Temporary Assistance for Needy Families: Update on Program Performance
Published: 2012-06-05T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: This hearing is on combating poverty and understanding new challenges for families. The testimony focuses on the role of the Temporary Assistance for Needy Families (TANF) block grant in helping low-income families with children. 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. States are also required to maintain a specified level of their own spending to receive TANF funds. Over the past 15 years, the federal government and states have spent a total of $406 billion for TANF, about 60 percent of which were federal funds. This federal-state 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. According to the Bureau of the Census, poverty among children fell from about 21 percent in 1995 to about 16 percent in 2000, rising again to 22 percent in 2010. Examining TANFs past performance can help shed light on the challenges facing low-income families and the role of the federal government in combating poverty.
This testimonybased primarily on reports issued by GAO from 2010 to 2012 on TANF and related issueswill focus on TANFs performance in three areas: (1) as a cash safety net for families in need, (2) as a welfare-to-work program that promotes employment, and (3) as a funding source for various services that address families needs.
section_title: What GAO Found
paragraphs: The federal-state TANF partnership makes significant resources available to address poverty in the lives of families with children. With these resources, TANF has provided a basic safety net to many families and helped many parents step into jobs. At the same time, there are questions about the strength and breadth of the TANF safety net. Many eligible familiessome of whom have very low incomesare not receiving TANF cash assistance. Regarding TANF as a welfare-to-work program, the emphasis on work participation rates as a measure of state program performance has helped change the culture of state welfare programs to focus on moving families into employment. However, features of the work participation rates as currently implemented undercut their effectiveness as a way to encourage states to engage parents, including those difficult to serve, and help them achieve self-sufficiency. Finally, states have used TANF funds to support a variety of programs other than cash assistance as allowed by law. Yet, we do not know enough about this spending or whether this flexibility is resulting in the most efficient and effective use of funds at this time.

section_title: Letter
paragraphs: I am pleased to have the opportunity to participate in today’s discussion  on combating poverty and understanding new challenges for families. I  will focus on the role of the Temporary Assistance for Needy Families  (TANF) block grant in helping low-income families with children. 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.
States are also required to maintain a specified level of their own  spending to receive TANF funds. Over the past 15 years, the federal  government and states have spent a total of $406 billion for TANF, about  60 percent of which were federal funds. This federal-state 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. According to the Bureau of the  Census, poverty among children fell from about 21 percent in 1995 to  about 16 percent in 2000, rising again to 22 percent in 2010. Examining  TANF’s past performance can help shed light on the challenges facing  low-income families and the role of the federal government in combating  poverty.
My remarks today –based primarily on reports issued by GAO from 2010  to 2012 on TANF and related issues—will focus on TANF’s performance  in three areas: (1) as a cash safety net for families in need, (2) as a  welfare-to-work program that promotes employment, and (3) as a funding  source for various services that address families’ needs. We used  multiple methodologies to develop our findings for these reports. We  reviewed and analyzed state TANF data reported to the Department of  Health and Human Services (HHS); reported on microsimulation analyses  conducted for us by the Urban Institute; reviewed relevant federal laws,  regulations, and guidance and relevant research on the factors affecting  the decline of cash recipient families; interviewed HHS officials; and  collected information from TANF officials using different methods for  different studies, including surveying and interviewing state TANF  administrators and conducting site visits in selected states. We assessed  the data we received for data reliability and concluded that the data were  sufficiently reliable for the purposes of this testimony. (See related reports  cited throughout for more information on scope and methodology of our  work.)  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.
In summary, the federal-state TANF partnership makes significant  resources available to address poverty in the lives of families with  children. With these resources, TANF has provided a basic safety net to  many families and helped many parents step into jobs. At the same time,  there are questions about the strength and breadth of the TANF safety  net. Many eligible families—some of whom have very low incomes—are  not receiving TANF cash assistance. Regarding TANF as a welfare-to- work program, the emphasis on work participation rates as a measure of  state program performance has helped change the culture of state  welfare programs to focus on moving families into employment. However,  features of the work participation rates as currently implemented undercut  their effectiveness as a way to encourage states to engage parents,  including those difficult to serve, and help them achieve self-sufficiency.  Finally, states have used TANF funds to support a variety of programs  other than cash assistance as allowed by law. Yet, we do not know  enough about this spending or whether this flexibility is resulting in the  most efficient and effective use of funds at this time.
subsections: section_title: Background
paragraphs: The TANF block grant was created by the Personal Responsibility and  Work Opportunity Reconciliation Act of 1996 (PRWORA) 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. States  have responsibility for designing, implementing, and administering their  welfare programs to comply with federal guidelines, as defined by federal  law and HHS that oversees state TANF programs at the federal level.  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. Similarly, during the recent economic recession, Congress  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.
section_title: TANF’s Cash Assistance Role Has Declined
paragraphs: The story of TANF’s early years is well known. During a strong economy,  increased federal support for work supports like child care, and the new  TANF program’s emphasis on work, welfare rolls were cut by more than  half. Many former welfare recipients increased their income through  employment, and employment rates among single parents increased.  At  the same time that some families worked more and had higher incomes,  others had income that left them still eligible for TANF cash assistance.  However, many of these eligible families were not participating in the  program. According to our estimates in a previous report, the vast  majority—87 percent—of the caseload decline can be explained by the  decline in eligible families participating in the program, in part because of  changes to state welfare programs. These changes include mandatory  work requirements, changes to application procedures, lower benefits,  and policies such as lifetime limits on assistance, diversion policies, and  sanctions for non-compliance, according to a review of the research.  Among eligible families who did not participate, 11 percent did not work,  did not receive means-tested disability benefits, and had very low  incomes. While we have not updated this analysis, some research shows  that this potentially vulnerable group may be growing.
Despite the decrease in the cash assistance caseload overall, the number  of cases in which aid was provided only for the children in the household  increased slightly, amounting to about half the cash assistance caseload.  For these households, the adult is not included in the benefit calculation,  generally either because: (1) the parent is receiving cash support through  the Supplemental Security Income program; (2) the parent is an  immigrant who is ineligible; (3) the child is living with a nonparent  caregiver; or (4) the parent has been sanctioned and removed from cash  assistance for failing to comply with program requirements. Nationally,  about one-third of these “child only” households are children living with  non-parent caregivers.
We also know that during and after this recent significant recession, while  caseloads increased in most states, the overall national increase totaled  about 13 percent from fiscal years 2008 to 2011. This has been the first  test of TANF—with its capped block grant structure—during severe  economic times. This relatively modest increase—and decreases in some  states—has raised questions about the responsiveness of TANF to  changing economic conditions. We recently completed work on what was  happening to people who had exhausted their unemployment insurance   While almost 40 percent of  benefits after losing a job in the recession.near-poor households with children that had exhausted UI received aid  through the Supplemental Nutrition Assistance Program (formerly known  as food stamps), we estimated that less than 10 percent received TANF  cash assistance.
section_title: TANF Emphasizes the Importance of Work but Its Work Performance Measure Falls Short
paragraphs: A key TANF goal is helping parents prepare for and find jobs. The primary  means to measure state efforts in this area has been TANF’s work  participation requirements. 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 allowable activities for the required number of hours  each week. However, over the years, states have not typically engaged  that many recipients in work activities on an annual basis—instead, states  have engaged about one third of families in allowable work activities  nationwide.  Most states have relied on a combination of factors, including  various policy and funding options in federal law and regulations, to meet  the work participation requirements without reaching the specified 50  percent.
Factors that influenced states’ 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  (not due to program eligibility changes) that provide a state credit  toward meeting its rates ,   state spending on TANF-related services beyond what is required that  also provides a state credit toward meeting its rates,   state policies that allow working families to continue receiving TANF  cash assistance, helping a state to increase its rate, and   state policies that provide nonworking families cash assistance  outside of the TANF program.   For example, some states serve  families with work barriers outside of state TANF because of concerns  that they will not be able to meet work requirements.
Many states have cited challenges in meeting TANF work participation  rates, such as requirements to verify participants’ actual activity hours  and certain limitations on the types and timing of activities that count  toward meeting the requirements.
Because of the various factors that affect the calculation of states’ work  participation rates, the rate’s usefulness as an indicator of a state’s effort  to help participants achieve self-sufficiency is limited. Further, the TANF  work participation rates, as enacted, in combination with the flexibility  provided, may not serve as an incentive for states to engage more  families or to work with families with complex needs.
section_title: States Rely on TANF Flexibility to Provide a Broad Array of Services
paragraphs: While the focus is often on TANF’s role in cash assistance, it plays a  significant role in states’ budgets for other programs and services for low- income families, as allowed under TANF. The substantial decline in  traditional cash assistance caseloads combined with state spending  flexibilities under the TANF block grant allowed states to broaden their  use of TANF funds. As a result, TANF and state TANF-related dollars  played an increasing role in state budgets outside of traditional cash  assistance payments. In our 2006 report that reviewed state budgets in  nine states, we found that in the decade after Congress created TANF,  the states used their federal and state TANF-related funds to support a  wide range of state priorities, such as child welfare services, mental  health services, substance abuse services, prekindergarten, and  refundable state earned income credits for the working poor, among  others.
While some of this spending, such as that for child care assistance,  relates directly to helping cash assistance recipients leave and stay off  the welfare rolls, other spending is directed to a broader population that  did not necessarily ever receive welfare payments. This is in keeping with  the broad purposes of TANF specified in the law: providing assistance to needy families so that children could be cared  for in their own homes or in the homes of relatives; ending needy families’ dependence on government benefits by  promoting job preparation, work, and marriage; preventing and reducing the incidence of out-of-wedlock pregnancies; encouraging the formation and maintenance of two-parent families.
This trend away from cash assistance has continued. In fact, in fiscal year  2011, federal TANF and state expenditures for purposes other than cash  assistance totaled 71 percent of all expenditures. This stands in sharp  contrast with 27 percent spent for purposes other than cash assistance in  fiscal year 1997, when states first implemented TANF. Beyond the cash  assistance rolls, the total number of families assisted is not known, as we  have noted in our previous work.
TANF funds can play an important role in some states’ child welfare  budgets. In our previous work, Texas state officials told us that 30  percent of the child welfare agency’s budget was funded with TANF  dollars in state fiscal year 2010. Many states have used TANF to fund  child welfare services because, although TANF funding is a capped block  grant, it is a relatively flexible funding source. However, some states may  not be able to continue relying on TANF to fund child welfare services  because they need to use TANF funds to address other program goals,  such as promoting work. For example, Tennessee officials told us that  they previously used some of their TANF grant to fund enhanced  payments for children’s relative caregivers and their Relative Caregiver  Program, but that the state recently discontinued this practice due to  budget constraints.
While states have devoted significant amounts of the block grant as well  as state funds to these and other activities, little is known about the use of  these funds. Existing TANF oversight mechanisms focus more on the  cash assistance and welfare-to-work components of the block grant. For  example, when states use TANF funds for some purposes, they are not  required to report on funding levels for specific services and how those  services fit into a strategy or approach for meeting TANF goals. In effect,  there is little information on the numbers of people served by TANF- funded programs other than cash assistance, and there is no real  measure of workload or of how services supported by TANF and state  TANF-related funds meet the goals of welfare reform. This information  gap hinders decision makers in considering the success of TANF and  what trade offs might be involved in any changes to TANF when it is  authorized.
section_title: Concluding Observations
paragraphs: The federal-state TANF partnership makes significant resources available  to address poverty in the lives of families with children. With these  resources, TANF has provided a basic safety net to many families,  triggered a focus on work in the nation’s welfare offices while helping  many parents step into jobs, and provided states flexibility to help families  in ways they believe will help prevent dependence on public assistance  and improve the lives of children.
At the same time, it does raise questions about the strength and breadth  of the TANF safety net. Are some eligible families falling through?
The emphasis on work participation rates as a measure of program  performance has helped change the culture of state welfare programs to  focus on moving families into employment, but weaknesses in the  measure undercut its effectiveness. Are the work participation rates  providing the right incentive to states to engage parents, including those   difficult to serve, and help them achieve self-sufficiency?
The flexibility of the TANF block grant has allowed states to shift their  spending away from cash assistance and toward other programs and  services for low-income families, potentially expanding the ability of states  to combat poverty in new ways. However, we do not have enough  information about the use of these funds to determine whether this  flexibility is resulting in the most efficient and effective strategies at this  time of scarce government resources and great need among the nation’s  low-income families.
Chairman Baucus, Ranking Member Hatch, and Members of the  Committee, this concludes my statement. I would be pleased to respond  to any questions you may have.
section_title: GAO Contacts and Acknowledgments
paragraphs: For questions about this statement, please contact me 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 testimony  include Alexander G. Galuten, Gale C. Harris, Sara S. Kelly, Kathryn A.  Larin, and Theresa Lo.
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