Temporary Assistance for Needy Families:

Implications of Changes in Participation Rates

GAO-10-495T: Published: Mar 11, 2010. Publicly Released: Mar 11, 2010.

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Kay E. Brown
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This testimony is based on our report entitled "Temporary Assistance for Needy Families: Fewer Eligible Families Have Received Cash Assistance Since the 1990s, and the Recession's Impact on Caseloads Varies by State." As a result of sweeping changes made to federal welfare policy in 1996 with the creation of TANF, welfare changed from a program entitling eligible families to monthly cash payments under Aid to Families with Dependent Children (AFDC) to a capped block grant that emphasized employment and work supports for most adult participants who receive such assistance. With the creation of TANF, the number of families who received cash assistance fell significantly, from 4.8 million families on average each month in 1995--just prior to the creation of TANF--to 1.7 million in 2008. During this time frame, poverty among all children initially fell, from about 21 percent in 1995 to about 16 percent in 2000, and then rose thereafter to 19 percent in 2008. Most families receiving cash assistance are single mothers with children, and children in such families have historically experienced high rates of poverty. Furthermore, the recession, which began in late 2007 and deepened nationally in 2008, put additional pressures on families living in poverty, especially families with children, who are particularly vulnerable. Under the TANF block grant program, created by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), states receive federal funds to design and operate their own welfare programs within federal guidelines. The Department of Health and Human Services (HHS) administers the TANF program, which provides states with up to about $16.5 billion each year in TANF block grant funds, and each state must contribute a specified level of its own funds to qualify for the grant. In addition, under TANF, states must involve a minimum percentage of their adult TANF cash assistance recipients in work activities for a required number of hours each week. They must also restrict most families to a lifetime limit of 60 months of federally funded TANF cash assistance. Within certain limitations, states set their own eligibility limits and benefit levels for cash recipients. States also impose financial consequences, or sanctions, on families that do not comply with TANF work or other requirements, and many states have also implemented programs or strategies intended to divert families from cash assistance. To help states in an economic downturn, PRWORA created a TANF contingency fund of up to $2 billion, and most recently, the American Recovery and Reinvestment Act of 2009 made an additional $5 billion available to states for fiscal years 2009 and 2010 through a new Emergency Contingency Fund.

First, with regard to the decline in the number of poor families receiving cash assistance from 1995 to 2005, we found that the changes reflect declines on two fronts--both in the number of eligible families and in the number of eligible families who participated in the program. The strong economy of the 1990s, TANF's focus on work, and other factors such as increases in the minimum wage and the Earned Income Tax Credit contributed to increased family incomes, which in turn led to a decline in the number of families eligible for TANF cash assistance. We also found that changes to eligibility rules, such as restrictions on immigrants and the 60-month time limit, had a small impact on the number of eligible families. According to our research, the decline in participation reflected, among other things, families' responses to changes in state welfare programs, including mandatory work activities, declining cash benefit levels, and time limits as well as state diversion strategies and sanctions for non-compliance with work and other program requirements. According to a research synthesis conducted for HHS, mandated work activities may have caused declines in the caseload, as families chose not to apply rather than be expected to fulfill the requirement to work. Other families may have found it 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, as we noted in previous work. In examining the characteristics of eligible nonparticipants and TANF participants, we found that eligible families not participating in TANF had higher annual incomes on average than TANF participants in 2005, but that a small but distinct subgroup of non-participants had lower incomes than TANF participants. With regard to child poverty, we found that if the percent of eligible families participating in TANF in 2005 was 84 percent--the rate of participation in AFDC in 1995--rather than about 40 percent, an estimated 3.3 million families would gain TANF benefits and experience an increase in their net income. According to our TRIM3 analysis, this higher participation would have resulted in 800,000 fewer children in extreme poverty--defined as those with incomes below half the federal poverty threshold. In terms of more recent TANF trends, the number of families receiving TANF cash assistance increased in 12 of the 21 states we reviewed between June 2008 and June 2009, although the recession's impact on cash assistance caseloads varied widely by state, according to state-provided data.

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