF eligible youth as well as support TANF eligible families. 

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TANF state spending requirements created during the welfare reform act of 1996, 

known as "Maintenance of Effort" or "MOE" as well the ability of a state to count thirdparty spending toward MOE requirements is of particular importance to the work of our 

Clubs. The positive impact on the goals of TANF when done properly can ultimately 

provide a model that maximizes the role third-party MOE match plays in a publicprivate partnership. 

When states have incentives to maximize MOE with little or no regard for accountability 

to the validity of how that particular third-party is directly related to eligible TANF 

recipients and/or how the third-party spends its money, the states and our federal 

leadership has missed the mark. 

Positive examples of how states can bring direct service providers to the table with 

contracts for services that require meaningful cash match towards the contracted 

services creates an environment of private industry investing in the goals and focus of 

TANF. 

Example: 

In one state, our Clubs are awarded a contract for afterschool services for school age 

children (documented as TANF eligible). This contract has a requirement for us to 

provide MOE. We view this partnership and this contract as a great success in carrying 

out the true meaning of TANF funding. Not because it feeds into excess MOE for the 

state to decrease Work Participation Rate (WPR) or cut out their general fund support, 

but because it is a solid business model for effective and efficient use of public funds. 

1. The children have a quality program to attend afterschool and in the summer 

while their parent(s) are at work, school, job training etc. They are kept off the 

streets and out of trouble. High school graduation rates are improved and 

children are encouraged to continue their education. 

2. If a 3:1 Match is agreed upon, the TANF funds put in .25 cents on the dollar. The 

other.75 cents is raised by the Clubs - private, non-federal funds that leverage 

individuals, corporations and foundations to partner to reach our most vulnerable 

youth and families. 

3. Over 90% of the entire match is cash. Yes - real money that is going back into 

the communities to serve TANF youth and their families. 

4. Programmatic implementation is cost effective with proven results and evidence 

based programs with measured outcomes. 

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Center for Fiscal Equity 


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Comments for the Record 

United States House of Representatives 

Committee on Ways and Means 

Subcommittee on Human Resources 

Hearing on State TANF Spending and Its Impact on Work Requirements 

Thursday, May 17,2012,2:00 PM 

By Michael G. Bindner 

Center for Fiscal Equity 

Chairman Davis and Ranking Member Doggett, thank you for the opportunity to submit 

comments on these issues. Sadly, the Center believes that welfare reform has worked exactly as 

intended in far too many cases and it is only recent reforms which have mitigated the harm done 

to marginally skilled families. The current law is in drastic need of reform, although we do not 

expect the current majority to propose those reforms which would actually improve the lives of 

our nation '5 economically marginal families. 

The goal of using welfare reform to cut case loads and reduce budgets has led some states to 

cherry pick T ANF participants, directing families in more need of assistance to the Social 

Security Disability program or other forms of assistance. This helps no one escape long term 

poverty. Further, lifetime benefit limits have pushed poorer women to use abortion services to 

preserve the economic health of their families, Poor women have been chosen to sacrifice their 

children for subsistence, just as ancient Israelites sacriticed their children to Baal for a good 

harvest. We can do better. 

The work opportunities available to most TANF participants can easily be described as low wage 

work and, without significant resources in human development, are likely dead-end jobs. Such 

jobs often receive tax subsidies, such as the Earned Income Tax Credit and the payroll tax 

holiday. One must look askance at any programs which transfer the responsibility for providing 

adequate wages from the employer and the consumer to the taxpayer. 

The Making Work Pay tax credit and the payroll tax holiday subsidize low wage labor where the 

preferred option would be a higher minimum wage, forcing employers and ultimately consumers 

to pay for the services they receive. Minimum wage laws are necessary because they level the 

playing field so that employers cannot initiate a "race to the bottom" by allowing workers to 

compete against each other to offer ever lowcr wages, ollen leaving families in the impossible 

position of having to bid well below what would otherwise be a reasonable standard ofliving in 

order to survive, 

Increases to minimum wages and benefits, such as mandatory sick leave are, by far, the best 

incentive to get people to work. Mandatory sick leave would also help the prospects of health 

care reform, as parents would no longer be forced to resort to emergency room care because the 

doctor's oftice is closed during working hours, thus decreasing costs for alL 
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Another area that will help make work more attractive is income support for families. Such 

support addresses real market failure in the employment market. It is entirely appropriate to use 

tax benefits to assure that all families receive a decent wage. 

The United States Department of Agriculture estimates that it should cost $1,000 per month per 

child to provide a decent level of subsistence. The federal government could easily guarantee 

half of this amount using tax reform, with states providing the other halfwith coordinated tax 

benefits. 

This credit would replace the earned income tax credit, the exemption for children, the current 

child tax credit, the mortgage interest deduction and the property tax deduction. This will lead 

employers to decrease base wages generally so that the average family with children and at an 

average income level would see no change in wage, while wages would go up for lower income 

families with more children and down for high income earners without children. 

This shift in tax benefits is entirely paid for and it would not decrease the support provided in the 

tax code to the housing sector - although it would change the mix of suppOli provided because 

the need for larger housing is the largest expense faced by growing families. Indeed, this reform 

will likely increase support for the housing sector, as there is some doubt in the community of 

tax analysts as to whether the home mortgage deduction impacted the purchase of housing, 

including second homes, by wealthier taxpayers. 

One major obstacle in getting TANF recipients into the working world is the quality of skills 

they bring to the table. Indeed, a recent survey ofthe vocabulary ofTANF recipients in public 

housing puts it below the level of the average seven year old. Not seventh grader, seven year 

old. 

State based efforts to move TANF participants to a level of basic - or even advanced literacyshould be applauded. Indeed, provisions to not only provide remedial education to all who 

require it should be a mandatory part of T ANF reform, not just in states that chose to. 

Literacy training must also be provided to fathers if required. Indeed, to facilitate this, the 

restriction on benefits to intact families must be abolished. Furthermore, compensation for this 

training should be as rewarding as work, so participation should be compensated at the minimum 

wage. 

In addition to the wage, participants should also receive the same Child Tax Credit as those who 

work, as well as the same level orhealth insurance, which could be offered to them as if they 

were employees of the education provider - thus ending the second class care they receive 

through the Medicaid program, as well as the need to pay benefits through large, yet 

underfunded, social welfare bureaucracies at the state level. Public housing should be replaced 

with residential training programs for both parents and children. 
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Center for Law and Social Policy 


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CLASP 

policy solutions that work for low-income people 

Elizabeth Lower-Basch 

Center for Law and Social Policy 

Testimony for the Record 

May 17,2012 

Hearing on State TANF Spending 

and Its Impact on Work Requirements 

Subcommittee on Human Resources 

Committee on Ways and Means 

U.S. House of Representatives 

elowerbasch@clasp.org 

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Mr. Chairman, Members of the Committee, thank you forthe opportunity to share CLASP's 

views regarding the work and spending requirements that states must meet under the Temporary 

Assistance for Needy Families (TAN F) program. CLASP develops and advocates for policies at 

thc federal, state and local levels that improve the lives of low-income people. In particular, we 

focus on policies that strengthen families and create pathways to education and work. 

This hearing addressed the relationship between the T ANF work participation rate and the 

"maintenance of effort" (MOE) provision that requires states to continue to spend at least a 

specified fraction (75 or 80 percent) of what they had spent under Aid to Families with 

Dependent Children (AFDC), \vhich \vas a matching grant. In particular, it focused on the 

"excess MOE" provision, which alloVvs states to receive an enhanced caseload reduction credit 

toward the \\fork pal1icipation rate if they spend more than the MOE requirement. 

It is helpful to recognize that this particular question is one manifestation of a broader issue 

about accountability and incentives in the context of a block grant. TANF was designed to be a 

flexible block grant, with states given wide discretion in the usc of federal funds as long as these 

uses are consistent with the four broad purposes ofTANF. HO\vever, Congress wished to enSllfe 

that the programs states operated were work-focused and temporary, and therefore created the 

work participation rate and federal time limits. Congress also did not want TANF to be simple 

revenue sharing with the states, and therefore created the MOE requirement so that states would 

continue to invest their own funds in programs serving low-income families and could not 

simply substitute the fcderal funds for existing state spending. 

Neither of these provisions has quite played out as expected when Congress created them in 

1996. It is therefore appropriate for Congress to revisit these issues. But I urge this Committee 

to look at the full range of incentives in the T ANF program, rather than to single out this one 

interaction. Based on the evidence of recent history, removing states' ability to claim credit for 

"Excess MOE" without making additional changes is unlikely to have the desired effect of 

encouraging states to serve a larger share of welfare recipients with work activities. However, it 

could well lead to more states reducing their investments in programs for low-income families. 

The TANF Work Participation Rate 

Since TANF was created, the primary performance measure has been the work participation rate 

(WPR), a measure of how successful states are at engaging adults in families receiving cash 

assistance in a specific list of work-related activities. States must engage at least 50 percent of 

adult members offamilies receiving assistance, and 90 percent of their two-parent families, in 

countable work activities for a minimum number of hours per week. States that fail to meet their 

WPR can lose a portion of their block grant funding. 

By statute, states have their target WPR lowered to the extent that they have experienced 

declines in the number offamilies receiving TANF assistance. During the early years ofTANF, 

caseloads dropped far more than expected, such that many states were able to meet their work 

participation rates entirely through the caseload reduction credit. When TANF was reauthorized 

as part of the Deficit Reduction Act of2005 (ORA), Congress reset the baseline for the case10ad 

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reduction credit. As a result, states nmv only receive credit for declines compared to their 2005 

levels. 

The ORA also added to the work participation rate families receiving assistance from programs 

that are funded with state dollars claimed toward the MOE requirement; previously, many states 

had used such programs to serve families for whom they did not believe the federally countable 

work activities were the rno~t appropriate assignment. Finally, the reauthorization allowed the 

Administration for Children and Families to issue regulations defining each of the work activities 

and requiring all hours of participation to be documented. The effect of these changes was to 

make the work participation rate more challenging for states to achieve. 

As the Gove111ment Accountability Office (GAO) has reported, states responded to these changes 

through a variety of strategies to increase their reported work participation rate andlor lower the 

required target. Many states have made extensive efforts to improve the reporting and 

documentation of hours of participation. However, there is little reason to believe that these 

efforts have in any way improved the employment services available to recipients. If anything, 

they have consumed large amounts of staff time that could otherwise be used to provide 

individualized services. For example, a Minnesota study found that employment services 

casev.rorkcrs spent half their time documenting participation. 

Other states have improved their work participation rates by changing the population included in 

the denomil1Jtor ofthc calculation. Many states have taken steps including up~front diversion, 

use of solely state funded programs, and tull~family sanctions to remove from their caseload 

families with adult members who are not participating in countable activities for the required 

number of hours. Others have added families who are employed and countable as participating. 

A final common strategy to reduce the required WPR has been the use of Excess MOE. The 

provision allowing states to increase their caseload reduction credit in this way had been in place 

since the early years ofTANF, but had not been widely used until after the DRA changes. 

Based on this experience, there is little reason to believe that removing the Excess MOE 

provision would have the effect of increasing the number oflow-income parents who are 

engaged in work activities. Particularly in this period of highly limited resources, it is simply 

less costly and easier for states to attempt to achieve the \\lork patticipation rate by serving fewer 

families who need assistance, particularly those with significant barriers to employment who are 

likely to require more time and extensive services before they are able to participate at the levels 

needed to be counted toward the work participation rate. EYen the states that have maintained 

their commitment to both providing a cash assistance safety net and serving all T ANF recipients 

with appropriate work activities recognize that these efforts are likely to be only minimally 

reflected in the work participation rate. These states therefore combine their work-focused 

dforts with backup strategies for ensuring that they do not become subject to WPR penalties. In 

these instances, Excess MOE and other strategies are not a substitute for operating a workfocused program; rather, they are the means by which states ensure that they have the flexibility 

to do so. 

Because of the caseload reduction credit, from the first years ofTANF until the ORA, the WPR 

was not a binding constraint upon states. Nonetheless, it sent a powerful signal to states that 

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4 

TANF should be a work-focused program. This signaling effect continues. Moreover, TANF 

agencies have ovenvhelmingly internalized this mission of engaging recipients in activities 

leading to self-sufficiency, and would likely continue to enforce a work expectation even in the 

absence of any federal requirements. 

The WPR measures whether states are tracking the participation ofTANF recipients in countable 

activities. It does not distinguish between states that have low participation rates because they 

are doing a poor job of engaging recipients in any activity and states that have carefully assessed 

recipients and assigned some to reduced hours of participation or to activities that are not 

federally countable, such as full-time basic education. States with high WPRs may have 

achieved them by placing hurdles to keep individuals viith significant challenges out of the 

program. The WPR also does not measure the effectiveness of states' employment programs. 

States that are willing to be held accountable for the outcomes they achieve in their programs, 

such as employment entry, job retention, or poverty reduction, should be given the ability to opt 

out of the process-focused participation rate either for the entire TANF population or for groups 

participating in specific programs such as career pathways initiatives. Several states are already 

using such measures internally to monitor the performance of contractors or county agencies, and 

to guide policy development. Performance measures and targets should be negotiated between 

the states and HHS, with adjustments for populations served and economic conditions. States 

taking up this option should be required to report data that demonstrate that they are not 

"creaming" or setting up barriers that discourage services to less employable participants. 

Maintenance of Effort (MOE) 

AFDC, the predecessor to TANF, was a matching program, where each dollar of state spending 

dre\v down additional federal dollars. When the TANF block grant was created and this 

matching relationship ended, Congress required states to continue investing their own funds in 

TANF and other programs serving low-income families, at 75 percent of their historic levels 

(rising to 80 percent if states fail to achieve the required WPRs). This provision was designed to 

prevent states from supplanting their own spending with federal dollars, and to preserve a floor 

on services to low-income families with children. State administrators also report that the MOE 

requirement is helpful in enabling them to avoid even deeper budget cuts in this time of fiscal 

retrenchment. 

However, the MOE requirement has become less effective at these purposes over time, for 

several reasons: 

Neither the TANF block grant nor the MOE requirement has been adjusted for inflation 

or population growth since T ANF was created in 1996. Inflation alone has eroded the 

purchasing power by more than 30 percent. This means that the same nominal levels of 

spending have significantly less purchasing power than they did \\!hen TANF was 

created. 

MOE funds are not limited to TANF and related services, but can be spent on a wide 

range of programs and services for "needy" families, with certain exceptions, such as for 

1200 18th Street NW • Suite 200 • Washington. DC 20036 • P (202) 906.8000 • f (202) 842.2885 • www clasp.org 
98 

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Coalition of CA Welfare Rights Organizations 


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CCWRO has been advocating for impoverished families since the early 1980. Kevin Aslanian is a former welfare recipient who is now the executive director of CCWRD. CCWRO has examined the T ANF 

program since its enactment and has witnessed a lot of impoverished families and children who have 

experiences severe misery due to the T ANF program. The primary beneficiaries of the TANF program 

have been the state governments fleecing the TANF program since its enactment. 

The TANF program is supposed to be the safety net for impoverished families of 

the United State of America. The TANF law provides that the State has to 

match the federal funds with at least 75% of what is known as "maintenance of 

effort" (MOE) money. Innocent taxpayers may think that these dollars are being 

used to assist the impoverished families of the United States of America. In reality this program is not a program that provides temporary assistance to 

needy families - it provides "Permanent Assistance to Needy States" (PANS). 

Honesty would dictate that the name of the program should be changed. Dishonesty would retain the dishonest name of this program for it does not provide assistance to needy families for most part. 

The evidence reveals that a mere 36% of the money is used to payments to 

families while the rest of the money is used for purposes other than providing 

assistance to needy families like Foster Care, Child Care, and primarily for 

State Budget Care. 

Rather than looking at States manipulating the process to meet the work participation rates through caseload reduction credits scheme, Congress should 

look at the TANF program that is loaded with loopholes, such as considering 

money used for families not subject to work requirements as eligible for TANF 

funds for those expenditures meeting the silly requirement of "promoting job 

preparation, work, marriage, reducing out-of-wedlock births; and encouraging 

the formation of two-parent families". States got the message loud and clear 

when TANF was enacted - this is all a shell game. We give you money called 

State T ANI" Spending 
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"temporary assistance to needy families" and you can spend the money on 

"non-needy families" - hah hah hah. 

And now some in Congress are appalled that States are using "case credits" to 

meet the so-called work participation rates. You should not be surprised at all. 

Congress let States know that although we call this program "temporary assistance to needy families" -blink-blink-blink- you can use it for non-needy families not subject to work requirements. 

AFDC program 70% of the 

money was used to "payment to families". The evidence reveals that under 

TANF a meager 36% of the 

money is used for "payment 

to families". 

The "Green Book" published by the House 

Ways and Means Committee reveals that in 

the AFDC program 70% of the money was 

used to "payment to families". The evidence 

reveals that under TANF a meager 36% of 

the money is used for "payment to families". 

Below is a state-by-state percentage ofTANF funds used by States during 2011 

according to DHHS. A meager 8% of the TANF money is used for impoverished 

families in Arkansas. It is the worse state for the poor along with Illinois that 

uses only 8% of its money as payments to families. North Carolina, Michigan, 

Georgia, South Carolina, Idaho and Maryland use less than 20% of their TANF 

funds for poor families. Has Congress ever wondered what's happening with 

this money? Impoverished families and children suffer while TANF money is 

fleeced by States and Congress acquiesces and with apparent Congressional 

support. 

Nobody really cares about poor kids in America unless there are on 60 

minutes. They do not make political contributions to Congress and do not have 

deep pockets. Many of their parents can't even vote now days for they may not 

have a valid i.d. to vote. 

State TANF Spending 
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CHART # 1 - State-by-state percentage of total 

TANF federal and MOE funds used for 

"Payment to Families" during FY 2011 

U.S. TOTAL 36% D1ST.OF COLUMBIA 31% 

ARKANSAS < 8% 'ALABAMA 33% 

ILLINOIS 8% MASSACHUSETTS 33% 

NORTH CAROLINA 12% . VERMONT ,,' 34% 

MICHIGAN 14% UTAH 35% 

GEORGIA . 15% OHIO 37% 

SOUTH CAROLINA 17% NEW YORK 37% 

IDAHO ."1~% OKLAHOMA , 40"10 

MARYLAND 19% NEVADA 40% 

TEXAS. 20% WYOMING " 41% 

CONNECTICUT 20% NEW MEXICO 42% 

PEf,/NSYLVANI:A 21% VIRGINIA' 43% 

MINNESOTA 22% IOWA 43% 

W,SqONSIN 22% . WESt VIRGINIA '. 43% 

FLORIDA 24% TENNESSEE 43% 

INDIANA • 24% DELAWARE '" 44% 

ARIZONA 25% KANSAS 45% 

HAWAII. 25% MONTANA 45% 

NEW JERSEY 25% NEW HAMPSHIRE 56% 

NEaRA~KA 26% NORl'H DAKOTA 58% 

RHODE ISLAND 26% OREGON 59% 

CoLORADO 26% CALIFOR,NIA 63% 

MISSOURI 28% KENTUCKY 65% 

WASHINGTON 2~% ALASKA 70% 

MISSISSIPPI 29% SOUTH DAKOTA 73% 

LOUiSiANA· 3'1% MAINE 76% 

Source: Chart #2 below 

State TANF Spending 
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::HART # 2 - Summary of Federal TANF and 

State MOE Expenditures in FY 2011 Source: 

.ttp://www.acf.hhs.gov/programs/ofa/data/20ll fin/table_It l.pdf 

STATE 

U.S. TOTAL 

ABAMA 

ALASKA 

ARIZONA 

ARKANSAS 

CALIFORNIA 

COLORADO 

CONNECTICUT 

DELAWARE 

DIST.OF COL. 

FLORIDA 

GEORGIA 

HAWAII 

IDAHO 

ILLINOIS 

INDIANA 

IOWA 

KANSAS 

KENTUCKY 

LOUISIANA 

MAINE 

MARYLAND 

MASSACHUSETTS 

MICHIGAN 

MINNESOTA 

MISSISSIPPI 

MISSOURI 

MONTANA 

State TANF Spending 

TOTAL 

ASSISTANCE 

AND NONASSISTANCE 

EXPENDITURES 

$30,624,118,314 

$184,763,017 

$66,298,196 

$358,556,919 

$186,593,246 

$6,674,677,301 

$318,107,617 

$482,570,156 

$79,324,359 

$249,872,756 

$834,073,269 

$561,502,767 

$317,337,786 

$25,888,064 

$1,311,050,647 

$292,230,235 

$195,699,997 

$213,316,638 

$246,939,849 

$276,612,891 

$129,562,449 

$454,564,757 

$1,022,055,560 

$1,376,629,731 

$434,204,017 

$109,841,555 

$323,315,070 

$44,337,665 

PAYMENT TO 

TANF 

ELIGIBLE 

FAMLIIES 

$11,131,407,676 

$60,565,282 

$46,609,347 

$87,968,991 

$15,706,228 

$4,221,005,090 

$82,536,581 

$98,)68,216 

$35,223,265 

$77,011,103 

$196,198,069 

$85,820,475 

$77,973,976 

$4,734,754 

$110,592,904 

$71,524,114 

$83,834,174 

$95,559,824 

$161,452,160 

$84,668,911 

$98,556,141 

$88,468,836 

$337,075,697 

$193,973,371 

$94,909,659 

$31,795,625 

$91,316,362 

$19,899,386 

NONASSISTANCE 

$19,492,710,638 

$124,197,735 

$19,688,849 

$270,587,928 

$170,887,018 

$2,453,672,211 

$235,571,036 

$384,401,940 

$44,101,094 

$172,861,653 

$637,875,200 

$475,682,292 

$239,363,810 

$21,153,310 

$1,200,457,743 

$220,706,121 

$111,865,823 

$117,756,814 

$85,487,689 

$191,943,980 

$31,006,308 

$366,095,921 

$684,979,863 

$1,182,656,360 

$339,294,358 

$78,045,930 

$231,998,708 

$24,438,279 

PERCENTAGE 

OFTANF 

FUNDS USED 

FOR PAYMENTS TO 

FAMLIES 

36% 

33% 

70% 

25% 

80/0 

63% 

26% 

20% 

44% 

31% 

24% 

15% 

25% 

18% 

8% 

24% 

43% 

45% 

65% 

31% 

76% 

19% 

33% 

14% 

22% 

29% 

28% 

45% 
103 

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104 

Washington State 


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ST.ur. orWA.S III GTO~ 

DEPARTMENT OF SOCIAL AND HEALTH SERVICES 

~--

The lLo<.o<al>l< G<offDaris. ClIo"""" 

Sub."",m",« "" 11"""", RCOOO!<CI 

c;.,m.n.""" .... WIl)'llODd M_ 

u.s l1 _or _;_ 

!1 0 1 !.ooportII nOlI 

Wuhi"" .... O.C.20S15 

I>Utll.1012 

Ito: Id. y 17. NI2 11_ .. SUo. T ANF s,c..Iircond II> I~ ... WorI; It""",,,,,,,,,,,, 

n.. a.a;""", Dovio: 

Thank)'>U for 011< """"""'"'y "'...- """""""' ... thio. __ ........ )'QI'~. ,he: 

T~ A .. i>un« for N<a!y 1'lImi1 ... (TAN~) prosnm ... irocnclod 10 provide .... with 011< n".ibililylO dooia:n ' prosnm in .... )'I1he:)' reb """Id _ """'" ~e famil>oo ... poIhway 

00 """"""'"' odr ... ff",W:ncy _ .. """ os...,.. ~1Od ..;th 011< _ -..wry.,.b ODd ..... 

spcn!i"ll ... ..u!Ui""''' ' f~ly _ ted Ie\'d. l1owever. ,he ffdelal J<qO.U""""", hit .. 

<r<atod burien for thio ..... ",til r<pN to .ff ........ ly "'ilill", I"";,ed """""""" thO! "'""'" 

btnil;", """""" ..:Ir ... 1T",W:ncy. 

The .."... "",,,,,,,,,ion J<qUO""""" ofTANF on: not llu.ibk, ";tb oilPllfOCOlll h",," <III tho 'YPOS 

of "",vii;'" thai. <001II .... ard tMd"'ll 011< .."... "",i<;;..o"'" ~ The ........ d<fmit ... 

omduly'-;CO ..... bevel fl<>;ibility. I, .100 ""'-' cffoots 00 "iklf O<rYio<d<h;oay 10 oddraa 

thoopocif", _ofoll< !'amity. 

Wo on: 00<IIII ~,. ....ma. of_ "ho lack . bai<: -...... YClIqIl sclIooI 

~" ""'. <OrO odi';'y.1U>d "*"l' lQ """,,,. _ """".- 011< lQ how mqowrmo:nt 

foroingk_. f""., __ r"""ly. thu<lo=aoosoo n""""",,, per""""" 

.... ~1xn<f .. ...,<>_od,_....,.om,"IIOTMWforfdid'."""hc:""'" _""y for ~ it. kIb s-clI. t·"" _ ... ho bo .. '...... _10 fond ~-. ............ 

.... _ job __ 1U>d 0_ "'" thoOflPOl1 .... y •• incrcu< lhc:>r ~l>ility by 

<>!her m<ant. Wlui< lhe:)'oould 1xn<f" from sJJll. """"0&. thoro is li,tIe lhOI ooo.a ,_ 011< lQ -"'."""y ................... Yo<soo.-t _ion "belpful, but ...... ""..,. IlIlo:rwod to "'""" """" than lQ ~ of.""" _ "",,,i,,,,,ion f""" _ "'II'IlI"'I in """" _ _ ""'. In oddi, ___ .,...1 odu<ooian 

"""'" for 12 tIIOIlIho in 011< lif .. """.foll< .......... hit< ...... ~ ""'. """"" than '"'" Y<* 10 -" 
105 


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c ............ on s... TANF Si><od"'lllllldlmpoc1 ... WM< R"'I'"ranrnli 

Mayll,2012 

P.i<T ..... 

We Of< 01 ... om ... _,.110 110 .... 1<CCI''Od vocat ...... _ .... in Ib< puI-.d «I<IIcI1><n<r., 

from;' ..... ""''''''''''''''''''''''<>1",'''' 12_,;"",h ... ", S"","6 '''''e_'lu< IhQ 

_"'" ""';"'1;S >+'1""!"1"<' ""''';'Y II)' Ih>t _ do<> n<t """'" _wd the .,."Ie'potion -. 

Th. Impor ..... oft:' .... OR 

We ~ ,""<ITo:< of",,,, •• MOil "....,..."lOa .... OfII'OI'IUlllty f<If the IlOl< 1<l _ok. "'"'_ ..... ...,.... fu",l~ _ oeJf .... rr,,"""'y .. hi\< otill..-...Ib< _ .,."""pot .... -, 

S!.oI .. f>« "",~...-...to~"""' ... ......oo: .. _ylSmil .... 'hile.....mu'nlllII 

fOCllluntl>< _'o""""""'Klf .... rr"....,y, When. flonIly_",,~ and lea, ....... 

TANF prosrom. the ..... <.aM(II ..... """ pot"mI', """",of ~ '_Ib< ... "'" 

.,."",po<_"" 1'hiJ ... Cf<Ot ........ "'. 'nccnI"-' to k"", lamih .. "" TANP Ion:ii<>' in otdtr to =<,,-. <!<dlt bib< ~ houn. 

W ..... OOCIIlJI incr<asu\& ........... <>I"familieotholbo .... .;""f"""'_ ",~, W. _"""","--""._""",,,,1 ""'..;,; ...... ....,_""""'_.,.,,;,i""'"'" cro;IIt formanyof,"""'''''''''''_ 

WOI'k puI"'ipatioo n:quitc! d ... ,,","''' "'Pi< m "M< oct";,;,,, .. I ....... p' oflO """'" <a:;h 

.... <d!, Mony _ cMn<It .,."Ie'pol. III' 10 ,hot .=- 10 ...... ..-t«<!1'0 .,."ie,pot"", 

<r<di, f<lf las than ,he .... .-ory I'<qu.....-. 

Tho: .rro:< <If "'''''''' MOE ""pend;, ..... i. '" ""' .. """" portl<'potion "'J<U ',>0 leI .. 1 """ 01""", 

...., .. '0I""I'id<.--yIllld~ .... i,,"<>f<lfli'w:><f..,.;h""""'_""'I><Ip, 

2. A

~ 

llo ........ "'''''<i .. _ JIO"i<,pot""'cro;I;' f<wfom;li<o'hot """,T"'NFdo.o<,o 

for 00< year 

"'pond II>< ...,.,"''''' of""", 0<1,""," II)' 'nc ... "", ,I>< nwtbcr of «If< "",",',""1<l'nclWe 

born ... """""'I.'''''' .... Soon< .f ...... ""p<et<Dlly<l .... f"" .. Job s....:hlJob ~<'!IdI_ 

and ""',,"" 10 Ib< "'1'" ........ 6 w""u In. 12...-h raiOO. 

EJ ....... the oo1,Inry 10""'" I ... , on """"""'" ""_ ..... 1 ""''''11<1. Thcoc: .... ,,;, ... 11"< 

i"""""'n&lY in_ "'" <n'''''' to """1 f"",I, ... 

S, "'Ilow ..... '0 =<II'< <R<iI, b .,.,,<ime pari""""""" ,,1Im~. 
106 

Æ 


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