Temporary Assistance for Needy Families: Update on Families Served and Work Participation
Published: 2011-09-08T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Temporary Assistance for Needy Families (TANF) program, created in 1996, is one of the key federal funding streams provided to states to assist low-income families. A critical aspect of TANF has been its focus on employment and self-sufficiency, and the primary means to measure state efforts in this area has been TANF's work participation requirements. When the Deficit Reduction Act of 2005 (DRA) reauthorized TANF, it also made changes that were generally expected to strengthen these work requirements. Given the impending extension or reauthorization of TANF, this testimony primarily draws on previous GAO work to focus on (1) how the welfare caseload and related spending have changed since TANF was created and (2) how states have met work participation rates since DRA. To address these issues, in work conducted from August 2009 to May 2010, GAO analyzed state data reported to the Department of Health and Human Services (HHS); surveyed state TANF administrators in 50 states and the District of Columbia; conducted site visits to Florida, Ohio, and Oregon, selected to provide geographic diversity and variation in TANF program characteristics; and reviewed relevant federal laws, regulations, and research. In July 2011, GAO updated this work by analyzing state data reported to HHS since that time. In addition, GAO gathered information on caseload changes through its forthcoming work on TANF child-only cases.
section_title: What GAO Found
paragraphs: Between fiscal years 1997 and 2008, the total number of families receiving welfare cash assistance decreased by almost 50 percent. At the same time, there have also been changes in the types of families receiving cash assistance. Specifically, child-only cases--in which the children alone receive benefits--increased from about 35 percent of the overall TANF caseload in 2000 to about half in 2008. As the number of families receiving TANF cash assistance declined, state spending shifted to support purposes other than cash assistance, which is allowed under the law. However, because states are primarily required to report data to HHS on families receiving cash assistance and not on families receiving other forms of aid funded by TANF, this shift in spending has left gaps in the information gathered at the federal level to understand who TANF funds are serving and ensure state accountability. Nationally, the proportion of TANF families who met their work requirements changed little after DRA was enacted, and many states have been able to meet their work participation rate requirements because of various policy and funding options allowed in federal law and regulations. Although federal law generally requires that a minimum of 50 percent of families receiving TANF cash assistance in each state participate in work activities, both before and after DRA, about one-third of TANF families nationwide met these requirements. Nonetheless, many states have been able to meet their required work participation rates because of policy and funding options. For example, states receive a caseload reduction credit, which generally decreases each state's required work participation rate by the same percentage that state caseloads decreased over a specified time period. States can further add to their credits, and decrease their required work rates, by spending their own funds on TANF-related services beyond the amount that is required to receive federal TANF funds. In fiscal year 2009, 7 states met their rates because 50 percent or more of their TANF families participated in work activities for the required number of hours. However, when states' caseload decreases and additional spending were included in the calculation of state caseload reduction credits, 38 other states were also able to meet their required work participation rates in that year.

section_title: Letter
paragraphs: I am pleased to have the opportunity to participate in today’s discussion  of the $16.5 billion Temporary Assistance for Needy Families (TANF)  block grant. As you know, the Personal Responsibility and Work  Opportunity Reconciliation Act of 1996 (PRWORA) introduced sweeping  changes to federal welfare policy. It ended Aid to Families with  Dependent Children, which entitled eligible families to monthly cash  payments, and created TANF, a capped block grant provided to states to  operate their own welfare programs within federal guidelines. Those  guidelines, in part, emphasize employment and work supports, and as  such, designate specific work participation requirements for many families  who receive cash assistance. For example, in December 2010,  approximately 60 percent of the 1.9 million families receiving TANF cash  assistance included an adult or teen parent who was required to  participate in work activities as a condition of benefit receipt. The  remaining families were excluded from the work requirements, often  because those families included only children receiving benefits. Although  the work requirements have been in place since TANF was created,  Congress took steps through the Deficit Reduction Act of 2005 (DRA)  that were generally expected to strengthen these requirements, including  adding several provisions to improve the reliability of work participation  data. Both the U.S. Department of Health and Human Services (HHS),  which oversees TANF at the federal level, and states were required to  take steps to implement the DRA changes beginning in fiscal year 2007.
My remarks today are primarily based on our past work, specifically our  May 2010 report examining how DRA affected state TANF programs and  work participation rates. I will focus on (1) how the welfare caseload and  related spending have changed since TANF was created and (2) how  states have met work participation rates since DRA. To develop our  findings for our May 2010 report on work participation, we used multiple  methodologies. We reviewed state TANF data reported to HHS, as well  as relevant federal laws, regulations, and guidance; and interviewed HHS  officials. We also surveyed state TANF administrators from the 50 states  and Washington, D.C.; and conducted site visits to meet with state and  local TANF officials in Florida, Ohio, and Oregon, selected because they  made varied modifications to their TANF programs after DRA and varied  in geographic location and selected TANF program characteristics. We  conducted our work for that report from August 2009 to May 2010, and in  July 2011, we obtained more recent data on work participation from HHS  to supplement our earlier work. This statement also draws from our  February 2010 report on TANF caseloads, as well as our recent work on  TANF child-only cases, which examines cases in which the children alone  receive benefits. We determined that the data we obtained were  sufficiently reliable for the purposes of this testimony. Our performance  audit was conducted 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.
subsections: section_title: Data Gaps Hinder Full Assessment of Families Being Assisted with TANF Funds
paragraphs: The number of families receiving welfare cash assistance fell significantly  after the creation of TANF, decreasing by almost 50 percent from a  monthly average of 3.2 million families in fiscal year 1997 to a low of 1.7  million families in fiscal year 2008 (see fig. 1). Several factors likely  contributed to this caseload decline, such as the strong economy of the  1990s, declines in the number of eligible families participating, concurrent  policy changes, and state implementation of TANF requirements,  including those related to work participation. However, since fiscal year  2008 and the beginning of the recent economic recession, the number of  families receiving TANF cash assistance has increased by 13 percent to  a monthly average of 1.9 million families in fiscal year 2010. Comparing  the types of families that receive TANF cash assistance, the number of  two-parent families increased at a faster rate than single-parent families  or child-only cases, in which only the children receive benefits, during this  time period.
The number of child-only cases has increased slightly from fiscal year  2000 to fiscal year 2008; however, these cases make up an increasing  proportion of the total number of families receiving cash assistance  because TANF cases with adults in the assistance unit have decreased  substantially. Specifically, the number of TANF child-only cases increased  from approximately 772,000 cases to approximately 815,000 cases, but  the number of families with adults receiving assistance decreased from  about 1.5 million to about 800,000 cases (fig. 2). As a result, the share of  child-only cases in the overall TANF caseload increased from about 35  percent to about half.
There are four main categories of “child-only” cases in which the  caregiver (a parent or non-parent) does not receive TANF benefits: (1)  the parent is receiving Supplemental Security Income; (2) the parent is  a noncitizen or a recent legal immigrant; (3) the child is living with a  non-parent caregiver, often a relative; and (4) the parent has been  sanctioned and removed from the assistance unit for failing to comply  with program requirements, and the family’s benefit has been  correspondingly reduced. Families receiving child-only assistance are  generally not subject to work requirements.
Between fiscal years 2000 and 2008, increases in two of the categories  were statistically significant: children living with parents who were  ineligible because they received SSI benefits and children living with  parents who were ineligible because of their immigration status. Cases in  which the parents were ineligible due to immigration status almost  doubled and increased from 11 percent of the TANF child-only caseload  in fiscal year 2000 to 19 percent in fiscal year 2008 (see fig. 3). This  increase of 8 percentage points is statistically significant and represents  an increase from about 83,000 in fiscal year 2000 to over 155,000 in  fiscal year 2008, with the greatest increase occurring in California.  However, in some cases, the relationship between the child and the adult  living in the family is not known. The number of these cases decreased  significantly over the same period, and it is possible that some of the  increase in cases with ineligible parents due to SSI receipt or immigration  status resulted from better identification of previously unknown  caregivers. However, given available data, we were unable to determine  how much of the increase was due to better reporting versus an actual  increase in the number of cases.
Both the composition of the overall TANF caseload, as well as the  composition of the TANF child-only caseload, varies by state. For  example, in December 2010, 10 percent of TANF cases in Idaho were  single-parent families, compared to almost 80 percent in Missouri. In both  of these states, child-only cases comprised the rest of their TANF  caseloads. Concerning the variation in child-only cases by state, almost  60 percent of TANF child-only cases in Tennessee included children  living with non-parent caregivers, compared to 31 percent in Texas,  according to state officials.
As the overall number of families receiving TANF cash assistance has  declined, so has state spending of TANF funds on cash assistance.  TANF expenditures for cash assistance declined from about 73 percent of  all expenditures in fiscal year 1997 to 30 percent in fiscal year 2009 (see  fig. 4) as states shifted spending to purposes other than cash assistance,  which is allowed under the law. States may use TANF funds to provide  cash assistance as well as a wide range of services that further the  program’s goals, including child care and transportation assistance,  employment programs, and child welfare services. While some of this  spending, such as that for child care assistance, relates directly to helping  current and former TANF cash assistance recipients work and move  toward self-sufficiency, other spending is directed to a broader population  that did not ever receive TANF cash assistance.
Tracking the number of families receiving monthly cash assistance—the  traditional welfare caseload—no longer captures the full picture of families  being assisted with TANF funds. As states began providing a range of  services beyond cash assistance to other low-income families, data  collection efforts did not keep pace with the evolving program. Because  states are primarily required to report data to HHS on families receiving  TANF cash assistance but not other forms of assistance, gaps exist in the  information gathered at the federal level to understand who TANF funds  are serving and services provided, and to ensure state accountability. For  example, with the flexibility allowed under TANF, states have used a  significant portion of their TANF funds to augment their child care subsidy  programs. However, states are not required to report on all families  provided TANF-funded child care, leaving an incomplete picture of the  number of children receiving federally funded child care subsidies.  Overall, data on the total numbers of families served with TANF funds  and how states use TANF funds to help families and achieve program  goals in ways beyond their welfare-to-work programs is generally  unavailable. When we first reported on these data limitations to this  Subcommittee in 2002, we noted that state flexibility to use TANF funds  in creative ways to help low-income families has resulted in many families  being served who are not captured in the data reported to the federal  government. At that time, it was impossible to produce a full count of all  families served with TANF funds, and that data limitation continues today.
section_title: National Work Participation Rates Changed Little after DRA, and States’ Rates Reflected Both Recipients’ Work Participation and States’ Policy Choices
paragraphs: Because job preparation and employment are key goals of TANF, one  of the federal measures of state TANF programs’ performance is the  proportion of TANF cash assistance recipients engaged in allowable work  activities. Generally, states are held accountable for ensuring that at  least 50 percent of all families receiving TANF cash assistance participate  in one or more of the 12 specified work activities for an average of 30  hours per week. However, before DRA, concerns had been raised  about the consistency and comparability of states’ work participation rates and the underlying data on TANF families participating in work activiti Although DRA was generally expected to strengthen TANF work  requirements and improve the reliability of work participation data and  program integrity by implementing federal definitions of work activities  and participation verification requirements, the proportion of families  receiving TANF cash assistance who participated in work activities for the  required number of hours each week changed little after DRA, as did the  types of work activities in which they most frequently participated.  Specifically, in fiscal years 2007 through 2009, from 29 to 30 percent of  TANF families participated in work activities for the required number of  hours, which is similar to the 31 to 34 percent of families who did so in  each year from fiscal years 2001 through 2006. Among families that met  their work requirements both before and after DRA, the majority  participated in unsubsidized employment. The next most frequent work  es. activities were job search and job readiness assistance, vocational  educational training, and work experience.
Although fewer than 50 percent of all families receiving TANF cash  assistance participated in work activities for the required number of hours  both before and after DRA, many states have been able to meet their  work participation rate requirements because of various policy and  funding options allowed in federal law and regulations. Specifically,  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  1.  decreases in the number of families receiving TANF cash assistance,  2.  state spending on TANF-related services beyond what is required,  3.  state policies that allow working families to continue receiving TANF  4.  state policies that provide nonworking families cash assistance  outside of the TANF program.
Beyond families’ participation in the 12 work activities, 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 time period are accounted for in each state’s caseload reduction  credit, which essentially then lowers the states’ required work  participation rate from 50 percent. For example, if a state’s caseload  decreases by 20 percent during the relevant time period, the state  receives a caseload reduction credit equal to 20 percentage points, which  results in the state work participation rate requirement being adjusted  from 50 to 30 percent. While state caseload declines have generally been  smaller after DRA because the act changed the base year for the  comparison from fiscal year 1995 to fiscal year 2005, many states are  still able to use caseload declines to help them lower their 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 declines (see fig.5).
However, while states’ caseload reduction credits before DRA were  based primarily on their caseload declines, after DRA, states’ spending of  their own funds on TANF-related services also became a factor in some  states’ credits. Specifically, states are required to spend a certain amount  of their funds every year in order to receive their federal TANF block  grants. However, if states spend in excess of the required amount, they  are allowed to correspondingly increase their caseload reduction  credits. In fiscal year 2009, 32 of the 45 states that met their required  work participation rates for all families receiving cash assistance claimed  state spending beyond what is required toward their caseload reduction  credits. In addition, 17 states would not have met their rates without  claiming these expenditures (see fig. 5). Among the states that needed  to rely on excess state spending to meet their work participation rates,  most relied on these expenditures to add between 1 and 20 percentage  points to their caseload reduction credit s (see fig. 6).
section_title: Concluding Observations
paragraphs: As traditional cash assistance caseloads declined and states broadened  the types of services provided and the number of families served, existing  data collection efforts resulted in an incomplete picture of the TANF  program at the national level. In effect, there is little information on the  numbers of people served by TANF funds other than cash assistance and  no real measure of how services supported by TANF funds meet the  goals of welfare reform. This leaves the federal government with  underestimates of the numbers served and potentially understated results  from these funds.
In addition, as before DRA, states have continued to take advantage of  the various policy and funding options available to increase their TANF  work participation rates. As a result, while measuring work participation of  TANF recipients is key to understanding the success of state programs in  meeting one of the federal purposes of TANF, whether states met the  required work participation rates provides only a partial picture of state  TANF programs’ effort and success in engaging recipients in work  activities. Although the DRA changes to TANF work requirements were  expected to strengthen the work participation rate as a performance  measure and move more families toward self-sufficiency, the proportion  of TANF recipients engaged in work activities remains unchanged. States’  use of the modifications currently allowed in federal law and regulations,  as well as states’ policy choices, have diminished the rate’s usefulness as  the national performance measure for TANF, and shown it to be limited  as an incentive for states to engage more families in work.
Lack of complete information on how states use funds to aid families and  to measure work participation hinders decision makers in considering the  success of TANF and what trade-offs might be involved in any changes to  program requirements. In addressing these issues, care must to be taken  to ensure that data requirements are well thought out and do not present  an unreasonable burden on state programs.
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 appendices of the relevant reports.  We also provided HHS a draft  of this testimony for technical comments on the new information on child- only TANF cases and updated TANF work participation data.  HHS had  no technical comments.
Chairman Davis and Ranking Member Doggett, and Members of the  Subcommittee, 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 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, Rachel Frisk, Alex Galuten, Gale  Harris, Jean McSween, and Cathy Roark.
section_title: Appendix I: How a State’s Work Participation Rate Is Calculated When It Claims State Expenditures in Excess of Its Requirement
subsections: section_title: Federal law allows states to apply for caseload reduction credits, which decrease their required work participation rates.
paragraphs: The state in this example would have its minimum work participation rate reduced to 26 percent for all TANF families.
section_title: Appendix II: TANF Child-Only Caseload Estimates and 95 Percent Confidence Intervals