The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) established the Temporary Assistance for Needy Families program, often referred to as welfare reform because it fundamentally changed welfare policies. TANF has a goal of promoting work and helping welfare recipients move toward self-sufficiency. It also established work requirements for welfare recipients and set a limit of 60 months on the amount of time recipients can receive cash assistance. Under TANF, states receive a family assistance block grant from the federal government that they can use to provide monthly cash assistance payments to families as well as to finance services for TANF clients or other low-income people to support their efforts to work. States can also combine their TANF funds with state funds and those from other federal programs that finance services such as child care, transportation, and training. States have flexibility to set their TANF policies, such as to define the specific activities that count toward the TANF work requirements and to set the number of months—up to a maximum of 60—for the cash assistance time limit. Further, states have flexibility in how they administer TANF; they can set policies at the state level or they can allow counties to set their own policies. The U.S. Department of Health and Human Services’ Administration for Children and Families administers the TANF block grant program and monitors states’ performance, such as whether states meet the targets for the percentage of TANF recipients who meet the work requirements. States’ federal TANF funding can be reduced if they do not meet the federally set targets. Welfare caseloads declined dramatically in the years following welfare reform. Researchers have identified various factors that may have contributed to the caseload decline, such as welfare reform-related policy changes and economic growth, but there is no consensus about the extent to which the different factors contributed to the decline. Welfare caseload changes are only one element to consider in assessing how well welfare reform is working. Some of the other information that is needed for such an assessment includes what happened to families who left welfare, whether former welfare recipients are working and moving toward self- sufficiency, and whether those who continue to rely on welfare, including hard-to-serve clients, are getting the services they need to help them leave welfare. Rural areas of the nation are diverse. The economic conditions, the characteristics of the population, and the geography differ from one rural area to another. For example, a rural area can be a retirement location on a coast, a coal-mining community in the mountains, or an agricultural community on a plain. A common characteristic of rural areas is relatively low population density. There are numerous definitions of what is meant by “rural.” The one used in this report was developed by the Office of Management and Budget and is based on a classification of counties as either metropolitan or nonmetropolitan. Metropolitan counties include both central counties with a large urbanized area and outlying counties that are economically tied to the central counties and display a level of “metropolitan character” based on population density, urbanization, and population growth. Counties that do not qualify as metropolitan are classified as nonmetropolitan. We refer to the metropolitan counties as “urban” and the nonmetropolitan counties as “rural.” Of the 3,141 counties in the United States, 2,052 are classified as rural. Rural TANF families constitute about 14 percent of the total TANF monthly caseload for the 48 states covered by our study combined. However, when states are looked at individually, the rural portion of the TANF caseload ranges from 0.02 percent to 77 percent. Rural TANF families are not distributed evenly across rural America but are concentrated in counties that tend to have poor economic conditions. Finally, following national implementation of welfare reform, rural counties, as a group, had caseload declines similar to those experienced by urban counties. Yet in some states, there were substantial differences between rural and urban counties’ caseload changes. In 2003, during an average month, about 293,000 families living in rural counties received cash assistance under TANF programs of the combined 48 states included in our analysis. (Three of the 48 states—the District of Columbia, New Jersey, and Rhode Island—do not have any rural counties and therefore do not have any TANF families living in rural counties.) The 293,000 families composed about 14 percent of the total number of TANF families in the 48 states. About 18 percent of families in the general population live in rural counties in the 48 states; therefore, TANF families are slightly less concentrated in rural counties in these combined states than is the general population. This is also indicated by the fact that 2.4 percent of all rural families received TANF cash assistance in the 48 states in 2003, compared with 3.1 percent of urban families. Looking at states individually, the percentage of TANF families living in rural counties ranged from 0.02 percent in Massachusetts to 77 percent in South Dakota. The median for the 48 states was 26.6 percent. The rural TANF percentage for all 48 states combined—14 percent—is much lower than the median because several highly populated states with large TANF populations, most notably California and New York, have a very low percentage of TANF families living in rural counties. Figure 1 shows, for each state, the percentage of the state’s TANF families who live in rural counties as well as the percentage who live in urban counties. When we compared, for each state, the percentage of the TANF families living in rural counties with the percentage of all families living in rural counties, we found that for most states, the two were very similar. However, there were several exceptions. For example, South Dakota has a higher proportion of rural TANF families than would be expected (77 percent of TANF families live in rural counties, compared with 58 percent of all families), and Nebraska has a lower proportion than would be expected (32 percent of TANF families live in rural counties, compared with 46 percent of all families). See appendix III for more information on individual states and their rural TANF caseload characteristics. The distribution of TANF families is uneven across rural counties, with some rural counties having very low numbers of TANF families and others having high numbers relative to all the counties’ families. We found that about 150,000 (51 percent) of the about 293,000 TANF families living in rural counties live in only a quarter of the rural counties in the 48 states covered by our study. These counties have on average about 4.7 percent of all their families receiving TANF. On the other hand, the quarter of rural counties with the lowest proportion of TANF families have a total of only about 14,000 (4.9 percent) TANF families and, on average, only about 0.6 percent of all their families on TANF. To determine how counties with different proportions of their families on TANF compared, we looked at demographic and socioeconomic indicators for the counties. We grouped rural counties according to the proportion of all their families on TANF and compared the counties with a high proportion of families receiving TANF to those with a low proportion. We found significantly worse socioeconomic conditions in the counties with a high proportion of all families receiving TANF. For example, counties with a high proportion of all families receiving TANF had, on average, significantly higher unemployment, lower median incomes, and proportionately more people without high school diplomas. See appendix II for more specific information about how different groups of counties compared. Figure 2 shows the location of the rural counties with the highest proportion of families on TANF. Rural and urban counties experienced about the same amount of caseload decline between 1997 and 2003. Specifically, the number of families, on average per month, receiving TANF cash assistance in rural counties in the 40 states covered by our analysis decreased by 43.9 percent, and urban counties had a 44.1 percent caseload decrease. However, as shown in figure 3, rural TANF caseloads declined somewhat more than urban caseloads from 1997 to 2001. The rural and urban caseloads in many states declined by about the same percentage over the 1997-2003 period. However, for other states, there were substantial differences between the percentage of caseload decline in rural areas and that in urban areas, as shown in figure 4. To determine how counties with different levels of caseload size changes compare, we looked at socioeconomic indicators for the counties. Although it might be expected that counties with the greatest declines in caseload would have the most favorable socioeconomic conditions, we did not find that. We found that counties with the least caseload decreases had, on average, somewhat more favorable socioeconomic conditions, such as lower unemployment rates, higher median incomes, and proportionately fewer people without high school diplomas than counties with the greatest caseload decreases. Also, counties with the lowest caseload decreases had, on average, greater increases in unemployment rates and greater population growth than counties with higher caseload decreases. See appendix II for more specific information about how counties with different amounts of caseload change compared. Several studies and our own site visits indicate that transportation shortages, fewer jobs, low wages, and a scarcity of ancillary services are common challenges to welfare reform in rural areas. In some economically depressed areas, other problems, such as very low education levels, are additional challenges to welfare reform. On the other hand, rural areas have strengths in implementing welfare reform in that they foster collaboration and personal attention to clients. During our site visits, we found that for some TANF clients, transportation may be the primary obstacle to becoming or remaining employed.