But the pressure to spend TANF funds may lead some states to use TANF funds in ways that advocates would consider undesirable. For example, the welfare law allows states in some cases to use TANF funds simply to replace state funding in programs providing services to low-income families, without providing any additional level of services. The state savings generated this way can be used to finance anything from a tax cut for families that are not poor to prison construction. As described below, it is appropriate to consider both types of unspent funds when measuring a state s welfare surplus. Unliquidated obligations refers to amounts that a state has committed to spend but has not yet spent, such as funds a state has contracted to pay a private child care agency.
Unobligated funds are funds a state has neither spent nor committed to spend as of a given date.
Because unliquidated obligations are supposed to reflect amounts committed to be spent, it might seem appropriate not to consider those amounts as available for new investment. But a number of states such as Indiana, Ohio, Oregon, and Texas consistently report all or nearly all of their unspent TANF balances as obligated. CBPP conversations with state officials confirm that in some states with sizable amounts of unliquidated obligations, a large share actually may reflect funds that should be considered unobligated. For these reasons, advocates should examine both the amount of unobligated TANF funds and the amount of unliquidated obligations. This is particularly true if a state reports little or no unobligated funds and substantial amounts of unliquidated obligations.