The TANF Emergency Contingency Fund
Released: 2010-12-22T00:00:00

Summary:
The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) created a $5 billion Emergency Contingency Fund (ECF) within the Temporary Assistance for Needy Families (TANF) block grant to help states, Indian tribes, and the territories pay for additional economic aid to families during the current economic downturn. It was part of a package of tax and benefit program provisions aimed at stemming the decline in family incomes and purchasing power caused by increased unemployment. The ECF was a temporary fund for two years, FY2009 and FY2010, and expired on September 30, 2010. All of the available $5 billion was awarded by the fund's expiration date to states, tribes, and territories.
Though the economy grew in the last half of 2009 and the first three quarters of 2010, unemployment remained high. Historically, the trend in the cash welfare caseload has sometimes followed economic conditions, but sometimes not. After the 1990-1991 recession, welfare caseloads actually peaked in March 1994 before beginning their decline. The 111th Congress considered legislation in 2010 to extend the ECF beyond September 30, 2010. However, though the House twice passed bills to extend the ECF, none of these measures received Senate approval. A provision of the Claims Resolution Act of 2010 (P.L. 111-291) extended the basic TANF program through the end of FY2011 without the ECF.
TANF is best known for funding cash welfare payments for low-income families, but it actually provides funds for a wide range of benefits and services to ameliorate the effects of, or address the root causes of, economic disadvantage among families with children. While TANF funds a wide range of both economic aid and human services to families with children, the ECF was limited to funding three categories of expenditures: basic assistance, a category that most closely resembles traditional cash welfare; non-recurrent short-term (e.g., emergency) aid; and subsidized employment. These categories typically are those that provide direct aid to families, rather than fund services. States, Indian tribes, and the territories were reimbursed 80% of the costs of increased expenditures in these categories. To qualify for ECF grants for increased basic assistance expenditures, a state, tribe, or territory had to aid more families on its assistance rolls than it did in FY2007 or FY2008. Qualification of states, tribes, and territories for ECF grants supporting short-term aid or subsidized employment were dependent only on increased expenditures from FY2007 or FY2008. ARRA placed a limit on total ECF and other TANF contingency fund payments to states, at a combined 50% of a state's basic block grant over the two years, FY2009 and FY2010.
A total of 49 states, the District of Columbia, Puerto Rico, and the Virgin Islands had their applications for ECF grants approved. Additionally, 25 tribes and tribal organizations had approved ECF applications. Of the total $5 billion awarded, $1.6 billion was for basic assistance, $2.1 billion for short-term aid, and $1.3 billion for subsidized employment. Twelve states (Colorado, Delaware, Maryland, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Tennessee, and Washington State) have received their maximum ECF grants.

subsections: section_title: Introduction
paragraphs: The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) created an Emergency Contingency Fund (ECF) within the Temporary Assistance for Needy Families (TANF) block grant. The fund expired on September 30, 2010. It helped states, Indian tribes, and territories pay for additional costs of providing economic aid to families during the current economic downturn for FY2009 and FY2010. 
section_title: TANF
paragraphs: The TANF block grant provides states, Indian tribes, and territories with federal funding for a wide range of benefits and services to ameliorate the effects of, or address the root causes of, economic disadvantage for families with children. The bulk of federal TANF funding is in a basic block grant of $16.5 billion. Under the basic block grant, each state receives an amount that has remained the same, without adjustment, since the 1996 welfare reform law. States—taken together—are also required to contribute a minimum of $10.4 billion to TANF-funded or related programs under a maintenance of effort (MOE) requirement. This amount, too, has not been adjusted since the 1996 welfare reform law.
TANF is best known for funding cash welfare payments for very low-income families with children. However, states may use TANF funds "in any manner reasonably calculated" to help states achieve the broad statutory purpose of the block grant. In FY2009, only 28% of federal and related state TANF funds were expended on basic assistance, the category of spending that most closely corresponds to traditional cash welfare. The cash welfare rolls had declined to 1.7 million families by July 2008, down from a historical peak of 5.1 million families in March 1994. TANF also provided considerable funding for state subsidized child care programs, programs that address child abuse and neglect, pregnancy prevention programs, youth programs, and early childhood development (e.g., pre-Kindergarten) programs.
Absent additional TANF funds, the limited and fixed nature of the block grant means that states bear the full cost of increased costs (e.g., increases in cash welfare). To share this risk during periods of recession, the 1996 welfare reform law created a $2 billion Contingency Fund. This fund, hereafter in this report called the "regular" contingency fund, provides capped matching grants to states that meet criteria of economic need and increased state spending to help states meet recession-related costs. 
section_title: The Emergency Contingency Fund
paragraphs: The overall cash assistance caseload began to rise in August 2008. From March 2008 to March 2010, the national caseload increased by 13%—with some states experiencing faster caseload growth. The regular TANF contingency fund provided 19 states with additional funding in FY2009 and early FY2010. However, some states (e.g., California and Florida) experienced substantial increases in their TANF cash assistance caseloads, and met the criterion of economic need required to draw regular contingency funds, but failed to draw them because of the increased state spending requirement of the regular fund. 
The ARRA included a number of provisions related to taxes and benefit payments, designed to partially offset the declines in family income and purchasing power resulting from the increased joblessness caused by the recession. As part of this package, the ARRA established within TANF a $5 billion ECF for FY2009 and FY2010. The ECF provided states, tribes, and territories with capped additional funding to help meet additional costs or create new programs to respond to the current economic downturn. Subject to a cap on state grants from the ECF, the fund paid states, tribes, and territories 80% of the increased costs of expenditures in the three categories of expenditures discussed below. 
subsections: section_title: What Types of Benefits and Services Are Funded from the Emergency Fund?
paragraphs: While TANF funds a wide range of economic aid and human services to families, the ECF reimbursed for only three categories of activities: basic assistance, non-recurrent short-term aid, and subsidized employment. These categories typically are those that provide direct aid to families, rather than fund services. 
subsections: section_title: Basic Assistance
paragraphs: This category represents spending on what most people think of as cash welfare. Generally, it is a monthly check (or deposit on an electronic benefit card) to help very low-income families meet ongoing basic needs. In order to qualify for funding for increased basic assistance, a state must experience both an increase in the number of families receiving assistance benefits as well as an increase in expenditures for basic assistance. To determine eligibility for ECF grants on the basis of increased cash assistance, the average number of families receiving cash assistance in a current fiscal quarter in FY2009 or FY2010 was compared with the number of families receiving cash assistance in the comparable quarter in the "base year." The base year was defined as either FY2007 or FY2008, whichever had the lowest cash assistance caseload. If a state, tribe, or territory experienced an increase in the cash assistance caseload, it was reimbursed for 80% of the increased costs (if any) of basic assistance from the comparable quarter in the base year to the current quarter.
section_title: Non-recurrent Short-Term Aid
paragraphs: This category represents spending on aid that is to meet a specific family situation and aid is limited to a four-month timeframe. States, tribes, and territories had broad latitude in defining the types of "short-term aid" that they provide to families under the ECF. Moreover, short-term aid was provided to families both on and off the cash assistance rolls. If a family received only non-recurrent short-term aid, and not ongoing TANF assistance, that family was not subject to the rules that apply to TANF cash welfare families (e.g., work participation, time limit, and child support enforcement requirements).
Unlike basic assistance, which required both increased expenditures and that more families be assisted, ECF funding for non-recurrent short-term aid was based solely on increased expenditures. The expenditures on non-recurrent short-term aid in a current quarter in FY2009 or FY2010 were compared with expenditures in the comparable quarter in the base year. The base year for non-recurrent short-term aid was either FY2007 or FY2008, whichever had the lowest expenditures for this category of expenditures. The base year for non-recurrent short-term aid could have been different from that used to determined ECF eligibility for basic assistance. The ECF reimbursed 80% of the increased expenditures on short-term non-recurrent aid from the comparable quarter in the base year to the current quarter.
section_title: Subsidized Employment
paragraphs: This category represents work subsidies: payments to employers or third parties to help cover the costs of employee wages, benefits, supervision, and training. The subsidized job could have been in the private or public sector. As with non-recurrent short-term aid, states were permitted to subsidize jobs for those on the cash assistance rolls as well as for other persons. If a person's only ongoing TANF benefit was an employment subsidy, his or her family was not subject to the rules that apply to TANF families receiving cash welfare. 
To draw ECF grants for subsidized employment, a state only needed to show that it had increased its expenditures for subsidized employment. The comparison used to determine increased costs for subsidized employment was the same type of comparison used for short-term benefits, as discussed above. Expenditures for subsidized employment for a current quarter in FY2009 or FY2010 were compared to those in the comparable quarter in the base year. The base year for subsidized employment was FY2007 or FY2008, whichever year had the lowest expenditures in the category, and could have differed from the base years used for basic assistance and short-term non-recurrent aid. The ECF reimbursed 80% of the increased expenditures on subsidized employment from the comparable quarter in the base year to the current quarter.
section_title: What Are the State Caps for Emergency Funds?
paragraphs: Each state was limited on what they can draw combined from the ECF and the TANF regular contingency fund. Over the two-year period, FY2009 and FY2010, a state could draw up to 50% of its basic block grant from the two funds. 
section_title: What Are the Rules for the State 20% "Match"?
paragraphs: The ECF did not pay for the full increase in expenditures for basic assistance, short-term aid, or subsidized employment. It provided for an 80% reimbursement for these increased costs. This is sometimes referred to as an 80% match rate, though this is somewhat misleading because states, tribes, and territories did not need to come up with "new money" to cover the remaining 20%. They were able to use funding reallocated from other activities funded from the basic TANF block grant or MOE monies to cover these costs. 
Additionally, states were permitted to count the value of in-kind, third party payments toward the 20%. This was particularly important for subsidized employment. According to guidance from the Department of Health and Human Services (HHS), the state could have counted the value of employers' supervisory time toward the 20%. The limit on supervisory time was 25% of an employee's wage.
section_title: State, Tribe, and Territorial Use of TANF Emergency Funds
paragraphs: At the end of FY2010 (September 30, 2010), all $5 billion appropriated to the ECF was awarded to states, tribes, and territories. Figure 1 shows the TANF ECF grant awards by category of spending. The figure shows cumulative grant awards. It shows that $1.6 billion, 32% of the total grant awards, was to help finance increases in expenditures for basic assistance. Another $2.1 billion, 41% of the total, was for non-recurrent short-term aid and $1.3 billion, 26% of the total, was for subsidized employment. 
A total of 49 states, the District of Columbia, Puerto Rico, and the Virgin Islands were awarded ECF funds. Only Wyoming and Guam failed to receive ECF grants. Table 2 shows ECF grant awards by category of expenditures, showing the dollar awards in each category as well as the percent of the total awards for each category by state. Most of these jurisdictions (48) were awarded funds for increases in their basic assistance caseload, with 44 jurisdictions awarded funds for non-recurrent short-term aid and 42 jurisdictions receiving funds for subsidized employment. Only three states (Nevada, New Hampshire, and New Mexico) received funding only for basic assistance.
In addition, 25 tribes and tribal organizations were awarded ECF grants. These grants total $14.2 million.
Twelve states (Colorado, Delaware, Maryland, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Tennessee, and Washington State) received their maximum allotment of contingency funds, and some others were close to receiving their maximums. As discussed above, states, tribes, and territories were limited to receiving only up to 50% of their basic TANF block grant in combined grants from the regular and emergency contingency funds over the two years, FY2009 and FY2010. Table 2 shows state awards from the regular TANF contingency fund and the ECF, comparing the sum of these awards with their maximum grants. States are sorted in descending order, so that states closest to exhausting their maximum allotments are shown at the top of the table. 
section_title: Proposals to Extend the TANF Emergency Contingency Fund
paragraphs: The TANF ECF was enacted as a temporary measure to help finance extra economic support to families to help them weather the recession. Though the economy grew in the last half of 2009 and the first three quarters of 2010, unemployment remained high. Unemployment is typically considered a "lagging" indicator and falls only after an economic expansion has already been underway for some time. Historically, the trend in the cash welfare caseload has sometimes followed economic conditions, but sometimes not. After the 1990-1991 recession, welfare caseloads actually peaked in March 1994, before beginning their decline.
President Obama's FY2011 budget proposal sought to establish a new Emergency Fund for FY2011. It would have been funded at $2.5 billion for that year. The House voted twice in 2010 to extend the ECF, though such proposals failed to clear the Senate. A provision of the Claims Resolution Act of 2010 ( P.L. 111-291 ) extended the basic TANF program through the end of FY2011 without the ECF.