The number of families receiving welfare cash assistance fell significantly after the creation of TANF, decreasing by almost 50 percent from a monthly average of 3.2 million families in fiscal year 1997 to a low of 1.7 million families in fiscal year 2008 (see fig. 1). Several factors likely contributed to this caseload decline, such as the strong economy of the 1990s, declines in the number of eligible families participating, concurrent policy changes, and state implementation of TANF requirements, including those related to work participation. However, since fiscal year 2008 and the beginning of the recent economic recession, the number of families receiving TANF cash assistance has increased by 13 percent to a monthly average of 1.9 million families in fiscal year 2010. Comparing the types of families that receive TANF cash assistance, the number of two-parent families increased at a faster rate than single-parent families or child-only cases, in which only the children receive benefits, during this time period. The number of child-only cases has increased slightly from fiscal year 2000 to fiscal year 2008; however, these cases make up an increasing proportion of the total number of families receiving cash assistance because TANF cases with adults in the assistance unit have decreased substantially. Specifically, the number of TANF child-only cases increased from approximately 772,000 cases to approximately 815,000 cases, but the number of families with adults receiving assistance decreased from about 1.5 million to about 800,000 cases (fig. 2). As a result, the share of child-only cases in the overall TANF caseload increased from about 35 percent to about half. There are four main categories of “child-only” cases in which the caregiver (a parent or non-parent) does not receive TANF benefits: (1) the parent is receiving Supplemental Security Income; (2) the parent is a noncitizen or a recent legal immigrant; (3) the child is living with a non-parent caregiver, often a relative; and (4) the parent has been sanctioned and removed from the assistance unit for failing to comply with program requirements, and the family’s benefit has been correspondingly reduced. Families receiving child-only assistance are generally not subject to work requirements. Between fiscal years 2000 and 2008, increases in two of the categories were statistically significant: children living with parents who were ineligible because they received SSI benefits and children living with parents who were ineligible because of their immigration status. Cases in which the parents were ineligible due to immigration status almost doubled and increased from 11 percent of the TANF child-only caseload in fiscal year 2000 to 19 percent in fiscal year 2008 (see fig. 3). This increase of 8 percentage points is statistically significant and represents an increase from about 83,000 in fiscal year 2000 to over 155,000 in fiscal year 2008, with the greatest increase occurring in California. However, in some cases, the relationship between the child and the adult living in the family is not known. The number of these cases decreased significantly over the same period, and it is possible that some of the increase in cases with ineligible parents due to SSI receipt or immigration status resulted from better identification of previously unknown caregivers. However, given available data, we were unable to determine how much of the increase was due to better reporting versus an actual increase in the number of cases. Both the composition of the overall TANF caseload, as well as the composition of the TANF child-only caseload, varies by state. For example, in December 2010, 10 percent of TANF cases in Idaho were single-parent families, compared to almost 80 percent in Missouri. In both of these states, child-only cases comprised the rest of their TANF caseloads. Concerning the variation in child-only cases by state, almost 60 percent of TANF child-only cases in Tennessee included children living with non-parent caregivers, compared to 31 percent in Texas, according to state officials. As the overall number of families receiving TANF cash assistance has declined, so has state spending of TANF funds on cash assistance. TANF expenditures for cash assistance declined from about 73 percent of all expenditures in fiscal year 1997 to 30 percent in fiscal year 2009 (see fig. 4) as states shifted spending to purposes other than cash assistance, which is allowed under the law. States may use TANF funds to provide cash assistance as well as a wide range of services that further the program’s goals, including child care and transportation assistance, employment programs, and child welfare services. While some of this spending, such as that for child care assistance, relates directly to helping current and former TANF cash assistance recipients work and move toward self-sufficiency, other spending is directed to a broader population that did not ever receive TANF cash assistance. Tracking the number of families receiving monthly cash assistance—the traditional welfare caseload—no longer captures the full picture of families being assisted with TANF funds. As states began providing a range of services beyond cash assistance to other low-income families, data collection efforts did not keep pace with the evolving program. Because states are primarily required to report data to HHS on families receiving TANF cash assistance but not other forms of assistance, gaps exist in the information gathered at the federal level to understand who TANF funds are serving and services provided, and to ensure state accountability. For example, with the flexibility allowed under TANF, states have used a significant portion of their TANF funds to augment their child care subsidy programs. However, states are not required to report on all families provided TANF-funded child care, leaving an incomplete picture of the number of children receiving federally funded child care subsidies. Overall, data on the total numbers of families served with TANF funds and how states use TANF funds to help families and achieve program goals in ways beyond their welfare-to-work programs is generally unavailable. When we first reported on these data limitations to this Subcommittee in 2002, we noted that state flexibility to use TANF funds in creative ways to help low-income families has resulted in many families being served who are not captured in the data reported to the federal government. At that time, it was impossible to produce a full count of all families served with TANF funds, and that data limitation continues today. Because job preparation and employment are key goals of TANF, one of the federal measures of state TANF programs’ performance is the proportion of TANF cash assistance recipients engaged in allowable work activities. Generally, states are held accountable for ensuring that at least 50 percent of all families receiving TANF cash assistance participate in one or more of the 12 specified work activities for an average of 30 hours per week. However, before DRA, concerns had been raised about the consistency and comparability of states’ work participation rates and the underlying data on TANF families participating in work activiti Although DRA was generally expected to strengthen TANF work requirements and improve the reliability of work participation data and program integrity by implementing federal definitions of work activities and participation verification requirements, the proportion of families receiving TANF cash assistance who participated in work activities for the required number of hours each week changed little after DRA, as did the types of work activities in which they most frequently participated. Specifically, in fiscal years 2007 through 2009, from 29 to 30 percent of TANF families participated in work activities for the required number of hours, which is similar to the 31 to 34 percent of families who did so in each year from fiscal years 2001 through 2006. Among families that met their work requirements both before and after DRA, the majority participated in unsubsidized employment. The next most frequent work es. activities were job search and job readiness assistance, vocational educational training, and work experience. Although fewer than 50 percent of all families receiving TANF cash assistance participated in work activities for the required number of hours both before and after DRA, many states have been able to meet their work participation rate requirements because of various policy and funding options allowed in federal law and regulations. Specifically, factors that influenced states’ work participation rates included not only the number of families receiving TANF cash assistance who participated in work activities, but also 1. decreases in the number of families receiving TANF cash assistance, 2. state spending on TANF-related services beyond what is required, 3. state policies that allow working families to continue receiving TANF 4. state policies that provide nonworking families cash assistance outside of the TANF program. Beyond families’ participation in the 12 work activities, the factor that states have commonly relied on to help them meet their required work participation rates is the caseload reduction credit. Specifically, decreases in the numbers of families receiving TANF cash assistance over a specified time period are accounted for in each state’s caseload reduction credit, which essentially then lowers the states’ required work participation rate from 50 percent. For example, if a state’s caseload decreases by 20 percent during the relevant time period, the state receives a caseload reduction credit equal to 20 percentage points, which results in the state work participation rate requirement being adjusted from 50 to 30 percent. While state caseload declines have generally been smaller after DRA because the act changed the base year for the comparison from fiscal year 1995 to fiscal year 2005, many states are still able to use caseload declines to help them lower their required work participation rates. For example, in fiscal year 2009, 38 of the 45 states that met their required work participation rates for all TANF families did so in part because of their caseload declines (see fig.5). However, while states’ caseload reduction credits before DRA were based primarily on their caseload declines, after DRA, states’ spending of their own funds on TANF-related services also became a factor in some states’ credits. Specifically, states are required to spend a certain amount of their funds every year in order to receive their federal TANF block grants. However, if states spend in excess of the required amount, they are allowed to correspondingly increase their caseload reduction credits. In fiscal year 2009, 32 of the 45 states that met their required work participation rates for all families receiving cash assistance claimed state spending beyond what is required toward their caseload reduction credits. In addition, 17 states would not have met their rates without claiming these expenditures (see fig. 5). Among the states that needed to rely on excess state spending to meet their work participation rates, most relied on these expenditures to add between 1 and 20 percentage points to their caseload reduction credit s (see fig. 6). As traditional cash assistance caseloads declined and states broadened the types of services provided and the number of families served, existing data collection efforts resulted in an incomplete picture of the TANF program at the national level. In effect, there is little information on the numbers of people served by TANF funds other than cash assistance and no real measure of how services supported by TANF funds meet the goals of welfare reform. This leaves the federal government with underestimates of the numbers served and potentially understated results from these funds. In addition, as before DRA, states have continued to take advantage of the various policy and funding options available to increase their TANF work participation rates. As a result, while measuring work participation of TANF recipients is key to understanding the success of state programs in meeting one of the federal purposes of TANF, whether states met the required work participation rates provides only a partial picture of state TANF programs’ effort and success in engaging recipients in work activities. Although the DRA changes to TANF work requirements were expected to strengthen the work participation rate as a performance measure and move more families toward self-sufficiency, the proportion of TANF recipients engaged in work activities remains unchanged. States’ use of the modifications currently allowed in federal law and regulations, as well as states’ policy choices, have diminished the rate’s usefulness as the national performance measure for TANF, and shown it to be limited as an incentive for states to engage more families in work. Lack of complete information on how states use funds to aid families and to measure work participation hinders decision makers in considering the success of TANF and what trade-offs might be involved in any changes to program requirements. In addressing these issues, care must to be taken to ensure that data requirements are well thought out and do not present an unreasonable burden on state programs. We provided drafts of the reports we drew on for this testimony to HHS for its review, and copies of the agency’s written responses can be found in the appendices of the relevant reports. We also provided HHS a draft of this testimony for technical comments on the new information on child- only TANF cases and updated TANF work participation data. HHS had no technical comments. Chairman Davis and Ranking Member Doggett, and Members of the Subcommittee, this concludes my statement. I would be pleased to respond to any questions you may have. For questions about this statement, please contact Kay E. Brown at (202) 512-7215 or brownke@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this statement include James Bennett, Rachel Frisk, Alex Galuten, Gale Harris, Jean McSween, and Cathy Roark. The state in this example would have its minimum work participation rate reduced to 26 percent for all TANF families.

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