The 112 th Congress will decide whether, and on what terms, to extend the Temporary Assistance for Needy Families (TANF) block grant and related programs. TANF was created in the 1996 welfare reform law ( P.L. 104-193 ), and is best known for helping states pay for their cash assistance programs for very low-income families with children. However, TANF also helps states finance a wide range of benefits and services that seek to either ameliorate the effects of or address the root causes of economic disadvantage among families with children. TANF is currently funded through the end of FY2012 (September 30, 2012). This report provides an overview of potential issues that might arise during a discussion of extending TANF funding or a long-term reauthorization. It does not go into detail on TANF program rules or necessarily provide the most up-to-date data on TANF. For a non-technical overview, see CRS Report R40946, The Temporary Assistance for Needy Families Block Grant: An Introduction . For a report that details TANF program rules, see CRS Report RL32748, The Temporary Assistance for Needy Families (TANF) Block Grant: A Primer on TANF Financing and Federal Requirements . For current data on TANF, see CRS Report RL32760, The Temporary Assistance for Needy Families (TANF) Block Grant: Responses to Frequently Asked Questions . TANF is a product of the welfare reform debate of the mid-1990s, which ended four decades of legislative efforts to either substantially revamp or replace the system of providing cash assistance to needy families with children. Cash assistance programs specifically for needy families with children date back to the state- and locally funded "mothers' pension" programs of the early 1900s; the federal government first funded these programs under the Social Security Act of 1935. The visibility of cash assistance programs increased in the 1960s, when caseload increases raised concerns about their cost and effects. The welfare reform debates from the late 1960s to the mid-1990s focused on issues related to families headed by a single mother (which comprised most of the families on the assistance rolls during that period), and, specifically, concerns that welfare itself helped contribute to economic disadvantage of families with children. Social science research showed that cash assistance provided to non-working families was a disincentive for the single mother to go to work. Additionally, there was much discussion that a system of cash welfare targeted toward single parent families contributed to the rise in single, female-headed families. The research evidence on the effects of cash assistance on family structure is less conclusive than it is on the effects of cash assistance on work. There were other policy concerns about the adequacy of cash assistance benefits. Cash assistance programs were run at the state and local level, with large variations in eligibility criteria and benefit amounts. The cash assistance programs also provided limited aid to the working poor. Research conducted in the 1980s and the early 1990s indicated that while many families received cash assistance for short periods of time, some families experienced long-term welfare dependency. Further, other research showed that mandatory welfare-to-work programs could be effective in moving families from the assistance rolls into employment. Thus, a policy requiring participation in activities that could lead to employment addressed the concern that receipt of cash assistance discouraged work. TANF was created in the 1996 welfare law. The basic rules of TANF are discussed below. However, TANF was only a part of a series of policy changes that addressed the many policy concerns raised by cash assistance programs. The changes in low-income assistance policies of the mid-1990s were the culmination of a shift in emphasis away from providing a safety net for families without earnings to supporting the "working poor," particularly through expansions of the Earned Income Tax Credit (EITC). Table 1 shows the cash assistance caseload in the context of related economic and social indicators for families with children for 1995 through 2010. The table shows that some of the circumstances of 2010 were very different from those of 1995. The cash assistance rolls are significantly diminished and reach a far smaller share of poor children than in 1995. The rate at which single mothers work is even higher in 2010 than in 1995 (despite the lingering effects of the 2007-2009 recession), and the poverty rate for children living in families headed by mothers is lower in 2010 than in 1995. However, some of the indicators of social and economic disadvantage commonly associated with welfare issues have changed little or have even worsened in an era of lower cash assistance caseloads. The poverty rate for all children declined in the late 1990s—but this improvement was ephemeral, as the child poverty rate increased in the 2000s even before the onset of the recession that began in December 2007. The rate at which children are born to unmarried mothers climbed in the 2000s, reaching a historical high. The continued high rates of child poverty and children being born into and living in single-mother families raise policy issues. Research has linked both being raised in a poor family and being raised in a single-parent family to lower chances of success later in life. That is, while many poor children and many children raised by a single parent do well, these factors increase the likelihood that a child will fail in school or suffer other negative outcomes. It should be noted that the diminishment of state-based cash assistance does not mean that overall spending for the poor or poor families with children has also declined. On the contrary, expansions of the EITC and a new refundable portion of the child tax credit, along with increases in Medicaid, the Children's Health Insurance Program (CHIP), the Supplemental Nutrition Assistance Program (SNAP, the program formerly known as food stamps), and Supplemental Security Income (SSI) have resulted in higher levels of outlays for total need-tested aid to low-income families, including low-income families with children. The bulk of federal TANF funding is in a basic block grant to states that totals $16.5 billion per year. States are also required to expend a certain amount of their own funds on TANF-related programs, under what is called a maintenance of effort (MOE) requirement, equal to a total minimum of $10.4 billion per year. The basic block grant and MOE amounts, both nationally and for each state, were set back in the original 1996 welfare law based on what states were spending in pre-1996 programs, and they have not been changed since. They are not adjusted for inflation or any other changes in national or state conditions (cash assistance caseloads, population, child poverty, etc.). In addition to the basic block grant, there have been federal supplemental grants and contingency funds for states that are discussed later in this report. TANF also includes competitive grants for healthy marriage and responsible fatherhood initiatives. The statutory purpose of TANF is to increase the flexibility of states to achieve four goals: 1. provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives; 2. end the dependence of needy parents on government benefits by promoting job preparation, work, and marriage; 3. prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies; and 4. encourage the formation and maintenance of two-parent families. This statutory purpose is more than a symbolic statement of policy. States may use their TANF funds (and to a certain extent MOE funds) in any manner they "reasonably calculate" could further this purpose and achieve these goals. Figure 1 shows nationally how federal TANF and state MOE funds were used in FY2010. Basic assistance, the category of expenditure most commonly associated with TANF, represents only 30% of all TANF and MOE funds used in FY2010. TANF also provides substantial support to state child care subsidy programs; additional work supports such as the refundable portion of state tax credits (state versions of the EITC); and a wide range of spending in the "other" category, on activities such as providing services to families with children at-risk of being placed in foster care, early childhood education programs (e.g., pre-K programs), programs for youths, and responsible fatherhood and healthy marriage programs. Federal law gives states complete latitude in determining the rules of their cash assistance programs. States set rules for determining how low a family's income must be to qualify for assistance as well as the amount paid. In July 2010, the maximum monthly benefit for a family of three ranged from $923 in Alaska to $170 in Mississippi. The wide variation in benefit amounts is not a result of the 1996 welfare reform law; under pre-1996 policies, states also set benefit levels that varied greatly among the states. The most well-known features of both TANF and the 1996 welfare reform law are the requirements that apply to families receiving cash assistance that include an adult recipient: work requirements and time limits. The main TANF work requirement is actually a performance measure that applies to states rather than individual recipients. TANF time limits prohibit states from aiding a family with an adult for more than 60 months (five years). However, states have considerable flexibility in implementing time limits. P.L. 112-96 (the law that extended the payroll tax cut through 2012) provided TANF funding through the end of FY2012. It provides FY2012 funding for the basic TANF block grant, healthy marriage and responsible fatherhood competitive grants, and certain other funds at their FY2011 levels. It does not provide FY2012 funding for TANF supplemental grants (discussed in detail below). In addition, P.L. 112-96 prevents electronic benefit transaction access to TANF cash at liquor stores, casinos, and strip clubs; states would be required to prohibit access to TANF cash at Automated Teller Machines (ATMS) at such establishments; and requires states to report TANF data in a manner that facilitates the exchange of that data with other programs' data systems. Under the short-term extension of TANF, the 112 th Congress would have to act again to continue the program beyond September 30, 2012 (the end of FY2012). President Obama's FY2013 budget did not propose a comprehensive reauthorization of TANF. It did propose to revive TANF supplemental grants and make them permanent. It also proposed to "restructure" the TANF contingency fund, which provides additional grants to help states deal with increased costs associated with a recession. The proposed extension of TANF and the lack of an Administration proposal for a longer-term reauthorization defers the major budget and policy decisions related to the block grant. Most federal TANF policy focuses on historical concerns related to cash assistance for needy families with children, which led to the 1996 welfare law more than 15 years ago. In terms of the larger policy issues associated with TANF, the Administration did discuss some general principals it would like to see addressed. The Department of Health and Human Services FY2013 Budget in Brief says: When Congress takes up reauthorization, we want to work with lawmakers to strengthen the program's effectiveness in accomplishing its goals. This should include using performance indicators to drive program improvement and ensuring that states have the flexibility to engage recipients in the most effective activities to promote success in the workforce – including families with serious barriers to employment. We also want to work with Congress to revise the Contingency Fund to make it more effective during economic downturns. The remainder of this report will use the Administration's budget request and general principles as a framework for discussing TANF issues before the 112 th Congress. It will first discuss general budget issues and supplemental grants that are the main focus of the President's FY2013 budget request. A discussion of TANF performance measurement, its response to recessions, and subsidized employment follow. In addition, the report will briefly address a related issue of responsible fatherhood initiatives, as the Administration put forward a responsible fatherhood agenda in its FY2013 budget. For each issue, it provides a listing of policy options that generally have been drawn from proposals made in the past. Also, see " Additional Reading ," below, for documents from organizations that provide policy options that might be addressed in TANF reauthorization. TANF is a mandatory spending program, as its grants are entitlements to the states. TANF funding is provided in authorizing legislation rather than annual appropriation bills. As a mandatory spending program, it is subject to both the pay-as-you-go budget rules, requiring tax or spending offsets to any increases in spending, and the "cut-as-you-go" rules in the House, requiring spending offsets for any increases in TANF spending. Cuts or spending increases are measured relative to the "baseline." In general, the baseline is the level of funding necessary to continue current policies. Table 2 shows actual TANF grants for FY2011 and the Congressional Budget Office (CBO) January 2012 baseline for TANF for FY2012 through FY2017. In general, the TANF baseline for future years is the same as it is for the last year for which funding is provided under current law (in this case, FY2012). Because TANF grants are set in statute, there is no adjustment for inflation or other conditions (cash assistance caseload, population growth) in constructing the baseline. Supplemental grants (discussed in further detail below) are not continued in the baseline. This is because a provision in TANF law says the baseline should assume no further supplemental grants beyond its last funding authorization (through June 30, 2011). Thus, under congressional budget rules, the cost of extending supplemental grants would have to be offset. The President's FY2013 budget proposal would reinstate and make permanent TANF supplemental grants. Under the proposal, TANF supplemental grants would be funded at their FY2001 through FY2010 levels, $319 million per year. It would be paid for through a corresponding reduction in current law funding for the TANF contingency fund (discussed later in this report). As discussed above, the TANF basic block grant and MOE were set back in the 1996 welfare reform law. Each state's block grant funding level is based on federal grants to states in the pre-1996 welfare programs; the MOE is based on state spending in the pre-1996 programs. The basic block grant and MOE are frozen, not adjusted for changes in a state's economic or demographic circumstances. During debates on the legislation that became the 1996 welfare law, it was thought that this "freeze" would particularly disadvantage two sets of states: (1) those that have high rates of population growth and that would experience steeper declines than other states in their per-capita grants; and (2) those that paid relatively low benefit amounts under pre-1996 welfare programs and thus would have low federal grants compared to poverty in the state. To address this issue, Congress provided TANF supplemental grants to certain qualifying states based on historical population growth and historical grants per poor person. In total, 17 states qualified for supplemental grants: Alabama, Alaska, Arizona, Arkansas, Colorado, Florida, Georgia, Idaho, Louisiana, Mississippi, Montana, Nevada, New Mexico, North Carolina, Tennessee, Texas, and Utah. Supplemental grants reduced the disparities in TANF funding among the states in terms of grants per poor child. However, this reduction was small. (See Table A-1 for supplemental grants per poor child by state.) Supplemental grants themselves had been frozen since FY2001, and even at their full funding level some states with high population growth and increases in child poverty (e.g., Texas and Nevada) saw continuing declines in their grants per poor child. However, further addressing the issue of disparities in grants per poor child would require either additional funding or a redistribution of existing funds from states with relatively high grants per poor child to states with lower grants per poor child. From FY2001 through FY2010, supplemental grants totaled $319 million per year. In order to keep the legislation that extended TANF through FY2011 cost neutral, FY2011 supplemental grants were funded only through June 30, 2011, and at a reduced rate. Supplemental grants have not been funded in FY2012. No FY2012 funding has been provided for supplemental grants. All of the current TANF performance measures focus on the cash assistance caseload. In the past, TANF attempted to assess a broad range of outcomes through measures used to award two bonuses: the High Performance Bonus and the bonus for reducing out-of-wedlock pregnancies. The High Performance Bonus awarded grants based on state rankings of nationally based welfare-to-work measures (job entry, job retention, wage gains), receipt in the state of work supports , and the percent of children in a state living in two-parent families. The bonus for reduction in out-of-wedlock pregnancies was awarded based on state rankings of out-of-wedlock birth ratios, with a proviso that such reductions could not stem from increases in abortions. These two bonuses were repealed in 2006. A key issue was that these broad outcome measures could not be tied to what states were doing in their TANF programs. The repeal of the TANF bonuses means that the main performance measure currently used to assess state programs is the TANF work participation standard that applies to families receiving cash assistance. This measurement reflects the major welfare reform policy concerns that led to the 1996 welfare law, but it is out of step with the way states currently use TANF funds. Should Congress wish to measure and assess TANF beyond its cash assistance programs, a number of challenges would have to be addressed. Relative to the information that states are currently required to provide the federal government, measuring and assessing the broader range of TANF activities would require: (1) more detailed descriptions of the programs and activities that states are conducting in order to know what policies are actually being assessed; (2) more detailed data on how much money is spent for these programs and activities in order to know how much effort a state is making in a particular policy area; and (3) measuring program outcomes and impacts to permit assessments of whether programs are effective. The Claims Resolution Act, which extended TANF through FY2011, included a requirement that states submit supplemental expenditure reports in 2011 detailing program expenditures on activities such as child welfare payments, child welfare services, emergency aid, domestic violence services, mental health and addiction services, education and youth programs, early childhood development programs, and TANF-funded expenditures on juvenile justice. These are not categories in the existing TANF expenditure report. HHS reports from the Claims Resolution Act data confirmed that much of "other" spending is for activities for families with children who have been subject to, or are at risk of, abuse and neglect, and potentially subject to removal from the home to foster care. The additional reporting required for 2011 in the Claims Resolution Act indicates that Congress recognized that a part of the TANF story is not being told. Obtaining more detailed information imposes additional reporting burdens on the states. However, for the long term, Congress could modify TANF's existing requirements to obtain such information rather than require additional reports. Existing reports include TANF plans, which are prospective documents that states must submit before receiving their block grants, quarterly reports on expenditures and caseloads, and a retrospective annual report. Options for modifying these reports include changing the requirements for state plans to (1) describe all TANF-funded programs and activities; (2) submit information in a standardized form, for better comparisons across states; (3) relate each program or activity to a TANF goal; (4) establish goals and outcome measures for the program or activity; and (5) provide a plan for assessing the effectiveness of the activity; requiring additional detail in quarterly expenditure reports, such as the additional information required for the supplemental reports under the Claims Resolution Act; and expanding quarterly caseload reporting to include additional, selected TANF-funded benefits and services (e.g., require reporting on participants in subsidized jobs); Congress potentially also could expand relevant reporting systems in certain related programs (e.g., child care reporting system) to include TANF-funded services. In terms of requiring an assessment of TANF-funded activities, Congress could ask the U.S. Department of Health and Human Services (HHS) to re-establish some national measures and assess programs in that manner. However, because each state may use TANF's flexibility differently, another option would be to have each state set its own goals and provide an annual assessment for how these goals are being met in retrospective annual reports. As discussed above, the TANF work participation standard is the main performance measure used to assess the block grant. It relates to only one facet of what states do with TANF. It also affects a relatively small population (particularly when compared with the historical welfare caseload). However, the work participation standard reflects the welfare-to-work philosophy that helped to create TANF. Additionally, it reflects efforts to help a very disadvantaged population (those who have come on the cash assistance rolls) reintegrate into the workforce. TANF's work participation standards are numerical performance measures that set target rates of participation in work and self-sufficiency activities for a state's cash assistance caseload as a whole. They do not apply directly to recipients, though they may help shape the types of requirements states place on individuals. The TANF statute sets a target that 50% of all families with an adult recipient should be engaged in specified work or self-sufficiency activities for at least a certain number of hours per week each month. It also sets a separate two-parent work participation standard, with a target of 90% for these families. Figure 2 shows that the national average work participation rate for all families has been fairly stable over the period from FY2000 to FY2009 at a level well below 50%. The rate has hovered around 30% for the entire period. Most states have met their individual state standards because the actual, effective standard they face is lower than 50% because of credits. A state receives credit toward meeting its participation standard through caseload reductions and also for spending in excess of what is counted toward the MOE. The calculation of the work participation rate is fairly complex. Almost all activities that one would typically think of as helping a recipient achieve self-sufficiency count in some manner toward the TANF work standard—including educational and rehabilitative activities. However, the law places limits on counting pre-employment activities. The combination of job search and job readiness activities, which includes rehabilitative activities, is only countable for up to 12 weeks in a fiscal year. Vocational educational training, which includes post-secondary education, is only countable for one year in a recipient's lifetime. Completing secondary school or obtaining a General Educational Development (GED) credential for those age 20 or older are countable only in conjunction with activities more closely associated with work. Teen parents engaged in education may be considered as engaged in activities countable toward the standard. However, the combination of teen parents engaged in education and those engaged by virtue of vocational educational training cannot count for more than 30% of all families engaged in work or activities countable toward the standards. The only activities that count without limit are unsubsidized employment, subsidized employment, on-the-job training, and working off a cash assistance benefit through work experience or community service. The limits on counting pre-employment activities of job search, rehabilitation, and education raise both measurement and policy issues. In terms of measurement, they raise questions about whether the work participation rate adequately measures state effort in moving families from welfare-to-work. An alternative, broader measure that reports the percent of adult recipients engaged in any activity for any number of hours shows somewhat higher rates of engagement, but little change in the trend (fluctuating between 42% and 45% for FY2000 through FY2008). This broader measure might also understate total engagement if states fail to report participation that does not count toward the official standard. The Claims Resolution Act included a provision to require states to make a supplemental report on engagement, focusing on activities that do not count toward the official standard. HHS reports from the Claims Resolution Act reporting showed that states did fail to report some work activity, but that this failure to report some participation does not substantially alter the picture in terms of the percent of the caseload engaged in any activity. However, the Claims Resolution Act data did provide new information on the circumstantiates of those with zero hours of participation – including the share of the caseload exempt because of illness or disability (6% of all those considered work-eligible) and the share in the process of being sanctioned (10% of all those considered work-eligible). Additionally, the work participation rate only captures activities for those on the rolls. States may, and have, used TANF funds for employment and education activities for low-income parents who are not on the cash assistance rolls. A major recent example, discussed below, is subsidized employment. To address the measurement issues, Congress might seek to require states to report activities even if they don't count toward the TANF work participation standard; require the calculation of a second, broader measure of participation in self-sufficiency activities that could be developed to complement the existing, current participation standard; this could include employment and training activities for those not on the assistance rolls, such as subsidized employment and participation of low-income parents in TANF-funded community college programs. The policy question is whether the work participation standard achieves the goal of engaging a sufficient number of recipients in activities that could lead to employment. The credits against the participation standard have diluted its effect. If Congress would seek to raise the rate at which recipients engage in activities, the major issue would be determining what rate is achievable and under what circumstances. Welfare-to-work programs evaluated before the 1996 law, even the successful ones, failed to achieve a 50% monthly participation rate. The natural dynamics of the cash assistance caseload—new recipients coming on to the rolls and awaiting assignments, and others leaving—can depress monthly participation rates. A 90% participation rate for two-parent families has generally been considered difficult to achieve, and many states have withdrawn their two-parent families from TANF to avoid the necessity of achieving that standard. Most of the past proposals for changing the participation standard focused on expanding either education or rehabilitative activities (e.g., vocational rehabilitation for physical disabilities; mental health or substance abuse treatment, etc.). The evaluation literature of the 1980s and early 1990s found that education-focused programs, while effective in moving families from welfare-to-work, were not more effective than "work-first" programs even over a relatively long (five-year) time period. However, since that research was completed, a new generation of programs has emerged in the education arena that shows promise in addressing the factors that might have limited the effectiveness of past education-focused programs (for example, progressing in an educational program). Little definitive research has been done on the effectiveness of rehabilitative activities on cash assistance recipients. Moreover, it should be noted that the "work-first" approach evaluated in welfare-to-work studies emphasized job search—itself only countable for up to 12 weeks in the fiscal year under the current work participation rules. Policy options to address the policies of work participation among cash assistance families include strengthening the participation standard by eliminating credits against them, so that only participation in activities helps states achieve the work participation rate; expanding the exemptions from families being considered in the participation rate calculation, such as allowing an optional exemption for the first month on the rolls to allow states time to engage a recipient in activities; eliminating the 90% participation standard for two-parent families; and allowing broader measures of participation—that count more or even all pre-employment activities—to be used against the standard rather than the current work participation rate; the broader measure could also count selected activities of those not receiving ongoing cash assistance, such as subsidized employment. Welfare-to-work and the work participation standard reflect policies that apply to families with an adult recipient. However, a large share of the TANF assistance caseload does not have an adult recipient. In June 2011, 41% of all TANF assistance families had no adult receiving benefits on their own behalf—all benefits were paid on behalf of the children in the families. This portion of the caseload, known as the "child-only" caseload, reflects families in a range of circumstances. This includes families where (1) the parents receive Supplemental Security Income (SSI), usually on the basis of disability; (2) the children are living with non-parent caretakers, such as grandparents; and (3) citizen children are living with TANF-ineligible noncitizens. There is little federal policy that affects this portion of the cash assistance caseload. Moreover, there is little in the way of performance measurement for these families. The Government Accountability Office (GAO) recently examined the "child welfare caseload" and, focusing on those child-only cases in the care of non-relative parents, recommended that HHS clarifying its guidance and provide technical assistance to the states to facilitate greater data sharing between TANF and the agencies that deal with issues related to child abuse and neglect. The recession of 2007-2009 represents the first deep and long economic slump since the enactment of the 1996 welfare reform law. During the recession and its aftermath, the cash assistance caseload increased nationally and in most states. Though the cash assistance caseload fell during the first months of the recession, the caseload increased beginning in August of 2008. From July 2008 to June 2011, the cash assistance caseload increased by 15%, adding about 250,000 families to the monthly benefit rolls. Under TANF, the cash assistance rolls continued to be much diminished from their pre-1996 welfare reform levels. The number of families receiving benefits in June 2011—1.9 million—is well below the number receiving benefits—5.1 million—at the peak of the cash assistance caseload in March 1994, well after the end of the 1990-1991 recession. Whether the 15% rise in the TANF cash assistance caseload was an adequate response to the recession is difficult to answer. Not all demographic groups were hit equally hard by the recession. The unemployment rate for men was well above that for women, though young women and young single mothers, who represent most TANF cash adult recipients, had higher rates of unemployment than older, married women (see Table A-2 and Table A-3 for changes in unemployment and employment by family type). Additionally, TANF's response is best viewed in the context of the response of all assistance programs. The front-line program of income support during a recession is Unemployment Insurance (UI). During the 2007-2009 recession and thereafter, the share of the unemployed receiving UI was higher than during any recession since the 1970s. Moreover, UI receipt had a greater effect on reducing poverty in the most recent recession—including poverty among children living with single mothers—than it did during either the 1990-1991 or the 2001 recessions. Much of the impact of UI on incomes and poverty is owed to the legislated, ad-hoc extensions of benefits (beyond the 26 weeks of regular UI benefits usually available). Taken together, all transfer programs had a substantial impact in mitigating the income loss during the 2007-2009 recession and its aftermath. Further, TANF responded to the recession in ways other than through increases in the cash assistance caseload. As discussed below, TANF also funded subsidized jobs in response to the recession and provided emergency, short-term aid to families. Participants in subsidized employment and receiving short-term aid are not counted in the TANF assistance caseload figures. However, the experience of the 2007-2009 recession raises a number of policy concerns. First, some of the policies outside of TANF to aid families during the recession—particularly the extensions of UI benefits—are not part of permanent policy, but rather were temporary measures enacted to respond to the recession. There is no assurance that Congress will be able or willing to respond to future recessions in the same manner. Second, the 1996 welfare law included a $2 billion contingency fund, most of which was still available at the beginning of FY2008. However, the fund was exhausted in early FY2010 based on grants made to relatively few states (18 states and the District of Columbia). Many states failed to qualify for regular contingency funds because of its requirement that states expend more than 100% of what they spent in FY1994 to receive matching grants. Congress augmented the regular contingency fund by creating a temporary, Emergency Contingency Fund (ECF), funded at $5 billion for two years, FY2009 and FY2010. The ECF only financed expenditures for basic assistance, short-term non-recurrent aid, and subsidized jobs. However, it allowed states to access these funds based on increased expenditures in these categories from the recent pre-recession years rather than increases from pre-welfare reform levels. The ECF rules expanded access to extra funding and 52 of the 54 jurisdictions operating TANF drew ECF grants. However, the ECF also is not part of permanent law, and it expired on September 30, 2010. Finally, the story of how TANF responds to the recession is ongoing, given the persistent high rate of unemployment. The most likely options for Congress to address TANF's ability to respond to a future recession are through changes to the contingency fund. Congress might consider adding new funding to the contingency fund or establishing policies that would structure aid (though, given budget constraints, not necessarily automatically provide funding) that would be available in future recessions. Congress might consider the following: Revising the requirement that states spend more than 100% of what they spent in FY1994. Like the ECF, proposals approved by the Senate Finance Committee (but not acted on by the full Senate) during the 2002-2005 period would have allowed access to contingency funds on the basis of increased expenditures from recent, pre-recession years, rather than linking it to increased spending from FY1994 levels. Narrowing the types of expenditures reimbursed to target economic aid to families, such as basic assistance, short-term emergency aid, and subsidized employment. This would help ration extra funding, which otherwise might be diverted into fiscal relief that could be simply re-financing existing state spending on human services. Revising the economic criteria for allowing access to the contingency fund. This might help target aid to periods when a state experiences its next economic slump. The current economically needy criteria for states—particularly the criterion that Supplemental Nutrition Assistance Program (SNAP ) caseloads be at least 10% above pre-welfare reform levels—are likely to be met by many states long after the recent recession has ended. Despite the focus on work during the 1996 welfare reform debate, subsidized employment has been a relatively small part of TANF throughout most of its history. However, the ECF (discussed above) provided grants of $1.3 billion to help finance subsidized employment during FY2009 and FY2010. The ECF was estimated to have funded 262,500 job slots during its lifetime. TANF-funded subsidized employment programs can be for those who are on the cash assistance rolls, or for those who are not receiving cash assistance but qualify for TANF: needy custodial parents, noncustodial parents, nonparent caretaker relatives (grandparents, aunts, and uncles) or youth. That is, a subsidized job can be provided in lieu of cash assistance or to certain persons (e.g., noncustodial parents) who are unlikely to receive TANF cash assistance. Subsidized employment programs can benefit individual participants by providing job experience for those with limited work histories, filling gaps in employment histories for those who are unemployed for long periods of time, and keeping an individual attached to the labor force. Subsidized employment programs can also provide more income for families than TANF cash assistance benefits provide. Subsidized employment programs can also benefit communities by producing goods or services that are of value to the community. However, a more difficult question to answer is whether subsidized employment programs actually create jobs. While programs must comply with non-displacement requirements (cannot use a subsidized job to fill a position where someone is on layoff), this does not mean that all subsidized employment positions reflect jobs that otherwise would not exist. Research on public sector, public service jobs in the 1970s found that state and local governments did to some degree substitute subsidized jobs for regular public sector jobs. The applicable research is more limited on whether subsidized private sector jobs can substitute for regular jobs. One of the Obama Administration's "general principles" for reauthorization of TANF is to build on recent experience with TANF subsidized employment. Congress could consider establishing a dedicated funding stream for subsidized employment; and/or creating non-financial inducements for states to expand their subsidized employment programs, such as counting participation in subsidized employment for those not on the ongoing cash assistance rolls toward a state's work participation standard. The current cash assistance programs date their lineage to "mothers' pension" programs, and most of the policy concerns in past welfare reform debates have focused on families headed by a single mother. The circumstances of the fathers of children living with single mothers—today, more likely to be alive but absent from the household rather than deceased—have received far less policy attention until recently. Noncustodial fathers are expected to help support their children through the payment of child support. Child support collections through the Federal-State Child Support Enforcement (CSE) program increased dramatically in the post-welfare reform period, rising 73% in inflation-adjusted terms between FY1995 and FY2009. Total CSE collections stood at $26.4 billion in the recession year FY2009. Despite the successes of the CSE program in increasing collections, the CSE program collected only 64% of the total amount of current support that was due and an even smaller proportion (7%) of past-due support. One common characterization of noncustodial fathers who fail to pay their child support is that of a "dead-beat" dad. However, research has shown that some of these fathers are themselves poor. These fathers—like their single mother counterparts—tend to have lower levels of educational attainment and face above-average rates of health barriers to employment. Long-term economic and social trends reflect some of the challenges to policies that would further involve men in the lives of their children. Wages of men in general have been stagnant—the inflation-adjusted median annual earnings of a man working full-time all year peaked in 1973—and for men with lower levels of educational attainment, wages have fallen. Fathers face an additional barrier to supporting their children—high rates of incarceration. In 2009, 949 per 100,000 males were incarcerated versus 67 per 100,000 females. For African-American males, the incarceration rate was 3,119 per 100,000. While fathers who are in prison have obvious constraints on their ability to support their children, the stigma of having a criminal record is an employment barrier faced by ex-offenders. The Deficit Reduction Act of 2005 ( P.L. 109-171 ) established within the TANF program two categorical, competitive grant programs to fund healthy marriage and responsible fatherhood initiatives. For FY2006 through FY2010, the grants were funded at about $100 million per year for healthy marriage activities and $50 million per year for responsible fatherhood activities. These programs fund grants to community-based organizations, to operate initiatives that focus on providing training in "soft-skills" (e.g., social skills, conflict resolution) to help either couples or noncustodial fathers. TANF's one year extension in the Claims Resolution Act provided equal funding at $75 million each for these two sets of activities, though the Administration solicited grantees who would take a more comprehensive approach to fatherhood issues, integrating employment services with soft-skills training. Congress has a number of options should it wish to expand programs focused on fathers. It could create a new funding stream within the CSE program for this purpose. Or Congress might consider ways states could make more extensive use of existing TANF funds to serve disadvantaged noncustodial parents by, for example, continuing DRA-established programs, possibly emphasizing activities such as employment services in addition to training in social skills; providing states with the incentive to expand subsidized jobs programs for noncustodial parents; an example of such an incentive is allowing states to count participants in subsidized employment who are not recipients of ongoing cash assistance toward the TANF work participation standard; establishing a TANF state plan requirement that requires states to discuss and set goals for noncustodial parents; this could be paired with requiring states to assess their efforts at aiding noncustodial parents. P.L. 112-35 ( H.R. 2943 , Geoff Davis). Extended TANF basic, healthy marriage and responsible fatherhood, and mandatory child care grants (and certain other TANF funds) through December 31, 2011. Passed the House, September 21, 2011; passed the Senate, September 23, 2011; signed by the President, September 30, 2011. P.L. 112-78 ( H.R. 3765 , Camp). Includes a two-month extension of TANF funding through February 29, 2012. Passed by both the House and Senate by unanimous consent, and signed by the President, on December 23, 2011. P.L. 112-96 ( H.R. 3630 , Camp). Includes provisions to extend TANF basic, contingency fund, responsible fatherhood and healthy marriage grants, and mandatory child care funds through the end of FY2012. Also provides that TANF cash assistance cannot be accessed in strip clubs, liquor stores, or casinos. Requires that TANF data reported by states be in a standardized format. Passed the House December 13, 2011. Amended to provide a two-month extension of TANF funding without policy changes and passed by the Senate December 17, 2011. Conference agreement, including an extension of TANF through the end of FY2012, filed on February 16, 2012, and passed both the House and Senate February 17, 2012. Signed by the President on February 22, 2012. S. 943 (Hatch) and H.R. 3567 (Boustany). Would require states to establish policies that prevent the use of TANF cash assistance in any transaction that occurs in a liquor store, a casino, or a strip club. States that fail to implement a policy could be penalized with a funding reduction of up to 5% of the state family assistance grant. Amended version passed the House February 2, 2012. H.R. 628 (Cleaver). Establishes a $20 billion TANF Emergency Contingency Fund for FY2011 through FY2018. It provides funding for increases in cash assistance, non-recurrent short-term benefits, and subsidized employment. H.R. 1135 (Jordan) and H.R. 1167 (Jordan). Similar bills; both would reduce the TANF basic block grant to $15.5 billion. Also, both would set an overall cap on spending for need-tested benefits, enforced through the congressional budget process. H.R. 2277 (Doggett). Would extend TANF supplemental grants through the end of FY2011 (September 30, 2011). H.R. 3193 (Fincher). Would require state TANF programs to operate random drug testing programs for TANF applicants and recipients and would require state TANF programs to deny assistance to individuals who test positive for illegal drugs or are convicted of drug-related crimes. The state family assistance grant would be reduced by 10% if a state does not implement a drug testing program. H.R. 3226 (Lee). Would reestablish the Emergency Contingency Fund for state TANF programs to provide funding related to increased caseload, increased expenditures for non-recurrent short-term benefits, and increased expenditures for subsidized employment. H.R. 3573 (Moore). Would permanently reauthorize TANF, increase the basic block grant for both inflation and child population growth since 1996, prospectively increase the block grant for inflation and child population growth, establish open-ended matching grants for subsidized employment, revise the TANF contingency fund, and provide open-ended matching grants for child care. It would establish reducing child poverty as the first goal of the block grant. The bill would also prohibit states from ending benefits entirely (full family sanctions) for failure to meet program requirements, require states to engage in a sanction review process with a family before imposing a sanction, and prohibit states from imposing a time limit on receipt of assistance of less than 60 months. It would also require states to determine a family budget necessary to meet basic needs, as well as penalize states that fail to provide a benefit commensurate with such a family benefit. H.R. 3638 (Grijalva). Includes a provision to establish a $5 billion contingency fund for FY2012 and FY2013. H.R. 3659 (Paulsen). Includes provisions to extend TANF basic, contingency fund, responsible fatherhood and healthy marriage grants, and mandatory child care funds through the end of FY2012. Also provides that TANF cash assistance cannot be accessed in strip clubs, liquor stores, or casinos. Requires that TANF data reported by states be in a standardized format. Passed the House December 15, 2011. H.R. 3722 (Pearce). Would require states to operate drug testing programs for all applicants of assistance and require sanctions for those that fail the test. Also requires applicants to pay the costs of the drug test up-front. Such costs would be reimbursed to the applicant once he or she passes the drug test and begins to receive assistance. S. 83 (Vitter) and H.R. 1769 (Boustany). Would require states to operate drug testing programs for recipients of TANF assistance, and would require states to sanction individuals who fail drug tests. The American Public Human Services Association and the National Association of State TANF Administrators, Temporary Assistance for Needy Families: Recommendations for Reauthorization , December 2010, http://www.aphsa.org/Home/Doc/APHSA-NASTATANFRecommendations.pdf . Katherine Bradley and Robert Rector, Confronting the Unsustainable Growth of Welfare Entitlements: Principles of Reform and Next Steps , Heritage Foundation, June 24, 2010, http://thf_media.s3.amazonaws.com/2010/pdf/bg2427.pdf . Elizabeth Lower-Basch, Goals for TANF Reauthorization, Center for Law and Social Policy January 24, 2011, http://www.clasp.org/admin/site/publications/files/TANF-Reauthorization-Goals.pdf .

Summary: P.L. 112-96 funds TANF through the end of FY2012. It generally provides FY2012 TANF funding at FY2011 levels, but does not fund TANF "supplemental grants." In addition, P.L. 112-96 prevents electronic benefit transaction access to TANF cash at certain establishments, and also revises TANF reporting standards to facilitate data exchanges with other programs. The short-term extension of TANF defers major budget and policy decisions related to the block grant. Most federal TANF policy focuses on historical concerns related to cash assistance for needy families with children, which led to the 1996 welfare law. However, TANF has evolved into a funding stream that funds a wide range of economic aid and human services that address economic and social disadvantage for families with children. In FY2010, only 30% of all federal TANF and associated state dollars were used for basic monthly cash assistance. The recent recession was the first long and deep one since the enactment of the 1996 welfare law. TANF's contingency fund, established in 1996 to provide extra grants during recessions, was exhausted in early FY2010. Congress created a $5 billion temporary Emergency Contingency Fund (ECF) for FY2009 and FY2010 that provided extra funding to help pay for increased cash assistance caseloads, short-term aid, and subsidized employment. The ECF expired on September 30, 2010. Congress might consider policy alternatives to provide states with extra funding during the next economic downturn. A TANF-funded activity that was substantially expanded during the recent economic downturn was subsidized employment. The ECF provided $1.3 billion for subsidized employment for an estimated 262,500 slots during the lifetime of the fund. TANF-funded subsidized employment can be for those on the assistance rolls as well as other low-income parents, caretakers, or youth. Congress might consider ways to encourage states to continue subsidized employment activities, including providing dedicated funding for this activity and/or considering participation in subsidized employment for individuals not receiving ongoing assistance when assessing state TANF performance. Additionally, most traditional welfare reform issues have focused on families headed by a single mother. Current law provides TANF grants to community-based organizations for initiatives to promote both healthy marriage and responsible fatherhood. However, poor noncustodial fathers, like their poor single mother counterparts, tend to have low levels of educational attainment, weak attachment to work, and health barriers to employment. They might also have a criminal record. Congress might examine ways to expand TANF-funded work and employment services for disadvantaged noncustodial fathers.