In response to the creation of TANF, states implemented more work- focused welfare programs, and research shows that these changes—in concert with other policy changes and economic conditions—contributed to raising the incomes of single parent families so that fewer were eligible for cash assistance. In designing and implementing their new 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 also imposed financial consequences, or sanctions, on families that did not comply with TANF work or other requirements, strengthening the incentives for TANF participants to comply with work requirements. Other concurrent policy changes contributed to an increase in the share of single parents in the labor force. These included an increase in the Earned Income Tax Credit (EITC) in the 1990s and increases in the minimum wage in 1996 and 1997, both of which contributed to an increase in the returns to work. Additional funds for federal and state work supports such as child care also made it easier for single parents to enter the labor force. Finally, the strong economy of the 1990s facilitated the move from welfare to work for many TANF recipients. A decline in the unemployment rate and strong economic growth contributed to the widespread availability of job openings for workers of all skill levels in many parts of the country. During this period, labor force participation increased among single mothers, the population most affected by TANF—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 welfare reform. Because the incomes of many single-parent families increased as a result of these policies, in total, 420,000 fewer families had incomes low enough to be eligible for cash assistance in 2005 compared to 1995, according to HHS data. At the same time that some families worked more and had higher incomes, others had income that left them still eligible for TANF cash assistance; however, many of these eligible families were not participating in the program. According to our estimates, the vast majority—87 percent—of the caseload decline can be explained by the decline in eligible families participating in the program, in part because of changes to state welfare programs. (See Fig. 1). These changes include mandatory work requirements, changes to application procedures, lower benefits, and policies such as lifetime limits on assistance, diversion policies, and sanctions for non-compliance, according to a review of the research. While mandatory work activities assisted some participants in getting jobs, according to a research synthesis conducted for HHS, these mandates may have led other families to choose not to apply rather than be expected to fulfill the requirement to work. Other families may have found it more difficult to apply for or continue to participate in the program, especially those with poor mental or physical health or other characteristics that make employment difficult. A decline in average cash benefits may also have contributed to the decline in participation. Average cash benefits under 2005 TANF rules were 17 percent lower than they were under 1995 AFDC rules, according to our TRIM3 estimates, as cash benefit levels in many states have not been updated or kept pace with inflation. Research also suggests that in response to lifetime limits on the amount of time a family can receive cash assistance eligible families may hold off on applying for cash assistance and “bank” their time, a practice that could contribute to the decline in families’ use of cash assistance. In addition, fewer families may have applied or completed applications for TANF cash assistance because of state policies and practices for diverting applicants from cash assistance; nearly all states have at least one type of diversion strategy, such as the use of one-time nonrecurring benefits instead of monthly cash assistance. Finally, some studies and researchers noted that 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. During the recent economic recession, caseloads increased in some states but decreased in others, as circumstances in individual states as well as states’ responses to the economic conditions varied. Between December 2007 and September 2009, 37 states had increases in the number of families receiving TANF cash assistance while 13 states had decreases. However, the degree of change in families receiving TANF cash assistance varied significantly by state, as some states experienced caseload increases or decreases of over 25 percent while others experienced minimal changes of 0 to 5 percent. Nationwide, the total number of families receiving TANF cash assistance increased by 6 percent during this time period although the subset of two-parent families receiving such assistance increased by 57 percent. Initially few states reported reducing TANF-related spending on family and/or work supports in response to the recession, instead using funding sources such as the Emergency Contingency Fund created by the Recovery Act to respond to rising caseloads and/or to establish or expand subsidized employment programs. However, through their comments on our national survey and during our site visits, state officials discussed how the economic recession has caused changes to local TANF service delivery in some states. A majority of state TANF officials nationwide, as well as TANF officials from all eight localities we visited, reported that they made changes in local offices’ TANF service delivery because of the economic recession. Specifically, of the 31 states reporting such changes through our survey, 22 had reduced the number of TANF staff, 11 had reduced work hours at offices, and 7 had reduced the number of offices. Officials in all three states we visited also reported that local TANF caseworkers are now managing an increased number of TANF cash assistance families per person. As a result of these increased caseloads, along with tightened resources, local officials in all three of the states we visited expressed their concerns that staff are less able to provide services to meet TANF cash assistance families’ needs and move them toward self-sufficiency. Research on how families are faring after welfare reform has shown that, like those who receive TANF cash assistance, families that have left welfare, either for work or for other reasons, tend to remain low income and most depend in part on other public benefits. As we noted in a 2005 report, most of the parents who left cash welfare found employment and some were better off than they were on welfare, but earnings were typically low and many worked in unstable, low-wage jobs with few benefits and advancement opportunities. There is evidence that some former TANF recipients have had better outcomes; for example, a 2009 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 on TANF. However, even among working families, many rely on government supports such as the EITC, Medicaid, the Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamp Program, and other programs to help support their families and lift them out of poverty, as most parents who recently left welfare are not earning enough to be self-supporting. In addition, a considerable body of work has documented families who are often described as “disconnected” from the workforce. It is not yet known whether or to what extent the recession has led to an increase in the number of these families. A recent GAO analysis of the characteristics of low-income families several years post-welfare reform found that while families who were receiving TANF cash assistance in 2005 had low incomes, a third worked full-time and most received other public supports, according to the most recent data available. The median household income of families receiving TANF cash assistance was $9,606 per year, not including means-tested benefits. One third of families who received TANF cash assistance at some point during the year (33 percent) were engaged in full-time employment, while 44 percent were headed by an adult without earnings. About a fifth (18 percent) of these families were headed by an adult who had a work- limiting disability. The vast majority of families receiving TANF cash assistance—91 percent—also received at least one other public benefit, with most (88 percent) receiving benefits from the Supplemental Nutritional Assistance Program (SNAP), formerly known as the Food Stamp Program, and a smaller proportion receiving subsidized housing (22 percent), child care subsidized by the Child Care and Development Fund (CCDF) (11 percent), or Supplemental Security Income (SSI), a cash assistance program for low-income people with disabilities (22 percent). Only 16 percent of families receiving cash assistance included married couples, and even fewer—less than 10 percent—had income from an unmarried partner. Many TANF eligible families do not participate in the program, possibly because they left the program or because they did not apply. Our analysis found that on average, these families had higher incomes than TANF recipients, but median incomes remained low, a significant proportion did not work full time, and many received public supports other than TANF. Compared to TANF cash assistance recipients, eligible non-recipients had higher median incomes ($15,000 per year) and higher rates of full-time employment (44 percent). However, a significant proportion of TANF- eligible non-recipient families—41 percent—were headed by an adult without any earnings, and 11 percent had a work limiting disability. A somewhat lower percentage of those eligible but not receiving TANF cash assistance received other public benefits (66 percent received any benefit), but a majority lived in households that received SNAP (59 percent).