Temporary Assistance for Needy Families: Fewer Eligible Families Have Received Cash Assistance Since the 1990s, and the Recession's Impact on Caseloads Varies by State
Published: 2010-02-23T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Following sweeping changes made to federal welfare policy in 1996 with the creation of the Temporary Assistance for Needy Families (TANF) program, the number of needy families who received cash assistance fell by more than half to 1.7 million in 2008. Poverty among children also fell from about 21 percent in 1995 to about 16 percent in 2000, rising again to 19 percent in 2008. The current recession deepened in 2008, raising questions about state TANF programs' response to increased needs. GAO was asked to provide Congress with information on the (1) factors contributing to the decline in the number of families receiving assistance; (2) characteristics of participating and nonparticipating eligible families; (3) impact of higher participation in TANF cash assistance on child poverty; and (4) changes states are experiencing in caseloads and spending in the current recession. GAO's methodologies included using microsimulation analyses; reviewing relevant research and federal laws; interviewing TANF officials in 21 selected states; analyzing state cash assistance data; and interviewing researchers, federal officials, and other experts.
section_title: What GAO Found
paragraphs: The decline in the number of poor families receiving cash assistance from 1995 to 2005 reflects declines in both the number of eligible families and in eligible families' participation. The strong economy of the 1990s, TANF's focus on work, and other factors contributed to increased family incomes and a decline in the number of eligible families. However, most of the caseload decline--about 87 percent--resulted from fewer eligible families participating in the program, perhaps in response to TANF work requirements, time limits, and sanction and diversion policies. Compared to TANF families, eligible nonparticipating families worked more and had higher incomes and educational levels. However, among eligible families who did not participate, 11 percent did not work, did not receive means-tested disability benefits, and had very low incomes. 800,000 fewer children would live in extreme poverty--below half the federal poverty threshold--if participation increased from 40 percent to 84 percent of eligible families, the level it reached in 1995, the year before TANF was created. While TANF benefits would generally increase incomes, higher participation would not significantly change the number of children in poverty overall, partly because many children in poverty are not poor enough to be eligible for TANF and because TANF cash benefits are typically low. From June 2008 to June 2009, the number of families receiving TANF cash assistance rose in 12 of the 21 states GAO surveyed, although the recession's impact on cash assistance caseloads varied by state. To offset higher costs of cash assistance, few states reported reducing TANF-related spending on family- and/or work-supports during this time period. Instead, states paid for increases by using funding sources such as 2009 emergency stimulus funds.

section_title: Letter
paragraphs: Following sweeping changes made to federal welfare policy in 1996 with  the creation of the Temporary Assistance for Needy Families (TANF)  program, the number of needy families receiving cash assistance fell  significantly, from 4.8 million families on average each month in 1995— just prior to the creation of TANF—to 1.7 million on average each month  in 2008. With the creation of TANF, welfare changed from a program  entitling eligible families to monthly cash payments to a capped block  grant that emphasized employment and work supports for most adult  participants who receive such assistance. Since 1996, the decline in the  number of families receiving cash assistance has been cited as evidence of  welfare reform’s success in reducing families’ dependency on government  benefits—a chief program goal. The extent of the decline, however, was  deeper and faster—especially in the late 1990s—than analysts and others  had anticipated, and the number of low-income families who were eligible  for TANF cash assistance but who did not participate in the program  increased.
During this period, poverty among all children initially fell, from about 21  percent in 1995 to about 16 percent in 2000—the lowest level since the late  1970s, according to U.S. Census data. Poverty for all children then rose  thereafter until it reached 19 percent in 2008. Most families receiving cash  assistance are single mothers with children, and children in such families  have historically experienced high rates of poverty. The recession that  began in late 2007 deepened nationally in 2008, putting additional  pressures on families living in poverty, especially families with children,  who are particularly vulnerable. The growing recession also raised  questions about how states, which provide cash assistance to families  through TANF, would address any increases in need.
In light of the decline in the number of low-income families who receive  cash assistance, especially given the current recession, you asked us to  examine what is known about the factors contributing to this decline and  its implications. More specifically, you asked us to address the following  questions:  1.  What factors have contributed to the decline in families receiving  TANF cash assistance since the 1990s? 2.  Among eligible families, how do the characteristics of families who do  not receive TANF cash assistance compare with families who do  receive TANF cash assistance? 3.  How does the participation of eligible families in TANF affect the  number of children in extreme poverty and poverty? 4.  In the current recession, what changes are states experiencing in their  cash assistance caseloads and what changes, if any, have states made  in their TANF–related spending to date to respond to any increases?
To determine which factors contributed to the decline in caseload, we  conducted a literature review of relevant research; interviewed TANF  experts, as well as officials at the Department of Health and Human  Services (HHS); reviewed TANF caseload and other data; and reviewed  relevant federal laws and regulations. In conducting our literature review,  we searched various databases for peer-reviewed journals and other  publications; obtained recommendations from TANF researchers and  policy experts, including HHS officials; and reviewed policy and research  organization Web sites for relevant studies. We cited studies that at least  two social scientists had reviewed and assessed for the adequacy of their  methodologies. We also contracted with the Urban Institute to conduct  analyses—using the Transfer Income Model, version 3, known as TRIM3— of changes in families’ TANF eligibility and receipt of TANF cash  assistance. These analyses helped us estimate the extent to which  changes in eligibility rules under TANF affected the number of families  eligible for cash assistance after welfare reform. For this analysis, we  applied TANF eligibility rules for 2005, including rules established by  states, to all families in 1995, which was the year prior to welfare reform  under the Personal Responsibility and Work Opportunity Reconciliation  Act of 1996 (PRWORA). We also contacted state-based social service and  other organizations in selected states regarding state TANF practices and  policies that could affect a family’s decision to participate in the program.  To determine how TANF cash recipients compare to eligible nonrecipients  and to estimate the impact of TANF cash assistance on child poverty and  extreme poverty, we requested additional analyses using TRIM3. For our  analysis of the characteristics of cash recipients and eligible nonrecipients,  we used 2005 data, the most recent publicly available TRIM3 data when we  conducted our work. In comparing the characteristics of cash recipients  and eligible nonrecipients, differences are statistically significant at the 95  percent confidence level unless otherwise noted. For our analysis of the  impact of higher rates of TANF cash assistance on child poverty and  extreme poverty, we compared data from 2005 to data from 1995, the year  prior to welfare reform. To determine how the number of families  receiving cash assistance changed and how states have changed their use  of block grant funds in response to the most recent recession, we  conducted semi-structured telephone interviews with TANF officials in 21  states and obtained the most recent data available on their cash assistance  caseloads. In analyzing caseload changes, we included families receiving  cash assistance through both federally funded TANF block grants as well  as through separate state programs (SSP), which use state funds that  count towards qualifying for the federal TANF block grant and which are  subject to certain federal TANF requirements. In addition, we obtained  data on cash assistance caseloads that states funded through newer  programs funded only by states—known as “solely state-funded  programs”—which are not subject to federal work requirements or federal  reporting. The 21 states we selected had a range of child poverty rates,  unemployment rates, cash assistance caseloads, approaches to sanctions  and monthly earnings limits, and geographic diversity. Collectively these  states represent more than half the families receiving TANF cash  assistance nationally. Our analysis focused on the period between June  2008—6 months after the official start of the current recession—and June  2009. We assessed the data we received from TRIM3 and from state  agencies for data reliability. On the basis of these assessments, we  concluded that the data were sufficiently reliable for the purposes of our  report. We also provided our draft report to three external reviewers who  have conducted research and published on welfare reform issues and  whose work reflects a variety of approaches to this work. We incorporated  their comments as appropriate.
We conducted our work from November 2008 to February 2010 in  accordance with all sections of GAO’s Quality Assurance Framework that  are relevant to our objectives. The framework requires that we plan and  perform the engagement to obtain sufficient and appropriate evidence to  meet our stated objectives and to discuss any limitations in our work. We  believe that the information and data obtained, and the analysis  conducted, provide a reasonable basis for any findings and conclusions in  this product.
subsections: section_title: Background
subsections: section_title: TANF Goals, Structure, and Requirements
paragraphs: The TANF program represented a significant departure from Aid to  Families with Dependent Children (AFDC), the federal welfare program it  replaced—in program goals, funding structure, and program requirements.  Under the TANF block grant program, created by PRWORA and  reauthorized in 2006, states receive federal funds to design and operate  their own welfare programs within federal guidelines. In addition to  providing cash benefits to eligible families, as AFDC did, the TANF  program, instead, focuses on, among other things, ending the dependence  of needy parents on government benefits by promoting job preparation,  work, and marriage. HHS administers the TANF program, which provides  states with up to about $16.5 billion each year in TANF block grant funds.  To qualify to receive its portion of the available TANF funds, each state  must contribute a specified level of its own funds, which is referred to as  the state’s maintenance of effort (MOE). In addition to providing cash  assistance, states may use these TANF and MOE funds to finance a wide  range of benefits, services, activities, or programs, such as child care and  other activities that further TANF program goals.
In addition to the new goals and funding structure of the TANF program,  PRWORA established more stringent work requirements; credits to states  for reducing caseloads; time limits; and restrictions on immigrant receipt  of assistance. The act also established that eligible families were no  longer entitled to receive cash assistance from states, as they had been  under AFDC. States must involve a minimum percentage of their adult  TANF and MOE cash assistance recipients in work activities for a required  number of hours each week. Under PRWORA, states are allowed to  reduce their required work participation rates by earning credit for  reducing their cash assistance caseloads. All states have received such  caseload reduction credits, thereby reducing the work participation rate  they must meet. The caseload reduction credit also introduced an  incentive for states to contain or reduce the number of families receiving  cash assistance, since states that fail to meet the target work participation  rates face financial penalties. To emphasize the temporary nature of  assistance, states must restrict most families to a lifetime limit of 60  months of federally funded TANF cash assistance, although states can  implement shorter time limits. A few states have chosen to terminate  benefits only for the adults in the family unit; otherwise benefits are  terminated for the entire family after the lifetime limit expires, although  some states may continue serving families using state funds. PRWORA  also limited the eligibility of immigrants for means-tested benefits— including TANF—to those who have been in the country legally for 5  years. While federal law generally limits TANF cash welfare to low- income families with either a child under the age of 18 (or under the age of  19 if the child is in school) or a pregnant woman, states set their own  eligibility limits and benefit levels for cash recipients.
In designing and implementing their TANF programs, states focused more  than ever before on helping welfare recipients and other low-income  parents find jobs. Many states implemented work-focused programs that  stressed moving parents quickly into jobs and structured the benefits to  allow more parents to combine welfare and work. States use TANF and  MOE funds to provide child care subsidies, education and training, and  other services, for TANF cash recipients as well as other low-income  families. In addition, TANF funds are also transferred to the Child Care  and Development Fund (CCDF) to help fund subsidized child care and to  the Social Services Block Grant (SSBG) program to help fund child  welfare agencies. According to 2006 figures, TANF spending on support  services and transfers exceeded spending on cash assistance. In fiscal year  2006, states spent approximately $10 billion on cash assistance and $11  billion on support services and transfers.
States also imposed financial consequences, or sanctions, on families that  did not comply with TANF work or other requirements as well as  implemented strategies to divert families from cash assistance. States have  implemented partial sanctions, in which benefits are reduced, and full- family sanctions, in which benefits are ended for the entire family for a  period of time or until compliance if an adult failed to meet TANF program  requirements. Often states increase the severity of the sanction based on  the number of times or the amount of time the individual is noncompliant.  As of July 2008, nearly all states had policies ending cash benefits for the  whole family or closing cases as their most severe sanction for an adult’s  noncompliance with work requirements. Many states have also  implemented programs or strategies intended to divert families from cash  assistance. One diversion strategy was to provide one-time, non-recurring  benefits instead of monthly TANF cash assistance to families who face  temporary hardships. Families who receive certain non-recurring short- term benefits are not required to participate in federally mandated work  activities, and their receipt of these benefits does not count towards the  family’s 60-month lifetime limit.
Cash assistance may be funded by the TANF block grant, MOE funds, or  state-only funds, and the source of the money determines which TANF  requirements apply to the recipient. With certain exceptions, recipients of  cash assistance funded by the TANF block grant are subject to work  participation requirements, the 60-month lifetime limit on receipt of cash  assistance, and immigration restrictions. Some states provide cash  assistance through SSP programs using MOE funds. Recipients of cash  assistance funded through SSPs are subject to TANF work participation  requirements, but not the time limits or immigrant restrictions. SSP  recipients began to be counted in the calculation of the TANF work  participation rate beginning in fiscal year 2007 as a result of TANF  reauthorization. In response to the changes made in reauthorization, some  states chose to provide cash assistance funded with the state’s own funds  that are not counted towards the MOE requirement. Recipients of  assistance from these solely state-funded programs are not subject to  TANF requirements.
section_title: TANF and Recessions
paragraphs: To help states in the event of an economic downturn, PRWORA created a  TANF contingency fund of up to $2 billion. To qualify for access to the  contingency fund, states must meet a test of economic need. In addition,  states may draw upon unused portions of their own federal TANF grants  from previous years—often referred to as carry-over or reserve funds.  Most recently, the American Recovery and Reinvestment Act of 2009  (ARRA) made an additional $5 billion available to states for fiscal years  2009 and 2010 through a new Emergency Contingency Fund. This fund  reimburses states for 80 percent of their increased expenditures for cash  assistance, provided there is also an increase in caseload; non-recurrent  short term benefits; or subsidized employment in a quarter in fiscal year  2009 or fiscal year 2010, as compared with the comparable quarter in fiscal  year 2007 or fiscal year 2008.
section_title: Poverty Measurement in the United States
paragraphs: Poverty is measured in the United States using the federal poverty  threshold, which is calculated annually by the U.S. Census Bureau. The  threshold reflects estimates of the amount of money individuals and  families of various sizes need to purchase goods and services deemed  minimally adequate based on 1960s living standards, and is adjusted each  year using the consumer price index. Persons or families having income  below this amount are, for statistical purposes, considered to be living in  poverty. The poverty threshold varies by family size and composition but  does not vary by geographic location. Extreme or deep poverty is defined  as income below 50 percent of the federal poverty threshold for a given  family. For example, for a single parent with two children the poverty  threshold in 2008 was $17,346; for that family type, the extreme poverty  threshold was $8,673. Over the years, the official Census measure of  poverty has been criticized for, among other things, not fully capturing the  value of public supports and benefits, such as SNAP or the Earned Income  Tax Credit (EITC), and for not considering health care and work-related  costs. In 1995, a National Academy of Sciences panel recommended that  changes be made to the threshold to count noncash benefits, tax credits,  and taxes; deduct certain expenses from income such as child care and  transportation; and adjust income levels according to an area’s cost of  living. In recent years, such noncash benefits and supports have  comprised larger portions of the assistance package for families with low  incomes. In response to these issues, several pieces of legislation have  been proposed to update the federal poverty measure, although none has  been passed as of the date of this report.
Poverty in the United States is also measured through the poverty  guidelines, which are published annually by HHS and are used by some  federal programs in determining the income eligibility of individuals and  families for need-based assistance. The poverty guidelines are a  simplified version of the Census poverty thresholds. Although the  guidelines reflect variations in family size, the poverty guidelines—unlike  the thresholds—do not reflect variations in the age group of the family  members. Alaska and Hawaii have higher federal poverty guidelines than  the rest of the country.
section_title: Factors Contributing to the Decline in Cash Recipients Include Declines in the Number of Eligible Families and in Eligible Families’ Participation
paragraphs: Since the 1990s, the decline in the number of families receiving cash  assistance reflects declines not only in the number of eligible families but  also in eligible families’ participation in the program in response to TANF  policies. From 1995 to 2005, the number of families who were eligible for  cash assistance fell from about 5.69 million families on average each  month under AFDC to about 5.27 million families eligible on average each  month under TANF—a decline of about 420,000 families eligible for cash  assistance overall, according to our TRIM3 analysis. Factors that  contributed to the decline in the number of families eligible for TANF cash  assistance include families’ higher incomes, which reflect TANF’s focus on  work and the strong economy of the 1990s, and changes to eligibility rules.  However, a much larger portion of the caseload decline from 1995 to 2005  reflects sharp declines in eligible families’ participation in the program.  Research suggests that changes in participation resulted from, among  other things, the dynamics of family decision-making in response to TANF  policies, including mandatory work activities, state diversion strategies,  time limits, and sanctions for non-compliance with work and other  program requirements.
subsections: section_title: Higher Employment Rates and Earnings Reduced the Number of Families Eligible for Cash Assistance More than Changes in Eligibility Rules
paragraphs: The requirement to engage in work activities in order to receive TANF  cash benefits changed the culture of cash assistance, leading more low- income families towards employment and raising their earned incomes.  During this period of declining caseloads, labor force participation  increased among single mothers, the population most affected by TANF.  According to the Bureau of Labor Statistics (BLS), the labor-force  participation of single mothers with children rose from 58 percent in 1995– the year prior to the creation of TANF—to 71 percent in 2007, with most of  this increase occurring immediately following the passage of PRWORA. In  addition, as we noted in a 2005 report, most of the parents who left cash  welfare found employment, and some families who left cash welfare were  better off than they were on welfare. However, our report also found that  earnings were typically low, and many families who left cash welfare  worked in unstable, low-wage jobs with few benefits and advancement  opportunities. A more recent study found that, in general, former TANF  recipients in three cities, especially those who had left TANF prior to 2001,  had higher employment rates and average income levels than they had  while they were receiving TANF benefits. Although former recipients  experienced some declines in their employment rates and income levels  after 2001, both measures were nevertheless at the same level or higher in  2005 than in 1999.
Wage increases—due in part to increases in the minimum wage in 1996  and 1997 as well as the 1990s expansions in the Earned Income Tax Credit  (EITC)—contributed to the decline in the number of families who were  eligible for TANF cash assistance. Wages for low-wage workers increased  from 1994 to 2000. During these 6 years, the 10th percentile of the hourly  wage rate distribution rose 12.4 percent, in contrast to declines in previous  years, while the middle—the 50th percentile—rose about 9 percent, based  on numbers in a study by the Congressional Budget Office. Expansions in  the EITC for low-income working families in effect provide a subsidy that  increases the incentive to work. A number of studies found that the EITC  increased labor-force participation among single women. According to  one study, as well as experts we interviewed, the EITC also played an  important role in the decline in the TANF caseload, because higher  incomes made families ineligible.
The strong economy of the late 1990s facilitated the movement towards  work by creating jobs and reducing unemployment, thereby reducing the  need for cash assistance. The annual U.S. unemployment rate for  workers ages 16 and over declined from 5.6 percent in 1995—before TA was created—to 4.0 percent in 2000, according to BLS data. In the same  period from 1995 to 2000, the annual unemployment rate for single women  with children fell from 16.6 percent in 1995, to 11.0 percent in 2000,  according to BLS data. Starting in 2001, the unemployment rate for singl women rose for several years, reaching 15.1 percent in 2005. During this  time, the number of TANF-eligible families increased, while the  participation rate remained stable or fell. Researchers do not agree on the  extent to which a strong economy relative to TANF work requirements  and other changes affected TANF eligibility. Nevertheless several studies  as well as experts we interviewed agreed that the strong economy played a major role in the decline, making it easier for single mothers and oth ers to  find jobs.
Changes to welfare eligibility rules that occurred under PRWORA, such as time limits for receiving cash assistance and restrictions on eligibility for  legal immigrants, also contributed to the decline in families’ eligibility for  cash assistance. However, we found that these kinds of rules changes—by  themselves—accounted for a small portion of the caseload decline. Using  the TRIM3 microsimulation model, we applied certain 2005 TANF rules to  the families estimated as eligible for cash assistance in 1995 under AFDC.
According to our TRIM3 analysis, had 2005 TANF eligibility-related rules  on time limits and immigrant restrictions been in place in 1995, 1.6 percent  fewer families overall would have been eligible for cash assistance in  1995. We obtained similar results when we applied a more  comprehensive range of eligibility-related rules to the 1995 population.  This more comprehensive analysis included—in addition to rules on time  limits and immigrant restrictions—rules for two-parent families and teen  parents; caps on benefits if a family’s size increases; and financial  eligibility rules.  These rules varied in their impact on eligibility. Some  rules contributed to increases in the number of families who would have  been eligible, while other rules contributed to reductions in eligible  families. In this analysis, had this wider range of 2005 TANF eligibility- related rules been in place in 1995, about 1 percent fewer families overall  would have been eligible for cash assistance. Overall, although these  analyses cannot definitively establish the portion of the caseload change  from 1995 to 2005 that was due solely to a particular rule change, they  suggest that the net effect was small.
Following welfare reform, there was some concern that the number of  eligible families would decline because of competition among states to  make their policies more stringent and less attractive to low-income  families—such as by lowering the maximum income a family could earn  and still be eligible for TANF. However, from 1996 to 2006, very few  states reduced their maximum cash assistance benefits for a family of  three—the money families receive if they have no other income. A 2002  review analyzed a range of state policy changes enacted by states,  including policies on earned income and assets disregards, work activities,  and sanctions. The study found little evidence that states competed to  expand restrictive policies while also decreasing policies to enhance  access. Instead, it found that states adopted both types of policies in  varying combinations, leading to substantial variation among the states.
section_title: Factors Affecting Eligible Families’ Participation Played a Larger Role in the Decline than Changes in Families’ Eligibility
paragraphs: While declines in the number of families eligible for cash assistance  accounted for some of the caseload decline, the preponderance of the  decline reflects changes in eligible families’ participation in the program.
From 1995 to 2005, the number of families eligible for cash assistance  declined by about half a million families, but the decline in the share of  eligible families participating in AFDC/TANF cash assistance has been  dramatic—from about 84 percent of eligible families receiving cash  assistance in 1995 (4.8 million) to about 40 percent of eligible families in  2005 (2.13 million). In that period, the number of eligible families who did  not participate in cash assistance climbed from an estimated 890,000 in  1995 under the AFDC entitlement program to about 3.14 million eligible  families in 2005 under the TANF cash assistance program, according to  HHS data. The change in the participation rate from 1995 to 2005  accounted for about 87 percent of the decline in cash recipients in that  period. (See fig. 1.)
Research suggests that the dynamics of family decision-making in relation  to TANF work requirements, time limits, and other policies have played a  key role in the decline in the number of families receiving cash assistance,  and experts we interviewed agreed. The decline in participation reflected  changes in families’ decisions about whether to apply for TANF cash  assistance in the first place, and, for those who receive cash assistance,  whether to continue or leave the program, as well as responses to state  policies such as sanctions and diversion.
One of the most important factors affecting whether or not eligible  families participate is the requirement to participate in work activities  under TANF, according to research as well as the experts we  interviewed. To receive cash benefits, TANF recipients must generally  participate in work activities such as job search, job skills training, and  employment for a minimum number of hours per week—with the hours  varying depending on family type and the age of the youngest child. Such  mandated work activities under TANF have been well studied, and  according to a research synthesis conducted for HHS, multiple studies  have provided compelling evidence that these work activities may cause  declines in the caseload, as families choose not to apply rather than be  expected to fulfill the work requirement or find it difficult to apply or  continue participation in the program. As we noted in an earlier report,  studies have shown that families who are eligible for TANF, including cash  recipients, often have characteristics that make employment difficult, such  as substance abuse, poor mental or physical health, disability, low  educational attainment, limited work experience, limited English  proficiency, low basic skills, or exposure to domestic violence. Many  recipients have two or more of these characteristics, making it especially  difficult for them to get and keep jobs.
Eligible families may also not participate in TANF because they view the  TANF application and eligibility determination process as too burdensome  and not worth the effort. With its focus on work and temporary assistance,  the TANF application process can include pre-application interviews and  assessments of employability. It can also include non-work-related  requirements for school attendance, meetings and cooperation with other  agencies, or fingerprinting. Some states also added questions to cash  assistance applications after 1996 on assets, living situations, or household  characteristics. According to a 2003 study of low-income families, non- applicants who visited a TANF office but chose not to apply cited as  important reasons for their decisions the effort, or “hassle” to do so, as  well as discouragement by a caseworker or poor treatment. Two  researchers we interviewed also emphasized that implementation  practices and procedures in local welfare offices affect participation.  Several legal and social service organizations that we contacted in 21  states reported that, in their view, eligible families do not participate in  TANF partly because of their difficulties with the application process.  Additional difficulties they cited included documentation requirements;  literacy and language barriers, which interfered with the completion of  application forms; the number of required trips to the TANF office; poor  treatment by caseworkers; and inconvenient business hours and/or  locations of TANF offices.
Eligible families may also not apply for TANF cash assistance—or complete  the application process—because of state policies and practices on  diversion. As part of their process for assessing eligibility for TANF cash  assistance, nearly all states also have at least one type of strategy for  diverting applicants from cash assistance, according to a 2008 report.  Diversion strategies states use include requiring applicants to complete a  job search, program orientation, or employment plan as a condition of  eligibility. Many states provide a one-time payment to families to meet  immediate needs—most often for applicants with a job or job offer. In  return for one-time cash assistance, states usually initiate a period of TANF  ineligibility that keeps families off the caseload. Some research indicates  that families who received such one-time assistance are less likely to ever  participate in TANF, even if they remain eligible for assistance.
The 60-month lifetime limit for families established under PRWORA  represented a fundamental change to cash assistance, and this time limit is  generally viewed as contributing to the decline in families receiving cash  assistance as well. Nationally, many TANF households—about 47 percent  in fiscal year 2006—are not subject to federal or state time limits because  they are “child-only” cases in which a child lives with a relative or families  in which the parent is not eligible for benefits. Time limits—which are  shorter in some states than the federal limit—make some families  ineligible for TANF, but such limits may also lead eligible families to  consider alternatives if they think they will need TANF cash benefits in the  future. According to researchers and other experts we interviewed,  families may hold off on applying for TANF—and “bank their time” for  when they may have greater needs. Research suggests that such banking  of time occurs, especially among families with young children who may be  concerned about how much time they would have left on welfare, and that  it contributes to the decline in the use of cash assistance.
An additional element is that the value of TANF cash benefits—which are  determined by states—has fallen over time, which could affect families’  participation. Our TRIM3 analysis estimates that average cash benefits  under 2005 rules were 17 percent lower than they were under 1995 rules.  This reduction occurred because cash benefit levels in many states have  not been updated or kept pace with inflation—24 states had maximum  cash benefits set at the same levels in 2006 as in 1996, and 6 states had  maximum cash benefit levels that were lower than in 1996. Several legal  and social service providers in 21 states we contacted agreed that low  benefit levels contributed to the non-participation of eligible families. In  2006, the maximum cash benefit levels among the states ranged from $170  per month to $723 per month for a family of three, while the median for  all states was $396 per month for a family of three—less than a third of the  poverty threshold for this type of family.
Another factor that may affect family decisions is that the TANF cash welfare  system is no longer the main “gateway” into other supports and services, as  AFDC was. PRWORA severed the link between cash assistance and Medicaid  benefits for health care. As a result, post-PRWORA, TANF recipient families  are not automatically eligible to receive Medicaid benefits. Independent of  TANF, low-income families who are not eligible for Medicaid can also apply  for benefits under the State Children’s Health Insurance Program, which was  established in 1997 to cover additional low-income children. Child care  subsidies were consolidated under PRWORA for low-income families, and  families do not need TANF as a gateway to these subsidies. Although SNAP  (formerly food stamps) was available to low-income families before TANF  was created, federal legislation after PRWORA created options for states to  simplify application and eligibility determination processes and increase  enrollment in SNAP. Some researchers have suggested that families may  decide to take up other supports and benefits in lieu of TANF, partly because  they do not entail requirements such as regular visits by social workers and  are not subject to time limits, among other reasons.
A related issue is that some families may be less inclined to take up TANF  cash assistance because participation in TANF could reduce their benefits  from other programs, leaving them with little, if any, net increase in family  resources. TANF cash assistance is counted as cash income by some other  assistance programs. As a result, having a higher income because of TANF  could reduce a family’s benefits from SNAP or increase the amount the  family must pay for subsidized child care or housing. Most families who  receive TANF benefits would see increases in their annual net income.  However, the greater the number of other supports a TANF family  receives, the smaller the relative increase in annual net income that they  gain from participating in TANF. According to our estimates—using  Illinois, the state with the median maximum TANF cash benefit, as an  example—if a single parent with two children received child support; tax  credits; SNAP benefits; benefits under the Special Supplemental Nutrition  Program for Women, Infants, and Children (WIC), a federal nutritional  program; and a housing subsidy in addition to having monthly earnings,  the family would have an overall monthly net income of $1,743–or an  annual net income of about $20,916. If the family also received TANF  cash benefits of $185 monthly, adjustments to the other benefits they  received would result in a $53 net increase. (See fig. 2.)
The maximum TANF benefit, which varies by state, refers to the highest amount of cash  benefits that a state pays to a family per month. Here we are referring to the median of this  cash payment across the states. these families would actually lose annual net income. Whether families  gain or lose net income may reflect the choice of supports, families’  demographics and income, relevant state rules, and level of benefits.
Finally, according to some studies as well as researchers we interviewed,  full sanctions for families’ noncompliance—those that cut off all benefits  for a period of time—are associated with declines in the number of  families receiving cash assistance, although more research is needed to  validate this association. Eligible families who receive cash assistance  but do not comply with TANF program requirements may face financial  consequences, or sanctions. Under state sanction policies, families may  lose all or part of their TANF cash benefits, and possibly other public  benefits as well, if they do not comply with TANF’s work and other  requirements. In addition to being sanctioned for noncompliance with  work activities, TANF families may also be sanctioned for failing to  comply with behavioral requirements, such as obtaining drug treatment,  cooperating with establishing paternity, or ensuring that children are  immunized and attend school. In one study, TANF recipients who reported  having been sanctioned cited missing an appointment or failing to file  required paperwork as the most common reasons for their loss of  benefits. Such work and behavioral requirements may be particularly  challenging for families with physical or mental impairments. As we  noted in an earlier GAO report, impairments were relatively common  among TANF recipients, and, while recipients with impairments may  sometimes be exempted from work requirements and time limits, they  may be at risk of having their benefits reduced or terminated through  sanctions.
Overall, according to researchers and other experts we interviewed, there  is a general consensus that these factors—including TANF policies, the  strong economy, and family decision-making processes—played a role in  contributing to the decline in the number of families receiving TANF cash  assistance. However, there is not agreement on the relative weight of each  factor. This is partly because many policy changes were implemented  around the same time period that TANF was created—such as increases in  the minimum wage, expansions of the EITC, and the de-linking of  Medicaid from cash welfare—and are difficult to isolate from each other  and from the economic climate. It is also because several of these factors  have moved in the same direction—such as TANF, with its emphasis on  work, initially being implemented during a strong economy when more  low-wage jobs were available—so it is hard to disentangle their effects.  Furthermore, as we have discussed, TANF policies—including mandatory  work activities, state diversion strategies, time limits, and sanctions for  non-compliance with work and other program requirements—can  influence participation, including family decisions about whether to apply,  remain on cash assistance, or leave.
section_title: Eligible Nonparticipating Families Generally Had Higher Incomes Than TANF Recipients, but a Portion of Eligible Nonparticipants Had Very Low Incomes
paragraphs: Although they are similar in many ways, families participating in TANF  and eligible nonparticipating families differed in their incomes, education,  and use of other public supports in 2005, according to our TRIM3  analysis. Eligible families who did not participate in TANF generally had  relatively higher incomes and higher education levels than TANF families.  However, among eligible nonparticipants, 11 percent of nonparticipating  families did not work or receive Supplemental Security Income (SSI)—a  cash assistance program for people with disabilities. This subgroup of  nonparticipating families also had very low incomes compared with other  nonparticipants, and a larger portion of them received SNAP and  subsidized housing.
subsections: section_title: Although Similar in Many Ways, Participating and Eligible Nonparticipating Families Differed in Income, Education, and Use of Other Public Supports
paragraphs: According to our TRIM3 analysis, an estimated 6.6 million families were  eligible for TANF cash assistance for at least 1 month in 2005. Of those  families, 2.66 million, or 40 percent, were estimated to have ever received  TANF cash assistance during the year. (See fig. 3.)
While all families who were eligible to receive TANF cash assistance in  2005 had low incomes, about the same proportions of both participants  and eligible nonparticipants (44 percent compared to 41 percent) were  headed by an adult without earnings, and hardships such as not having  enough to eat were common among families in poverty.
However, eligible families who did not participate in TANF cash assistance  had relatively higher incomes than TANF recipients. Overall,  nonparticipating eligible families had median incomes about $5,000 higher  than TANF families. According to our estimates, in 2005 the median annual  income for eligible nonparticipating families was roughly $15,000  compared to $9,600 annually for families receiving TANF. (See fig. 4.)
Eligible families who did not participate in the TANF cash assistance  program also had higher rates of full-time employment (44 percent)  compared to TANF cash recipients (33 percent) and lower rates of work- limiting disabilities (11 percent) compared to TANF recipients (18  percent). While approximately the same proportion of both groups—less  than 10 percent—had income from an unmarried partner, the median  amount contributed by that partner was considerably greater in the  eligible nonparticipating families.
Eligible families who did not participate in TANF generally had higher  education levels than TANF families. Eligible adults not receiving TANF  were more likely to have graduated from high school than adults receiving  TANF cash assistance (40 percent compared to 33 percent). A larger  proportion of nonparticipating families also had some education beyond  high school (36 percent compared to 32 percent).
In addition, eligible families who did not participate in TANF cash  assistance were much less likely to receive SNAP benefits than TANF cash  recipients, and eligible nonparticipants were also less likely to receive  subsidized housing and child care subsidies. According to our estimates,  59 percent of eligible families who did not participate in TANF received  SNAP in 2005 compared to 88 percent of TANF families.
Similarly, our estimates show that 13 percent of eligible families not  participating in TANF received subsidized housing compared to 22 percent  of TANF participants. The differences in the two groups’ receipt of  subsidized child care were not as large, with 8 percent of eligible families  not participating in TANF receiving child care subsidized by CCDF  compared to 11 percent of TANF participants. (See fig. 5.)
According to our TRIM3 analyses, a greater proportion of eligible  nonparticipating families were White and a smaller proportion were Black  than for TANF cash recipients, while there were not significant differences  with other racial groups. (See fig. 6.)
A greater proportion of eligible families who did not receive TANF in 2005  were married than TANF families (27 percent compared to 16 percent) and  a smaller proportion of eligible non-recipients were headed by a single  mother (50 percent compared to 61 percent), according to our analysis.  (See fig. 7.)
section_title: Among Eligible Nonparticipants in 2005, a Portion of Families Did Not Work and Had Very Low Incomes, but Received Public Supports
paragraphs: While many eligible families who did not participate in TANF had higher  incomes than families on TANF, a portion of nonparticipating families had  very low incomes. According to our estimates, of the nearly 4 million  families who were eligible for TANF cash assistance for 1 or more months  in 2005 but did not participate that year, 732,000 were neither working nor  receiving Supplemental Security Income (SSI), a cash assistance program  for people with disabilities.  This subgroup of more disadvantaged  nonparticipants accounted for 11 percent of all families who were eligible  for TANF cash assistance in 2005, according to our TRIM3 analysis. (See  fig. 8.)
This subgroup of nonparticipating eligible families also had very low  incomes. The median annual income for eligible families who were not  working or receiving TANF or SSI was $7,020—compared to $16,316 for  other eligible nonparticipating families—an amount equal to about 45  percent of the federal poverty threshold for a family consisting of one  adult and two children. The median income for this subgroup of eligible  nonparticipants was also lower than the median income for TANF cash  recipients.
Twelve percent of this subgroup of families was also headed by a who reported having a work-limiting disability—similar to other  nonparticipants. Families in this subgroup also had low levels of  education, with 70 percent having a high school educa tion or less  compared with 63 percent for other nonparticipants.
section_title: Increased TANF Participation Would Reduce the Number of Children in Extreme Poverty, but Would Not Significantly Change the Number in Poverty
subsections: section_title: Fewer Children Would Be in Extreme Poverty If TANF Participation Increased
paragraphs: Increased TANF participation would reduce the number of children in  extreme poverty—those below half the poverty threshold—according to  our analyses. According to our TRIM3 analysis, an estimated 4.8 million  children were in extreme poverty for at least one month in 2005. If the  percent of eligible families participating in TANF in 2005 was 84 percent— the rate of participation in AFDC in 1995—rather than about 40 percent— 800,000 fewer children would have been in extreme poverty. This higher  participation would reduce the share of children in extreme poverty by  close to 17 percent because the gain in income from TANF benefits would  raise some families’ incomes above the extreme poverty threshold. The  median income for families with children in extreme poverty in 2005 was  $5,400. If TANF participation were higher, families in extreme poverty  would have median incomes of $5,964—10 percent higher on average.  For those families who would gain TANF cash assistance at the 1995  participation rate, the average increase in TANF annual income is  estimated to be $2,554 per family.
According to our estimates—using Illinois, the state with the median  maximum TANF benefit, as an example—a TANF-eligible family in  extreme poverty, consisting of a working single parent with two children  that applied for and received cash assistance, would gain enough in TANF  benefits to be just above the extreme poverty threshold. In this scenario,  this family has estimated monthly earnings of $346, which is roughly half  the median for families participating in TANF. Before receiving TANF  cash assistance, this family has an estimated income of $446 per month,  including child support, which would provide an income equal to 34  percent of the poverty threshold. After receiving TANF, this family’s  income would increase to $676 per month–equal to 52 percent of poverty.  A family with one child would similarly benefit. (See fig. 10.)
However, some families would remain in extreme poverty even with TANF  benefits—those with no earned income or with low earned incomes who  receive the maximum cash benefit in their state. For example, in Illinois, a  single parent with two children who had no earned income would receive  $396 per month in TANF benefits—an amount that would be $260 below  the extreme poverty threshold for that type of family.
section_title: If More Eligible Families Participated in TANF, the Number of Children in Poverty Would Not Significantly Change
paragraphs: Although the median income of eligible families would rise if TANF  participation increased, neither the number of children in poverty nor the  poverty rate would significantly change if families who were eligible for  TANF cash assistance in 2005 participated at the higher 1995 rate. Nearly  all of the estimated 3.3 million families in our TRIM3 analysis who would  gain TANF benefits at the higher 1995 participation rate would experience  an increase in their annual net income. However, these benefits would not  be enough to lift a significant portion of them above the poverty  threshold.
One reason for this is that many children in poverty are not eligible for  TANF, since the majority of states set their TANF eligibility standards at  less than half of the federal poverty guidelines. States have the flexibility  to determine how high or low to set their eligibility standards relative to  the federal poverty guidelines. For example, in Alabama, a family of three  must have earnings below $269 per month to be eligible for TANF cash  assistance—an income that represents about 19 percent of the poverty  guideline for this family size in 2006. Alabama has the lowest income  eligibility threshold. In 2006, 56 percent of children in poverty lived in  states that set their eligibility standards for TANF cash assistance below  half of the federal poverty guidelines. Because of this, increasing TANF  participation would not affect child poverty among children in states with  very low eligibility standards.
Another reason is that TANF benefits are typically too low to raise  children in poverty above the federal poverty threshold. These benefits  range from $170 per month in Mississippi to $723 per month in California  for a family of three. The median income for all families in poverty in  2005 was approximately $10,500. If TANF participation were higher,  families in poverty would have median incomes of about $11,100. This  income is below the federal poverty threshold for a family of three.  According to our estimates, TANF-eligible families consisting of one  working adult and one or two children in Illinois—the state that has the  median maximum TANF benefit—would still be in poverty after receiving  TANF cash assistance. In this example, prior to participating in TANF,  the income of the family with one child would fall $390 short of the federal  poverty threshold and the income of the family with two children would  fall $579 below poverty. After receiving TANF cash assistance, the  incomes of both types of families would rise, but not enough to reach the  poverty threshold. (See fig. 11.)
Finally, higher TANF participation would not significantly affect child  poverty because some TANF families already have incomes above the  federal poverty threshold. As of 2005, seven states have policies that allow  a family of three with an income just above the federal poverty threshold  to retain their TANF eligibility for at least 2 months. These states are  Alaska, California, Connecticut, Delaware, Hawaii, Texas, and Virginia. In  these states higher TANF participation could result in more families above  poverty receiving benefits, which would not result in a reduction of the  poverty rate. Twenty-eight percent of all children in poverty and 35  percent of children receiving cash assistance lived in these states in 2005.
section_title: In the Current Recession, Changes in Cash Assistance Caseloads Varied Widely in States We Surveyed While Few States Reduced Spending for Family and/or Work Supports
subsections: section_title: TANF and Solely State- Funded Cash Assistance Caseloads Increased to Varying Degrees in the Majority of States We Surveyed
paragraphs: Between June 2008—6 months after the start of the current recession— and June 2009, the number of families receiving TANF cash assistance  increased in 12 of the 21 states we reviewed, decreased in 6 states and  remained relatively unchanged in 3 states, according to state-provided  data. The magnitude of these caseload changes, however, varied widely  across states. For instance, over the same time period, the number of  families receiving TANF cash assistance increased by 22 percent in  Nevada and decreased by 9 percent in Texas. (See fig. 12.)
During the current recession, more of the states we surveyed saw  increases in the number of two-parent families receiving cash assistance  than in the number of single-parent families or child-only cases. Between  June 2008 and June 2009, the number of two-parent families receiving cash  assistance increased in 17 of the states we surveyed, while the number of  single-parent families increased in 15 states and the number of child-only  cases increased in 12 states. The median percent change in the number of  two-parent families receiving cash assistance was an increase of 27  percent—far more than for other types of eligible families. While the  number of two-parent families as a portion of all families receiving  assistance was small, the increase in this population of cash assistance  recipients is notable because they are the least common type of recipient  group. Further, several state officials and representatives of social service  organizations noted the increase in two-parent families associated with the  current recession, which, according to unemployment data, has had a  greater impact on men than women and might result in the need for two- parent families to seek assistance.
While many of these two-parent families received assistance through their  state’s TANF program, about 20 percent of these families received  assistance through their state’s solely state-funded programs. Most of  these programs also grew to varying degrees during the recession. Of the  states we contacted, 13 maintained solely state-funded programs during  the time period we examined and 9 of these experienced caseload  increases between June 2008 and June 2009. These increases ranged from  a 2 percent increase in the District of Columbia to a 10-fold increase in  Colorado. Some state officials we surveyed explained that their  assessment of their ability to meet federal work participation rates  determined which families would be served through the solely state- funded program. Specifically, officials in the 13 states with solely state- funded programs explained that these programs, in whole or part, served  two-parent families because the state was concerned that it would not be  able to meet the federally established 90 percent work participation rate  for two-parent families. In seven of the states with a solely state-funded  program, the state’s entire two-parent family caseload was served through  this program. In a few states, solely state-funded programs also served  families with disabilities who similarly may have been unable to meet  mandatory work participation rates, particularly requirements for a  minimum number of hours in a work activity, according to state officials.
In order to understand more fully the extent to which families are  receiving cash assistance in the current recession, including those families  who are in solely state-funded programs in caseloads provides a more  comprehensive picture of these changes. Because these programs are  funded only by states and are not counted toward state maintenance-of- effort requirements, HHS lacks authority to require that their caseload  data be reported to HHS, according to HHS officials. In some states,  including families from these solely state-funded programs in the state’s  total cash assistance caseload provided a more accurate picture of  increases or decreases in states’ programs in the current recession. For  instance, in Colorado, the number of families receiving TANF cash  assistance increased by 15 percent. However, the solely state-funded  program experienced a large amount of growth, and overall the state’s  cash assistance caseload increased by more than 33 percent. In Rhode  Island, the number of families receiving TANF cash assistance decreased  by 10 percent. However, in October 2008 the state discontinued benefits to  children it had been serving through the solely state-funded program  whose parents had received 5 years of assistance, so overall the state’s  cash assistance caseload decreased by more than 20 percent. In other  states, including the solely state-funded caseload reveals a more modest  degree of change than the TANF caseload might indicate. For example,  New Hampshire eliminated part of its solely state-funded program due to  budget concerns and moved families receiving benefits into the TANF  program. As a result, the number of families receiving TANF cash  assistance increased by almost 38 percent, while overall the state’s cash  assistance caseload increased by a substantial, but more modest, 23  percent. (See fig. 13.)
In the time period we examined, there was no clear association between  the change in the number of families receiving cash assistance in a state  and either the unemployment rate or the change in unemployment rate in  that state. (See table 1.) For instance, Illinois, the District of Columbia,  Florida, and Georgia all had unemployment rates of between 10 and 11  percent in June 2009. However, caseloads increased 4 percentage points in  Illinois, 8 percentage points in the District of Columbia, and 14 percentage  points in Florida, and decreased 3 percentage points in Georgia, between  June 2008 and June 2009. Similarly, both New Jersey and Washington  experienced a 4 percentage point increase in unemployment rates between  June 2008 and June 2009. However, caseloads decreased 3 percentage  points in New Jersey and increased 18 percentage points in Washington  over the same period of time. This does not mean that there is no  relationship between unemployment and cash assistance caseloads, but  rather that unemployment is one of many factors—including the state’s  eligibility and asset limits, the state’s application process, and other state- specific program characteristics—that may affect a state’s caseload.
Since June 2009, state and local fiscal conditions have continued to  deteriorate, and the effect of the changes in the economic climate on  TANF and solely state-funded cash assistance programs is unknown. For  example, the impact of expiring extensions of unemployment insurance  (UI) on state caseloads is hard to predict. Officials from eight states  believed that the number of families receiving cash assistance in their  states had not increased, or had not increased as much as might have been  expected, because families were still collecting UI benefits. If jobs are  still not available when UI benefits end, these families may turn to TANF  for cash assistance. However, two experts we interviewed questioned the  extent to which UI has lessened or delayed the need for cash assistance.  Eligibility for UI is generally conditional on meeting certain state-imposed  qualifications, including having a minimum amount of wages and  employment over a defined period of time as well as having become  unemployed for good cause under state law. According to two experts we  interviewed, many TANF-eligible single-mothers would not likely meet the  criteria for receipt. Still, UI benefit extensions may be delaying the need  for cash assistance for some two–parent families that do qualify for UI  benefits.
section_title: Few States We Surveyed Reduced Spending on Family and Work Supports during the Current Recession to Offset Increased Spending on Cash Assistance
paragraphs: Few states we surveyed reported that they had reduced TANF block grant  and MOE spending for family and work supports, such as child care and  subsidized employment programs, to offset increased expenditures for  growth in their cash assistance caseloads. When a state’s spending on  cash assistance increases, it has several options to address this need for  additional resources. The state can use reserve funds, if available, to  defray costs; use state funds to augment the TANF program; access the  TANF contingency fund; access the Emergency Contingency Fund created  under ARRA; shift resources from work support programs; or cut services.  In a previous GAO report, we found that when cash assistance caseloads  and related spending increased in the states we reviewed, there was an  associated contraction in the spending for other forms of aid and  services. However, we did not observe this trend in the time period we  explored. According to state officials, 11 of the 21 states we surveyed  increased spending on cash assistance between June 2008 and June 2009.  Of these 11 states, 7 either maintained or increased the amount of TANF- related spending for family and work supports—including child-care  subsidies, transportation subsidies, subsidized employment, CCDF, and  SSBG. The remaining four states reduced spending for family and/or work  supports to offset the cost of increased spending on cash assistance.  However, in three of the seven states that did not make cuts to family  and/or work supports, officials offered that they expected there would be  cuts in TANF-related spending for these services in the near future  because of state budget and resource constraints associated with their  growing caseloads. (See table 2.)
States that increased spending on cash assistance while maintaining or  increasing TANF-related spending for family and/or work supports did so  by spending reserve funds, accessing the TANF Contingency Fund,  accessing the ARRA Emergency Contingency Fund, or a combination of  the three. (See table 3.) Under PRWORA, states can save portions of their  TANF block grant to use in the future for cash assistance to families.  According to state officials, four of the seven states accessed these reserve  or carry-over funds accumulated from previous years to increase cash  assistance expenditures and maintain or increase expenditures on the  family supports. Officials in one of these states, though, told us that  projections show that it will have expended all of its reserve funds within  the next 2 years.
Until recently, states may also have been eligible to use the TANF  Contingency Fund, but these funds are now depleted. Of the seven states  in our survey that increased spending on cash assistance while  maintaining TANF-related spending on family and work supports, all seven  were eligible to apply for access to the Contingency Fund, according to  HHS, and in fiscal year 2009, two of these states had drawn money from  this fund. At the end of the fiscal year in September 2009, there was about  $212 million left in the contingency fund. For the first quarter of the 2010  fiscal year, New York had applied for more than half the remaining sum,  according to state officials. Anticipating the exhaustion of the Contingency  Fund, officials from one state we surveyed questioned the state’s ability to  continue funding their TANF programs at current levels. According to HHS  officials, final payments from the TANF Contingency Fund were  distributed in December 2009.
In addition, states used or planned to use money drawn from the  Emergency Contingency Fund created by ARRA to allow them to increase  spending on cash assistance without cutting TANF-related spending for  family and work supports. According to HHS data, as of October 2009, all  21 of the states we surveyed applied for money from the Emergency  Contingency Fund, including all 7 of the states that increased spending on  cash assistance but did not reduce TANF-related spending for family and  work supports. Most states we surveyed that had applied for Emergency  Contingency Funds plan to use them to cover the growing number of  families receiving cash assistance, according to state officials. In addition,  officials in some states told us that these funds may allow them to  continue providing family and work supports at the current level and  expand subsidized employment programs. However, one state official  explained that caseloads and spending could increase or remain high  beyond fiscal year 2010, the time when Emergency Contingency Funds will  no longer be available to supplement funding.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to HHS for its review, and a copy of the  agency’s written response is in appendix II. In its comments, HHS said that  the report was informative and did not disagree with our findings. HHS  noted that the report provided useful insights into a range of factors that  help account for declines in TANF participation, the extent to which  increased participation in TANF among eligible families could reduce the  severity of poverty, and the challenges facing states as they respond to  increased need during the economic downturn. The agency also noted  several useful areas for additional work, for example, on the extent and  nature of disability among eligible nonparticipants and how participation  may change over the course of the recession. With regard to our finding on  the characteristics of participants and nonparticipants, HHS suggested  that more could be learned by examining subgroups of nonparticipants  rather than examining nonparticipants broadly as a group. The agency also  suggested that we discuss our findings about nonparticipants in the  context of the research literature on this subject. Our study was designed  to describe the characteristics of both participants and eligible  nonparticipants, as requested, and we further identified the characteristics  of one important subgroup of nonparticipating eligible families. While we  agree that further analyses of subgroups of nonparticipants could be  useful, conducting such analyses was beyond the scope of our  engagement. Finally, HHS also provided technical comments on the draft,  and in response to these comments, we made changes where appropriate.
We also provided the draft report to external reviewers with expertise in  welfare reform and TANF and incorporated their comments as appropriate.
As agreed with your office, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days after its  issue date. At that time, we will send copies of this report to the Secretary  of Health and Human Services, appropriate congressional committees, and  other interested parties. The report is also available at no charge on the  GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, 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 report. Key contributors to this report are listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: We designed our study to provide information on (1) the factors that  contributed to the decline in families receiving TANF cash assistance since  the 1990s, (2) how the characteristics of eligible families who participate  in TANF compare to eligible families who do not receive TANF cash  assistance, (3) how the participation of eligible families in TANF affects  the number of children in extreme poverty and poverty, and (4) the  changes states are experiencing in the number of families receiving cash  assistance in the current recession and what changes, if any, states have  made in their TANF–related spending to respond to any increases.
Overall, to address these objectives, we contracted with the Urban  Institute for analyses using the Transfer Income Model, version 3—a   microsimulation model known as TRIM3—which simulates major  governmental tax, transfer, and health programs, including TANF;  reviewed literature and relevant federal laws and regulations; interviewed  TANF experts and officials at HHS; interviewed state TANF officials in 21  selected states and obtained state TANF data; and contacted state-based  social services organizations in the selected states.
We conducted our work from November 2008 to February 2010 in  accordance with all sections of GAO’s Quality Assurance Framework that  are relevant to our objectives. The framework requires that we plan and  perform the engagement to obtain sufficient and appropriate evidence to  meet our stated objectives and to discuss any limitations in our work. We  believe that the information and data obtained, and the analysis  conducted, provide a reasonable basis for any findings and conclusions in  this product.
subsections: section_title: Analyses Using the Transfer Income Model, Version 3 (TRIM3)
paragraphs: To identify factors contributing to the caseload decline (for question 1),  compare the characteristics of TANF participants and non-participants  (for question 2), and analyze the impact of TANF participation on child  poverty and extreme poverty (for question 3), we contracted with the  Urban Institute for analyses—using the Transfer Income Model, version 3,  known as TRIM3. TRIM3 is maintained and developed at the Urban  Institute under primary funding from HHS, Office of the Assistant  Secretary for Planning and Evaluation. TRIM3 simulates major  governmental tax, transfer, and health programs, including TANF. TRIM3  can be used to estimate the effect of rule changes, such as restrictions on  eligibility for legal immigrants, on the number of eligible families; compare  the income and other characteristics of participating and nonparticipating  families; and estimate the effect of higher TANF participation rates on  child poverty and extreme child poverty, with incomes below 50 percent  of the federal poverty level. Using TRIM3 for these analyses required our  input on assumptions and/or interpretations about economic behavior and  about the rules governing federal programs. Therefore, the conclusions  presented in this report are attributable only to GAO.
The TRIM3 microsimulation model was used to estimate the number of  families who would be eligible for TANF and the amount of their potential  benefits. The model simulates the process a caseworker would go through  to determine eligibility based on each family’s state of residence,  household composition, income, and other factors. TRIM3 relies on the  Annual Social and Economic Supplement (ASEC) to the Current  Population Survey (CPS), as well as information from the Welfare Rules  Database, to simulate eligibility based on state specific program rules and  information on income and other eligibility criteria.
The model was also used to estimate the number of families who  participate in the TANF program. While the ASEC includes information on  whether a family received TANF, the benefit is substantially under- reported. Among TANF-eligible families who did not report receipt of  TANF, a family’s likelihood of TANF participation is estimated based on  the family’s demographic characteristics and the level of potential benefit.  Simulated participation decisions are aligned to bring the simulated  caseload acceptably close to the actual caseload in overall size and by key  characteristics. TRIM3 does not model certain aspects of program  eligibility, such as sanctions from failing to comply with work rules or  child support rules, diversion strategies, or adherence to behavioral  requirements such as school attendance and immunizations. The fact that  TRIM3 does not model sanctions means that the model may overestimate  eligibility and underestimate participation rates.
In this study, we used both “baseline” simulations and “alternative”  simulations of TANF cash assistance. TRIM3 baseline simulations are  simulations that apply the actual policies that were in place in a particular  year to the CPS survey data for that year. In a baseline simulation, the  initially-estimated probabilities of participation are modified in order to  bring the size and characteristics of the simulated caseload sufficiently  close to the size and characteristics of the actual caseload in that year. We  used TRIM3 baseline estimates for TANF cash assistance for our analyses  of the characteristics of participants and nonparticipants in 2005, and as  the point of comparison for the alternative simulations—using 1995  participation rates—for our analyses of the effect of TANF 2005 rules on  the 1995 AFDC population and our analyses of TANF participation on  child poverty.
Our TRIM3 analyses are based on data from 2005 because it was the most  recent publicly available data when we conducted our work. We chose  1995 as a comparison year partly because it was the year prior to the  creation of TANF under PRWORA. Researchers at the Urban Institute also  advised us that 1996 data was not likely to be reliable because of data  system transitions from the prior program, AFDC, to TANF.  Furthermore,  Urban Institute researchers told us they could not use 1996 data to analyze  the impact of PRWORA rules on families’ eligibility because non-citizens’  legal status (e.g., whether legal permanent resident, undocumented,  refugee, or temporary resident) had not been imputed for that year’s data.  Given these technical limitations, we agreed that 1995 data was best and  that it also provided a 10-year spread for comparison.
To provide insight into the impact of the immigrant restrictions, time  limits, and other PRWORA rules on TANF eligibility, we applied the  PRWORA changes to the 1995 caseload data, assuming that the rules had  been imposed 10 years before they were actually imposed. In cases of  state options with regard to policies, states were assumed to make the  same choices as they made in 2005. It is important to note that this type of  analysis cannot definitively establish the portion of caseload change from  1995 to 2005 that is due solely to a particular rules change, due to the  potential inter-relationships between rules, population characteristics, and  participation behavior.
To compare the characteristics of eligible families who participate in  TANF to eligible families who do not receive TANF cash assistance, we  analyzed differences in demographic characteristics, such as race, age,  family type; income differences, such as median income and poverty  status; and the receipt of other public supports such as SNAP, subsidized  child care, or subsidized housing. For this analysis we used 2005 data, the  most recent available. Estimates in this analysis are based on annual data,  so as to capture longer term characteristics of these families, and the  distribution of the annual caseload by some characteristics could be  different from the distribution of the monthly-snapshot caseload. When  looking at income differences between groups, we compared all gross  cash income, such as earnings and child support, and excluded means- tested benefits such as TANF or Supplemental Security Income (SSI), a  cash assistance program for low-income people who are elderly or who  have disabilities.  We also examined the characteristics of a subgroup of  eligible nonparticipants who during the year were neither working nor  receiving SSI.  In comparing the characteristics of participants and  nonparticipants, differences are statistically significant at the 95 percent  confidence level unless otherwise noted.
To estimate how the participation of eligible families in TANF affects the  number of children in extreme poverty and poverty, we imposed the 1995  AFDC participation rate of 84 percent on the 2005 population. To do this,  we started from each family’s probability of participation as produced by  TRIM3’s baseline simulation—the result of the statistical equation,  adjusted by adjustment factors established during the baseline alignment  process—but we applied an additional across-the-board adjustment factor  to increase each family’s probability of participation. This has the effect of  bringing in the “next most likely” families until the desired participation  rate is reached. Some families are technically eligible for TANF but are  financially better off without taking TANF, due to the fact that the amount  of child support that would be retained by the state exceeds the TANF  benefit they would receive. These families were simulated to remain  nonparticipants; all the new TANF participants were selected from  families who would receive more in TANF than they would lose in child  support income.
To estimate the impact of TANF receipt on examples of families in  extreme poverty and poverty, we chose Illinois because it is the state with  the median TANF benefit. Earnings for families in poverty were set at $632  per month. This is the median earnings of TANF families containing one  adult and two children, according to our analysis of 2005 participants. It is  also the amount one would earn by working 18 hours per week at the  Illinois minimum wage of $8 per hour. Earnings for families in extreme  poverty were set at $346, based on the assumption that families in extreme  poverty work 10 hours a week at the Illinois minimum wage of $8 per  hour, and about half of median earnings of TANF families containing one  adult and two children.
We assessed the reliability of the TRIM3 modeling procedures by  reviewing extensive documentation on the TRIM3 model and input data  sources, having several conversations with staff from the Urban Institute  who were responsible for the work provided under our contract, reviewing  the Urban Institute’s internal quality control procedures, and having  extensive discussions about the underlying assumptions used in specifying  the models. We identified data limitations in the CPS that we reconciled  with the Urban Institute through meetings and acquiring additional  documentation. In addition to the estimates presented in the report, the  Urban Institute calculated standard errors and performed statistical tests  of significance for all estimates and pairwise comparisons. We verified  that those calculations were correct by reviewing the CPS technical  documentation. We evaluated other TRIM3 estimates, particularly those  illustrating hypothetical scenarios, on the basis of substantive significance  rather than statistical significance. To this end, we considered the size and  direction of the effect rather than whether the statistic differed from zero  to assess the validity of the estimate. We determined that none of the data  limitations or modeling assumptions affected or compromised the analysis  for this report and the data are considered to be sufficiently reliable for  our purposes.
section_title: Review of Literature and Legislation
paragraphs: To analyze the factors that contributed to the decline in families receiving  TANF cash assistance since the 1990s, we conducted a review of relevant  literature by researchers by obtaining recommendations for studies from  internal GAO and external TANF researchers and policy experts, including  HHS officials; searching various databases for peer-reviewed journal  articles and other publications; and reviewing policy and research  organization websites for relevant studies. We used the relevant research  to analyze the factors researchers have identified as contributing to the  declining number of families receiving cash assistance. At least two social  scientists or statisticians with specialized training in the evaluation of  research methodology reviewed each study to assess its methodology. Our  conclusions about the factors contributing to the decline in the number of  cash recipients are based, in part, on our assessment of the evidence  presented in these studies. We also reviewed relevant federal laws and  regulations. We did not conduct a legal analysis of state laws of state cash  assistance programs for this report. As noted elsewhere, references to  state laws or rules were based on the Welfare Rules Database, which is  maintained at the Urban Institute under HHS/ACF funding and is used by  the TRIM3 model in its simulations.
section_title: Interviews with Researchers and Policy Analysts
paragraphs: We also interviewed researchers and policy analysts at academic centers  and other organizations to obtain their perspectives on factors that  contributed to the decline in cash assistance caseloads since the 1990s and  any information they may have had on state experiences during the  current recession. In selecting experts for our interviews, we sought  researchers and organizations who have conducted work on welfare  issues and who could provide us with a range of perspectives. We  interviewed TANF researchers and officials at the Department of Health  and Human Services (HHS) as well as researchers and policy analysts at  the American Enterprise Institute for Public Policy Research, The  Brookings Institution, Center on Budget and Policy Priorities, Center for  Law and Social Policy, Congressional Research Service, Johns Hopkins  University, Mathematica Policy Research, Inc., the Urban Institute, and the  University of Michigan (National Poverty Center). We also interviewed  officials at the American Public Human Services Association, the National  Conference of State Legislatures, and the National Governors Association.
section_title: Interviews with State Officials
paragraphs: To determine if and how the number of families receiving cash assistance  and the use of TANF-related funds have changed during the current  recession, we conducted semi-structured telephone interviews with TANF  officials in 21 states and obtained data on their TANF programs, and  where applicable, SSPs and solely state-funded programs. In addition, we  reviewed TANF data on the number of families receiving cash assistance  and other administrative data available through HHS. We pre-tested our  questions in California, Iowa, New York, and Rhode Island. In our  interviews, we asked questions about changes in the number of families  receiving cash assistance, in the uses of the TANF block grant and MOE  funds, and in other polices that might affect the number of applicants or  recipients. We also asked about state’s plans for use of ARRA stimulus  funding.
The 21 states we selected to interview represent a range of child poverty  rates, unemployment rates, cash assistance caseloads, approaches to  sanctions and monthly earnings limits, and geographic diversity.  Collectively these states represent more than half the families receiving  TANF cash assistance nationally. Our analysis focused on the period  between June 2008 and June 2009, beginning 6 months after the official  start of the current recession. The 21 states included in our analysis were:  Arizona, California, Colorado, Florida, Georgia, Illinois, Iowa,  Massachusetts, Michigan, Mississippi, New Hampshire, New Jersey, New  York, Nevada, North Carolina, Ohio, Pennsylvania, Rhode Island, Texas,  Washington, and the District of Columbia.
Analysis of Caseload Data  We collected data on the number of families receiving cash assistance  from June 2008 and June 2009 for the 21 states we selected. This includes  federal TANF data as well as data from separate state programs and solely  state-funded programs for states that had such programs. We analyzed  these data for changes in the number of families receiving cash assistance  as well as the types of families receiving cash assistance.
We assessed the reliability of data obtained through our 21 state agency  surveys by asking questions on the survey that helped us gauge the  agency’s processes and procedures for collecting and maintaining data of  reasonable quality and reliability. We asked questions pertaining to data  entry procedures, training, edit checks, written documentation of  procedures, supervisory or other internal and external reviews of data,  and known limitations of the data. The answers were analyzed for  concerns and states were re-contacted as necessary to gain clarity about  the concern and assess the degree to which the concern would limit data  quality. We determined that none of these concerns or limitations affected  or compromised the data submitted for this review and the data are  considered to be sufficiently reliable for our purposes.
section_title: State-Based Social Service Organizations
paragraphs: To understand why eligible families may not participate in TANF and to  learn more about families’ experiences with the TANF application process,  we contacted state-level social service and other organizations in selected  states regarding state TANF practices and policies. To identify state-level  organizations that could provide the perspective of families on the  experience of applying for and receiving cash aid, we requested the names  and contact information from TANF officials that we interviewed in 21  states. In these interviews, we asked officials to identify state-level  organizations in their states that could address issues such as application  processes, benefit levels, and sanctions as they affect families. In some  cases, these social services groups referred us to alternative organizations  for our review, and in those cases we contacted these additional  organizations. In one case, we identified and contacted a state-level  service provider organization for a state that did not provide us with a  contact initially. We e-mailed questions to the organizations we identified  in these ways to obtain their perspective on possible reasons why eligible  families would not participate in TANF, the ability of families to navigate  the application process in their state, and other issues. We obtained  written responses to these questions from state organizations and used  them in this report solely for illustrative purposes.
section_title: Appendix II: Comments from the Department of Health and Human Services
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: Contact
section_title: Acknowledgments
paragraphs: Heather McCallum Hahn, Assistant Director; Kathryn A. Larin, Assistant  Director; and Deborah A. Signer, Analyst-in-Charge, managed this  assignment and made significant contributions to all aspects of this report.  Hedieh Rahmanou Fusfield and Jessica R. Wintfeld, Analysts, also made  important contributions to this report. Katya Melkote assisted with data  collection and analysis, and Susannah Compton and James Bennett  provided writing and graphics assistance. In addition, Susan Offutt, Chief  Economist, and Max Sawicky provided assistance with economic aspects  of this study; Shana B. Wallace and Monique B. Williams provided design  and methodological assistance; Russell C. Burnett provided additional  methodological assistance; and Alexander G. Galuten provided legal  assistance.
section_title: Related GAO Reports
paragraphs: Poverty in America: Consequences for Individuals and the Economy.  GAO-07-343T. Washington, D.C.: January 24, 2007.
Welfare Reform: Better Information Needed to Understand Trends in  States’ Uses of the TANF Block Grant. GAO-06-414. Washington, D.C.:  March 3, 2006.
Welfare Reform: More Information Needed to Assess Promising Strategies  to Increase Parents’ Incomes. GAO-06-108. Washington, D.C.: December 2,  2005.
Welfare Reform: HHS Should Exercise Oversight to Help Ensure TANF  Work Participation Is Measured Consistently across States. GAO-05-821.  Washington, D.C.: August 19, 2005.
Means-Tested Programs: Information on Program Access Can Be an  Important Management Tool. GAO-05-221. Washington, D.C.: April 11,  2005.
TANF AND SSI: Opportunities Exist to Help People with Impairments  Become More Self-Sufficient. GAO-04-878. Washington, D.C.: September  15, 2004.
Welfare Reform: Information on Changing Labor Market and State Fiscal  Conditions. GAO-03-977. Washington, D.C.: July 15, 2003.
Welfare Reform: Former TANF Recipients with Impairments Less Likely to  Be Employed and More Likely to Receive Federal Supports. GAO-03-210.  Washington, D.C.: December 6, 2002.
Welfare Reform: Outcomes for TANF Recipients with Impairments.  GAO-02-884. Washington, D.C.: July 8, 2002.
Welfare Reform: With TANF Flexibility, States Vary in How They  Implement Work Requirements and Time Limits. GAO-02-770. Washington,  D.C.: July 5, 2002.
Welfare Reform: States Provide TANF-Funded Work Support Services to  Many Low-Income Families Who Do Not Receive Cash Assistance.  GAO-02-615T. Washington, D.C.: April 10, 2002.
Welfare Reform: States Are Using TANF Flexibility to Adapt Work  Requirements and Time Limits to Meet State and Local Needs.  GAO-02-501T. Washington, D.C.: March 7, 2002.
Welfare Reform: Progress in Meeting Work-Focused TANF Goals.  GAO-01-522T. Washington, D.C.: March 15, 2001.
Welfare Reform: Moving Hard-to-Employ Recipients into the Workforce.  GAO-01-368. Washington, D.C.: March 15, 2001.
Unemployment Insurance: Role as Safety Net for Low-Wage Workers Is  Limited. GAO-01-181. Washington, D.C.: December 29, 2000.