Welfare Reform:

Challenges in Maintaining a Federal-State Fiscal Partnership

GAO-01-828: Published: Aug 10, 2001. Publicly Released: Aug 10, 2001.

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The reauthorization of the Temporary Assistance for Needy Families (TANF) block grant represents an opportunity to re-examine the fiscal balance between the federal government and the states in providing services to needy families. Since the enactment of federal welfare reform, there has been much discussion of the fiscal implications of these sweeping changes in national welfare policy. A particularly contentious issue has been the extent to which states have replaced, rather than supplemented, their own spending with federal TANF dollars, thereby freeing up state funds for other budget priorities. This report reviews (1) the degree to which states have used the flexibility afforded in the federal TANF grant to supplant, rather than supplement, state spending for low-income families; (2) the changes that have occurred in the states' use of different funding sources (including their TANF funds) on programs that help the poor; (3) the effects of state funding choices on the amounts of TANF funds the states have left unspent at the U.S. Treasury; and (4) the measures states are taking to save a portion of the TANF grant or set aside their funds for a rainy day.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In May 2003, the Department of Health and Human Services (HHS) issued a report entitled "The Fiscal Effects of Welfare Reform: State Social Service Spending Before and After Welfare Reform" that was in keeping with GAO's recommendation that the Secretary periodically gather data focused on the federal-state fiscal balance for achieving the goals of the Temporary Assistance for Needy Families (TANF) block grant program. Additionally, in June 2004, HHS issued a report in June 2004 entitled "Spending on Social Welfare Programs in Rich and Poor States" that examined the federal/state fiscal balance in a subset of states.

    Recommendation: Given the breadth of the goals for the TANF program, understanding the overall federal-state fiscal balance covering a broad range of TANF-related social services is important for national oversight of the program. However, little information is currently gathered systematically on expenditures on the broad array of social services GAO surveyed for this report. In order to inform decisionmakers on the status of the federal-state fiscal balance, the Secretary of Health and Human Services should consult with the states to explore cost-effective ways to periodically gather data revealing the federal-state fiscal balance relevant to achieving the broader programmatic goals of the TANF program. The categories used in this report could constitute a basis for these periodic reports.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: In its May 2003 report entitled "The Fiscal Effects of Welfare Reform: State Social Service Spending Before and After Welfare Reform," HHS comments that many states did not spend TANF funds fully in the early years of the program, creating concern among advocates for the poor, members of Congress, and others. The report says states have begun to spend down TANF balances and that data collected from the states provided an opportunity to determine whether states that built up unspent balances were states that had not been increasing social services spending. This HHS analysis constitutes a positive response to GAO's recommendation that HHS gather data on how states plan to use or have used their unspent TANF funds.

    Recommendation: The Secretary of Health and Human Services should work with the states to provide for more transparent reporting by the states of their plans for the unspent TANF balances. Such plans can enhance congressional oversight and provide the states with an opportunity to better demonstrate their plans and needs for federal funding.

    Agency Affected: Department of Health and Human Services

 

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