Federal dollars given to states that are supposed to help families experiencing poverty are often diverted to other uses – or not spent at all. Congress should reform the Temporary Assistance for Needy Families (TANF) program to ensure that dollars are directly invested in financially under-resourced families.
Here are problems with TANF:
TANF is a deficit-based program.
In 1997, TANF replaced the Aid to Families with Dependent Children (AFDC) program that was centered on giving direct cash transfers to eligible recipients with fewer conditionalities and little to no time limits.
TANF’s overall purpose is to “increase the flexibility of states” to meet four statutory goals:
However, TANF created a more paternalistic welfare system for recipient families. It implemented more conditions on recipients, lowered the amount of total aid assistance and cash transfers, and limited the time families could receive assistance.
TANF Funding is Flat
States get a total of $16.5 billion a year in TANF block grants, a number that hasn’t changed since the program was enacted in 1997. States must also contribute their own funds to get the full share of the federal grants.
Under AFDC, there was little reason for states to cap the number of recipients since the federal government would reimburse states for cash aid up to a certain percentage regardless of the number of caseloads in the state. The TANF funding formula, however, encourages states to limit caseloads and spending.
States Have Too Much Leeway
States have a great deal of flexibility to decide on cash benefits amounts, eligibility requirements, and how they will spend (or not to spend) their TANF dollars.
States are spending less and less money on providing direct cash assistance to families. According to the Center on Budget Policies and Priorities, in 1997, states collectively spent $14 billion, or 71% TANF funds allocated annually. By 2020, states were spending $7.1 billion, only 22% of the annual allotment. States spend little more than one-fifth of their combined federal and state TANF dollars on basic assistance for families with children.
If states are not spending TANF dollars on cash assistance for families, what are they spending the money on? It varies widely among states and includes things like Pre-K/Head Start, drug courts, after-school programs, and pregnancy prevention. Despite the worthiness of these priorities, the reality is that states are hoarding TANF funds to plug budget holes and fund other budget areas that should be paid for with other funding sources.
Where You Live Matters
Where a family lives often has a tremendous impact on their ability to access TANF funds and how much funds they will receive in income support. In 2020, less than ten states spent more than 30% of their TANF funding on basic assistance for families, while 15 states only spent between 4%-10%. Some of the worst offending states are Arkansas (5%), Texas (5%), Mississippi (5%). North Carolina (6%), and Louisiana (7%).
TANF Dollars Are Diverted to Middle Class Families
Some states use TANF dollars to serve families well above the poverty line. For example, in 2018, Louisiana counted over $30 million paid by the Office of Financial Assistance for two scholarship programs as maintenance of effort. One is a merit-based scholarship that gives students a full ride to any public university in the state. Recipients of this scholarship are often not eligible for TANF and come from middle-class or more affluent families. Similar TANF exploitation was present in Michigan in 2018, where $103 million in federal TANF money was spent on college scholarship programs for families deemed middle class or above.
In 2020, a huge controversy erupted in Mississippi, where TANF funds were diverted to wealthy individuals’ pet projects, including a drug company and sports arena. The state’s former human services director pleaded guilty to corruption charges as a result of the scandal.
Some states don’t spend TANF money at all!
There is no requirement for states to spend all of the TANF allocations in a given year, and states can carry over funds for use in future years. Declining TANF acceptance rates coupled with states choosing not to spend all of their annually appropriated money each year has resulted in many states having reserve dollars. In 2020, states had a combined $6 billion in unspent TANF funds despite rising poverty rates, including 11 states with unspent funds exceeding 100 percent of their annual block grant. The three states with the largest reserve of TANF unspent funds were Tennessee ($790 million), Hawaii ($380 million), and Oklahoma ($264 million).
TANF Needs Reform
States should spend at least 75% to 80% of their annual federal TANF block grant on direct, unrestricted, unconditional cash assistance programs for eligible recipients. Further, the aggregate block grant amount the federal government appropriates to the states should be significantly increased to account for the drastic increase in inflation since 1997.
Research has repeatedly shown that investing in families by providing direct and unconditional cash assistance is the best way to promote equity and sustained economic mobility. If states continue this trend, millions of families, particularly Black and Brown families, will not receive the basic assistance they need.