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To Strengthen Economic Security and Advance Equity, States Should Invest More TANF Dollars in Basic Assistance

September 23, 2024 @ 12:00 pm

States spend less than one-fourth of their combined federal and state Temporary Assistance for Needy Families (TANF) dollars on basic cash assistance for families with children, our analysis of the latest data from fiscal year 2022 shows. (See Table 1.) States continue to use their considerable flexibility under TANF to divert funds away from income support for families and toward other, often unrelated, state budget areas.[2] If states maintain their current TANF spending practices, millions of children experiencing poverty — disproportionately Black children — will continue to be left without critical cash assistance. By redirecting the funds back toward cash assistance, however, states could do more to strengthen economic security and promote racial equity and child well-being.

Cash assistance to families struggling to make ends meet can improve children’s long-term outcomes while also providing parents with the cash they need to afford necessities such as rent, utilities, personal hygiene products, and school supplies. In addition, because material hardship is a risk factor for child maltreatment and child welfare involvement, income supports to families with low incomes, like those provided through TANF, reduce the likelihood of these adverse outcomes. A compilation of research from the Chapin Hall Center shows that state policies that ease TANF restrictions and increase family access to TANF play a role in reducing child welfare involvement.[3] Families strive to meet their children’s basic needs. Providing cash to families can help to reduce the risk of economic hardship by promoting stability. Despite the clear benefits of providing direct cash assistance, state policymakers have repeatedly and over time made policy choices to spend TANF dollars elsewhere, significantly weakening TANF in performing this core task. Fewer families in need have access to the program (in 2020, for every 100 families living in poverty, only 21 received TANF cash assistance, down from 68 families when TANF was created);[4] insufficient benefits levels, set by state policymakers, leave those who do have access far below the poverty line; and as this report explains, states are spending a shrinking portion of their TANF funds on basic assistance.

TABLE 1
Total TANF Spending by Category, Fiscal Year 2022
CategoryAmount Spent (rounded in billions)Share of Total Spending
Basic Assistance$7.223.0%
Work, Education, and Training Activities$2.58.1%
Work Supports and Supportive Services$0.82.6%
Child Care$4.915.5%
Refundable Tax Credits$2.68.4%
Pre-kindergarten/Head Start$3.210.4%
Child Welfare$2.88.9%
Program Management$3.210.4%
Other$4.012.7%
Total$31.3100%

Note: TANF = Temporary Assistance for Needy Families.

Funds in “Other” go toward a range of areas such as non-recurrent, short-term benefits, which are used to help low-income families in crisis situations; transfers to the Social Services Block Grant; services for youth and children, including after-school programs; pregnancy prevention and two-parent family programs; and juvenile justice and emergency payments and services “authorized under prior law,” meaning they are not within the four TANF purposes but were in the state’s Aid to Families with Dependent Children (AFDC) Emergency Assistance plan when TANF replaced AFDC. 

Source: CBPP analysis of Department of Health and Human Services 2022 TANF financial data

State Spending on Basic Assistance Has Plummeted Since TANF’s Creation

TANF provides a vital support to families with the lowest incomes in the form of cash assistance. Families with little or no cash income don’t have the funds they need to pay their bills or to buy essential items such as diapers, personal hygiene products, and household cleaning supplies. Cash assistance is crucial for stabilizing families who are facing crises, such as those fleeing domestic violence, and can promote racial equity and improve child well-being.

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Figure 1

However, cash assistance has weakened significantly under TANF because of disincentives structured into the founding law that, over time, have motivated state policymakers away from maintaining robust cash assistance programs for families.[5] Less direct cash assistance has potentially devastating long-term consequences for children growing up in families with little or no cash income to meet basic needs.

States spend less than one-fourth of their federal and state TANF funds on basic cash assistance. When TANF began, basic assistance was the single biggest use of TANF funds in all states. In 2022, states spent just $7.2 billion, or 23 percent, of their total funds on basic assistance. This is down from $14 billion in 1997, which would be $25.5 billion in 2022 dollars. (See Figure 1.) This amounts to a 69 percent drop in basic assistance spending when adjusting for inflation. 

The share of federal and state TANF funds spent on basic assistance varies across states, ranging from 2 percent to 74 percent in 2022. Eighteen states spent 10 percent or less on basic assistance, while 10 spent more than 30 percent. 

HHS Spending Data Provide Only Partial Picture of State Basic Assistance Spending

While state spending data reported to the federal government provide an overall reliable picture of TANF and maintenance of effort (MOE) spending, some states have made changes in spending configurations that can obscure their actual spending on children and families with low incomes. (For more on MOE spending, which is based on a state’s historical AFDC spending, see Appendix 1.)

These changes were precipitated by the Deficit Reduction Act of 2005, which made it harder for states to meet their TANF work participation rate (WPR) requirements and thereby threatened states with a loss of federal TANF funds due to penalties. Federal law requires state TANF programs to engage 50 percent of all work-eligible families (and 90 percent of two-parent families) in a set list of work activities for a minimum number of hours each week.

To meet their WPR, about half of the states have created solely state-funded (SSF) programs, not funded by federal TANF or state MOE dollars, to provide cash assistance to families who either have significant barriers to employment (such as disabilities) or would otherwise count toward the state’s WPR for two-parent families. Because no TANF or MOE funds are used, these families are not included in the work rate calculation. While most SSF programs are a relatively small share of a state’s cash assistance caseload, in a few states they provide assistance to a significant share.

States do not include spending on SSF programs in the data they report to the Department of Health and Human Services (HHS), so those data can understate a state’s spending on cash assistance to families with children. Illinois is a prime example: HHS data show that Illinois spends only 4 percent of its TANF and MOE funds on basic assistance, but the state’s large SSF program assists roughly as many families as its TANF program. (The two programs together, however, only provided cash assistance to 16 out of every 100 families in poverty in 2020, below the national average of 21.)

A state’s spending can also be skewed when it spends much more than its minimum MOE obligation to obtain “caseload reduction credits” to lower its WPR. (For more on this “excess MOE strategy,” see Appendix 1.) However, the data states report to HHS are still the best source for comparing spending across states and over time.

Many States Have Unspent Funds, Some Exceeding Their Annual Block Grant

States are not required to spend all their annual federal TANF block grant allocation each year. As TANF caseloads have continued to shrink, many states have accumulated carry-over or “reserve” funds by not spending their full block grant allocation over multiple years. There is no limit under federal law on how much states can carry over or when states must spend these carry-over funds, and states can continue to use them in the same way as any TANF funds in future years.

In 2022, states had $9 billion in unspent TANF funds, equaling 54 percent of the total annual block grant allocation. Five states had no unspent TANF funds, while 17 states had unspent funds equal to or exceeding 100 percent of their annual block grant. The majority of these funds ($6.5 billion or 72 percent of the funds) are unobligated, meaning that the state has not committed to use them for any specific purpose.

TABLE 2
17 States Have TANF Reserves That Equal or Exceed Their Annual Block Grant
StateTotal Unspent Funds, 2022 (rounded in millions)Total Unspent Funds as a Share of Block Grant, 2022
Hawai’i$422426%
Tennessee$808422%
Oklahoma$368249%
Nebraska$126217%
Arkansas$103181%
Mississippi$146168%
New Hampshire$62161%
Montana$61133%
Pennsylvania$957133%
Alabama$123131%
Maine$102131%
Wyoming$26120%
Utah$91119%
South Dakota$25112%
Oregon$181108%
West Virginia$117106%
Nevada$45103%

Note: TANF = Temporary Assistance for Needy Families.

Source: CBPP analysis of Department of Health and Human Services 2022 TANF financial data

By redirecting the funds back toward cash assistance, however, states could do more to strengthen economic security and promote racial equity and child well-being. Consistent with the Black Women Best framework,[6] redesigning TANF to center the needs of Black women and families and to adequately help families struggling to afford necessities would better serve families of all races and ethnicities. Such a redesign would require significant changes to TANF spending. To ensure that no family falls below a certain income level, federal policymakers must:

  • direct states to spend a majority of existing federal TANF and state MOE dollars on basic assistance;
  • require states to target their TANF funds toward families with the lowest incomes; and
  • reshape TANF’s allocation formula to promote equity so that states with more families in need receive more resources.

Appendix 1: Background on Methodology and Funds Available to States

Federal TANF Funding

Each state receives a fixed annual amount of federal TANF funding, technically known as the State Family Assistance Grant but generally referred to as the TANF block grant. The total amount of federal block grant funds available to all states each year is $16.5 billion. The TANF block grant allocations for each state are set in accordance with the 1996 law that created TANF, based on the amount of federal funding that the state had received in AFDC and related programs before 1996. Each state’s annual block grant allocation has generally remained unchanged since TANF’s creation (see Appendix 3) and thus has declined in value by 47 percent due to inflation. (In 2022, each state’s allocation was reduced by 0.33 percent as a set-aside for research funding.) Because states can carry over unspent TANF funds to use in future years, the amount of federal TANF funds that a state spends in a given year may vary.

In 19 states, the annual block grant is further reduced by a certain amount as a set-aside for Tribal TANF programs. The set-aside for Tribal TANF programs varies by state. In 2022, set-asides for Tribal TANF programs ranged from just under $70,000 in Nevada to $87 million in California. (See Appendix 3.) In total, $208 million in federal TANF funding was set aside for Tribal TANF programs in 2022 — about 1 percent of total federal funding. In Appendix 3, “Block Grant Received” refers to how much federal funding states received after the research funding and Tribal TANF (in states with such programs) set-asides, as well as any fiscal penalties, were subtracted out.

A state can transfer up to 30 percent of its block grant funds per year to the Child Care and Development Fund and up to 10 percent to the Social Services Block Grant (SSBG), as long as the total amount transferred doesn’t exceed 30 percent. Transferred funds are subject to the rules of the program to which they are transferred, not to TANF rules. Funds transferred to SSBG must be spent on programs and services for children or families with incomes below 200 percent of the poverty line.

In addition to the basic block grant, some states can receive additional TANF federal funds from the TANF Contingency Fund. A state can access the TANF Contingency Fund if it meets a monthly economic hardship (or “needy state”) trigger and spends more MOE funds than are otherwise required. (See below for more on MOE.) Congress created this $2 billion fund when it created TANF to provide additional help to states in hard economic times. States made little use of it until the Great Recession, but they began to draw on it in 2008, and nearly half of the states have done so since then. Since the original $2 billion provided was depleted early in fiscal year 2010, Congress has added limited funds ($608 million) for each year; qualifying states have received less than half of the amount for which they qualified each year since 2010.

State Maintenance of Effort Funding

Each year, states are required to meet a MOE obligation under the TANF block grant or face a fiscal penalty. (The statute refers to this spending as “qualified state expenditures,” but the common usage is “state MOE.”) Each state’s MOE amount is based on its historical spending, defined as its 1994 financial contribution to AFDC and related work programs. To meet its MOE obligation, a state must report spending at least 80 percent of this historical spending level; this minimum share falls to 75 percent for any year in which a state meets its TANF work participation rate requirement.

The fact that the MOE requirement is only 75 percent or 80 percent of a state’s historical spending, rather than 100 percent, allowed states to withdraw part of the funds they had spent on AFDC and related programs. Moreover, a state’s MOE requirement is based on its 1994 expenditure level, with no adjustment for inflation over the years since then.

Since the Deficit Reduction Act of 2005 made it harder for states to meet their TANF work participation rate requirements — threatening states with the loss of some federal TANF funds due to penalties — a number of states have found it advantageous to claim as MOE certain existing expenditures they hadn’t previously claimed. States with MOE spending exceeding their minimum MOE requirement can obtain a “caseload reduction credit” that lowers their work participation rate requirement. Claiming excess MOE also helps a state qualify for additional federal money from the TANF Contingency Fund.

Thus, since 2006, total MOE spending across states has risen above the minimum required levels. This increase does not necessarily represent an increase either in underlying state spending or in benefits or services for families with low incomes. Some of the reported MOE may represent existing state spending or existing third-party spending that the state hadn’t previously counted as MOE. In analyzing a state’s TANF and MOE expenditures, it is important to understand the extent to which they may be part of an “excess MOE” strategy in effect. Also, when a state has a particularly high MOE, percentages of total spending in various categories can be skewed.

Expenditures that qualify as MOE include state and local government spending or third-party spending that benefits members of “needy families” and meets one of TANF’s four purposes. Examples of qualifying third-party expenditures include spending by food banks or domestic violence shelters on TANF-eligible families. Third-party MOE also can include in-kind contributions, such as volunteer hours or employer-provided supervision and training for people in subsidized jobs. While a number of states have reported third-party MOE in order to boost MOE to obtain caseload reduction credits or a portion of the TANF Contingency Fund, not all third-party spending is excess MOE spending; some states claim third-party expenditures toward their minimum MOE obligations. The financial data that states report to HHS do not identify what reported spending arises from third-party MOE.

MOE expenditures must occur during the year for which the state claims them; states cannot carry them over to a future year. MOE expenditures can come from any area of the state budget and are not limited to spending by the TANF agency. MOE spending, however, must be an actual expenditure, not simply forgone revenue; thus, a state can count the refundable portion of a state EITC as MOE but not the portion that simply reduces the amount of income tax owed to the state.

Methodology

Throughout the analysis, percentages are used to describe portions of total TANF funding spent in a particular year. Because federal funding can be carried over into future years and due to variation in state MOE from year to year, percentages across years use different denominators and may not always be comparable.

Appendix 2
CBPP Groupings of Federal TANF Reporting Categories
CBPP CategoryFederal Reporting Categories
Basic AssistanceBasic Assistance (excluding Relative Foster Care Maintenance Payments and Adoption/Guardianship Subsidies)
Relative Foster Care Maintenance Payments and Adoption/Guardianship Subsidies
Work, Education, and Training ActivitiesSubsidized Employment
Education and Training
Additional Work Activities
Work Supports and Supportive ServicesWork Supports
Supportive Services
Child CareChild Care – Assistance and Non-Assistance
Transferred to Child Care and Development Fund
Program ManagementAdministrative Costs
Assessment/Service Provision
Systems
Refundable Tax CreditsRefundable Earned Income Tax Credit (EITC)
Non-EITC Refundable State Tax Credits
Child WelfareFamily Support/Family Preservation/Reunification
Adoption Services
Additional Child Welfare Services
Authorized Under Prior Law (AUPL): Child Welfare or Foster Care (Assistance and Non-Assistance)
Pre-K/Head StartPre-kindergarten/Head Start
Other AreasNon-Recurrent Short-Term Benefits
Transferred to Social Services Block Grant
Services for Children and Youth
Home Visiting Programs
Financial Education and Asset Development
Prevention of “Out-of-Wedlock” Pregnancies
Fatherhood and 2-Parent Family Formation & Maintenance Programs
AUPL: Juvenile Justice Payments (Assistance and Non-Assistance)
AUPL: Emergency Assistance (Assistance and Non-Assistance)
Other
Appendix 3
Federal TANF Funds Allocated to Each State in 2022 (Millions)
StateBlock Grant AllocationBlock Grant Received*Contingency FundTribal TANF
Alabama$93.3$93.0$11.1 
Alaska$63.6$44.4 $19.0
Arizona$222.4$199.4$23.8$22.3
Arkansas$56.7$56.5$6.7 
California$3,733.8$3,634.3 $87.2
Colorado$136.1$135.6$16.2 
Connecticut$266.8$265.9  
Delaware$32.3$32.2$3.8 
District of Columbia$92.6$92.3$10.9 
Florida$562.3$560.5  
Georgia$330.7$329.7  
Hawai’i$98.9$98.6  
Idaho$31.9$30.3 $1.5
Illinois$585.1$583.1  
Indiana$206.8$206.1  
Iowa$131.5$130.6 $0.5
Kansas$101.9$101.5 $0.1
Kentucky$181.3$180.7  
Louisiana$164.0$163.4  
Maine$78.1$77.9  
Maryland$229.1$228.3$27.2 
Massachusetts$459.4$457.9$54.5 
Michigan$775.4$772.8  
Minnesota$268$259.6 $7.5
Mississippi$86.8$86.5  
Missouri$217.1$216.3  
Montana$45.5$37.9 $7.5
Nebraska$58.0$56.6 $1.2
Nevada$44.0$43.8 $0.07
New Hampshire$38.5$38.4  
New Jersey$404.0$402.7  
New Mexico$126.1$109.9$13.1$15.8
New York$2,442.9$2,434.9$290.1 
North Carolina$302.2$300.4$35.8$0.8
North Dakota$26.4$26.3  
Ohio$728.0$725.6  
Oklahoma$148.0$138.0 $9.5
Oregon$167.9$165.8 $1.5
Pennsylvania$719.5$717.1  
Rhode Island$95.0$94.7  
South Carolina$100.0$99.6$11.9 
South Dakota$21.9$21.2 $0.6
Tennessee$191.5$190.9  
Texas$486.3$484.7$57.7 
Utah$76.8$75.4 $1.2
Vermont$47.4$47.2  
Virginia$158.3$157.8  
Washington$404.3$379.0$45.1$24.0
West Virginia$110.2$109.8  
Wisconsin$318.2$312.8 $4.3
Wyoming$21.8$18.4 $3.3

*Block grant allocation minus the 0.33 percent research set-aside, as well as any Tribal TANF set-asides or penalties.
Source: CBPP analysis of Department of Health and Human Services 2022 TANF financial data

Appendix 4
Basic Assistance Spending by State in 2022
StateTotal Spending (Millions)Basic Assistance Spending (Millions)Basic Assistance Spending as a Share of Total Spending
Alabama$197$136.54%
Alaska$73$3243.34%
Arizona$383$369.37%
Arkansas$116$32.84%
California$6,755$2,87842.60%
Colorado$398$6115.44%
Connecticut$552$244.43%
Delaware$149$74.80%
District of Columbia$302$17357.30%
Florida$797$11714.68%
Georgia$461$8518.47%
Hawai’i$199$3316.59%
Idaho$43$614.66%
Illinois$1,187$433.62%
Indiana$269$145.08%
Iowa$187$2413.01%
Kansas$159$106.48%
Kentucky$218$16374.55%
Louisiana$256$218.10%
Maine$143$3726.18%
Maryland$637$7411.68%
Massachusetts$1,178$29725.20%
Michigan$1,331$997.44%
Minnesota$467$10923.36%
Mississippi$60$47.18%
Missouri$391$225.52%
Montana$33$824.55%
Nebraska$100$1919.24%
Nevada$121$3125.69%
New Hampshire$61$2743.37%
New Jersey$1,442$825.70%
New Mexico$444$5211.79%
New York$5,031$1,57731.34%
North Carolina$554$264.71%
North Dakota$29$39.42%
Ohio$1,151$20617.88%
Oklahoma$160$117.05%
Oregon$218$7735.34%
Pennsylvania$1,093$1019.27%
Rhode Island$134$2015.16%
South Carolina$163$3118.85%
South Dakota$29$1243.04%
Tennessee$270$6825.32%
Texas$1,041$191.87%
Utah$86$1415.99%
Vermont$92$1314.48%
Virginia$343$9828.60%
Washington$1,152$21118.33%
West Virginia$137$4633.31%
Wisconsin$521$7013.40%
Wyoming$27$1348.31%

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